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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.
9th Cir.: Group Home Housing “Severely Emotionally Disturbed” Children Not An “Institution Primarily Engaged in the Care of the Sick, the Aged, Mentally Ill”
Probert v. Family Centered Services of Alaska, Inc.
This case was before the Ninth Circuit on the defendant’s appeal of an order granting plaintiffs- house parents at their various group homes of emotionally disturbed children- summary judgment, holding that each of defendant’s homes were subject to FLSA coverage as an “institution primarily engaged in the care of the sick, the aged, mentally ill or defective who reside on the premises of such institution.” 29 U.S.C. § 203(r)(2)(A). The Ninth Circuit reversed, holding that defendant’s homes were not primarily engaged in such care, although it was undisputed that they provided housing for same. In so doing, the Ninth Circuit ignored long-held jurisprudence requiring that courts liberally construe the FLSA’s coverage to serve the statute’s remedial goals.
Describing the relevant background facts, the Ninth Circuit explained:
“Plaintiffs Loretta and Robert Probert and Plaintiffs–Intervenors Debra and Eric Cloninger, Donna and John Grimes, Gene and Sandra Grissom, and Kenneth and Leona McDaniels are married couples who worked as “house parents” in FCSA’s Homes. Each Home housed up to five children. All the children were “severely emotionally disturbed” as defined by the Alaska law that qualifies the Homes for Medicaid funding, 7 Alaska Admin. Code § 43.471, and each of the children had at least one diagnosed mental disorder under Axis–I of the current Diagnostic and Statistical Manual of Mental Disorders. The children attended local public schools and participated in other activities away from the Homes. The children participated in group therapy conducted by clinicians in the Homes, but received most of their medical and psychological treatment outside the Homes. Plaintiffs were not licensed medical or social service professionals.
Plaintiffs sued FCSA for overtime pay under the FLSA. After denying Plaintiffs’ first motion for partial summary judgment, the district court granted a similar motion for partial summary judgment in their favor, concluding that FCSA through its Homes, was operating “an institution primarily engaged in the care of the … mentally ill or defective who reside on the premises of such institution,’ “ 29 U.S.C. § 203(r)(2)(A), and was therefore an enterprise subject to the FLSA’s overtime provisions, id. § 207(a)(1). The district court observed that the FLSA does not define “institution.” As an analogy, the district court looked to a federal Medicaid regulation, not directly applicable to this situation, that defined “institution” as “an establishment that furnishes (in single or multiple facilities) food, shelter, and some treatment or services to four or more persons unrelated to the proprietor,” 42 C.F.R. § 435.1010, and concluded that the “Homes (either individually or as a group) could be considered an ‘institution.’ “ The court also relied on FCSA’s own website, which described the Homes as “provid[ing] quality residential care to male and female youth ages 6–18 that are experiencing mental health and behavioral issues and are at imminent risk of psychiatric placement outside of their community.”
Holding that the defendant did not fall within the definition of 203(r)(2)(A), the court reasoned:
“Plaintiffs argue that each of the FCSA Homes in which they worked is covered by the statute as “an institution primarily engaged in the care of … the mentally ill … who reside on the premises of such institution.” The FLSA is a remedial statute that is “to be liberally construed to apply to the furthest reaches consistent with Congressional direction.” Dent v. Cox Communications Las Vegas, Inc., 502 F.3d 1141, 1146 (9th Cir.2007) (internal quotation marks omitted); see also 29 C.F.R. § 779.101 (“An employer who claims an exemption under the Act has the burden of showing that it applies.”). Nonetheless, we conclude that the language of the statute does not cover the FCSA Homes, for two primary reasons.
The first reason is that the Homes were not “primarily engaged” in providing “care,” as that term is used in the statute. The statute refers to “care” in relation to groups with special needs, namely “the sick, the aged, the mentally ill or defective.” 29 U.S .C. § 203(r)(2)(A). As such, we understand “care” in this context to include something more like treatment. What the Homes primarily provided, as their name suggests, was a home or a residence. As noted above, the children attended school, engaged in activities, and received most of their medical and psychological treatment from medical and mental health professionals outside the Homes. Obviously, for children a home should be more than simply a place to live, and the children presumably benefitted from Plaintiffs’ “care” as house parents. But Plaintiffs were not medical or social service professionals and were not primarily focused on providing the type of “care” that those professionals provide.
The language of the statute clearly suggests a covered institution must provide more than the general care of a residence. In addition to requiring that the institution’s patrons “reside on the premises of [the] institution,” the institution must provide “care” of the type that is provided to “the sick, the aged, the mentally ill or defective.” If residing on the premises were enough by itself to define the given premises as covered by the statute, then the requirement that the institution be “primarily engaged” in the “care” of the individuals residing there would be superfluous. We are to avoid interpreting a statute in that manner. See TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (“It is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” (internal quotation marks omitted)).
Second, the Homes do not appear to us to be “institutions” as that term is used in this statute. Around the time the 1966 amendment was drafted, the Oxford English Dictionary offered the following definition of “institution”:
An establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational, etc., e.g. a church, school, college, hospital, asylum, reformatory, mission, or the like; as a literary and philosophical institution, a deaf and dumb institution, the Royal National Life-boat Institution, the Royal Masonic Benevolent Institution …, the Railway Benevolent Institution, etc. 5 Oxford English Dictionary 354 (1933, reprinted 1961). The FCSA Homes do not fit well within that definition.
Nor do the Homes fit well with the neighboring parts of the relevant statute. They are not very much like
a hospital, …, a school for mentally or physically handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such hospital, institution, or school is operated for profit or not for profit). 29 U.S.C. § 203(r)(2)(A).”
Similar to reasoning in Christopher v. SmithKline Beecham Corp., broadly construing the outsides sales exemption and refusing to adopt the guidance of the DOL outside of regulations promulgated by the Administrator of the DOL, the court further reasoned:
“Plaintiffs argue that we should interpret § 203(r)(2)(A) to include FCSA’s Homes because guidance from the Department of Labor indicates that a reference to “nursing homes” in that provision should be interpreted broadly. See Dep’t of Labor, Wage and Hour Division, Field Operations Handbook (FOH), ch. 12, § 12g02 (“[Institutions primarily engaged in the care of the aged] are not limited to nursing homes, … but include those institutions generally known as nursing homes, rest homes, convalescent homes, homes for the elderly and infirm, and the like.”). Plaintiffs argue that by the same reasoning, “institution primarily engaged in the care of the … mentally ill” should be interpreted broadly to include FCSA’s Homes. We disagree.
The FCSA Homes are very different from nursing homes and the related facilities listed in the handbook. The children who live at the FCSA Homes spend much of their time, perhaps a majority of their waking hours, elsewhere. They leave the Homes to attend school, participate in activities, and receive medical and psychological treatment. Residents of nursing homes are not necessarily confined completely to those facilities, but the expectation is that the vast majority of their time is spent there. Those facilities are also staffed with professionals, not simply house parents, and residents may be expected to receive substantially greater “care” in those facilities.”
Combined with its recent decision in Christopher v. SmithKline Beecham Corp., this decision is particularly disturbing. It appears the Ninth Circuit is quickly moving away from long held tenets of FLSA jurisprudence, the twin constructs that FLSA coverage is to be liberally construed, while exemptions/exceptions to coverage are to be narrowly construed against employers. In any case, it clear that here, that the Ninth Circuit construed FLSA coverage as narrowly as possible in holding that defendant was not a covered enterprise.
Click Probert v. Family Centered Services of Alaska, Inc. to read the entire Opinion.
9th Cir.: Notwithstanding DOL’s Position Otherwise, Pharmaceutical Reps (PSRs) Are “Outside Sales” Exempt
Christopher v. SmithKline Beecham Corp.
This case was before the Ninth Circuit on the plaintiffs’ appeal from an order granting defendant’s motion for summary judgment, finding plaintiffs’, pharmaceutical reps (“PSRs”), to be exempt from the Fair Labor Standards Act (“FLSA”) under the “outside sales” exemption. Although the DOL, filed an Amicus Brief, explaining that the type of work performed by the PSRs did not come within the “outside sales” exemption, because the PSR’s did not perform any sales, the Ninth Circuit disagreed.
Reasoning that the PSR employees came within the outside sales exemption, notwithstanding the fact that they did not complete sales, the court essentially held that their work was close enough to sales, that it should be deemed sales:
“Absent an agency-determined result, it is the province of the court to construe the relevant statutes and regulations. N. Cal. River Watch, 620 F.3d at 1088-89. As noted supra, Plaintiffs argue that by not transferring any product to physicians, they are not selling pharmaceuticals, but only “promoting” them. Plaintiffs say this distinction is warranted in light of the rule that the FLSA be “narrowly construed against … employers.” Webster, 247 F.3d at 914. For its part, Glaxo urges us to view “sale” in Section 3(k) in a commonsensical fashion, while contending that the meaning of “sale” is permissive. Glaxo urges us to adopt the rationale that the phrase “other disposition” in Section 3(k)’s definition of “sale” is a broad catch-all category. This view was cited with approval by the district court here, and is supported by the Secretary’s usage, dating back to 1940, of the language that an employee must “in some sense make a sale.” 69 Fed.Reg. at 22,162 (quoting “Executive, Administrative, Professional Outside Salesman” Redefined, Wage and Hour Division, U.S. Dept. of Labor, Report & Recommendations of the Presiding Officer (Harold Stein) at Hearings Preliminary to Redefinition, at 46 (Oct. 10, 1940)) (emphasis added).
Plaintiffs’ contention that they do not “sell” to doctors ignores the structure and realities of the heavily regulated pharmaceutical industry. It is undisputed that federal law prohibits pharmaceutical manufacturers from directly selling prescription medications to patients. Plaintiffs suggest that despite being hired for their sales experience, being trained in sales methods, encouraging physicians to prescribe their products, and receiving commission-based compensation tied to sales, their job cannot “in some sense” be called selling. This view ignores the reality of the nature of the work of detailers, as it has been carried out for decades. Plaintiffs’ argument also fails to account for the fact that the relevant “purchasers” in the pharmaceutical industry, and the appropriate foci of our inquiry, are not the end-users of the drug but, rather, the prescribing physicians whom they importune frequently. See, e.g., Baum v. AstraZeneca LP, 605 F.Supp.2d 669, 678-79 (W.D.Pa.2009) (discussing why the “professional paradigm” places the physician as the relevant decision maker in the health services industry), aff’d on other grounds, 372 Fed. App’x 246 (3d Cir.2010). Unlike conventional retail sales, the patient is not at liberty to choose personally which prescription pharmaceutical he desires. As such, he cannot be fairly characterized as the “buyer.” Instead, it is patient’s physician, who is vested with both a moral and legal duty to prescribe medication appropriately, who selects the medication and is the appropriate focus of our “sell/buy” inquiry. In this industry, the “sale” is the exchange of non-binding commitments between the PSR and physician at the end of a successful call. Through such commitments, the manufacturer will provide an effective product and the doctor will appropriately prescribe; for all practical purposes, this is a sale. Because pharmaceutical manufacturers appreciate who the “real” buyer is, they have structured their 90,000-person sales force and their marketing tactics to accommodate this unique environment.
When a PSR visits a doctor, he or she attempts to obtain the absolute maximum commitment from his or her “buyer”-a non-binding commitment from the physician to prescribe the PSR’s assigned product when medically appropriate. In most industries, there are no firm legal barriers that prohibit the actual physical exchange of the goods offered for sale. Because such barriers do exist in this industry, the fact that commitments are non-binding is irrelevant; the record reveals that binding or non-binding, a physician’s commitment to a PSR is nevertheless a meaningful exchange because pharmaceutical manufacturers value these commitments enough to reward a PSR with increased commissions when a physician increases his or her use of a drug in the PSR’s bag. See, e.g., Baum, 605 F.Supp.2d at 681 (“This Court believes that other courts, and perhaps regulatory agencies, underestimate the significance of this oral commitment from physicians. In part, this error emerges from a misunderstanding of the ways in which human beings are socially and informally motivated. Sometimes lawyers and judges forget that a person’s word means something; remarkably, many people do not actually need a 400-page contract to bind themselves to their word.”).
Moreover, the industry has agreed upon and abides by the PhRMA Code to regulate the marketing of medicine to healthcare professionals-just as any consumer-products maker might develop rules to limit the express warranties its sales force might offer to a customer. Such industry practice and prevailing customs should inform our disposition. Cf. Reiseck v. Universal Commc’ns of Miami, Inc., 591 F.3d 101, 106 (2d Cir.2010) (in resolving whether advertising sales director was an administrative or sales worker in the publishing industry “a careful consideration of [employer’s] business model provides some clarity”).
Under Plaintiffs’ view, PSRs are not salespeople, despite the fact that more than 90,000 pharmaceutical representatives make daily calls on physicians for the purpose of driving greater sales. See IMS Health, 616 F.3d at 14. We cannot square this view with Section 3(k)’s open-ended use of the word “sale,” which includes “other disposition[s].” While we recognize that the FLSA is to be narrowly construed in light of its remedial nature, that general principle does not mean that every word must be given a rigid, formalistic interpretation. For example, for over seventy years, the Secretary has emphasized a sensible application of the exemptions; in the Preamble to the 2004 Rule, the Secretary employs the openended concept that a salesman is someone who “in some sense” sells. 69 Fed.Reg. at 22,162-63 (emphasis added). In other words, while the Secretary asks us to narrowly interpret this exemption, she herself acknowledges that technical considerations alone and changes in the way sales are made should not be grounds for denying the exemption. See 69 Fed.Reg. at 22,162.
To further explain our common sense understanding of why PSRs make sales, we find the paradigm “outside salesman” case Jewel Tea Co. v. Williams-instructive. 118 F.2d 202 (10th Cir.1941). The importance of Jewel Tea is illustrated by the fact that both parties and the amicus offer it as favorable precedent for their conflicting positions.
Jewel Tea involved a FLSA overtime-wage suit brought by three employees of a tea, coffee, and sundry goods manufacturer and distributor. 118 F.2d at 203. The plaintiffs held the position of “route salesmen” to “sell and distribute” products to customers in their homes. Id. The area in which the company sold its goods was divided and “[e]ach salesman [was] assigned an exclusive territory which he cover[ed].” Id. The employees made no immediate deliveries but instead took orders for future delivery, although they might advance an item to a customer. Id. The company provided sales training and sent a supervisor with a new hire on early sales calls before permitting the employee to “go out on a route by himself.” Id. at 204. Further, employees were taught a “five-point sale” method to employ when speaking with customers. Id. A certain degree of knowledge about the products and potential customers was also required-“[t]he salesman must know recipes for the preparation of the Company’s products … [and] must learn the general requirements of each family, in order to avoid over-stocking his customer and in order to anticipate the family’s needs.” Id. After working in the field during the day, employees completed some clerical tasks at night. Id. at 205. Finally, employees were paid a base salary plus a commission if their collections were in excess of a sum certain. Id.
The Jewel Tea plaintiffs brought suit to collect unpaid overtime, asserting they did not fall within the “outside sales” exemption, primarily employing the argument that they were “delivery men.” Id. at 208. In its decision denying plaintiffs overtime pay, the Tenth Circuit penned the oft-quoted justification for the outside sales exemption:
The reasons for excluding an outside salesman are fairly apparent. Such salesman, to a great extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime, he ordinarily receives commissions as extra compensation. He works away from his employer’s place of business, is not subject to the personal supervision of his employer, and his employer has no way of knowing the number of hours he works per day. To apply hourly standards primarily devised for an employee on a fixed hourly wage is incompatible with the individual character of the work of an outside salesman. Id. at 207-08.
Reviewing the undisputed facts here, we consider the rationale for applying the outside sales exemption to PSRs to be as “apparent” as it was in Jewel Tea. Of course, this case does not involve door-to-door consumer-product sales. But, the FLSA is not an industry-specific statute. As the Second Circuit recognized in Reiseck, not all FLSA claims will involve the “archetypal businesses envisaged by the FLSA,” 591 F.3d at 106. Even though there are differences, it is notable that the salesmen in Jewel Tea and Plaintiffs here each (1) worked in assigned territories, (2) did not make immediate deliveries, (3) were required to analyze client backgrounds, (4) received product training, (5) employed a pre-planned routine for client interaction, (6) were accompanied by supervisors for training, (7) were later subject to minimal supervisor oversight, (8) completed clerical activities at the end of the day, and (9) had a dual salary and commission-based compensation plan tied to their performance. Even though PSRs lack some hallmarks of the classic salesman, the great bulk of their activities are the same, as is the overarching purpose of obtaining a commitment to purchase (prescribe) something.
The primary duty of a PSR is not promoting Glaxo’s products in general or schooling physicians in drug development. These are but preliminary steps toward the end goal of causing a particular doctor to commit to prescribing more of the particular drugs in the PSR’s drug bag. Without this commitment and the concomitant increase in prescriptions, or drug volume, or market share-i.e. without more sales-the PSR would not receive his or her commission salary and could soon find himself or herself unemployed. While not all steps in the PSR’s daily activities constitute “selling,” that fact does not render the totality of those activities non-exempt promotion; “work performed incidental to and in conjunction with the employee’s own outside sales or solicitations … shall be regarded as exempt outside sales work … [and] … other work that furthers the employee’s sales efforts also shall be regarded as exempt work.” 29 C.F.R. § 541.500(b).
The Secretary’s distinction between selling and promoting is only meaningful if the employee does not engage in any activities that constitute “selling” under the Act. This much is seen from the plain language of the regulations, which gives the example of promotional work as “a company representative who visits chain stores, arranges the merchandise on shelves, replenishes stock by replacing old with new merchandise, sets up displays and consults with the store manager when inventory runs low, but does not obtain a commitment for additional purchases.” 29 C.F.R. § 541.503(c) (emphasis added). PSRs do far more than collect general data or provide consultations; indeed they ask for, and sometimes obtain, a commitment by the doctor to prescribe Glaxo drugs, and whether the doctor keeps that commitment is verified and traced using aggregated pharmacy data Glaxo collects. See IMS Health, 550 F.3d at 44-47 (“A valuable tool in this endeavor, available through the omnipresence of computerized technology, is knowledge of each individual physician’s prescribing history.”).
In Reisick, the Second Circuit highlighted an important distinction between selling and promoting, noting that the latter is directed to the public at large, as opposed to a particular client:
Consider a clothing store. The individual who assists customers in finding their size of clothing or who completes the transaction at the cash register is a salesperson under the FLSA, while the individual who designs advertisements for the store or decides when to reduce prices to attract customers is an administrative employee for the purposes of the FLSA. Reiseck, 591 F.3d at 107. At Glaxo, Plaintiffs had no interest in “generally” promoting sales by the company or improving sales across the board. Rather, Plaintiffs directed their sales efforts only towards certain products, only to a discrete group of physicians, and only within a defined geographic area. Targeting physicians is not based on mass appeals or general advertisements, but is the result of a personalized review of each physician’s prescribing habits and history. The process, like any sales process, is tailored to the customer’s preferences.
We also find that the Secretary’s acquiescence in the sales practices of the drug industry for over seventy years further buttresses our decision. The outside sales exemption has existed since 1938. Detail men have practiced their craft over that same period. Generally, they have been considered salespeople. Until the Secretary’s appearance in Novartis, the DOL did not challenge the conventional wisdom that detailing is the functional equivalent of selling pharmaceutical products. Indeed, the DOL has recognized as much in its Dictionary of Occupation Titles, which provides the following definition for pharmaceutical detailers:
Promotes use of and sells ethical drugs and other pharmaceutical products to physicians, [dentists], hospitals, and retail and wholesale drug establishments, utilizing knowledge of medical practices, drugs, and medicines: Calls on customers, informs customer of new drugs, and explains characteristics and clinical studies conducted with drug. Discusses dosage, use, and effect of new drugs and medicinal preparations. Gives samples of new drugs to customer. Promotes and sells other drugs and medicines manufactured by company. May sell and take orders for pharmaceutical supply items from persons contacted.
D.O.L. Dictionary of Occupational Titles § 262.157-010 (4th ed.1991) (emphases added). Likewise, although it emerged in a different context, we find Judge Posner’s observation in Yi v. Sterling Collison Centers, Inc., 480 F.3d 505, 510-11 (7th Cir.2007), informative-while it is “possible for an entire industry to be in violation of the [FSLA] for a long time without the Labor Department noticing[, the] more plausible hypothesis is that the … industry has been left alone” because DOL believed its practices were lawful.
In view of many similarities between PSRs and salespeople in other fields, pharmaceutical industry norms, and the acquiescence of the Secretary over the last seventy-plus years, we cannot accord even minimal Skidmore deference to the position expressed in the amicus brief. Under Skidmore, “[t]he fair measure of deference to an agency administering its own statute has been understood to vary with circumstances, and courts have looked to the degree of the agency’s care, its consistency, formality, and relative expertness, and to the persuasiveness of the agency’s position.” United States v. Mead Corp., 533 U.S. 218, 228 (2001) (internal citations omitted); see also League of Wilderness Defenders v. Forsgren, 309 F.3d 1181, 1189 (9th Cir.2002) (quoting Skidmore, 323 U.S. at 140) (internal quotation marks omitted). Many, if not all, of these hallmarks of “respectful” deference are absent here. The about-face regulation, expressed only in ad hoc amicus filings, is not enough to overcome decades of DOL nonfeasance and the consistent message to employers that a salesman is someone who “in some sense” sells. Moreover, we are unable to accept an argument that fails to account for industry customs and emphasizes formalism over practicality, in particular the argument that “obtaining a commitment to buy” is the sine qua non of the exemption. Under the Secretary’s view, “sale” means unequivocally the final execution of a legally binding contract for the exchange of a discrete good. In addition to the point that such stringent wording is not found in Section 3(k), or plausibly implied from phrases like “other disposition,” the Secretary’s approach transforms what since the time of Jewel Tea has been recognized as a multi-factor review of an employee’s functions into a single, stagnant inquiry.
Telephones, television, shopping malls, the Internet and general societal progress have largely relegated the professional pitchman embodied in Jewel Tea to the history books. But selling continues, and, as in prior eras, a salesperson learns the nuances of a product and those of his or her potential clientele, tailors a scripted message based on intuition about the customer, asks for the customer to consider her need for the product, and then receives a commission when the customer’s positive impression ultimately results in a purchase.
For the past seventy-plus years, selling in the pharmaceutical industry has followed this process. PSRs are driven by their own ambition and rewarded with commissions when their efforts generate new sales. They receive their commissions in lieu of overtime and enjoy a largely autonomous work-life outside of an office. The pharmaceutical industry’s representatives-detail men and women-share many more similarities than differences with their colleagues in other sales fields, and we hold that they are exempt from the FLSA overtime-pay requirement.
For the foregoing reasons, we AFFIRM the district court’s summary judgment for Defendant-Appellee SmithKline Beecham Corporation.”
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9th Cir.: Reporters For Newspaper Properly Deemed Nonexempt; Creative Professional Exemption Not Applicable, Because The Reporters’ Work Does Not Require Sophisticated Analysis
Wang v. Chinese Daily News, Inc.
Following a verdict/decision in the plaintiffs favor, the defendant appealed to the Ninth Circuit based on a variety of issues, both substantive and procedural. As discussed here, the Ninth Circuit affirmed the lower Court’s holding that the plaintiffs, reporters for a local Chinese-language newspaper were nonexempt under the Fair Labor Standards Act (“FLSA”) and California Wage and Hour Law.
Reasoning that the plaintiff-reporters were not subject to the so-called “creative professional” exemption, the Court reasoned:
“CDN argues that the district court erred in holding on summary judgment that CDN’s reporters were non-exempt employees entitled to overtime. Specifically, CDN argues that its reporters were subject to the “creative professional exemption” and were therefore exempt employees not subject to FLSA and state-law overtime pay and break requirements. We review the district court’s grant of summary judgment de novo. Bamonte v. City of Mesa, 598 F.3d 1217, 1220 (9th Cir.2010).
Federal law exempts employers from paying overtime to “any employee employed in a bona fide … professional capacity.” 29 U.S.C. § 213(a)(1). To qualify as an exempt professional under federal law, an employee must be compensated “at a rate of not less than $455 per week,” and his or her “primary duty” must be the performance of exempt work. 29 C.F.R. §§ 541.300, 541.700. “[A]n employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” 29 C.F.R. § 541.302(a). The exemption is construed narrowly against the employer who seeks to assert it. Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir.2005). California wage and hour law largely tracks federal law. See Industrial Welfare Commission Order 4-2001 § 1(A)(3)(b) (defining professional to include “an employee who is primarily engaged in the performance of … [w]ork that is original and creative in character in a recognized field of artistic endeavor … and the result of which depends primarily on the invention, imagination, or talent of the employee”); see also id. § 1(A)(3)(e) (directing that the exemption is “intended to be construed in accordance with … [inter alia, 29 C.F.R. § 541.302 ] as [it] existed as of the date of this wage order”).
As applied to journalists, the federal Department of Labor construed the “creative professional exemption” in a 2004 regulation:
Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy. Employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. Thus, for example, newspaper reporters who merely rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals. Reporters also do not qualify as exempt creative professionals if their work product is subject to substantial control by the employer. However, journalists may qualify as exempt creative professionals if their primary duty is performing on the air in radio, television or other electronic media; conducting investigative interviews; analyzing or interpreting public events; writing editorials, opinion columns or other commentary; or acting as a narrator or commentator. 29 C.F.R. § 541.302(d) (2004). Unlike the “interpretation” it replaced, the 2004 regulation was promulgated pursuant to notice and comment rulemaking and therefore has the force of law. See 69 Fed.Reg. 22122, 22157-58 (Apr. 23, 2004). In promulgating the new regulation, the Department of Labor explained that “[t]he majority of journalists, who simply collect and organize information that is already public, or do not contribute a unique or creative interpretation or analysis to a news product, are not likely to be exempt.” Id. at 22158. Although we have not decided a case applying the creative professional exemption to journalists, other courts have explored the circumstances under which print journalists qualify for the exemption. In Reich v. Gateway Press, Inc., 13 F.3d 685 (3d Cir.1994), the Third Circuit concluded that none of the reporters at a chain of nineteen local weeklies was exempt. The newspapers largely contained “information about the day-to-day events of their respective local communities … overlooked by the Pittsburgh metropolitan daily press.” Id. at 688. The reporters primarily generated articles and features using what they knew about the local community, spent 50-60% of their time accumulating facts, and mostly filed recast press releases or information taken from public records. They wrote a feature article or editorial about once per month. Id. at 689. The court held that they were among the majority of reporters who were non-exempt. Id. at 699-700. It noted that the work was not “the type of fact gathering that demands the skill or expertise of an investigative journalist for the Philadelphia Inquirer or Washington Post, or a bureau chief for the New York Times.” Id. at 700.
In Reich v. Newspapers of New England, Inc., 44 F.3d 1060 (1st Cir.1995), the First Circuit similarly held that reporters and other employees employed by a small community newspaper were not exempt professionals. The day-to-day duties of the reporters involved “general assignment work” covering hearings, criminal and policy activity, and legislative proceedings and business events. Employees were not “asked to editorialize about or interpret the events they covered.” Id. at 1075. They, too, were therefore among the majority of reporters who were not exempt, even though their work occasionally demonstrated creativity, invention, imagination, or talent. Id.
By comparison, in Sherwood v. Washington Post, 871 F.Supp. 1471, 1482 (D.D.C.1994), the district court held that a Washington Post reporter whose “job required him to originate his own story ideas, maintain a wide network of sources, write engaging, imaginative prose, and produce stories containing thoughtful analysis of complex issues” was exempt. As a high-level investigative journalist who had held multiple positions of prominence at one of the nation’s top newspapers, the reporter was the sort of elite journalist whom the creative professional exemption was intended to cover.
The parties in this case submitted extensive evidence on summary judgment. Reporters stated in their depositions that they wrote between two and four articles per day, and that they very seldom did investigative reporting. The reporters proposed articles, but the editors gave considerate direction and frequently assigned the topics. One reporter explained that with having to write so much, “you didn’t have enough time to-really analyze anything.” Some time was spent rewriting press releases. There were no senior reporters or others with distinctive titles, and each of the reporters performed essentially the same tasks.
Editors’ declarations submitted by CDN, on the other hand, stated that articles “include background, analysis and perspective on events and news,” that CDN employs some of the most talented reporters in the Chinese newspaper industry, and that the reporters have extensive control over their time, pace of work, and ideas for articles to write. They stated that reporters must cultivate sources, sift through significant amounts of information, and analyze complicated issues. Several editors stated that they approved more than 90% of the topics suggested by reporters. Reporters’ salaries ranged from $2,060 to $3,700 per month.
Although the evidence submitted revealed disputes over how to characterize CDN’s journalists, we agree with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption. CDN’s Monterey Park (Los Angeles) operation, with twelve to fifteen reporters and a local circulation of 30,000, is not quite as small or unsophisticated as the community newspapers described in the Newspapers of New England and Gateway Press cases. But CDN is much closer to the community newspapers described in those cases than to the New York Times or Washington Post. As the district court explored in detail, the materials submitted on summary judgment make clear that CDN’s articles do not have the sophistication of the national-level papers at which one might expect to find the small minority of journalists who are exempt. Moreover, the intense pace at which CDN’s reporters work precludes them from engaging in sophisticated analysis. CDN’s reporters’ primary duties do not involve “conducting investigative interviews; analyzing or interpreting public events; [or] writing editorial[s], opinion columns or other commentary,” 29 C.F.R. § 541 .302(d), even if they engage in these activities some of the time. Indeed, many CDN articles may be characterized as “standard recounts of public information [created] by gathering facts on routine community events,” id., as opposed to the product of in-depth analysis. Characterizing CDN journalists as exempt would therefore be inconsistent with the Department of Labor’s intent that “the majority of journalists … are not likely to be exempt,” 69 Fed.Reg. at 22158, and with the requirement that FLSA exemptions be construed narrowly.
The evidence before the district court did not create a genuine issue of material fact as to the reporters’ status. We therefore affirm the district court’s determination on summary judgment that CDN’s reporters were non-exempt employees who were entitled to the protections of the FLSA and California law.”
Not discussed here, the Court also held that the certification of both a collective action of the FLSA claims and a class action of the California state law claims was within the court’s discretion, as was the lower court’s decision to invalidate many opt-out forms received in response to the initial class action notice, in response to what it believed was coercion from the defendant employer.
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