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The U.S. Department of Labor announced today that it will reinstate the issuance of opinion letters, a practice that was widespread under some prior administrations, but which it elected to forego during the Obama administration. In an email announcement sent out today, the Department of Labor announced:
The U.S. Department of Labor will reinstate the issuance of opinion letters, U.S. Secretary of Labor Alexander Acosta announced today. The action allows the department’s Wage and Hour Division to use opinion letters as one of its methods for providing guidance to covered employers and employees.
An opinion letter is an official, written opinion by the Wage and Hour Division of how a particular law applies in specific circumstances presented by an employer, employee or other entity requesting the opinion. The letters were a division practice for more than 70 years until being stopped and replaced by general guidance in 2010.
“Reinstating opinion letters will benefit employees and employers as they provide a means by which both can develop a clearer understanding of the Fair Labor Standards Act and other statutes,” said Secretary Acosta. “The U.S. Department of Labor is committed to helping employers and employees clearly understand their labor responsibilities so employers can concentrate on doing what they do best: growing their businesses and creating jobs.”
The division has established a webpage where the public can see if existing agency guidance already addresses their questions or submit a request for an opinion letter. The webpage explains what to include in the request, where to submit the request, and where to review existing guidance. The division will exercise discretion in determining which requests for opinion letters will be responded to, and the appropriate form of guidance to be issued.
In the past, Republican administrations have often used the issuance of opinion letters to skirt the normal approval process for administrative regulation, which requires public comment. It remains to be seen, but this will likely be a boon for employers and another setback for employees under the Trump administration.
DOL Issues Final Overtime Rule, Expanding Overtime Pay for Over 4 Million Workers; New Rule to Go Into Effect Dec. 1, 2016
The United States Department of Labor (DOL) Announced its long-awaited final rule regarding the update to the existing overtime rules. The new rule is set to take effect on December 1, 2016.
Most significantly, whereas the previous rule employees who met certain duties tests under the so-called “white collar” exemptions had to make at least $455 per week on a “salary basis,” the new rule brings that threshold to $913 per week (or $47,476 annually). This is approximately $3,000 less on an annual basis that an estimated $50,440 per year that a proposed version of the rule promulgated by the DOL had set last year, but over two times the current threshold amount.
The new salary basis threshold equates with the 40th percentile of weekly earnings for a full-time, salaried work in the United States’ lowest income region.
The final rule also raises the overtime eligibility threshold for highly compensated employees from $100,000 to $134,000.
While the rule raises the applicable thresholds for various exemptions, it also allows employers to count earnings paid to employees as bonuses and commissions toward meeting the salary threshold. Specifically, the rule permits employers to meet up to ten (10%) of the salary threshold with amounts paid to employees as bonus and commission payments.
Although the DOL had also asked for input on a proposed rule which would have tracked the California white collar exemptions and created a more bright-line test requiring that a worker spend at least 50 percent of his or her time on exempt duties each week to qualify for an exemption, the final rule abandoned any such change to the duties’ portions of the executive, administrative, professional, outside sales, and computer employee exemptions.
In a lesser publicized 2nd final rule, the DOL carved out certain employers from the new rule. Specifically, the 2nd rule announced a non-enforcement policy with regard to the 1st rule, for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities (i.e. group homes) with 15 or fewer beds. Under the 2nd final rule announced, from December 1, 2016 to March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for this subset of employers covered by the non-enforcement policy.
For further information on all things pertaining to the new rules, visit the DOL’s website.
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
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 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 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.
President Obama Announces That Threshold Salary for FLSA’s White Collar Exemptions Will Rise From $23,660 ($455/week) to $50,400 ($969/week)
In an Op-Ed penned by President Obama on the website Huffington Post, the new proposed overtime rules from the administration officially began their roll-out. Most significantly, the new rules more than double the current salary threshold for exempt employees from $23,660 per year (or $455 per week) to $50,400 per yer (or $969 per week), and continue to increase automatically in years to come.
“In this country, a hard day’s work deserves a fair day’s pay,” Obama wrote in an op-ed published Monday evening by the Huffington Post — an outreach to the president’s base on the left. “That’s at the heart of what it means to be middle class in America.”
The President continued:
Without Congress, I’m very hard-pressed to think of a policy change that would potentially reach more middle class earners than this one,” said Jared Bernstein, a former economic adviser to Vice President Joe Biden who’s now a senior fellow at the Center on Budget and Policy Priorities.
According to an article published last night on Politico.com:
The new threshold wouldn’t be indexed to overall price or wage increases, as many progressives had hoped. Instead, it would be linked permanently to the 40th percentile of income. That would set it at the level when the overtime rule was first created under President Franklin Delano Roosevelt.
The timing reflects an administration increasingly feeling the clock ticking: it expects the overtime rule to be challenged in court, and will press to complete by 2016 the review process during which comments are submitted by the public and then considered by the Labor Department and the White House as it prepares the final rule. If all goes according to plan, the rule will go into effect before Obama leaves office.
The proposed rule comes after months of pitched internal debate, with Labor Secretary Tom Perez and Domestic Policy Council director Cecilia Muñoz pushing to keep the threshold at the 40th percentile, and other members of the White House economic team, including Council of Economic Advisers chairman Jason Furman, trying to lower it to the 37th percentile.
Perez spent months conferring with business groups while his team wrote the rule. Obama made the decision to go forward in a meeting of his economic team several months ago, and originally the plan had been to roll out the rule last week. That was put on hold so that Obama could instead deliver the eulogy Friday at Rev. Clementa Pinckney’s funeral in Charleston, S.C.
For years the White House has faced the frustrating reality that despite consistently improving economic numbers, wages have been largely stagnant. Obama’s 2014 push to raise the minimum wage struck many middle class voters as not having much to do with them. But the overtime rule would affect workers whose salaries approach the median household income.
As explained by Politico:
The regulation would be the most sweeping policy undertaken by the president to assist the middle class, and the most ambitious intervention in the wage economy in at least a decade. Administration aides warn that it wouldn’t always lead to wages going up, though, because in many instances employers would cut back employee hours worked rather than pay the required time-and-a-half. Even so, they say, the additional hires needed to make up for that time could spur job growth, and give existing workers either more time with their families or more opportunities to work second jobs and put more money in their pockets.
This change was badly needed. The overtime threshold has been updated only once since 1975 and now covers a mere 8 percent of salaried workers, according to a recent analysis by the left-leaning Economic Policy Institute. Raising the threshold to $50,440 would bring it roughly in line with the 1975 threshold, after inflation. Back then, that covered 62 percent of salaried workers. But because of subsequent changes in the economy’s structure, the Obama administration’s proposed rule would cover a smaller percentage — about 40 percent.
The current overtime rules contain a white collar exemption, which excludes “executive, administrative and professional” employees from receiving overtime pay. Advocates for changing the rule say the white collar exemption allows employers to avoid paying lower-wage workers overtime. The proposed rule contains no specific changes to this “duties test,” but instead solicits questions from the public about how best to alter it.
Click Huffington Post to read the President’s Op-Ed piece or Politico, to read Politico’s article. Of course, we will continue to update our readers as further details of the new regulations are rolled out.
D.D.C.: Laborers on Governmental Job, Who Have Exhausted Their Administrative Remedy, May Bring Case Under Davis-Bacon Act Against Bond of General Contractor; 2 Year SOL Applies
Castro v. Fidelity and Deposit Company of Maryland
It has long been the law that generally employees lack the right to bring a private cause of action under the Davis Bacon Act (DBA). Rather, the sole avenue under which aggrieved employees, on governmental jobs, can seek repayment of their improperly withheld wages under the DBA is through a proceeding brought by the Department of Labor. However, the Department of Labor rarely brings such proceedings and thus, workers on governmental projects are often left without a remedy where they have been the victims of wage theft. This case sheds some light on another avenue that such employees can use to attempt to recover their wages however. In this case, after exhausting their administrative remedies (i.e. filing with the DOL and being told the DOL could not pursue their claims) the plaintiffs—employees of a sub-contractor on a job for the District of Columbia—sued on the bond of general contractor to seek payment of their wages. Denying the defendant-bond company’s motion to dismiss, the court explained that this was a valid cause of action.
Discussing the relevant facts and procedural history, the court explained:
Plaintiffs were employed by S & J Acoustics, a second-tier subcontractor (or subsubcontractor) retained to complete ceiling installation on the Consolidated Forensic Laboratory, a building owned by the District of Columbia. See Am. Compl., ¶¶ 2, 5. Pursuant to the DBA, 40 U.S.C. § 3141, et seq., and the DCLMA, D.C.Code § 2–201.01, et seq., the project’s prime contractor, Whiting–Turner Contracting Co., provided a payment bond to the District of Columbia as an assurance that project laborers would receive payment at Department of Labormandated hourly rates. See Am. Compl., ¶¶ 3, 8. In bringing this action against Defendants (1) Fidelity and Deposit Company of Maryland and (2) Travelers Casualty and Surety Company of America, who insured Whiting–Turner’s bond as co-sureties, see id., ¶ 3, Plaintiffs allege that they were not paid for their contributions to the project in accordance with these designated wage rates. See id., ¶¶ 16–18, 21. As background, the DCLMA requires contractors on governmentfunded projects to secure payment bonds to protect the interests of suppliers of materials and subcontractors, and the DBA establishes prevailing wage rates for workers who contribute to government-funded construction projects.
Prior to initiating this action, Plaintiffs filed an administrative complaint with DOL, requesting that payments to the project’s prime contractor be withheld until an investigation could be completed and Plaintiffs compensated for the alleged back wages. See id., ¶¶ 23–25. As the project had since wound up and all payments had been released to Whiting–Turner, the DOL investigator closed the case without making any findings on Plaintiffs’ eligibility for relief under the DBA. See id., ¶¶ 24–25. After Plaintiffs brought suit and Defendants filed their Motion to Dismiss, the Court sua sponte raised the issue of subject-matter jurisdiction, questioning whether Plaintiffs had sufficiently exhausted their administrative remedies with DOL. See Order to Show Cause at 2–3. Out of deference to DOL’s plenary role in making DBA back-wage determinations, the Court issued a temporary stay in the proceedings and ordered Plaintiffs to return to DOL and request that conclusive findings be made. See ECF No. 16 (Order) at 4. Plaintiffs did so, but without success. DOL refused to take further action on the ground that the government had already made all payments to the prime contractor and had no further funds to withhold. See Joint Status Report, ¶¶ 6–7 & Exh. A. Satisfied that Plaintiffs had made all efforts to exhaust remedies with DOL, the Court concluded that it did have subjectmatter jurisdiction under the DBA and could consequently address the substance of their claims and Defendants’ pending Motion to Dismiss. See Castro v. Fid. & Deposit Co. of Maryland, No. 13–818, 2014 WL 495464 (D.D.C. Feb. 7, 2014).
Under these circumstances, the defendant argued that the plaintiffs lacked any remedy. The court summarized the defendants contentions as follows:
Defendants first argue that Plaintiffs cannot invoke the DCLMA to sue on Whiting Turner’s payment bond because eligibility under the statute is restricted to those suppliers of labor and materials that have been retained either by the prime contractor or by an immediate subcontractor. See Mot. to Dismiss at 9; Reply at 1–2. Since Plaintiffs were hired by a second- tier subcontractor, Defendants suggest that they fall outside of the scope of the statute. See Supp. to Mot. to Dismiss at 3.
Defendants further maintain that Plaintiffs also have no remedy under the DBA. They premise this argument on the text of DBA § 3144(a)(2), which provides that “laborers and mechanics have the same right [of] action … as is conferred by law on persons furnishing labor or materials.” See Reply at 4. The use of the phrase “same right,” according to Defendants, demonstrates that § 3144(a)(2) does not actually grant aggrieved workers an independent cause of action, but merely references the applicable bond statute – in this case, DCLMA § 2–201.02. See Mot. to Dismiss at 9; Reply at 1 (“Plaintiffs do not have separate cause [sic ] of action against the Defendants in this case under the DBA….”). Alternatively, even if § 3144(a)(2) does create a freestanding cause of action, Defendants reason that the result should be the same because “the rights, if any, that were conferred [by § 3144(a)(2) ] were limited by the express terms of the bond statute.” Reply at 7. The DBA, by this logic, merely duplicates the DCLMA, mirroring its procedural requirements and limitations on eligibility.
Addressing the defendants’ contentions, the court first analyzed the scope and requirements of the DCLMA, acknowledging that plaintiffs lacked standing thereunder, because like the federal Miller Act, it applies only to prime contractor and immediate subcontractors. That did not end the court’s inquiry however. It then turned to an examination of § 3144(a)(2) of the DBA to determine whether it provides an independent remedy with its own terms and conditions. Holding that the DBA, under these circumstances, provided the plaintiffs with a remedy the court explained:
The game is not over, however, because the DBA protects precisely those “ordinary laborers” that the Miller Act appears to exclude. The DBA applies to any construction contracts for public works and public projects that exceed $2,000 in value and to which either the Federal Government or the District of Columbia is a party. See 40 U.S.C. § 3142(a). It obliges contractors on such projects to pay workers in accordance with prevailing wage rates, established by the Secretary of Labor. See id. In the event that contractors do not comply with prevailing wage rates, a worker may seek redress through the mechanism set out in DBA § 3144(a)(2). Promulgated in 1935 – just six days after the federal Miller Act was updated to reflect its current language – § 3144(a)(2) is broadly worded, granting a right of action to “all the laborers and mechanics who have not been paid the wages required” pursuant to the DBA. In contrast to the Miller Act and DCLMA, which condition their protections on a requisite level of contractual proximity to the prime contractor, DBA eligibility appears to hinge upon a laborer’s presence at the job site. Section 3144(a)(2) stipulates that each “contractor or subcontractor” involved in a “contract” governed by the DBA “shall pay all mechanics and laborers employed directly on the site of the work, unconditionally and at least once a week … regardless of any contractual relationship which may be alleged to exist between the contractor or subcontractor and the laborers and mechanics.” § 3142(c)(1) (emphasis added).
Although the DBA does not separately delineate the terms “contract,” “contractor,” “subcontractor,” or “laborer,” these terms are defined in corresponding regulations promulgated by the Secretary of Labor. See 29 C.F.R. § 5.2. The term “contract” comprises “any prime contract which is subject … to the labor standards provisions of [the DBA] and any subcontract of any tier thereunder, let under the prime contract.” § 5.2(h) (emphasis added). This definition, unlike that in the DCLMA, is not limited by a particular degree of separation from the prime contractor. The regulations, in fact, expressly disavow any requirement that a worker demonstrate a particular contractual relationship, instead providing that “[e]very person performing the duties of a laborer or mechanic in the construction … of a public building or public work … is employed regardless of any contractual relationship alleged to exist between the contractor and such person.” § 5.2(o). The regulatory definition of “laborer” is governed by function, not by contractual formality, and extends to “at least those workers whose duties are manual or physical in nature.” § 5.2(m).
Even in the unlikely event that a court were to find the text of the DBA ambiguous, it would still be bound to apply DOL’s regulatory definitions in making its decision. “Because the Secretary of Labor has interpreted the Act,” courts must defer to the Secretary’s judgment provided that these “interpretations are reasonable.” AKM LLC v. Sec’y of Labor, 675 F.3d 752, 754 (D.C.Cir.2012) (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984)). In this case, the regulatory interpretations are more than merely reasonable – they are grounded in the most basic common sense. Because a prime contractor should have ample notice of laborers working at its project site, it can institute sufficient controls to ensure that they are accounted for and paid for their contributions, regardless of any particular contractual arrangement. In contrast to the situation with suppliers, who may come and go without any physical connection to a job site, there is far less risk that laborers will be completely “[un]known to the prime contractor,” U.S. ex rel. E & H Steel Corp., 509 F.3d at 187, and thereby expose it to unforeseen liability.
The court then explained that where, as here, workers had exhausted their administrative remedy (i.e. filed with the DOL), they were entitled to bring a private cause of action under the DBA:
Clearly titled as a “[r]ight of action,” DBA § 3144(a)(2) provides that, if the Secretary of Labor’s withholdings under the terms of a contract are “insufficient to reimburse all the laborers and mechanics who have not been paid the wages required[,] … the laborers and mechanics have the same right to bring a civil action and intervene against the contractor and the contractor’s sureties as is conferred by law on persons furnishing labor or materials.” (Emphasis added). Two points are notable here. First, the express title of § 3144(a)(2) indicates that Congress believed that it was creating a new and fully functional right of action, and not merely a superficial reference to remedies already available under the bond statutes. While many battles have been waged over whether or not an aggrieved worker can claim an implied right of action under the DBA and thereby circumvent the administrative-exhaustion requirements of § 3144(a), see, e.g., Univers. Research Ass’n v. Coutu, 450 U.S. 754, 780 (1981), courts have long recognized that § 3144(a)(2) furnishes an express cause of action once remedies have been exhausted. See, e.g., U.S. ex rel. Bradbury v. TLT Const. Corp., 138 F.Supp.2d 237, 241 (D.R.I.2001).
Second, the formulation “all the laborers … who have not been paid” sets an expansive scope of application that is not obviously restricted by what follows. If Congress had intended to limit the scope of eligibility to sue on a bond to the narrow class of workers who might qualify under the terms of the Miller Act, it stands to reason that the legislature would have said so in clear and unambiguous terms or, more plausibly, would have completely omitted § 3144(a)(2) from the DBA. If Defendants are correct, § 3144(a)(2) would be mere surplusage, offering nothing of value over and above the remedies already available via the Miller Act and DCLMA. The Court cannot ignore the ” ‘cardinal principle of statutory construction’ that ‘a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.’ ” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)).
Perhaps even more troubling, Defendants’ assessment of § 3144(a)(2) would create two arbitrary classes of workers – first, those who satisfy the technical qualifications imposed by the terms of the Miller Act and DCLMA, and second, all otherwise DBA-eligible workers. If the Court were to endorse Defendants’ highly restrictive interpretation, it might encourage prime contractors to insulate themselves behind several layers of subcontracts and thus opt out of the obligation to pay DBA-mandated wages, particularly as a project draws to a close and the government is no longer able to withhold funds. It should be obvious, accordingly, that all laborers present on the worksite of a DBA-eligible project should stand to benefit from the Act’s protections, regardless of contractual formalities. The Court thus concludes that § 3144(a)(2) of the DBA creates an independent cause of action that grants the ability to collect on a prime contractor’s bond to all eligible on-site workers, regardless of who hired them.
Finally, the court rejected the defendant’s argument that the plaintiff’s were limited by a one year statute of limitations, and held that a two year statute of limitations was applicable to the claims, pursuant to the Portal-to-Portal Act.
Click Castro v. Fidelity and Deposit Company of Maryland to read the entire Memorandum Opinion of the court.
In an announcement that has long been awaited by workers advocates and those in the home health industry as well, today the United States Department of Labor (DOL) announced a final rule, to go into effect on January 1, 2015, which extends the FLSA’s minimum wage and overtime protections to home health aides that perform typical CNA tasks in the homes of the aged and infirm. In an email blast, the DOL reported:
The U.S. Department of Labor’s Wage and Hour Division announced a final rule today extending the Fair Labor Standards Act’s minimum wage and overtime protections to most of the nation’s direct care workers who provide essential home care assistance to elderly people and people with illnesses, injuries, or disabilities. This change, effective January 1, 2015, ensures that nearly two million workers – such as home health aides, personal care aides, and certified nursing assistants – will have the same basic protections already provided to most U.S. workers. It will help ensure that individuals and families who rely on the assistance of direct care workers have access to consistent and high quality care from a stable and increasingly professional workforce.
Among other things, the final rule overrules the 2007 holding of the Supreme Court in Long Island Care at Home, Ltd. v. Coke, and requires 3rd party employers such as staffing agencies to pay companions and home health workers overtime under the FLSA when they work in excess of 40 hours per week.
The New York Times provides a pretty good synopsis of the changes to the Companionship Exemption, provided by the final rule:
Under the new rule, any home care aides hired through home care companies or other third-party agencies cannot be exempt from minimum wage and overtime coverage. The exemptions for aides who mainly provide “companionship services” — defined as fellowship and protection for an elderly person or person with an illness, injury or disability who requires assistance — are limited to the individual, family or household using the services.
If an aide or companion provides “care” that exceeds 20 percent of the total hours she works each week, then the worker is to receive minimum wage and overtime protections.
The new rule defines care as assisting with the activities of daily living, like dressing, grooming, feeding or bathing, and assisting with “instrumental activities of daily living,” like meal preparation, driving, light housework, managing finances and assisting with the physical taking of medications.
The companionship exemption will not apply if the aide or companion provides medically related services that are typically performed by trained personnel, like nurses or certified nursing assistants.
Live-in domestic service workers who reside in the employer’s home and are employed by an individual, family or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked.
6th Cir.: Employment Contract That Purported to Shorten FLSA Statute of Limitations to 6 Months Invalid
Boaz v. FedEx Customer Information Services Inc.
Employers continue to include language in employment contracts which purports to shorten the statute of limitations applicable to FLSA claims. By law, the statute of limitations is 2 years on such claims if the employee is unable to show the employers violations are willful, and 3 years if the employee can make such a showing. Recently, the Sixth Circuit reviewed FedEx’s contract that purported to reduce that time to 6 months. As discussed below, it struck down the employers’ attempts to shorten the statute of limitations. Reasoning that same was an impermissible waiver of rights under the FLSA, the court agreed that such a limitation was unenforceable. In so doing, the Sixth Circuit reversed the trial court, which had held that such an abridgement of FLSA rights was permissible.
Initially the court briefly reiterated longstanding black-letter law regarding the non-waivable nature of FLSA rights:
Shortly 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 under the Act. See Brooklyn Savs. Bank v. O’Neil, 324 U.S. 697, 706–10, 65 S.Ct. 895, 89 L.Ed. 1296 (1945). Such waivers, according to the Court, would “nullify” the Act’s purpose of “achiev[ing] a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act.” Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of Am., 325 U.S. 161, 167, 65 S.Ct. 1063, 89 L.Ed. 1534 (1945); see also O’Neil, 324 U.S. at 707. The Court therefore held that employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114, 66 S.Ct. 925, 90 L.Ed. 1114 (1946); O’Neil, 324 U.S. at 707; see also Runyan v. Nat’l Cash Register Corp., 787 F.2d 1039, 1041–42 (6th Cir.1986) (en banc).
The issue here is whether Boaz’s employment agreement operates as a waiver of her rights under the FLSA. Boaz accrued a FLSA claim every time that FedEx issued her an allegedly illegal paycheck. See Hughes v. Region VII Area Agency on Aging, 542 F.3d 169, 187 (6th Cir.2008). She filed suit more than six months, but less than three years, after her last such paycheck—putting her outside the contractual limitations period, but within the statutory one.
An employment agreement “cannot be utilized to deprive employees of their statutory [FLSA] rights.” Jewell Ridge, 325 U.S. at 167 (quotation omitted). That is precisely the effect that Boaz’s agreement has here. Thus, as applied to Boaz’s claim under the FLSA, the six-month limitations period in her employment agreement is invalid.
In so doing, the court rejected FedEx’s reliance on what it deemed inapposite case law:
FedEx (along with its amicus, Quicken Loans) responds that courts have enforced agreements that shorten an employee’s limitations period for claims arising under statutes other than the FLSA—such as Title VII. And FedEx argues that the discrimination barred by Title VII (i.e., racial discrimination) is just as bad as the discrimination barred by the FLSA, and hence that, if an employee can shorten her Title VII limitations period, she should be able to shorten her FLSA limitations period too. But that argument is meritless for two reasons. First, employees can waive their claims under Title VII. See, e.g., Alexander v. Gardner–Denver Co., 415 U.S. 36, 52, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974). Second—and relatedly—an employer that pays an employee less than minimum wage arguably gains a competitive advantage by doing so. See Citicorp Indus. Credit, Inc. v. Brock, 483 U.S. 27, 36, 107 S.Ct. 2694, 97 L.Ed.2d 23 (1987). An employer who refuses to hire African–Americans or some other racial group does not. The Court’s rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.
FedEx also relies on Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306 (6th Cir.2000). There, we held that an employee asserting an FLSA claim can waive her right to a judicial forum, and instead arbitrate the claim. Id. at 313, 316. From that holding FedEx extrapolates that employees can waive their “procedural” rights under the FLSA even if they cannot waive their “substantive” ones. But the FLSA caselaw does not recognize any such distinction. That is not surprising, given that the distinction between procedural and substantive rights is notoriously elusive. See Sun Oil Co. v. Wortman, 486 U.S. 717, 726, 108 S.Ct. 2117, 100 L.Ed.2d 743 (1988). More to the point, Floss itself said 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.” 211 F.3d at 313. The provision at issue here does the opposite.
Click Boaz v. FedEx Customer Information Services Inc. to read the entire Opinion. Click DOL Amicus Brief, to read the amicus brief submitted by the Department of Labor in support of the Plaintiff-Appellant.
2 Recent Decisions Hold That an Employer-Defendant Cannot Avoid Liquidated Damages By Relying on Involuntary Administrative Governmental Audits
As FLSA cases have proliferated in recent years, among the formally sleepy areas of jurisprudence that has seen a dramatic rise in litigation is the so-called “good faith” defense. Although in its earliest years the FLSA provided for mandatory liquidated damages, a subsequent amendment to the FLSA, through the Portal-to-Portal Act, now allows for a defendant to avoid the imposition of liquidated damages (in addition to the underlying unpaid wages damages) if it can demonstrate that it took affirmative steps to attempt compliance with the FLSA, but violated the FLSA nonetheless. Two recent cases reiterate that a defendant’s burden is not met solely by demonstrating that it had a subjective belief that it was complying.
McLean v. Garage Management Corp.
In the first case, the defendant sought to avoid liquidated damages by relying on a series of involuntary misinformed DOL audits, which it claimed it reasonably relied upon in establishing their belief that its illegal pay methodology, whereby it treated hourly employees as executive exempt from the FLSA’s overtime provisions. While the DOL has in fact found the defendant’s classification to be proper, the court noted that the DOL’s finding was based on its examination of the employees’ duties alone, because the defendant had misrepresented to the DOL that the employees were paid on a salary basis, at the required rate under the applicable regulations in the initial audit. Subsequent audits simply compounded this initial incomplete investigation, based on the information the defendant provided to the DOL in the initial audit.
Significantly, the court rejected the defendants’ claimed reliance on the DOL audits for 3 separate reasons. First, it found that any informal conversations do not constitute “active steps” to ascertain the dictates of the law. Second, the court noted that the audits were involuntary and defendant had not requested same and thus, giving government investigators access to records and employees did not relieve defendant of its own obligation to determine what the labor laws require. Third, the court noted that defendant had not shown that any government investigator focused with care on its time and payroll records for the employees in question, and thus the DOL had not undertaken a review to see whether the defendant indeed paid a predetermined amount that did not vary, as required to meet the “salary basis” prong of the executive exemption. “Without such full disclosure, [the defendant] cannot reasonably rely on the existence of the investigations and their failure to find any inadequacies in the compensation system for [the employees].”
Finally, the court held that the defendant was not entitled to rely on the fact that it periodically consulted with outside counsel, because it had invoked its attorney-client privilege. The court explained that absent a waiver of the privilege, the defendant could not sustain a defense based on good faith reliance on the advice of counsel.
Click McLean v. Garage Management Corp. to read the entire Opinion and Order.
Solis v. R.M. Intern., Inc.
In the second case- concerning an alleged misclassification of drivers under the Motor Carrier Act (MCA) exemption- the defendant sought to avoid the imposition of liquidated damages, by relying on a prior involuntary Department of Transportation (DOT) audit/citations and the advise of counsel it received as part of the audit process. As in McLean above, the court rejected this evidence of “good faith” as insufficient to meet the defendant’s heavy burden.
The court noted:
Defendants maintain they have demonstrated both their subjective good faith and objectively reasonable belief that their failure to pay overtime wages to their drivers did not violate FLSA. To meet their burden, Defendants rely almost exclusively on their compliance with DOT rules and the DOT’s citation of “some” of their intrastate-only drivers. The DOT’s citation of “some” of Defendants’ intrastate-only drivers, however, does not provide a sufficiently reasonable basis for concluding all such drivers were under the DOT’s jurisdiction and, therefore, exempt from FLSA. The objective reasonableness of Defendants’ failure is undermined by the fact that the determination as to whether the Department of Labor or the DOT has jurisdiction is resolved on a driver-by-driver basis, as the Court explained at length on summary judgment, and, in any event, DOT jurisdiction for a driver who only occasionally drives in interstate commerce lasts only 4 months from the last such trip. See Reich v. Am. Driver Serv., Inc., 33 F.3d 1153, 1155–56 (9th Cir.1994). Furthermore, exemptions to FLSA, such as the Motor Carrier Exemption relied on by Defendants, are to be construed narrowly and only apply to employees who “plainly and unmistakably” fall within their terms. See Solis v. Washington, 656 F.3d 1079, 1083 (9th Cir.2011). Thus, the Court concludes Defendants’ generalizations about entire classes of their drivers on the basis of DOT citations of some of its drivers are insufficient to establish the objective reasonableness of Defendants’ failure to comply with FLSA. Similarly and in light of the lack of testimony in this regard, the fact that Defendants required both their interstate and intrastate drivers comply with DOT regulations neither establishes Defendant’s subjective belief nor its objective reasonableness.
Defendants also maintain their belief that their drivers were exempt from FLSA is reasonable in light of the fact that they hired counsel to assist with the November 2009 DOT compliance audit. Although there is not any direct evidence as to the purpose of counsel’s representation, the Court concludes it is fair to infer that counsel was hired to ensure Defendants’ compliance with DOT regulations rather than to ensure Defendants were compliant with FLSA. In any event, there is not any evidence on this record from which the Court can find that Defendants took “the steps necessary to ensure [its] practices complied with [FLSA].” Alvarez, 339 F .3d at 910 (“Mistaking ex post explanation and justification for the necessary affirmative ‘steps’ to ensure compliance, [the defendant] offers no evidence to show that it actively endeavored to ensure such compliance.”). Thus, the Court concludes on this record that Defendants did not satisfy their “difficult” burden to show their subjective good faith failure to comply with FLSA or the objective reasonableness of their actions, and, therefore, the Court concludes Plaintiff is entitled to liquidated damages in the amount equal to the unpaid overtime wages.
Click Solis v. R.M. Intern., Inc. to read the entire Supplemental Findings of Fact and Conclusions of Law and Verdict.
DOL to Issue Notice of Proposed Rulemaking to Amend the Companionship and Live-In Worker Regulations
The DOL announced yesterday that it would be issuing proposed amended rules regarding companionship and live-in workers’ eligibility for overtime under the FLSA. A preview of the announcement from the DOL’s website explains:
“While Congress expanded protections to “domestic service” workers in 1974, these Amendments also created a limited exemption from both the minimum wage and overtime pay requirements of the Act for casual babysitters and companions for the aged and infirm, and created an exemption from the overtime pay requirement only for live-in domestic workers.
Although the regulations governing exemptions have been substantially unchanged since they were promulgated in 1975, the in-home care industry has undergone a dramatic transformation. There has been a growing demand for long-term in-home care, and as a result the in-home care services industry has grown substantially. However, the earnings of in-home care employees remain among the lowest in the service industry, impeding efforts to improve both jobs and care. Moreover, the workers that are employed by in-home care staffing agencies are not the workers that Congress envisioned when it enacted the companionship exemption (i.e., neighbors performing elder sitting), but instead are professional caregivers entitled to FLSA protections. In view of these changes, the Department believes it is appropriate to reconsider whether the scope of the regulations are now too broad and not in harmony with Congressional intent.
Proposed Changes to the Companionship and Live-In Worker Regulations
On December 15, 2011 the Department announced that it will publish a Notice of Proposed Rulemaking (NPRM) to revise the companionship and live-in worker regulations for two important purposes:
- To more clearly define the tasks that may be performed by an exempt companion
- To limit the companionship exemption to companions employed only by the family or household using the services. Third party employers, such as in-home care staffing agencies, could not claim the exemption, even if the employee is jointly employed by the third party and the family or household.
Although the Office of Management and Budget (OMB) has reviewed and approved the attached Notice of Proposed Rulemaking (NPRM), the document has not yet been published in the Federal Register. The NPRM that appears in the Federal Register will specify the dates of the public comment period and may contain minor formatting differences in accordance with Office of the Federal Register publication requirements. The OMB-approved version is being provided as a convenience to the public and this website will be updated with the Federal Register’s published version when it becomes available.”
Among other things, the proposed rule would overrule the 2007 holding of the Supreme Court in Long Island Care at Home, Ltd. v. Coke, and require 3rd party employers such as staffing agencies to pay companions and home health workers overtime under the FLSA when they work in excess of 40 hours per week.
Click Notice of Proposed Rulemaking to read more.
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
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.