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M.D.La.: Defendant Not Entitled to FWW in Salary Misclassification Case, Where Failed to Pay Plaintiff “Fixed Salary” as Required by 778.114
McCumber v. Eye Care Center of America, Inc.
This case was before the court on the parties cross-motions seeking summary judgment. As discussed here, the court held that Plaintiff’s unpaid overtime damages, if any, were to be calculated using the FLSA’s default time and a half methodology, rather than the fluctuating workweek (“FWW”) methodology. Although the Defendant claimed it was entitled to use the FWW to calculate Plaintiff’s damages, due to the fact that Plaintiff was salaried misclassified, the court disagreed. The court held that Defendant had failed to pay Plaintiff a “fixed salary” as required for application of 29 C.F.R. § 778.114, because the evidence showed that Defendant docked Plaintiff’s pay on at least 2 occasions when Plaintiff worked fewer than 40 hours in a workweek.
Reviewing the parties’ respective arguments and holding that any damages ultimately found due were to be calculated at time and a half, the court reasoned:
“Defendants’ motion for partial summary judgment seeks judgment in its favor declaring that any wages found to be due plaintiff in this case shall be calculated using the fluctuating workweek method (“FWW method”) pursuant to 29 C.F.R. § 778.114. Subsection (a) of the provision at issue instructs that
‘[a]n employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.’
Under the FWW method, the amount of overtime owed to such an employee is paid at the rate of one-half-time pay, rather than one-and-a-half-time pay. The reason for this is that, according to the salary agreement among the parties, all the hours worked by the employee have already been compensated at straight-time pay and, thus, these hours are only shortchanged by half-time pay, rather than completely uncompensated.
In order to calculate the amount actually due under the FWW method, the fixed weekly salary is divided by the number of hours actually worked in a particular week. The resulting sum is the employee’s “regular rate of pay.” An employee found to be due overtime pay would be paid one half of the regular rate of pay for each hour of overtime worked in that particular week. While the regular rate of pay decreases as hours worked each week increase, the fixed salary must be sufficient such that the regular rate of pay never falls below the minimum wage requirement of 29 U.S.C. § 206(a)(1).
In addition to the requirement that the minimum wage requirement be sustained by the regular rate of pay calculation, the employer who has allegedly misclassified a position as exempt under the FLSA bears the burden of proving that there existed a “clear mutual understanding” among the employer and employee that the fixed weekly salary is compensation for the hours worked in any given workweek, no matter how few or many, in order to impose the FWW method for calculating overtime due.
Defendants argue that “it is undisputed that [p]laintiff was classified as exempt under the FLSA and was paid a fixed salary of $40,000 per year, regardless of the hours he worked.” Defendants point to plaintiff’s testimony that he was “usually paid a set amount in each paycheck” and “often worked before and more often after the time set on the schedule” as evidence that plaintiff and defendants were parties to a “clear mutual understanding” that his salary was fixed, despite his varying hours .
The court has examined plaintiff’s written statement, as cited by defendants, and finds that the citation offered by defendants quotes only a portion of plaintiff’s statement. In its entirety, the passages cited by defendants reads
22. I was usually paid a set amount in each paycheck, plus production and other bonuses.
23. The weekly schedule made by the store manager was the minimum time I was expected to work. I often worked before and more often after the time set on the schedule when there were orders to fill or equipment to maintain or repair, or when I had to drive to one of the other labs in the district to repair or maintain equipment. I was also frequently called in to repair machinery on my days off.
Plaintiff asserts that he was not party to a “clear mutual understanding” as is required for application of the FWW method. Plaintiff points out that, on at least two occasions, his biweekly paycheck was reduced by 8 hours so that he was paid for only 72 hours, though he is usually paid for 80 hours. Plaintiff argues that, pursuant to 29 C.F.R. 778.114(c), the FWW method is inapplicable in the instant case because subsection (c) clearly instructs that the employer must pay the salary agreed to by the parties even when the employee does not work the full number of hours scheduled.
Plaintiff further asserts that ECCA internal policies instruct general managers to assume a 40 hour workweek when scheduling various management personnel to work in their stores. Plaintiff also points to the ECCA policy entitled “Work Schedules and Attendance,” which states that “[t]he normal workweek will consist of forty hours. The normal workday will consist of eight hours of work with an unpaid meal period.” Plaintiff argues that these policies, as well as the documented deductions in his biweekly paychecks demonstrate that defendants expected plaintiff to work a minimum of 40 hours and, in the event he failed to do so and did not claim leave or other holiday to make up for the time, defendants expected not to pay him the full amount of his salary.
The court has reviewed the documentary evidence cited by plaintiff, as well as plaintiff’s statement, cited by defendants and finds that defendants have failed to demonstrate that no genuine dispute exists as to the applicability of the FWW method in this case. In light of the documentary evidence produced by plaintiff, the court finds that plaintiff has demonstrated that, pursuant to 29 C.F.R. 778.114(c), the FWW method is inapplicable to the case at bar. More specifically, the court finds that the check summary documents offered by plaintiff demonstrate that, on two occasions (9/25/2009 and 10/9/2009), plaintiff failed to work the required 80 hours in a designated two-week period and did not claim any holiday or vacation to make up for the shortage in his hours and, accordingly, eight hours worth of pay was deducted from his salary. Thus, no sincere argument may be made by defendants that its intention was to pay plaintiff a set salary regardless of the hours he worked in a given week, as required for application of the FWW method. On the contrary, the evidence before the court demonstrates defendants’ expectation that plaintiff work a minimum of forty hours each week and that he would be compensated only for those hours he worked or for which he claimed holidays or vacation to which he was entitled. Defendants’ motion will be denied as to its request for application of the FWW method in this case and, accordingly, any overtime found by the jury to be owed to plaintiff shall be compensated at the rate of one and one-half times the amount of plaintiff’s regular hourly wage pursuant to 29 C.F.R. 541.207(a)(1).”
Click McCumber v. Eye Care Center of America, Inc. to read the entire Memorandum Ruling.
6th Cir.: Applying “Primary Benefit” Test, Students in Work-Study Program Were Not Employees Under FLSA
Solis v. Laurelbrook Sanitarium and School, Inc.
This case was before the Sixth Circuit on the Secretary of Labor’s appeal of the decision below, holding that the student-workers at Defendant’s sanitarium were not “employees” under the FLSA, and thus, were not entitled to the child labor protections afforded by the FLSA. Of interest here, the Sixth Circuit clarified the test to be used under circumstances where students perform work as part of a work-study program, in which they are not compensated for such work monetarily. After surveying the applicable case law, the DOL’s regulations and its interpretations of same, the court held that the applicable test was the “primary benefit” test. In other words, the issue of whether such student-workers are covered by the FLSA or not turns on whether the “employer” or they themselves derive the “primary benefit” of the work performed. Here, reviewing the specific facts of the case, the Sixth Circuit held that the trial court had properly concluded that the student-workers were non-employees, properly excluded from the coverage of the FLSA.
Describing the general factual background, the court explained:
“In conformity with its beliefs, Laurelbrook operates a boarding school for students in grades nine through twelve, an elementary school for children of staff members, and a 50–bed intermediate-care nursing home that assists in the students’ practical training (the Sanitarium). The school has been approved and accredited by the Tennessee Department of Education since the 1970s. The State of Tennessee accredits certain private schools through independent authorized accrediting agencies. The E.A. Sutherland Education Association (EASEA) is one such agency, whose purpose is to consider and adjudicate requests for accreditation from self-supporting (as opposed to denominational) schools, like Laurelbrook, which are operated by members of the Seventh–Day Adventist Church. Laurelbrook is currently accredited through EASEA.”
After surveying the applicable law and deeming the “primary benefit” test to be the proper test for determining whether the student-workers were employees, the court reasoned the student-workers here were not “employees” under the FLSA:
“In applying the primary benefit test, the district court recognized that students’ activities at Laurelbrook contribute to Laurelbrook’s maintenance, thereby benefitting Laurelbrook’s operations. Laurelbrook receives payment for services it provides to patients at the Sanitarium; some of these services are performed by students at no cost to Laurelbrook. Hours worked by students in the Sanitarium also contribute to the Sanitarium’s satisfaction of its licensing requirements. Laurelbrook sells flowers and produce grown at Laurelbrook with student help. The proceeds from these sales go directly to Laurelbrook’s operations. As part of a course on collision repair, students assist in repairing cars for the public. Beneficiaries of these services pay Laurelbrook directly and the money is recycled back into school programs. Laurelbrook also earns revenue from the sale of wood pallets the students help build.
The value of these benefits to Laurelbrook, however, is offset in various ways. The district court found that Laurelbrook students do not displace compensated workers, and instructors must spend extra time supervising the students at the expense of performing productive work. Specifically, the court found that Laurelbrook is sufficiently staffed such that if the students did not perform work at the Sanitarium, the staff members could continue to provide the same services there without interruption. And while not specifically mentioned by the district court in its findings, there was evidence at trial that the same was also true of the work performed by students outside the Sanitarium. There was also testimony that, were it not for the instructors’ supervisory responsibilities, instructors would be able to complete more productive tasks in less time. Moreover, as the district court found, Laurelbrook is not in competition with other institutions for labor, so Laurelbrook does not enjoy an unfair advantage over other institutions by reason of work performed by its students…
Students do not receive wages for duties they perform. They are not entitled to a job with Laurelbrook upon graduation, and are expected to move on after graduation.”
On the other side of the ledger are the tangible and intangible benefits that accrue to the students. The district court found that Laurelbrook provides it students with significant tangible benefits. Students are provided with hands-on training comparable to training provided in public school vocational courses, allowing them to be competitive in various vocations upon graduation. Students learn to operate tools normally used in the trades they are learning, while being supervised by instructors. Students engage in courses of study that have been considered and approved of by the state accrediting agency. In short, the educational aspect of the instruction at Laurelbrook is sound, in contrast to the training program at issue in Baptist Hospital, where the supervision was inadequate, the exposure to various aspects of the trade limited, and the overall value to the students nil. None of these educational shortcomings is present here. Indeed, the Tennessee Department of Education, through EASEA, has determined that Laurelbrook’s vocational program provides benefits to the students sufficient to warrant accreditation.
Significant, too, are the intangible benefits students receive at Laurelbrook. As the district court found, receiving a well-rounded education—one that includes hands-on, practical training—is a tenet of the Seventh–Day Adventist Church. Laurelbrook provides students with the opportunity to obtain such an education in an environment consistent with their beliefs. The district court found that the vocational training portion of the education teaches students about responsibility and the dignity of manual labor. Thought not mentioned in the district court’s opinion, there is ample evidentiary support for these findings. Parents testified to the benefits their children received from the program, stating that the students learn the importance of working hard and seeing a task through to completion. Some parents testified that their children have become more responsible and have taken on leadership roles since participating in Laurelbrook’s program. Service in the Sanitarium engenders sensitivity and respect for the elderly and infirm. Laurelbrook alumni testified that the leadership skills and work ethic developed at Laurelbrook have proved highly valuable in their future endeavors. Employers also testified that Laurelbrook alumni have a strong work ethic, leadership skills, and other practical skills that graduates of other vocational programs lack.
The Secretary discounts the value of these intangible benefits, but we agree with the district court that they are of significant value. Courts that have addressed the value of such benefits have likewise concluded that they are significant enough to tip the scale of primary benefit in the students’ favor even where the school receives tangible benefits from the students’ activities. See, e.g., Blair, 420 F.3d at 829; Woods, 400 F.Supp.2d at 1166; Bobilin, 403 F.Supp. at 1108. The overall value of broad educational benefits should not be discounted simply because they are intangible.
After considering all of the evidence, the district court found that there is benefit to Laurelbrook’s operations from the students’ activities, but the primary benefit of the program runs to the students. We find no error in the district court’s application of the primary benefit test.”
Click Solis v. Laurelbrook Sanitarium & School to read the entire opinion.
8th Cir.: DOL’s 20% Rule, As Applicable to Tipped Employees Entitled to “Chevron” Deference; Relaxed Evidentiary Burden on Employees, Where Employer Failed to Maintain Proper Records Distinguishing Between Tipped and Non-Tipped Duties
Fast v. Applebee’s International, Inc.
This case was before the Eighth Circuit on Applebee’s interlocutory appeal of the district court’s denial of its motion for summary judgment. The primary issue in the case was how to properly apply the “tip credit” to employees whom both sides agree are “tipped employees” but who perform both tipped and non-tipped (dual) jobs for the employer. Relying on 29 C.F.R. § 531.56(e), the district court applied the so-called 20% rule promulgated by the D.O.L., requiring an employer to pay a tipped employee regular minimum wage to employees who spend more than 20% of their work time in a given week performing non-tipped duties. Applebee’s challenged the ruling and asserted that the “dual job” regulations were inconsistent with 29 U.S.C. § 203(m) or the FLSA. Affirming the decision below, the Eighth Circuit held that the D.O.L.’s regulations were entitled to “Chevron” deference and explained:
“Applebee’s argues that neither the statute nor the regulation places a quantitative limit on the amount of time a tipped employee can spend performing duties related to her tipped occupation (but not themselves tip producing) as long as the total tips received plus the cash wages equal or exceed the minimum wage. The regulation, to which we owe Chevron deference, makes a distinction between an employee performing two distinct jobs, one tipped and one not, and an employee performing related duties within an occupation “part of [the] time” and “occasionally.” § 531.56(e). By using the terms “part of [the] time” and “occasionally,” the regulation clearly places a temporal limit on the amount of related duties an employee can perform and still be considered to be engaged in the tip-producing occupation. “Occasionally” is defined as “now and then; here and there; sometimes.” Webster’s Third New Int’l Unabridged Dictionary 1560 (1986); see also United States v. Hackman, 630 F.3d 1078, 1083 (8th Cir. 2011) (using dictionary to determine ordinary meaning of a term used in the commentary to the United States Sentencing Guidelines). The term “occasional” is also used in other contexts within the FLSA, such as in § 207, which allows a government employee to work “on an occasional or sporadic basis” in a different capacity from his regular employment without the occasional work hours being added to the regular work hours for calculating overtime compensation. See 29 U.S.C. § 207(p)(2). The DOL’s regulation defines occasional or sporadic to mean “infrequent, irregular, or occurring in scattered instances.” 29 C.F.R. § 553.30(b)(1). Thus, the DOL’s regulations consistently place temporal limits on regulations dealing with the term “occasional.”
A temporal limitation is also consistent with the majority of cases that address duties related to a tipped occupation. The length of time an employee spends performing a particular “occupation” has been considered relevant in many cases. For example, even when the nontip-producing duties are related to a tipped occupation, if they are performed for an entire shift, the employee is not engaged in a tipped occupation and is not subject to the tip credit for that shift. See, e.g., Myers v. Copper Cellar Corp., 192 F.3d 546, 549-50 (6th Cir. 1999) (noting that 29 C.F.R. § 531.56(e) “illustrat[es] that an employee who discharges distinct duties on diverse work shifts may qualify as a tipped employee during one shift” but not the other and holding that servers who spent entire shifts working as “salad preparers” were employed in dual jobs, even though servers prepared the very same salads when no salad preparer was on duty, such that including salad preparers in a tip pool invalidated the pool); Roussell v. Brinker Int’l, Inc., No. 05-3733, 2008 WL 2714079, **12-13 (S.D. Tex. 2008) (employees who worked entire shift in Quality Assurance (QA) were not tipped employees eligible to be included in tip pool even though servers performed QA duties on shifts when no QA was working; court “agrees that such work likely can be considered incidental to a server’s job when performed intermittently,” but distinguished full shifts). The same is true of nontipped duties performed during distinct periods of time, such as before opening or after closing. See Dole v. Bishop, 740 F. Supp. 1221, 1228 (S.D. Miss. 1990) (“Because [the] cleaning and food preparation duties [performed for substantial periods of time before the restaurant opened] were not incidental to the waitresses’ tipped duties, the waitresses were entitled to the full statutory minimum wage during these periods of time.”). Conversely, where the related duties are performed intermittently and as part of the primary occupation, the duties are subject to the tip credit. See, e.g., Pellon v. Bus. Representation Int’l, Inc., 528 F. Supp. 2d 1306, 1313 (S.D. Fla. 2007) (rejecting skycap employees’ challenge to use of the tip credit where “the tasks that allegedly violate the minimum wage are intertwined with direct tip-producing tasks throughout the day”), aff’d, 291 F. Appx. 310 (11th Cir. 2008).
Because the regulations do not define “occasionally” or “part of [the] time” for purposes of § 531.56(e), the regulation is ambiguous, and the ambiguity supports the DOL’s attempt to further interpret the regulation. See Auer, 519 U.S. at 461. We believe that the DOL’s interpretation contained in the Handbook—which concludes that employees who spend “substantial time” (defined as more than 20 percent) performing related but nontipped duties should be paid at the full minimum wage for that time without the tip credit—is a reasonable interpretation of the regulation. It certainly is not “clearly erroneous or inconsistent with the regulation.” Id. The regulation places a temporal limit on the amount of related nontipped work an employee can do and still be considered to be performing a tipped occupation. The DOL has used a 20 percent threshold to delineate the line between substantial and nonsubstantial work in various contexts within the FLSA. For example, an “employee employed as seaman on a vessel other than an American vessel” is not entitled to the protection of the minimum wage or overtime provisions of the FLSA. See 29 U.S.C. § 213(a)(12). The DOL recognized that seamen serving on such a vessel sometimes perform nonseaman work, to which the FLSA provisions do apply, and it adopted a regulation that provides that a seaman is employed as an exempt seaman even if he performs nonseaman work, as long as the work “is not substantial in amount.” 29 C.F.R. § 783.37. “[S]uch differing work is ‘substantial’ if it occupies more than 20 percent of the time worked by the employee during the workweek.” Id. Similarly, an employee employed in fire protection or law enforcement activities may perform nonexempt work without defeating the overtime exemption in 29 U.S.C. § 207(k) unless the nonexempt work “exceeds 20 percent of the total hours worked by that employee during the workweek.” 29 C.F.R. § 553.212(a). And an individual providing companionship services as defined in 29 U.S.C. § 213(a)(15) does not defeat the exemption from overtime pay for that category of employee by performing general household work as long as “such work is incidental, i.e., does not exceed 20 percent of the total weekly hours worked.” 29 C.F.R. § 552.6. The 20 percent threshold used by the DOL in its Handbook is not inconsistent with § 531.56(e) and is a reasonable interpretation of the terms “part of [the] time” and “occasionally” used in that regulation.”
Determining that the issue was not properly before it, the court declined to answer the question of what duties are incidental to the tipped employee duties and what duties are not, stating:
“We note that the parties dispute which specific duties are subject to the 20 percent limit for related duties in a tipped occupation and which duties are the tip producing part of the server’s or bartender’s tipped occupation itself. The regulation lists activities such as “cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses” as “related duties in . . . a tipped occupation.” § 531.56(e). The Handbook repeats these examples and states that the 20 percent limit applies to “general preparation work or maintenance.” (Appellant’s Add. at 32, DOL Handbook § 30d00(e).) Although the district court stated that “it was for the Court to decide what duties comprise the occupation of a server or bartender” (Dist. Ct. Order at 6 n.3), the order under review did not do so and concluded only that “[e]mployees may be paid the tipped wage rate for performing general preparation and maintenance duties, so long as those duties consume no more than twenty percent of the employees’ working time” (id. at 15). To the extent that questions remain concerning which duties the 20 percent rule applies to, those issues are beyond the scope of this interlocutory appeal, and we do not address them. We hold only that the district court properly concluded that the Handbook’s interpretation of § 531.56(e) governs this case.”
Lastly, citing the Supreme Court’s Mt. Clemens decision, the court held that the “recordkeeping rule” applies in situations where the employer fails to maintain sufficient records to distinguish between time spent performing tipped duties and non-tipped duties.
Click Fast v. Applebee’s International, Inc. to read the entire decision.
M.D.Fla.: Employer Not Entitled to Offset Unpaid Overtime Damages Based on Provision of Car, Car Insurance, Gasoline, or a Cell Phone It Provided
Vancamper v. Rental World, Inc.
This case was before the court on plaintiff’s motion for summary judgment. Among the issues of interest ruled upon, the court held that plaintiff’s pre-arranged shuttling of defendants’ clients to and from the airport to defendants’ rental office for pre-arranged rental of defendant’s cars and the cleaning of such cars, satisfied the individual coverage test of the FLSA. As discussed here, the court also addressed defendants’ argument that it should be entitled to offset plaintiff’s minimum wage and overtime damages, if any, due to its provision of a car, car insurance, gasoline and cell phone to plaintiff, during his employment. Holding that such offsets are impermissible under the FLSA, the court explained:
“The parties dispute whether Vancamper’s use of a car, car insurance, gasoline, and a cellular phone provided by Rental World offset the overtime compensation that Rental World owed Vancamper as permitted by 29 U.S.C. § 207(h)(2). (Doc. No. 27 at 14; Doc. No. 33 at 5–6.) The Defendants bear the burden of establishing a credit for overtime compensation under Section 207(h)(2). See Leonard, 614 F.Supp. at 1187 (noting that an employer bears the burden of establishing a credit under 29 U.S.C. § 203(m) against the overtime owed to an employee (citing Donovan, 676 F.2d at 473–76)).
Under Section 207(h)(2), the forms of compensation described in 29 U.S.C. § 207(e)(5)-(7) are creditable toward overtime compensation. Those forms of compensation are as follows:
(5) extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee under subsection (a) of this section or in excess of the employee’s normal working hours or regular working hours, as the case may be;
(6) extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days;
(7) extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section, where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek;
These provisions plainly contemplate a dollar-for-dollar credit against overtime pay for premium pay awarded on particular days and times. Wheeler v. Hampton Twp., 339 F.3d 238, 245 (3d Cir.2005). The parties do not cite, and the Court does not find, any authority that these provisions encompass use of a car, car insurance, gasoline, or a cellular phone provided by an employer. Moreover, because Vancamper’s uncontroverted time sheets show that he was never paid extra compensation for working during the periods described in Section 207(e)(5)-(7), (Doc. No. 27–5 at 1–102), Defendants are not entitled to any overtime credit under Section 207(h)(2).”
Click Vancamper v. Rental World, Inc. to read the entire order.
S.D.N.Y.: Although Elements of First-Filed Rule Satisfied, Court Declines to Transfer Second-Filed Case Due to Lack of Progress of First-Filed Case
Pippins v. KPMG LLP
This case was before the court on defendant’s motions to dismiss the case under the first-filed rule, or in the alternative to transfer the case to the site of the first-filed case, as well as defendant’s motion to stay the case, pending the outcome of a related appeal in the first-filed case. Citing the lack of progress in the first-filed case, the court denied the motions, although acknowledging that the underlying elements necessary for application of the first-filed rule were present.
The court reasoned:
“KPMG has met its burden of showing that the first-filed rule applies in this case by demonstrating that the Present Action and the California Action are nearly identical; however, due to the extensive delay in the California Action, the application of the first-filed rule is diminished.
Since the actions include the same parties and claims, the first-filed rule applies. However, application of the first-filed rule is diminished where there has been little progress in the first-filed action. Am. S.S. Owners Mut. Prot. & Indem. Ass’n, Inc. v. Lafarge N. Am., Inc., 474 F.Supp.2d 474, 489 (S.D.N.Y.2007), aff’d sub nom, N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am ., Inc., 599 F.3d 102 (2d Cir.2010); see Raytheon Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 306 F.Supp.2d 346, 352–53 (S.D.N.Y.2004). This case was filed by the California Plaintiffs in 2007. Since that time there has been no significant movement in the case, (Swartz Decl. Ex. 2.) and there has been no movement since the case was stayed in 2009 pending the outcome of Campbell by the Ninth Circuit. Thus, the presumption afforded the California Action is diminished here. If Plaintiffs can show the balance of convenience tilts even slightly in their favor, there is no reason for this court to transfer the action.
Plaintiffs have not identified any “special circumstances” that warrant deviation from the first-filed rule. However, the balance of convenience factors weigh in favor of maintaining this action in the Southern District of New York.”
The court also denied defendant’s motion for a stay, pending the outcome of a related appeal in the Ninth Circuit, noting:
“The first three factors are similar to those considered in the “first-filed” analysis, so those factors weigh in favor of proceeding with this action. The interests of the persons not parties to the civil litigation and the public interest also weigh in favor of denying Defendant’s motion to stay the action. As a collective action, the statute of limitations for opt-in plaintiffs continues to run until the plaintiffs opt-in to the action. 29 U.S.C. § 216(b); Hoffman v. Sbarro, Inc., 982 F.Supp. 249, 260 (S.D.N . Y.1997) (Sotomayor, J.). The FLSA has a statute of limitations of three years, two if “willfulness” is not found. Any further delay could prejudice the interests of potential opt-in plaintiffs, whose claims may stale. Public interest also favors the swift resolution of claims alleging violations of the FLSA.”
S.D.Fla.: Employer Need Not Pay Employee MW For All Hours Worked to Take Advantage of Tip Credit
Goldin v. Boce Group, L.C.
This case was before the court on defendant’s motion to dismiss, for failure to state a claim. The plaintiff’s theory of relief for minimum wage violations arose from the fact that while he worked 51 hours per week, each week, Defendants paid Plaintiff the required reduced minimum wage for only forty hours, and failed to pay him at all for the additional eleven hours of overtime. Plaintiff claimed that because Defendants “did not pay Plaintiff the required amount for every hour he worked,” they were not permitted to take advantage of the tip credit at all and must disgorge the entire tip credit. Inasmuch as the FLSA requires that employers who seek to take the tip credit must pay tipped minimum wage in order to do so, this theory would seem to make perfect sense, however the court disagreed and dismissed the case.
The court reasoned:
“There is no basis in the FLSA for the relief Plaintiff seeks. The FLSA clearly lays out the prerequisites an employer must meet in order to claim the tip credit. There are only two: (1) the employer must inform the employee that the employee will be paid the reduced minimum wage; and (2) all tips received by the employee must be retained by the employee. 29 U.S.C. § 203(m). There is no “condition precedent” that the reduced cash wage be paid for every hour worked before an employer is entitled to claim the statutorily-mandated tip credit. See id. Congress could, and did, write into the FLSA express conditions precedent to the application of the tip credit. The Court declines to read a condition precedent into the statute where Congress did not create one. In re Tennyson, 611 F.3d 873, 877 (11th Cir.2010) (stating that where statute is “clear, unambiguous, and does not result in any absurd consequences,” the Court “will not … read into the text of the statute an unstated purpose.”).
In addition, the FLSA very clearly lays out the remedies available to employees who are subject to FLSA violations by employers. Successful FLSA plaintiffs are entitled to recover “the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and [ ] an additional equal amount as liquidated damages.” 29 U.S.C. § 216(b). Congress wrote specific remedies into the statute. Congress did not choose to include as a remedy disgorgement of the tip credit where the plaintiff is a tipped employee. The Court will not write this additional remedy into the statute where Congress did not see fit to do so. See In re Tennyson, 611 F.3d at 877.
In addition, two other divisions of court in this District have rejected Plaintiff’s theory on almost identical facts. See Muldowney v. Mac Acquisition, LLC, Case No. 09–22489–CIV, 2010 WL 520912 (S.D.Fla. Feb. 9, 2010) (Huck, J.); Perez v. Palermo Seafood, Inc., Case No. 07–21408–CIV, 2008 WL 7505704 (S.D.Fla. May 8, 2008) (O’Sullivan, M.J.). In both cases, a tipped employee who was paid the reduced minimum wage for some hours claimed their employers were not entitled to claim the tip credit because they were not paid for “off-the-clock work.”
In Palermo Seafood, Magistrate Judge O’Sullivan found no textual support in the statute for the plaintiff’s position, observing: “The cases that have disallowed the tip credit have done so because the employer failed to comply with one, or both, of the following requirements: (1) the employee receive proper notice of the tip credit and (2) that the employee is not required to share his or her tips with non-tipped employees.” 2008 WL 7505704 at *2. Accordingly, Judge O’Sullivan found tip credit should apply to the plaintiff’s regular shift hours, for which she was compensated at the reduced minimum wage. Id. at *1.
In Muldowney, Judge Huck came to the same conclusion:
Section 203(m) merely prescribes the method for calculating a tipped employee’s wages and sets forth two explicit requirements that must be met for an employer to claim the tip credit, both of which are satisfied in this case. The statute says nothing about unpaid wages due to off-the-clock hours. Further, by rejecting Plaintiff’s interpretation, she is not left without a remedy: she can seek unpaid wages for her alleged off-the-clock hours under state law or other sections of the FLSA. Therefore, the Court finds that Defendants are entitled to the tip credit for hours where Plaintiff was paid the specified reduced cash wage.2010 WL 520912 at *1.
The Court agrees with these two well-reasoned decisions. However, this does not mean, as Plaintiff argues, that employers are therefore not required to pay employees the minimum wage for every hour worked. Of course employers must compensate employees at the required rate for every hour worked, and of course the failure to do so is a violation of the FLSA. 29 U.S.C. § 206(a)(1) (providing minimum wage amounts); 29 U.S.C. § 215(a)(2) (creating cause of action for violation of minimum wage and overtime provisions).”
It should be noted that this decision and the 2 decisions on which it relies were all rendered in the Southern District of Florida. As tipped employee cases continue to become more and more prevalent though, as a result of tremendous amount of abuses of tipped workers in various industries, it will be interesting to see if courts outside of the Southern District of Florida have a different take, based on the text of 203(m).
Click Goldin v. Boce Group, L.C. to read the entire order.
D.Mass.: FLSA Defendant Not Entitled to Discovery of Plaintiff’s Immigration Status
Jin-Ming Lin v. Chinatown Restaurant Corp.
This case was before the court on the parties cross-motions to compel discovery. It appears that, as often occurs, the defendant was all too happy to employ plaintiff, an undocumented immigrant, prior to plaintiff’s filing of his FLSA case. However, once the FLSA case was filed, the employer sought to fight the FLSA claim on the basis of plaintiff’s immigration status. As discussed here, the court denied defendant’s motion to compel discovery of plaintiff’s immigration status. Apparently this was an issue of first impression in the First Circuit, as the court noted that no prior court within the First Circuit had decided this hot-button issue. While the court reached the same conclusion as most- that such information was irrelevant, because FLSA rights are absolute, regardless of immigration status- it noted that it’s reasoning was divergent from the majority of courts.
Denying the defendant’s motion and noting that such information was irrelevant to a case under the FLSA, the court reasoned:
“Nonetheless, while I find the reasoning advanced by other courts in holding that illegal aliens may recover for unpaid wages under the FLSA to be insufficient, I come to the same ultimate conclusion for a different reason that has not, so far as I know, yet been relied on. Awards for back pay under the NLRA, at issue in Hoffman, are discretionary. See 29 U.S.C. § 160(c) (Courts may order “reinstatement of employees with or without back pay ….”); see also NLRB v. Harding Glass Co., 500 F.3d 1, 8 (1st Cir.2007) (NLRB has “broad remedial powers” under 29 U.S.C. § 160(c) including “discretion both to determine that back pay is appropriate … and to compute the back pay amount.”). As Hoffman recognized, agencies are required to exercise their discretion in light of other federal policies. 535 U.S. at 146 (“In devising remedies for unfair labor practices, the Board is obliged to take into account [other] equally important Congressional objective[s].”) (internal quotation omitted). This basic tenet of administrative law is what first prompted the Court in Hoffman to look at federal immigration policy as a limit on the NLRB’s authority and discretion to award back pay in the circumstances. See id. at 143-44.
In contrast, awards for unpaid wages under the FLSA are not discretionary, but rather a matter of statutory entitlement when the necessary factual predicate has been established. 29 U.S.C. § 216(b) (“Any employer who violates the [minimum wage or overtime provisions of the FLSA] shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation.”) (emphasis added). Courts do not have discretion to deny the award of FLSA damages when they have been proved. Adjudication of an FLSA cause of action does not call upon the court to make a discretionary policy- or interest-balancing assessment. See Keith Cunningham-Parmeter, Redefining the Rights of Undocumented Workers, 58 Am. U.L.Rev. 1361, 1389 (2009) (remarking that the nondiscretionary nature of back pay under the FLSA “leaves no room for any type of Hoffman-inspired balancing between federal labor and immigration objectives”).
Of course, the tension between policies underlying the FLSA, on the one hand, and the IRCA, on the other, continues to exist. In Hoffman, the Court was able to find a resolution by giving priority to the statutory policy of the IRCA over the administrative discretion of the NLRB. That resolution is not possible where both poles of the conflict are statutory directives. A court entertaining an FLSA suit lacks the authority or discretion to resolve the tension. If a plaintiff makes out an FLSA case, he is entitled to an FLSA remedy, any obstruction or interference with immigration policy notwithstanding. As Judge Walker of the Second Circuit noted, after that circuit tackled a particularly confounding case of conflict preemption under Hoffman, “judges are especially ill-suited to divining the unexpressed will of Congress when it comes to hot-button and ever-shifting issues like immigration policy.” Madeira, 469 F.3d at 254 (Walker, C.J., concurring). Any remedy for an incompatibility between federal labor and immigration policies will have to come from Congress, not the lower courts.
For the foregoing reasons, the plaintiffs’ immigration status is irrelevant to their FLSA claims and their suitability to lead a class. The defendants’ motions to compel (dkt. nos. 28 & 29) are DENIED.”
Click Jin-Ming Lin v. Chinatown Restaurant Corp. to read the entire decision.
D.Mass.: Offsets to Unpaid Overtime, Pursuant to § 207(h)(2) of FLSA, Attributable Only to Singular Workweeks in Which Both Premiums and Overtime Earned Simultaneously
Rudy v. City of Lowell
This case was before court on defendant’s motion for summary judgment, as to the methodology applicable to calculate plaintiff’s damages. The interesting, but rarely raised issue: to the extent that the employer is entitled to an offset for certain premium compensation paid to the employee, to what extent can that offset reduce the unpaid overtime wage damages sought by the employee? Holding that such offsets are only applicable in singular workweeks (i.e. they may only be taken in the week in which the payment giving rise to the offset occurred), the court explained:
“Section 207(h) (2) of the FLSA provides that extra compensation paid as described in paragraphs (5), (6), and (7) of subsection (e) of this section shall be creditable toward overtime compensation payable pursuant to this section.
29 U.S.C. § 207(h)(2). Only the “premium” portion of the contractual overtime rate (the extra one-half on top of the regular rate) may be used to offset the defendant’s statutory overtime liability. O’Brien v. Town of Agawam, 350 F.3d 279, 289 (1st Cir.2003) (“O’Brien I” ).
Here, the CBA allows employees to treat certain non-work days such as vacation, sick and personal days as hours actually worked for the purpose of determining overtime hours. The City also pays some workers time and one-half for working on holidays. The parties do not dispute that the extra compensation provided for in the plaintiffs’ CBA falls within the compensation described in subsection (5), (6) and (7) and can be used to offset defendant’s underpayment, pursuant to § 207(h)(2).
The parties do dispute, however, whether premium compensation earned in one week can be used to offset an underpayment in a different week. Plaintiffs argue that their damages for unpaid overtime should be calculated on a workweek basis and that any offsets pursuant to § 207(h)(2) may only be attributed to the singular workweeks in which the premiums and overtime were earned. In other words, an underpayment one week cannot be offset by a premium payment made in a different week. The defendant contends, to the contrary, that it is entitled to a “cumulative offset”, consisting of all premium payments, against any FLSA overtime it owes, regardless of when the premium payments were earned or made.
The FLSA does not provide an explicit answer to this difference of interpretation and the United States Circuit Courts have taken divergent positions. Some courts have held that § 207(h) offsets should be calculated on a workweek basis. Herman v. Fabri-Centers of Am., Inc., 308 F.3d 580, 585-93 (6th Cir.2002); Howard v. City of Springfield, 274 F.3d 1141, 1147-49 (7th Cir.2001); Roland Elec. Co. v. Black, 163 F.2d 417, 420 (4th Cir.1947); Conzo v. City of New York, 667 F.Supp.2d 279, 291 (S.D.N.Y.2009); Bell v. Iowa Turkey Growers Co-op., 407 F.Supp.2d 1051, 1063 (S.D.Iowa 2006); Nolan v. City of Chicago, 125 F.2d 324, 331 (N.D.Ill.2000). Other courts have allowed defendants to apply a cumulative offset. Singer v. City of Waco, 324 F.3d 813, 826-28 (5th Cir.2003); Kohlheim v. Glynn County, 915 F.2d 1473, 1481 (11th Cir.1990).
The First Circuit has not directly addressed this issue but other sessions in this District have. In O’Brien v. Town of Agawam, United States District Judge Michael A. Ponsor addressed facts analogous to those at bar and held that the employer could apply a cumulative offset. 491 F.Supp.2d 170, 176 (D.Mass.2007) (“O’Brien II” ). The Court surmised that the First Circuit would hold accordingly given its holding in Lupien v. City of Marlborough. Id. at 175. In Lupien, the employer’s practice of compensating employees for overtime by use of compensatory time (“comp time”), instead of in cash, violated the FLSA. 387 F.3d 83 (1st Cir.2004). With respect to damages, the First Circuit held that the employer did not have to pay its employees for overtime hours for which the employee had used comp time, regardless of when the employee used the comp time. The Court reasoned that paying the employees for overtime hours for which they had used comp time would result in double payment for the same overtime hours. In Murphy v. Town of Natick, another case analogous to this one, United States District Judge Richard G. Stearns agreed with the holding in O’Brien II and also allowed defendants to apply a cumulative offset. 516 F.Supp.2d 153, 160-61 (D.Mass.2007).
Although the two cases in this District are directly analogous to this case, the Court disagrees with them with respect to their interpretation of the FLSA and of Lupien. A further analysis of the Lupien case, the purpose of the FLSA and its interpretation by the Department of Labor (“the DOL”) and the First Circuit’s language in O’Brien I all undermine the position adopted by the courts in O’Brien II and Murphy. Rather, they lead to the conclusion that § 207(h)(2) offsets should be calculated on a workweek basis for the following reasons:
1. This case is distinguishable from Lupien and other First Circuit case law indicates support for a workweek offset model. Lupien dealt with an application of § 207(o) (regulating the use of compensatory time), not § 207(h). In fact, § 207(h) is not referred to in that opinion. Furthermore, here, the employees were not given the option of taking comp time rather than overtime payments. Thus, there is no risk in our case, as there was in Lupien, that the plaintiffs will be compensated twice for the same hours. Thus, the Court concludes that the First Circuit’s decision in Lupien does not indicate how it would decide the question at bar.
More on point is the First Circuit’s discussion of § 207(h)(2) in O’Brien I, in which it stated that
The regulations specifically explain how to treat such mid-workweek contractual overtime payments under the Act: only the premium portion of the contractual overtime rate (that is, the amount in excess of the employee’s regular rate) is deemed “overtime” pay and may be offset against any statutory overtime liability in the same week. O’Brien I, 350 F.3d at 289 (citing 29 C.F.R. §§ 778.201(a), 202(a)) (emphasis added). Thus, although not resolving the offset issue in that decision, the First Circuit conveyed its inclination by specifying that offsets pursuant to § 207(h)(2) would apply “in the same week”.
2. The FLSA overtime requirement uses a single workweek as its basic unit of measurement. Scott v. City of New York, 592 F.Supp.2d 475, 484 (S.D.N.Y.2008). Section 207(a)(1) sets forth the basic overtime rule:
no employer shall employ any of his employees … for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.
The focus on the unitary workweek is prevalent throughout § 207 and the DOL’s interpretation of that section. For example, 29 C.F.R. § 778.103 directs employers to calculate overtime liability on a weekly basis. Further, 29 C.F.R. § 778.104 provides that “[t]he Act takes a single workweek as its standard” and an employer cannot average the number of hours an employee worked in two weeks in order to avoid paying overtime:
[I]f an employee works 30 hours one week and 50 hours the next, he must receive overtime compensation for the overtime hours worked beyond the applicable maximum in the second week, even though the average number of hours worked in the 2 weeks is 40.
It is clear from § 778.104 that cumulative offsets were not contemplated by the DOL. In addition, where the single workweek model is problematic, i.e. when applied to firefighters and law enforcement officers, the FLSA includes a very specific and limited exception. See 29 U.S.C. § 207(k).
With regard to the exact issue before the Court, 29 C.F.R. § 778.202(c) explains that credits pursuant to § 207(h) may be given for overtime due “in that workweek”. See Howard, 274 F.3d at 1148-49; Conzo, 667 F.Supp.2d at 290. Finally, and perhaps most importantly, the DOL has also issued an opinion letter stating that surplus overtime premium payments, which may be credited against overtime1 pay pursuant to section 7(h) of FLSA, may not be carried forward or applied retroactively to satisfy an employer’s overtime pay obligation in future or past pay periods.
Letter from Herbert J. Cohen, Deputy Administrator, U.S. Dep’t of Labor, WH-526, 1985 WL 304329 (Dec. 23, 1985).
3. Overtime payments are intended to be paid as soon as is practicable. Although they are not entitled to deference by this Court, several of the DOL’s official interpretations of § 207 demonstrate the FLSA’s emphasis on ensuring that overtime payments are made soon after they are earned. Howard, 274 F.3d at 1148. For instance, 29 C.F.R. § 778.106 provides that overtime payments need not be paid weekly but must be paid as soon as is practicable:
Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made. See also Nolan, 125 F.Supp.2d at 332 (discussing 29 C.F.R. § 778.106 and holding that offsets for overtime paid apply on a pay period basis).
The reason for requiring employers to calculate and make overtime payments as soon as practicable is obvious: employees are entitled to know how much they will be paid and to prompt payment of what they have earned. As poignantly stated by the Seventh Circuit in Howard v. City of Springfield, if § 207(h)(2) were to permit a cumulative offset, employers could withhold overtime earnings in order to offset them against potential “short” weeks in the future. 274 F.3d at 1148-49. Under such a model, an employee’s overtime payments could be put on hold indefinitely until the employer is either willing or compelled to pay. That outcome is not only illogical but also contradicts the FLSA’s focus on the workweek as a unit and its concern with prompt overtime payments.
In fact, this case uniquely illustrates why a workweek offset is appropriate: if the City had correctly calculated its overtime rate and applied the § 207(h)(2) offsets contemporaneously, it would not have been able to apply those offsets to obligations incurred one or two years later. See id. at 1148. The workweek method of calculating offsets most closely reproduces what the parties would be entitled to had there been no error in the City’s initial computation of its overtime liability. See Nolan, 125 F.Supp.2d at 333.
4. The purpose of the FLSA, to protect workers from “excessive work hours and substandard wages”, is best served by the workweek offset model. Howard, 274 F.3d at 1148; see Herman, 308 F.3d at 585-93. This was clearly articulated in Scott v. City of New York, in which the DOL advocated for the workweek offset model. 592 F.Supp.2d at 484. The District Court in that case found that “both the structure of the Act and its legislative history lend credence to DoL’s interpretation.” Id. The Court explained how a cumulative offset undermines the protections afforded by the FLSA:
The [overtime] requirement protects workers from the imposition of excessive hours by placing an immediate cost on the employer. If employers were allowed to bank credit for contractual overtime against future obligations to pay statutory overtime, it would place workers in the employer’s debt[.] Id. In essence, it would require employees to work large blocks of overtime without premium compensation.
5. Finally, the arguments for applying a cumulative offset are unpersuasive. The City claims that a workweek offset will result in a windfall to the employees but that seems implausible given the fact that, if the City had been correctly calculating its overtime rate and applying the § 207(h)(2) offset at every pay period, the offset would have been applied only to the overtime liability in that pay period. Moreover, the circuit court cases cited by the City do not provide support for a cumulative offset. In Singer v. City of Waco, 324 F.3d at 827, the Fifth Circuit held that § 207(h) was inapplicable, while in Kohlheim v. Glynn County, 915 F.2d at 1481, the Eleventh Circuit did not even explain why it allowed a cumulative offset.
In summary, the Court finds that the plaintiffs’ method of calculating damages is most compatible with both the language and purpose of the FLSA’s overtime requirements and the First Circuit’s understanding of those requirements. As such, the plaintiffs’ damages for unpaid overtime should be calculated on a workweek basis and any offsets pursuant to § 207(h)(2) should be attributed only to the singular workweeks in which both premiums and overtime were earned. The Court concludes that only the premium portions of the extra payments, i.e. the extra one-half of the regular rate, may be used to offset the City’s overtime liability. O’Brien II, 491 F.Supp.2d at 176.”
Click Rudy v. City of Lowell to read the entire order.
S.D.Ind.: FLSA Defendant Not Entitled to Discovery of Plaintiff’s Attorney’s Billing Records, Until Such Time Plaintiff Is “Prevailing Party”
Johnson v. Bridges of Indiana, Inc.
This case was before the court on the defendant’s motion to compel discovery of plaintiff’s attorney’s billing records. In denying the motion, the court noted that only a “prevailing” plaintiff is entitled to attorney’s fees. As such, the request was premature.
Denying the motion to compel, the court explained:
“The FLSA directs courts to award reasonable attorneys’ fees and costs to prevailing plaintiffs.” Spegon v. Catholic Bishop of Chicago, 175 F.3d 544, 550 (7th Cir.1999) (emphasis added). Federal Rule of Civil Procedure 54(d)(2) and the common practice in this District requires the court to establish an appropriate fee after the Plaintiff has prevailed at trial. Plaintiff has not yet, and may never, become a “prevailing plaintiff.” Rule 26(b)(1) of the Federal Rules of Civil Procedure explains: “Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense …. Because Plaintiff has not yet become a prevailing party, her attorney’s billing records are not relevant to any claim she has raised against Defendants, nor is it relevant to any defense that Defendants might raise.”
Click Johnson v. Bridges of Indiana, Inc. to read the entire decision.
U.S.S.C.: Oral Complaints Are Sufficient to Trigger the Anti-Retaliation Provisions of the Fair Labor Standards Act
Kasten v. Saint-Gobain Performance Plastics Corp.
Kasten brought an anti-retaliation suit against his former employer, respondent (Saint-Gobain), under the Fair Labor Standards Act of 1938 (Act), which forbids employers “to discharge . . . any employee because such employee has filed any complaint” alleging a violation of the Act, 29 U. S. C. §215(a)(3). In a related suit, the District Court found that Saint-Gobain violated the Act by placing timeclocks in a location that prevented workers from receiving credit for the time they spent donning and doffing work related protective gear. In this case Kasten claimed that he was discharged because he orally complained to company officials about the timeclocks. Holding that such oral complaints were not protected activity, the trial court granted the respondent summary judgment. Subsequently, the Seventh Circuit affirmed. Reversing, the Supreme Court held that the scope of statutory term “filed any complaint” includes oral, as well as written, complaints.
Click Kasten v. Saint-Gobain Performance Plastics Corp. to read the entire decision.
Overtime Law Blog 