Tag Archives: FLSA

E.D.Pa.: For Application of Computer Exemption, Hourly Rate Must Be Measured Hour-by-Hour, Not On A Weekly Average Basis

Jones v. Judge Technical Services, Inc.

This case was before the court on a variety of motions from all parties. As discussed here, the court was tasked with deciding how the hourly rate must be calculated for purposes of applying the computer exemption, where all parties agreed that the plaintiff was paid on an hourly not salary basis. Plaintiff’s primary contention was that the defendant misclassified him and other employees as exempt from the FLSA’a overtime provisions under 29 U.S.C. § 213(a)(17) (the FLSA’s computer-employee exemption), and subsequently failed to pay them overtime compensation.

Describing the relevant factual background, the court explained:

Defendant maintains a variety of pay structures for its employees. The pay structures at issue are the “Professional Day” and “Professional Week” agreements, which apply only to employees who Defendant has classified as exempt under the FLSA’s computer-employee exemption. Under the “Professional Day” agreement, an employee “will not be paid for more than eight hours in a day, unless that employee works more than ten hours in a day. If the employee works more than ten hours in a day and the manager approves, the employee will be entitled to be paid an additional fee for services provided after the 11th hour.” Under the “Professional Week” plan, employees receive a set hourly rate for every hour worked up to forty hours per week, and receive no additional compensation for hours worked in excess of forty hours per week. (Id. at ¶¶ 10, 15–18) (alterations omitted). Defendant considers employees designated under either structure as exempt under § 213(a)(17).

Plaintiff Morgan Jones initially contacted Defendant through one of its recruiters, Robert Helsel. In July 2011, Defendant successfully placed Plaintiff in a position as Senior Project Manager with Citigroup. When Plaintiff started at Citigroup, he was classified by Defendant as exempt from the FLSA’s overtime requirements under 29 U.S.C. § 213(a)(17) and was subject to Defendant’s “Professional Day” pay plan. (Id. at ¶¶ 20, 27, 30–31, 51.)

Like Defendant’s other employees, Plaintiff was required to enter his daily hours into Defendant’s “EaZyTyme system,” an online-based time reporting system maintained and controlled by Defendant. In addition to reporting his time in EaZyTyme, Plaintiff also reported his work hours directly to Citigroup for purposes of effectuating payment from Citigroup to Defendant for Plaintiff’s work. During his placement with Citigroup, Plaintiff routinely worked over forty hours per week and occasionally over fifty hours per week. (Id. at ¶¶ 39–40, 46, 52.) Beginning on November 14, 2011, Plaintiff was taken out of the Professional Day structure and paid on an hourly basis. (Id. at ¶¶ 13–14, 56–57.)

After quoting the language in the relevant computer exemption, 29 U.S.C. § 213(a)(17), the court broke the criteria for same down to:

(1) that the employee perform certain “primary duties”; and (2) that he be compensated at a rate of at least $27.63 an hour.

Framing the issue presented by the respective parties, the court stated:

Defendant asserts that it is entitled to judgment on the second criteria, reasoning that the requirement is met so long as an employee is paid an average hourly wage of $27.63 or more in a given workweek (hereinafter, “the workweek method”). Defendant explains that because it is undisputed that, in any given week, Plaintiff was always paid an average hourly wage well above $27.63, there is no dispute that the exemption’s $27.63 requirement is met. (Def.’s Br. in Support of Mot. for Partial Summ. J. 7–14.)

Plaintiff counters that the statute sets forth an hour-by-hour, rather than an averaging, approach, and thus computer employees must be paid at least $27.63 for each hour worked (hereinafter, “the hour-by-hour method”). Because Plaintiff was paid $0.00 for hours nine and ten while he was paid under the “Professional Day” structure, he argues that the exemption’s second requirement was not met and he was thus misclassified as exempt. (Pl.’s Br. in Opp’n to Mot. for Partial Summ. J. 9–12.)

Noting that the issue presented was one of first impression and susceptible to different interpretations, the court held:

With the above precepts in mind, and after examination of the statutory language, the Department of Labor regulations and the canons of construction applicable to FLSA exemptions, we conclude that an employee paid on an hourly basis may only be classified as exempt under 29 U.S.C. § 213(a)(17) if that employee is compensated at least $27.63 for each and every hour he or she works

The court reasoned that the language in the exemption was not intended to merely mimic that of the minimum wage portions of the FLSA, but rather should be construed narrowly, as any other exemption should be:

We initially find that the statutory language is susceptible to different interpretations. Neither the FLSA nor the implementing regulations set forth a formula for determining whether an employee has received “not less than $27.63 an hour,” and both parties have presented plausible interpretations of the provision. That said, it appears that a more exact reading of the language is that it requires an employer to pay the requisite sum for each and every hour worked. Indeed, the language of the provision in question specifically refers to compensation on an “hourly basis,” and is silent regarding the use of a weekly or averaging basis.

Defendant argues we should treat the $27.63 hourly rate as a minimum wage provision, and points to Dove v. Coupe, 759 F.2d 167, 171–72 (D.C.Cir.1985), a case which allowed a minimum wage requirement to be met by looking at the average of hours worked. While we have carefully considered Dove, we decline to follow its holding, in part because that case focused on minimum wage requirements while the issue before us is Defendant’s exempting Plaintiff from overtime compensation.

Defendant also posits that applying the workweek standard effectuates congressional intent. Defendant asserts that the averaging approach ensures that the purpose of the minimum wage—the protection of “certain groups of the population from sub-standard wages … due to … unequal bargaining power,” Dove, 759 F.2d at 171 (quoting Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (internal quotation marks omitted))—is met. Defendant further argues that the Department of Labor’s Wage & Hour Division has adopted the workweek as the period for determining whether an employee has received wages at a rate not less than the statutory minimum, and that this interpretation of the statute is entitled to deference. (Def.’s Br. in Support of Mot. for Partial Summ. J. 8–10.) Again, Defendant’s arguments focus on minimum wage theories not at issue here.

We agree with Plaintiff’s view that, based on the allegations raised in this case, the $27.63 requirement is not a minimum wage test, but rather a compensation test for applicability of the exemption pertaining to overtime. Plaintiff correctly stresses that Defendant’s argument fails to recognize that his claims are for unpaid overtime under § 207, not for unpaid minimum wages under § 206, and that there is a significant distinction between those provisions. Section 206 is directed at providing a minimum standard of living while § 207 is concerned with deterring long hours by making those hours more expensive for the employer. In light of these two separate provisions, we conclude that Defendant’s reliance on minimum wage arguments and case law is misplaced. The fact that § 213(a) refers to both §§ 206 and 207 does not mean, as Defendant urges, that the overtime provisions of § 207 can be conflated with minimum wage principles.

The parties also dispute which construction of § 213(a)(17) best effectuates the purpose of the FLSA. Because neither legislative history nor the regulations clarify whether the computer-employee exemption’s $27.63 requirement is to be calculated on a weekly or hourly basis, our determination must necessarily rest on a construction that “best accords with the overall purposes of the statute.” United States v. Introcaso, 506 F.3d 260, 267 (3d Cir.2007) (internal quotation marks omitted).

Plaintiff argues that the FLSA is remedial in nature, and thus should be construed liberally in favor of employees. He also notes that, in light of this remedial purpose, courts have consistently found that FLSA exemptions must be narrowly construed, that is, against the employer. (Pls.’ Br. in Opp’n to Mot. for Partial Summ. J. 9–10.) Defendant counters that, because the FLSA contains criminal penalties for violations of the minimum wage and overtime requirements, the rule of lenity dictates that a less harsh meaning should be applied in interpreting the computer-employee exemption. (Def.’s Br. in Support of Mot. for Partial Summ. J. 10–11.)

Courts are to apply the rule of lenity only if, “after considering text, structure, history, and purpose, there remains a ‘grievous ambiguity or uncertainty in the statute.’ ” Barber v. Thomas, 560 U.S. 474, 130 S.Ct. 2499, 2508–09, 177 L.Ed.2d 1 (2010) (quoting Muscarello v. United States, 524 U.S. 125, 139, 118 S.Ct. 1911, 141 L.Ed.2d 111 (1998)). In other words, the rule of lenity’s application is limited to instances in which a court “can make no more than a guess as to what Congress intended.” United States v. Wells, 519 U.S. 482, 499, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997) (quoting Reno v. Koray, 515 U.S. 50, 65, 115 S.Ct. 2021, 132 L.Ed.2d 46 (1995) (internal quotation marks omitted)). That is not the case here.

While the relevant unit for determining compliance with the computer-employee exemption’s compensation requirement is less than clear, and appears to be a matter of first impression, the appropriate construction of FLSA exemptions is not. The United States Court of Appeals for the Third Circuit has held that the FLSA must be construed liberally in favor of employees, and that statutory exemptions should thus be construed narrowly. Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir.2008) (citing Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 296, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985), Barrentine v. Arkansas–Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) and Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960)). Therefore, an employer seeking to apply an exemption to the FLSA must prove that the employee and/or employer comes ‘plainly and unmistakably’ within the exemption’s terms and spirit. Id. (quoting Arnold, 361 U.S. at 392) (emphasis omitted).

With the above canon of construction in mind, we conclude that the hour-by-hour approach advocated by Plaintiff best accords with the remedial nature of the FLSA. Exemptions are to be construed narrowly and their application must be established by the employer. Defendant has not persuaded us that the computer-employee exemption “plainly and unmistakably” applies. Nor has Defendant demonstrated that its proposed interpretation is required by the plain language of the provision, that the legislative history or regulations support its interpretation, or that the interpretation best accords with the purpose of the FLSA. Therefore, we find that, as a matter of law, the computer-employee exemption is applicable only where, assuming the primary duties test is met, an employee paid on an hourly basis receives compensation at a rate of $27.63 for each and every hour worked.

Applying this standard, we conclude that Plaintiff was misclassified as exempt under § 213(a)(17). Accordingly, we will deny Defendant’s motion for partial summary judgment with respect to this claim.

Click Jones v. Judge Technical Services, Inc. to read the entire Memorandum Opinion.

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Courts Continue to Hold That Exotic Dancers Are Misclassified as Independent Contractors When Actually Employees; Entitled to Minimum Wage For All Hours Worked

If you are someone who follows the trends in wage and hour law, you are no doubt aware of the recent proliferation of cases in which exotic dancers or strippers have challenged the seemingly industry wide misclassification of their positions.  Whereas adult entertainment clubs have classified their exotic dancers as independent contractors for many years, for almost the same duration of time, courts have held that such a classification is erroneous and that the dancers are actually “employees,” as defined by the Fair Labor Standards Act (FLSA).  In the continuing cat and mouse game, clubs typically utilize the misclassification of independent contractor, reap the additional profits, and only change their classification of the position if and when they are called to task when same is challenged in a lawsuit—typically brought by a dancer no longer employed by the club.  In the two decisions discussed below, two addition courts joined the overwhelming majority of courts to have opined on the issue—albeit with slightly different fact patterns—and held that exotic dancers are “employees” and not independent contractors, as the clubs had classified them.

Butler v. PP & G, Inc.

In the first case, the court—in the District of Maryland—summarized the relevant facts as follows:

Defendant PP & G, Inc. is the owner and operator of Norma Jean’s Nite Club, a night club located in Baltimore that features semi-nude female dancers. Plaintiff Unique S. Butler worked at various times as an exotic dancer at Norma Jean’s until August 2012, when she alleges that she was terminated.

Defendant has always classified the dancers who perform at Norma Jean’s as independent contractors. Defendant asserts that the dancers are permitted to elect, in writing, to become either an employee or independent contractor. To date, no dancer, including Plaintiff, has elected to be classified as an employee.

There is no dispute that, during her time as an exotic dancer at Norma Jean’s, Plaintiff did not receive compensation in the form of hourly wages. Rather, the only compensation Plaintiff received for her work as an exotic dancer was from customer tips. Defendant contends that dancers were permitted to keep the entirety of their tips, save a non-mandatory, $45 cleaning or maintenance fee that they could pay to the club per shift. Following her separation from Norma Jean’s, Plaintiff filed the present lawsuit against PP & G, Inc., arguing that, because she was misclassified by Defendant as an independent contractor rather than an employee, Defendant illegally failed to pay her wages. She claims that, as an employee, she is entitled to back pay under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”), and the Maryland Wage Payment and Collection Law, Md.Code Ann., Lab. & Empl. §§ 3–501 et seq. (“MWPCL”). Defendant argues that Plaintiff elected to be an independent contractor, and thus was not entitled to wages under the FLSA and MWPCL.

After laying out the factors to be applied under the “economic reality” test, the court explained that the factors required a finding that the dancers were employees:

The ultimate question for the Court’s consideration is whether the dancers were, “as a matter of economic reality, dependent on the business they served, or, conversely, whether they were in business for themselves.” Schultz, 466 F.3d at 305.

With regard to the first factor, “degree of control,” the court discussed same specifically in regard to voluminous case law that has now developed regarding exotic dancers:

Courts considering the status of exotic dancers under the FLSA generally look not only to the guidelines set by the club regarding the entertainers’ performances and behavior, but also to the club’s control over the atmosphere and clientele. For example, in Reich v. Circle C. Investments, Inc., 998 F.2d 324 (5th Cir.1993), the court determined that the club exerted significant control where the defendant set weekly work schedules, fined the dancers for absences and tardiness, set price levels for table dances and couch dances, set standards for costumes, and managed song selection, among other things. Id. at 327. Similarly, in Morse v. Mer Corp., the defendant exercised control by publishing “Entertainer Guidelines” that set minimum shift lengths, minimum charges, and behavioral prohibitions. No. 1:08–cv–1389–WTL–JMS, 2010 WL 2346334, at *3 (S.D. Ind. June 4, 2010). Additionally, although the court in Priba Corp. noted that the defendant exercised control over the entertainers by setting show times and establishing behavioral guidelines, it emphasized that “the real touchstone” of the control factor was the “reality of the employment relationship.” 890 F.Supp. at 592. Thus, the Priba court focused on the dancers’ dependence on the club for earnings, and the club’s control over advertising and atmosphere. Id.

Here, unlike in many of the cases involving exotic dancers, see, e.g., Hart v. Rick’s Cabaret Int’l, Inc., ––– F.Supp.2d ––––, 2013 WL 4822199, at *6 (S.D.N.Y.2013) (club exerted control where it had written behavioral guidelines, imposed fines, and imposed a dress code); Thompson v. Linda And A., Inc., 779 F.Supp.2d 139, 148 (D.D.C.2011) (significant control exercised where dancers were required to “sign in,” follow a schedule, were permitted to dance only for set durations, and the defendant enforced certain behavioral rules); Harrell v. Diamond A Entertainment, Inc., 992 F.Supp. 1343, 1349–50 (M.D.Fla.1997) (economic dependence found where the club set fees, had a “stage rotation,” controlled customer volume and atmosphere, and required dancers to abide by written rules and regulations), Defendant does not appear to manage the day-to-day aspects of the dancers’ performance. Defendant does not create work schedules for the dancers, but rather permits them to work at other clubs and to “come and go as they please.” Walter Alexander Robinson, III Dep. 45:15–21, 79:1–4, Aug. 9, 2013. Defendant did not mandate that Plaintiff dress or dance a certain way, did not limit the amount of lap dances she could perform, and did not limit the number of beverages a customer could purchase for her. Unique S. Butler Dep. 40:1–10, Aug. 9, 2013. The only behavioral guidelines that Defendant required Plaintiff to follow were those set by the Maryland State Liquor Board and the adult entertainment laws. Robinson Dep. 51:1–14.

Defendant asserts that the only fee imposed on the Plaintiff was a non-mandatory $45 cleaning or maintenance fee. Id. at 71:10–14. Although Defendant recommends a minimum fee for lap dances, the manager testified that each dancer can set her own fee. Id. at 55:13–56:4. Plaintiff asserts that Defendant also imposed a “late fee,” mandated that she pay the DJ prior to getting on stage, and required her to tip the house mom. Butler Dep. 20:9–13, 31:14–32:9. Plaintiff also stated that Defendant required her to dance at particular times. Id. at 19:11–19. Further, she testified that, if dancers were sanctioned for any matter, they were instructed to work the day shift as punishment. Id. at 32:6–15.

It is undisputed, however, that the Defendant alone is responsible for advertising and creating the atmosphere of the club. Robinson Dep. 30:16–20 (“Q [:] The Defendant is responsible for the advertising, location, business hours, maintenance of facility, aesthetics, and inventory of beverages and food? A [:] Yes. There’s no food.”); 33:6–12 (“Q[:] Okay. The Plaintiff’s employment with Defendant was dependent on Defendant’s financial savvy and business know-how to keep Defendant’s business financially sound so as to keep the doors open and afford Plaintiff the opportunity to work at Norma Jean’s Nightclub? A [:] Yes.”). Like in Priba Corp., the visibility and quality of the club itself “dictates the flow of customers into the club.” 890 F.Supp. at 592. Plaintiff is thus entirely dependent on the Defendant to provide her with customers, and her economic status “is inextricably linked to those conditions over which [Defendant has] complete control.” Id.

Thus, although viewing the facts in the light most favorable to the Defendant suggests that Defendant does not exercise control over the day-to-day decisions and work of its dancers, it exercises significant control over the atmosphere, clientele, and operation of the club. Thus, this factor likely tips in favor of economic dependence, as Defendant exclusively controls the flow of customers, on which Plaintiff depended for her income.

Applying the second factor, “opportunity for profit or loss,” the court held that same supported a finding of employment, based on the defendant’s acknowledgement that plaintiff did not share in the profits or losses of the club.  The court similarly held that plaintiff made virtually no investment in  equipment or material, the third factor considered, and the little or no skill was required for her job (the fourth factor).

While the court acknowledged that the fifth factor, “permanence of the working relationship was not as clear, it nonetheless concluded that, the mere fact that the plaintiff was free to come and go as she pleased and work at other clubs, did not belie classification as an employee:

As to the permanence and duration of the working relationship, Plaintiff was generally permitted to work without a specified end date and could come and go as she pleased. Robinson Dep. 45:15–21, 79:1–4. Additionally, she was free to work at other adult entertainment clubs. This factor tends to weigh in favor of independent contractor status. As other courts have noted in considering this factor, however, “it is entitled to only modest weight in assessing employee status under the FLSA.” Hart, ––– F.Supp.2d at ––––, 2013 WL 4822199, at *14; see also Priba Corp., 890 F.Supp. at 593 (“Because dancers tend to be itinerant, the court must focus on the nature of their dependence.”). As the District Court for the Southern District of New York recently noted in regard to a similar challenge, “[t]hat dancers were free to work at other clubs or in other lines of work, and that they were not permanent employees, do[es] not distinguish them from countless workers in other areas of endeavor who are undeniably employees under the FLSA-for example, waiters, ushers, and bartenders.” Hart, ––– F.Supp.2d at ––––, 2013 WL 4822199, at *14.

Finally, the court dismissed the defendant’s argument that plaintiff’s services were not of an “integral nature” to its business operations:

It is undisputed that Defendant maintains an adult entertainment business at Norma Jean’s Nite Club. Defendant asserts that, although the club features dancers, dancers are not integral to the operation of the business. Rather, Defendant characterizes Norma Jean’s as “a sports bar” with pool tables, and contends that dancers constitute but one of the features. Robinson Dep. 19:5–10, 31:2–7. Defendant states that it makes all of its profits off of the sale of alcoholic beverages, not the exotic dancers.

Courts have routinely noted that the presence of exotic dancers are “essential,” or “obviously very important,” to the success of a topless nightclub. See, e.g., Harrell, 922 F.Supp. at 1352; Martin v. Circle C. Invs., Inc., No. MO–91–CA–43, 1991 WL 338239, at *4 (W.D.Tex. Mar. 27, 1991). For example, the court in Hart stated, in considering the club owners’ argument that “the Club’s restaurant, bar, and televisions served to attract customers,” that “[n]o reasonable jury could conclude that exotic dancers were not integral to the success of a club that marketed itself as a club for exotic dancers.” ––– F.Supp.2d at ––––, 2013 WL 4822199, at *14.

Here, any contention that the exotic dancers were not integral to the operation of Norma Jean’s flies in the face of logic. The presence of the exotic dancers was clearly a major attraction of the club, and increased significantly the sales of alcoholic beverages and, accordingly, the profits earned by PP & G. Further, unlike the club in Hart, Norma Jean’s does not serve food or have a restaurant. Rather, the only attractions, aside from exotic dancers, are televisions and pool tables. Because no reasonable jury could determine that exotic dancers were not integral to the success of Norma Jean’s, this factor also tips in favor of employee status.

Holding that all factors together supported an employment relationship the court concluded:

Considering the preceding factors in conjunction, and resolving all disputes of fact in favor of the Defendant, the Court concludes that Plaintiff was an employee, not an independent contractor, at Norma Jean’s Nite Club. Although Defendant asserts that Plaintiff elected to become an independent contractor, neither the label placed on an employment relationship, nor an individual’s subjective belief about her employment status, are dispositive. See, e.g., Clincy v. Galardi South Enterprises, Inc., 808 F.Supp.2d 1326, 1329 (N.D.Ga.2011). Defendant controlled the economic opportunity of the Plaintiff. Plaintiff did not have the opportunity for profit or loss, did not invest in the club, and did not have any specialized skills. Moreover, work of the type performed by Plaintiff as an exotic dancer is integral to the operation of the club. Regardless of the Defendant’s characterization of the relationship as that of an independent contractor, “[w]here the work done, in its essence, follows the usual path of an employee, putting on an ‘independent contractor’ label does not take the worker from the protection of the [Fair Labor Standards] Act.” Rutherford, 331 U.S. at 729.

Click Butler v. PP & G, Inc. to read the entire Memorandum opinion.

Stevenson v. Great American Dream, Inc.

In a second recent opinion, on very similar facts, a court within the Northern District of Georgia reached the same conclusion.  Applying the same “economic reality” test to the facts before it, the court explained:

To begin, this is not a matter of first impression for this Court. In Clincy v. Galardi South Enterprises, Inc., 808 F.Supp.2d 1326 (N.D.Ga.2011), this Court found that adult entertainers-working under conditions similar to the Plaintiffs in this action-were “employees” protected by the FLSA. Many other courts have reached the same conclusion. See Reich v. Circle C. Investments, Inc., 998 F.2d 324 (5th Cir.1993); Reich v. Priba Corp., 890 F.Supp. 586 (N.D.Tex.1995); Harrell v. Diamond A Entertainment, Inc., 992 F.Supp. 1343 (M.D.Fla.1997); Morse v. Mer Corp., 1:08–CV–1389–WTL–JMS, 2010 WL 2346334 (S.D. Ind. June 4, 2010); Hart v. Rick’s Cabaret Intern., Inc., No. 09 Civ. 3043, 2013 WL 4822199 (S.D.N.Y. Sept. 10, 2013).

Here, five out of the six factors support finding “employee” status. First, Pin Ups exercised a significant amount of control over the Plaintiffs. The Plaintiffs were issued a document titled “General Policies and Procedures.” (Pls.’ Statement of Facts ¶ 59.) These rules laid out standards for appropriate dress5 and how the entertainers were to conduct themselves on stage. (Id., Ex. 4.) They also stipulated that the DJ would ultimately select the music that the entertainers would perform to. (Id.) These rules applied not only to how the Plaintiffs conducted themselves on the main stage, but also to how they conducted themselves in the VIP room. (Id.) Further, these rules were enforced. Violations could result in dismissal. (Id. ¶¶ 16–17.) The “house moms” made sure that the Plaintiffs complied with the appearance standards. (Id. ¶ 23.) If there was a dispute regarding proper dress, the manager would make the final call. (Id. 43.) In addition to these regulations, the Plaintiffs were required to pay several fees. Upon arriving for a shift, they had to pay a house fee. (Id. ¶¶ 31–32.) They also paid fees that went to the house mom and the DJ. (Id. ¶¶ 22, 24.) Moreover, Pin Ups was responsible for settling disputes arising within the club. For example, disputes concerning the entertainer tip pool were resolved by the house mom and the manager. (Id. ¶ 49.) Pin Ups also handled disputes between the Plaintiffs and the customers. (Id. ¶ 18.) The Defendants argue that the entertainers could set their own schedules. But this was true in several cases where courts found that the entertainers were nonetheless employees. See, e.g., Priba Corp., 890 F.Supp. at 591; Harrell, 992 F.Supp. at 1348. Control over scheduling is minimal compared to all of the elements of the job that Pin Ups controlled. See Usery, 527 F.2d at 1312 (“Each operator is given the right to set her own hours … [i]n the total context of the relationship … the right to set hours [does not indicate] such lack of control by [the defendant] as would show these operators are independent from it …. [c]ontrol is only significant when it shows an individual … stands as a separate economic entity.”). Here, “the entertainer’s economic status is inextricably linked to those conditions over which defendants have complete control.” Priba Corp., 890 F.Supp. at 592.

Second, the Plaintiffs and Pin Ups did not share equally in the opportunities for profit and loss. Although the Plaintiffs risked a loss equal to the fees they paid-assuming they made nothing in tips-“The risk of loss [was] much greater for the Club.” Clincy v. Galardi South Enterprises, Inc., 808 F.Supp.2d 1326, 1346 (N.D.Ga.2011). It bore the vast majority of overhead costs. Pin Ups also had more of an impact on potential profits. It was “primarily responsible for attracting customers to the Club, as decisions about marketing and promotions for the Club, its location, its maintenance, aesthetics, and atmosphere, and food and alcohol availability and pricing are made by” Pin Ups. Id. The Defendants argue that the entertainers could earn more profit based on their interactions with the customers. (Defs.’ Resp. to Mot. for Summ. J., at 17–18.) This argument was rejected in Clincy. See Clincy, 808 F.Supp.2d at 1345–46. The Plaintiffs’ control over profits was minor compared to Pin Ups’. “[B]ut for defendants’ provision of the lavish work environment, the entertainers at the club likely would earn nothing.” Priba Corp., 890 F.Supp. at 593.

Third, Pin Ups invested far more than the Plaintiffs on necessary personnel and equipment. It provided bartenders, waitresses, cashiers, security staff, and disc jockeys. (Pls.’ Statement of Facts ¶¶ 12–13, 70.) Pin Ups also provided the facility, the stages, and the poles. (Id. ¶ 71.) As other courts have noted, the amount spent on clothing, hair styling, and make-up “is minor when compared to the club’s investment.” Harrell, 992 F.Supp. at 1350; see also Reich, 998 F.2d at 328 (“A dancer’s investment in costumes and a padlock is relatively minor to the considerable investment Circle C has in operating a nightclub.”). Many employees in many different fields are also financially responsible for maintaining an appearance suitable to their respective work environments.

Fourth, little skill is required. Pin Ups does not require that its entertainers undergo formal training. (Id. ¶ 73.) The Defendants argue that the entertainers get better as they gain experience. Although different entertainers may possess varying degrees of skill, there is no indication that a high degree of skill or experience is necessary. Taking your clothes off on a nightclub stage and dancing provocatively are not the kinds of special skills that suggest independent contractor status. See Priba Corp., 890 F.Supp. at 593 (“The scope of her initiative is restricted to decisions involving what clothes to wear or how provocatively to dance. Such limited initiative is more consistent with the status of an employee than an independent contractor.”).

Fifth, and most definitively, the Plaintiffs’ services were an integral part of Pin Ups’ business. Pin Ups is an adult entertainment club and so it needs adult entertainers. Kelly Campbell, the general manager of Pin Ups, acknowledged this. (Campbell Dep. at 20.) (“Because we are an entertainment facility and we could not be such without an entertainer.”). Pin Ups’ General Policies and Procedures issued to the entertainers states: “Your job as an entertainer is the most important one in our organization.” (Pls.’ Statement of Facts, Ex. 4.)

The court did recognize that the final factor did not necessarily weigh in favor of an employment relationship, but—citing some of the identical language as the Butler court had—it held that same was not terribly important in its inquiry:

Only the duration factor supports the Defendants’ position. There is no indication that all of the Plaintiffs worked at Pin Ups for an extended period of time, and all of the Plaintiffs were permitted to work as entertainers at other clubs. However, “[t]hat dancers were free to work at other clubs or in other lines of work, and that they were not permanent employees, do not distinguish them from countless workers in other areas of endeavor who are undeniably employees under the FLSA-for example, waiters, ushers, and bartenders.” Hart, 2013 WL 4822199, at *14. In light of the other factors, this alone cannot nudge the Plaintiffs out of the protective sphere of the FLSA.7 See Reich, 998 F.2d at 328–29 (“The transient nature of the work force is not enough here to remove the dancers from the protections of the FLSA. In analyzing the … factors, we must not lose sight of economic reality.”).

Click Stevenson v. Great American Dream, Inc. to read the complete Opinion and Order.

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S.D.N.Y.: Existence of Arbitration Agreements for Some (Not All) Employees in Putative Class, Irrelevant re “Similarly Situated” Inquiry at Stage I

Romero v La Revise Associates, L.L.C.

This case was before the court on plaintiff’s motion for conditional certification. The case concerned allegations of impermissible tip credit, inadequate notice of same (under 203(m)), and other allegations of unpaid minimum wages. As further discussed here, defendants largely focused their attack on their twin contentions that the class proposed by plaintiff was not similarly situated to him and/or was too broad, because it contained English speakers (the plaintiff did not speak English) and employees and former employees who had signed arbitration agreements (the plaintiff did not). The court rejected both of these contentions, and reasoned that neither of these factors were appropriately considered at Stage I, the conditional certification stage.

Rejecting the defendant’s arguments in this regard, and holding that such issues were more properly reserved for Stage II or decertification analysis, the court reasoned:

The Court disagrees with defendants’ arguments. Case law imposes only a very limited burden on plaintiffs for purposes of proceeding as a conditional collective action. “[C]ourts have conditionally certified collective actions under the FLSA where plaintiffs, based on their firsthand observations, identify an approximate class of similarly situated individuals.” Hernandez v. Immortal Rise, Inc ., 2012 WL 4369746, at *4 (E.D.N.Y. Sept. 24, 2012). Here, Romero has done just that, stating in his declaration that he “personally observed … Defendants’ policy to pay below the statutory minimum wage rate to all tipped employees,” that he and other tipped employees were compensated “all at rates below the minimum wage,” that he has never seen a tipped employee “receive proper notice explaining what a tip credit is,” that he and other tipped employees had to spend more than 20% of their daily time in non-tipped related activities, that he observed defendants engaging in time-shaving, that he observed when employees were sent home without call-in pay if the restaurant was not busy, and that he “personally observed that all non-exempt employees received the same form of wage and hour notice.” Romero Decl. ¶¶ 2–9. The affidavit of a plaintiff attesting to the existence of similarly situated plaintiffs is sufficient for the purposes of a motion to approve a collective action. See Cheng Chung Liang v. J.C. Broadway Restaurant, Inc., 2013 WL 2284882, at *2–3 (S.D.N.Y. May 23, 2013) (“For the purposes of this motion, … plaintiffs’ evidence—in the form of [one employee's] affidavit—is sufficient to establish that … there may be class members with whom he is similarly situated.”). Thus, Romero has made a sufficient showing that he and potential plaintiffs “were victims of a common policy or plan that violated the law.” Hoffman, 982 F.Supp. at 261.

Defendants’ principal argument is that because other employees signed arbitration agreements, Romero is not similarly situated to these other employees. Def. Mem. at 6–14. Defendants assert that the claims here are “properly pursued solely in arbitration, on an individual basis, by all of Ruhlmann’s employees who signed such an agreement” and therefore that “Ruhlmann’s employees are dissimilar from Plaintiff Romero and must pursue any claims they may have in an arbitral forum rather than federal court.” Def. Mem. at 8–9. Romero challenges both the enforceability and the validity of these arbitration agreements. He argues that the agreements are not enforceable because they violate the fee-shifting provision of the FLSA. Reply at 6–7. Romero also argues that defendants caused several of these agreements to be signed by coercion, that it is highly likely that several employees did not actually sign arbitration agreements, and that the validity of the signatures on several agreements are questionable. Reply at 7–9; Pl. May 31 Letter at 2. Additionally, he asserts that the agreements are unenforceable because they limit the statute of limitations on employees’ claims to six months and because they were not provided to employees in their native language. Pl. Aug. 20 Letter at 2–3.

As already noted, the question on a motion to proceed as a collective action is whether the proposed plaintiffs are similarly situated “with respect to their allegations that the law has been violated.” Young, 229 F.R.D. at 54; accord Meyers, 624 F.3d at 555 (in conditional collective action approval, question is whether the proposed plaintiffs are similarly situated to the named plaintiffs “with respect to whether a FLSA violation has occurred”). The arbitration agreements do not create any differences between Romero and the proposed plaintiffs with respect to Romero’s claims that defendants have violated the FLSA. That is, the validity vel non of the agreements is unrelated to any claims of a violation of the FLSA. Under this reasoning, the existence of differences between potential plaintiffs as to the arbitrability of their claims should not act as a bar to the collective action analysis. Indeed, courts have consistently held that the existence of arbitration agreements is “irrelevant” to collective action approval “because it raises a merits-based determination.” D’Antuono v. C & G of Groton, Inc., 2011 WL 5878045, at *4 (D.Conn. Nov. 23, 2011) (citing cases); accord Hernandez, 2012 WL 4369746, at *5;Salomon v. Adderly Indus., Inc., 847 F.Supp.2d 561, 565 (S.D.N.Y.2012) (“The relevant issue here, however, is not whether Plaintiffs and [potential opt-in plaintiffs] were identical in all respects, but rather whether they were subjected to a common policy to deprive them of overtime pay ….”) (alteration in original) (internal citation and quotation marks omitted).

In support of its argument that the existence of arbitration agreements merits denial of collective action approval, defendants make arguments about the eventual enforceability of the arbitration agreements and rely on cases in which courts granted motions to dismiss and compel arbitration because of such agreements. See Def. Mem. at 6–7. Critically, defendants do not even address the cases holding that consideration of the validity of arbitration agreements is inappropriate in the context of a motion to approval an FLSA collective action. The situation here is thus akin to the situation in Raniere v. Citigroup Inc., 827 F.Supp.2d 294 (S.D .N.Y.2011), rev’d on other grounds, 2013 WL 4046278 (2d Cir.2013), in which the court remarked:

Defendants have failed to cite a single authority finding that due to the possibility that members of the collective [action] might be compelled to bring their claims in an arbitral forum, certification is not appropriate. Such arguments are best suited to the second certification stage, where, on a fuller record, the court will examine whether the plaintiffs and opt-ins are in fact similarly situated.

Id. at 324.

Defendants’ strongest argument is that “[i]t would be a waste of judicial and party resource to force defendants” to send notice to individuals ultimately bound to arbitrate claims. Def. June 4 Letter at 3. But the notice requirement is not unduly burdensome in this case and the defendants’ proposal essentially amounts to an invitation for the Court to adjudicate the validity of the arbitration agreements. But, as already noted, case law makes clear that this sort of merits-based determination should not take place at the first stage of the conditional collective action approval process. Plaintiff has raised at least colorable arguments to support the invalidity or unenforceability of the arbitration agreements, some of which are fact-intensive. Case law holds, however, that issues of fact surrounding arbitration agreements are properly resolved at the second stage of the two-step inquiry. D’Antuono, 2011 WL 5878045, at *5; accord Salomon, 847 F.Supp.2d at 565 (“[A] fact-intensive inquiry is inappropriate at the notice stage, as Plaintiffs are seeking only conditional certification.”) (citing cases); Ali v. Sugarland Petroleum, 2009 WL 5173508, at *4 (S.D.Tex. Dec. 22, 2009) (“The Court will make the determination [of whether to exclude those who signed arbitration agreement from the class] at the conclusion of discovery, when it may properly analyze the validity of the arbitration agreement.”). Defendants not only fail to distinguish these cases, they do not even proffer any argument as to why the reasoning of these cases is wrong.

Defendants have submitted evidence contradicting Romero’s claim that he is similarly situated to other employees with respect to other aspects of his claims, such as his understanding of the tip credit. See Collin Decl. ¶ 9. However, “the two-stage certification process exists to help develop the factual record, not put an end to an action on an incomplete one.” Griffith v. Fordham Fin. Mgmt., Inc., 2013 WL 2247791, at *3 (S.D.N.Y. May 22, 2013) (granting collective action approval where defendant had put forth “contravening evidence”) (emphasis omitted) (internal citations and quotation marks omitted). For these reasons, Romero’s motion for conditional approval of a collective action is granted.

Click Romero v La Revise Associates, L.L.C. to read the court’s entire Opinion & Order.

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N.D.Ohio: Where Defendant Retains Right to Reject Contracts Obtained by Door-to-Door Solicitors, Otherwise Allowed by Law to Enter Into Contracts, Outside Sales Exemption Inapplicable

Hurt v. Commerce Energy, Inc.

Following the United States Supreme Court’s decision in Christopher v. SmithKline Beecham Corp., courts continue to grapple with the issue of who is engaged in making sales, within the definition of the FLSA’s outside sales definition versus who simply helps solicit or promote sales to be made by others. This recent case distinguished door-to-door solicitors, who worked for the defendant energy company, from Christopher, and held that their duties could be non-exempt and more akin to those of the student salesman and military recruiters that Christopher in turn had distinguished from the pharmaceutical sales reps involved in that case. As such, the court denied the defendant’s motion for summary judgment. In so doing, the court provided some needed guidance on the issue of who is engaged in sales and who is not, for purposes of application of the “outside sales exemption.”

The court discussed the following facts relevant to this issue:

The Plaintiffs worked as door-to-door salespeople for Just Energy Marketing. They worked at various times from 2009 to 2013 at Just Energy’s Beachwood, Ohio office. During most of that time, Dennis Piazza was the regional distributor for the Beachwood office. Just Energy says that Piazza is an independent contractor himself, and his business is separately incorporated as Star Energy, Inc.

A. Ohio Regulations & PUCO

Because Just Energy operates in multiple states, it adopted policies to have its door-to-door workers comply with Ohio regulations. Specifically, in Ohio, the Public Utilities Commission of Ohio (“PUCO”) regulates energy suppliers like Just Energy. Generally, PUCO requires suppliers who solicit door-to-door to provide customers with acknowledgment forms; have independent third-party verification of at least fifty percent of all its customers; print terms and conditions in tenpoint type or greater; and require the door-to-door solicitors to display a valid photo identification.

But Just Energy’s door-to-door solicitors have additional requirements. In 2010, Commerce Energy entered into a settlement agreement with the Ohio PUCO to renew its retail natural gas supplier certificate. That agreement resulted from an investigation into customer complaints about the sales, solicitation, and enrollment practices of Just Energy’s residential door-to-door solicitors.

In the settlement, Commerce Energy agreed to implement an in-state quality assurance program “to provide the company with additional oversight of its sales force, as well as retrain all Ohio sales agents to assure compliance with PUCO’s rules.” Commerce also agreed that all its new customers would be subject to a new third-party independent verification process. That process requires door-to-door solicitors to initiate a third-party verification call before leaving the premises. The solicitors cannot be present on the premises during the call, and they cannot return to the premises after the call. Just Energy’s policies for its Ohio door-to-door solicitors reflect these requirements.

B. Hiring and Orientation

For its door-to-door solicitors, Just Energy often hires low-skill workers, many without prior sales experience. At its Beachwood office, Just Energy regional distributors and supervisors conducted short interviews before hiring these workers, sometimes completing the interviews in large groups. After the interviews, Just Energy required its solicitors to sign employment contracts.

The contracts required the Plaintiffs to comply with federal, state, and local laws and regulations and Just Energy Marketing’s codes of behavior. Further, the contracts said that the Plaintiffs would be paid a commission “according to the commission schedule in place at the time.” During the Plaintiffs’ employment, the commission schedule said that Just Energy paid the Plaintiffs approximately $35 for every order that they obtained. According to Just Energy, the Plaintiffs also “enjoyed the potential to earn productivity bonuses and additional commissions if customers remained with Commerce for certain periods of time.” But if “a customer cancelled an agreement after signing, then no commissions were paid at all; if the customer cancelled after the commission was already paid, it was subject to recoupment.”

After signing their employment contracts, Just Energy required its door-to-door workers to attend an orientation session led by a regional distributor. These orientation sessions covered a number of topics “including company and industry background, the products and services being sold, and helpful sales techniques.” After the orientation, Just Energy generally required the Plaintiffs to shadow a more experienced solicitor in the field for one or two days before soliciting customers on their own. Just Energy provided a script for the workers to use with customers. The Plaintiffs used these scripts to varying degrees.

C. Disputed Roles and Responsibilities

Just Energy and the Plaintiffs disagree about their respective roles and responsibilities. According to Just Energy, the Plaintiffs’ primary responsibilities were “knocking on potential customers’ doors, selling Commerce’s services and obtaining signed sales agreements for Commerce’s energy supplies.” Just Energy says that the “Plaintiffs were absolutely allowed to travel and work independently.” It says that they worked free from supervision, and Just Energy did not require them to work particular hours. Both parties agree, however, that the Plaintiffs worked approximately six to seven days a week for approximately twelve hours a day.

In contrast, the Plaintiffs say that Just Energy subjected them to significant supervision. They say that Just Energy regional distributors and supervisors controlled the length of the Plaintiffs’ work week and work day by assigning them to a work crew and van, sending the vans to solicit specific neighborhoods, and prohibiting the vans from returning to the office before 9 p.m. The Plaintiffs also say that Just Energy regional distributors required the Plaintiffs to knock on a specific number of doors and obtain a certain number of orders, required the Plaintiffs to report to the office every morning, prevented the Plaintiffs from working independently, controlled the Plaintiffs’ break time, and required the Plaintiffs to purchase and wear Just Energy branded clothing.

Initially, the court rejected the defendant’s contention that the plaintiffs “made sales” as defined by the outside sales exemption, as a matter of law:

The Plaintiffs’ evidence raises a genuine issue of material fact about whether they were “making sales,” and thus, qualified as outside salesman. FLSA does not define “outside salesman,” instead leaving it to be “defined and delimited … by regulations of the Secretary [of Labor].” The Department of Labor defines “outside salesman” as “any employee … [w]hose primary duty is … making sales within the meaning of [29 U.S.C. § 203(k) ]” and who is “customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.” Section 203(k) defines a “sale” as “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.”

In Christopher v. SmithKline Beecham Corp., the United States Supreme Court found that pharmaceutical representatives were exempt outside salespeople even though they did not actually accomplish a “sale” of drugs to the patient. Because Congress meant to define sales broadly to “accommodate industry-by-industry variations in methods of selling commodities,” the Supreme Court said that courts should consider the impact of regulatory requirements or “arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity.” Thus, because federal regulations prevented the pharmaceutical representatives from engaging in the actual sale of drugs to the patient, the Supreme Court found it was enough that the representatives “promoted” sales to doctors who in turn made “nonbinding commitments” to prescribe the drugs to their patients.

In Clements v. Serco, the United States Court of Appeals for the Tenth Circuit held that military recruiters were not exempt outside salespeople because they lacked the authority to enlist a recruit. There, recruiters “sold” potential recruits on the idea of the Army, but the Army retained the authority to enlist recruits. The Tenth Circuit held that the recruiters did not “make sales” because the Army required the recruits to report to a military processing station for a physical, job selection, and an oath before enlisting. Because the Army retained discretion to enlist a recruit, the recruiters were not outside salesman.

Similarly, in Wirtz v. Keystone Readers, the United States Court of Appeals for the Fifth Circuit found that “student salesman” were not outside salesman. There, a company hired student salesman to “obtain orders” for magazine subscriptions by door-to-door solicitation. The company required the student salesman to give their order cards to a “student manager,” who then contacted the customer, verified the customer met the company’s qualifications, and passed the order on to a “verifier.” The verifier then checked the order to make sure that the customer met the company’s qualifications. Only then did the company execute a contract. The Fifth Circuit concluded that the student salesman were not outside salesman because they did not “mak[e] sales of their own.”

Taking the evidence in the light most favorable to the Plaintiffs, Just Energy fails to show, as a matter of law, that the Plaintiffs “made sales.” Just Energy says that Christopher should control because the Plaintiffs obtained “far more” than the nonbindinding commitments at issue in Christopher. The Court agrees that the Plaintiffs obtained contracts, but Christopher is distinguishable.

The court reasoned that unlike the pharmaceutical reps in Christopher, here the plaintiffs were not prohibited from entering into binding contracts as a matter of law, rather it was defendant’s internal policies alone that stopped them from doing so:

Unlike the pharmaceutical representatives in Christopher, the Plaintiffs are not prohibited from completing a contract by state or federal regulations. Instead, Just Energy prevented the Plaintiffs from completing a sale by retaining unlimited discretion to accept and reject the orders obtained by the Plaintiffs. For example, in Just Energy’s New Customer User Guide, Just Energy says: “This Agreement will become firm and binding when (i) Just Energy accepts this Agreement, and (ii) the LDC [local distributor] accepts and successfully implements the Customer’s enrolment submission from Just Energy.” Similarly, in Just Energy’s Regional Distributor Services Agreement, Just Energy says: “The Service Provider and the Principal understand and agree that JUST ENERGY or any Affiliate thereof retain the sole and unfettered discretion to reject any Energy Contract submitted (whether by an Independent Contractor, the Principal or the Service Provider).”

Here, neither Ohio law nor the PUCO agreement require Just Energy to retain unlimited rejection authority. And Just Energy has failed to provide evidence showing that this right to reject contracts was necessary to comply with regulations or the PUCO agreement. Just Energy has not shown that it accepts agreements that comply with the applicable regulations. The contracts the Plaintiffs bring to Just Energy are merely proposals until Just Energy accepts them. Therefore, because Just Energy retains an unlimited right of rejection, the Plaintiffs are more like the student salesman in Wirtz and the military recruiters in Serco whose employers retained discretion to accept and reject their orders.

Additionally, like the magazine company in Wirtz, Just Energy required the Plaintiffs to submit their orders for further review before Just Energy chose to accept or reject them. While it is true that Just Energy’s evidence shows that the PUCO agreement requires Just Energy to conduct third-party verification, Just Energy has failed to show that the regulations require a credit check and approval of the customer by the local distributor. Thus, the Plaintiffs’ evidence raises a genuine issue of material fact about whether the Plaintiffs were “making sales,” and thus, qualified for the outside salesman exemption.

The court also reasoned that the “external indicia” did not support defendant’s contention that the plaintiffs were engaged in outside sales, further distinguishing the case from Christopher. Last, the court relied on the FLSA’s purpose, and reasoned that here- unlike the $70,000 a year (plus) pharmaceutical reps at issue in Christopher- the FLSA’s guiding principles supported a finding that the plaintiffs were not outside sales exempt.

Subsequent to this decision, the defendant sought interlocutory review of the decision, but the motion for same was denied. Nonetheless, this one is likely headed to the Sixth Circuit, and it’s unclear what they will do with it. Stay tuned for a further update here if/when the Sixth Circuit ultimately weighs in.

Click Hurt v. Commerce Energy, Inc. to read the full Opinion and Order.

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6th Cir.: Purportedly “Volunteer” Firefighters, Paid Per Call as Independent Contractors, Are “Employees” Under FLSA

Mendel v. City of Gibraltar

This case was before the Sixth Circuit, following the district court’s order granting the defendant’s motion for summary judgment. Although the case concerned the issue of whether the defendant-City met the prerequisite for FMLA coverage (number of employees), the issue considered by the Sixth Circuit was “purportedly volunteer firefighters who receive a substantial hourly wage for responding to calls whenever they choose to do so are “employees” or “volunteers” for purposes of the Fair Labor Standards Act (“FLSA”) and Family Medical Leave Act (“FMLA”).” The Sixth Circuit held that the firefighters at issue were employees rather than volunteers, such that the defendant met the number of employee requirement to trigger FMLA coverage.

The Sixth Circuit laid out the following facts relevant to its inquiry of whether the firefighters were properly deemed to be employees or volunteers:

The volunteer firefighters of Gibraltar must complete training on their own time without compensation.  While they are not required to respond to any emergency call, they are paid $15 per hour for the time they do spend responding to a call or maintaining equipment. They do not work set shifts or staff a fire station; they maintain other employment and have no consistent schedule working as volunteer firefighters.  The firefighters generally receive a Form–1099 MISC from the City. They do not receive health insurance, sick or vacation time, social security benefits, or premium pay. The City does have an employment application for the firefighters, and it apparently keeps a personnel file for each firefighter. A volunteer firefighter may be promoted or discharged.  [The Plaintiff] introduced evidence below of what several other local communities pay their full-time firefighters. According to his wife’s affidavit, she and Mendel discovered that certain other communities in the area pay hourly wages ranging from approximately $14 to $17 per hour. Also, the City pays its own part-time Fire Chief $20,000 per year, and the Chief testified in his deposition that he “tr[ies] to work 20 hours per week at the [Gibraltar] fire station.” Based on this information, the Secretary of Labor notes in her amicus brief that if one assumes the Fire Chief works fifty-two weeks per year, he effectively earns $19.23 per hour.

After explaining that the FMLA’s definition of “employees” incorporates the FLSA’s definition, the Court then examined the issue under the FLSA. Holding that the firefighters were employees and not volunteers, the Court explained:

Here, it appears that the Gibraltar firefighters fall within the FLSA’s broad definition of employee. The firefighters are suffered or permitted to work, see
29 U.S.C. § 203(g), and they even receive substantial wages for their work.

This is not the end of our analysis, however. In 1986, Congress amended the FLSA to clarify that individuals who volunteer to perform services for a public agency are not employees under the Act. Section 203(e) now includes the following provision:

The term “employee” does not include any individual who volunteers to perform services for a public agency which is a State, a political subdivision of a State, or an interstate governmental agency, if—

(i) the individual receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and

(ii) such services are not the same type of services which the individual is employed to perform for such public agency.

29 U.S.C. § 203(e)(4)(A).

Thus, the question becomes whether the Gibraltar firefighters fall within this exception to the FLSA’s generally broad definition of “employee.” Specifically, the question before us is whether the wages paid to the firefighters constitute “compensation” or merely a “nominal fee.” If the hourly wages are compensation, then the firefighters are employees under the FLSA. Conversely, if the wages are merely a nominal fee, then the firefighters are volunteers expressly excluded from the FLSA’s definition of employee.

The official regulations provide guidance at this juncture. The regulations define “volunteer” as “[a]n individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered.” 29 C.F.R. § 553.101(a); see also 29 C.F.R. § 553.104(a) (employing similar language). The regulations proceed to recognize, “Volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers.” 29 C.F.R. § 553.106(a). The specific provision addressing nominal fees provides, in part, “A nominal fee is not a substitute for compensation and must not be tied to productivity. However, this does not preclude the payment of a nominal amount on a ‘per call’ or similar basis to volunteer firefighters.” 29 C.F.R. § 553.106(e). Finally, the regulations caution, “Whether the furnishing of expenses, benefits, or fees would result in individuals’ losing their status as volunteers under the FLSA can only be determined by examining the total amount of payments made (expenses, benefits, fees) in the context of the economic realities of the particular situation.” 29 C.F.R. § 553.106(f).

In the context of the economic realities of this particular situation, we hold that the hourly wages paid to the Gibraltar firefighters are not nominal fees, but are compensation under the FLSA. The firefighters do not receive “a nominal amount on a ‘per call’ or similar basis.” 29 C.F.R. § 553.106(e). Rather, they render services with the promise, expectation, and receipt of substantial compensation. See 29 C.F.R. §§ 553.101(a), 553.104(a). Each time a firefighter responds to a call, he knows he will receive compensation at a particular hourly rate—which happens to be substantially similar to the hourly rates paid to full-time employed firefighters in some of the neighboring areas. Essentially, the Gibraltar firefighters are paid a regular wage for whatever time they choose to spend responding to calls. These substantial hourly wages simply do not qualify as nominal fees. Cf. Purdham v. Fairfax Cnty. Sch. Bd., 637 F.3d 421, 433–34 (4th Cir.2011) (holding that a School Board’s payment of a fixed stipend to a golf coach was a nominal fee where: (1) the stipend amount did not change based on either how much time and effort the coach expended on coaching activities or how successful the team was; and (2) the approximate hourly rate to which the coach’s stipend could be converted was only a fraction (less than¼) of the hourly wage he received as a full-time security assistant employed by the School Board).

Notably, the Supreme Court has held that those who “work in contemplation of compensation” are “employees” within the meaning of the FLSA, even though they may view themselves as “volunteers.” Tony & Susan Alamo Found., 471 U.S. at 300–02, 306, 105 S.Ct. 1953. Despite the fact that the Gibraltar firefighters are referred to as “volunteers,” the inescapable fact nevertheless remains that they “work in contemplation of compensation.” Thus, the Gibraltar firefighters are “employees” and not “volunteers” within the meaning of the FLSA. See Krause v. Cherry Hill Fire Dist. 13, 969 F.Supp. 270, 277 (D.N.J.1997) (“In view of the fact that the plaintiffs [firefighters] both expected and received hourly compensation, in an amount greater than a ‘nominal’ fee, it is clear that plaintiffs were not volunteers….”).

Finally, the Court rejected the defendant’s contention—apparently adopted by the court below, that the firefighters were not “employees” under the FLSA, because they fell within the purview of 207(y).

Thus, the Court concluded “under the relevant authority and the facts of this case, we are constrained to hold that, simply put, the substantial wages paid to these firefighters constitute compensation, not nominal fees, which makes the Gibraltar firefighters employees, not volunteers, for purposes of the FLSA and FMLA.”

Click Mendel v. City of Gibraltar to read the entire Opinion. Click DOL Amicus Brief, to read the DOL’s Brief in support of the Plaintiff-Appellant, relied upon in part by the Court.

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W.D.Tex.: Hourly Pay for Weekend Work, Identical to Work Performed During Week and Purportedly Paid at “Day Rates,” Rendered So-Called “Hybrid” Day Rates Impermissible

Rodriguez v Republic Services, Inc.

This case was before the court on the parties’ cross-motions for summary judgment. At issue was whether the defendants pay policy—whereby they paid their trash collector employees purported “day rates” for days worked during the week (i.e. Monday-Friday) and hourly pay for weekend work—complied with 29 C.F.R. § 778.112, the regulation governing payment of day rates. The court held that it did not, because violated the clear language of the regulation and because the plaintiffs performed the same work during the week for the defendants as they did on the weekends (i.e. it was 2 different forms of pay for the same type of work). Following the court’s order denying their motion for summary judgment, the defendants sought reconsideration, which was also denied by the court with a further explanation. Both order are discussed here.

Discussing the facts relevant to its inquiry, the court explained:

Defendant BFI Waste Services of Texas, LP d/b/a Allied Waste Services of San Antonio (“BFI”) operates a residential collection, recycling and waste disposal business in and around San Antonio, Texas. Gilbert Rodriguez (“Plaintiff Rodriguez”) and Refugio Campos (“Plaintiff Campos”) were employed by BFI as Residential Route Drivers and thus were primarily responsible for driving through various residential garbage routes collecting and disposing of residential waste. Plaintiff Rodriguez worked for BFI from August of 2012 until February of 2013, while Plaintiff Campos worked for BFI from September of 2012 until November of 2012. 

During the relevant time period, BFI paid Plaintiff Rodriguez and Plaintiff Campos (collectively “Plaintiffs”) under a “hybrid compensation plan” that included payments based on both a daily and hourly rate. For the five regularly scheduled work days of the week, Plaintiffs were paid a base day rate of $120. Plaintiffs were also required on occasion to work a day during the weekend (the “Sixth Day”) at the discretion of their supervisor. On the Sixth Day, despite Plaintiffs performing the same work as on the regularly scheduled days, Plaintiffs were paid at an hourly rate based upon each employee’s regular rate of pay for a trailing thirteen-week average. In addition, it appears that Plaintiffs were provided “incentive payments” of $10 for each day worked, including both the regularly scheduled days and the Sixth Day.

If Plaintiffs worked for more than forty hours in a workweek, BFI paid them overtime. The way in which BFI calculated this overtime is exemplified by the pay stub of Plaintiff Rodriguez for the week ending on September 1, 2012. During this week, Plaintiff Rodriguez worked for a total of 51.23 hours at a day rate of $120 over the five regularly scheduled work days. In addition, Plaintiff Rodriguez worked for 6.12 hours on the Sixth Day at an hourly rate of $15. Thus, when taking into account the $60 incentive payment, Plaintiff Rodriguez’s compensation for 57.35 hours was $751.80.

To calculate Plaintiff Rodriguez’s overtime compensation, BFI first determined the “regular rate of pay” by dividing Plaintiff Rodriguez’s total non-overtime compensation for the week by his total number of hours worked. Specifically, BFI divided Plaintiff Rodriguez’s total non-overtime compensation of $751.80 by his 57.35 hours worked. Accordingly, the resulting “regular rate of pay” obtained by BFI for the week ending on September 1, 2012, was $13.11.

BFI then paid Plaintiff Rodriguez overtime for all hours worked in excess of forty at half their regular rate of pay. For the week ending on September 1, 2012, this meant that BFI paid Plaintiff Rodriguez 17.35 hours of overtime at $6.55 per hour, for a total of $113.72 in overtime pay. BFI then added this overtime amount to Plaintiff Rodriguez’s “straight-time” compensation, found by applying the regular rate of $13.11 to all 57.35 hours, to arrive at Plaintiff Rodriguez’s total compensation of $865.52 for the week.

After a brief discussion of 778.112 and 778.115 (the regulation which permits an employer to pay 2 different amounts/types of pay for 2 different types of work), the court explained that 778.115 was inapplicable to the case, because the plaintiffs here performed the same type of work, regardless of the day of the week (i.e. the defendants could not substantiate the hourly pay on this ground). The court similarly analyzed and disposed of the defendants’ 3 remaining arguments as well.

First, the court rejected the defendants’ reliance on a 1967 DOL opinion letter, again reasoning same was distinguishable because there the employees performed 2 different types of work, unlike here:

Defendants have provided the Court with a 1967 DOL opinion letter which Defendants argue demonstrates the DOL’s approval of a compensation plan “very similar to the one at issue in this case.” The scenario addressed in the opinion letter revolved around school bus drivers who were also employed as custodians and who were compensated at a day rate of $10. In addition, these bus drivers were paid $2.00 per hour for taking extra bus trips. The letter goes to outline the method for calculating an employee’s regular rate of pay under sections 778.112 and 778.115, before appearing to conclude that the regular rate of pay for these employees could be calculated under section 778.112 by adding the wages earned at both the day and hourly rates and then dividing by the total hours worked in the week. From this, Defendants reason that the DOL has previously approved “essentially the same compensation structure” as the one at issue.

As an initial matter; and despite Defendants assertions to the contrary, the Court finds that the scenario described in the DOL opinion letter is distinguishable from the compensation scheme employed by BFI. Specifically, it is stated in the letter that the employment arrangement being addressed is one “[w]here employees perform two types of duties.” As noted above, however, the employment arrangement between BFI and its Residential Route Drivers involves the performance of identical work on different days for different rates. Accordingly, the Court finds the arrangement described in the 1967 DOL letter to be different from BFI’s employment arrangement and compensation scheme in this significant respect. Moreover, the Supreme Court has recognized that opinion letters like the one provided by Defendants are “entitled to respect in proportion to their power to persuade.” Wos v. E.M. A., ––– U.S. ––––, ––––, 133 S.Ct. 1391, 1402, 185 L.Ed.2d 471 (2013). Here, in indicating that the employees could be compensated under the day rate regulation despite receiving an additional hourly rate, the opinion letter appears to completely ignore the language in section 778.112 concerning any “other form of compensation.”

Next the court rejected the defendants contentions relying on the text of 778.112 itself:

Defendants also argue that, when viewed in the proper context, the DOL regulation concerning day rates supports BFI’s “hybrid” compensation plan. To reach this conclusion, Defendants correctly note that following section 778.109 in the FLSA regulations is a list of “some” different compensation arrangements and the proper method for calculating the employee’s regular rate of pay under each. See 29 C.F.R. § 778.109. Given this context, Defendants reason that section 778.112 merely sets forth one specific situation in which the DOL chose to illustrate the proper regular rate calculation. In other words, Defendants believe that section 778.112 only demonstrates the proper calculation method for scenarios in which an employee is paid a day rate and “no other form of compensation for services.” Defendants therefore conclude that while this regulation exemplifies one way that a regular rate of pay may be determined, it does not serve as a categorical rule prohibiting employers from providing additional compensation to employees paid on a day rate basis.

Once again, the Court is not persuaded by Defendants’ argument. The Court does not find that the DOL regulations provide support for the possibility of a compensation scheme awarding both day and hourly rates for the completion of the same type of work. The only regulation which explicitly covers employment arrangements involving two different rates being paid to an employee is section 778.115, and this section expressly requires that the employee undertake “different kinds of work.” See
29 C.F.R. § 778.115 (section titled “Employees working at two or more rates”). Further, section 778.112, upon which Defendants rely, appears to directly contradict the notion that an employee may be compensated on the basis of both a day and hourly rate. Rather, section 778.112 states that it covers employees that are paid a day rate and who also receive “no other form of compensation for services.” Id. at § 778.112.

Finally, the court rejected the defendants’ reliance on 778.111:

Finally, Defendants argue that BFI’s payment scheme is consistent with the compensation arrangement set out in section 778.111 which discusses employees compensated on a piece rate basis. See 29 C .F.R. § 778.111. Defendants assert that the piece rate regulation endorses a hybrid compensation plan like BFI’s because it provides an example of an arrangement under which an employee is paid on both a piece rate and hourly basis.14 The example cited by Defendants appears in the regulation as follows:

[I]f the employee has worked 50 hours and has earned $ 491 at piece rates for 46 hours of productive work and in addition has been compensated at $ 8.00 an hour for 4 hours of waiting time, the total compensation, $ 523.00, must be divided by the total hours of work, 50, to arrive at the regular hourly rate of pay—$ 10.46.

29 C.F.R. § 778.111.

The Court is not persuaded by Defendants’ analogy between BFI’s hybrid compensation plan and the arrangement described in the piece rate regulation. Rather, the Court finds that it is more appropriate to compare this example, which involves payment based upon both a flat piece rate as well as an hourly rate to compensate the employee for waiting time, to the scenario in which hospital personnel are compensated for being on-site and on-call. This latter scenario was at issue in Townsend v. Mercy Hospital of Pittsburgh, a Third Circuit case involving hospital personnel that received one wage for their performance of active duties, and another for working “on-premises-on-call” shifts. 862 F.2d at 1010–11. During these “on-premises-on-call” shifts, the hospital personnel were required to stay on the hospital’s premises, but had no assigned duties and were free to eat, sleep, read, and watch television. Id. at 1011. Given the substantive difference in duties, the Third Circuit determined that the personnel’s active periods constituted a different kind of work from the on-call shift when the only responsibility was to be present. Id. at 1011–12.

Viewing the section 778.111 example in light of such authority, the Court finds that the “waiting time” compensation described therein is easily analogous to the “on-premises-on-call” compensation received by the hospital personnel in Townsend. Thus, the employee’s “waiting time” in the example is best viewed as a different kind of work from the active duties being compensated under a piece rate. As noted above, however, the work being performed by BFI’s Residential Route Drivers remains the same throughout the entirety of the workweek, including the occasional Sixth Day. Consequently, rather than endorsing a hybrid compensation arrangement like the one employed by BFI, the example provided in the piece rate regulation and cited by Defendants is distinguishable.

In light of the foregoing, the court denied the defendants’ motion for summary judgment, and held the plaintiffs’ motion in abeyance.

Thereafter, the defendants sought reconsideration of the Order denying their motion for summary judgment. The court denied the defendants’ motion and granted the plaintiffs’ still pending motion for summary judgment. Using even stronger language the second time around, and again denying the defendants’ motion, the court reasoned:

In this case the parties appear to agree that if Plaintiffs only worked Monday through Friday and Defendants had merely paid the Plaintiffs their day rate, section 778.112 would apply. In this scenario, rather than receiving overtime at one and one-half times the regular rate, Plaintiffs would only receive overtime at half-time the regular rate. For whatever business reasons, the employer here employed two additional compensation methods in the payroll system. To acquiesce to this system, however, the court would have to rewrite section 778.112 as follows: If the employee is paid a flat sum for a day’s work … without regard to the number of hours worked in the day …, and if he receives no other form of compensation for services, his regular rate is determined by totaling all the sums received at such day rates … in the workweek and dividing by the total hours actually worked. See Rodriguez v. Carey Intern., Inc., 2004 WL 5582173 (S.D.Fla. Sept.15, 2004) (“[Section 778.112] does not provide definitional contours, nor is there case law to explain the clause. But the most logical and likely reasoning is that the regulation does not apply if one of the other forms of compensation delineated in the surrounding regulations is also utilized, or if the employee is given some other form of compensation separate and apart from the job rate. For example, if besides a job rate, an employee also receives an hourly rate, salary, or commission, for some of his work, the job rate regulation would not apply.”).

While these 2 decisions should seem to be “no-brainers” based on the clear statutory language of 778.112, surprisingly not all courts have agreed the language in 778.112 means what it says. For this reason, these decisions are noteworthy.

Click Rodriguez v Republic Services, Inc. to read the initial Order denying the defendants’ motion for summary judgment and Order on Reconsideration for the Order denying the motion for reconsideration.

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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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