Tag Archives: Overtime Law

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.

Click Madden v. Lumber One Home Center, Inc. to read the entire Decision.

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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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S.D.Ohio: Compensation System Based on Number and Type of Cases Managed, Did Not Qualify as “Fee Basis,” For Purpose of Applying Learned Professional Exemption

Cook v. Carestar, Inc.

This case was before the court on the parties’ cross-motions for summary judgment regarding the application (or lack thereof) of the learned professional exemption to plaintiffs, nurse case managers. As discussed here, the court held that the case managers were non-exempt as a matter of law, because the defendants’ compensation plan was neither a salary nor a fee basis plan. As such, the court granted the plaintiffs’ motion in part (regarding their non-exempt status) and denied the defendants’ motion.

The court outlined the relevant undisputed facts regarding the plaintiffs compensation plan as follows:

The facts of Carestar’s compensation system for case managers are not in dispute. Each case manager is assigned a number of consumers or cases that he or she is responsible for managing. Each case is assigned one of three acuity levels depending upon the “needs/situation” of that particular case. The acuity levels have an associated point value ranging from 1.66 to 2.00 to 3.33. A case manager’s total caseload is determined by totaling the point value of his or her assigned cases.

Upon hiring, a case manager is given a dollar value for each point in his or her caseload. This amount is determined based upon the individual case manager’s educational level, credentials (i.e., RN/LSW/LISW) and experience. The Case Manager’s compensation per pay period is determined by adding up the total number of points in his or her caseload and multiplying that by the dollar value of the points. (See Case Manager Compensation Review, Doc. 34–7.)

The compensation system pays case managers an amount for each case managed, regardless of the time expended in performing such management duties. As Plaintiffs point out, Carestar’s compensation system guidelines nowhere discuss the amount of time expected to be worked by case managers in performing their duties.

Based on their compensation plan, the court held that the plaintiffs were neither paid on a salary or fee basis. Discussing the issue, the court explained:

To qualify for the “learned professional” exemption, Plaintiffs must first be “[c]ompensated on a salary or fee basis at a rate of not less than $455 per week….” 29 C.F.R. § 541.300(a)(1) (emphasis added).5 Defendants concede that Case Managers are not compensated on a “salary basis,” but rather assert that they are compensated on a “fee basis.” The DOL regulation on “fee basis” compensation, explains:

An employee will be considered to be paid on a “fee basis” within the meaning of these regulations if the employee is paid an agreed sum for a single job regardless of the time required for its completion. These payments resemble piecework payments with the important distinction that generally a “fee” is paid for the kind of job that is unique rather than for a series of jobs repeated an indefinite number of times and for which payment on an identical basis is made over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.

29 C.F.R. 541.605(a).

Defendants rely on Fazekas v. Cleveland Clinic Foundation Health Care Ventures, Inc., 204 F.3d 673 (6th Cir.2000), to argue that Carestar case managers are compensated on a “fee basis.” In Fazekas, the Sixth Circuit considered whether certain home health nurses were paid on a fee basis for the purposes of the FLSA’s “professional” exemption. See id. at 675–79. The Fazekas plaintiffs were compensated on a per-visit basis, regardless of the time spent on each home health visit. Although the nurses performed multiple tasks within a single visit, including case management and care coordination tasks, and even expended some time outside consumers’ homes on “attendant transportation and administrative duties,” all such tasks were “connected with the actual visits themselves.” Id. at 675. Thus, while the nurses often provided ongoing treatments and implemented ongoing care plans over the course of multiple visits, such services were divisible in to discrete components (i.e., the individual visit), and compensated as such. Accordingly, the disputed matter in Fazekas was not whether the nurses were compensated for performing a “single job,” but rather whether each job was “unique” and, therefore, unlike “piecework payments.” Id. at 676. Analogizing a home health nurse to “a singer, who may, after all, perform the same song or set of songs over and over again during a series of performances, or … an illustrator, who may similarly repeat the same drawings or set of drawings as necessary,” id. at 679, the Court determined that each home health visit was indeed unique. Because this was consistent with the controlling DOL opinion on the matter, see id. at 676–678, the Court concluded that home health nurses paid on a per-visit basis were professionals compensated on a fee basis and therefore FLSA-exempt.

Here, in contrast, throughout a two-week pay period, case managers perform multiple individual tasks in connection with a particular consumer, which cannot be linked back to a single discrete job like a visit, a performance, or a project. Indeed, the pay-period does not correlate with a discrete set of tasks or goals. (Case Mgmt. Practice Guidelines, Doc. 29–11, 2–4; Bowman Aff., Doc. 33–1, ¶ 5 (“The points system used to compensate me was not based on my completion of any single task. Rather, this compensation system required I provide consumers with a series of services which were repeated an indefinite number of times per year based on the consumer’s particular needs.”); Cook Aff., Doc. 33–2, ¶ 5 (same); Gildow Aff. Doc. 33–3, ¶ 5(same); Kurtz Aff., Doc. 33–4, ¶ 5 (same); Potelicki Aff., Doc. 33–5, ¶ 5 (same); Steele Aff., Doc. 33–6, ¶ 5(same)). Rather, Carestar’s Case Management Practice Guidelines identifies numerous ongoing duties, such as periodic reevaluations and a number of required contacts with the consumer during the first and subsequent six month periods. (Case Mgmt. Practice Guidelines, Doc. 29–11; see also Job Description, Doc. 29–5 (“The Case Manager is responsible for on-going case management services to the consumer, including … the on-going monitoring of consumer outcomes, health, safety, eligibility and costs.”)).6 Thus, unlike a nurse’s home health visits, a singer’s performances, or an illustrator’s drawings, the on-going work done by case managers in connection with a case cannot be reduced a series of two-week-long “single job[s].” Therefore, the only basis for delineating and distinguishing case managers’ unit of compensation is the duration of the pay period. As DOL regulations make plain, however, “[p]ayments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.” 29 C.F.R. § 541.605(a). Carestar’s case manager compensation system thus fails to meet the DOL’s definition of a “fee basis” of payment as a matter of law.

Because Case Managers are not compensated on a “salary or fee” basis, they cannot satisfy the requirements for a “professional” exemption under the FLSA. See 29 C.F.R. § 541.300(a)(1). Accordingly, this alone is sufficient to grant Plaintiffs’ Motion for Partial Summary Judgment with respect to Carestar’s misclassification of its Case Managers as “exempt” employees.

The court went on to discuss the duties element of the learned professional exemption, but declined to resolve issues of fact at the summary judgment stage, and noted that resolution of the issue was not necessary in light of the defendants’ inability to meet the salary or fee basis prong of the exemption.

Click Cook v. Carestar, Inc. to read the entire Opinion & Order.

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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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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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N.D.Ga.: Where Weekly Compensation of RNs and PTs Not Guaranteed and Comprised of Fees Per Visit as Well as Other Pay Based on Time Worked, Not “Salary” or “Fee Basis;” Clinicians Entitled to Overtime

Rindfleisch v Gentiva Health Services, Inc

As discussed here, this case was before the court on the parties’ respective cross-motions for summary judgment. Plaintiffs, registered nurses (RNs) and physical therapists (PTs)(collectively “clinicians”), paid in part by-the-visit to defendant’s patient’s homes asserted that they were entitled to unpaid overtime under the FLSA. Defendant contended that plaintiffs were exempt from overtime pursuant to the so-called “professional exemption.” Granting the plaintiffs’ motion and denying that of the defendant, the court held that the plaintiffs did not qualify for such exemption, because they were not paid on a “salary basis” or “fee basis,” a requisite element for application of the exemption.

Describing the pay policy at issue, the court stated:

Gentiva provides home healthcare services to patients throughout the United States[Doc. No. 508, 1].1 To provide these services, Gentiva employs registered nurses and physical or occupational therapists to provide in-home healthcare to Gentiva’s patients (collectively “Clinicians”) [Doc. No. 508, 1]. Since December of 2008, Gentiva pays the majority of its Clinicians on a pay per-visit plan (the “PPV Plan”) [Doc. No. 586, 4–5].2 Under the PPV Plan, Clinicians are paid a set fee for a “routine visit” to a patient’s home (“visit fees”) [Doc. No. 586, 14]. These visit fees do not vary based on the time it takes Clinicians to complete a specific in-home visit [id. at 15]. In addition, Clinicians under the PPV Plan are also paid on what Gentiva describes as a “flat rate” for non-visit related work (“non-visit fees”) [id. at 19]. In setting the amount of non-visit fees, Gentiva factors in the amount of time it takes Clinicians to perform a specific non-visit related activity [id.].

Gentiva maintains that the PPV Plan constitutes a “fee basis” payment under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. [id. at 14]. Therefore, Gentiva classifies all of its Clinicians compensated under the PPV Plan as professional employees exempt from overtime compensation under the FLSA [id. at 10].

The court framed the issue before it as follows: 

In summary, the only issue for the Court to determine at this stage of the litigation process is whether or not the PPV Plan is unlawful under the FLSA.

After explaining the elements required for the application of the professional exemption, and noting that here it was undisputed that plaintiffs me the duties prong of the exemption, the court addressed whether or not the defendant’s pay scheme was a “fee basis” or “salary basis” within the meaning of the applicable regulation:

The DOL regulations state that, in order to satisfy the salary basis test, a professional employee can be paid “on a fee basis, as defined in § 541.605.” 29 C.F.R. § 541.600(a). Section 541.605 states an employee can be paid on a “fee basis” that satisfies the salary basis test if “the employee is paid an agreed sum for a single job regardless of the time required for its completion.” 29 C.F.R. § 541.605(a). Subsection (b) of section 541.605 states that, in order for a particular fee payment to satisfy the salary basis test, “the amount paid to the employee will be tested by determining the time worked on the job and whether the fee payment is at a rate that would amount to at least $455 per week if the employee worked 40 hours.” 29 C.F.R. § 541.605(b).

In the alternative, the DOL regulations, under section 541.604, allow an employee exempt from overtime pay to receive “extra” compensation that does not satisfy the salary basis test. Specifically, section 541.604 allows two forms of “extra” payment, articulated respectively in subsections (a) and (b). Anani v. CVS RX Servs., Inc., 788 F.Supp.2d 55, 66 (E.D.N.Y.2011). Subsection (a) of section 541.604 allows an employee to receive “additional compensation,” that does not satisfy the salary basis test, “based on hours worked for work beyond the normal workweek.” 29 C.F.R. § 541.604(a). Subsection (b) allows an employee to receive payment on an hourly, daily, or shift basis without losing the overtime exemption, so long as he is guaranteed weekly payment of at least $455 and there is a “reasonable relationship” between the guaranteed weekly payment and the employee’s usual weekly earnings. 29 C.F.R. § 541.604(b).

Summarizing the parties’ respective positions, the court explained:

In its motion for partial summary judgment, Plaintiffs argue that the PPV Plan, because the non-visit fees vary based on the amount of time it takes a Clinician to complete a non-visit activity, violates the salary basis test. Therefore, Plaintiffs argue the PPV Plan violates the FLSA and, as a result, that they are owed overtime compensation. In its response to Plaintiffs’ motion, as well as in its own motion for partial summary judgment on the lawfulness of its fee payments, Gentiva asserts the following two arguments: 1. Pursuant to subsection (b) of section § 541.605, the non-visit fees can vary based on the time it takes Clinicians to complete a non-visit activity and still satisfy the salary basis test; and 2. Even if Gentiva’s non-visit fees improperly consider time, Gentiva’s visit fees properly satisfy the salary basis test and, therefore, the non-visit fees constitute “extra” payments under section 541.604. The Court will discuss each of Gentiva’s arguments below.

The court rejected both of the defendant’s arguments in this regard. First, the court concluded that the defendant’s payment of non-visit fees did not satisfy the salary basis test under 29 C.F.R. § 541.605, because they were variable and depended on the amount of time a clinician spent on non-appointment activities:

Subsection (a) of § 541.605 clearly states that a fee for an activity, in order to satisfy the salary basis test, cannot be based on “the time required for [the activity's] completion.” 29 C.F.R. § 541.605(a). Subsection (a) further states that “[p]ayments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.” Id. Based on this clear and unambiguous language, a “fee” that varies based on the amount of time it takes to complete a specific activity does not satisfy the DOL regulation’s salary basis test. See Bread Political Action Comm. v. Fed. Election Comm’n, 455 U .S. 577, 580 (1982) (stating that, in the absence of clearly expressed legislative intention, the plain language of a statute controls its construction and must be considered conclusive); see also Evenson v. Hartford Life & Annuity Ins. Co., 244 F.R.D. 666, 667 (M.D.Fla.2007) (“As a general rule of interpretation, the plain meaning of a regulation governs.”).

Gentiva argues that subsection (b) of § 541.605 allows it to alter the amount of its non-visit fees based on the time it takes Clinicians to complete a non-visit activity. Subsection (b) of § 541.605 provides that, in order for a fee to satisfy the salary basis test, the fee must “amount to at least $455 per week if the employee worked 40 hours.” 29 C.F.R. § 541.605(b). To illustrate this point, subsection (b) provides the following example: “[t]hus, an artist paid $250 for a picture that took 20 hours to complete meets the minimum salary requirement for exemption since earnings at this rate would yield the artist $500 if 40 hours were worked.” Id. Based on this language, Gentiva argues that subsection (b) allows an employer to alter the amount of a fee based on the time it takes an employee to complete a specific activity, so long as the fee is not set on a straight hourly basis.

In essence, Gentiva argues that it can consider the amount of time it takes Clinicians to perform certain non-visit activities prospectively, thereby allowing its non-visit fees to vary based on time. Specifically, Gentiva argues that its non-visit fees factor in time “for the purpose of accommodating the clinician for missed visits that she would have otherwise performed” [Doc. No. 512–1, 25]. In support of this argument, Gentiva provides the following example:

in accordance with one of its conversion charts, Gentiva may pay a visit rate equivalent of $30 for a training that lasted 45 minutes and a rate of $60, equivalent to two visits, for a different training that lasted 3 hours. If, however, Gentiva simply set a flat rate for all trainings at the visit rate equivalent of $30, the training that took 3 hours would not qualify as a bona fide fee ($30 ÷ 3=$10 an hour or $400 over a 40–hour work week)

[id. at 54]. In comparison, Plaintiffs argue that subsection (b) of § 541.605 “describes how to evaluate the payments after the job is completed to determine whether the clinician has been compensated sufficiently to meet the exemption or is instead overtime eligible” [Doc. No. 584, 13]. In summary, Gentiva argues that subsection (b) is in place to allow an employer, in setting a fee for a specific activity, to vary the fee based on the amount of time it takes to complete said activity before it is complete. In contrast to Gentiva’s position, Plaintiffs argue subsection (b) is in place for the purpose of determining if a set fee satisfies the $455/40 hour requirement after the specific activity is complete.

The 2003 version of the fee basis regulation, former 29 C.F.R. § 541.313, is persuasive authority on this point. In the preamble to rule 29 C.F.R. § 541.605, the Department of Labor (the “DOL”) states that “[p]roposed section 541.605 simplified the fee basis provision in the current rule, but made no substantive change.” Dep’t of Labor, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed.Reg. 22122, 22184 (Apr. 23, 2004). Based on the lack of substantive change, it can be inferred that 29 C.F.R. § 541.605 is consistent with the language of former 29 C.F.R. § 541.313. See Belt v. Emcare, Inc., 444 F.3d 403, 414 (5th Cir.2006) (“The amendments effectively adopted § 541.314 after notice and comment, without substantive change, [ ] thereby tending to show that the text of § 541.3(e) does not contradict the former § 541.314.”).

Former 29 C.F.R. § 541.313 provides that “[t]he adequacy of a fee payment … can ordinarily be determined only after the time worked on the job has been determined.” 29 C.F.R. § 541.313(c) (2003) (emphasis added). To illustrate this point, 29 C.F.R. § 541.313 provides the following example:

An illustrator is assigned the illustration of a pamphlet at a fee of $150. When the job is completed, it is determined that the employee worked 60 hours. If the employee worked 40 hours at this rate, the employee would have earned only $100. The fee payment of $150 for work which required 60 hours to complete therefore does not meet the requirement of payment at a rate of $170 per week and the employee must be considered nonexempt.

29 C.F.R. § 541.313(d)(3) (2003). Based on this language, the Court agrees with Plaintiffs that 29 C.F.R. § 541.605(b) articulates how to determine a fee for a specific activity satisfies the salary basis test after the activity is completed. Therefore, 29 C.F.R. § 541.605(b) does not authorize an employer to prospectively alter a fee based on the amount of time it takes an employee to perform a specific work activity.

Without question, Gentiva’s non-visit fees vary based on the amount of time it takes Clinicians to complete a specific non-visit activity. Therefore, the non-visit fees violate the clear language of 29 C.F.R. § 541.605(a), which specifies a fee only satisfies the salary basis test when it is “an agreed sum for a single job regardless of the time required for its completion.” Subsection (b) of 29 C.F.R. § 541.605 merely provides a basis for determining whether or not a fee for a specific activity satisfies the salary basis test after the activity is complete. Therefore, Gentiva cannot rely on subsection (b) as justification for varying its non-visit fees based on the amount of time it takes Clinicians to complete a non-visit activity. Such a reading of subsection (b) would completely contradict and negate the clear and unambiguous language of subsection (a). Therefore, Gentiva’s non-visit fees do not satisfy the salary basis test under 29 C.F.R. § 541.605.

The court also rejected the defendant’s alternative argument that the non-visit fees constituted an “extra” payment under 29 C.F.R. § 541.604:

Section 541.604 provides that “[a]n employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount [$455] paid on a salary basis.” 29 C.F.R. § 541.604(a). Gentiva argues that, because its visit fees satisfy the salary basis test, its non-visit fees constitute extra payments under section 541.604. The Court does not find this argument persuasive under either subsection (a) or subsection (b) of section 541.604.

Subsection (a) of section 541.604 allows an exempt employee to receive “extra” payment as “additional compensation … paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off.” Id. However, such “extra” or “additional” compensation is only available under subsection (a) for “extra” or “additional” work, meaning “hours worked for work beyond the normal workweek.” Id. Under subsection (a), “beyond the normal workweek” signifies hours worked in excess of forty. See Anani, 788 F.Supp.2d at 67 (stating “common sense as well as the purpose of the FLSA supports the interpretation that the words ‘the normal workweek’ clearly contemplate a forty (40) hour workweek because the FLSA itself generally establishes the right to overtime for hours worked in excess of forty (40) hours.”) (internal quotation marks, alterations and citation omitted).

Here, Gentiva does not designate non-visit activities as additional work only performed after Clinicians have completed forty hours of in-home visits [Doc. No. 586, 34–35]. Instead, in the weeks non-visit activities are performed, non-visit fees are a part of the Clinicians’ compensation for a normal forty hour workweek. Therefore, non-visit fees are not a form of compensation separate from the Clinicians’ forty hour workweek, but are instead a part of the Clinicians’ compensation for a forty hour workweek that includes non-visit activities. Because non-visit activities, and by extension the non-visit fees, are not designated as separate from the Clinicians’ normal workweek, it is irrelevant that Gentiva’s visit fees satisfy the salary basis test. The visit fees do not encompass the complete form of payment for a Clinicians’ normal workweek and, therefore, do not justify payment of the non-visit fees which do not satisfy the salary basis test. As a result, the non-visit fees cannot be considered “extra” payment under subsection (a) of 29 C.F.R. § 541.604.

Subsection (a) of 29 C.F.R. § 541.604 does not allow an employee to receive two forms of payment, with one form failing to satisfy the fee basis test, for two forms of activities completed as part of an employee’s forty hour workweek. An additional form of payment that does not satisfy the salary basis test can only be awarded for work outside of an employee’s normal workweek. As Gentiva’s non-visit fees are a part of the Clinicians’ compensation for a normal workweek that includes non-visit activities, they do not constitute an “extra” payment under subsection (a) of section 541.604.

 Subsection (b) of section 541.604 allows an employer to pay its employee on an hourly, daily or shift basis without negating the overtime exemption “if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis [$455] regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.” 29 C.F.R. § 541 .604 (emphasis added). In summary, subsection (b) allows an employee to be paid on an hourly, daily, or shift basis without losing the overtime exemption, so long as the “reasonable relationship” test is met. Anani, 788 F.Supp.2d at 62. Subsection (b) provides that “[t]he reasonable relationship test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily or shift rate for the employee’s normal scheduled workweek.” 29 C.F.R. § 541.604(b).

Perhaps most significantly, the court noted that the defendant apparently conceded that there was no guarantee that the clinicians would receive at least $455.00 per week, regardless of the characterization of the non-visit fees:

In its reply brief regarding its motion for summary judgment on the lawfulness of its fee payments, Gentiva appears to concede that the visit fees do not guarantee Clinicians paid under the PPV Plan even $455 in a given week [Doc. No. 617, 24–25]. Based on this concession, Gentiva argues that “fee-based employees need not be guaranteed pay of at least $455 per week to be eligible for extras under section 541.604, they only need to be guaranteed fees that pay them at a rate that would result in at least $455 if they were to work a full 40–hour week performing those fee-compensated tasks” [id. at 25]. This argument, when applied to Clinicians and their usual weekly earnings, supports the very form of payment scheme that the reasonable relationship test of subsection (b) is attempting to guard against…

Here, Gentiva argues in favor of a compensation framework, without even establishing a set amount of “guaranteed” weekly payment, that allows an even greater discrepancy between the Clinicians’ normal weekly earnings and their “guaranteed” weekly payment. Specifically, Gentiva argues that Clinicians can receive one visit fee in a given week and still meet the guarantee requirement of subsection (b), so long as that single fee satisfies the fee basis test under section 541.605. However, under that scenario, Clinicians would have to receive an amount of non-visit fees that is significantly greater than the amount received from the one visit fee. For example, Gentiva asserts “the more productive opt-in clinicians in this action were able to earn more than $150,000 per year, and one plaintiff earned over $240,000″ [Doc. No. 512–1, 15].11 To earn this amount of compensation in a given year, Clinicians have to receive a weekly amount of earnings that greatly exceeds $455, let alone an undetermined amount that is less than $455. Therefore, under the compensation framework put forth by Gentiva, Clinicians’ “guaranteed” payment is an illusion, having no reasonable relationship to the amount of pay that Clinicians usually receive in a given week. See Dep’t of Labor, 69 Fed.Reg. at 22184 (stating “if an employee is compensated on an hourly basis, or on a shift basis, there must be a reasonable relationship between the amount guaranteed per week and the amount the employee typically earns per week. Thus, if a nurse whose actual compensation is determined on a shift or hourly basis usually earns $1,200 per week, the amount guaranteed must be roughly equivalent to $1,200; the employer could not guarantee such an employee only the minimum salary required by the regulation.”). Therefore, Gentiva’s non-visit fees do not constitute an “extra” payment under subsection (b) of 29 C.F.R. § 541.604.

Thus, the court held that the defendant’s payment plan failed to satisfy the salary or fee basis requirement and thus the professional exemption was inapplicable to the plaintiffs.

Click Rindfleisch v. Gentive Health Services, Inc to read the entire Order.

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S.D.Fla.: Contractor Engaged in Heavy-Duty Cleaning of Airplanes Not Air-Carrier Exempt Under Railway Labor Act (RLA)

Roca v Alphatech Aviation Services, Inc.

In this case, an employee sued his employer, a company that provided heavy-duty cleaning of airplanes, alleging failure to pay overtime in violation of the Fair Labor Standards Act (FLSA). The case was before the court on the defendant cleaning company’s motion for summary judgment. Specifically, the defendant asserted that it was entitled to the air-carrier exemption under the Railway Labor Act (RLA), because its work involved cleaning airplanes pursuant to contracts with air carriers covered that were covered by the exemption. The court disagreed and denied the defendant’s motion.

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

Alphatech specializes in heavy-duty cleaning of airplanes operated by commercial and freight airlines. In addition to cleaning airplane interiors and exteriors, Alphatech personnel replace components, perform light maintenance, preventive maintenance, and carry out related servicing of the aircraft. D.E. 22–1. As explained by Plaintiff, Alphatech employees “leave the plane clean; all the bathrooms, the galleys, everything, seats, carpeting[,] …. leave like the shell of the plane.” D.E. 25–1, at 13:13–16. In other words, cleaning is performed when an aircraft’s cabin is completely disassembled. D.E. 24–1, at 24:25. This work is primarily performed at the Miami International Airport complex, in a facility owned by AAR Aircraft Services (“AAR”), though Alphatech’s administrative work is performed out of its own office space adjacent to the airport. D.E. 22–1, at 35:3–6.

Alphatech does work for various air carriers, maintaining a separate contractual relationship with each. See D.E. 26–4. The work performed for each air carrier is executed in accordance with that air carrier’s maintenance manual. D.E. 24–1, at 9:12–14. Each air carrier specifies the manner in which it desires for its planes to be cleaned. Id. at 17:17–18. Alphatech employees sometimes work on the same exact model plane for two different air carriers and nevertheless perform their assignments differently, in accordance with each air carrier’s manual for that air craft. Id. at 17:19–22. The air carriers separately contract with AAR to inspect and certify the work that Alphatech performs. Id. at 15:10–13, 16:15–19. AAR “professors” are also responsible for administering the air carrier-specific training that Alphatech personnel must receive before servicing an aircraft. The air carrier representatives “walk [through the plane], they turn around, and they leave.” D.E. 15:9–10. Defendant Brullo testified that he could not remember the names of any air carrier supervisors because they change all the time, coming and going with the particular aircrafts that Alphatech personnel service. D.E. 23–1, at 29:19–22.

Giving an overview of the air-carrier exemption, and concluding that the defendant could not satisfy its burden to demonstrate the applicability of same, the court stated:

The question presented by this Motion is whether Plaintiff is an “employee of a carrier by air” for purposes of the FLSA’s air carrier exemption. Under the FLSA, employers are required to pay their employees at overtime rates for work in excess of 40 hours per week. See
29 U.S.C. § 207. However, certain classes of employers are exempt from this overtime requirement. Thus, the air carrier exemption removes from coverage “any employee of a carrier by air subject to the provisions of Title II of the Railway Labor Act.” Id. § 213(b)(3). Title II of the Railway Labor Act (“RLA”), in turn, covers “every common carrier by air …, and every air pilot or other person who performs any work as an employee or subordinate official of such carrier or carriers, subject to its or their continuing authority to supervise and direct the manner of rendition of his service.” 45 U.S.C. § 181.

Defendants have failed to show that Plaintiff is exempt from overtime coverage. The application of an exemption under the FLSA is an affirmative defense on which the employer has the burden of proof. Corning Glass Works v. Brennan, 417 U.S. 188, 196–97, 94 S.Ct. 2223, 41 L.Ed.2d 1 (1974). The Eleventh Circuit has found that Title II of the RLA “is certainly unambiguous” in scope, Valdivieso v. Atlas Air, 305 F.3d 1283, 1287 (11th Cir.2002), yet Defendants urge the Court to find that Plaintiff qualifies as an air-carrier employee under a two-pronged conjunctive test promulgated by the National Mediation Board (“NMB”)2 in cases where the employer does not itself fly aircraft. Plaintiff no more satisfies this two-part test than she does the plain text of the subject exemption. Under the NMB’s two-pronged conjunctive test, an employee is covered by the air-carrier exemption if: (1) the nature of the work is that traditionally performed by employees of air carriers (the “function” test); and (2) the employer is directly or indirectly owned or controlled by or under common control with an air carrier (the “control” test). Verrett v. The Sabre Grp., 70 F.Supp.2d 1277, 1281 (N.D.Okla.1999). Both prongs must be satisfied in order for the RLA exemption to apply. Here, neither prong is satisfied.

Discussing each prong in more detail, and finding that defendant here could satisfy neither prong, the court reasoned:

1. Function Test

Defendants have not shown that the work performed by Alphatech employees is of the sort traditionally performed by air-carrier employees. Indeed, Defendants’ own witnesses have severely undercut their position. Mr. Pichardo testified that the air carriers hire outside contractors to perform the sort of heavy-duty cleaning work performed by Alphatech. When Alphatech works on an aircraft, it does so for an extended period of time, rather than between scheduled flights. In fact, Alphatech’s witnesses repeatedly clarified at deposition that the company’s work is not at all akin to the rapid cabin cleanup performed by air carrier personnel between flights. Indeed, Defendants have not presented any evidence tending to show that the work performed by Alphatech is ever performed by air-carrier employees, let alone that it is “traditionally” performed by those workers.

The RLA’s definition of a “carrier” sheds additional light on what should be considered work traditionally performed by carrier employees. Under the RLA, the term “carrier” includes actual carriers as well as “any company … which operates any equipment or facilities or performs any service (other than trucking service) in connection with the transportation, receipt, delivery, elevation, transfer in transit, refrigeration or icing, storage, and handling of property transported.” 45 U.S.C. § 151. The focus, then, tends to be on companies performing the auxiliary functions of loading, unloading, and shipping to and from carriers’ depots and terminals for the ultimate transportation of whatever is being carried in interstate commerce.

What Defendants have presented in their defense are NMB decisions purporting to hold that aircraft cleaning is a function traditionally performed by air-carrier employees. The Court finds these non-precedential decisions to be distinguishable and otherwise unpersuasive.3 Defendants also rely on Moyano v. Professional Contractors Services, Inc., No. 1:07–cv–22411 (S.D.Fla. Mar. 7, 2008), a case involving mechanic contractors. Moyano offers little analysis under either prong, but does rely on the NMB’s analysis in In re Empire Auto Center, Inc., 33 NMB 3, 2005 WL 3089356 (Oct. 13, 2005). In that case, the employees also worked for an independent contractor and performed their tasks according to maintenance manuals provided by the air-carrier clients. 2005 WL 3089356, at *6. However, Empire’s chief financial officer testified that Empire employees performed maintenance work identical to maintenance work performed by aircraft employees employed by commercial air carriers. Alphatech’s owner, by contrast, acknowledges that the work performed by Alphatech is traditionally contracted out by the air carriers. Moreover, the nature of the work at issue in Empire does not at all appear to be similar to the work Plaintiff performed while at Alphatech. Empire’s employees all fell into one of four categories: exhibit air frame and power plant mechanic; non-destructive test technician; aircraft sheet metal technician; and aircraft avionics and electrical mechanic. Id. at 10. These maintenance and repair operations are similar to the work at issue in Moyano, but not similar to the work performed by Plaintiff. The Court finds that Defendants have failed to show that Plaintiff satisfies the function prong of the NMB test.

2. Control Test

Defendants’ argument that Alphatech’s air carrier clients indirectly control the company’s operations would convert most independent contractors into “carriers” for purposes of the RLA, so long as their clients are air carriers. But entering into a contractual relationship, while perhaps necessary, is certainly not sufficient to satisfy the control test. Courts find that carriers control a contractor’s employees “[w]here the carrier controls the details of the day-to-day process by which the contractor provides services—for example, the number of employees assigned to particular tasks, the employees’ attire, the length of their shifts, and the methods they use in their work.” Cunningham v. Elec. Data Sys. Corp., No. 06–3530, 15 Wage & Hour Cas.2d (BNA) 1891, 2010 WL 1223084, at *6 (S.D.N.Y. Mar.31, 2010) (citing In re Ogden Aviation Serv., 23 NBM 98, 104 (Feb. 5, 1996)). Defendants insist that the air carriers have ultimate control over Alphatech employees because they have an absolute say over the means by which their aircrafts are cleaned, and because individual Alphatech employees must be approved to work on each given aircraft. But Defendants’ deposition testimony establishes that the air carriers have absolutely no control over what Alphatech pays its employees, when and how they are promoted or given pay raises, which shifts they work, how many hours they work per shift, or how many employees are scheduled to work on an aircraft at once.

Meticulous work instructions and prior approval of an independent contractors’ employees will not convert those employees into a carrier’s employees for RLA purposes. See Dobbs Houses, Inc. v. N .L.R.B., 443 F.2d 1066, 1070 (6th Cir.1971). In Dobbs Houses, the court found that while an airline caterer was “engaged in a business which requires it to please some very meticulous and demanding customers, that fact alone does not establish their ‘control directly or indirectly’ of it or its employees.” Id. at 1072. In so finding, the Sixth Circuit distinguished the case of a catering company employed by a rail carrier under circumstances more indicative of “control.” It found that control was exercised in that case because: the catering company could not do any work for any other client except by the carrier’s explicit permission; the carrier reimbursed the caterer for the total cost of its workers’ wages; the carrier had the explicit right to discharge the caterer’s employees; and the catering employees were directly subject to the carrier’s supervision. Id. at 1071. None of those factors were present in the Dobbs Houses case, and none are present here.

Thus, the court held that the defendant was not an exempt air-carrier and denied the defendant’s motion for summary judgment. Subsequently, the plaintiff moved for partial summary judgment regarding the same issue, and the court granted the motion for virtually identical reasons as stated here.

Click Roca v. Alphatech Aviation Services, Inc. to read the entire Opinion and Order on [Defendant's Motion for] Summary Judgment. Click Roca v. Alphatech Aviation Services, Inc. to read the Order on [Plaintiff's Motion for Partial] Summary Judgment.

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