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

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

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

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

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

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

The Takeaway

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

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

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

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

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

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

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

The Takeaway

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

Corinne Burzichelli writes:

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

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

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

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

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

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

The Takeaway

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

Hopefully, it will…


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

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

Golf Course
Copyright: Photozek07 / 123RF Stock Photo

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

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

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

The Takeaway

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

Sometimes…

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…