There have been many investigations of gas stations by the US Department of Labor. Like other retail industries, these businesses sometimes work their employees long hours for a set salary or lump sum of money. The problem is that in these scenarios, the employer is likely not paying proper overtime.

Gas stationIt has happened again, in New Jersey. A chain of six southern New Jersey gas stations will pay twenty-seven (27) workers almost $500,000 in back pay and liquidated damages in an audit emanating from a USDOL investigation into violations of the Fair Labor Standards Act,

The latest violator, R & R Store Inc., operating as USA Gas, had paid these workers a flat monthly salary ranging from $2,200-2,400; the employees worked approximately seventy (70) hours per week, but were not paid overtime. A DOL spokeswoman stated that “not paying employees the wages they’ve earned seriously impacts low-wage employees, such as gas station attendants, causing them hardships as they try to support themselves and their families.”

Significantly, the agency also assessed liquidated damages, which doubled the wages due, for an aggregate total of $463,453.52.  Liquidated damages are often now the rule, even in administrative investigations and audits. Interestingly, gas stations in New Jersey and Oregon are the only states that prevent motorists from pumping their own gas, so they need to employ workers, many of them full-time, to pump the gas and provide customer assistance and services.

In sum, the government took a hard line. Its spokesperson stated that the “U.S. Department of Labor remains focused on New Jersey’s gas stations to determine if FLSA violations exist. If violations are found, we will vigorously pursue corrective action to ensure accountability, deter future violations and prevent violators from gaining a competitive advantage.”

The Takeaway

These wage hour problems/issues are rampant in this industry (and in many other retail industries). Employees are paid a lump sum of cash for hours far exceeding the statutory threshold for overtime, i.e. 40 but they never receive appropriate time and one-half overtime. There are ways, however, legal ways, to build in the overtime to employee lump sums (whether cash or otherwise). The employer’s labor costs need not rise in this scenario and, most importantly, the DOL problems go away and never come back.

It can happen…

The joint employer possibility is a dangerous one for employers, as two related (or semi-related) entities may be held liable for overtime monies if the hours worked by employees at the two (or more) entities exceed 40. Now, Republicans in the House of Representatives have introduced a bill to narrow the definition of joint employment under federal wage-hour and labor law. This would provide businesses clear and bright lines for how they structure deals with contractors, but employee advocates take the opposite view and fear that this act would allow companies that outsource labor to avoid liability for workplace violations.

U.S. Capitol Building
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The proposed legislation, entitled the Save Local Business Act (introduced by Rep. Bradley Byrne, R-Alabama) would amend the National Labor Relations Act and the Fair Labor Standards Act to specify that a business may be branded as a joint employer only if it exercises direct, actual and immediate “significant control” over the essential terms and conditions of certain workers. These essential terms and conditions include hiring and firing/discipline, setting of employee rates of pay and benefits, daily supervision of employees, assignment of individual work schedules and assignment of jobs and job duties.

The proposed standard is stricter (i.e. more pro-employer) than the concepts outlined for joint employment in the controversial NLRB decision in Browning-Ferris Industries of California. The proposed law could result in some finality, in that it will place one body of guiding principles in place under both the NLRA and FLSA so that employers will gain some consistency. One practitioner has stated that, “it provides everybody with a clear definition for who will be liable under both laws.”

A pro-employee advocate from the National Employment Law Project stated that this statute could have serious and adverse effects on lower paid workers, who work, for example, in agriculture or janitorial services. The advocate warned that if the bill becomes law, it would be easier for businesses to place buffers between themselves and their workers, e.g. temporary agencies, staffing service providers, which would facilitate the avoidance of liability. Another employee advocate expressed a dimmer, more radical view, stating that the law would “undermine the concept of joint employment” and “set a high threshold to hold an employer who contracts or outsources work” liable for workplace law violations.

The Takeaway

In FLSA cases involving joint employment, there is varying law between federal circuits, but as regards labor law, the NLRB’s interpretation of the statute is given broad deference by courts on joint employment issues. If, however, Congress adopts a specific test, that test will then likely be given considerable deference by courts in future cases. Long story short—this bill is geared towards a considerable narrowing of the definition of joint employment.

At last!

I have blogged often on these new OT regulations and now it seems the game is continuing, with opposition (not unexpected) from the current administration. The USDOL has released its request for information (RFI) on the revision of the white-collar overtime exemption rules. This has engendered, and will continue to engender, a great deal of controversy. The Obama administration-authored changes to the rules would double the salary level for workers to qualify as overtime-exempt.

The request for information requests stakeholder input on the salary test for exemption under the Fair Labor Standards Act. The questions that the DOL has posed shows that the agency is weighing many options for the rule.  These include setting the salary threshold differently depending on geographical area or possibly eliminating any salary test at all and focusing only on employee job duties to determine if a white-collar exemption (executive, administrative, professional) applied.

U.S. Department of Labor headquarters
By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons
Alfred Robinson, a former WHD Administrator, and someone likely to know, has stated that. “I’ve seen offices that maybe pushed liquidated damages or things of that nature beforehand are not so adamant about it this year.”  He added that, “I read the tea leaves as suggesting that hopefully some reason is coming into some of the enforcement practices.”

In November 2016, an employer group sought and secured a nationwide injunction from a federal court in Texas against the proposed overtime rule.  The new Secretary of Labor has indicated that the new salary level should be set somewhere between the old level and the proposed one (approximately $47,000 per year), but, significantly, the RFI does not suggest the level where it should be set.  The DOL states that “concerns expressed by various stakeholders after publication of the 2016 final rule that the salary level would adversely impact low-wage regions and industries have further shown that additional rulemaking is appropriate.”

The exemption test is now tri-partite—employees must be salaried, must earn a certain minimum salary and must perform certain duties.  The exemption regulations are updated periodically; the last time was in 2004 when the salary level was raised from $250 per week to $455 per week and some changes were made to the duties components of the so-called white-collar exemptions.  The current proposal would not touch the duties tests but would raise the salary level to $913 per week.

The RFI does not trigger the formal rulemaking process that will rescind or modify the proposed (and currently enjoined rule) but the purpose is to secure data and feedback on an issue of concern. Significantly, the agency is on record as stating that it will not seek to revise the rule unless the Fifth Circuit affirms the DOL’s ability and right to establish a salary test.

The Takeaway

I find most interesting the concept that only duties should determine whether an employee is exempt or not.  That might make it easier for employers to maintain lower level supervisors as exempt, as for example, in the retail industry.  Maybe employers would like even better the reverse—if the employee makes a certain amount of salary, he/she is, by definition, exempt.

That seems simpler…

No industry is immune to FLSA collective actions and the energy industry is seeing a significant uptick in these actions. In this regard, a class of workers employed by an oil field services company has just agreed to a $2.1 million deal to settle a Fair Labor Standards Act collective action alleging that the company did not pay them proper overtime wages. The case is entitled Meals v. Keane Frac GP LLC et al., and was filed in federal court in the Western District of Pennsylvania.

Oil pump jack and oil tank silhouette
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The employer advised the Court that a settlement had been reached with a class of “frac supervisor I’s” to settle a FLSA collective action, seeking overtime, on a misclassification theory. The agreement recited that both counsel believed the settlement was in the best interests of all the parties, given the costs to be incurred, the risks inherent in litigation, as well as the delays, when placed up against the benefits of the settlement.

The defendant, however, made sure to secure non-admissions language. The papers stated that the “defendant denies and continues to deny all of plaintiff’s allegations in the action. Defendant enters into this agreement expressly disavowing any fault, liability and/or wrongdoing.”

Importantly, there had been a grant of conditional certification in June to a class of current and former “frac supervisor I’s” and other like employees who were employed by the Company in the last three years. The plaintiffs alleged that these alleged supervisors performed primarily manual work, which precluded the application of the exemption. The plaintiffs also claimed that the Company has a policy of deliberately misclassifying these supervisors to save overtime costs (even though they received bonuses). The Complaint alleged that all of these supervisors were similarly situated because they shared common job duties, were all classified as exempt and all performed uncompensated work.

The Takeaway

This was the right move by the employer. Exemption cases are always tough to win—often, the entire class is held to be exempt, or, heaven forbid, non-exempt, especially if common policies apply to the affected workers. The issue now becomes whether to re-classify these workers, i.e. pay them hourly, or enhance their duties so they “evolve” into exempt employees.

A lot easier to re-classify.  A lot less (future) worry and aggravation…

I have blogged on this topic many times but I never tire of it. What is the way to defeat a class action? The magic bullet? The answer? Too much individual scrutiny is needed! Another Judge has proven me right on this. A federal judge has denied a motion to certify a class of distributors who distributed products for a bakery with brands such as Wonder Bread and Nature’s Own. The drivers alleged that they were misclassified as independent contractors and should have been overtime-eligible employees. The case is entitled Soares et al. v. Flowers Foods Inc. et al. and was filed in federal court in the Northern District of California.

Bakery
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The judge acknowledged that there were common questions as to the drivers’ substantive claims. However, it was the varying nature of their businesses, such as differences in operations, whether they hired their own “employees” and whether they did business with other entities that would have necessitated the individual evaluation(s). The Judge noted that “individualized issues over how to determine which distributors personally serviced their routes and whether the distributors operated distinct businesses prevents common questions of fact or law from predominating, and class wide treatment is not superior to individual actions.”

The class members bought exclusive rights to sell products in designated geographic territories and were responsible for delivering, displaying and selling the products in their chosen territories. The agreements designated the distributor as “an independent contractor with the resources, expertise and capability to act as a distributor.” The documents also specifically stated that the distributors would not be subject to Company control “as to the specific details or manner” of their business. In October 2015, they filed suit alleging that the Company misclassified them as independent contractors.

The Judge noted that although the class was confined to distributors who “personally serviced” their routes, the sorting out of those distributors that actually did that and when they did that “cannot be answered in one fell swoop.” The Court indicated that some distributors did engage their own employees who performed the routes some of the time and neither party could show through evidence, which distributors “personally serviced” their routes and which did not or how many days they did or did not personally service the routes.

The Court stated that “there would need to be mini-trials into these distributors’ recollections of how often they personally serviced their routes, and when and how often, if at all, they provided distribution services for other companies. Thus, some distributors might be found to operate businesses distinct from Flowers’ operation, while for others this factor would weigh in favor of an employment relationship, and thus this factor is not subject to common proof.”

The Takeaway

This is the object lesson for employer-defendants. I believe these independent contractor cases are peculiarly susceptible to these defenses. The employer must always look at and focus upon the “individual scrutiny” defense because it could be a single stroke method of making the whole thing go away.

The attorneys for the USDOL advised the federal Fifth Circuit Court of Appeals that the agency does intend to revise the currently pending changes to the overtime regulations.  The lawyers also requested that the Court approve of the agency’s right to use salary levels to determine exemption status.  The case is entitled Nevada et al v. USDOL and is being heard in the Fifth Circuit.

The lawyers requested “that this Court not address the validity of the specific salary level set by the 2016 final rule ($913 per week), which the Department intends to revisit through new rulemaking.” In lieu of such a holding, the DOL wants the Court to acknowledge that the USDOL possesses the authority to establish a salary minimum; if a salary is less than that amount, the employees would be automatically entitled to overtime for actual hours worked exceeding forty (40).

U.S. Secretary of Labor Alex Acosta
Secretary of Labor Alexander Acosta

A federal district court Judge stayed the rule last year.  The lower court found that the agency emphasized salary levels too much, rather than the job duties performed, in determining exempt status under the proposed revision.  The new Secretary of Labor, Alexander Acosta, stated during his confirmation hearing that this decision seemed to question whether the agency had the power to set a salary threshold.

The DOL has submitted a request for information on the overtime rule to the Office of Management and Budget.  This action suggests that the DOL is prepared to reconsider the pending regulation.  Mr. Acosta hinted that he could envision the current $24,000 salary threshold rising to the low $30,000 range.  The rule, as currently constituted, is estimated to make another four million people eligible for overtime.

The Takeaway

This is an interesting development.  Perhaps the Court will be guided by the government’s arguments and toss this hot potato back to the agency to establish a new (and more business friendly) salary threshold.

*Photo credit: By US Department of Labor (L-17-05-01-C-AlexanderAcosta-023-E) [Public domain], via Wikimedia Commons

I blogged about this off-the-beaten-path case a short time ago. Wow, whoever thought the courts would work this fast? A federal judge dismissed a proposed FLSA collective action against Fluor Corp. filed by contractors who alleged that the Company did not pay them overtime based upon a contract performed in Afghanistan. The Court held that the country’s labor laws were inapplicable to foreign citizens who did not have work permits. The case is entitled Allen et al. v. Fluor Corp., and was filed in federal court in the Northern District of Texas.

Silhouette of U.S. soldier
Copyright: zabelin / 123RF Stock Photo

The contractors had alleged that they were owed more than $5 million dollars in back-due overtime, as they worked twelve hours per day, seven days per week. They claimed this violated the Afghanistan Labor Code. The federal Judge, however, agreed with the Company that the Labor Code did not apply to workers who may have registered with the nation’s Investment Support Agency but were not compelled to apply for work permits in order to provide services. These contractors were providing housing, performing construction work and ensuring that, fuel, food and laundry services were provided for the soldiers.

The Court stated that “based on the evidence of foreign law submitted by the parties, including expert declarations, the court concludes that the Afghanistan Labor Code does not apply to plaintiffs. The code, by its terms, applies to foreign citizens who have obtained or will later obtain work permits, and not to other foreign citizens.”

Pursuant to the Bilateral Security Agreement between the U.S. and Afghanistan, military contractors must register with the Afghan Investment Support Agency, but need not apply for work permits. The Company contended that the requirement provided an exception for American contractors from the requirement to secure permits and, therefore, from the labor law that applies only to foreigners who have secured or will secure such permits. The Judge would also not allow the plaintiffs to amend their Complaint, as the fundamental defects in it could not be cured by re-pleading.

The Takeaway

An outlier kind of case with perhaps little relevance to the average employer, here in “the States.” It does, however, show that wage-hour situations, e.g. overtime class action suits, can arise in any number of scenarios or contexts and creative lawyers need to be able to adapt defenses to the tools, or body of law, at hand.

I always look for a preemption defense when I am defending a FLSA collective action, whenever there is a labor contract involved. What a magic bullet that is—get rid of the entire matter in one fell swoop (with maybe just a 12(b)(6) motion). But, and it is a big but, there must be something in the labor contract that is pertinent. If not, that tactic fails, as evidenced by a recent (split) Third Circuit opinion.  The Court refused to dismiss a FLSA collective action brought by nurses at a New Jersey assisted living home and send the case to arbitration, asserting that there were factual disputes, not claims contained within the collective bargaining agreement. The case is entitled Tymeco Jones et al. v. SCO Silver Care Operations LLC, and was issued by the Court of Appeals for the Third Circuit.

Hospital Emergency signThe plaintiffs alleged that their employed miscalculated their overtime wages and did not pay them when they were compelled to work through lunch. The Court found that the workers did not explicitly waive their right to sue under the Fair Labor Standards Act and the claims did not center on a contractual dispute at its heart. As the majority succinctly stated, “neither of the plaintiffs’ FLSA claims depend on disputed interpretations of CBA provisions such that arbitration is necessary.”

The nurses filed the action in December 2013, charging that the Company did not include shift differentials (up to $3.00 per hour) when calculating their overtime, i.e. their regular rate and also claimed they were not paid for working through lunch on the many occasions that they did. The employer argued that the case should have been sent to arbitration.

The Third Circuit noted that a court could compel arbitration on a federal statutory claim when the Union “clearly and unmistakably” waived its right to sue and the statute at issue did not exclude arbitration as a forum. In addition, a court could order arbitration when the claims depended “on the disputed interpretation of a CBA provision” even if the Union had not waived its right to sue.  That was not the case herein, as the Court concluded that “all of these so-called disputed ‘interpretations’ of the CBA … are factual questions — length of meal breaks, types of interruptions, how they were handled and whether the plaintiffs ever received compensation due to these interruptions.”

The Takeaway

I think this is a chance worth taking. There are always labor contract articles that focus on methods and amounts of compensation. I believe, all the time, a plausible argument can be made for a preemption position. The employer here came close to prevailing. Even if the employer loses, I believe it makes the case that the challenged payment method is legal, because, if it was not, wouldn’t the Union have challenged it or negotiated it out of the contract?        

We usually think of FLSA and overtime cases arising in our country, but companies operating overseas have to deal with the laws of that country. In an interesting case that hearkens to the headlines of national security and international crisis, Fluor Corporation has requested that a federal judge dismiss a putative class action filed by contractors who allege that they were not paid overtime in violation of Afghanistan labor law. The company claims that the Afghan labor code does not apply to employees of U.S. contractors. The case is entitled Allen et al. v. Fluor Corp. and was filed in federal court in the Northern District of Texas.

Silhouette of U.S. soldier
Copyright: zabelin / 123RF Stock Photo

The contractors filed suit in May 2016, claiming that the Company violated Article 67 of the Afghanistan Labor Code by not paying them overtime despite the fact that they worked twelve hours per day, seven days a week. They seek a class of at least 100 contractors and allege their total claims exceed $5 million dollars. They built base camps, provided housing, transportation and meals to the troops.

The Company defends by claiming that the contractors were fully paid under their employment agreements and under American law. The Company claims that although these men were “paid a fortune,” the workers are engaged in a “self-serving” attempt to benefit from the overtime laws in the Afghanistan Labor Code; the Company asserts such law does not apply to them. The lawyer for the Company asserted “these plaintiffs are not entitled to a windfall recovery under the laws of the Islamic Republic of Afghanistan.”

The Company argues that the Afghanistan Labor Code only applies to foreign workers who are required to obtain work permits, which these workers did not have, or need. The Company asserts that even if Afghan labor laws applied, there must first be findings of fact made by that nation’s labor regulator before that ruling could be appealed to a competent court.

The lawyer for the plaintiffs appealed for sympathy from the Court. He asserted that if the court declines jurisdiction, then hundreds or thousands of Americans will be prevented from pursuing their rights. He also claimed (perhaps with some justification) that going to Afghanistan to pursue these claims would be far too dangerous for the workers, adding that security alone would cost $20,000 a day. He also urged the Court note that Afghanistan remains a sovereign nation with the right to have its laws apply to workers who are in the country.

The Takeaway

What an interesting set of circumstances this is! Of course, these men cannot go to Afghanistan to pursue their claims. That is why I believe the Court will side with the workers.

You know, law firms are not immune from FLSA issues merely because they are law firms and may be allegedly endowed with some superior knowledge of laws. A recent case illustrates this maxim.  The name partner of a Los Angeles firm has been charged with misclassifying his legal secretary as exempt.  She now has won a jury verdict of $80,000 in overtime; her former boss had claimed that she was properly classified as an executive employee. The case is entitled Bernal v. Little PC et al. and was filed in state court in the Superior Court of California, County of Los Angeles.

Law books and justice scales
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Ms. Bernal alleges that she was promised a salary of $1,000 per week and no evening hours.  Her workload increased but Mr. Little refused to pay her overtime wages.  Her counsel told the jury to disregard Little’s assertion that they had an arrangement to pay the Plaintiff a set salary, because the lawyer explained that her position was not exempt from overtime.

Mr. Little claimed Bernal was exempt as manager, as she directed the work of two or more other employees, was responsible for HR and payroll duties and could establish her own hours and manage her own workload.  The plaintiff’s lawyer took strong issue with those assertions, telling the jury that she was primarily a legal secretary, including the taking of dictation.

The lawyer testified that Ms. Bernal had worked for him before and knew what the hours were and that there was no conversation about her having a set hourly schedule as she claimed.  He also asserted that Ms. Bernal knew it was a “salaried” position; he told the jury that she testified that the initial offer appealed to her because she would be paid for days she did not work.  The secretary countered by claiming that her job was all-consuming, sometimes working twenty-hour days and running personal errands for Little, as well as being required to respond to texts and calls on nights and weekends.

The Takeaway

Merely paying someone a salary does not mean that they could not eligible for overtime.  They must perform the duties required for the executive (or other) exemption.  This person’s job duties did not sound like that.  Nor does fancy title, if she had one, e.g. Office Manager, mean that she managed anything.

(Expensive) lesson learned…