FLSA Retaliation

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Usually, in FLSA cases, no emotional damages are allowable in retaliation cases.  Perhaps that inviolate principle is now changing.  In an important case, the Fifth Circuit has recently held that “an employee may recover for emotional injury resulting from retaliation” under the Fair Labor Standards Act in Pineda, et al. v. JTCH Apartments LLC. 

Stressed businessman in the office
Copyright: tomwang / 123RF Stock Photo

The FLSA prohibits employers from retaliating against employees for complaining about not being paid correctly or for commencing a lawsuit or an administrative proceeding.  The anti-retaliation damages clause states that “[a]ny employer who violates the provisions … shall be liable for such legal or equitable relief as may be appropriate to effectuate the purpose of” the anti-retaliation section.  In Pineda, the issue was whether this language allowed a plaintiff to recover emotional harm damages in FLSA retaliation cases as well as the lost wages.

The plaintiff was a maintenance worker who was given an apartment to live in, at a discounted rent, as part of his compensation.  He sued for alleged unpaid overtime; then, three days after the Company was served with the Complaint, the employer told Pineda (and his wife) to vacate their apartment for nonpayment of rent, where the unpaid rent equaled the discount that the Company had given to Mr. Pineda.  The employee then added a FLSA retaliation Count and at trial requested a jury instruction on emotional distress damages for the retaliation claim, which was denied.   The employee won his wage case (and attorney fees) and then he appealed the lower court’s refusal to instruct the jury on emotional distress damages to the Fifth Circuit.

The Fifth Circuit found the language of the FLSA damages provision for retaliation claims to be “expansive” and should “be read to include the compensation for emotional distress that is typically available for intentional torts like retaliatory discharge.” The Fifth Circuit cited precedent from other Circuits that have approved such awards.  The Fifth Circuit also noted that intentional retaliation cases were more detrimental than ordinary wage violations.  In this case, the Court noted that the plaintiff’s testimony on the nature and level of emotional harm was “sufficient to enable a jury to find that the plaintiff experienced compensable emotional distress damages.” Now, he has to prove such harm.

The Takeaway

Employers must be careful when they want to discipline or fire an employee who filed a wage claim or complained about his compensation.  It seems that a disturbing trend is forming, with more and more courts ready to award emotional distress damages in FLSA retaliation cases.  Thus, even a simple wage violation, even if an accident, may expose the employer to damages for pain and suffering.  The action(s) cannot be, or be perceived to be, retaliatory.

granite slabs
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Usually, it is the USDOL that is seeking sanctions against an employer who has, in wholesale fashion, violated the Fair Labor Standards Act. Well, for once that wheel has turned the other way. A federal judge has just sanctioned Labor Secretary Tom Perez for discovery failures and the Court prevented the government from calling witnesses at trial. Further, the lawyer representing the agency has sought permission to withdraw from the case. The case is entitled Perez et al v. Virginia Marble and Granite Inc. et al, and was filed in federal court in the Eastern District of Virginia.

The Judge granted three motions for sanctions filed by the Company, “for reasons stated from the bench” in an Order filed a few days ago. The Judge also barred the Secretary from discussing a damages calculation at trial and denied the agency’s motion to extend the discovery deadline; that motion was filed five days after discovery closed. The agency admitted that several unexpected medical emergencies involving the agency attorney’s son delayed its discovery responses.

The agency had sued the Company, alleging overtime violations involving forty-six employees. The Complaint alleged that the Company paid some workers a flat rate for each day of work, but not the required time-and-a-half when they did overtime work. The agency also charged that the Company was altering their records to make it appear that the employees were paid proper overtime.

The Company, for its part, filed three sanctions motions, alleging discovery derelictions and deficiencies; the Company requested that the Court bar testimony regarding the agency’s damages calculation or, even better, dismiss the case completely. The Company contended that the Secretary failed to himself appear or make an investigator available for a deposition, failed to disclose the agency’s damages calculation and witness lists under Rule 26(a) and failed to respond to written discovery requests. The Company sought to accommodate scheduling issues and many times had asked for the damages calculation and witness list.

The Takeaway

This makes me feel good—even the Secretary of Labor can be sanctioned for failure to comply with discovery deadlines and protocols in federal court. I have found state courts much more lenient on discovery issues and failure to meet deadlines.

Good way to start the holidays!

After an employer make settlements with employees, especially if done through a DOL investigation, and those employees are still employed, there exists perhaps a natural “urge” to take some of that money back or perhaps, to get some pay back.  That’s a No-No.  To prove the point, the US Department of Labor has now sued an employer who cut the wages of two workers when they refused to return back wages paid to them as part of a settlement in a prior DOL investigation.  The case is entitled Perez v. Makin’ Choices Inc. and was filed in federal court in North Carolina.

Dollar signs
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The company agreed in August 2014 to pay sums exceeding $100,000 to resolve a DOL investigation centering on allegations of unpaid overtime/minimum wage.  Then, allegedly, the company began repeatedly asking two of the employees to return what they were paid out under the DOL audit.  Their refusal triggered (allegedly) the wage cuts.  The government’s complaint charges the company the owner, personally, with violating the anti-retaliation protections of the FLSA.  As the Complaint aptly states, “shorting workers once is bad enough, but we simply will not tolerate attempts to retaliate after we’ve stepped in to recover the wages they’ve worked so hard to earn.”

The audit started in July 2012 and culminated in an August 2014 settlement.  The simple fact is that the workers worked between 77-112 hours per week, making about $12 per hour, so these people were working a huge amount of overtime hours.  Then, after many times being asked to give back the “hard-earned” settlement dollars, the company decided to try an alternative method to recoup the money.

While DOL investigators were looking into the alleged retaliation, they also uncovered other violations by the company of FLSA overtime laws.  The agency is seeking back pay and damages for the alleged retaliatory action and, adding insult to injury, seeking overtime wages for the two employees at issue as well as two other technicians.

The Takeaway

Sometimes it is better to leave well enough alone.  The most important thing for me, when I am advising and representing a client in a DOL audit, is to come out of the audit or inspection, fix what was broken and then move on.  The company here seemingly did not do that.

So the company will perhaps learn another, harder, more expensive lesson.

Usually, when a party does not respond to discovery requests, it can face sanctions, including the dismissal of the case (if he/they are the plaintiff(s).  Well, that truism took a hit the other day when a New Jersey federal judge did not dismiss the claims of two opt-in plaintiffs in a FLSA collective action against General Electric Company, as the Court concluded that the delays in their responding to discovery by service technicians, who have charged they were not compensated for off-the-clock duties, did not mandate dismissal of their case.  The case is entitled Maddy et al. v. General Electric Co., and was filed in federal court in the District of New Jersey.

Copyright: marsil / 123RF Stock Photo
Copyright: marsil / 123RF Stock Photo

Although the plaintiffs had a lengthy history of delinquent discovery responses, including a year-long lack of response to certain discovery requests, the Judge refused to throw their claims out.  The Judge examined the so-called Poulis factors, the Third Circuit six-part standard  to determine whether to dismiss a case for failure to comply with discovery and concluded that, in their totality, the standards weighed against dismissal. The Court found that “the only factors which somewhat weigh in favor of dismissal are the extent of the parties’ personal responsibility and the history of dilatoriness.”

The Judge found no evidence to support the employer’s claim that it had been prejudiced by the discovery delay nor was there any evidence that the two opt-ins had acted in bad faith when eventually responded to the May 2014 request in September 2015.  Significantly, the Judge also found that the plaintiffs’ claims seemed meritorious (which is one of the Poulis factors) as the defendant had not filed a motion challenging the legal sufficiency of the claims.

The allegations were that employees were doing preliminary, off-the-clock work.  The employees charge that spent time on integrally connected tasks, including time spent logging in to the computer system in order to download jobs, responding to emails and travel time.  Importantly, they allege that their supervisors intimidated them when they tried to report the time worked on their timesheets.

The Takeaway

This case evidences the “leniency” with which courts allow plaintiffs to continue to press their claims, even in the face of dilatory (beyond words) conduct in responding to discovery.  It seems if the defendant had made some motion to dismiss or challenge the claims, on their own merits, the result might have been different.

The bigger issue is whether, in reality, the employees were working off-the-clock or performing tasks so directly connected to their primary jobs that those sideline activities became compensable.  If supervisors intimidated employees not to report the time, that is bad enough on its own and worse, it will fortify the allegations of how many hours they claimed they worked.

When a FLSA case (or a state law wage hour case) is filed against a unionized client, the first line of defense for me is to ascertain if we can argue that the court has no jurisdiction because the wage hour claims are preempted by federal labor law and must be decided pursuant to federal labor contract law.  Preemption is also appropriate where the state-based cause of action is “inextricably intertwined” with the collective bargaining agreement.  In Johnson v. Langer Transport Corporation, filed in federal court in New Jersey, this doctrine has recently been given renewed vitality.

Copyright: laschi / 123RF Stock Photo
Copyright: laschi / 123RF Stock Photo

The plaintiff claimed that he was not paid regular or overtime wages, that the Company failed to accurately record wages and hours and then retaliated against him when he made complaints regarding his allegations of unpaid wages. The Company argued that this would necessarily require the Court to examine and interpret the labor contract to determine the worker’s pay rate, how hours were reported and tracked, the Company timekeeping policies, and its policies for reporting errors in pay.

The plaintiff contended that there was no dispute about the labor contract, what it says, or anyone’s rights under the contract. Instead, the plaintiff argued that he was not paid for hours he worked with the Company because it “manipulated” the time clock and refused to pay him. This, according to the plaintiff, did not require an analysis of the contract’s terms.  He argued that the factual determination of the amount of time worked, and the legal determination regarding whether this time is compensable under the applicable wage law did not depend on a reading of the terms of the labor contract.

The Court concluded that the claims for unpaid wages under the New Jersey Wage Hour Law were preempted under the Labor Management Relations Act because such claims, at their core, required an analysis and interpretation of the contract.  While the Court recognized that not every dispute tangentially involving a provision of a collective bargaining agreement is preempted, because that would be inconsistent with congressional intent, the core allegations of this Complaint were founded directly on rights created by the labor contract, specifically the Plaintiff’s right to be paid in accordance with labor contract provisions.

The Takeaway

If the labor contract provision at issue violates an explicit state wage hour law, then the wage claim is not preempted.   For example, in New Jersey the minimum wage is $8.38 per hour; if management and labor agreed to pay a starting rate of $8.00 per hour, such an explicit violation would exist and preemption would not be appropriate.

If, on the other hand, an arguable contention can be made that the dispute requires interpretation of contract terms, or explicitly addresses a matter agreed to by management and labor negotiators and codified in the contract (sometimes for years), the case for preemption becomes that much stronger.  If faced with a state court or NJDOL proceeding involving such an issue, the defendant (i.e. Employer) should strongly consider moving for a declaratory judgment in federal court.

We are all happy with the falling gasoline prices we have experienced, but, as lawyers, we (seemingly) always look for the dark spot in the sky. Some commentators are positing that the sharp drop in oil prices may trigger an increase in Fair Labor Standards Act suits against employers in the energy sector, as involuntarily separated workers seek out lawyers who look for weaknesses in employer compensation procedures, such as dubious classifications of workers as exempt or independent contractors. In fact, I recently posted on just such a misclassification lawsuit in this industry (won by the plaintiffs).

Factors possibly impelling this increase are the rather lenient standard for securing conditional collective action certification in FLSA cases and the widespread use of independent contractors by oil companies.  From numerous experiences, I can safely say that the issue of who is and who is not an independent contractor is often a murky question and the term “consultant” is used a little too loosely.

The use of independent contractors is more pervasive in the energy space industry, as opposed to other industries, according to Becky Baker, of Houston’s Bracewell & Giuliani.  She opines that oil companies rely “heavily on a contract workforce in the field.”  Although using independent contractors is certainly lawful, the issue of whether such workers are actually employees is extremely fact sensitive and the law is generally tilted (in any State) in favor of finding people to be employees.

Starting a FLSA lawsuit is easier for plaintiff side attorneys because many of them now use a detailed intake questionnaire, which probes not only “standard” type discrimination issues but also ferrets out the manner and mode of payment of the potential client, whether they receive overtime and whether they are in fact classified as independent contractors.   If the person answers that they do not receive overtime, then a whole line of inquiry opens, with now a new focus on FLSA type issues.

The Takeaway

Perhaps the larger energy companies, which may have already been sued on classification issues (exemption and independent contractor status) may be well positioned to defend such new cases, but there will be many opportunities for plaintiff lawyers to go after small and mid-size employers.  Although lower/falling oil prices may not be good for all kinds of employment cases, wage-hour suits specifically are a genre of cases that may have legs.  This is because, unlike many discrimination lawsuits, which must first begin with the filing of a Charge before the Equal Employment Opportunity Commission, FLSA plaintiffs do not have to go through this procedural hurdle, as they would for a Title VII claim.

Further, although an employer can ultimately seek to decertify a FLSA collective action, there is only a modest burden placed on plaintiffs to secure conditional certification, which then triggers the sending of notices to all putative plaintiffs, which then raises the stakes geometrically.  Also, is extraordinarily expensive to defend such actions and the fee shifting nature of the FLSA further multiplies the fees at issue.

So, fill up and let’s ride…

In November we reported on Wigdor v SoulCycle, which had been filed in New York Supreme Court, New York County.  In that action a well-known plaintiff’s attorney, Douglas Wigdor, alleged that SoulCycle retaliated against him by banning him from the Company’s establishments because Wigdor had filed a putative wage and hour class action against SoulCycle.

This action reminded us of Jerry Seinfeld’s “Soup Man,” who would decline to serve customers that did not properly place a soup order.  We had previously asked whether the owner of a store has a right to prevent counsel from entering, for example, to solicit business in their establishment.  The answer is apparently: yes …. and no.

In Wigdor v SoulCycle, Mr. Wigdor asserted four claims: (1) retaliation under New York Labor Law (NYLL) § 215; (2) retaliation under California Labor Code (CLC); (3) prima facie tort; and (4) breach of an obligation of good faith and fair dealing.  SoulCycle moved to dismiss all claims for failure to state a claim, and now the Court has issued a decision on that motion.

The Court dismissed three of the four claims – the retaliation claims under NYLL and CLC as well as the prima facie tort claim – but declined to dismiss the claim for good faith and fair dealing.  See Wigdor v SoulCycle, Index 161572/2014 (Sup. Ct, NY County April 13, 2015).  In dismissing the NYLL and CLC retaliation claims the Court recognized, as we noted in the November blog, that both statutes prohibit retaliation against an “employee.”  Indeed, NYLL § 215 states: “No employer … shall discharge, penalize, or in any other manner discriminate against any employee because such employee has made a complaint to his employer….” id. (emphasis supplied).  The CLC contains a similar provision.  Yet neither statute references protection for the employee’s lawyer.  The Court explained:

Contrary to the plaintiff’s contention, the text of Labor Law § 215 does not reveal a clear intent to authorize a claim where an employer retaliates against an attorney that represents a former employee of the employer.  Indeed, neither the plain language of the statute nor its legislative history, as revealed by the 1967 bill jacket accompanying its enactment and the 1986 bill jacket accompanying its amendment, contemplates an action by someone other than an employee making complaints regarding a former employer.

Id.  Additionally, the Court dismissed the claim for prima facie tort because “other than conclusory contentions, there are no facts supporting the assertion that defendants sole motivation for banning plaintiff from SoulCycle premises was intended to maliciously injure plaintiff.”   Id.  Thus, Seinfeld’s Soup Man would appear to be vindicated.

Unfortunately, the case took a turn for the worse for SoulCycle as the Court refused to dismiss the final claim for breach of good faith and fair dealing.  A prerequisite for asserting such a claim under New York law is that a plaintiff must plead and prove that there was a contractual relationship between the plaintiff and defendant.  SoulCycle argued that it never had a contractual relationship with Wigdor and therefore the claim should be dismissed. The Court disagreed concluding that when Wigdor plead that he had “electronically agreed to SoulCycle’s terms and conditions” he established, at least for the purpose of stating a claim, that a contractual relationship was created.   Accordingly, the breach of good faith and fair dealing claim survives, for now.

Thus, it seems the Court’s ruling does give some guidance to our inquiry as to when a business owner has an appropriate say in deciding who should not be allowed to patronize his/her business.  Certainly, had there been no prior business relationship between Wigdor and SoulCycle, and then this case would have been dismissed.  Yet, apparently when there is some prior “contractual relationship” then the lines become a little cloudy as to when the business owner can decide whether someone should continue to patronize the business.  We are now left to ask, merely because someone had patronized the business before and abided by the terms and conditions of the business owner, such as paying for the goods and services rendered, when can the business owner end that relationship?  How long does the former patron get to ask, as Oliver Twist might – “Please Sir, can I have some more?”

On Friday, February 20, 2015, a federal judge issued an unusual order in Fujiwara, et al. v. Sushi Yasuda, LTD, et al, 12-cv-8742(WHP) (S.D.N.Y. Feb. 20, 2015).  After receiving an anonymous letter in an FLSA lawsuit, United States District Judge William H. Pauley directed counsel for the parties to conduct an investigation into the circumstances concerning the allegations asserted in the anonymous letter and to submit a joint report by next Monday, March 2, 2015 on the status of the investigation.

The lawsuit claimed that a sushi restaurant, Sushi Yasuda, improperly withheld gratuities from employees, and violated the minimum wage and overtime requirements of the FLSA and New York Labor Law (NYLL).  After taking initial discovery, Plaintiffs moved for class certification of their NYLL claims.  However, before Sushi Yasuda filed any opposition, the parties entered into a settlement agreement on a class-wide basis, which the court eventually approved in January 2015.  Thus, the lawsuit had been settled before the anonymous letter was sent to the court.   However, the letter, purportedly sent by an unknown chef at the restaurant, indicated that class members were being pressured by unnamed managers not to cash their settlement checks under the threat of losing their job and work visa.

Certainly, the anonymous letter would trigger concerns of prohibited retaliation under the FLSA, see 29 USC § 215, which explains why Judge Pauley took the unusual step of having counsel for the parties investigate the circumstances surrounding the letter.  Indeed, the court’s reaction to the letter demonstrates that retaliation can occur even after a settlement has been reached between the parties and approved by the court.

However, the letter does raise additional questions.  Because the letter is anonymous there is no way to know whether the author was a named plaintiff, an opt-in plaintiff, or a class member that never affirmatively joined the litigation.  The FLSA anti-retaliation provision, however, prohibits any retaliatory conduct “against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA] or has testified or is about to testify in any such proceeding …” Id. at §215(a)(3).   Thus, one question is presented as to whether a claim of FLSA retaliation can involve an individual who engaged in no protected activity.  Additionally, in this case there was no determination on the class certification under Rule 23 or under state law.  Thus, there could not be retaliation based on the unknown author’s standing as a class member involved in the litigation.  Because the FLSA relies on an “opt-in” procedure, as opposed to Rule 23 class certification, an individual who does not opt-in to the litigation, is not presenting any FLSA claim or bound by any determination concerning such claims in that litigation.  See, e.g., Guzman v. VLM, Inc., 07-cv-1126 (JG), 2008 WL 597186 at *10 (E.D.N.Y. Mar. 2, 2008); Butler v. American Cable & Tel, LLC, 09-cv-5336, 2011 WL 4729789, at *12 (N.D.Ill. Oct. 6, 2011).

Of course, the argument can be made that, by virtue of sending the letter, the anonymous-chef author has engaged in some type of protected activity, even if he/she is not a named Plaintiff or opt in Plaintiff.  Thus raising the question as to whether such activity, merely sending a letter to the judge, actually satisfies the requirements of Section 215.

Putting those questions aside, there is no question that the court, by virtue of its inherent authority to supervise the settlement and ensure that the settlement is fairly effectuated, would have jurisdiction to address the possibility of any conduct which could impact the settlement and to punish anyone who threatens the fair and efficient resolution of the settlement.  Exercising such jurisdiction inevitably requires a determination as to whether any threat was actually made, and if so, what exactly was stated or threatened.

Whatever the answer to the questions posed above, it is important for any employer to impress on its managers that they may not threaten any employee for asserting an FLSA claim.  Certainly, any such threats could result in additional claims of retaliation, which will inevitably cost the employer more to defend.  Indeed, in order to truly realize the benefit of the settlement agreement and finally resolve these wage and hour claims, the employer should want the settlement payment to be fulfilled so that the employer can move on and return to business without further issues.

In FLSA cases in which retaliation is alleged, it is incumbent upon the employer to defend by showing that the disciplinary process had started prior to the protected activity, meaning that the employer must show that the employee’s engaging in the protected activity could not salvage a job that was legitimately in danger.  If such evidence is not already in existence, then there is the risk that the retaliation complaint will have life breathed back into it, possibly leading to an unpredictable jury trial.  A recent case illustrates this maxim.

In Cantu v. Vitol, filed in federal court in the Southern District of Texas, the employer fired two people.  The employer filed a summary judgment motion and, for one of the workers, it made a sufficient showing that it had already commenced disciplinary actions against the worker and had actually planned to dismiss her well before she instituted legal action against the Company for failure to pay overtime.

So, the district court granted summary judgment as to that employee.  The court, however, did not agree that the employer had presented sufficient evidence i.e. documents/paper trail, showing performance or conduct issues with the second employee, so the motion was denied as to that worker.  The court made specific mention of the fact that there was no proof that the termination decision had been made before the lawsuit was filed.

The employees, a pair of contract administrators for an energy trading company, sought back-due overtime.  The employees had sent notice of their lawsuit to the Company and were then both fired only days after.  Both claimed their discharges were in retaliation for their protected activity.  The Company made a showing that one of the employees had a longstanding dispute with one of the traders; there was also evidence that other traders were unhappy with this employee’s work. Significantly, the Company also demonstrated that it had started to look for a replacement for the employee before the suit was filed.

As to the second worker, the evidence was less convincing and, indeed, rather scanty.  The Company failed to produce any of the e-mail messages that it claimed showed that concerns about the employee’s work performance had been raised prior to her discharge.  Also significant, and making the situation even more problematic for the employer, was the fact that when the employee received a change in responsibilities and increase in workload, she complained about overtime and then she allegedly began to experience different and harsher treatment from Company management, culminating in her firing.
 

On March 22, 2011, the United States Supreme Court held in Kasten v. Saint-Gobain Performance Plastics Corp., that the Fair Labor Standards Act (“FLSA”) prohibits employers from retaliating against employees who make verbal, as well as written, complaints regarding a violation of the statute. The Supreme Court did not, however, specify whether a “complaint” must be made to a government agency, or whether an internal complaint is sufficient to trigger the protection of the FLSA.

In Kasten, the plaintiff sued the company for allegedly terminating his employment in retaliation for verbally complaining to company officials about the placement of its time clocks. The Western District of Wisconsin ruled that the plaintiff’s informal complaint did not constitute protected activity under the FLSA. In affirming the District Court’s decision, the Seventh Circuit ruled that the FLSA’s use of the phrase “file any complaint” indicates that the statute only protects written complaints.

The Supreme Court rejected the Seventh Circuit’s interpretation of the phrase “file any complaint,” and held that “considering the purpose and context” of the FLSA’s anti-retaliation provisions, both verbal and written complaints should be protected. The Court further provided that the following standard should be considered when determining whether an employee has filed a complaint: “[A] complaint is filed when a reasonable, objective person would have understood the employee to have put the employer on notice that [the] employee is asserting statutory rights under the [act].”

In light of this decision, employers can expect an increase in retaliation claims under the FLSA. To protect themselves from such claims, employers should treat potential verbal complaints under the FLSA in the same manner as they would verbal complaints under federal and state anti-discrimination laws.

Specifically, employers should consider: (1) implementing and notifying employees of a complaint procedure for claims of wage and hour violations; (2) training managers and supervisors on how to identify protected complaints; and (3) advising managers and supervisors to consult with Human Resources prior to taking any adverse action against an employee who has previously complained.