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N.D.Miss.: Court Rejects Retaliatory Counterclaims in FLSA Case
Hale v. KTG USA, Inc.
A recent decision out of the Northern District of Mississippi underscores that courts do not look favorably upon what appear to be retaliatory counterclaims, asserted by defendant-employers in the context of FLSA claims. In Hale v. KTG USA, Inc., the individual defendant filed a counterclaim in response to the plaintiff’s FLSA claims, asserting that the FLSA claims had negligently inflicted emotional distress on him and/or interfered with his business relations. On the plaintiff’s motion, the court dismissed counterclaims relying on well-settled Fifth Circuit authority which typically does not allow such counterclaims.
Background
Plaintiff Dameon Hale alleged he worked as many as 60 to 80 hours per week in KTG’s shipping yard from April 2023 to November 2024 without receiving overtime pay as required under the FLSA. He named both KTG and Robert L. Ruth, Jr., doing business as RBT Transportation, as his employers and defendants in the action. In response, Ruth filed a counterclaim accusing Hale of negligent infliction of emotional distress and interference with business relations, alleging the filing of the FLSA suit against KTG caused him personal harm and risked his business ties with the company. Hale moved to dismiss.
The Court’s Analysis
The court characterized Hale’s motion as a facial Rule 12(b)(1) jurisdictional attack and found Ruth’s claims squarely barred under Fifth Circuit precedent. The Fifth Circuit has long prohibited employer counterclaims in FLSA cases where those claims function as set-offs or seek damages against employees, citing Brennan v. Heard and subsequent reaffirmations such as Martin v. PepsiAmericas. The rationale is policy-driven: FLSA proceedings should focus narrowly on employer compliance with minimum wage and overtime rules, not devolve into collateral disputes about employer-employee grievances.
Although Ruth argued his claims were “compulsory” because they arose from the same transaction, the court disagreed. Even if jurisdiction could theoretically exist, the court declined to exercise supplemental jurisdiction under § 1367(c)(4), pointing to Fifth Circuit precedent rejecting such counterclaims as fundamentally inconsistent with the purpose of the Act.
Takeaways for Practitioners
This decision reinforces what most of us practicing in this space already know: employer counterclaims in FLSA cases are typically not well-received by courts, absent the extremely narrow “set-off” exception where the employer is acknowledging and crediting previously paid wages. This ruling is useful when opposing retaliatory counterclaims designed to intimidate plaintiffs. It’s also a strong reminder to defense counsel—pursuing unrelated tort claims against an FLSA plaintiff in federal court is typically a losing strategy.
Click Hale v. KTG USA, Inc. to read the entire decision.
D.Ct.: Approval of FLSA Settlement Denied Based on Non-Reemployment Clause
Shorter v. Greenwich Homecare LLC
Each year federal courts are asked review and approve FLSA settlements in thousands of cases. In some Circuits like the Second and the Eleventh, settlements must be approved for fairness under almost all circumstances. Certain clauses, like general releases and non-disparagement often raise red flags and result in denial of approval. Although many employer-defendants and their counsel often seek to include non-reemployment clauses in such settlement agreements, a recent case from the District of Connecticut holds that such clauses may be taboo as well.
In that case, the court held that inclusion of a non-reemployment clause in the settlement agreement in an individual FLSA/wage and hour case was impermissible and thus, denied the motion for approval. Addressing the issue, the court explained:
ORDER denying 63 Motion for Settlement Approval. The Court finds that approval of the proposed settlement is precluded by an impermissible provision of the agreement itself. The settlement agreement here contains a total ban on Plaintiff’s ability to seek future employment with Defendant. See ECF No. 63 -2 Paragraph 4.3. The FLSA “was not created as a vehicle for employers to fire their employees,” and thus courts in this circuit generally do not approve any agreement by the parties containing a “no re-employment clause.” Vega v. Brown Roofing Co., Inc., No. 3:21-cv-64 (CSH), 2021 WL 6048926, at *5 (D. Conn. Nov. 19, 2021) (collecting cases). The parties have included no caselaw as to why the inclusion of this provision should be permitted.
Thus, the court denied the motion for settlement approval without prejudice, and directed the parties to address what it referred to as “the problematic agreement provision” in a renewed motion, “either by removing it or explaining why its inclusion is permissible under relevant authorities.”
Because the clause often provides little relief to the defendant-employers who seek its inclusion, it might be wise to forego such clauses going forward when settling FLSA cases in jurisdictions that require judicial approval of such settlements.
E.D.Tex.: Texas Court Strikes Down DOL Overtime Rule
Texas v. United States Department of Labor
Last week, in a long-awaited decision, the U.S. District Court for the Eastern District of Texas struck down the 2024 Rule issued by the U.S. Department of Labor (DOL), which aimed to increase the salary threshold for the executive, administrative, and professional (EAP) exemptions under the Fair Labor Standards Act (FLSA). The rule which would have provided overtime for approximately 4,000,000 workers who do not currently receive it.
The case continued a back and forth in which Democrat administrations have sought to expand workers’ rights by increasing the salary thresholds required to maintain overtime exemptions, and Republican appointed judges have invalidated the rules, stripping workers of enhanced rights provided by DOL promulgated regulations.
Background of the Case
The FLSA mandates that most employees must receive at least the federal minimum wage and overtime pay for hours worked beyond 40 in a workweek. However, certain employees are exempt from these requirements, particularly those classified under the EAP exemptions. Historically, the DOL has set a minimum salary level to qualify for these exemptions.
In April 2024, the DOL announced the 2024 Rule, which significantly raised the minimum salary threshold for EAP employees—from $684 to $844 per week starting July 1, 2024, and further to $1,128 per week by January 1, 2025. Additionally, the rule included an automatic indexing mechanism for future salary increases based on contemporary earnings data every three years.
The Legal Challenge
Texas, along with a coalition of business organizations, argued that the DOL overstepped its statutory authority by effectively prioritizing salary over the actual duties performed by employees. They contended that the changes would displace the duties-based test required by the FLSA and improperly classify millions of employees as nonexempt from overtime pay, despite no changes to their job responsibilities.
The court’s analysis began with the text of the FLSA, which does not explicitly specify a minimum salary for the EAP exemption. The DOL has historically exercised its authority to define and delimit this exemption, but the court emphasized that such authority has limits—primarily that the focus should remain on the duties performed by employees rather than solely their salary.
The Court’s Ruling
Judge Sean D. Jordan ruled in favor of Texas and the business organizations, stating that the DOL’s 2024 Rule was an unlawful exercise of agency power. The court held that the rule’s changes effectively eliminated the consideration of job duties in favor of a predominately salary-based exemption test, contravening the FLSA’s intent.
The ruling detailed that the DOL’s increase in salary thresholds and the implementation of automatic indexing would improperly classify millions of employees as nonexempt, thereby violating the fundamental purpose of the EAP exemption, which is to protect workers who perform executive, administrative, or professional duties.
Implications of the Decision
This ruling has far-reaching implications for employers and employees alike. By vacating the 2024 Rule, the court has reinstated the previous salary thresholds and reaffirmed the importance of the duties test in determining exemption status.
This order effectively reverts the minimum weekly salary requirement back to the 2019 number, $684 per week (except in jurisdictions, such as California and New York, which have higher minimum requirements under state law). In the months leading up to the July 1 increase, many employers reclassified workers as nonexempt. In theory, employees who were converted to nonexempt due to the July 1 increase may now be reclassified to exempt, if desired.
It is anticipated that the DOL will appeal this decision to the Fifth Circuit. However, any appeal most certainly will not be resolved by the Jan. 1 effective date of the next planned increase, and the new administration may ultimately abandon the appeal at a later date if it is still pending. The 2019 rule, which is now once again in effect, was issued under the previous Trump administration.
Key takeaways at this time are:
- The minimum salary for exempt status under federal law is once again $684 per week, with limited exceptions.
- Employees who earned between $684 and $844 per week and were reclassified as nonexempt as a result may be reclassified as exempt, provided they continue to meet one of the applicable job duties tests.
- The anticipated increase to $1,128 per week on Jan. 1, 2025, will not occur.
- Any future revisions to the minimum salary will not face an uphill battle, ostensibly freezing wages for millions of Americans paid relatively moderate salaries.
Click Texas v. United States Department of Labor to read the entire decision.
Fifth Circuit Strikes Down DOL’s Tip Credit Regulation
Restaurant Law Center v. Department of Labor
Due to its conservative bent, the Fifth Circuit has long been a hotbed of litigation challenging regulations of all sorts, typically in cases brought by business groups. In a recent decision, the then-current Department of Labor (DOL) regulation setting limits on when a business can take advantage of the FLSA’s tip credit rules and pay less than the regular minimum wage was struck down, potentially opening the floodgates for restaurants and bars to pay sub-minimum wages to a much greater extent than previously, at least in certain parts of the country where the regulation had arguably displaced case law allowing restaurants free reign as long as a portion of employees’ work constituted “tipped” duties. Taking up the regulation, the Fifth Circuit vacated the regulation, voiding the provision nationwide.
Background
The Fair Labor Standards Act (FLSA) permits tipped employees to receive $2.13 per hour in a direct wage, so long as the combination of their direct wage and tips equals at least the $7.25 hourly minimum wage.
Consistent with relatively longstanding agency authority (save for the Trump DOL), in 2021, the DOL issued a final rule that codified earlier DOL guidance, often referred to as the “80/20” or “20%” rule. That rule, codified DOL agency position that first appeared in the DOL’s field handbook in 1988, and placed limits on the amount of time an employee could spend on non tip-producing work each week, to the extent the employer wished to take advantage of the tip credit and pay such a worker less than the regular minimum wage. Specifically, the regulation limited such non-tipped work to 20% of the employee’s hours in a given workweek, if an employer wished to take the tip credit.
The final rule distinguished between tip-producing work, such as waiting tables and bartending, and work that directly supports tip-producing work, such as setting and bussing tables. The final rule challenged also imposed a new “30-minute” restriction. Under the 30 minute rule, employers could not pay the tipped minimum wage for work exceeding 30 continuous minutes during a shift that a tipped employee may spend performing tasks that are “directly supporting” tipped work.
The Decision
In a decision directly contrary to that from at least 2 sister circuit courts that preceded the current rule, the Fifth Circuit held the 2021 tip rule is contrary to law and arbitrary and capricious because it draws an impermissible, arbitrary line between tip-producing and tip-supporting work, and conflicts with the statutory scheme that Congress established under the FLSA. Thus, the Fifth Circuit struck down and vacated the rule.
Where Does That Leave Us
The appellate court’s decision vacating the 2021 tip rule is a win for restaurant and hospitality industry employers who would prefer to pay sub-minimum wages for as many hours as they can, relying largely on the generosity of their patrons to ensure that their employees make a fair wage. It is unclear whether the DOL will seek en banc review before the full Fifth Circuit or petition the Supreme Court for review, given both Court’s currently overtly business and anti-regulatory bent.
In the meantime, the vacation of the 80/20/30 rule means that the rules in place prior will govern. However, because the case law differs in different places across the country, with some courts like the 8th and 11th Circuits signaling approval of the preceding 80/20 rule, it appears that the law might differ depending on where a business operates in the country. Moreover, the Fifth Circuit indicated that the “dual jobs” regulation notwithstanding its opinion. Thus, there is a likelihood that what was previously characterized as an 80/20 issue will morph to dual jobs litigation, where employees will contend that they are performing duties so untethered from their principal duties as servers that they are actually performing 2 distinct jobs (and the employer violated the law by taking the tip credit relative to the non-tipped job).
This sets up yet another election issue as well. While both Trump and Harris have signaled that they might be open to a change of tax law to cease taxing tips, the prior Trump DOL supported regulations which allowed restaurant/bar/club employers to pay significantly lower direct wages for many more hours of “non-tipped” work, whereas the regulation struck down was a product of the Biden/Harris DOL. Thus, it’s likely the Trump DOL would again fight to roll-back tipped employees’ rights, where as a Harris DOL would seek to protect workers and move towards new regulation similar to that which was struck down, but which might pass muster in the courts in the years ahead.
In the meantime, many states’ wage and hour laws will continue to provide more protections for tipped employees than the current federal laws.
If you believe that your employer is not paying you in compliance with applicable federal and state laws, contact Andrew Frisch for a free consultation today.
Click Restaurant Law Center v. Department of Labor to read the entire decision.
DOL Issues Final Rule Raising Salary Threshold for Exempt “White Collar” Employees
After a lengthy comment period, the U.S. Department of Labor (DOL) issued its final rule on April 23, 2024, and raised the salary threshold for “white collar” employees to be exempt from federal overtime requirements under the Fair Labor Standards Act (FLSA). The new rule significantly increases the minimum salary requirement for executive, professional, and administrative employees, effective July 1, 2024. In other words, once the new rule goes into effect, an employer will have to pay such employees a significantly higher minimum weekly salary in order to legally classify them as exempt from overtime under the FLSA.
Currently, to be exempt from federal overtime requirements under the FLSA, a white-collar worker must receive a guaranteed base salary of at least $684 per week ($35,568 per year), in addition to satisfying the applicable “duties” test. The newly propagated rule increases this minimum salary threshold, initially to $844 per week ($43,888 per year) as of July 1, 2024, and then to $1,128 per week ($58,656 per year) as of January 1, 2025. Thereafter, the rule provides for an automatic update to the threshold every three years levered to statistical wage data.
The rule also raises the annualized salary threshold for white-collar workers to qualify under the “highly compensated employee” overtime exemption. As of July 1, 2024, this threshold would increase from $107,432 to $132,964, then on January 1, 2025, it would increase to $151,164, and thereafter the threshold would be updated every three years based on wage data.
The new rule does not modify the duties test for either the white-collar or highly compensated employee exemption, which also must be satisfied for an employee to properly be classified as exempt from federal overtime pay requirements. Likewise, the new rule does not impact employees subject to other overtime exemptions, for which the salary-basis test is not an element of the exemption (e.g. truck drivers or seasonal employees).
Click FINAL RULE to read the rule in its entirety. Click summary chart to see a chart of the applicable dates and thresholds.
9th Cir.: District Court Properly Limited Employer’s Communications With Putative Collective Members Regarding Lawsuit After Employer Misleadingly Sought Releases/Arbitration Agreements Post-Suit
Dominguez v. Better Mortgage Corporation
In an appeal addressing issues which frequently confront district courts when managing FLSA collective action and prospective opt-ins to such cases, the Ninth U.S. Circuit Court of Appeals recently affirmed a district court’s order imposing restrictions on the employer-defendant’s communications with its current employees regarding the claims in the lawsuit.
The issue arose after Lorenzo Dominguez, a former underwriter for Better Mortgage Corporation, filed a putative collective/class action in which he alleged that the company violated federal and state wage and hour laws, primarily because it failed to pay Dominguez and its other underwriters overtime.
Just days after Dominguez sued, the New York-based company offered workers $10,000 to sign a retention agreement that required them to agree to an updated at-will employment agreement with a new arbitration provision that would cover Dominguez’s claims, in order to continue their employment. Better Mortgage also offered workers a release agreement that indicated they were being paid $5,000 to release their claims in the Dominguez lawsuit, according to court documents. All three agreements included a warning in bold that said “Do Not Share This Email.”
Dominguez filed a motion asking the district court to invalidate both the release agreements and the new employment agreements, arguing that Better Mortgage’s ability to communicate with putative class and collective action members without court approval should be restricted. Better Mortgage argued that such restrictions were improper and would impermissibly restrain its First Amendment rights.
The district court agreed with Dominguez, and held that Better Mortgage obtained signatures on the new employment agreements and release agreements through coercion and misleading information. As such, it invalidated the agreements.
The court also required Better Mortgage to send a court-approved curative notice to the underwriters and prohibited the company from communicating with putative class members except in writing as approved by the court.
Better Mortgage appealed.
The Ninth Circuit affirmed the restriction on communications, finding it both justified and narrowly tailored to the situation.
Citing longstanding FLSA jurisprudence the Ninth Circuit explained:
The Supreme Court recognizes that district courts have the duty and the power to oversee communications from both defendants and class counsel with potential class members and FLSA collective action participants, but also that this power must be exercised cautiously”.
Here, the district court exercised the appropriate caution, the court found:
The district court’s detailed order shows a careful analysis of the prior communications and how those communications affected the employees’ understanding of their options in this pending lawsuit,” the court explained. “The misleading and coercive nature of these efforts was clear.”
The court reasoned that the restriction on communications was substantiated because, the district court “paid attention to the timing of the messages, to how the different messages presented inconsistent and thus confusing information, and to missing content that could have helped employees better evaluate their options.”
Better Mortgage argued that the restriction was too broad. Specifically, it argued that the restriction should have been narrowed to permit it to discuss wage and hours matters with employees and obtain factual information to defend itself in the litigation. Citing this argument, the Ninth Circuit said it demonstrated that–in the absence of the restriction–Better Mortgage intended to continue communicating with current employees in ways related to the lawsuit.
Thus, the Ninth Circuit held the district court acted within its discretion in finding that narrowing the restriction would have allowed Better Mortgage to circumvent the order.
As such the panel affirmed the district court’s order restricting communications between Better Mortgage and current employees regarding wage and hour issues to written communications, which had to be approved by the district court before transmitted.
Click Dominguez v. Better Mortgage Corporation to read the entire opinion, including the dissent.
11th Cir.: Nanny Who Worked Overnight Shifts Not Domestic Live-In Employee and Thus Overtime Eligible
In a reported decision issued on Wednesday, the 11th Circuit reversed the trial court seemingly applying clear law that a nanny who did not reside on her premises with the family whose children she took care of, and held that such an arrangement was not live-in domestic employment. As such, the court reversed the decision of the trial court, which had held that the nanny was exempt from the FLSA’s overtime provisions as a live-in domestic employee. In so doing, the court adopted much of the argument raised by the DOL in its amicus brief in the case. However, the 11th Circuit remanded for further findings regarding whether the parents of the nanny’s charges were here employer, finding that issues of fact precluded a finding on that issue.
Addressing the principal issue of whether the plaintiff was a “domestic” or not, the court found the issue to be clear-cut: “No doubt Blanco worked at the house and spent significant time there. But that alone does not mean she ‘resided’ there any more than firefighters who sleep in fire-station dormitories while on duty reside at a fire station,” the panel said.
The court further noted that the plaintiff’s job was “hardly a typical arrangement” of a live-in nanny.
The panel noted that while the plaintiff did sleep, at times, when she was on duty to take care of the children, the place she slept was not her own, as she shared the bed she slept in with other nannies, and the room in which she slept with 2 of the couple’s smallest children. Further, the court noted that if/when a child woke up in and/or cried in the middle of the night, she would “immediately respond”. Thus, “though Blanco may have slept sometimes while the children slept, her time was not hers,” the panel said.
The panel also noted as significant that the plaintiff lacked her own key to the house, adding that the mere fact that she had left personal belongings at the residence and some religious decorations, and occasionally had guests over didn’t make the house her own. Likewise, the court noted that the plaintiff maintained her own separate residence and paid rent to live in her aunt’s nearby apartment, where she typically returned at the end of her shifts, so that she could sleep in her own bed.
The court also rejected the defendant-parents’ argument that Blanco would be overtime-exempt under a 2013 U.S. Department of Labor rule that aimed at expanding FLSA protections. While the language of the preamble to the rule seemed to signal that five consecutive nights is the appropriate measuring stick to determine whether a nanny lived at someone’s residence, the court noted that such language was contained in the preamble to the rule and not the text of the actual rule’s text, and thus not a proper source of interpretive guidance.
The court also noted that the defendant-parents’ arguments regarding application of the rule/preamble ignored the context in which the five consecutive nights phrase is included, reasoning that such argument failed to consider the plaintiff’s four off-duty days that preceded the five days on-duty.
As such, the court concluded that the plaintiff was not an exempt domestic service employee as a matter of law. However, the court held that issues of fact regarding application of the “economic realities” test to plaintiff’s employment, required further findings by the trial court as to whether the defendant-parents were plaintiff’s employers under the FLSA.
Among the factual issues the court cited were the fact that: (1) one defendant testified she didn’t give any directions to the nannies on how to care for her children or control or supervise the plaintiff; (2) the defendants’ testimony that they didn’t know how much the nannies received in wages, as the mother testified that she paid about $2,400 per week to Amazing Gracie LLC, one of the two companies the parents used to hire the nannies that was managed by one of the nannies who worked for the family; and (3) the defendant-mother’s testimony that she didn’t know how plaintiff had started working for the family. In light of these factual issues, the court held that the defendants presented enough evidence to show that “they had minimal oversight over the nannies’ care for their children” and thus there remained a question of fact as to whether they were the plaintiff’s employer, upon application of the “economic realities” test.
Click Blanco v. Anand Samuel to read the entire opinion.
Click DOL Amicus to read the DOL’s amicus brief.
DOL Seeks to Raise Salary Threshold for White Collar Exemption to Overtime
On August 30, 2023, the U.S. Department of Labor (DOL) released a Notice of Proposed Rulemaking (NPRM) that would significantly raise the minimum weekly salary to qualify for one of the Fair Labor Standards Act’s (FLSA) three white-collar exemptions. If the changes go into effect, they would have a significant impact on how employers pay their employees and who is or is not entitled to overtime pay.
Specifically, the DOL proposes raising the weekly salary by over 50 percent from $684 per week to $1,059 per week (which is the equivalent to an annual salary of $55,068). The DOL also seeks to increase the annualized salary threshold for the exemption for “highly compensated employees” (HCE) from $107,432 per year to $143,988 per year. Finally, the DOL proposes automatically updating these earnings thresholds every three years.
The Proposed Rule
According to the DOL’s press release, the proposed rule seeks to accomplish four (4) primary goals:
- Restore and extend overtime protections to low-paid salaried workers. Many low-paid salaried employees work side-by-side with hourly employees, doing the same tasks and often working over 40 hours a week. Because of outdated and out-of-sync rules, however, the DOL believes these low-paid salaried workers are not getting paid time-and-one-half for hours worked over 40 in a week. The DOL’s proposed salary increase would help ensure that more of these low-paid salaried workers receive overtime protections traditionally provided by the DOL’s rules.
- Give valuable time back to workers who are not exempt under the executive, administrative or professional exempt classifications. By better identifying which employees are executive, administrative or professional employees who should be overtime exempt, the proposed rule will better ensure that those who are not exempt will gain more time with their families or receive additional compensation when working more than 40 hours a week.
- Prevent a future erosion of overtime protections and ensure greater predictability. The rule proposes automatically updating the salary threshold every three years to reflect current earnings data.
- Restore overtime protections for US territories. From 2004 until 2019, the DOL’s regulations ensured that for US territories where the federal minimum wage was applicable, so too was the overtime salary threshold. The DOL’s proposed rule would return to that practice and ensure that workers in the US territories subject to the federal minimum wage have the same overtime protections as other US workers.
The DOL further stated in the FAQs that “[a]utomatically updating the salary level and HCE total annual compensation requirement using the most recent data will ensure that these tests continue to accurately reflect current economic conditions.” The FAQs further noted that the proposed rule includes a provision that would allow “the Department to temporarily delay a scheduled automatic update where unforeseen economic or other conditions warrant.”
As with the most recent 2019 rule, which increased the salary and total annual compensation requirements for the EAP and HCE exemptions, the DOL has not proposed any changes to the duties tests, which outline the types of primary duties an employee must perform in order to be classified as exempt (in addition to receipt of a salary at or above the threshold).
Read more about the NPRM in the DOL’s official press release.
Supreme Court Confirms That a Day Rate is Not a Salary
Helix Energy Solutions Group Inc. v. Hewitt
In a widely anticipated opinion, on February 22, 2023, the Supreme Court of the United States ruled that an employee who was paid a daily rate more than $684 per day, who received a total of more than $200,000 per year, was not paid on a “salary basis” as required for application of the highly-compensated employee (HCE) exemption. As such, the court held that he was entitled to overtime pay under the Fair Labor Standards Act (FLSA) notwithstanding his high total annual earnings.
The ruling will have wide-ranging implications the oil and gas industry, the nursing field, and other industries which often rely on “day rate only” pay schemes and pay schemes which pay high hourly rates (but no overtime) to attract workers to remote locations, often on short notice.
Relevant Facts
The case concerned an employee who alleged he had been misclassified as exempt from the FLSA’s overtime provisions, and improperly denied overtime premium compensation. He worked twenty-eight day “hitches” on an offshore oil rig where he would work daily twelve-hour shifts, often seven days per week, totaling 84 hours a week. Throughout his employment, the plaintiff was on a daily-rate basis, without overtime compensation, earning between $963 and $1,341 per day, an amount that equated with more than $200,000 annually.
Helix had argued that the plaintiff fell under the DOL’s exemption for highly compensated employees found in 29 C.F.R. §541.601. At the time of the toolpusher’s employment, the highly compensated employee (HCE) exemption applied to employees whose primary duties included performing office or non-manual work; who customarily and regularly performed at least one duty of an exempt executive, administrative, or professional employee; and who were paid at least $455 per week on a “salary or fee basis”; and who earned at least $100,000 annually. (Currently, the threshold salary and total compensation amounts are $684 per week and $107,432 annually, respectively.)
Opinion of the Court
In its decision, the high court stated that the “critical question” in this case was whether the plaintiff was paid on a “salary basis” pursuant to 29 C.F.R. §541.602(a). That regulation states that an employee is paid on a “salary basis” when the “employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation.”
Helix had argued that in any week in which the employee performed any work, he was guaranteed to receive an amount above the $455 weekly threshold, such that his compensation met the requirements of the salary basis test.
The court rejected this argument, holding that §541.602(a) “applies solely to employees paid by the week (or longer)” and the test is “not met when an employer pays an employee by the day.” The court noted that a companion regulation, 29 C.F.R. §541.604(b), allows an employee’s earnings to be computed on an hourly, daily, or shift basis without violating the salary basis requirement, that regulation states that the arrangement must include a guarantee of at least the minimum weekly required amount paid on a salary basis and that there be a reasonable relationship between the guaranteed amount and the amount actually earned. However, the parties in this case agreed that the plaintiff’s compensation failed the reasonable relationship test, such that the sole issue was whether his admitted day rates qualified as a “salary basis” within the meaning of §541.602(a).
Writing for the court, Justice Elena Kagan stated that “[i]n demanding that an employee receive a fixed amount for a week no matter how many days he has worked, §602(a) embodies the standard meaning of the word ‘salary’” which generally refers to a “steady and predictable stream of pay.” Justice Kagan stated that even a “high-earning employee” who is compensated on a “daily rate—so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on” is “not paid on a salary basis, and thus entitled to overtime pay.”
Key Takeaway
The court’s decision will likely have wide-ranging impact. Employers have long-argued that the FLSA was not intended to protect highly-compensated employees, notwithstanding the unambiguous language of the statute itself and the DOL’s regulations. The majority squarely rejected this reasoning, adopting a typically conservative textualist approach and holding that the regulations mean precisely what they say and must be strictly construed to protect employees, both low-wage and higher-wage.
Click Helix Energy Solutions Group Inc. v. Hewitt to read the entire opinion of the court and the dissents.
9th Cir.: LA County Was Joint Employer of Home Healthcare Workers, Liable Under the FLSA
Ray v. Los Angeles County Department of Public Social Services
In a recent published opinion, the Ninth Circuit held that Los Angeles County is a joint employer of state-provided home health care aides and is liable for alleged failures to pay those aides sufficient overtime wages, the Ninth Circuit held Friday. The opinion partially reversed the lower court’s which held that the County was not jointly for the wage violations alleged.
The case arose from California’s In-Home Supportive Services program, a publicly-funded initiative under which the state and counties pay the wages of certain in-home care providers who assist low-income elderly, blind and disabled residents. In 2017, IHSS provider Trina Ray sued both the California Department of Social Services and the LA County Department of Public Social Services, alleging that the governments jointly employed her and failed to pay time and a half overtime premiums.
The district court granted LA County summary judgment, largely relying on the fact that the county had no hand in issuing paychecks to IHSS workers. Rejecting the reasoning of the lower court, the Ninth Circuit held that the county still had sufficient economic control over the program, noting that counties provide 35% of the program’s budget, and counties are able to negotiate for higher-than-minimum wages for home care workers among other things.
Thus, the panel held that counties were joint employers alongside the state under existing Ninth Circuit precedent, reasoning.
However, the panel split on whether the state-level centralization of the IHSS program’s payroll system meant that the county’s FLSA violations were willful. The majority concluded that the state’s ultimate control of pay processes meant counties had no ability to provide overtime pay without authorization.
Writing in partial dissent, U.S. Circuit Judge Marsha Berzon disagreed with the majority’s finding that the county’s FLSA violations were in good faith. Regardless of whether the county or state ordinarily handled payroll, Judge Berzon said that joint employers were individually and jointly responsible for ensuring compliance with the FLSA under Bonnette, prior Ninth Circuit precedent.
“Allowing joint employers to avoid liability for violations of the FLSA by showing they ordinarily did not perform a particular employer function would risk undermining the statute’s remedial purposes,” Judge Berzon said.
It would appear that the dissent is correct in that FLSA, does not permit a finding of “good faith” simply in reliance on or because a joint employer was more actively responsible for the unpaid wages. Rather, well-settled law requires an employer to demonstrate affirmative steps that it undertook to ascertain and comply with the FLSA’s requirements, which appear to be lacking here.
Click Ray v. Los Angeles County Department of Public Social Services to read the entire Opinion.
Click Nurse Wages to learn more about wage and hour rights of home health aides (HHAs), certified nurse assistants (CNAs), licensed nurse practitioners (LPNs) and registered nurses (RNs).
Overtime Law Blog 