Category Archives: Department of Labor

DOL Announces It Will Not Enforce New Regulations Regarding FLSA Rights of Home Health Workers for First 6 Months of 2015

The Department of Labor’s (Department) October 1, 2013, Final Rule amending regulations regarding domestic service employment, which extends the Fair Labor Standards Act’s (FLSA) minimum wage and overtime protections to most home care workers will become effective on January 1, 2015. However, by an announcement dated October 6, 2014, the DOL advised that it will not be enforcing the regulations for the first 6 months that the regulations are in effect.

Critically important, while the DOL will not be bringing enforcement actions—as it is able to do under the FLSA—this announcement does not effect home health workers’ rights to bring private enforcement actions themselves through private lawsuits.

In a thoughtful commentary regarding the importance of the new regulation, issued on his blog on the day of the DOL’s recent announcement, former Deputy Administrator of the Wage and Hour Division, Seth Harris, has this to say:

Home health workers are the people who care for people with disabilities and seniors so that they may live in the community rather than in nursing homes or other institutions.  Their work is essential.  They allow each of us to rest assured that we will be able to live in dignity in our homes if age, happenstance, or genetics result in physical, mental, or developmental disabilities.  Yet, these workers have not been protected by the federal minimum wage or the requirement that workers who work more than 40 hours in a week receive overtime pay for those additional hours.  These requirements are found in the Fair Labor Standards Act. Home health workers have been excluded from the FLSA.  On January 1, that exclusion ends.  Home health workers will be entitled to at least the federal minimum wage and time-and-one-half for overtime worked beginning New Year’s Day.

While Harris went further to explain that he thought that the new regulations would likely lack teeth, in light of this delayed enforcement policy—given the relatively small sums of money individuals stand to lose from unscrupulous employers who ignore the new regulation—that may not turn out to be accurate. While many smaller home health agencies will likely feel free to skirt the new regulation, at least initially, most of the larger national home health agencies have already put the wheels in motion to make the necessary changes to comply with the new law about to go into effect. However, if you are a home health worker, who is still being denied your rightful minimum wages and/or overtime pay, after the new law goes into effect on January 1, 2015, you should contact a wage and hour lawyer to investigate whether you have a claim to recover your rightful wages.

Click DOL Announcement to read the official announcement, and Harris Blog to read Seth Harris’ commentary on this issue.

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Filed under Department of Labor, Exemptions, Minimum Wage, Wage and Hour News

D.D.C.: Laborers on Governmental Job, Who Have Exhausted Their Administrative Remedy, May Bring Case Under Davis-Bacon Act Against Bond of General Contractor; 2 Year SOL Applies

Castro v. Fidelity and Deposit Company of Maryland

It has long been the law that generally employees lack the right to bring a private cause of action under the Davis Bacon Act (DBA). Rather, the sole avenue under which aggrieved employees, on governmental jobs, can seek repayment of their improperly withheld wages under the DBA is through a proceeding brought by the Department of Labor. However, the Department of Labor rarely brings such proceedings and thus, workers on governmental projects are often left without a remedy where they have been the victims of wage theft. This case sheds some light on another avenue that such employees can use to attempt to recover their wages however. In this case, after exhausting their administrative remedies (i.e. filing with the DOL and being told the DOL could not pursue their claims) the plaintiffs—employees of a sub-contractor on a job for the District of Columbia—sued on the bond of general contractor to seek payment of their wages. Denying the defendant-bond company’s motion to dismiss, the court explained that this was a valid cause of action.

Discussing the relevant facts and procedural history, the court explained:

Plaintiffs were employed by S & J Acoustics, a second-tier subcontractor (or subsubcontractor) retained to complete ceiling installation on the Consolidated Forensic Laboratory, a building owned by the District of Columbia. See Am. Compl., ¶¶ 2, 5. Pursuant to the DBA, 40 U.S.C. § 3141, et seq., and the DCLMA, D.C.Code § 2–201.01, et seq., the project’s prime contractor, Whiting–Turner Contracting Co., provided a payment bond to the District of Columbia as an assurance that project laborers would receive payment at Department of Labormandated hourly rates. See Am. Compl., ¶¶ 3, 8. In bringing this action against Defendants (1) Fidelity and Deposit Company of Maryland and (2) Travelers Casualty and Surety Company of America, who insured Whiting–Turner’s bond as co-sureties, see id., ¶ 3, Plaintiffs allege that they were not paid for their contributions to the project in accordance with these designated wage rates. See id., ¶¶ 16–18, 21. As background, the DCLMA requires contractors on governmentfunded projects to secure payment bonds to protect the interests of suppliers of materials and subcontractors, and the DBA establishes prevailing wage rates for workers who contribute to government-funded construction projects.

Prior to initiating this action, Plaintiffs filed an administrative complaint with DOL, requesting that payments to the project’s prime contractor be withheld until an investigation could be completed and Plaintiffs compensated for the alleged back wages. See id., ¶¶ 23–25. As the project had since wound up and all payments had been released to Whiting–Turner, the DOL investigator closed the case without making any findings on Plaintiffs’ eligibility for relief under the DBA. See id., ¶¶ 24–25. After Plaintiffs brought suit and Defendants filed their Motion to Dismiss, the Court sua sponte raised the issue of subject-matter jurisdiction, questioning whether Plaintiffs had sufficiently exhausted their administrative remedies with DOL. See Order to Show Cause at 2–3. Out of deference to DOL’s plenary role in making DBA back-wage determinations, the Court issued a temporary stay in the proceedings and ordered Plaintiffs to return to DOL and request that conclusive findings be made. See ECF No. 16 (Order) at 4. Plaintiffs did so, but without success. DOL refused to take further action on the ground that the government had already made all payments to the prime contractor and had no further funds to withhold. See Joint Status Report, ¶¶ 6–7 & Exh. A. Satisfied that Plaintiffs had made all efforts to exhaust remedies with DOL, the Court concluded that it did have subjectmatter jurisdiction under the DBA and could consequently address the substance of their claims and Defendants’ pending Motion to Dismiss. See Castro v. Fid. & Deposit Co. of Maryland, No. 13–818, 2014 WL 495464 (D.D.C. Feb. 7, 2014).

Under these circumstances, the defendant argued that the plaintiffs lacked any remedy. The court summarized the defendants contentions as follows:

Defendants first argue that Plaintiffs cannot invoke the DCLMA to sue on Whiting Turner’s payment bond because eligibility under the statute is restricted to those suppliers of labor and materials that have been retained either by the prime contractor or by an immediate subcontractor. See Mot. to Dismiss at 9; Reply at 1–2. Since Plaintiffs were hired by a second- tier subcontractor, Defendants suggest that they fall outside of the scope of the statute. See Supp. to Mot. to Dismiss at 3.

Defendants further maintain that Plaintiffs also have no remedy under the DBA. They premise this argument on the text of DBA § 3144(a)(2), which provides that “laborers and mechanics have the same right [of] action … as is conferred by law on persons furnishing labor or materials.” See Reply at 4. The use of the phrase “same right,” according to Defendants, demonstrates that § 3144(a)(2) does not actually grant aggrieved workers an independent cause of action, but merely references the applicable bond statute – in this case, DCLMA § 2–201.02. See Mot. to Dismiss at 9; Reply at 1 (“Plaintiffs do not have separate cause [sic ] of action against the Defendants in this case under the DBA….”). Alternatively, even if § 3144(a)(2) does create a freestanding cause of action, Defendants reason that the result should be the same because “the rights, if any, that were conferred [by § 3144(a)(2) ] were limited by the express terms of the bond statute.” Reply at 7. The DBA, by this logic, merely duplicates the DCLMA, mirroring its procedural requirements and limitations on eligibility.

Addressing the defendants’ contentions, the court first analyzed the scope and requirements of the DCLMA, acknowledging that plaintiffs lacked standing thereunder, because like the federal Miller Act, it applies only to prime contractor and immediate subcontractors. That did not end the court’s inquiry however. It then turned to an examination of § 3144(a)(2) of the DBA to determine whether it provides an independent remedy with its own terms and conditions. Holding that the DBA, under these circumstances, provided the plaintiffs with a remedy the court explained:

The game is not over, however, because the DBA protects precisely those “ordinary laborers” that the Miller Act appears to exclude. The DBA applies to any construction contracts for public works and public projects that exceed $2,000 in value and to which either the Federal Government or the District of Columbia is a party. See 40 U.S.C. § 3142(a). It obliges contractors on such projects to pay workers in accordance with prevailing wage rates, established by the Secretary of Labor. See id. In the event that contractors do not comply with prevailing wage rates, a worker may seek redress through the mechanism set out in DBA § 3144(a)(2). Promulgated in 1935 – just six days after the federal Miller Act was updated to reflect its current language – § 3144(a)(2) is broadly worded, granting a right of action to “all the laborers and mechanics who have not been paid the wages required” pursuant to the DBA. In contrast to the Miller Act and DCLMA, which condition their protections on a requisite level of contractual proximity to the prime contractor, DBA eligibility appears to hinge upon a laborer’s presence at the job site. Section 3144(a)(2) stipulates that each “contractor or subcontractor” involved in a “contract” governed by the DBA “shall pay all mechanics and laborers employed directly on the site of the work, unconditionally and at least once a week … regardless of any contractual relationship which may be alleged to exist between the contractor or subcontractor and the laborers and mechanics.” § 3142(c)(1) (emphasis added).

Although the DBA does not separately delineate the terms “contract,” “contractor,” “subcontractor,” or “laborer,” these terms are defined in corresponding regulations promulgated by the Secretary of Labor. See 29 C.F.R. § 5.2. The term “contract” comprises “any prime contract which is subject … to the labor standards provisions of [the DBA] and any subcontract of any tier thereunder, let under the prime contract.” § 5.2(h) (emphasis added). This definition, unlike that in the DCLMA, is not limited by a particular degree of separation from the prime contractor. The regulations, in fact, expressly disavow any requirement that a worker demonstrate a particular contractual relationship, instead providing that “[e]very person performing the duties of a laborer or mechanic in the construction … of a public building or public work … is employed regardless of any contractual relationship alleged to exist between the contractor and such person.” § 5.2(o). The regulatory definition of “laborer” is governed by function, not by contractual formality, and extends to “at least those workers whose duties are manual or physical in nature.” § 5.2(m).

Even in the unlikely event that a court were to find the text of the DBA ambiguous, it would still be bound to apply DOL’s regulatory definitions in making its decision. “Because the Secretary of Labor has interpreted the Act,” courts must defer to the Secretary’s judgment provided that these “interpretations are reasonable.” AKM LLC v. Sec’y of Labor, 675 F.3d 752, 754 (D.C.Cir.2012) (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984)). In this case, the regulatory interpretations are more than merely reasonable – they are grounded in the most basic common sense. Because a prime contractor should have ample notice of laborers working at its project site, it can institute sufficient controls to ensure that they are accounted for and paid for their contributions, regardless of any particular contractual arrangement. In contrast to the situation with suppliers, who may come and go without any physical connection to a job site, there is far less risk that laborers will be completely “[un]known to the prime contractor,” U.S. ex rel. E & H Steel Corp., 509 F.3d at 187, and thereby expose it to unforeseen liability.

The court then explained that where, as here, workers had exhausted their administrative remedy (i.e. filed with the DOL), they were entitled to bring a private cause of action under the DBA:

Clearly titled as a “[r]ight of action,” DBA § 3144(a)(2) provides that, if the Secretary of Labor’s withholdings under the terms of a contract are “insufficient to reimburse all the laborers and mechanics who have not been paid the wages required[,] … the laborers and mechanics have the same right to bring a civil action and intervene against the contractor and the contractor’s sureties as is conferred by law on persons furnishing labor or materials.” (Emphasis added). Two points are notable here. First, the express title of § 3144(a)(2) indicates that Congress believed that it was creating a new and fully functional right of action, and not merely a superficial reference to remedies already available under the bond statutes. While many battles have been waged over whether or not an aggrieved worker can claim an implied right of action under the DBA and thereby circumvent the administrative-exhaustion requirements of § 3144(a), see, e.g., Univers. Research Ass’n v. Coutu, 450 U.S. 754, 780 (1981), courts have long recognized that § 3144(a)(2) furnishes an express cause of action once remedies have been exhausted. See, e.g., U.S. ex rel. Bradbury v. TLT Const. Corp., 138 F.Supp.2d 237, 241 (D.R.I.2001).

Second, the formulation “all the laborers … who have not been paid” sets an expansive scope of application that is not obviously restricted by what follows. If Congress had intended to limit the scope of eligibility to sue on a bond to the narrow class of workers who might qualify under the terms of the Miller Act, it stands to reason that the legislature would have said so in clear and unambiguous terms or, more plausibly, would have completely omitted § 3144(a)(2) from the DBA. If Defendants are correct, § 3144(a)(2) would be mere surplusage, offering nothing of value over and above the remedies already available via the Miller Act and DCLMA. The Court cannot ignore the ” ‘cardinal principle of statutory construction’ that ‘a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.’ ” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)).

Perhaps even more troubling, Defendants’ assessment of § 3144(a)(2) would create two arbitrary classes of workers – first, those who satisfy the technical qualifications imposed by the terms of the Miller Act and DCLMA, and second, all otherwise DBA-eligible workers. If the Court were to endorse Defendants’ highly restrictive interpretation, it might encourage prime contractors to insulate themselves behind several layers of subcontracts and thus opt out of the obligation to pay DBA-mandated wages, particularly as a project draws to a close and the government is no longer able to withhold funds. It should be obvious, accordingly, that all laborers present on the worksite of a DBA-eligible project should stand to benefit from the Act’s protections, regardless of contractual formalities. The Court thus concludes that § 3144(a)(2) of the DBA creates an independent cause of action that grants the ability to collect on a prime contractor’s bond to all eligible on-site workers, regardless of who hired them.

Finally, the court rejected the defendant’s argument that the plaintiff’s were limited by a one year statute of limitations, and held that a two year statute of limitations was applicable to the claims, pursuant to the Portal-to-Portal Act.

Click Castro v. Fidelity and Deposit Company of Maryland to read the entire Memorandum Opinion of the court.

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Filed under Davis Bacon Act, Department of Labor

DOL Announces Final Rule Extending Minimum Wage and Overtime Pay to Home Health Workers

In an announcement that has long been awaited by workers advocates and those in the home health industry as well, today the United States Department of Labor (DOL) announced a final rule, to go into effect on January 1, 2015, which extends the FLSA’s minimum wage and overtime protections to home health aides that perform typical CNA tasks in the homes of the aged and infirm.  In an email blast, the DOL reported:

The U.S. Department of Labor’s Wage and Hour Division announced a final rule today extending the Fair Labor Standards Act’s minimum wage and overtime protections to most of the nation’s direct care workers who provide essential home care assistance to elderly people and people with illnesses, injuries, or disabilities. This change, effective January 1, 2015, ensures that nearly two million workers – such as home health aides, personal care aides, and certified nursing assistants – will have the same basic protections already provided to most U.S. workers. It will help ensure that individuals and families who rely on the assistance of direct care workers have access to consistent and high quality care from a stable and increasingly professional workforce.

Among other things, the final rule overrules the 2007 holding of the Supreme Court in Long Island Care at Home, Ltd. v. Coke, and requires 3rd party employers such as staffing agencies to pay companions and home health workers overtime under the FLSA when they work in excess of 40 hours per week.

The New York Times provides a pretty good synopsis of the changes to the Companionship Exemption, provided by the final rule:

Under the new rule, any home care aides hired through home care companies or other third-party agencies cannot be exempt from minimum wage and overtime coverage. The exemptions for aides who mainly provide “companionship services” — defined as fellowship and protection for an elderly person or person with an illness, injury or disability who requires assistance — are limited to the individual, family or household using the services.

If an aide or companion provides “care” that exceeds 20 percent of the total hours she works each week, then the worker is to receive minimum wage and overtime protections.

The new rule defines care as assisting with the activities of daily living, like dressing, grooming, feeding or bathing, and assisting with “instrumental activities of daily living,” like meal preparation, driving, light housework, managing finances and assisting with the physical taking of medications.

The companionship exemption will not apply if the aide or companion provides medically related services that are typically performed by trained personnel, like nurses or certified nursing assistants.

Live-in domestic service workers who reside in the employer’s home and are employed by an individual, family or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked.

Click Final Rule to read the published rule, or U.S. News and Report to read an article discussing the announcement.

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Filed under Coverage, Department of Labor, Minimum Wage

W.D.Mo.: Under Motor Carrier Act (MCA), Weight of Vehicle Measured by Gross Vehicle Weight Rating (GVWR) Which Includes the Weight of Trailer Pulled

McCall v. Disabled American Veterans Ernestine Schumann-Heink Missouri Chapter 2

This case was before the court on the parties dueling motions for summary judgment. Specifically, the motions addressed the applicability of the Fair Labor Standards Act (“FLSA”) to drivers employed by the defendants, in light of the Motor Carrier Act (“MCA”). As discussed here, the court was required to opine on the method by which the 10,001 pound threshold is calculated under the MCA, in order to determine whether a vehicle qualifies as a covered vehicle for the purposes of the MCA’s application to its driver(s). While the plaintiff argued that the actual weight of the truck, when loaded was less than 10,000 pounds, the court held that this was not dispositive of the issue. Instead, the court held that the plaintiff came within the MCA’s exemption to the FLSA because, “[t]he uncontroverted facts demonstrate[d] the truck’s gross vehicle weight rating (“GVWR”) exceeded 12,000 pounds.”

After surveying the MCA and the recent amendments thereto under SAFETA–LU and the TCA, the court- applying the post-TCA standard (due to the dates of plaintiff’s employment/claim) explained:

The TCA does not specify how the vehicle weight is to be determined: whether the vehicle is weighed loaded or unloaded, fueled or unfueled, or some sort of average is to be utilized. On November 4, 2010, the Department of Labor (“DOL”) issued Field Assistance Bulletin No.2010–2 (“the Bulletin”) to explain its interpretation of the TCA. Among other matters, the Bulletin announces DOL’s method for determining whether a vehicle weighs 10,000 pounds or less, stating the Wage and Hour Division “will continue to use the gross vehicle weight rating (GVWR) or gross combined vehicle weight rating in the event that the vehicle is pulling a trailer.”

The parties agree the Bulletin is entitled to deference because it represents DOL’s interpretation of statutory provisions it is charged with enforcing, but they disagree as to the Bulletin’s meaning. The Court believes the interpretation is quite clear: a vehicle’s GVWR is its weight for purposes of the TCA and, hence, applicability of the FLSA. If the vehicle is pulling a trailer, the combined GVWR of the vehicle and the trailer will be used. Plaintiff’s interpretation—that GVWR is to be used only if the vehicle is pulling a trailer makes no sense. There is no reason to use GVWR in one instance and not in another, and Plaintiff’s interpretation renders part of the Bulletin a nullity (or, at worst, surplusage) by purporting to have the Bulletin explain how vehicles are weighed if they pull a trailer but failing to explain how vehicles are weighed if they are not. The Court also notes DOL’s interpretation is reasonable because it not only leads to certainty but it is consistent with the Secretary of Transportation’s entire statutory and regulatory framework, which elsewhere typically relies on GVWR when referencing the weight of vehicles.

Plaintiff contends this interpretation thwarts Congress’ intent by diminishing the reach of the FLSA. The Court disagrees. Before 2005, the Secretary of Transportation had authority over all motor private carriers regardless of the weight of the vehicle, and the FLSA did not apply to any motor private carriers. With the passage of SAFETEA–LU in 2005, Congress removed the Secretary’s authority over motor private carriers using vehicles with a GVWR of 10,000 pounds or less—and thereby expanded the FLSA’s reach. The TCA restores the Secretary’s authority to all motor private carriers regardless of a vehicle’s weight, but specifies that the FLSA’s reach will remain as it was expanded with SAFETEA–LU’s passage. In short, the TCA expanded the Secretary’s authority, but it was not intended to further expand the FLSA’s reach—it remained exactly where it was before the TCA was passed.

Thus the court concluded:

There is no dispute that the GVWR of the vehicle Plaintiff drove exceeded 10,000 pounds. Therefore, the FLSA does not apply and the moving Defendants are entitled to judgment as a matter of law.

Click McCall v. Disabled American Veterans Ernestine Schumann-Heink Missouri Chapter 2 to read the entire Order and Opinion.

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Filed under Department of Labor, Exemptions

Courts Support DOL Positions re: Tip-Credit Regs and Classification of Mortgage Loan Officers

More so than any recent Department of Labor in memory, the DOL’s positions have come under attack by several major industries largely under the battle cry that they amount to unfair or “over” regulation. Although the Supreme Court recently handed the pharmaceutical industry a major victory in its industry-wide litigation regarding the outside sales exemption’s application to its so-called pharmaceutical reps or PSRs, the DOL and workers come out on the winning end in 2 district-level cases, both challenging recent DOL pronouncements of its policies. In the first, the DOL’s recent amendment to the rules governing when an employer may take the tip-credit with respect to tipped employees came under fire. In the second, the Mortgage Bankers Association challenged the DOL’s recent Administrative Interpretation 2010–1 in which the DOL took the position that Mortgage Loan Officers (MLOs) performing typical MLO duties were non-exempt.

National Restaurant Ass’n v. Solis

In the first case, the National Restaurant Association, Counsel of State Restaurant Associations, Inc., and National Federation of Independent Businesses sued the Secretary of Labor, Hilda L. Solis, in her official capacity as Secretary of the U.S. Department of Labor; Nancy Leppink, in her official capacity as Acting Administrator of the U.S. Department of Labor; and the U.S. Department of Labor (“the Department” or “DOL”).

The rule at issue, 29 C.F.R. § 531.59(b), which went into effect on May 5, 2011, provided:

Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer’s use of the tip credit of the provisions of section 3(m) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section.

In its challenge to the regulation, the restaurant tradegroup-Plaintiffs alleged that the DOL violated the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 611, 702 (2006), when DOL promulgated a new regulation, 29 C.F.R. § 531.59(b) (2011), concerning an employer’s obligation to inform tipped employees of the “tip credit” requirements of the Federal Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201219 (2006). The parties filed cross-motions seeking judgment in their respective favor. The court held that because the agency complied with the APA notice requirements when it conducted this rulemaking exercise, and the public was fully and specifically informed of the subject matter under consideration, the DOL was within its rulemaking powers when it promulgated the new tip-credit notice rules.

Click National Restaurant Ass’n v. Solis to read the entire Memorandum Opinion.

Mortgage Bankers Ass’n v. Solis

In the second case, the Mortgage Bankers Association, a trade group for mortgage bankers challenged the DOL’s issuance, in 2010, of Administrative Interpretation, the 2010 AI, which expressly withdrew a DOL’s 2006 Opinion Letter, regarding the exempt status of typical Mortgage Loan Officers (“MLOs”). Whereas, previously the DOL had taken the position that MLOs, performing typical duties of MLO positions met the requirements for application of the administrative exemption, the 2010 Administrative Interpretation took the opposite view- that typical MLOs are non-exempt.

Discussing the AI, the court explained:

The 2010 AI relies on a District of Minnesota decision, Casas v. Conseco Finance Corp., No. Civ.00–1512, 2002 WL 507059 (D.Minn. March 31, 2002) in addition to several other cases, as support for its position that mortgage loan officers are non-exempt employees. Id. at 105. In Casas, loan originators asserted they were entitled to overtime compensation from the defendants under the FLSA, requiring the court to decide whether the plaintiffs were exempt from FLSA overtime pay provisions. The court found that because “Conseco’s primary business purpose [was] to design, create and sell home lending products,” the mortgage loan officers’ primary duty was to sell those lending products on a day-to-day basis, not ” ‘the running of [the] business [itself]‘ or determining its overall course or policies.” Casas, 2002 WL 507059, at *9 (citation omitted) (alterations in original). Relying on the ruling in Casas, the 2010 AI reasons that “because Conseco’s loan officers’ duties were ‘selling loans directly to individual customers, one loan at a time,’ ” the administrative exemption did not apply to them. A.R. at 105 (Administrator’s Interpretation No.2010–01) (internal citation omitted). The 2010 AI further notes that the 2004 amended regulations examined the difference between mortgage loan officers who spend the majority of their time selling mortgage products to consumers, like the Casas plaintiffs, as compared to those who “promot[e] the employer’s financial products generally, decid[e] on an advertising budget and techniques, run[ ] an office, hir[e] staff and set[ ] their pay, service [ ] existing customers …, and advis[e] customers.” Id. at 105 (citing 69 Fed.Reg. at 22145–46). The 2010 AI concluded that in order for mortgage loan officers to be properly classified as exempt employees, their primary duties must be administrative in nature. Id. at 105.

Relying on the facts that a significant portion of mortgage loan officers’ compensation is composed of commissions from sales, that their job performance is evaluated based on their sales volume, and that much of the non-sales work performed by the officers is completed in furtherance of their sales duties, the 2010 AI concluded “that a mortgage loan officer’s primary duty is making sales.” Id. at 106–07. And because their primary duty is making sales, the 2010 AI further concludes that “mortgage loan officers perform the production[, not the administrative,] work of their employers.” Id. at 107.

After concluding that the work of mortgage loan officers is not related to the general business operation of their employers, the 2010 AI considered another factor that could provide the basis for finding that mortgage loan officers are subject to the administrative exemption. Id. at 108. The AI states that “[t]he administrative exemption can also apply if the employee’s primary duty is directly related to the management or general business operations of the employer’s customers.Id. In making this assessment, the 2010 AI notes that “it is necessary to focus on the identity of the customer.” Id. The 2010 AI finds that “work for an employer’s customers does not qualify for the administrative exemption where the customers are individuals seeking advice for their personal needs, such as people seeking mortgages for their homes.” Id. However, it recognizes that a mortgage loan officer “might qualify under the administrative exemption” if the customer that the officer is working with “is a business seeking advice about, for example, a mortgage to purchase land for a new manufacturing plant, to buy a building for office space, or to acquire a warehouse for storage of finished goods.” Id. Nevertheless, the 2010 AI concludes that the typical mortgage loan officers’ “primary duty is making sales for the employer [to homeowners], and because homeowners do not have management or general business operations, a typical mortgage loan officer’s primary duty is not related to the management or general business operations of the employer’s customers.” Id. at 109.

Finally, the 2010 AI took exception with the 2006 Opinion Letter’s apparent assumption “that the example provided in 29 C.F.R. § 541.203(b) creates an alternative standard for the administrative exemption for employees in the financial services industry.” Id. Rather, the 2010 AI states that 29 C.F.R. § 541.203(b) merely illustrates an example of an employee who might otherwise qualify for the exemption based on “the requirements set forth in 29 C.F.R. § 541.200.” Id. Thus, the 2010 AI clarifies that “the administrative exemption is only applicable to employees that meet the requirements set forth in 29 C.F.R. § 541.200.” Id. In providing this clarification, the 2010 AI states, “[t]he fact example at 29 C.F.R. § 541.203(b) is not an alternative test, and its guidance cannot result in it ‘swallowing’ the requirements of 29 C.F.R. § 541.200.” FN4
Id.

In summation, the DOL through the issuance of the 2010 AI explicitly withdrew the 2006 Opinion Letter “[b]ecause of its misleading assumption and selective and narrow analysis[.]” Id. Before taking this action, the DOL did not utilize the APA’s notice and comment process. Compl. ¶¶ 32–33.

The Mortgage Bankers Association relied on two different theories in seeking that the court strike down the AI at issue. First, relying on Paralyzed Veterans, 117 F.3d at 586, the plaintiff argues that once an agency issues an authoritative interpretation of its own regulation, it must utilize the notice and comment process if it desires to modify that interpretation. Second, the Mortgage Bankers Association argued that the 2010 AI does not comport with the 2004 regulations and is therefore “arbitrary, capricious, an abused of discretion, and otherwise not in accordance with law.”

With regard to the first argument, the rejected it, noting that ” seven courts of appeals have held that the notice and comment provisions found in section 553 of the APA do not apply to interpretative rules.” Further, the court held that the case did not fit within the limited recognized exceptions to that general rule. Similarly, the court held that the DOL’s interpretation of its own 2004 white collar regulations was not inconsistent and therefore not arbitrary and capricious. Thus, the court granted the DOL summary judgment, in part, and denied the Mortgage Bankers Association’s similar motion, and upheld the AI.

Click Mortgage Bankers Ass’n v. Solis to read the entire Memorandum Opinion.

 

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Filed under Department of Labor, Exemptions, Tips

DOL to Issue Notice of Proposed Rulemaking to Amend the Companionship and Live-In Worker Regulations

The DOL announced yesterday that it would be issuing proposed amended rules regarding companionship and live-in workers’ eligibility for overtime under the FLSA.  A preview of the announcement from the DOL’s website explains:

“While Congress expanded protections to “domestic service” workers in 1974, these Amendments also created a limited exemption from both the minimum wage and overtime pay requirements of the Act for casual babysitters and companions for the aged and infirm, and created an exemption from the overtime pay requirement only for live-in domestic workers.

Although the regulations governing exemptions have been substantially unchanged since they were promulgated in 1975, the in-home care industry has undergone a dramatic transformation. There has been a growing demand for long-term in-home care, and as a result the in-home care services industry has grown substantially. However, the earnings of in-home care employees remain among the lowest in the service industry, impeding efforts to improve both jobs and care. Moreover, the workers that are employed by in-home care staffing agencies are not the workers that Congress envisioned when it enacted the companionship exemption (i.e., neighbors performing elder sitting), but instead are professional caregivers entitled to FLSA protections. In view of these changes, the Department believes it is appropriate to reconsider whether the scope of the regulations are now too broad and not in harmony with Congressional intent.

Proposed Changes to the Companionship and Live-In Worker Regulations

On December 15, 2011 the Department announced that it will publish a Notice of Proposed Rulemaking (NPRM) to revise the companionship and live-in worker regulations for two important purposes:

  • To more clearly define the tasks that may be performed by an exempt companion
  • To limit the companionship exemption to companions employed only by the family or household using the services. Third party employers, such as in-home care staffing agencies, could not claim the exemption, even if the employee is jointly employed by the third party and the family or household.

Although the Office of Management and Budget (OMB) has reviewed and approved the attached Notice of Proposed Rulemaking (NPRM), the document has not yet been published in the Federal Register. The NPRM that appears in the Federal Register will specify the dates of the public comment period and may contain minor formatting differences in accordance with Office of the Federal Register publication requirements. The OMB-approved version is being provided as a convenience to the public and this website will be updated with the Federal Register’s published version when it becomes available.”

Among other things, the proposed rule would overrule the 2007 holding of the Supreme Court in Long Island Care at Home, Ltd. v. Coke, and require 3rd party employers such as staffing agencies to pay companions and home health workers overtime under the FLSA when they work in excess of 40 hours per week.

Click Notice of Proposed Rulemaking to read more.

 

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Filed under Department of Labor, Exemptions

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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Filed under Affirmative Defenses, Break Time, Collective Actions, Department of Labor, Pre-Certification Communications, Settlements