Continuing its line of common sense interpretations of the administrative exemption, the United States Court of Appeals for the Seventh Circuit has ruled that an insurance company employee tasked with maintaining an in-depth understanding of particular insurance products and training sales staff on those products was an administratively exempt employee. Blanchar v. Std. Ins. Co., 2013 U.S. App. LEXIS 23854 (7th Cir. Nov. 27, 2013).
Plaintiff Blanchar, who held the title of Director of Institutional Sales/Product Manager, argued that he was not an exempt administrative employee because he performed sales work, and he did not exercise the requisite discretion and independent judgment. The Circuit, citing its prior opinion in Schaefer-LaRose v. Eli Lilly & Co., 679 F.3d 560 (7th Cir. 2012) and the First Circuit’s earlier decision in Reich v. John Alden Life Ins. Co., 126 F.3d 1 (1st Cir. 1997), disagreed, finding that he did not “directly engage in sales” but “merely assisted salespeople with those sales” and that he “was involved in advising salespeople and promoting the sales” of his products. As to the discretion and independent judgment requirement, the Court expressly found that “Blanchar’s duties—promoting sales, advising sales staff, and fielding questions—required the exercise of discretion and independent judgment.” In conducting the exemption analysis, the Blanchar Court did not reference its related 2008 industry decision in Roe-Midgett v. CC Servs., Inc., 512 F.3d 865, 870 (7th Cir. 2008)(adjusters qualified for administrative exemption), relying instead on its more recent Eli Lilly decision and its analysis of the pharmaceutical sales representative position.
Seventh Circuit authority continues to support the exempt classification of many insurance professionals who receive the requisite salary in accordance with the FLSA’s salary basis test and work autonomously. Exemption analysis—particularly administrative exemption analysis—unfortunately remains fact and jurisdiction specific.
Rejecting a challenge to classification as an exempt supervisor in a warehouse setting District Court Judge James C. Turk of the Western District of Virginia ruled last week that a “personnel supervisor” in a tire production plant qualified for the FLSA’s executive exemption because “the vast majority of his time was spent in management-type functions” and his input into personnel decisions was “given sufficient weight.” Martin v. Yokohama Tire Corp., 2013 U.S. Dist. LEXIS 161228 (W.D. Va. Nov. 12, 2013).
In Martin, Plaintiff’s general work duties included directing the work of all hourly employees within his division and shift, typically seven to ten employees. Plaintiff was accountable for production and quality and ensured that all equipment was operating properly. He dealt with any problems that arose with operations and provided continuous reports to his supervisors regarding production numbers. Additionally, Plaintiff oversaw the training of new employees on how to operate machines and ran monthly safety drill for his employees. The Court, in holding that Defendant properly classified Plaintiff as an exempt employee, relied on the fact that a majority of his time was spent in management-type functions, and noted that other employees, especially Union witnesses, all testified that he was a supervisor and a member of management.
Rejecting Plaintiff’s assertion that “he ‘didn’t get [any] say-so’” because his performance evaluations and recommendations were not always followed, the Court held that “his opinions were (at least occasionally) given sufficient weight.” The other requirements for the executive exemption, including salary basis compliance and directing the work of other employees, were not subjects of dispute.
Martin is a favorable decision for employers within Virginia and the Fourth Circuit, demonstrating a court’s practical, reasonable approach to interpretation of the FLSA’s executive exemption. Employers should regularly review their classification of individuals as exempt status based on federal decisions within the relevant Circuit and, as applicable, state law.
In the latest in a series of decisions addressing the proper allocation of travel and immigration fee expenses between employers and employees utilizing the H2A agricultural guestworker program, the Court of Appeals for the Ninth Circuit (the largest federal circuit, encompassing Washington, Montana, Idaho, Oregon, Nevada, California, Arizona, Alaska and Hawaii) ruled an employer must reimburse an H2A worker for the employee’s travel and immigration expenses in the initial week of employment, otherwise the employer violates the minimum wage requirements of the FLSA. Rivera v. Peri & Sons Farms, 2013 U.S. App. LEXIS 22891 (9th Cir. 2013).
At issue in Rivera were whether: 1) FLSA regulations addressing whether employee expenses bringing employees’ wages below the minimum wage applied to H2A workers in light of separate H2A regulations addressing reimbursement of the same expenses; and 2) if the FLSA regulations also applied, whether the worker’s expenditures for travel and the immigration fees were made for the benefit of the employer, resulting in payment of a sub-minimum wage in the initial week of employment. The Court answered both questions in the affirmative, deferring to the DOL’s regulations stating that the FLSA’s requirements apply independent of separate federal regulations regarding the H2A program (which require reimbursement only upon completion of part of the work assignment in question), and, as to the second question, ruling that, while the expenditures clearly benefited both employer and employee, the DOL’s position that such expenses are primarily for the benefit of the employer and not the worker was entitled to deference under Auer v. Robbins, 519 U.S. 452 (1997). “In the face of regulatory ambiguity [regarding the primary benefit question],” wrote the Court, “the DOL’s determination that inbound travel and immigration expenses primarily benefit H2A employers was reasonable.” Thus, these expenses were expenses of the business and subject to reimbursement under the FLSA where they result in payment of less than the minimum wage.
This ruling will impose an “up front” financial cost on businesses bringing H2A workers into states within the Ninth Circuit, as such expenses must be reimbursed immediately rather than following partial completion of the H2A work in question. All employers utilizing workers pursuant to H2A or other immigration programs must analyze the wage-and-hour and legal implications of the working arrangement.
In 2010, Judge Leonard Wexler of the Eastern District of New York denied summary judgment in an early motion regarding the applicability of the administrative exemption to GEICO’s insurance adjusters. Harper v. Gov’t Emples. Ins. Co., 754 F. Supp. 2d 461 (E.D.N.Y. 2010). Now, three years later, following extensive class-wide discovery on the issue of the adjusters’ exempt status, Judge Wexler reversed his earlier finding, ruling on the expanded record that the adjusters satisfiedthe exemption test as a matter of law. Harper v. Gov’t Emples. Ins. Co., 2013 U.S. Dist. LEXIS 157938 (E.D.N.Y. Nov. 4, 2013).
Critical to the court’s decision was Judge Wexler’s finding on the expanded record that the adjusters exercised discretion and independent judgment within the meaning of the exemption because they fell “squarely within the particular regulation describing claims adjusters who are deemed exempt.” Citing 29 C.F.R. § 541.203(a). Observed Judge Wexler with respect to the adjusters’ discretion and independent judgment, “the monetary amount of individual claims adjusted does not take away from the significance of the matters handled by the [Plaintiffs]. The personal interaction with [an adjuster] may be a policy holder’s only interaction with GEICO. Certainly, the customer service provided by the [adjuster] is a significant matter to the company’s overall business reputation and, consequently, its financial health and potential for growth.”
Harper joins other Eastern District decisions finding that individuals who exercise discretion with respect to their employer’s business—be it a restaurant, municipality or large insurance firm—meet the administrative exemption test. However, the administrative exemption remains a difficult one for courts—and thus, employers—to apply. Often, protracted costly litigation such as that seen in Harper may be necessary to obtain a favorable ruling.
As discussed in greater detail here, the New York State Department of Labor’s revised Wage Orders, which were published in the administrative record on October 9, 2013 and set to become final by the time New York’s December 31 minimum wage hike becomes effective, implement a number of changes to the pay requirements and credits available under state law.
Amongst these are provisions modifying the available tip credits. While the minimum wage that must be paid to most Hospitality industry employees will remain at its current level of $5.00/hour (with only the overtime rate increasing due to the increased tip credit), employers who avail themselves of the tip credit provision under the Miscellaneous Wage Order—such as car washes and salons to use two common industry examples— must recognize that the maximum tip credit has been set at $1.95/hour, resulting in a revised minimum wage for tipped employees of at least $6.05, an increase of fifty-five cents above the current level.
Affected businesses regulated by the Miscellaneous Wage Order with employees for whom a tip allowance is taken must prepare for this scheduled increase in labor costs.
While the compensability of time spent in internship programs continues to be an hotly contested litigation issue, the United States Supreme Court has declined an opportunity to provide clarity in this area, denying certiorari to a Florida medical billing intern whose claim was rejected last year by the Eleventh Circuit. Kaplan v. Code Blue Billing & Coding, Inc., 2013 U.S. LEXIS 8046 (U.S. 2013). Perhaps multiple requests for high court review of an appellate decision will be necessary before the Supreme Court addresses the status of interns under the FLSA, as was required before the Court accepted review of the exempt status of pharmaceutical sales representatives.
Overriding the March 2013 veto by Governor Chris Christie of a proposed bill increasing the state’s minimum wage, New Jersey’s Democratic legislative majority successfully pushed through a constitutional amendment through a voter referendum (not subject to gubernatorial veto) to increase the New Jersey minimum wage from $7.25/hour to $8.25/hour effective January 1, 2014. This request is similar to the increase effective for 2014 in New York. The New Jersey amendment also has the state joining a number of other states – eleven in all –tying the state minimum wage and annual increases thereof to inflation.
Providing guidance on some longstanding ambiguity regarding the meaning of Nevada’s statute on tip pooling, Nevada’s highest court ruled that an employer may impose mandatory tip pooling on employees and determine to which employees tips may be distributed. The Wynn casino’s tip pooling policy, which was reviewed by the Court and required pooled tips to be distributed among casino dealers, boxpersons, and casino service team leads, did not violate Nevada law because “Wynn distributes the tips among its employees, keeping none for itself.” Wynn Las Vegas, LLC, v. Baldonado, et al., 129 Nev., Advance Opinion 78 (October 31, 2013). Unfortunately, the Court’s decision left open whether an employer has complete discretion to decide to whom tips may be distributed.
The Court also ruled that the Nevada Labor Commissioner’s interpretation of a Nevada regulation, which the Commissioner determined does not permit class action administrative complaint, deserved deference and was within the meaning of the law. This has important implications for Nevada employers because certain wage/hour rights in Nevada may only be heard by the Labor Commissioner in an administrative forum.
“This decision is a welcome and practical ruling,” observed industry expert and Jackson Lewis partner Elayna Youchah. “Nevada employers will need to analyze it thoroughly before applying it to their practices.”
Watch www.jacksonlewis.com for expanded coverage of the Baldonado decision and its impact on Nevada employers.
The legislation setting forth a schedule for increasing New York’s minimum wage has numerous implications for the New York employer community. On October 9, 2013, the Department of Labor published proposed amended Wage Orders for all industries which are effective as of December 31, 2013.
The changes to the minimum wage implicate many facets of employee compensation under the Wage Orders, including allowances for tips, meals and lodging; uniform pay requirements; and, importantly, the minimum salary basis for exempt status under New York law.
New York employers have only a short window of time to determine whether any changes to compensation practices need to be implemented and if so to implement such changes. Given the continued volume of class action wage litigation, decisive action must be taken to ensure compliance and avoid claims.
"As the season for sweet onions ends, another onion farm labor dispute begins," observes Judge B. Avant Edenfield of the Southern District of Georgia in a new opinion, commenting upon the flurry of FLSA lawsuits filed in recent years in the American Southeast arising out of labor conditions at large farming concerns utilizing immigrant workers. Judge Edenfield’s opinion, in addition to tackling common FLSA litigation issues such as conditional certification of a collective action and amendment of Plaintiffs’ complaint, also addresses and rejects a novel claim brought by American Plaintiffs alleging discrimination in violation of 42 U.S.C. § 1981. Tomason v. Stanley, 2013 U.S. Dist. LEXIS 148932 (S.D. Ga. Oct. 16, 2013).
The group of American citizen Plaintiffs — some black, some white, and some Hispanic — claimed that the farm’s failure to pay them the wage rate paid to Mexican farm workers under the terms of the H2-A visa program through which the latter worked violated Section 1981′s prohibition against discrimination based on race or alienage. Because Plaintiffs’ claims were based on their national original (American), not their varied races, and because Section 1981 does not protect American citizens from discrimination based on their citizenship status under the "alienage" provision, the Court held that Plaintiffs claims were legally deficient. Further, "a claim of alienage discrimination by Americans, in America, dies on the proverbial vine no matter the facts pled."
FLSA Plaintiffs and their counsel continue to pursue new theories of recovery under all available statutes. Employers must continue to carefully review all wage and hour policies and practices.