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6th Cir.: Collective Action Waivers in Employees’ Separation Agreements Did Not Validly Waive Employees’ Rights to Participate in Collective Action Under FLSA, Absent Valid Arbitration Provision
Although this one is not exactly breaking news, we are discussing it because of its importance in the general landscape of FLSA jurisprudence. As discussed here, this case was before the Sixth Circuit on Plaintiffs’ appeal, regarding an issue of first impression. Specifically, the Sixth Circuit was asked to decide whether an agreement by employees to waive their rights to participate in a collective action under the FLSA can be enforceable in the absence of an agreement to arbitrate their FLSA claims. Reversing the district court, the Sixth Circuit held that such agreements are unenforceable, absent an agreement to arbitrate the claims in an alternative forum, because in such a situation there is no congressional interest that weighs against the remedial goals of the FLSA.
In this case, former employees of the Defendant brought putative collective action against their former employer to recover overtime wages under the Fair Labor Standards Act (FLSA). The district court determined that collective-action waiver in certain employees’ separation agreements was enforceable, despite the fact that the separation agreements contained no agreement to arbitrate their FLSA claims. The employees appealed, and the Sixth Circuit reversed.
Framing the parties’ respective positions, the Sixth Circuit explained:
This brings us to the merits regarding the validity of the unmodified collective-action waivers. The plaintiffs argue that this court’s decision in Boaz v. FedEx Customer Information Services, Inc., 725 F.3d 603 (6th Cir.2013), controls because it holds that an employee will not be bound by a contract entered into with his employer that has the effect of limiting his rights under the FLSA. In response, KeHE argues that cases upholding agreements that require employees to submit to arbitration on an individual basis are more on point. No court of appeals appears to have squarely addressed this issue outside of the arbitration context.
Given its recent related decision in Boaz, the Sixth Circuit began by discussing that case’s implications on the issue presented in this case:
This court’s decision in Boaz provides the relevant framework for the issue before us. In Boaz, the plaintiff-employee signed an employment agreement that contained a provision requiring her to bring any legal action against the defendant-employer within “6 months from the date of the event forming the basis of [the] lawsuit.” Id. at 605. When the plaintiff filed an FLSA lawsuit after the six-month time period had elapsed, the defendant moved for summary judgment, arguing that her claims were untimely under the employment agreement.
This court disagreed. It first noted that “[s]hortly after the FLSA was enacted, the Supreme Court expressed concern that an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights … to minimum wages, overtime, or liquidated damages.” Id. at 605–06. The Boaz court concluded that because the waiver of the statutory-limitations period would have deprived the plaintiff of her FLSA rights, the provision was invalid. Id. at 606. It also rejected the defendant’s argument that a plaintiff may waive procedural rights under the FLSA, just not substantive ones. Id. Finally, the court distinguished cases enforcing an employee’s agreement to arbitrate his or her claims on an individual basis due to the strong federal presumption in favor of arbitration. Id. at 606–07 (distinguishing Floss v. Ryan’s Family Steak Houses Inc., 211 F.3d 306 (6th Cir.2000), on that basis).
Following its own reasoning from the Boaz decision, the Sixth Circuit concluded that normally a plaintiff’s right to participate in a collective action under 29 U.S.C. 216(b) cannot be waived:
Boaz therefore implies that a plaintiff’s right to participate in a collective action cannot normally be waived. The court clearly said that “[a]n employment agreement cannot be utilized to deprive employees of their statutory [FLSA] rights.” Id. (alteration in original) (internal quotation marks omitted). And “Congress has stated its policy that ADEA plaintiffs [and thus FLSA plaintiffs because the statutory language is identical] should have the opportunity to proceed collectively.” Hoffmann–La Roche Inc. v. Sperling, 493 U.S. 165, 170, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). We have little reason to think that the right to participate in a collective action should be treated any differently than the right to sue within the full time period allowed by the FLSA. The concern, Boaz explained, is that “an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights under the Act.” 725 F.3d at 605.
Conscious of the body of law that has permitted collective action waivers when they are contained in agreements containing arbitration clauses, the court was careful to distinguish such cases:
We are aware, of course, that the considerations change when an arbitration clause is involved. Boaz explained that “an employee can waive his right to a judicial forum only if the alternative forum allow[s] for the effective vindication of [the employee’s] claim.” Id. at 606–07 (alteration in original) (internal quotation marks omitted). Arbitration, it noted, is such a forum. Id. at 606. But this line of precedents is of only minimal relevance here because the plaintiffs’ collective-action waivers in this case contained no arbitration clause. And, in any event, none of our precedents permitting arbitration of FLSA claims has addressed employees’ collective-action rights.
KeHE nonetheless points to cases from other circuits enforcing agreements to arbitrate FLSA claims on an individual basis. As KeHE notes, the Eleventh Circuit recently addressed the jurisprudence of the courts of appeals on collective-action waivers in the arbitration context in Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir.2014). It determined that
all of the circuits to address this issue have concluded that § 16(b) does not provide for a non-waivable, substantive right to bring a collective action. See Sutherland v. Ernst & Young LLP, 726 F.3d 290, 296–97 & n. 6 (2d Cir.2013) (determining that the FLSA does not contain a “contrary congressional command” that prevents an employee from waiving his or her ability to proceed collectively and that the FLSA collective action right is a waivable procedural mechanism); Owen [v. Bristol Care, Inc.], 702 F.3d [1050,] 1052–53 [ (8th Cir.2013) ] (determining that the FLSA did not set forth a “contrary congressional command” showing “that a right to engage in class actions overrides the mandate of the FAA in favor of arbitration”); Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 298 (5th Cir.2004) (rejecting the plaintiffs’ claim that their inability to proceed collectively deprived them of a substantive right to proceed under the FLSA because, in Gilmer [v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) ], the Supreme Court rejected similar arguments regarding the ADEA); Adkins [v. Labor Ready, Inc.], 303 F.3d [496,] 503 [ (4th Cir.2002) ] (determining that a plaintiff failed to point to any “suggestion in the text, legislative history, or purpose of the FLSA that Congress intended to confer a non-waivable right to a class action under that statute” and that the plaintiff’s “inability to bring a class action, therefore, cannot by itself suffice to defeat the strong congressional preference for an arbitral forum”); cf. D.R. Horton [v. NLRB ], 737 F.3d [344,] 362 [ (5th Cir.2013) ] (determining that the National Labor Relations Act does not contain a contrary congressional command overriding the application of the FAA).
Id. at 1336. The Eleventh Circuit then joined this emerging consensus. Id. Crucially, however, the respective waiver agreements in all of the above-cited cases included provisions subjecting the employees to arbitration. See Walthour, 745 F.3d at 1330 (noting the existence of an arbitration*592 agreement between the parties); Sutherland, 726 F.3d at 296 (same); Owen, 702 F.3d at 1052 (same); Carter, 362 F.3d at 298 (same); Adkins, 303 F.3d at 498 (same).
These circuit decisions, in turn, rely on the Supreme Court’s decisions in Gilmer, 500 U.S. at 35, 111 S.Ct. 1647 (“We conclude that Gilmer has not met his burden of showing that Congress, in enacting the ADEA, intended to preclude arbitration of claims under that Act.”), and American Express Co. v. Italian Colors Restaurant, ––– U.S. ––––, 133 S.Ct. 2304, 2309, 186 L.Ed.2d 417 (2013) (holding that “[n]o contrary congressional command requires us to reject the waiver of class arbitration here”). See Walthour, 745 F.3d at 1331 (citing Gilmer and Italian Colors); Sutherland, 726 F.3d at 296 (quoting Italian Colors ); Carter, 362 F.3d at 298 (citing Gilmer); Adkins, 303 F.3d at 502 (citing Gilmer ). Accordingly, none of the foregoing authorities speak to the validity of a collective-action waiver outside of the arbitration context.
Thus, the Sixth Circuit concluded that, in the absence of a valid arbitration agreement, a collective action waiver is unenforceable because there is no countervailing federal policy (i.e. the FAA) that outweighs the remedial policy articulated in the FLSA:
Because no arbitration agreement is present in the case before us, we find no countervailing federal policy that outweighs the policy articulated in the FLSA. The rationale of Boaz is therefore controlling. Boaz is based on the general principle of striking down restrictions on the employees’ FLSA rights that would have the effect of granting their employer an unfair advantage over its competitors. Requiring an employee to litigate on an individual basis grants the employer the same type of competitive advantage as did shortening the period to bring a claim in Boaz. And in cases where each individual claim is small, having to litigate on an individual basis would likely discourage the employee from bringing a claim for overtime wages. Boaz therefore controls the result here where arbitration is not a part of the waiver provision.
Click Killion v. KeHE Distributors, LLC to read the Sixth Circuit’s decision.
In an announcement that has long been awaited by workers advocates and those in the home health industry as well, today the United States Department of Labor (DOL) announced a final rule, to go into effect on January 1, 2015, which extends the FLSA’s minimum wage and overtime protections to home health aides that perform typical CNA tasks in the homes of the aged and infirm. In an email blast, the DOL reported:
The U.S. Department of Labor’s Wage and Hour Division announced a final rule today extending the Fair Labor Standards Act’s minimum wage and overtime protections to most of the nation’s direct care workers who provide essential home care assistance to elderly people and people with illnesses, injuries, or disabilities. This change, effective January 1, 2015, ensures that nearly two million workers – such as home health aides, personal care aides, and certified nursing assistants – will have the same basic protections already provided to most U.S. workers. It will help ensure that individuals and families who rely on the assistance of direct care workers have access to consistent and high quality care from a stable and increasingly professional workforce.
Among other things, the final rule overrules the 2007 holding of the Supreme Court in Long Island Care at Home, Ltd. v. Coke, and requires 3rd party employers such as staffing agencies to pay companions and home health workers overtime under the FLSA when they work in excess of 40 hours per week.
The New York Times provides a pretty good synopsis of the changes to the Companionship Exemption, provided by the final rule:
Under the new rule, any home care aides hired through home care companies or other third-party agencies cannot be exempt from minimum wage and overtime coverage. The exemptions for aides who mainly provide “companionship services” — defined as fellowship and protection for an elderly person or person with an illness, injury or disability who requires assistance — are limited to the individual, family or household using the services.
If an aide or companion provides “care” that exceeds 20 percent of the total hours she works each week, then the worker is to receive minimum wage and overtime protections.
The new rule defines care as assisting with the activities of daily living, like dressing, grooming, feeding or bathing, and assisting with “instrumental activities of daily living,” like meal preparation, driving, light housework, managing finances and assisting with the physical taking of medications.
The companionship exemption will not apply if the aide or companion provides medically related services that are typically performed by trained personnel, like nurses or certified nursing assistants.
Live-in domestic service workers who reside in the employer’s home and are employed by an individual, family or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked.
S.D.N.Y.: Where Successor Liability Alleged, “Successor in Interest” Need Not Meet the $500,000 Threshold As Long as the Previous Employer Did
Alvarez v. 40 Mulberry Restaurant, Inc.
This case was before the court on the defendant’s motion for summary judgment. Plaintiff alleged that the defendant at issue was a “successor in interest” to his actual employers, whom he actively worked for and whose failure to pay him pursuant to the FLSA gave rise to his claims. The defendant alleged to be the “successor in interest” such that it had derivative liability (of plaintiff’s actual employers), asserted that the case was due to be dismissed against it, because plaintiff could not show that it grossed $500,000.00 or more in annual sales during the periods relevant to the claim. Explaining that this was an incorrect reading of the law, the court reasoned that the successor employer was covered, so long as the plaintiff’s actual employers were subject to enterprise coverage under the FLSA. However, because neither the plaintiff, nor the defendants addressed the issue of whether the plaintiffs actual employers were covered enterprises, the court remanded the case for further discovery on this issue.
Discussing the issue, the court explained:
Defendants 40 Mulberry and Chin claim that, because it has not been established that AR Restaurant has ever grossed $500,000 or more in annual sales, Alvarez’s FLSA claim must be dismissed. That is incorrect.
The FLSA covers only those workers employed by an “enterprise” that is “engaged in commerce.” 29 U.S.C. § 207. “An entity constitutes an enterprise where ‘the related activities performed (either through unified operation or common control) by any person or persons [are] for a common business purpose.’ ” Rodriguez v. Almighty Cleaning, 784 F.Supp.2d 114, 121 (E.D.N.Y.2011) (quoting 29 U.S.C. § 203(r)). An enterprise is “engaged in commerce or in the production of goods for commerce” if, inter alia, it: (1) “has employees engaged in commerce or in the production of goods for commerce;” or “has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person;” and (2) its “annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated).” 29 U.S.C. § 203(s)(1)(A)(i)-(ii).
Defendants argue that, because the summary judgment record would not permit a fact finder to conclude that AR Restaurant has ever grossed $500,000 or more in annual sales, Alvarez cannot sue 40 Mulberry and Chin under the FLSA. But that does not logically follow. It is correct that, on the record before the Court, AR Restaurant’s financial condition would prevent an employee from suing under the FLSA based on work done at AR Restaurant. But Alvarez is not seeking to impose liability on 40 Mulberry and Chin based on AR Restaurant’s activities. Instead, he is claiming that, during his employment at the former Asia Roma, which ended in July 2010, the former Asia Roma (1) had $500,000 or more in annual sales; and (2) violated the FLSA’s substantive obligations as to overtime and other pay. He further alleges that defendants 40 Mulberry and Chin are responsible for those violations as successors in interest. Assuming arguendo that Asia Roma had $500,000 in annual revenues required by the FLSA in, say, 2009, the fact that AR Restaurant has not had such revenues would not shield defendants, if properly held to be responsible for Asia Roma’s conduct, from liability for FLSA violations during 2009. The financial condition of AR Restaurant is thus not determinative. The relevant question is, instead, whether Asia Roma was a qualifying “enterprise engaged in commerce” when it employed Alvarez, and whether 40 Mulberry and Chin are answerable for Asia Roma’s liabilities.
It does not appear that the parties have focused their discovery efforts on the critical question of whether Asia Roma had the requisite sales during Alvarez’s employment. However, this question is potentially dispositive, and the Court believes it must be addressed promptly.
The Court, accordingly, grants the parties one month to conduct further discovery—by means including, but not limited to, subpoenas to Asia Roma, Chan, Lee, or any other relevant party, person, or entity—on the question of whether Asia Roma constituted an “enterprise engaged in commerce” during the period of Alvarez’s employment. After the close of discovery, the Court will afford the defendants two weeks to move for summary judgment on the issue of whether Asia Roma was an “enterprise engaged in commerce” during the years it employed Alvarez. If summary judgment is granted for the defendants on that ground, such that Alvarez’s FLSA claims cannot go forward, the Court expects to dismiss, without prejudice, his state law claims. If, on the other hand, the FLSA sales threshold is met by competent evidence for all or some of these years, discovery may then go forward on the remaining issues in the case.
The court also denied the defendants’ motion for summary judgment to the extent they sought a finding that the subsequent business was not a successor in interest, reasoning that under the relevant tests (the traditional common law test OR the “substantial continuity test”) a finder of fact could certainly find that the subsequent business was a successor in interest to plaintiff’s actual employers.
Click Alvarez v. 40 Mulberry Restaurant, Inc. to read the entire Opinion & Order.
S.D.Fla.: “Gross Volume of Sales” For Purposes of Determining Enterprise Coverage Does Not Include Unrealized Revenue Attributable to Coupons or Discounts
Marckenson v. LAL Peker, LLC
Anyone who has been following for the last few years knows that the issue of “enterprise coverage,” relatively dormant for decades, has been hotly litigated throughout the Southern and Middle Districts of Florida-2 hotbeds of FLSA litigation- in recent years. In another recent decision weighing in on the issue, Judge Michael Moore in the S.D.Fla. was asked to decide whether the $500,000 annual gross sales requirement must take into account unrealized sales/revenues attributable to coupons or discounts a business gives to its customers. Specifically, here it was undisputed that the defendant-employer recorded actual sales of less than $500,000.00 per year during the relevant years. However, when discounts and coupons (unrealized revenue) were factored in, its sales rose above the $500,000.00 threshold. The defendants moved for summary judgment asserting that they were not a “covered enterprise” under the FLSA. The court agreed and granted the defendants summary judgment.
Discussing the issue, the court stated:
“The issue before the Court is whether “gross volume of sales made or business done” as used in 29 U.S.C. § 203(s)(1)(A) incorporates unrealized revenue attributable to coupons or discounts provided to customers. Interpretations of the FLSA are determined ultimately by the Court. See Mitchell v. Zachry, 362 U.S. 310, 80 S.Ct. 739, 4 L.Ed.2d 753 (1960); Kirschbaum v. Walling, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638 (1942); see also 29 C.F.R. § 779.8 (2011). In interpreting the FLSA, the Court may rely on official interpretations of the FLSA promulgated by the Department of Labor. Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944) (“[T]he rulings, interpretations and opinions of the Administrator under [the FLSA], while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.”); Dade Cnty. Fla. v. Alvarez, 124 F.3d 1380, 1385 (11th Cir.1997). Title 29 C.F.R. § 779.259 provides helpful guidance in interpreting “gross volume of sales made or business done”:
The gross volume of sales made or business done means the gross dollar volume (not limited to income) derived from all sales and business transactions including, for example, gross receipts from service, credit, or other similar charges. Credits for goods returned or exchanged and rebates and discounts, and the like, are not ordinarily included in the annual gross volume of sales or business…. Gross volume is measured by the price paid by the purchaser for the property or service sold to him …
29 C.F.R. § 779.259 (2011) (emphasis added). When a coupon or discount is provided to a customer free of consideration, a true price reduction occurs, and the new price paid by the customer represents the sale amount. This is consistent with the Department of Labor’s view that “gross volume of sales” is measured by the price actually “paid by the purchaser for the property or service sold to him.” Id. Consequently, having found this interpretation reasonable, this Court adopts a view of “gross volume of sales made or business done” that excludes lost revenue attributable to coupons or discounts provided to customers.
In light of this interpretation, it is clear that enterprise coverage does not apply to Defendants. Excluding approximately $103,000 in discounts provided to customers from Plaintiff’s FY 2010 gross sales calculation, Defendants “gross volume of sales made or business done” falls well short of the $500,000 threshold required by 29 U.S.C. § 203(s)(1)(A). This is substantiated by the tax forms submitted on behalf of Defendants for fiscal years 2009 and 2010. Moreover, Plaintiffs alleged personal knowledge that Defendants’ weekly sales revenues “averaged above $8,000.00 per week and on occasions exceeded $11,000.00,” is insufficient to create a genuine issue of material fact in light of Plaintiff’s implicit acceptance and overt reliance on Defendants’ monthly sales reports from August 2009 through April 2011. Even discounting Plaintiffs acceptance of Defendants’ monthly sales reports, Plaintiffs’ alleged personal knowledge in no way conflicts with the amount of income reported by Defendants. Without any further specificity as to how much revenue Defendants’ collected, or without any articulation by Plaintiff as to how often and for what duration he closed Defendants’ register, Plaintiff’s assertion does not amount to more than a conclusory allegation. Thus, summary judgment on the issue of enterprise coverage is awarded in favor of Defendants.”
Click Marckenson v. LAL Peker, LLC to read the entire Order.
In his recent article, “Taking the Employer Out of Employment Law? Accountability for Wage and Hour Violations in an Age of Enterprise Disaggregation,” Professor, Timothy P. Glynn of Seton Hall School of Law makes a compelling argument that the answer is yes.
In the abstract to his article, Professor Glynn explains:
“Violations of wage and hour mandates are widespread at the low end of the labor market. The disaggregation of business enterprises into smaller, independent parts has been an important factor in this growing problem. Limitations on liability for work-law violations invite such arrangements since statutory protections for workers usually impose duties only on “employers.” That status, in turn, hinges on the level of control a firm exercises over the work, and when exacting control is not necessary, firms usually can avoid accountability by shifting work to independent third-party suppliers. This creates severe enforcement obstacles: detection becomes difficult, labor suppliers often are undercapitalized, and coverage uncertainties lead to unprosecuted claims and discounted settlements. Thus, disaggregation does far more than shift legal responsibility from one entity to another: it allows end-user firms to avoid noncompliance risks while benefiting from labor at a price discounted by the unlikelihood of enforcement.”
Thus, Professor Glynn proposes “eliminating the ’employer’ coverage barrier altogether.” Under his approach, “commercial actors would be held strictly liable for wage and hour violations in the production of any goods and services they purchase, sell, or distribute, whether directly or through intermediaries. The only limitation is that a firm’s liability would not exceed the proportion of the violations attributable to the goods or services it purchases, sells, or distributes.”
Adopting this less restrictive coverage requirement would lead to easier enforcement of wage and hour laws and thus, fewer abuses at the low end of the labor market. It doesn’t appear that there’s any push to adopt these logical changes which would no doubt further the remedial goals of wage and hour laws, but it’s a refreshing perspective nonetheless. In this day and age, Professor Glynn’s recognition that a modern fractured economy is far different than the economy of the past, with fewer larger actors, is largely unaddressed by wage and hour laws that are currently on the books.
Click Abstract to read more on Professor Glynn’s work.
Thanks to the Workplace Prof Blog for bringing this to our attention.
C.D.A.C.: Court Declines to Adopt “Economic Reality” Test and Confirms Prisoners Are Not Covered by FLSA
Shipley v. Woolrich, Inc.
This case was before the court on plaintiff’s appeal of an order dismissing his FLSA case below, based on the fact that, as a federal prisoner, he was not an employee subject to FLSA coverage. The district court sua sponte dismissed the complaint, relying on the D.C. Circuit’s decision in Henthorn v. Dep’t of the Navy, 29 F.3d 682, 686 (D.C . Cir.1994), in which they noted that convicted criminals are not protected by the Thirteenth Amendment against involuntary servitude and that a prisoner is barred from asserting a claim under the FLSA where the prisoner’s labor is compelled and/or where any compensation he receives is set and paid by his custodian.
On appeal the plaintiff argued that the court should adopt an “economic reality” test based on whether the labor in question involves a “service,” such as the janitorial chores performed in Henthorn, or rather involves a “good,” such as the making of clothes performed by the plaintiff.
Rejecting this argument, the court reasoned:
“In Henthorn the appellant asked us to adopt a somewhat similar “economic reality” test that would have made a distinction, for purposes of applying the FLSA, between work inside or outside the prison compound. We declined the request, holding instead that a prerequisite to finding that an inmate is covered “under the FLSA is that the prisoner has freely contracted with a non-prison employer to sell his labor.” 29 F.3d at 686. Here we likewise reject Shipley’s request and follow our holding in Henthorn.
In Henthorn we stated that at the pleading stage “a federal prisoner seeking to state a claim under the FLSA must allege that his work was performed without legal compulsion and that his compensation was set and paid by a source other than the Bureau of Prisons itself.” Id. at 687. Here, Shipley has made no allegation that his work was voluntary or that he was paid by anyone other than UNICOR, an entity within the organizational structure of the Bureau of Prisons.”
While the court made clear that work performed for a private entity may sometimes qualify a prisoner as an “employee” subject to the FLSA coverage, such facts were not present here.
Click Shipley v. Woolrich, Inc. to read the entire Opinion.
S.D.Fla.: Assistants At Medical Office Properly Allege Individual Coverage Under The FLSA, Based On Evidence Of Regular Communications With Out-Of-State Insurers, Patients And Vendors
Lopez v. Pereyra
Plaintiffs brought this action to recover unpaid overtime wages under the Fair Labor Standards Act (“FLSA”). Defendant was an obstetrics and gynecological doctor’s office located in Hollywood, Florida. Plaintiff Carmen Lopez was a medical assistant in the Office from October 31, 2006 through January 23, 2009. Plaintiff Dawn Serra was an administrative assistant in the Office from May 2, 2006 through May 1, 2009. Plaintiffs alleged that the Office met the requirements of an enterprise under the FLSA and that each Plaintiff also qualified for individual coverage because they engaged in commerce. Defendant moved for summary judgment arguing that the Office was not an enterprise as defined by the FLSA and Plaintiffs were not individually engaged in interstate commerce so as to trigger individual coverage. The Court agreed that Defendant was not an enterprise engaged in commerce, based on its tax returns showing revenue of less than $500,000.00 per year. However, the Court denied Defendant’s Motion as to individual coverage, holding that Plaintiffs’ allegations of regular communications with out-of-state insurers, out-of-state patients and out-of-state vendors, if true, satisfied the “engaged in commerce” test for individual coverage.
Discussing the applicability of individual coverage, the Court stated:
“For individual coverage to apply under FLSA, an employee must present evidence that he or she was (i) engaged in commerce or (ii) engaged in the production of goods for commerce. See Thome v. All Restoration Services, Inc., 448 F.3d 1264, 1265-1266 (11th Cir.2006).FN4 The Eleventh Circuit found that to “engage in commerce,” a plaintiff must “directly participat[e] in the actual movement of persons or things in interstate commerce.” Thome, 448 F.3d at 1266. When determining individual coverage, the character of the employee’s activities is determinative, not the nature of the employer’s business. Overstreet v. N. Shore Corp., 318 U.S. 494, 498 (1943).
FN4. The Department of Labor takes the position that the “[s]hipment of goods from another State direct to a customer located in the same State as the distributor who ordered the shipment, constitutes interstate commerce by virtue of which [ ] the distributor’s employees who procured the shipment … are covered by the FLSA as being engaged in interstate commerce.” Field Operations Handbook (FOH), Wage and Hour Division, U.S. Dep’t of Labor, § 11 i15 (1994). Although not entitled to Chevron deference, the Department of Labor’s Field Operations Handbook has been held to be persuasive and entitled to some weight in judicial interpretations of the FLSA. See Martin v. Occupational Safety and Health Review Comm’n, 499 U.S. 144, 157, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991); Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1275 (11th Cir.2008).
A key factor in determining if a plaintiff engaged in commerce for purposes of individual coverage under the FLSA is whether such activities were a “regular and recurrent” part of the plaintiff’s employment duties. 29 C.F.R. 776.10(b). The “employee’s interstate activity must be regular and recurrent and not simply isolated or sporadic for jurisdiction to exist.” Dent v. Giaimo, 606 F.Supp.2d 1357, 1360 (S.D.Fla.2009) (citing Scott v. K.W. Max Investments, Inc., 256 Fed. App’x 244, 247 (11th Cir.2007)); see also Curry v. High Springs Family Practice and Diagnosis Center, Inc., 2009 WL 3163221 (N.D.Fla. Sept.30, 2009) (granting summary judgment on FLSA claim by doctor’s assistant who performed primarily administrative functions and had only sporadic contact with out-of-state insurers).
The Court finds that there is a factual dispute regarding whether individual coverage applies to each Plaintiff. Defendants rely heavily on the Dent case where the court found no individual coverage for a medical assistant working in a local doctor’s office. Judge Ryskamp’s decision in Dent presents a similar, though distinguishable, factual scenario. Dent can be distinguished on two grounds, which ultimately require a different result.
First, Judge Ryskamp found that “although some patients may have been residents of other states, defendant was not engaged in interstate commerce if his contact with those patients was primarily local.” Dent, 606 F.Supp.2d at 1361. In Dent, “there [was] no evidence to suggest that defendant solicited business from patients while they were out of state or that any contract with out of state patients was regular or recurrent.” Id. Conversely, the Declaration of Carmen Lopez states that “[o]n a weekly basis I … made telephone calls to patients located in Santo Domingo and other states.”
Second, in Dent, “although the plaintiff averred that her job duties included contacting out of state insurance companies she did not allege how much of her time was spent conducting these activities.” 606 F.Supp.2d at 1361 (emphasis in original). Therefore, the court reasoned that “[i]t could be that [other individuals in the office] conducted the majority of those activities and that plaintiff only occasionally contacted out of state insurance companies.” Id. Here, the Declaration of Dawn Serra states that she “used to telephone [ ] insurance companies outside of Florida to verify patient insurance coverage at least three (3) times each work day.” DE 38-2 ¶ 5. Further, Ms. Serra declares that her job duties “each work day” also included (i) “mailing twelve (12) to twenty five (25) billing and other insurance forms to insurance companies outside of Florida;” id. ¶ 6, and (ii) “opening mail containing checks and other documents from insurance companies outside of Florida.” Id. ¶ 7.
In addition, Defendants rely on Thorne to argue that “[w]ith respect to the supplies and equipment used by the [Office], Plaintiffs do not allege that the [Office] engaged in the sale of goods that came from other states.” DE 42 at 5. “Plaintiffs’ ‘activities were not rendered interstate commerce simply because [the Office], an ultimate consumer, purchased goods which had previously moved in interstate commerce.’ “ Id. (quoting Thome, 448 F.3d at 1267). This argument holds true with respect to medical supplies used by the Office such as syringes, latex gloves and surgical sutures. The same cannot be said with respect to products and medications for which the Office’s patients were the ultimate consumer. In this regard, Ms. Lopez states that she “regularly used the telephone to call businesses to order from outside of Florida birth control medications for patients, birth control devices for patients and bladder control devices for patients.” Id. ¶ 5. Ms. Lopez also attests that she used “the telephone weekly to call patient insurance companies outside of Florida to obtain authorization for medications that the insurance companies did not cover.” Id. ¶ 6.
Finally, Defendants argue that Plaintiffs’ Declarations are vague and rely on words such as “regularly.” Defendants claim that such statements are conclusory and fail to “state the frequency with any particularity.” DE 42 at 4. Defendants claim is not entirely accurate as each Declaration does contain certain specific statements regarding the frequency of employment activities. Moreover, Defendant has not provided the Court with any telephone records, invoices or patient information that would enable this Court to conclude that Plaintiffs did not engage in commerce on a “regular and recurrent” basis. Cf. Curry v. High Springs Family Practice and Diagnosis Center, Inc., 2009 WL 3163221 (N.D.Fla. Sept.30, 2009).
In Curry, the plaintiff relied on an affidavit describing the number of times she communicated with out-of-state insurers. Id. at *1. “In response, Defendants provided detailed billing records for all phone and facsimile lines at the walk-in-clinic from the relevant time period.” Id. Based on this evidence, the Court granted summary judgment in favor of defendants finding that plaintiff’s contact with out-of-state insurers was sporadic at best. Id. at *4. In this case, the parties have relied solely on conflicting declarations and, therefore, the Court can only decide this issue by making credibility determinations. “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions ….” Anderson, 477 U.S. at 255. Therefore, whether each Plaintiff qualifies for individual coverage is factually in dispute and must be decided by the trier of fact. Accordingly, Defendant’s Motion for Summary Judgment will be denied on the issue of individual coverage.”
N.D.Ind.: Employee Of Used Car Business, Who Purchased Cars From Other States At Auto Auctions, Subject To Individual Coverage Of FLSA
Kelley v. Stevens Auto Sales
Plaintiff sued Defendants alleging violations of the Fair Labor Standards Act, (FLSA) 29 U.S.C. § 201, et seq., and several Indiana statutes. This matter is before the Court on cross motions for summary judgment. Of interest, as discussed here, the Defendants argued that neither they, nor Plaintiff, individually was subject to FLSA coverage. The Court denied Defendants’ Motion, finding that Plaintiff could be entitled to individual coverage based on his duties while working for Defendants.
The following facts were relevant to the Court’s inquiry on the coverage issue:
“Defendant Dave Stevens is the president of Defendant Dave Stevens Auto Sales, Inc. (SAS). In 2007, SAS was in the business of selling used cars in Peru, Indiana. Plaintiff worked for SAS for part of that year as its only employee. His duties included traveling to Fort Wayne, Indiana, to buy used cars at auction establishments and reselling them to customers at the SAS sales lot in Peru. According to Defendant Stevens, some of the vehicles SAS purchased at the auctions were titled to owners from states other than Indiana. Stevens was Plaintiff’s boss; he determined how Plaintiff was compensated.”
Denying Defendants’ Motion as to the individual coverage issue the Court stated:
“The FLSA requires employers to pay a minimum wage if the employer is a covered enterprise or the employee is a covered individual within the meaning of the Act. 29 U.S.C. § 206(a). A covered enterprise is one that (1) “has employees engaged in commerce or the production of goods for commerce or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person” and (2) “is an enterprise whose annual gross volume of sales made or business done is not less than $500,000.” 29 U.S.C. § 203(s)(1)(A) (i-ii). If enterprise coverage applies, all of the enterprise’s employees are protected under the FLSA, even if they are not personally involved in interstate commerce. See Boekemeier v. Fourth Universalist Soc’y in the City of New York, 86 F.Supp.2d 280, 284 (S.D.N.Y.2000). The FLSA also protects individual employees who are “engaged in commerce or in the production of goods for commerce,” 29 U.S.C. § 207(a)(1), regardless of whether their employers qualify as covered enterprises. See, e.g., Marshall v. Whitehead, 463 F.Supp. 1329, 1341 (M.D.Fla.1978).
Plaintiff concedes that SAS is not a covered enterprise, but maintains that he qualifies for individual coverage because he was engaged in interstate commerce when he worked for SAS. To determine whether an employee is engaged in interstate commerce in this context, the focus is on what the employee actually does. It is not enough that the employee’s activities affect or indirectly relate to interstate commerce: they must be “actually in or so clearly related to the movement of the commerce as to be a part of it.” McLeod v. Threlkeld, 319 U.S. 491, 497 (1943). For example, handlers of goods for a wholesaler who moves them interstate are engaged in interstate commerce, while those employees who handle goods after acquisition by a merchant for local distribution are not. Id. At 494, (citin g Walling v. Jacksonville Paper Co., 317 U.S. 564 (1943); Higgins v. Carr Bros. Co., 317 U.S. 572 (1942)). An interruption in the movement of goods that have traveled interstate does not remove them from interstate commerce simply because they do not again cross state lines; they remain in interstate commerce until they reach the customers for whom they are intended. Jacksonville Paper Co., 317 U.S. at 335.
Neither party has directed the Court to cases in any jurisdiction with facts similar to those presented here, nor has the Court’s independent research uncovered any. However, applying the general principals discussed above, the Court must deny Defendants’ motion for summary judgment. The Court concludes that buying vehicles titled to out-of-state owners at auction, for resale to the ultimate consumer, constitutes engaging in interstate commerce, even if the vehicles did not cross a state line again after the purchase. Plaintiff has designated enough evidence that he engaged in interstate commerce as an employee of SAS to create a question of fact for trial. Moreover, the Court must also deny Plaintiff’s motion for summary judgment on the issue of whether he is a covered employee, because the evidence does not establish as a matter of law that at all times relevant to his claim he was engaged in interstate commerce.”
2nd Cir.: Private Non-Profit Foster Home Not “Enterprise” Subject To FLSA Coverage, Notwithstanding Contractual And Regulatory Relationship With A Public Agency
Jacobs v. New York Foundling Hosp.
Appellants appealed from a judgment of the United States District Court for the Eastern District of New York (Azrack, M.J.) granting, inter alia, appellee’s (employer’s) motion for summary judgment and dismissing appellants’ claim that they were unlawfully denied overtime pay in violation of the Fair Labor Standards Act of 1938, 29 U.S.C. § 207(a)(1). Appellants contended appellee is an “enterprise” obligated to pay overtime because certain contractual and regulatory relations render its activities “in connection with the activities of a public agency” pursuant to § 203(r)(2)(C) and thus “performed for a business purpose.” The Second Circuit disagreed and affirmed the judgment below.
On appeal, the Employees contended that Foundling, a private, non-profit, independent contractor, is an “enterprise” under 29 U.S.C. § 203(r)(1) because its contractual and regulatory relations with the New York City Administration for Children’s Services (“ACS”) render its activities “in connection with the activities of a public agency” pursuant to 29 U.S.C. § 203(r)(2)(C) and thus “performed for a business purpose.” Accordingly, the Employees claimed, Foundling owes them overtime pay under the Act. Because it concluded that the FLSA’s definition of “enterprise” does not extend to a private, non-profit, independent contractor associated by regulation and contract with a public agency, the Second Circuit held Foundling was not obligated to pay overtime under the Act.
The Court cited the following facts as relevant to its analysis: “New York Foundling Hospital is a private, charitable provider of social services to children and families in the New York City area. Founded in 1869 by a Catholic religious order as a home for abandoned children, today its services include foster care, adoption, and physical and mental health initiatives.
All of the children served through Foundling’s Foster Home and Boarding Home Programs are referred by ACS, which is responsible for administering New York City’s child welfare services and is authorized to contract with private providers like Foundling under New York Social Services Law § 423(2). The Foster Home Program deals with approximately 150 abused or neglected children without special needs who have been removed from their biological families and placed with foster parents. The Boarding Home Program serves the same category of children who could not have or have not yet been placed with foster parents. Foundling’s funding is derived exclusively from charitable grants and other federal, state, and local government sources. Almost half of its total revenue originates as payments from ACS.
The relationship between ACS and Foundling is set forth in a number of agreements premised upon Foundling’s status as an independent contractor and, in turn, the entities’ operational independence. The contracts provide that Foundling’s “executive staff shall manage its affairs and programs and shall have the responsibility for the day-to-day provision of Services to and for each child placed with it.”Foundling “alone is responsible for … [the] work, direction, compensation and personal conduct” of its employees, as well as for their recruiting, screening, and training. Foundling can unilaterally terminate the agreements, in whole or in part, with thirty days notice.
ACS exercises no control over Foundling’s Board of Directors, structure, finances and governance, except to the extent that it retains some degree of oversight over Foundling’s programs and client relations. The Foster Care Agreement, for instance, requires Foundling to “recruit a sufficient number and variety of prospective foster parents” to meet the level ACS calculates is appropriate for a targeted area. Foundling must generally accept all ACS-referred children, establish grievance procedures for its service recipients with decisions appealable to ACS, and allow ACS to monitor and review all of its “program activities, procedures[ ][and] records … as ACS deems necessary … including, at reasonable times, unannounced and unscheduled visits” to Foundling’s offices and to its clients.”
Determining that Defendant was/is not an “enterprise” subject to FLSA coverage, the Court reviewed the applicable law:
“FLSA defines an “enterprise,” inter alia, as “the related activities performed … by any person or persons for a common business purpose … [excluding] the related activities performed for such an enterprise by an independent contractor.”§ 203(r)(1). Generally, non-profit organizations that do not “engage in ordinary commercial activities,” Tony & Susan Alamo Found., 471 U.S. at 297 (quoting 29 C.F.R. § 779.214 (1984)), or “serve the general public in competition with ordinary commercial enterprises,” id. at 299, operate without a “business purpose” and therefore are not enterprises. See§ 203(r)(1).See also U.S. Department of Labor, Wage and Hour Division, Opinion Letter FLSA2005-8NA, 2005 WL 5419044 (Sept. 2, 2005) (private nonprofit children’s care facility not a FLSA enterprise); U.S. Department of Labor, Wage and Hour Division, Opinion Letter FLSA2004-30NA, 2004 WL 5303058 (Dec. 13, 2004) (private nonprofit foster home not a FLSA enterprise). The FLSA, however, ensures that certain types of entities that might otherwise be held to operate with a business purpose under the Act are nevertheless brought within its ambit. For example, under § 203(r)(2)(A) and (B), Congress expressly included within the definition of enterprise “the activities performed … in connection with” hospitals, institutions providing residential care to the sick, aged, or mentally ill, certain types of schools, and certain types of railway or other transportation providers. Congress deemed all of these entities operated “for a business purpose” whether they were public or private, or operated for profit or not for profit. See29 U.S.C. § 203(r)(2).”
The Court disagreed with Plaintiffs’ argument that regarding 203(r)’s ambiguity and adopted Defendant’s reading of the statute stating, ‘[T]he phrase ‘in connection with the activities of a public agency’ means activities performed by a public agency, not activities performed by a private nonprofit organization providing services to a public agency.’ Dep’t of Labor Br. 3.
Analysis of the Act offers significant support to the Department’s position, and we therefore find it persuasive. First, as previously noted, absent special circumstances inapplicable to Foundling, non-profit organizations do not operate for a business purpose and are not enterprises. See Tony & Susan Alamo Found., 471 U.S. at 297, 299. In § 203(r)(2)(A), (B), and (C), however, Congress singled out specific non-profits (i.e., medical, certain educational and transportation facilities, and public agencies) that are to be deemed enterprises nonetheless. The Employees concede that entities like Foundling-charitable independent contractors that support neglected children-are not included in this list, and they offer nothing other than their problematic plain language approach to § 203(r)(2)(C) to suggest that Congress intended such organizations to be engrafted onto the existing exceptions when they contract with a public agency. See Greene v. United States, 79 F.3d 1348, 1355 (2d Cir.1996) (“The ancient maxim expressio unius est exclusio alterius (mention of one impliedly excludes others) cautions us against engrafting an additional exception to what is an already complex [statute].”).
Second, § 203(r)(2)(A) and (B) end in parentheticals stating that the entities enumerated therein-hospitals, certain schools, certain common carriers, etc.-are covered “regardless of whether or not such [entities are] operated for profit or not for profit.”Section 203(r)(2)(C) lacks this parenthetical. If the “in connection with” phrase in § 203(r)(2)(C) were intended to cover private, third-party entities that contract with the government, the parenthetical would have been critical to include in the section because public agencies themselves-unlike schools and hospitals-are by definition solely public and non-profit. Its absence adds weight to the Department’s conclusion that § 203(r)(2)(C) encompasses only the public “activities performed by a public agency,” not the private acts of independent contractor organizations associated with an agency through contract and regulation, like Foundling.
Third, by limiting § 203(r)(2)(C) to “activities performed by a public agency,” the Department’s reading avoids the absurd result that follows from the Employees’ contrary interpretation. See United States v. Dauray, 215 F.3d 257, 264 (2d Cir.2000) (“A statute should be interpreted in a way that avoids absurd results.”). Ultimately, the Act applies to Foundling only if it qualifies both as an “enterprise” under § 203® and as an “enterprise engaged in commerce” under § 203(s).Section 203(s) defines an “enterprise engaged in commerce” as an “enterprise that … is an activity of a public agency.”§ 203(s)(1)(C) (emphasis added). Because “of” is a word used to indicate belonging or a possessive relationship, the Department points out that “Foundling’s activities are not the activities of ACS, even assuming it operates in connection with ACS.”See Powell v. Tucson Air Museum Found., 771 F.2d 1309, 1312 (9th Cir.1985) (“Because the Museum is a private corporation which is an independent contractor of Pima County, it is not an ‘activity of a public agency’ … and thus is not subject to the requirements of the FLSA.”).
Thus, § 203(r)(2)(C) and § 203(s)(1)(C) operate in tandem, and if the former is interpreted to encompass a third-party, private, independent contractor somehow associated with an agency, the Act still would not apply to that third-party because the “in connection with” phrase is missing from the latter. The Employees’ notion that § 203(r)(2)(C) includes Foundling while § 203(s)(1)(C) excludes Foundling is a result we are compelled to avoid. The Department’s interpretation of § 203(r)(2)(C), in contrast, allows the two sections to be read seamlessly: the “activities performed by a public agency” comports with both the activities “in connection with” a public agency and the activities “of” a public agency.
To the extent that § 203(r)(2)(C)‘s meaning remains unresolved after we have considered the section in its surrounding statutory context, we may turn to legislative history for clarification. Lee v. Bankers Trust Co., 166 F.3d 540, 544 (2d Cir.1999). To this end, the Department points out that:
[w]hile nothing in the legislative history specifically addresses the phrase “in connection with the activities of a public agency” in Section 203(r)(2)(C), the legislative history is replete with statements that the amendments were meant to extend FLSA coverage to federal, state, and local government employees. There is, by contrast, no indication that Congress intended to extend enterprise coverage to employees of nonprofit entities that provide services to a public agency. Dep’t of Labor Br. 7.
Because the Employees concede that legislative history offers no support for their position, and the district court’s own thorough analysis “reveal[ed] no mention of an intent to extend enterprise coverage to non-profits that act in conjunction with … agencies,” Jacobs v. N.Y. Foundling Hosp., 483 F.Supp. 251, 261 (E.D.N.Y.2007), legislative history further buttresses the Department’s view that “in connection with the activities of a public agency” means activities performed by a public agency and not those performed by private independent contractors providing services to that agency.
Finally, we note that through regulation, opinion letter, and other statements, the Department has consistently interpreted § 203(r)(2)(C) to apply the FLSA’s overtime provisions only to public agencies, not to private independent contractors dealing with such agencies.FN9This interpretation has stood for almost 35 years, and deeming the various independent contractors retained by public agencies enterprises might have unanticipated and uncertain consequences. We agree with the Department that, under these circumstances, carving a hole in the Act’s unequivocal exemption of independent contractors is a policy judgment best left to the legislative branch. See, e.g., United States v. All Funds Dist. to, ex rel., Weiss, 345 F.3d 49, 57 (2d Cir.2003) (stating that where a section of the Employee Retirement Income Security Act of 1974 ” ‘reflects a considered congressional policy choice … [i]f exceptions to this policy are to be made, it is for Congress to undertake that task’ “) (quoting Guidry v. Sheet Metal Workers Nat’l Pension Fund, 493 U.S. 365, 376 (1990)).”
Curiously, the Court noted, “[i]n this case, the parties do not dispute that Foundling is not a hospital, school, or any other type of institution listed under § 203(r)(2)(A), nor an actual municipal public agency under § 203(r)(2)(C). At issue, rather, is the meaning of the phrase “in connection with” as applied to “the activities of a public agency” in § 203(r)(2)(C).” It is not clear, but Foundling may have qualified as an enterprise under 203(r)(2)(A), an argument apparently waived by the Plaintiffs.