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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.”
Pennsylvania Laborers Like New Law That Defines “Employees,” Pittsburgh Post-Gazette Reports
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.
D.N.J.: Following 3rd Circuit Precedent Pharma Reps Found To Be Administrative Exempt
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.”
11th Cir.: “Dual Assignment” Regulation Still In Full Affect; Whether An Employee With Police And Fire Duties Is Entitled To Overtime Based On Which Duties Take Up Majority Of Working Time
Cremeens v. City of Montgomery
The Appellants, fire investigators for the City of Montgomery’s fire department, appealed the dismissal via summary judgment of their collective action seeking overtime pay from the city. Their appeal raised the question of the continuing validity of the Department of Labor’s dual assignment regulation, which addresses overtime for firefighters who perform law enforcement duties. The Eleventh Circuit concluded that the regulation remains valid and therefore, reversed the judgment of the district court.
In addition to describing the Plaintiff’s firefighting duties and fire suppression training, the Court explained that, “Fire investigators investigate fires involving loss of life, arson and other crimes, and multiple fire alarms. They gather physical evidence, interview witnesses, interrogate suspects, and testify in court. They have the power to make arrests without first calling the Montgomery police department. Candidates for the job of fire investigator must graduate from state and national fire investigation academies; graduate from the Montgomery police academy; and be certified by the state as a peace officer. Candidates also must pass continuing education and firearms qualifications.” Thus, the record demonstrated that Plaintiffs perform both police duties and firefighting duties.
Reasoning that the “Dual Assignment” Rule continued in full effect, notwithstanding the revised definition of those engaged in firefighting duties (and thus exempt), the Court explained:
“Similarly, because the plain language of the dual assignment regulation does not purport to alter § 203(y)’s definition of an employee engaged in fire protection activities, it skirts the province of § 203(y) and does not conflict with it. The simpler reading of the dual assignment regulation is that it dictates how to apply the overtime rules to those employees who have already satisfied the definitions both for fire protection and law enforcement. The dual assignment regulation does no defining. It is fair to say that while § 203(y) defines, the dual assignment regulation applies.
This analysis explains why our well-reasoned precedents in Huff and Gonzalez do not control here. For one, neither of those cases addressed the dual assignment regulation. Rather, those cases held that the regulatory definition of fire protection activities and the 80/20 rule by their texts purported to alter § 203(y)’s definition of an employee engaged in fire protection activities. The 80/20 rule stated, after all, that “[a] person who spends more than 20 percent of his/her working time in nonexempt activities is not considered to be an employee engaged in fire protection or law enforcement activities for purposes of this part.” 29 C.F.R. § 553.212(a) (emphasis added). Therefore the regulations had to yield to the statute, and were deemed obsolete. And lastly, the analysis in Huff and Gonzalez centered on whether the plaintiffs there satisfied § 203(y)’s requirement for a “responsibility” to fight fires. Here, the plaintiffs have already conceded § 203(y) applies to them.
The city nevertheless urges us to apply a broader interpretation of Huff and Gonzalez to this case-to conclude that § 203(y) mandates, without exception, firefighter overtime for anyone who fits the statute’s definition of firefighter. The city argues that the dual assignment regulation must fall because it creates an exception to § 203(y). It essentially claims that what the 80/20 regulation did through its text, the dual assignment regulation does in its effect. Therefore, concludes the city’s argument, the dual assignment regulation poses a “direct conflict” to the operation of § 203(y). The district court adopted this line of reasoning, concluding that 29 C.F.R. § 553.213(b) “further refined” § 203(y)’s definition of an employee in fire protection activities in the same way the 80/20 rule did. Mem. Op. and Order 12. The district court concluded that the dual assignment regulation posed an “inherent conflict” with § 203(y). Id. 13.
We find no conflict between § 203(y) and the dual assignment regulation, and we reject the broader reading of Huff and Gonzalez that the city urges. The plain words of the regulation create no problematic interaction with the statute, in the way the regulations at issue in Huff and Gonzalez did. Therefore those cases do not control the outcome here.
We also note that in order to effectuate the FLSA, Congress, in passing § 203(y), clearly relied on the existence and operation of numerous pre-existing DOL regulations. One such regulation, by way of example, is regulation 29 C.F.R. § 553.230, which specifies the numerical overtime ceilings for firefighters and law enforcement employees. It is not unreasonable to conclude that Congress, in passing § 203(y), was also aware of the dual assignment regulation, implicitly relied on it, and thereby ratified its continuing application.
One last issue bears addressing. The district court identified a second ground for finding the dual assignment regulation obsolete: the dual assignment regulation invokes the obsolete regulations for fire protection activities and the 80/20 rule. However, we do not find such citation, by itself, disabling. Rather, it is easy to read the dual assignment regulation as importing and applying § 203(y)’s updated statutory definition of an employee in fire protection activities as seamlessly as it once applied the now-obsolete regulatory definition. And, the mention of the 80/20 rule in 29 C.F.R. § 553.213(a) has no bearing on the operation of the dual assignment provision in 29 C.F.R. § 553.213(b).”
Thus, the Court held that the “dual assignment” regulation, which provides that, when public employee qualifies both as fire protection and law enforcement personnel, he receives overtime according to rules for activity that takes up majority of his working time, was not definitional and did not conflict with updated statutory definition of “[e]mployee in fire protection activities,” so as not to be rendered obsolete by amendment of statute.
The full opinion is available at Cremeens v. City of Montgomery.
11th Cir.: Although § 255(a)’s Statute Of Limitations Is An Affirmative Defense That Must Be Specifically Pled, Defendants Sufficiently Did So With Language Referencing 2-3 Year Period In Their Pleadings
Following a jury verdict in favor of the Defendants, the Plaintiff appealed, based on a jury instruction the Court gave regarding the FLSA’s 2-3 statute of limitations. Specifically, the Plaintiffs asserted that the Court erred in giving an instruction framing the applicable limitations period, because Defendants had failed to specifically plead statute of limitations as an affirmative defense. However, construing Defendants’ pleadings in the case, as described below, to have pled such an affirmative defense, the Court affirmed the lower Court’s jury verdict, based on the instruction at issue.
The Eleventh Circuit explained:
“The district court instructed the jury as follows:
The Plaintiff is entitled to recover lost wages from the present time back to no more than two years before this lawsuit was filed on June 18, 2008, unless you find the employer either knew, or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA. If you find that the employer knew, or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA, the Plaintiff is entitled to recover lost wages from the present time back to no more than three years before this lawsuit was filed.
The jury answered “no” to the first question on the verdict form, concerning whether Appellees failed to pay Navarro overtime wages as required by law. Thereafter, Navarro filed this appeal.
On appeal, Navarro urges that the district court’s application of § 255(a)‘s limitation was improper because Appellees had waived the limitation by failing to properly plead it in their Answer. Appellees, on the other hand, urge that § 255(a) is not a traditional statute of limitations that must be raised as an affirmative defense. In the alternative, they claim that they adequately raised the limitation in their Answer and in the pretrial stipulations submitted to the district court.
The Court reviews a district court’s instructions to the jury for abuse of discretion. U.S. v. Lopez, 590 F.3d 1238, 1247-48 (11th Cir.2009). The Court reviews de novo a district court’s grant of a F.R.Civ.P. 50 motion for judgment as a matter of law. D’Angelo v. Sch. Bd., 497 F.3d 1203, 1208 (11th Cir.2007).
This Court has held that the § 255(a) statute of limitations is “an affirmative defense which must be specifically pled.” Day v. Liberty Nat’l Life Ins. Co., 122 F.3d 1012, 1015 (11th Cir.1997) (citing F.R.Civ.P. 8(c)). In Day, the Court ruled that the defendant had waived the § 255(a) statute of limitations by failing to assert it until after the jury had rendered a verdict. As a result, the Court reversed the district court’s grant of a judgment notwithstanding the verdict based on the statute of limitations defense. Id. at 1015-16 The Day Court emphasized the fact that the defendant’s failure to raise the defense until after the jury rendered a verdict deprived the plaintiff of the opportunity to contest the application of the limitation. Id. at 1015 (“[I]f [the defendant] had brought the limitations issue to the court during the … trial, [the plaintiff] could have offered evidence that the statute was tolled during some period of time, or have insisted that the jury instructions reflect the effect of the statute of limitations on any possible recovery by him.”). In finding a waiver, the Day Court relied on the Fifth Circuit’s earlier opinion in Pearce v. Wichita County, 590 F.2d 128, 134 (5th Cir.1979). The Pearce Court had addressed a situation almost identical to that in the Day case. In Pearce, the defendant had not raised the statute of limitations defense in its pleadings or in objection to the court’s jury instructions. Id. It had waited until after the jury verdict, finally bringing the limitations issue to the Court’s attention in a motion for judgment notwithstanding the verdict. Id. The Pearce Court held that such a delay constituted waiver of any objection to the limitations period that was applied. Id.
The case at hand is clearly distinguishable from the Day and Pearce cases, however, as Appellees raised § 255(a) several times before the case was submitted to the jury. First, Appellees stated in their Answer (under the heading “Affirmative Defenses”) that “[a]ny violation of the [FLSA] by Defendants was not willful, and was wholly unintentional. Defendants continuously acted in good faith with regard to the administration of its [sic] pay plan.” Next, more than a month before trial, the two-or-three-year limitation was referenced more than once in the parties’ Joint Pretrial Stipulation. Specifically, under the heading “Defendants’ Statement of the Case,” Appellees stated that “Defendants dispute … that Plaintiff was not paid for any overtime he may have worked during the last two or three years of his employment.” Also, in the Stipulation, the parties stated that the following fact was agreed upon and would not require proof at trial: “The corporate Defendant grossed in excess of $500,000.00 per year during the last three years of Plaintiff’s employment.” Finally, the parties and the court addressed this matter during trial, when, following the close of Navarro’s case, the Appellees based several motions for directed verdict on the three-year maximum limitations period. Navarro’s counsel, armed with case law, responded with the contention that the Appellees had not pled § 255(a) as an affirmative defense. The Court reviewed the proffered case, but ultimately ruled that § 255(a) would apply so that, at most, Navarro would recover for a three-year time period. Thus, this case stands in stark contrast to the Day and Pearce cases, where defendants had waived the defense by not raising it until after the jury had rendered a verdict.
The Court finds that Appellees timely raised the § 255(a) statute of limitations. Even if Appellees’ assertions in their Answer did not comply with a strict reading of F.R.Civ.P. 8(c), under this Court’s precedent, the limitation was still not waived. That is, although Rule 8(c) requires that a statute of limitations defense be raised as an affirmative defense, this Court has noted that “the purpose of Rule 8(c) is to give the opposing party notice of the affirmative defense and a chance to rebut it,” and, as a result, “if a plaintiff receives notice of an affirmative defense by some means other than the pleadings, ‘the defendant’s failure to comply with Rule 8(c) does not cause the plaintiff any prejudice.’ “ Grant v. Preferred Research, Inc., 885 F.2d 795, 797 (11th Cir.1989) (quoting Hassan v. U.S. Postal Serv., 842 F.2d 260, 263 (11th Cir.1988)). In Grant, the defendant raised the statute of limitations defense for the first time in a motion for summary judgment filed approximately one month before trial. Id. This court ruled that, because the plaintiff was “fully aware” that the defendant intended to rely on the defense, and because the plaintiff did not assert any prejudice from the lateness of the pleading, the defendant’s failure to comply with Rule 8(c) did not result in a waiver. Id. at 797-98.
As demonstrated above, in this case, Navarro was given ample notice of Appellees’ intent to rely on § 255(a) in several instances prior to trial. Moreover, when the issue was debated in light of the Appellees’ directed verdict motions, Navarro’s counsel made a thorough argument (including case citations) against the statute’s application. He never claimed during that argument that he had been surprised or somehow otherwise prejudiced by defense counsel’s reliance upon § 255(a) at trial. As a result, the district court did not err in limiting the jury’s consideration of unpaid overtime to the two-or three-year period prior to the filing of the complaint. Further, because it was uncontested that there was no evidence that Domingo or Rosa Santos exercised any active supervisory control over the company for the period three years prior to the filing of the complaint, the district court did not err in granting Appellees’ motion for judgment as a matter of law on the issue of the individual liability of either of them. Accordingly, we affirm the judgment entered on the jury’s verdict.”
Mortgage Loan Officers Do Not Typically Qualify For The Administrative Exemption, Says DOL
Administrator’s Interpretation No. 2010-1
The Wage and Hour Division, under the current Administration, has issued its first Administrative Interpretation Letter. The introductory text of the Letter is below:
“Based on the Wage and Hour Division’s significant enforcement experience in the application of the administrative exemption, a careful analysis of the applicable statutory and regulatory provisions and a thorough review of the case law that has continued to develop on the exemption, the Administrator is issuing this interpretation to provide needed guidance on this important and frequently litigated area of the law. Based on the following analysis it is the Administrator’s interpretation that employees who perform the typical job duties of a mortgage loan officer, as described below, do not qualify as bona fide administrative employees exempt under section 13(a)(1) of the Fair Labor Standards Act, 29 U.S.C. § 213(a)(1).
Typical Job Duties of Mortgage Loan Officers
The financial services industry assigns a variety of job titles to employees who perform the typical job duties of a mortgage loan officer. Those job titles include mortgage loan representative, mortgage loan consultant, and mortgage loan originator. For purposes of this interpretation the job title of mortgage loan officer will be used. However, as the regulations make clear, a job title does not determine whether an employee is exempt. The employee’s actual job duties and compensation determine whether the employee is exempt or nonexempt. 29 C.F.R. § 541.2.
Facts found during Wage and Hour Division investigations and the facts set out in the case law establish that the following are typical mortgage loan officer job duties: Mortgage loan officers receive internal leads and contact potential customers or receive contacts from customers generated by direct mail or other marketing activity. Mortgage loan officers collect required financial information from customers they contact or who contact them, including information about income, employment history, assets, investments, home ownership, debts, credit history, prior bankruptcies, judgments, and liens. They also run credit reports. Mortgage loan officers enter the collected financial information into a computer program that identifies which loan products may be offered to customers based on the financial information provided. They then assess the loan products identified and discuss with the customers the terms and conditions of particular loans, trying to match the customers’ needs with one of the company’s loan products. Mortgage loan officers also compile customer documents for forwarding to an underwriter or loan processor, and may finalize documents for closings. See, e.g., Yanni v. Red Brick Mortgage, 2008 WL 4619772, at *1 (S.D. Ohio 2008); Pontius v. Delta Financial Corp., 2007 WL 1496692, at *2 (W.D. Pa. 2007); Geer v. Challenge Financial Investors Corp., 2007 WL 2010957 (D. Kan. 2007), at *2; Chao v. First National Lending Corp., 516 F. Supp. 2d 895, 904 (N.D. Ohio 2006), aff’d, 249 Fed.App. 441 (6th Cir. 2007); Epps v. Oak Street Mortgage LLC, 2006 WL 1460273, at *4 (M.D. Fla. 2006); Rogers v. Savings First Mortgage, LLC, 362 F. Supp. 2d 624, 627 (D. Md. 2005); Casas v. Conseco Finance Corp., 2002 WL 507059, at *1 (D. Minn. 2002).”
To read the entire Letter click here.
D.S.D.: Special Detail Exemption Recognized By 29 U.S.C. § 207(p)(1) Of The FLSA Applies To Exclude Certain Time Worked, Because Firefighters Were On Firefighting Detail Solely At Their Own Option, During Off Duty Hours, And The State And The City Are Separate And Independent Employers
Specht v. City of Sioux Falls
This case was before the Court on Defendant’s Motion for Summary Judgment. The specific issue is the City’s affirmative defense that the firefighters were exempt from the Fair Labor Standards Act. 29 U.S.C. § 207(p)(1) establishes a special detail exemption so that hours worked on special detail are not combined with the regular hours for calculating overtime compensation.
The Court cited the following facts as relevant to the issue at bar:
“Plaintiffs are firefighters employed by the City of Sioux Falls in the Fire Rescue Department (SFFR). During July and August of 2006, all of the Plaintiffs were deployed to assist in fighting wildfires. In July of 2006, Ricky Larsen, who was the Chief of SFFR received a call from the South Dakota state fire dispatch requesting assistance in battling wildfires. There was a list of SFFR firefighters who were wildland firefighter certified. Each firefighter has the right to accept or deny when offered an opportunity at deployment. Reimbursements to the City by the State for the firefighters’ compensation were made pursuant to a contract between the City and the State. The normal schedule called for the firefighters to work 204 hours during a 27 day pay period. Typically a firefighter’s deployment for wildland firefighting is not more than 14 days. There was a concern that deployed firefighters would be paid less than if they had stayed in Sioux Falls and worked the normal 204 hours work schedule. SFFR agreed to pay the difference between 204 hours and the hours actually worked during a 27 day period in which a firefighter was deployed if a firefighter’s hours during the 27 day period totaled less than 204.”
Laying out the relevant law regarding the s0-called “Special Detail Exemption” the Court stated:
“29 U.S.C. § 207(p)(1) provides:
If an individual who is employed by a State, political subdivision of a State, or an interstate governmental agency in fire protection or law enforcement activities (including activities of security personnel in correctional institutions) and who, solely at such individual’s option, agrees to be employed on a special detail by a separate or independent employer in fire protection, law enforcement, or related activities, the hours such individual was employed by such separate and independent employer shall be excluded by the public agency employing such individual in the calculation of the hours for which the employee is entitled to overtime compensation under this section if the public agency-
(A) requires that its employees engaged in fire protection, law enforcement, or security activities be hired by a separate and independent employer to perform the special detail,
(B) facilitates the employment of such employees by a separate and independent employer, or
(C) otherwise affects the condition of employment of such employees by a separate and independent employer.
Code of Federal Regulations.
29 C.F.R. § 553.227 provides:
(a) Section 7(p)(1) makes special provision for fire protection and law enforcement employees of public agencies who, at their own option, perform special duty work in fire protection, law enforcement or related activities for a separate and independent employer (public or private) during their off-duty hours. The hours of work for the separate and independent employer are not combined with the hours worked for the primary public agency employer for purposes of overtime compensation.
(b) Section 7(p)(1) applies to such outside employment provided (1) The special detail work is performed solely at the employee’s option, and (2) the two employers are in fact separate and independent.
(c) Whether two employers are, in fact, separate and independent can only be determined on a case-by-case basis.
(d) The primary employer may facilitate the employment or affect the conditions of employment of such employees. For example, a police department may maintain a roster of officers who wish to perform such work. The department may also select the officers for special details from a list of those wishing to participate, negotiate their pay, and retain a fee for administrative expenses. The department may require that the separate and independent employer pay the fee for such services directly to the department, and establish procedures for the officers to receive their pay for the special details through the agency’s payroll system. Finally, the department may require that the officers observe their normal standards of conduct during such details and take disciplinary action against those who fail to do so.
(e) Section 7(p)(1) applies to special details even where a State law or local ordinance requires that such work be performed and that only law enforcement or fire protection employees of a public agency in the same jurisdiction perform the work. For example, a city ordinance may require the presence of city police officers at a convention center during concerts or sports events. If the officers perform such work at their own option, the hours of work need not be combined with the hours of work for their primary employer in computing overtime compensation.
(f) The principles in paragraphs (d) and (e) of this section with respect to special details of public agency fire protection and law enforcement employees under section 7(p)(1) are exceptions to the usual rules on joint employment set forth in part 791 of this title.
(g) Where an employee is directed by the public agency to perform work for a second employer, section 7(p)(1) does not apply. Thus, assignments of police officers outside of their normal work hours to perform crowd control at a parade, where the assignments are not solely at the option of the officers, would not qualify as special details subject to this exception. This would be true even if the parade organizers reimburse the public agency for providing such services.
(h) Section 7(p)(1) does not prevent a public agency from prohibiting or restricting outside employment by its employees.
Department of Labor Letter Rulings.
This § 207(p)(1) exemption has been addressed in two opinion letter rulings issued by the United States Department of Labor on November 19, 1992 and in a third opinion letter ruling issued December 31, 2007. Ginsburg et al., Fair Labor Standards Handbook, App. III, pp. 186-87 & 457-58 (1998). In the second1992 opinion letter the Department of Labor opined that county sheriff’s deputies who are employed by a village to perform law enforcement services for the village under a proposed contract between the county and the village fall under § 207(p)(1) so that the hours worked by the deputies for both employers are not combined for FLSA overtime compensation purposes. “Section 207(p)(1) applies to such outside employment provided (1) the special detail work is performed solely at the employee’s option, and (2) the two employers are in fact separate and independent.” The Department of Labor cited 29 C . F.R. § 553.227.
In contrast, the first November 19, 1992, opinion letter opined that § 207(p)(1) did not apply to a paramedic who worked for a county’s emergency medical services department and who also worked as a part time communications supervisor in the county’s sheriff department so that the hours worked in both county departments should be combined for overtime purposes. The departments were not separate and independent employers. The employee worked for a single employer, the county, in different departments. These two opinion letters illustrate the principle of § 207(p)(1) which is described as follows in the first letter ruling:
Section 7(p)(1) makes special provision for fire protection and law enforcement employees who, at their own option, perform activities for a separate and independent (emphasis in original) employer(public or private) during their off-duty hours. The hours of work for the separate and independent employer are not combined with the hours worked for the primary public agency employer for the purposes fo overtime compensation. See § 553.227 of the regulations. Id.
In the 2007 opinion letter the Department of Labor opined that the city police department and a non-profit group which operates the city convention center are separate and independent employers so that § 207(p)(1) applies when police officers perform security duties at the convention center during their off hours. “[I]t is our opinion that the City Police Department would not be obligated to include the hours worked by police officers on special assignment to the Authority in calculating and paying overtime due them.”
The language of 29 U.S.C. § 207(p)(1), 29 C.F.R. § 553.227, and the Department of Labor is plain, i.e. if the firefighter has the option to accept or reject the assignment and if the second employer is a separate and independent employer, then the primary employer does not count the hours the firefighter spends on the special detail for the second employer in the calculation to determine the firefighter’s entitlement to overtime.
Case Precedent.
Case precedent is consistent with these legal principles. Jackson v. City of San Antonio, 2006 WL 2548545, *4-*7, (W.D.Tex.2006) (Section 7(p)(1) special duty exemption bars police officers’ overtime claims against the City for hours worked for separate and independent employers during off duty hours); Nolan v.. City of Chicago, 125 F.Supp.2d 324, 335-339, (N.C.Ill.2000) (Section 7(p)(1) sets forth a two part test: if the assignment is solely at the employees option and the employers are in fact separate and independent the special detail exemption applies and the hours worked for the separate employer are not combined for purposes of assessing overtime compensation); Cox v. Town of Puughkeepsie, 209 F.Supp.2d 319, 324-327 ((S.D. N.Y 2002) (Section 7(p)(1) does not apply to voluntary work performed by police officers because the town and the town police department are a single employer); Baltimore County FOP Lodge 4 v. Baltimore County, 565 F.Supp.2d 672, 676-679, (D. Maryland 2008) (Section 7(p)(1) special detail exemption cannot be decided as a matter of law on summary judgment motion because there are questions of fact to be resolved by a jury on both the voluntary and separate employer prongs); Murphy v. Town of Natick, 515 F.Supp.2d 153, 157-158, (D. Mass 2007) (Section 7(p)(1) special detail exemption does not apply because the Town is not a separate and independent entity from any of its constituent departments); Barajas v. Unified Government of Wyandotte County/Kansas City, Kansas, 87 F.Supp.2d 1201, 1205-1209, (D.Kansas 2000) (Section 7(p)(1) special detail exemption cannot be decided as a matter of law even though parties agree the assignments are solely at the employees option because there are questions of fact about the Unified Government and the Housing Authority as separate and independent employers).
The Court then analyzed the relevant factors, concluding that all elements of the exemption were met here.
“Solely at the Firefighter’s Own Option.
Specht described the procedure for calling the list for volunteers (Doc. 24, Ex. 13, Specht depo. p. 63-64):
… [Y]ou have to go to the first person on the list that has the fewest number of hours…. I will use SF 29 as an example …; under “Remarks,” it says, “No answer.”…. [T]hey can leave an answer (sic) on the answering machine, and they must wait a minimum of-I believe it’s five minutes-before they can call the next person so that that person could look at their messages and call in and say: “Yes, I want to work.” “No, I don’t.” …. By contract and by policy, you can either accept the overtime or reject it, unless they declare an emergency. Or, once they’ve been all the way through the list, then they can call-if they get a hold of you the second time, then they can require you to take the overtime. (emphasis added).
Specht also testified that all the firefighters who responded in 2006 were accepting the offered “overtime.” Whether it is called volunteering or called overtime, the firefighters accepted. They had the option to say, “no, I won’t go,” or “yes” on the first time the list was called. Plaintiff argues that the wildfire fighting deployment was not voluntary because the firefighter could be assigned to go on deployment if there were not enough who accepted the first time the list was called. This argument is academic and not relevant. There were enough firefighters who accepted the first time the list was called. None of these plaintiffs was assigned to accept the deployment against his will. The list was not called a second time. The notes on the calling sheets reflect that several said “yes” to this wildfire fighting deployment and several said “no” (Doc. 36). There were ten “yes.” There were ten “no.” There were seven who said “after a certain date.”
The plaintiffs were on this wildland fire fighting project solely at their own option. The first prong of the section 7(p)(1) special detail test existed.
Separate and Independent Employer.
The other employer is the State. It cannot reasonably be argued or concluded that the City and the State are the same employer. The Department of Labor and the case law have identified the factors to test for separate and independent employers:
(1) whether the employers have separate payroll/personnel systems;
(2) whether the employers have separate retirement systems;
(3) whether the employers have separate budgets and funding authorities;
(4) whether the employers are separate legal entities with the power to sue and to be sued;
(5) whether the employers dealt with each other at arms length concerning the employment of any individuals in question;
(6) how they are treated under state law;
(7) whether one employer controls the appointment of the officers of the other entity.
Department of Labor Letter Ruling: December 31, 2007; Jackson, 2006 WL 2548545 at *5.
The responses to these questions are so obvious there is little or nothing in the record about them. Judicial notice is taken of the facts not in the record, but which are nonetheless relevant to the evaluation of these factors. Federal Rules of Evidence 201(b), (c) & (f). It is known that under state law the State has its own payroll, personnel, and retirement system. It is known that under city ordinance the City has its own payroll, personnel, and retirement system. The State and the City have separate budgets and different funding sources. (Both rely significantly on sales taxes-the State sales tax is 4% and the City sales tax is 2%. A purchaser in Sioux Falls pays a total of 6%, but the 6% is the total of two separate tax levies.) The State and the City are separate legal entities. Both have the power to sue and be sued, e.g. this lawsuit where the City is a defendant and the State is not a party. The State and the City dealt at arms length-see the written contract between them formed and filed under State statute, SDCL 1-24. The City and the State are treated as separate entities under state law. Neither the State nor the City control the appointment of officers of the other.
The City and the State are separate and independent employers. The second prong of the section 7(p)(1) special detail test existed.
During Off Duty Hours.
The usual scenario for the application of 7(p)(1) is when the fireman or policeman works for a second employer during off duty hours, e.g. at a concert or a sporting event. The Code of Federal Regulations and the Department of Labor letter rulings use the words “during their off duty hours.” The present plaintiffs are not in that situation because they are geographically so far from their home duty station that they cannot return home after a duty shift. Consequently, at the remote locations they work both the equivalent of their normal duty shift and the equivalent of their normal off duty hours. Since the present firefighters work both their normal on duty hours and their normal off duty hours at a remote location fighting wildfires, the use of the words “off duty hours” in the Code of Federal Regulations raises an issue about the applicability of the special detail exemption to the plaintiffs. The question is answered by 29 U.S.C. § 207(p)(1) itself. The statute does not limit the special detail exemption to off duty hours. The statute provides that a firefighter employed by a city “in fire protection … who, solely at the firefighter’s option agrees to be employed on a special detail by a separate or independent employer in fire protection … the hours such individual was employed by such separate and independent employer shall be excluded by the public agency employing such individual in the calculation of the hours for which the employee is entitled to overtime compensation ….“ (emphasis added) The statute which created the special detail exemption did not limit the special detail exemption to off duty hours. The statute plainly says the hours employed by the separate and independent employer shall be excluded when calculating overtime compensation
Under the FLSA the second employer must pay overtime if the employee works more than 40 hours during a workweek and some exemption does not apply. 29 U.S.C. § 207(a)(1). To illustrate, if the firefighter works three 16 hour days fighting a wildfire during a workweek, then the second employer pays overtime, i.e. 48 hours worked compared to 40 hours equals 8 hours overtime. The way it works is this: if FLSA overtime is worked on the special wildfire fighting detail, the State pays the FLSA overtime. If a firefighter’s special detail hours and other, normal hours in Sioux Falls added together during a 27 day work cycle total fewer than 204 hours, the City pays the difference so the firefighter is assured at least 204 hours for the pay cycle in which a wildfire fighting deployment occurs. The special detail hours are not combined with the normal shift hours to calculate overtime compensation per 29 U.S .C. § 207(p)(1).”
Holding that all the relevant elements of the exemption were present here, the Court granted Defendant’s Motion for Summary Judgment finding that the special detail exemption recognized by 29 U.S.C. § 207(p)(1) of the Fair Labor Standards Act applied.
Overtime Law Blog 