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What a delight to read the Fifth Circuit Court of Appeals‘ recent opinion in Bin Hoa Le v. Exeter Financing Corp., 20-10377 (5th Cir. March 5, 2021).  A copy of the opinion is available HERE.  After affirming the district court’s summary judgment decision, Fifth Circuit Judge Don Willett goes on to address the fact that nearly 75% of the district court’s summary judgment record was “troublingly sealed from the public.”  The opinion goes on to address the Constitutional imperative of ensuring that court records be available to the public in all but the most exceptional circumstances (such as, for example, “protecting trade secrets or the identities of confidential informants”).  The opinion explains why the public’s access to judicial records is sacred to our democracy and to the legitimacy of our court system.  The opinion also explains that, because the parties to litigation are not sufficiently incentivized to safeguard the public interest, “the judge is the public interest’s principal champion. And when the parties are mutually interested in secrecy, the judge is the only champion.”

The opinion also criticizes the all-too-common practice of conflating the extremely strict standard applicable to sealing documents with the more lenient lenient standard of designating a document as confidential for discovery purposes.  Crucially, a “protective order” applicable to discovery must not be treated as a “sealing order” when filing court papers.  When this happens, “there is no sealing analysis — no reasons given, no authorities cited, no document-by-document inquiry . . . no grappling with public and private interests, no consideration of  less drastic alternatives . . . no assurance that the extent of sealing was congruent to the need.”

In writing blog entries, I sometimes try to quote the most important passage in an opinion.  But I cannot do that today, because almost every passage of this important opinion is notable and quotable and important.  I urge you to read the opinion and — for the sake of our democracy — ask yourself whether you’ve been too lenient in permitting documents to be filed under seal.  I surely am guilty as charged.  Too often, I don’t object when a corporate defendant files a document under seal.  I just “go with the flow,” believing that putting up a fight will upset the judge by making him/her do unnecessary work.  But, as Judge Willett explains, it is the judge’s job to ensure the transparency of judicial proceedings.  And it is our job to alert the judge when corporate defendants seek to improperly file documents under seal. -PW

On February 11, 2021, the U.S. House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law held a hearing entitled “Justice Restored: Ending Forced Arbitration and Protecting Fundamental Rights.”  The hearing addressed, among other things, the “FAIR Act,” which was recently introduced in the House and will make it far more difficult to companies to use “private arbitration agreements” to force workers and consumers to give up their right to pursue sue in court.  You can watch the hearing by clicking HERE.

 

Generally speaking, plaintiffs in the Third Circuit seeking “conditional certification” of an FLSA collective action are merely required to “make a ‘modest factual showing’ — something beyond mere speculation — to demonstrate a factual nexus between the manner in which the employer’s alleged policy affected him or her and the manner in which it affected the proposed collective action members.”   Halle v. West Penn Allegheny Health System Inc., 842 F.3d 215, 224 (3d Cir. 2016) (quoting Zavala v. Wal Mart Stores Inc., 691 F.3d 527, 536 n. 4 (3d Cir. 2012)).  Notwithstanding, FLSA defendants often argue that a “heightened” or “intermediate” standard of review should apply if discovery was conducted in advance of the plaintiff’s conditional certification motion.  The Third Circuit Court of Appeals has never endorsed such an approach, and the district courts have issued mixed decisions regarding both the general availability of the purported heightened/intermediate standard and the amount of discovery necessary to trigger the purported standard.  For a recent example of an opinion on which a district court refuses to apply the heightened/intermediate standard, you should read Western District of Pennsylvania Chief Magistrate Judge Cynthia Reed Eddy’s opinion in Fitch v. Giant Eagle Inc., 2020 U.S. Dist. LEXIS 201418 (W.D. Pa. Oct. 28, 2020).  Unfortunately, I am not able to find an internet link for this opinion, so you will need to get it off LEXIS.  Anyway, Judge Eddy provides a thoughtful explanation for the very limited circumstances in which the purported heightened/intermediate standard might apply.  Then, she refuses to apply the standard notwithstanding the completion of some depositions conducted during the pre-conditional certification discovery period.

I’ve noticed that many wage and hour lawyers have been talking and writing about the Fourth Circuit Court of Appeals‘ recent precedential opinion in Tom v. Hospitality Ventures LLC, 18-2509 (4th Cir. Nov. 24, 2020).  A copy of the opinion is available HERE.

In case you are too busy to read the opinion, the following is a quick summary of the legal rules expressed by the Court:  (1)  the “automatic gratuities” (e.g., customer required to leave 20%) at issue were not “tips” because the customer was not authorized to deviate from the required gratuity amount; (2) the automatic gratuities could possibly qualify as “commissions” under the Section 7(i) “retail sales” exemption; (3) even if the automatic gratuities are deemed commissions, they still must be counted as total compensation in determining whether the employer satisfies Section 7(i)’s requirement that “more than half [of the employee’s] compensation for a representative period (not less than one month) represents commissions;” (4) an employer violates the tip credit rules by distributing tip pool proceeds to restaurant employees whose customer contact is de minimis (adopting the viewpoint expressed by the Fifth and Sixth Circuits); and (5) an FLSA retalition claim requires and “adverse employment action.”  -PW

As most readers of this website know, the USDOL issued a Notice of Proposed Rulemaking indicating its intent to issue new interpretive guidance regarding the classification of workers as non-employee independent contractors under the FLSA.  You can read the Federal Register materials addressing the proposed rulemaking HERE.

Anyway, individuals wishing to make comments were required to do so by October 26, 2020.  Our firm opposes the proposed guidance on many grounds, including the fact that the guidance ignores U.S. Supreme Court precedent and contradicts precedential decisions from various U.S. Circuit Courts.

Our firm, working pro bono, helped out with h the comments submitted by the National Employment Law Project (NELP).  NELP’s extensive comments are worth reading and can be found HERE.

In addition, I filed my own comments on behalf of Winebrake & Santillo and our clients.  The pdf image of our comment is available HERE.  However, the following is what I wrote:

Dear Secretary Scalia and Ms. DeBisschop:

I write on behalf of myself and my law firm, Winebrake & Santillo, LLC (“W&S”), to urge the Department to withdraw the above-referenced proposed rule.  My comments are based on extensive experience litigating hundreds of FLSA actions – including many actions in which workers contend that they have been misclassified as “independent contractors” – in federal courts within the Third Circuit, which covers Delaware, New Jersey, and Pennsylvania.

As discussed below, the proposed rule: (i) is premised on the incorrect notion that the current independent contractor test “has proven to be unclear and unwieldy,” 85 F.R. 60605, and (ii) will not be entitled to deference within the Third Circuit.

A.  Our firm’s FLSA experience.

Since its founding in January 2007, W&S has exclusively represented employees in employment rights litigation.  W&S is a pure contingency fee law firm and is “at risk” in every matter it handles.  W&S never requires a client to pay an hourly fee or retainer.

At the federal district courts, W&S has resolved collective and individual FLSA lawsuits that have benefitted thousands of workers.  At the Third Circuit Court of Appeals, we have argued cases resulting in precedential FLSA opinions:  See Mazzarella v. Fast Rig Support, LLC, 823 F.3d 786 (3d Cir. 2016); Resch v. Krapf’s Coaches, Inc., 780 F.3d 869 (3d Cir. 2015); McMaster v. Eastern Armored Services, 780 F.3d 167 (3d Cir. 2015); Knepper v. Rite Aid Corp., 675 F.3d 249 (3d Cir. 2012).

B.  The Third Circuit test for determining whether a worker is an employee or an independent contractor is not “unclear.”

In the NPRM, the Department asserts that the “multifactor test, as currently applied, has proven to be unclear and unwieldy.”  85 F.R. 60605.  This is incorrect.  As discussed below, the pertinent multi-factor test is abundantly clear throughout the Third Circuit.

In 1985, our Court of Appeals adopted a six-factor “economic realities” test.  See Donovan v. DialAmerica Marketing, Inc., 757 F.2d 1376, 1382-83 (3d Cir. 1985).  The six factor include:  “(1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; (4) whether the service rendered required a special skill; (5) the degree of permanence of the working relationship; [and] (6) whether the service rendered is an integral part of the alleged employer’s business.”  Id. at 1382.

In the ensuing 35 years, DialAmerica’s six-factor test has been reaffirmed in at least three precedential opinions, see Razak v. Uber Technologies, Inc., 951 F.3d 137, 142-43 (3d Cir. 2020); Verma v. 3001 Castor, Inc., 937 F.3d 221, 229-30 (3d Cir. 2019); Martin v. Selker Brothers, Inc., 949 F.2d 1286, 1293 (3d Cir. 1991), and in various non-precedential opinions, see, e.g., Safarian v. American DG Energy, Inc., 729 Fed. Appx. 168, 173 (3d Cir. 2018); Yu v. McGrath, 597 Fed. Appx. 62, 66 (3d Cir. 2014).

Importantly, our Court of Appeals has repeatedly explained that the six-factor DialAmerica test stems directly from the FLSA’s statutory text and Supreme Court decisions – such as Rutherford Foods Corp. v. McComb, 331 U.S. 722 (1947) – interpreting such text.  See Razak, 951 F.3d at 142; Selker Brothers, 949 F.2d at 1293; DialAmerica, 757 F.2d at 1382.

In addition, in discussing the six-factor DialAmerica test, our Court of Appeals has repeatedly instructed that no particular factor is entitled to special weight.  This principle has been in place  for 35 years, see DialAmerica, 757 F.2d at 1382 (“neither the presence nor absence of any particular factor is dispositive and that courts should examine the circumstances of the whole activity”) (internal quotation omitted), and was reiterated as recently as March 2020, Razak, 951 F.3d at 142 (same).

In sum, DialAmerica’s six-factor economic reality test is not “unclear” within the Third Circuit.  On the contrary, the test is firmly rooted in Third Circuit jurisprudence and has been consistently utilized by the Court of Appeals, district court judges, lawyers, workers, and businesses for 35 years.

C.  The Third Circuit test for determining whether a worker is an employee or an independent contractor is not “unwieldy.”

Nor is DialAmerica’s six-factor test “unwieldy.”  At the Circuit Court level, the test has been efficiently and successfully applied to a wide variety of jobs ranging from homeworkers who research telephone numbers, see DialAmerica, supra, to gas station operators, see Selker Brothers, supra, to topless dancers, see Verma, supra, to Uber drivers, see Razak, supra.

Meanwhile, district courts within the Third Circuit have successfully applied the six-factor test to hundreds of different fact patterns.  See, e.g., Pendleton v. JEVS Human Services, Inc., 2020 WL 2793131, 2020 U.S. Dist. LEXIS 93911 (E.D. Pa. May 29, 2020); Jimenez v. Best Behavioral Healthcare, Inc., 391 F. Supp. 3d 380 (E.D. Pa. 2019); Acosta v. Heart II Heart, LLC, 2019 WL 5197329, 2019 U.S. Dist. LEXIS 178260 (W.D. Pa. Oct. 15 2019); Cherichetti v. PJ Endicott Co., 906 F. Supp. 2d 312 (D. Del. 2012).  Moreover, the Secretary has litigated some of these cases without any apparent difficulty.  See, e.g., Heart II Heart, supra.

To my knowledge, no one has ever suggested that DialAmerica’s six-factor test is “unwieldy” or especially difficult to apply or understand.  So it really does appear that the Department’s proposed rule is a solution in search of a problem.  Here in the Third Circuit, its implementation will cause – rather than mitigate – uncertainty.

D.  The proposed rule will not be entitled to deference within the Third Circuit.

The Third Circuit has recognized that the Department’s interpretive regulations are merely entitled to Skidmore deference.  See Secretary U.S. Dept. of Labor v. American Future Systems, Inc., 873 F.3d 420, 426-28 (3d Cir. 2017).  As such, the proposed independent contractor rule will be followed only to the extent it has the “power to persuade.”  Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

Here in the Third Circuit, the proposed rule is likely to fail any Skidmore analysis.  This is so for at least three independent reasons.

First, the five-factors described in Proposed § 795.105(c) simply do not match up with the six DialAmerica factors.  In essence, the Department is trying to “re-write” existing and binding Third Circuit precedent through an interpretive regulation.  This is especially troubling where, as here, the Third Circuit precedent stems directly from an interpretation of the statutory text.

Second, as discussed in Section B, our Court of Appeals has repeatedly explained that, in applying the six-factor DialAmerica test, “neither the presence nor absence of any particular factor is dispositive and that courts should examine the circumstances of the whole activity.”  DialAmerica, 757 F.2d at 1382 (internal quotations omitted); accord Razak, 951 F.3d at 142 (same).  The proposed rule violates this principle by focusing on two “core factors” – the “nature and degree of the [worker’s] control over the work” and the worker’s “opportunity for profit and loss” – that are purportedly “the most probative” and entitled to “greater weight in the analysis.”  Proposed § 795.105(c).  None of this can be squared with Third Circuit precedent.

Third, Proposed § 795.110 – entitled “Primacy of actual practice” – conflicts with binding Third Circuit authority with respect to the “control” factor.  Specifically, under Third Circuit law, we focus on “the alleged employer’s right to control the manner in which the work is to be performed.”  DialAmerica, 757 F.2d at 1382 (emphasis supplied).  As the Court of Appeals recently instructed:  “Actual control of the manner of work is not essential; rather, it is the right to control which is determinative.”  Razak, 951 F.3d at 145.  Proposed § 795.110 cannot be squared with this clear instruction.

Thank you for your consideration of the above comments.  -PW

Frequently restaurant servers are required to spend a large percentage of their time performing sidework instead of waiting on customers.  Examples of sidework tasks include: rolling silverware; washing dishes, cooking and preparing food, taking used dishes from the dining room to the back of the restaurant, bringing clean dishes from the back of the restaurant to the dining room, cutting fruit, restocking condiments, and cleaning the restaurant.

Federal courts have regularly held that when a server spends more than 20% of his/her time performing these tasks, they should be paid the full minimum wage of $7.25/hr. for this time and not the “tipped minimum wage” of $2.13/hr. (or $2.83/hr. in Pennsylvania).  Often restaurants will argue that even if a server spends more than 20% of their time performing impermissible sidework, there unpaid wages are limited to the tip credit (or difference between $7.25/hr. and the tipped minimum wage) for those hours above the 20% threshold.  However, three Pennsylvania district courts have recently held otherwise and indicated that a server must be paid the full minimum wage for all time that they spend performing such sidework:

Belt v. P.F. Chang’s China Bistro, Inc., 401 F. Supp. 3d 512, 538 (E.D. Pa. 2019) (“When, however, that employee spends more than twenty percent of his or her time performing untipped related work, they are no longer a tipped employee during any of the time they spend performing untipped related work. In essence, they become a dual jobs employee, and the employer is no longer permitted to take the tip credit for any of the hours the employee spends performing untipped related work.”) (emphasis supplied);

Reynolds v. Chesapeake & Del. Brewing Holdings, LLC, 2020 U.S. Dist. LEXIS 83633, at *9 (E.D. Pa. May 12, 2020) (“Therefore, to the extent that [Plaintiff] spent more than 20% of her time performing untipped side work in a workweek, Defendants were not entitled to take a tip credit for any of the hours [Plaintiff] spent performing side work.”) (emphasis supplied);

Williams v. Bob Evans Rests., LLC, 2020 U.S. Dist. LEXIS 145852, at *33-34 (W.D. Pa. Aug. 13, 2020) (“In analyzing the temporal language in the Dual Jobs Regulation and noting that the DOL uses a 20% threshold in other similar FLSA contexts, the Court concludes, in concurrence with its sister courts, that an employee who spends more than twenty percent of their hours performing non-tipped, related work, can be found to have ceased to be a tipped employee and become a dual-jobs employee such that they must be paid full minimum wage for hours spent performing those duties.”) (emphasis supplied).

If you, a friend, or a family member has worked as a server and would like a free and confidential consultation, give us a call at 215-884-2491.  One of our attorneys would be happy to speak with you.

Winebrake & Santillo, LLC has been recognized by U.S. News-Best Lawyers® “Best Law Firms” with a First Tier ranking on the 2021 Best Law Firms List in Philadelphia. The firm received these first tier rankings in both “Employment Law – Individuals” and “Litigation-Labor and Employment”.  In addition, Winebrake & Santillo was also ranked nationally for “Litigation-Labor and Employment.”  This is the third year that the firm has received this national recognition.

Some of the Nation’s biggest FLSA lawsuits involve the overtime rights of “distributors” who work in the bread and snack food industries.  These distributors are usually required to form closely-held corporations (usually LLCs) and sign contracts classifying them as non-employee “independent contractors.”  Of course, whether these distributors really are independent contractors depends on an assessment of their employment under the FLSA’s multi-factor “economic reality” test.  See, e.g., Razak v. Uber Technologies, Inc., 951 F.3d 137 (3d Cir. 2020).  A putative employer cannot escape scrutiny under the economic reality test by simply making a worker sign an independent contractor agreement.  That would put form over substance.

Anyway, today’s blog is not about the economic reality test.  Instead, let’s assume the food distributor is deemed an employee under the FLSA.  The next step will be to decide whether, as an employee, he/she is entitled to overtime pay.  The employer is likely to argue that the distributor is exempt under the FLSA’s motor carrier exemption, which covers employees “with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service . . . .”  See 29 U.S.C. 213(b)(1).  In response, the distributor is likely to argue that he/she falls outside the confines of the motor carrier exemption due to the SAFTEA-LU Technical Corrections Act of 2008, which, among other things, amended the FLSA’s motor carrier exemption to exclude employees “who perform[] duties on motor vehicles weighing 10,000 pounds or less.”  See Public Law 110-244 at sec. 306(c)(3).  We will call this provision the “TCA small vehicle exception.”  For a good discussion of the TCA small vehicle exception, you should read the Third Circuit’s opinion in a case handled by our firm:  McMaster v. Eastern Armored Services, Inc., 780 F.3d 167 (3d Cir. 2015).

All of the above brings us to our featured decision:  Noll v. Flowers Foods, Inc., 1:15-cv-00493-LEW (D. Me. Aug. 3, 2020).  In Noll, Maine District Court Judge Lance E. Walker addressed whether the TCA’s small vehicle exception applies if the bread distributor’s uses his personal, sub-10,000 vehicle to “‘pull[] stales’ from the [grocery store] shelves and transport[] them to another location in a small vehicle.”  The Judge held that such activity does bring the distributor into the TCA small vehicle exception’s reach:  “Here, the transportation of stales, when performed in a small vehicle, comes within the TCA’s small vehicle exception because it substantially affects interstate commerce, even though it is entirely intrastate transportation.”  Thus, a distributor who uses his/her personal vehicle to “pull stales” can be eligible for overtime pay.  -PW

 

As we have discussed over the years, several states have implemented an “ABC Test” for determining whether a worker is an “employee” rather than an “independent contractor.”  These ABC Tests make it easier for workers to demonstrate that they are “employees” entitled to many important workplace benefits and protections.  For example, employees generally are entitled to overtime pay when they work over 40 hours per week and are protected against many state laws limit the type of wage deductions that can be made to their pay.

The Illinois Wage Payment and Collection Law (“IWPCL”) contains a good example of an ABC Test.  As the Seventh Circuit Court of Appeals has observed:  “The IWPCA provides a broad definition of what constitutes an ‘employee’ using a three-prong test commonly referred to as an ABC test.”  Costello v. BeavEx, Inc., 810 F.3d 1045, 1050 (7th Cir. 2016).  Under this test, “all individuals are considered to be employees of an employer, unless the employer can prove all three prongs of the independent-contractor exemption.”  Id. at 1059.  The employer must prove that the worker is an individual:

  • who has been and will continue to be free from control and direction over the performance of his work, both under his contract … and in fact; and
  • who performs work which is either outside the usual course of business or is performed outside all of the places of business of the employer …; and
  • who is in an independently established trade, occupation, profession or business.

Id. (citing 820 ILCS 115/2).  Crucially, “because the test is conjunctive, if [S-L] cannot satisfy just one prong of the test, its [distributors] must be treated as employees.”  Costello, 810 F.3d at 1059 (emphasis supplied).

Anyway, the main point of this blog is to tell you that the NATIONAL EMPLOYMENT LAW PROJECT recently posted a great video that describes the ABC Test.  You can check out the video HERE.  -PW

I just read the Second Circuit Court of Appeals important decision in Scott v. Chipotle Mexican Grill, Inc., 954 F.3d 502 (2d Cir. 2020), which held, among other things, “that the requirements for certifying a class under Rule 23 are unrelated to and more stringent than the requirements for ‘similarly situated’ employees to proceed in a collective action under [FLSA] § 216(b).”  Id. at 520.  I think Scott certainly is going to be one of 2020’s ten most important FLSA decisions.  Hopefully, the decision will help bring an end to employers’ misguided (but persistent) attempts to graft Rule 23 principles onto FLSA collective actions.

Reading Scott brings to mind another area in which FLSA collective actions are met with less stringent judicial oversight than Rule 23 class actions:  Settlement Approval.  Specifically, various courts have observed that “[t]he requirements for approval of a FLSA collective action settlement are less stringent . . . because persons who do not opt-in as parties to the FLSA collective action are not bound by the settlement.”  Acuna v. So. Nev. T.B.A. Supply Co., 324 F.R.D. 367, 379 (D. Nev. 2018); accord Bozak v. FedEx Ground Package System, Inc., 2014 U.S. Dist. LEXIS 106042, *7 (D. Conn. (July 31, 2014) (“the exacting standards for approval of a class action settlement under Rule 23 do not apply to an FLSA settlement under the collective action provisions of 29 U.S.C. § 216(b)”); Willix v. Healthfirst, Inc., 2011 U.S. Dist. LEXIS 21102, *13 (E.D.N.Y. Feb. 18, 2011) (“The standard for approval of an FLSA settlement is lower than for a Rule 23 settlement because an FLSA settlement does not implicate the same due process concerns as does a Rule 23 settlement.”); see also Prena v. BMO Financial Corp., 2015 U.S. Dist. LEXIS 65474, *1-2 (N.D. Ill. May 15, 2015) (explaining that approval of FLSA collective settlement does not entail Rule 23’s “two-step” process of preliminary approval followed by notice and final approval); Collins v. Sanderson Farms, Inc., 568 F. Supp. 2d 714, 719 (E.D. La. 2008) (“The primary focus of the Court’s inquiry in determining whether to approve the settlement of a FLSA collective action is not, as it would be for a Rule 23 class action, on due process concerns, . . . but rather on ensuring that an employer does not take advantage of its employees in settling their claim for wages.”).  Perhaps you will find these citations useful next time you seek approval of a “pure” FLSA collective settlement.  -PW

Our firm has the privilege of representing a class of Amazon.com warehouse workers who seek compensation under the Pennsylvania Minimum Wage Act (“PMWA”) for time associated with mandatory, anti-theft security screenings that Amazon subjected the warehouse workers to at the end of their shifts.  In opposing the lawsuit, one of Amazon’s arguments is that the time is non-compensable because it is de minimis.

The case wound up at the Sixth Circuit Court of Appeals, which certified two questions to the Pennsylvania Supreme Court.  One of those questions asks whether the de minimis doctrine apples to PMWA claims.  Specifically:  “Does the doctrine of de minimis non carat lex, as described in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946) and Sandifer v. U.S. Steel Corp., 571 U.S. 220 (2014), apply to bar claims brought under the Pennsylvania Minimum Wage Act, 43 P.S. §§ 333.101-333.115?”

Fortunately, the Pennsylvania Supreme Court agreed to answer the above question.  The appeal is pending and is styled Heimbach v. Amazon.com, Inc., 43 EAP 2019.  Our firm has filed an opening brief on behalf of the warehouse workers.  Of course, we argue that the answer to the above question is “No.”

Our full argument to the Supreme Court is reproduced below:

1. The FLSA’s de minimis rule.

In federal FLSA litigation, the caselaw and the federal Department of Labor (“DOL”) have recognized a de minimis rule.  The rule has its origins in Anderson v. Mount Clemens Pottery Co., a 1946 opinion in which the U.S. Supreme Court held that, under the FLSA, compensable pay included, inter alia, “time necessarily spent by the employees in walking to work on the employer’s premises” because “[s]uch time was under the complete control of the employer.”  328 U.S. 680, 691 (1946).  The Anderson Court also explained that, when an employer fails to keep “proper and accurate records” of an employee’s work time, an employee is merely required to “produce[] sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.”  Id. at 687.  Finally, the Anderson Court described a “de minimis rule” that applied to FLSA claims for uncompensated time:

We do not, of course, preclude the application of a de minimis rule where the minimum walking time is such as to be negligible.  The workweek contemplated by [FLSA] § 7(a) must be computed in light of the realities of the industrial world.  When the matter in issue concerns only a few seconds or minutes of work beyond the scheduled working hours, such trifles may be disregarded.  Split-second absurdities are not justified by the actualities of working conditions or by the policy of the Fair Labor Standards Act.  It is only when an employee is required to give up a substantial measure of his time and effort that compensable working time is involved.  The de minimis rule can doubtless be applied to much of the walking time involved in this case, but the precise scope of that application can be determined only after the trier of facts makes more definite findings as to the amount of walking time in issue.

Id. at 692.

In 1961, the federal Department of Labor (“DOL”) enacted a regulation describing the FLSA’s de minimis rule.  See 26 FR 195 (Jan. 11, 1961).  As indicated below, the DOL takes a restrictive view of the doctrine:

In recording working time under the [FLSA], insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded.  The courts have held that such trifles are de minimis. (Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946))  This rule applies only where there are uncertain and indefinite periods of time involved of a few seconds or minutes duration, and where the failure to count such time is due to considerations justified by industrial realities.  An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him.  See Glenn L. Martin Nebraska Co. v. Culkin, 197 F.2d 981, 987 (C.A. 8, 1952), cert. denied, 344 U.S. 866 (1952), rehearing denied, 344 U.S. 888 (1952), holding that working time amounting to $1 of additional compensation a week is “not a trivial matter to a workingman,” and was not de minimis; Addison v. Huron Stevedoring Corp., 204 F.2d 88, 95 (C.A. 2, 1953), cert. denied 346 U.S. 877, holding that “To disregard workweeks for which less than a dollar is due will produce capricious and unfair results.” Hawkins v. E. I. du Pont de Nemours & Co., 12 W.H. Cases 448, 27 Labor Cases, para. 69,094 (E.D. Va., 1955), holding that 10 minutes a day is not de minimis.

29 C.F.R. 785.47; see also 26 FR 195 (Jan. 11, 1961).

The U.S. Supreme Court would not address the FLSA’s de minimis rule again until a 2014 opinion entitled Sandifer v. U.S. Steel Corp.  There, the Court held that, under FLSA § 3(o) – which makes certain washing and clothes-changing activities non-compensable when performed by unionized employees – the employees’ FLSA claims were strictly limited to time spent putting on safety glasses, earplugs, and a respirator.  See 571 U.S. 220, 226-33 (2014).  Then, in a somewhat confusing paragraph, the Court stated that the de minimis rule did not apply to lawsuits arising under FLSA Section 3(o):

We doubt that the de minimis doctrine can properly be applied to the present case.  To be sure, Anderson included “putting on aprons and overalls” and “removing shirts” as activities to which “it is appropriate to apply a de minimis doctrine.” Id., at 692-693, 66 S. Ct. 1187, 90 L. Ed. 1515.  It said that, however, in the context of determining what preliminary activities had to be counted as part of the gross workweek under §207(a) of the Fair Labor Standards Act.  A de minimis doctrine does not fit comfortably within the statute at issue here, which, it can fairly be said, is all about trifles – the relatively insignificant periods of time in which employees wash up and put on various items of clothing needed for their jobs.  Or to put it in the context of the present case, there is no more reason to disregard the minute or so necessary to put on glasses, earplugs, and respirators, than there is to regard the minute or so necessary to put on a snood.  If the statute in question requires courts to select among trifles, de minimis non curat lex is not Latin for close enough for government work.

Id. at 234 (emphasis in original).  In addition, the Sandifer Court recognized the restrictive nature of the DOL’s de minimis regulation:

We note, moreover, that even in that context, the current regulations of the Labor  Department apply a stricter de minimis standard than Anderson expressed.  They specify that “[a]n employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him.”  29 CFR § 785.47.

Id. at 234 n. 8.

Finally, the Third Circuit Court of Appeals addressed the FLSA’s de minimis rule in a 2007 opinion entitled De Asencio v. Tyson Foods, Inc., which involved poultry workers’ FLSA claims seeking compensation for time spent “donning, doffing and washing” at the beginning and end of the shift.  See 500 F.3d 361, 363 (3d Cir. 2007).  The De Asencio Court cited favorably to the restrictive language in the DOL’s de minimis regulation.  See id. at 374 (quoting 29 C.F.R. § 785.47).  The Court also listed three considerations that should be considered in applying any de minimis rule:  “‘(1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work.’”  Id. (quoting Lindow v. United States, 738 F.2d 1057, 1063 (9th Cir. 1984)).  Finally, the Court cited favorably to the following language:  “[W]e will consider the size of the aggregate claim.  Courts have granted relief for claims that might have been minimal on a daily basis but, when aggregated, amounted to a substantial claim.”  Id. at 374-75 (quoting Lindow, 738 F.2d at 1063).

2. Neither the PMWA nor its regulations establish a de minimis rule 

As observed in the Caiarelli dissent, there is no “established ‘de minimis’ rule under the PMWA.”  Caiarelli, 46 A.3d at 648; see also Appx. C at 9 (“It appears to us that no Pennsylvania case other than Caiarelli addresses the de minimis doctrine in the context of the PMWA.”).

3. The PMWA’s plain language precludes imposition of a de minimis rule.

As previously noted, in interpreting Pennsylvania statutes and regulations, the plain language “is paramount.”  Schappel, 934 A.2d at 1187 (Pa. 2007); accord 1 P.S. § 1921(b).  So we must look to the PMWA’s text, which requires employers to pay employees “for all hours worked.”  43 P.S. § 333.104(a) (emphasis supplied).  Moreover, the PMWA’s overtime pay regulation requires that overtime-eligible employees receive time and one-half overtime pay for “all hours worked in excess of 40 hours in a workweek.”  34 Pa. Code § 231.41 (emphasis supplied).

The FLSA’s de minimis rule – which allows for some amounts of time to be excluded from hours worked – simply cannot be reconciled with the PMWA’s plain language requirement that employees be paid “for all hours worked.”  The word “all” means, inter alia, “the whole amount” and “as much as possible” and “the greatest possible.”  Webster’s Third New International Dictionary (1993 ed.) 54.

This brings an end to the analysis.  See Martin, 905 A.2d at 443 (this Court “will resort to other considerations to discern legislative intent only when the words of the statute are not explicit”).  The FLSA’s de minimis rule contradicts the PMWA’s unambiguous statutory and regulatory language and, as such, has no place in PMWA litigation.  Accord Troester v. Starbucks Corp., 421 P.3d 1114, 1120 (Cal. 2018) (refusing to adopt de minimis rule because, inter alia, rule violates California Wage Order requiring employees to be paid for “any work” and “all hours worked”).

4. Even if this Court looks beyond the PMWA’s plain language, further analysis confirms that the de minimis rule should not be imposed on PMWA claims.

Perhaps this Court will choose to look beyond the PMWA’s plain statutory and regulatory language.  If it does, several previously discussed principles of statutory construction will apply.  These principles include the Court’s instructions that: (i) “‘it is not for the courts to add, by interpretation, to a statute, a requirement which the legislature did not see fit to include,’” Piper Group, 30 A.3d at 1092 (quoting Rieck Investment Corp., 213 A.2d at 282); (ii) “one must listen attentively to both what a statute says, and to what it does not say,” Pa. Medical Society, 39 A.3d at 283; accord Piper, 30 A.3d at 1092; and (iii) courts “presume[] that when enacting legislation, the General Assembly is familiar with extant law.”  Int’l Ass’n of Firefighters, 999 A.2d at 566 (citing White Deer Twp., 985 A.2d at 762); see also Birth Centers, 787 A.2d at 387.

The above principles of construction are important because neither the PMWA nor its accompanying regulations make any mention of the de minimis rule.  As discussed below, the judiciary should not fill this void:

First of all, when the PMWA was passed and the PMWA regulations were drafted, the FLSA’s de minimis rule was well-established, having been featured in the U.S. Supreme Court’s 1946 Anderson opinion and “codified” in the federal DOL’s 1961 regulations.  See pp. 33-35 supra.  Surely, the General Assembly and Secretary have been aware of the FLSA’s de minimis rule.  See Troester, 421 P.3d at 1120 (“Although Anderson has been the law for 70 years and has been incorporated into the Code of Federal Regulations for over 50 years, neither the Labor Code statutes nor any wage order has been amended to recognize a de minimis exception.”).

Moreover, in 2012, Justice Todd and former Justice McCafferty publicly asserted that there is no “established ‘de minimis’ rule under the PMWA.”  Caiarelli, 46 A.3d at 648.  Yet, in the eight ensuing years, the General Assembly still has not adopted a de minimis rule, and the Secretary still has not promulgated a de minimis regulation.  This is so even though the General Assembly has demonstrated a willingness to amend the PMWA in response to other judicial decisions.  See, e.g., LeClair v. Diakon Lutheran Social Ministries, 2013 Pa. Dist. & Cnty. Dec. LEXIS 1, *8 (Pa. Com. Pl., Lehigh Cty. Jan. 14, 2013) (discussing 2012 PMWA amendments passed in response to court decisions).

Finally, the General Assembly’s and Secretary’s silence regarding the de minimis rule is even more significant when one considers that, in other contexts, the General Assembly and Secretary have seen fit to copy other FLSA provisions verbatim.  E.g., compare 43 P.S. § 333.105(a)(5) with 29 U.S.C. § 213(a)(1); compare 34 Pa. Code § 231.43(b) with 29 C.F.R. § 778.112; compare 34 Pa. Code § 231.43(1)-(7) with 29 U.S.C. § 207(e)(1)-(7).  As Judge Bissoon observed in another PMWA action, if the Department of Labor & Industry wanted to copy an FLSA regulation into the Pennsylvania Code, “it certainly knew how to do so.”  Foster v. Kraft Foods Global, Inc. 285 F.R.D. 343, 345 (W.D. Pa. 2012).

In sum, it is not for this Court to impose on Pennsylvania workers a substantive limitation on their PMWA right to be paid for “all hours worked” where neither the General Assembly nor the Secretary has chosen to do so through the formal legislative or rulemaking procedures.

5. The de minimis rule also contradicts the public policy underlying the PMWA.

Analysis of the public policy underlying the PMWA is unnecessary where, as here, the de minimis rule’s inapplicability can be determined based on the statutory and regulatory text.  See, e.g., Martin, 905 A.2d at 443 (this Court “will resort to other considerations to discern legislative intent only when the words of the statute are not explicit”).  Notwithstanding, and as discussed below, the PMWA’s policy goals are not furthered by a de minimis rule.

As discussed at pages 20-22 supra, the public policy underlying the PMWA is profoundly pro-employee.  See, e.g., Chevalier, 220 A.3d at 1055 (“In enacting the PMWA, the General Assembly did not mince words in stating its purpose and fervently indicating its intent to use the Commonwealth’s police power to increase employee wages.”).  So the PMWA must be “liberally construed to effect th[is] object and to promote justice.”  1 P.S. § 1928(c).

The de minimis rule cannot be squared with the PMWA’s policy goals.  At its core, the rule requires workers – rather than employers – to absorb the economic cost of otherwise compensable “work.”  This is unjust.  Why, for example, should warehouse workers like Mr. Heimbach and Ms. Salasky be shortchanged just because their multi-billion-dollar employer views security screening time as “insignificant” or “de minimis” or not worth measuring?  If, as Anderson states, the de minimis doctrine really is about “trifles,” shouldn’t the company – rather than the hourly worker – be responsible for the trifles?

In Troester, the California Supreme Court put it this way:  “Nor is it clear why, when it is difficult to keep track of time worked, the employee alone should bear the burden of that difficulty.”  Troester, 421 P.3d at 1123.  After all, “employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring worktime.”  Id. at 1125.  Thus, the Court “decline[d] to adopt a rule that would require the employee to bear the entire burden of any difficulty in recording regularly occurring worktime.”  Id.  The Court held:

In light of the wage order’s remedial purpose requiring a liberal construction, its directive to compensate employees for all time worked, the evident priority it accorded that mandate notwithstanding customary employment arrangements, and its concern with small amounts of time, we conclude that the de minimis doctrine has no application under the circumstances presented here.

Id.

The same can be said in Pennsylvania.  Although this Court is called upon to answer a question of law, the disputed facts underlying the instant lawsuit exemplify the “real-life” context in which the de minimis rule is invoked by employers.  As summarized at pp. 7-8 supra, Heimbach asserts that Amazon’s mandatory security screenings resulted in unpaid time averaging 8.02 minutes per day and totaling 67.75 hours; Salasky asserts that the screenings resulted in unpaid time averaging 4.38 minutes per day and totaling 9.46 hours; and the putative class asserts that the screenings resulted in unpaid time averaging 21 minutes per week per class member, totaling 12,343,546 (or 205,725 hours), and costing workers over $2 million in unpaid overtime wages.  As in Troester, “[w]hat [Amazon] calls ‘de minimis’ is not de minimis at all to many ordinary people who work for hourly wages.”  Troester, 421 P.3d at 1125.

In Pennsylvania – as in California – the de minimis rule cannot be squared with the pro-employee policies underlying our state’s wage and hour laws.

6. If this Court endorses a de minimis rule for PMWA claims, the rule should be severely restricted.

In FLSA litigation, some federal courts have stretched the de minimis rule well beyond any reasonable limits.  For example, some judges have made sweeping assertions that any work totaling less than 10 minutes per day is de minimisSee, e.g., Hesseltine v. Goodyear Tire & Rubber Co. 391 F. Supp. 2d 509, 519 (E.D. Tx. 2005) (“Plaintiffs’ claims for ten minutes or less are de minimis as a matter of law.”).[1]  Amazon referenced this purported 10-minute threshold at the Kentucky District Court.  See R.116a.  Such an arbitrary “10-minute rule” is profoundly unfair and would cost a full-time employee making $15/hour over $18 in wages per week ($15 X 1.5 X .8333 hours).  Surely, such rules cannot be squared with this Commonwealth’s tradition of workplace justice.

However, if this Court decides to endorse a PMWA de minimis rule, it should restrict the rule so that it is not abused by employers and misapplied by trial court judges in contravention the PMWA’s policy goals.  The following restrictions would be warranted:

First, the de minimis rule should not apply to class action lawsuits.  After all, the whole purpose of the class action device is “to provide[] small claimants with a method of obtaining redress for claims which otherwise would be too small to warrant individual litigation.”  Bell v. Beneficial Consumer Discount Co., 348 A.2d 734, 737 (Pa. 1975); see also Kelly v. County of Allegheny, 546 A.2d 608, 612-13 (Pa. 1988) (class action rules reflect “longstanding public policy of this Commonwealth to permit the aggregation of small claims which otherwise could not be litigated in individual actions”); see, e.g., Braun v. Wal-Mart Stores, Inc., 106 A.2d 656 (Pa. 2014) (affirming class action that enabled thousands of Pennsylvania workers to recover wages associated with missed breaks).  Thus, as the Troester Court explained:

the modern availability of class action lawsuits undermines to some extent the rationale behind a de minimis rule with respect to wage and hour actions.  The very premise of such suits is that small individual recoveries worthy of neither the plaintiff’s nor the court’s time can be aggregated to vindicate an important public policy.

421 P.3d at 1123-24.

The above reasoning makes good sense and is entirely consistent with this Court’s class action jurisprudence.  See Kelly, 546 A.2d at 613 (in class action where class member payments averaged $13.61, Court observed: “A class action on behalf of over 10,000 public employees who allege that they have been wrongfully subjected to a 25% charge against their sick benefits by their employer is not ‘trivial’ or de minimis.”).

Second, when a group of workers seeks unpaid wages, the de minimis rule should apply only if the group’s aggregate uncompensated time is trivial.  Some federal courts have taken this approach to the FLSA’s de minimis rule. See, e.g., Aguilar v. Management & Training Corp., 948 F.3d 1270 (10th Cir. 2020); Bagoue v. Developmental Pathways, Inc., 2019 WL 4597869, 2019 U.S. Dist. LEXIS 162007 (D. Colo. Sept. 23, 2019).

Third, when an individual employee seeks unpaid wages based on a recurring practice, the de minimis rule should apply only if the individual employee’s aggregate uncompensated time is trivial.  See, e.g., 29 C.F.R. § 785.47 (“An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him.”).  As the Troester Court explained:

An employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine.  As the facts here demonstrate, a few extra minutes of work each day can add up.  According to the Ninth Circuit, Troester is seeking payment for 12 hours and 50 minutes of compensable work over a 17-month period, which amounts to $ 102.67 at a wage of $ 8 per hour. That is enough to pay a utility bill, buy a week of groceries, or cover a month of bus fares.  What Starbucks calls “de minimis” is not de minimis at all to many ordinary people who work for hourly wages.

Id.

The facts underlying this appeal demonstrate the same point.  While the parties vigorously dispute the amount of uncompensated time associated with the mandatory security screenings, “no party disputes that [Amazon] did not compensate their employees for the time it took to wait in line for and undergo these security screenings.”  Appx. C at 3.  Thus, even if, as Amazon suggests, the time associated with the screenings averaged only 3 minutes per shift (and, to be clear, Heimbach/Salasky contend the average times exceed 3 minutes), Heimbach, who Amazon claims worked 494 separate shifts, see R.95a-96a, would have incurred a total of 1,482 screening time minutes (494 shifts X 3 minutes), which translates to 24.7 hours.

Fourth, any employer invoking the de minimis rule should be required to definitively prove that the uncompensated time is incapable of being measured or estimated.  As previously discussed, the FLSA’s de minimis rule originated in the U.S. Supreme Court’s’ 1946 Anderson opinion.  See pp. 33-34 supra.  However, as recognized in Troester,

many of the problems in recording employee worktime discussed in Anderson 70 years ago, when time was often kept by punching a clock, may be cured or ameliorated by technological advances that enable employees to track and register their worktime via smartphones, tablets, or other devices.  We are reluctant to adopt a rule purportedly grounded in “the realities of the industrial world” (Anderson, supra, 328 U.S. at p. 692) when those realities have been materially altered in subsequent decades.

421 P.3d at 1124.  The Troester Court further observed:

We recognize that one of the main impetuses behind the de minimis doctrine in wage cases is “the practical administrative difficulty of recording small amounts of time for payroll purposes.”  (Lindow, supra, 738 F.2d at p. 1062; see 29 C.F.R. § 785.47 (2018) [insignificant periods of time “which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded”].)  But employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring worktime. . . .  Moreover, as noted, technological advances may help with tracking small amounts of time. An employer may be able to customize and adapt available time tracking tools or develop new ones when no off-the-shelf product meets its needs.  And even when neither a restructuring of work nor a technological fix is practical, it may be possible to reasonably estimate worktime – for for example, through surveys, time studies, or . . . a fair rounding policy – and to compensate employees for that time.  Under the circumstances of this case, we decline to adopt a rule that would require the employee to bear the entire burden of any difficulty in recording regularly occurring worktime.

Id. at 1125.

In sum, even if this Court decides to endorse a PMWA de minimis rule, it should set limits ensuring that the rule is narrowly tailored to those rare circumstances in which work time truly is insignificant and immeasurable.

Earlier this month, the Third Circuit Court of Appeals issued an opinion reversing a lower court’s finding that UberBlack Drivers were “independent contractors” not entitled to minimum wage and overtime pay under federal and Pennsylvania law.  In a case titled Razak v. Uber Technology, Inc., the appellate court (which covers Pennsylvania, New Jersey and Delaware) held that a jury should decide whether the company maintains the right to control several aspects of the drivers’ work and their opportunities for profit making the drivers “employees” entitled to minimum wage and overtime pay protections.  A copy of the opinion is available here.

Companies often try to avoid many of the protections federal, state and local governments enact to protect workers from downturns in the economy by classifying them as non-employee “independent contractors.”  These protections include, for example, minimum wage pay, overtime pay, unemployment pay, sick pay, and workers’ compensation protections.

Let us know if you would like a free and confidential consultation with one of our attorneys about your rights.

 

In recent years, many Pennsylvanians have been required to work as “CONTRACTORS.”  Businesses have a BIG financial incentive to call their workers “contractors” rather than “employees.”  Specifically, many businesses have used the “contractor” label to avoid legal obligations such as social security contributions, unemployment and worker’s compensation insurance, overtime pay, and other workplace laws.

Now that the CORONAVIRUS has struck, many “contractors” are realizing that the boss does not provide unemployment insurance.

Here’s what you and your family needs to know if you’ve been working as a “contractor” and find yourself unemployed.  YOU MAY BE ENTITLED TO UNEMPLOYMENT BENEFITS EVEN IF YOU WERE CALLED A “CONTRACTOR.”  Under Pennsylvania law, a worker’s right to unemployment depends on the actual duties and responsibilities of the job.  Even if the worker was called an “contractor,” he/she may be considered an employee for unemployment purposes if the boss exerted significant CONTROL over his/her job or if he/she did not operate a truly independent business.

Whether you or a family member or friend is an “employee” entitled to unemployment pay depends on a careful analysis of your actual job.  Our office is currently closed.  But we can speak with you by cell phone.  If you would like to speak with one of our attorneys about your eligibility for unemployment, please email Pete Winebrake at pwinebrake@winebrakelaw.com to arrange a FREE and CONFIDENTIAL phone consultation.

The Fair Labor Standards Act (“FLSA”) states that “[a]n employer may not keep tips received by its employees for any purposes, including allowing a manager or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”  29 U.S.C. §203(m)(2)(B).  Moreover, a restaurant that violates this rule must:  (i) pay each server the total value of any tip credit used by the restaurant (in Pennsylvania, the tip credit amount is usually $4.42 for every hour worked by the server); (ii) reimburse each server for all tips taken by the manager or supervisor; and (iii) pay each server additional “liquidated damages.”  See id. at § 216(b).

In a March 17 opinion entitled Whited v. New Cafe at Greystone Gardens, Scranton PA Federal Judge Malachy E. Mannion explained that restaurants cannot escape the above rule by arguing that the manager sharing in the servers’ tips “wears two hats” by also tending bar and waiting on customers.  See 2020 U.S. Dist. LEXIS 45715 (M.D. Pa. March 17, 2020).  The Judge explained that this holding is consistent with the viewpoint expressed in other federal district court opinions, including Gionfriddo v. Jason Zink, LLC, 769 F. Supp. 2d 880 (D. Md. 2011).

Judge Mannion’s Whited opinion is welcome news for workers in Pennsylvania and beyond.  It is illegal for restaurants to require waiters, waitresses, bartenders, and other tipped employees to share tips with restaurant owners, managers, and supervisors.  This rule would become meaningless if it carved out every owner, manager, or supervisor who also happens to perform some customers service activities.

Earlier today, the Court of appeals for the District of Columbia issued an opinion in Camara v. Mastro’s Restaurants, LLC, 18-7167, which affirmed the district court’s refusal to compel an FLSA plaintiff to arbitration where (i) the company did not maintain a signed arbitration agreement and (ii) the plaintiff swore that he never signed the agreement.  The Court of Appeals held that the restaurant failed to satisfy its burden of demonstrating that the plaintiff agreed to the terms of the company’s arbitration program or had an “implied agreement” based on his continued employment at the restaurant following the rollout of the arbitration program.  A copy of the opinion is available here.

The appeal was argued by Andy Santillo.  Our co-counsel are Jason Rathod and Nick Migliaccio of Migliaccio & Rathod LLP.

The lawsuit alleges that the restaurant implemented an improper tip pool and violated federal and District of Columbia wage law by requiring servers to pay a portion of their tips winerunners, silverware polishers and baristas.

We are very pleased to announce that on February 25, 2020 the federal judge overseeing a lawsuit brought by Winebrake & Santillo on behalf of servers at the Houlihan’s restaurant in Hersey, Pennsylvania issued an opinion denying the company’s motion to dismiss.  As part of its decision, the Court rejected the recent opinion letter issued by the U.S. Department of Labor under President Trump which would allow Pennsylvania restaurants to require their servers to perform an unlimited amount of non-tip producing sidework while still being paid the tipped minimum wage of $2.83 per hour.

This is a very significant development.

Both the federal Fair Labor Standards Act (“FLSA”) and the Pennsylvania Minimum Wage Act (“PMWA”) exempt “executives,” “administrators,” and “professionals” from the statutes’ overtime pay mandates.  These are generally referred to as the “white collar exemptions.”

Employees falling under the white-collar exemptions generally are paid on a “salary basis.”  Both FLSA and PMWA have historically set the minimum salary at especially low levels.  As discussed below, however, progress is being made:

The FLSA’s Increase to $35,308

With respect to the FLSA, the federal Department of Labor has published a regulation that became effective on January 1, 2020 and increases the annual salary requirement from $23,660 to $35,308.  See 84 FR 51230.  This increase by the Trump Administration is disappointing because it undercuts the Obama Administration’s proposed regulation raising the salary requirement to $47,476.  Unfortunately, Obama’s $47,476 proposal was enjoined by a Texas district court judge.  Instead of fighting for the $47,476 at the Fifth Circuit Court of Appeals, Trump settled for a more modest increase.

The PMWA’s Eventual Increase to $45,500

But, here in Pennsylvania, the Trump Administration’s modest increase is not the end of the story.  That’s because, on January 31, 2020, the Pennsylvania Independent Regulatory Review Commission (“IRRC”) approved the Wolf Administration’s proposed regulation increasing the annual salary requirement to $35,568 when the regulation becomes effective later this year, to $40,560 one year later, and to $45,500 two years later.  Click HERE for access to the regulation.

We currently expect the new Pennsylvania regulation to become effective this Spring.  If this happens, the PMWA’s minimum salary requirement will exceed the FLSA’s requirement in Spring 2021 and substantially exceed the FLSA’s requirement in Spring 2022.  (Of course, this assumes the FLSA’s salary requirement will not be increased in the first 18 months of a post-Trump presidency).

Although our law firm has advocated for an even larger increase to the PMWA’s salary threshold, we are delighted that the Wolf Administration is fighting for Pennsylvania’s salaried workers.  Hopefully, the excellent results achieved at the IRRC will encourage the Governor and his Department of Labor & Industry to continue to update Pennsylvania’s overtime regulations and to extend overtime rights beyond the federal floor.

One final note:  Workers and employers must always remember that, under both the FLSA and the PMWA, satisfaction of the minimum salary is only one of several independent requirements that must be satisfied in order for workers to fall within one of the white-collar exemptions.  All three exemptions also require that the employee actually perform “executive,” “administrative,” or “professional” job duties.  – PW

The federal Department of Labor (“DOL”) is empowered to publish regulations that interpret different provisions of the Fair Labor Standards Act (“FLSA”).  These types of interpretive regulations are published in the Code of Federal Regulations (“the CFR”).  A long time ago, in Skidmore v. Swift & Co., 323 U.S. 134 (1944), the Supreme Court explained that whether or not an interpretive regulation is entitled to judicial deference “will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”

In recent years, some legal thinkers have questioned the continued viability of “Skidmore deference.”  But that topic is far too heavy for the Wage and Overtime Quarterly.

Anyway, on January 16, 2020, the DOL published an interpretive regulation that becomes effective on March 16, 2020 and is entitled “Joint Employer Status Under the Fair Labor Standards Act.”  See 85 FR 2820-2862 (Jan. 16, 2020).  As discussed below, this new joint employment regulation is misguided.

Why Is “Joint Employment” Important in FLSA Lawsuits?

The American workplace is becoming increasingly “fissured.”  Millions of workers who used to be paid directly by big companies now find themselves working for contractors, subcontractors, and even sub-subcontractors.  For example, the janitors who clean your local big-box store probably are not directly paid by the store.  Instead, they may be paid by a janitorial services company that contracts with the store.  Or they might work for a very small business (e.g. “Little Frankie’s Cleaning LLC”) that contracts with a janitorial services company that, in turn, contracts with the store’s owner.

Let’s say the janitors in the above example are cheated out of overtime pay.  Under the FLSA, they certainly can sue the business that directly pays them.  But such a lawsuit is pointless if such business is small, undercapitalized, and unable to satisfy a judgment.  So, as a practical matter, the janitors must sue “up the chain” and prove that the small business and the store’s owner are jointly liable under the FLSA for the unpaid overtime.

So “joint employment” principles are pretty important.  When it becomes too difficult for workers to prove joint employment, it becomes too easy for big companies to cheat workers by hiding behind contractors and subcontractors.

The FLSA’s Expansive View of “Employment.”

Historically, the FLSA has been understood to define “employment” very broadly.  For example, in Walling v. Portland Terminal Co., 330 U.S. 148 (1947), the Supreme Court observed that the FLSA is “comprehensive enough to require its application to many persons and working relationships which, prior to this Act, were not deemed to fall within an employer-employee category.”   Id. at 150-51.  Likewise, in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), the Court explained that the FLSA “stretches the meaning of ‘employee’ to cover some parties who might not qualify as such under a strict application of traditional agency law principles.”  Id. at 326.

Here in the Third Circuit, our Court of Appeals has observed:  “the FLSA defines employer “expansively,” and with “striking breadth.”  The Supreme Court has even gone so far as to acknowledge that the FLSA’s definition of an employer is “the broadest definition  that has ever been included in any one act.”  In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462, 467-68 (3d Cir. 2012) (internal citations omitted).

Bonnette and Other Conflicting “Joint Employment” Tests.

The Supreme Court has never established a specific test for deciding whether two companies can be liable as joint employers under the FLSA.  However, federal Courts of Appeals have issued opinions establishing various multi-factor tests.  These tests differ from circuit to circuit.  However, as any first-year law student knows, a circuit court decision is binding precedent within the circuit.

In Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983), the Ninth Circuit Court of Appeals – which covers the federal courts in California and other western states – weighed the following four factors in determining whether a purported joint employer could be liable under the FLSA:  “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.”  Id. at 1470.  We will refer to these factors as the “Bonnette Factors.”

Crucially, other circuit courts disagree with the Ninth Circuit’s Bonnette Factors.  For example, in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the Fourth Circuit Court of Appeals – which covers the federal courts in the Carolinas, Maryland, Virginia, and West Virginia – endorsed a six-factor test, see id. at 141-42, and specifically instructed: “district courts should not follow Bonnette and its progeny in determining whether two or more persons or entities constitute joint employers for purposes of the FLSA,” id. at 139 (emphasis supplied).

Likewise, in Zheng v. Liberty Apparel Co., 355 F.3d 61 (2d Cir. 2003), the Second Circuit Court of Appeals – which covers the federal courts in New York, Connecticut, and Vermont – endorsed its own six-factor test that differs significantly from the Bonnette Factors.  See id. at 72.  And, here in the Third Circuit – which covers Pennsylvania, New Jersey, and Delaware – our Court of Appeals has endorsed a four-factor test that is much less stringent than the Bonnette Factors.  See Enterprise, 683 F.3d at 469.

The New Joint Employment Regulation:  Bonnette with a Twist.

This brings us to the DOL’s new joint employment regulation.  In the Executive Summary accompanying the regulation, the DOL asserts that it is “adopting a four-factor balancing test derived from Bonnette [].”  85 FR 2820.  Then, in the regulation, DOL describes the four factors as whether the alleged employer “(1) Hires or fires the employee; (2) Supervises and controls the employee’s work schedule or conditions of employment; (3) Determines the employee’s rate and method of payment; and (4) Maintains the employee’s employment records.”  Id. at 2859 (to be codified at 29 C.F.R. §791.2(a)(1)).

We’ll get to DOL’s decision to select Bonnette over other circuit court authority in a moment.  In the meantime, however, we pause to briefly note that DOL has watered down the first Bonnette Factor to benefit business.  Specifically, while the Ninth Circuit’s first Bonnette Factor asks whether the purported employer “had the power to hire and fire the employees,” Bonnette, 704 F.2d at 1470, the DOL’s first factor omits the phrase “had the power to.”  85 FR 2859.

 What Gives DOL the Right to Select Bonnette Over Other Judicially Endorsed Tests?

All of this brings us to the fundamental problem with the new joint employment regulation.  The DOL is not interpreting anything.  Rather, it is selecting a variation of the Ninth Circuit’s Bonnette test over the joint employment tests endorsed by other Courts of Appeals.  This practice – attempting to “nationalize” one circuit’s decisional law at the expense of other circuits’ decisional law – is very troubling to me.  But the practice should be even more troubling to “conservatives” who purport to oppose such administrative overreach.

We all should be concerned.  The Secretary of Labor is not some jurisprudential “Grand Wizard” empowered to rummage through conflicting circuit court authority and then enshrine – through “interpretive regulations” – the court decision that he likes best.

Under our judicial system, “circuit splits” are resolved by the Supreme Court, not the DOL.  So, if the Trump Administration wants to nationalize the Bonnette joint employment test, it should either (i) pass legislation codifying the test or (ii) advocate for the test in the litigation arena.  Writing a new “interpretive regulation” is a cheap end-run around these proper legislative and judicial channels.  It is destined to fail.

So Now We’re All Confused.

DOL asserts that the new joint employment regulation is intended “to offer guidance explaining how to determine joint employer status.”  85 FR 2823.  But, in reality, DOL has just spawned confusion.

Imagine being an employer in North Carolina.  The Fourth Circuit Court of Appeals has held that “district courts should not follow Bonnette and its progeny in determining whether two or more persons or entities constitute joint employers for purposes of the FLSA.”  Salinas, 848 F.3d at 139.  Yet, DOL says Bonnette is just fine.

Imagine being a corporate employment lawyer in Virginia.  Are you really going to advise your client to follow the Bonnette test over the Salinas teat?

And what about the worker in Maryland who is relying on DOL to investigate her complaint against a putative joint employer.  Is the DOL investigator really going to follow Bonnette instead of Salinas?  Can the investigator even do that?

Well, that’s all for now.  It looks like DOL’s “guidance” will keep us all busy for years to come. –PW

Winebrake & Santillo, LLC has been recognized by U.S. News-Best Lawyers® “Best Law Firms” with a First Tier ranking on the 2020 Best Law Firms List in Philadelphia. The firm received these first tier rankings in both “Employment Law – Individuals” and “Litigation-Labor and Employment”.  In addition, Winebrake & Santillo was also ranked nationally for “Litigation-Labor and Employment.”  This is the second year that the firm has received this national recognition.

For more information about this recognition, you can visit the following website:  https://bestlawfirms.usnews.com/profile/winebrake-santillo-llc/overview/64731?fbclid=IwAR17UpnQR778yPe9n9y8IJmJ5bWo3vGsmpMLMd2J6amb0JvhBcxv8ZkDxPc

During a 10-day stretch August, the Third Circuit Court of Appeals (which covers Pennsylvania, New Jersey, and Delaware) issued three separate opinions addressing the Fair Labor Standards Act (“FLSA”).  Moreover, each opinion is “precedential” and will be published in the Federal Reporter.  Because precedential FLSA opinions are pretty rare in the Third Circuit, this 10-day stretch has created a frenzy of high excitement for FLSA nerds like us.  Here is a summary of the first of the three opinions:

First, in Stone v. Troy Construction, Inc., No. 18-1825 (3d Cir. Aug 20, 2019), the Court provided clarification regarding (1) the legal standard required for an FLSA plaintiff to establish a “willful” violation under the FLSA and (2) the requirement than an FLSA plaintiff affirmatively consent to participate in the lawsuit.

Stone’s first topic – “willfulness” – is important because, under the FLSA, employees generally can recover unpaid wages for a period going backwards two-years from the filing of the complaint.  However, if the FLSA violation is “willful,” the employee can recover for a three-year period.  Some sloppy language in a 2017 opinion entitled Souryavong v. Lackawanna County, 872 F.3d 122 (3d Cir. 2017), had created a lot of confusion by suggesting that an FLSA violation must be “egregious” in order be “willfulness” standard.  In Stone, the Court clarified that “willfulness” does not require “egregiousness.”  Instead, “willfulness” will be found if the employer either “knew” its conduct violated the FLSA or “showed reckless disregard” of a potential FLSA violation.

Stone’s second topic – necessity of a consent form – is extremely important to FLSA lawyers representing workers in FLSA “collective” actions.  The statute of limitations period applicable to an FLSA claim is not tolled until the lawsuit is “commenced.”  29 U.S.C. § 255(a).  When the plaintiff brings the lawsuit on behalf of herself alone, the commencement date is the date on which the complaint is filed in court.  See 29 U.S.C. § 256.  However, when the plaintiff brings a “collective” action lawsuit on behalf of herself and other employees, the commencement date is the date on which she files a “written consent to become a party plaintiff.”  Id.  Thus, because the Stone plaintiff did not file a written consent form until many months after she filed her complaint, the running statute of limitations took a huge bite out of her FLSA claim.  As the Court observed, this highly technical requirement might seem like an “oddity,” but it “is one of the shoals on the FLSA waterway, and parties must navigate accordingly.” -PW

On September 24, 2019 Federal District Judge Robert Mariani (who sits in Scranton, PA) issued a thoughtful, 22-page opinion in a class action lawsuit handled by our firm.  The lawsuit is styled Knapp v. Susquehanna Village Facility Operations, LLC, 3:18-cv-01941 (M.D. Pa.), and the opinion can be found HERE.

In this lawsuit, the plaintiff worked at a Pennsylvania nursing home.  The nursing home published an employee handbook stating that employees would earn and accrue leave time with few restrictions or limitations.  Consistent with the handbook’s policy, plaintiff accrued over 1,000 hours of leave time over many years of employment.  This accumulated leave time appeared on each paystub, thereby reinforcing the handbook’s policy and leading the plaintiff to reasonably understand that her accumulated leave time would not be taken away.

Unfortunately for plaintiff and her coworkers, the company sold the nursing home to a new owner and, in the process, the employees’ accumulated leave time was erased.  So plaintiff filed a class action lawsuit seeking the monetary value of the erased leave time.  The lawsuit asserts claims for breach of contract, violation of the Pennsylvania Wage Payment and Collection Law (“PWPCL”), promissory estoppel, and unjust enrichment.

The company moved to dismiss plaintiff’s complaint.  The company emphasized that the employee handbook contained a disclaimer stating that it was not a contract and, therefore, could not form the basis for plaintiff’s breach of contract claim.  Judge Mariani denied the motion.  In a well-researched opinion, the Judge explained that, under Pennsylvania law, the existence of an implied contact must be evaluated based on the totality of evidence.  Thus, even though an employee handbook might not constitute a contract standing alone, the handbook may nonetheless serve as evidence of a binding agreement when viewed in combination with other facts demonstrating the parties’ reasonable understanding and course of dealing over a period of years.

Judge Mariani’s opinion gathers together some important court cases (from both federal and state courts) addressing the role of employee handbooks in breach of contract and PWPCL lawsuits.  The opinion is a good resource for employment lawyers and demonstrates the important role that employee handbooks and similar policy documents can play in unpaid wage litigation.

In Fair Labor Standards Act (“FLSA”) collective actions, the parties often disagree about the propriety of conducting discovery pertaining to a representative sample of the FLSA collective rather than from each and every collective member.  The use of such representative discovery is widely accepted at this point, especially when the collective consists of hundreds of opt-in plaintiffs.  However, after agreeing to the concept of representative discovery, the parties still need to reach agreement over some important details.  The most basic source of disagreement is the size of the representative sample.  E.g.: Should the sample include 10%, 15%, or 20% of the opt-in plaintiffs?  A second source of disagreement is the method by which the sample of opt-in plaintiffs should be selected.  In this regard, I want to direct you to a thoughtful opinion issued a few months ago by Southern District of Ohio Magistrate Judge Chelsey M. Vascura and entitled Rosenbohm v. Cellco Partnership, 2:17-cv-00731 (S.D. Ohio May 16, 2019).  Therein, the Judge concisely explains the reasons why, as a matter of basic statistics, the representative sample should be comprised of a randomly selected group of opt-in plaintiffs.  The Judge also explains that “[h]and-picking [the sample of opt-in plaintiffs] is almost certain to introduce a substantial amount of selection bias into the sample.”  I strongly recommend that attorneys contemplating representative discovery in FLSA collective actions read this opinion.  -PW

Section 16(b) of the Fair Labor Standards Act (“FLSA”) enables workers who win FLSA wage and overtime lawsuits to recover attorney’s fees and expenses.  See 29 U.S.C. sec 216(b).  Specifically, Section 16(b) provides:  “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”  29 U.S.C. sec. 216(b) (emphasis supplied).  Congress included this fee-recovery provision because, as we all know, most workers cannot afford to pay a lawyer out of their own pockets.

This brings us to a July 30, 2019 opinion issued by the Seventh Circuit Court of Appeals in Fast v. Cash Depot, Ltd., 18-3571.  There, the employee’s lawyer filed a petition for attorney’s fees after the employer, as a result of the FLSA lawsuit, voluntarily paid the employee all of the wages and liquidated damages he possibly could recover under the FLSA.  Citing language from the fee-recovery statutes in federal civil rights statutes, the employee’s lawyer asserted that fees should be awarded because the employee, having received a full recovery, effectively was a “prevailing party” in the lawsuit.  The Seventh Circuit disagreed.  Relying on FLSA Section 16(b)’s plain language, the Court held that the recovery of fees required the formal entry of a entry of a “judgment” in the employee’s favor.

The moral of this story is that, when an employers pay-off FLSA plaintiffs as a result of litigation, plaintiff’s lawyers who achieve success for their clients and rightfully desire (and deserve) to be paid for their time should make sure that the district court formerly enters a judgment.  While this might seem like a technicality or mere formality, the Seventh Circuit’s Fast decision demonstrates that it is an important step that should be taken.   -PW

As readers of this blog probably know, courts uniformly hold that judges must review Fair Labor Standards Act (“FLSA”) collective action settlements for fairness (although the verdict is still out on whether the same rule applies to FLSA lawsuits settled on behalf of an individual employee).  However, courts differ on what standards and procedures should apply to such judicial review.  In traditional “class actions,” Federal Rule of Civil Procedure 23 describes a three-step process for reviewing settlements: (1) the parties move for “preliminary approval” of the settlement; (2) upon preliminary approval, the class members receive a court-authorized notice describing the settlement and providing them with an opportunity to object or seek exclusion from the settlement; and (3) after the notice period expires, the judge conducts a final approval hearing and decides whether to approve the settlement.  But, as many courts have observed, FLSA collective actions are fundamentally different from Rule 23 class actions.  Most notably, FLSA collective settlements only impact workers who affirmatively “opt-in” to the collective and, therefore, do not impact the rights of “absent” class members.  Along these lines, you might want to take a look at the Fourth Circuit’s July 16, 2019 Opinion in Haskett v. Uber Technologies, Inc., Case No. 19-1116.  Therein, the Circuit Court explains: “Unlike Rule 23, [FLSA] section 216(b) does not require a district court to notify potential claimants about a proposed settlement.”  The opinion then cites several opinions supporting this proposition.  Citation to Haskett might be useful next time you are seeking judicial approval of an FLSA collective action settlement. -PW

As most readers of this blog know, Fair Labor Standards Act (“FLSA”) collective action settlements must be approved by the court as “fair and reasonable” resolutions of a “bona fide dispute” (although it is less clear whether such a requirement should apply to FLSA lawsuits settled on behalf of individual employees).  On September 3, 2019, Judge J. Nicholas Ranjan (who recently took a seat on the Western District of Pennsylvania bench) issued an opinion preliminarily rejecting the parties’ request that the motion papers seeking approval be filed under seal pursuant to a confidentiality provision in the settlement agreement.  The opinion in Kapolka v. Anchor Drilling Fluids, USA, LLC, 2:18-cv-01007-NR is available HERE.  I think the opinion is concise and thoughtful.  It cites numerous cases holding that, as a matter of public policy, FLSA settlements should be available to the public.  So it’s a good resource for lawyers researching the confidentiality issue.  -PW

The American Association for Justice (also known as “AAJ” and formerly known as the “American Trial Lawyers Association”) recently issued a report discussing how forced arbitration is harming workers and consumers all over the country by preventing them from, among other things, presenting their legal claims to a jury and participating in class actions (which, often, are the only feasible method of vindicating employment and consumer rights).  The report is entitled “The Truth About Forced Arbitration” and is worth reading.  A copy is available by clicking HERE.

As many of you know, the USDOL’s Wage & Hour Division recently sought comments regarding a proposed rule that seeks to make it harder for workers to prove “joint employment” under the FLSA.  The proposed rule — available HERE — is yet another gift from the Trump Administration to giant corporations.  This time, the Trump Administration wants to make it easier for big business to escape responsibility for wage/overtime violations by hiding behind layers of “contractors” and “subcontractors” that pay the workers.

Writing on behalf of our firm, my comments regarding the proposed rule seem pedestrian compared to the extensive analysis presented by other commentators.  We keep it short and simply argue that the FLSA’s definition of employment is based on well-established, precedential decisions issued by the U.S. Supreme Court and various U.S. Courts of Appeal.  In our view, USDOL should not — and cannot — issue purported “rules” that contradict binding decisional law.

Many worker’s rights advocates submitted comments that are more thoughtful and extensive than mine.  If you click HERE, you will be taken to the regulations.gov webpage that allows you to search among the thousands of submitted comments.

Finally, in case you are interested, here are links to comments submitted by a few excellent organizations (just click on the organization name and you will be taken to the comment): the AFL-CIO; the National Employment Law Project (NELP); the Service Employees International Union (SEIU);  the  National Employment Lawyers Association (NELA);  the Equal Justice Center; and the United Brotherhood of Carpenters and Joiners.

-PW

 

I just read a May 2019 Report entitled “Unchecked Corporate Power: Forced Arbitration, the Enforcement Crisis, and How Workers are Fighting Back.  The report is published by the Economic Policy Institute and the Center for Popular Democracy, with the assistance of the National Employment Law Project.    I think the Report does a great job of explaining how our Nation’s most precious employment rights laws are largely going unenforced due to the combination of employers’ increasing use of forced arbitration agreements (with class action waivers, of course) plus the decrease in resources dedicated to governmental enforcement.  The Report is very well-researched and is written in plain language that is easy to understand.  I thought it was excellent, and I hope you will read it.  -PW

On June 12, 2019, Attorney Pete Winebrake testified before the Congressional Subcommittee on Workforce Protections about the proposed rule which would increase the salary level for overtime exempt employees under the federal Fair Labor Standards Act.  In March, the Department of Labor unveiled its long-awaited update to the so-called white collar overtime rule, saying workers may qualify for an overtime exemption if they earn a salary of at least $35,308 a year.  The Obama administration previously tried to increase the salary threshold to $47,000 a year.  However, the Obama rule was blocked by a court on the eve of its implementation.  The currently annual salary threshold under federal law is $23,660.

A recording of the full hearing, including Attorney Winebrake’s testimony, is available here.

An article in Law360 discussing the hearing can be viewed here.

Over the years, we have repeatedly published news reports addressing the requirement that FLSA settlements be reviewed and approved by judges.  On the downside, judicial approval makes “small” FLSA cases extremely “unprofitable” because the attorney time necessary for obtaining judicial approval often exceeds the value of the settlement.  Judges should be sensitive to this reality, or else the judicial approval requirement will undermine the FLSA by discouraging competent lawyers from getting involved in “low-value” (but nonetheless important) FLSA cases.

On the other hand, it cannot be denied that the judicial approval requirement provides an important safeguard for American workers.  District of New Jersey Judge Renee Marie Bumb’s May 17, 2019 decision in Kessler v. Joarder Properties LLC, 18-cv-11867 (D.N.J.) provides a good example.  There, the defendant allegedly reached an FLSA settlement directly with employees and without negotiating with the employees’ lawyer.  When the defendant sought dismissal of the case, the employees’ lawyer filed papers that, according to the opinion, “alleg[ed] that Defendants had convinced [the employees] to drop their cases, using coercive tactics to secure private and confidential settlement agreements without presence of counsel.”  In response, Judge Bumb refused to dismiss the lawsuit and ordered defense counsel to turn over any settlement agreements so they can be reviewed for fairness.  Hats off to the Judge.  This is precisely why the judicial approval requirement exists.

I also was interested to read Eastern District of Pennsylvania Magistrate Judge Lynne Sitarski’s April 24, 2019 opinion in Farris v. National Forensic Consultants, Inc., 18-cv-03052.  There, Judge Sitarski recommended the approval of a $50,000 FLSA settlement EXCEPT that she recommended that the settlement agreement’s broad general release language be disapproved.  The Judge provided a good analysis of why FLSA settlements should not be used as a vehicle for employees’ releasing legal claims that have nothing to do with the FLSA.

 

We recently filed a brief in our Amazon.com security clearance case arguing that the Federal Portal-to-Portal Act’s restrictions to compensable time do not apply to claims under the Pennsylvania Minimum Wage Act (PMWA).  You can access the brief by visiting our Amazon.com page.

In the brief, we explain that, sometimes the PMWA is silent regarding an FLSA provision that is especially beneficial to employers.  Faced with this circumstance, some employers will try to convince Pennsylvania judges to construe the PMWA’s silence as an implicit adoption of the FLSA provision.  These efforts generally fail.  And such failure is not surprising.  The PMWA, after all, is interpreted expansively to the benefit of employees, and the state’s Supreme Court has unanimously instructed that the PMWA should not be read in pari materia with the FLSA.  See Bayada Nurses, Inc. v. Pennsylvania Dept. of Labor & Industry, 8 A.3d 866 (Pa. 2010).

Consistent with the above, three separate Pennsylvania courts have rejected employers’ attempts to graft Portal Act § 4’s compensability limits onto the PMWA.  These three opinions have been authored by a federal judge in Scranton, a state trial judge in Washington County, and a unanimous panel of the Third Circuit. The opinions are described below:

In re Cargill Meat Solutions Wage and Hour Litig., 632 F. Supp. 2d 368 (M.D. Pa. 2008):

In Cargill, employees in a Pennsylvania beef plant brought claims under, inter alia, the FLSA and PMWA, alleging that Cargill failed to compensate them “for time spent donning, doffing, waiting for, gathering, maintaining, and sanitizing work-related clothing, gear, and equipment and for time spent traveling between the changing area and the production line before and after shifts and during break times.”  Cargill, 632 F. Supp. 2d at 371.  Since the plant was unionized, the employees were covered by a collective bargaining agreement.  See id. at 373.

The district court initially focused on the employees’ FLSA claim.  See id. at 376-92.  All agreed that, absent the collective bargaining agreement, the pre-shift activities at issue were compensable under Portal Act § 4.  See id. at 377-78.  However, according to Cargill, such activities were non-compensable under the Section 3(o) amendment to Portal Act § 4 because the activities (i) constituted “time spent in changing clothes or washing” and (ii) had been treated as non-compensable “by custom or practice under a bona fide collective-bargaining agreement.”  See id.  at 378.  The district court rejected this argument, see id. at 378-88, as well as some others relating to the FLSA claim, see id. at 388-92.

This brings us to the portion of Cargill that is relevant to the instant appeal.  Cargill argued that the employee’s PMWA claim was preempted by the FLSA to the extent the PMWA conflicted with Portal Act § 4, as amended by Section 3(o).  See id. at 392-94.  The district court rejected this argument.  See id.  First, the court explained that the FLSA contemplates that state wage laws can offer employees wage rights that rise above the “floor” established by the FLSA.  See id. at 393.  Next, focusing on the interplay between the Portal Act and Pennsylvania law, the court observed:  “The series of incidents which led to the Portal-to-Portal Act was litigation under the FLSA not state law legislation.”  Id. at 394.  Finally, and most importantly, the court explained that the Portal Act, as amended by Section 3(o), had no application to the PMWA claim:  “Neither the PMWA nor the PWPCL contain a counterpart to § 203(o) or other similar provisions. . . .  A more beneficent definition of hours worked embodied in the Pennsylvania statutes does not circumvent or nullify the purpose of § 203(o). . . . The provisions of the Portal Act and §203(o) ‘indicate Congress’s intent to better define the liability of employers under the FLSA. They do not, however, supplant the traditional power of the state to more generously regulate wage and hours via there [sic] own state regulations.’ Pennsylvania has not adopted a similar exception to § 203, and, as a result Pennsylvania law protects employees by not permitting unions and employers to negotiate away payment for donning and doffing of clothes as Congress has under the FLSA. As noted above, Cargill argues that it cannot comply with both the FLSA and Pennsylvania law regarding this matter. However, Cargill, in Pennsylvania, could comply with both laws by following the Pennsylvania law, which is more protective of individual employee rights, by paying its employees for donning and doffing of gear. Based on the entire scheme of the FLSA to protect workers and create minimum standards over which a state may more generously regulate, a successful § 203(o) defense would not preempt Plaintiffs’ PMWA and PWPCL claims.”  Id.

Bonds v. GMS Mine Repair & Maintenance, Inc., 2017 Pa. Dist. & Cnty. Dec. LEXIS 10622 (Pa. Com. Pl., Washington Cty. Dec. 12, 2017):

Bonds started out as a hybrid class/collective action in federal district court.  See Bonds v. GMS Mine Repair & Maintenance, Inc., 2014 U.S. Dist. LEXIS 89181 (W.D. Pa. July 1, 2014).  The plaintiffs were coal miners who sought to be paid under the FLSA and PMWA for various pre-shift activities such as attending mandatory safety meetings.  See id. at *15.  After discovery, the employer moved for summary judgment, and the district court set out to determine “whether the time that the underground mine workers spend attending pre-shift meetings is compensable under the FLSA, as amended by the Portal-to-Portal Act of 1947.”  Id. at *21.  In answering this question, the district court undertook an extensive analysis of the FLSA, the Portal-to-Portal Act, and the U.S. Supreme Court decisions applying the Portal-to-Portal Act.  See id. at *21-35.  The district court then granted summary judgment against the miners, reasoning that the pre-shift safety meetings were not compensable under the Portal-to-Portal Act.  See id. at *35-40.

Next, the district court turned to the miners’ PMWA claim.  See Bonds, 2014 U.S. Dist. LEXIS 89181, at *40-41.  The district court observed that “‘the Pennsylvania General Assembly has not in any way adopted the federal Portal-to-Portal Act.’”  Id. at *40 (quoting Ciarelli v. Sears, Roebuck & Co., 46 A.3d 643, 648 (Pa. 2012) (McCafferty, J. dissenting from dismissal of appeal as being improvidently granted)).  The district court then reasoned that, because the Portal Act’s applicability to the miners’ PMWA claim was a “novel issue of state[] law,” it would refrain from exercising supplemental jurisdiction over the PMWA claim.  See id. at *40-41.

In the wake of the district court’s ruling, the miners pursued their PMWA claim in the Pennsylvania Court of Common Pleas.  See Bonds v. GMS Mine Repair & Maintenance, Inc., 2017 Pa. Dist. & Cnty. Dec. LEXIS 10622 (Pa. Com. Pl., Washington Cty. Dec. 12, 2017).  Once again, the employer moved for summary judgment, arguing that the PMWA – like the Portal Act – rendered the miners’ pre-shift activities non-compensable.  See id. at *6-11.

The Common Pleas Court rejected the employer’s argument.  See Bonds, 2017 Pa. Dist. & Cnty. Dec. LEXIS 10622, at *6-11.  After explaining that the PMWA often provides Pennsylvania employees with greater protections than the FLSA, see id. at *9-10, the Court explained that the Portal Act and Integrity Staffing were irrelevant to the miners’ claim:  “Although the Integrity Staffing case significantly changed the scope of the federal law regarding compensation of pre- and post-shift work activities, the case ultimately has no impact on Plaintiff’s [P]MWA claim.  As previously stated, the law in Pennsylvania provides greater protection for employees than the federal law, and Pennsylvania has refused to adopt the FLSA.  The standard set forth in Integrity Staffing is inapplicable to plaintiffs’ state law claims, therefore Defendant’s Motion for Summary Judgment is DENIED.”  Id. at *11.

Smith v. Allegheny Technologies, Inc., __ Fed. Appx. __, 2018 U.S. App. LEXIS 34700 (3d Cir. Dec. 10, 2018):

Most recently, the Third Circuit issued a non-precedential opinion in Smith.  The opinion is notable for two reasons.  First, it refuses to follow another non-precedential opinion, entitled Espinoza v. Atlas Railroad Construction, LLC, 657 Fed. Appx. 101 (3d Cir. 2016), and states that Espinoza “has no persuasive authority under the rules of our Court.”  Smith, 2018 U.S. Dist. LEXIS 34700, at 9.  This is notable because, in the opinion below, the district court cited to Espinoza, see Opinion, RE 86, Page ID # 2358-2859.

More importantly, Smith held that Portal Act § 4’s limitations on compensability do not apply to PMWA claims.  In Smith, temporary employees were hired to work in a steel plant while the unionized permanent employees were on strike.  See Smith, 2018 U.S. Dist. LEXIS 34700, at *1-3.  This required the temporary employees to ride in company-supplied vans across union picket lines at the beginning of each workday.  See id.  The temporary employees eventually filed suit, seeking unpaid wages under the FLSA and the PMWA for time spent riding in the vans.  See id.  The district court dismissed both claims.  See id.

On appeal, the Third Circuit affirmed the dismissal of the FLSA claim. See Smith, 2018 U.S. Dist. LEXIS 34700, at *3-8.  The Court explained that the employees’ travel claims were non-compensable under Portal Act § 4 and Integrity StaffingSee id.

Crucially, however, the Third Circuit vacated the district court’s dismissal of the PMWA claim.  See Smith, 2018 U.S. Dist. LEXIS 34700, at *8-9.  The Court explained that the district court’s Portal Act/Integrity Staffing analysis was irrelevant to the PMWA claims:  “The District Court concluded that Smith and Harris’ claim under the PMWA failed for “the same reasons that the Court concluded that [they] cannot establish that commuting across the picket line in Strom’s vans was either a principal activity or integral and indispensable to a principal activity of their employment.” J.A. at 26. But Pennsylvania has not enacted the Portal-to-Portal Act, and Pennsylvania law requires compensation for a broader range of activities, including travel time, than the FLSA. See De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 307 (3d Cir. 2003), as amended (Nov. 14, 2003); In re Cargill Meat Sols. Wage & Hour Litig., 632 F. Supp. 2d 368, 394, 397-98 (M.D. Pa. 2008). Neither the principal activity nor the integral or indispensable test applies here.”  Id. at *8-9 (emphasis supplied).

As many of you know, employers throughout the Nation increasingly require employees to sign agreements waiving their right to pursue legal claims in court, their right to a jury trial, and their right to pursue legal claims on a class/collective basis.  However, in recent months, it has become increasingly clear that many employers do not actually want employees to pursue the expensive arbitration process.  Indeed, when employees call the employers’ bluff and actually pursue arbitration, many employers respond by simply refusing to pay the arbitration fees.  This results in the American Arbitration Association (“AAA”) dismissing the case.  In other words, the employer can essentially pick and choose the cases it wants to arbitrate.  If the employer does not want to arbitrate a particular claim, it can escape arbitration be refusing to pay the fee.  Then, the employee must go to court to ether pursue her claims in the judicial forum or compel the employer to pay the arbitration fees.  So much for arbitration being “fast, inexpensive, and efficient.”  What a joke.

Anyway, it was nice to read Southern District of New York Judge Vincent L. Briccetti‘s  decision addressing this tactic in an opinion entitled Nadeau v. Equity Residential Properties Management Corp., 7:16-cv-07986-VB (S.D.N.Y. May 5, 2017).  There, Ms. Nadeau commenced an AAA arbitration alleging that the company required her and other employees to work “off the clock” in violation of the FLSA and the New York Labor Law.  Seeking to avoid the arbitration, the company refused to pay the arbitration fee, and, as usual, the AAA dismissed the arbitration.  But Ms. Nadeau refused to give up.  She pursued her claims in federal court.  At this point, the company changed its tune and asked Judge Briccetti to compel Ms. Nadeau’s claims to arbitration.  The Judge refused, holding that the company’s “refusal to arbitrate constitutes a material breach of the Arbitration Agreement, and therefore defendant cannot compel arbitration.”

Judge Briccetti’s holding is not an outlier.  A few months earlier, the New Jersey Supreme Court issued a similar holding in Roach v. BM Motoring, LLC, 228 N.J. 163, 155 A.3d 985 (N.J. 2017).

I have a feeling we are going to see more opinions along the lines of Nadeau and Roach as federal and state judges continue to be exposed to the actual workings of mandatory employment arbitration.  -PW

On December 18, 2018, Judge David M. Lawson of the Eastern District of Michigan issued an order conditionally certifying a collective of all current and former servers who worked for Trinity Restaurant Group, LLC at its IHOP restaurants in Detroit, Mount Pleasant, and Saginaw Michigan at any time during the last three years.  In accordance with the Court’s ruling, notice will be mailed out in the coming weeks to those individuals who worked at these three IHOP restaurants. You can access a copy of the Court’s order here.

This lawsuit seeks to recover unpaid wages for restaurant servers and alleges that IHOP violated federal wage laws by paying servers a tipped minimum wage less than $7.25 per hour and requiring that they perform significant side-work tasks such as cleaning the restaurant. The servers are represented by Winebrake & Santillo and co-counsel.  If you would like additional information about the case you can access it here.

On January 29, 2019, the Third Circuit Court of Appeals issued an important decision in a case titled Bedoya v. American Eagle Express, Inc. brought by Winebrake & Santillo and co-counsel Lichten & Liss-Riordan PC on behalf of delivery drivers in New Jersey.

In a precedential decision, the federal appellate court held that a federal law limiting state regulation of the trucking sector called the Federal Aviation Administration Authorization Act (“FAAAA”) does not preempt New Jersey’s ABC test for distinguishing between employees entitled to the state’s wage protections and independent contractors who are not.  A copy of the Third Circuit’s opinion is attached.

Under New Jersey’s version of the ABC test, an individual is presumed to be an “employee” unless a business can show the worker is free from its control or direction, performs work that is outside the usual course or place of business, and works “in an independently established trade, occupation, profession or business.” A business must demonstrate that all three prongs of the test are met to justify an independent contractor classification for workers.

This is an important victory for workers who are improperly misclassified as non-employee independent contractors.  If you one of your friends or family members worked as a driver and did not receive overtime premium pay or was subject to deductions to their compensation, we would be happy to provide a free and confidential consultation.

Over the past few years, the U.S. Supreme Court has issued a string of decisions endorsing the use of “take-it-or-leave-it” contracts that require workers to arbitrate employment rights disputes arising under some of this Nation’s most precious civil rights laws.  The federal judiciary’s willingness to surrender its authority to the private arbitration industry is nothing short of extraordinary.  For tens of millions of workers, judges currently play no meaningful role in the enforcement of workplace rights.  They are mere bystanders, rendered toothless by a series of 5-4 Supreme Court decisions decide along the usual partisan lines.

Anyone troubled by this Nation’s “incredible shrinking judiciary” should read a November 30, 2018 opinion by Pennsylvania District Judge Gerald McHugh.  The opinion is entitled Styczynski v. MarketSource, Inc., 18-cv-2662, and can be found HERE.  Therein, Judge McHugh explains why, under existing Supreme Court and Third Circuit precedent, he is required to compel Ms. Styczynski’s sexual harassment claim to mandatory arbitration overseen by JAMS, Inc., a large arbitration company.  Importantly, however, the Judge spends the last few pages of his opinion summarizing some of the most recent scholarship regarding the potential unfairness of mandatory arbitration.  Anyone who is concerned about the privatization of our Nation’s civil justice system should read Judge McHugh’s thoughtful opinion.

The FLSA makes it illegal for employers to retaliate against employees for complaining about workplace FLSA violations.  See 29 U.S.C. 215(a)(3).  Moreover, the FLSA’s damages provision enables an employee who wins a retaliation lawsuit to recover “such legal or equitable relief as may be appropriate to effectuate the purposes of [the FLSA’s anti-retaliation provision], including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages.”  See 29 U.S.C. 216(b).

Neither the U.S. Supreme Court nor the Third Circuit Court of Appeals  has addressed whether employees who win FLSA retaliation lawsuits can recover punitive damages.  However, I just re-read a couple of reported decisions from the U.S. District Court for the Eastern District of Pennsylvania in which the judges hold that employees can recover punitive damages.  The first decision was issued in 2001 by the late (and great) Judge Louis K. Pollak and is styled Marrow v. Allstate Security & Investigative Services, Inc., 167 F. Supp. 2d 838 (E.D. Pa. 2001).  The second decision was issued in 2015 by Judge Mark Kearney and is styled Jones v. Amerihealth Caritas, 95 F. Supp. 3d 807 (E.D. Pa. 2015).  You can read these opinions for the details, but, in a nutshell, both Judges conclude that the deterrent impact of punitive damages is the type of relief that “effectuate[s] the purposes” of the FLSA’s anti retaliation provision.

I hope these excellent decisions from within the Third Circuit will help you next time you represent a Pennsylvania, New Jersey, or Delaware employee pursuing an FLSA retaliation claim.

On November 11, 2018, we reported on a terrific decision by the Washington County (PA) Court of Common Pleas in which the Judge held that the FLSA’s “Portal-to-Portal Act” restrictions on compensable work do not apply to claims for unpaid wages under the Pennsylvania Minimum Wage Act (“PMWA”).  You can read that post by clicking HERE.  This was good news because the Portal-to-Portal Act renders non-compensable many activities that workers perform at the beginning and end of their workday.  Meanwhile, in a case our law firm is handling against Amazon.com, we have requested that the Sixth Circuit Court Appeals certify to the Pennsylvania Supreme Court the question of whether the Portal-to-Portal restrictions apply to the PMWA.

Well, on December 10, 2018, things got even more interesting when the Third Circuit Court of Appeals issued a non-precedential opinion in an appeal styled Ralph Smith v. Allegheny Technologies, Inc., No. 18-1707.  A copy of the  opinion is available HERE.  In Smith, the defendant manufacturing plant had a unionized workforce.  The plant locked out the union workers, who responded by picketing the plant.  The plant then brought in non-union replacement workers, who were required to ride through the picket line on busses provided by the plant.  Some of these replacement workers eventually filed a lawsuit.  The replacement workers argued that the FLSA and PMWA required the plant to pay them for the time spent boarding the busses and traveling through the picket line.  Federal District Judge Mark Hornak disagreed with the replacement workers.  He threw out the case, finding that the pre-shift travel time was non-compensable under Portal-to-Portal principles.  On appeal, the Third Circuit agreed with Judge Hornak’s assessment under the FLSA and held that the challenged time was non-compensable under the Portal-to-Portal Act.  Crucially, however, the Third Circuit reversed Judge Hornak’s PMWA holding.  The Circuit Court explained:  “But Pennsylvania has not enacted the Portal-to-Portal Act, and Pennsylvania law requires compensation for a broader range of activities, including travel time, than the FLSA.”  Slip. Op. at pp. 7-8.

The Third Circuit’s Smith decision is good news for lawyers and advocates who — in the name of workers’ rights and states’ rights — continue to fight for a vibrant PMWA that extends workplace protections beyond the confines of the FLSA.

Almost every employer knows that “at-will employees have no contractual entitlement to their jobs.  But, sometimes, corporate lawyers try to stretch “at-will” principles too far.  For example, in a case our firm is handling now, an “at-will” employees contends that she had a “contractual” entitlement to over 1,000 hours of accumulated and unused leave.  Applying well-established principles, the employee argues that her contractual right to the leave time stems from written promises in an employee guidebook as well as other course of conduct evidence.  This is not unusual.  Judges often find that contractual agreements can be based on “implied” or even “oral” contracts.

The employer has moved to dismiss the lawsuit, arguing that our client’s “at-will” status prevents her from seeking the leave time.  In response, we were able to find some cases that make the between wrongful termination claims (where an employee’s “at-will” status is generally fatal to the claim) and claims for wages or benefits earned during the court of the employment (where an employee’s “at-will” status is a bit of a red herring).  Here is our write-up:

Consulate’s “at-will” argument misses the mark.  “Employment at-will” is employment that “may be terminated at any time, by either the employer or the employee, without cause.”  Black’s Law Dictionary, 9th Ed. (West 2009).  But that does not mean an “at-will” employee cannot also enjoy contractual rights to wages and benefits accrued during the course of her employment.

The above principle is demonstrated by many decisions in which courts permit “at-will” employees to sue for wages and benefits under Pennsylvania contract law.  Here are a few examples:

In Bertolino v. Controls Link, Inc., 2014 U.S. Dist. LEXIS 145983 (W.D. Pa. Oct 14, 2014), an employee, who was issued an Employee Handbook designating him as an “at-will” employee, asserted breach of contract and PWPCL claims when the employer failed to pay him for all of hours worked.  See id. at *1-6.  Judge Lenihan explained that the employee’s “at-will” status was irrelevant to the claim for unpaid wages: “while an employer may permissibly discharge an at-will employee at any time, the at-will doctrine does not relieve the employer of its contractual obligation to provide the compensation promised in return for the employee’s services.”  Id. at *12 (citing Braun v. Wal-Mart Stores, Inc., 24 A.3d 875 (Pa. Super. 2011)).

In Kotlinski v. Mortgage America, Inc., 40 F. Supp. 2d 298 (W.D. Pa. 1998), an “at-will” employee alleged that she was owed certain commission payments pursuant to an “oral employment agreement” with her employer.  Id. at 307.  Judge Ambrose explained that the claim for unpaid commissions “is not inconsistent with” the employee’s “at-will” status because the notion of “at-will” employment “does not address issues of compensation for work completed prior to an employee’s termination.”  Id.

In Pilkington v. CGU Insurance Co., 2001 U.S. Dist. LEXIS 3668 (E.D. Pa. Feb. 12, 2001), an “at-will” employee asserted a contractual right to “accrued bonus monies.”  Id. at *20.  The employer responded “that as an at-will employee who could be fired for any reason at any time, plaintiff cannot maintain a breach of contract claim.”  Id.  Judge Waldman rejected this argument, explaining that nothing prevents “at-will” employees from accruing implied contractual rights that are “incidental or collateral to at-will employment.”  Id. at *22.

Finally, in Miller v. Cerebian Biotech Corp., 2016 U.S. Dist. LEXIS 154597 (E.D. Pa. Nov. 8, 2016), an ‘at-will” employee claimed she had an implied contractual right to be paid a specific salary for her work.  See id. at *1-4.  Judge O’Neill explained that the employee’s “at-will” status did not prevent her from pursuing breach of contract and WPCL claims: “While a contract of employment is presumed to be terminable at will by either party absent a specification of definite duration, . . . the existence of an at-will contract does not negate a finding of an employment agreement for purposes of the WPCL.”  Id. at *18.

We hope the above research helps Pennsylvania employment rights faced with an overly-expansive use of the “at-will” employment defense.

As most readers of this website knows, every week brings us new court decisions addressing FLSA “conditonal certification” motions.  But an October 26, 2018 opinion issued by Eastern District of Pennsylvania Judge Wendy Beetlestone caught my eye because it very efficiently and effectively rejected two arguments that companies continue to press in opposing conditional certification.  The opinion was issued in Gauzza v. Prospect Medical Holdings, Inc. and is available HERE.

Most notably, Judge Beetlestone rejected the company’s argument that conditional certification should be denied because no one had opted-in to the collective.  This argument is often referred to as the “lack of interest” argument.  In rejecting the argument, the Judge explained:  “Defendants’ argument that conditional certification should be denied because Plaintiffs have not yet secured any additional members of the collective action puts the cart before the horse. The ‘purpose’ of conditional certification is to ‘facilitate[e] notice to potential opt-in plaintiffs and conduct[] pre-trial discovery.’ Camesi v. University of Pittsburgh, 729 F.3d 239, 243 (3d Cir. 2013). Requiring Plaintiffs to secure those opt-in plaintiffs’ participation before notice is issued would entirely defeat the purpose of the conditional certification process by requiring putative members to opt in without having received notice.”  This is one of the most concise rejections of the “lack of interest” I’ve seen, and worker’s rights lawyers would be wise to quote this language the next time they confront the “lack of interest” argument.

Secondly, Judge Beetlestone rejected the company’s argument that the conditional certification analysis is impacted by the fact that some members of the putative collective signed arbitration agreements.  In this regard, the Judge explained:  “Defendants also argue that because some employees who fall within the described collective group may have signed arbitration agreements as a condition of their employment and others may not have, . . .  it would be inefficient for this case to proceed as a collective action given the need to determine which agreements are enforceable and which are not. Even if, however, it turns out that employees who receive a notice have signed enforceable arbitration agreements, this is not the appropriate stage in the litigation to decide whether to excise those potential members from the collective action. Whether an employee has signed an arbitration agreement does not speak to the dispositive legal question at the conditional certification stage: whether the putative members have claims with a factual nexus to Plaintiffs’ claims. Accordingly, for the reasons stated above, Plaintiffs’ motion to conditionally certify the class shall be granted.”  I think this is some very nice language, and it’s similar to the reasoning of a District of Columbia Judge in our firm’s Mastro’s Restaurant case.  Click HERE for access to the Mastro’s opinion.

As many readers of this website already know, the federal Portal-to-Portal Act places significant restrictions on the compensability of of pre-shift and post-shift work activities under the Fair Labor Standards Act.  In recent years, these concepts have been explored by the U.S. Supreme Court in the IBP, Inc. v. Alvarez (2005) and Integrity Staffing Solutions, Inc. v. Busk (2014).

However, as we often emphasize on this website, many states have enacted wage laws that are more worker friendly than the FLSA.  In this regard, Pennsylvania wage , overtime, and labor lawyers should be aware of  a recent opinion issued by the Pennsylvania Court of Common Pleas in Bonds v. GMS Mine Repair & Maintenance, Inc.  The Bonds litigation is summarized below:

Bonds started out as a hybrid class/collective action in federal district court.  See Bonds v. GMS Mine Repair & Maintenance, Inc., 2014 U.S. Dist. LEXIS 89181 (W.D. Pa. July 1, 2014).  The plaintiffs were coal miners who sought to be paid under the FLSA and Pennsylvania Minimum Wage Act (“PMWA”) for various pre-shift activities such as attending mandatory safety meetings.  See id. at *15.  After discovery, the employer moved for summary judgment, and the district court set out to determine “whether the time that the underground mine workers spend attending pre-shift meetings is compensable under the FLSA, as amended by the Portal-to-Portal Act of 1947.”  Id. at *21.  In answering this question, the district court undertook an extensive analysis of the FLSA, the Portal-to-Portal Act, and the U.S. Supreme Court decisions applying the Portal-to-Portal Act.  See id. at *21-35.  The district court then granted summary judgment against the miners, reasoning that the pre-shift safety meetings were not compensable under the Portal-to-Portal Act.  See id. at *35-40.

Next, the district court turned to the miner’s PMWA claim.  See Bonds, 2014 U.S. Dist. LEXIS 89181, at *40-41.  The district court observed that “‘the Pennsylvania General Assembly has not in any way adopted the federal Portal-to-Portal Act.’”  Id. at *40 (quoting Ciarelli v. Sears, Roebuck & Co., 46 A.3d 643, 648 (Pa. 2012) (McCafferty, J. dissenting from dismissal of appeal as being improvidently granted)).  The district court then reasoned that, because the Portal-to-Portal Act’s applicability to the miners’ PMWA claim was a “novel issue of state[] law,” it would refrain from exercising supplemental jurisdiction over the PMWA claim.  See id. at *40-41.

In the wake of the district court’s ruling, the miners pursued their PMWA claim in the Pennsylvania Court of Common Pleas.  See Bonds v. GMS Mine Repair & Maintenance, Inc., 2017 Pa. Dist. & Cnty. Dec. LEXIS 10622 (Pa. Com. Pl., Washington Cty. Dec. 12, 2017).  Once again, the employer moved for summary judgment, arguing that the PMWA – like the FLSA – rendered the miners’ pre-shift activities non-compensable.  See id. at *6-11.

The Common Pleas Court rejected the employer’s argument.  See Bonds, 2017 Pa. Dist. & Cnty. Dec. LEXIS 10622, at *6-11.  After explaining that the PMWA often provides Pennsylvania employees with greater protections than the FLSA, see id. at *9-10, the Common Pleas Court explained that the FLSA’s Portal-to-Portal limitations and the U.S. Supreme Court’s Integrity Staffing opinion were irrelevant to the miners’ claim:  “Although the Integrity Staffing case significantly changed the scope of the federal law regarding compensation of pre- and post-shift work activities, the case ultimately has no impact on Plaintiff’s [P]MWA claim.  As previously stated, the law in Pennsylvania provides greater protection for employees than the federal law, and Pennsylvania has refused to adopt the FLSA.  The standard set forth in Integrity Staffing is inapplicable to plaintiffs’ state law claims, therefore Defendant’s Motion for Summary Judgment is DENIED.”  Id. at *11.

Bonds finds support in In re Cargill Meat Solutions Wage and Hour Litig., 632 F. Supp. 2d 368 (M.D. Pa. 2008), which observed: “The provisions of the Portal Act and § 203(o) indicate Congress’s intent to better define the liability of employers under the FLSA. They do not, however, supplant the traditional power of the state to more generously regulate wage and hours via th[eir] own state regulations.”  Id. at 394 (internal quotations omitted).  The holding also finds support in Lugo v. Farmer’s Pride, Inc., 967 A.2d 963 (Pa. Super. 2009), wherein the Pennsylvania Superior Court makes no mention of Portal-to-Portal principles in addressing food processing workers’ claim that pre-shift donning and doffing activities – precisely the types of activities covered by the Portal-to-Portal Act in FLSA lawsuits – were compensable under the PMWA.  See id. at 967.

Our firm recently filed a brief asking the Sixth Circuit Court of Appeals to certify to the Pennsylvania Supreme Court the question of whether the Portal-to-Portal restrictions on compensable time apply to wage claims brought under the PMWA.  You can find our brief and additional information by clicking HERE and visiting our page dedicated to the Amazon.com litigation.

As we have previously reported, the Pennsylvania Superior Court issued an important decision in December 2017 in a case called Chevalier v. General Nutrition Centers, Inc.  This case addresses the amount of overtime pay that is due to salaried employees who work over 40 hours per week.  As detailed in a previous article on this website, the Superior Court’s opinion holds that, under the Pennsylvania Minimum Wage Act, salaried employees in Pennsylvania are entitled to full overtime pay equaling 150% of their regular pay rate.  This far more generous than the “half-time” overtime pay available under the federal FLSA’s “fluctuating workweek” (a.k.a. “Missel”) methodology.  Once again, if you want to delve into this issue, please see our previous article.

The Chevalier opinion is on appeal at the Pennsylvania Supreme Court, and our firm recently filed an amicus curiae brief urging the Supreme Court to affirm the Superior Court’s Opinion.  The brief was filed on behalf of the Pennsylvania AFL-CIO, The National Employment Law Project (NELP), Community Legal Services Inc., The Women’s Law Project, the Keystone Research Center, and Pathways PA.

Anyway, in doing research for the amicus brief, we were pleased to see that, beyond Pennsylvania, judges from several other states have rejected the half-time/fluctuating workweek method under their states overtime laws.  In case you are interested in this issue, here is the relevant passage from our amicus brief:

Consistent with this Court’s observation that the FLSA “establishes only a national floor under which wage protections cannot drop, but more generous protections provided by a state are not precluded,” Bayada, 8 A.3d at 883, various state courts have refused to impose the Federal FWW Method on workers covered by their state’s overtime laws.  These court decisions contradict GNC’s assertion that affirming the Superior Court majority will make Pennsylvania “the first and only state where the Federal FWW method was deemed unlawful in the absence of an express statutory prohibition.”  GNC Brief at 30).  While it is true that Alaska prohibited the use of the Federal FWW by the regulation upheld in Dresser Industries, Inc. v. Alaska Dept. of Labor, 633 P.2d 998 (Alaska 1981), other state statutes have been interpreted to prohibit the Federal FWW Method without having either express statutory or regulatory prohibitions.

In particular, some states have concluded, similar to Judge Moulton, that the Federal FWW Method is not permitted under state law because it is incompatible with other wage and hours provisions, either statutory, regulatory, or both.      For example, in Skyline Homes, Inc. v. Dept. of Industrial Relations, 211 Cal. Rptr. 792 (Cal. Ct. App. 1985), the California Court of Appeals refused to allow California employers to use the Federal FWW Method in determining the overtime pay owed to salaried manufacturing workers based upon other statutory and regulatory provisions it interpreted as incompatible with the Federal FWW Method.[1]  See id. at 794-802.  A similar approach was taken by the Montana Supreme Court in Glick v. State of Montana, 509 P.2d 1 (Mont. 1973).  Likewise, in Williams v. General Nutrition Centers, Inc., 166 A.3d 625 (Conn. 2017), the Connecticut Supreme Court, relying on administrative orders that it interpreted to be incompatible with the Federal FWW Method, held that GNC’s use of the Federal FWW Method to pay its salaried employees violated Connecticut wage law.  See id. at 627-34[2].

Meanwhile, like Judge Wettick in his underlying opinion, rulings in New Mexico and New Jersey interpret state laws to prohibit the Federal FWW Method based on the public policy behind the laws.  Particularly, in New Jersey Dept. of Labor v. Pepsi Cola Co., 2000 WL 34401845 (N.J. Admin. Aug. 29, 2000), the New Jersey Commissioner of Labor issued a final determination holding that using the Federal FWW Method to determine overtime wages under the New Jersey Wage and Hour Law was not “legally or equitably appropriate.”  Id. at 5.  As the Commissioner explained, the absence of any state law provision explicitly adopting the Federal FWW Method is, standing alone, dispositive of the issue.  See id.  On appeal, the Appellate Division of New Jersey’s Superior Court affirmed the Commissioner’s holding.  See New Jersey Dept. of Labor v. Pepsi Cola Co., 2002 N.J. Super. Unpub. LEXIS 2, *260-73 (N.J. Super Ct. App. Div. Jan. 31, 2002), cert. denied, 798 A.2d 1271 (N.J. 2002).

More recently, in Frisari v. Dish Network, LLC, AAA Case No. 18-160-001431-12 (Oct. 30, 2015), retired New Jersey Appellate Division Judge William A. Dreir issued a detailed arbitration award agreeing that the Federal FWW Method “has no basis in New Jersey law.”  See Appendix C at 2.  Judge Dreir’s thoughtful analysis – which is similar to Judge Wettick’s analysis in the instant lawsuit – bears repeating:

The New Jersey Supreme Court has noted the remedial purpose of the NJWHL and has dictated that this law “should be given a liberal construction.”  New Jersey Dep’t of Labor v. Pepsi-Cola Co., 170 N.J. 59, 62 (2001).  By engrafting this Fluctuating Work Week exception, the Arbitrator would not be giving this liberal construction to the law. If the Legislature or the Department of Labor through its regulatory powers had determined that the Fluctuating Work Week standard should apply, it could have amended the statute or promulgated a regulation in the many years that this rule has been applicable to the FLSA.  As the New Jersey authorities have not done so, the Arbitrator will not make this extension here.  The Arbitrator finds the Pennsylvania approach in Verderame, measured against the liberal construction required by the New Jersey courts, to be the correct application to apply in this case.

Id. at 6-7 (footnote omitted); see also New Mexico Dept. of Labor v. Echostar Communications Corp., 134 P.3d 780 (N.M. Ct. App. 2006) (rejecting Federal FWW Method basedon public policy behind New Mexico Minimum Wage Act).

In sum, there is nothing sacred about the Federal FWW Method.  At least six other states have rejected the method, upholding state sovereignty and protecting the state’s workers on top of the FLSA’s “minimum floor.”

Winebrake & Santillo, LLC has been recognized by U.S. News-Best Lawyers® “Best Law Firms” with a First Tier ranking on the 2019 Best Law Firms List in Philadelphia. The firm received these first tier rankings in both “Employment Law – Individuals” and “Litigation-Labor and Employment”.  In addition, Winebrake & Santillo was also ranked nationally for “Litigation-Labor and Employment.”  This is the first year that the firm has received this national recognition.

For more information about this recognition, you can visit the following website: https://bestlawfirms.usnews.com/profile/winebrake-santillo-llc/overview/64731

Our firm continues to pursue the Pennsylvania wage rights of Amazon warehouse workers who were not compensated for time associated with security screenings that the workers are subjected to before leaving the warehouse at the end of their shift.  As many of our readers know, in Integrity Staffing Solutions, Inc. v. Busk,  the U.S. Supreme Court held that such time is non-compensable under the federal FLSA due to the Portal-to-Portal Act.  However, we are currently handling an appeal before the Sixth Circuit Court of Appeals in which the workers allege that such time is compensable under the Pennsylvania Minimum Wage Act (“PMWA”) because the state law — unlike the FLSA — does not incorporate the Portal-to-Portal Act.  In this regard, we recently filed a motion asking the Sixth Circuit to certify this question to the Pennsylvania Supreme Court.  A copy of the motion can be found HERE.

Today the United States District Court for the District of Columbia conditonally certified a collective consisting of  “All employees who worked as servers and received an hourly wage less than $7.25 an hour at any Mastro’s location in the United States from May 22, 2015 to the present.”  The servers are represented by Winebrake & Santillo and co-counsel Migliaccio & Rathod LLP.  A court-approved notice will be mailed to these servers in the coming weeks giving them the opportunity to join this case.

In this same order, the judge also denied Mastro’s attempt to compel this case to arbitration.  A copy of the Court’s order and opinion are available here.

Our firm recently wrote a brief that required us to really focus on the Third Circuit’s decision in Thompson v. Real Estate Mortgage Network, 748 F.3d 142 (3d Cir. 2014), wherein the Third Circuit explained that, at the pleadings stage, workers are not expected to have detailed information regarding the interrelationships between corporate defendants and, therefore, cannot be expected to definitively litigate each defendants’ employer status. See Thompson, 748 F.3d at 148-49.  Here is a slightly modified version of what we wrote:

In Thompson, a mortgage underwriter named Patricia Thompson alleged that two related companies – Security Atlantic Mortgage Company (“Security Atlantic”) and Real Estate Mortgage Network (“REMN”) – were jointly liable under the FLSA for improperly classifying her as overtime-exempt.  See Thompson, 748 F.3d at 145-46.  The district court dismissed the FLSA claim, holding that Ms. Thompson failed to plead that Security Atlantic and REMN were joint employers under the FLSA.  See id. at 147; see also Thompson v. Real Estate Mortgage Network, 2012 U.S. Dist. LEXIS 190045, *12-14 (D.N.J. Aug. 31, 2012).  The district court provided Ms. Thompson with the opportunity to re-plead.  See Thompson, 748 F.3d at 145-46.  However, she declined the invitation and appealed instead.  See id.

On appeal, the Third Circuit reversed the district court.  See Thompson, 748 F.3d at 148-49.  In so doing, the Court made some important observations that are relevant here:

First, the Court recognized the basic principle that, in deciding Rule 12(b)(6) motions, judges must “accept as true all facts set forth in the [complaint], and draw all reasonable inferences from such allegations in favor of the claimant.”  Thompson, 748 F.3d at 145 n. 1 (citing Warren General Hospital v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011)).

Second, the Court explained that the FLSA “defines employer ‘expansively,’ and with ‘striking breadth.’”  Id. at 148 (quoting In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462, 467 (3d Cir. 2012)).  In fact, “the FLSA’s definition of an employer is ‘the broadest definition that has ever been included in any one act.’”  Id. (quoting Enterprise, 683 F.3d at 467-68).

Third, the Court recognized that its previous Enterprise opinion described four factors that are relevant to the joint employment analysis.  See Thompson, 748 F.3d at 149 (quoting Enterprise, 683 F.3d at 469.  However, the Court explained that these four factors are “non-exhaustive.”  Id.  That’s because the FLSA employment “determination depends on ‘all the facts of a particular case.’”  Id. (quoting 29 C.F.R. 791.2(a)); see also Enterprise, 683 F.3d at 469 (“We emphasize, however, that these factors do not constitute an exhaustive list of all potentially relevant facts and should not be ‘blindly applied.’”); Field, 2015 U.S. Dist. LEXIS 193177, at *5 (same); Rapczynski v. DIRECTV, LLC, 2016 U.S. Dist. LEXIS 34833, *16 (M.D. Pa. Mar. 17, 2016)

Fourth, the Court explained that the employment analysis often turns on evidence that is unavailable at the pleadings stage and goes beyond the personal knowledge of the individual plaintiff:  “We caution that our assessment rests heavily on the procedural posture of this litigation. Thompson, a low-level employee with each of the defendant companies, has had no opportunity for discovery as to payroll and taxation documents, disciplinary records, internal corporate communications, or leadership and ownership structures. It may well be that a fully developed factual record will preclude a finding that Security Atlantic and REMN were “joint employers” of Thompson for any of the pay periods at issue. But under these circumstances, we cannot say that Thompson’s Amended Complaint fails to state a claim upon which relief can be granted. We will vacate the District Court’s dismissal of Thompson’s claims in this regard and remand for further proceedings.”  Thompson, 748 F.3d at 149 (emphasis supplied).

Fifth, the Court held that Ms. Thompson adequately pled joint employment based on only three factual allegations: (i) that REMN provided her with training after she was hired by Security Atlantic; (ii) that one of the trainers referred to REMN as being Security Atlantic’s “sister company;” and (iii) that, after Security Atlantic went out of business, Ms. Thompson was integrated into REMN’s business.  See Thompson, 748 F.3d at 149; see also Harris v. Medical Transportation Management, Inc., 300 F. Supp. 3d 234, 243 (D.D.C. 2018) (“defeating a claim of joint employment at the motion to dismiss stage is no easy task”); Benitez v. Demco of Riverdale, LLC, 2015 U.S. Dist. LEXIS 20325, *4 (S.D.N.Y. Feb. 19, 2015) (whether a franchisor is a joint employer “presents a question of fact that cannot be resolved on a pre-answer motion to dismiss”); Aguilar v. United Floor Crew, 2014 U.S. Dist. LEXIS 166468, *9 (S.D. Fla. Dec. 1, 2014) (joint employment “inquiry is ill-suited for consideration on a motion to dismiss.”); Jennings v. Rib King West Palm, LLC, 2012 U.S. Dist. LEXIS 183959, *6 (S.D. Fla. Aug. 15, 2012) (“resolution of this matter at this stage in the proceedings is premature”).

We hope you will find the above discussion helpful the next time a defendant alleges that you complaint does not adequately plead joint-employment under the FLSA.

As many of the readers of this website know, the Eastern District of Pennsylvania has an arbitration program whereby certain cases with a total potential value of under $150,000 proceed to non-binding arbitration before a panel of three arbitrators.  This is an excellent program.  The arbitrators rule quickly and, unless the losing party objects and seeks a trial de novo, the arbitrators’ ruling is converted to a binding judgment.

Many of the cases in the program arise under federal employment and civil rights statues like the FLSA, the ADA, and Title VII.  These statutes contain provisions requiring that a prevailing plaintiff recover attorney’s fees and costs.  Over the years, lawyers have been a little confused about whether, in addition to awarding damages to a prevailing plaintiff, arbitrators are expected to also award fees and costs to the plaintiff’s lawyer.

I recently came across a very thoughtful 016 decision issued by Judge Mark Kearney in Saddler v. Pennsbury Racquet & Athletic Club LLC, 2016 U.S. Dist. LEXIS 165317 (E.D. Pa. Nov. 30, 2016).  Therein, Judge Kearney explains that the assigned judge — not the arbitrators — award fees and expenses to the prevailing plaintiff’s lawyer.  Thus, at arbitration, the parties and arbitrators can limit their analysis to liability and the plaintiff’s alleged damages.  Then, if plaintiff wins and neither party objects to the arbitration award, the Clerk will enter judgment in plaintiff’s favor and the plaintiff’s lawyer can file his/her fee petition with the assigned district court judge under the generally applicable procedures.  See generally Fed. R. Civ. P. 54.

In my opinion, Saddler makes a lot of sense and clears up any confusion that lawyers may have the interplay between the EDPA’s arbitration program and statutory fee-shifting.

One big frustration we FLSA lawyers have is watching the limitations period run against the claims of workers who have not yet learned about the lawsuit because the originating plaintiff’s “conditional certification” motion has not yet been filed.  This happens because under the FLSA’s collective action device, unlike Rule 23’s class action device, the filing of the complaint does not automatically toll the running of the limitations period.  Thus, members of the FLSA collective do not toll running of the statute of limitations period until they affirmatively opt-in.  This is really unfortunate, since most workers do not learn about an FLSA collective action lawsuit until a conditional certification motion is granted and court supervised notice is issued.

It seems like federal judges are becoming more sympathetic to the dilemma caused by the FLSA’s running limitations period.  I’ve been noticing quite a few opinions in which judges toll the running of the limitations period where resolution of the conditional certification motion has been delayed by circumstances beyond the workers’ control.  Here are quick summaries of three cases decisions from within the Third Circuit that you might find useful:

DePalma v. The Scotts Company LLC, 2017 U.S. Dist. LEXIS 8884 (D.N.J. Jan. 20, 2017) — Judge McNulty held that tolling was justified where a full year expired between the plaintiff’s conditional certification motion and the court’s decision granting such motion.  This opinion contains an extensive and scholarly review of the decisional law. See id. at *7-19.

McLaughlin v. Seneca Resources Corp., 2018 U.S. Dist. LEXIS 63038 (W.D. Pa. Mar. 13, 2018) — Judge Fischer held that tolling was justified where conditional certification was delayed by the defendant’s filing of unsuccessful Rule 12 motions.

Hunt v. McKesson Group, 2018 U.S. Dist. LEXIS 145733 (W.D. Pa. Aug. 28, 2018) — Judge Hornak held that tolling was justified to the extend conditional certification was delayed by the defendant’s refusal to turn over discovery and engage in unsuccessful discovery motions.

I hope the above cases will help you if you seek tolling in an FLSA collective action.

We are happy to announce that on August 13, 2018, the State of New Jersey and the New Jersey Department of Labor and Workforce Development jointly filed a brief with the Third Circuit Court of Appeals in support of drivers represented by Winebrake & Santillo and co-counsel Lichten & Liss-Riordan.

The drivers allege that they were improperly classified as non-employee “independent contractors” and thus were not paid overtime premium compensation and were subject to improper deductions to their compensation.

The appeal is in a case titled Bedoya, et al. v. American Eagle Express, Inc. and concerns whether New Jersey’s “ABC” test to determine whether an individual is an “employee” under the New Jersey wage and hour laws is preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).  The federal district judge held that it was not.  The company sought an appeal and the issue is now before the Third Circuit.

New Jersey’s support of the drivers’ position is yet another example of the crackdown on independent contractor misclassification in the State.  In May of this year, Governor Murphy  signed an executive order establishing the Task Force on Employee Misclassification.

On May 3, 2018, Governor Phil Murphy announced that he had signed an executive order establishing the Task Force on Employee Misclassication.  According to Governor Murphy, the purpose of this task force is to address the use of the independent contractor classification by New Jersey employers to “escape their legal responsibilities to their workers, such as ensuring adequate workplace protections and providing employment-related benefits like unemployment insurance and workers’ compensation.”

The Task Force will be charged with a number of responsibilities to combat employee misclassification, including:

  1. Examining and evaluating existing misclassification enforcement by executive departments and agencies;
  2. Developing best practices by departments and agencies to increase coordination of information and efficient enforcement;
  3. Developing recommendations to foster compliance with the law, including by educating employers, workers, and the public about misclassification; and
  4. Conducting a review of existing law and applicable procedures related to misclassification.

This is an important step by Governor Murphy to address one of the more important wage and hour issues confronting workers in the current economy.  This is especially true for those workers who are part of the “gig economy” and do not receive the countless benefits of being classified as an employee.  A copy of executive order is available here.

Winebrake & Santillo has represented hundreds of employees who have alleged that they were improperly classified as non-employee independent contractors and did not receive minimum wage and overtime premium compensation.

We are very pleased to announce that on May 24, 2018 the federal judge overseeing a lawsuit brought by Winebrake & Santillo and co-counsel Barrett Johnston Martin & Garrison LLC on behalf of home health workers issued its opinion on the parties’ cross motions for summary judgment. The Court granted the Plaintiff’s motion for summary judgment and held that Defendant’s hybrid pay practice in which it paid employees both on a fee basis and hourly basis violated the federal wage law. The Court also denied Defendant’s summary judgment motion as to whether the Plaintiff worked over 40 hours during the period in which she was paid a hybrid fee per visit and hourly amount.

This is a very significant development.  A copy of the Court’s decision can be accessed here.

I just came across an important opinion issued by an American Arbitration Association (“AAA”) Arbitrator named William A. Dreir, who is a retired New Jersey Appellate Court Judge. The opinion was issued back on October 30, 2015 in a case called Frisari v. Dish network, LLC, AAA Case No. 18-160-001431-12. Therein, the Arbitrator finds that the Fluctuating Workweek method of overtime compensation is not allowed under the New Jersey Wage and Hours Law (“NJWHL”). A copy of this important arbitration award can be found here: Frisari v. Dish Network, LLC, 18-160-001431-12 (AAA Oct. 30, 2015)

I’m currently cleaning my office and came across a research folder containing a collection of federal district court opinions holding that the dreaded “Fluctuating Workweek Method” of calculating overtime cannot apply retroactively after a salaried worker wins an FLSA misclassification lawsuit. If you are reading this blog, you probably know that the federal courts are split on this issue. However, before throwing away the research folder, I just wanted to quickly post this blog in order to provide some of the pro-worker opinions for future reference. This list is not intended to be exhaustive: Snodgrass v. Bob Evans farms, LLC, 2015 U.S. Dist. LEXIS 33621 (S.D. Oh. Mar. 18, 2015) (citing a lot of good opinions); Hasan v. GPM Investments, LLC, 2012 U.S. Dist. LEXIS 121048 (D. Conn. Aug. 27, 2012); Perkins v. Southern New England Telephone Co., 2011 U.S. Dist. LEXIS 109882 (D. Conn. Sept. 27, 2011); Russell v. Wells Fargo and Company, 672 F. Supp. 2d 1008 (N.D. Cal. 2009); Scott v. OTS Inc., 2006 U.S. Dist. LEXIS 15014 (N.D. Ga. March 31, 2006); Hunter v. Sprint Corp., 453 F. Supp. 2d 44 (D.D.C. 2006); Cowan v. Treetop Enterprises, Inc., 163 F. Supp. 2d 930 (M.D. Tenn. 2001); Rainey v. American Forest and Paper Association, Inc., 26 F. Supp. 2d 82 (D.D.C. 1998).

On May 22, 2018 Attorney Pete Winebrake was interviewed on WHYY Radio’s NewsWorks Tonight about the recent decision by the U.S. Supreme Court that corporations are allowed to require employees to sign agreements as a condition of their employment that prevent employees from banding together to challenge illegal wage practices. You can listen to the interview here.

On May 17, 2018 Attorney Pete Winebrake was interviewed for an article in the Philadelphia Inquire about class action waivers in employment arbitration agreements.  A copy of this article is available here.

On May 4, 2018 Attorney Andy Santillo was mentioned in an article in the Philadelphia Inquire titled “Why Philly Employers Should Pay Attention to this California Supreme Court Ruling.”  A copy of this article is available here.  Attorney Santillo was interviewed for the article about his experience representing workers whose employers misclassified them as “Independent Contractors” rather than employees.

 

Winebrake & Santillo has issued its latest installment of the Wage and Overtime Quarterly.  A copy of our Spring 2018 newsletter is available here.

In late-March, Congress passed the big $1.3 trillion budget bill.  The bill is over 2,000 pages long, was passed within hours of its introduction, and is loaded with legislative “riders” that have no apparent connection to governmental spending.  One such rider addresses the circumstances in which restaurants can keep servers’ tips.

The FLSA’s tip rules have been a hot topic lately.  And there’s a lot of misinformation floating around out there.  Here is an explanation of what Congress just did and how we got to this place:

The Tip Credit and Tip Sharing:  The FLSA sets the minimum wage at $7.25/hour.  Yet, many servers, bartenders, bussers, runners, and other customer service employees are paid an hourly wage of less than $7.25.  That’s because, under the FLSA, restaurants can pay these “tipped employees” as little as $2.83/hour plus customer tips.  When a restaurant does this, it is taking a “tip credit.”  In other words, the restaurant is using customer tips as a “credit” against its minimum wage obligation to the tipped employee.

As you can see, the tip credit provides a big benefit to American restaurants.  The customers primarily pay the employees.  That’s a pretty sweet deal for the employer.  And it really only happens here in the United States.  (In Europe, by contrast, tipping is not expected because the server gets paid directly from the restaurant).

Traditionally, the have been several rules that restaurants  must follow if they want to take the “tip credit.”  One important rule is that tips may only be shared among restaurant employees who “customarily and regularly” receive tips.  In other words, tips cannot be shared with managers or kitchen employees.

The 9th Circuit’s Cumbie v. Woody Woo Decision:  In 2010, the Ninth Circuit Court of Appeals issued an opinion called Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010).  In Cumbie, the restaurant did not take advantage of the tip credit.  In other words, the restaurant paid the servers a minimum wage of 0ver $7.25/hour.  The restaurant also required the servers to share some of their tips with kitchen employees.

The servers filed a lawsuit, arguing that the restaurant violated the rule that tips not be shared with kitchen employees.  The restaurant disagreed, arguing that this rule applied only if it was taking advantage of the tip credit.  The Ninth Circuit agreed with the restaurant.  According to the Ninth Circuit, a restaurant that pays servers the full minimum wage can do whatever it wants with customer tips.

The Obama Administration’s 2011 Regulation Disagreeing with Cumbie:  In response to Cumbie, the Department of Labor implemented a regulation (found at 29 CFR 531.52) in 2011 that disagreed with the Ninth Circuit’s Cumbie decision.  Under the 2011 regulation, tips could never be shared with managers or kitchen staff, even if the restaurant paid the servers the full minimum wage and did not take advantage of the tip credit.

The Ninth Circuit Upholds the 2011 Regulation:  In response to the DOL 2011 regulation, a trade association representing the restaurant industry started a lawsuit asserting that the DOL exceeded its regulatory authority by implementing the 2011 regulation.  This lawsuit made its way to the Ninth Circuit.  In 2016, the Ninth Circuit upheld the regulation in an opinion called Oregon Restaurant and Lodging Assoc. v. Perez, 816 F.3d 1080 (9th Cir. 2016).

So then, in the wake of the Ninth Circuit’s Oregon opinion, the law of the land was finally clear:  Even restaurants that pay the full minimum wage to servers may not require tips to be shared with managers or kitchen staff.

The Trump Administration’s Proposed Regulation:  In December 2017, the Trump Administration’s DOL started the an administrative rulemaking process that was clearly aimed at reversing the Obama Administration’s 2011 rule.  The proposed rule can be found HERE.  This rule was aimed at returning the law to the Crumbie-world in which a restaurant that pays the full minimum wage to servers may do whatever it wants with customer tips.  This proposed regulation was met with some pretty stiff resistance, as indicated in a February 2018 New York Times Article.

The 2018 Omnibus Budget Bill Settles the Dispute with a Compromise:   All of this brings us to the the 2,232-page Omnibus Budget Bill passed in late-March.  Turning to pages 2,025-2,027, we find a section of the Bill headed “Tipped Employees.”  Here is what the new legislation does in a nutshell:  (1) it revokes the 2011 Obama regulations; (2) it allows tips to be shared with non-supervisory kitchen staff if, an only if, the restaurant pays servers the full minimum wage and does not take advantage of the tip credit; (3) it strictly prohibits tips from being shared with restaurant owners, managers, or supervisors under any circumstances; (4) it clarifies that a restaurant allowing tips to be shared with owners, managers, or supervisors must pay the aggrieved servers both the amount of the tip credit (if any) taken and the amount of the diverted tips; (5) it makes liquidated damaged (a.k.a. “double damages”) mandatory if the restaurant allows tips to be shared with owners, managers, or supervisors; and (6) it provides for a $1,100-per-violation-penalty where the restaurant allows tips to be shared with owners, managers, or supervisors.

My Takeaway:  In my view, the 8-year saga described above demonstrates a big problem with the current state of affairs:  Throughout the past three Administrations, the DOL’s Wage and Hour Division has sometimes been treated like a pawn in an ongoing chess match between workers’ rights advocates and the employer community.  The regulations and guidance from one administration to another often seem irreconcilable, with one administration reversing the previous administration’s rules.  All of this must be very demoralizing to the DOL investigators who are working in the field and probably would like to be guided by a consistent set of rules that do not change with every Presidential election.  And fair-minded lawyers surely would prefer a set sensible and moderate rules that can withstand the test of time and foster a sense of consistency and predictability.

The research arm of the NELA Institute for Law and Policy recently issued a report entitled “The Widespread Use of Workplace Arbitration Among America’s Top 100 Companies.”  You can link to the report HERE.  I thought this was interesting reading if you want to learn more about how forced arbitration is becoming the “new norm” in employment law.  It really is extraordinary how a branch of our government (the judiciary) has relinquished to private arbitrators the sacred duty of enforcing some of Nation’s most precious laws (Title VII, the FLSA, the ADA, etc.).

Back in June 2016, the U.S. Supreme Court decided Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016).  In the June 2016 opinion, the Court invalidated 29 C.F.R. § 779.372(c)(1), a 2011 U.S. Department of Labor regulation deeming “service advisors” uncovered by the FLSA’s “salesman, partsman, or mechanic” exemption.  See 29 U.S.C. § 213(b)(10)(A).  The 2016 Opinion reasoned that the regulation was not entitled to Chevron deference, and remanded the case to the Ninth Circuit Court of Appeals so it could consider whether the plaintiff service advisor was exempt in the absence of the regulation.

On remand, the Ninth Circuit issued a January 2017 opinion holding that, even in the absence of the 2011 regulation, the plaintiff service advisor was not overtime exempt.  The car dealership appealed, the Supreme Court granted cert., and, earlier today, the Court issued a 5-4 opinion authored by Justice Thomas and joined by Justices Roberts, Kennedy, Alito, and Gorsuch.

Before going any further, let’s take a quick break for a multiple choice question:  “Earlier today, Justice Thomas wrote an opinion in an employment rights case that was decided 5-4 and joined by Justices Roberts, Kennedy, Alito, and Gorsuch.  Who won?:  (A) the employee; (B) the Mercedes Benz dealership; or (C) I have no idea because Supreme Court outcomes cannot be predicted based on which Justices write or join an opinion.”

And the correct answer is . . . . (B).  Now for my quick takeaway:

The opinion’s analysis of the actual issue — whether service advisors are covered by the “salesman, partsman, or mechanic” exemption in the absence of the 2011 DOL regulation — generally turns on a statutory construction analysis that, in my view, does not have any obvious implications on future FLSA cases.  So, while the Court’s holding stinks for “service advisors” and, maybe, a few other types of car dealership employees, it looked like today’s opinion was going to have a limited reach.  There’s even a faint silver lining tucked into the analysis:  the Court gives a favorable nod to an old provision in the Wage and Hour Division’s Field Operations Handbook.

But then, on page 9 of the 11-page opinion, the majority drops a bomb:  it “rejects” the longstanding principle that “exemptions to the FLSA should be narrowly construed.”  According to the majority:  “We reject this principle as a useful guidepost for interpreting the FLSA.  Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a “narrow”) interpretation.'”

. . . and just like that, an 80-year-old principle of FLSA law — a principle that has been repeated in many Supreme Court opinions and countless Circuit Court opinions — has been washed away in the final pages of an opinion that already was a lost cause.  As Justice Ginsberg wrote in dissent:  “In a single paragraph, the Court ‘reject[s]’ this longstanding principle as applied to the FLSA . . . without even acknowledging that it unsettles more than half a century of our precedent.”

This, my friends, is what conservative judicial activism looks like.

Winebrake & Santillo, LLC is very pleased to announce that Mark Gottesfeld has been made a Partner at the firm.  This is a well-deserved promotion for Mark, who has done a great job since joining the firm in August 2010.  Prior to joining the firm, Mark worked at the Philadelphia firm of Saltz, Mongeluzzi, Barrett & Bendesky, P.C.  Mark is a  is a 2006 graduate of Lehigh University (magna cum laude) and a 2009 graduate of the inaugural class of Drexel University School of Law (cum laude).  At Drexel, Mark served as an editor on the Drexel Law Review.

Mark has represented our clients with earnestness, intelligence, and, most importantly, empathy.  Many of our clients have commented on how much they appreciate the attention Mark pays to their cases.  Mark has tried several cases to verdict, including a federal court trial in the District of New Mexico that resulted in a plaintiff’s recovery and an 19-page  opinion addressing some very important issues of federal and New Mexico overtime law.

So congratulations to Mark Gottesfeld!  We are lucky to have him working at our firm.

 

In each of the past three years, the Third Circuit Court of Appeals (which is the appellate court for all the U.S. District Courts in Pennsylvania, New Jersey, and Delaware) has issued an opinion addressing the rules for deciding when workers should be paid for “breaks.”  All three cases interpret the Fair Labor Standards Act (FLSA) and its detailed regulations.  Since the Third Circuit only issues a handful of precedential FLSA opinions each year, it’s a little unusual so see three decisions addressing a common topic.

Here’s a quick summary of the three “break” cases:

First, in Babcock v. Butler County, 860 F.3d 153 (3d Cir. Nov. 24, 2015), a group of County correctional officers claimed that the prison violated their FLSA rights by failing to pay them for 15 minutes of their one hour meal break.  The officers claimed they should be paid for the full hour because, during the break, they were not allowed to leave the prison and were required to remain in uniform.  The Circuit Court disagreed, explaining that time spent during meal breaks must be paid only if the workers’ activities during the break are for the “predominant benefit” of the employer.  The Court then observed that the restrictions on the officers’ time (requiring the officers to remain at the prison and remain in uniform) were not very onerous in the law enforcement context and, as such, did not “predominantly benefit” the prison.  This outcome is unsurprising and, in my view, reaffirms the mantra that: “Bad facts make bad law.”  Does anyone really expect judges or juries to feel sorry for employees who (i) get a full one-hour meal break and (ii) are actually paid for 45 minutes of the break.  “Give me a break.”

Next, in Smiley v. E.I. DuPont De Nemours & Co., 839 F.3d 325 (3d Cir. Oct. 7, 2016), workers at a manufacturing plant in Towanda, PA sought pay for time spent before and after their shifts “donning and doffing their uniforms and protective gear.”  The company argued that, even if the workers were entitled to be paid for these pre-shift and post-shift activities, such unpaid time could be “offset” by the time the workers spent in paid meal breaks.  The Circuit Court disagreed with the company based on a detailed analysis of the FLSA’s statutory and regulatory language addressing wage “offsets.”  This is an extremely complicated and technical opinion.  But the resulting rule of law is clear: employers who provide workers with paid meal breaks may not use such compensation to offset unpaid time during other periods of the workday.

Finally, in Secretary of the U.S. Dept. of Labor v. American Future Systems, Inc., 873 F.3d 420 (3d Cir. Oct. 13, 2017), the Third Circuit issued the most far-reaching of the three break opinions.  There, the Court endorsed and adopted the bright-line rule that workplace breaks of under 20 minutes must be paid under the the FLSA.  The U.S. Department of Labor previously adopted this rule in an interpretive regulation described at 29 C.F.R. 785.18.  And now the Circuit Court has formally endorsed the 20-minute rule, making the unambiguous law of the land in Pennsylvania, New Jersey, and Delaware.  This is very good news for both employees (whose FLSA rights have been solidified) and employers (who benefit from easy-to-understand and administer FLSA rules).  One final observation:  the Circuit Court flatly rejected the employers’ argument that the 20-minute rule did not apply because the unpaid time was “flex-time” rather than a “break.”  This reaffirms the mantra that: “If it looks like a duck and quacks like a duck, it probably is a duck.”

I recently was asked to do a quick summary of recent Sixth Circuit FLSA opinions for a program my friend and fellow wage lawyer Bob DeRose  is giving to the Ohio Association of Justice.   As you probably know, the Sixth Circuit includes the federal courts in Kentucky, Michigan, Ohio, and Tennessee.

Here is what I came up with.  The following summary is limited to precedential opinions that (i) arise under the FLSA and (ii) have been or will be reported in the Federal Reporter.  I did my best to capture every such decision since January 2016, but I might have missed a few.  Finally, as you will see, the case Comments generally are written from the perspective of a plaintiffs-side lawyer.

Craig v. Bridges Brothers Trucking LLC, 823 F.3d 382 (6th Cir. May 19, 2016)

Holding:  District court erred in issuing summary judgment against employee who purportedly “waived” her right to overtime “by not immediately claiming is.”

Comments:  This is another good decision (see also Rosenfeld in Ninth Circuit section and Bailey in Eleventh Circuit section) in which a circuit rejects the notion that workers can waive or be estopped from asserting FLSA claims by failing to affirmatively seek additional pay or complain about the unpaid hours.  The court observes that these notions of “waiver” or “estoppel” cannot be squared with the rule that workers cannot agree to FLSA violations.  The relevant question is whether the company has actual or constructive knowledge of the unpaid work.  In other words, did the company “know or have reason to believe” the work was being done?  The company can be liable if it “should have discovered [the unpaid work] through the exercise of reasonable diligence.”

Hughes v. Gulf Interstate Field Services, Inc., 878 F.3d 183 (6th Cir. Dec. 19, 2017)

Holding:  District court erred in granting summary judgment against welding inspectors paid on a day-rate basis because a jury could find that their weekly salary was not “guaranteed.”

Comments:  This case addresses the salary basis regulations and the requirement that the salary be “guarantee[d].”  29 C.F.R. § 541.604(b).  In a split decision, the Court held that this requirement could be violated if the company’s policy makes it possible that the employees can receive less than their guaranteed salary even if, in practice, the plaintiff employees always received their full salary.

Lutz v. Huntington Bancshares, Inc., 815 F.3d 988 (6th Cir. March 2, 2016)

Holding:  District court did not err in entering summary judgment ruling that residential loan underwriters “were administrative employees within the meaning of 29 U.S.C. § 213(a)(1) and 29 C.F.R. § 541.200(a), and therefore exempt from the overtime-pay provisions because their job duties related to the general business operations of the Bank, and they exercised discretion and independent judgment when performing those duties.”

Comments:  This is a split decision.  The majority surveys the various administrative exemption decisions involving loan underwriters, and that discussion is worth reading.  The dissent convincingly argues that disputed facts regarding the administrative exemption requirements should preclude summary judgment.  Administrative exemption cases are just very tough.  The requirements described in 29 C.F.R. § 541.200, et seq., are elusive and almost always can “go either way.”  The more administrative exemption cases I read, the more I become convinced that the outcomes are almost always “results-oriented.”   

Monroe v. FTS USA, LLC, 815 F.3d 1000 (6th Cir. March 2, 2016) (Monroe I)

Holding:  (1) District court properly refused to “decertify” the FLSA collective.  (2) Use of “representative testimony” at trial for both damages and liability purposes was proper.  (3) It is permissible for the judge – rather than the jury – to calculate damages based on the jury’s findings regarding hours worked by the collective.

Comments:  This is a must-read for any lawyer facing a decertification motion or going to trial in an FLSA collective action.  The court’s denial of decertification is thorough and has a great discussion of the efficiencies fostered by the collective action device and the fact that the FLSA’s “similarly situated” analysis is less demanding than Rule 23(b)(3)’s commonality and predominance inquiries.

Monroe v. FTS USA, LLC, 860 F.3d 389 (6th Cir. June 21, 2017) (Monroe II)

Holding:  The Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016), does not alter the outcome of Monroe I (discussed above).

Comments:  This opinion is even better than Monroe I.  It provides a great roadmap for defeating decertification motions and, as importantly, demonstrates how – contrary to the assertions of defense counsel in almost every class/collective action – the rights of large groups of employees can be tried to a jury in a fair and efficient manner.

NLRB v. Alternative Entertainment, Inc., 858 F.3d 393 (6th Cir. May 26, 2017)

Holding:  Worker not prevented from pursuing an FLSA collective action even though he signed an arbitration agreement containing a class waiver because the class waiver violates the National Labor Relations Act.

Comments:  This decision (along with a similar decision from the Ninth Circuit and a contrary decision from the Fifth Circuit) is on appeal at the Supreme Court.  Oral argument was conducted in October 2017, and the Supreme Court will be ruling soon!!!   

Perry v. Ranstad Genral Partner (US) LLC, 876 F.3d 191 (6th Cir. 2017)

Holding:  (1) District court correctly granted summary judgment in favor of staffing company that asserted that “Account Managers” were covered by the administrative exemption; (2) District court erred in granting summary judgment in favor of staffing company that asserted that “Staffing Consultants” were covered by the administrative exemption; (3) District court erred finding that company entitled to the FLSA’s “good faith” defense.

Comments:  The first half of this opinion delves into the administrative exemption’s requirement that the covered employee’s “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”  29 C.F.R. § 521.200(a)(3).  The administrative exemption is especially boring, so cases analyzing the exemption are generally boring.  This opinion fits the mold.  The Court basically draws a distinction between the Account Manager position (which purportedly required a lot of independent judgment) and the Staffing Consultant position (which purportedly was a sales job).  As I have said many times, administrative exemption cases are very, very tough when the plaintiff holds an office job and gets paid a good salary.  It’s just really easy for the employer to make any office job seem more complicated and important than it really is.  That brings us to the second half of the opinion, which has some very nice analysis if the “good faith” defense.  This defense allows an employer to escape liability when its conduct was done “in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation, of the [DOL].”  29 U.S.C. § 259.  Adopting the reasoning of Judge Black in Swigart v. Fifth Third Bank, 870 F. Supp. 2d 500 (S.D. Ohio 2012), the Court explains that “[a]n employer cannot avail itself of the defense unless it relied on a DOL interpretation that specifically addresses its circumstances,” and that “[t]he administrative interpretation relied upon must provide a clear answer to the particular situation in order for the employer to rely on it.”  (internal quotations and citations omitted; emphasis supplied).  This is really important language because, in the absence of a specificity requirement, the good faith defense could swallow up many FLSA disputes.

Stein v. hhgregg, Inc., 873 F.3d 523 (6th Cir. Oct. 12, 2017)

Holding:  District court improperly dismissed complaint against retail sales people under the FLSA’s “retail or service” exemption.

Comments:  This is another favorable opinion drafted by Judge Moore.  This opinion deals with the FLSA’s retail/service exemption codified at 29 U.S.C. § 207(i).  First, the Court observes that the exemption only applies to overtime claims, not to minimum wage claims.  Thus, the district court erred by relying on the exemption to dismiss the salespeoples’ minimum wage claim.  Next, the Court delves into the exemption’s requirement that the salespeoples’ “regular rate of pay [be] in excess of one and one-half the minimum hourly [wage]” and addresses the issue of whether the company’s “draw against commission” policy violated this requirement.  Under the policy, the salespeople took a weekly draw against commissions whenever their actual commissions were not sufficient to satisfy the minimum wage.  The Court had no problem with this aspect of the policy.  However, the policy also enabled the company to require the employee to pay back any outstanding draw payments at the time of termination.  Even though this never actually happened, the Court held that the mere existence of such retroactive deductions could violate the well-established principle that minimum wage payments must be “free and clear” of deductions.

Vance v. Amazon.com, Inc., 852 F.3d 601 (6th Cir. March 31, 2017)

Holding:  Uncompensated time that Amazon.com warehouse workers spend engaged on post-shift security screening activities is not compensable under the Kentucky Wage and Hours Act.

Comments:  In 2014, the Supreme Court decided Integrity Staffing Solutions, Inc. v. Busk, 135 S. Ct. 513, 190 L. Ed. 2d 41 (U.S. 2014), which held that uncompensated time that Amazon.com warehouse workers spend engaged on post-shift security screening activities is not compensable due to the Portal-to-Portal amendments to the FLSA.  In Vance, the workers argued that such Portal-to-Portal principles did not apply under Kentucky law.  The Sixth Circuit disagreed, reasoning that the Kentucky state legislature never manifested any intention to deviate from the FLSA.

Pete Winebrake will be the guest speaker at the March 2018 meeting of the Southeastern Pennsylvania Chapter of the Society for Human Resource Management (SHRM).  Mr. Winebrake will be speaking about recent developments in wage and hour law.  The SHRM mostly consists of HR professionals and “management-side” lawyers.  Mr. Winebrake — who never represents employers — very much appreciates the opportunity to providing this distinguished group with some insights from the “plaintiffs’ lawyer’s” perspective.  You can learn more about the program by clicking HERE.

We are happy to announce that today Magistrate Judge Maria Valdez granted our motion for final approval of the class and collective action settlement of this case on behalf of salaried managers at T-Mobile retail stores who worked for TCC Wireless.  A copy of the Court’s order is available here.

We represent salaried Store Managers who worked at Joe’s Quick Mart convenience stores and did not receive overtime pay.  You can learn more about this case, by visiting our Joe’s Quick Mart page.

We are very pleased that the Federal Judge overseeing this lawsuit adopted the Magistrate Judge’s Report and Recommendation and conditionally certified the following collective:  “All individuals who, during any time within the past three years, were employed by SMG Group, LLC or any of its affiliated companies as salaried Store Managers and classified as overtime-exempt.”  A copy of the order is available here.  Judge Mariani also ordered the parties to submit draft language for the notice that will be mailed to the Store Managers.

Yesterday, Judge Catherine C. Eagles of the Middle District of North Carolina approved a $1,725,000 settlement covering over 1,500 servers at 49 IHOP restaurants located throughout the south.  The servers were represented by Winebrake & Santillo and co-counsel Migliaccio & Rathod LLP and Whitfield Bryson & Mason LLP.  The servers allege that the operator of the IHOP restaurants, CFRA, LLC, violated federal wage laws by paying them a tipped minimum wage of $2.13 per hour and requiring them to perform significant side-work tasks such as cleaning the restaurant and rolling silverware.

A copy of Judge Eagles’ order is available here.

Yesterday, Judge John E. Jones, III of the Middle District of Pennsylvania approved a $185,000 collective action settlement for servers at Quaker Steak & Lube Restaurants in Mechanicsburg and York Pennsylvania.  Winebrake & Santillo represented the 101 servers in this case who alleged that the restaurant violated federal and Pennsylvania wage and hour law by requiring them to share a portion of their tips with individuals working as Expediters (or “Expos”).  The servers alleged that the Expediters were really back of the house staff who did not have sufficient customer contact to receive tips from the servers.

You can read a copy of the Court’s order here.

We represent salaried Store Managers who worked at Joe’s Quick Mart convenience stores and did not receive overtime pay.  You can learn more about this case, by visiting our Joe’s Quick Mart page.   We are very pleased that, earlier today, a Federal Magistrate Judge issued a 10-page opinion recommending that the Store Managers’ “conditional certification” motion be granted.  This opinion contains a nice summary of the lenient conditional certification standard.  If the Federal District Judge adopts this recommendation, we will be able to notify all the Store Managers of the lawsuit.

Hats off to Eastern District of Pennsylvania Judge Paul Diamond for his January 9, 2018 Order refusing to approve an FLSA settlement that required workers to release claims that extend beyond the scope of the lawsuit.  Lexis subscribers can find the one-page order — which relies on two other EDPA decisions — at Hoover v. Mid-Atlantic Lubes, Inc., 2018 U.S. Dist. LEXIS 7480 (E.D. Pa. Jan. 9, 2017).  All of us wage an hour lawyers — on both sides of the “v.” — have been guilty of overlooking the rule that FLSA settlements should not include broad waiver language.  But, in recent years, federal judges have been cracking down and enforcing the rule.  And that is a good thing.

The Sixth Circuit Court of Appeals — which covers Kentucky, Michigan, Ohio, and Tennessee — recently issued an important overtime rights opinion in Hughes v. Gulf Interstate Field Services, Inc., No. 17-3112 (6th Cir. Dec. 19, 2017).    This case involved pipeline welding inspectors employed in the fracking industry.  The inspectors made over $100,000 per year but did not receive extra overtime pay for hours worked over 40 per week.  The pipeline company asserted that the inspectors were not entitled to overtime pay because they fell within the FLSA’s  “highly-compensated employee” exemption, which can be found at 29 C.F.R. 541.601.  An Ohio district court judge agreed, and threw out the case.  The Sixth Circuit reversed, explaining that, based on the evidence, a jury could reasonably find that the inspectors were “day-rate” employees, rather than employees paid on a “salary or fee basis” and “guaranteed” to make at least $455/week.   In my view, the important takeaway from Hughes is that, under the highly-compensated exemption, it is not enough for an employee to merely make over $100,000 annually.  He/she must also be guaranteed “guaranteed” to earn a minimum weekly payment.  Thus, few “day-rate” employees can fall within the exemption.

On January 14, 2009 — a mere six days before President Barack Obama was sworn into office — the U.S. Department of Labor’s Wage and Hour Division issued a bunch of Opinion Letters that mostly interpret the FLSA in a restrictive manner.  A few weeks later, the Obama administration “withdrew” the eleventh-hour opinion letters for “further consideration.”

The Bush Administration’s eleventh-hour Letters were never re-issued or modified because the Obama Administration decided to eliminate the use of Opinion Letters  in favor of more generalized — and, in my opinion, more helpful — Administrator Interpretations.  Opinion Letters often are of dubious value to the general public because the Letters (i) tend to be extremely fact-specific and (ii) often are based on “assumptions” regarding essential background facts.

Well, the January 2009 Opinion Letters are back.  On January 5, 2018, the Trump Administration’s Acting Wage and Hour Administrator re-issued 17 Opinion Letters that were withdrawn in March 2009.

Most of the Opinion Letters favor employers over workers.  Also, 7 of the 17 Letters concern the FLSA’s Administrative Exemption and reflect the growing prominence of that exemption in overtime rights law.

The following is my very brief summary of the outcome reached in each of the 17 Opinion Letter (along with links to the full text of the letters):

FLSA 2018-1:  Ambulance workers not entitled to be paid for their “on-call” time.

FLSA 2018-2:  Sales/Service Technicians employed by Plumbing Company are overtime-exempt under the Retail Sales Exemption.

FLSA 2018-3:  Helicopter Pilots not covered by the Professional Exemption and, therefore, are entitled to overtime pay.  Notwithstanding, DOL will take a position of “non-enforcement” with respect to most helicopter pilots.

FLSA 2018-4:  Project Superintendents employed by a commercial construction company are overtime-exempt under the Administrative Exemption (but not the Executive or Professional Exemptions).

FLSA 2018-5:  Under FLSA Section 7(k), the “regular rate” was not properly calculated for Firefighters but was properly calculated for Alarm Operators.

FLSA 2018-6:  Coaches  without a teaching certificate overtime-exempt under the Professional Exemption pursuant to the regulations applicable to teachers.

FLSA 2018-7:  Under 29 C.F.R. 541.602, deductions from the salary paid for a worker covered by the white-collar exemptions can be made based on the number of hours in which the employee was absent from work during a scheduled workday as long as the employee was absent for the entire workday.

FLSA 2018-8:    Client Service Managers employed by insurance company are overtime-exempt under the Administrative Exemption.

FLSA 2018-9:   Non-discretionary, year-end bonus  based on the prior year’s regular and overtime earnings does not trigger additional overtime pay obligations.  This Opinion Letter contradicts and overturns a prior Opinion Letter issued in 1973.

FLSA 2018-10:    Project Supervisor employed by residential home construction company is overtime-exempt under the Administrative Exemption.

FLSA 2018-11:  “Job Bonus” payments of $100 per day made to hourly oil and gas employees must be included in the “regular rate” when calculating the amount of overtime pay owed.

FLSA 2018-12 (mis-dated December 17, 2017):  Certain “Consultants,” “Clinical Coordinators,” “Coordinators,” and “Business Development Managers” employed by health care company are overtime-exempt under the Administrative Exemption.

FLSA 2018-13:  Addresses whether various salaried employees working for company that investigates insurance claims are covered by the Administrative Exemption.  Found that employees holding the position of “Field Information Analyst” and “Supervisory Special Agent” are overtime-exempt, while employees holding the “Analyst” position are non-exempt.

FLSA 2018-14:  If a salaried-exempt employee is absent for a full workday and does not have enough time in his or her leave bank to cover the entire absence, the employer may deduct the salary to account for any portion of the full-day absence not covered by the leave bank.  Also, as in FLSA 2018-7 (discussed above), salary deductions may be based on the number of hours in which the employee was absent from work during a scheduled workday as long as the employee was absent for the entire workday.

FLSA 2018-15:  “Out-of-Town Coordinators” employed by a national product demonstration company overtime-exempt under the Administrative Exemption.

FLSA 2018-16:  EMTs who purportedly spend some weekly work hours “volunteering” for local firehouse and other weekly work hours working for a for-profit company that provides services to the same firehouse are entitled to overtime pay based on their combined weekly work hours in the FLSA’s horizontal joint-employment criteria can be met.

FLSA 2018-17:  This Letter attaches a previously-issued Opinion Letter in response to an inquiry regarding the overtime-exempt status of Construction Supervisors employed by a residential homebuilder.  I cannot figure out what Opinion Letter is attached due to a broken link in the DOL website.  Although it is quite possible that the attached letter is FLSA 2018-10 (discussed above).

 

 

 

 

The Third Circuit Court of Appeals recently issued a very worker-friendly opinion entitled Secretary U.S. Dept. of Labor v. American Future Systems, Inc., 873 F.3d 420 (3d Cir. 2017).  You can read a copy of the opinion HERE.

In this case, the employees worked from home as Sales Representatives, and the company only paid them for time they were logged-in to their computer systems.  Under the company’s “flex time” policy, the employees were free to “take breaks from work at any time, for any reason, and for any duration.”  The company did not pay the employees for any breaks lasting more than 90 seconds.

The Court explained that the company’s policy violated the U.S. Department of Labor’s regulation entitled “Rest” and located at 29 C.F.R. 785.18.  This regulation provides, in part:  “Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked.”

The Court explained that the above regulation represents a longstanding, “bright line” rule that promotes certainty and predictability in determining when rest or break periods must be paid.  The fact that the company wrapped the unpaid breaks into a “flex time” policy as irrelevant.

A Federal Judge in New Jersey recently issued a short and concise opinion allowing an employee covered by an FLSA collective action to join (or “opt-in”) to an overtime rights lawsuit even though the filing deadline had expired.  The decision is entitled Mejia v. Blue Bay Enterprises, LLC, 2017 U.S. Dist. LEXIS 166014 (D.N.J. Oct. 6, 2017) and is available HERE.    

The Judge ruled that the employee was excused from meeting the filing deadline because he suffered from a “severe back injury” during the notice period.  The Judge explained that the following four factors must be considered in deciding whether to accept an employees’ late opt-in form:  (1) the danger of prejudice to the employer; (2) the length of the delay and its potential effect on the judicial proceedings; (3) the reason for the delay; and (4) whether employee acted in good faith.

While the federal, New Jersey, and Pennsylvania Labor Departments enforce the federal and state overtime laws, most wage and overtime lawsuits are bought by private law firms like ours.  Workers often can join these lawsuits by returning a judicially approved form.  The recent Mejia decision explains how to analyze situations in which workers file their forms late.

Here is some good news for Pennsylvania workers and their advocates:  On December 22, 2017, Pennsylvania Superior Court Judge Geoffrey Moulton issued a scholarly 44-page opinion explaining that, under the Pennsylvania Minimum Wage Act (“PMWA”), Pennsylvania employers may not use the dreaded “half-time” method in determining the amount of extra overtime pay owed to salaried workers.  The case is Chevalier v. General Nutrition Centers, Inc., and a copy of Judge Moulton’s majority opinion in  is available HERE.  Although several federal district court judges have issued similar opinions, seee.g.Verderame v. RadioShack Corp., 31 F. Supp. 3d 702 (E.D. Pa. 2014), this is the first time a Pennsylvania appellate court has confronted the issue.  Here is what you need to know:

Under the federal overtime law (known as the Fair Labor Standards Act or the “FLSA” for short), employers required to make overtime payments to salaried employees usually can get away with calculating the extra pay based on a “half-time” methodology.  I won’t bore you with too many details, but this method has its genesis in the U.S. Supreme Court’s 1942 decision in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942),  and was later codified by the Department of Labor at 29 C.F.R. 778.114.  The FLSA’s half-time method is sometimes referred to as the “Missel” method or the “fluctuating workweek” method.

Regardless of the nomenclature, the FLSA’s half-time method is bad for salaried workers.   Here’s how the half-time method works:  Ann is an Assistant Manager at a convenience store and is paid a salary of $500 per week.  On a particular week, she works a total of 50 hours.  So now the boss needs to determine how much extra overtime pay is owed to Ann.  Under the half-time method, the boss must divide Ann’s $500 salary by her 50 hours of work to convert her salary to a regular pay rate of $10/hour.  Then, the boss is allowed to assume that Ann already received $10 for each of her 10 overtime hours.  Thus, the boss is merely required to provide Ann with extra half-time pay for her 10 overtime hours.  In other words, Ann receives an extra $50 ($5 X 10 hours) for her 10 hours of overtime work.

The Superior Court’s new Chevalier opinion addresses whether the above half-time approach is allowed under the PMWA.  This gets a little complicated, but, when Judge Moulton’s lead opinion is combined with the concurring opinion and the dissenting opinion, we are left with two important holdings:

First, a majority of the panel endorsed the FLSA’s practice of converting the salary to a regular hourly rate by dividing the salary by all hours worked.  In taking this approach, the Superior Court rejected the worker’s argument that the regular rate should be determined by dividing the salary by 40 hours.

Second, a majority of the panel rejected the company’s argument that a worker’s extra overtime pay should be limited to a mere half-time rate for the overtime hours.  Instead, the worker must receive extra overtime pay calculated at 150% (or “time and one-half”) of the regular rate.  This second holding represents an excellent result for Pennsylvania workers.

Let’s go back to Ann, our convenience store Assistant Manager who, under the half-time method, was entitled to an extra $50 for her 10 overtime hours.  Under the PMWA’s Chevalier method, Ann’s $500 salary would still translate to a $10/hour regular pay rate.  But, she is now entitled to $15 (150% of $10) for every overtime hour, bringing her total extra overtime pay to $150 ($15 X 10 hours) rather than the skimpy $50 she was entitled to under the FLSA’s half-time method.

So Pennsylvania workers have good reason to thank Superior Court Judge Geoffrey Moulton this Holiday Season for his extensive and scholarly opinion in Chevalier.

I just read a new Report issued by the Economic Policy Institute that discusses the significant increase in the amount of unpaid wages recovered by the Department of Labor.  The Report can be found HERE.  The Report is eye-opening, but it fails to mention that even more money is recovered for workers through private wage lawsuits in which private law firms like ours represent the workers.

Today, Attorney Pete Winebrake was quoted in an article in the Philadelphia Inquire which mentions some of our recent successes recovering unpaid wages for restaurant employees (such as servers and bartenders) who were required to share their tips with back-of-house staff such as expos and silverware polishers.  You can access a copy of the article here.

We are continuing to investigate restaurants in Philadelphia that allow ineligible employees to receive money from servers’ tip pool.  We’d be happy to speak with you to determine whether you may have a viable legal claim. Just give us a call at 215-884-2491 for a totally free and confidential consultation with one of our attorneys.

In recent weeks, much has been written about the Notice of Proposed Rulemaking issued by the U.S. Department of Labor’s Wage and Hour Division on December 5, 2017.  A copy of the Notice, as published in the Federal Register, can be found by clicking HERE.

When I read the Notice, I was relieved to see that the proposed rule will have limited reach.  Here’s why:

Many restaurants require that customer tips be contributed to a “tip pool,” which is then distributed to the servers and other restaurant employees.  The general rule provides that tip pool proceeds can only be shared with restaurant employees who spend at least some time interacting with restaurant customers.  Seee.g.Montano v. Montrose Restaurant Associates, Inc., 800 F.3d 186, 193 (5th Cir. 2015); Ford v. Lehigh Valley Restaurant Group, Inc., 2014 U.S. Dist. LEXIS 92801, *10 (M.D. Pa. July 9, 2014); Pedigo v. Austin Rumba, Inc., 722 F. Supp. 2d 714, 730 (N.D. Tx. 2010).  Such employees include bussers, food runners, and hosts/hostesses.

Crucially, the DOL’s proposed rulemaking does not purport to alter the above rule for restaurants that utilize a “tip credit” in satisfying their minimum wage obligations to servers.  That is a big relief, since, outside of a few Western states, most restaurants (i) utilize the tip credit and (ii) are unlikely to stop utilizing the tip credit any time soon.

The proposed rulemaking will eliminate restrictions on tip pool distributions for restaurants that do not utilize the tip credit in paying the servers.  Thus, if a restaurant pays servers the full minimum wage without relying on the tip credit, then it can allow back-of-the-house kitchen workers to share in tip pool proceeds.

I am not suggesting that the proposed rulemaking constitutes good public policy or protects workers.  Clearly it does neither.  But it could be worse.

The settlement of an overtime class/collective action lawsuit filed by Winebrake & Santillo and co-counsel Werman Salas P.C. on behalf of managers at T-Mobile retail stores was recently highlighted by Law360.

This lawsuit alleged that the salaried managers were misclassified as “exempt” (or not eligible) for overtime pay when they worked over 40 hours in a week.  If you would like more information about this lawsuit or the overtime claims made by the managers, feel free to give us a call at (215) 884-2491 or visit the page on our website dedicated to this case.

As you remember our military veterans this Memorial Day, you might take a moment to read a new report by the Economic Policy Institute.  The Report, available by clicking HERE, explains that one out of five veterans will see their wages increase if the minimum wage is increased to $15 per hour.  The current minimum wage is only $7.25 per hour under both federal and Pennsylvania law.

Winebrake & Santillo, LLC has received a First Tier ranking on the 2018 Best Law Firms List in Philadelphia for both “Employment Law – Individuals” and “Litigation-Labor and Employment” by U.S. News-Best Lawyers® “Best Law Firms”.  The annual rankings, done by the U.S. News and World Report, recognize firms for professional excellence with persistently impressive ratings from clients and peers.  For more information about this recognition, you can visit the following website:  http://bestlawfirms.usnews.com/profile/winebrake-santillo-llc/overview/64731

 

We represent home health aids who are employed in several Philadelphia-area Comfort Keepers franchises and seek to recover overtime pay for hours worked over 40 per week.   The lawsuit is proceeding as a class action arbitration at the American Arbitration Association.  You can learn more about this lawsuit by visiting our Cases and Investigations page.  As indicated there, Judge Joseph A. Smyth of the Montgomery County Court of Common Pleas rejecting the company’s attempts to prevent the arbitration from going forward as a class action.  Click here for a copy of Judge Smyth’s opinion.

Also the Philadelphia Legal Intelligencer recently wrote an article about Judge Smyth’s opinion.  Click here for a copy of the article.

As you can see from our “Cases and Investigation” page, we have been representing a group of 15 servers from a few Chili’s restaurants in PA and NJ.  This case only covers 15 servers because the federal court ruled that the servers were not allowed to pursue their claims on a “class action” basis due to the language in arbitration agreements the servers were forced to sign as a condition of employment.  Anyway, we were able to reach a settlement for our 15 hard-working clients.  On September 29, 2017, the federal court approved the settlement as fair, and I just read an informative article about the settlement in the Allentown Morning Call.  Here is a link to the Morning Call article:  http://www.mcall.com/news/police/mc-biz-chilis-server-wage-settlement-20171002-story.html.

I also noticed that Catherine Ruckelshaus of the National Employment Law Project (“NELP”) is quoted in the Morning Call article.  NELP is a terrific organization, and you can visit its website by clicking here:  http://www.nelp.org/

I traveled to Washington today to attend the Supreme Court’s argument in the consolidated cases of  Epic Systems Corp. v. Lewis (No. 16-285), Ernst & Young LLP v. Morris (No. 16-300), and NLRB V. Murphy Oil USA (No. 16-307).  A tsunami of lawyers descended on the Courthouse.  So many, in fact, that myself and other employment law geeks were relegated to the Lawyers Lounge, where the live argument was piped in.  Nevertheless, a good time was had by all, as we burned a “vacation day” watching lawyers and judges debate whether class waivers in employment arbitration agreements are unenforceable under the FAA’s savings clause due to the NLRA provision allowing workers to engage in concerted activity.

Here are my observations:

First, the four “liberal” judges (Ginsberg, Breyer, Kagan, and Sotomayor) asked way more questions than the others.  A few of these questions concerned the notion that, in real-life, these agreements do not manifest a bargain between parties with equal bargaining power.  Justice Ginsberg, for example, asserted that the FAA was enacted to deal with commercial contracts and viewed employment arbitration agreements as the types of “yellow dog” contracts that the Norris-Laguardia Act was intended to outlaw.  A couple of other Justices used the word “commercial” in describing the types of agreements contemplated by the FAA.

Second, there was very little discussion of Concepcion or United Colors.  I found this surprising.  When these precedents did come up, Justice Kagan tried to emphasize that Concepcion addressed state law limitations on arbitration, whereas today’s cases concern an alleged conflict with federal NLRA rights.

Third, it seemed like Justices Breyer and Kennedy wanted to detach the argument from “class actions.”  Both posed questions based on hypotheticals in which 2 or 3 employees seek to pursue their rights together in court, arbitration, or some other forum.  Breyer suggested that such analysis enabled the Court to focus on the interplay between the NLRA and the FAA’s savings clause without getting “bogged down” in Conception and class actions.  The employers seemed to concede that the applicable waiver language would prohibit even small groups of 3-4 workers from banding together.  However, the employers argued that these small groups could still achieve some economies of scale by, for example, retaining the same lawyer.  This argument did not seem too satisfactory.

Fourth, some of the most interesting questions surrounded the NLRB’s assertion that the NLRA only prohibits employers from restricting concerted action.  Thus, according to the NLRB, an arbitration provision would not be illegal if it (i) mandates arbitration without explicitly banning collective litigation but (ii) the selected arbitral forum (e.g AAA or JAMS) enacts rules that make it really difficult for workers to proceed collectively.  That’s because, under these circumstances, the restrictions on arbitration are implemented by the arbitral forum; not the employer.  Put differently:  the NLRA merely gives workers the right to attempt to proceed collectively under the procedural rules of the forum where the dispute winds up.  This concept seemed to be especially important to the Justices Breyer and Kennedy.  For example, Justice Kennedy asked if there’s anything wrong with compelling a worker to an arbitral forum that had a bright-line rule that disputes involving fewer than 51 employees could not go forward collectively.  Breyer weighed in that such requirements are similar to Rule 23 in the judicial context.

My Takeaway:  In my humble opinion, Justice Breyer was the “star” of the argument.  His questions and observations seemed to reveal an attempt to carve out a narrow rationale that Justice Kennedy can join.  I think such a strategy entails (1) not getting bogged down in Concepcion or the “class action” device and (2) acknowledging that the pertinent arbitral forum might have procedural requirements that make class litigation difficult (but not impossible) to obtain.  The goal, it seems to me, is to draft an opinion holding that arbitration clauses cannot contain waivers that strip workers of the opportunity to attempt to pursue collective litigation in some forum (judicial, arbitral, or administrative) under the forum’s particular procedural guidelines.

On March 21, 2017, the Pennsylvania Superior Court handed down and important decision that is worth reading if you are a Pennsylvania wage and hour attorney.  The decision is captioned Andrews v. Cross Atlantic Capital Partners, Inc., No 1694 EDA 2014 and is available through this link: http://www.pacourts.us/assets/opinions/Superior/out/j-e02005-16do.pdf#search=%22ANDREWS V. CROSS ATLANTIC%22

The Andrews Court held that a plaintiff who proves that the employer failed to pay her wages under both a breach of contract and a Pennsylvania Wage Payment and Collection Law (PWPCL) theory can recover both prejudgment interest (available under breach of contract theory) and liquidated damages (available under the PWPCL theory).  The Court explains that the PWPCL is meant to supplement — not supplant — the breach of contract claim.  The decision also contains some helpful language regarding the PWPCL’s legislative purpose and burden of proof issues.  You will see what I mean if you read the opinion.

In the past few years, federal district courts in Pennsylvania have been extremely hostile towards FLSA settlements in which the Plaintiffs release claims that extend beyond wage and hour claims.  In this regard, Pennsylvania wage and hour lawyers are directed to the following examples, which we hope you will find helpful: Altnor v. Preferred Freezer Services, Inc., 2016 U.S. Dist. LEXIS 92786, *34-35 (E.D. Pa. July 18, 2017); Rubbo v. PeopleScout, Inc., 2017 U.S. Dist. LEXIS 72578, *7-9 (E.D. Pa. May 11, 2017); Kraus v. PA Fit II, LLC, 155 F. Supp. 3d 516, 532-33 (E.D. Pa. 2016); Howard v. Philadelphia Housing Authority, 197 F. Supp. 2d 773, 779-80 (E.D. Pa. 2016); Bettger v. Crossmark, Inc., 2015 U.S. Dist. LEXIS 7213, *22-26 (M.D. Pa. Jan. 22, 2015).

 

Our law firm exclusively represents workers in wage and overtime litigation.  Our cases range from “single-plaintiff” lawsuits worth a few thousand dollars to class action lawsuits worth millions.  We have enjoyed great success by focusing on the quality – rather than the size – of our client’s claims.

Many of our cases are referred to us by our friends at other law firms.  As a result, we have had the great pleasure of writing hundreds of referral fee checks to fellow lawyers.  We enjoy paying referral fees and we always pay a fair referral fee.

We are happy to provide you with this “18-Month Referral Fee Report.”  It summarizes the various referral fees we’ve paid between January 1, 2016 and July 20, 2017.  During this 18-month period, we’ve paid referral fees in 42 cases totaling $405,515.  These referral fees range from a high of $109,259 to a low of $500.  If you have referred us clients in the past, thanks so much.

The following table summarizes the types of wage/overtime claims that have generated referral fees over the past 18 months.  We hope this information will give you a “flavor” for the types of claims we handle:

 

Alleged Violation Date Referral Fee Amount
Nurse not paid for all charting and telephone time July 2017 $858  referral fee
Water truck drivers not paid overtime July 2017 $24,299  referral fee
Salaried office “managers” not paid overtime July 2017 $15,585  referral fee
Gas well employee’s overtime pay miscalculated June 2017 $1,709  referral fee
Call center employees not paid for pre-shift work May 2017 $22,343  referral fee
Satellite dish installer not paid overtime May 2017 $500  referral fee
Salaried warehouse “manager” not paid overtime May 2017 $743  referral fee
Call center employee not paid for pre-shift work May 2017 $3,000  referral fee
Hardware store “manager” not paid overtime May 2017 $20,121  referral fee
Kitchen worker not paid for all work hours April 2017 $783  referral fee
Home health aid not paid overtime April 2017 $555  referral fee
Construction workers not paid for all recorded work April 2017 $1,123  referral fee
Pharmaceutical salesperson denied bonus Feb. 2017 $1,596  referral fee
Oil well inspector not paid overtime Feb. 2017 $1,005  referral fee
Restaurant “manager” not paid overtime Jan. 2017 $4,375  referral fee
Armored car guards/drivers not paid overtime Jan. 2017 $13,352  referral fee
Convenience store employees not paid overtime Dec. 2016 $1,972  referral fee
Delivery driver subjected to improper pay deductions Nov. 2016 $9,600  referral fee
Waitress required to share tips with kitchen staff Nov. 2016 $1,017  referral fee
Visiting nurse not paid for all “charting” time Oct. 2016 $3,410  referral fee
Gas rig workers not paid overtime Oct. 2016 $11,168  referral fee
Doctor’s office “administrator” not paid overtime Oct. 2016 $600  referral fee
Housing authority employee not paid for all work hours Sept. 2016 $914  referral fee
Home health aid not paid overtime Sept. 2016 $3,225  referral fee
Construction site “flaggers” not paid overtime Aug. 2016 $3,644  referral fee
Construction foreman not paid overtime Aug. 2016 $1,072  referral fee
Home health aids not paid overtime Aug. 2016 $39,500  referral fee
Billboard salespeople not paid for all work hours July 2016 $3,913  referral fee
Electrician not paid overtime July 2016 $4,070  referral fee
Tuxedo warehouse employee not paid for all work hours June 2016 $1,838  referral fee
Landscapers’ overtime pay miscalculated June 2016 $19,506  referral fee
Gas rig workers not paid overtime May 2016 $30,426  referral fee
Gas rig workers not paid overtime May 2016 $25,250  referral fee
Servers required to share tips with kitchen staff May 2016 $109,259  referral fee
Convenience store employee not paid overtime May 2016 $1,038  referral fee
Real estate agent denied commission April 2016 $2,406  referral fee
Salesperson’s overtime pay miscalculated April 2016 $2,485  referral fee
Home health aid not paid overtime April 2016 $911  referral fee
Motel “manager” not paid overtime April 2016 $1,945  referral fee
Gas Rig worker not paid overtime March 2016 $2,977  referral fee
Beef processing workers not paid for pre-shift work March 2016 $8,474  referral fee
Gas rig workers not paid overtime Jan. 2016 $2,948  referral fee

 

If you have previously referred us cases, we greatly appreciate the confidence you have placed in our firm.  If you have never referred us a case, we hope you will keep us in mind if the need arises in the future.

Today, Judge Peter J. Messitte of the United States District Court for the District of Maryland entered judgment against Heartland Dental and in favor of three Salaried Office Managers represented by Winebrake & Santillo and co-counsel.  This judgment represented over $28,000 in unpaid wages and liquidated damages. Copies of the Court’s opinion and judgment are linked.

The lawsuit alleged that Heartland Dental violated wage laws by failing to pay salaried office managers any compensation, including overtime premium compensation, for hours worked over 40 per week.

If you would like to learn more about the lawsuit against Heartland Dental or the judgment please call our office at (215)-884-2491. One of our attorneys would be happy to help answer any questions you may have.

On May 17, 2017  Judge James Munley of the United States District Court for the Middle District of Pennsylvania granted our Motion for Conditional Certification. In accordance with the Court’s ruling, notice will be mailed out in the coming weeks to all individuals who, during any time within the past three years, worked as oil and gas workers for Linde Corporation.  A copy of the Court’s order is attached here.

The lawsuit alleges that Linde Corporation violated the law by failing to pay these workers overtime premium compensation for all hours worked over 40 per week.

If you or one of your friends or relatives worked at Linde Corporation please feel free to call us at 215-884-2491.  One of our attorneys would be happy to speak with you.

On May 11, 2017  Judge Renee Bumb of the United States District Court for the District of New Jersey granted our Motion for Conditional Certification. In accordance with the Court’s ruling, notice will be mailed out in the coming weeks to all “individuals who, during any time within the past three years, worked as servers and/or bartenders at the Harvest Seasonal Grill & Wine Bar located in Moorestown, New Jersey”. A copy of the Court’s order is attached here. 

The lawsuit alleges that Harvest violated state wage law by requiring servers at its Moorestown restaurant to contribute a portion of their tips to a tip pool that was shared with expediters otherwise known as “Expos.”

If you or one of your friends or relatives worked as a server at any one of the Harvest Seasonal Grill & Wine Bar restaurants feel free to call us at 215-884-2491.  One of our attorneys would be happy to speak with you.

The Economic Policy Institute recently published a report on the prevalence and magnitude of minimum wage theft in the 10 most populous US states. The study found that minimum wage violations, when workers are paid below the hourly minimum wage rate, gravely impact low-paid workers and their communities. The EPI concludes that “if the findings for these states are representative for the rest of the country, they suggest that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year”.

Minimum wage violations are one form of wage theft. Others include overtime violations, off-the-clock violations, meal break violations, pay stub and illegal deductions, tipped minimum wage violations, and employee misclassification violations. If you believe you have been cheated wages and would like to know more about your rights please call our office today at (215)-884-2491, one of our attorneys would be happy to speak with you.

If you are interested in reading more about the EPI report on wage theft please click here.

On April 3rd, 2017, the Economic Policy Institute published an article on the newly proposed Working Families Flexibility Act (WFFA). The act would amend the Fair Labor Standards Act (FLSA) to “allow private-sector employers to “compensate” hourly workers with compensatory time off in lieu of overtime pay.” Employee-side attorneys and employee rights activists argue the WFFA would actually reduce worker income, allow employers to avoid paying their employees overtime, and give employers the right to control comp time.

If you are interested in reading more about this issue click here.

We have been seeing more and more lawsuits,  in which workers assert that the company has violated the Pennsylvania Wage Payment and Collection Law (“PWPCL”) by making improper “deductions” from their pay.  The company often responds by arguing that, as a matter of law, the PWPCL claim must fail unless the worker can demonstrate a preexisting contractual right to the wages that were the subject of the deduction.  This argument is predicated on the notion that a worker’s PWPCL rights always are defined by and limited to her contractual rights.  As discussed below, this proposition is incorrect both as a general matter and, more specifically, in the context of a PWPCL wage deduction case.

First, the PWPCL’s text contains no language requiring – or even suggesting – that wages owed must be based on a contract or agreement.  See generally 43 P.S. §§ 260.1, et seq.

Second, the PWPCL’s text flatly contradicts a rule that wages owed must be based on a formal contract.  In particular, the PWPCL states:  “No provision of this act shall in any way be contravened or set aside by private agreement.”  43 P.S. § 260.7.  As Judge Wettick has observed, this provision reaches “any contractual provisions that interfere with enforcement of the legislation” and prevent courts from enforcing written agreements “that make it more difficult for workers to enforce their statutory rights.”  Watson v. Prestige Delivery Systems, Inc., 27 Pa. D. & C. 5th 449, 456 (Pa. C.C.P., Allegheny Cty. Feb. 7, 2013) (emphasis supplied).  This statutory mandate – that PWPCL rights cannot “be contravened or set aside by private agreement” – cannot be reconciled with the false argument that workers’ PWPCL rights are defined exclusively by private agreements.  Indeed, the whole point of  PWPCL § 260.7 is to create a rule that prohibits private agreements from dictating the parameters of a worker’s PWPCL rights.

Third, the caselaw contradicts any bright-line rule that PWPCL claims cannot extend beyond a contract between the worker and the company.  In Lugo v. Farmers Pride, Inc., 967 A.2d 963 (Pa. Super. 2009), the Superior Court held that a class of poultry workers could assert PWPCL claims that were predicated entirely on the employer’s violation of statutory minimum wage and overtime laws.  See id. at 969.  The Lugo decision contains no indication or suggestion that these at-will poultry workers had any employment contract or any contractual basis for their PWPCL claims.  See id.  Thus, as Judge Rufe has observed:  “Lugo adopts a broader interpretation of the WPCL as a vehicle for employees to recover unpaid wages, regardless of the source of their employer’s obligation to pay the wages.”  Moser v. Papadopoulos, 2011 U.S. Dist. LEXIS 64716, *12 (E.D. Pa. June 15, 2011).  Other judges agree.  See Galloway v. George Junior Republic, 2013 U.S. Dist. LEXIS 134014, *43-44 (W.D. Pa. Sept. 19, 2013) (Mitchell, M.J.); Hilvey v. Allis-Chalmers Energy, Inc., 2013 U.S. Dist. LEXIS 80800, *8-9 (W.D. Pa. June 10, 2013) (Fischer, J.); Turner v. Mercy Health System, 2010 Phila. Ct. Com. Pl. LEXIS 146, *13-14 (Pa. C.C.P., Phila. Cty. Mar. 10, 2010) (Fox, J.).

Fourth, the PWPCL’s wage deduction regulation contradicts any rule that PWPCL claims require a contract or agreement between the plaintiff and defendant.  At almost every turn, the regulation requires particular categories of deductions to be “authorized in writing” in order to be legal.  See 34 Pa. Code §§ 9.1(2)-(7), (10)-(13).  Thus, with respect to these deductions, a PWPCL violation arises if the deductions are not authorized in writing, a reality that cannot be reconciled with the false argument that PWPCL wrongful deduction claims must be predicated on the existence of contract.  Indeed, the regulatory language commands the opposite: it is the absence of an agreement that triggers the PWPCL violation.  See id.[2]

Fifth, the PWPCL’s wage deduction regulation contains other requirements that further contradict any notion that PWPCL claims must be defined by contract.  Most significantly, even if an agreement is reached between the plaintiff and defendant regarding a particular deduction, the PWPCL is still violated if the deduction is not “for the convenience of employees.”  Id. at § 9.1.  This requirement exists because the regulators “would not have intended to give employers a free pass as long as the job-seeking worker would sign a piece of paper authorizing a deduction.”  Watson, 27 Pa. D. & C. 5th at 465.

Sixth, even though Plaintiff’s PWPCL claim is expressly based on Ressler v. Jones Motor Co., Inc., 487 A.2d 424, 427-29 (Pa. Super. 1985), see Am. Cpl. (Doc. 18) at ¶ 69, DIRECTV entirely ignores the decision and the rule it creates.  Ressler explains that, in order to be permissible, wage deductions must either (i) fall within one of 12 categories of authorized deductions described at 34 Pa. Code § 9.1(1)-(12) or (ii) be covered by the  “catch-all” provision described at 34 Pa. Code § 9.1(13).  See Ressler, 487 A.2d at 427-28.  Moreover, the catch-all provision is very narrow.  Under that provision, a deduction “is unlawful absent a showing of Department of Labor & Industry approval and written authorizations by employees.”  Id. at 429.  Ressler’s rule cannot be reconciled with the false argument that PWPCL wage deduction claim must necessarily stem from a contract.  In fact, like the deduction regulation itself, Ressler says the opposite:  it is the absence of an agreement that triggers the violation.  (Moreover, even if there is an agreement, the deduction still is illegal absent L&I authorization.)

In sum, the argument that the worker cannot bring a PWPCL claim in the absence of a contract between her and the company cannot be reconciled with statutory text, regulatory text, or existing caselaw.

 

On March 31st, 2017, Pete Winebrake, of Winebrake & Santillo, LLC, will present the following FLSA Circuit Court Opinions at NELA’s 2017 Spring Seminar titled “Litigating Wage & Hour Cases: Challenges & Opportunities”.

 

First Circuit

Lalli v. General Nutrition Centers, Inc., 814 F.3d 1 (1st Cir. Feb. 12, 2016)

Holding:  Employer permitted to use fluctuating workweek method of overtime calculation, see 29 U.S.C. § 778.114, even though it also paid the employees a non-discretionary sales commission in addition to the weekly salary.  However, the commission payments should be included in the “regular rate” calculation.

Comments:   This decision addresses some confusion regarding the circumstances in which extra payments (e.g., bonus payments, commissions, premium pay) can render use of the FWW method illegal.  The court surveys the caselaw and summarizes the basic rule:  Extra payments not tied to the hours worked are permissible and do not prohibit use of the FWW method (although the extra payments may factor into the regular rate calculation). In other words, extra performance-based payments are consistent with the FWW, while extra time-based payments are not.

 

Litz v. The Saint Consulting Group, Inc., 772 F.3d 1 (1st Cir. Nov. 4, 2014)

Holding:  Employees’ weekly “stipends” satisfied the “salary basis” test, enabling the company to deny overtime under the “highly compensated employee” regulation.

Comments:  Plaintiffs’ counsel made some good arguments that the employees’ weekly “stipends” violated the salary basis rules because the stipends were “subject to reductions because of variations in the . . . quantity of work performed.”  But these employees were making well over $100,000 per year, and, as the Supreme Court’s 2012 Christopher opinion demonstrates, it sure is difficult to convince judges that such well-heeled employees should get overtime pay.

 

Martinez v. Petrenko, 792 F.3d 173 (1st Cir. July 6, 2015)

 Holding:  Plaintiff whose complaint asserted that company covered under FLSA’s “enterprise coverage” provision and who did not assert “individual coverage” in the complaint, in opposition to a motion to dismiss, or during the discovery period was prohibited from asserting individual coverage for the first time in opposition to a post-discovery summary judgment motion.

 

Comments:  The FLSA creates two independent ways in which a plaintiff can assert that his/her employment is covered by the FLSA:  (i) individual coverage, which focuses on the nature of the individual plaintiff’s work and whether it entails interstate commerce; or (ii) enterprise coverage, which focuses on the interstate nature of the company’s business operations and requires, inter alia, proof that the enterprise’s “annual gross volume of sales made or business done is not less than $500,000.”  29 U.S.C. § 203(s)(1)(A).  Individual coverage generally is extremely easy to satisfy, since almost all employees’ activities have some connection to interstate commerce or require use of an “instrument of interstate commerce” such as a telephone.  Yet, because many plaintiffs’ lawyers do not understand the difference between individual and interstate commerce, they inexplicably plead out their complaints by asserting enterprise coverage.  This case demonstrates the pitfalls of neglecting to plead individual coverage.

Marzuq v. Cadete Enterprises, Inc., 807 F.3d 431 (1st Cir. Dec. 9, 2015)

Holding:  District court erred in entering summary judgment against donut shop manager who allegedly was misclassified as overtime-exempt under the executive exemption.

Comments:  This is an important and excellent decision that should be read by anyone dealing with the executive exemption.  Retired Supreme Court Justice Souter sat on the panel.  As with many executive exemption decisions granting summary judgment for the employer, the district court over-emphasized that the plaintiff  was “in charge” of the store and was the store’s highest-ranking employee and placed too little emphasis on what the plaintiff actually spent his time doing.  The First Circuit rejects The District Court’s superficial analysis and goes through each of the four factors that must be considered in determining whether a worker’s “primary duty” is “management.”  In addition, the First Circuit significantly limits its dreaded 1982 decision in Donovan v. Burger King Corp., 672 F.2d 221 (1st Cir. 1982).  Burger King has haunted overtime rights lawyers for over 30 years and has been cited to justify many unfair executive exemption outcomes.  Marzuq explains that, even under Burger King, “being ‘in charge’ is not merely a label belied by the realities of the workplace.”  Finally, the judges must ensure that the opinion contains a nice passage about the FLSA’s public policy of fighting unemployment by spreading employment. The court explains that the business model of sticking the salaried-exempt employee with all the extra hours violates this public policy.  (NELA filed an amicus brief emphasizing this argument.)

Newman v. Advanced Technology Innovation Corp., 749 F.3d 33 (1st Cir. Apr. 18, 2014)

Holding:  Because the per diem component of the plaintiffs’ pay was tied, in part, to the number of hours work, the per diem payments should have been included in determining the employees regular pay rate for overtime calculation purposes.

Comments:  This opinion cogently summarizes the rules applicable to determining when per diem payments can be excluded from the regular rate calculation.  The Court relies, in part, on the DOL Field Operations Handbook.

Perez v. Lorraine Enterprises, Inc., 769 F.3d 23 (1st Cir. Oct. 1, 2014).

Holding:  Restaurant violated FLSA by failing to provide servers with advance notice that it utilized the “tip credit” to satisfy its minimum wage obligation.

Comments:  Most notably, the Court’s rejected the restaurant’s argument that the servers were sufficiently put on notice of the tip credit based on the content of their pay stubs.

Second Circuit

 

Beaulieu v. Vermont, 807 F.3d 478 (2d Cir. Sept. 16, 2015)

Holding:  State of Vermont enjoyed general sovereign immunity from FLSA lawsuit and did not waive such immunity by removing FLSA lawsuit to federal court.

 

Comments:  This case contains a good discussion of the two distinct types of immunity that potentially apply to state employers: (i) immunity from federal court lawsuits stemming from the Eleventh Amendment and (ii) the broader concept of sovereign immunity.  The Court explains that, when a state removes an FLSA lawsuit from federal to state court, it waives the former but not the latter.

 

Brown v. New York City Department of Education, 755 F.3d 154 (2d Cir. June 18, 2014)

Holding:  Individual who performed volunteer work at public school for a three-year period was not an employee covered by the FLSA.

Comments:  Why this relatively sophisticated plaintiff would continuously work for three years without pay seems puzzling.  The facts are so extreme that this case is easily distinguishable from any case you may file.

Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. Aug. 17, 2015)

 Holding:  FLSA lawsuits cannot be settled through a private stipulated dismissal pursuant to Federal Rule of Civil Procedure 41.  Rather, FLSA settlements must be approved by the district court or the Department of Labor.

 

Comments:  This holding is consistent with holdings and dicta from hundreds of district court decisions from throughout the country.  However, a handful of New York district courts were going against the grain by suggesting that small FLSA lawsuits could be settled and dismissed without court approval.  In Cheeks, the Second Circuit rejects such reasoning.

 

Chen v. Major League Baseball Properties, Inc., 798 F.3d 72 (2d Cir. Aug. 14, 2015)

 Holding:  Baseball fans who volunteered to work at Major League Baseball’s five-day “Fan Fest” not entitled to minimum wage and overtime pay because the Fan Fest is covered by the FLSA’s exemption for amusement or recreation establishments.  See 29 U.S.C. § 213(a)(3).

 

Comments:  The Court engaged in some fancy footwork to reach this holding.  But do we really expect judges to award money to baseball fans who volunteer at professional baseball festivities?

 

Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. July 2, 2015)

Holding:  Reversed summary judgment entered in favor of unpaid interns who alleged that they were FLSA “employees” for their work on the Black Swan movie.  The Court rejected the six-part test endorsed by the Wage and Hour Division of the Department of Labor.  Instead the Court endorsed a more flexible test focused on “whether the intern or the employer is the primary beneficiary of the relationship” based on an analysis of seven “non-exhaustive” factors.  Case remanded to district court to review the facts based on the newly-adopted test.

 

Comments:  This very significant holding will make it more difficult for unpaid interns to prove that they are covered employees under the FLSA.  The holding recently was followed by the Eleventh Circuit in the Schulman decision discussed infra.  It will be interesting to see if another appellate court creates circuit-split enabling Supreme Court review.

 

Gortat v. Capala Brothers, Inc., 795 F.3d 292 (2d Cir. June 16, 2015)

Holding:  Prevailing plaintiff cannot recover expert fees under FLSA’s fee/cost-shifting provision, 29 U.S.C. § 216(b).

 

Comments:  This holding is unsurprising, but it is nice that the Circuit wrote this brief opinion clarifying the law.

 

Greathouse v. JHS Security, Inc., 784 F.3d 105 (2d Cir. April 20, 2015)

Holding:  Under USSC’s 2011 Kasten decision, FLSA retaliation claim can be predicated on oral complaint to employer. Previous Second Circuit authority to contrary overruled.

Comments:  This case provides a  nice summary of the FLSA’s anti-retaliation provision and exemplifies the impact of Kasten going forward.

Hill v. Delaware North Companies Sportservice, Inc., 838 F.3d 281 (2d Cir. Oct. 13, 2016)

Holding:  Company that ran the concession stands at the Baltimore Orioles’ ballpark not required to pay overtime because it fell within the “amusement or recreational establishment” exemption described at 29 U.S.C. § 213(a)(3).

Comments:  This exemption clearly applies to the baseball team.  Here, the court extensively reviewed that statutory/regulatory language, the pertinent DOL guidance, and the legislative history to determine that the exemption also extends to concessionaires and other companies that contract to provide services at the ballpark. However, these contractors must themselves satisfy the exemption’s requirement that they either (i) operate for less than seven months per year or (ii) earn less than 33.3% of their annual receipts during a six-month period.

Holick v. Cellular Sales of New York, LLC, 802 F.3d 391 (2d Cir. Sept. 22, 2015)

 Holding:  Workers asserting that, under the FLSA, they were misclassified as contractors rather than employees not required to arbitrate the dispute because the arbitration agreement did not apply retroactively.

 

Comments:  This decision turns on the specific language of the pertinent contract provisions and is unlikely to have much precedential impact.  But it is a good reminder that the purported “rule” that arbitration is favored under the Federal Arbitration Act does not override contract language stating otherwise.

Parada v. Banco Industrial de Venezuela, C.A., 753 F.3d 62 (2d Cir. Mar. 25, 2014)

Holding:  Plaintiff not entitled to equitable tolling back to the time she filed her administrative overtime complaint with DOL.

Comment:  This unsurprising decision demonstrates the risks that workers take when they rely on DOL’s investigative process – rather than trial lawyers – to recover back wages.

Perez v. City of New York, 832 F.3d 120 (2d Cir. Aug. 2, 2016)

Holding:  District court improperly granted summary judgment against park rangers who sought compensation for time associated with the donning and doffing of uniforms.

Comments:  This is an interesting opinion because it represents a pro-plaintiff application of the Supreme Court’s recent holding in Integrity Staffing Solutions, Inc. v. Busk, 135 S. Ct. 513 (2014), that, under the FLSA’s Portal-to-Portal amendments, an activity is “integral and indispensable” to a “principal activity,” and therefore compensable, “if it is an intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities.”  The court holds that the rangers’ uniform changing activities might qualify as “integral and indispensible” under this standard.  Moreover, in the wake of Busk, the court limits the impact of Gorman v. Consolidated Edison Corp., 488 F.2d 586 (2d cir. 2007), which had been the leading Second Circuit case on what’s “integral and indispensible.”  Gorman is a troubling opinion that has been a thorn in the side of plaintiffs’ lawyers for years.  While Busk is not very good for workers, Gorman is even worse.  This case demonstrates how, within the Second Circuit, trading Gorman for Busk probably is a good exchange.

Pippins v. KPMG LLP, 759 F.3d 235 (2d Cir. July 22, 2014)

Holding:  Salaried, non-CPA accountants at large accounting firm are covered by the learned professional exemption.

Comment:  This holding follows a trend of decisions finding staff accountants to be exempt.  It seems like judges perceive these types of well-educated employees as merely “paying their dues” before moving up the corporate ladder.  Also, the opinion contains a good discussion of the differences between the administrative exemption and the professional exemption and demonstrates how white-collar employees can be exempt professionals even though they do not engage in the type of managerial decision-making required under the administrative exemption.   

Third Circuit

Babcock v. Butler County, 806 F.3d 153 (3d Cir. Nov. 24, 2015)

Holding:  Third Circuit adopts the “predominant benefit test” for determining whether time spent during a meal break is compensable under the FLSA.  This test entails a “necessarily fact-intensive inquiry” and requires courts to “assess[] the totality of the circumstances to determine, on a case-by-case basis, to whom the benefit of the meal period inures.”  In an unnecessarily confusing opinion, the Court characterized the predominant benefit test in two different ways:  (i) the test “asks ‘whether the officer is primarily engaged in work-related duties during meal periods;’” and (ii) the test’s “essential consideration” asks “whether the employees are in fact relieved from work for the purpose of eating a regularly scheduled meal;’”  The Court “eschewed a literal reading” of the pertinent Department of Labor regulation, which requires that “[t]he employee must be completely relieved from duty for the purposes of eating regular meals” and that “[t]he employee is not relieved if he is required to perform any duties, whether active or inactive, while eating.”  29 C.F.R. § 785.19(a).

Comments:  This opinion is disappointing.  The Circuit had an opportunity to provide clear guidance on when meal breaks are compensable.  Instead, we are left with a wishy-washy legal standard that is characterized differently within the opinion.  What seems clear, however, is that 29 C.F.R. § 785.19(a) is inapplicable within the Third Circuit.  This case reminds me of the Seventh Circuit’s recent opinion in Alvarado v. Corporate Cleaning Services, Inc., 782 F.3d 365 (7th Cir. April 1, 2015), discussed infra.  In both opinions, the Judges seem to be heavily influenced by the fact that the workers were unionized, which means that the purported FLSA violation (i) was tolerated by the unions (possibly in exchange for other employee benefits) and (ii) could be addressed during the next round of collective bargaining.  As I have said many times, it is extremely difficult to win FLSA cases on behalf of unionized workers, and plaintiffs’ lawyers really need to think twice before filing such cases.  

Davis v. Abington Memorial Hospital, 765 F.3d 236 (3d. Cir. Aug. 26, 2014)

Holding:  (1) Plaintiff asserting FLSA overtime claim “must sufficiently allege forty hours of work in a given workweek as well as some uncompensated time in excess of the forty hours” but is not required to “identify the exact dates and times that she worked overtime.”  (2) Absent a minimum wage violation, the FLSA does not permit employees to recover damages for “gap-time” (unpaid hours worked under the 40-hour threshold).

Comments:  The Court endorses a pleading requirement that does not seem very onerous to meet.  Also, the “gap time” holding is unsurprising.

Halle v. West Penn Allegheny Health System Inc., 842 F.3d 215 (3d Cir. Nov. 18, 2016)

Holding:  Opt-in plaintiffs may not appeal from district court order decertifying FLSA collective; thus, if the originating plaintiff settles or accepts a Rule 68 offer after the decertification decision, opt-ins have no avenue for appealing the decertification decision.

Comments:  Although this is an unfavorable outcome, the Court’s opinion includes some nice (and helpful) discussion of the collective action mechanism.  First, there’s a good discussion about the benefits of collective actions to the judicial system (avoidance of duplicative actions) and workers (pooling of resources).  Second, the Court explains that decertification merely results in dismissal of an opt-in’s FLSA claim without prejudice to file an individual case.  Third, the Court explains that, while opt-ins enjoy “party-status” upon joining the collective, they also are “passive observers” without any right to control the litigation.  Fourth, while the Court does not explicitly endorse representative discovery, there’s a nice passage where the Court states that collective actions “frequently” entail representative discovery and provides some examples of sampling.

Mazzarella v. Fast Rig Support, LLC, 823 F.3d 786 (3d Cir. May 23, 2016)

 

Holding:  Drivers who drove intrastate transporting  water to and from fracking wells within Pennsylvania not covered by the motor carrier exemption.

Comments:  The motor carrier exemption requires that the drivers “engage in activities of a character directly affecting the safety of operation of motor vehicles . . . in interstate commerce.”  29 C.F.R. § 782.2(a).  In cases involving drivers who transport products in commercial motor vehicles, this requirement usually is satisfied because the products themselves are part of the “stream” of interstate travel.  In this case, however, the drivers were able to convince the court that fracking water is not such a product because it is not part of a “practical continuity of movement” across state lines.  The Third Circuit describes various factors to be considered in addressing the “practical continuity of movement”. These include: the extent to which the product “pauses” in-state before reaching its final destination; whether the product is altered before heading out of state; the employer’s intent at the time of transport; and whether the employer’s business “involve[s] an integrated system of interstate shipments.”

 

McMaster v. Eastern Armored Services, Inc., 780 F.3d 167 (3d Cir. Mar. 11, 2015)

 

Holding:  Under the SAFETEA-LU Technical Corrections Act of 2008, employee who spent approximately 50% of her time driving vehicles weighing less than 10,000 pounds is not covered by the FLSA’s motor carrier exemption and is entitled to overtime premium pay.

Comments:  This is a significant opinion that rejects the flimsy reasoning of several district courts from around the country.  Under this opinion, many drivers who work for “mixed-fleet” employers are entitled to overtime premium pay.

Opalinski v. Robert Half International Inc., 761 F.3d 326 (3d Cir. July 30, 2014)

Holding:  Where an FLSA claim is covered by an arbitration agreement that does not clearly indicate whether the worker waived her right to pursue the claim as a collective action, the federal judge – not the arbitrator – determines whether class-wide arbitration is permissible.

Comments:  This represents the majority view, although this issue may eventually make it to the Supreme Court.

 

Resch v. Krapf’s Coaches, Inc., 785 F.3d 869 (3d Cir. May 12, 2015)

 Holding:  Bus/shuttle drivers who never actually drove across state lines fell under the FLSA motor carrier exemption’s requirement that employees be engaged “in activities of a character directly affecting” interstate commerce because they “reasonably could have expected to drive interstate.”

 

Comments:  The Court takes an expansive view of the motor carrier exemption, looking well beyond the actual work experiences of the plaintiffs and placing significant – and, some might say, too much – emphasis on whether the company services interstate routes.

Rosano v. Township of Teaneck, 754 F.3d 177 (3d Cir. June 10, 2014)

Holding:  (1) Governmental “law enforcement” or “fire protection” agency can calculate overtime damages using FLSA Section 7(k) methodology even if the agency did not contemporaneously intend to utilize a Section 7(k) “work period” in paying workers.  (2) Police officer uniforms constitute “clothing” under FLSA Section 3(o).

Comments:  Neither holding is too surprising.  The Section 7(k) analysis is a must-read before you file an overtime rights case on behalf of police officers, prison guards, or firefighters.

Smiley v. E.I. DuPont De Nemours & Co., 839 F.3d 325 (3d Cir. Oct. 7, 2016)

Holding:  In an FLSA action alleging off-the-clock work, an employer that pays workers for some or all of their meal breaks may not use such payments to “offset” overtime wages otherwise owed for uncompensated hours.

Comments:  This is a very nice opinion and contains a good (albeit technical) discussion of FLSA “regular rate” principles, the types of extra payments that must be included in the regular rate calculation, and the types of payments that may be used to “offset” underpayments.  The court strictly limits offsets to the three types of extra payments specifically described at 29 U.S.C. § 207(e)(5)-(7).

Thompson v. Real Estate Mortgage Network, 748 F.3d 142 (3d Cir. Apr. 3, 2014)

Holding:  Employees adequately pled that: (i) two companies were joint employers under FLSA; (ii) one of the companies could be liable under the FLSA as a “successor in interest”; and (iii) two corporate executives could be individually liable under FLSA.

Comments:  This opinion contains good language explaining that, at the pre-discovery pleadings stage, plaintiffs are not expected to have access to the type of detailed, intra-company information necessary to fully address the joint-employment, successor liability, and individual liability factors. A more thorough and recent discussion of joint employment principles can be found in the Hill opinion, which is discussed in the Fourth Circuit section of this paper.

 Fourth Circuit

 

Amaya v. Power Design, Inc., 833 F.3d 440 (4th Cir. Aug. 15, 2016)

Holding:  Workers employed on federally-funded projects covered by the Davis-Bacon Act (“DBA”) and the Contract Work Hours and Safety Standards Act (“CWHSSA”) are not prohibited from filing an overtime rights lawsuit under the FLSA.

Comments:  Neither the DBA nor the CWHSSA allow workers to bring a private lawsuit.  But, as the Court explained, this has no bearing on their right to bring an overtime rights lawsuit under the FLSA.  And when they do, the prevailing rate under the DBA and the CWHSSA is the “regular rate” to be used in calculating overtime premium pay.

Calderon v. GEICO General Insurance Co., 809 F.3d 111 (4th Cir. Dec. 23, 2015)

Holding:  District court properly found that: (i) insurance claims investigators were not covered by the administrative exemption; (ii) the violation was not “willful” and, therefore, a two-year limitations period applied and liquidated damages were not warranted; (iii) because the investigators’ salaries covered all work hours, Overnight Motors Transportation Co. v. Missel, 316 U.S. 572 (1942), requires that damages be calculated under the half-time methodology; and (iv) prejudgment interest is mandatory under the FLSA..

Comments:  The administrative exemption requires that the employee has the “primary duty of the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.”  29 C.F.R. § 541.200(a)(2).  The court conducts a very extensive analysis of this requirement and concludes  that the authorities “indicate that employees whose primary duty is to conduct factual investigations do not satisfy the directly related element.”  The court’s additional holdings regarding “willfulness,” the Missel half-time issue, and prejudgment interest are unsurprising but worth reading for a good summary of the law in these areas.

 

Cruz v. Maypa, 773 F.3d 138 (4th Cir. Dec. 1, 2014)

Holding:  Plaintiff’s FLSA claim was equitably tolled because her employer failed to conspicuously post notice of employees’ FLSA-rights as required by 29 C.F.R. § 516.4.

Comments:  A nice decision. The plaintiff, an immigrant laborer, had been severely exploited and was sympathetic.  The Court explains: “absent a tolling rule, employers would have no incentive to post notice since they could hide the fact of their violations from employees until any relevant claims expired.”

Hall v. DIRECTV, LLC, 846 F.3d 757 (4th Cir. Jan. 25, 2017)

Holding:  Satellite dish installers seeking overtime pay and alleging that they were misclassified as non-employee independent contractors adequately pled that DIRECTV and DirectSat (which contracted with DIRECTV to provide dish installation services “through a web of agreements with various affiliated and unaffiliated service providers”) could be liable under the FLSA as joint employers.

Comments:   This important opinion will be discussed during the program.  The Fourth Circuit has been very, very good lately.  If wage and hour lawyers were hipsters, the Fourth Circuit would be Brooklyn.  This opinion clarifies the confusion that arises when a purported independent contractor seeks to recover against two or more joint employers.  Such cases require two separate “employment” inquiries, and, in this opinion, the court describes the order in which the inquiries should unfold.  The first step is to focus on whether the two defendants are joint employers with respect to the type of work performed by the plaintiff.  This requires the court to consider six non-exhaustive factors.  If the defendants are in a joint employment relationship with each other, the court turns to the second step, which entails analyzing if the plaintiff is an employee (rather than a non-employee contractor) under the familiar six-factor “economic reality” test.  Crucially, the economic reality test asks whether the two defendants’ “combined influence over the terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.”  In other words, once the defendants have been found to be in a joint employment business relationship, the plaintiff does not have to prove that each defendant independently employed him as a matter of economic reality.  This is a very important concept, and you probably will need to read the opinion more than once to fully absorb its analytical significance to “fissured employment” cases.  Finally, the court includes some good language stating that Rule 12(b)(6) dismissals should be rare in fissured employment cases because (i) the plaintiffs, in the absence of discovery, cannot be expected to understand the particulars of the purported joint employers’ business relationship and (ii) the cases entail the weighing of multiple factors.          

Harbourt v. PPE Casino Resorts Maryland, LLC, 820 F.3d 655 (4th Cir. April 25, 2016)

Holding:  Newly hired casino dealers adequately pled an FLSA claim that the time they spent in dealer “training school” was compensable work.

Comments:  The court explains that, in FLSA training time cases, it is important to determine whether the employer or the employee is the “primary beneficiary” of the training.  This concise opinion is consistent with other recent Fourth Circuit opinions slapping down improvidently granted motions to dismiss.

Martin v. Wood, 772 F.3d 192 (4th Cir. Nov. 18, 2014)

Holding:  Supervisors at state-owned hospital enjoyed Eleventh Amendment immunity from FLSA lawsuit because their allegedly illegal conduct was “inextricably tied to their official duties.”

Comments:  It is well-established in the Fourth Circuit that the Eleventh Amendment protects from FLSA lawsuits both state defendants and individual defendants acting in their “official capacities.”  In this opinion, the Court makes it difficult for plaintiffs to circumvent this rule by simply labeling the suit as being filed against a defendant in his/her “individual capacity.”

McFeeley v. Jackson Street Entertainment, LLC, 825 F.3d 235 (4th Cir. June 8, 2016)

Holding:  (1) Affirming jury finding that exotic dancers misclassified as non-employee independent contractors under the FLSA; (2) Adult entertainment club cannot apply performance fees or tips to offset its failure to pay the minimum wage.

Comments:  This outcome is consistent with many recent decisions in which judges reject the notion that exotic dancers are independent contractors.  Here, the district court presided over a jury trial and instructed the jury on the well-known “economic realities” test to the evidence presented.  The Circuit Court’s decision contains a nice discussion of the 6 economic reality factors and provides a good outline of what you need to prove to win an exotic dancer case.  As importantly, the Court explains that a club seeking to use the FLSA “tip credit” provisions to satisfy its minimum wage obligations must actually pay the dancers $2.83/hour and must comply with the notice requirements imposed by the tip-credit rules.  Moreover, “performance fees” cannot qualify as “service charges” that offset minimum wage payments unless they are included in the club’s gross receipts (which never is the case).

Morrison v. County of Fairfax, VA, 826 F.3d 758 (4th Cir. June 21, 2016)

Holding:  Fire Captains are not covered by the executive or administrative exemptions because their primary duty was emergency response.

Comments:  This opinion has a very good discussion of 29 C.F.R. § 541.3(b), which the Bush Administration included in the 2004 re-write of Part 541 in order to ensure that police and firefighters – unlike many other employees – did not lose their right to overtime pay.  The regulation provides that, “regardless of rank or pay level,” overtime pay must be paid to first responders “who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; . . . or other similar work.”

 

Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. Jan. 25, 2017)

Holding and Comments:  This is the companion case to Hall (discussed above) and was decided on the same day.  So see the Hall write-up regarding this import of this case.

Trejo v. Ryman Hospitality Properties, Inc., 795 F.3d 442 (4th Cir. July 29, 2015)

 Holding:  FLSA rules prohibiting restaurants from taking servers tips and restricting tip pooling do not apply where the restaurant does not rely on the tip credit to satisfy its minimum wage obligations to servers.

 

Comments:  This decision followed the Ninth Circuit’s holding in Crumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010).  But, note the conflict with the Ninth Circuit’s more recent ruling in the February 2016 decision in Oregon Restaurant and Lodging Ass’n v. Perez, which is discussed in the Ninth Circuit section of this paper.

Williams v. Genex Services, LLC, 809 F.3d 103 (4th Cir. Dec. 18, 2015)

Holding:  Medical Case Managers – who were registered nurses making over $80,000 to analyzed medical costs on behalf of worker’s compensation insurance companies – were overtime-exempt under the FLSA’s professional exemption.

Comments:  This case stands for the proposition that judges do not like awarding overtime pay to well-educated employees who are paid a lot of money.  And the white collar exemptions are so subjective that the judge can easily rule against these well-paid employees in deciding summary judgment.  Be very careful about filing cases like this.

 

Fifth Circuit

   

Allen v. Coil Tubing Services, L.L.C., 755 F.3d 279 (5th Cir. June 13, 2014)

Holding:  In deciding whether employees are sufficiently engaged in “safety-affecting interstate activities” to be covered by the FLSA motor carrier exemption, courts are not necessarily required to analyze each employee’s individual work experience.

Comments:  We probably have not seen the last of this important issue, as indicated by Judge Dennis’ scholarly dissent.  However, the Third Circuit’s recent opinion in Resch, discussed supra, is consistent with the majority’s view.

Bodle v. TXL Mortgage Corp., 788 F.3d 159 (5th Cir. June 1, 2015)

 Holding:  Release of FLSA claims stemming from private settlement of state court action that did not involve wage and hour claims does not prohibit plaintiff from filing subsequent FLSA lawsuit in federal court.

 

Comments:  This holding follows the general rule – also addressed in the Second Circuit’s Cheeks decision discussed supra – that FLSA settlements must be approved by either the court or the DOL.

 

Coffin v. Blessey Marine Services, Inc., 771 F.3d 276 (5th Cir. Nov. 13, 2014)

Holding:  Vessel-based tankermen covered by FLSA’s seaman exemption.

Comments:  The Court accepted this interlocutory appeal after the employer’s summary judgment motion was denied.  In refusing to follow previous decisions that workers who load and unload cargo from ships are not covered by the seaman exemption, the Court emphasized that these particular plaintiffs lived on the vessel.

Fairchild v. All American Check Cashing, Inc., 815 F.3d 959 (5th Cir. March 18, 2016)

Holding:  An employee who sought to recover overtime pay for a handful of overtime hours during a two week period in which she was training barred from recovery because she “intentionally failed” to report her overtime work and “deliberately evade[d] the company’s timekeeping policies.

Comments:  The FLSA claim was a small part of this case. I don’t think this very fact-specific holding will have much precedential value.

Johnson v. Heckmann Water Resources, Inc., 758 F.3d 627 (5th Cir. July 14, 2014)

Holding:  In determining overtime pay, employers may utilize a recurring, seven-day workweek that does not coincide with the employees’ work schedule.

Comments:  This decision is based on well-established regulations and is entirely unsurprising.  Decision contains a concise recitation of the seven-day workweek rule and the pertinent regulations.

Montano v. Montrose Restaurants Associates, Inc., 800 F.3d 186 (5th Cir. Aug. 28, 2015)

 Holding:  Application of the rule that customer tips cannot be shared with employees who do not “customarily and regularly receive tips,” 29 U.S.C. § 203(m), requires the court to assess the extent of the tip recipient’s “customer interaction.”

 

Comments:  This decision follows the recent trend of decisions addressing this thorny issue and, in my view, contains the most cogent analysis of the issue. This holding can be used to argue that restaurant “expediters” may not participate in the tip pool.

 

Naylor v. Securiguard, Inc., 801 F.3d 501 (5th Cir. Sept. 15, 2015)

 Holding:  In determining whether company excused from paying employees for time expired during a “bona fide meal periods” of over 20 minutes, see 29 C.F.R. §§ 785.18-19, courts should subtract time attributable to activities that did not “predominantly benefit” the employees.

 

Comments:  This decision contains a good discussion of basic meal break regulations and principles.  It also is refreshing to see a district court reversed for failing to allow the jury to decide disputed facts regarding the extent and nature of unpaid work activities.

Olibas v. Barclay, 838 F.3d 442 (5th Cir. Sept. 20, 2016)

Holding:  (1) Jury verdict finding that sand hauling drivers not covered by the FLSA motor carrier exemption affirmed.  (2) Jury permitted to rely on representative testimony to estimate unpaid work hours in collective action.

Comments:  This is a good result. The motor carrier exemption requires that the drivers “engage in activities of a character directly affecting the safety of operation of motor vehicles . . . in interstate commerce.”  29 C.F.R. § 782.2(a).  The court explained that, in analyzing this requirement, the jury must consider whether the drivers are “likely to be called upon in the ordinary course of [their] work to perform, either regularly or from time to time,” interstate driving or activities.  Also,  this opinion contains some nice passages about the permissibility of using representative testimony and averaging to estimate unpaid work hours where the employer fails to maintain adequate records.

 

Orozco v. Plackis, 757 F.3d 445 (5th Cir. July 3, 2014)

Holding:  (1) Owner of franchisor is not a covered employer with respect to FLSA claims of an employee of the franchisee.

Comments:  In my view, this decision exemplifies “conservative judicial activism.”  The appellate panel overturned a jury verdict (and the district court’s decision endorsing the jury verdict) in which the franchisor’s owner was found liable based on the jury’s weighing of the “economic reality” factors.  It seems like the panel substitutes its own judgment for that of the jury.

Pineda v. JTCH Apartments, L.L.C., 843 F.3d 1062 (5th Cir. Dec. 19, 2015)

Holding:  (1) Damages for emotional pain and suffering are available in an FLSA retaliation case.  (2) Non-employee spouse may not bring FLSA retaliation claim.

Comments:  The Fifth Circuit now joins the Sixth and Seventh Circuits in allowing emotional pain and suffering in FLSA retaliation cases.  This is a good trend for plaintiffs.  The other holding – is that non-employees are prohibited from suing under the FLSA’s anti-retaliation provision in unsurprising.

Reyna v. International Bank of Commerce, 839 F.3d 373 (5th Cir. Oct. 4, 2016)

Holding:  District court faced with both  plaintiff’s motion for conditional certification and defendant’s motion to compel arbitration should decide the motion to compel arbitration first.

Comments:  This is an important issue that is popping up more and more.  The district court decisions go both ways, and few (if any) other circuit courts have addressed the issue.  Importantly, due to the language of the arbitration agreement’s delegation clause, the court’s holding does not prevent the arbitrator from conditionally certifying the FLSA collective.  So this holding would not have been too prejudicial to the workers.

Richardson v. Wells Fargo Bank, N.A., 839 F.3d 442 (5th Cir. Oct 14, 2016)

Holding:  Workers who were covered by and failed to exclude themselves from a state court class action settlement that included a waiver of FLSA claims were precluded from participating in a subsequent FLSA collective action.

Comments:  It will be interesting to see how this holding fares in other circuits.  Many judges take the position that, in private civil actions, workers must affirmatively join the collective (either during adversarial litigation or as part of a settlement claims process) in order to waive their FLSA claims.

Starnes v. Wallace, __ F.3d __, 2017 U.S. App. LEXIS 3399 (5th Cir. Feb. 24, 2017)

Holding:  (1) District court erred in deciding summary judgment against management-level employee who complained that a co-worker’s FLSA rights were being violated.  (2) FLSA retaliation plaintiff can recover emotional damages.

Comments:  The court’s analysis is similar to the analysis in Rosenfield, which is discussed in the Ninth Circuit section of this paper.  Management-level employees’ complaints are most likely to succeed as predicates for FLSA retaliation claims when FLSA compliance is outside of the employees’ job responsibilities.  The court also includes a good discussion of the burden-shifting causation analysis applicable to FLSA retaliation claims.  Finally, the court follows Pineda (discussed above) to hold that emotional damages are available in an FLSA retaliation lawsuit.

Steele v. Leasing Enterprises, Ltd., 826 F.3d 237 (5th Cir. June 14, 2016)

Holding:  When a restaurant taking a tip credit to satisfy its minimum wage obligations withholds a portion of the server’s tips received by credit card, such withholdings must be limited to the expense actually associated with collecting the credit card tips.

Comments:  This is a very good opinion.  With the exception of a valid “tip pooling” arrangement, restaurants benefiting from a tip credit must ensure that “all tips received by [the servers] have been retained by [the servers].”  29 U.S.C. § 203(m).  The court basically holds that this rule is violated when withholdings for credit card tips go beyond the fees actually charged by the credit card company.  The court also finds that liquidated damages and a three-year limitations period was not required due to a lack of “willfulness.”

Sixth Circuit

Barks v. Silver Bait, LLC, 802 F.3d 856 (6th Cir. Oct. 2, 2015)

 Holding:  Workers at worm farm covered by FLSA’s agricultural exemption, 29 U.S.C. § 213(b)(12).

 

Comments:  After substantial statutory and regulatory analysis, the court reasons that “[t]he raising and growing of bait worms – at least as practiced by Silver Bait – shares much in common with traditional farming.”  So now you know.

Craig v. Bridges Brothers Trucking LLC, 823 F.3d 382 (6th Cir. May 19, 2016)

Holding:  District court erred in issuing summary judgment against employee who purportedly “waived” her right to overtime “by not immediately claiming is.”

Comments:  This is another good decision (see also Rosenfeld in Ninth Circuit section and Bailey in Eleventh Circuit section) in which a circuit rejects the notion that workers can waive or be estopped from asserting FLSA claims by failing to affirmatively seek additional pay or complain about the unpaid hours.  The court observes that these notions of “waiver” or “estoppel” cannot be squared with the rule that workers cannot agree to FLSA violations.  The relevant question is whether the company has actual or constructive knowledge of the unpaid work.  In other words, did the company “know or have reason to believe” the work was being done?  The company can be liable if it “should have discovered [the unpaid work] through the exercise of reasonable diligence.”

 

Keller v. Miri Microsystems LLC, 781 F.3d 799 (6th Cir. March 26, 2015)

Holding:  Under “economic realities” test, jury could reasonably find that satellite dish installers are employees rather than independent contractors.  Also, where company fails to maintain time records, worker can prove his overtime hours through imprecise testimony.

Comments:  This is a significant decision that demonstrates how judges are becoming very skeptical of the independent contractor business model.  For example, outside of the FLSA context, we have seen many similar holdings from circuit courts considering whether FedEx delivery drivers are employees under state wage statutes.  See, e.g., In re. FedEx Ground Package System, Inc. Employment Practices Litig., 729 F.3d 818 (7th Cir. 2015) (drivers are employees under Kansas wage laws); Slayman v. FedEx Ground Packaging System, Inc., 765 F.3d 1033 (9th Cir. 2014) (same under Oregon wage laws); Alexander v. FedEx Ground Packaging System, Inc., 765 F.3d 981 (9th Cir. 2014) (same under California wage laws).

Killion v. Kehe Distributors, 761 F.3d 574 (6th Cir. July 30, 2014)

Holding:  District court improperly entered summary judgment against salaried sales representatives under FLSA’s outside sales exemption, where the sales representatives’ responsibilities include, inter alia, delivering products to retail stores, stocking shelves, and facilitating the automatic re-ordering process.

Comments:  It’s nice to see a reversal of summary judgment in an FLSA misclassification case.  The appellate court recognized that, based on the disputed evidence, a reasonable jury could find that the sales representatives’ primary duty was not “making sales.”  The decision contains a good discussion of what types of activities are “incidental” to making sales.

Lutz v. Huntington Bancshares, Inc., 815 F.3d 988 (6th Cir. March 2, 2016)

Holding:  District court did not err in entering summary judgment ruling that residential loan underwriters “were administrative employees within the meaning of 29 U.S.C. § 213(a)(1) and 29 C.F.R. § 541.200(a), and therefore exempt from the overtime-pay provisions because their job duties related to the general business operations of the Bank, and they exercised discretion and independent judgment when performing those duties.”

Comments:  This is a split decision.  The majority surveys the various administrative exemption decisions involving loan underwriters, and that discussion is worth reading.  The dissent convincingly argues that disputed facts regarding the administrative exemption requirements should preclude summary judgment.  Administrative exemption cases are just very tough.  The requirements described in 29 C.F.R. § 541.200, et seq., are elusive and almost always can “go either way.”  The more administrative exemption cases I read, the more I become convinced that the outcomes are almost always “results-oriented.”

Michigan Corrections Organization v. Michigan Department of Corrections, 774 F.3d 895 (6th Cir. Dec. 17, 2014)

Holding:  (1) State Department of Corrections is constitutionally immune from FLSA liability.  (2) Neither FLSA nor any other theory provides a private right of action for plaintiffs to seek injunctive relief against the Department’s Director in his individual capacity.

Comments:  Judge Sutton’s scholarly opinion contains a good discussion of the constitutional limits of the FLSA.  Very heady stuff.

Misewicz v. City of Memphis, 771 F.3d 332 (6th Cir. Nov. 14, 2014)

Holding:  Municipal paramedics’ training time is not compensable under FLSA.

Comments:  This decision contains a good discussion to the rules applicable to determining whether municipal employee training time is compensable.  The Court explains that, in refusing to pay for training time, a municipality is only required to satisfy 29 C.F.R. § 553.226(b) and is not required to also satisfy 29 C.F.R. § 553.226(a) (which applies to private employers).  Here, the paramedics were not entitled to be paid for their training time because, under § 553.226(b)(1), the training was required for their state certifications.

Monroe v. FTS USA, LLC, 815 F.3d 1000 (6th Cir. March 2, 2016)

Holding:  (1) District court properly refused to “decertify” the FLSA collective.  (2) Use of “representative testimony” at trial for both damages and liability purposes was proper.  (3) It is permissible for the judge – rather than the jury – to calculate damages based on the jury’s findings regarding hours worked by the collective.

Comments:  This is a must-read for any lawyer facing a decertification motion or going to trial in an FLSA collective action.  The court’s denial of decertification is thorough and has a great discussion of the efficiencies fostered by the collective action device and the fact that the FLSA’s “similarly situated” analysis is less demanding than Rule 23(b)(3)’s commonality and predominance inquiries. The court’s discussion of representative testimony and approximating damages under Anderson addresses some of the same themes underlying the Supreme Court’s recent decision in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2015).  But this opinion is not as cautious as Bouaphakeo. It is a very important case for plaintiffs’ lawyers to know and cite.

Moran v. Al Basit LLC, 788 F.3d 201 (6th Cir. June 1, 2015)

 Holding:  Where company allegedly failed to maintain accurate timekeeping records, plaintiff could rely entirely on his own testimony and recollection to prove the amount of his/her allegedly uncompensated time and precision is not required.  Summary judgment in favor of company reversed.

 

Comments:  This brief opinion applies and follows the Supreme Court’s seminal decision in Anderson v. Mount Clemens Pottery Co., 328 U.S. 680 (1946).  A very concise discussion of basic FLSA principles and another example of a district court getting slapped down for improvidently granting summary judgment.

 Perez v. D. Howes, LLC, 790 F.3d 681 (6th Cir. June 22, 2015)

 Holding:  District court’s properly held that cucumber pickers were employees rather than independent contractors under, inter alia, the FLSA.

 

Comments:  This one-page opinion simply adopts the district court’s analysis, which can be found at 7 F. Supp. 3d 715 (W.D. Mich. 2014).

Seventh Circuit

Alvarado v. Corporate Cleaning Services, Inc., 782 F.3d 365 (7th Cir. April 1, 2015)

Holding:  Window washers covered by 29 U.S.C. §207(i), which covers certain “commissioned” employees working at “retail or service establishment[s].”

Comments:  The outcome of this result-oriented opinion appears to be mostly driven by the fact that the window washers were unionized and reasonably well-paid and, therefore, not the type of workers who fit Judge Posner’s mold of needing the FLSA’s statutory protections.  The Court stretches mightily to find that piece-work pay can constitute commissions under the retail or service exemption.  The “unwritten” lesson of this case: unionized employees do not evoke much judicial sympathy in FLSA cases because judges expect the union to define and protect their wage rights through the collective bargaining process.

Bell v. PNC Bank, N.A., 800 F.3d 360 (7th Cir. Aug. 31, 2015)

 Holding:  Under Federal Rule of Civil Procedure 23, district court properly granted class certification in hybrid class/collective action asserting that PNC Bank maintained an “unofficial” policy of tolerating off-the-clock work at 26 Illinois retail branch locations.

 

Comments:  This opinion, written by Judge Rovner, will be cited by plaintiffs-side class action lawyers for many years to come.  The Court explains, inter alia, that: (i) employers cannot defeat class certification by merely relying on their “official” policies prohibiting off-the-clock work; (ii) class certification merely requires that some – not all – legal and factual issues be common to all class members; and (iii) class certification can be proper even if determining each class member’s amount of unpaid wages may require individualized damages trials/proceedings.

Berger v. NCAA, 843 F.3d 285 (7th Cir. Dec. 5, 2016)

Holding:  College athletes are not employees under the FLSA.

Comments:  Although this case got a lot of media attention, the outcome is unsurprising.  However, the court struggles to reach the result and, notably, avoids applying the multi-factor “economic reality” test to the case.  According to the court, determining employment under the FLSA is a fluid process, and “multifactor tests” that “fail to capture the true nature of the relationship” can be ignored.  The court then justifies the outcome by principally relying on (i) the “long tradition of amateurism in college sports” and (ii) guidance from the DOL Wage & Hour Division’s Field Operations Handbook, which the court characterizes as “persuasive” authority.  Finally, Judge Hamilton writes a concurrence suggesting that, in his view, the outcome might have been different if the plaintiffs were scholarship athletes playing revenue-generating sports (rather than members of an Ivy League college’s track and field team).

 

Callahan v. City of Chicago, 813 F.3d 658 (7th Cir. Feb. 17, 2016)

Holding:  City’s regulation of taxi cab industry does not place it in a joint employment relationship with the cab company.

Comments:  This is an oddball case that tries to stretch joint employment principles too far.  Judge Easterbrook disposes of the arguments in a short opinion.     

 

Driver v. Appleillinois, LLC, 739 F.3d 1073 (7th Cir. Jan 15, 2014)

Holding:  Restaurant’s petition for interlocutory appeal of class certification denied.

Comments:  I am including this opinion because, notwithstanding the above holding, the opinion relies to the DOL Wage & Hour Division’s Field Operations Handbook in discussing the rules for determining when a server’s non-tip-generating work is significant enough to result in the restaurant losing its right to utilize a tip-credit in satisfying its minimum wage obligations to the server.  This topic is addressed in the Fast decision, which is summarized in the Eighth Circuit section of this paper..

Gaines v. K-Five Construction Corp., 742 F.3d 256 (7th Cir. Jan. 3, 2014)

Holding:  Truck driver not entitled to compensation for purported pre-shift truck inspection work where he failed to offer any evidence that management knew or should have known he was performing such work.

Comments:  This opinion, which is primarily dedicated to non-FLSA issues, applies a well-established FLSA rule to some very case-specific facts.  Not too noteworthy.

Melton v. Tippecanoe County, 838 F.3d 814 (7th Cir. Sept. 22, 1016)

Holding:  In case alleging off-the-clock work, summary judgment properly entered against employee who failed to present any meaningful evidence that his uncompensated work exceeded 40 hours during any week.

Comments:  This is very fact-specific opinion and is not very consequential.  However, I do like the following line for use in future off-the-clock cases:  “Relying on the employee’s recollection is permissible given the unlikelihood that an employee would keep his own records of his work hours.”  

 

Mitchell v. JCG Industries, Inc., 745 F.3d 837 (7th Cir. Mar. 18, 2014)

Holding:  Under FLSA Section 3(o), unionized workers’ clothes-changing during unpaid meal breaks is not compensable.

Comments:  This controversial Judge Posner opinion drew a strong dissent from Judge Wood.  Later, a sharply-divided Seventh Circuit denied en banc review by a 6-4 vote, with Judge Williams issuing a strongly-worded dissent on behalf of herself and Judges Wood, Rovner, and Hamilton.  In essence, this decision extends the Supreme Court’s recent Sandifer holding into the meal break.  This is controversial because FLSA Section 3(o) always has been understood to be limited to activities at the beginning and end of the workday, not during meal breaks.  Anyway, before getting too excited about this opinion, it’s important to remember that (i) Section 3(o) only applies to unionized workplaces and (ii) it is questionable whether other Circuit Courts will be influenced by this decision in light of the dissenting voices within the Seventh Circuit.

Schaefer v. Walker Brothers Enterprises, Inc., 829 F.3d 551 (7th Cir. July 15, 2016)

Holding:  District court properly held that restaurant did not violate FLSA Section 3(m) tip credit rules or notice requirements.

 

Comments:   As discussed in other sections of this paper, the FLSA allows restaurants to utilize customer tips to satisfy a portion of their minimum wage obligations to servers.  See 29 U.S.C. § 203(m).  But several courts and the DOL have explained that a restaurant utilizing a tip credit may not require servers to spend more than 20% of their time performing non-tip producing work.  See, e.g., Fast v. Applebee’s Intl., Inc., 638 F.3d 872, 879-82 (8th Cir. 2011).  Here, after giving Auer deference to the Wage & Hour Division Field Operations Handbook section establishing the 20% rule, the court holds that plaintiff failed to establish that the rule was violated.  The opinion also contains a discussion of Section 3(m)’s mandate that workers subjected to a tip credit “be informed” of the tip credit.  The court explains that the notice requirement does not need to be detailed.  The server just needs to be told the extent to which the minimum wage will exceed her pay and that either tips will make up the difference or the restaurant will cover any shortage.

 

Smith v. Dart, 803 F.3d 304 (7th Cir. Sept. 25, 2015)

 Holding:  Inmates are not covered by the FLSA.

 

Comments:  The FLSA portion of this opinion merely applies a very well-established rule.

Eighth Circuit

Acosta v. Tyson Foods, Inc., 800 F.3d 468 (8th Cir. Aug. 26, 2015)

 Holding:  Named plaintiffs who originate FLSA collective actions must file with the court a consent form, and the originating plaintiff’s failure to do so required reversal of $19 million jury verdict.

 

Comments:  This is a brutally harsh outcome for the collective members and their lawyers.  Please do not forget to obtain and file a consent form from your originating plaintiff.

 

Alexander v. Tutle & Tutle Trucking, Inc., 834 F.3d 866 (8th Cir. Aug. 22, 2016)

Holding:  Drivers who hauled “frac sand” and rarely drove out of state were nonetheless covered by the FLSA’s motor carrier exemption.

Comments:  Like Resch (discussed in the Third Circuit section) this is a very harsh decision that adopts a broad reading of the FLSA’s motor carrier exemption.  The motor carrier exemption requires that the drivers “engage in activities of a character directly affecting the safety of operation of motor vehicles . . . in interstate commerce.”  29 C.F.R. § 782.2(a).  Usually, this requirement is easily satisfied because the goods being transported are, themselves, part of the stream of interstate travel.  Occasionally, however, the goods being transported are both picked-up and delivered within the state and have no connection to any interstate “stream.”  Such was the case here.  The plaintiffs were picking-up and delivering “frac sand” within the state of Arkansas.  Thus, for plaintiffs to fall within the motor carrier exemption, they needed to actually drive over state lines.  The court found that the plaintiffs’ were exempt because, even though they almost never drove over state lines, they could be required to do so based on their job duties.  Like the Third Circuit in Resch, the court read the de minimis rule in 29 C.F.R. 782.2(b)(3) as having almost no teeth.

 

Ash v. Anderson Merchandisers, LLC, 799 F.3d 957 (8th Cir. Aug. 21, 2015)

 Holding:  Plaintiffs who filed FLSA lawsuit against three separate companies failed to plead facts adequately demonstrating joint employment.

 

Comments:  Many plaintiffs’ lawyers unnecessarily name multiple defendants without having any actual evidence of joint employment and without having any strategic rationale for this aggressive tactic.  The better approach usually is to focus on the obvious employer, unless you have reason to believe that such employer cannot satisfy a judgment.  You can always amend later if discovery demonstrates a joint employer relationship.  Also, although the Circuit Court affirmed dismissal of the complaint, it also stressed that, at the pleadings stage, plaintiffs are not expected to have highly detailed knowledge of facts relevant to joint employment.

 

Beauford v. ActionLink, LLC, 781 F.3d 396 (8th Cir. March 20, 2015)

 

Holding:  “Brand Advocates” for electronics company were not covered by outside sales or administrative exemptions.  Also, plaintiffs do not waive their right to bring FLSA action by cashing backpay checks and signing waivers that were not directly supervised by DOL.

Comments:  This significant decision takes a narrow view of the exemptions at issue and has some good passages regarding what types of activities constitute “sales” activities under the outside sales exemption.

Bouaphakeo v. Tyson Foods, Inc., 765 F.3d 791 (8th Cir. Aug. 25, 2014), aff’d, 136 S. Ct. 1036 (2015).

  

Holding:  (1) District court correctly refused to decertify an FLSA collective of meat packers seeking to recover for donning, doffing, and walking times, even though the uncompensated time of some collective members may not have crossed the 40-hour overtime threshold.  (2) Plaintiffs are permitted to estimate “class-wide” damages based on the average amount of time a statistically valid sample of employees spent donning, doffing, and walking.

Comments:  This decision was affirmed by the Supreme Court in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2015), which, of course, is required reading for anyone handling class or collective actions.

Conners v. Gusano’s Chicago Style Pizzeria, 779 F.3d 835 (8th Cir. Mar. 9, 2015)

Holding:  Where originating plaintiffs did not sign arbitration agreements, they lacked standing to challenge the validity of arbitration agreements signed by members of the putative FLSA collective who signed such agreements.

Comments:  Because this opinion is grounded in constitutional standing, it does not address the substantive arguments regarding the propriety of arbitration agreements that employers present to putative collective members after the commencement of an FLSA collective action.

Fezard v. United Cerebral Palsy of Central Arkansas, 809 F.3d 1006 (8th Cir. Jan. 5, 2016)

 Holding:  (1) Plaintiff who provided companionship services to client within plaintiff’s home was exempt under the FLSA’s companionship exemption.  (2) District court properly granted summary judgment against plaintiff with respect to her FLSA retaliation claim.

Comments:  The companionship exemption holding does not warrant any discussion because it was decided under the old regulations that are no longer in effect.  Under the current regulations, plaintiff would have been entitled to overtime.  The retaliation claim is not too notable and is very fact-specific.  The court found that temporal proximity, standing alone, could not get plaintiff to a jury in the face of evidence that her termination was based on significant workplace misconduct.

Garrison v. ConAgra Foods Packaged Foods, LLC, 833 F.3d 881 (8th Cir. Aug. 15, 2016)

 

Holding:  Team Leaders at food processing plant were properly classified as overtime-exempt executives.

Comments:  In this case, the parties stipulated that the company satisfied all of the executive exemption requirements except for 29 C.F.R. § 541.100(a)(4)’s requirement that the Team Leaders had “the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.”  The opinion has a good discussion of this requirement and then concludes that it was sufficient that each of the nine Team leaders were “personally involved in at least one personnel decision.”  This outcome is typical of the leniency given to employers in satisfying this requirement in the wake of the 2004 amendments to Part 541.

 

Gomez v. Tyson Foods, Inc., 799 F.3d 1192 (8th Cir. Aug. 26, 2015)

 Holding:  Named plaintiffs who originate FLSA collective actions must file with the court a consent form, and the originating plaintiff’s failure to do so required reversal of $5 million jury verdict.

 

Comments:  See above comments to the Eighth Circuit’s Acosta decision.

Grage v. Northern States Power Co., 813 F.3d 1051 (8th Cir. 2015)

Holding:  District court erred in granting summary judgment in favor of salaried employee who allegedly was misclassified as overtime-exempt.

Comment:  When summary judgment is granted in favor of the worker, conservative appellate judges can become great champions of the jury trial.  For example, the court instructs:  “When analyzing a potential FLSA exemption, ‘the amount of time devoted to [administrative] duties, and the significance of those duties, present factual questions.’”  Also, “‘[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.’”  (emphasis in original)

 Guyton v. Tyson Foods, Inc., 767 F.3d 754 (8th Cir. Aug. 25, 2014)

Holding:  District court did not commit reversible error during class/collective donning and doffing trial that resulted in a defense verdict in favor of Tyson Foods.

Comments:  The errors complained of by plaintiffs are case-specific and probably do not have much application to other cases.  Like Bouaphakeo, this case exemplifies that class/collective actions can be manageably tried to verdict.

Holaway v. Stratasys, Inc., 771 F.3d 1057 (8th Cir. Nov. 6, 2014)

Holding:  Plaintiff’s FLSA claim was properly dismissed on summary judgment because he failed to present any credible evidence that he worked over 40 hours in any week.

Comments:  This opinion is very fact-specific.  The Court recognizes the rule that, when an employer fails to maintain time records, the employee can prove his/her work hours by “just and reasonable inference.”  The Court then explains that the plaintiff failed to meet this relatively low standard.

Jackson v. Old PPT, LLC, 834 F.3d 872 (8th Cir. Aug. 23, 2016)

Holding:  Because the union and the battery plant had reached an “implied-in-fact” agreement that donning and doffing time would be non-compensable, FLSA Section 3(o) precluded the employees from recovering for such time.

Comments:  This opinion contains a good discussion of circumstances under which Section 3(o)’s “custom or practice” requirement can be satisfied in the absence of a collective bargaining agreement specifically mentioning the non-compensable time.  As in many of these cases, the union contradicted Plaintiffs counsels’ Section 3(o) argument by filing grievances alleging that the uncompensated time violated the CBA.

Lochridge v. Lindsey Management Co., Inc., 824 F.3d 780 (8th Cir. June 2, 2016)

 

Holding:  The FLSA does not prohibit a prevailing defendant from seeking and obtaining costs under Federal Rule of Civil Procedure 54(d).

Comments:  This holding is straightforward and unsurprising.  Note that this case has nothing to do with defendant’s attorney’s fees.

Madden v. Lumber One Home Center, Inc., 745 F.3d 899 (8th Cir. Mar. 17, 2014)

Holding:  Jury verdict that three lumber yard supervisors were overtime-exempt executives reversed, in part.

Comments:  At trial, the jury found that all three plaintiffs were overtime-exempt executives.  The Court affirms this verdict as to two of the supervisors.  However, the Court overturns the jury verdict with respect to one supervisor who, based on the evidence, played absolutely no role in personnel decisions.  The opinion contains some good language regarding the executive exemption’s requirement that a plaintiffs “suggestions and recommendations” regarding personnel decisions be “given particular weight.”

Perez v. Contingent Care, LLC, 820 F.3d 288 (8th Cir. April 7, 2016)

Holding:  (1) Custodial day care center qualified as a “preschool” for purposes of FLSA enterprise coverage.  (2) Day care workers adequately estimated their unpaid work hours as a matter of “just and reasonable inference” under Anderson v. Mount Clemens Pottery Co., 328 U.S. 680 (1946) and its progeny.

Comments:  The FLSA’s enterprise coverage provision makes “preschools” a covered “employer” even if the annual gross sales do not exceed $500,000.  See 29 U.S.C. § 203(s)(1)(B).  The court surveys the caselaw and some DOL opinion letters in holding that custodial daycare centers are the equivalent of “preschools,” and, therefore, are covered by the FLSA. Moreover, the application of Anderson to the ‘hours worked” analysis is standard fare.

Petroski v. H&R Block Enterprises, LLC, 750 F.3d 976 (8th Cir. May 5, 2014)

 

Holding:  H&R Block tax preparers are not employed by the company during the “off-season” and, as such, have no FLSA right to be paid for time spent attending off-season training courses.

Comments:   This was a big case, and the holding seems unfair.  But the Court’s reasoning is limited to “seasonal” employees required to perform unpaid work during their off-season.  Outside of the tax preparation arena, the opinions’ reach seems limited.

Romero v. Top-Tier Colorado, LLC, __ F.3d __, 2017 U.S. App. LEXIS 3996 (10th Cir. March 7, 2017)

Holding:  FLSA’s tip credit provision requires restaurants to pay tipped employees at least $2.83/hour, even if the servers tips, standing alone, exceed the $7.25/hour minimum wage.

Comments:  This holding is unsurprising, and any other approach would violate the plain language of 29 U.S.C. § 203(m).  Court includes a somewhat interesting discussion about the distinction between “wages” and “tips.”

Williams v. Central Transport Int’l, Inc., 830 F.3d 773 (8th Cir. July 28, 2016)

Holding:  Workers who spent substantial time loading tractor trailers are overtime-exempt under the motor carrier act exemption.

Comments:  This decision contains a good discussion of the rules for determining when “loaders” are covered by the MCA exemption.  Importantly, the court refuses to follow the portion of the DOL regulation requiring that the loader “exercise[e] judgment and discretion in planning and building a balanced load . . . .”  29 C.F.R. § 782.5(a)(2).  In the court’s view, all that matters is that the worker spend “a substantial part of his time” loading.

Ninth Circuit

Avila v. Los Angeles Police Department, 758 F.3d 1096 (9th Cir. July 10, 2014)

Holding:  Jury properly found that police officer’s termination was retaliatory under the FLSA.

Comments:  This opinion does not break any new ground and is very fact-specific.  It’s not too surprising that the plaintiff police officer – who was terminated shortly after testifying against the department in a federal FLSA trial – prevailed.

Balestrieri v. Menlo Park Fire Protection District, 800 F.3d 1094 (9th Cir. Sept. 4, 2015)

Holding:  (1)  Under Supreme Court’s recent Busk v. Integrity Staffing Solutions, Inc., 135 S. Ct. 513 (2014), time spent by firefighters at their assigned firehouse to gather certain firefighting gear was non-compensable under the FLSA’s Portal-to-Portal provisions, 29 U.S.C. § 254(a).  Because the firefighters were permitted to take such gear home with them – which would have eliminated the need to gather the gear at the firehouse – such activities were not “integral and indispensible” under their firefighting duties.  (2) Payments received by firefighters when employer “buys back” unused leave time is not be included in the “regular rate” calculation for overtime pay purposes.

 

Comments:  This is the first circuit court decision applying Busk, and the result is unsurprising.  Under Busk’s interpretation of the Portal-to-Portal act, preliminary and postliminary work activities are compensable only if they are an “intrinsic element” of the employee’s primary activities and if they are activities “with which the employee cannot dispense if he is to perform his principal activities.”  Also, the “regular rate” holding breaks no new ground.

Corbin v. Time Warner Entertainment, 821 F.3d 1069 (9th Cir. May 2, 2016)

Holding:  (1) A company’s “time rounding” practices are legal as long at than are neutral as to all employees in the aggregate, even if any single employee is slightly underpaid or overpaid.  (2) Plaintiff’s attempt to recover for one minute of uncompensated time was barred by the de minimis defense.  (3) A defendant’s failure to plead the de minimis defense as an affirmative defense does not result in a waiver of the defense.

Comments:  The circuit court rightfully seemed baffled that anyone would file suit for such miniscule amounts of unpaid time, and, indeed, the facts of this case are not worthy of discussion.  However, the circuit court’s opinion contains a good discussion of both the DOL’s time-rounding regulation and the de minimis doctrine.

Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. June 2, 2016)

Holding:  (1) In calculating overtime, the City’s payments for unused benefits must be included in the regular rate determination because such payments are not among the types of payments statutorily excluded from the regular rate, see 29 U.S.C. § 207(e).  (2) The City’s violation of the regular rates rules was willful, triggering a three-year limitations period and liquidated damages.  (3) City qualified for the partial overtime exemption available to law enforcement agencies and described at 29 U.S.C. § 207(k).

Comments:  This case has a good discussion of regular rate principles and “willfulness.”  However, if you ever represent law enforcement plaintiffs, you really should read the discussion of the Section 7(k) “partial exemption.”  This provision enables governmental employees to calculate overtime based on recurring periods other than a 7-day week and can result in seriously diminished overtime.

 

Landers v. Quality Communications, Inc., 771 F.3d 638 (9th Cir. Nov. 12, 2014)

 

Holding:  Plaintiff asserting an FLSA overtime claim “must allege that she worked more than forty hours in a given workweek without being compensated for the hours worked in excess of forty during that week.”  However, the plaintiff “may establish a plausible claim by estimating the length of her average workweek during the applicable period and the average rate at which she was paid, the amount of overtime wages she believes she is owed, or any other facts that will permit the court to find plausibility.”

 

Comments:  This opinion takes an approach that is similar to the Third Circuit’s approach in Davis (discussed above).  If you are interested in the FLSA pleading issue, this opinion includes a great survey of the various circuit court authority from throughout the country.

Navarro v. Encino Motorcars, LLC, 845 F.3d 925 (9th Cir. Jan. 9, 2017)

Holding:  Auto dealership “Service Advisors” not exempt under 29 U.S.C. § 213(b)(10)(A), which applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.”

 

Comments:  The Ninth Circuit reached the same outcome in 2015.  However, the Supreme Court reversed and remanded because the 2015 decision improperly relied upon a DOL regulation that, in the Supreme Court’s view, was unworthy of Chevron deference.  See  Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016).  This time around, the Ninth Circuit relied on statutory language and legislative history to hold that Service Advisors are non-exempt.

Oregon Restaurant and Lodging Ass’n v. Perez, 816 F.3d 1080 (9th Cir. Feb. 23, 2016)

Holding:  DOL did not exceed its authority in revising 29 C.F.R. § 531.52 to clarify that 29 U.S.C. § 207(m)’s restrictions on tip-pooling extend to servers for whom no tip credit is taken.

Comments:  The FLSA both allows a restaurant to utilize customer tips to satisfy a portion of its minimum wage obligations to servers and permits “the pooling of tips” among restaurant employees.  See 29 U.S.C. § 203(m).  But there’s a catch:  restaurants utilizing tips to satisfy their minimum wage obligations may not allow tip pool proceeds to be shared with restaurant employees who do not “customarily and regularly receive tips.”  29 U.S.C. § 203(m).  Courts have explained that, under this rule, employees must interact with customers in order to share in the tip pool.  See, e.g., Montano v. Montrose Restaurant Associates, Inc. (discussed in Fifth Circuit section of this paper).  The Ninth Circuit’s 2010 decision in Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010), held that, if a restaurant paid its servers the full minimum wage without utilizing a tip credit, then the restaurant was not required to follow these rules.  In response, DOL amended the pertinent regulations to clarify that a restaurant must follow the tip-pooling rules “whether or not it has taken a tip credit.”  29 C.F.R. § 531.52 (2011).  That brings us to the instant Oregon Restaurant and Lodging decision.  Relying on Chevron deference principles, the Ninth Circuit explained that DOL did not exceed its authority in revising § 531.52 and that the previous Cumbie decision did not prevent the DOL from acting.

Rosenfield v. Globaltranz Enterprises, Inc., 811 F.3d 282 (9th Cir. Dec. 14, 2015)

Holding:  Management-level employee who complained to higher-ups about company’s FLSA violations was not necessarily prohibited from bringing retaliation claim as long as “FLSA compliance was not part of [the employee’s] job portfolio.”

 

Comments:  In Kasten v. Saint Gobain Performance Plastics Corp., 563 U.S. 1 (2011), the Supreme Court held that an employee alleging retaliation under the FLSA must demonstrate that her complaint “was sufficiently clear and detailed for a reasonable employer to understand it, in both content and context, as an assertion of rights protected by the [FLSA] and a call for their protection”.  Here, the Ninth Circuit applies Kasten to complaints by a management-level employee and emphasizes that FLSA retaliation cases must be decided on a case-by-case basis.  As such, it is possible for a management-level employee’s complaints to pass the Kasten test where, as in this case, her job duties did not include FLSA compliance.

Tenth Circuit

 

Albers Board of County Commissioners of Jefferson County, 771 F.3d 697 (10th Cir. Nov. 13, 2014)

Holding:  Employer did not violate the FLSA by calculating the overtime premium based upon the employee’s actual – rather than agreed upon – pay rate.

Comments:   Plaintiffs claimed that their employer paid them at an hourly rate that was lower than the agreed-upon pay rate.  Plaintiffs then tried to transform this breach of contract claim into an FLSA violation by arguing that, under the FLSA, the agreed-upon rate must be used to calculate the overtime premium.  The Court flatly rejected this argument, observing that, under the FLSA, the regular rate is the amount actually “paid to” the employee.  See 29 U.S.C. § 207(e).

Castaneda v. JBS USA, LLC, 819 F.3d 1237 (10th Cir. May 3, 2016)

Holding: “Clothes changing” that is non-compensable under 29 U.S.C. § 203(o) and Sandifer v. v. U.S. Steel Corp., 134 S. Ct. 870 (2014) cannot define the parameters of the compensable workday for purposes of applying the “continuous workday” rule.

Comments:  This complicated, pro-business opinion (with Judge Gorsuch on the panel) would have been more consequential ten years ago, when “donning and doffing” cases were at their height.  Moreover, because this is a Section 3(o) case, its holding has no application to donning and doffing cases arising in non-union plants.  So, I just don’t think this decision will have many ramifications going forward.  On the bright side, the decision does have a nice recitation of the “continuous workday” rule.

Deherrera v. Decker Truck Line, Inc., 820 F.3d 1147 (10th Cir. April 21, 2016)

Holding:  Driver of commercial motor vehicle whose job consisted of the intrastate hauling of beer and empty kegs between the brewing company’s Colorado brewery and Colorado warehouse was covered by the FLSA motor carrier exemption because the shipments were part of a “practical continuity of movement.”

Comments:  This is an interesting case that applies some of the same concepts already discussed in Mazzarella, which is discussed in the Third Circuit section of this paper.  The “practical continuity of movement” principle has really been flushed in the past two years.

 

Ellis v. J.R.’s Country Stores, Inc., 779 F.3d 1184 (10th Cir. Mar. 9, 2015)

Holding:  Employer did not lose the executive exemption by making a single, improper deduction to a manager’s salary.

Comment:   This opinion is not too surprising.  Plaintiff’s misclassification theory hinged on evidence that, on one single occasion, the employer made an improper deduction to her salary.  When this deduction was brought to the employer’s attention, it promptly reimbursed Plaintiff.  The opinion contains a good discussion of the salary deduction rules and the “window of correction” regulation.      

 

Garcia v. Tyson Foods, Inc., 770 F.3d 1300 (10th Cir. Aug. 19, 2014)

Holding:  (1) Jury in this class/collective donning and doffing lawsuit properly found in the workers’ favor and awarded class-wide damages based on the evidence presented.  (2) District court properly awarded Plaintiffs’ counsel over $3.3 million in attorney’s fees.

Comments:  This opinion – the third Tyson Foods opinion covered in this paper – provides another example of how large FLSA collective actions can be effectively tried to verdict.  Like the Tenth Circuit’s Bouaphakeo opinion (discussed above), this opinion contains some good language regarding the propriety of “representative evidence” in trying FLSA collective actions.  The portion of the opinion addressing attorney’s fees contains some good language (i) rebutting Tyson’s “partial-success” arguments and (ii) reaffirming that statutory fees under the FLSA will often exceed the amount of unpaid wages awarded to the plaintiffs.

Mencia v. Allred, 808 F.3d 463 (10th Cir. Dec. 14, 2015)

Holding:  (1) District court erred in holding that a sheep ranch worker fell within the FLSA’s “range production of livestock” exemption.  See 29 U.S.C. § 213(a)(6)(E).  (2) District court erred in holding that worker was “estopped” from bringing FLSA claim due to his failure to complain to the boss.

Comments:  The opinion contains a pretty extensive discussion of the “range production of livestock” regulations.  The court explains that, to fall within the exemption, workers must spend more than half their time working in a “remote” location where the livestock can graze.  The more far-reaching aspect of this opinion is the court’s rejection of the “estoppel” argument.  The court explains that there really is no such thing as “estoppel” in FLSA cases and that there is no requirement that workers preserve future FLSA claims by contemporaneously complaining to the boss.  Instead, in evaluating unpaid wage claims, the operative question is whether the company “knew or should have known what [the worker] was doing.”  For a similar analysis, see the Bailey decision discussed in the Eleventh Circuit section of this paper.

Perez v. El Tequila, LLC, 847 F.3d 1247 (10th Cir. Feb. 7, 2017)

Holding:  In determining damages after finding multiple FLSA violations, the district court properly included bonus payments in the “regular rate” calculation.

Comments:  There is not much discussion of the issue.  The employer claimed that the bonus payments were discretionary and, therefore, should not be included in the regular rate calculation.  In disagreeing, the court made the helpful comment that “claiming discretionary bonus is an affirmative defense for which the employer . . . bears the burden of proof.”

 

Sanchez v. Nitro-Lift Technologies, Inc., 762 F.3d 1139 (10th Cir. 2014)

Holding:  Plaintiff’s FLSA claim was covered by arbitration clause contained in a Confidentiality/Non-Compete Agreement he signed when first hired.

Comments:  The outcome of this case is both unsurprising and fact-specific.  The Court also discusses – without deciding – whether high arbitration fees can violate the Plaintiff’s substantive right to pursue his FLSA claim.

Sharp v. CGK Land (US), Inc., 840 F.3d 1211 (10th Cir. Nov. 4, 2016)

Holding:   Meal allowance payments of $35/day need not be included in the “regular rate” calculation.

Comments:  The court follows a DOL opinion letter and holds that, because the meal allowance payments only applied on days in which the workers were stationed far away from home, they were covered by 29 U.S.C. § 207(e)(2), which excludes from the regular rate “reasonable payments for traveling expenses.”

Eleventh Circuit

Bailey v. Titlemax of Georgia, Inc., 776 F.3d 797 (11th Cir. Jan. 15, 2015)

Holding:  A supervisor’s knowledge that employees are working off-the-clock is imputed to the employer for FLSA liability purposes, and, under such circumstances, the employer cannot escape liability by asserting that the employee had “unclean hands” by failing to report all of her work hours.

Comments:  This is a very important opinion.  The Court squarely addresses and rejects an increasingly prominent defense argument:  that workers are to blame for off-the-clock work by failing to comply with company policies that require employees to report all time.  As the Court explains, this argument contradicts the FLSA’s policy of addressing the unequal bargaining power between employers and employees.  If an employee is working off-the-clock and her supervisor knows or should know, then the employer is liable.

Calderone v. Scott, 838 F.3d 1101 (11th Cir. Sept. 28, 2016)

Holding:  FLSA collective actions and Rule 23 class actions may proceed together in the same lawsuit.

Comments:  This unsurprising holding brings the Eleventh Circuit in-line with other Circuits and rejects the now-discredited “inherent incompatibility” doctrine.  The decision has a nice passage comparing class actions to collective actions.  Also, the following can come in handy in opposing defense motions to “decertify” FLSA collectives:  “The certification requirements for a Rule 23 class action are more demanding.”

Garcia-Celestino v. Ruiz Harvesting, Inc., 843 F.3d 1276 (11th Cir. Dec. 15, 2016)

Holding:  Laborer asserting FLSA claim against a large citrus producer and two labor contacting companies asserted sufficient facts to make the citrus producer liable as a joint employer.

Comments:  The FLSA portion of this opinion is pretty cursory.  But the court does lay out and briefly discuss the Eleventh Circuit’s joint employment factors.  Also, the court states that, in analyzing joint employment, the judge “should separately focus on the worker’s relationships with each putative employer.”  This statement – which is made without any discussion – seems to conflict with the Fourth Circuit’s approach to joint employment in Hill, which was discussed earlier.

Pioch v. IBEX Engineering Services, Inc., 825 F.3d 1263 (11th Cir. June 14, 2016)

 

Holding:  When a highly compensated hourly employee who was exempt under the computer employee exemption, see 29 U.S.C. § 213(a)(17), had his final paycheck withheld due to alleged misconduct, the withholding did not convert him to a non-exempt employee during the final weeks of his employment.

Comments:  The court undertakes a thorough analysis of this issue.  I find the outcome to be unsurprising and this opinion to be relatively unimportant in the greater scheme of FLSA law.

Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. Sept. 11, 2015)

Holding:  Agreeing with the Second Circuit, see Glatt, supra, that the six-part DOL test should be replaced with a more flexible test focused on “whether the intern or the employer is the primary beneficiary of the relationship” based on an analysis of seven “non-exhaustive” factors.

 

Comments:  See Comments to Second Circuit’s Glatt decision.

 

Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir. Mar. 21, 2014)

Holding:  The FLSA does not substantively prevent the enforcement of arbitration agreements that prevent workers from pursuing their claims on a class-wide or collective basis.

Comments:  Even under the Federal Arbitration Act, an arbitration agreement cannot be applied in a manner that violates a plaintiff’s substantive rights under another federal statute.  Unfortunately, in this case, the Court found that the FLSA’s collective action mechanism is not the type of substantive statutory right that overrides the FAA.

For a contrary view, see Gaffers v. Kelly Services, Inc., 2016 U.S. Dist. LEXIS 1/2789 (E.D. Mich. Aug. 24, 2016).

Watkins v. City of Montgomery, 775 F.3d 1280 (11th Cir. Dec. 24, 2014)

Holding:  (1) Jury in FLSA collective action properly determined that disciplinary deductions from the salaries paid to exempt fire department lieutenants did not violate the “salary basis” rules.  (2) District court properly instructed the jury with respect to the executive exemption.

Comments:  This is yet another example of an FLSA collective action that was successfully tried to verdict.  The opinion contains a good discussion of the regulations and caselaw applicable in determining whether salary deductions for disciplinary reasons violate the salary basis requirement.

District of Columbia Circuit

 

Home Care Association of America v. Weil, 799 F.3d 1084 (D.C. Cir. Aug. 21, 2015)

Holding:  Department of Labor regulations stating that FLSA’s companionship services and live-in domestic services exemptions, see 29 U.S.C. §§ 213(a)(15), (21), do not cover workers employed by third-party companies were implemented in compliance with the Administrative Procedure Act.

 

Comments:  This important – but unsurprising – opinion has enabled millions of home health aids to receive overtime pay under the FLSA.

 

Radtke v. Lifecare Management Partners, 795 F.3d 159 (D.C. Cir. July 28, 2015)

Holding:  Upholding jury verdict that medical records coders are not covered by the FLSA’s administrative or professional exemptions.

 

Comments:  Good discussion of principle that FLSA exemption determinations involve mixed questions of law and fact.  Also, in upholding the jury verdict, the Circuit Court notes that one plaintiff spent 75% of her time and the other plaintiff spent 92% of her time performing routine medical coding work.  So this opinion may be a good counterweight to other recent circuit court opinions that seem to de-emphasize the importance of time percentages in white-collar exemption cases.

Rhea Lana, Inc. v. Department of Labor, 824 F.3d 1023 (D.C. Cir. June 3, 2016)

Holding:  Letter from the DOL’s Wage & Hour Division that that employer’s continued violation of FLSA would subject it to civil penalties in the event of a future enforcement action constituted the type of final administrative agency action to trigger the employer’s right to seek injunctive relief under the Administrative Procedure Act.

Comments:  This decision is interesting, but not too consequential for private plaintiffs-side lawyers.

Attorney Pete Winebrake, of Winebrake & Santillo LLC, will be a featured speaker at the National Employment Lawyers Association seminar titled “Litigating Wage & Hour Cases: Challenges & Opportunities”. The seminar will be held at the Sheraton Silver Spring Hotel in Silver Spring, MD from March 31–April 1, 2017.

In his presentation, “Significant Developments, Recent Trends & Emerging Issues In Wage & Hour Law”,  Pete will provide an in-depth review of recent developments in the U.S. Supreme Court, key cases from the lower federal courts, as well as government regulations and their implications for wage and hour practitioners. He will be joined by panelist Catha Worthman.

The National Employment Lawyers Association (NELA) is the largest professional membership organization in the country comprising lawyers who represent workers in labor, employment, and civil rights disputes.

To read more about the seminar please click here.

On March 22nd, a federal judge in Scranton, PA granted approval for a $137,500 settlement in a case in which our firm represented 28 natural gas industry workers who were paid on a day-rate basis. In the lawsuit, we allege these workers were missclassified as “independent contractors” and were not compensated overtime premium pay for hours worked over 40 in a week. The company denies liability.

A copy of the judge’s decision can be found here.

If you have any questions about your overtime rights please do not hesitate to call our office at (215) 884-2491 to speak with an attorney or send an email to mdunn@winebrakelaw.com

 

Our law firm continues to represent Servers who worked at Chili’s Bar & Grill restaurants operated in Pennsylvania by Quality Dining, Inc. and Grayling Corporation.  The lawsuit alleges that the restaurants violated federal and state wage laws by requiring Servers to tip-out restaurant Expediters.  After we started the lawsuit, the restaurant changed its tip-out policies.  The lawsuit seeks unpaid wages and other damages for the time period before the policy change. The restaurant denies liability. The lawsuit is titled Joseph v. Quality Dining, Inc., 5:16-cv-01907-JLS (E.D. Pa.).

On March 21st, the judge issued a ruling requiring that the claims in this lawsuit be pursued in private arbitration rather than in federal court.  A copy of the judge’s decision can be found here.

If you have worked in a Pennsylvania Chili’s restaurant during the past three years and wish to learn more about the Expediter tip-out claims, please do not hesitate to give us a call at (215) 884-2491 or send an email to mdunn@winebrakelaw.com

 

Today three Salaried Office Managers for Heartland Dental represented by Winebrake & Santillo filed a motion with the United States District Court for the District of Maryland asking that it enter a judgment in their favor for over $28,000.00.  The three Office Managers alleged in a complaint filed in June 2016 that based on their job duties, they should have been paid overtime premium pay when they worked over 40 hours in a week.  Instead, Heartland paid them only a salary and misclassified them as exempt from overtime pay.

A a copy of the motion papers that were filed with the Court today are available here.

If you should have any questions, feel free to give us a call at (215) 884-2491.

 

 

Winebrake & Santillo just recovered over $20,000 in a trial against McCoy Corporation (d/b/a “McCoy’s Building Supply”) on behalf of a salaried Assistant Store Manager.  The Court’s decision issued by Judge Carmen E. Garza from the District of New Mexico held that McCoy’s Building Supply violated the law by failing to pay overtime compensation to a salaried Assistant Store Manager.

Plaintiff asserted in this lawsuit that McCoy’s violated the Fair Labor Standards Act (FLSA) and the New Mexico Minimum Wage Act (MWA) by failing to pay Plaintiff his overtime wages.  As an Assistant Store Manager at McCoy’s store in Roswell, New Mexico, Plaintiff was paid on a salaried basis and typically worked 58 hours a week.

The case went to trial in December 2016 and Judge Garza presided over the two-day bench trial in Albuquerque, New Mexico.  Plaintiff’s trial attorneys, Mark Gottesfeld from Winebrake & Santillo, LLC, along with co-counsel Brandt P. Milstein, argued that Plaintiff was entitled to overtime pay based on his actual work performed such as merchandising, stocking, running the cash register, providing customer service, cleaning the store, loading and unloading vehicles, and yard work.

Specifically, Plaintiff presented evidence at trial that, even though he was paid a salary, he spent almost all of his time performing the same duties as other McCoy’s employees, who were eligible for overtime pay, holding job titles such as Yard Crewmember, Stock Crewmember, Cashier, Sales Associate, and Yard Leader.  McCoy’s argued at trial that it provided Plaintiff training on how to be a manager and expected him to perform managerial duties.  However, Plaintiff’s Store Manager even admitted at trial that Plaintiff should have spent 25 to 30% of his time performing manual, non-managerial work.  Moreover, Plaintiff’s trial attorneys presented evidence that the employees at McCoy’s Roswell store did not need direction or supervision from Plaintiff.

In Judge’s Garza’s decision ordering that McCoy’s pay Plaintiff overtime compensation, the Court found that Plaintiff spent the “vast majority of his time” performing manual tasks at McCoy’s Roswell store and that “the sheer amount of time Plaintiff spent performing nonexempt work disqualifies him from exemption under the MWA.”  Further, the Court ruled that the managerial duties that Plaintiff actually performed for McCoy’s “were relatively unimportant.”

The Court awarded Plaintiff $6,411.60 in overtime wages, $12,823.20 in treble damages, and also pre-judgment interest at 10%, and post-judgment interest at 8.75%.  Plaintiff’s attorneys will petition the Court to seek recovery of their attorney’s fees and costs from McCoy’s.

McCoy’s Building Supply is headquartered in San Marcos, Texas.

South Jersey — On Feb. 17th, 2017, the Courier-Post published an article that highlighted the wage lawsuit Winebrake & Santillo, LLC filed against Harvest Seasonal Grill & Wine Bar in Moorestown, NJ on behalf of food servers and bartenders who claim they were made to illegally share tips with food runners or “expos”. The suit says expos, who prepare meals for pickup by servers in the kitchen area, do not interact with restaurant patrons and are not normally tipped.

“The lawsuit was filed by a Dresher, Pennsylvania, law firm, Winebrake & Santillo, that recently settled a similar suit against the Iron Hill Brewery chain for $1.3 million”, the article quotes.

Read the full article here. 

If you or one of your friends or relatives worked as a server or bartender at any one of the Harvest Seasonal Grill & Wine Bar restaurants feel free to call us at 215-884-2491.  One of our attorneys would be happy to speak with you.

 

Akron, Ohio — Winebrake & Santillo, LLC has filed a collective action lawsuit against VXI Global Solutions that alleges VXI failed to pay call center employees for all of their work hours. This unpaid time includes: (i) time spent at the beginning of the day booting up the computer and logging into computer programs; (ii) time spent attending meetings; and (iii) time spent handling calls while logged out of VXI’s timekeeping system.

This lawsuit is filed as a “collective action” which means other current/former VXI call center employees can join the lawsuit. If you worked at VXI any time in the last 3 years, you can give us a call at (215) 884-2491 to learn more about the lawsuit. We would be happy to talk with you and provide you with the information you need to join the case.

Please find attached: (i) a copy of the complaint and (ii) the form needed to be completed and returned in order to join the lawsuit.

If you or someone you know worked as a server or bartender at a restaurant that enacted one or more of the violations below you may have a claim to recover unpaid wages owed to you!

Restaurants can violate the laws when they:

• require or allow servers to share tips with managers, Expediters, or kitchen staff

• withhold tips from servers

• require or allow servers to spend over 20% of their time performing jobs not related to serving customers

• require or allow servers to work “off-the-clock” performing cleaning or other duties before or after the paid shift

• fail to make extra overtime payments for hours worked over 40 per week

• in Philadelphia, deducting tips to pay for credit card fees

Call us today at (215)-884-2491 to speak with an attorney for a free and confidential consultation. Know your rights!

 

Our firm represents 6 salaried “Store Managers” who were employed at Joe’s Kwik Mart stores operated by SMG Group, LLC.  The company classifies the Store Managers as “executives” who are not entitled to overtime.  In the lawsuit, our clients claim that this classification is wrong because, even though the Store Managers have a fancy job title, their day-to-day work consists almost entirely of doing non-managerial work such as cleaning, stocking shelves, and working the cash register

The lawsuit is assigned to a Federal Judge in Scranton, PA.  The Federal Judge currently is considering our motion requesting that he notify all salaried Store Managers of this lawsuit and give them an opportunity to join.  This is called a “conditional certification” motion.  We hope the Judge will grant the motion.

However, we always are interested in adding more Store Managers to this lawsuit.  So, if you have worked as a Joe’s Quick Mart Store Managers any time in the last 3 years, you can give us a call at (215) 884-2491 to learn more about the lawsuit.  We would be happy to talk to you and to provide the you with more information they need to join the case.

Also, for your information, please find attached:  (i) a copy of the Complaint and (ii) a copy of the form that should be completed and returned to join the lawsuit

Our firm represents 6 salaried “Store Managers” who were employed at Joe’s Kwik Mart stores operated by SMG Group, LLC.  The company classifies the Store Managers as “executives” who are not entitled to overtime.  In the lawsuit, our clients claim that this classification is wrong because, even though the Store Managers have a fancy job title, their day-to-day work consists almost entirely of doing non-managerial work such as cleaning, stocking shelves, and working the cash register

The lawsuit is assigned to a Federal Judge in Scranton, PA.  The Federal Judge currently is considering our motion requesting that he notify all salaried Store Managers of this lawsuit and give them an opportunity to join.  This is called a “conditional certification” motion.  We hope the Judge will grant the motion.

However, we always are interested in adding more Store Managers to this lawsuit.  So, if you have worked as a Joe’s Quick Mart Store Managers any time in the last 3 years, you can give us a call at (215) 884-2491 to learn more about the lawsuit.  We would be happy to talk to you and to provide the you with more information they need to join the case.

Also, for your information, please find attached:  (i) a copy of the Complaint and (ii) a copy of the form that should be completed and returned to join the lawsuit

On December 19th, 2016, Senator Bob Casey (D-PA) and 17 other legislators sent a letter to President-elect Donald Trump addressing the temporary block on the Department of Labor’s overtime ruling. The ruling “restores the 40-hour workweek”, ensuring that people making less than $47,476 a year will be paid time-and-a-half for extra hours worked.

Unfortunately, on November 22, 2016, a federal court in Texas temporarily blocked the ruling from taking effect on its proposed start-date of December 1, 2016.

“The court’s ruling comes on the heels of months of steadfast opposition to the rule by Republicans, who have unfortunately chosen to stand with big business instead of helping workers get the pay they have earned”, the letter reads. It calls on President-elect Donald Trump to stand up for the American worker and to “make good on [campaign promises] by ensuring that the overtime rule takes effect without any further delay”.

Want to read the letter? Click here: Senators Letter to Trump on Overtime Pay

 

 

Pete Winebrake, of Winebrake & Santillo LLC, was a recently featured guest on WRNB 100.3 Philly’s ‘Search Us, Pay Us’ court radio show. He sat down with show-host, Dean Weitzman, to discuss employment law and the complexities of wage and overtime issues. Listeners also called in with legal questions for Dean and Pete.

Want to listen? Visit this link:  https://rnbphilly.com/2781395/search-us-pay-us/

Winebrake and Santillo, LLC has recovered millions of dollars in unpaid wages and overtime pay for hard-working employees. Please call us at (215) 884-2491 if you or someone you know believes that he or she has not received their full wages or overtime pay.  All phone consultations are confidential and free.

 

 

On November 9, 2016, Judge John E. Jones, III of the Middle District of Pennsylvania conditionally certified a collective under the Fair Labor Standards Act of servers at the Quaker Steak & Lube restaurant in York, Pennsylvania represented by Winebrake & Santillo.  A copy of the Court’s order is attached here.

The lawsuit alleges that restaurant violated state wage law by requiring servers to contribute a portion of their tips to a tip pool that was shared with expediters otherwise known as “Expos.”

If you or one of your friends or relatives worked as a server at any one of the Quaker Steak & Lube restaurants feel free to call us at 215-884-2491.  One of our attorneys would be happy to speak with you.

On November 9, 2016, Judge Nitza I. Quinones Alejandro of the Eastern District of Pennsylvania conditionally certified a collective under the Fair Labor Standards Act of servers at the Harvest Seasonal Grill & Wine Bar in Glen Mills, Pennsylvania represented by Winebrake & Santillo.  A copy of the Court’s order is attached here.

The lawsuit alleges that Harvest violated state wage law by requiring servers at its Glen Mills restaurant to contribute a portion of their tips to a tip pool that was shared with expediters otherwise known as “Expos.”

If you or one of your friends or relatives worked as a server at any one of the Harvest Seasonal Grill & Wine Bar restaurants feel free to call us at 215-884-2491.  One of our attorneys would be happy to speak with you.

Companies are increasingly requiring workers to sign arbitration agreements that prevent workers from suing the company in court.  Instead, under these agreements, employment disputes must be resolved through private arbitration.

Mandatory arbitration agreements frequently are criticized because private arbitration proceedings are not open to the public and do not allow for jury trials.  These criticisms recently got some publicity when the sexual harassment claims of Fox News celebrity Gretchen Carlson were compelled to arbitration.  The news media and women’s rights groups complained that private arbitration would prevent the public from learning about outrageous behavior tolerated at one of the nation’s biggest media empires.

A less-discussed criticism of private arbitration is that most arbitration agreements contain “class waiver” provisions.  Under these provisions, the worker must agree that any arbitration will be limited to his/her individual dispute.  In other words, companies are using arbitration agreements to prevent workers from bringing class action lawsuits on behalf of fellow employees.

Here is why workers’ rights advocates and policymakers should be very concerned about class action waivers.  In many employment rights cases – especially those arising under wage and overtime laws – the damages stemming from an individual employee’s legal claim might only amount to a few hundred or a few thousand dollars.  However, in the aggregate, the damages owed to all employees for the same legal violation might total millions of dollars.

Put in economic terms, class actions enable workers to achieve the “economies of scale” necessary to go up against the big boss.  As observed by the Supreme Court:  “The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.”  Amchem Products, Inc. v. Windsor, 521 U.S. 591, 617 (1997).

Employment rights class actions recently received a big boost when the U.S. Courts of Appeal for the Seventh Circuit (covering Illinois, Indiana, and Wisconsin) and the Ninth Circuit (covering Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) ruled that class waivers in arbitration agreements are illegal because they violate the right of workers to engage in “concerted activity” under the National Labor Relations Act (“NLRA”).  See: Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. Aug. 22, 2016).Meanwhile, the U.S. Courts of Appeal for the Fifth Circuit (covering Texas, Louisiana, and Mississippi), the Eighth Circuit (covering Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota), and the Second Circuit (covering Connecticut, New York, and Vermont) have held that such class waivers do not violate the NLRA. See: D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013).These conflicting decisions are irreconcilable.  So whether or not the NLRA prohibits class waivers in arbitration agreements is almost certainly destined for the Supreme Court.  In the meantime, here in Pennsylvania, employment lawyers are anxiously waiting for the U.S. Court of Appeals for the Third Circuit (covering Delaware, New Jersey, and Pennsylvania) to decide this issue in an appeal entitled The Rose Group v. NLRB, 15-4092.  The Court heard oral argument on October 5 and should issue a decision in the next several months.

In the absence of Supreme Court guidance, employment lawyers will continue to fight over the legality of class waivers in arbitration agreements.  Although this “procedural” issue does not get much attention in the news media, it is extraordinarily important to the vindication of workers’ wage, overtime, and other employment rights.

 

The November 8 election resulted in big wins for low wage workers in Arizona, Colorado, Maine, and Washington.  In all four states, voters approved referenda to increase the minimum wage.  The minimum wage in Arizona, Colorado, and Maine will rise to $12.00 by 2020.  In Washington, it will rise to $13.50.

In Arizona, the minimum wage increase was supported by 58.9% of voters.  This is especially significant, since Arizona is a “Red” state that Donald Trump won by over 4%.  Similarly, in each of the other three states, the minimum wage increase received significantly more support than the winning Presidential candidate: Colorado – 54.7%; Maine – 55.5%; and Washington – 58.1%.

Such election outcomes demonstrate that Americans of all political stripes embrace the common sense notion that workers cannot survive on the current federal minimum wage of $7.25/hour.  Unlike our two presidential candidates, a higher minimum wage is something the whole country can rally around.

For important information about the settlement of the Iron Hill Brewery and Restaurant Wage lawsuit please click on this link:

http://www.winebrakelaw.com/ironhill-wage-settlement/

 

The Iron Hill Brewery chain is paying $1.3 million to settle a class and collection lawsuit brought by servers and bartenders represented by Winebrake and Santillo LLC, who alleged the restaurant chain improperly diverted tips from servers and bartenders. Based in Delaware, Iron Hill operates a dozen restaurants in the tri-state area.

The company has agreed to end a tip-pool policy that required employees to share gratuities with workers who would not normally be tipped, such as expediters or “expos” who prepare meals for pick-up by servers and do not interact with restaurant patrons.

Read more about the Iron Hill settlement here. 

Winebrake and Santillo LLC has recovered millions of dollars in unpaid wages and overtime pay for hard-working employees. Please call us at (215) 884-2491 if you or someone you know believes that he or she has not received their full wages or overtime pay.  All phone consultations are confidential and free.

 

 

The Philadelphia Inquirer recently quoted Pete Winebrake of Winebrake and Santillo LLC  in an article on the workplace battle over arbitration.

Disgruntled employees are finding it increasingly difficult to take their workplace disputes to court and instead must arbitrate. Management-side lawyers say arbitration is a “streamlined and less expensive dispute-resolution method” while others  say it is unfair to “take away the rights of the employee to a trail by jury”. Many employees sign arbitration agreements when they are first hired, and therefore are bound to resolve their workplace dispute in arbitration. This allows  employers to “avoid being held accountable for large-scale labor-issues”.

It is likely the Supreme Court will tackle the workplace arbitration issue. Winebrake says, “As an employment-right class-action lawyer, the possible elimination of arbitration is the most important issue in employment law”.

Read “The Workplace Battle Over Arbitration” article here. 

Winebrake and Santillo LLC has recovered millions of dollars in unpaid wages and overtime pay for hard-working employees. Please call us at (215) 884-2491 if you or someone you know believes that he or she has not received full overtime pay.  All phone consultations are confidential and free.

 

 

StateImpact, a broadcast and online publication which explores state issues, recently quoted Pete Winebrake of Winebrake and Santillo LLC,  in an article on the agreement for oil giant, Halliburton, to pay $18M in back pay for unpaid overtime.

Halliburton discovered the unpaid overtime issue during a self-audit and reported it to the government. After investigation by U.S. Department of Labor’s Wage and Hour division, Halliburton was found to have incorrectly classified employees in 28 job positions as “exempt from overtime” and failed to have kept accurate record of employees’ work hours.  Winebrake says these “misclassifications” are common in the oil and gas industry.

The Labor department called it ‘one of the largest recoveries of overtime wages in recent years’. Thirty-nine workers in Pennsylvania will receive $800,000 in back pay.

Read the StateImpact Halliburton Unpaid Overtime Agreement article here. 

 

 

Winebrake and Santillo LLC,  has recovered millions of dollars for employees in the Oil and Natural Gas industry. In our experience, companies associated with the oil and natural gas industry often cheat employees out of overtime pay.

The illegal practices include:

  • Paying on a day-rate basis without including any extra overtime pay for hours worked over 40.
  • Using scheduled work hours (rather than actual hours) to determine employee pay.
  • Paying a salary and telling the employee he is “exempt” from the overtime law based on his job duties or job title.
  • Failing to include bonuses, differential pay, or other extra payments in the calculation of overtime pay.
  • Failing to calculate overtime based on a 7-day period.
  • Failing to pay for time spent traveling long distances during normal working hours.
  • Classifying workers as “independent contractors” rather than employees.

Please call us at (215) 884-2491 if you or someone you know believes that he or she has not received full overtime pay.  All phone consultations are confidential and free.

 

 

 

 

 

For a second year in a row, Winebrake & Santillo has been recognized by U.S. News-Best Lawyers® “Best Law Firms” with a First Tier ranking on the 2017 Best Law Firms List in Philadelphia.  The firm received these first tier rankings in both “Employment Law – Individuals” and “Litigation-Labor and Employment”

A link to the U.S. News and World Reports website is below:

http://bestlawfirms.usnews.com/profile/winebrake-santillo-llc/rankings/64731

According to its website:  “The U.S.News – Best Lawyers ‘Best Law Firms’ rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process.”

Restaurants are frequently cited for having pay practices that do not abide by state and federal wage and hour law.  On example is requiring waiters and servers to share their tips with “back of the house” employees such as expediters and kitchen staff.  Another is requiring waiters and servers to spend a significant part of their shift performing non-tipped “side work” such as rolling silverware and general cleaning.

However, restaurants in the City of Brotherly Love also need to follow the Gratuity Protection Law that was passed in 2011.  This law forbids restaurants and other businesses in Philadelphia from taking a portion of employees’ tips to cover fees charged by credit card companies.  The Gratuity Protection Law provides one more example of how servers and waiters may not be receiving all the pay that they are entitled to.
If you or a friend or relative have worked as a tipped employee and would like to speak with a lawyer about his or her rights, feel free to give us a ca call at 215-884-2491.

On October 25, 2016, Winebrake & Santillo received the Guardián Award from Friends of Farmworkers, Inc. at its annual banquet.  This award is in recognition of the firm’s work on behalf of low-wage workers in both individual wage actions and class/collective actions.

We are very honored to be recognized by such a respected organization in the Philadelphia legal community and look forward to many more years of working along side them advocating for workers’ rights.

 

The Philadelphia Inquirer published an opinion piece today by Attorney Pete Winebrake discussing the Department of Labor regulations that are scheduled to take effect on December 1, 2016 raising the minimum salary requirement for workers to be treated as “exempt” from receiving overtime premium pay under the federal Fair Labor Standards Act.

http://www.philly.com/philly/opinion/commentary/20160921_Commentary__Businesses_fighting_effort_to_make_OT_rules_fairer.html

 

Attention Chili’s Servers: Winebrake & Santillo recently filed a lawsuit on behalf of Servers working at Chili’s restaurants operated by Brinker International, Inc. The lawsuit alleges that the restaurants violated federal and state wage laws by requiring servers to share tips with expediters/expos.   The Penn Record recently issued an article highlighting this lawsuit:

http://pennrecord.com/stories/510983712-owner-of-hundreds-of-chili-s-eateries-faces-minimum-wage-class-action-suit

If you or a friend or relative worked as a Server at Chilli’s we would be happy to provide a free and confidential consultation about this lawsuit.  Feel free to call us at 215-884-2491.  One of our attorneys would be happy to speak with you.

In April, 2016, Winebrake & Santillo filed a class and collective action lawsuit on behalf of servers employed by Quality Dining, Inc. at Chili’s Grill & Bar franchises in Pennsylvania.  The lawsuit is currently in the United States District Court for the Eastern District of Pennsylvania.  A copy of the amended complaint is attached here.

The lawsuit alleges that the restaurants violated the federal Fair Labor Standards Act (“FLSA”) and Pennsylvania Minimum Wage Act (“PMWA”) by requiring servers to share a portion of their tips through the tip pool with individuals performing the work of expediters (or “Expos”), even though the expediters did not have direct customer interaction.  Under the law, servers generally cannot be required to share their tips with other employees who do not have a lot of customer contact.

 

If you or a family or friend worked as a server at a Chili’s Grill & Bar restaurant in Pennsylvania within the last three years and would like a free and completely confidential consultation or more information about the unpaid wage claims that are currently asserted please give us a call at (215) 884-2491.  One of our attorneys would be more than happy to speak with you.

Customer service representatives at call centers are frequently required by their employers to spend time to boot-up or log onto their computers as well as obtain access to various software programs and databases.  All of these pre-shift activities are work and call centers must pay their customer call service representatives for such work.  It is a violation of federal and state law for call centers to refuse to pay their employees for time spent performing these duties.

Employees often wrongly assume that they cannot bring a lawsuit because of an employer’s written policy that purports to prohibit off-the-clock work.  However, courts routinely recognize that these written policies drafted by an employer’s attorneys do not prevent an employee from bring a lawsuits seeking recovery of unpaid wages including overtime pay.  See Sharpe v. APAC Customer Servs, 2010 U.S. Dist. LEXIS 1671, *14-15 (W.D. Wis. Jan. 8, 2010); Burch v. Qwest Communs, Int’l, Inc., 677 F. Supp. 2d 1101, 1115 (D. Minn. 2009); Wilks v. Pep Boys, 2006 U.S. Dist. LEXIS 69537 (M.D. Tenn. Sept. 26, 2006).  In fact, a federal Department of Labor Regulation is directly on point:  “In all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed.  It cannot sit back and accept the benefits without compensating for them.  The mere promulgation of a rule against such work is not enough.  Management has the power to enforce the rule and must make every effort to do so.”  29 C.F.R. § 785.13.

Winebrake & Santillo represents customer service representatives seeking the recovery of such unpaid wages.  For example, in a prior lawsuit filed by Winebrake & Santillo, our law firm reached a settlement for over $200,000 against a call center located in Pennsylvania.

 

 

 

 

United States District Judge James M. Munley from the Middle District of Pennsylvania granted final approval of a class/collection action settlement on March 10, 2016 that Winebrake & Santillo reached with Pennsylvania Red Robin Franchisor Lehigh Valley Restaurant Group, Inc. (“LVRG”).  The $1.3 million settlement provided unpaid wages to Servers employed by LVRG that were required to share tips with Expos (a.k.a. Expediters) since February 2011.  LVRG operates 20 Red Robin restaurants throughout Pennsylvania including locations in Allentown, Center Valley, Easton, Harrisburg, Hershey, Lancaster, Harrisburg, and Quakertown.

In this lawsuit, Ford v. Lehigh Valley Restaurant Group, Inc., the Servers that worked at LVRG asserted that LVRG violated the Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA) by requiring them to share their tips with Expos.  Servers were required to contribute 3% of their gross sales to a tip-pool.  LVRG then distributed a portion of those tips to Expos.  The lawsuit alleged that because Expos (who function as back of the house employees) do not have direct interaction with restaurant patrons, LVRG’s tip-sharing policy violated federal and state law.  As a result, the Servers sought to recover the difference between the $7.25 minimum wage and the $2.83 (or, in some instances, $3.33) they were paid by LVRG.  By only paying its Servers below the minimum wage, LVRG sought to utilize a tip-credit in the amount of $4.42 (or $3.92 in some instances).

Earlier in the lawsuit, Winebrake & Santillo defeated motions to dismiss the lawsuit filed by LVRG which argued that the Servers did not have viable claims.  The Middle District of Pennsylvania and the Lackawanna County Common Pleas Court rejected LVRG’s motions finding that under federal law and state law, to take part in a tip pool, a restaurant employee must have direct customer interaction.

Attorney Pete Winebrake was quoted in an article in Law360 discussing the U.S. Supreme Court’s refusal earlier this week to review the $188 million class action judgment against Wal-Mart in favor of Pennsylvania employees who had to work during unpaid breaks.

http://www.law360.com/employment/articles/781298?nl_pk=50e4ab8b-0e6f-41fe-8576-c99ce7043da8&utm_source=newsletter&utm_medium=email&utm_campaign=employment

On March 22, 2015, Winebrake & Santillo along with co-counsel Crossover Law, LLC filed a class and collective action lawsuit in the United States District Court for the Middle District of Pennsylvania against Linde Corporation on behalf natural gas employees.  The lawsuit challenges the manner in which Linde Corporation paid employees based on “Extra Compensation Units” (a.k.a. “Additional Compensation Units” or “ECUs”)

A copy of the complaint is attached here.

The Pennsylvania Record also wrote a story covering this lawsuit.

If you or a family member or friend worked for Linde Corporation or one of its related companies within the last three years and would like a free and completely confidential consultation or more information about the claims against Linde please give us a call at (215) 884-2491.  One of our attorneys would be more than happy to speak with you.

As we have previously written on this blog, the federal Department of Labor (DOL) recently changed the federal regulations so that almost all home health aids and certified nurses assistants (CNAs) will be covered by the minimum wage and overtime pay regulations of the Fair Labor Standards Act.  Unfortunately, the home health industry filed suit, alleging that the regulations were illegal.  The U.S. Court of Appeals for District of Columbia found that the regulations are legal, and now the home health industry is trying to get the U.S. Supreme Court to consider the Court of Appeals’ decision.  For a really great description of the regulatory changes and the current status of the appeal, you should read the attached brief, in which the United States urges the Supreme Court to reject the home health industry’s attempt to appeal the Court of Appeals’ decision.  Here is the link:  U.S. Department of Labor Brief in Opposition to Petition of Certiorari

On February 11, 2016, the federal judge overseeing a lawsuit brought by Winebrake & Santillo and co-counsel McEldrew Young on behalf of a class of meat packing workers near Harrisburg, Pennsylvania entered an order approving a $320,000.00 settlement.  The court’s decision was highlighted in an articles by Law360 and PennLive:

http://www.law360.com/employment/articles/758742?nl_pk=50e4ab8b-0e6f-41fe-8576-c99ce7043da8&utm_source=newsletter&utm_medium=email&utm_campaign=employment

http://www.pennlive.com/news/2016/02/judge_oks_320k_settlement_of_w.html#incart_river_home

On February 10, 2016, the federal bankruptcy judge presiding over the bankruptcy of RadioShack entered an order approving a $5.5 million unsecured claim on behalf of a class of store managers represented by Winebrake & Santillo and co-counsel Nichols Kaster, PLLP of Minneapolis, MN.  The store managers alleged that RadioShack violated Pennsylvania overtime law by paying them under the fluctuating workweek method (or “half-time”) for hours worked over 40 in a week.  The bankruptcy court’s decision was highlighted in an article by Law360:

http://www.law360.com/employment/articles/758041?nl_pk=50e4ab8b-0e6f-41fe-8576-c99ce7043da8&utm_source=newsletter&utm_medium=email&utm_campaign=employment

Corporations have been incorrectly classifying workers as “independent contractors” to maximize profits, and the legal system appears to be turning in favor of workers who challenge these abuses.

In a recent publication with the American Association for Justice, Attorney Pete Winebrake sheds important light on corporate abuse of the “independent contractor” business model, and why the media, political community, and taxpayers alike are right to take an active interest. Read more by clicking below:

https://www.justice.org/sections/newsletters/articles/judges-increase-scrutiny-independent-contractor-business-model

The FLSA permits several defenses necessitating an inquiry into the employer’s “state of mind” in implementing or correcting the challenged pay practice.  See, e.g., 29 U.S.C. § 255(a) (limitations period extends back three – rather than two – years if FLSA violation is “willful”); 29 U.S.C. § 260 (liquidated damages avoided if employer’s conduct “was in good faith” and based on “reasonable grounds for believing” that the conduct complied with FLSA).

In many cases, employers rely on the advice of counsel in asserting these types of state of mind defenses.  For example, a company executive might assert that, before implementing the purportedly illegal overtime pay policy, the company’s lawyer reviewed the policy.  Under these circumstances, the employer will argue, the lawyer’s review renders any FLSA violation “non-willful” and/or “in good faith.”

All of this is well and good.  But it sure is frustrating when the employer attempts to protect the underlying lawyer communications as covered by the attorney-client privilege.  This seems entirely unfair.  An employer relying on the advice of counsel as a defense should not be able to use the attorney-client privilege as a shield  against the discovery process.

If you’re an employment rights lawyer and are faced with the above defense tactic, here are a few cases in which federal judges hold that an employer relying on advice of counsel as the basis for its FLSA willfulness/good faith defense waives the attorney client privilege.  Be sure to check out theses cases: Scott v. Chipotle Mexican Grill, Inc., 2014 U.S. Dist. LEXIS 175775 (S.D.N.Y. Dec. 18, 2014);   Phelps v. MC Communications, Inc., 2013 U.S. Dist. LEXIS 101965, *58-61 (D. Nev. July 22, 2013); Wang v. The Hearst Corp., 2012 U.S. Dist. LEXIS 179609, 2-8 (S.D.N.Y. Dec. 19, 2012); McLaughlin v. Lunde Truck Sales, Inc., 714 F. Supp. 916, 919-20 (N.D. Ill. Apr. 14, 1989).

Here is the text of a brief we recently filed in a class action lawsuit in which our client alleges that, under the Pennsylvania Minimum Wage Act (PMWA), he and other railroad workers should be compensated for the time they spend traveling away from home.  As explained in the brief, while ordinary commuting time generally is not compensable under the PMWA, workers should be paid for time they spend draveling away from home during normal working hours.  We hope the following test will be instructive to Pennsylvania wage/overtime/employment lawyers and employees seeking to be paid for their travel time:

Defendant Atlas Railroad Construction, LLC (“Atlas”) has filed a Rule 12(b)(6) motion asking the Court to hold that, under the Pennsylvania Minimum Wage Act (“PMWA”), 43 P.S. §§ 333.101, et seq., workers assigned to project sites located hundreds of miles from their homes are not entitled to be paid for time spent traveling during normal working hours to, from, and between the project sites.  Because such a draconian holding would contradict the pertinent regulatory language, the motion should fail.[1]

I.    FACTS

Plaintiff’s job duties included travel to, from, and between project sites located hundreds of miles from his home.

Plaintiff lives in Chambersburg, PA.  See Amended Complaint (“Am. Cpl.”) (Doc. 19) at ¶ 5.  Prior to April 2015, he was employed by Atlas to perform manual labor at railroad construction, maintenance, and repair projects located throughout the United States.  See id. at ¶¶ 9-10.

Atlas often assigned Plaintiff to projects “located hundreds of miles away from” his home.  Am. Cpl. at ¶ 11 (emphasis supplied).  “The basic duties of the manual labor performed by Plaintiff” required travel to, from, and between project sites.  Id. at ¶ 16.   Indeed, it was impossible for Plaintiff, who worked at the project sites, to perform his job without engaging in such travel.”  See id.  Refusal to travel would result in termination.  Id. at ¶ 17.

The remoteness of the project sites “ma[de] it impossible for [Plaintiff] to commute on a daily basis between [his home] and the project locations.”  Am. Cpl. at ¶ 11.  Thus, Plaintiff was required to “stay in hotels, motels, or other temporary housing” near the project site.  Id.

Some of Plaintiff’s travel to far-away project sites occurred during normal working hours.

Atlas generally scheduled Plaintiff to work “pursuant to a recurring schedule consisting of: (i) eight (8) consecutive 10.5-hour shifts (generally running from approximately 7:00 am until approximately 5:30 pm) at the project site followed by (ii) six consecutive days away from the project site.”  Am. Cpl. at ¶ 12.

Atlas generally expected Plaintiff “to arrive at the hotel, motel, or other temporary housing unit near the assigned project site on the evening before the first 10.5-hour shift.”  Am. Cpl. at ¶ 13.  Thus, if Plaintiff’s first 10.5-hour shift was scheduled to begin on a Thursday morning, he was required to arrive at the hotel, motel, or other temporary housing unit on or before Wednesday evening.  See id.

Due to the long distances between Plaintiff’s home and the assigned project sites, Plaintiff sometimes was required to travel to the project site location during his normal working hours of 7:00am-5:00pm.  For example, in the late-Fall of 2014, Atlas assigned Plaintiff to a project site located in or around Chicopee, Massachusetts.  See Am. Cpl. at ¶ 19.  This project site was located 372 miles from Plaintiff’s Chambersburg home.[2]  In order to arrive in Chicopee on the evening before his first shift, Plaintiff was required to drive during daytime hours from Chambersburg to Chicopee.  See id.

Some of Plaintiff’s return travel from far-away project sites occurred during normal working hours.

After completing his eighth consecutive 10.5-hour shift, Plaintiff was required to travel back to Chambersburg.  See Am. Cpl. at ¶ 14.  Since it would be unsafe for Plaintiff to drive hundreds of miles home on the evening immediately following his 10.5-hour shift, some of the return travel would take place during normal working hours on the day after the eighth consecutive 10.5-hour shift.  See id.  Such was the case when Plaintiff returned to Chambersburg from a project site in Lima, Ohio in the late-Fall of 2014.  See id. at ¶ 19.  Plaintiff was unable to complete the entirety of this 416-mile trip during the evening hours.

Some of Plaintiff’s travel between project sites occurred during normal working hours.

Plaintiff sometimes was required to travel from one project site to another during the 8-day period between the first 10.5-hour shift and the eighth 10.5-hour shift.  See id. Am. Cpl. at ¶ 15.  Sometimes, such travel would take place during Plaintiff’s normal working hours of 7:00am-5:00pm.  See id.  For example, in the late-Fall of 2014, Plaintiff was required to drive from the Chicopee, MA project site to the Lima, OH project site.  See id. at ¶ 19.  This was a 720-mile trip, and. due to the long distance, some of the driving occurred during daytime hours.  See id.

Plaintiff’s compensation did not include time spent traveling to, from, or between project sites during normal working hours. Plaintiff alleges that this violates the PMWA.

Atlas did not award any payroll credit to Plaintiff for the above-described travel activities during Plaintiff’s normal working hours of 7:00am-5:00pm.  See Am. Cpl. at ¶¶ 18-19.  As a result, Plaintiff did not receive any compensation – including overtime premium compensation – when such travel hours exceeded 40 in a week.  Id.

Plaintiff asserts that Atlas’ failure to compensate him for travel occurring during normal working hours violated the PMWA.  See id. at Count I.  Under the PMWA, employees are entitled to be paid for all of their hours worked, see Lugo v. Farmers Pride, Inc., 967 A.2d 963, 967-69 (Pa. Super. 2009), and are entitled to be paid “one and one-half times” their regular pay rate when such hours exceed 40 hours per week, see 43 P.S. §333.104(c); 34 Pa. Code §231.41.

ARGUMENT

The applicable standard of review.

This Court has described the applicable standard of review as follows:

In order to avoid dismissal under Rule 12(b)(6), a pleading party’s complaint must provide “enough factual matter” to allow the case to move beyond the pleading stage of litigation; the pleader must “‘nudge [his or her] claims across the line from conceivable to plausible.’” Phillips v. County of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008) (quoting Bell Atlantic Co. v. Twombly, 550 U.S. 544, 556, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). The United States Supreme Court has recognized that “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Co. v. Twombly, 550 U.S. at 555.

In 2009, the United States Supreme Court revisited the requirements for surviving a 12(b)(6) motion to dismiss in Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). In Iqbal, the Supreme Court made clear that “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements [are] not suffic[ient]” to defeat a Rule 12(b)(6) motion to dismiss.” Id. at 678. Only “a complaint that states a plausible claim for relief [will] survive[] a motion  to dismiss.” Id. at 679. In Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009), the United States Court of Appeals for the Third Circuit provided a two-part test to determine whether a claim survives a motion to dismiss. “First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’ The plaintiff must show ‘the allegations of his or her complaints are plausible. Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – that the pleader is entitled to relief.’ [This] ‘plausibility’ determination will be ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’” Id. (quoting Iqbal, 556 U.S. at 679.) Generally speaking, a Complaint that provides adequate facts to establish “how, when, and where” will survive a Motion to Dismiss.  Fowler, 578 F.3d at 212; see also Guirguis v. Movers Specialty Servs., Inc., 346 F. App’x. 774, 776 (3d Cir. 2009). If a court determines that a complaint is vulnerable to 12(b)(6) dismissal, the court must permit a curative amendment, irrespective of whether Plaintiff seeks leave to amend, unless such amendment would be inequitable or futile. Phillips, 515 F.3d at 236.

Lapaglia v. Borough of Baldwin, 2013 U.S. Dist. LEXIS 69423, *3-6 (W.D. Pa. May 16, 2013) (Kelly, CMJ).

The PMWA’s “Hours Worked” regulation does not limit Plaintiff’s compensable hours to time spent at the project site.

Atlas asserts that Plaintiff’s travel activities cannot constitute compensable work because such activities took place away from the project site where Plaintiff performed manual labor.  See Def. Br. (Doc. 21) at 5-7.  This assertion cannot be squared with the PMWA’s pertinent regulatory language, which provides:

Hours worked – The term includes time during which an employee is required by the employer to be on the premises of the employer, to be on duty or to be at the prescribed work place, time spent in traveling as part of the duties of the employee during normal working hours and time during which an employee is employed or permitted to work.

34 Pa. Code § 231.1 (emphasis supplied).  This regulatory definition has been followed and enforced by Pennsylvania courts.  See, e.g.Lugo, 967 A.2d at 967.

As indicated, the “Hours worked” definition includes “time spent in traveling as part of the duties of the employee during normal working hours” as one of several independent categories of “Hours worked.”  See 34 Pa. Code § 231.1.  Another independent category includes time during which an employee is required “to be on duty or to be at the prescribed work place.”  Id.

Atlas’ assertion that Plaintiff’s “Hours worked” are limited to time spent at the project site would make sense if the term’s regulatory definition were strictly limited to time spent “on duty or at the prescribed workplace.”  But that is not what the regulation says.  Rather, time spent “on duty or at the prescribed workplace” is just one of several listed categories of “Hours worked.”  Atlas’ narrow interpretation of the regulation renders superfluous an independent category of work hours:  “time spent in traveling as part of the duties of the employee during normal working hours.”  Ignoring this additional category of “Hours worked” violates the basic rule that, in interpreting a statute or regulation, courts must give meaning to all of the language without rendering any part thereof superfluous.  See 1 P.S. § 1921(a) (“Every statute shall be construed, if possible, to give effect to all of its provisions.”); Frazier v. Workers’ Compensation Appeal Board, 52 A.3d 241, 245 (Pa. 2012) (courts “should construe statutes to give effect to all of their provisions, and should not ignore language nor render any portion of the statute superfluous”).

In sum, the regulatory language flatly contradicts Atlas’ argument that activities must be performed at the project site to be compensable.

Plaintiff adequately pleads that the travel time in question was “part of [his] duties.”

As noted above, the PMWA’s definition of “Hours worked” includes “time spent in traveling as part of the duties of the employee during normal working hours.”  34 Pa. Code § 231.1 (emphasis supplied).  Atlas argues that Plaintiff’s travel to far-away project sites was not part of his duties.  See Def. Br. (Doc. 21) at 5-8.

Atlas’ argument ignores the applicable Rule 12(b)(6) standard.  At the motion to dismiss stage, Plaintiff is merely required to demonstrate that liability is “plausible.”  See Lapaglia, 2013 U.S. Dist. LEXIS 69423, at *3-6.  Thus, the pertinent question is whether, based on the factual allegations in Plaintiff’s amended complaint, it is “plausible” that traveling to far-away project sites can be characterized as “part of” Plaintiff’s job duties?

The answer to this question is “yes.”  Plaintiff has clearly alleged that his job entailed traveling to, from, and between far-away project sites in order to perform manual labor at the site locations.  See Section I supra (summarizing factual allegations).  Such travel was a fundamental requirement of his job.  See id.

Plaintiff’s circumstances are not unusual or surprising.  Many workers – from “high-flying” business executives to traveling salespeople to carnival workers – have job duties that include, among other things, travel to far-away locations.  Indeed, it is not unusual for a job posting to state that the job requires travel or for someone to make a statement such as “my job requires a lot of travel.”  Plaintiff is such an employee.  His job duties include, among other things, traveling to remote project sites located throughout the United States.

Of course, discovery is likely to shed further light on the scope of Plaintiff’s job duties.  For example, employee handbooks, company memoranda, rules, and directives, and job postings/descriptions might affirmatively present travel as one of Plaintiff’s job duties.  Also, evidence might reveal that workers compensation benefits have been paid when Plaintiffs’ co-workers were injured while traveling to, from, or between project sites.  Having plausibly asserted that his job duties included travel to far-away project sites, Plaintiff should be permitted to pursue such discovery.  Atlas’ attempt to short-circuit this lawsuit at the pre-discovery stage should fail.[3]

Plaintiff adequately pleads that the travel time in question arose “during normal working hours.”

 As noted above, the PMWA’s definition of “Hours worked” includes “time spent in traveling as part of the duties of the employee during normal working hours.”  34 Pa. Code § 231.1 (emphasis supplied).  Atlas asserts that it is “not plausible” for the Court to conclude that some of Plaintiff’s travel to, from, and between far-away project sites did not occur during normal working hours.  See Def. Br. (Doc. 21) at 7-13.  As discussed below, Plaintiff disagrees.

Plaintiff’s amended complaint clearly alleges that his normal working hours extended from approximately 7am-5pm and that some of his travel necessarily occurred during these daytime periods.  See Section I supra (summarizing factual allegations).  There is nothing “implausible” about the notion that Plaintiff was required to travel during such normal working hours when, in order to reach the project site on the evening prior to his first scheduled shift, he made a 372-mile trip from Chambersburg, PA to Chicopee, MA.  See Am. Cpl. at ¶ 19.  Nor is it implausible that Plaintiff was required to travel during normal working hours when he made the 720-mile trip from the Chicopee, MA project site to the Lima, OH project site.  See id.  Nor is it implausible that Plaintiff, after completing a 10.5 hour shift in Lima, OH, was not able to make the entirety of his 416-mile trip home during nighttime hours.  See id.

In sum, Plaintiff’s amended complaint plausibly alleges that some of his travel to, from, and between far-away project sites occurred during his “normal working hours” of 7am-5pm.

This lawsuit does not concern “commuting” time.

Atlas repeatedly asserts that Plaintiff seeks to recover for ordinary “commuting” time.  See Def. Br. (Doc. 21) at 5-13.  This is incorrect.  Plaintiff’s lawsuit has nothing to do with commuting time.  In this regard, Plaintiff does not seek to recover for: (i) time spent traveling between his hotel/motel/temporary housing unit and the assigned project site; (ii) time spent traveling between his Chambersburg home and project sites in the evenings or early morning hours; or (iii) time spent traveling between project sites in the evenings or early morning hours.  Such travel time arises before or after “normal working hours” and, therefore, is not compensable under 34 Pa. Code § 231.1.

Plaintiff merely seeks to recover for those occasions when, due to the remoteness of the project sites, he was required to travel during his “normal working hours,” 34 Pa. Code § 231.1, of 7am-5pm.  It is this “normal working hours” requirement that, under the PMWA, distinguishes non-compensable commuting time from compensable travel time.  In this regard, the PMWA coincides with the federal Fair Labor Standards Act (“FLSA”), which similarly defines compensable work to include travel occurring during normal working hours:

Travel that keeps an employee away from home overnight is travel away from home. Travel away from home is clearly worktime when it cuts across the employee’s workday. The employee is simply substituting travel for other duties. The time is not only hours worked on regular working days during normal working hours but also during the corresponding hours on nonworking days. Thus, if an employee regularly works from 9 a.m. to 5 p.m. from Monday through Friday the travel time during these hours is worktime on Saturday and Sunday as well as on the other days.

29 C.F.R. § 785.39; see also Mendez v. Radec Corp., 232 F.R.D. 78, 85-88 (W.D.N.Y. 2005) (plaintiffs entitled to pay for time spent traveling to distant job sites during normal working hours); Ellen C. Kearns, The Fair Labor Standards Act, 2d. Edition (ABA Section of Labor and Employment Law) at Chapter 8, pp. 70-71 (“When employees are required to take a trip by car, train, or other public transportation that keeps them away from home overnight, all time spent traveling during the hours corresponding to the employees’ normal working hours must be counted as time worked.”).

Atlas fails to explain why Plaintiff’s lawsuit, which is narrowly tailored to long-distance travel arising during his normal working hours, should not proceed to discovery.  Indeed, it appears that Atlas recently settled a similar FLSA collective action lawsuit in the Northern District of Ohio.  See Braucher v. Atlas Railroad Construction, LLC, 5:14-cv-01601-BYP.

Atlas’ legal authority concerns commuting time and, as such, is inapplicable.

Atlas references two decisions – Ciarelli v. Sears Roebuck & Co., 46 A.3d 643 (Pa. 2012), and Bonds v. GMS Mine Repair & Maintenance, Inc., 2015 U.S. Dist. LEXIS 127769 (W.D. Pa. Sept. 23, 2015) – in support of its argument that the time Plaintiff spends traveling to, from, and between far-away project sites during normal working hours is not compensable.  See Def. Br. (Doc. 21) at 8-10.  As discussed below, however, these cases merely stand for the unremarkable proposition that employees are not entitled to be paid for commuting time at the beginning and end of the workday.

Atlas’ reliance on the Supreme Court’s Ciarelli decision is misplaced.  First of all, Ciarelli has no apparent precedential value, since the Supreme Court found the appeal to be improvidently granted, see Ciarelli, 46 A.3d at 644, and the Superior Court’s decision is unpublished, see 988 A.2d 713.  Moreover, the dissent authored by former Justice McCafferty – who thought the Supreme Court should have taken the appeal – explains that Ciarelli involved daily travel time incurred by service repair technicians driving between their homes and their customers at the beginning and end of the workday.  See  Ciarelli, 46 A.3d at 644.  The trial court and the Superior Court found such daily driving was ordinary commuting arising outside of normal working hours.  See id. at 644-46.  Judge McCafferty opined that even such daily commuting time might be compensable under the PMWA.  See id. at 646-48.

If Plaintiff was seeking pay for his daily commute between the motel/hotel/temporary housing unit and the project site, Ciarelli might be instructive.  But, as already explained, Plaintiff does not seek to recover for such daily commuting.  He merely seeks to recover for time spend traveling during normal working hours to job sites located hundreds of miles away from his home and/or each other.  Ciarelli has no bearing on the compensability of such travel.

Atlas also references Bonds, which concerns the compensability of certain preliminary activities performed by workers prior to the beginning of their shifts.  See Bonds, 2015 U.S. Dist. LEXIS 127769, at *15.  Bonds has nothing to do with the compensability of travel time during normal working hours.  Like Ciarelli, it is entirely inapplicable.

Finally, Atlas references a page from the Pennsylvania Department of Labor and Industry website.  See Def. Br. (Doc. 21) at 8-9.  But once again, the quoted language is unhelpful because it concerns daily commuting “directly from home to the job site and vice versa.”  The website language – unlike 34 Pa. Code § 231.1 – does not purport to address travel time during normal working hours.

CONCLUSION

For all of the above reasons, Plaintiff’s motion to dismiss should be denied.

[1]   Co-Defendant Genesee & Wyoming, Inc. also argues that it is not subject to the Court’s jurisdiction and did not employ Plaintiff.  See Def. Br. (Doc. 21) at 16-18.  These arguments are rendered moot by Plaintiff’s voluntary dismissal of Genesee & Wyoming, Inc.  See Doc. 22.

[2]   The Court may take judicial notice of these distances, which are taken from the Mapquest website.  See, e.g., Baker v. Eric M. Berman, P.C., 2009 U.S. Dist. LEXIS 97469, *17 n. 5 (W.D. Pa. Oct. 21, 2009); Coppola v. Ferrellgas, Inc., 250 F.R.D. 195, 199 n. 4 (E.D. Pa. 2008).

[3]   Atlas also argues that Plaintiff cannot recover for the travel time in question because “[t]his was the nature of the work that [Plaintiff] agreed to perform when [he] agreed top work for Atlas.”  Def. Br. (Doc. 21) at 5.   This argument lacks merit.  The whole purpose of wage and hour laws is to create statutory rights that cannot be waived by agreement.  See generally Deitz v. Budget Renovations & Roofing, Inc., 2013 U.S. Dist. LEXIS 75005, *4 (M.D. Pa. May 29, 2013).  The PMWA is such a statute.  See 43 P.S. § 333.101; Glatts v. Crozier-Keystone Health System, 645 F. Supp. 2d 446, 449 (E.D. Pa. 2009) (PMWA rights exist independent of collective bargaining agreement).

On October 16, 2015, Winebrake & Santillo filed a class and collective action lawsuit in the United States District Court for the Middle District of Pennsylvania on behalf of all Traffic Control/Manifold Attendants (“TCMAs”) employed by ECM Energy Services who were paid a day rate for their work.  A copy of the complaint is attached here.

ECM is an energy services company that performs work in the natural gas and fracking industries in Pennsylvania, Ohio and West Virginia.  The lawsuit alleged that TCMAs regularly worked over 40 hours a week and sometimes as many as 48 to 72 hours in a week.  However, ECM only paid TCMAs their day rate without any overtime premium pay.

The TCMAs represented by Winebrake & Santillo assert violations of both the federal Fair Labor Standards Act and the Pennsylvania Minimum Wage Act and seek unpaid overtime wages.  So far a total of five TCMAs have asserted claims against ECM.

If you or a family or friend worked as a TCMA within the last three years and would like a free and completely confidential consultation or more information about the claims against ECM please give us a call at (215) 884-2491.  One of our attorneys would be more than happy to speak with you.

On December 2, 2015, the Honorable James M. Munley of the Middle District of Pennsylvania preliminarily approved a $1.3 million class action settlement on behalf of servers represented by Winebrake & Santillo who worked at Red Robin franchise restaurant locations operated by Lehigh Valley Restaurant Group. This settlement covers approximately 2,000 servers and challenged the company’s use of the “tip credit” to pay its servers.  A sample of the articles discussing this settlement are below:

http://www.mcall.com/business/mc-red-robin-settles-wage-lawsuit-20151203-story.html

http://thetimes-tribune.com/news/red-robin-agrees-to-settle-class-action-wage-suit-1.1978668

http://citizensvoice.com/news/red-robin-chain-owner-agrees-to-settlement-in-class-action-suit-1.1978698

On November 24, the Third Circuit issued its decision in a Fair Labor Standards Act cases entitled Babcock v. Butler County, __ F.3d __, 2015 U.S. App. LEXIS 20393 (3d Cir. Nov. 24, 2015).  In this case, the plaintiffs were correctional officer who sought to be paid for time purportedly spent working during the meal period.  In deciding the case, the Third Circuit for the first time endorsed and adopted the “predominant benefit test” for determining whether time spent during a meal break is compensable under the FLSA.  A copy of the opinion can be found at:  Babcock v. Butler County (Third Circuit Nov. 24, 2015)

According to the Court, the predominant benefit test entails a “necessarily fact-intensive inquiry” and requires courts to “assess[] the totality of the circumstances to determine, on a case-by-case basis, to whom the benefit of the meal period inures.”  In an unnecessarily confusing opinion, the Court characterized the predominant benefit test in two different ways:  (i) the test “asks ‘whether the officer is primarily engaged in work-related duties during meal periods;’” and (ii) the test’s “essential consideration” asks “whether the employees are in fact relieved from work for the purpose of eating a regularly scheduled meal.’”

The Court “eschewed a literal reading” of the pertinent Department of Labor regulation, which requires that “[t]he employee must be completely relieved from duty for the purposes of eating regular meals” and that “[t]he employee is not relieved if he is required to perform any duties, whether active or inactive, while eating.”  29 C.F.R. § 785.19(a).

In my view, this opinion is disappointing.  The Circuit had an opportunity to provide clear guidance on when meal breaks are compensable.  Instead, we are left with a wishy-washy legal standard that is characterized differently within the same judicial opinion.  What seems clear, however, is that 29 C.F.R. § 785.19(a) is inapplicable within the Third Circuit.  (Although even that point could have been made with more clarity; and some explanation for why the Court did not defer to the DOL Wage and Hour Division regulation would have been nice.)

This case reminds me of the Seventh Circuit’s recent opinion in Alvarado v. Corporate Cleaning Services, Inc., 782 F.3d 365 (7th Cir. April 1, 2015).  In both opinions, the Judges seem to be heavily influenced by the fact that the workers were unionized, which means that the purported FLSA violation (i) was tolerated by the unions (possibly in exchange for other employee benefits) and (ii) could be addressed during the next round of collective bargaining.  As I have said many times, it is extremely difficult to win FLSA cases on behalf of unionized workers, and plaintiffs’ lawyers really need to think twice before filing such cases.

In Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. Nov. 14, 2015) the New York-based Second Circuit Court of Appeals held that pending FLSA lawsuits cannot be dismissed as settled without court approval:

Dorian Cheeks appeals . . . from the refusal of the United States District Court for the Eastern District of New York (Joanna Seybert, J.) to enter the parties’ stipulation of settlement dismissing, with prejudice, Cheeks’ claims under the Fair Labor Standards Act (“FLSA”) and New York Labor Law. The district court held that parties cannot enter into private settlements of FLSA claims without either the approval of the district court or the Department of Labor (“DOL”). We agree that absent such approval, parties cannot settle their FLSA claims through a private stipulated dismissal with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). We thus affirm, and remand for further proceedings consistent with this opinion.

Id. at 200.

Although the Third Circuit (which covers Pennsylvania, New Jersey, and Delaware) has not addressed whether court approval is required before FLSA lawsuits can be dismissed as settled, the Second Circuit’s Cheeks holding is consistent with the views expressed by many district courts within the Third Circuit.  See, e.g., Vargas v. General Nutrition Centers, Inc., 2015 U.S. Dist. LEXIS 35330, *1 (W.D. Pa. Mar. 20, 2015) (quoting Adams v. Bayview Asset Management, LLC, 11 F. Supp. 3d 474, 476 (E.D. Pa. Feb. 26, 2014) (“Because of the public interest in FLSA rights, there are only two ways that FLSA claims can be settled or compromised by employees: (1) a compromise supervised by the Department of Labor pursuant to 29 U.S.C. § 216(c); or (2) a district court-approved compromise pursuant to 29 U.S.C. § 216(b).”)); Dino v. Pennsylvania, 2013 U.S. Dist. LEXIS 111742, *11 (M.D. Pa. Aug. 7, 2013) (“Claims arising under the FLSA may be settled where either the Secretary of Labor supervises an employer’s payment of unpaid wages to employees or a district court enters a stipulated judgment after scrutinizing a proposed settlement for fairness.”); Deitz v. Budget Renovations & Roofing, Inc., 2013 U.S. Dist. LEXIS 75005, *4 (M.D. Pa. May 29, 2013) (“Although the Third Circuit has not addressed the issue, its district courts have taken the position stated by the Eleventh Circuit in Lynn’s Food Stores that court approval is required of proposed settlements in a FLSA lawsuit brought under 29 U.S.C. § 216(b).”).

Earlier this month, Winebrake & Santillo was recognized by U.S. News and World Reports with a First Tier ranking on the 2016 Best Law Firms List in Philadelphia for Litigation-Labor and Employment by U.S. News-Best Lawyers® “Best Law Firms”.  A link to the U.S. News and World Reports website is below:

http://bestlawfirms.usnews.com/profile/winebrake-santillo-llc/rankings/64731

The rankings recognize firms for professional excellence with persistently impressive ratings from clients and peers and are based on, for example, the collection of client and lawyer evaluations, and peer reviews from other attorneys.

A recent class action filed by Winebrake & Santillo and co-counsel Nichols Kaster, PLLP of Minneapolis, Minnesota against Big Lots Stores, Inc. was highlighted in a recent Law360 article.  The class action lawsuit was filed in the Philadelphia Court of Common Pleas in Pennsylvania and alleges that the company violated the Fair Credit Reporting Act (“FCRA”) by failing to have potential employees and applicants sign a standalone document agreeing to certain background checks.

The article is available at http://www.law360.com/employment/articles/723731/big-lots-accused-of-background-check-violations-

Our employment rights law firm recently filed a brief in the United States District Court for the Eastern District of Pennsylvania addressing several ‘coverage” issues arising under the Pennsylvania Wage Payment and Collection Law (“PWPCL”).  The brief has been filed in a class action lawsuit brought on behalf of Pennsylvania delivery drivers/installation technicians (“delivery workers”) who allege that XPO Logistics, Inc. and its predecessor company, CPD, Inc., misclassified them as independent contractors rather than employees.  XPO filed a motion seeking to narrow the class definition so that it will not include delivery workers who were “paid through” individual “business corporations, limited liability companies, [or] partnerships” that XPO required them to set-up in order to enter into Delivery Service Agreements (“DSAs”) with XPO or 3PD.  Her is the text of the brief our firm filed in opposition to this motion:

INTRODUCTION

Defendant XPO Logistics, Inc. (“XPO”) has filed a “Motion for Judgment on the Pleadings” (“Motion”) before any discovery has taken place.  See Doc. 16.  As XPO admits, the Motion is not dispositive of this lawsuit.  Even if the Court agrees with XPO’s arguments, the Pennsylvania Wage Payment and Collection Law (“PWPCL”) claims of Plaintiff Victor Reyes (“Reyes”) and 12 putative class members will survive.  See XPO Br. (Doc. 16-1) at p. 4 n. 4.

XPO’s motion seeks to preliminarily narrow Reyes’ class definition so that it will not include delivery workers who were “paid through” individual “business corporations, limited liability companies, [or] partnerships” that XPO required them to set-up in order to enter into Delivery Service Agreements (“DSAs”) with XPO or its predecessor company, 3PD, Inc.[1]

XPO proposes that Reyes’ class definition is so fundamentally defective that it can be trimmed as a matter of law at the pre-discovery stage.  Because class certification determinations generally require courts to “delve beyond the pleadings,” Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 167 (3d Cir. 2001), and because dismissal of class claims at the pleading stage generally is improper, see Landsman & Funk PC v. Skinder-Strauss Assoc., 640 F.3d 72, 93 (3d Cir. 2011),[2] XPO needs a “slam dunk” to prevail on its Motion at the pre-discovery stage.  Slam dunks are rare in the law.[3]

As discussed below, XPO’s Motion should fail because it rests on arguments that, at worst, have no basis in the PWPCL’s text or caselaw, and, at best, can only be resolved based on a more detailed discovery record.

As a preliminary matter, many judges have rejected the notion that workers allegedly misclassified as “contractors” are prohibited from pursuing statutory wage claims just because the purported employer required them to form their own corporate entities.  See Section III.A.  As one judge already explained to 3PD, such a rule would make it far too easy for companies to avoid the reach of statutory wage protections.  See id. (discussing Martins v. 3PD, Inc., 2013 U.S. Dist. LEXIS 45753 (D. Mass. Mar. 28, 2013)).

Secondly, XPO’s assertion that a PWPCL claim must be based on a contract between the plaintiff and defendant cannot be reconciled with the PWPCL’s statutory text, regulatory text, or existing caselaw.  See Section III.C.  Moreover, even if such a requirement existed, the current factual record is insufficient to establish that class members who formed corporate entities were not personally covered by the pertinent DSAs.  See Section III.D.

Finally, the caselaw contradicts XPO’s assertion that a plaintiff must be “paid through” the defendant in order to state a claim under the PWPCL.  See Section III.E.

BACKGROUND

A.   The legal claim asserted by Reyes.

XPO and its predecessor, 3PD, Inc. (collectively “XPO”) provide “last mile” logistics services to retail stores such as Sears and Home Depot.  See Complaint (Doc. 1) at ¶¶ 5-6.  After an end-consumer purchases an appliance or similar item from the retail store, XPO delivers the item to the end-consumer’s home or business and assembles/installs the item at the end-consumer’s home or business.  See id. at ¶ 5.  This delivery and installation work is performed by workers such as Reyes, who worked for XPO from approximately October 2008 until approximately October 2013.  See id. at ¶¶ 7-8.

During the relevant time period, XPO subjected Reyes and similar workers to wage deductions covering, inter alia, insurance premiums, damage to end-consumers’ homes and businesses, loan repayments, truck leases, service fees, settlement fees, administration fees, and driver qualification fees.  See Complaint (Doc. 1) at ¶ 9.  For example, for the pay period ending June 1, 2012, XPO subjected Reyes to the following deductions:  $100.00 for “Broken Freight Charges;” $78.45 for “AON Auto Liability Insurance Premium;” $12.50 for “AON Cargo Insurance Premium;” $48.16 for “AON General Liability Insurance Premium;” $20.88 for “AON Umbrella Insurance Premium;” $78.86 for “AON Zurich Workers Compensation Insurance Premium;” $459.96 for “Enterprise Direct Truck Lease Payments;” and $15.00 for “Settlement and Administration Fees.”  See id. at ¶ 10.  XPO never sought or obtained the Pennsylvania Department of Labor & Industry’s approval for these wage deductions.  See id. at ¶ 11.

Reyes asserts that the above wage deductions violate the PWPCL, which prohibits employers from making wage deductions that are not “provided by law, or authorized by regulation of the Department of Labor and Industry for the convenience of the employee.”  43 P.S. § 260.3(a).  Reyes submits that none of the deductions imposed on him were authorized by the pertinent regulations.  See Complaint (Doc. 1) at ¶ 24 (citing 34 Pa. Code § 9.1).

B.   The putative class consists of individuals, not corporate entities.

Reyes asserts his PWPCL claim on behalf of the following class:  “all Pennsylvania residents who, during any time within the past three years, (i) delivered, assembled, and/or installed items at end-consumers’ homes or businesses and (ii) were paid directly by Defendant (including 3PD) in either their individual capacities or through personal corporate entities.”  Complaint (Doc. 1) at ¶ 12 (emphasis supplied).  At the time of filing, Reyes estimated that the class consisted of “over 50 individuals.”  Id. (emphasis supplied).  Importantly, and as Class Counsel unambiguously asserted during the September 9, 2015 case management conference, this class definition does not include corporate entities.  Rather, the class is limited to individuals, some of whom may also have formed “corporate entities.”

C.   XPO’s “independent contractor” defense.

In answering the Complaint, XPO asserts that Reyes and other class members are non-employee independent contractors not covered by the PWPCL.  See Answer (Doc. 10) at Tenth Affirmative Defense.  Notably, because XPO’s independent contractor theory is an affirmative defense, Reyes was neither required nor expected to plead any facts relevant to the defense in his complaint.  See Ceant v. Aventura Limousine & Transp. Service, Inc., 874 F. Supp. 2d 1373, 1382-83 (S.D. Fla. 2012); Roberts v. Caballero & Castellanos, 2010 U.S. Dist. LEXIS 1783, *8-9 (S.D. Fla. Jan. 11, 2010).[4

D.   Reyes names himself “Victor’s Delivery Service” and signs a Delivery Service Agreement.

XPO’s independent contractor defense is based on the fact that Reyes and other workers signed DSAs with XPO.  See footnote 1 supra (identifying different versions of the DSA).

As XPO admits, Reyes never formed a corporate entity.  See XPO Br. (Doc. 16-1) at p. 4 n. 4.  Instead, in October 2008, Reyes called himself “Victor’s Delivery Service” and signed the DSA.  See Ex. C.  Even though “Victor’s Delivery Service” is not a real corporate entity, Reyes would spend the next five years performing XPO delivery and installation services.  XPO does not suggest that Reyes’ failure to form a corporate entity had any material impact on his relationship with XPO, the work he performed for XPO, or any other “economic realities.”  On the contrary, Reyes’ five-year run seems to confirm that whether or not a worker forms a “corporate entity” is immaterial to the actual work relationship.

ARGUMENT

A.   As a preliminary matter, courts often find that putative employers – including XPO – cannot escape wage laws by simply requiring workers to form personal corporations.

Workers, governmental entities, and business competitors are increasingly recognizing the adverse economic and societal consequences of independent contractor misclassification.  Misclassifying workers as independent contractors unfairly punishes workers, taxpayers, and competing businesses.  As the Seventh Circuit has summarized:

[T]he issue is of great importance not just to this case but to the structure of the American workplace.  The number of independent contractors in this country is growing.  There are several economic incentives for employers to use independent contractors and there is a potential for abuse in misclassifying employees as independent contractors.  Employees misclassified as independent contractors are denied access to certain benefits and protections.  Misclassification results in significant costs to government: “[B]etween 1996 and 2004, $34.7 billion of Federal tax revenues went uncollected due to the misclassification of workers and the tax loopholes that allow it.”  And misclassification “puts employers who properly classify their workers at a disadvantage in the marketplace[.]”

Craig v. FedEx Ground Package System, Inc., 686 F.3d 423, 430-31 (7th Cir. 2012) (internal citations omitted).[5]

Independent contractor misclassification lawsuits come in all shapes and sizes.  In some lawsuits, the putative employer requires the workers to form a personal corporation and then sign a contract purporting to create a non-employment relationship between the putative employer and the personal corporation.  In such lawsuits, judges generally reject the argument that a worker’s formation of his own business or corporation prevents him from seeking employee status under federal or state wage laws.  See, e.g., Ruiz v. Affinity Logistics Corp., 754 F.3d 1093; 899, 907-08 (9th Cir. 2014); DeGiovanni v. Jani-King Int’l, Inc., 262 F.R.D. 71, 86 (D. Mass. 2009); Parrilla v. Allcom Construction & Installation Services, LLC, 2009 U.S. Dist. LEXIS 77585, *15-16 (M.D. Fla. Aug. 31, 2009); Lee v. ABC Carpet & Home, 236 F.R.D. 193, 198 (S.D.N.Y. 2006); Gustafson v. Bell Atlantic Corp., 171 F. Supp. 2d 311, 325 (S.D.N.Y. 2001).  Consistent with these rulings, the Wage & Hour Division of the U.S. Department of Labor recently instructed that a worker’s formation of his own corporation is not dispositive of employment status under the FLSA:

[T]he Department has seen and increasing number of instances where employees are labeled . . . “owners,” “partners,” or “members of a limited liability company.”  In these instances, the determination of whether the workers are in fact FLSA covered employees is also made by applying an economic realities analysis.

Administrator’s Interpretation No. 2015-1 (Ex. H).

None of the above is surprising to XPO.  Indeed, the above principles have been applied in lawsuits against 3PD.  In Phelps v. 3PD, Inc., 261 F.R.D. 548 (D. Or. 2009), for example, the district court certified a class consisting of Oregon 3PD drivers.  Notably, almost all of these drivers “needed to form a business entity to do business with [3PD] and execute a new [contract] with [3PD] on behalf of that business entity.”  Id. at 556.

Likewise, in Martins v. 3PD, Inc., 2013 U.S. Dist. LEXIS 45753 (D. Mass. Mar. 28, 2013), the plaintiff “incorporated his delivery business . . . under the name AAR Trucking, Inc.”  Id. at *4.  3PD argued that this fact prevented the plaintiff from asserting a Massachusetts wage claim.  See id. at *49-51.  The district court rejected this argument, holding “that an individual can bring a Massachusetts wage claim even if he has incorporated his business, and the employer’s formal relationship is with the entity and not the individual.”  Id. at *50.  Otherwise, “‘any employer who wanted to avoid the requirements of the Wage Act would simply require its employees to incorporate as a condition of employment.’”  Id. at *51 (quoting Amero v. Townsend Oil Co., 2009 Mass. Super. LEXIS 433, *7-8 n. 4 (Mass. Super. Apr. 15, 2009)).

B.   Because the class members in this case are individuals – not corporate entities – the rule that corporate entities are prohibited from asserting PWPCL claims is irrelevant.

Citing Frank Burns, Inc. v. Interdigital Communications Corp., 704 A.2d 678 (Pa. Super. 1987), XPO emphasizes that corporations cannot pursue PWPCL claims.  See XPO Br. (Doc. 16-1) at 4-7.  This rule is irrelevant to this lawsuit because, as discussed in Section II.B above, the proposed class definition consists entirely of individuals.  As Judge Surrick recently explained, the rule prohibiting corporate entities from pursuing PWPCL claims does not apply to individuals who happen to form such entities.  See Myers v. Jani-King of Philadelphia, Inc., 2015 U.S. Dist. LEXIS 29566, *23-25 (E.D. Pa. Mar. 11, 2015); see also Martins, 2013 U.S. Dist. LEXIS 45753, at *50 (fact that “company itself cannot bring a [wage] claim” does not mean individual who formed company cannot bring wage claim).

C.   PWPCL wage deduction claims do not require a contract between the plaintiff and defendant.

XPO’s entire argument is predicated on the proposition that a worker cannot bring a PWPCL claim against XPO in the absence of a contract between him and XPO.  As discussed below, this proposition is incorrect both as a general matter and in the context of PWPCL wage deduction cases.

First, the PWPCL’s text contains no language requiring – or even suggesting – that wages owed must be based on a formal contract.  See generally 43 P.S. §§ 260.1, et seq.

Second, the PWPCL’s text actually contradicts a rule that wages owed must be based on a formal contract.  In particular, the PWPCL states:  “No provision of this act shall in any way be contravened or set aside by private agreement.”  43 P.S. § 260.7.  As Judge Wettick has observed, this provision reaches “any contractual provisions that interfere with enforcement of the legislation” and prevent courts from enforcing written agreements “that make it more difficult for workers to enforce their statutory rights.”  Watson v. Prestige Delivery Systems, Inc., 27 Pa. D. & C. 5th 449, 456 (Pa. C.C.P., Allegheny Cty. Feb. 7, 2013) (emphasis supplied).  As such, this statutory provision confirms that PWPCL rights exist independently of contractual rights and cannot be reconciled with the notion that PWPCL rights are defined by private agreements.

Third, the caselaw contradicts any rule that unpaid wages must be based on a contract between the plaintiff and defendant.  In Lugo v. Farmers Pride, Inc., 967 A.2d 963 (Pa. Super. 2009), the Superior Court held that a class of poultry workers could assert PWPCL claims that were predicated entirely on the employer’s violation of statutory minimum wage and overtime laws.  See id. at 969.  The Lugo decision contains no indication or suggestion that these at-will poultry workers had any employment contract or any contractual basis for their PWPCL claims.  See id.  Thus, as Judge Rufe has observed:  “Lugo adopts a broader interpretation of the WPCL as a vehicle for employees to recover unpaid wages, regardless of the source of their employer’s obligation to pay the wages.”  Moser v. Papadopoulos, 2011 U.S. Dist. LEXIS 64716, *12 (E.D. Pa. June 15, 2011).  Other judges agree.  See Galloway v. George Junior Republic, 2013 U.S. Dist. LEXIS 134014, *43-44 (W.D. Pa. Sept. 19, 2013) (Mitchell, M.J.); Hilvey v. Allis-Chalmers Energy, Inc., 2013 U.S. Dist. LEXIS 80800, *8-9 (W.D. Pa. June 10, 2013) (Fischer, J.); Turner v. Mercy Health System, 2010 Phila. Ct. Com. Pl. LEXIS 146, *13-14 (Pa. C.C.P., Phila. Cty. Mar. 10, 2010) (Fox, J.).

Fourth, the PWPCL’s wage deduction regulation – which forms the basis for Reyes’ lawsuit – contradicts any rule that PWPCL claims require a contract between the plaintiff and defendant.  At almost every turn, the regulation requires particular categories of deductions to be “authorized in writing” in order to be legal.  See 34 Pa. Code §§ 9.1(2)-(7), (10)-(13).  Thus, with respect to these deductions, a PWPCL violation arises if the deductions are not authorized in writing, a reality that cannot be reconciled with the false notion that PWPCL claims must be predicated on the existence of contract.  Indeed, the regulatory language commands the opposite: it is the absence of an agreement that triggers the PWPCL violation.  See id.

The PWPCL’s wage deduction regulation contains other requirements that further contradict any notion that PWPCL claims must be defined by contract.  Most significantly, even if an agreement is reached between the plaintiff and defendant regarding a particular deduction, the PWPCL is still violated if the deduction is not “for the convenience of employees.”  Id. at § 9.1.  This requirement exists because the regulators “would not have intended to give employers a free pass as long as the job-seeking worker would sign a piece of paper authorizing a deduction.”  Watson, 27 Pa. D. & C. 5th at 465.  Likewise, under the wage deduction regulation’s “catch-all” provision, see 34 Pa. Code § 9.1(13), a PWPCL violation will be found unless the employer specifically obtained the Department of Labor & Industry’s approval for the deduction.  See Ressler v. Jones Motor Co., Inc., 487 A.2d 424, 427-29 (Pa. Super. 1985).  This is true even if the deduction is agreed upon between the plaintiff and defendant, see id., a reality that contradicts any argument that PWPCL rights are defined by contract.

In sum, XPO’s assertion that a driver cannot bring a PWPCL claim against XPO in the absence of a contract between him and XPO cannot be reconciled with statutory text, regulatory text, or existing caselaw.  For this reason, standing alone, XPO’s motion should fail.

D.   Even if a PWPCL claim requires a contract between the plaintiff and defendant, discovery may establish that class members satisfy such requirement.

As discussed above, a PWPCL wage deduction claim does not require a contract between the plaintiff and defendant.  But, even if such a requirement exists, this Court can easily conclude that all class members – including those who established personal “corporate entities” – may be individually covered by the DSAs they signed.  XPO’s attempt to short-circuit such a finding at the pre-discovery stage is improper.

There is no validity to XPO’s conclusory assertion that, as a matter of law, class members who formed corporate entities cannot possibly be considered parties to the DSAs.  In fact, individual business owners often are considered to be “parties” to lawsuits arising under contracts entered into between their corporations and the defendant.  For example, in Margarite v. HRN Corp., 1993 U.S. Dist. LEXIS 10132 (E.D. Pa. Jul. 22, 1993), Judge Gawthrop held that two individuals who formed a corporation called Black Bear Systems, Inc. had standing to assert breach of contract claims arising out of a contract between Black Bear Systems, Inc. and HRN Corporation:

It is clear that the two individual plaintiffs were the parties with whom HRN contracted. It was their services which HRN wished to acquire, regardless of corporate name. Finally, it was the individual plaintiffs who were to reap the benefits of the contract. If defendants did breach the contract or commit fraud, then the individual plaintiffs were harmed. They are true parties in interest.

Id. at *7-8; accord Copelco Credit Corp. v. Fahey, 1997 U.S. Dist. LEXIS 19886, *12-14 (E.D. Pa. Dec. 8, 1997) (corporate owners could assert breach of contract entered into by their companies because they “were all central players in the underlying dispute”).

Clearly, where a contract places obligations on both the business and the individual business owner, Pennsylvania courts refuse to entertain the fiction that the individual business owner is not covered by the agreement.  As “the Pennsylvania Supreme Court explained: ‘the mere signature of the appellant preceded by the word ‘by’ and following the typed name of the corporation on the corporation’s letterhead is not conclusive that he was acting in a representative capacity, if the alleged contract showed an intent to bind appellant individually.’”  CDL Medical Tech, Inc. v. Malik, 2011 U.S. Dist. LEXIS 11710, *6 (W.D. Pa. Feb. 7, 2011) (quoting Viso v. Werner, 369 A.2d 1185, 1188 (Pa. 1977) (emphasis in original)).

In this regard, Judge Surrick’s opinion in a PWPCL lawsuit entitled Myers v. Jani-King of Philadelphia, Inc., 2015 U.S. Dist. LEXIS 29566, *33 (E.D. Pa. Mar. 11, 2015), is noteworthy.  Myers involved the classwide PWPCL claims of janitors who alleged that Jani-King misclassified them as independent contractors.  Jani-King considered the janitors to be “franchisees” and required them to perform their custodial duties pursuant to Franchise Agreements.  See id. at *1-14.  Jani-King also required janitors to “form a corporation or a limited liability company.”  Id. at *4.  A copy of the Jani-King Franchise Agreement, obtained from the Court’s ECF system, is attached as Exhibit I.  As indicated, the Agreement – like the DSA attached to XPO’s Motion – was formally entered into between Jani-King and the janitor’s corporate entity, and the signature page – like the signature page of XPO’s DSA – did not require the janitor to sign as an individual.  See id. at p. 29.  Rather, each janitor signed the Franchise Agreement in his/her capacity as the “Owner, Partner or Authorized Officer” of the corporate entity.  Id.

Based on the above, Jani-King argued that a plaintiff named Howard Brooks “is not qualified to represent the proposed class because he operates his franchise as a corporate entity, and under Pennsylvania law, a corporate entity cannot bring a claim under the WPCL.”  Myers, 2015 U.S. Dist. LEXIS 29566, at *23.  Judge Surrick rejected this argument, refusing to accept the fiction that Mr. Brooks was not individually covered by the Franchise Agreement.  See id. at *23-25.

Here, as in Myers, this Court should reject XPO’s argument that the DSA cannot constitute an agreement between XPO and class members who formed individual corporate entities.  Indeed, XPO seems to admit that Reyes is individually bound by the DSA.  See Def. Br. (Doc. 16-1) at p. 4 n. 4.  Yet, Reyes signed his DSA on behalf of “Victors Delivery Service,” see Ex. C. at p. 12, and his DSA is not very different from the DSAs signed by other class members, Compare Ex. C (Reyes DSA) with Ex. A-B (other DSAs) and Doc. 16-3 (DSA attached to Motion).  It is likely that discovery will reveal that Reyes – who worked for XPO without forming a corporate entity – was subjected to the same work conditions as other class members who formed corporate entities.  Such evidence would debunk XPO’s argument and demonstrate that the creation of a corporate entity is immaterial to the relationship – contractual and otherwise – between XPO and the workers.  Reyes has a right to obtain such discovery.[6]

Also, discovery may reveal that individual workers – including those who formed corporate entities – were subjected to direct and individualized oversight and control by XPO management.  Such evidence is common in PWPCL misclassification cases, see, e.g., Sherman v. American Eagle Express Inc., 2012 U.S. Dist. LEXIS 30728, *6-7 (E.D. Pa. Mar. 8, 2012), and it is hard to believe that a worker’s individual “corporation” or “LLC” created a meaningful buffer between himself and XPO management.  If discovery reveals that XPO, under the auspices of the DSA, was managing workers’ activities in a direct manner, such evidence certainly would support an argument that the DSA created contractual obligations on the worker in his/her individual capacity.

It also will be interesting to see whether XPO ever sought to hold a worker individually liable under a DSA.  Such evidence, which must be obtained through the discovery process, is certainly relevant to determining whether individual workers were individually covered by the DSAs.  Once again, however, XPO’s Motion would prevent such discovery.

In sum, even if a PWPCL wage deduction claim requires a contract between the plaintiff and defendant, it cannot be said that class members who formed corporate entities cannot satisfy such requirement.  Resolution of this issue would require discovery.

E.   There is no merit to XPO’s argument that PWPCL plaintiffs must be paid directly by the defendant.

XPO asserts that class members who formed individual corporate entities cannot bring PWPCL claims against XPO because they were “paid through those corporate entities.”  See XPO Motion (Doc. 16) at p. 1; XPO Br. (Doc. 16-1) at pp. 1-2.  This assertion finds no support in the caselaw, which clearly establishes that defendants who do not directly pay the plaintiffs can be liable under the PWPCL.

E.1   The determination of an employer-employee relationship under the PWPCL requires the weighing of factors that generally have nothing to do with whether the purported employee was “paid through” the purported employer.

As Judge Sanchez has observed, “[i]n deciding whether an individual is an employee or an independent contractor under the PWPCL, Pennsylvania courts apply the same multi-factor test used in the context of misclassification claims under the Workers’ Compensation Act (WCA) and the Unemployment Compensation Act (UCA).”  Sherman, 2012 U.S. Dist. LEXIS 30728, at *26.  These factors include:

the control of the manner that work is to be done; responsibility for result only; terms of agreement between the parties; the nature of the work or occupation; the skill required for performance; whether one employed is engaged in a distinct occupation or business; which party supplies the tools; whether payment is by the time or by the job; whether the work is part of the regular business of the employer, and the right to terminate the employment at any time.

Id. at *26-27 (quoting Morin v. Brassington, 971 A.2d 844, 850 (Pa. Super. 2005)); accord Accurso v. Infra-Red Services, Inc., 2015 U.S. Dist. LEXIS 104641, *29-30 (E.D. Pa. Aug. 10, 2015); Myers, 2015 U.S. Dist. LEXIS 29566, at *33; In re FedEx Ground Package Systems Employment Practices Litig., 273 F.R.D. 424, 469 (N.D. Ind. 2008).  Moreover, “control” is the most important of these factors.  See Sherman, 2012 U.S. Dist. LEXIS 30728, at *27 (control is “chief” factor); Accurso, 2015 U.S. Dist. LEXIS 104641, at *31 (control is “crucial” factor); Myers, 2015 U.S. Dist. LEXIS 29566, at *33 (control is “key” factor); FedEx, 273 F.R.D. at 469 (control is “paramount” factor); Morin, 971 A.2d at 850 (same).  As explained by the Superior Court,

the basic inquiry is whether such person is subject to the alleged employer’s control or right to control with respect to his physical conduct in the performance of the services for which he was engaged.  The hallmark of an employee-employer relationship is that the employer not only controls the result of the work but has the right to direct the manner in which the work shall be accomplished; the hallmark of an independent contractee-contractor relationship is that the person engaged in the work has the exclusive control of the manner of performing it, being responsible only for the result.”

Valles v. Albert Einstein Medical Center, 758 A.2d 1238, 1241 (Pa. Super. 2000).

Notably lacking from the multi-factor analysis described above is any mention of whether the purported employee is paid by the purported employer.  While the question “Who paid the purported employee?” is arguably relevant to one or more of the factors, it certainly is not dispositive.  The whole point of the multi-factor analysis, after all, is to assess the “realities of the working relationship,” Accurso, 2015 U.S. Dist. LEXIS 104641, at *36, between the purported employee and the purported employer.  No single factor is dispositive.  See, e.g., id. at *30-36 (finding plaintiff to be employee even though “factors are split”).

In sum, the fundamental problem with XPO’s argument that a PWPCL plaintiff must be “paid through” the putative employer is that it creates a bright-line rule that cannot be reconciled with the multi-factor analysis actually applied by Pennsylvania courts addressing employment relationships under the PWPCL.

E.2   Under the PWPCL’s multi-factor test, a company can be deemed an employer even though the putative employee was paid through some other entity.

Because the existence of an employer-employee relationship under the PWPCL does not depend on any particular fact or characteristic, it is unsurprising that courts handling independent contractor misclassification lawsuits often find that a defendant can employ a plaintiff even though some other entity paid the plaintiff.  Here are some examples:

In Myers, supra, Judge Surrick found that Mr. Brooks could bring an individual PWPCL claim even though he was paid through his incorporated franchise.  See Myers, 2015 U.S. Dist. LEXIS 29566, at *1-14, 23-25.

In Feret v. First Union Corp., 1999 U.S. Dist. LEXIS 570 (E.D. Pa. Jan. 29, 1999), CoreStates Financial Corp. entered into a “long-term contract” with Andersen Consulting for the provision of “Systems and Technology Services.”  See id. at *4.  Upon execution of this contract “approximately 170 employees of CoreStates’ Systems and Technology Group were terminated and transferred to the payroll of Andersen.”  Id. at *8 (emphasis supplied).  Later, after the termination of their Andersen employment, these employees – now plaintiffs – sued CoreStates for PWPCL violations.  See id. at *39-44.  The plaintiffs asserted that they “were de facto employees of CoreStates during the time they were nominally employed by Andersen.” Id. at *30.  In support of this assertion, the plaintiffs alleged that they “reported to both CoreState and Andersen employees . . . during their tenure at Andersen” and they “denied that Andersen actually controlled their daily activities.”  Id. at ¶ 44.  CoreStates sought summary judgment, based on, inter alia, the uncontroverted fact that the plaintiffs “were paid by Andersen, were reimbursed for expenses by Andersen, and received benefits from Andersen.”  Id. at *43 (emphasis supplied).  Judge Yohn disagreed, observing that, even under these facts, plaintiffs could prove that CoreStates employed the plaintiffs under the PWPCL.  See id. at *44.

In Henderson v. UPMC, 2010 Pa. Dist. & Cnty. Dec. LEXIS 43 (Pa. C.C.P., Allegheny Cty. Feb. 24, 2010), the UPMC health system sought dismissal of a PWPCL lawsuit, arguing that it could not be liable under the PWPCL to a plaintiff directly employed by a subsidiary hospital.  See id. at *5-6.    The plaintiff countered that “there is no reason why there cannot be more than one employer within the meaning of the [PWPCL] where more than one entity is imposing the terms and conditions of plaintiffs employment.”  Id. at *5.  Judge Wettick agreed with the plaintiff, explaining:  “Recovery under the [PWPCL] is not limited to recovery against the immediate corporate employer.”  Id. at *7 (emphasis supplied).

In sum, XPO’s argument that a PWPCL plaintiff must be “paid through” her putative employer cannot be reconciled with the outcomes of other PWPCL cases.

CONCLUSION

For the above reasons, XPO’s motion should be denied.

Footnotes:

[1]   XPO’s current version of the DSA is attached to the Motion.  See Doc. 16-3.  The March 2012 and January 2014 versions are attached hereto as Exhibits A and B respectively.  Finally, a fourth version, as signed by Reyes in October 2008, is attached as Exhibit C.

[2]   See also Rosario v. Penn State Fed. Credit Union, 2011 U.S. Dist. LEXIS 99668, *5 (M.D. Pa. Sept. 6, 2011); Mills v. Service First Credit Union, 2011 U.S. Dist. LEXIS 82641, *1-3 (M.D. Pa. July 28, 2011); Vlachos v. Tobyhanna Army Depot Fed. Credit Union, 2011 U.S. Dist. LEXIS 69725, *4-5 (M.D. Pa. June 29, 2011).

[3]   Slam dunks also are rare in the Lawyers Basketball League, where outside shooting and arguing with the referee are paramount.

[4]   Accord Perez v. Oak Grove Cinemas, Inc., 2014 U.S. Dist. LEXIS 175196, *10 (D. Or. Dec. 17, 2014); Tavares v. S-L Distrib. Co., 2014 U.S. Dist. LEXIS 146404, *23-24 (M.D. Pa. Jan. 14, 2014); Gentrup v. Renovo Servs., LLC, 2011 U.S. Dist. LEXIS 67887, *3 (S.D. Ohio June 24, 2011); Gayle v. Harry’s Nurses Registry, Inc., 2010 U.S. Dist. LEXIS 137498, *4 (E.D.N.Y. Dec. 30, 2010).

[5]   See generally Economic Policy Institute, Briefing Paper: (In)Dependent Contractor Misclassification (June 8. 2015) (Ex. D); Marjorie Elizabeth Wood, “Victims of Misclassification,” New York Times (Dec. 15, 2013) (Ex. E);  Vickie Elmer, “Working: U.S. and local governments crack down on employers who pay workers as contractors,” Washington Post (Oct. 9, 2011) (Ex. F); U.S. Government Accountability Office, Employment Arrangements: Improved Outreach Could Help Ensure Proper Worker Classification (July 2006) (Ex. G).

[6]   Many courts have recognized that determining whether workers are employees or independent contractors requires discovery and cannot be decided at the pleadings stage.  See Fernandez v. Kinray, Inc., 2014 U.S. Dist. LEXIS 17954, *29 (E.D.N.Y. Feb. 5, 2014); Scott v. Bimbo Bakeries, Inc., 2012 U.S. Dist. LEXIS 26106, *37-38 (E.D. Pa. Feb. 29, 2012); Harris v. Coastal Offshore, Inc., 2011 U.S. Dist. LEXIS 64314, *12 (S.D. Tex. June 16, 2011); Stilles v. BP Express, Inc., 2011 U.S. Dist. LEXIS 43511, *3 (E.D. Tenn. April 21, 2011); Cabrera v. 27 of Miami Corp., 2009 U.S. Dist. LEXIS 64278, *16-17 (S.D. Fla. July 13, 2009).

A recent decision by the United States District Court for the District of New Jersey in a case brought on behalf of landscape worker represented by Winebrake & Santillo was highlighted in a Law360 article.  The landscape company moved for summary judgment asking the Court to dismiss the case.  In denying the motion, the Court held that “shop time work” represented “an integral and indispensable part” of the principle of the client’s job activities, based on the Supreme Court’s December 2014 ruling in Integrity Staffing v. Busk.  A copy of the Court’s opinion is available here.  The article by Law360 is available at https://www.law360.com/newjersey/articles/724375/nj-landscaping-co-can-t-escape-worker-s-shop-time-claims

On October 15, 2015, the Eastern District of Pennsylvania approved a class action settlement on behalf of workers who were not paid full overtime premium pay and represented by Winebrake & Santillo, LLC.

This approval order represents the 100th time that Winebrake & Santillo has obtained a recovery of unpaid wages on a class and/or collective action basis for its clients since the firm was founded in 2007.  This does not include the more than 200 addition cases we have brought on behalf of individual workers that we have obtained recoveries for during the same time period.

We are very proud of this milestone and look forward to continuing to represent workers in not only Pennsylvania and New Jersey, but throughout the country in the years to come.

After a three-day federal court trial, our firm recovered approximately $18,500 for three employees of a Philadelphia landscaping company.  In  addition to this payment, the landscaping company was required to reimburse our firm for its attorney’s fees and expenses.

In this trial, our three clients proved that the company failed to pay them for work performed at the beginning and end of their work shifts.  This unpaid work included, among other things, gathering tools and loading and unloading the truck at the shop.  Under the federal and state overtime laws, employees generally are entitled to be paid for all the time that transpires between the first and last activities performed for the benefit of the employer.  This is known as the “continuous workday rule.”

This federal court victory exemplifies how many landscaping and construction employees are cheated out of wages owed to them for work performed at the shop.

State Impact, a reporting project of National Public Radio stations, just published a good article summarizing the Halliburton’s recent $18 million settlement of a Department of Labor investigation addressing the companies policy of classifying over 1,000 oil and gas rig workers as exempt from the requirement that workers receive time and one-half overtime pay.  The DOL alleged that workers holding job titles such as Field Service Representatives, Pipe Recovery Specialists, Drilling Technical Advisors, Perforating Specialists, and Reliability Tech Specialists were misclassified as overtime-exempt.  This investigation is similar to lawsuits our law firm has successfully handled on behalf of Pennsylvania oil and gas workers holding positions such as Solids Control Technicians, Environmental Inspectors, Welding Inspectors, and Water Truck Drivers.

Pete Winebrake of our law firm is quoted in the State Impact article.  As indicated, Attorney Winebrake points out that many fracking workers’ overtime rights are violated and observes that overtime rights violations seriously impact unemployment rates.

Here is a link to the State Impact article:  State Impact Article: Halliburton agrees to pay $18M in back pay for overtime

Our firm has substantial experience representing oil, gas, and fracking field workers in overtime rights litigation arising in the Marcellus Shale region of Pennsylvania as well as other states such as Colorado, North Dakota, West Virginia, Ohio, New York, and Texas.  These workers are often provided with numerous job titles such as Truck Pushers, Truck Supervisors, Solids Control Technicians, Mud Loggers, Mud Logging Technicians, Service Technicians, Fluid Service Technicians, and Rig Operators just to name a few.  Regardless of the specific job title, however, such oil and gas field workers typically work very long hours and are easily working over 40 hours during a workweek, but are not receiving overtime pay.

In an attempt to avoid paying overtime, oil, gas and fracking companies will often pay field workers a “day-rate” payment for each day spent working in the field.  Such pay practices may violate the federal Fair Labor Standards Act (“FLSA”), and applicable state law, by failing to workers overtime compensation, i.e. pay for one and one-half times their regular pay rate for all hours worked over 40 in a workweek.

For example, our firm is currently represents day-rate field workers in federal overtime lawsuits against Flint Energy Services, Inc., Grant Production Testing Services Inc., Kestrel Engineering, Inc., Kestrel Energy, LLC, TForce Energy Services, Inc., and WhipperHill Consulting, LLC.

If you (or a friend or family member) are a former or current field worker for one of these companies or another company in the oil, gas, or fracking industry, you may be entitled to unpaid overtime compensation. Please do not hesitate to call.  The phone call will be free of charge and completely confidential.

While giving a speech on the US economy early this month, Presidential Candidate Hillary Clinton vowed to “crack down on bosses who exploit employees by misclassifying them as contractors”. Over the years, Winebrake & Santillo has written many blog posts on the common misclassification of employees as independent contractors.  Recently, it has come to more national attention, as demonstrated by Clinton’s mention and also by the numerous judges who have been cracking down on it.

Workers who are misclassified as “contractors” or “franchisees” are denied the benefits given to employees.  If you are classified as an independent contractor, you could potentially be owed millions of dollars for improper deductions and unpaid overtime wages.

Call Mark Gottesfeld at 2150884-2491 for a free and confidential consultation to see if you are entitled to more wages.

Earlier this week, the city of Birmingham, AL became the first city in the Deep South to enact a local minimum wage.  The Birmingham minimum wage is now on track to increase from the federal minimum wage ($7.25 an hour) to $8.50 an hour in July 2016 and to $10.10 an hour in July 2017. According to NELP (National Employment Law Project), an estimated 40,000 workers and their families – 19% of the city’s population – could be affected by the increase.

Many local business support the raise, including Danny Winter, owner and operator of two local restaurants, who says that “the $7.25 minimum wage that’s been in effect since 2009 is bad for business and bad for Birmingham.  If Birmingham had a $10.10 minimum wage, it would boost the consumer spending that businesses depend on”.

The increase shows the far-reaching effects of the Raise the Wage movement.  Currently, the Pennsylvania minimum wage remains at $7.25 an hour – the same as the federal minimum wage – but if the Raise the Wage movement continues growing, that could soon change.

Below is part of a recent brief we filed in opposition to an employer’s motion to strike consent forms for opt-in plaintiffs that were filed prior to conditional certification:

 

Defendant has filed a “Motion to Strike Consents and to Bar the Filing of Additional Consents” (“Motion to Strike”) in which it argues that certain opt-ins are prohibited from joining this collective action until after the Court grants Plaintiff’s anticipated conditional certification motion.  See Doc. 13.  As the Court may be aware, conditional certification of the FLSA collective would  (i) enable plaintiff’s counsel to discover the names and addresses of the potential members of the FLSA collective and  (ii) facilitate the mailing of a Court-approved notice form to be mailed to each member of the collective.  See generally Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 170 (1989); Zavala v. Wal-Mart Stores Inc., 691 F.3d 527, 535-36 (3d Cir. 2012); Symczyk v. Genesis Healthcare Corp., 656 F.3d 189, 192-94 (3d Cir. 2012).

A. Employees Are Permitted to Join an FLSA Collective Prior to the District Court’s Conditional Certification Ruling. 

Defendant’s argument that that conditional certification is a necessary prerequisite to individuals joining an FLSA collective action is simply incorrect.  While conditional certification is an important procedural device that enables district courts to facilitate an orderly FLSA notice and opt-in process, see generally Hoffman-La Roche, 493 U.S. at 170-73, the Third Circuit has made clear that conditional certification “‘is neither necessary nor sufficient for the existence of a representative action under FLSA.’”  Symczyk, 656 F.3d at 194 (quoting Myers v. Hertz Corp., 624 F.3d 537, 555 n. 10 (2d Cir. 2010)) (emphasis supplied); see also Zavala, 691 F.3d at 536 (repeating same quote).

In other words, FLSA collective actions can go forward (subject to the district court’s potential “decertification” of the collective after the close of discovery) without the plaintiffs’ lawyer ever obtaining conditional certification.[1]  This point is made abundantly clear in footnote 10 of the Second Circuit’s Myers opinion (which is the same footnote from which the Third Circuit quotes in both Symczyk and Zavala):

Indeed, while courts speak of “certifying” a FLSA collective action, it is important to stress that the “certification” we refer to here is only the district court’s exercise of the discretionary power, upheld in Hoffmann-La Roche, to facilitate the sending of notice to potential class members.  Section 216(b) does not by its terms require any such device, and nothing in the text of the statute prevents plaintiffs from opting in to the action by filing consents with the district court, even when the notice described in Hoffmann-La Roche has not been sent, so long as such plaintiffs are “similarly situated” to the named individual plaintiff who brought the action.  Thus “certification” is neither necessary nor sufficient for the existence of a representative action under FLSA, but may be a useful “case management” tool for district courts to employ in “appropriate cases.”

Myers, 624 F.3d at 555 n. 10 (emphasis supplied; internal citations omitted).

Moreover, Defendants’ Motion to Strike ignores the reality that employees routinely opt-in to FLSA collective actions at the pre-conditional certification stage.  Hundreds (and maybe even thousands) of cases exemplify this point.  For example, a review of the docket in Mayan v. Rydbom Express, Inc., 2:07-cv-02658-LS (E.D. Pa.), will reveal that many employees opted-in to the lawsuit before the defendant company even filed an answer and well before Judge Stengel conditionally certified the collective.  The same can be said of Resch v. Krapf’s Coaches, Inc., 2:11-cv-06893-WY (E.D. Pa.), and Spellman v. American Eagle Express, Inc., 2:10-cv-01764-JS (E.D. Pa.), and other cases too numerous to mention.  Indeed, in Knecht v. Penn Psychiatric Center, Inc., 2:12-cv-00988-JHS, an FLSA collective action currently pending before Your Honor, experienced defense counsel from the Morgan Lewis firm never suggested that it was inappropriate (or even unusual) for employees to opt-in to the FLSA collective before Your Honor’s August 24, 2012 conditional certification order.  Simply put, Defendant’s arguments cannot be squared with the manner in which FLSA collective actions are routinely handled in this Court and other district courts throughout the country.[2]

Finally, Defendants’ argument ignores the fact that, in FLSA collective actions (unlike Rule 23 class actions), the filing of the original plaintiff’s complaint does not toll the statute of limitations as to other employees.  See 29 U.S.C. § 256(b); Taylor v. Pittsburgh Mercy Health System, Inc., 2009 U.S. Dist. LEXIS 40080, *2 (W.D. Pa. May 11, 2009).  Thus, application of Defendant’s rule prohibiting employees from joining the FLSA collective prior to resolution of the conditional certification motion (which can sometimes take over six months to be briefed and resolved) will force individuals to begin new lawsuits in order to toll the running of the statute of limitations.  Such an outcome (which would require the litigation of multiple individual actions rather than a single collective action) contradicts the very purpose of the FLSA’s collective action device, which is to provide employees with “the advantage of lower individual costs to vindicate rights by the pooling of resources.”  Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 170 (1989); see also Evans v. Lowe’s Home Centers, Inc., 2006 U.S. Dist. LEXIS 32104, *15 (M.D. Pa. May 18, 2006) (collective actions enable the “lowering cost and limiting the controversy to one proceeding to efficiently resolve the common issues of law and fact.”); Moss v. Crawford & Co., 201 F.R.D. 398, 410 (W.D. Pa. 2000) (“the primary objectives of a § 216(b) collective action are: (1) to lower costs to the plaintiffs through the pooling of resources; and (2) to limit the controversy to one proceeding which efficiently resolves common issues of law and fact that arose from the same alleged activity”).

In sum, Defendant’s argument that these opt-ins are barred from opting-in to this action prior to the Court’s conditional certification decision should fail.  The argument is inconsistent with the controlling decisional law, cannot be squared with the manner in which FLSA collective actions are actually handled, and contradicts the very purpose behind the collective action device.

B. Defendant’s Apparent Concern About Improper Communications are Irrelevant.

Defendant seems to assume that the undersigned counsel has embarked on a widespread notification campaign in order to locate potential opt-in plaintiffs.  Indeed, Defendant’s brief discusses two non-binding, pre-Symczyk/Zavala court decisions – Cintron v. Hershey Puerto Rico, Inc., 363 F. Supp. 2d 10 (D. Puerto Rico 2005), and Bouder v. Prudential Financial, Inc., 2007 WL 3396303 (D.N.J. 2007) – that primarily concern situations in which the plaintiffs’ lawyer unilaterally embarked on a notice campaign outside of the court-supervised process resulting from conditional certification.

Defendant’s assumptions are incorrect.  Here, the three opt-ins are former employees who are Ciarrocchi’s personal friends and/or relatives.  They learned about the lawsuit by speaking with Ciarrocchi as well as the undersigned counsel, and they smartly decided to join the collective before the running statute of limitations eliminated their legal claims.  Plaintiff’s counsel has not issued any widespread notice to potential members of the FLSA collective.  In fact, Plaintiff’s counsel agrees with Defendant that conditional certification (and the resulting Court-supervised notice process) is the best way to notify employees of the lawsuit and their right to participate.[3]  In this regard, Plaintiffs’ counsel will reach out to defense counsel to determine whether (like employers in many other FLSA collective actions) Defendant will stipulate to conditional certification.

 C. Conclusion

For the above reasons, the Court should deny Defendant’s Motion to Strike.

[1]   If, after the close of discovery, the collective is “decertified,” then each opt-in plaintiff will be dismissed from the action without prejudice to them filing individual lawsuits.  See Mayan v. Rydbom Express, Inc., 2009 U.S. Dist. LEXIS 90525, *34-35 (E.D. Pa. Sept. 30, 2009) (“If the court chooses to decertify, then the remaining plaintiffs are dismissed without prejudice and are free to initiate their own suits.”); accord Lusardi v. Xerox Corp., 747 F.2d 174, 178 (3d Cir. 1984); Andrako v. United States Steel Corp., 788 F. Supp. 2d 372, 383-84 (W.D. Pa. 2011).

[2]   Indeed, some district courts have denied conditional certification motions on grounds that the lack of pre-notice opt-ins demonstrates a lack of interest amongst the potential members of the FLSA collective.  See, e,g,, Simmons v. T-Mobile USA, Inc., 2007 U.S. Dist. LEXIS 5002, *33-34 (S.D. Texas Jan. 24, 2007) (to justify conditional certification “a showing is necessary that at least a few similarly situated individuals seek to join the lawsuit”).

[3]   In the undersigned’s experience, only about 20% of potential FLSA opt-ins actually join the collective.  This is in-line with several empirical nationwide studies that have been conducted.

Economic Policy Institute, an organization which we proudly support, recently wrote a very informative article about the possible effects of the proposed overtime salary threshold raise. Last month, the Department of Labor proposed to raise the threshold for salaried exemption from $23,660 per year to $50,440 per year.  The raised threshold would help approximately 13.5 million workers receive fair wages for the work that they do.

Read the Economic Policy Institute’s full article here.

If you are paid a salary and do not receive proper overtime pay for hours worked over forty in a week, call us at (215)884-2491 for a free consultation with one of our attorneys.

 

We have recently filed a new case against FedEx with our colleagues at Lichten & Liss-Riordan, P.C., and Barkan, Meizlish, Handelman, Goodin, DeRose & Wentz, LLP.  Check out the website for the lawsuit here.

As stated on the lawsuit’s website, in the past two years, courts around the country have ruled that FedEx has classified its drivers as independent contractors.  However, there has not yet been a case that challenges the failure of FedEx to pay overtime (time and a half pay for hours worked beyond 40 per week) to its small truck drivers.  Federal law has an overtime exemption for many truck drivers, but this exemption has an important exception for drivers of trucks under 10,000 pounds.  If you have driven one of these smaller trucks for FedEx, this case could provide you significant compensation.  Contact our office at (215)884-2491 for free consultation.

Earlier this month, the Department of Labor proposed to update the country’s overtime pay regulations. The new proposal will expand overtime pay to 5 million salaried white-collar workers. Previously, overtime pay only applied to salaried workers who made $455 a week or less (approximately 23,660 a year), an unreasonably low salary to act as the threshold.  This resulted in millions of exploited workers who worked long hours for little pay. The raised threshold, $970 a week ($50,440 a year), will help many workers achieve fair pay for the work that they do.  As stated in the proposal, the threshold will also automatically update when inflation or wage growth occurs, which, in the words of the DOL, will prevent “a future erosion of overtime protection”.

 

“For too long, retail chains, fast food restaurants, and other employers have sought to avoid overtime by simply slapping a ‘manager’ title and a modest salary on an employee and then requiring her to work the extra overtime hours free,” explains Attorney Pete Winebrake. “This practice is simply wrong.”

 

Read more about the proposal on the Wage and Hour Division’s Overtime NPRM webpage.

Please give us a call at 215-884-2491 if you would like a free and completely confidential consultation with one of our attorneys.  Winebrake & Santillo has extensive experience representing workers who are paid a salary and do not receive proper overtime pay for hours worked over 40 in a week.

 

Colorado workers are the latest group of workers to sue Chipotle for unpaid wages.  This case is an example of an FLSA overtime rights case – one that specifically deals with “excutive exemption”.  Several cases such as this one have arisen against Chipotle in recent years.  For example, $2 million settlement was recently reached between Chipotle and 38,000 California workers who were acting as plaintiffs.  Read or listen to the full story here: http://www.marketplace.org/topics/business/colorado-workers-sue-chipotle-following-nation-trend

On July 23, 2015, the Second Circuit Court of Appeals held that licensed contract attorneys performing document review can assert claims for unpaid overtime wages under the Fair Labor Standards Act.  The case is titled Lola v. Skadden, Arps, Slate, Meagher & Flom and a copy of the opinion is here.

Contract attorneys reviewing documents and coding are typically classified as “exempt” from receiving overtime premium pay and are either paid a salary or a straight hourly rate for all hours worked.

In reaching its conclusion, the Second Circuit held that document review does not constitute practicing law in North Carolina per se, because the practice of law requires the exercise of at least a modicum of independent legal judgment.  The court noted that the contract attorney at issue alleges that he performed the document review “under such tight constraints that he exercised no legal judgment whatsoever – he alleges that he used criteria developed by others to simply sort documents into different categories.  A fair reading of the complaint in the light most favorable to Lola is that he provided services that a machine could have provided.”

Here is the text from a very brief memorandum I just filed arguing that the federal court should reject a company’s argument that our client is required to plead “willfulness” with specificity in an FLSA overtime rights lawsuit pending in Easton, PA.  As indicated, we argue that conclusory allegations of “wilfullness” are sufficient at the outset of litigation:

The Fair Labor Standards Act (“FLSA”) provides for a 3-year – rather than a 2-year – limitations period in the event of a “willful” FLSA violation.  See 29 U.S.C. § 255(a).  Referencing this provision, Defendant has filed a motion to dismiss (Doc. 3) asserting that Plaintiff’s complaint does not sufficiently plead “willfulness.”

Defendant’s motion should be denied.  As a matter of law, Plaintiff has absolutely no obligation to plead “willfulness” with any specificity.  See Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892, 903 (9th Cir. 2013) (“At the pleading stage, a plaintiff need not allege willfulness with specificity.”); Woodards v. Chipotle Mexican Grill, Inc., 2015 U.S. Dist. LEXIS 69606, *11 (D. Minn. April 3, 2015) (“general allegations are sufficient to ‘satisfy the requirements of pleading a willful violation of the FLSA’”); Goodman v. Port Authority of New York and New Jersey, 850 F. Supp. 2d 363, 381 (S.D.N.Y. 2012) (“Whether or not a violation of the FLSA is ‘willful’ is a fact-intensive inquiry not appropriately resolved on a motion to dismiss.”); LePage v. Blue Cross and Blue Shield of Minnesota, 2008 U.S. Dist. LEXIS 49298, *7-10 (D. Minn. June 25, 2008) (“general assertions satisfy the requirements of pleading a willful violation of the FLSA” because “the applicability of the statute of limitations is an affirmative defense” and “plaintiffs are not required to negate an affirmative defense in their complaint”); Moran v. GTL Construction, LLC, 2007 U.S. Dist. LEXIS 55098, *11 (S.D.N.Y. July 24, 2007) (“whether a defendant’s actions were willful is a factual question that cannot be decided on a motion to dismiss”); Colon v. Wyeth Pharmaceuticals Co., 363 F. Supp. 2d 24, 29 (D.P.R. 2005) (“to make a factual finding regarding whether defendant’s actions were willful is inappropriate at a motion to dismiss stage in the proceedings”).

The above rule has been applied by district courts within the Third Circuit.  For example, in Burroughs v. MGC Services, Inc., 2009 U.S. Dist. LEXIS 29700 (W.D. Pa. April 7, 2009), the plaintiff – represented by the undersigned – alleged willfulness in an entirely conclusory manner.  Yet, the employer’s motion to dismiss was denied.  Judge Standish explained:  “After consideration, the Court concludes that the issue of willfulness also may not be resolved at this early stage of the litigation.”  Id. at *18.

Likewise, in Gallagher v. Lackawanna County, 2008 U.S. Dist. LEXIS 43722 (M.D. Pa. May 30, 2008), the plaintiffs – represented by the undersigned – alleged willfulness in an entirely conclusory manner.  Judge Vanaskie had no problem with the conclusory pleading, observing:  “Facts regarding willfulness must be explored during discovery, and the County may challenge the three-year statute of limitations at a later date.”  Id. at *30.

In sum, Defendant’s motion to dismiss should fail because it rests on the incorrect argument that Plaintiff is required to plead “willfulness” with specificity.

Over the years, this Newsletter has spilled considerable ink discussing corporate abuse of the “independent contractor” business model. Unfortunately, too many workers are misclassified as independent contractors – rather than employees – even though their day-to-day work conditions are indistinguishable from the conditions encountered by full-fledged employees. Indeed, we often find independent contractors and employees working side-by-side performing the same work for the benefit of the same company.

 

Independent contractor misclassification can be extremely unfair to workers. Independent contractors, after all, are not entitled to basic workplace benefits such as: (i) matching FICA contributions; (ii) workers compensation and unemployment insurance; (iii) coverage under federal/state laws barring workplace discrimination, retaliation, and harassment; (iv) the right to unionization; and (v) the right to be paid a minimum wage and overtime compensation.

 

By classifying workers as independent contractors, corporations are able to shift the most basic business costs onto the backs of workers. For example, package delivery companies can require the worker to purchase or lease the delivery truck bearing the company’s logo. It sure seems unfair to require workers, rather than the companies’ owners, to bear such basic business risks and expenses.

 

Make no mistake: taxpayers, competing businesses, and working families are left holding the tab for independent contractor misclassification.

 

In recent years, the media has focused increased attention on the unfairness and societal costs of the independent contractor business model. And it appears that judges – like the general public – are growing more skeptical of the business model.

 

The increasing judicial skepticism is reflected in two recent developments:

 

New Jersey Supreme Court Adopts the “ABC Test”

 

In Hargrove v. Sleepy’s, Inc., 106 A.2d 449 (N.J. 2015), the New Jersey Supreme Court addressed the proper legal test for determining whether a plaintiff is an employee or an independent contractor under the state’s Wage and Hour Law and Wage Payment Law. See id. at 453. The workers’ cause was argued by Boston attorney Harold Lichten, who – as many readers of this Newsletter know – has had great success representing misclassified contractors.

 

On January 15, the Hargrove Court issued a unanimous opinion adopting the “ABC test.” See id. at 463-65. Under the ABC test, a worker is presumed to be an employee unless the company can satisfy each of the following three requirements:

 

(A) the worker “has been and will continue to be free from control or direction over the performance of” the services provided”; and (B) the worker’s services fall either “outside the usual course of” the company’s business or are “performed outside of all the [company’s] places of business;” and (C) the worker “is customarily engaged in an independently established trade, occupation, profession or business.”

 

Id. at 458.

 

The ABC test adopted in Hargrove will be difficult for many companies to satisfy. That’s why several groups representing corporate interests filed briefs opposing the ABC test. But, in the Court’s view, these arguments could not overcome the fundamental fact that the ABC test “fosters the provision of greater income security for workers, which is the express purpose of both the [Wage Payment Law] and [Wage and Hour Law].” Id. at 315.

 

Going forward, New Jersey is likely to be a major battleground in the effort to eliminate independent contractor abuse.

 

FedEx Under Attack

 

Over the past ten years, numerous cases have been filed against FedEx Ground Package System (“FedEx”) challenging the company’s business model of classifying thousands of package delivery drivers as non-employee independent contractors. Our firm has handled a few of these cases, and, in the process, we’ve been privileged to work with some really great Trial Lawyers.

 

The FedEx cases are working their way through the appellate courts, and, so far, the results generally have been very good for working families.

 

The most recent decision came from the Atlanta-based Eleventh Circuit Court of Appeals in a case entitled Carlson v. FedEx Ground Packaging System, Inc., 2015 U.S. App. LEXIS 8810 (11th Cir. May 28, 2015). There, the Circuit unanimously reversed the trial judge’s summary judgment finding that the drivers were independent contractors. The Circuit’s opening paragraph is worth repeating:

 

For customers who are regularly visited by the ubiquitous white trucks of FedEx Ground, with their familiar purple and green logos, the usual concern is whether packages are picked up on schedule and delivered on time. If asked, a good number of those customers would probably say that they believe (or reasonably assume) that the drivers of those white trucks are employed by FedEx. The law, however, sometimes has a funny way of making hard what would otherwise seem intuitively simple, and that is the case with the legal status of FedEx’s ‘drivers. The drivers who work for FedEx in Florida say they are employees, while FedEx maintains that they are independent contractors, and the resolution of that dispute is critical to a class action lawsuit filed by those Florida drivers against FedEx. Applying Florida law, we conclude that, on this record, the issue is one for a jury to resolve.

 

Id. at *2.

 

Carlson came on the heels of Craig v. FedEx Ground Packaging Systems, Inc., 335 P.3d 66 (Kan. 2014), the highly-anticipated decision in which the Kansas Supreme Court unanimously held that FedEx delivery workers are employees under the state’s wage laws. After an extensive opinion, the Craig Court summarized that “FedEx has established an employment relationship with its delivery drivers but dressed that relationship in independent contractor clothing.” Id. at 92.

 

Finally, in Slayman v. FedEx Ground Packaging System, Inc., 765 F.3d 1033 (9th Cir. 2014), and Alexander v. FedEx Ground Packaging System, Inc., 765 F.3d 981 (9th Cir. 2014), the San Francisco-based Ninth Circuit Court of Appeals held that FedEx delivery drivers are employees under Oregon and California law. The Alexander Court summarized:

 

As a central part of its business, [FedEx] contracts with drivers to deliver packages to its customers. The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards. FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent. FedEx contends its drivers are independent contractors under California law. Plaintiffs, a class of FedEx drivers in California, contend they are employees. We agree with plaintiffs.

 

Id. at 984.

 

In sum, the tide finally appears to be turning in favor of workers’ who challenge independent contractor abuses. The next several years are going to be filled with many important court battles defining the legal limits of the independent contractor model.

On July 6, 2015, Southern District of New York Judge Analisa Torres issued a very concise opinion rejecting an FLSA settlement because (i) the settlement agreement contained a sweeping confidentiality agreement and required the plaintiff to pay liquidated damages in the event of a breach and (ii) contained release language that extended well beyond wage and hour claims.  The opinion can be found at Flood v. Carlson Restaurants, Inc., 2015 U.S. Dist. LEXIS 88068 (S.D.N.Y. July 6, 2015).  Judge Torres’s opinion is excellent and reflects a growing judicial consensus that confidentiality agreements violate the FLSA’s public policy goal of ensuring that workers remain aware of their wage and overtime rights.  Likewise, the Judge’s concerns regarding the scope of the FLSA release is a breath of fresh air, since too many FLSA lawsuits are being settled with broad releases that have nothing to do with the subject matter of the lawsuit.  Indeed, Middle District of Pennsylvania Chief Judge Christopher Connor recently issued a similar holding in a decision entitled Bettger v. Crossmark, Inc., 2015 U.S. Dist. LEXIS 7213 (M.D. Pa. Jan. 22, 2015).  New York and Pennsylvania wage anmd employment lawyers should be on the lookout for similar decisions in the future.

Attorney Pete Winebrake was quoted in an article in today’s Philadelphia Inquirer about the proposed regulations released by the U.S. Department of Labor yesterday that would expand the overtime protections to millions of Americans who are paid on a salary basis and currently considered “overtime exempt.”

Under these proposed regulatory changes, employees who earn below $50,440 a year, or $970 a week, would become eligible for overtime after 40 hours, no matter what their responsibilities or whether they are managers, professionals or administrators.  The current salary threshold is $23,660 a year or $455 a week.

Winebrake & Santillo has extensive experience representing workers who are paid a salary and do not receive proper overtime pay for hours worked over 40 in a week.  If you would like a free and completely confidential consultation with one of our attorneys please give us a call at 215-884-2491.

 

 

On June 24, 2015 the Social Justice Lawyering Clinic at the Stephen and Sandra Sheller Center for Social Justice at Temple University Beasley School of Law released a report titled “Shortchanged: How Wage Theft Harms Pennsylvania’s Workers and Economy.”

The report’s central finding was that wage theft in Pennsylvania harms hundreds of thousands of workers each year, and negatively affects law-abiding businesses and local economies. The report further states that in any given workweek, almost 400,000 Pennsylvania workers experience a minimum wage violation, representing between $19 million and $32 million in lost wages. To combat wage theft, the report recommends, among other things, “strengthening state and local laws, making state agency enforcement more effective, and providing support for low-wage workers.”

Attorney Pete Winebrake was interviewed by the report’s authors and quoted as follows: “[Wage theft] is rampant. Employers claim that they violate the law because they don’t understand it—that the law is confusing. It’s not. They just don’t want to pay people what they are owed—it’s a race to the bottom.”

Read the full report here.

Last week, a federal judge in Nashville, Tennessee granted preliminary approval of a $3 million dollar settlement in the overtime rights class/collective action styled Carroll v. Guardian Home Care Holdings, Inc., 3:14-cv-01722.  Our firm and the Nashville firm of Barrett Johnston Martin & Garrison LLC represent a class of visiting nurses who allege that they did not receive any extra overtime pay when they worked over 40 hours per week.  Here is link to a recent newspaper article about the settlement:  Nashville Tennessean Article

The lawsuit addresses whether visiting nurses paid a “fee-per-visit” basis are entitled to extra overtime pay for hours worked over 40 per week.  The nurses argued that extra overtime pay is required because a portion of their weekly pay was based on the amount of time they spent performing certain types of work, such as, for example, attending weekly staff meetings.  Plaintiffs argued that, under the federal overtime regulations, visiting nurses cannot be considered “exempt” from receiving overtime if any portion of their pay is based on the time it takes to perform certain tasks.”

Our firm is very interested in protecting the overtime rights of visiting nurses and, as indicated by the above settlement, we have has great success handling such cases.  Please call if you are a visiting nurse who has not been paid overtime by your current or former employer.

On May 6, 2015, Southern District of New York Judge Analisa Torres issued a short but excellent decision holding that parties seeking court approval of an FLSA settlement may not file the settlement agreement under seal.  The Judge explained “that the public’s interest in ensuring that workers receive ‘a fai day’s pay for a fair day’s work’ outweighs the movants’ purported privacy interest”  The case is entitled Flood v. Carlson Restaurants Inc., 1:14-cv-02740-AT, and the decision can be found at docket entry 186.

In an important case of first impression, Judge Kevin McNulty recently issued a thoughtful opinion explaining that the New Jersey Wage and Hour Law (“NJWHL”) allows New Jersey employees to bring private lawsuits seeking unpaid overtime pay.  The case is entitled Thompson v. Real Estate Mortgage Network, Inc., 2:11-cv-01494 (D.N.J.).  In the May 22, 2015 opinion, the court rejects the argument that the NJWHL’s statutory provision allowing workers to bring a private right of action is strictly limited to minimum wage — but not overtime — claims.  Here is a link to the decision:  Decision-Thompson v. Real Estate Mortgage Network Inc. (D.N.J. May 22, 2015)

Here is the link to an article recently appearing in The Pennsylvania Record concerning an overtime rights lawsuit against Flint Energy:  Worker Claims Flint Energy Owes Him Overtime Pay.

Our firm has had substantial success representing oil, gas, and fracking employees in overtime rights litigation arising in the Marcellus Shale region of Pennsylvania as well as other states.  Please do not hesitate to call our firm if you or a family member worked in the oil, gas, or fracking industry and wish to speak with us about your overtime rights.  The phone call will be free of charge and confidential.

For purposes of the recent NELA wage and hour seminar, I prepared some commentary regarding all reported decisions issued by the Nation’s Circuit Courts between January 1, 2014 and March 14, 2015.  The summary, which is reproduced below, is limited to precedential opinions that (i) arise under the FLSA and (ii) have been or will be reported in the Federal Reporter.  I did my best to capture every such decision, but I probably missed a few.  Also, this summary does not include Circuit Court decisions addressing wage/overtime issues arising under state or local laws.

First Circuit

Litz v. The Saint Consulting Group, Inc., 772 F.3d 1 (1st Cir. Nov. 4, 2014)

Holding:  Employees’ weekly “stipends” satisfied the “salary basis” test, enabling the company to deny overtime under the “highly compensated employee” regulation.

Comments:  Plaintiffs’ counsel made some good arguments that the employees’ weekly “stipends” violated the salary basis rules because the stipends were “subject to reductions because of variations in the . . . quantity of work performed.”  But these employees were making well over $100,000 per year, and, as the Supreme Court’s 2012 Christopher demonstrates, it sure is difficult to convince judges that such well-heeled employees should get overtime pay.

Newman v. Advanced Technology Innovation Corp., 749 F.3d 33 (1st Cir. Apr. 18, 2014)

Holding:  Because the per diem component of the plaintiffs’ pay was tied, in part, to the number of hours work, the per diem payments should have been included in determining the employees regular pay rate for overtime calculation purposes.

Comments:  This opinion cogently summarizes the rules applicable to determining when per diem payments can be excluded from the regular rate calculation.  The Court relies, in part, on the DOL Field Operations Handbook.

Perez v. Lorraine Enterprises, Inc., 769 F.3d 23 (1st Cir. Oct. 1, 2014).

Holding:  Restaurant violated FLSA by failing to provide servers with advance notice that it utilized the “tip credit” to satisfy its minimum wage obligation.

Comments:  Most notably, the Court’s rejected the restaurant’s argument that the servers were sufficiently put on notice of the tip credit based on the content of their pay stubs.

Second Circuit

Brown v. New York City Department of Education, 755 F.3d 154 (2d Cir. June 18, 2014)

Holding:  Individual who performed volunteer work at public school for a three-year period was not an employee covered by the FLSA.

Comments:  Why this relatively sophisticated plaintiff would continuously work for three years without pay seems puzzling.  The facts are so extreme that this case is easily distinguishable from any case you may file.

Parada v. Banco Industrial de Venezuela, C.A., 753 F.3d 62 (2d Cir. Mar. 25, 2014)

Holding:  Plaintiff not entitled to equitable tolling back to the time she filed her administrative overtime complaint with DOL.

Comment:  This unsurprising decision demonstrates the risks that workers take when they rely on DOL’s investigative process – rather than trial lawyers – to recover back wages.

Pippins v. KPMG LLP, 759 F.3d 235 (2d Cir. July 22, 2014)

Holding:  Salaried, non-CPA accountants at large accounting firm are covered by the learned professional exemption.

Comment:  This holding follows a trend of decisions finding staff accountants to be exempt.  It seems like judges perceive these types of well-educated employees as merely “paying their dues” before moving up the corporate ladder.  Also, the opinion contains a good discussion of the differences between the administrative exemption and the professional exemption and demonstrates how white collar employees can be exempt professionals even though they do not engage in the type of managerial decision-making required under the administrative exemption.   

Third Circuit

Davis v. Abington Memorial Hospital, 765 F.3d 236 (3d. Cir. Aug. 26, 2014)

Holding:  (1) Plaintiff asserting FLSA overtime claim “must sufficiently allege forty hours of work in a given workweek as well as some uncompensated time in excess of the forty hours” but is not required to “identify the exact dates and times that she worked overtime.”  (2) Absent a minimum wage violation, the FLSA does not permit employees to recover damages for “gap-time” (unpaid hours worked under the 40-hour threshold).

Comments:  The Court endorses a pleading requirement that does not seem very onerous to meet.  Also, the “gap time” holding is unsurprising.

Opalinski v. Robert Half International Inc., 761 F.3d 326 (3d Cir. July 30, 2014)

Holding:  Where an FLSA claim is covered by an arbitration agreement that does not clearly indicate whether the worker waived her right to pursue the claim as a collective action, the federal judge – not the arbitrator – determines whether class-wide arbitration is permissible.

Comments:  Employers hate this holding, which conflicts with a holding by the Sixth Circuit.  Eventually, this issue will make its way to the Supreme Court.

Rosano v. Township of Teaneck, 754 F.3d 177 (3d Cir. June 10, 2014)

Holding:  (1) Governmental “law enforcement” or “fire protection” agency can calculate overtime damages using FLSA Section 7(k) methodology even if the agency did not contemporaneously intend to utilize a Section 7(k) “work period” in paying workers.  (2) Police officer uniforms constitute “clothing” under FLSA Section 3(o).

Comments:  Neither holding is too surprising.  The Section 7(k) analysis is a must-read before you file an overtime rights case on behalf of police officers, prison guards, or firefighters.

Thompson v. Real Estate Mortgage Network, 748 F.3d 142 (3d Cir. Apr. 3, 2014)

Holding:  Employees adequately pled that: (i) two companies were joint employers under FLSA; (ii) one of the companies could be liable under the FLSA as a “successor in interest”; and (iii) two corporate executives could be individually liable under FLSA.

Comments:  This opinion contains good language explaining that, at the pre-discovery pleadings stage, plaintiffs are not expected to have access to the type of detailed, intra-company information necessary to fully address the joint-employment, successor liability, and individual liability factors.

McMaster v. Eastern Armored Services, Inc., __ F.3d __, 2015 U.S. App. LEXIS 3826 (3d Cir. Mar. 11, 2015)

Holding:  Under the SAFETEA-LU Technical Corrections Act of 2008, employee who spent approximately 50% of her time driving vehicles weighing less than 10,000 pounds is not covered by the FLSA’s motor carrier exemption and is entitled to overtime premium pay.

Comments:  This is a significant opinion that rejects the flimsy reasoning of several district courts from around the country.  Under this opinion, many drivers who work for “mixed-fleet” employers are entitled to overtime premium pay.

Fourth Circuit

Cruz v. Maypa, 773 F.3d 138 (4th Cir. Dec. 1, 2014)

Holding:  Plaintiff’s FLSA claim was equitably tolled because her employer failed to conspicuously post notice of employees’ FLSA-rights as required by 29 C.F.R. § 516.4.

Comments:  A nice decision, especially coming from the Fourth Circuit.  The plaintiff, an immigrant laborer, had been severely exploited and was sympathetic.  The Court explains: “absent a tolling rule, employers would have no incentive to post notice since they could hide the fact of their violations from employees until any relevant claims expired.”

Martin v. Wood, 772 F.3d 192 (4th Cir. Nov. 18, 2014)

Holding:  Supervisors at state-owned hospital enjoyed Eleventh Amendment immunity from FLSA lawsuit because their allegedly illegal conduct was “inextricably tied to their official duties.”

Comments:  It is well-established in the Fourth Circuit that the Eleventh Amendment protects from FLSA lawsuits both state defendants and individual defendants acting in their “official capacities.”  In this opinion, the Court makes it difficult for plaintiffs to circumvent this rule by simply labeling the suit as being filed against an defendant in his/her “individual capacity.”

Fifth Circuit

Allen v. Coil Tubing Services, L.L.C., 755 F.3d 279 (5th Cir. June 13, 2014)

Holding:  In deciding whether employees are sufficiently engaged in “safety-affecting interstate activities” to be covered by the FLSA motor carrier exemption, courts are not necessarily required to analyze each employee’s individual work experience.

Comments:  We have not seen the last of this important issue, as indicated by Judge Dennis’ scholarly dissent.  The Third Circuit is currently considering the same issue in a pending appeal entitled Resch v. Krapf’s Coaches, Inc., No. 13-3947.

Coffin v. Blessey Marine Services, Inc., 771 F.3d 276 (5th Cir. Nov. 13, 2014)

Holding:  Vessel-based tankermen covered by FLSA’s seaman exemption.

Comments:  The Court accepted this interlocutory appeal after the employer’s summary judgment motion was denied.  In refusing to follow previous decisions that workers who load and unload cargo from ships are not covered by the seaman exemption, the Court emphasized that these particular plaintiffs lived on the vessel.

Johnson v. Heckmann Water Resources, Inc., 758 F.3d 627 (5th Cir. July 14, 2014)

Holding:  In determining overtime pay, employers may utilize a recurring, seven-day workweek that does not coincide with the employees’ work schedule.

Comments:  This decision is based on well-established regulations and is entirely unsurprising.  Decision contains a concise recitation of the seven-day workweek rule and the pertinent regulations.

Orozco v. Plackis, 757 F.3d 445 (5th Cir. July 3, 2014)

Holding:  Owner of franchisor is not a covered employer with respect to FLSA claims of an employee of the franchisee.

Comments:  In my view, this decision exemplifies “conservative judicial activism.”  The appellate panel overturned a jury verdict (and the district court’s decision endorsing the jury verdict) in which the franchisor’s owner was found liable based on the jury’s weighing of the “economic reality” factors.  It seems like the panel substitutes its own judgment for that of the jury.

Sixth Circuit

Killion v. Kehe Distributors, 761 F.3d 574 (6th Cir. July 30, 2014)

Holding:  District court improperly entered summary judgment against salaried sales representatives under FLSA’s outside sales exemption, where the sales representatives’ responsibilities include, inter alia, delivering products to retail stores, stocking shelves, and facilitating the automatic re-ordering process.

Comments:  It’s nice to see a reversal of summary judgment in an FLSA misclassification case.  The appellate court recognized that, based on the disputed evidence, a reasonable jury could find that the sales representatives’ primary duty was not “making sales.”  The decision contains a good discussion of what types of activities are “incidental” to making sales.

Michigan Corrections Organization v. Michigan Department of Corrections, 774 F.3d 895 (6th Cir. Dec. 17, 2014)

Holding:  (1) State Department of Corrections is constitutionally immune from FLSA liability.  (2) Neither FLSA nor any other theory provides a private right of action for plaintiffs to seek injunctive relief against the Department’s Director in his individual capacity.

Comments:  Judge Sutton’s scholarly opinion contains a good discussion of the constitutional limits of the FLSA.  Very heady stuff.

Misewicz v. City of Memphis, 771 F.3d 332 (6th Cir. Nov. 14, 2014)

Holding:  Municipal paramedics’ training time is not compensable under FLSA.

Comments:  This decision contains a good discussion to the rules applicable to determining whether municipal employee’s training time is compensable.  The Court explains that, in refusing to pay for training time, a municipality is only required to satisfy 29 C.F.R. § 553.226(b) and is not required to also satisfy 29 C.F.R. § 553.226(a) (which applies to private employers).  Here, the paramedics were not entitled to be paid for their training time because, under § 553.226(b)(1), the training was required for their state certifications.

Seventh Circuit

Driver v. Appleillinois, LLC, 739 F.3d 1073 (7th Cir. Jan 15, 2014)

Holding:  Restaurant’s petition for interlocutory appeal of class certification denied.

Comments:  I am including this opinion because, notwithstanding the above holding, it contains some language by Judge Posner that you may find helpful.  In particular, the opinion states that restaurants may not take a tip credit – and, therefore, must pay the full minimum wage – for any amounts of time that tipped employees spend performing duties “that are unrelated to their tipped duties.”  Examples of such duties include “washing dishes, preparing food, mopping the floor, or cleaning bathrooms.”  This rule is presented as distinct from the rule that restaurants may not take a tip credit when servers spend more than 20% of their time on “non-tipped work” that is “related to” tipped work (such as, for example, setting or clearing tables).

Gaines v. K-Five Construction Corp., 742 F.3d 256 (7th Cir. Jan. 3, 2014)

Holding:  Truck driver not entitled to compensation for purported pre-shift truck inspection work where he failed to offer any evidence that management knew or should have known he was performing such work.

Comments:  This opinion, which is primarily dedicated to non-FLSA issues, applies a well-established FLSA rule to some very case-specific facts.  Not too noteworthy.

Mitchell v. JCG Industries, Inc., 745 F.3d 837 (7th Cir. Mar. 18, 2014)

Holding:  Under FLSA Section 3(o), unionized workers’ clothes-changing during unpaid meal breaks is not compensable.

Comments:  This controversial Judge Posner opinion drew a strong dissent from Judge Wood.  Later, a sharply-divided Seventh Circuit denied en banc review by a 6-4 vote, with Judge Williams issuing a strongly-worded dissent on behalf of herself and Judges Wood, Rovner, and Hamilton.  In essence, this decision extends the Supreme Court’s recent Sandifer holding into the meal break.  This is controversial because FLSA Section 3(o) always has been understood to be limited to activities at the beginning and end of the workday, not during meal breaks.  Anyway, before getting too excited about this opinion, it’s important to remember that (i) Section 3(o) only applies to unionized workplaces and (ii) it is questionable whether other Circuit Courts will be influenced by this decision in light of the dissenting voices within the Seventh Circuit.

Eighth Circuit

Bouaphakeo v. Tyson Foods, Inc., 765 F.3d 791 (8th Cir. Aug. 25, 2014)

Holding:  (1) District court correctly refused to decertify an FLSA collective of meat packers seeking to recover for donning, doffing, and walking times, even though the uncompensated time of some collective members may not have crossed the 40-hour overtime threshold.  (2) Plaintiffs are permitted to estimate “class-wide” damages based on the average amount of time a statistically valid sample of employees spent donning, doffing, and walking.

Comments:  This helpful opinion affirms a $2.8 million jury verdict against Tyson Foods and rejects some of the defense bar’s favorite “trial by formula” arguments against class/collective litigation.  The defense bar constantly argues that chaos will ensue if a class/collective action actually goes to trial.  This opinion demonstrates that complex class/collective actions can be managed through verdict and that, even in off-the-clock cases, damages can be quantified on a class-wide basis.

Conners v. Gusano’s Chicago Style Pizzeria, __ F.3d __, 2015 U.S. App. LEXIS 3632 (8th Cir. Mar. 9, 2015)

Holding:  Where originating plaintiffs did not sign arbitration agreements, they lacked standing to challenge the validity of arbitration agreements signed by members of the putative FLSA collective who signed such agreements.

Comments:  Because this opinion is grounded in constitutional standing, it does not address the substantive arguments regarding the propriety of arbitration agreements that employers present to putative collective members after the commencement of an FLSA collective action.     

Guyton v. Tyson Foods, Inc., 767 F.3d 754 (8th Cir. Aug. 25, 2014)

Holding:  District court did not commit reversible error during class/collective donning and doffing trial that resulted in a defense verdict in favor of Tyson Foods.

Comments:  The errors complained of by plaintiffs are case-specific and probably do not have much application to other cases.  Like Bouaphakeo, this case exemplifies that class/collective actions can be manageably tried to verdict.

Holaway v. Stratasys, Inc., 771 F.3d 1057 (8th Cir. Nov. 6, 2014)

Holding:  Plaintiff’s FLSA claim was properly dismissed on summary judgment because he failed to present any credible evidence that he worked over 40 hours in any week.

Comments:  This opinion is very fact-specific.  The Court recognizes the rule that, when an employer fails to maintain time records, the employee can prove his/her work hours by “just and reasonable inference.”  The Court then explains that the plaintiff failed to meet this relatively low standard.

Madden v. Lumber One Home Center, Inc., 745 F.3d 899 (8th Cir. Mar. 17, 2014)

Holding:  Jury verdict that three lumber yard supervisors were overtime-exempt executives reversed, in part.

Comments:  At trial, the jury found that all three plaintiffs were overtime-exempt executives.  The Court affirms this verdict as to two of the supervisors.  However, the Court overturns the jury verdict with respect to one supervisor who, based on the evidence, played absolutely no rule in personnel decisions.  The opinion contains some good language regarding the executive exemption’s requirement that a plaintiffs “suggestions and recommendations” regarding personnel decisions be “given particular weight.”

Petroski v. H&R Block Enterprises, LLC, 750 F.3d 976 (8th Cir. May 5, 2014)

Holding:  H&R Block tax preparers are not employed by the company during the “off-season” and, as such, have no FLSA right to be paid for time spent attending off-season training courses.

Comments:   This was a big case, and the holding seems unfair.  But the Court’s reasoning is limited to “seasonal” employees required to perform unpaid work during their off-season.  Outside of the tax preparation arena, the opinions’ reach seems limited.

Ninth Circuit

Avila v. Los Angeles Police Department, 758 F.3d 1096 (9th Cir. July 10, 2014)

Holding:  Jury properly found that police officer’s termination was retaliatory under the FLSA.

Comments:  This opinion does not break any new ground and is very fact-specific.  It’s not too surprising that the plaintiff police officer – who was terminated shortly after testifying against the department in a federal FLSA trial – prevailed.

Landers v. Quality Communications, Inc., 771 F.3d 638 (9th Cir. Nov. 12, 2014)

Holding:  Plaintiff asserting an FLSA overtime claim “must allege that she worked  more than forty hours in a given workweek without being compensated for the hours worked in excess of forty during that week.”  However, the plaintiff “may establish a plausible claim by estimating the length of her average workweek during the applicable period and the average rate at which she was paid, the amount of overtime wages she believes she is owed, or any other facts that will permit the court to find plausibility.”

Comments:  This opinion takes an approach that is similar to the Third Circuit’s approach in Davis (discussed above).  If you are interested in the FLSA pleading issue, this opinion includes a great survey of the various circuit court authority from throughout the country.

Tenth Circuit

Albers Board of County Commissioners of Jefferson County, 771 F.3d 697 (10th Cir. Nov. 13, 2014)

Holding:  Employer did not violate the FLSA by calculating the overtime premium based upon the employee’s actual – rather than agreed upon – pay rate.

Comment:   Plaintiffs claimed that their employer paid them at an hourly rate that was lower than the agreed-upon pay rate.  Plaintiffs then tried to transform this breach of contract claim into an FLSA violation by arguing that, under the FLSA, the agreed-upon rate must be used to calculate the overtime premium.  The Court flatly rejected this argument, observing that, under the FLSA, the regular rate is the amount actually “paid to” the employee.  See 29 U.S.C. § 207(e).

Ellis v. J.R.’s Country Stores, Inc., __ F.3d __, 2015 U.S. App. LEXIS 3667 (10th Cir. Mar. 9, 2015)

Holding:  Employer did not lose the executive exemption by making a single, improper deduction to a manager’s salary.

Comment:   This opinion is not too surprising.  Plaintiff’s misclassification theory hinged on evidence that, on one single occasion, the employer made an improper deduction to her salary.  When this deduction was brought to the employer’s attention, it promptly reimbursed Plaintiff.  The opinion contains a good discussion of the salary deduction rules and the “window of correction” regulation.

Garcia v. Tyson Foods, Inc., 770 F.3d 1300 (10th Cir. Aug. 19, 2014)

Holding:  (1) Jury in this class/collective donning and doffing lawsuit properly found in the workers’ favor and awarded class-wide damages based on the evidence presented.  (2) District court properly awarded Plaintiffs’ counsel over $3.3 million in attorney’s fees.

Comments:  This opinion – the third Tyson Foods opinion covered in this paper – provides another example of how large FLSA collective actions can be effectively tried to verdict.  Like the Tenth Circuit’s Bouaphakeo opinion (discussed above), this opinion contains some good language regarding the propriety of “representative evidence” in trying FLSA collective actions.  The portion of the opinion addressing attorney’s fees contains some good language (i) rebutting Tyson’s “partial-success” arguments and (ii) reaffirming that statutory fees under the FLSA will often exceed the amount of unpaid wages awarded to the plaintiffs.

Sanchez v. Nitro-Lift Technologies, Inc., 762 F.3d 1139 (10th Cir. 2014)

Holding:  Plaintiff’s FLSA claim covered by arbitration clause contained in a Confidentiality/Non-Compete Agreement he signed when first hired.

 

Comments:  The outcome of this case is both unsurprising and fact-specific.  The Court also discusses – without deciding – whether high arbitration fees can violate the Plaintiff’s substantive right to pursue his FLSA claim.

Eleventh Circuit

Baliey v. Titlemax of Georgia, Inc., 776 F.3d 797 (11th Cir. Jan. 15, 2015)

Holding:  A supervisor’s knowledge that employees are working off-the-clock is imputed to the employer for FLSA liability purposes, and, under such circumstances, the employer cannot escape liability by asserting that the employee had “unclean hands” by failing to report all of her work hours.

Comments:  This is a very important opinion.  The Court squarely addresses and rejects an increasingly prominent defense argument:  that workers are to blame for off-the-clock work by failing to comply with company policies that require employees to report all time.  As the Court explains, this argument contradicts the FLSA’s policy of addressing the unequal bargaining power between employers and employees.  If an employee is working off-the-clock and her supervisor knows or should know, then the employer is liable.

Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir. Mar. 21, 2014)

Holding:  The FLSA does not substantively prevent the enforcement of arbitration agreements that prevent workers from pursuing their claims on a class-wide or collective basis.

Comments:  Even under the Federal Arbitration Act, an arbitration agreement cannot be applied in a manner that violates a plaintiff’s substantive rights under another federal statute.  Unfortunately, in this case, the Court found that the FLSA’s collective action mechanism is not the type of substantive statutory right that overrides the FAA.

Watkins v. City of Montgomery, 775 F.3d 1280 (11th Cir. Dec. 24, 2014)

Holding:  (1) Jury in FLSA collective action properly determined that disciplinary deductions from the salaries paid to exempt fire department lieutenants did not violate the “salary basis” rules.  (2) District court properly instructed the jury with respect to the executive exemption.

Comments:  This is a fourth example in this paper of an FLSA collective action that was successfully tried to verdict.  The opinion contains a good discussion of the regulations and caselaw applicable in determining whether salary deductions for disciplinary violate the salary basis requirement.

Beauford v. ActionLink, LLC, 781 F.3d 396 (8th Cir. March 20, 2015)

“Brand Advocates” for electronics company not covered by outside sales or administrative exemptions.  Also, plaintiffs do not waive their right to bring FLSA action by cashing backpay checks and signing waivers that were not directly supervised by DOL.

Navarro v. Pinkins, 780 F.3d 1267 (9th Cir. March 24, 2015)

Auto dealership “Service Advisors” not exempt under 29 U.S.C. § 213(b)(10)(A), which applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.”

Keller v. Miri Microsystems LLC, __ F.3d __, 2015 U.S. App. LEXIS 4887 (6th Cir. March 26, 2015)

Under “economic realities” test, jury could reasonably find that satellite dish installers were employees rather than independent contractors.  Also, where company fails to maintain time records, worker can prove his overtime hours through imprecise testimony.

Alvarado v. Corporate Cleaning Services, Inc., __ F.3d __, 2015 U.S. App. LEXIS 5270 (7th Cir. April 1, 2015)

Window washers covered by 29 U.S.C. §207(i), which covers certain “commissioned” employees working at “retail or service establishment[s].”

Greathouse v. JHS Security, Inc., __, 2015 U.S. App. LEXIS 6437 (2d Cir. April 20, 2015)

Under USSC’s 2011 Kasten decision, FLSA retaliation claim can be predicated on oral complaint to employer. Previous Second Circuit authority to contrary overruled.

On April 24, 2015, Lackawanna County County Court of Common Pleas Judge Terrence R. Nealon overruled preliminary objections from Defendant Lehigh Valley Restaurant Group Inc., which owns and operates 20 Red Robin restaurants in central and eastern Pennsylvania, to a proposed class action brought on behalf of Servers represented by Winebrake & Santillo.  A copy of the Court’s order is available here.  The Plaintiffs allege that the company violated the Pennsylvania Minimum Wage Act by improperly allowing expediters (or “Expos”) who did not have regular and direct customer interaction to participate and receive a portion of the the servers’ tips that were part of the “tip pool.”

Attorney Pete Winebrake was quoted in a Law360 article as saying:  “Too many restaurants are using servers’ tips to subsidize the compensation paid to back-of-the house employees.  Judge Nealon’s decision makes it clear that such practices are illegal under Pennsylvania law as well as the [Fair Labor Standards Act].”

Many private security guards are not paid for all of their work hours.  That’s why Winebrake & Santillo is very happy to report that we obtained a judgment on behalf of eight security guards who alleged that their employer, a private security company based in Bethlehem, Pennsylvania, failed to pay them for all of their work hours, including unscheduled hours and hours spent performing various “pass-down” procedures at the beginning and end of their scheduled work shift.  The Judge ordered the security company to pay over $25,000 in unpaid wages and litigation fees/expenses.

On March 11, 2015, the Third Circuit Court of Appeals issued an important decision in a case titled McMaster v. Eastern Armored Services, Inc. brought by Winebrake & Santillo on behalf of armored care drivers and guards.

The company paid the Driver/Guards their regular hourly rate (or “straight-time”) for all hours worked and did not pay overtime premium compensation (or “time and one-half”) for hours worked over 40 in a week.  The Driver/Guards drove vehicles in a “mixed fleet” that has some vehicles weighing more than 10,000 pounds, and others that weighed less than 10,000 pounds.  The company asserted that the Driver/Guards were not entitled to overtime pay under the Motor Carrier Act Exemption to the Fair Labor Standards Act.  See 29 U.S.C. § 213(b)(1).

In March of 2013, the District of New Jersey held that the named plaintiff was entitled to overtime premium pay because she did not qualify of the Motor Carrier Act Exemption.  The District Court reached this conclusion even though Ms. McMaster spent the majority of her time driving vehicles that weighed more than 10,000 pounds.  A copy of the District Court opinion is attached.

The company appealed.  But the Third Circuit affirmed the District Court’s decision, holding that under 2008 amendments to the Motor Carrier Act, the named plaintiff was entitled to overtime premium pay because she was driving vehicles weighing less than 10,000 pounds as part of her employment.  A copy of the Third Circuit’s opinion is attached.

This is an important victory for drivers who do not receive overtime premium pay.  If you one of your friends or family members worked as a driver and did not receive overtime premium pay, we would be happy to provide a free and confidential consultation.

A group of current and former employees of the Chipotle Mexican Grill restaurant chain appear to be making good progress in a lawsuit seeking to recover unpaid wages for off-the-clock work.  The lawsuit is pending in the federal court in Colorado.  It is a “collective action” brought on behalf of all current and former Chipotle workers employed during the past three years and paid an hourly wage.  Because the lawsuit seeks nationwide relief, current and former Chipotle employees from throughout the United States can join the lawsuit.

The case has received some notable media attention.  Here is a link to a recent article about the lawsuit in CNN Money:  http://money.cnn.com/2014/10/29/news/companies/chipotle-labor-lawsuit/

Here is another link to a recent article about the lawsuit appearing in the Denver Business Journal: http://www.bizjournals.com/denver/blog/finance_etc/2014/10/chipotle-sued-for-allegedly-violating-fair-labor.html

Our law firm is not involved in this lawsuit and has no interest in its outcome.  However, another very good Pennsylvania lawyer named Adam Levy is among the team of lawyers who is representing the Chipotle workers. Adam is a friend of our law firm, and his phone number is (267) 994-6952.  I’m sure he would be happy to talk to any current or former employees who want to learn more about the lawsuit.

I think this is an interesting case.  As we’ve previously reported, Judges have issued some recent decisions expressing skepticism of corporations’ attempts to blame workers for working off-the-clock.  The best example of this is the Eleventh Circuit’s recent opinion in Bailey Titlemax of Georgia, which can be found at the following link:  http://media.ca11.uscourts.gov/opinions/pub/files/201411747.pdf

Our Northeastern Pennsylvania employment rights lawyers recently obtained an important victory in a collective action lawsuit entitled Neal v. Air Drilling Associates, Inc., 3:14-cv-01104-JMM.   The lawsuit is proceeding in the United States District Court for the Middle District of Pennsylvania in Scranton, PA and is assigned to United States District Judge James M. Munley.

The lawsuit alleges that the Company violated federal wage law by failing properly pay its field workers at its gas and oil drilling sites throughout the United States.  Our clients allege that the Company accomplished this by requiring field employees to work “off-the-clock” and not be paid for hours worked in excess of 12 per day.  The lawsuit seeks to recover unpaid overtime wages in addition to liquidated damages, attorney’s fees, and litigation expenses.  Judge Munley held that these employees were “similarly situated” and granted the plaintiffs’ motion for conditional certification.  A copy of Judge Munley’s order is available hereNotice is now being sent to those individuals who worked as filed employees for the Company during the last three years to provide them with the opportunity to join or “opt-in” to the lawsuit by completing and returning a “Consent to Join” form.

If you have any questions about this lawsuit or your wage/overtime rights, do not hesitate to contact our firm.  We have had great success litigating wage and overtime complaints in Pennsylvania and throughout the United States.

I just read a terrific decision by SDNY Magistrate Judge Sarah Netburn in an overtime rights lawsuit entitled Scott v. Chipotle Mexican Grill, Inc., 1:12-cv-08333-ALC-SN.  The decision was issued on December 18 and can be fond at the following link:  http://scholar.google.com/scholar_case?case=9682648012469993490&q=scott+v.+chipotle&hl=en&as_sdt=6,33&as_vis=1.

In the decision, the judge provides a great general explanation of 29 U.S.C. 259’s “good faith” defense to liability and 29 U.S.C. 260’s “good faith” defense to liquidated damages.  The Judge explains that both defenses are difficult for companies to prove and that liquidated damages considered “the norm” in FLSA lawsuits.

Next, the judge explains that companies invoking a “goof faith” defense cannot simultaneously rely on the attorney-client privilege to protect from disclosure otherwise privileged communications between the company and its lawyers regarding the corporate decision-making challenged in the lawsuit.  What’s more, the attorney-client privilege is waived even if the company says it will not “rely on” the advise of counsel in asserting the defense.

New York wage and overtime attorneys, as well as employment lawyers in neighboring Pennsylvania and New Jersey and elsewehere should be aware of this helpful decision.

Charter schools continue to be among the biggest violators of our nation’s wage an overtime laws.  Many charter schools in Pennsylvania and elsewhere fail to pay time and one-half overtime compensation to their dedicated employees.  We stand up for the rights of these employees.  In this regard, we are proud to announce that we obtained a judgment on behalf of six hourly employees who were employed by a Philadelphia charter school as bus attendants and janitors.  Many charter schools assert that they are more “efficient” than public schools.  But violating the overtime laws is not efficiency; it is illegality.  If you are a charter school employee who has been denied overtime pay, we would be delighted speak with you confidentially and free of charge.

Under Pennsylvania law, Home Health Aids and Certified Nursing Assistants (CNAs) are entitled to extra pay for hours worked over 40 per week.  This extra “overtime” pay must equal “one and one-half” the regular pay rate.  For example, if a Home Health Aid or CNA is paid $10/hour, she should receive $15/hour for all of her hours worked over 40 in a 7-day week.

Also, the time Home Health Aids and CNAs spend traveling between clients must be paid.  For example, if a Home Health Aid or CNA spends 45 minutes traveling from her first client’s home to her second client’s home, she must be paid for the 45 minutes.  In fact, Home Health Aids and CNAs generally are entitled to be paid for all of the time elapsed between their arrival at the first client’s home and their departure from the last client’s home.

Our law firm has recovered millions of dollars for Pennsylvania home health workers who have been cheated by a current or former employer.  Don’t get cheated.  If you think your rights have been violated, please call us for a free and confidential phone consultation.  It would be our pleasure to speak with you.

Yesterday, the Pennsylvania Supreme Court issued an important decision concerning Pennsylvania employees’ ability to assert wage and hour claims under state law.  In Braun et al., v. Wal-Mart Stores, Inc., the Pennsylvania Supreme Court affirmed the verdict of a Philadelphia county jury in favor of Pennsylvania Wal-Mart employees who were asserting claims for missed meal breaks and off-the-clock work.  The case was brought as a class action.

The Supreme Court spent the majority of its opinion rejecting Wal-Mart’s argument that it had been subject to a “trial by formula” that denied Wal-Mart its due process rights in violation of Pennsylvania law.  In doing so, the Court affirmed the $151 million verdict against Wal-Mart and in favor of the workers.

While the Supreme Court did not directly address the trial court’s certification of this case as a class action, it did make some very important observations about the certification of wage and hour claims under Pennsylvania law.  For example:

  • -“Wal-Mart’s allegation that both courts below disregarded individualized issues does not prove misapplication of procedural requirements because the existence of distinguishing individual facts among class members is not fatal to certification.  Appellees here were not required to prove that the claims of all class members were identical. Class members may assert a single common complaint even if they have not all suffered actual injury, and demonstrating that all class members are subject to the same harm will suffice.”  Braun v. Wal-Mart Stores, 2014 Pa. LEXIS 3324, *17 n.8 (Pa. Dec. 15, 2014) (internal citations omitted);
  • -“[A]s one federal district court has noted, one takeaway from the [U.S. Supreme Court’s decisions in Dukes and Behrend] in this area is that ‘the propriety of class certification in wage and hour cases that involve recordkeeping violations should be assessed in light of the relaxed burden of proving damages.’”  Id. at *27;
  • -“We are persuaded by the observation of the federal district court in Jackson v. Bloomberg, 298 F.R.D. 152, 168 (S.D.N.Y. 2014), which declined to read into Behrend ‘a principle that would fundamentally undermine the use of the class action vehicle in the wage-and-hour context.’  In addition, we subscribe to what appears to be the prevailing view that Dukes does not bar class actions in wage and hour cases.”  Id. at *29 n.11 (internal citations omitted).

Winebrake & Santillo has filed several class action lawsuits against large Pennsylvania employers alleging similar off-the-clock claims that were at issue in Braun v. Wal-Mart Stores, Inc.  If you or one of your co-workers would like a free and totally confidential consultation with one of our attorneys, feel free to contact us at 215-884-2491.  We would be happy to speak with you.

On December 9, 2014, the U.S. Supreme Court ruled that workers at Amazon Fulfillment Centers were not entitled to compensation under the federal Fair Labor Standards Act for time spent waiting to undergo and undergoing security screenings.  See Integrity Staffing Solutions, Inc. v. Busk, 574 U.S. __ (2014).  A copy of the Supreme Court’s Busk opinion is available here.

While the Busk opinion addresses fulfillment center employees’ claims under federal law, it does not address whether similar claims can be asserted under the Pennsylvania Minimum Wage Act.

Winebrake & Santillo, along with co-counsel, currently represents workers at Amazon’s  Breinigsville, Pennsylvania and Hazleton, Pennsylvania fulfillment centers seeking unpaid wages under Pennsylvania law for time spent waiting to undergo and undergoing security checks.  As discussed in the attached article, claims on behalf of workers at these facilities will proceed despite the Supreme Court’s ruling.

On December 5, 2014, Winebrake & Santillo filed a brief with the Court of Appeals for the Third Circuit which seeks to reverse a district court’s grant of summary judgment against Transit drivers of Krapf’s Coaches, Inc. who allege that they were misclassified as overtime-exempt under the Motor Carrier Act Exemption to the overtime premium pay requirements of the federal Fair Labor Standards Act and Pennsylvania Minimum Wage Act.  See Resch v. Krapf’s Coaches, Inc., 2013 U.S. Dist. LEXIS 123438  (E.D.Pa. Aug. 29 2013).  Below is the contents of that brief

I.                  STATEMENT OF ISSUE PRESENTED FOR REVIEW

Whether the District Court erred in granting summary judgment for Krapf’s on the grounds that each Appellant fell within the Motor Carrier Act Exemption (“MCA Exemption”) to the FLSA and PMWA’s overtime pay mandate.

II.               STATEMENT OF CASE

A.   Relevant Facts

Defendant-Appellee Krapf’s Coaches, Inc. (“Krapf’s”) is a bus company located in West Chester, Pennsylvania.  See Joint Appendix (“JA”) at 33a at ¶ 5 (Complaint); see also id. at 67a at ¶ 3 (Krapf’s Concise Statement of Undisputed Material Facts).  Krapf’s operates a Transit Division, which provides shuttle services to, inter alia, private companies, non-profit organizations, and local colleges.  See JA at 33a at ¶ 10 (Complaint); see also id. at 67a at ¶ 3 (Krapf’s Concise Statement of Undisputed Material Facts).  Since 2009,[1] Krapf’s Transit Division has operated a total of thirty-two routes.  See 91a-93a (Krapf’s Exhibit MSJ-1).  Only four of these routes entailed travel outside of Pennsylvania.  Id.  Moreover, prior to May 2011, only one route entailed travel outside of Pennsylvania.  Id.

Appellants are thirty-four current/former drivers employed by Krapf’s and assigned to its Transit Division.  See generally JA at 32a-38a (Complaint).  Krapf’s admits that Appellants worked over forty hours per week without receiving any extra overtime premium pay.  See JA at 68a at ¶ 4 (Krapf’s Concise Statement of Undisputed Material Facts).  According to Krapf’s, Appellants are exempt from the FLSA’s and PMWA’s overtime pay mandate under the MCA Exemption.  Id.

During discovery, Krapf produced detailed data pertaining to each trip made by each Appellant during the relevant time period after November 2008.  See JA at 565a-568a at ¶ 49 (Appellants’ Response to Krapf’s Concise Statement of Undisputed Material Facts); 136a (Krapf’s Exhibit MSJ-4).  This data (which is uncontroverted) reveals that Appellants’ interstate trips were either non-existent or extraordinarily rare.  As summarized in the following table,[2] of 13,957 total trips made by Appellants, only 178 (or 1.3%) required Appellants to cross state lines:

Name

Total Trips

Total Out-of-State Trips

Percentage of Trips that Cross State Lines

Boggs, Charles L.

644

0

0.0%

Dennis, Kevin

1

0

0.0%

Hall, Michael T.

875

0

0.0%

Holland, John

115

0

0.0%

Johnson, Harry A.

687

0

0.0%

Lee, Dolly E.

660

0

0.0%

Lipscomb, Cynthia

705

0

0.0%

Loftin, Deatrice

87

0

0.0%

Mathis, Douglas H.

160

0

0.0%

McClain, Kenneth

371

0

0.0%

McNair, Elizabeth

21

0

0.0%

Mendez, Richard

130

0

0.0%

Murrey, Howard

48

0

0.0%

Rodriguez, Jr., Adalberto

260

0

0.0%

Simmons, David L.

609

0

0.0%

Wallin, Jr., Edward J.

366

0

0.0%

Dickinson, III, Edward S.

1091

1

0.1%

Brown, Delto

831

1

0.1%

Sealy, Barry

630

1

0.2%

Hoffecker, Darlene

525

2

0.4%

Hopkins, Bradley L.

458

2

0.4%

Holcombe, Robert

195

1

0.5%

Imes, Richard

178

1

0.6%

Womack, David

162

1

0.6%

Katona, Anthony J.

118

1

0.8%

Resch, Joseph

588

5

0.9%

Thompson, Jon R.

113

1

0.9%

Coughlin, Paul B.

309

4

1.3%

Beinlich, Scott

135

4

3.0%

King, Anita

1845

58

3.1%

Levesque, Matthew

566

25

4.4%

Jordan, Jr., Harry L.

171

11

6.4%

Moore, Richard

260

43

16.5%

Miller, Stanley

43

16

37.2%

Notably, sixteen Appellants never crossed state lines, eight Appellants traveled out-of-state only once, and an additional five Appellants traveled out-of-state on five or fewer occasionsId.

B.   Procedural History

On November 3, 2011, Joseph Resch (“Resch”) initiated this collective action lawsuit by filing a Complaint that demanded a jury trial.  See JA at 32a (Complaint).  Resch alleged that Krapf’s violated the FLSA and PMWA by failing to pay overtime premium compensation to himself and other drivers employed in Krapf’s Transit Division.  Id.[3]

After Krapf’s answered, see JA at 39a, the parties conducted limited discovery concerning the propriety of conditionally certifying the collective under 29 U.S.C. § 216(b).  See JA at 46a (January 9, 2012 Stipulated and Proposed Scheduling Order).  On March 3, 2012, Resch moved for conditional certification, and on June 29, 2012, the District court entered an order conditionally certifying the action.  See JA at 49a-57a (June 29, 2012 Memorandum Opinion and Order); see also Symczyk v. Genesis Healthcare Corp., 656 F.3d 189, 192-93 (3d Cir. 2011) (discussing FLSA conditional certification).

In July 2012, a notice form approved by the District Court was mailed to potential members of the collective.  See JA at 58a-63a (July 18, 2012 Order).  Ultimately, forty-three current/former drivers elected to join (or “opt-in” to) the action.  See JA at 25a-29a (District Court Docket).[4]  Nine drivers subsequently withdrew from the action, id., leaving a total of thirty-four plaintiffs (all of whom are Appellants herein).

Following the close of the FLSA opt-in period, the parties engaged in and completed discovery.

In April 2013, Krapf’s moved for summary judgment, seeking dismissal of Appellants’ FLSA claim on grounds that Appellants are overtime-exempt under the MCA Exemption.  See JA at 66a.[5]  Due to an apparent oversight, Krapf’s did not seek to dismiss Appellants’ PMWA claim.  Id.

The summary judgment motion was fully briefed, and, on August 21, 2013, the District Court held oral argument.  See id. at 29a (District Court Docket); 711a-757a (Transcript of Argument).

C.   The District Court’s FLSA Summary Judgment Opinion

On August 29, 2013, the District Court entered a Memorandum and Order granting Krapf’s summary judgment motion and dismissing Appellants’ FLSA claim.  See JA at 4a-21a.

Initially, the District Court rejected Krapf’s argument that so-called “continuum” trips to/from Pennsylvania-based transportation hubs (such as, for example, airports or Amtrak, Greyhound, or SEPTA stations) should be considered “interstate” trips for purposes of the MCA Exemption.  See JA at 8a at n.6 (discussing Packard v. Pittsburgh Transportation Co., 418 F.3d 246 (3d Cir. 2005)).

Next, after generally discussing the MCA Exemption’s parameters, see JA at 13a-17a, the District Court observed:  “The exemption does not apply if the ‘continuing [interstate] duties of the employee’s job  . . . are so trivial, casual, and insignificant as to be de minimus.’”  Id. at 14a (quoting 29 C.F.R. § 782.2(b)(3)); see also id. at 16a (“if the employee’s job duties are such that ‘he is . . . (or . . . is likely to be) called upon in the ordinary course of his work to perform either regularly or from time to time,’ interstate driving he comes within the motor carrier exemption” (quoting 29 C.F.R. § 782.2(b)(3)); id. at 15a (MCA Exemption applies if Appellants “could have reasonably been expected to cross state lines as part of their employment”); id. at 20a (“the relevant question is . . . whether [Appellants] could reasonably have been expected to drive interstate.”).

The District Court recognized the undisputed record evidence demonstrating that Appellants’ interstate trips were either non-existent or extraordinarily rare:

In this case, sixteen of the thirty-four opt-in plaintiffs never traveled outside of Pennsylvania.  Of the eighteen plaintiffs who did travel interstate, eight traveled interstate once, and five traveled interstate on five or fewer occasions.

JA at 11a.  Notwithstanding this evidence, the District Court held that the MCA Exemption barred Appellants’ FLSA claims.  Seeid. at 20a-21a.

In reaching its holding, the District Court did not consider Appellants’ actual driving experiences.  See JA at 15a.  Instead, it focused on supposedly company-wide evidence such as:  (i) the purportedly “indiscriminate” manner by which Krapf’s assigned drivers to various routes, see id. at 17a-18a; (ii) the fact that Krapf’s drivers must comply with various requirements for drivers of commercial motor vehicles, see id. at 18a-19a; and (iii) the fact that between 1.0% and 9.7% of the Transit Division’s revenue came from interstate routes, see id. at 19a-20a.

In the District Court’s view, the above evidence established that “all transit drivers, including [Appellants], could be assigned an interstate route,” JA at 20a.  The district court concluded:

While these select [Appellants] happened to have been called upon to drive interstate rather infrequently during the relevant time period, that does not change the fact that the [Appellants] were subject to driving interstate at all times, and were reasonably likely to do so based on [Krapf’s] interstate routes.

Id.  Finally, the District Court did not rule on Appellants’ PMWA claim, since Krapf’s summary judgment papers did not address it.  See JA at 5a-6a at n.1.

D.   Appellants’ Initial Appeal to this Court

Appellants attempted to appeal from the District Court’s August 29, 2013 Memorandum and Order.  See Case Number 13-3947.  However, because the August 29th Order did not resolve Appellants’ supplemental PMWA claims, this Court dismissed the appeal for lack of finality.  See JA at 767a-771a.

On remand, Krapf’s moved for summary judgment as to Appellants’ PMWA claims.  See JA at 30a.  Krapf’s motion relied primarily on the District Court’s reasoning in its August 29, 2013 opinion entering judgment against Appellants on their FLSA claims.  Appellants filed an opposition to the motion.  Id.

On July 29, 2014, the District Court entered an order granting Krapf’s summary judgment motion, bringing finality to the district court proceedings.  See JA at 22a.  Therein, the District Court observed that MCA Exemption is interpreted identically under both the FLSA and the PMWA.  Id.

III.           RELATED CASES AND PROCEEDINGS

As discussed in section II.D supra, this is the second time that this matter has been before this Court.  Appellants are not aware of any other case or proceeding that is in any way related to this appeal that is pending or about to be presented to this Court, any other court, or any state or federal agency.

IV.            SUBJECT MATTER AND APPELLATE JURISDICTIONAL STATEMENT

The District Court had jurisdiction over Appellants’ FLSA claim under 29 U.S.C. §216(b) and 28 U.S.C. § 1331, and over their PMWA claim under 28 U.S.C. § 1367.  This Court has appellate jurisdiction under 28 U.S.C. § 1291.

V.               STATEMENT OF STANDARD OF REVIEW

The District Court’s summary judgment decisions are subject to de novo review.  See Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008).

VI.            SUMMARY OF ARGUMENT

The District Court correctly observed in its August 2013 opinion that the MCA Exemption (i) applies only if an Appellant’s “job duties are such that ‘he is . . . (or . . . is likely to be called upon in the ordinary course of his work to perform either regularly or from time to time” interstate driving, see JA at 16a (quoting 29 C.F.R. § 782.2(b)(3)); and (ii) does not apply if the “continuing [interstate] duties of [Appellants’] job . . . are so trivial, casual, and insignificant as to be de minimis,see id. at 14a (quoting 29 C.F.R. § 782.2(b)(3)).  In performing its analysis, however, the District Court committed reversible error by failing to perform an individualized analysis that gave sufficient weight to the actual driving experiences of the actual Appellants.

Appellants respectfully submit that this appeal exemplifies how even experienced and highly-regarded jurists can allow the summary judgment device to improperly infringe on the province of the jury.  According to the District Court, “the relevant question is . . . whether [Appellants] could reasonably have been expected to drive interstate.”  JA at 20a (emphasis supplied).  Yet, construing all inferences in Appellants’ favor, a jury could easily conclude that the actual circumstances of the sixteen Appellants who drove 5,739 separate trips without ever crossing state lines do not reasonably harbor such an expectation.  It is even more likely that the jury would conclude that out-of-state travel for these sixteen Appellants is “so trivial, casual, and insignificant as to be de minimis.”  29 C.F.R. § 782.2(b)(3); see also Pyramid Motor Freight Corp. v. Ispass, 330 U.S. 695, 708, 67 S. Ct. 954, 960, 91 Ed. 1184, 1192 (1947).

Of the remaining eighteen Appellants, eight of these Appellants crossed state lines only once, and an additional five crossed state lines fewer than five times.  Faced with this individualized data, a jury could easily conclude that, for some or all of these Appellants, out-of-state travel was “so trivial, casual, and insignificant as to be de minimis.”  Id.

If this action proceeds to trial, Appellants will describe their actual work experiences and will direct the jury to the uncontroverted trip data confirming that they either never or almost never crossed state lines.  Appellants will argue that “the proof is in the pudding”:  if out-of-state travel was anything more than a de minimis part of an Appellant’s job, then the Appellant’s trip data would reflect a meaningful quantity of out-of-state trips.  This is not an unreasonable argument.

The jury, after considering all the evidence (including Krapf’s evidence, as described in the District Court’s opinion), is well-equipped to determine matters such as whether each Appellant was “reasonably expected” to travel over state lines, whether out-of-state travel fell within the “ordinary course” of an Appellant’s work, see 29 C.F.R. § 782.2(b)(3), and whether each Appellant’s out-of-state travel was “so trivial, casual, and insignificant as to be de minimis,” id.

Also, it should be remembered that the FLSA and the PMWA are remedial statutes and, as such, their exemptions are to be narrowly construed.  Yet, by undertaking an analysis that places almost no emphasis on an Appellants’ actual driving experience, the District Court endorsed a business model that enables transportation companies to avoid paying overtime to the entire workforce by merely mixing in a few interstate trips and asserting that all drivers might be expected to drive such trips.  Avoiding the federal and state overtime mandates should not be so easy.

VII.        ARGUMENT

A.   The Summary Judgment Standard

The Supreme Court very recently reversed an appellate court for “fail[ing] to adhere to the axiom that in ruling on a motion for summary judgment, ‘[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.’”  Tolan v. Cotton, __ U.S. __, 134 S. Ct. 1861, 1863, 188 L. Ed. 2d 895, 897 (2014) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202, 216 (1986)).  The “‘judge’s function’ at summary judgment is not ‘to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.’”  Tolan, 134 S. Ct. at 1866, 188 L. Ed. 2d at 901 (quoting Anderson, 477 U.S. at 249, 106 S. Ct. at 2511, 91 L. Ed. 2d at 212).  “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, . . .”   Anderson, 477 U.S. at 255, 106 S. Ct. at 2513, 91 L. Ed. 2d at 216.

Put differently, the non-moving party is not required to produce conclusive evidence.  See Cloverland-Green Spring Dairies, Inc. v. Penna. Milk Marketing Bd., 298 F.3d 201, 217 (3d Cir. 2002).  “Instead, it need only offer sufficient evidence for a reasonable jury to find the facts necessary for a decision in its favor.”  Id.

The above safeguards should be strictly followed since summary judgment deprives the non-movant of the chance to present her case to a jury of her peers.  As Justice Black observed:

The right to confront, cross-examine and impeach adverse witnesses is one of the most fundamental rights sought to be preserved by the Seventh Amendment provision for jury trials in civil cases.  The advantages of trial before a live jury with live witnesses, and all the possibilities of considering the human factors, should not be eliminated by substituting trial by affidavit and the sterile bareness of summary judgment.

Adickes v. S. H. Kress & Co., 398 U.S. 144, 176, 90 S. Ct. 1598, 1618, 26 L. Ed. 2d 142, 164-65 (1970) (Black, J., concurring).[6]

B.   The MCA Exemption – Like All Overtime Exemptions – Must Be Narrowly Construed Against the Employer

Both the FLSA and PMWA entitle employees to overtime premium pay equaling one and one-half times their regular pay rate for hours worked over 40 per week.  See 29 U.S.C. § 207(a)(1); 43 P.S. § 333.104(c).  In Parker v. NutriSystem, Inc., 620 F.3d 274 (3d Cir. 2010), this Court described the public policy underlying the overtime premium pay mandate:

Congress enacted the FLSA “to protect all covered workers from substandard wages and oppressive working hours, ‘labor conditions [that are] detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.’”  Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S. Ct. 1437, 67 L. Ed. 2d 641 (1981) (quoting 29 U.S.C. § 202(a)).  The Act was designed “to ensure that each employee covered by the Act would receive ‘[a] fair day’s pay for a fair day’s work’ and would be protected from ‘the evil of overwork as well as underpay.’” Id. (quoting 81 Cong. Rec. 4983 (1937) (message of President Roosevelt)).
The legislative history of the overtime compensation provisions of the FLSA reveal a threefold purpose underlying them: (1) to prevent workers who, perhaps out of desperation, are willing to work abnormally long hours from taking jobs away from workers who prefer shorter hours, including union members; (2) to spread available work among a larger  number of workers and thereby reduce unemployment; and (3) to compensate overtime workers for the increased risk of workplace accidents they might face from exhaustion or overexertion.  Mechmet [v. Four Seasons Hotels, Ltd.], 825 F.2d at 1175-76 (7th Cir. 1987) (citing H.R. Rep. No. 1452, 75th Cong., 1st Sess. (1937); S. Rep. No. 884, 75th Cong., 1st Sess. (1937)).

Id. at 279; accord A.H. Phillips v. Walling, 324 U.S. 490, 493, 65 S. Ct. 807, 808, 89 L. Ed. 1095, 1098-99 (1945); Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S. Ct. 1437, 1444, 67 L. Ed. 2d 641, 653 (1981).[7]  The Supreme Court has held that this “broad remedial goal of the [FLSA] should be enforced to the full extent of its terms.”  Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 173, 110 S. Ct. 482, 488, 107 L. Ed. 2d 480, 491 (1989).

Consistent with the above principles, the MCA Exemption – like all overtime exemptions – must be “construed narrowly[] against the employer,” and the employer “bears the burden of proving ‘plainly and unmistakably’ that the drivers qualify for the MCA [E]xemption.”  Packard v. Pittsburgh Transp. Co., 418 F.3d 246, 250 (3d Cir. 2005) (citing Friedrich v. U.S. Computer Servs., 974 F.2d 409, 412 (3d Cir. 1992)) (emphasis supplied); accord Pignataro v. Port Auth. of New York and New Jersey, 593 F.3d 265, 268 (3d Cir. 2010); Lawrence, 527 F.3d at 310; Davis v. Mountaire Farms, Inc., 453 F.3d 554, 556 (3d Cir. 2006).

Moreover, “if the record is unclear as to some exemption requirement, the employer will be held not to have satisfied its burden.”  Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 900 (3d Cir. 1991) (emphasis supplied).  Thus, Krapf’s must not only clear the high hurdle of demonstrating that each Appellant is individually exempt even after all reasonable inferences are construed in his/her favor; it also must demonstrate that each Appellant falls “plainly and unmistakably” within the narrow confines of the MCA Exemption.

C.   The MCA Exemption Does Not Apply Where the Employee’s “Interstate” Driving Activities are De Minimis

The MCA Exemption excludes from the FLSA’s overtime pay mandate[8] “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of title 49.”  29 U.S.C. § 213(b)(1).

The Department of Labor (“DOL”) interprets the parameters of the MCA Exemption as follows:

The exemption of an employee from the hours provisions of the [FLSA] under section 13(b)(1) depends both on the class to which his employer belongs and on the class of work involved in the employee’s job.  The power of the Secretary of Transportation to establish maximum hours and qualifications of service of employees, on which exemption depends, extends to those classes of employees and those only who: (1) Are employed by carriers whose transportation of passengers or property by motor vehicle is subject to his jurisdiction under section 204 of the Motor Carrier Act, and (2) engage in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the Motor Carrier Act.

29 C.F.R. § 782.2(a) (internal citations omitted and emphasis supplied); see also 49 U.S.C. § 31502(a)-(b) (limiting the Department of Transportation’s (“DOT”) jurisdiction to “interstate” transportation by employees of “motor carriers” and “private motor carriers.”).

Appellants do not dispute that Krapf’s is a motor carrier subject to the Motor Carrier Act or that their driver duties place them within the “class” of employees who “directly affect the safety of operation of motor vehicles.”  29 C.F.R. § 782.2(a).  Rather, Appellants allege that they do not fit within the MCA Exemption because their duties do not sufficiently involve “transportation on the public highways of passengers or property in interstate or foreign commerce.”  29 C.F.R. § 782.2(a); see also 49 U.S.C. §§ 31502(a), 13501 (defining “interstate” to include transportation that crosses state borders).

The application of the MCA Exemption, however, is by no means automatic.  As the Supreme Court recognized in Pyramid Motor Freight Corp. v. Ispass, an employee does not fit within the MCA Exemption if her covered activities are “de minimis” and only represent a “trivial, casual or occasional” part of her employment.  330 U.S. 695, 708, 67 S. Ct. 954, 960, 91 Ed. 1184, 1192 (1947); see also Friedrich v. U.S. Computer Services, 974 F.2d 409, 416 (3d Cir. 1992) (“The Supreme Court has recognized a de minimis exception to the application of the MCA [Exemption].”) (citing Pyramid).  Similarly, this Court has observed that the MCA Exemption applies “only where the employees regularly travel interstate or reasonably are expected to do interstate driving.”  Id. at 417 (emphasis supplied).

Consistent with this authority, the DOL has promulgated regulations for determining whether a driver’s purported interstate activity is of such character to fit within the MCA Exemption:

As a general rule, if the bona fide duties of the job performed by the employee are in fact such that he is (or, in the case of a member of a group of drivers, driver’s helpers, loaders, or mechanics employed by a common carrier and engaged in safety-affecting occupations, that he is likely to be) called upon in the ordinary course of his work to perform, either regularly or from time to time, safety-affecting activities of the character described in paragraph (b)(2) of this section, he comes within the exemption in all workweeks when he is employed at such job.

29 C.F.R. § 782.2(b)(3) (emphasis supplied); see also JA at 16a (quoting 29 C.F.R. § 782.2(b)(3)). 

Moreover, as the DOL regulations explain, the driver’s interstate activities must be of some substance and exceed the Pyramid court’s de minimis standard:

[W]here the continuing duties of the employee’s job have no substantial direct effect on such safety of operation or where such safety-affecting activities are so trivial, casual, and insignificant as to be de minimis, the exemption will not apply to him in any workweek so long as there is no change in his duties.

29 C.F.R. § 782.2(b)(3)(emphasis supplied); see also JA at 14a (quoting 29 C.F.R. § 782.2(b)(3)).

The de minimis requirement makes good sense.  As Judge Mukasey cogently explained:  “To extend the MCA Exemption to any driving activity, no matter how infrequent or trivial, would be to encourage employers to send their employees on a minimal number of interstate trips simply to avoid the overtime compensation provisions of the FLSA.”  Masson v. Ecolab, Inc., 04-cv-4488, 2005 U.S. Dist. LEXIS 18022, *22-23 (S.D.N.Y. Aug. 17, 2005).

In applying the above principles, district courts have relied on objective factors such as the driver’s actual number of out-of-state trips to determine if he/she falls within the MCA Exemption.  See, e.g., Sturm v. CB Transp., Inc., 943 F. Supp. 2d 1102, 1113 (D. Idaho 2013) (observing that courts utilize “objective criteria” to determine if driver was reasonably expected to make interstate trips and that the MCA Exemption will not apply “‘if there is no possibility of driving interstate or the possibility is remote’”); Barrios v. Suburban Disposal, Inc., 12-cv-3663, 2013 U.S. Dist. LEXIS 175155, *20 (D.N.J. Dec. 11, 2013) (“[T]he Court cannot find, based on these two [interstate] trips, that all Plaintiffs had a reasonable expectation of driving interstate routes.”); Dauphin v. Chestnut Ridge Transp., Inc., 544 F. Supp. 2d 266, 276 (S.D.N.Y. 2008) (denying employer’s summary judgment motion based on the MCA Exemption because, inter alia, “the evidence is in conflict regarding how often drivers . . . traveled across state lines as part of their regular runs”).

D.   Application of the MCA Exemption Requires an Individual Examination of the Actual Job Activities of the Specific Employees Asserting Unpaid Overtime Claims

Consistent with the principles described in subsection B, supra, the Supreme Court has stated on two separate occasions that the MCA Exemption requires an individual analysis of actual job circumstances of those individuals asserting unpaid overtime claims.  This condition has been adopted by several Circuit Courts, including this Court, as well as numerous district courts. 

In Pyramid, the Supreme Court addressed the application of the MCA Exemption to employees performing “loading” activities who were seeking unpaid overtime wages under the FLSA.  330 U.S. 695, 67 S. Ct. 954, 91 Ed. 1184.  On multiple occasions, the Pyramid court stated that any analysis of the MCA Exemption must be performed on an employee-by-employee basis for only those individuals asserting FLSA claims, observing:

The District Court must determine simply whether or not the respective employees who seek to recover overtime compensation under § 7 [of the FLSA] are excluded from the benefits of that Section because they are within [the MCA Exemption]. . . . Whether or not an individual employee is within any such classification is to be determined by the judicial process.

 

***

 

If none of the alleged “loading” activities of the respective respondents, during the periods at issue, come within the kind of activities which, according to the [Interstate Commerce] Commission,[9] affect the safety of operation of motor vehicles in interstate or foreign commerce within the meaning of the Motor Carrier Act, then those respondents of which that is true are entitled to the benefits of § 7 of the Fair Labor Standards Act.  On the other hand, if the whole or a substantial part of such alleged “loading” activities of the respective respondents, during the periods at issue, does come within the kind of activities which, according to the Commission, affect such safety of operation, then those respondents who were engaged in such activities are excluded from the benefits of such § 7.

id. at 707-08 (emphasis supplied); see also id. at 698 (directing the district court to “determine whether or not the activities of each respondent consisted” of work covered by the MCA Exemption) (emphasis supplied); id. at 707 (“the District Court, in applying § 204 of the Motor Carrier Act to respondents, will determine whether or not the activities of each respondent, either as a whole or in substantial part, come within the Commission’s definition of the work of a ‘loader.’”) (emphasis supplied); id. at 708 (“The District Court shall give particular attention to whether or not the activities of the respective respondents included that kind of ‘loading’ which is held by the Commission to affect safety of operation.”) (emphasis supplied).

Eight months later, the Supreme Court’s Morris v. McComb, 332 U.S. 422, 68 S. Ct. 131, 92 L. Ed. 44 (1947) opinion reaffirmed the Pyramid court’s individualized analysis requirement.  Specifically, the Morris court stated:

There is noting in the record showing the extent to which the respective [employees] devoted themselves to the several classes of work above mentioned and, if there were an action to recover overtime compensation for individual employees, it would be necessary to determine that fact.  However, as this is an action only for an injunction relating to future practices, the situation can be met by limiting the injunction to the appropriate classifications of workers.

 

Id. at 430 (emphasis supplied).            This Court, as well as the Seventh and Fourth Circuits, recognized the individualized analysis required under Pyramid and Morris.

First, in Harshman v. Well Service, Inc., the Western District of Pennsylvania held that the test to determine if employees are entitled to overtime premium pay is “whether each plaintiff, during the relevant time periods, performed duties which substantially affected the safety operation of defendant’s pump trucks in interstate commerce” to qualify for the MCA Exemption.  248 F. Supp. 953, 958 (W.D. Pa. 1965) (emphasis supplied).  In affirming the Harshman decision, this Court relied on “the reasons so well stated in the opinion of Judge Marsh, 248 F. Supp. 953.”  Harshman v. Well Service, Inc., 355 F.2d 206 (3d Cir. 1965).

Second, in Goldberg v. Faber Industries, Inc., 291 F. 2d 232 (7th Cir. 1961), the Seventh Circuit reversed the district court’s holding that certain employees were not entitled to overtime premium compensation under the MCA Exemption.  Id. at 233, 235.  In reaching its conclusion, the Goldberg court stated:

The District court was in error in holding the employer’s operations were controlling.  The test is the nature of the transportation performed by the employees.  The exemption in the Fair Labor Standards Act depends upon the activities of the individual employees.

Id. at 235 (emphasis supplied).

More recently, in Troutt v. Stavola Brothers Inc., 107 F.3d 1104 (4th Cir. 1997), the Fourth Circuit observed:

[T]he Supreme Court has been equally clear that when there is a factual question as to whether a particular employee is within one of these covered [MCA Exemption] classifications that question is decided in the judicial process and on an individual basis.

Id. at 1108 (emphasis in original).[10]

Several district courts have echoed these findings by requiring that employers present evidence that each individual employee plainly and unmistakably fit within the parameters of the MCA Exemption.  See, e.g., Dauphin, 544 F. Supp. 2d at 274 (“Because the [MCA E]xemption ‘depends upon the activities of the individual employees,’ a defendant generally must present evidence as to the character of the activities of each plaintiff in order to determine whether he or she is subject to the exemption.”); id. at 275 (criticizing the defendant for not offering “evidence establishing the character of the activities of each plaintiff”); Sturm, 943 F. Supp. 2d at 1113 (MCA Exemption “as applied to an individual employee depends upon the activities of the individual; what is controlling is the character of the activities involved in the performance of his or her job.”); Masson v. Ecolab, Inc., 04-cv-4488, 2005 U.S. Dist. LEXIS 18022, at *17-18 (“Because ‘the exemption depends . . . upon the activities of the individual employees,’ [defendant] must present evidence as to ‘the character of the activities involved in the performance’ of each plaintiff’s job in order to determine whether [defendant] owes individual employees overtime compensation.  Hence, the activities of one or a few plaintiffs cannot justify a blanket exemption as to all plaintiff-employees.”) (internal citations omitted); McGee v. Corporate Express Delivery Systems, 01-cv-1245, 2003 U.S. Dist. LEXIS 20855, *2-3 (N.D.Ill. Nov. 26, 2003) (“[Defendant] is not entitled to summary judgment because it has failed to heed this Court’s earlier directive that to show each plaintiff is exempt from the overtime provisions of the FLSA, it must come forth with evidence that each plaintiff was engaged in activities that are covered by the [MCA Exemption].”).

E.   The District Court Erred by Failing to Perform an Individual Analysis Limited to the Activities of Each Appellant

As discussed in subsection D, supra, the Supreme Court and multiple Circuit Courts have held that application of the MCA Exemption should be based on an individualized analysis limited to those employees asserting unpaid overtime claims.[11]  The District Court, however, refused to perform this mandated analysis.  See JA at 15a-17a.  Instead, it relied on general “company policy and activity” to hold that Appellants “‘could reasonably be expected to do interstate driving’” regardless of their actual employment circumstances based solely on their assignment to Krapf’s Transit Division.  Id. at 17a (quoting Friedrich, 974 F.2d at 412).  This analysis was improper and represents reversible error.

F.    Viewing All Evidence in Appellants’ Favor, a Reasonable Jury Could Find that Krapf’s Fails to Satisfy its Heavy Burden of Demonstrating that Each Appellant “Plainly and Unmistakably” Qualifies for the MCA Exemption

The record before the District Court also contains ample evidence enabling a jury to determine on an individual basis that Appellants do not “plainly and unmistakably” qualify for the MCA Exemption.  In particular, the record evidence is sufficient to enable a jury to conclude that Appellants were not reasonably expected to do interstate driving because their actual interstate activity was so “trivial, casual, and insignificant as to be de minimis.”  This is so for three independent reasons.  First, sixteen of the thirty-four Appellants never traveled out-of-state as part of their employment with Krapf’s, defusing any reasonable expectation that they would ever have to travel interstate.  See pages 25-26, infra.  Second, the remaining eighteen Appellants’ interstate transportation activities were so minimal that a jury could find that their interstate activity was de minimis and that they were not likely to be called upon in the ordinary course of their work for Krapf’s to travel interstate.  See pages 27-28, infra.  Third, the District Court’s holding that Appellants could reasonably be expected to be assigned trips outside of Pennsylvania is contradicted by the fact that, in actuality, there was minimal opportunity to do so.  See pages 28-29, infra.  These facts alone, or in combination, could convince a jury that Appellants do not fit within the narrow confines of the MCA Exemption.  Thus, the District Court erred by finding every Appellant to be overtime-exempt.

1.  Sixteen Appellants Never Traveled Outside of Pennsylvania

Of the thirty-four Appellants, the parties agree that sixteen never traveled out-of-state as part of the 5,739 trips they drove for Krapf’s during the applicable three-year statute of limitations period.  See pages 2-3, supra.  Based on this evidence alone, a jury could find that these sixteen Appellants could not reasonably be expected to travel interstate because during the course of their entire employment they never were called upon to do so.

Other district court judges have held that a driver’s lack of actual interstate travel is sufficient to deny summary judgment in an MCA Exemption case.  For example, in Arranda v. Southwest Transport, Inc., 11-cv-21222, 2012 U.S. Dist. LEXIS 34763 (S.D. Fla. Mar. 15, 2012), the court explained:

The plaintiff never left the state of Florida for purposes of his employment with the defendant. The plaintiff never agreed to leave the state of Florida for work, nor was he ever asked to do so. While the defendant owner, Robert Muriedas indicated that the defendant could have been asked to leave the state of Florida, the plaintiff never left the state. Accordingly, the undersigned finds that the second above-mentioned prong has not been met, and summary judgment should be granted [in favor of the plaintiff] to the extent that the [MCA Exemption] does not apply to the plaintiff in this matter because the plaintiff’s class of work did not involve interstate commerce.

Id. at *19; see also Goldberg, 291 F.2d at 234 (reversing lower court’s finding that 15 drivers who never crossed state lines qualified for the MCA Exemption); Packard, 418 F.3d at 258 (MCA Exemption did not apply to drivers who did not travel outside Pennsylvania.).[12]

2.  The Remaining Eighteen Appellants’ Interstate Travel Activities are Minimal

The parties agree that, during the relevant time period, eighteen Appellants crossed state lines on only 178 (or 2.2%) of 8,218 trips.  See pages ­­2-3, supra.  Moreover, eight of these eighteen Appellants traveled out-of-state only once during the relevant time period, with an additional five Appellants traveling out-of-state on five or less occasions.  Id.

Again, a jury could find this insignificant number of interstate trips to be de minimis, and thus these eighteen Appellants could not reasonably expect to travel out-of-state in the ordinary course of their employment with Krapf’s because they almost never did so.  Judge William Martini of the District of New Jersey recently relied on similar de minimis amounts of interstate travel to find that drivers did not have a reasonable expectation of driving interstate routes:

in considering whether [all nine] Plaintiffs reasonably could have expected to drive interstate routes, the Court notes that Barrios, Cruz, Cabrera, Marin, and Salazar each worked for Suburban for seven years or more, and that during their time at Suburban only one of them, Marin, ever drove an interstate route.  There is no evidence that any Plaintiffs ever serviced one of Suburban’s customers in New York, Connecticut, or Maryland. Though Marin went on interstate trips for Suburban twice during his eight-year employment, the Court cannot find, based on these two trips, that all Plaintiffs had a reasonable expectation of driving interstate routes

Barrios, 12-cv-3663, 2013 U.S. Dist. LEXIS 175155, at *20.

Here, the undisputed fact that only 2.2% of the 8,218 trips these eighteen Appellants made were interstate, demonstrates that it is highly unlikely that these individuals would have ventured out of Pennsylvania on any given day or would have a reasonable expectation to do so.  Moreover, as indicated in the table at pages 2-3, supra, most of these eighteen Appellants’ out-of-state travel falls well below the 2.2% average.  However, the District Court’s summary judgment decision prevents these Appellants from making this common sense argument to the jury.

Appellants do not assert that victory is assured for the eighteen Appellants who almost never traveled across state lines.  However, their general lack of interstate travel certainly can lead a jury to reasonably find the MCA Exemption to be inapplicable.

3.  The Overwhelming Majority of Krapf’s Transit Routes were Intrastate Providing Limited Opportunity for Interstate Travel

During the relevant period, Krapf’s Transit Division had thirty-two fixed routes.  See JA at 91a-93a.  Of these, only four routes required drivers to cross state lines at any time.  Id.  Moreover, prior to May 2011, only one route entailed travel outside of Pennsylvania.  Id.  Thus, the odds were significantly higher that Appellants would be assigned an entirely intrastate route rather than one possessing interstate stops.[13]

This general unavailability of interstate routes provides the jury with yet another reason to find that Appellants could not reasonably be expected to drive out of Pennsylvania as part of their employment because their interstate driving activities were so trivial, casual and insignificant as to be de minimis.

G.  The Facts Relied on by the District Court Do Not Warrant a Finding that Appellants Could Reasonably be Expected to be Called Upon to Perform Interstate Travel, Either Regularly or from Time to Time

In support of its conclusion that all Appellants could have reasonably be expected to be called upon to drive interstate, either regularly or from time to time, the District Court relied on three alleged facts.  First, the District Court cited “the indiscriminate nature of [Krapf]’s assignment procedure [as] undisputed evidence that [Appellants] could be reasonably expected to drive interstate.”  JA at 17a-18a; see also id. at 20a (“[Krapf’s] has establish[ed] through undisputed facts that all [T]ransit drivers, including [Appellants], could be assigned an interstate route.”).  Second, the district court referenced Krapf’s efforts “to ensure that [T]ransit drivers comply with the federal requirements for interstate driving so that every [T]ransit driver can drive interstate at any time.”  Id. at 18a.  Third, the District Court found summary judgment was appropriate because Krapf’s Transit Division “was significantly engaged in interstate commerce” based on the fact that between 2009 and 2012, its annual revenue from interstate routes ranged between 1.0% and 9.75%.  Id. at 19a-20a. 

As discussed below, these alleged facts are insufficient to plainly and unmistakably demonstrate that Appellants individually fit within the MCA Exemption.

1.  The Purported Potential that Appellants “Could” Be Assigned an Interstate Trip is Belied By Unrebutted Statistics Demonstrating their Lack of Actual Interstate Activity

The District Court relied heavily on Krapf’s purportedly indiscriminate scheduling procedures and adherence to federal interstate driving requirements as a basis for finding that Appellants “could have been assigned to drive interstate.”  However, this supposed potential for Appellants to be called upon to cross state lines is not supported by Krapf’s records of Appellants’ actual interstate travel.

Rather, the facts demonstrate that it is extraordinarily unlikely that each Appellant would have ventured out of Pennsylvania as part of his/her duties on any given day based not only on a review of the actual trips Appellants drove, but also the general lack of interstate routes within the Transit Division during the relevant period.  See pages 25-29, supra.  Thus, the District Court erred by relying almost exclusively on this “potential” for interstate travel to hold Appellants were exempt.

Several District Courts have recognized this flaw, and refused to find that employees are covered by the MCA Exemption based on the “possibility” for interstate travel through the indiscriminate assigning of routes.  See, e.g., Sturm, 943 F. Supp. 2d at 1114 (“Because the [MCA Exemption] does not apply if the potential of driving interstate is remote, an employer does not establish that there was a reasonable expectation that its employees could drive interstate when it merely indiscriminately fills vacant interstate routes with drivers who otherwise have regular, intrastate routes.”); id. at 1116 (holding that the defendant’s policy of “requiring all drivers to maintain DOT compliance” so that any driver could be called “at any time to drive interstate, is similarly insufficient to carry the day.”); Kosin v. Fredjo’s Enterprises, Ltd., 88-cv-5924, 1989 U.S. Dist. LEXIS 1491, *12 (N.D.Ill. Feb. 13, 1989) (“That unexpected vacancies may be filled indiscriminately does not establish that all drivers could at some time travel interstate routes.”) McGee, 01-cv-1245, 2003 U.S. Dist. LEXIS 20855, at *21-24 (denying an employer’s summary judgment motion and holding “to demonstrate a driver is exempt from the overtime provisions of the FLSA, [an employer] must do more than simply assert that it assigned routes indiscriminately.  Rather, it must show that because of its assignment procedure, the driver was likely to engage in interstate commerce for the week”) (emphasis supplied).

Again, the potential for interstate travel by Appellants based on the purported indiscriminate nature of the assignment of routes and the fact that Krapf’s adheres to federal requirements for employing interstate drivers may ultimately convince a jury that Appellants plainly and unmistakably fit within the MCA Exemption.  However, based on the actual statistics demonstrating their minimal interstate travel, and making all inferences in Appellants’ favor, a jury also could find that Appellants were not reasonably expected to drive instate because their actual interstate trips do not exceed the de minimis standard.

As just one example, Appellant Harry Johnson worked 144 weeks in Krapf’s Transit Division during the relevant period, performing 687 trips.  See JA at 136a.  However, during his nearly three-years of employment, Appellant Johnson never traveled out of Pennsylvania.  Id.  Based on an individualized analysis of Mr. Johnson’s employment circumstances, a jury could find that he could not reasonably be expected to travel out-of-state or that his interstate travel was trivial, casual and insignificant because, in nearly three years of employment, he never left Pennsylvania.  Thus, the steps Krapf’s took to create the purported “potential” for interstate trips were meaningless.

2.  Krapf’s Revenue from Interstate Activity is Not Relevant to Whether Appellants’ Activities Qualified them for the MCA Exemption

The District Court also cited to the percentage of annual revenues Krapf’s Transit Division received from interstate activity as a factor demonstrating Appellants were exempt.  This fact is relevant to whether Krapf’s is a motor carrier covered by the Motor Carrier Act.  See subsection C supra (discussing 29 C.F.R. § 782.2(a) and how the MCA Exemption analysis requires an examination of the nature of both the employer’s and employees’ activities).  However, Krapf’s revenue data is irrelevant to whether Appellants could each be reasonably expected to drive interstate or if their interstate activities were more than de minimisSee Goldberg, 291 F.2d 235 (“The District court was in error in holding the employer’s operations were controlling.  The test is the nature of the transportation performed by the employees.”).

Again, even if Krapf’s annual revenues were an appropriate factor to consider as part of the review of the class of work involved in Appellants’ jobs, the unrebutted statistics of Appellants’ actual interstate travel could convince a jury to find that Krapf’s failed to fulfill its burden of demonstrating that Appellants plainly and unmistakably fall within the MCA Exemption.

VIII.    CONCLUSION

In conclusion, Appellants respectfully request that this Court reverse the district court’s summary judgment orders.



[1]   Because a three-year limitations period applies to Appellants’ FLSA and PMWA claims, see 29 U.S.C. § 255(a); Gonzalez v. Bustleton Servs., 08-cv-4703, 2010 U.S. Dist. LEXIS 23158, *19 (E.D. Pa. Mar. 5, 2010), the time period relevant to this action runs from November 3, 2008 (the date falling three years prior to the filing of the complaint) until the present.

[2]   See JA at 136a (Krapf’s Exhibit MSJ-4).

[3]  Resch’s FLSA claim was asserted as a collective action pursuant to 29 U.S.C. § 216(b).  See JA at 35a at ¶ 20 (Complaint).  Resch did not pursue his PMWA claim as an opt-out class action pursuant to Federal Rule of Civil Procedure 23.  However, those individuals who affirmatively opted-in to the action under 29 U.S.C. § 216(b) also are permitted to pursue the PMWA claim asserted in the Complaint.  See id at 35a at n.1. (citing O’Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 580 (6th Cir. 2008)).

[4] One of these drivers – Anita King – joined the action prior to the district court’s conditional certification order.  See JA at 24a (District Court Docket).

[5] Appellants did not move to decertify the collective action.

[6] “Since the Supreme Court removed the summary judgment procedure from disfavored status in the 1980s, some have observed that the pendulum has swung too far in the opposite direction.”  Doe v. Abington Friends School, 480 F.3d 252, 258 (3d Cir. 2007) (citing Arthur R. Miller, The Pretrial Rush to Judgment, 78 N.Y.U. L.Rev. 982 (2003)); accord Hon. Patricia M. Wald, Summary Judgment at Sixty, 76 Tex. L.Rev. 982 (2003)); Hon. Mark W. Bennett, Essay: From the “No Spittin’, No Cussin’ and No Summary Judgment” Days of Employment Discrimination Litigation to the “Defendant’s Summary judgment Affirmed Without Comment” Days: One Judge’s Four-Decade Perspective, 57 N.Y. L. SCH. L. REV. 685 (2012-13); see also Melvin v. Car-Freshener Corp., 453 F.3d 1000, 1003-04 (8th Cir. 2006) (Lay, J., dissenting) (“Too many courts in this circuit, both district and appellate, are utilizing summary judgment in cases where issues of fact remain.”); Gallagher v. Delaney, 139 F.3d 338, 342 (2d Cir. 1998) (recognizing “dangers of robust use of summary judgment to clear trial dockets”); In re One Star Class Sloop Sailboat, 517 F. Supp. 2d 546, 555 (D. Mass. 2007) (“Today, commentators are in near unanimous agreement that federal courts overuse summary judgment as a case management tool.”).

[7] Pennsylvania courts have recognized the similar remedial purpose behind the PMWA’s overtime pay requirement.  See Chevalier v. General Nutrition Ctrs., Inc., GD-13-017194, 2014 Pa. Dist. & Cnty. Dec. LEXIS 145, *33-34 (Allegheny Cty. Oct. 20, 2014) (“The purpose of the portion of the PMWA governing overtime was to alter the behavior of employers. The goal was to cause employers to hire new workers in lieu of paying existing employees to work overtime by making overtime more expensive.”).

[8] Appellants do not dispute that the MCA Exemptions to the overtime premium pay protections of the FLSA and the PMWA are virtually identical, compare 29 U.S.C. § 213(b)(1) with 43 P.S. § 333.105(b)(7), or that they should be applied in an identical manner, see Mayan v. Rydbom Express, Inc., 07-cv-2658, 2009 U.S. Dist. LEXIS 90525, *32-33 (E.D. Pa. Sept. 30, 2009).

[9] The DOT took over authority to regulate motor carriers from the Interstate Commerce Commission in 1966.  See Friedrich, 974 F.2d at 411.

[10] However, earlier this year, a divided Fifth Circuit rejected the use of an employee-by-employee analysis holding that only a “company-wide analysis” was required under Fifth Circuit precedent to determine the application of the MCA Exemption.  See Allen v. Coil Tubing Services, L.L.C., 755 F.3d 279, 284 (5th 2014).  Justice James L. Dennis wrote an eighteen page dissent that, inter alia, criticized the majority’s failure to perform the individualized analysis required by the authority cited above.  See id. at 288-307.

[11]   Such an individual analysis is not necessarily inconsistent with this action proceeding to trial as a collective action.  The District Court might conclude that the presentation of all thirty-four Appellants’ testimony in a single trial (during which the parties also will present “common” evidence of Krapf’s business practices and common damages analysis) is more efficient than the individual trials that will ensue if the collective is “decertified.”  Of course, the propriety of collective litigation is a matter for the District Court to consider on remand.  See Zavala v. Wal-Mart Stores Inc., 691 F.3d 527, 534-37 (3d Cir. 2012) (discussing FLSA decertification analysis).  If the District Court believes that the individualized analysis required by the above decisions makes the collective unmanageable, the appropriate remedy is decertifying the FLSA collective, not the dismissal of each Appellants’ substantive legal claims.

[12] The Packard court focused on whether the drivers’ continuum trips qualified as participation in interstate commerce sufficient to fulfill the MCA Exemption even though they never traveled across state lines.  Id.

[13] These odds are supported by the statistical analysis of Appellants’ actual driving activity.  See subsections F.1-3, supra.

Our Northeasern Pennsylvania employment rights lawyers recently obtained an important victory in a collective/class action lawsuit entitled Chung v. Wyndham Vacation Resorts, Inc., 3:14-cv-00490-RDM.   The lawsuit is proceeding in the United States District Court in Scranton, PA and is assigned to United States District Judge Robert D. Mariani.  As a result of the court’s ruling, which granted our clients’ “conditional certification” motion, over 35 current and former employees have joined the lawsuit.

The lawsuit alleges that the Company violated federal wage law by failing to pay sales employees at the Wyndham Vacation Resorts Shawnee Village extra overtime pay for hours worked over 40 per week.  Our clients allege that the Company accomplished this by requiring sales employees to work “off-the-clock” in two ways:  (1) by requiring sales employees to report 40 or less hours each week regardless of the number of hours they actually worked; and/or (ii) failing to credit overtime hours actually reported by sales employees.  The lawsuit seeks to recover unpaid overtime wages in addition to liquidated damages, attorney’s fees, and litigation expenses.

If you have any questions about this lawsuit or your wage/overtime rights, do not hesitate to contact our firm.  We have had great success litigating wage and overtime complaint in the Scranton/Wilkes-Barre area and throughout the Poconos region.

 

 

 

Our firm recently prepared and filed with the First Circuit Court of Appeals a “friend of the court” brief (commonly known as an amicus in the appeal entitled Marzuq, et al. v. Cadete Enterprises, Inc., No. 14-1744.  The brief is filed on behalf of the following  organizations:  the National Employment Law Project, the National Employment Lawyers Association (“NELA”), and the Economic Policy Institute.

This appeal concerns the district court’s summary judgment order finding that managers of a Dunkin Donuts store are overtime-exempt.  Our brief emphasizes the legislative purpose behind the FLSA overtime pay mandate and arguies that the company’s business model contradicts that purpose.  Here is what we write in the brief:

Amici curiae urge this Court to reverse the district court’s summary judgment decision.  As discussed below, Congress passed the FLSA’s “time and one-half” overtime pay requirement with the intent of benefitting all workers by spreading work hours and increasing employment.  The district court’s application of Donovan v. Burger King, 672 F.2d 221 (1st Cir. 1982), to excuse a detailed analysis of the four “primary duty” factors described in 29 C.F.R. § 541.700(a) threatens to undermine this legislative purpose.  In particular, the district court’s approach makes it far too easy for companies to avoid assigning extra work to the hourly workforce by simply requiring salaried employees to perform the extra work free-of-charge.  Moreover, the district court’s reading of Burger King as excusing a rigorous primary duty analysis cannot be reconciled with decisions from other circuit courts.

A.  The FLSA’s Overtime Pay Mandate Was Enacted for the Purpose of Benefitting All Workers by Spreading Work Hours and Increasing Employment.

The FLSA requires that employees receive extra “time and one-half” pay for working over 40 hours per week.  See 29 U.S.C. § 207(a)(1).  In enacting this requirement, Congress intended “to spread work and thereby reduce unemployment, by requiring an employer to pay a penalty for using fewer workers to do the same amount of work as would be necessary if each worker worked a shorter week.”  Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1176 (7th Cir. 1987) (Posner, J.).

This public policy favoring “work-spreading” is fundamental to the FLSA’s overtime pay mandate.  As the Supreme Court explained shortly after the FLSA’s passage:

The provision of § 7(a) requiring this extra pay for overtime is clear and unambiguous.  It calls for 150% of the regular, not the minimum wage. By this requirement, although overtime was not flatly prohibited, financial pressure was applied to spread employment to avoid the extra wage and workers were assured additional pay to compensate them for the burden of a workweek beyond the hours of the act.  In a period of widespread unemployment and small profits, the economy inherent in avoiding extra pay was expected to have an appreciable effect in the distribution of available work.  Reduction of hours was part of the plan from the beginning.

Overnight Motor Transport v. Missel, 316 U.S. 572, 577-78 (1941) (emphasis supplied); seealsoBay Ridge Operating Co., Inc. v. Aaron, 334 U.S. 446, 460 (1948) (overtime pay mandate intended “to spread employment through inducing employers to shorten hours because of the pressure of extra cost”); Walling v. Youngerman-Reynolds Hardwood Co., Inc., 325 U.S. 419, 423-24 (1945) (overtime pay mandate intended “to reduce the hours of work and to employ more men”); Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of America, 325 U.S. 161, (1945) (“the plain design of § 7(a) to spread employment through imposing the overtime pay requirement on the employer”); Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 40 (1944) (overtime pay mandate intended “to spread employment by placing financial pressure on the employer through the overtime pay requirement”).

In sum, the FLSA’s overtime pay mandate is intended to benefit ALL employees, not just those who actually are called upon to work extra overtime hours.  When a company classifies a salaried employee as an overtime-exempt “executive,” the economic implications are felt by the entire workforce.  This is why overtime exemptions must be narrowly construed.  As this Court has recognized:  “Because of the remedial nature of the statute, the Supreme Court has emphasized that the exemptions should be ‘narrowly construed’ and ‘limited to those establishments plainly and unmistakably within their terms and spirit.’”  Hines v. State Room, Inc., 665 F.3d 235, 242 (1st Cir. 2011) (quoting Arnold v. Ben Kanowski, Inc., 361 U.S. 388, 392 (1960)).

B.  Cadete’s Business Model Contradicts the FLSA’s Purpose of Spreading Work Hours Among the General Workforce.

Mindful of the FLSA’s Congressional purpose of spreading work among all employees, courts should be skeptical of business models in which employers classify a few employees as overtime-exempt managers, pay them modest weekly salaries, require them to work long hours performing non-managerial tasks, and prohibit their hourly co-workers from working additional hours.[1]  Such business models clearly undermine Congress’ intent that the overtime premium foster the spreading of work hours among the entire workforce.

In Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir. 2008), the Eleventh Circuit affirmed a jury finding that the Family Dollar retail chain violated the FLSA by misclassifying their “store managers” as overtime-exempt.  The Morgan Court put special emphasis on Family Dollar’s use of strict store payroll budgets to force the store managers to perform tasks that otherwise would be performed by the hourly employees.  See Morgan, 551 F.3d at 1251-54, 1270.  The Court offered the following summary:

Because store managers are under orders that overtime labor is not allowed, they are required to do any and all work, even if the payroll budget does not allocate enough hourly employees to get the job done.  Cuts to a store’s payroll budget necessarily reduce a store’s workforce and ensure that the salaried store manager (and not the hourly employees) makes up the difference by working more hours.

Id. at 1252 (footnote omitted).

Here, Cadete has implemented a similar business model.  Plaintiffs were paid modest weekly salaries, see Joint Appendix (“JA”) at 296, and worked alongside other donut shop employees paid on an hourly basis, see id.  Plaintiffs were expected to regularly work at least 48 hours per week and often worked over 60 hours per week.”  See JA 45, 60, 147, 170-71, 219.  During these work hours, Appellants often spent over 90% of  their time performing the same routine tasks as the donut shop’s hourly employees,  See JA 105-06, 168-69, 171-72, 179, 186-88, 193, 198, 217-18, 222, 244-45, 252, 319.

C.  Cadete’s Practices Harm the Very Employees Who Most Need the FLSA’s Protections.

 It is easy to view Appellants as the only individuals harmed by Cadete’s overtime-exempt classification.  But such a viewpoint is incomplete.  As already discussed, Cadete’s current and prospective hourly employees also have suffered harm.  Absent the overtime-exempt classification of Appellants, the donut shop’s hourly employees would have worked more hours and received more pay.  Alternatively, Cadete would have hired a new employee, possibly lifting him/her out of unemployment.

The $8.00/hour donut shop employees harmed by Cadete’s practices desperately need the FLSA’s protections.  The food service industry employs almost 10% of our nation’s private sector workers.[2]  Almost half of all food service workers live near or below the poverty level.[3]  As a whole, food service workers earn only one-half of the national average wage for all industries, and the average food service manager’s salary is less than twice the wage of their hourly employees.[4]  Moreover, over 22 percent of restaurant managers can be classified as low-wage employees.[5]

D.  Careful Analysis of Each of the Four “Primary Duty” Factors is Crucial to Ensuring that an Overly-Broad Executive Exemption Does Not Undermine the FLSA’s Work-Spreading Goals.

Whether a purportedly overtime-exempt executive has “management” as her “primary duty” depends on consideration of four separate factors.  As explained in the pertinent regulation:

Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

29 C.F.R. § 541.700(a).

Magistrate Judge Boal’s Report and Recommendation carefully analyzed each of the four primary duty factors.  See JA at 294-309.  Judge Saylor, however, did not undertake any analysis of the primary duty factors.  See JA at 317-27.  Instead, Judge Saylor appeared to read this Court’s decision in Donovan v. Burger King, 672 F.2d 221 (1st Cir. 1982), as requiring a finding that Appellants are exempt executives by virtue of their status as “in charge” of their stores.  See JA at 325-26.

Amici Curiae respectfully disagree with Judge Saylor’s approach.  This Court has never held that Burger King permits a district court to avoid a rigorous analysis of the primary duty factors just because the plaintiff is the person “in charge” of his assigned store or work department.  Such a reading of Burger King would put this Court at odds with circuit courts authority throughout the nation.

For example, in Morgan, the Eleventh Circuit flatly rejected the company’s argument that “its store managers were ‘in charge’ of the store, and therefore, exempt as a matter of law.”  Morgan, 551 F.3d at 1271.  The Morgan Court cogently observed:

In answering the primary duty inquiry, courts do not “simply slap[]on a talismanic phrase.”  Family Dollar’s “in charge” label strikes us as a way to bypass a meaningful application of the fact-intensive factors.

Id. at 1272 (quoting Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259, 1264 (11th Cir. 2008)).

Likewise, in Guthrie v. Lady Jane Collieries, Inc., 722 F.2d 1141, 1145 (3d Cir. 1983), the Third Circuit explained that an employee’s status as the person “in charge” of an entity’s operations does not excuse a thorough analysis of the primary duty factors:

Preliminarily, we reject the implication in the district court’s opinion that by merely holding that the foremen were “in charge” of their respective sections, without analyzing the underlying criteria of the relevant regulation, the district court could properly conclude that the regulation’s requirement that the foremen’s primary duty be management had been satisfied. The regulation clearly directs the court’s attention to several factors, which must be considered before a determination of “primary duty of management” may be made. Thus, the regulation requires more than a conclusory leap from a holding of “in charge” to a conclusion that a “primary duty of management” has been established.

Guthrie, 722 F.2d at 1145.

Similarly, in Ale v. Tennessee Valley Auth., 269 F.3d 680 (6th Cir. 2001), the Sixth Circuit observed:  “The words ‘in charge’ are not a magical incantation that render an employee a bona fide executive regardless of his actual duties.”  Id. at 691; see also Indergit v. Rite Aid Corp., No. 08-09361, 2010 U.S. Dist. LEXIS 32322, *16-19 (S.D.N.Y. March 31, 2010) (store manager’s status as “captain of the ship,” as person “in charge,” and as “highest ranked employee in his store” not relevant to exemption analysis); Kohl v. Woodlands Fire Dept., 440 F. Supp. 2d 626, 634 (S.D. Tx. 2006) (exempt status not determined by “the labels the employee or the employer place on those duties”).

Consistent with the above principles, various circuit courts have held that an employee can be misclassified as overtime-exempt notwithstanding her status as the highest-ranking employee or the person in-charge.  See, e.g., Rodriguez, 518 F.3d at 1263-65 (store managers); Jackson v. Go-Tane Services, Inc., 56 Fed. Appx. 267, 268-72 (7th Cir. 2003) (manager of car wash facility); Aaron v. City of Wichita, No. 96-3091, 1997 U.S. App. LEXIS 13039, *11-17 (10th Cir. May 23, 1997) (fire captains); Dept. of Labor v. City of Sapula, 30 F.3d 1285, 1287-88 (10th Cir. 1994) (fire captains).

In sum, district courts must carefully analyze each specific primary duty factor in deciding whether an employee is properly classified as an overtime-exempt manager.  This Court should not permit employers and trial courts to read Burger King as excusing a detailed primary duty analysis.

E.  Conclusion.

For the above reasons, Amici Curiae submit that the district court’s summary judgment decision should be reversed

[1]   See generally David Jamieson, “Join the Booming Dollar Store Economy! Low Pay, Long Hours, May Work While Injured,” HuffingtonPost.com (Aug. 29, 2013) (available at http://www.huffingtonpost.com/2013/08/29/dollar-stores-work_n_3786781.html​, last accessed on October 28, 2014) (generally describing business model of requiring salaried managers to perform all of store’s extra work).

[2]   See Heidi Shierholz, “Low Wages and Few Benefits Mean Many Restaurant Workers Can’t Make Ends Meet,” Economic Policy Institute Report (Aug. 21, 2014) (“EPI Report”) at p. 5 (available at http://www.epi.org/publication/restaurant-workers/, last accessed on October 28, 2014).

[3]   See EPI Report, supra, at Table 7.  Generally speaking, many of this Nation’s poor are employed.  “In 2009, according to the US Census Bureau’s official definition of poverty, 8.8 million US families were below the poverty line (11.1% of all families). Of these families, 5.19 million, or 58.9%, had at least one person who was classified as working.  In the same year, there were 11.7 million unrelated individuals (people who do not live with family members) whose incomes fell below the official poverty line (22% of all unrelated individuals).  This means that 3.9 million of these poor individuals, or 33%, were part of the working poor.”  (Wikipedia, Working Poor, http://en.wikipedia.org/wiki/Working_poor, last accessed on October 28, 2014.)

[4]   EPI Report, supra, at Table 6, p. 17 [$10.00 ÷ $18.00 = .55], Table 5, p. 14 [$15.42 ÷ $8.23 = 1.87].  By comparison, managers in all employment earn approximately 2.5 times more than hourly employees ($54.66 versus $21.78.).  See Bureau of Labor Statistics, “May 2013 National Industry-Specific Occupational Employment and Wage Estimates For Cross Industries, Private.” (“May 2013 Wages”) (available at http://www.bls.gov/oes/current/000001.htm#00-0000, last accessed on October 28, 2014)

[5]   EPI Report, supra, Table 8, at p. 20.

Our firm continues to have success representing Pennsylvania retail workers who receive half-time pay (instead of full time-and-one-half pay) for their overtime work. This overtime pay method most commonly applies to salaried employees who hold “manager” and “assistant manager” positions. This method of calculating overtime is referred to as “half-time pay” or “fluctuating workweek pay.” Some workers and supervisors refer to the payment method as “Chinese overtime.”

 

We have successfully argued that Pennsylvania law prohibits the half-time method of calculating salaried employees’ overtime pay.  This past July, a federal Judge in Philadelphia agreed with our argument held that RadioShack violated Pennsylvania law by paying its managers under the half-time method:

http://www.bloomberg.com/news/2014-07-11/radioshack-found-liable-in-pennsylvania-overtime-lawsuit.html

Just last week, the Honorable R. Stanton Wettick, Jr. of the Allegheny Court of Common Pleas based in Pittsburgh, Pennsylvania joined three other federal court judges in Pennsylvania in holding that the half-time pay method is impermissible under Pennsylvania law.  A copy of Judge Wettick’s opinion is available here.

 

To date, we have recovered millions of dollars for employees paid under the half-time method. And we are continuing to investigate companies that may be using this method to pay its workers.If you are a Pennsylvania salaried employee who has been paid under the half-time method, we’d be happy to speak with you to determine whether you may have a viable legal claim. Just give us a call at 215-884-2491 for a totally free and confidential consultation with one of our attorneys.

 

Attorney Advertising Material: This Notice are for informational purposes and should not be construed as legal advice.

We recently have been taking calls from individuals who work in the fracking industry as environmental inspectors, and environmental technicians.  Many of these employees are paid on a day-rate or per diem basis.  These employees work long hours without getting any extra overtime pay.  This can be illegal.  Employees paid on a day-rate, per-dies, or per-day basis are entitled to extra overtime pay for hours worked over 40 per week.  If you are employed in the fracking industry by an environmental inspection or consulting company and are not getting extra overtime pay, please feel free to call us for a free and confidential consultation.

Last week,  Judge Gershwin Drain of the Eastern District of Michigan issued a decision entitled Bacon v. Eaton Aeroquip, LLC, 2014 U.S. Dist. LEXIS 143721 (E.D. Mich. Oct. 9, 2014).  Therein, the Judge held that a company’s payment of shift premium payments precluded it from using the “fluctuating workweek method” to calculate the overtime premium compensation owed to salaried front-line supervisors.  As the judge explained, these types of “hours-based” or “time-based” bonuses are irreconcilable with the fluctuating workweek method’s requirement that employees receive a “fixed weekly salary.”  Someday, Congress will amend the FLSA to do away with the profoundly unfair fluctuating workweek method.  Until then, we can be happy that courts are issuing decision that put some limits on the method’s reach.

George Barrett recently passed away in Nashville, TN.  He was 86.  For over 50 years, George represented “the little guy” in civil rights and worker’s rights cases.  He was a mentor and hero to many younger lawyers, especially our friends at the Nashville firm of Barrett Johnston Martin & Garrison.  These lawyers surely will carry George’s torch for many years to come.

George was affectionately known as “The Citizen,” and his long list of accomplishments would fill this Newsletter many times over.  Simply put, George was one of this country’s great civil rights and worker’s rights lawyers.  His cases helped desegregate the South and brought basic workplace justice to countless employees.  In the 1950’s and 60’s, he represented African Americans and unions without regard to public backlash.  Even death threats did not deter “The Citizen” from his important work.

George practiced law right up until the end.  He worked at the office on Saturday – as he always did – and was hospitalized the next day.  That is fitting for a tireless Champion of Justice.

The federal Fair Labor Standards Act (“FLSA”) generally requires that employees receive overtime premium pay calculated at 150% of their regular pay rate.  However, the FLSA exempts from this requirement employees who perform “executive,” “administrative,” or “professional” work.  These exemptions are known as the “white collar” exemptions.

The New Deal Congress that enacted the FLSA intended that the white collar exemptions would be very narrow and would only cover high-level employees who were personally involved in actually running the business.  One way of keeping the exemption from covering too many low and mid-level employees was to set a strict salary threshold that must be satisfied in order for an employee to even be considered an overtime-exempt executive, administrator, or professional.  As the federal Department of Labor observed in 1940, the “most effective check on the validity of the claim for exemption is the payment of a salary commensurate with the importance supposedly accorded the duties in question.”

In 1975, federal regulations generally provided that an employee could not be covered by the white collar exemptions unless her salary exceeded $250 per week.  As the Economic Policy Institute recently observed, had this $250/week requirement merely kept pace with inflation, it would equal $970 per week – or $50,440 per year – in 2012 dollars.

Unfortunately, the white collar exemptions’ salary requirement has not kept pace with inflation.  Today, the salary threshold stands at a mere $455 per week.  That’s just $23,660 per year.

It seems absurd that an individual making only $23,660 per year could be the type of “executive,” “administrative,” or “professional” employee excluded from the Nation’s overtime laws.  After all, the median household income in the Unites States currently exceeds $51,000.

Over the years, our firm has represented purportedly exempt “executives,” “administrators,” and “professionals” who earn so little that their families qualify for food stamps, free school lunches, and other government benefits.  It really is troubling that taxpayers are directly subsidizing the under-compensation of purported company executives, administrators, and professionals.

Earlier this year, President Obama issued a memorandum instructing the Department of Labor (“DOL”) to update the regulations pertaining to the white collar exemptions.  Why it took the Administration over five years to take this simple step is baffling.  Regardless, the DOL now must go through the formal “rulemaking” process, which will take at least another year.  Then, after the new rules are issued, Big Business surely will file lawsuits asserting that any new regulations exceed the DOL rulemaking authority.  That may cause even more delay.

Hopefully, common sense will prevail during the DOL’s rulemaking process.  One does not need a Ph.D. in Economics to know that someone making $23,660/year is not really a corporate “executive,” “administrator,” or “professional.”

On July 10, 2014, the United States District Court for the Eastern District of Pennsylvania issued an important decision in Verderame v. RadioShack Corporation, 2:13-cv-2539-MSG, a case brought by our firm and our friends at the Minneapolis, MN firm of Nichols Kaster PLLP.

The store managers in Verderame were paid overtime under the federal “fluctuating workweek method” in which overtime-eligible employees are paid a salary plus overtime compensation equal to “one-half” the employee’s regular hourly rate.  In certain circumstances, this method of overtime compensation is permissible under the federal overtime law.

The Verderame lawsuit alleged that RadioShack’s use of the fluctuating workweek method violated Pennsylvania’s overtime law, which often is found to be more worker-friendly than federal law.  RadioShack sought dismissal of the lawsuit, alleging that the fluctuating workweek method is permissible under Pennsylvania law.

United States District Judge Mitchell S. Goldberg’s 12-page opinion rejected RadioShack’s argument.  The Judge concluded that, while the fluctuating workweek method of compensation “may be lawful under the baseline federal regulation, the same cannot be said as it applies to the more employee-friendly Pennsylvania regulation.”  Thus, the Court held that “RadioShack violated the [Pennsylvania Minimum Wage Act] by not compensating Plaintiff for overtime at ‘1 ½ times’ the basic rate as set forth in their compensation plan” and granted the plaintiff’s motion for summary judgment.”

To date, our firm has recovered millions of dollars for Pennsylvania employees paid under the fluctuating workweek method of overtime compensation.  Most of these employees hold “manager,” “assistant manager,” and “co-manager” positions at retail chains.

If any of your Pennsylvania clients have worked in retail and been paid overtime under the half-time method, we would be very happy to speak with them.

Congress does not seem too motivated to pass a minimum wage increase anytime soon.  This inaction defies public opinion.  According to a recent Gallup Poll, over 76% of Americans favor increasing the federal minimum wage from $7.25/hour to $9.00/hour.

But all is not lost.  When it comes to the minimum wage, the federal Fair Labor Standards Act (“FLSA”) is not the only game in town.  That’s because many states – and even some cities – have their own minimum wage laws.  Nothing prevents state and local legislators from increasing the minimum wage under these laws.  Put differently – for all you lawyers out there – the FLSA’s minimum wage provisions do not “preempt” state and local laws.

A quick survey of the news reveals that several states are taking important steps to increase the minimum wage.  For example, in the first half of 2014, four states – Connecticut, Hawaii, Maryland, and Vermont – increased their minimum wage to over $10.00/hour.  The State of Washington, meanwhile, just increased its minimum wage to $9.47/hour.

Several cities have taken even more aggressive steps.  In June, for example, the Seattle City Council voted to raise the city’s minimum wage to $15.00, while the San Diego City Council recently voted to gradually increase its city’s minimum wage to $11.50/hour over the next few years.  And New York City Mayor Bill de Blasio just signed an Executive Order that will establish a $13.13/hour minimum wage for an estimated 18,000 workers.  These are just a few examples of how local progressives are giving America’s workers a fighting chance.

Many of the Trial Lawyers who read this Newsletter “rub elbows” with state and local officials.  If you are such a creature of politics, here’s a question you might ask your friends:  “What are you doing to increase the minimum wage?”  This is especially true in Pennsylvania and its major cities — Philadelphia and Pittsburgh — where the minimum wage continues to stand at $7.25/hour.

In July 2014, a federal judge in Philadelphia issued an opinion holding that employees can bring suit under the federal Fair Labor Standards Act and the Pennsylvania Wage Payment and Collection Law when their employers fail to pay them for all of their work hours in a timely manner.  In this case, home health aids and homecare workers claimed that their employer – Maxim Healthcare Services, Inc. – violated the law by waiting more than 15 days to pay the employees for all of their work hours for the completed pay period.  As this case demonstrates, employees must both be paid the minimum wage and be paid in on-time.  Late paychecks can be illegal, and Pennsylvania employees who believe their rights have been violated can file a complaint with the Pennsylvania Department of Labor and Industry or can contact our law firm to bring a court case.  We file many Pennsylvania wage complaints and lawsuits.  The case can be found at: Gordon v. Maxim Healthcare Services, Inc., No. 13-cv-07175, 2014 U.S. Dist. LEXIS 95864 (E.D. Pa. July 15, 2014).

The District Court for the District of Maryland recently granted summary judgment on behalf of a plaintiff seeking to recover unpaid wages under the Fair Labor Standards Act (“FLSA”).  See Mould v. NJG Food Serv., 2014 U.S. Dist. LEXIS 111510 (D. Md. Aug. 12, 2014).  In that case, the plaintiff was employed at a restaurant named the “Crab Bag.”  During his employment as a Server, plaintiff was paid a substandard minimum wage of $3.63.  The restaurant used a tip-credit to avoid paying plaintiff the full minimum wage on account of the tips plaintiff received from patrons.  However, plaintiff alleged that the restaurant could not use a tip-credit because of the restaurant’s policy which required him to share a portion of his tips with other employees such as cooks, crab steamers, and prep cooks.  Plaintiff’s argument was that under section 203(m) of the FLSA, the restaurant was prohibited from pooling tips to other employees who do not customarily and regularly receive tips themselves.

Thus, plaintiff alleged that the restaurant’s tip-pooling arrangement which distributed tips to cooks, crab steamers, and prep cooks was illegal and forfeited the restaurant’s use of a tip-credit.  As a result, plaintiff alleged that he should have been paid the full minimum wage for all of his hours worked as a Server.

To determine whether the restaurant’s distribution of plaintiff’s tips to other employees was proper, the Court looked at the job duties of the employees participating in the tip pool.  The Court held that the other employees participating in the tip-pool at best had very limited direct contact with patrons.  The Court stated:  “In sum, at best, some of the kitchen staff occasionally had limited contact with customers. However, it is also clear that those cooks, crab steamers, and prep cooks who were not on ‘counter help’ duty abstained from any direct intercourse with diners, worked entirely outside the view of patrons, and solely performed duties traditionally classified as food preparation or kitchen support work.”

Unfortunately, restaurants throughout Pennsylvania, New Jersey and New York routinely violate the FLSA’s strict rules regarding tip-pooling arrangements.  Current and former tipped employees employed as Servers or Bartenders often do not realize that their employer violated the law in distributing their hard-earned tips to “back of the house” employees such as chefs, kitchen staff, dishwashers, runners, expos or expediters, or even members of management.

On September 9, 2014, the Middle District of Pennsylvania conditionally certified, pursuant to Section 16(b) of the Fair Labor Standards Act, 29 U.S.C. § 216(b), on behalf of the following collective:  All sales employees (including, inter alia, Sales Representatives) employed at the Wyndham Vacation Resorts Shawnee Village Facility in Pennsylvania during any workweek within the past three years.  See Chung v. Wyndham Vacation Resorts, Inc., 2014 U.S. Dist. LEXIS 126156 (M.D. Pa. Sept. 9, 2014).   The sales employees are represented by Winebrake & Santillo in addition to co-counsel Nichols Kaster, PLLP (Minneapolis, MN) and Hawks Quindel, S.C. (Madison, WI).

Below is the contents of the reply brief that was filed by Winebrake & Santillo approximately one week prior to the Court’s conditional certification order:

PLAINTIFFS’ REPLY BRIEF IN FURTHER SUPPORT OF THEIR CONDITIONAL CERTIFICATION MOTION

Plaintiffs have moved for conditional certification of this FLSA collective action, see Docs. 18 and 23, and Wyndham has filed an opposition brief, see Doc. 39.  Plaintiffs reply as follows:

A.   Plaintiffs’ Three Additional Declarations.

Plaintiffs’ original moving papers include declarations from five individuals who worked as Shawnee Facility salespeople and attest to the employment practices challenged in this lawsuit.  See Docs. 23-2.  Plaintiffs now submit three additional declarations.  See Exhibit C.

As indicated, these individuals worked as salespeople, and their declarations are consistent with the five previously submitted declarations.  See Ex. C.  Notably, these individuals list five different supervisors who instructed them to work off-the-clock.

B.   The Conditional Certification Stage is Not the Appropriate Time for the Court to Determine the Credibility of Competing Declaration Testimony.

To date, Plaintiffs have submitted 8 separate declarations in which sales representatives assert that various Sales Managers instructed them to work off-the-clock and/or erased reported overtime hours.  See Ex. A (Doc. 23-2), Ex. C (Doc. 43-1).  In response, Wyndham submits competing declarations.

Simply put, the parties’ competing declarations are irreconcilable.  But that does not prohibit conditional certification because, at the preliminary conditional certification stage, it is premature for the Court to consider or resolve the parties’ competing factual allegations.  There will be ample opportunity to weigh disputed evidence at the post-discovery decertification stage.  As Judge Vanaskie observed:

Where, as here, plaintiffs have adduced sufficient evidence to meet step one’s “extremely lenient standard” for conditional certification, evidence offered by the defendant purporting to show plaintiffs are not similarly situated to absent class members, while significant after discovery and during the step-two analysis, does not compel denial of conditional certification.

Gallagher v. Lackawanna County, 2008 U.S. Dist. LEXIS 43722, *27-28 (M.D. Pa. May 30, 2008); Bonds v. GMS Mine Repair & Maintenance, Inc., 2014 U.S. Dist. LEXIS 89181, *14 (W.D. Pa. July 1, 2014) (“GMS attempts to push the Court towards applying a standard that weighs evidence, finds facts and scrutinizes inconsistencies in the record. This Court declines to do so.”).

Consistent with the above principle, district courts within the Third Circuit repeatedly grant conditional certification notwithstanding employer-generated affidavits/declarations that attack the credibility of the plaintiffs’ evidence.  For example, in Pereira v. Foot Locker, Inc., 261 F.R.D. 60 (E.D. Pa. Sept. 15, 2009), the plaintiff sought conditional certification of an FLSA claim alleging off-the-clock work and time-shaving.  In response, the employer “challenged Plaintiff’s evidence with numerous declarations of putative plaintiffs who claim never to have worked off-the-clock or had their time shaved.”  Id. at 62.  Judge Joyner explained that consideration of the employer’s sworn statements was premature:

Defendant has provided affidavits from putative class members that directly refute Plaintiff’s allegations and detail the individualized circumstances of each person as to their experience with managers.  While this evidence may be significant after discovery and during step two of the process, at this stage, it does not compel us to deny preliminary certification.

Id. at 65 (internal quotations omitted).  Other judges within the Third Circuit agree with Judge Joyner’s approach.  See, e.g., Potoski v. Wyoming Valley Health Care System, 2013 U.S. Dist. LEXIS 177932, *14-15 (M.D. Pa. Dec. 19, 2013) (Caputo, J.) (refusing to consider 8 employer declarations); Goldstein v. Children’s Hospital of Philadelphia, 2013 U.S. Dist. LEXIS 24974, *16-17 n. 4 (E.D. Pa. Feb. 25, 2013) (refusing to consider employer’s “declarations from various department heads”); Goodman v. Burlington Coat Factory, 2012 U.S. Dist. LEXIS 166910, *26 (D.N.J. Nov. 20, 2012) (refusing to consider 38 employer declarations); Williams v. Owens & Minor, Inc., 2009 U.S. Dist. LEXIS 102304, *9 (E.D. Pa. Oct. 9, 2009) (refusing to consider 9 employer declarations); DeAsencio v. Tyson Foods, Inc., 130 F. Supp. 2d 660, 663 (E.D. Pa. 2001) (refusing to consider employer’s “detailed declarations”).[1]

The irrelevance of employer-obtained declarations should come as no surprise to Wyndham.  Recently, in Bitner v. Wyndham Vacation Resorts, Inc., 2014 U.S. Dist. LEXIS 101589 (W.D. Wis. July 25, 2014), Wyndham sales representatives brought an FLSA collective action challenging “Wyndham’s alleged policy of preventing its In-House and Discovery Sales Representatives from recording more than 40 hours in a week” by requiring them to “clock out of Wyndham’s timekeeping system” during the workday and whenever their recorded work hours neared 40 for the week.  See id. at *4.  In opposing conditional certification, Wyndham presented the court with declarations from sales representatives who alleged that they never worked off-the-clock.  See id. at *15, 22.  The district court found that these declarations were premature and irrelevant:

While these declarations suggest that plaintiffs may have an uphill battle ahead of them in proving the merits of their claims, . . . the court resolves all factual disputes in their favor at the conditional certification stage.

Id. at *15.[2]

 

Here, as in Bitner, Wyndham invites the Court resolve the credibility of competing declaration testimony at the conditional certification stage.  Based on the above authority, the Court should decline this invitation.

C.   Wydham’s “Time Record” Evidence Is Unavailing.

Other than the employee declarations, the only evidence presented by Wyndham in opposing conditional certification is a set of timekeeping records for one of the seven Plaintiffs in this case.  See Doc. 39-2.    Wyndham claims these records demonstrate that Plaintiff worked more than 40 hours.  See Def. Br. (Doc. 39) at pp. 2-3, 8.  Wyndham does not explain why it fails to include the time records of the other six plaintiffs.

It should not be too surprising that Plantiff’s time records consistently show less than 40 work hours per week.  Plaintiff, after all, alleges that (i) he regularly worked off-the-clock and (ii) his manager sometimes deleted time from his recorded work hours.  Of course, during the discovery phase of this lawsuit, Plaintiff’s lawyers will learn more about these time records (including how the records are maintained and interpreted).  At the pre-discovery stage, the meaning and importance of these time records is speculative.

More importantly, the extent to which Plaintiff’s time records enhance or undermine his credibility is not an issue the Court needs to resolve at the conditional certification stage.  See Section B supra.  Once again, Wyndham is prematurely presenting credibility arguments.  In Bitner, the district court explained to Wyndham that these same time records are irrelevant at the conditional certification stage.  See Bitner, 2014 U.S. Dist. LEXIS 101589, at *16 n. 4.  This Court should take the same approach.

D.   Wyndham Improperly Focuses on Merits Issues.

Wyndham’s conditional certification opposition focuses almost entirely on merits issues.  For example, one portion of Wyndham’s brief lists nine unresolved issues, see Def. Br. (Doc. 39) at p. 1, and another portion lists seven additional unresolved issues, see id. at pp. 15-16.  These issues – which include, for example, whether “Plaintiffs worked off the clock” and whether “defenses such as unclean hands and equitable estoppel apply” – concern the merits of Plaintiffs’ claims.

The problem for Wyndham is that merits issues – like credibility issues – are not properly before the Court at the conditional certification stage.  As Judge Hornak recently observed, FLSA defendants err when their “arguments against preliminary certification boil down to a generalized position that ‘we will win.’”  Stallard v. Fifth Third Bank, 2013 U.S. Dist. LEXIS 186531, *9 (W.D. Pa. Dec. 12, 2013).  Other judges agree: the ultimate merits of a plaintiff’s claim is irrelevant to the conditional certification analysis.  See, e.g., Vargas v. General Nutrition Centers, Inc., 2012 U.S. Dist. LEXIS 154073, *12 (W.D. Pa. Oct. 26, 2012) (“[t]he thrust of the Court’s inquiry at this juncture . . . ‘is not on whether there has been an actual violation of the law’”); Resch v. Krapf’s Coaches, 2012 U.S. Dist. LEXIS 89993, *6 (E.D. Pa. June 28, 2012) (“the merits of plaintiff’s claims need not be evaluated in order for notice to be approved and disseminated”); Bishop v. AT&T Corp., 256 F.R.D. 503, 507 (W.D. Pa. 2009) (“At this stage, the merits of the Plaintiff’s claims are not addressed”).

Wyndham seems pretty confident that it will win this lawsuit.  Time will tell whether such confidence is warranted.  In the meantime, Wyndham’s emphasis on the merits of its defenses and the purported shortcomings of Plaintiffs’ claims is misplaced at the conditional certification stage.[3]

E.   Wydham’s “Company Policy” Argument is Unavailing.

Like almost every other company sued for permitting uncompensated work and the under-reporting of work hours, Wyndham asserts that its official company policy prohibits such illegal conduct.  See Def. Br. (Doc. 39) at pp. 5-6.  This focus on official company policy is unavailing at the conditional certification stage, as has been explained by Judges Munley and Caputo.  See, e.g., Potoski, 2013 U.S. Dist. LEXIS 177932, at *18-20; Outlaw, 2012 U.S. Dist. LEXIS 108218, at *15-16.  Other judges agree.  See, e.g., Essame v. SSC Laurel Operating Company LLC, 847 F. Supp. 2d 821, 828 (D. Md. 2012); Pereira, 261 F.R.D. at 67.

The above decisions should come as no surprise to Wyndham.  In Bitner, the district court rejected Wyndham’s same argument that its “official” policy against uncompensated work prevented conditional certification.  See Bitner, 2014 U.S. Dist. LEXIS 101589, at *16-17.  Likewise, in Pierce v. Wyndham Vacation Resorts, Inc., 2014 U.S. Dist. LEXIS 116712 (E.D. Tenn. Apr. 24, 2014), the district court conditionally certified analogous off-the-clock FLSA claims brought by Tennessee salespeople, notwithstanding Wyndham’s argument that “it has a strict policy to ensure that all such persons are compensated for their overtime compensation.”  Id. at *4.

Here, as in Bitner and Pierce, Wyndham’s official policy prohibiting uncompensated work should have no bearing on conditional certification.

F.    There Is No “Conflict” Justifying Denial of Conditional Certification.

Wyndham also points out a purported “conflict” that arose when an individual (who worked as both a salesperson and a Sales Manager) opted-in to this lawsuit, seeking damages for a few months in which he worked as a salesperson.  See Def. Br. (Doc. 39) at 22-23.  Wyndham fails to identify any other person who raises a similar conflict.  See id.

Wyndham’s “conflict” argument fails for several independent reasons:

First, the exact same argument already was rejected by the Bitner Court, which cogently observed:  “All of those current and former sales representatives share a common interest in compensation for off-the-clock work allegedly performed in those roles pursuant to Wyndham policy, regardless of whether they have since been promoted to a management position.”  Bitner, 2014 U.S. Dist. LEXIS 101589, at *13.

Second, since this individual has withdrawn as a Plaintiff, see Doc. 38, the argument is moot.

Third, if some person other than this individual worked as both a salesperson and a Sales Manager within the relevant three-year period, the solution to the purported “conflict” would be to exclude that person from the collective, not to deny conditional certification.

G.  Plaintiffs Properly Define the Collective.

At the end of its brief, Wyndham, without citing any legal authority, recites a number of criticisms of Plaintiffs’ proposed collective definition.  See Def. Br. (Doc. 39) at pp. 23-25.  As discussed below, Wyndham’s complaints are misplaced:

First, as explained by Judge Vanaskie and many other judges, Wyndham’s assertion that the FLSA collective period should go back only two years (rather than the three years applicable to “willful” FLSA violations) is repeatedly rejected by district courts.  See Gallagher, 2008 U.S. Dist. LEXIS 43722, at *29-31.

Second, there is no merit to Wyndham’s assertion that the FLSA collective period should end in December 2012 because none of the current Plaintiffs worked after that date.  FLSA collective periods (like Rule 23 class periods) regularly extend beyond the employment dates of the originating class representatives.  Indeed, FLSA collective actions almost always are initiated by former employees (since current employees generally are afraid to file such lawsuits).  Yet, district courts consistently certify collectives that extend beyond the initiating plaintiff’s employment.  Such collective definitions are reflected in many of the cases cited in this brief, and it is no surprise that Wyndham’s same argument has been summarily rejected by Judge Munley.  See Outlaw, 2012 U.S. Dist. LEXIS 108218, at *17-18.

Wyndham also asserts that the collective should be limited to “sales representatives” rather than “sales employees.”  This assertion seemingly concerns semantics rather than substance.  Plaintiffs would be willing to limit the collective to “sales representatives” so long as the parties’ lawyers can reach a mutual understanding of which employees are covered by such terminology.  The undersigned often resolves such issues with adverse counsel prior to the mailing of FLSA notice forms.

Finally, Wyndham asserts that the collective definition should be limited to employees who “have worked more than forty hours per week” and “have been instructed to, and did, report forty or fewer hours per week when they worked more than forty hours in a workweek and/or have had their time records altered to reflect that they worked less time than they recorded.”  Def. Br. (Doc. 39) at p. 25.  This is a classic example of a “circular” class/collective definition that requires the resolution of disputed merits issues (e.g. was the putative collective member “instructed to” under-report hours; did the putative collective member have his “time records altered”) before the notices can even be mailed to the putative class/collective members.  Indeed, if the collective were defined as Wyndham requests, the mailing list produced by Wyndham presumably would be empty, since Wyndham contends that no individuals were subjected to the off-the-clock and time-shaving practices alleged in this lawsuit.  In sum, Wyndham’s proposed collective definition is self-serving and improper.  As the Court will see in reviewing the cases cited in this brief, FLSA collectives generally are defined in an objective manner that enables the putative collective members to be ascertained without nearly so much ambiguity and confusion.  Whether these individuals have meritorious claims can be determined later.

Respectfully,

/s/ Peter Winebrake

Peter Winebrake

R. Andrew Santillo

Mark J. Gottesfeld

WINEBRAKE & SANTILLO, LLC

715 Twining Road, Suite 211

Dresher, PA 19025

 

For Plaintiffs


[1]   Outside of the Third Circuit, district courts similarly disregard employer-generated declarations in deciding conditional certification.  See, e.g., Chastain v. Cam, 2014 U.S. Dist. LEXIS 102465, *14 (D. Or. July 28, 2014); Amador v. Morgan Stanley & Co., 2013 U.S. Dist. LEXIS 19103, *27-30 (S.D.N.Y. Feb. 7, 2013); Creely v. HCR ManorCare, Inc., 789 F. Supp. 2d 819, 839 (N.D. Ohio 2011).

[2]   One might question why Wyndham bothered to gather declarations from 21 current sales representatives even though, in the nearly identical Bitner case, such declarations were deemed irrelevant.  Here is a possible answer to the question:  Wyndham knows that, if conditional certification is granted and notice is issued to the putative collective, none of these 21 employees will be able join the lawsuit (having already sworn out declarations drafted by Wyndham’s lawyers or HR staff).  In essence, Wyndham has preempted the Court-supervised notice process (which is intended to foster transparency and objectivity) by unilaterally notifying at least 21 current employees of the lawsuit through the “declaration-gathering” process.

[3]   Wyndham’s opposition brief also relies on cases decided under the post-discovery “decertification” stage.  See Def. Br. (Doc. 39) at pp. 14-16 (citing Camilotes (N.D. Ill.), Tracy (W.D.N.Y.), and Martin (E.D. Pa.)).  These cases are obviously inapplicable to the instant conditional certification motion.

On August 26, 2014, Winebrake & Santillo filed a brief with the Court of Appeals for the Third Circuit which seeks to reverse a district court’s grant of summary judgment against a Family Dollar Store Manager who alleges that he was misclassified as overtime-exempt under the executive exemption to the overtime premium pay requirements of the Pennsylvania Minimum Wage Act.  See Itterly v. Family Dollar Stores, Inc., 2014 U.S. Dist. LEXIS 12340 (E.D. Pa. Jan. 30, 2014).  Below is the contents of that brief:

I.                  JURISDICTIONAL STATEMENT

The district court had jurisdiction under 28 U.S.C. § 1331.  This Court has appellate jurisdiction under 28 U.S.C. § 1291.

II.               STATEMENT OF THE ISSUE PRESENTED FOR REVIEW

Is the evidence supporting the classification by Defendants/Appellees Family Dollar Stores, Inc. and Family Dollar Stores of Pennsylvania, Inc. (collectively “FD”) of Plaintiff/Appellant Albert Itterly (“Itterly”) as an overtime-exempt “executive” so one-sided that, even after accepting Itterly’s evidence as true and drawing all justifiable inferences in his favor, no reasonable jury could conclude that “management” was not Itterly’s “primary duty”?  [Suggested Answer: No.]

III.           STATEMENT OF THE CASE

A.   Commencement of Itterly’s Lawsuit.

From July 21, 2007 until November 21, 2007, Itterly worked for FD as a salaried store manager (“SM”) in Allentown, PA.  See Joint Appendix (“JA”) at 173a, ¶ 5.  FD classified Itterly as an “executive” exempt from the overtime pay mandates of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., and the Pennsylvania Minimum Wage Act (“PMWA”), 43 P.S. §§ 333.101, et seq.

In March 2008, Plaintiff commenced in the United States District Court for the Eastern District of Pennsylvania (“EDPA”) a “hybrid” class/collective action lawsuit alleging that FD’s classification of him and other Pennsylvania SMs as overtime-exempt violated the FLSA and PMWA.  See JA at 25a-33a.  FD promptly answered, denying all liability.  See id. at 34a-45a.

B.   The JPML Proceedings.

In June 2008, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred Itterly’s lawsuit to the Western District of North Carolina (“WDNC”) to be coordinated with other SM misclassification lawsuits.  See In re Family Dollar Stores, Inc. Wage and Hour Empl. Practices Litig., 545 F. Supp. 2d 1363 (JPML 2008) (transferring initial actions to WDNC).  Thereafter, Itterly’s lawsuit generally sat in limbo for several years, while FD and the MDL “Lead Counsel” focused on other, earlier-filed lawsuits.

Sometime in late-2011, the presiding MDL judge – WDNC Judge Graham Mullen – suggested that lawsuits consisting solely of state law claims could be released from the MDL proceedings and remanded to their originating jurisdictions.  Based on this suggestion, Itterly withdrew his FLSA claim and sought remand to the EDPA.  In February 2012, the JPML granted Itterly’s remand request over FD’s objections.  See In re Family Dollar Stores, Inc. Wage and Hour Empl. Practices Litig., JPML No. 1932, 2012 U.S. Dist. LEXIS 15587 (JPML Feb. 8, 2012).

C.   The Summary Judgment Motion and Opposition.

Upon remand to the EDPA, the district court entered a scheduling order staying all class certification proceedings and class discovery until after the parties completed discovery specific to Itterly’s legal claim and FD moved for summary judgment.  See JA at 46a.  Discovery ensued, and, in August 2012, FD filed its summary judgment papers.  See id. at 47a-178a.

Pursuant to the district court’s individual procedures, FD’s motion included a 35-paragraph statement of purportedly “undisputed” facts.  See JA at 47a-53a.  The record evidence submitted by FD consisted entirely of: (i) Itterly’s deposition transcript, see id. at 54a-170a; (ii) a paralegal’s affidavit describing Itterly’s compensation, work hours, and other basic information, see id. at 171a-174a; and (iii) the job resume Itterly prepared after leaving FD, see id. at 175a-178a.  FD did not submit any evidence from Itterly’s supervisors or coworkers.  See generally id. at 47a-178a.  Nor did FD submit any documents demonstrating Itterly’s purportedly “executive” activities.  See generally id.

In September 2012, Itterly filed his summary judgment opposition.  See JA at 179a-2588a.  Itterly’s opposition included a 37-page counterstatement of facts that responded to each of the factual assertions made in FD’s factual statement.  See id. at 179a-215a.  Itterly’s counterstatement was accompanied by 26 separate exhibits.  See id. at 216a-2588a.

Itterly’s counterstatement served several functions.  First, because FD’s factual statement repeatedly mischaracterized – through selective quotation, etc. – Itterly’s deposition testimony, Itterly was required to “set the record straight” by referencing competing deposition passages and explaining why FD’s characterizations of his testimony were inaccurate.  See, e.g., JA at 179a-215a, ¶¶ 9, 10(a), 11, 11(a), 13, 14(a), 15(a), 15(b), 16, 17(a), 18(a), 19(a), 22, 23, 24(a), 29, 33, 35.  Second, because FD’s factual statement contained many assertions that were contradicted by competing evidence, Itterly was required to introduce and describe the contradictory evidence.  See, e.g., id. at 179a-215a, ¶¶ 10(a), 11(a), 11(b), 11(c), 12(b), 13, 14(c), 15(a), 16, 17(a), 18(a), 18(b), 19(a), 23, 24(d), 24(e), 24(q), 29, 32(a), 32(b), 32(c), 32(d), 32(e), 32(f), 32(h), 33, 34, 35.  Finally, because FD’s factual statement simply ignored many facts relevant to Itterly’s overtime classification, Itterly was required to introduce and describe the ignored evidence.  See, e.g., id. at 179a-215a, ¶¶ 10(b), 11(d), 12(a), 12(c), 13, 14(b), 14(c), 17(b), 17(c), 18(b), 19(b), 19(c), 23, 24(b), 24(c), 24(f), 24(g), 24(h), 24(i), 24(j), 24(k), 24(l), 24(m), 24(n), 24(o), 24(p), 32(g), 35.[1]

In October 2012, FD filed a reply brief that did not attach any new evidence.

D.   The District Court’s Summary Judgment Decision.

The fully-briefed summary judgment motion remained undecided for 15 months.  Then, on January 30, 2014, the district court entered an order and 11-page memorandum granting summary judgment.  See JA at 5a-17a.

Itterly does not take issue with the first six pages of the district court’s opinion.  Therein, the district court: (i) describes Itterly’s legal claim, see JA at 7a; (ii) sets out some uncontroverted facts regarding Itterly’s overtime-exempt classification, work hours, and compensation, see id. at 7a-8a; (iii) describes the summary judgment standard of review, see id. at 8a-9a; (iv) describes the PMWA test for determining whether an employee is an overtime-exempt executive, see id. at 9a-10a (quoting 34 Pa. Code § 231.82); (v) recognizes – per the parties’ agreement – that the FLSA’s definitions of “primary duty” and “management” apply to Itterly’s PMWA claim, see id. at 10a; (vi) recognizes that, to qualify for the executive exemption, Itterly must have “a primary duty consisting of management,” see id. at 11a; and (vii) describes the regulatory definitions of “primary duty” and “management,” see id. at 11a-12a.

Itterly respectfully takes issue with pages 7-8 of the district court’s memorandum.  Therein, the district court concludes that Itterly’s “primary duty” was “management.”  See JA at 13a-14a.  This is an independent requirement of the PMWA’s executive exemption.  See id. at 9a-10a (quoting 34 Pa. Code § 231.82).[2]  The district court’s primary duty discussion – which is the subject of this appeal – is summarized below:

1.     The District Court’s Factual Findings.

The district court’s four-paragraph primary duty analysis contains few factual findings.[3]  In particular:

The first paragraph summarizes – in the most general manner – the parties’ respective arguments.  See JA at 13a.  No factual findings are included in this paragraph.  See id.

The second paragraph contains three broadly-worded factual assertions.  See JA at 13a.  They are: (i) “[Itterly] was performing some non-exempt work in addition to his managerial duties;” (ii) “It is clear that [Itterly] performed non-exempt work when he operated cash registers, unloaded freight, arranged merchandise on shelves, and cleaned the store;” and (iii) “It is also clear that [Itterly] was ultimately responsible for the overall management of the store at all times when he was working.”  Id.

The third paragraph starts out by summarizing – again in the most general terms – the parties’ disagreement regarding the extent to which Itterly’s district manager oversaw his work.  See JA at 14a.  Then, the district court then makes two factual findings: (i) “A district manager was present at [Itterly’s] store about once a week;” and (ii) the district managers “would remain in contact with the store manager through phone and email.”  Id.

The fourth paragraph makes several factual findings regarding Itterly’s pay: (i) Itterly “was the highest paid employee in the store, making $930 per week;” (ii) Itterly’s “compensation was greater than that of his subordinates;” and (iii) Itterly once “received a bonus of $904.75, for which none of the nonexempt employees were eligible.”  JA at 14a.

2.     The District Court’s “Primary Duty” Discussion.

The district court correctly observed that, in determining whether a purported “executive” has “management” as his “primary duty,” the jury should consider the four factors described in 29 C.F.R. 541.700(a).  See JA at 11a-12a.  This regulation provides:

Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

29 C.F.R. 541.700(a).  The district court also correctly observed that Itterly and FD “disagree on each prong of the primary duty analysis.”  JA at 13a.

The district court’s discussion of the four primary duty factors is described below:

The first factor – “the relative importance of the exempt duties as compared with other types of duties” – was neither addressed nor analyzed.  See JA at 13a-14a.

The second factor – “the amount of time spent performing exempt work” – was addressed but not analyzed.  See JA at 13a.  The district court recognized Itterly’s assertion that he “frequently performed non-exempt work” and found that Itterly “was performing some non-exempt work” and “performed non-exempt work when he operated cash registers, unloaded freight, arranged merchandise on shelves, and cleaned the store.”  Id.  But the district court never determined which party benefits from the second factor.  See id.

The third factor – “the employee’s relative freedom from direct supervision” – was addressed but not analyzed.  See JA at 14a.  The district court recognized Itterly’s argument that he “was not free from direct supervision in managing the store, as there was close oversight by the district manager,” and found that a “district manager was present at [Itterly’s] store about once a week” and “would remain in contact with the store manager through phone and email.”  Id.  But the district court never determined which party benefits from the third factor.  See id.

The fourth factor – “the relationship between the employee’s salary and the wages paid to other employees” – was addressed but not analyzed.  See JA at 14a.  The district court accurately recognized the undisputed facts that Itterly received a weekly salary of $930, that his compensation exceeded the compensation of other store employees, and that he once received a $904.75 bonus that other store employees did not receive.  See id.  The district court also stated that the some non-exempt store employees made $8.21/hour, that the highest-ranking non-exempt store employee made $10.00/hour per hour, that FD converts Itterly’s salary to a rate of $14.65/hour, and that Itterly converts his salary to a rate of $12.39/hour.  See id. at 14a n. 2.  But, once again, the district court never determined which party benefits from the fourth factor.  See id. at 14a.

3.     The District Court’s Apparent Justification For Not Analyzing the Four Primary Duty Factors.

The district court apparently decided that a detailed analysis of the four primary duty factors was not required because Itterly purportedly “was ultimately responsible for the overall management of the store at all times when he was working.”  JA at 13a.  The district court did not reference any specific evidence supporting this factual conclusion.  See id.

After making the above factual conclusion, the district court asserted that “[t]his responsibility of overall management is the key factor or outweighs the fact that the plaintiff performed some non-managerial work.”  J.A. at 13a.  The district court did not provide any legal authority for this proposition.  See id.  However, it appears that this “key factor,” in combination with Itterly’s purported “ultimate responsibility” for his store, spelled the end of Itterly’s lawsuit.

4.     The District Court’s Reference to the Western District of North Carolina Decisions.

At the end of its memorandum, the district court observed that, in the MDL proceeding, WDNC Judge Mullen routinely grants summary judgment in favor of FD, and, without providing any analysis or referencing any specific evidence, asserted that these WDNC cases “are very factually similar” to Itterly’s case.  See JA at 15a-16a.

The district court made no mention of Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir. 2008), a frequently-referenced opinion in which the Eleventh Circuit affirmed a $35 million judgment against FD for misclassifying SMs and held that SMs did not have management as their primary duty.

E.   The Instant Appeal.

On January 31, 2014, Itterly filed a notice of appeal from the district court’s summary judgment decision.  See JA at 1a-3a.

IV.            STATEMENT OF FACTS

A.   Itterly’s Position, Pay, and Work Hours.

Although Itterly worked at various FD stores in various positions around the country, this lawsuit concerns his time working as a SM in an Allentown, PA store from July 2007 until November 2007.  See JA at 47a, ¶ 1.  During this time, Itterly was classified as overtime-exempt and received a weekly salary of $930.  See id. at 47a, ¶ 1.  Meanwhile, the non-exempt Assistant Store Managers (“ASM”) assigned to Itterly’s store earned $10/hour.  See JA at 174a, ¶ 10; 179a, ¶ 3 (citing JA at 262a).

Itterly generally worked between 60 and 80 hours per week.  See JA at 213a-214a, ¶ 32(h) (citing JA at 122a).  FD admits that Itterly averaged 63.5 work hours per week.  See id. at 173a, ¶ 7.

B.   Itterly’s Job Responsibilities Are Not Significantly Different from the Job Responsibilities of the Non-Exempt ASMs.

At deposition, Itterly repeatedly explained that virtually all of the purportedly “managerial” tasks he was questioned about also were performed by non-exempt ASMs.  See JA at 184a, ¶ 11(c) (citing JA at 90a; 134a; 140a-141a; 145a; 152a-157a).  This testimony is consistent with FD’s written policies and guidelines, which confirm that SMs generally shared responsibilities with ASMs.  Seeid. at 184a-188a, ¶ 11(d).  In this regard, Itterly provided the district court with 48 separate examples of general tasks/duties that, according to FD’s company documents, can be performed by either the SM or the ASM.[4]

C.   Itterly Spent Virtually All of His Time Performing Manual Labor and Other Non-Managerial Tasks.

Itterly was required to resign his SM position after he injured his back at work.  See JA at 180a, ¶ 6 (citing JA at 58a-60a).  FD refused to allow Itterly to continue working because his back injury prohibited him from lifting anything over 20 pounds or being on his feet for an extended period.  See id. at 212a, ¶ 32(b) (citing JA at 158a).  This is not surprising, given the physical demands of Itterly’s SM employment.  As reflected in FD’s company documents, the SM position “frequently” entails “Climbing,” “Stooping,” “Kneeling,” “Crouching,” “Reaching,” “Pushing,” “Pulling,” “Lifting,” and “Fingering,” and “continuously” entails “Balancing,” “Standing,” and “Walking.”  See id. at 213a, ¶ 32(g) (citing JA at 2586a-2588a).

Itterly’s supervisors referred to him as a “work horse.”  See JA at 213a, ¶ 32(h) (citing JA at 159a-161a).  As Itterly explains: “I mean, they were – they were just saying that I do the physical work, and that’s what they wanted from everybody.”  See id. at 213a, ¶ 32(h) (citing JA at 161a).

FD admits that Itterly performed “non-managerial tasks” such as “operat[ing] cash registers, unload[ing] freight and arrang[ing] merchandise on shelves, and clean[ing] the store.”  See JA at 51a, ¶ 32.  But this is an understatement.  In fact, the evidence reveals that Itterly spent virtually all of his time performing non-managerial tasks.  See generally JA at 211a-214a, ¶¶  32(a)-32(h) (citing JA at 122a; 125a-126a; 127a; 134a; 135a; 140a-141a; 143a; 158a; 159a-161a; 2586a-2588a).

For example, Itterly spent most Fridays unloading inventory from trucks.  See JA at 211a-212a, ¶ 32(a) (citing JA at 125a-126a).  As Itterly explained: “80 percent of the time it was me and the truck driver unloading the truck and it took seven hours.”  Id. at 212a, ¶ 32(a) (citing JA at 126a).  When Itterly complained to his District Manager (“DM”) that he needed help unloading the truck, the DM responded: “if you can’t do it, just quit.”  Id. at 212a, ¶ 32(a) (citing JA at 127a).

During the other six days of the week, Itterly’s basic duties included “putting out freight,” “recovering” (which means re-shelving stray inventory), and “running a register.”   See JA at 212a, ¶ 32(c) (citing JA at 134a).  As Itterly explains: “I was constantly stocking shelves, ringing on a register.  There was nothing that I was doing that was extra special.  I was just trying to keep the store running.”  Id. at 212a, ¶ 32(c) (emphasis supplied) (citing JA at 135a).

During the morning hours, Itterly often was the sole store employee, left alone to work the cash register.  See JA at 212a, ¶ 32(d) (citing JA at 122a and 134a).  Asked about his daily routine, Itterly explains:  “I would get in there so that I could get what little paperwork before the store opened, about ten minute’s worth, get the money to the bank and be ready to start ringing on the register.”  See id. at 212a-213a, ¶ 32(e) (citing JA at 135a).  Later, if Itterly “got lucky,” he would be able “to go start stocking shelves” and to perform other tasks such as “doing planograms” (which means placing merchandise according to FD’s requirements), “sweep[ing]” the store, and “mop[ping]” the floor.  Id. at 213a, ¶ 32(e) (citing JA at 135a).

D.   Itterly’s Store Was Managed By His District Manager.

The Allentown Store was managed by Itterly’s DM.   Under FD’s written policies, the DM’s “Principal Duties and Responsibilities” include “[p]rovid[ing] staff training, development and counsel using [FD] training programs to ensure store operating standards . . . are consistently met.”  JA at 182a, ¶ 10(b) (citing JA at 269a-270a).  DMs also have “direct responsibility for managing and controlling company assets as well as managing and developing employees for future growth,” and are “[r]esponsible for maximizing return on investment, profit and loss, daily operation, planning and development and implementation of marketing plans for both short and long-term sales growth.”  JA at 196a, ¶ 24(b) (citing JA at 269a-270a).  Moreover, DMs must “[a]ssess, evaluate and analyze store and store management performance,” id., and must “[i]nsur[e] appropriate staffing levels for current and projected needs . . .,” id. at 189a, ¶ 12(c) (citing JA at 269a-270a).

FD’s policies and guidelines repeatedly mandate that decisions pertaining to store operations be approved by the DM.  See generally JA at 196a-199a, ¶ 24(c).  Indeed, Itterly provided the district court with 31 separate examples of store-based decisions/tasks that must be approved by the DM.[5]  As these examples demonstrate, DMs oversee even the most minor aspects of store operations.  See, e.g., JA at 332a (DM must approve use of coffee pots and other appliances in the break room).

Itterly’s DM once instructed that Itterly was not expected to make any decisions regarding store operations.  See JA at 199a, ¶ 24(e) (citing JA at 161a-162a).  On two other occasions, the DM told Itterly:  “you’re not paid to think, you’re paid to do.”  Id. at 199a, ¶ 24(e) (citing JA at 162a) (emphasis supplied).

Itterly’s DM communicated with Itterly by e-mail.  See JA at 199a-200a, ¶¶ 24(f)-24(g) (citing JA at 2524a, 2526a-2527a).  Although most emails are not recoverable, see id. at 199a, ¶ 24(f), the few surviving emails confirm that Itterly’s DM micro-managed the Allentown store, see id. at 199a-200a, ¶¶ 24(f)-(g) (citing JA at 2524a, 2526a-2527a).

Itterly’s DM also managed the Allentown Store through FD’s “Anytime 5” Program.  See JA at 201a-202a, ¶ 24(i) (citing JA at 121a, 224a-226a, 240a, 242a, 225a-240a, 246a-250a).  Under this program, all FD stores are evaluated based on over 20 separate criteria.  See id. at 201a, ¶ 24(i) (citing JA at 1388a-1389a).  To ensure compliance, DMs perform “Anytime 5 Visits” and complete detailed “Visit Reports” that are used to score the store’s performance against various grading criteria.  See id. at 201a-202a, ¶ 24(i) (citing JA at 2532a-2533a, 225a-240a, 246a-250a, 253a-259a, 111a-115a, and 124a-130a).  During a typical week, Itterly’s DM made approximately 1-2 Anytime 5 visits to Itterly’s store.  See id. at 201a, ¶ 24(i) (citing JA at 121a).

E.   Itterly Was Required to Follow Corporate Directives that Micro-Managed His Job.

Itterly’s store was subjected to voluminous corporate mandates, directives, policies, and guidelines that eliminated the need for Itterly or any other store employee to exercise managerial judgment or discretion.  The discovery record contains thousands of pages of mandatory guidelines and policies that applied to the Allentown store.  See JA at 205a-210a, ¶ 24(p).  In an effort to synthesize this large body of material, Itterly provided the district court with a list categorizing the materials’ contents into 55 separate topics.[6]

The extent to which these company policies micromanaged Itterly’s day-to-day employment is extraordinary.  For example, Itterly was not even free to arrange the store’s office as he saw fit.  Instead, he was required to comply with “Office Schematics,” which FD describes as “requirements as to how the store office should be arranged and maintained.”  JA at 202a, ¶ 24(j) (citing JA at 701a; 703a-711a).  These Office Schematics dictate matters such as the specific materials (e.g. “[p]encil and penholder” and “[r]ubber bands”) that Itterly must maintain on his desktop, the manner in which clipboards should be maintained, the organization of file drawers, the items that may be hung on the office wall, and the organization of “Task Crates” and “Monthly Retention Files.”  See id. at 202a, ¶ 24(j) (citing JA at 703a-711a).

Itterly also received emails and “Monthly Reminders” from FD executives dictating the need to strictly follow company mandates.  See JA at 200a-201a, ¶ 24(h) (citing JA at 2519a-2522a; 2529a-2530a).  And, each week, Itterly received “Weekly Action Items” in which FD conveyed “direction regarding all aspects of day-to-day operations.”  Id. at 202a-203a, ¶ 24(k) (emphasis supplied) (citing JA at 439a and 2535a-2582a).

Each month, Itterly received store “Schematics” which provided “a blueprint of the physical lay layout of the store merchandise . . . show[ing], by department and category, what types of fixtures are to be used and how the fixtures need to be arranged.”  JA at 203a-204a, ¶ 24(l) (citing JA at 1111a and 151a).  Itterly’s compliance with these schematics was mandatory.  See id. at 203a, ¶ 24(l) (citing JA at 469a; 398a; 1111a; 1112a; 1119a; 2205a).  The store schematics are simply too detailed to describe here.  For example, the schematic for August 2007 numbers 422 pages and covers every conceivable aspect of store set-up and merchandise display.  See id. at 203a, ¶ 24(l).

In addition to the schematics, Itterly was required to follow other monthly merchandising blueprints, such as, for example, a “Promotional Planner” dictating the manner in which promotional items should be displayed and advertised, see JA at 204a, ¶ 24(m), and a “Monthly Sign Kit” dictating the display of store signage and advertisements, see id. at 204a, ¶ 24(n) (citing JA at 1244a-1254a).

F.    Itterly Played No Meaningful Role With Respect to Basic Store Management Decisions.

Itterly played no role in ordering store merchandise.  See JA at 191a-192a, ¶ 17(a) (citing JA 151a-152a).  Itterly also played no role in setting merchandise prices, and his ability to change prices was strictly limited to damaged or outdated merchandise.  See JA at 204a-205a, ¶ 24(o) (citing JA at 1235a and 1237a-1240a).

FD implemented a strict payroll budget that allotted a fixed number of employee hours to Itterly’s Store.  See JA at 192a-193a, ¶¶ 18(a)-(b) (citing JA at 120a; 124a; 269a; 455a; 162a).  Itterly played no role in establishing the payroll budget and was unable to make changes to the payroll budget.  See id. at 192a-193a, ¶¶ 18(a)-(b) (citing JA at 120a; 124a; 162a).  When Itterly requested a change to the payroll budget, his DM responded:  “you’re not paid to think, you’re paid to do.”  JA at 193a, ¶ 18(b) (citing 162a); see also JA at 210a, ¶ 29 (citing JA at 127a) (DM tells Itterly: “if you can’t do it [within allotted payroll hours], just quit”).

Itterly played almost no role in scheduling store employees.  See JA at 188a-189a, ¶¶ 12(a)-(b) (citing JA at 122a-125a; 565a; 1000a-1001a).  Instead, FD sent Itterly a “Staff Scheduler” that outlined the employee schedule for each week.  See id. at 188a, ¶ 12(a) (citing JA at 565a; 1000a-1001a).  Itterly was required to follow the Staff Scheduler.  See JA at 189a, ¶ 12(b) (citing JA at 122a-125a).  As Itterly explains: “The schedule came pre-made, all I did was put names in it.”  Id. at 189a, ¶ 12(b) (citing JA at 122a).

Itterly played no role in deciding the pay rates of store employees.  See JA at 210a, ¶ 24(q) (citing JA at 133a).  When one of the store’s employees asked Itterly for a pay raise, Itterly “told her [he] had no control over that.”  Id. at 210a, ¶ 24(q) (citing JA at 133a).

Itterly played no discernable role in training Store employees.  See JA at 181a-182a, ¶¶ 10(a)-(b) (citing JA at 138a-139a; 145a; 267a).  Moreover, as already noted, the DM has the principal duty and responsibility of training staff.  Id. at 182a, ¶ 10(b) (citing JA at 269a-270a).

Itterly played an extremely limited role with respect to store personnel decisions.  For example, he never demoted an employee or recommended an employee demotion.  See JA at 191a, ¶ 15(a), n. 8 (citing JA at 148a).  On one occasion, Itterly recommended to his DM that a store employee receive a pay raise after informing the employee that he lacked authority to give her the pay raise on his own.  See JA at 190a, ¶ 15(a) (citing JA at 148a-149a).  On one occasion, Itterly completed a two-page “progress review” form.  See JA at 191a, ¶ 15(b) (citing JA at 149a-151a; 2517a).  On one occasion, Itterly spoke to and “wrote-up” an employee about a rule violation after consulting with the DM.  See JA at 191a, ¶ 16 (citing JA at 145a-146a).  Finally, on one occasion, Itterly provided information to his DM that resulted in the DM’s decision to terminate an employee for violations of company rules.  See id. at 191a, ¶ 16 (citing JA at 146a-147a).

Itterly did have discretion to hire cashiers/stockers and provide recommendations as to the hiring of ASMs.  See JA at 211a, ¶ 30 (citing JA at 141a; 773a-777a).  However, Itterly’s involvement in the hiring process took little time.  For example, Itterly spent only one hour per month reviewing job applications and deciding who should be interviewed.  See id. at 213a, ¶ 32(f) (citing JA at 140a-141a).

V.               STATEMENT OF STANDARD OF REVIEW

The district court’s summary judgment decision is subject to de novo review.  See Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008).

VI.            SUMMARY OF ARGUMENT

In resolving a civil defendant’s summary judgment motion, the judicial role is limited.  The judge should not resolve factual disputes.  Rather, the judge must accept the plaintiff’s evidence as true and draw all legitimate inferences in the plaintiff’s favor.  Summary judgment may be granted if – and only if – no reasonable jury could find in the plaintiff’s favor.

Here, the district court violated the above rules.  All agree that Itterly cannot be classified as overtime-exempt unless his “primary duty” is “management.”  The factual record contains substantial evidence that, when construed in Itterly’s favor, enables a reasonable jury to conclude that Itterly’s “primary duty” was not “management.”  Yet, this evidence is generally ignored by the district court.

The district court might prefer FD’s evidence over Itterly’s evidence.  But, at the summary stage, the district court was not empowered to “pick the winner” by weighing disputed evidence in FD’s favor and drawing broad conclusions based on FD’s disputed version of the facts.  A reasonable jury might weigh the evidence differently and might draw different conclusions.  Indeed, in Morgan, supra, a reasonable jury awarded FD store managers over $35 million based on evidence that is similar to the evidence presented by Itterly in this case.

The district court’s two-page “primary duty” discussion is flawed.  Although the district court recognizes the four primary duty factors, it steers clear of stating whether any of the factors can possibly favor Itterly.  It seems like the district court does not want to acknowledge that Itterly can “win” some or all of the factors.  So it just avoids any detailed analysis or discussion.

The district court emphasizes that Itterly “was ultimately responsible for the overall management of the store at all times when he was working.”  JA at 13a.  Even if this factual conclusion was based on undisputed facts – and it certainly was not – the conclusion did not enable the district court to avoid a rigorous primary duty analysis that confronts each of the primary duty factors.  This Court explained as much in Guthrie v. Lady Jane Collieries, Inc., 722 F.2d 1141, 1145 (3d Cir. 1983), and other circuit courts – including the Eleventh Circuit in Morgan – agree.

In sum, viewing this case through the lens of summary judgment, Itterly’s evidence – as well as the legitimate inferences drawn from such evidence – enables a reasonable jury to conclude that Itterly’s primary duty was not management.  As such, summary judgment was improper.

No one can doubt that Judge Stengel is top-notch.  But, in this era of “trial by summary judgment,” even the best judges can go too far.  This Court should reverse.

VII.        ARGUMENT

A.   Overtime Exemptions Are Narrowly Construed. 

Employers bear the burden of proving that employees are overtime-exempt, and such exemptions must be narrowly construed.  See Pignataro v. Port Auth. of New York and New Jersey, 593 F.3d 265, 268 (3d Cir. 2010); Davis v. Mountaire Farms, Inc., 453 F.3d 554, 556 (3d Cir. 2006).  In fact, employers “must prove that the employee . . . comes ‘plainly and unmistakably’ within the exemption’s terms.”  Lawrence, 527 F.3d at 310 (quoting Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S. Ct. 453, 456, 4 L. Ed. 2d 393, 396 (1960)) (emphasis in original).  These basic principles apply to overtime exemption lawsuits arising under the PMWA.  See, e.g., Mudgett v. Univ. of Pittsburgh Med. Center, No. 09-00254, 2010 U.S. Dist. LEXIS 44266, *7-8 (W.D. Pa. May 6, 2010); Baum v. AstraZeneca LP, 605 F. Supp. 2d 669, 674 (W.D. Pa. 2009), aff’d, 372 Fed. Appx. 246 (3d Cir. 2010).

B.   The Proper Summary Judgment Standard.

The Supreme Court very recently reversed an appellate court for “fail[ing] to adhere to the axiom that in ruling on a motion for summary judgment, ‘[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.’”  Tolan v. Cotton, __ U.S. __, 134 S. Ct. 1861, 1863, 188 L. Ed. 2d 895, 897 (2014) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202, 216 (1986)).  The “‘judge’s function’ at summary judgment is not ‘to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.’”  Tolan, 134 S. Ct. at 1866, 188 L. Ed. 2d at 901 (2014) (quoting Anderson, 477 U.S. at 249, 106 S. Ct. at 2511, 91 L. Ed. 2d at 212).  “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, . . .”   Anderson, 477 U.S. at 255, 106 S. Ct. at 2513, 91 L. Ed. 2d at 216.

Put differently, the non-moving party is not required to produce conclusive evidence.  See Cloverland-Green Spring Dairies, Inc. v. Penna. Milk Marketing Bd., 298 F.3d 201, 217 (3d Cir. 2002).  “Instead, it need only offer sufficient evidence for a reasonable jury to find the facts necessary for a decision in its favor.”  Id.

The above safeguards should be strictly followed since summary judgment deprives the non-movant of the chance to present her case to a jury of her peers.  As Justice Black observed:

The right to confront, cross-examine and impeach adverse witnesses is one of the most fundamental rights sought to be preserved by the Seventh Amendment provision for jury trials in civil cases.  The advantages of trial before a live jury with live witnesses, and all the possibilities of considering the human factors, should not be eliminated by substituting trial by affidavit and the sterile bareness of summary judgment.

Adickes v. S. H. Kress & Co., 398 U.S. 144, 176, 90 S. Ct. 1598, 1618, 26 L. Ed. 2d 142, 164-65 (1970) (Black, J., concurring).

“Since the Supreme Court removed the summary judgment procedure from disfavored status in the 1980s, some have observed that the pendulum has swung too far in the opposite direction.”  Doe v. Abington Friends School, 480 F.3d 252, 258 (3d Cir. 2007) (citing Arthur R. Miller, The Pretrial Rush to Judgment, 78 N.Y.U. L.Rev. 982 (2003); Hon. Patricia M. Wald, Summary Judgment at Sixty, 76 Tex. L.Rev. 982 (2003)); see also Melvin v. Car-Freshener Corp., 453 F.3d 1000, 1003-04 (8th Cir. 2006) (Lay, J., dissenting) (“Too many courts in this circuit, both district and appellate, are utilizing summary judgment in cases where issues of fact remain.”); Gallagher v. Delaney, 139 F.3d 338, 342 (2d Cir. 1998) (recognizing “dangers of robust use of summary judgment to clear trial dockets”); In re One Star Class Sloop Sailboat, 517 F. Supp. 2d 546, 555 (D. Mass. 2007) (“Today, commentators are in near unanimous agreement that federal courts overuse summary judgment as a case management tool.”).[7]

C.   The “Primary Duty” Analysis.

The PMWA – like the FLSA – requires that an exempt executive’s “primary duty consisted of the management of the enterprise in which he is employed.”  34 Pa. Code § 231.82(6).  All parties agree that the FLSA definitions of “primary duty” and “management” apply to Itterly’s PMWA claim.  See JA at 11a-12a; see also Baum v. AstraZeneca LP, 372 Fed. Appx. 246, 248 n.4 (3d Cir. 2010) (applying FLSA’s regulatory language to claim arising under PMWA’s “administrative exemption”).[8]  The term “management” includes activities such as:

interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.

29 C.F.R. § 541.102.

The regulations define “primary duty” to mean “the principal, main, major or most important duty that the employee performs.”  29 C.F.R. § 541.700(a).  The regulations also describe four non-exclusive factors that should be considered in determining an employee’s primary duty:

Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

29 C.F.R. § 541.700(a).  Importantly, the employee is not required to demonstrate that she can prevail with respect to every one of these factors in order to defeat summary judgment.  SeeBarreto v. Davie Marketplace, LLC, 331 Fed. Appx. 672, 676 (11th Cir. 2009); Tamas v. Family Video Movie Club, Inc., No. 11-01024, 2013 U.S. Dist. LEXIS 44313, *24 (N.D. Ill. March 28, 2013); In re: Enterprise Rent-a-Car Wage & Hour Litig., MDL No. 2056, 2012 U.S. Dist. LEXIS 136252, *52 (W.D. Pa. Sept. 24, 2012).

Several appellate courts have observed that it should be very difficult for an employer to win summary judgment against an employee who asserts that her “primary duty” was not “management.”  For example, the Tenth Circuit has observed that that “[b]ecause the primary duty determination is a factual one” and because the employer “bears the burden of producing evidence that ‘plainly and unmistakably’ shows that its position is correct, . . . any gaps in the evidence work in plaintiffs’ favor.”  Maestas v. Day & Zimmerman, LLC, 664 F.3d 822, 828-31 (10th Cir. 2012).[9]

D.   The District Court’s Conclusory Finding that Plaintiff was “Ultimately Responsible” for the Store Did Not Excuse It from Thoroughly Analyzing the Four Primary Duty Factors.

The district court’s two-page discussion of the four primary duty factors is cursory.  See JA at 13a-14a.  In this regard, the Court might compare the district court’s discussion to the extensive analysis undertaken by Judge Munley in cases involving store managers employed by Dollar General retail stores.  SeePierce v. Dolgencorp, Inc., No. 09-00097, 2011 U.S. Dist. LEXIS 10624, *2-10, 14-39 (M.D. Pa. Feb. 3, 2011); Plaunt v. Dolgencorp, Inc., No. 09-00084, 2010 U.S. Dist. LEXIS 132135, *2-8, 13-42 (M.D. Pa. Dec. 14, 2010).

Here, the district court did not even consider the first primary duty factor, which required analysis of “the relative importance of the employee’s exempt duties as compared with other types of duties.”  See JA at 13a-14a.  The second, third, and fourth factors – “the amount of time spent performing exempt work,” “the employee’s relative freedom from direct supervision,” and “the relationship between the employee’s salary and the wages paid to other employees” – were mentioned but never resolved by the district court.  See id.  In other words, the district court never addressed whether these factors can weigh in Itterly’s favor.  See id.

It’s hard to know for sure what the district court had in mind.  But it seems the court believed it could avoid a detailed analysis of the four primary duty factors based on its conclusion that Itterly “was ultimately responsible for the overall management of the store at all times when he was working” and that “[t]his responsibility of overall management is the key factor or outweighs the fact that the plaintiff performed some non-managerial work.”  J.A. at 13a.

The district court’s approach cannot be reconciled with Guthrie, supra, wherein this Court explained that an employee’s status as the person “in charge” of an entity’s operations does not automatically resolve the primary duty issue and does not excuse a thorough analysis of the primary duty factors:

Preliminarily, we reject the implication in the district court’s opinion that by merely holding that the foremen were “in charge” of their respective sections, without analyzing the underlying criteria of the relevant regulation, the district court could properly conclude that the regulation’s requirement that the foremen’s primary duty be management had been satisfied. The regulation clearly directs the court’s attention to several factors, which must be considered before a determination of “primary duty of management” may be made. Thus, the regulation requires more than a conclusory leap from a holding of “in charge” to a conclusion that a “primary duty of management” has been established.

Guthrie, 722 F.2d at 1145.[10]

Guthrie’s observations are consistent with Morgan, supra, wherein the Eleventh Circuit rejected FD’s argument that “its store managers were ‘in charge’ of the store, and therefore, exempt as a matter of law.”  Morgan, 551 F.3d at 1271.  The Morgan Court cogently observed:

In answering the primary duty inquiry, courts do not “simply slap[]on a talismanic phrase.”  Family Dollar’s “in charge” label strikes us as a way to bypass a meaningful application of the fact-intensive factors.

Id. at 1272 (quoting Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259, 1264 (11th Cir. 2008)); see alsoAle v. Tennessee Valley Auth., 269 F.3d 680, 691 (6th Cir. 2001) (“The words ‘in charge’ are not a magical incantation that render an employee a bona fide executive regardless of his actual duties.”); Indergit v. Rite Aid Corp., No. 08-09361, 2010 U.S. Dist. LEXIS 32322, *16-19 (S.D.N.Y. March 31, 2010) (store manager’s status as “captain of the ship,” as person “in charge,” and as “highest ranked employee in his store” not relevant to exemption analysis); Kohl v. Woodlands Fire Dept., 440 F. Supp. 2d 626, 634 (S.D. Tx. 2006) (exempt status not determined by “the labels the employee or the employer place on those duties”).

Consistent with the above principles, various circuit courts have held that an employee can be misclassified as overtime-exempt notwithstanding her status as the highest-ranking employee.  See, e.g., Rodriguez, 518 F.3d at 1263-65 (store managers); Jackson v. Go-Tane Services, Inc., 56 Fed. Appx. 267, 268-72 (7th Cir. 2003) (manager of car wash facility); Aaron v. City of Wichita, No. 96-3091, 1997 U.S. App. LEXIS 13039, *11-17 (10th Cir. May 23, 1997) (fire captains); Dept. of Labor v. City of Sapula, 30 F.3d 1285, 1287-88 (10th Cir. 1994) (fire captains).

Likewise, many trial judges reject the notion that retail store managers are overtime-exempt by sole virtue of their position as the person ultimately responsible for store operations.  For example, in Pierce, supra, Judge Munley refused to grant summary judgment against the store manager, even though she “was the leader of the store and was the employee most in charge.”  Pierce, No. 09-00097, 2011 U.S. Dist. LEXIS 10624, at *8; see also Plaunt, No. 09-00084, 2010 U.S. Dist. LEXIS 132135, *7 (SM could be non-exempt even though she “was largely in charge of the store and responsible for its profitability”).

In sum, based on Guthrie and the other decisions discussed above, Itterly’s purported status as the person “ultimately responsible” for the “overall management” of his store did not excuse the district court from undertaking a rigorous analysis of the four primary duty factors.[11]

E.   Even if the District Court Were Correct that an Employee’s  Status as “Ultimately Responsible” for “Overall Management” Did Excuse a Thorough Analysis of the Four Primary Duty Factors, the Factual Conclusion that Itterly Was “Ultimately Responsible” for the “Overall Management” of His Store Is Not Supported By the Undisputed Evidentiary Record.

Even if the district court’s approach to the primary duty analysis was legally valid, it should nonetheless fail because, contrary to the district court’s conclusion, a reasonable jury could conclude that Itterly was not “ultimately responsible for the overall management of the store at all times when he was working.”  JA at 13a.

In this regard, Itterly presented ample evidence that would enable a reasonable jury to conclude that the DM – not Itterly – was ultimately responsible for store operations.  See pp. 14-16 supra.  In addition, to the limited extent Itterly had managerial responsibilities, such responsibilities were shared with the hourly ASM.  See pp. 11-12 supra.[12]  Finally, Itterly played no role in many of the most basic store management functions.  See pp. 19-21 supra.

In sum, when viewed through the lens of summary judgment, the district court’s factual conclusion that Itterly “was ultimately responsible for the overall management of the store at all times when he was working,” JA at 13a, cannot withstand scrutiny.

F.    Summary Judgment Was Improper Because a Reasonable Jury Weighing the Primary Duty Factors Can Conclude that Itterly’s Primary Duty Was Not Management.

As discussed below, when the evidentiary record is viewed through the lens of summary judgment, Itterly’s evidence – as well as the legitimate inferences drawn from such evidence – is sufficient to enable a reasonable jury to conclude that Itterly’s primary duty was not management based on the four primary duty factors:

1.     First Factor:  “The Relative Importance of the Exempt Duties as Compared with Other Types of Duties.”

The first factor – “the relative importance of the exempt duties as compared with other types of duties” – could weigh in Itterly’s favor.  In fact, a reasonable jury easily could conclude that the most “important” aspect of Itterly’s job was his ability to work long hours – an average of 63.5 hours per week – performing manual labor and other routine work.  See p. 11 supra.  In this regard, it is telling that FD terminated Itterly’s employment when he returned from his back injury with doctor’s restrictions prohibiting him from lifting anything over 20 pounds or standing for an extended period.  See p. 12 supra.

The SM position’s emphasis on manual labor is further corroborated in FD’s “Essential Job Functions” document, which recognizes that the SM position “frequently” entails “Climbing,” “Stooping,” “Kneeling,” “Crouching,” “Reaching,” “Pushing,” “Pulling,” “Lifting,” and “Fingering,” and “continuously” entails “Balancing,” “Standing,” and “Walking.”  See p. 12 supra; see also Morgan, 551 F.3d at 1270 (considering FD’s “Essential Job Functions” document in analyzing “relative importance” factor); accord Ely v. Dolgencorp, LLC, 827 F. Supp. 2d 872, 887 (E.D. Ark. 2011).

Itterly was referred to as a “work horse,” see p. 12 supra, and, on two separate occasions, Itterly’s DM told him: “you’re not paid to think, you’re paid to do,” see p. 15 supra.  As Itterly explains: “I mean, they were – they were just saying that I do the physical work, and that’s what they wanted from everybody.”  See pp. 12-13 supra.  Other courts have found such employee testimony important in considering the “relative importance” factor.  See, e.g., Johnson v. Big Lots Stores, Inc., 604 F. Supp. 2d 903, 916 (E.D. La. 2009).

Moreover, almost all of the purportedly “managerial” duties performed by Itterly also were performed by ASMs who were classified as non-exempt and earned $10.00/hour.  See pp. 11-12 supra.  In other dollar store manager cases, courts have found that similarities between the SM and ASM positions weigh in the plaintiff’s favor under the “relative importance” factor.  See, e.g., Ely, 827 F. Supp. 2d at 887; Pierce, No. 09-00097, 2011 U.S. Dist. LEXIS 10624, at *26-27; Myrick v. Dolgencorp, LLC, No. 09-00005, 2010 U.S. Dist. LEXIS 1781, *15-16, n.7 (M.D. Ga. Jan. 11, 2010); see also Johnson, 604 F. Supp. 2d at 916.

FD also imposed a strict and inflexible payroll budget on Itterly’s store.  See p. 19 supra.  This required Itterly – as the Store’s only salaried employee – to work long hours in order to stay within the budget.  See id.  In Morgan, the Eleventh Circuit explained that such evidence weighs in the SM’s favor under the “relative importance” factor.  See Morgan, 551 F.3d at 1270 (“A large amount of manual labor by store managers was a key to FD’s business model given each store’s limited payroll budget and the large amount of manual labor that had to be performed.”); accord Clougher v. Home Depot, 696 F. Supp. 285, 291 (E.D.N.Y. 2010); Ely, 827 F. Supp. 2d at 887-88; Johnson, 604 F. Supp. 2d at 916.

FD also required Itterly to follow detailed directives, policies, and guidelines that eliminated the need for him to exercise managerial judgment or discretion.  See pp. 16-19 supra.  The Morgan Court, in considering the “relative importance” factor, observed that such FD “manuals and other corporate directives micro-managed” virtually all aspects of store operations.  See Morgan, 551 F.3d at 1270.  Here, as in Morgan, a reasonable jury could find that FD’s detailed policies, procedures, and mandates “routinized,” Aaron, 1997 U.S. App. LEXIS 13039, at *17, the SM position and thereby lessened the “relative importance” of Itterly’s management responsibilities.  Other courts have so reasoned.  See, e.g., Ely, 827 F. Supp. 2d at 887-88; Plaunt, No. 09-00084, 2010 U.S. Dist. LEXIS 132135 at *24, 27.

The “relative importance” of Itterly’s management responsibilities is further undermined by evidence that Itterly’s DM closely monitored the store and was required to approve even the most minor decisions.  See pp. 14-16 supra.

The record also establishes that Itterly played no meaningful role in many managerial decisions and functions, such as, for example, scheduling employees, setting employee pay rates, training employees, ordering store merchandise, pricing store merchandise, and arranging merchandise within the store.  See pp. 16-20 supra.  This evidence also weighs in Itterly’s favor under the “relative importance” factor.  See, e.g., Jones v. Dolgencorp, Inc., 789 F. Supp. 2d 1090, 1105-06 (N.D. Iowa 2011).

Finally, FD’s summary judgment motion presented no affirmative evidence other than Itterly’s deposition transcript.  As several courts have observed, an employer seeking to prevail under the “relative importance” factor is expected to present actual evidence from company representatives attesting to the value of the employee’s purportedly managerial work in comparison to the non-managerial work, and the failure to present such evidence is fatal to the employer.  See Myrick, No. 09-00005, 2010 U.S. Dist. LEXIS 1781, at *14-15; Indegrit, No. 08-09361, 2010 U.S. Dist. LEXIS 32322 at *16-18.

In sum, the “relative importance” factor, when viewed through the lens of summary judgment, can favor Itterly.

2.     Second Factor:  “The Amount of Time Spent Performing Exempt Work.”

This second factor – “the amount of time spent performing exempt work” – usually involves disputed facts, making the factor’s resolution at the summary judgment stage inappropriate.  SeeJones, 789 F. Supp. 2d at 1104; Indegrit, No. 08-09361, 2010 U.S. Dist. LEXIS 32322, at *21-24.  This is such a case.

The record evidence surely enables a reasonable jury to conclude that the “amount of time” factor weighs in Itterly’s factor.  As Itterly testified:  “I was constantly stocking shelves, ringing on a register. There was nothing that I was doing that was extra special. I was just trying to keep the store running.”  See p. 13 supra (emphasis supplied); see also pp. 13-14 supra (summarizing other testimony).  This account of Itterly workday is consistent with:  (i) FD’s own assessment of the physical demands of the SM position, see p. 12 supra; (ii) FD’s refusal to permit Itterly to return to work with restrictions limiting his ability to perform certain physical labor, see id.; and (iii) the fact that FD management referred to Itterly as a “work horse” and told him “you’re not paid to think, you’re paid to do,” see pp. 12, 19 supra.  Indeed, FD admits that Itterly performed “non-managerial tasks” such as “operat[ing] cash registers, unload[ing] freight and arrang[ing] merchandise on shelves, and clean[ing] the store.”  JA at 51a, ¶ 32.

As significantly, FD failed to provide the district court with any affirmative analysis or evidence demonstrating the amount of time Itterly spent performing managerial versus non-managerial tasks. [13]  See JA at 47a-51a.  This failure is fatal to FD.  As the party bearing the heavy burden of proof, FD – not Itterly – was required to demonstrate how Itterly actually spent his time.  See Morgan, 551 F.3d at 1269-70; Ely, 827 F. Supp. 2d at 833; Jones, 789 F. Supp. 2d at 1104; McKinney v. United Stor-All Centers, 656 F. Supp. 2d 114, 131 (D.D.C. 2009).

In sum, the “amount of time” factor, when viewed through the lens of summary judgment, can favor Itterly.

3.     Third Factor:  Itterly’s “Relative Freedom from Direct Supervision.”

In addressing the third primary duty factor – “relative freedom from direct supervision” – the district court acknowledged Itterly’s argument that he “was not free from direct supervision in managing the store, as there was close oversight by the district manager,” and found that a “district manager was present at [Itterly’s] store about once a week” and “would remain in contact with the store manager through phone and email.”  JA at 14a.  These factual findings seem to favor Itterly.  Yet, as with the other factors, the district court never said so.  See id.

In Morgan, the Eleventh Circuit found that the “relative freedom from direct supervision” factor weighed in favor of the plaintiff SMs:  “Indeed, ample evidence showed that the combination of sweeping corporate micro-management, close district manager oversight, and fixed payroll budgets left store managers little choice in how to manage their stores and with the primary duty of performing manual, not managerial, tasks.”  Morgan, 551 F.3d at 1271.

Here, the record contains all of the evidence listed by the Morgan Court:

First, the record contains ample evidence of corporate oversight and micro-management, as indicated by, inter alia, detailed emails from company executives, office schematics, weekly action items, store schematics, promotional planners, and thousands of pages of directives and guidelines.  See pp. 16-19.  The detailed nature of these materials is extraordinary, enabling a reasonable jury to easily conclude that such corporate directives impeded Itterly’s ability to supervise as he saw fit.  See id.  Moreover, Itterly had no say over the most fundamental aspects of retail management, including, inter alia, scheduling employees, setting employee pay rates, training employees, ordering store merchandise, pricing store merchandise, and arranging merchandise within the store.  See pp. 16-20 supra.  Various courts – in addition to the Morgan Court – have deemed such evidence of corporate oversight significant in addressing the “relative freedom from direct supervision” factor.  See, e.g.Johnson, 604 F. Supp. 2d at 917; Davis v. Wal-Mart Stores, Inc., No. 10-00068, 2010 U.S. Dist. LEXIS 95172, *20 (M.D. Ala. Sept. 13, 2010); Hale v. Dolgencorp, Inc., No. 09-00014, 2010 U.S. Dist. LEXIS 62384, *14 (W.D. Va. June 23, 2010).

Second, as in Morgan, the record contains detailed evidence of close DM oversight.  Indeed, FD’s own company policies state that the DM is generally responsible for overseeing the stores and ensuring their profitability.  See pp. 14-15 supra.   Moreover, the evidence reveals that Itterly’s DM closely managed Itterly through a combination of verbal dress-downs, aggressively-worded emails, and weekly “Anytime 5 Visits” to Itterly store.  See pp. 15-16, 19 supra.  As Itterly’s own DM instructed:  “you’re not paid to think, you’re paid to do.”  See p. 19 supra.  Such evidence of DM oversight clearly favors Itterly under the “freedom from supervision” factor.  See, e.g., Jones, 789 F. Supp. 2d at 1108-09; Kanatzer v. Dolgencorp, Inc., No. 09-00074; 2010 U.S. Dist. LEXIS 67798, *15-16 (E.D. Mo. July 8, 2010); Hale, No. 09-00014, 2010 U.S. Dist. LEXIS 62584 at *16; Myrick, No. 09-00005, 2010 U.S. Dist. LEXIS 1781 at *19-22; Smith v. Heartland Automotive Services, Inc., 418 F. Supp. 2d 1129, 1137-38 (D. Minn. 2006).

Third, as in Morgan, the fixed payroll budget left Itterly with very limited ability to assign non-managerial work to hourly employees.  See pp. 19-20 supra.

In sum, the “relative freedom from direct supervision” factor, when viewed through the lens of summary judgment, can favor Itterly.

4.     Fourth Factor:  “The Relationship Between the Employee’s Salary and the Wages Paid to Other Employees.”

The fourth factor – “the relationship between the employee’s salary and the wages paid to other employees” – was mentioned but not analyzed by the district court.  See JA at 14a.  As discussed below, an actual analysis would have revealed that a reasonable jury could find in Itterly’s favor regarding this factor.

In Guthrie, this Court’s primary duty analysis required a comparison between the salaries paid to allegedly exempt foremen and the day-rates paid to non-exempt crew members.  See Guthrie, 722 F.2d at 1146.  In performing this analysis, the Guthrie Court determined the amount of pay (including overtime) the crew members would have made if they worked as many hours as the foremen.  See id.  The Court then compared this amount to the salaries received by the foremen.  See id.

Guthrie’s general approach, which accounts for the overtime hours actually worked by the plaintiff, is consistent with the approach taken by other courts.   See Morgan, 551 F.3d at 1271; In re: Enterprise Rent-a-Car Wage & Hour Litig., MDL No. 2056, 2012 U.S. Dist. LEXIS 100445, *61-64 (W.D. Pa. July 19, 2012); Plaunt, No. 09-00084, 2010 U.S. Dist. LEXIS 132135, at *37-41; Davis, No. 10-00068, 2010 U.S. Dist. LEXIS 95172, at *21; Hale, No. 09-00014, 2010 U.S. Dist. LEXIS 62584, at *17-18.

According to FD, Itterly was employed at the Allentown store for the 18-week period between July 21, 2007 and November 24, 2007, worked an average of 63.5 hours per week, received a weekly salary of $930, and received a $904.75 bonus.  See JA at 173a, ¶¶ 5-7.  Assuming that the entire $904.75 bonus is attributable to Itterly’s 18 weeks at the Allentown store, the bonus enhances Itterly’s salary by approximately $50 per week [$904.75/18 = $50.26].  This elevates Itterly weekly salary to $980 [$930 + $50].

It is undisputed that the hourly, non-exempt ASMs working with Itterly at the Allentown store were paid $10/hour.  See p. 11 supra.  Thus, if an ASM worked Itterly’s average workweek of 63.5 hours, he would have been paid $752.50 [($10 X 40 regular hours) + ($15 X 23.5 overtime hours)].  Based on this analysis, during an average workweek, Itterly’s pay of $980 equals 130% of the ASM’s pay of $745.

Itterly’s weekly pay of $980 also converts to an “effective” hourly rate of $13.02 during an average 63.5-hour workweek.  See In re: Enterprise, MDL No. 2056, 2012 U.S. Dist. LEXIS 100445, *61-64 (discussing methodology and formula for converting salary to effective hourly rate).  This makes Itterly’s effective hourly rate $3.02 greater than the $10/hour rate paid to ASMs.

Whether analyzed as a weekly salary of as an effective hourly rate, a reasonable jury can conclude that the fourth primary duty factor weighs in Itterly’s favor.  For example, in Morgan, the Eleventh Circuit characterized as “relatively small” a “two or three dollar[]” difference between the effective hourly rates paid by FD to SMs and ASMs.  See Morgan, 551 F.3d at 1271; see also Smith, 418 F. Supp. 2d at 1139-40 (finding that, under fourth primary duty factor, jury could find in favor of store managers whose effectively hourly wage exceeded pay of non-exempt assistant store managers by up to $5.68); Jones, 789 F. Supp. 2d at 1110-11 (same where hourly wage difference was $2.20); Ely, 827 F. Supp. 2d at 892-93 (same where plaintiff store manager made 27% more than non-exempt assistant store manager).

It is unclear how a reasonable jury might view the difference between Itterly’s compensation and the compensation that hourly ASMs would have received for working the same hours.  This will be a hotly disputed issue at trial, and the outcome will depend on the persuasiveness of each party’s evidence, their presentation, and the jury members’ predilections and life experiences.  But that is the whole point of a jury trial.

For purposes of summary judgment, the question is whether, based on Itterly’s evidence, a reasonable jury could possibly weigh the fourth factor in Itterly’s favor.  Because the answer to this question is “yes,” the fourth factor weighs against summary judgment.[14]

5.     Summary of the Primary Duty Factors.

In sum, viewing this case through the lens of summary judgment, Itterly’s evidence – as well as the legitimate inferences drawn from such evidence – is sufficient to enable a reasonable jury to conclude that Itterly’s primary duty was not management.  As such, summary judgment was not warranted.

G.  The Western District of North Carolina Decisions Should Carry Little Weight.

At the end of its memorandum, the district court observed that, in the MDL proceeding, WDNC Judge Graham Mullen routinely grants summary judgment in favor of FD.  See JA at 15a-16a.  As discussed below, these decisions should carry little weight here in the Third Circuit.

Judge Mullen routinely grants FD’s summary judgment motions based on the general viewpoint that, under the Fourth Circuit’s decision in In re Family Dollar FLSA Litig., 637 F. 3d 508 (4th Cir. 2011), it is virtually impossible for a SM to get to trial.  When this Court reads some of Judge Mullen’s decisions, it will see that the amount of time SMs spend performing manual labor at their stores does not matter.  Even SMs who spend over 90% of their time performing manual labor cannot take their case to a jury.  This is because Judge Mullen generally adopts the draconian position that SMs, by virtue of their position as the store’s highest-ranking employee, are always managing the store regardless of their actual activities.  This viewpoint essentially renders the second primary duty factor meaningless.  Likewise, Judge Mullen always finds the other factors to favor FD regardless of the particulars.  Facts that sway other judges – e.g. the existence of DM oversight or the application of directives that routinized the SM position – are inconsequential in the WDNC.[15]

More importantly, Judge Mullen’s approach to the primary duty analysis cannot be squared with the approach this Court articulated in GuthrieSee p. 30 supra.  Nor can the analysis be reconciled with the Eleventh Circuit’s Morgan opinion.  In fact, in almost every opinion, Judge Mullen explicitly states that he gives Morgan absolutely not weight.  Meanwhile, other judges from throughout the country – including Judge Munley in the Pierce and Plaunt cases and Chief Judge Conti in the Enterprise cases – continue to rely upon Morgan as pursuasive authority.

It also is notable that FD does not fare nearly so well outside of the WDNC.  For example, a Connecticut state court recently denied FD’s summary judgment motion in an SM misclassification lawsuit.  See Cook v. Family Dollar Stores of Conn., Inc., No. 116011946, 2013 Conn. Super. LEXIS 1016 (Conn. Super. May 22, 2013).  In other cases, FD has reached class action settlements with the SM plaintiffs.  See, e.g., Farley v. Family Dollar Stores, Inc., No. 12-00325 (D. Colo. July 21, 2014) at Doc. 128 (preliminarily approving class action settlement in misclassification lawsuit covering Colorado SMs); Youngblood v. Family Dollar Stores, Inc., No. 09-cv-03176 (S.D.N.Y. June 7, 2013) at Doc. 162 (approving class action settlement in misclassification lawsuit covering New York SMs).

In sum, the district court should not have been influenced by Judge Mullen’s various opinions.

VIII.    CONCLUSION

For the above reasons, the district court’s summary judgment order should be reversed, FD’s summary judgment motion should be denied, and this lawsuit should be remanded to the district court for further proceedings.

Respectfully submitted,

/s/ Peter Winebrake

Peter Winebrake

R. Andrew Santillo

Mark Gottesfeld

Winebrake & Santillo, LLC

715 Twining Road, Suite 211

Dresher, PA 19025

(215) 884-2491

 Attorneys for Plaintiff/Appellant


[1]   In a nutshell, FD’s factual statement made little effort to present “undisputed” facts in a fair, complete, or accurate manner.  Instead – as is often the case in federal summary judgment practice – the factual statement included many conclusory assertions that were not supported by the referenced evidence and/or were contradicted by competing record evidence.

[2]   The PMWA’s “executive” exemption also requires that the employee’s work “includes the customary and regular direction of the work of two or more other employees.”  See JA at 9a-10a (quoting 34 Pa. Code § 231.82(6)).  At page 9 of its memorandum, the district court held that FD satisfied this requirement.  See id. at 15a.  Itterly does not appeal from this holding.  This requirement generally is satisfied by retail employers, since it merely requires that the exempt employee’s store location be staffed with two or more other employees who worked a total of over 80 hours per week.  See id.

[3]   Nor are there any significant factual findings in the first six pages of the memorandum.  See JA at 7a-12a.

[4]   See JA at 184a-188a, ¶ 11(d) (citing JA at 280a; 281a; 283a; 287a; 290a-292a; 332a; 418a-419a; 423a; 424a; 425a; 428a; 429a; 430a; 431a-432a; 440a; 502a; 525a-527a; 542a; 546a; 548a; 557a; 585a; 587a; 602a; 610a-611a; 619a; 630a; 631a; 632a; 634a; 655-660a; 730a; 733a; 738a; 756a; 1397a-1399a; 1399a-1400a; 1404a-1405a; 1408a; 1417a; 1441a; 1451a; 1459a; 1461a; 1467a-1478a; 1485a-1486a; 1487a-1490a; 1491a-1492a; 1493a; 1494a; 1498a-1500a; 1501a; 1512a; 1534a; 1547a; 1581a; 1591a-1592a).

[5]   See JA at 196a-199a, ¶ 24(c) (citing JA at 280a; 281a; 282a; 284a; 312a; 313a; 320a; 327a; 339a; 347a; 356a; 358a-359a; 361a-362a; 380a; 398a; 428a; 429a; 441a; 450a; 451a; 468a; 490a; 532a; 533a; 539a-540a; 542a; 550a; 631a; 647a; 649a; 652a; 664a; 675a-676a; 691a; 745a; 763a; 962a; 966a; 1112a; 1197a; 1203a; 1204a; 1541a; 1543a; 2205a).

[6]   See JA at 205a-210a, ¶ 24(p) (citing JA at 280a; 281a-284a; 285a-286a; 287a-288a; 290a-307a; 307a-324a; 325a-327a; 328a; 329a-331a; 331a-332a; 332a-349a; 337a-339a; 339a; 342a; 344a-345a; 345a-346a; 353a-364a; 366a-381a; 376a-377a; 383a-391a; 393a-398a; 401a-413a; 418-422a; 423a-432a; 428a-429a; 433a; 440a-445a; 446a-448a; 449a-450a; 451a-452a; 455a; 456a; 457a; 458a-460a; 465a-480a; 499a- 501a; 522a-532a; 532a-540a; 541a-546a; 547a-549a; 550a-551a; 575a-582a; 585a-598a; 610a-612a; 614a-625a; 630a; 632a; 634a; 673a-685a; 686a-694a; 698a-713a; 723a; 726a-747a; 750a-765a; 770a-846a; 850a-939a; 943a-952a; 955a-986a; 991a-994a; 995a-1005a; 1007a-1068a; 1079a-1092a; 1095a-1106a; 1108a-1121a; 1124a-1139a; 1144a-1152a; 1156a-1169a; 1172a-1183a; 1188a-1206a; 1208a-1229a; 1232a-1242a; 1244a-1255a; 1256a-1282a; 1284a-1302a; 1306a-1367a; 1323a; 1359a-1367a; 1380a; 1393a-1510a;1406a; 1407a; 1418a-1419a; 1428a-1440a; 1437a-1440a; 1465a-1478a; 1479a-1480a; 1487a-1490a; 1502a-1506a; 1511a-1514a; 1515a-1518a; 1519a-1539a; 1547a-1549a; 1553a-1562a; 1561a-1566a; 1563a; 1589a; 1590a-1592a; 1593a-1595a; 1599a-1615a; 1616a-1624a; 1625a-1688a; 1640a-1641a; 1642a-1643a; 1645a; 1671a-1673a; 1674a-1677a; 1681a; 1689a-1695a; 1696a-1710a; 1719a-1725a; 1726a-1735a; 1736a-1755a; 1756a-1783a; 1793a-1802a; 1803a-1820a; 1821a-1829a; 1840a-1871a; 1850a-1872a; 1874a-1881a; 1885a-1895a; 1937a-1949a; 1951a-1956a; 1966a-1993a; 1996a-2002a; 2003a-2021a; 2103a-2107a; 2023a-2039a; 2042a-2076a; 2077a-2092a; 2109a-2115a;  2117a-2131a; 2124a-2131a; 2133a-2182a; 2159a-2182a; 2179a-2219a; 2183a-2186a; 2187a-2202a; 2203a-2216a; 2222a-2246a; 2234a-2236a; 2237a-2246a; 2312a-2415a; 2337a-2460a; 2355a-2361a; 2417a-2426a; 2463a-2515a).

[7]   For an insightful discussion of the overuse of summary judgment in employment rights lawsuits, the Court is referred to Northern District of Iowa Judge Mark W. Bennett’s 2013 essay: From the “No Spittin’, No Cussin’ and No Summary Judgment” Days of Employment Discrimination Litigation to the “Defendant’s Summary Judgment Affirmed Without Comment” Days: One Judge’s Four-Decade Perspective, N.Y.L. Sch. L. Rev. 685 (2012-13).  Also, the Court might be interested in three recent decisions in which circuit courts have used especially strong language in reversing imprudently granted summary judgment motions.  See Suchanek v. Sturm Foods, Inc., No. 13-3843, 2014 U.S. App. LEXIS 16259, *27-33 (7th Cir. Aug. 22, 2014); Malin v. Hospira, Inc., No. 13-2433, 2014 U.S. App. LEXIS 15243, *30-32 (7th Cir. Aug. 7, 2014); Feliciano v. City of Miami Beach, 707 F.3d 1244, 1252-54 (11th Cir. 2013).

[8]   Where the PMWA’s statutory or regulatory language differs from the FLSA’s language, courts do not automatically apply the FLSA language to PMWA claims.  See, e.g., Bayada Nurses, Inc. v. Pennsylvania, 8 A.3d 866 (Pa. 2010).  All agree that the instant appeal is not present such a case.

[9]   Indeed, circuit courts do not hesitate to reverse summary judgment rulings where the evidence enables a reasonable jury to weigh the primary duty factors in the employee’s favor.  See, e.g., Taylor v. AutoZone, Inc., No. 12-15378, 2014 U.S. App. LEXIS 8852, *2-4 (9th Cir. May 12, 2014); Barreto, 331 Fed. Appx. at 673-76; Ward v. Park Avenue Exploration Corp., No. 94-6157, 1994 U.S. App. LEXIS 36093, *4-10 (10th Cir. Dec. 21, 1994).

[10]   In reviewing Guthrie and some of the other “primary duty” decisions, the Court will note that, prior to 2004, there were five primary duty factors, which were described at 29 C.F.R. § 541.103.  After the 2004 regulatory revisions, the primary duty factors were reduced to four and moved to 29 C.F.R. § 541.700(a).

[11]   Also, the district court’s assertion that “overall management” is the “key factor” in the primary duty analysis ignores the plain language of the primary duty regulation, which makes absolutely no mention of a fifth “overall management” factor.  See 29 CFR § 541.700(a).

[12]   Although not referenced in the district court’s memorandum, FD’s summary judgment papers included a copy of Itterly’s resume, which contains a general description of his role as an SM in various different states during a five-year time-span.  See JA at 48a, ¶ 7 (citing JA at 176a-178a).  The district court was correct to put little or no weight on this resume.  Courts in overtime rights lawsuits repeatedly hold that job descriptions in resumes are not particularly relevant to determining the primary duty of a plaintiff’s job.  See, e.g., Schaefer v. Indiana Michigan Power Co., 358 F.3d 394, 400-01 (6th Cir. 2004); Ale, 269 F.3d at 689 n. 2 (6th Cir. 2001); Morrison v. Ocean State Jobbers, Inc., No. 09-01285, 2013 U.S. Dist. LEXIS 40010, at *45 n.10 (D. Conn. Mar. 22, 2013); Boring v. World Gym-Bishop, Inc., No. 06-03260, 2009 U.S. Dist. LEXIS 21061 (N.D. Ill. Mar. 17, 2009); Wolfslayer v. IKON Office Solutions, Inc., No. 03-06709, 2005 U.S. Dist. LEXIS 1106, *29 (E.D. Pa. Jan. 26, 2005).

[13]   In its summary judgment brief, FD asserted that Itterly “concurrently” managed while he performed some of his non-managerial work.  However, FD’s entire factual basis for this assertion turned out to be a reference to purported testimony that, while unloading the truck, Plaintiff would be on the lookout for drivers stealing merchandise.  See JA at 214a, ¶ 33 (citing JA at 126a).  This was not too significant, since all FD store employees are required to prevent theft.  See JA at 194a-195a at ¶¶ 19(b)-(c).

[14]   Moreover, even of this Court holds that no reasonable jury could weigh the “pay comparison” factor in Itterly’s favor, disputed facts with respect to the other three factors would still preclude summary judgment.  See Barreto, 331 Fed. Appx. at 676; Tamas, No. 11-01024, 2013 U.S. Dist. LEXIS 44313, at *24; Enterprise, MDL No. 2056, 2012 U.S. Dist. LEXIS 136252, at *52.

[15]   This brief references various store manager cases in which employers’ summary judgment motions have been denied.  Itterly submits that, under Judge Mullen’s approach to the evidence, the great majority of these cases would be decided in favor of summary judgment.  As a general matter, there simply is no way to reconcile the WDNC decisions with these other decisions from throughout the country.

Our firm continues to have success representing Pennsylvania retail workers who receive half-time pay (instead of full time-and-one-half pay) for their overtime work.  This overtime pay method most commonly applies to salaried employees who hold “manager,” “assistant manager,” and “c0-manager” positions.  This method of calculating overtime is referred to as “half-time pay” or “fluctuating workweek pay.”  Some workers and supervisors refer to the payment method as “Chinese overtime.”

Our firm has successfully argued that Pennsylvania law prohibits the half-time method of calculating salaried employees’ overtime pay.  This past July, a federal Judge in Philadelphia agreed with our argument held that RadioShack violated Pennsylvania law by paying its managers under the half-time method:

http://www.bloomberg.com/news/2014-07-11/radioshack-found-liable-in-pennsylvania-overtime-lawsuit.html

To date, we have recovered millions of dollars for employees paid under the half-time method.  And we are continuing to investigate companies that may be using this method.

If you are a current or former Pennsylvania salaried employee who has been paid under the half-time method, we would be happy to speak with you to determine whether you may have a viable legal claim.  Just give is a call at 215-884-2491 for a completely free and totally confidential consultation with one of our attorneys.

We’ve been noticing that more and more federal judges presiding over FLSA collective actions have been tolling the running of the statute of limitations where the defendants’ litigation tactics delay the court’s resolution of the plaintiff’s conditional certification motion.  Here is a string cite we recently put together listing some of the better cases:  In other FLSA collective actions, district courts toll the running of the limitations period where the defendant’s litigation tactics have delayed conditional certification proceedings.  See, e.g., Kellgren v. Petco Animal Supplies, Inc., 2014 U.S. Dist. LEXIS 78456, *12-14 (S.D. Cal. June 6, 2014) (tolling where conditional certification delayed by defendant’s motion to dismiss); Lorenzo v. Prime Communications, Inc., 2014 U.S. Dist. LEXIS 93123, *5-10 (E.D.N.C. May 8, 2014) (tolling where conditional certification delayed by defendant’s refusal to produce discovery and attempt to compel arbitration); Curless v. Great American Real Food Fast, Inc., 280 F.R.D. 429, 434-35 (S.D. Ill. 2012) (tolling where conditional certification delayed by defendant’s failure to produce discovery); Bolletino v. Cellular Sales of Knoxville, Inc., 2012 U.S. Dist. LEXIS 112132, *8-12 (E.D. Tenn. Aug. 9, 2012) (tolling where conditional certification delayed by defendant’s motion to dismiss); Mitchell v. Acosta Sales, LLC, 841 F. Supp. 2d 1105, 1120 (C.D. Cal. 2011) (tolling where conditional certification delayed by defendant’s motion to consolidate and stay); Yahraes v. Restaurant Associates Events Corp., 2011 U.S. Dist. LEXIS 23115, *9-10 (E.D.N.Y. March 8, 2011) (tolling where conditional certification delayed by defendants’ “re-briefing the certification motion, [attempt] to defer certification in anticipation of dispositive motions, and fail[ure] to produce documents”); Stickle v. SCI Western Support Center, L.P., 2008 U.S. Dist. LEXIS 83315, *61-67 (D. Ariz. Sept. 30, 2008) (tolling where conditional certification delayed by defendant’s motion to dismiss); Adams v. Inter-Con Security Systems, Inc. 242 F.R.D. 530, 542-43 N.D. Cal. 2007) (tolling where notice delayed by defendant’s failure to provide list of collective members).  In fact, some judges have even tolled the FLSA limitations period where the delays in deciding conditional certification are not even attributable to defendant’s conduct or tactics.  See, e.g., Jackson v. Bloomberg, L.P., 298 F.R.D. 152, 170-71 (S.D.N.Y. 2014); Engel v. Burlington Coat Factory Direct Corp., 2013 U.S. Dist. LEXIS 130513, *2-6 (S.D. Ohio Sept. 12, 2013); McGlone v. Contract Callers, Inc., 867 F. Supp. 2d 438, 445 (S.D.N.Y. 2012); Ruffin v. Entertainment of the Eastern Panhandle, 2012 U.S. Dist. LEXIS 1511, *2-9 (N.D.W.V. Jan. 5, 2012); Helton v. Factor 5, Inc., 2011 U.S. Dist. LEXIS 136170, *6-8 (N.D. Cal. Nov. 28, 2011).

Winebrake & Santillo recently filed a brief with the Third Circuit Court of Appeals arguing that it should affirm the summary judgment decision on behalf of delivery drivers for Eastern Armored Services, Inc in New Jersey.   The district court ruled that named plaintiff Ashley McMaster was not exempt under the Motor Carrier Act Exemption to the Fair Labor Standards Act and entitled to overtime premium pay because she drove vehicles with gross vehicle weight ratings both above and below 10,000 pounds.  See McMaster v. Eastern Armored Servs., Inc., 2013 U.S. Dist. LEXIS 42721 (D.N.J. Mar. 26, 2013).  Oral arguments are currently scheduled for October 23, 2014.  A copy of the brief is below:

I.                  STATEMENT OF ISSUE PRESENTED FOR REVIEW

Did the district court correctly interpret Section 306(c)(2) of the SAFETEA-LU Technical Corrections Act of 2008 (“TCA”) to find that Plaintiff/Appellee Ashley McMaster (“McMaster”) did not fit within the Motor Carrier Exemption to the Fair Labor Standards Act’s overtime pay mandate.

II.               STATEMENT OF CASE

A.   Relevant Facts

Defendant/Appellant Eastern Armored Services, Inc. (“Eastern”) provides “armored courier transport, same day credit, cash / coin processing, vaulting services, [and] customer security consulting” services in New Jersey, Pennsylvania, New York City, and Delaware.  See Joint Appendix (“JA”) at 57A at ¶ 1.  Eastern employs individuals who are paid on an hourly basis and perform Driver/Guard tasks.  Id. at ¶ 2.  These individuals are referred to as “Driver/Guards.”

From approximately March 2010 until approximately June 2011, McMaster worked for Eastern as a Driver/Guard employee.  JA at 58A at ¶ 3.  McMaster was assigned a single route each day that she either drove alone or with a partner.  Id. at ¶¶ 4-6.  For each assigned route there was a corresponding vehicle to perform the pick-up and deliveries associated with that route.  Id.

It is undisputed that some of the vehicles that McMaster was assigned had a gross vehicle weight (“GVW”) of 10,000 pounds or less.  JA at 58A-59A at ¶¶ 7-13; see also id. at 87A; 89A-92A.  In fact, according to Eastern’s own analysis, 49% of the days McMaster worked for Eastern she was not assigned to a vehicle with a GVW over 10,000 pounds.  Id. at 59A at ¶¶ 12-13; see also id. at 87A, 89A.

It is also undisputed that McMaster frequently worked over 40 hours per week.  JA at 59A-60A at ¶ 14.  Eastern does deny that on those occasions in which she worked over 40 hours in a single workweek, she was not paid overtime premium pay equal to 150% of her regular hourly rate.  Id. at 60A at ¶¶ 15-16.  Instead, McMaster only received “straight time” or her regular hourly rate without any overtime premium pay.  Id. at ¶ 17.

B.   Procedural History

On August 26, 2011, McMaster filed a Complaint alleging that Eastern violated the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. §§ 201, et seq. by failing to pay her and other similarly situated Driver/Guards overtime premium pay.  See generally JA at 35A-41A.  Eastern countered that McMaster and other Driver/Guard employees were not entitled to overtime premium compensation because they were exempt under the FLSA’s Motor Carrier Exemption 29 U.S.C. § 213(b)(1) (“MCA Exemption”).  Id. at 44A at First Affirmative Defense.

On January 30, 2012, the parties agreed to conditional certification.  See JA at 47A-53A.  At the close of the consent period, a total of twenty-five (25) current and former Driver/Guards had joined the lawsuit pursuant to 29 U.S.C. §216(b).[1]  Id. at 29A-31A.  The parties then conducted some initial discovery.

During a June 27, 2012 conference with Magistrate Judge Tonianne J. Bongiovanni, the parties agreed to use McMaster’s individual claim as a “test case” because the legal and factual issues surrounding her claim are likely to be applicable to the claims of the other Appellees.  See JA at 54A.  In August, 2012, the parties cross-moved for summary judgment concerning whether McMaster was covered by the MCA Exemption.  Id. at 55A-213A.  The briefing on the cross motions for summary judgment closed in November 2012.  Id. at 32A-33A.

C.   The District Court’s Summary Judgment Opinion

On March 26, 2013, Judge Michael A. Shipp issued an order granting McMaster’s summary judgment motion and finding that she “is entitled to be paid overtime wages pursuant to the requirements of the Fair Labor Standards Act for all hours she works over forty (40) hours in a given workweek.”  See JA at 19A.  The district court simultaneously denied Eastern’s summary judgment motion.  Id.

In its supporting memorandum opinion, the district court observed that the parties’ cross motions for summary judgment “primarily concern statutory interpretation” of the SAFETEA-LU Technical Corrections Act of 2008 Pub. L. No. 110-244, 122 Stat. 1572, 1620 (“TCA”), “which made significant alterations to the MCA Exemption from the FLSA.”  See JA at 22A-23A.  Included in these alterations was the expansion of the definition of “covered employees” to include “those individuals ‘whose work, in whole or in part . . . [affects] the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in intestate or foreign commerce.’”  Id. at 23A (TCA at Section 306(c)(2)).  Thus, the district court reasoned:  “If it is determined that [McMaster] worked in part with non-commercial vehicles [weighing less than 10,000 pounds], she is a ‘covered employee’ and is entitled to FLSA overtime payments notwithstanding the MCA Exemption.”  Id. (emphasis supplied).

Before addressing the merits of the parties’ arguments, the district court reiterated that “[i]t is well-settled that exemptions from the FLSA are construed narrowly, against the employer” and that a “party seeking to invoke the MCA Exemption ‘carries the burden of proving plainly and unmistakably that it is entitled to the exemption.’”  See JA at 23A.

After outlining the case law proffered by each party, the district court relied on the plain meaning of the TCA’s unambiguous language and held McMaster was a “covered employee” entitled to overtime premium compensation because her employment “in part” concerned vehicles weighing less than 10,000 pounds:

As set forth by the Parties, it is undisputed that 49% of the days [McMaster] worked for [Eastern], she was assigned to a non-commercial vehicle. The [TCA] clearly defines a covered employee to include individuals “whose work, in whole or in part . . . affect[s] the safety of operation of” non-commercial vehicles.  [TCA] § 306(c)(2).  It is embedded in the very definition of “covered employees” that an employee’s work need only involve the operation of non-commercial vehicles, in part, to be entitled to overtime.

See JA at 25A-26A (emphasis supplied).  The district court also held that it did not need to determine if McMaster’s work on vehicles weighing less than 10,000 pounds qualified as “de minimis” because “although ‘de minimis’ does not lend itself to a simple quantitative definition, 49% is clearly more than de minimis.”  Id. at 26A.

Judge Shipp then addressed Eastern’s secondary argument that if McMaster fit within the MCA Exemption, she “should only be paid for overtime for half of the hours that she works above the normal forty hour work week.”  See JA at 26A.  The district court utilized the following example to articulate Eastern’s argument:  “if [McMaster] worked 44 hours in a week, she would only be entitled to 2 hours at the overtime rate because she only worked approximately half of her time in a vehicle which qualifies her as a covered employee under the FLSA.”  Id.  The district court rejected this argument, stating that Eastern’s reading of the TCA was “too rigid and does not properly reflect Congress’ intent.”  Id.  The district court further observed:

The [TCA] states that a worker qualifies as a “covered employee” if she works in whole or in part on non-commercial vehicles.  There is nothing in the Act which indicates that a “covered employee” is only covered by the FLSA for the portion of the time that she works on non-commercial vehicles.  This reading is required in light of the fact that exceptions from the FLSA must be narrowly construed against the employer.  As such, [McMaster] is entitled to overtime for all time worked over forty hours in a given workweek.

Id. at 26A-27A.

III.           SUMMARY OF ARGUMENT

The district court relied on the plain and unambiguous language of the TCA and interpreted the MCA Exemption narrowly against Eastern to hold that McMaster was entitled to the FLSA’s overtime premium protection because her employment at Eastern concerned the operation of vehicles weighing less than 10,000 pounds “in part.”  For these reasons, the Court should affirm the district court’s findings.

The district court’s holding did not break new ground.  On the contrary, the preponderance of courts examining the TCA have recognized that it drastically altered the contours of the MCA Exemption.

Eastern attempts to avoid the plain and unambiguous language of the TCA and its expansion of the FLSA’s protections by arguing that pre-TCA case law should apply and exempt any individual whose work on vehicles weighing more than 10,000 pounds is more than de minimis.  This argument should be rejected because it not only violates basic rules of statutory construction, but also this Court’s instruction that the MCA Exemption be narrowly construed against the employer.

In the alternative, Eastern argues that if the TCA entitles McMaster to overtime pay, it should be limited to only those weeks in which she worked on vehicles weighing less than 10,000 pounds more than a de minimis amount.  This argument should be rejected because it is inconsistent with both the express language of the TCA as well as the remedial nature the FLSA.  It would also create administrative difficulties that would be extremely burdensome on employers.

IV.            ARGUMENT

A.   The MCA Exemption – Like All FLSA Exemptions – Must Be Narrowly Construed Against the Employer

Section 7 of the FLSA entitles employees to overtime premium pay equaling one and one-half times their regular pay rate for hours worked over 40 per week.  See 29 U.S.C. § 207(a)(1).  In Parker v. NutriSystem, Inc., 620 F.3d 274 (3d Cir. 2010), this Court described the public policy underlying the overtime pay mandate:

Congress enacted the FLSA “to protect all covered workers from substandard wages and oppressive working hours, ‘labor conditions [that are] detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.’”  Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S. Ct. 1437, 67 L. Ed. 2d 641 (1981) (quoting 29 U.S.C. § 202(a)).  The Act was designed “to ensure that each employee covered by the Act would receive ‘[a] fair day’s pay for a fair day’s work’ and would be protected from ‘the evil of overwork as well as underpay.’” Id. (quoting 81 Cong. Rec. 4983 (1937) (message of President Roosevelt)).

The legislative history of the overtime compensation provisions of the FLSA reveal a threefold purpose underlying them: (1) to prevent workers who, perhaps out of desperation, are willing to work abnormally long hours from taking jobs away from workers who prefer shorter hours, including union members; (2) to spread available work among a larger  number of workers and thereby reduce unemployment; and (3) to compensate overtime workers for the increased risk of workplace accidents they might face from exhaustion or overexertion.  Mechmet [v. Four Seasons Hotels, Ltd.], 825 F.2d at 1175-76 (7th Cir. 1987) (citing H.R. Rep. No. 1452, 75th Cong., 1st Sess. (1937); S. Rep. No. 884, 75th Cong., 1st Sess. (1937)).

Id. at 279; see alsoA.H. Phillips v. Walling, 324 U.S. 490, 493, 65 S. Ct. 807; 89 L. Ed. 1095 (1945); Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S. Ct. 1437, 67 L. Ed. 2d 641 (1981).  The Supreme Court has held that this “broad remedial goal of the [FLSA] should be enforced to the full extent of its terms.”  Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 173, 110 S. Ct. 482; 107 L. Ed. 2d 480 (1989).

Consistent with the above principles, the MCA Exemption – like all FLSA exemptions – must be “construed narrowly[] against the employer,” and the employer “bears the burden of proving ‘plainly and unmistakably’ that the drivers qualify for the MCA [E]xemption.”  Packard v. Pittsburgh Transp. Co., 418 F.3d 246, 250 (3d Cir. 2005) (citing Friedrich v. U.S. Computer Servs., 974 F.2d 409, 412 (3d Cir. 1992)) (emphasis supplied); accord Pignataro v. Port Auth. of New York and New Jersey, 593 F.3d 265, 268 (3d Cir. 2010); Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008); Davis v. Mountaire Farms, Inc., 453 F.3d 554, 556 (3d Cir. 2006).

B.   The MCA Exemption and Recent Legislative Changes

The MCA Exemption excludes from the FLSA’s overtime pay mandate “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of title 49.”  29 U.S.C. § 213(b)(1).  Specifically, Congress provided for the Secretary of Transportation (or “DoT”) to “prescribe requirements for qualifications and maximum hours of service of employees of, and safety of operation and equipment of, a motor carrier,” 49 U.S.C. § 31502(b), if it provides interstate transportation of property or passengers, id. at § 13501(1).             

1.     The 2005 Change in the Definition of “Motor Carrier”

Prior to August 2005, a “motor carrier” was defined as a “person providing motor vehicle[2] transportation for compensation.”  49 U.S.C. § 13102(12) (2000).  However, on August 10, 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, Pub. L. No. 109-59, § 4142(a), 119 Stat. 114, 1747 (“SAFETEA-LU”) was enacted.

As part of this legislation, SAFTEA-LU changed the definition of a “motor carrier” in the MCA to “a person providing commercial motor vehicle (as defined in [49 U.S.C. §] 31132) transportation.”  49 U.S.C. § 13102(14) (2005) (emphasis supplied).  The term “commercial motor vehicle” was defined as:

a self -propelled or towed vehicle used on the highways in interstate commerce to transport passengers or property, if the vehicle — (A) has a gross vehicle weight rating or gross vehicle weight of at least 10,001 pounds, whichever is greater; (B) is designed or used to transport more than 8 passengers (including the driver) for compensation; (C) is designed or used to transport more than 15 passengers, including the driver, and is not used to transport passengers for compensation; or (D) is used in transporting material found by the Secretary of Transportation to be hazardous under section 5103 of this title and transported in a quantity requiring placarding under regulations prescribed by the Secretary under 5103.

49 U.S.C. § 31132(1) (emphasis supplied).  By replacing the term “motor vehicle” with “commercial motor vehicle”:

Those who did not use commercial motor vehicles were no longer considered motor carriers.  Consequently, for those persons or entities who did not operate commercial motor vehicles, the Motor Carrier Act exemption would not apply because the Secretary of Transportation no longer had regulatory authority. These carriers were now within the Department of Labor’s jurisdiction and employers could be required to provide overtime compensation.

Mayan v. Rydbom Express, Inc., 07-cv-2658, 2009 U.S. Dist. LEXIS 90525, *12-13 (E.D. Pa. Sept. 30, 2009); see also Bedoya v. Aventura Limousine & Transp. Serv., 11-cv-24432, 2012 U.S. Dist. LEXIS 128826, *7-8 (S.D. Fla. Sept. 11, 2012) (“Thus, beginning in 2005, a motor carrier was exempt from having to pay its employees overtime only if the vehicles the motor carrier owned: ‘(1) traveled . . . in interstate commerce; and (2) weighed over 10,001 pounds [or] were designed to transport more than 8 passengers including the driver . . . .’  This represented a fairly significant change, as ‘employees of motor carriers . . . historically ha[d] not been entitled to overtime compensation.’”) (internal citations omitted).      

2.     The MCA After the SAFETEA-LU Technical Corrections Act of 2008

On June 6, 2008, Congress enacted the SAFETEA-LU Technical Corrections Act of 2008, Pub. L. No. 110-244, 122 Stat. 1572, 1620.[3]  For purposes of this appeal, the TCA made two notable alterations to SAFETEA-LU.

First, Section 305(c) of the TCA (entitled “Definitions Relating to Motor Carriers”), eliminated the SAFETEA-LU’s definition of “commercial motor carrier” and reinserted the prior definition of “motor carrier.”  Id.; see also JA at 142A-143A.  This change “expanded the scope of the [DoT]’s authority to entities that operated any kind of vehicle, see 49 U.S.C. § 13102(16), not merely entities that operated commercial motor vehicles.”  Allen v. Coil Tubing Servs., L.L.C., 846 F. Supp. 2d 678, 704 (S.D. Tex. 2012) (emphasis supplied).

Second, Section 306 of the TCA (entitled “Applicability of the Fair Labor Standards Act Requirement and Limitation on Liability”) addressed the scope of the MCA Exemption to the FLSA’s overtime premium mandate.  Id.; see also JA at 143A-144A.  Section 306(a) provides that:  “Beginning on the date of enactment of this Act, section 7 of the Fair Labor Standards Act of 1938 (29 U.S.C. 207) shall apply to a covered employee notwithstanding [the MCA Exemption].”  Id. (emphasis supplied).  Section 306(c) defines a “covered employee” as follows:

COVERED EMPLOYEE DEFINED. – In this section, the term “covered employee” means an individual –

(1) who is employed by a motor carrier or motor private carrier (as such terms are defined by section 13102 of title 49, United States Code, as amended by section 305);

(2) whose work, in whole or in part, is defined –

(A) as that of a driver, driver’s helper, loader, or mechanic; and

(B) as affecting the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce, except vehicles –

(i) designed or used to transport more than 8 passengers (including the driver) for compensation;

(ii) designed or used to transport more than 15 passengers (including the driver) and not used to transport passengers for compensation; or

(iii) used in transporting material found by the Secretary of Transportation to be hazardous under section 5103 of title 49, United States Code, and transported in a quantity requiring placarding under regulations prescribed by the Secretary under section 5103 of title 49, United States Code; and

(3) who performs duties on motor vehicles weighing 10,000 pounds or less. 

Id. (emphasis added); see also JA at 144.

As the Southern District of Texas observed in Allen v. Coil Tubing Servs., L.L.C.:

This change thus narrowed the range of employees who were covered by the MCA Exemption.  By this provision, Congress broke with its legislative tradition pursuant to which expansion of the [DoT]’s jurisdiction concomitantly narrowed the reach of the DOL’s authority and thus the applicability of FLSA overtime provisions.  Notwithstanding the MCA Exemption, under the TCA, the FLSA’s overtime provisions now apply to any ‘covered employee’ as defined in section 306.  In substance, under the TCA, an employee of a motor carrier or motor private carrier … who works with ‘non-commercial motor vehicles’ defined as vehicles weighing 10,000 pounds or less may now be entitled to overtime compensation.

846 F. Supp. 2d at 692-93 (internal citations omitted); see also O’Brien v. Lifestyle Transp., Inc., 956 F. Supp. 2d 300, 305 (D. Mass. 2013) (“Thus, even if subject to the jurisdiction of the Secretary of Transportation, an employer may still be obligated to pay its employees overtime if the employees meet the definition of a covered employee.  And only those employees who operate vehicles of 10,000 pounds or less are ‘covered employees.’”); Vanzzini v. Action Meat Distribs., 11-cv-4173, 2014 U.S. Dist. LEXIS 13781, *20 (S.D. Tex. Jan. 31, 2014) (“[T]he TCA both restored the scope of the Secretary of Transportation’s regulatory jurisdiction to what it was prior to the enactment of SAFETEA-LU, and simultaneously narrowed the scope of the MCA [E]xemption.”).

C.   The District Court Correctly Relied on the Unambiguous Language of the TCA to Interpret the Scope of the MCA Exemption

As discussed, Section 306 of the TCA made significant alterations to the MCA Exemption in June 2008[4] by limiting those individuals who are excluded from the FLSA’s overtime premium compensation mandate while still retaining the DoT’s jurisdiction over such employees.  Specifically, the definition of “covered employees” entitled to FLSA overtime payments was expanded to include those individuals “whose work, in whole or in part, is defined . . . as affecting the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce.”  See TCA at Section 306(c) (emphasis added). 

Congress’s intention to extend the overtime premium compensation requirement to those individuals whose employment concerns 10,001 pound or less vehicles during at least part of their employment is clear based on the plain and unambiguous language of the TCA.  As this Court has repeatedly recognized:

The role of the courts in interpreting a statute is to give effect to Congress’s intent.  Because it is presumed that Congress expresses its intent through the ordinary meaning of its language, every exercise of statutory interpretation begins with plain language of the statute itself. Where the statutory language is plain and unambiguous, further inquiry is not required, except in the extraordinary case where a literal reading of the language produces an absurd result.  Moreover, a court may depart from the plain language of a statute only by an extraordinary showing of a contrary congressional intent in the legislative history.  In interpreting a statute, courts should endeavor to give meaning to every word which Congress used and therefore should avoid an interpretation which renders an element of the language superfluous.

Idahoan Fresh v. Advantage Produce, 157 F.3d 197, 202 (3d Cir. 1998) (internal quotations and citations omitted); see alsoParker, 620 F.3d at 277-78; Abdul-Akbar v. McKelvie, 239 F.3d 307, 313 (3d Cir. 2001).

As discussed at pages 3-5 supra, the district court recognized that the TCA’s insertion of the phrase “in part” represented a significant legislative change to the parameters of the MCA Exemption because it required that employees’ work only involve the operation of vehicles weighing less than 10,001 pounds during a portion of their employment to be entitled to the FLSA’s overtime protections.  The district court relied on not only the plain meaning of “in part”[5] to reach this conclusion, but also this Court’s instruction that the MCA Exemption be narrowly construed against the employer.

Furthermore, the district court’s application of the TCA’s “in whole or in part” language to McMaster’s employment is consistent with our Supreme Court’s interpretation of identical language in the Federal Employers’ Liability Act (“FELA”), 45 U.S.C. § 51 et. seq.  See CSX Transportation, Inc. v. McBride, _ U.S. _, 131 S. Ct. 2630, 180 L. Ed. 2d 637 (2011).  CSX Transportation concerned the appropriate causation jury charge for cases arising under § 51 of FELA, which “renders railroads liable for employees’ injuries or deaths ‘resulting in whole or in part from [carrier] negligence.’”  Id. at 2634; see also 45 U.S.C. § 51 (“Every common carrier by railroad . . . shall be liable in damages to any person suffering injury while he is employed by such carrier . . . for such injury or death resulting in whole or in part from the negligence of any of the officers, agents, or employees of such carrier . . .  .”).

The Supreme Court held that FELA’s “in part” phrase should be interpreted in accordance with the language Congress expressly utilized and include conduct “‘no matter how small.’”  CSX Transportation, 131 S. Ct. at 2644; see also id. at 2634 (“The charge proper in FELA cases, we hold, simply tracks the language Congress employed, informing juries that a defendant railroad caused or contributed to a plaintiff employee’s injury if the railroad’s negligence played any part in bringing about the injury.”) (emphasis supplied).  In reaching this conclusion, the CSX Transportation Court relied on FELA’s “‘humanitarian’” and “‘remedial goal[s],’” id. at 2636, which mimic the objectives of the FLSA, see pages 7-8, supra.

D.   Federal Courts Across the Country Have Similarly Relied on the Plain Meaning of “In Part” to Recognize the Expansion of the FLSA’s Overtime Protections through the TCA

Several courts have agreed that the TCA limited the MCA Exemption and provided the FLSA’s overtime protections to individuals who worked on vehicles weighing both more and less than 10,000 pounds.  These opinions include: 

  • Allen v. Coil Tubing Services, L.L.C., 846 F. Supp. 2d 678, 705 (S.D. Tex. 2012) (“To be entitled to overtime pay, an employee must perform some meaningful work for more than an insubstantial time with vehicles weighing 10,000 pounds or less.”) (emphasis supplied);
  • Garcia v. Western Waste Services, Inc., 969 F. Supp. 2d 1252 (D. Idaho. 2013) (“The TCA specifically states that a mechanic who works on small vehicles, ‘in whole or in part,’ is excepted from the MCA [E]xemption.  It logically follows that any mechanic whose work on small vehicles is more than de minimis fits under the TCA exception.”);[6]
  • O’Brien v. Lifestyle Transp., Inc., 956 F. Supp. 2d 300, 305 (D. Mass. 2013) (“In sum, covered employees are entitled to overtime, regardless of the MCA [E]xemption.  The test is clear: if an employee works as a driver of motor vehicles that weigh less than 10,000 pounds in the provision of interstate transportation and is employed by a motor carrier, that employee is entitled to overtime pay under the FLSA.”);
  • Vanzzini v. Action Meat Distribs., 11-cv-4173, 2014 U.S. Dist. LEXIS 13781, *25-27 (S.D. Tex. Jan. 31, 2014) (denying an employer’s summary judgment motion because a plaintiff “may have been given an assignment to complete a business-related task” using a vehicle weighing less than 10,000 pounds) (emphasis supplied);
  • Botero v. Commonwealth Limousine Serv., 12-cv-10428, 2013 U.S. Dist. LEXIS 104947, *36 (D. Mass. Apr. 12, 2013) (“the TCA expressly recognized that covered employees would receive compensation under the FLSA even though they were under the jurisdiction of the [DoT].  Moreover, the statutory language notes that there is overtime coverage if the employee’s work “in whole or in part” is on vehicles that weigh less than 10,000 pounds.”);[7]
  • Westberry v. William Joule Marine Transp., Inc., 12-cv-486, 2013 U.S. Dist. LEXIS 24882, *10 (M.D. Fla. Feb. 22, 2013) (“[A]lthough Plaintiffs as escort drivers affected the safety of the operation of the 18-wheeler semi-trucks, i.e., motor vehicles weighing 10,001 pounds or more, Plaintiffs also affected the safety of the operation of the vehicles they were driving and those vehicles undisputably weighed 10,000 pounds or less.  Thus, Plaintiffs are covered employees because their work, at least in part, was that of a driver affecting the safety of the operation of a vehicle weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce, and who performed duties on that vehicle.”);
  • Hernandez v. Alpine Logistics, LLC, 08-cv-6254, 2011 U.S. Dist. LEXIS 96708, *14, *17-18 (W.D.N.Y. Aug. 29, 2011) (“Congress determined that even if the [MCA] Exemption applied to certain drivers, those drivers would still nevertheless be entitled to overtime compensation if they qualified as ‘covered employees’” because “Section 306, clearly and unmistakably, provides that notwithstanding the existence of the [MCA] Exemption, employees who work on exclusively or in part on vehicles weighing less than 10,000 pounds are entitled to overtime compensation.”);
  • Mayan v. Rydbom Express, Inc., 07-cv-2658, 2009 U.S. Dist. LEXIS 90525, *31 (E.D. Pa. Sept. 30, 2009) (holding that “Section 306(c) [of the TCA] clearly states that the employee’s work need only ‘in whole or in part’ affect the safety of operation of vehicles weighing 10,000 pounds or less. . . . In short, the employees must simply perform some work on such vehicles” to be entitled to overtime pay).

Several of these courts reached this conclusion regarding the post-TCA claims even though the employees at issue could have been asked to operate vehicles weighing more than 10,000 at any time as part of their employment.  See, e.g., Hernandez, 08-cv-6254, 2011 U.S. Dist. LEXIS 96708, *4  (“Under the terms of their employment, any of the drivers could be required to drive any one of the vehicles regardless of its weight.”); Mayan, 07-cv-2658, 2009 U.S. Dist. LEXIS 90525, at *3 (“A driver might drive a vehicle weighing more than 10,000 pounds on one day and then a vehicle weighing less than 10,000 pounds on the next day.  Consequently, all drivers were trained to operate any of the vehicles in the fleet.”).[8]

E.   No Other Circuit Court Has Addressed the Applicability of the TCA’s Amendments to the MCA Exemption to Drivers Whose Work Concerns Vehicles Weighing Both More and Less than 10,000 Pounds

In its brief, Eastern states that “[t]hree different United States Circuit Courts have held drivers of mixed fleets, that is, those working on both commercial and non-commercial vehicles are exempt from overtime under the MCA if the exempt work is more than de minimis.”  See Eastern Brief at 16 (emphasis supplied and citing to Collins v. Heritage Wine Cellars, Ltd., 589 F.3d 895, 901 (7th Cir. 2009); McCall v. Disabled American Veterans, 723 F.3d 962, 966 (8th Cir. 2013); and Buckner v. United Parcel Service, Inc., 489 Fed. Appx. 709 (4th Cir. 2012)).  As discussed below, this assertion is not accurate:

First, in McCall, supra, the Eighth Circuit was not asked to decide whether individuals who operated vehicles weighing both more and less than 10,000 pounds were entitled to overtime pay as Eastern suggests.  Rather, the McCall court was confronted with the very different question of what metric – a vehicle’s “actual weight” or its “Gross Vehicle Weight Rating” (“GVWR”)[9] – should be used to determine if an employee is a “covered employee” entitled to overtime pay under the TCA.  See 723 F.3d at 966.  The McCall court held that the “the overtime-pay provision of [the FLSA] applies to vehicles with a GVWR of 10,000 pounds or less.”  Id.; see also id. (“McCall argues that he was a covered employee with overtime rights under the FLSA because the trucks that he operated actually weighed less than 10,000 pounds despite having GVWRs greater than 10,000 pounds.  Upon review, we agree with the district court that GVWR, not actual weight, is the appropriate criterion for determining if the TCA applies to place a driver’s wage regulation under the FLSA rather than the Transportation Secretary.”).[10]  However, since the McCall plaintiff only “operated trucks with GVWRs in excess of 10,000 pounds,” he was “not entitled to overtime under the FLSA.”  Id.  Thus, contrary to Eastern’s assertion otherwise, McCall did not address the applicability of the TCA to employees who operated qualified vehicles during a portion of their employment like McMaster.

Second, all of McMaster’s claims (and those of the other 25 Appellee) arise after the TCA was enacted in 2008.  As discussed at pages 11-13, supra, Congress used the express language of the TCA to not only expand the DoT’s jurisdiction back to its pre-SAFETEA-LU levels by deleting the definition of commercial motor carriers, but also broadened the Department of Labor’s (or “DoL”) domain by excluding “covered employees” from the MCA Exemption to the FLSA’s overtime pay mandate.

In essence, the TCA created dual jurisdiction by both the DoT and DoL over the same employees.  Id.  Thus, the analysis of drivers “working on both commercial and non-commercial vehicles” is no longer relevant.  The Seventh Circuit’s examination in Collins was strictly limited to this dichotomy based on the definition of “motor carriers” under 2005’s SAFETEA-LU.  See Collins, 598 F.3d at 901 (“We end with the plaintiffs’ back-up argument for reversal.  Between 2005 and 2008 the Motor Carrier Act limited the definition of ‘motor carriers’ to carriers that provide transportation by . . . a truck that weights at least 10,001 pounds.’”).  Since the Seventh Circuit was not asked to consider the effects of the TCA on the claims in Collins, its concern that establishing dual jurisdiction by both the DoT and DoL absent express instruction to do so by Congress would create, inter alia, possible “confusion” and “disputes” should be given little weight.

Third, Eastern makes the dubious suggestion that the “Fourth Circuit affirmed a decision of the Eastern District of North Carolina finding that drivers of mixed fleets were not entitled to overtime.”  See Eastern Brief at 17 (citing Buckner, supra).  In Buckner v. United Parcel Service, Inc., the district court was confronted with a pro se plaintiff asserting, inter alia, claims for unpaid overtime premium compensation under the FLSA.  09-cv-411, 2012 U.S. Dist. LEXIS 63711, *4 (E.D.N.C. May 7, 2012).  The plaintiff in Buckner only drove vehicles weighing more than 10,000 pounds.  Id. at *13 (“Here, the records submitted by UPS demonstrate that plaintiff has regularly operated vehicles weighing at least 10,001 pounds throughout the course of his employment with UPS.”).  Due to this undisputed evidence, the district court did not need to examine the plaintiff’s claims after June 2008 under the TCA to hold that he was not entitled to overtime pay under the MCA Exemption.  The Buckner plaintiff appealed eight separate district court orders to the Fourth Circuit, which were affirmed without analysis.  See Buckner v. United Parcel Service, Inc., 489 Fed. Appx. 709 (4th Cir. 2012).

F.    The District Court Opinions Eastern Relies on are Factually Distinguishable and Often Rejected by the Courts Examining Post-TCA Claims

Eastern also attempts to avoid the consequences of the plain and unambiguous language of the TCA by citing to district court opinions that purportedly hold that drivers of vehicles weighing less than 10,000 pounds are still ineligible for overtime after the TCA if their work on vehicles in excess of 10,000 pounds is more than de minimusSee Eastern Brief at 18-24.  A brief review of these opinions demonstrates that they should be given little weight by the Court because they are factually distinguishable and repeatedly rejected by other courts:

First, in Avery v. Chariots for Hire, 748 F. Supp. 2d 492 (D. Md. 2010), the plaintiff drove vehicles that weighed less than 10,000 pounds throughout his employment for the defendant from November 2007 through August 2009.  Id. at 498, 495.  However, these lighter vehicles also were designed to transport at least eight passengers, and thus, were covered by the MCA Exemption even after the enactment of the TCA.[11]  Id.  In addition, the defendant’s fleet in Avery included only one vehicle out of 28 that would qualify him as a covered employee under the TCA.  Id. at 499.  Since there was no evidence of the amount of time, if any, the plaintiff drove this single small vehicle during his post-TCA employment, the Avery court relied on pre-TCA case law to state in dicta that “the [MCA E]xemption should apply so long as the time an employee spends operating commercial motor vehicles is more than de minimus.”  Id. at 500.

This analysis is flawed because it is based on the premise that “[n]either the language of the FLSA nor the [MCA E]xemption indicates how to categorize individuals who operate both commercial motor vehicles and non-commercial motor vehicles.”  Id. at 499.  This is incorrect because the TCA clearly defined a “covered” employee to include those driving qualified vehicles “in part.”  See pages 11-13, supra.[12]  Moreover, Avery failed to follow the oft-repeated instruction that an FLSA exemption be construed narrowly against the employer asserting it.[13]

Second, in Dalton v. Sabo, Inc., 09-cv-358, 2010 U.S. Dist. LEXIS 32472 (D. Or. Apr. 1, 2010), the plaintiffs only drove vehicles weighing more than 10,000 pounds.  See id. at *9 (“I find that defendants produce competent and unrebutted evidence that the vehicles driven by Covington, Ritchie, and George either had gross vehicle weight ratings in excess of 10,000 [pounds] or actually weighted in excess of 10,000 pounds.”).  Thus, the plaintiffs in Dalton clearly fell outside the definition of a covered employee under the TCA during their brief periods of employment after its enactment.

The Dalton court did express concerns that having employees fall under the jurisdiction of both the DoL and the DoT in the post-TCA world would “‘require burdensome record-keeping, create confusion, and give rise to mistakes and disputes.’”  2010 U.S. Dist. LEXIS 32472, at *12 (quoting Collins, 589 F.3d at 901).  However, as the Hernandez court recognized in its rejection of Dalton:

I find, however, that such policy considerations cannot overcome the clear and express language of the [TCA] which unambiguously provides that covered employees are entitled to overtime compensation notwithstanding the fact that such employees may also be subject to regulation by the [DoT].  I therefore grant plaintiff’s motion for a declaration that covered employees are entitled to overtime compensation under the FLSA.

08-cv-6254, 2011 U.S. Dist. LEXIS 96708, at *19. 

Third, the Northern District of Illinois’ opinion in Jaramillo v. Garda, Inc., 12-cv-662, 2012 U.S. Dist. LEXIS 149468 (N.D. Ill. Oct. 17, 2012) is readily distinguishable.  In Jarmillo, the court found that the drivers were not entitled to overtime largely because the employer only had a “limited number of vehicles” with a GVWR of 10,000 pounds or less, and “21 out of the 34 named Plaintiffs [had] driven large trucks more than 80 percent of the time.”  Id. at *2, *14 (emphasis added).[14]  The Jarmillo court based its conclusion on the incorrect premise that the TCA failed to articulate “whether employees who work on both vehicles weighing 10,001 pounds and vehicles less than 10,000 pounds would be subject to the jurisdiction of the Secretary of Transportation.”  Id. at *8-9.  As discussed at pages 11-13, supra, district courts repeatedly hold that the TCA established just the opposite – that employees of motor carriers would be subject to both the safety regulations of the DoT as well as the DoL’s overtime protections.  Thus, the district court’s rejection of Jarmillo was rationally based.[15]

G.  Eastern’s Argument that the District Court’s Opinion Creates “Safety Concerns” by Removing Drivers From the DoT’s Jurisdiction is Not Accurate

Eastern also argues that the district court should be reversed because it “focused on the wrong question” of whether the work on vehicles weighing 10,000 pounds or less was more than de minimis.  Eastern Brief at 27.  According to Eastern:

Here, the safety issue of operating a commercial vehicle weighing in excess of 10,000 pounds presents a far greater safety issue that requires the regulation and oversight of the Department of Transportation.  The courts interpreting the mixed fleet issue in favor of an exemption cite issues with the safety of operating these commercial vehicles weighing over 10,001 pounds on the public highways in interstate commerce as a reason for the exemption.  As noted above, the issue for the employee can be and has been addressed by limiting the amount of hours that drivers of commercial vehicles operate.  49 C.F.R. § 395.3.

Id.

As discussed at pages 11-13, supra, this assertion by Eastern creates a false choice for the Court.  Several district courts have recognized that the plain and unambiguous language of the TCA restored the DoT’s jurisdiction to the pre-SAFETEA-LU scope by reestablishing the previous definition of “motor carrier” by replacing “commercial motor vehicle” with “motor vehicle.”  Id.  “Covered employees,” who the TCA now entitles to overtime pay under the FLSA, will still be under the jurisdiction of the DoT and subject to its safety restrictions and regulations.  See id.  Thus, the safety of our highways will in no way be compromised by affirming the district court’s holding in this case.

H.   The TCA Does Not Require a Week-By-Week Analysis of the Work of “Covered Employees”

Eastern’s second argument is:  “If this Court finds that McMaster was exempt, it still must reverse the district court’s order because the district court found that McMaster was entitled to overtime for all workweeks instead of looking to those workweeks where she worked on non-commercial vehicles more than a de minimis amount of time.”  Eastern Brief at 29-34.  The Court should reject this argument for three reasons:

First, the plain and unambiguous language of the TCA does not call for a week-by-week limitation on a “covered” employees’ entitlement to the FLSA’s overtime protections.  Rather, the TCA focuses on the duties and work that covered employees perform instead of their day-to-day or week-by-week activities.  See TCA at Section 306(c)(2)-(3) (individuals “whose work, in whole or in part” and “who performs duties on motor vehicles weighing 10,000 pounds or less”) (emphasis supplied).  The Supreme Court has repeatedly recognized that the terms such as “work” are to be construed “broadly.”  See, e.g., IBP, Inc. v. Alvarez, 546 U.S. 21, 25-28, 126 S. Ct. 514; 163 L. Ed. 2d 288 (2005)  Thus, Congress’s utilization of such broad terms to define “covered employees” logically leads to the conclusion that its intention was that a more generalized analysis of the duties performed throughout an individual’s employment is required.

Second, the week-by-week limitation proffered by Eastern would create administrative difficulties that would be extremely burdensome on employers.  While the Seventh Circuit’s opinion in Collins, supra, is distinguishable from this case as detailed above, the Collins court was correct to find that week-by-week determinations advocated now by Eastern “would require burdensome record-keeping, create confusion, and give rise to mistakes and disputes.”  Collins, 589 F.3d  at 901.  If Congress wanted to impose the burdensome record-keeping of week-by-week determinations, it certainly could have done so in the TCA.  It did not, and this Court need not read such a requirement into the statute.

Third, a week-by-week analysis is inconsistent with not only the remedial nature of the FLSA, see, e.g., Hoffmann-La Roche Inc., 493 U.S. at 173 (The “broad remedial goal of the [FLSA] should be enforced to the full extent of its terms.”), but also this Court’s instruction that exemptions to the FLSA be interpreted narrowly against the employer asserting them, see, e.g., Packard, 418 F.3d at 250 (“It is well settled that exemptions from the FLSA are construed narrowly, against the employer.”).

Finally, if the Court were to find that a week-by-week analysis is warranted, it would need to be performed in a manner consistent with TCA’s plain and unambiguous “in whole or in part” language.  As discussed above, this would entitle covered employees to overtime pay so long as they performed some work on vehicles weighing 10,000 pounds or less during a given week.

V.        CONCLUSION

In conclusion, Appellees respectfully request that this Court affirm the district court’s summary judgment order.

Respectfully submitted,

/s/ R. Andrew Santillo

Peter Winebrake

R. Andrew Santillo

WINEBRAKE & SANTILLO, LLC

715 Twining Road, Suite 211

Dresher, PA 19025

Attorneys for Plaintiffs/Appellees



[1] McMaster and the 25 opt-in plaintiffs are collectively referred to as “Appellees.”

[2] A “motor vehicle” was simply defined as “a vehicle, machine, tractor, trailer, or semitrailer propelled or drawn by mechanical power and used on a highway in transportation.”  49 U.S.C. § 13102(14) (2000).

[3] A full version of the TCA is provided in the Joint Appendix at JA at 94A-146A.

[4]The claims of McMaster and the 25 other Appellees arise entirely after the enactment of the TCA.

[5] The word “part” is commonly defined as: “one of the equal or unequal portions into which something is or is regarded as divided:  something less than a whole: a unit (as a number, quantity, or mass) held to constitute with one or more other units something larger.”  Webster’s New International Dictionary Of The English Language Unabridged 1645 (3d 1993).

[6]See alsoid. at *19 (“This is also abundantly clear from the language of the statute providing that a mechanic who works on small vehicles, ‘in whole or in part,’ is not covered by the MCA [E]xemption.  With this in mind, the focus should be on the time spent with small vehicles, rather than the time spent on commercial vehicles.”).

[7] Magistrate Judge Dein’s Report and Recommendation was ultimately adopted by District Court Judge Nathaniel Gorton.  See Botero v. Commonwealth Limousine Serv., 12-cv-10428, 2013 U.S. Dist. LEXIS 104944 (D. Mass. July 25, 2013).

[8] Even in cases that did not concern drivers of vehicles weighing both more and less than 10,000 pounds such as McMaster, district courts have regularly recognized that the plain and unambiguous language of the TCA drastically narrowed the confines of the MCA Exemption.  See, e.g., Brooks v. Halsted Communication, Ltd., 620 F. Supp. 2d 193, 198 (D. Mass. 2009) (“[T]he TCA reconfirmed that the MCA exemption was inapplicable to employees of motor carriers who drove motor vehicles that weighed 10,000 pounds or less.  Given the sharp clarity of the TCA’s language, Defendants do not, and could not, dispute their obligation to pay FLSA overtime after June of 2008.”) (emphasis added and internal citations omitted); Bedoya v. Aventura Limousine & Transp. Serv., 11-cv-244432, 2012 U.S. Dist. LEXIS 128826, *11 (S.D. Fla. Sept. 11, 2012) (“‘The Court pauses to emphasize that an employee’s work need only in part involve the operation of non-commercial vehicles to be entitled to overtime.  See Technical Corrections Act § 306(c).  Thus, if more than a de minimis portion of Plaintiff’s work involved driving non-commercial vehicles, he is eligible for overtime under the FLSA as a “covered employee.’”); Garza v. Smith International, Inc., 10-cv-100, 2011 U.S. Dist. LEXIS 22869, *8 (S.D. Tex. Mar. 7, 2011) (“The TCA reconfirmed that the MCA exemption does not apply to drivers operating motor vehicles that weigh 10,000 pounds or less.”); Miller v. Professional Transportation, Inc., 09-cv-0111, 2010 U.S. Dist. LEXIS 87940, *10-11 (S.D. Ind. Aug. 25, 2010) (“The net result of [the TCA] is that employees, who drive vehicles denoted in the Act as part of their employment that were once exempt from overtime prior to the passage of SAFETEA-LU, are now eligible for the benefits of overtime compensation by virtue of the fact that they are ‘covered employees.’ Covered employees are those that drive vehicles weighing 10,000 pounds gross vehicle weight or less and are designed or used to transport 8 or few passengers, including the driver.”).

[9] The GVWR “‘means the value specified by the manufacturer as the loaded weight of a single motor vehicle.’”  Garcia, 969 F. Supp. 2d 1252, at *8 n1.

[10] This issue is not before the Court as part of this appeal.

[11]The TCA states that drivers of vehicles that transport eight (8) or more passengers or transported hazardous materials still qualified for the MCA Exemption even if the vehicle weighed less than 10,000 pounds.  See Section 306(c)(2)(B); see also JA at 144A.  Eastern has not asserted that McMaster drove such vehicles and her testimony confirms that she never did.  See JA at 70A.

[12] The district court here, in addition to several others, recognized this flaw and rejected the Avery court’s analysis.  See JA 24A-25A; see also Garcia, 969 F. Supp. 2d 1252, at *18-19 (characterizing Avery as “inconsistent with the plain language and purpose of the TCA”); accord O’Brien, 956 F. Supp. 2d at 306-07.

[13] Avery is also distinguishable because here it is undisputed that McMaster spent a significant amount of her employment (49%) driving vehicles that qualify her as a covered employee under the TCA.  This is evident from a subsequent District of Maryland opinion that adopted Avery, but distinguished the district court’s opinion in this case because McMaster “spent more than a de minimus amount of time in driving non-commercial vehicles.”  See Rucker v. Hoffberger Moving Services, LLC, 13-cv-2716, 2013 U.S. Dist. LEXIS 182052, *2 n.2 (D. Md. Dec. 31, 2013).

[14] This is significantly more than McMaster in this case, who drove vehicles weighing less than 10,000 at least 49% of the time.  See pages 1-2, supra.

[15] Eastern also cites to the decisions in Fox v. Commonwealth Worldwide Chauffeured Transp. of NY, LLC, 865 F. Supp. 2d 257, 260 (E.D.N.Y. 2012); Hernandez v. Brink’s Inc., 08-cv-20717, 2009 U.S. Dist. LEXIS 2726 (S.D.Fla. Jan. 15, 2009); and Garcia v. Western Waste Servs., Inc., 969 F. Supp. 2d 1252 (D. Idaho 2013).  See Eastern Brief at 22-24.  However, none of these cases support Eastern’s arguments.  First, Garcia rejected the analysis in Avery and instead followed the district court’s opinion here to hold that if an individual “is working on small vehicles for more than a de minimis portion of his time, the TCA exception is applicable” and is entitled to overtime pay.  969 F. Supp. 2d 1252, at *19.  Second, both Fox and Hernandez concern claims arising entirely prior to the June 2008 enactment of the TCA, eliminating any benefit their analysis may provide.  See Fox, 865 F. Supp. 2d at 264 n.9 (“In June 2008, after Fox left Commonwealth, Congress removed the word ‘commercial’ from the definition of ‘motor carrier’ provided in 49 U.S.C. § 13102.  But the [TCA] have not been given retroactive effect, and so the court will apply the [MCA E]xception as it existed during the time of Fox’s employment.”) (internal citations omitted, emphasis supplied); Hernandez, 08-cv-20717, 2009 U.S. Dist. LEXIS 2726, at *5 (“Plaintiffs seek to recover unpaid overtime compensation earned between March 19, 2005 and March 19, 2008.”).

Several Philadelphia and New Jersey unpaid wage attorneys have asked us to post the brief we filed in the Red Robin tip lawsuit that appears in out July 10 blog entry.  We are happy to share this work product.  Here is the legal argument section of the brief:

The FLSA requires employers to pay employees a minimum wage of $7.25/hour.  See 29 U.S.C. § 206(a)(1)(C).  However, in determining the minimum wage owed to a “tipped employee,” the FLSA contains a “tip credit” provision that enables an employer to pay the tipped employee as little as $2.13/hour so long as the employee’s additional tip payments bring her total pay above the $7.25/hour threshold.  See id. at § 203(m); 29 C.F.R. § 531.50(a).

Generally speaking, employers can use the FLSA tip credit in paying a tipped employee only if “all tips received by such employee have been retained by the employee.”  29 U.S.C. § 203(m).  However, this rule “shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.”  Id.

In this lawsuit, Plaintiffs worked at Defendant’s restaurants as servers.  See Complaint at ¶¶ 9-11.  Defendant utilized the FLSA tip credit in satisfying its minimum wage obligations to Plaintiffs.  See id. at ¶ 15.  Defendant also required Plaintiffs to contribute some of their tips to a tip pool that was distributed to “Expos.”  See id. at ¶¶ 16-17.  These Expos – who are more commonly known in the restaurant business as “expediters” – “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers,” id. at ¶ 18, and “are not the types of employees who customarily and regularly receive tips from customers,” id. at ¶ 19.

In a nutshell, Plaintiffs’ FLSA claim alleges that Defendant violated the rule – described in 29 U.S.C. § 203(m) – that employers who use the FLSA’s tip credit provision to satisfy their minimum wage obligations may not require their tipped employees to share tips with other employees who do not “customarily and regularly receive tips.”  29 U.S.C. § 203(m).  In particular, Plaintiffs allege that the Expos – who “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers” – are the types of employees who do not “customarily and regularly receive tips.”

Defendant argues that Plaintiffs have failed to adequately plead that Expos are the types of employees who do not “customarily and regularly receive tips.”  According to Defendant, the fact that Expos “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers,” Complaint at ¶ 18, is entirely irrelevant to this issue.  Defendant fails to cite to any court decisions endorsing its position.  See generally Doc. 18.

Meanwhile, Defendant’s argument has been flatly rejected by federal courts throughout the country:

In Roussell v. Brinker Int’l, Inc., 441 Fed. Appx. 222 (5th Cir. 2011), the employees alleged that the restaurant violated FLSA § 203(m) by requiring them to share tips with expediters who did not customarily and regularly receive tips.  See id. at 224-25.  The restaurant – like Defendant in this case – argued that the extent of the expediters’ interaction was irrelevant to whether they were the types of employees who customarily and regularly receive tips.  See id. at 231.  The Fifth Circuit disagreed:  “We conclude that the district court reasonably found direct customer interaction “highly relevant” to tip-eligibility. . . .  Brinker has not advanced a compelling reason why direct customer interaction should not be considered.”  Id.; accord Roussell v. Brinker Int’l, Inc., 2008 U.S. Dist. LEXIS 52568, *29-51 (S.D. Tx. July 9, 2008) (exhaustively analyzing the issue and holding “that the level of customer interaction is highly relevant to the question of whether an employee may participate in a valid tip pool”).

In Myers v. The Copper Cellar Corp., 192 F.3d 546 (6th Cir. 1999), the Sixth Circuit was called upon to determine whether a restaurant violated § 203(m) by allowing salad preparers to participate in a tip pool.  See id. at 548-50.  In affirming the district court’s finding against the restaurant, the Circuit Court expressly considered the extent of the salad preparers’ customer interactions:

Because the salad preparers abstained from any direct intercourse with diners, worked entirely outside the view of restaurant patrons, and solely performed duties traditionally classified as food preparation or kitchen support work, they could not be validly categorized as “tipped employees” under section 203(m).  Accordingly, during the work shifts in which salad mixers were included within the tip pool, the pooling scheme was illegal.

 

Id. at 550-51.

In Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294 (6th Cir. 1998), the Sixth Circuit considered a tip pool that distributed tips to hosts, buspersons, and bartenders.  Id. at 296-97.  The plaintiffs argued that the inclusions of hosts in the tip pool violated § 203(m) because hosts did not customarily and regularly receive tips.  See id. at 297, 300.  In finding no § 203(m) violation, the Sixth Circuit expressly considered the extent of the hosts’ customer interactions:  “Hosts at Outback are ‘engaged in an occupation in which [they] customarily and regularly receive[] . . . tips’ because they sufficiently interact with customers in an industry (restaurant) where undesignated tips are common.  Although the parties dispute exactly how hosts spend their time working at Outback, hosts do perform important customer service functions: they greet customers, supply them with menus, seat them at tables, and occasionally “enhance the wait.”  Like bus persons, who are explicitly mentioned in 29 C.F.R. § 531.54 as an example of restaurant employees who may receive tips from tip outs by servers, hosts are not the primary customer contact but they do have more than de minimis interaction with the customers.  One can distinguish hosts from restaurant employees like dishwashers, cooks, or off-hour employees like an overnight janitor who do not directly relate with customers at all.”  Id. at 301.

In Shahriar v. Smith & Wolenski Restaurant Group, Inc., 659 F.3d 234 (2d Cir. 2011), the Second Circuit summarized the pertinent law as follows:  “Under the FLSA an employer may not avail itself of the tip credit if it requires tipped employees to share their tips with employees who do not “customarily and regularly receive tips.”  29 U.S.C. § 203(m) (stating that the tip credit “shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips”).  Thus, an employer loses its entitlement to the tip credit where it requires tipped employees to share tips with (1) employees who do not provide direct customer service or (2) managers.”  Id. at 240 (emphasis supplied).

Consistent with the above circuit court decisions, district court judges consistently analyze the extent of customer interaction in determining whether restaurant employees’ participation in a tip pool violates § 203(m).  See, e.g., Porter v. West Side Restaurant, LLC, 2014 U.S. Dist. LEXIS 57126, *31 (D. Kan. Apr. 24, 2014) (“The case law suggests that direct customer interaction is a relevant factor in determining whether an employee ‘regularly and customarily receives tips’ and therefore can participate in a mandatory tip pool.”); Chhab v. Darden Restaurants, Inc., 2013 U.S. Dist. LEXIS 135926, *18 (S.D.N.Y. Sept. 20, 2013) (“Courts in this District have concluded that certain back-of-the-house restaurant staff, including cooks and dishwashers, cannot participate in valid tip pools under the FLSA because they do not interact with customers.”); Arango v. Landry’s, Inc., 2013 U.S. Dist. LEXIS 97240, *11-13 (N.D. Ill. July 12, 2013) (expediters’ “level of interactivity with customers” relevant to § 203(m) analysis); Rubio v. Fuji Sushi & Teppani, Inc., 2013 U.S. Dist. LEXIS 8469, *5-9 (M.D. Fla. Jan. 22, 2013) (considering extent of kitchen chef’s customer interaction); Giuffre v. Marys Lake Lodge, LLC, 2012 U.S. Dist. LEXIS 140506, *5-12 (D. Col. Sept. 28, 2012) (considering extent of expediters’ customer interaction); Pedigo v. Austin Rumba, Inc., 722 F. Supp. 2d 714, 727-36 (N.D. Tx. 2010) (considering extent of prep cooks’ and dishwashers’ customer interaction because “the level of customer interaction is highly relevant to the question of whether an employee may participate in a valid tip pool”); Rudy v. Consolidated Restaurant Cos., Inc., 2010 U.S. Dist. LEXIS 92764, *6-11 (N.D. Tx. Aug. 18, 2010) (considering extent of maitre d’s customer interaction); Ash v. Sambodromo, LLC, 676 F. Supp. 2d 1360, 1369-70 (S.D. Fla. 2009) (considering extent of sushi chefs’ customer interaction); Morgan v. Speak Easy, LLC, 625 F. Supp. 2d 632, 653 (N.D. Ill. 2007) (considering extent of “senior servers” customer interaction); Hai Ming Lu v. Jing Fong Restaurant, Inc., 503 F. Supp. 2d 706, 711 (S.D.N.Y. 2007) (considering extent of “pantry workers’” and “dim sum servers’” customer interaction).

As reflected by Roussell, Myers, Kilgore, Sharriar, and the above-cited district court opinions, § 203(m) can be violated when employees who do not sufficiently interact with customers share in a tip pool.  As such, Plaintiffs have adequately stated an FLSA claim by clearly alleging that Defendant violated § 203(m) – and thereby lost the benefit of the FLSA tip-credit provision – by requiring Plaintiffs to share tips with Expos who “spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers,” Complaint at ¶ 18, and “are not the types of employees who customarily and regularly receive tips from customers,” id. at ¶ 19.  Defendant’s Motion – which is predicated entirely on the incorrect notion that customer interaction is irrelevant to the § 203(m) analysis – should fail.

In an opinion issued yesterday from the Middle District of Pennsylvania, Judge James M. Munley denied Red Robin restaurant’s motion to dismiss a Fair Labor Standards Act (“FLSA”) claim brought by our firm as a collective action on behalf of all other Red Robin restaurant Servers employed within the last 3 years.  See Ford, et al. v. Lehigh Valley Rest. Group, 2014 U.S. Dist. LEXIS 92801 (M.D. Pa. July 9, 2014).  In this case, the defendant is Lehigh Valley Restaurant Group, Inc., a corporate entity that operates approximately 19 Red Robin Restaurants throughout Eastern Pennsylvania.  Specifically, Lehigh Valley Restaurant Group, Inc. operates Red Robin restaurants in Allentown, Center Valley, Easton, Carlisle, Collegeville, Dickson City, Lancaster, Harrisburg, Lancaster, Quakertown, and Reading, among other cities.

In our case, the plaintiffs (2 servers  who previously worked at Red Robin restaurants in the Wilkes-Barre, PA area) allege that Red Robin violated 29 U.S.C. § 203(m) by distributing the Servers’ tips to Expediters (aka “Expos”) who have virtually no customer interaction.  Thus, plaintiffs argue that Red Robin violated the FLSA’s minimum wage and overtime pay mandate law by distributing the Servers’ tips to Expos.  Plaintiffs argue that Expos may not properly participate in the tip pool because Expos rarely, if ever, interact with customers.  Because of Red Robin’s distribution of the tip pool proceeds to Expos, Plaintiffs argue that Red Robin may not utilize a tip credit wherein it only pays Servers $2.83 for every hour worked, instead of the mandatory $7.25 minimum wage.  

Defendant moved to dismiss our FLSA claim alleging that section 203(m) does not require customer interaction and instead only requires that tips be distributed to anyone that customarily and regularly receives tips regardless of job duties; thus, according to Red Robin’s logic, anyone could receive tips.  The Court denied Red Robin’s motion to dismiss and relying upon the plain meaning of 203(m) and several circuit courts held that “[b]ased on this case law, section 203(m)’s plain meaning and the directive that exemptions to the FLSA are narrowly construed, we conclude that to take part in a tip pool a restaurant employee must have direct customer interaction.”  

Section 203(m) allows the “pooling of tips among employees who customarily and regularly receive tips.”  29 U.S.C.  § 203(m).  Red Robin argued that Expos customarily and regularly receive tips due to their regular inclusion in the tip pool.  The Court, however, rejected this argument:   “section 203(m)’s plain meaning beckons the image of customer service employees who receive tips directly from customers in a recurring fashion and as a matter of occupational custom.”   Indeed, the Court noted that the requirement that direct customer interaction is needed for an employee to participate in a tip pool is supported by cases from the Second, Fifth, and Sixth Circuits.

In addition to their federal FLSA claim asserted as a collective action, Plaintiffs assert Rule 23 class action claims brought under the Pennsylvania Minimum Wage Act (“PMWA”) and the Pennsylvania Wage Payment and Collection Law (“PWPCL”) against Lehigh Valley Restaurant Group, Inc.  Plaintiffs agreed to the dismissal of their PMWA and PWPCL claims in federal court so that they could instead be litigated in state court.  Plaintiffs’ PWPCL claim alleges that Red Robin improperly required Servers to purchase uniforms through deductions from their paychecks.  The PMWA, similar to the FLSA claim, alleges that Red Robin’s distribution of Servers’ tips to Expos violate the PMWA’s minimum wage and overtime pay mandates.  To date, 3 other individuals have joined the federal lawsuit.

Employers will often argue that a Court need not examine what an individual’s actual job duties or how they spend their time to determine if they were misclassified as not entitled to overtime pay.  Instead, they often point to job descriptions on an employee’s resume as evidence that “managerial” or “executive” tasks were the primary duties of the position.  However, courts repeatedly hold that an employee’s description of her general job responsibilities in a resume are not particularly relevant to the manner in which she actually spent her time on a day-to-day basis.  See, e.g., Ale v. TVA, 269 F.3d 680, 689 n.2 (6th Cir. 2001) (“resumes may not provide the most accurate picture of an employee’s job because resumes are typically designed to enhance the employee’s duties and responsibilities in order to obtain a job”); Morrison v. Ocean State Jobbers, Inc., 2013 U.S. Dist. LEXIS 40010, at *45 n.10 (D. Conn. Mar. 22, 2013) (“It is unsurprising that an employee would choose to emphasize in a resume managerial tasks, such as hiring or training new employees, over non-managerial tasks, such as cleaning the bathrooms or bringing in carriages, even where the managerial tasks took up significantly less of the employee’s time.”); Boring v. World Gym – Bishop, Inc., 2009 U.S. Dist. LEXIS 21061 (N.D. Ill. Mar. 17, 2009) (when courts consider exemption issues, the “appropriate inquiry…is into [plaintiffs’] actual job duties and not into what [they] list[] on [their] resume.”); Wolfslayer v. IKON Office Solutions, Inc., 2005 U.S. Dist. LEXIS 1106, at *29 (E.D. Pa. Jan. 26, 2005) (“statements [on resumes] must be taken with a grain of salt.”).

Retailers in Pennsylvania frequently pay overtime to salaried employees under what is called the “Fluctuating Workweek Method” in which they receive “half-time” for hours worked over 40 in a week.   Many retail workers unfortunately refer to this method of payment as Chinese Overtime.”  Evans v. Lowe’s Cos., 2004 U.S. Dist. LEXIS 8335, *8 (M.D. Pa. Apr. 29, 2004).

A federal judge recently ruled that this method of calculating overtime violates Pennsylvania law. See Foster v. Kraft Foods Global, Inc., 285 F.R.D. 343, 344 (W.D. Pa. 2012).  Under the judge’s ruling, most Pennsylvania retail workers are entitled to full “time-and-one-half” overtime pay when they work over 40 hours in a week.  Id.

Our firm currently is investigating several retailers in Pennsylvania who only pay their employees “half-time” for their overtime work.

If a current OR FORMER employer only paid you “half-time” for your overtime hours, you may be entitled to valuable overtime compensation.

Our law firm represents Pennsylvania workers who have been denied overtime pay.  If you or someone you know would like a free and confidential consultation, please call us at (215) 884-2491.

On April 24, 2014, Magistrate Judge Eddy from the United States District Court for the Western District of Pennsylvania granted Plaintiff’s motion to conditionally certify a collective action comprised of all Field Service Managers (“FSMs”) employed by Alliance Inspection Management, LLC (“AIM”) in the United States within the past three years.  Jones v. Alliance Insp. Mgmt., LLC, 2014 U.S. Dist. LEXIS 57257 (W.D. Pa. Apr. 24, 2014).  As a Field Service Manager, Plaintiff performed routine work associated with Alliance Inspection Management’s vehicle inspections and dealership audits.  Plaintiff alleged that Alliance Inspection Management misclassified her and other Field Service Managers as overtime-exempt.  As a result, Plaintiff alleged that she and other Field Service Managers did not receive any overtime pay for hours worked over 40 in a week in violation of the Fair Labor Standards Act (“FLSA”) and the Pennsylvania Minimum Wage Act (“PMWA”).

In granting Plaintiff’s motion for conditional certification under 29 U.S.C. § 216(b), the Court found that Plaintiff had presented “substantial evidence that shows a factual nexus between the manner in which Alliance Inspection Management Inc.’s overtime policy affected her and other FSMs.”  The Court referenced a letter from the DOL which was apparently sent to all Field Service Managers concerning the Wage & Hour Division of the United States Department of Labor’s (“DOL”) investigation into Alliance Inspection Management’s overtime classification of Field Service Managers.  Likewise, the Court referenced a letter that Alliance Inspection Management’s CEO circulated to all Field Service Managers in response to the DOL’s overtime investigation   Thirdly, the Court referenced documents stemming from the DOL’s investigation which demonstrated that Plaintiff and all other Field Service Managers (“FSMs”) employed by Alliance Inspection Management (“AIM”) were similarly subject to the DOL’s overtime investigation.

Finding that the “lenient standards” pertaining to the conditional certification of a collective action were met, the Court concluded that “Plaintiff has produced a great deal of compelling evidence that shows she is in a class of similarly situated FSMs who were the subject of the DOL’s nationwide investigation into AIM’s alleged overtime pay violations, and that there is a factual nexus between the manner in which AIM’s policy (deeming FSMs to be exempt from FLSA’s overtime requirements) affected her and other FSMs.”  Thus, other Field Service Managers will now have an opportunity to join the collective action lawsuit to assert their unpaid overtime rights by filling out and returning a consent form.

On January 27, 2014, the Supreme Court decided Sandifer v. United States Steel Corp., __ U.S. __, 134 S. Ct. 870 (2014), wherein it addressed the scope of Section 3(o) of the FLSA.  Before addressing the Court’s holding, here is some background:

The FLSA generally requires that employees be paid a minimum wage for all hours worked and overtime premium compensation (calculated at 150% of the employee’s regular pay rate) for hours worked over 40.  The FLSA’s Portal-to-Portal amendments exclude from compensable work time activities which are “preliminary to or postliminary to” the employee’s “principal activities.”  29 U.S.C. § 254(a)(2).  In Steiner v. Mitchell, 350 U.S. 247, 76 S. Ct. 330 (1956), the Supreme Court held that activities that are “integral and indispensible” to an employee’s principal activities are themselves principal activities and, therefore, are not “preliminary” or “postliminary” activities under the Portal-to-Portal amendments.  Under Steiner, many pre-shift and post-shift activities remain compensable.  For example, the time associated with food processing workers’ donning of sanitary and protective gear is compensable.  Seee.g.IBP, Inc. v. Alvarez, 546 U.S. 21, 126 S. Ct. 514 (2005); De Asencio v. Tyson Foods, Inc., 500 F.3d 361 (3d. Cir. 2007).

The FLSA contains an exception to the general rules discussed above.  In particular, FLSA Section 3(o) permits employers and labor unions to enter into agreements that exclude from the compensable workday “time spent in changing clothes or washing at the beginning or end of each workday.”  29 U.S.C. § 203(o) (emphasis supplied).  Thus, under Section 3(o), activities that would otherwise be compensable under Steiner – such as, for example, a poultry worker’s gathering and donning of sanitary gloves, aprons, smocks, and hairnets – can become non-compensable by virtue an agreement between the employer and the union to exclude such time from compensation.  Of course, this would require a finding that the sanitary gloves, aprons, smocks, and hairnets constitute “clothes” under Section 3(o).

This brings us to Sandifer, where the Court was called upon to decide whether various “protective gear” donned by steelworkers prior to their paid shift constitute “clothes” under Section 3(o).  The gear included:  “a flame-retardant jacket, pair of pants, and hood; a hardhat; a ‘snood’; ‘wristlets’; work gloves; leggings; ‘metatarsal’ boots; safety glasses; earplugs; and a respirator.”  Sandifer, 134 S. Ct. at 874.  The employer and labor union had agreed that employees would not be paid for the time associated with the donning and doffing of such gear.  But the plaintiffs – who cared little about the agreement struck by their union – wanted to be paid anyway, and, under Section 3(o) the employer-union agreement prevented plaintiffs from being paid only if the protective gear constituted “clothes.”

In a 5-4 decision split along the usual ideological lines, the Court held that all of the protective gear listed above constituted “clothes” except the safety glasses, earplugs, and respirators.  Moreover, the Court reasoned that, since the great majority of the items donned were “clothes,” none of the plaintiffs’ changing time was compensable. To hold otherwise, would require courts to engage in temporal nit-picking (e.g. trying to separate out the time spent donning safety glasses, earplugs, and respirators from the time spent donning the various “clothing” items).

In the author’s view, it’s important to recognize the limited reach of Sandifer.  Since FLSA Section 3(o) only applies to unionized workplaces, the great majority of FLSA lawsuits are not impacted by this decision.

In a classic “man bites dog” story, a mortgage company has failed to prevent 188 mortgage loan officers from arbitrating their overtime rights claims.  It seemed like Corporate America’s love affair with arbitration clauses is not so strong when they face multiple claims and realize that arbitration really is pretty expensive and inefficient.  You should read this decision, which is entitled Aguilera v. Prospect Mortgage, LLC, 2:13-cv-05070 (C.D. Cal. Sept. 5, 2013).

Earlier today, the Sixth Circuit Court of Appeals issued an opinion holding that FedEx could not enforce a contract provision in which employees purportedly agreed to file overtime rights and equal pay claims within a time period that is shorter than the period allowed under the FLSA and EPA.  The court based its opinion on the longstanding principle that employees cannot waive their rights under the FLSA or EPA. In another part of the opinion, the Court held that an employee’s belief that he/she was properly classified as overtime-exempt is not relevant to the legal issue of whether he/she REALLY was properly classified under the law.  Click here for a copy of the Court’s opinion in Boaz v. FedEx Customer Information Services, Inc.  In sum, the Court explained that a worker’s overtime rights are based on the law, not on what the employee agrees or understands.  If you are a delivery driver or other employee who might have been denied overtime, call us so that our Pennsylvania, New York, and Pennsylvania overtime lawyers can evaluate your case.

Employers continue to argue that they can use the fluctuating workweek method (a.k.a. half-time method) to calculate the amount of overtime damages owed to employees who win overtime lawsuits alleging that they were misclassified as overtime exempt.  I will not go into the details of the decisions, because this topic has been covered repeatedly on this blog.  The first case is entitled Costello v. Home Depot USA, Inc., 3:11-cv-953-JCH (D. Conn. May 13, 2013), and concerns Connecticut retail managers who alleged that they were misclassified as overtime exempt.  Click HERE for the Costello opinion.  The second case is entitled Wallace v. Countrywide Home Loans, Inc., 08-cv-1463-JST (C.D. Cal. April 29, 2013), and concerns California bank employees who allege that they were misclassified as overtime-exempt.  As many of you know, the overtime lawyers at Winebrake & Santillo represent many retail managers, assistant managers, account managers, and department managers in Pennsylvania and elsewhere who allege that they have been wrongfully denied overtime by being misclassified as exempt from the overtime laws, including the Pennsylvania overtime laws and the New Jersey overtime laws.

In a recent opinion, Judge Jerome Simandle for the District of New Jersey denied a motion to dismiss filed by individual defendants seeking to dismiss the Fair Labor Standards Act (“FLSA”) and New Jersey Wage and Hour Law (“NJWHL”) claims asserted against them.  See Adami v. Cardo Windows, Inc., 2013 U.S. Dist. LEXIS 102447 (D.N.J. July 23, 2013),

In this lawsuit, the plaintiffs, who worked as window installers, sought unpaid overtime compensation against defendants under the FLSA and NJWHL for hours worked over 40 each workweek.  The plaintiffs alleged that the company incorrectly classified them as independent contractors and that they were instead employees who were entitled to overtime compensation. Companies routinely violate the FLSA, as well as New Jersey overtime law, by incorrectly classifying workers as independent contractors in the belief that they do not have to pay overtime.  For example, window installers, carpet installer, painters, roofers, carpenters, construction workers, and workers for water restoration companies and fire restoration companies, are commonly, and often incorrectly, considered by their employer to be independent contractors and wrongfully denied overtime pay.

Judge Simandle cited to 4 specific factors that the Court should look to in determining whether the individual defendants could be considered employers under the FLSA or NJWHL:  1) whether the defendants had the power to hire and fire; 2) whether the defendants supervised and controlled work schedules or conditions of employment; 3) whether the defendants determined the rate and method of payment; and 4) whether the defendants maintained employment records.

In denying the motion to dismiss, the Court noted that plaintiffs alleged that the individual defendants supervised and controlled employee schedules and conditions, controlled the method of payment, and issued 1099 forms.  Moreover, the Court noted that every individual defendant was either an owner, director, or manager of the company.  The Court still denied defendants’ motion to dismiss even though it was never alleged that each individual defendant could hire or fire.

On July 2, the DC Circuit Court of Appeals issued an opinion invalidating a 2010 Wage and Hour Administrator’s Interpretation that explained that mortgage loan officers generally are not covered by the FLSA’s outside sales exemption.  The Circuit Court did address whether or not mortgage loan officers are, in fact, overtime exempt.  Rather, the Court invalidated the interpretation because, in issuing the interpretation, the Administrator did not follow the notice and comment procedures set forth in the Administrative Procedures Act.  The opinion is Mortgage Brokers Association v. Harris, No. 12-5246 (D.C. Cir. July 2, 2013).  Click here for a copy of the opinion.  Importantly, many mortgage loan officers are entitled to valuable overtime pay.  The DC Circuit’s recent opinion (which was based entirely on procedural grounds) does not alter the overtime rights of mortgage loan officers.  So our overtime attorneys will continue to file these cases in New York, New Jersey, Pennsylvania, and throughout the United States.

On July 15, a federal judge in Minnesota conditionally certified a class of admissions representatives employed by Regency Corporation, which runs a chain of for-profit beauty schools.  The lawsuit alleges that the admissions representatives were denied overtime by being required to work off-the-clock.  The opinion is entitled Michelle Le, et al. v. Regency Corp., et al., 13-cv-00391-DWF-SER (D. Minn. July 15, 2013), and you can get a copy by clicking HERE.  This is a good decision.  Although the admissions representatives (a.k.a. sales representatives) in this case alleged that they worked off-the-clock without being paid, in many other cases (some of which have been handles by our firm) admissions representatives employed by for-profit colleges and trade schools have successfully alleged that they were misclassified as exempt from the overtime laws.  However, in our experience, many college and trade school admissions representatives do not perform the types of managerial or administrative duties necessary to fall within the exemptions to the overtime right laws, including the Pennsylvania overtime rights laws.  We are always happy to discuss the overtime rights of admissions representatives (a.k.a. admissions reps) or sales representatives.

As the result of recent amendments to Department of Labor regulations, many retailers in Pennsylvania, New Jersey, New York and elsewhere are facing unpaid overtime claims challenging their use of the Fluctuating Workweek Method of compensation for overtime eligible employees. “Many referred to the pay system as ‘Chinese Overtime.’”  Evans v. Lowe’s Cos., 2004 U.S. Dist. LEXIS 8335, *8 (M.D. Pa. Apr. 29, 2004). Under the Department of Labor Regulations, employers cannot pay bonuses and non-overtime premiums such as, for example, shift differentials, to employees who are paid under the Fluctuating Workweek Method.

In reaction to these lawsuit, many employers argue collective action treatment is not proper because some of the workers paid in this manner were exempt and not eligible for overtime pay in the first place.  However, Middle District of Tennessee recently rejected this argument and conditionally certified a class despite this potential defense.  See Ott v. Publix Super Markets, Inc., 2013 U.S. Dist. LEXIS 63581 (M.D.Tenn. May 2, 2013).

Due to the complicated requirements of the Fluctuating Workweek or “Half-Time” Method, many employers are improperly paying their workers.  This is especially true for retail employees.  In addition, the Western District of Pennsylvania recently held that the Fluctuating Workweek Method is not permissible under Pennsylvania law.  See Foster v. Kraft Foods Global, Inc., 2012 U.S. Dist. LEXIS 121282, *2-3 (W.D. Pa. Aug. 27, 2012).

In a recent decision from Judge Totenberg for the Northern District of Georgia, Jewell v. Aaron’s, Inc., 2013 U.S. Dist. LEXIS 102182 (N.D. Ga. July 19, 2013) the Court held that social media posts for 87 employees that opted into a Fair Labor Standards Act (“FLSA”) 29 U.S.C. § 216(b) collective action were not discoverable.

The case, which was originally filed in the Northern District of Ohio, seeks to recover unpaid overtime compensation on behalf of employees for time spent working during meal breaks.  The employees allege that their employer, a retailer that leases and sells furniture, electronics, appliances, and computers, automatically deducted 30 minutes from their pay for meal breaks without regard to whether they were working.  The collective action consists of non-exempt account managers, manager trainees, sales managers, customer service representatives, and product technicians.

In discovery Defendant sought the broad production from 87 of the FLSA opt-ins of any social networking activity made during work hours, specifically any “Facebook, MySpace, LinkedIn, Twitter” or blog postings.

Defendant’s purported rationale for this request was that such evidence would demonstrate that the employees were not too busy to take breaks.  However, the Court was not persuaded by the defendant’s rationale, stating that “Defendant has not made a sufficient predicate showing that the broad nature of material it seeks is reasonably calculated to lead to the discovery of admissible evidence.”  Even though there was evidence that the named plaintiff often made Facebook posts during work hours, the Court nonetheless stated that “such activity does not persuade the Court that the Facebook postings will show, contrary to Plaintiffs’ claims, that they were not forced to work through their meal periods.”

This decision is important because it addresses the problem presented by overly broad discovery requests that request personal information, such as social networking posts, from employees in FLSA overtime cases.  The Court’s opinion correctly recognizes that requests for such information amounts to no more than a “proverbial fishing expedition” which have no direct relevance to an employee’s FLSA overtime case.

Our firm continues to have success litigating overtime lawsuits on behalf of salaried managers and assistant managers in Pennsylvania who are paid for their overtime work under the “fluctuating workweek” method of compensation.  This method also is referred to by some companies and employees as the “half-time” method and “Chinese overtime.”  As previously reported in this bloc, a federal judge in Pittsburgh recently ruled that this method of compensation (which fails to pay full time-and-one-half overtime pay to many managers and assistant managers) is illegal under the Pennsylvania overtime law (formally known as the Pennsylvania Minimum Wage Act or the PMWA”).  This method id especially used to deny full overtime to store managers, assistant managers, and department managers.  We have reason to believe that many companies have used that half time method to pay overtime to their Pennsylvania Managers and/or Assistant Managers.  For example, we believe that certain Payless Shoes  managers were paid overtime under the half-time method.  We also believe that certain managers at Claire’s Stores (Claire’s Stores) received overtime under this method.  We would be happy to investigate the overtime rights claims of any employees of Payless, Claire’s, or any other retail or non-retail employees who may be entitled to overtime. 

Our law firm currently represents oil and gas field workers employed in the oil/gas/natural gas/fracking industry in overtime cases.  If you are a former or current oil and gas worker, you may be entitled to unpaid overtime compensation. 

Field workers employed by oil and gas companies are often provided with numerous job titles such as Solids Control Technicians, Mud Loggers, Mud Logging Technicians, Service Technicians, Fluid Service Technicians, and Rig Operators.  Regardless of the specific job title, however, such oil and gas field workers typically work very long hours and are easily working over 40 hours during a workweek, but are not receiving overtime pay.

In an attempt to avoid paying overtime, oil and gas companies will often pay solids control technicians and other field workers a salary and/or compensate them with a per diem payment for each day spent working in the field.  Such pay practices may violate the federal Fair Labor Standards Act (“FLSA”), and applicable state law, by failing to pay oilfield and gas technical workers overtime compensation, i.e. pay for one and one-half times their regular pay rate for all hours worked over 40 in a workweek.   Oil and gas workers, such as solids control technicians, typically perform manual labor at assigned oilfield and gas locations, engage in various drilling activities at assigned sites, operate equipment (such as centrifuges, shakers, or other solids control equipment) on rig sites, complete routine paperwork, and perform other miscellaneous work in the shop.  Such work does not classify as “exempt” work under the FLSA and state law, and, thus oil and gas workers may be entitled to overtime pay for hours worked over 40 each workweek.

If you worked as an oil and gas worker for an oil and gas company, particularly in the Marcellus Shale region (Pennsylvania) or Utica Shale region (New York), please call our law firm for a completely free and confidential consultation concerning your overtime rights.  We will investigate whether you are entitled to unpaid overtime compensation.

In a case titled Glatt v. Fox Searchlight Pictures, Inc., 2013 U.S. Dist. LEXIS 82079 (S.D.N.Y. June 11, 2013), a New York federal court held that unpaid interns who worked on the production of various films including “Black Swan” were entitled to minimum wage and (if necessary) overtime compensation for the hours they worked.  The Glatt decision relied heavily on the U.S. Department of Labor’s Fact Sheet #71 which concerns “Internship Programs Under the Fair Labor Standards Act.”  Therein, the DoL outlined six factors to be considered when determining if an intern is entitled to compensation for work provided to “for-profit” private sector employees.  These include:

1.      The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2.      The internship experience is for the benefit of the intern;

3.      The intern does not displace regular employees, but works under close supervision of existing staff;

4.      The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.

5.      The intern is not necessarily entitled to a job at the conclusion of the internship; and

6.      The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The Glatt opinion has sent shockwaves through corporate America and forced businesses in Pennsylvania, New Jersey and New York to re-evaluate their internship programs for students and recent graduates.  Many companies, both in and outside of the entertainment industry, assumed that if you called someone an “intern” they were excused from following state and federal wage and hour law.  The Glatt opinion suggests otherwise.

Our firm would be happy to provide a completely free and confidential consultation to anyone who has worked as an unpaid intern in any industry and investigate their potential minimum wage and overtime claims.

An Ohio federal judge has conditionally certified an FLSA overtime rights case brought on behalf of Account Managers employed in Ohio by Healthcare Services Group, Inc.  The company is also commonly known as HSG.  In the lawsuit, the Account Managers alleged that the company misclassified them as exempt from the overtime laws.  The case citation is Cox v. Healthcare Services Group, Inc., 2013 U.S. Dist. LEXIS 78290 (N.D. Ohio 2013).  Here is how the federal court summarized the facts:  “[HSG]  provides housekeeping and dietary management services in health care facilities across the country. Since 2010, HSG has provided services to 178 different health care facilities in Ohio alone. Plaintiff Joshua Cox is employed by Defendant as an Account Manager (“AM”). AMs work at facilities with which HSG has contracted to provide services, and there is a dispute in this case over their regular duties — Defendant argues they generally are responsible for “recruiting, training, supervising and managing housekeepers, janitors and, in some facilities, laundry workers at their facility, as well as labor and procurement budget management, inventory, regulatory compliance, and quality control”, while Plaintiff argues they primarily are engaged in “housekeeping, floor care and laundry duties” . Many AMs go through a training program, during which time one is considered a Manager in Training (“MIT”). While in the program, MITs perform housekeeping, laundry, and floor care duties at various HSG-contracted facilities.  Plaintiff alleges that AMs and MITs in Ohio perform non-exempt work under the FLSA, work in excess of forty hours per week, and are not paid overtime to which they are entitled under the  [*3] FLSA (id.). He alleges specifically that (1) despite HSG’s classification of MITs as non-exempt employees, it has a “uniform practice” of not paying MITs overtime; and (2) HSG misclassifies its AMs as exempt employees and fails to pay them overtime, despite the fact AMs primarily perform non-exempt work. The FLSA provides a private cause of action against an employer “by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” Collective actions brought by employees under the FLSA require putative class members to opt into the action, or generally termed, the “class.” The statutory standard for bringing a collective action under the FLSA is that the opt-in plaintiffs are “similarly situated.” “Similarly situated” does not mean plaintiffs need to be identical; however, it is the lead plaintiffs’ burden to show the opt-in plaintiffs are similarly situated to the lead plaintiffs.”  (internal citations omitted).  This Ohio overtime lawsuit is like many of the Pennsylvania overtime lawsuits that our firm brings on behalf of assistant managers, department managers, loan officers, retail assistants, and other workers who get fancy job titles but really spend most of their time doing the same work as hourly employees.  These cases are known as overtime misclassification lawsuits.  assistant manager overtime, department manager overtime, store manager overtime, retail overtime, loan officer overtime, assistant branch manager overtime, account manager overtime, sales manager overtime, account assistant overtime.

A Minnesota federal judge has refused to decertify an FLSA misclassification case brought by Territory Managers employed by Valspar Corporation.  This case, which was brought to our attention by a fellow Philadelphia wage and overtime attorney, provides a good example of an overtime “misclassification” case in which the employees allege that they were improperly designated as overtime-exempt.  The case is cited at Simmons v. Valspar Corp., 2013 U.S. Dist. LEXIS 69528 (D. Minn. May 16, 2013).  Here is how the Court summarized the dispute:  “Plaintiffs are current and former employees of Defendant (“Valspar”). In this action, they allege that Valspar failed to pay them for overtime as required by the Fair Labor Standards Act, (“FLSA”). The Court conditionally certified Plaintiffs’ collective action under  and permitted Plaintiffs to proceed jointly for the purpose of discovery. Now that discovery is complete, Valspar asserts that Plaintiffs’ claims are not sufficiently similar and moves to decertify the collective action. For the reasons set forth below, the Court will deny Valspar’s Motion.  Valspar is a paint manufacturer that sells its products through Lowe’s and other home-improvement retailers. Plaintiffs were employed by Valspar as Lowe’s Team Territory Managers (“TMs”) from 2007 through 2012, to promote and oversee Valspar’s products in Lowe’s home-improvement stores. Each TM is responsible for an assigned territory, which encompasses an average of six Lowe’s stores. A TM’s job duties are split into seven general categories:  1. In-store “sales,” which includes attending to Lowe’s customers, answering their questions, helping them select paint products, and mixing paints for them; 2. Maintaining the appearance of Valspar products in the stores, which includes cleaning and fixing displays and stock, replenishing brochures and color samples, and moving product to the easy-to-reach shelves; 3. Training and educating Lowe’s associates on Valspar’s products and selling techniques, both formally and informally; 4. Analyzing Lowe’s paint sales and inventory data using the Business Intelligence system (“BI”); 5. “Sets, resets, and remerchandises” in stores, which includes setting up new stores and setting up or restocking displays; 6. Outside “sales,” which include calling on contractors  to promote their use of Valspar’s products and Lowe’s stores’ services; and 7. Miscellaneous tasks such as preparing schedules, responding to surveys or emails, telephone calls and meetings with supervisors, etc. VMs are expected to execute these tasks for each of their assigned store locations.  TMs are each supervised by a Regional Manager (“RM”), with whom they communicate at least weekly. RMs evaluate the TMs’ job performance, in part, by performing a quarterly walk-through of Lowe’s stores. On these walk-throughs, the RMs use a standardized checklist that focuses almost entirely on store appearance (i.e. how well the TM has maintained Valspar’s products and displays within the Lowe’s paint department).  The average number of weekly hours each Plaintiff reported working varied, but all Plaintiffs reported working more than forty hours per week. They testified that they were expected to be in Lowe’s stores Monday through Friday, and some Saturdays, for at least eight hours each day, and that they were expected to visit each of their stores at least once a week. The amount of time each Plaintiff devoted to a given task varied—not only from Plaintiff to Plaintiff,   but also from day to day, week to week, and store to store. Nonetheless, all Plaintiffs reported spending a majority of their time on “in-store selling” and “store appearance.”  TMs generally were not required to keep track of their time because they were not paid on an hourly basis. But a few sources provide hard data on the amount of time they spent working and on which tasks. First, they were expected to log in and out of the Lowe’s time-keeping system (“LSM”) upon arriving and departing each Lowe’s store. They were also expected to keep track of their contact with contractors, although not necessarily the time spent with contractors. TMs also reported the amount of time they spent on each of the seven categories of job duties through Valspar’s “time-and-action” surveys. While this data is helpful to evaluating how Plaintiffs spent their time and how much time they spent working, the parties agree that it does not accurately reflect their schedules—it does not include time they worked at home, their commutes between stores, or time spent on “outside sales,” and it may include time that they were not working because Plaintiffs occasionally did not log out of LSM before leaving a Lowe’s store. Overall, Plaintiffs estimate they worked fifty to sixty-five hours a week. Because Valspar classified TMs as exempt from the FLSA as either outside salespeople or administrative employees, it did not pay them on an hourly basis or for overtime. Instead, TMs were paid an annual salary plus a commission based on Valspar’s sales at the Lowe’s stores in the TM’s territory, and, on designated days, TMs were also eligible to earn an additional amount or “spiff” for each can of Valspar paint sold.”  (internal citations omitted).  It will be interesting to see how this case turns out.  Our firm’s Pennsylvania wage/overtime lawyers and New Jersey  and New York wage/overtime lawyers are well prepared to evaluate cases in which employees allege that they have been misclassified as exempt under the outside sales exemption to the overtime laws.

Our New Jersey employment rights lawyers and New Jersey overtime lawyers are happy to see that, in May 2013, the New Jersey Senate passed the above law, which cracks down on the illegal practice of depriving delivery drovers of overtime pay and other employee befits by misclassifying them as independent contractors rather than employees.  We have represented delivery drivers (including Pennsylvania, New Jersey, New York and Massachusetts delivery drivers) in overtime lawsuits.  If you are a delivery driver or deliveryman or delivery person, you may be entitled to overtime pay.  Call us to learn about you delivery driver overtime rights. 

Employers often assume that they can make deductions from their employees’ compensation without any ramifications.  However, many states such as Pennsylvania, New Jersey, and New York, possess laws prohibiting deductions from employees’ compensation with the exception of very specific and limited circumstances.  See, e.g., 43 P.S. § 260.3; 34 Pa. Code § 9.1 (Pennsylvania); N.J.Stat.Ann. §34:11-4.4 (New Jersey); N.Y.Lab.Law §193 (New York); Conn.Gen.Stat. §31-71e (Connecticut); Del.Code.Ann. §1103(a) (Delaware); Ill.Admin.Code §300.720 (Illinois); Ind.Code.Ann. §22-2-6-1 (Indiana); Mich.Comp.Laws §408.477(1) (Michigan); N.H.Rev.Stat.Ann ch. 275, §48 (New Hampshire); and R.I.Gen.Laws § 28-14-10 (Rhode Island); accord Camara v. Attorney General, 458 Mass. 756, 763 (2011) (listing limited types of permissible deductions from compensation). These statutes are strictly interpreted.  Specifically, under the Pennsylvania Wage Payment and Collection Law (“PWPCL”), 43 P.S. §§ 260.1, et seq., permissible deductions are limited to those specifically identified in 34 Pa. Code § 9.1(1)-(12).  Many of these concern “typical” deductions such as taxes, contributions to pension plans and donations to charitable organizations.  However, while the PWPCL does have a catchall provision for “other deductions,” see 34 Pa. Code § 9.1(13), an employer must have both (i) an agreement in writing with the employee authorizing the deduction and (ii) approval by the Pennsylvania Department of Labor and Industry, to fit within its confines.  See Ressler v. Jones Motor Co., Inc., 487 A.2d 424 (Pa. Super. 1985).  Otherwise, the deduction is illegal and the employer can face monetary penalties for each deduction.  Courts also interpret state regulations describing the types of legal deductions in a very limited fashion.  See, e.g., Watson v. Prestige Delivery Systems, Inc., et al., GD-09-15746, slip op. (Allegheny Cty. Feb 7, 2013).

In addition, employers will often make otherwise illegal deductions because they think that these state laws do not apply to there employees because they have classified them as “independent contractors.”  However, often this classification is improper based on the nature of their relationship with their employees and opens the employer for potential liability.

The United States District Court for the District of New Jersey issued an opinion today finding that a driver represented by Winebrake & Santillo was entitled to overtime premium compensation even though she periodically drove vehicle weighing more than 10,000 pounds.  In a case titled McMaster v. Eastern Armored Services, Inc., the company argued that the plaintiff was exempt under the Motor Carrier Act exemption to the Fair Labor Standards Act because she occasionally drove vehicles weighing more than 10,000 pounds.  As a result, Plaintiff was paid just her regular rate or “straight-time” for her overtime hours while employed with the company.  Plaintiff argued that under the SAFETEA-LU Technical Corrections Act of 2008, she was a “covered employee” entitled to overtime premium compensation for hours worked over 40 because 51% of her employment was spent driving vehicles weighing less than 10,000 pounds.  The Court found in favor of the plaintiff and held that she was entitled to overtime pay.  The Court also held that all hours worked should be counted towards the calculation of any overtime premium compensation owed, not just those hours in which the plaintiff drove vehicles weighing less than 10,000 pounds.  Click here for a copy of the opinion.

The Court of Common Pleas for Lehigh County recently issued an order finding that a senior care provider violated the Pennsylvania Minimum Wage Act (“PMWA”) by paying its hourly employees represented by Winebrake & Santillo under the “8/80 Rule.”  In a case titled LeClair v. Diakon Lutheran Social Ministries, the Court held that prior to a July 2012 amendment, the PMWA required that employees receive overtime premium pay for all hours worked over 40 in a “workweek” defined as “a period of 7 consecutive days.”  Diakon had paid its hourly employees pursuant to the 8/80 Rule where they received overtime premium pay for hours worked either in excess of eight in one 24 hour day or in excess of 80 hours in a 14 day pay period.  This pay practice, the Court held, violated the PMWA prior to July 2012 when Governor Corbett signed an amendment into law that would allow Pennsylvania healthcare providers to utilize the 8/80 method of pay.  Click here for a copy of the opinion.  The federal Fair Labor Standards Act allows healthcare providers to utilize the 8/80 Rule to calculate overtime compensation so long as certain prerequisites are fulfilled.  The LeClair opinion follows the March 2010 ruling of the Philadelphia Court of Common Pleas in a similar challenge to the 8/80 method of compensation that Winebrake & Santillo and co-counsel obtained in a case called Turner v. Mercy.

The attorneys at Winebrake & Santillo, LLC have extensive experience representing workers from various employment fields and backgrounds to help them recover unpaid wages.  Just a few examples of the types of employees we have previously represented are:

Computer Technicians and IT Employees:  Many employers will automatically pay their IT employees a salary and classify them as exempt from federal and state overtime laws.  However, those individuals who generally do not write code or spend the majority of their time performing basic helpdesk functions may be entitled to overtime compensation.

Construction Workers and Skilled Laborers:  Workers in the building and trade industries are often denied proper payment of wages.  Often individuals performing work on government contact jobs are not paid the required “prevailing wage.”  Similarly, they may not be paid time and a half for hours worked over 40 or are simply told that their employer “does not pay overtime.”  These individuals may be entitled to unpaid wages.

Home Health Workers:  Pennsylvania home health workers are often not paid “time and a half” for hours worked over 40 in a workweek.  This may be a violation of Pennsylvania wage and overtime law.

Hospital and Assisted Living Workers:  Workers at hospitals and assisted living facilities will often be required to work “off-the-clock” during unpaid meal breaks due to the emergency nature of their job.  These individuals may be entitled to unpaid wages.

Independent Contractors: Companies, regardless of field, will often improperly classify workers as “independent contractors” to avoid paying minimum wages, overtime compensation and other benefits typically provided to “employees.”  Just because an employer labels someone as an independent contractor or even requires him/her to an independent contractor “agreement” does not automatically mean that he/she is not entitled to the protections of federal and state wage and hour laws.

Mortgage Loan Officers:  Mortgage loan advisors and officers are often paid either a salary or 100% commissions and do not receive overtime compensation.  These workers are often misclassified as exempt from federal and state overtime laws and may be entitled to unpaid wages.

Landscapers and Maintenance Workers:  Workers for landscape and maintenance companies are often paid “straight time” for hours worked over 40 and not “time-and-a-half.”  These individuals are often required to report to a “shop” or central location at the beginning and end of his/her shift and travel to and from assigned worksites throughout the day without being paid for this time.  Workers may be entitled to unpaid wages for such work.

Manufacturing Workers:  Employees at factories and laboratories will often be required to put on, take off and maintain certain protective clothes and equipment before and after their paid work hours.  This time, even if it only takes a few minutes to perform, may be compensable.

Mechanics and Technicians:  Mechanics and technicians are often required to work “off-the-clock” and not receive pay for all the hours they work.  Also, many times employers do not include commissions or shift differentials in calculating their hourly rate for purposes of paying overtime premium compensation.  These are each potential violations of federal and state wage and overtime laws.

Office Workers:  Workers in an office setting will often be paid a salary and classified as exempt even though they primarily perform non-managerial functions.  These individuals may be entitled to overtime pay for hours worked over 40 in a single workweek.  Just because you are paid a salary does not me you are automatically not entitled to overtime compensation.

Retail Employees:  Retail workers who are paid on an hourly basis will often be required to work during unpaid meal breaks or before or after their paid shift in order to address customer needs.  Employers will either refuse to pay workers for this “off-the-clock” time or offer “comp time” instead of paying overtime wages.  These are each potential violations of federal and state wage and overtime laws.

Service Technicians and Installers:  Service technicians are often paid on a “piece rate” or not compensated for work performed at the company’s shop at the beginning and end of the day.  In addition, many times employers do not include commissions or shift differentials in calculating their hourly rate for purposes of paying overtime premium pay.  These are each potential violations of federal and state overtime laws.

Social Workers:  Social workers are often paid a salary and not compensated for hours worked over 40 in a single workweek.  Unless you have a master’s degree in your field of specialization you may be entitled to overtime compensation under federal and state law.

Telemarketers:  Workers performing phone banking and help-desk services are often required to “log on” and “log off” his or her employer’s computer system before they can begin making or taking calls as part of his/her paid shift.  This time, even if it only takes a few minutes to perform, may be compensable under federal and state overtime law.

Tipped Restaurant and Hotel Workers:  Workers paid primarily with tips are often improperly classified as exempt from federal and state minimum wage and overtime laws.  If you are paid from a “tip pool” with other employees you may still be entitled to minimum wages and overtime compensation.

Transit Drivers:  Individuals who drive buses or vehicles transporting passengers are often classified as exempt from overtime pay and will only receive their “straight” hourly wage for working over 40 hours in a single workweek.  If you do not regularly cross state lines as part of your driver duties, you may be entitled to overtime premium compensation.

Warehouse Employees:  Workers in warehouses will often be classified as exempt from federal and state overtime laws and will only receive their “straight” hourly wage for hours worked over 40 in a single workweek.  However, this classification is often incorrect entitling warehouse workers to unpaid overtime compensation.

On December 13, 2012, U.S. District Judge Christopher Conner issued an opinion concerning whether settlements of overtime claims in FLSA cases requires approval from either a district court or the Department of Labor to be binding.  In Deitz v. Budget Innovations & Roofing, Inc., the Court concluded that such oversight was necessary, stating:  “The undersigned concurs with the majority of courts who cite Lynn’s Food for the premise that bona fide disputes of FLSA claims may only be settled or compromised through payments made under the supervision of the Secretary of the Department of Labor or by judicial approval of a proposed settlement in a FLSA lawsuit.  It is simply impossible to ensure that an agreement settles a bona fide factual dispute over the number of hours worked or the regular rate of employment in the absence of judicial review of the proposed settlement agreement.”  2012 U.S. Dist. LEXIS 177878, *12-14 (M.D. Pa. Dec. 13, 2012).  Winebrake & Santillo had filed a brief at the Court’s request regarding whether FLSA settlements required Court approval.

As we reported this past July, Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout Massachusetts.  The lawsuit, entitled Lyons v. Citizens Financial Group, Inc., 11-cv-11187-GAO (D.Mass.), is pending in the United States District Court for the District of Massachusetts.  The ABMs allege that they were misclassified as exempt from Massachusetts overtime rights laws.  Citizens Bank asked the First Circuit Court of Appeals to review the district court’s certification order.  On December 18, 2012, the First Circuit Court of Appeals issued an order denying Citizens’ request to review the class certification decision.  Click here for a copy of the opinion.

On December 13, 2012, Judge Tena Campbell of the District of Utah refused to allow the notice to potential FLSA class members to include language stating that if unsuccessful, plaintiffs may be subject to paying a pro rata portion of the costs incurred by a defendant.  The Court held that “[g]iven the small amount of costs compared to the overall stakes, and the rarity of fee-shifting, the disputed language proposed by Cellular Sales risks chilling participation in the collective action.”  Bolletino v. Cellular Sales of Knoxville, 2012 U.S. Dist. LEXIS 177217, *4 (D. Utah Dec. 13, 2012)

Plaintiff Bolletino is represented by Winebrake & Santillo as well as Barrett Johnston, LLC (Nashville, Tenn.) and Barkan Meizlish Handelman Goodin DeRose Wentz, LLP (Columbus, OH).  Mr. Bolletino alleges that he and other Sales Professionals for Cellular Sales were misclassified as independent contractors, rather than employees, and should have received overtime premium compensation when they worked over 40 hours in a single workweek.  A copy of Judge Campbell’s order is attached here.

 

Pennsylvania overtime lawyers and wage lawyers should keep the following cases in mind when they think about filing cases involving the overtime rights of employees:  The FLSA explicitly provides that “[t]he court in [an FLSA] action shall . . . allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”  29 U.S.C. § 216(b) (emphasis supplied); see also 43 P.S. § 333.113 (a prevailing party under PMWA shall recover “reasonable attorney’s fees as may be allowed by the court”).  The FLSA’s language mandates that prevailing parties under the FLSA recover attorney’s fees and costs.  See Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir. 1994); Albers v. Tri-State Implement, Inc., 2010 U.S. Dist. LEXIS 23450, *67 (D.S.D. Mar. 12, 2010).  In fact, “attorney fees are an integral part of the merits of FLSA cases,” Shelton v. M.P. Ervin, 830 F.2d 182, 184 (11th Cir. 1987), and, as courts repeatedly explain, the ability of FLSA claimants to recover a reasonable attorney’s fee is crucial to the statute’s enforcement scheme, see, e.g., Fegley, 19 F.3d at 1134-35 (the “purpose of the FLSA attorney fees provision is ‘to ensure effective access to the judicial process by providing attorney fees for prevailing plaintiffs with wage and hour grievances,’” and, furthermore, “an award of attorney fees here ‘encourages the vindication of congressionally identified policies and rights’”); United Slate, Local 307 v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 502 (6th Cir. 1984) (FLSA attorney’s fee analysis “must reflect the obvious congressional intent that the policies enunciated in FLSA Section 2 be vindicated, at least in part, through private lawsuits charging a violation of the substantive provisions of the wage act”); Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir. 1946) (“Obviously Congress intended that the wronged employee should receive his full wages plus the penalty without incurring any expense for legal fees or costs.”); Estrella v. P.R. Painting Corp., 596 F. Supp. 2d 723, 727 (E.D.N.Y. 2009) (FLSA fee-recovery provision is “designed in part to secure legal representation for plaintiffs whose wage and hour grievances were too small, in terms of expected recovery, to create a financial incentive for qualified counsel to take such cases under conventional fee arrangements”); Mezger v. Price CPAs, PLLC, 2008 U.S. Dist. LEXIS 55311, *12-13 (M.D. Tenn. Jul. 21, 2008) (same as Fegley); see also Heder v. City of Two Rivers, 255 F.Supp.2d 947, 952 (E.D. Wis. 2003) (FLSA’s fee-recovery provision “exists to enable plaintiffs to employ reasonably competent lawyers without cost to themselves if they prevail and, thereby, to help ensure enforcement of the substantive provisions of the FLSA”).  Consistent with the above principles, it is commonplace (and entirely consistent with the FLSA’s legislative purpose) for FLSA attorney’s fee awards to far exceed the amount of the plaintiff’s recovered unpaid wages.  See Howe v. Hoffman-Curtis Partners Ltd. 215 Fed. Appx. 341, 342 (5th Cir. Jan. 30, 2007) (“Given the nature of claims under the FLSA, it is not uncommon that attorney fee requests can exceed the amount of judgment in the case by many multiples.”).  For example, after one recent FLSA trial handled by our co-counsel at the Winebrake & Santillo firm, the federal court awarded $73,195.00 in attorney’s fees even though the plaintiffs recovered only $18,495 in unpaid wages.  See Gonzalez v. Bustleton Servs., 2010 U.S. Dist. LEXIS 85153 (E.D. Pa. Aug. 10, 2010).  Similar outcomes abound.  See, e.g., Fegley, 19 F.3d at 1134-35 (upholding award of $40,000 in fees even though Plaintiff recovered only $7,680 in damages); Cox v. Brookshire Grocery Co., 919 F.2d 354, 358 (5th Cir. 1990) (upholding award of $9,250 in attorney’s fees even though Plaintiff recovered only $1,698.00); Bonnette v. Cal. Health & Welfare, 704 F.2d 1465, 1473 (9th Cir. 1983) (affirming award of $100,000 in attorney’s fees for a recovery of $20,000); Albers, 2010 U.S. Dist. LEXIS 23450, at *66-86 (awarding $43,797 in fees even though plaintiffs’ combined damages totaled only $2,137.97);King v. My Online Neighborhood, Inc., 2007 U.S. Dist. LEXIS 16135 (M.D. Fla. Feb. 20, 2007) (approving a settlement for $4,500 in unpaid wages and $10,500 in attorney’s fees); Heder, 255 F. Supp. 2d 947, 962 (E.D. Wis. 2003) (awarding $36,204.88 in fees even though plaintiff’s damages totaled only $3,540.00); Griffin v. Leaseway Deliveries, Inc., 1992 U.S. Dist. LEXIS 20203 (E.D. Pa. Dec. 31, 1992) (awarding attorney’s fees of $33,631.00 for a plaintiff’s award of $17,467.20); Holyfield v. F.P. Quinn & Co., 1991 U.S. Dist. LEXIS 5293 (N.D. Ill. Apr. 22, 1991) (awarding $6,922.25 in attorney’s fees for a judgment in the amount of $921.50); see also Singer v. City of Waco, 324 F.3d 813, 829 (5th Cir. 2003) (affirming fee award despite the fact that plaintiffs recovered less than 4% of the damages sought).  

As we reported this past July, Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout Massachusetts.  The lawsuit, entitled Lyons v. Citizens Financial Group, Inc., 11-cv-11187-GAO (D.Mass.), is pending in the United States District Court for the District of Massachusetts.  The ABMs allege that they were misclassified as exempt from Massachusetts overtime rights laws.  On November 9, 2012, the District of Massachusetts responded to a request from the First Circuit Court of Appeals and issued an opinion reaffirming its original class certification decision.

The Court of Common Pleas for Dauphin County Pennsylvania recently entered an order finding that Home Health Workers, represented by Winebrake & Santillo, were entitled to overtime premium under the Pennsylvania Minimum Wage Act as a matter of law.  In a case titled Grajales v. Safe Haven Quality Care, LLC , the Court held that the Pennsylvania Supreme Court’s ruling in Bayada Nurses, Inc. v. Commonwealth, 8 A.3d 866 (Pa. 2010) applied retroactively.  The Bayada decision affirmed Home Health Workers entitlement to overtime premium pay for hours worked over 40 in a workweek under the Pennsylvania Minimum Wage Act.  Under the Court’s decision, Home Health Workers in Pennsylvania should be paid overtime both before and after the Bayada decision.

On August 21, 2012, a Kansas District Court denied post-trial motions by Tyson Foods in a donning and doffing case in which a jury found that it violated the FLSA by failing to pay Kansas beef workers for all time spent working.  The district court’s opinion addresses various issues, including the propriety of conditional certification, the propriety of representative testimony, and propriety of liquidated damages.  This is just the latest victory for wage and overtime lawyers seeking to vindicate the wage rights of food processing workers.  Click here for a copy of the Court’s decision:  http://docs.justia.com/cases/federal/district-courts/kansas/ksdce/2:2006cv02198/56745/1098/

On September 29, 2012, Southern District of Ohio Judge Edmund Sargus conditionally certified a class of over 1,600 Mortgage Loan Officers who alleged that they were misclassified as exempt from the overtime laws.  The Loan Officers worked for US Bank. As a result of the conditional certification order, the loan officers will be notified of the lawsuit and of their right to join.  In granting conditional certification, Judge Sargus relied, in part, of the fact that the bank recently reclassified the loan officers in an across-the-board manner, a fact that contradicts the bank’s litigation argument that individualized inquiry is necessary to determine whether or not loan officers are overtime-exempt.  The Judge also rejected the banks arguments that plaintiffs’ counsel acted improperly by contacting loan officers prior to obtaining conditional certification.  By now it should be clear:  mortgage loan officers generally are entitled to overtime pay under the FLSA.  Mortgage loan officers also may be entitled to overtime under many state’s laws.  Click here for a copy of Judge Sargus’s decision:  http://docs.justia.com/cases/federal/district-courts/ohio/ohsdce/2:2011cv00593/147732/71/0.pdf?ts=1348842983

Here are some cases in which district courts have tolled the FLSA limitations period:

In Bolletino v. Cellular Sales of Knoxville, Inc., 2012 U.S. Dist. LEXIS 112132 (E.D.Tenn. Aug. 9, 2012), the defendant sought to stay all proceedings pending the resolution of their motion to dismiss.  See id. at *3-8.  The district court generally granted the stay, see id., but, in doing so, also granted the plaintiffs request that the FLSA limitations period be tolled, see id. at *8-12.  The court reasoned:  “In this case, the Court finds that the request for equitable tolling is well-taken. The Court finds the potential opt-in plaintiffs almost certainly lack notice or constructive knowledge of the filing requirement and lack knowledge of the FLSA or their potential claim. The Court further finds that the named Plaintiffs have been diligent in pursuing their rights. There will be essentially no prejudice to the Defendants because discovery has been stayed at their request, and the equitable tolling will not increase the number of persons who had claims against the Defendants. It will simply prevent preclusion of claims based upon the delay in discovery and any collective action certification.”  Id. at *11-12; see also Struck v. PNC Bank N.A., 2013 U.S. Dist. LEXIS 41666, *10 (S.D. Ohio Mar. 19, 2013) (“[t]he extreme delay in receipt of actual notice in this case – through no fault of the potential plaintiffs – will prove highly prejudicial.”).

Likewise, in Stickle v. SCI Western Mkt. Support Ctr., 2008 U.S. Dist. LEXIS 83315 (D. Ariz. Sept. 30, 2008), conditional certification was delayed by the district court’s consideration of defendant’s motion to dismiss.  See id. at *2-4.  After denying the motion to dismiss, the court turned to whether the FLSA’s limitations period should be tolled to account for the delay.  See id. at *61.  The court ruled that tolling was appropriate.  See id. at *61-65.  In making this ruling, the court explained that judges “have equitably tolled the statute of limitations in a FLSA action when doing so is in the interest of justice,” id. at *63 (citing cases), and reasoned as follows: “The Court finds it appropriate in the interest of justice to toll the statute of limitations here. Defendants here will not be prejudiced by an equitable toll.  See, e.g., Baden-Winterwood, 484 F. Supp. 2d 822, 828 (S.D. Oh. 2007) (defendant was fully aware of its scope of potential liability on the date the suit was filed). If not tolled, the statute of limitations could act to deprive consenting employees of their right of action.  Partlow, 645 F.2d at 761; see also Lee v. ABC Carpet & Home, 236 F.R.D. 193, 199 (S.D.N.Y. 2006) (holding that “the time during which a party is prevented from obtaining legal relief is not counted for purposes of statutes of limitations.”).  Here, the Court has not made a determination as to Plaintiffs’ collective action notification pending its determination of Defendants” Motions to Dismiss.  As the Supreme Court noted in Hoffmann-La Roche, Inc. v. Sperling, 493 U.S. 165, 170, 110 S. Ct. 482, 107 L. Ed. 2d 480 (1989), the inherent benefits of  the collective action “will disappear” if plaintiffs are not notified of the suit before their statute of limitations expires. Similarly, here, without tolling the statute of limitations, Plaintiffs will have lost the time between the filing of the Motions to Dismiss on February 8, 2008 until the filing of the instant Motion that they could have used to notify potential class members. Accordingly, Plaintiffs’ Motion for an Equitable Toll of the Statute of Limitations is granted. Plaintiffs’ statute of limitations is hereby tolled from the date Defendants filed their Motions to Dismiss, February 8, 2008, until the date Plaintiffs re-file their motion for expedited collective action notification.” Id. at *64-65.

In Abadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978 (M.D. Tenn. Dec. 14, 2010), the district court tolled the FLSA limitations period for seven months in conjunction with allowing defendant to take pre-conditional certification discovery.  See id. at *7-8.  Next, after the court granted conditional certification, defendant further delayed the proceedings by seeking an unsuccessful appeal of the conditional certification decision.  See id. at *8-9.  The court, citing pertinent caselaw, tolled the limitations period to account for these delays.  See id. at *9-15; accord Roslies-Perez v. Superior Forestry Service, Inc., 652 F. Supp. 2d 887, 899 (M.D. Tenn. July 28, 2009).

In Ruffin v. Entertainment of the Eastern Panhandle, 2012 U.S. Dist. LEXIS 1511 (N.D.W.V. Jan. 5, 2012), the district court decided to delay resolution of plaintiffs’ conditional certification motion until after it resolved certain “set-off” issues stemming from the defendant’s asserted counterclaims.  See id. at *4-5.  However, in order to ensure that employees were not prejudiced by this approach, the court tolled the FLSA limitations period.  See id. at *6-9.  The court recognized that “[s]everal courts have allowed equitable tolling of FLSA claims where the case’s litigation posture has delayed the court’s consideration of the motion for conditional certification and notice.”  Id. at *6-7 (citing cases).  Relying on such authority, the court reasoned: “Like the cases listed above, this action presents a proper situation in which to apply the doctrine of equitable tolling. Ruffin moved for conditional certification on August 26, 2011, which the parties fully briefed by September 23, 2011. However, this Court subsequently decided that the FLSA setoff issue should be resolved before determining whether conditional certification should be granted. As such, this Court ordered briefing scheduled to conclude on February 28, 2012. As a result, claims of putative opt-in plaintiffs could become time-barred before those potentially similarly-situated individuals receive notice of this action. This constitutes a circumstance beyond those individuals’ control. Accordingly, this Court holds that the FLSA statute of limitations should be equitably tolled pending a determination on conditional certification.” Id. at *7-8.

The above decisions provide just a few examples of district courts exercising their authority to toll the FLSA limitations period where (i) plaintiffs’ counsel have acted diligently in seeking conditional certification and (ii) resolution of the conditional certification motion is delayed through no fault of plaintiffs or their counsel.

Southern District of New York Judge Harold Bear recently refused to compel arbitration in a lawsuit in which Financial Solutions Advisors employed by Merrill Lynch & Co. allege that they are violated overtime pay in violation of the FLSA.  While it was clear that the Advisers signed arbitration clauses, the Judge noted that the arbitration clauses were contained in standardized FINRA contracts that prohibited the arbitration of class or collective actions unless the court refused to certify the class or collective.  The case is entitled Zeltser v. Merrill Lynch & Co., Inc., 1:13-cv-01531 (S.D.N.Y.). This is one of many cases in which bank employees such as loan officers

Our law firm continues to file federal court lawsuits challenging the corporate scam of misclassifying workers as “independent contractors” rather than “employees.”  This practice enables corporations to: (i) cheat workers out of basic benefits (such as, for example, overtime pay, worker’s compensation insurance, and unemployment insurance), (ii) cheat the government out of tax dollars, and (iii) gain an unfair advantage over competitors who comply with the law.

Make no mistake about it: the practice of misclassifying employees as “independent contractors” is a disaster for American workers and their families.  Congress’ failure to effectively crack down on this practice is a national embarrassment.

Since our politicians are incapable of protecting working families against the independent contractor scam, it’s up to Trial Lawyers and the hard-working (but under-resourced) Department of Labor to protect working families.

Based on our review of the recent caselaw, Federal Court decisions appear to be trending in favor of workers in lawsuits alleging independent contractor misclassification.  It seems that Federal Judges are becoming more skeptical of the independent contractor business model.

We see hints of the growing judicial skepticism in a Seventh Circuit Court of Appeals opinion issued in the massive, multi-district litigation involving thousands of FedEx package delivery drivers allegedly misclassified as independent contractors.  (Our firm has the privilege of working on the FedEx litigation alongside many excellent law firms throughout the United States.)

The Seventh Circuit opinion, issued on July 12, 2012, made some very cogent observations about the importance of the independent contractor misclassification issue:

The question [of whether the drivers were properly classified as independent contractors] appears to be a close one.  And the issue is of great importance not just to this case but to the structure of the American workplace.  The number of independent contractors in this country is growing.  There are several economic incentives for employers to use independent contractors and there is a potential for abuse in misclassifying employees as independent contractors.  Employees misclassified as independent contractors are denied access to certain benefits and protections.  Misclassification results in significant costs to government: “[B]etween 1996 and 2004, $34.7 billion of Federal tax revenues went uncollected due to the misclassification of workers and the tax loopholes that allow it.”  And misclassification “puts employers who properly classify their workers at a disadvantage in the marketplace[.]”  FedEx has approximately 15,000 delivery drivers in the U.S.  This case will have far-reaching effects on how FedEx runs its business . . . throughout the United States.  And it seems likely that employers in other industries may have similar arrangements with workers, whether delivery drivers or other types of workers.  Thus, the decision in this case will have ramifications beyond this particular case and FedEx’s business practices, affecting FedEx’s competitors and employers in other industries as well.

Craig v. FedEx Ground Package System, Inc., 686 F.3d 423 (7th Cir. 2012).

The Seventh Circuit hit the nail on the head.  In these tough economic times, the fight against independent contractor abuse is more important than ever.

If your firm represents current or former independent contractors in workers compensation lawsuits or other types of litigation, we would be delighted to speak with your clients about whether, due to a misclassification, they might be able to recover overtime wages and other valuable benefits.  As you know, we always pay a fair referral fee.

Many workplace advocates and Trial Lawyers assume that only “hourly” employees are entitled to time-and-one-half overtime pay for hours worked over 40 in a workweek.  It’s time to bust this myth.  In fact, the right to overtime pay extends to all kinds of employees who are not paid on a traditional hourly basis.

For example, many employees are paid a fixed amount per day.  These “day-rate” employees are especially common in the construction, landscaping, and natural gas industries.  Many of these employees assume that, because they are paid by the day, it does not matter how many hours they work during the week.  In fact, in many of these industries, the Boss does not even keep track of the hours worked by the employee.  This lack of recordkeeping perpetuates the employee’s mistaken belief that no extra overtime pay is due.

Under the federal overtime laws and regulations, most day-rate employees are entitled to extra overtime pay. See generally 29 C.F.R. § 778.112.  In order to figure out the amount of extra overtime pay due to a day-rate employee, we need to convert the employee’s day-rate into an hourly rate by dividing all the pay received during the week by all the hours worked during the week.  The employee is then entitled to an extra payment equaling one-half of the regular hourly rate for every hour worked over 40 during the week.

I know this is pretty confusing, so here’s an example:  Joe works in the northern tier of Pennsylvania for a natural gas company.  He is paid $150 for every day worked.  The seven-day workweek runs from Sunday through Saturday.  Joe does not work on Sunday or Saturday.  But he works the following hours on Monday-Friday: Monday = 9 hrs.; Tuesday = 11 hrs; Wednesday = 6 hrs; Thursday = 13 hrs; Friday = 9 hrs.  Because Joe worked five days during the week, the Boss pays him $750 ($150 X 5 days).  However, Joe is entitled to an extra overtime payment because he worked over 40 hours during the workweek.  Specifically, Joe worked a total of 48 hours (9 + 11 + 6 + 13 + 9) during the week.  He is entitled an extra overtime payment for eight hours.

Based on the above, here’s how Joe’s extra overtime payment is calculated: [$750/48] X .5 X 8 hrs.  Put differently, the Boss owes Joe an extra overtime payment of $62.50.

Many of our Trial Lawyer and community activist friends who receive this Newsletter are too busy focusing on their own practice areas to delve into complicated FLSA regulations.  If you fall within this category, it’s OK to put away your calculator.  Just remember one thing:  day rate employees are entitled to extra overtime pay when they work over 40 hours in a week.

If you encounter a current or former day-rate employee who might not have received extra overtime pay, be sure to give us a call.  We would be delighted to evaluate the situation and, if appropriate, file suit in federal court.  As so many of you know, we always pay a fair referral fee.

Many of you know that our federal overtime law – the Fair Labor Standards Act (“FLSA”) – was enacted during the Great Depression and that the law ensures that employees are fairly compensated for working long hours.  This, however, is not the only purpose behind the FLSA.

In these times of high unemployment, it’s especially important to remember that the FLSA’s primary purpose was to spur employment by making it expensive for companies to pay employees for working over 40 hours per week.  In a fair world (one in which employers don’t skirt the overtime laws) the costs to the company of paying all that extra overtime often will tilt the scales in favor of hiring additional employees and spreading work among more employees.

A few years ago, our firm came out on the losing end of a split-decision in Parker v. NutriSystem, Inc., 620 F.3d 274 (3d Cir. 2010).  While the Court of Appeals’ decision was very disappointing, it did contain an excellent summary of the purpose behind the FLSA.

The legislative history of the overtime compensation provisions of the FLSA reveal a threefold purpose underlying them: (1) to prevent workers who, perhaps out of desperation, are willing to work abnormally long hours from taking jobs away from workers who prefer shorter hours, including union members; (2) to spread available work among a larger number of workers and thereby reduce unemployment; and (3) to compensate overtime workers for the increased risk of workplace accidents they might face from exhaustion or overexertion.

Id. at 279 (citing Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1175-76 (7th Cir. 1987)).

In sum, the FLSA’s important role in fighting unemployment is more important than ever.  So next time you hear someone whining about the supposed proliferation of overtime rights lawsuits, try to remind them of the FLSA’s important role in fighting unemployment.

Here are some cases you can cite to the next time a defense firm tries to use your client’s resume against them in an overtime misclassification case under the executive, administrative, or professional exemptions: Schaefer v. IMPC, 358 F.3d 394, 400-01 (6th Cir. 2004) (“[W]e have recognized that resumes may not provide the most accurate picture of an employee’s job because resumes are typically designed to enhance the employee’s duties and responsibilities in order to obtain a job.”); Wolfslayer v. IKON, 2005 U.S. Dist. LEXIS 1106, *29 (E.D. Pa. Jan. 26, 2005) (recognizing “statements [in resumes] must be taken with a grain of salt.”); Smith v. Bank of N.Y. Mellon Corp., 2011 U.S. Dist. LEXIS 21996 (W.D. Pa. Jan. 20, 2011) (“The focus is on the evidence of the plaintiff’s day-to-day duties, and not on job descriptions, resumes, or performance evaluations.”); Chicca v. St. Lukes Episcopal Health Sys., 2012 U.S. Dist. LEXIS 32399 (S.D. Tex. Mar. 12, 2012) (“To discern what an employee’s actual, day-to-day job activities are, general job descriptions contained in an employee’s resume or prepared by the employer may be considered, but are not determinative.”);Johnston v. Robert Bosch Tool Corp., 2008 U.S. Dist. LEXIS 80053 (W.D. Ky. Oct. 6, 2008) (“A plaintiff seeking recovery of unpaid overtime therefore is not precluded from arguing that his or her day-to-day activities differed from those described in his or her job description, resume or other documents.”); Ale v. TVA, 269 F.3d 680, 689 n2 (6th Cir. 2001) (“there is reason to believe that these resumes may not provide the most accurate picture of an employee’s job because resumes are typically “’designed to enhance the employees duties and responsibilities in order to obtain a job.’”).

On August 27, 2012, Judge Cathy Bissoon of the Western District of Pennsylvania issued an opinion in Foster v. Kraft Foods Global, Inc. holding that the Fluctuating Workweek method of paying overtime compensation was not permissible under the Pennsylvania Minimum Wage Act.

Under the Fluctuating Workweek method, an employee is paid a salary and then receives additional compensation for hours worked over 40 in a workweek.  However, the overtime pay is calculated by dividing the employee’s salary by all the hours worked in a week to come up with a regular hourly rate of pay.  The regular hourly rate of pay is then divided by two to come up with a “half-time” rate.  The employee then receives half-time pay for each worked hour over 40 that he or she works in a particular week.  Many times this method of paying overtime is referred to by employees as “‘Chinese Overtime.’”  See  Evans v. Lowe’s Cos., 2004 U.S. Dist. LEXIS 8335, *8 (M.D. Pa. Apr. 29, 2004).

Federal overtime law allows employers to pay employees under the Fluctuating Workweek method.  However, in Foster v. Kraft Foods Global, Inc., 2012 U.S. Dist. LEXIS 121282 (W.D.Pa. Aug. 27, 2012), Judge Bissoon held that Pennsylvania employers are not allowed to pay workers under the Fluctuating Workweek method without violating 34 Pa. Code § 231.43(d)(3) of the Pennsylvania Minimum Wage Act which requires that workers receive overtime pay equal to 150% of their hourly rate for all hours worked over 40 in a workweek.

The attorneys at Winebrake & Santillo have successfully litigated cases against some of the nation’s largest retailers on behalf of workers challenging the Fluctuating Workweek of paying overtime compensation.

Our firm is especially proud of our role in Knepper v. Rite Aid Corp., 675 F.3d 249 (3d Cir. 2012), wherein the Third Circuit held that workers participating in FLSA collective actions may simultaneously assert class action claims under state wage and hour laws.  The decision rejects the reasoning of at least 15 separate district court opinions.  The opinion, which received nationwide attention, is one of the year’s most important employment rights opinions.  Pete Winebrake argued the appeal at the Third Circuit, and our winning brief was written by both our firm and our friends at Klafter Olsen & Lesser LLP (Rye Brook, NY).  Please do not hesitate to call if you ever need assistance litigating wage and overtime claims on a class-wide basis.

     A defendant’s motion for decertification as to a collective class consisting of “front-line salespeople and “travel club salespeople” was recently denied by the New Jersey District Court in William Zanes, et al. v. Flagship Resort Development.  See 2012 U.S. Dist. LEXIS 22191 (D.N.J. Feb. 22, 2012).  The Court also granted the plaintiffs’ motion for summary judgment holding that the plaintiffs are employees, and not independent contractors, pursuant to the Fair Labor Standards Act (“FLSA”). 

The plaintiffs in this case consisted of travel club salespeople and front-line salespeople who worked over 40 hours each week and did not receive any overtime compensation.  The front-line salespeople sold timeshare units in the Atlantic City area and the travel club salespeople sold trial memberships in the timeshare program.  Both the front-line salespeople and travel club salespeople were paid on a draw against commission.  Plaintiffs argued that based upon the job duties performed by the plaintiffs, they were not exempt from the overtime mandates of the FLSA and the New Jersey State Wage and Hour Law, and were therefore required to be paid overtime for all hours spent working over 40 each workweek.

In ruling upon whether the present and former employees could pursue a collective action against their employer, Judge Irenas held that the plaintiffs were similarly situated despite minor differences in their job duties:  “All Plaintiffs had similar job duties, responsibilities and compensation structures.  All Plaintiffs assert common claims of failure to properly pay overtime compensation in violation of the FLSA.  Although differences between the Plaintiffs in the travel club and front-line departments exist, any such differences are outweighed by the similarities between those Plaintiffs.”

Moreover, in granting the plaintiffs’ motion for summary judgment as to the plaintiffs’ status of employees, and not independent contractors, the court noted that the large amount of control with which the defendant exerted over the plaintiffs’ work demonstrated that plaintiffs are properly classified as employees:  “The Court finds that Defendant controlled the overall manner of Plaintiffs’ work by setting Plaintiffs’ compensation structure, establishing working hours and approving days off, and by requiring Plaintiffs to adhere to its policies in performing work.  While Defendant has identified specific ways that Plaintiffs exercise discretion in making and recording sales of trial-memberships, this limited discretion over the manner in which sales were pitches does not alter the fact that Defendant exercised control over the day-to-day operations of the travel club department.”

Eastern District of Tennessee Grants Plaintiff’s Motion to Toll the Running of On August 9, 2012, Magistrate Judge H. Bruce Guyton of the Eastern District of Tennessee granted Plaintiff Nicholas Bolletino’s motion to toll the running of the statute of limitations for Sales Professionals who worked for Cellular Sales of Knoxville, Inc.  Plaintiff Bolletino is represented by Winebrake & Santillo as well as Barrett Johnston, LLC (Nashville, Tenn.) and Barkan Meizlish Handelman Goodin DeRose Wentz, LLP (Columbus, OH).

The lawsuit alleges that Cellular Sales violated the FLSA by misclassifying its Sales Professionals who worked in Verizon Wireless stores as “independent contractors” who were exempt from overtime pay when in reality they were “employees” entitled to such compensation.  Cellular Sales denies any wrongdoing.  The Complaint also alleges that Cellular Sales reclassified its Sales Professionals as employees in January 2012 entitled to overtime pay.

In Bolletino v. Cellular Sales of Knoxville, Inc., 2012 U.S. Dist. LEXIS 112132 (E.D.Tenn. Aug. 9, 2012), the Eastern District of Tennessee held that tolling the statute of limitations as of June 6, 2012 for potential opt-in plaintiffs to this FLSA collective action was appropriate because each of the factors articulated by the Sixth Circuit in Allen v. Yukins, 366 F.3d 396, 401-02 (6th Cir. 2004) were fulfilled.  The Court also cited to similar decisions to toll the running of the statute of limitations in FLSA collective actions in Abadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978 (M.D.Tenn. Dec. 14, 2010) and Baden-Winterwood v. Life Time Fitness, 484 F. Supp.2d 822 (S.D. Ohio 2007).  A copy of the opinion is available here.

On August 13, 2012, the United States District Court for the District of Maine issued an opinion in Scovil v. FedEx Ground Package System, Inc., 2012 U.S. Dist. LEXIS 113558 (D. Me. Aug. 13, 2012).  In Scovil, the plaintiffs are package delivery drivers who allege that FedEx violated the FLSA by misclassifying them as independent contractors and failing to pay them the overtime premium.  The district court denies the company’s motion to decertify the FLSA class.  See Scovil, 2012 U.S. Dist. LEXIS 113558, at *31-37.  For a copy of the opinion, click here.

  Equitable tolling should be granted in the instant litigation as Plaintiff has diligently been pursuing her rights on behalf of the potential collective class.  See Abadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978, *9 (M.D. Tenn. Dec. 14, 2010).  Indeed, as demonstrated by the procedural history set forth above, “extraordinary circumstances” exist here which warrant equitable tolling as Plaintiff is seeking relief on behalf of putative opt-ins whose statute of limitations have been and will continue to run, until they are afforded the opportunity to affirmatively opt-in to this case.  See id.  As such, equitable tolling is needed to prevent further running of potential class members’ claims.

Courts routinely hold that when a motion for conditional certification is pending in a Fair Labor Standards Act (“FLSA”), the statute of limitations should be tolled for those opt-ins that have not affirmatively opted in to the action.  Courts reach this conclusion because of the recognition that opt-ins suffer prejudice as their statute of limitations continues to run due to reasons beyond their control until their notice of written consent is filed with the court.  Specifically, Section 256 provides that in a collective action, an opt-ins’ claim is commenced upon filing of the notice of written consent with the court.  See 29 U.S.C. § 256(b) (providing that “in the case of a collective or class action instituted under the Fair Labor Standards Act [ . . . ] it shall be considered to be commenced in the case of any individual claimant [ . . . ]  on the subsequent date on which such written consent is filed in the court in which the action was commenced.”).  As such, signed consents do not relate back to the original filing date of the complaint.  See id.; see also Symczyk v. Genesis Healthcare Corp., 656 F.3d 189, 200 (3rd Cir. 2011).

Indeed, there is often a lengthy amount of time that elapses from the granting of a conditional certification motion until the filing of an individual’s notice of consent form, because before an opt-in’s notice of written consent can even be filed with the court, a number of procedural steps must first occur.  Firstly, plaintiff’s counsel must move for conditional certification before the court.  Secondly, the court must then grant conditional certification.  Thirdly, the parties must agree upon a Notice form which requires court approval is then mailed to all potential opt-ins.  Potential class members must then review, complete, and mail the notice of consent forms back to Plaintiff’s counsel.  Lastly, Plaintiff’s counsel must file the notice of consent forms with the court.  It is only upon the filing of the notice of consent form that an opt-ins’ statute of limitations stop running.  It is no surprise then, the courts routinely will grant tolling to putative opt-ins starting from a much earlier date, such as the date plaintiffs’ counsel moved for conditional certification.

The Middle District of Tennessee in Abadeer v. Tyson Foods, Inc.  granted an additional 120 days of tolling on behalf of potential opt-ins following the date of the Court’s Order granting conditional certification.  See Abadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978, *15 (M.D. Tenn. Dec. 14, 2010).  The Court had previously already granted tolling on behalf of putative opt-ins for seven (7) months, which represented the time period during which plaintiff’s motion for conditional certification was pending before the court.  See id.at *7-8.  Relying in part upon other caselaw from the Sixth Circuit, the Court found that equitable tolling was warranted.  See id. at *9-14.  Specifically, the Court found tolling was appropriate as “the members of this collective action are low wage workers, members of this group [who already opted in] had the assistance of counsel, and the necessity of time for the Court’s ruling.”  Id. at *10-11; see also Roslies-Perez v. Superior Foresty Service, Inc., 652 F. Supp. 2d 887, 899 (M.D. Tenn. July 28, 2009) (tolling the statute of limitations for putative class members).

In a recent FLSA action, the Southern District of New York held that the statute of limitations should be tolled as of the date of the plaintiff’s filing of the motion for conditional certification.  See McGlone v. Contract Callers, Inc., 2012 U.S. Dist. LEXIS 49702, *16-17 (S.D.N.Y. Apr. 9, 2012).  In McGlone, plaintiff moved for conditional certification on behalf of approximately 500 individuals in October of 2011 and the Court did not rule on the motion for conditional certification until nearly six (6) months later.  See Civil Docket attached hereto as Exhibit A.  The Court recognized that equitable tolling was appropriate as “putative class representatives and their counsel are diligently and timely pursuing the claims should also not be penalized due to the court’s heavy dockets and understandable delays in rulings.  Accordingly, the statute of limitations will be tolled as of the date of the filing of this motion.” Id.

Similarly, in Yahraes v. Restaurant Associates Events Corp., the Eastern District of New York granted equitable tolling of the statute of limitations on behalf potential opt-ins for the period of time that plaintiff’s two separate motions for conditional certification was pending which amounted to a total of approximately three (3) months.  Yahraes v. Restaurant Associates Events Corp., 2011 U.S. Dist. LEXIS 23115, *9-10 (E.D.N.Y. March 8, 2011).  In doing so, the Court held that “plaintiffs have vigorously pursued their claims and, through no fault of their own, have been delayed in prosecuting their action and distributing 216(b) notice to potential opt-in plaintiffs.”  Id. at *8.  Significantly, the Court noted that equitable tolling would not prejudice the defendants as they had been on notice since the complaint was originally served that they would be potentially liable for FLSA claims going back three years.  See id. at *9.

In Stickle v. SCI Western Mtk. Support Ctr., the Court granted plaintiffs’ motion for equitable tolling for the period of time from when defendants filed their motion to dismiss until the date that plaintiffs re-file their motion for conditional certification.  See Stickle v. SCI Western Mtk. Support Ctr.,  2008 U.S. Dist. LEXIS 83315, *61-65 (D. Ar. Sep. 30, 2008).  The Court held that the delay caused by defendant’s motion to dismiss was prejudicial to potential opt-ins should the case be certified:  “The commencement of a lawsuit does not act to toll the statue of limitations under the FLSA for putative class members.  Instead, the statute of limitations continues to run until putative class members file consent forms.  Court have equitably tolled the statute of limitations in a FLSA action when doing so is in the interest of justice.  [Citing cases]  The Court finds it appropriate in the interest of justice to toll the statute of limitations here.  Defendants here will not be prejudiced by an equitable toll.  If not tolled, the statute of limitations could act to deprive consenting employees of their right of action.”  Id. at *63-64 (internal citations omitted).

Likewise, the Court in Antonio-Morales v. Bimbo’s Best Produce, Inc. granted plaintiff’s motion to toll the statute of limitations during the pendency of a stay requested by the U.S. Department of Justice.  See Antonio-Morales v. Bimbo’s Best Produce, Inc., 2009 U.S. Dist. LEXIS 51833, *6 (E.D. La. April 20, 2009).  In granting the motion, the Court noted that “[c]ourts routinely grant equitable tolling in the FLSA collective action context to avoid prejudice to actual or potential opt-in plaintiffs that can arise from the unique procedural posture of collective actions under 29 U.S.C. § 216(b).”  Id. at *4.

Lastly, in Owens v. Bethlehem Mines Corp., the Court granted tolling of the statute of limitations as to two opt-ins to an action involving Age in Discrimination Employment Act (“ADEA”) claims.  See  Owens v. Bethlehem Mines Corp., 630 F. Supp. 309, 312-313 (S.D. W. Va. 1986).  The ADEA operates pursuant to the same statutory framework applicable to the FLSA concerning how potential opt-ins must join a collective action.  See id. at 311; see also 29 U.S.C. § 256.  The Court found the claims of the two opt-ins timely, even though the notice of consent forms filed by both opt-ins did not meet the ADEA’s three-year statute of limitations.  See id. at 310-311.  In granting equitable tolling to both opt-ins’ claims, the Court stated that “[t]hrough no fault of the Plaintiffs or the Defendant, the motion to certify was not ruled upon until November 21, 1985. In a Rule 23 class action, the running of the statute of limitations for the individual plaintiffs is suspended during the pendency of the class certification question.”  Id. at 312 (internal citations omitted).  Although recognizing that Rule 23 principles did not apply, the Court followed the holdings of other courts and granted tolling, in part, no doubt to the approximately 16 month time period between the motion to conditionally certify the class and the Court Order granting conditional certification.  See id. 310.

In the wake of conditional certification, lawyers often argue about whether the conditionally certified FLSA class period should run from (i) three years prior to the issuance of the notice form or (ii) three years prior to the filing of the complaint.  Southern District of New York Judge John G. Koeltl recently issued a decision squarely addressing this issue.  In Winfield v. Citibank, N.A., 2012 U.S. Dist. LEXIS 16449 (S.D.N.Y.), the Court held that notice should be sent to all individuals who fall within the definition of the conditionally certified class within three years of the filing of the complaint.  The Court reached this conclusion even though at most opt-in plaintiffs can only recover for the three years prior to actually filing a consent to join the lawsuit, stating “because equitable tolling issues often arise for prospective plaintiffs, courts frequently permit notice to be keyed to the three-year period prior to the filing of the complaint, ‘with the understanding that challenges to the timeliness of individual plaintiffs’ actions will be entertained at a later date.’”  In fact, due to the plaintiff’s Rule 23 claims under the New York Labor Law (“NYLL”) in Winfield, the allowed the notice to go out to individuals who worked as personal bankers during the six years prior to the filing of the complaint. 

Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, recently obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout Massachusetts.  The lawsuit, entitled Lyons v. Citizens Financial Group, Inc., 11-cv-11187-GAO (D.Mass.), is pending in the United States District Court for the District of Massachusetts.  The ABMs allege that they were misclassified as exempt from Massachusetts overtime rights laws.  The federal court’s class certification decision allows the lawsuit to go forward on behalf of hundreds of ABMs.  Click here for a copy of the Court’s class certification decision.

Winebrake & Santillo, recently obtained conditional certification for a class of Transit Bus drivers for Krapf’s Coaches, Inc in Pennsylvania.  The lawsuit is pending in the United States District Court for the Eastern District of Pennsylvania.  The plaintiff alleges that he and other Transit Bus drivers were misclassified as exempt from federal and Pennsylvania overtime rights laws and thus were not paid overtime premium compensation for all hours worked over 40 in a single workweek.  The federal court’s certification decision allows notice of the lawsuit to be sent to other Transit Bus drivers so that they will have the opportunity of joining the lawsuit.  Click here for a copy of the Court’s conditional certification decision.

    As discussed below, all FLSA settlements (regardless of whether they concern collective action claims) should be subjected to judicial oversight.  Moreover, even if the Court declines to endorse such a rule, it nonetheless should require FLSA collective action settlements to be judicially approved.

A.   All FLSA Settlements  (Regardless of Whether They Concern Collective Action Claims) Should be Subjected to Judicial Oversight.

Shortly after the FLSA’s enactment, the Supreme Court issued two separate decisions prohibiting the waiver of FLSA rights through private agreement.  First, in Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945), the Court held that employees were not bound by private agreements with their employers in which they purport to waive FLSA rights.  See id. at 698-714.  The Court based its holding on the FLSA’s legislative purpose:

The legislative history of the Fair Labor Standards Act shows an intent on the part of Congress to protect certain groups of the population from sub-standard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce.  The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate  commerce.  To accomplish this purpose standards of minimum wages and maximum hours were provided. Neither petitioner nor respondent suggests that the right to the basic statutory minimum wage could be waived by any employee subject to the Act.  No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.

Id. at 706-07 (footnotes omitted).  The Court left open the issue of whether bona fide settlements of bona fide FLSA disputes may, under some circumstances, be deemed valid.  See id. at 714.

Next, in Schulte Co. v. Gangi, 328 U.S. 108 (1946), the Supreme Court addressed “whether the [FLSA] precludes a bona fide settlement of a bona fide dispute over the coverage of the Act on a claim for overtime compensation and liquidated damages where the employees receive the overtime compensation in full.”  Id. at 110.  Relying on O’Neil, the Court held that such private settlements are not enforceable.  See id. at 110-16;see also Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 740 (1981) (“We have held that FLSA rights cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”).

Importantly, O’Neil and Gangi concerned instances in which employees released FLSA rights privately and outside of the context of either adversarial court litigation or an active Department of Labor (“DOL”) investigation.  Neither the Supreme Court nor the Third Circuit has addressed the circumstances under which FLSA claims may be released at the post-litigation stage.  Thus, we look to other circuit courts for guidance.

In this regard, the Eleventh Circuit’s opinion in Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir, 1982), is recognized as the seminal case addressing the circumstances under which FLSA claims may be released at the post-litigation stage.  The Lynn’s Food Court recognized that neither O’Neil nor Gangi resolved this issue.  See id. at 1353 n. 8.  The Court also recognized that an employee can waive his FLSA rights by accepting wage payments supervised by the United States Secretary of Labor.  See id. at 1353.

Most importantly, the Lynn’s Food Court explained:

The only other route for compromise of FLSA claims is provided in the context of suits brought directly by employees against their employer under section 216(b) to recover back wages for FLSA violations.  When employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.

Lynn’s Foods, 679 F.2d at 1353 (footnote omitted; emphasis supplied).  The Court further explained why judicially approved settlements further the FLSA’s purpose:

Settlements may be permissible in the context of a suit brought by employees under the FLSA for back wages because initiation of the action by the employees provides some assurance of an adversarial context. The employees are likely to be represented by an attorney who can protect their rights under the statute. Thus, when the parties submit a settlement to the court for approval, the settlement is more likely to reflect a reasonable compromise of disputed issues than a mere waiver of statutory rights brought about by an employer’s overreaching. If a settlement in an employee FLSA suit does reflect a reasonable compromise over issues, such as FLSA coverage or computation of back wages that are actually in dispute; we allow the district court to approve the settlement in order to promote the policy of encouraging settlement of litigation.  But to approve an ‘agreement’ between an employer and employees outside of the adversarial context of a lawsuit brought by the employees would be in clear derogation of the letter and spirit of the FLSA.

Id. at 1354 (footnote omitted; emphasis supplied); see also Taylor v. Progress Energy, Inc., 493 F.3d 454, 460 (4th Cir. 2007) ( “there is a judicial prohibition against the unsupervised waiver or settlement of [FLSA] claims”); O’Connor v. United States, 308 F.3d 1233, 1243-44 (Fed. Cir. 2002) (discussing Lynn’s Foods);Walton v. United Consumers Club, Inc., 786 F.2d 303, 306 (7th Cir. 1986) (courts “have refused to enforce wholly private [FLSA] settlements”).

By the undersigned’s estimate, at least 100 federal district courts have cited Lynn’s Foods for the general proposition that settlements of individual (i.e. non-collective) FLSA lawsuits must be judicially approved.  See, e.g., Baker v. D.A.R.A. II, Inc., 2008 U.S. Dist. LEXIS 81347, *4-5 (D. Ariz. Sept. 24, 2008); Yue Zhou v. Wang’s Restaurant, 2007 U.S. Dist. LEXIS 60683, *2 (N.D. Cal. Aug. 8, 2007); Ferguson v. Upscale Saturday Night, Inc., 2006 U.S. Dist. LEXIS 63663, *2 (M.D. Fla. Sept. 6, 2006); Carey v. Space Coast Quality Lawn, 2006 U.S. Dist. LEXIS 45957, *3-5 (M.D. Fla. July 6, 2006); Cooks v. Osmose, Inc., 2004 U.S. Dist. LEXIS 29346, *3-4 (M.D. Tenn. Feb. 13, 2004).

Within the Third Circuit, the undersigned is aware of at least one reported opinion in which a district court explains that FLSA settlements of individual FLSA lawsuits should be judicially approved.  See Morales v. Pepsico, Inc., 2012 U.S. Dist. LEXIS 35284, *2-3 (D.N.J. Mar. 14, 2012).  This lack of reported opinions is not surprising because court orders approving individual FLSA settlements are routine and do not generate substantive opinions.  Indeed, the undersigned estimates that he has obtained at least 50 such orders over the past several years.  Some examples from the Middle District of Pennsylvania are attached as Exhibit A.

Importantly, in individual FLSA cases, the court approval process can be done in a manner that does not burden the Court or the parties with formal motion practice.  In the undersigned’s experience, FLSA approval orders in individual cases generally can be entered after the Court presides over a brief telephone conference in which the parties’ counsel represent the terms of the settlement.  See Exhibit A.  It is the accountability created by judicial oversight (not procedural formalities) that matters under the FLSA.

B.   Even if the Court Declines to Endorse a Rule Subjecting All FLSA Settlements to Judicial Oversight, the Court Nonetheless Should Require FLSA Collective Action Settlements to be Judicially Approved.

FLSA collective action settlements should require judicial approval for all of the reasons described in Section A above.  Moreover, as discussed below, there are some additional reasons why the Court should require FLSA collective action settlements should be judicially approved.

a.     Judicial Approval of FLSA Collective Action Settlements is the Common Practice in the District Courts of Pennsylvania.

The undersigned’s law firm has represented FLSA classes in at least 26 FLSA collective actions that have settled in the federal courts of Pennsylvania.  A listing of these collective actions, as well as copies of the orders approving the settlements as fair and reasonable, is attached as Exhibit B.  As indicated, judicial approval has been obtained in every FLSA collective action settlement involving the undersigned’s firm.

Moreover, no defense lawyer in any of these cases has ever sought to avoid judicial approval.  On the contrary, lawyers who settle FLSA collective action lawsuits welcome the judicial approval process because, among other reasons, it protects them against potential allegations that the settlement was somehow unfair or inadequate.  Simply put, lawyers and parties who negotiate in good faith and reach fair and reasonable settlements have nothing to fear from the court approval process.

b.     Outside of Pennsylvania, Judicial Approval of FLSA Collective Action Settlements is the Common Practice.

The undersigned also has been involved in many FLSA collective actions that have settled outside of Pennsylvania.  Some of these non-Pennsylvania actions have been “large-scale” matters involving numerous plaintiffs co-counsel and “large firm” defense counsel.  See, e.g., In re Tyson Foods, Inc., 2012 U.S. Dist. LEXIS 7335 (M.D. Ga. Jan. 23, 2012); Gatewood v. Kock Foods of Mississippi, LLC, 569 F. Supp. 2d 687 (S.D. Miss. 2008); In re Pilgrim’s Pride FLSA Litig., 2008 U.S. Dist. LEXIS 40360 (W.D. Ark. May 14, 2008).  Never, in any previous case, has any co-counsel or defense counsel suggested that a FLSA collective action settlement should proceed without judicial approval.

Indeed, research reveals an overwhelming number of opinions (literally too many to reference here) in which district courts recognize the need to review FLSA collective action settlements as fair and reasonable.  See, e.g., Brumley v. Camin Cargo Control, Inc., 2012 U.S. Dist. LEXIS 40599, *4-8 (D.N.J. Mar. 26, 2012); Barker v. City of Troy, 2012 U.S. Dist. LEXIS 12779, *1-2 (N.D.N.Y. Feb. 2, 2012); Bredbender v. Liberty Travel, Inc., 2011 U.S. Dist. LEXIS 38663, *50-52 (D.N.J. Apr. 8, 2011); Goudie v. Cable Communications, Inc., 2009 U.S. Dist. LEXIS 1907, *2 (D. Or. Jan 9, 2009); Baker v. D.A.R.A. II, Inc., 2008 U.S. Dist. LEXIS 81347, *4-5 (D. Ariz. Sept. 24, 2008); Collins v. Sanderson Farms, Inc., 568 F. Supp. 2d 714 (E.D. La. 2008).  Moreover, the seminal FLSA treatise does not seriously question the need for parties to obtain judicial approval of FLSA collective action settlements.  See Ellen C. Kearns, The Fair Labor Standards Act, 2d Ed., at 19-197-207 (attached as Exhibit D).

c.     FLSA Class Members Need the Protection of Judicial Oversight.

It is well-known that traditional Rule 23 class action settlements are subjected extensive review and approval.  See Fed. R. Civ. P. 23(e); see generally In re GMC Pick-Up Truck Fuel Tank Products Liability Litig., 55 F.3d 768 (3d Cir. 1995).  Thus, when FLSA collective action claims proceed alongside Rule 23 class action claims asserting state law violations (these are known as “hybrid” actions), the parties enjoy all the benefits and protections of Rule 23 judicial review.  The undersigned has obtained court approval of such “hybrid” settlements.  See, e.g., Duval v. Tri-County Access Co., Inc., 2:10-cv-00118-RCM (W.D. Pa. Nov. 22, 2010 and Mar. 30, 2011); Sisko v. Wegmans Food Markets, Inc., 3:06-cv-00433-JMM (M.D. Pa. Aug. 27, 2007);Rodriguez-Fargas v. Hatfield Quality Meats, Inc., 2:06-cv-01206-LS (E.D. Pa. May 29, 2007).

Stand-alone FLSA collective actions are procedurally different from Rule 23 class actions, primarily because an FLSA class is limited to those class members who affirmatively join (or “opt-in”) to the lawsuit, while a Rule 23 class (upon certification) automatically includes all class members except those who affirmatively exclude themselves from (or “opt-out” of) the lawsuit.  See Knepper v. Rite Aid, Corp., 675 F.3d 249, 257 (3d Cir. 2012); DeAsencio v. Tyson Foods, Inc., 342 F.3d  301, 306 (3d Cir. 2003).  Notwithstanding, these FLSA collective actions carry the same basic public policy rationale as their Rule 23 counterparts.  As the Supreme Court has observed, FLSA collective actions provide employees with “the advantage of lower individual costs to vindicate rights by the pooling of resources” and benefit the judicial system by facilitating the “efficient resolution in one proceeding of common issues of law and fact.”  Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 170 (1989); see also Symczyk, 656 F.3d at 200 (collective actions “‘avoid multiple lawsuits where numerous employees have allegedly been harmed by a claimed violation or violations of the FLSA by a particular employer.’”).  These are the same basic policy interests underlying the Rule 23 class action device. See In re GMC, 55 F.3d at 783-84.

In re GMC, Judge Becker explained how judicial approval of Rule 23 class actions is required in order to protect the rights and interests of class members who are not intimately involved in the litigation and, therefore, do not have either the information or the motivation to independently evaluate whether the settlement is fair.  See In re GMC, 55 F.3d at 783-86.  Thus, “‘the district court acts as a fiduciary who must serve as a guardian of the rights of absent class members . . . .  The Court cannot accept a settlement that the proponents have not shown to be fair, reasonable and adequate.”  Id. at 785 (quoting Grunin v. International House of Pancakes, 513 F.2d 114, 123 (8th Cir.), cert. denied, 423 U.S. 864 (1975)); see also Manual for Complex Litigation, Fourth at § 21.61 (“Because [in a Rule 23 class action] there is typically no client with the motivation, knowledge, and resources to protect its own interests, the judge must adopt the role of a skeptical client and critically examine the . . . proposed settlement terms, and procedures for implementation.”).

Several courts have cogently observed that FLSA settlement approval standards need not be as rigorous as Rule 23(e) standards because collective action settlements do not bind absent class members who never join the lawsuit.  See Bredbender, 2011 U.S. Dist. LEXIS 38663, at *50-51; Reyes v. Altamarea Group, 2011 U.S. Dist. LEXIS 115984, *16 (S.D.N.Y. Aug. 16, 2011); deMunecas v. Bold Food, LLC, 2010 U.S. Dist. LEXIS 87644, *16 (S.D.N.Y. Aug. 23, 2010); Collins, 568 F. Supp. 2d at 719.  This observation is surely correct.  Notwithstanding, the policy concerns raised by Judge Becker in In re GMC apply to FLSA collective actions as well as Rule 23 class actions.  See Collins, 568 F. Supp. 2d at 719 (approval of FLSA settlements is focused “on ensuring that an employer does not take advantage of its employees in settling their claim for wages”).

It is important to appreciate that FLSA collective actions usually involve numerous class members who are geographically dispersed.  The great majority of these individuals simply are not engaged in the day-to-day litigation in the same way that an individual litigant is engaged.  For example, in Craig v. Rite Aid Corp., 4:08-cv-02317-JEJ (M.D. Pa.), Judge Jones presides over an FLSA collective action involving over 1,000 opt-in plaintiffs from throughout the nation.  While the undersigned and his co-counsel work very hard to communicate with these class members and keep them informed, a “traditional” attorney-client relationship simply is not possible.  As with Rule 23 class actions, it is crucial to know that any settlement affecting the rights of so many individuals will be scrutinized by a judge to assess fairness.  Indeed, the mere prospect of judicial scrutiny often enhances the fairness of FLSA settlements.

Also, many FLSA collective actions settle before “conditional certification,” and, therefore, before the potential opt-in plaintiffs are even notified of the settlement.  Under these circumstances, Court approval ensures that potential opt-in plaintiffs receive a written notice that clearly explains the lawsuit and the settlement.  Several examples of such notice forms are attached as Exhibit F.  It is important for the Court to review such materials to ensure accurate notice.  Both the Supreme Court and the Third Circuit have encouraged district court judges to be engaged in the notice phase of FLSA collective litigation.  See Symczyk, 656 F.3d at 198-99 (citing Hoffman-LaRoche, 493 U.S. at 170-71.

d.     Court Approval of FLSA Actions Is Necessary to Prevent Potential Attorney’s Fee Abuses.

As with Rule 23 settlements, FLSA collective actions can provide opportunities for lawyers to shortchange a class (or abandon class claims entirely) for excessive attorney’s fees.  Thus, judicial approval of FLSA collective actions includes the consideration of whether attorney’s fees are fair and reasonable.  See In re Tyson Foods, 2012 U.S. Dist. LEXIS 7335, at *8-12; Brumley, 2012 U.S. Dist. LEXIS 40599, at *28-38; Collins, 568 F. Supp. 2d at 728-29.

Moreover, many FLSA collective actions are “high-stakes” lawsuits that have been vigorously litigated for years on behalf of many opt-in class members.  If and when such cases settle, the attorney’s fee recovery (which often is a percentage of a common settlement fund) can be substantial and can significantly impact the monies payable to the class.  Such fee distributions should not be made without any judicial oversight.

On the other end of the spectrum, judicial approval of collective action settlements ensures that plaintiffs’ counsel (who almost always work on a contingency-fee basis) are not “left out in the cold” through “private,” post-litigation settlements between employers and opt-in class members.  The FLSA’s language mandates that prevailing parties under the FLSA recover attorney’s fees and costs.  See Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir. 1994).  Moreover, “attorney fees are an integral part of the merits of FLSA cases,” Shelton v. M.P. Ervin, 830 F.2d 182, 184 (11th Cir. 1987), and, as courts repeatedly explain, the ability of FLSA claimants to recover a reasonable attorney’s fees and costs is crucial to the statute’s enforcement scheme, see, e.g., Fegley, 19 F.3d at 1134-35.  Judicial approval prevents both employers and opt-in class members (who generally do not enter into fee agreements with class counsel) from circumventing these important provisions by settling collective action claims without the involvement of class counsel.

Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, recently obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout New York state.  The lawsuit, entitled Cuevas v. Citizens Financial Group, Inc., 10-cv-5582-FB (E.D.N.Y.), is pending in the United States District Court for the Eastern District of New York.  The ABMs allege that they were misclassified as exempt from New York overtime rights laws.  The federal court’s class certification decision allows the lawsuit to go forward on behalf of hundreds of ABMs.  Click Here for a copy of the Court’s class certification decision.

Courts around the country have consistently held that declarations submitted by an employer on behalf of current employees are of little value in deciding whether a class should be certified.  This is because it should be of no surprise that these “Happy Camper” statements hold questionable value when they are obtained in the context of an employer-employee relationship.  Notably, the Southern District of Alabama in Longcrier v. HL-A Co, Inc., 595 F. Supp. 2d 1218 (S.D. Ala. Dec. 10, 2008) struck declarations obtained by a defendant where such statements were obtained in a manner that mislead and deceived the employees – employees who happened to also be potential class members.

Moreover, in determining whether potential class members are similarly situated or whether their claims are capable of classwide resolution, individual statements from employees created at the bequest of the employer have little value toward determining that issue.  For example, the Northern District of Ohio in Creely v. HCR Manor Care, Inc., 2011 U.S. Dist. LEXIS 61376 (N.D. Oh. June 9, 2011), a case involving inter alia overtime violations under the Fair Labor Standards Act (FLSA) and uninterrupted meal break violations, stated that it was not persuaded by 35 “happy camper” affidavits submitted by the defendant.  The court explained: “These affidavits are of little use at this juncture.  Just as courts have not traditionally required a plaintiff seeking conditional certification to come forward with some threshold quantity of opt-in plaintiffs [ . . . ] it is no more helpful for the employer to round up a small sample of favorable statements form employees.  [ . . . ]  While it is likely true that not all hourly employees will opt-in to the collective action, the Court’s function at this stage of conditional certification is not to perform a detailed review of individualized facts from employees hand-picked by [Defendant].”  Creely, 2011 U.S. Dist. LEXIS at **62-63.  See also Rindfleisch v. Gentiva Health Services, Inc., 2011 U.S. Dist. LEXIS 57949 (N.D. Ga. April 13, 2011).   In West v. Lowes Home Centers, Inc., the Western District of Louisiana granted conditional certification despite employer-obtained declarations stating that plaintiffs had not yet had the chance to depose the employees providing the declarations and further noted that such deposition testimony was not needed to support collective adjudication.  West, 2010 U.S. Dist. LEXIS 139737 (W.D. La. Dec. 16, 2010).

U.S. Department of Labor (“DOL”) regulations interpreting the FLSA’s Administrative exemption provide three criteria that an employer must demonstrate for an employee to fit within its narrow confines. These are: (1) the employee must earn at least $ 455 a week; (2) the employee’s “primary duty” is the performance of “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers”; and (3) the employee’s “primary duty” must “include[] the exercise of discretion and independent judgment with respect to matters of significance.” Novartis, 611 F.3d at 155 (citing 29 C.F.R. § 541.200(a)). Moreover, the term “primary duty” is defined as the employee’s “principal, main, major or most important duty.” 29 C.F. R. §541.700. In determining an employee’s primary duty, courts look to “all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.” Id.

With respect to the requirement that the employee’s primary duty include the performance of work “directly related to the management or general business operations of the employer or the employer’s customers,” DOL regulations state:
(a) . . . The phrase “directly related to the management or general business operations” refers to the type of work performed by the employee. To meet this requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.
(b) Work directly related to management or general business operations includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities. Some of these activities may be performed by employees who also would qualify for another exemption.
(c) An employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. Thus, for example, employees acting as advisers or consultants to their employer’s clients or customers (as tax experts or financial consultants, for example) may be exempt.
29 C.F.R. §541.201 (emphasis supplied).

The Second Circuit Court of Appeals has been especially strict in applying the above principles so that the administrative exemption is limited to employees who primarily are involved in the functional operation of a business and the implementation of company-wide policy and strategy. For example:
In Novartis, supra, the Court refused to extend the exemption to highly-compensated pharmaceutical sales reps. See Novartis, 611 F.3d at 155-57. In so holding, the Court emphasized the lack of evidence “that the Reps have any authority to formulate, affect, interpret, or implement Novartis management policies or its operating practices, or that they are involved in planning Novartis long-term or short-term business objectives, or that they carry out major assignments in conducting the operations of Novartis business, or that they have any authority to commit Novartis in matters that have significant financial impact.” Id. at 156; see also Reiseck, 591 F.3d at 105-08 (advertising salespersons not covered by exemption).

Likewise, in Davis v. J.P. Morgan Chase, 587 F.3d 529 (2d Cir. 2009), the Court refused to extend the administrative exemption to bank underwriters. The Court reasoned that the underwriters’ work was “primarily functional rather than conceptual.” Id. at 535. Moreover, the Court emphasized that the underwriters “were not at the heart of the company’s business operations” and “had no involvement in determining the future strategy or direction of the business, nor did they perform any other function that in any way related to the business’s overall efficiency or mode of operation.” Id.

Finally, Reich v. State of New York, 3 F.3d 581 (2d Cir. 1993), the Court refused to extend the administrative exemption to State Police Investigators. See id. at 586-89. Notably, the Court reached this conclusion notwithstanding “the broad discretion enjoyed by the Investigators in the conduct of investigations.” Id. at 589. What matters, the Court explained, is “the relationship of the Investigators to the management policies or general business operations of the [State Police].” Id.

The Circuit Court decisions discussed above are consistent with the outcomes of many district court decisions within the Second Circuit. These district courts, like the Circuit Court, focus on whether the purportedly administrative employee is involved in implementing company policy. See, e.g., Kuzinski v. Schering Corp., 2011 U.S. Dist. LEXIS 86575 (D. Conn. Aug. 5, 2011); Harper v. GEICO, 754 F. Supp. 2d 461 (E.D.N.Y. 2010); Ruggeri v. Boehringer Ingelheim Pharms., 585 F. Supp. 2d 254 (D. Conn. 2008).

To calculate unpaid overtime wages under the FLSA, one must first determine the employee’s “regular rate” of pay for the relevant workweeks. See 29 U.S.C. § 207(a)(1). For salaried employees, such as the ICs here, the rate “is computed by dividing the salary by the number of hours which the salary is intended to compensate.” 29 C.F.R. §778.113(a). Importantly, it is improper for a court to simply “assume as a fact that the weekly salary was intended to compensate the [salaried employees] for however many hours they actually worked.” Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259, 1269 (11th Cir. 2008); see also Giles v. City of New York, 41 F. Supp. 2d 308, 316-17 (S.D.N.Y. 1999) (“The fact an employee regularly works 60 or more hours does not, without more, indicate that the employee’s weekly salary was intended to include the FLSA overtime premium for all hours in excess of 40.”); Yourman v. Dinkins, 865 F. Supp. 154, 165 (S.D.N.Y. 1994) (“Plaintiffs’ hourly rates are supposed to be determined by reference to the parties intent.”).

Courts within the Second Circuit hold that “there is a rebuttable presumption that a weekly salary covers 40 hours; the employer can rebut the presumption by showing an employer-employee agreement that the salary cover a different number of hours.” Giles v. City of New York, 41 F. Supp. 2d 308, 317 (S.D.N.Y. 1999); accord Jiao v. Chen, 2007 U.S. Dist. LEXIS 96480, *45 (S.D.N.Y. Mar. 30, 2007); Doo Nam Yang v. ACBL Corp., 427 F. Supp. 2d 327, 334-35 (S.D.N.Y. 2005); Keun-Jae Moon v. Joon Gab Kwon, 248 F. Supp. 2d 201, 207 (S.D.N.Y. 2002). Thus, “[u]nless the contracting parties intend and understand the weekly salary to include overtime hours at the premium rate, courts do not deem weekly salaries to include overtime premium for workers regularly logging overtime, but instead hold that weekly salary covers only the first 40 hours.” Giles, 41 F. Supp. 2d at 317.

New York District Courts have followed Giles in calculating the overtime wages owed to salaried employees. For example, in Aguilar v. E-Z Supply Corp., 2008 U.S. Dist. LEXIS 112585, *8-9 (E.D.N.Y. Mar. 13, 2008), the district court followed the 40-hour methodology because the defendant defaulted and, therefore, could not counter the rebuttable presumption that the weekly salary covers 40 hours.
Applying the above principles to this lawsuit, it is unlikely that Defendant can defeat the 40-hour rebuttable presumption discussed in Giles and other New York district court cases. Simply put, there is no “employer-employee agreement that the salary cover a different number of hours.” Giles, 41 F. Supp. 2d at 317. Here, Defendant admits that it does not have a specific agreement as to how many hours their salary is intended to compensate them for working. See Moore Dep. (Ex. C) at 120:02-120:07. In fact, Defendant’s corporate designee assumes that an IC’s salary is for a 40-hour work week. Id. (testifying that 2,080 hours annually (52 weeks X 40 hours per week) is “what I am accustomed to as a full-time role”).
Notwithstanding the above, Defendant contends that ICs’ regular pay rate is arrived at by dividing the weekly salary by all hours worked and that the IC is merely entitled to an extra payment equaling one-half of the regular rate for all hours worked over 40. While this methodology has been endorsed by some courts, it is inconsistent with the approach taken by courts within the Second Circuit, as demonstrated by Giles and the other decisions referenced above.
Moreover, New York district courts have refused to adopt Defendant’s preferred methodology in the absence of specific evidence that Defendant can actually satisfy each of the requirements codified in the DOL’s Fluctuating Workweek Method (“FWM”) regulation, including the requirement of a “clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number.” 29 C.F.R. § 778.114. For example, in Dingman v. Friedman Fisher Associates, P.C., 3 F. Supp. 2d 215 (N.D.N.Y. 1998), Judge Kahn refused to apply the FWM after holding that a misclassified salaried employee was entitled to overtime pay. See id. at 221. Instead, Judge Kahn used the 40-hour methodology. See id. at 222. Likewise, in Yourman, supra, Judge Preska refused to apply the FWM and elected, instead, “to fall back on the FLSA’s default position, which is to calculate hourly and overtime rates based on a regular workweek consisting of a fixed number of hours.” Yourman, 865 F. Supp. at 165.
Judge Kahn’s holding in Dingman is consistent with the analysis of other district courts which have flatly refused to apply the FWM methodology to compute damages in overtime misclassification cases. As these courts cogently explain, because the FWM applies to non-exempt employees and requires the actual payment of overtime premium compensation, it is simply impossible to satisfy the FWM’s requirements for an employee who (due to his exempt classification) did not contemporaneously receive any overtime pay. See, e.g., Russell v. Wells Fargo and Co., 672 F. Supp. 2d 1008, 1013-17 (N.D. Cal. 2009); Hunter v. Sprint Corp., 453 F. Supp. 2d 44, 58-62 (D.D.C. 2006); Scott v. OTS Inc., 2006 U.S. Dist. LEXIS 15014, *32-39 (N.D. Ga. Mar. 31, 2006); Cowan v. Treetop Enters., 163 F. Supp. 2d 930, 941-42 (M.D. Tenn. 2001); Rainey v. American Forest & Paper Assoc., 26 F. Supp. 2d 44, 58-62 (D.D.C. 1998).

I recently came across Zivali v. AT&T Mobility, LLC, 08-cv-10310-JSR (S.D.N.Y. June 6, 2011), in which SDNY Judge Jed Rakoff, after decertifying an FLSA class, tolls the running of the statute of limitations for 45 days in order to give the opt-ins time to file individual cases. On one hand, its great that the Judge gave some tolling. On the other hand, 45 days is not a lot of time to notify class members of the decertification decision, obtain individual representation agreements, and file new complaints. I think this demonstrates the importance of getting together (in advance) a contingency plan for dealing with decertification in our FLSA collective actions.

The Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., and the Pennsylvania Minimum Wage Act (“PMWA”), 43 P.S. §§ 333.101, et seq., generally entitle employees to overtime premium pay calculated at 150% of their regular pay rate. See 29 U.S.C. § 207(a)(1); 43 P.S. § 333.104(c). Here, it is uncontroverted that Defendant did not pay Plaintiff overtime premium compensation because it considered him exempt under the “executive” and “learned professional” exemptions to the FLSA’s and PMWA’s overtime pay mandate. See 29 U.S.C. § 213(b)(1); 43 P.S. §§ 333.105(a)(5); see also Stipulated Facts (Doc. 36) at ¶ 5.

The unresolved issue in this case is whether Defendant properly classified Plaintiff as overtime-exempt. If the Court upholds Defendant’s classification, Plaintiff is entitled to nothing. If the Court rules that Plaintiff was misclassified, Plaintiff is entitled to overtime premium pay.
1. Defendant’s Heavy Burden of Proof.
Plaintiff respectfully submits that, in deciding this case, the Court should be mindful of two overriding principles:

First, overtime exemptions are construed “narrowly against the employer.” Davis v. Mountaire Farms, Inc., 453 F.3d 554, 556 (3d Cir. 2006); accord Madison v. Resources for Human Dev., Inc., 233 F.3d 175, 183 (3d Cir. 2000) (citing Mitchell v. Kentucky Fin. Co., 359 U.S. 290, 295 (1959)). Thus, Defendant bears the burden of proving that Plaintiff is overtime-exempt. See Davis, 453 F.3d at 556 (citing Fredrich v. U.S. Computer Serv., 974 F.2d 409, 412 (3d Cir. 1992).

Second, Defendant’s burden is heavy. In particular, Defendant must prove that Plaintiff “comes ‘plainly and unmistakably’ within the exemption’s terms.” Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008) (quoting Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960)) (emphasis in original); see also Pignataro v. Port Authority of New York and New Jersey, 593 F.3d 265, 268 (3d Cir. 2010); Plaunt v. Dolgencorp, Inc., 2010 U.S. Dist. LEXIS 132135, *19-20 (M.D. Pa. Dec. 14, 2010) (Munley, J.). As the Supreme Court has observed, “[t]o extend an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretive process and to frustrate the announced will of the people.” A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945).

2. Defendant Fails to Meet its Burden of Proving that it Plainly and Unmistakably Satisfies the Salary Basis Requirement of the Applicable Overtime Exemptions.

Under both the FLSA and PMWA, employees must be paid on a “salary basis” in order to be covered by either the executive or the learned professional exemption. See 29 C.F.R. § 541.100(a)(1) (FLSA executive); 29 C.F.R. § 541.300(a)(1) (FLSA learned professional); 34 Pa. Code 231.82(6) (PMWA executive); 34 Pa. Code 231.84(5) (PMWA learned professional).

The pertinent Department of Labor regulations define compensation on a salary basis as follows:
An employee will be considered to be paid on a salary basis within the meaning of these regulations if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to the exceptions provided in paragraph (b) of this section, an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.
29 C.F.R. §541.602(a) (emphasis supplied).

Next, the regulations specifically list permissible deductions from an exempt employee’s salary. Only one of the enumerated deductions is relevant to the instant lawsuit:

Deductions from pay may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.
29 C.F.R. §541.602(b)(1) (emphasis supplied).

Federal courts considering the salary basis requirement consistently hold that the overtime exemption is lost where the employer makes improper deductions for absences of less than one day. See, e.g., Auer v. Robbins, 519 U.S. 452 (1997); Bowman v. City of Indianapolis, 133 F.3d 513 (7th Cir. 1998); Kinney v. District of Columbia, 994 F.2d 6 (D.C. Cir. 1993); Brock v. The Claridge Hotel and Casino, 846 F.2d 180 (3d Cir. 1988); see also Ellen C. Kearns, The Fair Labor Standards Act (2d Ed. 2010) at 4-46 (“When an employer deducts from the wages of an employee for partial-day absences taken for personal reasons or illness, the employee cannot be considered exempt.”).
[Case-Specific Factual Arguments Omitted]

First, as a practical matter, there is no meaningful difference between leave bank deductions and monetary deductions. For example, in Klein v. Rush-Presbyterian-St. Luke’s Med. Ctr., 990 F.2d 279 (7th Cir. 1993), the Seventh Circuit saw no distinction between monetary deductions and deductions from a “comp time” bank, observing that “[w]hen [plaintiff] was forced to go into negative comp time, she may not have been actually paid less, but she was going into a form of debt since any later accumulated comp time had to pay off that debt.” Id. at 284. Indeed, Defendant’s own written deduction policy characterized the deduction of leave time as a “charge” against the employee. See Plf. Ex. 12 (“If this becomes abusive, the employee will then be charged for every hour.”).
[Case-Specific Factual Arguments Omitted]

In Oral v. Aydin Corp., 2001 U.S. Dist. LEXIS 20625 (E.D. Pa. Oct. 31, 2001), the Eastern District of Pennsylvania addressed “whether [an employer] is entitled to an exemption from the FLSA for those employees classified as salaried who were not actually docked pay but either (1) made up for partial day absence by working extra hours, or (2) used sick or vacation leave to cover the absence.” Id. at *18. In ruling against the employer, the court reasoned that it was enough that the employees merely “face[d] a threat that their pay would be docked for a partial day absence unless they used sick or vacation leave to cover the absence.” Id. at *22. Moreover, as the district court observed, the policy of making partial-day deduction to leave banks “is inconsistent with the definition of what it means to be a salaried employee,” since truly exempt managers and professionals should not be required to answer for every hour worked within a day. See id. at *22-23 (citing Kinney, 994 F.2d at 11).

Here, as in Oral, Defendant publicized and distributed a deduction policy emphasizing that employees must “use time” for partial-day absences of less than one day. See, e.g., Plf. Ex. 12; see also Sharer v. Tanderberg, Inc., 2007 U.S. Dist. LEXIS 14246, *16-17 (E.D. Va. Feb. 27, 2007) (single written communication sufficient to establish illegal deduction policy). Defendant offers no explanation for why an employee reviewing this policy would assume that he would receive his full pay if he exhausted his leave time. Nor does Defendant explain why (even after the commencement of this lawsuit) it did not provide clear guidance to its employees. See Tr. at 51:20-52:5; 93:6-93-14; 94:8-94:10. Instead, Defendant deliberately took a “keep them guessing” approach that discourages salaried employees from availing themselves of a primary benefit of salaried employment: the ability to take partial day absences without fear of being docked pay.

As the Supreme Court observed in Auer, the onus is on employers to implement “a clear and particularized policy – one which ‘effectively communicates’ that deductions will be made in specified circumstances.” Auer, 519 U.S. at 461. Defendant has failed to meet this standard. As such, Defendant fails to meet its heavy burden of proving that it “plainly and unmistakably” satisfied the salary basis test.

3. Alternatively, Defendant Cannot Satisfy its Burden of Proving that it Plainly and Unmistakably Falls Outside of the Pay Scheme Prohibited By the Third Circuit in Brock v. The Claridge Hotel and Casino, 846 F.2d 180 (3d Cir. 1988).

In addition to guarding against illegal pay deductions, federal courts also refuse to find salaried employees exempt when employers util