Wage and Hour Law Update : Wage & Hour Lawyer & Attorney : Jackson Lewis Law Firm : Minimum Wage, Overtime & Service Contracts

The Supreme Court's web site confirms that the nation's highest court has granted the petition for certiorari filed by the pharmaceutical sales representative (PSR) plaintiffs in Christopher et al. v. SmithKline Beecham Corporation.  The Court will now review the Ninth Circuit's ruling in Christopher that SmithKline properly classifies its pharmaceutical sales representatives as "outside sales" employees, despite the FDA regulations precluding PSRs from receiving money from the medical practitioners they visit.  Absent unforeseen delays, the parties (and the industry at large) should expect a ruling prior to end of the Court’s 2011/2012 term. 

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As the pharmaceutical community eagerly awaits the Supreme Court’s decision whether to grant certiorari in Christopher v. SmithKline Beecham Corp., courts within the Third Circuit (encompassing Pennsylvania, New Jersey and Delaware) continue to conform to the appeals court’s previous holding in Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010), that pharmaceutical representatives meet the test for the administrative exemption under federal and Pennsylvania law. See Ibanez v. Abbott Labs., Inc., 2011 U.S. Dist. LEXIS 131945 (E.D. Pa. Nov. 14, 2011).

In Ibanez, as in previous cases such as Smith and Baum v. AstraZeneca LP, 372 Fed. Appx. 246 (3d Cir. 2010), the court determined that “plaintiff regularly exercised discretion and independent judgment in all aspects of his job, including pre-call planning, interactions with physicians, territory business planning, and the planning of events.” rejected plaintiff’s reliance on U.S. Department of Labor guidance concerning the applicability of the administrative exemption to positions and duties allegedly analogous to the PSR position. Some courts, relying on this guidance, have narrowly interpreted the exemption to apply principally (if not solely) to operational employees such as Human Resources, Accounting or Information Technology. ]

The continuing “wave” of wage-and-hour litigation seeking to find PSR’s non-exempt presents an important case study for employers in other industries, where assumptions about the exempt status of particular classifications of employees persist. A preventive audit is often the only way to detect potential wage-and-hour exposures (individual and/or class-wide) and make changes before they are identified via costly litigation.  As to PSR’s, the issue only will be resolved if the Supreme Court grants certiorari and provides guidance to the industry as to the applicability of both the administrative and outside sales exemptions.

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As we recently discussed, interplay between state wage-and-hour laws and other statutes (federal or state) is not always seamless, as neither the state wage statute nor the competing law or regulation at issue properly addresses the extent to which their scope might interfere with each other. However, as employment statutes, the wage-and-hour laws are often construed broadly, and some courts are reluctant to limit their scope regardless of the presence of another statute. In a recent example of this judicial reticence, the United States Court of Appeals for the Ninth Circuit reversed a trial court decision finding that a district court could not adjudicate plaintiffs’ state wage-and-hour law claims against SuperShuttle because it lacked subject matter jurisdiction. Kairy v. SuperShuttle Int'l, 2011 U.S. App. LEXIS 22161 (9th Cir. Nov. 3, 2011).       

Plaintiffs, “franchisee” van drivers for SuperShuttle in California, allege they were misclassified as independent contractors for the purposes of various provisions of the California Labor Code. The trial court applied a three-part test laid out by the California Supreme Court to resolve conflicts potentially implicating the jurisdiction of Public Utilities Commission (“PUC”). The trial judge determined that: 1) the PUC had authority to formulate policy regarding the classification of all drivers for so-called passenger stage corporations (“PSCs”), including SuperShuttle; 2) the PUC had exercised such authority by issuing a General Order relating to PSC conduct, and a decision interpreting that order; and, accordingly 3) that to allow plaintiffs’ wage action to proceed would interfere with this regulation of PSC drivers. Id. at 6-7. In reversing, the appellate court acknowledged that the PUC had authority to regulate the relationship between a PSC, such as SuperShuttle, and its drivers, and that it was a “close” question as to whether the General Order issued by the PUC constituted an exercise of this authority. However, the appellate court ruled that application of the wage/hour laws would not interfere with the PUC regulations governing drivers. Thus, the Public Utilities Code was “not implicated, and the district court retains subject matter jurisdiction over this case.”

Public sector employers, and all businesses performing work for public sector entities, must closely analyze the interplay of employment statutes and the regulatory environment governing their particular industry.

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In April, we addressed at length New York’s newly-enacted “Wage Theft Prevention Act.” Now, through Assembly Bill 469, California has adopted a nearly identical law, the California Wage Theft Prevention Act. Effective January 1, 2012, the law increases the penalties available under existing provisions of the California Labor Code, and adds a detailed notice requirement to employees, echoing the requirements recently imposed on employers by N.Y. Labor Law § 195. 

Codified as Cal. Labor Code § 2810.5, the California WTPA notice requirement requires private California employers of non-exempt employees not subject to certain collective bargaining agreements to provide each new hire with a notice containing:

(A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable.

(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.

(C) The regular payday designated by the employer in accordance with the requirements of this code.

(D) The name of the employer, including any “doing business as” names used by the employer.

(E) The physical address of the employer’s main office or principal place of business, and a mailing address, if different.

(F) The telephone number of the employer.

(G) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.

(H) Any other information the Labor Commissioner deems material and

Id. § 2810.5. (a)(1). Employers also must provide a notice to existing employees within seven days where there are any changes to the above information, unless the change is conveyed through a Cal. Labor Code § 226-compliant wage statement. 

One prominent question not addressed by the California statute is whether a mandatory or recommended notice form will issue under the new law’s notice requirement, which provides only that “The Labor Commissioner shall prepare a template that complies with the requirements [of the law].” Of course, interpretation of the notice requirement and all other provisions of the Act within the context of the California Labor Code and California law will become hotly-contested issues for California courts.

With New York Wage Theft Act compliance and issues already providing grounds for litigation, this new California law (along with California’s new written commission plan law and new legislation imposing significant damages for misclassification of individuals as independent contractors) adds yet another layer of compliance and exposure to the already difficult environment for California employers, who should strongly consider developing an action plan over the next 60-days to ensure compliance with the WTPA requirements.

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As discussed by our colleagues at the California Workplace Blog, California governor Jerry Brown has signed into law AB 1396, requiring all employers doing business in California to draft written contracts for any agreements with employees that involve commissions as a method of payment for services.  California joins New York in the vanguard of making such a writing a requirement.  N.Y. Labor Law § 191(1)(c).  Of course, such a writing remains a best practice under almost all circumstances. 

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Numerous state wage laws provide for limitations periods longer than the maximum three years provided under federal law (such as six years under the New York Labor Law). Some state statutes fail to address the issue, giving rise to litigation over how far back a plaintiff can go on his or her minimum wage, overtime or other wage claims. In a unanimous decision issued late last week, the Arkansas Supreme Court held that the limitations period for overtime claims under the Arkansas Minimum Wage Act is three years, not five as urged by Plaintiffs.  The issue had been certified by a federal district judge to the state’s highest court.  Douglas v. First Student, Inc., 2011 Ark. 172 (Ark. 2011). The Douglas action is being defended by a Jackson Lewis team consisting of wage-and-hour specialists Steve Munger, Skip Smith and Justin Barnes. 

 “We have traditionally applied a three-year statute of limitations to actions arising under a liability that is imposed by statute,” observed Associate Justice Jim Gunter, who authored the opinion. “[We] hold that a three-year statute of limitations would apply to private cause of action brought pursuant to the [Arkansas Minimum Wage Act].” Douglas v. First Student, Inc., Supreme Court Case No. 11-361 (Order Nov. 3, 2011). In so holding, the Court rejected plaintiffs’ argument, based on earlier Arkansas precedent, that a five-year “catch-all” statute of limitations should apply, because in Douglas any liability was created expressly by statute, as opposed to a blend of statutory and contractual claims. 

This ruling in Douglas constitutes a victory for Arkansas employers, harmonizing the statute of limitations for actions under state law with the FLSA’s three years. The vagaries and unanswered questions of many state wage laws continue to trip up employers, especially those with multi-state operations.

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While states generally are free to enact wage and hour laws providing greater protections than contained in the Fair Labor Standards Act, sometimes such laws run afoul of federal statutes governing particular industries. In a recent decision exemplifying this type of preemption, a judge in the United States District Court of the Southern District of California ruled that the oppressive meal and rest break provisions of the California Labor Code (which will be clarified by the California Supreme Court following oral argument on November 8), conflict with and are preempted by the Federal Aviation Authorization Act of 1994 (FAAA), because the state requirements interfere with interstate commerce. Dilts v. Penske Logistics LLC, 2011 U.S. Dist. LEXIS 122421 (S.D. Cal. Oct. 19, 2011). This is a significant victory for industry employers as class action lawsuits alleging violation of these requirements have been prevalent in California.

Dilts concerned the meal and rest statute’s interference with the FAAA provision providing that “a State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.” Id. at * 13 quoting 49 U.S.C. § 14501(c)(1).  California’s strict meal and rest break laws, which the Court characterized as fairly rigid, force drivers to alter their daily routes while searching out appropriate places to pull off the highway and park their vehicles, preventing them from making some daily deliveries. Allowing California to “insist exactly when and for exactly how long carriers provide meal breaks for their employees would allow other states to do the same, and do so differently,” Judge Janis L. Sammartino observed. Id. at * 27.

Navigating the maze of federal, state and local regulation of wage-hour laws is never easy, particularly in heavily regulated industries such as trucking or aviation. Employers in these industries must monitor the status of the law to determine how best to comply with potentially competing provisions on the state and federal level. This decision points that the first step of any analysis is first to determine a statute or regulation’s enforceability.

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