After lamenting for some time the direction which FLSA law has been heading, it may be too soon to say that the inevitable swing back to the middle has begun, but there are encouraging signs and last week's decision in Martin, et al v. Spring Break '83 Prodn, L.L.C (5th Cir. 7.24.12) is yet another step.
When there was a dispute over time worked by the lighting and rigging technicians on that now famous film, Spring Break '83, the production company and the union reached an agreement, money was paid and accepted, and of course a law suit was filed.
The first argument was that the individuals who had brought the suit had not signed the settlement agreement, but the Court found the Union was their authorized representative.
More importantly, the individuals argued that the settlement was not permitted under the terms of the FLSA, because it was not approved by a court or the DOL. In a case of first impression, the Court found that this was not the type of case where that prohibition applies. This was not a challenge to substantive FLSA rights, but merely settlement of a disputed liability.
In a real compliment to District Judge Xavier Rodriguez, who sits in San Antonio, the court adopted his reasoning in his 2005 decision, Martinez v. Bohls Bearing Equip. Co. As I noted in my post about the Bohls Bearing case at the time, Challenging Conventional Wisdom - Private Settlements of FLSA May Be OK, it was unclear how far one can go without getting approval, but clearly there is some area where court and DOL approval are not required in order to have a valid FLSA settlement agreement.
And that is not only good news, but common sense.
Showing posts with label FLSA. Show all posts
Showing posts with label FLSA. Show all posts
Function Over Form: The Supreme Court's Realistic View of the FLSA
For those who think that one of the travesties of the recent history of employment law has been the explosion of FLSA collective action litigation, today's 5-4 decision by the Supreme Court holding that pharmaceutical representatives are in fact exempt employees under the outside sales exemption is a re-affirmation that common sense can in fact prevail. Christopher v. SmithklineBeacham Corp. (6/18/12).
Although a critical decision for the pharmaceutical industry in its own right, the case has generally been viewed more importantly for its insight as to the weight the Supreme Court would give to agency views of the laws they enforce. Here the DOL had weighed in as amicus in a series of law suits arguing that the pharmaceutical sales reps were not exempt, although the DOL had given differing views as to why that was so.
The majority opinion begins with Justice Alito's description of why the DOL's position is not entitled to deference. Perhaps more significantly, the dissent written by Justice Breyer, the member of the court with the most claim to administrative law expertise, agrees. In fact, on this key point, it would be fair to say that this is a 9-0 decision. Justice Breyer writes:
Having jointly rejected the DOL's view, the two wings of the Court still reach a different outcome on their own independent review of the exemption.
The problem is that we have a 1938 statute designed for a very simple economic model which existed at the time was adopted. The FLSA was designed for an even pre-Leave it to Beaver world, where a factory was divided between the white collar workers in the front office and the blue collar workers in the back, whose product was sold by the Willy Loman's of the world, who packed their sales bag and left on Monday through Thursday and returned to do their paper work on Friday. Trying to use regulations written for that world, in today's workplace results in often ludicrous results.
It seems clear to me that the Supreme Court understands this historical fact, at least as relevant to the outside sales exemption, as it noted that the DOL had been authorized by the statute to issue regulations, and that those regulations were issued in 1938, 1940 and 1949, and in 2004 "following notice-and-comment procedures, the DOL reissued the regulations with minor amendments." Although they limit that historical reference to the outside sales exemption, I think a review would indicate that it is applicable for much of the remainder of the FLSA and its regulations as well.
The points relied on by the majority in rejecting the formalistic view of the minority are significant and could be utilized by other courts to rein in what has been an overly mechanistic view of the FLSA:
The biggest beneficiaries of course have been the repeat players, lawyers who represent the plaintiffs in those cases, who of course have taken their share of the extraction, and lawyers who represent the defendants (including me and my firm) in those cases.
In a world where there are many issues that call out for righting, for the most part mis-classification under the FLSA has not been in my mind a worthy fight. Today's decision is by no means the end, but it is at least a bright and correct light.
Although a critical decision for the pharmaceutical industry in its own right, the case has generally been viewed more importantly for its insight as to the weight the Supreme Court would give to agency views of the laws they enforce. Here the DOL had weighed in as amicus in a series of law suits arguing that the pharmaceutical sales reps were not exempt, although the DOL had given differing views as to why that was so.
The majority opinion begins with Justice Alito's description of why the DOL's position is not entitled to deference. Perhaps more significantly, the dissent written by Justice Breyer, the member of the court with the most claim to administrative law expertise, agrees. In fact, on this key point, it would be fair to say that this is a 9-0 decision. Justice Breyer writes:
In light of important, near-contemporaneous differences in the Justice Department’s views as to the meaning of relevant Labor Department regulations, I also agree that we should not give the Solicitor General’s current interpretive view any especially favorable weight.Although casting the blame on the Department of Justice, not the Department of Labor, it is clearly a rebuke to the DOL.
Having jointly rejected the DOL's view, the two wings of the Court still reach a different outcome on their own independent review of the exemption.
The problem is that we have a 1938 statute designed for a very simple economic model which existed at the time was adopted. The FLSA was designed for an even pre-Leave it to Beaver world, where a factory was divided between the white collar workers in the front office and the blue collar workers in the back, whose product was sold by the Willy Loman's of the world, who packed their sales bag and left on Monday through Thursday and returned to do their paper work on Friday. Trying to use regulations written for that world, in today's workplace results in often ludicrous results.
It seems clear to me that the Supreme Court understands this historical fact, at least as relevant to the outside sales exemption, as it noted that the DOL had been authorized by the statute to issue regulations, and that those regulations were issued in 1938, 1940 and 1949, and in 2004 "following notice-and-comment procedures, the DOL reissued the regulations with minor amendments." Although they limit that historical reference to the outside sales exemption, I think a review would indicate that it is applicable for much of the remainder of the FLSA and its regulations as well.
The points relied on by the majority in rejecting the formalistic view of the minority are significant and could be utilized by other courts to rein in what has been an overly mechanistic view of the FLSA:
- that until 2009, the pharmaceutical industry had "little reason to suspect that its longstanding practice of treating detailers as exempt outside salesmen transgressed the FLSA."
- that the DOL had never initiated any enforcement actions or otherwise suggested that it thought the industry was acting unlawfully.
- the realization that pharmaceutical sales reps, whose average income is $90,000 a year according to the opinion, "typically earn salaries well above the minimum wage" and enjoyed other benefits that "set them apart from the nonexempt workers entitled to overtime pay." Hardly the kind of employees the FLSA was intended to protect.
- That it would be "challenging, to say the least" for pharmaceutical companies to compensate reps for overtime going forward without significantly changing the nature of that position.
- Rejecting a legalistic argument, that requires title to pass, to instead taking a more "realistic approach" of what the outside salesman exemption is meant to reflect.
The biggest beneficiaries of course have been the repeat players, lawyers who represent the plaintiffs in those cases, who of course have taken their share of the extraction, and lawyers who represent the defendants (including me and my firm) in those cases.
In a world where there are many issues that call out for righting, for the most part mis-classification under the FLSA has not been in my mind a worthy fight. Today's decision is by no means the end, but it is at least a bright and correct light.
The 9th Circuit Does Their Part On Oracle Case, Extending California Labor Laws
One of the issues that I think has the potential to cause a lot of trouble for employers is the application of one state's labor and employment laws to employee who travel to work in another state. In today's mobile world that is a lot of folks, especially employees located near state borders.
Basically, what happened is that Colorado based trainers who work for California based Oracle, brought a suit claiming that they should be paid in accordance with California wage and hour laws for the days they did training in California. The District Court rejected the claim. A 9th Circuit panel reversed. After a request for en banc hearing, the question was certified to the California Supreme Court. The Supreme Court basically gave the same answer the 9th Circuit had -- California law is applicable for the days the instructors worked more than a full day in California. See, Sullivan v. Oracle Corp. (Cal. S.Ct 6/30/11).
This week, the 9th Circuit completed the round trip (and engaged in a little mutual back patting), allowing as how, just like they did in their original opinion, the California Supreme Court got it right. They threw out some constitutional arguments on the part of Oracle and remanded the case for further proceedings. Sullivan v. Oracle Corp. (12/13/11).
How much training did they do? Not all that much. One plaintiff did 150 days in Colorado, 32 in California and 52 days in other states. The next year, 150 in Colorado, 12 days in California and 20 days in other states and the third year of the period, 150 in Colorado, 30 days in California and at least 19 days in other states. The other two plaintiffs had even less time in California.
The only thing that prevents this decison from being a total disaster is the following paragraph:
Ultimately, I think this is an issue that the Supreme Court has to take up. From my prior experience there is precious little law on how we deal with state laws on "traveling" employees.
Talk about an impact on commerce.
Hopefully I am wrong, but I would not be surprised if this were one of the hot new things in 2012. And after enough are filed, maybe we will start to get some answers. Hopefully better ones than this weeks ruling.
Basically, what happened is that Colorado based trainers who work for California based Oracle, brought a suit claiming that they should be paid in accordance with California wage and hour laws for the days they did training in California. The District Court rejected the claim. A 9th Circuit panel reversed. After a request for en banc hearing, the question was certified to the California Supreme Court. The Supreme Court basically gave the same answer the 9th Circuit had -- California law is applicable for the days the instructors worked more than a full day in California. See, Sullivan v. Oracle Corp. (Cal. S.Ct 6/30/11).
This week, the 9th Circuit completed the round trip (and engaged in a little mutual back patting), allowing as how, just like they did in their original opinion, the California Supreme Court got it right. They threw out some constitutional arguments on the part of Oracle and remanded the case for further proceedings. Sullivan v. Oracle Corp. (12/13/11).
How much training did they do? Not all that much. One plaintiff did 150 days in Colorado, 32 in California and 52 days in other states. The next year, 150 in Colorado, 12 days in California and 20 days in other states and the third year of the period, 150 in Colorado, 30 days in California and at least 19 days in other states. The other two plaintiffs had even less time in California.
The only thing that prevents this decison from being a total disaster is the following paragraph:
The contacts creating California interests are clearly sufficient to permit the application of California’s Labor Code in this case. The employer, Oracle, has its headquarters and principal place of business in California; the decision to classify Plaintiffs as teachers and to deny them overtime pay was made in California; and the work in question was performed in California.Which keeps alive an argument that the case is only applicable to California based employers, although I am sure that cases are already in the works to challenge that aspect of the case.
Ultimately, I think this is an issue that the Supreme Court has to take up. From my prior experience there is precious little law on how we deal with state laws on "traveling" employees.
Talk about an impact on commerce.
Hopefully I am wrong, but I would not be surprised if this were one of the hot new things in 2012. And after enough are filed, maybe we will start to get some answers. Hopefully better ones than this weeks ruling.
Maybe Not So Ho Hum at the Supreme Court: FLSA and Wal-Mart v. Dukes
In addition to denying cert on the USERRA hostile environment case (see yesterday's post), the Supreme Court yesterday also reversed an FLSA case from the 9th Circuit:
And according to the Employment Law 360 story ($) Citing Dukes, Supreme Court Vacates $7.7M FLSA Award, which tipped me off to the case, the argument that got the Supreme Court's attention was in fact the 9-0 portion of Wal-Mart v. Dukes:
However, if (like me) you are looking for glimmers of hope, the Court did note "Moreover, “because mandamus is a discretionary remedy, a Court may decline to issue the writ if it finds that it would not be ‘appropriate under the circumstances’ even if the petitioner has shown he is ‘clear[ly ] and indisputabl[y]’ entitled to it.”
To be fair, the Court did not find that the employer was entitled to the writ. However, with these cases and others, it does appear that small chinks in what heretofore has been a fairly impermeable wall protecting easy passage to conditional certification for FLSA collective actions are beginning to occur.
Although it would be disruptive to the financial income of lawyers who practice on both sides of the FLSA docket, I can't think of a single trend in employment law that could be more important.
10-1202 CHINESE DAILY NEWS, INC. V. WANG, LYNN, ET AL.The use of Wal-Mart Stores, Inc. v. Dukes in an FLSA case is a key link for those who are advocating for greater control by the courts of FLSA collective actions. Unfortunately, as the 9th Circuit opinion shows, while the case is an FLSA case it is also a Rule 23 case on the state law claims. So, the linkage is not as definitive as one would like.
The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Ninth Circuit for further consideration in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011). Justice Breyer took no part in the consideration or decision of this petition.
And according to the Employment Law 360 story ($) Citing Dukes, Supreme Court Vacates $7.7M FLSA Award, which tipped me off to the case, the argument that got the Supreme Court's attention was in fact the 9-0 portion of Wal-Mart v. Dukes:
In its petition, the Chinese Daily News leaned heavily on the decision, in which the Supreme Court unanimously ruled that claims for injunctions or declaratory rulings in class actions typically don’t allow for monetary payments.For a more aggressive attempt to use the Dukes decision in a pure FLSA context check out the mandamus action recently filed in the 6th Circuit, In Re HCR ManorCare ($). The employer which had been ordered to send notice under the two-step Lusardi standard had challenged the court's continued use of such standard in light of Dukes. Unfortunately, last week, the Court denied the petition.
However, if (like me) you are looking for glimmers of hope, the Court did note "Moreover, “because mandamus is a discretionary remedy, a Court may decline to issue the writ if it finds that it would not be ‘appropriate under the circumstances’ even if the petitioner has shown he is ‘clear[ly ] and indisputabl[y]’ entitled to it.”
To be fair, the Court did not find that the employer was entitled to the writ. However, with these cases and others, it does appear that small chinks in what heretofore has been a fairly impermeable wall protecting easy passage to conditional certification for FLSA collective actions are beginning to occur.
Although it would be disruptive to the financial income of lawyers who practice on both sides of the FLSA docket, I can't think of a single trend in employment law that could be more important.
Now an iPhone App for Wage and Hour Litigation
This is clearly a first for this blog. A link to the apple app store.
But when the Department of Labor releases an app for iPhone, iPod and iPad with this description:
Technology, as employers have found with email, can be a two-edged sword. It will be interesting to see how this one plays out down the line.
A hat tip to my Indianapolis colleague, Christopher Murray, for pointing this out.
But when the Department of Labor releases an app for iPhone, iPod and iPad with this description:
DOL-Timesheet for iPhone, iPod touch, and iPad on the iTunes App Store, it sounds blog worthy to me.... a timesheet to help employees independently track the hours they work and determine the wages they are owed. .... This new technology is significant because, instead of relying on employer's records, workers can now keep their own records. This information could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records.
Technology, as employers have found with email, can be a two-edged sword. It will be interesting to see how this one plays out down the line.
A hat tip to my Indianapolis colleague, Christopher Murray, for pointing this out.
A Ray of Sanity in the FLSA Collective Action Morass: Half-pay in Misclassification Cases
Given the overwhelming number of FLSA collective actions that continue to be filed, it is hard to find very much encouraging news, but one ray of sanity is the 4th Circuit's opinion in Desmond v. PNGI Charles Town Gaming, (4th Cir. 1/18/11) [pdf].
The issue was the not inconsequential question of how do you calculate damages in a misclassification case. Here, the employees were thought to be exempt under the administrative exemption, but the court held otherwise.
Plaintiffs of course seek a 150% premium (time and one-half) of the newly computed hourly rate, while defendants argue that overtime has already been calculated in. and so the premium should only be 50% or half-pay. The counter by the plaintiffs is that it gives the defendants the benefits of a fluctuating work week calculation, without having to comply with the regulations.
Noting that it was joining four other circuits and the DOL itself, the Court found the correct way of calculating damages in such cases to be set out by the Supreme Court in Overnight Motor Transportation Co. v. Missel (1942), one of the Court's early FLSA decisions.
According to the court
The 4th Circuit decision does not eliminate the penalty for misclassification, but it does at least rein it in, so that it is more appropriate.
One other lesson to be learned from this case is how it started. It has been a highly contested (and no doubt expensive) case. Yesterday's decision is the second time it has been in the 4th Circuit and the second time it has been sent back to the district court for additional action.
Its genesis was when three racing officals were discharged because they unaminously declared the wrong horse to have won a race. It certainly was not the first, nor will it be the last, case where an employee unhappy with his discharge, which may be perfectly legal makes it to counsel who can not help with the "presenting problem," but can help in other ways.
The issue was the not inconsequential question of how do you calculate damages in a misclassification case. Here, the employees were thought to be exempt under the administrative exemption, but the court held otherwise.
Plaintiffs of course seek a 150% premium (time and one-half) of the newly computed hourly rate, while defendants argue that overtime has already been calculated in. and so the premium should only be 50% or half-pay. The counter by the plaintiffs is that it gives the defendants the benefits of a fluctuating work week calculation, without having to comply with the regulations.
Noting that it was joining four other circuits and the DOL itself, the Court found the correct way of calculating damages in such cases to be set out by the Supreme Court in Overnight Motor Transportation Co. v. Missel (1942), one of the Court's early FLSA decisions.
According to the court
Although there may be examples of where individuals were badly served by misclassification, in most cases, it is a case of individuals paid higher than most employees,who clearly understood that they were not receiving any pay for overtime, and were willing to work under those terms. Thus in many respects, any recovery under the FLSA really is a windfall for them.The First, Fifth, Seventh, and Tenth Circuits all have determined that a 50% overtime premium was appropriate in calculating unpaid overtime compensation under 29 U.S.C. § 216(b) in mistaken exemption classification cases, so long as the employer and employee had a mutual understanding that the fixed weekly salary was compensation for all hours worked each workweek and the salary provided compensation at a rate not less than the minimum wage for every hour worked.
The 4th Circuit decision does not eliminate the penalty for misclassification, but it does at least rein it in, so that it is more appropriate.
One other lesson to be learned from this case is how it started. It has been a highly contested (and no doubt expensive) case. Yesterday's decision is the second time it has been in the 4th Circuit and the second time it has been sent back to the district court for additional action.
Its genesis was when three racing officals were discharged because they unaminously declared the wrong horse to have won a race. It certainly was not the first, nor will it be the last, case where an employee unhappy with his discharge, which may be perfectly legal makes it to counsel who can not help with the "presenting problem," but can help in other ways.
Polyglot for Wage and Hour Administrator
Almost two years into his term, President Obama is making a 2nd try at an Administrator for the Wage and Hour division of the Department of Labor, with his nomination of Leon Rodriguez, currently a DOJ lawyer and formerly County Attorney for Montgomery County, Maryland. See, President Obama Announces More Key Administration Posts.
The White House did not use the polyglot label, but when he was announced as County Attorney in April 2007, it was noted he spoke, "English, French, Spanish, Hebrew and Italian".
President Obama's earlier nominee, Lorelei Boylan from New York had asked that her name be withdrawn more than a year ago. See, Wage & Hour: Not Just Collective Actions Anymore.
The White House did not use the polyglot label, but when he was announced as County Attorney in April 2007, it was noted he spoke, "English, French, Spanish, Hebrew and Italian".
President Obama's earlier nominee, Lorelei Boylan from New York had asked that her name be withdrawn more than a year ago. See, Wage & Hour: Not Just Collective Actions Anymore.
Another Interesting Development from Last Tuesday - $4 MDV for FLSA Retaliation
While most eyes were turned to the election results last Tuesday night, a former Los Angeles policeman was enjoying a $4 million dollar verdict in his favor, after a jury agreed that he had been fired because of his testimony in a federal wage and hour lawsuit brought against the city by another officer.
Richard Romney had testified that he had followed the "unwritten policy" of denying officer's pay for less than a full hour of overtime. After his testimony, an investigation was initiated and he was ultimately discharged for violating the city's written rules on overtime. L.A. County jury awards $4 million to former LAPD officer.
Although all jury verdicts have a long way to go before they become collectable judgments, this one has an additional and somewhat unusual hurdle. It could be severely influenced by the Supreme Court's decision in Kasten v. Saint-Gobain Performance Plastics, which was argued on October 13th. The transcript of the argument is here.[pdf]
Part of the issue is that the FLSA was really the first statute to provide employee rights and a prohibition against retaliation outside the union context, and Congress had not yet had the ability to focus on all the aspects of what protected activity really needed to be covered. Whether the statute is applied as it was written or as Congress would no doubt write it now, may make all the difference.
And in this case, that's a big difference.
Richard Romney had testified that he had followed the "unwritten policy" of denying officer's pay for less than a full hour of overtime. After his testimony, an investigation was initiated and he was ultimately discharged for violating the city's written rules on overtime. L.A. County jury awards $4 million to former LAPD officer.
Although all jury verdicts have a long way to go before they become collectable judgments, this one has an additional and somewhat unusual hurdle. It could be severely influenced by the Supreme Court's decision in Kasten v. Saint-Gobain Performance Plastics, which was argued on October 13th. The transcript of the argument is here.[pdf]
Part of the issue is that the FLSA was really the first statute to provide employee rights and a prohibition against retaliation outside the union context, and Congress had not yet had the ability to focus on all the aspects of what protected activity really needed to be covered. Whether the statute is applied as it was written or as Congress would no doubt write it now, may make all the difference.
And in this case, that's a big difference.
Latest DOL Opinion On Donning and Doffing, Not So Fast - 6th Circuit Says
Although it may no longer be true, donning and doffing cases at one time were clearly the big ticket FLSA collective action. And for those still fighting those fights who have been concerned about the thumb that the DOL put on the scale with their June 16 Administrator's Interpretation (No. 2010-2), which reversed course from two earlier opinion letters issued this decade (yes, Obama administration vs. Bush administration), you now have some very favorable authority from yeseterday's decision by the 6th Circuit in Franklin v. Kellogg Co. (6th Cir. 8/31/10) [pdf].
Looking to determine the meaning of the phrase "changing clothes" in § 203(o) of the FLSA, the Court surveyed the DOL's view of that portion of the FLSA and found the following:
As it appears in §203 not §213 the Court placed the burden on the employee, siding with the 5th and all other circuits which have decided the question, except for the 9th Circuit.
Up to this point the opinion is very employer friendly, but at this point it diverges for some other holdings:
If it does, given the somewhat limited nature of section 3(o) which requires a collective bargaining agreement to be applicable, the most important point could well be the deference given to agency interpretations. While it may always have been the case, it is now more clear than ever, particularly in the field of labor and employment law, regulatory agencies are much more bound to an Administration's viewpoint than stare decisis.
My own view is that is not a very good way to run a railroad, but no one has asked my opinion, nor are likely to give it much weight. It is however a fact of life, and if we are going to deal with it, we might as well know exactly what view the courts are going to give such changing views. Myguess hope is that it is the same as the 6th Circuit here.
Looking to determine the meaning of the phrase "changing clothes" in § 203(o) of the FLSA, the Court surveyed the DOL's view of that portion of the FLSA and found the following:
- 1997 Opinion Letter - "clothes" in section 3(o) does not encompass protective equipment and section 3(o) is an exemption to the FLSA that should be read narrowly;
- 2001 Opinion Letter - reiterated the position taken in the 1997 Letter;
- 2002 Opinion Letter - "changing clothes" in section 3(o) refers to the putting on and taking off the protective safety equipment typically worn in the meatpacking industry;
- 2007 Opinion Letter - reiterated the position of the 2002 Letter;
- June 16, 2010 Administrator's Opinion - section 3(o) exemption does not extend to protective equipment worn by employees, that is required by law, by the employer, or due to the nature of the job.
First, "an agency interpretation of a relevant provision which conflicts with the agency's earlier interpretation is entitled to considerably less deference than a consistently held agency view. [cite omitted] The DOL's position on this issue has changed repeatedly in the last twelve years, indicating that we should not defer to its interpretation. Additionally, we find its interpretation to be inconsistent with the language of the statute.For the fans of burden of proof (the most important vestige of employment at will), the Court addressed the question of whether section 3(o) is an exemption to the FLSA where the employer has the burden or a definition, where the employee has the burden. Although it does so, the Court really did not have to look much further than which section of the FLSA section 3(o) appears, is it § 203, Definitions or § 213, Exemptions?
As it appears in §203 not §213 the Court placed the burden on the employee, siding with the 5th and all other circuits which have decided the question, except for the 9th Circuit.
Up to this point the opinion is very employer friendly, but at this point it diverges for some other holdings:
- in determining whether changing clothes can be a "principal activity" which thus launches the "workday," the Court held that whether or not the time was compensable does not impact the determination;
- here, changing clothes was a "principal activity".
If it does, given the somewhat limited nature of section 3(o) which requires a collective bargaining agreement to be applicable, the most important point could well be the deference given to agency interpretations. While it may always have been the case, it is now more clear than ever, particularly in the field of labor and employment law, regulatory agencies are much more bound to an Administration's viewpoint than stare decisis.
My own view is that is not a very good way to run a railroad, but no one has asked my opinion, nor are likely to give it much weight. It is however a fact of life, and if we are going to deal with it, we might as well know exactly what view the courts are going to give such changing views. My
CBA-FLSA-State Law? Is It Like Rock-Paper-Scissors?
Unfortunately for companies that operate in more than one state or are intently focused on the Fair Labor Standards Act, the answer is no.
Unlike the kid's game, where the winner is variable, when deciding wage and hour compliance questions, the answer invariably seems to be -- state law tops all.
Judge Easterbrook's short 7 page opinion in Spoerle v. Kraft Foods Global, Inc. (7th Cir. 8/2/10) [pdf] is a good example and (surprisingly) the first appellate decision to address at least one variation of this non-preemption issue. The question was what happens when a CBA which specifically excludes donning and doffing from time worked as permitted under Section 203(o) of the FLSA, runs into a state statute which does not have a similar exclusion? The answer under Section 218(a) according to Judge Easterbrook: state law prevails; employer loses. Here that translates to a $2.2 million dollar judgment on behalf a group of employees against the employer.
This may be the first for this specific issue, but it is not the only time it is a problem. See Union Bargaining Agreements Likely Cannot Waive Overtime Pay Rights, at the Overtime Advisor for a similar issue brewing in Nevada.
If I were rewriting wage and hour law, and I wish someone would ask me to do so, starting with Section 218(a) might not be a bad place to start. Compliance for companies that truly want to comply is hard enough when it is one law, but one law and 50 possible variations is a little too much federalism at times.
If it were truly protecting individuals from abusive treatment that would be one thing. But here, Local 538 of the UFCW, the employees' representative, and the company agreed that donning and doffing time would not be paid. No doubt elsewhere in the CBA that benefit to the company was offset by a benefit to employees, more than likely higher hourly wage rates.
So who really benefits from this $2.2 million decision?
The workers get all that they bargained for, plus a substantial windfall. Lawyers for the company and the plaintiffs (assuming that the judgment is not reversed by the Supreme Court) will have been well compensated. The Company will be out $2.2 + million dollars, which in classic economic terms likely means consumers will now have to pay more for their products.
I am sorry I must have missed something. Why is any of this a good thing?
Unlike the kid's game, where the winner is variable, when deciding wage and hour compliance questions, the answer invariably seems to be -- state law tops all.
Judge Easterbrook's short 7 page opinion in Spoerle v. Kraft Foods Global, Inc. (7th Cir. 8/2/10) [pdf] is a good example and (surprisingly) the first appellate decision to address at least one variation of this non-preemption issue. The question was what happens when a CBA which specifically excludes donning and doffing from time worked as permitted under Section 203(o) of the FLSA, runs into a state statute which does not have a similar exclusion? The answer under Section 218(a) according to Judge Easterbrook: state law prevails; employer loses. Here that translates to a $2.2 million dollar judgment on behalf a group of employees against the employer.
This may be the first for this specific issue, but it is not the only time it is a problem. See Union Bargaining Agreements Likely Cannot Waive Overtime Pay Rights, at the Overtime Advisor for a similar issue brewing in Nevada.
If I were rewriting wage and hour law, and I wish someone would ask me to do so, starting with Section 218(a) might not be a bad place to start. Compliance for companies that truly want to comply is hard enough when it is one law, but one law and 50 possible variations is a little too much federalism at times.
If it were truly protecting individuals from abusive treatment that would be one thing. But here, Local 538 of the UFCW, the employees' representative, and the company agreed that donning and doffing time would not be paid. No doubt elsewhere in the CBA that benefit to the company was offset by a benefit to employees, more than likely higher hourly wage rates.
So who really benefits from this $2.2 million decision?
The workers get all that they bargained for, plus a substantial windfall. Lawyers for the company and the plaintiffs (assuming that the judgment is not reversed by the Supreme Court) will have been well compensated. The Company will be out $2.2 + million dollars, which in classic economic terms likely means consumers will now have to pay more for their products.
I am sorry I must have missed something. Why is any of this a good thing?
Some Facts on Breast Feeding Requirement Under Healthcare Bill
A hat tip to Employment Law 360 for their story, DOL Releases Guidelines On Breaks For Breastfeeding [pdf] ($) and inclusion of Fact Sheet #73 from the Wage and Hour Division, Break Time for Nursing Mothers under the FLSA.
It's the first official word I have seen on a provision contained in the major healthcare reform bill passed earlier this year, that was scant on details.
I am not sure this answers all the questions, but at least it's a start.
It's the first official word I have seen on a provision contained in the major healthcare reform bill passed earlier this year, that was scant on details.
I am not sure this answers all the questions, but at least it's a start.
5th Circuit to Hear Katrina Related FLSA Labor Case En Banc
Yesterday the 5th Circuit announced it would hear Castellanos-Contrera v. Decatur Hotels en banc.
The case turns on whether an employer who brought foreign workers in post-Katrina under the H-2B visa program was required to reimburse them for recruitment, transportation and visa expenses in order to meet requirement that wages be paid "free and clear" under the FLSA.
The original panel said no, although it took two opinions to do so. I know that the 5th Circuit has a lot of Katrina related cases that deal with insurance coverage and it may be that there are other H-2B FLSA cases.
Or maybe a majority of judges just thought the panel got it wrong.
For links to the panel opinon and replacement opinion, see my original post from February 2009.
The case turns on whether an employer who brought foreign workers in post-Katrina under the H-2B visa program was required to reimburse them for recruitment, transportation and visa expenses in order to meet requirement that wages be paid "free and clear" under the FLSA.
The original panel said no, although it took two opinions to do so. I know that the 5th Circuit has a lot of Katrina related cases that deal with insurance coverage and it may be that there are other H-2B FLSA cases.
Or maybe a majority of judges just thought the panel got it wrong.
For links to the panel opinon and replacement opinion, see my original post from February 2009.
Wage & Hour: Not Just Collective Actions Anymore
Wage and hour compliance issues remain one of the potentially most dangerous areas for employers. Most of the attention has been focused on collective actions brought by a new generation of plaintiffs' lawyers who frequently focus on only those types of claims.
However, this press release last week from the Department of Labor, Grandville, Mich., restaurant operators ordered to pay more than $2 million in back wages and damages is a sobering reminder that there is a newly invigorated government agency that is conducting investigations and seeking back wages and penalties on behalf of employees.
The restaurants in question were 5 Chinese restaurants operated by a husband and wife team. It will take a lot of kung pao chicken to cover that fine.
Earlier this fall, the ABA Journal reported that the DOL had hired 250 new investigators for the Wage and Hour Division. Feds to Ramp Up Enforcement of ‘Rampant’ Wage-and-Hour Violations. And all of this activity is occurring without a permanent head of the group as President Obama's nominee for Administrator of the Wage and Hour Division, Lorelei Boylan withdrew her nomination last month. Lorelei Boylan Withdraws her Nomination for Wage and Hour Administrator.
While this may sound like a broken record (for those of you who still understand that reference), there's no likelihood that this problem is going away any time soon.
However, this press release last week from the Department of Labor, Grandville, Mich., restaurant operators ordered to pay more than $2 million in back wages and damages is a sobering reminder that there is a newly invigorated government agency that is conducting investigations and seeking back wages and penalties on behalf of employees.
The restaurants in question were 5 Chinese restaurants operated by a husband and wife team. It will take a lot of kung pao chicken to cover that fine.
Earlier this fall, the ABA Journal reported that the DOL had hired 250 new investigators for the Wage and Hour Division. Feds to Ramp Up Enforcement of ‘Rampant’ Wage-and-Hour Violations. And all of this activity is occurring without a permanent head of the group as President Obama's nominee for Administrator of the Wage and Hour Division, Lorelei Boylan withdrew her nomination last month. Lorelei Boylan Withdraws her Nomination for Wage and Hour Administrator.
While this may sound like a broken record (for those of you who still understand that reference), there's no likelihood that this problem is going away any time soon.
Trying to Avoid Layoffs, Employers Turn to Furloughs
Which is a good idea, but one that possesses some legal risks (what doesn't?). One of the primary areas of concern is compliance with wage and hour law. The Department of Labor has put out a timely FAQ, Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues.
If you are considering some form of furlough or related way of reducing costs without eliminating employees, this is a good place to start on the various issues that might arise.
Hat tip to Richard Tuschman at the Florida Employment Law Blog for catching this one.
If you are considering some form of furlough or related way of reducing costs without eliminating employees, this is a good place to start on the various issues that might arise.
Hat tip to Richard Tuschman at the Florida Employment Law Blog for catching this one.
Gearing Up for Tougher Wage & Hour Enforcement from DOL
Although given all the FLSA collective actions that have been directed at employers, it would be somewhat foolish to argue that the last few years have been easy, it is clear that a new administration, means likely much tougher enforcement by the DOL.
And although Secretary Solis probably did not need anything to jump start that activity, in case she did, the GAO report on enforcement efforts in the recent past no doubt will serve that purpose. The report to Congress, neutrally entitled, is Wage and Hour Division's Complaint Intake and Investigative Processes Leave Low Wage Workers Vulnerable to Wage Theft.
And although Secretary Solis probably did not need anything to jump start that activity, in case she did, the GAO report on enforcement efforts in the recent past no doubt will serve that purpose. The report to Congress, neutrally entitled, is Wage and Hour Division's Complaint Intake and Investigative Processes Leave Low Wage Workers Vulnerable to Wage Theft.
Some high (or more accurately) low lights:
GAO’s overall assessment of the WHD complaint intake, conciliation, and investigation processes found an ineffective system that discourages wage theft complaints. With respect to conciliations, GAO found that WHD does not fully investigate these types of complaints or compel employers to pay. In addition, a WHD policy instructed many offices not to record unsuccessful conciliations in its database, making WHD appear better at resolving conciliations than it actually is. WHD’s investigations were frequently delayed by months or years, but once complaints were recorded in WHD’s database and assigned as a case to an investigator, they were often adequately investigated.Secretary of Labor Solis' response can be found here. One key point, 250 new wage and hour investigators are on the way.
5th Circuit - No Duty To Reimburse Expenses Under H-2B Visa Program
Not many Katrina related cases have been employment law cases, but yesterday the 5th Circuit dealt with an FLSA challenge arising out of a hotel's hiring of workers under the H-2B visa program in the hurricane's aftermath. The challenge was simple. The hotel did not reimburse the workers for their recruitment, transportation and visa expenses, and therefore they did not pay them the minimum wage, free and clear.
The Court said no, basically relying on a regulation by the Bush Department of Labor issued on December 19, 2008. See Fed. Reg. 78020 et seq. The bottom line, the employer is not on the hook for the expenses. Castellanos-Contreras v. Decatur Hotels (5th Cir. 2/11/09) [pdf].
Updated (7.22.09): I haven't read it, but the 5th Circuit today withdrew the above opinion and replaced it with a new decision (here) [pdf] , but with the same result.
Updated (3.24.10): The 5th Circuit has now voted to hear the case en banc, see my post here.
The Court said no, basically relying on a regulation by the Bush Department of Labor issued on December 19, 2008. See Fed. Reg. 78020 et seq. The bottom line, the employer is not on the hook for the expenses. Castellanos-Contreras v. Decatur Hotels (5th Cir. 2/11/09) [pdf].
Updated (7.22.09): I haven't read it, but the 5th Circuit today withdrew the above opinion and replaced it with a new decision (here) [pdf] , but with the same result.
Updated (3.24.10): The 5th Circuit has now voted to hear the case en banc, see my post here.
Wal-Mart vs. Wage and Hour Litigation
Wal-Mart has been under a siege of litigation over its payment practices both under the FLSA and various state laws. One of its relatively few victories, the decertification of a 10 year class in Massachusetts has now been taken away by the Supreme Court of the Commonwealth. Salvas v. Wal-Mart (Mass. 9/23/08).
I know that given all the adverse publicity and some of the evidence of practices by some Wal-Mart managers, they may not be the poster child to call for reform of litigation in these type cases. However, just a reading of this opinion and seeing other courts struggle with how to handle these cases, makes me think that the overall system is in need of a massive restructuring.
One problem is that relatively few cases make it for appellate review, since the cost pressures of fighting them make settlement often an economically viable option. Anytime a system has that principle, it becomes very hard for the court system to separate the good from the merely mercenary cases. The Salvas opinion unfortunately, does nothing to advance the cause but is likely to lead to more litigation, make it more difficult (hence more costly) to defend and the downward spiral continues.
For all employers, not just Wal-Mart this is no longer an idle threat, but is now a major problem.
I know that given all the adverse publicity and some of the evidence of practices by some Wal-Mart managers, they may not be the poster child to call for reform of litigation in these type cases. However, just a reading of this opinion and seeing other courts struggle with how to handle these cases, makes me think that the overall system is in need of a massive restructuring.
One problem is that relatively few cases make it for appellate review, since the cost pressures of fighting them make settlement often an economically viable option. Anytime a system has that principle, it becomes very hard for the court system to separate the good from the merely mercenary cases. The Salvas opinion unfortunately, does nothing to advance the cause but is likely to lead to more litigation, make it more difficult (hence more costly) to defend and the downward spiral continues.
For all employers, not just Wal-Mart this is no longer an idle threat, but is now a major problem.
Free Government Advice from the EEOC, NLRB and the DOL
You can agree or disagree with it, but it is always helpful to know what the regulators think.
Tuesday, the EEOC published its updated Compliance Manual section on Religious Discrimination. Just as a reminder as to how broad religious discrimination can be, the definition of religion used by the EEOC is:
According to the analytical approach set out in the memorandum, the GC concludes such conduct is covered by §7 of the NLRA:
Tuesday, the EEOC published its updated Compliance Manual section on Religious Discrimination. Just as a reminder as to how broad religious discrimination can be, the definition of religion used by the EEOC is:
Also on Tuesday, the NLRB General Counsel Ron Meissberg issued a Guideline Memorandum Concerning Unfair Labor Practice Charges Involving Political Advocacy. Although it could have obvious implications during this election season, the reason for the advice memorandum was the immigration law demonstrations in 2006 which included employees leaving their jobs to protest proposed legislation.Religion is very broadly defined under Title VII. Religious beliefs, practices, and observances include those that are theistic in nature, as well as non-theistic “moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views.” Religious beliefs can include unique views held by a few or even one individual; however, mere personal preferences are not religious beliefs. Title VII requires employers to accommodate religious beliefs, practices, and observances if the beliefs are “sincerely held” and the reasonable accommodation poses no undue hardship on the employer.
According to the analytical approach set out in the memorandum, the GC concludes such conduct is covered by §7 of the NLRA:
However, coverage is not the key question, the question is whether it is protected activity. That requires both coverage by §7 and an analysis of the "means employed." The memorandum set out three principles that will guide that determination:Immigrant employees and even non-immigrant employees could reasonably believe that the bill could impact their interests as employees. For these reasons, employee attendance at and support of these demonstrations in our view was within the the scope of the "mutual aid or protection" clause.
identified employment concern is subject to restrictions imposed by lawful and neutrally applied work rules; and
It is likely that the battleground in the immigration cases will be over the third principle.
And a final bit of advice from the government comes from the folks at DOL, reminding that as of today, the Federal minimum wage increases to $6.55.
5th Circuit View on Retaliation Under the FLSA
No question that FLSA is the hot topic labor and employment circles these days, although most of that attention is focused on collective actions. Last week, the 5th Circuit took up another area, one of those rare cases of "first impression" -- what constitutes retaliation under the "complaint" portion of the anti-retaliation statute in the FLSA. Hagan v. Echostar Satellite LLC (5/30/08) [pdf].
That section of the FLSA provides it is illegal for an employer to:
The district court made three legal findings before applying them to the facts:
That section of the FLSA provides it is illegal for an employer to:
discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee.The case reached the Court on an appeal by a discharged employee. The trial court granted a direct following a mistrial. The employee, a supervisor, claimed the protected activity was his passing to the human resources department a question from the technicians he supervised about whether a change in policy that would lead to less overtime was legal. Since he was terminated for the way he handled the implementation the new practice whether that action was "protected activity" was crucial.
The district court made three legal findings before applying them to the facts:
- "even an informal, internal complaint could constitute protected activity under the FLSA,"
- in order to be protected employee the employee must have “stepped out of his role as an Echostar field service manager, either to complain to his employer in behalf of the technicians, or in his own behalf, about a supposed violation or irregularity under or related to the FLSA,"
- and that the FLSA "protects employees engaged in otherwise protected activity if that employee possesses a good faith belief that the employer had violated the law."
The 5th Circuit, in an opinion joined by one of its newer members, Judge Leslie Southwick, noted that the 2nd Circuit had taken a more restrictive view than the district court did and would not extend FLSA protection to informal complaints. It refused to take that view, instead going with the district court and what it viewed to be the majority rule in other courts. It did note that it was important that the complaint be about the legality of an action.
The Court also accepted the district court's 2nd premise, that the employee must be doing something other than his job, here being an intermediary between his employees and human resources, which was one of the functions of a manager. A different holding would otherwise mean a whole class of employees, managers, hr and legal, would be protected for just doing their job.
The Court found givenn that Hagan could not meet either of the first two principles, it did not need to address the good faith argument and so, in an appropriate act of judicial restraint, it did not.
I don't think this case represents a land mark shift in the 5th Circuit's view of employment cases generally, but I do think it is an indicator that it is not now a court that automatically looks for the most harsh outcome for employees, if in fact it ever was. Although here the employee lost, the standard which the Court articulates for the first time seems to be a clearly correct and mainstream, as well as less employer friendly than at least one of its sister circuits.
A Judicial Rarity - Circuit Court Decision on Collective Action
Since FLSA collective actions have been taking an inordinate share of my time recently, I am keenly aware that there is a scarcity of appellate decisions dealing with many of the interesting issues that can arise in these cases. Part of the problem is the nature of the cases.
Since every court that I am aware of that has ruled on the question has held the interlocutory certification of a class for notice purposes is not appealable, and a high percentage of cases in which the court conditionally certifies the case and permits notice settle before trial, there are very few chances for appellate review.
The downside of course is that means very little opportunity for the appellate courts to provide direction on key issues in what is one of the most burgeoning and certainly one of the more burdensome types of litigation.
Last week's decision in M. H. Fox v. Tyson Foods, Inc. (11th Cir. 3/12/08) [pdf] was a procedural odd ball. Plaintiffs who had filed consents to join a donning and doffing collective action were dismissed when the Court refused to certify the collective action. Undaunted, they then sought to intervene. The district court denied the intervention and they appealed.
Although much of the opinion has to do with intervention (short answer, not an abuse of discretion to deny it), the Court also needed to address an issue that has more general implications to these cases -- whether Tyson had a company wide policy about compensation for donning and doffing.
Unfortunately because of the unique procedural status, there were some things the Court specifically did not address, whether: the collective action order ignored the continuous workday rule, whether the plaintiffs should not have been required to prove individual claims with precision, and whether a single plan is not a prerequisite for a collective action. Guidance on those issues, particularly the last one would be helpful.
On the issue it did address however, was there a company wide policy, the Court upheld the lower court's determination that there was not one. First the Court found that the evidence of how the time was treated varied among the plants:
Although it could reflect just the particular facts of this case and the courts involved, it could also be a signal that courts themselves are becoming weary of these large unwieldy cases. If that is in fact the case, it would be a welcome sign.
Since every court that I am aware of that has ruled on the question has held the interlocutory certification of a class for notice purposes is not appealable, and a high percentage of cases in which the court conditionally certifies the case and permits notice settle before trial, there are very few chances for appellate review.
The downside of course is that means very little opportunity for the appellate courts to provide direction on key issues in what is one of the most burgeoning and certainly one of the more burdensome types of litigation.
Last week's decision in M. H. Fox v. Tyson Foods, Inc. (11th Cir. 3/12/08) [pdf] was a procedural odd ball. Plaintiffs who had filed consents to join a donning and doffing collective action were dismissed when the Court refused to certify the collective action. Undaunted, they then sought to intervene. The district court denied the intervention and they appealed.
Although much of the opinion has to do with intervention (short answer, not an abuse of discretion to deny it), the Court also needed to address an issue that has more general implications to these cases -- whether Tyson had a company wide policy about compensation for donning and doffing.
Unfortunately because of the unique procedural status, there were some things the Court specifically did not address, whether: the collective action order ignored the continuous workday rule, whether the plaintiffs should not have been required to prove individual claims with precision, and whether a single plan is not a prerequisite for a collective action. Guidance on those issues, particularly the last one would be helpful.
On the issue it did address however, was there a company wide policy, the Court upheld the lower court's determination that there was not one. First the Court found that the evidence of how the time was treated varied among the plants:
The manner in which the time was recorded also differed:Alison Maria Hayes, a group leader at the Wilkesboro, North Carolina, plant, for example, testified that “team members on the line get a few extra paid minutes each day” for donning and doffing. Theresa Grigsby, a supervisor at the Vicksburg, Mississippi, plant, testified that team members at her plant receive five minutes of paid time during breaks to account for time spent changing clothes and washing. Earnesto Felipe Ford, a supervisor at the Cleveland plant, testified that he allowed “team members [an] extra five to eight minutes each morning for dressing time."
Those two areas of difference alone were enough to support the lower court's decision that this was not suitable for a collective action.In some departments and on some production lines, all employees report to their workstations at the same time and leave their workstations at the end of mastercard time. Other departments or lines employ a staggered system in which team members arrive and leave at different times. This practice allows some employees to leave before the mastercard is punched, while others do not leave until the mastercard is punched. Director of Labor Relations Tim McCoy testified, “Tyson uses several different methods to ensure that employees are properly paid for all the time they work. The method used depends upon the plant, department, position, and shift.”
Although it could reflect just the particular facts of this case and the courts involved, it could also be a signal that courts themselves are becoming weary of these large unwieldy cases. If that is in fact the case, it would be a welcome sign.
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