There have been a number of FLSA lawsuits in the energy industry of late, focusing on unpaid overtime.  One of these employers who was sued, Key Energy, has just settled two class actions for $3 million.  The case is entitled Grillo v. Key Energy Services LLC and was filed in federal court in the Central District of California.

Offshore drilling platform
Copyright: 1971yes / 123RF Stock Photo

The employees advised the Court, in their motion for preliminary approval, that the decision to settle was founded on the strength (or weakness) of the case and the goal of ending the case without incurring additional legal fees and costs that could cut into the monies that the plaintiffs might receive.

The court papers filed by plaintiffs stated that “although plaintiffs and their counsel maintained a strong belief in the underlying merits of the claims, they also acknowledge the significant challenges posed by continued litigation through trial.  Accordingly, when balanced against the risk and expense of continued litigation, the settlement is fair, adequate, and reasonable.”

The plaintiffs worked on oil rigs off the coast of California.  They claimed that although the Company had proper overtime policies, the actuality was that the Company denied employees their statutorily mandated lunch periods and compelled people to work more than forty hours without paying proper overtime.  The plaintiffs won certification in July 2016 for a class of California-based Key Energy employees; the motion before the Court asks for approval of a class with eight subclasses.

The settlement would pay the employees a total of $1.79 million dollars; the class is estimated to include more than 1800 employees.  These workers would receive an average of approximately $985 per person; there would be a formula utilized, depending on the number of pay periods worked, between June 2009 and February 2017.  The named plaintiffs (Grillo and Zaragoza) would each get an additional $10,000 in incentive payments for bringing the suit.

The Takeaway

Employers in the energy industry should take note of this case and the others that have been filed (and are being filed) in recent years.  I have blogged about this and spoken on it many times.  There are factors inherent in the industry, e.g. methods of compensation, that have developed over the many years and may be well suited to this unique industry, but, and it is a big “but,” they may not comply with the Fair Labor Standards Act.

I urge employers in this industry to examine their compensation practices and fix what is broken, which will start to erode away the statute of limitations.

Regretfully, to my lights, conditional certification seems all too easy for plaintiffs in a FLSA collective action to secure.  Are things changing?  A federal judge has refused to certify a proposed class of natural gas pipeline inspectors for Gulf Interstate Field Services Inc. in a Fair Labor Standards Act overtime suit, concluding that the named worker in the suit is not similarly situated.  The case is entitled Sloane v. Gulf Interstate Field Services Inc., and was filed in federal court in the Middle District of Pennsylvania.

Pipeline Leading to Oil Refinery
Copyright: kodda / 123RF Stock Photo

The employee has alleged that he was paid a day rate but overtime was not paid for hours exceeding forty.  Judge Brann observed that many factors militated towards denying conditional certification.  He noted that there were many differences among the putative class members, such as where they worked, what they did and who their clients were.  Thus, there was a lack of commonality amongst the workers.

The Court aptly observed that the “plaintiff seeks certification of collective action generically comprising ‘all current and former employees of [GIFS] who performed work as a pipeline inspector in the United States in any workweek between three years prior to the date of the court’s order and the present.  The proposed class otherwise embraces no limitations based on geography, timeframe, client, position type or project nature, though it does incorporate a carve-out for three separate projects where workers were believed to not have suffered any unlawful treatment.”

Significantly, the Court also focused on the prior convictions of lead plaintiff Thomas Sloane, finding that those convictions and his evasiveness and dissembling about them with his own lawyer, showed that he was not a proper class representative.  Three of Sloane’s offenses involved burglary or theft; the Court concluded that this “propensity for untruthfulness” would taint the entire case for the other possible class members.

The Takeaway

This is the dogma that must be pursued when defending one of these collective actions.  Look for discrepancies in the fabric of the class, especially as regards the named plaintiff and the rest of the class.  Herein, this task was made easier because of the criminal convictions and conduct related to those convictions of the named plaintiff.  In sum, if the named plaintiff is but a poor representative of a putative class, the case for conditional certification is rendered much weaker.

Corinne Burzichelli writes:

The issue of the exempt status of financial services employees has been explored in numerous cases for many years and in different parts of the country.  Now, there is a new chapter to add to this saga.  On February 28, 2017, Judge William J. Martini granted Morgan Stanley Smith Barney LLC’s motion for summary judgment, dismissing financial advisers’ claims that they were entitled to overtime under the FLSA and New Jersey law.  The case is entitled In re: Morgan Stanley Smith Barney LLC Wage And Hour Litigation and was filed in federal court in the District of New Jersey.

Banking and Financial Services
Copyright: sashkin7 / 123RF Stock Photo

The plaintiffs, consolidated from four cases originating in New Jersey, New York, Connecticut and Rhode Island, alleged that Morgan Stanley failed to pay overtime in violation of the FLSA.  The named plaintiff, Nick Pontilena, additionally claimed that Morgan Stanley violated New Jersey law by not paying him required overtime, making improper wage deductions, and failing to maintain required pay records.

The court rejected these claims and concluded that financial advisers were exempt from overtime  under the FLSA.  The Court concluded that the administrative exemption applied.  This is significant because many courts have rejected the identical defendant contentions/defenses.

Judge Martini determined that financial advisers met this standard by reviewing the USDOL regulations and case law directly addressing financial advisers as opposed to DOL guidance on mortgage loan officers.  Indeed, the Court chose to follow precedent from the Eastern District of Pennsylvania and the Northern District of California, and deferred to a 2006 DOL letter, all of which found that financial advisers were exempt from the FLSA.

Specifically, the Court agreed with the regulations and concluded that the financial advisers satisfied the administrative exemption because they primarily offered advice and analyzed client information in an independent manner and were not focused solely on making “sales.  That is a very momentous decision because the decisions that have gone the other way have found that these employees’ main job duty was selling.

The Takeaway

Employers in the financial services industry who are hit with these suits must focus on the analysis, rather than the selling, job duties of the employees.  If a court believes that the “sale” is the ultimate driving force for the employees’ work, they will be found to be non-exempt.  At least in New Jersey, financial advisers will be exempt from the FLSA.  Let’s now see if this trend carries through to other Circuits in the country.

Hopefully, it will…


Corinne Burzichelli is an associate in the Labor & Employment Department of Fox Rothschild LLP, resident in its Princeton office.

I have blogged before about fancy golf clubs being sued for FLSA violations.  Well, here is another one.  The Farm Neck Golf Club is a members-only golf club on Martha’s Vineyard, where Presidents Barack Obama and Bill Clinton have played.  This organization was just sued in a putative collective/class action by a cafe cook who alleged that she was not properly paid for overtime hours.  The case is entitled Shkuratova v. Farm Neck Association Inc. and was filed in federal court in the District of Massachusetts.

Golf Course
Copyright: Photozek07 / 123RF Stock Photo

The former cook, Anna Shkuratova, began a putative class action over overtime compensation for violations of the federal Fair Labor Standards Act and state law.  The Complaint stated that the “plaintiff was subject to defendants’ common practices, policies or plans including failing to pay at least minimum wage for all regular hours worked, failing to pay at least one and one-half times the regular rate of pay for hours worked in excess of 40 hours per week, failing to compensate plaintiff and class members for hours worked off the clock and failing to keep accurate time and payroll records in violation of the FLSA.”

The golf club is located in a very pretty piece of farmland on the eastern edge of the island, right on the water.  It has earned a consistently high rating in Golf Digest’s Places to Play, “and is considered by many to be one of the premiere golfing experiences in the Northeast, a true test of golf in an idyllic setting.”

The named plaintiff states that she worked as a cook at the club’s Cafe at Farm Neck from May 2016-September 2016.  The plaintiffs seek five subclasses of employees who were not paid minimum and overtime wages and who worked off the clock, such as kitchen employees, front-of-house cafe workers, golf course workers such as golf professionals and pro shop salespeople, tennis pros and maintenance workers.

The Takeaway

It is the off-the-clock allegations that, to me, are the most troubling.  Oftentimes, employers have to work under very tight labor budgets and there is pressure, implicit or otherwise, to stay within those budgets.  It is that pressure that sometimes results in FLSA violations.

Sometimes…

Jonathan Ash writes:

Waiter carrying tray of glasses
Copyright: bedya / 123RF Stock Photo

In what amounts to a victory for all employers throughout the State of New York, the Supreme Court of New York recently granted summary judgment in one of the first cases to effectively make use of the newly amended affirmative defense set forth in the Wage Theft Prevention Act (“WTPA”).  The case is entitled Ahmed v. Morgans Hotel Group Management, LLC.

Employers in the hospitality industry in New York often fall victim to unsubstantiated claims by former employees of unpaid wages.  Attorneys will send letters threatening a potential class action wage and hour lawsuit and demanding that the employer provide documentation on a class-wide basis to disprove the existence of the claim in order to resolve the case with a substantial settlement.  The mere threat of such a lawsuit is enough to get employers to comply with this fishing expedition.

In this instance, the Company limited its production to only those documents necessary to show that the named plaintiff(s) did not have a claim that they were not paid gratuities for banquet events where the Company charged an administrative fee.  The Court rejected the plaintiff’s claim and concluded that no reasonable customer could have been confused and that because the plaintiff could not identify a single instance in which the gratuity was not paid, the WTPA claim must fail.

Perhaps more significantly, however, was the claim for unpaid minimum wage, which was based upon the alleged failure to provide the required notice under the Hospitality Wage Order.  Plaintiffs’ attorneys attempt to capitalize on this nuanced area of the law in hopes that one of these requirements is not met due to human error or inadvertence.

One year ago, the WTPA was amended to provide that “it shall be an affirmative defense” to such a violation if the employer can show complete and timely payment of all wages due and that the employee never earned below the minimum wage.  In such a case, the employee suffered no actual injury, so this affirmative defense prevents a windfall and discourages the predatory practices of plaintiffs’ attorneys.

The Takeaway

This significant decision paves the way for other employers to defend against such actions.  Rather than succumbing to the demands of an aggressive plaintiffs’ attorney fishing for information, employers now have a means to defend these claims through this affirmative defense if they can show that the employee was always timely paid wages equal to or above the minimum wage.


Jonathan Ash is an associate in the firm’s Labor & Employment Department, resident in its Princeton office.

There have been many class actions concerning the job title “Assistant Manager” and this malady has risen again.   The chain, Hooters, has been sued in a nationwide collective action that alleges the Company misclassified assistant store managers, calling them supervisors, in order to avoid paying overtime.  The case is entitled Stirewalt et al. v. Hooters of America LLC and was filed in federal court in the Northern District of Alabama.

Hooters Restaurant
By Ildar Sagdejev (Specious) (Own work) [GFDL or CC BY-SA 4.0-3.0-2.5-2.0-1.0], via Wikimedia Commons
The named plaintiffs allege that they worked up to eighty (80) hours per week but were never paid overtime due to their misclassification.  The claim they only had the title of Manager, but that their main duty was sales and not the supervision of at least two other employees, over whom they could exercise managerial authority.  They claim that when they did create schedules, they were “almost always changed,” according to the Complaint.  They claim that although they interviewed new job applicants, the recommendations they made were often ignored by their supervisors.

More significantly, the Complaint alleges fraudulent conduct by the Company. It alleges that the “defendants have intentionally and repeatedly misrepresented the true status of managerial compensation … to avoid suspicion and inquiry by employees regarding their entitlement to monies owed to them.  Plaintiffs, as well as other similarly situated present and former employees, relied upon these misrepresentations by defendants and [were] unable to determine [their] true status under the FLSA by the exercise of reasonable diligence because of those misrepresentations.”

The plaintiffs want notices to be sent to current and former assistant managers who worked at a Hooters store within the last three years.  This would allow these workers to opt in to the collective action.  The plaintiffs seek overtime, commissions, bonuses, vacation and sick time and, naturally, attorneys’ fees.

The Takeaway

I don’t mind these so much.  (Famous last words?)  These kinds of actions usually necessitate an individualized determination of the duties of the various employees and that is the death knell of a viable class action.  The problem is if they were subject to the same, uniform, system-wide policies, that would be bad.  But, at least from the start the defendant here has a legitimate, viable chance of defeating the motion(s) for class certification.

A defendant in a FLSA collective action case is fighting an initiative to compel it to produce information that the named plaintiffs allege is relevant to their discovery requests.  The defendant labels the requests a “fishing expedition.”  The case is entitled Martinez et al v. T-Mobile Ltd. et al., and was filed in federal court in the Northern District of Illinois.

Woman using her mobile phone, city skyline night light background
Copyright: ldprod / 123RF Stock Photo

The plaintiffs want the defendant, Wireless Vision LLC, to produce electronically stored information to support (supposedly) their claim that it was the Company’s policy to have employees work before they clocked in to start the day and after they clocked out, as well as working through clocked-out breaks.  They claim they were not paid for those hours.  The Company refutes this by affirming that it has produced thousands of pages of documents in an appropriate and acceptable format, records such as payroll records, personnel files and disciplinary records.

The Company’s papers that the “plaintiffs’ motion is like a tree without roots.  The premise of the motion is that the plaintiffs’ are automatically entitled to unspecified ESI; from assumed repositories of ESI in the hands of Wireless Vision; that are assumed relevant to the case; which entitlements are based upon unstated search protocols with no safeguards at all and no consideration of feasibility and costs.”  The Company asserted that if the plaintiffs wanted the information in a different format, they should have to convert it. The Company also asserted that the plaintiffs should make a showing as to the reason what they sought was discoverable and why the information thus far produced was not sufficient.

The plaintiffs counter by claiming that although almost one-thousand pages were produced, this was nothing more than timekeeping, payroll and personnel records for the nine opt-in plaintiffs and the Employee Manual. The plaintiffs want emails and documents relating to the Company’s payroll and timekeeping software, performance evaluation programs, commission structure or training of sales representatives.  The plaintiffs also claim that the information they want is easily accessible, as the Company’s own IT department had control over all of its computer systems.

The plaintiffs claimed they worked before they officially clocked in and they were compelled had to collect supplies, prepare equipment, meet with supervisors and other duties.  They also claimed working time after they punched out, sometimes for allegedly several hours, to perform other job-related duties.

The Takeaway

The discovery requests appear burdensome and excessive.  The problem is, as I have found, that lower federal courts, especially Magistrates, are being fairly liberal in the amount and kinds of information that they are allowing to be discovered in FLSA collective action litigation.

A group of sales representatives for a car dealership have requested conditional certification in a Fair Labor Standards Act case.  The employees allege that they were paid less than minimum wage and were not properly paid their commissions.  The case is entitled Hotaranu et al. v. Star Nissan Inc. and was filed in federal court in the Eastern District of New York.

Auto dealership row of cars
Copyright: happyalex / 123RF Stock Photo

The named plaintiffs contend that they only received a base rate of $100 per week for those weeks in which they did not earn commissions, thereby causing their compensation not to meet the minimum wage standards. The complaint (filed in September 2016) alleges that there were numerous times when a sales representative did not earn any commissions, or where the commission were insufficient to meet the minimum wage/overtime requirements of the FLSA.

The Complaint also claims that the dealer manipulated gross profits of sold cars that resulted in reductions of the commissions earned by the sales representatives.  The named plaintiffs allege that they received flat commissions regardless of the gross profit on the car sold.  This, they claim, was done, notwithstanding agreed-upon calculations in their commission agreements.

The motion for certification claims that the plaintiffs have met their burden for conditional collective certification because they have demonstrated that the sales representatives are subject to the same policies.  At the conditional certification stage, the burden is fairly low (in any event) and the plaintiffs note that they have produced an alleged “well-pled” complaint and four affidavits from Star Nissan employees.  This is sufficient, according to plaintiffs, for the motion to be granted.

The Takeaway

It seems that there is a good chance that the motion will be granted, as the burden on plaintiffs at this stage is low – some might say, ridiculously so.  With that said, there might be an out, a magic bullet for the employer.  If the auto dealership is defined as a “retail business” under Section 207(i) of the FLSA and if the commissions earned equaled or exceeded 50% of weekly income over a representative period, then the sales representative(s) would be exempt from overtime for those weeks under the so-called commission exemption of the FLSA.

Then, the whole thing (or a good chunk of it) goes away.

Worth looking into…

The issue of whether to pay for training time is a vexing one.  In a recent case, a major airline avoided liability (for the most part) in a FLSA collective action alleging that it did not pay workers for time spent in a customer service-training program.  The Court held that the trainees were not employees “engaged” in work.  The case is entitled Otico v. Hawaiian Airlines Inc., and was filed in federal court in the Northern District of California.

Airplane
Copyright: khunaspix / 123RF Stock Photo

The individual (Otico) had claimed that she was entitled to ten days pay for her time spent in a pre-employment training program.  The Court concluded, in granting summary judgment that no reasonable juror could conclude that this person was acting as an “employee” when she took the training courses.  The Court found that the airline was not directly benefitting from any free labor.  The Court held that “the trainees receive the benefit of learning how to do a job they hope to get.  Otico, therefore, was the ‘primary beneficiary’ of the arrangement. Although one wonders why Hawaiian is unwilling to pay something to these people, since they no doubt must sacrifice to participate in the program, the law does not require it to do so.”

The employer contended that the training provided was equivalent to the kind of instruction that the people could have received at a trade or vocational school and which would have cost them a lot of money.  The airline also asserted that it incurred extra costs and there were disruptions to its operations that were a by-product of its providing the training.

Ms. Otico, as a part of the hiring process, claimed that she was compelled to attend the unpaid training course, which took ten days, for eight hours per day.  The people learned about federal regulations and how to utilize the airline computer/software system.  Ms. Otico completed the course in December 2015 and got a job with the airline after she passed a drug test and received clearance from the airport.

The Takeaway

I do not understand the judicial reasoning here.  The person claimed that attendance was mandatory, the course material was related to the trainee’s job, and attendance was during regular working hours.  If those facts are true, then, under FLSA regulations and precedent, this time should have been compensable.

There have been a number of cases in which the FLSA employee status of exotic dancers has been litigated.  Well, in a very recent one, the plaintiffs’ counsel is strongly attacking the Company’s early summary judgment motion.  The dancers argued they were employees, not independent contractors; the Court has now granted conditional certification to the class.  The case is entitled Shaw et al. v. The Set Enterprises Inc. et al., and was filed in federal court in the Southern District of Florida.

Former dancers Sarah Shaw, Rebecca Wiles and Ashley Howell argued that the amount of control exerted over them by the club owners was the key in deciding what their status should be.  The plaintiffs reeled off many cases in which just such findings were made.  Their papers noted that their “position is not novel; the vast majority of courts to have considered this issue have found exotic dancer/entertainers to be employees as a matter of law.”

Their theory was a willful misclassification had occurred and they were paid only through tips from the customers.  The class was granted conditional certification in December 2016, as the Court found that a sufficient evidentiary showing was made indicating 300 entertainers worked at the two clubs during the three years leading up to the lawsuit and all were similarly situated.

The owners asserted they were independent contractors who just paid a “modest fee” to the club as a licensee, in exchange for being allowed to perform, use the facilities and collect tips and fees from the clientele. They also asserted they exercised no control while they were dancing and performing.

An attorney for the plaintiffs said that notice was being sent to 4,500 prospective class members.  He opined that, in the end, these people would be considered employees under the law, as they have in many other cases.  He said that “there’s been very strong precedent over the last ten years or so, consistently, in nearly all courts, that has found entertainment dancers do qualify as employees. We believe the same will be found under the facts of this case.”

The Takeaway

These cases are very fact-sensitive, but I agree that the majority of them rule that these folks are employees.  This case is interesting in the sense that an ultimate decision on the merits has not been made, but the opt-in notices are being sent to prospective claimants.