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10th Cir.: Workers for Recreational Marijuana Covered by FLSA, Notwithstanding Federal Law Which Renders Business Illegal
Following denial of the defendant-employer Helix’s motion to dismiss, Helix appealed. Helix–a company that provides security services in the state sanctioned recreational marijuana business–appealed contending that the FLSA did not apply to it. Specifically, Helix asserted that the FLSA does not apply to workers such as plaintiff, because Colorado’s recreational marijuana industry is in violation of federal law, the Controlled Substances Act (CSA). Rejecting this argument just as the court below had, the Tenth Circuit held that just because an employer – such as one in Colorado’s recreational marijuana industry – may be in violation of federal law, here the CSA, that does not mean its employees are not entitled to overtime under the Fair Labor Standards Act (FLSA).
Helix TCS, Inc., provides security services for businesses in Colorado’s state-sanctioned marijuana industry. One of its employees, Robert Kenney, alleged that he and other security guards regularly worked more than 40 hours per week without overtime pay.
Helix did not dispute the fact that Kenney worked more than 40 hours without overtime, nor did it try to argue that he was covered by one of the FLSA’s many overtime exemptions. Instead, it argued that the FLSA was in conflict with CSA’s purpose. The Tenth Circuit rejected this argument and held that employers are not excused from complying with federal laws because of their other federal violations.
The 10th Circuit compared the situation to the 1931 trial of Al Capone in which jurors convicted the gangster for failing to pay taxes on his ill-gotten income. Just as there was no reason then why the fact a business was unlawful should exempt it from paying the taxes it would otherwise have had to pay, the Tenth Circuit said there is no reason today why a recreational marijuana company should be exempt from paying overtime just because it may be in violation of the CSA.
Click Kenney v. Helix TCS, Inc. to read the entire decision.
9th Cir.: Employers May NOT Retain Employee Tips Even Where They Do Not Take a Tip Credit; 2011 DOL Regulations Which Post-Dated Woody Woo Due Chevron Deference Because Existing Law Was Silent and Interpretation is Reasonable
Oregon Rest. & Lodging Ass’n v. Perez
In a case that will likely have very wide-reaching effects, this week the Ninth Circuit reversed 2 lower court decisions which has invalidated the Department of Labor’s 2011 tip credit regulations. Specifically, the lower courts had held, in accordance with the Ninth Circuit’s Woody Woo decision which pre-dated the regulations at issue, that the DOL lacked the authority to regulate employers who did not take a tip credit with respect to how they treated their employees’ tips. Holding that the 2011 regulations were due so-called Chevron deference, the Ninth Circuit held that the lower court had incorrectly relied on its own Woody Woo case because the statutory/regulatory silence that had existed when Woody Woo was decided had been properly filled by the 2011 regulations. As such, the Ninth Circuit held that the lower court was required to give the DOL regulation deference and as such, an employer may never retain any portion of its employees tips, regardless of whether it avails itself of the tip credit or not.
Framing the issue, the Ninth Circuit explained “[t]he precise question before this court is whether the DOL may regulate the tip pooling practices of employers who do not take a tip credit.” It further noted that while “[t]he restaurants and casinos [appellees] argue that we answered this question in Cumbie. We did not.”
The court then applied Chevron analysis to the DOL’s 2011 regulation at issue.
Holding that the regulation filled a statutory silence that existed at the time of the regulation, and thus met Step 1 of Chevron, the court reasoned:
as Christensen strongly suggests, there is a distinction between court decisions that interpret statutory commands and court decisions that interpret statutory silence. Moreover, Chevron itself distinguishes between statutes that directly address the precise question at issue and those for which the statute is “silent.” Chevron, 467 U.S. at 843. As such, if a court holds that a statute unambiguously protects or prohibits certain conduct, the court “leaves no room for agency discretion” under Brand X, 545 U.S. at 982. However, if a court holds that a statute does not prohibit conduct because it is silent, the court’s ruling leaves room for agency discretion under Christensen.
Cumbie falls precisely into the latter category of cases—cases grounded in statutory silence. When we decided Cumbie, the DOL had not yet promulgated the 2011 rule. Thus, there was no occasion to conduct a Chevron analysis in Cumbie because there was no agency interpretation to analyze. The Cumbie analysis was limited to the text of section 203(m). After a careful reading of section 203(m) in Cumbie, we found that “nothing in the text of the FLSA purports to restrict employee tip-pooling arrangements when no tip credit is taken” and therefore there was “no statutory impediment” to the practice. 596 F.3d at 583. Applying the reasoning in Christensen, we conclude that section 203(m)‘s clear silence as to employers who do not take a tip credit has left room for the DOL to promulgate the 2011 rule. Whereas the restaurants, casinos, and the district courts equate this silence concerning employers who do not take a tip credit to “repudiation” of future regulation of such employers, we decline to make that great leap without more persuasive evidence. See United States v. Home Concrete & Supply, LLC, 132 S. Ct 1836, 1843, 182 L. Ed. 2d 746 (2012) (“[A] statute’s silence or ambiguity as to a particular issue means that Congress has . . . likely delegat[ed] gap-filling power to the agency[.]”); Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 222, 129 S. Ct. 1498, 173 L. Ed. 2d 369 (2009) (“[S]ilence is meant to convey nothing more than a refusal to tie the agency’s hands . . . .”); S.J. Amoroso Constr. Co. v. United States, 981 F.2d 1073, 1075 (9th Cir. 1992) (“Without language in the statute so precluding [the agency’s challenged interpretation], it must be said that Congress has not spoken to the issue.”).
In sum, we conclude that step one of the Chevron analysis is satisfied because the FLSA is silent regarding the tip pooling practices of employers who do not take a tip credit. Our decision in Cumbie did not hold otherwise.
Proceeding to step 2 of Chevron analysis, the court held that the 2011 regulation was reasonable in light of the existing statutory framework of the FLSA and its legislative history. The court reasoned:
The DOL promulgated the 2011 rule after taking into consideration numerous comments and our holding in Cumbie. The AFL-CIO, National Employment Lawyers Association, and the Chamber of Commerce all commented that section 203(m) was either “confusing” or “misleading” with respect to the ownership of tips. 76 Fed. Reg. at 18840-41. The DOL also considered our reading of section 203(m) in Cumbie and concluded that, as written, 203(m) contained a “loophole” that allowed employers to exploit the FLSA tipping provisions. Id. at 18841. It was certainly reasonable to conclude that clarification by the DOL was needed. The DOL’s clarification—the 2011 rule—was a reasonable response to these comments and relevant case law.
The legislative history of the FLSA supports the DOL’s interpretation of section 203(m) of the FLSA. An “authoritative source for finding the Legislature’s intent lies in the Committee Reports on the bill, which represent the considered and collective understanding of those Congressmen [and women] involved in drafting and studying proposed legislation.” Garcia v. United States, 469 U.S. 70, 76, 105 S. Ct. 479, 83 L. Ed. 2d 472 (1984) (citation and internal quotation marks omitted). On February 21, 1974, the Senate Committee published its views on the 1974 amendments to section 203(m). S. Rep. No. 93-690 (1974).
Rejecting the employer-appellees argument that the regulation was unreasonable, the court explained:
Employer-Appellees argue that the report reveals an intent contrary to the DOL’s interpretation because the report states that an “employer will lose the benefit of [the tip credit] exception if tipped employees are required to share their tips with employees who do not customarily and regularly receive tips[.]” In other words, Appellees contend that Congress viewed the ability to take a tip credit as a benefit that came with conditions and should an employer fail to meet these conditions, such employer would be ineligible to reap the benefits of taking a tip credit. While this is a fair interpretation of the statute, it is a leap too far to conclude that Congress clearly intended to deprive the DOL the ability to later apply similar conditions on employers who do not take a tip credit.
The court also examined the Senate Committee’s report with regard to the enactment of 203(m), the statutory section to which the 2011 regulation was enacted to interpret and stated:
Moreover, the surrounding text in the Senate Committee report supports the DOL’s reading of section 203(m). The Committee reported that the 1974 amendment “modifies section [20]3(m) of the Fair Labor Standards Act by requiring . . . that all tips received be paid out to tipped employees.” S. Rep. No. 93-690, at 42. This language supports the DOL’s statutory construction that “[t]ips are the property of the employee whether or not the employer has taken a tip credit.” 29 C.F.R. § 531.52. In the same report, the Committee wrote that “tipped employee[s] should have stronger protection,” and reiterated that a “tip is . . . distinguished from payment of a charge . . . [and the customer] has the right to determine who shall be the recipient of the gratuity.” S. Rep. No. 93-690, at 42.
In 1977, the Committee again reported that “[t]ips are not wages, and under the 1974 amendments tips must be retained by the employees . . . and cannot be paid to the employer or otherwise used by the employer to offset his wage obligation, except to the extent permitted by section [20]3(m).” S. Rep. No. 95-440 at 368 (1977) (emphasis added). The use of the word “or” supports the DOL’s interpretation of the FLSA because it implies that the only acceptable use by an employer of employee tips is a tip credit.
Additionally, we find that the purpose of the FLSA does not support the view that Congress clearly intended to permanently allow employers that do not take a tip credit to do whatever they wish with their employees’ tips. The district courts’ reading that the FLSA provides “specific statutory protections” related only to “substandard wages and oppressive working hours” is too narrow. As previously noted, the FLSA is a broad and remedial act that Congress has frequently expanded and extended.
Considering the statements in the relevant legislative history and the purpose and structure of the FLSA, we find that the DOL’s interpretation is more closely aligned with Congressional intent, and at the very least, that the DOL’s interpretation is reasonable.
Finally, the court explained that it was not overruling Woody Woo, because Woody Woo had been decided prior to the enactment of the regulation at issue when there was regulatory silence on the issue, whereas this case was decided after the 2011 DOL regulations filled that silence.
This case is likely to have wide-ranging impacts throughout the country because previously district court’s have largely simply ignored the 2011 regulations like the lower court’s here, incorrectly relying on the Woody Woo case which pre-dated the regulation.
Click Oregon Rest. & Lodging Ass’n v. Perez to read the entire decision.
11th Cir.: Trial Court Erred in Denying Liquidated Damages Where Sole Evidence of Good Faith Was VP’s Testimony He Researched Alleged Exemption After Plaintiff Commenced Legal Action
This case was before the Eleventh Circuit for a second time. Previously, the plaintiff had successfully appealed the trial court’s decision that he was exempt from the FLSA under the so-called Motor Carrier Exemption. Following remand, plaintiff prevailed at trial and was awarded unpaid overtime wages. The plaintiff then moved for an award of liquidated damages and attorneys’ fees and costs. As discussed here, despite virtually non-existent evidence of any good faith on the part of the defendant to determine its FLSA obligations prior to the lawsuit, the court below denied plaintiff liquidated damages. The Eleventh Circuit reversed reiterating that a defendant (and not plaintiff) bears the burden of proof on this issue and that the burden is a relatively high one.
Discussing the relevant burden of proof, the court explained:
Under the FLSA, liquidated damages are mandatory absent a showing of good faith by the employer. See 29 U.S.C. § 216(b) (2012); Joiner v. City of Macon, 814 F.2d 1537,1538-39 (11th Cir. 1987). Although liquidated damages are typically assessed at an equal amount of the wages lost due to the FLSA violation, they can be reduced to zero at the discretion of [*7] the court. See 29 U.S.C. §§ 216(b), 260. If an 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 . . . the court may, in its sound discretion, award no liquidated damages . . . .
29 U.S.C. § 260.
An employer who seeks to avoid liquidated damages bears the burden of proving to the court that its violation was “both in good faith and predicated upon such reasonable grounds that it would be unfair to impose upon him more than a compensatory verdict.” Reeves v. Int’l Tel. & Tel. Corp., 616 F.2d 1342, 1352 (5th Cir. 1980) (quoting Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 468 (5th Cir. 1979)). “Before a district court may exercise its discretion to award less than the full amount of liquidated damages, it must explicitly find that the employer acted in good faith.” Joiner, 814 F.2d at 1539.
The Eleventh Circuit then held that the defendant in this case had not carried its burden of proof:
The district court erred in denying liquidated damages on this record. Aqua Life had the burden of proving good faith and reasonable belief and failed to carry that burden. The only evidence of the alleged good faith was the testimony of its Vice President, [*8] Mr. Ibarra, who ostensibly researched the Motor Carrier Act exception to the FLSA, concluding that Mr. Reyes did not need to be paid overtime hours for his work. Yet, Mr. Ibarra also admitted that he had never heard of the FLSA until legal action was taken by Mr. Reyes. Aqua Life thus did not make a sufficient factual showing upon which the district court could have reasonably relied to deny liquidated damages and the record does not support the district court’s refusal to grant liquidated damages.
We need not reach Mr. Reyes’s alternative arguments against the denial of liquidated damages, as the factual record contains no evidence to support the district court’s denial of liquidated damages. Accordingly, we REVERSE, and direct the district court to assign full liquidated damages in the amount of $14,770.00 to Mr. Reyes.
Click Reyes v. Aqua Life Corp. to read the entire decision.
5th Cir.: General Release Obtained By Defendant in Non-FLSA State Court Case Did Not Waive FLSA Claims
In this appeal, the Fifth Circuit was asked (by the defendant-appellee) to extend its holding in Martin v. Spring Break ′83 Productions, L.L.C., 688 F.3d 247 (5th Cir.2012). In Martin, the Fifth Circuit held that a private settlement reached over a bona fide dispute regarding Fair Labor Standards Act (“FLSA”) claims was enforceable despite the general prohibition against the waiver of FLSA claims via private settlement. Applying Martin, the district court in the instant action enforced a generic, broad release against the plaintiffs’ subsequent FLSA claims, even though the release was obtained through the private settlement of a prior state court action that did not involve the FLSA or any claim of unpaid wages. Because it reasoned that it could not be assured under the facts at bar that the release at issue resulted from a bona fide dispute regarding overtime wages, the Fifth Circuit declined to extend Martin and reversed.
Laying out the relevant facts and procedural history, the court explained:
Plaintiffs–Appellants Ambre Bodle and Leslie Meech (collectively referred to as “the plaintiffs”) filed the instant FLSA action against their former employer TXL Mortgage Corporation (“TXL”) and its president William Dale Couch (collectively referred to as “the defendants”) on May 16, 2012. The plaintiffs alleged that the defendants failed to compensate them for their overtime work as required by Section 207 of the FLSA. The defendants moved for summary judgment asserting res judicata as a basis for dismissal. The defendants also argued that the plaintiffs executed a valid and enforceable waiver in a prior state court action, which released all claims against the defendants arising from the parties’ employment relationship. The district court found the latter contention dispositive.
The defendants in the instant case filed the prior state court action against the plaintiffs on February 3, 2012. The defendants claimed that the plaintiffs, who had resigned from the company about a year prior, had begun to work for a direct competitor and had violated their noncompetition covenants with TXL by soliciting business and employees to leave TXL for the competitor. In connection with these allegations, the defendants asserted nine state law causes of action against the plaintiffs.3In response, the plaintiffs sought a declaration that the non-compete and non-solicitation of client provisions in the employment agreements were unenforceable.
On May 16, 2012, the parties filed with the state court a joint motion for entry of agreed final judgment pursuant to a settlement agreement. The state court granted the parties’ motion and entered an agreed final judgment on May 23, 2012. The private settlement agreement between the parties contained a release by the plaintiffs which stated the following:
In exchange for the consideration identified above, DEFENDANTS hereby fully and completely release and discharge TXL and its agents, representatives, attorneys, successors, and assigns from any and all actual or potential claims, demands, actions, causes of action, and liabilities of any kind or nature, whether known or unknown, including but not limited to all claims and causes of action that were or could have been asserted in the Lawsuit and all claims and causes of action related to or in any way arising from DEFENDANTS’ employment with TXL, whether based in tort, contract (express or implied), warranty, deceptive trade practices, or any federal, state or local law, statute, or regulation. This is meant to be, and shall be construed as, a broad release.
The district court in the instant action granted summary judgment to the defendants on the basis that the plain language of the release from the state court settlement was binding on the plaintiffs and therefore banned their subsequent FLSA claims. The plaintiffs now appeal the dismissal. The defendants contend that the dismissal was proper under the state court settlement release, and in the alternative, that res judicata bars the plaintiffs’ FLSA claims.
After discussing the well-settled authority which holds that generally—absent approval from the DOL or a court of adequate jurisdiction—private settlements of FLSA claims are not binding on employees, the court then examined its prior holding in the Martin case:
We considered this question in Martin v. Spring Break ′83 Productions, L.L.C., 688 F.3d 247 (5th Cir.2012). In Martin, we enforced a private settlement agreement that constituted a compromise over FLSA claims because the settlement resolved a bona fide dispute about the number of hours worked.Id. at 255. In reaching this conclusion, we adopted reasoning from Martinez v. Bohls Bearing Equipment Co., 361 F.Supp.2d 608 (W.D.Tex.2005).Martinez held that “parties may reach private compromises as to FLSA claims where there is a bona fide dispute as to the amount of hours worked or compensation due. A release of a party’s rights under the FLSA is enforceable under such circumstances.”Id. at 631…
In Martin, we approved, as an enforceable compromise of a bona fide dispute, a settlement between a union representative and a movie production company. 688 F.3d at 249. After an investigation, the union representative concluded it would be impossible to validate the number of hours claimed by the workers for unpaid wages. Id. The parties’ settlement of the union members’ complaints read as follows:
The Union on its own behalf and on behalf of the IATSE Employees agrees and acknowledges that the Union has not and will not file any complaints, charges, or other proceedings against Producer, its successors, licenses and/or assignees, with any agency, court, administrative body, or in any forum, on condition that payment in full is made pursuant to the terms of this Settlement Agreement.
Id. at 254. In reaching the conclusion that a bona fide dispute existed, we emphasized the union representative’s inability to “determine whether or not Appellants worked on the days they claimed they had worked[.]”Id. at 255.
However, the Fifth Circuit held that meaningful facts distinguished this case from Martin and declined to extend Martin’s holding to these facts:
In the instant action, the settlement containing the release of future claims derived from a state court action centered upon a disputed non-compete agreement. Nevertheless, the district court concluded that the release validly barred the plaintiffs’ subsequent FLSA claims because the topic of unpaid wages for commissions and salary arose in the settlement negotiations. The district court found that at the time of the settlement discussions regarding the unpaid wages, the plaintiffs were aware of their claims for unpaid overtime because they had signed consent forms to join the instant lawsuit. However, the plaintiffs chose, at that time, to remain silent about their overtime claims. The district court concluded that the overall “bona fide dispute” as to wages (which focused on wages for commissions and salary), could have included the claims for overtime wages, but for the plaintiffs’ silence. And for that reason, the district court held that the plaintiffs are now barred from claiming that the compromise resulting from their bona fide dispute over wages did not encompass their claim for unpaid overtime.
The plaintiffs contend on appeal that the district court erred in extending Martin’s limited holding to the circumstances of this case. The plaintiffs point out that in Martin the settlement was reached in response to the filing of a FLSA lawsuit, as opposed to the state court action concerning a non-compete agreement that is present in this case. The plaintiffs further emphasize that in Martin, the parties specifically disputed the amounts due and the number of overtime hours claimed under the FLSA. The plaintiffs maintain that because they did not receive any FLSA compensation for unpaid overtime in the state court settlement, the rationale set out in Martin, does not apply to this case. The defendants argue that since the state court settlement resolved a bona fide dispute about hours worked and compensation due in a general sense, the release of a claim for unpaid overtime is valid, even if brought under the FLSA. The defendants state that if the plaintiffs wished to bring a subsequent FLSA claim, they should have carved that claim out of the settlement agreement.
The plaintiffs have the stronger argument on this issue. The general rule establishes that FLSA claims (for unpaid overtime, in this case) cannot be waived. See Brooklyn Sav. Bank, 324 U.S. at 706–08. Accordingly, many courts have held that, in the absence of supervision by the Department of Labor or scrutiny from a court, a settlement of an FLSA claim is prohibited. See, e.g., Lynn’s Food Stores, Inc. v. U.S., 679 F.2d 1350, 1355 (11th Cir.1982) ( “Other than a section 216(c) payment supervised by the Department of Labor, there is only one context in which compromises of FLSA back wage or liquidated damage claims may be allowed: a stipulated judgment entered by a court which has determined that a settlement proposed by an employer and employees, in a suit brought by the employees under the FLSA, is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.”) (emphasis added); Taylor v. Progress Energy, Inc., 493 F.3d 454, 460 (4th Cir.2007), superseded by regulation on other grounds as stated in Whiting v. Johns Hopkins Hosp., 416 F. App’x 312 (4th Cir.2011) (“[U]nder the FLSA, a labor standards law, there is a judicial prohibition against the unsupervised waiver or settlement of claims.”).
Nevertheless, we have excepted, from this general rule, unsupervised settlements that are reached due to a bona fide FLSA dispute over hours worked or compensation owed. See Martin, 688 F.3d at 255. In doing so, we reasoned that such an exception would not undermine the purpose of the FLSA because the plaintiffs did not waive their claims through some sort of bargain but instead received compensation for the disputed hours. Id. at 257. The Martin exception does not apply to the instant case because not only did the prior state court action not involve the FLSA, the parties never discussed overtime compensation or the FLSA in their settlement negotiations. Therefore, there was no factual development of the number of unpaid overtime hours nor of compensation due for unpaid overtime. To deem the plaintiffs as having fairly bargained away unmentioned overtime pay based on a settlement that involves a compromise over wages due for commissions and salary would subvert the purpose of the FLSA: namely, in this case, the protection of the right to overtime pay. Under these circumstances where overtime pay was never specifically negotiated, there is no guarantee that the plaintiffs have been or will be compensated for the overtime wages they are allegedly due under the Act.
Thus, the court held as follows:
Accordingly, we hold that the absence of any mention or factual development of any claim of unpaid overtime compensation in the state court settlement negotiations precludes a finding that the release resulted from a bona fide dispute under Martin.The general prohibition against FLSA waivers applies in this case, and the state court settlement release cannot be enforced against the plaintiffs’ FLSA claims.
The court also rejected the Appellee’s alternative argument that the FLSA claims were barred by res judicata due to the plaintiff’s failure to raise them in the unrelated underlying state-law case.
Click Bodle v. TXL Mortg Corp. to read the entire Fifth Circuit Opinion.
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.
N.D.Ga.: Defendant Barred from Unilateral Meetings With Putative Class Members Outside of Formal Discovery Process, Absent Detailed Disclosures to Alleviate Concerns re Chilled Participation and/or Retaliation
Wilson v. Regions Financial Corporation
This case was before the court for consideration of the parties’ Joint Statement regarding restrictions on communications with putative class members, as required by L.R. 23.1(C)(2) of the Northern District of Georgia.
The specific issue raised by the parties’ Joint Submission was explained as follows:
In the Joint Statement, Plaintiffs raise a concern that Defendants will question putative class members about a policy requiring employees to lodge contemporaneous internal complaints about incorrect pay (“Complaint Policy”). Plaintiffs fear that if representatives of Defendants raise the Complaint Policy in communications with putative plaintiffs, the putative plaintiffs will believe that their failure to have lodged a contemporaneous complaint about incorrect pay may have been a violation of company policy that could result in their termination from employment. In its portion of the Joint Statement, Defendants do not deny an intention to make such inquiries of employees.
Initially the court discussed the basic applicable law:
[A]n order limiting communication between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of a need for limitation and the potential interference with the rights of the parties. Only such a determination can insure that the court is furthering, rather than hindering, the policies embodied in the Federal Rules of Civil Procedure, especially Rule 23.
Gulf Oil Co. v. Bernard, 452 U.S. 89, 101–102, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981). “Unsupervised, unilateral communications with the plaintiff class sabotage the goal of informed consent by urging exclusion on the basis of a one-sided presentation of the facts, without opportunity for rebuttal. The damages from misstatements could well be irreparable.” Kleiner v. First Nat’l Bank of Atlanta, 751 F.2d 1193, 1203 (11th Cir.1985).
Based on its conclusion that there were inherent risks in the anticipated questioning by the defendants, the court held that the defendants were barred from communicating with former employee putative class members regarding the subject matter of the case, outside of the regular discovery process in the case and without the consent of plaintiff’s counsel. While the court permitted defendants’ counsel to speak with current employees who were putative class members, it set forth detailed prerequisites prior to any such communications, in order to safeguard against defenadnts’ improperly influencing putative class members from exercising their rights under the FLSA:
The Court finds that the risks inherent in the anticipated questioning by Defendants warrant the following limitations on Defendants’ communications with potential class members.
There shall be no communications with any named Plaintiff or with any current or future opt-in Plaintiffs outside the formal discovery process or without the consent of the named Plaintiff’s counsel of record, except-as to any currently employed present or future opt-in Plaintiff-for routine business matters unrelated to this action.
With respect to any presentation of information, including any views or opinions, to any “putative class members” by the Defendants—whether acting through management, counsel, other employees, or any other agent of any kind—that relates to the allegations and claims in this action, whether for the purpose of gathering information in a one-on-one or group basis to defend this action or to address any employee complaints regarding past, current or future compensation practices, such communication shall commence with the following statements:
(a) The person(s) present on the Defendants’ behalf is a Defendant employee or agent acting at the direction of Defendants’ management;
(b) The person(s) present on the Defendants’ behalf is there to address a lawsuit filed against the Defendants, as well as employee complaints, involving allegations that the Defendants failed to pay employees all the wages and overtime they had earned and were entitled to receive;
(c) The lawsuit is a class-action—which means the individual may receive money as a result of the lawsuit;
(d) The allegations of wrongdoing (accurately stated), accompanied by a copy of the Third Amended Complaint;
(e) The “putative class member” is under no obligation to stay, or listen, or speak, or respond;
(f) No record of anyone who does not stay, speak, or respond is being made and no record of who does not stay, speak, or respond will be made at any future time;
(g) No adverse action will be taken if the “putative class member” chooses not to stay, speak, or respond;
(h) No adverse action will be taken if the “putative class member” says, in substance, they believe they not were not properly compensated or did not receive all compensation owed to them, whether or not they complained to anyone about any compensation issues; and
(i) The “putative class member” is free to leave at any time, including at this point.
Click Wilson v. Regions Financial Corporation to read the entire Order Regarding Communications With Putative Class Members.
While the procedural posture of this case was somewhat unique, in that the Northern District of Georgia has a detailed/explicit rule regarding pre-certification communications (and there was a Rule 23 class claim in addition to the FLSA collective action claim), this decision will likely serve as a blueprint for many courts going forward, given the chilling effect unilateral meetings with current and former employees can have, as many courts have previously noted.
6th Cir.: Collective Action Waivers in Employees’ Separation Agreements Did Not Validly Waive Employees’ Rights to Participate in Collective Action Under FLSA, Absent Valid Arbitration Provision
Killion v. KeHE Distributors, LLC
Although this one is not exactly breaking news, we are discussing it because of its importance in the general landscape of FLSA jurisprudence. As discussed here, this case was before the Sixth Circuit on Plaintiffs’ appeal, regarding an issue of first impression. Specifically, the Sixth Circuit was asked to decide whether an agreement by employees to waive their rights to participate in a collective action under the FLSA can be enforceable in the absence of an agreement to arbitrate their FLSA claims. Reversing the district court, the Sixth Circuit held that such agreements are unenforceable, absent an agreement to arbitrate the claims in an alternative forum, because in such a situation there is no congressional interest that weighs against the remedial goals of the FLSA.
In this case, former employees of the Defendant brought putative collective action against their former employer to recover overtime wages under the Fair Labor Standards Act (FLSA). The district court determined that collective-action waiver in certain employees’ separation agreements was enforceable, despite the fact that the separation agreements contained no agreement to arbitrate their FLSA claims. The employees appealed, and the Sixth Circuit reversed.
Framing the parties’ respective positions, the Sixth Circuit explained:
This brings us to the merits regarding the validity of the unmodified collective-action waivers. The plaintiffs argue that this court’s decision in Boaz v. FedEx Customer Information Services, Inc., 725 F.3d 603 (6th Cir.2013), controls because it holds that an employee will not be bound by a contract entered into with his employer that has the effect of limiting his rights under the FLSA. In response, KeHE argues that cases upholding agreements that require employees to submit to arbitration on an individual basis are more on point. No court of appeals appears to have squarely addressed this issue outside of the arbitration context.
Given its recent related decision in Boaz, the Sixth Circuit began by discussing that case’s implications on the issue presented in this case:
This court’s decision in Boaz provides the relevant framework for the issue before us. In Boaz, the plaintiff-employee signed an employment agreement that contained a provision requiring her to bring any legal action against the defendant-employer within “6 months from the date of the event forming the basis of [the] lawsuit.” Id. at 605. When the plaintiff filed an FLSA lawsuit after the six-month time period had elapsed, the defendant moved for summary judgment, arguing that her claims were untimely under the employment agreement.
This court disagreed. It first noted that “[s]hortly after the FLSA was enacted, the Supreme Court expressed concern that an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights … to minimum wages, overtime, or liquidated damages.” Id. at 605–06. The Boaz court concluded that because the waiver of the statutory-limitations period would have deprived the plaintiff of her FLSA rights, the provision was invalid. Id. at 606. It also rejected the defendant’s argument that a plaintiff may waive procedural rights under the FLSA, just not substantive ones. Id. Finally, the court distinguished cases enforcing an employee’s agreement to arbitrate his or her claims on an individual basis due to the strong federal presumption in favor of arbitration. Id. at 606–07 (distinguishing Floss v. Ryan’s Family Steak Houses Inc., 211 F.3d 306 (6th Cir.2000), on that basis).
Following its own reasoning from the Boaz decision, the Sixth Circuit concluded that normally a plaintiff’s right to participate in a collective action under 29 U.S.C. 216(b) cannot be waived:
Boaz therefore implies that a plaintiff’s right to participate in a collective action cannot normally be waived. The court clearly said that “[a]n employment agreement cannot be utilized to deprive employees of their statutory [FLSA] rights.” Id. (alteration in original) (internal quotation marks omitted). And “Congress has stated its policy that ADEA plaintiffs [and thus FLSA plaintiffs because the statutory language is identical] should have the opportunity to proceed collectively.” Hoffmann–La Roche Inc. v. Sperling, 493 U.S. 165, 170, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). We have little reason to think that the right to participate in a collective action should be treated any differently than the right to sue within the full time period allowed by the FLSA. The concern, Boaz explained, is that “an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights under the Act.” 725 F.3d at 605.
Conscious of the body of law that has permitted collective action waivers when they are contained in agreements containing arbitration clauses, the court was careful to distinguish such cases:
We are aware, of course, that the considerations change when an arbitration clause is involved. Boaz explained that “an employee can waive his right to a judicial forum only if the alternative forum allow[s] for the effective vindication of [the employee’s] claim.” Id. at 606–07 (alteration in original) (internal quotation marks omitted). Arbitration, it noted, is such a forum. Id. at 606. But this line of precedents is of only minimal relevance here because the plaintiffs’ collective-action waivers in this case contained no arbitration clause. And, in any event, none of our precedents permitting arbitration of FLSA claims has addressed employees’ collective-action rights.
KeHE nonetheless points to cases from other circuits enforcing agreements to arbitrate FLSA claims on an individual basis. As KeHE notes, the Eleventh Circuit recently addressed the jurisprudence of the courts of appeals on collective-action waivers in the arbitration context in Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir.2014). It determined that
all of the circuits to address this issue have concluded that § 16(b) does not provide for a non-waivable, substantive right to bring a collective action. See Sutherland v. Ernst & Young LLP, 726 F.3d 290, 296–97 & n. 6 (2d Cir.2013) (determining that the FLSA does not contain a “contrary congressional command” that prevents an employee from waiving his or her ability to proceed collectively and that the FLSA collective action right is a waivable procedural mechanism); Owen [v. Bristol Care, Inc.], 702 F.3d [1050,] 1052–53 [ (8th Cir.2013) ] (determining that the FLSA did not set forth a “contrary congressional command” showing “that a right to engage in class actions overrides the mandate of the FAA in favor of arbitration”); Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 298 (5th Cir.2004) (rejecting the plaintiffs’ claim that their inability to proceed collectively deprived them of a substantive right to proceed under the FLSA because, in Gilmer [v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) ], the Supreme Court rejected similar arguments regarding the ADEA); Adkins [v. Labor Ready, Inc.], 303 F.3d [496,] 503 [ (4th Cir.2002) ] (determining that a plaintiff failed to point to any “suggestion in the text, legislative history, or purpose of the FLSA that Congress intended to confer a non-waivable right to a class action under that statute” and that the plaintiff’s “inability to bring a class action, therefore, cannot by itself suffice to defeat the strong congressional preference for an arbitral forum”); cf. D.R. Horton [v. NLRB ], 737 F.3d [344,] 362 [ (5th Cir.2013) ] (determining that the National Labor Relations Act does not contain a contrary congressional command overriding the application of the FAA).
Id. at 1336. The Eleventh Circuit then joined this emerging consensus. Id. Crucially, however, the respective waiver agreements in all of the above-cited cases included provisions subjecting the employees to arbitration. See Walthour, 745 F.3d at 1330 (noting the existence of an arbitration*592 agreement between the parties); Sutherland, 726 F.3d at 296 (same); Owen, 702 F.3d at 1052 (same); Carter, 362 F.3d at 298 (same); Adkins, 303 F.3d at 498 (same).
These circuit decisions, in turn, rely on the Supreme Court’s decisions in Gilmer, 500 U.S. at 35, 111 S.Ct. 1647 (“We conclude that Gilmer has not met his burden of showing that Congress, in enacting the ADEA, intended to preclude arbitration of claims under that Act.”), and American Express Co. v. Italian Colors Restaurant, ––– U.S. ––––, 133 S.Ct. 2304, 2309, 186 L.Ed.2d 417 (2013) (holding that “[n]o contrary congressional command requires us to reject the waiver of class arbitration here”). See Walthour, 745 F.3d at 1331 (citing Gilmer and Italian Colors); Sutherland, 726 F.3d at 296 (quoting Italian Colors ); Carter, 362 F.3d at 298 (citing Gilmer); Adkins, 303 F.3d at 502 (citing Gilmer ). Accordingly, none of the foregoing authorities speak to the validity of a collective-action waiver outside of the arbitration context.
Thus, the Sixth Circuit concluded that, in the absence of a valid arbitration agreement, a collective action waiver is unenforceable because there is no countervailing federal policy (i.e. the FAA) that outweighs the remedial policy articulated in the FLSA:
Because no arbitration agreement is present in the case before us, we find no countervailing federal policy that outweighs the policy articulated in the FLSA. The rationale of Boaz is therefore controlling. Boaz is based on the general principle of striking down restrictions on the employees’ FLSA rights that would have the effect of granting their employer an unfair advantage over its competitors. Requiring an employee to litigate on an individual basis grants the employer the same type of competitive advantage as did shortening the period to bring a claim in Boaz. And in cases where each individual claim is small, having to litigate on an individual basis would likely discourage the employee from bringing a claim for overtime wages. Boaz therefore controls the result here where arbitration is not a part of the waiver provision.
Click Killion v. KeHE Distributors, LLC to read the Sixth Circuit’s decision.
S.D.N.Y.: Following Conditional Certification, Court Permits Notice Via Social Media
As is often the case, in its order granting plaintiff’s motion for conditional certification and to permit notice, the court in this case ordered the parties to confer regarding the terms of the proposed notice, the length of the notice period, and the means of transmitting such notice. Of note here, the plaintiff requested several alternative means of notice, including posting at defendant’s physical office, requiring that defendant post the notice on its blogs and/or websites, and that plaintiff be permitted to post copies of the court-approved notice on dedicated social media sites. Although the court denied some of plaintiff’s requests in this regard, it granted plaintiff’s request that he be permitted to transmit the notice via social media.
Discussing this issue the court explained:
Plaintiff’s final request is to use social media to target potential plaintiffs. They want to use dedicated social media pages entitled “Gawker Intern Lawsuit” or “Gawker Class Action”—names that match the URLs of the websites that the parties agree will be used to provide notice—on sites such as Facebook, LinkedIn, and Twitter.
Defendants argue, first, that there is “no evidence here that any former Gawker intern uses Twitter or could reasonably be expected to receive notice in that way,” and second, that creating social media pages would “deprive[ ] the Court of control over the message delivered to potential collective members.” As to the former argument, the Court finds it unrealistic that Defendant’s former interns do not maintain social media accounts; the vast majority likely have at least one such account, if not more. As to the latter, the Court exercises control only over the materials prepared and sent by the parties, not over the discussion that takes place by and among potential class members after notice is sent. The Court’s inability to control “discussion of the lawsuit” on social media sites, as Defendants put it, is no different from the Court’s inability to control two potential plaintiffs’ discussions of the lawsuit in person, by telephone, or even on a social media page that could be created by such a person without the parties’ intervention. The Court’s role is to ensure the fairness and accuracy of the parties’ communications with potential plaintiffs—not to be the arbiter of all discussions not involving the parties that may take place thereafter.
In a footnote, the court explained that its ruling was supported by the widespread use of social media by 18-30 year olds, the same group who comprised the putative class:
The Pew Research Center notes that as of January 2014, 89% of 18—to 29–year–olds use social networking sites. See “Social Networking Fact Sheet,” The Pew Internet Project, http://www.pewinternet.org/fact-sheets/social-networking-fact-sheet/ (last accessed Oct. 31, 2014).
Thus, the court concluded:
To the extent Plaintiffs propose to use social media to provide potential plaintiffs with notice that mirrors the notice otherwise approved by the Court, that request is granted. Before disseminating any notice by social media, the Plaintiffs shall confer with Defendants over the form and substance of any proposed social media postings, and submit to the court a joint letter describing the postings and any disputes about their contents that the parties cannot resolve themselves. The disputes already settled in this order—for example, the prohibition on the use of Defendant’s logos-shall govern any social media notice as well… Plaintiffs may send notice via social media sites, subject to the Court’s further approval of the form and content of such notice.
Click Mark v. Gawker Media LLC to read the entire Order.
E.D.Cal.: Attorney’s Fees and Costs Recoverable Under 216(b) When Plaintiff Obtains Declaratory Relief
This case was before the court on the relatively novel issue of whether an FLSA plaintiff, who prevails in a case solely seeking a declaratory judgment or declaratory relief is entitled to attorneys fees and costs under 29 U.S.C. § 216(b). The court answered the question in the affirmative, reasoning that the broad remedial purpose of the FLSA dictated that such fees are recoverable.
Describing the somewhat unique procedural posture of the case, the court explained:
This case is brought as a collective action under 29 U.S.C. § 201 et seq., the Fair Labor Standards Act (“FLSA”), by Plaintiffs against Defendant Jeffrey Beard in his official capacity as the Secretary of the California Department of Corrections and Rehabilitations. Plaintiffs complain about the calculation of wages by Beard and seek a declaration that Beard is violating the FLSA. Plaintiffs also seek attorneys’ fees under § 216(b). Beard has filed a counterclaim in which he seeks several declarations, the gist of which is that Plaintiffs are not entitled to attorneys’ fees under § 216(b) in this case. Plaintiffs have filed a motion to dismiss under Rules 12(b)(1) and 12(b)(6), and alternatively a Rule 12(f) motion to strike Beard’s counterclaim. For the reasons that follow, Plaintiffs’ motion to dismiss will be granted.
Initially, the court rejected the plaintiffs’ argument that defendant’s claim that attorneys fees was not recoverable on their declaratory judgment count, holding that the issue was one of pure law and thus ripe from the outset of the case.
After summarizing the parties’ respective positions, the court framed the issue before it as follows:
The issue of whether attorney’s fees may be awarded under § 216(b) when only declaratory judgment is sought or obtained appears to be relatively novel. The parties rely to one degree or another on the language of § 216(b), the policies behind § 216(b) and the FLSA in general, and a comparable 2013 district case.
The court then examined the applicable law, noting that it was aware of only two cases discussing the issue before it:
With respect to case law, there are actually two cases that bear on the issue. The first case is Barrows v. City of Chattanooga, 944 F.Supp.2d 596 (E.D.Tenn.2013), which has been cited by Plaintiffs. In Barrows, Fire Captain Barrows sued the City of Chattanooga under the FLSA regarding his employee classification and for past unpaid overtime. Following a bench trial, the district court held that the City had been improperly classifying Barrows as an FLSA-exempt employee and that a declaration that Barrows was a non-exempt FLSA employee was appropriate. See Barrows, 944 F.Supp.2d at 605. As for past unpaid overtime compensation, the district court held that Barrows had failed to meet his burden of proof in that his evidence was essentially too inconsistent and vague. See id. at 606. As a result, Barrows was awarded no monetary damages. See id. With respect to attorney’s fees, the district court held that Barrows could recover attorney’s fees, despite the lack of monetary relief, because Barrow was entitled to a declaratory judgment. See id. at 607. The court explained:
Section 216 of the FLSA provides, in relevant part, that the Court shall allow a prevailing employee to recover his reasonable attorney’s fees, as well as the costs of the action. Defendant has conceded that Plaintiff is entitled to attorney’s fees and costs in the event that he prevails in this action. Although the Court has found that Plaintiff is not entitled to damages for overtime compensation, Plaintiff has prevailed as to his claim for declaratory relief. Judgment for a plaintiff on a claim for declaratory relief will “usually” be satisfactory for finding that the plaintiff has prevailed in order to recover attorney’s fees. Because Plaintiff here has prevailed on his claim for declaratory relief on the merits, the Court finds that he is a prevailing party; accordingly, he is entitled to recovery of reasonable attorney’s fees and costs of this action pursuant to 29 U.S.C. § 216(b).
Id. at 607 (citations omitted).
The second case, which was cited by neither party, is Council 13, American Fed’n of State, Cnty. & Mun. Emples., AFL–CIO v. Casey, 156 Pa.Cmwlth. 92, 626 A.2d 683 (Pa.Commw.Ct.1993).3 In Council 13, employees of the State of Pennsylvania sought inter alia a declaration that the FLSA required Pennsylvania to pay wages and salaries that were coming due, despite an anticipated exhaustion of appropriated funds. See id. at 684. The court held that the employees were entitled to the declaration they sought, and that the FLSA required payment of wages. See id. at 686. With respect to attorney’s fees under § 216(b), the court found that attorney’s fees were not available. See id. After quoting the third and fifth sentences of § 216(b), the court explained:
Although that sentence, as quoted above, itself contains no mention of fault or violation, it rests in a context which plainly involves legal actions against employers in violation. The first sentence in the quoted passage states that it deals with an ‘action to recover the liability prescribed in either of the preceding sentences … against any employer (including a public agency) in any Federal or State court….’ The ‘preceding sentences’ expressly and exclusively refer to situations involving any “employer who violates” [FLSA § 206 or § 207]. However, this present action clearly is not an enforcement action under [§ 216(b) ] to cure and punish a violation, but is one mutually pursuing a declaratory judgment for guidance—no violation having yet occurred. Hence, the federal Act does not mandate imposition of attorney’s fees here….
Id. at 686–87 (emphasis in original).
In both Barrows and Counsel 13, declaratory relief was sought and obtained. In both Barrows and Counsel 13, attorney’s fees under § 216(b) were sought by the plaintiffs. However, only in Barrows, where an actual violation of the FLSA was found, were fees awarded. Because no violation of the FLSA was actually involved in Counsel 13, the court held that attorney’s fees were not appropriate. Together, Barrows and Counsel 13 indicate that an award of only declaratory relief may form the basis of attorney’s fee under § 216(b), but that attorney’s fees are only available when an actual violation of the FLSA is involved.
Turning to the public policy and legislative intent behind the FLSA’s fee provisions, the court reasoned that such policy and intent too supported a reading of the FLSA that permitted the recovery of attorneys fees and costs for a plaintiff who successfully recovered declaratory relief:
With respect to the policy and legislative intent behind § 216(b)‘s attorney’s fee provision, several circuits have made observations. The Fourth and Eleventh Circuits have indicated that Congress intended that a wronged employee “receive his full wages plus the penalty without incurring any expense for legal fees or costs.” Silva v. Miller, 307 Fed. Appx. 349, 351 (11th Cir.2009); Maddrix v. Dize, 153 F.2d 274, 275–76 (4th Cir.1946). Similarly, the Fifth Circuit has indicated that the legislative intent behind § 216(b)‘ s attorney’s fee provision is “to recompense wronged employees for the expenses incurred in redressing violations of the FLSA and obtaining wrongfully withheld back pay.” San Antonio Metro. Transit Auth. v. McLaughlin, 876 F.2d 441, 445 (5th Cir.1989). The Sixth Circuit, in reliance in part on Maddrix, has found that “the purpose of § 216(b) is to insure effective access to the judicial process by providing attorney fees for prevailing plaintiffs with wage and hour grievances; ‘obviously Congress intended that the wronged employee should receive his full wages … without incurring any expense for legal fees or costs.’ ” United Slate, Local 307 v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 501–02 (6th Cir.1984) (quoting Maddrix, 153 F.2d at 275–76). Finally, the D.C. Circuit has noted that through § 216(b), “Congress clearly hoped to provide an adequate economic incentive for private attorneys to take employment discrimination cases, and thereby to ensure that plaintiffs would be able to obtain competent legal representation for the prosecution of legitimate claims.” Laffey v. Northwest Airlines. Inc., 746 F.2d 4, 11 (D.C.Cir.1984). These cases reflect that the intent behind § 216(b) was to allow employees to obtain payment owed under the FLSA in court without the employee incurring legal fees and expenses, and to encourage attorneys to take FLSA cases.
While the court acknowledged that the defendant’s proposed reading of the plain language of the FLSA could support the defendant’s argument that the fees at issue were not recoverable, ultimately it rejected this view, citing the need to liberally construe the FLSA:
The FLSA as a whole is to be interpreted liberally to the fullest extent of Congressional direction. See Probert, 651 F.3d at 1010. As indicated above, the intent behind the attorney’s fees provision is to ensure that employees obtain full payment owed under the FLSA without incurring legal fees. An interpretation of § 216(b) that would eliminate the availability of attorney’s fees to employees who seek to obtain or who only obtain declaratory relief, would partially frustrate the intent behind § 216(b). Although declaratory relief will not necessarily permit an employee to obtain past payments that were mandated by the FLSA, it could ensure that future payments do conform to the FLSA. That is, declaratory relief could aid an employee in obtaining his full future wages. For example, in a case like Barrows, no monetary relief was awarded despite obtaining declaratory relief.4 Nevertheless, by declaring that an employee is properly classified as a non-exempt FLSA employee, and not as an exempt FLSA employee, the declaratory relief will ensure that the employee begins to receive overtime pay in the future and in conformity with the FLSA.5 As another example, in this case, the dispute is whether Beard is currently calculating overtime correctly. A declaration that the overtime calculations are incorrectly being made will help Plaintiffs to obtain the full future FLSA wages and overtime that would be due to them under a proper calculation. In cases where monetary damages are unavailable or very tenuous, but a violation of the FLSA appears to be occurring, the availability of attorney’s fees provides an incentive to correct the FLSA violation. Without the availability of attorney’s fees, the expense to employees bringing such lawsuits would be increased and the incentive for attorneys to take such cases would be diminished.
There is a broader interpretation of § 216(b) that is also reasonable. The fifth sentence is ultimately tethered to actions under the first and second sentences involving violations of § 206, § 207, and § 215(a)(3). In actions that seek to remedy violations of § 206, § 207, or § 215(a)(3), the fifth sentence requires courts to award attorney’s fees in addition “to any judgment obtained by the plaintiff.” 29 U.S.C. § 216(b) (emphasis added). There is no express limit as to the type or amount of judgment that must be obtained before attorney’s fees are available, rather, so long as “any judgment” is obtained by the plaintiff, attorney’s fees are to be awarded. Declaratory relief has been awarded in this district in an FLSA case against a State, the Third Circuit has held that declaratory relief in an FLSA case is available against a State, and the District of Tennessee has awarded declaratory relief in an FLSA case even in the absence of monetary damages. See Balgowan v. New Jersey, 115 F.3d 214, 217–18 (3d Cir.1997); Barrows, 944 F.Supp.2d at 605;Biggs v. Wilson, 828 F.Supp. 774, 779–80 (E.D.Cal.1991), aff d 1 F.3d 1537 (9th Cir.1993). If a declaratory judgment may be issued in an FLSA case, then it is unclear why a declaratory judgment would not be included under § 216(b)‘s “any judgment” language. As long the lawsuit/action is one that seeks to correct/remedy violations of § 206, § 207, or § 215(a)(3), obtaining a declaratory judgment would constitute “any judgment” and could serve as the basis for attorney’s fees under § 216(b).6 Such an interpretation would permit attorney’s fees not only when unpaid wages for past violations of § 206 or § 207 are obtained, but also for declarations that would essentially end ongoing violations of § 206 or § 207. Declarations that find and/or remedy ongoing violations of § 206 or § 207 would help to ensure that an employee obtains the full wages and overtime that are due him in the future. Correcting violations of § 206 or § 207 and obtaining full wages due are both consistent with congressional intent.
As such, the court concluded that fees and costs are available to an FLSA plaintiff who prevails solely on a claim for declaratory relief:
The Court does not find Beard’s interpretation to be unreasonable. However, as discussed above, there is a broader interpretation of § 216(b) that appears consistent with Congressional intent. Further, the very limited case law that deals with § 216(b) attorney’s fees provision in the context of declaratory relief indicates that attorney’s fees may be awarded. Considering the arguments made by the parties, the limited case law, and the Ninth Circuit’s admonition for a liberal interpretation of the FLSA, the Court concludes that, in cases that seek to correct violations of § 206, § 207, or § 215(a)(3), attorney’s fees under § 216(b) are available when only declaratory relief is sought or obtained, so long as an actual violation of the FLSA by the employer is involved. In this case, Plaintiffs allege ongoing violations of § 207, and seek declarations relating to the proper calculation of overtime under § 207. This case is therefore one that seeks to correct an actual and ongoing violation of § 207. Accordingly, if Plaintiffs prevail and obtain declaratory relief, they will be entitled to attorney’s fees.
The declaratory relief requested by Beard is a pure issue of law, and no further facts need be developed before resolving that issue. The declaratory relief requested by Beard is contrary to the Court’s conclusion. Because attorney’s fees are available under § 216(b) in this case, it is appropriate to dismiss Beard’s request for declaratory relief.
Click Pickett v. Beard to read the entire Order on Plaintiffs’ Motion to Dismiss and Alternatively Motion to Strike.
Overtime Law Blog 