Monthly Archives: December 2010

5th Cir.: Severance Payment Not A Set-off To FLSA Damages for Unpaid Overtime

Martin v. PepsiAmericas, Inc.

Plaintiff sued her former employer, to recover unpaid overtime wages allegedly due under the Fair Labor StandardsAct (“FLSA”), 29 U.S.C. § 201 et seq.  The district court granted Defendant’s motion to dismiss for lack of subject matter jurisdiction after finding that Plaintiff’s maximum potential recovery was less than the value of her severance package received from Defendant, which the district court determined should be set-off against anypotential damages awarded to Plaintiff.  Holding that such a set-off was improper, the Fifth Circuit vacated the district court’s dismissal and remanded the case for further proceedings.

The court reasoned:

“At issue is whether Pepsi can set-off the value of benefits it paid to Karen Martin under her severance agreement against Martin’s FLSA claim for overtime wages. The district court found that Pepsi was entitled to the set-off and, consequently, dismissed the case for lack of subject matter jurisdiction. We review a court’s ruling on a FED. R. CIV. P. 12(b)(1) motion to dismiss de novo. See Budget Prepay, Inc. v. AT&T Corp., 605 F.3d 273, 278 (5th Cir.2010) (citing Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001)). When challenging a 12(b)(1) motion, the party asserting jurisdiction bears the burden of proof. Id.

Pepsi initially contends that our opinion in Singer v. City of Waco, 324 F.3d 813 (5th Cir.2003), should be read broadly to allow set-offs in FLSA cases so long as they do not result in sub-minimum wages. Generally speaking, courts have been hesitant to permit an employer to file counterclaimsFN1 in FLSA suits for money the employer claims the employee owes it, or for damages the employee’s tortious conduct allegedly caused. See Brennan v. Heard, 491 F.2d 1, 4 (5th Cir.1974), rev’d on other grounds by McLaughlin v. Richland Shoe Co., 486 U.S. 128, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988); see also Donovan v. Pointon, 717 F.2d 1320, 1323 (10th Cir.1983) (“[T]he purpose of the present action is to bring Pointon into compliance with the Act by enforcing a public right. To permit him in such a proceeding to try his private claims, real or imagined, against his employees would delay and even subvert the whole process. Pointon is free to sue his employees in state court ….”).

In Heard, we said that set-offs and counterclaims are inappropriate in any case brought to enforce the FLSA’s minimum wage and overtime provisions. In that case, the Secretary of Labor sued an employer to enjoin it from withholding base and overtime wages from employees. Heard, 491 F.2d at 2. After finding a willful FLSA violation, the district court ordered the employer to pay its employees back wages, but permitted a set-off for the value of goods the employer had furnished to its employees. Id. This court reversed, stating that “[t]he federal courts were not designated by the FLSA to be either collection agents or arbitrators for an employee’s creditors.” Id. at 4. Noting that the only function of the federal judiciary under the FLSA “is to assure to the employees of a covered company a minimum level of wages,” we said that “[a]rguments and disputations over claims against those wages are foreign to the genesis, history, interpretation, and philosophy of the Act.” Id. And we observed that “[t]he only economic feud contemplated by the FLSA involves the employer’s obedience to minimum wage and overtime standards. To clutter [FLSA] proceedings with the minutiae of other employer-employee relationships would be antithetical to the purpose of the Act.” Id.; see also Pointon, 717 F.2d at 1323 (declining to address employer’s counterclaim for tortious sabotage in employee’s FLSA suit); Hodgson v. Lakewood Broad. Serv., 330 F.Supp. 670, 673 (D.Colo.1971) (declining to allow set-off or counterclaim against Secretary for employee’s breach of employment contract).

This language notwithstanding, in Singer v. City of Waco, 324 F.3d 813 (5th Cir.2003), we allowed an employer to set-off certain wage overpayments against the employees’ overall damages award. Singer involved a class of municipal fire fighters whose hours varied among pay periods. The city’s method for calculating their regular rate of pay under the FLSA resulted in an underpayment of the fire fighters’ overtime pay during some pay periods. Id. at 817, 824-25. When calculating how much money the city owed the fire fighters in unpaid overtime wages, “the district court found that the City’s method of calculating overtime compensation resulted in small deficiencies … in the work periods in which the fire fighters worked 120 hours,” but “the City’s method resulted in considerable overpayments ($126.20) in the work periods in which the fire fighters worked 96 hours.” Id. at 826. Because of this incongruity, the district court allowed the employer to set-off overpayments in some work periods against shortfalls in others. Id. at 826. We viewed these overpayments as akin to pre-payments, not prohibited by the Code of Federal Regulations or the FLSA, and affirmed. Id. We reconciled our holdings in Singer and Heard by observing that “the offsets permitted by the district court [in Heard] caused the final awards of many of the defendants’ workers to drop below the statutory minimum.” Id. at 828 n. 9 (quoting Heard, 491 F.2d at 3) (internal quotation marks omitted). Meanwhile, in Singer, “no party contend[ed] that the offset might cause the fire fighters’ wages to fall below the statutory minimum wage.” 324 F.3d at 828 n. 9.

Relying on this distinction, Pepsi contends that Singer should be read to limit Heard, to stand for the proposition that set-offs are appropriate in FLSA cases so long as they do not cause an employee’s wages to fall below the statutory minimum. Pepsi has cited, as did the district court, several lower court decisions from outside this circuit that have given Singer such a broad construction. See, e.g. Hanson v. ABC Liquors, Inc., No. 3:09-cv-966, 2009 U.S. Dist. LEXIS 108954, at *7-8 (M.D.Fla. Nov. 9, 2009) (collecting cases); see also Docket Entry No. 110, Memorandum Order at 5 n.3. These cases, however, predate our opinion in Gagnon v. United Technisource, Inc., 607 F.3d 1036 (5th Cir.2010), where we clarified that Heard’s longstanding prohibition of set-offs in FLSA cases is the rule in this circuit and Singer an exception.

In Gagnon, the district court found an FLSA overtime violation and awarded damages to the plaintiff. 607 F.3d at 1040. The defendant-employer counterclaimed and sought a set-off in the amount equal to the damages caused by the plaintiff’s breach of contract (i.e., his failure to notify the employer of his new address, as he was contractually obligated to do). Id. The district court did not address the employer’s counterclaims, and this court gave them short shrift likewise, holding that “our precedent suggests that such claims should not be addressed in an FLSA action.” 607 F.3d at 1042 (citing Heard, 491 F.2d at 4).

We specifically addressed the employer’s set-off claim in Gagnon, despite its semblance to the contract counterclaim, to clarify a reasonable uncertainty over Singer’s reach. See 607 F.3d at 1043 (“we nonetheless address the claim because we have previously held that offsets are permissible in FLSA actions”). Gagnon distinguished the set-off allowed in Singer as one that “simply acknowledged that the City had already paid the bulk of its overtime obligations.” Id. (citing Singer, 324 F.3d at 828) (emphasis in original). Gagnon (the employee), by contrast, was not paid “any additional sums that could be characterized as advanced or inappropriate amounts subject to an offset against the overtime owed to him,” id., and thus, a set-off was inappropriate.

In Gagnon, we rejected the employer’s argument, which Pepsi renews here, that Singer stands for the proposition that set-offs are allowed in FLSA cases so long as they do not result in sub-minimum wages. Although that reading of Singer may have been plausible at one time, Gagnon clarified that it was the unique character of the set-offs in Singer-that they represented overtime obligations already fulfilled-that allowed for a narrow exception to the bright-line rule spelled out in Heard. We continue to look with disfavor on set-offs unless the money being set-off can be considered wages that the employer pre-paid to the plaintiff-employee.

Pepsi contends, alternatively, that the benefits paid to Martin are similar to the fire fighters’ wages set-off in Singer because, in both cases, the employer paid some extra money or benefits to the employee to which the employee was not otherwise entitled. And in the opinion granting Pepsi’s motion to dismiss, the district court cited several lower court decisions that have allowed employers to plead set-offs as an affirmative defense in FLSA wage cases “where the employer paid the employee funds to which the employee was not entitled.” (Docket Entry No. 110, Memorandum Order at 5 & n.3.) This misconstrues the reciprocal nature of the benefits bargained for in Martin’s severance agreement. Although Martin had no legal entitlement to the benefits included in her severance package, these benefits were not gratuitous. Pepsi paid these benefits in return for Martin’s release of claims. That Martin later sued Pepsi on state law claims simply means that Martin did not keep her end of the agreement. Pepsi’s damages flow from a breach of contract. Pepsi is not entitled to set-off those damages here because unlike Singer, the money and benefits Pepsi paid to Martin were not wage payments, advance or otherwise; they were not related to her labors at all.

Because we find that the district court erred in setting-off the value of Martin’s severance package against her potential recovery at trial, we VACATE the district court’s dismissal of Martin’s FLSA claim for lack of subject matter jurisdiction and REMAND the case for further proceedings.”

Click Martin v. PepsiAmericas, Inc. to read the entire decision.

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S.D.Tex.: Defendants’ Motion For Protective Order, Seeking To Bar Plaintiffs’ Attorneys From Communicating With Putative Class Denied; No Evidence Of Coercive, Misleading, Or Improper Communications

McKnight v. D. Houston, Inc.

In this collective action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., Plaintiffs sued six strip clubs in Houston, along with the owners and operators.  The court conditionally certified a class previously.  Following the conditional certification, the defendants filed an expedited motion for a protective order, asking the court to forbid the plaintiffs and their attorneys from using the class members’ contact information “for any purpose other than the mailing of the court-approved notice,” or, alternatively, to require “specific approval from the court for any mailings, emails, phone calls or communications with potential opt-in plaintiffs other than the court-approved notice.” (Id. at 9). The defendants argued that without such an order, the plaintiffs will be able to recruit more plaintiffs under the guise of contacting fact witnesses, undermining the purpose of court-approved notice to potential class members.  Holding that the Defendants failed to satisfy their burden of proof to necessitate such a protective order, the court denied the Defendants’ motion.

The court reasoned:

“The defendants argue that communications ban is necessary to prevent solicitation of clients under the guise of contacting fact witnesses. In support, they cite portions of McKnight’s deposition testimony in which McKnight explains that she spoke to the individuals who are now her coplaintiffs about her plans to file a lawsuit and gave them her attorney’s contact information. They also point to inconsistencies between the practices alleged by the plaintiffs in their declarations and described in their depositions, and conclude that “[t]he dynamic between the unlawful solicitations to join the suit and the subsequent substantial inconsistencies between the declarations that were filed in support of the motion for notice to class members and the deposition testimony of the plaintiffs suggests some level of impropriety or inaccuracy with regard to the pre-suit solicitations and communications that occurred in this case.” (Docket Entry No. 47 at 5-6).

This evidence falls short of the “evidence of coercive, misleading, or improper communications” necessary to impose the type of order the defendants seek. See Jackson, 2009 WL 650181, at *2. There is no evidence that McKnight’s precertification communications with her coplaintiffs were misleading or coercive. There is also no evidence that the plaintiffs plan to engage in improper communications going forward. Gulf Oil cautioned against protective orders that make it “more difficult [for counsel] … to obtain information about the merits of the case from the persons they sought to represent.” 452 U.S. at 101. The record does not support a protective order to prevent misleading or otherwise abusive communications by plaintiffs and their counsel.

The defendants’ expedited motion for a protective order is denied on the present record.”

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11th Cir.: Trial Court Erred In Allowing Defendants To Amend Their Affirmative Defenses At Trial To Add Previously Unpled Exemption

Diaz v. Jaguar Restaurant Group, LLC

Plaintiff filed a lawsuit against Defendants, her former employer, for unpaid overtime wages under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201–216. During trial, the district court allowed Jaguar to amend its Answer pursuant to Federal Rule of Civil Procedure 15(b) to include the administrative exemption as an affirmative defense as it found that Diaz had injected the issue through her testimony at trial. The jury returned a verdict finding that Diaz had worked more than 40 hours per week for which she was not compensated, but also finding that she was exempt from the requirements of the FLSA as she was an administrative employee.  On appeal to the Eleventh Circuit, Plaintiff challenged the district court’s decision to allow Defendant to amend its Answer during trial. The Eleventh Circuit reversed, and remand the case to the district court for a trial on damages.

In reversing, the Eleventh Circuit reasoned:

“Jaguar failed to plead the administrative exemption as an affirmative defense in its Answer. In the fourteen months between the filing of its Answer and the commencement of trial, Jaguar never moved to amend its Answer to include the administrative exemption. Jaguar also did not raise the issue of the administrative exemption during discovery. The only time Jaguar raised the issue prior to trial was by inserting it in one line of the Joint Pretrial Stipulation and in the proposed Joint Jury Instructions, to which Diaz objected. Jaguar did not raise the issue during the pretrial conference and the district court did not include the issue in its Omnibus Order Following Pretrial Conference. If ever there were a classic case of waiver, this is it! See Latimer v. Roaring Toyz, Inc., 601 F.3d 1224, 1239 (11th Cir. 2010) (“Failure to plead an affirmative defense generally results in a waiver of that defense.”). Jaguar repeatedly waived the administrative exemption defense by failing to plead the defense in its Answer and by failing to move to amend its Answer before trial.

Ideally, cases should be tried on their merits. Accordingly, even if Jaguar failed to plead the administrative exemption defense, the district court could allow Jaguar to amend its Answer during trial if the issue was tried by the parties’ express or implied consent, or included in a pretrial order. See Fed. R. Civ. P. 15(b); see Steger v. Gen. Elec. Co., 318 F.3d 1066, 1077 (11th Cir. 2003) (“[I]ssues not raised in the pleadings may be treated as if they were properly raised when they are ‘tried by express or implied consent of the parties,’ Federal Rule of Civil Procedure 15(b), or are included in a pretrial order.”). In this case, the issue was not included in the district court’s Omnibus Order Following Pretrial Conference. Further, it is clear that the administrative exemption issue was not tried by the parties’ express consent as Diaz opposed the insertion of the issue in the Joint Pretrial Stipulation, proposed Joint Jury Instructions, and at trial. See R. Vol. 5: 160–65. The district court, however, found that the issue was tried by implied consent as it believed Diaz introduced the issue of the administrative exemption through her testimony at trial. Thus, the district court allowed the amendment.

The district court erred in finding that the administrative exemption issue was tried by implied consent and in thereby allowing Jaguar to amend its Answer.  That issue was not tried by implied consent as Diaz’s testimony was relevant to another defense in this case: Jaguar’s independent contractor defense. “The introduction of evidence arguably relevant to pleaded issues cannot serve to give a party fair notice that new issues are entering the case.” Wesco Mfg., Inc. v. Tropical Attractions of Palm Beach, Inc., 833 F.2d 1484, 1487 (11th Cir. 1987); see Jimenez v. Tuna Vessel Granada, 652 F.2d 415, 421 (5th Cir. 1981) (stating that implied consent cannot be found when “evidence is introduced that is relevant to an issue already in the case and there is no indication that the party who introduced the evidence was seeking to raise a new issue”). Diaz’s testimony was relevant to counter Jaguar’s independent contractor defense, and she clearly was not seeking to raise the administrative exemption as a new issue. Further, we cannot conclude that her testimony was “much more strongly relevant” to the administrative exemption than to the independent contractor defense, which could be construed as notice of a new issue. See United States f/u/b/o Seminole Sheet Metal Co. v. SCI, Inc., 828 F.2d 671, 677 (11th Cir. 1987). Thus, her testimony cannot be considered implied consent to try the administrative exemption.”

Click Diaz v. Jaguar Restaurant Group, LLC, to read the entire opinion.

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Filed under Affirmative Defenses, Exemptions, Trial

W.D.Tex.: Emotional Distress and Punitive Damages Unavailable In FLSA Retaliation Claim

Douglas v. Mission Chevrolet

In addition to seeking unpaid overtime wages and liquidated damages under the FLSA, the Plaintiff alleged that he was entitled to emotional distress and/or punitive damages as a result of claimed retaliation in violation of the anti-retaliation provisions of the FLSA, 29 U.S.C. § 215(a)(3).  Defendant moved to dismiss plaintiff’s claim for retaliation, asserting that neither emotional distress damages nor punitive damages are available under the FLSA.  Construing comparable Fifth Circuit law pertaining to ADEA claims, the court agreed and dismissed the plaintiff’s retaliation claim.

The court addressed each type of damages separately:

“1. Emotional distress damages

The damages provision of the anti-retaliation section of the FLSA states, in relevant part,:

Any employer who violates the provisions of section 215(a)(3) of this title shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of section 215(a)(3) of this title, including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages. 29 U.S.C. § 216(b).

Circuit courts that have addressed the issue have held that “legal or equitable relief” includes emotional distress damages. See Moore v. Freeman, 355 F.3d 558, 563-64 (6th Cir.2004) (emotional distress damages are recoverable under the anti-retaliation provision of the FLSA); Broadus v. O.K. Indus., Inc., 238 F.3d 990, 992 (8th Cir.2001) (emotional distress damages are recoverable in Equal Pay Act retaliation case); Lambert v. Ackerley, 180 F.3d 997, 1017 (9th Cir.1999) (reversing and remanding emotional distress award of $75,000 under anti-retaliation provision of FLSA for determination of appropriate amount of emotional distress damages); Avitia v. Metro. Club of Chi., Inc., 49 F.3d 1219, 1228-29 (7th Cir.1995) (citing Travis v. Gary Cmty. Mental Health Ctr., Inc., 921 F.2d 108, 111-12 (7th Cir.1990)) (emotional distress damages are recoverable under the anti-retaliation provision of the FLSA). The Fifth Circuit has yet to address whether emotional distress damages are available in an FLSA anti-retaliation claim.

However, the Fifth Circuit has held that the remedies provisions of the FLSA and the Age Discrimination in Employment Act (“ADEA”) must be interpreted consistently. See Lubke v. City of Arlington, 455 F.3d 489, 499 (5th Cir.2006) (“Because the remedies available under the ADEA and the FMLA [Family and Medical Leave Act] both track the FLSA, cases interpreting remedies under the statutes should be consistent.”); see also Johnson v. Martin, 473 F.3d 220, 222 (5th Cir.2006) (applying ADEA precedent to the FLSA to determine whether wages earned after termination offset lost wage damages because “[t]he FLSA and ADEA have the same remedies provisions”).

The Fifth Circuit has addressed whether emotional distress damages are available under the ADEA, which has similar remedies provisions as the FLSA. See Dean v. Am. Sec. Ins. Co., 559 F.2d 1036 (5th Cir.1977). In Dean, the Fifth Circuit rejected the argument that the statutory language “legal or equitable relief” in the ADEA includes emotional distress damages. Id. at 1038. In so holding, the Fifth Circuit emphasized the notably absent phrase “general damages,” “punitive damages,” or any type of damages based on emotional distress from the ADEA’s damages provisions. Id. at 1038-39. In the FLSA damages provision cited above, the same phrases are absent.

Since the Fifth Circuit has expressed its desire for the FLSA’s remedies provision to be interpreted consistently with the ADEA’s remedies provision, and since emotional distress damages are not available in claims brought under the ADEA, see Dean, 559 F.2d at 1038, this Court must hold that emotional distress damages are also unavailable under the FLSA. It is for this reason that another judge on this Court has already reached the same conclusion in another case. See Rumbo v. Southwest Convenience Stores, LLC, No. EP-10-CA-184-FM (W.D.Tex. July 19, 2010) (order granting motion to dismiss) (employing similar reasoning in granting the defendant’s motion to dismiss plaintiff’s claims for emotional distress damages and punitive damages in an FLSA anti-retaliation claim). Therefore, Plaintiff may not recover damages based on emotional distress in his anti-retaliation claim brought under the FLSA.

2. Punitive damages

Similarly, Defendant contends punitive damages are not available in an anti-retaliation claim based on the FLSA, Mot. 2, while Plaintiff claims punitive damages are recoverable. Resp. 3. Federal appellate courts that have considered the issue are split on whether a plaintiff can recover punitive damages in an FLSA anti-retaliation claim. Compare Travis, 921 F.2d at 111-12 (punitive damages are available in an FLSA anti-retaliation claim), with Snapp v. Unlimited Concepts, Inc., 208 F.3d 928, 933-35 (11th Cir.2000) (punitive damages are not available in an FLSA anti-retaliation claim). The Fifth Circuit, however, has yet to address whether punitive damages are available under an anti-retaliation claim brought pursuant to the FLSA.

Just as it held with respect to emotional distress damages, the Fifth Circuit in Dean held that punitive damages are unavailable under the ADEA. 559 F.2d at 1038. As discussed above, because the ADEA and FLSA must be interpreted consistently with respect to remedies, see Lubke, 455 F.3d at 499; Johnson, 473 F.3d at 222, this Court must hold that punitive damages are not recoverable in an anti-retaliation claim brought under the FLSA.”

Click Douglas v. Mission Chevrolet to read the entire opinion.

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2d. Cir.: Contested Attorney’s Fee Petition Must Be Accompanied By Contemporaneous Time Records

Scott v. City of New York

After prevailing at trial, the Plaintiff in this Fair Labor Standards Act (FLSA) case, moved for an award of attorney’s fees and costs pursuant to 216(b).  The Defendant opposed the amount of attorney’s fees sought by Plaintiff’s attorney.  The trial court awarded plaintiffs’ attorney partial attorney fees, based on the fees asserted.  The Defendant appealed the award, asserting that the fee award was improper, inasmuch as the Plaintiff’s attorney had not submitted contemporaneous time records in support of his fee application.  Plaintiff’s attorney cross-appealed from denial of certain of those fees.  On appeal, the Second Circuit held that a contested attorney’s fee petition must be accompanied by contemporaneous time records.  Therefore, they remanded the case back to the trial court in order to make a detailed finding regarding appropriate fees to be awarded (or in the alternative to state the basis for an exemption from such requirements).

Click Scott v. City of New York to read the entire opinion.

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