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M.D.Fla.: Court Defines “General Household Work” And Denies Defendant’s Motion For Summary Judgment Regarding Companionship Exemption; Defendant’s Proposed Broad Reading Of The Exemption Rejected
Anglin v. Maxim Healthcare Services, Inc.
This case was before the Court on Defendant’s Motion for Summary Judgment. Defendant argued that Plaintiff was exempt from overtime under the FLSA’s companionship exemption and was not entitled to overtime compensation under the FLSA. The Plaintiff argued that because she spent more than 20% of her time performing general housework and other work unrelated to patient treatment, she fell outside the exemption and should be paid at an overtime rate for all hours over 40 in a workweek. In denying Defendant’s Motion, the Court also clarified the type(s) of work that qualify for allocation towards the 20% “general household work” versus the work that should be allocated to the 80% companionship work.
The Court explained, “[i]n this case, Maxim argues that the FLSA’s healthcare companion exemption applies to Plaintiff’s employment, precluding her entitlement to overtime. See 29 U.S.C. § 213. The Fair Labor Standards Act (“FLSA”) mandates that “no employer shall employ any of her employees … for a workweek longer than forty hours unless such employee receives compensation for her employment in excess of the hours … specified at a rate not less than one and one-half times the regular rate at which she is employed.” 29 U .S.C. § 207(a)(1); Reich v. Department of Conservation and Natural Resources, 28 F.3d 1076, 1081 (11th Cir.1994). The term “employ” is defined as “to suffer or permit to work.” 29 U.S.C. § 203(g). To “suffer or permit to work” an employer must have knowledge of the work being performed. Fox v. Summit King Mines, 143 F. 926, 932 (9th Cir.1944). The FLSA mandates that employees, in general, receive one and one-half times their regular rate of pay for all hours worked in excess of forty per week. Armitage v. Dolphin Plumbing & Mechanical, LLC, 510 F.Supp.2d 763, 768-69 (M.D.Fla.2007) (citing 29 U.S.C. § 207(a)(1)).
In 1974, Congress amended the Fair Labor Standards Act to include many “domestic service” employees not previously subject to its minimum wage and maximum hour requirements. Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 127 S.Ct. 2339, 2344 (2007) (citing Fair Labor Standards Amendments of 1974). Congress simultaneously created an exemption that excluded from FLSA coverage certain subsets of employees “employed in domestic service employment,” including companionship workers Id. (citing 29 U.S .C. § 213(a)(15)).
Federal law exempts from the overtime provisions “employee[s] employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary [of Labor] ).” 29 U.S.C. § 213(a)(15). The Department of Labor defines “companionship services” as:
[T]hose services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs. Such services may include household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes, and other similar services. They may also include the performance of general household work. Provided, however, [t]hat such work is incidental, i.e., does not exceed 20 percent of the total weekly hours worked. The term “companionship services” does not include services relating to the care and protection of the aged or infirm which require and are performed by trained personnel, such as a registered or practical nurse.29 C.F.R. § 552.6. “The companion must perform the services with respect to the aged or infirm persons and not generally to other persons.” 29 C.F.R. § 552.106. The Eleventh Circuit has recognized that Department of Labor regulations promulgated under the FLSA as controlling authority. Buckner v. Florida Habilitation Network, 489 F.3d 1151, 1154 (11th Cir.2007).
Like all exemptions under the FLSA, the companionship exemption must be “narrowly construed.” Buckner, 489 F.3d at 1154 (citing Mitchell v. Ky. Fin. Co., 359 U.S. 290, 295 (1959)). The Act should be interpreted liberally in the employee’s favor and the defendant must prove applicability of an exemption by “clear and affirmative evidence.” Birdwell v. City of Gadsden, 970 F.2d 802 (11th Cir.1992) (internal citations omitted). The employer has the burden of showing that it is entitled to the exemption. Klinedinst v. Swift Invs., Inc., 260 F.3d 1251, 1254 (11th Cir.2001). The exemption applies even though Plaintiff is employed by a service agency, rather than directly by the patient or his family. Long Island Care, 127 S.Ct. at 2344.
The healthcare companionship exemption allows for general household work as long as the general household work is “incidental” or does not exceed 20% of the total weekly hours. Aside from the vague description in the FLSA regulations-work provided for the “benefit of the entire household rather than for the care of the patient”-no precise definition of “general household work” is provided by the act, the department’s regulation, or Eleventh Circuit case law. 29 C.F.R. § 552.106.”
Turning to a definition of the term “general household work,” the Court stated:
“Plaintiff relies on the Utah Supreme Court’s opinion in Bowler v. Deseret Village Association, Inc., 922 P.2d 8 (1996). In Bowler, the court found that activities including “general maintenance services, including cleaning laundry areas, general household cleaning (through use of mop, duster, and vacuum), washing vehicles, cleaning the garage, and maintaining the yards and grounds,” while providing service to the residents receiving companionship services, also provided service to the entire community; therefore, these activities were properly classified as general household work and counted against the 20% threshold. Id. at 15. Plaintiff argues based on the holding in Bowler that the activities must solely benefit the patient/client, to the exclusion of other household members, or they are characterized as general household work.
Other courts considering the type of work that a CNA performs have held that their typical work falls within the healthcare companion exception. See, e.g., Salyer v. Ohio Bureau of Workers’ Compensation, 83 F.3d 784, 787 (6th Cir.1996) (woman who gave medication and helped disabled dress, bathe, ambulate, and clean provided “companionship services” under FLSA); Cox v. Acme Health Services, Inc., 55 F.3d 1304, 1306 (7th Cir.1995) (CNA who performed therapy and nursing services, personal care, ambulation, exercise, household services, and medication assistance performed “companionship services” within the exemption); McCune v. Oregon Senior Services Div., 894 F.2d 1107, 1111 (9th Cir.1990) (CNAs who performed cleaning, cooking, hygiene and medical care held to perform “companionship services” under FLSA). The court in McCune considered what kind of work qualified as general housework and distinguished between services related to patient care and other household work: “Dusting or cleaning either [the bedroom or living] room appears to be routine, general household work, rather than work related to the individual. Cleaning a spill by the client in either room, by contrast, would be non-routine care more related to the individual than to the general household, and would not be included in the twenty percent figure.” 894 F.2d at 1111.
It is undisputed that 90% of Plaintiff s shifts were dedicated to the care of two Maxim patients, Angela Houston and Clyde Mallory. Doc. No. 32 at 5 n. 5. Plaintiff admitted during her testimony that she spent her time caring directly for these patients by: bathing them, preparing meals for then, feeding them, grocery shopping, assisting them with prescribed medication needs, cleaning for them, changing their bedding, transporting them, and washing their clothes. Doc. No. 32-3 (Anglin Dep. at 84-85).
Maxim cites to a Statement of Facts “(SOF 2, 3, 5-6, 12)” as if it is a separate document, and no such document is in the Record. See Doc. No. 32 at 10. If Maxim is referring to various pages within its Motion for Summary Judgment as the “Statement of Facts,” the cites refer to pages throughout the document including pages containing argument, and such a practice would be extremely confusing. A statement of facts generally is a stand-alone document which contains sequential paragraphs to which the Court and opposing counsel can easily refer. That is not the case here, and portions of Maxim’s argument are not supported with citation to evidence in the record to support its points. Plaintiff also noted the lack of a traditional statement of facts that would have been much easier to use. Doc. No. 42 at 2 n. 2.
However, Plaintiff argues that she additionally “regularly spent” more than 20% of her time each week performing general household work, and other work unrelated to the care of Defendant’s patients, at the patient’s homes.” Doc. No. 42 at 4 (citing Anglin Dep. at 191, 204, 223). Plaintiff characterized the type of work she did as that of a “maid” or “housekeeper” to the entire household when serving as a companion to patients Clyde Mallory and Angela Houston. Doc. No. 42-2 (Anglin Dep. at 170-71). Plaintiff testified that when there was some “downtime,” when she was not required to perform duties for patients, Plaintiff would perform tasks for others in the household, including: daily laundry; daily cooking; daily washing dishes; the heavy cleaning (dusting/vacuuming/mopping) of the patient’s entire house 2-3 times per week, including those portions which the patient never frequented; taking patient’s family members to the (non-patient) family member’s doctor’s appointments; shopping for the entire household, including separate lists in many cases for non-patient members of the household one to two times per week; daily making the bed of everyone in the patient’s household; changing the linens on the bed of everyone in the patient’s household; taking out the entire household’s trash out one to two times per week; painting portions of a patient’s home; and feeding and cleaning up after the household pets. Doc. No. 42-2 (Anglin Dep. at 68, 79, 82, 90-91, 93, 96, 121, 123, 129, 177-78, 180-81, 183, 185-87, 195, 197-99, 201-03, 205-12, 216-217, 219-221, 233, 239, 252, 255, 273, 342, 374-75).
Both of Plaintiff’s two main patients lived with elderly parents, which, she testified, created situations in which Plaintiff had to do work for more than just the patients. For one of the patients, Angela Houston (with Down’s syndrome and Cerebral Palsy), whose mother was seventy-seven years old and very sick, Plaintiff was not just taking care of Angela, but also her mother Joanne Gibson/Houston too. Doc. No. 42-2 (Anglin Dep. at 69, 206). When Angela’s mother was in the hospital for one month, Plaintiff stayed with Angela around the clock, but did not get paid for the hours from midnight until 8:00 a.m. because Angela was a Medicaid case and Medicaid did not pay for a companion to stay overnight. Doc. No. 42-2 (Anglin Dep. at 69, 121). The other patient, Clyde Mallory (a paraplegic requiring round the clock care), lived with his father who was 97 years old and “would mess up everything.” Doc. No. 42-2 (Anglin Dep. at 202). Clyde Mallory would make frequent reports to the Maxim office-“all kinds of reports, one right after another” complaining about the “house not being kept up by the other CNAs that worked there.” Doc. No. 42-2 (Anglin Dep. at 233). Maxim submitted the affidavit of Mallory which described Plaintiff as a hard worker who did a “very good job” and occasionally vacuumed the house, cleaned the kitchen, and help and cook for his father in the kitchen; however, Mallory’s opinion was that Plaintiff did not spend 20% of her time on tasks “unrelated to his care.” Doc. No. 32-6 (Mallory Aff.). There is a genuine issue of material fact as the to amount of household work Plaintiff performed for other than the infirm individuals for whom she cared.
Maxim argues that Plaintiff’s list of tasks is contradicted by her affirmative answer to the leading question, “So 100% of the time you were working for Maxim, you [were] doing things in order to provide care for the patients, right?” Doc. No. 32 at 6 (citing Anglin Dep. at 84-85). The precise nature of the work that Plaintiff did to “provide care for the patients” or others in the household is at the very heart of this FLSA dispute, and Plaintiff’s very general affirmative answer does not foreclose her subsequent more specific explanation that she performed other household work for patient’s family members because she had specific instructions from her supervisors, to do “whatever” required to make Maxim’s patients happy. Doc. No. 42-2 (Anglin Dep. at 97, 104, 124, 276).
Although Plaintiff testified as to the estimated time she devoted to the tasks for other family members, Maxim in excruciating detail lists its calculation of the total time that Plaintiff estimated in order to make her testimony appear overstated. See Doc. No. 32 at 17-18. Notably, Maxim’s supplies no evidence from Plaintiff’s supervisors, i.e., the Registered Nurses, that Plaintiff did not perform the general household work that she alleges; Maxim supplies only Plaintiffs job description and a general affidavit from Maxim’s account manager, Melissa White. Doc. No. 32-2.
Maxim’s other argument is, that even if Plaintiff performed household work for patients’ family members and directly for patient-care, the other individuals, Mallory Sr. and Angela’s mother, were also infirm and the companionship exemption would have applied to them regardless of whether Plaintiff was paid extra for her services. That argument really cuts the other way, in that if Maxim admits there were other members of patients’ households too infirm to do the housework, her testimony that she was the only one performing the housework and pet care for the household is more credible. Moreover, it is the type of work performed for other than a patient, and not the health of the additional family members receiving household work services, that determines whether the 20% threshold of general household work has been reached.
Maxim appears to argue that any of the tasks related to the patients’ family members, such as vacuuming, sweeping, or mopping in other family member’s part of the houses still were provided for the patient’s direct care because such things were necessary to “maintain the sterile environment for the patients.” Taken to the extreme, Maxim’s definition of “sterile environment” would include every type of household work and pet care, and that is clearly not the intent of the regulation.”
After discussing the “general household duties” test, the Court went on to discuss the concept of volunteering versus work under the FLSA:
“Maxim also contends that Plaintiff changed her deposition testimony after initially stating that she “volunteered” to stay with “the mother of one of Maxim’s patients when she fell gravely ill.” Doc. No. 32 at 5 (citing Anglin Dep. 68-70). That is not Plaintiffs testimony. Plaintiff testified that because she felt close to the family and “there was nobody” else, Plaintiff “voluntarily” stayed with the patient while the patient’s mother was in the hospital. Doc. No. 42-2 (Anglin Dep. at 70). Maxim contends that Plaintiff performed the extra nine hours as a “volunteer” and is not entitled to be paid for those hours as a matter of law.
As to whether Plaintiff’s staying with Angela twenty-four hours nine more than she was paid for was employment or “volunteer” time, the FLSA provides a very general definition to “employ.” It defines “to employ” as expansively as to “suffer or permit to work.” 29 U.S.C. § 203(g). The FLSA does not define “work.” 29 C.F.R. § 785.6. However, time spent doing work not requested by the employer, but permitted, is generally considered work time, since the employer knows or has reason to believe that the employees are continuing to work and the employer is benefitting from the work being done. See Reich v. Department of Conservation and Natural Resources, State of Alabama, 28 F.3d 1076, 1082 (11th Cir.1994) (citing 29 C.F.R. § 785.11). The FLSA places the duty on management to exercise control and see that work is not performed if the employer does not want it performed; an employer cannot sit back and accept the benefits of an employee’s work without considering the time spent to be hours worked. Id.
In this case, Maxim’s use of the term “volunteer” and Plaintiff’s statement that she “voluntarily” watched Angela for an extra nine hours are not equivalent use of the terms because, as Plaintiff points out, Maxim’s rules prohibited Plaintiff from leaving Angela’s home without being relieved by another caregiver. Doc. No. 42-4 (White Dep. at 89-90); Doc. No. 41-5 (Morgan Dep. at 49, 55, 57, 59). If Plaintiff had left Angela, despite the fact that there was no other caregiver to relieve her, Maxim would have deemed it “abandonment” of the patient and Plaintiff would have been subject to discipline by Maxim, for failing to follow Maxim’s policies, rules and procedures. Doc. No. 41-5 (Morgan Dep. at 49, 59, 60-61). Maxim did not send anyone to relieve Plaintiff during this one month period. Doc. No. 42-2 (Anglin Dep. at 114). Instead, Melissa White, Anglin’s supervisor, told her not to record the extra nine hours per day, because Maxim would not be paying her for it and she would be “volunteering” her time, since Maxim was not getting paid for it. Doc. No. 42-2 (Anglin Dep. at 225-228). Maxim was clearly aware of the situation because the company requested that Medicaid provide authorization for more CNA hours-for the most time possible-so it would be reimbursed for more of Plaintiff’s work. Doc. No. 42-4 (White Dep. at 80-84, 91).
Maxim argues that Plaintiff’s decision “not to sit idle and while away the day … waiting for another patient need to arise while she was at rest” led her to “voluntarily” engage in other tasks at the same time she was acting as a companion for the infirm individual. Doc. No. 32 at 25. Maxim’s final argument is that Plaintiff spent time “multitasking,” simultaneously performing exempt functions with non-exempt functions, and the non-exempt time should not be counted toward an exception to the exemption. Doc. No. 32 at 24. In support, Maxim cites inapposite cases that considering the management exemption, not the healthcare companion exemption, which on its faces says nothing about not counting time spent “multitasking.” To the contrary, the plain language of the regulations mandate that in calculating “general household work,” the Court confirm such work “does not exceed 20 percent of the total weekly hours worked” and is “not generally” performed for “other persons.” 29 C.F.R. § 552.6; 29 C.F.R. § 552.106. The regulations say nothing about carving out the “multi-tasked” work performed by the companion. Moreover, such an interpretation would not be construing the Act “liberally in the employee’s favor” and would certainly reduce an employer’s burden to prove “applicability of an exemption by clear and affirmative evidence.” See Birdwell v. City of Gadsden, 970 F.2d 802 (11th Cir.1992). Maxim’s remaining arguments relate to Plaintiff’s credibility, which are decisions left to the finder of fact.
Based on the evidence presented by Plaintiff, there are genuine issues of material fact as to the amount and extent of the general household tasks performed by Plaintiff; thus, Maxim has failed to establish as a matter of law that Plaintiff qualified under the healthcare companion exemption.”
9th Cir.: Walmart Not Joint Employer Of Its Suppliers’ Employees Under FLSA; Employees Not Third-party Beneficiaries Of Standards Contained In Supply Contracts Between Walmart And Plaintiff’s Employers
Doe I v. Wal-Mart Stores, Inc.
The appellants were employees of foreign companies that sell goods to Wal-Mart. They brought claims against Wal-Mart based on the working conditions in each of their employers’ factories. These claims relied primarily on a code of conduct included in Wal-Mart’s supply contracts, specifying basic labor standards that suppliers must meet. The district court dismissed the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The Ninth Circuit affirmed the dismissal on appeal.
For its analysis the Court assumed the following facts to be true:
“In 1992, Wal-Mart developed a code of conduct for its suppliers, entitled “Standards for Suppliers” (“Standards”). These Standards were incorporated into its supply contracts with foreign suppliers. The Standards require foreign suppliers to adhere to local laws and local industry standards regarding working conditions like pay, hours, forced labor, child labor, and discrimination. The Standards also include a paragraph entitled “RIGHT OF INSPECTION”:
To further assure proper implementation of and compliance with the standards set forth herein, Wal-Mart or a third party designated by Wal-Mart will undertake affirmative measures, such as on-site inspection of production facilities, to implement and monitor said standards. Any supplier which fails or refuses to comply with these standards or does not allow inspection of production facilities is subject to immediate cancellation of any and all outstanding orders, refuse [sic] or return [sic] any shipment, and otherwise cease doing business [sic] with Wal-Mart.
Thus, each supplier must acknowledge that its failure to comply with the Standards could result in cancellation of orders and termination of its business relationship with Wal-Mart.
Wal-Mart represents to the public that it improves the lives of its suppliers’ employees and that it does not condone any violation of the Standards. However, Plaintiffs allege that Wal-Mart does not adequately monitor its suppliers and that Wal-Mart knows its suppliers often violate the Standards. Specifically, Plaintiffs claim that in 2004, only eight percent of audits were unannounced, and that workers are often coached on how to respond to auditors. Additionally, Plaintiffs allege that Wal-Mart’s inspectors were pressured to produce positive reports of factories that were not in compliance with the Standards. Finally, Plaintiffs allege that the short deadlines and low prices in Wal-Mart’s supply contracts force suppliers to violate the Standards in order to satisfy the terms of the contracts.”
Initially, the Court found that Plaintiffs’ Complaint could not support a third-party beneficiary claim on behalf of the employees under the contract their employer had with Walmart.
Next, the Court addressed the “Plaintiffs’ theory that Wal-Mart was Plaintiffs’ joint employer, such that they can “sue Wal-Mart directly for any breach of contract or violation of labor laws.” Again, the Court concluded, to the contrary, that Wal-Mart could be considered Plaintiffs’ employer on the facts alleged. “The key factor to consider in analyzing whether an entity is an employer is “the right to control and direct the activities of the person rendering service, or the manner and method in which the work is performed.” Serv. Employees Int’l Union v. County of L.A., 225 Cal.App.3d 761, 275 Cal.Rptr. 508, 513 (1990) (internal quotations and citation omitted). “A finding of the right to control employment requires … a comprehensive and immediate level of ‘day-to-day’ authority over employment decisions.” Vernon v. State, 116 Cal.App.4th 114, 10 Cal.Rptr.3d 121, 132 (2004).”
The Court then addressed “Plaintiffs’ negligence claims, which Plaintiffs bring under four distinct theories: third-party beneficiary negligence, negligent retention of control, negligent undertaking, and common law negligence. Whichever theory is invoked, however, we conclude that Wal-Mart did not owe Plaintiffs a common-law duty to monitor Wal-Mart’s suppliers or to prevent the alleged intentional mistreatment of Plaintiffs by the suppliers. Without such a duty, Plaintiffs’ negligence theories do not state a claim. See *684 Paz v. State, 22 Cal.4th 550, 93 Cal.Rptr.2d 703, 994 P.2d 975, 980-81 (2000) (“The threshold element of a cause of action for negligence is the existence of a duty …”).
Plaintiffs’ “third-party beneficiary” negligence theory relies on the assumption that Wal-Mart owes Plaintiffs a duty under Wal-Mart’s supply contracts. Because we have already determined that no legal obligation flows from Wal-Mart to Plaintiffs under Wal-Mart’s supply contracts, Plaintiffs do not state a claim for third-party beneficiary negligence.
In order to state a claim for “negligent retention of control and supervision,” Plaintiffs must allege facts that, if proven, would show that Wal-Mart exercised significant control over Plaintiffs and that “exercise of retained control affirmatively contributed to the employee’s injuries.” Hooker v. Dep’t of Transp., 27 Cal.4th 198, 115 Cal.Rptr.2d 853, 38 P.3d 1081, 1083 (2002) (emphasis in original). We have already determined that Wal-Mart is not Plaintiffs’ employer because Wal-Mart exercised minimal or no control over the day-to-day work of Plaintiffs in the suppliers’ foreign factories. Accordingly, we hold that Wal-Mart did not owe Plaintiffs a special duty to protect Plaintiffs from the suppliers’ alleged intentional misconduct.
Plaintiffs’ “negligent undertaking” theory relies on the assumption that Wal-Mart undertook to protect Plaintiffs, and therefore Wal-Mart had to exercise reasonable care in monitoring the suppliers. See Delgado v. Trax Bar & Grill, 36 Cal.4th 224, 30 Cal.Rptr.3d 145, 113 P.3d 1159, 1175 (2005) (stating that one who “undertakes to provide protective services to another” must exercise a duty of care). This theory fails because, as we have already concluded, Wal-Mart did not undertake any obligation to protect Plaintiffs. “[T]he scope of any duty assumed depends upon the nature of the undertaking,” id., and here Wal-Mart merely reserved the right to cancel its supply contracts if inspections revealed contractual breaches by the suppliers. Any inspections actually performed by Wal-Mart were therefore gratuitous, and do not independently impose a duty on Wal-Mart to protect Plaintiffs. Id.
Plaintiffs’ “common law negligence” claim provides no additional ground for finding a duty on the part of Wal-Mart. Wal-Mart had no duty to monitor the suppliers or to protect Plaintiffs from the intentional acts the suppliers allegedly committed. Thus, Plaintiffs’ theories sounding in negligence do not state a claim. See Paz, 93 Cal.Rptr.2d 703, 994 P.2d at 980-81.”
Lastly, the Court addressed Plaintiffs’ claim of unjust enrichment. “Plaintiffs allege that Wal-Mart was unjustly enriched at Plaintiffs’ expense by profiting from relationships with suppliers that Wal-Mart knew were engaged in substandard labor practices. Unjust enrichment is commonly understood as a theory upon which the remedy of restitution may be granted. See 1 George E. Palmer, Law of Restitution § 1.1 (1st ed. 1978 & Supp. 2009); Restatement of Restitution § 1 (1937) (“A person who has been unjustly enriched at the expense of another is required to make restitution to the other.”). California’s approach to unjust enrichment is consistent with this general understanding: “The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.” First Nationwide Sav. v. Perry, 11 Cal.App.4th 1657, 15 Cal.Rptr.2d 173, 176 (1992) (emphasis in original).
The lack of any prior relationship between Plaintiffs and Wal-Mart precludes the application of an unjust enrichment theory here. See Smith v. Pac. Props. & Dev. Corp., 358 F.3d 1097, 1106 (9th Cir.2004) (noting that a party generally may not seek to disgorge another’s profits unless “a prior relationship between the parties subject to and benefiting from disgorgement originally resulted in unjust enrichment”). Plaintiffs essentially seek to disgorge profits allegedly earned by Wal-Mart at Plaintiffs’ expense; however, we have already determined that Wal-Mart is not Plaintiffs’ employer, and we see no other plausible basis upon which the employee of a manufacturer, without more, may obtain restitution from one who purchases goods from that manufacturer. That is, the connection between Plaintiffs and Wal-Mart here is simply too attenuated to support an unjust enrichment claim. See, e.g., Sperry v. Crompton Corp., 8 N.Y.3d 204, 831 N.Y.S.2d 760, 863 N.E.2d 1012, 1018 (2007) (holding that “the connection between the purchaser of tires and the producers of chemicals used in the rubbermaking process is simply too attenuated to support” the purchaser’s claim of unjust enrichment).
In sum, we conclude that Plaintiffs have not stated a claim against Wal-Mart. Wal-Mart had no legal duty under the Standards or common law negligence principles to monitor its suppliers or to protect Plaintiffs from the suppliers’ alleged substandard labor practices. Wal-Mart is not Plaintiffs’ employer, and the relationship between Wal-Mart and Plaintiffs is too attenuated to support restitution under an unjust enrichment theory.”
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.
D.R.I.: Since Rhode Island Minimum Wage Act Does Not Create Private Cause Of Action, Rhode Island Has Not Waived Its Sovereign Immunity From FLSA Claims
Hauser v. State of Rhode Island Dept. of Correction
This case arose from an allegation that the State of Rhode Island Department of Corrections (DOC) fails to adequately compensate five officers who care for police dogs. The State moved to dismiss Plaintiffs’ two claims: violation of the Rhode Island Minimum Wage Act, R.I. Gen. Laws § 28-12-1 et seq.; and violation of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. The Court concluded that no private right of action exists under the Rhode Island Minimum Wage Act, and that the State has not waived its sovereign immunity as to the FLSA claim.
The Court first determined that the Rhode Island Minimum Wage Act does not provide for a private right of action, “[w]hile the Minimum Wage Act is silent as to whether an individual private right of action exists, it does speak to enforcement. Section 28-12-13 provides: “Responsibility for enforcement-[t]he provisions of this chapter shall be carried out by the division of labor standards”; and § 28-12-14(7) provides: ‘Enforcement powers-[t]he director or the commissioner or any authorized representative of either shall have the authority to: [b]ring all actions, suits, complaints, and prosecutions for the violation of any of the provisions of this chapter.
These provisions, combined with the lack of an express private right to sue, indicate that the General Assembly did not intend to provide an individual right of action to aggrieved employees. See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 19 (1979) (“[I]t is an elemental canon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.”); In re John, 605 A.2d 486, 488 (R.I.1992) (noting that when a statute “does not plainly provide for a private cause of action, such a right cannot be inferred”); Narragansett Pellet Corp. v. City of East Providence ex rel. Fitzgerald, C.A. No. 06-464 ML, 2007 WL 2821538, at *6-7 (D.R.I. Sept. 25, 2007) (no private right of action where statute prescribed a particular enforcement process). There can be little doubt that had the General Assembly deemed it appropriate or necessary to afford employees a private right of action against employers to enforce the minimum wage law, it would have expressly done so. Compare, e.g.,R.I. Gen. Laws §§ 28-5-24.1, 28-29 (setting forth framework for individual claims under Fair Employment Practices Act). Absent any indication from the statute itself or in the legislative history that this is what the legislature intended, it would be clearly inappropriate to create such a right by judicial fiat.”
The Court then tackled the more nuanced issue of whether Rhode Island has waived sovereign immunity under the FLSA, and held it has not. “The issue in this case, however, is not so easily dispatched because of an interesting procedural wrinkle: whether the State waived its Eleventh Amendment immunity as to an FLSA claim by removing the action from Rhode Island Superior Court to federal court?
A state may consent to suit by a clear declaration of its intention to submit itself to federal court jurisdiction, and may waive immunity to suit by voluntarily invoking federal court jurisdiction. See Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 670, 675 (1999); Lombardo v. Pennsylvania Dep’t of Pub. Welfare, 540 F.3d 190, 195-96 (3d Cir.2008). The “test for determining whether a State has waived its immunity from federal-court jurisdiction is a stringent one.” Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241 (1985). There is no suggestion here that Rhode Island expressly consented to be sued for an FLSA violation in federal court. Rather, Plaintiffs say the State’s removal voluntarily invoked jurisdiction, constituting an implied waiver of immunity.
The leading decision on “waiver by removal” is Lapides v. Bd. of Regents of Univ. Sys. Of Georgia, and it is instructive but not on all fours with the present circumstances. 535 U.S. 613 (2002).Lapides discussed whether a state that removes a claim to federal court waives Eleventh Amendment immunity when the state already consented to suit for the claim in its own state court. Id. at 616-17.The Supreme Court held that it did, because otherwise the state would unfairly regain in a federal forum an immunity which it voluntarily abandoned in state court. Id. Importantly, though, the decision did not directly address the effect of removal of a claim as to which a state retained immunity in its own state court-arguably the situation here, and the subject of post-Lapides debate. See, e.g., Stewart v. North Carolina, 393 F.3d 484, 490-91 (4th Cir.2005) (discussing scope of Lapides and holding a state does not waive immunity by removal when it would have been immune from suit for the same claim in state court); Boone v. Pennsylvania Office of Vocational Rehab., 373 F.Supp.2d 484, 499-500 (M.D.Pa.2005) (barring ADA claims against state despite removal because state retained immunity from suit under the ADA in state court).
Under Lapides, the question here, then, is whether Rhode Island retained its immunity from suit as to an FLSA claim in its own courts. If it did, removal triggers no concerns about inconsistency or unfair litigation gamesmanship because in either forum, the State maintains its immunity. As a starting point, under Alden v. Maine the State is correct that it is immune from suit in its own court under the FLSA absent consent or waiver. 527 U.S. 706, 755-57 (1999). Thus the key issue is Plaintiffs’ contention that Rhode Island waived this Alden immunity in its own courts.
Waivers of immunity must not be lightly implied and must be “stated by the most express language or by such overwhelming implications from the text as [will] leave no room for any other reasonable construction.” Edelman v. Jordan, 415 U.S. 651, 673 (1974) (internal citation and quotation omitted); see Andrade v. Rhode Island, 448 A.2d 1293, 1295 (R.I.1982) (noting courts must presume the legislature did not intend to “deprive the state of any part of its sovereign power unless the intent to do so is clearly expressed or arises by necessary implication from the statutory language”). The Court has not identified, nor have the parties offered, any Rhode Island state case addressing waiver of immunity as to a wage claim.
Plaintiffs first suggest the State made itself amenable to suit for claims “identical” to the FLSA via the Rhode Island Minimum Wage Act, so “it does not make much sense to allow the State to ignore parallel federal law.”They claim “there is no question that the state courts permit suits against the State under the Act.”(See Pl.’s Obj. to M. to Dismiss 8 (Doc. No. 8).) But there is indeed a question. As detailed above, the statute lacks express consent by the State to be sued for wage violations. Compare Anthony v. Iowa, 632 N.W.2d 897, 900-02 (Iowa 2001) (rejecting state’s immunity claim under Alden to FLSA action in state court where state wage and labor scheme provided express consent to be sued). The fact that Rhode Island’s wage statute excludes some, but not all, state employees from the overtime provisions (arguably suggesting all other state employees are subject to the provisions) does not mean the State intended to make itself amenable to suit for those claims. And while it may well be the case that the State could be subject to an action in its own courts by the Rhode Island DOL, or an FLSA action by the Secretary of Labor in federal court, this is not a substitute for a clear and unequivocal waiver of immunity for private causes of action. The bottom line is that the simple enactment of wage provisions reflecting or mirroring the FLSA, without more, is too thin a reed on which to find clear waiver. See Jarrett v. Alexander, 235 F.Supp.2d 1208, 1215 (M.D.Ala.2002) (discussing waiver of immunity for FLSA claim in federal court where state did not waive immunity merely because it “incorporated portions of the FLSA or its regulations into state law”); Crawford v. Lexington-Fayette Urban County Gov’t, No. 06-299-JBC, 2007 WL 101862, at *2-3 (E.D.Ky. Jan. 10, 2007) (refusing to find waiver of immunity simply because state wage law broadly defined “employer” and “employee”)
Finally, Plaintiffs urge “waiver by necessary implication.” This, they claim, comes from the fact that sovereign immunity in general has been “obliterated” for many tort and employment-related claims in Rhode Island-creating a landscape “vastly” different than the one in Maine, which was found not to constitute waiver in Alden.
There is no question that in some circumstances Rhode Island has explicitly waived its sovereign immunity. See, e.g.,R.I. Gen. Laws § 9-31-1 (governmental tort liability). But no such explicit waiver exists here, and the cases on which Plaintiffs rely for implied waiver are very situation-specific and fail to support this broad, so-called “obliteration” of immunity. See, e.g., Pellegrino v. Rhode Island Ethics Comm’n, 788 A.2d 1119, 1123-25 (R.I.2002) (state impliedly waived immunity by providing for compensation to commission members for attendance at meetings and then refusing to pay, because disallowing recovery would give statute a “mere nugatory existence”); Donnelly v. Town of Lincoln, 730 A.2d 5, 10 (R.I.1999) (town not insulated from prejudgment interest award in workers compensation case because it voluntarily joined workers’ compensation system) (emphasis added); Capital Props., Inc. v. State, 749 A.2d 1069, 1081 (R.I.1999) (over city’s protest, state could waive immunity and bring declaratory judgment action to determine contractual obligations).
In sum, Rhode Island is not unlike many states that pick and choose what classes of suits to permit, and there is nothing wrong with such a selective practice: “To the extent Maine has chosen to consent to certain classes of suits while maintaining its immunity from others, it has done no more than exercise a privilege of sovereignty concomitant to its constitutional immunity from suit.” Alden, 527 U.S. at 758. Nothing in Rhode Island’s “landscape” or wage laws justifies finding waiver of immunity by necessary implication. See Reagan Constr. Corp. v. Mayer, 712 A .2d 372, 373 (R.I.1998) (“When a statute purporting to waive any aspect of the state’s sovereign immunity is examined, the language of the statute must be closely parsed and strictly construed.”).
Consequently, because the State did not consent to suit or waive its Alden immunity to be sued in its courts under the FLSA, removal does not waive its Seminole Tribe immunity in federal court. The result is harsh but could be easily changed with a stroke of the legislative pen, if so desired. See Rodriguez v. Puerto Rico Fed. Affairs Admin., 435 F.3d 378, 380 (D.C.Cir.2006) (“Taken together, Seminole Tribe and Alden mean that state employees no longer have any ‘court of competent jurisdiction,’ 29 U .S.C. § 216(b) [FLSA], in which to sue their employers for FLSA violations.”).”
W.D.Mo.: Minor Differences In Plaintiffs’ Situations Do Not Warrant Decertification
Fast v. Applebee’s Intern., Inc.
This case was before the Court on Defendant’s Motion to Decertify the class (stage 2). The Court denied Defendant’s Motion, finding that the Plaintiffs were similarly situated, such that the case should proceed as a collective action, notwithstanding minor differences in each employees situation.
The Court identified three factors to consider on a Motion to Decertify: “(1) individual plaintiff’s disparate factual and employment settings, (2) defenses which are individual to each plaintiff, and (3) fairness and procedural considerations. See Keef v. M.A. Mortenson Co., No. 07-CV-3915 (JMR/FLN), 2009 WL 465030 (D.Minn. Feb. 24, 2009).”
Evaluating the evidence before it the Court stated, “Plaintiffs have shown that they are similarly situated with respect to their job requirements and pay provisions. First, they have demonstrated that their claims involve substantially similar factual and employment settings, despite minor variances restaurant-to-restaurant. Applebee’s applied national uniform policies and practices relevant to its servers and bartenders, including policies concerning the tip credit, manager bonuses for productivity, complaint resolution, and job descriptions. Plaintiffs performed substantially the same job tasks under national guidelines. Plaintiffs were subject to similar pay structures.
The minor differences in Plaintiffs’ situations do not warrant decertification. See generally Frank v. Gold’N’Plump Poultry, Inc ., No. 04-CV01018 (PJS/RLE), 2007 WL 2780504 (D.Minn. Sept. 24, 2007). Applebee’s focuses on differences in Plaintiffs’ situations which vary by restaurant. Any challenges which might be posed by these differences will be addressed through dividing the class into subclasses by restaurant.
Second, liability in this case turns on class-wide claims and defenses, most notably whether Applebee’s improperly took the tip credit for general maintenance and preparation work done by the class. Evidence contradicting Plaintiffs’ claims may be resolved by a finder of fact at trial. See Pendlebury v. Starbucks Coffee Co., 518 F.Supp.2d 1345, 1363 (S.D.Fla.2007) (finding that conflicts in evidence concerning the amount of time store managers spent performing nonmanagerial work did not require decertification). Both Applebee’s and the Plaintiffs benefit from having these matters resolved collectively. As to due process concerns, representative testimony is contemplated by the FLSA and Applebee’s can defend with representative testimony just as Plaintiffs can seek to prove their claims with representative testimony.
Third, fairness and other procedural considerations weigh in favor of maintaining class certification. The FLSA is a remedial statute which should be read in favor of coverage. Kelly v. Alamo, 964 F.2d 747 (8th Cir.1992). The judicial system will benefit from efficient resolution of the common issues in Plaintiffs’ claims which arise from the same alleged FLSA violations. See Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 170 (1989) (evaluating ADEA class). Applebee’s interest in defending Plaintiffs’ small claims individually must be balanced against the rights of Plaintiffs, many of whom could not bear the costs of individual trials to redress the alleged violations. Id.
Plaintiffs have established that they are sufficiently similarly-situated. No fairness or procedural considerations raised by Applebee’s warrants disturbing the Court’s conclusion that this case should proceed to trial collectively.” Accordingly the Court denied Defendant’s Motion to Decertify.
N.D.Ga.: “Design Consultant” For Furniture Store, Paid Strictly Commissions, Retail Exempt Under 7(i)
Lee v. Ethan Allen Retail, Inc.
Plaintiff brought this case based on 200-250 hours she claimed to have worked in overtime for Defendant, which she was not paid for. Defendant maintained the Plaintiff was subject to the so-called retail exemption of 7(i). Before the Court was Defendant’s Motion for Summary Judgment on the retail exemption issue. The Court granted Defendant’s Motion, holding that Plaintiff was paid under a bona fide commission plan throughout her employment with Defendant, despite the fact that she never received anything other than her bi-weekly draw.
The Court relied on the following facts:
“Defendant Ethan Allen owns and operates Ethan Allen Design Centers (“Design Centers”) throughout the United States. These Design Centers are retail establishments, which sell Ethan Allen home furnishing products. Plaintiff began working as a Design Consultant on August 6, 2006, at Ethan Allen’s Peachtree City, Georgia Design Center. Plaintiff worked as a Design Consultant throughout her employment with Ethan Allen. As a Design Consultant, Plaintiff’s primary job responsibility is selling Ethan Allen home furnishing products. Design Consultants, including Plaintiff, are paid on a commission basis. They are never paid a salary. After an initial two week training period, Plaintiff began making sales and earning commissions. Ethan Allen paid Plaintiff according to its written Design Consultant Compensation Plan (“Compensation Plan”). Pursuant to this Compensation Plan, Design Consultants earn a minimum of 7% commission on net written sales per fiscal month. The commission increases to 8% if the Design Consultant has sales of at least $45,000, 8.5% at $55,000, and 9% at $70,000. Design Consultants earn a commission on every dollar of their sales; there are no caps on the amount of commissions a Design Consultant can earn.
During the first four months of employment, Ethan Allen pays its Design Consultants through a non-recoverable, bi-weekly draw. Every month Ethan Allen reduces the Design Consultant’s commissions by the amount of the draw. The Design Consultant earns commissions on sales that exceed her draw. Because the draw is non-recoverable, Design Consultants do not have to repay Ethan Allen if the amount of their draw exceeds their commissions during the month. After the initial four month period, however, Ethan Allen pays its Design Consultants through a bi-weekly, recoverable draw. Accordingly, if a Design Consultant does not earn enough in commissions to cover the draw, the Design Consultant carries forward a deficit, which she owes to Ethan Allen. Ethan Allen then reduces any deficit from prior months by the amount that her commissions exceeded the draw.
Plaintiff received a bi-weekly draw of approximately $1,100. Although Plaintiff earned commissions that exceeded her draw in four of the fourteen months she was employed at Ethan Allen, she never received an additional commission payment beyond her draw because throughout her employment at Ethan Allen she maintained a cumulative deficit as a result of her failure to earn enough commissions to cover her draw in prior months. When Ethan Allen terminated, Plaintiff she had an accumulated deficit of $4,610.14.”
Discussing the retail exemption, and granting Defendant’s Motion the Court stated, “The retail or service establishment exemption applies where: (1) the employee was employed by a retail or service establishment; (2) the employee’s regular rate of pay was more than one and one-half times the minimum hourly rate; and (3) more than half of the employee’s compensation comes from commissions. 29 U.S.C. § 207(i); 29 C.F.R. § 779.412; see also Schwind v. EW & Assocs. Inc., 371 F. Supp 2d 560, 563 (S.D.N.Y.2005). As the employer, Defendant bears the burden of proving the applicability of this exemption by ” ‘clear and affirmative evidence.’ ” Klinedinst, 260 F.3d at 1254 (quoting Birdwell v. City of Gadsden, 970 F.2d 802, 805 (11th Cir.1992)). Moreover, the Court construes exemptions from the overtime provisions of the FLSA narrowly against the employer. Birdwell, 970 F.2d at 905.
Plaintiff concedes that Defendant is a retail establishment and that her regular rate of pay was in excess of one and one-half times the minimum hourly rate applicable to her, thus satisfying the first two prongs of the test. (Pl.’s Resp. to Def.’s Mot. for Summ. J. at 5; Pl.’s Mot. for Summ. J. at 5.) The dispute in this case centers around the final requirement.
To rely on the retail or service establishment exemption, Defendant must demonstrate that more than half of Plaintiff’s compensation for a representative period of at least one month represents commissions on goods or services. See29 U.S.C. § 207(i).Section 207(i) provides that:
In determining the proportion of compensation representing commissions, all earnings resulting from the application of a bona fide commission rate shall be deemed commissions on goods and services without regard to whether the computed commissions exceed the draw or guarantee.
29 U.S.C. § 207(i) (emphasis added). Accordingly, in determining whether more than half of Plaintiff’s compensation came from commissions, the Court must also determine whether the commissions paid to Plaintiff were the result of “the application of a bona fide commission rate.”Id. Provided that the employer’s compensation plan is a bona fide plan, any compensation calculated as commissions according to the plan will count as commissions, even if the amount of commissions may not equal or exceed the guarantee or draw in some weeks. 29 C.F.R. § 779.416(b); Erichs v. Venator Group, Inc., 128 F. Supp 2d 1255, 1259 (N.D.Cal.2001). Conversely, even where an employer characterizes the entirety of an employee’s earnings as commissions, the employer may not rely on the retail and service establishment exemption unless the commissions are calculated pursuant to a bona fide commission plan. See generally Erichs, 128 F. Supp 2d at 1260 (explaining that “some payment plans that apparently are commission plans on their face may reveal themselves to be something different upon closer inspection.”). Although Ethan Allen categorized 100% of Plaintiff’s earnings as commissions, Plaintiff contends that Ethan Allen cannot demonstrate that more than half of her compensation came from commissions because her earnings did not result from the application of a bona fide commission rate.
Congress did not define the meaning of “bona fide commission rate.” Herman v. Suwannee Sifty Stores, Inc., 19 F. Supp 2d 1365, 1369 (M.D.Ga.1998) (Sands, J.); Erichs, 128 F. Supp 2d at 1259. Black’s Law Dictionary defines “bona fide” as “made in good faith.” BLACKS’S LAW DICTIONARY 186 (8th ed.2004). Courts have applied this definition to the term bona fide commission rate in Section 207(i).See Herman, 19 F. Supp 2d at 1370 (“Congress … provided that to use this commission-based exception, the commission rate must be set in good faith.”). Therefore, “[t]he inquiry is whether the employer set the commission rate in good faith.” Enrichs, 128 F. Supp 2d at 1259.
The Code of Federal Regulations provides two examples of commission rates that are not bona fide. See29 C.F.R. § 779.416(c). First, a commission rate is not bona fide where “the employee, in fact, always or almost always earns the same fixed amount of compensation for each workweek (as would be the case where the computed commissions seldom or never equal or exceed the amount of the draw or guarantee).”Id.Second, an employer’s commission plan is not bona fide where “the employee receives a regular payment constituting nearly his entire earnings which is expressed in terms of a percentage of the sales which the establishment … can always be expected to make with only a slight addition to his wages based upon a greatly reduced percentage applied to the sales above the expected quota.”Id.
These two examples are not exhaustive. See Erichs, 128 F. Supp 2d at 1260. The Court must examine Defendant’s particular commission rate and determine whether the plan is bona fide or set in good faith. As the Court explained in Herman:
Congress did not state that any commission rate was fine … Instead, it limited the exception to ensure employers would create a commission rate in good faith. Since Congress did not specify a definition of ‘bona fide [,]’ … the DOL did so through section 779.416(c). The DOL’s interpretation is consistent with the purpose of passing an exception to overtime by paying commissions. The whole premise behind earning a commission is that the amount of sales would increase the rate of pay. Thus, employees may elect to work more hours so they can increase their sales, and in turn, their earnings. When a commission plan never affects the rate of pay, the purpose behind using a commission rate also fails.
Herman, 19 F. Supp 2d at 1370;
Erichs, 128 F. Supp 2d at 1260. By requiring that a commission rate is bona fide, “Congress apparently envisions a smell test, one that reaches beyond the formal structure of the commission rate and into its actual effects and the purpose behind it.” Erichs, 128 F. Supp 2d at 1260.
The commission rate in this case passes this “smell test.” Defendant set the commission rate in good faith; the commission rate was not a superficial attempt to categorize Plaintiff’s earnings as commissions in order to avoid having to pay her overtime compensation. Cf. Id. at 1260-61 (finding that the defendant’s commission rate plan was not made in good faith because it was an attempt to replicate the prior, “legally nebulous” plan and would not increase sales); Herman, 19 F. Supp 2d at 1372 (holding that store managers who never received more than the guaranteed rate or received more than the guaranteed rate only once a year were not exempt under the retail and service exemption). Plaintiff’s compensation was entirely commission based. She received a commission ranging from 7% to 9% depending on the volume of her sales. Every two weeks, Plaintiff received a recoverable draw. After the initial four months of employment, if Plaintiff did not have enough sales to cover the draw, she went into deficit. Ethan Allen then deducted any earnings from commissions exceeding the draw from this deficit.
Ethan Allen’s compensation plan provided Plaintiff with a meaningful opportunity to elect to work more hours to increase her sales and earnings. Plaintiff’s monthly commissions exceeded her draw four times. Although Defendant used these funds to reduce Plaintiff’s accumulated deficit from prior months, the fact that Plaintiff could exceed her draw by increasing sales demonstrates her ability to impact her compensation by increasing sales. Unlike the example in the Code of Federal Regulations, Plaintiff did not always or almost always earn the same fixed amount each week; Plaintiff’s earnings fluctuated based on the amount of her sales. Because all of Plaintiff’s earnings resulted from the application of a bona fide commission rate, and are commissions within the meaning of Section 207(i), Defendant met its burden of demonstrating that one of the exemptions to the FLSA’s general overtime requirements applies to Plaintiff. Accordingly, the Court GRANTS Defendant’s motion for Summary Judgment [# 91].”
S.D.Tex.: Plaintiff’s Prior Acceptance Of Check For Backwages, Following DOL Investigation, Not A Waiver Of Her FLSA Rights; No Waiver/Release Was Ever Signed
Alvarez v. 9ER’s Grill @ Blackhawk, L.L.C.
In November of 2008 Alvarez went to the Department of Labor (“DOL”) to complain about the lack of overtime pay. Alvarez identified the establishment about which she was complaining as 9ER’s Grill, 1315 Grand Parkway, Katy, Harris County, Texas, and identified Mr. Ali Qattom and Mrs. Ghapa Qattom as the owners of the establishment. Qattom met with a DOL investigator and agreed to pay back wages to Alvarez. The funds to pay the back wages to Alvarez came from Jaser and 9ER’s Grill @ Blackhawk. Since Jaser was out of the country at the time, Qattom “handled the making of the payment [ ].” Alvarez received a cashier’s check for $1,690, but never signed any forms or receipts for the check. The Court denied Defendants’ Motion, finding that under the circumstances, Plaintiff did not waive her right to pursue a private right of action, simply by cashing a check issued by Defendants, resulting from the prior DOL investigation.
Addressing the settlement/waiver issue the Court stated,
“Defendants Jaser and 9ER’s Grill @ Blackhawk contend that they are entitled to summary judgment because Alvarez settled any FLSA claim that she may have against them by accepting payment made at the conclusion of an investigation by the DOL.
(a) Applicable Law
The FLSA provides for a waiver of an additional recovery when settlement payments have been supervised by the Secretary of Labor. 29 U.S.C. § 216(c). For such a waiver to be valid, the employee must agree to accept the payment that the Secretary determines to be due and there must be payment in full. See Sneed v. Sneed’s Shipbuilding, Inc., 545 F.2d 537 (5th Cir.1977). In Sneed, 545 F.2d at 539, the court held there was adequate supervision where the DOL official investigated the claim for back wages, determined the amount owed the employee, presented the check to the employee on the employer’s behalf, and required the employee to sign a receipt waiving his right to sue. Id. 545 F.2d at 538-40.
(b) Application of the Law to the Facts
Citing the Back Wages Disbursement and Pay Evidence Instructions that they received from the DOL, defendants argue that Alvarez’s claims “are barred by settlement of the claims prior to the filing of this lawsuit.” The DOL Back Wages Disbursement and Pay Evidence Instructions instructed the employers “to make the full payment of back wages by 09/03/2008 …” and also instructed the employers to “Send the Wage and Hour Division copies of the signed WH-58 Receipt Form to the Houston TX District Office as they are returned to you.” Alvarez states in her declaration, “I received a cashiers check in certified mail. There was nothing in the envelope with the check. I was never asked to sign any forms to receive my check. I did not sign any forms to receive my check.” Defendants do not dispute Alvarez’s statements that she neither received nor signed any form releasing her right to bring this action. Instead, Jaser states in his affidavit that
[t]he payments would not have been made if we had realized that the Plaintiff [ ] would take the money and then file a lawsuit … Based on the DOL material provided to us, it was my understanding the Plaintiffs were provided with a release and knew that by cashing the checks each was releasing any claims against each of their respective employers.
Because defendants have failed to present any evidence that they either provided Alvarez a form WH-58 to sign, or that Alvarez ever signed such a form releasing her FLSA claims, the court is not persuaded that her claims against Jaser and/or 9ER’s Grill @ Blackhawk are barred by settlement of the claims prior to the filing of this action.
(c) Conclusions
For the reasons explained above, the court concludes that 9ER’s Grill @ Blackhawk and 9ER’s Grill @ 359 are subject to enterprise treatment under the FLSA, and that neither Jaser nor 9ER’s Grill @ Blackhawk has presented evidence showing that the claims asserted against them in this action are barred by prior settlement.”
9th Cir.: Managers Of Business Are “Employers” Within Meaning Of FLSA, Subject To FLSA Liability; Bankruptcy Of The Underlying Corporation Does Not Affect This Liability Where Individual (Not Corporate Pledged) Assets Sought
Boucher v. Shaw
Three former employees of the Castaways Hotel, Casino and Bowling Center (the Castaways) and their local union sued the Castaways’ individual managers for unpaid wages under state and federal law. The district court dismissed the plaintiffs’ claims. This appeal raised several issues, most significantly whether the Castaways’ individual managers can be held liable for unpaid wages under Nevada law and/or the Fair Labor Standards Act (FLSA). The state court held that individual managers cannot be held liable as “employers,” and therefore that claim was properly dismissed by the district court. The Ninth Circuit holds that such managers can be held liable, and therefore reversed and remanded the FLSA claim to the district court.
“The Castaways filed for Chapter 11 bankruptcy protection on June 26, 2003. The individual plaintiffs were discharged in January 2004, when the Castaways was operating as the debtor-in-possession. On February 10, 2004, after the plaintiffs were discharged, the Chapter 11 petition was converted to a Chapter 7 liquidation, and the Castaways ceased operations. The individual plaintiffs, Ardith Ballard, Thelma Boucher and Joseph Kennedy III, filed suit in Nevada state court seeking to recover unpaid wages for themselves and for a class of Castaways employees. Ballard alleges that she has not been paid for the last pay period that she worked at the Castaways. Boucher alleges that she was not paid for the final pay period until two weeks after her employment was terminated. All three individual plaintiffs allege that they have not been paid their accrued vacation and holiday pay. Culinary Workers Union, Local 226 (Local 226 or the union) seeks to recover wages that were withheld as dues from the paychecks of Thelma Boucher and other employees. The plaintiffs assert claims under Chapter 608 of the Nevada Revised Statutes and the FLSA, 29 U.S.C. § 206(a).
The defendants are three Castaways’ managers. Dan Shaw was the Chairman and Chief Executive Officer of the Castaways at the time the plaintiffs were discharged. Michael Villamor was responsible for handling labor and employment matters at the Castaways. And James Van Woerkom was the Castaways’ Chief Financial Officer. Shaw had a 70 percent ownership in the Castaways, and Villamor had a 30 percent ownership interest. The plaintiffs allege that each defendant had custody or control over the “plaintiffs, their employment, or their place of employment at the time that the wages were due.”
The plaintiffs filed this lawsuit in Nevada state court on October 14, 2004. On December 21, 2004, Defendant Shaw removed the case to the United States District Court for the District of Nevada and filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Villamor and Van Woerkom separately filed motions to dismiss, alleging the same grounds for dismissal as Shaw. The district court granted the defendants’ motions and dismissed all of the plaintiffs’ claims. Boucher v. Shaw, No. CV-S-04-1738-PMP (PAL) (D.Nev. Jan. 25, 2005); Boucher v. Shaw, No. CV-S-04-1738-PMP (PAL) (D.Nev. Feb. 18, 2005); Boucher v. Shaw, No. CV-S-04-1738-PMP (PAL) (D.Nev. Apr. 11, 2005). The district court concluded that the defendants were not “employers” under Nevada law, Local 226 lacks standing to bring a claim under Nevada law and the plaintiffs cannot maintain a cause of action under the Fair Labor Standards Act against the defendants. Boucher v. Shaw, No. CV-S-04-1738-PMP (PAL), slip op. at 1-2 (D.Nev. Jan. 25, 2005). The plaintiffs challenge each of these conclusions on appeal. We certified the state law question to the Nevada Supreme Court, and stayed the case pending its resolution. The Nevada Supreme Court has answered the state law question, and we incorporate that court’s reasoning into our decision.”
After discussing the holding of Nevada’s Supreme Court, upon referral of the issue from the Ninth Circuit, that Nevada State law does not consider individuals liable for wage law violations of the corporation as “employers,” the Court considered the same issue under the FLSA, and whether such individuals can be liable as employers, despite the bankrupt status of the underlying corporate employer.
“In the case at bar, Ballard has alleged that Defendant Villamor was responsible for handling labor and employment matters at the Castaways; Defendant Shaw was chairman and chief executive officer of the Castaways; and Defendant Van Woerkom was the Castaways’ chief financial officer and had responsibility for supervision and oversight of the Castaways’ cash management. The plaintiff also alleges that Shaw held a 70 percent ownership interest in the Castaways, Villemor held a 30 percent ownership interest and all three defendants had “control and custody of the plaintiff class, their employment, and their place of employment.” ( See Complaint ¶¶ 9-11.) Accepting these allegations of material fact as true, Ballard’s claim withstands a motion to dismiss. See Simon, 546 F.3d at 664.
The defendants do not challenge their status as employers under the FLSA. Rather, they argue that any duty they had to pay wages to Castaways’ employees ended with the conversion of the Castaways’ Chapter 11 bankruptcy proceeding into a Chapter 7 liquidation. The defendants cite no authority for this proposition, but state merely that “[a]ny action under the FLSA is properly directed to the Chapter 7 Trustee and not Shaw, Villamor or Van Woerkom.” (Appellees’ Br. at 14.) Ballard responds that the case was not converted to a Chapter 7 proceeding until February 10, 2004, at least eleven days after she was fired, so that even if the duty to pay wages ceased upon the conversion of the case, the managers were liable up until that point. In supplemental briefing ordered by the court, the defendants do not dispute that the bankruptcy was converted to a Chapter 7 on February 10. Yet they assert that the Castaways “had ceased its operations altogether at the time that Ballard’s wage claim accrued,” which appears to mean that although Ballard is owed wages for the final pay period prior to when the Castaways ceased operating on January 29, her paycheck was not due to be issued to her until afterwards. Ballard argues to the contrary, citing Nev.Rev.Stat. § 608.020, for the proposition that wages and compensation earned and unpaid at the time of discharge are to be paid immediately. We agree. Moreover, the defendants’ subsequent argument that Ballard’s FLSA claim should fail because her wage claim has already been satisfied in the bankruptcy proceeding raises a question of fact not properly resolved on a motion to dismiss.
As a more general matter, we cannot see how it makes a difference one way or the other whether the Castaways was in Chapter 11 or Chapter 7. The Castaways is not a defendant, and the defendants are not debtors. The defendants perhaps assume that the automatic stay or other injunctive power of the bankruptcy court has some effect on the plaintiff’s claim, but they have not shown how that would be.
Section 362 of the Bankruptcy Code embodies the automatic stay, which immediately applies when a debtor files a bankruptcy petition and is designed to preclude a variety of post-petition actions-both judicial and non-judicial-against the debtor or affecting property of the estate. See 11 U.S.C. § 362(a). The automatic stay is fundamental to bankruptcy law. It ensures that claims against the debtor will be brought in one place, the bankruptcy court. The stay protects the debtor by giving it room to breathe and, thereby, hopefully to reorganize. The stay also protects creditors as a group from any one creditor who might otherwise seek to obtain payment on its claims to the others’ detriment. See, e.g., Chugach Forest Prods., Inc. v. Northern Stevedoring & Handling Corp., 23 F.3d 241, 243 (9th Cir.1994) (quoting Hillis Motors, Inc. v. Hawaii Auto. Dealers’ Ass’n, 997 F.2d 581, 585 (9th Cir.1993)).
As a general rule, the automatic stay protects only the debtor, property of the debtor or property of the estate. See 11 U.S.C. §§ 362(a); 541(a) (defining property of the estate); Advanced Ribbons and Office Prods., Inc. v. U.S. Interstate Distrib., Inc., 125 B.R. 259, 263 (9th Cir.BAP1991) (citation omitted); see also Chugach, 23 F.3d at 246. The stay “does not protect non-debtor parties or their property. Thus, section 362(a) does not stay actions against guarantors, sureties, corporate affiliates, or other non-debtor parties liable on the debts of the debtor.” Chugach, 23 F.3d at 246 (citations omitted). We have refused to extend the automatic stay to enjoin claims against a contractor-debtor’s surety, even though a surety bond guarantees the contractor-debtor’s performance. See In re Lockard, 884 F.2d 1171, 1178-79 (9th Cir.1989). In Lockard, we reasoned that extending the stay was inappropriate because the surety, not the contractor-debtor, puts its property directly at risk of liability to creditors in the event of nonpayment by the contractor-debtor, and therefore a surety bond is not property of the bankruptcy estate. Id. at 1178. We found that this was the case even though allowing a claim against the surety would trigger the surety’s right to recourse against the debtor. Id. Similarly, the automatic stay does not protect the property of parties such as officers of the debtor, even if the property in question is stock in the debtor corporation, and even if that stock has been pledged as security for the debtor’s liability. Advanced Ribbons, 125 B.R. at 263.
We have never addressed the question whether a company’s bankruptcy affects the liability of its individual managers under the FLSA. But our case law regarding guarantors, sureties and other non-debtor parties who are liable for the debts of the debtor leaves no doubt about the answer: the Castaways bankruptcy has no effect on the claims against the individual managers at issue here.
This is, in fact, an easier case than our precedent cited supra . Here, the plaintiff’s claim does not seek to reach property of the managers that has been pledged to secure the Castaways’ debt, or that would otherwise impact property of the estate. The individual managers generally are not liable for debts of the debtor, and even if they were, the plaintiff’s statutory claim against the individual managers is unrelated to any of the Castaways’ debts. Nor does the plaintiff seek damages based on an insurance policy held by the debtor. Cf. A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 998-1004 (4th Cir.1986). The plaintiff’s claim is not being used as an alternative route to recoup property of the estate, and therefore cannot be said to be “related to” the bankruptcy proceeding, such that it would be swept into the bankruptcy court’s jurisdiction under 28 U.S.C. § 1334(b). See Celotex v. Edwards, 514 U.S. 300, 307-08, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). Neither party has alleged that the estate would be diminished by any judgment in favor of the plaintiff, nor is there any indication in the record that the Castaways would be required to indemnify the individual managers for legal expenses or any judgment against them in this case. Cf. In re Minoco Group of Cos., 799 F.2d 517, 518 (9th Cir.1986) (affirming bankruptcy court’s finding that insurance policy cancellation was automatically stayed because of its impact on debtor’s obligation to indemnify officers and directors). However, if the liability of the non-debtor party were to affect the property of the bankruptcy estate, such as by a requirement that the debtor indemnify the non-debtor or by payment of the liability from a director’s and officer’s insurance policy, it may be necessary for the plaintiff in such a case to proceed against the non-debtor party through bankruptcy proceedings. See id.; A.H. Robins Co., 788 F.2d at 1007-08.
In this case, the parties have not raised any claims that this suit would affect the bankruptcy estate, so we need not reach this question.
To the contrary, the managers are independently liable under the FLSA, and the automatic stay has no effect on that liability. The defendants in their supplementary briefing repeatedly assert that they were unable to find any authority in support of this proposition. We have found at least two cases holding that individual managers can be held liable under the FLSA even after the corporation has filed for bankruptcy. See Donovan v. Agnew, 712 F.2d 1509, 1511, 1514 (1st Cir.1983) (finding managers of bankrupt corporation individually liable under FLSA and noting, “The overwhelming weight of authority is that a corporate officer with operational control of a corporation’s covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages.”); Chung v. New Silver Palace, 246 F.Supp.2d 220, 226 (S.D.N.Y.2002) (“The automatic stay … affects only [the debtor]; it does not apply to plaintiff’s [FLSA] claims against the [debtor]’s non-debtor co-defendants.”).
The district court correctly held that the plaintiffs could not state a claim against the managers for unpaid wages under Nevada law, and therefore correctly dismissed that claim, making the issue of the union’s standing moot. However, the plaintiffs have adequately stated a claim under the FLSA.”
5th Cir.: FLSA Does Not Require Employer To Reimburse H-2B Visa Workers’ Recruitment, Transportation or Visa Expenses, Absent Showing of “Kick-Back” To Recruiter
CASTELLANOS-CONTRERAS v. DECATUR HOTELS LLC
The aftermath of Hurricane Katrina required New Orleans hotelier Decatur Hotels, L.L.C. (“Decatur”) to look to foreign sources of labor. A group of these employees (collectively, the “guest workers”), who held H-2B visas while working for Decatur, contend that Decatur violated the Fair Labor Standards Act (“FLSA”) by paying them less than minimum wage, free and clear, when Decatur refused to reimburse them for recruitment, transportation, and visa expenses that they incurred before relocating to the United States to work for Decatur.
Decatur filed a motion to dismiss and/or for summary judgment, and the guest workers filed a cross-motion for summary judgment. The district court denied Decatur’s motion, granted the guest workers’ motion in part, and certified its order for interlocutory appeal. A motions panel of this court authorized Decatur to file an interlocutory appeal. In this interlocutory appeal under 28 U.S.C. § 1292(b), Decatur raised three issues of first impression for this court: whether, under the FLSA, an employer must reimburse guest workers for (1) recruitment expenses, (2) transportation expenses, or (3) visa expenses, which the guest workers incurred before relocating to the employer’s location. The 5th Circuit held that the FLSA does not require an employer to reimburse any of these expenses, and reversed the district court’s order, and rendered judgment in favor of Decatur. The Court discussed each of the three reimbursement claims (recruitment costs, transportation and visa expenses) and found that none created a FLSA obligation on behalf of the employer.
“The guest workers contend that they are entitled to reimbursement because, under 29 U.S.C. § 203(m), the expenses they incurred are de facto deductions from cash wages received for their first week of work, leaving a balance owed them by Decatur. In other words, they liken these expenses (in an inverse way) to employer-furnished “facilities,” such as room and board, which the employer may deduct from an employee’s wages; only here, the guest workers contend that Decatur must reimburse them for expenses that they incurred before their first workweek began.
Section 203(m) defines wages as cash or “the reasonable cost … to the employer of furnishing [the] employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees.” (Emphasis added.) The provision’s plain language thus permits employers flexibility in the method of paying employees. This section of the FLSA, contrary to the guest workers’ suggestion, does not impose liability upon employers for expenses that employees incur. See Donovan v. Miller Props., Inc., 711 F.2d 49, 50 (5th Cir.1983) (per curiam) (“[S]ection 3(m) of the Fair Labor Standards Act, 29 U.S.C. § 203(m), … allows an employer to credit toward its obligation to pay the minimum wage ‘the reasonable cost … of furnishing [an] employee with board, lodging, or other facilities’ ….”) (emphasis added). Section 203(m) provides no ground for Decatur to have violated the FLSA by refusing to reimburse the guest workers for recruitment, transportation, and visa expenses that they incurred.
We thus turn to the argument that Decatur’s failure to pay these pre-employment expenses encumbered the guest workers’ wages, so that Decatur did not pay the wages “finally and unconditionally or ‘free and clear’ “:
Whether in cash or in facilities, “wages” cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or “free and clear.” The wage requirements of the Act will not be met where the employee “kicks-back” directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee. This is true whether the “kick-back” is made in cash or in other than cash. For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer’s particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act.
29 C.F.R. § 531.35.
The above-quoted regulation does not define when an employee-incurred expense constitutes a kick-back. Our precedents, however, clarify that an employer-imposed condition of employment is a kick-back if it “tend[s] to shift part of the employer’s business expense to the employees.” Mayhue’s Super Liquor Stores, Inc. v. Hodgson, 464 F.2d 1196, 1199 (5th Cir.1972).
We now consider whether, under 29 C.F.R. § 531.35, the guest workers are entitled to reimbursement of their recruitment, transportation, or visa expenses.
We begin with the visa expenses. Although § 531.35 does not specifically address employers’ obligation to reimburse guest workers for these expenses, other regulations clarify that employee-paid expenses to obtain H-2B visas more properly belong to the guest worker than to the employer. See
22 C.F.R. §§ 40.1( l )(1) (requiring nonimmigrant visa applicants, such as the guest workers here, to submit processing fees when they apply for visas). The expense of applying to become a sponsoring employer of H-2B employees, by contrast, more properly belongs to the employer. See
8 C.F.R. §§ 103.7(a), 103.7(b)(1), 214.2(h)(2)(i)(A) (requiring, collectively, that a U.S. employer submit certain forms and filing fees to become an H-2B visa sponsor). These regulations, which assign H-2B visa processing fees to visa applicants and H-2B sponsorship-application fees to employers, show that requiring the guest workers to bear the visa expenses at issue did not tend to shift part of Decatur’s business expense to the guest workers. We hold that Decatur has no FLSA responsibility to reimburse the guest workers for the visa expenses that the employees incurred.
We next consider the transportation expenses. For many years, the Department of Labor interpreted the FLSA and its implementing regulations as requiring employers to bear guest workers’ inbound transportation expenses. See Wage & Hour Div. Op. Ltr., 1990 DOLWH LEXIS 1, at *3 (June 27, 1990) (“Under the FLSA, it has always been the position of the Department of Labor that no deduction, that cuts into the minium wage, may be made for transportation of workers from the point of hire and return to that point…. [S]uch transportation costs [are] primarily for the benefit of the employer.”). The agency, however, has called this interpretation into question. See Labor Certification Process and Enforcement for Temporary Employment in Occupations Other Than Agriculture or Registered Nursing in the United States (H-2B Workers), and Other Technical Changes, 73 Fed.Reg. 78020, 78041 (Dec. 19, 2008) (“[T]he cost[ ] of relocation to the site of the job opportunity generally is not an ‘incident’ of an H-2B worker’s employment within the meaning of 29 CFR 531.32, and is not primarily for the benefit of the H-2B employer.”); Withdrawal of Interpretation of the Fair Labor Standards Act Concerning Relocation Expenses Incurred by H-2A and H-2B Workers, 74 Fed.Reg. 13261, 13262 (Mar. 26, 2009) (“DOL believes that this issue warrants further review. Consequently … DOL withdraws the [December 19, 2008,] FLSA interpretation … for further consideration and the interpretation may not be relied upon as a statement of agency policy ….” (footnote omitted)); see also De Luna-Guerrero v. N.C. Grower’s Ass’n, 338 F.Supp.2d 649, 659 (E.D.N.C.2004) (“[T]he issue [of an employer’s liability for transportation expenses] has been under review by the DOL…. DOL’s policy regarding de facto deductions [of transportation expenses] is anything but clear.”); Rivera v. Brickman Group, Ltd., 2008 U.S. Dist. LEXIS 1167, at *37-39 (E.D.Pa. Jan. 7, 2008) (“The DeLuna-Guerrero court refused to rely on the opinion letters because it believed the Department of Labor’s position to be too unclear. I agree, and in so doing, I note that the Department of Labor’s position is not merely unclear, but untenable. * * * Given the apparent (and now more than thirteen-year-old) incoherence at the Department of Labor with regard to this issue, I am not persuaded that I should accord the older opinion letters any significant weight [under Auer v. Robbins, 519 U.S. 452 (1997), or Skidmore v. Swift & Co., 323 U.S. 134 (1944) ].”).
We agree with the Rivera court that Auer deference to the DOL’s older interpretation seems inappropriate. Furthermore, inasmuch as the DOL never fully explained why it adopted that interpretation in the first place, we agree with the Eleventh Circuit that Skidmore deference seems inappropriate. See Arriaga v. Fla. Pac. Farms, 305 F.3d 1228, 1239 (11th Cir.2002) ( “Because of this lack of explanation, it is impossible to weigh the ‘validity of its reasoning’ or the ‘thoroughness [ ] in its consideration.’ ” (quoting Skidmore, 323 U.S. at 140) (alteration in original)). Relying on case law that defers to the interpretation similarly seems inappropriate, and thus we can accord no weight to the guest workers’ cited authorities such as Marshall v. Glassboro Service Ass’n, 1979 U.S. Dist. LEXIS 9053, at *6 (D.N.J. Oct. 19, 1979); and Torreblanca v. Naas Foods, Inc., 1980 U.S. Dist. LEXIS 13893, at *13 (N.D.Ind. Feb. 25, 1980).
As is the case with visa expenses, the regulation addressing employer kick-backs does not specify whether an H-2B guest worker’s inbound transportation expenses belong more properly to the employer or to the guest worker. Other statutory and regulatory provisions may guide this determination.
Two provisions have some relevance. Under the Immigration and Nationality Act, an H-2B guest worker’s outbound transportation expenses sometimes belong to the employer. See 8 U.S.C. § 1184(c)(5)(A).FN4 Under U.S. Citizenship and Immigration Service regulations, an H-2A agricultural guest worker’s inbound transportation expenses sometimes belong to the employer. See 20 C.F.R. § 655.102(b)(5)(i). No provision, however, requires an employer to bear an H-2B guest worker’s inbound transportation expenses. We find silence in this context indicative that Congress most likely did not intend for the employer to bear H-2B guest workers’ inbound transportation expenses.FN5
The guest workers do cite two cases which, without relying on the DOL’s now-unclear FLSA interpretation, hold that employers must bear guest workers’ inbound transportation expenses. See Arriaga, 305 F.3d at 1244 (11th Cir.2002); Rivera, 2008 U.S. Dist. LEXIS 1167, at *42-44. Arriaga involves H-2A guest workers. It holds that employers must bear guest workers’ inbound transportation expenses because the expenses are “incident of and necessary to” the guest workers’ employment. See 305 F.3d at 1241-44. We find Arriaga distinguishable insofar as its analysis derives from the case’s H-2A, as opposed to H-2B, origins. Arriaga also is distinguishable because its “incident of and necessary to” standard originates from 29 C.F.R. § 531.32 instead of § 531.35. Section 531.32 implements 29 U.S.C. § 203(m); and, as we have said, our Donovan precedent from 1983 informs us that, under Fifth Circuit law, § 203(m) imposes no obligation on employers to bear employee-incurred expenses. We will not follow Arriaga.
Rivera essentially does follow Arriaga, albeit in the H-2B context. Rivera quotes 29 C.F.R. § 531.35 at length, 2008 U.S. Dist. LEXIS 1167, at *36-37, but ultimately decides the issue of transportation expenses under 29 U.S.C. § 203(m): “point-of-hire transportation is primarily for the employer’s benefit, both because it is dissimilar to lodging and board, and because the expense arises out of Brickman’s decision actively to recruit workers in foreign countries.” Id. at *43. We do not necessarily agree with Rivera that Arriaga ‘s reasoning extends so readily from H-2A guest workers to H-2B guest workers. In any event, Donovan forecloses us from following Rivera ‘ s § 203(m)-based analysis. Just as we will not follow Arriaga, we will not follow Rivera.
On the authorities before us, we hold that the FLSA does not obligate Decatur to reimburse its guest workers for their inbound transportation expenses.FN6
Finally, we consider whether the FLSA obligates Decatur to reimburse its guest workers for the expenses that they incurred with foreign recruitment companies. The FLSA’s provisions do not require reimbursement of these employee-incurred expenses. See
29 U.S.C. § 201 et seq. Neither do the FLSA’s implementing regulations-unless the expenses were “kick-backs” to Decatur. See 29 C.F.R. § 531.35.
We hold that the recruitment expenses were not kick-backs within the meaning of § 531.35. The expenses differed in all fundamental characteristics from the expenses that our court has labeled kick-backs. See Mayhue’s Super Liquor Stores, Inc. v. Hodgson, 464 F.2d 1196, 1199 (5th Cir.1972) (deduction from cashiers’ wages to pay for every shortage in employer cash-register accounts, regardless of the reason for the shortage); Brennan v. Veterans Cleaning Serv., Inc., 482 F.2d 1362, 1370 (5th Cir.1973) (employee’s wage deduction in favor of employer to recover the cost of a wrecked company truck). The expenses were not treated as an employer obligation by custom or practice of Decatur’s industry. In sum, there is no basis in custom, practice, or law to include the recruitment expenses as part of Decatur’s business expense.
Our attention, however, has been brought to two relatively new regulations that for the first time address unscrupulous practices in recruiting workers to participate in the H-2B visa program. Effective January 18, 2009, the Department of Labor requires an employer seeking H-2B labor certification to attest that “[t]he employer has contractually forbidden any foreign labor contractor or recruiter whom the employer engages in international recruitment of H-2B workers to seek or receive payments from prospective employees, except as provided for in DHS regulations at 8 CFR 214.2(h)(5)(xi)(A).” 20 C.F.R. § 655.22(g)(2). Also effective January 18, 2009, the Department of Homeland Security forbids an employer, employer’s agent, recruiter, or similar employment service from collecting any “job placement fee or other compensation (either direct or indirect)” from a foreign worker as a condition of an H-2B job offer or as a condition of H-2B employment. 8 C.F.R. § 214.2(h)(6)(i)(B).FN7 These regulations ultimately may influence whether H-2B employers will reimburse the recruitment expenses of future guest workers, but they do not affect Decatur’s obligations here. See, e.g., Sierra Med. Ctr. v. Sullivan, 902 F.2d 388, 392 (5th Cir.1997) (“Generally, courts will not apply regulations retroactively unless their language so requires.”); 20 C.F.R. § 655.5 (indicating, by creating a transition period for implementing the Department of Labor’s January 2009 changes to 20 C.F.R. part 655, that the changes do not apply retroactively); 73 Fed.Reg. 78103, 78127-30 (Dec. 19, 2008) (giving no indication that the Department of Labor’s January 2009 changes to 8 C.F.R. part 214 apply retroactively). Furthermore, because the regulations for the first time forbid an H-2B employer from permitting guest workers to bear such recruitment expenses, they strongly suggest that the guest workers’ recruitment expenses incurred long before the regulations became effective were not part of Decatur’s business expense.
Finally, our conclusion is not disturbed by the one case that the guest workers cite holding recruitment expenses can be part of an employer’s business expense. See Rivera, 2008 U.S. Dist. LEXIS 1167, at *47-*50. The employer there, Brickman, required guest workers to hire a particular recruitment company, which charged them fees. See id. at *48-*49. Because the employer required the guest workers to use the recruitment company, the court concluded “that fees associated with Brickman-designated workers’ representatives [we]re costs ‘primarily for the benefit of the employer,’ and that Brickman, therefore, was not allowed to pass those costs along [to the guest workers] to the extent that doing so reduced their wages below the FLSA minimum.” Id. at *50.
Assuming the correctness and continued validity of that case’s reasoning, the case is distinguishable. Here, there is no evidence that Decatur even knew about the foreign recruitment companies, much less that the companies charged a fee to the guest workers as a condition of receiving an offer of employment. Decatur paid Pickering $300 per job position filled, which itself was in the nature of an employer-paid recruitment fee. Although the record does show that the guest workers knew of no other way to obtain employment with Decatur, the record also shows that Decatur did not require, or approve, any guest worker to pay any sum to anyone as a condition of an H-2B job offer or as a condition of H-2B employment.
For all of the foregoing reasons, we hold that the FLSA does not obligate Decatur to reimburse the guest workers for their recruitment expenses.
In sum, we hold that Decatur incurred no FLSA liability to reimburse its guest workers for the recruitment fees, transportation costs, or visa fees that they incurred to work in the United States. We REVERSE the summary judgment, RENDER judgment in favor of Decatur, and REMAND for entry of same.”
N.D.Cal.: Internal Complaint Regarding Sick Leave Not Protected From Retaliation Under 29 U.S.C. § 215(a)(3), Because Sick Leave Not Covered By The FLSA
Byrd v. California Superior Court, County of Marin
Among the issues before the Court, was whether a request for sick leave, and alleged retaliation resulting therefrom is protected under section 215 of the FLSA, the anti-retaliation provision. Finding that it is not, the Court explained,
“Defendant argues that section 215 of the FLSA is inapplicable to this case because plaintiff’s internal complaint concerned sick leave, for which there is no provision in the FLSA. Section 215(a)(3) provides that it is unlawful “[t]o discharge or in any manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this act.”29 U.S.C. § 215(a)(3).
The FLSA covers wage and hour violations and is intended as a “remedial statute.” Lambert v. Ackerley, 180 F.3d 997,1007 (9th Cir.1990). FLSA must “not be interpreted or applied in a narrow, grudging manner.” Id. at 1003,citing Tenn. Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597 (1944).Section 215 was enacted to ensure that employees who lodge complaints could do so free of fear of economic retaliation. Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 292-93 (1960).
The internal complaint at issue concerned allegations of harassment and discrimination in response to plaintiff’s taking sick leave. Sick leave is not explicitly covered under the FLSA. FLSA cases concern, by and large, monetary compensation, or other compensation only insofar as it can be translated into monetary compensation. See, e.g., Lambert, 180 F.3d at 1010 (concerning overtime compensation); Acton v. City of Columbia, 436 F.3d 969 (8th Cir.2006) (holding that sick leave “buy back” monies should be included in employee’s regular rate of pay under FLSA) reh’g denied; cf. Featsent v. City of Youngstown, 70 F.2d 1456 (6th Cir.1995) (holding that sick leave “buy back” monies should not be included in an employee’s regular rate of pay under FLSA). From the available cases, interference with the sick leave claim alleged here does not “relate to” the FLSA. Accordingly, harassment and discrimination as a result of taking sick leave would also not be “related to” the FLSA.
Based on the complaint as filed, the court does not believe that plaintiff can allege any facts that would bring her internal complaint concerning harassment and discrimination in response to her taking sick leave within the purview of section 215. Even if plaintiff’s internal complaint could be construed to be a complaint about “interference with” sick leave, which was not alleged until after she filed her instant complaint (see Compl. ¶ 38), such allegations are still not under or related to the FLSA. Accordingly, the Superior Court’s motion to dismiss plaintiff’s thirteenth cause of action is GRANTED without leave to amend.”