I do a great deal of prevailing wage defense on behalf of employers, both on a federal level (i.e. Davis-Bacon Act) and the State of New Jersey prevailing wage statute.  It sometimes seems that trade unions are able to aggressively lobby the NJDOL to take administrative actions that militate against non-union employers or make it harder for such employers to conduct their construction businesses.  One prime example of this is the law that mandates construction contractors (e.g. those doing public work) to be affiliated with an apprenticeship program.  Well, a trade association, the New Jersey Electronic Life Supply Association (“Association”), represented by my Partner, Beth Hampton, has now challenged that requirement in federal court.  The case is entitled Centcom Corporation et al. v. New Jersey Department of Labor and Workforce Development and was filed in federal court in the District of New Jersey.

The suit alleges that this requirement precludes Association members, particularly smaller entities, from meeting existing contracts and was really a boondoggle to the trade unions, which are very powerful in New Jersey.  The Complaint notes that “this preference was enacted … to reward political favor and to ensure that every public contractor in the state of New Jersey was part of and contributed to a union, and for no other legitimate purpose.”

The Association maintains that the apprenticeship requirement impermissibly favors union contractors, because one manner to secure compliance with this mandate is to be in a collective bargaining relationship with a Union, as the unions have access to various government-approved apprenticeship programs.  Members of this Association, made up of companies that install safety systems (e.g. fire detection), have the additional obstacle that the US Department of Labor has not sanctioned an apprenticeship program for entities that install safety systems.

Thus, these companies cannot renew their registration certificate with the NJDOL, which allows them to perform public work.   As a result, the entities cannot service the systems that they themselves installed.  The Association alleges that because these systems are unique, the State would be compelled to install new safety systems in many public buildings.

The Association charges that this apprentice requirement violates the contracts clause of the U.S. Constitution, a clause that precludes the States from enacting laws that impede the performance of contracts.  The Association also charges that the statute violates the due process clause by, de facto, stopping these companies from conducting their businesses as well as the First Amendment by discriminating against contractors based on their association (or lack of such association) with a union.  The plaintiffs seek declaratory and injunctive relief, i.e., an order declaring the law unconstitutional.

As Ms. Hampton aptly put it, “hardworking small business owners who have invested their life’s work in building a business from the ground up and who have for decades established and worked under contracts with municipalities, boroughs and cities in our state are being deprived by state law from continuing existing contracts unless they establish an apprenticeship program.”

The Takeaway

The prevailing wage laws are, in a sense, the great equalizer.  Employers, whether union or non-union, must pay the same wages and benefits on a public project.  So far so good.  But, the NJDOL has not only expanded the definition of “public work” but has also enacted measures that seem to facilitate union organizing.  Like this apprenticeship rule.

We’ll see where the lawsuit goes…

I have been praising the Opinion Letters which have, of late, been issuing from the US Department of Labor because, candidly, they are displaying a business friendly attitude, or should I say, a pragmatic approach to the thorny issues employers face in the maze of USDOL regulations.  Well, this may all change as President Biden has selected Boston Mayor Marty Walsh as the Secretary of Labor.  He is clearly a friend of labor, as he was the head of the Boston Building and Construction Trades Council.

Union leaders were quick to praise the pick.  Richard Trumka, the head of the AFL-CIO, stated that “it will take an unprecedented effort from the president-elect and the Labor Department to recover from the failed policies of the past four years, which have harmed working people and our families.  But with Joe Biden and Marty Walsh, we are setting our sights high.”  Randi Weingarten, who leads the American Federation of Teachers asserted that Mr. Walsh would be “a crucial addition” to the Biden administration.  She lauded the fact that “he’s walked picket lines and knows workers’ struggles and power when they come together…”

The new Secretary will face an agency that has issued a number of pro-employer rulings and Opinion Letters.  These include a regulation just issued as final which addresses the thorny issue of independent contractors.  Also, as I have written about often, a number of business friendly Opinion Letters have issued as well, which this Secretary may look to rescind.

Employer and business proponents criticized the selection.  Virginia Foxx, R-N.C., who sits on the Education and Labor Committee, stated that the pick of Walsh “raises significant concerns” that the new administration will move vigorously on a $15 minimum wage and other supposedly anti-employer policies.  Another commentator observed that, in his view, Walsh is “moderate only in comparison to the other radical individuals reportedly considered for the Cabinet position.”

The Takeaway

I hope that the USDOL continues to issue Opinion Letters which are very helpful and instructive in guiding employers towards compliance.  My fear is that the agency will either stop that procedure (as was done by the Obama Administration) or that their tone and conclusions will be less than business friendly.  Other changes like this are, not may, coming down the pike, and all we can do is wait to see what they are.

With bated breath…

There has been a lot of action lately from the USDOL on the issue of the Section 7(i) exemption from overtime (29 USC 207(i), the so-called commission exemption.  One of the basic requirements for an employer trying to claim this exemption is that it must be in a “retail business.”  Until May 2020, this was a hard test because the agency had (for decades) included in the regulations governing Section 7(i) a listing of businesses that did not have a retail quality.  In May 2020, the agency rescinded those lists, opting to allow the analysis to be governed by the general criteria applicable to these issues.  Now, the agency has, essentially, followed its own new tenets and ruled in an Opinion Letter that employees of staffing firms may be eligible for the commission/retail exemption.

As Wage and Hour Administrator Cheryl Stanton noted, a “typical staffing firm,” meaning an entity that sends temporary workers to clients could, in fact, qualify as retail or service establishment.  The Administrator went through the three factor standards utilized in these issues and she concluded that staffing firms could be found to: 1) sell goods and services; 2) at least 75% of which could be “recognized by the industry as retail;” and, 3) these entities receive no more than 25% of their business from resale.

Ms. Stanton noted that the DOL had (in May 2020) rescinded the decades-old lists of businesses that might or might not qualify as retail.  She explained that the lists were rescinded after numerous courts wondered whether they continued to have usefulness.  However, the Administrator observed that whether a staffing firm was, in fact, a retail or service establishment was very dependent on the particular circumstances of that company’s operation.

The Takeaway

I welcome this holding and hope that the trend continues.  The longstanding definition of a “retail or service” business is outdated and not suited to a modern, high tech, society.  The listings had made courts prisoners of the agency’s view, from decades ago.  Now courts, and the agency, will be allowed to gauge the circumstances how a business operates against the designated statutory and regulatory criteria.

Keep up the good work!

I have often lamented how easy it seems for plaintiffs to secure conditional certification in a FLSA collective action.  A few Affidavits, often identical in content, are produced and then, voila, the plaintiff gets conditional certification which then inordinately complicates matters for the employer and makes litigating the case and, of equal import, settling the case, that much harder (and more expensive).  Well, the Fifth Circuit might have just signaled that a change, a new day, is coming on this front.  That Court just set out a protocol for certification that requires a district court to “rigorously scrutinize” purported similarities among plaintiffs from the commencement of the collective action.  The case is entitled Swales et al. v. KLLM Transport Services LLC, and issued from the Court of Appeals for the Fifth Circuit.

In a published opinion, meaning it is precedential, the Judges criticized the current conditional certification process as overly lenient for the plaintiffs and that it “frustrates, rather than facilitates” the collective action process.  In response, the Court set forth a series of guidelines to “require” that a lower court request preliminary discovery on certain fundamental issues and then render a final decision regarding certification to allow the case to proceed, or not.  This framework allows a court to resolve possibly dispositive, initial, issues that would now normally be held in abeyance at the conditional certification stage.

As the Court stated, “in our view, a district court must rigorously scrutinize the realm of ‘similarly situated’ workers, and must do so from the outset of the case, not after a lenient, step-one ‘conditional certification.  Only then can the district court determine whether the requested opt-in notice will go to those who are actually similar to the named plaintiffs.”

The plaintiffs alleged that they were misclassified as independent contractors.  The lower court Judge granted conditional certification but then, sua sponte, certified the decision for appeal, observing that “few areas of the law are less settled than the test for determining whether a collective action should be certified.  The Fifth Circuit disapproved of the so-called Lusardi test, otherwise known as the “Goldilocks” approach to the two-step certification test.  Under this standard, the lower court grants conditional certification prior to discovery being conducted and then revisits certification question later, where it renders a final decision on whether to sustain that earlier decision.

Pursuant to the new standard, the lower court is now required to identify any facts and legal issues that may be pertinent to the certification question and direct that discovery be done on those issues.  After discovery, the court could grant certification, or rule that the purported class members were too dissimilar to merit certification or establish certain sub-classes.  Lastly, more discovery could be ordered.

The Takeaway

This case, if picked up on by other Circuits, could have a major impact on the manner in which certification is, or, rather is not, granted.  Maybe there will come an end to the facile, easy manner in which plaintiffs nowadays secure conditional certification, putting that much more pressure on the defendant employer to capitulate, I mean, settle.

Maybe the pendulum is swinging back a little…

In class actions there is always a named plaintiff (or two or three, etc).  That person acts as the class representative and is the “flagship” for the entire case.  When that individual does something to jeopardize their status as such a “representative,” the entire case might go away.  That is precisely what happened in a recent class case for alleged unpaid overtime where the named plaintiff contradicted her deposition testimony, tried to change it to better bolster her case and failed.  The case is entitled Tam et al. vs. Federal Management Co. Inc. et al. and issued from the Massachusetts Appeals Court.

The plaintiff here tried to, through the “abundant” use of the errata sheet, used to correct ostensible errors in a deposition, to make wholesale changes in that deposition testimony, where she admitted that she may have been exempt from overtime, in diametric opposition to her claims and theory of the case.  Thus, her tactic came under the sham affidavit rule, which precludes a party from undermining their own deposition testimony so as to manufacture a factual dispute that would preclude summary judgment.

As the Judge aptly stated, “she admitted to subsidiary facts that contradicted her earlier statements and then ultimately had to acknowledge the opposite of what she initially had asserted.”  The Judge then added that “given that the sham affidavit rule applies, Tam’s admissions about the nature of her job stand uncontradicted.  There is, therefore, no genuine dispute as to the material fact that her job qualified as an exempt administrative position.”

The plaintiff, a property manager, submitted a 32-page errata, far after the due date for such a submission.  She claimed her deposition was paused, not completed, which made her submission timely.  The Court knocked down that argument quickly.  On the merits, the Court noted that the plaintiff changed “no” answers from her deposition to “yes” and other answers from “yes” to “no” more than more than 60 times.  As to fifty of the changes, the plaintiff claimed she either misunderstood a question or found it confusing.  The Court shot that down as well, stating that “nothing in the deposition transcript suggests that the relevant questions were posed to Tam in a manner that overbore her will or that even could be characterized as intimidating, that the questions themselves were unclear, or that she failed to understand them.”

The Takeaway

What the plaintiff was trying to reverse was her admission that she was exempt from overtime based upon her job description.  The defendant’s brief labeled what she was trying to do as a “troublesome tactic” that would “undercut the very purpose of civil discovery and summary judgment.”  They were right.  This case serves as an object lesson for plaintiffs and lawyers when undertaking lawsuits on exemption issues.

Take heed plaintiffs (and their lawyers)…

 

Lately, there has been a lot of “action” from the USDOL on the thorny and misunderstood issue of travel time.  The agency has just issued another Opinion Letter that addresses the issue of whether employers must pay workers for travel time on days when they spend part of the day working from home and the other half of the day in the office.  The USDOL concluded that payment for such travel time was not warranted.

The Opinion Letter takes the (in my view) correct position that, provided the employee may use his time “to use effectively for her own purposes” between working from home and then switching to the office, employers are not compelled to pay for travel time.  The Opinion Letter notes that “when employee arranges for her workday to be divided into a block worked at home and a block worked at the office, separated by a block reserved for the employee to use for her own purposes, the reserved time is not compensable, even if the employee uses some of that time to travel between home and the office.”

As they often do, the Opinion Letter addressed two hypothetical situations.  In the first scenario, the worker departed the office in the afternoon to attend a parent-teacher conference.  He then went home and resumed work, after one hour of travel to/from the school.  The Opinion Letter found that the time between leaving the office and clocking back in from home was not working time because the employee could do “as she pleases” with that time and thus no travel pay could be awarded.

In the second scenario, the worker signed in from home for one hour, went to see a doctor and then drove to the office.  Although the work time prior to the doctor visit was obviously compensable, the time spent in transit/travel between that doctor appointment and then back to the office was not compensable because the employee still had “a block of time to use effectively and for her own purposes.”

The Wage Hour Administrator, Cheryl Stanton, also concluded that the time was not compensable because the employer did not require it as part of the normal duties of the employee.  The Administrator also addressed the issue of the “continuous workday” doctrine, under which employers must pay workers for the time band between when they start performing productive tasks and when they end their work day.  This doctrine was inapplicable because the worker was off-duty during when they were traveling.

The Takeaway

This is a very sensible take on this rather new issue that is a by-product of the COVID pandemic.  Note that the Administrator observed that the employer did not require this travel as part of the employee’s duties, hearkening back to the US Supreme Court decision in Busk.  Further, she referenced the issue of using the time for one’s own pursuits and benefits is another longstanding concept applicable to these kinds of activities.

Well done, Ms. Stanton…

 

The health care industry seems to be ground zero for a particular kind of class action lawsuit.  Many of these health care institutions have policies where a thirty-minute lunch period is automatically deducted from the daily scroll of hours.  This is quite understandable, from an operational perspective, as it usually is difficult for employees to go to their time clock, punch out and then back in for lunch.  Although this facilitates operational efficiency, it also leads to allegations that employees supposedly worked through lunch and were not paid.  Then, a class action ensues.

The latest example of this is a group of nurses who have received conditional certification for a class in a FLSA collective action based on the theory that they took their lunch breaks when they really worked.  The case is entitled Hamid et al. v. The Chester County Hospital and was filed in federal court in the Eastern District of Pennsylvania.

Securing conditional certification is often not that hard, as only a modest showing of commonality has to be made.  In approving the request for conditional certification, the Judge agreed that the named plaintiff showed sufficient commonality with other workers, concluding she had the same job duties and same kind of claims as the other hourly nurses at the Hospital.  He concluded that “Hamid has provided some evidence, beyond mere speculation, of a ‘factual nexus’ between defendants’ pay and break structure policy for Hamid and defendant’s pay and break structure policy for other nurses.”

The lawsuit charged that the hospital automatically deducted break times from employee wages their pay notwithstanding that the employees duties’ prevented them from taking their breaks.   A second theory of the lawsuit is the employer’s alleged failure to include weekend premium pay, e.g. shift differentials, when computing overtime pay.   Under the FLSA regulations, these kinds of extra payments must be included when the employer calculates overtime.

The Judge noted that the plaintiff had presented sufficient evidence to meet the “lenient” standard for conditional certification.  This low standard necessitates that the named plaintiff must demonstrate a “factual nexus” between the application of the employer’s policy to not only the named plaintiff but to the co-workers allegedly affected in the same manner.  The Judge concluded that the employer’s pay and break policies applied to all workers, causing them to not receive all of the wages they were entitled to.  The Judge also found that the named plaintiff also had made “a modest showing” that she worked under the same terms and conditions of employment as the other employees.  Thus, a class, at this time, was appropriate.

The Takeaway

I keep harping on the concept of a fail-safe mechanism.  Any employer who utilizes an automatic deduction system for lunches, which is quite legal, must ensure that there is some way for employees who ostensibly work through lunch to report that missed lunch.  Then, the employer can pay for the time if it deems it was properly worked.  That way, if the employee does not use the reporting system and then files a suit for wages, he is put on the defensive as to why he did not use the reporting mechanism.

And, there is no (good) answer for that…

In FLSA cases, plaintiff lawyers are always looking for a deep pocket and one of the avenues they use towards this “goal” is the joint employer doctrine.  That doctrine allows more than one employer to be liable for employee damages (e.g. overtime, back wages) if the employers are found to co-determine employee terms and conditions of employment.  In a recent Third Circuit case involving the health care industry, a panel has reversed a lower court ruling that found two entities were not a joint employer meaning that this company now has to defend the collective action allegations of unpaid overtime.  The case is entitled Talarico v. Public Partnerships LLC and issued from the Court of Appeals for the Third Circuit.

The Court found that Public Partnerships, LLC (PPL) set rules for a group of Direct Care Workers (DCWs), established their working conditions

Copyright: rmarmion / 123RF Stock Photo

and maintained their employment records, all indicators of a joint employer relationship.  In the end, it was a factual question for a jury.  The Court observed that “whether PPL is Talarico’s employer is a genuine dispute as to a material fact because the evidence — viewed in the light most favorable to the nonmoving party, Talarico — does not so favor PPL that no reasonable juror could render a verdict against it.”  PPL provided “financial management services” to entities who participated in Medicaid’s Home and Community-Based Services waiver program.  It must be noted that the joint employer “problem” is prevalent in the health care industry, where many different agencies and entities work together to provide care.

The suit alleged that overtime was only paid to these direct care workers when they worked in excess of forty hours for a single client.  When they worked for more than one client, and their hours added up to more than forty, they were only paid straight time.  The lower court Judge applied the four-factor test adopted by the Third Circuit in 2012 decision and noted that the documents “all state that the [participant-employer] is the employer of the DCW, not PPL.”  On appeal, the appellate panel that two of these factors militated a conclusion that the entities were a joint employer.

The Third Circuit identified those “bad” factors as “the alleged employer’s authority to promulgate work rules and assignments and to set the employees’ conditions of employment: compensation, benefits, and work schedules, including the rate and method of payment,” and “the alleged employer’s actual control of employee records, such as payroll, insurance, or taxes.”  The Court also noted that “although the participants select the specific wage rate for their DCWs, PPL caps the maximum rate DCWs may receive based on the commonwealth’s reimbursement rate.  In addition to this cap, PPL requires DCWs and the participants to submit time sheets, which PPL then reviews before paying the DCWs.”  The Court also found that PPL had the “authority to hire and fire the relevant employees” and PPL played a role in “day-to-day employee supervision, including employee discipline.”

The Takeaway

Health care employers are, I believe, particularly at risk in these joint employer cases.  Health care entities often utilize many staffing or other agencies for personnel and the lines of supervision can grow blurry, which may impel a joint employer finding.  The strategy here is to engraft into any vendor or other commercial agreement specifically demarcated lines of independence that seal off, to as large an extent as possible, the putative joint employer from making any decisions into the terms and conditions of employment of the workers at issue.  In other words, the employer can draft its way out of a problem.

Maybe…

I blogged the other day about a USDOL travel time Opinion Letter for the construction industry and foremen in that industry.  The employer seeking the advice posed three scenarios and wanted answers about the foremen and the laborers that also ride in the trucks.  In this installment, I look at the issue of compensable time for the laborers who work for these foremen.

In the first scenario, the job site is near or within the same city as the employer’s main site of business.  Each foreman retrieves a company truck in the morning from the employer’s principal place of business, drives it to the job site, and returns it at the end of the day.  In the second scenario, the job site is between 1-4 hours travel time from the employer’s principal place of business.  Each foreman retrieves a company truck from the employer’s principal place of business at the beginning of the job, drives it to the job site, and returns it at the end of the job.  In the third scenario, the facts are identical to the second situation, but the laborers choose to travel between the remote job site and their homes each day rather than stay at the hotel.

In the first situation, the agency opined that the travel time of the laborers is normal commuting time and not compensable.  What is important here is that the agency noted that if the employees choose to meet at the employer’s main job site and ride with the foreman as a passenger in a Company vehicle, the fact they meet there did not convert the home-to-work travel time into compensable work hours.  The Opinion Letter also observed that if laborers were away overnight, staying at a hotel, the hotel became their home and travel from that temporary home to the job site did not convert the time to work hours.

The Opinion Letter affirmed the longstanding principle that laborers who drive their personal vehicles to a remote job site at the beginning of the job and home at the end of the job are not owed compensation if they have the choice of doing so.  In other words, if the employer requires the workers to, simply, be at the job site to perform their duties and they are not commanded to travel in that way, then the time is not compensable.

The Opinion Letter then noted that when the laborers were travelling to a remote job site, as passengers, outside of their normal working hours, such time would not be compensable.  If these employees were traveling to a remote job site during their normal working hours, that time would be compensable, even if the day was not a usual workday (e.g. Monday-Friday).

Then, the Opinion Letter focused on those laborers who wanted to drive their personal vehicles to the main employer site and then ride, as a passenger, with the foreman, to the first remote job site.  In that scenario, if the employer offers to transport laborers to the remote job sites in the company trucks but a laborer chose to drive his own vehicle, the employer could count as compensable time either (1) the actual amount of compensable time the laborer accrues in driving to the remote job site or (2) the amount of time that would have accrued during travel in the truck.  In the last scenario, laborers choose to drive from their houses to a distant or remote job site every day.  The travel time in this situation would not be compensable.

The Takeaway

 The Opinion Letter notes that travel-time regulations do not address every conceivable situation in which an employee must travel for work.  They focus, rather, on the principles which apply in determining whether travel hours are working time.  This is part of the laudable goal of explaining how hours-worked principles apply under certain, repetitive situations.  Again, I strongly believe this Opinion Letter (as others) is important for guiding employers how to conduct their businesses and how to stay compliant with the Fair Labor Standards Act.

Because, as we all know, compliance is the ultimate goal…

I have stated many times that I am pleased that the USDOL has taken again to issuing Opinion Letters which guide employers in complying with the Fair Labor Standards Act.  I am particularly happy that the agency has issued an Opinion Letter dealing with travel time issues in the construction industry, as these issues are always popping up and, more importantly, might pose a “hidden” danger to employers (e.g. class action) if travel time that should be compensated is not.  This recent letter deals with the travel time of non-exempt foremen and laborers in three different scenarios.

The entity is a construction company that maintains work sites at a number of locations and it stores its trucks at the principal business location.  The (non-exempt, hourly-paid) foremen were required to first go to this primary location to pick up a truck, then drive the truck to a job site, transport tools and materials around the job site and then return the truck to the primary location at the end of the day.  The employer seeking the advice posed three scenarios and wanted answers about the foremen and the laborers that also ride in the trucks.  Today, I look at the issue of compensable time for the foremen.

 In the first scenario, the job site is near or within the same city as the employer’s main site of business.  Each foreman retrieves a company truck in the morning from the employer’s principal place of business, drives it to the job site, and returns it at the end of the day.  In the second scenario, the job site is between 1-4 hours’ travel time from the employer’s principal place of business.  Each foreman retrieves a company truck from the employer’s principal place of business at the beginning of the job, drives it to the job site, and returns it at the end of the job.  In the third scenario, the facts are identical to the second situation, but the laborers choose to travel between the remote job site and their homes each day rather than stay at the hotel.

Under the FLSA regulations, whether the employee “works at a fixed location or at different job sites,” travel to and from home or a place of lodging at either end of the workday is “ordinary home to work travel which is a normal incident of employment” and “is not worktime.”  Conversely, when an employee is “required to report at a meeting place to receive instructions or to perform other work there, or to pick up and to carry tools.”  With that said, a preliminary activity such as travel, was not compensable simply because it benefits the employer and the employer requires it.  The Opinion Letter referenced the Supreme Court decision in Integrity Staffing Solutions, Inc. v. Busk, for the proposition that the activity must be “integral and indispensable to the principal activities that [the] employee is employed to perform”; that is, the activity must be both “an intrinsic element” of the employee’s principal activities and one that the employee “cannot dispense [with] if he is to perform his principal activities.”

Against those principles, the Opinion Letter concluded that the foreman travel time between the employer’s principal place of business and the job sites was compensable in all three scenarios.  The agency noted that being required to report to the central location alone cannot convert travel from that location to the first job site compensable, but had to, under Busk, be “integral and indispensable” to the principal activities performed.

The Opinion Letter recited that the job sites were large and the employer needed the trucks to transport tools and materials around those sites. Further, for safety and security, the trucks needed to be kept at the principal place of business when not in use.  Given those business needs, the Company directed the foremen to retrieve the truck from the main location, drive to the job site and return the truck to that main site at day’s end.  On that basis, the agency concluded that the work of securing/returning the truck from/to the main employer location was integral and indispensable to the principal activities they are employed to perform, thereby converting the travel time to compensable time.

The Takeaway

I am not thrilled about this conclusion but at least it clarifies the situation of travel time in the construction industry.  So, now employers know that they have to pay their foremen for this kind of time.  I do believe, however, that this travel time does not have to be paid at the regular rate of the foremen (whether it is a prevailing wage job when they are at the site) but may be paid at the minimum wage because I believe the travel time “work” is qualitatively different from the principal job, thus allowing for a lower rate to be paid.

Better to find out up front, then learn this later, the hard way. ..