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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….
(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.
If you are an hourly-paid Physician Assistant, call us at 1-888-OVERTIME to discuss your rights.
S.D.Tex.: FLSA Does Not Impose A Duty On Employees To Mitigate Their Damages By Notifying Employers Of Their Failure To Pay Proper Overtime
Tran v. Thai
Notwithstanding the fact that the Fair Labor Standards Act (“FLSA”) imposes no duty on employees to mitigate their damages, a recent trend among attorneys for employers is to plead a so-called “Ellerth/Faragher” defense to claims brought under the FLSA, whereby the employer essentially argues that it’s the employee’s fault they didn’t get paid overtime, because they failed to complain about the employer’s failure to pay them appropriate wages. An informal survey of Plaintiff’s attorneys by this author confirms that while defense lawyers are quick to plead such a defense, they are almost as quick in most cases to withdraw the defense- likely based on their understanding that it is frivolous- when pressed at the outset of FLSA litigation. Here however, the defense was pled and the case proceeded to the summary judgment stage, giving the court a chance to address the unfounded affirmative defense. Noting that such a defense was simply a defense of mitigation, which is not an appropriate defense to claims under the FLSA, the court granted Plaintiff’s motion for summary judgment on the defense.
The court reasoned:
“The defendants argue that the plaintiff failed to mitigate his damages by failing “to take reasonable actions to notify Nails of America # 3 of any alleged unpaid overtime accounts” and because “Plaintiff worked at Bow & Mary-Nails of America # 5, LLC from April 2007 through August 2008 and failed to take reasonable actions and tell Defendants of any alleged unpaid overtime amounts at any point.” (Docket Entry No. 59, at 17). The defendants have not cited any authority imposing a duty on an FLSA plaintiff to notify an employer of alleged FLSA violations. Courts have found that as a matter of law “there is no requirement to mitigate overtime wages under the FLSA.” King v. ITT Educ. Servs., Inc., No. 3:09-cv-848, 2009 WL 3583881, at *3 (M.D.Fla. Oct.27, 2009); see also Gonzalez v. Spears Holdings, Inc., No. 09-60501-CV, 2009 WL 2391233, at *3 (S.D.Fla. July 31, 2009) (granting a motion to strike mitigation-of-damages affirmative defense because there is no duty to mitigate damages under the FLSA, nor a duty to provide notice as to any alleged unlawful pay practice); Lopez v. Autoserve LLC, No. 05 C 3554, 2005 WL 3116053, at *2 (N.D.Ill. Nov.17, 2005) (granting the plaintiff’s motion to strike mitigation-ofdamages affirmative defense because there is no duty to mitigate damages under the FLSA); Perez-Nunez v. North Broward Hosp. Dist., No. 008-61583-CIV, 2009 WL 723873, at *2 (S.D.Fla. Mar.13, 2009) (granting motion to strike the mitigation-of-damages affirmative defense and holding that a duty-to-mitigate-damages defense based on the plaintiff’s failure to timely disclose alleged violations to her employer so that the terms of her employment could be corrected failed as a matter of law under the FLSA).
Because there is no duty to mitigate overtime wages under the FLSA, this court grants the plaintiff’s motion for summary judgment as to this affirmative defense.”
The Pittsburgh Post-Gazette reports that a new law defining who is an employee (versue independent contractor) is being greated enthusiastically by Pennsylvania workers:
“Union laborers are claiming victory now that Gov. Ed Rendell has signed a law aimed at curtailing construction companies’ ability to skirt taxes — and cut its own costs and liability — by labeling its workers independent contractors.
By classifying their workers as “independent contractors” instead of employees, companies can avoid paying unemployment compensation and workers’ compensation taxes.
Avoiding those taxes, according to labor groups, reduces employer costs and allows such companies to underbid contracting companies that are following the letter of the law.
The new law — formerly House Bill 400 and now Act 72 — is called the Construction Workplace Misclassification Act. Contracting companies that violate the act could be subject to fines and criminal prosecution. There’s also an “acting in concert” provision, which would penalize anyone who knowingly hires a contractor that is in violation of the act.
“It really will start to separate responsible contractors from irresponsible contractors,” said Jason Fincke, executive director of the Builders Guild of Western Pennsylvania, a labor management and contractor association group.
The point of the law isn’t to eliminate the use of independent contractors in the construction industry, he said.
“If there’s a service that you need that you don’t normally provide, you would get someone to do that for you,” Mr. Fincke said. “That’s a legitimate independent contractor.”
The law applies to the construction field only, to the regret of the Teamsters, who had hoped the law would be expanded to include truck drivers (and other kinds of workers) as well. The Teamsters have been fighting with Moon-based FedEx Ground, which classifies its drivers independent contractors. FedEx says its drivers are “small business owners” because they own their own equipment.”
To read the entire article go to Pittsburgh Post-Gazette.
Jackson v. Alpharma, Inc.
Less than a month after the Second Circuit held that pharmaceutical representatives, who performed typical marketing duties, were non-exempt and entitled to overtime pay, a District Court in New Jersey reminds us that the Third Circuit disagrees, and believes that pharma reps are administrative exempt. However, like some other courts before it, the Court declined to address whether such employees qualify for the outside sales exemption as well.
The Court cited the following facts as relevant to its inquiry:
“The plaintiffs worked as PSRs for Alpharma, which manufactures Kadian and Flector, two treatments for pain. (Def.’s 56.1 Stmt. at ¶¶ 2-4; Doc. No. 81-4.) Because of federal statutes and regulations, Kadian and Flector can be sold or dispensed to the public only by a prescription written by a licensed healthcare professional. (Id. at ¶ 4.) Therefore, plaintiffs did not “sell” the drugs, but rather called on doctors and pharmacies to encourage them to prescribe or stock Alpharma’s products over the products of its competitors. (Id. at ¶¶ 5, 6.)
Defendant paints a picture of the PSR with unlimited autonomy, given only a list of doctors and an expense account with which to effectuate their goal. (Def.’s 56.1 Stmt. at ¶¶ 38-71.) The facts that defendant highlights to pinpoint the PSRs’ discretion include: (1) that each PSR worked alone and not with partners or on teams; (2) that plaintiffs spent only two days with their District Manager every one to two months; (3) that upon the beginning of their employment with Alpharma, each plaintiff was given a list of 500 physicians in their territory, and it was up to each PSR to narrow this list to approximately 120 physicians, and further that it was up to each PSR to decide how best to contact these doctors and move their business; (4) that PSRs had similar experiences when dealing with pharmacies; (5) that the PSRs planned their own routing, the process by which they would map out what their activities would be for the upcoming weeks; and (6) that each PSR prepared an annual business plan, which laid out how the PSR intended to grow his or her business in the coming year.
Plaintiffs, on the other hand, paint a picture of Alpharma “micro-managing” its PSRs. Alpharma notes that from the beginning of their employment, Alpharma PSRs receive training and instruction from Alpharma specifically designed to ensure the Alpharma Representatives did not deviate from corporate-approved messages about the drugs. (Pl.’s 56.1 Stmt. at ¶ 22; Doc. No. 83-1.) Plaintiffs also state that they had no discretion concerning, and did not exercise independent judgment in framing Alpharma’s message, and Alpharma explicitly directed its PSRs to use company scripted messages. (Id. at ¶¶ 23-25.) Further, with respect to Kadian, plaintiffs state that they had no discretion in describing its effectiveness, but instead were trained to adhere to the information that was already on the package insert. (Id. at ¶ 27.) Alpharma also provided specific information in the form of handouts and promotional literature that could not be altered or modified by the PSRs, nor could the PSRs develop their own aids to use in their work. (Id. at ¶ 31.) Further, according to plaintiffs, their direct supervisors were micro-managers that “wanted to know everything you were doing” and required plaintiffs to check in with management at least three times per day. (Id. at ¶¶ 34-35.)”
Reasoning that that Plaintiffs were exempt under the administrative exemption, the Court stated:
“The parties concede that the plaintiffs in this case meet the salary requirement of the rules. (Pl.’s Br. in Opp. at Fn. 8; Doc. No. 83.) The main disputes are the second and third prongs: whether the PSRs work is directly related to management or general business operations, and whether the PSRs exercise discretion and independent judgment with respect to matters of significance.
With respect to the second prong, the phrase “directly related to the management or general business operations” refers to the type of work performed by the employee. “To meet this requirement, an employee must perform work directly related to assisting with the running or servicing of the business.” 29 C.F.R. § 541.201(a). The regulations distinguish this type of work from, for example, “working on a manufacturing production line” or “selling a product in a retail or service establishment.” Id. The regulations state that “[w]ork directly related to management or general business operations includes, but is not limited to, work in functional areas such as … advertising; marketing … and similar activities.” 29 C.F.R. § 541.201(b). The regulations specifically include “marketing” and “promoting sales” in the definition of general business operations. Id. Because the PSRs in this case were clearly marketing and promoting the sale of Alpharma’s products, the Court concludes that they were performing work “directly related to the management or general business operations” of Alpharma.
With respect to the third prong:
In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term “matters of significance” refers to the level of importance or consequence of the work performed. 29 C.F.R. § 541.202(a).
Defendant argues that the primary duties of the PSRs require discretion and independent judgment with respect to matters of significance. (Def.’s Br. at 24; Doc. No. 81-2.) Defendant relies heavily on Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir.2010), the pending outcome of which caused this matter to be stayed. In Smith, the Third Circuit held that a pharmaceutical sales representative was not entitled to overtime pay because she qualified for the administrative exemption under the FLSA. Id. at 285. In Smith, the plaintiff testified regarding the independent and managerial qualities that her position required. Smith described herself as “the manager of her own business who could run her own territory as she saw fit.” Id. Though the duties of a particular position is a fact-sensitive inquiry, the facts in Smith are startlingly similar to the case at bar. Johnson & Johnson (“J & J”), Smith’s employer, gave her a list of target doctors that it created and told her to complete an average of ten visits for day. Id. at 282. J & J left the itinerary and order of Smith’s visits to the target doctors to her discretion. Id. The J & J target list identified “high-priority” doctors that issued a large number of prescriptions for the drug that Smith was promoting, or a competing product. Id. While meeting with doctors, Smith worked off of a prepared “message” that J & J provided, although she had “some discretion when deciding how to approach the conversation. Id. J & J gave her visual aids and did not permit her to use other aids.” Id.
Here, the plaintiffs were assigned a geographic territory for which they were solely responsible. (Def.’s 56.1 Stmt. at ¶ 40; Doc. No. 81-4.) They worked alone the majority of the time. (Id. at ¶ 42.) PSRs controlled their territory by developing business plans designed to grow their business and also by governing their own day-to-day activities (Id. at ¶ 72.) PSRs decided when and where to travel (their “routing”) and with whom to meet in order to effectuate the most business. (Def.’s 56.1 Stmt. at ¶¶ 51, 67-68.) In executing individual calls, the plaintiffs had discretion by deciding how to approach the physician, what topics to discuss with the physician, and what materials to use (though the universe of materials were provided to them, as in Smith ). (Def.’s 56.1 Stmt. at 59, 83, 97.)
Plaintiffs argue that this case is distinguishable from Smith, because here the plaintiffs worked under a “closely supervised and tightly controlled regime, exercising no independence and discretion in any important matters.” (Pl.’s Br. in Opp. at 35; Doc. No. 83.) Plaintiffs argue that the controlling nature of Alpharma, as noted in the facts section above, differs from the type of “freelancing” done by the plaintiff in Smith. (Id. at 36.) Further, plaintiffs note that the regulations provide a nonexhaustive list of factors for use in the Court’s examination of whether or not an employee exercises the requisite discretion and judgment to fit within the exemption. (Id. at 31.) The list includes: whether the employee carries out major assignments in conducting the operations of the business; whether the employee performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to the operation of a particular segment of the business; … whether the employee has authority to waive or deviate from established policies and procedures without prior approval; … whether the employee provides consultation or expert advice to management; whether the employee is involved in planning long- or short-term business objectives; … and whether the employee represents the company in handling complaints, arbitrating disputes, or resolving grievances. 29 C.F.R. § 541.202(b). Plaintiffs argue that they do not meet a single one of the identified factors, nor any surrogates of those factors, and thus do not exercise discretion or independent judgment. (Pls.’ Br. at 32; Doc. No. 83.)
The Court concludes that the plaintiffs in this case, like the plaintiff in Smith, qualify for the administrative employee exemption. While this case lacks the direct testimony of the plaintiffs regarding their autonomy and independent nature, the underlying facts differ little from the facts in Smith. Through either stipulation or undisputed facts (not plaintiffs’ characterizations of those facts), it is clearly shown that the plaintiffs in this case (1) earn a salary high enough to qualify for the first prong of the exemption, (2) perform non-manual work directly related to the general business operations of their employer, and (3) exercise discretion and independent judgment with respect to matters of significance. Of the ten factors listed in § 541.202(b), the Court concludes that the plaintiffs satisfy the same two that Smith did: their work for advancing the sales of their products within their territories “affects business operations to a substantial degree,” and they are “involved in planning long- or short-term business objectives” related to the marketing of their products within their territories. 29 C.F.R. § 541.202(b). These conclusions are buttressed by the plaintiffs’ duties to write reports and business plans to determine where their business was coming from, to detect trends in the sales of the drug, and to generate ideas on how to grow the business. (Def.’s 56.1 Stmt. at ¶ 76; Doc. No. 81-4.)
In supplemental submissions, the plaintiffs direct the Court’s attention to two new cases: Jirak v. Abbott Laboratories, Inc., Civ. No. 07-3626 (N.D. Ill. June 10, 2010) (Doc. No. 85) and In re Novartis Wage and Hour Litigation, Civ. No. 09-0437 (2d Cir. July 6, 2010) (Doc. No. 87). In light of the Third Circuit’s clear opinion in Smith, and subsequent nonprecedential opinion in Baum v. Astrazeneca LP, 2010 U.S.App. LEXIS 6047 (3d Cir. Mar. 24, 2010), the Court does not find it necessary to discuss these other cases.”
Although the holding here should come as no surprise, given Third Circuit precedent, it does create a situation where abutting districts (New Jersey and the Eastern and Southern Districts of New York) ascribe entirely different meanings to the administrative exemption generally, and specifically its effect on the classification of pharmaceutical reps. With so much at stake, it’s likely this conflict of law is headed to the United States Supreme Court for resolution.
To read the entire decision, click here.
W.D.Va.: Dollar General “Store Manager” May Have Been Misclassified As Executive Exempt; Defendant’s Motion For SJ Denied
Hale v. Dolgencorp, Inc.
This case was before the Court on Defendant’s Motion for Summary Judgment. Defendant asserted the Plaintiff, the “Store Manager” of its Dollar General store was properly classified as exempt from the Fair Labor Standard Act’s (“FLSA”) overtime provisions, under the executive exemption. Citing factual issues, that needed to be resolved by a jury, the Court denied Defendant’s Motion however.
The Court conducted a detailed factual inquiry in reaching its holding, as is typical in most exemption cases:
“Dollar General operates a chain of discount retail stores located around the country. Hale was hired as a full-time clerk in one of the stores in 1996. Initially, she earned $4.75 per hour and worked as a clerk until January 1997, when she was promoted to a position known as “third key.” A third key worker is a clerk who can open and close the store, and may take deposits to the bank. A year later, in 1998, Hale was promoted to assistant store manager. During this period she transferred from her original store to several different Dollar General stores in Southwest Virginia. With each promotion Hale also received a pay raise. She was promoted to the position of store manager in November 1999, and she worked in this position until July 2003, when she left the company for a new job.
During her tenure as a store manager, Hale was paid a weekly salary and she was eligible for bonuses based upon her store’s profitability. In the four years that she managed a store, Hale received one bonus for $1,182.02. Her salary as a manager ranged from $313 per week to $431 per week. As a manager Hale estimated that she averaged between sixty to seventy hours of work per week. In her management position, Hale was not required to punch a time clock and the company did not pay her overtime.
The parties in this case agree that Hale made more than $250 and her work included the regular direction of two or more employees. The central issue thus is whether Hale’s primary duty consisted of management.
Contrary to the defendant’s assertion, it is not particularly helpful to compare Hale’s situation to that of other discount store managers, such as the one described in Grace v. Family Dollar Stores Inc., No. 3:08 MD 1932, 2009 WL 2045784 (W.D.N.C. July 9, 2009). The question here centers upon the facts of Hale’s employment. I must, therefore, perform a fact-intensive inquiry as to each prong of the five-factor test as applied to Hale in order to determine whether the management issue can be decided as a matter of law.
Although the plaintiff’s estimate of time spent on managerial tasks is important, it has been held that “ ‘when non-management duties are performed simultaneous to the supervision of employees or other management tasks” this supports a finding “ ‘that the employee’s primary duty is managerial.’ “ Jones, 69 F. App’x at 637 (quoting Horne v. Crown Cent. Petroleum, Inc., 775 F.Supp. 189, 190 (D.S.C.1991)).
Hale stated she spent ten percent of her time, about six hours each week, performing management duties such as ordering supplies and scheduling workers. The remainder of her time was spent performing menial labor: cleaning restrooms, scrubbing floors, checking out customers, and stocking shelves.
Hale’s district manager determined how many labor hours each store was allotted. As a store manager, Hale was responsible for scheduling employees according to the district manager’s allotment of labor hours. Hale’s primary concern was making certain she had enough staff to unload supply trucks and place merchandise on the store floors on “truck day.” (Hale Dep. 274.) Dollar General required stores to place stock on the floor within twenty-four hours of a supply truck’s arrival. The store referred to this as their “door-to-store in 24” strategy. (Hale Dep. 278.) Hale would save her staff’s hours for truck day so merchandise could be placed in the store within twenty-four hours. During the rest of the week, Hale had to run the store with a skeleton crew.
To save labor hours for truck day, Hale worked alone in the store for about four hours every day during her ten-hour shift. During this time she manned the cash register, which could not be left unattended. When staff was in the store with her, Hale would have the other individual man the register while she stocked merchandise on shelves according to the company’s “Plan-O-Grams.” A Plan-O-Gram was a chart that instructed employees where to place specific merchandise within a store. Typically, ninety percent of Hale’s store was organized according to the Plan-O-Gram, with the remaining ten percent stocked according to rules prescribed by Dollar General and Hale’s discretion. (Hale Dep. 125-128.)
In response to questions from defense counsel in her deposition, Hale admitted that she was always thinking about how to manage her store even when she performed menial labor such as stocking shelves or cleaning. (Hale Dep. 205-207.) Hale’s answer, however, did not indicate that she actively managed the store while performing menial labor. Rather, she performed menial tasks and at the same time she pondered ways to clean the store or organize merchandise.
The defendant argues that a reasonable jury “could only” conclude that these facts demonstrate Hale’s primary duty was management. (Def.’s Individual Reply Br. 6.) But, in fact, a reasonable juror could reach the opposite conclusion. Based upon these facts, a juror could decide that Hale spent very little time managing the store. Hale spent forty percent of her time alone in the store, during which she supervised no one and she performed tasks typically done by a clerk. A juror could conclude that her mental management of the store, such as spotting empty shelves while performing menial labor, did not constitute management or supervision of others. Further, a reasonable juror could determine that the company’s strict policies and stringent allocation of staff labor hours resulted in Hale forgoing true management duties in order to perform menial tasks so the store could simply remain open. Thus, a genuine issue of material fact exists as to whether Hale’s primary duty was management, or, whether Hale essentially performed a clerk’s duties under a different title and pay scale.
Dollar General argues that it principally valued Hale’s management abilities. This is evidenced, the defendant asserts, by the fact that Hale had to take a test to become a manager and that Hale’s district manager transferred Hale to two different locations to “rescue” the troubled stores. (Id.) Further evidence of the store’s emphasis on Hale’s management duties was Hale’s salary-she earned more than any other employee in the store-and the fact that she could receive a bonus based upon the profitability of her store. The defendant also notes that Hale was subject to very little supervision because the district manager only visited Hale’s location once every few months for twenty to thirty minutes. The company asserts that this shows that it trusted Hale’s management abilities and that she was the individual responsible for the store’s overall performance.
Although Dollar General asserts that these facts indicate Hale’s management duties were the most important tasks that she performed, a reasonable juror could reach a different conclusion.
Hale’s deposition testimony emphasizes that she spent a significant amount of time alone in the store manning the cash register. Further, the company frequently sent Hale to a store in nearby West Virginia where she spent the day stocking shelves. While Hale testified that her district manager, Judy Spangler, never interfered with her ability to perform her duties, a possible reason for this was that Spangler did not have enough time to frequently visit Hale’s store or to spontaneously review Hale’s work. As Hale testified, Spangler served as the district manager for twenty to thirty stores within in a 200-mile radius. In addition, Spangler worked from an office located three hours away from Hale’s store. Hale testified that Spangler left frequent voice mails for her, which included detailed instructions on running the store. Under Dollar General’s policies, the company expected store managers to immediately report issues to district managers, which Hale did. The company’s policies did not instruct store managers to wait for a district supervisor’s visit to discuss issues or problems.
Based upon these facts, a reasonable juror could conclude that Dollar General valued Hale’s ability to quickly stock shelves, man a cash register, and serve as an employee who promptly informed her superior about problems. Hale’s testimony could lead a juror to conclude that what Dollar General truly valued was Hale’s unquestionable compliance with company rules and her ability to promptly report problems to a supervisor who could then decide how to proceed.
As a store manager, Hale interviewed and recommended candidates for hiring, trained employees, conducted employee performance evaluations, created employees’ work schedules, and recommended employees for raises, promotions and terminations. While Dollar General permitted Hale to perform these tasks, she did so under rules that a reasonable juror could interpret as severely limiting the frequency with which Hale truly exercised discretion.
Although Hale created work schedules, she had no control over the amount of labor hours allotted to the store. Given the company’s emphasis on its “door-to-store in 24” policy, Hale had almost no discretion with scheduling staff because her primary focus was to make sure she had enough staff for truck day. Hale was unable to discipline or terminate employees unless the district manager directed her to do so. While Hale could recommend that employees receive raises or promotions, the district manager decided whether to adopt such recommendations. Further, the company’s standard operating procedures dictated, with step-by-step directions, how Hale should respond to numerous issues, such as angry customers, answering the phone, and store operations during possible weather emergencies.
Hale testified that the true amount of discretion she exercised depended upon the specific task at hand. When it came to general staff issues on a day-to-day basis, things were “pretty open.” (Hale Dep. 280.) But, when she made decisions about inventory, procedures, and stocking shelves, Hale “didn’t feel like [she] had that much discretion….” (Id.)
Dollar General argues that Hale had the discretion to manage inventory and to mark down items, but Hale testified that she never discounted an item unless she had express permission from her district manager. The defense asserts that Hale had discretion as to what she placed within the “flex-space” that constituted ten percent of the store’s floor area. But, even within this space, Hale had to adhere to company policies such as placing related items near one another.
Given these facts, it would be rational for a juror to conclude that in reality, the company’s policies left little for Hale to decide and therefore, she did not frequently exercise her discretion.
Hale testified that Spangler, the district manager, spent relatively little time inside Hale’s store. Hale testified that Spangler was in the store for eight to ten hours during inventory visits. Outside of inventory days, Spangler was in the store for about twenty minutes every two to three months.
Clearly, the record demonstrates that Hale had little face-to-face contact with her supervisor. This factor weighs in favor of the exemption. But the record does not show that Hale was genuinely free from supervision. Rather, Hale’s testimony indicates that she knew she did not have the freedom to make unfettered decisions about employee pay, promotions, terminations, or punishment. Further, Hale was constantly reminded by Spangler’s frequent voice mails or in-store visits that she had to closely adhere to Dollar General’s rules regarding placement of merchandise, store cleanliness, and other customer relations policies such as greeting customers within ten feet of entry.
Viewing the evidence at this stage most favorably to Hale, it appears that her decisions about merchandise and store procedures were dictated by company policies, from which she could not deviate. So while Spangler did not personally supervise Hale on a day-to-day basis, Hale had little freedom from the supervisory rules and regulations outlined in Dollar General’s corporate publications and ultimately enforced by Spangler.
Hale testified that on average, she worked sixty to seventy hours. Prior to her departure from Dollar General, Hale earned $431 per week. When she started as a manager, her pay was $313 per hour. Converted to an hourly rate, Hale’s salary ranged from $4.47 to $5.21 when she began as a manager, and between $6.16 and $7.19 per hour when she left the company. The actual hourly rate depends upon whether Hale’s salary is based upon her minimum work week, sixty hours, or the higher end of her average work week, seventy hours.
During the time Hale worked as a manager, the federal minimum wage was $5.15. When Hale left the company in 2003, the lowest paid clerk earned $5.60 per hour. (Hale Dep. 112). At that same time, assistant managers earned about $7 per hour.
Hale was also eligible for bonuses and during her tenure as a manager she received one for $1,182. The bonus paid to Hale weighs against a finding that Hale’s salary was similar, or close to, the salary of an hourly worker because Hale earned a ten percent bonus based upon the store’s profit while the remainder of the profit was pro-rated among lower-paid employees.
The analysis of Hale’s salary, however, when converted to an hourly rate, weighs toward a finding that Hale essentially earned the same as a clerk. For example, had a clerk earning $5.60 per hour, the lowest paid salary in Hale’s store, worked a sixty-hour week, she would have earned $224 for the first forty hours, and time and a half, or $168, for the next twenty hours. If this clerk worked a sixty-hour week she would earn $392 to Hale’s $431. If the same clerk worked seventy hours, she would earn $476 to Hale’s salary of $431. Thus, only when Hale worked a sixty-hour week would she earn slightly more than an hourly employee. Given these facts, a reasonable juror could determine that this factor weighs in favor of Hale and demonstrates that her primary duty was not management.
Whether Hale’s primary duty consisted of management is a question which must be answered by a jury. Based upon the applicable five-prong test, a reasonable juror could determine that Hale’s primary duty was not management. Thus, summary judgment in favor of the defendant is inappropriate.”
Similarly, the Court denied the branch of Defendant’s Motion seeking summary judgment regarding the alleged willful nature of its FLSA violations.
The Court’s analysis and holding was starkly similar to another case, recently discussed here, where another Court held that issues of fact required a jury determination of whether a Dollar General “Store Manager” was exempt under the executive exemption.
EDITOR’S NOTE: On July 8, 2010, another Court reached virtually the same decision, regarding another claim alleging that a Dollar General “Store Manager” was improperly denied overtime. In that case, Kanatzer v. Dogencorp, Inc., No. 4:09CV74 CDP (E.D. Mo. July 8, 2010), the Court denied Defendant’s motion for summary judgment, citing to factual issues regarding the applicability of the executive exemption.
5th Cir.: Defendants’ Purported Day-Rates Were Impermissible Where They Made Deductions For Partial Days Worked
Solis v. Hooglands Nursery, L.L.C.
This is an appeal from the district court’s order granting summary judgment for Plaintiff on behalf of various employees of Defendants. The district court held that the Defendants violated the overtime and record-keeping provisions of the Fair Labor Standards Act (“FLSA”). The Defendants appealed the district court’s order as it relates to its non-salaried employees, arguing that there were genuine issues of fact regarding whether their day rate plan was invalid under the FLSA and whether they acted in good faith. Discussing each basis for summary judgment in turn, the 5th Circuit affirmed.
Briefly discussing Defendants’ purported day-rate methodology, the Court explained:
“Appellants first argue that there remained a genuine issue of fact regarding whether their day-rate method of paying their employees met the standards of 29 C.F.R. § 778.112. However, Appellants concede both before the district court and on appeal that their employees’ wages were reduced when the employees worked less than a full day. Accordingly, Appellants did not have a valid day-rate plan in use, and their failure to pay their employees overtime compensation pay for time worked beyond forty hours per week violated 29 U.S.C. § 207(a)(1).”
Next the Court discussed the issue of unpaid fifteen minute breaks.
“Appellants next concede that they failed to pay their employees for two fifteen-minute breaks per day, in violation of the FLSA. Nevertheless, Appellants argue that their purported overpayment to their employees as part of their day-rate plan compensated for the shortfall, pursuant to 29 C.F.R. § 778.202(a). However, as the district court properly held, Appellants did not employ a valid day-rate plan, because they reduced employees’ pay for hours they did not work. Accordingly, the district court properly concluded that Appellants remain liable for the amounts deducted from their employees’ compensable break periods.”
Last the Court discussed the award of liquidated damages, and the fact that the Court was entitled to award liquidated damages, notwithstanding a showing of both subjective and objective good faith.
“Finally, Appellants argue that even if they violated the FLSA by not implementing a proper day-rate plan and failed to pay proper overtime compensation, there remained a question of fact as to whether Appellants’ failures were in good faith, thus precluding an award of liquidated damages. Liquidated damages are awarded as a matter of course for violations of 29 U.S.C. § 207. See 29 U.S.C. § 216(b). Pursuant to 29 U.S.C. § 260, however, a district court may decline to award liquidated damages if the employer demonstrates that it acted reasonably and in good faith. Heidtman v. County of El Paso, 171 F.3d 1038, 1042 (5th Cir.1999). Nevertheless, even if a defendant shows both subjective good faith and objective reasonableness, an award of liquidated damages remains in the discretion of the district court. See § 260; Heidtman, 171 F.3d at 1042. After reviewing the record, the district court correctly held that Appellants “ha[ve] submitted no evidence that [their] reliance on a bookkeeper with no managerial authority to ensure [their] compliance with the FLSA was reasonable.” Accordingly, Appellants have not carried their burden of showing good faith, and an award liquidated damages was proper.”