This is an interesting case because it combines the elements of necessary, but not proven, commonality of situation for class certification and a quirky element of overtime calculation based on a unique FLSA provision.  The bottom line is that the two workers who sought a class action on both the federal and state levels lost both because of the need for too much individual scrutiny of worker claims.  The case is entitled Sinclair et al. v. PGA Inc., and was filed in federal court in the Western District of Wisconsin.

The Judge rejected the claim, for a class, that the Company should have paid the higher wage rates for skilled labor (e.g. trade work, such as carpentry) as opposed to generic wage rates.  The Judge also agreed to decertify a FLSA collective whose overtime rates were allegedly miscalculated or underestimated.  The Judge opined that the state-law part of the suit did not possess several elements of a viable class action under Rule 23, citing to the need for too much individual attention needed for each worker’s situation.  The Judge also observed that no other worker had opted into the suit, and this fact “undermines the entire purpose of a collective action.”

The theory was that the employer violated the Wisconsin prevailing wage law by paying workers at a lower, general for work done to support more skilled work.  The plaintiffs alleged that this practice violated the FLSA because the rate should have been that which they earned before overtime kicked in as opposed to the lower-rated work they were actually performing in the overtime hours.

Importantly, the Judge denied the request for class certification on the prevailing wage claims.  The Court held that the workers failed to meet the numerosity requirement, as they could not make a showing as to the actual number of workers who worked the lower-rated support work.  They also could not meet the “predominance” requirement, meaning that the underpayment theory applied to most members of the class.

The Judge stated that the claim of the employees is based “not just on the amount, but also on the type of work” each class member did, and would force the court to make “an individual determination of whether an employee’s work on a specific week, day and even hour made possible, supported or cleaned up after a skilled trade worker.”  The Court added that a trial would focus on individual workers’ “unique work on an hourly, daily or weekly basis” and whether it should have been paid at higher wages, the workers did not meet the “superiority” requirement that they show a single class case would be better than a series of individual cases.

The Takeaway

Here, the workers lost the federal and state class actions.  The state case is quite interesting because it shows a path for employers sued in class actions in prevailing wage cases how they can defeat the motion for class certification.  I have preached this dogma for years and repeat it proudly now, again.

Individual scrutiny destroys a class!

The world of prevailing wage law is a complex and nuanced one. It is, in truth, a niche within a niche of the wage-hour world. I have handled almost one hundred prevailing wage audits and lawsuits and still am learning things about how these laws are interpreted. In an interesting twist, the New York State Court of Appeals has examined the issue of when apprentice wages can (and cannot) be paid on prevailing wage projects. The case is entitled International Union of Painters & Allied Trades, Dist. Council No. 4 v. New York State Dept. of Labor and issued from the Court of Appeals of the State of New York.

The Court held (in agreement with the NYS DOL) that apprentices who are not discharging the job functions of their trade must be paid the higher, journeyman wages.  The vote was 6-1.   The Court stated “we uphold the statute-based policy of the New York State Department of Labor that the payment of apprentice wages on public work projects to apprentices who are performing tasks that are within the respective trade classifications of the approved apprenticeship programs in which they are enrolled.”

The Union sponsored a DOL-approved glazier apprenticeship program, but during their work as apprentice glaziers, these workers may have to discharge some Ironworker job duties.  The plaintiffs sued, asking for a judgment that as long as the tasks were performed under the aegis of the apprentice program, it did not matter that they were doing other tasks covered by other trade jurisdictions.  The DOL took the view that this work demanded payment at that craft’s rate (a much higher rate).

The lower court dismissed the suit but an appellate tribunal revived it, holding that “glazing contractors may compensate apprentices registered and enrolled in the DC 4 Glazier Apprenticeship Program in accordance with the applicable apprentice rates posted by defendant New York State Department of Labor on taxpayer financed projects.”  That panel also was concerned that apprentices could be improperly used as “cheap labor.”   The highest NYS court agreed, finding “there is a substantial risk that employers would seek to use cheaper labor whenever consistent with the construction market.”

The Takeaway

Construction contractors need to be very careful when they do prevailing wage projects, as there are many minefields for the unwary employer.   This case highlights but a single one of these.

There are many more…

Employers may make deductions for uniforms under the Fair Labor Standards Act but such deductions cannot take their wage rates under the minimum. Life Time Fitness just learned this truism. The gym chain has agreed to pay in excess of $976,000 in back wages and damages to almost 16,000 employees whose wages fell below the minimum after these deductions were made.

Gym Treadmills
Copyright: fotomircea / 123RF Stock Photo

The Wage Hour Administrator stated that “the U.S. Department of Labor takes its responsibility to ensure workers receive the wages they have earned very seriously. This agreement will put thousands of dollars where they belong — in the pockets of hardworking people and their families.”

The agreement applies to workers at locations in 26 states. The Company will pay back $11,899 to 363 workers across three locations in Minnesota and $476,329 to 15,546 employees at locations in 26 states for a total of $488,228 in back wages. The Company will also pay a sum equal to the wages in liquidated damages and was also assessed Civil Money Penalties of almost $100,000 for these FLSA violations.

The Company has self-corrected. More than a year ago, the Company voluntarily ceased compelling employees buy their own uniforms. A Company spokesperson stated that “we are pleased to have since reached a resolution with the Department of Labor that was acceptable to all parties.”

The Takeaway

The minimum wage is inviolate. Deductions can never reduce an employee’s wage rate below that basement level. Moreover, each State has their own rules, often times stricter than the FLSA, concerning “illegal” deductions. Thus, the takeaway here is to learn the wage payment laws of each State where business is conducted and to “honor” the sacredness of the minimum wage.

Employers often have questions relating to basic wage and hour issues.  This blog post is designed to refresh your memory as to the current status of some of your more basic wage and hour issues in New Jersey as we wrap up 2014.

Q1. What is New Jersey’s minimum wage?

A. Effective January 1, 2014, the hourly minimum wage in New Jersey is $8.25 per hour. BUT effective January 1, 2015, the minimum wage rate in New Jersey will be raised to $8.38 per hour.

Q2. If I have tipped employees, do I have to pay the minimum wage ?

A. The employee’s total earnings (hourly wage plus tips) must equal at least the minimum wage per hour. The hourly rate is up to the employer; however, the suggested rate according to the NJ DOL is a minimum of $2.13 per hour.  If the hourly rate plus tips does not equal at least the minimum wage per hour, the employer is required to make up the difference.

Q3. When do I pay out overtime?

A. You must pay overtime, at the rate of time and one half, after 40 hours of actual work in a 7-day workweek, with the exception of certain salaried employees.

Q4. Am I required to give employees a lunch break?

A. In NJ, the mandatory break law only applies to minors under the age of 18 and they must be given a 30 minute meal period after 5  consecutive hours of work. Company policy dictates break and lunch periods for anyone over the age of 18.

This is just an overview of some FAQs.  And don’t worry, it’s not uncommon to have questions as simple as those outlined above.  It’s important to know the basic rules well, because failing to know the state’s basic wage and hour rules tends to lead to more complicated problems.

Small business owners now have additional wage and hour concerns that need to be addressed in deciding where to open for business in New York City.  The minimum wage could be higher right across the street.

On Tuesday, September 30th, New York City Mayor Bill de Blasio signed an Executive Order which expands the “living wage” requirements for real estate projects that receive $1 million or more in New York City subsidies.  Previously, only direct recipients of City subsidies in excess of $1 million had to pay the “living wage” to their employees.  The September 30th Executive Order greatly expands this requirement beyond the direct recipients.  Now tenants, subtenants, leaseholders, subleaseholders, and concessionaires of buildings/properties that receive at least $ 1 million in City subsidies on or after September 30, 2014 will also have to pay the “living wage” to their employees.   The Executive Order does not impact buildings/properties that received such subsidies prior to September 30, 2014.  Further, the executive Order will also not apply to certain residential properties that provide 75 or more “affordable units,” manufacturers, or businesses with less than $3 million in gross income.

Businesses that take space in subsidized buildings/properties will now be required to pay a minimum wage of $13.13 per hour for employees who are not offered health care, and $11.90 for employees that are offered health care.   These wage levels are expected to increase every year.  This Executive Order will have the greatest impact on restaurants, bars and retailers that take space in the major developments substantially raising labor costs for such businesses which have a large number of minimum-wage or near-minimum wage employees.  Moreover, the regulation permits private causes of action, which can include punitive damage awards and attorney’s fees, against businesses that violate these higher minimum wage requirements.

The Executive Order creates significant concerns as to how the order’s directives will be implemented.  Oversight of the implementation will be handled by the Department of Consumer Affairs, whose mission and training has not been in labor relations, wages or the workplace.  These concerns include how prospective tenants will be placed on notice of the new increased wage requirements, who will be responsible for violations of the regulation, and how does this regulation impact other labor issues such as tip and meal credits, which are currently permitted under federal and state law, and collective bargaining agreements.

As a result of this new Executive Order, small businesses will again be asked to bear heavier and heavier burdens.  The small business owner will now need to think long and hard about where to open for business in New York City.  Thus, giving new meaning to the familiar real estate mantra: location, location, location.

I posted last week on the issue of raising the minimum wage for tipped workers in New Jersey, but that State is not alone in these efforts. There are a number of these initiatives afoot and the effort in New York State is particularly significant. Although, at first blush, raising the minimum wage may sound like the “decent” or “humanitarian” thing to do, but the fact is there are a number of untoward consequences for the business community that should give legislators (some) pause when launching into these efforts in almost a blunder buss manner.

Democratic legislators are leading this push. Senator Daniel Squadron claims that the statute would exempt small and medium-sized businesses from the new wage level, but would force bigger companies to assist their workers in escaping what the Senator deemed their “crushing poverty.” A lawyer for the National Employment Law Project, which is pushing hard for the legislation, took the “rob from the rich and give to the poor” perspective. He opined that, as these large companies, i.e. McDonalds, are earning millions and millions in profits, they should be able to and, more importantly, ought to pay their workers more.

What would happen in actuality? If bigger entities raise their wages, there would be inherent pressure on smaller employers to raise their wages to keep pace and seek to attract better qualified workers. Larger companies would, however, marshal their arguments and forces and seek to avoid the application of the law, in order to avoid the large dollar liabilities the law would engender. This arises from the vagueness in the law as to coverage, such as what constitutes a large employer and what constitutes a formula retail store. These coverage issues by themselves would keep lawyers quite busy in litigation. A “formula retail store” is an entity with eleven or more outlets is covered, but litigation would immediately ensue over the definition of such a business.

As the law also applies to subcontractors and franchisees, this facet would lead to another whole “chapter” in litigation. In this regard, a franchisee who owns a Subway shop has the name of a big company but in reality is likely a very small employer. Thus, franchise owners could file equal protection suits, if they believe they are being singled out or unfairly treated compared to other similar entities. Another possible fallout is that the law could make current rules relating to tipped workers very confusing and costly, causing bigger restaurant chains to severely cut costs, e.g. lay off workers. That effect would have the equal and opposite effect of causing plaintiff side lawyers to ferret out violations, or what they think are violations.

End result. More litigation. Just what we need.

Prevailing wage (“PW”) law is an almost anachronistic subset within the field of wage hour law. Prevailing wages mean those wages that “prevail” in union contracts within a defined geographical area (i.e., a county) and are wages that must be paid on all public work, such as construction contracts to build roads, bridges, and, as discussed herein, in ameliorating the damage caused to New Jersey by Hurricane Sandy. Many see these statutes as union boondoggles because they artificially mandate an unusually high level of wages.

The NJ Department of Labor is very aggressive in its enforcement of the State’s prevailing wage law. Individuals (and classes of employees) may bring private lawsuits under the law and now, a construction company reconstructing the Seaside Heights, N.J., boardwalk in the aftermath of Superstorm Sandy has been hit with a class action alleging a failure to pay PW rate. The case is entitled Beza et al v. Jamali Developers LLC and was filed in Superior Court in Middlesex County, New Jersey.

The named plaintiffs, both carpenters, charge that overtime was not paid and more importantly PW rate was not paid. They allege there are 75 workers that are involved in the class, i.e., people who performed public work. The Complaint actually seeks a class wider than just “hands-on” workers at the public works site. It alleged that the “defendants’ actions in failing to pay proper overtime as required by the FLSA was not uniquely applied to the individual plaintiffs, but rather as a policy and practice applied to hourly employees as a whole.”

There are not many defenses against an allegation that prevailing rate was not paid. If the project qualifies as ‘public work,” meaning it was financed by public money beyond a tiny threshold, then (with very few exceptions) the PW rate has to be paid. The defenses lie in arguing that not as many hours were worked as claimed and that the craft rate that is alleged to be owed is the wrong classification and that the proper PW rate is a lower one, e.g. Carpenter (higher) rate vs. Laborer (lower) rate. For this defense to work, the work at issue must be claimed in the work jurisdictions of both unions.

The best option for the employer here is probably a quick settlement, or its money will be blown away by Sandy-force winds of litigation and then, in the end, it will still be liable for back due wages.

What a strange turn of events, a Department of Labor being cited for not paying the prevailing wage. Yet this is exactly what has happened in Delaware. A Delaware state court has refused to dismiss a lawsuit alleging that the state’s Department of Labor has misclassified workers on public works construction products and has improperly enforced the state prevailing wage statute. The case is The Roofers, Inc. d/b/a Tri-State The Roofers v. Delaware Department of Labor and is being heard in the Superior Court in Delaware.

The judge rejected the Delaware DOL’s contention that the company failed to exhaust its administrative remedies before taking the matter into the Delaware courts. The controversy centered around disputed wage classifications.  On public works projects, workers are classified by trades and paid according to the rate for that trade.  Initially, the DOL has the responsibility to assign certain work to certain trades, but a contractor may challenge that determination and that was what happened herein.

The state DOL tried to mount a procedural defense to the judicial action.  The agency argued that the contractor had not appealed its decision “in writing.” Yet, the employer had met with the Secretary of Labor to rebut the allegations, which the court ruled (quite correctly) was the equivalent of sending the required notice to the DOL.  The matter arose when the DOL alleged that the contractor did not pay the rate for sheet metal workers, but rather paid the roofer or carpenter rate (a lower rate) for the work at issue.

In July 2009, the state DOL notified the contractor of the alleged violations, but the letter did not alert the contractor to its right to appeal.  The agency then ordered the prime contractor to withhold funds from the contractor, against the liabilities for the alleged underpayments.  The contractor then filed he lawsuit, which challenged the DOL’s classification system as not complying with the Administrative Procedures Act.  This gimmicky, procedural tactic launched by the DOL has now failed and the case will proceed.  For once, it is a DOL that will be obliged to prove the propriety of its classification procedures.

What goes around, comes around.