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Yearly Archives: 2017
M.D.Fla.: Plaintiffs Entitled to Irrebuttable Presumption That Their Damage Calculations Are Correct Where Defendant Spoliated Payroll Records
Sec’y of Labor v. Caring First, Inc.
This case was before the court on the plaintiffs’ motion for sanctions. Specifically, plaintiffs sought sanctions as a result of the defendant-employers intentional destruction of the relevant payroll records pertaining to plaintiffs’ employment. While the court denied plaintiffs’ motion to the extent that it sought a default judgment, the court ordered that—to the extent plaintiffs prevailed on liability at trial—their calculation based on payroll records available from a third-party would be deemed irrebuttably correct, subject to the court’s approval.
The court provided the following history of the defendants’ egregious discovery misconduct:
This case arises under the Fair Labor Standards Act of 1938 (“FLSA“), as amended, 29 U.S.C. § 201 et seq. Plaintiff alleges that Defendants mischaracterized their licensed practical nurse and registered nurse employees as independent contractors. (Compl., Doc. 1, at 3). On December 3, 2015, this Court entered a scheduling order directing the parties to exchange all documents germane to this case by January 15, 2016. (FLSA Scheduling Order, Doc. 29, ¶ 1). Defendants failed to timely comply with the disclosure of documents and, as a result, an Order to Show Cause why sanctions should not be imposed was issued. (Feb. 25, 2016 Order, Doc. 32, at 1-2). After a hearing on the matter, this Court found that sanctions were warranted against Defendants and Defendants’ counsel for their failure to comply with the Court’s order, but held the sanctions in abeyance so long as Defendants produced all relevant documents in their possession, custody, or control by March 21, 2016. (Mar. 7, 2016 Order, Doc. 37, ¶¶ 1-3).
On March 11, 2016, Plaintiff filed a motion for sanctions against Defendants. (Mot. for Sanctions, Doc. 38). Therein, Plaintiff alleged that Defendants willfully destroyed, or negligently allowed to be destroyed, payroll records prior to May 2015, despite an ongoing investigation by the Department of Labor (“Department”). (Id. at 12-13). Additionally, Plaintiff asserted that since May 2015, an administrative employee had been deleting payroll records on a weekly basis by writing [*3] over them at the end of each work week. (Id. at 15-16). Defendants acknowledged that an employee was writing over the payroll week-to-week but claimed that the records prior to May 2015 were destroyed by a disgruntled former employee, Karen Reyes. (Id. at 7). On September 22, 2016, this Court entered an order denying the motion for sanctions because there was a factual dispute regarding whether Reyes deleted the payroll records and because Plaintiff had not yet determined what, if any, prejudice Plaintiff had suffered. (Sept. 22, 2016 Order, Doc. 55, at 6-7, 9). Nevertheless, the Court was troubled by Defendants’ actions and ordered Defendants to “immediately halt the destruction of any Current Payroll Records” and produce all payroll records to Plaintiff on a bi-weekly basis. (Id. at 10). Now, Plaintiff again seeks sanctions against Defendants and Defendants’ counsel pursuant to Federal Rule of Civil Procedure 37(b), 28 U.S.C. § 1927, and this Court’s inherent authority.
Following a discussion of the relevant standards for sanctions under Fed. R. Civ. Proc. 37, the court determined that the appropriate “punishment to fit the crime” in this case was to order that plaintiffs’ damages calculations would be subject to an irrebuttable presumption of correctness. Specifically, the court explained that plaintiffs could not show the extreme prejudice to warrant a default judgment, because they were apparently ultimately able to obtain the payroll records at issue from defendants third-party payroll company, notwithstanding defendants’ destruction of the copies in defendants’ possession.
Thus, the court held:
Plaintiff represented at the evidentiary hearing that he was able to obtain a sampling of nurses’ paychecks from Caring First’s bank. From these paychecks, which contain the hours worked by the nurses and their pay rate, Plaintiff claims he will be able to accurately calculate back wages. Therefore, as a sanction the Court will order the production of the nurses’ paychecks from Caring First’s bank. In addition, the Court will allow Plaintiff to recalculate potential back wages based on these paychecks. If Plaintiff prevails as to liability at trial, this calculation will be irrebuttably presumed to be correct, subject to Court approval.
This is definitely a case for all wage and hour practitioners to hold on to, because the circumstances of this case are unfortunately far from unique.
Click Sec’y of Labor v. Caring First, Inc. to read the entire Opinion of the court.
3d Cir.: Employer Must Pay for All Breaks Shorter Than 20 Minutes Notwithstanding “Flex Time” Policy
Secretary United States Department of Labor v. American Future Systems, Inc.
This case was before the Third Circuit on appeal by the employer. The district court granted the DOL’s motion for summary judgment, holding that the employer’s policy of excluding time for breaks less than 20 minutes long violated the FLSA. The Third Circuit agreed and affirmed, holding that the Fair Labor Standards Act requires employers to compensate employees for breaks of 20 minutes or less during which they are free of any work related duties.
The court summarized the relevant facts as follows:
American Future Systems, d/b/a Progressive Business Publications, publishes and distributes business publications and sells them through its sales representatives. Edward Satell is the President, CEO, and owner of the company. Sales representatives are paid an hourly wage and receive bonuses based on the number of sales per hour while they are logged onto the computer at their workstation. They also receive extra compensation if they maintain a certain sales-per-hour level over a given two-week period.
Progressive previously had a policy that gave employees two fifteen-minute paid breaks per day. In 2009, Progressive changed its policy by eliminating paid breaks but allowing employees to log off of their computers at any time. However, employees are only paid for time they are logged on. Progressive refers to this as “flexible time” or “flex time” and explains that it “arises out of an employer’s policy that maximizes its employees’ ability to take breaks from work at any time, for any reason, and for any duration.”
Furthermore, under this policy, every two weeks, sales representatives estimate the total number of hours that they expect to work during the upcoming two-week pay period. They are subject to discipline, including termination, for failing to work the number of hours they commit to. Progressive also sends representatives home for the day if their sales are not high enough and sets fixed work schedules or daily requirements for representatives when that is deemed necessary.
Apart from those requirements, representatives can decide when they will work between the hours of 8:30 AM and 5:00 PM from Monday to Friday, so long as they do not work more than forty hours each week. As noted above, during the work day, they can log off of their computers at any time, for any reason, and for any length of time and may leave the office when they are logged off. Employees choose their start and end time and can take as many breaks as they please. However, Progressive only pays sales representatives for time they are logged off of their computers if they are logged off for less than ninety seconds. This includes time they are logged off to use the bathroom or get coffee. The policy also applies to any break an employee may decide to take after a particularly difficult sales call to get ready for the next call. On average, representatives are each paid for just over five hours per day at the federal minimum wage of $7.25 per hour.
On appeal, the defendant-employer raised three arguments: (1) that time spent logged off under its flexible break policy categorically does not constitute work; (2) that the District Court erred in finding that WHD’s interpretive regulation on breaks less than twenty minutes long, 29 C.F.R § 785.18, is entitled to substantial deference; and (3) that the District Court erred in adopting the bright-line rule embodied in 29 C.F.R. § 785.18 rather than using a fact-specific analysis. The Third Circuit rejected each of these arguments.
The court rejected the defendant’s that their defendant’s “flex time” policy was not a break policy within the meaning of the FLSA, reasoning that labeling its policy as “flex time” was simply a means to attempt to illegally circumvent the requirements of the FLSA.
The court next held that the DOL’s break time regulation, codified in 29 C.F.R. § 785.18 is entitled to Skidmore deference, the highest level of deference given to an administrative regulation. The court reasoned that the regulation was due Skidmore deference because: (1) the former FLSA specifically empowered the DOL to promulgate such regulations; (2) the DOL’s interpretation of the break time regulations has been consistent throughout the various opinion letters the DOL has issued to address this issue; and (3) the DOL’s interpretation is reasonable given the language and purpose of the FLSA.
Having determined that the regulation is entitled to deference, the court held that the regulation must be read to create a bright line rule and concluded that it does. The court explained that “the restrictions endemic in the limited duration of twenty minutes or less illustrate the wisdom of concluding that the Secretary intended a bright line rule under the applicable regulations.” As such, the court affirmed the decision below and held that defendant’s break policy which excluded time for breaks less than 20 minutes long violated the FLSA.
Click Secretary United States Department of Labor v. American Future Systems, Inc. to read the entire Opinion of the Court.
USDOL Announces the Reinstatement of Issuance of Opinion Letters
The U.S. Department of Labor announced today that it will reinstate the issuance of opinion letters, a practice that was widespread under some prior administrations, but which it elected to forego during the Obama administration. In an email announcement sent out today, the Department of Labor announced:
The U.S. Department of Labor will reinstate the issuance of opinion letters, U.S. Secretary of Labor Alexander Acosta announced today. The action allows the department’s Wage and Hour Division to use opinion letters as one of its methods for providing guidance to covered employers and employees.
An opinion letter is an official, written opinion by the Wage and Hour Division of how a particular law applies in specific circumstances presented by an employer, employee or other entity requesting the opinion. The letters were a division practice for more than 70 years until being stopped and replaced by general guidance in 2010.
“Reinstating opinion letters will benefit employees and employers as they provide a means by which both can develop a clearer understanding of the Fair Labor Standards Act and other statutes,” said Secretary Acosta. “The U.S. Department of Labor is committed to helping employers and employees clearly understand their labor responsibilities so employers can concentrate on doing what they do best: growing their businesses and creating jobs.”
The division has established a webpage where the public can see if existing agency guidance already addresses their questions or submit a request for an opinion letter. The webpage explains what to include in the request, where to submit the request, and where to review existing guidance. The division will exercise discretion in determining which requests for opinion letters will be responded to, and the appropriate form of guidance to be issued.
In the past, Republican administrations have often used the issuance of opinion letters to skirt the normal approval process for administrative regulation, which requires public comment. It remains to be seen, but this will likely be a boon for employers and another setback for employees under the Trump administration.
9th Cir.: Employer’s Attorney Can Be Sued for Retaliation as a “Person Acting Directly or Indirectly” in Employer’s Interest
This case presented an issue of first impression: Can an employer’s attorney be held liable for retaliating against his client’s employee because the employee sued his client for violations of workplace laws? The district court held that he could not and dismissed the claim. On appeal the Ninth Circuit disagreed and reversed. Specifically, the Ninth Circuit held that as a “person acting directly or indirectly” in the employer’s interest, the employer’s attorney could be subject to liability under 29 U.S.C. § 215.
In the case, the defendant-employers had hired the plaintiff-employee, an undocumented immigrant without verifying his immigration status or his right to work in the United States. Although not explicitly stated, the Ninth Circuit’s opinion strongly implies that the defendants intentionally neglected to complete an I-9 form or verify plaintiff’s status because it knew he was not legally permitted to work in the United States.
After working for defendants for 11 years, in 2006, plaintiff filed suit in California state court against defendants, alleging that defendants violated a multitude of employment laws, and alleged among other things that defendants failed to provide him with legally mandated rest breaks and failed to pay him legally mandated overtime premiums.
The Ninth Circuit recited the following facts regarding the alleged retaliation, all taken from plaintiffs subsequent lawsuit alleging illegal retaliation that was the subject of the Ninth Circuit’s opinion:
On June 1, 2011, ten weeks before the state court trial, the Angelos’ attorney, Anthony Raimondo, set in motion an underhanded plan to derail Arias’s lawsuit. Raimondo’s plan involved enlisting the services of U.S. Immigration and Customs Enforcement (“ICE”) to take Arias into custody at a scheduled deposition and then to remove him from the United States. A second part of Raimondo’s plan was to block Arias’s California Rural Legal Assistance attorney from representing him. This double barrel plan was captured in email messages back and forth between Raimondo, Joe Angelo, and ICE’s forensic auditor Kulwinder Brar.
On May 8, 2013, Arias filed this lawsuit against Angelo Dairy, the Angelos, and Raimondo in the Eastern District of California. Arias alleged that the defendants violated section 215(a)(3) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.
Arias’s theory of his case is that Raimondo, acting as the Angelos’ agent, retaliated against him in violation of section 215(a)(3) for filing his original case against Raimondo’s clients in state court . Raimondo’s sole legal defense is that because he was never Arias’s actual employer, he cannot be held liable under the FLSA for retaliation against someone who was never his employee.
As noted by the court, Angelo Dairy and its owners settled their part of this case at the early stages of its existence.
The district court dismissed plaintiff’s claims against the defendants’ attorney holding that he was not covered under the FLSA’s retaliation provisions because he was not plaintiff’s employer. Noting that the FLSA’s retaliation provision defines those subject to liability in a much broader way than the underlying definition of employer (which is broad to begin with) the Ninth Circuit reversed.
Discussing the issue before it the court explained:
Notwithstanding section 215(a)(3)’s reference to “any person,” section 203(a)’ s inclusion of a legal representative as a “person,” and section 203(d)’s plain language defining “employer,” the district court granted Raimondo’s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court did so without the benefit of oral argument, concluding that because Arias “ha[d] not alleged that [Raimondo] exercised any control over [his] employment relationship,” Raimondo as a matter of law could not be Arias’s employer.
The Ninth Circuit rejected this reasoning noting that the statutory definition of those who may be subject to liability under the FLSA’s retaliation provision include a broader spectrum of people:
Section 215(a)(3), an anti-retaliation provision, makes it unlawful “for any person … to discharge or in any other manner discriminate against any employee because such employee has filed any complaint … under or related to this chapter.” The FLSA defines the term “person” to include a “legal representative.” Id. § 203(a). Section 216(b) in turn creates a private right of action against any “employer” who violates section 215(a)(3); and the FLSA defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Id. §§ 203(d), 216(b).
Controversies under FLSA sections 206 and 207 that require a determination of primary workplace liability for wage and hour responsibilities and violations, on one hand, and controversies arising from retaliation against employees for asserting their legal rights, on the other, are as different as chalk is from cheese. Each category has a different purpose. It stands to reason that the former relies in application on tests involving economic control and economic realities to determine who is an employer, because by definition it is the actual employer who controls substantive wage and hours issues.
Retaliation is a different animal altogether. Its purpose is to enable workers to avail themselves of their statutory rights in court by invoking the legal process designed by Congress to protect them. Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997) (the “primary purpose of antiretaliation provisions” is to “[m]aintai[n] unfettered access to statutory remedial mechanisms”).
This distctive purpose is not served by importing an “economic control” or an “economic realities” test as a line of demarcation into the issue of who may be held liable for retaliation. To the contrary, the FLSA itself recognizes this sensible distinction in section 215(a)(3) by prohibiting “any person” –not just an actual employer – from engaging in retaliatory conduct. By contrast, the FLSA’s primary wage and hour obligations are unambiguously imposed only on an employee’s de facto “employer,” as that term is defined in the statute. Treating “any person” who was not a worker’s actual employer as primarily responsible for wage and hour violations would be nonsensical…
Congress made it illegal for any person, not just an “employer” as defined under the statute, to retaliate against any employee for reporting conduct “under” or “related to” violations of the federal minimum wage or maximum hour laws, whether or not the employer’s conduct does in fact violate those laws. … Moreover, “the remedial nature of the statute further warrants an expansive interpretation of its provisions. …” Id. at 857 (second omission in original) (quoting Herman v. RSR Sec. Servs., 172 F.3d 132, 139 (2d Cir. 1999)).
In line with this reasoning, the court concluded:
The FLSA is “remedial and humanitarian in purpose. We are not here dealing with mere chattels or articles of trade but with the rights of those who toil, of those who sacrifice a full measure of their freedom and talents to the use and profit of others …. Such a statute must not be interpreted or applied in a narrow, grudging manner.” Tenn. Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597 (1944).
Accordingly, we conclude that Arias may proceed with this retaliation action against Raimondo under FLSA sections 215(a)(3) and 216(b). Raimondo’s behavior as alleged in Arias’s complaint manifestly falls within the purview, the purpose, and the plain language of FLSA sections 203(a), 203(d), and 215(a)(3).
Our interpretation of these provisions is limited to retaliation claims. It does not make non-actual employers like Raimondo liable in the first instance for any of the substantive wage and hour economic provisions listed in the FLSA. As illustrated by the Court’s opinion in Burlington, the substantive provisions of statutes like Title VII and the FLSA, and their respective anti-retaliation provisions, stand on distinctive grounds and shall be treated differently in interpretation and application. Ultimately a retaliator like Raimondo may become secondarily liable pursuant to section 216(b) for economic reparations, but only as a measure of penalties for his transgressions.
Click Arias v. Raimondo to read the entire opinion.
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