Home » Posts tagged 'Overtime Pay'
Tag Archives: Overtime Pay
10th Cir.: Workers for Recreational Marijuana Covered by FLSA, Notwithstanding Federal Law Which Renders Business Illegal
Following denial of the defendant-employer Helix’s motion to dismiss, Helix appealed. Helix–a company that provides security services in the state sanctioned recreational marijuana business–appealed contending that the FLSA did not apply to it. Specifically, Helix asserted that the FLSA does not apply to workers such as plaintiff, because Colorado’s recreational marijuana industry is in violation of federal law, the Controlled Substances Act (CSA). Rejecting this argument just as the court below had, the Tenth Circuit held that just because an employer – such as one in Colorado’s recreational marijuana industry – may be in violation of federal law, here the CSA, that does not mean its employees are not entitled to overtime under the Fair Labor Standards Act (FLSA).
Helix TCS, Inc., provides security services for businesses in Colorado’s state-sanctioned marijuana industry. One of its employees, Robert Kenney, alleged that he and other security guards regularly worked more than 40 hours per week without overtime pay.
Helix did not dispute the fact that Kenney worked more than 40 hours without overtime, nor did it try to argue that he was covered by one of the FLSA’s many overtime exemptions. Instead, it argued that the FLSA was in conflict with CSA’s purpose. The Tenth Circuit rejected this argument and held that employers are not excused from complying with federal laws because of their other federal violations.
The 10th Circuit compared the situation to the 1931 trial of Al Capone in which jurors convicted the gangster for failing to pay taxes on his ill-gotten income. Just as there was no reason then why the fact a business was unlawful should exempt it from paying the taxes it would otherwise have had to pay, the Tenth Circuit said there is no reason today why a recreational marijuana company should be exempt from paying overtime just because it may be in violation of the CSA.
Click Kenney v. Helix TCS, Inc. to read the entire decision.
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.
11th Cir.: Trial Court Erred in Denying Liquidated Damages Where Sole Evidence of Good Faith Was VP’s Testimony He Researched Alleged Exemption After Plaintiff Commenced Legal Action
This case was before the Eleventh Circuit for a second time. Previously, the plaintiff had successfully appealed the trial court’s decision that he was exempt from the FLSA under the so-called Motor Carrier Exemption. Following remand, plaintiff prevailed at trial and was awarded unpaid overtime wages. The plaintiff then moved for an award of liquidated damages and attorneys’ fees and costs. As discussed here, despite virtually non-existent evidence of any good faith on the part of the defendant to determine its FLSA obligations prior to the lawsuit, the court below denied plaintiff liquidated damages. The Eleventh Circuit reversed reiterating that a defendant (and not plaintiff) bears the burden of proof on this issue and that the burden is a relatively high one.
Discussing the relevant burden of proof, the court explained:
Under the FLSA, liquidated damages are mandatory absent a showing of good faith by the employer. See 29 U.S.C. § 216(b) (2012); Joiner v. City of Macon, 814 F.2d 1537,1538-39 (11th Cir. 1987). Although liquidated damages are typically assessed at an equal amount of the wages lost due to the FLSA violation, they can be reduced to zero at the discretion of [*7] the court. See 29 U.S.C. §§ 216(b), 260. If an employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act . . . the court may, in its sound discretion, award no liquidated damages . . . .
29 U.S.C. § 260.
An employer who seeks to avoid liquidated damages bears the burden of proving to the court that its violation was “both in good faith and predicated upon such reasonable grounds that it would be unfair to impose upon him more than a compensatory verdict.” Reeves v. Int’l Tel. & Tel. Corp., 616 F.2d 1342, 1352 (5th Cir. 1980) (quoting Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 468 (5th Cir. 1979)). “Before a district court may exercise its discretion to award less than the full amount of liquidated damages, it must explicitly find that the employer acted in good faith.” Joiner, 814 F.2d at 1539.
The Eleventh Circuit then held that the defendant in this case had not carried its burden of proof:
The district court erred in denying liquidated damages on this record. Aqua Life had the burden of proving good faith and reasonable belief and failed to carry that burden. The only evidence of the alleged good faith was the testimony of its Vice President, [*8] Mr. Ibarra, who ostensibly researched the Motor Carrier Act exception to the FLSA, concluding that Mr. Reyes did not need to be paid overtime hours for his work. Yet, Mr. Ibarra also admitted that he had never heard of the FLSA until legal action was taken by Mr. Reyes. Aqua Life thus did not make a sufficient factual showing upon which the district court could have reasonably relied to deny liquidated damages and the record does not support the district court’s refusal to grant liquidated damages.
We need not reach Mr. Reyes’s alternative arguments against the denial of liquidated damages, as the factual record contains no evidence to support the district court’s denial of liquidated damages. Accordingly, we REVERSE, and direct the district court to assign full liquidated damages in the amount of $14,770.00 to Mr. Reyes.
Click Reyes v. Aqua Life Corp. to read the entire decision.
S.D.Ohio: Compensation System Based on Number and Type of Cases Managed, Did Not Qualify as “Fee Basis,” For Purpose of Applying Learned Professional Exemption
This case was before the court on the parties’ cross-motions for summary judgment regarding the application (or lack thereof) of the learned professional exemption to plaintiffs, nurse case managers. As discussed here, the court held that the case managers were non-exempt as a matter of law, because the defendants’ compensation plan was neither a salary nor a fee basis plan. As such, the court granted the plaintiffs’ motion in part (regarding their non-exempt status) and denied the defendants’ motion.
The court outlined the relevant undisputed facts regarding the plaintiffs compensation plan as follows:
The facts of Carestar’s compensation system for case managers are not in dispute. Each case manager is assigned a number of consumers or cases that he or she is responsible for managing. Each case is assigned one of three acuity levels depending upon the “needs/situation” of that particular case. The acuity levels have an associated point value ranging from 1.66 to 2.00 to 3.33. A case manager’s total caseload is determined by totaling the point value of his or her assigned cases.
Upon hiring, a case manager is given a dollar value for each point in his or her caseload. This amount is determined based upon the individual case manager’s educational level, credentials (i.e., RN/LSW/LISW) and experience. The Case Manager’s compensation per pay period is determined by adding up the total number of points in his or her caseload and multiplying that by the dollar value of the points. (See Case Manager Compensation Review, Doc. 34–7.)
The compensation system pays case managers an amount for each case managed, regardless of the time expended in performing such management duties. As Plaintiffs point out, Carestar’s compensation system guidelines nowhere discuss the amount of time expected to be worked by case managers in performing their duties.
Based on their compensation plan, the court held that the plaintiffs were neither paid on a salary or fee basis. Discussing the issue, the court explained:
To qualify for the “learned professional” exemption, Plaintiffs must first be “[c]ompensated on a salary or fee basis at a rate of not less than $455 per week….” 29 C.F.R. § 541.300(a)(1) (emphasis added).5 Defendants concede that Case Managers are not compensated on a “salary basis,” but rather assert that they are compensated on a “fee basis.” The DOL regulation on “fee basis” compensation, explains:
An employee will be considered to be paid on a “fee basis” within the meaning of these regulations if the employee is paid an agreed sum for a single job regardless of the time required for its completion. These payments resemble piecework payments with the important distinction that generally a “fee” is paid for the kind of job that is unique rather than for a series of jobs repeated an indefinite number of times and for which payment on an identical basis is made over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.
Defendants rely on Fazekas v. Cleveland Clinic Foundation Health Care Ventures, Inc., 204 F.3d 673 (6th Cir.2000), to argue that Carestar case managers are compensated on a “fee basis.” In Fazekas, the Sixth Circuit considered whether certain home health nurses were paid on a fee basis for the purposes of the FLSA’s “professional” exemption. See id. at 675–79. The Fazekas plaintiffs were compensated on a per-visit basis, regardless of the time spent on each home health visit. Although the nurses performed multiple tasks within a single visit, including case management and care coordination tasks, and even expended some time outside consumers’ homes on “attendant transportation and administrative duties,” all such tasks were “connected with the actual visits themselves.” Id. at 675. Thus, while the nurses often provided ongoing treatments and implemented ongoing care plans over the course of multiple visits, such services were divisible in to discrete components (i.e., the individual visit), and compensated as such. Accordingly, the disputed matter in Fazekas was not whether the nurses were compensated for performing a “single job,” but rather whether each job was “unique” and, therefore, unlike “piecework payments.” Id. at 676. Analogizing a home health nurse to “a singer, who may, after all, perform the same song or set of songs over and over again during a series of performances, or … an illustrator, who may similarly repeat the same drawings or set of drawings as necessary,” id. at 679, the Court determined that each home health visit was indeed unique. Because this was consistent with the controlling DOL opinion on the matter, see id. at 676–678, the Court concluded that home health nurses paid on a per-visit basis were professionals compensated on a fee basis and therefore FLSA-exempt.
Here, in contrast, throughout a two-week pay period, case managers perform multiple individual tasks in connection with a particular consumer, which cannot be linked back to a single discrete job like a visit, a performance, or a project. Indeed, the pay-period does not correlate with a discrete set of tasks or goals. (Case Mgmt. Practice Guidelines, Doc. 29–11, 2–4; Bowman Aff., Doc. 33–1, ¶ 5 (“The points system used to compensate me was not based on my completion of any single task. Rather, this compensation system required I provide consumers with a series of services which were repeated an indefinite number of times per year based on the consumer’s particular needs.”); Cook Aff., Doc. 33–2, ¶ 5 (same); Gildow Aff. Doc. 33–3, ¶ 5(same); Kurtz Aff., Doc. 33–4, ¶ 5 (same); Potelicki Aff., Doc. 33–5, ¶ 5 (same); Steele Aff., Doc. 33–6, ¶ 5(same)). Rather, Carestar’s Case Management Practice Guidelines identifies numerous ongoing duties, such as periodic reevaluations and a number of required contacts with the consumer during the first and subsequent six month periods. (Case Mgmt. Practice Guidelines, Doc. 29–11; see also Job Description, Doc. 29–5 (“The Case Manager is responsible for on-going case management services to the consumer, including … the on-going monitoring of consumer outcomes, health, safety, eligibility and costs.”)).6 Thus, unlike a nurse’s home health visits, a singer’s performances, or an illustrator’s drawings, the on-going work done by case managers in connection with a case cannot be reduced a series of two-week-long “single job[s].” Therefore, the only basis for delineating and distinguishing case managers’ unit of compensation is the duration of the pay period. As DOL regulations make plain, however, “[p]ayments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis.” 29 C.F.R. § 541.605(a). Carestar’s case manager compensation system thus fails to meet the DOL’s definition of a “fee basis” of payment as a matter of law.
Because Case Managers are not compensated on a “salary or fee” basis, they cannot satisfy the requirements for a “professional” exemption under the FLSA. See 29 C.F.R. § 541.300(a)(1). Accordingly, this alone is sufficient to grant Plaintiffs’ Motion for Partial Summary Judgment with respect to Carestar’s misclassification of its Case Managers as “exempt” employees.
The court went on to discuss the duties element of the learned professional exemption, but declined to resolve issues of fact at the summary judgment stage, and noted that resolution of the issue was not necessary in light of the defendants’ inability to meet the salary or fee basis prong of the exemption.
Click Cook v. Carestar, Inc. to read the entire Opinion & Order.
10th Cir.: Employee Who Performed Work Afterhours for Employer Through His Separate Company Held to be Independent Contractor for Afterhours Work
Barlow v. C.R. England, Inc.
Following an order granting the defendant summary judgment, the plaintiff appealed. As discussed here, the issue before the Tenth Circuit regarding the plaintiff’s FLSA claim, was whether he was properly deemed to be an independent contractor for janitorial work her performed for his employer afterhours, while the same employer deemed him to be an employee for security work he performed during the day. In a decision lacking much by way of reasoning, the Tenth Circuit affirmed the decision of the court below and held that the defendant’s dual classification for the two different types of duties performed was valid.
The Tenth Circuit laid out the pertinent facts as follows:
In February 2005, Barlow began working as a part-time security guard at a Denver maintenance yard operated by England, a large trucking company. Barlow patrolled England’s grounds for about thirty hours a week, from 6:30 P.M. to 5:00 or 6:00 A.M. Friday through Sunday nights. Most of the yard was fenced in, accessible through an automatic overhead gate. Barlow also performed maintenance and ground work to try to reach 40 hours of work per week.
After Barlow had been at England for about a year and a half, he asked the facility’s site manager, John Smith, for extra work. Smith, who had initially hired Barlow, was not satisfied with England’s janitorial contractor at that time, so he asked England’s personnel department about having Barlow take over. Smith was told he could not allow Barlow to work any more hours because the company would have to pay overtime.
To get around this, Smith suggested Barlow create a company England could contract with. Barlow formed E & W Janitorial & Maintenance Services, LLC. Beginning in February 2007, Barlow cleaned for England on Mondays, Wednesdays, and Saturdays, pursuant to an oral agreement with Smith. On a few occasions, his girlfriend, a co-owner of E & W, filled in. England provided his cleaning supplies, but did not require Barlow clean in any particular order. England, the only company for which E & W worked, paid $400 a month for E & W’s services.
Without much reasoning regarding this portion of the plaintiff’s claim, the court held:
We also agree with the district court’s decision to grant summary judgment against Barlow regarding his FLSA claims. Barlow argues that he performed his janitorial work as an employee under the FLSA, and that he was therefore entitled to overtime pay. But applying the “economic realities” test of employee status, we conclude that Barlow was not a statutory employee for purposes of the FLSA.
The “economic realities” test seeks to look past technical, common-law concepts of the master and servant relationship to determine whether, as a matter of economic reality, a worker is dependent on a given employer. Baker v. Flint Engineering & Const . Co., 137 F.3d 1436, 1440 (10th Cir.1998). “The focal point in deciding whether an individual is an employee is whether the individual is economically dependent on the business to which he renders service, or is, as a matter of economic fact, in business for himself.” Doty v. Elias, 733 F.2d 720, 722–23 (10th Cir.1984) (emphasis added) (citations omitted). “In applying the economic reality test, courts generally look at (1) the degree of control exerted by the alleged employer over the worker; (2) the worker’s opportunity for profit or loss; (3) the worker’s investment in the business; (4) the permanence of the working relationship; (5) the degree of skill required to perform the work; and (6) the extent to which the work is an integral part of the alleged employer’s business.” Baker, 137 F.3d at 1440. It also “includes inquiries into whether the alleged employer has the power to hire and fire employees, supervises and controls employee work schedules or conditions of employment, determines the rate and method of payment, and maintains employment records.” Id. “None of the factors alone is dispositive; instead, the court must employ a totality-of-the-circumstances approach.” Id.
Some factors favor Barlow, while other factors favor C.R. England, but, ultimately, we agree with the district court that Barlow was an independent contractor. Barlow and his partner created a licensed, limited liability company in order to provide janitorial services. Cf. Rutherford Food Corp. v. McComb, 331 U .S. 722, 730 (1947) (classifying as employees speciality group of production line workers in part because “[t]he group had no business organization that could or did shift as a unit from one slaughter-house to another”). Barlow kept records for the company, opened a separate bank account, and filed a corporate tax return. The district court also noted Barlow had the “freedom to decide how to accomplish” his tasks, even if the company reviewed the ultimate work product. 816 F.Supp.2d at 1107. Indeed, little in the case indicates the relationship between Barlow and C.R. England materially differed from one the company would have with any other cleaning service except for the fact Barlow also happened to otherwise be an employee. This suggests Barlow was in business for himself as a janitor, and we therefore affirm the district court’s decision to grant summary judgment.
Click Barlow v. C.R. England, Inc. to read the entire decision.
D.Kan.: FLSA Plaintiffs’ Motion to Compel Entry Into Defendant’s Facility To Conduct A Time & Motion Study Related To “Walk Time” Claims Granted
McDonald v. Kellogg Co.
In this Fair Labor Standards Act (“FLSA”) wage and hour case, plaintiffs, current and former hourly production employees at defendant’s bakery facility, claimed that defendant violated the overtime provisions of the FLSA, 29 U.S.C. § 201 et seq., by, among other things, failing to compensate them for time spent walking to and from workstations. Following a ruling on the parties’ cross motions for summary judgment– which in part held that plaintiffs’ time spent walking to their workstations was compensable– plaintiffs’ moved to compel defendant to allow entry into its facility for the purpose of conducting a time and motion study related to plaintiffs’ walk time.
Describing the plaintiffs’ proposed study the court explained:
“Plaintiffs have served a request, pursuant to Fed.R.Civ.P. 34, seeking access to defendant’s bakery facility for their expert, Dr. Kenneth S. Mericle, to gather data on the time employees spend walking to and from their workstations (see doc. 195). Dr. Mericle proposes to use Radio Frequency Identification technology (“RFID”) to gather this data. To conduct an RFID study, Dr. Mericle would first place electronic readers at the employees’ locker rooms and at the time clocks outside their workstations. Next, Dr. Mericle would issue credit-card-sized cards to employees to carry with them during the study. When the cards pass in the proximity of the readers, a time stamp in the reader would record the time that the employee passed through the area. Thus, the readers would record the time that card-carrying employees leave the locker room and the time that they arrive at the workstations (and vice versa). In addition, Dr. Mericle would place small sensors at various locations in the factory, such as bathrooms, to register detours in the employees’ paths to and from their workstations. Plaintiffs suggest that only Dr. Mericle and, perhaps, one other individual would need to be on-site during the study to ensure that there are no problems with the RFID equipment.
Plaintiffs request that Dr. Mericle enter defendant’s facility on two occasions. On the first entry, Dr. Mericle would simply observe plant conditions and employee habits in order to plan placement locations for the RFID readers and sensors. On the second entry, Dr. Mericle would set up the readers and sensors, and issue cards to the employees. Plaintiffs propose that the study then be conducted over a period of several days.
Defendant objects to the RFID study as overreaching discovery. Defendant asserts that nothing in the Federal Rules of Civil Procedure requires it to alter its factory by attaching readers and sensors to its property, or to mandate that its employees carry reader cards. According to defendant, the proposed RFID study is overly broad and burdensome.”
Granting plaintiffs’ motion, the court reasoned:
“In objecting to plaintiffs’ proposed RFID study, defendant broadly asserts that “[c]onducting such a study during working hours will consume considerable time at [defendant’s] expense, will interfere with operations, potentially jeopardize the safety of individuals conducting the study, and expose [defendant’s] proprietary production processes to disclosure to third parties.” Defendant suggests that plaintiffs can estimate employee walking time much more simply by measuring the distances between employee locker rooms and workstations, and then using expert information concerning reasonable walk times.
The court rejects defendant’s objections and grants plaintiffs’ motion to compel. Pursuant to Rules 34(a)(2) and 26(b)(1), the court clearly has the authority to order access to defendant’s facility for the purpose of conducting the RFID study and gathering relevant walk-time data. While there may be, as defendant suggests, alternate means to gather data regarding employee walking time, such is not the test for determining whether the discovery requested should be compelled. Defendant is not at liberty to dictate how plaintiffs should gather information to support their case. Rather, the rules permit plaintiffs to enter defendant’s property for the purpose of gathering relevant information unless defendant makes a “particularized showing” that the discovery plaintiffs propose would create an undue burden or danger. Defendant has made no attempt to meet this burden-defendant has not submitted an affidavit discussing the burdens or dangers that would accompany the proposed RFID study, nor has defendant even “provide[d] a detailed explanation as to the nature and extent of the claimed burden.” Although during the hearing defense counsel requested an opportunity to supplement the record in this regard, the undersigned denied defendant’s tardy request for a second bite at the apple.
Considering the record as it stands, the court finds that defendant has offered no support for its conclusory assertion that the proposed RFID study would consume a considerable amount of defendant’s time and would interfere with defendant’s operations. As plaintiffs explained at the hearing, the readers and sensors can be placed unobtrusively and without having to make permanent modifications to defendant’s property. They will record no data other than the time that the cards pass in their vicinity. Indeed, this proposed methodology appears to be less intrusive than other methods of conducting time and motion studies (e.g., videotaping employees or having experts follow employees as they walk the designated paths). With regard to defendant’s concern that its proprietary information is at risk, the Stipulated Protective Order already entered in this case (doc. 56) is sufficient to protect defendant’s trade secrets.
Nor has defendant demonstrated or explained what legitimate safety concerns would be faced by persons conducting the study. Nonetheless, the court will permit defendant to conduct safety-training, limited to one hour, as a prerequisite for access to the facility. In addition, as discussed below, defendant’s safety manager may accompany Dr. Mericle while he is in the facility.
Finally, as to defendant’s complaint that its employees should not be required to carry the small reader cards, the court agrees that no employee should be compelled to carry the card against his or her will. However, as noted by plaintiffs, the vast majority of hourly production workers whose walk time the RFID study would measure are opt-in plaintiffs in this case. The court finds it likely that these employees will voluntarily carry the card. The court permits plaintiffs’ counsel and expert to supply cards to employees who voluntarily consent to carry them during the study.”
Click McDonald v. Kellogg Co. to read the entire order.
M.D.Tenn.: FLSA Defendant’s Counterclaim Seeking Declaratory Judgment That Plaintiff Was Exempt Dismissed, Because It Mirrored Plaintiff’s Claim
Richmond v. Centurion Exteriors, Inc.
This case was before the court on Plaintiff’s motion to dismiss the Defendant’s counterclaim, which sought a declaratory judgment that Plaintiff was exempt from the FLSA’s overtime provisions. Because the Plaintiff had made an identical claim for declaratory judgment that the Defendant had misclassified him as exempt, the court dismissed the counterclaim.
Discussing the duplicative counterclaim, the court reasoned:
“In his complaint, Richmond alleged four legal claims, including a violation of the Fair Labor Standards Act (“FLSA”) based upon Defendants’ alleged failure to pay Richmond, a nonexempt employee, wages and overtime for all hours worked before his employment was terminated. (Docket No. 1, Complaint ¶¶ 21, 35-40 (Count I).) Among various forms of relief, Richmond requested a declaratory judgment that the practices he complains about are unlawful. (Id. at 9.) In the answer, Defendants denied the FLSA allegations and raised as an affirmative defense that the FLSA does not apply because Richmond was an “outside salesman” pursuant to 29 U.S.C. § 213 and thus, an exempt employee who was not covered by the FLSA. In addition, Defendants filed a counterclaim seeking a declaratory judgment that Richmond was an exempt employee. (Docket No. 9, Answer at 6-7, 10-11.)
Richmond now seeks dismissal of the counterclaim under Federal Rule of Civil Procedure 12(b)(6) on the ground that the counterclaim is a mirror image of his own claim and Defendants do not allege factual or legal issues different from those raised in the complaint. Defendants emphasize that they carry the burden to prove that Richmond was an exempt employee, and that their counterclaim could have been brought as a separate declaratory judgment action. Additionally, they believe their declaratory judgment request is proper because a ruling could impact the way Centurion classifies current and future employees under the FLSA or a ruling may have ramifications on enforcement actions of the federal government with respect to Richmond’s claim. Defendants also want to assure their ability to obtain a declaratory judgment that Richmond was an exempt employee even if Richmond decides to dismiss his lawsuit voluntarily.
The Sixth Circuit apparently has not addressed this issue outside the patent context. In Dominion Elec. Mfg. Co. v. Edwin Wiegand Co., 126 F.2d 172, 173-74 (6th Cir.1942), the court held that a counterclaim in a patent infringement suit should not have been dismissed prior to trial, but in so holding the court recognized the unique situation often presented in patent cases where defendants seek declaratory judgments on issues beyond the scope of the complaint. In other types of cases, district courts “have disagreed on the proper treatment of so-called ‘mirror-image’ counterclaims.” Erickson v. Brock & Scott, PLLC, 2009 WL 4884424 at *3 (W.D.Tenn. Dec.8, 2009). Some district courts have dismissed counterclaims because they are redundant to the complaint, while other courts have not. Id. (and cases cited therein).
A district court in Ohio found that these “cases are not necessarily at odds.” Pettrey v. Enterprise Title Agency, Inc., 2006 WL 3342633 at * 3 (N.D.Ohio Nov.17, 2006). Relying on 6 Wright, Miller & Kane, FEDERAL PRACTICE & PROCEDURE 2D § 1406, the Pettrey court determined the focus should be on whether the counterclaim serves any useful purpose. Id. If it cannot be determined early in the litigation if the counterclaim is identical to the complaint, “ ‘the safer course for the court to follow is to deny a request to dismiss a counterclaim for declaratory relief unless there is no doubt that it will be rendered moot by the adjudication of the main action.’ ” Id. (quoting 6 Wright, Miller & Kane, FEDERAL PRACTICE & PROCEDURE 2D § 1406). On the other hand, the court should dismiss a redundant counterclaim when it is clear that there is complete identity of factual and legal issues between the complaint and the counterclaim. Id. (citing Aldens, Inc. v. Packel, 524 F.2d 38, 51-52 (3d Cir.1975)). In Pettrey the district court “harbor[ed] no doubt whatsoever that Defendants’ declaratory judgment counterclaims will be rendered moot by the adjudication of Plaintiffs’ claims [,]” and dismissed the counterclaims, distinguishing the case from the patent infringement context in Dominion. Id.
Applying a similar analysis here, the Court concludes that Defendants’ counterclaim raises factual and legal issues identical to those stated in the complaint, and the counterclaim will be rendered moot upon adjudication of the complaint. See id.; Aldens, Inc., 524 F.2d at 51-52; Mille Lacs Band of Chippewa Indians v. State of Minnesota, 152 F.R.D. 580, 582 (D.Minn.1993); Resolution Trust Corp. v. Ryan, 801 F.Supp. 1545, 1556 (S.D.Miss.1992). Defendants secured their opportunity to litigate whether Richmond was an exempt employee by raising that issue as an affirmative defense, on which they carry the burden of proof. See Franklin v. Kellogg Co., — F.3d —-, 2010 WL 3396843 at *4 (6th Cir.2010); Baden-Winterwood v. Life Time Fitness, Inc., 566 F.3d 618, 626 (6th Cir.2009). Even if Richmond decides to dismiss his case voluntarily, Defendants have not identified any case or controversy that would remain for adjudication so that Defendants would have standing to proceed and the Court would possess jurisdiction to render a proper decision, and not an advisory opinion. See Fieger v. Michigan Supreme Court, 553 F.3d 955, 961 (6th Cir.2009) (holding Article III and Declaratory Judgment Act allow district court to enter declaratory relief only in case of actual controversy where plaintiff has standing).
Accordingly, Richmond’s Motion To Dismiss Counterclaim (Docket No. 11) is hereby GRANTED and Defendants’ counterclaim is hereby DISMISSED for failure to state a claim under Rule 12(b)(6).”
S.D.N.Y.: Court Refuses To Allow “Settlement” That Grossly Undervalued FLSA Claims To Serve As Basis For Summary Judgment
Latacela v. Cohen
This case involved an action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., for unpaid minimum wages and unpaid overtime wages. The case was before the court on defendants motion for summary judgment and for judicial approval of a settlement allegedly reached by the parties. The plaintiff opposed the defendants’ motion on the basis that he had withdrawn support for the settlement because the sum certain agreed to by the parties was based on faulty calculations by the plaintiff. Plaintiff asserted that he had mistakenly calculated that he was owed $1,415.82 in unpaid minimum wages, rather than $14,170. This miscalculation also affected the amount the plaintiff claimed in liquidated damages, since employees are entitled to liquidated damages (in addition to back wages) equal to the amount of unpaid wages. 29 U.S.C. § 216(b).
Denying the defendants’ motion, the court reasoned:
” ‘There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under [29 U.S.C. § 216(c) ], the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. Second [sic] when employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.’ Manning v. New York Univ., 2001 WL 963982 (S.D.N.Y. Aug. 22, 2001). Even assuming that the agreement defendant presses the Court to approve remains valid, the Court is not satisfied that it is fair. Under the agreement, the plaintiff would receive approximately $28,000 less than the amount he claims he is owed not for strategic reasons, but rather because plaintiff’s counsel made an arithmetical error. Cf. Elliot v. Allstate Investigations, Inc., 2008 WL 728648, at *2 (S.D.N.Y. Mar. 19, 2008) (approving settlement of less than half the amount plaintiff claims he was owed under the FLSA when the plaintiff could not support his claims through documentary evidence and the defendant could not pay more than the amount agreed to).
Accordingly, defendant’s motion for summary judgment is DENIED.”
Click Latacela v. Cohen to read the entire opinion.
S.D.Tex.: Upon Reconsideration, Pharmaceutical Reps Nonexempt; Court Elects To Adopt Second Circuit’s Reasoning
Harris v. Auxilium Pharmaceuticals, Inc.
This case was before the court on Plaintiff’s Motion for Reconsideration of the court’s prior decision granting Defendant’s Motion for Summary Judgment. The court had previously held that the Plaintiff’s, pharmaceutical representatives were exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) under both the administrative and outside sales exemptions. Plaintiff sought reconsideration in light of the United States Secretary of Labor’s amicus curiae brief filed in In re Novartis Wage and Hour Litigation. Granting the Plaintiff’s Motion, the court reversed itself, finding that the Second Circuit’s recent opinion was more persuasive than the contrary jurisprudence.
Discussing the exemption issues, the court reasoned:
“In its previous order, this Court determined that Harris could not bring a FLSA claim because her position as a Medical Sales Consultant (“MSC”), or pharmaceutical representative, took her out of FLSA’s purview. This Court found that the MSC position was exempt from FLSA under the “administrative” and “outside sales” exemptions.
Shortly after this Court’s order came out, the Department of Labor (“DOL”) filed an amicus curiae brief in a case then pending before the Second Circuit, In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2010). In Novartis, The DOL argued that, under its regulations, pharmaceutical representatives “do not meet the requirements for either the outside sales or administrative exemption.” (Br. for the Secretary of Labor as Amicus Curiae in Supp. of Pls.-Appellants, Doc. No. 106-2, at 5.) Regarding the outside sales exemption, the DOL noted that, “[b]ecause the [pharmaceutical representatives] do not sell any drugs or obtain any orders for drugs, and can at most obtain from the physicians a non-binding commitment to prescribe NPC’s drugs to their patients when appropriate, [they] do not meet the regulation’s plain and unmistakable requirement that their primary duty must be ‘making sales.’ “ (Id. at 10.) Under the administrative exemption, the DOL noted that, although pharmaceutical representatives work independently, that “does not suffice to qualify for the administrative exemption; [the representatives] do not perform any primary duties that are largely comparable to those found in 29 C.F.R. § 541.202(b), such as formulating or implementing management policies, utilizing authority to deviate from established policies, providing expert advice, or planning business objectives.” (Doc. No. 106-2, at 21.)
While this motion for reconsideration was pending at this Court, the Second Circuit concluded that under the DOL’s regulations, pharmaceutical representatives are not outside salesmen or administrative employees for the purposes of FLSA’s overtime pay requirements. Novartis, 611 F.3d at 149. The Novartis court determined that the DOL’s interpretations were “entitled to ‘controlling’ deference,” id., under the Supreme Court’s decision in Auer v. Robbins, 519 U.S. 452, 461 (1997).
After a review of the applicable authority, this Court adopts the reasoning of the Second Circuit and holds that Plaintiffs are not outside salesmen or administrative employees under FLSA. This Court recognizes that district courts are split on the issue, and that some courts have specifically rejected the DOL’s reasoning as set forth in its Novartis amicus brief. See, e.g., Christopher v. SmithKlein Beecham Corp., 2010 WL 396300, at *1-2 (D.Ariz. Feb. 1, 2010). In this Court’s opinion, however, the Novartis court sets forth a persuasive and reasoned analysis for its deference to the DOL’s interpretation of its regulations. As the Novartis court pointed out, the DOL’s interpretations “do far more than merely parrot the language of the FLSA,” and are therefore “entitled to ‘controlling’ deference unless those interpretations are ‘plainly erroneous or inconsistent with the regulation.’ “ 611 F.3d at 153 (quoting Auer v. Robbins, 519 U.S. 452, 461 (1997)). This Court further agrees that no such error or inconsistency exists. Id.
Auxilium points this Court to two opinions in the Third Circuit that came to the opposite conclusion on this question: Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir.2010), and Baum v. AstraZeneca LP, 372 F. App’x 246 (3d Cir.2010). Neither of these cases, however, considers the impact of the DOL’s amicus brief on their decisions. Therefore, they do not provide a reasoned counterweight to the Second Circuit’s analysis.”
EDITOR’S NOTE: There continues to be a split of authority with respect to whether pharmaceutical representatives are exempt or nonexempt under the FLSA. Within the last week, another court, analyzing the very same issue–whether reconsideration (of an order granting defendant summary judgment) in light of the Novartis ruling and the DOL’s amicus brief(s) was warranted–another court held that the decision was not due to be reconsidered and allowed its prior decision to stand. Schaefer-Larose v. Eli Lilly and Co., 2010 WL 3892464, at *1 (S.D. Ind. Sept. 29, 2010).