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.

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).

A little known aspect of the FLSA is the need for an employer to include non-discretionary bonuses when calculating the regular rate for purposes of overtime calculation.  In a collective action, the employees of Publix Super Markets have charged that the Company has not done that, particularly in the face of an alleged admission by the employer that the bonuses were nondiscretionary.  The case is entitled White et al. v. Publix Super Markets Inc. and was filed in federal court in Tennessee.

The Company had filed a motion for summary judgment asserting that the quarterly profit sharing bonus paid to hourly employees, the Christmas bonus, paid time for six holidays and tuition reimbursement did not warrant inclusion in the OT rate.  The Company charged that the plaintiffs mislabeled the manner in which the employee bonuses were actually calculated and that, in fact, the payments were within the law.

The workers fired back, contending that the Company had gone on record conceding that the payments were nondiscretionary and that the payments conflicted with DOL regulations.  The Company rebutted by contending that the bonus already provided “simultaneous payment of overtime compensation due on the bonus.” The Company asserted that the bonus was calculated based on number of hours employees worked at their store during the relevant period and thus fell within the safe harbor of percentage bonuses.  If a bonus is computed as a percentage of total employee earnings, then under USDOL regulations, it is legal.   The Company asserted that the USDOL had already concluded that the bonus did not need to be included into the OT calculation based on this percentage calculation.

The workers countered by asserting that the DOL’s “longstanding interpretation” of the total earnings requirement for rendering a bonus excludable from the regular rate was that the retail bonus had to be included because they were remuneration for employment and not just expense reimbursements, the Company could not exclude those payments from the regular rate.

 The Takeaway

Bonuses (or whatever they are called) must be included in the regular rate, if they part of a policy, practice or custom and employees expect such bonuses.  Truly discretionary bonuses are rare animals, i.e. the Christmas bonus, but a way to defend such an allegation is to build into the bonus “program” that the giving of such bonuses is contingent on, for example, “budgetary concerns.”

With that said, if the plaintiffs in this case can show that the payments at issue were given as payments for some employment related activity, as opposed to, for example, a paid sick day where no employment activity is engaged in, they might have a case.

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…

Better safe than sorry is the old adage.  Nowhere is this maxim more applicable than for an employer’s compensation practices, especially on issues of classification, working time, and record keeping protocols and obligations.

In the last several years, there has been an escalation of wage hour lawsuits, single and class action.  These cases can be grouped into certain categories that correspond almost exactly to particular payroll practices and corporate/financial decisions that impact the FLSA and state law.  Some of these flashpoint areas are:

  • Overtime claims arising from classification of employees as exempt or non-exempt;
  •  Independent contractor/consultant classification;
  •  Preliminary and postliminary work claims (e.g. donning and doffing, travel time);
  •   Automatic deductions for lunch (the curse of the smart clock)
  •  On-call cases; and
  • The Blackberry/E-Mail Claims (a “new” type of preliminary and postliminary work).

There is no way to tell when a claim will arise.  Usually, they come from workers fired for eminently good reasons but who complain to the DOL or file suit and, bad luck, have, not been properly paid.  If the “policy” at issue affects a group or, class, of workers, the snow ball rolls downhill.

The best, really, the only protection employers have is to self-audit all of their compensation practices and if there are issues, fix them, but do so in ever so subtle a manner as to “not arouse suspicion.”  The focus should be not only on having/drafting the legally correct (and employer friendly) policies but to exercise oversight to ensure they are implemented and maintained in a consistent manner.

The best defense is a good offense.  Another adage but, here, the best defense is proactive planning.  Such audits do not cost a great deal and the report that I submit to the employer when I do one highlights areas of concern and suggested remedial measures.  Such an audit also provides the ability to mount a “good faith” argument/defense.

An ounce of prevention….