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In a recent published opinion, the Ninth Circuit held that Los Angeles County is a joint employer of state-provided home health care aides and is liable for alleged failures to pay those aides sufficient overtime wages, the Ninth Circuit held Friday. The opinion partially reversed the lower court’s which held that the County was not jointly for the wage violations alleged.
The case arose from California’s In-Home Supportive Services program, a publicly-funded initiative under which the state and counties pay the wages of certain in-home care providers who assist low-income elderly, blind and disabled residents. In 2017, IHSS provider Trina Ray sued both the California Department of Social Services and the LA County Department of Public Social Services, alleging that the governments jointly employed her and failed to pay time and a half overtime premiums.
The district court granted LA County summary judgment, largely relying on the fact that the county had no hand in issuing paychecks to IHSS workers. Rejecting the reasoning of the lower court, the Ninth Circuit held that the county still had sufficient economic control over the program, noting that counties provide 35% of the program’s budget, and counties are able to negotiate for higher-than-minimum wages for home care workers among other things.
Thus, the panel held that counties were joint employers alongside the state under existing Ninth Circuit precedent, reasoning.
However, the panel split on whether the state-level centralization of the IHSS program’s payroll system meant that the county’s FLSA violations were willful. The majority concluded that the state’s ultimate control of pay processes meant counties had no ability to provide overtime pay without authorization.
Writing in partial dissent, U.S. Circuit Judge Marsha Berzon disagreed with the majority’s finding that the county’s FLSA violations were in good faith. Regardless of whether the county or state ordinarily handled payroll, Judge Berzon said that joint employers were individually and jointly responsible for ensuring compliance with the FLSA under Bonnette, prior Ninth Circuit precedent.
“Allowing joint employers to avoid liability for violations of the FLSA by showing they ordinarily did not perform a particular employer function would risk undermining the statute’s remedial purposes,” Judge Berzon said.
It would appear that the dissent is correct in that FLSA, does not permit a finding of “good faith” simply in reliance on or because a joint employer was more actively responsible for the unpaid wages. Rather, well-settled law requires an employer to demonstrate affirmative steps that it undertook to ascertain and comply with the FLSA’s requirements, which appear to be lacking here.
Click Ray v. Los Angeles County Department of Public Social Services to read the entire Opinion.
Click Nurse Wages to learn more about wage and hour rights of home health aides (HHAs), certified nurse assistants (CNAs), licensed nurse practitioners (LPNs) and registered nurses (RNs).
This case was before the court on the State of Nevada’s interlocutory appeal, following the district court’s denial of its motion to dismiss on jursidictional grounds. Addressing an issue of first impression, the Ninth Circuit held that removal from state court to federal court constitutes a waiver of sovereign immunity as to all federal claims, including the FLSA claims at issue here.
In Walden, state correctional officers alleged that the Nevada Department of Corrections improperly failed to pay them for pre- and post-shift work at state prisons and other facilities. They filed suit in state court, alleging minimum wage and overtime claims under the FLSA, in addition to a minimum-wage claim under Nevada’s Constitution, a overtime claim under Nevada law, and a claim for breach of contract.
Nevada removed the case to federal court and moved for judgment on the pleadings with regard to the FLSA claims, and contended that it was “immune from liability as a matter of law.” Nevada did not explicitly mention state sovereign immunity or the Eleventh Amendment, though.
The district court requested briefing on the question whether state sovereign immunity applies to the FLSA claims against the state following its removal of the case to federal court.
The district court held that Nevada had waived its sovereign immunity as to the officers’ FLSA claim by virtue of its removal of the case to federal court, and denied the state’s motion to dismiss. Nevada filed an interlocutory appeal to the Ninth Circuit.
While the particular issue at bar was one of first impression, the Ninth Circuit looked to other cases in which states had been held to waive soverign immunity when they removed federal claims to federal court, to reach its holding.
The Ninth Circuit noted that the Supreme Court had previously held that a state can waive sovereign immunity with regard to state law claims by removing them to federal court and the Ninth Circuit itself had previously held that, at least in some circumstances a state can waive soverign immunity by removing federal statutory claims to federal court.
The court then went one step further: “We now hold that a State that removes a case to federal court waives its immunity from suit on all federal-law claims in the case, including those federal-law claims that Congress failed to apply to the states through unequivocal and valid abrogation of their Eleventh Amendment immunity,” it wrote.
As the Supreme Court had observed, it was inconsistent for a state simultaneously to invoke federal jurisdiction, thus acknowledging the federal court’s authority over the case at hand, while claiming it enjoyed sovereign immunity from the “Judicial Power of the United States” in the matter before it.
Thus, the Ninth Circuit held that a state waives soverign immunity as to all federal statutory claims in a case which the state has removed to federal court, including those federal claims that Congress did not apply to the states through unequivocal and valid abrogation of their Eleventh Amendment immunity (like the FLSA).
Click Walden v. State of Nevada to read the entire decision.
9th Cir.: Employer’s Attorney Can Be Sued for Retaliation as a “Person Acting Directly or Indirectly” in Employer’s Interest
This case presented an issue of first impression: Can an employer’s attorney be held liable for retaliating against his client’s employee because the employee sued his client for violations of workplace laws? The district court held that he could not and dismissed the claim. On appeal the Ninth Circuit disagreed and reversed. Specifically, the Ninth Circuit held that as a “person acting directly or indirectly” in the employer’s interest, the employer’s attorney could be subject to liability under 29 U.S.C. § 215.
In the case, the defendant-employers had hired the plaintiff-employee, an undocumented immigrant without verifying his immigration status or his right to work in the United States. Although not explicitly stated, the Ninth Circuit’s opinion strongly implies that the defendants intentionally neglected to complete an I-9 form or verify plaintiff’s status because it knew he was not legally permitted to work in the United States.
After working for defendants for 11 years, in 2006, plaintiff filed suit in California state court against defendants, alleging that defendants violated a multitude of employment laws, and alleged among other things that defendants failed to provide him with legally mandated rest breaks and failed to pay him legally mandated overtime premiums.
The Ninth Circuit recited the following facts regarding the alleged retaliation, all taken from plaintiffs subsequent lawsuit alleging illegal retaliation that was the subject of the Ninth Circuit’s opinion:
On June 1, 2011, ten weeks before the state court trial, the Angelos’ attorney, Anthony Raimondo, set in motion an underhanded plan to derail Arias’s lawsuit. Raimondo’s plan involved enlisting the services of U.S. Immigration and Customs Enforcement (“ICE”) to take Arias into custody at a scheduled deposition and then to remove him from the United States. A second part of Raimondo’s plan was to block Arias’s California Rural Legal Assistance attorney from representing him. This double barrel plan was captured in email messages back and forth between Raimondo, Joe Angelo, and ICE’s forensic auditor Kulwinder Brar.
On May 8, 2013, Arias filed this lawsuit against Angelo Dairy, the Angelos, and Raimondo in the Eastern District of California. Arias alleged that the defendants violated section 215(a)(3) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.
Arias’s theory of his case is that Raimondo, acting as the Angelos’ agent, retaliated against him in violation of section 215(a)(3) for filing his original case against Raimondo’s clients in state court . Raimondo’s sole legal defense is that because he was never Arias’s actual employer, he cannot be held liable under the FLSA for retaliation against someone who was never his employee.
As noted by the court, Angelo Dairy and its owners settled their part of this case at the early stages of its existence.
The district court dismissed plaintiff’s claims against the defendants’ attorney holding that he was not covered under the FLSA’s retaliation provisions because he was not plaintiff’s employer. Noting that the FLSA’s retaliation provision defines those subject to liability in a much broader way than the underlying definition of employer (which is broad to begin with) the Ninth Circuit reversed.
Discussing the issue before it the court explained:
Notwithstanding section 215(a)(3)’s reference to “any person,” section 203(a)’ s inclusion of a legal representative as a “person,” and section 203(d)’s plain language defining “employer,” the district court granted Raimondo’s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court did so without the benefit of oral argument, concluding that because Arias “ha[d] not alleged that [Raimondo] exercised any control over [his] employment relationship,” Raimondo as a matter of law could not be Arias’s employer.
The Ninth Circuit rejected this reasoning noting that the statutory definition of those who may be subject to liability under the FLSA’s retaliation provision include a broader spectrum of people:
Section 215(a)(3), an anti-retaliation provision, makes it unlawful “for any person … to discharge or in any other manner discriminate against any employee because such employee has filed any complaint … under or related to this chapter.” The FLSA defines the term “person” to include a “legal representative.” Id. § 203(a). Section 216(b) in turn creates a private right of action against any “employer” who violates section 215(a)(3); and the FLSA defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Id. §§ 203(d), 216(b).
Controversies under FLSA sections 206 and 207 that require a determination of primary workplace liability for wage and hour responsibilities and violations, on one hand, and controversies arising from retaliation against employees for asserting their legal rights, on the other, are as different as chalk is from cheese. Each category has a different purpose. It stands to reason that the former relies in application on tests involving economic control and economic realities to determine who is an employer, because by definition it is the actual employer who controls substantive wage and hours issues.
Retaliation is a different animal altogether. Its purpose is to enable workers to avail themselves of their statutory rights in court by invoking the legal process designed by Congress to protect them. Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997) (the “primary purpose of antiretaliation provisions” is to “[m]aintai[n] unfettered access to statutory remedial mechanisms”).
This distctive purpose is not served by importing an “economic control” or an “economic realities” test as a line of demarcation into the issue of who may be held liable for retaliation. To the contrary, the FLSA itself recognizes this sensible distinction in section 215(a)(3) by prohibiting “any person” –not just an actual employer – from engaging in retaliatory conduct. By contrast, the FLSA’s primary wage and hour obligations are unambiguously imposed only on an employee’s de facto “employer,” as that term is defined in the statute. Treating “any person” who was not a worker’s actual employer as primarily responsible for wage and hour violations would be nonsensical…
Congress made it illegal for any person, not just an “employer” as defined under the statute, to retaliate against any employee for reporting conduct “under” or “related to” violations of the federal minimum wage or maximum hour laws, whether or not the employer’s conduct does in fact violate those laws. … Moreover, “the remedial nature of the statute further warrants an expansive interpretation of its provisions. …” Id. at 857 (second omission in original) (quoting Herman v. RSR Sec. Servs., 172 F.3d 132, 139 (2d Cir. 1999)).
In line with this reasoning, the court concluded:
The FLSA is “remedial and humanitarian in purpose. We are not here dealing with mere chattels or articles of trade but with the rights of those who toil, of those who sacrifice a full measure of their freedom and talents to the use and profit of others …. Such a statute must not be interpreted or applied in a narrow, grudging manner.” Tenn. Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597 (1944).
Accordingly, we conclude that Arias may proceed with this retaliation action against Raimondo under FLSA sections 215(a)(3) and 216(b). Raimondo’s behavior as alleged in Arias’s complaint manifestly falls within the purview, the purpose, and the plain language of FLSA sections 203(a), 203(d), and 215(a)(3).
Our interpretation of these provisions is limited to retaliation claims. It does not make non-actual employers like Raimondo liable in the first instance for any of the substantive wage and hour economic provisions listed in the FLSA. As illustrated by the Court’s opinion in Burlington, the substantive provisions of statutes like Title VII and the FLSA, and their respective anti-retaliation provisions, stand on distinctive grounds and shall be treated differently in interpretation and application. Ultimately a retaliator like Raimondo may become secondarily liable pursuant to section 216(b) for economic reparations, but only as a measure of penalties for his transgressions.
Click Arias v. Raimondo to read the entire opinion.
9th Cir.: Employers May NOT Retain Employee Tips Even Where They Do Not Take a Tip Credit; 2011 DOL Regulations Which Post-Dated Woody Woo Due Chevron Deference Because Existing Law Was Silent and Interpretation is Reasonable
In a case that will likely have very wide-reaching effects, this week the Ninth Circuit reversed 2 lower court decisions which has invalidated the Department of Labor’s 2011 tip credit regulations. Specifically, the lower courts had held, in accordance with the Ninth Circuit’s Woody Woo decision which pre-dated the regulations at issue, that the DOL lacked the authority to regulate employers who did not take a tip credit with respect to how they treated their employees’ tips. Holding that the 2011 regulations were due so-called Chevron deference, the Ninth Circuit held that the lower court had incorrectly relied on its own Woody Woo case because the statutory/regulatory silence that had existed when Woody Woo was decided had been properly filled by the 2011 regulations. As such, the Ninth Circuit held that the lower court was required to give the DOL regulation deference and as such, an employer may never retain any portion of its employees tips, regardless of whether it avails itself of the tip credit or not.
Framing the issue, the Ninth Circuit explained “[t]he precise question before this court is whether the DOL may regulate the tip pooling practices of employers who do not take a tip credit.” It further noted that while “[t]he restaurants and casinos [appellees] argue that we answered this question in Cumbie. We did not.”
The court then applied Chevron analysis to the DOL’s 2011 regulation at issue.
Holding that the regulation filled a statutory silence that existed at the time of the regulation, and thus met Step 1 of Chevron, the court reasoned:
as Christensen strongly suggests, there is a distinction between court decisions that interpret statutory commands and court decisions that interpret statutory silence. Moreover, Chevron itself distinguishes between statutes that directly address the precise question at issue and those for which the statute is “silent.” Chevron, 467 U.S. at 843. As such, if a court holds that a statute unambiguously protects or prohibits certain conduct, the court “leaves no room for agency discretion” under Brand X, 545 U.S. at 982. However, if a court holds that a statute does not prohibit conduct because it is silent, the court’s ruling leaves room for agency discretion under Christensen.
Cumbie falls precisely into the latter category of cases—cases grounded in statutory silence. When we decided Cumbie, the DOL had not yet promulgated the 2011 rule. Thus, there was no occasion to conduct a Chevron analysis in Cumbie because there was no agency interpretation to analyze. The Cumbie analysis was limited to the text of section 203(m). After a careful reading of section 203(m) in Cumbie, we found that “nothing in the text of the FLSA purports to restrict employee tip-pooling arrangements when no tip credit is taken” and therefore there was “no statutory impediment” to the practice. 596 F.3d at 583. Applying the reasoning in Christensen, we conclude that section 203(m)‘s clear silence as to employers who do not take a tip credit has left room for the DOL to promulgate the 2011 rule. Whereas the restaurants, casinos, and the district courts equate this silence concerning employers who do not take a tip credit to “repudiation” of future regulation of such employers, we decline to make that great leap without more persuasive evidence. See United States v. Home Concrete & Supply, LLC, 132 S. Ct 1836, 1843, 182 L. Ed. 2d 746 (2012) (“[A] statute’s silence or ambiguity as to a particular issue means that Congress has . . . likely delegat[ed] gap-filling power to the agency[.]”); Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 222, 129 S. Ct. 1498, 173 L. Ed. 2d 369 (2009) (“[S]ilence is meant to convey nothing more than a refusal to tie the agency’s hands . . . .”); S.J. Amoroso Constr. Co. v. United States, 981 F.2d 1073, 1075 (9th Cir. 1992) (“Without language in the statute so precluding [the agency’s challenged interpretation], it must be said that Congress has not spoken to the issue.”).
In sum, we conclude that step one of the Chevron analysis is satisfied because the FLSA is silent regarding the tip pooling practices of employers who do not take a tip credit. Our decision in Cumbie did not hold otherwise.
Proceeding to step 2 of Chevron analysis, the court held that the 2011 regulation was reasonable in light of the existing statutory framework of the FLSA and its legislative history. The court reasoned:
The DOL promulgated the 2011 rule after taking into consideration numerous comments and our holding in Cumbie. The AFL-CIO, National Employment Lawyers Association, and the Chamber of Commerce all commented that section 203(m) was either “confusing” or “misleading” with respect to the ownership of tips. 76 Fed. Reg. at 18840-41. The DOL also considered our reading of section 203(m) in Cumbie and concluded that, as written, 203(m) contained a “loophole” that allowed employers to exploit the FLSA tipping provisions. Id. at 18841. It was certainly reasonable to conclude that clarification by the DOL was needed. The DOL’s clarification—the 2011 rule—was a reasonable response to these comments and relevant case law.
The legislative history of the FLSA supports the DOL’s interpretation of section 203(m) of the FLSA. An “authoritative source for finding the Legislature’s intent lies in the Committee Reports on the bill, which represent the considered and collective understanding of those Congressmen [and women] involved in drafting and studying proposed legislation.” Garcia v. United States, 469 U.S. 70, 76, 105 S. Ct. 479, 83 L. Ed. 2d 472 (1984) (citation and internal quotation marks omitted). On February 21, 1974, the Senate Committee published its views on the 1974 amendments to section 203(m). S. Rep. No. 93-690 (1974).
Rejecting the employer-appellees argument that the regulation was unreasonable, the court explained:
Employer-Appellees argue that the report reveals an intent contrary to the DOL’s interpretation because the report states that an “employer will lose the benefit of [the tip credit] exception if tipped employees are required to share their tips with employees who do not customarily and regularly receive tips[.]” In other words, Appellees contend that Congress viewed the ability to take a tip credit as a benefit that came with conditions and should an employer fail to meet these conditions, such employer would be ineligible to reap the benefits of taking a tip credit. While this is a fair interpretation of the statute, it is a leap too far to conclude that Congress clearly intended to deprive the DOL the ability to later apply similar conditions on employers who do not take a tip credit.
The court also examined the Senate Committee’s report with regard to the enactment of 203(m), the statutory section to which the 2011 regulation was enacted to interpret and stated:
Moreover, the surrounding text in the Senate Committee report supports the DOL’s reading of section 203(m). The Committee reported that the 1974 amendment “modifies section 3(m) of the Fair Labor Standards Act by requiring . . . that all tips received be paid out to tipped employees.” S. Rep. No. 93-690, at 42. This language supports the DOL’s statutory construction that “[t]ips are the property of the employee whether or not the employer has taken a tip credit.” 29 C.F.R. § 531.52. In the same report, the Committee wrote that “tipped employee[s] should have stronger protection,” and reiterated that a “tip is . . . distinguished from payment of a charge . . . [and the customer] has the right to determine who shall be the recipient of the gratuity.” S. Rep. No. 93-690, at 42.
In 1977, the Committee again reported that “[t]ips are not wages, and under the 1974 amendments tips must be retained by the employees . . . and cannot be paid to the employer or otherwise used by the employer to offset his wage obligation, except to the extent permitted by section 3(m).” S. Rep. No. 95-440 at 368 (1977) (emphasis added). The use of the word “or” supports the DOL’s interpretation of the FLSA because it implies that the only acceptable use by an employer of employee tips is a tip credit.
Additionally, we find that the purpose of the FLSA does not support the view that Congress clearly intended to permanently allow employers that do not take a tip credit to do whatever they wish with their employees’ tips. The district courts’ reading that the FLSA provides “specific statutory protections” related only to “substandard wages and oppressive working hours” is too narrow. As previously noted, the FLSA is a broad and remedial act that Congress has frequently expanded and extended.
Considering the statements in the relevant legislative history and the purpose and structure of the FLSA, we find that the DOL’s interpretation is more closely aligned with Congressional intent, and at the very least, that the DOL’s interpretation is reasonable.
Finally, the court explained that it was not overruling Woody Woo, because Woody Woo had been decided prior to the enactment of the regulation at issue when there was regulatory silence on the issue, whereas this case was decided after the 2011 DOL regulations filled that silence.
This case is likely to have wide-ranging impacts throughout the country because previously district court’s have largely simply ignored the 2011 regulations like the lower court’s here, incorrectly relying on the Woody Woo case which pre-dated the regulation.
Click Oregon Rest. & Lodging Ass’n v. Perez to read the entire decision.
Rother v. Lupenko
As with many concepts in the law, many practitioners know something to be true, but they are not exactly sure why or what the authority for the position is. Such seems to be true with regard to the notion that an employer’s failure to tender an employee’s paycheck on the regular payday, constitutes a minimum wage violation. For anyone who is ever faced with this issue, a recent decision from the Ninth Circuit provides clear authority for this position. After a jury verdict in the plaintiff’s favor, all parties appealed various parts of the final judgment. As discussed here, the plaintiff appealed the District Court’s Order granting the defendants summary judgment on her late last paycheck (minimum wage) claim. The Ninth Circuit reversed the decision and held that the defendants failure to tender the plaintiff’s final paycheck on the normal payday was a minimum wage violation under the FLSA.
Briefly discussing the issue, the court reasoned:
Although there is no provision in the FLSA that explicitly requires an employer to pay its employees in a timely fashion, this Circuit has read one into the Act. Biggs v. Wilson, 1 F.3d 1537, 1541 (9th Cir.1993). In Biggs, we held that payment must be made on payday, and that a late payment immediately becomes a violation equivalent to non-payment. Id. at 1540. “After [payday], the minimum wage is ‘unpaid.’ ” Id. at 1544. The district court misread Biggs. For purposes of the FLSA, there is no distinction between late payment violations and minimum wage violations: late payment is a minimum wage violation. See id. Accordingly, we reverse the district court’s entry of summary judgment for Defendants on Plaintiffs’ federal minimum wage claim.
Click Rother v. Lupenko to read the entire Memorandum Opinion.
D.Idaho: Collective Action Waiver Unenforceable Under Section 7, Because It Would Prevent Employees “from Asserting a Substantive Right Critical to National Labor Policy”
Brown v. Citicorp Credit Services, Inc.
This case was before the court on the defendant’s motion to compel arbitration and dismiss the plaintiffs operative (second amended) complaint. Of significance, joining several recent courts, the court considered the effect of the NLRA’s Section 7, as it relates to a purported waiver of employees’ rights to proceed under the FLSA’s collective action mechanism. Reasoning that a waiver of the right to proceed as a collective action basis, “bars [plaintiff] from asserting a substantive right that is critical to national labor policy,” the court held that same was unenforceable.
Discussing prior precedent and explaining that same failed to consider the argument that the NLRA forbids such a waiver the court explained:
Several Circuits have cited the dicta in Gilmer to uphold waivers of the FLSA’s collective action rights—these Circuits hold that the waiver affects only the employee’s procedural right to bring a collective action, not his substantive right to seek recovery under the FLSA for himself, and thus the waiver is valid. Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1378 (11th Cir.2005); Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294, 298 (5th Cir.2004); Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir.2002). The Ninth Circuit has reached the same result but in an unpublished decision that cannot be cited for any purpose.
These cases did not address, however, the issue of whether a waiver of FLSA collective action rights violates the National Labor Relations Act (NLRA). Section 7 of the NLRA vests in employees the right “to engage in … concerted activities for the purpose of … mutual aid or protection.” 29 U.S.C. § 157. The right to engage in concerted action for “mutual aid or protection” includes employees’ efforts to “improve terms and conditions of employment or otherwise improve their lot as employees through channels outside the immediate employee-employer relationship.” Eastex, Inc. v. NLRB, 437 U.S. 556, 565–566, 98 S.Ct. 2505, 57 L.Ed.2d 428 (1978). Those “channels’ include lawsuits. See Brady v. National Football League, 644 F.3d 661, 673 (8th Cir.2011) (holding that “a lawsuit filed in good faith by a group of employees to achieve more favorable terms or conditions of employment is ‘concerted activity’ under 29 U.S.C. § 157“).
The National Labor Relations Board has recently held that an employee’s lawsuit seeking a collective action under the FLSA is “concerted action” protected by Section 7 of the NLRA. In re D.R. Horton, Inc., 2012 WL 36274 (N.L.R.B. Jan.3, 2012). Although some Section 7 rights can be waived by a union acting on behalf of employees, see Metro. Edison Co. v. NLRB, 460 U.S. 693, 707–08, 103 S.Ct. 1467, 75 L.Ed.2d 387 (1983), it is unlawful for the employer to condition employment on the waiver of employees’ Section 7 rights. Retlaw Broadcasting Co. v. NLRB, 53 F.3d 1002 (9th Cir.1995). That is precisely what Brown alleges happened here.
Under Chevron USA, Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the Court must defer to the Board’s interpretation of the NLRA if its interpretation is rational and consistent with the Act. Local Joint Executive Bd. of Las Vegas v. NLRB, 657 F.3d 865, 870 (9th Cir.2011). The Board’s interpretation in Horton of Section 7 of the NLRA is rational and consistent with the Act: A collective action seeking recovery of wages for off-the-clock work falls easily within the language of Section 7 protecting “concerted action” brought for the “mutual aid and protection” of the employees.
Holding that it had the power to invalidate the waiver, and doing so, the court reasoned:
Thus, Citicorp’s arbitration agreement waives Brown’s Section 7 rights to bring an FLSA collective action. As discussed, an arbitration agreement may, by the terms of the FAA, be declared unenforceable “upon such grounds as exist at law or in equity for the revocation of any contract.” See 9 U.S.C. § 2. Do legal grounds exist to revoke an agreement to waive Section 7 rights?
Section 7 rights are protected “not for their own sake but as an instrument of the national labor policy.” Emporium Capwell Co. v. W. Addition Cmty. Org., 420 U.S. 50, 62, 95 S.Ct. 977, 43 L.Ed.2d 12 (1975). Thus, Citicorp’s arbitration agreement does more than merely waive Brown’s right to a procedural remedy; it bars her from asserting a substantive right that is critical to national labor policy. A contract that violates public policy must not be enforced. See United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 42, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987) (citing the “general doctrine, rooted in the common law, that a court may refuse to enforce contracts that violate law or public policy”). Moreover, it is unlawful for the employer to condition employment on the waiver of employees’ Section 7 rights. Retlaw Broadcasting Co. v. NLRB, 53 F.3d 1002 (9th Cir.1995).
For these reasons, the Court finds that under the FAA, there are legal grounds to revoke the arbitration agreement’s waiver of Brown’s right to bring a collective action under the FLSA and a class action under the IWCA. Accordingly, the Court will deny Citicorp’s motion to compel arbitration and to dismiss Brown’s claims.
Given the lack of clarity on this issue (see, e.g., here), and the fact that courts continue to come down on opposite sides of it, this issue is likely to end up at the Supreme Court at some point in the relatively near future. However, this case was certainly a win for employees in the ongoing battle. Stay tuned for further developments.
Click Brown v. Citicorp Credit Services, Inc. to read the entire Memorandum Decision and Order.
U.S.S.C.: Court Grants Certiorari to PSRs on Appeal of 9th Circuit Decision Holding Pharma Reps Exempt Under the FLSA’s Outside Sales Exemption
Christopher v. SmithKline Beecham Corp.
In a case with far sweeping ramifications for the pharmaceutical industry and its employees, the Supreme Court has granted certiorari to revisit the Ninth Circuit’s decision that held pharmaceutical representatives (pharma reps) to be exempt under the FLSA’s outside sales exemption, and therefore, entitled to overtime. The Supreme Court has granted Plaintiff’s Petition for Cert, and therefore the issue remains largely unresolved. In a decision discussed here, the Second Circuit had previously held that the pharma reps were non-exempt, notwithstanding the pharmaceutical companies’ arguments that they were outside sales and/or administrative exempt. While, the Third Circuit agreed that pharma reps were not outside salespeople because they did not complete any sales, in several cases, it has reached the conclusion that pharma reps are exempt under the administrative exemption. Most recently, the Ninth Circuit held that, notwithstanding the fact that pharma reps cannot and do not consummate sales, their promotional activities are close enough to render them exempt under the outside sales exemption. The Supreme Court has now granted cert in the Ninth Circuit case to potentially resolve the issue.
The Department of Labor had submitted an Amicus Brief in support of the employees in both the Second and Ninth Circuit cases. While the Second Circuit relied on the DOL’s Brief in large part, reaching its conclusion that the pharma reps are non-exempt, the Ninth Circuit rejected the arguments in the Brief. Now, the stage is set for the Supreme Court to resolve the conflict between the circuits once and for all.
The 2 certified issues the Supreme Court is set to hear are:
(1) Whether deference is owed to the Secretary of Labor’s interpretation of the Fair Labor Standards Act’s outside sales exemption and related regulations; and (2) whether the Fair Labor Standards Act’s outside sales exemption applies to pharmaceutical sales representatives.
Visit the scotusblog to read the full decision below as well as the parties’ briefings to date in Christopher v. SmithKline Beecham Corp.
9th Cir.: Defendant in Putative Wage and Hour Class Action May Not “Pick Off” Class With OJ to Named Plaintiff
Pitts v. Terrible Herbst, Inc.
This case was before the Ninth Circuit on any issue that has become more and more prevalent in recent years, with the increased wage and hour putative class and collective action filings. Specifically, the issue before the Ninth Circuit was “whether a rejected offer of judgment (OJ) for the full amount of a putative class representative’s claim moots a class action complaint where the offer precedes the filing of a motion for class certification.” The Ninth Circuit held that it does not and a defendant may not “pick off” a class by making such an offer to the named-plaintiff alone.
The procedural history in the case is worth discussing, because there were other issues, not discussed in detail, also addressed in the opinion. The trial court had not set a bright-line deadline for filing a motion for class certification simultaneously. And, because the defendant failed to provide plaintiff with the records pertaining to the putative class members during the initial discovery period, plaintiff filed a motion to compel and sought to extend the discovery deadline as well. The court ultimately granted both motions. However, while it held that the OJ did not moot the claim, it nonetheless dismissed the case, because the plaintiff had failed to move for class certification as of the initial discovery deadline. This appeal ensued.
After reviewing surveying applicable case law from around the country, the court held that the district court below properly concluded that a defendant may not “pick off” a putative class action, by tendering payment to the named-plaintiff alone.
Other issues the court discussed included whether state law class actions (Rule 23 classes) are “inherently incompatable” with FLSA opt-in actions. However, because the plaintiff had volutarily dismissed his FLSA claims at the lower court, the Ninth Circuit declined to address this hot-button issue, addressed earlier in the year by the Seventh Circuit and currently pending before the Third Circuit. The court did rule however, that the court below erred in dismissing the case based on plaintiff’s perceived failure to move for class certification in a timely manner. On this issue the Ninth Circuit opined, “[w]ithout a clear statement from the district court setting a deadline for the filing of the motion for class certification, Pitts could not predict that he was expected to file his motion by the end of the initial discovery deadline.”
Click Pitts v. Terrible Herbst, Inc. to read the entire decision.