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Wage & Hour Law Update

Maryland High Court Issues Opinion Regarding Right of Employees to Sue for Unpaid Wages

This summary of recent Maryland wage-and-hour case law is provided courtesy of Jackson Lewis attorney Charles J. Kresslein, Of Counsel to the firm’s Baltimore office.

On March 22, 2014, Maryland’s highest court issued a new ruling regarding the scope of an employee’s right to file a lawsuit for unpaid wages under the Maryland Wage Payment and Collection Law (the “MWPCL”), Maryland’s principal wage payment statute.  In Marshall v. Safeway, the Maryland Court of Appeals held that an employee may bring a private action under the MWPCL when the employer allegedly makes unlawful deductions from the employee’s pay.  The employer in Marshall mistakenly garnished too much money from the plaintiff’s pay due to a miscalculation.  When the employee brought a private action under the MWPCL for improper wage deductions, the trial court and intermediate appellate court dismissed the claim, ruling that the MWPCL permits a private civil action only when an employer does not pay all wages due upon the employee’s termination of employment or when the employer does not pay an employee in regular pay periods.  These lower court rulings were consistent with Maryland federal courts’ interpretations.  The Court of Appeals reversed, holding that any violation of the MWPCL, including improper wage deductions, may serve as the basis of a private action under the MWPCL.  2014 Md. LEXIS 163 (Md. Mar. 26, 2014).

The prior federal cases and the intermediate appellate court in Marshall had looked to the express language of MWPCL’s private civil enforcement provision, which states that an employee may file a lawsuit for violations of two specific statutory sections—the sections governing wages due upon termination of employment and the employer’s obligation to pay employees in regular pay periods.  Because the MWPCL’s provision governing deductions from pay was contained in a separate statutory section that was not specifically referenced in the private enforcement provision, those courts had held that the MWPCL does not permit a private action for unlawful deductions from an employee’s pay, leaving the employee with only an administrative remedy.  However, the Court of Appeals in Marshall looked to the legislative history and broader statutory scheme of the MWPCL and concluded that the legislature intended for any violation of the MWPCL to be subject to a private lawsuit, notwithstanding the limiting language in the civil enforcement section.

The District of Maryland federal court already has taken note of Marshall’s change in the law.  On April 11, 2014, in Mould v. NJG Food Service, Inc., the U.S. District Court for the District of Maryland revised a holding that it issued only a few months ago, in December 2013.  In Mould, several restaurant employees claimed that their employer’s improper tip pooling and tip credit practices resulted in unlawful deductions from their pay.  Relying on the intermediate appellate opinion in Marshall, the Mould Court in December dismissed several MWCPL counts that were based on the wage deductions.  Revisiting that holding in light of the decision in Marshall, the Mould Court reinstated some of those claims.  However, the court stopped short of reinstating the MWPCL claims that alleged that the deductions resulted in unpaid overtime in violation of the Fair Labor Standards Act, since it found those claims were preempted by the FLSA.

Employers with multi-state operations must constantly remain abreast of legislative, regulatory and case law developments.

Florida Judge: LPN Who Administered Workers’ Comp Program Was Exempt Administrative Employee

Judge William Terrell Hodges of the United States District Court for the Middle District of Florida recently ruled that an employee with an LPN degree who was responsible for managing an employer’s workers’ compensation claims qualified for the administrative exemption.  Hodge v. ClosetMaid Corp., 2014 U.S. Dist. LEXIS 45490 (M.D. Fla. Apr. 2, 2014).

In Hodge, Plaintiff did not work as a nurse, but utilized her medical expertise as the company’s “[O]ccupational Nurse . . . responsible for establishing, promoting, coordinating, and recommending treatment plans for all workers’ compensation claimants . . . with the ultimate goal of ensuring optimal care is given in a cost effective manner.”  Judge Hodges ruled both that this was administrative function related to the general business operations of ClosetMaid, and that the plaintiff exercised discretion and independent judgment as she “made recommendations to the [insurance plan’s] third-party administrator, to legal counsel and to her supervisors concerning whether to settle claims, and whether to place an employee under surveillance.  Moreover, she prepared her department’s budget, attended mediation conferences where she was given settlement authority, and proposed changes to several employee policies.”  In the Court’s view, performing these duties in the context of managing the company’s $850,000 annual workers compensation expense constituted discretion and independent judgment.

Discretion and independent judgment within the context of the administrative exemption continues to be a source of litigation.  The presence (or lack thereof) of the hallmark examples identified in Hodge – interfacing directly with important contacts outside the organization and making significant recommendations regarding how to proceed – are important for employers, human resources and legal departments to consider when classifying workers.

Second Circuit Affirms Ruling That NYC Was Not “Joint Employer”

Affirming a 2013 district court ruling discussed in detail here, in a summary order the Court of Appeals for the Second Circuit held that Eastern District of New York Magistrate Judge Joan M. Azrack did not err in finding that home attendants employed by a not-for-profit agency who provided  personal care services to City residents were not “jointly employed” by the New York City Human Resources Administration under the FLSA.  Godlewska v. Human Dev. Ass’n, 2014 U.S. App. LEXIS 6547 (2d Cir. Apr. 8, 2014).

The terse order does not expand greatly on Magistrate Azrack’s ruling, noting only that the Circuit Court “reviewed the factors” set forth in prior Second Circuit precedent on joint employer issues in assessing the economic reality of a putative employment relationship, and found “based on these factors and the totality of the circumstances” that no employment relationship existed.

Joint employment allegations continue to be brought against government entities, parent corporations and franchisors (among others).  Businesses and municipalities must analyze the putative “control” they exert over business partners’ workers to assess this issue.

Supreme Court Declines Skycaps’ Appeal of Tip Claim Preemption Ruling

Presumably ending the long-running litigation regarding whether certain Massachusetts skycaps’ common law claims challenging the imposition of a $2 curbside baggage handling fee that allegedly caused a reduction in tips are preempted, the U.S. Supreme Court has declined to hear an appeal of the First Circuit’s 2013 decision finding those claims preempted by the Airline Deregulation Act.  Brown v. United Airlines, Inc., U.S., No. 13-444, cert. denied 4/7/14.  While the Court has elected to tackle certain wage-and-hour issues recently, its refusal here leaves intact this leading appellate court ruling holding that the Airline Deregulation Act preempts such claims based on the impact the cost of such services has on the “price, route, or service of an air carrier.”

Seventh Circuit Rules Changing Time Before and After Meals Non-Compensable

In the latest in a series of appellate decisions addressing “donning and doffing” issues, the Court of Appeals for the Seventh Circuit ruled that time spent changing at the start and end of a non-compensable meal break is not compensable time under the FLSA.  Mitchell v. JCG Indus., 2014 U.S. App. LEXIS 5099 (7th Cir. Mar. 18, 2014).

In Mitchell, the question was whether employees who worked at a chicken processing plant were entitled to compensation for time spent donning and doffing various sanitary gear (e.g., jacket, gloves, earplugs, hair net) before and after lunch.  The FLSA permits employers and their union to exclude from compensable time, time spent changing clothes “at the beginning or end of each workday.”  Mitchell, 2014 U.S. App. LEXIS 5099 at *5 (quoting 29 U.S.C. § 203(o)).  The Plaintiffs in Mitchell argued the exclusion did not apply because the time spent changing into their protective gear occurred during the workday (i.e. lunch) and not at the beginning or end of the workday.  The Court rejected this argument and held the exclusion applied because the “workday” refers to “the period of time in a day during which work is performed” and that “workers given a half-hour lunch or other meal break from work are in effect working two four-hour workdays in an eight-and-a-half-hour period.”

Mitchell also held, alternatively, that the time at issue was de minimis or simply part of the meal break, which the court explained was not “work” because it was primarily for the benefit of the employee,  mirroring the arguments made by Defendant it its motion to dismiss.  Id. at *10-22 (“the employer does not provide a meal break so that the employees can don and doff protective clothes and equipment, but so that they don’t have to work eight hours straight without food. The meal break is for the employees’ benefit.  The clothes changing is incidental to their eating lunch”).  Opining that “common sense has a place in adjudication,” in evaluating the de minimis argument, the Court also disclosed that it had its staff engage in a controlled experiment, putting on and removing the gear in question, and found that it took a matter of a few seconds or minutes at most.

Mitchell provides important guidance to employers regarding the compensability of certain activities before and after meal periods and the de minimis doctrine.  Employers must continue to analyze the scope of compensable time and the meal and rest break requirements of the various states in which they operate.

MLB All-Star Weekend Volunteers Not Employees Under FLSA

Judge John G. Koeltl from the Southern District of New York has dismissed the minimum wage claims of an individual who served as a volunteer at last year’s Major League Baseball All Star Weekend FanFest, held at New York City’s Javits Center, based on the “amusement or recreational establishment” exemptionChen v. Major League Baseball, 2014 U.S. Dist. LEXIS 42078 (S.D.N.Y. Mar. 25, 2014).

Plaintiff worked three shifts as a volunteer at FanFest, stamping attendees’ wrists, handing out paraphernalia and directing attendees.  He argued that this work made him an “employee” of Major League Baseball.  Judge Koeltl declined to address whether Plaintiff’s volunteer services made him an “employee”, because even if the court made such a conclusion, Plaintiff’s claim failed as a matter of law as  Plaintiff was “employed by an establishment which is an amusement or recreational establishment . . . [which did] not operate for more than seven months in any calendar year.”

While Chen is a victory for the employer community in light of the widespread series of actions brought by individuals classified as outside FLSA protection, principally asserted by interns,  many businesses are not seasonal in nature and thus cannot readily avail themselves of this exemption.  All potential exemptions and defenses to claims for minimum and overtime wages must be closely analyzed under the FLSA and, as applicable, state law.

President Obama Continues Push To Increase Federal Minimum Wage, Turns Attention to Tipped Wage

Despite encountering strong opposition to its proposals to raise the federal minimum wage and rewrite the Department of Labor regulations defining the exemptions from overtime under the FLSA, the White House is now requesting Congress raise the minimum wage for “tipped” employees.  Through a report released last week, the President argues that the minimum wage for “tipped” employees should be increased because women make up the majority of workers in tipped occupations.  The report released by the Administration notes that women “account for three-quarters of all workers in predominantly tipped occupations who would benefit” from a raise in the tipped minimum wage.  Not surprisingly, the report also contends that raising the tipped minimum wage would not impact employment rates.  However, it is more than possible that to offset the increased labor costs, employers will reduce working hours.  Like the President’s other proposed changes to the FLSA, any change to the tipped minimum wage is likely to meet stiff opposition in Congress.

We will continue to monitor these developments as well as similar state law initiatives (some of which have been successful) on this blog.

Eighth Circuit Affirms In Part District Court’s Rejection of Jury Finding That Managers Were Properly Classified as Exempt

Reviewing a decision of a trial judge reversing a jury’s finding that several lumber company managers were properly classified as exempt, the Court of Appeals for the Eighth Circuit ruled on the narrow issue of whether testimony that ownership solicited feedback from “all employees” could support a finding that the exempt managers’ recommendations were given “particular weight” within the meaning of the FLSA executive exemption regulations.  Unsurprisingly, the Court rejected the position that such evidence can support exempt status and affirmed the lower court’s reversal of a jury finding that the majority of such managers were properly classified as exempt.  Madden v. Lumber One Home Ctr., Inc., 2014 U.S. App. LEXIS 4929 (8th Cir. Mar. 17, 2014).

In Madden, several individuals were hired to serve in managerial roles for a new company location.  Due to Defendant’s financial struggles, there was little subordinate hiring or firing activity during the period in question.  The manager responsible for the entire site was unable to identify any specific individuals whom several of the plaintiffs had recommended for hire.  The Circuit Court agreed with District Judge J. Leon Holmes that the ultimate manager’s general testimony regarding the involvement of all subordinates in hiring could not support a conclusion that plaintiffs’ recommendations had been given “particular weight” within the meaning of 29 C.F.R. § 541.100(a)(4).  As to another plaintiff for whom Defendant had provided evidence of specific recommendations, the Circuit overruled Judge Holmes and reinstated the jury’s verdict finding that such manager was exempt.

Madden, while an adverse decision for the employer in question, is not a particularly damaging decision to the employer community. The holding is not a sea change in the law; employers must continue to take care when classifying employees as exempt executives to ensure that this prong of the exempt test is met.

Second Circuit Rejects Plaintiff’s Tolling, Willfulness Arguments

Reviewing a district court’s dismissal of FLSA claims which were not timely filed within the FLSA’s two-year limitations period for non-willful violations, the Court of Appeals for the Second Circuit found no error in the lower court’s two findings that: 1) plaintiff failed to create a question of fact as to willfulness in order to potentially extend the limitations period to three years; and, 2) there was no basis to toll the statute of limitations based on plaintiff’s Department of Labor complaint or illness.  Parada v. Banco Indus. De Venez., 2014 U.S. App. LEXIS 5497 (2d Cir. Mar. 25, 2014).

In Parada, plaintiff alleged, inter alia, that she was misclassified under the FLSA.  However, the District Court determined, and the Second Circuit affirmed, that Plaintiff could not meet her burden to establish willfulness because there was “no record evidence of [Defendant]‘s willful violation of the FLSA when it mistakenly classified [Plaintiff] as exempt.”  Thus, a two-year limitations period applied and her claim was untimely.  In a last gasp, plaintiff argued for tolling of the limitations period based on her filing of a DOL complaint during the limitations period and/or due to an alleged medical condition from which she suffered during the relevant period.  The Circuit Court noted that tolling applies only in “extraordinary circumstances” and observed that nothing prevented plaintiff from filing her FLSA claims while the DOL investigation was open, as the FLSA contains no requirement to exhaust administrative remedies.  The Court further concluded that her medical condition was not “severe enough to prevent her from filing the FLSA claim earlier.”

Plaintiffs bringing untimely claims for wages continue to seek avenues to extend the limitations period.  Parada serves as a reminder that plaintiffs must provide evidence of willfulness and/or “extraordinary circumstances” to support a tolling argument.

Ohio Judge Finds Dispatchers to be Exempt Administrative Employees

Cases upholding the exempt status of dispatchers pursuant to the administrative exemption of the FLSA generally have focused on whether the position requires the performance of decision-making duties and analysis “beyond mere communication and tracking of vehicles.”  A new decision builds on that analysis.  Wade v. Werner Trucking Co., 2014 U.S. Dist. LEXIS 35653 (S.D. Ohio Mar. 18, 2014).

In Wade, Judge Edmund A. Sargus, Jr. of the Southern District of Ohio summarized prior authority, including the Court of Appeals for the Eleventh Circuit’s leading decision on the issue, and then concluded that the defendant had established that many of the fleet coordinator or fleet manager Plaintiffs challenging exempt status qualified for the administrative exemption as a matter of law because: (i) their job consisted of “overseeing trucks and truck drivers operating within their jurisdiction during their shift, [which] was non-manual office work directly related to the management and business operations of Werner;” and (ii) they exercised discretion in supervising, training, recruiting, directing or disciplining the truck drivers working under them.

Dispatching employees, like certain classifications of insurance industry workers, continue to assert misclassification claims from time to time.  Employers need to analyze the specific duties of the individuals performing the functions discussed in Wade for their businesses and make classification decisions accordingly.