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Wage & Hour Law Update

Missouri Court Finds Trial Necessary To Resolve Whether Break Time Is Compensable Under Missouri Law

Per FLSA regulations, break periods between 5 to 20 minutes generally are considered compensable.  29 C.F.R. § 785.18.  While state wage-and-hour laws typically borrow extensively from the FLSA’s regulatory framework, a new decision from a Missouri Federal Judge highlights that many of the vagaries of state law are unsettled or unclear, rejecting Plaintiffs’ motion for summary judgment that breaks of precisely such duration required compensation under Missouri state law.  Benton v. Labels Direct, Inc., 2014 U.S. Dist. LEXIS 133308 (E.D. Mo. Sept. 23, 2014).

In Benton, plaintiff warehouse workers for Defendant Labels Direct historically were provided with a one-hour unpaid lunch break for many years.  At their own urging, the break policy was modified so that instead of one consecutive hour, the workers took a 30 minute and two 15 minute breaks, all of which remained unpaid.  Several sued and moved for summary judgment, arguing that the FLSA regulation also applied under Missouri law and accordingly the two 15-minute breaks were compensable.  Judge E. Richard Webber denied their summary judgment motion, noting that “It is uncontroverted that during these breaks, the employees were completely relieved from duty, free to do whatever they wanted, and provided meals” and that the regulation did not necessarily control the Court’s ruling under either the FLSA or Missouri law.

The Benton decision, while reached under Missouri law, provides some measure of defense for employers providing uncompensated breaks of under 20 minutes.  However, in light of the federal regulation, FLSA covered employers must consider the federal regulation, as well as applicable state law and any applicable collective bargaining agreement.

New Jersey Court Finds Beauty School Students Not “Employees”

A development in the ongoing litigation regarding the scope of the term “employee” for purposes of the Fair Labor Standards Act involves a rash of cases filed against beauty schools.  In these cases, students who provide services to customers as part of their training allege they should be compensated for such work. A New Jersey federal court recently rejected such a claim, citing the regulatory scheme surrounding operation of the bona fide beauty school, and the purpose of such a vocational program.  Atkins v. Capri Training Ctr., 2014 U.S. Dist. LEXIS 139989 (D.N.J. Oct. 1, 2014).

In Atkins, the court rejected plaintiff’s claim that while enrolled in Defendants’ beauty school she was an employee who essentially cut hair for patrons, entitling her to minimum wage protection. The court did not credit plaintiff’s evidence that the school profited from her work (which the school contested), but did not rest its determination on that evidence, opining that even if “Defendants were making a profit from the Clinic services, Defendants may be violating the Board’s regulations; but the existence of profitability, in and of itself, would not create an employer/employee relationship. Rather, the economic realities test focuses on dependency, the expectation of continued work, and a common sense view of the underlying facts and circumstances.”

Atkins reflects only the views of one federal District Judge in New Jersey (within the Third Circuit), but it is an encouraging ruling for vocational programs, which are not limited to beauty training programs, confronted with similar claims.

Second Circuit Reviews Record, Finds Question of Fact as to Discretion and Independent Judgment Exercised by Adjusters

The FLSA exemption inquiry is fact-intensive, particularly when the analysis pertains to the so-called “white collar” exemptions, as highlighted by a new decision from the Court of Appeals for the Second Circuit.  Harper v. Gov’t Emples. Ins. Co., 2014 U.S. App. LEXIS 19310 (2d Cir. Oct. 10, 2014).

In Harper, District Judge Leonard Wexler granted a renewed motion for summary judgment, finding that the GEICO auto insurance adjuster plaintiffs exercised the requisite discretion and independent judgment to qualify for exempt status.  On appeal, the Second Circuit disagreed, holding that a fact-finder needed to resolve disputes the Circuit Court deemed material concerning the adjusters’ discretion, particularly with respect to the settlement value of claims.  The Court found summary judgment an inappropriate vehicle for resolving the parties’ conflicting positions concerning, inter alia, the role of GEICO’s claims analysis software in the claim settlement process.

Harper, originally filed in 2009, highlights the fact-specific nature litigation over exemption issues.

Federal Court Finds New York City Not Required To Compensate Employees For Time Spent In Alcohol Rehabilitation

Few entities are subject to as many lawsuits as the City of New York, with its millions of occupants and thousands of employees.  A recent decision rejects three NYPD police officers’ claims that they should have been paid for time spent in alcohol rehabilitation and counseling sessions.  Makinen v. City of New York, 2014 U.S. Dist. LEXIS 139732 (S.D.N.Y. Sept. 30, 2014).

In Makinen, several officers deemed by the NYPD to have alcohol-related issues were ordered to undergo treatment for those issues.  The sum and substance of Plaintiffs’ wage-and-hour claim was that, having been ordered to undergo certain therapy and rehabilitation to which they “vigorously objected,” they should have been paid for the time spent in “outpatient rehabilitation sessions, private counseling sessions and AA meetings during their personal time, as well as for hours spent in excess of their normal working hours in mandated meetings and programs during their inpatient treatment.”  Judge Andrew Carter disagreed, applying the Second Circuit’s three-pronged test for determining if an activity constituted work: “exertion or loss of an employee’s time that is (1) controlled or required by an employer, (2) pursued necessarily and primarily for the employer’s benefit, and (3) if performed outside the scheduled work time, an integral and indispensable part of the employee’s principal activities.”  Judge Carter found this test was not satisfied, ruling that the treatment was not primarily for the City’s benefit but rather for the officers’, and that receiving treatment was not an indispensable part of the officers’ police duties.

All businesses (not just municipalities) must continually analyze the scope of employees’ compensable work time.

DOL Policy Statement Delays (Government) Enforcement of Home Care Overtime Rule

In response to pressure from state governments and others fearing the increased cost of home care services, the Department of Labor announced Tuesday that it would delay its own enforcement of the new rule requiring that previously-exempt “companions” receive minimum wage and overtime.  The DOL’s Policy Statement stated that the DOL would not enforce the new rule for the first six months of 2015, then exercise “prosecutorial discretion” in addressing enforcement for another six months, until 2016.  Importantly, however, the Policy Statement did not delay the effective date, which remains January 1, 2015.  Industry employers still must implement appropriate compliance measures due to the concern of private litigation, and press ahead with all industry lobbying efforts seeking modification or reversal of this new rule.

Brooklyn Federal Court Rejects Allegation That Not-For-Profit Board President Was An Employer

Many courts, including the Court of Appeals for the Second Circuit, have ruled that under certain circumstances an individual can be a statutory “employer” under the Fair Labor Standards Act, liable for minimum or overtime wages usually along with a corporate entity.  The scope of such potential liability and the precise formulation of the “economic realities” test associated with that analysis remain points of contention.  A recent decision highlights that standing alone status as a non-profit board chairperson does not open the door to such liability.  Coley v. Vannguard Urban Improvement Ass’n, 2014 U.S. Dist. LEXIS 135608 (E.D.N.Y. Sept. 24, 2014).

In Coley, one individual defendant moved to dismiss because he was merely chairman of Vannguard’s board of directors, not the Brooklyn-based not-for-profit’s executive director or other manager.  The chairman of the board asserted the Plaintiffs failed to allege that he engaged in activities demonstrating any control over their employment terms.  Noting that under New York law “an individual board member is not empowered to act on behalf of its organization—only the board as a whole is—and voting members of boards are not liable for the acts of the board merely by virtue of their status as board members,” Judge Pamela Chen agreed with the defendant, ruling that the allegations of the complaint failed to set forth a claim against him.  The Court stated that Plaintiffs’ complaint “made no allegation that Mr. Hansard, in his capacity as an individual board member, [was] empowered to act, or acted, on behalf of the board in employment matters at Vannguard,” and further failed to allege that he scheduled Vannguard’s workers or maintained its employment records.

Clearly, the potential for individual liability is a deterrent to those who would otherwise serve not-for-profits as Board members, or in any other capacity.  All such organizations must analyze and seek to minimize such liability, so that they can focus on their core mission and ensure their ability to attract qualified, committed Board members.

North Carolina Judge Upholds Employer Classification of Employee as Exempt Computer Professional

The rapidly evolving world of information technology can give rise to disputes regarding the applicability of the FLSA’s 20+ year-old exemption for “computer professionals.”  A new decision reinforces that individuals whose job responsibilities require them to maintain large networks qualify for the exemption.  Campbell v. Kannapolis City Schs. Bd. of Educ., 2014 U.S. Dist. LEXIS 133318 (M.D.N.C. Sept. 23, 2014).

The computer professional exemption applies to any employee who is a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker whose primary duty involves systems analysis or computer programming.  Plaintiff, a $60,000 per annum LAN Engineer “responsible for designing and implementing local area networks in a school environment” for a district of five thousand students qualified for exemption in Judge N. Carlton Tilley, Jr.’s view because “the proper inquiry . . . [is] the level of skill and sophistication exhibited by the employee in conducting those [networking] activities”.  The court rejected Plaintiff Campbell’s overbroad and overly simplistic postulate that employees “primarily responsible for the day-to-day operations and functionality of computer networks do not fall into the computer professional exemption.”  Plaintiff testified that his duties included “monitoring not only just the functionality of the [Virtual Private Network ("VPN")], but [] monitoring the servers to make sure they were operating properly, monitoring the switches and routers . . . just to make sure that they were all up and running, and analyzing data to make determinations as to problems regarding network issues.”  The Court found the independent performance of these tasks sufficient to meet the duties test for computer professional exempt status.

Employers must analyze the applicability of all white collar exemptions when classifying  information technology personnel (or any other white collar personnel).

U.S. Open Tennis Umpires Properly Classified As Independent Contractors

Service providers vendors (and those vendors’ employees) are free to assert claims that they  “employees” of the entity for which they are providing services under the FLSA under independent contractor misclassification and joint employer theories.  Service providers continue to do so despite limited success, the most recent example being Judge Andrew Carter’s (SDNY) summary judgment ruling that the USTA properly classified U.S. Open umpires as independent contractors.  Meyer v. United States Tennis Ass’n, 2014 U.S. Dist. LEXIS 128209 (S.D.N.Y. Sept. 11, 2014).

Analyzing the “economic realities” of the relationship between the Open and its umpires, Judge Carter observed that the umpires had control over whether to participate, how to umpire, and opportunity for profit or loss developing their business as tennis umpires both with the Open and within the tennis industry at large.  Further, the relationship was temporally sporadic in nature. Thus, the presence of neutral or contrary factors, including the Open’s investment in the business relative to the umpires’ and the umpire’s “integral” role, did not negate contractor status or create a question of fact.

The USTA’s victory in Meyer joins Major League Baseball’s win earlier this year employee misclassification claim brought by volunteers at the MLB All-Star game FanFest.  Employers must continue to monitor these issues.

Manhattan Federal Court Finds Contract Attorney “Practiced Law,” Exempt From Overtime

An attorney and his lawyer made headlines recently when he asserted an FLSA claim against prominent Manhattan law firm Skadden Arps claiming the firm owed him overtime pay for his work as a contract attorney on large scale litigation handled by Skadden.  On Wednesday, Judge Richard J. Sullivan granted Skadden’s motion to dismiss the claim.  Lola, et al. v. Skadden, Arps, et ano., No. 13-CV-5008, DKT 35 (S.D.N.Y., Sept. 16, 2014).

While Skadden argued that the agency through which Plaintiff Lola worked was his employer, and that Plaintiff failed to plead that Skadden was his “joint employer” under the FLSA, Judge Sullivan declined to reach that argument because he answered the dispositive question of whether Lola was “exempt from the overtime requirement by virtue of being ’the holder of a valid license…permitting the practice of law…[who] is actually engaged in the practice thereof’” in favor of the defendants.  After a lengthy analysis in which the court determined that the operative inquiry under the applicable FLSA regulation (29 C.F.R. § 541.304) was whether Plaintiff Lola was practicing law as defined under North Carolina state law, Judge Sullivan determined that Lola’s document review for Skadden constituted practicing law within the meaning of a North Carolina State Bar ethics opinion amplifying the term “legal services.”  The Judge declined Plaintiff Lola’s invitation to utilize an analysis similar to that utilized for the other “white collar” exemptions, i.e., to “scrutinize his precise job responsibilities to determine whether they required legal judgment and discretion.” finding that approach “at odds with [the] regulatory framework…[placing] licensed attorneys and doctors…in a special class of workers that may be deemed to be professionals even without a fact intensive inquiry into the nature of their job duties.”

Judge Sullivan’s thoughtful and technical analysis confirms what may seem obvious to lay people and many practitioners: lawyers practicing law are not overtime-eligible under the FLSA.  However employers must analysis their compensation obligations to all professional employees under the FLSA and state law.  Of course, Plaintiff Lola’s counsel has indicated he will appeal this matter to the Second Circuit, and counsel represents at least one other attorney in a similar pending claim.  Henig v. Quinn Emanuel Urquhart & Sullivan, LLP, No. 13-cv-1432 (S.D.N.Y. Dec. 11, 2013).

NYS Commissioner of Labor Issues Official Wage Board Charge

On Monday, New York Commissioner of Labor Peter Rivera formally issued his Charge to the recently convened 2014 Wage Board.  The Charge, available here, asks the Board to answer the following question:

What modifications, if any, should be made to the required cash wage rates and the allowable credits for tips, meals, and lodging, for food service workers and service employees in the hospitality industries?

To answer it, the Board must, first and foremost, determine whether the state should 1) increase the current tip credit available under the Wage Order for the Hospitality Industry (12 NYCRR 146-1 et seq.) consistent with federal law (an unlikely outcome), 2) keep the same tip credit (permitting a cash minimum wage of $5.00/hour for food service workers as long as at least $3 of tips are received for each hour worked) or 3) decrease the tip credit (thereby requiring a higher wage to be paid by the employer than the current $5.00/hour for food service workers).  The Board will conduct a series of hearings on the issue, and issue a report providing the Commissioner, “with an understanding of what minimum wage means in today’s hospitality industries,” including the difficult question of assessing the role of tip income in the minimum wage scheme.  The Commissioner then will issue an Order accepting or rejecting the recommendations contained in the Wage Board’s report.

Watch this space for further updates regarding the tenor of Wage Board hearings and the various information provided to the Board, as well as the final Board recommendations and response by the Commissioner.