Though the high court recently has accepted other petitions for certiorari on FLSA issues, today the Court declined Gristede’s owner and former NYC mayoral candidate John Catsimatidis’ request that the Court take up his case and review the imposition of individual liability imposed by the Second Circuit. Catsimatidis v. Irizarry, 2014 U.S. LEXIS 1802 (2014). The Circuit court opinion did not address whether Mr. Catsimatidis could be found liable under New York state law.
Florida has maintained a separate minimum wage requirement since the 2005 passage of the Florida Minimum Wage Act (“Act”), which was authorized by the Minimum Wage Amendment (“Amendment”) to Article X of the Florida Constitution. Since then, courts have disagreed as to whether the Amendment provides the right to a separate cause of action to employees seeking unpaid minimum wages, distinct from the Act, and thus whether those seeking to recover under the Amendment itself must comply with the written notice procedure set forth in the subsequent Act. A new decision holds that such pre-suit notice is required. Nichols v. Lab. Corp. of Am., 2014 U.S. Dist. LEXIS 26780 (M.D. Fla. Mar. 1, 2014).
The sole issue addressed by the Nichols court was whether, by suing directly under the constitutional Amendment, a plaintiff could circumvent the Act’s requirement that, prior to filing a suit, the employee write to his or her employer to “identify the minimum wage to which the person aggrieved claims entitlement, the actual or estimated work dates and hours for which payment is sought, and the total amount of alleged unpaid wages through the date of the notice.” The Act provides a 15-day window for the employer to make such payment in response to such a notice and avoid litigation. Analyzing the enforcement scheme, Judge Sheri Polster Chappell concluded that “any person alleging a violation of [the Amendment] must do so through the lens of the [Act] because the Florida Constitution does not create an independent constitutional right to bring suit to recover unpaid minimum wages.” Thus, the notice obligation must be satisfied before Plaintiff’s Florida minimum wage claims could be asserted in litigation.
“The notice requirement provides employers with a fair opportunity to address wage issues, without the attendant expense of litigation,” observed Jackson Lewis Jacksonville Shareholder Benjamin D. Sharkey. “Judge Chappell rightly determined that allowing the Amendment itself to serve as an end-around frustrates the statutory intent behind the notice requirement.”
Employers in Florida, as in other states with a separate minimum wage requirement and enforcement scheme, must monitor state law developments and ensure compliance with both the FLSA (assuming coverage under federal law) and applicable state law.
The Supreme Court agreed today to hear a case involving application of the Portal-to-Portal Act to employees who claim they should be compensated for time spent undergoing security screenings used to prevent employee theft. Integrity Staffing Solutions, Inc. v. Busk, Case No. 13-433. The employees allege they were required to undergo security screenings to prevent shrinkage or loss of product while working at a distribution warehouse servicing their staffing agency employer’s clients, such as Amazon. The district court dismissed the FLSA claim, finding the activities were excluded by the Portal-to-Portal Act. The Ninth Circuit reversed, becoming the first court to ever hold that security screenings are compensable under the FLSA and creating a conflict with the both the Second and Eleventh Circuits, which have both held security screenings are non-compensable under the Portal-to-Portal Act [Gorman v. Consolidated Edison Corp., 488 F.3d 586 (2d Cir. 2007) and Bonilla v. Baker Concrete Constr. Coo., 487 F.3d 1340 (11th Cir. 2007)]. The Ninth Circuit’s decision also conflicts with district court decisions that have addressed the issue. Argument will occur next term.
Administrative employees classified as exempt under the administrative exemption who function as a “one man department” at times challenge whether their work genuinely constitutes the exercise of discretion and independent judgment with respect to matters of significance. They argue that without subordinates, the work must entail significant ministerial tasks. Rejecting just such a challenge, a Georgia federal judge recently determined that the rental manager for a historic mansion operating as a non-profit fine arts center, responsible for ensuring continued rental of its facilities, qualified for the exemption. Cue-Lipin v. Callanwolde Found., Inc., 2014 U.S. Dist. LEXIS 20057 (N.D. Ga. Feb. 14, 2014).
Plaintiff Cue-Lipin served as the rental manager for Callanwolde, a historic Tudor mansion in Atlanta listed in the national register of historic places. Callanwolde generated approximately half its revenue through fee-based services which included “renting its property for private events.” The facility prevailed on its assertion that plaintiff exercised discretion and independent judgment vis à vis her authority to negotiate and select customers as well as through her development of marketing strategy. The court rejected plaintiff’s contention that all of these functions were performed within guideline constraints.
The Cue-Lipin decision highlights the essential duties a classic FLSA administratively exempt employee should perform to demonstrate significant discretion and independent judgment: negotiation; recommendations regarding policy; and/or serving as the “face” of the organization. State law requirements must be analyzed separately where applicable.
Illinois’ highest court upheld that state’s six year old statute imposing strict penalties for employee misclassification in the construction industry, the Illinois Employee Classification Act. Bartlow v. Costigan, 2014 IL 115152 (Ill. 2014).
In Bartlow, Rhonda and Jack Bartlow were partners in a roofing company who contested a finding under the Act made by the Illinois Department of Labor that the company misclassified workers as independent contractors. The Department’s preliminary determination carried a potential penalty of $1.6 million. Based on recent amendments to the Act providing new clarity to enforcement procedures, the Illinois Supreme Court rejected the Bartlows’ constitutional challenges to the Act, including their assertions that the statute did not provide for procedural due process and was impermissibly vague. The court’s opinion was limited to these challenges to the bona fides of the statute, not the Department’s determination under the statute regarding the Bartlows’ purportedly misclassified contractors.
Employers in Illinois and other states that impose industry specific wage-and-hour regulations, such as New York, must be mindful of state law impacting their industry.
Last week, the United States Court of Appeals for the Fifth Circuit affirmed the holding of a Texas district court that “an unsubstantiated and speculative estimate of uncompensated overtime does not constitute evidence sufficient to show the amount and extent of that work as a matter of just and reasonable inference.” Ihegword v. Harris County Hosp. Dist., 2014 U.S. App. LEXIS 2669 (5th Cir. Feb. 12, 2014). The plaintiff in the case—a registered nurse—claimed that she often worked overtime without compensation in violation of the Fair Labor Standards Act (“FLSA”). More specifically, the plaintiff claimed her supervisor instructed her to “clock out” and complete her work “off the clock.”
The Fifth Circuit rejected the plaintiff’s claims and affirmed the grant of summary judgment in favor of the employer because, although the plaintiff submitted a declaration in response to the summary judgment motion stating that she regularly worked 12 hours of uncompensated overtime per workweek, her own deposition testimony (as well as the declarations of co-workers) contradicted this assertion. At deposition, Plaintiff testified that she could not remember “how often she worked overtime and that on the days she remember[ed] working overtime, it could have been ‘three or two or one’ hours.” Moreover, the employer had a well-disseminated policy forbidding unauthorized overtime, and time card reports showed that plaintiff rarely worked a full forty-hour workweek. Without specifically relying on the so‑called “sham affidavit doctrine,” the Fifth Circuit concluded that the employer’s evidence “soundly refuted” plaintiff’s “unsubstantiated assertions” contained in her affidavit.
Ihegword reinforces the importance to all employers of maintaining specific policies to address reporting hours worked and the importance of systematic record-keeping.
On the heels of similar legislation passed in 2010 for the construction industry, and consistent with the state’s continuing focus on alleged misclassification of service providers as independent contractors, the New York state legislature recently passed the Transportation Industry Fair Play Act, N.Y. Labor Law § 862 et seq. This legislation creates a “presumption of employment” for commercial vehicle drivers who possess a state issued commercial driver’s license and work in the commercial goods transportation industry. In order to overcome this presumption and classify such individuals as “independent contractors” instead of employees, the contractor in question must either be a “separate business entity” (as defined in the statute) or meet the multi-factor test laid out in the statute, namely that “(a) the individual is free from control and direction in performing the job, both under his or her contract and in fact; (b) the service must be performed outside the usual course of business for which the service is performed; and (c) the individual is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue.” NY CLS Labor § 862-b(1).
Expanded analysis of this legislation will be available at www.jacksonlewis.com’s Workplace Resource Center here. Employers in all industries must continue to focus on worker classification and seek legal counsel as necessary.
While the definition of employer under the FLSA is broad, as the Court of Appeals for the First Circuit (encompassing Maine among other states) has noted, state law is not always consistent, as highlighted by a new federal court decision from Maine. Saunders v. Getchell Agency, 2014 U.S. Dist. LEXIS 16728 (D. Me. Feb. 11, 2014).
In Saunders, Chief Judge John A. Woodcock, Jr. reviewed the issue in light of a prior decision of a sister court (Affo v. Granite Bay Care, Inc., 2013 U.S. Dist. LEXIS 76019 (D. Me. May 30, 2013)(Hornby,J)) which held that “extending Maine wage-and-hour laws to individual shareholders and officers would represent a ‘drastic step,’” because the state legislature, in enacting its wage statute many years after the passage of the FLSA, had not seen fit to define employer as broadly as under the FLSA, and Maine courts have been generally deferential to the corporate form. Judge Woodcock determined that he would “not reinvent Judge Hornby’s well-crafted wheel” and adopted the Affo analysis. The Judge also analyzed whether Plaintiff Saunders had alleged acts potentially creating individual liability for acts of the corporate entity under both the piercing of the corporate veil and individual wrongful acts doctrine, and found no basis to apply either. Thus, the claims against the individual defendant under Maine law were dismissed.
“Saunders is a favorable decision for Maine employers. However, the absence of individual liability under the state law — which has not been confirmed by the Maine Supreme Court — should never be viewed as a panacea or a substitute for wage/hour compliance,” observed Jackson Lewis’ Portsmouth Managing Shareholder Debra Weiss Ford.
Individual liability under state wage-and-hour laws is a state-by-state matter, and uncertainty lingers in many jurisdictions. Operators of all businesses must fully consider potential liabilities in their states of operation.
In a case addressing coverage under the FLSA, Federal Judge Ramona V. Manglona from the District of the Northern Mariana Islands held coverage was not triggered merely because a cook in Saipan accessed the Internet to obtain recipes. Dean v. Pac. Bellwether, LLC, 2014 U.S. Dist. LEXIS 15797 (D. N. Mar. I. Feb. 6, 2014).
“There is no movement of commerce here. [Plaintiff] searched for recipes on the Internet and downloaded them. She did not attempt to buy goods online. She did not attempt to sell goods online. She did not even attempt to contact people online. Lacking any actual or prospective movement of goods, the commerce requirement is not satisfied,” the Court held. Dean concerned the same fundamental question addressed by a Brooklyn judge last year regarding a tire repair shop in Queens, namely whether the limited credit card transaction processing activity engaged in by a predominately local employee constituted participation in “interstate commerce” sufficient to trigger individual coverage under the FLSA. The Court in that case held such activity also did not trigger coverage.
FLSA coverage remains broad notwithstanding the favorable holding in this case. As always, employers in every jurisdiction must analyze their business to determine FLSA and state law coverage and, if covered, regularly review compliance practices.
Rejecting a challenge to Motor Carrier Act exempt status, Judge Keith P. Ellison of the Southern District of Texas recently ruled that drivers for a meat distribution company were subject to DOT regulation and engaged in interstate commerce driving trucks with gross vehicle weight excess of 10,000 pounds and thus exempt. Vanzzini v. Action Meat Distribs., 2014 U.S. Dist. LEXIS 13781 (S.D. Tex. Jan. 31, 2014).
Plaintiffs in Vanzzini argued that documentation produced in discovery created a question of fact concerning whether some of Defendant’s trucks weighed less than 10,000 pounds, taking them outside of MCA exemption coverage under the Technical Corrections Act. The uncontroverted evidence on summary judgment, however, established that most drivers drove exclusively qualifying vehicles with gross vehicle weight of 10,001 pounds or more and “either actually were, or could have been, given assignments to drive across state lines.” The Court also noted in applying the exemptions that the drivers had valid commercial driver’s licenses, received the relevant regulations (including the Federal Motor Carrier Safety Regulations), were required to log their time driving, were required to make pre-trip DOT inspections, and to undergo drug tests.