U.S. District Court for the District of New Jersey

Where a plaintiff files a FLSA (or other statutory wage hour) lawsuit, he may well file state law, tort-like claims, such as unjust enrichment, breach of contract, fraud and others. Usually, if not always, those claims/counts are predicated upon and solely arise from the alleged FLSA violations. As such, the FLSA (or any other wage statute at issue, like the NJ Prevailing Wage Act) is the exclusive remedy for these alleged violations and the state law claims are preempted. Thus, the employer should initially file a motion to dismiss rather than answer the Complaint.

Law books and justice scales
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For example, in Moeck v. Gray Supply Corp., 2006 WL 42368, at *1-2 (D.N.J. Jan. 6, 2006), plaintiffs asserted fraud and negligent misrepresentation claims (in addition to their FLSA claims), arising out of the fact that defendants purportedly ‘’materially misrepresented“ that employees would be given overtime pay and “concealed“ that defendant’s employees “would be compelled to work additional time without compensation.” The Moeck court found these claims preempted by the FLSA because they were “merely based on Plaintiffs’ [FLSA] overtime claims.” Id

Similarly, in Kronick v. bebe Stores Inc., 2008 WL 4509610 (D.N.J Sept. 29, 2008), plaintiff claimed that the employer required employees to work overtime without compensation, thereby violating the FLSA and state common law. The Kronick court determined that the state common law claims were preempted because plaintiff premised the state law claims on the same facts relied upon in support of plaintiff’s FLSA claims. Id. Additionally, in Ramirez v. Gromitsaris, 2013 WL 2455966 (D.N.J. June 3, 2013), the court likewise dismissed plaintiff’s unjust enrichment claim as preempted by the FLSA because plaintiff did “not make any independent factual allegations in support of [the] claim.

Furthermore, the Davis-Bacon Act (DBA), 40 U.S.C. 3141 et seq., a federal statute which mandates the payment of prevailing wages for certain work performed under federally funded or assisted contracts has been deemed to preempt common law claims based on the same nucleus of facts. See Alvarez-Soto v. B. Frank Joy, LLC, 258 F. Supp.3d 615, 627-628 (D. Md. 2017) (unjust enrichment claim was “based on the failure to pay wage rates in accordance with the [DBA],” and therefore, was preempted by the DBA); Grochowski v. Phoenix Const., 318 F.3d 80, 85-86 (2d Cir. 2013) (DBA preempts breach of contract and quantum meruit claims because those claims are “indirect attempts at privately enforcing the prevailing wage schedules contained in the DBA.”).

The Takeaway

I believe this is a very good, strong tactic for defense counsel to employ. The law is very solid  on this issue. It also makes the plaintiff’s lawyer do some work, changes the dynamic and momentum of the case and shows the plaintiff that it is not going to be easy and that their case is fraught with difficulty.

It’s called changing the momentum…

I have often written about the scourge of Assistant Manager class actions. The employee category is particularly subject to this kind of lawsuit as these workers often perform some non-exempt work and it is unclear many times if they possess and exercise sufficient and proper supervisory authority. A recent case in New Jersey provides yet another example. A federal judge has just conditionally certified a class of Assistant Store Managers who work for Panera Bread. They allege that they were misclassified as exempt. Interestingly, the Court would not certify such classes in Massachusetts and New York.  The case is entitled Friscia v. Doherty Enterprises Inc. and was filed in federal court in the District of New Jersey.

Waitress carrying three platesThe judge concluded that the lead plaintiff Jacqueline Friscia made a “modest factual showing” concerning the alleged misclassification but refused to certify classes in other states. The court stated that “put simply, Friscia has not produced sufficient evidence to show that she is similarly situated to assistant managers in New York or Massachusetts.”

As is typical in these cases, the named plaintiff claims she worked 55-80 hours per week. She also claims that she performed many non-exempt tasks and that these tasks comprised the majority of her work time per week These tasks included preparing food, taking food orders, cleaning the store, working at the cash register and dish washing. Other than her weekly salary of $800, she asserted that she never received overtime for her long hours.

The company took the position that since the named plaintiff worked in only one store, she could not know conditions at other stores or whether the other Assistant Managers were “similarly situated.” The company also contended that there was an arbitration agreement in place and thus the workers could not be included all together in the same class actions. The judge was not impressed by these arguments, finding that the plaintiffs had met the “lenient burden” to receive conditional certification.

The Takeaway

The company can still defeat this class action by making a motion to de-certify the class later on. This would entail taking more discovery, perhaps many more depositions, in an effort to show that there is too much individual difference between the workers across the system to allow for class treatment. This will be expensive and may not be successful.

Or, the company can bite the bullet and settle…

There has been a great deal of litigation about class action waivers in Employee Handbooks and use of arbitration mechanisms in Employee Handbooks to preclude judicial litigation. A recent New Jersey federal case sheds more light on this thorny issue, and the decision favors employers. The case is entitled Essex v. The Children’s Place and was filed in federal court in the District of New Jersey.

Pen on paperIn October 2014, the Company developed an arbitration program that applied to all Associates working at retail stores in the United States. The Company used an intranet portal to communicate with Associates. To gain access, Associates used an employee identification number and personal password. Since October 2014, the Portal included The Mutual Agreement to Arbitrate Claims.

When the Company introduced the arbitration program, it sent Associates already working for the Company received a message through the Portal, directing them to review the Arbitration Agreement. That message explained “it is important that you review the Arbitration Agreement carefully” and that “[w]e expect all Associates to review and sign the Arbitration Agreement. However, because it is not a mandatory condition of your employment, you may elect to opt out and not be subject to the Arbitration Agreement.” Associates hired after October 2014 reviewed the Arbitration Agreement following orientation. The Arbitration Agreement included a class, collective, and representation waiver.

An Associate who declined to accept the terms of the Arbitration Agreement filled out an Opt Out Form, which was also located on the Portal. Of the 377 Store Managers who filed consent to join the lawsuit, 209 of them signed and submitted the Arbitration Agreements. These employees were not required to participate in the arbitration program as a condition of employment and the Arbitration Agreement expressly provided that signing the Arbitration Agreement was not a mandatory condition of employment.

The Court ruled that the Arbitration Agreement had a clear “opt out” provision. The Court noted that numerous Plaintiffs who opted into the case first opted out of the Arbitration Agreement. Thus, it was clear that the arbitration agreement had an opt-out clause and that “[s]uch a provision can hardly be construed to interfere with, restrain, or coerce an employee into forfeiting the rights afforded by § 7 of the NLRA”).  The Defendant conceded that the forty-nine Plaintiffs who did opt out of the Arbitration Agreement were not subject to this motion to compel. Thus, the Court dismissed the case as concerned those Plaintiffs who did not opt out of the arbitration provision.

The Takeaway

This is a very instructive case for employers. The defense works! In how many of my postings am I talking about magic bullets or an easy, quick, cheap way out of a FLSA collective action (at least for many of the opt-in workers).

Well, here is a real good one…

I always look for the easiest way out of a FLSA lawsuit. I use the word “easiest” in the most generic sense, as no magic bullet defense is truly easy. However, there are times when you catch lightning in a bottle, i.e. the jurisdictional defense. In a recent case, the Company was able to use this defense/shield to dismiss a FLSA overtime suit. The case is entitled Zheng v. Best Food In Town, LLC et al and was filed in federal court in the District of New Jersey. The plaintiff alleged violations of the Fair Labor Standards Act (“FLSA”) and the New Jersey Wage and Hour Law (“NJWHL”).

Cooks in restaurant kitchenThe plaintiff alleged that he was a salaried employee and worked as a kitchen helper for Defendants with a fixed lump sum per month compensation. His duties included washing and cutting vegetables, frying and cooking rice, preparing meat, and cleaning. He separated employment in May 2015. The plaintiff alleged that his employer engaged in a widespread pattern and practice of not paying a class of employees proper minimum wage and overtime compensation.

The Court noted that to sustain a suit under the FLSA, an employee must work for an enterprise or business that “has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person.” 29 U.S.C. § 203(s)(1)(a). This enterprise must have annual gross sales or business “not less than $500,000.” Id.

On this point, the Company submitted individual and corporate tax returns to support the argument that the business did not reach this threshold. These documents included tax returns from 2013, 2014, and 2015; Defendants’ gross corporate annual revenue ranged from $385,420 to $428,856. The plaintiff countered by asserting that these income tax records did not account for all of Best Food In Town’s sales. The Court observed that, thus, the Plaintiff’s only evidence to rebut these documents was “an assertion of tax fraud.”

The Court concluded that this lack of evidence was fatal. In a summary judgment proceeding, the non-moving party must make some showing of evidence from which a reasonable jury might return a verdict in his favor. All the Plaintiff did here was make an assertion. That did not and could not carry the day. Thus, the Court ruled that the FLSA did not apply to the Company and dismissed the Complaint.

The Takeaway

How quick and effective! No jurisdiction because the dollar threshold was not met and the case is dismissed, early on. This will certainly not work in every case, but the moral of the story remains the same. Defense counsel should explore the possibility of a sure-fire, quick, easy way out. If you don’t look, you don’t find.

Always look…

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
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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.

A putative class of delivery truck drivers has filed a collective action FLSA lawsuit against Bimbo Bakeries, alleging a failure to pay overtime.  The case is entitled Oddo et al. v. Bimbo Bakeries U.S.A. Inc. and was filed in federal court in the District of New Jersey.  The plaintiffs will seek conditional certification and try to get the ability to send opt-in notices to affected employees.

Bakery
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The plaintiffs claim that by paying drivers a flat rate of $110 per week plus 12% commission on sales, the Company violated both federal and state law.

The Complaint alleges that the “plaintiffs assert that defendants failed to pay named plaintiffs and those similarly situated proper overtime compensation and failed to implement a system to track the number of hours worked each work week.” The Complaint contends that the drivers, titled “route sales representatives,” could not improve their commissions since they had no sales training and “the amount of sales that named plaintiffs made to a retailer along their delivery routes was mainly determined by the volume of the retailer’s sales to its customers since named plaintiffs’ last delivery.”

There have been many other FLSA lawsuits against this Company, which is a multinational bakery company based in Mexico; the Company owns several brands, including Sara Lee, Entenmann’s and Thomas’. The Company has also settled several cases with fairly large dollar payouts over the last six years.  By contrast, the class here is no more than forty employees (if they all opt in).

The Takeaway

Overtime cannot be waived nor can it be paid through compensation arrangements which, although fair or even generous, do not comply with the law.  The employer here must either keep employees to forty hours or less or pay them overtime.

There are legal ways to pay overtime and yet not experience an increase in labor costs.  This Company must examine any number of procedures for effecting compliance and still being efficient and profitable.  They do exist!

I believe the Company can do it…

In Atkins v Capri Training Center, in the District of New Jersey, Judge Susan Wigenton considered a Motion to Conditionally Certify a Collective Action. Capri was a for-profit corporation that included beauty schools. Atkins attended one of the schools owned by Capri. While she was a student, Atkins worked at the Clinic in Clifton, NJ, and provided services for paying customers in an effort to satisfy her statutorily required clinical training for a license in cosmetology. Atkins also performed janitorial and clerical functions that were essential to the Clinic’s operation.

She alleged that she and other students performing similar tasks were considered “employees” under the Fair Labor Standards Act (“FLSA”) and were therefore entitled to wages. She moved for conditional certification and to be allowed to send notice to potential class members.

To obtain a license to practice cosmetology or hairstyling, an individual must attend a licensed beauty school and perform work in a clinical setting. This clinical setting is a portion of a licensed school in which members of the general public receive cosmetology services from registered students for a fee (used to recoup only the cost of materials used in the services). The Students receive credits towards graduation, and ultimately, licensure in cosmetology.

Plaintiff alleged that she was an employee under the FLSA because: (1) Capri was “a for-profit enterprise where the Plaintiff’s labor was essential” to its operation; and, (2) the Clinic actually made a profit. The court rejected these contentions, finding that profitability alone, or lack thereof, was not determinative when assessing the existence of an employer/employee relationship. The Plaintiff also argued that she should be considered an “employee” because Capri, not herself, was the primary beneficiary of her labor, basing this contention on the fact she had to perform janitorial and clerical work. The court found this contention unpersuasive. The purpose of the Clinic was to mimic a real beauty salon. The clinical program allowed students to train under a professional and gain the needed experience and skills.

The Judge concluded that the Plaintiff was not an “employee.” She was not dependent upon Capri for either her livelihood or continued employment and she trained at the Clinic with the understanding that the relationship was temporary. The economic reality of the situation showed that Plaintiff was merely a student trainee who was required, by statute, to hone her soon-to-be professional skills at a clinic.

Maybe this starts a reverse trend in these intern cases, of which there has been a disturbing abundance.