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11th Cir.: Nanny Who Worked Overnight Shifts Not Domestic Live-In Employee and Thus Overtime Eligible
In a reported decision issued on Wednesday, the 11th Circuit reversed the trial court seemingly applying clear law that a nanny who did not reside on her premises with the family whose children she took care of, and held that such an arrangement was not live-in domestic employment. As such, the court reversed the decision of the trial court, which had held that the nanny was exempt from the FLSA’s overtime provisions as a live-in domestic employee. In so doing, the court adopted much of the argument raised by the DOL in its amicus brief in the case. However, the 11th Circuit remanded for further findings regarding whether the parents of the nanny’s charges were here employer, finding that issues of fact precluded a finding on that issue.
Addressing the principal issue of whether the plaintiff was a “domestic” or not, the court found the issue to be clear-cut: “No doubt Blanco worked at the house and spent significant time there. But that alone does not mean she ‘resided’ there any more than firefighters who sleep in fire-station dormitories while on duty reside at a fire station,” the panel said.
The court further noted that the plaintiff’s job was “hardly a typical arrangement” of a live-in nanny.
The panel noted that while the plaintiff did sleep, at times, when she was on duty to take care of the children, the place she slept was not her own, as she shared the bed she slept in with other nannies, and the room in which she slept with 2 of the couple’s smallest children. Further, the court noted that if/when a child woke up in and/or cried in the middle of the night, she would “immediately respond”. Thus, “though Blanco may have slept sometimes while the children slept, her time was not hers,” the panel said.
The panel also noted as significant that the plaintiff lacked her own key to the house, adding that the mere fact that she had left personal belongings at the residence and some religious decorations, and occasionally had guests over didn’t make the house her own. Likewise, the court noted that the plaintiff maintained her own separate residence and paid rent to live in her aunt’s nearby apartment, where she typically returned at the end of her shifts, so that she could sleep in her own bed.
The court also rejected the defendant-parents’ argument that Blanco would be overtime-exempt under a 2013 U.S. Department of Labor rule that aimed at expanding FLSA protections. While the language of the preamble to the rule seemed to signal that five consecutive nights is the appropriate measuring stick to determine whether a nanny lived at someone’s residence, the court noted that such language was contained in the preamble to the rule and not the text of the actual rule’s text, and thus not a proper source of interpretive guidance.
The court also noted that the defendant-parents’ arguments regarding application of the rule/preamble ignored the context in which the five consecutive nights phrase is included, reasoning that such argument failed to consider the plaintiff’s four off-duty days that preceded the five days on-duty.
As such, the court concluded that the plaintiff was not an exempt domestic service employee as a matter of law. However, the court held that issues of fact regarding application of the “economic realities” test to plaintiff’s employment, required further findings by the trial court as to whether the defendant-parents were plaintiff’s employers under the FLSA.
Among the factual issues the court cited were the fact that: (1) one defendant testified she didn’t give any directions to the nannies on how to care for her children or control or supervise the plaintiff; (2) the defendants’ testimony that they didn’t know how much the nannies received in wages, as the mother testified that she paid about $2,400 per week to Amazing Gracie LLC, one of the two companies the parents used to hire the nannies that was managed by one of the nannies who worked for the family; and (3) the defendant-mother’s testimony that she didn’t know how plaintiff had started working for the family. In light of these factual issues, the court held that the defendants presented enough evidence to show that “they had minimal oversight over the nannies’ care for their children” and thus there remained a question of fact as to whether they were the plaintiff’s employer, upon application of the “economic realities” test.
Click Blanco v. Anand Samuel to read the entire opinion.
Click DOL Amicus to read the DOL’s amicus brief.
DOL Seeks to Raise Salary Threshold for White Collar Exemption to Overtime
On August 30, 2023, the U.S. Department of Labor (DOL) released a Notice of Proposed Rulemaking (NPRM) that would significantly raise the minimum weekly salary to qualify for one of the Fair Labor Standards Act’s (FLSA) three white-collar exemptions. If the changes go into effect, they would have a significant impact on how employers pay their employees and who is or is not entitled to overtime pay.
Specifically, the DOL proposes raising the weekly salary by over 50 percent from $684 per week to $1,059 per week (which is the equivalent to an annual salary of $55,068). The DOL also seeks to increase the annualized salary threshold for the exemption for “highly compensated employees” (HCE) from $107,432 per year to $143,988 per year. Finally, the DOL proposes automatically updating these earnings thresholds every three years.
The Proposed Rule
According to the DOL’s press release, the proposed rule seeks to accomplish four (4) primary goals:
- Restore and extend overtime protections to low-paid salaried workers. Many low-paid salaried employees work side-by-side with hourly employees, doing the same tasks and often working over 40 hours a week. Because of outdated and out-of-sync rules, however, the DOL believes these low-paid salaried workers are not getting paid time-and-one-half for hours worked over 40 in a week. The DOL’s proposed salary increase would help ensure that more of these low-paid salaried workers receive overtime protections traditionally provided by the DOL’s rules.
- Give valuable time back to workers who are not exempt under the executive, administrative or professional exempt classifications. By better identifying which employees are executive, administrative or professional employees who should be overtime exempt, the proposed rule will better ensure that those who are not exempt will gain more time with their families or receive additional compensation when working more than 40 hours a week.
- Prevent a future erosion of overtime protections and ensure greater predictability. The rule proposes automatically updating the salary threshold every three years to reflect current earnings data.
- Restore overtime protections for US territories. From 2004 until 2019, the DOL’s regulations ensured that for US territories where the federal minimum wage was applicable, so too was the overtime salary threshold. The DOL’s proposed rule would return to that practice and ensure that workers in the US territories subject to the federal minimum wage have the same overtime protections as other US workers.
The DOL further stated in the FAQs that “[a]utomatically updating the salary level and HCE total annual compensation requirement using the most recent data will ensure that these tests continue to accurately reflect current economic conditions.” The FAQs further noted that the proposed rule includes a provision that would allow “the Department to temporarily delay a scheduled automatic update where unforeseen economic or other conditions warrant.”
As with the most recent 2019 rule, which increased the salary and total annual compensation requirements for the EAP and HCE exemptions, the DOL has not proposed any changes to the duties tests, which outline the types of primary duties an employee must perform in order to be classified as exempt (in addition to receipt of a salary at or above the threshold).
Read more about the NPRM in the DOL’s official press release.
DOL Publishes Final Rule Increasing Salary Thresholds for White Collar Exemptions
Following a court decision which struck down the prior regulations promulgated by the Obama administration, which would have rendered for more employees overtime eligible, the Trump has now increased the salary threshold for white collar exemption. This marks the first increase since 2004.
In addition to limiting the number of workers who will now receive overtime (versus the more expansive Obama-era rule), the current DOL rejected a provision automatically increasing the salary threshold over time, to ensure that another 15-20 years does not pass before the thresholds are re-examined and increased again.
The updated and revised the regulations issued under the Fair Labor Standards Act (FLSA) to allow 1.3 million workers to become newly entitled to overtime by updating the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements.
The DOL has updated both the minimum weekly standard salary level and the total annual compensation requirement for “highly compensated employees” or HCEs to reflect growth in wages and salaries. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004.
Key Provisions of the Final Rule
The final rule updates the salary and compensation levels needed for workers to be exempt in the final rule:
raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
raising the total annual compensation level for “highly compensated employees (HCEs)” from the currently-enforced level of $100,000 to $107,432 per year;
allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
revising the special salary levels for workers in U.S. territories and in the motion picture industry.
Standard Salary Level
The DOL set the standard salary level at $684 per week ($35,568 for a full-year worker).
HCE Total Annual Compensation Requirement
In addition, the DOL set the total annual compensation requirement for HCEs at $107,432 per year. This compensation level equals the earnings of the 80th percentile of full-time salaried workers nationally. To be exempt as an HCE, an employee must also receive at least the new standard salary amount of $684 per week on a salary or fee basis (without regard to the payment of nondiscretionary bonuses and incentive payments).
Special Salary Levels for Employees in U.S. Territories and Special Base Rate for the Motion Picture Producing Industry
The DOL is maintaining a special salary level of $380 per week for American Samoa. Additionally, the Department is setting a special salary level of $455 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands.
The DOL also is maintaining a special “base rate” threshold for employees in the motion picture producing industry. Consistent with prior rulemakings, the Department is increasing the required base rate proportionally to the increase in the standard salary level test, resulting in a new base rate of $1,043 per week (or a proportionate amount based on the number of days worked).
Treatment of Nondiscretionary Bonuses and Incentive Payments
The DOL’s new rule also permits employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the standard salary level. For employers to credit nondiscretionary bonuses and incentive payments toward a portion of the standard salary level test, they must make such payments on an annual or more frequent basis.
If an employee does not earn enough in nondiscretionary bonus or incentive payments in a given year (52-week period) to retain his or her exempt status, the Department permits the employer to make a “catch-up” payment within one pay period of the end of the 52-week period. This payment may be up to 10 percent of the total standard salary level for the preceding 52-week period. Any such catch-up payment will count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.
When Will the Current Thresholds Be Updated?
Although initially proposed, the Trump DOL inexplicably rejected a provision of the rule, overwhelmingly supported by workers and workers advocates which would have automatically raised the thresholds over time without the necessity of further rulemaking. As a result it is possible if not likely that there will be no further increase to the current thresholds for another 15 years if not more. In its final rule the DOL reaffirms its intent to update the earnings thresholds more regularly in the future through notice-and-comment rulemaking, but given the anti-worker sentiment of the current DOL, including the recent confirmation of a steadfast anti-worker advocate as the head of the DOL, this is most-likely best viewed as lip service.
The DOL’s final rule is available at Final Rule to Update the Regulations Defining and Delimiting the Exemptions for Executive, Administrative, and Professional Employees.
D.D.C.: Revised Regulations re Companionship Exemption Reinstated; DOL Acted Within Its Rulemaking Authority and the New Regulation Grounded in Reasonable Interpretation of the FLSA
Home Care Association of America v. Weil
This case was before the D.C. Circuit on the Department of Labor’s appeal of a lower court’s decision that held the DOL’s recent amendments to the companionship exemption regulations to be unenforceable. Specifically, in 2 separate decisions, the same lower court judge had invalidated the new regulations, both as they applied to third-party staffing companies and as they revised the definition of companionship duties within the scope of the exemption. The D.C. Circuit reversed the lower court’s decision and reinstated the revised regulation, finding that the DOL acted within its rulemaking authority with regard to the revision pertaining to third-party staffing companies. The D.C. Circuit declined to reach the second issue regarding the definition of companionship services, because it held that the plaintiffs lacked standing to challenge same in light of the fact that the exemption was inapplicable to them under the regulation in the first instance.
Explaining the issue before it, the court stated:
The Fair Labor Standards Act’s protections include the guarantees of a minimum wage and overtime pay. The statute, though, has long exempted certain categories of “domestic service” workers (workers providing services in a household) from one or both of those protections. The exemptions include one for persons who provide “companionship services” and another for persons who live in the home where they work. This case concerns the scope of the exemptions for domestic-service workers providing either companionship services or live-in care for the elderly, ill, or disabled. In particular, are those exemptions from the Act’s protections limited to persons hired directly by home care recipients and their families? Or do they also encompass employees of third-party agencies who are assigned to provide care in a home?
Until recently, the Department of Labor interpreted the statutory exemptions for companionship services and live-in workers to include employees of third-party providers. The Department instituted that interpretation at a time when the provision of professional care primarily took place outside the home in institutions such as hospitals and nursing homes. Individuals who provided services within the home, on the other hand, largely played the role of an “elder sitter,” giving basic help with daily functions as an on-site attendant.
Since the time the Department initially adopted that approach, the provision of residential care has undergone a marked transformation. The growing demand for long-term home care services and the rising cost of traditional institutional care have fundamentally changed the nature of the home care industry. Individuals with significant care needs increasingly receive services in their homes rather than in institutional settings. And correspondingly, residential care increasingly is provided by professionals employed by third-party agencies rather than by workers hired directly by care recipients and their families.
In response to those developments, the Department recently adopted regulations reversing its position on whether the FLSA’s companionship-services and live-in worker exemptions should reach employees of third-party agencies who are assigned to provide care in a home. The new regulations remove those employees from the exemptions and bring them within the Act’s minimum-wage and overtime protections. The regulations thus give those employees the same FLSA protections afforded to their counterparts who provide largely the same services in an institutional setting.
The D.C. Circuit held that the DOL acted within its rulemaking authority when it issued the regulations at issue and that they were not arbitrary and capricious. For these reasons it held the regulations were proper and enforceable:
Appellees, three associations of home care agencies, challenged the Department’s extension of the FLSA’s minimum-wage and overtime provisions to employees of third-party agencies who provide companionship services and live-in care within a home. The district court invalidated the Department’s new regulations, concluding that they contravene the terms of the FLSA exemptions. We disagree. The Supreme Court’s decision in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 127 S.Ct. 2339, 168 L.Ed.2d 54 (2007), confirms that the Act vests the Department with discretion to apply (or not to apply) the companionship-services and live-in exemptions to employees of third-party agencies. The Department’s decision to extend the FLSA’s protections to those employees is grounded in a reasonable interpretation of the statute and is neither arbitrary nor capricious. We therefore reverse the district court and remand for the grant of summary judgment to the Department.
To read the entire decision click Home Care Association of America v. Weil.
President Obama Announces That Threshold Salary for FLSA’s White Collar Exemptions Will Rise From $23,660 ($455/week) to $50,400 ($969/week)
In an Op-Ed penned by President Obama on the website Huffington Post, the new proposed overtime rules from the administration officially began their roll-out. Most significantly, the new rules more than double the current salary threshold for exempt employees from $23,660 per year (or $455 per week) to $50,400 per yer (or $969 per week), and continue to increase automatically in years to come.
“In this country, a hard day’s work deserves a fair day’s pay,” Obama wrote in an op-ed published Monday evening by the Huffington Post — an outreach to the president’s base on the left. “That’s at the heart of what it means to be middle class in America.”
The President continued:
Without Congress, I’m very hard-pressed to think of a policy change that would potentially reach more middle class earners than this one,” said Jared Bernstein, a former economic adviser to Vice President Joe Biden who’s now a senior fellow at the Center on Budget and Policy Priorities.
According to an article published last night on Politico.com:
The new threshold wouldn’t be indexed to overall price or wage increases, as many progressives had hoped. Instead, it would be linked permanently to the 40th percentile of income. That would set it at the level when the overtime rule was first created under President Franklin Delano Roosevelt.
The timing reflects an administration increasingly feeling the clock ticking: it expects the overtime rule to be challenged in court, and will press to complete by 2016 the review process during which comments are submitted by the public and then considered by the Labor Department and the White House as it prepares the final rule. If all goes according to plan, the rule will go into effect before Obama leaves office.
The proposed rule comes after months of pitched internal debate, with Labor Secretary Tom Perez and Domestic Policy Council director Cecilia Muñoz pushing to keep the threshold at the 40th percentile, and other members of the White House economic team, including Council of Economic Advisers chairman Jason Furman, trying to lower it to the 37th percentile.
Perez spent months conferring with business groups while his team wrote the rule. Obama made the decision to go forward in a meeting of his economic team several months ago, and originally the plan had been to roll out the rule last week. That was put on hold so that Obama could instead deliver the eulogy Friday at Rev. Clementa Pinckney’s funeral in Charleston, S.C.
For years the White House has faced the frustrating reality that despite consistently improving economic numbers, wages have been largely stagnant. Obama’s 2014 push to raise the minimum wage struck many middle class voters as not having much to do with them. But the overtime rule would affect workers whose salaries approach the median household income.
As explained by Politico:
The regulation would be the most sweeping policy undertaken by the president to assist the middle class, and the most ambitious intervention in the wage economy in at least a decade. Administration aides warn that it wouldn’t always lead to wages going up, though, because in many instances employers would cut back employee hours worked rather than pay the required time-and-a-half. Even so, they say, the additional hires needed to make up for that time could spur job growth, and give existing workers either more time with their families or more opportunities to work second jobs and put more money in their pockets.
This change was badly needed. The overtime threshold has been updated only once since 1975 and now covers a mere 8 percent of salaried workers, according to a recent analysis by the left-leaning Economic Policy Institute. Raising the threshold to $50,440 would bring it roughly in line with the 1975 threshold, after inflation. Back then, that covered 62 percent of salaried workers. But because of subsequent changes in the economy’s structure, the Obama administration’s proposed rule would cover a smaller percentage — about 40 percent.
The current overtime rules contain a white collar exemption, which excludes “executive, administrative and professional” employees from receiving overtime pay. Advocates for changing the rule say the white collar exemption allows employers to avoid paying lower-wage workers overtime. The proposed rule contains no specific changes to this “duties test,” but instead solicits questions from the public about how best to alter it.
Click Huffington Post to read the President’s Op-Ed piece or Politico, to read Politico’s article. Of course, we will continue to update our readers as further details of the new regulations are rolled out.
3d Cir.: Armored Car Drivers Who Drove Vehicles Weighing Less Than 10,000 Lbs as Well as CMVs Non-Exempt and Entitled to Overtime
McMaster v. Eastern Armored Services Inc.
In the first such case to reach an appellate court, the Third Circuit has held that an armored car driver who split her time between driving “covered” commercial motor vehicles (those over 10,000 lbs) and non-covered (those under 10,000 lbs) is non-exempt pursuant to the Technical Corrections Act (TCA), which modified the Motor Carrier Act exemption applicable to some interstate truck drivers.
The brief pertinent facts were as follows:
Ashley McMaster worked for Eastern Armored Services, Inc. (“Eastern”) from approximately March 2010 until June 2011. As its name suggests, Eastern is an armored courier company, and its fleet of armored vehicles operates across several states in the mid-Atlantic region. McMaster was a driver and/or guard for Eastern, which meant that some days she was assigned to drive an armored vehicle, while other days she rode as a passenger to ensure safety and security. McMaster was not assigned to one specific vehicle. Rather, her vehicle assignment changed according to the particular needs of a given day’s transport. As it happened, McMaster spent 51% of her total days working on vehicles rated heavier than 10,000 pounds, and 49% of her total days working on vehicles rated lighter than 10,000 pounds. She was paid by the hour, and she frequently worked more than 40 hours in a given week. For all hours worked, she was paid at her regular rate. In other words, she was not paid overtime.
Discussing the MCA exemption generally the court explained:
One exemption to this general rule is Section 13(b)(1) of the Act. Known as the Motor Carrier Act Exemption, the provision provides that overtime pay is not required for “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service.” See 29 U.S.C. § 213(b)(1); see also 49 U.S.C. §§ 31502(b), 13102 (defining scope of Secretary of Transportation’s regulatory authority).
Congress elaborated upon the Motor Carrier Act Exemption with the enactment of the Corrections Act of 2008. Section 306(a) of the Corrections Act provides that “Section 7 of the Fair Labor Standards Act . . . shall apply to a covered employee notwithstanding section 13(b)(1) of that Act.” See Corrections Act, § 306(a). Section 306(c) of the Corrections Act defines the term “covered employee.” In short, a “covered employee” is an employee of a motor carrier whose job, “in whole or in part,” affects the safe operation of vehicles lighter than 10,000 pounds, except vehicles designed to transport hazardous materials or large numbers of passengers. Corrections Act § 306(c).
Concluding that the plaintiff was non-exempt because she fit within the definition of a “covered employee” under the TCA’s definition, the court stated:
McMaster’s job placed her squarely within the Corrections Act’s definition of a “covered employee.” McMaster was a driver and guard of commercial armored vehicles, and approximately half of her trips were on vehicles undisputedly lighter than 10,000 pounds. Her daily routes included interstate trips on public roadways, and none of the vehicles were designed to transport eight or more passengers or used to transport hazardous materials. And her employer, Eastern, is by its own admission a motor carrier. The critical issue, then, is the significance of being a “covered employee” when determining a motor carrier employee’s entitlement to overtime.
The Third Circuit reasoned that the TCA’s language was clear and unambiguous and therefore there was no reason to depart from its literal meaning:
It is well-established that, “[w]here the text of a statute is unambiguous, the statute should be enforced as written and only the most extraordinary showing of contrary intentions in the legislative history will justify a departure from that language.” Murphy v. Millennium Radio Grp. LLC, 650 F.3d 295, 302 (3d Cir. 2011). As stated above, the relevant language of the Corrections Act is that, as of June 6, 2008, “Section 7 of the Fair Labor Standards Act of 1938 . . . shall apply to a covered employee notwithstanding section 13(b)(1) of that Act.” Corrections Act § 306(a). This is a plain statement that a “covered employee” is to receive overtime even where section 13(b)(1)—the Motor Carrier Act Exemption—would ordinarily create an exemption. We see no plausible alternative construction, and neither Eastern nor any of the authorities it cites attempt to offer one. Nor does Eastern point to legislative history probative of a drafting error. Cf. Murphy, 650 F.3d at 302. Statutory construction points to one conclusion: “covered employees” are entitled to overtime.
The court also found support for its holding in many of the district court level cases decided to date on the same issue, as well as the DOL’s own Field Bulletin regarding the TCA:
District courts considering the plain language of the Corrections Act have reached the same conclusion. See, e.g., McMaster v. E. Armored Servs., Inc., 2013 WL 1288613, at *1 (D.N.J. 2013); Garcia v. W. Waste Servs., Inc., 969 F. Supp. 2d 1252, 1260 (D. Idaho 2013); Bedoya v. Aventura Limousine & Transp. Serv., Inc., 2012 WL 3962935, at *4 (S.D. Fla. 2012); Mayan v. Rydbom Exp., Inc., 2009 WL 3152136, at *9 (E.D. Pa. 2009); Botero v. Commonwealth Limousine Serv. Inc., 2013 WL 3929785, at *13 (D. Mass. 2013); O’Brien v. Lifestyle Transp., Inc., 956 F. Supp. 2d 300, 307 (D. Mass. 2013). So, too, the Department of Labor, in a post-Corrections Act Field Bulletin entitled “Change in Application of the FLSA § 13(b)(1) ‘Motor Carrier Exemption.'” See Department of Labor Field Bulletin, available at http://www.dol.gov/whd/fieldbulletins/fab2010_2.htm. (“Section 306(a) extends FLSA Section 7 overtime requirements to employees covered by [Corrections Act] Section 306(c), notwithstanding FLSA Section 13(b)(1).”).
Our sister courts of appeals have yet to weigh in squarely on whether a Corrections Act “covered employee” is entitled to overtime, but the Fifth and Eighth Circuits have noted the plain language of the Corrections Act, too.
Distinguishing “mixed fleet” decisions that have departed from the statute’s clear language the Third Circuit explained:
Rather than contest Congress’s express carveout from the Motor Carrier Act Exemption for “covered employees,” Eastern relies on a series of district court cases holding that the Motor Carrier Act Exemption remains absolute after the Corrections Act. See Avery v. Chariots For Hire, 748 F. Supp. 2d 492, 500 (D. Md. 2010); Dalton v. Sabo, Inc., 2010 WL 1325613, at *4 (D. Or. 2010); Jaramillo v. Garda, Inc., 2012 WL 4955932, at *4 (N.D. Ill. 2012). Each of these cases relies on a policy statement of the Seventh Circuit in 2009 that “[d]ividing jurisdiction over the same drivers, with the result that their employer would be regulated under the Motor Carrier Act when they were driving the big trucks and under the Fair Labor Standards Act when they were driving trucks that might weigh only a pound less, would require burdensome record-keeping, create confusion, and give rise to mistakes and disputes.” See Collins v. Heritage Wine Cellars, Ltd., 589 F.3d 895, 901 (7th Cir. 2009). Indeed, our own jurisprudence has historically seen the Motor Carrier Act Exemption as establishing a strict separation between the Secretary of Transportation’s jurisdiction and the ambit of the Fair Labor Standards Act overtime guarantee. See Packard, 418 F.3d at 254 (rejecting argument that Motor Carrier Act Exemption applied only to drivers actually regulated by the Secretary of Transportation); Friedrich v. U.S. Computer Servs., 974 F.2d 409, 412 (3d Cir. 1992). Neither history nor policy, however, can overcome an express change to the statutory scheme.
Thus the could concluded:
The Corrections Act says it plainly: “Section 7 of the Fair Labor Standards Act of 1938 . . . appl[ies] to a covered employee notwithstanding section 13(b)(1) of that Act.” Corrections Act § 306(a). As McMaster meets the criteria of a “covered employee,” she is entitled to overtime. We will therefore affirm the order of the District Court and remand for assessment of wages owed to McMaster and for additional proceedings relating to the other members of the conditional class.
Click McMaster v. Eastern Armored Services Inc. to read the Third Circuit’s entire decision.
U.S.S.C.: DOL Acted Within Its Rulemaking Authority When It Withdrew Its Administrative Interpretation re Exempt Status of Mortgage Loan Officers
Perez v. Mortgage Bankers Assn.
In a widely anticipated decision, a unanimous Supreme Court today held that the DOL acted properly within its authority in 2010 when it withdrew its prior administrative interpretation letter regarding the exempt status of mortgage loan officers and replaced it with an Administrator’s Interpretation concluding that mortgage-loan officers do not qualify for the administrative exemption. Reversing the D.C. Circuit’s decision below, it held that the DOL was not required to adhere to the Administrative Procedure Act’s (APA) notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation.
A copy of the Court’s syllabus preceding the official opinion is copied and pasted below:
The Administrative Procedure Act (APA) establishes the procedures federal administrative agencies use for “rule making,” defined as the process of “formulating, amending, or repealing a rule.” 5 U. S. C. §551(5). The APA distinguishes between two types of rules: So-called “legislative rules” are issued through notice-and-comment rulemaking, see §§553(b), (c), and have the “force and effect of law,” Chrysler Corp. v. Brown, 441 U. S. 281, 302–303. “Interpretive rules,” by contrast, are “issued . . . to advise the public of the agency’s construction of the statutes and rules which it administers,” Shalala v. Guernsey Memorial Hospital, 514 U. S. 87, 99, do not require notice-and-comment rulemaking, and “do not have the force and effect of law,” ibid.
In 1999 and 2001, the Department of Labor’s Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act of 1938. In 2004, the Department issued new regulations regarding the exemption. Respondent Mortgage Bankers Association (MBA) requested a new interpretation of the revised regulations as they applied to mortgage-loan officers, and in 2006, the Wage and Hour Division issued an opinion letter finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations. In 2010, the Department again altered its interpretation of the administrative exemption. Without notice or an opportunity for comment, the Department withdrew the 2006 opinion letter and issued an Administrator’s Interpretation concluding that mortgage-loan officers do not qualify for the administrative exemption.
MBA filed suit contending, as relevant here, that the Administrator’s Interpretation was procedurally invalid under the D. C. Circuit’s decision in Paralyzed Veterans of Am. v. D. C. Arena L. P., 117 F. 3d 579. The Paralyzed Veterans doctrine holds that an agency must use the APA’s notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation. The District Court granted summary judgment to the Department, but the D. C. Circuit applied Paralyzed Veterans and reversed.
Held: The Paralyzed Veterans doctrine is contrary to the clear text of the APA’s rulemaking provisions and improperly imposes on agencies an obligation beyond the APA’s maximum procedural requirements. Pp. 6–14.
(a) The APA’s categorical exemption of interpretive rules from the notice-and-comment process is fatal to the Paralyzed Veterans doctrine. The D. C. Circuit’s reading of the APA conflates the differing purposes of §§1 and 4 of the Act. Section 1 requires agencies to use the same procedures when they amend or repeal a rule as they used to issue the rule, see 5 U. S. C. §551(5), but it does not say what procedures an agency must use when it engages in rulemaking. That is the purpose of §4. And §4 specifically exempts interpretive rules from notice-and-comment requirements. Because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures to amend or repeal that rule. Pp. 7–8.
(b) This straightforward reading of the APA harmonizes with longstanding principles of this Court’s administrative law jurisprudence, which has consistently held that the APA “sets forth the full extent of judicial authority to review executive agency action for procedural correctness,” FCC v. Fox Television Stations, Inc., 556 U. S. 502, 513. The APA’s rulemaking provisions are no exception: §4 establishes “the maximum procedural requirements” that courts may impose upon agencies engaged in rulemaking. Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U. S. 519, 524. By mandating notice-and-comment procedures when an agency changes its interpretation of one of the regulations it enforces, Paralyzed Veterans creates a judge-made procedural right that is inconsistent with Congress’ standards. Pp. 8–9.
(c) MBA’s reasons for upholding the Paralyzed Veterans doctrine are unpersuasive. Pp. 9–14. (1) MBA asserts that an agency interpretation of a regulation that significantly alters the agency’s prior interpretation effectively amends the underlying regulation. That assertion conflicts with the ordinary meaning of the words “amend” and “interpret,” and it is impossible to reconcile with the longstanding recognition that interpretive rules do not have the force and effect of law. MBA’s theory is particularly odd in light of the limitations of the Paralyzed Veterans doctrine, which applies only when an agency has previously adopted an interpretation of its regulation. MBA fails to explain why its argument regarding revised interpretations should not also extend to the agency’s first interpretation. Christensen v. Harris County, 529 U. S. 576, and Shalala v. Guernsey Memorial Hospital, 514 U. S. 87, distinguished. Pp. 9–12. (2) MBA also contends that the Paralyzed Veterans doctrine reinforces the APA’s goal of procedural fairness. But the APA already provides recourse to regulated entities from agency decisions that skirt notice-and-comment provisions by placing a variety of constraints on agency decisionmaking, e.g., the arbitrary and capricious standard. In addition, Congress may include safe-harbor provisions in legislation to shelter regulated entities from liability when they rely on previous agency interpretations. See, e.g., 29 U. S. C. §§259(a), (b)(1). Pp. 12–13. (3) MBA has waived its argument that the 2010 Administrator’s Interpretation should be classified as a legislative rule. From the beginning, this suit has been litigated on the understanding that the Administrator’s Interpretation is an interpretive rule. Neither the District Court nor the Court of Appeals addressed this argument below, and MBA did not raise it here in opposing certiorari. P. 14. 720 F. 3d 966, reversed.
Click Perez v. Mortgage Bankers Assn. to read the entire unanimous decision, delivered by SOTOMAYOR, J., in which ROBERTS, C. J., and KENNEDY, GINSBURG, BREYER, and KAGAN, JJ., joined, and in which ALITO, J., joined except for Part III–B.
While it is too soon to tell, many observers believe this unanimous decision bodes well for the other big “exemption” case currently pending at the Supreme Court, regarding the DOL’s power to utilize its formal rulemaking authority to alter the companionship exemption, which was recently struck down by a Judge in the same Circuit where this case originated.
DOL Announces It Will Not Enforce New Regulations Regarding FLSA Rights of Home Health Workers for First 6 Months of 2015
The Department of Labor’s (Department) October 1, 2013, Final Rule amending regulations regarding domestic service employment, which extends the Fair Labor Standards Act’s (FLSA) minimum wage and overtime protections to most home care workers will become effective on January 1, 2015. However, by an announcement dated October 6, 2014, the DOL advised that it will not be enforcing the regulations for the first 6 months that the regulations are in effect.
Critically important, while the DOL will not be bringing enforcement actions—as it is able to do under the FLSA—this announcement does not effect home health workers’ rights to bring private enforcement actions themselves through private lawsuits.
In a thoughtful commentary regarding the importance of the new regulation, issued on his blog on the day of the DOL’s recent announcement, former Deputy Administrator of the Wage and Hour Division, Seth Harris, has this to say:
Home health workers are the people who care for people with disabilities and seniors so that they may live in the community rather than in nursing homes or other institutions. Their work is essential. They allow each of us to rest assured that we will be able to live in dignity in our homes if age, happenstance, or genetics result in physical, mental, or developmental disabilities. Yet, these workers have not been protected by the federal minimum wage or the requirement that workers who work more than 40 hours in a week receive overtime pay for those additional hours. These requirements are found in the Fair Labor Standards Act. Home health workers have been excluded from the FLSA. On January 1, that exclusion ends. Home health workers will be entitled to at least the federal minimum wage and time-and-one-half for overtime worked beginning New Year’s Day.
While Harris went further to explain that he thought that the new regulations would likely lack teeth, in light of this delayed enforcement policy—given the relatively small sums of money individuals stand to lose from unscrupulous employers who ignore the new regulation—that may not turn out to be accurate. While many smaller home health agencies will likely feel free to skirt the new regulation, at least initially, most of the larger national home health agencies have already put the wheels in motion to make the necessary changes to comply with the new law about to go into effect. However, if you are a home health worker, who is still being denied your rightful minimum wages and/or overtime pay, after the new law goes into effect on January 1, 2015, you should contact a wage and hour lawyer to investigate whether you have a claim to recover your rightful wages.
Click DOL Announcement to read the official announcement, and Harris Blog to read Seth Harris’ commentary on this issue.
8th Cir.: Informal Input Regarding Personnel Decisions Does Not Satisfy Hire/Fire Prong of Executive Exemption
Madden v. Lumber One Home Center, Inc.
Following a jury verdict in favor of the defendant-employer below, the trial court granted the plaintiffs’ motion for judgment notwithstanding the verdict, holding that—as a matter of law—defendant had failed to satisfy its burden of proof regarding the executive exemption. Defendant appealed and the Eighth Circuit affirmed with respect to two of the plaintiffs, but reversed as to one. As discussed here, the Eighth Circuit’s analysis focused on the hire/fire prong of the executive exemption. Significantly, the court explained in detail what types of involvement in personnel decisions rise to the level required for application of the executive exemption.
Initially the court restated the applicable regulation:
We determine whether an employee meets the executive exemption by applying Department of Labor regulations. See Fife v. Bosley, 100 F.3d 87, 89 (8th Cir.1996). The Department of Labor defines an “executive” employee—that is, one exempt from FLSA requirements relating to overtime pay—as follows:
(a) The term ’employee employed in a bona fide executive capacity’ in section 13(a)(1) of the Act shall mean any employee:
(1) Compensated on a salary basis at a rate of not less than $455 per week (or $380 per week, if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities;
(2) Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;
(3) Who customarily and regularly directs the work of two or more other employees; and
(4) Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.
The court then framed the issue before it:
At issue in this case is whether the plaintiffs’ job duties met the requirements of the fourth element. In other words, we must determine whether the jury was presented with evidence that reasonably would support an inference that the plaintiffs had the ability to hire and fire other employees, or that their hiring recommendations were given “particular weight.” The Department of Labor defines “particular weight” as follows:
To determine whether an employee’s suggestions and recommendations are given ‘particular weight,’ factors to be considered include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations; the frequency with which such suggestions and recommendations are made or requested; and the frequency with which the employee’s suggestions and recommendations are relied upon. Generally, an executive’s suggestions and recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include an occasional suggestion with regard to the change in status of a co-worker. An employee’s suggestions and recommendations may still be deemed to have ‘particular weight’ even if a higher level manager’s recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee’s change in status. 29 C.F.R. § 541.105. The district court, in granting the plaintiffs’ motion for judgment as a matter of law, found that Lumber One presented no evidence that the plaintiffs had the authority to make personnel decisions or that Morton gave their hiring recommendations particular weight.
Clarifying what type and amount of input into personnel decisions satisfies an employer’s burden regarding the executive exemption, the Eighth Circuit explained:
We first address what type and what amount of input into personnel decisions is sufficient to satisfy the fourth element of the FLSA’s executive exemption. Second, we look at the evidence in this case. We conclude that Lumber One failed to show that Madden and O’Bar met the executive exemption standard but that Lumber One did prove that Wortman was eligible for the executive exemption.
Courts previously addressing what is required by the fourth element of the FLSA executive exemption suggest that more than informal input, solicited from all employees, is needed to prove applicability of the executive exemption. See, e.g., Lovelady v. Allsup’s Convenience Stores, Inc., 304 F. App’x 301, 306 (5th Cir.2005) (per curiam) (unpublished) (affirming the district court’s decision that plaintiff-store managers met the fourth element because their hiring recommendations were almost always followed and they could fire employees without obtaining authorization from a higher manager); Grace v. Family Dollar Stores, Inc., 845 F.Supp.2d 653, 663 (W.D.N.C.2012) (finding fourth element satisfied because plaintiff, a store manager, selected applicants for interviews, conducted interviews, and recommended employees for promotions and demotions, and her recommendations were almost always followed by the district manager); Rainey v. McWane, Inc., 552 F.Supp.2d 626, 632 (E.D.Tex.2008) (finding fourth element satisfied because plaintiff, a production supervisor, completed weekly employee evaluations, recommended employee discipline, and recommended which temporary employees should be hired permanently); Goulas v. LaGreca, No. 12–898, 2013 WL 2477030, at *10 (E.D. La. June 7, 2013) (finding fourth element satisfied because the employer was grooming the plaintiff to eventually take over the company, and the employer terminated employees based on plaintiff’s recommendations). These cases provide useful guidance for understanding what is needed to satisfy the fourth element of the executive exemption. After looking at the different factors these courts used to find the fourth element satisfied, including the offering of personnel recommendations that were acted upon by managers, involvement in screening applicants for interviews, and participation in interviews, among others, it is apparent that many different employee duties and levels of involvement can work to satisfy this fourth element. When we look at the evidence regarding how Lumber One utilized Madden and O’Bar in this case, however, we find that it simply does not meet the standard. Cf. 5 C.F.R. 551.202(e) (“[T]he designation of an employee as FLSA exempt or nonexempt must ultimately rest on the duties actually performed by the employee.”).
Discussing the law in the context of this case, the Eighth Circuit explained:
The evidence presented at trial concerning the plaintiffs’ duties consisted solely of testimony from the plaintiffs, Morton, and office manager Amy Quimby. Morton testified that none of the plaintiffs hired or fired other employees. Therefore, in order to satisfy the fourth element, Lumber One needed to present evidence at trial that the plaintiffs were consulted about personnel decisions and that Morton gave each of their opinions particular weight regarding specific hiring decisions. Prior to hiring a new employee, Morton generally asked all of the Mayflower employees if they knew the applicant and could provide information about that person, and Lumber One believes this is sufficient to support the jury’s verdict.
At trial, Morton generically described how he elicited input from employees about applicants and how he used the information he received. For example, when asked if the plaintiffs were ever consulted during the screening process for new applicants, Morton responded: “[W]e would always ask all of our people if they knew someone before we hired them. When we would be interviewing them, we would ask for input from them because these guys were from the local area and we’d always ask if they knew the people or could recommend or knew anything at all about them.” Morton also said he took this information seriously, adding that “it was good information. We’re hiring blind here, so any input we could have or reference, it was used in making that determination.” Lumber One did not present any evidence that the plaintiffs were involved in, for instance, screening applicants, conducting interviews, checking references, or anything else related to its hiring process.
In determining that Lumber One’s practice of soliciting informal recommendations from all staff members is insufficient to meet the fourth element of the executive exemption, we find Rooney v. Town of Groton, 577 F.Supp.2d 513 (D.Mass.2008), instructive. In Rooney, the court held that a police lieutenant satisfied all of the requirements for designation as an exempt executive employee. Id. at 523–32. Concerning the fourth element, the court noted that the lieutenant was a member of an interview panel that ranked applicants, discussed the merits of applicants, and made hiring recommendations. Id. at 531. In addition, the police chief took the lieutenant’s opinion into consideration when determining which employees to promote. Id. While the lieutenant had no control over the ultimate hiring and personnel decisions, the court found that he was sufficiently involved in the hiring process to classify him as an exempt executive employee. Id.
Rooney specifically addresses Lumber One’s argument that Morton could have given the plaintiffs’ recommendations particular weight even though he asked all of his employees for input. In Rooney, the lieutenant characterized his recommendations to the police chief as the same type of recommendation an ordinary patrolman could provide to the chief, so he should not have been classified as an exempt employee. Rooney, 577 F.Supp.2d at 531. The court rejected his argument, finding that the lieutenant’s recommendations were given more weight than an ordinary patrolman. The court concluded that “the regulation does not state that Rooney must be the only officer in the department whose recommendations and suggestions are given particular weight, but rather that a ‘higher level manager’s recommendation [may have] more importance.’ ” Id. (citing 29 C.F.R. § 541.105).
In the present case, Morton testified that he solicited input from all employees. He did not testify that some employees’ input had more influence than others. Lumber One argues that requiring Morton to testify that he placed “particular weight” on each plaintiff’s input, as Lumber One claims the district court did in the order granting the plaintiffs’ motion for judgment as a matter of law, is unfair because it requires a lay person to use legal jargon in his testimony. We agree that Morton was not required to use the exact phrase “particular weight.” Morton could have used any number of words to convey that he gave the plaintiffs’ recommendations special consideration when making hiring decisions. The material point, however, is that in order to meet the fourth element of the executive exemption, Lumber One must present some proof that the purported executives’ input into personnel decisions was given particular weight. 29 C.F.R. § 541.105. For example, one way they could have done this is to show that the purported executives’ input had more influence than hourly employee’ input. This is especially true if that recommendation is the only evidence relied on for the exemption, which is what happened in this case.
Lumber One also argues that because the business was struggling financially in 2008 and did not hire many employees, the plaintiffs were simply unable to participate in personnel decisions because none were being made. In this regard, we note that the Office of Personnel Management’s regulation stating that FLSA exemptions are based on actual job functions, not intended responsibilities, is persuasive in this circumstance. See 5 C.F.R. § 551.202(e) (noting that FLSA exemptions are based on “duties actually performed by the employee”). The Rooney court acknowledged that the police department in that case was small and that its size should be a factor “taken into account when determining the frequency of recommendations made by the plaintiff. It is reasonable to assume that generally a smaller police department would have correspondingly fewer new hires, fires, and promotions.” 577 F.Supp.2d at 531. The same is true with Lumber One. Morton estimated that he hired between six and eight employees during the time the plaintiffs were employed at Lumber One. Morton testified that he generally asked all of the employees if they knew applicants, but there is no evidence that the plaintiffs had any sort of involvement in the hiring process like the lieutenant in Rooney. The plaintiffs did not participate in the interviews, did not review resumes, did not rank applicants, and did not make hiring recommendations outside of informal reference checks. Contra id. at 522 (“[Rooney] has acted as a member of an interview panel, ranked applicants on account of their suitability for the position, discussed the merits of applicants, made applicant recommendations to the Chief regarding the applicant’s suitability, discussed the potential promotion of a Patrolman to the rank of Sergeant, and discussed the assignment of an officer to an administrative position[.]”). And Morton asked all employees for informal reference checks, not just the plaintiffs. Morton asserts that he would have involved the plaintiffs more if he had hired more employees. This may be true, but it requires the jury to impermissibly speculate and to rely on intended rather than actual job functions. See Clark v. Long, 255 F.3d 555, 557 (8th Cir.2001) (“[When ruling on a motion for judgment as a matter of law, t]he nonmovant receives the benefit of all reasonable inferences that may be drawn from the evidence, but those inferences may not be based solely on speculation.” (emphasis added)).
Having fleshed out the applicable law and the parties’ respective arguments, the court initially explained why two of the plaintiffs were properly held to be non-exempt:
Against this backdrop, we now turn to the evidence regarding each individual plaintiff. At trial, Morton could not recall Madden or O’Bar providing a single personnel recommendation. Morton stated that he could only recall the company’s “general policy there as to how we did that.” In response to the question, “Did any of the plaintiffs hire Lumber One employees?” Morton responded, “No, they didn’t. Well, Doug [Wortman] was involved in hiring some of the truck drivers.” When questioned if O’Bar ever provided a recommendation for an applicant, Morton responded, “Not that I recall.” Morton said he intended to include O’Bar in the hiring process, but because Lumber One was not hiring while she was employed, she never had the opportunity to participate. Later in the trial, counsel asked Morton if he could remember O’Bar recommending any applicant for hire. Morton responded, “Offhand today, I can’t tell you one, no.”
Morton similarly could not remember Madden being involved in any hiring decision. When asked about Madden, Morton again referenced only the general policy: “Once again, what we would do, anytime that we hired anybody, which we hired very, very few in this time period, and I don’t recall—you know, it depends on what time frame we’re talking about, but we would always ask all of our people if they knew someone before we hired them.” When asked again, “Is it your testimony that [Madden] did not recommend anybody for hiring?” Morton responded, “I do not remember, to be honest with you. I know that we consulted with him or asked him if he knew people.” Morton asserted that he “definitely remember[ed] asking Terry Madden if he knew people that we were interviewing,” but Morton could not provide additional information related to any recommendations Madden may have provided. When asked if Madden hired any employees, Morton replied, “No, ma’am, he did not hire any.”
Morton’s testimony is simply not enough to satisfy the fourth element of the FLSA’s executive exemption for Madden and O’Bar. To be sure, one of the jury’s main responsibilities is to make credibility determinations. However, here the jury was forced to speculate due to Morton’s lack of memory regarding specific recommendations and hiring decisions. Moreover, Morton’s admissions that Madden and O’Bar were not involved directly in hiring contradicts Lumber One’s contentions that the plaintiffs were actually Lumber One executive employees whose input was solicited and considered prior to making personnel decisions. Indeed, for a jury to reach that conclusion, a jury had to speculate that, if Morton were able to recall specifics from 2008 and 2009, he would be able to testify about Madden and O’Bar’s involvement in personnel decisions. This is not a credibility determination; this is speculation. See Wilson, 382 F.3d at 770 (“Judgment as a matter of law is appropriate only when the record contains no proof beyond speculation to support the verdict.”). While it should be rare that a judge elects to override a jury verdict, the district court was correct in this case to do so. See Hunt v. Neb. Pub. Power Dist., 282 F.3d 1021, 1029 (8th Cir.2002) (“We recogniz[e] that the law places a high standard on overturning a jury verdict … because of the danger that the jury’s rightful province will be invaded when judgment as a matter of law is misused.” (internal citation omitted)). Lumber One simply presented no evidence that would allow a jury to determine, without conjecture, that Lumber One satisfied the fourth element with respect to Madden and O’Bar.
The court went on to hold that, applying the same test, there had been sufficient evidence at trial for the jury to hold that the third plaintiff was an exempt executive:
In contrast, we conclude that Lumber One did present sufficient evidence to allow a jury to conclude that Wortman provided a recommendation for at least one employee and that Morton relied on that recommendation when deciding to hire the applicant. Accordingly, we reverse the district court’s judgment as to Wortman and reinstate that portion of the jury verdict in favor of Lumber One.
Morton testified at trial that Wortman knew two applicants, truck drivers Fred Dempsey and Anthony Dixon, and that Morton appreciated Wortman’s input regarding both applicants’ qualifications. Morton testified that “we’re brand-new, so I asked everybody there for a reference on any new hire at this point to—and [Wortman] recommended these guys, said they were good folks, Fred [Dempsey] in particular. I think he and Fred had a—somewhat of a friendship maybe in the past.” Morton later asserted that if Wortman had provided a bad recommendation, Morton would not have hired Dempsey. Morton testified that “when we did do that little bit of hiring, we asked everyone. We tapped every resource we had…. [Wortman] would put his stamp of approval on, and I’ll use Fred Dempsey, for instance, you know, if he would have said, no, we don’t want him, he would not have been there.”
Morton’s testimony provided sufficient evidence that reasonably could lead a jury to believe that Wortman provided recommendations about Dempsey and that Morton gave particular weight to Wortman’s recommendation when deciding to hire Dempsey. See 29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.100. In addition, Wortman testified that although he was not hired to supervise employees, Morton occasionally had him direct the truck drivers, which included Dempsey, regarding where to make deliveries. See
29 C.F.R. § 541.105 (generally requiring that an executive’s recommendations pertain to employees whom the executive directs). Because there is evidence regarding Wortman’s involvement in at least one personnel decision, we conclude that the district court erred by overturning the jury’s verdict finding that Wortman was an executive employee who was exempt from FLSA overtime pay requirements.
Taken together, this opinion is instructive regarding the type and amount of input an employee must have in order to meet the hire/fire prong of the executive exemption.
Click Madden v. Lumber One Home Center, Inc. to read the entire Decision.
S.D.Ohio: Compensation System Based on Number and Type of Cases Managed, Did Not Qualify as “Fee Basis,” For Purpose of Applying Learned Professional Exemption
This case was before the court on the parties’ cross-motions for summary judgment regarding the application (or lack thereof) of the learned professional exemption to plaintiffs, nurse case managers. As discussed here, the court held that the case managers were non-exempt as a matter of law, because the defendants’ compensation plan was neither a salary nor a fee basis plan. As such, the court granted the plaintiffs’ motion in part (regarding their non-exempt status) and denied the defendants’ motion.
The court outlined the relevant undisputed facts regarding the plaintiffs compensation plan as follows:
The facts of Carestar’s compensation system for case managers are not in dispute. Each case manager is assigned a number of consumers or cases that he or she is responsible for managing. Each case is assigned one of three acuity levels depending upon the “needs/situation” of that particular case. The acuity levels have an associated point value ranging from 1.66 to 2.00 to 3.33. A case manager’s total caseload is determined by totaling the point value of his or her assigned cases.
Upon hiring, a case manager is given a dollar value for each point in his or her caseload. This amount is determined based upon the individual case manager’s educational level, credentials (i.e., RN/LSW/LISW) and experience. The Case Manager’s compensation per pay period is determined by adding up the total number of points in his or her caseload and multiplying that by the dollar value of the points. (See Case Manager Compensation Review, Doc. 34–7.)
The compensation system pays case managers an amount for each case managed, regardless of the time expended in performing such management duties. As Plaintiffs point out, Carestar’s compensation system guidelines nowhere discuss the amount of time expected to be worked by case managers in performing their duties.
Based on their compensation plan, the court held that the plaintiffs were neither paid on a salary or fee basis. Discussing the issue, the court explained:
To qualify for the “learned professional” exemption, Plaintiffs must first be “[c]ompensated on a salary or fee basis at a rate of not less than $455 per week….” 29 C.F.R. § 541.300(a)(1) (emphasis added).5 Defendants concede that Case Managers are not compensated on a “salary basis,” but rather assert that they are compensated on a “fee basis.” The DOL regulation on “fee basis” compensation, explains:
An employee will be considered to be paid on a “fee basis” within the meaning of these regulations if the employee is paid an agreed sum for a single job regardless of the time required for its completion. These payments resemble piecework payments with the important distinction that generally a “fee” is paid for the kind of job that is unique rather than for a series of jobs repeated an indefinite number of times and for which payment on an identical basis is made over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.
Defendants rely on Fazekas v. Cleveland Clinic Foundation Health Care Ventures, Inc., 204 F.3d 673 (6th Cir.2000), to argue that Carestar case managers are compensated on a “fee basis.” In Fazekas, the Sixth Circuit considered whether certain home health nurses were paid on a fee basis for the purposes of the FLSA’s “professional” exemption. See id. at 675–79. The Fazekas plaintiffs were compensated on a per-visit basis, regardless of the time spent on each home health visit. Although the nurses performed multiple tasks within a single visit, including case management and care coordination tasks, and even expended some time outside consumers’ homes on “attendant transportation and administrative duties,” all such tasks were “connected with the actual visits themselves.” Id. at 675. Thus, while the nurses often provided ongoing treatments and implemented ongoing care plans over the course of multiple visits, such services were divisible in to discrete components (i.e., the individual visit), and compensated as such. Accordingly, the disputed matter in Fazekas was not whether the nurses were compensated for performing a “single job,” but rather whether each job was “unique” and, therefore, unlike “piecework payments.” Id. at 676. Analogizing a home health nurse to “a singer, who may, after all, perform the same song or set of songs over and over again during a series of performances, or … an illustrator, who may similarly repeat the same drawings or set of drawings as necessary,” id. at 679, the Court determined that each home health visit was indeed unique. Because this was consistent with the controlling DOL opinion on the matter, see id. at 676–678, the Court concluded that home health nurses paid on a per-visit basis were professionals compensated on a fee basis and therefore FLSA-exempt.
Here, in contrast, throughout a two-week pay period, case managers perform multiple individual tasks in connection with a particular consumer, which cannot be linked back to a single discrete job like a visit, a performance, or a project. Indeed, the pay-period does not correlate with a discrete set of tasks or goals. (Case Mgmt. Practice Guidelines, Doc. 29–11, 2–4; Bowman Aff., Doc. 33–1, ¶ 5 (“The points system used to compensate me was not based on my completion of any single task. Rather, this compensation system required I provide consumers with a series of services which were repeated an indefinite number of times per year based on the consumer’s particular needs.”); Cook Aff., Doc. 33–2, ¶ 5 (same); Gildow Aff. Doc. 33–3, ¶ 5(same); Kurtz Aff., Doc. 33–4, ¶ 5 (same); Potelicki Aff., Doc. 33–5, ¶ 5 (same); Steele Aff., Doc. 33–6, ¶ 5(same)). Rather, Carestar’s Case Management Practice Guidelines identifies numerous ongoing duties, such as periodic reevaluations and a number of required contacts with the consumer during the first and subsequent six month periods. (Case Mgmt. Practice Guidelines, Doc. 29–11; see also Job Description, Doc. 29–5 (“The Case Manager is responsible for on-going case management services to the consumer, including … the on-going monitoring of consumer outcomes, health, safety, eligibility and costs.”)).6 Thus, unlike a nurse’s home health visits, a singer’s performances, or an illustrator’s drawings, the on-going work done by case managers in connection with a case cannot be reduced a series of two-week-long “single job[s].” Therefore, the only basis for delineating and distinguishing case managers’ unit of compensation is the duration of the pay period. As DOL regulations make plain, however, “[p]ayments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.” 29 C.F.R. § 541.605(a). Carestar’s case manager compensation system thus fails to meet the DOL’s definition of a “fee basis” of payment as a matter of law.
Because Case Managers are not compensated on a “salary or fee” basis, they cannot satisfy the requirements for a “professional” exemption under the FLSA. See 29 C.F.R. § 541.300(a)(1). Accordingly, this alone is sufficient to grant Plaintiffs’ Motion for Partial Summary Judgment with respect to Carestar’s misclassification of its Case Managers as “exempt” employees.
The court went on to discuss the duties element of the learned professional exemption, but declined to resolve issues of fact at the summary judgment stage, and noted that resolution of the issue was not necessary in light of the defendants’ inability to meet the salary or fee basis prong of the exemption.
Click Cook v. Carestar, Inc. to read the entire Opinion & Order.
Overtime Law Blog 