Tag Archives: Unpaid Overtime

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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S.D.N.Y.: De Minimis Exception Applies Only in Cases Where There is a “Practical Administrative Difficulty in Recording Time”

Chavez v. Panda Jive, Inc.

Anyone who handles more than a handful of FLSA cases no doubt knows that defendants often raise an affirmative defense regarding the de minimis nature of the work. Typically the defense asserted claims that even if the defendants failed to properly pay the plaintiff for all time due and owing under the FLSA, such time was de minimis, so no damages are due and owing. And, while most of the decisions discussing the issue focus on the amount of time that is (or is not) de minimis as a matter of law, a recent case sheds light on the narrow circumstances where the defense is even available to an employer. And, as it turns out, the defense is likely applicable far less than you might have thought, only in circumstances where there is a “practical administrative difficulty in recording [the employee's] time,” as discussed briefly in this case.

In this case, the plaintiff’s time records clearly showed overtime hours worked, however the defendant paid him only straight time for his overtime hours, and not time and a half. As the court’s opinion indicates, initially the defendant had raised an exemption defense, however because the plaintiff was admittedly paid by the hour, the defendant ultimately conceded that the plaintiff was generally entitled to overtime (which he was not paid) when he worked over 40 hours in a work week. However, the defendant asserted that because such time was “de minimis” it was not recoverable under the FLSA. Rejecting defendant’s contention, the court explained:

The de minimis exception applies, however, only in cases where there is a “practical administrative difficulty of recording additional time,” such as an employee’s commuting time. Singh v. City of New York, 524 F.3d 361, 371 (2d Cir.2008) (Sotomayor, J.); Reich v. N.Y. Transit Auth., 45 F.3d 646, 652 (2d Cir.1995). This is not such a case: defendants concede that they paid Chavez only straight time for hours for which their own records explicitly show he was owed time and a half. See, e.g., Reply Memorandum of Law in Support of Defendants’ Motion for Summary Judgment dated May 4, 2012 at 4–5; Tr. at 5–6. Accordingly, the Court grants summary judgment to plaintiff on the issue of liability against defendant Panda Jive for overtime hours Chavez worked prior to moving back to Penelope’s kitchen in December 2009.

Click Chavez v. Panda Jive, Inc. to read the entire Memorandum Order.

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D.Mass.: Offsets to Unpaid Overtime, Pursuant to § 207(h)(2) of FLSA, Attributable Only to Singular Workweeks in Which Both Premiums and Overtime Earned Simultaneously

Rudy v. City of Lowell

This case was before court on defendant’s motion for summary judgment, as to the methodology applicable to calculate plaintiff’s damages.  The interesting, but rarely raised issue: to the extent that the employer is entitled to an offset for certain premium compensation paid to the employee, to what extent can that offset reduce the unpaid overtime wage damages sought by the employee?  Holding that such offsets are only applicable in singular workweeks (i.e. they may only be taken in the week in which the payment giving rise to the offset occurred), the court explained: 

Section 207(h) (2) of the FLSA provides that extra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) of this section shall be creditable toward overtime compensation payable pursuant to this section.

29 U.S.C. § 207(h)(2). Only the “premium” portion of the contractual overtime rate (the extra one-half on top of the regular rate) may be used to offset the defendant’s statutory overtime liability. O’Brien v. Town of Agawam, 350 F.3d 279, 289 (1st Cir.2003) (“O’Brien I” ).

Here, the CBA allows employees to treat certain non-work days such as vacation, sick and personal days as hours actually worked for the purpose of determining overtime hours. The City also pays some workers time and one-half for working on holidays. The parties do not dispute that the extra compensation provided for in the plaintiffs’ CBA falls within the compensation described in subsection (5), (6) and (7) and can be used to offset defendant’s underpayment, pursuant to § 207(h)(2).

The parties do dispute, however, whether premium compensation earned in one week can be used to offset an underpayment in a different week. Plaintiffs argue that their damages for unpaid overtime should be calculated on a workweek basis and that any offsets pursuant to § 207(h)(2) may only be attributed to the singular workweeks in which the premiums and overtime were earned. In other words, an underpayment one week cannot be offset by a premium payment made in a different week. The defendant contends, to the contrary, that it is entitled to a “cumulative offset”, consisting of all premium payments, against any FLSA overtime it owes, regardless of when the premium payments were earned or made.

The FLSA does not provide an explicit answer to this difference of interpretation and the United States Circuit Courts have taken divergent positions. Some courts have held that § 207(h) offsets should be calculated on a workweek basis. Herman v. Fabri-Centers of Am., Inc., 308 F.3d 580, 585-93 (6th Cir.2002); Howard v. City of Springfield, 274 F.3d 1141, 1147-49 (7th Cir.2001); Roland Elec. Co. v. Black, 163 F.2d 417, 420 (4th Cir.1947); Conzo v. City of New York, 667 F.Supp.2d 279, 291 (S.D.N.Y.2009); Bell v. Iowa Turkey Growers Co-op., 407 F.Supp.2d 1051, 1063 (S.D.Iowa 2006); Nolan v. City of Chicago, 125 F.2d 324, 331 (N.D.Ill.2000). Other courts have allowed defendants to apply a cumulative offset. Singer v. City of Waco, 324 F.3d 813, 826-28 (5th Cir.2003); Kohlheim v. Glynn County, 915 F.2d 1473, 1481 (11th Cir.1990).

The First Circuit has not directly addressed this issue but other sessions in this District have. In O’Brien v. Town of Agawam, United States District Judge Michael A. Ponsor addressed facts analogous to those at bar and held that the employer could apply a cumulative offset. 491 F.Supp.2d 170, 176 (D.Mass.2007) (“O’Brien II” ). The Court surmised that the First Circuit would hold accordingly given its holding in Lupien v. City of Marlborough. Id. at 175. In Lupien, the employer’s practice of compensating employees for overtime by use of compensatory time (“comp time”), instead of in cash, violated the FLSA. 387 F.3d 83 (1st Cir.2004). With respect to damages, the First Circuit held that the employer did not have to pay its employees for overtime hours for which the employee had used comp time, regardless of when the employee used the comp time. The Court reasoned that paying the employees for overtime hours for which they had used comp time would result in double payment for the same overtime hours. In Murphy v. Town of Natick, another case analogous to this one, United States District Judge Richard G. Stearns agreed with the holding in O’Brien II and also allowed defendants to apply a cumulative offset. 516 F.Supp.2d 153, 160-61 (D.Mass.2007).

Although the two cases in this District are directly analogous to this case, the Court disagrees with them with respect to their interpretation of the FLSA and of Lupien. A further analysis of the Lupien case, the purpose of the FLSA and its interpretation by the Department of Labor (“the DOL”) and the First Circuit’s language in O’Brien I all undermine the position adopted by the courts in O’Brien II and Murphy. Rather, they lead to the conclusion that § 207(h)(2) offsets should be calculated on a workweek basis for the following reasons:

1. This case is distinguishable from Lupien and other First Circuit case law indicates support for a workweek offset model. Lupien dealt with an application of § 207(o) (regulating the use of compensatory time), not § 207(h). In fact, § 207(h) is not referred to in that opinion. Furthermore, here, the employees were not given the option of taking comp time rather than overtime payments. Thus, there is no risk in our case, as there was in Lupien, that the plaintiffs will be compensated twice for the same hours. Thus, the Court concludes that the First Circuit’s decision in Lupien does not indicate how it would decide the question at bar.

More on point is the First Circuit’s discussion of § 207(h)(2) in O’Brien I, in which it stated that

The regulations specifically explain how to treat such mid-workweek contractual overtime payments under the Act: only the premium portion of the contractual overtime rate (that is, the amount in excess of the employee’s regular rate) is deemed “overtime” pay and may be offset against any statutory overtime liability in the same week. O’Brien I, 350 F.3d at 289 (citing 29 C.F.R. §§ 778.201(a), 202(a)) (emphasis added). Thus, although not resolving the offset issue in that decision, the First Circuit conveyed its inclination by specifying that offsets pursuant to § 207(h)(2) would apply “in the same week”.

2. The FLSA overtime requirement uses a single workweek as its basic unit of measurement. Scott v. City of New York, 592 F.Supp.2d 475, 484 (S.D.N.Y.2008). Section 207(a)(1) sets forth the basic overtime rule:

no employer shall employ any of his employees … for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.

29 U.S.C. § 207(a)(1).

The focus on the unitary workweek is prevalent throughout § 207 and the DOL’s interpretation of that section. For example, 29 C.F.R. § 778.103 directs employers to calculate overtime liability on a weekly basis. Further, 29 C.F.R. § 778.104 provides that “[t]he Act takes a single workweek as its standard” and an employer cannot average the number of hours an employee worked in two weeks in order to avoid paying overtime:

[I]f an employee works 30 hours one week and 50 hours the next, he must receive overtime compensation for the overtime hours worked beyond the applicable maximum in the second week, even though the average number of hours worked in the 2 weeks is 40.

It is clear from § 778.104 that cumulative offsets were not contemplated by the DOL. In addition, where the single workweek model is problematic, i.e. when applied to firefighters and law enforcement officers, the FLSA includes a very specific and limited exception. See 29 U.S.C. § 207(k).

With regard to the exact issue before the Court, 29 C.F.R. § 778.202(c) explains that credits pursuant to § 207(h) may be given for overtime due “in that workweek”. See Howard, 274 F.3d at 1148-49; Conzo, 667 F.Supp.2d at 290. Finally, and perhaps most importantly, the DOL has also issued an opinion letter stating that surplus overtime premium payments, which may be credited against overtime1 pay pursuant to section 7(h) of FLSA, may not be carried forward or applied retroactively to satisfy an employer’s overtime pay obligation in future or past pay periods.

Letter from Herbert J. Cohen, Deputy Administrator, U.S. Dep’t of Labor, WH-526, 1985 WL 304329 (Dec. 23, 1985).

3. Overtime payments are intended to be paid as soon as is practicable. Although they are not entitled to deference by this Court, several of the DOL’s official interpretations of § 207 demonstrate the FLSA’s emphasis on ensuring that overtime payments are made soon after they are earned. Howard, 274 F.3d at 1148. For instance, 29 C.F.R. § 778.106 provides that overtime payments need not be paid weekly but must be paid as soon as is practicable:

Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made. See also Nolan, 125 F.Supp.2d at 332 (discussing 29 C.F.R. § 778.106 and holding that offsets for overtime paid apply on a pay period basis).

The reason for requiring employers to calculate and make overtime payments as soon as practicable is obvious: employees are entitled to know how much they will be paid and to prompt payment of what they have earned. As poignantly stated by the Seventh Circuit in Howard v. City of Springfield, if § 207(h)(2) were to permit a cumulative offset, employers could withhold overtime earnings in order to offset them against potential “short” weeks in the future. 274 F.3d at 1148-49. Under such a model, an employee’s overtime payments could be put on hold indefinitely until the employer is either willing or compelled to pay. That outcome is not only illogical but also contradicts the FLSA’s focus on the workweek as a unit and its concern with prompt overtime payments.

In fact, this case uniquely illustrates why a workweek offset is appropriate: if the City had correctly calculated its overtime rate and applied the § 207(h)(2) offsets contemporaneously, it would not have been able to apply those offsets to obligations incurred one or two years later. See id. at 1148. The workweek method of calculating offsets most closely reproduces what the parties would be entitled to had there been no error in the City’s initial computation of its overtime liability. See Nolan, 125 F.Supp.2d at 333.

4. The purpose of the FLSA, to protect workers from “excessive work hours and substandard wages”, is best served by the workweek offset model. Howard, 274 F.3d at 1148; see Herman, 308 F.3d at 585-93. This was clearly articulated in Scott v. City of New York, in which the DOL advocated for the workweek offset model. 592 F.Supp.2d at 484. The District Court in that case found that “both the structure of the Act and its legislative history lend credence to DoL’s interpretation.” Id. The Court explained how a cumulative offset undermines the protections afforded by the FLSA:

The [overtime] requirement protects workers from the imposition of excessive hours by placing an immediate cost on the employer. If employers were allowed to bank credit for contractual overtime against future obligations to pay statutory overtime, it would place workers in the employer’s debt[.] Id. In essence, it would require employees to work large blocks of overtime without premium compensation.

5. Finally, the arguments for applying a cumulative offset are unpersuasive. The City claims that a workweek offset will result in a windfall to the employees but that seems implausible given the fact that, if the City had been correctly calculating its overtime rate and applying the § 207(h)(2) offset at every pay period, the offset would have been applied only to the overtime liability in that pay period. Moreover, the circuit court cases cited by the City do not provide support for a cumulative offset. In Singer v. City of Waco, 324 F.3d at 827, the Fifth Circuit held that § 207(h) was inapplicable, while in Kohlheim v. Glynn County, 915 F.2d at 1481, the Eleventh Circuit did not even explain why it allowed a cumulative offset.

In summary, the Court finds that the plaintiffs’ method of calculating damages is most compatible with both the language and purpose of the FLSA’s overtime requirements and the First Circuit’s understanding of those requirements. As such, the plaintiffs’ damages for unpaid overtime should be calculated on a workweek basis and any offsets pursuant to § 207(h)(2) should be attributed only to the singular workweeks in which both premiums and overtime were earned. The Court concludes that only the premium portions of the extra payments, i.e. the extra one-half of the regular rate, may be used to offset the City’s overtime liability. O’Brien II, 491 F.Supp.2d at 176.”

Click Rudy v. City of Lowell to read the entire order.

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D.Ariz.: Employee Who Resolved His Claims For Unpaid Overtime Prior To Lawsuit Entitled To Award Of Attorney’s Fees Under § 216

McBurnie v. City of Prescott

Before the court was plaintiff’s motion for summary judgment regarding entitlement to attorneys fees following his presuit acceptance of a check that purported to resolve all of his claims for unpaid overtime wages and attorneys fees.  Noting that an empl0yee can not waive his or her rights to substantive FLSA rights absent a settlement supervised by either the DOL or a court, the court held that notwithstanding Plaintiff’s prior acceptance of payment for his unpaid overtime, he was entitled to an award of attorneys fees under the FLSA.

In November 2007, Plaintiff filed a grievance against his then supervisor, alleging that the City’s forced use of compensatory time in lieu of overtime pay violated the Fair Labor Standards Act, 29 U.S.C. § 207.  In February 2009, prior to the institution of Plaintiff’s lawsuit, the Defendant sent two checks to plaintiff-one in the amount of $26,000 for overtime compensation and the other in the amount of $5,778.32 for attorney’s fees.  The settlement letter enclosed with the two checks stated that “[b]y cashing either or both of these two checks your client is accepting these funds as resolution of any and all overtime issues; we have indicated that on each of these checks.”  Plaintiff accepted and cashed the $26,000 settlement offer, but returned the check for attorney’s fees to the City.

In August, 2009, Plaintiff filed his lawsuit.  Among other claims, he sought attorney’s fees related to the settlement of his FLSA wage claim.

Reasoning that Plaintiff was entitled to an award of attorneys fees and granting Plaintiff summary judgment with regard to same, the court explained:

“Plaintiff moves for summary judgment on Count 12, his claim for attorney’s fees under the Fair Labor Standards Act, 29 U.S.C. §§ 207 and 216 (“FLSA”). The FLSA was enacted for the purpose of protecting workers from substandard wages and oppressive working hours. Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 1444 (1981). The Act provides that an employee shall receive overtime wages “at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U .S.C. § 207(a)(1). The FLSA further provides that any employer who violates the overtime wage provision will be liable to the affected employee in the amount of unpaid overtime wages, plus an additional equal amount as liquidated damages. Id. § 216(b).

Because of the unequal bargaining power between employers and employees, Congress made the FLSA provisions mandatory. D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 116, 66 S.Ct. 925, 929 (1946) (“neither wages nor damages for withholding them are capable of reduction by compromise”). An individual may not relinquish rights under the Act, even by private agreement between the employer and employee, “because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”   Barrentine, 450 U.S. at 740, 101 S.Ct. at 1445 (quoting Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707, 65 S.Ct. 895, 902 (1945)).

The FLSA provides two avenues for claim resolution. Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353-54 (11th Cir.1982). First, under section 216(c), the Secretary of Labor can supervise an employer’s voluntary payment to employees of unpaid wages. 29 U.S.C. § 216(c). An employee who accepts such supervised payment waives his right to file an action for both the unpaid wages and for liquidated damages. Id. Or, under section 216(b), an employee can bring a private action for back wages under the FLSA and can “present to the district court a proposed settlement, [and] the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.” Lynn’s Food Stores, 679 F.2d at 1353 (citing D.A. Schulte, Inc, 328 U.S. at 113 n. 8, 66 S.Ct. at 928 n. 8). Settlements that do not follow the two methods authorized by the Act are unenforceable. Hohnke v. United States, 69 Fed. Cl. 170, 178-79 (Fed.Cl.2005).

Here, we have neither an agreement supervised by the Department of Labor, nor entered as a stipulated judgment by a court. The settlement agreement regarding back wages is fully consummated and the parties do not seek court approval. Therefore, the settlement falls outside the two statutorily-prescribed avenues of FLSA claim resolution.

An award of attorney’s fees to a prevailing party in an action brought under section 216(b) is mandatory. “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (emphasis added); Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 415 n. 5, 98 S.Ct. 694, 697 n. 5 (1978) (referring to § 216 of the FLSA as one of the “statutes [that] make fee awards mandatory for prevailing plaintiffs”). The payment of the attorney’s fees discharges a statutory, not a contractual, duty. Because the FLSA was intended to provide workers with the full compensation due under the law, requiring a claimant to pay attorney’s fees incurred to enforce his FLSA rights would frustrate the statute’s underlying purpose. See Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir.1946) (stating that Congress intended that a claimant “should receive his full wages plus the penalty without incurring any expense for legal fees or costs”).

Thus, the statement in the settlement letter that “[b]y cashing either or both of these two checks your client is accepting these funds as resolution of any and all overtime issues” in unenforceable as to plaintiff’s claim for attorney’s fees under the FLSA. Plaintiff has not waived his right to attorney’s fees under the Act. We grant summary judgment in favor of plaintiff on Count 12.”

Click McBurnie v. City of Prescott to read the entire opinion.

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N.D.Cal.: Undocumented Worker’s Submission Of False Documents To Obtain Employment Has No Bearing On FLSA Claims For Unpaid Wages Or Liquidated Damages

Ulin v. Lovell’s Antique Gallery

This case was before the Court on the parties’ cross motions for summary judgment on a variety of issues.  As discussed here, the Defendants asserted that the Plaintiff, an undocumented immigrant, was not entitled to recover unpaid overtime wages and/or liquidated damages under the FLSA, because he fraudulently obtained his job by providing false documents to the Defendants.  The Court roundly rejected this assertion, ruling that neither Plaintiff’s immigration status nor how he obtained his job had any impact on his FLSA claims.

Discussing these issues, the Court reasoned:

“Defendants argue that Plaintiff’s submission of false documents at the time of his employment precludes any recovery of overtime pay. Defendants point to the declaration of immigration attorney Jason Marachi, who reviewed the documents that Plaintiff submitted to Defendants at the time of his employment, performed an independent investigation, and concluded that Plaintiff submitted false work authorization documents to his employer and was not working legally in the United States while he worked for Defendants. See generally Marachi Decl. Plaintiff has not raised any factual dispute on this issue, but disagrees that his recovery of damages is affected.

Defendants rely primarily on Reyes v. Van Elk, Ltd., 148 Cal.App. 4th 604, 611 (2007), where the court stated that:

Thus, as presented to this court, this case does not involve a situation where undocumented workers submitted false work authorization documents to a prospective employer. (See e.g., Ulloa v. Al’s All Tree Service, Inc. (Dist.Ct.2003) 2 Misc.3d 262, 768 N.Y.S.2d 556, 558 [“The Court also notes in passing that, if there had been proof in this case that the Plaintiff had obtained his employment by tendering false documents (activity that is explicitly unlawful under IRCA), Hoffman would require that the wage claim [for unpaid wages] be disallowed in its entirety.”].) However, the issue of whether Hoffman requires that a wage claim be denied if an employee submitted false authorization documents is not before this court.

However, Reyes expressly did not reach the issue raised by Defendants, and therefore is of little help to them. Hoffman Plastic Components, Inc. v. National Labor Relations Board, 535 U.S. 137 (2002), cited by Reyes, foreclosed an award of backpay under the National Labor Relations Act to a worker who had submitted false documents to his employer because the Court found that an award of backpay “for years of work not performed, for wages that could not lawfully have been earned, and for a job obtained in the first instance by criminal fraud” would run counter to immigration policy. Id. at 149, 151. Hoffman did not involve a case such as this, where Plaintiff claims to have already performed the work in question and seeks payment for that work, and so it is also not directly on point.

Plaintiff argues that regardless of whether he presented false documents and was working illegally, he is entitled to recover his earned wages. Plaintiff notes that the cases interpreting Hoffman have not applied it to bar recovery of wages already earned. See, e.g., Singh v. Jutla & C.D. & R’s Oil, Inc., 214 F .Supp.2d 1056, 1061 (N.D.Cal.2002) (Breyer, J.) (quoting Flores v.. Albertsons, Inc., 2002 WL 1163623 (C.D.Cal.2002) (“Hoffman does not establish that an award of unpaid wages to undocumented workers for work actually performed runs counter to IRCA.”); Opp. at 19 (citing cases).

The case cited in Reyes, Ulloa v. Al’s All Tree Service, Inc., 768 N.Y.S.2d 556, 558 (Dist.Ct.2003), does not mandate a contrary result. Ulloa is New York small claims court decision where the Court limited an undocumented worker’s recovery of unpaid wages to the minimum wage, and then noted “in passing that, if there had been proof in this case that the Plaintiff had obtained his employment by tendering false documents (activity that is explicitly unlawful under IRCA), Hoffman would require that the wage claim [for unpaid wages] be disallowed in its entirety.” No case has followed this portion of Ulloa, or otherwise affirmatively held than an undocumented worker is precluded from recovering wages for work already performed simply because he submitted false documents at the time of employment. Indeed, a higher New York court has expressly rejected Ulloa ‘s dicta, and instead held that: “If federal courts ban discovery on immigration status in unpaid wages cases, the use of fraudulent documents on immigration status to gain employment in unpaid wages cases is likewise irrelevant. The only crucial issue is whether the undocumented worker performed services for which the worker deserves compensation. If so, public policy requires payment so that employers do not intentionally hire undocumented workers for the express purpose of citing the workers’ undocumented status or their use of fraudulent documents as a way to avoid payment of wages.” Pineda v. Kel-Tech Const., Inc., 832 N.Y.S.2d 386, 396 (N.Y.Sup.2007).

At oral argument, Defendants contended that, even if Plaintiff’s employment status does not require that all of his claims be disallowed, Hoffman precludes an award of liquidated damages under the FLSA. Defendants’ argument appears to be that FLSA liquidated damages are akin to the backpay for work not performed due to wrongful termination at issue in Hoffman, in that they go beyond simply compensating for past work, and therefore federal immigration policy makes this remedy unavailable to Plaintiff because it would reward violation of immigration laws while punishing the employer. There is no case expressly addressing the issue of whether FLSA liquidated damages are available to a plaintiff who presented false documents to his employer. While a close question, and one that pits important governmental policies relating to labor and immigration against each other, the Court’s interpretation of the statute and the caselaw runs counter to Defendants’ position.

First, the plain language of the FLSA mandates liquidated damages in an amount equal to the unpaid wages unless the employer “shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act of 1938, as amended,” in which case “the court may, in its sound discretion, award no liquidated damages or award any amount thereof …” 29 U.S.C. § 260. “Under 29 U.S.C. § 260, the employer has the burden of establishing subjective and objective good faith in its violation of the FLSA.” Local 246 Utility Workers Union of America v. Southern California Edison Co., 83 F.3d 292, 297-298 (9th Cir.1996). Thus, the plain language of the FLSA’s liquidated damages provision focuses exclusively on the employer’s conduct, not the employee’s conduct. There is nothing in the language of the statute that allows the Court to take Plaintiff’s misconduct into account in determining whether to award liquidated damages. To the contrary, the imposition of liquidated damages is mandatory unless the employer establishes its own good faith.

Second, under the FLSA, “liquidated damages represent compensation, and not a penalty. Double damages are the norm, single damages the exception.” Local 246 Util. Workers Union v. S. Cal. Edison Co., 83 F.3d 292, 297 (9th Cir.1996); see also Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 584 (1942) (liquidated damages compensate for damages too obscure and difficult of proof), superceded by statute on other grounds; Herman v. RSR Sec. Services Ltd., 172 F.3d 132, 142 (2d Cir.1999) (“Liquidated damages are not a penalty exacted by the law, but rather compensation to the employee occasioned by the delay in receiving wages due caused by the employer’s violation of the FLSA”). Congress provided for liquidated damages because it recognized that those protected by federal wage and hour laws would have the most difficulty maintaining a minimum standard of living without receiving minimum and overtime wages and thus “that double payment must be made in the event of delay in order to insure restoration of the worker to that minimum standard of well-being.” See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 (1945).

Following Hoffman, “[c]ourts have distinguished between awards of post-termination back pay for work not actually performed and awards of unpaid wages pursuant to the Fair Labor Standards Act (‘FLSA’).” Zeng Liu v. Donna Karan Intern., Inc., 207 F.Supp.2d 191, 192 (S.D.N.Y.2002); see also Widjaja v. Kang Yue USA Corp., 2010 WL 2132068, *1 (E.D.N.Y.2010). In Flores v. Amigon, 233 F.Supp.2d 462 (E.D.N.Y.2002), the court held that Hoffman did not apply to FLSA cases in which workers sought pay for work actually performed, and that, “enforcing the FLSA’s provisions requiring employers to pay proper wages to undocumented aliens when the work has been performed actually furthers the goal of the IRCA” because if the FLSA did not apply to undocumented aliens, employers would have a greater incentive to hire illegal aliens with the knowledge that they could not be sued for violating minimum wage requirements. While the interest in deterring employers from knowingly hiring undocumented workers in order to avoid lawsuits for wage violations does not apply when an employee uses false documents to successfully deceive an unknowing employer who attempted to comply with immigration law, the interest in deterrence does apply when the employer had reason to suspect or knew that the employee was not authorized to work in the United States but hired him anyway, colluding in the use of false documents. The record here is silent as to whether Defendants were successfully deceived as to Plaintiff’s authorization to work or instead knew or suspected that his documents were falsified.

Unlike the backpay for hours not worked at issue in Hoffman, here the liquidated damages are a form of compensation for time worked that cannot otherwise be calculated. See also Singh v. Jutla & C.D. & R’s Oil, Inc., 214 F.Supp.2d 1056 (N.D Cal.2002) (Breyer, J.) (stating that Hoffman did not address remedies of compensatory and punitive damages, and holding that undocumented employee could proceed with FLSA retaliation claim); Galdames v. N & D Investment Corp., 2008 WL 4372889 (S.D.Fla. Sept. 24, 2008) (finding that Hoffman did not overrule previous rule that an “undocumented worked may bring claims for unpaid wages and liquidated damages” for work already performed); Renteria v. Italia Foods, Inc., 2003 WL 21995190, *5-6 (N.D.Ill.2003) (striking FLSA backpay and frontpay claims in light of Hoffman /IRCA, but allowing claim for compensatory damages).

While none of the cases cited above involve an employee who affirmatively presented false documents, as opposed to simply being undocumented, Hoffman did not preclude compensatory damages for time already worked on the basis that the employee presented false documents. While the Hoffman Court was certainly concerned about the fact that the plaintiff had criminally violated IRCA by presenting false documents and was therefore never authorized to work in the United States, it also focused on the facts that: (1) the plaintiff had not actually performed the work for which he was seeking backpay, (2) he was only entitled to the backpay award by remaining in the country illegally, and (3) he could not mitigate damages as required without triggering further a IRCA violation. Here, by contrast, no further employment by Plaintiff is at issue as he only seeks compensation for work performed before his termination by Defendants and the issue of mitigating damages is not present, unlike in Hoffman. Further, as the Hoffman Court held, the NLRB’s other “ ‘traditional remedies’ [were] sufficient to effectuate national labor policy regardless of whether the ‘spur and catalyst’ of backpay accompanies them.” In contrast, FLSA liquidated damages are not a “spur and catalyst,” but instead numerous courts have found that they are intended as compensation for unpaid wages already earned but too difficult to calculate. Therefore, Defendants’ Motion is DENIED on this issue.”

Click Ulin v. Lovell’s Antique Gallery to read the entire opinion.

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E.D.N.Y.: Defendant Not Entitled To Discovery Of FLSA Plaintiff’s Immigration Status

Widjaja v. Kang Yue USA Corp.

This case was before the Court, in part, on defendants motion to compel discovery of plaintiffs’ immigration status.  Joining the majority of Courts to have ruled on such motions, the Court denied defendants’ Motion.

Defendants asserted two reasons to discover the immigration status of the plaintiffs for two reasons.  First, they claimed the plaintiffs’ status in this country was relevant to plaintiffs’ credibility, arguing that if plaintiffs entered the country illegally then they are more likely to make false claims regarding hours worked.  Second, defendants argued that if it is discovered that plaintiffs are illegal immigrants, then they would not be entitled to back pay for future loss of earnings since they would not be permitted to work under the Immigration Reform and Control Act of 1986 (“IRCA”). See Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002) (holding that the IRCA prevents the NLRB from awarding backpay to an illegal alien for work not performed).

Rejecting both claimed bases for defendants’ position, the Court explained:

Rule 26 of the Federal Rules of Civil Procedure allows discovery of all relevant non-privileged matters. Fed.R.Civ.P. 26. A plaintiff’s immigration status is not normally discoverable. Rengifo v. Erevos Enterprises, Inc., No. 06 CV 4266, 2007 WL 894376 at *1 (S.D.N.Y. March 20, 2007). “[D]iscovery of such information would have an intimidating effect on an employee’s willingness to assert his workplace rights.” Id.

The Court rejects plaintiffs’ first argument that plaintiffs’ immigration status is relevant to their credibility. “While it is true that credibility is always at issue, that does not by itself warrant unlimited inquiry into the subject of immigration status….” Id. at *3. “[T]he opportunity to test the credibility of a party … does not outweigh the chilling effect that disclosure of immigration status has on employees seeking to enforce their rights.” Id. See also E.E.O.C. v. First Wireless Group, Inc., No. 03 CV 4490, 2007 WL 586720 (E.D.N.Y. Feb. 20, 2007) (finding immigration status not relevant to credibility); Avila-Blue v. Casa De Cambio Delgado Inc., 236 F.R.D. 190 (S.D.N.Y.2006) (same).

Defendants’ second argument is that plaintiffs’ immigration status may be relevant to damages, relying on the Supreme Court’s holding that the IRCA prevents the NLRB from awarding backpay to an illegal alien for work not performed. Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271. However, on the issue of damages, “[c]ourts have distinguished between awards of post-termination back pay for work not actually performed and awards of unpaid wages pursuant to the Fair Labor Standards Act (“FLSA”).” Zeng Liu v. Donna Karan Intern., Inc., 207 F.Supp.2d 191, 192 (S.D.N.Y.2002). In Flores v. Amigon, 233 F.Supp.2d 462 (E.D.N.Y.2002), the court stated that Hoffman Plastic Compounds, Inc. v. NLRB does not apply to FLSA cases in which workers are seeking pay for work actually performed. The court in Flores stated that, “enforcing the FLSA’s provisions requiring employers to pay proper wages to undocumented aliens when the work has been performed actually furthers the goal of the IRCA” because if the FLSA did not apply to undocumented aliens, employers would have a greater incentive to hire illegal aliens with the knowledge that they could not be sued for violating minimum wage requirements. Flores v. Amigon, 233 F.Supp.2d at 464See also Sandoval v. Rizzuti Farms, Ltd., No. 07 CV 3076, 2009 WL 2058145, at *2 (E.D.Wash. July 15, 2009) (holding that immigration status is not discoverable and Hoffman does not apply). But see Avila-Blue v. Casa De Carnbio Delgado Inc., 236 F.R.D. at 192 (finding that “the issue of immigration status may be relevant to damages insofar as it may limit the availability of certain forms of damages” and allowing the issue to be reopened at a later stage of the proceeding).”

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D.Md.: Defendant Not Entitled To Offset For Room and Board Or Meals, Due To Failure to Provide Documentation Of Costs To Plaintiff During Employment and Lack Of Agreement Regarding Same

Epps v. Way of Hope, Inc.

This case was before the Court on Plaintiff’s Motion for Summary Judgment.  Plaintiff was employed by defendants as a “care provider” at defendants’ facility, where she prepared meals, cleaned, did laundry, and assisted facility residents with personal care, hygiene, and medication.  Her duties also included night care of residents, including changing sheets, monitoring residents walking the halls, and personal hygiene.  Plaintiff alleged that, while she worked seven days per week, without weekend breaks, and that “it was not uncommon for [her] to work far in excess of 40 hours per week.”  She alleges that defendants did not pay her for all hours worked and did not pay her minimum wage.  She further alleged that defendants did not direct her to record her hours.  Among other things, as discussed here, Defendant responded that they provided plaintiff with room and board, and contended that plaintiff was aware that her receipt of room and board would constitute a portion of her wages, such that the provision of same should constitute an offset to any wages found due and owing.  The Court rejected this argument, as discussed below.

Rejecting Defendant’s argument regarding offset, the Court stated:

“Plaintiff seeks summary judgment on two related issues: (1) whether defendants took “impermissible” deductions from plaintiff’s wages; and (2) whether the claimed deductions can offset or reduce the amount of wages owed to plaintiff.

Under the FLSA and Maryland Wage and Hour Law (MWHL), an employer must compensate employees for all hours worked at a rate not less than the federal minimum wage, and at least one and one half the regular rate of pay for each hour worked over 40 in one workweek. 29 U.S.C. § 207(a)(1); MD.CODE ANN., LAB. & EMPL.¤ §§ 3-415(A), 3-420(A). WHILE “WAGES” MAY INCLUDE BOTH ACTUAL PAID WAGES AND “THE REASONABLE COST … TO THE EMPLOYER OF FURNISHING SUCH EMPLOYEE WITH BOARD, LODGING, OR OTHER FACILITIES, IF SUCH BOARD, LODGING, OR OTHER FACILITIES ARE CUSTOMARILY FURNISHED BY SUCH EMPLOYER TO HIS EMPLOYEE,” 29 U.S.C. § 203(B), THE EMPLOYER MUST MAINTAIN AND PRESERVE RECORDS SUBSTANTIATING THIS COST ON A WORKWEEK BASIS. 29 C.F.R. § 516.27(A)-(B); Md.Code. Ann., Lab. & Empl. § 3-503. FURTHERMORE, AN EMPLOYER MUST RECEIVE WRITTEN AUTHORIZATION FROM THE EMPLOYEE BEFORE COMPENSATING THE EMPLOYEE IN PART BY PROVIDING BOARD AND LODGING. MD. CODE ANN., LAB. & EMPL. § 3-503. FAILURE TO MAINTAIN SUCH DOCUMENTATION IS FATAL TO AN EMPLOYER’S ATTEMPT TO COUNT ROOM AND BOARD AS WAGES PAID TO AN EMPLOYEE.   JONES V. WAY OF HOPE, INC., 2009 WL 3756843, CIV. NO. 07-1517-BEL *3 (D.MD. NOV. 6, 2009); MARROQUIN V. CANALES, 505 F.SUPP.2D 283, 292-93 (D.MD.2007).

Although defendants claim in their opposition to the Motion for Summary Judgment that they “furnished records to show the cost of meals, lodging and other facilities supplied to the Plaintiff” (Paper No. 22, 5), it is undisputed that defendants did not provide plaintiff with documentation showing deductions from her wages for room and board during the course of her employment. (Paper No. 1, 5; Paper No. 4, 2; Paper No. 25, 4-5). It is also undisputed that plaintiff “never signed a document authorizing Defendants to take deductions for room and board from her wages.” (Paper No. 1, 5; Paper No. 4, 2). Defendants suggest that plaintiff’s awareness and acceptance of board and lodging entitled defendants to deduct the value of board and lodging from her pay. (Paper No. 22, 5-6). However, the FLSA’s protections are construed strictly, and defendants’ failure to obtain written authorization from plaintiff or to maintain documentation showing deductions from her wages for room and board precludes them from counting room and board within the wages paid to plaintiff. See, e.g., Marroquin, 505 F.Supp.2d. at 292-93 (collecting authority supporting the proposition that an employer is not entitled to offset wages by lodging or board when it fails to maintain and preserve requisite documentation); Jones, 2009 WL 3756843 at *3 (“The failure to document the amount, the failure to obtain [ ] written authorization from Jones, and the failure to include detailed documentation on the amount of room and board all preclude the Defendants from counting room and board within the wages paid to [Plaintiff].”).

For the reasons set forth herein, the Court hereby GRANTS partial summary judgment in favor of plaintiff on the issue of “offsetting” of wages owed to plaintiff, and specifically rules that, as a matter of law, defendants cannot use room and board provided by them to plaintiff to offset the wages owed to plaintiff under the FLSA and MWHL because they failed to obtain plaintiff’s written authorization for such deductions and failed to maintain requisite documentation of deductions.”

Click here to read the entire opinion Epps v. Way of Hope, Inc.

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

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

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

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

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

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

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

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

BARKETT, Circuit Judge, dissenting:

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

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

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

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

WILSON, Circuit Judge, dissenting:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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11th Cir.: Receipt And Signing WH-58 Form And Cashing Of The Employer’s Check Is Sufficient To Effect A Waiver Of Right To Sue Under FLSA

Blackwell v. United Drywall Supply

Plaintiffs were employed by Defendants.  In September 2007, they sued Defendants pursuant to the Fair Labor Standards Act (FLSA).  Plaintiffs alleged that, from 2002 forward, Defendants intentionally violated the Act by failing to pay them properly for overtime.  Plaintiffs further alleged that, in 2007, “as a result of an investigation by the United States Department of Labor involving allegations of the improper payment of overtime compensation to its laborer employees, [United Drywall] made payments to various employees for past due overtime compensation.”  Plaintiffs alleged that Defendants retaliated against Williams for his complaints to the Department of Labor regarding overtime violations.  And, Plaintiffs alleged that the payments made as part of the Department of Labor supervised settlement were “far lower than what the employees were legally due.”  They sought allegedly unpaid overtime compensation for three years before the filing of the complaint and attorney’s fees and expenses pursuant to § 216 of the Act.  The Court below granted Defendants’ Motion for Summary Judgment holding that Plaintiffs’ signing of the DOL WH-58 form and cashing of settlement checks was a valid waiver of their FLSA rights.  On appeal, the Eleventh Circuit affirmed.

Framing the issue before it, the Court explained, “Defendants moved for summary judgment, arguing, among other things: (1) that Plaintiffs had waived their right to sue under the Act when they cashed checks from United Drywall pursuant to the 2007 settlement between the parties supervised by the Department of Labor, and (2) that Plaintiffs are exempt employees under the Motor Carrier Exemption in the Act (“the Exemption”) and therefore are not entitled to back pay pursuant to the Act. Plaintiffs opposed the motion, arguing that there were genuine issues of fact regarding whether they had knowingly waived their rights to sue and whether the Exemption applied.  After considering arguments and evidence from both sides, the district court granted Defendants’ motion for summary judgment. The court held that, because Plaintiffs had received Department of Labor form WH-58 (which contained a statement that if Plaintiffs accepted the back wages provided in conjunction with the form, they would give up their rights to bring suit under the Act) and because Plaintiffs had cashed the checks provided in conjunction with the WH-58 forms, Plaintiffs had waived their rights to sue Defendants for the payments they sought under the Act.  The court entered judgment for Defendants.  Plaintiffs appeal the judgment.”

Addressing and denying Plaintiffs’ appeal, the Court reasoned, “Plaintiffs argue that the district court erred in finding waiver because Plaintiffs did not knowingly and intentionally waive their rights to sue. They argue that the WH-58 form provided to them by the Department of Labor is ambiguous and did not put them on notice that, by cashing the checks, they would waive their rights to sue for additional back pay. Defendants argue that the district court correctly found waiver and that the judgment can be supported on the additional ground that the Exemption applies to bar Plaintiffs’ claims. In their reply brief, Plaintiffs respond that affirmance of the judgment based on the Exemption would not be proper because the Exemption is not applicable to Defendants’ business as a matter of law or, in the alternative, there are genuine issues of material fact regarding the application of the Exemption.

We affirm the judgment. We find no error in the district court’s holding “that receipt of a WH-58 form and cashing of the employer’s check is sufficient to effect a waiver of the right to sue under the FLSA.”  There is no dispute that Plaintiffs received WH-58 forms in connection with the checks written by United Drywall and given to Plaintiffs by the Department of Labor as part of the supervised settlement between United Drywall and its employees. Those forms are receipts for payment of “unpaid wages, employment benefits, or other compensation due … for the period up to and including 05/20/2007 … under … The Fair Labor Standards Act….” They contain this language:

NOTICE TO EMPLOYEE UNDER THE FAIR LABOR STANDARDS ACT-Your acceptance of back wages due under the Fair Labor Standards Act means that you have given up any right you may have to bring suit for back wages under Section 16(b) of that Act.     ( Id.)

The WH-58 forms then proceed to describe the types of recovery and statutes of limitations under § 16(b) of the Act. We agree with the district court that these forms unambiguously informed Plaintiffs that, if they cashed the checks provided with the forms, they would be waiving their rights to sue for back pay. And, there is no dispute that Plaintiffs cashed the checks. Therefore, the district court correctly determined that ‘both Plaintiffs have waived their right to sue.  Affirming the judgment on waiver grounds, we do not address the parties’ arguments regarding application of the Exemption.’ “

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Filed under Affirmative Defenses, Department of Labor, Settlements

E.D.Tex.: Where Class Consists Of Over 1000 Plaintiffs, Court Limits Discovery To 91 Randomly Chosen Representative “Discovery Plaintiffs”

Nelson v. American Standard, Inc.

Before the Court is Plaintiffs’ motion for entry of limited discovery order, filed in support of Plaintiffs’ proposal contained in the Joint Motion for Entry of Discovery and Case Management Plan and Scheduling Order.  Although the parties largely agreed on the extent of discovery to be conducted, Plaintiffs sought an Order limiting such discovery a representative sampling of 91 “discovery Plaintiffs,” while Defendants claimed they should be entitled to seek discovery from every individual class member.  Agreeing with Plaintiffs, the Court pared discovery down to the 91 representative Plaintiffs.

The Court described the dispute as follows:

“[The parties] have agreed to the scope of oral discovery and to a schedule governing the deadlines in this case. The parties have also agreed that they will select individual case participants as “Discovery Plaintiffs” as a representative sample from all of the individuals who are named plaintiffs or who have opted into the litigation. The “Discovery Plaintiffs” are to be selected as follows: (1) three Named Plaintiffs (Nelson, Gross, and Dewberry); (2) 19 individuals who submitted declarations in support of the Motion for Notice; and (3) 84 opt-ins selected at random by the parties from the 1,328 individuals in the consolidated case, with a specified number of opt-ins for each location.  The fundamental disagreement which remains to be resolved by the Court is the scope of written discovery. The central disagreement is that Plaintiffs seek to limit written discovery to the Discovery Plaintiffs who may be used at trial while Defendant seeks to allow written discovery to be issued to the entire class of 1,328 opt-in plaintiffs in some capacity. In the joint motion, both sides present their proposals on how written discovery should be conducted. In support of Plaintiffs’ proposal contained in the joint motion for discovery order, Plaintiffs’ also filed a motion for entry of limited discovery order. (Dkt. No. 110.) Plaintiffs seek to limit both written and oral discovery of class members to the agreed upon group of 91 Discovery Plaintiffs rather than to require all 1,328 participants to be subjected to written discovery and disclosures. Defendant seeks individualized written discovery for all opt-in plaintiffs.”

Citing other courts that have reached the same conclusion, the Court ordered representative discovery, rather than individualized discovery, stating:

“The Eastern District of Texas, and specifically this Court, is one of many jurisdictions that has ordered limited, representative discovery of the named plaintiffs and opt-in plaintiffs in FLSA actions. Schiff et al. v. Racetrac Petroleum, Inc., 2:03-cv-402-TJW, Dkt. No. 111 (E.D. Tex. June 8, 2005) (limiting discovery to a random sample of 35 opt-in plaintiffs). Numerous other courts also have found that individualized discovery is generally not appropriate in FLSA collective actions and should be limited to a representative sample of the entire group. See Smith v. Lowes Home Ctrs., 236 F.R.D. 354, 356-58 (S.D.Ohio 2006) (denying defendant’s request for individualized discovery of more than 1,500 opt-ins and instead ordering a representative sample of 90 randomly selected individuals from the opt-in plaintiffs); Cranney v. Carriage Services, Inc., 2008 WL 2457912 at *3-5 (D.Nev. June 16, 2008) (limiting individualized discovery to 10% of a relevant combination of workers and work sites for the opt-in plaintiffs). The Court finds that limiting discovery in a FLSA action to a relevant sample minimizes the burden imposed on the plaintiffs “while affording the defendant a reasonable opportunity to explore, discover and establish an evidentiary basis for its defenses.” Smith, 236 F.R.D. at 357-58. Further, the Court finds that there is no due process violation to Defendant in limiting written discovery to the Discovery Plaintiffs.

In this case “representative” discovery refers not only to the named plaintiffs but to a sample of 91 largely randomly selected individuals that the parties have agreed to designate as “Discovery Plaintiffs.” The Court finds that there is no reason that all defenses and alleged differences among class members cannot be ascertained and articulated based on the results of full discovery for the “Discovery Plaintiffs.” If the discovery shows defenses and differences for these individuals, Defendant Trane will be able to make its case for decertification or summary judgment. The fundamental precept of statistics and sampling is that meaningful differences among class members can be determined from a sampling of individuals. The Court finds that the agreed upon group of “Discovery Plaintiffs” is a statistically acceptable representative sample of the entire group of opt-in Plaintiffs. Defendant Trane has not shown that the representative sample needs expanding to all class members for discovery purposes. However, if after conducting the discovery of the representative sample Defendant Trane can demonstrate to the Court that broader discovery is appropriate and necessary, the Defendant can so move.

III. CONCLUSION

Accordingly, it is ORDERED that written discovery in this case be limited to the named plaintiffs and the 91 opt-in plaintiffs who the parties have agreed to designate as Discovery Plaintiffs. A concurrent order will be entered that adopts the parties’ joint proposal for discovery and case management plan and adopts the Plaintiffs’ proposal on written discovery, consistent with this order. Thus, Plaintiffs’ Motion (Dkt. No. 110) is hereby GRANTED.”

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Filed under Collective Actions, Discovery