I read a very interesting article in the Epstein Becker Wage & Hour Defense Blog, whose sentiments I wholeheartedly agree with.  It concerns the issue of attorney fees for plaintiff lawyers in FLSA/wage cases.  The blog post notes that often, these lawyers get big dollar fee awards, while the allegedly victimized people they represent get “pennies.”

The posting notes, and I agree, that there are many, many plaintiff wage hour class (or single) action lawyers who believe in their clients and feel that their clients were “wronged” by not receiving proper payment (e.g. overtime).  With that said, there are also many who are more dedicated to their fees and maximizing those fees than they are in vindicating their clients’ position.

The posting notes that some plaintiff lawyers will announce that they “need” to get a certain sum as their fees for the case.  Then, the defendant’s lawyer (and a mediator, if it goes that far) know that they have to work back from that demanded fee award to get to a point where the case settles and the plaintiff(s) get something, whatever that “something” is.  That is, as the post correctly notes, the “tail wagging the dog.”

The posting notes, and again I agree, that the issue defaults to whether judges will try to do something about this disturbing trend, to stem this tide.  One example makes the point.  A Judge was presiding over a matter where the parties settled a wage-hour case, with small recoveries by the plaintiffs and where the plaintiff lawyers sought fees far greater than the recoveries that their clients would themselves receive.

The Judge could have easily approved the settlement, just to get it off the docket, but this Judge refused to take the easy way out.  She observed that these cases often are not about the employees or “justice” but rather the plaintiff lawyer’s fees.  She would not approve the settlement and hoped that other Judges would also not put up with these tactics.

 The Takeaway

I am so glad to hear a Judge express this sense of frustration.  I encounter it all the time and feel it all the time.  She is right.  Often times, I find myself settling so-called small cases because the portent of a large attorney fee demand makes the risk of defending too great, even if I know the client did nothing wrong.  That is wrong and very frustrating to me.

I hope the next Judge I get in a wage hour case is just like this one…

The New Jersey independent contractor test is one of the toughest for a putative employer to prevail upon.  So, when an employer does do that, it is a great day for the employer community and that is what has happened in the case of a law firm who fought the UI claim of its paralegal, lost before the agency and prevailed before the Appellate Division.  The case is entitled Law Office of Gerard C. Vince, LLC v. Board of Review and issued from the New Jersey Appellate Division.

The worker filed for unemployment benefits after she was terminated.  She had been engaged to integrate the law firm’s files into a web-based computer software system known as “LEAP.”  The law firm would identify the files to be integrated into LEAP, but provided no instruction on how the person would actually do this integration.  The parties entered into a consulting agreement, a temporary agreement (3-6 months).  The worker would not be paid for any expenses, had to take care of her own taxes and recited that she was an independent contractor.

The Board of Review, the final agency tribunal, found, under Part A of the “famous” A-B-C in the statute (N.J.S.A. 43:21-19(i)(6)) that “[a]lthough the claimant had some flexibility as to when and where the work was performed, it was the employer who assigned specific tasks to the claimant.” Under part “B”, the Board found that the worker “was performing paralegal work for a law firm,” and she was an employee “as the work performed by the claimant was essential to the services provided by that type of business.”  The Board found there was no need to look at the third prong, the independent business component, because the first two prongs had not been satisfied.

The Appellate Division reversed, finding that the employer satisfied the ABC test.  There was no showing that the employer exercised control beyond that required by a Rule of Professional Conduct.  The law firm did not control the manner or means as to how she performed the work.  Any lawyer would have to maintain some level of control for client relations and protection.  Thus, some modicum of direction and control was required or the paralegal would be engaging in the unauthorized practice of law.  The Court pointed out that under the agency’s view, a paralegal could never be an independent contractor because of the ethically required control that an attorney must exercise.

As to part B, there was no dispute that the work could have been performed at any location and the facts showed some work performed away from the firm.  On the independent business prong, the Court noted that the Board did not even examine that but there was a showing that the worker was a certified paralegal who received income from other similar businesses and that she also, importantly, advertised her services as a certified paralegal.

The Takeaway

A person is presumed to be an employee unless the employer satisfies each part of the ABC test.  This case shows that under the right set of circumstances, an employer can prevail.  What I find most interesting and encouraging is that the Court did not seem to focus on whether the plaintiff derived 28% of her income from other sources, which is the ironclad, golden rule of the Department of Labor.

It’s a start…

The issue of willfulness is very important in FLSA cases because such a finding extends the statute of limitations from two years to three. The standards utilized in making these decisions have been established but their application to particular situations often is difficult. A recent example of this tenet has just emerged in a case involving the calculation of employee wage rates. The case is titled Stone et al. v. Troy Construction LLC and issued from the Third Circuit Court of Appeals.

The appellate court noted that the lower court, which did not find willfulness existed, applied an “overly burdensome” standard to reach the conclusion a third year of liability was not warranted.  The Court sent the case back for further proceedings.

The worker had claimed that per diem compensation for travel time was reported as “wages” by the Company for tax purposes but the Company did not include these payments in employees’ wage rates when overtime was calculated (which it would have had to do if these payments were in fact wages). That would have increased the amounts of overtime due the workers. The employee claimed that the Company was aware that this was wrong but continued not to include the monies when computing the proper overtime rate. The lower court found there were insufficient facts to demonstrate willfulness, limiting the statute of limitations to two years.

The appellate court stated that “the district court was evidently looking for something egregious.  Supreme Court case law and our own precedent counsel against a standard for willfulness that requires a showing of egregiousness.”  If the statute extends back another year, the Court noted, some of the claims of the named plaintiff would not be time-barred, i.e. if the recklessness standard, in lieu of a more stringent “egregious” standard, was applied.

The Takeaway

The standard for willfulness has been, for many years, one of “reckless disregard,” meaning that the employer knew that its wage practices were illegal but nevertheless continued to engage in these practices. For example, if an employer was audited by the USDOL and told that certain employees were misclassified as exempt, but still maintained them as exempt, that would evidence willfulness. The “egregious” standard, seemingly invented by the lower court, was a bridge too far for the Third Circuit.

As it should have been…

The area of prevailing wage law, construction wage-hour law, is a niche within a niche and a very complicated area of wage hour law.  I am proud to say I have defended more than one hundred employers in these cases, both the federal Davis Bacon Act and a number of state prevailing wage, but there are many vagaries in this law and unique pleading issues that lay in wait for unwary plaintiffs.  An example of this is a recent New Jersey decision where the Court granted a motion to dismiss on the pleadings because the plaintiffs did not allege that they were performing “public work.”  The case is entitled Chambers v Precision Pipeline Solutions and was filed in federal court in the District of New Jersey.

The plaintiffs claimed they were owed prevailing wages for work they allegedly performed for the Company on the Rockford Eclipse Valve Replacement project.  However, to make out a case under the New Jersey Prevailing Wage Act, they had to allege facts that supporting a possible conclusion that they performed “public work” which were “on property or premises owned by a public body.” The Court noted that neither of these conditions were alleged in the Complaint.

The Complaint vaguely alleged that the Plaintiffs’ job duties “included but were not limited to, regulator changes installs, high pressure gas valves [sic] changes, and pipeline mechanic work.”  However, and significantly, the Complaint did not set forth the specific work that the Plaintiffs did while working at the Rockford Eclipse Valve Replacement project.  Thus, the Court was unable to conclude that the project was of a type that the Prevailing Wage Act would encompass.

Moreover, the contention that the Rockford Eclipse Valve Replacement work was “state-funded and/or state-incentivized” could not establish the source of the funds that paid for the work, i.e. whether it was paid for through public financing, making it “public work” as the statute defines such work.  Therefore, the Court ruled that the Plaintiffs had failed to allege sufficient facts to allow their NJPWA claims to survive and dismissed the Complaint.

The Takeaway

Defense lawyers must look for any option to make a case go away early.  Now, the plaintiff here may file an Amended Complaint but given the posture of the case, might not.  Even if he did, this tactic shows the plaintiffs (and their lawyers) that the employer is going to fight aggressively against the case, which may engender an early (and reasonable) settlement.

I applaud my colleague and friend, Eric Stuart, on this victory.

Well done!

The State of New Jersey has passed several laws in the wage-hour area that are definitely pro-employee, to say the least.  The latest effort on this front is something quite special, or onerous, depending on which side you are on.  The brand new, effective immediately, New Jersey State Wage Theft Act (WTA) geometrically adds to the existing penalty structure for employers by adding a liquidated damages provision and gives extra protections for employee retaliation claims.  The joint employer provisions have also been expanded; indeed, the new law states that any waiver of its “joint and several liability” section is void and against the law.”

There is now a rebuttable presumption against employers who do not maintain records mandated by law or who take disciplinary actions (e.g. firing) against workers who voice internal or external complaints.  The law also increases the ceiling on wage claims that can be filed with the NJDOL Wage Collection Section (“Section”).  The ceiling was $30,000—now it is $50,000.  The Section can now also take jurisdiction over retaliation claims.

Importantly, the law also now, for the first time ever, imposes liquidated damages on employers who do not properly pay wages.  These penalties, amazingly, can be to Two-hundred (200) percent of the wages owed.  Just as amazingly, the statute of limitations has been extended from the current two years to six years (equal to that of New York).

The rebuttable presumption of retaliation kicks in should an employer fire/discipline a worker within ninety (90) days of his engaging in any conduct or actions protected under the new law.  The employer must establish the bona fides of the adverse action under a stringent “clear and convincing evidence” standard and prove that the action was for a legitimate, business-based reason.

The penalties have also been stepped up.  Now, it is $1,000 for a first violation (or imprisonment of 10 to 90 days); $1000-2000 for a second or subsequent violation (or imprisonment of 10 to 100 days).  These penalties can be assessed, in theory, for every employee and for every week.

Significantly, a first-time offender can escape liquidated damages if that business can show that the violation was “an inadvertent error made in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation.”  In order to maybe get that safe harbor, the Company must admit it violated the law and pay the entire amount owed in thirty (30) days.

Each employee must be give a WTA notice, whether incumbent or new hire.  Interestingly, the notice must advise how a claim for wages can be filed.

The Takeaway

This law is a quantum leap in terms of enforcement efforts.  It also places (as did the NJ Equal Pay Act before it) a heavy burden on employers to prove they were right, e.g. motivated by legitimate business reasons.  The threat of liquidated damages and the vast increase in penalty assessments that are possible really puts pressure on employers to settle cases/audits quickly, even if they believe they did nothing wrong.

What’s next?

The New Jersey DOL is very aggressive on the issue of independent contractor status, i.e. the issue of misclassification.  The latest, perhaps best (or worst) illustration of this view is the agency’s determination that court reporters are employees for purposes of the Unemployment Law.  This errant decision, which cuts against traditional modes of thinking on the status of these individuals, is but a sign of the enforcement efforts that have emanated from Trenton.

This determination, which is being fought by Jersey Shore Reporting LLC, brings into the focus the heightened enforcement efforts of the DOL; the end point of all this is alarming for businesses and the lawyers who advise them.  This is because not only would these reporters need to pay back due contributions, they would, going forward, have to file the necessary quarterly forms and pay UI, which will significantly reduce their incomes.

The State is clearly becoming very aggressive on this issue.  The Commissioner of Labor has asserted that misclassification “robs” the State of revenue streaming into the unemployment compensation fund.  To add to this stance, Governor Murphy has stated he will foster a bill to allow the NJDOL to halt work at construction sites when allegedly “sufficient violations” are found relating to worker misclassification.

Jersey Shore argued that it satisfied the so-called A-B-C test for the determination of independent contractor status.  The Company also argued that a 2009 amendment to the UI law that made court reporter-type employees ineligible for unemployment compensation and therefore exempt from contributing to the UI coffers was dispositive.  The DOL did not answer that contention but mechanically asserted in a brief that the reporters did not meet the statutory A-B-C test.

There is a definite preference for the NJDOL to classify people as employees observed Ian Meklinsky, co-chair of Fox Rothschild’s labor and employment department and the administrative hearing process makes it tough for an employer to prevail.  This is because the findings of the Administrative Law Judge are “nonbinding recommendations that state agencies can choose to accept or reject,” Meklinsky said.  “That means an agency essentially has the final say on its own determination.”  He added that “I personally don’t think it is, or should be, appropriate for the head of an administrative agency to overturn the decision of an Office of Administrative Law judge.”

The Takeaway

The problem is that, in reality, people who are classified as independent contractors truly want to be and in fact consider themselves as such.  The State is taking, as this court reporter decision (and a host of others) demonstrates, a draconian position, painting with the broadest brush possible on who is and who is not an independent contractor.

An individual’s preference should count for something…


It seems that with the resignation of Secretary Acosta there is going to be a decidedly more pro-business posture for the agency.  This is because Patrick Pizzella, who will take over, has let it be known that he will be “hitting the gas” according to Paul DeCamp.

The business community sought (and expected) a great deal of deregulation emanating from the agency in the wake of the 2016 election.  That did not materialize so quickly.  The first nominee, Andy Puzder, withdrew his nomination and then a more moderate selection, Acosta, was made.  He started off quickly, reversing the trend of expansion of the joint employer doctrine, but then he slowed down, a little too much for business.

It seemed that, under Acosta, the enforcement attitude did not change that much from what it had been under President Obama.  The DOL during that administration hit employers with large damage assessments and heavy penalties.  Under Acosta, it has been pretty much the same, it appears.  His approach to reducing the amount of regulation has also been criticized as deliberate, if not slow.

The new DOL chief is said to be an enthusiastic champion of deregulation, a specialty of this Administration.  Indeed, another commentator has noted that “the corporate community has made no secret for quite some time that they were hoping that Acosta would somehow be removed or step aside so that Pat Pizzella, the deputy secretary, could take over.  That’s what’s happening now.”

The new Secretary comes in at an important juncture for the agency.  There is still the new overtime rule that needs to be finalized and a “new” clarification of when two entities constitute a joint employer.  They need to get done by the 2020 election.

The Takeaway

If Acosta was seen to be as moving too slow, I don’t think the same criticism will be leveled at the new Secretary.  For employers, for business, this should be a good thing as these regulations need overhauling.  In an employer friendly way.


When employers classify individuals as independent contractors, they are not obligated to provide them with certain benefits, as they would statutory employees.  Sometimes, if those individuals are found to not be independent contractors, those “failures” come back oftentimes to haunt the employers.  Another example of this phenomenon has happened in that a New Jersey appellate court has reversed a lower court that found that an employer properly deducted monies from truck driver compensation to pay for workers compensation insurance (as well as other things).  The case is entitled Morales et. al. v. V.M. Trucking LLC and issued from the New Jersey Appellate Division.

The Court found that the “defendants do not cite to any legal authority allowing an employer to shift its legal obligation to provide workers’ compensation insurance to its employees through the guise of requiring the employees to pay the costs of the insurance, and we find nothing in the [Wage and Payment Law] authorizing a wage deduction for that purpose.”  Thus, the Court concluded that the deductions were illegal because the drivers were really employees under the NJ Wage Payment Act because the drivers did not meet the (stringent) ABC test under the NJ Unemployment Law.

The lower court found the deductions were allowable under certain provisions of the agreements that the men signed.  The appellate Court disagreed, finding that the “record here is devoid of any evidence establishing that the insurance for which deductions were made from plaintiffs’ wages was part of an employee insurance plan.”  The Court remanded the case back to the trial court to make additional findings regarding the deductions and whether a class of such workers should be certified.

The Takeaway

Calling people independent contractors allows employers to do things that they might not be able to do vis-à-vis their own employees.  From many cases that I have handled, I know that the New Jersey Wage Payment Act is enforced in a very strict manner, in favor of employees.  The lesson here is that simply having an “agreement” that denominates people as independent contractors is not the end of the game, by any means.

There still remains the ABC test to be overcome…

The issue of whether athletic referees are independent contractors has surfaced a few times in the last few years. Here, in Pennsylvania, the Pennsylvania Interscholastic Athletic Association (the PIAA) that engages these referees has agreed to settle with a group of these individuals for $260,000 to close out a FLSA action, based on misclassification. The case is entitled Ruslavage et al. v. PIAA, and was filed in federal court in the Western District of Pennsylvania.

The Judge signed off on the settlement. The referees were used to participate in high school football, basketball, baseball and lacrosse matches. The case would have been long and expensive to try and the recent issuance of a DC Circuit decision holding that lacrosse referees were independent contractors under the National Labor Relations Act (NLRA)(and therefore could not unionize) also played a role in the decision to settle, no doubt.

More than four-hundred referees opted in to the suit and they will share most of a $262,500 fund. In an unusual provision, the settling workers will also receive a free registration for one Association annual convention over the next four years. The lawyers will receive fees equal to 35% of the settlement fund as augmented by the value of the conference attendance.

Each share will hinge on how many sports an individual refereed from 2015-2018.  The refs worked at more than 1,500 schools statewide. The lawsuit alleged numerous violations, e.g. working off-the-clock, not being paid for required training or meetings and pre and post-game work. All of these alleged violations flowed from the referees’ alleged misclassification as independent contractors.

The employer had two arguments. The refs were independent contractors or even if they were employees, they were nevertheless exempt from FLSA rules under the seasonal and recreational employee exemptions. If either argument prevailed, the plaintiff’s case would all but collapse. There was also an employer contention that there was a uniform industry practice that governed referee status across the nation.

The Takeaway

A lot of moving parts generated this settlement and the plaintiffs were wise to get out and at least get “something.” I find it interesting that there was mention of using “industry practice” as a defense on the independent contractor issue. I’ve tried that tact a few times and it has not gotten me far when the agency measures that up against the (usually tough) statute or standard.

Given this case, however, that defense might bear revisiting…

New USDOL Wage Hour Administrator Issues Opinion Letter Finding Paralegals Can Be Exempt: A New Day Dawning!

Under the Trump Administration, there has been a return to the issuance of Opinion Letters which I have highly applauded.  I also applaud the rather pro-employer stance that many of these Letters have reflected.  Another example of both of these scenarios has just been announced.  The USDOL issued an Opinion Letter finding that highly paid paralegals for a “global trade organization” perform sufficient management-type work to qualify as exempt under the white-collar exemptions.  As paralegals have, for years and years, been designated as non-exempt, this letter signals a change in the agency’s attitude towards such employees..

The new Wage and Hour Administrator, Cheryl Stanton, concluded that the paralegals fit within the rubric of the so-called Highly Compensated Exemption (HCE) as they earned more than $100,000 and they “regularly” discharged duties that qualified as administrative under the FLSA regulations.

The letter cited to the “litany of the paralegals’ job duties and responsibilities — including keeping and maintaining corporate and official records, assisting the finance department with bank account matters, and budgeting — that are ‘directly related to management or general business operations.  Thus, the Administrator found that “as such, the paralegals perform at least one of the duties of an exempt administrative employee.”

The Letter also was instructive in that the Administrator concluded that an employee can fit within the HCE if they perform exempt work “more than occasionally.”  For such work to be deemed more than sporadic, it must be “performed normally and recurrently every workweek, but not if it is an isolated or one-time task.”  However, and most significantly, the work need not be the primary duty of the worker.  She also concluded (and I wholeheartedly agree with this) that an employer does not have to conduct a minute examination of employee duties because a “high level of compensation is a strong indicator of an employee’s exempt status.”

Therefore, these paralegals were exempt from overtime-exempt.  These workers were also different from the typical paralegals who are always found to be non-exempt because those other paralegals discharged “a wide variety of administrative tasks … that are clearly directly related to the management or general business operations of the employer.”

The Takeaway

These USDOL Opinion Letters do not bind courts, but they are instructive, if not very influential on the thinking of a court.  This Opinion Letter displays a common sense perspective on the issue because people who earn in excess of $100,000 are (most likely) performing important work that qualifies for an exemption.  This new view on paralegals is literally a breath of fresh air.

My compliments to Ms. Stanton!