The Sixth Circuit Gives Employers a "Twofer": An Employer's Automatic Pay Deduction Policy Does Not Automatically Violate the FLSA and a Class Plaintiff Must "Commence" Suit
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.
2. The Sixth Circuit Holds that a Class Representative Plaintiff Must Consent to Commence Suit and Stop the Statute of Limitations from Running
The next part of the Court's holding addressed an unusual procedural issue under the FLSA. Interestingly, the Sixth Circuit held that the named plaintiff could not recover because he failed to file the requisite consent under 29 U.S.C. § 256(a). Section 256(a) provides that an FLSA collective action is "commenced" for statute of limitations purposes "on the date when the complaint is filed, if [the plaintiff] is specifically named as a party plaintiff in the complaint and his written consent to become a party plaintiff is filed on such dates in the court in which the action is brought."
The Court found that the statute's language was clear, and the statute of limitations continued to run because the named plaintiff had not opted into the suit. The court went on to hold that the statute's consent filing requirement could not be satisfied by the fact that the plaintiff hired an attorney to litigate the collective action, filed a complaint as the lead class plaintiff, or even appeared for a deposition in the case. As a result, the Court held that the statute of limitations had continued to run, and that plaintiff's claims were time barred.
It is not often that employers get a favorable holding in an FLSA case, let alone two. So, Frye is a welcome decision for employers facing FLSA collective actions, especially employers who have automatic meal break deduction policies. While Frye certainly does not change the FLSA game — plaintiffs still have the upper hand — it gives employers two more arrows in their quiver. So remember:
- Take steps to ensure that your employees understand your policies for reversing automatic deductions, if that is your policy. When an employer can show its employees understand its policies for reversing automatic meal break deductions, it can better argue that the case is not suitable for class resolution because it requires too many individual determinations of fact and helps draw a sharp divide among the employees to defeat the "similarity" requirement.
- If you do get stuck in an FLSA collective action, see if the named plaintiff has filed a consent. If the plaintiff has not, then he has not yet "commenced" suit and may end up with statute of limitations problems.