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11th Cir.: Following Tender of Unpaid Wages and Liquidated Damages, an Employer Only Moots a Case if the Plaintiff Agrees to Dismissal, Absent Payment of Mandatory Fees and Costs
Dionne v. Floormasters Enterprises, Inc.
Following a controversial opinion that created more questions than it answered, the Eleventh Circuit reconsidered it’s prior Opinion in this case and in so doing largely restricted its holding to the unique facts presented in the case. Previously the Court had held that an employer, who denies liability for nonpayment for overtime work, need not pay attorney’s fees and costs pursuant to 29 U.S.C. § 216(b) of the Fair Labor Standards Act (“FLSA”) if the employer tenders the full amount of overtime pay claimed by an employee, and moves to dismiss on mootness grounds where the employee concedes that “the claim for overtime should be dismissed as moot. Although the prior Opinion seemed restricted to these unique facts where the employee conceded that the overtime claim should be dismissed (but attempted to reserve as to fees/costs), courts throughout the Eleventh have since expanded the holding to scenarios where the employee makes no such stipulation. Here, the Eleventh Circuit affirmed the prior decision, but clarified and limited its applicability.
Significantly, the Eleventh Circuit included the following footnote in its new Opinion:
“Our decision in this matter addresses a very narrow question: whether an employee who conceded that his claim should be dismissed before trial as moot, when the full amount of back pay was tendered, was a prevailing party entitled to statutory attorney’s fees under § 216(b). It should not be construed as authorizing the denial of attorney’s fees, requested by an employee, solely because an employer tendered the full amount of back pay owing to an employee, prior to the time a jury has returned its verdict, or the trial court has entered judgment on the merits of the claim.”
It remains to be seen exactly how the new Dionne Opinion will be applied by trial courts, but it does appear that much of the uncertainty created by the initial Opinion has now been resolved. To that end, it appears that a Plaintiff who has suffered a theft of his or her wages can now safely accept tender of such wages (and liquidated damages) in response to a lawsuit to collect same, without fear that the employer can avoid payment of mandatory fees and costs, as long as they do not agree that the tender moots the case.
Click Dionne v. Floormasters Enterprises, Inc. to read the entire Opinion on Petition for Rehearing.
C.D.Cal.: Where Defendant’s Rounding Policy Was Facially Neutral No FLSA Violation
Alonzo v. Maximus, Inc.
In this case, brought under the FLSA and California State laws, plaintiffs alleged a variety of wage and hour violations, including failure to include all appropriate compensation when calculating regular rates (and resulting overtime premiums), unpaid off-the-clock work and impermissible rounding of work-time. Following discovery, the case was before the court on defendant’s motion for summary judgment. As discussed here, the court granted defendant’s motion with regard to plaintiffs’ rounding claim, because the evidence demonstrated that the rounding was facially neutral and did not have the overall effect of reducing plaintiffs’ reported time and resulting wages.
Significant to the rounding claim, it was undisputed that defendant’s timekeeping policy required plaintiffs to round their time worked to the nearest quarter of an hour (whether higher or lower) and that plaintiffs self-reported and thus self-rounded their reported time each day/week.
Discussing the rounding issue the court reasoned:
“Defendant moves for summary judgment on Plaintiffs’ Rounding Claim on the basis that Defendant’s time rounding policy is facially neutral, and, therefore, permissible under California law. For the reasons set forth below, Defendant’s Motion is GRANTED.
While no California statute or regulation expressly addresses the permissibility of using a rounding policy to calculate employee work time, the United States Department of Labor has adopted a regulation regarding rounding pursuant to the Fair Labor Standards Act (the “FLSA”) that permits employers to use time rounding policies under certain circumstances:
It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked. 29 C.F.R. § 785.48(b) (2011).
While few Courts have interpreted this regulation, those that have recognize that the regulation permits employers to use a rounding policy for recording and compensating employee time as long as the employer’s rounding policy does not “consistently result[ ] in a failure to pay employees for time worked.” See, e.g., Sloan v. Renzenberger, Inc., No. 10–2508–CM–JPO, 2011 WL 1457368, at *3 (D.Kan. Apr.15, 2011).
That is, an employer’s rounding practices comply with § 785.48(b) if the employer applies a consistent rounding policy that, on average, favors neither overpayment nor underpayment. East v. Bullock’s, Inc., 34 F.Supp.2d 1176, 1184 (D.Ariz.1998) (granting summary judgment in employer’s favor where “evidence show[ed] that [employer’s] rounding system may not credit employees for all the time actually worked, but it also credits employees for time not actually worked” so that the employer’s “rounding practices average[d] out sufficiently to comply with § 785.48(b)”); see also Adair v. Wis. Bell, Inc., No. 08–C–280, 2008 WL 4224360, at *11 (E.D.Wis. Sept.11, 2008) (approving policy where there was no evidence to suggest it systematically favored employer); Contini v. United Trophy Mfg., No. 6:06–cv–432–Orl–18UAM, 2007 WL 1696030, at *3 (M.D.Fla. June 12, 2007) (granting employer’s motion for summary judgment where the “[employer], throughout [the employee’s] employment, [used] a consistent policy as to the rounding of clocking-in and clocking-out, which [was] both fair and evenly applied to all employees.”).
An employer’s rounding practices violate § 785.48(b) if they systematically undercompensate employees. See, e.g., Russell v. Ill. Bell Tel. Co., 721 F.Supp.2d 804, 820 (N.D.Ill.2010) (time rounding and log-out policies may violate FLSA if they “cause[ ] plaintiffs to work unpaid overtime”); Austin v. Amazon .com, Inc., No. C09–1679JLR, 2010 WL 1875811, at *3 (W.D.Wash. May 10, 2010) (denying defendant’s motion to dismiss where policy “allows rounding when it benefits the employer without disciplining the employee; but disciplines the employee when the rounding does not work to the employer’s advantage”); Eyles v. Uline, Inc., No. 4:08–CV–577–A, 2009 WL 2868447, at *4 (N.D.Tex. Sept.4, 2009) (granting summary judgment for plaintiff where defendant’s rounding policy “encompasses only rounding down”); Chao v. Self Pride, Inc., No. Civ. RDB 03–3409, 2005 WL 1400740, at *6 (D.Md. June 14, 2005) (ruling that employer’s practice of rounding employee time down violated FLSA).
The parties concede that the federal standard governs this case, as California courts look to federal regulations under the FLSA for guidance in the absence of controlling or conflicting California law, Huntington Mem’l Hosp. v. Superior Court, 131 Cal.App.4th 893, 903, 32 Cal.Rptr.3d 373 (2005), and the California Division of Labor Standards Enforcement (the “DLSE”) has adopted the Department of Labor regulation in its Enforcement Policies and Interpretation Manual (“DLSE Manual”), DLSE Manual §§ 47.1–47.2.
It is undisputed that Defendant employed a facially neutral time rounding policy. Defendant’s Corporate Employee Manual required employees to self-report their time “on a daily basis by recording hours worked to the nearest quarter hour” on timesheets provided at the beginning of the pay period. (Doc. 127–13, Ex. R at 110; id., Ex. S at 127.) And Defendant’s human resources managers testified that Employment Case Managers in each of Defendant’s San Diego, Orange County, and Los Angeles locations adhered to this policy by rounding their hours worked to the nearest quarter hour and entering that figure on a daily basis into an electronic time sheet on Defendant’s computer system. (Doc. 127–17 ¶ 5 (San Diego); Doc. 130–15 ¶ 5 (Orange County); Doc. 130–14 ¶ 5 (Los Angeles).)
Plaintiffs do not dispute the mechanics of Defendant’s time reporting policy. In fact, their expert acknowledges that “class members were required to and did round [the total hours worked] to the nearest quarter hour” on their self-reported time sheets. (Doc. 126–5 ¶ 12.) Rather, Plaintiffs contend that “[o]ver a period of time, such rounding resulted in putative class members being paid for less than all the time they actually worked” in violation of § 785.48. (Doc. 126–5 ¶ 12.)
In support of their contention, Plaintiffs point to records generated at Defendant’s San Diego locations by an electronic system used to record when employees entered and exited Defendant’s offices (the “Simplex System”). The Simplex System was “essentially the electronic equivalent of a sign in/sign out sheet. An employee could punch in their number when they arrived at the workplace and then punch in the number when they left the workplace.” (Doc. 127–17 ¶ 6.; see also Doc. 136–2, Ex. A. 52:9–22.) Based on those entries, the Simplex System generated reports “in a variety of formats [showing] various clock-in and clock-out times for each employee for each date” (the “Simplex Records”). (Doc. 127–18 ¶ 16.) At least some employees also used the Simplex System to record the beginning and end of their lunch breaks. (Doc. 136–2, Ex. A. at 54:8–13.)
Plaintiffs used a sample of these Simplex Records to perform two statistical analyses. In the first, Plaintiffs compared the clock-in/clock-out times recorded by Simplex on a particular day with shift beginning and end times for that day. Plaintiffs conclude that their analysis shows that the number of minutes that would have been subtracted from employees’ time under Defendant’s rounding policy was 5.4% more than the number of minutes that would have been added to their time under Defendant’s rounding policy. (Doc. 129–4 ¶ 5; Doc. 127–18 ¶ 19.) In the second, Plaintiffs compared the total hours reflected on Simplex Records for a given employee on a particular day with the total amount paid to that employee reflected on his or her timesheets. Plaintiffs conclude that analysis reveals a net underpayment of 472.72 minutes for the sample group. (Doc. 129–4 ¶ 8.) Based on these statistical comparisons, Plaintiffs assert a triable issue of fact as to whether Defendant’s rounding policy is invalid under California law because it “result[ed], over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b). Plaintiffs are mistaken.
Even assuming the accuracy of Plaintiffs’ mathematical calculations, which Defendant disputes, Plaintiffs’ statistical analysis of Simplex Records does not create a genuine issue of material fact as to their Rounding Claim. At oral argument, Plaintiffs’ counsel conceded that the evidentiary record is devoid of evidence that Simplex Records reflect time actually worked by Plaintiffs, as opposed to time Plaintiffs may have been present on Defendant’s premises but not engaged in work activities. Rather, Plaintiffs’ counsel clarified that the Rounding Claim is based on Plaintiffs’ contention that all on-premises time reflected by Defendant’s Simplex Records constitutes time during which Plaintiffs were subject to Defendant’s control, and, therefore, compensable as a matter of law under the California Supreme Court’s decision in Morillion v. Royal Packing Co., 22 Cal.4th 575, 94 Cal.Rptr.2d 3, 995 P.2d 139 (2000). The Court disagrees with Plaintiffs’ reading of Morillion.
In Morillion, the California Supreme Court considered whether employees who were required by their employer to travel to a work site on the employer’s buses were “subject to the control of [the] employer” such that their travel time constituted compensable “hours worked” under Industrial Welfare Commission wage order No. 14–80. Id. at 578. The Court concluded that the employees were “subject to the control of [their] employer” during the time they traveled to the employer’s work site because the employer “require[d] plaintiffs to meet at the departure points at a certain time to ride its buses to work,” “prohibited them from using their own cars,” and “subject[ed] them to verbal warnings and lost wages if they [did not use the employer’s transportation].” Id. at 587. Accordingly, the employees’ compulsory travel time constituted compensable “hours worked.” Id. at 594. In so ruling, however, the Court clarified that:
[E]mployers do not risk paying employees for their travel time merely by providing them with transportation. Time employees spend traveling on transportation that an employer provides but does not require its employees to use may not be compensable as ‘hours worked .’ Instead, by requiring employees to take certain transportation to a work site, employers thereby subject those employees to its control by determining when, where, and how they are to travel. Id. at 588 (emphasis added). “The level of the employer’s control over its employees, rather than the mere fact that the employer requires the employee’s activity, is determinative.” Id . at 587.
This case does not present a situation in which Plaintiffs were “subject to the control of [Defendant]” such that all time spent on Defendant’s premises is compensable under the reasoning and holding of Morillion. Here, unlike in Morillion, Plaintiffs have presented no evidence that Defendant required them to arrive at its offices before their shifts began or to remain on the premises after their shifts ended. Nor have they presented evidence that Plaintiffs were engaged in work during any of the on-premises time reflected on their Simplex Records that was not accounted for in their electronic time sheets. In the absence of such evidence, the Simplex Records are simply immaterial to whether Defendant’s rounding policy systematically undercompensated Plaintiffs, and, therefore do not create a genuine issue of material fact as to the legality of Defendant’s rounding policy.
Accordingly, Defendant’s Motion for Summary Judgment is GRANTED as to Plaintiffs’ Rounding Claim.”
Click Alonzo v. Maximus, Inc. to read the entire Order Granting in Part and Denying in Part Defendant’s Motion for Summary Judgment and Granting in Part and Denying in Part Plaintiffs’ Motion for Summary Judgment.
S.D.Ohio: 21 Late Opt-ins May Be Properly Added Despite Lack of Good Cause Showing
Heaps v. Safelite Solutions, LLC
This case was before the court on the defendant’s motion to strike the consents of opt-in plaintiffs filed after the court-imposed deadline (45 days from mailing of notice), and plaintiff’s cross-motion for order allowing late opt–ins. Citing judicial economy and the remedial principles underlying the FLSA, the court denied the defendant’s motion to strike and granted plaintiff’s cross-motion, allowing the opt-in plaintiffs to remain in the case. Significantly, the court granted plaintiff’s motion without requiring a showing of good cause as to why the opt-ins filed their consents up to 2 months beyond the deadline imposed by the court.
Permitting the late opt-ins to remain in the case, the court reasoned:
“The FLSA provides the procedure for potential plaintiffs to opt-in to a collective action but does not specify when the potential plaintiff must opt-in. See 29 U.S.C. §§ 216(b), 255, 256. Consequently, deadlines to opt-in are established by the trial court. The FLSA also does not “provide a standard under which a court should consider whether to include opt-in plaintiffs whose consent forms are filed after the court-imposed deadline has passed.” Ruggles v. Wellpoint, Inc., 687 F.Supp.2d 30, 37 (N.D.N.Y.2009).
Although the caselaw on this issue is wide-ranging, courts have generally decided the question by balancing various combinations of the following factors: (1) whether ‘good cause’ exists for the late submissions; (2) prejudice to the defendant; (3) how long after the deadline passed the consent forms were filed; (4) judicial economy; and (5) the remedial purposes of the FLSA. Id. (citing Ayers v. SGS Control Servs., Inc., 2007 WL 3171342, at *4–5 (S.D.N.Y. Oct.9, 2007) (requiring that late opt-in plaintiffs show good cause for their untimely consent filings), Robinson–Smith v. Gov’t Empl. Ins. Co., 424 F.Supp.2d 117, 123–24 (D.D.C.2006) (considering the potential prejudice to the defendant and the purposes of the FLSA), Raper v. State of Iowa, 165 F.R.D. 89, 92 (S.D.Iowa 1996) (considering potential prejudice to the defendant and judicial economy), Monroe v. United Air Lines, Inc., 94 F.R.D. 304, 305 (N.D.Ill.1982) (considering how long after the deadline the consent forms were filed); but see Reyes v. Texas Ezpawn, L.P., 459 F.Supp.2d 546, 566–67 (S.D.Tex.2006) (dismissing plaintiffs who filed consent forms after the opt-in period without any discussion of the above factors)).
Balancing all of the above factors, the Court finds that the 21 opt-in plaintiffs may be properly added despite their failure to submit consent notices prior to the Court’s deadline. Although Plaintiffs have offered no good cause for their failure to timely file these consent forms, all of the other factors weigh in their favor. See id. (permitting late consent opt-in plaintiffs to join collective class even though the plaintiffs offered no good cause for their failure to timely file, but all other factors weighed in their favor); In Re Wells Fargo Home Mortgage Overtime Pay Litigation, No. MDL 06–01770 MHP, 2008 WL 4712769 at *2 (N.D.Cal. Oct.23, 2008) (rejecting a “rigid application of a ‘good cause’ standard” because it “does not fully respond to the various factors with which the court must concern itself” such as judicial economy and prejudice to the defendant) (citing Raper, 165 F.R.D. at 89).
Given that over 200 persons have consented to opt-in, the inclusion of these 21 plaintiffs, approximately 10% increase in the size of the potential class, will not overly burden or prejudice Defendants. See Abubakar v. Co. of Solano, No. Civ. S–06–2268, 2008 WL 550117 at *2 (E.D.Cal. Feb.27, 2008) (holding a 15% increase in liability, 23 plaintiffs added to a class of 155, was not prejudicial). Also, all of these consent notices were filed with the Court within a few months after the deadline and the majority of them within one month, not presenting any unfair surprise or requiring that Defendants take any additional steps to defend this action. See Raper, 165 F.R.D. at 92 (finding no prejudice to the defendant by allowance of the addition of plaintiffs even after liability had been determined). Thus, Defendant has not been prejudiced by a significant delay and the addition of these opt-in plaintiffs should not hamper the discovery process already underway.
In terms of judicial economy, were the Court to deny the admission of these plaintiffs, they would still be able to file separate claims for relief against Defendant, who would still face the prospect of defending against their individual FLSA claims. See Ruggles, 687 F.Supp.2d at 37 (citing 29 U.S.C. § 256(b)). Indeed, Plaintiffs suggest that they would file separate actions and then request consolidation with the instant action. (ECF No. 85 at 6) (the untimely plaintiffs “only option will be to file identical, individual claims with the Court” and this Court would be permitted to consolidate those individual lawsuits under Fed.R.Civ.P. 42(a) “because the cases will all ‘involve a common question of law or fact’ ”). “Obviously, there is little economy in spawning identical FLSA lawsuits that themselves might be properly joined with this lawsuit in the future.” Ruggles, 687 F.Supp.2d at 38 (citing Abubakar, 2008 WL 550117 at *2) (noting the futility in requiring late opt-in plaintiffs to file separately given the foreseeability of a consolidation order pursuant to Fed.R.Civ.P. 42(a)).
Finally, this Court agrees with other courts’ holdings that with respect to the FLSA, “[a] generous reading, in favor of those whom congress intended to benefit from the law, is also appropriate when considering issues of time limits and deadlines.” Kelley v. Alamo, 964 F.2d 747, 750 (8th Cir.1992) (citation omitted); see also Ruggles, 687 F.Supp.2d at 38 (agreeing with a generous reading of the FLSA in favor of those whom congress intended to benefit from the statute in late opt-in circumstance); In re Wells Fargo Home Mortg. Overtime Pay Litigation, 2008 WL 4712769 at *2 (same); Schaefer–LaRose v. Eli Lilly & Co., No. 1:07–cv–1133–SEB–TAB, 2008 WL 5384340, at *2 (S.D.Ind. Dec.17, 2008) (same).”
Click Heaps v. Safelite Solutions, LLC to read the entire Opinion and Order.
S.D.N.Y.: Collective Action Waiver Unenforceable Because It Would Prevent Employees From Vindicating Their Substantive Statutory Rights Under the FLSA
Raniere v. Citigroup Inc.
In an issue appearing more and more these days, this case was before the court on the defendant’s motion to compel arbitration on an individualized basis. Although the plaintiffs raised several issues regarding the enforceability of the arbitration agreement at issue, as discussed here, the case is significant because it held that- as a matter of law- purported waivers of the right to participate in an FLSA collective action are unenforceable, because they prevent employees from vindicating their substantive statutory rights (that are not waivable).
In so holding, the court reasoned:
“Plaintiffs make two arguments to the effect that the collective action waiver is unenforceable because it would prevent Plaintiffs from vindicating their substantive statutory rights. The first, and broader, of these arguments is that if the waiver is given effect, the FLSA will not serve both its remedial and deterrent functions. Plaintiffs’ second, narrower, contention is that to give effect to the collective action waiver and arbitration agreement here would have the practical effect of precluding Plaintiffs from pursuing the enforcement of their statutory rights due to the costs involved.
It is well recognized that employees cannot release their substantive rights under the FLSA by private agreement. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (“No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.”); see also Bormann v. AT & T Commc’ns, Inc., 875 F.2d 399 (2d Cir.1989) (“[P]rivate waiver of claims under the [FLSA] has been precluded by such Supreme Court decisions as Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 65 S.Ct. 895, 89 L.Ed. 1296 (1945), and D.A. Shulte, Inc. v. Gangi, 328 U.S. 108, 66 S.Ct. 925, 90 L.Ed. 1114 (1946).” (citations omitted)).
It is likewise well established that “ ‘[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.’ “ Circuit City, 532 U.S. at 123 (quoting Gilmer, 500 U.S. at 26); see also Desiderio, 191 F.3d at 205–06. Arbitration of a claim of statutory rights will only be compelled if that claim can be effectively vindicated through arbitration. See Mitsubishi, 473 U.S. at 637 n. 19 (noting that if arbitration clause and other contractual provisions “operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies,” “we would have little hesitation in condemning the agreement as against public policy”); Green Tree, 531 U.S. at 90 (noting that “even claims arising under a statute designed to further important social policies may be arbitrated because so long as the prospective litigant effectively may vindicate his or her statutory cause of action in the arbitral forum the statute serves its functions.” (citations and internal quotation marks and brackets omitted)).
Federal substantive law of arbitrability requires federal courts to declare otherwise operative arbitration clauses unenforceable when enforcement would prevent plaintiffs from vindicating their statutory rights. American Express II, 634 F.3d at 199; see also Kristian v. Comcast Corp., 446 F.3d 25, 47–48 (1st Cir.2006); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 n. 14 (5th Cir.2003); Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054, 1062 (11th Cir.1998); Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547, 549 (S.D.N.Y.2011); Chen–Oster v. Goldman, Sachs & Co., 785 F.Supp.2d 394 (S.D.N.Y.2011); DeGaetano v. Smith Barney, Inc., 983 F.Supp. 459, 469 (S.D.N.Y.1997).
The Second Circuit addressed this issue in American Express I, 554 F.3d 300. The Court concluded that the class action waiver in that case was unenforceable because plaintiffs had demonstrated that they otherwise would not be able to vindicate their statutory rights “in either an individual or collective capacity,” id. at 314 (emphasis in original), due to the great expense of pursuing that antitrust litigation and the small individual recovery each plaintiff could expect. As such, the waiver would have the practical effect of ensuring no claims would be brought at all, granting the defendant “de facto immunity from … liability.” Id. at 320. The Supreme Court vacated American Express I and remanded for reconsideration in light of Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp., ––– U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). American Express Co. v. Italian Colors Rest., ––– U.S. ––––, 130 S.Ct. 2401, 176 L.Ed.2d 920. On remand, the Circuit again found the arbitration provision unenforceable because “the class action waiver in this case precludes plaintiffs from enforcing their statutory rights” due to the prohibitive cost of litigating on an individual basis. American Express II, 634 F.3d at 197–99.
In Ragone, 595 F.3d 115, the Court of Appeals again confirmed the importance of the statutory rights analysis, indicating its willingness, if in dicta, to hold unenforceable an arbitration agreement containing a shortened statute of limitations and a fee-shifting provision that would “significantly diminish a litigant’s rights under Title VII.” 595 F.3d at 125–26. The Court of Appeals discussion in Ragone demonstrates “that the holdings of American Express apply not only to ‘negative value’ class action claims, that is, claims that are so small in value that it is not economically viable to pursue them as individual claims.” Chen–Oster, 785 F.Supp.2d at 408.
Defendants are incorrect that the Supreme Court’s decision in AT & T, –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742, overrules American Express and Ragone. AT & T addressed only whether a state law rule holding class action waivers unconscionable was preempted by the FAA. ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742. The holdings of both the American Express cases and Ragone were based, in contrast and as this decision must be, on federal arbitral law, and AT & T in no way alters the relevance of those binding circuit holdings. See Chen–Oster v. Goldman, Sachs & Co., 2011 WL 2671813 (S.D.N.Y. July 7, 2011) (holding that AT & T does not abrogate American Express or Ragone and noting that “it remains the law of the Second Circuit that an arbitration provision which precludes plaintiffs from enforcing their statutory rights is unenforceable.” Id. at *4). Moreover, while the dissent in AT & T noted with concern that “agreements that forbid the consolidation of claims can lead small-dollar claimants to abandon their claims rather than to litigate,” 131 S.Ct. at 1760, AT & T involved the vindication of state, not federal, rights. Thus, even if AT & T is read broadly to acquiesce to the enforcement of an arbitral agreement that as a practical matter would prevent the vindication of state rights in the name of furthering the strong federal policy favoring arbitration, that would not alter the validity of the federal statutory rights analysis articulated in Mitsubishi, Green Tree, American Express and Ragone. The Court accordingly analyses the present issues under the reasoning articulated in those cases.
i. The Right to Proceed Collectively Under the FLSA Cannot be Waived
The Second Circuit has not determined whether the collective action provisions of the FLSA are integral to its structure and function, and, as such, whether an agreement waiving that right can be enforced.
The First Circuit has expressly reserved decision on this question. Skirchak v. Dynamics Research Corp., 508 F.3d 49, 62 (1st Cir.2007) (“We do not need to decide if class actions under the FLSA may ever be waived by agreement…. We also do not reach the question of whether such waivers of FLSA class actions are per se against public policy under either the FLSA or the Massachusetts Fair Wage Law”). And while a number of other Circuits have accepted that, at least in principle, arbitration agreements containing waivers of the right to proceed collectively under the FLSA are enforceable, those decisions were either based upon a premise rejected by the Second Circuit or did not reach the question here. See Horenstein v. Mortgage. Mkt., Inc., 9 F. App’x 618, 619 (9th Cir.2001); Carter v. Countrywide Credit Indus. ., Inc., 362 F.3d 294, 297–98 (5th Cir.2004); Vilches v. Travelers Co., Inc., 413 Fed. App’x 487, 494 n. 4 (3d Cir.2011); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1378 (11th Cir.2005); Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir.2002).
Specifically, the court in Caley did not address whether the right to proceed collectively under the FLSA may be waived as a matter of federal law. Instead, it addressed whether such waivers were unconscionable under Georgia state law principles. See Caley, 428 F.3d at 1377–79.
The Second Circuit has rejected the reasoning relied on in Horenstein, Adkins, Carter, and Vilches. In American Express, the Second Circuit noted that the issue of whether statutorily granted collective action rights under the ADEA, which incorporates by reference the collective action rights granted in the FLSA, could be waived was not decided by Gilmer, 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26, because “because a collective and perhaps a class action remedy was, in fact, available in that case.” American Express II, 634 F.3d at 195–96; American Express I, 554 F.3d at 314 (same). Countrywide, Adkins, Horenstein, and Vilches, the latter three relying on Johnson v. West Suburban Bank, 225 F.3d 366, 377 (3d Cir.2000), assumed that Gilmer resolved whether collective enforcement rights were waivable. See Vilches, at 494 n. 4 (citing Adkins, 303 F.3d at 503 (citing Johnson, 225 F.3d at 377)); Adkins, 303 F.3d at 503 (citing Johnson, 225 F.3d at 377); Countrywide, 362 F.3d at 298 (citing Gilmer, 500 U.S. at 32). Under the Second Circuit’s precedents, Gilmer does not. See American Express II, 634 F.3d at 195–96. Accordingly, the issue presented by Plaintiffs here, namely whether the right to proceed collectively under the FLSA is unwaivable—beyond such a clause being unenforceable were Plaintiffs to demonstrate that to do so would have the practical effect of denying them their substantive rights—is an open question in this Circuit.
This issue is fundamentally distinct, and more nuanced, than that presented in Gilmer, which addressed whether ADEA claims are arbitrable at all. Here, Plaintiffs do not contest that individually filed FLSA claims are generally arbitrable or that were the agreement to permit proceeding as a collective in arbitration, as the parties could in Gilmer, see American Express II, 634 F.3d at 195–96, that such a provision would be enforceable. Accordingly, this case does not oppose the strong federal policy favoring arbitration with the rights granted in the FLSA, but instead only questions whether the right to proceed collectively may be waived.
There are good reasons to hold that a waiver of the right to proceed collectively under the FLSA is per se unenforceable—and different in kind from waivers of the right to proceed as a class under Rule 23. Collective actions under the FLSA are a unique animal. Unlike employment-discrimination class suits under Title VII or the Americans with Disabilities Act that are governed by Rule 23, Congress created a unique form of collective actions for minimum-wage and overtime pay claims brought under the FLSA.
The Fair Labor Standards Act of 1938, and its original collective action provision, was a product of the forces that gave rise to what has been termed the constitutional revolution of 1937, marking a high point in the clash of the federal courts with President Roosevelt and New Deal legislators. The original FLSA collective action provision, passed in the wake of the “switch in time that saved nine,” provided that
[a]ny employer who violates the provisions of section 6 or section 7 of this Act shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Action to recover such liability may be maintained in any court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees similarly situated. 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.
Fair Labor Standards Act, 75 Cong. Ch. 676, § 16(b), 52 Stat. 1060, 1069 (1938). As the Supreme Court has noted, this provision appeared for the first time in the bill reported by a Conference Committee of both Houses. See Brooklyn Sav. Bank, 324 U.S. at 705 n. 15 (citing H. Rep. No. 2738, 75th Cong.3d Sess., at 33). The bill that later became the FLSA took over thirteen months to become law and went through a variety of iterations, creating a veritable raft of legislative history. Within this, however, “[t]he only reference to Section 16(b) was by Representative Keller….” Id. at 705 n. 16. Representative Keller stated in relevant part:
Among the provisions for the enforcement of the act an old principle has been adopted and will be applied to new uses. If there shall occur violations of either the wages or hours, the employees can themselves, or by designated agent or representatives, maintain an action in any court to recover the wages due them and in such a case the court shall allow liquidated damages in addition to the wages due equal to such deficient payment and shall also allow a reasonable attorney’s fees and assess the court costs against the violator of the law so that employees will not suffer the burden of an expensive lawsuit. The provision has the further virtue of minimizing the cost of enforcement by the Government. It is both a common-sense and economical method of regulation. The bill has other penalties for violations and other judicial remedies, but the provision which I have mentioned puts directly into the hands of the employees who are affected by violation the means and ability to assert and enforce their own rights, thus avoiding the assumption by Government of the sole responsibility to enforce the act. Id. (citing 83 Cong. Rec. 9264).
This collective action provision was amended by the Portal–to–Portal Act of 1947, the history of which has been described by the courts in the following manner:
In 1947, in response to a “national emergency” created by a flood of suits under the FLSA aimed at collecting portal-to-portal pay allegedly due employees, Congress enacted the Portal–to–Portal amendments to the FLSA. 61 Stat. 87 (1947). The original, stated purpose of the bill containing these amendments was: “To define and limit the jurisdiction of the courts, to regulate actions arising under certain laws of the United States, and for other purposes.” 93 Cong. Rec. 156 (H.R.2157). To this end, the amendments, among other things, barred unions from bringing representative actions under the FLSA. Arrington v. Nat. Broadcasting Co., Inc., 531 F.Supp. 498, 500 (D.D.C.1982) (citations omitted); see also United Food & Commercial Workers Union, Local 1564 of N.M. v. Albertson’s, Inc., 207 F.3d 1193, 1200–01 (11th Cir.2000) (noting the Arrington court’s “exhaustive survey of the legislative history of the 1947 amendments”). As amended, FLSA collective actions allow “plaintiffs the advantage of lower individual costs to vindicate rights by the pooling of resources. The judicial system benefits by efficient resolution in one proceeding of common issues of law and fact arising from the same alleged” unlawful activity. Hoffman–La Roche Inc. v. Sperling, 493 U.S. 165, 170, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989) (describing the collective action provisions under the ADEA, which are by reference those of the FLSA).
More specifically, the revised collective action provision that resulted from these amendments limited representative suits to those workers who submit written opt-in notices. See 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought”). FLSA actions are, consequently, not true representative actions as under Rule 23, but instead those actions brought about by individual employees who affirmatively join a single suit. These collective action provisions were crafted by not one but over the course of several Congresses to balance the need to incentivize the bringing of often small claims by way of collectivization in order to ensure the statute’s function, while barring actions “brought on behalf of employees who had no real involvement in, or real knowledge of, the lawsuit.” Arrington, 531 F.Supp. at 501. The Act’s, and more specifically this provision’s, lengthy legislative history evidences Congress’ precise determination of how this balance should be struck in order to ensure the statute’s remedial and deterrent functions.
In addition, as the Supreme Court has described,
[t]he legislative history of the Fair Labor Standards Act shows an intent on the part of Congress to protect certain groups of the population from substandard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce. The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency as a result of the free movement of goods in interstate commerce. Brooklyn Sav. Bank, 324 U.S. at 706–07. Although the right to sue under the FLSA is compensatory, “it is nevertheless an enforcement provision.” Id. at 709. Not the least integral aspect of this remedy is the ability of employees to pool resources in order to pursue a collective action, in accordance with the specific balance struck by Congress. The particular FLSA collective action mechanism was additionally a Congressional determination regarding the allocation of enforcement costs, as the ability of employees to bring actions collectively reduces the burden borne by the public fisc, as Representative Keller noted. See 83 Cong. Rec. 9264. Moreover, prohibition of the waiver of the right to proceed collectively accords with the Congressional policy of uniformity with regard to the application of FLSA standards, see H. Rep. No. 2182, 75th Cong., 3d Sess. at 6–7, because an employer is not permitted to gain a competitive advantage because his employees are more willing to assent to, or his human resources department more able to ascertain, collective action waivers than those of his competitors. As the Supreme Court has noted, “the purposes of the Act require that it be applied even to those who would decline its protections.” Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985). It is not enough to respond that such a waiver should be upheld in the name of the broad federal policy favoring arbitration, simply because the waiver was included in an arbitration agreement. An otherwise enforceable arbitration agreement should not become the vehicle to invalidate the particular Congressional purposes of the collective action provision and the policies on which that provision is based.
In sum, a waiver of the right to proceed collectively under the FLSA is unenforceable as a matter of law in accordance with the Gilmer Court’s recognition that “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute.” Gilmer, 500 U.S. at 26. See also Chen–Oster v. Goldman, Sachs & Co., 785 F.Supp.2d 394 (S.D.N.Y.2011) (holding arbitral provision waiving right to proceed as a class unenforceable as to Title VII pattern and practice claims).”
Further, because the arbitration agreement at issue said that if the collective action waiver were found to be unenforceable, the case(s) must be litigated in court, the court held that the case should not be remanded to arbitration, having held the collective action waiver unenforceable.
Click Raniere v. Citigroup Inc. to read the entire Opinion.
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.
N.D.Cal.: Defendant’s Motion to Compel Depositions of 3 Named Plaintiffs and 25 Opt-ins in Venue Where Case Pending Denied Due to Financial Concerns
Gee v. Suntrust Mortg., Inc.
This case was before the court on the defendant’s motion to compel the three named plaintiffs and twenty-five opt-in plaintiffs who live in twenty-five different cities across the country to appear for depositions in San Francisco or in three other cities of its choice. The defendant argued that the deponents were required to appear in San Francisco, which is where the FLSA putative collective action was filed, because they have not established good cause for appearing elsewhere. Prior to its motion, the defendant offered to take the depositions either in San Francisco or in three other cities it claims would be more convenient to the deponents. The plaintiffs had offered to produce the deponents in 14 different cities, or alternatively suggested that the depositions be taken by video conference. Plaintiffs opposed the motion, arguing that traveling to any of the cities selected by the defendant would be financially burdensome for them, and that requiring them to do so despite this burden would contradict the purpose of joining a collective action brought under the FLSA. Holding that the financial concerns expressed by the plaintiffs constituted good cause for excusing the deponents from traveling to the cities selected by the defendant for the depositions, the court denied the defendant’s motion.
Addressing the parties contentions, the court reasoned:
“One of the chief advantages of opting into a collective action, such as the one brought by Plaintiffs, is that it “lower[s] individual costs to vindicate rights by the pooling of resources.” Hoffmann–La Roche Inc. v. Sperling, 493 U.S. 165, 179, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). Here, this advantage would be significantly reduced or even eliminated if the proposed deponents are required to travel hundreds of miles for their depositions. See, e.g., Bransfield v. Source Broadband Services, LLC, 255 F.R.D. 447, 450 (W.D.Tenn.2008) (rejecting defendants’ argument that opt-in plaintiffs in FLSA collective action must be required to appear for depositions in the forum where action was filed because doing so “would cancel much of the benefit gained by joining in the collective action” and because “the forum was chosen for [the opt-in plaintiffs]”). The Court is not persuaded by Suntrust’s interpretation of the case law cited by Plaintiffs, but even when taking its interpretation at face value, this case meets the criteria for excusing the deponents from appearing in the cities selected by Suntrust, as Suntrust has made no showing that the issues to be covered in the depositions are sufficiently complex to require in-person depositions.
Likewise, Suntrust’s argument that conducting the depositions via videoconference would be detrimental to its ability to question and observe the deponents is unconvincing. Parties routinely conduct depositions via videoconference, and courts encourage the same, because doing so minimizes travel costs and “permits the jury to make credibility evaluations not available when a transcript is read by another.” Fanelli v. Centenary College, 211 F.R.D. 268, 270 (D.N.J.2002) (citations omitted); see also Guillen v. Bank of America Corp., No. 10–cv–05825, 2011 WL 3939690, at *1 (N.D.Cal. August 31, 2011) (“A desire to save money constitutes good cause to depose out-of-state witnesses via telephone or remote means”). Accordingly, Suntrust’s motion is denied.”
Click Gee v. Suntrust Mortg., Inc. to read the entire Order Denying Motion to Compel.
M.D.Tenn.: Contractual Limitation of FLSA Claims to One Year SOL Unenforceable; Provision Severed and Arb Agreement Enforced
Pruiett v. West End Restaurants, LLC
Before the court in this putative collective action were the defendants’ motion to dismiss and remand the case to arbitration, as well as plaintiffs’ motion to conditionally certify the case as a collective action. As discussed here, the court held that the provision within the arbitration agreement purporting to reduce the applicable statute of limitations to one year (from either two or three years) was unenforceable. However, because the court further held that the unenforceable provision was severable, it severed the statute of limitations provision and otherwise held the arbitration agreement to be enforceable. Thus, it remanded the case to arbitration after striking the unenforceable provision.
After reviewing a history of applicable case law and determining that the enforceability of the provision in question was an issue of first impression, the court reasoned that allowing an employer to contractually shorten the statute of limitations applicable to FLSA claims would unduly abridge the statutory rights granted under the FLSA. The court explained:
“The FLSA requires employers to pay their employees a statutory minimum wage and to pay overtime compensation at a rate not less than one and one-half times the employees’ regular rate of pay. 29 U.S.C. §§ 206 and 207 (2011). An employer who fails to comply with these provisions is liable for the unlawfully withheld compensation, as well as an additional equal amount of liquidated damages. Id. at § 216(b). These damages, including liquidated damages, are compensatory. Elwell v. Univ. Hosp. Home Care Servs., 276 F.3d 832, 840 (6th Cir.2002).
A plaintiff seeking to recover under the FLSA must file the claim within two years of accrual of the cause of action, or within three years of accrual for a willful violation. 29 U.S.C. § 255(a) (2011). Each paycheck that fails to include required wages constitutes a separate statutory violation. See Archer v. Sullivan Cnty., Nos. 95–5214, 95–5215, 129 F.3d 1263, 1997 WL 720406, at *2 (6th Cir.1997). The plaintiff may recover compensatory damages under § 216(b) as far back as the statute of limitations will reach—that is, the plaintiff may recover up to two years of compensatory damages if the violation was not willful, and up to three years of compensatory damages if the violation was willful, dating back from the date of the complaint. See, e.g., Campbell v. Kelly, No. 3:09–cv–435, 2011 WL 3862019, at *10 (S.D.Ohio Aug.31, 2011) (finding that, where plaintiff filed FLSA claims on November 16, 2009, the plaintiff could seek relief dating back to November 17, 2007 for a non-willful violation, or back to November 17, 2006 for a willful violation); Sisk v. Sara Lee Corp., 590 F.Supp.2d 1001, 1004 (W.D.Tenn.2008) (finding that where plaintiff filed FLSA claims on May 7, 2007, the “relevant time period” for willful violations began on May 7, 2004); Herman v. Palo Grp. Foster Home, Inc., 976 F.Supp. 696, 700, 705–06 (W.D.Mich.1997) (finding that defendant willfully violated FLSA and awarding back wages and liquidated damages for period of three years prior to filing of complaint), aff’d, 183 F.3d 468 (6th Cir.1999) (upholding damages award). Thus, under the FLSA, a plaintiff’s substantive right to full compensation is determined by the statute of limitations. As a consequence, unlike the federal statutory claims at issue in Morrison, Daimler–Chrysler, and Ray, shortening the statute of limitations for an FLSA claim necessarily precludes a successful plaintiff from receiving full compensatory recovery under the statute.
Indeed, BrickTop’s does not dispute that enforcing the contractual limitations provision would limit the Plaintiffs to one year of compensatory damages recovery, even though the FLSA entitles Plaintiffs to more. Thus, Defendants concede that the provision prevents plaintiffs from recovering the “full panoply” of compensatory remedies to which the FLSA entitles them. That is not a permissible result. Plaintiffs’ substantive right to full compensation under the FLSA may not be bargained away. Accordingly, the contractual limitations provision is unenforceable as to FLSA claims.
In reaching this holding, the court has undertaken the necessary statute-specific analysis that neither the Boaz court nor the Wineman court conducted. In Wineman, which was issued before the U.S. Supreme Court decision in Penn Plaza limited Barrentine to its facts, the district court found that a six-month contractual limitations provision in an employment agreement was not enforceable as to FLSA claims. Wineman, 352 F.Supp.2d at 821–23. The defendant had argued, as BrickTop’s does here, that waiver of the FLSA statute of limitations constituted waiver of a procedural right, not a substantive right. Id. at 922. The court rejected this argument, reasoning that, “in light of the public policy implications, … that is a distinction without a difference.” Id. In support of this reasoning, the court relied on Barrentine for the proposition that even FLSA procedural rights, including the right to the judicial forum, could not be abridged, compromised, or waived by private agreement. Id. at 823. Thus, the court characterized the shortened limitations period as “a compromise of employees’ rights under the FLSA” in violation of public policy. Id. at 822–23. It did not analyze whether the shortened statute of limitations affected FLSA remedies, likely based on its assumption that Barrentine rendered that inquiry irrelevant.
In Boaz, the district court enforced a six-month contractual limitation on FLSA claims, but, like Wineman, did not analyze whether that limitation affected FLSA remedies. In Boaz, the plaintiff had asserted claims under Title VII for race and gender discrimination, as well as FLSA claims for pay discrimination and failure to pay overtime compensation. Id. at 932. At the summary judgment stage, the plaintiff, relying on Wineman, contended that her FLSA claims were not time-barred by a six-month limitations provision in her employment agreement. The court declined to follow Wineman, reasoning that the subsequent Penn Plaza decision limited Barrentine to its facts, and found that federal statutory procedural rights may be abridged. Id. The court observed that several courts had found that limitations provisions were enforceable as to other federal statutes, including discrimination claims under § 1981, ERISA claims, and FMLA claims. Id. at 933. It is also noted that, as a general matter, statutes of limitations are procedural, not substantive. Id. However, without any analysis specific to the FLSA, the court summarily concluded that the FLSA statute of limitations is procedural and, therefore, waivable.
Thus, although Boaz and Wineman reached differing conclusions about the enforceability of a contractual limitation on FLSA claims, neither reached the crucial inquiry presented here. In particular, the reasoning in Boaz is flawed for two reasons. First, the Boaz court misinterpreted Penn Plaza, which merely held that statutory claims may be arbitrated, but did not address whether the statute of limitations for any federal statute—let alone the FLSA—constituted a waivable right. Second, the court should not have concluded that the FLSA statute of limitations was purely “procedural” without assessing whether enforcing a shortened limitation on FLSA claims prevented successful plaintiffs from vindicating their substantive right to full compensation.”
Click Pruiett v. West End Restaurants, LLC to read the entire Memorandum and Order.
U.S.S.C.: Court Grants Certiorari to PSRs on Appeal of 9th Circuit Decision Holding Pharma Reps Exempt Under the FLSA’s Outside Sales Exemption
Christopher v. SmithKline Beecham Corp.
In a case with far sweeping ramifications for the pharmaceutical industry and its employees, the Supreme Court has granted certiorari to revisit the Ninth Circuit’s decision that held pharmaceutical representatives (pharma reps) to be exempt under the FLSA’s outside sales exemption, and therefore, entitled to overtime. The Supreme Court has granted Plaintiff’s Petition for Cert, and therefore the issue remains largely unresolved. In a decision discussed here, the Second Circuit had previously held that the pharma reps were non-exempt, notwithstanding the pharmaceutical companies’ arguments that they were outside sales and/or administrative exempt. While, the Third Circuit agreed that pharma reps were not outside salespeople because they did not complete any sales, in several cases, it has reached the conclusion that pharma reps are exempt under the administrative exemption. Most recently, the Ninth Circuit held that, notwithstanding the fact that pharma reps cannot and do not consummate sales, their promotional activities are close enough to render them exempt under the outside sales exemption. The Supreme Court has now granted cert in the Ninth Circuit case to potentially resolve the issue.
The Department of Labor had submitted an Amicus Brief in support of the employees in both the Second and Ninth Circuit cases. While the Second Circuit relied on the DOL’s Brief in large part, reaching its conclusion that the pharma reps are non-exempt, the Ninth Circuit rejected the arguments in the Brief. Now, the stage is set for the Supreme Court to resolve the conflict between the circuits once and for all.
The 2 certified issues the Supreme Court is set to hear are:
(1) Whether deference is owed to the Secretary of Labor’s interpretation of the Fair Labor Standards Act’s outside sales exemption and related regulations; and (2) whether the Fair Labor Standards Act’s outside sales exemption applies to pharmaceutical sales representatives.
Visit the scotusblog to read the full decision below as well as the parties’ briefings to date in Christopher v. SmithKline Beecham Corp.
E.D.N.Y.: Defendant Precluded From Offering Evidence of Plaintiffs’ Immigration Status at Trial
Solis v. Cindy’s Total Care, Inc.
This case, brought by the Secretary of Labor, was before the court on the Secretary’s Motion in Limine to exclude any reference to plaintiffs’ immigration status at trial, due to irrelevance. The underlying case concerned nails techs who worked at defendant’s nail salon, presumably at least some of whom were undocumented workers. The court agreed with the Secretary that such information was irrelevant to the issues at bar- namely whether defendant had failed to properly compensate plaintiffs for their previous overtime work.
Framing the issue, the court explained:
“At issue here is a motion in limine brought by the Secretary, seeking to preclude Cindy’s from introducing at trial evidence of the immigration status or national origin of any of Cindy’s employees and from questioning employee witnesses as to these subjects. In its answer, Cindy’s had identified the immigration status of its employees as an affirmative defense. Cindy’s stated that employees’ immigration status “is important for future wages” and that claims as to such wages therefore “are barred in this case .” At an October 13, 2011 pretrial conference, counsel for Cindy’s reiterated its intention to elicit evidence of the immigration status and national origin of one or more employees whose wages are at issue.”
Granting plaintiffs’ motion, the court reasoned:
“In this case, an employee’s immigration status, or national origin, is clearly irrelevant to a claim for back pay for overtime wages under the FLSA. By its terms, the FLSA applies to “any individual” employed by an employer, as the term “employer” is defined by the Act. 29 U.S.C. § 203(e)(1). The Act contains no exception or exclusion for persons who are not U.S. citizens or who are in this country illegally.
For this reason, the courts to consider this issue have uniformly held that any person, regardless of his or her immigration status, who is employed by an employer, may pursue an action under the Act for work actually performed. See, e.g., Corona v. Adriatic Italian Restaurant & Pizzeria, 2010 WL 675702, at *1 (S.D.N.Y. Feb.23, 2010) (citing Patel v. Quality Inn South, 846 F.2d 700, 702 (11th Cir.1988), cert. denied, 489 U.S. 1011, 109 S.Ct. 1120, 103 L.Ed.2d 182 (1989)). Indeed, cases have held that employees’ immigration status or national origin is not even a suitable area for pretrial discovery. See, e . g., Liu v. Donna Karan Int’l, Inc., 207 F.Supp.2d 191, 192 (S.D.N.Y.2002) ( “plaintiff-workers’ immigration status in cases seeking unpaid wages brought under the FLSA” held “undiscoverable”); Renfigo v. Erevos Enter. Inc., 2007 WL 894376, *2 (S.D.N.Y. Mar.20, 2008) (plaintiff’s “immigration status and authority to work is a collateral issue” and not discoverable).
In its answer, Cindy’s asserted that employees’ immigration status might be relevant in an action seeking to recover “future wages.” There is no occasion to address that issue here. The Secretary has stated clearly that that the monetary relief she seeks to obtain on behalf of Cindy’s employees in this case is exclusively retrospective, in the form of back wages owed to current or former employees as a result of Cindy’s alleged failure to pay them overtime wages for the overtime hours that they worked.
This is also not a case in which an employee’s immigration status may be relevant to impeachment. Where an employee witness had falsely attested to United States citizenship or had fabricated naturalization documents, evidence of the employee’s illegal immigration status might well be relevant to credibility. However, the Court would still have to determine whether the probative value of such evidence was substantially outweighed by the risk of unfair prejudice or confusion, see Fed.R.Evid. 403, including the potential chilling, in terrorem effect on undocumented alien employees who might be deterred from coming forward to report FLSA infractions or to testify at trial. See, e.g., Flores v. Amigon, 233 F.Supp.2d 462, 464–65 (E.D.N.Y.2002). Here, however, at the October 13, 2011 hearing, Cindy’s expressly disclaimed an intent to offer immigration status as evidence of impeachment. As a result, no such impeachment evidence will be permitted at trial.”
Click Solis v. Cindy’s Total Care, Inc. to read the entire Opinion and Order.
W.D.Tex.: Plaintiffs Retained Right to Open and Close at Trial; Defendants’ Attempt to Shift Burden With Admissions on the Eve of Trial Denied
Ransom v. M. Patel Enters, Inc.
This case was before the court on the Defendants’ Motion to Open and Close Evidence and Case. Apparently seeking to gain the tactical advantage of addressing the jury first and last (opening and closing), normally reserved for the plaintiff in a typical case, the defendants sought leave just prior to trial to file a third amended complaint. If granted, defendants’ motion would have permitted them to admit the plaintiffs’ prima facie case (i.e. that they worked uncompensated overtime), and rendered the issue of whether plaintiffs were exempt the sole issue at trial. The plaintiffs refused to accept defendants stipulations regarding their prima facie case, instead preferring to retain the right to open and close the case. Largely due to the fact defendants’ filed their motion on the eve of trial, the court denied defendants’ motion.
Denying defendants’ motion(s), the court reasoned:
“This presents the Court with an atypical controversy—and one which the Court could not find case law discussing: the Plaintiffs oppose the Defendants’ motion to admit facts proving a portion of the Plaintiffs’ case, facts that the Plaintiffs have the burden of proving at trial. Defendants argue that the Plaintiffs’ refusal to agree to the amendment demonstrates that they are trying to unnecessarily prolong the evidence solely to hold on to the right to open and close.
The deadline to amend pleadings passed months ago. Therefore, the Defendants must demonstrate good cause to obtain leave to amend. Meaux Surface Prot., Inc. v. Fogleman, 607 F.3d 161, 167 (5th Cir.2010). “Four factors are relevant to good cause: (1) the explanation for the failure to timely move for leave to amend; (2) the importance of the amendment; (3) potential prejudice in allowing the amendment; and (4) the availability of a continuance to cure such prejudice.” Id. As the Defendants admit, this is a strategic move. They want to present their evidence first. Obtaining a strategic advantage is not good cause for leave to amend. Had the Defendants wished to obtain this advantage, they should have admitted these facts early in the case, instead of contesting them until the final pretrial conference. The Plaintiffs note that they spent time and money gathering evidence on both their prima facie case and on the issue of the individual defendants’ status as “employers” under the FLSA. Therefore, the Court DENIES Defendants’ Motion for Leave to File Third Amended Original Answer (Clerk’s Doc. No. 135).
That still leaves the order of proof. The Defendants argue that, regardless of whether the Plaintiffs accept the stipulations they have offered, the Defendants bear the burden of proof on the primary issue at trial, whether the Plaintiffs were exempt employees under the FLSA. Because the Defendants bear the burden of proof on that issue, they contend that they should present their evidence first.
It appears that there are three primary issues for trial: (1) whether the Plaintiffs can demonstrate a prima facie case under the FLSA (on which there appears to be little or no controversy); (2) whether the Plaintiffs were exempt employees under the FLSA; and (3) whether the Defendants failed to pay overtime “willfully.” The Plaintiffs bear the burden of proof on the first and last of these three items, and the Defendants on the second. As the Defendants note, the bulk of the evidence at trial will no doubt relate to the issue on which they bear the burden of proof. This does not mean that the Defendants should automatically be permitted to open and close, however. The Plaintiffs were the parties who were forced to take the initiative to file this lawsuit, the Defendants have vigorously defended it, and only in the last few days have they sought the right to open and close the evidence. Rule 16 makes it clear that these issues should be raised early in the case, not late. See FED. R. CIV. P. 16(c)(2)(A), (D), (N) and (P) (directing courts at the pretrial conference to address, among other things, “formulating and simplifying the issues,” “avoiding unnecessary proof and cumulative evidence,” “ordering the presentation of evidence early in the trial on a manageable issue that might, on the evidence, be the basis for a judgment,” and “facilitating in other ways the just, speedy, and inexpensive disposition of the action”).
The Court has wide discretion on these matters. Moreau v. Oppenheim, 663 F.2d 1300, 1311 (5th Cir.1981) (“The matter of a court’s allocation of the right to open and close … does not go to the merits of a controversy and has long not been the subject of writ of error, even when coupled with the denial of requested party realignment.”) (citing Day v. Woodworth, 54 U.S. 363, 370, 13 How. 363, 14 L.Ed. 181 (1851)). On balance, considering all of the above, the Court believes that it is appropriate to leave the order of proof as is, so that the Plaintiffs shall open and close. Accordingly, the Court DENIES the Defendants’ Motion to Open and Close Evidence and Case (Clerk’s Doc. No. 128).”
Click Ransom v. M. Patel Enters, Inc. to read the entire Order.
Overtime Law Blog 