A class of equipment operators and trainees has asked a federal court to approve a $1.35 million settlement of their FLSA class action lawsuit alleging the Company did not fairly pay them their wages and used a gimmick to avoid doing so.  The case is entitled Elliott v. Schlumberger Technology Corp. et al., and was filed in federal court in the District of North Dakota.

The plaintiffs alleged that the Company violated the law by paying them under the “fluctuating workweek” method.   Interestingly (or maybe not so much), the settlement talks took place after U.S. District Judge Ralph R. Erickson granted the Company’s motion to decertify the class.   The Judge ruled that there was insufficient evidence to show that the workers were similarly situated. There are 138 people in the class.

The plaintiffs alleged that the Company paid equipment operators and trainees by the fluctuating-workweek (FWW) method.  That method allows employers to pay workers overtime at a half-time, as opposed to time and one-half, but certain conditions must be met.  The workers claimed that in order to validly use this method, the employees must be paid on a fixed salary, which they were not.

The Court had conditionally certified a collective class of equipment operators, trainees and other similar employees who were employed at the Company plant in Williston, North Dakota, and to whom the Company applied the fluctuating workweek method for at least one week during the three years preceding the lawsuit.

The Takeaway

This case presents a valuable lesson.  Attempted use of the FWW method of payment must have the employees receiving a fixed salary and an agreement, in advance of the work, that the employees understand what the payment arrangements and overtime protocols are going to be.  This allows the employer to pay half time for overtime instead of time and one-half.  Without these two requirements being met, any attempt to use the FWW method is doomed to failure.  Put differently, the FWW method can be the employer’s best friend, if done right.

If not, it is the employer’s worst enemy…

I have blogged on this long, protracted saga many times and I am glad to see that with each posting, the judicial result does not change.  The Seventh Circuit has now affirmed a lower court’s ruling that determined that Chicago police officers did not have a viable claim for overtime under the Fair Labor Standards Act for their after-hours work performed on city-issued BlackBerrys.  The Court concluded that there was a lack of any systemic or uniform policy that stopped the officers from putting in for the overtime.  The case is entitled Allen v. Chicago and issued from the Court of Appeals for the Seventh Circuit.

The panel affirmed U.S. Magistrate Judge Sidney I. Schenkier’s December 2015 decision, which followed a six-day bench trial.  The Seventh Circuit agreed with the lower court that the police department did not act to affirmatively prevent officers from requesting payment for nonscheduled overtime work.  The Court also concluded that the City had no knowledge that officers were not being paid for the work.

The police department issued BlackBerrys to the officers, which they sometimes used for such off-duty work.  They were required to submit “time due slips” to their supervisors and they had to write a short explanation of the work they performed, after which the supervisor approved the time and the officers were then paid.  The Magistrate eventually concluded that the officers did not demonstrate that the department had an “unwritten policy” that discouraged them from submitting slips.

The officers argued that their supervisors knew they were working off-the-clock because, according to them, the City gave them BlackBerrys so they could be contacted at any time.  The City countered by pointing to evidence that supervisors believed the officers were preparing the overtime slips so they could be paid.  The Seventh Circuit rejected the contention that the department had actual or constructive knowledge that overtime was being underreported and/or that there was pressure on the officers not to report that time.

Interestingly, the Seventh Circuit compared this case to the Sixth Circuit holding in White v.  Baptist Memorial Health Care Center.  In that 2012 decision, the Sixth Circuit held that an employee’s failure to accurately record/log work hours doomed her FLSA suit for overtime.  The Seventh Circuit observed “plaintiffs in this case, like the nurse in White, worked time they were not scheduled to work, sometimes with their supervisors’ knowledge. They had a way to report that time, but they did not use it, through no fault of the employer,” the Seventh Circuit said. “Reasonable diligence did not, in the district court’s view, require the employer to investigate further. Since … we see no clear error in that view of the facts, we see no legal error in reaching the same conclusion as the White court.”

The Takeaway

In order for employees to be paid for alleged off-the-clock work, they must show that their employer knew or should have known about the work.  They must also show that there was a system wide policy or practice that prevented them from being paid.  There was no evidence of either of these scenarios in this case and, more importantly, there was evidence that the City paid for this working time!

The correct result…

As an employer’s, i.e. a defendant’s attorney, I just want to win the case and I don’t care how (within ethical parameters, naturally).  Not too often, however, can an employer argue that the workers who are suing are not even covered by the Fair Labor Standards Act.  In a recent case, an employer was able to do just that because it successfully argued that the suing workers were engaged in “agriculture,” which is an exempt industry under the FLSA.  The case is entitled (Barks v. Silver Bait, LLC  and was decided by the Sixth Circuit Court of Appeals.

Copyright: belchonock / 123RF Stock Photo
Copyright: belchonock / 123RF Stock Photo

The suing workers were employed at a Tennessee facility that raises worms to sell for bait.  The Sixth Circuit concluded (affirming the lower court) that the FLSA definition of agriculture was meant broadly to reach “farming in all its branches” and applied to this sizeable company which cultivated worms for sale to retailers.  Although “worm farming” was not agriculture in a traditional sense, the Court (as other courts) held that the definition is intended to evolve and that the “ordinary meaning” of farming applied to the “entire field of farming.”

The Court examined the FLSA definitions of “farming” and had some difficulty categorizing the activity.  The Court looked at the covered commodities (e.g. milk, wool, eggs, honey) and stated that “the list of included and excluded commodities is instructive in that worms are more like the included cultivated commodities than the excluded wild ones.”  The Court also noted that raising worms was not “expressly exempt” under any FLSA example.  The Court then examined the scope of the “unlisted” farming activities and concluded that the raising of bait worms “has much in common with traditional farms.”  It shared “the same basic purpose” as traditional farms, to raise animals for sale as commodities.”

The Court finally observed that “although not a specifically enumerated farming activity, there is little to distinguish Silver Bait from a traditional farm other than the unfamiliarity of worm farming.”  Thus, the Court found that the growing and raising of worms is a form of farming within the FLSA’s agricultural exemption.

The Takeaway

A win is a win.  The lesson here is always to look at issues like jurisdiction or statute of limitations or some other perhaps, purely procedural, hyper-technical (dare I say gimmicky?) way to win the case especially in its early stages. i.e. motion to dismiss, summary judgment motion.  Here, the defendant convinced the court to stretch the meaning of the word “farming” as defined under the FLSA by arguing that the meaning of farming was not frozen in time and had changed with the times.

As does the need/desire to find creative ways out of a case…

In most (if not all) FLSA cases I handle, whether single plaintiff or collective action, there is usually a State of New Jersey cause of action set forth as Count II, with the FLSA Count as the first one.  The New Jersey Count is duplicative of the federal count to the extent that people (ultimately) opt-in to the federal case (but without the liquidated damages) but the state Count is governed by Rule 23 considerations, not the opt-in principles.

Copyright: andreypopov / 123RF Stock Photo
Copyright: andreypopov / 123RF Stock Photo

In Thompson v. Real Estate Mortgage Network, Inc., the plaintiff, Patricia Thompson, sued her former employers for allegedly failing to compensate for overtime work, in violation of the FLSA and the New Jersey Wage and Hour Law (“NJWHL”).  Under FRCP Rule 12(b)(6), the Employer moved to dismiss the state Count on the pleadings, asserting that a claim for overtime was not cognizable under the New Jersey minimum wage law.

The Employer argued that the lack of a definition of the term “minimum fair wage” in the section of the NJWHL that conferred a private right of action precluded an overtime action from being brought.  The defendants argued that, without a specific definition, a court could not expand that term to include overtime claims.  The district court Judge began his analysis by observing that it was not” immediately apparent” to the Court that a “minimum fair wage” excluded overtime.

With that said, the Court then noted (as was quite plain) that the NJWHL’s statute of limitations section – titled “Limitations; commencement of action” – did refer explicitly to overtime compensation.   Thus, the court reasoned that “if the State legislature did not intend to create a private right of action for overtime compensation, this language is inexplicable.  The New Jersey legislature would not have prescribed a limitation period for a nonexistent cause of action.”

The Court also observed that the FLSA included a right of action to recover withheld overtime payments and that the principle of parallel construction suggested that the NJWHL should be interpreted the same way.  Noting that these laws should be interpreted liberally, the Court found it “difficult to conclude that the NJWHL gives employees fewer or narrower rights than the FLSA.”

The Takeaway

There is an old canon in the world of litigation—you don’t want your first motion, your first initiative before a Court (any court) to be a loser.  To me, that was the entire reason for not doing this.  The liberal construction given to wage hour also should have, by itself, precluded this approach.

Second, more importantly, reading the statute as a whole and noting that the statute of limitations explicitly included overtime claims in it should have been another red flag tip-off that this motion was destined for failure.

If the impetus for the motion was to buy time for the employer to come into compliance, that is one thing.  But, if not, I am left to wonder the reason for doing it…

I have often warned clients that simply having a policy against working unauthorized overtime does not immunize an employer against a successful lawsuit claiming payment for off-the-clock work.  A recent case (yet again) proves this maxim.

Clock
Copyright: / 123RF Stock Photo

An appellate court has now held that a group of nurses working for the US Department of Veterans Affairs need not have been “expressly directed” to work overtime in order for them to receive overtime compensation.   The case is entitled Mercier v. United States and issued from the Federal Circuit Court of Appeals.

The nurses alleged that the VA required them to work overtime by imposing increased scrutiny, including a greater risk of discipline, on those who would not work.  The nurses claimed that the VA knew the nurses were working overtime “on a recurring and involuntary basis.”  The Federal Circuit concluded the work could be considered “officially ordered and approved,” as required by the statute and that the nurses had been “induced” to work overtime, but then the agency avoided paying for the overtime by contending that the work had not been ordered or approved. Thus, the Court concluded that work that was “induced” but not specifically required was nonetheless “ordered or approved.”

The Court succinctly stated that “we therefore hold that Anderson’s interpretation of [the Federal Employee Pay Act], namely that overtime is ‘officially ordered or approved’ where it is induced by one with the authority to order or approve overtime but not expressly directed, remains good law.”

The plaintiffs stated that the overtime was necessary to discharge the tasks known as “View Alerts,” which were described as time-sensitive requests for information related to patient care.  They contended that their supervisors, who had the power to order or approve the overtime, required the extra work and then threatened them with more enhanced scrutiny and the threat of disciplinary action.

The Takeaway

Employers cannot condone employees working or making the employees believe that they must perform certain tasks and then defend an overtime claim by asserting the “I did not order it” defense.  That is the essence of “suffering and permitting” work to be done and then seeking to avoid paying for it.

If employees believe they will be disciplined or can reasonably face discipline if they do not perform the off-the-clock work and the activity at issue is sufficiently connected to the job, then the activity will be considered “work” for which compensation is owed.

I have followed this protracted saga for years, since I wrote an article for the Banking Law Journal in 2001 on the issue of exempt status of mortgage brokers.  Then, in 2010, the US Department of Labor issued a “white paper” on the exempt status of such employees, finding most of them non-exempt under the administrative exemption (the only “white collar” exemption possibly applicable).  The Mortgage Bankers Association successfully challenged that rulemaking in federal district court and the DC Circuit sustained the district court’s striking down of that new interpretation.

Well, the story (or the war) is over!  The US Supreme Court has now held that agencies do not have to go through formal rule-making to effect major changes to their rules interpreting regulations. This is a major victory for the agency and a blow to employers.  The cases are entitled Perez et al. v. Mortgage Bankers Association and Nickols et al. v. Mortgage Bankers Association.

The Supreme Court reversed the July 2013 appellate court decision that vacated the 2010 “administrator interpretation” that threw out the DOL’s position on the exempt status of mortgage loan officers and other employees in this far flung industry.  In that decision, the DC Circuit ruled that the DOL had to conduct notice-and-comment rule-making. The Supreme Court disagreed.

The Court stated that the “Paralyzed Veterans doctrine is contrary to the clear text of the Administrative Procedure Act’s (“APA”)  rule-making provisions, and it improperly imposes on agencies an obligation beyond the ‘maximum procedural requirements’ specified in the  APA.”  The DC Circuit utilized the Paralyzed Veterans to hold that any new DOL interpretation could only occur after the rule-making process, with notice-and-comment, had been engaged in.  The DOL contended that the DC Circuit decision impinged upon the flexibility that Congress wanted government agencies to possess.

The Supreme Court concluded that the text of the APA “clearly” stated that only if notice/hearing was required by statute did an agency have to abide by the notice/comment requirement, but other than that, it could issue “unilateral” interpretations.  Imposing such rules, the justices said, would violate “the very basic tenet of administrative law that agencies should be free to fashion their own rules of procedure.”

The Takeaway

Employers in the banking and mortgage industries must take special heed when classifying employees as exempt or not.  Many of the employees at issue work long hours (far in excess of the threshold forty for overtime) and many of them make “good money.”  As such, the potential for successful overtime lawsuits (e.g. class actions) is frightening.  Now that the Supreme Court has issued this ruling and upheld the DOL position, I urge such employers to seriously consider classifying all such employees as non-exempt and either pay them the overtime or limit them to forty hours per week (if this is, indeed, operationally or economically possible).

It is no secret that most FLSA class action lawsuits settle.  The costs of litigation, the fee shifting nature of the statute, plus the fact that oftentimes the merits/defenses are not that clear (or good) for the employer militate settlements being made.  However, that is not the end of the story because the settlement then has to be approved by the Judge and that may be easier said than done, as the parties to a suit involving Ricoh Americas Corporation just were made to realize.

The Court would not approve a $325,000 settlement between the company and a class of 400 technicians, finding it was unfair and that insufficient information was provided to the Court to allow it to approve the settlement.  The case is entitled Ramirez v. Ricoh Americas Corp. and was filed in federal court in the Southern District of New York.

U.S. District Judge Fox ruled that the lead plaintiff did not give enough details to support the validity of the settlement.  The plaintiff failed to identify how much additional discovery was needed, e.g. number of class members to be deposed, what experts might be required and, most importantly, why “the instant litigation would be complex, expensive and time consuming.”  The Judge also noted a dearth of evidence showing that putative class members supported the deal and he chided the plaintiff for only taking a single deposition in the seven months since the litigation commenced.

The plaintiff(s) were technicians and sued under the FLSA, the New York Minimum Wage Act and the overtime provisions of the New York Labor Law; the suit was filed in December 2013.  However, the plaintiff did not explain what a comparable position to the position of technician meant and that the class definition (as set forth in the plaintiff’s memorandum of law) was inconsistent with the definition set forth in his notice of motion seeking conditional certification and there was no definition in the proposed settlement agreement.

The Court stated that “the inconsistency of the proposed class definition in the plaintiff’s notice of motion and the memorandum of law and the absence of a definition of the proposed class from the proposed settlement agreement and notices, makes it unclear to the court — as it will make it to anyone who would receive the plaintiff’s notices — who the putative class members might be.”  That was enough, by itself, for the Court to reject the proposed settlement.

The Takeaway

Both parties must take heed when they reach a deal to ensure that all details are addressed so the settlement will get court approval.  The last thing either side wants is to get a deal shot down and then go back to the drawing board, i.e. engage in more protracted discovery, at more expense for both sides and then hope/pray that the settlement then gets approved.  I have (on more than one occasion) had to “help” adversaries prepare and frame settlements so that they get court approval.

Sometimes easier said than done!

Necessity is the mother of invention…

In Naider v. A-1 Limousine, (Dkt. No 14-2212, October 8, 2014), a case filed in federal court in New Jersey, the defendant attempted to preempt a FLSA collective action by filing a motion to dismiss very early on in the case. The defendant asserted that the Plaintiff had failed to sufficiently plead a valid collective action under the FLSA because the Plaintiff did not make substantial allegations that other employees were treated similarly. USDJ Wolfson denied the motion.

The plaintiff was a limousine driver and there were other drivers who performed similar job functions as Plaintiff. The Plaintiff alleged that he and other drivers routinely worked in excess of 40 hours a week, but were compensated by the same hourly rate for all hours worked, regardless of whether any of those hours were overtime. The plaintiff asserted that although he and other drivers received additional compensation in the form of so-called “gratuities,” these gratuities were not FLSA tips, because Defendant charged them as flat fees/service charges that were not given at the discretion of the customers.

Although Plaintiff had not moved for an initial certification of the collective action, Defendant sought to preemptively strike the collective action claims based on insufficient pleadings. The Court rejected that initiative, finding that the Plaintiff had made sufficient factual allegations, which, when assessed in the context of a motion to dismiss, stated a possible collective action. Importantly, Plaintiff alleged that many policies were in violation of the FLSA — no overtime and the use of flat fees/service charges as de facto gratuities. The Plaintiff argued that these practices applied to all similarly situated employees.

The Defendant did not dispute that Plaintiff was subjected to the alleged practices, but argued that the Complaint lacked any substantial allegations that these practices applied to similarly situated employees. However, at this juncture, based on Plaintiff’s pleadings, the Court ruled it was reasonable to infer that all drivers were treated similarly. Accordingly, the allegations were more than mere “speculation” and there could reasonably be, in fact other similarly situated employees.

It was worth a try.

Arbitrate or litigate? Like everything else in the law, it depends…

Whether a claim for overtime should be arbitrated rather than fought out in court depends on whether the claim necessitates examination and interpretation of the labor contract. Under well-established legal principles, workers have an independent right to sue in court, rather than arbitrate, but if the employer successfully argues that contract interpretation is required, the lawsuit is preempted by labor law and arbitration ensues.

Indeed, I believe most employers that I deal with would rather be in arbitration than a full-blown FLSA litigation involving claims for overtime, but in a case entitled Independent Laboratory Employees’ Union Inc. v. ExxonMobil Research & Engineering Co., the Company argued that arbitration was inappropriate. A New Jersey District Court judge disagreed, holding that the grievances seeking compensation for travel time to/from job-related conferences did fall under the aegis of the parties’ labor contract.

The judge stated that “the question presented by the ILEU is whether travel time is included in those circumstances. This is an issue that requires interpretation of the CBA, and particularly in light of the broad language of the arbitration clause, is a matter which falls within the zone of interests receiving protection under the CBA.” The company defended by asserting there was no explicit reference to travel time in the labor contract and thus there was no obligation to arbitrate; the Union then moved to compel arbitration.

The Takeaway

I am somewhat surprised. I have been faced with this situation a few times and I have been the one, on behalf of a client, to argue that arbitration was required, rather than allowing a FLSA lawsuit (with its fee shifting component, doubling of damages and possible extra year of liability) to proceed. In arbitration, the Company, in addition to having the “usual” FLSA defenses (i.e. the travel time was not working time) will also have any contractual defenses it can muster.

To the Union—-Don’t wish for something because you just may get it!

I told you so!

A federal judge dismissed the putative collective action against the huge law firm, Skadden Arps, which was filed by a lawyer claiming he was working as a non-lawyer and was entitled to overtime. Judge Sullivan ruled that the lawyer(s) were exempt from the FLSA under the professional exemption in 29 USC 213(a) as licensed attorneys practicing law. The case is entitled Lola v. Skadden Arps Meagher Slate & Flom LLP and had been filed in the Southern District of New York.

The named plaintiff claimed his document review work was routine and “mechanical” in nature and did not require any legal knowledge or training. Interestingly, the Judge stated that it seemed unfair that these lawyers should not receive overtime when a properly trained and supervised non-lawyer could have done this work, but as the plaintiff was a licensed attorney he was, in fact, engaged in the practice of law and therefore exempt.

The plaintiff’s attorney stated that they will appeal, on the theory that in order to be considered practicing law, an individual had to use/apply his legal knowledge and be exercising discretion. This was hotly contradicted by the defendants who contended, in their motion to dismiss papers, that the assertion that a licensed attorney doing document review was not practicing law was “flawed and refuted by the FLSA, overwhelming legal authority and common sense.” Plaintiff rebutted by claiming that the exemption applies only to those “actually engaged in the practice thereof.”

The Judge stated that the Congress and the US Department of Labor could revisit the regulations and law given the circumstances (e.g. many lawyers doing document review as their job) that the legal profession faces. This is, perhaps, most especially so for young lawyers starting out, faced with oftentimes a long and grueling process of finding a “real” job.

The plaintiff’s lawyer will appeal to the Second Circuit. I “boldly” predict the result will be the same.

To be continued…