Fair Labor Standards Act (FLSA)

I love this one.  For the title of the worker classification involved.  It appears that a class of drilling fluid specialists, commonly referred to as “mud men,” has reached a $7 million settlement in its wage and hour suit against M-I LLC.  The case is entitled Syed et al. v. M-I LLC and was filed in federal court in the Eastern District of California.

The employees worked in drilling operations in Bakersfield, Calif.  They claimed they were compelled to work either twelve (12) hour shifts daily for two weeks before leaving their work sites, or work full-days (i.e. 24 hours) in which they were always on-call.  They claimed that they were not paid overtime when they worked more than forty hours per week.  (They also claimed no overtime pay when their work days exceeded eight hours, which is California law).

The settlement monies will be paid to 115 members of the national FLSA class as well as 353 members of the California class; the $7 million settlement includes up to $2.37 million in attorneys’ fees and costs, service awards of $15,000 to plaintiff Balfour and $20,000 to named plaintiff Syed, $11,500 in claims administration expenses and a $75,000 Private Attorneys General Act payment.

That leaves more than four million dollars to be paid out to class members, based on the number of weeks worked during the class period. Some class members will receive $55 for every week, while the California class members will receive $165 for each week worked.  The proposed settlement document stated that “for purposes of this proposed settlement, at a mediation … the parties operated under the premise that Rule 23 proposed class members were in a better position under California law for claims than FLSA collective action members, where in some individual cases, the covered positions have generally been deemed ‘exempt’ under federal law.  This is crucial to understand in order to realize the structure of the proposed settlement.”

The Takeaway

The plaintiffs’ attorney posited that “there are many of these types of cases pending against many major players in the industry.”  If this is an industry wide pattern and practice, that would be a problem.  The only thing to do in that instance is get into compliance and hope no one sues for two years…

A group of New Jersey sales associates who work in Dish Network LLC call centers urged a federal court to confirm a $1.9 million arbitration award stemming from a proposed class action, in which the workers said the satellite television provider miscalculated their overtime pay rates.  The case is entitled Frisari v. Dish Network LLC, and was filed in federal court in the District of New Jersey.

Group of satellite dishes
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The workers urge that the award, which gave the employees overtime at time and one-half, instead of the half-time overtime rates they were paid, is appropriate under long established principles.  The plaintiffs urge that “it is well established that when this court reviews an arbitration award, as long as the arbitrator’s award is not by ‘his own brand of industrial justice,’ the award is legitimate.”

The plaintiffs’ lawyer stated that the award shows that employers could not “cut corners” by paying overtime based on a half-time premium, which is a form of the FLSA “fluctuating work week” method.  He stated that “this sets precedent that companies cannot use the fluctuating work week method under the New Jersey Wage & Hour Law.”

The employees claimed that they were compelled to work off the clock and were prevented from accurately reporting these overtime hours.  They asserted that they were not paid while they performed preliminary duties before their shifts began, such as booting up computers and launching software.  The employees also claimed that they often worked through lunch, although these meal breaks were counted as unpaid periods.

The employees had filed suit and then the Company claimed that they were compelled to arbitrate their claims individually, as opposed to a class action, but the arbitrator held that there was the possibility the workers could still proceed with their claims as a class.   The Company sought to vacate that award but was unsuccessful.  In the final order he entered, the arbitrator awarded $480,000 in attorneys’ fees to the class and $1.9 million damages for the class.

The Takeaway

This case illustrates an interesting trend that is perhaps developing.  I believe (and I see it in my practice) that plaintiff lawyers are becoming less averse to litigating FLSA claims in an arbitral forum, where defendants would much prefer to be in.  On balance, I think it is better for both sides.  It is much cheaper, much faster and arbitrators are usually pretty savvy, both in deciding the case on the merits and facilitating settlements.

A win win.  Maybe…

A group of field service engineers have filed a FLSA suit against Alcon Laboratories, on the theory that the company misclassified them as exempt employees.  They seek conditional class certification, alleging that they were consistently denied overtime pay.  The case is entitled Voss v. Alcon Laboratories Inc., and was filed in federal court in the District of Minnesota.

Lab and engineers
Copyright: nd3000 / 123RF Stock Photo

The allegation is that the Company wrongfully classified field service engineers as exempt until the Company changed their classification in 2016.  The plaintiffs seek conditional certification of a class of field service engineers.  The motion for certification asserts that “regardless of their specific job title, Alcon’s field service engineers performed the same primary job duties and were compensated in the same manner.  And despite the fact that they routinely worked over 40 hours per week, they were uniformly classified as exempt and denied proper overtime pay.”

Although they now receive overtime, the employees want back due wages for the period(s) of time they were misclassified.  The lead plaintiff asserts that his duties included installing, repairing, troubleshooting, servicing and maintaining ophthalmic laser equipment.  The Company defended its earlier classification decision by contending that the employees were professionally exempt or fit within the Highly Compensated Employee (HCE) exemption.

But – and it is a big but – at the conditional certification stage, there is a lower burden of proof and the plaintiffs argue that they have met the “fairly lenient” burden of evidence for conditional certification, i.e., a showing that the workers were similarly situated.  The plaintiffs argue that they share the same job duties, FLSA classification and pay structure and that they were all told, via a series of conference calls, about their new classification policy.

The Takeaway

The danger, always, when an employer re-classifies employees and begins to pay them overtime going forward is that the employees will realize that maybe they should have been paid overtime “all along” and will take some action.  In the litigious world in which we live, in the internet world in which we live, where employees can (all too) easily learn about their “rights,” an employer who re-classifies must always anticipate future challenges to its prior reclassification decisions.

One answer.  Compute what the employees are owed for that past overtime and pay them, along with getting the employees to sign releases.  That also brings with it legal issues, as one or more of the people may take that Release to an attorney or seek an attorney’s advice, but if the employer can get most of the people to “take the money and run” on that backdue overtime, the size of any ostensible class has been greatly diminished.

Whenever a FLSA suit is lodged against a unionized employer, I always look for the possibility of a preemption defense, which will, in one fell swoop, doom the entire litigation.  If the Court finds that the matter is governed by the parties’ labor contract and is better and properly left for the arbitration (or NLRB) process, then the Court does not have jurisdiction.  In a recent case, FreshPoint Inc. has tried to argue just that.  The Company has urged dismissal of a class action FLSA suit, asserting that the claims are nullified by the drivers’ collective bargaining agreement.  The case is entitled Rodriguez Jr. v. FreshPoint Inc. and was filed in federal court in the Northern District of California.

Picket line
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The FreshPoint attorney argued that the claims for failure to pay straight wages, pay overtime, provide meal periods and permit rest periods are not suited for resolution in federal court because these items were negotiated into the labor contract by FreshPoint and the Teamsters.  He also argued that the California Labor Code has an exemption from state overtime and meal break requirements for commercial drivers who have agreed to such a union contract.

The lawyer for the workers acknowledged that the meal break and overtime pay policy complied with the collective bargaining agreement under California law.  She asserted, however, that the other claims should not be dismissed and took issue with the defendant’s contention that the workers were seeking “improper reimbursements” by seeking relief with both rest break premiums and penalties and for not enumerating the breaks in the wage statements of the employees.  She claimed that “it’s not a double recovery. That’s just what they’re owed.  There are hours they were off the clock that weren’t paid for.”

The Judge seemed skeptical about the federal preemption argument.  The Judge wondered “if I were to find there was no preemption, what’s the basis of jurisdiction under the state law claim?”

The was filed in state court but the defendants removed it to federal court in September.  This is the usual course of action when federal claims are implicated, explicitly or otherwise, in a state court law suit.

The Takeaway

This is the best starting point to mount a defense.  If this is successful, the whole thing goes away.  That would be good because if these alleged violations were the products of common policies or practices, the argument for a class certification would be stronger.

I read an interesting post the other day by Michael Thompson in the Wage & Hour Defense Blog, in which he discussed the discoverability of plaintiff ATM and cell phone records in a FLSA collective action case.  He discussed the case of Gonzalez v. Allied Concrete Industries, Inc., where the plaintiffs claimed they were not paid overtime in violation of the Fair Labor Standards Act and New York law.  The case was filed in federal court in the Eastern District of New York.  To help them ascertain whether the plaintiffs were working when they claimed they were, the defendants sought an order compelling discovery of their ATM and cell phone records.

Woman using her mobile phone, city skyline night light background
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The defendants asserted the records of the plaintiffs’ ATM transactions were likely to lead to the discovery of admissible evidence because they could reveal each plaintiff’s “whereabouts and activities during hours they claim to have been working.”  The defendants relied on other precedent where access to ATM records was granted.  The Court denied the motion, although it acknowledged the existing precedent.

The Court found that in the other case an evidentiary showing had been made to the effect that the plaintiff attended prolonged lunches during the workweek and withdrew cash from ATMs for that purpose.  In the instant case, however, the defendants had not shown any “evidentiary nexus between the en masse discovery sought and a good faith basis to believe that such discovery material is both relevant and proportional to the needs of the case.”

The defendants also sought the release of the plaintiffs’ cell phone records in order to determine whether the plaintiffs “engaged in personal activities such as non-work related telephone calls, extended telephone calls, [and] frequent text messaging” during times they claimed to have been working.  There was also precedent for this production but the Court ruled that the defendants had not made a showing that the plaintiffs made personal calls when they were supposed to be working.  Thus, the Court ruled that this was mere speculation and did not warrant a “wholesale intrusion into the private affairs” of the plaintiffs.

The Takeaway

I have blogged recently about employers obtaining tax records of plaintiffs in FLSA cases.  I think this possibility, i.e. obtaining, or requesting, electronic evidence of an employee’s activities through discovery, may be another good tactic.  Obviously, some evidential foundation is needed but there may be a possibility that plaintiffs do not want their ATM or cell phone records thrust into the middle of a litigation.

Therefore, they may be more inclined to settle.  Something to ponder, isn’t it?  Or to try…

For the last several months, I have been talking to and advising clients on strategies to deal with the advent of the new FLSA salary regulations, i.e. the $913 per week commencing December 1, 2016.  Maybe all that was for naught?  This is because more than fifty business groups and twenty-one (21) States have filed lawsuits challenging these rule changes.  The theory is that the agency unconstitutionally exceeded its authority to establish a federal minimum salary level for exempt, white collar workers.  The cases are entitled Nevada et al. v. U.S. Department of Labor et al. and Plano Chamber of Commerce et al. v. Perez, both filed in federal court in the Eastern District of Texas

Courthouse pillars
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The States contend that the large increases in required salary levels would force many state and local governments (and private businesses) to dramatically increase their employment costs.  This could compel employers to cut services or lay off employees.  The States seek a declaratory judgment to the effect that the new rules unlawfully violate the Tenth Amendment by requiring a certain mode of payment for state employees.  On that same day, many business groups (e.g. US Chamber of Commerce, National Association of Manufacturers, National Retail Federation) also filed legal actions, claiming that the reasons proffered by the USDOL for the new salary threshold are not a proper construction of the FLSA.

The states also take issue with the policy behind the rule change, saying a worker’s salary level doesn’t reflect the kind of work an employee actually performs. The states argue the DOL regulation disregards the text of the Fair Labor Standards Act by imposing a salary threshold without regard to whether an employee is actually performing bona fide executive, administrative or professional duties.

The States also assert that the rule’s automatic indexing mechanism, which kicks up the minimum salary threshold every three years would not be illustrative of the nation’s economic conditions or the potential impact on public and private resources.  The plaintiffs contend that by compelling States to spend more from state funds on exempt employee salaries or overtime, the federal government is unilaterally depleting state resources and that violates the Constitution.

The business groups also allege that losing the overtime exemption for “frontline executives, administrators and professionals” would rob businesses of being able to flexibly manage their workforces.  Ostensibly, millions of employees nationwide would have to be reclassified to non-exempt hourly workers, which would result in their hours being cut back to avoid overtime and thereby “deny them opportunities for advancement and hinder performance of their jobs — to the detriment of their employers, their customers and their own careers.”

The Takeaway

The agency has raised the minimum salary level several times, the last time in 2004, without legal challenge, or, at least, a successful legal challenge.  I think the same result will obtain this time.  In any event, every employer should be going through the process of determining, under current salary levels, if all of their exempt people are truly exempt??

Get ready for December 1!

I had blogged about this case a short time ago, with my “take” being that this was a bad case for the employer and that it should be settled quickly.  Maybe they were listening.  Now, the employer, a Florida country club and the workers suing have requested that the federal judge dismiss the Fair Labor Standards Act (“FLSA”) suit, asserting that the club has paid almost $96,000 to 35 workers and $34,000 in fees to the lawyers.  The parties assert this will resolve the case.  The case is entitled Werman et al. v. Rotonda Golf Partners LLC and was filed in federal court in the Middle District of Florida.

Golf course
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Under the agreement, the former maintenance workers (Mark Werman and Ronald Segui) agreed to cut their damages calculation to 1.5 times the amounts allegedly due them, rather than doubling the damages, as they initially sought.  The employer (quite correctly) took the view that it was worth paying $130,000 to avoid a long, drawn out judicial process that most certainly would have cost the Company a great deal more in legal fees (for their counsel and the adversary, as the FLSA is a fee shifting statute) and possible damages.

The joint motion stated that “plaintiffs’ probability of success on the merits, and the amount of any potential award, also is uncertain, further suggesting that this settlement is fair and appropriate.”  The plaintiffs assert, and the defendants deny, that the plaintiffs are owed wages due to defendants’ alleged violations of the FLSA.”

The plaintiffs alleged that the employer avoided and evaded the payment of proper overtime by splitting hours between the entities, thereby always paying straight time even though the hours worked at both places aggregated to more than forty in a week.  The settlement discussions began in in June “in an effort to avoid the cost and risk associated with continued litigation.”  Then the parties sent opt-in notices to 36 current/former employees.  By this juncture, the Company had already sent checks to 35 workers, including all opt-ins, which added up to $95,862.40.  The defendants also agreed to pay $34,141.76 in attorney fees.  The parties urged the Court to approve the settlement.

The Takeaway

The parties, especially the defendant, did the right thing here.  I have done this myself many times when faced with a set of facts, as the defendant/employer’s counsel, that signaled to me that something had been done wrong and considerable expense and liability lay down the line.

The best thing to do is get out early and as cheaply as can be done.  Then, of far greater importance, is the need to correct the deficiencies that led to the suit and never do it again.

Kudos to the employer!

It is not that often that a motion for conditional certification is denied, as there is only needed a modicum of evidence, e.g. affidavits, to support the motion.  But sometimes, it does happen.  A federal judge has refused to certify a collective action that sought a class of employees against Stuart Petroleum Testers Inc.  The plaintiffs allege that they were not paid overtime under the Fair Labor Standards Act, but the Judge concluded that the named plaintiff did not introduce sufficient evidence to show he was situated similarly to others in the proposed class.  The case is entitled Mathis v. Stuart Petroleum Testers Inc. et al and was filed in federal court in the Western District of Texas.

Oil pump jack and oil tank silhouette
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The Court noted that, even under the “fairly lenient standard” of the conditional certification stage, the plaintiff, James Mathis, laid out only “bare assertions” about the nature of the job he performed.  These bare assertions were too vague to allow a determination that other employees in the same positions performed the same basic tasks.

The Judge observed that the plaintiff did not explain what kind of equipment a field supervisor or pump supervisor would regularly use nor did he describe the other classifications of employees they would work with or the specific tasks they would perform.  In lieu of doing that, the plaintiff only gave a broad description of “maintaining and operating the equipment used at the oilfield well sites.”  The Court noted that this could include nearly any worker performing some manual labor at a well site.

The Court stated that “if the court were to evaluate which Stuart Petroleum employees are in a ‘similar position’ to a pump supervisor or field supervisor based on plaintiff’s description of his job duties, the resulting class would inevitably include workers who are not ‘similarly situated’ to plaintiff.”

The Company attacked the motion for conditional certification by contending that it was based on the fundamentally incorrect premise that, although he was a salaried field supervisor, there was a “class” of similarly situated hourly employees.  The Company pointed out that the named plaintiff was a senior operator on a hydraulic choke crew who occasionally supervised other crew members, who were hourly paid and received bonuses.  The Company also argued that he had not presented evidence that any potential opt-in plaintiffs gave any sign that they might want to join the lawsuit.

The Takeaway

Usually, a motion for conditional certification will be accompanied by several affidavits or sworn statements.  Most times, these are canned and boilerplate and then the defense counsel must argue that there is no basis to conclude that any of the affidavits are persuasive and/or that none of the supporters of the motion have “real” knowledge.  In essence, the defendant in that scenario is arguing that the showing was “barebones” as was argued here.

But, here, consisting of only one named plaintiff’s allegations, generalized and vague as they were, the showing was indeed, the essence, of barebones.

Quiz
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The TSheets Time Tracking Blog recently posted a quiz testing readers’ knowledge of the Fair Labor Standards Act (FLSA). It was a pleasure to assist in preparing the 9-question quiz, asking participants to correctly apply the FLSA to several hypothetical situations. Can you get a perfect score?

As I live and breathe!

The USDOL, the agency charged with enforcing the Fair Labor Standards Act has, evidently, not been paying its own employees proper overtime.  The agency has just agreed to pay $7 million to settle claims that it did not pay proper overtime to thousands of its own employees.  The matter was brought as a grievance by the American Federation of Government Employees, Local 12 (“AFGE”) and had been percolating through “the process” for almost ten years.

U.S. Department of Labor headquarters
By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons
The Union lawyer aptly noted that “this is the agency that goes around fining all the private employers for doing the same thing that it just ended up paying $7 million to make go away.”  The “collective action” grievance charged that the DOL failed to pay employees when the agency “suffered or permitted” overtime to be worked.  Interestingly, during the pendency of this grievance, many workers who had been classified as exempt were re-classified to non-exempt, i.e. overtime-eligible.

It is estimated that thousands of employees will receive payments under the settlement.  The theory of the grievance was that employees were performing work beyond their assigned shifts, work that the agency knew or should have known about, but nonetheless did not pay the employees for this work.

The Union sought to place the blame directly on the former Secretaries of Labor, Elaine Chao and Hilda Solis.  The Union President stated that “it is deeply disappointing that both Secretary Chao and Secretary Solis were unwilling to abide by their own regulations when it came to paying their employees.  It is sad that a decent and hard-working public servant like Secretary Perez has to clean up their mess.”

The Takeaway

The Union lawyer stated that “this settlement will help ensure that the agency follows the same laws it enforces.  I guess this should be taken as a cautionary tale by all employers, small or titanic.”

But, most especially, for the agency.