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…

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.

Although Andrew Puzder, the fast food executive who has been named as the nominee for Secretary of Labor, has indicated that he is “looking forward” to his confirmation hearing, there are also indications that he may withdraw his name from consideration for this post.  There are unnamed sources that assert that he was having second thoughts about the job and could be “bailing” due in part to the intense criticism that has come at him from many sides, e.g. labor unions.

Andrew Puzder
By U.S. Senate [Public domain or Public domain], via Wikimedia Commons
Mr. Puzder opposes increasing the minimum wage and an expansion for overtime pay and has hard line positions on immigration.  In this vein, the AFL-CIO President Richard Trumka and Sen. Patty Murray, D-Wash. have requested that Puzder release documents prior to the confirmation hearing, showing the manner in which his company has treated its employees, such as contracts with CKE franchisees, employee pay and benefit data and employee handbooks.  Indeed, Senator Murray called Puzder “a uniquely unqualified choice.” Mr. Trumka stated that Puzder has “used his position and authority to enrich himself at the expense of workers by violating labor laws.”

A group that supports restaurant industry workers issued an unscientific report that concluded that workers were subjected to significant wage theft while Puzder was in charge and also that many female employees were victims of sexual harassment in numbers that far exceeded the national average in this industry.  The report was mentioned during the hearings held last week led by Senator Murray and Sen. Elizabeth Warren, when they heard testimony from workers relating to their experiences with many allegedly restrictive employment practices.

Puzder has also been criticized for his views on immigration.  He has called the current system “unfair and unworkable.”  He has stated that any such reform should include a guest worker program, as well as some channel or mechanism to “adjust status” for people in this country without authorization and “special relief” for the children of unauthorized immigrants.  Interestingly, the news site Breitbart (which has been linked to white nationalists, i.e. the “alt-right”) also attacked the nominee, claiming that he “stands diametrically opposed to Trump’s signature issues on trade and immigration.”

The Takeaway

We will see (yet again).  Seems like there is an active groundswell of opposition that is shaping up that may doom this nominee.

Senator Elizabeth Warren, D-Mass., and Patty Murray, D-Wash., took testimony from workers at Carl’s Jr. and Hardee’s. These are the businesses that are operated by Labor Secretary nominee Andrew Puzder. The employees spoke of wage theft and other allegedly improper employment practices.

The Senators organized the forum after Sen. Lamar Alexander, R-Tenn. (the Chair of the Senate Health, Education, Labor and Pensions Committee) denied a request by several Democratic senators to allow the workers to testify at Puzder’s forthcoming confirmation hearing.  Senator Warren utilized the event to attack a number of policy positions that the nominee has taken, such as his opposition to an increase in the federal minimum wage and his opposition to the USDOL’s initiative to increase the numbers of workers eligible for overtime.

One of the workers testified that restrictive labor budgets set down for the individual restaurants compelled managers to have employees work off-the-clock without pay to make sure that all of the work was done.  She also asserted that the Company placed restrictions on the number of full-time workers so that health care benefits need not be provided.

Senator Warren observed that “if you work for a living, this man is important to you.” She noted that the Secretary will be responsible for enforcing wage and hour laws and establishing workplace safety standards and then added that “unfortunately, Mr. Puzder is not the kind of person that workers can trust will stand up for them.”

Senator Murray observed that “I can’t help but think about President-elect Trump throughout the campaign telling rally after rally that he was on the side of workers.  I met with the secretary of labor nominee, Mr. Puzder, and it’s such a contrast to what I heard President-elect Trump say. … I’m increasingly concerned that this is a very broken promise from the president-elect.”

The Takeaway

It is difficult to envision how this Secretary will be a pro-employee advocate. His views have been well-publicized and they will be/are in line with the very much pro-business (i.e. anti-worker) views of the new President.

Assuming the nominee is confirmed, we will soon see where this goes…

I love this one.  For the title of the worker classification involved.  It appears that a class of drilling fluid specialists, commonly referred to as “mud men,” has reached a $7 million settlement in its wage and hour suit against M-I LLC.  The case is entitled Syed et al. v. M-I LLC and was filed in federal court in the Eastern District of California.

The employees worked in drilling operations in Bakersfield, Calif.  They claimed they were compelled to work either twelve (12) hour shifts daily for two weeks before leaving their work sites, or work full-days (i.e. 24 hours) in which they were always on-call.  They claimed that they were not paid overtime when they worked more than forty hours per week.  (They also claimed no overtime pay when their work days exceeded eight hours, which is California law).

The settlement monies will be paid to 115 members of the national FLSA class as well as 353 members of the California class; the $7 million settlement includes up to $2.37 million in attorneys’ fees and costs, service awards of $15,000 to plaintiff Balfour and $20,000 to named plaintiff Syed, $11,500 in claims administration expenses and a $75,000 Private Attorneys General Act payment.

That leaves more than four million dollars to be paid out to class members, based on the number of weeks worked during the class period. Some class members will receive $55 for every week, while the California class members will receive $165 for each week worked.  The proposed settlement document stated that “for purposes of this proposed settlement, at a mediation … the parties operated under the premise that Rule 23 proposed class members were in a better position under California law for claims than FLSA collective action members, where in some individual cases, the covered positions have generally been deemed ‘exempt’ under federal law.  This is crucial to understand in order to realize the structure of the proposed settlement.”

The Takeaway

The plaintiffs’ attorney posited that “there are many of these types of cases pending against many major players in the industry.”  If this is an industry wide pattern and practice, that would be a problem.  The only thing to do in that instance is get into compliance and hope no one sues for two years…

I blogged about this the other day.  Well, the Fifth Circuit has acted with alacrity and has stated that it will hear the USDOL appeal of the lower court injunction blocking the new overtime regulations on an accelerated, expedited basis.  Indeed, the Court has ordered that briefs be submitted by the end of January, which, for legal proceedings, is very quick.  The case is entitled Nevada et al. v. U.S. Department of Labor et al., in the Court of Appeals for the Fifth Circuit.

Courthouse pillars
Copyright: bbourdages / 123RF Stock Photo

The appellate Court has advised that it will schedule oral argument as soon as possible after briefs are submitted.

The successful (for the moment) plaintiffs are not at all cowed by this development.  The Nevada Solicitor has stated that “the Fifth Circuit’s willingness to expedite oral argument shows that it recognizes the national importance of this issue.   As we did in the district court, the states look forward to presenting how this new overtime rule is unlawful and presents a sweeping departure from over 75 years of past practice.”

The twenty-one States that had brought the suit opposed the fast-tracking of the appeal.  They asserted that such an expedited proceeding could conflict with the lower court’s ruling on their motion arguing for final judgment invalidating the DOL rule.  These plaintiffs also argued that if the lower court issued a new decision, that action would then moot the preliminary injunction and the Fifth Circuit would not have needed to rearrange its calendar and oral argument schedule.

The DOL countered by asserting that even if court below issued a final order, the Fifth Circuit would then consolidate the preliminary injunction appeal with the agency’s appeal from final judgment.  The DOL argued that this approach would be very efficient because the legal basis for the grant of a preliminary injunction would be the legal foundation for the summary judgment proceeding and Order.

The Takeaway

As they say, now the fun begins.

Anyone who tells you they know how this will turn out does not, really know at all.

The DOL filed an appeal of the lower court’s granting an injunction staying the implementation of the new overtime regulations.  Now, as expected, frankly, the agency has requested that the Fifth Circuit expedite these proceedings.  The agency claims that the delay has denied giving additional pay (i.e. overtime) to millions of workers.

Dollar signs
Copyright: sergo / 123RF Stock Photo

The Department of Labor observed that the States themselves asked for an expedited argument and decision.  The agency’s theory is that the lower court decision should be reversed because the Judge incorrectly ruled that the FLSA did not provide the agency with the authority to use “a salary-level test” to gauge which workers would be exempt from overtime.

The DOL motion stated that “this court, however, reached the opposite conclusion in Wirtz v. Mississippi Publishers Corp. There, this court emphasized that ‘[t]he statute gives the secretary broad latitude to ‘define and delimit’ the meaning of the term ‘bona fide executive … capacity’,” and rejected the argument “that the minimum salary requirement is arbitrary or capricious.”

The DOL has also contended that the newly revised salary threshold is consistent with the salary levels established over the last seven decades.  It notes that the proposed minimum salary level for exempt employees is roughly three times the minimum wage for a 40-hour work week, which is equivalent to the multiplier utilized at the law’s inception, in 1938.

The Takeaway

I assumed this request would be made.  I also believe the request will be granted as this is an issue of national importance.

That does not mean the lower court decision will be overturned or that the new Administration will not roll back (in some part) the proposed salary level.

We will see…

On November 22, 2016, Judge Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide injunction against the Department of Labor (DOL) blocking its Final Overtime Rule, which was set to go into effect on December 1, 2016.

The injunction “preserves the status quo while the Court determines the Department [of Labor]’s authority to make the Final Rule as well as the Final Rule’s validity.” Moving forward, the Final Rule may face an uphill battle as the Court found the states challenging the Final Rule showed a “substantial likelihood of success on the merits.”

Dollar signs
Copyright: sergo / 123RF Stock Photo

This leaves many employers in a quandary.  Employers who had plans to implement those changes must decide whether to postpone, temporarily or otherwise, those initiatives, proceed with the changes or see what develops down the line.

I believe the following guidelines provide some reasoned basis for dealing with this injunction and the uncertainty that it brings with it:

  • Employers that have already implemented changes in anticipation of the new rules taking effect need to consider from a human resources standpoint the impact of reversing those actions. Taking away promised salary increases will inevitably lead to dissatisfied employees and employee relations problems. Employers need to weigh the “human” costs of that unhappiness against the cost of the salary increases.
  • Employers that have not implemented changes are better able to take a wait-and-see approach. The injunction could well be modified or even lifted.  If that happens, there is no way to know how long employers will have to comply with any revised standards.
  • Employers must still be mindful of the duties test of the “white-collar exemption,” which has not been altered. If employees are non-exempt, today, from a duties perspective, they will be non-exempt in the future, whatever the salary levels are raised or (or not raised to).
  • As always, employers must comply with state-specific requirements for overtime exemptions, which may well include salary thresholds more than $455 per week, e.g. California, New York.
  • Keep employees informed, whatever you do!

The Takeaway

In my humble opinion, I do not believe these new changes will be implemented, or, if they are, they might/will be diluted under the pro-business Administration that will be taking over in seven weeks.

To be continued…

A group of New Jersey sales associates who work in Dish Network LLC call centers urged a federal court to confirm a $1.9 million arbitration award stemming from a proposed class action, in which the workers said the satellite television provider miscalculated their overtime pay rates.  The case is entitled Frisari v. Dish Network LLC, and was filed in federal court in the District of New Jersey.

Group of satellite dishes
Copyright: foottoo / 123RF Stock Photo

The workers urge that the award, which gave the employees overtime at time and one-half, instead of the half-time overtime rates they were paid, is appropriate under long established principles.  The plaintiffs urge that “it is well established that when this court reviews an arbitration award, as long as the arbitrator’s award is not by ‘his own brand of industrial justice,’ the award is legitimate.”

The plaintiffs’ lawyer stated that the award shows that employers could not “cut corners” by paying overtime based on a half-time premium, which is a form of the FLSA “fluctuating work week” method.  He stated that “this sets precedent that companies cannot use the fluctuating work week method under the New Jersey Wage & Hour Law.”

The employees claimed that they were compelled to work off the clock and were prevented from accurately reporting these overtime hours.  They asserted that they were not paid while they performed preliminary duties before their shifts began, such as booting up computers and launching software.  The employees also claimed that they often worked through lunch, although these meal breaks were counted as unpaid periods.

The employees had filed suit and then the Company claimed that they were compelled to arbitrate their claims individually, as opposed to a class action, but the arbitrator held that there was the possibility the workers could still proceed with their claims as a class.   The Company sought to vacate that award but was unsuccessful.  In the final order he entered, the arbitrator awarded $480,000 in attorneys’ fees to the class and $1.9 million damages for the class.

The Takeaway

This case illustrates an interesting trend that is perhaps developing.  I believe (and I see it in my practice) that plaintiff lawyers are becoming less averse to litigating FLSA claims in an arbitral forum, where defendants would much prefer to be in.  On balance, I think it is better for both sides.  It is much cheaper, much faster and arbitrators are usually pretty savvy, both in deciding the case on the merits and facilitating settlements.

A win win.  Maybe…

A group of field service engineers have filed a FLSA suit against Alcon Laboratories, on the theory that the company misclassified them as exempt employees.  They seek conditional class certification, alleging that they were consistently denied overtime pay.  The case is entitled Voss v. Alcon Laboratories Inc., and was filed in federal court in the District of Minnesota.

Lab and engineers
Copyright: nd3000 / 123RF Stock Photo

The allegation is that the Company wrongfully classified field service engineers as exempt until the Company changed their classification in 2016.  The plaintiffs seek conditional certification of a class of field service engineers.  The motion for certification asserts that “regardless of their specific job title, Alcon’s field service engineers performed the same primary job duties and were compensated in the same manner.  And despite the fact that they routinely worked over 40 hours per week, they were uniformly classified as exempt and denied proper overtime pay.”

Although they now receive overtime, the employees want back due wages for the period(s) of time they were misclassified.  The lead plaintiff asserts that his duties included installing, repairing, troubleshooting, servicing and maintaining ophthalmic laser equipment.  The Company defended its earlier classification decision by contending that the employees were professionally exempt or fit within the Highly Compensated Employee (HCE) exemption.

But – and it is a big but – at the conditional certification stage, there is a lower burden of proof and the plaintiffs argue that they have met the “fairly lenient” burden of evidence for conditional certification, i.e., a showing that the workers were similarly situated.  The plaintiffs argue that they share the same job duties, FLSA classification and pay structure and that they were all told, via a series of conference calls, about their new classification policy.

The Takeaway

The danger, always, when an employer re-classifies employees and begins to pay them overtime going forward is that the employees will realize that maybe they should have been paid overtime “all along” and will take some action.  In the litigious world in which we live, in the internet world in which we live, where employees can (all too) easily learn about their “rights,” an employer who re-classifies must always anticipate future challenges to its prior reclassification decisions.

One answer.  Compute what the employees are owed for that past overtime and pay them, along with getting the employees to sign releases.  That also brings with it legal issues, as one or more of the people may take that Release to an attorney or seek an attorney’s advice, but if the employer can get most of the people to “take the money and run” on that backdue overtime, the size of any ostensible class has been greatly diminished.