Tag Archives: Automatic Deductions

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

W.D.Mo.: Plaintiffs Sufficiently Pled a “Rounding” Claim, Where Alleged Defendants’ Policy of Rounding Resulted in Improper Denial of Wages

McClean v. Health Systems, Inc.

The Plaintiffs, Certified Nursing Assistants (“CNAs”) for Defendant, claimed that they were required to work off the clock during automatically deducted meal breaks, during mandatory meetings and training sessions, and while performing mandatory data entry known as “dart charting.”  The result of these policies was to allegedly deny the Plaintiffs wages and overtime. After the Plaintiffs amended their Complaint the Defendants filed a motion to dismiss regarding several of Plaintiffs’ allegations.  As discussed here, the court denied Defendants’ motion as it pertained to Plaintiffs’ claims arising from Defendants’ policy of rounding their time to the nearest quarter of an hour, regardless of actual time worked.

Discussing the sufficiency of the rounding claim, the court explained:

“One of the Plaintiffs’ substantive allegations is that the Defendants have a practice of “reduc[ing] [their] employees’ work hours by rounding their hours to the nearest quarter hour of time to their detriment (i.e., the rounding did not average out to equally benefit Defendants and its employees over time) which results in Defendants not paying its employees for all time worked.” Doc. 51 at ¶ 112. Defendants cite federal regulations which expressly allow the practice of rounding to the nearest 15–minute increment. 29 C.F.R. § 785.48(b) (“For enforcement purposes this practice of [rounding to 5, 10 or 15–minute increments] will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”).  The Defendants submit Harding v. Time Warner, Inc. in support of their position that the Plaintiffs have not sufficiently pled a claim of improper rounding. No. 09cv1212–WQH–WMC, 2010 WL 457690 (S .D.Cal. Jan. 26, 2010). In Harding, the court found that, despite describing the allegedly improper rounding procedures in detail, Harding had failed to provide “specific factual allegations” showing that employees had been underpaid. Id. at *5. The Plaintiffs provided the following statements regarding rounding in their Amended Complaint:

112. Defendants further reduce its [sic] employees’ work hours by rounding their hours to the nearest quarter hour of time to their detriment (i.e., the rounding did not average out to equally benefit Defendants and its [sic] employees over time) which results in Defendants not paying its [sic] employees for all time worked. This practice results in Plaintiffs and all other similarly situated employees being denied wages including overtime premiums and Defendants’ illegal rounding practices are not de minimus. [sic]

113. Even though Defendants had a computerized timekeeping system in place and could have easily recognized and paid Plaintiffs’ and other similarly situated employees’ actual hours worked, Defendants deliberately disregarded the system’s records and rounded Plaintiffs’ and other similarly situated employees work time down to the nearest quarter of an hour.”

114. Defendants willfully and illegally rounded Plaintiffs’ and other similarly situated employees’ work time down to the nearest quarter of a [sic] hour.

Doc. 51 at ¶¶ 112–14 (legal conclusions in bold). Iqbal requires “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. The Plaintiffs allege that the rounding did not average out properly. They further allege that the Defendants maintain a computerized system which keeps time, but still chose to use rounding. Assuming the truth of these allegations, the Court can plausibly infer that the Defendants chose to round time because it would be more favorable than paying for actual time worked on a minute by minute basis, thus violating the averaging rationale inherent to rounding. While the Plaintiffs could have chosen to state more, to require them to plead, for example, specific minutes on specific days for which they were denied wages would be fact pleading inconsistent with Iqbal. Hamilton v. Palm, 621 F.3d 816, 817 (8th Cir.2010) (noting that “Iqbal did not abrogate the notice pleading standard of Rule 8(a)(2)”). The Defendants’ Motion to dismiss the Plaintiffs’ rounding claim is DENIED.”

Click McClean v. Health Systems, Inc. to read the entire Order.

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Filed under Break Time, Pleadings, Recordkeeping, Wage Theft, Work Time

CareGroup, Staffers Settle Pay Lawsuit For Up to $8.5 Million, Boston Globe Reports

Today’s Boston Globe reports that:

“Beth Israel Deaconess Medical Center and other CareGroup Inc. affiliates have agreed to settle a class-action lawsuit against the hospital chain that alleges workers were not paid for working through lunch breaks or beyond their scheduled shifts. The settlement, if given court approval, will cover as many as 9,000 current and former CareGroup employees.

CareGroup Inc. and its affiliates — Beth Israel, Beth Israel Deaconess-Needham, Mount Auburn Hospital, and New England Baptist Hospital — will pay up to $8.5 million. The settlement will include payments to cover back wages. CareGroup and its affiliates deny any wrongdoing.”

To read the entire story, click here.

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Filed under Settlements, Wage and Hour News

W.D.Pa.: Grants Conditional Certification Under FLSA In Automatic Deduction/Meal Break Case

Camesi v. University of Pittsburgh Medical Center

Describing the policy in question, the Court stated:

“Non-exempt employees are the subject of Defendants’ written “UPMC Compensation Manual.” Although different versions of the Manual have existed, Defendants advise that the relevant provisions have remained materially the same

MEAL PERIODS

UPMC attempts to grant a 30-minute meal period for all employees even though meal periods are not required under the FLSA. Typically, this meal period is unpaid. However, meal periods must be counted as hours worked unless all three of the following conditions are met:

• The meal period must be scheduled for 30 minutes;

• The employee is completely relieved of all duties during the meal period; and

• The employee is free to leave the workstation or area.

If a non-exempt employee does not receive 20 consecutive minutes of uninterrupted time it will be considered work time and will be paid. Answering a page or beeper is considered to be an interruption. The time and attendance system (KRONOS) has an automatic feature that will deduct a 30 minute meal period after 5 hours of time worked. If an employee does not receive a meal period and it is to be recorded as time worked, it is the employee’s responsibility to make sure the automatic [meal] deduction is cancelled via the manner designated by the department. Employees must immediately notify their supervisors if they are unable to appropriately record their time.”

Considering the lighter burden Plaintiffs have on this Stage 1 Motion for Conditional Certification, the Court noted, “Plaintiffs have placed into the record the undisputed written policies of UPMC regarding non-exempt employees’ ‘meal breaks.’ By implication, UPMC’s policies dictate that meal breaks lasting twenty minutes or longer, but less than thirty minutes, qualify as ‘bona fide meal periods’ that are non-compensable under the FLSA. See 29 C.F.R § 785.19(a) ( “Section 785.19(a)“). At least for the purposes of conditional certification, Defendants’ position is unsupported by Section 785.19(a):

Bona fide meal periods are not worktime. Bona fide meal periods do not include coffee breaks or time for snacks. These are rest periods. The employee must be completely relieved from duty for the purposes of eating regular meals. Ordinarily 30 minutes or more is long enough for a bona fide meal period. A shorter period may be long enough under special conditions. The employee is not relieved if he is required to perform any duties, whether active or inactive, while eating.
29 C.F.R. § 785.19(a). Lastly, the Court explained, “[i]f ‘special conditions’ warranting a deviation from the standard thirty-minute meal period exist, Defendants have failed to identify them.”

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Filed under Break Time, Work Time