Employer Law Report : Employment and Labor Relations Lawyer & Attorney : Porter Wright's Employer Law Report : Employment Litigation, Non-Compete, Trade Secrets

By a tight five-to-four decision, the United States Supreme Court's Genesis Health Care Corp. v. Symczyk decision provides employers a method to "pick off" the lead plaintiff in an FLSA collective action using a Federal Rule of Civil Procedure 68 offer of judgment and by doing so, take out the remaining collective action. For reasons we will explain in a bit, however, the Court merely "assumed" -- without deciding -- that an unaccepted Rule 68 offer of judgment that offers complete relief moots the named plaintiff's individual claim and, in the absence of any other claimant having opted into the action, the individual plaintiff lacks any personal interest in representing others in the case. Because the Court was unwilling to resolve the predicate issue as it was anticipated it would, however, there remains a split among the circuit courts of appeal as to the effect of the Rule 68 offer of judgment under this scenario. As a result, the four dissenting justices argued, the decision “aids no one, now or ever” and should simply be forgotten.

Because the circuits are split on the mootness issue, employers should take Genesis for what it is: A potential weapon to stop frivolous wage/hour cases before they become expensive collective actions and further indication of the Supreme Court's efforts to limit the ability to bring class and collective actions – at least in those Circuits -- the Third, Fourth, Seventh (and perhaps the Fifth, which appears to be leaning this way) – that already have held that an unaccepted offer of judgment moots an individual plaintiff's claims. Unfortunately for those employers in Ohio, the Sixth Circuit, along with the Second, has gone the other way, rendering this strategy useless here – until the Supreme Court ultimately decides to actually resolve the split.

The Back Story: This case originated when respondent Laura Symczyk ("Symczyk") filed this case on behalf of herself and "all other persons similarly situated" as a collective action under the Fair Labor Standards Act ("FLSA") against her former employer, the petitioners, alleging the company's automatic meal break deduction policy violated the FLSA because it failed to pay employees for compensable work. While Ms. Symczyk purported to bring the case as a collective action, rather than a single-plaintiff lawsuit, she remained the sole plaintiff.

When the petitioners answered the complaint, and before Symczyk could move for conditional certification, they served Symczyk a Federal Rule of Civil Procedure Rule 68 offer of judgment and offered her $7,500 for her alleged unpaid wages, "reasonable attorneys' fees, costs, and expenses" as the Court would determine. The petitioners gave Symczyk ten days to respond, and when she did not, petitioners filed a motion to dismiss for lack of subject matter jurisdiction arguing they had offered Symczyk complete relief on her individual damages claim and she no longer had a personal stake in the outcome of the case. Symczyk argued in response that the petitioners were trying to "pick off" the named plaintiff before the collective action could play out.

The District Court found that because no other individuals had joined the suit and the Rule 68 offer of judgment fully satisfied Symczyk's individual claim, Symczyk's claim was moot and it dismissed her suit for lack of subject matter jurisdiction.

On appeal, the Third Circuit reversed. In holding that the case was not moot, the Third Circuit explained that the defendants' attempts to "pick off" the named plaintiff with a Rule 68 offer could short circuit the collective action process and frustrate the goals of collective actions. The Third Circuit remanded the case to allow Symczyk to seek conditional certification.

The Supreme Court's Decision: The Supreme Court overturned the Third Circuit. While most waiting for this decision expected the Supreme Court to resolve the issue of whether an unaccepted offer of judgment under Rule 68 that fully satisfied a plaintiff's claim renders a claim moot, it did not. While recognizing this is an issue on which the circuit courts remain split, the Court refused to decide this significant issue. Rather, the Court chose to "assume" Symczyk's individual claims were moot because she had conceded the point at the district court level and had not filed a cross-petition challenging it. The majority then determined that Symczyk had no "personal interest" left in the case to represent the other employees who had failed to join the suit, and therefore had no other "continuing interest to preserve her suit".

• Print
• Trackbacks
• Share Link

The Northern District of Ohio is the latest in a long line of courts to send the following message to nationwide collective class plaintiffs: Stop seeking nationwide class certification where the plaintiffs are spread across facilities and have too many factual differences to be "similarly situated" and to have experienced a common injury under the Fair Labor Standards Act ("FLSA").

In Creely v. HCR ManorCare, Inc. (N.D. Ohio Jan. 31, 2013), a group of 318 nurses, licensed practical nurses, certified nursing assistants, and admissions coordinators opted into a collective action lawsuit alleging that their employer, HCR ManorCare, Inc. ("HCR"), a nationwide provider of short- and long-term medical and rehabilitation care, violated the FLSA by not paying them for all time worked because of HCR's improperly-administered automatic meal break deduction rule. After the notice stage, the parties sent notices to 3,239 current and former HCR employees from 29 facilities located in 28 states. Of those 3,239, 318 opted into the suit.

Sound familiar? It should. The case is similar to two recent Sixth Circuit cases that also concerned auto-deduct meal policies in the health care industry, Frye v. Memorial Baptist Hospital, which we blogged on here, and White v. Memorial Baptist Hospital, which we blogged on here.

The Creely plaintiffs tried to set their case apart from Frye by not arguing that the auto-deduct policy itself was per se illegal — a contention pointedly rejected in Frye. Rather, plaintiffs argued that, because they were subject to HCR's uniform auto-deduct policy, they either missed or worked though meal breaks, were not paid and that HCR illegally shifted the burden of monitoring "compensable work time" to them by requiring them to cancel the automatically deducted 30 minutes when they did not receive an uninterrupted meal break using its "missed punch" card system. The plaintiffs also argued that HCR failed to monitor them to determine if they actually received their meal breaks; that HCR failed to train or inform them what to do if they missed a meal break; and that they did not report missed or interrupted meal breaks because HCR did not train them or discourage them from doing so.

Plaintiffs' arguments highlight the problems for employers defending FLSA suits —the FLSA places the burden upon employers, not employees, to accurately record time worked and to ensure that employees are paid for all compensable time worked.

For its defense, HCR focused on the fact that plaintiffs' ability to take uninterrupted breaks depended on their particular facility, unit, shift, patient population served, job duties, and individual habits. Given the variables, HCR argued that the nationwide class could not be "similarly situated" because plaintiffs' ability to take breaks, and HCR's knowledge of plaintiffs' missed breaks, if any, depended on individual circumstances that could not be represented in a single class. This argument eventually won the day.

The Creely plaintiffs also took issue with HCR's "missed punch" form, which employees were to submit if they did not receive their meal breaks. Plaintiffs argued they were discouraged from submitting the forms, but from the testimony it was unclear whether this was actually the case.
What the evidence did demonstrate was that HCR – at the corporate level at least – had numerous, consistent policies on the "missed punch" policy, which were available to the employees. For example, HCR's Employee Handbook provided: "Occasionally, you will be unable to take a meal break or will be interrupted for an emergency. When this happens you must inform your supervisor that you were unable to take the scheduled break". My favorite, and what I thought was really smart on the part of the employer, was its "Letter of Understanding" it had some employees sign that provided: "I understand a 30-minute meal break will be deducted for every shift I work over five hours. I will notify my supervisor and complete the proper paperwork for any occasion where I do not receive my full meal break." Even though the evidence was scattered as to how many of the 318 plaintiffs signed the Letter of Understanding, or signed acknowledgments indicating they received any of HCR's numerous policy on the issue, the court found that the documents reflected a corporate-wide position to implement and enforce a "lawful" auto-deduct policy.

While the court recognized that the fact that individual proofs exist in a case will not defeat final certification because they always play a role in collective actions, the court noted that where the application of an auto-deduct policy is so varied based on several factors, including job duties and individuals managers at the various HCR facilities, plaintiffs are just not similarly situated to form a proper class.

The court looked to Frye and White to demonstrate what kind of factual distinctions weigh against "similarly situated" and, thus, against final certification. The court noted that in Frye, the court decertified an auto-deduct class where the employer implemented its auto-deduct policy on a facility-by-facility basis where each facility "maintained its own finance and human resources functions." The court cited to White for its finding that differences in job duties determined whether and why an employee would miss or have an interrupted meal break. The court went through numerous other cases to support its decision to decertify a class where company-wide policies were implemented in a decentralized manner.

Although Judge Zouhary had ordered the parties to brief the impact, if any, of the Brinker v. International Inc. v. Superior Court decision where the California Supreme Court clarified the meal break standard under California law, the Judge did not cite Brinker in his opinion.

Key Takeaways

Here, the fact that the employer had clear company-wide policies directing employees how to adjust for missed or interrupted meal breaks was key to the court's decision decertifying the class. I've said it before and I'll say it again: Have proper policies in place. If you are an employer that has an auto-deduct policy with a method for employees to signal that they did not get a meal break or had an interrupted meal break, put it in writing and make sure your employees get a copy of it. If you can, have your employees sign something similar to HCR's Letter of Understanding where your employees can acknowledge that they understand a 30-minute meal break will be deducted for every shift they work over five hours and that they will notify their supervisor and complete the proper paperwork for any occasion where they do not receive my full meal break.

The Future

This case begs the question, will these cases go away or did the plaintiffs simply aim too high. The court distinguished Creely from Berger v. Cleveland Clinic, another case out of the Northern District of Ohio, where the same court granted certification, because the plaintiffs in Berger all worked at the same facility, "in the same department within the same building, had the same supervisor, and their job duties overlapped significantly." With this, two big questions come to mind: (1) had plaintiffs sought to certify a small class based on the goings on of just one facility, would the proposed class have been decertified?; and (2) does this mean that instead of plaintiffs aiming to certify a large nationwide collective action, the trend will be for plaintiffs to bring numerous collective actions in each of the districts where an employer has its individual facilities?

The two more immediate questions are: (1) will plaintiffs appeal to the Sixth Circuit in light of Frye and White; and (2) will HCR seek their fees and costs like the defendant in Frye did to the tune of over $55,000, which we blogged on here?
 

• Print
• Trackbacks
• Share Link

We have kept you up to speed on Martin v. Spring Break ’83 Productions, L.L.C., here and then here, a Fifth Circuit case in which the Fifth Circuit approved a private settlement of employees' claims for unpaid overtime under the Fair Labor Standards Act ("FLSA"). More specifically, the court held that parties could privately settle and release wage claims, under the right circumstances, and that doing so would not compromise employee rights guaranteed by the FLSA. The plaintiffs asked the Supreme Court to review the case arguing that the decision creates a split among the circuits, which it does. Martin is in direct conflict with Lynn's Food Stores, Inc. v. United States, an Eleventh Circuit case dating back to 1982 that held that FLSA claims could only be settled with the approval of the Department of Labor or the courts.

Despite the inherent conflict between the two jurisdictions, the United States Supreme Court has declined to take up the issue and settle the split. With the Supreme Court's move comes with good news and bad news. The bad news first, there will not be a resolution to this issue, at least not in the near future. Now the good, employers in the Fifth Circuit, which includes Texas, Louisiana, and Mississippi, can privately settle disputed claims under the FLSA in circumstances that are similar to those in Martin. So, for any such private settlement to be arguably valid under Martin, the following facts must be present in the case: (1) a genuine dispute regarding the compensation owed to the employee; (2) the employee must be aware of his or her rights under the FLSA; and (3) there the employee might be disadvantaged by unequal bargaining power. In addition, employers in other jurisdictions outside the Eleventh (the Eleventh Circuit governs Florida, Georgia and Alabama) have case law authority to argue that a private settlement of employee FLSA claims is enforceable. Of course, the question will be whether or not Martin or Lynn's Foods should control, but that will be for the courts in jurisdictions where Martin is argued to decide. And who knows, the more courts that side with Martin, the more likely it will get up to the Supreme Court who may decide to hear the issue.,

Fin.

• Print
• Comments
• Trackbacks
• Share Link

It's no secret that employers face an uphill battle when defending claims of unpaid hours worked by employees. These claims usually involve a similar pattern: the employee fails to report or record time worked, then the employee later raises that unpaid time worked in the form of a Fair Labor Standards Act claim for unpaid overtime against his employer. Many courts side with employees because the Fair Labor Standards Act places the burden upon employers, not employees, to accurately record time worked. But two recent federal appellate court decisions show that things may not be so grim when employers have adequate procedures in place for employees to record time worked and the employee fails to follow those procedures.

The Sixth Circuit Court of Appeals (which includes Ohio in its jurisdiction), recently upheld the dismissal of a similar claim by an employee under the FLSA, basing its decision upon the plaintiff's failure to follow the employer's reasonable procedures for reporting extra time worked. In White v. Baptist Memorial Health Care Corp., the employer automatically deducted its employees meal breaks, but allowed employees to report meals worked through an "exception log" submitted to the employer. The employer also had procedures for employees to report and correct payroll errors to a supervisor. The employee, White, claimed that she had worked through several lunch periods but was not paid for that time. She used the exception log in the past to report lunch time worked. But she did not use any of the employer's procedures to report the alleged unpaid meal periods at issue in her lawsuit.

The Court held that the employer did not know or have any reason to know of the time White worked during her meal breaks. It stated "[w]hen the employee fails to follow reasonable time reporting procedures she prevents the employer from knowing its obligation to compensate the employee and thwarts the employer's ability to comply with the FLSA." Because the hospital had reasonable procedures for White to report her time worked during meals and White failed to avail herself of those procedures, her FLSA claims lacked merit. The court added that there was no evidence that the hospital prevented or discouraged White from using its procedures to report her time.

The Tenth Circuit Court of Appeals (which covers Colorado, Kansas, Oklahoma, New Mexico, Utah, and Wyoming) followed similar reasoning to kick another plaintiff's FLSA lawsuit. In Brown v. ScriptPro LLC, the plaintiff, Brown, worked over 80 hours from home shortly after his second child was born. He failed to record any of this time in the employer's timekeeping system, which the plaintiff could access from home. After Brown was terminated, he alleged his employer violated the FLSA by its failure to paid him for the 80 hours he worked, among other claims.

Predictably, Brown argued that the FLSA obligates employers to keep accurate records of employees' time worked, and his employer's failure to do so in his case was an FLSA violation. The Tenth Circuit disagreed, stating that it was the employee's failure to comply with the employer's timekeeping system that was the problem. It said that "Mr. Brown chose not to enter any of the hours he allegedly worked from home in ScriptPro's timekeeping system," but noted that "Mr. Brown easily could have entered his hours [from home]; in fact he was required to do so." As a result of Brown's failure to appropriately enter his time, the Court found no FLSA violation occurred.

Key Takeaways

These cases show that clear policies and procedures requiring employees to record time worked outside of normally scheduled hours (including meal periods) can help employers defend themselves against FLSA claims for unpaid wages and overtime. But having these policies is just a start—the employer's procedures must be reasonable and easily understood, regularly communicated to employees and supervisors, and implemented in a manner that does not discourage employees from reporting additional time worked. With all of these elements in place, an employer can be well-positioned to defend itself against wage and hour claims when an employee fails to follow its procedures.

• Print
• Trackbacks
• Share Link

In September, we told you about the Sixth Circuit's decision in Frye v. Baptist Memorial Hospital, Inc., where the court handed down, not one, but two favorable rulings for employers in an FLSA collective action. First, the court held that automatic pay deduction policies for unpaid meal breaks do not per se violate the FLSA, and that a class representative plaintiff in a collective action must formally opt-in to their own case to "commence" suit and stop the running of the statute of limitations or be barred from suit. Here's that blog.

After considering the employer's motion for costs, the Sixth Circuit went for a trifecta and awarded the employer over $55,000 in fees and costs in defending the action. In challenging the award, Frye had four primary arguments. First, Frye argued the FLSA does not provide for an award of costs to a prevailing defendant, and that such an award would have a chilling effect on future FLSA claims. Second, he claims that the employer was not a "prevailing party" as to the opt-in plaintiffs of the decertified collective action whose claims were dismissed without prejudice. Third, that the employer's costs in defending the action should not be taxed against him because they were not necessary to resolve his substantive claims. Finally, he argued that because he only earned $75,000 a year, he would be impoverished if required to pay.

In response to Frye's argument that the employer's costs were not recoverable under the FLSA, the court found that nothing in the FLSA precludes an award of costs to a prevailing defendant. Although Section 216(b) of the FLSA specifically addresses costs to a prevailing plaintiff, the court held that the employer could use Federal Rule of Civil Procedure 54 to seek its costs. The court summarily dismissed Frye's "chilling effect" argument without discussion. As for Frye's argument that the employer was not really a "prevailing party," the court didn't buy that either and found that since the employer successfully obtained decertification of the collective action and summary judgment on Frye's claims due to his failure to opt-in, the employer was the prevailing party for purposes of the action. The court also held that the district court did not abuse its discretion in ordering Frye to pay because, given his level of income and expenses, Frye failed to demonstrate that he was unable to pay the costs awarded.

• Print
• Trackbacks
• Share Link

In Frye v. Baptist Memorial Hospital, Inc., the United States District Court for the Sixth Circuit handed down not one, but two favorable rulings for employers in an FLSA collective action. First, in considering an automatic pay deduction policy for unpaid meal breaks in a collective action for the first time, the Court held that such a policy does not automatically, or per se, violate the FLSA. Second, a class representative plaintiff must formally opt-in to their own case to "commence" suit and stop the running of the statute of limitations.

1.  The Sixth Circuit Holds that Automatic Pay Deduction Polices are Not Per Se Illegal

In Frye, the plaintiff brought a putative collective action against her hospital employer challenging its 30-minute automatic meal break deduction from pay policy claiming that it violated the FLSA's requirement that employees be paid for all time worked. Specifically, Frye argued that employees worked during their lunch breaks and were not properly paid. The hospital's policy on automatic deductions, however, did not ignore the possibility that employees may sometimes work during their lunch breaks and, as is common with these types of policies, the hospital had an exception procedure whereby employees were instructed to report such work so they could be paid for it. These exception procedures, however, varied significantly by department, e.g., some employees could make an exception by submitting a written notice, some could do it through verbal notice to their supervisor, etc. The point being, there was no universal policy regarding how these exceptions could be made.

The district court granted conditional certification of the class at the initial notice stage, but decertified the class after discovery. The district court determined that the plaintiff had failed to demonstrate that the employer applied a uniform policy, or that the over 400 would-be class members (made up of workers in various departments and positions) were similarly situated. While the plaintiff relied heavily on the automatic deduction policy itself to link the putative class members, the district court disagreed. More important, it noted that automatic deduction policies are lawful under the FLSA. So, to recover, the plaintiff had to show that the employer implemented its policy in such a way as to violate the FLSA.

The Sixth Circuit agreed and, in addition to holding that automatic break deduction policies are not per se unlawful under the FLSA, also found that the class was properly decertified because there was insufficient evidence of a common injury among class plaintiffs as a result of the automatic deduction policy.

• Print
• Trackbacks
• Share Link

With Martin v. Spring Break '83 Productions, LLC,, the Fifth Circuit put a much-needed (and 30-year-in-the making) dent in a long line of case law refusing to enforce private Fair Labor Standards Act (FLSA) waivers between employees and employers that are not approved by the Department of Labor (DOL) or by a court during litigation. This case is one that will be well-received by employers and, optimistically, followed by courts outside the Fifth Circuit, which governs Louisiana, Mississippi and Texas. With any luck, FLSA settlements will be increasingly private matters between employer and employee, like other agreements settling employment-related claims, and the requirement that FLSA claims be released only through long protracted and expensive litigation be the exception, not the rule.

• Print
• Trackbacks
• Share Link

In a highly anticipated decision under the Fair Labor Standards Act, the United States Supreme Court handed down a big win on Tuesday for the pharmaceutical industry when the Court found pharmaceutical sales representatives are covered by the outside sales exemption in Christopher v. Smith Kline Beecham Corp. We covered in previous posts the differing interpretations of the Second Circuit, which held the reps to be non-exempt, and the Ninth Circuit, which said they were exempt. The Court agreed with the Ninth Circuit that the sales activity pharma sales reps engaged in were sufficient "outside sales" even though federal regulation prohibits the reps from selling pharmaceutical products directly to their customers, the prescribing physicians. The nonbinding commitments obtained from physicians by sales reps were sufficient sales activity to meet the exemption, considering, as the Court stated, "the unique regulatory environment within which pharmaceutical companies must operate." The Court also stressed their interpretation was consistent with its parsing of the language of the FLSA, the FLSA regulations, and previous Department of Labor interpretations that said a sale "in some sense" had to be made.

The majority opinion had some tough language for the current DOL, however. The DOL took the position that pharma sales reps should be non-exempt because their sales activity involved no actual transfer of title and, as the federal agency charged with interpreting the FLSA and its regulations, argued that the Court should defer to its interpretation of the exemption. Finding the DOL's transfer-of-title argument "quite unpersuasive" and "flatly inconsistent with the FLSA," the Court declined to defer to the DOL.

This decision is a major victory for the pharmaceutical industry, who otherwise would have been faced with even more years of litigation and radical changes to their business model if the Court found the employees to be non-exempt. The result, however, is likely to be limited to the unique sales arrangement in this industry. As the Court noted, "when an entire industry is contracted by law or regulation from selling its products in the ordinary manner," the DOL and courts should not rely on "technicalities" to exclude employees from the outside sales exemption. Still, the Court's recognition of the sometimes impractical and draconian results under the FLSA (which many of us see everyday) is refreshing to see reflected in its decision here, despite the decision's lack of applicability to other industries.

Some commentators have suggested this decision might result in a more pragmatic, broader view of FLSA exemptions, even beyond the outside sales exemption. That broader view may be possible, particularly for courts struggling to fit a statute designed for the 1940's workplace into the 21st Century. But, until more decisions come to bear on that point, employers outside of the pharmaceutical industry should wait and see what may transpire. 

• Print
• Trackbacks
• Share Link

Many employers consider hiring interns during the summers or school year to help students gain experience or learn about a certain industry or career. However, when these interns are unpaid, there are certain rules employers need to follow to guard against liability for failure to pay minimum wage or overtime under the Fair Labor Standards Act—which carries risks of lawsuits by former interns (a few of which have been very recently filed), class actions, and DOL investigation and other enforcement activities.

In fact, in the last few years the DOL has focused some attention on unpaid internships, as we said in a previous post on this topic. The DOL guidance on this topic certainly reveals some traps for the unwary who hire unpaid interns, All of the below factors must be met in order for an intern working at a private, for-profit employer to be appropriately unpaid:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

There are a few factors above that are very easy for employers to overlook. For example, according to the DOL, employers receive "immediate advantage" from work that interns often perform, like filing, answering phones, or assisting customers. In short, if unpaid interns are asked to do work that could be, should be, or is typically performed by paid employees, the internship looks less like an educational experience and more like an employment relationship , requiring the intern's work to be paid.

So, before interns start, employers should consider what type of work they will be asking their interns to perform. If the interns' responsibilities are more like "job shadowing" or classroom-like activities and the interns aren't asked to do much (if any) productive work, then it may be appropriate to make them unpaid, as long as all of the other factors above are met. On the other hand, employers who wish to have interns perform work for their benefit don't have to avoid hiring interns altogether—as long as interns who perform productive work, however minor, are paid minimum wage (and overtime as appropriate under the FLSA), employers aren't prevented from having interns do work both for the employer's benefit and the intern's.
 

• Print
• Trackbacks
• Share Link

We’ve noticed some cases recently filed challenging employers’ use of the fluctuating workweek method to determine the overtime compensation for employees who receive commission payments. Plaintiffs are alleging that this practice is not permitted by the Fair Labor Standards Act (FLSA) when employees earn commissions in addition to their salaries. However, this issue is unresolved, and precedent seems to favor the employer defendants.

The fluctuating workweek method is permitted by FLSA regulation 29 C.F.R. § 778.114, promulgated by the Department of Labor to implement the Supreme Court's holding in Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 580 (1942). This method permits employers to pay non-exempt employees pursuant to the fluctuating hours method if five criteria are met:

1. The employee's hours must fluctuate from week to week;
2. The employee must receive a fixed weekly salary that remains the same regardless of the number of hours worked per week;
3. The fixed salary must be sufficient to provide compensation at a regular rate not less than the legal minimum wage;
4. The employee must receive at least 50 percent of his regular hourly pay for all overtime hours worked; and
5. The employer and the employee must have a clear mutual understanding that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek.

• Print
• Trackbacks
• Share Link

In a decision issued on April 28, 2011, the Sixth Circuit Court of Appeals offers employers some clarity on the test to determine whether using unpaid interns or other student trainees violates the Fair Labor Standards Act (FLSA). In this case, Solis, Secretary of Labor v. Laurelbrook Sanitarium and School Inc., 6th Cir. No. 09-6128, the Court threw out a U.S. Department of Labor lawsuit against a Tennessee religious school's student work experience program.

The Department of Labor brought an action against the Laurelbrook school alleging that its students were "employees" and had to be paid under the FLSA. The school operates a nursing home partially staffed by students to further the students' practical training. The Sixth Circuit affirmed the district court's finding that the school's students were not "employees." The Court noted that there is no bright-line test for determining whether a student worker is an employee for purposes of the FLSA. The Court affirmed the district court's use of the "primary benefit" test in making the determination. This test ascertains which party derives the primary benefit from the relationship. If a student receives the primary benefit of the work performed for a purported employer, and the student's presence does more harm to the purported employer's operations than good (or no good at all), the student will not be considered to be an employee under the FLSA. Factors such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship are relevant considerations.

• Print
• Trackbacks
• Share Link

Yesterday, the U.S. Supreme Court held that an employee's Fair Labor Standards Act (FLSA) retaliation claim can be based on an oral complaint made by the employee to his employer regarding wages or other issues covered by the Act.

An employee of Saint-Gobain Performance Plastics Corp. complained orally to Company officials about the Company's timeclocks, which he claimed were located in an area that prevented the employees from receiving credit for the time they spent donning and doffing work-related protective gear. After making the oral complaints, he was discharged.

The employee then sued the Company for terminating him in violation of the FLSA's anti-retaliation provision, which prohibits an employer from discharging "any employee because such employee has filed any complaint" alleging a violation of the Act. 29 U.S.C. 215(a)(3). The District Court for the Western District of Wisconsin granted the employer's motion for summary judgment, concluding that the FLSA's anti-retaliation provision did not cover oral complaints, and the Seventh Circuit affirmed that decision.

The Supreme Court, however, reversed the judgment, holding that the statutory phrase "filed any complaint" includes oral, as well as written, complaints. In reaching this conclusion, the Court relied, in part, on the FLSA's "basic objective, which is to prohibit 'labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.'" Limiting anti-retaliation claims to cases in which a written complaint was filed, the Court reasoned, would not support this broad objective.

This case is another in a line of cases expansively interpreting retaliation provisions in employment law. (See, for example, our previous posts on the U.S. Supreme Court's Crawford and Thompson decisions regarding retaliation under Title VII.) The Court's opinion in this case should also reinforce to employers the importance of thoroughly investigating discipline and discharge decisions when the employee involved has raised, whether orally or in writing, complaints or allegations of discrimination or other legal violations.
 

• Print
• Comments
• Trackbacks
• Share Link

Just weeks after the Ninth Circuit created a circuit split by ruling that pharmaceutical sales representatives are exempt under the Fair Labor Standards Act's outside sales exemption (see our earlier post on that decision), the Supreme Court has declined to hear Novartis Pharmaceutical Corp.'s appeal of a Second Circuit decision reaching the opposite conclusion. As a result, the existing circuit split will continue to exist, and drug companies facing current and potential litigation should not expect clarity on the issue in the foreseeable future.
 

• Print
• Comments
• Trackbacks
• Share Link

In August 2008, sales representatives from GlaxoSmithKline PLC filed a class action against the company, claiming they were non-exempt and entitled to overtime pay. They had always been treated as exempt by the company under the FLSA's outside sales exemption. However, they argued, in part, that their exempt classification was improper because they do not actually "make" any sales. Rather, they argued, they simply present information to physicians regarding the company's drugs in the hope the physicians will then prescribe those drugs. The sales representatives do not actually sell the drugs to anyone.

The employees lost at the District Court level and appealed to the Ninth Circuit Court of Appeals. Recently, a three-judge panel of the Ninth Circuit upheld the lower court's ruling. Contrary to the representatives' argument, the Ninth Circuit found that the sales representatives do "make" sales because they visit certain physicians in defined geographic areas, ask those physicians to commit to prescribing certain drugs, and receive bonuses based on how well those specific drugs sell in their defined geographic regions. The Court reasoned that because patients typically do not select what drugs their physicians prescribe, the real sale occurs between the sales representative and the physician, not the pharmacy and the patient.

This case, Christopher et al. v. SmithKline Beecham Corp., 9th Cir. No. 10-15257, was one of first impression in the Ninth Circuit, but the decision creates a split with the Second Circuit, which has held similar employees to be non-exempt. The U.S. Department of Labor has also issued guidance stating that pharmaceutical sales representatives are not covered under the outside sales exemption. Unless and until the Supreme Court addresses this issue or other appellate courts chime in, companies in the pharmaceutical and medical device industry, as well as other businesses that use a similar sales model, should still proceed cautiously in classifying their sales representatives.
 

• Print
• Comments
• Trackbacks
• Share Link

In addition to adding 350 new wage-and-hour investigators to its staff, the U.S. Department of Labor recently announced a new collaboration between its Wage-and-Hour Division and the American Bar Association Standing Committee on Lawyer Referral and Information Service that will likely further increase the amount of FLSA and FMLA litigation.  Through this new collaboration, which the DOL has named the "Bridge to Justice," the DOL and ABA are now providing an attorney referral service to individuals who contact the DOL to allege violations of the FLSA or FMLA by their employers.

As explained on this recently released FAQ website, over 35,000 employees contact the Wage and Hour Division each year, and the Division is not able to assist all of these employees.  Now, when employees call and the DOL determines that it cannot assist them, they will be provided a toll-free number to call, which will give them the contact information of attorneys in their area who might be able to take their case. In addition, in situations in which the Wage-and-Hour Division conducts an investigation, but does not pursue further action on behalf of an employee, the Division will now supply the complainant with its determination regarding the violation(s) at issue and back wages owed, as well as the phone number for the attorney referral service.

This recent announcement has caused quite a stir among employers who have already experienced the effects of increased wage-and-hour litigation.

• Print
• Comments
• Trackbacks
• Share Link

The federal health care reform legislation passed in March of this year included an amendment to the Fair Labor Standards Act (FLSA), requiring employers to provide reasonable unpaid break time to nursing mothers to express breast milk for the nursing child. The requirement to provide breaks extends for one year after the child is born. The DOL has just released a fact sheet with general information about the requirements.

Briefly, the law requires that employers provide "reasonable break time... each time such employee has need to express milk." Employers must provide a private location, free from intrusion, other than a bathroom, for purposes of the break.

• Print
• Comments
• Trackbacks
• Share Link

Less than a month after the New York Times ran an article on the DOL’s position regarding unpaid internships, the U.S. Department of Labor’s Wage and Hour Division has released a Fact Sheet explaining the test used to determine whether an intern is an employee under the FLSA. Although the test – which is laid out in one of our previous posts – remains unchanged, the Fact Sheet provides information regarding the test’s factors that may be useful to employers trying to discern whether their interns are covered by the FLSA’s overtime and minimum wage provisions.

The first factor is whether the internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment. The Fact Sheet provides additional detail on how to analyze this factor, noting that this “educational environment” often exists where a college or university exercises oversight over the internship program and provides educational credit. Also, the more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training.

• Print
• Comments
• Trackbacks
• Share Link

Employers may not realize that the recently signed health care reform law includes a provision which amends the Fair Labor Standards Act to require reasonable unpaid breaks for nursing employees. In addition to the unpaid break time, the amendment to the FLSA (29 U.S.C. § 207(r)(1)) provides that employers must furnish a private location, other than a restroom, which may be used by the employee to express breast milk. Employers with fewer than 50 employees are not subject to these requirements if such requirements would cause an undue hardship on the employer.

This amendment creates some confusion with existing federal law on the issue of employee breaks. While the FLSA does not require that employees be given breaks, there are federal regulations which indicate that rest periods of short duration (usually lasting 5 to 20 minutes) are considered compensable work hours. The proposed amendment, however, specifically states that employers are not required to compensate nursing mothers for reasonable break times.

In addition, although many states have passed laws requiring employers to provide nursing mothers with reasonable break time, Ohio’s law addresses only the right to breastfeed in a place of public accommodation. Although Ohio’s breastfeeding law governs the relationship between a place of public accommodation and individuals who are attempting to use the accommodations, employers with places of public accommodation on their premises (i.e., store, restaurant, bank) should be mindful of this law. Also, based on the Ohio Supreme Court decision in Allen v. Totes/Isotoner, it appears that there are at least a few justices who may be prepared to extend pregnancy discrimination laws to nursing mothers.  For a further discussion of the Allen case, please see our previous blog from August 31, 2009.

• Print
• Comments
• Trackbacks
• Share Link

Recent reports have indicated that the number of FLSA collective actions rose sharply in 2009. Many believe this trend will continue in 2010 as employees gain increased awareness of their rights under wage and hour laws and the plaintiffs' bar recognizes the potential value of FLSA collective actions.

Indeed, there has been a recent flurry of activity across the country in the area of wage and hour class actions. Assistant managers at Foot Locker Retail Inc. filed a nationwide collective action in the Southern District of California, alleging that the company misclassified them as exempt and failed to pay them overtime wages. Similarly, Vermont state employees have brought a putative class action under the FLSA, claiming that the state has failed to pay overtime to employees in higher pay grades. 

• Print
• Comments
• Trackbacks
• Share Link

On March 6, 2009, the United States Department of Labor (DOL) released two noteworthy wage and hour opinion letters.

The first, Opinion Letter FLSA2009-16, may cause an unnecessary stir in the employer and legal communities. The opinion letter approves an employer’s “compressed work schedule.” Employees work nine hours per day Monday through Thursday and work eight hours on one of the two Fridays during the two-week pay period. The company operates under two alternative workweeks. Under the first option, the workweek begins at 11:31 a.m. on Friday and ends at 11:30 a.m. the following Friday, with the scheduled workday beginning at 7:30 a.m. Under the second option, the workweek begins at 12:31 a.m. on Friday and ends at 12:30 a.m. the following Friday, with the scheduled workday beginning at 8:30 a.m. Assuming the employees work no more than the stated hours, they do not receive overtime under this schedule.

On first glance, this opinion letter appears to allow employers to “average” the workweek – employees work 44 hours one week, 36 hours the next. While this reading would be extremely employer-friendly, it would also contradict the Fair Labor Standards Act, which sets a single workweek as the standard length of time used to determine if an employee is due overtime. The law does not allow for the averaging of hours over two or more weeks. See 29 U.S.C. § 207(a)(1); 29 C.F.R. § 778.104. 

• Print
• Trackbacks
• Share Link

Opinion Letter FLSA2008-1 addressed whether purchasing agents in a private sector company were properly categorized as exempt administrative employees. Based on the specific context, DOL determined that the employees were exempt from overtime requirements. As a reminder, to meet the criteria for an administrative exemption, the position must: (1) meet the salary basis test; (2) have a “primary duty” of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) include the exercise of discretion and independent judgment with respect to matters of significance in performing the primary duties. 29 C.F.R. § 541.200(a).  

• Print
• Trackbacks (1)
• Share Link

A recent wage-and-hour case illustrates the effect payroll deductions can have on minimum wage compliance. In Rivera v. Brickman Group, Ltd., No. 05-1518 (E.D. Pa. Jan. 7, 2008), a company brought Guatemalan and Mexican workers to the United States for seasonal employment under H-2B visas. Although the workers were paid amounts that appeared to be above the minimum wage, the company failed to take into account certain travel expenses and other employment-related costs incurred by the workers – expenses that reduced the workers’ earnings below minimum wage levels.

In particular, the court found that transportation expenses, costs involved in obtaining visas, and fees charged by the company’s recruiters were incurred by the workers primarily for the company’s benefit. Therefore, the company violated the Fair Labor Standards Act because the deductions brought the employees’ earnings below the minimum wage. In reaching its decision, the court rejected the company’s argument that the Immigration and Nationality Act and the Portal-to-Portal Act supersede the FLSA with regard to H-2B workers’ wages and do not require employers to bear the travel expenses of such employees. The company has not yet announced whether it will appeal the decision.

• Print
• Trackbacks
• Share Link

Adding clarity to an often-litigated area of wage and hour law, the Sixth Circuit recently held that a small store manager was exempt from the FLSA's overtime requirements despite her performance of non-managerial tasks and close supervision by her district manager. The case – Thomas v. Speedway SuperAmerica, LLC, No. 04-00147 (6th Cir. 2007) – involved a Speedway  gas station and convenience store manager who Speedway claimed was an exempt “executive employee” under the Fair Labor Standards Act. Even though the store manager was the most senior employee at the store, she was supervised by a district manager who visited the store twice a week. She was expected to work at least 50 hours per week, and often worked much more than that. She received a $500 weekly base salary as well as managerial bonuses equaling a percentage of the gross profit from certain products sold in the store. As for her day-to-day work duties, the manager spent about 60 percent of her time performing non-managerial tasks such as stocking merchandise, sweeping bathrooms, operating the cash register, and performing routine clerical duties.  The remaining 40 percent of her time was spent performing several management functions, including supervising current employees, hiring new employees, preparing weekly work schedules, handling employee complaints, evaluating employees, and terminating employees.

• Print
• Trackbacks
• Share Link