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9th Cir.: District Court Properly Limited Employer’s Communications With Putative Collective Members Regarding Lawsuit After Employer Misleadingly Sought Releases/Arbitration Agreements Post-Suit
Dominguez v. Better Mortgage Corporation
In an appeal addressing issues which frequently confront district courts when managing FLSA collective action and prospective opt-ins to such cases, the Ninth U.S. Circuit Court of Appeals recently affirmed a district court’s order imposing restrictions on the employer-defendant’s communications with its current employees regarding the claims in the lawsuit.
The issue arose after Lorenzo Dominguez, a former underwriter for Better Mortgage Corporation, filed a putative collective/class action in which he alleged that the company violated federal and state wage and hour laws, primarily because it failed to pay Dominguez and its other underwriters overtime.
Just days after Dominguez sued, the New York-based company offered workers $10,000 to sign a retention agreement that required them to agree to an updated at-will employment agreement with a new arbitration provision that would cover Dominguez’s claims, in order to continue their employment. Better Mortgage also offered workers a release agreement that indicated they were being paid $5,000 to release their claims in the Dominguez lawsuit, according to court documents. All three agreements included a warning in bold that said “Do Not Share This Email.”
Dominguez filed a motion asking the district court to invalidate both the release agreements and the new employment agreements, arguing that Better Mortgage’s ability to communicate with putative class and collective action members without court approval should be restricted. Better Mortgage argued that such restrictions were improper and would impermissibly restrain its First Amendment rights.
The district court agreed with Dominguez, and held that Better Mortgage obtained signatures on the new employment agreements and release agreements through coercion and misleading information. As such, it invalidated the agreements.
The court also required Better Mortgage to send a court-approved curative notice to the underwriters and prohibited the company from communicating with putative class members except in writing as approved by the court.
Better Mortgage appealed.
The Ninth Circuit affirmed the restriction on communications, finding it both justified and narrowly tailored to the situation.
Citing longstanding FLSA jurisprudence the Ninth Circuit explained:
The Supreme Court recognizes that district courts have the duty and the power to oversee communications from both defendants and class counsel with potential class members and FLSA collective action participants, but also that this power must be exercised cautiously”.
Here, the district court exercised the appropriate caution, the court found:
The district court’s detailed order shows a careful analysis of the prior communications and how those communications affected the employees’ understanding of their options in this pending lawsuit,” the court explained. “The misleading and coercive nature of these efforts was clear.”
The court reasoned that the restriction on communications was substantiated because, the district court “paid attention to the timing of the messages, to how the different messages presented inconsistent and thus confusing information, and to missing content that could have helped employees better evaluate their options.”
Better Mortgage argued that the restriction was too broad. Specifically, it argued that the restriction should have been narrowed to permit it to discuss wage and hours matters with employees and obtain factual information to defend itself in the litigation. Citing this argument, the Ninth Circuit said it demonstrated that–in the absence of the restriction–Better Mortgage intended to continue communicating with current employees in ways related to the lawsuit.
Thus, the Ninth Circuit held the district court acted within its discretion in finding that narrowing the restriction would have allowed Better Mortgage to circumvent the order.
As such the panel affirmed the district court’s order restricting communications between Better Mortgage and current employees regarding wage and hour issues to written communications, which had to be approved by the district court before transmitted.
Click Dominguez v. Better Mortgage Corporation to read the entire opinion, including the dissent.
11th Cir.: Nanny Who Worked Overnight Shifts Not Domestic Live-In Employee and Thus Overtime Eligible
In a reported decision issued on Wednesday, the 11th Circuit reversed the trial court seemingly applying clear law that a nanny who did not reside on her premises with the family whose children she took care of, and held that such an arrangement was not live-in domestic employment. As such, the court reversed the decision of the trial court, which had held that the nanny was exempt from the FLSA’s overtime provisions as a live-in domestic employee. In so doing, the court adopted much of the argument raised by the DOL in its amicus brief in the case. However, the 11th Circuit remanded for further findings regarding whether the parents of the nanny’s charges were here employer, finding that issues of fact precluded a finding on that issue.
Addressing the principal issue of whether the plaintiff was a “domestic” or not, the court found the issue to be clear-cut: “No doubt Blanco worked at the house and spent significant time there. But that alone does not mean she ‘resided’ there any more than firefighters who sleep in fire-station dormitories while on duty reside at a fire station,” the panel said.
The court further noted that the plaintiff’s job was “hardly a typical arrangement” of a live-in nanny.
The panel noted that while the plaintiff did sleep, at times, when she was on duty to take care of the children, the place she slept was not her own, as she shared the bed she slept in with other nannies, and the room in which she slept with 2 of the couple’s smallest children. Further, the court noted that if/when a child woke up in and/or cried in the middle of the night, she would “immediately respond”. Thus, “though Blanco may have slept sometimes while the children slept, her time was not hers,” the panel said.
The panel also noted as significant that the plaintiff lacked her own key to the house, adding that the mere fact that she had left personal belongings at the residence and some religious decorations, and occasionally had guests over didn’t make the house her own. Likewise, the court noted that the plaintiff maintained her own separate residence and paid rent to live in her aunt’s nearby apartment, where she typically returned at the end of her shifts, so that she could sleep in her own bed.
The court also rejected the defendant-parents’ argument that Blanco would be overtime-exempt under a 2013 U.S. Department of Labor rule that aimed at expanding FLSA protections. While the language of the preamble to the rule seemed to signal that five consecutive nights is the appropriate measuring stick to determine whether a nanny lived at someone’s residence, the court noted that such language was contained in the preamble to the rule and not the text of the actual rule’s text, and thus not a proper source of interpretive guidance.
The court also noted that the defendant-parents’ arguments regarding application of the rule/preamble ignored the context in which the five consecutive nights phrase is included, reasoning that such argument failed to consider the plaintiff’s four off-duty days that preceded the five days on-duty.
As such, the court concluded that the plaintiff was not an exempt domestic service employee as a matter of law. However, the court held that issues of fact regarding application of the “economic realities” test to plaintiff’s employment, required further findings by the trial court as to whether the defendant-parents were plaintiff’s employers under the FLSA.
Among the factual issues the court cited were the fact that: (1) one defendant testified she didn’t give any directions to the nannies on how to care for her children or control or supervise the plaintiff; (2) the defendants’ testimony that they didn’t know how much the nannies received in wages, as the mother testified that she paid about $2,400 per week to Amazing Gracie LLC, one of the two companies the parents used to hire the nannies that was managed by one of the nannies who worked for the family; and (3) the defendant-mother’s testimony that she didn’t know how plaintiff had started working for the family. In light of these factual issues, the court held that the defendants presented enough evidence to show that “they had minimal oversight over the nannies’ care for their children” and thus there remained a question of fact as to whether they were the plaintiff’s employer, upon application of the “economic realities” test.
Click Blanco v. Anand Samuel to read the entire opinion.
Click DOL Amicus to read the DOL’s amicus brief.
DOL Seeks to Raise Salary Threshold for White Collar Exemption to Overtime
On August 30, 2023, the U.S. Department of Labor (DOL) released a Notice of Proposed Rulemaking (NPRM) that would significantly raise the minimum weekly salary to qualify for one of the Fair Labor Standards Act’s (FLSA) three white-collar exemptions. If the changes go into effect, they would have a significant impact on how employers pay their employees and who is or is not entitled to overtime pay.
Specifically, the DOL proposes raising the weekly salary by over 50 percent from $684 per week to $1,059 per week (which is the equivalent to an annual salary of $55,068). The DOL also seeks to increase the annualized salary threshold for the exemption for “highly compensated employees” (HCE) from $107,432 per year to $143,988 per year. Finally, the DOL proposes automatically updating these earnings thresholds every three years.
The Proposed Rule
According to the DOL’s press release, the proposed rule seeks to accomplish four (4) primary goals:
- Restore and extend overtime protections to low-paid salaried workers. Many low-paid salaried employees work side-by-side with hourly employees, doing the same tasks and often working over 40 hours a week. Because of outdated and out-of-sync rules, however, the DOL believes these low-paid salaried workers are not getting paid time-and-one-half for hours worked over 40 in a week. The DOL’s proposed salary increase would help ensure that more of these low-paid salaried workers receive overtime protections traditionally provided by the DOL’s rules.
- Give valuable time back to workers who are not exempt under the executive, administrative or professional exempt classifications. By better identifying which employees are executive, administrative or professional employees who should be overtime exempt, the proposed rule will better ensure that those who are not exempt will gain more time with their families or receive additional compensation when working more than 40 hours a week.
- Prevent a future erosion of overtime protections and ensure greater predictability. The rule proposes automatically updating the salary threshold every three years to reflect current earnings data.
- Restore overtime protections for US territories. From 2004 until 2019, the DOL’s regulations ensured that for US territories where the federal minimum wage was applicable, so too was the overtime salary threshold. The DOL’s proposed rule would return to that practice and ensure that workers in the US territories subject to the federal minimum wage have the same overtime protections as other US workers.
The DOL further stated in the FAQs that “[a]utomatically updating the salary level and HCE total annual compensation requirement using the most recent data will ensure that these tests continue to accurately reflect current economic conditions.” The FAQs further noted that the proposed rule includes a provision that would allow “the Department to temporarily delay a scheduled automatic update where unforeseen economic or other conditions warrant.”
As with the most recent 2019 rule, which increased the salary and total annual compensation requirements for the EAP and HCE exemptions, the DOL has not proposed any changes to the duties tests, which outline the types of primary duties an employee must perform in order to be classified as exempt (in addition to receipt of a salary at or above the threshold).
Read more about the NPRM in the DOL’s official press release.
Supreme Court Confirms That a Day Rate is Not a Salary
Helix Energy Solutions Group Inc. v. Hewitt
In a widely anticipated opinion, on February 22, 2023, the Supreme Court of the United States ruled that an employee who was paid a daily rate more than $684 per day, who received a total of more than $200,000 per year, was not paid on a “salary basis” as required for application of the highly-compensated employee (HCE) exemption. As such, the court held that he was entitled to overtime pay under the Fair Labor Standards Act (FLSA) notwithstanding his high total annual earnings.
The ruling will have wide-ranging implications the oil and gas industry, the nursing field, and other industries which often rely on “day rate only” pay schemes and pay schemes which pay high hourly rates (but no overtime) to attract workers to remote locations, often on short notice.
Relevant Facts
The case concerned an employee who alleged he had been misclassified as exempt from the FLSA’s overtime provisions, and improperly denied overtime premium compensation. He worked twenty-eight day “hitches” on an offshore oil rig where he would work daily twelve-hour shifts, often seven days per week, totaling 84 hours a week. Throughout his employment, the plaintiff was on a daily-rate basis, without overtime compensation, earning between $963 and $1,341 per day, an amount that equated with more than $200,000 annually.
Helix had argued that the plaintiff fell under the DOL’s exemption for highly compensated employees found in 29 C.F.R. §541.601. At the time of the toolpusher’s employment, the highly compensated employee (HCE) exemption applied to employees whose primary duties included performing office or non-manual work; who customarily and regularly performed at least one duty of an exempt executive, administrative, or professional employee; and who were paid at least $455 per week on a “salary or fee basis”; and who earned at least $100,000 annually. (Currently, the threshold salary and total compensation amounts are $684 per week and $107,432 annually, respectively.)
Opinion of the Court
In its decision, the high court stated that the “critical question” in this case was whether the plaintiff was paid on a “salary basis” pursuant to 29 C.F.R. §541.602(a). That regulation states that an employee is paid on a “salary basis” when the “employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation.”
Helix had argued that in any week in which the employee performed any work, he was guaranteed to receive an amount above the $455 weekly threshold, such that his compensation met the requirements of the salary basis test.
The court rejected this argument, holding that §541.602(a) “applies solely to employees paid by the week (or longer)” and the test is “not met when an employer pays an employee by the day.” The court noted that a companion regulation, 29 C.F.R. §541.604(b), allows an employee’s earnings to be computed on an hourly, daily, or shift basis without violating the salary basis requirement, that regulation states that the arrangement must include a guarantee of at least the minimum weekly required amount paid on a salary basis and that there be a reasonable relationship between the guaranteed amount and the amount actually earned. However, the parties in this case agreed that the plaintiff’s compensation failed the reasonable relationship test, such that the sole issue was whether his admitted day rates qualified as a “salary basis” within the meaning of §541.602(a).
Writing for the court, Justice Elena Kagan stated that “[i]n demanding that an employee receive a fixed amount for a week no matter how many days he has worked, §602(a) embodies the standard meaning of the word ‘salary’” which generally refers to a “steady and predictable stream of pay.” Justice Kagan stated that even a “high-earning employee” who is compensated on a “daily rate—so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on” is “not paid on a salary basis, and thus entitled to overtime pay.”
Key Takeaway
The court’s decision will likely have wide-ranging impact. Employers have long-argued that the FLSA was not intended to protect highly-compensated employees, notwithstanding the unambiguous language of the statute itself and the DOL’s regulations. The majority squarely rejected this reasoning, adopting a typically conservative textualist approach and holding that the regulations mean precisely what they say and must be strictly construed to protect employees, both low-wage and higher-wage.
Click Helix Energy Solutions Group Inc. v. Hewitt to read the entire opinion of the court and the dissents.
9th Cir.: LA County Was Joint Employer of Home Healthcare Workers, Liable Under the FLSA
Ray v. Los Angeles County Department of Public Social Services
In a recent published opinion, the Ninth Circuit held that Los Angeles County is a joint employer of state-provided home health care aides and is liable for alleged failures to pay those aides sufficient overtime wages, the Ninth Circuit held Friday. The opinion partially reversed the lower court’s which held that the County was not jointly for the wage violations alleged.
The case arose from California’s In-Home Supportive Services program, a publicly-funded initiative under which the state and counties pay the wages of certain in-home care providers who assist low-income elderly, blind and disabled residents. In 2017, IHSS provider Trina Ray sued both the California Department of Social Services and the LA County Department of Public Social Services, alleging that the governments jointly employed her and failed to pay time and a half overtime premiums.
The district court granted LA County summary judgment, largely relying on the fact that the county had no hand in issuing paychecks to IHSS workers. Rejecting the reasoning of the lower court, the Ninth Circuit held that the county still had sufficient economic control over the program, noting that counties provide 35% of the program’s budget, and counties are able to negotiate for higher-than-minimum wages for home care workers among other things.
Thus, the panel held that counties were joint employers alongside the state under existing Ninth Circuit precedent, reasoning.
However, the panel split on whether the state-level centralization of the IHSS program’s payroll system meant that the county’s FLSA violations were willful. The majority concluded that the state’s ultimate control of pay processes meant counties had no ability to provide overtime pay without authorization.
Writing in partial dissent, U.S. Circuit Judge Marsha Berzon disagreed with the majority’s finding that the county’s FLSA violations were in good faith. Regardless of whether the county or state ordinarily handled payroll, Judge Berzon said that joint employers were individually and jointly responsible for ensuring compliance with the FLSA under Bonnette, prior Ninth Circuit precedent.
“Allowing joint employers to avoid liability for violations of the FLSA by showing they ordinarily did not perform a particular employer function would risk undermining the statute’s remedial purposes,” Judge Berzon said.
It would appear that the dissent is correct in that FLSA, does not permit a finding of “good faith” simply in reliance on or because a joint employer was more actively responsible for the unpaid wages. Rather, well-settled law requires an employer to demonstrate affirmative steps that it undertook to ascertain and comply with the FLSA’s requirements, which appear to be lacking here.
Click Ray v. Los Angeles County Department of Public Social Services to read the entire Opinion.
Click Nurse Wages to learn more about wage and hour rights of home health aides (HHAs), certified nurse assistants (CNAs), licensed nurse practitioners (LPNs) and registered nurses (RNs).
7th Cir.: Truck Driver Adequately Alleged He Was Misclassified as an Independent Contractor and Thus Entitled to Minimum Wage and Overtime
Brant v. Schneider National, Inc.
In this case, a truck owner-operator who contracted with an over the road hauling company contended that he was misclassified as an independent contractor, and thus entitled to overtime pay and minimum wages under the Fair Labor Standards Act (FLSA) and Wisconsin law (minimum wage). In addition, the plaintiff alleged that the contracts he signed with the defendant were unconscionable and thus defendant was unjustly enriched because it required him to bear overhead costs that should have been borne by defendant. Finally, plaintiff alleged that defendant violated the Truth in Leasing regulations, based on representations it made to him.
After the district court dismissed the case with leave to amend, the plaintiff amended his complaint, and the defendant moved to dismiss the amended complaint. The lower court again dismissed the complaint, but the second time with prejudice, and held that plaintiff’s claims were essentially barred by the very agreements he was challenging the legality of. On appeal, the Seventh Circuit reversed, noting that employee status is determined by application of the “economic reality” test and thus, reaffirmed the longstanding black letter law that FLSA rights may not abridged by contract.
While Schneider argued that this agreement established that the driver had a high degree of control over his work and that Schneider had therefore properly classified him as an independent contractor, the plaintiff argued that under the controlling test–the economic reality test–he was Schneider’s employee.
Under the FLSA, workers are employees when “as a matter of economic reality, [they] are dependent upon the business to which they render service.” As the Seventh Circuit noted, the economic reality test includes analyzing: (1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; and (6) the extent to which the service rendered is an integral part of the alleged employer’s business.
In reversing dismissal of the driver’s minimum wage claims, the Seventh Circuit concluded that the district court had “erred by giving decisive effect to the terms of [its] contracts,” when “what matters is the economic reality of the working relationship, not necessarily the terms of a written contract.”
For instance, while the operating agreement gave the driver the ability to choose the route and schedule to follow when delivering a shipment, the driver alleged that “the economics of his work constrained his route selection, so his nominal freedom to choose a route did not determine whether he controlled his labor.”
Similarly, while the operating agreement gave the driver the ability to choose which Schneider shipments to haul (and in theory, to select more shipments with higher profit margins), the driver alleged that he could not actually exercise this theoretical right to turn down shipments. The driver further alleged that, despite the terms of his contract, Schneider did not allow him to hire workers or haul freight for other carriers.
In light of these allegations, the Seventh Circuit concluded that the driver’s amended complaint had pled sufficient facts to allow a plausible inference that Schneider was his employer and he was its employee, and not an independent contractor. Thus, the Seventh Circuit reversed.
Click Brant v. Schneider National, Inc. to read the entire Opinion.
*** Andrew Frisch and Morgan & Morgan are actively handling and investigating similar cases regarding independent contractor misclassification. If you believe you have been misclassified as an independent contractor by a current or former employer, contact us for a free consultation at (888) OVERTIME [888-683-7846] today. ***
9th Cir.: Time Spent by Call Center Workers Booting Up Computers is Compensable
Cadena v. Customer Connexx LLC
The time a group of call center workers spent booting up their computers is inextricably intertwined with their work and therefore compensable under the Fair Labor Standards Act (FLSA), the Ninth Circuit ruled this week, overturning a win a district court handed to their employer, and joining sister circuits who have reached a similar conclusion.
In a unanimous published decision, the Ninth Circuit reversed a Nevada district court’s 2021 decision which had granted call center employer Customer Connexx LLC summary judgment on the workers’ overtime suit, reasoning that the workers needed to have a functional computer in order to do their jobs. Thus, the panel concluded that the time the call center workers spent booting up the computers is compensable under the Portal-to-Portal Act.
“The employees’ duties cannot be performed without turning on and booting up their work computers, and having a functioning computer is necessary before employees can receive calls and schedule appointments,” U.S. Circuit Judge Jay S. Bybee wrote on behalf of the panel.
Under the Portal-to-Portal Act, which amended the FLSA, employers are not required to pay for time workers spend traveling to and from the place of principal work activities or for time they spend on certain preliminary or postliminary activities which are not integral to their work.
Here, the workers sued in 2018, alleging that Connexx, failed to pay them overtime as required by the FLSA and Nevada law, because they failed to track and compensate them for the time they spent booting up and turning off their computers after they logged into and out of the company’s timekeeping system.
The district court granted Connexx summary judgment in July 2021, finding that the tasks the workers completed before and after they logged out of the company’s timekeeping system were not compensable preliminary and postliminary activities because they did not meet the legal standard to be considered part of their jobs.
The Ninth Circuit disagreed and reversed, saying the district court erred in focusing its reasoning on whether the activities were essential to the workers’ jobs and should have instead put emphasis on whether starting the computer led the call center workers to be able to perform their work. Discussing the issue, the Court explained:
When the employees’ duties are understood in this way, the electronic timekeeping system becomes a red herring. It is a convenience to the employer… It has no impact on the ‘integral and indispensable’ analysis except to show us when Connexx began counting the employees’ time.
Because the workers needed to have “a functional computer … turning on or waking up their computers at the beginning of their shifts is integral and indispensable to their principal activities,” the panel concluded.
The Ninth Circuit also rejected Connexx’s argument that the district court’s decision should be affirmed because the pre-shift time was de minimis and because the company was not aware of the alleged overtime, noting that those are “factual questions” that the lower court didn’t address, and thus not properly before it.
Of note, the panel clarified in a footnote that its opinion focused on the pre-shift activities, and stated that its opinion should not be read to hold that turning the computers off was an integral part of the workers’ jobs.
The Department of Labor had filed an amicus brief in support of the workers, in which it argued the time at issue was compensable under the FLSA, because the workers could not do their jobs without booting up the computers.
Click Cadena v. Customer Connexx LLC to read the entire decision.
*** Andrew Frisch and Morgan & Morgan are actively handling and investigating similar cases on behalf of call center workers. If you believe your call center employer is not paying you for all time worked, contact us for a free consultation at (888) OVERTIME [888-683-7846] today. ***
3d Cir.: FLSA Retaliation Provisions Protect Anticipated Collective Action Opt-ins
Uronis v. Cabot Oil & Gas Corp.
Resolving an issue of first impression, the Third Circuit recently held that a job applicant who was a potential member of a collective action, was entitled to the protections of the FLSA anti-retaliation provisions.
The FLSA prohibits discrimination against employees who have engaged in “protected activity” which, in part, includes having “testified” or being “about to testify” in any FLSA-related proceeding. 29 U.S.C. § 215(a)(3). However, until the Third Circuit’s recent decision, it was unclear whether an employee or potential employee’s status as a potential member of a collective action protected him or her from retaliation under the FLSA. The Third Circuit held that it does, and reversed the lower court’s opinion which had dismissed the Complaint and held that it did not.
In this case, a former coworker of plaintiff Matthew Uronis filed a collective action lawsuit against both Cabot Oil & Gas Corporation and a transport and rental company, claiming that the two companies were joint employers and that they failed to properly pay overtime to members of the class, in violation of the FLSA, in February 2019. Uronis, who was similarly employed by the same transport and rental company (and arguably jointly employed by Cabot), was allegedly similarly situated to the named-Plaintiff in that case, based on the definition of the putative collective action contained within the complaint in the initial case.
Subsequent to February 2019, in August 2019, Uronis alleged that he applied for a position with GasSearch Drilling Services Corporation (GDS), a subsidiary of Cabot. In response, on August 28, 2019, a GDS manager sent Uronis a text message stating that, despite his clear qualifications, GDS could not hire Uronis because he was a putative member of the collective action lawsuit against Cabot and the transport and rental company. That same day, Uronis signed his consent to join the collective action. However, he had not informed anyone at Cabot or GDS that he planned to join the lawsuit.
Following GDS refusal to hire him, based on his status a potential opt-in plaintiff, Uronis filed his own lawsuit, against Cabot and GDS, alleging they violated Section 215(a)(3) of the FLSA when GDS refused to hire him and others because they were “about to testify” in his former coworker’s lawsuit. Uronis referenced the text message from the GDS manager and attached a copy to his Complaint.
In response to the Complaint, the defendants filed a motion to dismiss on the basis that Uronis had not pled conduct constituting protected activity under Section 215(a)(3). The district court agreed, granted the defendants’ motion, and dismissed the case.
The district court concluded that Uronis was not “about to testify” because he had not alleged he was scheduled to provide testimony in the underlying collective action. On appeal, the Third Circuit reversed.
Noting first that “Congress included in the FLSA an antiretaliation provision . . . to encourage employees to assert their rights without ‘fear of economic retaliation [which] might often operate to induce aggrieved employees to quietly accept substandard conditions,” the Third Circuit stated that the FLSA “must not be interpreted or applied in a narrow, grudging manner.” In support of this position, the Court of Appeals cited to the U.S. Supreme Court’s decision in Kasten v. Saint-Gobain Performance Plastics Corporation, 563 U.S. 1 (2011), in which the Court held that an oral complaint of an FLSA violation constitutes protected activity, even though the statute (in a companion subsection) refers to a complaint that has been “filed,” which most commonly is interpreted to require a written document.
In so holding, the Supreme Court reasoned that to limit the scope of Section 15(a)(3) to the filing of written complaints would foul Congress’ intent by ‘prevent[ing] Government agencies from using hotlines, interviews, and other oral methods of receiving complaints’ and ‘discourag[ing] the use of desirable informal workplace grievance procedures to secure compliance with the [FLSA].’” The Court further noted that it had interpreted an analogous provision of the National Labor Relations Act (NLRA) to protect conduct not explicitly listed in that NLRA, specifically, to extend anti-retaliation protection to individuals who merely had participated in a National Labor Relations Board investigation, even though the language of the NLRA itself referred only to those who had “filed charges or given testimony.”
The Court of Appeals further noted that previously, in Brock v. Richardson, 812 F.2d 121 (3d Cir. 1987), it had extended the protections of Section 215(a)(3) to individuals whom the employer believed had filed a complaint with the Department of Labor, even though they had not actually done so. “Even though the statute could be narrowly read to not include retaliation based on perception, such retaliation ‘creates the same atmosphere of intimidation’ as does discrimination based on situations explicitly listed in Section 15(a)(3),” the Court of Appeals reiterated, adding that “[s]uch an atmosphere of intimidation is particularly repugnant to the purpose of the FLSA in the context of collective actions.” Similarly, “[i]f employers can retaliate against an employee because the employer believes the employee has or will soon file a consent to join an FLSA collective action, this enforcement mechanism – and employee protection – will be gutted.
However, added the Third Circuit, “Section [2]15(a)(3) is not a per se bar against any adverse employment action against an employee who is or might soon be a collective action member. Rather, it bars discrimination because of protected activity.” Again citing to Kasten, the Court of Appeals emphasized that to qualify as arguably protected activity, the employer must be given “fair notice” that a reasonably detailed and clear complaint, whether oral or written, has been asserted (as in Kasten) or, as here, that the individual was “about to testify” in an FLSA proceeding (as the Third Circuit now broadly interprets that phrase) and there must be plausible evidence (or allegations) that the employer was aware of the conduct.
Reversing the district court, the Third Circuit explained:
The reasoning of Kasten and Brock compel the conclusion that to ‘testify’ under Section [2]15(a)(3) includes the filing of an informational statement with a government entity. A consent to join a collective action is just that: it is an informational statement (that an employee is similarly situated to the named plaintiff with respect to the alleged FLSA violation) made to a government entity (the court).
Accordingly, concluded the Third Circuit, “an employee testifies under Section [2]15(a)(3) when the employee files a consent to join an FLSA collective action.”
Likewise, the Court of Appeals held that “‘about to testify’ includes testimony that is impending or anticipated, but has not been scheduled or subpoenaed.” As set forth in several other district court decisions, “‘about to’ . . . includes activity that is ‘reasonably close to, almost, on the verge of,’ or ‘intending to do something or close to doing something very soon.’” This includes individuals who, like Uronis, intended to soon file his consent to join the collective action and testify in that lawsuit, the Third Circuit noted. Finally, the Court of Appeals held, Uronis had sufficiently pled – as evidenced by the text to him from the GDS manager – not only that Cabot and GDS were aware, or at least assumed, that he would join the collective action, but that GDS was flatly refusing to hire him for this very reason. Based on these allegations, “[i]t is plausible that [GDS would not hire Uronis] because they anticipated [he] and his former co-workers would soon file consents to join the putative collective action, or otherwise provide evidence relating to it.” Accordingly, the Third Circuit said, the complaint should not have been dismissed on the pleadings and the case was due to be remanded for further consideration.
Congratulations to Morgan & Morgan attorney Angeli Murthy for her outstanding advocacy on behalf of Uronis! Ms. Murthy was supported by the Department of Labor who filed amicus in support of Uronis as well.
Click Uronis v. Cabot Oil & Gas Corp. to read the entire decision.
Morgan & Morgan Investigating Claims Against Arise Virtual Solutions for Failing to Pay Legally Due Wages to Customer Service Agents
The Claims Assert That Arise Illegally Profited by Unlawfully Misclassifying Customer Service Agents as Independent Contractors Rather than Employees, Denying Workers Money and Benefits
Morgan & Morgan is investigating allegations of wage theft against Arise Virtual Solutions, Inc. on behalf of customer service representatives. Arise is a customer service support company that contracts with a multitude of companies to outsource their customer service needs. The investigation has revealed that Arise improperly denied customer service agents minimum wage, overtime, and other benefits by misclassifying them as independent contractors rather than employees. Arise’s scheme is believed to have injured tens of thousands of workers.
“We belive that Arise has been constructed to intentionally flout wage and hour laws and to avoid paying workers the minimum wage, overtime, and other benefits that employees are typically entitled to. Companies like Arise cannot escape the application of wage and hour laws by labeling itself a gig economy company and/or labeling its workers contractors if they are truly employees under the law as we believe. We will hold companies like Arise accountable if they shortchange workers.”
Worker misclassification is illegal, and occurs where an employer deprives employees minimum wage, overtime, and/or other benefits typically earned by employees, by classifying them as “independent contractors,” who are generally not entitled to the same protections.
Arise is a customer support services company that operates in the gig economy and employs a workforce of customer support agents, many of whom work remotely from their homes. Arise contracts with many Fortune 500 clients that are looking to cut costs by outsourcing call-center services. Arise maintains an online platform that allows its clients’ customer service calls to be routed to an Arise agent to resolve the issue. Arise has employed thousands of customer support agents nationwide and subjects them to the same common scheme.
Our investigation has revealed that Arise has systemically misclassified its agents as independent contractors, denying them their rights to minimum wage, overtime, another benefits. We believe the agents are legally employees because Arise has the power to hire and fire them, determines their rate of pay, requires agents to meet with supervisors and managers, and controls agents with a digital surveillance apparatus that tracks their performance down to the precise second. Moreover, Arise’s agents do the work at the very heart of the company’s business—Arise could not operate its customer support business without its customer support agents. In other words, we believe that the “economic reality” test utilized by federal courts, as applied to the Customer Service Agents, renders them employees rather than true contractors under the law.
Arise uses numerous methods to unlawfully short agents the wages they rightfully earned. Many agents work at hourly rates that are blatantly below the applicable minimum wage. Arise also further cuts into agents’ pay by charging them for training and certification fees, requiring agents to purchase their own work equipment, requiring agents to work unpaid hours (such as meeting with supervisors), and docking agent pay for failing to meet perforance goals. Additionally, it appears that Arise does not pay any of its Customer Service Agents overtime premiums when they work overtime hours.
In these lawsuits, Morgan & Morgan intends to seek damages for wages owed to agents as a result of Arise’s minimum wage, and overtime violations.
If you are a current Customer Service Agent, or previously worked for Arise as a Customer Service Agent, you may have a claim for unpaid wages, including minimum wages and overtime wages, as well as other damages.
Contact us for a free consultation at (888) OVERTIME [888-683-7846] to discuss your rights today.
2d Cir.: Accepted Rule 68 Offers of Judgment Not Subject to Judicial Review for Fairness
Mei Xing Yu v. Hasaki Restaurant Inc.
Clarifying murky law regarding when FLSA settlements require judicial versus when they are self-effectuating, a divided Second Circuit panel recently held that settlement proposals in the form of accepted offers of judgment under Federal Rule of Civil Procedure 68 are not subject to judicial review and approval. Although FLSA settlements generally require judicial or U.S. Department of Labor (DOL) approval to be enforceable, the Second Circuit held that the statutory language of Rule 68 overrides that conventional wisdom and thus are an exception to the general rule.
In this case, the plaintiff sued his restaurant-employer on behalf of himself and similarly situated employees for overtime violations under the FLSA and New York Labor Law (NYLL). During the pendency of his lawsuit, the defendant-restaurant sent the plaintiff, an offer of judgment (OJ) pursuant to FRCP 68(a), which the plaintiff accepted. Per FCRP 68, the clerk of the court was required to “enter judgment” once the offer and notice of acceptance had been filed with the court.
Notwithstanding the clear dictates of FRCP 68, the district court sua sponte ordered the parties to submit the settlement offer to the court for fairness review, relying on the Second Circuit’s opinion in Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), in which, the Second Circuit previously held that stipulated dismissals of FLSA claims under FRCP 41(a) require judicial approval notwithstanding the self-effectuating nature of that rule. The district court read Cheeks to stand for the proposition that parties to an FLSA claim could not “evade the requirement for judicial (or DOL) approval by way of Rule 68.”
In a 2-1 decision, the Second Circuit held that Cheeks does not extend to FRCP 68 offers of judgment, and that accepted OJs are an exception to the general rule requiring approval of private FLSA settlements. The majority distinguished FRCP 68(a)’s mandatory dismissal language from FRCP 41(a), which contains an exception to the self-executing nature of the dismissal where a federal statute governing the claim requires court approval. Because FRCP 68(a) contains no such exception to mandatory entry of judgment, the majority declined to read one into the rule.
The majority recognized the Cheeks court’s concern about “private, secret settlements and waivers of an employee’s FLSA rights that the Supreme Court [has] refused to endorse.” However, the Court reasoned that FRCP 68(a) requires public disclosure of the terms of FLSA settlements—unlike FRCP 41(a) stipulated dismissals—because the accepted offers must be publicly filed on the court’s docket. Furthermore, the majority reasoned that settlement agreements reached during the course of ongoing litigation in this manner are distinguishable from “private, back‐room compromises that could easily result in exploitation of the worker and the release of his or her rights,” the latter of which are more likely to be tainted by pressure applied by the employer.
The decision, which was the first from any Court of Appeals on this issue resolves a split among district courts in the Second Circuit. It also provides a blueprint for employees and employers who wish to avoid judicial scrutiny of their settlements reached in arm’s length negotiations during litigation.
Click Mei Xing Yu v. Hasaki Restaurant Inc. to read the entire decision.
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Overtime Law Blog 