Employers are always trying to cut off the head of a class action, i.e. the named plaintiff, in order to bring the case to an end. What happens when the named plaintiff is gone from the case but some people have opted in? Do they become named plaintiffs, with the case continuing?  The Eleventh Circuit has seemingly answered that question in the affirmative. The court has just ruled that workers who opt into collective actions under the Fair Labor Standards Act only have to file that little piece of paper, the consent form, to then become a named party to the case,  The case is entitled Mickles et al. v. Country Club Inc.

The Elbert P. Tuttle U.S. Courthouse in Atlanta, Georgia, now home to the U.S. Court of Appeals for the Eleventh Circuit.
By Eoghanacht [Public domain], from Wikimedia Commons
Importantly, the ruling is a published one, meaning it is precedential. The panel reversed the lower court which held that the three opt-ins were not properly added to the case and should have been eliminated from the suit after the original plaintiff did not succeed in securing conditional certification and then settled. The Judge who wrote the decision stated that this was a case of first impression.

The Court noted that the FLSA, on its face, buttressed the conclusion that workers who opt into a collective “become party plaintiffs upon the filing of a consent and that nothing further, including conditional certification, is required.” The Court stated that “we conclude that filing a written consent pursuant to [FLSA] section 216(b) is sufficient to confer party-plaintiff status.”

The case was filed in 2014 by a single named plaintiff Andrea Mickles, a dancer at Goldrush. The suit alleged that the company (Country Club Inc.) had misclassified her and other dancers as independent contractors and thus they were denied proper minimum wages and overtime monies. She sought a class of current and former dancers; three other dancers then opted in by filing consents.

The lower court denied the motion to conditionally certify the class, as it was filed beyond the deadline set forth in local court rules for such a motion. There was no mention, however, of what would happen to the three opt-in plaintiffs. The Company then asked the court to specify which individuals would stay in the case. The company claimed the opt-ins had never become named party plaintiffs and thus were eliminated from the case when the conditional certification motion was denied.

The three additional workers claimed they could not be dropped from the case because the conditional certification motion was denied. The lower court held that the three had not been ruled similarly situated to the original plaintiff and had not been joined to the collective action. Then, the original plaintiff settled with the company and the three opt-ins appealed to the Eleventh Circuit.

That appellate court noted that there was no determination made as to the “similarly situated” element for the three workers, as needed to be done. Although opt-ins must be similarly situated to the original plaintiff, as no ruling on this issue had been made, the three employees stayed as parties until that ruling was made; if they were not ruled to be similarly situated, then they would be dismissed from the case.

The Eleventh Circuit therefore ordered that the opt-in cases be dismissed without prejudice so they were free to refile their claims, or proceed with their own suits. The court stated that “the “appellants were parties to the litigation upon filing consents and, absent a dismissal from the case, remained parties in the litigation, Thus, the district court erred in deeming appellants non-parties in the clarification order, which had the effect of dismissing their claims with prejudice.”

The Takeaway

This is a major change in the FLSA litigation landscape and makes it harder for an employer to get a case dismissed or to even settle a case. Yes, it is only one circuit, but the reasoning and rationale may spread to other circuits.

I hope not…

Exemption class actions, i.e. lawsuits alleging misclassification, continue to pop up in different contexts and concerning different classifications. A bank has just agreed to settle a case by paying more than $2 million to put a close to a Fair Labor Standards Act (FLSA) collective action based on a theory that the bank misclassified certain computer/IT workers. The case is entitled Schaefer Jr. v. M&T Bank Corporation, and was filed in federal court in the Southern District of New York.

Network switch and ethernet cables,data center conceptThe settlement will pay almost $2.5 million to more than two hundred IT workers across the country. The parties have filed a joint motion asking that the settlement be approved. The motion notes that the employer denied liability as well as that it even was the employer of the workers. The motion then asserts that the settlement was “reasonable in light of the considerable risk that Plaintiffs face.” Naturally, the motion seeks money for attorney’s fees that would amount to 33% of the gross settlement funds and money for a settlement claims administrator.

The motion provides the rationale for the settlement by stating that “first, although plaintiffs obtained conditional certification, maintaining the collective and certifying a class through trial may be difficult. Defendant would likely argue that the differences among various job titles, departments and other individualized questions preclude class certification and would warrant decertification of the collective. Moreover, defendant could argue that the computer exemption applies to plaintiffs and ultimately convince the court that plaintiffs were properly classified as exempt from overtime pay. Although Plaintiffs disagree, other defendants have prevailed on such arguments in similar cases.”

The theory of the suit was that the bank did not properly pay overtime to technology department network computing analysts and staff specialists. The lead plaintiff, James Schaefer Jr., alleged that he was such an IT worker for several years and was not paid overtime because he was misclassified as exempt.

The Takeaway

These exemption cases prove difficult to win, often times. On the computer exemption issue, numerous titles abound which may or may not connote an exempt classification. A lot of gray here. With that said, the need-for-individualized-scrutiny defense sometimes works. Sometimes it does not and then the stakes for the employer-defendant are dramatically escalated.

Much better to settle…

I blog a lot about working time cases because these are the issues can sneak up on an employer, even the most well intentioned and good faith employer. Travel time is one of these murky, arcane kind of activities that go unnoticed by companies until, often, a lawsuit is filed. Another example emerges. A group of workers who constructed and maintained cellphone towers in several States gave been granted conditional certification in a FLSA collective action based on an alleged failure to pay for travel time. The case is entitled Lichy et al. v. Centerline Communications LLC, and was filed in federal court in the District of Massachusetts.

Silhouette of a cell phone tower shot against the setting sun.The judge certified a class of tower technicians and foremen. These workers can now opt into the lawsuit, which is based on the theory that the company should have compensated them for hours they spent driving company vehicles to work, over supposedly vast distances. The inclusion of foremen in the class, e.g. supervisory personnel, is quite interesting, but the Court found their duties were very similar to the rank-and-file workers and the foremen were working under the identical travel time policy.

The plaintiffs’ lawyer, naturally, applauded the decision, stating “first, the court recognized that slight differences among members of the class do not preclude conditional certification where all class members are subject to the same policy regarding payment of wages  Second, the court explicitly recognized that plaintiffs need not submit affidavits in support of their motion for conditional certification in order to prevail.”

Five tower technicians/lineworkers filed the suit. Their job duties included climbing cell towers, many times in distant locations and installing antennae, radios and cables. The Company mandated that the workers drive together to these job sites. The men were paid their regular hourly rates for the travel time between a meeting point and the job site. However, the Company failed to pay for the travel time returning to the central meeting place unless there were traffic delays or the job location was more than 130 miles from the regional workshop, according to the allegations in the case. The workers seek payment for the time driving back in Company vehicles to the central location. The Company contends that the FLSA does not mandate payment for travel time.

The Takeaway

I wonder why the company would not pay for the travel time back to the meeting place or regional office when the Company did pay for the travel time from the meeting place to the job site. That initial agreement to pay seems to undermine the defense that travel time is non-compensable. Home to work travel time is non-compensable, but when workers must first report to a central location, leave from there to the first job site and travel back to that central location, the travel time then does become compensable.

I bet this case settles…

Classification issues are annoying ones, to state the obvious. Especially decisions and issues as to who is and who is not an independent contractor. And, it does not matter whether the defending entity is a mom-and-pop candy store or one of our most elite educational institutions, such as Harvard University. That august institution has just recently agreed to revise its university-wide worker classification system as part of a settlement of a class action involving allegations of misclassification. The case is entitled Donahue v. Harvard University and was filed in state court in Massachusetts.

A massage therapist treating a female client on a table in an apartmentThe settlement included a class of approximately 20 acupuncturists and massage therapists who worked at the University’s Center for Wellness from January 2013 to December 2017. These workers will now be re-classified as employees and receive up to $30,000 each in back pay. When the University re-classifies other workers, the side “benefit” will be that they will be eligible to join unions.

The plaintiff’s attorney complimented the university. She stated, “from the outset of this case, I have said that Harvard should be a role model for other employers. I am very proud of this settlement and hope that it sets an example of how other employers should respond when a concern is raised that its workers have been misclassified.”

The named plaintiff, Kara Donohoe, a massage therapist, sued the University in January 2016, alleging it misclassified her and others as independent contractors. They were, consequently, denied certain employee-related benefits. She will receive $30,000 in back pay and an extra $30,000 for being the named plaintiff, a so-called “incentive award.” Other workers will receive up to $30,000 in back pay. Harvard has now tasked a group of people (e.g. HR) with revising its policies concerning classification of individuals as independent contractors. This study will be guided by federal and state law principles.

The Takeaway

A wholesale classification of any group of individuals as independent contractors is dangerous. As I have harped on many times, the starting point for any such analysis, whether under FLSA principles or state law, any state’s law, is to ascertain if the individual has other customers or clients or works solely/mostly for the putative employer.  In this case, if these Therapists worked only for Harvard, they were not engaged in an “independently established business” and that is the death knell for any employer defense in an independent contractor case.

Sorry, but, on this one, Harvard gets an “F.”

I have blogged several times recently on the rash of “check bag” cases that have percolated through the courts. Another example. A class of workers employed by Converse Inc. have now asked the Ninth Circuit to revive a class action resting on the theory that the time waiting to go through mandatory security inspections was compensable. The employees allege that the trial court’s decision that the time spent was de minimis was incorrect. The case is entitled Chavez v. Converse Inc., and was filed in federal court in the Northern District of California.

White canvas sneakersThe lower court judge found that the waiting time spent in inspections was a minute or a little more. Thus, the Court ruled that the time was de minimis. The employees argued that the judge should not have applied this doctrine to the California Labor Code claims because the test utilized by the Court was ostensibly meant to apply to Fair Labor Standards Act claims under the holding in Lindow v. United States. In this regard, the Court acknowledged that the question of whether the de minimis doctrine could ever apply to the California state statute was a question pending before the California Supreme Court after the Ninth Circuit certified that question to the Supreme Court.

The employees filed suit in July 2015 and in September 2016, Judge Cousins certified a class of approximately 1500 employees, finding that the claims shared commonality sufficient for a class-based litigation. Nevertheless, the judge dismissed the suit because the time spent in waiting was too brief to warrant litigation or to make findings that compensation was owed because the time was “working time.”

There were competing experts in this case. The Company expert stated that the inspection took less than ten seconds. The workers’ expert stated that the inspections took approximately 2.5 minutes per occurrence. The Judge ruled that even if the worker expert was right and it took 144 seconds per inspection, each worker would have to go through five exit inspections daily to amass more than ten minutes of off-the-clock time, which is the standard baseline for a de minimis finding.

The Takeaway

This case is interesting because the state Supreme Court is going to rule on the meaning of de minimis, which will impact on the holding reached in this matter. With that said, the lesson for employers is to always, I mean always, stake out the de minimis defense in any waiting time case, especially a bag case.

It just may work…

What is working time? There are many variations on this theme, some far grayer than others. When does waiting time become working time? Is the employee engaged to be waiting or waiting to be engaged? If the former, then it is working time. A class action involving more than 1,100 workers is now testing these hypotheses. These workers have been granted certification in a class action alleging they were not paid for time spent undergoing security checks before they left the store. The case is entitled Heredia et al. v. Eddie Bauer LLC and was filed in federal court in the Northern District of California.

Isometric Illustration of a Line at Security Checkpoint - Body Scan Machine U.S. District Judge Beth Labson Freeman certified several causes of action, including a class for off-the-clock “exit inspections.” The Judge stated that there were two existing questions common to all class members–did the company mandate that security checks be performed off the clock and, if it did so, was the time spent by employees off the clock, waiting to go through security checks. compensable hours worked.

The theory of the suit (filed by a sales associate at a retail store) was that employees were not properly paid for time spent engaged in screening and time they waited for the screening to be conducted. The employee alleged that she was compelled to undergo bag checks and security inspections whenever she left the facility and these inspections were conducted pursuant to Company policy. Indeed, the worker alleged that supervisors directed her to clock out and wait at the front of the store before a manager would conduct a bag check.

The Company defended by asserting that the employees were only subject to screening if they were carrying a bag that might be utilized to steal store merchandise. The Company further stated that these bag checks were to be conducted on the clock, pursuant to Company policy. It also argued that the named plaintiff could not demonstrate that all class members incurred a common injury because there was no liability for some employees, such as those who did not carry a bag. The Judge observed that Eddie Bauer’s written policies did not mention whether employees had to clock out before undergoing a screening, or whether managers had to advise employees that these screenings were to be conducted on the clock.

Significantly, the judge rejected the contention that plaintiffs could not establish commonality because the Company policy allowed inspections to be performed on the clock. The Court observed that “this argument itself is an answer to the common question: whether Eddie Bauer’s policy and practice was to mandate that security checks be performed off-the-clock. Of course, the parties disagree on the answer to this question, but that does not preclude a finding of commonality under Rule 23(a)(2).”

The Takeaway

This is a troubling case. The element of compulsion, i.e. allegedly making employees punch out and wait for the inspection, makes this case very dangerous for the employer. It is made more interesting because the Supreme Court ruled a few years ago that similar waiting time was not compensable because that waiting time was not directly related to the job.

Maybe that is the next argument the Company should make…

I have blogged many times about the rash of intern cases that have popped up over the last few years. Now maybe there will be a consistent, uniform test for determining whether interns are really statutory “employees.” The US Department of Labor has endorsed such a test. The agency is approving the so-called “primary beneficiary” standard.

Students/interns sitting at a table with laptops talking
Copyright: bialasiewicz / 123RF Stock Photo

The agency has endorsed a seven-part test for determining intern status. This was set forth in the Second Circuit decision in the 2015 ruling in Glatt v. Fox Searchlight Pictures Inc. That test analyzes the “economic reality” of interns’ relationship with the putative employer to ascertain who is the primary beneficiary of the relationship. This test has been applied in a number of cases and industries of industries, where courts have found that, as the primary beneficiaries of these internships, the individuals are not employees under the FLSA and therefore cannot file claims for misclassification and wage violations.

The agency noted that four federal appellate courts have rejected the six-part DOL test set forth almost a decade ago. The agency issued a statement asserting that the “Department of Labor today clarified that going forward, the department will conform to these appellate court rulings by using the same ‘primary beneficiary’ test that these courts use to determine whether interns are employees under the FLSA. The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”

Under the “old” test, an intern is an employee unless all of the six factors were satisfied. These included whether the intern displaced a regular employee and whether the employer derived any “immediate advantage” from the intern’s work. The updated test now restates the seven non-exhaustive factors that constituted the Glatt test. Those include: 1) whether there’ exists a clear understanding that no expectation of compensation exists; 2) whether interns receive training similar to what they would receive in an educational environment; and, 3) to what extent the internship is tied to a formal education program. The agency specifically noted that the primary beneficiary standard is “flexible,” and that determinations on intern-employee status hinge upon the unique circumstances of each case.

The Takeaway

I believe this is a better, fairer, more realistic test. Is it, as I postulated, “definitive guidance?”We will see…

There have been a great many intern cases recently, cases testing whether interns crossed the line into being statutory employees and therefore covered by the FLSA. I have blogged about these kinds of cases and have specifically blogged about beauty school cases. The Ninth Circuit has just affirmed a lower federal court’s dismissal of a lawsuit from three beauty school students, who allege they were employees while they studied for their degrees. The case is entitled Benjamin, et al v. B & H Education and issued from the Court of Appeals for the Ninth Circuit.

Hairdresser cutting young woman's hairApplying the test enunciated in Glatt v. Fox Searchlight Pictures, Inc., the Court agreed with the lower court’s conclusion that the students had not shown that the educational benefit they had received from attending B&H Education Inc.’s Marinello Schools of Beauty was not superseded by the amount of unpaid “work” that they performed. The Court stated that the “application of the Glatt factors establishes that students were the primary beneficiaries of their labors. Their participation in Marinello’s clinic provided them with the hands-on training they needed to sit for the state licensing exams.”

The Court also found that even if another, more restrictive test, i.e. the DOL factors, was applied, the students would still not be employees. The Court stated that even if it applied these DOL factors, “we view the training provided to plaintiffs to be in an educational environment, because state law requires students to clock hundreds of hours of instruction and practical training in order to qualify for taking the licensing exams.”

The issue was that as part of their educational training, the students at the school were expected to practice providing cosmetology services and, on occasion, some customers received these services. That gave the foundation for the students to allege that they were really “employees.” The Court was not convinced, finding that “as the district court noted in this case, schools typically exercise significant control over their students, but that does not make them employers.”

The Takeaway

There is a tension between the “moment” actual work may get performed and whether that alleged work is too integrally connected to the education to be called “work.”

The trick is knowing where that line gets crossed…

There has been a great deal of litigation about class action waivers in Employee Handbooks and use of arbitration mechanisms in Employee Handbooks to preclude judicial litigation. A recent New Jersey federal case sheds more light on this thorny issue, and the decision favors employers. The case is entitled Essex v. The Children’s Place and was filed in federal court in the District of New Jersey.

Pen on paperIn October 2014, the Company developed an arbitration program that applied to all Associates working at retail stores in the United States. The Company used an intranet portal to communicate with Associates. To gain access, Associates used an employee identification number and personal password. Since October 2014, the Portal included The Mutual Agreement to Arbitrate Claims.

When the Company introduced the arbitration program, it sent Associates already working for the Company received a message through the Portal, directing them to review the Arbitration Agreement. That message explained “it is important that you review the Arbitration Agreement carefully” and that “[w]e expect all Associates to review and sign the Arbitration Agreement. However, because it is not a mandatory condition of your employment, you may elect to opt out and not be subject to the Arbitration Agreement.” Associates hired after October 2014 reviewed the Arbitration Agreement following orientation. The Arbitration Agreement included a class, collective, and representation waiver.

An Associate who declined to accept the terms of the Arbitration Agreement filled out an Opt Out Form, which was also located on the Portal. Of the 377 Store Managers who filed consent to join the lawsuit, 209 of them signed and submitted the Arbitration Agreements. These employees were not required to participate in the arbitration program as a condition of employment and the Arbitration Agreement expressly provided that signing the Arbitration Agreement was not a mandatory condition of employment.

The Court ruled that the Arbitration Agreement had a clear “opt out” provision. The Court noted that numerous Plaintiffs who opted into the case first opted out of the Arbitration Agreement. Thus, it was clear that the arbitration agreement had an opt-out clause and that “[s]uch a provision can hardly be construed to interfere with, restrain, or coerce an employee into forfeiting the rights afforded by § 7 of the NLRA”).  The Defendant conceded that the forty-nine Plaintiffs who did opt out of the Arbitration Agreement were not subject to this motion to compel. Thus, the Court dismissed the case as concerned those Plaintiffs who did not opt out of the arbitration provision.

The Takeaway

This is a very instructive case for employers. The defense works! In how many of my postings am I talking about magic bullets or an easy, quick, cheap way out of a FLSA collective action (at least for many of the opt-in workers).

Well, here is a real good one…

I read an interesting post by Daniel Schwartz in the Connecticut Employment Law Blog. It concerned a recent Second Circuit decision that bodes well for employers in the never-ending fight against wage-hour class actions. The case is entitled Rodriguez-Depena v. Parts Authority, Inc. et al. and issued from the Court of Appeals for the Second Circuit.

Auto parts store shelvesThe Court therein ruled that the arbitration clause set forth in the employment agreement precluded the federal action.  Dan noted that the “clear logic” of the decision will be hard to overlook and I believe he is quite right. The Court relied upon an earlier decision that held that age discrimination claims could not be brought in court if a valid arbitration policy was in place.

The Court also examined the issue of whether the required judicial oversight of FLSA settlements would be a bar to arbitration of these claims. The Court held that it did not, as the guarantee of the fairness of a settlement of a claim filed in court did not mean that this right provided an ironclad right to file suit in court.

Dan notes that this “federal endorsement of arbitration provisions” will allow employers to adopt these provisions and provide themselves with another defense. It also provides yet another stratagem to be utilized in the early stages of a FLSA class action case.

The Takeaway

Maybe employers should consider utilizing such mandatory arbitration provisions. Arbitration is a much cheaper and faster litigation mechanism. I am a big advocate of taking the easiest way out of a class action federal court FLSA case and these kinds of provisions may be another weapon in that early dismissal arsenal.

Well done, Dan…