Tag Archives: Overtime Law

U.S.S.C.: Time Spent By Employees Waiting For and Undergoing Security Screenings Before Leaving Workplace Was Not Compensable Under FLSA

Integrity Staffing Solutions, Inc. v. Busk

The Supreme Court handed yet another victory to America’s corporations early last month, when it ruled that employers do not have to pay their employees for time spent waiting for and undergoing security screening before leaving the workplace, despite the fact that such screenings are solely for the benefit of the employers. Of note, while the decision reversed a contrary decision from the Ninth Circuit, other Circuits and the DOL itself (which filed an amicus brief in support of employers) have long held that such screenings do not constitute compensable work time.

The Court summarized its decision in its Syllabus, preceding the actual opinion as follows:

Petitioner Integrity Staffing Solutions, Inc., required its hourly warehouse workers, who retrieved products from warehouse shelves and packaged them for delivery to Amazon.com customers, to undergo a security screening before leaving the warehouse each day. Respondents, former employees, sued the company alleging, as relevant here, that they were entitled to compensation under the Fair Labor Standards Act of 1938 (FLSA) for the roughly 25 minutes each day that they spent waiting to undergo and undergoing those screenings. They also alleged that the company could have reduced that time to a de minimis amount by adding screeners or staggering shift terminations and that the screenings were conducted to prevent employee theft and, thus, for the sole benefit of the employers and their customers.

The District Court dismissed the complaint for failure to state a claim, holding that the screenings were not integral and indispensable to the employees’ principal activities but were instead postliminary and noncompensable. The U.S. Court of Appeals for the Ninth Circuit reversed in relevant part, asserting that postshift activities that would ordinarily be classified as noncompensable postliminary activities are compensable as integral and indispensable to an employee’s principal activities if the postshift activities are necessary to the principal work and performed for the employer’s benefit.

Held : The time that respondents spent waiting to undergo and undergoing security screenings is not compensable under the FLSA. Pp. –––– – ––––.

(a) Congress passed the Portal–to–Portal Act to respond to an economic emergency created by the broad judicial interpretation given to the FLSA’s undefined terms “work” and “workweek.” See 29 U.S.C. § 251(a); Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598, 64 S.Ct. 698, 88 L.Ed. 949. The Portal–to–Portal Act exempted employers from FLSA liability for claims based on “activities which are preliminary to or postliminary to” the performance of the principal activities that an employee is employed to perform. § 254(a)(2). Under this Court’s precedents, the term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” Steiner v. Mitchell, 350 U.S. 247, 252–253, 76 S.Ct. 330, 100 L.Ed. 267. An activity is “integral and indispensable” if it is an intrinsic element of the employee’s principal activities and one with which the employee cannot dispense if he is to perform his principal activities. This Court has identified several activities that satisfy this test—see, e.g., id., at 249, 251, 76 S.Ct. 330; Mitchell v. King Packing Co., 350 U.S. 260, 262, 76 S.Ct. 337, 100 L.Ed. 282—and Department of Labor regulations are consistent with this approach, see 29 CFR §§ 790.8(c), 790.7(g). Pp. –––– – ––––.

(b) The security screenings at issue are noncompensable postliminary activities. To begin with, the screenings were not the principal activities the employees were employed to perform—i.e., the workers were employed not to undergo security screenings but to retrieve products from warehouse shelves and package them for shipment. Nor were they “integral and indispensable” to those activities. This view is consistent with a 1951 Department of Labor opinion letter, which found noncompensable under the Portal–to–Portal Act both a preshift screening conducted for employee safety and a postshift search conducted to prevent employee theft. The Ninth Circuit’s test, which focused on whether the particular activity was required by the employer rather than whether it was tied to the productive work that the employee was employed to perform, would sweep into “principal activities” the very activities that the Portal–to–Portal Act was designed to exclude from compensation. See, e.g., IBP, supra, at 41, 126 S.Ct. 514. Finally, respondents’ claim that the screenings are compensable because Integrity Staffing could have reduced the time to a de minimis amount is properly presented at the bargaining table, not to a court in an FLSA claim. Pp. –––– – ––––.

While the decision was lauded by corporations throughout the country, it does not present a significant change to the existing law. However, depending on how the dicta in the decision is read in the future the case could have wide unanticipated consequences going forward. For this reason, and because it is from the United States’ highest court, wage and hour practitioners would be wise to read the entire decision.

Click Integrity Staffing Solutions, Inc. v. Busk to read the entire decision.

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11th Cir.: Defendant May Not Moot an Individual or Class Claim By Serving Offer of Judgment on Named Plaintiffs

Stein v. Buccaneers Ltd. Partnership

This case presented the issue of whether a defendant may moot a class action through an unaccepted Federal Rule of Civil Procedure 68 offer of complete relief to the named plaintiffs—but not to class members—before the named plaintiffs move to certify the class. Joining the majority of circuits that have addressed the issue, the Eleventh Circuit held that it may not.

The Eleventh Circuit described the following relevant procedural history at the court below:

Six named plaintiffs filed this proposed class action in Florida state court against the defendant Buccaneers Limited Partnership (“BLP”). The complaint alleged that BLP sent unsolicited faxes to the named plaintiffs and more than 100,000 others, that the faxes advertised tickets to National Football League games involving the Tampa Bay Buccaneers, and that sending the unsolicited faxes violated the Telephone Consumer Protection Act, see 47 U.S.C. § 227(b)(1)(C), and its implementing regulations, see 47 C.F.R. § 64.1200 & 68.318(d) (2013).

The named plaintiffs sought to represent a nationwide class of recipients of the unsolicited faxes. The complaint demanded statutory damages of $500 per violation, trebled to $1,500 based on BLP’s willfulness, and an injunction against further violations.

The plaintiffs served process on BLP on August 1, 2013. BLP removed the action to federal court on August 16. Three days later, on August 19, BLP served on each named plaintiff an offer of judgment under Federal Rule of Civil Procedure 68. The offer to the first named plaintiff, who alleged in the complaint that he had received three faxes, provided in full.

Pursuant to Rule 68 of the Federal Rules of Civil Procedure, Defendant, BUCCANEERS LIMITED PARTNERSHIP, hereby offers to allow Judgment to be entered against it in this action in the amount of $4,500.00 as well as all reasonable costs incurred to date by JEFFREY M. STEIN, D.D.S., M.S.D., P.A. to be decided by the Court, and an entry of a stipulated injunction enjoining the Defendant from any future violations of 47 U.S.C. § 227, 47 C.F.R. 64.1200, and 47 C.F.R. 68.318(d). The offer extended herein is intended to fully satisfy the individual claims of JEFFREY M. STEIN, D.D.S., M.S.D., P.A. made in this action or which could have been made in this action, and to the extent the offer extended does not do so, BUCCANEERS LIMITED PARTNERSHIP hereby offers to provide JEFFREY M. STEIN, D.D.S., M.S.D., *701 P.A. with any other relief which is determined by the Court to be necessary to fully satisfy all of the individual claims of JEFFREY M. STEIN, D.D.S., M.S.D., P.A. in the action. This offer of judgment is made for the purposes specified in Federal Rule of Civil Procedure 68, and is not to be construed as either an admission that Defendant, BUCCANEERS LIMITED PARTNERSHIP is liable in this action, or that the Plaintiff, JEFFREY M. STEIN, D.D.S., M.S.D., P.A., has suffered any damage. This Offer of Judgment shall not be filed with the Court unless (a) accepted or (b) in a proceeding to determine costs. The Plaintiff must serve written acceptance of this offer within fourteen (14) days, or this offer will be deemed rejected.

The offers to the other named plaintiffs were identical except for the names of the offerees and amounts of the offers; one was for $7,500, one was for $3,000, and three were for $1,500 each, based on the number of faxes the complaint alleged the offeree had received.

Two days later, on August 21, BLP moved to dismiss for lack of jurisdiction, asserting that the unaccepted Rule 68 offers rendered the case moot.

The motion stirred the plaintiffs to action. On August 22, the plaintiffs moved to certify a class. This was long before the deadline under the Local Rules for filing such a motion. On August 28, the district court denied the motion to certify, saying it was “terse” and “admittedly (in fact, purposefully) premature.”

The Rule 68 offers set the deadline for acceptance as 14 days after service of the offers. The applicable counting rules, see Fed.R.Civ.P. 6, extended the deadline 3 days because the offers were served electronically, and further extended the deadline to the next business day. So the deadline for acceptance was September 9. The plaintiffs did not accept the offers, and the deadline passed.

On October 24, the district court entered an order concluding the action was indeed moot, granting the motion to dismiss, and directing the clerk to close the case. The named plaintiffs received no money, no injunction, and no judgment.

Following the order granting the motion to dismiss the plaintiffs appealed. Noting that the case presented an issue of first impression in the Eleventh Circuit, the panel went through great detail providing the reasoning for its holding.

The Eleventh Circuit began by addressing the procedural mechanics of an unaccepted offer of judgment:

Rule 68 provides: “An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.” An unaccepted offer is admissible in a proceeding to determine costs because of Rule 68(d): “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” That is the whole point of Rule 68: a party who rejects an offer, litigates, and does not get a better result must pay the other side’s costs. A defendant who wishes to offer complete relief need not invoke Rule 68; the defendant can simply offer complete relief, including the entry of judgment. See, e.g., Doyle v. Midland Credit Mgmt., Inc., 722 F.3d 78, 80–81 (2d Cir.2013). BLP did not do that.

The Court then explained that dismissing a case based an unaccepted offer of judgment is “flatly inconsistent with the rule.” The Court found support for its decision in this regard in the strong decent from the recent Supreme Court case of Symczyk:

Four justices of the United States Supreme Court—the only four who have weighed in on this issue—have adopted precisely this analysis. In Genesis Healthcare Corp. v. Symczyk, ––– U.S. ––––, 133 S.Ct. 1523, 185 L.Ed.2d 636 (2013), a collective action under the Fair Labor Standards Act, the parties stipulated that an unaccepted Rule 68 offer mooted the individual plaintiff’s claim. The majority accepted the stipulation without addressing the issue. Id. at 1528–29. But Justice Kagan, writing for four dissenters, said this:

That thrice-asserted view [that the defendant’s offer mooted the plaintiff’s individual claims] is wrong, wrong, and wrong again. We made clear earlier this Term that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case *703 is not moot.” Chafin v. Chafin, 568 U.S. ––––, ––––, 133 S.Ct. 1017, 1023, 185 L.Ed.2d 1 (2012) (internal quotation marks omitted). “[A] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Ibid. (internal quotation marks omitted). By those measures, an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer “leaves the matter as if no offer had ever been made.” Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U.S. 149, 151, 7 S.Ct. 168, 30 L.Ed. 376 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that “[a]n unaccepted offer is considered withdrawn.” Fed. Rule Civ. Proc. 68(b). So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.

For this reason, Symczyk’s individual claim was alive and well when the District Court dismissed her suit. Recall: Genesis made a settlement offer under Rule 68; Symczyk decided not to accept it; after 10 days [the rule now says 14], it expired and the suit went forward. Symczyk’s individual stake in the lawsuit thus remained what it had always been, and ditto the court’s capacity to grant her relief. After the offer lapsed, just as before, Symczyk possessed an unsatisfied claim, which the court could redress by awarding her damages. As long as that remained true, Symczyk’s claim was not moot, and the District Court could not send her away empty-handed. So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home. Symczyk, 133 S.Ct. at 1533–34 (Kagan, J., dissenting). BLP invites us to try this at home. We decline.

At least one circuit has explicitly adopted the position set out in the Symczyk dissent. See Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948, 954–55 (9th Cir.2013). Before Symczyk, at least two other circuits took a different approach, holding that an unaccepted Rule 68 offer for full relief moots an individual claim. See O’Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 575 (6th Cir.2009); McCauley v. Trans Union, L.L.C., 402 F.3d 340 (2d Cir.2005). But even those decisions said a plaintiff’s claims could not just be dismissed as was done here; the proper approach, the courts said, was to enter judgment for the plaintiff in the amount of the unaccepted offer.

We agree with the Symczyk dissent. But even if we did not, we would be unable to affirm the dismissal of the plaintiffs’ claims without the entry of judgment for the amount of the Rule 68 offers.

The court also reasoned that the language in the individual offers of judgment at issue, stating that the offers were withdrawn if not accepted within 14 days, also supported its decision.

Although not discussed in great detail here, in a second/alternative holding, the Court also adopted the majority view that a motion for class certification can “relate back” to avoid allowing a defendant to “pick off” a class action by attempting to tender an offer of judgment to the named plaintiffs alone.

Of note, on the same day that it issued this decision, the Eleventh Circuit issued two decisions in similar cases in which they reversed the respective trial court’s dismissals based on mootness grounds. Although none of the three decisions discussed claims brought pursuant to the FLSA and the opt-in mechanism of 29 U.S.C. § 216(b), at least one district court applied the now binding authority to an FLSA case less than a week after the decision, in a case pending in the Southern District of Florida, Collado v. J. & G. Transport, Inc.

With this trifecta of cases and the cases that have already followed suit in the less than one month since the cases were decided, hopefully this illogical defense tactic will now finally be put to bed.

Click Stein v. Buccaneers Ltd. Partnership to read the entire decision, and Collado v. J. & G. Transport, Inc. to read that decision.

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4th Cir.: Statute of Limitations Equitably Tolled Where Employer Fails to Post Required FLSA Notice

Cruz v. Maypa

This case involved a former domestic servant who sued her former employers alleging claims for forced labor and involuntary servitude under the Victims of Trafficking and Violence Protection Act (TVPA), willful violation of Fair Labor Standards Act (FLSA), and state law claims for breach of contract, fraudulent misrepresentation, and false imprisonment. After the court below dismissed the case on statute of limitations grounds, plaintiff appealed. As discussed here, the Fourth Circuit joined other courts who have similarly held, and held that where an employer fails to post the required FLSA Notice, the statute of limitations for an employees claims under the FLSA are tolled until he or she either obtains an attorney, or obtains actual knowledge of his or her rights.

Initially, the Fourth Circuit identified two circumstances under which equitable tolling may generally be applicable:

[E]quitable tolling is available when 1) “the plaintiffs were prevented from asserting their claims by some kind of wrongful conduct on the part of the defendant,” or 2) “extraordinary circumstances beyond plaintiffs’ control made it impossible to file the claims on time.” Harris, 209 F.3d at 330 (internal quotation marks omitted). Cruz asks us to evaluate this rule in light of Vance v. Whirlpool Corp., 716 F.2d 1010 (4th Cir.1983), in which this Court found that the district court properly held that the 180–day filing requirement of the Age Discrimination in Employment Act (“ADEA”) was tolled by reason of the plaintiff’s employer’s failure to post statutory notice of workers’ rights under the Act. Id. at 1013.

Extending its reasoning from Vance, an ADEA claim to claims under the FLSA, the court explained:

It makes good sense to extend our reasoning in Vance to the FLSA. The notice requirements in the ADEA and the FLSA are almost identical. Compare 29 C.F.R. § 1627.10 (requiring employers to “post and keep posted in conspicuous places … the notice pertaining to the applicability of the [ADEA]”), with id. § 516 .4 (requiring employers “post and keep posted a notice explaining the [FLSA] … in conspicuous places”). The purpose of these requirements is to ensure that those protected under the Acts are aware of and able to assert their rights. Although Vance tolled an administrative filing deadline rather than a statute of limitations, the FLSA lacks an equivalent administrative filing requirement; thus, the FLSA’s deadline to sue is, like the ADEA’s administrative filing deadline, the critical juncture at which a claimant’s rights are preserved or lost. Neither the ADEA nor the FLSA inflicts statutory penalties for failure to comply with the notice requirements. See Cortez v. Medina’s Landscaping, Inc., No. 00 C 6320, 2002 WL 31175471, at *5 (N.D.Ill. Sept.30, 2002) (extending an actual notice tolling rule similar to Vance from the ADEA to the FLSA). Therefore, absent a tolling rule, employers would have no incentive to post notice since they could hide the fact of their violations from employees until any relevant claims expired. For all of these reasons, this Court’s analysis in Vance applies with equal force to the notice requirement of the FLSA. Under Vance, tolling based on lack of notice continues until the claimant retains an attorney or obtains actual knowledge of her rights. 716 F.2d at 1013. The current factual record, which is limited to the amended complaint, does not identify when Cruz first retained a lawyer or learned of her rights under the FLSA. Therefore, the district court should allow discovery on remand to determine in the first instance whether Cruz’s FLSA claim was time-barred despite being equitably tolled.

Click Cruz v. Maypa to read the entire Opinion.

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E.D.Pa.: Late Payment of Wages Constitutes Non-Payment of Wages, Subjecting Employer to Liquidated Damages Under FLSA

Gordon v. Maxim Healthcare Services, Inc.

This case was before the court on the defendant’s motion to dismiss plaintiff’s complaint for failure to state a claim. The issue before the court was whether a defendant/employer who makes payment to its employee of his or her wages, but does so 1 week after such wages are due, is nonetheless liable for liquidated damages under the FLSA. Answering the question in the affirmative, the court held that late payment (in this case 1 week after the regular payday) constituted non-payment under the FLSA, and therefore liquidated damages were due under the FLSA notwithstanding the fact the employer had ultimately made payment of the wages due.

As a starting point for deciding the issue, the court examined the purpose of liquidated damages, as stated previously stated by the Third Circuit:

[t]hese liquidated damages … compensate employees for the losses they may have suffered by reason of not receiving their proper wages at the time they were due.” Id. at 1299 (emphasis added). Our Court of Appeals clearly contemplated that injury from lost wages under the FLSA is to be measured from the payday on which wages are ordinarily to be paid.

Explaining that the Third Circuit had not spoken on the issue subsequent to the 1991 case, Selker, that it quoted, the court turned to the case law from other circuits for guidance on the issue:

[t]he Court of Appeals for the Ninth Circuit cited the Selker decision favorably in Biggs v. Wilson, 1 F.3d 1537, 1542 (9th Cir.1993). There the court undertook a detailed analysis of whether late payment constitutes nonpayment under the FLSA. The issue in that case was whether the State of California, in paying its highway maintenance workers 14–15 days late as a result of a budget impasse, violated the FLSA. Drawing on the language of the statute, mandatory and persuasive authority from other federal courts including Selker, the opinion of the Department of Labor, and policy considerations, the court concluded that payment at a point after payday is tantamount to nonpayment under the FLSA.   Id . at 1539–44. Invited by the state to craft a balancing test to distinguish late payment from nonpayment, the court found that any such line drawing would be unworkable under the statutory scheme and detrimental to employees seeking the statute’s protection. Id. at 1540.

Squaring Third Circuit jurisprudence with that of the Ninth Circuit, the Court held “that late payment of wages is the equivalent of nonpayment for purposes of the FLSA.

The court also rejected the argument that this was an overly harsh result, especially because of the FLSA’s remedial purpose:

This may appear to be a harsh result, causing an otherwise diligent employer who misses payday by a day or two to be subject to liability under the statute. Nonetheless, it must be remembered that the FLSA is to be liberally construed to achieve its purpose. Mitchell v. Lublin, McGaughy & Assocs., 358 U.S. 207, 211, 79 S.Ct. 260, 3 L.Ed.2d 243 (1959). The law is there to protect those who are receiving a minimum wage and are living from paycheck to paycheck. A delay of a few days or a week in the remittance of wages may only be a minor inconvenience to some, but for those at the lower end of the economic scale, even a brief delay can have serious and immediate adverse consequences.

Thus, the court denied the defendant’s motion to dismiss.  

Click Gordon v. Maxim Healthcare Services, Inc. to read the entire Memorandum Opinion.

Editor’s Note:  Within weeks of this decision, the Court of Federal Claims was called upon to rule upon the same issue and agreed with the Gordon court’s analysis and holding.  In the context of government workers, whose paychecks were delayed approximately 2 weeks, by the government’s shutdown in the fall of 2013, the court held that late payment constitutes non-payment, such that the FLSA’s liquidated damages provisions were triggered.  Click Martin v. United States to read the Opinion and Order in that case.

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Filed under Liquidated Damages, Minimum Wage

11th Cir.: District Court Correctly Refused to Enforce Arbitration Agreement Obtained From Putative Class Members With Motion for Conditional Cert Pending

Billingsley v. Citi Trends, Inc.

Employers seem to getting increasingly aggressive with class waivers, arbitration agreements in the wake of recent high court rulings which are seemingly boundless. In the wake of these recent decisions, some employers—who previously did not include waivers or arbitration agreements in their employment agreements—are seeking to play catch up. Troublingly, we seem to be seeing more and more situations where employers, facing the prospect of class/collective actions based on their often willful violations of wage and hour laws are attempting to force arbitration agreements on their employees in an effort to blunt efforts by their employees to recover their rightful wages. However, most courts faced with such situations have invalidated these improperly obtained arbitration clauses, recognizing that employers are in a position to exert undue pressure on employees fearful for their jobs, and that such arbitration “agreements” are frequently anything but an agreement between two parties consenting to arbitration of their own will.

In a recent decision, the Eleventh Circuit was called upon to review one such decision by a district court (first discussed here) that held such a forced arbitration clause to be invalid, and affirmed the district court’s order denying the defendant’s motion to enforce arbitration under the agreements at issue.

Laying out the salient facts of the case, the court explained:

To support its order denying Citi Trends’s motion to compel arbitration, the district court made the following findings of fact:

Citi Trends devised and implemented a new alternative dispute resolution (“ADR”) policy in the late spring and early summer of 2012—after it was served with the complaint in this action on February 27, 2012, and after the district court set a scheduling conference for May 31, 2012. Weeks after the district court’s May 31, 2012 scheduling order, Citi Trends began to roll out its new ADR policy. The ADR policy included a mandatory agreement to arbitrate all disputes individually rather than collectively.

By June 30, 2012, Citi Trends sent its human resource representatives to meet with store managers to roll out the new ADR policy—but only to putative collective action members (i.e., store managers). Throughout the summer, Citi Trends’s human resource representatives met individually with all store managers across the country. Citi Trends had two employees in each ADR meeting: a human resources representative and a “witness.”

The human resources representative who met with the store managers advised Citi Trends in its employment decisions. Thus, the store managers reasonably believed the human resources representative had authority to make or influence employment decisions, including hiring and firing decisions.

Store managers were ordered to attend the ADR meetings by their supervisors. Citi Trends did not inform the store managers of the true purpose of the mandatory meetings. Instead of telling the store managers that the meetings concerned the company’s new ADR policy, Citi Trends told the store managers that the mandatory meetings concerned the issuance of a new employee handbook.

Typically, Citi Trends rolled out its new employee handbook in a group setting. The handbook was generally provided in printed form (i.e., not as a photocopy), and the employees were required to sign for the handbook. Here, however, Citi Trends did not follow any of its general procedures for rolling out the employee handbook. Instead, Citi Trends (1) held two-on-one private meetings with each store manager in a small, back room in Citi Trends retail stores—the same places where the store interrogated or investigated its employees, (2) discussed only the ADR policy and the fill-in-the-blank declarations related to the store managers’ job duties, (3) provided photocopied versions of the employee handbooks as the store managers left the meetings, and (4) did not require the store managers to sign for the photocopied employee handbook.FN6 The district court found that this rushed and atypical rollout of the employee handbook demonstrated that Citi Trends’s handbook rollout was “pretext for presenting the [arbitration] Agreement to the [store managers] to derail their participation in this lawsuit.”

When a store manager arrived at the back-room meetings, a human resources representative greeted the store manager. A second individual was also at each meeting; however, this person was not introduced to, or known by, the store managers.

At the meetings, Citi Trends’s human resources representative gave the store managers these documents: the arbitration agreement, a fill-in-the-blank declaration, and the store manager disclosure. The store managers were asked to sign each of these documents at the meeting.

Citi Trends informed the store managers that the arbitration agreement was a condition of continued employment. The store managers understood that they would be fired if they did not assent to the arbitration agreement or the new ADR policy. Thus, the store managers lacked meaningful choice in whether to sign the arbitration agreements or other documents. The district court found the setting of the back-room meetings to be a “highly coercive” and “interrogation-like.”

Opt-in plaintiffs testified that they signed the documents but felt intimidated by the human resources representative. They also felt pressured to sign the arbitration agreements to avoid losing their jobs. Even when specifically requested, Citi Trends did not give the store managers copies of the documents that the store managers signed.

The district court found that Citi Trends did not conceive or begin to institute its ADR policy until after the district court held a scheduling conference to determine when and how Billingsley must move for conditional certification. Citi Trends then rolled out its ADR policy in a “blitzkrieg fashion” and only required potential members of this collective action to agree to the ADR policy. The district court found that Citi Trend’s “ADR roll-out was a hurried reaction specifically targeted at curtailing this litigation.”

The district court found that the “purpose and effect” of the arbitration agreement was “to protect Citi Trends in this lawsuit.” The district court also found that the timing of the arbitration agreement’s rollout “was calculated to reduce or eliminate the number of collective action opt-in Plaintiffs in this case” and the rollout was “replete with deceit” and “designed to be[ ] intimidating and coercive.”

After a discussion of the FLSA, its remedial purpose and the broad discretion afforded to courts in managing collective actions, the Eleventh Circuit held that that the district court properly exercised its broad discretion in denying the defendant’s motion to compel arbitration, because such a denial was in line with the court’s responsibilities to manage communications between the parties and putative class members. Specifically, the court reasoned:

Given the “broad authority” that the district court has to manage parties and counsel in an FLSA collective action, the district court did not abuse its discretion in determining that Citi Trends’s conduct in the summer of 2012 undermined the court’s authority to manage the collective action. Nor did the district abuse its discretion in determining that—to correct the effect of Citi Trends’s misconduct—it would allow putative collective action members to join the lawsuit notwithstanding their coerced signing of the arbitration agreements.

Whatever right Citi Trends may have had to ask its employees to agree to arbitrate, the district court found that its effort in the summer of 2012 was confusing, misleading, coercive, and clearly designed to thwart unfairly the right of its store managers to make an informed choice as to whether to participate in this FLSA collective action. Since the arbitration agreements by their terms will directly affect this lawsuit, the district court had authority to prevent abuse and to enter appropriate orders governing the conduct of counsel and the parties. See Hoffmann–La Roche, 493 U.S. at 171, 110 S.Ct. at 486–87; see also Kleiner, 751 F.2d at 1203 (class action).

The district court simply did what other district courts routinely do: exercise discretion to correct the effects of pre-certification communications with potential FLSA collective action members after misleading, coercive, or improper communications are made. See, e.g., Balasanyan v. Nordstrom, Inc., No. 11–CV2609–JM–WMC, 2012 WL 760566, at * 1–2, 4 (S.D.Cal. Mar.8, 2012) (refusing to enforce individual arbitration agreement in an FLSA action because the defendant’s imposition of the agreement was an improper class communication); Williams v. Securitas Sec. Servs. USA, Inc., No. 10–7181, 2011 U.S. Dist. LEXIS 75502, at *8–12 (E.D.Pa. July 13, 2011) (invalidating arbitration agreement imposed on the defendant’s employees during pre-certification stage of FLSA litigation and ordering corrective measures because the arbitration agreement was a “confusing and unfair communication” with the potential opt-in plaintiffs); Ojeda–Sanchez v. Bland Farms, 600 F.Supp.2d 1373, 1379–81 (S.D.Ga.2009) (granting a limited protective order in FLSA collective action where the defendants engaged in unsupervised, unsolicited, in-person interviews of the plaintiffs in an environment that encouraged speedy and uninformed decision-making); Longcrier v. HL–A Co., 595 F.Supp.2d 1218, 1229–30 (S.D.Ala.2008) (striking declarations obtained through the defendants’ abusive and misleading communications with prospective opt-in plaintiffs); Jones v. Casey’s Gen. Stores, 517 F.Supp.2d 1080, 1086, 1089 (S.D.Iowa 2007) (limiting the plaintiffs’ counsel from affirmatively soliciting potential opt-in plaintiffs to join the FLSA action and requiring counsel to modify their website to provide “only a factual, accurate, and balanced outline of the proceedings”); Maddox v. Knowledge Learning Corp., 499 F.Supp.2d 1338, 1342–44 (N.D.Ga.2007) (observing that district courts in § 216(b) actions rely on broad case management discretion by limiting misleading, pre-certification communications and exercising that discretion in the case before the court by ordering the plaintiffs to correct false, unbalanced, and misleading statements on their website); Belt v. Emcare, Inc., 299 F.Supp.2d 664, 667–70 (E.D.Tex.2003) (sanctioning the employer and enjoining the employer from communicating ex parte with potential class action members because the employer intentionally attempted to subvert the district court’s role in the FLSA collective action by unilaterally sending a misleading and coercive letter to potential plaintiffs that encouraged those persons not to join).

District courts’ corrective actions have included refusal to enforce arbitration agreements instituted through improper means and where the timing of the execution of those agreements was similar to the post-filing, pre-certification timing in this case. See, e.g., Balasanyan, 2012 WL 760566, at * 1–2; Williams, 2011 U.S. Dist. LEXIS 75502, at *8–12; see also In re Currency Conversion Fee Antitrust Litig., 361 F.Supp.2d at 252–54 (imposing similar corrective action in Rule 23 class action).

The district court did not abuse its discretion in correcting the effects of Citi Trends’s improper behavior in this case. The district court held an initial hearing, after which it denied Citi Trends’s motion to compel arbitration. The court then reconsidered its order, held an additional two-day evidentiary hearing, made specific and detailed findings of fact that were supported by the record, and took minimal action to correct the effects of Citi Trends’s conduct.

The district court limited its order temporally and substantively. The district court limited its order to those agreements signed under the coercive conditions used by Citi Trends in the summer of 2012. And, the district court limited its order to this particular FLSA action. The court specifically said that it was not ruling on the enforceability of the arbitration agreements as they relate to other cases or controversies. The district did not restrict Citi Trends from entering into new arbitration agreements with the store managers; nor did the court prevent store managers from electing to comply with the terms of the arbitration agreements that they signed in the summer of 2012.

The district court’s limited remedial action is not an abuse of its considerable discretion to manage this collective action. Accord Kleiner, 751 F.2d at 1203 (holding that a district court’s power to manage a class action included the power to prohibit a defendant from making “unsupervised, unilateral communications with the plaintiff class”). That is especially true given the opt-in nature of FLSA collective actions. Because FLSA plaintiffs must opt-in, unsupervised, unilateral communications with those potential plaintiffs can sabotage the goal of the FLSA’s informed consent requirement by planting the slightest seed of doubt or worry through the one-sided, unrebutted presentation of “facts.” Because the damage from misstatements could well be irreparable, the district court must be able to exercise its discretion to attempt to correct the effects of such actions. See Hoffmann–La Roche, 493 U.S. at 170, 110 S.Ct. at 486 (noting that court intervention in the collective action notice process may be necessary).

Because we affirm the district court’s decision to deny enforceability of the arbitration agreements in this case, we necessarily must affirm the district court’s order denying Citi Trends’s motion to compel arbitration.

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8th Cir.: Informal Input Regarding Personnel Decisions Does Not Satisfy Hire/Fire Prong of Executive Exemption

Madden v. Lumber One Home Center, Inc.

Following a jury verdict in favor of the defendant-employer below, the trial court granted the plaintiffs’ motion for judgment notwithstanding the verdict, holding that—as a matter of law—defendant had failed to satisfy its burden of proof regarding the executive exemption. Defendant appealed and the Eighth Circuit affirmed with respect to two of the plaintiffs, but reversed as to one. As discussed here, the Eighth Circuit’s analysis focused on the hire/fire prong of the executive exemption. Significantly, the court explained in detail what types of involvement in personnel decisions rise to the level required for application of the executive exemption.

Initially the court restated the applicable regulation:

We determine whether an employee meets the executive exemption by applying Department of Labor regulations. See Fife v. Bosley, 100 F.3d 87, 89 (8th Cir.1996). The Department of Labor defines an “executive” employee—that is, one exempt from FLSA requirements relating to overtime pay—as follows:

(a) The term ‘employee employed in a bona fide executive capacity’ in section 13(a)(1) of the Act shall mean any employee:

(1) Compensated on a salary basis at a rate of not less than $455 per week (or $380 per week, if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities;

(2) Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;

(3) Who customarily and regularly directs the work of two or more other employees; and

(4) Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

29 C.F.R. § 541.100.

The court then framed the issue before it:

At issue in this case is whether the plaintiffs’ job duties met the requirements of the fourth element. In other words, we must determine whether the jury was presented with evidence that reasonably would support an inference that the plaintiffs had the ability to hire and fire other employees, or that their hiring recommendations were given “particular weight.” The Department of Labor defines “particular weight” as follows:

To determine whether an employee’s suggestions and recommendations are given ‘particular weight,’ factors to be considered include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations; the frequency with which such suggestions and recommendations are made or requested; and the frequency with which the employee’s suggestions and recommendations are relied upon. Generally, an executive’s suggestions and recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include an occasional suggestion with regard to the change in status of a co-worker. An employee’s suggestions and recommendations may still be deemed to have ‘particular weight’ even if a higher level manager’s recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee’s change in status. 29 C.F.R. § 541.105. The district court, in granting the plaintiffs’ motion for judgment as a matter of law, found that Lumber One presented no evidence that the plaintiffs had the authority to make personnel decisions or that Morton gave their hiring recommendations particular weight.

Clarifying what type and amount of input into personnel decisions satisfies an employer’s burden regarding the executive exemption, the Eighth Circuit explained:

We first address what type and what amount of input into personnel decisions is sufficient to satisfy the fourth element of the FLSA’s executive exemption. Second, we look at the evidence in this case. We conclude that Lumber One failed to show that Madden and O’Bar met the executive exemption standard but that Lumber One did prove that Wortman was eligible for the executive exemption.

Courts previously addressing what is required by the fourth element of the FLSA executive exemption suggest that more than informal input, solicited from all employees, is needed to prove applicability of the executive exemption. See, e.g., Lovelady v. Allsup’s Convenience Stores, Inc., 304 F. App’x 301, 306 (5th Cir.2005) (per curiam) (unpublished) (affirming the district court’s decision that plaintiff-store managers met the fourth element because their hiring recommendations were almost always followed and they could fire employees without obtaining authorization from a higher manager); Grace v. Family Dollar Stores, Inc., 845 F.Supp.2d 653, 663 (W.D.N.C.2012) (finding fourth element satisfied because plaintiff, a store manager, selected applicants for interviews, conducted interviews, and recommended employees for promotions and demotions, and her recommendations were almost always followed by the district manager); Rainey v. McWane, Inc., 552 F.Supp.2d 626, 632 (E.D.Tex.2008) (finding fourth element satisfied because plaintiff, a production supervisor, completed weekly employee evaluations, recommended employee discipline, and recommended which temporary employees should be hired permanently); Goulas v. LaGreca, No. 12–898, 2013 WL 2477030, at *10 (E.D. La. June 7, 2013) (finding fourth element satisfied because the employer was grooming the plaintiff to eventually take over the company, and the employer terminated employees based on plaintiff’s recommendations). These cases provide useful guidance for understanding what is needed to satisfy the fourth element of the executive exemption. After looking at the different factors these courts used to find the fourth element satisfied, including the offering of personnel recommendations that were acted upon by managers, involvement in screening applicants for interviews, and participation in interviews, among others, it is apparent that many different employee duties and levels of involvement can work to satisfy this fourth element. When we look at the evidence regarding how Lumber One utilized Madden and O’Bar in this case, however, we find that it simply does not meet the standard. Cf. 5 C.F.R. 551.202(e) (“[T]he designation of an employee as FLSA exempt or nonexempt must ultimately rest on the duties actually performed by the employee.”).

Discussing the law in the context of this case, the Eighth Circuit explained:

The evidence presented at trial concerning the plaintiffs’ duties consisted solely of testimony from the plaintiffs, Morton, and office manager Amy Quimby. Morton testified that none of the plaintiffs hired or fired other employees. Therefore, in order to satisfy the fourth element, Lumber One needed to present evidence at trial that the plaintiffs were consulted about personnel decisions and that Morton gave each of their opinions particular weight regarding specific hiring decisions. Prior to hiring a new employee, Morton generally asked all of the Mayflower employees if they knew the applicant and could provide information about that person, and Lumber One believes this is sufficient to support the jury’s verdict.

At trial, Morton generically described how he elicited input from employees about applicants and how he used the information he received. For example, when asked if the plaintiffs were ever consulted during the screening process for new applicants, Morton responded: “[W]e would always ask all of our people if they knew someone before we hired them. When we would be interviewing them, we would ask for input from them because these guys were from the local area and we’d always ask if they knew the people or could recommend or knew anything at all about them.” Morton also said he took this information seriously, adding that “it was good information. We’re hiring blind here, so any input we could have or reference, it was used in making that determination.” Lumber One did not present any evidence that the plaintiffs were involved in, for instance, screening applicants, conducting interviews, checking references, or anything else related to its hiring process.

In determining that Lumber One’s practice of soliciting informal recommendations from all staff members is insufficient to meet the fourth element of the executive exemption, we find Rooney v. Town of Groton, 577 F.Supp.2d 513 (D.Mass.2008), instructive. In Rooney, the court held that a police lieutenant satisfied all of the requirements for designation as an exempt executive employee. Id. at 523–32. Concerning the fourth element, the court noted that the lieutenant was a member of an interview panel that ranked applicants, discussed the merits of applicants, and made hiring recommendations. Id. at 531. In addition, the police chief took the lieutenant’s opinion into consideration when determining which employees to promote. Id. While the lieutenant had no control over the ultimate hiring and personnel decisions, the court found that he was sufficiently involved in the hiring process to classify him as an exempt executive employee. Id.

Rooney specifically addresses Lumber One’s argument that Morton could have given the plaintiffs’ recommendations particular weight even though he asked all of his employees for input. In Rooney, the lieutenant characterized his recommendations to the police chief as the same type of recommendation an ordinary patrolman could provide to the chief, so he should not have been classified as an exempt employee. Rooney, 577 F.Supp.2d at 531. The court rejected his argument, finding that the lieutenant’s recommendations were given more weight than an ordinary patrolman. The court concluded that “the regulation does not state that Rooney must be the only officer in the department whose recommendations and suggestions are given particular weight, but rather that a ‘higher level manager’s recommendation [may have] more importance.’ ” Id. (citing 29 C.F.R. § 541.105).

In the present case, Morton testified that he solicited input from all employees. He did not testify that some employees’ input had more influence than others. Lumber One argues that requiring Morton to testify that he placed “particular weight” on each plaintiff’s input, as Lumber One claims the district court did in the order granting the plaintiffs’ motion for judgment as a matter of law, is unfair because it requires a lay person to use legal jargon in his testimony. We agree that Morton was not required to use the exact phrase “particular weight.” Morton could have used any number of words to convey that he gave the plaintiffs’ recommendations special consideration when making hiring decisions. The material point, however, is that in order to meet the fourth element of the executive exemption, Lumber One must present some proof that the purported executives’ input into personnel decisions was given particular weight. 29 C.F.R. § 541.105. For example, one way they could have done this is to show that the purported executives’ input had more influence than hourly employee’ input. This is especially true if that recommendation is the only evidence relied on for the exemption, which is what happened in this case.

Lumber One also argues that because the business was struggling financially in 2008 and did not hire many employees, the plaintiffs were simply unable to participate in personnel decisions because none were being made. In this regard, we note that the Office of Personnel Management’s regulation stating that FLSA exemptions are based on actual job functions, not intended responsibilities, is persuasive in this circumstance. See 5 C.F.R. § 551.202(e) (noting that FLSA exemptions are based on “duties actually performed by the employee”). The Rooney court acknowledged that the police department in that case was small and that its size should be a factor “taken into account when determining the frequency of recommendations made by the plaintiff. It is reasonable to assume that generally a smaller police department would have correspondingly fewer new hires, fires, and promotions.” 577 F.Supp.2d at 531. The same is true with Lumber One. Morton estimated that he hired between six and eight employees during the time the plaintiffs were employed at Lumber One. Morton testified that he generally asked all of the employees if they knew applicants, but there is no evidence that the plaintiffs had any sort of involvement in the hiring process like the lieutenant in Rooney. The plaintiffs did not participate in the interviews, did not review resumes, did not rank applicants, and did not make hiring recommendations outside of informal reference checks. Contra id. at 522 (“[Rooney] has acted as a member of an interview panel, ranked applicants on account of their suitability for the position, discussed the merits of applicants, made applicant recommendations to the Chief regarding the applicant’s suitability, discussed the potential promotion of a Patrolman to the rank of Sergeant, and discussed the assignment of an officer to an administrative position[.]”). And Morton asked all employees for informal reference checks, not just the plaintiffs. Morton asserts that he would have involved the plaintiffs more if he had hired more employees. This may be true, but it requires the jury to impermissibly speculate and to rely on intended rather than actual job functions. See Clark v. Long, 255 F.3d 555, 557 (8th Cir.2001) (“[When ruling on a motion for judgment as a matter of law, t]he nonmovant receives the benefit of all reasonable inferences that may be drawn from the evidence, but those inferences may not be based solely on speculation.” (emphasis added)).

Having fleshed out the applicable law and the parties’ respective arguments, the court initially explained why two of the plaintiffs were properly held to be non-exempt:

Against this backdrop, we now turn to the evidence regarding each individual plaintiff. At trial, Morton could not recall Madden or O’Bar providing a single personnel recommendation. Morton stated that he could only recall the company’s “general policy there as to how we did that.” In response to the question, “Did any of the plaintiffs hire Lumber One employees?” Morton responded, “No, they didn’t. Well, Doug [Wortman] was involved in hiring some of the truck drivers.” When questioned if O’Bar ever provided a recommendation for an applicant, Morton responded, “Not that I recall.” Morton said he intended to include O’Bar in the hiring process, but because Lumber One was not hiring while she was employed, she never had the opportunity to participate. Later in the trial, counsel asked Morton if he could remember O’Bar recommending any applicant for hire. Morton responded, “Offhand today, I can’t tell you one, no.”

Morton similarly could not remember Madden being involved in any hiring decision. When asked about Madden, Morton again referenced only the general policy: “Once again, what we would do, anytime that we hired anybody, which we hired very, very few in this time period, and I don’t recall—you know, it depends on what time frame we’re talking about, but we would always ask all of our people if they knew someone before we hired them.” When asked again, “Is it your testimony that [Madden] did not recommend anybody for hiring?” Morton responded, “I do not remember, to be honest with you. I know that we consulted with him or asked him if he knew people.” Morton asserted that he “definitely remember[ed] asking Terry Madden if he knew people that we were interviewing,” but Morton could not provide additional information related to any recommendations Madden may have provided. When asked if Madden hired any employees, Morton replied, “No, ma’am, he did not hire any.”

Morton’s testimony is simply not enough to satisfy the fourth element of the FLSA’s executive exemption for Madden and O’Bar. To be sure, one of the jury’s main responsibilities is to make credibility determinations. However, here the jury was forced to speculate due to Morton’s lack of memory regarding specific recommendations and hiring decisions. Moreover, Morton’s admissions that Madden and O’Bar were not involved directly in hiring contradicts Lumber One’s contentions that the plaintiffs were actually Lumber One executive employees whose input was solicited and considered prior to making personnel decisions. Indeed, for a jury to reach that conclusion, a jury had to speculate that, if Morton were able to recall specifics from 2008 and 2009, he would be able to testify about Madden and O’Bar’s involvement in personnel decisions. This is not a credibility determination; this is speculation. See Wilson, 382 F.3d at 770 (“Judgment as a matter of law is appropriate only when the record contains no proof beyond speculation to support the verdict.”). While it should be rare that a judge elects to override a jury verdict, the district court was correct in this case to do so. See Hunt v. Neb. Pub. Power Dist., 282 F.3d 1021, 1029 (8th Cir.2002) (“We recogniz[e] that the law places a high standard on overturning a jury verdict … because of the danger that the jury’s rightful province will be invaded when judgment as a matter of law is misused.” (internal citation omitted)). Lumber One simply presented no evidence that would allow a jury to determine, without conjecture, that Lumber One satisfied the fourth element with respect to Madden and O’Bar.

The court went on to hold that, applying the same test, there had been sufficient evidence at trial for the jury to hold that the third plaintiff was an exempt executive:

In contrast, we conclude that Lumber One did present sufficient evidence to allow a jury to conclude that Wortman provided a recommendation for at least one employee and that Morton relied on that recommendation when deciding to hire the applicant. Accordingly, we reverse the district court’s judgment as to Wortman and reinstate that portion of the jury verdict in favor of Lumber One.

Morton testified at trial that Wortman knew two applicants, truck drivers Fred Dempsey and Anthony Dixon, and that Morton appreciated Wortman’s input regarding both applicants’ qualifications. Morton testified that “we’re brand-new, so I asked everybody there for a reference on any new hire at this point to—and [Wortman] recommended these guys, said they were good folks, Fred [Dempsey] in particular. I think he and Fred had a—somewhat of a friendship maybe in the past.” Morton later asserted that if Wortman had provided a bad recommendation, Morton would not have hired Dempsey. Morton testified that “when we did do that little bit of hiring, we asked everyone. We tapped every resource we had…. [Wortman] would put his stamp of approval on, and I’ll use Fred Dempsey, for instance, you know, if he would have said, no, we don’t want him, he would not have been there.”

Morton’s testimony provided sufficient evidence that reasonably could lead a jury to believe that Wortman provided recommendations about Dempsey and that Morton gave particular weight to Wortman’s recommendation when deciding to hire Dempsey. See 29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.100. In addition, Wortman testified that although he was not hired to supervise employees, Morton occasionally had him direct the truck drivers, which included Dempsey, regarding where to make deliveries. See
29 C.F.R. § 541.105 (generally requiring that an executive’s recommendations pertain to employees whom the executive directs). Because there is evidence regarding Wortman’s involvement in at least one personnel decision, we conclude that the district court erred by overturning the jury’s verdict finding that Wortman was an executive employee who was exempt from FLSA overtime pay requirements.

Taken together, this opinion is instructive regarding the type and amount of input an employee must have in order to meet the hire/fire prong of the executive exemption.

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E.D.Cal.: Attorney’s Fees and Costs Recoverable Under 216(b) When Plaintiff Obtains Declaratory Relief

Pickett v. Beard

This case was before the court on the relatively novel issue of whether an FLSA plaintiff, who prevails in a case solely seeking a declaratory judgment or declaratory relief is entitled to attorneys fees and costs under 29 U.S.C. § 216(b). The court answered the question in the affirmative, reasoning that the broad remedial purpose of the FLSA dictated that such fees are recoverable.

Describing the somewhat unique procedural posture of the case, the court explained:

This case is brought as a collective action under 29 U.S.C. § 201 et seq., the Fair Labor Standards Act (“FLSA”), by Plaintiffs against Defendant Jeffrey Beard in his official capacity as the Secretary of the California Department of Corrections and Rehabilitations. Plaintiffs complain about the calculation of wages by Beard and seek a declaration that Beard is violating the FLSA. Plaintiffs also seek attorneys’ fees under § 216(b). Beard has filed a counterclaim in which he seeks several declarations, the gist of which is that Plaintiffs are not entitled to attorneys’ fees under § 216(b) in this case. Plaintiffs have filed a motion to dismiss under Rules 12(b)(1) and 12(b)(6), and alternatively a Rule 12(f) motion to strike Beard’s counterclaim. For the reasons that follow, Plaintiffs’ motion to dismiss will be granted.

Initially, the court rejected the plaintiffs’ argument that defendant’s claim that attorneys fees was not recoverable on their declaratory judgment count, holding that the issue was one of pure law and thus ripe from the outset of the case.

After summarizing the parties’ respective positions, the court framed the issue before it as follows:

The issue of whether attorney’s fees may be awarded under § 216(b) when only declaratory judgment is sought or obtained appears to be relatively novel. The parties rely to one degree or another on the language of § 216(b), the policies behind § 216(b) and the FLSA in general, and a comparable 2013 district case.

The court then examined the applicable law, noting that it was aware of only two cases discussing the issue before it:

With respect to case law, there are actually two cases that bear on the issue. The first case is Barrows v. City of Chattanooga, 944 F.Supp.2d 596 (E.D.Tenn.2013), which has been cited by Plaintiffs. In Barrows, Fire Captain Barrows sued the City of Chattanooga under the FLSA regarding his employee classification and for past unpaid overtime. Following a bench trial, the district court held that the City had been improperly classifying Barrows as an FLSA-exempt employee and that a declaration that Barrows was a non-exempt FLSA employee was appropriate. See Barrows, 944 F.Supp.2d at 605. As for past unpaid overtime compensation, the district court held that Barrows had failed to meet his burden of proof in that his evidence was essentially too inconsistent and vague. See id. at 606. As a result, Barrows was awarded no monetary damages. See id. With respect to attorney’s fees, the district court held that Barrows could recover attorney’s fees, despite the lack of monetary relief, because Barrow was entitled to a declaratory judgment. See id. at 607. The court explained:

Section 216 of the FLSA provides, in relevant part, that the Court shall allow a prevailing employee to recover his reasonable attorney’s fees, as well as the costs of the action. Defendant has conceded that Plaintiff is entitled to attorney’s fees and costs in the event that he prevails in this action. Although the Court has found that Plaintiff is not entitled to damages for overtime compensation, Plaintiff has prevailed as to his claim for declaratory relief. Judgment for a plaintiff on a claim for declaratory relief will “usually” be satisfactory for finding that the plaintiff has prevailed in order to recover attorney’s fees. Because Plaintiff here has prevailed on his claim for declaratory relief on the merits, the Court finds that he is a prevailing party; accordingly, he is entitled to recovery of reasonable attorney’s fees and costs of this action pursuant to 29 U.S.C. § 216(b).

Id. at 607 (citations omitted).

The second case, which was cited by neither party, is Council 13, American Fed’n of State, Cnty. & Mun. Emples., AFL–CIO v. Casey, 156 Pa.Cmwlth. 92, 626 A.2d 683 (Pa.Commw.Ct.1993).3 In Council 13, employees of the State of Pennsylvania sought inter alia a declaration that the FLSA required Pennsylvania to pay wages and salaries that were coming due, despite an anticipated exhaustion of appropriated funds. See id. at 684. The court held that the employees were entitled to the declaration they sought, and that the FLSA required payment of wages. See id. at 686. With respect to attorney’s fees under § 216(b), the court found that attorney’s fees were not available. See id. After quoting the third and fifth sentences of § 216(b), the court explained:

Although that sentence, as quoted above, itself contains no mention of fault or violation, it rests in a context which plainly involves legal actions against employers in violation. The first sentence in the quoted passage states that it deals with an ‘action to recover the liability prescribed in either of the preceding sentences … against any employer (including a public agency) in any Federal or State court….’ The ‘preceding sentences’ expressly and exclusively refer to situations involving any “employer who violates” [FLSA § 206 or § 207]. However, this present action clearly is not an enforcement action under [§ 216(b) ] to cure and punish a violation, but is one mutually pursuing a declaratory judgment for guidance—no violation having yet occurred. Hence, the federal Act does not mandate imposition of attorney’s fees here….

Id. at 686–87 (emphasis in original).

In both Barrows and Counsel 13, declaratory relief was sought and obtained. In both Barrows and Counsel 13, attorney’s fees under § 216(b) were sought by the plaintiffs. However, only in Barrows, where an actual violation of the FLSA was found, were fees awarded. Because no violation of the FLSA was actually involved in Counsel 13, the court held that attorney’s fees were not appropriate. Together, Barrows and Counsel 13 indicate that an award of only declaratory relief may form the basis of attorney’s fee under § 216(b), but that attorney’s fees are only available when an actual violation of the FLSA is involved.

Turning to the public policy and legislative intent behind the FLSA’s fee provisions, the court reasoned that such policy and intent too supported a reading of the FLSA that permitted the recovery of attorneys fees and costs for a plaintiff who successfully recovered declaratory relief:

With respect to the policy and legislative intent behind § 216(b)‘s attorney’s fee provision, several circuits have made observations. The Fourth and Eleventh Circuits have indicated that Congress intended that a wronged employee “receive his full wages plus the penalty without incurring any expense for legal fees or costs.” Silva v. Miller, 307 Fed. Appx. 349, 351 (11th Cir.2009); Maddrix v. Dize, 153 F.2d 274, 275–76 (4th Cir.1946). Similarly, the Fifth Circuit has indicated that the legislative intent behind § 216(b)‘ s attorney’s fee provision is “to recompense wronged employees for the expenses incurred in redressing violations of the FLSA and obtaining wrongfully withheld back pay.” San Antonio Metro. Transit Auth. v. McLaughlin, 876 F.2d 441, 445 (5th Cir.1989). The Sixth Circuit, in reliance in part on Maddrix, has found that “the purpose of § 216(b) is to insure effective access to the judicial process by providing attorney fees for prevailing plaintiffs with wage and hour grievances; ‘obviously Congress intended that the wronged employee should receive his full wages … without incurring any expense for legal fees or costs.’ ” United Slate, Local 307 v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 501–02 (6th Cir.1984) (quoting Maddrix, 153 F.2d at 275–76). Finally, the D.C. Circuit has noted that through § 216(b), “Congress clearly hoped to provide an adequate economic incentive for private attorneys to take employment discrimination cases, and thereby to ensure that plaintiffs would be able to obtain competent legal representation for the prosecution of legitimate claims.” Laffey v. Northwest Airlines. Inc., 746 F.2d 4, 11 (D.C.Cir.1984). These cases reflect that the intent behind § 216(b) was to allow employees to obtain payment owed under the FLSA in court without the employee incurring legal fees and expenses, and to encourage attorneys to take FLSA cases.

While the court acknowledged that the defendant’s proposed reading of the plain language of the FLSA could support the defendant’s argument that the fees at issue were not recoverable, ultimately it rejected this view, citing the need to liberally construe the FLSA: 

The FLSA as a whole is to be interpreted liberally to the fullest extent of Congressional direction. See Probert, 651 F.3d at 1010. As indicated above, the intent behind the attorney’s fees provision is to ensure that employees obtain full payment owed under the FLSA without incurring legal fees. An interpretation of § 216(b) that would eliminate the availability of attorney’s fees to employees who seek to obtain or who only obtain declaratory relief, would partially frustrate the intent behind § 216(b). Although declaratory relief will not necessarily permit an employee to obtain past payments that were mandated by the FLSA, it could ensure that future payments do conform to the FLSA. That is, declaratory relief could aid an employee in obtaining his full future wages. For example, in a case like Barrows, no monetary relief was awarded despite obtaining declaratory relief.4 Nevertheless, by declaring that an employee is properly classified as a non-exempt FLSA employee, and not as an exempt FLSA employee, the declaratory relief will ensure that the employee begins to receive overtime pay in the future and in conformity with the FLSA.5 As another example, in this case, the dispute is whether Beard is currently calculating overtime correctly. A declaration that the overtime calculations are incorrectly being made will help Plaintiffs to obtain the full future FLSA wages and overtime that would be due to them under a proper calculation. In cases where monetary damages are unavailable or very tenuous, but a violation of the FLSA appears to be occurring, the availability of attorney’s fees provides an incentive to correct the FLSA violation. Without the availability of attorney’s fees, the expense to employees bringing such lawsuits would be increased and the incentive for attorneys to take such cases would be diminished.

There is a broader interpretation of § 216(b) that is also reasonable. The fifth sentence is ultimately tethered to actions under the first and second sentences involving violations of § 206, § 207, and § 215(a)(3). In actions that seek to remedy violations of § 206, § 207, or § 215(a)(3), the fifth sentence requires courts to award attorney’s fees in addition “to any judgment obtained by the plaintiff.” 29 U.S.C. § 216(b) (emphasis added). There is no express limit as to the type or amount of judgment that must be obtained before attorney’s fees are available, rather, so long as “any judgment” is obtained by the plaintiff, attorney’s fees are to be awarded. Declaratory relief has been awarded in this district in an FLSA case against a State, the Third Circuit has held that declaratory relief in an FLSA case is available against a State, and the District of Tennessee has awarded declaratory relief in an FLSA case even in the absence of monetary damages. See Balgowan v. New Jersey, 115 F.3d 214, 217–18 (3d Cir.1997); Barrows, 944 F.Supp.2d at 605;Biggs v. Wilson, 828 F.Supp. 774, 779–80 (E.D.Cal.1991), aff d 1 F.3d 1537 (9th Cir.1993). If a declaratory judgment may be issued in an FLSA case, then it is unclear why a declaratory judgment would not be included under § 216(b)‘s “any judgment” language. As long the lawsuit/action is one that seeks to correct/remedy violations of § 206, § 207, or § 215(a)(3), obtaining a declaratory judgment would constitute “any judgment” and could serve as the basis for attorney’s fees under § 216(b).6 Such an interpretation would permit attorney’s fees not only when unpaid wages for past violations of § 206 or § 207 are obtained, but also for declarations that would essentially end ongoing violations of § 206 or § 207. Declarations that find and/or remedy ongoing violations of § 206 or § 207 would help to ensure that an employee obtains the full wages and overtime that are due him in the future. Correcting violations of § 206 or § 207 and obtaining full wages due are both consistent with congressional intent.

As such, the court concluded that fees and costs are available to an FLSA plaintiff who prevails solely on a claim for declaratory relief:

The Court does not find Beard’s interpretation to be unreasonable. However, as discussed above, there is a broader interpretation of § 216(b) that appears consistent with Congressional intent. Further, the very limited case law that deals with § 216(b) attorney’s fees provision in the context of declaratory relief indicates that attorney’s fees may be awarded. Considering the arguments made by the parties, the limited case law, and the Ninth Circuit’s admonition for a liberal interpretation of the FLSA, the Court concludes that, in cases that seek to correct violations of § 206, § 207, or § 215(a)(3), attorney’s fees under § 216(b) are available when only declaratory relief is sought or obtained, so long as an actual violation of the FLSA by the employer is involved. In this case, Plaintiffs allege ongoing violations of § 207, and seek declarations relating to the proper calculation of overtime under § 207. This case is therefore one that seeks to correct an actual and ongoing violation of § 207. Accordingly, if Plaintiffs prevail and obtain declaratory relief, they will be entitled to attorney’s fees.

The declaratory relief requested by Beard is a pure issue of law, and no further facts need be developed before resolving that issue. The declaratory relief requested by Beard is contrary to the Court’s conclusion. Because attorney’s fees are available under § 216(b) in this case, it is appropriate to dismiss Beard’s request for declaratory relief.

Click Pickett v. Beard to read the entire Order on Plaintiffs’ Motion to Dismiss and Alternatively Motion to Strike.

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