9th Cir.: Reporters For Newspaper Properly Deemed Nonexempt; Creative Professional Exemption Not Applicable, Because The Reporters’ Work Does Not Require Sophisticated Analysis
Wang v. Chinese Daily News, Inc.
Following a verdict/decision in the plaintiffs favor, the defendant appealed to the Ninth Circuit based on a variety of issues, both substantive and procedural. As discussed here, the Ninth Circuit affirmed the lower Court’s holding that the plaintiffs, reporters for a local Chinese-language newspaper were nonexempt under the Fair Labor Standards Act (“FLSA”) and California Wage and Hour Law.
Reasoning that the plaintiff-reporters were not subject to the so-called “creative professional” exemption, the Court reasoned:
“CDN argues that the district court erred in holding on summary judgment that CDN’s reporters were non-exempt employees entitled to overtime. Specifically, CDN argues that its reporters were subject to the “creative professional exemption” and were therefore exempt employees not subject to FLSA and state-law overtime pay and break requirements. We review the district court’s grant of summary judgment de novo. Bamonte v. City of Mesa, 598 F.3d 1217, 1220 (9th Cir.2010).
Federal law exempts employers from paying overtime to “any employee employed in a bona fide … professional capacity.” 29 U.S.C. § 213(a)(1). To qualify as an exempt professional under federal law, an employee must be compensated “at a rate of not less than $455 per week,” and his or her “primary duty” must be the performance of exempt work. 29 C.F.R. §§ 541.300, 541.700. “[A]n employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” 29 C.F.R. § 541.302(a). The exemption is construed narrowly against the employer who seeks to assert it. Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir.2005). California wage and hour law largely tracks federal law. See Industrial Welfare Commission Order 4-2001 § 1(A)(3)(b) (defining professional to include “an employee who is primarily engaged in the performance of … [w]ork that is original and creative in character in a recognized field of artistic endeavor … and the result of which depends primarily on the invention, imagination, or talent of the employee”); see also id. § 1(A)(3)(e) (directing that the exemption is “intended to be construed in accordance with … [inter alia, 29 C.F.R. § 541.302 ] as [it] existed as of the date of this wage order”).
As applied to journalists, the federal Department of Labor construed the “creative professional exemption” in a 2004 regulation:
Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy. Employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. Thus, for example, newspaper reporters who merely rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals. Reporters also do not qualify as exempt creative professionals if their work product is subject to substantial control by the employer. However, journalists may qualify as exempt creative professionals if their primary duty is performing on the air in radio, television or other electronic media; conducting investigative interviews; analyzing or interpreting public events; writing editorials, opinion columns or other commentary; or acting as a narrator or commentator. 29 C.F.R. § 541.302(d) (2004). Unlike the “interpretation” it replaced, the 2004 regulation was promulgated pursuant to notice and comment rulemaking and therefore has the force of law. See 69 Fed.Reg. 22122, 22157-58 (Apr. 23, 2004). In promulgating the new regulation, the Department of Labor explained that “[t]he majority of journalists, who simply collect and organize information that is already public, or do not contribute a unique or creative interpretation or analysis to a news product, are not likely to be exempt.” Id. at 22158. Although we have not decided a case applying the creative professional exemption to journalists, other courts have explored the circumstances under which print journalists qualify for the exemption. In Reich v. Gateway Press, Inc., 13 F.3d 685 (3d Cir.1994), the Third Circuit concluded that none of the reporters at a chain of nineteen local weeklies was exempt. The newspapers largely contained “information about the day-to-day events of their respective local communities … overlooked by the Pittsburgh metropolitan daily press.” Id. at 688. The reporters primarily generated articles and features using what they knew about the local community, spent 50-60% of their time accumulating facts, and mostly filed recast press releases or information taken from public records. They wrote a feature article or editorial about once per month. Id. at 689. The court held that they were among the majority of reporters who were non-exempt. Id. at 699-700. It noted that the work was not “the type of fact gathering that demands the skill or expertise of an investigative journalist for the Philadelphia Inquirer or Washington Post, or a bureau chief for the New York Times.” Id. at 700.
In Reich v. Newspapers of New England, Inc., 44 F.3d 1060 (1st Cir.1995), the First Circuit similarly held that reporters and other employees employed by a small community newspaper were not exempt professionals. The day-to-day duties of the reporters involved “general assignment work” covering hearings, criminal and policy activity, and legislative proceedings and business events. Employees were not “asked to editorialize about or interpret the events they covered.” Id. at 1075. They, too, were therefore among the majority of reporters who were not exempt, even though their work occasionally demonstrated creativity, invention, imagination, or talent. Id.
By comparison, in Sherwood v. Washington Post, 871 F.Supp. 1471, 1482 (D.D.C.1994), the district court held that a Washington Post reporter whose “job required him to originate his own story ideas, maintain a wide network of sources, write engaging, imaginative prose, and produce stories containing thoughtful analysis of complex issues” was exempt. As a high-level investigative journalist who had held multiple positions of prominence at one of the nation’s top newspapers, the reporter was the sort of elite journalist whom the creative professional exemption was intended to cover.
The parties in this case submitted extensive evidence on summary judgment. Reporters stated in their depositions that they wrote between two and four articles per day, and that they very seldom did investigative reporting. The reporters proposed articles, but the editors gave considerate direction and frequently assigned the topics. One reporter explained that with having to write so much, “you didn’t have enough time to-really analyze anything.” Some time was spent rewriting press releases. There were no senior reporters or others with distinctive titles, and each of the reporters performed essentially the same tasks.
Editors’ declarations submitted by CDN, on the other hand, stated that articles “include background, analysis and perspective on events and news,” that CDN employs some of the most talented reporters in the Chinese newspaper industry, and that the reporters have extensive control over their time, pace of work, and ideas for articles to write. They stated that reporters must cultivate sources, sift through significant amounts of information, and analyze complicated issues. Several editors stated that they approved more than 90% of the topics suggested by reporters. Reporters’ salaries ranged from $2,060 to $3,700 per month.
Although the evidence submitted revealed disputes over how to characterize CDN’s journalists, we agree with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption. CDN’s Monterey Park (Los Angeles) operation, with twelve to fifteen reporters and a local circulation of 30,000, is not quite as small or unsophisticated as the community newspapers described in the Newspapers of New England and Gateway Press cases. But CDN is much closer to the community newspapers described in those cases than to the New York Times or Washington Post. As the district court explored in detail, the materials submitted on summary judgment make clear that CDN’s articles do not have the sophistication of the national-level papers at which one might expect to find the small minority of journalists who are exempt. Moreover, the intense pace at which CDN’s reporters work precludes them from engaging in sophisticated analysis. CDN’s reporters’ primary duties do not involve “conducting investigative interviews; analyzing or interpreting public events; [or] writing editorial[s], opinion columns or other commentary,” 29 C.F.R. § 541 .302(d), even if they engage in these activities some of the time. Indeed, many CDN articles may be characterized as “standard recounts of public information [created] by gathering facts on routine community events,” id., as opposed to the product of in-depth analysis. Characterizing CDN journalists as exempt would therefore be inconsistent with the Department of Labor’s intent that “the majority of journalists … are not likely to be exempt,” 69 Fed.Reg. at 22158, and with the requirement that FLSA exemptions be construed narrowly.
The evidence before the district court did not create a genuine issue of material fact as to the reporters’ status. We therefore affirm the district court’s determination on summary judgment that CDN’s reporters were non-exempt employees who were entitled to the protections of the FLSA and California law.”
Not discussed here, the Court also held that the certification of both a collective action of the FLSA claims and a class action of the California state law claims was within the court’s discretion, as was the lower court’s decision to invalidate many opt-out forms received in response to the initial class action notice, in response to what it believed was coercion from the defendant employer.
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D.Md.: FLSA Plaintiffs Residing In Honduras May Testify At Trial Via Videoconference; Good Cause Demonstrated By Visa Issues And Cost Of Travel
Lopez v. NTI, LLC
This case was before the Court on several motions. As discussed here, several of the plaintiffs who resided out of state and out of the country, requested that they be permitted to testify at trial via videoconference in lieu of appearing in person in court. Granting plaintiffs motion in part and denying in part, the court held that the international plaintiffs had demonstrated the requisite good cause, because of visa issues and high cost of international travel. However, the court denied the out of state plaintiffs’ motion for failure to demonstrate the requisite good cause.
Discussing the plaintiffs’ motion, the Court reasoned:
“Plaintiffs have moved for an order permitting certain Plaintiffs residing in Honduras, Tennessee, and Virginia to testify via “contemporaneous transmission” (Paper 70), namely videoconferencing. In support, Plaintiffs note the difficulty of securing a visa from Honduras and the substantial expense of travel. Defendants oppose, arguing that (1) the non-resident Plaintiffs need to be in the courtroom to establish their identity, (2) the use of videoconferencing would impede central credibility determinations, and (3) financial considerations weigh in favor of Defendants, not Plaintiffs.
Federal Rule of Civil Procedure 43 governs the taking of testimony at trial. That rule expressly provides for the possibility of videoconference testimony, stating that “[t]he court may, for good cause shown in compelling circumstances and upon appropriate safeguards, permit presentation of testimony in open court by contemporaneous transmission from a different location.” Fed.R.Civ.P. 43(a). Although Rule 43 provides some flexibility in accepting remote testimony, it seems obvious that remote transmission is to be the exception and not the rule. See Fed.R.Civ. P. 43 advisory committee’s note on 1996 amendments (“The importance of presenting live testimony in court cannot be forgotten. The very ceremony of trial and the presence of the factfinder may exert a powerful force for truth telling. The opportunity to judge the demeanor of a witness face-to-face is accorded great value in our tradition.”). Courts have also recognized that, even with the benefits that technology provides, substitutes for live testimony are necessarily imperfect:
Videoconference proceedings have their shortcomings. Virtual reality is rarely a substitute for actual presence and … even in an age of advancing technology, watching an event on the screen remains less than the complete equivalent of actually attending it. The immediacy of a living person is lost with video technology…. Video conferencing … is not the same as actual presence, and it is to be expected that the ability to observe demeanor, central to the fact-finding process, may be lessened in a particular case by video conferencing. This may be particularly detrimental where it is a party to the case who is participating by video conferencing, since personal impression may be a crucial factor in persuasion. Thornton v. Snyder, 428 F.3d 690, 697 (7th Cir.2005) (quotations and citations omitted).
Despite videoconferencing’s deficiencies, courts in this circuit and elsewhere have approved or affirmed its use in the civil context. See generally Rusu v. INS, 296 F.3d 316 (4th Cir.2002) (asylum proceeding); United States v. Baker, 45 F.3d 837 (4th Cir.1995) (civil commitment hearing); Edwards v. Logan, 38 F.Supp.2d 463 (W.D.Va.1999) (civil rights action); see also In re Merck Prods. Liab. Litig., 439 F.Supp.2d 640, 642 (E.D.La.2006) (listing cases). These cases reflect a “consistent sensitivity to the utility of evolving technologies that may facilitate more efficient, convenient, and comfortable litigation practices.” 9A Wright & Miller, Federal Practice & Procedure § 2414 (3d ed.2008). And while videoconferencing has its shortcomings, it at least appears to be favorable to alternative methods, such as the submission of written deposition testimony. Sallenger v. City of Springfield, No. 03-3093, 2008 WL 2705442, at *1 (C.D.Ill. July 9, 2008).
In this case, Plaintiffs have demonstrated good cause as to those Plaintiffs residing in Honduras. The cost of international travel can provide good cause for contemporaneous transmission of testimony. See, e.g., Dagen v. CFC Grp. Holdings, No. 00 Civ. 5682, 2003 WL 22533425, at *2 (S.D.N.Y. Nov. 7, 2003). In some cases, travel cost and inconvenience have justified contemporaneous transmission even when the parties where located within the United States, in contrast to the internationally resident Honduran Plaintiffs in this case. See, e.g., Beltran-Terado v. INS, 213 F.3d 1179, 1186 (9th Cir.2000) (affirming use of telephonic testimony for hearing in California where witness was in Missouri); Scott Timber, Inc. v. United States, No. 05-708C, 2010 WL 2947090, at *1 (Fed.Cl. July 28, 2010) (approving use of videoconferencing for trial in Washington, D.C., where witness was in Oregon); Fed. Trade Comm’n v. Swedish Match N. Am., Inc., 197 F.R.D. 1, 2 (D.D.C.2000) (finding good cause for videoconferencing where witness was in Oklahoma and hearing was in Washington, D.C.). Forcing the Honduran Plaintiffs in this case to travel to the United States would impose substantial inconvenience and cost on persons with strikingly few financial resources. (Paper 76-1). When viable alternatives like videoconferencing are available, compelling individuals who make no more than $7,000 a year to travel hundreds of miles seems fundamentally unjust. And although the court sympathizes with Defendants’ claim that this litigation has already imposed substantial costs on them as well (Paper 75, at 4-5), those costs do not justify imposing needless expense on Plaintiffs.
The use of videoconferencing for the Honduran Plaintiffs will not prejudice Defendants. Each of the witnesses will testify in open court, under oath, and will face cross-examination. Even if Defendants are correct that this case presents complicated issues (Paper 75, at 3), the protections of the oath and cross-examination will provide them with the tools necessary to resolve those issues. With videoconferencing, a jury will also be able to observe the witness’ demeanor and evaluate his credibility in the same manner as traditional live testimony. Indeed, one judge who presided over two hearings using videoconferencing has concluded that “there is no practical difference between live testimony and contemporaneous video transmission.” Swedish Match, 197 F.R.D. at 2; see also Scott Timber, 2010 WL 2947090, at *1 (observing that videoconferencing does not have a “significantly adverse effect” on factfinder’s ability to make credibility determinations).
Plaintiffs’ motion is not limited to the Honduran Plaintiffs; it requests an order permitting contemporaneous transmission of testimony for all Plaintiffs “outside a 100 mile radius of this Court.” (Paper 70-2). Although Plaintiffs have shown good cause as to the Honduran Plaintiffs, good cause has not been shown as to the remaining Plaintiffs. Plaintiffs do not address the Plaintiff residing in Richmond, Virginia anywhere in the motion papers, and the court cannot discern any reason why the Richmond Plaintiff would be unable to attend. The court is also unconvinced that the financial expense of travelling from Tennessee merits videoconferencing for that witness. Therefore, Plaintiffs’ motion will be denied as to those two witnesses.
In sum, Plaintiffs have shown good cause for contemporaneous transmission of the testimony of those Plaintiffs currently residing in Honduras. Those Plaintiffs are Marvin A. Mejia, Jesus Orellana, Victor Perez, Juan Pineda Gonzalez, Josue Roberto Pineda, Nery Armando Pineda, and Oscar Pineda. The Plaintiffs have not shown good cause as to any other Plaintiff.”
Not discussed here, the Court also denied Defendants’ motion for summary judgment based upon the plaintiffs prior settlement of a portion of their claims with some of the co-defendants.
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M.D.Ala.: Wal-Mart Assistant Store Managers (ASMs) May Be Entitled To Overtime Pay; Wal-Mart’s Motion for Summary Judgment Denied
Davis v. Wal-Mart Stores, Inc.
This case was before the Court on Wal-Mart’s motion for summary judgment. Wal-Mart asserted that the Plaintiffs, two (2) former Assistant Store Managers (“ASMs”) were exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”). Citing issues of fact raised by the Plaintiffs, the Court denied Wal-Mart’s motion.
After noting that the court was due to accept the facts in the light most favorable to the Plaintiffs (as the non-moving party), the court recited the following facts pertinent to the motion:
“The facts of this case concern the job duties of the Plaintiffs. Plaintiff Nancy Davis was employed at the Wal-Mart in Opelika, Alabama as a salaried assistant manager from June of 2006 until September 2009. Davis states that during her employment she performed such tasks as stocking, acting as cashier, sweeping, mopping, cleaning, unloading trucks, bringing in shopping carts, and doing price checks. Plaintiff Shirley Toliver was employed with the Wal-Mart store in Opelika from August 2001 to May 20, 2009. She also states that she performed tasks such as stocking, running the cash register, sweeping, mopping, cleaning, loading trucks, pulling pallets, bringing in shopping carts and performing price checks. The Plaintiffs have testified in their depositions that these tasks comprised 80-90 % of their work duties. Wal-Mart has presented documentary and deposition evidence that Davis and Toliver also engaged in managerial tasks, including delegation of duties, interviewing and hiring applicants, coaching associates, evaluating associates, and terminating associates.”
The Court held that, on these facts, the Plaintiffs could not be said, as a matter of law, to fall under the FLSA’s executive exemption or administrative exemption. After outlining the elements of the executive exemption, the Court reasoned:
“In a case relied upon by Davis and Toliver, the Eleventh Circuit has engaged in a lengthy analysis of the primary duty requirement in the context of store managers of Family Dollar Stores, a retail establishment. See Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir.2008). In Morgan, the plaintiffs were store managers who spent 80 to 90 % of their time performing manual labor tasks such as stocking shelves, running cash registers, unloading trucks, and cleaning. Id. at 1270. They were also assigned tasks such as completing paper work and making bank deposits, but those tasks were strictly prescribed. In evaluating the claim that the executive exemption did not apply to these managers, the court emphasized that at the executive exemption to FLSA overtime pay is to be narrowly construed because the Supreme Court has directed that the exemption be applied only to plaintiffs who fall “clearly and unmistakably within the terms and spirit of the exemption.” Id. at 1269 (citation omitted). The court further noted that the inquiry is fact-intensive, and if there is evidence “on both sides of the question,” the facts should be determined by a jury. Id. The factor of time spent on manual, nonexempt work, however, did not establish that the plaintiffs were nonexempt. Id. Instead, the court found that the jury’s determination that the managers were nonexempt was supported not just by the amount of time spent performing nonexempt work, but also by evidence that non-managerial tasks were of “equal or greater importance to the store’s functioning and success.” Id. The court found significant that the employer described manual labor performed on delivery day as an “essential function” of the position. Id. The court also concluded that the evidence of little time spent in discretionary matters, little freedom from direct supervision, and the difference between managerial and other wages supported the jury’s finding of non-exempt work as the primary duty. Id. at 1270-71. As Wal-Mart points out, the court distinguished other courts’ opinions on the basis that in Morgan the manual labor was not performed concurrently with managerial duties. Id. at 1272-73.
Davis and Toliver contend that here, as in Morgan, all four of the primary duty factors weigh in their favor in this case. With respect to managerial duties, Davis and Toliver contend that they spent the vast majority of their time performing non-managerial tasks, and that the managerial tasks they performed were relatively less important than their non-managerial duties. The court begins with the factor of the amount of time spent performing management duties.
1. Time Spent Performing Management Duties
Davis and Toliver have testified that 80-90 % of their time was spent performing nonmanagerial tasks. Davis Dep. at page 125: 19-126: 4. Davis stated that she would run the cash register for 15 or 20 minutes at a time all day long, three out of five days a week, on day and night shifts, and that she found herself doing sweeping and cleaning, particularly on the third shift. Id. at page 128: 18-129:16. Toliver testified that she performed the same tasks testified to by Davis, adding that sometimes she would be a cashier for three hours at a time. Toliver Dep. at pages 95: 16-96: 4, 17-11-19.
While Wal-Mart characterizes this testimony as self-serving, the court must accept the Plaintiffs’ testimony that they performed the sort of tasks described 80-90 % of the time. Those tasks testified to are not considered managerial duties.
Managerial duties are defined by the C.F.R. to include interviewing, selecting and training employees, directing the work of employees, maintaining sales records, appraising employees’ productivity and efficiency, handling employee complaints and grievances, disciplining employees, planning work, determining techniques to be used, apportioning work, determining merchandise to be bought and sold, controlling distribution of merchandise, providing for safety and security of employees or property, planning and controlling the budget, and implementing and monitoring legal compliance measures. 29 C.F.R. § 541.102. Clearly the tasks which Davis and Toliver have identified as comprising 80-90 % of their working time do not fall within these examples of managerial tasks. The C.F.R. also states, however, that
Occasional, infrequently recurring tasks that cannot practicably be performed by nonexempt employees, but are the means for an exempt employee to properly carry out exempt functions and responsibilities, are considered exempt work. The following factors should be considered in determining whether such work is exempt work: Whether the same work is performed by any of the exempt employee’s subordinates; practicability of delegating the work to a nonexempt employee; whether the exempt employee performs the task frequently or occasionally; and existence of an industry practice for the exempt employee to perform the task. 29 C.F.R. § 541.707.
The Plaintiffs argue that the extent to which they performed nonmanagerial tasks meant that the tasks cannot be considered to be exempt work. Davis and Toliver state that their time spent doing the managerial duties of performance evaluation was minimal, averaging 10 to 15 minutes. Toliver Dep. at page 98: 8-16. Davis described her duties as running the register, pulling pallets, unloading trucks, working freight by pulling it off a truck and putting it on the shelf, zoning by fronting merchandise, and cleaning. Davis Dep. at 156: 3-10. Given the testimony of the extent of their nonmanagerial duties, the court concludes that a reasonable jury could conclude that the tasks which, according to the Plaintiffs’ testimony, comprised 80-90 % of their work, were more than occasional, infrequently recurring tasks and, therefore, were nonexempt tasks.
Wal-Mart argues that the Plaintiffs’ choice to perform nonexempt tasks, rather than to delegate those tasks, because they were ultimately responsible for those tasks, does not make them nonexempt. Wal-Mart points to the C.F.R. and argues that concurrent performance of exempt and nonexempt work does not disqualify an employee from the executive exemption. See 29 C.F.R. § 106(a). That C.F.R. section states, however, that if exempt and nonexempt work occurs concurrently, the exemption can still apply, if the requirements for the exemption are otherwise met. Id. The C.F.R. offers as an example an assistant manager who supervises employees and serves customers at the same time, without losing the executive exemption. § 541.106(b). The C.F.R. draws a distinction between persons who make the decision of when to perform nonexempt duties and those directed to perform exempt work. § 541.106(a).
The Eleventh Circuit relied on such a distinction in Morgan. The court distinguished cases from other courts which had given less weight to plaintiffs’ estimates of time performed on nonexempt tasks because those plaintiffs concurrently performed exempt tasks. Morgan, 551 F.3d at 1272. The court explained that the amount of manual labor performed by the managers in Morgan overwhelmed their capacity to perform managerial duties concurrently during store hours. Morgan, 551 F.3d at 1272. The court further explained that management duties could not be performed concurrently because, for example, “a store manager unloading a truck and stocking the storeroom was not concurrently supervising the cashier out front.” Id. at 1273. The court noted that many of the tasks were performed before and after the store closed. Id. at 1272. The court concluded that the jury “may well have given more weight to the Plaintiffs’ evidence that they spent 80 to 90 % of their time solely on nonexempt work.” Id.
Davis stated in her deposition that she would receive managerial notes from the store manager which would tell her tasks that needed to be accomplished during a shift. Id. at page 126:15-127:14. She explained that “[w]e were told what to do, either find somebody to do it or do it yourself.” Id. at page 126: 15-16. Davis explained that she was assigned duties by the store manager or co-manager in the shift notes that told her what they wanted done. Id. at 150:8-22. If there were minimal associates working, she had to perform the manual labor tasks herself. Id. at page 150: 17-151:17. Davis gave as an example that if two or three trucks came in carrying freight during the third shift, she would have to go to that department. Id. at 151:10-17. She further explained that she would get in trouble for not getting the tasks done. Id. at 151:21-22. Davis testified that she performed sweeping, mopping, and cleaning duties “mostly on third shift” because there were not “enough associates to get everything done that needed to be done.” Id. at 129: 8-16. She also stated that she has been told to scrape dirt from under shelves with a scraper on third shift. Id. at 156:18-157. Davis also testified that she would stay on past the end of her shift on some occasions so that she averaged 54 to 65 hours per week. Id. at page 110: 13-19.
According to the Plaintiffs’ evidence, they were not responsible for the scheduling of associates. The scheduling of employees was conducted by co-Manager Ken King. King explained in his deposition that he set the schedules based on a budget he was provided by corporate headquarters, which came down through the regional and district manager. King Dep. at page 12. Although King also stated that assistant managers also set schedules, in her deposition, Toliver disputed that she made schedules, and stated that the co-manager made the schedules. Toliver Dep. at page 20: 8-12, 21-3.
While Wal-Mart has contended that the Plaintiffs chose to perform nonmanagerial tasks instead of delegating those tasks, viewing the evidence in a light most favorable to the non-movants, the Plaintiffs were directed to perform tasks even in the face of inadequate staffing levels. Furthermore, the nonexempt tasks performed by Davis and Toliver in this case were similar to those in Morgan, such as unloading of freight, which would not allow for the supervision of associates in other sections of the store. The court concludes, therefore, that Wal-Mart has not conclusively shown that the nonexempt tasks were performed concurrently with exempt tasks, for purposes of its affirmative defense. Here, as in Morgan, the court concludes that there is sufficient evidence to support the Plaintiffs’ estimate that 80 % to 90 % of their work was nonexempt work.
The C.F.R. states that the amount of time spent on managerial tasks “can be a useful guide in determining whether exempt work is the primary duty of an employee,” but it is not the sole test. § 541.700(b). A person who spends more than 50 percent of her time performing exempt work generally will satisfy the primary duty requirement, but “employees who do not spend more than 50 percent of their time performing exempt duties may nonetheless meet the primary duty requirement if the other factors support such a conclusion.” Id.
Given the Plaintiffs’ evidence, the factor of the amount of time spent on nonexempt tasks, while not dispositive, weighs against a finding of exempt work as the primary duty in this case. See Morgan, 551 F.3d at 1270.
2. Relative Importance of Managerial Duties
The next primary duty factor to be examined is the relative importance of managerial duties as compared to other duties. 29 C.F .R. § 541.700(a).
Wal-Mart has submitted multiple records evidencing managerial tasks, such as coaching for improvement of hourly associates, performance evaluations, and job offers. Wal-Mart states that Davis and Toliver managed recognized departments during the day shift, and were “in charge” of the store on night shifts. Wal-Mart further states that these duties were important, as they were evaluated in the Plaintiffs’ performance evaluations.
Davis and Toliver do not dispute that they coached associate employees, evaluated performance of associates, checked the status of inventory, and monitored store conditions. See Doc. # 20 at page 15. As noted above, however, they state their time spent doing managerial duties, for example, employee evaluation, was minimal, consisting of 10 to 15 minutes, and that these duties were secondary to their primary duties of waiting on customers, stocking shelves, cleaning, merchandising, unloading delivery trucks, and bringing in shopping carts. As further evidence of the relative importance of the nonmanagerial tasks, the Plaintiffs point out that in the job description’s listing of physical activities necessary to perform essential job functions an assistant manager is required to move, lift, carry, and place merchandise and supplies weighing up to 25 pounds without assistance, and to grasp, turn, and manipulate objects of varying size and weight, requiring fine motor skills and hand-eye coordination. As described extensively above, there is evidence that Davis and Toliver were required to perform manual tasks also performed by associates, and that the budget-based schedule, which left the store understaffed at times, required them to perform manual labor tasks.
In Morgan, the court concluded that nonmanagerial duties were more important because the essential job functions as listed by the employer required that the managers do the same work as stock clerks and cashiers, and that a large amount of manual labor by managers was a key to the business model, given the limited payroll and large amount of labor that had to be performed. Morgan, 551 F.2d at 1270.
Viewing the evidence presented in a light most favorable to the nonmovant, the court concludes that here, as in Morgan, there is enough evidence for a jury to find not only that nonmanagerial tasks consumed 80-90 % of Davis and Toliver’s time, but also that the nonmanagerial work was relatively more important than managerial work.
3. Relative freedom from Direct Supervision
As to the analytical factor of relative freedom from direct supervision, Davis and Toliver argue that not only were they governed by policies put in place by Wal-Mart at its corporate headquarters, but also policies created, implemented, and enforced by the store manager or co-manager who were present in the store daily. For instance, Toliver states in her deposition that there was a time during which assistant managers set the schedules, but during the relevant time period, the co-manager set schedules. Toliver Dep. at page 20: 4-12. She also explained that she thought it should be within her discretion to decide whom to interview for an position which was open, but that she was told whom to choose at times. Id. at page 78: 3-12. She testified that the rate of starting pay was dictated by policy and that she was not allowed to give raises. Id. at 107:10-23.
Davis testified that when the store manager and co-manager were present in the store, they were supervising the assistant supervisors and were supervising the hourly associates. Davis Dep. at page 148: 9-17. With respect to the placement of merchandise, Davis testified that the home office, store manager, or co-manager directed where to place merchandise, and that placement was dictated by planograms. Id. at page 152:12-153:4. Even on the third shift, when Wal-Mart insists the Plaintiffs were “in charge” of the store, as set out above, upper management gave instructions of what was to be done, down to tasks such as scraping dirt from beneath shelves.
In Morgan, the Eleventh Circuit found that the factor of freedom from supervision weighed in favor of a finding of the primary duty being nonexempt work, because managers above the level of the store managers were responsible for enforcing detailed store operating policies, closely reviewed inventory, closely monitored the payroll, controlled employee hourly rates and pay raises, routinely sent to-do lists and emails with instructions to the managers, closely supervised displays, and closely supervised store operations. Morgan, 551 F.3d at 1271. When viewed in a light most favorable to the non-movants, many of the same considerations present in Morgan, such as instructions from upper management as to tasks to perform, and pay rates and budget-controlled staffing by upper management, are present in this case as well. Therefore, the court concludes that this factor also weighs in Davis and Toliver’s favor.
4. Relative wages
As to the fourth primary duty factor, the relationship between employee’s salary and wages paid to other employees for the kind of nonexempt work performed by the employee, although Davis and Toliver have argued, correctly, that the court should account for the extra hours they worked in comparing salaries and wages, the court has not been pointed to evidence of the amount of hourly wages paid for the same nonexempt work duties. Therefore, the court cannot conclude that this factor weighs in favor of the Plaintiffs in this case.
Considering together the evidence of the relative importance of the management duties as compared with other types of duties, the amount of time spent performing management duties, the employee’s relative freedom from direct supervision, and the lack of evidence of relative wages, along with the fact that there is evidence that the Plaintiffs performed several types of managerial duties, it appears to the court there is a close question as to whether Davis and Toliver had primarily nonexempt duties. While the Morgan case is helpful in applying the analytical factors and considerations set forth in the C.F.R., the Morgan decision is also distinguishable to the extent that the evidence of managerial responsibilities of the plaintiffs in that case was somewhat limited. Bearing in mind that Wal-Mart has the burden of proof on its affirmative defense, and viewing the evidence in a light most favorable to the non-movants, however, the court concludes that there is sufficient evidence to create a question of fact as to whether the Plaintiffs’ primary duties were managerial. Having concluded that there are questions of fact which preclude judgment in Wal-Mart’s favor on the exemption requirement of primary duty, the court need not address the remaining requirements for application of the executive exemption.”
The Court then went on to hold that Plaintiffs may not be administratrively exempt either. While, this case was limited to the facts of the two (2) ASM Plaintiffs here, this will be an interesting one to watch.
Cliok here Davis v. Wal-Mart Stores, Inc. to read the entire opinion.
11th Cir.: Intrastate Travel Of SuperShuttle Drivers Satisfied Motor Carrier Act Exemption, Because Many Customers Were “Through Ticketed” Based On Internet Travel Packages
Abel v. Southern Shuttle Services, Inc.
This case was before the Eleventh Circuit for the second time. Plaintiff, a former driver of Defendant Southern Shuttle Services, Inc.’s airport shuttle vans, filed the action under the FLSA seeking unpaid overtime pay. In the first appeal, the Eleventh Circuit vacated the district court’s entry of summary judgment in Southern Shuttle’s favor because Southern Shuttle’s airport shuttle service did not fall within the “taxicab exemption” to the FLSA’s overtime provisions. See Abel v. S. Shuttle Servs., Inc., 301 F. App’x 856 (11th Cir.2008). After remand, Southern Shuttle filed a second motion for summary judgment, arguing that its airport shuttle van drivers fall under the Motor Carrier Act exemption in 29 U.S.C. § 213(b)(1). The district court agreed and granted Southern Shuttle summary judgment. On appeal, the Eleventh Circuit affirmed.
The Court outlined the following facts pertinent to its inquiry:
“Southern Shuttle operates a shared-ride airport shuttle, known as “SuperShuttle,” that transports passengers to and from three South Florida airports (Miami International Airport, Palm Beach International Airport and Fort Lauderdale-Hollywood International Airport). From December 19, 2005 to June 24, 2007, Abel worked for Defendant Southern Shuttle as a shuttle driver, driving passengers to and from airports. Abel, like all shuttle drivers, was paid commission and tips, but not overtime compensation. Abel’s employment ended after he refused to transport a passenger with a payment voucher and made the passenger exit the shuttle van, in violation of Southern Shuttle’s policy.
The shuttles are large nine- and ten-person passenger vans. The shuttles pick up passengers at one of the airports and take them to any location in the area (such as a residence, office or hotel), or pick them up at any location in the area and take them to one of the airports. Shuttle drivers do not transport passengers to or from locations outside of Florida. Some shuttle passengers are transported to the airports so they can travel via air carrier to other states or countries. Other shuttle passengers are transported from the airports after having flown from other states or countries.
Many shuttle passengers arrange for shuttle transportation by contacting Southern Shuttle directly. Passengers traveling to the airport make reservations ahead of time and schedule a trip to the airport. Similarly, passengers traveling from the airport check in at a SuperShuttle airport kiosk or counter or with a curbside representative to be assigned to the next available shuttle.
Southern Shuttle’s president, Mark Levitt averred that: (1) “[a] large portion of the reservations made with Southern Shuttle are through internet package deals wherein a traveler buys a package deal from a third party company that includes airfare, hotel accommodations and transportation to and from the airport”; (2) “the traveler receives a voucher for free transportation to and from the airport and provides the voucher to Southern Shuttle in lieu of payment”; and (3) “Southern Shuttle then prepares an invoice to the third party company for payment.” These third party companies include internet travel web sites such as Expedia.com, Travelocity, Orbitz, CheapTickets, a German company called Viator, a company in the United Kingdom called Get a Bed, and American Express, among others.”
Affirming the lower court’s decision, the Eleventh Circuit reasoned:
“[T]he Supreme Court’s Morris decision involved a general cartage business that primarily transported steel around the Detroit area either within local steel plants or to and from local steel plants. 332 U.S. at 427, 68 S.Ct. at 133. A small percentage of the employer’s trips, roughly four percent, involved transporting miscellaneous freight to and from Detroit boat docks, railroad depots and freight terminals. Id. at 427 & n. 7, 68 S.Ct. at 133 & n. 7. Although these trips did not cross state lines, they nonetheless met the de minimus interstate commerce requirement because they transported freight “in interstate commerce, either as part of continuous interstate movements or of interstate movements begun or terminated in metropolitan Detroit.” Id. at 427, 432-33, 68 S.Ct. at 133, 136.
Other cases make clear that trips within a single state are made in interstate commerce when they are part of “a practical continuity of movement of the goods” in interstate commerce. Walling v. Jacksonville Paper Co., 317 U.S. at 568, 63 S.Ct. at 335 (involving wholesale distributor of paper products made outside the state but transported only to customers within the state); see also Baez, 938 F.2d at 181-82 (involving armored trucks delivering to Florida banks checks and other instruments bound for banks outside Florida); Galbreath v. Gulf Oil Corp., 413 F.2d 941 (5th Cir.1969) (involving oil company’s transport within Georgia of petroleum products originating from refineries in Texas and Mississippi); Opelika Royal Crown Bottling Co. v. Goldberg, 299 F.2d 37 (5th Cir.1962) (involving wholesale soft drink distributor transporting drinks bottled in Georgia from Alabama warehouse to Alabama customers and returning empty bottles to Alabama warehouse, where other trucks took them back to Georgia).
The Third Circuit distinguished the transportation of passengers from goods. See Packard v. Pittsburgh Transp. Co., 418 F.3d 246 (3d Cir.2005). The employer in Packard provided transportation to the elderly and disabled in Allegheny County, which included trips to train and bus stations and to the airport. Id. at 248-49. The Third Circuit concluded that this transportation service did not fall within the Secretary’s jurisdiction because it was not “in practical continuity with a larger interstate journey.” Id. at 258. Because Morris involved transportation of goods not passengers, the Third Circuit looked at cases arising in other contexts that defined interstate transportation of passengers, including United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947), overruled on other grounds by Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), a Sherman Act case.
In Yellow Cab, the Supreme Court described interstate commerce as “an intensely practical concept drawn from the normal and accepted course of business.” Id. at 231, 67 S.Ct. at 1567. Because “the limits of an interstate shipment of goods” may be different than “the commonly accepted limits of an individual’s interstate journey,” courts must “mark the beginning and end of a particular kind of interstate commerce by its own practical considerations.” Id. In light of these practical considerations, the Supreme Court concluded that, “in the absence of some special arrangement,” a taxi ride to or from a railroad station at the beginning or end of an interstate journey ordinarily is a local trip that is not within interstate commerce. Id. at 231-32, 67 S.Ct. at 1567. However, where the railroad “contract[s] with the passengers to supply between-station transportation in Chicago,” the taxi ride “is clearly a part of the stream of interstate commerce.” Id. at 228, 67 S.Ct. at 1565-66. The Supreme Court explained that “[w]hen persons or goods move from a point of origin in one state to a point of destination in another, the fact that a part of that journey consists of transportation by an independent agency solely within the boundaries of one state does not make that portion of the trip any less interstate in character.” Id. at 228, 67 S.Ct. at 1566.
Relying on the distinctions drawn in Yellow Cab, the Third Circuit noted that the transportation of the elderly and disabled in Packard “involves no joint fare or ticketing arrangement, and no prior arrangement of any kind, contractual or otherwise, with the railroads, airlines, or other companies.” Packard, 418 F.3d at 258. The Third Circuit cited “through ticketing” as “one example of a common arrangement involving both intra and interstate portions of passenger transport” but concluded that it was “not the only means of establishing that passenger transport operating intrastate is in practical continuity with a larger interstate journey.” Id. (emphasis omitted). Highlighting the “lack of coordination with other transportation,” such as through “a prepackaged tour,” the Third Circuit concluded that the transportation service in Packard was “purely intrastate.” Id.
4. Southern Shuttle
Guided by the interstate commerce principles in Walters, Morris and Yellow Cab, we conclude that the purely intrastate transport of passengers to and from an airport may, under certain circumstances, constitute interstate commerce and thus bring the transportation company within the jurisdiction of the Secretary of Transportation. Those circumstances are present here.
Many of Southern Shuttle’s passengers to and from the airport have either just flown from, or are about to fly to, places outside the state of Florida. A large portion of Southern Shuttle’s reservations are made via travel websites on the internet. Travelers buy package deals from these internet travel companies that include hotel accommodations and airfare in addition to transportation to and from the airport. The internet travel companies provide their package-deal customers with a voucher for free airport transportation, which the customers use to board Southern Shuttle’s airport shuttles. Southern Shuttle then uses the collected vouchers to invoice the internet travel company for payment. In other words, Southern Shuttle’s local transport of these package-deal travelers has a “practical continuity of movement” with the overall interstate journey.
Furthermore, Southern Shuttle’s arrangement with internet travel companies to provide airport shuttle service for their package-deal customers meets the “common arrangement” requirement discussed in Walters. Indeed, Southern Shuttle’s voucher system resembles in many respects the voucher system the bus company used for cruise ship passengers in Walters. In sum, we conclude that Southern Shuttle has shown that it is subject to the Secretary of Transportation’s jurisdiction under the MCA.
C. Secretary’s MCA Jurisdiction over Abel’s Work-Related Activities
We next address the second requirement: whether the Secretary’s jurisdiction extends to Abel’s work-related activities at Southern Shuttle. To satisfy this requirement, Southern Shuttle must show that Abel “engage[d] in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the Motor Carrier Act.” 29 C.F.R. § 782.2(a). Abel does not dispute that, as an airport shuttle driver, he engaged in activities that directly affected the safety of operation of motor vehicles in the transportation of passengers on the public highways. Thus, the only issue presented is whether Abel’s activities as an airport shuttle driver constituted “interstate commerce” within the meaning of the MCA. Here, the issue is easily resolved because Abel performed Southern Shuttle’s core airport shuttle transport activity. Having already concluded that Southern Shuttle’s airport shuttle service was transportation of passengers in interstate commerce that subjected it to the Secretary’s jurisdiction, we conclude that Abel’s activities in driving the airport shuttle also constitute interstate commerce.”
To read the entire decision, click here.
StatemanJournal.com is reporting that Oregon is set to raise the State Minimum Wage by .10¢ per hour in January.
“Oregon’s minimum wage will rise to $8.50 per hour on Jan. 1, State Labor Commissioner Brad Avakian said Monday.
The 10-cent increase mirrors a 1.15 percent increase in the Consumer Price Index since August 2009. Oregon’s minimum wage rate has been $8.40 per hour since January 2009.
Washington, where the minimum wage is currently $8.55 per hour, will announce its adjustment on Sept. 30.”
According to the story, “Ballot Measure 25, enacted by Oregon voters in 2002, requires a minimum wage adjustment annually based on changes in inflation as measured by the Consumer Price Index. The Commissioner of the Bureau of Labor and Industries is directed to adjust the minimum wage for inflation every September, rounded to the nearest five cents.”
To read the entire article, click here.
The Palm Beach Post reports that:
“Two Boca Raton business owners accused of pressing Filipino workers into slavery pleaded guilty to federal criminal charges, the U.S. Justice Department announced today.
Sophia Manuel, 41, and Alfonso Baldonado Jr., 45, owners of Quality Staffing Services Corporation, pleaded guilty to conspiring to hold 39 Filipino nationals in compelled service at country clubs and hotels in South Florida, a Justice Department news release stated. A sentencing date is pending.
Manuel also pleaded guilty to making false statements to the U.S. Department of Labor in an application to obtain foreign labor certifications and visas, the release stated.
Manuel and Baldonado pressed the Filipino nationals into work for little or no pay, forced them to sleep on kitchen and garage floors, fed them rotten vegetables and chicken innards, and threatened to have them deported, according to court documents.”
To read the entire article, click here.
S.D.Ohio: Inclusion Of Maître D’ In Tip Pool Not Necessarily Illegal; Evidence Demonstrated Maître D’ Lacked Management Duties To Make Him An FLSA Employer, If He Did Not Hire Or Fire
Strange v. Wade
This case was before the court on plaintiff’s motion for summary judgment regarding a variety of issues. Although the court granted the motion in some respects, as discussed here, it denied the motion with respect to plaintiff’s claim that defendant’s inclusion of the maître d’ in its tip pool was illegal and invalidated the tip pool. The court held that on the record before it, it was not possible to conclude that the maître d’ was a management employee rather than a properly tipped service employee.
Discussing this issue the court reasoned:
“The FLSA expressly prohibits employers from participating in employee tip pools. “Congress, in crafting the tip credit provision of section 3(m) of the FLSA did not create a middle ground allowing an employer both to take the tip credit and share employees’ tips.” Chung v. New Silver Place Rest., Inc., 246 F.Supp.2d 220, 230 (S.D.N.Y.2002); Wajcman v. Investment Corp. of Palm Beach, No. 07-80912-CIV, 2008 WL 783741, *3 (S.D.Fla. March 20, 2008) (“The theory here is that employees who exercise substantial managerial authority over the day to day operations of the business are functionally the ‘employers’ themselves”). Where employers participate in a tip pool, the pool is invalid. See Ayres v. 127 Restaurant Corp., 12 F.Supp.2d 305 (S.D.N.Y.1998) (tip pool violated FLSA where general manager, who had authority to suspend, hire and fire employees and analyze payroll costs, was allowed to participate in the pool).
Plaintiff argues that Pigall’s tip pool was invalid because Brown was a manager and shared in the pool. (Doc. 22-1.) In support of its argument, Plaintiff points to Brown’s guaranteed compensation, his participation in the opening of the restaurant, his authority to train, schedule and supervise the wait staff, and his authority to hire and fire employees. (Id.) Plaintiff cites to the depositions of Brown and de Cavel, wherein both men testified that Brown was considered part of the restaurant’s management team. (de Cavel Dep. 50:13-14; Brown Dep. 59:17-22.) These facts, Plaintiff argues, unequivocally establish that Brown was an employer for purposes of the FLSA. See Ayres, 12 F.Supp.2d at 307-08 (general manager of restaurant, who had full authority to suspend or terminate employees, supervised wait staff, made hiring decisions, assumed responsibility for budget and received weekly salary of $2000 was not an employee who “customarily and regularly received tips” under the FLSA).
Defendants agree that Brown participated in the tip pool but argue that he was not a manager and, thus, the tip pool was not invalid by virtue of the fact that Brown participated in it. Defendants point to Dole v. Continental Cuisine, Inc., 751 F.Supp. 799 (E.D.Ark.1990), to support their contention that Brown cannot be considered an employer under the Act. In Continental Cuisine, the individual in question was the maître d’ of the restaurant alleged to have violated the FLSA. 751 F.Supp. at 802-03. The maître d’ was responsible for setting up the dining room, seating and greeting customers, serving the first drink to customers, scheduling shifts for the wait staff, interviewing applicants for positions as waiters and waitresses, and recommending that persons be hired or fired. Id. at 800. Because the maître d’ did not have final authority to hire and fire employees, set wages, control restaurant operations, or control payroll, he was not considered an employer for purposes of the FLSA. Id. at 803. Defendants argue that, similar to the maître d’ in Continental Cuisine, Brown did not have the requisite managerial authority to be considered an employer under the Act.
The Court agrees with Defendants that there is a genuine issue of material fact as to whether Brown is an employer under the FLSA. Although the parties appear to agree on many of the duties that Brown performs, there is conflicting testimony regarding whether Brown had full authority to hire and fire workers and how much control Brown exercised at the restaurant. For example, although Brown testified that he made final hiring decisions, he acknowledged that he was “not at liberty to hire someone” without de Cavel first meeting with that person. (Brown dep. 53:3-54:15.) Meanwhile, de Cavel testified that Brown was part of his management team and “fire[d] a few people without [his] agreement” (de Cavel dep. 50:13-14; 20:9-10). Conversely, Brown testified that he had no responsibility “for any decision that involved spending money.” (Brown dep. 51:19-20.) Based on the current record, and construing all facts in favor of Defendants, the Court believes that genuine issues of material fact preclude summary judgment on this issue. Plaintiff’s motion for summary judgment regarding the validity of the restaurant’s tip pool is DENIED.”
To read the entire decision, click here.
EDITOR’S NOTE: In a recent decision going one step further, a court in the Northern District of Texas held on similar evidence, that as a matter of law, the inclusion of a maître d’ did not render a tip pool illegal. Rudy v. Consolidated Restaurant Companies, Inc., 2010 WL 3565418 (N.D.Tex. Aug. 18, 2010).
It is clear from both of these decisions that while there is room for the argument that inclusion of a maître d’ may render an otherwise valid tip pool invalid, it is a very fact intensive issue and plaintiff attorneys would be wise to fully develop their factual record on issues of hiring/firing powers if they prosecute these claims.
Click here, to read more about the rules, regulations and laws applicable to Tipped Employees.
D.Minn.: “Insurance Investigators” Were Non-Exempt, Because Their Duties Lacked Independent Judgment and Discretion
Ahle v. Veracity Research Co.
Among other motions, the case was before the Court on the parties’ cross-motions for summary judgment. Of note here, the parties asked the Court to determine whether Plaintiffs, who were “Insurance Investigators” qualified as Administrative Exempt or not. Holding that their duties did not require the independent judgment and discretion necessary, the Court held that Plaintiffs were non-exempt under the FLSA.
Examining the Plaintiffs’ duties the Court explained:
“Veracity is a full-service investigative firm specializing in insurance defense investigations. Answer to Compl., Defenses and Am. Counterclaim (Counterclaim) [Docket No. 29] ¶ 5. Named Plaintiffs Ahle, Jordan, and Wiseman formerly worked as investigators for Veracity. Id. ¶¶ 6-8; Collective Action Compl. [Docket No. 1] ¶¶ 4-6. Approximately 150 other individuals have opted into this litigation. The plaintiff class members are current or former investigators for Veracity.
Veracity is hired by insurance companies, third-party administrators, and law firms to investigate suspect claims. Morgan Decl., May 13, 2010 [Docket No. 186], Ex. 1 (Foster Dep.) 45:22-46:8. Veracity categorizes its investigators by title and level; the titles and levels that are at issue in this litigation are surveillance investigators (levels 1-3), claims investigators (level 4), and senior field investigators (level 5). Morgan Decl., May 13, 2010, Ex. 2 (Doyle Dep.) 60:10-19. Surveillance investigators primarily work in the field conducting surveillance, undercover investigations, and background checks. Id. 50:15-21; Foster Aff ., July 7, 2009 [Docket No. 59], ¶ 7. Claims investigators generally perform the same duties as surveillance investigators, but they also interview witnesses, obtain statements, take photographs, and, occasionally, perform sales functions. Foster Aff., July 7, 2009, ¶¶ 8, 10-11. Senior field investigators supervise and manage surveillance and claims investigators in the field, train new investigators, and perform occasional promotion and sales duties. Id. ¶ 13. Thus, all of the titles and levels of investigators at issue have in common some surveillance duties, although the parties dispute whether the primary duty of investigators in each of these titles and levels is surveillance.
After receiving an assignment from Veracity but before driving to the surveillance site, the investigator typically completes several tasks including reviewing the assignment sheet, performing a background check on the subject, matching the name of the subject to an address, mapping out directions to the surveillance site, and ensuring that the investigator’s camera, laptop computer, and cellular phones are fully charged. Morgan Decl., May 13, 2010, Ex. 8 at VRC001063-64. According to Plaintiffs, investigators also are required to perform maintenance including cleaning the windows and filling the fuel tank on their vehicles before leaving for a surveillance site. Morgan Decl., May 13, 2010, Exs. 13, 14, ¶ 6. At the surveillance site, investigators monitor and video record the subject and take notes of their observations. Morgan Decl., May 13, 2010, Ex. 13, ¶ 5. Claims investigators may also interview witnesses, obtain statements, and collect documents. Foster Dep. 149:7-23.
Investigators record their activities in a daily investigative report (“DIR”). Morgan Decl., May 13, 2010, Exs. 13, 14 ¶ 7. An investigator’s DIR discloses when the investigator left home for the surveillance site, the drive time, the arrival time, observation notes, the departure time from the site, and the arrival time back at the investigator’s home. Id. Once completed, the investigator sends the DIR online to Veracity. Id. Investigators send any video recording taken during the day to their managers by depositing the tapes at a FedEx drop-off location. Id .
The dispute in this action centers on whether Plaintiffs, given their daily duties, were properly classified as FLSA “exempt” employees who are not required to be paid overtime for work in excess of forty hours per week. Based on Veracity’s founders’ view of the “industry standard,” Veracity classified its investigators as exempt when it began business in 1995. Doyle Dep. 15:10-17:6. Plaintiffs initiated this action on January 8, 2009, claiming that they were improperly classified as exempt and, therefore, were wrongfully denied compensation for overtime hours allegedly worked while employed by Veracity as investigators.”
After concluding that it lacked information sufficient to determine whether the second prong of the Administrative Exemption was met or not here, the Court held that Defendant could not, as a matter of law, establish that Plaintiffs’ activities required the independent judgment and discretion required for application of the exemption:
“Discretion and Independent Judgment
Although claims investigations is directly related to the management or general business operations of Veracity’s clients, such a primary duty must also involve the exercise of discretion and independent judgment with respect to matters of significance for claims investigators to meet the final element of the definition of administrative employees. DOL regulations explain that “the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.” 29 C.F.R. § 541.202(a).
Factors to be considered when determining whether an employee exercises discretion and independent judgment with respect to matters of significance include, but are not limited to: whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices; whether the employee carries out major assignments in conducting the operations of the business; whether the employee performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business; whether the employee has authority to commit the employer in matters that have significant financial impact; whether the employee has authority to waive or deviate from established policies and procedures without prior approval; whether the employee has authority to negotiate and bind the company on significant matters; whether the employee provides consultation or expert advice to management; whether the employee is involved in planning long- or short-term business objectives; whether the employee investigates and resolves matters of significance on behalf of management; and whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances. Id. § 541.202(b). “The exercise of discretion and independent judgment implies that the employee has the authority to make an independent choice, free from immediate direction or supervision,” but “employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level,” and discretion and independent judgment can “consist of recommendations for action rather than the actual taking of action.” Id. § 541.202(c). However, “[t]he exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.” Id . § 541.202(e).
In support of their argument that the duties of the claims investigators do not involve the exercise of discretion and independent judgment regarding matters of significance, Plaintiffs again cite Gusdonovich, as well as Fenton v. Farmers Insurance Exchange, 663 F.Supp.2d 718 (D.Minn.2009), a case from this district. In Gusdonovich, the court concluded that the insurance “investigators were merely applying their knowledge and skill in determining what procedure to follow, which … is not the exercise of discretion and independent judgment contemplated by the [DOL] regulation[s].” 705 F.Supp. at 265.
The plaintiffs in Fenton were insurance investigators employed by a company to investigate potentially fraudulent insurance claims. 663 F.Supp.2d at 721. The court held that the job duties of such “special investigators” did not involve a sufficient exercise of discretion and independent judgment to qualify for the administrative exemption. Id. at 726. Instead, the special investigators’ job duties were “sufficiently aligned with the employment circumstances” of (1) the insurance investigators who were the plaintiffs in Gusdonovich, (2) the employees performing background investigations discussed in the 2005 DOL Opinion Letter, and (3) the police investigations addressed in DOL regulation 29 C.F.R. § 541.3(b)(1). Id. at 726. In reaching that conclusion, the court noted that the employer’s written guidelines explained in great detail how the investigators should approach issues that often arise in conducting and documenting an investigation, there was “nothing in the residual discretion available to investigators that [was] sufficient to justify exemption,” and there was no dispute that the investigator’s subjective opinions and conclusions were excluded from their written reports. Id. at 726-27. In addition, written guidelines instructed the investigators to include, with equal detail and emphasis, all inculpating and exculpating information in their reports, and investigators had no authority to determine whether a claim should be denied or whether the insurance company should seek to negotiate a settlement. Id. at 727.
Like in Gusdonovich and Fenton, Plaintiffs’ duties as claims investigators for Veracity do not involve a sufficient degree of discretion and independent judgement with respect to matters of significance. Claims investigators do not have the discretion to decide when to conduct an investigation, where to conduct it, or the length of time to spend on it. Morgan Decl., May 13, 2010, Ex. 13, ¶ 6. In addition, Veracity does not allow claims investigators to (1) make any recommendations or give their opinions as to whether fraud occurred when submitting their DIRs or (2) recommend or participate in the decision whether to deny or pay a claim or whether to conduct further investigation. Id. ¶ 8. Furthermore, Plaintiffs’ declarations state that they received guidelines and manuals describing how claims investigations are conducted and that they are “expected to follow such guidelines and manuals when conducting day-to-day investigations.” Id. ¶ 11. For example, a Veracity document entitled “Introduction to Claims Investigation and Responsibilities” informs claims investigators as follows:
Your job will be to obtain facts that relate to a specific claim. This will include, but is not limited to, taking recorded statements from the person making the claim …, witnesses to the specific incident, [and] persons that may have direct knowledge about the incident…. Your responsibility is to get the facts of the case by means of questioning or research. At times you will be called upon to obtain needed documentation to include medical records, receipts …, employment information, and police reports. You will have to develop comprehensive investigative and communication skills, and you must be able to decide which leads must be followed, and which ones should be reported but need no further effort.
One of the most challenging areas of [your job as a claims investigator] will be your ability to transfer the information that you gather into a coherent and informative report…. [I]n most cases you will not have the opportunity to speak directly with the client and therefore your report must be accurate, concise, easily understood, and complete. Morgan Decl., May 13, 2010, Ex. 9 at VRC001154.
The manual includes outlines to follow when taking a recorded statement in all investigations and in particular types of investigations (e.g., employment injuries, motor vehicle accidents resulting in deaths, products liability, property loss or theft, vehicle or property damage). Id. at VRC001167, 1176, 1216, 1230, 1233, 1240. Although claims investigators are not required to follow the outlines verbatim, the outlines do command, in several instances, that some specific information is not optional, employing language such as, “must be on every recorded statement,” “must be covered,” or “must be asked.” Id. at VRC001167, 1176, 1216, 1230, 1233, 1240. Furthermore, the outlines instruct investigators to “obtain all of the facts,” and remind the claims investigators that it is Veractiy’s responsibility to “obtain the information and then let the [client] and their legal department make the determination.” Id. at VRC001230.
The record establishes that (1) Veracity’s written guidelines explain in great detail how claims investigators should conduct an investigation, (2) the claims investigators are required to obtain all the facts regardless of their impact, and (3) the claims investigators do not include their own opinions, conclusions, or recommendations regarding the decision whether to pay or deny the claim. Because the claims investigators do not provide opinions and conclusions about their investigative observations, they are significantly different than the insurance investigators in Foster v. Nationwide Mutual Insurance Co. See 695 F.Supp.2d 748, 761 (S .D.Ohio 2010) (concluding that genuine issues of material fact exist as to whether the plaintiffs, insurance investigators, exercised discretion and independent judgment because “[m]ost significantly, there is a factual dispute as to whether Special Investigators’ primary duty encompasses providing their opinions and conclusions regarding their investigative findings”). Admittedly, claims investigators do make decisions regarding the precise manner in which they conduct an investigation-creating action plans, deciding who to interview, what documents to review, what leads to follow, and whether to recommend hiring an expert-however, such decisions are more appropriately viewed as choices among “established techniques, procedures or specific standards described in manuals or other sources,” which do not amount to the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.202(a), (e); see also 2005 Opinion Letter at 4-5 (advising that “prioritizing the pursuit of particular leads, assessing whether the leads … have provided information that requires further investigation, determining which potential witnesses to see and which documents to review, and making similar decisions that promote effective and efficient use of … work time in performing assigned investigative activities” do not involve the exercise of discretion and independent judgment with respect to matters of significance); Auer v. Robbins, 519 U.S. 452, 461 (1997) (stating that the DOL’s interpretation of its own regulations are “controlling unless plainly erroneous or inconsistent with the regulation”).
The cases cited by Veracity are unavailing. In Stout v. Smolar, the court viewed evidence that a private investigator had the authority to make decisions as to how to “investigate the scene of an accident, including determining what materials to be preserved and whether expert witnesses would be required” as showing that the investigator exercised discretion and independent judgment. No. 1:05-CV-1202, 2007 WL 2765519, at *6 n. 2 (N.D.Ga. Sept. 18, 2007). The court also commented that treating insurance investigators as not qualifying for the administrative exemption “would appear contrary to the insurance claims adjuster example of administrative exemption cited by the [DOL].” Id. This Court finds more persuasive the reasoning in DOL regulations, cases such as Fenton, and the 2005 Opinion Letter, which suggest that having discretion over the types of matters discussed in Stout does not equate to having discretion and independent judgment with respect to matters of significance. See Foster, 695 F.Supp.2d at 761 (recognizing, in light of the 2005 Opinion Letter, that deciding who to interview, what documents to review, what leads to pursue, and “similar tactical matters” were “fact-finding logistics [that] do not necessarily rise to the level of discretion and independent judgment contemplated by DOL regulations, for they do not amount to matters of significance”).
Equating Veracity’s claims investigators to claims adjusters is not a fair comparison or particularly helpful. The core function of a claims adjuster is to decide whether and to what extent an insurance claim should be paid, a task that requires considerable exercise of discretion on a matter of significance. Inclusion of the term “adjuster” in the title of the job strongly suggests that conclusion. All employees exercise some discretion in deciding how to perform their jobs, and the way in which they exercise that discretion likely will affect matters of significance. In the case of claims investigators, how they exercise their discretion in conducting an investigation will impact or affect how a claims adjuster working for one of Veracity’s clients decides the significant matter of the value of the claim. But an exercise of discretion that impacts or affects a matter of significance is not exercising discretion with respect to a matter of significance. If the rule were otherwise, all employees would arguably meet the third element of the definition of administrative employees. Because the analogy to claims adjusters is not persuasive, Veracity’s reliance on cases such as Roe-Midgett, 512 F.3d at 874, where the Seventh Circuit held that claims adjusters routinely used their discretion and independent judgment to make choices that impact damage estimates, settlement, and other matters of significance, does not alter the result here.
The Court concludes that Veracity has failed to demonstrate a triable issue as to whether the duties of claims investigators include the exercise of discretion and independent judgment with respect to matters of significance. Because claims investigators do not meet the third element of the definition in 29 C.F.R. § 541.200(a), they do not qualify for the administrative exemption.”
Not discussed here, the Court also held that the Plaintiffs lacked the requisite duties to be deemed outside sales exempt. Further, the Court held that certain time claimed as compensable by the Plaintiffs was not and that the appropriate method for determining Plaintiffs damages–as “salaried misclassified” employees was the Fluctuating Workweek (“FWW”), adopting the reasoning in the recent Seventh Circuit decision discussed here. Lastly, the Court denied Defendant’s motion for decertification of the collective action.
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5th Cir.: As Plaintiffs’ Joint Employer, Staff Leasing Company Qualified As “Motor Carrier” Subject To MCA Exemption From FLSA’s Overtime Pay Requirements, Because “Actual” Employer Was A “Motor Carrier”
Songer v. Dillon Resources, Inc.
This case was before the Fifth Circuit on Plaintiffs’ appeal of an Order granting Defendant, a staff leasing company, summary judgment finding that they were entitled to assert the MCA exemption, because the company they leased Plaintiffs to was a motor carrier entitled to assert the exemption. The Fifth Circuit affirmed the decision, essentially holding that the staff leasing company Defendant was entitled to assert the exemption of the actual employer.
Plaintiffs did not dispute that Sunset Ennis and Sunset Logistics (the “actual” employers), two trucking companies, were motor carriers subject to the Secretary’s power. Instead, they argued that Dillon, a staff leasing agency, was not a motor carrier within the meaning of the MCA. Defendants assert that because the Sunset companies are motor carriers and the Sunset companies are joint employers with Dillon, Dillon is also a motor carrier within the meaning of the MCA.
Reasoning that the the staff leasing company was entitled to assert the Motor Carrier Exemption, if the “actual” employer was entitled to assert same, the Fifth Circuit stated:
“While Fifth Circuit precedent is limited on this issue, other courts have held that a staff leasing company who provides employees for a motor carrier and operates as a joint employer with the carrier meets the requirements of 29 C.F.R. § 782.2(a)(1). See, e.g., Moore v. Universal Coordinators, Inc., 423 F.2d 96, 99-100 (3d Cir.1970) (holding that truck drivers were employees of both noncarrier truck driver leasing company and private motor carrier and therefore MCA exemption extended to leasing company). The Moore court analyzed the MCA and the FLSA, and determined that Congress intended to regulate employees of carriers in the interest of safety. Id. at 99. Therefore, the Secretary’s power had to extend to leased drivers and to the leasing company that employed them. Id. at 99-100.
In a more recent case, the district court cited Congressional safety concerns as the rationale for extending the exemption:
The [MCA] exemption, as explained in Moore, safeguards the Secretary[‘s] authority to regulate the qualifications and maximum hours of employees whose work affects the “safety of operation” of a motor carrier…. Refusing to extend the [MCA] exemption to the staffing agency defendants would therefore facilitate what Congress sought to prohibit-circumvention of the Secretary’s regulatory authority. Tidd v. Adecco USA, Inc., No. 07-11214-GAO, 2010 WL 996769, at *2 (D.Mass. Mar.16, 2010) (citing Moore, 423 F.2d at 98-99).
Applying Moore and Tidd, the evidence supports a finding that Dillon, as joint employer with Sunset Logistics and Sunset Ennis, is a carrier subject to the Secretary’s jurisdiction. Dillon is a staff leasing company who provides drivers to Sunset Logistics and Sunset Ennis to fulfill interstate work orders from clients for compensation. Our review of the record reflects the following evidence: Dillon hires and trains the drivers and is responsible for their payroll, the Sunset companies are responsible for control of the drivers’ day-to-day operations, and Dillon is reimbursed for wages and benefits paid to the drivers and receives a fee when the drivers are assigned. These facts are similar to Tidd, in which the staffing agency defendants were held as joint employers to FedEx, a motor carrier, and, therefore, subject to the Secretary’s jurisdiction. See Tidd, 2010 WL 996769, at *2-3. Accordingly, we hold that the first requirement for jurisdiction under the MCA-i.e., that Plaintiffs work for carriers engaged in interstate commerce-is met. See Barefoot, 1994 WL 57686, at *2.”
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