2 Recent Cases Draw Distinction Between Volunteers and Employees
With the uptick in FLSA case filings in recent years, a previously rarely litigated issue- whether certain types of workers are volunteers or “employees” subject to FLSA coverage- has increasingly come under judicial scrutiny. And, while case law has long interpreted the FLSA in a liberal manner, with the stated purpose of erring on the side of coverage for workers, two recent cases demonstrate that definition is not without its limits. In the first case, the domestic partner/girlfriend of a Domino’s Pizza store manager helped the manager with his management duties, in the hopes that eventually such efforts would lead to the partner’s advancement within the company. In the second case, an alumni for a public high school served as a mentor to students following his graduation from school. As discussed below, in both cases, the courts employed the “economic reality” test, and held that the workers were volunteers as opposed to employees.
Emanuel v. Rolling in the Dough, Inc.
In the first case, the plaintiff- apparently the girlfriend of the general manager of a Domino’s franchise store- assisted her boyfriend in his duties as the general manager. After the boyfriend’s employment with the defendant ceased, the plaintiff sought renumeration for all of the work she had previously performed on behalf of defendants, while he boyfriend had been employed. Interestingly, it appears from the style of the case that the defendants- who denied that the plaintiff was ever their employee- sought to bring a claim for indemnification/contribution against the boyfriend by impleading him as a third-party defendant. Looking at the totality of the circumstances, the court concluded that she was a volunteer and not an employee under the FLSA. Thus, the court granted the defendants’ motion for summary judgment.
Elucidating the relevant facts, the court explained that at some point in 2007, the plaintiff (Emanuel) told her boyfriend that she wanted to work at the store he managed on behalf of the defendants. Apparently, the plaintiff wanted to help with her boyfriend’s effort to become a Domino’s Pizza franchise owner.In response the boyfriend said he’d have to speak to the defendants about Emanuel working at the Elmhurst store. Thereafter, the boyfriend conveyed to Emanuel that defendants “believed your talents can be better utilized somewhere else.” Nonetheless, sometime later, the boyfriend (Shafer) communicated to Emanuel that she could begin working at the Elmhurst store. Significantly, the plaintiff acknowledged that she could not have worked in the store pursuant to the defendants anti-nepotism policy and that defendants would have told her to “get the hell out of my store,” had they known she was performing work in the store.
It was undisputed that neither the defendants, nor plaintiff’s boyfriend or anyone for that matter, ever promised plaintiff any compensation for the work she performed.
Ultimately, the plaintiff’s boyfriend and defendants got into a dispute regarding their agreement about his [plaintiff’s boyfriend’s] compensation, and as a result both plaintiff and her boyfriend ceased working for defendants. Subsequently, she filed the lawsuit, seeking compensation for the approximately 3 years of work she performed on behalf of defendants (and her boyfriend).
Laying out the elements of the “economic reality” test, the court explained:
Courts look to the totality of the circumstances when determining whether an individual is an “employee” under the FLSA and examine the “economic reality” of the working relationship. See, e.g., Vanskike v. Peters, 974 F.2d 806, 808 (7th Cir.1992). Courts have considered a variety of factors when examining the “economic reality” of a purported employment relationship, though none are dispositive or controlling. Secretary of Lab. v. Lauritzen, 835 F.2d 1529, 1534 (7th Cir.1987). Six commonly applied factors are: (1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; and (6) the extent to which the service rendered is an integral part of the alleged employer’s business. Id. at 1534–35.
Rejecting the plaintiff’s contention that she was defendants’ “employee,” the court reasoned:
“Here, plaintiff Emanuel advances an absurd position. Emanuel argues that defendant Lindeman’s repeated statement that he would not pay her to work at the Elmhurst store was not a refusal to hire her as an employee, but an offer for her to work for free. Since Emanuel claims to have worked at the Elmhurst store without compensation and without [defendants] forcibly ejecting her from the store or otherwise preventing her from working, it is her position that an employment relationship impliedly exists.” However, noting the no one ever promised plaintiff compensation and that her work likely violated one or more of defendants corporate policies, the court held it was unreasonable for plaintiff to believe she was actually their employee, rather than a volunteer. Thus, the court granted the defendants’ motion for summary judgment.
Click Emanuel v. Rolling in the Dough, Inc. to read the entire Memorandum Opinion and Order.
Brown v. New York City Dept. of Educ.
In the second case, the plaintiff, Brown, graduated from the New School for Arts and Sciences, a high school that shared space with Banana Kelly. After graduation, Brown maintained ties with Banana Kelly and occasionally came in to visit former teachers. In October 2007, when Plaintiff expressed an interest in mentoring students, the school offered Plaintiff the opportunity to do so at Banana Kelly. Neither Brown nor the school raised the issue of compensation at this time, and neither discussed Brown’s employee status. No one interviewed Brown about his background or qualifications. Thereafter, the plaintiff went to Banana Kelly and continued at the school for more than three years, finally leaving in December 23, 2010, apparently because he was being investigated for inappropriate conduct related to his comments to a freshman student. During his time at the school, with minor exceptions, the plaintiff reported five days a week throughout the academic year, working 7-8 hours per day on a regular basis.
Citing the fact that the plaintiff never submitted to the normal, legal requirements for employment by the Department of Education: application, interview, background check, job classification, and assignment, the court rejected plaintiff’s assertion that he was an employee, because he expected compensation for his services. Although it was undisputed that the defendant told plaintiff that there was not enough money in the budget to pay him, according to the plaintiff, defendant promised that he would attempt to search the budget for the funding.
Again, looking at the “economic realities” and the totality of the facts of the situation, the court held that plaintiff was a volunteer and not an employee, subject to FLSA coverage. Thus, the court granted defendant’s motion for summary judgment.
The court gave the following overview of the analysis applicable to the issue:
Whether one is a volunteer is to be determined “in a common-sense manner, which takes into account the totality of the circumstances surrounding the relationship between the individual providing services and the entity for which the services are provided.” Purdham, 637 F.3d at 428;City of Elmendorf, 388 F.3d at 528; Todaro, 40 F.Supp.2d at 230. Accordingly, courts should review “the objective facts surrounding the services performed to determine whether the totality of the circumstances establish volunteer status, or whether, instead, the facts and circumstances, objectively viewed, are rationally indicative of employee status.” Purdham, 637 F.3d at 428. The court then examined 2 factors to determine whether the plaintiff was an employee or a volunteer. First, the court considered whether Brown performed the tasks at Banana Kelly for “civic, charitable, or humanitarian reasons,” pursuant to 553.101(a).
Looking at this factor, the court reasoned:
One is a volunteer, if motivated by an altruistic sense of civic duty, see Krause, 969 F.Supp. at 276, as opposed to the expectation of compensation, see Rodriguez, 866 F.Supp. at 1019. When the situation is one of mixed motives, “the regulatory definition does not require that the individual be exclusively, or even predominantly, motivated by ‘civic, charitable or humanitarian reasons. Rather, what is required is that the individual must be motivated by civic, charitable or humanitarian reasons, at least in part.” Purdham, 637 F.3d at 429 (citing Todaro, 40 F.Supp. at 230); see also Benshoff v. City of Virginia Beach, 9 F.Supp.2d 610, 623 (E.D.Va.1998) (finding that firefighters were volunteers when motivated primarily, but not exclusively, by civic, charitable and humanitarian concerns). Here, Brown accepted Jerome’s offer to mentor, in part, because he wanted “[s]omeone … to stand up, and make a change, and show the kids that we do care.” (Welikson Dec. Ex. C, Brown Dep. at 35:21–22.) He felt that the school needed the change because in his experience as a student, “nobody cared” (id. 35:14–17). This motivation remained unchanged as Brown started performing non-mentorship tasks. Brown testified that he helped with lunch duty, dismissals and escorting students despite his displeasure with being asked because he wanted to be a “team player” and that he “want[ed] to help and [he] care[d].” (38:14–39:5.) He felt obligated because he did not want to “let[ ] the school down.” (id. at 150:20–22.) These statements show a continued civic and charitable intent to improve the environment at Banana Kelly. At the same time, Brown testified that he worked because he believed (“hoped”) that money was forthcoming. (Okoronkwo Dec. Ex. 13 Brown Dep. 231:18–19). Accepting Brown’s acknowledgements, the Court turns to whether, in this mixed motive case, Brown acted at least in part, by the proper humanitarian concerns. See Purdham, 637 F.3d at 429. Plaintiff’s testimony shows that his actions at Banana Kelly, had their source, at least in part, in his concern for what would become of students if he did not show up, and was thus properly motivated.
Next the court looked at whether there was a “promise, expectation or receipt of compensation for services rendered.” 29 C.F.R. § 553.101(a). Noting that plaintiff was not compensated, was not offered “under-the-table” compensation, and was not promised compensation, the court concluded that the plaintiff had no reasonable expectation of compensation. Looking at all the circumstances the court concluded that:
There is ample evidence that Brown knew and understood, despite his hopes to the contrary, that he would not be compensated. Brown admitted that he understood that he would not get paid for mentoring. No one led Plaintiff to believe that he would get paid for non-mentoring tasks. Laub testified that he had conversations with Plaintiff in which he relayed to Brown that he was volunteer and intern. Banana Kelly gave him certificates of appreciation that acknowledged his services as an intern and volunteer which Brown accepted without objection. While labels used by the parties do not control the outcome (P. Opp. at 11), the parties’ understanding of their arrangement is a relevant factor in the totality-of-circumstances analysis. See Rodriguez v. Township, 866 F.Supp. 1012, 1020 (S.D.Tex.1994) (declining to hold that the plaintiff was a volunteer in part because both parties understood their relationship as an employment, rather than volunteer, relationship).
Taking all of the circumstances into consideration, the court concluded that the plaintiff was a volunteer.
Click Brown v. New York City Dept. of Educ. to read the entire Opinion and Order.
N.D.Ill.: Former Attorney and Accountant Improper Third-Party Defendants in FLSA Case; Non-Employers Not Subject to Liability
Strauss v. Italian Village Restaurant, Inc.
This case was before the court on the third-party defendants’ motion to dismiss. The defendant, sued for FLSA violations, sought to implead its former attorneys and accountant, on the basis that the faulty legal/accounting advice they rendered resulted in the potential liability at issue in this wage and hour case. While indemnification by the professionals who rendered allegedly bad advice which led to the liability would seem to be a legitimate claim, the court dismissed the claim, because neither of the third-party defendants were alleged to be the plaintiffs’ employer (or joint employers), a prerequisite for the imposition of liability under the FLSA.
Reasoning that the professional consultants at issue were not subject to liability under the FLSA, Illinois state wage and hour laws, or similar counts derived from such statutes, the court explained:
Multiple employers may be held liable under the FLSA when “the facts establish that the employee is employed jointly by two or more employers.” The Supreme Court has held that the determination of whether a party is an employer is based on the “economic reality” of the situation. Courts have considered a variety of factors when making this determination, including the ability to hire or fire the employees, supervision of the employees’ schedules, determination of wages, and the maintenance of employment records. The Seventh Circuit has held that an “employer must exercise control over the working conditions of the employee.”
As these third-party defendants accurately point out, there is nothing in the Italian Villages’s conclusory allegations in these counts that suggests that these defendants could ever be considered “employers” within the meaning of the FLSA. There are no allegations that these third-party defendants had any control over these plaintiffs’ working conditions as the case law require; that they could hire, fire or manage them. Nor could there be. These firms were hired by the Italian Village to negotiate the employment contracts and to manage employee payroll. Their work in this respect was controlled by the Italian Village. Regardless of how much The Italian Village chose to rely on the advice and counsel of their third-party contractors with respect to these issues, there is no authority that the Court could find that supports the argument that the Italian Village’s reliance on these firms’ transforms these into “employers” under the FLSA.
Essentially the Italian Village is asking the Court to by-pass the statutory scheme set forth in the FLSA and shift responsibility for compliance with the FLSA from itself, the employer, to third-party consultants which it paid for services rendered. But nothing in the FLSA suggests that the Italian Village’s alleged “reasonable reliance” on its consultants can shift compliance with the law on to them as well. Moreover, there is ample authority that holds that the FLSA precludes all such potential blame-shifting and bars third-party actions for contribution and indemnity using any tort theories.
The Italian Village’s response to this raft of authority is that it is directed only at attempts by employers to shift liability to certain key employees, not to third parties like the accountants and attorneys sued here. Actually this is not correct. In Chao v. St. Louis Internal Medicine, the court held that an accounting firm could not be sued as a third-party defendant in an FSLA case under a tort theory. But even if this case did not so hold, this Court can see no real distinction between efforts to shift liability to employees, which is prohibited by the case law, and the Italian Village’s efforts to shift liability to their third-party consultants. Either scenario is barred by the FLSA’s express language that liability for compliance rests with the employer and the employer only so that the statute’s mandates are not diluted.
Click Strauss v. Italian Village Restaurant, Inc. to read the entire Memorandum Opinion and Order.
5th Cir.: Department Head Who Notified Employer of Potential FLSA Violations Did Not Engage in Protected Activity, Because She Did Not “Step Outside Her Normal Job Role”
Lasater v. Texas A & M University-Commerce
This case was before the Fifth Circuit on appeal of an order awarding the defendant summary judgment on plaintiff’s FLSA retaliation claim. Specifically, the plaintiff, a former department head for the defendant asserted that she was terminated for raising concerns regarding the defendant’s payroll policies (and failure to comply with the FLSA) to an independent auditor and later her supervisors. The court below held that plaintiff failed to allege that she had engaged in protected activity, because she was merely performing her duties for defendant when she reported her concerns regarding non-compliance. The Fifth Circuit agreed and affirmed the award of summary judgment for the defendant.
The Fifth Circuit recited the following factual history:
This case arises from TAMUC’s termination of Lasater’s employment in December 2009. From March 2006 to December 2009, Lasater was employed as the Director of the Office of Financial Aid and Scholarships at TAMUC. Prior to that, Lasater worked in the Financial Aid Department at Texas A & M University–Corpus Christi for 17 years.
In November 2008, Lasater met with Lori Ellison, an outside auditor from The Texas A & M University System who was conducting a regularly scheduled audit. During the meeting, Lasater alleges that Ellison asked her if she had any “concerns” and Lasater told her that “there were some things that were of concern to me and I felt like I needed to, in good faith, report some things that I thought were violations, including comp time.” Lasater alleges that in the course of the conversation with Ellison she discussed a number of problems related to the university’s employee compensatory time (“comp time”) policy. First, she was concerned that comp time had to be used before vacation time; because vacation time would be lost if not taken before the end of the year, this could in turn cause employees to lose accrued comp time. She also voiced her concerns that employees in her department had accrued large balances of comp time and were too busy for Lasater to allow them to timely use their comp time and still meet the demands of her office. Third, she specifically expressed her concerns about one of her employees, Diane Lewis, who had been promoted to a position within the department exempt from the overtime requirements of the FLSA and TAMUC had declined Lasater’s request that Lewis be paid for her accrued comp time after her promotion. Finally, Lasater alleges that she reported to Ellison her concerns about the operation of TAMUC’s Financial Services division, including its failure to “draw down” its allotted federal funds and the fact that it was not performing monthly reconciliations related to federal funds for financial aid. At the time of the meeting Lasater did not suggest to Ellison that TAMUC policies regarding comp time violated the FLSA or refer to any applicable law she believed had been violated.
Relevant TAMUC policy provides that employees who are not exempt under the FLSA may earn comp time for working more than forty hours per week; the policy requires component universities to compensate employees by giving them time off rather than paying them overtime. TAMUC policy also provided that administrators who supervise staff were to ensure that no employee accrue a comp time balance in excess of 240 hours and that, if necessary, employees were to use comp time before taking vacation time. Lasater, as a supervisor, had the responsibility for approving, and the authority to deny, employee leave requests. The policy also states that an employee who transfers between departments may, upon the department managers’ agreement, be paid for accumulated comp time but no policy required payment for comp time to an employee promoted within a department. TAMUC policy additionally provides that inquiries or interpretations of FLSA legal issues should be directed to the System Human Resources Office or the Office of General Counsel.
In December 2008, Ellison reported Lasater’s concerns up the chain of command to Lasater’s supervisor, Stephanie Holley; Mary Hendrix, Vice President for Student Access and Success; and Dan Jones, President of TAMUC. Lasater alleges that shortly after her conversation with the auditor Holley and Hendrix demanded to know why she had reported the comp time issue and began to act colder toward her, harassed her, increased their scrutiny of her, and forced her to take unqualified employees.
In May 2009, Holley gave Lasater a favorable evaluation, and in August, Lasatar received a merit raise. In September 2009, Holley and Hendrix met with Lasater and discussed their concerns about the need for a training manual, the role of Lewis, and how Lasater was not “allowing other people into [her] inner circle.” In early December 2009, Rose Giles, one of Lasater’s subordinates, approached Holley to discuss her frustration with the fact that she did not feel Lasater’s staff was properly trained. Holley then spoke with Susan Grove, the Assistant Director of Scholarships, who alleged that Lasater did not adequately train her staff, spent most of her time with co-employee Lewis to the exclusion of all others, repeatedly arrived late, and had a tendency to “lash out.” Grove stated that she was so distressed by Lasater’s management style that she was planning to leave the university. On December 15, 2009, Holley and Hendrix informed Lasater that her employment was terminated.
Discussing the type of behavior a management-level employee must engage in, for such behavior/activity to constitute “protected activity,” the court explained:
[T]his circuit has recognized that an employee’s communication does not constitute a complaint unless that employee “somehow steps outside of his normal job role” so as to make clear to the employer that the employee is “taking a position adverse to the employer.” Id. at 627–28. Such a requirement is “eminently sensible for management employees” because a managerial position “necessarily involves being mindful of the needs and concerns of both sides and appropriately expressing them.” Id. at 628. Thus, voicing “concerns is not only not adverse to the company’s interests, it is exactly what the company expects of a manger.” Id. (emphasis in original). Without such a requirement, “nearly every activity in the normal course of a manager’s job would be protected activity.” Id.
Illustratively, a personnel director responsible for monitoring compliance with workplace laws did not engage in protected activity when she discussed her “concerns about the company’s possible FLSA violations” with the president of the company. McKenzie v. Renberg’s Inc., 94 F.3d 1478, 1481 (10th Cir.1996). The Tenth Circuit found her “job responsibilities” included discussing wage issues and that assisting the company with FLSA compliance was “completely consistent with her duties.” Hagan, 529 F.3d at 627 (quoting McKenzie, 94 F.3d at 1487). It held that it is “the assertion of statutory rights (i.e., the advocacy of rights) by taking some action adverse to the company … that is the hallmark of protected activity.” Id. (emphasis in original) (quoting McKenzie, 94 F.3d at 1486). Thus because McKenzie “never crossed the line from being an employee merely performing her job as personnel director to an employee lodging a personal complaint about the wage and hour practices of her employer and asserting a right adverse to the company,” her discussion of her FLSA violation concerns with the president could not reasonably “be perceived as directed towards the assertion of rights protected by the FLSA.” Id. (emphasis in original) (quoting McKenzie, 94 F.3d at 1486–87).
Applying this standard to the facts at bar, the court held that the plaintiff failed to show she stepped outside of her normal job role in reporting her concerns regarding the defendant’s comp time system to the auditor and to her supervisors. Further, the court noted that even if she had, her actions could not reasonably be construed to have asserted FLSA rights on behalf of herself or the employees who were the subject of her conversations. Thus, the court affirmed summary judgment for the defendant.
Click Lasater v. Texas A & M University-Commerce to read the entire per curiam decision.
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