Fair Labor Standards Act (FLSA)

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The President has not yet nominated an Administrator for the DOL Wage and Hour Division and the new Secretary of Labor, Alexander Acosta, has not named a political adviser to work with the Wage and Hour Division’s careerists. Thus, without new policy guidance, DOL field investigators seem to be enforcing minimum wage and overtime laws by adhering to and following policies that existed before January 20, 2017.

With that said, there are signs that some local DOL offices may be re-thinking their attitude toward businesses on their own, with their thinking being that the DOL will adopt, as an official stance, a more business-friendly enforcement policy. For example, there are signs that investigators are not keying in on joint employer relationships and may not be so quick to assess double damages (liquidated damages) on wage assessments made.

U.S. Department of Labor headquarters
By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons
Alfred Robinson, a former WHD Administrator, and someone likely to know, has stated that. “I’ve seen offices that maybe pushed liquidated damages or things of that nature beforehand are not so adamant about it this year.”  He added that, “I read the tea leaves as suggesting that hopefully some reason is coming into some of the enforcement practices.”

The agency has more than 1,000 investigators and the lack of leadership in the “main office” could make it harder for the agency to speak in a unified manner.  A long time ex-WHD official observed “until there’s political leadership in place below the Secretary, I think we’re going to see wage-and-hour on automatic pilot, and one of the consequences of that is that some of the district offices are left to their own devices.”

Some lawyers believe that the DOL is taking a more neutral enforcement stance thus far. In contrast, there are reports that some investigators are becoming more aggressive, as they set short time frames for the production of documents as a component of an investigation.

Under President Obama, the DOL significantly increased the number and kinds of cases on which it would assess liquidated damages. This is expected to slow down, as it is a big hammer for the agency, especially in an administrative context. As far as guidance issuing, the closest thing to the implementation of policies was the withdrawal of the two Administrator Interpretations on independent contractor status and what constitutes a joint employer relationship.

The Takeaway

 I expected the DOL to be more business friendly under this Administration, but if the agency does not get organized, there will be no clear direction. Maybe that is a good thing for the employer-defendant world.

Maybe not…

The Obama DOL had issued two so-called “white papers” one on independent contractor status (Administrator Interpretation No 2015-1).and the other on joint employer status (Administrator Interpretation No. 2016-1). These documents outlined the agency’s position on these two crucial issues and not surprisingly, took a very pro-employee perspective. Well now, in the stroke of a pen (or two pens), those Interpretations have been completely rescinded.

U.S. Secretary of Labor Alex Acosta
By US Department of Labor [Public domain], via Wikimedia Commons
The Secretary of Labor, Alex Acosta, stated that the agency would withdraw these Interpretations. In a statement, the agency asserted that the rescission of these documents “does not change employers’ legal responsibilities” under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, with the agency saying it “will continue to fully and fairly enforce all laws within its jurisdiction.”

The Takeaway

I am not convinced that these withdrawals will matter at all. The Interpretations were drawn from precedent — lots of precedent — on both of these issues. That precedent will not go away. The tenets enunciated in the documents reflect, in my view, the positions that federal courts have been taking for the last several years.

Unless DOL field offices are given specific, explicit guidance from “above” to totally change their view on these issues, which is likely not to happen, field investigators and District Directors in the numerous field offices will continue to apply the principles applicable to these issues in the same, liberal, pro-employee manner which they have been doing for many years now.

So, as Sonny and Cher sang many years ago, “the beat goes on.”

I always look for a preemption defense when I am defending a FLSA collective action, whenever there is a labor contract involved. What a magic bullet that is—get rid of the entire matter in one fell swoop (with maybe just a 12(b)(6) motion). But, and it is a big but, there must be something in the labor contract that is pertinent. If not, that tactic fails, as evidenced by a recent (split) Third Circuit opinion.  The Court refused to dismiss a FLSA collective action brought by nurses at a New Jersey assisted living home and send the case to arbitration, asserting that there were factual disputes, not claims contained within the collective bargaining agreement. The case is entitled Tymeco Jones et al. v. SCO Silver Care Operations LLC, and was issued by the Court of Appeals for the Third Circuit.

Hospital Emergency signThe plaintiffs alleged that their employed miscalculated their overtime wages and did not pay them when they were compelled to work through lunch. The Court found that the workers did not explicitly waive their right to sue under the Fair Labor Standards Act and the claims did not center on a contractual dispute at its heart. As the majority succinctly stated, “neither of the plaintiffs’ FLSA claims depend on disputed interpretations of CBA provisions such that arbitration is necessary.”

The nurses filed the action in December 2013, charging that the Company did not include shift differentials (up to $3.00 per hour) when calculating their overtime, i.e. their regular rate and also claimed they were not paid for working through lunch on the many occasions that they did. The employer argued that the case should have been sent to arbitration.

The Third Circuit noted that a court could compel arbitration on a federal statutory claim when the Union “clearly and unmistakably” waived its right to sue and the statute at issue did not exclude arbitration as a forum. In addition, a court could order arbitration when the claims depended “on the disputed interpretation of a CBA provision” even if the Union had not waived its right to sue.  That was not the case herein, as the Court concluded that “all of these so-called disputed ‘interpretations’ of the CBA … are factual questions — length of meal breaks, types of interruptions, how they were handled and whether the plaintiffs ever received compensation due to these interruptions.”

The Takeaway

I think this is a chance worth taking. There are always labor contract articles that focus on methods and amounts of compensation. I believe, all the time, a plausible argument can be made for a preemption position. The employer here came close to prevailing. Even if the employer loses, I believe it makes the case that the challenged payment method is legal, because, if it was not, wouldn’t the Union have challenged it or negotiated it out of the contract?        

The House has voted by 229-197 to pass a Republican bill that allows employers to offer compensatory time off rather than time-and-a-half wages for overtime hours.  A few days ago, the House Committee on Education and the Workforce voted 22-16 along party lines to approve the Working Families Flexibility Act (H.R. 1180, S. 801).  This is a rather perplexing move, given that the Trump Administration has not yet publicly decided whether it will support the overtime rule introduced by the previous Administration, which would make four million workers eligible for overtime.

U.S. Capitol Building
Copyright: mesutdogan / 123RF Stock Photo

This bill amends the Fair Labor Standards Act to allow employers and workers to voluntarily agree to 1.5 hours of compensatory time for every hour of overtime worked, for up to 160 hours of leave. The requested time would have to be approved by the employer.  This law would cover private sector workers; since 1985, the FLSA has permitted public sector employees to be given compensatory time in lieu of being paid cash overtime.

The Democrats strongly criticize the legislation, alleging the measure would help employers coerce workers to pass on overtime pay.  Congressman Scott (D-Va) stated that “H.R. 1180 doesn’t give employees any rights they don’t already have.  Most employees can already take time off without pay. The bill does, however, create a new right for employers to withhold employees’ overtime pay.”  The Republicans respond by asserting there are protections in the bill to stop employers from taking these kinds of actions.

A number of conservative groups and the Trump Administration have supported the bill.  One of its sponsors, Representative Byrne, asserts the bill’s purpose is to offer workplace flexibility.  He stated that “all we are trying to do is give workers a choice.  Policies written in the 1930s that are out of step with the needs of the 21st century workforce shouldn’t stand in the way of flexibility for workers and their families.”

Now it goes to the Senate.

The Takeaway

I think this is a good thing.  I know that many workers would rather have paid time off rather than receiving the overtime wages because the overtime is significantly taxed and the workers prefer time off, whether to spend with family or otherwise enjoy.

I can understand that…

I have blogged so many times about Assistant Manager class actions.  I never seem to get tired of it because there is a never-ending “supply” of them.  Guess what.  Another one.  A group of employees working for AC Moore, an arts, crafts and floral merchandise retailer, has petitioned a federal judge to approve an almost three-million dollar settlement that settles claims that they have been misclassified as exempt executive employees.  The case is entitled  Rossmeisl et al. v. A.C. Moore Arts & Crafts Inc., and was filed in federal court in the District of Massachusetts.

Arts & crafts items
Copyright: 36clicks / 123RF Stock Photo

The plaintiffs asked for the court approval a bare two months after they filed their collective action.  Their theory was that they were misclassified as exempt.  They argued equally hard that the settlement should be approved because it was the right thing to do.  They stated that “the settlement was the result of extensive pre-suit investigation, discovery and substantial arm’s-length negotiations.  Recognizing the uncertain legal and factual issues involved, the parties reached the settlement pending before the court after private mediation before an experienced mediator.”

The lawyers for the plaintiffs advised the employer that they were alleging that the assistant general managers were misclassified as exempt in January 2016.  The parties then entered into pre-litigation discussions to ascertain if a settlement was possible.  The Complaint was nevertheless filed on February 8.  The court papers then capture the essence of why this settlement should be approved.

The court papers advised the Judge that “the settlement, which followed a thorough investigation and mediation with a former federal magistrate judge, Hon. Diane Welsh, satisfies the criteria for approval of a Fair Labor Standards Act collective action settlement because it resolves a bona-fide dispute, was reached after in-depth investigation and review of significant documentary evidence and payroll data, was the result of arm’s-length settlement negotiations assisted by a private mediator and between experienced counsel and provides good value to the workers it will benefit.”

The Takeaway

This is an interesting tactic employed by the lawyers for the plaintiffs.  Avoid litigation, but still get a nice settlement.  It might also be better for an employer but there might be, I fear, too ready a desire to settle at such an early stage, just to avoid the (rapidly) escalating legal fees associated with defending such a case.  Naturally, the merits, good or bad, dictate the employer’s strategic decision.

Regretfully, to my lights, conditional certification seems all too easy for plaintiffs in a FLSA collective action to secure.  Are things changing?  A federal judge has refused to certify a proposed class of natural gas pipeline inspectors for Gulf Interstate Field Services Inc. in a Fair Labor Standards Act overtime suit, concluding that the named worker in the suit is not similarly situated.  The case is entitled Sloane v. Gulf Interstate Field Services Inc., and was filed in federal court in the Middle District of Pennsylvania.

Pipeline Leading to Oil Refinery
Copyright: kodda / 123RF Stock Photo

The employee has alleged that he was paid a day rate but overtime was not paid for hours exceeding forty.  Judge Brann observed that many factors militated towards denying conditional certification.  He noted that there were many differences among the putative class members, such as where they worked, what they did and who their clients were.  Thus, there was a lack of commonality amongst the workers.

The Court aptly observed that the “plaintiff seeks certification of collective action generically comprising ‘all current and former employees of [GIFS] who performed work as a pipeline inspector in the United States in any workweek between three years prior to the date of the court’s order and the present.  The proposed class otherwise embraces no limitations based on geography, timeframe, client, position type or project nature, though it does incorporate a carve-out for three separate projects where workers were believed to not have suffered any unlawful treatment.”

Significantly, the Court also focused on the prior convictions of lead plaintiff Thomas Sloane, finding that those convictions and his evasiveness and dissembling about them with his own lawyer, showed that he was not a proper class representative.  Three of Sloane’s offenses involved burglary or theft; the Court concluded that this “propensity for untruthfulness” would taint the entire case for the other possible class members.

The Takeaway

This is the dogma that must be pursued when defending one of these collective actions.  Look for discrepancies in the fabric of the class, especially as regards the named plaintiff and the rest of the class.  Herein, this task was made easier because of the criminal convictions and conduct related to those convictions of the named plaintiff.  In sum, if the named plaintiff is but a poor representative of a putative class, the case for conditional certification is rendered much weaker.

Corinne Burzichelli writes:

The issue of the exempt status of financial services employees has been explored in numerous cases for many years and in different parts of the country.  Now, there is a new chapter to add to this saga.  On February 28, 2017, Judge William J. Martini granted Morgan Stanley Smith Barney LLC’s motion for summary judgment, dismissing financial advisers’ claims that they were entitled to overtime under the FLSA and New Jersey law.  The case is entitled In re: Morgan Stanley Smith Barney LLC Wage And Hour Litigation and was filed in federal court in the District of New Jersey.

Banking and Financial Services
Copyright: sashkin7 / 123RF Stock Photo

The plaintiffs, consolidated from four cases originating in New Jersey, New York, Connecticut and Rhode Island, alleged that Morgan Stanley failed to pay overtime in violation of the FLSA.  The named plaintiff, Nick Pontilena, additionally claimed that Morgan Stanley violated New Jersey law by not paying him required overtime, making improper wage deductions, and failing to maintain required pay records.

The court rejected these claims and concluded that financial advisers were exempt from overtime  under the FLSA.  The Court concluded that the administrative exemption applied.  This is significant because many courts have rejected the identical defendant contentions/defenses.

Judge Martini determined that financial advisers met this standard by reviewing the USDOL regulations and case law directly addressing financial advisers as opposed to DOL guidance on mortgage loan officers.  Indeed, the Court chose to follow precedent from the Eastern District of Pennsylvania and the Northern District of California, and deferred to a 2006 DOL letter, all of which found that financial advisers were exempt from the FLSA.

Specifically, the Court agreed with the regulations and concluded that the financial advisers satisfied the administrative exemption because they primarily offered advice and analyzed client information in an independent manner and were not focused solely on making “sales.  That is a very momentous decision because the decisions that have gone the other way have found that these employees’ main job duty was selling.

The Takeaway

Employers in the financial services industry who are hit with these suits must focus on the analysis, rather than the selling, job duties of the employees.  If a court believes that the “sale” is the ultimate driving force for the employees’ work, they will be found to be non-exempt.  At least in New Jersey, financial advisers will be exempt from the FLSA.  Let’s now see if this trend carries through to other Circuits in the country.

Hopefully, it will…

Corinne Burzichelli is an associate in the Labor & Employment Department of Fox Rothschild LLP, resident in its Princeton office.

I am a big believer in the importance of USDOL Opinion Letters because they show the thinking of the agency and how it interprets various provisions of the Fair Labor Standards Act.  I often look to the published body of these letters for guidance and I lamented when the DOL (back in 2010) decided to stop issuing these letters.  Well, there seems to be good news around the corner.  The newly nominated Secretary of Labor, Alexander Acosta, has indicated that he is amenable to re-instituting this practice.

He stated that he believes “there’s a value from opinion letters…from the fact that they’re grounded in a specific set of facts, and not in broad legal premises.”  He continued by adding that he sees “no reason why I would not encourage opinion letters.”

The nominee made these comments when responding to a question from Sen. Mike Enzi (R-Wyo.).  The Congressman referenced a fairly common employer complaint that the agency stopped issuing this kind of specific (or, sometimes, general) guidance when it decided to issue so-called Administrator’s Interpretations, which were essentially major pronouncements on certain issues, such as independent contractor status and joint employer relationships.

writing letter
Copyright: perhapzzz / 123RF Stock Photo

Speaking of which, what is unclear and yet unanswered is whether the new Secretary (if confirmed) would rescind these two “controversial” Interpretations.  Both of these documents were very much pro-employee.  One widened the agency’s definition of joint employer status, making two entities liable for minimum wage and overtime violations.  The independent contractor Interpretation expanded the definition of “employee” to include many more so-called independent contractors.

The Takeaway

I think this would be a great idea.  When individuals or entities write in for opinions, on a particular set of facts, employers throughout the country can take definitive guidance from the factual scenarios presented and apply those lessons to their facts.  That is what employers want—to know how to comply with the law.

Opinion letters help employers do just that.

There have been many class actions concerning the job title “Assistant Manager” and this malady has risen again.   The chain, Hooters, has been sued in a nationwide collective action that alleges the Company misclassified assistant store managers, calling them supervisors, in order to avoid paying overtime.  The case is entitled Stirewalt et al. v. Hooters of America LLC and was filed in federal court in the Northern District of Alabama.

Hooters Restaurant
By Ildar Sagdejev (Specious) (Own work) [GFDL or CC BY-SA 4.0-3.0-2.5-2.0-1.0], via Wikimedia Commons
The named plaintiffs allege that they worked up to eighty (80) hours per week but were never paid overtime due to their misclassification.  The claim they only had the title of Manager, but that their main duty was sales and not the supervision of at least two other employees, over whom they could exercise managerial authority.  They claim that when they did create schedules, they were “almost always changed,” according to the Complaint.  They claim that although they interviewed new job applicants, the recommendations they made were often ignored by their supervisors.

More significantly, the Complaint alleges fraudulent conduct by the Company. It alleges that the “defendants have intentionally and repeatedly misrepresented the true status of managerial compensation … to avoid suspicion and inquiry by employees regarding their entitlement to monies owed to them.  Plaintiffs, as well as other similarly situated present and former employees, relied upon these misrepresentations by defendants and [were] unable to determine [their] true status under the FLSA by the exercise of reasonable diligence because of those misrepresentations.”

The plaintiffs want notices to be sent to current and former assistant managers who worked at a Hooters store within the last three years.  This would allow these workers to opt in to the collective action.  The plaintiffs seek overtime, commissions, bonuses, vacation and sick time and, naturally, attorneys’ fees.

The Takeaway

I don’t mind these so much.  (Famous last words?)  These kinds of actions usually necessitate an individualized determination of the duties of the various employees and that is the death knell of a viable class action.  The problem is if they were subject to the same, uniform, system-wide policies, that would be bad.  But, at least from the start the defendant here has a legitimate, viable chance of defeating the motion(s) for class certification.

A defendant in a FLSA collective action case is fighting an initiative to compel it to produce information that the named plaintiffs allege is relevant to their discovery requests.  The defendant labels the requests a “fishing expedition.”  The case is entitled Martinez et al v. T-Mobile Ltd. et al., and was filed in federal court in the Northern District of Illinois.

Woman using her mobile phone, city skyline night light background
Copyright: ldprod / 123RF Stock Photo

The plaintiffs want the defendant, Wireless Vision LLC, to produce electronically stored information to support (supposedly) their claim that it was the Company’s policy to have employees work before they clocked in to start the day and after they clocked out, as well as working through clocked-out breaks.  They claim they were not paid for those hours.  The Company refutes this by affirming that it has produced thousands of pages of documents in an appropriate and acceptable format, records such as payroll records, personnel files and disciplinary records.

The Company’s papers that the “plaintiffs’ motion is like a tree without roots.  The premise of the motion is that the plaintiffs’ are automatically entitled to unspecified ESI; from assumed repositories of ESI in the hands of Wireless Vision; that are assumed relevant to the case; which entitlements are based upon unstated search protocols with no safeguards at all and no consideration of feasibility and costs.”  The Company asserted that if the plaintiffs wanted the information in a different format, they should have to convert it. The Company also asserted that the plaintiffs should make a showing as to the reason what they sought was discoverable and why the information thus far produced was not sufficient.

The plaintiffs counter by claiming that although almost one-thousand pages were produced, this was nothing more than timekeeping, payroll and personnel records for the nine opt-in plaintiffs and the Employee Manual. The plaintiffs want emails and documents relating to the Company’s payroll and timekeeping software, performance evaluation programs, commission structure or training of sales representatives.  The plaintiffs also claim that the information they want is easily accessible, as the Company’s own IT department had control over all of its computer systems.

The plaintiffs claimed they worked before they officially clocked in and they were compelled had to collect supplies, prepare equipment, meet with supervisors and other duties.  They also claimed working time after they punched out, sometimes for allegedly several hours, to perform other job-related duties.

The Takeaway

The discovery requests appear burdensome and excessive.  The problem is, as I have found, that lower federal courts, especially Magistrates, are being fairly liberal in the amount and kinds of information that they are allowing to be discovered in FLSA collective action litigation.