Fair Labor Standards Act Law

Third Time Is Not a Charm for Chicago EMS Paramedics; Great American Sues to Avoid D&O Coverage

2009-07-10T11:13:00.011-04:00

EMS paramedics employed by the City of Chicago have brought and had summary granted on three FLSA lawsuits filed by the same attorney. The first two cases were consolidated by a federal judge sitting in the Northern District of Illinois because the cases were "not distinguishable...other than the timelessness of their claim." The same federal judge granted summary judgment to the City of Chicago on the consolidated case holding that the cases were "hopelessly heterogeneous" and therefore not properly collective actions with so many factual distinctions. In granting summary judgment in the newest collective action alleging the same facts by EMS paramedics against the City of Chicago, Judge Darrah also of the Northern District of Illinois noted that the plaintiffs' counsel stated during the earlier cases' consolidation hearing that he was going to file a third suit on "claims [that are] identical" to the consolidated case claims and Judge Hibbler's opinion in the consolidated case was "persuasive based both on the facts (identical to those here) and his analysis and application of controlling authority." To read the Memorandum Opinion and Order in Baley et al. v. City of Chicago, Case No. 09 C 228 (N.D. Ill. July 7, 2009), click here.

As a footnote to our entry on June 25, 2009 regarding an OT claim coverage dispute involving Great American Insurance Co., Great American has sued for a declaratory ruling that oil-and-gas exploration company GeoStar Corp. defendants are not covered by the insurance company's excess D&O liability policies in a suits against GeoStar for alleging defrauding investors. Great American states in the complaint that but for material misrepresentations by GeoStar, Great American would never have issued the policy at the same premium or with the same terms (if at all). To read the Complaint for Declaratory Judgment filed by Great American in Great American Insurance Co. v. GeoStar Corp. et al., case number 1:09-cv-12488 (E.D. Mich.), click here.

Federal Minimum Wage Rate Increase

2009-07-09T07:54:00.007-04:00

The Federal minimum wage will increase from $6.55 an hour to $7.25 an hour, effective July 24, 2009.

Employers should note this ten percent increase, take the necessary steps to implement the change and update their required postings, and ensure that they are complying with all applicable minimum wage laws. In doing so, it is important for employers to know the minimum wage laws in each state where they have employees. Some states have higher minimum wage rates than the Federal rate, while many others follow the Federal rate. (For example, under North Carolina law, employers must pay the higher of the Federal minimum wage or $6.15 per hour.) The U.S. Department of Labor makes available this handy chart summarizing the minimum wage laws of each state.

Iqbal Followup

2009-06-30T15:13:00.005-04:00

In a recent post, we discussed the Supreme Court's surprise May 18 decision in Iqbal v. Ashcroft - holding that a plaintiff needs to have some real facts in a complaint rather than just "formulaic conclusions." We predicted that the defense bar would rise to the occasion by filing motions to dismiss in Fair Labor Standards Act cases in which the skeletal allegations fail to say what it is that the defendant did which is claimed to violate the law. Here are two of the early returns:

Qureshi v. Panjwani, 2009 WL 1631798 (S.D. Tex., June 9, 2009): The court reviewed the pivotal language of Iqbal - "the pleading standard ... does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation" - and allowed the plaintiff to amend the complaint to supply additional facts.

Noble v. Serco, Inc., 2009 WL 1811550 (E.D.Ky., June 25, 2009): The employer's motion to dismiss was filed on February 2, and class certification proceedings were stayed pending the court's ruling on the motion. Since the briefing was long over when the Iqbal decision issued, the Judge didn't mention Iqbal but relied on the opinion two years earlier in Bell Atlantic Corp. v. Twombly. Twombly had announced a new rule for deciding motions to dismiss: A complaint must contain (1) "enough facts to state a claim to relief that is plausible," (2) more than "a formulaic recitation of a cause of action's elements," and (3) allegations that suggest "a right to relief above a speculative level." The court said there was enough in the complaint to meet these tests, and did not require plaintiff to amend to say more.

One swallow doesn't make a spring, but examination of these two decisions - and of the large number of other cases in which Iqbal motions have been filed - strongly suggests that there are lessons to be learned for both sides. Defendants will continue to file motions to dismiss, and plaintiffs will counter with amendments of the complaint (at the motion-to-dismiss stage, the complaint usually can be amended as a matter of right if no answer has been filed). Situations in which the court throws the case out based on a sketchy complaint may be rare. Life would be simpler if plaintiffs' counsel included enough facts to show what position plaintiff held, what the general nature of the claim is (e.g., misclassification as exempt, failure to pay for hours spent at the beginning and end of the workday, deductions from salary of exempt personnel, and so on), and whether the plaintiff or counsel had brought the claim to the employer's attention. That will require a little more work at the beginning, but could cut down on the number of arguments by both sides over truly threshold issues.

I rest my case.

No Insurance Coverage for OT Suits? Lawsuits Against Insurers Look to Be on the Rise

2009-06-25T11:14:00.010-04:00

Vozzcom, Inc., a cable and electrical contracting services provider based in Florida, has sued its insurance carrier, Great American Insurance Co. of New York, to determine the insurer's obligation to defend and indemnify Vozzcom in a putative collective action filed by an employee asserting wage and hour violations. The suit was filed in the U.S. District Court for the Southern District of Florida.

Vozzcom is no stranger to wage and hour suits having defended itself from several claims over the past few years. Vozzcom had previously been sued by an employee for wage and hour violations in 2007. At the time of the first wage and hour suit against Vozzcom, Vozzcom was not insured by Great American. Vozzcom's insurer at the time of the first wage and hour suit defended and settled the suit for Vozzcom. In 2008 (and continuing through the present time), Vozzcom purchased a claims-made employment practices claims policy from Great American for calendar years 2008 and 2009. A second wage and hour suit commenced against Vozzcom in 2008 that resulted in a court award of nominal back wages for the plaintiff although the court ruled that Vozzcom met its burden of acting in good faith and with reasonable grounds to believe its wage and hour practices were compliant. The second suit led to a dispute between Great American and Vozzcom's prior insurer as to who might be liable for defense costs and indemnity. Ultimately, a court ruled that the prior insurer was liable because the suit arose from the first wage and hour suit.

Once again in January 2009 (while the Great American policy remained in effect), a third wage and hour suit was filed against Vozzcom. Vozzcom requested Great American to defend and indemnify Vozzcom in the third suit. Great American denied the claim as part of the same single claim as the prior two wage and hour lawsuits. Whether Great American can successfully avoid coverage remains to be seen, but the case raises interesting issues for employers reviewing their current and past insurance coverage. This suit serves as a reminder to an employer to check insurance policies and, in the case of multiple suits over similar practices, assess which policy or policies may cover a wage and hour suit.

To read the complaint in the Great American suit, please click here.

Arbitration Can Be Troublesome

2009-06-24T10:49:00.004-04:00

The conventional wisdom that arbitration is a way to avoid the expense, time and risk of litigation has been challenged repeatedly as plaintiffs, courts, and even legislators seek to impose new requirements which can make the arbitration process just as costly as litigation, with the added downside that there's no meaningful way to appeal an arbitration award. That lesson was brought home in the ongoing fight known as In re Cintas Corp. Overtime Pay Arbitration Litigation (N.D.Cal. No. 06-1781), involving the Cincinnati-based uniform and business services supplier. This long-running dispute started in 2003 with a collective action filed by Cintas sales representatives who claimed they should not have been classified as exempt.

(Round 1) The court allowed the sending of notices to the alleged class, and about 2400 opted into the case.
(Round 2) Cintas then argued that most of the claims had to be arbitrated, and the court agreed as to nearly 80 percent of the group, and Cintas asked 70 different courts to order the claimants to arbitrate.
(Round 3) The claimants asked the Judicial Panel for Multidistrict Litigation to consolidate all those cases back to San Francisco, aand the JPML agreed.
(Round 4) After the California court named an arbitrator, the court concluded that the claimants were refusing to arbitrate by angling for the class arbitration and threatened to send the cases back to the 70 district courts. That decision is on appeal.
(Round 5) The arbitrator disagreed with the district judge and allowed the claimants to proceed with their class arbitration.
(Round 6) Cintas asked the court to order the arbitration halted. The court refused to enter an injunction.

Where will this go? What will it cost? When will it end? One major difference between the Cintas case and a sporting event is the lack of a single referee with authority to dispose of disputes. Once the arbitration genie was loosed from its bottle, the law of unintended consequences took hold. So the next time you think, "Wouldn't it be nice if we could channel our wage-hour disputes into a simple procedure?," think again to see what could go wrong. Plaintiffs' counsel may be sufficiently motivated and financed to see the match through to the final bell.

But That's What a Bonus is For!

2009-06-18T16:39:00.002-04:00

We frequently remind you that in order to utilize the executive or administrative "white collar" overtime exemptions, it is necessary that the employee in question be paid on a "salary basis" - an amount which doesn't fluctuate when the quantity or quality of work varies. The US Court of Appeals for the Sixth Circuit (covering Kentucky, Michigan, Ohio and Tennessee) recently brought this lesson home - expensively - in Winterwood v. Life Time Fitness, Inc. In 2005, the year after the new FLSA regulations took effect, the employer looked at the results suggested by its compensation plan and decided to "claw back" overpayments of bonuses which department heads had received, determining that those bonuses had not been "earned."

The District Court for the Southern District of Ohio sided with the 8-plaintiff class, reasoning that the recoupment of the bonuses destroyed the "salary basis" because it was a reduction in pay based on quality of work; however, since there were actual pay reductions levied in only three pay periods, the trial court ordered back pay for only those losses. The appeals court viewed the situation as more serious, saying that as of the effective date of the new plan the managers were not paid on a salary basis, were no longer exempt, and were entitled to overtime compensation for all hours worked in excess of 40 in any workweek. The bonus plan, the appellate panel said, created a "significant likelihood of improper deductions" even though, looking at what has actually happened, that "likelihood" had materialized in only three payroll cycles in 2005.

The moral? Just because something makes sense from the standpoint of business judgment has little to do with whether the FLSA's requirements have been met.

Family Dollar Mounts Vigorous Defense

2009-06-12T11:10:00.002-04:00

Originally published May 7, 2009

In another chapter in the hotly-contested multidistrict litigation involving FLSA claims against the discount retailer, Family Dollar has won a battle and continues to press the plaintiffs to comply with procedural rules. Since "class" members have to file written consents to join in federal wage-hour suits, they are subject to discovery requirements, including answering interrogatories. When a number of the consenters failed to provide responsive, signed responses, Family Dollar asked the court for help, and got it: For the ruling by Judge Graham Mullen of the US District Court for the Western District of North Carolina, see http://www.wcsr.com/resources/pdfs/flsa_blog042909.pdf.

Now the employer has filed motions to dismiss noncomplying plaintiffs' claims. Watch these pages for further developments.

Update (6/22/09): Docket and New Filing

Update (6/12/09): Judge Mullen denied the motion to dismiss

Update (6/5/09): The Court on Defendant's Motion to Dismiss

Update (5/14/09): "Judge says plaintiffs' attorneys are spiteful."

Just the Facts

2009-06-05T13:18:00.003-04:00

While Congress, the Department of Labor, and the plaintiffs' bar seem intent on pushing the envelope toward new claims and new employer liability, care should be taken to consider the teaching of the Supreme Court's decision in Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937 (May 18, 2009). The case involved a Muslim Pakistani pretrial detainee who claimed he had suffered under harsh prison conditions and brought suit against the former Attorney General and the FBI director. The question presented for review was a narrow one: did the plaintiff "plead factual matter that, if taken as true, states a claim that [Ashcroft and Mueller] deprived him of his clearly established constitutional rights." However, the 5-4 ruling by Justice Kennedy applies to all complaints filed in US District Courts, and carries the potential for more rigorous scrutiny of such pleadings given the heightened standard the Court explained.

Iqbal builds on the 2007 precedent established in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, which had announced a "flexible 'plausibility standard'" - reciting conclusory statements in the complaint will not always suffice to keep a case alive. In other words, a complaint needs more than legal conclusions - it must provide some factual context, which crosses the line between possibility and plausibility, in order to survive a motion to dismiss. Accordingly, the Court found that two claims in the complaint did not meet that threshold:

(1) that the defendants "knew of, condoned, and willfully and maliciously agreed to subject" [Iqbal] to harsh conditions of confinement "as a matter of policy, solely on account of [his] religion, race and/or national origin and for no legitimate penological interest"; and

(2) that Ashcroft was "the principal architect" of the policy and that Mueller was "instrumental" in adopting and executing it.

The problem was in the failure of the complaint to explain the chasm between those assertions and the conclusion that the defendants' purpose in formulating the policy was based on race, religion or national origin. Iqbal argued that these issues could be dealt with in the discovery process, the the Court disagreed on grounds that "it is counterproductive to require the substantial diversion that is attendant to participating in litigation and making informed decisions as to how it should proceed" just because the plaintiff has put together a complaint which, if all the allegations were proved, might result in liability for the defendant. In the most significant aspect of the decision for employment litigation, the Court warned that it is not enough to claim discrimination; there must be a factual context presented to allow the judge to assess whether the case should be allowed to proceed.

The four dissenters - Justices Souter, Stevens, Ginsburg and Breyer - deemed the majority's analysis "cursory," contending that the two claims discussed above were selected without regard for other concessions made by the defendants. It is instructive to note, however, that whatever concessions a defendant might make in an answer or otherwise are not pertinent to an analysis of the complaint itself. Iqbal stands for the proposition that something is needed beyond leaps of faith to enable a complaint to be answered at all.

How does this lesson apply? Using FLSA litigation as an example, there are plaintiffs' attorneys who file complaints which are formulaic, bare-bones documents in which the changes from one case to another are so minimal as to suggest a simple filling in of the blanks. Often there is no identification of the plaintiff's job, department, or working conditions; instead, there is a simple assertion that the employer violated the law by failing to pay plaintiff (and all those similarly situated) in accordance with the law. Nor are Department of Labor complaints much better (and often, since there is no plaintiff other than the Secretary of Labor, there may be even less detail). Will this become an issue in FLSA litigation? Will plaintiffs' counsel need to be a bit more specific in drafting their complaints? The answer to the first question is clearly yes; the answer to the second will be provided over the next few years, assuming, of course, that there is no revisiting of the subject by the Supreme Court.

NC Department of Labor Answers Questions on Interns and Wage Payment

2009-05-21T16:04:00.003-04:00

With summer around the country, questions about interns and wage payments may come up.

See the following FAQ (originally published in NC DOL newsletter)

Got a Wage Claim? Don't Expect Insurance to Cover It Automatically. Read the Fine Print.

2009-05-13T09:42:00.016-04:00

Employers who haven't checked the terms of their D&O policies may find themselves very sorry when it comes to coverage of wage claims. Recently, employer Jeff Tracy, Inc., found itself unable to prove that a wage class action was a "loss" under the terms of its D&O Policy issued by U.S. Specialty Insurance Co. according to a federal district court judge in California.

The D&O policy at issue in the Jeff Tracy case did not have any special endorsements to cover employee claims, such as the wage class action that cost Jeff Tracy over $400,000 in state assessments for various alleged misconduct including failing to pay the prevailing wage on public works projects, failing to inform employees of their classification under California state law, and making misstatements about how the employees would be paid. Not only did the policy not have a special endorsement, the policy contained an exclusion that the judge determined excluded the claims, namely that the policy did not cover any "claim" "for an actual or alleged employment practices wrongful act" or "for any actual or alleged violation of any provision of the Fair Labor Standards Act other than the Equal Pay Act, the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Occupational Safety and Health Act, ... or any other similar provisions of any federal, state or local statutory or common law or any rules and regulations promulgated under any of the foregoing." The insurer consistently denied coverage of the wage claims as not within the definition of "Loss" under the policy and as specifically excluded by the policy, in response to multiple notices of the wage assessment by the employer.

The opinion acknowledges that insurance policies are subject to special rules of construction. First, the law favors broad coverage to provide insured with the greatest possible protections and disfavors exclusions through narrow interpretation. Second, while the insured has the burden to establish coverage, the insurer has the burden to establish that the claim is specifically excluded. Furthermore, D&O policies generally favor requiring an insurer to reimburse the insured for the costs of a defense, rather than providing the insured with a defense.

This decision should serve as motivation for employers to review their various insurance policies and confirm what their policies cover and what what they do not cover. This is particularly important given the increase in wage claims over the past few years.

To read the decision of the Jeff Tracy, Inc. v. U.S. Specialty Insurance Company, etc., SA CV 08-361 AHS (RNBx) (May 5, 2009), click here.

"A New Sheriff in Town"

2009-05-07T16:31:00.002-04:00

Hilda Solis - former Democratic member of Congress and the new Secretary of Labor - told the AFL-CIO, "You can rest assured that there is a new sheriff in town." The Administration and Congress have now given the sheriff a larger posse and a potful of money. The 2008 budget gave DOL $175.7 million for wage-hour enforcement; that rose to $193.1 for 2009, and the stimulus package in ARRA added another nearly $5 million. The 2010 tally is a whopping $227.7 million for this function alone; the total DOL budget request is $104.5 billion for discretionary and mandatory programs. If you want to see the details, look at the 81-page "budget in brief" at http://www.dol.gov/dol/budget/2010/PDF/bib.pdf; the wage-hour discussion is on page 36. Solis plans to add at least another 150 wage and hour field investigators, plus 100 more to focus on employers who have received stimulus payments. Additionally, you may have noted that the Administration has determined enforcement of laws and regulations targeting union corruption as "not a priority"; in fact, the overall DOL budget is less than 2009's, reflecting a reordering of what the agency deems important.

The DOL initiative is buoyed by the release of a General Accounting Office report charging that the Wage and Hour Division of DOL "has left thousands of actual victims of wage theft who sought federal government assistance with nowhere to turn." Secretary Solis has also pledged that those Department employees who were negligent or dishonest in the past will be dealt with. All in all, you can expect the agency to be persistent and exhaustive in its efforts, and the plaintiffs' bar will take note. FLSA filings were marginally down last year; don't expect that trend to continue. By the way: state agencies with wage enforcement responsibility are likely to echo, or even attempt to outstrip, their federal counterpart; for example, more than 3000 California employees of a Michigan-based construction company recently garnered an aggregate settlement of $8.5 million as a result of alleged nonpayment for hours spent performing gutter installation work. Gutierrez v. Schmid Insulation Contractors Inc., CV 08-6010 (C.D. Cal., 3/9/09). A prudent employer will take note and attempt to insure it isn't the first kid on the block to have one of these problems.

Swine Flu Outbreak Information and Resources for Businesses

2009-05-06T15:02:00.001-04:00

With the recent concerns and extensive media coverage about the "swine flu" outbreak, all businesses would be well served to take time to get the most current information available, and to evaluate how this outbreak might impact their business.

Click here to learn more about how your business can prepare...

What is Good for the Goose? The EEOC Finds Itself in Hot Water over Its Overtime Practices

2009-04-06T09:05:00.011-04:00

Over the past three years and again this past month, the EEOC has found its own overtime policies and practices being scrutinized by an federal arbitrator reviewing a grievance filed on behalf of EEOC workers in April 2006 by the EEOC's union, the National Council of EEOC Locals No, 216, AFGE/AFL-CIO. One of the issues in the case was the EEOC's reclassification of certain investigators and mediators to exempt status under the FLSA's administrative exemption in the wake of a consultant's report.

The chief complaint discussed by this opinion was the EEOC's failure to give its nonexempt employees [investigators, mediators and paralegals] the choice between extra pay or compensatory time, only giving the employees comp time. After eight weeks of hearings on this issue, the arbitrator determined that the EEOC was correct in its assertion that flex time employees were not eligible for "suffered or permitted" overtime, but that the EEOC should have given its nonexempt investigators, mediators and paralegals the options of extra pay or comp time. Interestingly, in recent years, the EEOC has lost a significant amount of its employees, nearly a quarter of its workforce, with the largest losses from its investigators, mediators and paralegals.

The 83-page arbitration opinion and award is a good resource for FLSA analysis. The opinion contains numerous quotes of EEOC memoranda and policies of interest and painstakingly analyzes the overtime issue under a collective bargaining agreement. This opinion may be read by clicking here.

Winning Is Not Everything

2009-01-29T12:13:00.005-05:00

Whether or not Vince Lombardi actually said "Winning isn't everything - it's the only thing" (see http://aafla.org/index/FootballStudies.html), making sales isn't necessary to establish the outside sales exemption to the Fair Labor Standards Act. That's the lesson of Gregory v. First Title of America, Inc., decided by the US Court of Appeals in Atlanta on January 27. Nelda Gregory, who had been marketing director for a Florida title insurance company for slightly over 6 months, was initially paid $1000 per week but switched, at her own request, to a commission-only compensation plan based on 50% of closed orders. She was never paid extra for overtime.

After she was fired, she filed suit, contending she was entitled to additional compensation under both her employment contract and the FLSA. Her argument was, in a nutshell, that she couldn't and didn't "sell": Her work consisted of trying to generate business by urging lenders and real estate salespeople to refer business to her employer, and she even lacked a license to sell title insurance. Apparently unimpressed with that position, the District Court threw the case out.

Although it took the Court of Appeals 24 pages of analysis, summary judgment was affirmed. Deeming the question of whether Gregory was an exempt outside salesperson to be "a close one" requiring the court "to navigate between a rock and a hard place (or Scylla and Charybdis, for students of the classics)," the per curiam opinion resolved the issues in the employer's failure, but Gregory proved to be her own worst enemy in the process. In fact, you could as easily say Gregory failed to prove, because she offered no evidence of the overtime hours she had worked and hadn't even informed her employer of her assertions in this regard until just before the axe fell. She simply said the employer "should have known." On that basis, the court found it unnecessary to resolve the tough question and send Ms. Gregory on her way.

While the results were favorable for First Title, the lessons are clear: Make sure your exemption is borne out by the facts and the law (it's the employer's burden to prove exemption as an affirmative defense), and never trust that your opponent won't put together the best case possible; hope is not a strategy (which is, after all, the title of a popular book on - you guessed it - sales).

Two Pharmaceutical Companies Successfully End Wage and Hour Suits by Their Sales Representatives

2009-01-20T12:12:00.004-05:00

In the past weeks, Johnson & Johnson and Novartis each won summary judgment in cases brought by their respective sales representatives who had alleged that the sales reps were nonexempt under the FLSA and state law. Despite the clear victories, the Courts’ opinions offer different rationales for exemption depending on whether the outside sales representative exemption or the administrative exemption is used. This issue could make its way to the highest court in the land in the near future to resolve the ambiguity facing employers.

Johnson & Johnson had been sued by a former sales rep of a J&J subsidiary, Ortho-McNeill Pharmaceutical, in the United States District Court for the District of New Jersey in the case Patty Lee Smith v. Johnson & Johnson, case no. 06-cv-04787. In granting J&J’s motion for summary judgment, Judge Linares agreed with J&J’s assertion that its pharmaceutical sales reps were not misclassified and were exempt under the administrative exemption. Additionally, the plaintiff had brought claims based on actions taken more than three years prior that time-barred. Judge Linares recognized the lack of clarity in how to treat pharmaceutical sales reps under the FLSA, stating that “Smith’s position of Senior Professional Sales Representatives occupies a somewhat ambiguous zone under the FLSA.” Finding the logic of the Ruggieri case persuasive on the issue of how the FLSA outside sales exemption is applied, the Court denied that Ms. Smith could be considered an outside sales representative as envisioned by statute and regulation under the FLSA. Instead, the Court focused on the exemption for employees acting in an administrative capacity and found that J&J met its burden to demonstrate that Smith’s role was an “administrative advertising and marketing position with a substantial impact on J&J.” The Court noted the administrative exemption had been used in the Amendola case [click here for our blog entry on the Amendola case]. In closing, the Court noted that its granting of summary judgment for J&J mooted Ms. Smith’s motion to certify the action as a collective FLSA action. To read the Court’s opinion in the Smith case, click here.

Novartis Pharmaceutical Corp. similarly won summary judgment to beat a consolidated class action brought by current and former pharmaceutical sales representatives of Novartis in the United States District Court for the Southern District of New York entitled In Re Novartis Wage and Hour Litigation, case no. 06-MD-1794(PAC). Like J&J, Novartis argued that its pharmaceutical sales reps were exempt from overtime pay as outside sales representative and administrative employees under the FLSA and applicable state law (plaintiffs worked in either New York, California, or other states and were divided into group based on where they provided services for Novartis). The Court’s opinion provides a thoughtful summary of the potentially applicable exemptions and the various sources of interpretations (regulations, DOL guidance, and case law like the 2008 Ruggieri and Amendola decisions) and can be read by clicking here. Ultimately, the Court found that the pharmaceutical sales reps were exempt from overtime payment both on a narrow reading of the outside sales representative exemption (as applicable under the FLSA, California law, and New York law) and as administrative employees (under the FLSA, New York and California as well). The Court declined to reach the issue of whether the pharmaceutical sales reps were also exempt under the highly compensated employee exemption.

To view our blog entry from June 24, 2008 regarding the applicability of FLSA exemptions to pharmaceutical sales reps, click here.

Why We Blog

2009-01-16T12:49:00.004-05:00

Portfolio Media, Inc. has now released its 2009 Law360 Litigation Almanac, a 300-page-plus analysis of suits filed within the last calendar year. Among the findings, summarized in today's Employment Law360, are that the boom in new filings of Fair Labor Standards Act litigation, triggered by the 2004 release of new "white collar" exemption regulations, continues, with significant increases in new cases and an exponential growth of collective or "class" litigation.

Major judgments, verdicts and settlements have fueled this phenomenon. Critical issues include classification of workers - as to employer assertions of exempt status as well as challenges to independent contractor designations and the use of other contingent personnel; time worked issues ("donning and doffing," rest periods, the use of electronic communications outside regular duty hours or away from the employer's regular office facilities); and assaults on entire industry segments such as retail establishments, tipped employees, inside sales, call centers, and marketing representatives. Finally, retaliation claims are on the rise, and we forecast this as an area of even greater concern in the future.

Our blog offers a sampling of recent developments, but it can only touch on the issues which are topical, attention-grabbing, or downright unusual. Dramatic changes in government and the economy are causing us all to reevaluate our practices in an effort to avoid the distractions and expense of making war over workplace concerns. Our resolution for the new year is to continue to improve the quantity and quality of our postings to afford our readers with the best information available to assist in weathering this storm. As always, we welcome your feedback, and thank you for allowing us to take up time in your busy day.

See Employment Law360 article...

Asking the Right Questions

2009-01-16T10:28:00.003-05:00

When defending employment litigation, attorneys want to be certain they have covered all the bases, so when counsel for Chinese Daily News was deposing the named -plaintiff and two others who had filed declarations supporting class certification, he asked each "questions related to their union sympathies and union-related activities" - a natural line of inquiry since it appeared that the litigation was part of a long-simmering feud between the largest Chinese-language newspaper in North America and the Communications Workers of America.

A principle of US labor law which often traps the unwary is that employer efforts to prohibit or inquire into employee discussions of "matters of common concern" are generally deemed to be an interference with "protected concerted activity" and, therefore, constitute an unfair labor practice. This concept applies even in the absence of a union, and the National Labor Relations Board is of the view that policies or practices which ban disclosure of compensation and benefits and forbid discussions on the subject are per se violations of the law.

These two forces collided when the CWA, as part of their 9-case NLRB litigation, challenged the deposition questions as improper. Lana H. Parke, an Administrative Law Judge ruled that the employer's "significant interest in defending itself" trumped the employees' rights, particularly since the questioning dealt with the activities of the three individuals and not their interactions with others. The Union appealed to the "full" NLRB - currently consisting of only two members due to squabbling over recess appointments to the body. The two Board members concluded that asking one of the individuals how he had voted in the representation election crossed the line - even though he was an open Union supporter - because of the overriding interest in maintaining the confidentiality of the voting process. See www.nlrb.gov/shared_files/Board%20Decisions/353/v35366.pdf.

This decision takes on even more significance in light of current efforts to eliminate Board-supervised elections altogether and a push to afford even greater protections to employees' conversation about pay and benefits. A full appreciation of how all of these considerations interplay is essential to an employer's approach to the challenges of today's workplace.

When Is an FLSA Collective Action Mooted by an Employer Paying an Employee's Claim in Full?

2008-12-30T13:14:00.006-05:00

The Fifth Circuit Considers the Subject

The FLSA permits plaintiffs to bring purported collective actions on behalf of other similarly situated employees under its Section 216(b), and the federal rules of civil procedure allow a defendant to make an offer of judgment that would fully satisfy a plaintiff's claim under Rule 68. Under Article III, Section 2of the United States Constitution, federal jurisdiction is limited to "cases" and "controversies", those involving actual disputes not hypothetical or moot cases. According to Black's Law Dictionary, a case is said to be "moot" when "the matter in dispute has already been resolved and hence, one not entitled to judicial intervention unless the issue is a recurring one and likely to be raised again between the parties." This question was presented to and answered by the Fifth Circuit in recent opinion issued in Sandoz v. Cingular Wireless LLC, case number 08-30769.

Plaintiff Sandoz filed her complaint as an opt-in collective action in state court, but defendant Cingular removed the case to federal court and soon made an offer of judgment for $1,000 plus reasonable attorneys' fees. The offer of judgment was not accepted by Sandoz and the parties filed motions to strike the reference to the offer of judgment (Sandoz) and to dismiss the complaint (Cingular). The district court denied all motions, but certified Cingular's interlocutory appeal to the Fifth Circuit on the issue of mooting.

The Fifth Circuit noted only the Eleventh Circuit has address a similar scenario, with the Eleventh Circuit holding that a named plaintiff has no right to represent similarly-situated employees until they opt-in, which is when the action becomes "collective." The district court hearing the Cingular and Sandoz arguments was concerned that a defendant could "pick off" a named plaintiff through an offer of judgment that would "frustrate" the objectives of the FLSA and improperly minimize the use of judicially economical collective actions in favor of individual lawsuits. The Fifth Circuit held that, "when a FLSA plaintiff files a timely motion for certification of a collective action, that motion relates back to the date the plaintiff filed the initial complaint, particularly when one of the defendant's first actions is to make a Rule 68 offer of judgment." According to the Fifth Circuit, the principle of "relation back" ensures that defendants could not "pick off" collection action representatives and thwart plaintiff's access to FLSA collective actions. Thus, while the Fifth Circuit agreed in general with the district court's concerns, it attempted to balance the competing interests of a employer defendant when timely motions to certify were filed. Sandoz had filed the motion to certify 13 months after her complaint, while Cingular made its offer of judgment a month after service of the complaint. On remand, the district court will determine whether the plaintiff timely filed her motion to certify and if necessary, the merits of the motion to certify.

The mooting issue will be one to watch in future (and current) FLSA cases. If an employer can moot an employee's claims under a purported class action early before significant litigation costs have been incurred, we may see more offers of judgment being made.

Family Dollar Has a Holiday Headache

2008-12-22T15:08:00.004-05:00

The $35.6 million award - a $19.2 million jury verdict which the court cut to $17.8 million, and an equal amount for liquidated damages based on willfulness - in the Alabama-based nationwide collective action against Family Dollar Stores has been affirmed by the US Court of Appeals for the Eleventh Circuit in a 106-page opinion. The back pay and liquidated damages will be spread among 1424 retail store managers who were found not to be exempt "executives" because they spent a majority of their time on manual work; hundreds of depositions were taken from a pool deemed representative of the nearly 2500 managers who had opted into the case, which arose out of claims made before the FLSA white-collar regulations were amended in 2004. Morgan v. Family Dollar Stores, Inc.

Meanwhile, back in the checkout line, the company is engaged in another huge battle in the Western District of North Carolina, In re Family Dollar Stores, Inc. Wage and Hour Employment Practices Litigation, No. 3:08-CV-01932-GCM. Although that case was stayed while settlement negotiations have been ongoing, additional plaintiffs continue to queue up for this post-2004 attack on the company's compensation and classification system. It remains to be seen whether Family Dollar seeks further review of the Alabama matter, as well as what effect the new regulations, which don't require a specific percentage of exempt work in order to alleviate overtime requirements, may have on the settlement talks in Round 2.

And, by the way, please note that there has been no award of attorneys' fees reported in the Morgan case, so the employer has yet more opportunities to dig deep. What a way to end a year!

U.S. Supreme Court Declines To Review Decision Holding That Paramedics Are Entitled To Overtime

2008-12-18T11:22:00.000-05:00

On December 15, the United States Supreme Court declined to take on an appeal by the City of Philadelphia from a ruling that paramedics employed by the fire department were not exempt from overtime under the FLSA’s “firefighter exemption.” Philadelphia had petitioned the Supreme Court to review the opinion of the Third Circuit Court of Appeals in Lawrence v. Philadelphia, which can be found here. The Third Circuit had ruled that the paramedics were not exempt from overtime because they were not cross-trained as firefighters, had no responsibility for “fire suppression activities,” and therefore did not meet the exemption. The Supreme Court’s refusal to hear the case lets stand the Third Circuit’s opinion.

Family Online Safety Institute (FOSI) Releases Online Safety Proposals

2008-12-15T13:41:00.001-05:00

The Family Online Safety Institute ("FOSI") released its report Making Wise Choices Online in which it provides a survey of ongoing initiatives to ensure the safety of children using the Internet as well as four policy proposals for the coming Administration to consider. The release coincides with the Second Annual FOSI Conference, held today in Washington, D.C., themed "Safe At Any Speed: Rules, Tools & Public Policies to Keep Kids Safe Online."

Womble Carlyle is pleased to have sponsored the FOSI Conference and to have forged a friendship with this organization.

Click here to learn more about FOSI's Internet safety proposals.

Grilling Your Employer

2008-12-15T13:06:00.004-05:00

New York City's Saigon Grill, with two (formerly three) locations in Manhattan, is in hot water with wage-hour cases. Last October, a federal judge ordered the restaurant's owners, Simon (Chang S.) and Michelle (Pei Ying) Nget, to pay $4.6 million in back pay and liquidated damages to 35 delivery employees who worked 6 or 7 days, between 70 and 80 hours, per week, for around $1.70 per hour; while they received tips, the litigation was hampered by the employer's inability or unwillingness to produce pay and tip records, thereby allowing the plaintiffs to estimate how long they worked and what they were paid. Plaintiffs were represented by the venerable Wall Street firm of Davis, Polk & Wardwell along with the Asian-American Legal Defense and Education Fund. The National Labor Relations Board, in a separate proceeding, ordered Saigon Grill to rehire terminated employees.

Now the situation has become even more serious: On December 3, the Ngets were arrested on state criminal charges including criminal wage violations, paying illegal kickbacks and falsifying business records; the New York Attorney General's office claims that workers had to cash their paychecks with the company, which then gave them significantly less to keep. The charges, a mix of felonies and misdemeanors, total more than 400. In a press release, AG Andrew Cuomo said, "Like so many restaurants across New York City, Saigon Grill was run on the backs of its workers." How's that for a warm holiday message?

The cases are Ke v. Saigon Grill Inc., 1:07-CV-2329 (S.D.N.Y.); Saigon Grill, Inc., No. 2-CA- (NLRB); and State v. Nget.

The moral of the story, lest it not be obvious, is that compliance with the law is far less expensive than getting caught. While the presumption of innocence is still firmly in place, the Ngets have lots of explaining to do.

Click here to read more...

Air Pressure

2008-12-15T12:43:00.002-05:00

American Airlines pilots represented by the Allied Pilots Association have been in litigation with their employer since August 1, triggered by American's plans to place up to 200 pilots on furlough. In addition to bringing suit, the APA asked the pilots not to make known their availability for voluntary overtime - in other words, trying to maximize jobs by having their members forgo additional pay. American countered by claiming that the union's tactics violated the Railway Labor Act, since the parties are in contract negotiations and neither can upset the status quo.

Last month the union filed a motion in federal court in the District of Columbia claiming the campaign is legal, in spite of two earlier injunctions the company obtained against the APA in 1990 and 1999 to stop the same sort of tactics. Now American has replied, saying the union's actions risk grounding planes and jeopardizing its ability to operate. The company further argued that Delta was granted a similar injunction to bar a no-overtime effort by the APA. The union insists the Delta situation was different and that there's no impact on commerce.

For our readers, the point is that working overtime can be either voluntary or compelled, unless there's a contractual commitment preventing or limiting extra work. The twist here is that the union wants some of its members to give up premium payments in the interest of making work available for others (or, more simply, to force the company to make concessions). Watch this blog for further developments in Allied Pilots Assn. v. American Airlines Inc., 1:08-CV-01335 (D.D.C.)

BusBoy Demands Sauce from Justin Timberlake's Restaurant and Other Recent FLSA Cases

2008-11-20T16:34:00.019-05:00

Not all activities related to business are declining these days, in fact, some areas are booming. More and more federal court judges are being kept busy by the ongoing tide of new FLSA cases. This week has brought FLSA attorneys and watchers some new cases to track, with a former busboy at Southern Hospitality, the New York City BBQ restaurant owned by Justin Timberlake, filing a compliant proposing a class action for violations of FLSA and New York State Department of Labor regulations. The complaint alleges that the restaurant failed to pay minimum wage or overtime and further withheld the tips automatically added to patron's bills on parties of six or more. The restaurant, and not the wait staff, allegedly received all or some of the automatic 20% gratuity for large parties. The complaint alleges this tip redistribution bilked busboys out of tips while overtime was routinely not paid on the busboys 10-hour shifts. The case is Felipe Santiago Ramales Individually and on Behalf of All Other Persons Similarly Situated v. Justin Timberlake, et al., case number 08-cv-9890 (U.S.D.C. S.D.N.Y. November 14, 2008).

A former security employee of Brink's Inc. filed a complaint in federal district court in the Southern District of Florida for allegedly FLSA violations and purporting to seek a class action. The plaintiff alleged that he and other similarly situated coworkers routinely worked over 60 hours a week, but were never compensated for more than 40 hours per week. The plaintiff was an hourly employee, who had worked for Brinks over nine years. The complaint broadly seeks unpaid overtime compensation, liquidated damages, costs and attorneys' fees on behalf of all similarly situated current and former employees. Click here to read the complaint in Hernandez v. Brink's Inc., case number 08-cv-23208 (U.S.D.C. S.D. Fla. Nov. 18, 2008).

The salesman selling Marriott International Inc. timeshares sued the company for overtime compensation alleging that Marriott misclassified the salespeople as exempt employees. While the plaintiff was employed by Marriott, he was paid a daily base wage, plus commissions and personal bonuses. The plaintiff routinely worked 50 hours per week, but prior to June 2007 was not paid for any overtime. The plaintiff was fired by Marriott approximately a month ago and now has sued on behalf of himself and other similarly situated timeshare salespeople who worked for Marriott for the three years prior to June 2007. The complaint seeks overtime compensation, liquidated damages and attorneys' fees. This case is analogous to the FLSA lawsuits brought against various pharmaceutical companies by their outside sales representatives and it will be interesting to watch whether the same defenses are raised and successful in litigation. Click here to read this case, Gibbs v. Marriott International, Inc., case number 08-cv-81373.

Like Marriott, McAfee Inc. is now facing a potential collective FLSA action by its sales force who are claiming that salespeople routinely work in excess of 40 hours per week without overtime compensation in violation of the FLSA. The plaintiff seeks to represent a class of all current and former sales force employees of McAfee in the past three years. This FLSA suit joins McAfee's ongoing backdating of stock options are current legal woes for the virus-protecting software giant. Click here to read the complaint filed in Thomas v. McAfee Inc., case number 08-cv-429 (U.S.D.C. E.D. Tex. Nov. 17, 2008).

These cases and other recently filed complaints confirm that business is booming for plaintiffs' law firms on FLSA compliance. They serve as a reminder that a compliance audit of labor practices on an annual basis is not only good practice, but also essential in today's legal climate.

Understanding TARP Audioconference - November 20

2008-11-13T13:15:00.003-05:00

Congress has approved the Emergency Economic Stabilization Act (EESA) to address the nation's recent financial crisis. But many of the details of that relief package remain a work in progress. Particularly in question is the Troubled Assets Relief Program (TARP), the $700 billion in "rescue" funding. How exactly will that money be used? Find out more about this topic during an audioconference entitled "Understanding TARP: Opportunities and Challenges for the Mortgage Market." The audiconference will be held on Thursday, November 20th from 3:00-4:30 p.m. ET.

Click here to learn more about this event.