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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.

To read the entire decision, click here.

M.D.Ala.: Wal-Mart Assistant Store Managers (ASMs) May Be Entitled To Overtime Pay; Wal-Mart’s Motion for Summary Judgment Denied

Davis v. Wal-Mart Stores, Inc.

This case was before the Court on Wal-Mart’s motion for summary judgment.  Wal-Mart asserted that the Plaintiffs, two (2) former Assistant Store Managers (“ASMs”) were exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”).  Citing issues of fact raised by the Plaintiffs, the Court denied Wal-Mart’s motion.

After noting that the court was due to accept the facts in the light most favorable to the Plaintiffs (as the non-moving party), the court recited the following facts pertinent to the motion:

“The facts of this case concern the job duties of the Plaintiffs. Plaintiff Nancy Davis was employed at the Wal-Mart in Opelika, Alabama as a salaried assistant manager from June of 2006 until September 2009. Davis states that during her employment she performed such tasks as stocking, acting as cashier, sweeping, mopping, cleaning, unloading trucks, bringing in shopping carts, and doing price checks. Plaintiff Shirley Toliver was employed with the Wal-Mart store in Opelika from August 2001 to May 20, 2009. She also states that she performed tasks such as stocking, running the cash register, sweeping, mopping, cleaning, loading trucks, pulling pallets, bringing in shopping carts and performing price checks. The Plaintiffs have testified in their depositions that these tasks comprised 80-90 % of their work duties. Wal-Mart has presented documentary and deposition evidence that Davis and Toliver also engaged in managerial tasks, including delegation of duties, interviewing and hiring applicants, coaching associates, evaluating associates, and terminating associates.”

The Court held that, on these facts, the Plaintiffs could not be said, as a matter of law, to fall under the FLSA’s executive exemption or administrative exemption.  After outlining the elements of the executive exemption, the Court reasoned:

“In a case relied upon by Davis and Toliver, the Eleventh Circuit has engaged in a lengthy analysis of the primary duty requirement in the context of store managers of Family Dollar Stores, a retail establishment. See Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir.2008).  In Morgan, the plaintiffs were store managers who spent 80 to 90 % of their time performing manual labor tasks such as stocking shelves, running cash registers, unloading trucks, and cleaning. Id. at 1270. They were also assigned tasks such as completing paper work and making bank deposits, but those tasks were strictly prescribed. In evaluating the claim that the executive exemption did not apply to these managers, the court emphasized that at the executive exemption to FLSA overtime pay is to be narrowly construed because the Supreme Court has directed that the exemption be applied only to plaintiffs who fall “clearly and unmistakably within the terms and spirit of the exemption.” Id. at 1269 (citation omitted). The court further noted that the inquiry is fact-intensive, and if there is evidence “on both sides of the question,” the facts should be determined by a jury. Id. The factor of time spent on manual, nonexempt work, however, did not establish that the plaintiffs were nonexempt. Id. Instead, the court found that the jury’s determination that the managers were nonexempt was supported not just by the amount of time spent performing nonexempt work, but also by evidence that non-managerial tasks were of “equal or greater importance to the store’s functioning and success.” Id. The court found significant that the employer described manual labor performed on delivery day as an “essential function” of the position. Id. The court also concluded that the evidence of little time spent in discretionary matters, little freedom from direct supervision, and the difference between managerial and other wages supported the jury’s finding of non-exempt work as the primary duty. Id. at 1270-71. As Wal-Mart points out, the court distinguished other courts’ opinions on the basis that in Morgan the manual labor was not performed concurrently with managerial duties. Id. at 1272-73.

Davis and Toliver contend that here, as in Morgan, all four of the primary duty factors weigh in their favor in this case. With respect to managerial duties, Davis and Toliver contend that they spent the vast majority of their time performing non-managerial tasks, and that the managerial tasks they performed were relatively less important than their non-managerial duties. The court begins with the factor of the amount of time spent performing management duties.

1. Time Spent Performing Management Duties

Davis and Toliver have testified that 80-90 % of their time was spent performing nonmanagerial tasks. Davis Dep. at page 125: 19-126: 4. Davis stated that she would run the cash register for 15 or 20 minutes at a time all day long, three out of five days a week, on day and night shifts, and that she found herself doing sweeping and cleaning, particularly on the third shift. Id. at page 128: 18-129:16. Toliver testified that she performed the same tasks testified to by Davis, adding that sometimes she would be a cashier for three hours at a time. Toliver Dep. at pages 95: 16-96: 4, 17-11-19.

While Wal-Mart characterizes this testimony as self-serving, the court must accept the Plaintiffs’ testimony that they performed the sort of tasks described 80-90 % of the time. Those tasks testified to are not considered managerial duties.

Managerial duties are defined by the C.F.R. to include interviewing, selecting and training employees, directing the work of employees, maintaining sales records, appraising employees’ productivity and efficiency, handling employee complaints and grievances, disciplining employees, planning work, determining techniques to be used, apportioning work, determining merchandise to be bought and sold, controlling distribution of merchandise, providing for safety and security of employees or property, planning and controlling the budget, and implementing and monitoring legal compliance measures. 29 C.F.R. § 541.102. Clearly the tasks which Davis and Toliver have identified as comprising 80-90 % of their working time do not fall within these examples of managerial tasks. The C.F.R. also states, however, that

Occasional, infrequently recurring tasks that cannot practicably be performed by nonexempt employees, but are the means for an exempt employee to properly carry out exempt functions and responsibilities, are considered exempt work. The following factors should be considered in determining whether such work is exempt work: Whether the same work is performed by any of the exempt employee’s subordinates; practicability of delegating the work to a nonexempt employee; whether the exempt employee performs the task frequently or occasionally; and existence of an industry practice for the exempt employee to perform the task.  29 C.F.R. § 541.707.

The Plaintiffs argue that the extent to which they performed nonmanagerial tasks meant that the tasks cannot be considered to be exempt work. Davis and Toliver state that their time spent doing the managerial duties of performance evaluation was minimal, averaging 10 to 15 minutes. Toliver Dep. at page 98: 8-16. Davis described her duties as running the register, pulling pallets, unloading trucks, working freight by pulling it off a truck and putting it on the shelf, zoning by fronting merchandise, and cleaning. Davis Dep. at 156: 3-10. Given the testimony of the extent of their nonmanagerial duties, the court concludes that a reasonable jury could conclude that the tasks which, according to the Plaintiffs’ testimony, comprised 80-90 % of their work, were more than occasional, infrequently recurring tasks and, therefore, were nonexempt tasks.

Wal-Mart argues that the Plaintiffs’ choice to perform nonexempt tasks, rather than to delegate those tasks, because they were ultimately responsible for those tasks, does not make them nonexempt. Wal-Mart points to the C.F.R. and argues that concurrent performance of exempt and nonexempt work does not disqualify an employee from the executive exemption. See 29 C.F.R. § 106(a). That C.F.R. section states, however, that if exempt and nonexempt work occurs concurrently, the exemption can still apply, if the requirements for the exemption are otherwise met. Id. The C.F.R. offers as an example an assistant manager who supervises employees and serves customers at the same time, without losing the executive exemption. § 541.106(b). The C.F.R. draws a distinction between persons who make the decision of when to perform nonexempt duties and those directed to perform exempt work. § 541.106(a).

The Eleventh Circuit relied on such a distinction in Morgan. The court distinguished cases from other courts which had given less weight to plaintiffs’ estimates of time performed on nonexempt tasks because those plaintiffs concurrently performed exempt tasks. Morgan, 551 F.3d at 1272. The court explained that the amount of manual labor performed by the managers in Morgan overwhelmed their capacity to perform managerial duties concurrently during store hours. Morgan, 551 F.3d at 1272. The court further explained that management duties could not be performed concurrently because, for example, “a store manager unloading a truck and stocking the storeroom was not concurrently supervising the cashier out front.” Id. at 1273. The court noted that many of the tasks were performed before and after the store closed.   Id. at 1272. The court concluded that the jury “may well have given more weight to the Plaintiffs’ evidence that they spent 80 to 90 % of their time solely on nonexempt work.” Id.

Davis stated in her deposition that she would receive managerial notes from the store manager which would tell her tasks that needed to be accomplished during a shift. Id. at page 126:15-127:14. She explained that “[w]e were told what to do, either find somebody to do it or do it yourself.” Id. at page 126: 15-16. Davis explained that she was assigned duties by the store manager or co-manager in the shift notes that told her what they wanted done. Id. at 150:8-22. If there were minimal associates working, she had to perform the manual labor tasks herself. Id. at page 150: 17-151:17. Davis gave as an example that if two or three trucks came in carrying freight during the third shift, she would have to go to that department. Id. at 151:10-17. She further explained that she would get in trouble for not getting the tasks done. Id. at 151:21-22. Davis testified that she performed sweeping, mopping, and cleaning duties “mostly on third shift” because there were not “enough associates to get everything done that needed to be done.” Id. at 129: 8-16. She also stated that she has been told to scrape dirt from under shelves with a scraper on third shift. Id. at 156:18-157. Davis also testified that she would stay on past the end of her shift on some occasions so that she averaged 54 to 65 hours per week. Id. at page 110: 13-19.

According to the Plaintiffs’ evidence, they were not responsible for the scheduling of associates. The scheduling of employees was conducted by co-Manager Ken King. King explained in his deposition that he set the schedules based on a budget he was provided by corporate headquarters, which came down through the regional and district manager. King Dep. at page 12. Although King also stated that assistant managers also set schedules, in her deposition, Toliver disputed that she made schedules, and stated that the co-manager made the schedules. Toliver Dep. at page 20: 8-12, 21-3.

While Wal-Mart has contended that the Plaintiffs chose to perform nonmanagerial tasks instead of delegating those tasks, viewing the evidence in a light most favorable to the non-movants, the Plaintiffs were directed to perform tasks even in the face of inadequate staffing levels. Furthermore, the nonexempt tasks performed by Davis and Toliver in this case were similar to those in Morgan, such as unloading of freight, which would not allow for the supervision of associates in other sections of the store. The court concludes, therefore, that Wal-Mart has not conclusively shown that the nonexempt tasks were performed concurrently with exempt tasks, for purposes of its affirmative defense. Here, as in Morgan, the court concludes that there is sufficient evidence to support the Plaintiffs’ estimate that 80 % to 90 % of their work was nonexempt work.

The C.F.R. states that the amount of time spent on managerial tasks “can be a useful guide in determining whether exempt work is the primary duty of an employee,” but it is not the sole test. § 541.700(b). A person who spends more than 50 percent of her time performing exempt work generally will satisfy the primary duty requirement, but “employees who do not spend more than 50 percent of their time performing exempt duties may nonetheless meet the primary duty requirement if the other factors support such a conclusion.” Id.

Given the Plaintiffs’ evidence, the factor of the amount of time spent on nonexempt tasks, while not dispositive, weighs against a finding of exempt work as the primary duty in this case. See Morgan, 551 F.3d at 1270.

2. Relative Importance of Managerial Duties

The next primary duty factor to be examined is the relative importance of managerial duties as compared to other duties. 29 C.F .R. § 541.700(a).

Wal-Mart has submitted multiple records evidencing managerial tasks, such as coaching for improvement of hourly associates, performance evaluations, and job offers. Wal-Mart states that Davis and Toliver managed recognized departments during the day shift, and were “in charge” of the store on night shifts. Wal-Mart further states that these duties were important, as they were evaluated in the Plaintiffs’ performance evaluations.

Davis and Toliver do not dispute that they coached associate employees, evaluated performance of associates, checked the status of inventory, and monitored store conditions. See Doc. # 20 at page 15. As noted above, however, they state their time spent doing managerial duties, for example, employee evaluation, was minimal, consisting of 10 to 15 minutes, and that these duties were secondary to their primary duties of waiting on customers, stocking shelves, cleaning, merchandising, unloading delivery trucks, and bringing in shopping carts. As further evidence of the relative importance of the nonmanagerial tasks, the Plaintiffs point out that in the job description’s listing of physical activities necessary to perform essential job functions an assistant manager is required to move, lift, carry, and place merchandise and supplies weighing up to 25 pounds without assistance, and to grasp, turn, and manipulate objects of varying size and weight, requiring fine motor skills and hand-eye coordination. As described extensively above, there is evidence that Davis and Toliver were required to perform manual tasks also performed by associates, and that the budget-based schedule, which left the store understaffed at times, required them to perform manual labor tasks.

In Morgan, the court concluded that nonmanagerial duties were more important because the essential job functions as listed by the employer required that the managers do the same work as stock clerks and cashiers, and that a large amount of manual labor by managers was a key to the business model, given the limited payroll and large amount of labor that had to be performed. Morgan, 551 F.2d at 1270.

Viewing the evidence presented in a light most favorable to the nonmovant, the court concludes that here, as in Morgan, there is enough evidence for a jury to find not only that nonmanagerial tasks consumed 80-90 % of Davis and Toliver’s time, but also that the nonmanagerial work was relatively more important than managerial work.

3. Relative freedom from Direct Supervision

As to the analytical factor of relative freedom from direct supervision, Davis and Toliver argue that not only were they governed by policies put in place by Wal-Mart at its corporate headquarters, but also policies created, implemented, and enforced by the store manager or co-manager who were present in the store daily. For instance, Toliver states in her deposition that there was a time during which assistant managers set the schedules, but during the relevant time period, the co-manager set schedules. Toliver Dep. at page 20: 4-12. She also explained that she thought it should be within her discretion to decide whom to interview for an position which was open, but that she was told whom to choose at times. Id. at page 78: 3-12. She testified that the rate of starting pay was dictated by policy and that she was not allowed to give raises. Id. at 107:10-23.

Davis testified that when the store manager and co-manager were present in the store, they were supervising the assistant supervisors and were supervising the hourly associates. Davis Dep. at page 148: 9-17. With respect to the placement of merchandise, Davis testified that the home office, store manager, or co-manager directed where to place merchandise, and that placement was dictated by planograms. Id. at page 152:12-153:4. Even on the third shift, when Wal-Mart insists the Plaintiffs were “in charge” of the store, as set out above, upper management gave instructions of what was to be done, down to tasks such as scraping dirt from beneath shelves.

In Morgan, the Eleventh Circuit found that the factor of freedom from supervision weighed in favor of a finding of the primary duty being nonexempt work, because managers above the level of the store managers were responsible for enforcing detailed store operating policies, closely reviewed inventory, closely monitored the payroll, controlled employee hourly rates and pay raises, routinely sent to-do lists and emails with instructions to the managers, closely supervised displays, and closely supervised store operations.   Morgan, 551 F.3d at 1271. When viewed in a light most favorable to the non-movants, many of the same considerations present in Morgan, such as instructions from upper management as to tasks to perform, and pay rates and budget-controlled staffing by upper management, are present in this case as well. Therefore, the court concludes that this factor also weighs in Davis and Toliver’s favor.

4. Relative wages

As to the fourth primary duty factor, the relationship between employee’s salary and wages paid to other employees for the kind of nonexempt work performed by the employee, although Davis and Toliver have argued, correctly, that the court should account for the extra hours they worked in comparing salaries and wages, the court has not been pointed to evidence of the amount of hourly wages paid for the same nonexempt work duties. Therefore, the court cannot conclude that this factor weighs in favor of the Plaintiffs in this case.

Considering together the evidence of the relative importance of the management duties as compared with other types of duties, the amount of time spent performing management duties, the employee’s relative freedom from direct supervision, and the lack of evidence of relative wages, along with the fact that there is evidence that the Plaintiffs performed several types of managerial duties, it appears to the court there is a close question as to whether Davis and Toliver had primarily nonexempt duties. While the Morgan case is helpful in applying the analytical factors and considerations set forth in the C.F.R., the Morgan decision is also distinguishable to the extent that the evidence of managerial responsibilities of the plaintiffs in that case was somewhat limited. Bearing in mind that Wal-Mart has the burden of proof on its affirmative defense, and viewing the evidence in a light most favorable to the non-movants, however, the court concludes that there is sufficient evidence to create a question of fact as to whether the Plaintiffs’ primary duties were managerial. Having concluded that there are questions of fact which preclude judgment in Wal-Mart’s favor on the exemption requirement of primary duty, the court need not address the remaining requirements for application of the executive exemption.”

The Court then went on to hold that Plaintiffs may not be administratrively exempt either.  While, this case was limited to the facts of the two (2) ASM Plaintiffs here, this will be an interesting one to watch.

Cliok here Davis v. Wal-Mart Stores, Inc. to read the entire opinion.

3d Cir.: Flat-rate Payment Scheme Constituted Commissions; Nutrisystem Sales Associates 7(i) Exempt

Parker v. Nutrisystem, Inc.

This case was before the Third Circuit on Plaintiffs appeal of summary judgment in favor of Defendant.  Plaintiffs were sales associates, employed in Defendant’s call center, who completed sales orders on behalf of Defendant.  It was undisputed that Defendant’s business was “retail” in nature.  Thus, the only issue before the court was whether the District Court correctly concluded that NutriSystem’s method of compensating its call-center employees constituted a commission under the FLSA so that Nutrisystem was exempt from paying Appellants overtime.  The court concluded that the compensation constituted a commission and affirmed the ruling below.

Describing the pay methodology at issue, the Court said:

“In March 2005, NutriSystem implemented the compensation scheme for sales associates at issue in this case. Under the plan, sales associates receive the greater of either their hourly pay or their flat-rate payments per sale for each pay period. The hourly rate is $10 per hour for the first forty hours per week, and $15 per hour for overtime. The flat rates per sale are $18 for each 28-day program sold via an incoming call during daytime hours, $25 for each 28-day program sold on an incoming call during evening or weekend hours, and $40 for each 28-day program sold on an outbound call or during the overnight shift. These flat rates do not vary based on the cost of the meal plan to the consumer.

The majority of the sales associates are compensated based on these flat rates, not their hourly earnings. Under the compensation plan, sales associates do not receive overtime compensation when they are paid the flat rates for the sales made. There is no change to the flat rates when a sales associate works more than forty hours in one week.”

In affirming the decision that this pay constituted commissions under the FLSA, for the purposes of the 7(i) exemption, the Court reviewed  the legislative history of the applicable regulations, the limited case law and the DOL’s opinions and reference materials.

Dissenting, Judge Cowen took issue with the majority’s holding that commissions were proportional to the sales prices of the good sold here.  First, Judge Cowen noted:

“Unlike the majority, I would afford Skidmore deference to the Department’s view that in order to constitute a commission for purposes of § 7(I), the amount of compensation paid to the employee must be proportionally related to the amount charged to the customer. Because NutriSystem failed to demonstrate the requisite proportionality, its compensation plan cannot be considered a bona fide commission plan under § 7(I).”

Applying this definition to commissions, Judge Cowen reasoned that here, because the flat rates were not proportional to the products sold, the flat rates did not constitute commissions:

“The majority then concludes that NutriSystem’s compensation plan meets this definition because the payments made to its sales associates are “sufficiently proportional” to the cost to the consumer. Id . While I do not object to the majority’s contention that § 7(I) requires a proportional relationship between employee compensation and customer costs, I cannot agree that NutriSystem has demonstrated such a proportional relationship here.

It is undisputed that NutriSystem’s meal plans vary in price depending on the type of meal plan the customer chooses and the length of the customer’s commitment. It is likewise undisputed that the flat-rate fee paid to a sales associate does not vary depending on the type of plan the customer chooses or the length of the customer’s commitment. NutriSystem clearly has not demonstrated that the flat-rate fees are proportionally related to the cost to the customer. While neither the plaintiffs nor the Department suggests that a commission must be based on a strict percentage of the end cost to the consumer, the flat-rate payments in this case do not correspond at all with the end cost to the consumer. Rather, the flat-rate payments are based on the time the sale is made and whether it results from an incoming or outgoing call. The fact that NutriSystem can perform math to portray its flat-rate fees as percentages of customer costs does not transform the fees into commissions.

Therefore I am unable to agree with the majority and would reverse and remand for further proceedings.”

To read the entire decision and dissent click here.

11th Cir.: Despite Variable Premium/Bonuses That Fluctuated With Quantity/Quality of Work Performed, Bookkeeper/Accountants Were Paid on “Salary Basis”

Bell v. Callaway Partners, LLC

Plaintiffs were  bookkeepers/accountants classified by Defendant as exempt from the Fair Labor Standards Act’s (FLSA) overtime pay requirement.  This appeal concerned solely the issue of whether Plaintiff- who was paid a combination of a guaranteed weekly salary plus a variable bonus (at a straight-time rate rather than time and a half)- was paid on a “salary basis” for the purposes of satisfying the so-called “white collar” exemptions of the FLSA.  The Court ruled that she was and affirmed the ruling of the lower court, holding that variations in bonus or extra pay do not affect the underlying analysis of whether the first 40 hours are paid at on a “salary basis.”

Describing the pay structure at issue, the Court stated:

“Plaintiffs’ pay consisted of two distinct components. First, Plaintiffs received a guaranteed weekly salary of $1600 or more that did not depend on the quality or quantity of the work performed. This weekly salary was reduced by one-fifth of the weekly salary for every full day a Plaintiff took off from work for personal reasons during the normal workweek without substituting Paid Time Off (“PTO”). But, a Plaintiff could work fewer than eight hours during any given workday without any reduction in his or her weekly salary. Second, Plaintiffs were eligible to receive additional incentive compensation (a “bonus”) paid at a straight-time hourly rate based on the cumulative number of billable hours that Plaintiffs worked. Any bonus to be awarded was determined based on how many additional hours over forty a Plaintiff worked in a given week minus any “deficit” hours a Plaintiff had accumulated in past weeks. For example, if a Plaintiff worked seven and not eight hours on each regularly-scheduled workday in a given week, thus totaling 35 hours of work, he or she still earned the full predetermined weekly salary, but would not earn a bonus in a subsequent week until he or she made up the bonus-hour deficit of five hours and then worked more than 40 hours in a given week.”

Holding that this compensation methodology complied with the “salary basis” test, the Court reasoned:

“An employee is considered “paid on a salary basis” if “he regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C .F.R. § 541.602. Plaintiffs argue that they were not paid on a salary basis because the amount of their bonuses fluctuated based on the cumulative number of hours worked. But, as we have previously determined, “as long as there is a non-deductible minimum, additional compensation on top of the non-deductible salary is permissible.” Hogan v. Allstate Ins. Co., 361 F.3d 621, 625 (11th Cir.2004) (citation omitted). And, while additional compensation is permissible, the regulations do not require additional compensation, nor do they prescribe a set method for setting up a bonus system. 29 C.F.R. § 541.604(a) (“An employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis…. Such additional compensation may be paid on any basis ….”).

After a review of the record, we agree with the district court’s well-reasoned analysis concluding that Callaway’s bonus system conformed to the requirements of the salary basis test. (R.374 at 13-24.) While Callaway’s incentive program may have been designed in a way that encouraged overtime work, as Plaintiffs argue it was, because it deducted for “deficit” hours, it nevertheless conformed to the requirements of the FLSA. Because there was a non-deductible minimum weekly salary, Callaway was free to structure any bonus program as it saw fit.

Plaintiffs also argue that Callaway violated the salary basis test when it deducted a full day’s pay for personal days missed during the workweek (Monday through Friday) but did not pay Plaintiffs for a “full day” for partial days worked on Saturday or Sunday. Again, we agree with the district court’s analysis concluding that such deductions were allowable under the provisions of 29 C.F.R. § 541.602(b)(1). (R.374 at 25-34.) Therefore, we hold that the district court did not err in finding Callaway’s pay policies to be in compliance with the FLSA.”

D.S.C.: South Carolina Is Sovereign Immune From FLSA Suits Seeking Money Damages

Morris v. South Carolina Dept. of Corrections

In this case Plaintiff, an employee of the South Carolina Department of Corrections (“SCDC”), sought compensation for overtime work under Section 16(b) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b).  The Defendant moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6), claiming it was sovereign immune from such claims.  The Court agreed and granted Defendant’s motion to dismiss stating:

“SCDC argues that Plaintiff’s claim is barred because the state is immune from claims for money damages brought under Section 16(b). In making these arguments, SCDC relies on Alden v. Maine, which held that states are immune from private suits filed in state courts for damages brought under Section 16(b) of the FLSA. Based on Alden and its progeny, Defendant argues that state agencies are immune from private suits for money damages under the FLSA whether that suit is brought in state or federal court. See Alden v. Me., 527 U.S. 706, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999); see also Dkt. No. 15 at 4. Plaintiff disagrees, arguing that Alden applies only to FLSA suits brought in state court. Dkt. No. 16 at 2.

State Sovereign Immunity. The doctrine of state sovereign immunity bars suits in federal court for money damages against an “unconsenting State.” Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); see also Alden, 527 U.S. at 713 (noting that, while “Eleventh Amendment immunity” is often used as convenient shorthand for state sovereign immunity, the latter is “a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today … except as altered by the plan of the Convention or certain constitutional Amendments.”). This immunity extends to “arm[s] of the State,” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 50 L.Ed.2d 471 (1974), including state agencies and state officers acting in their official capacity.   Gray v. Laws, 51 F.3d 426, 430 (4th Cir.1995). This doctrine does not, however, preclude private suits against state officials (but not the state or state agency itself) for prospective or declaratory relief designed to remedy ongoing violations of federal law. Ex parte Young, 209 U.S. 123, 157, 28 S.Ct. 441, 52 L.Ed. 714 (1908); see also Virginia v. Reinhard, 568 F.3d 110 (4th Cir.2009).

Congress may abrogate state sovereign immunity, but “only by stating unequivocally its desire to do so and only pursuant to a valid exercise of constitutional authority.” Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474, 484 (4th Cir.2005) (citing Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 55, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996)).  Section 5 of the Fourteenth Amendment to the United States Constitution, the Amendment’s enforcement provision, provides one (and possibly the only) basis on which Congress may, under specific circumstances, abrogate state sovereign immunity. Nev. Dep’t of Human Res. v. Hibbs, 538 U.S. 721, 727, 123 S.Ct. 1972, 155 L.Ed.2d 953 (2003) (noting that, while Congress may abrogate the States’ sovereign immunity under Section 5 of the Fourteenth Amendment, it may not do so “pursuant to its Article I power over commerce”) (citing Fitzpatrick v. Bitzer, 427 U.S. 445, 456, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976)); see also Seminole Tribe, 517 U.S. at 73 (“Article I cannot be used to circumvent the constitutional limitations placed upon federal jurisdiction”).

Applied to Section 16(b) of the FLSA. In Alden, the Supreme Court held that states are immune from private suits for damages brought under Section 16(b) of the FLSA in state court. The Court’s reasoning was based, in part, on the principle that Congress cannot extend state court jurisdiction beyond where it may extend federal court jurisdiction. See 527 U.S. at 754 (“We are aware of no constitutional precept that would admit of a congressional power to require state courts to entertain federal suits which are not within the judicial power of the United States and could not be heard in federal courts.”). Put differently, as applied to Section 16(b) of the FLSA, it is precisely because Congress lacks the authority to subject states to suit in federal court that it also lacks the authority to subject states to suit in their own courts. Thus, the Alden rationale fully supports Defendant’s position.

Prior to Alden, the Fourth Circuit ruled that state sovereign immunity bars Section 16(b) claims for damages brought by state employees in federal court. See Abril v. Va., 145 F.3d 182, 186-89 (4th Cir.1998) (concluding that Section 16(b) was not a valid abrogation of state sovereign immunity under Congress’s Section 5 enforcement powers). No subsequent rulings appear to alter this rule, which is consistent with the rationale in Alden. As explained in Rodriguez v. Puerto Rico Federal Affairs Administration, a post-Alden decision addressing a Section 16(b) claim for damages, Seminole Tribe and Alden operate in tandem to protect states from liability for money damages under the FLSA. Rodriguez v. P.R. Fed. Affairs Admin., 435 F.3d 378, 380 (D.C.Cir.2006) (“Taken together, Seminole Tribe and Alden mean that state employees no longer have any ‘court of competent jurisdiction,’ 29 U.S.C. § 216(b), in which to sue their employers for FLSA violations.”). While not binding, the court finds the Rodriguez court’s reasoning persuasive.”

Thus, the Court concluded that, “SCDC is immune from suits for money damages brought pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b).”  Accordingly, Plaintiff’s case was dismissed.

To read the Court’s entire decision, click here.

E.D.Ky.: “Self-Critical Analysis” Privilege Does Not Shield Employer From Disclosure Of Documents Relating To FLSA Classification; Such Discovery Is Relevant To Issues Of “Good Faith” And Willfulness

Cochran v. National Processing Co.

This matter was before the Court on the Motions to Quash filed by the Defendants.  Defendants sought to quash a subpoena issued by the Court and served on one of the Defendants (Hanna), seeking documents relating to the FLSA classification of the Plaintiffs, who were employees of Defendant, National, assigned to work for Defendant, Hanna.  Defendants argued that the documents requested in the subpoena are protected under the self-critical analysis privilege and that they are beyond the scope of discovery.

The underlying action was pending in the United States District Court for the Southern District of Texas.  National was the Defendant in the Texas action. The Plaintiffs in that action are current and former National employees. They asserted a claim against National under the Fair Labor Standards Act, alleging that National had improperly classified them as “exempt” employees under the Act and has, thus, improperly failed to pay them overtime.  Hanna, which is located in Lexington, Kentucky, was not a party to the Texas action. However, the subpoena required Hanna to produce certain documents relating to work performed by Hanna for National regarding National’s policies and procedures for paying overtime.

Discussing the lack of “self critical analysis” privilege, the Court stated:

“National argues that the documents sought by the Plaintiffs are protected by the ‘self-critical analysis privilege.’

As an initial matter, it is not clear that the privilege exists. As support for its argument that the Sixth Circuit has adopted the self-critical analysis privilege, the Plaintiffs cite ASARCO, Inc. v. N.L.R.B., 805 F.2d 194 (6th Cir.1986). In that case, the Sixth Circuit determined that the employer should not have to disclose self-critical reports prepared after serious accidents in order to improve safety and prevent similar mishaps. Id. at 199. The court determined that “[t]he practice of uninhibited self-critical analysis, which benefits both the union’s and employer’s substantial interest in increased worker safety and accident prevention, would undoubtedly be chilled by disclosure.” Id. at 200.

However, that case involved a company’s duty to turn over certain information in collective bargaining efforts with the employee’s union. The Sixth Circuit specifically noted that items subject to discovery in litigation may not be subject to disclosure “in the collective bargaining context” and that any duty to disclose in that context must be evaluated in light of the rights and obligations created by the National Labor Relations Act. Id. at 199.

Even after ASARCO, district courts have found that the Sixth Circuit has never explicitly adopted the self-critical analysis privilege. See United States v. Allison Engine Company, Inc., 196 F.R.D. 310, 313-14 (S.D.Ohio 2000); Hickman v. Whirlpool Corp., 186 F.R.D. 362, 363 (N.D.Ohio 1999).

One district court has summarized the status of the privilege as follows:

Furthermore, “no circuit court of appeals has explicitly recognized the self-critical analysis privilege.” Johnson v. United Parcel Serv., Inc., 206 F.R.D. 686, 689-90 (M.D.Fla.2002). Most important, the validity of the self-critical analysis privilege is highly doubtful in light of the Supreme Court’s decision University of Pennsylvania v. EEOC, 493 U.S. 182, 110 S .Ct. 577, 107 L.Ed.2d 571 (1990), which declined to recognize a common law privilege against disclosure of confidential peer review materials.Granberry v. Jet Blue Airways, 228 F.R.D. 647, 650 (N.D.Cal.2005).

In Allison Engine, the court considered a claim of self-critical analysis privilege regarding internal audits of quality control for products supplied to the United States Navy. It applied a four-part test from Bredice v. Doctors Hosp., Inc., 50 F.R.D. 249 (D.D.C.1970):

(1) the information must result from self-critical analysis undertaken by the party seeking protection; (2) the public must have a strong interest in preserving the free flow of the type of information sought; (3) the information must be of the type whose flow would be curtailed if discovery were allowed; and (4) no documents should be accorded the privilege unless it was prepared with the expectation that it would be kept confidential.

Allison Engine, 196 F.R.D. at 312.

The court rejected the privilege in that case, noting that the privilege had rarely been applied and that its very rationale had been called into doubt.   Id. at 313.See also Wade v. Washington Metropolitan Area Transit Authority, 2006 WL 890679 at * 5 (D.D.C.2006)(the privilege is “rarely recognized.”)

Even if the Sixth Circuit has or would adopt the privilege, National would not meet all four elements of the test set forth above. National argues that the documents requested from Hanna relate to an evaluation that National hired Hanna to perform of National’s classification of employees as exempt or non-exempt under the FLSA. However, clearly not all the information contained in documents relating to the evaluation are necessarily protected by the privilege:

The privilege is not absolute. It applies only to analysis or evaluation, not the facts on which evaluation is based. See In re: Crazy Eddie Securities Litigation, 792 F.Supp. 197, 205 (E.D.N .Y.1992). Courts have protected analytical or evaluative information but allowed discovery of factual information. See Troupin, 169 F.R.D. at 550. Under the privilege, parties are not required to reveal self-critical analyses, but must produce data or statistical information. See Roberts v. National Detroit Corp., 87 F.R.D. 30, 32 (E.D.Mich.1980). Information, documents or records otherwise available from other sources are not immune from discovery. See Shipes, 154 F.R.D. at 307 (citing Hollowell v. Jove, 247 Ga. 678, 279 S.E.2d 430, 434 (1981)). Additionally, this is a qualified privilege and it can be overcome by showing extraordinary circumstances or special need. See Reichhold Chem. Inc., 157 F.R.D. at 527. The privilege must be balanced against the opposing party’s need for discovery. See In re: Crazy Eddie Securities Litigation, 792 F.Supp. at 205Allison Engine, 196 F.R.D. at 315.

The subpoena requests “all documents relating or pertaining to any review(s), audit(s), consulting or human resources management-related work performed by you for [National] regarding its policies or procedures concerning payment of overtime and/or classification of employees for overtime purposes,” and “all communications between you and anyone with [National] related to its policies or procedures concerning payment of overtime and/or classification of employees for overtime purposes.”

National has produced no evidence at all regarding the kinds of information contained in the documents requested, i.e., whether the information is “analysis” or “evaluation” or whether the information is “factual.” Thus, the Court has no basis for finding any of the documents are privileged.

Further, the privilege is most often applied in cases involving public health or safety. First Eastern Corp. v. Mainwaring, 21 F.3d 465, 467 n. 1 (C.A.D.C.1994). In fact the privilege was “initially developed to promote public safety by encouraging businesses to voluntarily evaluate their safety procedures. Morgan v. Union Pacific R. Co., 182 F.R.D. 261, 265 (N.D.Ill.1998)(citing Bredice v. Doctors Hosp. Inc., 50 F.R.D. 249, 251 (D.D.C.1970)). “Because production of such documents ‘would tend to hamper honest, candid self-evaluation geared toward the prevention of future accidents,’ the doctrine evolved in order ‘to prevent a ‘chilling’ effect on self-analysis and self-evaluation prepared for the purpose of protecting the public by instituting practices assuring safer operations.’ “ Id. (citing Granger v. National R.R. Passenger Corp., 116 F.R.D. 507, 508-509 (E.D.Pa.1987)).

While the privilege has been applied in other settings, the “essence of the privilege is the value to the public of continuing the free flow of the type of information created by the analysis. Consequently, the inquiry focuses on the public policy requirement, that is, whether disclosure of material generated by a party’s self-critical analysis will discourage or curtail future such studies.” Drayton v. Pilgrim’s Pride Corp., 2005 WL 2094903 at *2 (E.D.Pa.2005).

The assessment at issue in this case involved National’s classification of employees as exempt or non-exempt under the FLSA. National argues that it hired Hanna to develop and implement a compensation structure for the company including an evaluation of National’s classification of employees as exempt or non-exempt under the FLSA. Disclosure of that assessment will not inhibit National from conducting further such assessments. In order to pay its employees, it obviously must continue to classify them as exempt or non-exempt. Thus, to the extent that the Hanna report contained any “evaluation” or “analysis,” National must continue to engage in that analysis in order to pay its employees and avoid liability under the Act.

The privilege has been extended to employment cases to “protect business entities which are legally mandated to critically evaluate their hiring and personnel policies.” Morgan v. Union Pacific R. Co., 182 F.R.D. 261, 265 (N.D.Ill.1998). However, the rationale for the privilege in employment cases is different than it is for tort cases. While, “the justification for the privilege in tort cases is to promote public safety through voluntary and honest self analysis,” id., the privilege in employment cases is meant to “protect those businesses that are required to engage in critical self-evaluation from exposure to liability resulting from their mandatory investigations.” Id. To the extent that Hanna’s assessment contained any “evaluation” or “analysis,” National has pointed to no law requiring such an evaluation.

For all these reasons, the Court hold that the Hanna documents are not protected under the self-critical analysis privilege.

Next the Court addressed Defendants’ argument that the documents sought were not relevant.  Rejecting this argument, the Court explained, “National objects that the documents sought are not relevant to the Plaintiffs’ action and Hanna has joined in that objection. National argues that the Plaintiffs are IT Support Technicians in Texas but that the subpoena seeks information about every National employee and that it seeks information beyond the classification of those employees under the FLSA.

The Plaintiffs argue that the documents are relevant to the “good faith” defense to the imposition of liquidated damages under the Act and to the extended statutory limitations period for “willful violations” of the Act. National has asserted the good faith defense and has denied any willful violations or purposes of extending the limitations period. The Plaintiffs argue that the defense “delves into the mind of the employer” and, thus, communications with Hanna regarding interpretation and application of the FLSA are relevant.

The Court agrees with the Plaintiffs that National’s communications with Hanna regarding the FLSA classification of its employees for overtime purposes is relevant to National’s “good faith” and “willfulness.” The subpoena is confined to documents regarding “payment of overtime and/or classification of employees for overtime purposes.” Accordingly, the documents requested in the subpoena are discoverable.”

EDITOR’S NOTE:  Within days of the issuance of the Order in this case, a court within the Northern District of California held that there is no such thing as the “self-critical analysis” privilege.  See Lewis v. Well Fargo & Co., 2010 WL 890183 (N.D.Cal. March 12, 2010).

D.Md.: Training Time Outside Of Regular Work Hours Not Compensable, Because It Was Primarily For The Benefit Of The Employees Not The Employer

Carter v. Mayor & City Council of Baltimore City

Before the Court was Defendants’ Motion for Summary Judgment.  This was the second such Motion, because the Court had denied the prior application with leave to further establish the factual record.  Plaintiffs claimed that they were entitled to be paid for certain time spent training in Defendants’ CRT Apprentice program outside of their regular workweek.  The Court disagreed, granting Defendants’ Motion.  As discussed below, the Court reasoned that since the primary benefit of the training was to the Plaintiffs, such time spent training was not compensable under the FLSA or Portal-to-Portal Act.

Discussing the facts pertinent to its inquiry the Court explained:

“Plaintiffs are current or former apprentices in a Baltimore City Fire Department (BCFD) three-year Firefighter/Paramedic Apprenticeship Program. Plaintiffs allege that as part of their apprenticeship they were required to attend class and perform on-the-job practical training on an ambulance and in the hospital without compensation in violation of the FLSA.

It is undisputed that one of the duties of a Firefighter/Paramedic is to provide emergency medical care, including Advanced Life Support. In order to provide Advanced Life Support, Maryland state law requires licensure as a Cardiac Rescue Technician (CRT). Md.Code Regs. 30.01.01.20. State law designates the State Emergency Medical Services Board (EMS Board) to approve CRT courses, conduct examinations, and issue CRT licenses. Md.Code Ann., Educ. § 13-516(a)(2) [a portion of the facts is excluded here]…

The Fire Department required remedial training for apprentices when they failed the required national registry EMT test or any of the exams during the CRT-I course. In addition, if students failed the National Registry exam three times, the National Registry required the students to take a 48 hour review before it would allow them to re-take the exam.

The Maryland Institute for Emergency Medical Services Systems issued regulations governing the content of ALS education programs. Md.Code Regs. 30.04.02.01 et seq. In addition to classroom training, ALS students must also complete a supervised clinical experience, which includes the practice of skills within clinical education facilities, and a supervised field internship, which includes the practice of skills while functioning in a prehospital ALS environment. Id. 30.04.02.05. During the clinical and field training, the MIEMSS regulations require that the student is supervised by clinical and field preceptors. Id. 30.04.02.06. In the field portion of the training, the ratio of students to preceptors must be one to one. Id. 30.04.02.06(F)(2).

Upon entering the fire academy, the apprentices signed an Apprenticeship Agreement in which they agreed to the terms of the Apprenticeship Standards filed with the Maryland Apprenticeship and Training Council. The Standards include a requirement that apprentices will complete a minimum of 144 hours per year of related instruction and that these hours will not be considered as hours worked when given outside regular working hours. In addition to the CRT-I course, apprentices were required to undergo enhanced training, including courses in pump operations, aerial operations, hazmat tech, arson awareness/sprinkler, and rescue technician.

During the second portion of the apprentices’ training, they worked an eight day cycle, with 4 days on and 4 days off. Training to obtain their CRT licensure was sometimes scheduled on the apprentices’ days off. Apprentices were not compensated during the off-duty training times. Plaintiffs contend that they should have been compensated for this off-duty training time under the FLSA.”

Discussing the relevant law and concluding that Plaintiffs’ after-hours training was not compensable under the FLSA, the Court stated:

“Plaintiffs allege that the City violated this provision by refusing to pay them overtime for the hours spent in training outside their regular workweek.

Cases analyzing whether training mandated by employers or potential employers should be compensable as hours worked include cases in which the potential employer requires the completion of training before an individual may be hired and cases in which the individual is an apprentice or already an employee and required to complete training as part of the apprenticeship or as an agreed upon condition to hiring. The seminal cases relating to training and the FLSA are the companion cases, Walling v. Portland Terminal Co., 330 U.S. 148 (1947) and Walling v. Nashville, Chattanooga and St. Louis Ry., 330 U.S. 158 (1947). In Portland Terminal, the defendant railroad had required the completion of a course of practical training before individuals could be hired as prospective yard brakemen. 330 U.S. at 149. The course involved a progressive increase in the trainees’ ability to act as a brakeman beginning with observing routine activities through gradually conducting the actual work of a brakeman under close scrutiny. Id. The Supreme Court noted that the activities of the trainee did not displace any of the regular employees, who were required to supervise any actual work done by the trainees, and did not expedite the company business, but may at times have impeded it. Id. at 149-50. Once certified as competent, the individuals who completed the training comprised a pool of qualified workmen available to the railroad when needed. Id. at 150. The Supreme Court focused on whether the trainees were to be considered employees and thus protected by the FLSA. Id. The FLSA defines employ as “to suffer or permit to work.” Id. at 152; 29 U.S.C. § 203(g). Despite the broad definition, the Supreme Court held that it could not “be interpreted so as to make a person whose work serves only his own interest an employee of another person who gives him aid and instruction.” Portland Terminal, 330 U.S. at 152. The Court compared the training at issue to courses in railroading in a public or private vocational school, in which “it could not be reasonably suggested that [the students] were employees of the railroad merely because the school’s graduates would constitute a labor pool for the railroad.” Id. at 152-53. Thus, the Court held that when the railroads received no “immediate advantage” from the work done by the trainees, the trainees were not employees under the FLSA. Id. at 153.

In analyzing Portland Terminal, the Fourth Circuit has concluded that the general test used to determine if an employee is entitled to the protections of the Act is “whether the employee or the employer is the primary beneficiary of the trainees’ labor.” McLaughlin v. Ensley, 877 F.2d 1207, 1209 (4th Cir.1989). In McLaughlin, the defendant owned a snack foods distribution business in which he required new hires to spend five days travelling an ordinary route with an experienced routeman as training before they were hired. 877 F.2d at 1208. The trainees loaded and unloaded the delivery truck, restocked stores with the defendants products, were given instruction on how to drive the trucks, were introduced to retailers, were taught basic snack food vending maintenance, and occasionally helped in preparing orders of goods with financial exchanges. Id. The court found that, unlike in Portland Terminal, the prospective employees were simply helping to service a route, and the instruction they received did not rise to the level that one would receive in a general, vocational course in outside salesmanship. Id. at 1210. Instead, the court found that the trainees were taught only simple, specific job functions related to the defendant’s business. Id. For those reasons, the court concluded that the trainees were entitled to be considered covered employees under the FLSA. Id. Compare Reich v. Parker Fire Protection District, 992 F.2d 1023 (10th Cir.1993) (holding that firefighter trainees were not employees because they obtained training comparable to a vocational school and the defendant was not immediately benefited by the trainees’ activities as their training activities were supervised and they did not assume the duties of career firefighters; the benefit to the defendant from the plaintiffs’ supervised training activities was de minimis ).

Where trainees are already employees, the Courts look also to the Portal-to-Portal Act, which provides that an employer need not pay an employee for activities that are “preliminary or postliminary” to the principal activity or activities the employee is employed to perform. 29 U.S.C. § 254(a)(2). The Supreme Court has interpreted the mandate of the Portal-to-Portal Act to mean “that activities performed either before or after the regular work shift, on or off the production line, are compensable … if those activities are an integral and indispensable part of the principal activities for which covered workmen are employed.” Steiner v. Mitchell, 350 U.S. 247, 256 (1956).

The most oft-cited case applying the “preliminary or postliminary” test to training activities is Ballou v. General Electric Co. 433 F.2d 109 (1st Cir.1970). In Ballou, the First Circuit held that the classroom training required of the defendant’s apprentices taking place outside of working hours was neither integral nor indispensable to the apprentices’ principal activity, which was the work that took place during their regular 40 hour work-training week. Id. at 112. The court looked to Portland Terminal and found that if the defendant had not employed the appellants as workers, but provided only training programs that they were required to complete successfully before they could be employed as journeymen, the apprentices would be entitled to no compensation. Id. Thus, the court concluded that “the employer’s decision to hire its employees before the completion of training did not obligate it to compensate them for the time spent in their status as students after their hiring.” Bienkowski v. Northeastern Univ., 285 F.3d 138, 141 (1st Cir.2002) (citing Ballou, 433 F.2d at 112).Accord Chao v. Tradesman Int’l, Inc., 310 F.3d 904, 910 (6th Cir.2002) (“Therefore, we agree with the First Circuit that the defendant employer should not be made liable for overtime pay for time its employees spend as students, rather than as workers…. We do not see why the employer should be penalized for allowing a potential employee to begin earning income while striving to meet certain prerequisites for the job when the employer could just as easily withhold employment until successful completion of all the job requirements.”).

In Bienkowski, the First Circuit applied its analysis in Ballou to facts similar to the facts found here. 285 F.3d at 141. In Bienkowski, the defendant hired the plaintiffs as probationary police officers with a requirement that they receive and retain certification as Massachusetts-registered EMTs within one year of their appointment. Id. at 139. At the time of hire, the plaintiffs signed a letter acknowledging the requirement. Id. The training, as required pursuant to Massachusetts statutes, regulations, and Department of Public Health standards, required approximately 110 hours of classroom work, as well as 10 hours of in-hospital evaluation time, practical exams, and written exams. Id. Although the plaintiffs could have taken the EMT courses at various locations throughout Massachusetts, they chose to take the course at Northeastern, where they were entitled to tuition reimbursement. Id. For the most part, the course requirements took place outside of the plaintiffs’ working hours. Id. at 140. Prior to receiving their certification, the plaintiffs were prohibited from performing EMT work, but following their certification, they regularly used their skills on the job. Id. The Court held that it would not hold the defendant “liable for overtime pay for time its employees spend as students, rather than as workers, simply because [the defendant] decided to hire its employees on a probationary basis until they complete the training required to hold the job on a permanent basis.” Id. at 141.

Defendants have articulated and Plaintiffs have not disagreed that the classes and on-the-job training required of the apprentices can be broken down into four categories: 1) initial classroom training to obtain CRT licensure; 2) classroom enhanced training; 3) clinical training with an ambulance medic team and in the hospital to obtain CRT licensure; and 4) mandatory repeat classroom training to obtain CRT licensure when a student has failed any of the required exams. Under either the “primary beneficiary” test of McLaughlin or the “integral and indispensable part of the principal activities” test of Steiner, the hours spent in all four categories of training are not compensable as hours worked under the FLSA.

All of the classroom and practical training required to obtain the CRT license, the classroom enhanced training, and the repeat classroom training are no different than that found in Portland Terminal, Ballou, and Bienkowski. Plaintiffs are apprentices in an apprenticeship program approved by the Department of Labor and as part of that program were required to take the CRT Training, which required both classroom and clinical training. As the CRT license was required in order for Plaintiffs to conduct their duties as firefighters/paramedics, the City could have required the Plaintiffs to obtain the license before hiring them. In fact, similar training is provided at Baltimore City Community College and Community College of Baltimore County. Instead the city allowed Plaintiffs to obtain the license while they were concurrently employed by the city, and funded the training. Although the City ultimately benefitted from Plaintiffs obtaining the CRT license in that it then had a pool of employees certified to conduct ALS, Plaintiffs obtained a license fully transferrable to their employment with any other employer that required the ability to provide Advanced Life Support. Thus, as in Portland Terminal and unlike in McLaughlin, Plaintiffs were the primary beneficiaries of the training. Moreover, as Plaintiffs were not able to perform any of the ALS duties until they obtained their license, as in Bienkowski the training was not an integral and indispensable part of their paid work duties during the period of their training.

This Court’s holding is supported by Department of labor regulations interpreting the FLSA that exclude from the computation of “hours worked” the time spent in certain kinds of training.  One such regulation is found at 29 C.F.R. § 553.226(b).

(b) While time spent in attending training required by an employer is normally considered compensable hours of work, following are situations where time spent by employees of State and local governments in required training is considered to be noncompensable:

(1) Attendance outside of regular working hours at specialized or follow-up training, which is required by law for certification of public and private sector employees within a particular governmental jurisdiction (e.g., certification of public and private emergency rescue workers), does not constitute compensable hours of work for public employees within that jurisdiction and subordinate jurisdictions.

(2) Attendance outside of regular working hours at specialized or follow-up training, which is required for certification of employees of a governmental jurisdiction by law of a higher level of government (e.g., where a State or county law imposes a training obligation on city employees), does not constitute compensable hours of work.

(3) Time spent in the training described in paragraphs (b)(1) or (2) of this section is not compensable, even if all or part of the costs of the training is borne by the employer.

A 1999 Department of Labor Opinion letter applies this regulation to facts identical to those found here.

Q.1. As a condition of employment, firefighters for County A must have current EMT (emergency medical training) certification. Although this certification is granted through the state, the state does not require the fire fighters have the certification. However, since City A requires it, the training is not “voluntary.” Under these circumstances, must the EMT training that is required to maintain this certification be counted as hours worked if the training takes place during non-working hours?

A.1. No. While time spent in attending training required by an employer is normally considered compensable hours of work, attendance outside of regular working hours at specialized or follow-up training which is required by law for certification of employees of a governmental jurisdiction, does not constitute hours of work under the FLSA. See Section 553.226 of Regulations, 29 CFR Part 553.  Sept. 30, 1999, Dept. of Labor Op. Letter, 1999 WL 1788163.

In addition, the Department of Labor has issued a regulation as to apprenticeship training.

[T]ime spent in an organized program of related, supplemental instruction by employees working under bona fide apprenticeship programs may be excluded from working time if…. (b) such time does not involve productive work or the performance of the apprentice’s regular duties. If the above criteria are met the time spent in such related instruction shall not be counted as hours worked unless the written agreement specifically provides that it is hours worked. The mere payment or agreement to pay for time spent in related instruction does not constitute an agreement that it is hours worked.  29 C.F.R. § 785.32.

Plaintiffs do not contest that the initial CRT training and the enhanced training are not compensable under these regulations. They argue, however, that although the clinical training is a required component of the CRT-I course, it was compensable time because it was productive work and constituted performance of their regular duties. The undisputed evidence shows that a regular medic unit is staffed by two individuals, which could be two ALS providers or an ALS provider and a BLS provider. When Plaintiffs were assigned to a medic unit as part of their training, there was always an ALS provider and another BLS provider; the trainee would then be a third person on the team. Plaintiffs state in their opposition that “[i]n the experience of many Plaintiffs, under the guise of ‘training,’ only one person, the [ALS] preceptor-was paid. Therefore, a paid position on the medic unit was eliminated during the training, as the Defendants filled it with two unpaid apprentices.” Opp. at 8.

Contrary to Plaintiffs’ statements in their opposition, however, neither of the provided affidavits establishes that unpaid trainees replaced a paid BLS provider. Moreover, they have not established that any benefit the City may have received from the trainee’s presence is anything more than de minimis or that it outweighed the benefit to the trainee in completing a required component of the CRT training. One affiant testified that the other BLS provider was paid and drove the ambulance while he, as the trainee, sat in the back of the ambulance. Stoakley Aff. ¶ 4. Notably, the second affiant said nothing regarding whether the other BLS provider was paid and said nothing about whether he ever drove the ambulance while he was on a training run. Bonovich Aff. ¶ 4. Thus, Plaintiffs have provided no reason to believe that when they were conducting training runs they were not able to work with the ALS provider in a training capacity for the entire period.

Similarly, the time spent by the trainees in the hospital was also a required component of the CRT training. Plaintiffs’ affidavits confirm that all of the Plaintiffs’ activities in the hospital were supervised. They have not shown, however, that their activities were part of their regular duties or any more productive than the supervised work done by trainees in Portland Terminal. Thus, the clinical training does not constitute compensable hours worked under the FLSA and the Portal-to-Portal Act.

Plaintiffs also argue that the duplicative classroom training, required when Plaintiffs did not pass certain examinations required for the EMT-I certification, is compensable as hours worked because it was neither a part of the approved apprenticeship program nor a legal requirement. While the apprentice standards may have simply required the CRT-I course, it is logical to conclude that the apprentices were expected to successfully complete the course and obtain their CRT license. If an apprentice fails the course and must repeat it in order to satisfy the requirements to obtain the CRT license, it is hard to imagine how this is any different than the initial requirement to attend the course. Moreover, it seems perverse logic to say that the initial training is not compensable, but if an apprentice fails the training, it then becomes compensable. Finally, the Court sees no immediate benefit to the Defendants from Plaintiffs taking remedial courses since it delayed the time that Plaintiffs could conduct ALS duties. Thus, the Court sees no difference in the initial requirement to attend the CRT course and the requirement to take duplicative training when the student fails the required exams.”

Having determined that the training time at issue was not compensable, the Court granted Defendants’ Motion for Summary Judgment.

Companies Slash Payrolls By Calling Workers Independent Contractors; Costly To IRS And States, L.A. Times Reports

The LA Times reports that the “Internal Revenue Service and 37 states are cracking down on companies that try to trim payroll costs by illegally classifying workers as independent contractors, rather than as full employees, The Associated Press has learned. The practice costs governments billions in lost revenue and can leave workers high and dry when they are hurt at work or are left jobless.

Many who have studied the problem believe it’s worsened during the economic downturn, fueling even more aggressive recovery efforts by states.”

The article points out that “[t]ypically, unless workers fight for and win a ruling that they should have been treated as full employees, they aren’t able to collect workers’ compensation for the injury or unemployment benefits when left jobless.”

To read the full article click here.

To read more about the legal factors that determine whether someone is misclassified as an independent contractor vs employee, and industries where misclassification is rampant click here.

S.D.Fla.: Assistants At Medical Office Properly Allege Individual Coverage Under The FLSA, Based On Evidence Of Regular Communications With Out-Of-State Insurers, Patients And Vendors

Lopez v. Pereyra

Plaintiffs brought this action to recover unpaid overtime wages under the Fair Labor Standards Act (“FLSA”). Defendant was an obstetrics and gynecological doctor’s office located in Hollywood, Florida.  Plaintiff Carmen Lopez was a medical assistant in the Office from October 31, 2006 through January 23, 2009.  Plaintiff Dawn Serra was an administrative assistant in the Office from May 2, 2006 through May 1, 2009.  Plaintiffs alleged that the Office met the requirements of an enterprise under the FLSA and that each Plaintiff also qualified for individual coverage because they engaged in commerce.  Defendant moved for summary judgment arguing that the Office was not an enterprise as defined by the FLSA and Plaintiffs were not individually engaged in interstate commerce so as to trigger individual coverage.  The Court agreed that Defendant was not an enterprise engaged in commerce, based on its tax returns showing revenue of less than $500,000.00 per year.  However, the Court denied Defendant’s Motion as to individual coverage, holding that Plaintiffs’ allegations of regular communications with out-of-state insurers, out-of-state patients and out-of-state vendors, if true, satisfied the “engaged in commerce” test for individual coverage.

Discussing the applicability of individual coverage, the Court stated:

“For individual coverage to apply under FLSA, an employee must present evidence that he or she was (i) engaged in commerce or (ii) engaged in the production of goods for commerce. See Thome v. All Restoration Services, Inc., 448 F.3d 1264, 1265-1266 (11th Cir.2006).FN4 The Eleventh Circuit found that to “engage in commerce,” a plaintiff must “directly participat[e] in the actual movement of persons or things in interstate commerce.” Thome, 448 F.3d at 1266. When determining individual coverage, the character of the employee’s activities is determinative, not the nature of the employer’s business. Overstreet v. N. Shore Corp., 318 U.S. 494, 498 (1943).

FN4. The Department of Labor takes the position that the “[s]hipment of goods from another State direct to a customer located in the same State as the distributor who ordered the shipment, constitutes interstate commerce by virtue of which [ ] the distributor’s employees who procured the shipment … are covered by the FLSA as being engaged in interstate commerce.” Field Operations Handbook (FOH), Wage and Hour Division, U.S. Dep’t of Labor, § 11 i15 (1994). Although not entitled to Chevron deference, the Department of Labor’s Field Operations Handbook has been held to be persuasive and entitled to some weight in judicial interpretations of the FLSA. See Martin v. Occupational Safety and Health Review Comm’n, 499 U.S. 144, 157, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991); Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1275 (11th Cir.2008).

A key factor in determining if a plaintiff engaged in commerce for purposes of individual coverage under the FLSA is whether such activities were a “regular and recurrent” part of the plaintiff’s employment duties. 29 C.F.R. 776.10(b). The “employee’s interstate activity must be regular and recurrent and not simply isolated or sporadic for jurisdiction to exist.” Dent v. Giaimo, 606 F.Supp.2d 1357, 1360 (S.D.Fla.2009) (citing Scott v. K.W. Max Investments, Inc., 256 Fed. App’x 244, 247 (11th Cir.2007)); see also Curry v. High Springs Family Practice and Diagnosis Center, Inc., 2009 WL 3163221 (N.D.Fla. Sept.30, 2009) (granting summary judgment on FLSA claim by doctor’s assistant who performed primarily administrative functions and had only sporadic contact with out-of-state insurers).

The Court finds that there is a factual dispute regarding whether individual coverage applies to each Plaintiff. Defendants rely heavily on the Dent case where the court found no individual coverage for a medical assistant working in a local doctor’s office. Judge Ryskamp’s decision in Dent presents a similar, though distinguishable, factual scenario. Dent can be distinguished on two grounds, which ultimately require a different result.

First, Judge Ryskamp found that “although some patients may have been residents of other states, defendant was not engaged in interstate commerce if his contact with those patients was primarily local.” Dent, 606 F.Supp.2d at 1361. In Dent, “there [was] no evidence to suggest that defendant solicited business from patients while they were out of state or that any contract with out of state patients was regular or recurrent.” Id. Conversely, the Declaration of Carmen Lopez states that “[o]n a weekly basis I … made telephone calls to patients located in Santo Domingo and other states.”

Second, in Dent, “although the plaintiff averred that her job duties included contacting out of state insurance companies she did not allege how much of her time was spent conducting these activities.” 606 F.Supp.2d at 1361 (emphasis in original). Therefore, the court reasoned that “[i]t could be that [other individuals in the office] conducted the majority of those activities and that plaintiff only occasionally contacted out of state insurance companies.” Id. Here, the Declaration of Dawn Serra states that she “used to telephone [ ] insurance companies outside of Florida to verify patient insurance coverage at least three (3) times each work day.” DE 38-2 ¶ 5. Further, Ms. Serra declares that her job duties “each work day” also included (i) “mailing twelve (12) to twenty five (25) billing and other insurance forms to insurance companies outside of Florida;” id. ¶ 6, and (ii) “opening mail containing checks and other documents from insurance companies outside of Florida.” Id. ¶ 7.

In addition, Defendants rely on Thorne to argue that “[w]ith respect to the supplies and equipment used by the [Office], Plaintiffs do not allege that the [Office] engaged in the sale of goods that came from other states.” DE 42 at 5. “Plaintiffs’ ‘activities were not rendered interstate commerce simply because [the Office], an ultimate consumer, purchased goods which had previously moved in interstate commerce.’ “ Id. (quoting Thome, 448 F.3d at 1267). This argument holds true with respect to medical supplies used by the Office such as syringes, latex gloves and surgical sutures. The same cannot be said with respect to products and medications for which the Office’s patients were the ultimate consumer. In this regard, Ms. Lopez states that she “regularly used the telephone to call businesses to order from outside of Florida birth control medications for patients, birth control devices for patients and bladder control devices for patients.” Id. ¶ 5. Ms. Lopez also attests that she used “the telephone weekly to call patient insurance companies outside of Florida to obtain authorization for medications that the insurance companies did not cover.” Id. ¶ 6.

Finally, Defendants argue that Plaintiffs’ Declarations are vague and rely on words such as “regularly.” Defendants claim that such statements are conclusory and fail to “state the frequency with any particularity.” DE 42 at 4. Defendants claim is not entirely accurate as each Declaration does contain certain specific statements regarding the frequency of employment activities. Moreover, Defendant has not provided the Court with any telephone records, invoices or patient information that would enable this Court to conclude that Plaintiffs did not engage in commerce on a “regular and recurrent” basis. Cf. Curry v. High Springs Family Practice and Diagnosis Center, Inc., 2009 WL 3163221 (N.D.Fla. Sept.30, 2009).

In Curry, the plaintiff relied on an affidavit describing the number of times she communicated with out-of-state insurers. Id. at *1. “In response, Defendants provided detailed billing records for all phone and facsimile lines at the walk-in-clinic from the relevant time period.” Id. Based on this evidence, the Court granted summary judgment in favor of defendants finding that plaintiff’s contact with out-of-state insurers was sporadic at best. Id. at *4. In this case, the parties have relied solely on conflicting declarations and, therefore, the Court can only decide this issue by making credibility determinations. “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions ….” Anderson, 477 U.S. at 255. Therefore, whether each Plaintiff qualifies for individual coverage is factually in dispute and must be decided by the trier of fact. Accordingly, Defendant’s Motion for Summary Judgment will be denied on the issue of individual coverage.”

3rd Cir.: Helicopter Pilots Are Not “Learned Professional” Exempt, Because No Specialized Academic Training Required

Pignataro v. Port Authority of New York and New Jersey

This case was before the Court on the parties cross-appeals.  The Court below granted Plaintiffs, helicopter pilots employed by Defendants, summary judgment, holding that, as a matter of law, helicopter pilots are not exempt from the Fair Labor Standards Act (FLSA) under the so-called “learned professional” exemption.  The Court below determined that Defendants’ FLSA violations were not willful.  The Third Circuit agreed on all counts, affirming the lower Court’s decision.

Discussing the non-exempt status of helicopter pilots, the Court said:

“The applicable exemption from the FLSA urged here encompasses employees who are determined to be members of the “learned” professions, as defined by 29 C.F.R. §§ 541.3 and 541.301. An employee’s status as a “learned professional” is determined by his or her duties and salary. 29 C.F.R. § 541.3. In order to qualify as a “learned professional” an employee’s primary duties must consist of:

[w]ork requiring knowledge of an advance [sic] type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education and from an apprenticeship, and from training in the performance of routine mental, manual, or physical processes.  29 C.F.R. § 541.3(a)(1); see also29 C.F.R. § 541.301(a).

While there are additional requirements for “learned professional” status, namely receipt of compensation exceeding $250 or more per week and duties requiring the exercise of discretion, we concern ourselves initially with whether Port Authority helicopter pilots satisfy the requirements under § 541.3(a)(1). See29 C.F.R. § 541.3(e). We thus consider what advanced knowledge “in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction” entails, and then examine whether Pignataro and Chase’s primary duties required such advanced knowledge.

Advanced knowledge is knowledge “which cannot be attained at the high school level,” 29 C.F.R. § 541.301(b), and which has been obtained through “prolonged study.” 29 C.F.R. § 541.300. The learned professional exemption is available for professions where, in the “vast majority of cases,” the employee is required to have “specific academic training.” 29 C.F.R. § 541.301(d). The exemption does not apply to occupations in which “the bulk of the employees have acquired their skill by experience.” Id. An “advanced academic degree is a standard (if not universal) prequisite [sic]” and is, in fact, “the best prima facie evidence of [professional training].” 29 C.F.R. § 541.301(e)(1). The requirement that the employee’s knowledge be from a field of science or learning “serves to distinguish the professions from the mechanical arts where in some instances the knowledge is of a fairly advanced type, but not in a field of science or learning.” 29 C.F.R. § 541.301(c). Examples of professions included in the “learned professional” exemption are the fields of “law, medicine, nursing, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical, and biological sciences, including pharmacy.” 29 C.F.R. § 541.301(e)(1).

Although a college or other specific degree may not be per se required to qualify as a “learned professional,” it is clear that employees must possess knowledge and skill “which cannot be attained at the high school level” and which has been obtained through “prolonged study.” 29 C.F.R. §§ 541.301(b); 541.300. Furthermore, some type of academic degree is required, as opposed to skill acquired through experience. 29 C.F.R. § 541.301(e)(1).

We next examine whether the training and study Pignataro and Chase were required to complete constitute “advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.”  In order to qualify for their jobs, Port Authority helicopter pilots must fulfill the following requirements: (1) log 2,000 hours of flying time in helicopters; (2) earn a commercial helicopter pilot certificate with a helicopter instrument rating; (3) earn a Federal Aviation Administration (“FAA”) Second Class Medical certificate; (4) have knowledge of FAA rules and regulations governing helicopter flights; and (5) earn a high school diploma or GED. (App.182, 318.) In order to earn a commercial certificate, applicants must already hold a private pilot certificate and pass both a knowledge and practical test. 14 C.F.R. § 61.123. The Port Authority sends helicopter pilots to Florida for a one-week training, twice each year.

None of the certifications that helicopter pilots are required to have are academic degrees. Helicopter pilots are not required to spend a significant amount of time in a classroom in order to earn their certifications-nearly all of the instruction takes place in the air. Logging in-flight hours, in-flight instruction, and passing practical and written tests do not qualify as a “prolonged course of specialized intellectual instruction and study.” While the Port Authority is correct that helicopter pilots have “specialized knowledge” and “unique skills” (Port Authority Br. 12-13), this is not sufficient to qualify under the learned professional exemption because pilots’ knowledge and skills were acquired through experience and supervised training as opposed to intellectual, academic instruction. The District Court reasoned that pilots’ flight certificates require specialized instruction beyond a high school education, but do not constitute advanced academic degrees. Thus, the District Court determined that helicopter pilots are “ ‘merely highly trained technicians’ … and therefore do not qualify as professional employees under the FLSA.” (App. 7-8 (citing Martin v. Penn Line Serv. Inc., 416 F.Supp. 1387, 1389 (W.D.Pa.1976))). We agree and conclude that Port Authority helicopter pilots’ work does not require advanced knowledge that is customarily acquired from a prolonged course of specialized instruction. We therefore do not reach the issues of whether Pignataro and Chase were salaried employees or consistently exercised discretion in their work. Our reading of the regulation in light of the requirements for the job leads us to the same conclusion as the District Court. Port Authority helicopter pilots are, therefore, not “learned professionals” and are not exempt from the provisions of the FLSA.

The Department of Labor has reached the same conclusion. As we agree with the agency, we need not discuss the degree of deference we would owe to the agency’s view on the issue.  The Department of Labor Wage and Hour Division has noted that the Department has taken the position that pilots are not exempt professionals because “aviation is not a ‘field of science or learning,’ and … the knowledge required to be a pilot is not ‘customarily acquired by a prolonged course of specialized intellectual instruction.’ “ Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed.Reg. 22122, 22156 (Apr. 23, 2004) (citation omitted).

The Department of Labor Review Board (the “Board”) has also decided that airline pilots are not “learned professionals” as defined by 29 C.F.R. §§ 541.3 and 541.301 because there is “no doubt” that airline pilots do not meet the “threshold prerequisite” of “formal specialized academic training in a field of science or learning.” In re U.S. Postal Serv. ANET & WNET Contracts Regarding Review & Reconsideration of Wage Rates for Airline Captains and First Officers, ARB Case No. 98-131, 2000 WL 1100166, at *13-14 (Dep’t of Labor Admin. Rev. Bd. Aug. 4, 2000). The Board found that almost all of the professions delineated in the C.F.R. as “professional” require college or graduate-level study (one exception being certain nursing degrees that require completing a college-like academic program). Id. In contrast:

the training of airline pilots in this country typically does not revolve around specialized college-type academic instruction, but more-closely resembles the classic apprenticeship model-a “structured, systematic program of on-the-job supervised training” coupled with a program of related instruction.  Id. at *16 (citing 29 C.F.R. § 29.4 (1999)).

The Board further noted that many courts have held that a specialized college degree is required to meet the “learned professional” exemption. Id. at *29 n. 11. For example, the Court of Appeals for the Eighth Circuit held that “airfield operation specialists” are not learned professionals because they are only required to have a bachelor’s degree in aviation management or a related field, or four years of full-time experience, or an equivalent combination of education and experience. Fife v. Harmon, 171 F.3d 1173, 1177 (8th Cir.1999). The Fife Court held that “[t]his is advanced knowledge from a general academic education and from an apprenticeship, not from a prolonged course of specialized intellectual instruction.” Id. (internal quotation marks omitted). In addition, the Court of Appeals for the Eleventh Circuit held that probation officers are not “learned professionals” because their educational requirement (a four-year college degree) is general and not specialized. Dybach v. State of Fla. Dep’t of Corr., 942 F.2d 1562, 1565-66 (11th Cir.1991).

The Board and the Wage and Hour Division also noted, however, that the Court of Appeals for the Fifth Circuit in Paul v. Petroleum Equipment Tools, Co., 708 F.2d 168, 175 (5th Cir.1983), concluded that an airplane pilot was a “learned professional” and was therefore exempt from the overtime provisions of the FLSA. 69 Fed.Reg. at 22156;In re U.S. Postal Serv., 2000 WL 1100166 at *13-14. The Board “respectfully disagree[d] with the Paul majority’s analytical approach and conclusion.” In re U.S. Postal Serv., 2000 WL 1100166 at *14. Despite Paul, the Wage and Hour Division decided not to modify its position that pilots are not exempt professionals. 69 Fed.Reg. at 22156. Not surprisingly, the Port Authority urges that we should follow Paul. We note that Paul was decided approximately two decades prior to the Board’s decision and the Wage and Hour Division’s interpretation of the exemption that we cite, and the Paul Court stated that the Wage and Hour Division’s interpretations are entitled to “great weight.” 708 F.2d at 173 (citation omitted).

The Paul Court reasoned that, in order to obtain a commercial license and instrument rating, a pilot must “acquire extensive knowledge of aerodynamics, airplane regulations, airplane operations, instrument procedures, aeronautical charts, and weather forecasting.” 708 F.2d at 172. Additionally, pilots are required to receive instruction from a flight instructor, log a certain number of hours of flight time, and pass written and practical tests . Id. The Paul Court determined that this is “extensive, formal, and specialized training” that is comparable to that undergone by nurses, accountants, and actuaries. Id. at 173. However, in light of our own analysis set forth above, that is consistent with the Department of Labor’s interpretation of the regulations, we decline to follow the reasoning of the Paul Court.

Thus, in a field where most employees gain their skills through intellectual instruction, an individual employee who gained his skills through experience may still be exempt under the FLSA. The Paul Court seems to have focused more on Paul’s individual situation than the regulations permit. See708 F.2d at 174 (“[W]e do not decide that company pilots as a class perform exempt professional work. We face here only a pilot like Paul with the highest flight rating, considerable training, and job experience.”). We cannot endorse this approach. See also Dybach, 942 F.2d at 1565 (finding that the determinative factor is the education that the job requires, not the education that the employee actually has); In re U.S. Postal Serv., 2000 WL 1100166 at *14:

[A] close analysis of the specialized academic training provided to members of a job classification is a threshold step in determining whether the occupation generically meets the professional exemption test. Consequently, we share the view of the dissenting opinion in Paul that it is analytically incorrect to “work backwards” from the level of an employee’s knowledge and skill in order to infer that the occupation requires the kind of advanced academic instruction contemplated by the regulations.

Based on the above analysis, we will affirm the District Court’s grant of summary judgment.”

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