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M.D.Tenn.: Where Employees Believed They Were Required to Sign WH-58 and/or Unaware of Private Lawsuit Regarding Same Issues, Waivers Null & Void

July 28, 2011 7:34 am / Leave a comment

Woods v. RHA/Tennessee Group Homes, Inc.

This case was before the court on a variety of motions related to the plaintiffs’ request for conditional certification and for clarification as to the eligible participants in any such class.  The case arose from plaintiffs’ claims that defendants improperly automatically deducted 30 minutes for breaks that were not provided to them.  Of interest here, during the time the lawsuit was pending, the DOL was also investigating defendants regarding the same claims.  Shortly after the lawsuit was commenced, the DOL made findings and recommendations to the defendants, in which it recommended payments of backwages to certain employees that were also putative class members in the case.  As discussed here, the defendants then made such payments to the putative class members, but required that all recipients of backwage payments sign a WH-58 form (DOL waiver), which typically waives an employees claims covered by the waiver.  Subsequently, the plaintiffs sought to have the WH-58’s declared null & void and asserted that any waiver was not knowing and/or willful as would be required to enforce.  The court agreed and struck the waivers initially.  However, on reconsideration the court held that a further factual showing was necessary to determine whether the WH-58 waivers were effectual or not under the circumstances.

The court explained the following procedural/factual background relevant to the waiver issue:

“The six named plaintiffs filed this putative collective action on January 13, 2011. Coincidentally, on the same day, the Department of Labor (“DOL”) contacted the defendant and commenced an investigation regarding the Meal Break Deduction Policy. (Docket No. 80 at 25 (transcript of April 14, 2011 hearing).) The DOL was apparently following up on a complaint that it had received nearly a year earlier. (Id. at 32.) Several days later, on January 18, the defendant informed the DOL of the pending private lawsuit.

Nevertheless, the DOL proceeded with the investigation and, in early March 2011, the DOL and the defendant reached a settlement, pursuant to 29 U.S.C. § 216(c). Under the settlement, the defendant agreed to comply with the FLSA in the future and to pay a certain amount of back wages to employees who were subject to the Meal Break Deduction Policy. (See Docket No. 80 at 14.)

To distribute these payments, the defendant posted the following notice in a common area:

The following employees must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor on Tuesday, April 12, 2011, 8:00 am–4:00 pm.

If you have questions, see Lisa or Kamilla

(Docket No. 43, Ex. 1 at 72; Docket No. 56, Ex. 1.)  The posting contained a list of over 60 employees (see Docket No. 56, Ex. 1), including several employees who had already opted into this lawsuit (see, e.g., Docket No. 43, Ex. 1 at 56), although the defendant claims that their inclusion was an oversight. In her declaration, Human Resources Director Kamilla Wright states that she was simply “instructed to post a list of employees for whom checks were available.” (Docket No. 55 ¶ 7.)

Wright was further instructed “that when an employee came to the office to pick up their check, [she] was to have them sign the receipt for payment of back wages and then give them their check.” (Id. ¶ 9.) The declaration of Lisa Izzi, the defendant’s administrator, states that Izzi received identical instructions. (Docket No. 56 ¶ 9.) Accordingly, at the meetings with employees, each employee was given a check and DOL Form WH–58, which was titled “Receipt for Payment of Back Wages, Employment Benefits, or Other Compensation.” (Docket No. 43, Ex. 1 at 13.) The form stated:

I, [employee name], have received payment of wages, employment benefits, or other compensation due to me from Stones River Center … for the period beginning with the workweek ending [date] through the workweek ending [date.] The amount of payment I received is shown below.

This payment of wages and other compensation was calculated or approved by the Wage and Hour Division and is based on the findings of a Wage and Hour investigation. This payment is required by the Act(s) indicated below in the marked box(es):

[X] Fair Labor Standards Act 1 …

(Id.) Further down, in the middle of the page, the form contained the following “footnote”:

FN1NOTICE TO EMPLOYEE UNDER THE FAIR LABOR STANDARDS ACT (FLSA)—Your acceptance of this payment of wages and other compensation due under the FLSA based on the findings of the Wage and Hour Division means that you have given up the right you have to bring suit on your own behalf for the payment of such unpaid minimum wages or unpaid overtime compensation for the period of time indicated above and an equal amount in liquidated damages, plus attorney’s fees and court costs under Section 16(b) of the FLSA. Generally, a 2–year statute of limitations applies to the recovery of back wages. Do not sign this receipt unless you have actually received this payment in the amount indicated above of the wages and other compensation due you.

(Id.) Below that was an area for the employee to sign and date the form.

It appears that Wright and Izzi did not, as a matter of course, inform the employees that accepting the money and signing the WH–58 form was optional. Nor did they inform the employees that a private lawsuit covering the same alleged violations was already pending.

On April 12 and 13, 2011, a number of employees accepted the payments and signed the WH–58 forms. On April 13, the plaintiffs’ counsel learned of this and filed a motion for a temporary restraining order or preliminary injunction, seeking to prevent the defendant from communicating with opt-in plaintiffs and potential opt-in plaintiffs. (Docket No. 43.)

The court held a hearing on the plaintiffs’ motion on April 14, 2011. At that hearing, the court expressed its displeasure with the defendant’s actions, which, the court surmised, were at least partly calculated to prevent potential class members from opting in to this litigation. The court stated that it would declare the WH–58 forms (and the attendant waiver of those employees’ right to pursue private claims) to be null and void; thus, those employees would be free to opt in to this lawsuit.”

On reconsideration, the court reconsidered its prior Order on the issue.  While re-affirming that non-willful waivers would be deemed null & void, the court explained that the issue would be one for the finder of fact at trial.  After a survey of the relevant case law, the court explained:

“To constitute a waiver, the employee’s choice to waive his or her right to file private claims—that is, the employee’s agreement to accept a settlement payment—must be informed and meaningful. In Dent, the Ninth Circuit explicitly equated “valid waiver” with “meaningful agreement.” Dent, 502 F.3d at 1146. Thus, the court stated that “an employee does not waive his right under section 16(c) to bring a section 16(b) action unless he or she agrees to do so after being fully informed of the consequences.” Id. (quotation marks omitted). In Walton, the Seventh Circuit likened a valid § 216(c) waiver to a typical settlement between private parties:

When private disputes are compromised, the people memorialize their compromise in an agreement. This agreement (the accord), followed by the payment (the satisfaction), bars further litigation. Payment of money is not enough to prevent litigation…. There must also be a release.  Walton, 786 F.2d at 306. The relevant inquiry is whether the plaintiffs “meant to settle their [FLSA] claims.” Id.

Taken together, Sneed, Walton, and Dent suggest that an employee’s agreement to accept payment and waive his or her FLSA claims is invalid if the employer procured that agreement by fraud or duress. As with the settlement of any other private dispute, fraud or duress renders any “agreement” by the employee illusory. See 17A Am.Jur.2d Contracts § 214 (“One who has been fraudulently induced to enter into a contract may rescind the contract and recover the benefits that he or she has conferred on the other party.”); id. § 218 (“ ‘Duress’ is the condition where one is induced by a wrongful act or threat of another to make a contract under circumstances which deprive one of the exercise of his or her free will. Freedom of will is essential to the validity of an agreement.” (footnote omitted)).  The court finds that employees do not waive their FLSA claims, pursuant to § 216(c), if their employer has affirmatively misstated material facts regarding the waiver, withheld material facts regarding the waiver, or unduly pressured the employees into signing the waiver.

This holding does conflict with Solis v. Hotels.com Texas, Inc ., No. 3:03–CV–0618–L, 2004 U.S. Dist. LEXIS 17199 (N.D.Tex. Aug. 26, 2004), in which the district court rejected the contention that “an allegation of fraud could lead to the invalidity of a waiver under 216(c).” Id. at *6. That finding was mere dicta, however, and, regardless, this court is not bound by decisions from the Northern District of Texas.

Here, the defendant posted a sign with a list of employees’ names stating that those employees “must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor.” (Docket No. 43, Ex. 1 at 72 (emphasis added).) It appears that, when the employees met with the defendant’s human resources representatives, neither the representatives nor the Form WH–58 informed the employees that they could choose to not accept the payments.  On the evidence presented at the April 14 hearing and submitted thereafter, the court finds that reasonable employees could have believed that the defendant was requiring them to accept the payment.  Obviously, this calls into question the willingness of the employees’ waivers.

Additionally, it appears that the defendant never informed the employees that a collective action concerning the Meal Break Deduction Policy was already pending when the waivers were signed. The court finds that it was the defendant’s duty to do so. Section 216 exists to give employees a choice of how to remedy alleged violations of the act—by either accepting a settlement approved by the DOL or by pursing a private claim. An employer should not be allowed to short circuit that choice by foisting settlement payments on employees who are unaware that a collective action has already been filed. If employees are unaware of a pending collective action, they are not “fully informed of the consequences” of their waiver, Dent, 502 F.3d at 1146, because waiving the right to file a lawsuit in the future is materially different than waiving the right to join a lawsuit that is already pending. In the former situation, an employee who wishes to pursue a claim must undertake the potentially time-consuming and expensive process of finding and hiring an attorney; in the latter, all an employee must do is sign and return a Notice of Consent form.

Thus, the court finds that any employee of Stones River Center may void his or her § 216(c) waiver by showing either: (1) that he or she believed that the defendant was requiring him or her to accept the settlement payment and to sign the waiver; or (2) that he or she was unaware that a collective action regarding the Meal Break Deduction Policy was already pending when he or she signed the waiver. The court will vacate its April 14, 2011 Order, to the extent that the order declared all such waivers to be automatically null and void. Instead, under the above-described circumstances, the waivers are voidable at the election of the employee.  Because the validity of any particular employee’s waiver depends on questions of fact, the issue of validity as to each employee for whom this is an issue will be resolved at the summary judgment stage or at trial.”

Click Woods v. RHA/Tennessee Group Homes, Inc. to read the entire Memorandum Opinion on all the motions.

D.Ariz.: Employee Who Resolved His Claims For Unpaid Overtime Prior To Lawsuit Entitled To Award Of Attorney’s Fees Under § 216

January 2, 2011 12:51 pm / Leave a comment

McBurnie v. City of Prescott

Before the court was plaintiff’s motion for summary judgment regarding entitlement to attorneys fees following his presuit acceptance of a check that purported to resolve all of his claims for unpaid overtime wages and attorneys fees.  Noting that an empl0yee can not waive his or her rights to substantive FLSA rights absent a settlement supervised by either the DOL or a court, the court held that notwithstanding Plaintiff’s prior acceptance of payment for his unpaid overtime, he was entitled to an award of attorneys fees under the FLSA.

In November 2007, Plaintiff filed a grievance against his then supervisor, alleging that the City’s forced use of compensatory time in lieu of overtime pay violated the Fair Labor Standards Act, 29 U.S.C. § 207.  In February 2009, prior to the institution of Plaintiff’s lawsuit, the Defendant sent two checks to plaintiff-one in the amount of $26,000 for overtime compensation and the other in the amount of $5,778.32 for attorney’s fees.  The settlement letter enclosed with the two checks stated that “[b]y cashing either or both of these two checks your client is accepting these funds as resolution of any and all overtime issues; we have indicated that on each of these checks.”  Plaintiff accepted and cashed the $26,000 settlement offer, but returned the check for attorney’s fees to the City.

In August, 2009, Plaintiff filed his lawsuit.  Among other claims, he sought attorney’s fees related to the settlement of his FLSA wage claim.

Reasoning that Plaintiff was entitled to an award of attorneys fees and granting Plaintiff summary judgment with regard to same, the court explained:

“Plaintiff moves for summary judgment on Count 12, his claim for attorney’s fees under the Fair Labor Standards Act, 29 U.S.C. §§ 207 and 216 (“FLSA”). The FLSA was enacted for the purpose of protecting workers from substandard wages and oppressive working hours. Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 1444 (1981). The Act provides that an employee shall receive overtime wages “at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U .S.C. § 207(a)(1). The FLSA further provides that any employer who violates the overtime wage provision will be liable to the affected employee in the amount of unpaid overtime wages, plus an additional equal amount as liquidated damages. Id. § 216(b).

Because of the unequal bargaining power between employers and employees, Congress made the FLSA provisions mandatory. D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 116, 66 S.Ct. 925, 929 (1946) (“neither wages nor damages for withholding them are capable of reduction by compromise”). An individual may not relinquish rights under the Act, even by private agreement between the employer and employee, “because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”   Barrentine, 450 U.S. at 740, 101 S.Ct. at 1445 (quoting Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707, 65 S.Ct. 895, 902 (1945)).

The FLSA provides two avenues for claim resolution. Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353-54 (11th Cir.1982). First, under section 216(c), the Secretary of Labor can supervise an employer’s voluntary payment to employees of unpaid wages. 29 U.S.C. § 216(c). An employee who accepts such supervised payment waives his right to file an action for both the unpaid wages and for liquidated damages. Id. Or, under section 216(b), an employee can bring a private action for back wages under the FLSA and can “present to the district court a proposed settlement, [and] the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.” Lynn’s Food Stores, 679 F.2d at 1353 (citing D.A. Schulte, Inc, 328 U.S. at 113 n. 8, 66 S.Ct. at 928 n. 8). Settlements that do not follow the two methods authorized by the Act are unenforceable. Hohnke v. United States, 69 Fed. Cl. 170, 178-79 (Fed.Cl.2005).

Here, we have neither an agreement supervised by the Department of Labor, nor entered as a stipulated judgment by a court. The settlement agreement regarding back wages is fully consummated and the parties do not seek court approval. Therefore, the settlement falls outside the two statutorily-prescribed avenues of FLSA claim resolution.

An award of attorney’s fees to a prevailing party in an action brought under section 216(b) is mandatory. “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (emphasis added); Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 415 n. 5, 98 S.Ct. 694, 697 n. 5 (1978) (referring to § 216 of the FLSA as one of the “statutes [that] make fee awards mandatory for prevailing plaintiffs”). The payment of the attorney’s fees discharges a statutory, not a contractual, duty. Because the FLSA was intended to provide workers with the full compensation due under the law, requiring a claimant to pay attorney’s fees incurred to enforce his FLSA rights would frustrate the statute’s underlying purpose. See Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir.1946) (stating that Congress intended that a claimant “should receive his full wages plus the penalty without incurring any expense for legal fees or costs”).

Thus, the statement in the settlement letter that “[b]y cashing either or both of these two checks your client is accepting these funds as resolution of any and all overtime issues” in unenforceable as to plaintiff’s claim for attorney’s fees under the FLSA. Plaintiff has not waived his right to attorney’s fees under the Act. We grant summary judgment in favor of plaintiff on Count 12.”

Click McBurnie v. City of Prescott to read the entire opinion.

W.D.Wash.: Notwithstanding Prior DOL Consent Judgment, Plaintiffs May Pursue Full Damages Under State Law, Because Appropriate Damages For Salary Misclassification Are Time And A Half Not FWW, And Damages Under Consent Judgment Represented Only Partial Relief

March 6, 2010 1:33 pm / Leave a comment

Monahan v. Emerald Performance Materials, LLC

This case was before the Court on the parties cross-motions for summary judgment.  The issue was whether a prior consent judgment entered into by the DOL and the Defendant employer precluded this subsequent case, based solely on Washington state law, despite the fact that Plaintiffs were not on notice of the prior proceedings, did not participate in the prior proceedings, and Plaintiffs did not receive full damages due them under the prior consent judgment.  Because the damages awarded previously–based on FWW, rather than time and a half–were insufficient, and Plaintiffs were not parties to the prior litigation, the Court found that they were not precluded from pursuing their full time and a half damages due them.  Further, the Court held that although the consent judgment barred a subsequent FLSA action, it did not preempt or preclude a claim for the additional damages due, solely under the relevant Washington state law.

Discussing the relevant procedural background, the Court stated:

“Immediately after discovering the potential violation in overtime pay for twelve-hour shift employees, Emerald, through counsel, reported the potential overtime pay violation to the U.S. Department of Labor, Wage and Hour Division, in Ohio (where Emerald is headquartered). After investigation, the Department of Labor determined that a violation occurred. On May 27, 2008, the Department filed a complaint in U.S. District Court for the Northern District of Ohio seeking to enjoin Emerald from continuing to violate the Fair Labor Standards Act (“FLSA”) and from continuing to withhold overtime compensation due to eighty-eight (88) employees, including all ten plaintiffs in this matter, who worked twelve-hour scheduled shifts and were paid according to Section 17A of the CBA.

The Department of Labor reviewed Emerald’s time and payroll records to calculate the amount of overtime back wages due. The Department of Labor determined that Article 17A of the CBA provided for payments of a fixed weekly amount of compensation regardless of the number of hours worked in any particular work week. The Department of Labor and Emerald entered into a Consent Judgment that enjoined Emerald from violating the overtime provisions of the FLSA and further required Emerald to tender payment to each of the subject employees in an individual amount listed in the Consent Judgment. The total amount tendered was $241,308. On July 29, 2008, U.S. District Judge Lioi entered the Consent Judgment, which set forth the specific amount of back wages due and owing to each employee.”

Plaintiffs and all other employees affected by the Secretary’s lawsuit in Ohio did not receive notice of the lawsuit, did not participate in any way in the lawsuit, did not have standing to appeal the Consent Judgment and did not have knowledge of the lawsuit until sometime after the defendant began distributing checks for unpaid overtime wages to them in August 2008.

Seventy-eight (78) employees listed in the Consent Judgment accepted the overtime back wages tendered to them. The ten plaintiffs in this case rejected the tendered amounts. On October 10, 2008, plaintiffs filed this lawsuit seeking overtime compensation under both the Federal FLSA and the Washington Minimum Wage Act (MWA). Plaintiffs are claiming back wages commencing in October 2005, before Emerald became the plaintiffs’ employer. Plaintiffs claim that Emerald has “successor liability.” Plaintiffs allege at paragraph 8 of their complaint that the Department of Labor in the Ohio action did not properly calculate the overtime back wages due.”

Discussing the proper time and a half calculation for overtime damages due in a salary misclassification case, the Court stated:

“Both the FLSA and MWA overtime provisions require an employer to pay time and one-half the regular rate of pay for all hours worked in a work week in excess of 40. 29 U.S.C. § 207 and RCW 49.46.130(1). Under the Washington Administrative Code, the term “regular rate” is determined “by dividing the amount of compensation received per week by the total number of hours worked during that week.” WAC 296-128-550. Similarly, under the United States Department of Labor Wage and Hour regulations at 29 C.F.R. § 778.109, an employee’s regular hourly rate of pay is determined “by dividing his total remuneration for employment (except statutory exclusions) in any work week by the total number of hours actually worked by him in that work week for which such compensation was paid .” Therefore, “regular rate of pay” is the same under both the FLSA and the MWA. Plaintiffs’ claims for overtime compensation under the FLSA and the Washington MWA are identical.

The Ohio District Court entered a judgment ordering payment of overtime using the flexible work week method. That judgment disposed of all claims under federal law but left open the question whether identical language under Washington law should be interpreted in the same manner as the Ohio Court interpreted federal law. There is no clear guidance from the Supreme Court on the subject and cases from different circuits seem to be split in cases with comparable or analogous circumstances. The Ninth Circuit has not weighed in on the issue.

First, the Court resolves the issue of preemption by determining that the CBA provision in question is clear and unambiguous. The parties intended to segment the wages earned by 12-hour shift employees using the flexible work week methodology. No further interpretation of the provision is necessary or possible. Because the interpretation of a CBA is not required, the state claims are not preempted in this case. Lividas v. Bradshaw, 512 U.S. 107, 125 (1994); Cramer v. Consolidated Freightways, Inc., 225 F.3d 683, 691 (9th Cir.2001). Defendant’s Motion for Summary Judgment on the issue of preemption [Dkt. # 39] is DENIED.

Next the Court must review the applicable regulation and the interpretive case law to determine whether Emerald is entitled to the employer-friendly flexible work week method of calculating overtime pay under Washington state law.

Plaintiffs allege that the overtime compensation due to plaintiffs in the Ohio Consent Judgment was incorrectly calculated. The Department of Labor calculated the regular rate of pay as set forth in 29 C.F.R. § 778.109, determining that the overtime compensation due to plaintiffs was one-half the regular rate times the number of hours in excess of 40 in a work week. The federal court in Ohio, in calculating back wages, used the “fluctuating work week” method set forth in 29 C.F.R. § 778.114. This regulation allows overtime to be calculated at only half of the regular rate, rather than time and one-half the regular rate of pay under the FLSA and the MWA:

An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a work week whether few or many. Where the clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each work week, whatever the number, rather than for working 40 hours or some other fixed weekly work, such a salary arrangement is permitted by the act if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those work weeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not less than one-half his regular rate of pay. Since the salary in such a situation is intended to compensate the employee as straight time rates for whatever hours are worked in the work week, the regular rate of the employee will vary from week to week and is determined by dividing the number of hours worked in the work week into the amount of the salary to obtain the applicable hourly rate a week. Payment for overtime hours at one-half such rate in addition to the salary satisfies the overtime pay requirements because such hours have already been compensated at the straight time regular rate, under the salary arrangement.  29 C.F.R. § 778.114(a) (emphasis added).

It is undisputed that using this method would not result in a hourly rate below the statutory minimum wage, nor is there any dispute that the number of hours plaintiffs worked each week fluctuated. The parties dispute whether the “clear mutual understanding” requirement extends only to being paid a fixed weekly salary regardless of the number of hours worked, or whether it also includes an understanding that plaintiffs will be paid overtime. Likewise, the parties disagree about whether the regulation also requires that the employee actually have been contemporaneously paid overtime.

There is no Ninth Circuit case law directly interpreting this aspect of the regulation. Plaintiffs direct the Court’s attention to the district court decision in Russell v. Wells Fargo & Co., 2009 WL 3861764 (N.D.Cal.2009), while the defendant cites to Tumulty v. FedEx Ground Package Sys., Inc., 2005 WL 1979104 (W.D.Wash). Plaintiffs argue that because Emerald was not paying its employees overtime contemporaneously throughout the period in dispute, it could have no clear understanding with the employees about overtime and the rate of overtime pay to be paid. Plaintiffs argue that because there is no “clear mutual understanding” and no contemporaneous overtime pay, the flexible work week methodology is not available to Emerald here.

Although the state law of Washington is identical to the FLSA regarding calculation of overtime using the flexible work week method, this Court must choose between two conflicting lines of federal decisions. One line of cases adopts a common sense approach that requires only that so long as the parties (employer and employee) reached a clear mutual understanding that while the employee’s hours may vary, his salary will not, then the calculation of overtime pay in a subsequent action brought under the wage laws would be half-pay for each hour over 40 in a week. These courts did not require that the employee know that he would receive overtime compensation or have actually received it contemporaneously. Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir.2008); Valerio v. Putnam Assoc. Inc., 173 F.3d 35, 39-40 (1st Cir.1999); Blackman v. Brookshire Grocery Co., 835 F.2d 1135, 1138 (5th Cir.1988). If the Court follows this line of cases, the Ohio judgment will represent full compensation owed the plaintiffs and this case is at an end without further payment to plaintiffs, beyond that which has already been tendered.

The second line of cases looks more closely at the language of the applicable regulation and requires both a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each work week and contemporaneous payment of overtime as earned.

Here, because Emerald did not pay plaintiffs any more for overtime hours (hours worked in excess of 40 hours each week) the flexible work week method of payment for overtime hours at half the regular rate would give way to the predominant rate of compensation at time-and-a-half. This approach has been adopted by District Courts around the country: Russell v. Wells Fargo & Co., 2009 WL 3861764 (N.D.Cal.); Scott v. OTS Inc., 2006 WL 870369, *12 (N.D.Ga.); Hunter v. Sprint Corp., 453 F.Supp.2d 44, 58-62 (D.D.C.2006); Cowen v. Treetop Enters., 163 F.Supp.2d 930, 941 (M.D.Tenn.2001); Rainey v. Am. Forest & Paper Assoc., 26 F.Supp.2d 82, 99-102 (D.D.C.1998). The Court’s review of these cases, to include Overnight Motor Transport Co. v. Missel, 316 U.S. 572 (1942), and its consideration of the background and policy of the FLSA, convinces it that the flexible work week method cannot be used to calculate overtime retroactively (where it has not been paid contemporaneously with the overtime work) for the purposes of determining damages under Washington State law. The plaintiffs are entitled to pay at the rate of time-and-a-half for every hour of overtime time worked during the period of time covered by plaintiffs’ claims.

Washington courts recognize the “persuasive authority” of the federal Fair Labor Standards Act and regulations promulgated pursuant to it when construing MWA provisions that are similar to those of the FLSA. Inniss v. Tandy Corporation, 141 Wash.2d 517, 524-25, 7 P.3d 807 (2000). Both the FLSA and the MWA authorize the use of the Flexible work week methodology. 29 C.F.R. § 778.114; WAC 296-128-550.

The Washington Supreme Court has expressly found that 29 C.F.R. § 778.114 provides guidance when determining the applicability of the flexible work week method under the MWA. Inniss, 141 Wash.2d at 524-25.

29 C.F.R. § 778.114(a) sets out five prerequisites for application of the flexible work week method. Griffin v. Wake County, 142 F.3d 712, 715 (4th Cir.1998). The plain terms of 29 C.F.R. § 778.114(c) provide that unless “all the legal prerequisites” for applying the flexible work week method are present, an employer cannot avail itself of the flexible work week method for calculating overtime wages. In such cases where the flexible work week method cannot apply, the “statutory” method of multiplying the employee’s regular hourly rate by 1.5 and then by the number of hours worked over 40 in each work week is the applicable overtime pay computation method.

One of the prerequisites under 29 C.F.R. § 778.114(a) for applying the flexible work week method is payment of the mandatory 50% overtime premium contemporaneously with payment of the employee’s regular straight time pay.   Russell v. Wells Fargo & Co., 2009 Westlaw 3861764, at *3 (N.D.Cal.2009). Defendant paid plaintiffs no wages at all for the hours for which plaintiffs seek recovery of unpaid overtime wages. Defendant therefore did not satisfy the contemporaneous overtime pay prerequisite of 29 C.F.R. § 778.114(a).

Another prerequisite for the flexible work week method of overtime calculation to apply is that the employer and employee must have reached a “clear mutual understanding” at the outset of their employment relationship that the employee’s fixed salary would compensate the employee for all hours worked.   Griffin, 142 F.3d at 715. This understanding must include an understanding that the employee will be compensated for his overtime work at a rate of 50% of his regular hourly rate. Russell, 2009 Westlaw 3861764, at *5.

The parties lacked the clear mutual understanding required by 29 C.F.R. § 778.114(a) as evidenced by the fact that plaintiffs were paid nothing for the hours worked over 40 in various work weeks. If the employee receives no pay for overtime hours worked, the parties could not have understood that the employee was to be paid the requisite 50% overtime pay premium.

Defendant cannot avail itself of the flexible work week overtime pay computation method because two of the five prerequisites for application of that methodology were unsatisfied. The proper overtime pay computation method will be the statutory method described above.”

Thus, the Court concluded, since the Defendant was not entitled under the FLSA or Washington law to use the FWW to calculate the back-wages due for Plaintiffs, and the DOL consent judgment did not preempt the instant action, Plaintiffs were entitled to seek their proper time and a half damages under Washington law, notwithstanding the prior consent judgment.

11th Cir.: Receipt And Signing WH-58 Form And Cashing Of The Employer’s Check Is Sufficient To Effect A Waiver Of Right To Sue Under FLSA

January 21, 2010 8:09 am / Leave a comment

Blackwell v. United Drywall Supply

Plaintiffs were employed by Defendants.  In September 2007, they sued Defendants pursuant to the Fair Labor Standards Act (FLSA).  Plaintiffs alleged that, from 2002 forward, Defendants intentionally violated the Act by failing to pay them properly for overtime.  Plaintiffs further alleged that, in 2007, “as a result of an investigation by the United States Department of Labor involving allegations of the improper payment of overtime compensation to its laborer employees, [United Drywall] made payments to various employees for past due overtime compensation.”  Plaintiffs alleged that Defendants retaliated against Williams for his complaints to the Department of Labor regarding overtime violations.  And, Plaintiffs alleged that the payments made as part of the Department of Labor supervised settlement were “far lower than what the employees were legally due.”  They sought allegedly unpaid overtime compensation for three years before the filing of the complaint and attorney’s fees and expenses pursuant to § 216 of the Act.  The Court below granted Defendants’ Motion for Summary Judgment holding that Plaintiffs’ signing of the DOL WH-58 form and cashing of settlement checks was a valid waiver of their FLSA rights.  On appeal, the Eleventh Circuit affirmed.

Framing the issue before it, the Court explained, “Defendants moved for summary judgment, arguing, among other things: (1) that Plaintiffs had waived their right to sue under the Act when they cashed checks from United Drywall pursuant to the 2007 settlement between the parties supervised by the Department of Labor, and (2) that Plaintiffs are exempt employees under the Motor Carrier Exemption in the Act (“the Exemption”) and therefore are not entitled to back pay pursuant to the Act. Plaintiffs opposed the motion, arguing that there were genuine issues of fact regarding whether they had knowingly waived their rights to sue and whether the Exemption applied.  After considering arguments and evidence from both sides, the district court granted Defendants’ motion for summary judgment. The court held that, because Plaintiffs had received Department of Labor form WH-58 (which contained a statement that if Plaintiffs accepted the back wages provided in conjunction with the form, they would give up their rights to bring suit under the Act) and because Plaintiffs had cashed the checks provided in conjunction with the WH-58 forms, Plaintiffs had waived their rights to sue Defendants for the payments they sought under the Act.  The court entered judgment for Defendants.  Plaintiffs appeal the judgment.”

Addressing and denying Plaintiffs’ appeal, the Court reasoned, “Plaintiffs argue that the district court erred in finding waiver because Plaintiffs did not knowingly and intentionally waive their rights to sue. They argue that the WH-58 form provided to them by the Department of Labor is ambiguous and did not put them on notice that, by cashing the checks, they would waive their rights to sue for additional back pay. Defendants argue that the district court correctly found waiver and that the judgment can be supported on the additional ground that the Exemption applies to bar Plaintiffs’ claims. In their reply brief, Plaintiffs respond that affirmance of the judgment based on the Exemption would not be proper because the Exemption is not applicable to Defendants’ business as a matter of law or, in the alternative, there are genuine issues of material fact regarding the application of the Exemption.

We affirm the judgment. We find no error in the district court’s holding “that receipt of a WH-58 form and cashing of the employer’s check is sufficient to effect a waiver of the right to sue under the FLSA.”  There is no dispute that Plaintiffs received WH-58 forms in connection with the checks written by United Drywall and given to Plaintiffs by the Department of Labor as part of the supervised settlement between United Drywall and its employees. Those forms are receipts for payment of “unpaid wages, employment benefits, or other compensation due … for the period up to and including 05/20/2007 … under … The Fair Labor Standards Act….” They contain this language:

NOTICE TO EMPLOYEE UNDER THE FAIR LABOR STANDARDS ACT-Your acceptance of back wages due under the Fair Labor Standards Act means that you have given up any right you may have to bring suit for back wages under Section 16(b) of that Act.     ( Id.)

The WH-58 forms then proceed to describe the types of recovery and statutes of limitations under § 16(b) of the Act. We agree with the district court that these forms unambiguously informed Plaintiffs that, if they cashed the checks provided with the forms, they would be waiving their rights to sue for back pay. And, there is no dispute that Plaintiffs cashed the checks. Therefore, the district court correctly determined that ‘both Plaintiffs have waived their right to sue.  Affirming the judgment on waiver grounds, we do not address the parties’ arguments regarding application of the Exemption.’ “