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DOL Debars Seattle-Based Federal Contractor for Violating Minimum Wage, Overtime and Record-Keeping Laws
The U.S. Department of Labor has debarred HWA Inc., President John Wood and Vice President Barbara Wood from future government contracts for three years, due to significant and repeated violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act. Seattle-based HWA provided security services as a contractor to various federal facilities, government offices and public works projects in the states of Washington, Oregon, Idaho, Missouri and New York.
“The Labor Department will not allow federal contractors to misuse public funds and exploit hardworking laborers by denying their rightful wages,” said Secretary of Labor Hilda L. Solis. “Debarring violators such as HWA from future contracts ensures a level playing field, so that honest companies are not placed at a competitive disadvantage for playing by the rules, and paying their workers full and fair prevailing wages.”
According to a DOL press release:
“Most recently, in 2009, the company defaulted on seven federal contracts and failed to meet its payroll obligations, resulting in nearly $1 million in unpaid wages for 206 employees. The division ordered an emergency withholding of funds on several of the company’s federal contracts and secured the full payment of these wages. All SCA contracts held by the HWA were terminated shortly thereafter.”
The Service Contract Act (SCA) contract clauses, present in all Federal contracts, require contractors and subcontractors performing services under prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates contained in a predecessor contractor’s collective bargaining agreement, including prospective increases. The Labor Department issues SCA wage determinations for contracting agencies to incorporate into covered contracts, along with the required contract clauses. The fringe benefit requirements — usually vacation and holidays, known as “health and welfare” benefits — are separate and in addition to the hourly monetary wage requirement under the SCA. In addition, employers with prime contracts in excess of $100,000 under the CWHSSA must pay workers at least one and one-half times their regular rates of pay for all hours worked over 40 in a week.
Although violations of the primary federal wage and hour law, the Fair Labor Standards Act (FLSA), may be pursued by aggrieved employees in private lawsuits, alleged violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act, may only be pursued by the DOL. Largely due to the fact that under the prior republican leadership, the employer-friendly DOL pursued very few of these cases, such violations are commonplace on Federal worksites, despite the various laws prohibiting them. Hopefully, as the current DOL pursues these cases more frequently, workers will once again be assured of the protections of the laws that are on the books.
S.D.N.Y.: Class Action Waiver Unenforceable in FLSA Case, Because Cost of Individual Litigation vs. Potential Recovery Prohibitive
Sutherland v. Ernst & Young LLP
This case was before the court on Defendant’s motion to stay the proceedings and compel arbitration on an individual (rather than class/collective) basis. There was no dispute as to whether the Plaintiff had executed the arbitration agreement, containing the class waiver, however the court held that the class waiver was unenforceable, after a lengthy discussion of Second Circuit law and the impact of the recent United States Supreme Court case, Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010).
The court reasoned:
“Because the Amex decision retains its persuasive force, the Court applies the test adopted in Amex to determine the enforceability of the class waiver provision here at issue. In the totality of the circumstances, the Court finds that the class waiver provision is invalid because it prevents Sutherland from vindicating her statutory rights.
1. Cost to Individual Plaintiff Versus Potential Recovery
The record supports Sutherland’s argument that her maximum potential recovery would be too meager to justify the expenses required for the individual prosecution of her claim. Sutherland alleges “an actual overtime loss of approximately $1,867.02, with potentially liquidated damages of an equal amount under the FLSA.” (Folkenflik Decl. ¶ 8; see also Sutherland Deck. ¶ 4.) If her only option were to prosecute her claim on an individual basis, Sutherland would be required to pay expenses that would dwarf her potential recovery.
Sutherland’s uncontested submission estimates that her attorney’s fees during arbitration will exceed $160,000, and that costs will exceed $6,000. (Folkenflik Decl. ¶ 20, 24.) Sutherland will utilize expert assistance in support of her claims.(Id. ¶ 22.) Her expert, a professor of accountancy, has submitted an affidavit stating that his fees may exceed $33,500, and that he requires a retainer payment of $25,000. (Carmichael Decl. ¶ 5.) In sum, Sutherland would be required to spend approximately $200,000 in order to recover double her overtime loss of approximately $1,867 .02. Only a “lunatic or a fanatic” would undertake such an endeavor. Carnegie v. Household Intern., Inc., 376 F.3d 656, 661 (7th Cir.2004). Indeed, rather than prosecuting her low-value, high-cost claim on an individual basis, Sutherland “would give up any rights” she might have to recover overtime payments allegedly owed to her. (Sutherland Decl.¶ 2.)
Pursuant to the E & Y Agreement, Sutherland is responsible for the Court Equivalent Fee, or a fee specified by the arbitration provider, whichever is less; arbitration fees and costs are to be shared equally between the parties. (Reece Decl. Exh. D¶ IV.P.) Sutherland has submitted an uncontested affidavit stating that arbitration fees would amount to $24,000, and that the applicable Court Equivalent Fee is $350. (Folkenflik Decl.¶ 24.) E & Y’s offer to pay such costs, which the Court has factored into Sutherland’s expenses as detailed above, thus lessens her burden by $12,350. Although this amount is not insignificant, it is hardly enough to allow Sutherland to bring her claims on an individual basis: she would still be required to spend approximately $200,000 on attorney’s fees and costs, as well as expert fees, in order to recover double her overtime loss of approximately $1,867.02.
E & Y’s attempt to distinguish the cost-recovery differential in Amex from the differential present here is unavailing. The “median plaintiff” in Amex would have recovered damages of $1,751, and the expert’s services would have cost at least several hundred thousand dollars. Amex, 554 F.3d at 317. According to E & Y, a “median plaintiff” in the instant matter could recover “substantially more,” and expert fees here amount to “a small fraction” of those at issue in Amex. (Def. Reply at 6-7.) The Amex decision did not, however, set a cost-to-recovery ratio below which claims are deemed “prosecutable.” The court instead embraced a functional approach, which “depends upon a showing that the size of the recovery received by any individual plaintiff will be too small to justify the expenditure of bringing an individual action.” Amex, 554 F.3d at 320. Sutherland has satisfied her burden on that score.
E & Y also cites to authorities in which the cost-recovery differential was held not to preclude the prosecution of claims on an individual basis. Such decisions are either inapposite or unpersuasive. In Pomposi v. GameStop, Inc., for instance, a class waiver was enforced where the amount in controversy was $11,000, and plaintiff’s total fees and costs ranged from $46,000 to $62,000.09 Civ. 0340, 2010 WL 147196, at *7 (D.Conn. Jan. 11, 2010). The court in Pomposi did not, however, meaningfully discuss plaintiff’s ability to retain counsel notwithstanding the differential between potential costs and recovery. E & Y cites Ornelas v. Sonic-Denver T, Inc., No. 06 Civ. 253, 2007 WL 274738 (D.Colo. Jan. 29, 2007), as standing for the proposition that “compelling arbitration would not preclude plaintiff from pursuing his claims where damages were at least $3500.” (Def. Mem. at 12.) But the plaintiff in Ornelas was allegedly entitled to (i) a trebling of the approximately $3500 in actual damages, and (ii) unspecified punitive damages and interest. Id. at *6. Moreover, the plaintiff in Ornelas apparently would not incur any expert witness fees. Id. at *7. Finally, E & Y offers Anglin v. Tower Loan of Miss., Inc., 635 F.Supp.2d 523 (S.D.Miss.2009) as precedent for “compelling arbitration where damages, attorney’s fees and punitive damages would result in [a] recovery of over $5,000.” (Def. Reply at 12.) The nub of Anglin, however, was that the plaintiff “made no effort” to demonstrate the prohibitive costs of individual arbitration. Anglin, 635 F.Supp.2d at 529. By contrast, Sutherland has “substantial[ly] demonstrat[ed]” that an inability to prosecute her claims on a class basis “would be tantamount to an inability to assert [her] claims at all.” Amex, 554 F.3d at 302-03 n.1.
2. Ability to Obtain Legal Representation
Even if Sutherland were willing to incur approximately $200,000 to recover a few thousand dollars, she would be unable to retain an attorney to prosecute her individual claim. This is due largely to the E & Y Agreement’s obstacles to reimbursement of fees and expenses. Whether attorney’s fees and expenses incurred during arbitration are compensable is subject to the discretion of the arbitrators. (Reece Decl. Exh. D ¶ IV.P.3.) The amount of such reimbursement is also left to the arbitrators’ discretion. (See id. (arbitrators may award attorney’s fees, “in whole or part, in accordance with applicable law or in the interest of justice”); 29 U.S.C. § 216(b) (providing for the reimbursement of “reasonable” attorney’s fees).)
In light of the foregoing, Sutherland cannot reasonably be expected to retain an attorney to pursue her individual claim, and E & Y has not submitted an affidavit stating otherwise. Sutherland cannot afford to advance the fees and costs in order to hire an attorney on an hourly basis: she has remained unemployed since her termination from E & Y in December 2009; she has no savings, and owes $35,000 in student loans. (Sutherland Decl. ¶ 5.) Counsel for Sutherland will not prosecute her individual claim without charge, and will not advance the required costs where the E & Y Agreement’s fee-shifting provisions present little possibility of being made whole. (Folkenflik Decl. ¶ 25.) As the uncontested affidavit of Sutherland’s counsel reflects, Sutherland would find no attorney willing to represent her under the circumstances. (Id. ¶ 27.) Cf. Kristian, 446 F.3d at 60 (“[I]t would not make economic sense for an individual to retain an attorney to handle one of these cases on an hourly basis and it is hard to see how any lawyer could advise a client to do so.”) (internal quotations omitted).
Sutherland’s only option in pursuing her individual claim is thus to retain an attorney on a contingent fee basis. But just as no rational person would expend hundreds of thousands of dollars to recover a few thousand dollars in damages, “no attorney (regardless of competence) would ever take such a case on a contingent fee basis .” Caban v. J.P. Morgan Chase & Co., 606 F.Supp.2d 1361, 1371 (S.D.Fla.2009); see also Folkenflik Decl.¶ 27. Cf. Kristian, 446 F.3d at 59 (“[I]t would not make economic sense for an attorney to agree to represent any of the plaintiffs in these cases in exchange for 33 1/3% or even a greater percentage of the individual’s recovery.”) (internal quotations omitted). E & Y has submitted no evidence that an attorney would expend approximately $200,000 in time and costs in return for a mere chance to earn potentially one-third of Sutherland’s less than $4,000 recovery.
If Sutherland could aggregate her claim with the claims of others similarly situated, however, she would have no difficulty in obtaining legal representation. (See Folkenflik Decl.¶ 25; see also Pl. Reply at 3.) This is because class proceedings “achieve economies of time, effort, and expense….” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 616 (1997) (internal quotations omitted).
3. The Practical Effect of Waiver
Enforcement of the class waiver provision in this case would effectively ban all proceedings by Sutherland against E & Y. She will be unable to pursue her claims, even if they are meritorious. As a result, E & Y would enjoy de facto immunity from liability for alleged violations of the labor laws. The legislative purposes in enacting such laws-including, for example, combating “labor conditions detrimental to the maintenance of the minimum standard of living” FLSA § 2(a), 29 U.S.C. § 202(a), and assuring workers “additional pay to compensate them for the burden of a workweek beyond” 40 hours per week, In re Novartis Wage and Hour Litig. Litig. 611 F.3d 141, 150 (2d Cir.2010)-would go unfulfilled. “Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small-value claims.” Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir.2007).
4. Summary
Having examined the totality of the facts and circumstances, the Court finds that the class waiver provision here at issue is unenforceable because it prevents Sutherland from vindicating her statutory rights. See Amex, 554 F.3d at 302-03 n.1.
V. Future Proceedings
Although the class waiver provision is unenforceable, the Court cannot order E & Y to submit to class arbitration. After the offending provision is severed from the E & Y Agreement, (see Reece Decl. Exh. D ¶ V.F.), the Agreement is rendered silent as to whether class arbitration is permissible. In accordance with Stolt-Nielsen, class arbitration may not be imposed on parties whose arbitration agreements are silent on the permissibility of class proceedings. 130 S.Ct. at 1764, 1775. See also Fensterstock v. Educ. Fin. Partners, 611 F.3d 124, 140 (2d Cir.2010). The Court must accordingly deny E & Y’s motion to compel arbitration.”
It will be interesting to see whether courts in other circuits will follow this well-reasoned opinion. This is an area of FLSA jurisprudence where there is a wide divergence of opinions. The Eleventh Circuit for example has long-held that FLSA Collective Action rights can be waived by agreement.
Click Sutherland v. Ernst & Young LLP to read the entire opinion.
S.D.Tex.: Defendant Who Prevailed at Trial Following OJ, Not Entitled to Award of Attorney’s Fees Under FLSA
Tran v. Thai
While not a novel concept, this case demonstrates a commonly misunderstood concept in FLSA jurisprudence, an FLSA defendant who prevails at trial, following the tender of an offer of judgment (OJ), is not entitled to an award of its attorneys fees.
In this case the defendant had served an OJ on the plaintiff in the amount of $500.00, which the plaintiff did not accept. The case then proceeded to trial and resulted in a defense verdict. Following the defense verdict, the defendant moved for an award of its fees and costs, citing Rule 68, the OJ statute. Denying the defendant’s motion, the court explained that OJ’s do not shift attorney’s fees in FLSA cases, because: (1) OJ’s only shift fees where a plaintiff prevails at trial, but for less than the amount of the OJ; and (2) the FLSA does not permit fee shifting to a defendant.
Reasoning that an award of the defendant’s attorney’s fees was impermissible here, the court explained:
“There are two flaws in the defendants’ request for the fees they incurred after the plaintiff failed to accept the $500 offer. First, Rule 68 “applies only to offers made by the defendant and only to judgments obtained by the plaintiff. It therefore is simply inapplicable to this case because it was the defendant that obtained the judgment.” Delta Air Lines, Inc. v. August, 450 U.S. 346, 352, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981); MRO Communications, Inc. v. American Tel. & Tel. Co., 197 F.3d 1276, 1280 (9th Cir.1999); see also CHARLES ALAN WRIGHT, et al., 12 FED. PRAC. & PROC. CIV. § 3006 (2d ed.) (“[Rule 68] is entirely inapplicable … if the defendant, rather than the plaintiff, obtain judgment.”). In Delta Airlines, Justice Powell, concurring in the result noted that the Court’s holding implies that “a defendant may obtain costs under Rule 68 against a plaintiff who prevails in part but not against a plaintiff who loses entirely.” 450 U.S. at 362 (Powell, J., concurring) (emphasis in original). In other words, if the jury in this case had awarded Nguyen $300 against the defendants, they could seek attorney fees under Rule 68(d). But because the jury awarded nothing, and judgment is entered in favor of the defendants, there is no basis to award attorney’s fees. See Farley v. Country Coach, Inc., No. 05-71623, 2008 WL 795788, at *1 (E.D.Mich. Mar.26, 2008); Drewery v. Mervyns Dept. Store, No. C 07-5017 RJB, 2008 WL 222627, at *1-2 (W.D.Wash. Jan.25, 2008).
In support of their argument that Rule 68 is relevant to an award of costs in this case, the defendants have cited Haworth v. Nevada, 56 F.3d 1048 (9th Cir.1995). In that case, however, the plaintiffs prevailed on one of their claims. The Ninth Circuit held that the defendant was entitled to costs under Rule 68 because the defendant’s offer of judgment exceeded the final judgment obtained by the plaintiffs. Id. at 1052. In this case, the defendants prevailed and the plaintiff lost entirely. Rule 68 is not applicable.
The second flaw is that the FLSA does not appear to be in the category of statutes on which Rule 68 operates to include fees. The Supreme Court considered the applicability of Rule 68 to statutory fee-shifting provisions in Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985). The Court upheld the application of Rule 68 to the fee-shifting provision of 42 U.S.C. § 1983. The Court reasoned that in an action under § 1983, “all costs properly awardable in an action are to be considered within the scope of Rule 68 ‘costs.’ Thus, absent congressional expressions to the contrary, where the underlying statute defines ‘costs’ to include attorney’s fees, we are satisfied such fees are to be included as costs for purposes of Rule 68.” Id. at 9, 105 S.Ct. at 3016. Because § 1983 defined costs to include attorney’s fees, Rule 68 applied to bar recovery for any attorney’s fees incurred after a Rule 68 offer was made when the plaintiff recovered less by judgment than the settlement offer. Id. The FLSA is different. The FLSA defines attorney’s fees separately from costs. 29 U.S.C. § 216(b). Unlike attorney’s fees in a § 1983 action, attorney’s fees in an FLSA action are not automatically shifted by Rule 68. Accord Fegley v. Higgins, 19 F.3d 1126, 1135 (6th Cir.1994), cert. denied, 513 U.S. 875, 115 S.Ct. 203, 130 L.Ed.2d 134 (1994); Cox v. Brookshire Grocery Co., 919 F.2d 354, 358 (5th Cir.1990) (dicta); Haworth v. State of Nev., 56 F.3d 1048, 1051 (9th Cir.1995).
The motion for judgment is denied to the extent it seeks to include $22,057.90 in attorney’s fees after the offer of judgment.”
U.S.S.C.: Court Denies Certiorari to Novartis and Schering on Appeals of Decisions Finding Pharma Reps Non-Exempt Under the FLSA
Novartis Pharmaceuticals Corp. v. Lopes, Simona M. and Schering Corporation v. Kuzinski, Eugene, et al.
In a case with far sweeping ramifications for the pharmaceutical industry and its employees, following the Second Circuit’s decision that found pharmaceutical representatives (pharma reps) to be non-exempt and therefore, entitled to overtime, the Supreme Court has denied Plaintiff’s Petition for Cert, and therefore the issue remains largely unresolved. In a decision discussed here, the Second Circuit had previously held that the pharma reps were non-exempt, notwithstanding the pharmaceutical companies’ arguments that they were outside sales and/or administrative exempt. However, the Third Circuit, on facts it acknowledged were limited to the case before it, recently reached the opposite conclusion, holding Johnson & Johnson pharma reps to be exempt under the administrative exemption. Most recently, the Ninth Circuit held that, notwithstanding the fact that pharma reps cannot and do not consummate sales, their promotional activities are close enough to render them exempt under the outside sales exemption.
The Department of Labor had submitted an Amicus Brief in support of the employees in both the Second and Ninth Circuit cases. While the Second Circuit relied on the DOL’s Brief in large part, reaching its conclusion that the pharma reps are non-exempt, the Ninth Circuit rejected the arguments in the Brief.
It will be interesting to see if the large pharmaceutical companies, most of whom are in the midst of FLSA collective actions and/or state wage and hour class actions, will reclassify their pharma reps based on the Novartis decision. The stakes are huge, and the risk- if they chose not to- could be an imposition of liquidated damages, in addition to unpaid wage awards in any case(s) the employees win.
10th Cir.: FLSA Defendant Who Simultaneously Relied Upon and Rejected Advice of Counsel Committed Willful Violation of FLSA; 3 Year SOL Applied
Mumby v. Pure Energy Services (USA), Inc.
Following an award of summary judgment to the plaintiffs, which held that defendant’s violation of the Fair Labor Standards Act (FLSA) was willful, for both liquidated damages and statute of limitations purposes, the defendant appealed. The crux of defendant’s argument on appeal was that, due to partial reliance on attorney advice, it was entitled to reject portions of the attorney’s advice that were not relevant to its inquiry of the attorney, without a finding that its FLSA violations were willful. The lower court disagreed and granted plaintiffs summary judgment, holding that a three (3), rather than two (2) year statute of limitations was applicable, due to defendant’s willful violation of the FLSA. The Tenth Circuit agreed and affirmed.
Explaining the issue the Tenth Circuit stated: “[t]he thrust of Pure Energy’s argument is that it should be allowed to both rely on and disregard advice of counsel in order to avoid a three-year statute of limitations and liquidated damages.”
Laying out the general law regarding attorney consults as a defense to willfulness in cases brought under the FLSA, the court stated:
“Although consultation with an attorney may help prove that an employer lacked willfulness, such a consultation is, by itself, insufficient to require a finding in favor of the employer. The court’s operative inquiry focuses on the employer’s diligence in the face of a statutory obligation, not on the employer’s mere knowledge of relevant law. See McGlaughlin, 486 U.S. at 134-35; see also Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 129-30 (1985) (airline did not recklessly disregard the Age Discrimination in Employment Act where it sought legal advice, negotiated with union representatives, and then finally implemented a new retirement policy). We have also stated the inverse in our unpublished decisions: that failure to consult with a lawyer is equally insufficient to prove recklessness. See Fowler v. Incor, 279 F. App’x 590, 602 (10th Cir.2008). These principles are consistent with similar “advice-of-counsel” rules in other contexts. See, e.g., United States v. Wenger, 427 F.3d 840, 853 (10th Cir.2005) (in the securities fraud context, “[g]ood faith reliance on counsel … is merely one factor a jury may consider when determining whether a defendant acted willfully”); Takecare Corp. v. Takecare of Oklahoma, Inc., 889 F.2d 955, 957 (10th Cir.1989) (in a trademark infringement action, absent a showing of other factors, “counsel’s advice alone will not shield the actor from the consequences of his act”) (internal quotation marks omitted).”
Rejecting the defendant’s argument, the court explained:
“In 2005, after one year of U.S. operations, Pure Energy began transferring management of its U.S. operations from Canada to the United States. When it transferred payroll functions to its new domestic management team, it hired a new manager, Cindy Rucker, to run payroll operations in compliance with U.S. labor standards. At the time of her hiring, Ms. Rucker was aware of the FLSA, but she was unfamiliar with day rates. When she expressed concerns about the company’s compensation policy, Pure Energy’s management referred Ms. Rucker to a Colorado attorney, Paul Hurcomb.
In January 2006, after speaking with Ms. Rucker and reviewing some of Pure Energy’s employment offer letters, Mr. Hurcomb advised Ms. Rucker that Pure Energy’s day rate policy complied with the FLSA so long as the company itemized regular and overtime rates and did not have its field employees work more than twelve hours per day. Mr. Hurcomb also discussed with Ms. Rucker that any weekly hours over forty had to be paid as overtime, regardless of the day rate. Mr. Hurcomb did not perform any legal research regarding day rates or the FLSA. Although he essentially stated the forty-hour overtime requirement correctly, his other advice was incorrect.
After receiving Mr. Hurcomb’s advice, Ms. Rucker confirmed with management that Pure Energy was paying its employees correctly so long as it broke down the day rate into regular and overtime hourly rates and did not exceed twelve-hour shifts. However, until it changed its compensation policies in late 2007 to finally comply with the FLSA, Pure Energy continued to underpay its field employees for overtime. Field employees also continued to occasionally work more than twelve hours per day without additional compensation, in violation of Mr. Hurcomb’s advice…
In sum, Mr. Hurcomb and Ms. Rucker discussed day rates, but they also discussed the weekly overtime requirement for employees working more than forty hours per week. Mr. Hurcomb further advised-and Ms. Rucker communicated to her counterparts within the company-that employees must not work more than twelve hours per day. Yet, Pure Energy made no real changes to its compensation policy, nor did it investigate whether its employees were working shifts longer than twelve hours. Indeed, without tracking the number of hours worked by each field employee, it was virtually impossible for Pure Energy to determine whether it was complying with Mr. Hurcomb’s advice, let alone the requirements imposed under the FLSA. It is of no consequence that Mr. Hurcomb’s advice proved incorrect. Pure Energy did not rely in good faith on its counsel’s advice, and thus cannot raise an advice-of-counsel defense.
Pure Energy argues that its purpose in seeking Mr. Hurcomb’s advice was to determine the legality of its day rate policy, and with respect to this narrow issue it acted in good faith on Mr. Hurcomb’s advice. However, an employer may not selectively listen to and then, in good faith, rely upon only one of many issues discussed simply because it sought discrete legal advice on one potential FLSA violation and viewed all other advice as irrelevant to its original, limited inquiry.
In this case, it does not matter if Ms. Rucker’s intent was only to narrowly inquire about Pure Energy’s compliance with the FLSA’s day rate requirements and not to inquire about the FLSA’s weekly overtime requirement. The discussion between Mr. Hurcomb and Ms. Rucker essentially put Pure Energy on notice that it must pay weekly overtime for each hour over forty.
Pure Energy failed to compensate Plaintiffs for weekly overtime despite being put on notice. It applied its compensation policy in reckless disregard of FLSA requirements, and is therefore subject to the three-year statute of limitations for damages.”
USSC: Plaintiff’s Petition for Certiorari Denied Regarding Calculation of Damages for “Salaried Misclassified” Workers
Urnikis-Negro v. American Family Property
In a case where the United States Supreme Court could have decided the oft-raised issue of how to calculate an employee’s damages, following a finding that they were “salaried misclassified,” the Supreme Court has denied Plaintiff’s Petition for Cert, and therefore the issue remains largely unresolved. In a decision discussed here, the Seventh Circuit held that the proper calculation of damages in such a situation was the the “fluctuating workweek” methodology, rather than time and a half. The Fourth Circuit held that only “half-time” damages are due when an employee is salaried misclassified recently too. This decision was widely watched by Wage and Hour practitioners, because of the impact the calculation issue has on damages for such employees who are misclassified. Under the fluctuating workweek calculation, an employee who was salaried and misclassified receives less than one third the damages he or she would receive if the award were made at time and a half.
D.Kan.: FLSA Plaintiffs’ Motion to Compel Entry Into Defendant’s Facility To Conduct A Time & Motion Study Related To “Walk Time” Claims Granted
McDonald v. Kellogg Co.
In this Fair Labor Standards Act (“FLSA”) wage and hour case, plaintiffs, current and former hourly production employees at defendant’s bakery facility, claimed that defendant violated the overtime provisions of the FLSA, 29 U.S.C. § 201 et seq., by, among other things, failing to compensate them for time spent walking to and from workstations. Following a ruling on the parties’ cross motions for summary judgment– which in part held that plaintiffs’ time spent walking to their workstations was compensable– plaintiffs’ moved to compel defendant to allow entry into its facility for the purpose of conducting a time and motion study related to plaintiffs’ walk time.
Describing the plaintiffs’ proposed study the court explained:
“Plaintiffs have served a request, pursuant to Fed.R.Civ.P. 34, seeking access to defendant’s bakery facility for their expert, Dr. Kenneth S. Mericle, to gather data on the time employees spend walking to and from their workstations (see doc. 195). Dr. Mericle proposes to use Radio Frequency Identification technology (“RFID”) to gather this data. To conduct an RFID study, Dr. Mericle would first place electronic readers at the employees’ locker rooms and at the time clocks outside their workstations. Next, Dr. Mericle would issue credit-card-sized cards to employees to carry with them during the study. When the cards pass in the proximity of the readers, a time stamp in the reader would record the time that the employee passed through the area. Thus, the readers would record the time that card-carrying employees leave the locker room and the time that they arrive at the workstations (and vice versa). In addition, Dr. Mericle would place small sensors at various locations in the factory, such as bathrooms, to register detours in the employees’ paths to and from their workstations. Plaintiffs suggest that only Dr. Mericle and, perhaps, one other individual would need to be on-site during the study to ensure that there are no problems with the RFID equipment.
Plaintiffs request that Dr. Mericle enter defendant’s facility on two occasions. On the first entry, Dr. Mericle would simply observe plant conditions and employee habits in order to plan placement locations for the RFID readers and sensors. On the second entry, Dr. Mericle would set up the readers and sensors, and issue cards to the employees. Plaintiffs propose that the study then be conducted over a period of several days.
Defendant objects to the RFID study as overreaching discovery. Defendant asserts that nothing in the Federal Rules of Civil Procedure requires it to alter its factory by attaching readers and sensors to its property, or to mandate that its employees carry reader cards. According to defendant, the proposed RFID study is overly broad and burdensome.”
Granting plaintiffs’ motion, the court reasoned:
“In objecting to plaintiffs’ proposed RFID study, defendant broadly asserts that “[c]onducting such a study during working hours will consume considerable time at [defendant’s] expense, will interfere with operations, potentially jeopardize the safety of individuals conducting the study, and expose [defendant’s] proprietary production processes to disclosure to third parties.” Defendant suggests that plaintiffs can estimate employee walking time much more simply by measuring the distances between employee locker rooms and workstations, and then using expert information concerning reasonable walk times.
The court rejects defendant’s objections and grants plaintiffs’ motion to compel. Pursuant to Rules 34(a)(2) and 26(b)(1), the court clearly has the authority to order access to defendant’s facility for the purpose of conducting the RFID study and gathering relevant walk-time data. While there may be, as defendant suggests, alternate means to gather data regarding employee walking time, such is not the test for determining whether the discovery requested should be compelled. Defendant is not at liberty to dictate how plaintiffs should gather information to support their case. Rather, the rules permit plaintiffs to enter defendant’s property for the purpose of gathering relevant information unless defendant makes a “particularized showing” that the discovery plaintiffs propose would create an undue burden or danger. Defendant has made no attempt to meet this burden-defendant has not submitted an affidavit discussing the burdens or dangers that would accompany the proposed RFID study, nor has defendant even “provide[d] a detailed explanation as to the nature and extent of the claimed burden.” Although during the hearing defense counsel requested an opportunity to supplement the record in this regard, the undersigned denied defendant’s tardy request for a second bite at the apple.
Considering the record as it stands, the court finds that defendant has offered no support for its conclusory assertion that the proposed RFID study would consume a considerable amount of defendant’s time and would interfere with defendant’s operations. As plaintiffs explained at the hearing, the readers and sensors can be placed unobtrusively and without having to make permanent modifications to defendant’s property. They will record no data other than the time that the cards pass in their vicinity. Indeed, this proposed methodology appears to be less intrusive than other methods of conducting time and motion studies (e.g., videotaping employees or having experts follow employees as they walk the designated paths). With regard to defendant’s concern that its proprietary information is at risk, the Stipulated Protective Order already entered in this case (doc. 56) is sufficient to protect defendant’s trade secrets.
Nor has defendant demonstrated or explained what legitimate safety concerns would be faced by persons conducting the study. Nonetheless, the court will permit defendant to conduct safety-training, limited to one hour, as a prerequisite for access to the facility. In addition, as discussed below, defendant’s safety manager may accompany Dr. Mericle while he is in the facility.
Finally, as to defendant’s complaint that its employees should not be required to carry the small reader cards, the court agrees that no employee should be compelled to carry the card against his or her will. However, as noted by plaintiffs, the vast majority of hourly production workers whose walk time the RFID study would measure are opt-in plaintiffs in this case. The court finds it likely that these employees will voluntarily carry the card. The court permits plaintiffs’ counsel and expert to supply cards to employees who voluntarily consent to carry them during the study.”
Click McDonald v. Kellogg Co. to read the entire order.
WHD Proposes Update To FLSA Recordkeeping Requirements With “Right To Know Under The Fair Labor Standards Act” Regulation
According to the DOL’s Fall 2010 Semi-Annual Agenda, the Wage and Hour Division of the Department of Labor (WHD), intends to issue updated FLSA recordkeeping requirements in the near future.
Several of the initiatives the department is considering could have major impacts on both employees and employers.
For example, the WHD is considering a proposed rule that would require covered employers to notify workers of their rights under the FLSA, and to provide information concerning hours worked and wage computation, similar to the Wage and Hour laws some states like New York and California already have on the books.
Under the proposed rule, employers would be required to perform a written classification analysis for every worker that is excluded from FLSA coverage. In addition, the employer would have to disclose the individual analysis to each worker, and retain the documents in the event of a WHD investigation.
Thanks to Valiant for alerting us to this significant development.
4th Cir.: When Salaried Employees Were Misclassified, Damages Properly Calculated At “Half-Time” Rather Than Time And A Half
Desmond v. PNGI Charles Town Gaming, L.L.C.
As discussed here previously, this was the second time this case ended up at the 4th Circuit. Previously, the 4th Circuit had vacated the trial court’s Order determining the plaintiff’s to be administratively exempt and remanded the case for further findings. On this appeal the plaintiffs challenged the lower court’s ruling as to how their damages in this so-called “salary misclassified” case should be determined. Additionally, the defendant cross-appealed the lower court’s determination, on summary judgment, that it’s violations were willful. Joining other Circuits who have ruled on the calculation issue, the 4th Circuit held that the lower court properly applied a so-called “half-time” calculation in determining the plaintiffs damages.
In making its ruling, the 4th Circuit discussed, at length case law from other circuits:
“The former employees worked as racing officials with Charles Town Gaming. J.A. 50. Charles Town Gaming prepared the job descriptions for racing officials in 1999. Id. at 55-56. In doing so, Charles Town Gaming’s human resources director used a computer program to help determine whether to designate the position as exempt or non-exempt from overtime under the FLSA. Id. Charles Town Gaming paid the racing officials a per diem rate and treated them as exempt. See Aff. Karen Raffo, Nov. 20, 2007. Over the ensuing years, Charles Town Gaming changed the pay from per diem to a fixed weekly salary that the parties intended to cover all hours worked. See J.A. 56, 146-52; Aff. Karen Raffo, Nov. 20, 2007. Charles Town Gaming believed (erroneously) that the former employees were subject to the FLSA administrative exemption; therefore, Charles Town Gaming did not pay them overtime. J.A. 49. All three appellants often worked more than 40 hours in a week. Id. at 50. After the appellants unanimously declared the wrong horse to have won a race, Charles Town Gaming dismissed them from their employment. Id.
The former employees contend the district court erred in calculating their unpaid overtime compensation under 29 U.S.C. § 216(b). Charles Town Gaming contends the district court erred by concluding that their FLSA violation was willful. We review a grant of summary judgment de novo. See, e.g., United States v. Bergbauer, 602 F.3d 569, 574 (4th Cir.2010). When cross-motions for summary judgment are before a court, the court examines each motion separately, employing the familiar standard under Rule 56 of the Federal Rules of Civil Procedure. See, e.g., Ga. Pac. Consumer Prods., L.P. v. Von Drehle Corp., 618 F.3d 441, 445 (4th Cir.2010).
The former employees challenge how the district court calculated their unpaid overtime compensation under 29 U.S.C. § 216(b). The Supreme Court addressed how to calculate such unpaid overtime compensation under 29 U.S.C. § 216(b) in Overnight Motor. 316 U .S. at 580. The Court held that when calculating the “regular rate” of pay for an employee who agreed to receive a fixed weekly salary as payment for all hours worked, a court should divide the employees fixed weekly salary by the total hours worked in the particular workweek. Id. at 579-80 (analyzing section 7 of the FLSA, now codified at 29 U.S.C. § 207(a)(1)). This calculation should be completed for each workweek at issue and results in a regular rate for a given workweek. Id. Of course, the Court recognized that the regular rate could vary depending on the total hours worked. The Court then determined that the employee should receive overtime compensation for all hours worked beyond 40 in a given workweek at a rate not less than one-half of the employee’s regular rate of pay. Id.
Although the parties agree that Overnight Motor applies in calculating the regular rate, they disagree about how to calculate the overtime premium. Specifically, the parties disagree over whether the former employees should receive 150% of the regular rate for all hours worked over 40 in a given workweek or 50% of the regular rate for all hours worked over 40 in a given workweek.
In analyzing how to calculate unpaid overtime compensation under 29 U.S.C. § 216(b) in this mistaken exemption classification case, we note that four sister circuits have addressed this issue. The First, Fifth, Seventh, and Tenth Circuits all have determined that a 50% overtime premium was appropriate in calculating unpaid overtime compensation under 29 U.S.C. § 216(b) in mistaken exemption classification cases, so long as the employer and employee had a mutual understanding that the fixed weekly salary was compensation for all hours worked each workweek and the salary provided compensation at a rate not less than the minimum wage for every hour worked. See Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665 (7th Cir.2010); Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir.2008); Valerio v. Putnam Assocs., Inc., 173 F.3d 35 (1st Cir .1999); Blackmon v. Brookshire Grocery Co., 835 F.2d 1135 (5th Cir.1988).
In Blackmon, the Fifth Circuit applied 29 C.F.R. § 778.114 to calculate unpaid overtime compensation in a mistaken exemption classification case. 835 F.2d at 1138. The employees in Blackmon were meat-market managers who were wrongly classified as exempt. Id. at 1137-38. The district court calculated their unpaid overtime compensation by dividing the weekly salary by 40 hours to determine their regular rate, multiplying that rate by 150%, and then multiplying that result by the number of overtime hours. Id. at 1138. The Fifth Circuit rejected this method, instead applying 29 C.F.R. § 778.114 to determine the regular rate, and only using a 50% multiplier. Id. The Fifth Circuit did not cite, much less discuss, Overnight Motor.
In Valerio, the First Circuit upheld an award of summary judgment in a mistaken exemption classification case. 173 F.3d at 39-40. Valerio was wrongly classified as an exempt employee. Id. at 37. Upon dismissing Valerio from employment, her employer gave her a lump-sum payment intended to cover any overtime owed to her. Id. at 38. In calculating the unpaid overtime compensation, the employer paid her a 50% overtime premium and relied on 29 C.F.R. § 778.114. The First Circuit affirmed the district court’s finding that the amount paid was more than was owed to Valerio under the FLSA. Id. In Valerio, the First Circuit cited, but did not discuss, Overnight Motor. Id. at 39-40.
In Clements, the Tenth Circuit affirmed a district court’s application of 29 C.F.R. § 778.114 to calculate unpaid overtime compensation in a mistaken exemption classification case. 530 F.3d at 1225. The employees in Clements provided recruiting services to the Army on behalf of their employer, Serco. Id. Serco had erroneously classified these employees as exempt under the “outside salesmen” exemption. Id. at 1227; cf. 29 U.S.C. § 213(a)(1). The employees claimed a 150% multiplier applied because the employer and employees had not agreed on whether overtime compensation was owed. Clements, 530 F.3d at 1230. In affirming the use of a 50% multiplier in calculating the unpaid overtime compensation, the Tenth Circuit cited 29 C.F.R. § 778.114, the First Circuit’s decision in Valerio, and our decision in Bailey v. County of Georgetown, 94 F.3d 152, 155-57 (4th Cir.1996). Clements, 530 F.3d at 1230. The Tenth Circuit found the lack of a clear and mutual understanding on the overtime premium to be “irrelevant as to whether the Employees understood they were being paid on a salaried … basis.” Id. at 1231. In Clements, the Tenth Circuit did not cite, much less discuss, Overnight Motor.
In Urnikis-Negro, the Seventh Circuit affirmed a district court’s award of a 50% overtime premium to calculate unpaid overtime compensation in a mistaken exemption classification case. 616 F.3d at 684. However, the court rejected the district court’s retroactive application of 29 C.F.R. § 778.114, finding it a “dubious source of authority for calculating a misclassified employee’s damages.” Id. at 679. Instead, the court relied on Overnight Motor. Id. at 680-84. The court held that when an employer and employee agree that a fixed salary will constitute payment at the regular rate for all hours worked and the rate is not lower than the minimum wage, a court should rely on Overnight Motor to calculate unpaid overtime compensation under 29 U.S.C. § 216(b). Id. Moreover, in such a situation, the court calculates the unpaid overtime compensation using a 50% multiplier rather than a 150% multiplier. See id.
In addition to these decisions from our sister circuits, the Department of Labor also has approved using a 50% overtime premium to calculate unpaid overtime compensation in a mistaken exemption classification case. See Retroactive Payment of Overtime and the Fluctuating Workweek Method of Payment, Wage and Hour Opinion Letter, FLSA 2009-3 (Dep’t of Labor Jan. 14, 2009). The DOL issued the opinion letter in response to an employer who asked how to compensate employees mistakenly classified as exempt. Id. at 1. In the opinion letter, the DOL states that “because the fixed salary covered whatever hours the employees were called upon to work in a workweek; the employees will be paid an additional one-half their actual regular rate for each overtime hour …; and the employees received and accepted the salary knowing that it covered whatever hours they worked,” a retroactive payment of overtime using the 50% multiplier conforms with FLSA requirements. Id. at 2.
Here, the district court did not apply 29 C.F.R. § 778.114 to this mistaken exemption classification case. Rather, the district court relied on the logical implications of Overnight Motor to calculate unpaid overtime compensation under 29 U.S.C. § 216(b). Desmond, 661 F.Supp.2d at 584. The district court found that there was an agreement that the fixed weekly salary covered all hours worked. Id. The district court then reasoned that Overnight Motor’s regular-rate determination implies the previously paid weekly salary covers the base compensation for all hours worked. Id. Thus, the district court concluded that it need only award 50% of the regular rate to provide the employees their “unpaid overtime compensation” under 29 U.S.C. § 216(b). Id.
Appellants disagree and insist that such a reliance on Overnight Motor improperly expands federal common law. They also (confusingly) argue that Chevron deference to 29 C.F.R. § 778.114 requires courts to use a 150% multiplier and that if employers are allowed to retroactively apply section 778.114 in mistaken exemption classification cases, employers have no motive to pay for overtime as it accrues, effectively treating nonexempt employees as if they were exempt. In appellants’ view, such a holding will create an incentive for employers to pay a fixed weekly salary, never to pay overtime, and then simply pay a 50% premium on the regular rate if caught misclassifying non-exempt employees as exempt employees. Cf. 29 U.S.C. § 213(a)(1); 29 C.F.R. pt. 541 (white-collar exemption regulations).
As the district court held, appellants’ argument ignores the teaching of Overnight Motor. After all, in Overnight Motor, the Court recognized that employees and employers are free to agree to a reduced hourly wage in exchange for a fixed weekly salary, provided the fixed weekly salary covers all hours worked and meets minimum wage requirements. 316 U.S. at 580. In our view, the district court correctly concluded that Overnight Motor provides the appropriate method for calculating the unpaid overtime compensation under 29 U.S.C. § 216(b) in this case. Tellingly, in Overnight Motor, the Court provided the formula to compute the overtime due an employee who was paid a fixed weekly salary intended to cover all hours worked. Overnight Motor, 316 U.S. at 580 n. 16. Although Overnight Motor concerned the more basic question of whether overtime compensation applies to those earning more than the minimum wage requirements in the FLSA, 316 U.S. at 575, it contains nothing to indicate why such a computation would not apply in determining unpaid overtime compensation under 29 U.S.C. § 216(b) in a mistaken exemption classification case. Indeed, in Overnight Motor, the Court interpreted 29 U.S.C. § 207(a) and explained the meaning of “the regular rate at which he is employed,” and interpreted 29 U.S.C. § 216(b) and explained how to calculate “unpaid overtime compensation.” See Overnight Motor, 316 U.S. at 574 n. 2, 579-80.
Traditional principles of compensatory damages bolster this conclusion. Compensatory damages are “[d]amages sufficient in amount to indemnify the injured person for the loss suffered.” Black’s Law Dictionary 445 (9th ed.2009). Here, the former employees agreed to receive straight time pay for all hours worked in a given workweek and have already received such pay. Thus, the “loss suffered” is the 50% premium for their overtime hours. Accordingly, we affirm the district court’s judgment about how to calculate unpaid overtime compensation under 29 U.S.C. § 216(b).”
Currently, the plaintiffs in the 7th Circuit case, Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665 (7th Cir.2010), have filed a petition for cert in the Supreme Court, so the effect of the 4th Circuit’s holding may be should-lived.
E.D.Pa.: Hourly-Paid Physician Assistant (PA) Not Professional Exempt; Not A Practitioner “Licensed and Practicing In The Field Of Medical Science”
Cuttic v. Crozer-Chester Medical Center
This case was before the court on the parties’ cross-motions for summary judgment regarding whether plaintiff was exempt from the FLSA’s overtime provisions under the professional exemption. Because it was undisputed that Plaintiff was paid on an hourly rather than salary basis, the sole issue before the court was whether plaintiff, a physician assistant (PA), qualified as a “professional” within the meaning of § 541.304, the regulation that exempts certain “other practitioners licenced and practicing in the field of medical science” from the typical salary requirements for the professional exemption. Holding that PA’s do not fall within this definition, the court granted plaintiff’s motion and denied defendant’s motion.
The court reasoned:
“The issue in dispute is whether PAs are intended to be included within § 541.304 and, thus, exempt from the salary requirement in § 541.300(a)(1). In particular, the parties contest whether the language “other practitioners licenced and practicing in the field of medical science” includes PAs. See 29 C.F.R. § 541.304(b).
Defendant argues that PAs are explicitly included among those who qualify for the salary-basis exemption enunciated in § 541.304 because the regulation makes an exception to the salary-basis requirement for employees holding valid licenses or certifications permitting the practice of medicine and actually engaging in the practice thereof. 29 C.F.R. § 541.304(d). Defendant states that because Plaintiff admitted he possesses a valid licence to practice as a PA in Pennsylvania and that he “practice[s] medicine under the direct supervision of [his] attending physicians,” Plaintiff is a “practitioner licensed and practicing in a field of medical science” and qualifies under the salary-basis exemption. (Def.’s Mot. for Summ. J. at 9-12.)
Plaintiff, on the other hand, argues that the salary-basis exemption is narrow in scope and does not include PAs. To support this argument, Plaintiff compares the examples given in § 541.600(e) and § 541.304(b). Section 541.600(e) states that “[i]n the case of medical occupations, the exception from the salary or fee requirement does not apply to pharmacists, nurses, therapists, technologists, sanitarians, dieticians, social workers, psychologists, psychometrists, or other professions which service the medical profession.” 29 C.F.R. § 541.600(e) (emphasis added). Section 541.304(b) states that “the exemption applies to physicians and other practitioners…. The term ‘physicians’ includes doctors including general practitioners and specialists, osteopathic physicians …, podiatrists, dentists …, and optometrists ….” 29 C.F.R. § 541.304(b).
Plaintiff argues that a PA is more akin to one of the named professions which “service the medical profession” as opposed to a doctor, osteopathic physician, podiatrist, dentist, or optometrist. Plaintiff points out that any work he does as a PA must be performed under the direct supervision of a physician, and his main function “is to serve and provide support to the medical profession .” (Pl.’s Mot. for Summ. J. at 8.)
B. Examination of § 541.304
In interpreting the language and meaning of § 541.304, the Court must first determine whether the terms used in § 541.304 are ambiguous as to PAs. Defendant argues that PAs unambiguously practice medicine or a branch of medicine within the meaning of § 541.304, and Plaintiff maintains that the regulation does not speak to this issue. “A regulation is ambiguous when it is not free from doubt … and where no particular interpretation of the regulation is compelled by the regulation’s plain language or by other indications of the [agency’s] intent at the time of promulgation of the regulation.” Sec’y of Labor v. Beverly Healthcare-Hillview, 541 F.3d 193, 198 (3d Cir.2008) (internal marks omitted) (holding the term “cost” in Bloodborne Pathogens Standard regulation was ambiguous based on preamble language and fact that neither party “pointed to any indication contemporaneous with promulgation unequivocally stating the agency’s intent to interpret the provision in a particular way”).
Here, the regulations do not define the terms used in § 541.304. In particular, the term “other practitioners licensed and practicing in the field of medical science” is broad and undefined. See Belt v. Emcare, Inc., 444 F.3d 403, 409-12 (5th Cir.2006) (finding § 541.304‘s language is ambiguous and resorting to DOL for interpretative guidance); Clark v. United Emergency Animal Clinic, Inc., 390 F.3d 1124, 1127 (9th Cir.2004) (considering the applicability of § 541.304 to veterinarians); Parker v. Halpern-Ruder, M.D., No. 07-401S, 2008 WL 4365429, at *1 (D.R.I. Sept.16, 2008) (considering the applicability of § 541.304 to registered nurse practitioners and holding nurse practitioners do not fall within § 541.304). Consequently, the Court must construe the language of § 541.304 by giving controlling weight to the agency’s interpretations unless they are “arbitrary, capricious, or manifestly contrary to the statute.” Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837, 842-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). An agency’s interpretation is controlling “unless plainly erroneous or inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (internal marks omitted).
There is limited law on the question of whether PAs are exempt from the overtime requirements of the FLSA pursuant to § 541.304. The Fifth Circuit, the only circuit to consider the matter, gave deference to the DOL’s informal interpretative statements because that court held that there was limited law on the matter. Belt, 444 F.3d at 405 (using DOL interpretative statements to determine that PAs are not exempt from the salary-basis test); see also Parker, No. 07-401S, 2008 WL 4365429, at *4 (denying Defendant’s motion to dismiss because Defendant did not establish that nurse practitioners are subject to salary-basis exemption in § 541.304). This Court will do the same.
The DOL has consistently interpreted the regulations set forth in § 541 to require a PA to satisfy both the duties test and the salary-basis test, as set forth in § 541.300(a)(1)-(2), in order to qualify for an exemption from the FLSA’s overtime requirements. The DOL has refused to extend § 541.304‘s exception to the salary-basis requirement beyond actual physicians and has consistently taken the position that the salary-basis exception does not apply to PAs. The DOL issued an interpretative regulation in 1949, which was revised in 1973, regarding the meaning of § 541.304(a)‘s phrase “or any of its branches”. See Belt, 444 F.3d at 413 (examining DOL’s interpretative regulations to interpret 29 C.F.R. § 541.3(e) which is a predecessor to 29 C.F.R. § 541.304). This interpretative regulation stated:
Exception for physicians, lawyers, and teachers.
(a) … The exception applies only to the traditional professions of law, medicine, and teaching and not to employees in related professions which merely serve these professions.
(b) In the case of medicine:
(1) … The term physicians means medical doctors including general practitioners and specialists, and osteopathic physicians…. Other practitioners in the field of medical science and healing may include podiatrists …, dentists …, optometrists….
(2) [omitted]
(3) In the case of medical occupations, the exception from the salary or fee requirement does not apply to pharmacists, nurses, therapists, technologists, sanitarians, dieticians, social workers, psychologists, psychometrists, or other professions which service the medical profession.
Id. (quoting 29 C.F.R. § 541.314(a), (b)(1)-(3) (1973)) (emphasis added). This language indicates that the DOL intended for the salary-basis exemption, set forth in § 541.304, to only apply to the “traditional professions of law, medicine, and teaching….” Defendant does not assert any arguments as to why PA’s should be considered members of the “traditional professions of law, medicine, and teaching.” The PA occupation did not develop until 1960; as such, it could not have been within the traditional practice of medicine when the exception was first enacted in 1940.
The 2004 amendments to the regulations continue to use a salary-basis test to determine whether an employee qualifies for the “bona fide professional” exemption pursuant to § 541.300. Additionally, the 2004 amendments specifically reference PA’s. Section 541.301(e)(4) states that PAs who meet certain educational and certification requirements “generally meet the duties requirements for the learned professional exemption.” 29 C.F.R. § 541.301(e)(4). The learned professional exemption that is referenced is found in § 541.300, and this exemption requires an employee to meet the duties and salary requirements. Other occupations explicitly recognized in § 541.301 include registered or certified medical technologists and nurses. See § 541.301(e) (1)-(2). These recognized professions are explicitly excluded from § 541.304‘s salary-basis exemption in § 541.600(e). Further support for the Plaintiff’s position is found directly in the DOL’s statements. In Belt, the DOL, as amicus curiae, “unambiguously adopt[ed] the position that [nurse practitioners] and PA’s do not qualify for the professional exemption.” 444 F.3d at 415; see also Auer, 519 U.S. at 462 (finding that Secretary’s amicus brief sufficed to show how the DOL interpreted its own ambiguous regulation).
Under these circumstances, the Court will give deference to the DOL’s position which is consistent with the 1973 interpretative regulations and 2004 amendments. In deferring to the DOL’s interpretive statements, the Court holds that PAs are not included in the salary-basis exemption found in § 541.304.”
Click Cuttic v. Crozer-Chester Medical Center to read the entire opinion.
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Overtime Law Blog 