In its new regulatory agenda, the Department of Labor has indicated that its proposed rules remaking the traditional FLSA “white collar” exemptions in response to March’s Presidential directive will not be provided until February, 2015. The employer community eagerly awaits guidance from the Department, particularly given the uncertainty and litigation which followed in the wake of the 2004 revisions.
The scope of the computer professional exemption, enacted prior to the widespread use of the Internet and before the existence of some of the most well-known tech companies (e.g., it was enacted prior to the existence of Google), is often a source of litigation, as employers and the courts attempt to apply the exemption to hundreds of jobs that did not exist when the exemption was created. The exemption applies to those working as a computer systems analyst, computer programmer, or software engineer, but was written broadly to include as well, any “similarly skilled worker,” likely anticipating new positions would emerge as technology rapidly changed. . A new decision, applying the exemption, upholds application of the exemption to a lead technician for a commercial installer of voice and data systems. Haluska v. Advent Communs., Inc., 2014 U.S. Dist. LEXIS 158467 (W.D. Pa. Nov. 10, 2014).
While the plaintiff attempted to characterize his job as a “simplistic form of data entry,” Judge Terrence F. McVerry ruled that “by his own admission, plaintiff’s primary job duties included consulting with customers at precut meetings to discuss and determine hardware specifications and systems functions as well as programming/modifying the related software to meet their needs,” and that even if he was not a computer programmer he was a “similarly skilled worker” and the exemption applied.
Evolution in the information technology sector has outpaced the evolution of the applicable Department of Labor guidance on computer professionals. Practical assessment such as that found in Haluska, is necessary to preserve the purpose of exempt status, namely to permit exclusion from overtime for highly skilled, well-compensated workers.
Joining sister Circuits, on Wednesday the Court of Appeals for the Ninth Circuit ruled that an employee must set forth specific information regarding his or her work hours to properly plead an FLSA claim for unpaid minimum wages or overtime under the Iqbal doctrine. Landers v. Quality Communs., Inc., 2014 U.S. App. LEXIS 21440 (9th Cir. Nov. 12, 2014)
Joining the “trilogy of cases” from the Second Circuit, as well as decisions from the First and Third Circuits (and rejecting an unpublished order from the Eleventh Circuit permitting more conclusory pleading), the Court agreed “with our sister circuits that in order to survive a motion to dismiss, a plaintiff asserting a claim to overtime payments must allege that she worked more than forty hours in a given workweek without being compensated for the overtime hours worked during that workweek.” The Court declined to issue a hard and fast pleading rule that would serve as the “sine qua non of plausibility,” but consistent with the prior opinions from other Circuits required factual specificity. Having articulated that standard, the court affirmed dismissal of the complaint at bar because it “presented [only] generalized allegations asserting violations of the minimum wage and overtime provisions.”
Four Circuits have now adopted a variation of the rule originally set forth by the Second Circuit in Lundy. Practitioners must closely review pleadings and avail themselves of this doctrine as appropriate.
As we have written before the outside sales exemption is arguably one of the more straight-forward FLSA exemptions, having only two requirements: 1) having as the primary duty making sales or obtaining orders; and 2) doing so away from the employer’s place or places of business “customarily and regularly.” Nevertheless, this simple test can be the subject of contested litigation. A recent decision upholds the applicability of the exemption to a salary paid worker for a restoration and cleaning firm. Dooley v. CPR Restoration & Cleaning Servs. LLC, 2014 U.S. App. LEXIS 20918 (3d Cir. Oct. 29, 2014).
Dooley’s primary duty was to monitor a scanner and proceed to the location of fires in order to sell his employer’s services to the affected property owner, including offering “board-up” services as a “loss leader” in hopes of obtaining further, profitable work. Speed was of the essence in order to be the first one on location once the fire department permitted civilian personnel to the site. Plaintiff admitted that the boarding up services he offered (sometimes with agreement to pay the homeowner’s insurance deductible, which he was free to offer), did not make money for the company, but were part of an effort to secure more lucrative work. The court concluded that Plaintiff’s “task of monitoring fire reports was to further CPR’s sales goals and these exempt duties were more important than his non-exempt duties.”
Under recent Supreme Court precedent, employers must apply the outside sales exemption by reference to the sales process prevalent in their industry, mindful of the general FLSA standard and state law tangents.
The “highly compensated” regulation is designed to relax the exempt status tests for the white collar exemptions for individuals who make more than $100,000 per year in total compensation. 29 C.F.R. § 541.601(a). Nevertheless, challenges to exempt classification of such workers can arise, with the employee claiming he or she still was non-exempt based on his or her job duties or arguing the specific compensation arrangement did not satisfy the salary basis requirement. A new decision recently upheld the applicability of the exemption for highly compensated employees and rejected the employee’s argument that the salary basis test was not satisfied. Litz v. St. Consulting Group, Inc., 2014 U.S. App. LEXIS 21055 (1st Cir. Nov. 4, 2014).
In Litz, the Plaintiffs, project managers for the defendant political consultancy, “earned well over $100,000 per year” under a compensation scheme where “their earnings equaled the number of hours they billed to clients multiplied by an hourly rate between $40 and $60.” The compensation plan guaranteed a minimum weekly salary of $1,000, regardless of hours billed. Plaintiffs argued that this did not constitute salary basis payment, citing language on paystubs and several communications from the employer implying that a circumstance could arise where the guarantee would not have been paid. In a strongly worded decision, the First Circuit opined that this view “simply ignores the economic reality of the guarantee . . . The fact that the [actual] pay was usually–but not always–high enough to render the guaranteed stipend unnecessary hardly means that the guarantee was not part of the employee’s compensation.”
Several courts recently have examined these types of exemption challenges and rejected them. Anani v. CVS RX Servs., 730 F.3d 146 (2d Cir. 2013). However, employers must consider their exposure to claims and assess their wage-and-hour compliance, regardless of the level of worker compensation, from tipped employees on up to executives.
Employers defending FLSA overtime claims brought by employees are often frustrated when such claims include alleged “off the clock” work despite the fact that the business properly maintained records of hours worked. A new decision rejects one such allegation. Gilson v. Indaglo, Inc., 2014 U.S. App. LEXIS 20828 (11th Cir. 2014).
The sales employee plaintiffs in Gilson argued that because data reflecting when sales were entered into the system did not match up with their records of hours worked, some sales work must have occurred on-the-clock, because “sales commissions were credited to [their] accounts on days when [they] were calendared as not working.” The appellate court observed that plaintiffs “did not dispute, however, that sales commission dates reflected the day when the sale paperwork was completed, not when the salesperson initiated the sale . . . [and also] failed to produce documentary evidence or state with specificity particular dates on which their actual work hours were not accurately reflected in the employer’s records.” Thus, the district court’s granting of summary judgment to the employer was affirmed.
Employee-created, properly-maintained records of hours worked remain an employer’s best defense to overtime claims premised on alleged “off the clock” work initiated by non-exempt employees.
In a setback for that state’s thriving adult entertainment business, the Nevada Supreme Court yesterday ruled that Sapphire Gentleman’s Club improperly classified its 6000+ semi-nude performers as independent contractors rather than employees under Nevada’s minimum wage law. Terry et al. v. Sapphire Gentlemen’s Club et al., case number 59214, 10/30/14.
The Nevada court, citing policy considerations, adopted the FLSA’s “economic realities” test under state law, and concluded that under “the totality of the circumstances of the working relationship’s economic reality, Sapphire qualifies as an employer under NRS 608.011, and the performers therefore qualify as employees.”
Like many businesses using non-employee service providers, the adult entertainment industry has faced numerous challenges to its practices in recent years. Companies must assess their employment practices in light of the Terry ruling and the applicable law in their jurisdiction.
As the debate over the minimum wage and the role tip income should play in satisfying the minimum wage obligation for tipped employees continues on the federal and state level, a restaurant in Minnesota recently joined the fray. Rather than raise prices gradually in response to the recent increase to the Minnesota state minimum wage, the Oasis Café has attached a mandatory $.35 “minimum wage fee” charge to each order, expressly to highlight the impact of the minimum wage increase on their operation.
This “small business” response to a change in the minimum wage serves as a microcosm of the different forces impacting the discussion, such as businesses for whom compliance with minimum wage requirements is the most pressing, typically industries involving lower wage workers and smaller profit margins. Watch this space for further legal developments impacting the minimum wage on the federal and, importantly, state level, for both tipped and non-tipped employees.
One common “joint employer” allegation which has been regularly rejected by courts is that a regional cable provider is a joint employer of its installation subcontractors’ employees or contractor installers, due to the alleged business or operational control the cable provider exerts over the subcontractor in how installation work is performed. A Missouri court recently joined the numerous other courts rejecting such claims. Thornton v. Charter Communs., 2014 U.S. Dist. LEXIS 135523 (E.D. Mo. Sept. 25, 2014).
In Thornton, the plaintiffs argued that “the ‘economic reality’ of the relationship between Charter and [its subcontractor] [demonstrated that] the entities were in fact partners who jointly engaged in an employment relationship with plaintiffs under the FLSA . . . [due to Charter’s] extensive quality control procedures and the provisions of the Agreement between [subcontractor] and Charter.” Judge Stephen N. Limbaugh, Jr. rejected this argument along similar analytical lines to prior judges considering the issue (see, e.g., Lawrence v. Adderley Indus., 2011 U.S. Dist. LEXIS 14386 (E.D.N.Y. Feb. 11, 2011)), noting the absence of “formal control factors” such as the power to hire and fire and the supervision of work.
The joint employer debate is unlikely to subside anytime soon. All businesses must be attuned to this issue and take proper remedial measures to bolster a legal defense if a claim is made.
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.