E.D.N.Y.: FLSA Defendants Not Entitled To Discovery Of Plaintiffs’ Full Tax Returns; Motion For Protective Order Granted
Melendez v. Primavera Meats, Inc.
Before the court was plaintiffs’ motion for a protective order barring defendants from obtaining their income tax returns. Reasoning that the defendants failed to show a compelling need for same to overcome the plaintiffs’ privacy rights, the court granted the plaintiffs’ motion.
Framing the issue, the court explained:
“Defendants have served a discovery demand seeking production of federal and state income tax returns for various time periods for each plaintiff. Plaintiffs seek a protective order arguing that the tax returns are not relevant and that the requests are improper attempts to ascertain the immigration status of each plaintiff. Defendants respond that they are uninterested in the immigration question, but seek the information to determine the identity of plaintiffs’ employers.”
The court reasoned:
“Although income tax returns are not inherently privileged, courts are typically reluctant to compel their disclosure because of both ‘the private nature of the sensitive information contained therein’ and ‘the public interest in encouraging the filing by taxpayers of complete and accurate returns.’ “ Carmody v. Village of Rockville Centre, 2007 WL 2042807, at *2 (E.D.N.Y. July 13, 2007) (quoting Smith v. Bader, 83 F.R.D. 437, 438 (S.D.N.Y.1979)). In determining whether to compel discovery of tax returns, the court applies a two prong test: “(1) the tax returns must be relevant to the subject matter of the action, and (2) a compelling need must exist because the information is not readily obtainable from a less intrusive source.” Sadofsky v. Fiesta Prods., LLC, 252 F.R.D. 143, 149 (E.D.N.Y.2008) (citations omitted). The modern trend places the burden on the party seeking the discovery to establish both prongs of this test. See Uto v. Job Site Servs., Inc., — F.Supp.2d —-, 2010 WL 3700239, at *4 (E.D.N.Y. Sept. 20, 2010); see also Carmody, 2007 WL 2043807, at *2.
As the party seeking discovery in this case, the defendants first bear the burden of showing the relevance of the tax returns to the instant action. Defendants argue that the tax returns are relevant since they will identify other employers of the plaintiffs. As defendants apparently claim that they never employed these plaintiffs, they further argue that the tax returns are “relevant as to how much the plaintiffs were paid by these defendants, if they were paid by these defendants at all.” Defs.’ ltr at 1. Plaintiffs respond that the tax returns are irrelevant because even if they reflect the existence of other employers, the returns would not indicate how many hours plaintiffs worked for a particular employer.
Even assuming, arguendo, that the tax returns are relevant, defendants must also establish the second prong of the test-that they have a compelling need for these items because the information is not readily obtainable from a less intrusive source. Sadofsky, 252 F.R.D. at 150 (citations omitted). Defendants offer only a conclusory statement that “there is no other means by which the defendants in this case can establish that someone other than themselves were the plaintiffs’ employer” and a rhetorical question posed to plaintiff’s counsel as to what less intrusive methods might exist. Defendants have singularly failed to establish that the information sought cannot be obtained from a less intrusive source and thus have not met their burden.
As to defendants’ argument regarding the amounts paid by them to the plaintiffs, their own records should reflect this information. Interrogatories, demands for non-tax return documents, and/or inquiries during depositions are discovery devices that apparently have not yet been utilized by defendants. The same devices can be used to obtain discovery regarding any other entities that may have employed the plaintiffs during the relevant time periods. Defendants could, for example, pose interrogatories to determine plaintiffs’ employment history during the relevant time period or question plaintiffs during depositions concerning the number of hours they worked. Carmody, 2007 WL 2042807, at *3 (citing Sabetelli v. Allied Interstate, Inc., 2006 WL 2620385, at *1 (E.D.N.Y. Sept. 13 2006)). Here, there is no representation from defendants that they have attempted to retrieve the information sought from plaintiff’s through discovery of other documentary evidence such as financial records, or “through the use of any other, less intrusive, discovery device.” Carmody, 2007 WL 2042807, at *3.
For the foregoing reasons, plaintiffs’ motion for a protective order is granted. This ruling may be re-visited upon motion by the defendants, provided they can demonstrate that they have unsuccessfully attempted to obtain the information by other methods.”
The Pittsburgh Post-Gazette reports that a new law defining who is an employee (versue independent contractor) is being greated enthusiastically by Pennsylvania workers:
“Union laborers are claiming victory now that Gov. Ed Rendell has signed a law aimed at curtailing construction companies’ ability to skirt taxes — and cut its own costs and liability — by labeling its workers independent contractors.
By classifying their workers as “independent contractors” instead of employees, companies can avoid paying unemployment compensation and workers’ compensation taxes.
Avoiding those taxes, according to labor groups, reduces employer costs and allows such companies to underbid contracting companies that are following the letter of the law.
The new law — formerly House Bill 400 and now Act 72 — is called the Construction Workplace Misclassification Act. Contracting companies that violate the act could be subject to fines and criminal prosecution. There’s also an “acting in concert” provision, which would penalize anyone who knowingly hires a contractor that is in violation of the act.
“It really will start to separate responsible contractors from irresponsible contractors,” said Jason Fincke, executive director of the Builders Guild of Western Pennsylvania, a labor management and contractor association group.
The point of the law isn’t to eliminate the use of independent contractors in the construction industry, he said.
“If there’s a service that you need that you don’t normally provide, you would get someone to do that for you,” Mr. Fincke said. “That’s a legitimate independent contractor.”
The law applies to the construction field only, to the regret of the Teamsters, who had hoped the law would be expanded to include truck drivers (and other kinds of workers) as well. The Teamsters have been fighting with Moon-based FedEx Ground, which classifies its drivers independent contractors. FedEx says its drivers are “small business owners” because they own their own equipment.”
To read the entire article go to Pittsburgh Post-Gazette.
E.D.Va.: Notwithstanding Prior Conditional Certification Of Almost Identical Class, Class Conditionally Certified
Pollard v. GPM Investments, LLC
This case was before the court on the plaintiff’s motion for conditional certification. The defendant opposed the motion on several grounds. As discussed here, the court rejected the defendant’s arguments that conditional certification was inappropriate because: (1) the case and proposed class were largely duplicative of another case that had previously been certified, and (2) the plaintiffs had waited too long to move for conditional certification.
Rejecting the defendant’s argument that the case was not appropriate for certification, due to another almost identical case, that had previously been certified, the court stated:
“A class action filed in the District of Connecticut makes nearly identical allegations against Defendant as the instant case. Store managers who worked for Defendant between March 14, 2005, and October 22, 2008 received notice of the Connecticut litigation and were invited to join the class action. Plaintiffs argue that the Court should order that notice of the present litigation be issued to all store managers employed by Defendant since February 22, 2007, including those who received notice of the Connecticut litigation. Plaintiffs assert that the store managers who were given notice of the Connecticut litigation and those who joined that litigation should be given the opportunity to join the instant litigation to ensure that they are properly compensated for the overtime hours they may have worked since the Connecticut litigation’s notice period. Plaintiffs further assert that choosing not to join one § 216(b) action should not preclude a person from joining another action.
Defendant, on the other hand, argues that the Court should limit notice to (1) deli managers and (2) store managers who were not noticed in Connecticut case. Defendant states that this is fair because one of the goals of § 216(b) is to avoid “a multiplicity of duplicative suits….” Hoffmann, 493 U.S. at 172. Defendant also asserts that it is not asking the Court to limit or prohibit a second FLSA class action that has the same pool of plaintiffs. Instead, Defendant asks the Court to put the burden on Plaintiffs to show that the rights of the potential class members who received notice but did not join the Connecticut litigation will be prejudiced if they are not given a second opportunity to opt-in. Defendant argues that Plaintiffs cannot satisfy this burden because there is no evidence that the store managers who received notice of the Connecticut case and declined to join would be prejudiced if they did not receive a second notice. Defendant also asserts that the forty-eight store managers who are already plaintiffs in the Connecticut case should not be re-noticed because they chose to join the Connecticut litigation and that decision should not be disturbed.
Defendant has imposed upon Plaintiffs a burden where none exists. Furthermore, Defendant acknowledges that there is no authority that limits the right of potential plaintiffs to receive notice of § 216(b) lawsuits. As such, the Court will not impose this burden on Plaintiffs. To the extent Defendant believes potential class members should not be permitted, Defendant may raise those arguments at the second stage of the process.”
Rejecting the defendant’s argument regarding the timeliness of plaintiff’s motion, the court stated:
“Defendant argues that Plaintiffs unreasonably delayed in bringing the instant Motion in an attempt to obtain a four or five month delay in the trial of this matter. Defendants note that Plaintiffs waited nearly six months after filing the Complaint to request Court-supervised notice pursuant to § 216(b) of the FLSA. Because Plaintiffs’ requested notice period would expire after the November 22, 2010 trial date in this matter, Defendants argue that Plaintiffs’ request is untimely and should be denied. Plaintiffs assert that Defendant has made no argument that it has been prejudiced by Plaintiffs’ delay in bringing the Motion and that continuing the trial date should not present an issue because “[t]he judicial system benefits by efficient resolution in one proceeding of common issues of law and fact arising from the same alleged discriminatory activity.” Hoffman, 493 U.S. at 170.
Because Defendant has not shown that it has suffered prejudice due to the timing of Plaintiffs’ Motion, the Court finds that the Motion is not untimely.”
M.D.Tenn.: FLSA Defendant’s Counterclaim Seeking Declaratory Judgment That Plaintiff Was Exempt Dismissed, Because It Mirrored Plaintiff’s Claim
Richmond v. Centurion Exteriors, Inc.
This case was before the court on Plaintiff’s motion to dismiss the Defendant’s counterclaim, which sought a declaratory judgment that Plaintiff was exempt from the FLSA’s overtime provisions. Because the Plaintiff had made an identical claim for declaratory judgment that the Defendant had misclassified him as exempt, the court dismissed the counterclaim.
Discussing the duplicative counterclaim, the court reasoned:
“In his complaint, Richmond alleged four legal claims, including a violation of the Fair Labor Standards Act (“FLSA”) based upon Defendants’ alleged failure to pay Richmond, a nonexempt employee, wages and overtime for all hours worked before his employment was terminated. (Docket No. 1, Complaint ¶¶ 21, 35-40 (Count I).) Among various forms of relief, Richmond requested a declaratory judgment that the practices he complains about are unlawful. (Id. at 9.) In the answer, Defendants denied the FLSA allegations and raised as an affirmative defense that the FLSA does not apply because Richmond was an “outside salesman” pursuant to 29 U.S.C. § 213 and thus, an exempt employee who was not covered by the FLSA. In addition, Defendants filed a counterclaim seeking a declaratory judgment that Richmond was an exempt employee. (Docket No. 9, Answer at 6-7, 10-11.)
Richmond now seeks dismissal of the counterclaim under Federal Rule of Civil Procedure 12(b)(6) on the ground that the counterclaim is a mirror image of his own claim and Defendants do not allege factual or legal issues different from those raised in the complaint. Defendants emphasize that they carry the burden to prove that Richmond was an exempt employee, and that their counterclaim could have been brought as a separate declaratory judgment action. Additionally, they believe their declaratory judgment request is proper because a ruling could impact the way Centurion classifies current and future employees under the FLSA or a ruling may have ramifications on enforcement actions of the federal government with respect to Richmond’s claim. Defendants also want to assure their ability to obtain a declaratory judgment that Richmond was an exempt employee even if Richmond decides to dismiss his lawsuit voluntarily.
The Sixth Circuit apparently has not addressed this issue outside the patent context. In Dominion Elec. Mfg. Co. v. Edwin Wiegand Co., 126 F.2d 172, 173-74 (6th Cir.1942), the court held that a counterclaim in a patent infringement suit should not have been dismissed prior to trial, but in so holding the court recognized the unique situation often presented in patent cases where defendants seek declaratory judgments on issues beyond the scope of the complaint. In other types of cases, district courts “have disagreed on the proper treatment of so-called ‘mirror-image’ counterclaims.” Erickson v. Brock & Scott, PLLC, 2009 WL 4884424 at *3 (W.D.Tenn. Dec.8, 2009). Some district courts have dismissed counterclaims because they are redundant to the complaint, while other courts have not. Id. (and cases cited therein).
A district court in Ohio found that these “cases are not necessarily at odds.” Pettrey v. Enterprise Title Agency, Inc., 2006 WL 3342633 at * 3 (N.D.Ohio Nov.17, 2006). Relying on 6 Wright, Miller & Kane, FEDERAL PRACTICE & PROCEDURE 2D § 1406, the Pettrey court determined the focus should be on whether the counterclaim serves any useful purpose. Id. If it cannot be determined early in the litigation if the counterclaim is identical to the complaint, “ ‘the safer course for the court to follow is to deny a request to dismiss a counterclaim for declaratory relief unless there is no doubt that it will be rendered moot by the adjudication of the main action.’ ” Id. (quoting 6 Wright, Miller & Kane, FEDERAL PRACTICE & PROCEDURE 2D § 1406). On the other hand, the court should dismiss a redundant counterclaim when it is clear that there is complete identity of factual and legal issues between the complaint and the counterclaim. Id. (citing Aldens, Inc. v. Packel, 524 F.2d 38, 51-52 (3d Cir.1975)). In Pettrey the district court “harbor[ed] no doubt whatsoever that Defendants’ declaratory judgment counterclaims will be rendered moot by the adjudication of Plaintiffs’ claims [,]” and dismissed the counterclaims, distinguishing the case from the patent infringement context in Dominion. Id.
Applying a similar analysis here, the Court concludes that Defendants’ counterclaim raises factual and legal issues identical to those stated in the complaint, and the counterclaim will be rendered moot upon adjudication of the complaint. See id.; Aldens, Inc., 524 F.2d at 51-52; Mille Lacs Band of Chippewa Indians v. State of Minnesota, 152 F.R.D. 580, 582 (D.Minn.1993); Resolution Trust Corp. v. Ryan, 801 F.Supp. 1545, 1556 (S.D.Miss.1992). Defendants secured their opportunity to litigate whether Richmond was an exempt employee by raising that issue as an affirmative defense, on which they carry the burden of proof. See Franklin v. Kellogg Co., — F.3d —-, 2010 WL 3396843 at *4 (6th Cir.2010); Baden-Winterwood v. Life Time Fitness, Inc., 566 F.3d 618, 626 (6th Cir.2009). Even if Richmond decides to dismiss his case voluntarily, Defendants have not identified any case or controversy that would remain for adjudication so that Defendants would have standing to proceed and the Court would possess jurisdiction to render a proper decision, and not an advisory opinion. See Fieger v. Michigan Supreme Court, 553 F.3d 955, 961 (6th Cir.2009) (holding Article III and Declaratory Judgment Act allow district court to enter declaratory relief only in case of actual controversy where plaintiff has standing).
Accordingly, Richmond’s Motion To Dismiss Counterclaim (Docket No. 11) is hereby GRANTED and Defendants’ counterclaim is hereby DISMISSED for failure to state a claim under Rule 12(b)(6).”
S.D.N.Y.: Court Refuses To Allow “Settlement” That Grossly Undervalued FLSA Claims To Serve As Basis For Summary Judgment
Latacela v. Cohen
This case involved an action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., for unpaid minimum wages and unpaid overtime wages. The case was before the court on defendants motion for summary judgment and for judicial approval of a settlement allegedly reached by the parties. The plaintiff opposed the defendants’ motion on the basis that he had withdrawn support for the settlement because the sum certain agreed to by the parties was based on faulty calculations by the plaintiff. Plaintiff asserted that he had mistakenly calculated that he was owed $1,415.82 in unpaid minimum wages, rather than $14,170. This miscalculation also affected the amount the plaintiff claimed in liquidated damages, since employees are entitled to liquidated damages (in addition to back wages) equal to the amount of unpaid wages. 29 U.S.C. § 216(b).
Denying the defendants’ motion, the court reasoned:
” ‘There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under [29 U.S.C. § 216(c) ], the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. Second [sic] when employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.’ Manning v. New York Univ., 2001 WL 963982 (S.D.N.Y. Aug. 22, 2001). Even assuming that the agreement defendant presses the Court to approve remains valid, the Court is not satisfied that it is fair. Under the agreement, the plaintiff would receive approximately $28,000 less than the amount he claims he is owed not for strategic reasons, but rather because plaintiff’s counsel made an arithmetical error. Cf. Elliot v. Allstate Investigations, Inc., 2008 WL 728648, at *2 (S.D.N.Y. Mar. 19, 2008) (approving settlement of less than half the amount plaintiff claims he was owed under the FLSA when the plaintiff could not support his claims through documentary evidence and the defendant could not pay more than the amount agreed to).
Accordingly, defendant’s motion for summary judgment is DENIED.”
Click Latacela v. Cohen to read the entire opinion.
S.D.Tex.: Upon Reconsideration, Pharmaceutical Reps Nonexempt; Court Elects To Adopt Second Circuit’s Reasoning
Harris v. Auxilium Pharmaceuticals, Inc.
This case was before the court on Plaintiff’s Motion for Reconsideration of the court’s prior decision granting Defendant’s Motion for Summary Judgment. The court had previously held that the Plaintiff’s, pharmaceutical representatives were exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) under both the administrative and outside sales exemptions. Plaintiff sought reconsideration in light of the United States Secretary of Labor’s amicus curiae brief filed in In re Novartis Wage and Hour Litigation. Granting the Plaintiff’s Motion, the court reversed itself, finding that the Second Circuit’s recent opinion was more persuasive than the contrary jurisprudence.
Discussing the exemption issues, the court reasoned:
“In its previous order, this Court determined that Harris could not bring a FLSA claim because her position as a Medical Sales Consultant (“MSC”), or pharmaceutical representative, took her out of FLSA’s purview. This Court found that the MSC position was exempt from FLSA under the “administrative” and “outside sales” exemptions.
Shortly after this Court’s order came out, the Department of Labor (“DOL”) filed an amicus curiae brief in a case then pending before the Second Circuit, In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2010). In Novartis, The DOL argued that, under its regulations, pharmaceutical representatives “do not meet the requirements for either the outside sales or administrative exemption.” (Br. for the Secretary of Labor as Amicus Curiae in Supp. of Pls.-Appellants, Doc. No. 106-2, at 5.) Regarding the outside sales exemption, the DOL noted that, “[b]ecause the [pharmaceutical representatives] do not sell any drugs or obtain any orders for drugs, and can at most obtain from the physicians a non-binding commitment to prescribe NPC’s drugs to their patients when appropriate, [they] do not meet the regulation’s plain and unmistakable requirement that their primary duty must be ‘making sales.’ “ (Id. at 10.) Under the administrative exemption, the DOL noted that, although pharmaceutical representatives work independently, that “does not suffice to qualify for the administrative exemption; [the representatives] do not perform any primary duties that are largely comparable to those found in 29 C.F.R. § 541.202(b), such as formulating or implementing management policies, utilizing authority to deviate from established policies, providing expert advice, or planning business objectives.” (Doc. No. 106-2, at 21.)
While this motion for reconsideration was pending at this Court, the Second Circuit concluded that under the DOL’s regulations, pharmaceutical representatives are not outside salesmen or administrative employees for the purposes of FLSA’s overtime pay requirements. Novartis, 611 F.3d at 149. The Novartis court determined that the DOL’s interpretations were “entitled to ‘controlling’ deference,” id., under the Supreme Court’s decision in Auer v. Robbins, 519 U.S. 452, 461 (1997).
After a review of the applicable authority, this Court adopts the reasoning of the Second Circuit and holds that Plaintiffs are not outside salesmen or administrative employees under FLSA. This Court recognizes that district courts are split on the issue, and that some courts have specifically rejected the DOL’s reasoning as set forth in its Novartis amicus brief. See, e.g., Christopher v. SmithKlein Beecham Corp., 2010 WL 396300, at *1-2 (D.Ariz. Feb. 1, 2010). In this Court’s opinion, however, the Novartis court sets forth a persuasive and reasoned analysis for its deference to the DOL’s interpretation of its regulations. As the Novartis court pointed out, the DOL’s interpretations “do far more than merely parrot the language of the FLSA,” and are therefore “entitled to ‘controlling’ deference unless those interpretations are ‘plainly erroneous or inconsistent with the regulation.’ “ 611 F.3d at 153 (quoting Auer v. Robbins, 519 U.S. 452, 461 (1997)). This Court further agrees that no such error or inconsistency exists. Id.
Auxilium points this Court to two opinions in the Third Circuit that came to the opposite conclusion on this question: Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir.2010), and Baum v. AstraZeneca LP, 372 F. App’x 246 (3d Cir.2010). Neither of these cases, however, considers the impact of the DOL’s amicus brief on their decisions. Therefore, they do not provide a reasoned counterweight to the Second Circuit’s analysis.”
EDITOR’S NOTE: There continues to be a split of authority with respect to whether pharmaceutical representatives are exempt or nonexempt under the FLSA. Within the last week, another court, analyzing the very same issue–whether reconsideration (of an order granting defendant summary judgment) in light of the Novartis ruling and the DOL’s amicus brief(s) was warranted–another court held that the decision was not due to be reconsidered and allowed its prior decision to stand. Schaefer-Larose v. Eli Lilly and Co., 2010 WL 3892464, at *1 (S.D. Ind. Sept. 29, 2010).
According to a DOL press release just issued:
A proposed rule that seeks to improve the H-2B temporary nonagricultural worker program and better protect American workers has just been promulgated. “The proposed rule, to be published in the Federal Register tomorrow, addresses the calculations used to set wage rates for H-2B workers.
The H-2B program allows the entry of foreign workers into the U.S. when qualified American workers are not available and when the employment of foreign workers will not adversely affect the wages and working conditions of similarly employed American workers. The H-2B program is limited by law to a program cap of 66,000 visas per year…
The previous administration promulgated H-2B regulations and did not seek comment in the rulemaking process on the data used to set wage rates. Since the 2008 final rule took effect, however, the department has grown increasingly concerned that the current calculation method does not adequately reflect the appropriate wages necessary to ensure American workers are not adversely affected by the employment of H-2B workers. On Aug. 30, the U.S. District Court for the Eastern District of Pennsylvania ruled that the regulations issued by the department in 2008 had violated the Administrative Procedure Act. The court ordered the department to promulgate new rules that are in compliance with the APA concerning the calculation of the prevailing wage rate in the H-2B program no later than 120 days from the date of the order. Today’s announcement begins the process of complying with the order and with achieving the department’s goal of fully protecting the job opportunities and wages of American workers. The department anticipates a future rulemaking that will address other aspects of the H-2B program.
The proposed regulation would require employers to pay H-2B and American workers recruited in connection with an H-2B job application a wage that meets or exceeds the highest of: the prevailing wage, the federal minimum wage, the state minimum wage or the local minimum wage.
Under the proposed rule, the prevailing wage would be based on the highest of the following:
- Wages established under an agreed-upon collective bargaining agreement.
- A wage rate established under the Davis-Bacon Act or the Service Contract Act for that occupation in the area of intended employment.
- The arithmetic mean wage rate established by the Occupational Employment Statistics wage survey for
that occupation in the area of intended employment.
The proposed rule eliminates the use of private wage surveys, as well as the current four-tier wage structure that differentiates wage rates by the theoretical level of experience, education and supervision required to perform the job, a system that is not relevant to the unskilled positions generally involved in the H-2B program.
Interested persons are invited to submit comments on this proposed rule via the federal e-rulemaking portal at http://www.regulations.gov.”
D.Mass.: Personal Day Buy-Back, Yearly Sick Day Incentive Pay, Yearly Sick Leave Buy-Back Pay And Sick Leave Buy-Back Upon Separation Must Be Included In Officers’ “Regular Rate” Under The FLSA
Lemieux v. City of Holyoke
This case was before the Court on several cross-motions regarding a variety of issues arising from the application of various principles of the FLSA. As discussed here, the Court determined that several types of incentive and “buy-back” pay necessarily had to be included in the plaintiffs’ “regular rate” of pay (and resulting overtime rates).
Discussing the issue of whether such pay need be included in the plaintiff-employees regular rate of pay under the FLSA, the Court held:
“Because the FLSA requires overtime compensation to be paid at “a rate not less than one and one-half times the regular rate at which [an employee] is employed,” 29 U.S.C. § 207(a), “[c]alculation of the correct ‘regular rate’ is the linchpin of the FLSA overtime requirement.” O’Brien, 350 F.3d at 294. Under the terms of the CBA, Holyoke firefighters, in certain circumstances, are entitled to receive augments to their base salary. At issue is whether the FLSA requires Defendants to include eight of these contractual remunerations-yearly personal day buy-back; yearly sick day incentive pay; yearly sick leave buy-back pay; sick leave buy-back upon retirement, resignation, or death; vacation buy-back upon retirement; yearly holiday pay; detail pay; and Student Awareness of Fire Education (“SAFE”) pay-in Plaintiffs’ “regular rate” for the purpose of calculating overtime compensation. Plaintiffs argue that the statute requires this; Defendants argue that it does not.
The FLSA defines “regular rate” to include “all remuneration for employment paid to, or on behalf of, the employee” unless it falls under one of the eight expressly provided exclusions listed in paragraphs (1) through (8) of subsection (e) of the FLSA. 29 U.S.C. § 207(e)(1)-(8). This “list of exceptions is exhaustive, the exceptions are to be interpreted narrowly against the employer, and the employer bears the burden of showing that an exception applies.” O’Brien, 350 F.3d at 294 (citations omitted).
For the reasons that follow, the court holds that Defendants are obligated to include yearly personal day buy-back, yearly sick day incentive pay, yearly sick leave buy-back pay, and sick leave buy-back upon retirement, resignation, or death in the officers’ “regular rate” under the FLSA.
a. Buy-Back Provisions.
The CBA entitles Holyoke firefighters, subject to certain conditions, to sell back to the city sick leave time, vacation time, personal time, and holiday time that they have accrued but not used. Plaintiffs argue that the city is required to include the value of these “buy-backs” in the “regular rate” because they are renumeration not falling under any of the exceptions listed in 207(e)(1)-(8). Defendants contend that none of these buy-backs are paid as compensation for Holyoke firefighters’ hours of employment, and that they are all, therefore, excludable under section 207(e)(2).
Section 207(e)(2) provides that “payments made for occasional periods when no work is performed due to vacation, holiday, illness, … or other similar cause; … [or] other similar payments to an employee which are not made as compensation for his hours of employment” are excludable from the “regular rate.” 29 U.S.C. § 207(e)(2). It is plain that the value of the accrued time in dispute, if utilized by the firefighters for its intended purpose, would be excluded under 207(e)(2). The question before the court is whether a lump sum payment, keyed to time accrued for the causes listed in section 207(e)(2), although paid later under a buy-back program, is also excludable under that section.
i. Holiday and vacation time buy-back.
As to payments for accrued holiday and vacation time, the law is clear that these payments are excludable under section 207(e)(2) regardless of whether they are paid contemporaneously for days missed or are deferred and paid in a lump sum. Department of Labor Regulations explicitly provide that the 207(e)(2) exclusion applies even when an employee foregoes a day off but still receives the pay. 29 C.F.R. § 778.219(a). Accordingly, holiday and vacation buy-back payments are excluded under section 207(e)(2) and need not be included in the regular rate under the FLSA.
ii. Personal time buy-back.
Similarly, buy-back payments for personal time are excludable from the regular rate under the FLSA. Personal time, like holiday and vacation time, is paid idle time which, subject to scheduling restrictions, may be used by firefighters at their discretion as a matter of right. Therefore, personal time buy-back payments are excludable under section 207(e)(2). 29 C.F.R. § 778.219(a).
However, one wrinkle remains. Under the terms of the CBA, unused personal time is cashed in at one hundred and ten percent (110%) of that year’s rate. (CBA ¶ 33.0(D)). It appears that this ten percent premium represents an incentive bonus for employees who forego taking personal days. Because the express terms of CBA make this ten percent bonus non-discretionary, see id. (“[t]he payout shall occur in January of the following year”), it must be included in the “regular rate” under the FLSA. 29 U.S.C. § 7(e)(3)(a); 29 C.F.R. 778.211(c). See also Walling v. Harnischfeger Corp., 325 U.S. 427, 431 (U.S.1945) (noting that employees “who receive incentive bonuses in addition to their guaranteed base pay clearly receive a greater regular rate than the minimum base rate”).
iii. Sick leave buy-back.
The slightly more difficult question concerns whether remuneration in the form of buy-back payments for unused sick leave time is includable in the “regular rate” under the FLSA. Article 11 of the CBA provides Holyoke firefighters with three opportunities to sell accrued but unused sick leave time back to the city. Unlike vacation and holiday time, the Department of Labor regulations do not address whether section 207(e)(2) excludes the value of deferred sick leave time from the FLSA’s regular rate. See 29 C.F.R. § 778.219(a) (discussing only vacation and holiday pay).
In a closely analogous case, however, the Eighth Circuit has held that “sick leave buy-back monies constitute remuneration for employment” because “in contrast to § 207(e)(2) payments, [they] are awarded to employees for coming to work consistently, not for work that was never performed.” Acton v. City of Columbia, 436 F.3d 969, 977 (8th Cir.2006). In so holding, the Acton court reasoned that “the primary effect of the buy-back program is to encourage firefighters to come to work regularly over a significant period of their employment tenure” and concluded that the buy-back payments awarded to employees for not using accrued sick leave were akin to non-discretionary bonuses that compensated them for fulfilling their general attendance duties. Id. at 979.
This interpretation has not been adopted by all courts. The Sixth Circuit, in a case cited by Defendants, has come to the opposite conclusion, holding simply that “awards for nonuse of sick leave are similar to payments made when no work is performed due to illness, which may be excluded from the regular rate [under 29 U.S.C. § 207(e)(2) ].” Featsent v. City of Youngstown, 70 F.3d 900, 905 (6th Cir.1995). The First Circuit, for its part, has yet to weigh in on the issue.
Having considered all of the available authority, the court finds the reasoning of Acton persuasive. Here, as in Acton, firefighters must have worked for a period of time sufficient to accumulate a certain amount of leave in order to qualify for buy-back pay. Moreover, by its own terms, the CBA refers to its various sick leave buy-back provisions as “incentive days” and “sick leave buy back bonuses.” These facts militate toward the conclusion that sick leave buy-back payments provided for in the CBA are more akin to non-discretionary incentive bonuses includable under 29 C.F.R. 778.211(c) than remuneration for work that was never performed and therefore excludable under 207(e)(2). See 29 C.F.R. 778.211 (expressly including “[a]ttendance bonuses” in the regular rate of pay). It is also pertinent that this position has been adopted by the Department of Labor in a 2009 wage and hour opinion letter, 2009 DOLWH LEXIS 23 (DOLWH 2009). Finally, the court finds this position to be the most consistent with the First Circuit’s gloss on section 207(e), that its “exceptions are to be interpreted narrowly against the employer….” O’Brien, 350 F.3d at 294.
For these reasons, the court finds that sick leave buy-back pay is remuneration that must be included in the calculation of the FLSA regular rate of pay.
b. Off Duty/Detail pay.
In addition to their regular duties, some Plaintiffs perform additional outside work-referred to as “details” or “off-duty work”-that is assigned to them on a voluntary basis when they are not regularly scheduled to be on duty. The FLSA is clear that “special detail” compensation for hours worked on behalf of “separate and independent” employers is excludable from the calculation of FLSA overtime. 29 U.S.C. § 207(p). Department of Labor regulations specify that the hours worked for another entity will be exempt under § 207(p)(1)‘s special detail work exemption so long as (1) the special detail assignment is undertaken and performed solely at the employee’s option, and (2) the two employers are “in fact separate and independent.” 29 C.F.R. § 553.227(b). See also Nolan v. City of Chicago, 125 F.Supp.2d 324, 336 (N.D.Ill.2000).
Plaintiffs do not dispute that a Holyoke firefighter’s decision to perform off-duty detail work is purely voluntary. Their sole contention is that the outside vendors for whom they perform duty work are not, in fact, separate and independent because: (1) when firefighters perform duty work, they receive payment via their regular payroll check; (2) the amount of pay received by firefighters for detail work is non-negotiable (except by the Union during collective bargaining); (3) firefighters do not receive insurance benefits or retirement benefits, or worker’s compensation from the third-party vendors; and (4) firefighters are required to wear their uniforms while working detail or off duty.
Each of these assertions, however, is contrary to the applicable Department of Labor regulations which provide:
The primary employer may facilitate the employment or affect the conditions of employment of such employees. For example, a police department may maintain a roster of officers who wish to perform such work. The department may also select the officers for special details from a list of those wishing to participate, negotiate their pay, and retain a fee for administrative expenses. The department may require that the separate and independent employer pay the fee for such services directly to the department, and establish procedures for the officers to receive their pay for the special details through the agency’s payroll system. Finally, the department may require that the officers observe their normal standards of conduct during such details and take disciplinary action against those who fail to do so. 29 C.F.R. § 553.227(d) (emphasis added).
Accordingly, the FLSA does not require that Plaintiffs’ “detail” work be included in the calculation of the regular rate of pay.
c. Student Awareness of Fire Education (“SAFE”) Pay.
Some Holyoke firefighters receive pay for fire prevention and education duties performed under the grant-funded Student Awareness of Fire Education (“SAFE”) program. SAFE work performed while a firefighter is on regularly scheduled duty is compensated at the standard contractual rate of pay, while SAFE work performed outside of a firefighter’s regular duty cycle is compensated as overtime at one and one half times the contractual rate of pay. (Dkt. No. 157, Ex. D, LaFond Dep. 37: 8-18.
Here, to the degree that SAFE payments represent additional remuneration at all (i.e., to the degree that they are not already included in Plaintiffs’ regular pay), they are excludable from the regular rate under sections 207(e)(5) and (7) of the FLSA. Each of these provisions permits employers to exclude properly compensated overtime payments from the “regular rate” of pay under the FLSA. See 29 U.S.C. § 207(e)(5) (excluding “extra compensation provided by a premium rate paid for certain hours … in excess of the employee’s normal working hours or regular working hours”); 29 U.S.C. § 207(e)(7) (excluding time and a half compensation “for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday”). See also 29 C.F.R. 778.202. Because, as the record demonstrates, SAFE work performed outside of a firefighter’s regular duty cycle is already compensated as overtime, the FLSA does not require that Defendants include such time in the calculation of the FLSA’s regular rate of pay.”
Although the Court addressed issues that rarely come up in the context of FLSA litigation, its reliance on the general principle that any type of compensation not specifically excluded from calculating an employee’s regular rate under the FLSA must necessarily be included is instructive to employers who use any type of incentive or bonus pay.
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N.D.Cal.: Undocumented Worker’s Submission Of False Documents To Obtain Employment Has No Bearing On FLSA Claims For Unpaid Wages Or Liquidated Damages
Ulin v. Lovell’s Antique Gallery
This case was before the Court on the parties’ cross motions for summary judgment on a variety of issues. As discussed here, the Defendants asserted that the Plaintiff, an undocumented immigrant, was not entitled to recover unpaid overtime wages and/or liquidated damages under the FLSA, because he fraudulently obtained his job by providing false documents to the Defendants. The Court roundly rejected this assertion, ruling that neither Plaintiff’s immigration status nor how he obtained his job had any impact on his FLSA claims.
Discussing these issues, the Court reasoned:
“Defendants argue that Plaintiff’s submission of false documents at the time of his employment precludes any recovery of overtime pay. Defendants point to the declaration of immigration attorney Jason Marachi, who reviewed the documents that Plaintiff submitted to Defendants at the time of his employment, performed an independent investigation, and concluded that Plaintiff submitted false work authorization documents to his employer and was not working legally in the United States while he worked for Defendants. See generally Marachi Decl. Plaintiff has not raised any factual dispute on this issue, but disagrees that his recovery of damages is affected.
Thus, as presented to this court, this case does not involve a situation where undocumented workers submitted false work authorization documents to a prospective employer. (See e.g., Ulloa v. Al’s All Tree Service, Inc. (Dist.Ct.2003) 2 Misc.3d 262, 768 N.Y.S.2d 556, 558 [“The Court also notes in passing that, if there had been proof in this case that the Plaintiff had obtained his employment by tendering false documents (activity that is explicitly unlawful under IRCA), Hoffman would require that the wage claim [for unpaid wages] be disallowed in its entirety.”].) However, the issue of whether Hoffman requires that a wage claim be denied if an employee submitted false authorization documents is not before this court.
However, Reyes expressly did not reach the issue raised by Defendants, and therefore is of little help to them. Hoffman Plastic Components, Inc. v. National Labor Relations Board, 535 U.S. 137 (2002), cited by Reyes, foreclosed an award of backpay under the National Labor Relations Act to a worker who had submitted false documents to his employer because the Court found that an award of backpay “for years of work not performed, for wages that could not lawfully have been earned, and for a job obtained in the first instance by criminal fraud” would run counter to immigration policy. Id. at 149, 151. Hoffman did not involve a case such as this, where Plaintiff claims to have already performed the work in question and seeks payment for that work, and so it is also not directly on point.
Plaintiff argues that regardless of whether he presented false documents and was working illegally, he is entitled to recover his earned wages. Plaintiff notes that the cases interpreting Hoffman have not applied it to bar recovery of wages already earned. See, e.g., Singh v. Jutla & C.D. & R’s Oil, Inc., 214 F .Supp.2d 1056, 1061 (N.D.Cal.2002) (Breyer, J.) (quoting Flores v.. Albertsons, Inc., 2002 WL 1163623 (C.D.Cal.2002) (“Hoffman does not establish that an award of unpaid wages to undocumented workers for work actually performed runs counter to IRCA.”); Opp. at 19 (citing cases).
The case cited in Reyes, Ulloa v. Al’s All Tree Service, Inc., 768 N.Y.S.2d 556, 558 (Dist.Ct.2003), does not mandate a contrary result. Ulloa is New York small claims court decision where the Court limited an undocumented worker’s recovery of unpaid wages to the minimum wage, and then noted “in passing that, if there had been proof in this case that the Plaintiff had obtained his employment by tendering false documents (activity that is explicitly unlawful under IRCA), Hoffman would require that the wage claim [for unpaid wages] be disallowed in its entirety.” No case has followed this portion of Ulloa, or otherwise affirmatively held than an undocumented worker is precluded from recovering wages for work already performed simply because he submitted false documents at the time of employment. Indeed, a higher New York court has expressly rejected Ulloa ‘s dicta, and instead held that: “If federal courts ban discovery on immigration status in unpaid wages cases, the use of fraudulent documents on immigration status to gain employment in unpaid wages cases is likewise irrelevant. The only crucial issue is whether the undocumented worker performed services for which the worker deserves compensation. If so, public policy requires payment so that employers do not intentionally hire undocumented workers for the express purpose of citing the workers’ undocumented status or their use of fraudulent documents as a way to avoid payment of wages.” Pineda v. Kel-Tech Const., Inc., 832 N.Y.S.2d 386, 396 (N.Y.Sup.2007).
At oral argument, Defendants contended that, even if Plaintiff’s employment status does not require that all of his claims be disallowed, Hoffman precludes an award of liquidated damages under the FLSA. Defendants’ argument appears to be that FLSA liquidated damages are akin to the backpay for work not performed due to wrongful termination at issue in Hoffman, in that they go beyond simply compensating for past work, and therefore federal immigration policy makes this remedy unavailable to Plaintiff because it would reward violation of immigration laws while punishing the employer. There is no case expressly addressing the issue of whether FLSA liquidated damages are available to a plaintiff who presented false documents to his employer. While a close question, and one that pits important governmental policies relating to labor and immigration against each other, the Court’s interpretation of the statute and the caselaw runs counter to Defendants’ position.
First, the plain language of the FLSA mandates liquidated damages in an amount equal to the unpaid wages unless the employer “shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act of 1938, as amended,” in which case “the court may, in its sound discretion, award no liquidated damages or award any amount thereof …” 29 U.S.C. § 260. “Under 29 U.S.C. § 260, the employer has the burden of establishing subjective and objective good faith in its violation of the FLSA.” Local 246 Utility Workers Union of America v. Southern California Edison Co., 83 F.3d 292, 297-298 (9th Cir.1996). Thus, the plain language of the FLSA’s liquidated damages provision focuses exclusively on the employer’s conduct, not the employee’s conduct. There is nothing in the language of the statute that allows the Court to take Plaintiff’s misconduct into account in determining whether to award liquidated damages. To the contrary, the imposition of liquidated damages is mandatory unless the employer establishes its own good faith.
Second, under the FLSA, “liquidated damages represent compensation, and not a penalty. Double damages are the norm, single damages the exception.” Local 246 Util. Workers Union v. S. Cal. Edison Co., 83 F.3d 292, 297 (9th Cir.1996); see also Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 584 (1942) (liquidated damages compensate for damages too obscure and difficult of proof), superceded by statute on other grounds; Herman v. RSR Sec. Services Ltd., 172 F.3d 132, 142 (2d Cir.1999) (“Liquidated damages are not a penalty exacted by the law, but rather compensation to the employee occasioned by the delay in receiving wages due caused by the employer’s violation of the FLSA”). Congress provided for liquidated damages because it recognized that those protected by federal wage and hour laws would have the most difficulty maintaining a minimum standard of living without receiving minimum and overtime wages and thus “that double payment must be made in the event of delay in order to insure restoration of the worker to that minimum standard of well-being.” See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 (1945).
Following Hoffman, “[c]ourts have distinguished between awards of post-termination back pay for work not actually performed and awards of unpaid wages pursuant to the Fair Labor Standards Act (‘FLSA’).” Zeng Liu v. Donna Karan Intern., Inc., 207 F.Supp.2d 191, 192 (S.D.N.Y.2002); see also Widjaja v. Kang Yue USA Corp., 2010 WL 2132068, *1 (E.D.N.Y.2010). In Flores v. Amigon, 233 F.Supp.2d 462 (E.D.N.Y.2002), the court held that Hoffman did not apply to FLSA cases in which workers sought pay for work actually performed, and that, “enforcing the FLSA’s provisions requiring employers to pay proper wages to undocumented aliens when the work has been performed actually furthers the goal of the IRCA” because if the FLSA did not apply to undocumented aliens, employers would have a greater incentive to hire illegal aliens with the knowledge that they could not be sued for violating minimum wage requirements. While the interest in deterring employers from knowingly hiring undocumented workers in order to avoid lawsuits for wage violations does not apply when an employee uses false documents to successfully deceive an unknowing employer who attempted to comply with immigration law, the interest in deterrence does apply when the employer had reason to suspect or knew that the employee was not authorized to work in the United States but hired him anyway, colluding in the use of false documents. The record here is silent as to whether Defendants were successfully deceived as to Plaintiff’s authorization to work or instead knew or suspected that his documents were falsified.
Unlike the backpay for hours not worked at issue in Hoffman, here the liquidated damages are a form of compensation for time worked that cannot otherwise be calculated. See also Singh v. Jutla & C.D. & R’s Oil, Inc., 214 F.Supp.2d 1056 (N.D Cal.2002) (Breyer, J.) (stating that Hoffman did not address remedies of compensatory and punitive damages, and holding that undocumented employee could proceed with FLSA retaliation claim); Galdames v. N & D Investment Corp., 2008 WL 4372889 (S.D.Fla. Sept. 24, 2008) (finding that Hoffman did not overrule previous rule that an “undocumented worked may bring claims for unpaid wages and liquidated damages” for work already performed); Renteria v. Italia Foods, Inc., 2003 WL 21995190, *5-6 (N.D.Ill.2003) (striking FLSA backpay and frontpay claims in light of Hoffman /IRCA, but allowing claim for compensatory damages).
While none of the cases cited above involve an employee who affirmatively presented false documents, as opposed to simply being undocumented, Hoffman did not preclude compensatory damages for time already worked on the basis that the employee presented false documents. While the Hoffman Court was certainly concerned about the fact that the plaintiff had criminally violated IRCA by presenting false documents and was therefore never authorized to work in the United States, it also focused on the facts that: (1) the plaintiff had not actually performed the work for which he was seeking backpay, (2) he was only entitled to the backpay award by remaining in the country illegally, and (3) he could not mitigate damages as required without triggering further a IRCA violation. Here, by contrast, no further employment by Plaintiff is at issue as he only seeks compensation for work performed before his termination by Defendants and the issue of mitigating damages is not present, unlike in Hoffman. Further, as the Hoffman Court held, the NLRB’s other “ ‘traditional remedies’ [were] sufficient to effectuate national labor policy regardless of whether the ‘spur and catalyst’ of backpay accompanies them.” In contrast, FLSA liquidated damages are not a “spur and catalyst,” but instead numerous courts have found that they are intended as compensation for unpaid wages already earned but too difficult to calculate. Therefore, Defendants’ Motion is DENIED on this issue.”
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