Monthly Archives: October 2009

M.D.Tenn.: Police Officers Who Allegedly Arrested Employees In Retaliation For Informal Unpaid Wage Complaints Are Properly Defendants In A 29 U.S.C. § 215(a) Case

Montano-Perez v. Durrett Cheese Sales, Inc.

Defendant, a local Police Department, sued for their alleged role in retaliating against Plaintiffs, in cooperation with Plaintiffs’ employer filed a Motion to Dismiss the FLSA Retaliation claims asserted against it.  For the reasons discussed below, the Court denied the Police Department’s motion.

The Court cited the following extensive facts as relevant to its inquiry:

“The plaintiffs are Latino immigrants who moved to the Manchester, Tennessee, area from impoverished regions of Mexico. The plaintiffs speak either Mixteco, an indigenous Mexican language, or Spanish as their primary language. Shanna Ramirez was a supervisor with Durrett Cheese during the relevant time period, and she recruited and hired members of the Mixteco community in Manchester to work in non-supervisory positions with Durrett Cheese. Mostly all of the non-supervisory positions in the Durrett Cheese factory were filled by Latino workers of Mexican descent. The plaintiffs were hired by Durrett Cheese at various points in the late 2006 to late 2007 time period. After being hired, the plaintiffs performed various jobs in the factory, including “in-line” jobs slicing, packaging, and processing cheese for sale. At the time of hire, the plaintiffs understood that Durrett Cheese would pay them on a weekly basis at an hourly rate between approximately $6.00 and $6.75 per hour.

The plaintiffs’ employment with Durrett Cheese was problematic. The plaintiffs’ direct supervisor, Ms. Ramirez, frequently made offensive and potentially humiliating comments to the plaintiffs about their race, national origin, intelligence, language, and customs, among other things. Durrett Cheese also frequently failed to timely pay the plaintiffs at the applicable federal minimum wage. These problems persisted before and after Durrett Cheese’s August 2007 bankruptcy filing.

Indeed, in many workweeks in August, September, and October 2007, Durrett Cheese grossly underpaid the plaintiffs. In some workweeks during this time period, the plaintiffs were not paid at all, and some plaintiffs worked for more than a month during this time period without being paid. The plaintiffs regularly requested their unpaid wages during this period, often approaching Ramirez in groups to inquire about their pay. Acting through Ramirez, Durrett Cheese either postponed pay days or simply refused to pay the plaintiffs for the work they had performed. Ramirez convinced the plaintiffs to continue working by telling them that they would not receive their back pay if they quit, and that they would receive more back pay if they worked at higher production levels.

The tension over pay and working conditions came to a head in October 2007. On Friday, October 19, 2007, the plaintiffs made repeated requests to Ramirez for several weeks of back pay. Ramirez informed the plaintiffs that they would not be paid until the following Monday. On hearing this news, the plaintiffs met to plan a collective action to protest the continued non-payment of wages.

The following Monday, October 22, 2007, during the usual mid-morning break, the plaintiffs assembled in the Durrett Cheese break room and again requested their overdue pay from Ramirez. The plaintiffs were told by Ramirez that no checks would be distributed until defendant Durrett arrived, and, until that time, the plaintiffs could either return to work or leave for good (and risk never receiving their back pay). The plaintiffs refused to return to work, stating that they would only do so when they received their wages. In response, Ramirez fired the plaintiffs and ordered them off company property. The plaintiffs informed Ramirez that they would not leave the break room until they received their wages.

As the plaintiffs continued to wait in the break room, Ramirez conferred with Ron Girts, another supervisor at Durrett Cheese, and defendant Durrett. Defendant Durrett ordered Girts and Ramirez to call the Coffee County Sheriff’s Department. Officer-defendants Jones, Partin, and Barker responded to the call and headed to the Durrett Cheese factory. When the officers arrived, Ramirez, Girts, and the plaintiffs informed the officers that management and the employees were engaged in a dispute over unpaid wages. The officers noted the nature of the dispute in their incident report.

The plaintiffs allege that, at this point, the officers with the Coffee County Sheriff’s Department and the supervisors employed by Durrett Cheese began working together to defeat the plaintiffs’ wage complaints. For instance, a supervisor, either Ramirez or Girts, informed the officers that the plaintiffs were undocumented immigrants and should, therefore, be reported to Immigration and Customs Enforcement (ICE). The officers were also provided with paperwork from Durrett Cheese to assist in reporting the plaintiffs.

The officers told the plaintiffs that, if they did not leave the Durrett Cheese premises, they would be arrested and taken to the Coffee County jail. After the plaintiffs expressed their intent to remain in the break room, the officers arrested the plaintiffs and transported them, via Sheriff’s Department van, to the Coffee County jail. The officers’ supervisors, defendants Freeman and Graves, were advised of the situation as it unfolded and approved of the arrests. During the arrests, the officers, along with Ramirez, laughed at the plaintiffs, referred to the plaintiffs’ race and national origin, and made statements about sending the plaintiffs “back to Mexico.” In total, the entire work stoppage incident lasted less than two hours, and, at all times, it was peaceful and entirely confined to the Durrett Cheese break room.

At the Coffee County jail, the plaintiffs were booked on charges of trespassing and were detained. Over the course of the day on October 22, the plaintiffs were separated from their families and kept in the dark about what would happen to them. The plaintiffs slept on mattresses in a crowded jail cell and were denied free access to restroom facilities. The next day, October 23, the Coffee County District Attorney dropped all charges against the plaintiffs.

The plaintiffs allege that, while they were detained, defendants Graves and Freeman consulted with supervisors at Durrett Cheese as to how to proceed, in light of the ongoing labor dispute between Durrett Cheese and the plaintiffs. Durrett Cheese and defendant Graves agreed that, regardless of the charges being dropped, the plaintiffs would remain at the Coffee County jail and that the plaintiffs would be reported to ICE. Shortly after this conversation, defendant Freeman contacted ICE to report the plaintiffs as suspected undocumented immigrants. On October 24, agents from ICE arrived at the Coffee County jail, and, at the behest of the County Defendants, transported the plaintiffs to a detention center in Nashville, Tennessee, where the plaintiffs, very fearful of what would happen to them and their families, were interrogated for several hours before their attorney was able to secure their release.”

Finding the Plaintiffs’ 215 claim of FLSA Retaliation to be a viable one, at this stage in the litigation, the Court explained:

“As noted above, the plaintiffs allege that the County Defendants violated Section 215(a)(3) of the FLSA. In relevant part, that provision states: “it shall be unlawful for any person to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or caused to be instituted any proceeding under or related to this chapter.” 29 U.S.C. § 215(a) (3). The Sixth Circuit has consistently interpreted an informal complaint to management regarding working conditions to constitute a “filed complaint” under Section 215(a)(3). Moore v. Freeman, 355 F.3d 558, 562 (6th 2004); EEOC v. Romeo Community Schools, 976 F.2d 985, 989 (6th Cir.1992). While there does not appear to be a wealth of law on this subject from the Sixth Circuit, it appears clear that, given the broad language of this provision, entities other than an individual’s employer can violate the FLSA. See e.g. Centeno-Bernuy v. Perry, 302 F.Supp.2d 128, 135 (W.D.N.Y.2003); Meek v. United States, 136 F.2d 679, 679-80 (6th Cir.1943).

In asserting that the plaintiffs’ FLSA claim should be dismissed as to them, the County Defendants argue that the plaintiffs’ Complaint does not establish the prima facie case for retaliation under the FLSA, and, even if it did, the claim could not survive the well-known McDonnell Douglas burden-shifting analysis that is typically applied in employment discrimination and retaliation suits, including claims brought under the FLSA. (Docket No. 46 at 4, citing Williams v. GM., 187 F.3d 553, 568 (6th Cir.1999)).

This is not a proper argument at this stage in the proceedings. In employment discrimination and retaliation suits, the plaintiff is not required, at the pleading stage, to demonstrate a prima facie case or to survive McDonnell Douglas burden shifting. See Swierkiewicz, 534 U.S. at 508; EEOC v. FPM Group, Ltd., 2009 WL 3088808, *6 (E.D.Tenn. Sept.28, 2009). Rather, as discussed above, in order to survive a motion to dismiss, the plaintiff’s Complaint need only outline a “facially plausible” claim for relief.

The plaintiffs have met that burden here. Again, the language of the FLSA provision at issue is very broad, prohibiting “any person” from “discriminat [ing]” against “any employee,” because that employee has filed a covered workplace complaint. 29 U.S.C. § 215(a)(3). Further, the County Defendants recognize that retaliatory reporting of an employee to immigration authorities could constitute “discrimination” under this provision. (Docket No. 46 at 6; see also Singh v. Jutla, 214 F.Supp.2d 1056, 1062 (N.D.Cal.2002) (denying motion to dismiss FLSA retaliation claims where allegations centered on an employer’s reporting of the employee to immigration authorities in retaliation for FLSA protected conduct); Dunlop v. Carriage Carpet Co., 548 F.2d 139, 147 (6th Cir.1977) (equating FLSA discrimination to “black listing” and other actions that prevent an employee from gaining future employment.)

Providing significant factual support, the plaintiffs have alleged that the County Defendants, working in concert with the Durrent Defendants, arrested the plaintiffs and then reported the plaintiffs to ICE because of the plaintiffs’ complaints about pay. While the County Defendants claim that the plaintiffs have only alleged a racial or ethnic animus as motivation for the defendants’ conduct here, that is simply not the case. (Docket No. 46 at 6.) The Complaint contains numerous allegations, backed by factual support, that the County Defendants reported the plaintiffs to ICE, at least in part, because the plaintiffs had made a complaint about pay.

The plaintiffs allege that, shortly after the officers arrived at the break room, they were advised that this was a dispute about pay. Then, “Ramirez and/or Girts supplied Defendants Jones, Partin, and Barker with paperwork to assist the Coffee County Defendants in reporting Plaintiffs to ICE.” (Docket No. 1 at 15.) There is no indication from the Complaint that Jones, Partin and Barker attempted to mediate or resolve the labor dispute; rather, it is clear from the Complaint that, throughout the entire process, the County Defendants simply imposed the will of the Durrett Defendants, which was to permanently remove the plaintiffs from the premises (and, perhaps, the country) because the plaintiffs had complained about pay. Indeed, the Complaint alleges that, after the charges were dropped, defendant Graves “consult[ed] with the Durrett Defendants and with full awareness that he was unlawfully intervening in a labor dispute, defendant Graves instructed defendant Freeman to call ICE to report Plaintiffs as suspected undocumented immigrants. Defendant Freeman did so on or about October 22 or October 23, 2007.” (Id. at 16.)

Clearly, accepting the plaintiffs’ allegations as true and drawing all reasonable inferences in the plaintiffs’ favor, the plaintiffs have sufficiently alleged that the County Defendants violated the FLSA. The plaintiffs allege, with specific factual support, that, in response to the plaintiffs’ complaint about pay, the County Defendants not only had the plaintiffs arrested but worked in concert with the Durrett Defendants to have the plaintiffs reported to ICE. As to this claim, the County Defendants’ Motion to Dismiss, which is premised on the notion that the FLSA claim lacks factual support, will be denied.

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9th Cir.: Different Regular Hourly Rates For Same Work On Different Shifts Does Not Violate FLSA; No Evidence That Defendant Is Attempting To Avoid Paying Overtime Wages

Parth v. Pomona Valley Hosp. Medical Center

A nurse brought collective action against hospital, alleging that hospital violated the Fair Labor Standards Act (FLSA) by creating a pay plan that paid nurses working 12-hour shifts a lower base hourly rate than nurses working 8-hour shifts. The United States District Court for the Central District of California, Margaret M. Morrow, J., granted summary judgment to hospital, and nurse appealed.  The Ninth Circuit affirmed, holding that: “[w]hen an employer changes its shift schedule to accommodate its employees’ scheduling desires, the mere fact that pay rates changed, between the old and new scheduling schemes in an attempt to keep overall pay revenue-neutral, does not establish a violation of the Fair Labor Standards Act’s (“FLSA’s”) overtime pay requirements.”  At issue was Defendant’s pay policy whereby they paid nurses working a 12 hour shift lower base hourly pay than those working 8 hour shifts.

Analyzing the issue, the Court stated, “[Plaintiff] argues that PVHMC violated the FLSA by creating a pay plan that pays nurses working 12-hour shifts a lower base hourly rate than nurses who work 8-hour shifts. In support of her argument, Parth contends that: (A) PVHMC cannot reduce the base pay for nurses working the 12-hour shift, (B) the 12-hour base pay rate is an “artifice” designed to avoid the FLSA’s overtime and maximum hours requirements, and (C) PVHMC cannot justify the base hourly pay rate differences between the 8-hour and 12-hour shifts, because nurses working both shifts perform the same job duties.

Parth asserts that PVHMC’s pay plan violates the FLSA, because it was designed to “make overtime payments cost neutral,” and that such a scheme is lawful only when implemented “before the employer was subject to the FLSA.” We disagree. The 12-hour shift scheduling practice was first initiated at the nurses’ request. The 12-hour shift scheduling practice was then memorialized in a collective bargaining agreement as a result of negotiations between Local 121 and PVHMC (again initiated at the nurses’ request). The parties do not dispute that the wages paid under the pay plan are more than the minimum wages under federal law. We find no reason to invalidate the agreement between the parties. There is no justification in the law and no public policy rationale for doing so. Parth also failed to cite (either before the district court or on appeal) any authority to suggest that a voluntary base rate wage reduction made in exchange for a 12-hour shift schedule was unlawful.

The FLSA requires employers to pay employees, who work more than 40 hours in a work week, one and a half times the employees’ “regular rate” of pay. 29 U.S.C. § 207(a)(1). The Supreme Court interprets “regular rate” to mean “the hourly rate actually paid the employee for the normal, non-overtime workweek for which he is employed.” Walling v. Youngerman-Reynolds Hardwood Co., Inc., 325 U.S. 419, 424 (1945). Congress’s purpose in enacting the FLSA “was to protect all covered workers from substandard wages and oppressive working hours.” Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981). See also Adair v. City of Kirkland, 185 F.3d 1055, 1059 (9th Cir.1999). Under the FLSA, employers and employees are generally “free to establish [the] regular [non-overtime] rate at any point and in any manner they see fit,” “[a]s long as the minimum hourly rates established by Section 6 [of the FLSA] are respected.” Youngerman-Reynolds, 325 U.S. at 424. Though our Circuit has never been asked to determine whether an employer subject to the FLSA may alter the “regular rate” of pay in order to provide employees a schedule they desire, we conclude that such an arrangement does not contravene the FLSA’s purpose.

Soon after Congress enacted the FLSA, but before it became effective, many employers altered their compensation schemes-by lowering base hourly rates-to ensure that they paid employees the same overall wages after complying with the FLSA’s overtime requirements. See, e.g., Walling v. A.H. Belo Corp., 316 U.S. 624, 628-30, 62 S.Ct. 1223, 86 L.Ed. 1716 (1942). In Belo, the Supreme Court examined these compensation practices and held that, even when the employer’s purpose in lowering hourly base rates “was to permit as far as possible the payment of the same total weekly wage after the [FLSA] as before…. [N]othing in the [FLSA] bars an employer from contracting with his employees to pay them the same wages that they received previously, so long as the new rate equals or exceeds the minimum required by the [FLSA].” Id. at 630.

The Eleventh Circuit followed Belo’s holding in a case involving a municipal employer. See Wethington v. City of Montgomery, 935 F.2d 222 (11th Cir.1991). “When passed in 1938, the FLSA did not apply to any state or local employers.” Id. (citing Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 533, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985)). Congress expanded the FLSA’s definition of “employer” in 1974 to include municipalities. In Garcia, the Supreme Court reversed its previously-established precedent and held that state and local governments could be liable for FLSA violations.   Wethington, 935 F.2d at 224-25. Given the potential for sudden liability, Congress delayed application of the FLSA to municipal employers until April 15, 1986. Id. At 225 (citing Fair Labor Standards Amendments of 1985, Pub.L. No. 99-150, § 2(c), 99 Stat. 787, 788). Accordingly, municipal employers such as the City of Montgomery (the “City”) became subject to the FLSA as of April 15, 1986.

In Wethington, the City endeavored to create and implement a “budget-neutral” plan that would ensure FLSA compliance before April 15, 1986.   Wethington, 935 F.2d at 225. Prior to Garcia, the City paid its fire fighters on a salary basis, which covered “a cycle of three pay periods, each involving varied hours over 14 days: one 104-hour period, one 112-hour period, and one 120-hour period. For this 42-day, 336-hour cycle, a typical fire fighter would receive $2,208.45. The actual working time within these periods consisted of rotations of duty in which the fire fighters worked 24 hours, were off duty for 48 hours, worked another 24 hours, and so on.” Id. This scheme did not provide for overtime, so in June 1985, the City adopted a new hourly wage scale to comply with the FLSA. Id.

The City determined that under the FLSA, 316 of the 336 hours in the 42-day cycle would be considered regular hours, while 20 would be considered overtime. Id. In order to create a new, yet “budget-neutral,” pay plan that incorporated time-and-a-half overtime pay, the City, “for the purpose of calculation, increased the [20] overtime hours by 50%. [It] then took the fictitious total hours of 346 (316 regular plus 30 adjusted overtime) and divided them into the fire fighters’ total pay for that period to produce a per-hour wage of $6.3828.” Id. The revised system ensured that City fire fighters would work the same hours and shifts as before, but would receive $6.3828 per hour for 316 regular hours, and $9.5742 ($6.3828 multiplied by 1.5 as required by the FLSA) per hour for 20 hours of overtime, totaling $2,208.4488. Id. “Therefore the total salary and total hours did not change. The payment system and the equivalent hourly rates of pay, however, did change. Under the prior, salary system, the converted hourly rate amounted to $6.57. Under the revised system, the effective rate was decreased to $6.38.” Id. The fire fighters sued the City, making an argument similar to Parth’s.

Citing Belo, the Eleventh Circuit held that, if a new pay plan “actually employed is valid under the [FLSA], the fact that the regular rate adopted prior to the [FLSA's] effective date produces a total pay no greater than the total pay under a prior system is not enough to establish a violation of the FLSA.” Id. at 229. The court “read the Belo language to support the City’s argument that it is not a violation of the [FLSA] to reduce, prior to the effective date of the [FLSA], the hourly rate paid employees in order to avoid greater payments upon application of the FLSA.” Id.

We recognize that the Belo and Wethington cases dealt with employers creating cost-neutral pay plans that lowered employees’ base hourly rates before becoming subject to the FLSA. However, there is no Supreme Court or Ninth Circuit case that says whether an employer can or cannot do so while subject to the FLSA. Courts around the country have dealt with similar matters, with conflicting results. Compare, e.g., Conner v. Celanese, Ltd., 428 F.Supp.2d 628, 637 (S.D.Tex.2006) (holding that “an employer can comply with the FLSA by reducing the ‘regular’ wage paid to its employees and pay overtime at one and one-half times the reduced regular rate such that the total pay to the employees remains the same”), with Rhodes v. Bedford County, Tenn., 734 F.Supp. 289, 292 (E.D.Tenn.1990) (“The court is of the opinion that defendant’s implementation of [a revised pay plan similar to PVHMC's] constitutes a scheme intended to avoid the overtime requirements of § 7. [Even though it] result[ed] in the workers being paid the same amount for the same number of hours worked both before and after the changeover. This was accomplished by artificially altering plaintiffs’ ‘regular rate.’ ”).

Because this is a case of first impression for us, we agree with the district court’s approach and use Supreme Court precedent on pre-FLSA pay plan alterations for guidance on how to proceed under the facts before us. In Belo, 316 U.S. at 630, the Supreme Court stated that “nothing in the [FLSA] bars an employer from contracting with his employees to pay them the same wages that they received previously, so long as the new rate equals or exceeds the minimum rate required by the FLSA.” Further, Youngerman-Reynolds, 325 U.S. at 424, states that “[a]s long as the minimum hourly rates established by Section 6 [of the FLSA] are respected, the employer and employee are free to establish this regular rate at any point and in any matter they see fit.” The PVHMC pay plan conforms with this precedent.

Additionally, we look to the purpose of the FLSA, which is “to ensure that each [covered] employee … 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 ‘under-pay.’ “ Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1150 (9th Cir.2000) (quoting Barrentine, 450 U.S. at 739). The pay practice sought by PVHMC’s nurses, and agreed to by Parth, Local 121, and PVHMC, ensures that employees who work beyond eight hours in a day receive time-and-a-half for their efforts. It also ensures that employees who work more than twelve hours in a day receive “double-time” pay. We therefore conclude that the pay practice protects employees from the evils of overwork and underpay, and properly incentivizes PVHMC from overworking its nurses.

Accordingly, we conclude that the arrangement between Parth and PVHMC does not violate the FLSA, because it is not prohibited under the statute, and it does not contravene the FLSA’s purpose. Parth cannot cite any relevant case law to support her argument that PVHMC cannot respond to its employees’ requests for an alternative work schedule by adopting the sought-after schedule and paying the employees the same wages they received under the less-desirable schedule. To us, PVHMC’s actions seem perfectly reasonable, were requested by the nurses (who work the schedules), and are the result of a bargained-for exchange between the hospital administration and Local 121.

Parth also argues that the 12-hour shift pay plan is essentially an artifice to avoid paying overtime. The district court examined this argument. It noted that Parth could cite “no authority for the proposition that these facts show the 12-hour rate was a subterfuge that violated the FLSA.” We agree.

Parth’s argument hinges on two issues: first, whether PVHMC’s pay plan contravenes the FLSA’s purpose; second, whether the revised “regular rate” is unrealistic and artificial.

Employers cannot lawfully avoid the FLSA’s overtime provisions “by setting an artificially low hourly rate upon which overtime pay is to be based and making up the additional compensation due to employees by other means.” 29 C.F.R. § 778.500(a). The FLSA also prohibits employers from adopting “split-day” plans in which the employee’s hours are arbitrarily divided in such a way as to avoid overtime payments. Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 40, 65 S.Ct. 11, 89 L.Ed. 29 (1944); 29 C.F.R. § 778.501. Both types of plans work in a manner so that employees do not earn overtime compensation, regardless of how many hours they worked.

An employee’s “regular rate” of pay is “the hourly rate actually paid the employee for the normal, non-overtime workweek for which [s]he is employed.” Youngerman-Reynolds, 325 U.S. at 424. See also United States v. Rosen-wasser, 323 U.S. 360, 363-64, 65 S.Ct. 295, 89 L.Ed. 301 (1945) (holding that “Section 7(a) [of the FLSA] refers to a ‘regular rate’ which we have defined to mean ‘the hourly rate actually paid for the normal, non-overtime workweek.’ “ (quoting Helmerich & Payne, Inc., 323 U.S. at 40)). PVHMC’s regular rate for 12-hour shift nurses is the rate it pays for the first eight hours of a 12-hour shift. The pay plan does not fall under either of the prohibited categories discussed above.

Parth contends that PVHMC’s regular rate for nurses working the 12-hour shift is artificial, and therefore unlawful, relying on Youngerman-Reynolds to support her argument. Youngerman-Reynolds holds that employers cannot skirt the FLSA’s requirements by creating a new payment scheme and corresponding lower regular rate that does not reflect the economic reality of the employees’ work. Youngerman-Reynolds, 325 U.S. at 425. In Youngerman-Reynolds, an employer paid its employees a piece rate determined by the number of boards they ricked and stacked. Id. at 420-21. When generating the new hourly rate from which it would base overtime compensation under the FLSA, the employer created an arbitrary per-hour piece rate that did not reflect the actual rate at which its employees stacked and ricked wood. Id. at 421-23. The Supreme Court held that the scheme violated Congress’s goals in enacting the FLSA-“inducing the employer to reduce the hours of work and to employ more [workers],” and “compensating the employees for the burden of a long work-week.” Id. at 423-24.

PVHMC’s plan, however, does not impinge on Congress’s goals. It provides employees more scheduling flexibility, allows them to spend less time commuting to work (because they spend fewer days at work), and ensures that PVHMC does not retain an incentive to ask the nurses to work longer hours.

Parth also asserts that the regular rate is “unrealistic” and “artificial,” in violation of the Supreme Court’s admonition in Helmerich & Payne, Inc., 323 U.S. at 42, that a regular rate cannot be derived “in a wholly unrealistic and artificial manner.” See also Adams v. Dep’t of Juvenile Justice of New York, 143 F.3d 61, 67-68 (2d Cir.1998) (stating that the regular rate may not be set in a “wholly unrealistic and artificial manner” that does not reflect actual practice). The Department of Labor has provided regulations to guide employers who wish to ensure their regular rates are not deemed artificial or unrealistic. See 29 C.F.R. § 778.500(a) (“[T]he overtime provisions of the act cannot be avoided by setting an artificially low hourly rate upon which overtime pay is to be based and making up the additional compensation due to employees by other means”). Parth produced no evidence to show that the regular rates memorialized in the CBA were artificially low, or that PVHMC was attempting to set rates in a manner that would relieve it of the obligation to pay time-and-a-half whenever an employee worked more than eight hours in a day.

Moreover, Parth and the other nurses are paid overtime under the PVHMC plan. Their overtime wages are calculated according to the standards set forth in 29 C.F.R. § 778.115 and the CBA. Parth appears to take issue with the manner by which her “regular pay” is calculated, and basically argues that instead of using the weighted average method of determining the regular rate, PVHMC should be required to use the “average blended rate” of pay. The “average blended rate” is the total pay worked by a nurse in a 12-hour shift, divided by 12. To the extent Parth’s argument is that average blended rate calculation is the only permissible “regular rate” of pay under the FLSA, we reject it. The weighted average method of calculation is not prohibited by the FLSA, and has been upheld by other circuits. See, e.g., Gorman, 488 F.3d at 596 (“This Court has already validated the weighted average method of determining the regular rate, which we described as ‘properly calculated by adding all of the wages payable for the hours worked at the applicable shift rates and dividing by the total number of hours worked.’) (quoting Brock v. Wila-mowsky, 833 F.2d 11, 14 (2d Cir.1987)).

The district court noted that “Parth proffer[ed] no argument or support for the proposition that the regular rate for the 12-hour [nurses] was not properly determined, or that overtime pay was not properly calculated using the pay rates set out in the CBA.” On appeal, Parth does not challenge the calculation of the overtime rate, except to say that the regular rate upon which it is based is impermissible. Accordingly, we conclude that Parth has not presented any evidence or convincing authority to suggest that PVHMC’s pay plan contravenes Congress’s goals in enacting the FLSA or is an artifice to avoid paying overtime.

Parth also argues that PVHMC’s pay plan is unlawful, because nurses working both the 8-hour and 12-hour shifts perform the same work, but are paid at different rates. We find no authority that suggests employees cannot be paid different rates for different shifts, and Parth fails to present any authority to the contrary. We do, however, find ample authority from other circuits that supports PVHMC’s argument that workers working different shifts may be paid different rates. See, e.g., Gorman, 488 F.3d at 595-97; Conner, 428 F.Supp.2d at 636-37; Allen v. Bd. of Pub. Educ., 495 F.3d 1306, 1312-13 (11th Cir.2007).

Parth derives her sole support for this argument from 29 C.F.R. § 778.316, which prohibits employers from setting one hourly rate for the first 40 hours of work and a lower hourly rate for statutory overtime hours. See 29 C.F.R. § 778.316. The regulation does not, however, speak to the circumstances present in this case. 29 C .F.R. § 778.316 makes no reference to whether employees working one shift over another may or may not be paid a different wage. Parth has therefore failed to meet her burden to show that this scheme is unlawful.”

Accordingly, the Ninth Circuit affirmed the district court’s decision to grant Defendant summary judgment.

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D.Minn.: Defendant’s Request To Distribute Post-Notice Memorandum To Opt-ins Denied; Risk That Opt-ins Would Be Discouraged From Exercising FLSA Rights Outweighs Defendant’s Interests

Ahle v. Veracity Research Co.

Following the Court’s Order granting Notice, Defendant sought to send out a memorandum to all putative class members reminding them that they may not divulge trade secrets (without outlining what those trade secrets were).  Plaintiff objected and Defendant’s filed a Motion to send the memorandum out.  Finding that the chilling effect outweighed the probative value, if any, of such memorandum, the Court denied Defendant’s Motion.

The Court initially described the procedural history up until the point of the Motion and the contents of the memorandum Defendant sought to distribute.

“Veracity is a private investigative firm that specializes in insurance defense investigations. The Plaintiffs are current or former employees of Veracity, who work, or worked, as private investigators, and who claim that Veracity has violated the Fair Labor Standards Act, Title 29 U.S.C. §§ 201-219 (“FLSA”), by failing to pay them for certain hours that they had allegedly worked. Veracity denies any violation of the FLSA, and filed Counterclaims against certain of the Plaintiffs, including claims that those Plaintiffs had misappropriated confidential information, and trade secrets. In an Order dated July 28, 2009, the District Court, the Honorable Ann D. Montgomery presiding, granted the Plaintiffs’ Motion to Dismiss Veracity’s claims, on jurisdictional grounds, that those Plaintiffs had misappropriated Veracity’s confidential information, and trade secrets. See, Memorandum Opinion and Order dated July 28, 2009, Docket No. 67.

Veracity now seeks leave of the Court to distribute the following memorandum to those of its employees who elect to opt-into this collective action:

We understand that you recently elected to become a party plaintiff in this wage and hour lawsuit. We respect your decision and assure you that you will not be retaliated against in any way by [Veracity] because of your involvement in this case.

However, we want to remind you that, like all [Veracity] employees, you have a duty not to share or disclose any of our trade secrets or other confidential information outside of the Company except as authorized by [Veracity]. This includes any company property, whether in tangible or electronic form. Although we have no desire to interfere with your participation in this lawsuit, it does not relieve you of your obligations as a [Veracity] employee, including to protect our trade secrets and other confidential information.

Please let me know if you have any questions concerning this Memorandum or our policies prohibiting the nondisclosure and nonmisappropriation of [Veracity's] confidential information and property, as reflected in our Employee Manual and your Agreement with [Veracity].

Before distributing the memorandum to opt-ins, counsel for Veracity requested permission to do so from counsel for the Plaintiffs, who objected to the distribution, and urged that Veracity seek Court approval.

Without the knowledge of its counsel, on August 6, 2009, Veracity sent a copy of the memorandum, authored by Veracity’s Chief Executive Officer, to a current employee who had opted into the lawsuit, and followed that transmission with a personal email to the employee which directed that he confirm that he received, understood, and would comply, with the terms of that memorandum. According to the Plaintiffs, Veracity sent the memorandum to that employee “within 20 minutes” of the employee’s election to opt-into the case. See, Plaintiffs’ Memorandum in Opposition, Docket No 93 (“Pl’s Memo.”), at p. 4 of 8; see also, Sokolowski Aff., supra at p. 4 of 6. After counsel for the Plaintiffs reiterated their opposition to the distribution of the memorandum, Veracity filed their Motion for Court approval to do so.”

Veracity contends that the memorandum is “neither threatening, coercive, nor misleading, and Plaintiffs fail to explain why they object to it,” see, Veracity’s Memorandum in Support, Docket No. 89 (“Veracity’s Memo.”), at p. 1 of 6, and believes that, as the employer of those opt-ins who are current employees, Veracity is doing no more than reminding those employees of their obligation to maintain the secrecy of Veracity’s confidential information, and trade secrets. Id. at p. 1-2 of 6 (“The memo, which [Veracity] believed to be appropriate and benign, was intended to remind employees of their obligation not to disclose trade secrets or other confidential information.”). Accordingly, Veracity requests an Order that permits “it to distribute the memorandum to any future opt-in plaintiffs who are current employees of [Veracity] at the time they opt in to the lawsuit.” Id.

Addressing the competing interests, the Court noted, ” ‘Because of the potential for abuse, a district court has both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and the parties.’ Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981). “But this discretion is not unlimited, and indeed is bounded by the relevant provisions of the Federal Rules.” Id., citing Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974). “Before entry of such an order, there must be a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties.” Great Rivers Cooperative of Southeastern Iowa v. Farmland Industries, Inc., 59 F.3d 764, 766 (8th Cir.1995), citing Gulf Oil Co. v. Bernard, supra at 101.

‘In addition, such a weighing-identifying the potential abuses being addressed-should result in a carefully drawn order that limits speech as little as possible, consistent with the rights of the parties under the circumstances.’ Id., quoting Gulf Oil Co. v. Bernard, at 102. ‘Nevertheless, a limited restriction-such as precluding a defendant from soliciting class members to opt out of the litigation-will sometimes be justified.’ Id., quoting Manual for Complex Litigation, Second, at § 30.24 at p. 232, citing, in turn, Kleiner v. First Nat’l Bank of Atlanta, 751 F.3d 1193 (11th Cir.1985). While the foregoing authorities specifically address class action proceedings, the same principles have been extended to collective actions, such as this one. See, Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 170-71 (1989). In Hoffman-La Roche, the Court specifically recognized that the benefits of the collective form of litigation “depend on employees receiving accurate and timely notice concerning the pendency of the collective action, so that they can make informed decisions about whether to participate.” Id. at 170.

We do not suggest that there is anything misleading in the contents of Veracity’s proposed memorandum. Rather, we have concern that the memorandum, which will only be sent to Veracity’s current employees who opt-into the collective action, will unnecessarily highlight Veracity’s close attention to that employee’s election to participate in this proceeding. Perhaps, in and of itself, such a highlighting could prove to be innocent, we find no logical nexus between joining this collective action, and any derivative motivation to impermissibly share Veracity’s confidential information, or trade secrets. Instead, we are left with the distinct impression that the transmission of the memorandum-only to opt-ins-is intended to not-so-subtly influence the opt-in, as to his choice to engage in this lawsuit, by assuring him or her that Veracity’s management will be more closely scrutinizing that employee’s demeanor and conduct, than other similarly-situated employees who have not joined the suit.

The opt-ins do no wrong in joining this collective action; they are simply exercising their rights under a statute that Congress enacted to assure that they were fairly compensated for the hours that they worked for Veracity, or for any other employer. If that joinder warrants a cautionary, that the opt-in should not seek to steal Veracity’s property, whether tangible or electronic, the connection escapes us. Nor are we able to clearly understand Veracity’s asserted business purpose for the advisory. While we certainly accept that Veracity is engaged in a sensitive business, and could be exposed to penalties if the information its investigators gather is improperly disclosed in such a way as to violate State or Federal statutes, or Veracity’s contracts with third-parties, we are unable to perceive why joining this lawsuit potentiates toward any such violations. Veracity, and the Plaintiffs, have entered a Protective Order that preserves the confidentiality of information that has been so labeled by one party or the other. Counsel for the Plaintiffs need not request, even if they were so unprofessionally motivated to do so, information from the opt-ins which is otherwise available from Veracity.

Nor is it clear what Veracity characterizes as confidential, or as a trade secret. Surely that characterization could not encompass evidence, if any there be, that Veracity’s policies and practices violate the provisions of the FLSA, and yet, that inference may not be fully understood by the opt-ins who are warned not to communicate some undefined information to persons outside of Veracity. The Confidentiality Agreements between Veracity, and its investigators, have not been presented for our review, but we have grave difficulty in conceiving why “information about other employees” could be considered confidential. See, Veracity’s Memo., supra at p. 5 of 6 (“[Veracity's] employees have access to confidential information and trade secrets, including clients lists and information about other employees.”). While the confidences of Veracity’s client lists would surely be proprietary, we are unable to fathom why that information would be a subject of inquiry, by the Plaintiffs’ counsel, in an FLSA action.

In our considered view, Veracity’s memorandum unfairly chills the opt-ins’ Sixth Amendment right of access to the Courts, as well as their entitlement to consult with legal counsel, concerning their FLSA claims, without fear of retribution arising from some notion that the information that they are disclosing will subject them to discipline, or other legal action, predicated upon a breach of a Confidentiality Agreement. Moreover, we are unable to perceive any reason for the opt-ins to be disclosing information that would compromise a confidence, or a trade secret. As we have noted, the issues raised in this action pertain to wages, and hours worked; they do not involve matters of confidence or trade secret, and Veracity has failed to explain why it should fear such disclosures, much less why it believes that counsel for the Plaintiffs would be interested in any such information.

Given these considerations, and the entirety of the Record that the parties have presented for our consideration, we find that Veracity should be allowed to exercise its free speech right to communicate with its employees on matters as significant as the preservation of confidential information, and trade secrets. In order to preserve that right, without trammeling upon the opt-in’s right of access to the Courts, any communication from Veracity, on this subject, should be transmitted to all of its employees, who signed a Confidentiality Agreement, and not just to the opt-ins. In this fashion, the rights of both sides are appropriately weighed and protected. While our ruling will require that the memorandum be modestly reworded, if Veracity truly has a concern that its employees, or some subclass of them, will improperly disclose its trade secrets, or confidential information, then a cautionary advisory to its workforce will further its interest in preserving the integrity of such information, without sacrificing the opt-ins’ rights under the FLSA. As we did at the Hearing, we suggest that the memorandum be generic in form and content, and not be connected to this litigation. If a suitable memorandum evades the parties, they may jointly contact this Court for assistance.”

Thus, the Court denied the Defendant’s Motion for an Order Approving the Distribution of a Memorandum to Opt-ins.

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6 Construction Companies Accused Of Using Race-based Pay Scale: Whites At Top, Latinos Rock Bottom, Daily News Reports

The Daily News is reporting that, “[s]ix construction companies are accused in a new state lawsuit of paying their employees according to their race – with whites at the top and Latinos at the bottom.

The suit filed by [New York] state Attorney General Andrew Cuomo on Thursday says the companies cheated lower-paid minority workers out of $4 million in wages and overtime.

All six firms are controlled by Michael Mahoney, a contractor exposed by the Daily News last year after workers said his companies provided them with black market federal safety certificates.

Mahoney’s companies paid white workers an average hourly rate of $25, while paying African-Americans $18 and Latinos and Brazilians only $15 an hour for the same work, the suit charges.

Since 2002, the companies short-changed dozens of employes at at least 10 construction sites, Cuomo charged.

Some workers were cheated of as much as $600 a month, according to Cuomo.”

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Iowa Wal-Mart Wage Suit Settled For $11M, Quad City Times Reports

The Quad City Times is reporting that, “[a] class-action lawsuit filed eight years ago in Clinton County accusing Wal-Mart of intimidating employees into working overtime without pay has been settled, with the company agreeing to pay $11 million. The lawsuit was filed in June 2001 by Sally Mussmann and Taylor Vogue, two former employees of the Wal-Mart store in Clinton.”

The article stated that, “[t]he lawsuit alleged that Wal-Mart gave its employees tasks that were impossible to complete during their scheduled work hours, then intimidated them into working extra hours without pay to complete their assignments.”

To read the entire article go to the Quad City Times website.

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5th Cir.: Cable Installers Are Employees, Not Independent Contractors; Summary Judgment For Employer Reversed

Cromwell v. Driftwood Elec. Contractors, Inc.

The trial court in this case previously granted the Defendant-employer summary judgment finding that the Plaintiff-employee-cable installers were independent contractors and not employees.  The 5th Circuit reversed on appeal, finding that although it’s a close call, Plaintiffs were employees, thus entitled to the protections of the FLSA.

The Court cited the following facts as relevant to its inquiry:

“[Plaintiffs] provided cable splicing services for Driftwood for approximately eleven months, and were required to work twelve-hour days, thirteen days on and one day off. They were paid a fixed hourly wage for their work. BellSouth was Driftwood’s customer on the restoration project. AT & T appears to have had nothing to do with the facts of this case. Cromwell and Bankston reported to BellSouth’s location every morning to receive their assignments, unless they had not completed their jobs from the prior workday, in which case they were permitted to check in by phone. Cromwell and Bankston were given prints describing the type of work that needed to be performed for each assignment and were instructed by BellSouth supervisors to follow certain general specifications. Driftwood and BellSouth representatives checked on the progress of work, but did not train Cromwell and Benson or control the details of how they performed their assigned jobs.

Cromwell and Bankston provided their own trucks, testing equipment, connection equipment, insulation equipment, and hand tools, totaling over $50,000 for Cromwell and approximately $16,000 for Bankston, while BellSouth supplied materials such as closures and cables. Cromwell and Bankston were responsible for their own vehicle liability insurance and employment taxes, but Driftwood provided workers’ compensation insurance and liability insurance for Cromwell and Bankston’s work.”

Applying the relevant law, the Court stated, “[t]o determine if a worker qualifies as an employee under the FLSA, we focus on whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself. Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir.2008). To aid in that inquiry, we consider five non-exhaustive factors: (1) the degree of control exercised by the alleged employer; (2) the extent of the relative investments of the worker and the alleged employer; (3) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship. Id. No single factor is determinative. Id. The ultimate conclusion that an individual is an employee within the meaning of the FLSA is a legal, and not a factual, determination. Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1045 (5th Cir.1987); see also Beliz v. W.H. McLeod & Sons Packing Co., 765 F.2d 1317, 1327 & n. 24 (5th Cir.1985) (citing and reconciling cases). Therefore, “we review the determination that [plaintiffs] were not employees as we review any determination of law,” which is de novo. Donovan v. American Airlines, Inc., 686 F.2d 267, 270 n. 4 (5th Cir.1982). Because there are no disputes of material fact, we also conclude that the district court was correct to resolve the matter on summary judgment.

The defendants-appellees argue that the facts of this case are similar to those in Carrell v. Sunland Const., Inc., in which we held that a group of welders were independent contractors under the FLSA. 998 F.2d 330 (5th Cir.1993). In Carrell, we noted that several facts weighed in favor of employee status, including that the defendant dictated the welders’ schedule, paid them a fixed hourly rate, and assigned them to specific work crews. Id. at 334. However, we held that the welders were independent contractors because the welders’ relationship with the defendant was on a project-by-project basis; the welders worked from job to job and from company to company; the average number of weeks that each welder worked for the defendant each year was relatively low, ranging from three to sixteen weeks; the welders worked while aware that the defendant classified them as independent contractors, and many of them classified themselves as self-employed; the welders were highly skilled; the defendant had no control over the methods or details of the welding work; the welders performed only welding services; the welders supplied their own welding equipment; and the welders’ investments in their welding machines, trucks, and tools averaged $15,000 per welder. Id.

In Carrell, we distinguished our prior decision in Robicheaux v. Radcliff Material, Inc., 697 F.2d 662 (5th Cir.1983), in which we held that a group of welders were employees under the FLSA, on the grounds that the welders in Robicheaux worked a substantial period of time exclusively with the defendant in that case, ranging from ten months to three years; the welding in Robicheaux required only “moderate” skill; the defendant in Robicheaux told the welders how long a welding assignment should take; the welders in Robicheaux spent only fifty percent of their time welding, and the remaining time cleaning and performing semi-skilled mechanical work; and the defendant in Robicheaux provided the welders with “steady reliable work over a substantial period of time.” Carrell, 998 F.2d at 334 (citing Robicheaux, 697 F.2d at 667). The welders in Robicheaux had signed a contract with the defendant in that case describing themselves as independent contractors; furnished their own welding equipment, in which they had invested from five to seven thousand dollars each; provided their own insurance and workers’ compensation coverage; invoiced the defendant on their own business letterheads, filed federal income tax returns on IRS forms as self-employed individuals, and received a higher hourly wage than did other welders employed by the defendant who did not furnish their own equipment and who were considered by the company to be employees. Robicheaux, 697 F.2d at 665.

The facts of this case lie somewhere between those of Carrell and Robicheaux. Similar to the facts in Carrell, the plaintiffs in this suit are highly skilled and perform only services requiring the use of those skills, the defendants here did not control the details of how the plaintiffs performed their assigned jobs, and the plaintiffs provided their own trucks, equipment, and tools, in which they had invested substantial sums. However, there are some significant dissimilarities between the facts in the instant case and the facts in Carrell, such that the facts of this case are not as readily distinguishable from those in Robicheaux. The plaintiffs in this case worked full-time exclusively for the defendants for approximately eleven months, within the time range that the Robicheaux welders had worked for the defendant in that case. The plaintiffs in this case did not have the same temporary, project-by-project, on-again-off-again relationship with their purported employers as the plaintiffs in Carrell did with their purported employer. The defendants-appellees argue that Cromwell and Bankston’s work-restoring damaged telecommunications lines along the Mississippi Gulf Coast in the wake of Hurricane Katrina-was by nature temporary, but “courts must make allowances for those operational characteristics that are unique or intrinsic to the particular business or industry, and to the workers they employ.”   Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1054 (5th Cir.1987) (“[W]hen an industry is seasonal, the proper test for determining permanency of the relationship is not whether the alleged employees returned from season to season, but whether the alleged employees worked for the entire operative period of a particular season.”). Thus, the temporary nature of the emergency restoration work does not weigh against employee status.

It is common in FLSA cases that “there are facts pointing in both directions” regarding the issue of employee status, see Herman v. Express Sixty-Minutes Delivery Serv., Inc., 161 F.3d 299, 305 (1998) (quoting Carrell, 998 F.2d at 334), but the facts in this case truly appear to be nearly in equipoise. However, on balance, we believe that, as a matter of economic reality, Cromwell and Bankston were economically dependant upon Driftwood and BellSouth, and were not in business for themselves. The facts of this case simply appear closer to those in Robicheaux than in Carrell. The most significant difference between the facts in those cases, in terms of the economic reality of whether the plaintiffs were economically dependant upon the alleged employer, was that the Robicheaux welders worked on a steady and reliable basis over a substantial period of time exclusively with the defendant, ranging from ten months to three years, whereas the Carrell welders had a project-by-project, on-again-off-again relationship with the defendant, with the average number of weeks that each welder worked for the defendant each year being relatively low, ranging from three to sixteen weeks. Similar to the Robicheaux welders, Cromwell and Bankston worked on a steady and reliable basis over a substantial period of time-approximately eleven months-exclusively for their purported employers. The permanency and extent of this relationship, coupled with Driftwood and BellSouth’s complete control over Cromwell and Bankston’s schedule and pay, had the effect of severely limiting any opportunity for profit or loss by Cromwell and Bankston. Although it does not appear that Cromwell and Bankston were actually prohibited from taking other jobs while working for Driftwood and BellSouth, as a practical matter the work schedule establish by Driftwood and BellSouth precluded significant extra work. Also, the fact that Driftwood and BellSouth provided Cromwell and Bankston with their work assignments limited the need for Cromwell and Bankston to demonstrate initiative in performing their jobs. See Carrell, 998 F.2d at 333 (“As for the initiative required, a Welder’s success depended on his ability to find consistent work by moving from job to job and from company to company. But once on a job, a Welder’s initiative was limited to decisions regarding his welding equipment and the details of his welding work.”). Although there are facts that clearly weigh in favor of independent contractor status, notably that Cromwell and Bankston controlled the details of how they performed their work, were not closely supervised, invested a relatively substantial amount in their trucks, equipment, and tools, and used a high level of skill in performing their work, these facts are not sufficient to establish, as a matter of economic reality, that Cromwell and Bankston were in business for themselves during the relevant time period. The judgment of the district court is VACATED, and this case is REMANDED to the district court for proceedings consistent with this opinion.”

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S.D.N.Y.: Notwithstanding Defendants’ Disclaimer Of Liability, FLSA Plaintiffs That Accepted OJ Are “Prevailing Party”; Entitled To Reasonable Attorneys’ Fees And Costs

Kahlil v. Original Old Homestead Restaurant, Inc.

Plaintiffs moved for attorneys’ fees and costs following their acceptance of Defendants’ offer of judgment.  The Defendants argued there was no fee entitlement, because their offer contained a disclaimer of liability.  Rejecting this argument, the Court awarded Plaintiffs’ attorneys reasonable attorneys fees and costs.

The Court highlighted the following procedural history:

“Plaintiffs Sayed Kahlil, Wayne Walker, Mohamed Elmahdy and Brian Lahoff were employed as waiters at defendant The Original Old Homestead Restaurant. On January 30, 2007, plaintiffs filed a complaint to resolve wage and hour disputes arising under section 216(b) of the Fair Labor Standards Act of 1938 (“FLSA”) and section 198 of the New York State Labor Law (“NYLL”). 29 U.S.C. § 216(b) (2008); N.Y. Lab. Law § 198 (McKinney 2009). Plaintiffs were represented in this matter by Louis Pechman, a partner at Berke-Weiss & Pechman LLP (“BWP”), and Jaime Duguay, an associate at the same firm. On April 29, 2008, mid-way through the discovery process, defendants submitted an offer of judgment in the amount of $36,000, exclusive of attorneys’ fees, pursuant to Rule 68 of the Federal Rules of Civil Procedure. Plaintiffs accepted the offer of judgment on May 8, 2008, and judgment was entered by the Clerk on May 30, 2008. On June 13, 2008, plaintiffs filed a Motion for Attorneys’ Fees and Costs, pursuant to FLSA § 216(b) and NYLL § 198. Plaintiffs seek $119,737.15 to compensate Pechman and Duguay for labor and costs incurred up to the filing of the motion. Defendants oppose the award of attorneys’ fees and costs on the grounds that plaintiffs did not prevail in the foregoing litigation. In the alternative, defendants contend that the requested fee award should be reduced in light of Pechman’s excessively high hourly rate, the limited nature of plaintiffs’ success, the vagueness of BWP’s time entries, BWP’s small size, excessive hours, billing of clerical tasks at attorney rates, and billing of work completed prior to the filing of the complaint.”

The Court then determined that Plaintiffs were the “prevailing party” as defined by the FLSA:

In an action pursuant to the FLSA, a “prevailing party” must be awarded reasonable attorneys’ fees and costs: “The Court in such 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 added). Likewise, the NYLL requires that “[i]n any action … in which the employee prevails, the court shall allow such employee reasonable attorney’s fees ….“ § 198(1-a) (emphasis added).

Plaintiffs are the prevailing party for the purposes of the FLSA and NYLL “if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.” Hensley v. Eckerhart, 461 U.S. 424, 433 (1983) (quoting Nadeau v. Helgemoe, 581 F.2d 275, 278-79 (1st Cir.1978)). Likewise, to qualify as a prevailing party, a plaintiff must demonstrate a change in the legal relationship between itself and the defendant arising from the resolution of the lawsuit. Texas State Teachers Ass’n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792 (1989).

The judgment in this case suffices to establish plaintiffs as the prevailing party under the FLSA and NYLL. Where, as here, plaintiffs obtained a favorable settlement, they are entitled to an award of attorneys’ fees: “[t]he fact that [plaintiff] prevailed through a settlement rather than through litigation does not weaken [plaintiff's] claim to fees.” Maher v. Gagne, 448 U.S. 122, 129 (1980). Defendants contend that the settlement is insufficient to render plaintiffs the prevailing party because the complaint sought monetary, declaratory, and equitable relief, while the offer of judgment provided only monetary relief. The Court finds defendants’ argument unpersuasive. Plaintiffs surely obtained some of the relief sought, and no court in this circuit has indicated that relief obtained in settlement must exactly match relief sought in the complaint. See Lyte v. Sara Lee Corp., 950 F.2d. 101, 104 (2d Cir.1991) (holding that a plaintiff may be considered a prevailing party if the relief obtained through settlement is of the “same general type” as relief requested in the complaint); Koster v. Perales, 903 F.2d 131, 134 (2d Cir.1990) (“A plaintiff may be considered a prevailing party even though the relief ultimately obtained is not identical to the relief demanded in the complaint”); Texas State Teachers Ass’n., 489 U.S. at 791-92 (indicating that a plaintiff’s receipt of some of the benefit sought is enough to “cross the threshold to a fee award of some kind”).

The Court also finds unpersuasive defendants’ argument that the disclaimer of liability in the offer of judgment indicates that the settlement did not change the legal relationship between the parties, and therefore that plaintiffs are not the prevailing party. It is not necessary for a defendant to admit liability in order for a plaintiff to be designated as the prevailing party. In Buckhannon, the Supreme Court indicated that a consent judgment without an admission of liability by the defendant “[is] nonetheless … a court-ordered ‘chang[e][in] the legal relationship between [the plaintiff] and the defendant.’ “ 532 U.S. at 604, citing Texas State Teachers Ass’n., 489 U.S. at 792. Further, the Supreme Court in Maher v. Gagne upheld an award of attorneys’ fees based on a settlement agreement containing a disclaimer of liability similar to the one in defendants’ offer of judgment. See 448 U.S. at 126 n. 8. The Court therefore finds that plaintiffs are the prevailing party, and that they are entitled to attorneys’ fees and costs under the FLSA and NYLL.”

Thus, the Court calculated a reasonable attorneys fee and costs and awarded same to Plaintiffs’ counsel.

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D.Minn.: “Special Investigators” For Insurance Company, Who Investigate Potentially Fraudulent Claims, Non-Exempt As Matter Of Law; Entitled To Overtime Pay

Fenton v. Farmers Ins. Exchange

Farmers Insurance Exchange (“FIE”) is an inter-insurance exchange, or reciprocal, organized in California. FIE employs special investigators who investigate potentially fraudulent insurance claims. Special investigator Michael Fenton alleges that he and other FIE special investigators routinely work more than forty hours per week, but are improperly classified as “exempt” from overtime pay under the Fair Labor Standards Act (“FLSA”). Fenton and twenty other named plaintiffs bring this collective action challenging this practice on behalf of themselves and all other similarly situated special investigators. See 29 U.S.C. § 216(b). Both Plaintiffs and Defendant moved for summary judgment. Both motions were granted in part and denied in part. Significantly, as discussed here though, Plaintiffs were found to be non-exempt based on their duties performed (and entitled to overtime).

The Court recited the following facts as pertinent to its decision regarding Plaintiffs’ non-exempt status, “FIE is a reciprocal or inter-insurance exchange that sells insurance policies throughout the county. As a reciprocal exchange company, FIE is owned by its policyholders, or “subscribers,” who exchange contracts with one another and, by pooling their resources, insure one another against certain losses. FIE, whether on its own or through its related companies, performs all the functions of a typical insurance company, including selling policies, contracting with individual agents who sell and service policies, procuring reinsurance, and adjusting claims.

FIE’s special investigators-the plaintiffs in this action-investigate the factual basis for subscribers’ insurance claims, to determine whether the claims should be paid. The claim investigation process and the job duties of the investigators are critical to this action, and are described in detail below.

The claims investigations process begins with FIE’s claims representatives, who work out of a different business unit than the investigators, and flag claims that exhibit potential signs of fraud. (Morgan Aff., Docket No. 94, at 127-28.) The claims representatives then use a shared electronic database to refer the flagged claims to an FIE unit staffed by the plaintiffs. ( Id. at 105.) Managers in this unit then assign the claims to specific investigators. ( Id. at 107.)

After an investigator receives an assignment, he or she is required to promptly contact the claims representative who referred the claim. ( Id. at 115-16.) The investigator is required to consider the specific issues flagged by the claims representative, and attempt to develop a plan to investigate those issues. ( Id.; Morgan Aff., Docket No. 94, Ex. F, at 74.) While investigators may occasionally suggest an additional fraud indicator to pursue, they do not reshape the scope of an investigation without first getting the approval of the claims representative or their supervisor. (Morgan Aff., Docket No. 116, Ex. 7, at 44 (“It’s [the claims representative's] file.”); id. Ex. 2, at 38 (indicating that investigation plans are “always” sent to supervisors for approval).) In addition, while investigators may recommend that a claim does not require the work of an investigator, the final decision about whether to close an investigation is made by supervisors or claims representatives. (Ashbridge Decl., Docket No. 41, ¶ 18.)

Plaintiffs’ investigations often involve taking photographs of relevant materials; retrieving police or fire reports and other records; and interviewing the claimant and other witnesses. ( Id. ¶ 19.) Investigators also ensure that FIE complies with California’s requirement that suspected insurance fraud be reported to the state. See
Cal. Ins.Code § 1872.4. While plaintiffs may recommend that FIE use an expert to evaluate an incident, this determination is ultimately made by the claims representative. (Morgan Aff., Docket No. 116, Ex. 2, at 48.) In addition, while plaintiffs encounter new leads on occasion in the course of their investigations, they are not to pursue those leads without permission of the claims representative or a supervisor. (Morgan Aff., Docket No. 94, Ex. F, at 75.)

When an investigator believes that an investigation is complete, he or she contacts the claims representative to determine if the representative would like him or her to investigate further. (Morgan Aff., Docket No. 116, Ex. 12, at 158.) Once the claims representative approves the closing of the investigation, the investigators are required to submit an exhaustive file of their research materials, including “a list of all completed tasks (or an explanation of why a task was not completed), a report of any inconsistencies, discrepancies, and/or significant findings (both inculpating and exculpating); [and] a complete summary of the entire investigation.” (Ashbridge Decl., Docket No. 41, ¶ 22.) In addition, although investigators describe coming to credibility determinations after interviews with witnesses or claimants, and occasionally share these impressions in informal conversations with the assigning claims representatives, “the special investigator’s subjective opinions or conclusions are excluded from [these] written reports,” and investigators do not otherwise draft recommendations about whether a claim should be paid. ( Id. ¶ 21; Morgan Aff., Docket No. 94, Ex. A, at 146.)

Investigators are required to open new investigations at a rate of 12.5 per month, and must close each investigation within fourteen days. (Morgan Aff., Docket No. 94, Ex. 11, at 46.) These investigations are their primary job duty. (Ashbridge Decl., Docket No. 41, ¶ 6.) Investigators are also required to randomly review claim files to look for fraud indicators, an activity which accounts for 5% of their overall performance rating, (Morgan Aff., Docket No. 94, Ex. P, at 7), and occasionally conduct training for claims representatives about insurance fraud awareness.

FIE randomly subjects plaintiffs’ work product to Quality Assurance (“QA”) review. The results of QA reviews constitute 50% of FIE’s overall evaluation of an investigator’s performance. ( Id .) The guidelines for performing a QA review are nine pages long, and include dozens of specific criteria that are used to evaluate an investigation’s quality. (Moran Aff., Docket No. 94, Ex. O.) The QA guidelines give specific timelines for investigators’ work, state twenty-five separate steps that investigators should consider in the course of their investigations, and state nineteen requirements for investigators’ written reports. ( Id.) The QA guidelines add that the investigators’ “purpose is to provide … factual information that allows the Claims Professionals … to make good decisions, not tell them what decision to make, or provide conjecture on what really happened.” ( Id.)”

Discussing the relevant law the Court stated, “The FLSA delegates authority to define the scope of its exemptions to the Secretary of Labor (“Secretary”). 29 U.S.C. § 213(a)(1). In accordance with that authority, the Secretary has established the “short duties test,” which is used to determine whether an employee earning more than $455 per week qualifies for the administrative exemption. To qualify as exempt, an employee’s primary duty must (1) consist 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”; and (2) include “the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541 .200(a). The Secretary further explains:

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.29 C.F.R. § 541.201(a). In addition, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term “matters of significance” refers to the level of importance or consequence of the work performed.

29 C.F.R. § 541.202(a). The Secretary adds that whether an employee exercises sufficient discretion and independent judgment depends on factors such as “whether the employee has authority to waive or deviate from established policies and procedures without prior approval [and] whether the employee has authority to negotiate and bind the company on significant matters.” 29 C.F.R. § 541.202(b). In other words, “[t]he exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.” 29 C.F.R. § 541.202(e). The regulations go on to explain how these provisions apply to several specific jobs. For example, insurance claims adjusters generally are exempt where:

their duties include activities such as interviewing insureds, witnesses and physicians; inspecting property damage; reviewing factual information to prepare damage estimates; evaluating and making recommendations regarding coverage of claims; determining liability and total value of a claim; negotiating settlements; and making recommendations regarding litigation. 29 C.F.R. 541.203(a). In accordance with this standard, the Ninth Circuit has determined that FIE’s claims representatives-the employees to whom plaintiffs deliver their investigation results-are exempt. See In re Farmers Ins. Exch., 481 F.3d 1119 (9th Cir.2007). The Secretary clarifies, however, that “ordinary inspection work,” involving well-established techniques and procedures … catalogued and described in manuals or other sources” are not exempt. 29 C.F.R. § 541.203(g). Similarly, the Secretary has specifically indicated that investigators working in law enforcement are not exempt where they “perform work such as … conducting investigations or inspections for violations of law; performing surveillance … interviewing witnesses … preparing investigative reports; or other similar work.” 29 C.F.R. § 541.3(b)(1).

In arguing that plaintiffs are exempt from the FLSA’s overtime requirements, FIE relies heavily on the legal treatment of claims adjustors, both in the regulation quoted above, and in case law. See, e.g., McAllister, 325 F.3d at 999-1002 (finding an insurance claim “coordinator” exempt from the FLSA’s overtime requirements). Plaintiffs respond that their responsibilities are closer to those of mere investigators or inspectors, who are generally not exempt. In addition to the regulations quoted above, plaintiffs also point to an Opinion Letter issued by the Department of Labor, addressing employees who perform background investigations on federal employees seeking security clearances. See
Opinion Letter Fair Labor Standards Act, 2005 WL 3308592 (Dep’t of Labor Aug. 19, 2005); Auer v. Robbins, 519 U.S. 452, 461 (1997) (indicating that the Secretary’s interpretations of her own regulations are controlling unless they are plainly erroneous or inconsistent with the regulations). The Secretary confirmed that these investigators are not exempt from the FLSA’s overtime requirements, after noting a list of job responsibilities that are at least as significant as those at issue here. 2005 WL 3308592. Those responsibilities included (1) gathering and checking public records; (2) interviewing witnesses; (3) making decisions about whether to report security threats to the Defense Security Service (“DSS”); (4) determining what leads to follow; (5) resolving discrepancies in information with limited guidance; (6) stating whether a witness is credible; and (7) providing factual information to DSS so it can make a final determination about whether an individual should receive a security clearance. Id. The DOL explained:

[P]lanning one’s own workload, such as prioritizing the pursuit of particular leads, assessing whether the leads provided are in the Investigator’s area of responsibility, or have provided information that requires further investigation, determining which potential witnesses to see and which documents to review, and making similar decisions that promote effective and efficient use of that individual’s own work time in performing assigned investigative activities, do not constitute exercising discretion and independent judgment with respect to matters of significance. 2005 WL 3308592 (internal quotation marks omitted; emphasis original).

Plaintiffs also note that at least one federal case has dealt specifically with the classification of employees hired to investigate insurance claims. In Gusdonovich v. Business Information Co., the court considered the status of employees whose primary responsibilities were “the search of public records, the serving of subpoenas and orders, surveillance, [and] the interrogation of witnesses.” 705 F.Supp. 262, 263 (W.D.Pa.1985). The investigators’ work was subject to review by supervisors, who assessed whether the scope of their investigations stayed within appropriate parameters. Id. at 264. The court determined that in those circumstances, the employees did not exercise sufficient discretion and independent judgment to satisfy the short duties test. The court explained that in light of the extensive oversight over the investigators, their fact-gathering merely involved “applying their knowledge and skill in determining what procedure to follow,” as opposed to any bona fide exercise of discretion and independent judgment. Id. at 265.

The Court agrees that plaintiffs’ job duties and FIE’s constraints on their discretion are sufficiently aligned with the employment circumstances of (1) the insurance investigators discussed in Gusdonovich, and (2) the employees performing background investigations and police investigations addressed by the Secretary, for plaintiffs to be non-exempt from the FLSA’s overtime requirements as a matter of law. Specifically, the Court concludes that the record demonstrates as a matter of law that plaintiffs do not “exercise … discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a).

In reaching this conclusion, the Court begins with FIE’s extensive QA review guidelines, which explain in great detail how plaintiffs should approach dozens of issues that typically arise in the performance and documentation of investigations. ( See Morgan Aff., Docket No. 94, Ex. O.) Even though this document formally functions as guidance for how to evaluate investigators, rather than as guidance for how to perform investigations, deposition testimony demonstrates that investigators are well aware of it. ( See, e.g., Morgan Aff., Docket No. 94, Ex. H, at 92 (noting that one employee creates his own checklists to match the QA guidelines).) In light of the fact that QA reviews constitute 50% of an employee’s overall performance assessment, it is unsurprising that their detailed criteria attract investigators’ fixed attention, and it is clear that they are relevant to this Court’s application of the short duties test. ( See, e.g., Morgan Aff., Docket No. 94, Ex. H, at 92 (noting that one employee creates his own checklists to match the QA guidelines)); see also Gusdonovich, 705 F.Supp. at 265 (treating after-the-fact review as relevant to the scope of an employee’s discretion).

To be clear, FIE is correct that the mere fact that plaintiffs effectively operate in the shadow of an employment manual is not enough, on its own, to demonstrate that they are not exempt. See, e.g., McAllister, 325 F.3d at 1001 (“Just because McAllister was required to follow detailed manuals does not mean she did not exercise discretion and independent judgment.”); Cheatham v. Allstate Ins. Co., 465 F.3d 578, 585 (5th Cir.2006) (“[T]he requirement that Allstate adjusters must consult with manuals or guidelines does not preclude their exercise of discretion and independent judgment.”). Indeed, it is not difficult to conceive of circumstances where even extensive guidance could nonetheless leave employees with considerable discretion on matters of significance. See McAllister, 325 F.3d at 1001. Here, however, the Court finds nothing in the residual discretion available to investigators that is sufficient to justify exemption. Most significantly, FIE concedes that the investigators’ subjective opinions and conclusions are excluded from their written reports. (Ashbridge Decl., Docket No. 41, ¶ 21.) This is squarely confirmed in a passage from the QA review quoted above, which flatly states that the investigators’ “purpose is to provide … factual information that allows the Claims Professionals … to make good decisions, not tell them what decision to make, or provide conjecture on what really happened.” (Morgan Aff., Docket No. 94, Ex. O.) The guidelines add that “[a]ll inculpating and exculpating information must be reported in equal detail and emphasis,” and “[o]pinions and/or speculative ‘what if’ scenarios are not acceptable.” ( Id.) While employees do not necessarily need to make final decisions in order to be exempt, see
29 C.F.R. § 541.202(c), this explanation of the investigator’s responsibilities-in conjunction with the requirement that investigators provide the claims representatives with any and all documents that they gathered during their investigation ( id. (“All reports must be attached to the file, even if the result was no information available.”))-sufficiently demonstrates that their primary role is simply to gather facts and present them for someone else to analyze. They have no authority to determine whether a claim is covered or whether FIE should seek to negotiate a settlement, and-while their thoughts on these types of higher-level decisions may come up in informal conversation-any minor role they play in such discussions is plainly not among their “primary” duties. Cf. McAllister, 325 F.3d at 1001 (finding claims adjusters exempt despite their compliance with manuals where they had authority to settle claims of up to $250,000); Cheatham, 465 F.3d at 586 (finding insurance employees exempt despite their compliance with manuals and guidelines where they had discretion to determine liability and negotiate settlements). In short, as in Gusdonovich and the Secretary’s analysis of government background investigators, it is clear that plaintiffs are limited to “applying well-established techniques” in developing an evidentiary record for claims representatives, and do not exercise sufficient discretion and independent judgment to meet the short duties test. 29 C.F.R. § 541.202(e).

As to the Secretary’s assessment of claims adjustors, which is relied on heavily by FIE, the Court simply adds that although an employee need not perform all of the duties of claims adjusters listed by the Secretary in order to qualify as exempt, see In re Farmers, 481 F.3d at 1129, that list includes a variety of significant, discretion-laden activities that are undisputedly not present here, such as “negotiating settlements” and “making recommendations regarding litigation.” 29 C.F.R. § 541.203(a). In short, while the Ninth Circuit was correct to apply this regulation to FIE’s claims representatives, this Court finds nothing in federal law that would justify extending it to the employees who merely gather facts for those representatives, particularly when those employees are formally barred from presenting their opinions about how to handle claims in their written reports. Accordingly, as to the question of whether plaintiffs are exempt from the FLSA’s overtime requirements, plaintiffs’ motion is granted, and FIE’s motion is denied.”

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U.S. Supreme Court Will Not Hear Family Dollar Appeal Of $35 Million Verdict; Dow Jones Reports

Dow Jones is reporting that the, “The U.S. Supreme Court on Monday rejected Family Dollar Stores Inc.’s (FDO) appeal of a $35 million verdict in favor of store managers who said the company wrongly denied them overtime pay.

Family Dollar argued the managers were salaried employees who were not eligible for overtime pay under the [Fair Labor Standards Act ("FLSA")]. The discount retailer also objected to letting the store managers bring their cases in one collective lawsuit.

More than 1,400 Family Dollar employees joined the case as plaintiffs. They argued that they were eligible for overtime pay because they performed few managerial duties and spent most of their time doing the same work as their hourly-wage subordinates.

An Alabama jury ruled for the workers in 2006 and the trial court entered a $ 35.6 million judgment against the company. A federal appeals court upheld the judgment last year. The Supreme Court rejected Family Dollar’s appeal without comment.”

Click here to read the original report.

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N.D.Ill.: FLSA And SCA Supplement One Another; FLSA Allows For A Private Right Of Action Despite The SCA’s Applicability

McDonald v. Eagle Exp. Lines, Inc.

The issue before the Court was whether an employee working under a federal contract, governed by the Service Contract Act (“SCA”), may bring a private cause of action under the FLSA.  Defendant contended that the court lacked jurisdiction because the contract between Defendant and the USPS is a federal contract explicitly governed by the administrative procedures available in the SCA.  Denying Defendant’s Motion to Dismiss for lack of jurisdiction, the Court explained that the SCA supplements the FLSA and does not bar private lawsuits by employees working under contracts governed by the SCA.

“The SCA provides that any work conducted pursuant to federal service contracts must pay wages and fringe benefits consistent with those established by the Secretary of Labor. 41 U.S.C. §§ 351, 358. Those established wage and benefit rates are found in the Secretary’s Register of Wage Determinations. The Secretary of Labor has sole jurisdiction to enforce the SCA. 41 U.S.C. §§ 352(b), 353. The SCA does not provide for an explicit or implicit private right of action.   Dist. Lodge No. 166, Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO v. TWA Servs., Inc., 731 F.2d 711, 714-16 (11th Cir.1984); Miscellaneous Serv. Workers, Drivers & Helpers, Teamsters Local # 427 v. Philco-Ford Corp., 661 F.2d 776, 779-81 (9th Cir.1981); Oji v. PSC Envtl. Mgmt. Inc., 771 F.Supp. 232, 233-34 (N.D.Ill.1991). Eagle contends that McDonald is a service employee within the meaning of the SCA and is therefore not entitled to bring a private claim under the FLSA for overtime wages. Instead, Eagle argues that McDonald must file a complaint with the Secretary of Labor and proceed along the administrative channels prescribed by the SCA. Furthermore, Eagle asserts that McDonald’s state claims must be dismissed, as no basis for original jurisdiction would exist if the FLSA claim is not proper.

Both parties agree that subject matter jurisdiction in this case, including supplemental jurisdiction for McDonald’s quantum meruit and unjust enrichment state claims, is contingent on the propriety of the FLSA claim. Therefore, the issue is whether McDonald may bring a claim under the FLSA for overtime compensation despite the fact that the SCA governs the work he performed. For the reasons stated below, the court concludes that the court has jurisdiction over McDonald’s FLSA claim.

Eagle relies on Nichols v. Mower’s News Service, Inc., 492 F.Supp. 258 (D.Vt.1980), and Oji v. PSC Envtl. Mgmt. Inc., 771 F.Supp. 232, 233-34 (N.D.Ill.1991), in support of its motion to dismiss. Nichols involved the same fact pattern as here. In a briefly articulated decision, the court concluded that claims for overtime pay are regulated by the SCA and dismissed plaintiff’s claim for lack of subject matter jurisdiction. Id. Oji involved a suit by an employee for unpaid retirement benefits clothed as an action by a third-party beneficiary for breach of a contract to pay the benefits. The court inferred that the plaintiff was seeking to recover under a federal government contract subject to the SCA. Oji, 771 F. Supp at 233-34. As such, the plaintiff’s claim was under the SCA. Because there is no private right of action under the SCA, the court dismissed the lawsuit. As in Nichols, Eagle argues that consideration of legislative intent underlying the SCA and FLSA is unnecessary because the SCA plainly governs. The argument is unpersuasive in light of substantial authority to the contrary on which plaintiff relies. Indeed, Nichols is an outlier.

In the background, Powell v. U.S. Cartridge Company presents an important parallel. There, munitions workers operating under government contracts controlled by the Walsh-Healey Act sued their employers for overtime compensation under the FLSA. 339 U.S. 497 (1950). The United States Supreme Court characterized the broad sweeping nature of the FLSA as indicating “congressional awareness that the coverage of the Fair Labor Standards Act overlaps that of other federal legislation affecting labor standards.” Powell, 339 U.S. at 518. The Court noted that the FLSA specifically exempts certain employees from coverage but does not exempt employees of private contractors under public contracts. Id. at 517. Thus, the Court held that the Walsh-Healey Act did not preclude application of the FLSA. Id. at 519-20.

The SCA, like the Walsh-Healey Act, also deals with the wage rates of and benefits due to employees of government contractors. Courts have looked to Powell in determining whether the FLSA can supplement the SCA, have concluded that the FLSA and SCA can indeed supplement one another, and have held that the FLSA allows for a private right of action despite the SCA’s applicability.

For example, in Lee v. Flightsafety Services Corp., the court affirmed a judgment under the FLSA in favor of firefighters and engineers working under an SCA contract, reasoning from the parallel to Powell and asserting that Congress intended the FLSA to “overlap” with other federal legislation, including the SCA. 20 F.3d 428, 431 (11th Cir.1994). Similarly, in Masters v. Maryland Management Co., the Fourth Circuit concluded that the SCA can be supplemented by the FLSA where they are not in direct conflict. 493 F.2d 1329, 1332-33 (4th Cir.1974). The court affirmed the judgment in favor of the employees, reasoning that because the overtime computation rate was the same under both the FLSA and the SCA, the two acts did not conflict, permitting the employees to file a suit under the FLSA. Id.; see also Mersnick v. USProtect Corp., No. C-06-03993 RMW, 2006 WL 3734396, at *3-5 (N.D.Cal. Dec. 18, 2006) (FLSA overtime claim was not precluded by the SCA or a settlement entered into between the Department of Labor and the plaintiff’s employer under the SCA regarding unpaid compensation); Koren v. Martin Marietta Services, Inc., 997 F.Supp. 196, 211, 214-17 (D.P .R.1998) (summary judgment denied on FLSA claims because the SCA did not impliedly repeal the FLSA’s private enforcement provisions for unpaid overtime compensation); Brown v. Luk, Inc., No. 95-CV-1780, 1996 WL 280831 (N.D.N.Y. May 10, 1996) (wage rate and holiday pay claims dismissed because the SCA does not provide a private right of action to enforce these claims, but claims for certain overtime compensation could proceed under the FLSA); Dowd v. Blackstone Cleaners, Inc., 306 F.Supp. 1276, 1278-79 (N.D.Tex.1969) (a claim for overtime can be filed under the FLSA despite the SCA).

Both the FLSA and the SCA were enacted to guarantee employee rights, and the United States Supreme Court has made clear that rights under the FLSA may overlap with other labor laws without being conflicting. The reasoning of the Fourth and Eleventh Circuits and a variety of district courts is more persuasive than Nichols, the single district court decision Eagle cites.  The SCA is designed to ensure that employees working on federal contracts receive, at minimum, the same prevailing wages and benefits as other employees, government and non-government alike, in their respective localities. To this end, § 351(a) of the SCA provides that each federal contract shall contain a provision specifying the minimum monetary wage to be received as well as fringe benefits.FN5 41 U.S.C. § 351(a). Although § 351(a) does not require overtime compensation for federal contracts, § 355 provides that overtime pay may be determined under any applicable federal law, including the FLSA. Id. § 355. Moreover, Department of Labor regulations make clear that the SCA “does not provide for compensation of covered employees at premium rates for overtime hours of work …. however, … other Federal laws may require such compensation.” 29 C.F.R. § 4.180 (2009).

Given the supplemental nature of the FLSA, combined with the SCA’s failure to explicitly guarantee overtime compensation in all federal contracts but referencing the availability of other governing law as well as Department of Labor regulations stating that other laws may be applicable to claims for overtime compensation, the court concludes that McDonald and similarly situated employees may proceed under the FLSA for unpaid overtime despite being covered by the SCA. As such, the court has subject matter jurisdiction over McDonald’s claim.”

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