Tag Archives: Eleventh Circuit

11th Cir.: Absent Judgment in Plaintiff’s Favor, Offer Did Not Moot FLSA Claims; Mandatory Attorney’s Fees Due

Wolff v Royal American Management, Inc.

Following an order approving the settlement between the parties and an award of attorneys’ fees and costs to the plaintiff, as the prevailing party, the defendant appealed arguing that their tender of damages to plaintiff in exchange for a general release mooted the claims. Rejecting this assertion, the Eleventh Circuit affirmed the order below and held that an FLSA defendant cannot moot a claim for unpaid wages, absent an offer of judgment in favor of the plaintiff.

Summarizing the relevant facts and procedural history, the Eleventh Circuit explained:

The relevant background is this. After filing a complaint alleging FLSA violations, Wolff calculated that RAM had failed to pay her $1800 in overtime wages. Liquidated damages under the FLSA in the same amount brought her total itemized damages claim to $3600. In December 2011, RAM tendered $3600 to plaintiff through her attorney, and moved to dismiss the complaint; Wolff’s counsel returned the check. In December 2012, RAM offered to settle the case for $5000, but Wolff’s counsel claimed that he never submitted the offer to Wolff because it was never put into writing. Nevertheless, in February 2012, Wolff received a 1099 form reflecting a payment of $3600, and called RAM to determine the reason for the 1099. RAM informed Wolff for the first time of the prior tender to her counsel, and Wolff said she wanted to settle the case. Wolff then met with RAM, signed a general release and took the $3600 check. Thereafter, the parties moved the court to determine whether the payment and release rendered the action moot, stripping Wolff of attorneys’ fees on the ground that there was no judgment in the case to indicate that Wolff was the prevailing party. The district court ultimately approved the settlement as reasonable, even though the parties reached the settlement without the participation of Wolff’s counsel. The district court further found that the settlement had not mooted the lawsuit, and later awarded Wolff’s counsel $61,810.44 in fees and costs. This timely appeal follows.

Discussing recent FLSA jurisprudence regarding mandatory fees and the ability (or lack thereof) of a defendant to moot a claim for same, the Court explained:

Under the FLSA,

Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages …. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.

29 U.S.C. § 216(b). We have said that because the FLSA seeks to protect employees from “inequalities in bargaining power between employers and employees,” Congress had made its provisions mandatory. Lynn’s Food Stores, Inc. v. U.S. Dep’t. of Labor, 679 F.2d 1350, 1352 (11th Cir.1982). Thus, “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.” Id. (quotation omitted). We’ve also held that “[t]he FLSA plainly requires that the plaintiff receive a judgment in his favor to be entitled to attorney’s fees and costs.” Dionne v. Floormasters Enters., Inc., 667 F.3d 1199, 1205 (11th Cir.2012).

The Supreme Court, considering the fee-shifting provisions in “[n]umerous federal statutes [that] allow courts to award attorney’s fees and costs to the ‘prevailing party,’ ” has recognized that a plaintiff is a prevailing party only when she obtains either (1) a judgment on the merits, or (2) a settlement agreement “enforced through a consent decree.” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t. of Health & Human Res., 532 U.S. 598, 603–604 (2001), superseded by statute on other grounds, Open Government Act of 2007, Pub.L. No. 110–175, 121 Stat. 2524. The Buckhannon Court reasoned that a prevailing party needs a judgment or consent decree to prove that there has been an “alteration in the legal relationship of the parties.” Id. at 605. Thus, in the absence of a judgment on the merits, to be a prevailing party, the FLSA plaintiff needs a stipulated or consent judgment or its “functional equivalent” from the district court evincing the court’s determination that the settlement “is a fair and reasonable res[o]lution of a bona fide dispute over FLSA provisions.” Lynn’s Food Stores, 679 F.2d at 1355;
American Disability Ass’n, Inc. v. Chmielarz, 289 F.3d 1315, 1317, 1320 (11th Cir.2002) (holding that the district court’s approval of the terms of a settlement coupled with its explicit retention of jurisdiction are the functional equivalent of a consent decree, which renders the settlement a “judicially sanctioned change in the legal relationship of the parties” for purposes of the “prevailing party” determination necessary for attorneys’ fees).

In Dionne, we held that an employer, who denied liability for nonpayment for overtime work, did not need to pay attorneys’ fees and costs under the FLSA if the employer tendered the full amount of overtime pay claimed by an employee, and the employee conceded that “the claim for overtime should be dismissed as moot.” 667 F.3d at 1200. In other words, we concluded that Dionne was not a prevailing party under the FLSA because in granting the defendant’s motion to dismiss for lack of subject matter jurisdiction, the district court did not award a judgment to the plaintiff. Notably, however, we expressly limited our holding, emphasizing on rehearing that:

Our decision in this matter addresses a very narrow question: whether an employee who conceded that his claim should be dismissed before trial as moot, when the full amount of back pay was tendered, was a prevailing party entitled to statutory attorney’s fees under § 216(b). It should not be construed as authorizing the denial of attorney’s fees, requested by an employee, solely because an employer tendered the full amount of back pay owing to an employee, prior to the time a jury has returned its verdict, or the trial court has entered judgment on the merits of the claim.

Id. at 1206 n. 5 (emphasis added).

Thereafter, in Zinni, we held that a settlement offer for the full amount of statutory damages requested under the Fair Debt Collection Practices Act (“FDCPA”), without an accompanying offer of judgment, did not offer full relief to an FDCPA plaintiff and therefore did not render the plaintiff’s claim moot. 692 F.3d at 1167–68. Zinni involved three cases that were consolidated on appeal: in each case, the debt collector offered to settle for $1,001, an amount exceeding by $1 the maximum statutory damages available to an individual plaintiff under the FDCPA, as well as an unspecified amount of attorneys’ fees and costs. Id. at 1164–66. None of the plaintiffs accepted the settlement offers. Id. The district court granted the defendants’ motions to dismiss for lack of jurisdiction because the offers left the plaintiffs with “no remaining stake” in the litigation. Id. at 1164.

On appeal, we reversed, holding that “the failure of [the debt collectors] to offer judgment prevented the mooting of [the plaintiffs'] FDCPA claims.” Id. at 1168. We said that a settlement offer for the “full relief requested” means “the full amount of damages plus a judgment.” Id. at 1166–67. The court explained that judgment is important to a plaintiff because it is enforceable by the district court, whereas a settlement offer without an offer of judgment is “a mere promise to pay” which, if broken, required the plaintiff to sue for breach of contract in state court. Id. at 1167–68 (quoting from and relying on Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754, 766 (4th Cir.2011) (FLSA overtime case)). We also noted that “even if the [settlement] check had been tendered [to the plaintiff], that fact would not change our ultimate conclusion.” Id. at 1164 n. 5. In fact, we said that even if the plaintiff accepted the offer, without an offer of judgment, full relief had not been offered. Id. at 1167 n. 8 (“The issue of whether the offer was accepted or rejected, while argued by the parties, is not relevant to our analysis because Appellees never offered full relief.”).

Applying these principles to the case at bar, the Eleventh Circuit concluded that absent an offer of judgment in plaintiff’s favor, the defendant could not and did not moot the plaintiff’s claims, not withstanding the plaintiff’s acceptance of the monies tendered:

Here, RAM’s settlement offer to Wolff did not include an offer of judgment in Wolff’s favor and against RAM. Rather, Wolff signed a release providing that she “acknowledge[d] receipt of [the $3600] check as full and complete satisfaction of any monies owed to [Wolff] from Royal American.” As a result, under Zinni—which expressly relied on a FLSA case from the Fourth Circuit—we are compelled to conclude that RAM’s offer did not constitute full relief of Wolff’s FLSA claim. We recognize that in Zinni, the plaintiff did not accept the settlement check, but here, Wolff accepted the check and signed a release. However, Zinni made clear that so long as a settlement agreement does not include an offer of judgment against a defendant (and it did not in this case), whether a plaintiff accepted the settlement makes no difference. Thus, RAM’s settlement with Wolff did not moot her FLSA claim, and she was entitled to seek attorneys’ fees and costs from RAM.

Rejecting the defendant’s contention that the Supreme Court’s recent decision in Genesis required a different result, the court stated:

RAM argues that the Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013), requires a different result. There, the Supreme Court held that a “collective action” brought under the FLSA—wherein an employee brings an action to recover damages for FLSA violations on behalf of himself and other “similarly situated” employees—became non justiciable when the lone plaintiff’s individual claim became moot. Id. at 1526. However, Genesis involved a settlement offer that included an offer of judgment-unlike the offer here, and unlike the one in Zinni. See id. at 1527 (“When petitioners answered the complaint, they simultaneously served upon respondent an offer of judgment under Federal Rule of Civil Procedure 68.”). What’s more, Genesis explicitly said that it was “assum[ing], without deciding, that [an employer's] Rule 68 offer mooted [an employee's] individual claim.” See id. at 1529; see also id. n. 4 (“[W]e do not resolve the question whether a Rule 68 offer that fully satisfies the plaintiff’s claims is sufficient by itself to moot the action.”). Accordingly, Genesis is not directly on point, and expressly does not answer the question before us.

Affirming the district court’s award of attorneys fees to plaintiff, the Court reasoned:

We also find unavailing RAM’s claim that the district court abused its discretion in awarding the fees in this case. As for RAM’s claim that Wolff was not a prevailing party for purposes of obtaining FLSA attorneys’ fees, we are unpersuaded. As we’ve said, to be entitled to fees under the FLSA, a plaintiff must “receive a judgment in [her] favor.” Dionne, 667 F.3d at 1205. Here, the district court plainly found that the settlement—which RAM admits included the full amount of back pay as well as an equal amount for liquidated damages—was reasonable, and by doing so, the district court entered a judgment in Wolff’s favor. See Lynn’s Food Stores, 679 F.2d at 1355;
Chmielarz, 289 F.3d at 1317, 1320. RAM provides us with no reason to depart from Lynn, which directs a district court to enter a judgment after “scrutinizing” for fairness a proposed settlement entered into between the employee and the employer in an action brought for back wages under the FLSA. Id. at 1353. Further, unlike in Thomas v. State of La., 534 F.2d 613, 615 (5th Cir.1976), it is unclear in this case whether Wolff received “everything to which [she was] entitled under the FLSA at the time the agreement [wa]s reached,” since the district court found that the parties did not intend the settlement agreement to preclude attorneys’ fees under the FLSA.

As for RAM’s claim that it was denied due process when the district court entered the judgment, the record shows that RAM was given an opportunity to respond to Wolff’s motions on this matter, and that RAM expressly made arguments regarding its liability in its papers before the district court. Nor has RAM shown, based on the record of this case—including the record of attorney and party conduct on both sides—that the district court abused its considerable discretion in granting attorneys’ fees using the lodestar analysis. This is especially true given that in cases like this one where attorney fees are allowed to the prevailing party by federal statute, the compensable fees include time spent litigating both the entitlement to and amount of fees incurred; i.e. “fees for litigating fees.” Thompson v. Pharmacy Corp. of Am., Inc., 334 F.3d 1242, 1245 (11th Cir.2003) (statutory fees for civil rights litigants includes “fees for litigating fees”). Accordingly, we affirm.

Click Wolff v Royal American Management, Inc. to read the entire unpublished Per Curiam Opinion.

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N.D.Ala.: Arbitration Agreements Obtained By Defendant in Required Meetings After Putative Collective Commenced Unenforceable

Billingsley v. Citi Trends, Inc.

This case was before the court following the court’s order prohibiting enforcement of arbitration agreements that the defendant obtained from opt-ins (prior to the time they opted in to the case). The court previously had ruled that such arbitration agreements were unenforceable, because of the manner in which they were obtained from current employees, following an evidentiary hearing regarding same. This case is particularly important because it addresses the common situation in which a defendant-employer, at least arguably, crosses the line from attempting to mount a defense to a potential collective/class action, and begins to improperly exercise its unequal power over its current employees/putative class members. Denying the defendant’s motion for reconsideration, the court expanded on the reasoning of its prior order.

As the court explained:

This Fair Labor Standards Act case presents the court with a dilemma: enforce arbitration agreements against Defendant Citi Trends Store Managers, who are potential opt-in Plaintiffs in this collective action that were obtained during the conditional certification stage of this case and gut the collective action mechanism Congress provided for the protection of employees or refuse to enforce the arbitration agreements and run afoul of the federal policy favoring their enforcement. Because of the particular events surrounding the roll-out of the arbitration agreement in this case, as specifically discussed below, the court finds it cannot approve employer conduct like that involved in this case specifically targeting only potential class members during a critical juncture in this case with the definite goal of undercutting the Congressional intent behind the collective action process. The court will DENY the Defendant’s motion to compel arbitration and preserve the viability of the collective action mechanism.

Summarizing the parties’ respective contentions, the court explained:

Defendant Citi Trends, Inc. argues that this court’s ruling at the January 2013 hearing that it could not seek to compel arbitration against those opt-in Plaintiffs who signed mandatory arbitration agreements was an error of law. The Plaintiffs argue that the court’s ruling was appropriate and necessary to correct Citi Trends’s wrongful action—intimidating its employees into waiving their rights to join this lawsuit by signing mandatory arbitration agreements. On April 19, 2013, the court granted the motion to reconsider its ruling and set an evidentiary hearing to hear evidence surrounding presentment of the arbitration agreements to determine if any coercion, duress, or intimidation occurred.

While the court had previously denied the plaintiff’s motion for protective order and/or to strike declarations obtained from current employees, that was not the end of its inquiry as to whether the arbitration agreements should be enforced. Rather, the court held an evidentiary hearing because the

high standard had not been met on the parties’ submission alone, and thus, the court decided it needed to hold a hearing to determine if any coercion, duress, intimidation, or other abusive conduct occurred at the time SMs were required to sign the Agreement. The question of enforcement of or invalidation of the Agreement invokes a different standard than did the motion to strike or to enter a protective order, which was the requested relief before the court previously.

The court summarized the evidence received at the hearing as follows:

At the evidentiary hearing on May 14 and 15, 2013, the court heard testimony from opt-in Plaintiffs Roilisa Prevo and Katina Alfred, former Citi Trends SMs; Ivy Council, Executive Vice President of Human Resources for Citi Trends; Rashad Luckett, Human Resources Coordinator for Citi Trends; Vanessa Davis, Director of Human Resources for Citi Trends; and LaKesha Wilkins, an “independent third party witness” hired by Citi Trends to sit in SM meetings with Ms. Davis. The court will briefly summarize that testimony here but will also reference it as needed in the discussion below.

Citi Trends devised and implemented its new ADR policy in the late spring and early summer of 2012—shortly after it was served with the complaint on February 27, 2012 (doc. 6), and after the court on May 16, 2012, set a scheduling conference for May 31, 2012. (Doc. 17). On May 31, 2012, this court issued a Scheduling Order requiring the Plaintiffs to file their motion for conditional certification of the class on or before July 31, 2012 with briefing to be completed by September 10, 2012. (Doc. 18). Just a couple weeks after the Order, in mid-June, Citi Trends began the process of rolling out its new Alternative Dispute Resolution (“ADR”) plan, including the mandatory Agreement. Ms. Davis testified that as of mid-June she had virtually completed the new employee handbook she was working on, which did not include an ADR policy; she learned for the first time in mid-June that the updated handbook would include the new ADR policy. Citi Trends, under the direction of Ms. Council, sent Ms. Davis, Mr. Luckett, and other HR representatives to have two-on-one private meetings with SMs across the country as early as June 30, 2012 to roll out the new ADR policy. The HR representatives met with all SMs individually throughout the summer.

District Managers (“DMs”) told the SMs that they must attend the meetings that concerned the issuance of a new employee handbook. DMs were only asked to sign the Agreement if the HR Representatives happened to see them at the SM meetings, but Citi Trends distributed the Agreement to DMs, other corporate employees, and store associates at a later date.

When the SMs arrived at the meetings, they were greeted by an HR Representative and another individual, who Ms. Prevo claimed was never introduced to her and whom Ms. Alfred identified as another Citi Trends corporate employee. The HR Representatives gave the SMs four documents: the SM Disclosure, the Agreement, the SM Declaration, and a photocopied version of a new employee handbook. The two-on-one private meetings took place in small, back rooms in Citi Trends retail stores, the same places where interrogations or investigations of employees occurred. The HR Representatives who met with the SMs played an advisory role in the employment decisions of Citi Trends employees, and both Ms. Prevo and Ms. Alfred testified that they believed the HR representatives conducting the meetings had authority to make employment decisions about them, such as hiring and firing.

Ms. Alfred and Ms. Prevo testified that they signed the documents but came away from those meetings having felt intimidated by the HR Representatives and pressured to sign the Agreement or lose their jobs. The SMs were not given copies of the documents they signed at the meeting or at anytime afterward, even if they specifically requested copies.

After finding the agreements at issue to be both procedurally and substantively unconscionable, the court weighed the related public policy concerns as well:

The biggest public policy concern that the court has to consider about actions of Citi Trends, however, is the effect of the Defendant’s efforts on the purpose of an FLSA collective action. The court’s decision on this issue is bigger than this one case, and that concern is what has plagued the court about this situation from the first mention of the Agreement. The purposes of the FLSA and its collective action procedure factor into the court’s decision on this motion.

Congress passed the FLSA during the Great Depression to protect workers from overbearing practices of employers with greatly unequal bargaining power over them. See Roland Elec. Co. v. Walling, 326 U.S. 657, 668 n. 5 (1946) ( “The Bill was introduced May 24, 1937, [and] … accompanied by a Presidential message by Franklin D. Roosevelt …. ‘to protect the fundamental interests of free labor and a free people we propose that only goods which have been produced under conditions which meet the minimum standards of free labor shall be admitted to interstate commerce. Goods produced under conditions which do not meet rudimentary standards of decency should be contraband and ought not to be allowed to pollute the channels of interstate trade.’ “) (quoting 81 Cong. Rec. 4960, 4961). To further that purpose, § 216(b) of the FLSA authorizes an employee to file suit for and on behalf of himself and others similarly situated. See 29 U.S.C. § 216(b). Those employees who wish to join the lawsuit must give written consent or opt-in to the lawsuit, but they only know that they can do so once court-approved notice has been sent to them. See id…

In this case, the court finds that such goals are defeated if the court approves actions taken by defendants, such as those taken by Citi Trends in this case, that are designed and used to prevent employees from vindicating their rights in an FLSA collective action. The court wishes to make clear that it is not addressing a pre-lawsuit or pre-employment arbitration agreement between an employer and employee that would preclude participation in a collective action. Instead, this ruling only addresses the Agreement in this case that was presented to the specifically-targeted potential class of employees in the specific manner that gave those potential opt-in Plaintiffs no meaningful choice or known opportunity to refuse to sign without the fear of termination in a setting that was ripe for and calculated to produce perceived intimidation or coercion and when its very purpose and effect was to preclude participation in this lawsuit.

For these reasons, the court finds that the Agreement at issue in this case reeks of both procedural and substantive unconscionability in the context in which it was presented and obtained. The Agreement cannot and will not be enforced against Ms. Prevo, Ms. Alfred, or Ms. Cunningham, and the court will DENY Citi Trends’s motion to compel arbitration against them. In making this decision, the court notes that it found the testimony presented by the Defendant, specifically that from Ms. Council and Ms. Davis, particularly enlightening. In addition to the language of the documents themselves, the court finds that the concurrent timing of the ADR roll-out and the Plaintiffs’ preparation of the motion for conditional certification and court approved notice, and the manner in which the Agreement was presented weigh in favor of invalidating the Agreement as it relates to the SMs who were presented the Agreement during its initial roll-out in the summer of 2012.

The court truly believes it would be a derogation of the court’s responsibility if it were to approve employer conduct like that in this case that specifically undercuts the Congressional intent behind creating the FLSA collective action process for aggrieved employees, and the court does not take such action lightly.

In light of this reasoning, the court denied the defendant’s motion for reconsideration and held that the arbitration agreements, obtained from current employees were unenforceable.

Click Billingsley v. Citi Trends, Inc. to read the entire Memorandum Opinion.

A review of the docket shows that the defendant has filed an appeal to the Eleventh Circuit.  Thus, this issue will likely get further review.  Stay tuned for further developments….

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LPNs, Commercial Cleaners and Cable Installers: Recent Decisions Continue to Clarify That So-Called “Independent Contractors” May Actually Be Employees Under the FLSA

As the workforce becomes more and more aware of the differences between true independent contractors and employees under the FLSA—the latter entitled to minimum wages and overtime premiums under the FLSA—courts continue to address this factually intensive issue in a variety of industries. However, as many FLSA practitioners are no doubt aware, certain industries seem to have more than their fair share of employers who misclassify their employees as independent contractors. In 3 recent cases, all from within the Eleventh Circuit, courts addressed the issue of independent contractor misclassification. Significantly, all of the cases held that—under the FLSA’s very wide definition of employment, each of the workers at issue were employees (or in one case reversed the lower court’s ruling otherwise). Because the decisions themselves are factually intensive inquiries, the facts of each case are discussed in detail below.

M.D.Fla.: LPNs Employees Not Independent Contractors

Solis v. A+ Nursetemps, Inc.

The first case discussed here concerned the defendant-employer’s misclassification of its LPN (licensed practical nurse) employees as independent contractors. Following a bench trial, the court held that the LPNs were employees and not independent contractors as the employer had maintained. Analyzing the issue, the court explained:

The Eleventh Circuit cases clearly establish that the “economic realities test” is the standard to be applied in determining whether a worker is an employee covered by the FLSA, or is an independent contractor who is not covered by the Act. Medrick v. Albert Enterprises, Inc., 508 F.2d 297 (5th Cir.1975); Villarreal v. Woodham, 113 F.3d 202 (11th Cir.1997); Freund v. Hi–Tech Satellite, Inc., 185 Fed. Appx. 782 (11th Cir.2006).9
See also Antenor, 88 F.3d 925 (applying the economic realities test in resolving a joint employer issue under the FLSA).

 Each of those pertinent Eleventh Circuit decisions recite various factors to be considered in applying the economic realities test, and the lists are not identical. All of the cases agree, however, either implicitly or explicitly, that “[n]o one of these considerations can become the final determinant, nor can the collective answers to all of the inquiries produce a resolution which submerges consideration of the dominant factor—economic dependence.” Freund, supra, 185 Fed. Appx. at 783 (quoting Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 1311 (5th Cir.1976)).

The factors listed in the cases include: (a) whether the alleged employer had the power to hire and fire the workers in question; (b) whether the alleged employer supervised and controlled the employee work schedules or conditions of employment; (c) whether the alleged employer determined the rate and method of payment; (d) whether the alleged employer maintained work time records; (e) whether the worker performed a specialty job requiring specialized training or skill; (f) whether the contractual terms of the employment varied in a material way as one worker succeeded another; (g) whether the workers had business organizations that could offer the worker’s services to others; (h) whether the alleged employer supplied the premises and/or the equipment necessary to perform the work; (i) whether the worker employed others to assist in performing the job; (j) the employee’s opportunity for profit or loss depending upon management skill; (k) the degree of permanency or duration of the working relationship; and (l) the extent to which the service rendered by the worker is an integral part of the employer’s business.

Applying each of the factors, the court reasoned:

(a) The right to hire and fire. The Court interprets this factor (taken from Villarreal, supra ) to require an examination of whether the employer has retained the usual common law right to hire and fire at will, or has placed limitations on those rights by contract as would often be the case in dealing with an independent contractor and a contractual clause imposing liability or a penalty for cancellation of the work. Here, of course, Nursetemps has sole control with respect to the selection of nurses to be assigned to shifts, and may withhold such assignments if it pleases. Just as the nurses are under no obligation to take assignments, Nursetemps is under no obligation to make them.

(b) Control of work schedules and supervision of the work. This factor (also taken from Villarreal, supra ) has two aspects as applied to this case. Control of the work schedules, in terms of assigning work to the nurses, is in the hands of Nursetemps. Supervision of the work, however, is not. That control is in the hands of the client facility, not Nursetemps. Thus, as stated earlier, if the common law test applied, Nursetemps would have a stronger case. In the context of an FLSA examination, however, this division of control does not help the nurses’ independent contractor argument because control of the work does not shift to the nurses, it shifts to another entity (which may thereby become a joint employer, Antenor v. D & S Farms, supra,) but it does not mean that the nurses thereby become independent contractors.

(c) Determining the rate and method of payment. In an independent contractor relationship, the independent contractor normally has at least an equal say in the rate to be charged for particular work by bidding on the job or by posting or advertising standard rates for the work to be performed. Here, by contrast, it is Nursetemps that fixes the hourly rate it will pay the nurses for each shift or each assignment. Individual nurses have the right to negotiate with respect to the rate they will earn, but Nursetemps retains the upper hand in deciding the rate it will pay; and it is Nursetemps that pays the nurses, not the facility where the work is performed.

(d) Maintenance of time records. While the nurses keep their own time records, they are paid by the hour, and such records are turned in to and maintained by Nursetemps (albeit not in full compliance with 29 C.F.R. § 516.2) for the purpose of calculating the nurses’ pay. Stated another way, the nurses are not paid a flat rate or piece rate per shift. They are hourly employees.

(e) Performance of a specialty job requiring specialized training or skill. While it cannot be denied that the work of a nurse requires highly specialized training and skill, such work in this society is not necessarily a specialty job in the sense that members of the public do not typically seek them out for private or individual engagements; rather, the nurses involved in this case work, instead, on an hourly basis in institutional settings like the hospices, hospitals and detention facilities.

(f) Variation in terms of employment. There is no evidence of any variation in the terms of employment as one worker succeeds another. Nurses are assigned to work shifts for rates established by Nursetemps and (subject to occasional negotiation of rates with an individual nurse) remain the same from nurse to nurse, shift to shift, week to week.

(g) Business organization for offering nurses services to others. While some of the nurses formed limited liability or corporate entities, the evidence is that those who did so were acting at the suggestion of Nursetemps, and the existence of such entities did not change the practical day-to-day relationship between Nursetemps and the nurses in any way. Also, the formation of such entities did not lead any of the nurses to use them as a vehicle to offer their services as entrepreneurs to other health care providers or to the public in general.

(h) Premises and equipment. Nursetemps does not supply the premises on which the work is accomplished, but neither do the nurses. The equipment necessary for the nurses to do their work—stethoscopes, blood pressure cuffs, thermometers and uniforms are provided by the nurses who also bear the cost of their continuing educational requirements.

(i) Employment of others. The nurses do not employ others to assist them in the performance of their work.

(j) Opportunity for profit. The nurses are paid by the hour for shift work. There is no opportunity for additional income or profit through the exercise of managerial skill or increased efficiency in the manner or means of accomplishing the work.

(k) Permanency of the relationship. A majority of Nursetemps nurses have accepted work assignments on a regular basis for a year or more.

(l) Whether the nurses work is an integral part of Nursetemps business. The work performed by the nurses is more than an integral part of Nursetemps’ business, it is the whole of Nursetemps’ business.

Per its analysis of each of the factors, the court concluded:

Consideration of the foregoing factors, both individually and collectively, leads inexorably to the conclusion that Nursetemps nurses are employees for purposes of the FLSA, not independent contractors. The same result is reached when one simply steps back to take a common sense look at the nature of the relationship between Nursetemps and the nurses. While it is certainly true that the nurses enjoy a degree of flexibility in their working lives, not shared by many in the work force, including an enhanced ability to “moonlight” by working for more than one agency at a time and by choosing when and where to make themselves available for work, the simple fact remains that when the nurses are available for work they are dependent upon Nursetemps to provide it, and when they are working on assignment for Nursetemps they are, during those workweeks, employees of Nursetemps.

Click Solis v. A+ Nursetemps, Inc. to read the entire Memorandum Opinion Including Finding of Fact and Conclusions of Law.

S.D.Fla.: Commercial Contractors Were Employees Not Independent Contractors

Robles v. RFJD Holding Co., Inc.

In a second recent case, a court in the Southern District of Florida was asked to decide whether commercial cleaners were employees or independent contractors, as the employer-defendant claimed. Applying the same test as the court above, the court granted the plaintiffs’ motion for summary judgment and denied the defendant’s motion—holding that the defendant had misclassified the commercial cleaners as independent contractors. Discussing the factors regarding its determination on the issue the court explained, in part:

1. Control of the Manner of Performing Work 

When an alleged employer provides “specific direction for how workers, particularly lowskilled workers, are to perform their jobs, courts have weighed the control factor in favor of employee status.” Montoya v. S.C. C.P. Painting Contractors, Inc., 589 F.Supp.2d 569, 579 (D.Md.2008) (finding factors such as the provision of supervision of painters, instruction in what paint to use and how many coats to apply, and on-the-job training to be indicative of employee status). Similarly, the provision of written instructions and procedures for how to complete the job also indicates employee status. See Schultz v. Capital Int’l Sec., Inc. ., 466 F.3d 298, 307 (4th Cir.2006) (finding an eight-page standard operating procedure document outlining job tasks indicative of employee status); Solis v. Int’l Detective & Protective Serv., Ltd., 819 F.Supp.2d 740, 750 (N.D.Ill.2011) (finding a policy and procedure handout coupled with close monitoring of workers’ compliance with the procedures indicative of control). The provision of training likewise indicates an employee-employer relationship. See Gate Guard Servs. L.P. v. Solis, 2013 WL 593418, at *4 (S.D.Tex. Feb.13, 2013) (noting the significance of training and observing that the non-provision of training indicates an independent-contractor relationship). Finally, supervision need not be constant to establish an employee-employer relationship. See Brock v. Superior Care, Inc., 840 F.2d 1054, 1060 (2d Cir.1988) (citing Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376, 1383–84 (3d Cir.1985)) (“An employer does not need to look over his workers’ shoulders every day in order to exercise control.”).

Here, the facts demonstrate that Defendants exercised substantial control over the manner of performing work. Defendants trained the cleaning crews in how to clean specific items, including what tools to use; they provided the crews with extensively detailed checklists of what to clean and how often to do so; they initially monitored the crews’ performance on-site and in person for an entire week; and, although there is some dispute as to how often any particular supervisor visited and inspected a specific restaurant,2 it is undisputed that Defendants’ supervisors regularly supervised the cleaning crews’ work. Viewed together, this all suggests that Defendants closely controlled the manner of Plaintiffs’ work as an employer would. While Defendants—as all businesses to some degree—may certainly have been concerned with “customer satisfaction,” Defendants manifested that concern through closely controlling and monitoring Plaintiffs’ work habits and methods. Accordingly, the first factor weighs in favor of finding that Plaintiffs were “employees” under the FLSA.

2. Opportunity for Profit or Loss Depending on Managerial Skill

Turning to the second half of the inquiry on this factor, the Court notes that Defendants do not point to any opportunity for loss that Plaintiffs risked. The opportunity for loss must extend beyond the mere threat of lost wages and must involve the risk of losing a capital investment. See Lauritzen, 835 F.2d at 1536;
Clincy v. Galardi S. Enters., Inc., 808 F.Supp.2d 1326, 1345–46 (N.D.Ga.2011). Beyond the occasional purchase of negligible cleaning supplies and tools, which is insufficient to present a risk of loss, Plaintiffs invested practically nothing but their labor in their cleaning work. See Lauritzen, 835 F.2d at 1536. To the extent that Defendants may contend that the back charges that they imposed on cleaning crews when customers were dissatisfied represent losses, see D.E. 56–1 at 9, the Court rejects this argument. Such back charges are not attributable to any discretionary managerial decision but, rather, are the result of poor cleaning performance.

When viewed as a whole, Plaintiffs’ opportunities to increase their profits support the idea that they were independent contractors, but the absence of any real risk of loss suggests Plaintiffs were “employees.” This factor is a wash.

3. Investment in Required Equipment or Materials and Employment of Workers

As discussed above, Plaintiffs were permitted to hire individuals on their own to accomplish their cleaning tasks but were not required to do so. D.E. 56–2, ¶ 5; D.E. 68–1, ¶ 5. During their fourteen-month tenure with Emmaculate, Plaintiffs Robles and Ulloa hired an individual only one time to help with their cleaning work. D.E. 56–2, ¶ 27; D.E. 68–1, ¶ 27. Plaintiffs’ investment in additional labor was minimal—even aberrant—and not indicative of independence. See Usery, 527 F.2d at 1312 (“Occasional exercise of the right to hire helpers also has not been found sufficiently indicative of independence to allow a finding of nonemployee status.”)…

Here, Plaintiffs made admittedly minimal purchases rather than large-scale investments in supplies and equipment. The lack of Plaintiffs’ substantial investment in equipment and materials tips in the direction of finding employee status.

4. Whether the Service Rendered Requires Special Skills

As other courts have found, cleaning services such as those provided by Plaintiffs require no special skills. See Quinteros v. Sparkle Cleaning, Inc., 532 F.Supp.2d 762, 770 (D.Md.2008); see also Usery, 527 F.2d at 1314 (“Routine work which requires industry and efficiency is not indicative of independence and nonemployee status.”). Defendants’ arguments to the contrary are unpersuasive. To the extent that Defendants suggest experience is required to do Plaintiffs’ work, D.E. 67 at 7, the Court does not agree that experience is, or is equivalent to, a specialized skill, and Defendants point to no authority that suggests otherwise. See Lauritzen, 835 F.2d at 1537 (citing Brock v. Lauritzen, 624 F.Supp. 966, 969 (E.D.Wis.1985) (holding that the development of occupational skill through experience “is no different from what any good employee in any line of work must do”). Put another way, one can quickly and easily develop experience at routine, unspecialized tasks…

Accordingly, this factor weighs in favor of finding employee status.

5. Permanency and Duration of the Working Relationship

The ability to readily reject jobs is not reflective of the permanency found in an employee-employer relationship and supports finding an independent-contractor relationship. On balance, the duration and permanency factor tips slightly in favor of Defendants.

6. The Extent to Which the Service Is an Integral Part of the Alleged Employer’s Business

Next, the Court considers the extent to which Plaintiffs’ cleaning services were an integral part of Defendants’ business. It is undisputed that Emmaculate is a “commercial cleaning business specializing in restaurant cleaning.” D.E. 56–2, ¶ 1; D.E. 68–1, ¶ 1. As Plaintiffs provide the cleaning services that Defendants’ offer, Plaintiffs’ services are indisputably integral, if not essential, to Defendants’ business. While Defendants attempt to cursorily dismiss this factor as “not determinative of one’s employee’s status,” D.E. 56–1 at 11, the reality is that this factor informs the inquiry as much as any other factor listed here. Freund, 185 F. App’x at 784;
Scruggs v. Skylink, Ltd., 2011 WL 6026152, at *8 (S.D.W.Va. Dec.2, 2011) (“Generally, the more integral the work, the more likely the worker is an employee, not an independent contractor.” (citation omitted)). Consequently, this factor weighs strongly in favor of finding an employee relationship.

Having weighed each of the factors, the court concluded that the commercial cleaner workers were defendant’s employees, as a matter of law:

Upon consideration of the six factors above and the circumstances as a whole, the Court finds that Plaintiffs were dependent on Defendants in their economic relationship and are considered employees under the FLSA. The fact that Robles and Ulloa worked exclusively for Emmaculate during their fourteen-month association highlights Plaintiffs’ economic dependency on Defendants. Further, Defendants’ significant control and supervision of Plaintiffs’ work habits and methods, Plaintiffs’ minimal capital investments and nonexistent risk of loss, Plaintiffs’ dependence on Emmaculate to find and engage restaurants to be cleaned, the lack of a need for specialized skills, and the integral and essential nature of Plaintiffs’ services to Defendants’ business all describe a relationship with the character of one between an employee and an employer, notwithstanding the few indicia of independent-contractor status found on the record. Taken together, these facts demonstrate that Plaintiffs were not in business for themselves but were, instead, dependent on Defendants for their continued employment in the restaurant-cleaning business. Accordingly, Plaintiffs’ motion for summary judgment is granted on this point, and Defendants’ motion is denied.

Click Robles v. RFJD Holding Co., Inc. to read the entire Order on Motions for Summary Judgment.

11th Cir.: Cable Installers May Be Employees; Summary Judgment For Employer Reversed

Scantland v. Jeffrey Knight, Inc.

The final case was before the Eleventh Circuit on the appeal of cable installer employees, following the district court’s order in which it held that the installers were independent contractors rather than employees, notwithstanding many cases holding to the contrary on similar facts. Applying the economic realities test discussed above, and taking the facts in the light most favorable to the plaintiffs (as the non-movants), the Eleventh Circuit held that a reasonable jury could find that the cable installers were employees under the FLSA. As such, the court reversed the decision below and remanded the case for trial on the issue.

Weighing the various factors, the court explained:

A. Control

The first factor considers the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed. Control is only significant when it shows an individual exerts such a control over a meaningful part of the business that she stands as a separate economic entity. Usery, 527 F.2d at 1312–13. The facts, viewed in the light most favorable to plaintiffs, indicate that Knight exercised significant control over plaintiffs such that they did not stand as separate economic entities who were in business for themselves.

Technicians were required to report to a Knight facility by 7:00 to 7:15 each morning. Technicians would turn in equipment from the previous day and submit their work orders, which included the billing codes that determined their pay for particular jobs. These billing codes were set by Knight, and managers could unilaterally change the codes that technicians reported, thereby reducing a technician’s pay.4 Plaintiffs would also receive a route detailing the current day’s work orders, which were generally assigned in two-hour timeslots. Though plaintiffs’ Independent Contractor Service Agreements provided that they could decline any work assignments, plaintiffs testified that they could not reject a route or a work order within their route without threat of termination or being refused work in the following days. Thus, while a technician might consider a specific route or work order unprofitable, because, for example, it was low-paying or far away, plaintiffs had no power to decline the assignment. Technicians also might be required to attend quality control meetings and classes on new equipment or participate in a monthly equipment inventory conducted by BHN, which required technicians to unload their trucks and account for all BHN equipment. This morning routine could last up to two hours. Plaintiff Sperry testified that he had to arrive by 5:30 a.m. in order to make it to his first job assignment on time. During occasional downtime, technicians could request additional jobs; they could also be required to assist other technicians or be assigned additional jobs that they could not refuse. Technicians might be required to stay on the job until all the technicians in their area had completed their work; they could also be called back to jobs long after completing them to address problems. Plaintiffs could upsell by convincing customers to add additional BHN services, but those orders had to be approved by Knight. Plaintiffs could not sell non-BHN services to customers and could not work for other companies, either because they were told they could not do so or because the schedule Knight imposed prevented them from doing so. Plaintiffs could, according to their contract, employ others to help them, but any such employees had to be technicians already engaged by Knight, and were therefore bound by Knight’s policies. Plaintiffs were subject to meaningful supervision and monitoring by Knight. Technicians routinely communicated with dispatch during the day and were required to log in and out of Work Force Management—a service on their cellular phones that they paid for via payroll deductions—to indicate when they arrived on a job, when they completed a job, and what their estimated time of arrival was for their next job. Knight or BHN also conducted site checks of technicians’ work, and Knight tracked technicians’ quality control discrepancy rate. Technicians with consistent quality control issues could be given remedial training at a mock house or they could be terminated. An installation manager also might counsel a technician regarding his physical appearance or the appearance of his vehicle. Knight levied uncontestable fines called chargebacks for not meeting specifications, not using Work Force correctly, misplacing inventory, or being late to a job. Typically, $100 would be deducted from the technician’s pay for chargebacks on residential jobs and $150 for commercial jobs. Plaintiff Downs testified that chargebacks could mount up to the point where they surpassed the amount of money a technician could earn on a job. Technicians could also be downloaded, i.e., fired, for consistently misbilling, fraudulently billing, stealing, having a bad attitude, having consistently low quality control ratings, and being rude to customers, other technicians, or Knight employees. Knight’s Jill Williams testified that she and another installation manager had downloaded more than one hundred technicians. Plaintiff technicians worked five to seven days a week; some were required to work six days a week and sometimes seven days a week because of a requirement that they work rotating Sundays. Plaintiffs regularly worked more than forty hours a week.7 Technicians either had to inform their supervisors that they would be taking time off or request time off in advance, sometimes in writing.

In sum, Knight controlled what jobs plaintiffs did, how much they were paid, how many hours they worked, how many days they worked, their daily work schedule, whether they could work for others, whether they could earn additional income from customers, and closely monitored the quality of their work. Plaintiffs could not bid for jobs or negotiate the prices for jobs. Their ability to hire and manage others was illusory. This alleged control strongly suggests that the plaintiffs were economically dependent upon Knight…

B. Opportunity for Profit or Loss

The second factor considers the alleged employee’s opportunity for profit or loss depending upon his managerial skill. The facts, taken in the light most favorable to plaintiffs, indicate that plaintiffs’ opportunity for profit or loss depended more upon Knight’s provision of work orders and technicians’ own technical skill and efficiency than their managerial skill.

Plaintiffs’ opportunity for profit was largely limited to their ability to complete more jobs than assigned, which is analogous to an employee’s ability to take on overtime work or an efficient piece-rate worker’s ability to produce more pieces. An individual’s ability to earn more by being more technically proficient is unrelated to an individual’s ability to earn or lose profit via his managerial skill, and it does not indicate that he operates his own business. As the Supreme Court has explained, a job whose profits are based on efficiency is more like piecework than an enterprise that actually depend[s] for success upon the initiative, judgment or foresight of the typical independent contractor. Rutherford Food, 331 U.S. at 730, 67 S.Ct. at 1477. Technicians could not negotiate or otherwise determine the rates they were paid for jobs. In fact, the billing codes they submitted were subject to unilateral change by Knight. They were also subjected to uncontestable chargebacks that could wipe out their earnings from a single job.12 Knight’s argument that plaintiffs could control losses by avoiding chargebacks is unpersuasive. Chargebacks relate to the quality of a technician’s skill, not his managerial or entrepreneurial prowess. Plaintiffs’ ability to earn additional income through their own initiative was limited. Though plaintiffs could upsell, any jobs added to a work order by a technician had to be approved by Knight, and plaintiffs testified that the extra income was minimal and often not worth the additional effort. Plaintiffs could not sell non-BHN services to customers, nor work for other companies because of either a flat prohibition or because the schedules demanded by Knight prevented them from pursuing other work. Plaintiffs were able to exert some control over their opportunity for profits by pairing up to complete jobs and trading jobs among each other, but this ability was ultimately limited by the number and types of jobs Knight assigned them and whether Knight’s assigned schedule permitted them time to do so. Furthermore, as previously discussed, though the parties’ contract provided that technicians could hire helpers, this authority was illusory. Any helpers were required to be contracted with Knight as technicians, thus precluding the exercise of any real managerial skill over such helpers.

Assuming factual inferences in favor of plaintiffs, and in light of the minimal opportunity for profit (and that being little different from the usual path of an employee), this factor suggests economic dependence, and points strongly toward employee status.

C. Investment in Equipment or Materials

The third factor considers the alleged employee’s investment in equipment or materials required for his task, or his employment of workers. This factor favors independent contractor status, although it does so only weakly.

As previously discussed, technicians’ ability to employ workers was illusory. As regards investment in equipment and materials, Knight provides, via BHN, the hardware that is actually installed in customers’ homes and businesses, such as cable boxes, DVRs, and cable modems. Technicians are required to have vehicles, auto insurance, tools and safety equipment, and commercial general liability insurance. However, in light of the fact that most technicians will already own a vehicle suitable for the work and that many technicians purchased specialty tools from Knight directly via payroll withholdings, there seems to be little need for significant independent capital and very little difference from an employee’s wages being increased in order to pay for tools and equipment. Furthermore, even though a technician who initially bought his tools from Knight and paid for them via withholdings has some economic independence when the tools are paid for, it is analogous to the independence any employee has who has gained experience and the ability to market himself to competing employers.

In sum, these expenditures seem to detract little from the worker’s economic dependence on Knight, which is the lens through which we evaluate each of the several factors. Thus, to the extent that this factor weighs in favor of independent contractor status, the weight in that direction is minimal.

D. Special Skill

The fourth factor considers whether the service rendered requires a special skill. This factor favors independent contractor status, but it does so only weakly.

Plaintiffs were clearly skilled workers. The meaningfulness of this skill as indicating that plaintiffs were in business for themselves or economically independent, however, is undermined by the fact that Knight provided most technicians with their skills. Technicians could come to Knight from other installation outfits or be completely inexperienced. Most technicians, however, were inexperienced and underwent some length of unpaid training by Knight, which was followed by some period of unpaid ride-alongs with experienced technicians, before performing work on their own. Robert Collins, a former Knight installation manager, testified that Knight generally provided about two weeks of training and technicians did about a week of ride-alongs, and he estimated that only 10 to 15 percent of technicians did not require training.

Plaintiffs were, therefore, dependent upon Knight to equip them with the skills necessary to do their jobs. The skills attained by technicians point toward a degree of economic independence insofar as a highly trained technician could gain economic independence by the ability to market his skills to a competing employer. This does not, however, significantly distinguish such a worker from the usual path of an employee. To the extent that this factor favors independent contractor status, it does so weakly.

E. Permanency and Duration

The fifth factor considers the degree of permanency and duration of the working relationship. This factor points strongly toward employee status.

Named plaintiffs worked for Knight for an average of more than five years. Their contracts were for year terms, were automatically renewed, and were terminable only with thirty days’ notice. These facts suggest substantial permanence of relationship…

Assuming factual inferences in favor of plaintiffs, and looking through the lens of economic dependence vel non, long tenure, along with control, and lack of opportunity for profit, point strongly toward economic dependence. Thus, this factor strongly indicates employee status.

F. Integral Part of Alleged Employer’s Business

The sixth and final factor considers the extent to which the service rendered is an integral part of the alleged employer’s business. This factor weighs clearly and strongly toward employee status.

Approximately two-thirds of Knight’s business consists of the telecommunications installation and repair services it performs for BHN. Knight relies on approximately five hundred technicians to perform installations and repairs in BHN customers’ homes and businesses. Knight’s website described its Installation Services department as the backbone of its business.

The integral role played by technicians in Knight’s business shows that the arrangement follows more closely that of an employer-employee relationship than an independent contractor dynamic. If Knight had truly outsourced such a large portion of its business, as would be true if plaintiffs were independent contractors, then the company would retain far less control over the business. However, because of Knight’s concern with the quality of the services it provides through this arrangement, it does, as one might expect, control the relationship in much the same way a company would control its employees. The technicians’ integral part in Knight’s business follows the usual path of an employee.

Assuming factual inferences in favor of plaintiffs, this factor points strongly toward employee status.

Given these factual circumstances, the Eleventh Circuit concluded:

When all the facts are viewed in the light most favorable to the plaintiffs and all reasonable inferences are drawn in their favor, four of the six factors weigh strongly in favor of employee status. The two factors that do not—investment and special skill—weigh only very slightly toward independent contractor status. Neither contributes in any significant manner to the workers’ economic independence or to distinguishing the workers from the usual path of an employee. Thus, we conclude that, viewing the facts most favorably toward plaintiffs and with all justifiable inferences drawn in their favor, plaintiffs were employees—not independent contractors—under the FLSA. Because there are genuine issues of material fact, and because plaintiffs were employees if all reasonable factual inferences are found in plaintiffs’ favor, the district court erred in granting summary judgment to Knight.

Click Scantland v. Jeffrey Knight, Inc. to read the entire Opinion and DOL Amicus Brief to read the brief submitted by the Department of Labor in support of the Plaintiffs-Appellants.

Click independent contractor misclassification for more information on industries where employees are frequently misclassified as independent contractors.

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U.S.S.C.: High Court Declines to Decide Whether a “Full” Monetary Offer Absent Entry of Judgment Can Moot a Claim

Convergent Outsourcing, Inc. v. Zinni

On the heels of last month’s Genesis Healthcare Corp. v. Symczyk, the Supreme Court had the chance to decide a case which actually would help define the true parameters of the mootness doctrine, visa vis cases where the plaintiff claims finite (and typically relatively small) individual damages, but seeks to represent a putative class. However, as in the Symczyk, the Supremes left some observers scratching their heads and declined to answer the question posed to it. Although the Zinni case was a case brought under the Fair Credit Reporting Act (FCRA) and not the FLSA, the issue presented is common in FLSA cases.  Specifically, the issue presented by the Zinni case was:

Does an offer to provide a plaintiff with all of the relief he has requested, including more than the legal amount of damages plus costs and reasonable attorney’s fees, fail to moot the underlying claim because the defendant has not also offered to agree to the entry of a judgment against it?

Previously, the Eleventh Circuit had held that such an offer, absent an agreement by the defendant to allow entry of a judgment against it, necessarily cannot moot a claim, because it fails to truly give the plaintiff all of the relief sought which he or she may obtain by litigating the case. Given the high court’s decision to deny cert on the case, this remains good law and parties should govern themselves accordingly.

Click Convergent Outsourcing, Inc. v. Zinni to read the Eleventh Circuit’s underlying decision and ScotusBlog to view the briefing and orders at the Supreme Court.

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11th Cir.: Following Tender of Unpaid Wages and Liquidated Damages, an Employer Only Moots a Case if the Plaintiff Agrees to Dismissal, Absent Payment of Mandatory Fees and Costs

Dionne v. Floormasters Enterprises, Inc.

Following a controversial opinion that created more questions than it answered, the Eleventh Circuit reconsidered it’s prior Opinion in this case and in so doing largely restricted its holding to the unique facts presented in the case.  Previously the Court had held that  an employer, who denies liability for nonpayment for overtime work, need not pay attorney’s fees and costs pursuant to 29 U.S.C. § 216(b) of the Fair Labor Standards Act (“FLSA”) if the employer tenders the full amount of overtime pay claimed by an employee, and moves to dismiss on mootness grounds where the employee concedes that “the claim for overtime should be dismissed as moot.  Although the prior Opinion seemed restricted to these unique facts where the employee conceded that the overtime claim should be dismissed (but attempted to reserve as to fees/costs), courts throughout the Eleventh have since expanded the holding to scenarios where the employee makes no such stipulation.  Here, the Eleventh Circuit affirmed the prior decision, but clarified and limited its applicability.

Significantly, the Eleventh Circuit included the following footnote in its new Opinion:

“Our decision in this matter addresses a very narrow question: whether an employee who conceded that his claim should be dismissed before trial as moot, when the full amount of back pay was tendered, was a prevailing party entitled to statutory attorney’s fees under § 216(b). It should not be construed as authorizing the denial of attorney’s fees, requested by an employee, solely because an employer tendered the full amount of back pay owing to an employee, prior to the time a jury has returned its verdict, or the trial court has entered judgment on the merits of the claim.”

It remains to be seen exactly how the new Dionne Opinion will be applied by trial courts, but it does appear that much of the uncertainty created by the initial Opinion has now been resolved.  To that end, it appears that a Plaintiff who has suffered a theft of his or her wages can now safely accept tender of such wages (and liquidated damages) in response to a lawsuit to collect same, without fear that the employer can avoid payment of mandatory fees and costs, as long as they do not agree that the tender moots the case.

Click Dionne v. Floormasters Enterprises, Inc. to read the entire Opinion on Petition for Rehearing.

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11th Cir.: Board of Dental Examiners Not “Arm of the State” Entitled to Sovereign Immunity

***** EDITOR’S UPDATE *****:

On July 13, 2012, the Eleventh Circuit granted the Board of Dental Examiners of Alabama’s motion for rehearing, based on a subsequent decision of Alabama’s highest court which held that the Board was in fact an “arm of the state.”  As they had in the prior decision, the Eleventh Circuit deferred to the courts of Alabama.  Since a higher court in Alabama had ruled that the Board was an “arm of the state,” the Eleventh Circuit reversed itself (and the court below) and entered judgment on behalf of the Board holding that it was sovereign immune as an “arm of the state” of Alabama.  Thus, the initial Opinion discussed below is no longer good law.

Click Versiglio v. Board of Dental Examiners of Alabama to read the entire substituted Opinion on Petition for Rehearing.

Versiglio v. Board of Dental Examiners of Alabama

This case was before the Eleventh Circuit on the Board’s appeal asserting that the court below erred when it held that it was not subject to Eleventh Amendment immunity from the FLSA as an “arm of the state.”  Rejecting this contention and affirming the decision below, the Eleventh Circuit relied, almost entirely, on the fact that the highest court of Alabama had previously held that the Board was not entitled to Eleventh Amendment immunity.

The Court summarized the issue before it as follows:

“Appellant Board of Dental Examiners of Alabama (the “Board”) appeals the district court’s judgment denying it sovereign immunity protection as an arm of the state of Alabama. Appellee Natalie Versiglio contends that the Board is sufficiently independent from the state of Alabama, that it is not entitled to Eleventh Amendment immunity, and that her claim under the Fair Labor Standards Act should be allowed to continue. The Supreme Court in Alden v. Maine settled the matter of state employees suing under the FLSA, writing, “We hold that the powers delegated to Congress under Article I of the United States Constitution do not include the power to subject nonconsenting States to private suits for damages in state courts. We decide as well that the State of Maine has not consented to suits for overtime pay and liquidated damages under the FLSA.” 527 U.S. 706, 712, 119 S.Ct. 2240, 2246 (1999). Thus, the question before this court is whether the Board is an arm of the state. For the reasons stated below, we conclude that at this time it is not and affirm the judgment of the district court.”

Discussing the parties assertions regarding the applicability of the Eleventh Amendment to Defendant the Eleventh Circuit, the court appeared to find Board’s arguments more compelling.  Specifically, the court noted that in creating the Board, the Alabama legislature made specific findings that supported the argument that the Board was an “arm of the state.”  Further, the Eleventh Circuit rejected the Plaintiffs’ arguments that Board’s independence- including the composition of its Board and its discretion to spend its funds- supported the finding that it was not an “arm of the state,” based on prior jurisprudence.  Curiously, the court also questioned the Plaintiffs’ assertion that the State treasury was not implicated by the case before it.  Instead, the court reasoned that- despite the fact that the State does not allocate, administer or collect the funds used by the Board- ultimately the State would likely have to pay any judgment.

Notwithstanding all of the above, the court still concluded that that the Board was not subject to Eleventh Amendment immunity, but relied almost entirely on a decision by Alabama’s highest court in reaching its holding.  The court reasoned:

“Despite the strength of the Board’s claim of sovereign immunity under the Miccosukee test, one factor weighs heavily against it. On April 1, 2011, the Court of Civil Appeals of Alabama released its opinion in Wilkinson v. Board of Dental Examiners of Alabama, 2011 WL 1205669, 2011 Ala. Civ.App. LEXIS 88 (Ala. Civ.App. April 1, 2011). FN3 In its opinion, the state appeals court conducted the first substantial analysis by a state court of the Board’s status as a state agency. FN4 The Board argued that it was immune from suit in state court pursuant to Article 1, Section 14 of the Alabama Constitution. That section provides that “the State of Alabama shall never be made a defendant in any court of law or equity.” Alabama courts have construed this immunity to extend to arms of the state. Armory Comm’n v. Staudt, 388 So.2d 991, 993 (Ala.1980). The test for entities seeking immunity is much like this court’s test: whether “a lawsuit against a body created by legislative enactment is a suit against the state depends on the character of power delegated to the body, the relation of the body to the state, and the nature of the function performed by the body.” Id. Applying this test, the Court of Civil Appeals examined many of the provisions discussed above, concluding that the Board is not an arm of the state and thus “is not entitled to § 14 immunity.” Wilkinson, 2011 Ala. Civ.App. Lexis 88 at *16, 2011 WL 1205669 at *5.

This court gives great deference to how state courts characterize the entity in question. This practice is in keeping with the ordinary deference granted state courts when they interpret matters of state concern. See Silverberg v. Paine, Webber, Jackson & Curtis, Inc., 710 F.2d 678, 690 (11th Cir.1983) (“A federal court applying state law is bound to adhere to decisions of the state’s intermediate appellate courts absent some persuasive indication that the state’s highest court would decide the issue otherwise.”). Federal courts are often more skeptical of state court decisions involving issues of sovereign immunity, as otherwise “[a] state would have too much self-interest in extending sovereign immunity to as many of its agencies and corporate creations as possible.” Miller–Davis Co. v. Illinois State Toll Highway Auth., 567 F.2d 323, 330 (7th Cir.1977). However, that concern is obviated when, as here, the state court finds that an entity is not an arm of the state. Id. (“Especially when a state supreme court does not extend immunity but, rather, holds that an entity is not to be deemed the state for purposes of sovereign immunity, we think the federal courts must pay careful attention to the state opinion.”).

Finding that the Board is entitled to sovereign immunity would require this court to interpret Alabama law in a way that is diametrically opposed to the findings of the highest state court to consider the issue. Such a ruling would also create the incongruous result of having a “state agency” that is immune from suit under federal law but not under state law. Cf. Alden, 527 U.S. at 793 n.29, 119 S.Ct. at 2285 n.29 (noting in a different context that the Framers of the Eleventh Amendment “would have considered it absurd that States immune in federal court could be subjected to suit in their own courts”). As such, we believe that a holding by this court that the Board is an arm of the state for purposes of sovereign immunity would be inappropriate.

For the aforementioned reasons, we affirm the district court’s finding that the Board is not entitled to sovereign immunity protection as an arm of the state of Alabama.”

Click Versiglio v. Board of Dental Examiners of Alabama to read the entire decision.

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

Diaz v. Jaguar Restaurant Group, LLC

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

In reversing, the Eleventh Circuit reasoned:

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

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

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

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

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11th Cir.: Res Judicata Did Not Bar Claims Of FLSA Retaliation; Such Claims Arose After The Original Pleading Was Filed In The Earlier Litigation, So Not Previously Litigated

Moore v. Sei Pak

This case was before the Eleventh Circuit on Plaintiffs’ appeal of summary judgment in favor of their employer (“Pak”), in their suit against Pak for retaliation under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 215(a)(3).  The Plaintiffs sued Pak for retaliation because Pak denied them positions as independent contractors after they initiated an earlier FLSA suit against Pak for unpaid overtime compensation.  The Plaintiffs filed the separate retaliation suit while the overtime compensation suit, which the parties ultimately settled, was still pending. The magistrate judge granted Pak’s summary judgment motion on res judicata grounds after it concluded that the Plaintiffs had raised their retaliation claim in the prior suit. On appeal, Plaintiffs argued that their prior FLSA overtime compensation lawsuit does not preclude their current retaliation suit, because the facts underlying the retaliation suit occurred subsequent to the filing of the original case.  The Eleventh Circuit agreed and reversed the lower court reasoning:

“We review de novo a district court’s order on a motion for summary judgment and construe the facts in the light most favorable to the non-moving party.   Van Voorhis v. Hillsborough Cnty. Bd. of Cnty. Comm’rs, 512 F.3d 1296, 1299 (11th Cir.2008). We also review de novo a district court’s application of res judicata. EEOC v. Pemco Aeroplex, Inc., 383 F.3d 1280, 1285 (11th Cir.2004). We apply federal law “because federal preclusion principles apply to prior federal decisions.” Id. (quotation marks omitted).

“Under res judicata … a final judgment on the merits bars the parties to a prior action from re-litigating a cause of action that was or could have been raised in that action.” In re Piper Aircraft Corp., 244 F.3d 1289, 1296 (11th Cir.2001). “Res judicata applies not only to the precise legal theory presented in the previous litigation, but to all legal theories and claims arising out of the same operative nucleus of fact.” Manning v. City of Auburn, 953 F.2d 1355, 1358-59 (11th Cir.1992) (quotation marks omitted).

[A] party seeking to invoke the doctrine must establish … four initial elements: (1) the prior decision must have been rendered by a court of competent jurisdiction; (2) there must have been a final judgment on the merits; (3) both cases must involve the same parties or their privies; and (4) both cases must involve the same causes of action.  In re Piper Aircraft Corp., 244 F.3d at 1296. If these requirements are met, the court must determine whether the new claim could have been raised in the prior suit. Id. The preclusion of claims that “could have been brought” in earlier litigation does not include claims that arose after the original complaint was filed in the prior action, unless the plaintiff actually asserted the claim in “supplemental pleadings or otherwise.Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1357 (11th Cir.1998).

We conclude that even if this case satisfies the res judicata elements, the Plaintiffs’ retaliation claim is one “which ar[o]se after the original pleading [wa]s filed in the earlier litigation” and is not barred unless Plaintiffs asserted the claim in the prior litigation. Id. at 1357. The Plaintiffs filed their overtime compensation suit against Pak on March 4, 2008. Construing the facts in the Plaintiffs’ favor, the retaliation claim did not arise until November 21, 2008, when Pak excluded Plaintiffs from an opportunity to apply for independent contractor positions. Therefore, the Plaintiffs’ retaliation claim arose eight months after they filed their original complaint.

The Plaintiffs could not have asserted the retaliation claim in their initial complaint in the overtime compensation suit and were free to decline to do so through supplemental pleadings. We observed in Manning “that Federal Rule of Civil Procedure 15(d), which governs supplemental pleadings, makes such a pleading optional and held that the doctrine of res judicata does not punish a plaintiff for exercising the option not to supplement the pleadings with an after-acquired claim.” Pleming, 142 F.3d at 1357 (citing Manning, 953 F.2d at 1360).

We also conclude that the Plaintiffs never asserted their retaliation claim in their overtime compensation suit “through supplemental pleadings or otherwise.” Pleming, 142 F.3d at 1357 (emphasis omitted). In the overtime compensation suit, the Plaintiffs’ only reference to retaliation occurred in the status report they filed with the court immediately before the case settled. In this report, the Plaintiffs indicated that mediation had failed, and asked the court to try the case “as soon as possible” based on several unresolved concerns, including Pak’s failure “to … offer Plaintiffs the opportunity to become subcontractors for Defendant, an opportunity previously not granted to Plaintiffs because Plaintiffs were named on a lawsuit against Defendant.” This Court has held that while “a litigant may ‘otherwise’ assert a claim, without filing a supplemental pleading … these other means must conform with the rules of procedure.” Pleming, 142 F.3d at 1358. We have identified specific examples of other means of asserting a claim that trigger res judicata, such as “an amendment pursuant to Rule 15(b) or the assertion of a claim through a pretrial order pursuant to Rule 16(e).” Id. Neither of these options was pursued here. Pak concedes that, in light of Pleming, the magistrate judge’s reliance on the status report as the basis for concluding that the Plaintiffs asserted a retaliation claim in the prior litigation “may have been incorrect.”

The Plaintiffs’ reference to Pak’s retaliation is similar to the references we have held insufficient to assert a claim before a district court. In Coon v. Georgia Pacific Corp., 829 F.2d 1563, 1568-71 (11th Cir.1987), we affirmed the district court’s refusal to consider the plaintiff’s claims of specific acts of discrimination, which she included in her briefs, discovery requests, and motions, but never added to her complaint. We explained that “[t]hese claims were not somehow ‘present’ within her complaint, despite her failure to allege them.” Id. at 1570. We also rejected the notion that the claims were before the district court because they were part of a “continuing violation.” Id.; see also Pleming, 142 F.3d at 1358 (collecting cases). We conclude that the Plaintiffs’ reference to retaliation in the status report was insufficient to put their retaliation claim properly before the district court pursuant to the Federal Rules of Civil Procedure.

For these reasons, we hold that res judicata does not bar the Plaintiffs’ retaliation claim against Pak. We VACATE and REMAND this case to the district court for further proceedings consistent with this opinion.”

Click Moore v. Sei Pak to read the entire decision.

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11th Cir.: Despite Variable Premium/Bonuses That Fluctuated With Quantity/Quality of Work Performed, Bookkeeper/Accountants Were Paid on “Salary Basis”

Bell v. Callaway Partners, LLC

Plaintiffs were  bookkeepers/accountants classified by Defendant as exempt from the Fair Labor Standards Act’s (FLSA) overtime pay requirement.  This appeal concerned solely the issue of whether Plaintiff- who was paid a combination of a guaranteed weekly salary plus a variable bonus (at a straight-time rate rather than time and a half)- was paid on a “salary basis” for the purposes of satisfying the so-called “white collar” exemptions of the FLSA.  The Court ruled that she was and affirmed the ruling of the lower court, holding that variations in bonus or extra pay do not affect the underlying analysis of whether the first 40 hours are paid at on a “salary basis.”

Describing the pay structure at issue, the Court stated:

“Plaintiffs’ pay consisted of two distinct components. First, Plaintiffs received a guaranteed weekly salary of $1600 or more that did not depend on the quality or quantity of the work performed. This weekly salary was reduced by one-fifth of the weekly salary for every full day a Plaintiff took off from work for personal reasons during the normal workweek without substituting Paid Time Off (“PTO”). But, a Plaintiff could work fewer than eight hours during any given workday without any reduction in his or her weekly salary. Second, Plaintiffs were eligible to receive additional incentive compensation (a “bonus”) paid at a straight-time hourly rate based on the cumulative number of billable hours that Plaintiffs worked. Any bonus to be awarded was determined based on how many additional hours over forty a Plaintiff worked in a given week minus any “deficit” hours a Plaintiff had accumulated in past weeks. For example, if a Plaintiff worked seven and not eight hours on each regularly-scheduled workday in a given week, thus totaling 35 hours of work, he or she still earned the full predetermined weekly salary, but would not earn a bonus in a subsequent week until he or she made up the bonus-hour deficit of five hours and then worked more than 40 hours in a given week.”

Holding that this compensation methodology complied with the “salary basis” test, the Court reasoned:

“An employee is considered “paid on a salary basis” if “he regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C .F.R. § 541.602. Plaintiffs argue that they were not paid on a salary basis because the amount of their bonuses fluctuated based on the cumulative number of hours worked. But, as we have previously determined, “as long as there is a non-deductible minimum, additional compensation on top of the non-deductible salary is permissible.” Hogan v. Allstate Ins. Co., 361 F.3d 621, 625 (11th Cir.2004) (citation omitted). And, while additional compensation is permissible, the regulations do not require additional compensation, nor do they prescribe a set method for setting up a bonus system. 29 C.F.R. § 541.604(a) (“An employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis…. Such additional compensation may be paid on any basis ….”).

After a review of the record, we agree with the district court’s well-reasoned analysis concluding that Callaway’s bonus system conformed to the requirements of the salary basis test. (R.374 at 13-24.) While Callaway’s incentive program may have been designed in a way that encouraged overtime work, as Plaintiffs argue it was, because it deducted for “deficit” hours, it nevertheless conformed to the requirements of the FLSA. Because there was a non-deductible minimum weekly salary, Callaway was free to structure any bonus program as it saw fit.

Plaintiffs also argue that Callaway violated the salary basis test when it deducted a full day’s pay for personal days missed during the workweek (Monday through Friday) but did not pay Plaintiffs for a “full day” for partial days worked on Saturday or Sunday. Again, we agree with the district court’s analysis concluding that such deductions were allowable under the provisions of 29 C.F.R. § 541.602(b)(1). (R.374 at 25-34.) Therefore, we hold that the district court did not err in finding Callaway’s pay policies to be in compliance with the FLSA.”

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11th Cir.: Rehearing En Banc Denied On Refusal To Award Prevailing FLSA Plaintiff Attorney’s Fees; Strong Dissents

Sahyers v. Prugh, Holliday & Karatinos, P.L.

In a decision discussed here previously, the 11th Circuit had affirmed the trial court’s decision to award no attorneys fees or costs, in a case where they reasoned that attorney civility towards one another trumped the mandatory fee provisions of the FLSA.  The case was again before the 11th Circuit, this time on Plaintiff’s Motion for a Rehearing En Banc.  Although the Court denied the Motion for Rehearing, significantly, there was very strong dissent, perhaps signaling that the case may be ripe for review at the United States Supreme Court, who just this week signaled they will begin hearing more cases than they have in recent years.

Citing legal principle, but little statutory authority for the Court’s position, in a concurring opinion, one Judge explained, in part:

“About this case, I have a few observations to make. Lawyers, as members of the Courts’ Bars (that is, as officers of the Courts) are often, and in a variety of ways, treated by the Courts better or worse than nonlawyers. I stress that I do not see the Courts’ inherent powers to supervise the members of their Bars as “overriding” (that is, cancelling) the FLSA statute’s treatment of fees. The statute is law, general law tied to the outcome of FLSA suits.

I see the Courts’ inherent powers over Bar members as a separate and pre-existing font of law and legal authority that specifically governs the conduct of lawyers as lawyers, regardless of the outcome of the case: the law of inherent powers supplements the FLSA statute to make up the whole of the applicable law in this case. Therefore, I see the whole applicable law to run this way: When the outcome favors the plaintiff, fees shall be awarded unless the District Court, in the reasonable exercise of its power to supervise lawyers in their practice in cases before the Court, determines that an award of fees (given the specific circumstances of a particular case) is not right-not right directly because of lawyer conduct related to the specific case. Thus, fees nearly always are to be awarded; but never are the Courts altogether stripped of the power to supervise lawyer conduct through the grant or withholding of fees.

That Courts have the inherent and main-if not exclusive-authority (along with the duty and responsibility) to supervise their Bar members is, I believe, no innovative idea. And that Courts can use the control of attorney fees as a means of exercising the inherent power to supervise lawyer conduct in particular cases seems uninnovative too. See Chambers v. NASCO, Inc., 111 S.Ct. 2123, 2133 (1991) (court may per inherent power assess attorneys fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive purposes); Roadway Express, Inc. v. Piper, 100 S.Ct. 2455, 2463 (1980) (federal courts have inherent powers to assess attorneys fees against counsel).”

With separate strongly worded dissents, Circuit Court Judges Barkett and Wilson, sternly warned that the Eleventh Circuit had exceeded their authority by attempting to ignore the FLSA, a federal statute, without any basis.

BARKETT, Circuit Judge, dissenting:

“En banc review is warranted in this case because district courts do not have the power, inherent or otherwise, to directly contravene a federal statute. The panel decision, holding that the district court could deny attorneys’ fees mandated by the Fair Labor Standards Act (“FLSA”), is contrary to settled United States Supreme Court precedent providing that the use of a district court’s inherent supervisory powers is invalid when it conflicts with a statutory command. See, e.g. Bank of Nova Scotia v. United States, 487 U.S. 250, 254 (1988); Thomas v. Arn, 474 U.S. 140, 148 (1985). As Judge Wilson notes in his dissent, there is no dispute that the language of the statute is mandatory, see29 U.S.C. § 216(b) (“The court in such action shall, in addition to any judgment awarded to plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”), and has been previously so construed by our court. Dale v. Comcast Corp., 498 F.3d 1216, 1223 n.12 (11th Cir.2007).

The panel characterizes the denial of attorneys’ fees as an informal sanction of Sahyers’ lawyer for suing fellow lawyers without first attempting to resolve the dispute through informal means. In his concurrence to the denial of rehearing, Judge Edmondson stresses that the district court based its decision on local litigation customs and practices, but the district court opinion references no such customs or practices. The district court simply says that, in its view, it is “reasonable” to call another lawyer prior to filing suit. That is not enough to give notice to Sahyers’ attorney. District courts do not have the authority to sanction lawyers for conduct not proscribed by law or rule-which is the case here-without first providing them with notice that their conduct may warrant sanctions. Fed.R.Civ.P. 83(b) (“No sanction or other disadvantage may be imposed for noncompliance with any requirement not in federal law, federal rules, or the local rules unless the alleged violator has been furnished in the particular case with actual notice of the requirement.”). Because Sahyers’ attorney was given no actual notice, the district court had no authority to sanction him for failing to contact the defendants or their lawyers before filing suit. See In re Mroz, 65 F.3d 1567, 1575 (11th Cir.1995) (“Due process requires that the attorney (or party) be given fair notice that his conduct may warrant sanctions and the reasons why.” (citation omitted)). Accordingly, there is no authority for disregarding the mandatory language of FLSA on this basis.

The panel’s only supporting authority for its contention that a court may deny an award of litigation expenses to which a client is otherwise entitled by law is Litton Syss., Inc. v. Am. Tel. & Tel. Co., 700 F.2d 785 (2d Cir.1983). However, that decision does not permit a district court to simply disregard the express language of a statute that mandates attorneys’ fees and costs. Rather, it affirms a sanction imposed under Federal Rule of Civil Procedure 37 for “gross negligence” and “willful misconduct” by the plaintiff’s lawyers. Id. at 826-28. The failure to notify an opposing lawyer prior to suit in the absence of any known requirement to do so can hardly qualify as negligence or willful misconduct.

Because the panel opinion disregards the express mandate of Congress, this case warrants en banc review.”

WILSON, Circuit Judge, dissenting:

“The Court affirms a decision by a district court that denies a prevailing plaintiff’s lawyer his entitlement to an attorney’s fee under the Fair Labor Standards Act (“FLSA”) on account of his failure to give the defendant, a lawyer, advance notice of the lawsuit. I am concerned about the precedent this case sets. First, an award of attorneys’ fees to a prevailing party is mandatory under the FLSA. Second, I have found no authority that requires plaintiff’s counsel to provide pre-suit notice when another lawyer is the defendant. Although well-intentioned, I doubt that the federal courts have the inherent authority to ignore and override a statutory mandate in the interest of promoting a professional courtesy. I also do not believe that Congress intended to single out lawyers for exclusive treatment under the FLSA. Since it is now within the inherent authority and discretion of the district courts in our Circuit to hold that no attorney’s fee is a reasonable fee when no pre-suit notice is extended to defendants who are lawyers, I would consider this case en banc before permitting this new Circuit precedent to stand.

The facts are these. Plaintiff Christine Sahyers worked as a paralegal for the defendant law firm Prugh, Holliday & Karatinos, P.L. On January 9, 2007, Sahyers filed a lawsuit against her former employer and its three owners and principals, Timothy F. Prugh, James W. Holliday, II, and Theodore Karatinos (collectively the “defendants”), pursuant to the FLSA to recover unpaid overtime compensation. The defendants filed an answer, denying liability. The case proceeded to discovery, and less than one month after a failed court-ordered mediation, the plaintiff accepted an offer of judgment pursuant to Federal Rule of Civil Procedure 68. The next day, the district court entered final judgment against the defendants in the amount of $3,500.

Thereafter, the plaintiff filed a motion for attorneys’ fees and expenses, in which she sought $15,640.70, comprised of $13,800 in attorneys’ fees and $1,840.70 in costs. The district court determined that the plaintiff was a prevailing party under the FLSA. However, recognizing that the FLSA provides for a mandatory award of reasonable attorneys’ fees, the district court was persuaded to conclude that this case presented “special circumstances” and decided that “a reasonable fee is no fee.” Sahyers v. Prugh, Holliday & Karatinos, P.L., No. 8:07-cv-52-T-30MAP, slip op. at 3 (M.D.Fla. Feb. 1, 2008) (“District Court Order”).

The district court found that the plaintiff subjected the defendants to “unnecessary litigation” and refused to reward such behavior because at no time prior to filing the lawsuit did the plaintiff or the plaintiff’s attorney make a written demand for payment of the overtime compensation. Id. at 3-5. Further, the district court stressed that the plaintiff’s attorney should have notified the defendant law firm, because prior to filing suit in the Middle District of Florida, “it is still reasonable to pick up the phone and call another lawyer so it won’t be necessary to file suit.” Id. at 4. The district court dismissed the plaintiff’s counsel’s claim that his client did not want him to make a pre-suit demand, “remind[ing] [plaintiff's counsel] that the lawyer is the officer of the Court, not the client.” Id. at 5. The plaintiff appealed the denial of attorneys’ fees and costs, and defendant Karatinos cross-appealed the district court’s determination that the plaintiff was a prevailing party.

With the benefit of oral argument, the Sahyers opinion affirmed. The Sahyers opinion framed the issue in this way: “This appeal is about the power of a district court to supervise the work of the lawyers who practice before it.” Sahyers v. Prugh, Holliday & Karatinos, P.L., 560 F.3d 1241, 1243 (11th Cir.2009). The Sahyers opinion construed the District Court Order as creating an “exception” to the FLSA’s mandatory fee statute based on the district court’s “inherent powers to supervise the conduct of the lawyers who come before it and to keep in proper condition the legal community of which the courts are a leading part.” Id. at 1244. It explained that “at least in the absence of very clear words from Congress, we do not presume that a statute supersedes the customary powers of a court to govern the practice of lawyers in litigation before it.” Id. at 1245 n.6. I disagree-well-settled Supreme Court precedent rejects the Sahyers opinion’s “very clear words” standard.

“In the exercise of its supervisory authority, a federal court ‘may, within limits, formulate procedural rules not specifically required by the Constitution or the Congress.’ ” Bank of Nova Scotia v. United States, 487 U.S. 250, 254 (1988) (quoting United States v. Hasting, 461 U.S. 499, 505 (1983)) (emphasis added). One of those limits on a federal court is when Congress has spoken: “[e]ven a sensible and efficient use of [a court's] supervisory power, however, is invalid if it conflicts with constitutional or statutory provisions.” Thomas v. Arn, 474 U.S. 140, 148 (1985). “A contrary result ‘would confer on the judiciary discretionary power to disregard the considered limitations of the law it is charged with enforcing.’ ” Id. (quoting United States v. Payner, 447 U.S. 727, 737 (1980)). Applied here, the Sahyers opinion’s denial of attorneys’ fees and costs as an exercise of its supervisory authority over the practice of lawyers conflicts with the plain language of the FLSA.

The FLSA is a mandatory fee statute, and we have not recognized any exception to it. “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (emphasis added). The Supreme Court, our Circuit, and our sister circuits have consistently interpreted § 216(b) as mandatory. FN1 We have gone so far as to declare expressly that “[p]revailing plaintiffs are automatically entitled to attorneys’ fees and costs under the FLSA.” Dale v. Comcast Corp., 498 F.3d 1216, 1223 n.12 (11th Cir.2007) (emphasis added).

FN1. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 415 & n.5 (1978) (referring to § 216(b) of the FLSA as one of the “statutes [that] make fee awards mandatory for prevailing plaintiffs”); Singer v. City of Waco, 324 F.3d 813, 829 n.10 (5th Cir.2003) (“The FLSA requires an employer who violates the statute to pay attorney’s fees.”); Uphoff v. Elegant Bath, Ltd., 176 F.3d 399, 406 (7th Cir.1999) (“While the award of fees [under the FLSA] is mandatory, the district court has ‘wide latitude’ in determining the amount of the fee.”) (citation omitted); Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir.1994) (“An award of attorney fees to a prevailing plaintiff under § 16(b) of the FLSA is mandatory, but the amount of the award is within the discretion of the judge.”) (citation omitted); Shelton v. Ervin, 830 F.2d 182, 184 (11th Cir.1987) (“Section 216 provides for an award of attorney’s fees, as opposed to granting the court discretion in awarding such fees, to the prevailing plaintiff in FLSA cases.”) (emphasis added); Kreager v. Solomon & Flanagan, P.A., 775 F.2d 1541, 1542 (11th Cir.1985) (“Section 216(b) of the Act makes fee awards mandatory for prevailing plaintiffs.”); Burnley v. Short, 730 F.2d 136, 141 (4th Cir.1984) (“The payment of attorney’s fees to employees prevailing in FLSA cases is mandatory. The amount of the attorney’s fees, however, is within the sound discretion of the trial court.”) (internal citation omitted); Graham v. Henegar, 640 F.2d 732, 736 n.8 (5th Cir. Unit A Mar. 1981) (“[A]n award of attorney’s fees to a prevailing plaintiff in an FLSA suit is mandatory.”); Wright v. Carrigg, 275 F.2d 448, 449 (4th Cir.1960) (“With respect to the counsel fee [pursuant to § 216(b) ], the court had no discretion to deny it; the law’s requirement of an award is mandatory and unconditional.”); Murray v. Playmaker Servs., LLC, 548 F.Supp.2d 1378, 1381 (S.D.Fla.2008) (Ryskamp, J.) (providing that the FLSA “directs district courts to award reasonable attorney’s fees and costs to a plaintiff, in addition to any judgment received”) (emphasis added).

In a perfect world, a lawyer who files a lawsuit against another lawyer would first attempt to resolve the matter outside the courthouse. Such a practice is both sensible and efficient. However, a procedural rule that in effect mandates pre-suit notice is invalid if it conflicts with a statutory provision. The Court’s opinion in effect reads a requirement of pre-suit notice into § 216(b) of the FLSA, at least where a law firm or lawyer is a defendant, thereby “confer[ring] on [itself] discretionary power to disregard the considered limitations of the law it is charged with enforcing.” Arn, 474 U.S. at 148 (quoting Payner, 447 U.S. at 737). Although a legislature can make pre-suit notice mandatory when it chooses, that circumstance does not apply here. See, e.g.,Fla. Stat. § 766.106(2)(a) (providing that “prior to filing a complaint for medical negligence, a claimant shall notify each prospective defendant”). While it is desirable to encourage lawyer collegiality and to discourage unnecessary litigation, I do not believe that we can rewrite a statute to conform with certain policy preferences. See Reeves v. Astrue, 526 F.3d 732, 738 (11th Cir.2008) (“The Supreme Court has advised that whatever merits … policy arguments may have, it is not the province of this Court to rewrite the statute to accommodate them.”) (quotation marks, alteration, and citation omitted). The Sahyers opinion provides binding precedent for a district court to ignore a clear Congressional mandate from a federal statute based on its “inherent powers.” Such precedent oversteps the boundaries of our proper duty as neutral arbiters and obviates the role of Congress. My discussion could end here, as the plaintiff was the prevailing party, and the FLSA’s plain language is controlling.

Moreover, I also disagree with the Court’s statement that “a lawyer’s duties as a member of the bar-an officer of the court-are generally greater than a lawyer’s duties to the client.” Sahyers, 560 F.3d at 1245 n.7. It bears repeating that the Sahyers opinion failed to cite any statute, rule, local rule, or case from this Circuit, the Middle District of Florida, or elsewhere that even arguably imposes a duty on an attorney to contact prospective opposing counsel where that counsel represents a law firm or a lawyer. I can find no rule of professional responsibility that would place Sahyers’ lawyer on notice that it is a breach of professional or ethical responsibility to file a lawsuit against a fellow lawyer without the courtesy of advance notice. Honorable though it may be, providing a lawyer-defendant with pre-suit notice in FLSA cases is neither a requirement, nor a breach of a lawyer’s ethical responsibility.

I recognize that the appropriate balance between duty to a client and duty of candor to the court is certainly a difficult one to strike. In certain circumstances, a lawyer’s duty to the court is “greater” than his or her duty to a client. However, while counsel owes a duty to the court, context matters. The plaintiff did not instruct her counsel to commit a crime, to perpetrate a fraud upon the court, or to file a frivolous lawsuit. Rather, the plaintiff merely instructed her counsel to file a lawsuit, which-considering the fact that defendants filed an answer as opposed to a motion to dismiss and ultimately offered judgment-appeared to have, at least, some merit. In fact, the Model Code of Professional Responsibility appears to require exactly what the plaintiff’s counsel did-follow his client’s instructions: “[T]he lawyer should always remember that the decision whether to forego legally available objectives or methods because of non-legal factors is ultimately for the client and not for himself.” Model Code of Prof’l Responsibility EC 7-8 (1983); see also id. at EC 7-7 (providing that, except in areas of legal representation not affecting the merits of the cause or substantially prejudicing the rights of a client, “the authority to make decisions is exclusively that of the client and, if made within the framework of the law, such decisions are binding on his lawyer”) (emphasis added). Hence, not only is there no rule requiring plaintiff’s counsel to give pre-suit notice to his fellow lawyers, plaintiff’s counsel had an ethical duty to follow his client’s instructions. In applying the Sahyers opinion’s reasoning, however, a plaintiff’s lawyer must ignore a client’s explicit instruction to file an arguably meritorious lawsuit and must first give “word” by way of a phone call, e-mail, or letter before “su[ing] his fellow lawyers.” This rule should not be the law.

The Sahyers opinion equated the conduct of the plaintiff’s counsel to bad faith: “the conscious indifference to lawyer-to-lawyer collegiality and civility exhibited by Plaintiff’s lawyer (per his client’s request) amounted to harassing Defendants’ lawyers by causing them unnecessary trouble and expense and satisfied the bad-faith standard.” 560 F.3d at 1246 n.9. It relies on Litton Systems, Inc. v. American Telephone & Telegraph Co., 700 F.2d 785 (2d Cir.1983), stating that “[a] court … may deny an award of litigation expenses to which a client is otherwise entitled.” Sahyers, 560 F.3d at 1245. As a threshold matter, Litton Systems, a Second Circuit opinion, is not binding precedent in this Circuit; it is merely persuasive authority. Additionally, Litton Systems does not stand for that broad proposition, and, even if it did, the facts of Litton Systems are so far removed from Sahyers that the former sheds no light on the latter. The Litton court merely affirmed a sanction pursuant to Federal Rule of Civil Procedure 37 finding “gross negligence” and “willful misconduct.” Here, the district court did not impose any sanction and did not invoke Rule 37. Instead, it carved out a “special circumstances” exception to the FLSA. See District Court Order at 3. The only reason relied upon by the district court to award Sahyers “nothing” as an attorney’s fee was the failure to extend the professional courtesy of pre-suit notice to a law firm. This conduct does not amount to bad faith.

Finally, I am troubled by the implication that lawyers are entitled to exclusive treatment under the FLSA. Although the Sahyers opinion states that it does not intend to create a new rule of pre-suit notice in FLSA cases where the defendant is a law firm or a lawyer, such language will surely fall on deaf ears in this Circuit (as it should) in light of the fact that Sahyers is a published opinion, which makes it binding precedent in this Circuit. See I.O.P. 2 to Fed. R.App. P. 36 (“Under the law of this circuit, published opinions are binding precedent.”). Section 216(b) pays no attention to the occupation of the defendants. Neither should we. The Sahyers opinion has unintentionally created a new rule that a plaintiff’s failure to give pre-suit notice to a lawyer-defendant in an FLSA case may forfeit the plaintiff’s otherwise statutory right to attorneys’ fees and costs. Courts within this Circuit will rely on Sahyers and will interpret it as creating a discretionary exception to a mandatory fee statute. In point of fact, courts both within this Circuit and outside of this Circuit have already followed suit, recognizing, but not yet applying, the proposition that no fee can be a reasonable fee under the FLSA when a plaintiff fails to give pre-suit notice to a lawyer-defendant. See Roldan v. Pure Air Solutions, Inc., S.D. Fla.2010.

Moreover, there is no indication in the record that plaintiff’s counsel filed this lawsuit in an attempt to “shake down” the defendants for attorneys’ fees and costs. The case settled after discovery ended, and the defendants made an offer of judgment only after they had the opportunity to look at the evidence. Any determination that the case would have settled if plaintiff’s counsel sent a pre-suit notice to the defendants (based on the record as it appears before us) is pure speculation. In other words, pre-suit notice may not have made a difference. Moreover, at the motion hearing before the district court, Sahyers’ counsel asserted that (1) Sahyers herself made a demand on the law firm prior to litigation, and (2) he lacked the records necessary to make a pre-suit demand before filing the lawsuit. Tr. of Jan. 24, 2008 Mot. Hr’g at 21:19-23 (arguing that had the defendants deposed Sahyers, “she would have testified that she did ask for her money”); id. at 22:12-18 (arguing that “[plaintiff's counsel] did not have access to [Sahyers'] time records”).

While counsel’s arguments are not evidence, an evidentiary hearing would prove or disprove these assertions. The district court made no specific factual findings based on any evidence regarding, for example, bad faith on behalf of the plaintiff or the necessity of the litigation. The Sahyers opinion relied solely on plaintiff’s counsel’s failure to give pre-suit notice. Since we have held that “an inquiry into a party’s bad faith is best conducted by the district court,” Turlington v. Atlanta Gas Light Co., 135 F.3d 1428, 1438 (11th Cir.1998), I would at least have remanded this case back to the district court for an evidentiary hearing with instructions to engage in the lodestar analysis.

A district court retains the discretion to determine or to set a reasonable attorney’s fee under the FLSA, but the district courts, in my view, lack the discretion to deny all fees and costs by way of a “special circumstances” exception to promote collegiality. I agree completely with the efforts of the distinguished district judge to seek to promote professionalism and civility in the practice of law. It is an important component of judicial administration. I also agree that this Court was well-intentioned in deferring to the district court’s discretion; however, I fear that we went too far. My primary concern is with the precedent this case now creates: It is now within the discretion of district courts in our Circuit to deny attorney’s fees to lawyers who fail to extend professional courtesies to lawyer-defendants in FLSA and (presumably other) civil rights cases. This new law will undoubtedly discourage public interest lawyers from taking these cases. Although the plaintiff prevailed in her FLSA claim, her lawyer was unable to recover any fees or his client’s costs as mandated by Congress. I would prefer that the full Court consider this appeal before creating this new precedent.”

Many legal scholars have already voiced their opinion that this case is likely headed to the United States Supreme Court for ultimate decision.  Stay tuned, because this one is likely not done yet.

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