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D.Mass.: FLSA Provides For “Gap Time” Claims Where Plaintiff Paid Nothing For Certain Hours, Notwithstanding Fact That Average Hourly Wage Exceeded Minimum Wage
Norceide v. Cambridge Health Alliance
This case was before the court on multiple motions. As discussed here, the court denied the defendants’ motion to dismiss plaintiffs’ so-called “gap time” claims. The case is of significance because the court bucked the predominant trend, and- rather than accepting prior case law as gospel- examined the issue anew. In so doing, the court held that “gap time” claims are permissible under the FLSA.
Before we get to the court’s analysis though, it’s important to actually explain what gap time is. Gap time is comprised of non-overtime hours (their inclusion in an employee’s time in the workweek would not bring the employee above the 40 hour overtime threshold), typically worked off-the-clock. Because some employees have a sufficiently high hourly rate, when all hours (including those the employer failed to specifically pay the employee for) are divided into the renumeration paid to the employee in a given week, the resulting number can be higher than the minimum wage. The question then arises as to whether the FLSA only provides for an employee to receive minimum wage when all hours are divided into the weekly renumeration OR whether it requires an employee to be paid the minimum wage on an hourly basis for all such hours worked. These extra hours- which do not bring the average hourly wage below minimum rate- are referred to as “gap time.” Most courts have held that the FLSA does not provide for recovery of such “gap time” hours. However, this court disagreed.
Examining the issue, the court reasoned:
“According to CHA, Plaintiffs’ minimum wage claims should be dismissed because they do not allege that CHA ever paid them less than the operative minimum wage. Specifically, CHA argues that, if the total wages paid to any given plaintiff in a week were divided by the total hours worked in the week, then the average hourly wage would be greater than the minimum wage. For instance, suppose that one week Barbatine was scheduled to work 26 hours at a rate of $10.00 an hour and was paid accordingly, meaning she earned $260. However, in fact, she worked an additional 4 hours during her breaks and before/after her shifts and was not paid for this time. According to CHA, Barbatine has no claim for a minimum wage violation, since $260 divided by 30 hours is an average hourly wage of $8.67, which still exceeds the minimum wage.
In reality, Plaintiffs counter, Barbatine was being paid at a rate of $0 per hour for her additional 4 hours. CHA intended for its payment of $260 to cover her scheduled shifts and nothing more. Barbatine’s payment statement for the week in question on its face would indicate that she was getting paid for 26 hours of work, not 30. I agree with Plaintiffs.
The weekly average wage measuring rod that CHA argues should be utilized when assessing minimum wage violations stems from the Second Circuit’s decision in United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487 (2d Cir.1960). In that case, due to some financial difficulties their employer faced, security guard employees agreed to work an additional six hours per week but not be paid for this time until some later date. Id. at 489–90. The employer, however, never provided compensation for this extra work. The federal government charged the company with violating the FLSA. The Second Circuit dismissed the government’s minimum wage claim on the basis of the weekly average wage theory. Id. at 490. Articulating the purpose of the FLSA only as “guarantee [ing] a minimum livelihood to the employees,” the court found that “the Congressional purpose is accomplished so long as the total weekly wage paid by an employer meets the minimum weekly requirements of the statute, such minimum weekly requirement being equal to the number of hours actually worked that week multiplied by the minimum hourly statutory requirement.” Id. at 490 (citing H.R.Rep. No. 75–2738, at 28 (1938); Sen. Rep. No. 75–884, at 1–3 (1937); H.R.Rep. No. 75–1452, at 8–9 (1937)).
Since the court’s decision in 1960, several other circuits have adopted the Second Circuit’s approach—what has come to be known as the Klinghoffer rule. However, they have mostly done so by citing to Klinghoffer without any further analysis of whether, in fact, the weekly average rule effectuates the legislative intent of the FLSA’s minimum wage law. See, e.g., U.S. Dep’t of Labor v. Cole Enter., Inc., 62 F.3d 775, 780 (6th Cir.1995) (simply noting what “several courts have held”); Hensley v. MacMillan Bloedel Containers, Inc., 786 F.2d 353, 357 (8th Cir.1986) (citing to Klinghoffer without analysis); Blankenship v. Thurston Motor Lines, 415 F.2d 1193, 1198 (4th Cir.1969) (stating without explanation that Klinghoffer “contains a correct statement of the law”). The D.C. Circuit is a notable exception, accepting the weekly average wage rule in Dove v. Coupe only after its own analysis. 759 F.2d 167, 171–72 (D.C.Cir.1985). The First Circuit, however, has yet to address whether to use the hour-byhour or the Klinghoffer weekly average measure for evaluating minimum wage law compliance. In my view, as explained below, the Klinghoffer weekly average method ignores the plain language of the minimum wage provision and undermines the FLSA’s primary purpose of ensuring a fair wage for workers.
My review of the FLSA is guided by principles of statutory construction; my interpretation “depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that inform the analysis.” Dolan v. Postal Service, 546 U.S. 481, 486, 126 S.Ct. 1252, 163 L.Ed.2d 1079 (2006).
I begin by looking to the language of the statute. See Kasten v. Saint–Gobain Performance Plastics Corp., ––– U.S. ––––, ––––, 131 S.Ct. 1325, 1331, 179 L.Ed.2d 379 (2011). The FLSA’s minimum wage provision mandates that an employer pay to each non-exempt employee “wages at the following rates: (1) except as other provided … not less than—(A) $5.85 an hour, beginning on the 60th day after May 25, 2007; (B) $6.55 an hour, beginning 12 months after that 60th day; and (C) $7.25 an hour, beginning 24 months after that 60th day.” 29 U.S.C. § 206(a). As the other courts to have considered this language concede, it speaks only of an hourly wage. Thus, while it is does not explicitly state how to calculate what an employee has been paid for a hour’s worth of work, the statute’s text is explicit that, with respect to the minimum wage, the only metric Congress envisioned was the hour, with each hour having its own discrete importance.
To be sure, other parts of the FLSA speak of a “workweek.” But, this unit of time is used for determining worker entitlement to other protections, most importantly overtime, not for assessing violations of the minimum wage law. See, e.g., 29 U.S.C. § 207(a)(2) (“[N]o employer shall employ any of his employees who in any workweek is engaged in commerce … for a workweek longer than forty hours … unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.”). In fact, the other provisions of the FLSA support the conclusion that, for the purpose of determining a minimum wage violation, the use of any unit of time other than an hour is a contrivance. When Congress meant to use the word “workweek” it did so. When it meant to use “hour” that was the word it used.
The FLSA’s legislative history does not explicitly address whether an hour-by-hour or weekly-average method should be employed when determining compliance with the minimum wage law. However, it does makes clear that Congress’ overriding riding purpose when enacting the FLSA was to ensure, as the bill’s name implies, fairness for workers. “The principal congressional purpose in enacting the [FLSA] was to protect all covered workers from substandard wages and oppressive working hours, ‘labor conditions [that are] detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.’ ” Barrentine v. Arkansas–Best Freight Sys. Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (citing 29 U.S.C. § 202(a)). One way Congress attempted to effectuate this somewhat amorphous goal through the FLSA was by “guarantee[ing] a minimum livelihood to the employees covered by the Act,” Klinghoffer, 285 F.2d at 490 (citing H.R.Rep. No. 75–2738, at 28 (1938); Sen. Rep. No. 75–884, at 1–3 (1937); H.R.Rep. No. 75–1452, at 8–9 (1937)). While the Senate and House reports do not indicate whether Congress had in mind a formula for determining the amount necessary for “a minimum livelihood,” they do reveal that Congress considered the test to be whether a worker received “ ‘a fair day’s pay for a fair day’s work,’ ” Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 578, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942) (quoting 81 Cong. Rec. 4983 (1937) (message of President Roosevelt)); see also Barrentine, 450 U.S. at 739.FN5
Congress’ primary concern with protecting worker—not employers—buttresses the above conclusion that the plain language of the minimum wage provision should be read as an endorsement of the hour-by-hour method. When a statute is susceptible to two opposing interpretations—here, the hour-by-hour and weekly average methods—it must be read “in the manner which effectuates rather than frustrates the major purpose of the legislative draftsmen.” Shapiro v. United States, 335 U.S. 1, 31–32, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948). While the weekly method does ensure that workers earn a base amount after working a certain number of hours in a week, it frustrates the overall purpose of promoting fairness for workers.
Take the Barbatine example above. There, CHA intended for the $260 to compensate for only the 26 hours she was scheduled to work. CHA, therefore, got four free hours of work from Barbatine, while Barbatine received the same amount of compensation after working 30 hours as she would have for working 26 hours. Such a compensation scheme does promote not an environment in which a worker is ensured “a fair day’s pay for a fair day’s work.’ ” See Travis, 41 F.Supp. at 9 (“[I]f the act is given a very strict construction[,] averaging is probably not permitted.”); see also Dove, 759 F.2d at 171.
Taken together, the plain language of the minimum wage provision, the remaining parts of the FLSA, and the Congress’ primary goal of protecting workers buttresses the conclusion that Congress intended for the hour-by-hour method to be used for determining a minimum wage violation. Here, Plaintiffs have alleged that CHA knew the Plaintiffs were working more hours than reported on their time sheet and that it was not compensating its employees for this time. In other words, Plaintiffs have alleged that CHA intentionally paid its workers $0 for each unrecorded hour worked during their meal breaks and before/after their shifts. This allegation is sufficient to state a claim for a minimum wage violation at this stage, and CHA’s motion to dismiss Plaintiffs’ FLSA minimum wage claim is DENIED.”
It will be interesting to see if other courts begin following this well-reasoned opinion, and allowing for the recovery of “gap time” under the FLSA.
Click Norceide v. Cambridge Health Alliance to read the entire Memorandum and Order re: Motion to Dismiss, Motion to Amend, Motion for Conditional Certification.
N.D.Ga.: Exotic Dancers Are Employees Not Independent Contractors; Entitled to Minimum Wages and Overtime
Clincy v. Galardi South Enterprises, Inc.
This case was before the court on numerous motions. As discussed here, the judge granted plaintiffs’ motion for summary judgment and denied defendants’ cross motion, holding that plaintiffs’- exotic dancers or strippers- were defendants’ employees, not independent contractors. As such, plaintiffs were entitled to minimum wages and overtime pursuant to the Fair Labor Standards Act.
Significantly, none of the plaintiffs were paid any direct wages by the club in which they worked. Instead, they paid defendants for the right to perform in their club. The plaintiffs’ each were required to sign independent contractor agreements as a prerequisite to beginning work for the defendants. Further, the defendants claimed that the dancers were independent contractors because they were paid directly by customers and did not receive paychecks. They also claimed that the club did not profit from the dancers and that the dancers did not necessarily drive the club’s business. However, based on evidence that the defendants set the prices for tableside dances and how much of their gross receipts dancers were required to turn over in the form of “house fees” and disc jockey fees, as well as the fact that the defendants set specific schedules for the dancers, created rules of conduct (subject to discipline), check-in and check-out procedures and otherwise controlled the method and manner in which plaintiffs worked, the court held that the defendants were plaintiffs’ employers under the FLSA.
Although not a groundbreaking decision, it is significant because the majority of strip clubs around the country continue to disregard court decisions that have held that most strippers, employed under circumstances similar to those in the case, are actually employees.
Click Clincy v. Galardi South Enterprises, Inc. to read the entire Order.
Are the FLSA’s Enterprise Coverage Requirements Outdated in Today’s Economy?
In his recent article, “Taking the Employer Out of Employment Law? Accountability for Wage and Hour Violations in an Age of Enterprise Disaggregation,” Professor, Timothy P. Glynn of Seton Hall School of Law makes a compelling argument that the answer is yes.
In the abstract to his article, Professor Glynn explains:
“Violations of wage and hour mandates are widespread at the low end of the labor market. The disaggregation of business enterprises into smaller, independent parts has been an important factor in this growing problem. Limitations on liability for work-law violations invite such arrangements since statutory protections for workers usually impose duties only on “employers.” That status, in turn, hinges on the level of control a firm exercises over the work, and when exacting control is not necessary, firms usually can avoid accountability by shifting work to independent third-party suppliers. This creates severe enforcement obstacles: detection becomes difficult, labor suppliers often are undercapitalized, and coverage uncertainties lead to unprosecuted claims and discounted settlements. Thus, disaggregation does far more than shift legal responsibility from one entity to another: it allows end-user firms to avoid noncompliance risks while benefiting from labor at a price discounted by the unlikelihood of enforcement.”
Thus, Professor Glynn proposes “eliminating the ’employer’ coverage barrier altogether.” Under his approach, “commercial actors would be held strictly liable for wage and hour violations in the production of any goods and services they purchase, sell, or distribute, whether directly or through intermediaries. The only limitation is that a firm’s liability would not exceed the proportion of the violations attributable to the goods or services it purchases, sells, or distributes.”
Adopting this less restrictive coverage requirement would lead to easier enforcement of wage and hour laws and thus, fewer abuses at the low end of the labor market. It doesn’t appear that there’s any push to adopt these logical changes which would no doubt further the remedial goals of wage and hour laws, but it’s a refreshing perspective nonetheless. In this day and age, Professor Glynn’s recognition that a modern fractured economy is far different than the economy of the past, with fewer larger actors, is largely unaddressed by wage and hour laws that are currently on the books.
Click Abstract to read more on Professor Glynn’s work.
Thanks to the Workplace Prof Blog for bringing this to our attention.
D.Colo.: Pizza Hut Delivery Drivers’ Minimum Wage Claims, Premised on Claim That Defendants Failed to Reasonably Estimate Vehicle-Related Expenses for Reimbursement Can Proceed; Defendants’ Motion to Dismiss Denied
Darrow v. WKRP Management, LLC
This matter was before the Court on the defendants’ motion to dismiss plaintiff’s second amended complaint. Plaintiff, a Pizza Hut delivery driver, alleged that defendants, Pizza Hut franchisees, violated the Fair Labor Standards Act (“FLSA”) and the Colorado Minimum Wage of Workers Act (“CMWWA”) by failing to reasonably approximate his automotive expenses for reimbursement purposes, and thereby, failing to pay him minimum wage.
Significantly, defendants paid plaintiff and opt-in plaintiffs at or near the Colorado minimum wage from 2007 to 2009. According to the court, on average, the plaintiff and opt-in plaintiffs delivered two to three orders per hour and drove five miles per delivery. Plaintiff alleged that defendants required their delivery drivers to ‘maintain and pay for safe, legally-operable, and insured automobiles when delivering WKRP’s pizza and other food items.’ Defendants reimbursed Plaintiff between $0.75 and $1.00 per delivery for the vehicle expenses incurred by plaintiff to make deliveries. Plaintiff alleged that it was defendants’ policy and practice to unreasonably estimate employees’ automotive expenses for reimbursement purposes, which caused Plaintiff and other similarly situated individuals to be paid less than the federal minimum wage and the Colorado minimum wage from 2007 to 2009 in violation of the FLSA and the CMWWA.
Rejecting defendants’ argument that plaintiff failed to state a claim for unpaid minimum wages under these facts, the court looked to the section 7(e)(2), which states that an employee’s regular rate does not include travel or other expenses incurred in furtherance of the employer’s interest:
“The FLSA provides a definition for “wages,” but does not address an employer’s reimbursement of expenses. However, “[Department of Labor] regulations are entitled to judicial deference, and are the primary source of guidance for determining the scope and extent of exemptions to the FLSA,” including expense reimbursement. Spadling v. City of Tulsa, 95 F.3d 1492, 1495 (10th Cir.1996). Therefore, the Court will look to the Department of Labor regulations to determine whether, under the FLSA, an employee may claim that his wages are reduced below the minimum wage when he is under-reimbursed for vehicle-related expenses. Under 29 C.F.R. § 531.35, “the wage requirements of the [FLSA] 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.” A kickback occurs when the cost of tools that are specifically required for the performance of the employee’s particular work “cuts into the minimum or overtime wages required to be paid him under the Act.” Id. Section 531.35 specifically incorporates § 531.32(c), which in turn incorporates § 778.217, which states:
Where an employee incurs expenses on his employer’s behalf or where he is required to expend sums solely by reason of action taken for the convenience of his employer, section 7(e)(2) [which provides that employee’s regular rate does not include travel or other expenses incurred in furtherance of the employer’s interest] is applicable to reimbursement for such expenses. Payments made by the employer to cover such expenses are not included in the employee’s regular rate (if the amount of the reimbursement reasonably approximates the expenses incurred). Such payment is not compensation for services rendered by the employees during any hours worked in the workweek. 29 C.F.R. § 778.217(a). In Wass v. NPC International, Inc. (Wass I), 688 F.Supp.2d 1282, 1285–86 (D.Kan.2010), the court concluded that these regulations “permit an employer to approximate reasonably the amount of an employee’s vehicle expenses without affecting the amount of the employee’s wages for purposes of the federal minimum wage law.” However, if the employer makes an unreasonable approximation, the employee can claim that his wage rate was reduced because of expenses that were not sufficiently reimbursed. Id. at 1287.
Plaintiff alleges that his under-reimbursed vehicle expenses constituted a kickback to Defendants because Defendants failed to reasonably approximate Plaintiff’s vehicle-related expenses and Plaintiff was specifically required to use and maintain a vehicle to benefit Defendants’ business. Plaintiff further alleges that Defendants’ unreasonable approximation of Plaintiff’s vehicle-related expenses led to Plaintiff’s wage being reduced below the minimum wage.
Defendants argue that Plaintiff cannot use an estimated mileage rate as a substitute for actual vehicle-related expenses. Without pleading his actual expenses, Defendants contend that Plaintiff is unable to prove (1) that Defendants’ reimbursement rate was an unreasonable approximation, and (2) that Defendants paid him below the minimum wage as a result of the under-reimbursement. Plaintiff responds that he does not have to produce his actual automotive expenses in order to state a claim under the Iqbal and Twombly standard because he can raise the plausible inference that Defendants’ approximation of his vehicle-related expenses was unreasonable without knowing his actual expenses. For the following reasons, the Court finds that Plaintiff’s Amended Complaint meets the pleading standard under Iqbal and Twombly.”
After a recitation of the applicable law, the court held that plaintiff had sufficiently pled his estimated costs of running his vehicle, using a variety of facts, including the reimbursement rate paid by defendants versus the IRS’ mileage reimbursement rate. Further, when taken together with plaintiff’s hourly wages, he had sufficiently pled that defendants failed to pay him at least the federal and/or Colorado minimum wage(s). Therefore, the court denied defendants’ motion in its entirety.
Click Darrow v. WKRP Management, LLC to read the entire Order.
Florida’s Minimum Wage Increases to $7.31 Per Hour
The Florida minimum wage increased to $7.31 per hour, effective today, June 1, 2011. Florida law requires the Agency for Workforce Innovation to calculate an adjusted minimum wage rate each year. The annual calculation is based on the percentage change in the federal Consumer Price Index for urban wage earners and clerical workers in the South Region for the 12-month period prior to September 1, 2010.
On November 2, 2004, Florida voters approved a constitutional amendment which created Florida’s minimum wage. The minimum wage applies to all employees in the state who are covered by the federal minimum wage.
Employers must pay their employees the hourly state minimum wage for all hours worked in Florida. The definitions of “employer”, “employee”, and “wage” for state purposes are the same as those established under the federal Fair Labor Standards Act (FLSA). Employers of “tipped employees” who meet eligibility requirements for the tip credit under the FLSA, may count tips actually received as wages under the Florida minimum wage. However, the employer must pay “tipped employees” a direct wage. The direct wage is calculated as equal to the minimum wage ($7.31) minus the 2003 tip credit ($3.02), or a direct hourly wage of $4.29 as of June 1, 2011.
Go to the Palm Beach Post’s website or the State of Florida’s Agency for Workforce Innovation to read more about the increase.
U.S.Jud.Pan.Mult.Lit.: 4 Off-the-Clock Cases Against Foot Locker Centralized to Venue of First-Filed Case
In re: FOOT LOCKER, INC.
These proceedings were before the Multi District Panel, pursuant to 28 U.S.C. § 1407. The defendants (Foot Locker) moved to centralize several pending cases, all arising from similar claims, in the Eastern District of Pennsylvania. At the time Foot Locker’s motion was made four actions were pending in four districts. Plaintiffs in all actions oppose centralization. Notwithstanding the opposition of all plaintiffs in all cases, the Panel granted Foot Locker’s motion.
Largely breaking from its prior jurisprudence (in granting the motion over opposition of multiple parties), the Panel reasoned:
“On the basis of the papers filed and hearing session held, we find that these actions involve common questions of fact, and that centralization in the Eastern District of Pennsylvania will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation. No party disputes that these actions share factual questions arising out of allegations that Foot Locker routinely fails to pay retail employees wages for work they performed. These actions allege that (1) the timekeeping system used by Footlocker allows managers to modify or decrease the time recorded; and (2) Footlocker’s bonus policy encourages managers to force employees to work off-the-clock and to delete time recorded. As in In re Bank of America Wage and Hour Employment Practices Litigation, it appears that defendants’ timekeeping and labor budgeting policies and practices are corporate-wide and uniformly applied. See 706 F.Supp.2d 1369, 1371 (J.P.M.L.2010). Discovery among these actions regarding defendants’ corporate labor budgeting and timekeeping policies therefore will overlap. This litigation, like In re Bank of America, is distinguishable from wage and hour dockets “in which the Panel has denied centralization, because the duties of the employees at issue appeared to be subject to significant local variances.” Id. at 1371, n.3 (citing In re Tyson Foods, Inc., Meat Processing Facilities Fair Labor Standards Act (FLSA) Litig., 581 F.Supp.2d 1374, 1375 (J.P.M.L.2008)).
Plaintiffs’ primarily argue that informal coordination is preferable to centralization since only four actions are pending and plaintiffs are represented by common counsel. Plaintiffs make a strong case against centralization but, on balance, particularly given the likely overlap in discovery and pretrial proceedings, we are persuaded that centralization will promote the just and efficient conduct of this litigation. Though a large number of actions are not presently before the Panel, also weighing in favor of centralization is that additional related actions alleging similar class claims in other states could well be filed. Centralization in these circumstances will have the benefit of eliminating duplicative discovery; preventing inconsistent pretrial rulings, including with respect to class certification; and conserving the resources of the parties, their counsel, and the judiciary.
We are persuaded that the Eastern District of Pennsylvania is the most appropriate transferee district. The first-filed Pereira action has been pending there since May 2007, and Judge J. Curtis Joyner is familiar with the issues in this litigation. Although the Pereira action has been pending for some time, discovery is ongoing and, given that plaintiffs in all actions are represented by common counsel, plaintiffs will not be prejudiced by transfer to the Eastern District of Pennsylvania.”
Thus, although the Panel noted that the plaintiffs made a “strong case” against centralization, it centralized the case nonetheless.
Click In re: Foot Locker, Inc. to read the entire Transfer Order.
M.D.Tenn.: Contract Cleaners Not Joint Employees of the Restaurants Cleaned, Despite Fact They Exclusively Cleaned Defendant’s Restaurants
Politron v. Worldwide Domestic Services, LLC
Plaintiffs filed this action for unpaid wages and overtime pursuant to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq. Plaintiffs’ alleged that they were hired by Defendant Worldwide Domestic Services, Inc. (“Worldwide”) during the time period of October 2010 to December 2010 to clean Chili’s restaurants in the Middle Tennessee area. The case arose from Plaintiffs’ contention that paychecks issued to the Plaintiffs by Worldwide bounced due to insufficient funds. Plaintiffs alleged that Defendants’ failure to pay Plaintiffs at least minimum wage for each hour worked is a violation of the FLSA and, as discussed here, that Defendants Worldwide, Elite Commercial Cleaning, LLC and Chili’s, Inc. were “joint employers” under the FLSA.
Acknowledging that the Sixth Circuit had yet to formulate a specific test for the application of joint employment under the FLSA, the court instead discussed law from other courts, who have developed such tests. Applying the various factors other courts have used, the court determined that the restaurant owner Defendant, was not properly alleged to be a joint employer here.
The court reasoned:
“Here, the Court finds that the agreement between Brinker and Worldwide, as alleged in Plaintiffs’ Amended Complaint, was an outsourcing type of relationship. Worldwide contracted with Brinker to have its restaurants cleaned after hours. Plaintiffs admit that they worked at the direction of Worldwide. Plaintiffs’ work was dependent upon Worldwide’s ability to get and keep contracts for cleaning. Plaintiffs agree that no one from Brinker supervised, trained or directed them; no Brinker employees were even present when Plaintiffs worked. Brinker had no control over their wages, no authority to hire, fire or discipline them, and kept no employment records for Plaintiffs. Plaintiffs received their relevant income tax information from Worldwide or from Defendant Elite Commercial Cleaning. There is no allegation that Brinker knew which employees worked or how many hours they worked.
Although Plaintiffs contend that every hour they worked was at Chili’s and they used some equipment from the restaurants (they also used equipment from Worldwide), the Court finds that the factors indicating a joint employer are outweighed by those which indicate no such relationship between Plaintiffs and Brinker.”
Although the case is not groundbreaking, it does demonstrate the flaws in allowing such “outsourcing” to abrogate a company’s responsibilities to those who provide its essential services under the FLSA.
Click Politron v. Worldwide Domestic Services, Inc. to read the entire Memorandum Decision.
C.D.A.C.: Court Declines to Adopt “Economic Reality” Test and Confirms Prisoners Are Not Covered by FLSA
Shipley v. Woolrich, Inc.
This case was before the court on plaintiff’s appeal of an order dismissing his FLSA case below, based on the fact that, as a federal prisoner, he was not an employee subject to FLSA coverage. The district court sua sponte dismissed the complaint, relying on the D.C. Circuit’s decision in Henthorn v. Dep’t of the Navy, 29 F.3d 682, 686 (D.C . Cir.1994), in which they noted that convicted criminals are not protected by the Thirteenth Amendment against involuntary servitude and that a prisoner is barred from asserting a claim under the FLSA where the prisoner’s labor is compelled and/or where any compensation he receives is set and paid by his custodian.
On appeal the plaintiff argued that the court should adopt an “economic reality” test based on whether the labor in question involves a “service,” such as the janitorial chores performed in Henthorn, or rather involves a “good,” such as the making of clothes performed by the plaintiff.
Rejecting this argument, the court reasoned:
“In Henthorn the appellant asked us to adopt a somewhat similar “economic reality” test that would have made a distinction, for purposes of applying the FLSA, between work inside or outside the prison compound. We declined the request, holding instead that a prerequisite to finding that an inmate is covered “under the FLSA is that the prisoner has freely contracted with a non-prison employer to sell his labor.” 29 F.3d at 686. Here we likewise reject Shipley’s request and follow our holding in Henthorn.
In Henthorn we stated that at the pleading stage “a federal prisoner seeking to state a claim under the FLSA must allege that his work was performed without legal compulsion and that his compensation was set and paid by a source other than the Bureau of Prisons itself.” Id. at 687. Here, Shipley has made no allegation that his work was voluntary or that he was paid by anyone other than UNICOR, an entity within the organizational structure of the Bureau of Prisons.”
While the court made clear that work performed for a private entity may sometimes qualify a prisoner as an “employee” subject to the FLSA coverage, such facts were not present here.
Click Shipley v. Woolrich, Inc. to read the entire Opinion.
DOL Debars Seattle-Based Federal Contractor for Violating Minimum Wage, Overtime and Record-Keeping Laws
The U.S. Department of Labor has debarred HWA Inc., President John Wood and Vice President Barbara Wood from future government contracts for three years, due to significant and repeated violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act. Seattle-based HWA provided security services as a contractor to various federal facilities, government offices and public works projects in the states of Washington, Oregon, Idaho, Missouri and New York.
“The Labor Department will not allow federal contractors to misuse public funds and exploit hardworking laborers by denying their rightful wages,” said Secretary of Labor Hilda L. Solis. “Debarring violators such as HWA from future contracts ensures a level playing field, so that honest companies are not placed at a competitive disadvantage for playing by the rules, and paying their workers full and fair prevailing wages.”
According to a DOL press release:
“Most recently, in 2009, the company defaulted on seven federal contracts and failed to meet its payroll obligations, resulting in nearly $1 million in unpaid wages for 206 employees. The division ordered an emergency withholding of funds on several of the company’s federal contracts and secured the full payment of these wages. All SCA contracts held by the HWA were terminated shortly thereafter.”
The Service Contract Act (SCA) contract clauses, present in all Federal contracts, require contractors and subcontractors performing services under prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates contained in a predecessor contractor’s collective bargaining agreement, including prospective increases. The Labor Department issues SCA wage determinations for contracting agencies to incorporate into covered contracts, along with the required contract clauses. The fringe benefit requirements — usually vacation and holidays, known as “health and welfare” benefits — are separate and in addition to the hourly monetary wage requirement under the SCA. In addition, employers with prime contracts in excess of $100,000 under the CWHSSA must pay workers at least one and one-half times their regular rates of pay for all hours worked over 40 in a week.
Although violations of the primary federal wage and hour law, the Fair Labor Standards Act (FLSA), may be pursued by aggrieved employees in private lawsuits, alleged violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act, may only be pursued by the DOL. Largely due to the fact that under the prior republican leadership, the employer-friendly DOL pursued very few of these cases, such violations are commonplace on Federal worksites, despite the various laws prohibiting them. Hopefully, as the current DOL pursues these cases more frequently, workers will once again be assured of the protections of the laws that are on the books.
M.D.Fla.: Employer Not Entitled to Offset Unpaid Overtime Damages Based on Provision of Car, Car Insurance, Gasoline, or a Cell Phone It Provided
Vancamper v. Rental World, Inc.
This case was before the court on plaintiff’s motion for summary judgment. Among the issues of interest ruled upon, the court held that plaintiff’s pre-arranged shuttling of defendants’ clients to and from the airport to defendants’ rental office for pre-arranged rental of defendant’s cars and the cleaning of such cars, satisfied the individual coverage test of the FLSA. As discussed here, the court also addressed defendants’ argument that it should be entitled to offset plaintiff’s minimum wage and overtime damages, if any, due to its provision of a car, car insurance, gasoline and cell phone to plaintiff, during his employment. Holding that such offsets are impermissible under the FLSA, the court explained:
“The parties dispute whether Vancamper’s use of a car, car insurance, gasoline, and a cellular phone provided by Rental World offset the overtime compensation that Rental World owed Vancamper as permitted by 29 U.S.C. § 207(h)(2). (Doc. No. 27 at 14; Doc. No. 33 at 5–6.) The Defendants bear the burden of establishing a credit for overtime compensation under Section 207(h)(2). See Leonard, 614 F.Supp. at 1187 (noting that an employer bears the burden of establishing a credit under 29 U.S.C. § 203(m) against the overtime owed to an employee (citing Donovan, 676 F.2d at 473–76)).
Under Section 207(h)(2), the forms of compensation described in 29 U.S.C. § 207(e)(5)-(7) are creditable toward overtime compensation. Those forms of compensation are as follows:
(5) extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee under subsection (a) of this section or in excess of the employee’s normal working hours or regular working hours, as the case may be;
(6) extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days;
(7) extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section, where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek;
These provisions plainly contemplate a dollar-for-dollar credit against overtime pay for premium pay awarded on particular days and times. Wheeler v. Hampton Twp., 339 F.3d 238, 245 (3d Cir.2005). The parties do not cite, and the Court does not find, any authority that these provisions encompass use of a car, car insurance, gasoline, or a cellular phone provided by an employer. Moreover, because Vancamper’s uncontroverted time sheets show that he was never paid extra compensation for working during the periods described in Section 207(e)(5)-(7), (Doc. No. 27–5 at 1–102), Defendants are not entitled to any overtime credit under Section 207(h)(2).”
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