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N.D.Ill.: Pharmaceutical Representatives Not Outside Sales Or Administrative Exempt Under FLSA
Jirak v. Abbott Laboratories, Inc.
This case was before the Court on the parties cross-Motions for Summary Judgment on the hot-button issue of whether Plaintiffs, pharmaceutical representatives, were exempt–under either the outside sales or administrative exemption–or non-exempt and entitled to overtime. Joining the minority of courts to have decided the issue to date, the Court granted Plaintiffs’ Motion for Summary Judgment and denied Defendant’s Motion.
The Court cited the following facts as relevant to its inquiry:
“Defendant is a global, broad-based health care company headquartered in Illinois. (R. 144, Pls.’ Facts ¶ 1.) Plaintiffs are current and former employees of Defendant that worked as Pharmaceutical Representatives (“Representatives”). (Id. ¶ 2.) Representatives had the core duties of “generating market share and market share growth for assigned professional pharmaceutical products” and “mak[ing] selling presentations to physicians and other health care professionals.” (R. 149, Def.’s Facts ¶ 8.) Representatives, however, did not promote Defendant’s products directly to patients or end-users. (R. 144, Pls.’ Facts ¶ 53.)
Representatives received initial training from Defendant on science and selling skills. (R. 149, Def.’s Facts ¶ 10.) This included training on product and competitor product information as well as selling techniques and techniques to determine the physician’s needs. (Id. ¶¶ 11, 13-14.) After the initial period of training, Representatives received training to continue to develop these skills and were also encouraged to participate in sales training outside of the company. (Id. ¶¶ 16, 19.)
Representatives were evaluated on their ability to utilize their training in the field. (Id. ¶ 10.) During “calls” or visits to health care providers, Defendant expected Representatives to adhere to company policies and federal and state laws that govern the pharmaceutical industry. (R. 144, Pls.’ Facts ¶ 11.) Their evaluations were based on job responsibilities that included “selling to customers” and “coordinat[ing] sales efforts.” (R. 149, Def.’s Facts ¶ 20.) Defendant provided each Representative with a “call list” specifying the physicians in their assigned territory that they were to present information about Defendant’s products. (R. 144, Pls.’ Facts ¶¶ 8, 10.) Defendant ranked the physicians on the “call list” and Representatives were expected to call on the higher-ranked physicians with more frequency than others . (Id. ¶¶ 39-40.) Each Representative was also supplied with a laptop computer to enter “call notes” describing what they did on a particular sales call. (Id. ¶ 11.) District Managers (“DMs”) had access to these “call notes” to ensure that Representatives were following appropriate procedure. (Id.) DMs could also conduct “ride alongs” to monitor Representatives during their calls. (Id.)
Representatives were expected to deliver “core messages” created by Defendant’s marketing department about the products to health care providers. (Id. ¶¶ 4-5, 41.) Although Plaintiffs contend that Representatives “could not deviate” from these messages, the record illustrates that Representatives were not provided “transcripts of communications to be repeated verbatim.” (R. 144, Pls.’ Facts ¶ 4; R. 162, Def.’s Resp. Facts ¶ 4.) Rather, they were free to “weave” these “core messages” into “their overall product conversations with doctors.” (Id.)
To assist with “core message” delivery, Defendant’s marketing department provided “visual aids” and material that Representatives could use or distribute during their calls. (R. 144, Pls.’ Facts ¶¶ 6, 9.) The messaging and material was created under the supervision of Defendant’s medical, regulatory, and legal departments to ensure compliance with industry and company policy. (R. 162, Def.’s Resp. Facts ¶ 6.) Although Representatives were “prohibited” from using aids that had not been approved by Defendant, they did have discretion to decide which, if any, materials to use during a particular call. (Id. ¶ 9.) Representatives were evaluated on their ability to “consistently giv[e] a logical, reasonable call-to-action/close on every sales call to drive product adoption and utilization.” (R. 149, Def.’s Facts ¶ 26.) “Closing,” however, did not create a contract or an enforceable commitment by the doctor to write a prescription for Defendant’s products. (R. 144, Pls.’ Facts ¶ 19.)
Even if the targeted doctor wrote a prescription for the product and it was filled by a pharmacy, Defendant did not recognize income. (Id. ¶ 15.) Rather, Defendant recognized revenue when their “trade group” provided pharmaceutical products to wholesale and retail customers. (Id.) Eighty to ninety percent of the revenue recognized by Defendant came from sales to wholesalers. (Id.) The remaining ten to twenty percent, was from sales to managed care entities, VA hospitals, long-term care facilities, independent hospital, independent pharmacies, and other small entities. (Id.; R. 162, Def.’s Resp. Facts ¶ 15.) However, in addition to their base wages, Representatives were paid “incentive compensation” that was calculated, in part, based on prescriptions written in the Representatives’ assigned territory. (R. 149, Def.’s Facts ¶¶ 30-35.)”
Holding that neither the outside sales exemption, nor the administrative exemption was applicable, the Court reasoned:
“I. Outside Salesmen Exemption
The DOL regulations define an “outside salesman” as an employee: (1) Whose primary duty is: (i) making sales within the meaning of section 3(k) of the [FLSA], or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and (2) Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty. 29 C.F.R. § 541.500(a). “Primary duty” means “the principal, main, major or most important duty that the employee performs.” Id. at § 541.700(a). “Sale” or “sell” under the FLSA “includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” Id. at § 541.501(b); 29 U.S.C. § 203(k). The regulations indicate that “promotion work” is “one type of activity often performed by persons who make sales, which may or may not be exempt outside sales work, depending upon the circumstances under which it is performed.” 29 C.F.R. § 541.503(a). “Promotion activities directed toward consummation of the employee’s own sales are exempt.” Id. § 541.503(b). However, “[p]romotional activities designed to stimulate sales that will be made by someone else are not exempt outside sales work.” Id.
Plaintiffs argue that the outside sales exemption does not apply in this case because Representatives “do[ ] not sell anything” and health care providers “do [ ] not purchase anything.” (R. 145, Pls .’ Mem. at 2.) In support of their argument, Plaintiffs cite an amicus curiae brief submitted by the DOL in an appeal pending before the Second Circuit Court of Appeals, In Re Novartis Wage and Hour Litigation. (Id. at 3.) In its brief, the DOL argues that the district court in that case committed legal error when it concluded that the pharmaceutical sales representatives employed by Novartis Pharmaceutical Corporation (“NPC”) were exempt from the overtime requirements of the FLSA under the outsides sales and administrative exemptions. (R. 146-21, Ex. U-DOL Brief.)
In the context of the outside sales exemption, the DOL emphasizes the fact that pharmaceutical sales representatives do not sell or take orders for NPC’s drugs; rather, “they provide information to target physicians about NPC’s drugs with the goal of persuading the physicians to prescribe those drugs to their patients.” (Id. at 5.) The DOL contends that “[b]ecause the reps do not sell any drugs or obtain any orders for drugs, and can at most obtain a non-binding commitment to prescribe NPC’s drugs to their patients when appropriate,” they “do not meet the regulation’s plain and unmistakable requirement that their primary duty must be ‘making sales.’ “ (Id. at 10.) The DOL acknowledges that the sales reps duties “bear some of the indicia of sales.” (Id. at 5.) However, the DOL contends that insofar as the reps’ work increases NPC’s sales, “it is non-exempt promotional work ‘designed to stimulate sales that will be made by someone else’ “ and that “a ‘sale’ for the purpose of the outside sales exemption requires a consummated transaction directly involving the employee for whom the exemption is sought.” (Id. at 10 (citing 29 C.F.R. § 541.503(b)), 11-12.)
Plaintiffs argue that pursuant to Auer v. Robbins, 519 U.S. 452 (1997), the DOL’s amicus brief is “entitled to substantial deference by this Court.” (R. 145, Pls.’ Mem. at 4.) Auer involved a disputed interpretation of whether a class of law enforcement officers met the “salary-basis” test for overtime pay exemption under the FLSA. 519 U.S. at 454-55. The Secretary of Labor filed an amicus brief explaining why, in his view, the regulations gave exempt status to the officers. Id. at 461. The Supreme Court deferred to the Secretary’s interpretation explaining that the test was “a creature of the Secretary’s own regulations” and therefore his interpretation was “controlling unless ‘plainly erroneous or inconsistent with the regulations.’ “ Id. at 461 (citations omitted); see also Whetsel v. Network Prop. Servs., Inc., 246 F.3d 897, 901 (7th Cir.2001) (quoting Pauley v. BethEnergy Mines, Inc. 501 U.S. 680, 702 (1991)) (“[i]f the regulation is ambiguous, then we defer to any reasonable construction by the Secretary”).
Defendant argues that the Court should grant “no deference” to the DOL’s amicus brief. (R. 161, Def.’s Opp’n Mem. at 8.) Defendant claims that the DOL’s interpretation of what it means to “sell” under the outside sales exemption is not based on “language of the DOL’s own creation;” but rather, “statutory language created by Congress.” (Id. at 9.) Therefore, Defendant argues that pursuant to Gonzales v. Oregon, 546 U.S. 243 (2006), the DOL’s interpretation is not entitled to controlling deference. (Id.) In Gonzales, the Supreme Court held that it would not accord deference to an Attorney General rule interpreting a “parroting regulation” that “just repeats two statutory phrases and attempts to summarize the others.” 546 U.S. at 257. The Court reasoned that: “[a]n agency does not acquire special authority to interpret its own words when, instead of using its expertise and experience to formulate a regulation, it has elected merely to paraphrase the statutory language.” Id.
The Court, however, is not persuaded by Defendant’s argument because the regulations at issue in this case do not merely “parrot” the FLSA. The Court acknowledges that both the regulations and the FLSA define “sale” or “sell” to include “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” See 29 C.F.R. § 541.501(b); 29 U.S.C. § 203(k). The regulations, however, go further and provide guidance directly applicable to the issue in this case: when the outside sales exemption applies. The regulations explain that “sales” under the exemption include the transfer of both tangible and intangible property, and that “outside sales work” includes both the sale of commodities and obtaining orders or contracts for services or the use of facilities. See 29 C.F.R. § 541.501. Further, the regulations provide guidance as to when “promotion work” falls under the outside sales exemption. Id. at § 541.500(b). As such, the regulations do more than merely repeat or summarize the FLSA. See Harrell v. United States Postal Serv., 445 F.3d 913, 925-26 (7th Cir.2006) (determining that although the DOL’s interpretation “follows closely the language of the statute,” it is entitled to deference because “the regulation goes beyond the mere recitation of the statutory language and speaks to the issue presented in this case”). Accordingly, the Gonzales exception to awarding deference to the DOL’s interpretation does not apply here. Moreover, even if the Court did find that the DOL’s brief was not entitled to deference, its interpretation is still “entitled to respect” to the extent that “it has the ‘power to persuade.’ “ Gonzales, 546 U.S. at 256 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)).
After careful review, this Court finds that the DOL’s interpretation is both persuasive and consistent with our analysis of the regulations. The regulations dictate that if an employee does not make any sales and does not obtain any orders or contracts, then the outside sales exemption does not apply. See 29 C.F.R. § 541.500(a). Further, the regulations state that “promotional work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work” and that “promotional activities designed to stimulate sales that will be made by someone else are not exempt outside sales work.” Id. at § 541.503(a)-(b). The latter regulation describes promotional activities generally, and does not distinguish between activities that are “incidental” versus “essential” to sales. See id. at § 541.503(b). In this case, the Court acknowledges that Representatives’ promotional activities were not “incidental” to Defendant’s sales; rather, such activity was an essential component of Defendant’s business strategy. (See R. 149, Def.’s Facts ¶ 8.) However, the activities did not generate Representatives’ “sales,” but instead stimulated “sales” Defendant’s “trade group.” (See R. 144, Pls.’ Facts ¶¶ 15, 19.) Therefore, Representatives’ promotional activities are not exempt under the regulation.
Further, the Court finds that this conclusion is consistent with the DOL’s prior position that a “sale” for the purpose of the outside exemption requires a consummated transition involving the employee for whom the exemption is sought. For example, the DOL found that the outside sales exemption did not apply to “enrollment advisors” or college recruiters whose duties included “selling” the school and “inducing” student applicants, which resulted in the advisors personally obtaining a signed enrollment application and a nonrefundable $50.00 application fee. DOL Opinion Letter, 1998 DOLWH LEXIS 17, at *3, 7 (Feb. 19, 1998). The DOL explained that the activities of the position were more “analogous to sales promotion work” because “like a promotion person who solicits customers for a business,” the college recruiter identifies customers and induces their application but does not “make a contractual offer of its educational services to the applicant.” Id. at *7. See also DOL Opinion Letter, FLSA2006-16, 2006 WL 1698305, at *2 (May 22, 2006) (finding that “ ‘selling the concept’ of donating to a charity does not constitute ‘sales’ for purposes of the outside sales exemption” because the solicitors do not obtain orders or contracts and the “exchange of a token gift for the promise of a charitable donation” is not a “sale”).
In arguing that Representatives “made sales” within the meaning of the FLSA, Defendant relies on the Novartis district court decision as well as the opinion of the only court in this Circuit to address the issue, Schaefer-LaRose v. Eli Lily & Co., 663 F.Supp.2d 674 (S.D.Ind.2009). (R. 148, Def.’s Mem. at 6-12.) The district court in Novartis found that “the realities of the pharmaceutical industry” was “incompatible” with engaging in a “narrow reading” of the outside sales exemption and that a determination that sales representatives are exempt “produces results that reflect the exemptions terms and spirit.” 593 F.Supp.2d at 653. Similarly, the Schaefer court noted that the pharmaceutical industry was “unique” because “the only individuals who can legally authorize a purchase of the medication and who thus drive demand for those drugs” are physicians. 663 F.Supp.2d at 684. As such, the Schaefer court found that although the pharmaceutical sales representatives in that case did not provide “direct sales of the medications,” they represented a “special category with regard to ‘making sales’ “ and thus fell within the FLSA’s outside sales exemption. Id. at 684-85.
This Court, however, declines to follow these decisions and carve out this “special category.” Instead, pursuant to the Seventh Circuit’s mandate that FLSA exemptions must be “narrowly construed against the employer seeking the exemption,” Schmidt, 599 F.3d at 631, the Court finds that Representatives do not “plainly and unmistakably” come within the outside sales exemption. See Jackson, 56 Fed. Appx. at 270. It is clear that Representatives bear some indicia of salesmen (as evidenced by hiring considerations, training, their evaluation criteria and incentive pay). However, pursuant to both the plain text of the outside sales exemption and the DOL’s interpretation of it, Representatives fail to satisfy the primary duty test of the exemption because they do not “make sales” under the statute. (See R. 146-21, Ex. U-DOL Brief at 11 (“a ‘sale’ for the purpose of the outside sales exemption requires a consummated transaction directly involving the employee for whom the exemption is sought”).) See also Kuzinski v. Schering Corp., 604 F.Supp.2d 385, 402-03 (D.Conn.2009) (“Because [pharmaceutical sales reps] undisputedly do not ‘sell’ or make any ‘sales’ as those terms are defined in the FLSA and its implementing regulations, they fall outside the FLSA’s outside sales exemption.”); Ruggeri v. Boehringer Ingelheim Pharms., Inc., 585 F.Supp.2d 254, 272 (D.Conn.2008) (“Because Defendant has not shown that [pharmaceutical sales reps] make sales or obtain contracts or orders, the outside sales exemption is inapplicable.”).
Thus, Representatives are not exempt from the overtime requirements of the FLSA under the outside sales exemption. Accordingly, summary judgment is granted to Plaintiffs on this issue.
II. Administrative Exemption
Next, the parties present cross-motions on the issue of whether Representatives are exempt from the overtime requirements of the FLSA under the administrative exemption. (R. 145, Pls.’ Mem at 11-19; R. 148, Def.’s Mem. at 12-20.) The DOL Regulations define an “administrative employee” as someone: (1) Compensated on a salary or fee basis at a rate of not less than $455 per week … exclusive of board, lodging or other facilities; (2) Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200. There is no dispute that Representatives in this case meet the first prong of the administrative employee exemption. (See R. 145, Pls.’ Mem at 11-19; R. 148, Def.’s Mem. at 12-20.) The parties, however, disagree as to whether Representatives performed work “directly related” to Defendant’s management or business operations and whether Representatives exercised “discretion and judgment with respect to matters of significance.” (Id.)
Turning first to prong three of the exemption, the regulations explain that, “the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.” 29 C.F.R. § 541.202(a). “The term ‘matters of significance’ refers to the level of importance or consequence of the work performed.” Id. The exercise of discretion and independent judgment requires “more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.” Id. at § 541.202(e). The employee must have “authority to make an independent choice, free from immediate direction or supervision.” Id. at § 541.202(c). Further, an employee does not meet the requirement “merely because the employer will experience financial losses if the employee fails to perform the job properly.” Id. at § 541.202(f).
“The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts involved in the particular employment situation in which the questions arises.” Id. at § 541.202(b). The regulations, however, provide factors to consider when determining whether an employee’s duties meet this threshold. Id. These factors include, but are not limited to, whether the employee “carries out major assignments in conducting the operations of the business”; “has authority to commit the employer in matters that have significant financial impact”; “has authority to waive or deviate from established policies and procedures without prior approval”; and “has authority to negotiate and bind the company on significant matters.” Id.
Defendant argues that Representatives “regularly exercised discretion and independent judgment with matters of significance.” (R. 148, Def.’s Mem. at 13-19.) Specifically, Defendant asserts that Representatives built relationships, created “pre-call plans” and customized their calls to develop a specific strategy to increase their effectiveness with targeted physicians, which resulted in an increase in Defendant’s market share. (Id.) Defendant cites the recently decided case Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir.2010), in support of their argument. (R. 169, Def.’s Reply at 6-10; R. 173, Def.’s Mot. to File Supp. Authority.) The facts before the Third Circuit (the only circuit to address the administrative exemption status of pharmaceutical sales representatives), however, do not persuade this Court to reach the same conclusion in this case. The Third Circuit noted that the plaintiff, Smith, “executed nearly all of her duties without direct oversight” and during her deposition “described herself as the manager of her own business who could run her territory as she saw fit.” Smith, 593 F.3d at 285. Although Smith argued that she lacked discretion with respect to matters of significance and that her previous statements were “overinflated” and “mere puffery,” the Third Circuit was “unwilling to ignore Smith’s testimony” and accepted her statements “as an accurate description of her position .” Id.
The facts before this Court are distinguishable from Smith and indicate that Representatives did not exercise discretion and independent judgment, but instead used their sales skill to apply Defendant’s well established techniques and procedures. For example, the record illustrates that Representatives did not independently solicit doctors, but worked from a “call list” provided by Defendant that specified the physicians in their assigned territory that they were to target. (R. 144, Pls.’ Facts ¶¶ 8, 10.) The “call list” also dictated the frequency that Defendant expected Representatives to visit the targeted physicians. (Id. ¶ 39.) Further, although Representatives had flexibility to determine how to best craft the appropriate message for a particular doctor (R. 162, Def.’s Resp. Facts ¶ 4), they did not engage in sales “calls” “independent [ly],” and were not “free from immediate direction.” See 29 C.F.R. § 541.200. Representatives were expected to adhere to company policies and to deliver Defendant’s “core messages” about the products during “calls.” (R. 144, Pls.’ Facts ¶¶ 4-5, 11, 41.) Representatives could use or distribute marketing material provided by Defendant but were “prohibited” from creating their own material. (Id. ¶¶ 6, 9; R. 162, Def.’s Resp. Facts ¶ 9.) Further, because Representatives could not prepare contracts or create an enforceable commitment by a doctor to write a particular prescription (R. 144, Pls.’ Facts ¶ 19), they did not have the authority to negotiate and bind Defendant in significant matters or matters that had a significant financial impact. See 29 C.F.R. § 541.202(b).
Moreover, pursuant to the DOL’s interpretation, duties similar to those of the Representatives in this case, “do[ ] not suffice to qualify for the administrative exemption.” (R. 146-21, Ex. U-DOL Brief at 21.) In the Novartis brief, the DOL asserts that NPC’s pharmaceutical sales representatives do not perform duties that require the exercise of discretion and independent judgment as contemplated by the regulations. (Id. at 21.) Rather, the DOL states:
The facts are clear that, within the stringent restrictions on Reps’ work activities, the Reps’ discretion is limited to such matters as what time of day to visit a particular doctor, the manner in which to approach the doctor based on the doctor’s personality, and how best to deliver (i.e., to ‘fit in’) the NPC’s ‘core message’ for a particular drug given the time constraints of a visit. Id. at 26. Accordingly, the DOL argues that the district court in Novartis erred in concluding that NPC’s pharmaceutical sales representatives are administrative employees because they do not exercise discretion and independent judgment with respect to matters of significance. (Id. at 17.)
The DOL interpretation is consistent with previous agency decisions addressing the discretion and independent judgment prong of the exemption. See, e.g., DOL Opinion Letter, FLSA2006-27, 2006 DOLWH LEXIS 37, at *7 (July 24, 2006) (citation omitted) (stating that discretion and independent judgment requires more than “mak[ing] limited decisions, within clearly ‘prescribed parameters’ ”); DOL Opinion Letter, 2000 DOLWH LEXIS 23, at *5 (July 17, 2000) (“An employee who merely applies his knowledge in following prescribed procedures or determining which procedure to follow … is not exercising discretion and independent judgment within the meaning of section 541.2, even if there is some leeway in reaching a conclusion.”).
Accordingly, this Court finds that in light of the facts of this case, Representatives do not exercise discretion and independent judgment and thus do not meet the administrative exemption. Therefore, summary judgment is granted to Plaintiffs on this issue.
203(o) Does Not Extend To PPE Worn By Employees That Is Required By Law, The Employer Or Due To The Nature Of The Job; Changing Clothes May Be Principal Activity, Starting Continuous Workday, Says DOL
Administrator’s Interpretation No. 2010-2
Today, the DOL issued its second Administrative Interpretation of 2010. The subject of this interpretation was the oft-litigated issue of the definition of “clothes” under 29 U.S.C. 203(0), which has been the subject of countless so-called “donning and doffing” cases.
Significantly the DOL concluded that:
(1) “Based on its statutory language and legislative history, it is the Administrator’s interpretation that the § 203(o) exemption does not extend to protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job. This interpretation reaffirms the interpretations set out in the 1997, 1998 and 2001 opinion letters and is consistent with the “plain meaning” analysis of the Ninth Circuit in Alvarez. Those portions of the 2002 opinion letter that address the phrase “changing clothes” and the 2007 opinion letter in its entirety, which are inconsistent with this interpretation, should no longer be relied upon.”
and
(2) “Consistent with the weight of authority, it is the Administrator’s interpretation that clothes changing covered by § 203(o) may be a principal activity. Where that is the case, subsequent activities, including walking and waiting, are compensable. The Administrator issues this interpretation to assist employees and employers in all industries to better understand the scope of the § 203(o) exemption.”
To read the entire Administrator’s Interpretation, click here.
S.D.Ind.: Exotic Dancers Are Employees, Not Independent Contractors; Plaintiffs’ Motion for Summary Judgment Granted
Morse v. Mer Corp.
Before the Court were the parties’ cross motions for summary judgment. Plaintiffs, exotic dancers, alleged that they were employees of Defendant, the owner of the adult entertainment facility where they worked. Defendant alleged that Plaintiffs were independent contractors and thus, not covered by the Fair Labor Standards Act (FLSA). The Court granted Plaintiffs’ motion and denied Defendants motion.
Reciting the facts pertinent to its inquiry, the Court explained:
“The Plaintiffs in this case were all exotic dancers at Dancers Showclub, an establishment owned and operated by the Defendant, in Indianapolis, Indiana. To be hired by the Defendant, an individual had to go to the club, complete an audition application, provide sufficient identification, and perform an audition by dancing to two or three songs. Individuals who passed their auditions and were hired by the Defendant were given a copy of the Entertainer Guidelines (Docket No. 58 Ex. 3). Many of these guidelines, such as those prohibiting the Plaintiffs from leaving with male patrons and those banning family and significant others from the club while the Plaintiffs were performing, were put in place to keep the Plaintiffs safe and to ensure that the Plaintiffs followed the law.
The Defendant classified the Plaintiffs as independent contractors. Accordingly, the Defendant never paid any of the Plaintiffs a wage or other compensation. Instead, the Plaintiffs earned their income by collecting tips from customers. The Defendant did not monitor the Plaintiffs’ income.
None of the Plaintiffs had set work schedules. They were free to come to work on whatever dates and times they chose. They were also free to develop their own clientele and could generate business by advertising on the internet. The Plaintiffs’ dancing rotation was set on a first come, first served basis. Once at work, the Defendant preferred that the Plaintiffs work at least a six-hour shift. At some point during her shift, each Plaintiff was required to pay a House Fee to the Defendant. The House Fee was based on when a Plaintiff checked in to work.
The Entertainer Guidelines suggest that the Plaintiffs pay a “tip out” to the bar and the disc jockey (“DJ”) at the end of every shift. The suggested gratuity is ten percent to the bar and five percent to the DJ. However, this is not a requirement, and the Plaintiffs were not prohibited from working if they failed to pay the recommended tip out.
According to the Entertainer Guidelines, the Plaintiffs were to charge a minimum of $20 for VIP dances. Some Plaintiffs charged more than $20 for VIP dances and, according to the Defendant, no Plaintiff was ever disciplined for charging less than $20 for a VIP dance. A Plaintiff’s success as an exotic dancer was based, in large part, on her ability to entice interaction with her customers.
Discussing and applying the relevant law, the Court explained:
“The Plaintiffs filed this collective action lawsuit alleging that the Defendant violated the Fair Labor Standards Act (“FLSA”), 29 U .S.C. § 201, by failing to pay them a minimum wage. The parties agree that the relevant inquiry is whether the Plaintiffs were employees or independent contractors. This determination of a worker’s status is a question of law. Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1535 (7th Cir.1985). “For purposes of social welfare legislation, such as the FLSA, ‘employees are those who as a matter of economic reality are dependent upon the business to which they render service.’ ” Id. at 1534 (quoting Mednick v. Albert Enters., Inc., 508 F.2d 297, 299 (5th Cir.1975)). To determine the parties’ economic reality, the Seventh Circuit “do[es] not look to a particular isolated factor but to all the circumstances of the work activity.” Id. The six factors considered by courts in this circuit are:
(1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; [and] (6) the extent to which the service rendered is an integral part of the alleged employer’s business. Id. at 1535.
There is no analogous Seventh Circuit case law, and the only federal appellate court to examine the issue of whether exotic dancers are employees or independent contractors was the Fifth Circuit in Reich v. Circle C. Investments, Inc., 998 F.2d 324 (5th Cir.1993). Like the Plaintiffs in the instant litigation, the exotic dancers in Circle C claimed that they were employees, not independent contractors. After applying the Fifth Circuit’s version of the economic realities test, the court of appeals agreed.”
Similarly, here the Court applied the various factors to determine that Plaintiffs were indeed employees, and not independent contractors:
“A. The Defendant’s control as to the manner in which the work is performed.
With respect to the control factor, the Fifth Circuit explained that the club “exercise[d] a great deal of control over the dancers .” Circle C, 998 F.2d at 327. The dancers were “required to comply with weekly work schedules, which Circle C compile[d].” Id. Dancers who were tardy were fined. Circle C set the prices for table and couch dances. Although dancers could choose their own costumes and their own music, both the costume and the music had to meet standards set by Circle C. Id. Circle C also extensively controlled the dancers’ conduct by promulgating rules including: “[N]o flat heels, no more than 15 minutes at one time in the dressing room, only one dancer in the restroom at a time, and all dancers must be ‘on the floor’ at opening time.” Id. Dancers who violated the code of conduct were fined.
The Plaintiffs in the instant case are “subject to a broad range of control by Defendant when it comes to the manner in which their work is performed.” Docket No. 57 at 8. When they are hired, the Plaintiffs receive and review a copy of the Entertainer Guidelines. These guidelines require that, among other things, the Plaintiffs: work at least a six hour shift; charge at least $20 for all VIP dances; refrain from inviting significant others or family members to the club while the Plaintiffs are working; and avoid walking with a lit cigarette, chewing gum, drinking anything from a bottle, or having a cell phone on the club floor. Docket No. 58 Ex. 3 ¶¶ 9-10, 12, 15. Another version of the Entertainer Guidelines prohibits the Plaintiffs from frequenting the club on days when they are not working. See Docket No. 58 Ex. 6 ¶ 13.
The Defendant claims that the Entertainer Guidelines were “of no real import,” Docket No. 64 at 12, because there was no written record of violations. Docket No. 65 Ex. 2 at 27, lines 18-20. Further, certain violations such as chewing gum on the floor were not punished. Id. at 36, lines 3-10. In addition, the Defendant argues that some of the Entertainer Guidelines were included “to ensure that the Entertainers’ behavior conformed with the law and to keep both the patrons and Entertainers safe.” Docket No. 64 at 15. Finally, the Defendant asserts that Circle C is distinguishable because the Plaintiffs in this case were free to work on the dates and times that they chose and thus they largely set their own schedules.
Despite the Defendant’s arguments otherwise, this case is analogous to Circle C. The Defendant in the instant case regulated the Plaintiffs’ behavior with a written code of conduct. Although the Defendant claims that the rules in the Entertainer Guidelines were never enforced, there is nothing in the record indicating that anyone informed the Plaintiffs of this fact. The Defendant cannot claim that it did not impose a significant amount of control on the Plaintiffs by arguing, with absolutely no evidentiary support, that the rules did not actually apply. While it is true that the Plaintiffs in the instant case could set their own work schedules, once at the club, the Defendant asked the Plaintiffs to work for a certain amount of time. The Plaintiffs could request music, but the music was ultimately controlled by the Defendant. See Docket No. 58 Ex. 5 at 46, lines 8-14. The Plaintiffs could pick their own costumes; however, as in Circle C, the Defendant had ultimate veto power. See id. 46-47. Further, the Defendant prohibited the Plaintiffs from being at the club in their free time and also prohibited the Plaintiffs’ families and significant others from coming to the club while the Plaintiffs were working. Docket No. 58 Ex. 6 ¶¶ 13, 16. Finally, the Defendant’s argument that many of the rules were imposed to protect the Plaintiffs and to ensure compliance with the law is unavailing. See Circle C, 998 F.2d at 327 (rejecting Circle C’s attempt to downplay its control). In short, all of the parties’ admissible evidence indicates that the Defendant exerted a significant amount of control over the Plaintiffs. Thus, although the Defendant exercises less control than the club in Circle C, the Defendant’s conduct still indicates that the Plaintiffs were employees.
B. The Plaintiffs’ opportunity for profit or loss.
As to the opportunity for profit and loss, in Circle C the Fifth Circuit noted that although a dancer’s “initiative, hustle, and costume significantly contribute to the amount of her tips,” Circle C, 998 F.2d at 328, the dancers were not responsible for drawing customers to the club in the first place. “Circle C is responsible for advertisement, location, business hours, maintenance of facilities, aesthetics, and inventory of beverages and food.” Id. The court concluded that “[g]iven its control over determinants of customer volume, Circle C exercises and high degree of control over a dancer’s opportunity for ‘profit.’ ” Id. Therefore, “[t]he dancers are ‘far more akin to wage earners toiling for a living, than to independent entrepreneurs seeking a return on their risky capital investments.’ ” Id. (quoting Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1051 (5th Cir.1987)).
In the instant case, a Plaintiff’s only “opportunity for loss comes in the form of a ‘House Fee’ that she is required to pay for each shift, the amount of which ranges from $0.00-$30.00.” Docket No. 57 at 12. “All other potential risks of loss, be they food and beverage related or liability-related, are borne solely by Defendant .” Id. at 13. Similarly, an entertainer has no real opportunity to profit. At best she can “increase her earnings by taking care of herself, working harder, and enticing social interaction with her customers.” Id. The Defendant tacitly acknowledges that this was one way in which the Plaintiffs could enhance their profits. However, the Defendant refuses to acknowledge that this argument has been rejected by every court that has considered it. See, e.g ., Harrell, 992 F.Supp. at 1350; Priba Corp., 890 F.Supp. at 593. The Defendant also emphasizes that the Plaintiffs were allowed to advertise and market themselves by using MySpace, Facebook, and simple word of mouth. Docket No. 64 at 17. This may be true, but the simple fact remains that, like the club in Circle C, the Defendant is primarily responsible for drawing customers into the club. See Circle C, 998 F.2d at 328. Thus, the second factor also tips in favor of employee status.
C. The Plaintiffs’ investment in equipment or materials.
In Circle C, the Fifth Circuit noted that “a dancer’s investment is limited to her costumes and a padlock.” Circle C, 998 F.2d at 327. Although the court acknowledged that some dancers spend a significant amount of money on their costumes, the court concluded that “[a] dancer’s investment in costumes and a padlock is relatively minor to the considerable investment Circle C has in operating a nightclub.” Id. at 328; see also Harrell, 992 F.Supp. at 1350. “Circle C owns the liquor license, owns the inventory of beverages and refreshments, leases fixtures for the nightclub … owns sound equipment and music, maintains and renovates the facilities, and advertises extensively.” Circle C, 998 F.2d at 327. Thus, this factor indicated that the dancers were employees.
The instant case is markedly similar to Circle C. The Plaintiffs “do not make any capital investment in Defendant’s facilities, advertising, maintenance, security, staff, sound system and lights, food, beverage, and other inventory.” Docket No. 57 at 14. The Plaintiffs’ only investment is in their costumes and their general appearance (i.e. hair, makeup, and nails). Id. at 15. Thus, as in Circle C, this factor tips in favor of employee status.
D. Special skills required.
The Fifth Circuit concluded that the dancers in Circle C “do not need long training or highly developed skills to dance at a Circle C nightclub.” 998 F.2d at 328. Indeed, many of Circle C’s dancers had never before worked at a topless dance club. Id. Other courts have consistently held that little skill is necessary to be a topless dancer. See, e.g., Harrell, 992 F.Supp. at 1351; Priba Corp., 890 F.Supp. at 593; Jeffcoat v. Alaska Dept. of Labor, 732 P.2d 1073, 1077 (Alaska 1987) (applying federal courts’ economic realities analysis).
In the instant case, the Defendant claims that although the entertainers are not trained dancers, they must possess special skills “in communicating, listening, and (to some minor extent) counseling” in order to be successful. Docket No. 64 at 21. According to the Defendant, an Entertainer must be a peculiar combination of a customer service representative and counselor: she must have excellent listening skills, the ability to read another person’s affect and discern from that demeanor his particular conversational or emotional needs, and the ability and willingness to fulfill those needs in a purely non-sexual way. Id. at 21-22. This argument is unconvincing, especially because nothing in the record indicates that the Defendant’s hiring process included an assessment of a prospective dancer’s communication or counseling skills. Having examined all of the parties’ admissible evidence, the Court is convinced that this factor indicates that the Plaintiffs are employees.
E. The degree of permanency of the working relationship.
The Circle C court noted that “most dancers have short-term relationships with Circle C.” Circle C, 998 F.2d at 328. “Although not determinative, the impermanent relationship between the dancers and Circle C indicates non-employee status.” Id. However, the court concluded that “[t]he transient nature of the work force is not enough here to remove the dancers from the protections of the FLSA.” Id. at 328-29. Thus, despite the fact that this factor tipped in favor of independent contractor status, the court was convinced that the economic realities of the relationship indicated that the dancers were employees. Id. at 329.
In the case presently before this Court, the Plaintiffs argue that the Defendant considered the relationship between the parties to be ongoing. See Docket No. 57 at 16-17. Thus, according to the Plaintiffs, their situation is materially different “from the limited-duration relationship typical to independent contractors.” Id. at 17. However, the Defendant submitted admissible evidence indicating that most of the dancers only worked at the Defendant’s club for six months. Docket No. 65 Ex. 6 ¶ 3. Thus, as in Circle C, this factor tips in favor of independent contractor status.
F. The extent to which the Plaintiffs’ service is integral to the Defendant’s business.
The Fifth Circuit does not include this factor in its economic realities analysis. However, other district courts have considered this issue and have concluded that “[e]xotic dancers are obviously essential to the success of a topless nightclub.” Harrell, 992 F.Supp. at 1352; see also Jeffcoat, 732 P.2d at 1077. Although the Defendant claims that no more than ten percent of its profits came from the dancers, and thus, “the Entertainers are not a vital part of its business,” Docket No. 64 at 24, this assertion is belied by the Defendant’s own deposition testimony. Manager James Nicholson stated that “[p]robably less than one percent” of the club’s customers go to the club solely for food and drink. Docket No. 58 Ex. 1 at 27, line 20. When asked what would happen “if the club limited the use of dancers at the facility,” Nicholson stated: “The same thing if McDonald’s got rid of hamburgers, all right? We wouldn’t be that business.” Id. at 27, lines 21-25; id. at 28, line 1.
The Defendant’s argument that the dancers are non-essential forms of extra entertainment, “like televisions at a sports bar” is simply unconvincing. Robert W. Wood, Pole Dancers: Employees or Contractors? TAX NOTES, Nov. 9, 2009, at 673, 675. Indeed, the Defendant’s own manager apparently does not believe this assertion. The Plaintiffs are critical to the Defendant’s current business model. Thus, this factor indicates that the Plaintiffs are employees, and not independent contractors.
Having considered all of the parties’ admissible evidence and viewing the evidence in the light most favorable to the Defendant, the Lauritzen factors indicate that the Plaintiffs are employees.”
S.D.Fla.: Counterclaim For Indemnity Against FLSA Plaintiff In Her Supervisory Capacity Dismissed; FLSA Does Not Permit Such Claims
Quintana v. Explorer Enterprises, Inc.
This case was before the Court on the Plaintiff’s Motion to Dismiss Defendants’ Counterclaim Against Marcia Martinez. Martinez had commenced suit against the Defendants alleging violations of the FLSA. Specifically, Plaintiff sought to dismiss the Defendants’ counterclaims against her alleging that she should indemnify them, as an employer in her supervisory capacity. Dismissing the counterclaim, the Court reasoned that such a counterclaim was not permissible under the FLSA.
The Court explained:
“The defendants brought the counterclaim under the FSLA alleging that Ms. Martinez is an employer within the meaning of the FLSA. The defendants claim that Ms. Martinez is potentially liable for violating the FLSA as a person who is “acting directly or indirectly in the interest of an employer in relation to an employee .” 29 U.S.C. § 203(d). In their Response (DE # 50, 4/20/10), the defendants claim that they are “unaware of a single case holding that one employer within the meaning of the FLSA is prohibited from seeking indemnification or contribution from a second employer with [sic] the meaning of the FLSA, and Martinez cites none.” (DE # 50 p. 5; 4/20/10) Although the Eleventh Circuit has not addressed the issue, other circuits have. In LeCompte v. Chrysler Credit Corp., 780 F.2d 1260 (5th Cir.1986), which is cited by the plaintiff, the Fifth Circuit found that the district court property dismissed the counterclaim for indemnity against two plaintiffs in their supervisory capacity. The defendants fail to distinguish LeCompte.
Instead, the defendants unsuccessfully attempt to distinguish the Tenth Circuit decision in Martin v. Gingerbread House, Inc., 977 F.2d 1405 (10th Cir.1992), on the basis that it was a third-party complaint rather than a counterclaim. Notably, in Martin, the Tenth Circuit expressly agreed with the Fourth and Fifth Circuits’ holdings that “indemnity actions against employees work against the policy of the FLSA.” Id. at 1408. In Martin, the Tenth Circuit explained that
[c]ompliance with the FLSA will not be furthered if employees must defend against indemnity actions. Such actions are not part of the comprehensive statutory scheme set forth by Congress. The conflict between the purposes of federal law and a state cause of action require the latter to yield. We therefore hold that a third party complaint by an employer seeking indemnity from an employee is preempted. Id.
In their Response (DE # 50, 4/20/10), the defendants concede that there are very few cases on point. The defendants, however, believe that the lack of case holdings prohibiting such indemnification indicates that defendants may seek such relief. Although the Eleventh Circuit has not addressed this issue, the circuits that have addressed the issue consistently found that indemnification claims against employees or owners are contrary to public policy and the legislative intent of the FLSA. See, e.g., LeCompte v. Chrysler Credit Corp., 780 F.2d 1260, 1264 (5th Cir.1986); Lyle v. Food Lion, Inc., 954 F.2d 984, 987 (4th Cir.1992); Martin v. Gingerbread House, Inc., 977 F.2d 1405, 1407 (10th Cir.1992); Herman v. RSR Sec. Services Ltd., 172 F.3d 132, 144 (2d Cir.1999).
The dispositive issue raised in the plaintiff’s motion to dismiss is whether the indemnification sought by the defendants would be allowed under the FLSA. The Supreme Court addressed a related issue in Northwest Airlines v. Transp. Workers Union, 451 U.S. 77, 94-95 (1981). The Supreme Court analyzed the legislative intent regarding an implied right to contribution under the Equal Pay Act when the Act contains no reference of such contribution. The Court determined that unless the “congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.” Id. (emphasis added).
Several circuits have applied the reasoning of Northwest Airlines to their analysis of the viability of an indemnity claim under the FLSA. See, e.g., LeCompte v. Chrysler Credit Corp., 780 F.2d 1260, 1264 (5th Cir.1986); Lyle v. Food Lion, Inc., 954 F.2d 984, 987 (4th Cir.1992); Martin v. Gingerbread House, Inc., 977 F.2d 1405, 1408 (10th Cir.1992); Herman v. RSR Sec. Services Ltd., 172 F.3d 132, 144 (2d Cir.1999); Villareal v. El Chile, Inc., 601 F.Supp.2d, 1011, 1015 (N.D.Ill.2009); Spellman v. American Eagle Express, Inc., 680 F.Supp.2d 188, 191 (D.C.Cir.2010). Additionally, the Second, Fourth, Fifth and Tenth Circuits have consistently held that indemnity claims against employees under the FLSA are preempted by the Supremacy Clause of the United States Constitution. See LeCompte, 780 F.2d at 1264. See also Spellman, 680 F.Supp.2d at 191; Villareal, 601 F.Supp.2d at 1015; Lyle, 954 F.2d at 987 (adopting the reasoning of the court in LeCompte ).
The FLSA does not mention a right to seek indemnity. Indemnity against an employee would be contrary to the legislative intent. See LeCompte v. Chrysler Credit Corp., 780 F.2d 1260, 1264 (5th Cir.1986) (noting that such indemnity action would “undermine employers’ incentive to abide by the Act”). In Herman, the Second Circuit noted that the text of the FLSA makes no provision for contribution or indemnification and the Act’s legislative history is silent on a right to contribution or indemnification. Herman, 172 F.3d at 144; see also Lyle, 954 F.2d at 987 (holding that indemnity against an employee “is something the FLSA simply will not allow”). Most recently, in Villareal, 601 F.Supp.2d at 1015, the court affirmed the dismissal of an employer’s cross-claim against its supervisory personnel for indemnity claims under the FLSA (citing LeCompte ).
In LeCompte, the Fifth Circuit acknowledged that the supervisory personnel were partially at fault for the violation that resulted. Nonetheless, the court held that an indemnity claim against such personnel under the FLSA would be inappropriate as it would frustrate Congress’ purpose in enacting the FLSA. Id. at 1264. Similarly, in the case at hand, the defendants’ basis for the counterclaim against Ms. Martinez, as a store manager, is that she was the person most responsible for setting the plaintiffs’ rates of pay and schedule and that she was in the best position to ensure the defendants’ compliance with the FLSA. Applying the reasoning of the court in LeCompte, the counterclaim for indemnity is not viable.”
Thus, the Court granted Plaintiff’s Motion and dismissed Defendants’ counterclaim.
To read the entire order click here.
D.S.C.: South Carolina Is Sovereign Immune From FLSA Suits Seeking Money Damages
Morris v. South Carolina Dept. of Corrections
In this case Plaintiff, an employee of the South Carolina Department of Corrections (“SCDC”), sought compensation for overtime work under Section 16(b) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b). The Defendant moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6), claiming it was sovereign immune from such claims. The Court agreed and granted Defendant’s motion to dismiss stating:
“SCDC argues that Plaintiff’s claim is barred because the state is immune from claims for money damages brought under Section 16(b). In making these arguments, SCDC relies on Alden v. Maine, which held that states are immune from private suits filed in state courts for damages brought under Section 16(b) of the FLSA. Based on Alden and its progeny, Defendant argues that state agencies are immune from private suits for money damages under the FLSA whether that suit is brought in state or federal court. See Alden v. Me., 527 U.S. 706, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999); see also Dkt. No. 15 at 4. Plaintiff disagrees, arguing that Alden applies only to FLSA suits brought in state court. Dkt. No. 16 at 2.
State Sovereign Immunity. The doctrine of state sovereign immunity bars suits in federal court for money damages against an “unconsenting State.” Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); see also Alden, 527 U.S. at 713 (noting that, while “Eleventh Amendment immunity” is often used as convenient shorthand for state sovereign immunity, the latter is “a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today … except as altered by the plan of the Convention or certain constitutional Amendments.”). This immunity extends to “arm[s] of the State,” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 50 L.Ed.2d 471 (1974), including state agencies and state officers acting in their official capacity. Gray v. Laws, 51 F.3d 426, 430 (4th Cir.1995). This doctrine does not, however, preclude private suits against state officials (but not the state or state agency itself) for prospective or declaratory relief designed to remedy ongoing violations of federal law. Ex parte Young, 209 U.S. 123, 157, 28 S.Ct. 441, 52 L.Ed. 714 (1908); see also Virginia v. Reinhard, 568 F.3d 110 (4th Cir.2009).
Congress may abrogate state sovereign immunity, but “only by stating unequivocally its desire to do so and only pursuant to a valid exercise of constitutional authority.” Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474, 484 (4th Cir.2005) (citing Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 55, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996)). Section 5 of the Fourteenth Amendment to the United States Constitution, the Amendment’s enforcement provision, provides one (and possibly the only) basis on which Congress may, under specific circumstances, abrogate state sovereign immunity. Nev. Dep’t of Human Res. v. Hibbs, 538 U.S. 721, 727, 123 S.Ct. 1972, 155 L.Ed.2d 953 (2003) (noting that, while Congress may abrogate the States’ sovereign immunity under Section 5 of the Fourteenth Amendment, it may not do so “pursuant to its Article I power over commerce”) (citing Fitzpatrick v. Bitzer, 427 U.S. 445, 456, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976)); see also Seminole Tribe, 517 U.S. at 73 (“Article I cannot be used to circumvent the constitutional limitations placed upon federal jurisdiction”).
Applied to Section 16(b) of the FLSA. In Alden, the Supreme Court held that states are immune from private suits for damages brought under Section 16(b) of the FLSA in state court. The Court’s reasoning was based, in part, on the principle that Congress cannot extend state court jurisdiction beyond where it may extend federal court jurisdiction. See 527 U.S. at 754 (“We are aware of no constitutional precept that would admit of a congressional power to require state courts to entertain federal suits which are not within the judicial power of the United States and could not be heard in federal courts.”). Put differently, as applied to Section 16(b) of the FLSA, it is precisely because Congress lacks the authority to subject states to suit in federal court that it also lacks the authority to subject states to suit in their own courts. Thus, the Alden rationale fully supports Defendant’s position.
Prior to Alden, the Fourth Circuit ruled that state sovereign immunity bars Section 16(b) claims for damages brought by state employees in federal court. See Abril v. Va., 145 F.3d 182, 186-89 (4th Cir.1998) (concluding that Section 16(b) was not a valid abrogation of state sovereign immunity under Congress’s Section 5 enforcement powers). No subsequent rulings appear to alter this rule, which is consistent with the rationale in Alden. As explained in Rodriguez v. Puerto Rico Federal Affairs Administration, a post-Alden decision addressing a Section 16(b) claim for damages, Seminole Tribe and Alden operate in tandem to protect states from liability for money damages under the FLSA. Rodriguez v. P.R. Fed. Affairs Admin., 435 F.3d 378, 380 (D.C.Cir.2006) (“Taken together, Seminole Tribe and Alden mean that state employees no longer have any ‘court of competent jurisdiction,’ 29 U.S.C. § 216(b), in which to sue their employers for FLSA violations.”). While not binding, the court finds the Rodriguez court’s reasoning persuasive.”
Thus, the Court concluded that, “SCDC is immune from suits for money damages brought pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b).” Accordingly, Plaintiff’s case was dismissed.
To read the Court’s entire decision, click here.
E.D.N.Y.: Defendant Not Entitled To Discovery Of FLSA Plaintiff’s Immigration Status
Widjaja v. Kang Yue USA Corp.
This case was before the Court, in part, on defendants motion to compel discovery of plaintiffs’ immigration status. Joining the majority of Courts to have ruled on such motions, the Court denied defendants’ Motion.
Defendants asserted two reasons to discover the immigration status of the plaintiffs for two reasons. First, they claimed the plaintiffs’ status in this country was relevant to plaintiffs’ credibility, arguing that if plaintiffs entered the country illegally then they are more likely to make false claims regarding hours worked. Second, defendants argued that if it is discovered that plaintiffs are illegal immigrants, then they would not be entitled to back pay for future loss of earnings since they would not be permitted to work under the Immigration Reform and Control Act of 1986 (“IRCA”). See Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002) (holding that the IRCA prevents the NLRB from awarding backpay to an illegal alien for work not performed).
Rejecting both claimed bases for defendants’ position, the Court explained:
“Rule 26 of the Federal Rules of Civil Procedure allows discovery of all relevant non-privileged matters. Fed.R.Civ.P. 26. A plaintiff’s immigration status is not normally discoverable. Rengifo v. Erevos Enterprises, Inc., No. 06 CV 4266, 2007 WL 894376 at *1 (S.D.N.Y. March 20, 2007). “[D]iscovery of such information would have an intimidating effect on an employee’s willingness to assert his workplace rights.” Id.
The Court rejects plaintiffs’ first argument that plaintiffs’ immigration status is relevant to their credibility. “While it is true that credibility is always at issue, that does not by itself warrant unlimited inquiry into the subject of immigration status….” Id. at *3. “[T]he opportunity to test the credibility of a party … does not outweigh the chilling effect that disclosure of immigration status has on employees seeking to enforce their rights.” Id. See also E.E.O.C. v. First Wireless Group, Inc., No. 03 CV 4490, 2007 WL 586720 (E.D.N.Y. Feb. 20, 2007) (finding immigration status not relevant to credibility); Avila-Blue v. Casa De Cambio Delgado Inc., 236 F.R.D. 190 (S.D.N.Y.2006) (same).
Defendants’ second argument is that plaintiffs’ immigration status may be relevant to damages, relying on the Supreme Court’s holding that the IRCA prevents the NLRB from awarding backpay to an illegal alien for work not performed. Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271. However, on the issue of damages, “[c]ourts have distinguished between awards of post-termination back pay for work not actually performed and awards of unpaid wages pursuant to the Fair Labor Standards Act (“FLSA”).” Zeng Liu v. Donna Karan Intern., Inc., 207 F.Supp.2d 191, 192 (S.D.N.Y.2002). In Flores v. Amigon, 233 F.Supp.2d 462 (E.D.N.Y.2002), the court stated that Hoffman Plastic Compounds, Inc. v. NLRB does not apply to FLSA cases in which workers are seeking pay for work actually performed. The court in Flores stated that, “enforcing the FLSA’s provisions requiring employers to pay proper wages to undocumented aliens when the work has been performed actually furthers the goal of the IRCA” because if the FLSA did not apply to undocumented aliens, employers would have a greater incentive to hire illegal aliens with the knowledge that they could not be sued for violating minimum wage requirements. Flores v. Amigon, 233 F.Supp.2d at 464. See also Sandoval v. Rizzuti Farms, Ltd., No. 07 CV 3076, 2009 WL 2058145, at *2 (E.D.Wash. July 15, 2009) (holding that immigration status is not discoverable and Hoffman does not apply). But see Avila-Blue v. Casa De Carnbio Delgado Inc., 236 F.R.D. at 192 (finding that “the issue of immigration status may be relevant to damages insofar as it may limit the availability of certain forms of damages” and allowing the issue to be reopened at a later stage of the proceeding).”
D.Md.: Defendant Not Entitled To Offset For Room and Board Or Meals, Due To Failure to Provide Documentation Of Costs To Plaintiff During Employment and Lack Of Agreement Regarding Same
Epps v. Way of Hope, Inc.
This case was before the Court on Plaintiff’s Motion for Summary Judgment. Plaintiff was employed by defendants as a “care provider” at defendants’ facility, where she prepared meals, cleaned, did laundry, and assisted facility residents with personal care, hygiene, and medication. Her duties also included night care of residents, including changing sheets, monitoring residents walking the halls, and personal hygiene. Plaintiff alleged that, while she worked seven days per week, without weekend breaks, and that “it was not uncommon for [her] to work far in excess of 40 hours per week.” She alleges that defendants did not pay her for all hours worked and did not pay her minimum wage. She further alleged that defendants did not direct her to record her hours. Among other things, as discussed here, Defendant responded that they provided plaintiff with room and board, and contended that plaintiff was aware that her receipt of room and board would constitute a portion of her wages, such that the provision of same should constitute an offset to any wages found due and owing. The Court rejected this argument, as discussed below.
Rejecting Defendant’s argument regarding offset, the Court stated:
“Plaintiff seeks summary judgment on two related issues: (1) whether defendants took “impermissible” deductions from plaintiff’s wages; and (2) whether the claimed deductions can offset or reduce the amount of wages owed to plaintiff.
Under the FLSA and Maryland Wage and Hour Law (MWHL), an employer must compensate employees for all hours worked at a rate not less than the federal minimum wage, and at least one and one half the regular rate of pay for each hour worked over 40 in one workweek. 29 U.S.C. § 207(a)(1); MD.CODE ANN., LAB. & EMPL.¤ §§ 3-415(A), 3-420(A). WHILE “WAGES” MAY INCLUDE BOTH ACTUAL PAID WAGES AND “THE REASONABLE COST … TO THE EMPLOYER OF FURNISHING SUCH EMPLOYEE WITH BOARD, LODGING, OR OTHER FACILITIES, IF SUCH BOARD, LODGING, OR OTHER FACILITIES ARE CUSTOMARILY FURNISHED BY SUCH EMPLOYER TO HIS EMPLOYEE,” 29 U.S.C. § 203(B), THE EMPLOYER MUST MAINTAIN AND PRESERVE RECORDS SUBSTANTIATING THIS COST ON A WORKWEEK BASIS. 29 C.F.R. § 516.27(A)–(B); Md.Code. Ann., Lab. & Empl. § 3-503. FURTHERMORE, AN EMPLOYER MUST RECEIVE WRITTEN AUTHORIZATION FROM THE EMPLOYEE BEFORE COMPENSATING THE EMPLOYEE IN PART BY PROVIDING BOARD AND LODGING. MD. CODE ANN., LAB. & EMPL. § 3-503. FAILURE TO MAINTAIN SUCH DOCUMENTATION IS FATAL TO AN EMPLOYER’S ATTEMPT TO COUNT ROOM AND BOARD AS WAGES PAID TO AN EMPLOYEE. JONES V. WAY OF HOPE, INC., 2009 WL 3756843, CIV. NO. 07-1517-BEL *3 (D.MD. NOV. 6, 2009); MARROQUIN V. CANALES, 505 F.SUPP.2D 283, 292-93 (D.MD.2007).
Although defendants claim in their opposition to the Motion for Summary Judgment that they “furnished records to show the cost of meals, lodging and other facilities supplied to the Plaintiff” (Paper No. 22, 5), it is undisputed that defendants did not provide plaintiff with documentation showing deductions from her wages for room and board during the course of her employment. (Paper No. 1, 5; Paper No. 4, 2; Paper No. 25, 4-5). It is also undisputed that plaintiff “never signed a document authorizing Defendants to take deductions for room and board from her wages.” (Paper No. 1, 5; Paper No. 4, 2). Defendants suggest that plaintiff’s awareness and acceptance of board and lodging entitled defendants to deduct the value of board and lodging from her pay. (Paper No. 22, 5-6). However, the FLSA’s protections are construed strictly, and defendants’ failure to obtain written authorization from plaintiff or to maintain documentation showing deductions from her wages for room and board precludes them from counting room and board within the wages paid to plaintiff. See, e.g., Marroquin, 505 F.Supp.2d. at 292-93 (collecting authority supporting the proposition that an employer is not entitled to offset wages by lodging or board when it fails to maintain and preserve requisite documentation); Jones, 2009 WL 3756843 at *3 (“The failure to document the amount, the failure to obtain [ ] written authorization from Jones, and the failure to include detailed documentation on the amount of room and board all preclude the Defendants from counting room and board within the wages paid to [Plaintiff].”).
For the reasons set forth herein, the Court hereby GRANTS partial summary judgment in favor of plaintiff on the issue of “offsetting” of wages owed to plaintiff, and specifically rules that, as a matter of law, defendants cannot use room and board provided by them to plaintiff to offset the wages owed to plaintiff under the FLSA and MWHL because they failed to obtain plaintiff’s written authorization for such deductions and failed to maintain requisite documentation of deductions.”
Click here to read the entire opinion Epps v. Way of Hope, Inc.
7th Cir.: District Court Erred In Dismissing FLSA Claims; Court Was Required To Consider Most Efficient Way To Adjudicate Claims and Subclaims; Plaintiffs Have Right To Pursue Claims Individually
Alvarez v. City of Chicago
In this case a collective action had previously been consolidated with a multiple-Plaintiff non-collective action. Each of the Plaintiffs presented a variety of claims and between the hundreds of plaintiffs there were 10 different types of claims. The Court below granted the Defendant’s motion for summary judgment against all plaintiffs, reasoning that the plaintiffs were not similarly situated because each plaintiff raised a different combination of the ten subclaims, such that the plaintiffs could not be readily divided into homogenous subgroups. The district court also noted that arbitration pursuant to the collective bargaining agreement, while not mandatory, might be a more efficient way to resolve the paramedics’ claims. The court did not reach the merits of the ten subclaims raised by the plaintiffs. Instead, it dismissed the claims of all plaintiffs, without prejudice, and directed them to pursue arbitration. The Seventh Circuit reversed however, noting that, the Court failed to consider the efficiency of adjudicating the claims as a collective action, and, that the named Plaintiffs in each of the consolidated cases had the right to proceed with their individual claims, regardless of whether they were similarly situated to the other class members.
The Court reasoned:
“The Fair Labor Standards Act gives employees the right to bring their FLSA claims through a “collective action” on behalf of themselves and other “similarly situated” employees. 29 U.S.C. § 216(b) (2006). A collective action is similar to, but distinct from, the typical class action brought pursuant to Fed.R.Civ.P. 23. The principle difference is that plaintiffs who wish to be included in a collective action must affirmatively opt-in to the suit by filing a written consent with the court, while the typical class action includes all potential plaintiffs that meet the class definition and do not opt-out.
The City-and the district court’s opinion-relies heavily on our decision in Jonites v. Exelon Corp., 522 F.3d 721 (7th Cir.2008). In Jonites, we affirmed the dismissal of a collective action brought on behalf of more than a thousand lineman and other hourly workers employed by Commonwealth Edison. The Jonites plaintiffs alleged that two types of purportedly off-duty time were really compensable work. The first involved Com Ed’s “call-out” policy, which required off-duty workers to respond to at least 35% of the calls from their employer for additional manpower on an emergency basis. The frequency of these call-outs varied widely among workers; some were called as often as once every five and a half days on average, and others no more than once a month. The employees took the position that they were entitled to be paid for “some of the time” during which they were subject to call, with the amount to be determined by the trier of fact. The second challenge was to the lunch policy, which required workers at job sites to remain awake and be alert for trespassing and the theft of tools. However, only part of the class worked the daytime shift, to which the lunch policy applied. We held that as to both of these claims, the purported class was “hopelessly heterogenous” because liability would require significant individual fact-finding and many of the workers had no conceivable claim at all. Id. at 725-26. We further held that the individual plaintiffs must either file individual suits, create homogenous classes, or ask the union to file grievance proceedings under the collective bargaining agreement. Id. at 726. Because the purported class here is made up of plaintiffs who each have a different combination of subclaims, defendants argue that it is similarly heterogenous and was properly dismissed in favor of arbitration.
Appellants argue that this case is different from Jonites because the plaintiffs here appear to be similarly situated with regard to individual subclaims, but are heterogenous only because there are several different combinations of those subclaims. For example, whether any given paramedic is entitled to recover on the uniform pay theory depends on the legal question of whether such pay should have been included in the base rate, and the simple factual question of whether the particular paramedic received uniform pay. Instead of dismissing their claims as heterogenous, plaintiffs argue, the district court should have allowed them to split their claims into homogenous subclasses. See, e.g., Fravel v. County of Lake, No. 2:07-cv-253, 2008 WL 2704744 (N.D.Ind. July 7, 2008) (allowing plaintiffs to proceed collectively and grouping the plaintiffs into four distinct subclasses depending on which theory of liability applied to them). Plaintiffs suggest that here, as in Fravel, “[r]esolving common questions as a class, even through the additional mechanism of sub-classes, remains inherently more efficient” than splitting the action into four separate collective actions or allowing individual claims by each plaintiff. Id. at *3.
The district court appeared to agree with the plaintiffs’ characterization of their subclaims, noting that the City’s liability to any particular plaintiff on any given subclaim turns only upon a single uniform policy and whether that policy impacted that particular plaintiff. However, the district court refused to adopt the Fravel approach, concluding that the number of subclaims made the plaintiffs “hopelessly heterogenous” and that arbitration would be more efficient.
A district court has wide discretion to manage collective actions. See Hoffmann-La Roche v. Sperling, 493 U.S. 165, 171 (1989). However, it appears that here the district court may have mistakenly read Jonites to forbid it from adopting a subclaim approach merely because the variety of subclaims renders the class “heterogenous.” The problem with the Jonites class, however, was not that the plaintiffs had different subclaims, but rather that determining whether any given plaintiff had a viable claim depended on a detailed, fact-specific inquiry, and many plaintiffs lacked any conceivably viable claim altogether. Jonites, 522 F.3d at 723, 725-26; see also Mooney v. Aramco Services Co., 54 F.3d 1207, 1214-15 (5th Cir.1995), overruled on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003) (affirming decertification of collective action where employees who brought ADEA claim were subject to “vastly disparate employment situations” and defense was likely to center on purported reasonable factors other than age specific to each employee). If common questions predominate, the plaintiffs may be similarly situated even though the recovery of any given plaintiff may be determined by only a subset of those common questions.
Similarly, the district court mistakenly compared the efficiency of proceeding through subclaims only to the perceived efficiency of arbitration. Plaintiffs have the right to proceed individually and may be able to form more tailored classes. See Jonites, 522 F.3d at 725 (noting that a collective bargaining agreement cannot preempt or waive a worker’s right to a judicial remedy for FLSA violations). Thus, if it appears plaintiffs are prepared to proceed individually or through separate classes, the district court must consider whether these other mechanisms for judicial resolution of their claims are more or less efficient than a collective action comprised of various subclaims. Cf. Fravel, supra. In Jonites, the circumstances suggested that plaintiffs had “no stomach for proceeding case by case.” Id. at 726. Here, the twelve Caraballo plaintiffs filed their complaint as individuals and moved for summary judgment as individuals. Indeed, there is nothing apparent from the record to indicate that the fifty-four named plaintiffs in Alvarez were unwilling to proceed individually. Yet the district court dismissed their claims in favor of arbitration without considering whether it was better to address sixty-five individual claims or one collective action comprised of ten subclaims.
Finally, the district court erred when it dismissed the claims of the named plaintiffs. When a collective action is decertified, it reverts to one or more individual actions on behalf of the named plaintiffs. See Hipp v. Liberty Nat’l Life Ins. Co., 252 F.3d 1208, 1218 (11th Cir.2001) (citing Mooney, 54 F.3d at 1213-14); see also Fox v. Tyson Foods, Inc., 519 F.3d 1298, 1301 (11th Cir .2008) (affirming decertification of an FLSA collective action, dismissal of the opt-in plaintiffs, and severance of each of the named plaintiffs into separate individual actions). Defendants do not argue that arbitration under the collective bargaining agreement preempts litigating these issues in federal court. Plaintiffs are entitled, at minimum, to pursue their claims individually. Whether they are permitted to do so in one action or several is committed to the sound discretion of the district court, but misjoinder of parties is never a ground for dismissing an action. See Fed.R.Civ.P. 21. We therefore reverse the district court’s dismissal of the named plaintiffs’ claims in both the Alvarez and Caraballo actions.
Sifting through the subclaims of each of the myriad plaintiffs is an unenviable task. But plaintiffs are nonetheless entitled to their day in court. Moreover, it appears that here, common questions predominate with regard to each theory of liability. The parties have already filed cross-motions for summary judgment on the merits of these common questions. After the district court determines the validity of these subclaims, calculation of each plaintiff’s award (if any) will be largely mechanical. On remand, given that the claims of the named plaintiffs will still be before it, the district court should consider whether a collective action might be the most efficient judicial resolution of this matter after all.”
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N.D.W.Va.: An FLSA Employer Held Liable For FLSA Violations Has No Right To Contribution Or Indemnification; Allowing Same Would Contravene The Purposes Of The FLSA
McDougal v. G & S Tobacco Dealers, L.L.C.
This case was before the Court on the Defendant/Third-Party Plaintiff’s (and current owner of the employer) and the Third-Party Defendant’s (former employer) cross motions for summary judgment. In a nutshell, what started as a simple FLSA claim, “expanded into contract claims for indemnification and contribution by the [current] employer [Woodward] against the former owner [Oliverios] of the company that employed Plaintiff.”
Among other issues, the Court discussed whether there was any pleaded theory that could impose a duty of indemnity or contribution on the previous owner [Oliveros] for the current owner’s [Woodward’s] non-payment of Plaintiff for the time Plaintiff worked for Defendant, subsequent to the time Woodward took ownership of the company that employed Plaintiff. Holding that no such duty of indemnity or contribution existed, the Court explained:
“1. With respect to Woodward’s claim for indemnification, contribution and breach of statutory or agency duties, the doctrine of conflict or obstacle preemption is dispositive.
Woodward’s state common law claims of contractual and implied indemnification and contribution against Oliverios for wages and benefits damages not paid to McDougal after July 17, 2007 in violation of FLSA and WPCA are preempted by the doctrine of conflict or obstacle preemption.
On the same date the parties argued the instant cross-motions for summary judgment before this Court, the Fourth Circuit Court of Appeals published its decision in Equal Rights Center, et al v. Archstone Multifamily Series I Trust, et al, 09-1453.
The following facts and claims of Archstone are analogous to the facts and claims of the instant case: Archstone hired architect Bolton to design multi-family apartment buildings which Archstone then had various contractors build. Of the units constructed, Equal Rights Center, et al alleged 71 failed to be constructed so that they were accessible to persons with disabilities in violation of FHA and ADA. Archstone and the Equal Rights Plaintiffs entered into a Consent Decree which required Archstone to retro-fit the 71 units to make them ADA and FHA compliant and to pay 1.4 million in damages and attorneys fees and expenses. Bolton did not join in the settlement but later entered into a separate consent decree with the Equal Rights Plaintiffs which did not include any admission of liability. Archstone cross-claimed against Bolton seeking damages based on state law causes of action: express indemnity; implied indemnity; breach of contract; and professional negligence. After lengthy discovery and immediately prior to the dispositive motions deadline, Archstone sought leave to amend its cross-claim against Bolton to include a claim for contribution. Bolton objected. The District Court denied leave to amend. Thereafter the District Court granted Bolton summary judgment reasoning that Archstone’s causes of action were indemnity and de facto indemnity claims for violations of the FHA and ADA and, because no right to indemnification exists under the ADA or FHA, the state law claims asserted by Archstone would be antithetical to the purposes of the FHA and ADA and therefore preempted under the doctrine of conflict or obstacle preemption. Archstone appealed. The Court of Appeals affirmed holding:
Obstacle preemption applies “where state law; stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ “ …. where a state-law claim “interferes with the methods by which the federal statute was designed to reach [its] goal.” (internal citations omitted).
Obstacle preemption has been extended to state tort claims as well as positive enactments of state law. Id. citing Geier v. Am. Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000).
Finding Archstone’s indemnification claims were preempted, the Court held:
Here, Archstone sought to allocate the full risk of loss to Niles Bolton for the apartment buildings at issue. Allowing an owner to completely insulate itself from liability for an ADA or FHA violation through contract diminishes its incentive to ensure compliance with discrimination laws. If a developer of apartment housing, who concededly has a non-delegable duty to comply with the ADA and FHA, can be indemnified under state law for its ADA and FHA violations, then the developer will not be accountable for discriminatory practices in building apartment housing. Such a result is antithetical to the purposes of the FHA and ADA.
The Court further held Archstone’s last minute attempt to amend its cross-claim was properly denied as prejudicial to Bolton. Moreover, the Court held: “As presented on appeal, the claim which Archstone presents in its amended complaint is a de facto indemnification claim, and such a claim is preempted under federal law. Therefore, allowing Archstone to amend under these circumstances to include a so-called contribution claim is, in any event, futile.”
A number of cases have addressed the issue of whether there is a right to contribution or indemnification for employers held liable under the FLSA and have held there is none. Herman v. R.S.R. Security Servs. Ltd., 172 F.3d 132, 143 (2nd Cir.1999). Relying on the rationale expressed in Northwest Airlines, Inc. v. Transport Workers Union of America, AFL-CIO, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981), the Herman Court held:
There is no right of contribution or indemnification for employers found liable under the FLSA. The reasons are readily apparent. First, the text of the FLSA makes no provision for contribution or indemnification. Second, the statute was designed to regulate the conduct of employers for the benefit of employees, and it cannot therefore be said that employers are members of the class for whose benefit the FLSA was enacted. Third, the FLSA has a comprehensive remedial scheme as shown by the express provision for private enforcement in certain carefully defined circumstances. Such a comprehensive statute strongly counsels against judicially engrafting additional remedies. Fourth, the Act’s legislative history is silent on the right to contribution or indemnification. Accordingly, we hold that there is no right to contribution or indemnification for employers held liable under the FLSA.
In Herman, Portnoy contended that even if the FLSA did not permit contribution or indemnification, those claims could be prosecuted under New York law in much the same way Woodward contends she should be permitted to prosecute claims for indemnification against Oliverios under West Virginia law. The Herman Court held: “This view of the law is flawed because the FLSA’s remedial scheme is sufficiently comprehensive as to preempt state law in this respect.” Herman v. R.S.R. Security Servs. Ltd., supra at 144.
The Fourth Circuit held in the 1992 case of Lyle v. Food Lion, Inc. 954 F.2d 984, 987: “In effect, Food Lion sought to indemnify itself against Tew for its own violation of the FLSA, which the district court found, and we agree, is something the FLSA simply will not allow. As the fifth Circuit has noted, ‘[t]o engraft an indemnity action upon this otherwise comprehensive federal statute would run afoul of the Supremacy Clause of the Constitution’ and ‘would undermine employers’ incentives to abide by the Act. LeCompt v. Chrysler Credit Corp., 780 S.2d 1260, 1264 (5th Cir.1986).’ “
In the instant suit, Oliverios were the employers of McDougal prior to July 17, 2007 and therefore responsible for any FLSA and WPCA claims arising for work performed by McDougal up to July 17th. However, Woodward uses the warranty and indemnification clauses of the 2007 contract in an attempt to hold Oliverios liable for Woodward’s failure to pay McDougal FLSA wages after July 17, 2007. In the alternative to the contract indemnification claim, Woodward attempts to shift ultimate responsibility for payment of post July 17, 2007 FLSA wages to Oliverios using equitable principles. In every event, Woodward seeks to delegate her duty to comply with the FLSA to Oliverio for all wages and damages owed including those starting with the contract closing on July 17, 2007. This she cannot do. The FLSA does not contain language that provides for such indemnification or contribution. Woodward is not a member of the class protected by the FLSA. The FLSA is a comprehensive remedial statute designed to give employees the right to sue their employers for violations of the act. This is precisely what McDougal did in bringing his action against Woodward. Herman, supra at 144. This court cannot and will not engraft an indemnity clause on the FLSA where there is none. LeCompt, supra at 1264.
Accordingly, the Court concludes that Woodward’s Third Party Plaintiff claims against Oliverios for indemnification or contribution to McDougal’s FLSA claims arising post July 17, 2007 whether the same are based on contractual or equitable contribution, indemnification, breach of contract, breach of warranty, agency, or another state contract or equity claim, are preempted by the provisions of the FLSA; are antithetical to the purpose of the FLSA; undermine the public policy established by the FLSA; and are barred by the doctrines of Conflict and Obstacle Preemption.
Even if Woodward, in light of the absence of the availability of contribution and/or indemnification for the FLSA claims of McDougal, contends that she is entitled to contribution from Oliverios solely for WVPA damages claimed by McDougal, that contention also fails. The federal court only recognizes a right to contribution under state law “in cases in which state law supplie[s] the appropriate rule of decision.” Northwest Airlines, Inc. v. Transport Workers Union of America, AFL-CIO, supra at 97. The West Virginia’s Wage Payment and Collection Act (W.Va.Code, § 21-5-1 et seq.) provides a comprehensive method for employees forcing their immediate or ultimate employer to timely pay them in accord with law. It does not provide authorization or a method or a rule of decision for allocating claims of contribution toward the liability of the employer to timely pay his employee’s wages. Nor does it provide or recognize any method, contractual or equitable, for shifting the burden of paying wages in accord with law from the employer to a third person.”
Not discussed here, the Court held that language from the contract of sale of the employer from Oliverios to Woodward was binding, to the extent that Oliverios was required to pay the cost of Woodward’s legal defense arising from the lawsuit.
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