Category Archives: Affirmative Defenses

S.D.N.Y.: De Minimis Exception Applies Only in Cases Where There is a “Practical Administrative Difficulty in Recording Time”

Chavez v. Panda Jive, Inc.

Anyone who handles more than a handful of FLSA cases no doubt knows that defendants often raise an affirmative defense regarding the de minimis nature of the work. Typically the defense asserted claims that even if the defendants failed to properly pay the plaintiff for all time due and owing under the FLSA, such time was de minimis, so no damages are due and owing. And, while most of the decisions discussing the issue focus on the amount of time that is (or is not) de minimis as a matter of law, a recent case sheds light on the narrow circumstances where the defense is even available to an employer. And, as it turns out, the defense is likely applicable far less than you might have thought, only in circumstances where there is a “practical administrative difficulty in recording [the employee’s] time,” as discussed briefly in this case.

In this case, the plaintiff’s time records clearly showed overtime hours worked, however the defendant paid him only straight time for his overtime hours, and not time and a half. As the court’s opinion indicates, initially the defendant had raised an exemption defense, however because the plaintiff was admittedly paid by the hour, the defendant ultimately conceded that the plaintiff was generally entitled to overtime (which he was not paid) when he worked over 40 hours in a work week. However, the defendant asserted that because such time was “de minimis” it was not recoverable under the FLSA. Rejecting defendant’s contention, the court explained:

The de minimis exception applies, however, only in cases where there is a “practical administrative difficulty of recording additional time,” such as an employee’s commuting time. Singh v. City of New York, 524 F.3d 361, 371 (2d Cir.2008) (Sotomayor, J.); Reich v. N.Y. Transit Auth., 45 F.3d 646, 652 (2d Cir.1995). This is not such a case: defendants concede that they paid Chavez only straight time for hours for which their own records explicitly show he was owed time and a half. See, e.g., Reply Memorandum of Law in Support of Defendants’ Motion for Summary Judgment dated May 4, 2012 at 4–5; Tr. at 5–6. Accordingly, the Court grants summary judgment to plaintiff on the issue of liability against defendant Panda Jive for overtime hours Chavez worked prior to moving back to Penelope’s kitchen in December 2009.

Click Chavez v. Panda Jive, Inc. to read the entire Memorandum Order.

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5th Cir.: Where Employees Were Represented in Grievance Process By Their Union and Its Attorneys, Private Settlement of a Bona Fide Dispute Enforceable

Martin v. Spring Break ’83 Productions, L.L.C.

Following the entry of summary judgment on behalf of the defendants, the plaintiffs appealed. As discussed here, plaintiffs challenged the trial court’s holding that the private settlement reached between their union and one of their alleged employers was binding and enforceable. Specifically, the plaintiffs argued that absent: (1) court approval, (2) DOL supervision, or (3) a showing that they had been paid their wages in full without compromise, the settlement previously reached was not binding and/or enforceable. Affirming the decision below, the Fifth Circuit held that the settlement agreement was binding and enforceable notwithstanding the lack of court or DOL supervision, because it was a resolution of a bona fide dispute. While it is not entirely clear, it appears that the Fifth Circuit reasoned that the agreement, at least arguably could be said to be “without compromise,” thus making it binding and enforceable.

The case concerned grips and other movie production employees who worked on the set of a movie. Laying out the relevant procedural/factual background, the Fifth Circuit explained:

The plaintiffs “filed a grievance against Spring Break Louisiana alleging that they had not been paid wages for work they performed. The Union sent a representative to investigate the merits of the claims. After his investigation, the representative concluded that it would be impossible to determine whether or not Appellants worked on the days they alleged they had worked. The Union and Spring Break Louisiana entered into a Settlement Agreement pertaining to the disputed hours allegedly worked by Appellants.”

Discussing the issue of whether the private settlement here was binding and enforceable the Fifth Circuit reasoned:

The district court concluded that the plain language of the Settlement Agreement “is binding upon the [Appellants] in their individual capacities and prohibits those individuals from pursuing future legal action against Spring Break Louisiana after receiving their settlement payments.” We agree. The Settlement Agreement, in relevant part, states:

The Union on its own behalf and on behalf of the IATSE Employees agrees and acknowledges that the Union has not and will not file any complaints, charges or other proceedings against Producer, its successors, licenses and/or assignees, with any agency, court, administrative body, or in any forum, on condition that payment in full is made pursuant to the terms of this Settlement Agreement.

The Settlement Agreement also states that the Union “has the full power and authority to enter into this Settlement Agreement on behalf of IATSE Employees and bind them in accordance with the terms hereof.” By this plain language, the Appellants, who were IATSE Employees, were bound by its terms. Appellants contend, however, that the Settlement Agreement is unenforceable because they never signed it or agreed to it—instead, the Settlement Agreement was signed by Union representatives. However, Appellants do not dispute that they received full payment for their claims pursuant the terms of the Settlement Agreement. Nor do Appellants dispute that they cashed the Settlement Agreement payment checks they received. The Appellants were members of the Union and, under the CBA, Spring Break Louisiana recognized “the Union as exclusive representative of the employees in the bargaining unit.” Considering that Appellants, who were members of the Union, received and accepted full payment for their FLSA claims under the Settlement Agreement, the fact that Appellants did not themselves personally sign the Settlement Agreement does not render it unenforceable. See N.L.R.B. v. Allis–Chalmers Mfg. Co., 388 U.S. 175, 180, 87 S.Ct. 2001, 18 L.Ed.2d 1123 (1967) (“The employee may disagree with many of the union decisions but is bound by them.”).

On appeal, the plaintiffs argued that the settlement agreement was not binding and enforceable, because generally individuals may not privately settle FLSA claims. In response the defendants argued that that a private compromise of claims under the FLSA is permissible where there exists a bona fide dispute as to liability (and as to the amount of appropriate damages). After a discussion of the relevant Fifth Circuit precedent, the court agreed with the Defendants and held the settlement agreement at issue to be enforceable.

Significantly the court reasoned:

[H]ere, there is a bona fide dispute between Appellants and Spring Break Louisiana over the number of hours for which they are owed their set rate of pay. In fact, the Union representative conducted an investigation into the dispute and received conflicting information from various sources, ultimately concluding that it would be impossible to determine whether or not Appellants worked on the days they claimed they had worked in their grievance.  Approving of this rationale, we hold that the payment offered to and accepted by Appellants, pursuant to the Settlement Agreement, is an enforceable resolution of those FLSA claims predicated on a bona fide dispute about time worked and not as a compromise of guaranteed FLSA substantive rights themselves. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 714, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (“Our decision … has not necessitated a determination of what limitation, if any, Section 16(b) of the [FLSA] places on the validity of agreements between an employer and employee to settle claims arising under the Act if the settlement is made as the result of a bona fide dispute between the two parties, in consideration of a bona fide compromise and settlement.”); see also D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114–15, 66 S.Ct. 925, 90 L.Ed. 1114 (1946) (“Nor do we need to consider here the possibility of compromises in other situation which may arise, such as a dispute over the number of hours worked or the regular rate of employment.”); 29 U.S.C. § 253(a).

Apparently the court also believed that the settlement at issue here could arguably be said to be “without compromise” such that the third permissible basis for an enforceable private settlement was met:

Notably, in Thomas v. Louisiana, 534 F.2d 613 (5th Cir.1976), we held that a private settlement of FLSA claims was binding and enforceable where the settlement gave employees “everything to which they are entitled under the FLSA at the time the agreement is reached.” Id. at 615. We explained that, “[a]lthough no court ever approved this settlement agreement, the same reason for enforcing a court-approved agreement i.e., little danger of employees being disadvantaged by unequal bargaining power[,] applies here.” Id.  Here, Spring Break Louisiana and the Union agreed in the Settlement Agreement that the payments Appellants were paid pursuant to that agreement were the “amounts due and owing” for the disputed number of hours they claimed they had worked and not been paid for. The Settlement Agreement was a way to resolve a bona fide dispute as to the number of hours worked—not the rate at which Appellants would be paid for those hours—and though Appellants contend they are yet not satisfied, they received agreed-upon compensation for the disputed number of hours worked.

Lastly, the court distinguished a settlement privately negotiated by a union and its attorneys from a situation where a labor union purports to waive an employees’ rights under the FLSA through a collective bargaining agreement, a longstanding no-no under well-established FLSA jurisprudence:

Finally, Appellants contend, citing Barrentine v. Arkansas–Best Freight Sys., 450 U.S. 728, 745, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981), that because the Supreme Court has held that a union cannot waive employees’ rights under the FLSA through a collective bargaining agreement, they cannot have settled their FLSA claims in the Settlement Agreement, which was arrived at through the Union-facilitated grievance procedure laid out in the CBA. See Barrentine, 450 U.S. at 745, 101 S.Ct. 1437 (“FLSA rights … are independent of the collective-bargaining process. They devolve on petitioners as individual workers, not as members of a collective organization. They are not waivable.”). Although the terms and conditions of Appellants’ employment with Spring Break Louisiana were covered by a collective bargaining agreement, Barrentine is distinguishable. In Barrentine, the plaintiffs’ grievances based on rights under the FLSA were submitted by the union to a joint grievance committee that rejected them without explanation, a final and binding decision pursuant to the collective bargaining agreement. 450 U.S. at 731, 101 S.Ct. 1437. Here, Appellants accepted and cashed settlement payments—Appellants’ FLSA rights were adhered to and addressed through the Settlement Agreement, not waived or bargained away. The concerns the Court in Barrentine expressed, that FLSA substantive rights would be bargained away, see id. at 740, 101 S.Ct. 1437 (“This Court’s decisions interpreting the FLSA have frequently emphasized the nonwaivable nature of an individual employee’s right to a minimum wage and to overtime pay under the Act. Thus, we have held that FLSA rights cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”), are not implicated by the situation here where Appellants’ Union did not waive FLSA claims, but instead Appellants, with counsel, personally received and accepted compensation for the disputed hours. We reiterate that FLSA substantive rights may not be waived in the collective bargaining process, however, here, FLSA rights were not waived, but instead, validated through a settlement of a bona fide dispute, which Appellants accepted and were compensated for. Therefore, the district court did not err by finding an enforceable release resolving this wage dispute.

Given, the somewhat unique facts of this case, it remains to be seen whether the Fifth Circuit’s decision while trigger a change in longstanding FLSA jurisprudence regarding the enforceability of privately-negotiated settlements, or whether this case will remain an outlier, largely limited to its facts. For example, it is not clear whether the settlement would have been enforced absent the fact that plaintiffs were represented by both their union and attorneys in the negotiations, or if this was a “straight time” case where there was demonstrative evidence of the precise number of hours at issue.  Stay tuned, for what’s likely to be an influx of cases where defendant-employers seek to expand this case’s holding while plaintiff-employees seek to limit the holding to the facts at bar (which are not likely to be oft-repeated).

Click Martin v. Spring Break ’83 Productions, L.L.C. to read the entire Decision. For an excellent historical overview of more typical decisions regarding the enforceability of private settlements of FLSA claims click here to read an outline from the folks at Outten & Golden.

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2 Recent Decisions Hold That an Employer-Defendant Cannot Avoid Liquidated Damages By Relying on Involuntary Administrative Governmental Audits

As FLSA cases have proliferated in recent years, among the formally sleepy areas of jurisprudence that has seen a dramatic rise in litigation is the so-called “good faith” defense. Although in its earliest years the FLSA provided for mandatory liquidated damages, a subsequent amendment to the FLSA, through the Portal-to-Portal Act, now allows for a defendant to avoid the imposition of liquidated damages (in addition to the underlying unpaid wages damages) if it can demonstrate that it took affirmative steps to attempt compliance with the FLSA, but violated the FLSA nonetheless. Two recent cases reiterate that a defendant’s burden is not met solely by demonstrating that it had a subjective belief that it was complying.

McLean v. Garage Management Corp.

In the first case, the defendant sought to avoid liquidated damages by relying on a series of involuntary misinformed DOL audits, which it claimed it reasonably relied upon in establishing their belief that its illegal pay methodology, whereby it treated hourly employees as executive exempt from the FLSA’s overtime provisions. While the DOL has in fact found the defendant’s classification to be proper, the court noted that the DOL’s finding was based on its examination of the employees’ duties alone, because the defendant had misrepresented to the DOL that the employees were paid on a salary basis, at the required rate under the applicable regulations in the initial audit. Subsequent audits simply compounded this initial incomplete investigation, based on the information the defendant provided to the DOL in the initial audit.

Significantly, the court rejected the defendants’ claimed reliance on the DOL audits for 3 separate reasons. First, it found that any informal conversations do not constitute “active steps” to ascertain the dictates of the law. Second, the court noted that the audits were involuntary and defendant had not requested same and thus, giving government investigators access to records and employees did not relieve defendant of its own obligation to determine what the labor laws require. Third, the court noted that defendant had not shown that any government investigator focused with care on its time and payroll records for the employees in question, and thus the DOL had not undertaken a review to see whether the defendant indeed paid a predetermined amount that did not vary, as required to meet the “salary basis” prong of the executive exemption. “Without such full disclosure, [the defendant] cannot reasonably rely on the existence of the investigations and their failure to find any inadequacies in the compensation system for [the employees].”

Finally, the court held that the defendant was not entitled to rely on the fact that it periodically consulted with outside counsel, because it had invoked its attorney-client privilege. The court explained that absent a waiver of the privilege, the defendant could not sustain a defense based on good faith reliance on the advice of counsel.

Click McLean v. Garage Management Corp. to read the entire Opinion and Order.

Solis v. R.M. Intern., Inc.

In the second case- concerning an alleged misclassification of drivers under the Motor Carrier Act (MCA) exemption- the defendant sought to avoid the imposition of liquidated damages, by relying on a prior involuntary Department of Transportation (DOT) audit/citations and the advise of counsel it received as part of the audit process. As in McLean above, the court rejected this evidence of “good faith” as insufficient to meet the defendant’s heavy burden.

The court noted:

Defendants maintain they have demonstrated both their subjective good faith and objectively reasonable belief that their failure to pay overtime wages to their drivers did not violate FLSA. To meet their burden, Defendants rely almost exclusively on their compliance with DOT rules and the DOT’s citation of “some” of their intrastate-only drivers. The DOT’s citation of “some” of Defendants’ intrastate-only drivers, however, does not provide a sufficiently reasonable basis for concluding all such drivers were under the DOT’s jurisdiction and, therefore, exempt from FLSA. The objective reasonableness of Defendants’ failure is undermined by the fact that the determination as to whether the Department of Labor or the DOT has jurisdiction is resolved on a driver-by-driver basis, as the Court explained at length on summary judgment, and, in any event, DOT jurisdiction for a driver who only occasionally drives in interstate commerce lasts only 4 months from the last such trip. See Reich v. Am. Driver Serv., Inc., 33 F.3d 1153, 1155–56 (9th Cir.1994). Furthermore, exemptions to FLSA, such as the Motor Carrier Exemption relied on by Defendants, are to be construed narrowly and only apply to employees who “plainly and unmistakably” fall within their terms. See Solis v. Washington, 656 F.3d 1079, 1083 (9th Cir.2011). Thus, the Court concludes Defendants’ generalizations about entire classes of their drivers on the basis of DOT citations of some of its drivers are insufficient to establish the objective reasonableness of Defendants’ failure to comply with FLSA. Similarly and in light of the lack of testimony in this regard, the fact that Defendants required both their interstate and intrastate drivers comply with DOT regulations neither establishes Defendant’s subjective belief nor its objective reasonableness.

Defendants also maintain their belief that their drivers were exempt from FLSA is reasonable in light of the fact that they hired counsel to assist with the November 2009 DOT compliance audit. Although there is not any direct evidence as to the purpose of counsel’s representation, the Court concludes it is fair to infer that counsel was hired to ensure Defendants’ compliance with DOT regulations rather than to ensure Defendants were compliant with FLSA. In any event, there is not any evidence on this record from which the Court can find that Defendants took “the steps necessary to ensure [its] practices complied with [FLSA].” Alvarez, 339 F .3d at 910 (“Mistaking ex post explanation and justification for the necessary affirmative ‘steps’ to ensure compliance, [the defendant] offers no evidence to show that it actively endeavored to ensure such compliance.”). Thus, the Court concludes on this record that Defendants did not satisfy their “difficult” burden to show their subjective good faith failure to comply with FLSA or the objective reasonableness of their actions, and, therefore, the Court concludes Plaintiff is entitled to liquidated damages in the amount equal to the unpaid overtime wages.

Click Solis v. R.M. Intern., Inc. to read the entire Supplemental Findings of Fact and Conclusions of Law and Verdict.

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M.D.Tenn.: Where Employees Believed They Were Required to Sign WH-58 and/or Unaware of Private Lawsuit Regarding Same Issues, Waivers Null & Void

Woods v. RHA/Tennessee Group Homes, Inc.

This case was before the court on a variety of motions related to the plaintiffs’ request for conditional certification and for clarification as to the eligible participants in any such class.  The case arose from plaintiffs’ claims that defendants improperly automatically deducted 30 minutes for breaks that were not provided to them.  Of interest here, during the time the lawsuit was pending, the DOL was also investigating defendants regarding the same claims.  Shortly after the lawsuit was commenced, the DOL made findings and recommendations to the defendants, in which it recommended payments of backwages to certain employees that were also putative class members in the case.  As discussed here, the defendants then made such payments to the putative class members, but required that all recipients of backwage payments sign a WH-58 form (DOL waiver), which typically waives an employees claims covered by the waiver.  Subsequently, the plaintiffs sought to have the WH-58’s declared null & void and asserted that any waiver was not knowing and/or willful as would be required to enforce.  The court agreed and struck the waivers initially.  However, on reconsideration the court held that a further factual showing was necessary to determine whether the WH-58 waivers were effectual or not under the circumstances.

The court explained the following procedural/factual background relevant to the waiver issue:

“The six named plaintiffs filed this putative collective action on January 13, 2011. Coincidentally, on the same day, the Department of Labor (“DOL”) contacted the defendant and commenced an investigation regarding the Meal Break Deduction Policy. (Docket No. 80 at 25 (transcript of April 14, 2011 hearing).) The DOL was apparently following up on a complaint that it had received nearly a year earlier. (Id. at 32.) Several days later, on January 18, the defendant informed the DOL of the pending private lawsuit.

Nevertheless, the DOL proceeded with the investigation and, in early March 2011, the DOL and the defendant reached a settlement, pursuant to 29 U.S.C. § 216(c). Under the settlement, the defendant agreed to comply with the FLSA in the future and to pay a certain amount of back wages to employees who were subject to the Meal Break Deduction Policy. (See Docket No. 80 at 14.)

To distribute these payments, the defendant posted the following notice in a common area:

The following employees must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor on Tuesday, April 12, 2011, 8:00 am–4:00 pm.

If you have questions, see Lisa or Kamilla

(Docket No. 43, Ex. 1 at 72; Docket No. 56, Ex. 1.)  The posting contained a list of over 60 employees (see Docket No. 56, Ex. 1), including several employees who had already opted into this lawsuit (see, e.g., Docket No. 43, Ex. 1 at 56), although the defendant claims that their inclusion was an oversight. In her declaration, Human Resources Director Kamilla Wright states that she was simply “instructed to post a list of employees for whom checks were available.” (Docket No. 55 ¶ 7.)

Wright was further instructed “that when an employee came to the office to pick up their check, [she] was to have them sign the receipt for payment of back wages and then give them their check.” (Id. ¶ 9.) The declaration of Lisa Izzi, the defendant’s administrator, states that Izzi received identical instructions. (Docket No. 56 ¶ 9.) Accordingly, at the meetings with employees, each employee was given a check and DOL Form WH–58, which was titled “Receipt for Payment of Back Wages, Employment Benefits, or Other Compensation.” (Docket No. 43, Ex. 1 at 13.) The form stated:

I, [employee name], have received payment of wages, employment benefits, or other compensation due to me from Stones River Center … for the period beginning with the workweek ending [date] through the workweek ending [date.] The amount of payment I received is shown below.

This payment of wages and other compensation was calculated or approved by the Wage and Hour Division and is based on the findings of a Wage and Hour investigation. This payment is required by the Act(s) indicated below in the marked box(es):

[X] Fair Labor Standards Act 1

(Id.) Further down, in the middle of the page, the form contained the following “footnote”:

FN1NOTICE TO EMPLOYEE UNDER THE FAIR LABOR STANDARDS ACT (FLSA)—Your acceptance of this payment of wages and other compensation due under the FLSA based on the findings of the Wage and Hour Division means that you have given up the right you have to bring suit on your own behalf for the payment of such unpaid minimum wages or unpaid overtime compensation for the period of time indicated above and an equal amount in liquidated damages, plus attorney’s fees and court costs under Section 16(b) of the FLSA. Generally, a 2–year statute of limitations applies to the recovery of back wages. Do not sign this receipt unless you have actually received this payment in the amount indicated above of the wages and other compensation due you.

(Id.) Below that was an area for the employee to sign and date the form.

It appears that Wright and Izzi did not, as a matter of course, inform the employees that accepting the money and signing the WH–58 form was optional. Nor did they inform the employees that a private lawsuit covering the same alleged violations was already pending.

On April 12 and 13, 2011, a number of employees accepted the payments and signed the WH–58 forms. On April 13, the plaintiffs’ counsel learned of this and filed a motion for a temporary restraining order or preliminary injunction, seeking to prevent the defendant from communicating with opt-in plaintiffs and potential opt-in plaintiffs. (Docket No. 43.)

The court held a hearing on the plaintiffs’ motion on April 14, 2011. At that hearing, the court expressed its displeasure with the defendant’s actions, which, the court surmised, were at least partly calculated to prevent potential class members from opting in to this litigation. The court stated that it would declare the WH–58 forms (and the attendant waiver of those employees’ right to pursue private claims) to be null and void; thus, those employees would be free to opt in to this lawsuit.”

On reconsideration, the court reconsidered its prior Order on the issue.  While re-affirming that non-willful waivers would be deemed null & void, the court explained that the issue would be one for the finder of fact at trial.  After a survey of the relevant case law, the court explained:

“To constitute a waiver, the employee’s choice to waive his or her right to file private claims—that is, the employee’s agreement to accept a settlement payment—must be informed and meaningful. In Dent, the Ninth Circuit explicitly equated “valid waiver” with “meaningful agreement.” Dent, 502 F.3d at 1146. Thus, the court stated that “an employee does not waive his right under section 16(c) to bring a section 16(b) action unless he or she agrees to do so after being fully informed of the consequences.” Id. (quotation marks omitted). In Walton, the Seventh Circuit likened a valid § 216(c) waiver to a typical settlement between private parties:

When private disputes are compromised, the people memorialize their compromise in an agreement. This agreement (the accord), followed by the payment (the satisfaction), bars further litigation. Payment of money is not enough to prevent litigation…. There must also be a release.  Walton, 786 F.2d at 306. The relevant inquiry is whether the plaintiffs “meant to settle their [FLSA] claims.” Id.

Taken together, Sneed, Walton, and Dent suggest that an employee’s agreement to accept payment and waive his or her FLSA claims is invalid if the employer procured that agreement by fraud or duress. As with the settlement of any other private dispute, fraud or duress renders any “agreement” by the employee illusory. See 17A Am.Jur.2d Contracts § 214 (“One who has been fraudulently induced to enter into a contract may rescind the contract and recover the benefits that he or she has conferred on the other party.”); id. § 218 (“ ‘Duress’ is the condition where one is induced by a wrongful act or threat of another to make a contract under circumstances which deprive one of the exercise of his or her free will. Freedom of will is essential to the validity of an agreement.” (footnote omitted)).  The court finds that employees do not waive their FLSA claims, pursuant to § 216(c), if their employer has affirmatively misstated material facts regarding the waiver, withheld material facts regarding the waiver, or unduly pressured the employees into signing the waiver.

This holding does conflict with Solis v. Hotels.com Texas, Inc ., No. 3:03–CV–0618–L, 2004 U.S. Dist. LEXIS 17199 (N.D.Tex. Aug. 26, 2004), in which the district court rejected the contention that “an allegation of fraud could lead to the invalidity of a waiver under 216(c).” Id. at *6. That finding was mere dicta, however, and, regardless, this court is not bound by decisions from the Northern District of Texas.

Here, the defendant posted a sign with a list of employees’ names stating that those employees “must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor.” (Docket No. 43, Ex. 1 at 72 (emphasis added).) It appears that, when the employees met with the defendant’s human resources representatives, neither the representatives nor the Form WH–58 informed the employees that they could choose to not accept the payments.  On the evidence presented at the April 14 hearing and submitted thereafter, the court finds that reasonable employees could have believed that the defendant was requiring them to accept the payment.  Obviously, this calls into question the willingness of the employees’ waivers.

Additionally, it appears that the defendant never informed the employees that a collective action concerning the Meal Break Deduction Policy was already pending when the waivers were signed. The court finds that it was the defendant’s duty to do so. Section 216 exists to give employees a choice of how to remedy alleged violations of the act—by either accepting a settlement approved by the DOL or by pursing a private claim. An employer should not be allowed to short circuit that choice by foisting settlement payments on employees who are unaware that a collective action has already been filed. If employees are unaware of a pending collective action, they are not “fully informed of the consequences” of their waiver, Dent, 502 F.3d at 1146, because waiving the right to file a lawsuit in the future is materially different than waiving the right to join a lawsuit that is already pending. In the former situation, an employee who wishes to pursue a claim must undertake the potentially time-consuming and expensive process of finding and hiring an attorney; in the latter, all an employee must do is sign and return a Notice of Consent form.

Thus, the court finds that any employee of Stones River Center may void his or her § 216(c) waiver by showing either: (1) that he or she believed that the defendant was requiring him or her to accept the settlement payment and to sign the waiver; or (2) that he or she was unaware that a collective action regarding the Meal Break Deduction Policy was already pending when he or she signed the waiver. The court will vacate its April 14, 2011 Order, to the extent that the order declared all such waivers to be automatically null and void. Instead, under the above-described circumstances, the waivers are voidable at the election of the employee.  Because the validity of any particular employee’s waiver depends on questions of fact, the issue of validity as to each employee for whom this is an issue will be resolved at the summary judgment stage or at trial.”

Click Woods v. RHA/Tennessee Group Homes, Inc. to read the entire Memorandum Opinion on all the motions.

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M.D.Fla.: Applying Twombly, Defendant’s Assertion of Generalized Affirmative Defense of “Good Faith” Struck, Due to Insufficient Facts

Drzik v. Haskell Co.

This case was before the court on Plaintiff’s motion to strike several affirmative defenses pled by Defendant as factually insufficient under FRCP 8 and Twombly.  Significantly, the court struck Defendant’s two affirmative defenses asserting that liquidated damages were not due to Plaintiff because Defendant had acted in “good faith” in committing violations, if any, of the FLSA.  The case is significant, because the affirmative defenses struck are asserted in the majority of FLSA defendants’ answers, typically with identical language to that pled here.  Noting that such bare bones allegations do not satisfy the pleading requirements of Rule 8, the court struck the Defendant’s affirmative defense(s) of good faith, with leave to replead with additional facts.

Holding that the Defendant’s allegations of good faith were insufficient as pled, the court explained:

“[Defendant’s] Third and Fifth Affirmative Defenses respectively claim that Plaintiff’s claims are barred because Haskell has acted in good faith, and because of the existence of exceptions, exclusions, or exemptions provided in the FLSA. (Doc. 6 at 6). These affirmative defenses correctly state that a “good faith” defense and exceptions exist under the FLSA. See 29 U.S.C. §§ 207, 260. However, the affirmative defenses, as drafted, are lacking in sufficient details and fail to provide the requisite notice of the theory of the defense. See Twombly, 550 U.S. at 556 (explaining the need for factual support to give defendant fair notice of claims, but equally applicable to defenses). The requirement to include factual support to provide fair notice of claims is also applicable to affirmative defenses. Therefore, if Haskell intends to pursue these defenses it will need to plead some factual basis to give the Plaintiff fair notice of its defense. Therefore, Plaintiff’s Motion is granted as to the Third and Fifth Affirmative Defenses and those defenses are stricken with leave to amend.”

As the trend of defendants filing more and more motions to dismiss based on Twombly continues, it will be interesting to see if we begin seeing an uptick in motions like this, which seek to apply the pleading standards equally to the other side of the “v.”

Click Drzik v. Haskell Co. to read the entire Order.

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S.D.Ind.: Court Erred In Resolving MCA Exemption Issues on Motion for Conditional Certification; On Reconsideration Motion Granted

Thompson v. K.R. Drenth Trucking, Inc.

This case was before the court on plaintiffs’ motion for reconsideration of the court’s order denying their motion for conditional certification of a collective action.  The case arose out of allegations that defendants violated the Fair Labor Standards Act (“FLSA”) by failing to pay a certain group of truck drivers (“plaintiffs”) overtime premiums.  Initially, the court denied Plaintiffs’ Motion.  In doing so, “the Court held that the Motor Carrier Act exemption applied to [the] named Plaintiffs… thus rendering them ineligible for overtime pay and unsuitable collective action representatives.”  In their motion for reconsideration, the plaintiffs asserted that the court had previously erred by inappropriately resolving the merits of the Motor Carrier Act exemption, with respect to the named-plaintiffs at the conditional certification stage.  The court agreed, and upon reconsideration granted conditional certification.

The court explained:

“In the February 11, 2011 Entry (Dkt.68), this Court acknowledged that the issue of whether Thompson and Hayden engaged in interstate commerce was “hotly contested.” Plaintiffs emphasized that both Thompson and Hayden were Non–Recyclable Drivers who regularly transported non-recyclable materials within the State of Indiana. Plaintiffs argued that since they never engaged in interstate commerce as part of their “regular” or “normal” duties, Thompson and Hayden are suitable collective action representatives. KRD counters that any of its drivers, including Thompson and Hayden, “could be called upon at any time to carry any load, whether intrastate or interstate,” meaning the MCA exemption applies. (Dkt. 71 at 4). And, indeed, Thompson and Hayden each crossed Indiana state lines on one occasion to transport KRD equipment to South Carolina.

In its prior entry, the Court found KRD’s argument persuasive, determining that the MCA exemption applied to Thompson and Hayden. In other words, even if Thompson and Hayden rarely crossed state lines (or, for that matter, hauled recyclable material destined for out-of-state purchasers), they could have been called upon to do so in their regular course of work. For this reason, the Court denied Plaintiffs’ motion for conditional certification.

Having now reviewed a more thorough body of case law, the Court finds that it erred by, in effect, making a merits determination at this early stage. As Plaintiffs emphasize, they have a “lenient” burden at this stage of the proceedings and, as such, courts do not reach the merits of Plaintiffs’ FLSA claims. Fravel v. County of Lake, 2008 WL 2704744, at *2 (N.D.Ind. July 7, 2008) (citations omitted). However, it is worth noting that even at this early stage, a court must also ensure that the proposed class representatives are adequate.”

Luckily for the plaintiffs here, the court recognized its initial error and corrected it almost immediately.  The court’s decision serves as a reminder that courts simply do not resolve the merits of an FLSA case at the conditional certification stage.

Click Thompson v. K.R. Drenth Trucking, Inc. to read the court’s Entry on Plaintiffs’ Motion to Reconsider.

 

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M.D.Fla.: Employer Not Entitled to Offset Unpaid Overtime Damages Based on Provision of Car, Car Insurance, Gasoline, or a Cell Phone It Provided

Vancamper v. Rental World, Inc.

This case was before the court on plaintiff’s motion for summary judgment.  Among the issues of interest ruled upon, the court held that plaintiff’s pre-arranged shuttling of defendants’ clients to and from the airport to defendants’ rental office for pre-arranged rental of defendant’s cars and the cleaning of such cars, satisfied the individual coverage test of the FLSA.  As discussed here, the court also addressed defendants’ argument that it should be entitled to offset plaintiff’s minimum wage and overtime damages, if any, due to its provision of a car, car insurance, gasoline and cell phone to plaintiff, during his employment.  Holding that such offsets are impermissible under the FLSA, the court explained:

“The parties dispute whether Vancamper’s use of a car, car insurance, gasoline, and a cellular phone provided by Rental World offset the overtime compensation that Rental World owed Vancamper as permitted by 29 U.S.C. § 207(h)(2). (Doc. No. 27 at 14; Doc. No. 33 at 5–6.) The Defendants bear the burden of establishing a credit for overtime compensation under Section 207(h)(2). See Leonard, 614 F.Supp. at 1187 (noting that an employer bears the burden of establishing a credit under 29 U.S.C. § 203(m) against the overtime owed to an employee (citing Donovan, 676 F.2d at 473–76)).

Under Section 207(h)(2), the forms of compensation described in 29 U.S.C. § 207(e)(5)-(7) are creditable toward overtime compensation. Those forms of compensation are as follows:

(5) extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee under subsection (a) of this section or in excess of the employee’s normal working hours or regular working hours, as the case may be;

(6) extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days;

(7) extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section, where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek;

29 U.S.C. § 207(e)(5)-(7).

These provisions plainly contemplate a dollar-for-dollar credit against overtime pay for premium pay awarded on particular days and times. Wheeler v. Hampton Twp., 339 F.3d 238, 245 (3d Cir.2005). The parties do not cite, and the Court does not find, any authority that these provisions encompass use of a car, car insurance, gasoline, or a cellular phone provided by an employer. Moreover, because Vancamper’s uncontroverted time sheets show that he was never paid extra compensation for working during the periods described in Section 207(e)(5)-(7), (Doc. No. 27–5 at 1–102), Defendants are not entitled to any overtime credit under Section 207(h)(2).”

Click Vancamper v. Rental World, Inc. to read the entire order.

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