Working Time

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The issue of whether to pay for training time is a vexing one.  In a recent case, a major airline avoided liability (for the most part) in a FLSA collective action alleging that it did not pay workers for time spent in a customer service-training program.  The Court held that the trainees were not employees “engaged” in work.  The case is entitled Otico v. Hawaiian Airlines Inc., and was filed in federal court in the Northern District of California.

Airplane
Copyright: khunaspix / 123RF Stock Photo

The individual (Otico) had claimed that she was entitled to ten days pay for her time spent in a pre-employment training program.  The Court concluded, in granting summary judgment that no reasonable juror could conclude that this person was acting as an “employee” when she took the training courses.  The Court found that the airline was not directly benefitting from any free labor.  The Court held that “the trainees receive the benefit of learning how to do a job they hope to get.  Otico, therefore, was the ‘primary beneficiary’ of the arrangement. Although one wonders why Hawaiian is unwilling to pay something to these people, since they no doubt must sacrifice to participate in the program, the law does not require it to do so.”

The employer contended that the training provided was equivalent to the kind of instruction that the people could have received at a trade or vocational school and which would have cost them a lot of money.  The airline also asserted that it incurred extra costs and there were disruptions to its operations that were a by-product of its providing the training.

Ms. Otico, as a part of the hiring process, claimed that she was compelled to attend the unpaid training course, which took ten days, for eight hours per day.  The people learned about federal regulations and how to utilize the airline computer/software system.  Ms. Otico completed the course in December 2015 and got a job with the airline after she passed a drug test and received clearance from the airport.

The Takeaway

I do not understand the judicial reasoning here.  The person claimed that attendance was mandatory, the course material was related to the trainee’s job, and attendance was during regular working hours.  If those facts are true, then, under FLSA regulations and precedent, this time should have been compensable.

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

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

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

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

The Takeaway

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

Good way to start the holidays!

  • Corporate travel spend is at great risk for non-compliance if business travelers make independent decisions about airlines, hotels and rental cars. In fact, companies that have a very loose travel policy, or no formal policy often end up with endlessly escalating travel expenses. Yet, preparing, approving and gaining travel policy support can be a daunting task, often creating more questions than answers. Learn how to build a travel policy that reflects company philosophy, avoids common mistakes under FLSA and DOL, and other best practices. Join me October 18 for my C4CM-hosted webinar “Writing & Enforcing a Corporate Travel Policy that Cuts Costs & Keeps Your Company FLSA/DOL Compliant.“
  • The explosion of smartphones and tablets has eased the way for employees to have continuous remote connectivity to the workplace, presenting yet another liability threat for employers already battling an increase in overtime pay claims. An employer can be held liable for overtime pay for work it never requested from an employee upon a showing by the employee that the employer had actual or constructive knowledge of the work. Learn about the latest DOL developments impacting employees use of electronic devices after hours, how continuous connectivity of employees affect the definition of working time and compensable time, defenses to electronic overtime pay claims, and best practices to avoid such claims. Join me October 27 for my Stafford Live CLE-hosted webinar “Overtime Pay Claims for After-Hours Use of Electronic Devices: Navigating the Latest DOL and Case Law Developments.“

The financial giant Morgan Stanley announced that it will settle four FLSA collective actions for six million dollars; the suits, filed by financial adviser trainees, alleged that they were not paid overtime properly.  The case is entitled Devries v. Morgan Stanley & Co. LLC et al. and was filed in federal court in the Southern District of Florida.

Dollars
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The parties asked U.S. District Judge Kenneth A. Marra to grant preliminary approval of the settlement, which includes attorneys’ fees of almost four million dollars as well.  The filing papers asserted that “the proposed settlement satisfies the criteria for approval of a Fair Labor Standards Act collective action settlement because it was reached after significant information exchange and contested litigation in four venues, and was the result of arm’s length settlement negotiations conducted by experienced counsel well-versed in wage and hour law.”

The settlement provides that members of two of the four collective actions will receive the equivalent of six hours of unpaid overtime for each week they worked, while the others will receive payments equivalent to those reached in a very similar case involving this company, which ended in 2014 with a $4.2 million settlement.  The case involved allegedly unpaid training and study time, i.e. off-the-clock work.  These types of cases have reached epidemic proportion and are showing no signs of losing vitality.  The plaintiffs alleged that although the bank had a written policy to pay overtime, there existed, in reality, a de facto “off-the-clock” policy in violation of the FLSA.

The Company defended this case aggressively, as noted by the assertions in the filings that the “plaintiffs believe that this amount represents a very fair settlement given the amount of unpaid overtime that was claimed, the uncertainty of success on collective certification, and defendants’ defenses on the merits, including its contention that that it provided paid time during the workweek for studying during training weeks and that it took steps to prevent its employees from studying off the clock.”

The Takeaway

The Company put forth a statement that it agreed to settle these lawsuits in order to avoid the cost and distraction of prolonged litigation.  That was the correct thing to do but the more important thing is to now make sure that proactive steps are taken to ensure that if study/reading time is mandated (or implicitly mandated) that the employees are compensated for that time.

There is no industry or business that is immune to FLSA collective actions.  One might think that the a “high end” jewelry business would not be hit with such a suit, but a California federal judge has just certified a class of Zales employees who have alleged that their employer did not pay overtime properly; that FLSA class has been certified, nationwide.  The case is entitled Tapia v. Zale Delaware Inc. et al., and was filed in federal court in the Southern District of California.

Diamond ring
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The class includes 1,600 workers in a class limited to California workers.  The plaintiffs alleged that the Company rounded down time reflected on time cards.  The judge found it “easy” to certify the class as the Company’s uniform payroll policy showed that the workers were similarly situated.  The Court stated that “plaintiff established that defendant uses the same ‘point of sale’ computer system to record the time its hourly employees work at the stores.  Thus, plaintiff is able to determine from defendant’s time records — to the minute — the time every employee in the class clocked in and clocked out.”

The judge rejected Zales’ essentially legal argument that its “rounding” practice was legal.  The Court concluded that it was too early into the case to make that merits-based determination.  That was the (just) the California case.  The Court also granted conditional certification of a nationwide class of possibly 20,000 workers who worked at Zales since July 2010.  They alleged that the same rounding practices deprived them of overtime monies.  Again the Judge found commonality, stating that the “plaintiff has shown that there are other similarly situated employees because defendant uses the same payroll procedures at all of its stores.”

The named plaintiff, who was fired after less than one year, alleged that her time records were altered to show that she worked fewer hours than she actually did.  For example, if she worked nine hours and three minutes, the extra three minutes were automatically deducted.  She also claimed that a thirty minute lunch was deducted, whether she took her lunch or worked through it and she was not paid overtime.  The brevity of her employment may undermine her credibility.  The Company strongly denies the allegations and contends that the rounding system was in compliance with FLSA standards.

The Takeaway

This class was certified due to the overall, uniform practice of rounding employee time down (and, hopefully, up).  This is dangerous.  In many class actions, we defend by arguing that too much individualized scrutiny is called for and that is why the necessary commonality does not exist.  Here, where an overriding practice obtains, that argument goes away.  What the Employer is left with, it seems, is contending that the rounding practice comported with the FLSA.

All those eggs in a single basket?

I have a feeling it may hold them…

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

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

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

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

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

The Takeaway

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

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

The USDOL has announced a proposed rule for implementing the President’s Executive Order, which would require federal government contractors to offer employees up to seven days of paid sick leave.  This is a bold initiative that is paralleling this fairly common fringe benefit offered by many private employers, but which construction contractors were perhaps less ready to implement for their employees.

Sick person and paid sick leave
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The proposed rule will be published in the Federal Register on March 3, 2016.  The agency believes that more than 437,000 employees of contractors do not receive this benefit and this proposal provides a way by which workers will not have to choose between their health and their paycheck, according to the Secretary of Labor.

At the time the Executive Order was signed, there was a fear that this would lead to a federal law regarding paid sick leave legislation.  The proposal would allow employees to utilize the paid sick leave not only for their own illnesses and conditions, but also to care for sick children, parents, spouses or partners.  Another usage would be for circumstances related to domestic violence, sexual assault or stalking.

The rule would apply to, among other things, Davis-Bacon Act projects and work under the Service Contract Act.  The rule would apply to new contracts (and extensions of expiring contracts) that result from solicitations issued on or after Jan. 1, 2017, or that are awarded outside the solicitation process as of Jan. 1, 2017.

There are specific requirements for how employers treat accrued but unused paid sick leave.

Contractors have to allow employees to carry over any unused leave into the next year.  It also requires contractors to reinstate employees’ accrued, unused paid sick leave upon rehiring by the same contractor or successor entity within 12 months after job separation.  However, contractors will not have to pay out unused paid sick leave to employees at separation.

The Takeaway

Many foreign countries, like Canada, have all kinds of fringe benefit items statutorily set and there is little, if any, room for dispute because the statute spells everything out.  So maybe a federal, uniform law/procedure for some fringe benefits might establish reasonable overall standards. Then, employers would not have to consider/agonize about whether or not go provide such benefits.

I believe there are very, very few employment-related lawsuits in Canada.  Maybe they’re on to something.

I have followed this case closely for some time,  I blogged in September that I thought the City of Chicago had positioned itself in the most favorable position, with the policies and procedures it had implemented, to win this very large class action.  It seems I was right.  The federal district court judge has ruled that police officers who sought overtime pay for their off-duty use of City-issued BlackBerrys failed to demonstrate that there was an unwritten policy to the effect that they would not be compensated for the work.  The case is entitled Allen v. Chicago and was filed in federal court in the Northern District of Illinois.

Copyright: paylessimages / 123RF Stock Photo
Copyright: paylessimages / 123RF Stock Photo

The Judge agreed that the officers had proven that they did, in fact, perform off-duty work on their BlackBerrys, but concluded that they failed to show that the City “suffered and permitted” the work to be done, knowing about it but then refusing to compensate the officers for that work. This was a protracted proceeding; the case was filed five years ago and the trial ended in late August.

The Court found that there was no evidence indicating that the officers’ supervisors knew that they were working on their BlackBerrys off-duty without submitting time slips to be paid for the work.  The plaintiffs also did not show that the superiors pressured line officers not to submit slips for this off-duty work.  The Court rejected plaintiffs’ contention that they were “terrified” of submitting requests to be paid as there was a “culture” within the department of not submitting such requests.

The City countered those arguments, by asserting that the officers could not show any official department policies of not paying requests for overtime.  In fact, and to the contrary, the City presented evidence of numerous instances of officers requesting and, significantly, receiving overtime pay for off-duty use of their BlackBerrys.

The Takeaway

The issue of preliminary and postliminary, off-the-clock work, allegedly which has not been paid, has been bursting upon the legal scene for a number of years.  In this vein, there has been a horde of these BlackBerry cases.  Most of the time, the employer defends by claiming it is de minimis, which it usually never is.  The other defense is that the work was not ordered or directed.  It is then that the “suffer and permit” doctrine kicks in and the defendant loses on that ground.

What the City of Chicago did in this case, however, is the best defense of all.  By issuing the Memoranda and by having in place a system for officers to report the time, the City essentially preempted the claims of the men by “imposing” upon them a burden to prove that nameless, “unwritten” policies, trumped the documented issuances of the Police Department.

Guess what?  Wage suits are increasing.  Hardly a surprise.  A recent study shows that wage-hour lawsuits were up about 8 percent over last year, which may stem (in part) from the recent USDOL initiatives on revising the FLSA exemption regulations and its “white paper” on independent contractor issues.  There is also the problem with applying a law born of the Great Depression to the modern workplace and all the new technology issues.

Increase in wage hour lawsuits
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The study, with data derived from the Federal Judicial Center, shows that (as of the end of September), almost 9000 wage-hour suits had been filed, up from the 8000 filed the previous year.  The data included FLSA cases filed in federal courts and similar-type state-law suits removed to federal court.

There has been a lot of publicity about raising the minimum wage in many areas, such as the $15 per hour minimum wage in Seattle and the directive from Governor Andrew Cuomo to raise the minimum wage for fast-food workers to $15 per hour.  The President has called for the federal minimum wage to rise to $10.10.  It is also an issue in presidential politics.

The USDOL has also proposed changing the exemption rules, in favor of more employees getting overtime.  The agency has also issued a formal Interpretation in July 2015 that greatly limited the kinds and numbers of people that can be validly deemed “independent contractors.”  There is a march of technology and it is difficult to meld the law with the technology.  Commentators have noted that “trying to fit a law designed at a very different time to address different problems and a different type of economy and workplace is difficult, and raises issues.”

There has also been a geometric rise in “off the clock” working time cases.  The issues of preliminary and postliminary “work” generate many controversies.  The email/PDA cases persist and flourish; they are another example of the clash of law and technology.  It is really the general “theme” of what constitutes “work” in today’s world that skews the number of suits upwards.

The Takeaway

I have always preached that an employer cannot prevent lawsuits being filed against it.  If you fire someone, that disgruntled employee may seek out a lawyer or file a DOL complaint and then the litigation wheel starts spinning.  The best defense is to be proactive and undertake an objective examination (an internal audit) of all a company’s compensation practices, e.g. classification issues, working time policies, bonus, commission, vacation policies.

Fix what is broken and start eroding away, softly, the statutes of limitation.

I often blog about what is and is not working time under the FLSA.  Many class actions have been brought on these issues, with some focused on time waiting for security checks.  A class of retail workers working for Apple Inc. have sought a ruling that the time they spend having their bags checked at work was working time because they were under their employer’s control during these mandated security screenings.  The case is entitled Frlekin et al. v. Apple Inc., and was filed in federal court in the Northern District of California.

Apple employees and compensable time
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The plaintiffs argued that the time was compensable because it was required and, most importantly, they could be disciplined if they did not comply with the screenings.  The defendants countered by asserting that the screenings were not “required” because the employees were not required to bring backpacks, purses and iPhones to work, which were the items being screened.  The plaintiffs countered that by asserting that this was not “an activity that’s done for the employees’ benefit.”  Their lawyer stated that “you can’t tell an employee how to spend their time and not compensate them for that time.”

The defendants argued that it was insufficient to claim that the employees were under Apple’s control when they went through the security screenings, but rather the focus should be on whether the plaintiffs were required to bring items to work.  The defendants claimed that bringing these items to work was only for the employees’ convenience and therefore fell outside the realm of FLSA work time, which does require some element of compulsion.

The Court ruled in favor of Apple.  The Court noted that just because the bag checks solely benefited Apple and were required did not mean that the time was compensable; the employees could have simply not brought the bags to work.  The Court ruled that “plaintiffs could all freely choose not to bring bags to work, thereby avoiding Apple’s restrictions during exit searches.  That free choice is fatal to their claims.”  The Court also found that “Apple’s searches had no relationship to plaintiffs’ job responsibilities; they were peripheral activities relating to Apple’s theft policies.”  The Judge analogized the time waiting for a bag check, simply because the employer benefits by the activity, to the workers being paid for their commute to work because an employer benefits “by physically having its employees on premises.”

The Takeaway

When I give presentations on working time, I stress that there must be an integral connection of the preliminary activity to the primary/work activity for the time to be compensable.  Also, I stress that where there is an element of employer compulsion, this tilts the scales heavily in favor of the time being deemed working time.  Here, the Court concluded that the activity was not integrally connected.

The freedom of choice was the key, as the choice not to bring a bag ostensibly allowed the worker to pass right through and not “lose” any time in the security clearance process.   In scenarios where preliminary time is compensable, the employee cannot do his primary job without engaging in the preliminary work, such as a cashier who needs to balance out their cash drawer before commencing (or finishing) work.  Here, that was not the case.  Although there was employer compulsion, that did not trump the lack of connection to the primary work being done.