Fair Labor Standards Act (FLSA)

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Many employers these days have timekeeping systems that deduct time (e.g. thirty minutes) for lunch on a daily basis.  There is an inherent danger in doing this, as employees may claim that they worked through lunch and therefore should be paid.  This is evidenced in yet another settlement in such an action, a settlement that totals $1.5 million.  The case is entitled Magpayo v. Advocate Health and Hospitals Corp. and was filed in federal court in the Northern District of Illinois.

Lunch BreakThe collective action involved hundreds of emergency room nurses.  This class submitted papers to a federal Judge asking approval of the settlement, which will include 262 ER Nurses.  The motion noted that the employer would have continued to litigate and there were risks, for the plaintiffs, in maintaining the suit.

The motion stated that “the traditional means for handling wage claims like those at issue here — individual litigation — would unduly tax the court system, require a massive expenditure of public and private resources and, given the relatively small value of the claims of the individual class members, would be impracticable.  The proposed settlement, therefore, is the best vehicle for class members to receive the relief to which they are entitled in a prompt and efficient manner.”

As stated above, the theory of the case was worked lunch breaks were going unpaid because of the automatic deductions.  The lead plaintiff also claimed the Hospital did not pay for overtime when more than forty hours were worked and that she had to work after she clocked out.  The class had been certified under Rule 23 of the Federal Rules of Civil Procedure and as a collective action under the Fair Labor Standards Act.

The plaintiffs wanted to settle because there was a risk the class could be decertified and greater expense would be incurred.  The motion noted that by asserting that “additional litigation would only serve to increase the expenses incurred without reducing the risks facing class members.”  The layers will receive $600,000 in fees.

The Takeaway

Automatic lunch deduction systems are legal but there must be a reporting mechanism, a fail-safe mechanism, for when employees do work through lunch (or claim they do).  The employee is trained to fill out a form, submit it to the supervisor for approval, and payment.  Then, the employer is protected and the employee properly paid for a true missed lunch break.

Sounds simple, yet these suits keep happening?

It is not often when an employer defends a FLSA lawsuit by asserting that it is in an illegal business and therefore immune to suit. Sound funny? Well, that is precisely what a Colorado employer that furnishes security services to legal cannabis growers/sellers has pressed on the Tenth Circuit. The employer’s theory is that the workers are not entitled to allegedly unpaid overtime under the Fair Labor Standards Act because their work is illegal under federal law. The case is entitled Kenney v. Helix TCS, and was argued before the Court of Appeals for the Tenth Circuit.

The Company’s counsel argued that the collective action cannot proceed as the FLSA only applies to legal businesses. The lawyer claimed that all job functions engaged in by the workers amount to trafficking in illegal drugs. This case is fascinating because it highlights the tension between a state legalizing cannabis and its continuing illegality under federal law. The lawyer for the Company argued that this controversy entered the “legally ambiguous” sphere in which legal cannabis businesses operate.

The named plaintiff, an armed security guard who guarded growers and sellers, claimed he worked overtime many weeks and was not paid properly. He sought class certification for all such guards, going back three years. The Company moved to dismiss, arguing that the employee’s work (as he was dealing with a Schedule 1 drug under federal law) violated the federal Controlled Substances Act and was thus outside of FLSA coverage.

The district court Judge denied the motion and observed that other courts have not endorsed this concept. The Judge noted that in other cases involving businesses that violate federal laws, e.g. immigration, courts have ruled that these violations did not mean the businesses could not comply with other federal laws. However, the Judge certified the ruling for immediate appeal and thus it went (quickly) to the Tenth Circuit.

The lawyer for the plaintiff asserted that the FLSA does not have a requirement that employees subject to its jurisdiction must be engaged in “only” legal businesses. There was no outright mention of “lawfulness” in the law and there was nothing in the state statute that voided the dictates of the FLSA.

The Takeaway

Maybe Congress should make an exception to the FLSA for this industry, but it has not done so. Consider the implications of granting the employer’s motion to dismiss—it would be giving a business illegal under federal law an advantage over legal businesses by sanctioning the avoidance of paying overtime.

Hmm. Food for thought…

When a class action is filed, often times there are issues (for the plaintiff and their counsel) as to who should be in the class. Often, the named plaintiff will seek to reach out to other putative class members, but it is not every day when a Judge orders that the plaintiff may telephone or email these other class members, despite a claim that this would unfairly facilitate the plaintiff’s case. That is what a New Jersey federal judge has just ordered. The case is entitled Sanchez v. Santander Bank NA et al., and was filed in federal court in the District of New Jersey.

computer-email

The theory of the case is that the employer coerced employees into not filing for overtime; the named plaintiff claims the information will help her figure out if the workers are class members. The Judge denied Santander’s bid to limit contact and now the plaintiff can contact Branch Operations Managers at more than 600 banks spread across nine states. The Judge allowed this unrestricted access to facilitate the plaintiff’s discovery efforts. There are more than 1100 other possible class members.

The Judge observed that the plaintiff “is already in possession of the contact information for potential opt-ins, and the court sees no basis to prevent plaintiff from investigating whether or not these employees are similarly situated to plaintiff by limiting the scope or means of communication.”

The theory of the suit was that the Bank prohibited these employees from reporting extra hours worked or ostensible overtime. There were also allegations that the Bank punished/disciplined employees who did attempt to report the extra time worked. The named plaintiff asserted that she implored upper management to hire more employees or dispatch help from other branches, but these initiatives went nowhere. The named plaintiff claimed she had to work 10-12 extra hours per week, without pay.

The Bank had argued that Sanchez’ contact with potential plaintiffs should be limited to those Branch Managers she worked with or who were in the immediate geographical area. The Bank also opposed Sanchez calling or emailing other workers, contending that any communications should be confined to the letter that the Judge had approved.

The Takeaway

I don’t like this. It seems that the courts often make it easier for plaintiffs to do the “best” job that they can in securing the biggest class they can. The plaintiff already had the addresses so these people could have easily been contacted in the more traditional manner.

Seems the pendulum swings a little far to the left on this one…

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!

I often settle FLSA actions, as do many other lawyers, defense and plaintiff. It makes sense for both sides, given the costs and uncertainties of litigation and the protracted time it takes for a case to weave its way through the courts. There is now a growing controversy as to the degree that such settlements need to be reviewed by the courts. This dilemma has now found its way to the Second Circuit Court of Appeals in a case that may produce a watershed result. The case is entitled Yu v. Hasaki Restaurant Inc. et al., and was argued before the Court of Appeals for the Second Circuit.

A sushi chef who sued his employer and the employer wanted to settle the lawsuit for $20,000. The district court Judge (Jesse Furman) maintained that the statute required him to review the settlement for appropriateness. The matter has now been appealed to the appellate court where oral argument (and some tough questioning by the appellate panel) took place.

The plaintiff’s lawyer argued that Rule 68 of the Federal Rules of Civil Procedure explicitly provided that any agreement reached under that Rule had to be entered as a judgment. One of the appellate judges seemed to disagree, stating that this Rule was not intended to be used in that manner. The Judge observed “really, what is 68(a) about? … It’s about getting people to accept settlements in torts.” The lawyer responded that “it’s meant to create a settlement where there are disputes about the facts and what’s owed.” The lawyer noted that these kinds of disputes often exist in wage-and-hour cases.

The lawyer for the advocacy group Public Citizen asserted that the district court was right. She stated that the Judge Furman was correct in looking towards the Second Circuit’s recent holding in Cheeks v. Freeport Pancake House for guidance. That case closed the door on settling and dismissing FLSA cases under FRCP 41. The plaintiff’s lawyer countered by stating that there is no similar requirement in Rule 68, as there is in Rule 41, i.e. making sure that no other statute would preclude the proposed settlement.

Judge Debra Ann Livingston’s inquiries allowed the plaintiff’s lawyer to go into a speech about the long amount of time it takes for settlements to be approved by district courts. That Judge was also dubious of the applicability of the Cheeks holding. She observed that Rule 68 settlements were matters of pubic record, while Rule 41 settlements could be (and were) negotiated in a private setting.

The Takeaway

Settlements are such a vital part of the FLSA-litigation process that any obstacle that gets placed in the way of the facilitation of such settlements is bad for both plaintiff and the defendant…

This is an interesting case.  A class action that was denied certification, appealed to the Second Circuit, which reversed because the lower court did not properly interpret the job description on the key issue of duties qualifying for the employer to claim the protection of the Part 541 exemptions.  The employees were salesmen and installation technicians.  Now, they get another shot to prove they are worthy of class status. The case is entitled Sydney et al. v. Time Warner Entertainment-Advance/Newhouse Partnership and issued from the Court of Appeals for the Second Circuit.

plastic black toolbox with tools over white backgroundThe lower court had relied upon the outside sales exemption.  The panel, however, concluded that the jobs seemed much more inclined to be installation jobs, rather than selling jobs.  Therefore, it was too early and improper to grant summary judgment as there were issues of fact.  The Court stated that “we conclude that the district court erred in holding on summary judgment that plaintiffs’ primary duties were exempt sales, as opposed to nonexempt installations, and accordingly in its ultimate conclusion that the outside sales exemption applied.”

These workers, dubbed territory sales representatives, or TSRs, contacted apartment building owners in upstate New York.  Their role was to urge these owners to funnel their tenants to the Employer for their cable TV, internet and phone service needs.  They received a small salary and commissions.  The plaintiffs allege they spent some time making calls to get business but the majority of their time was supposedly spent doing the actual installations (which would obviously be non-exempt work).  They asserted that they worked 55-70 hours per week.

They sued but the lower court rejected their claims, relying on the outside sales exemption, finding that that “based on [the] undisputed facts, the court finds that plaintiff’s primary duty was making sales.”  The Second Circuit disagreed.  That Court noted that the men went to work in hard hats and safety glasses.  They also carried tool boxes full of different tools.  Also, there were other employees whose job was to focus on door-to-door sales.

The Takeaway

The issue on summary judgment was whether the facts, i.e., the job description, undisputedly showed that the men were outside salesmen.  If, however, the facts on the ground differ from the printed description, that job description will be worthless as a defense in proving the exemption.  In other words, if the workers spend the majority of the time at work performing nonexempt work, such as installations they are non-exempt.

Simple as that…

When an employer realizes that a certain classification or number of employees has been misclassified as exempt, the employer may do the right thing and, henceforth, treat those people as non-exempt and pay overtime accordingly.  That corrective measure, however, leaves a gap because the workers can sue for overtime for the period preceding the change.  That is just what happened in a case where the employer agreed to pay $2.75 million to settle a class action involving inside sales representatives claims for overtime.  The case is entitled Bisaccia v. Revel Systems Inc. and was filed in federal court in the Northern District of California.

Salesperson holding the receiver of a corded desk phone while dialing in the office.There were 264 employees who would be part of the settlement.  The attorney fees and costs would be around $750,000.  The lawyer for the plaintiffs asserted that “this settlement avoids expenditures of resources for all parties and the court, and provides ‘significant benefit that [plaintiffs] would not receive if the case proceeded — certain and prompt relief.”  The settlement is also reasonable because the proposed release only requires plaintiffs to release claims they might bring against Revel relating to their classification as exempt ISRs.”  To date, 151 people have opted in.

The plaintiffs claimed they should have been paid overtime prior to when they were changed over to non-exempt employees and overtime eligible.  These kinds of positions used to be (routinely) deemed exempt but now they are viewed as white-collar production jobs and simply a glorified form of “production,” i.e. non-exempt work.

The papers filed by the plaintiffs stated that “this settlement provides favorable resolution for all plaintiffs, without the need for litigating decertification or motions to compel arbitration.” Their attorney said that he was “pleased with the outcome, which we believe provides very good value to the inside sales representatives in this case.”

The Takeaway

When an employer converts people from exempt to non-exempt, he must always determine what to do with the years in the past.  One tactic is just ignore it and hope for the best, knowing that the statute of limitations gets eroded away week by week.  Another is to do a calculation of what people are owed for the two years prior to the change and make “restitution” on those hours.  I think the proactive way is the better way.

It will no doubt be cheaper than another litigation.

Often, when a class of workers petitions for conditional certification in FLSA collective action, and such certification is granted, it usually is for the entire class being asked for.  Sometimes it is not and when that happens, it is “news.”  That has happened in a recent Pennsylvania case where the proposed class was more than two-hundred workers and the certified class was less than forty.  The case is entitled Hunt v. McKesson Corp., and was filed in federal court in the Western District of Pennsylvania.

The Judge slashed the sought-after class from all McKesson employees in the “grade 103″ category to only the workers in the grade whose job descriptions matched concerning the use and levels of discretion and judgment.  The Judge noted that “this is a conditionally certified collective that is comprised of a group of employees for whom McKesson itself describes the scope of their discretion and judgment identically.  It is McKesson’s grouping of different titles with identical definitions of discretion and judgment (which plaintiff attests were accurate in practice) and McKesson’s identical treatment of that group for purposes of overtime exemptions that makes those job positions sufficiently similarly situated at the conditional certification stage.”

The plaintiff alleged that her duties lacked the requisite discretion and independent judgment needed for the administrative exemption.  The named plaintiff asserted that her job entailed that she “[follow] policies and procedures in analyzing situations or data from which answers can be readily obtained,” and that similar language was found in the description for other grade 103 jobs.  If that was borne out, it certainly would not be discretion as contemplated by the regulations.

close-up of a judge hitting mallet at deskThe Judge made specific note that many of the job descriptions at issue had language different than the plaintiff’s and these differences impacted whether or not discretion was utilized by the workers. The Judge found that “plaintiff continues to lump together ‘readily obtained’ job positions with ‘appropriate action’ job positions, but plaintiff has no evidence to show how those two ‘sub-categories’ of grade 103 are similarly situated to one another other than they share the same grade 103.”  Then, he cut the class.

The Takeaway

This Judge really delved into the minutiae of this matter and made a very reasoned decision that the class being asked for was an overreach.  This could well be a sound tactic for defense counsel to utilize when attacking a class and trying to whittle it down, if not eliminate/defeat it entirely.

It’s a start…

 

There is an old saying, “I’m from the government and I’m here to help you.” Everybody thinks that is funny as, often, the opposite is true, especially for the employer community. Well, the USDOL is putting a new spin on this maxim by creating an office to (supposedly) help employers in complying with the Fair Labor Standards Act.

The new organ, denominated the Office of Compliance Initiatives, will coordinate with other enforcement agencies in an effort to improve compliance with the FLSA. There will also be an enforcement perspective. The sub-agency will also work with employers (so they say) to facilitate greater employer compliance.

U.S. Department of Labor headquarters
By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons
There are two new websites, www.worker.gov and www.employer.gov. These websites will give data pertaining to the compensation and benefits that are required to be paid under various laws. The agency will also give contact information for the Wage and Hour Division and for State labor departments. This contact information is vital, assuming it is not the general 800 number.

This could be a sign that the DOL will look more towards enhancing compliance, than punishing transgressors or seeking to ferret out alleged wrongdoers. This approach would actually yield more for employees, as many employers are well-intentioned and have good faith but are confused by the laws.

The Takeaway

I think, actually, that this is a good idea. I have found that most employers want to comply with the law and have trouble doing that as it is often very nuanced and gray. If an employer can get information from this office and helpful hints, then double check that information with direction from counsel on how to apply and implement that information, everybody would win.

A zero sum game. Of sorts…

I had blogged about this case when it first came out. It struck me as very interesting because not only is the subject matter unique, it also raises the whole thorny issue of what is (or is not) working time. This latest case involves Parking Production Assistants (PPAs). These people worked for CBS and their function was to guard parking spaces. Now, the employer will settle this class action for $9.98 million to settle the case where the theory was unpaid overtime. The case is entitled Hines et al. v. CBS Corporation and was filed in federal court in the Southern District of New York.

Empty parking lotThis settlement parallels other similar settlements for these employees at other production companies. In fact, there are approximately twelve of these cases working their ways through the various pipelines of litigation. The motion by the parties to the Judge, seeking his approval on the settlement, stated “while the other settled PPA cases generally contain similar factual and legal allegations, they were brought against different movie and/or television production studios.  Although not binding, presently there is substantial precedent of both preliminary and final approval of settlements … similar to the one presented here.”

The plaintiff attorneys assert that they met with in excess of one-hundred potential plaintiffs and reviewed at least 20,000 weeks of payroll records. They further assert that more than one hundred people have already joined the lawsuit, although the opt-in notice has not even been sent out. On that basis, the lawyers seek 33% of the gross settlement amount for their fees.

The case started three years ago when the named plaintiffs sued, alleging that they were not paid proper overtime when they secured various sets and lots on production sites in New York for TV shows. They claimed that they worked up to 100 hours per week but were only paid a day rate or per diem rate.

The Takeaway

Working time is when an activity is directed or controlled by an employer or inures to that employer’s benefit. The “guarding” of the parking spots accomplished an important goal for the employer and therefore was of (considerable) benefit to the employer. That meant it was working time. The fact that the employer settled this case for almost ten million dollar shows that it came to understand this.

A little bit too late…