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

Reflecting the Supreme Court’s 2011 decision regarding the scope of protected activity under the FLSA, the U.S. Department of Labor has issued Fact Sheet 77A, summarizing the Department’s view of the FLSA’s anti-retaliation provision.    Simultaneously, the Department also issued fact sheets addressing retaliation under the FMLA and the Migrant and Seasonal Agricultural Worker Protection Act.

Fact Sheet 77A sets forth the DOL’s assessment of the current legal landscape, including the Kasten decision, holding that the FLSA’s anti-retaliation provision (29 U.S.C. § 215(a)(3)) protects complaining employees “regardless of whether the complaint is made orally or in writing.” The fact sheet goes further, addressing the question the Supreme Court declined to answer in Kasten: namely, whether such written or oral complaints can be protected if made internally, or whether to be protected such complaint must be made formally to the Department of Labor or through a formal filing of a claim (i.e., a lawsuit). In the DOL’s view “most courts have ruled that internal complaints to an employer are also protected.” While this view has been endorsed in multiple forums, notably, courts within the Second Circuit have continued to adhere to the Second Circuit’s 1993 decision in Lambert v. Genesee Hosp., 10 F.3d 46, 55 (2d Cir. 1993), holding that a formal complaint is required. Son v. Reina Bijoux, Inc., 2011 U.S. Dist. LEXIS 116417 at * 12-14 (S.D.N.Y. Oct. 7, 2011) citing Lambert. 

The DOL’s fact sheet clarifies the Department’s position, but is not “news” to employers who monitor this space or otherwise educate themselves on these issues. Such employers also know that many state laws, including New York’s retaliation provision as modified by the 2011 Wage Theft Prevention Act, provide for greater protections than those contemplated under federal law and discussed in Fact Sheet 77A.

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As previously discussed, last March the Supreme Court ruled that the FLSA’s anti-retaliation provision protects “informal” complaints, i.e., unwritten complaints alleging violation of the FLSA are protected activity to support a retaliation complaint.  Kasten v. Saint-Gobain Performance Plastics Corp., No. 09-834 (Mar. 22, 2011). However, the Court declined to resolve the open issue of whether the statute protects internal complaints (those made to an employer or agent of the employer) or only external complaints (those made to an agency or filed with a court).  Thus, Federal courts interpreting retaliation complaints under Kasten are left with the pre-existing body of law in their jurisdiction governing whether internal complaints are protected.  A New York federal judge recently reiterated that while many other Circuits protect such internal complaints, Second Circuit courts do not under the FLSA.  Son v. Reina Bijoux, Inc., 2011 U.S. Dist. LEXIS 116417 (S.D.N.Y. Oct. 7, 2011).

In Son, plaintiff’s retaliation complaint presented a strong factual case regarding her protected activity under the FLSA, including an alleged tape recording of a conversation in which managers arguably confirmed that Plaintiff, a non-exempt employee, was being terminated for refusing to work on Saturdays without overtime pay.  The complaint contained further scandalous allegations that defendants predatorily hired Korean-Americans due to their willingness to work in violation of the FLSA.  Observing that the Supreme Court did not elect to resolve the question of the internal complaint question in Kasten, the Court ruled that it was constrained to follow the Second Circuit’s long standing precedent in Lambert v. Genesee Hosp., 10 F.3d 46, 55 (2d Cir. 1993), and accordingly held the internal complaint to be unprotected. 

While Son reaffirms the Genessee Hospital doctrine regarding federal protection of internal complaints within the Second Circuit (New York, Connecticut and Vermont), the authority in other jurisdictions is directly contrary.  Furthermore, many State laws, including New York, provide broader protection for employee complaints, an issue not addressed in the Son opinion.  In other words, state law, as well as general employee relations and EEO best practices, must be considered when analyzing the propriety of disciplinary action in regard to an employee who has asserted a workplace complaint regarding wage and hour compliance.

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29 U.S.C. 215(a)(3) prohibits employer retaliation against an employee for complaints alleging FLSA violations (though the contours of what constitutes a protected complaint are still uncertain).  An unanswered question has been whether the FLSA’s anti-retaliation protections prohibit a prospective employer from considering an applicant’s FLSA activity arising out of previous employment?  Recently, the Court of Appeals for the Fourth Circuit ruled that such protections do not so extend, and that a prospective employer may consider such prior activity in making a hiring decision.  Dellinger v. Sci. Applications Int'l Corp., 2011 U.S. App. LEXIS 16635 (4th Cir. Aug. 12, 2011).

In Dellinger, plaintiff applied for employment with defendant SAIC.  After a contingent offer of employment was made, plaintiff disclosed to SAIC, in connection with the company’s required background check, her pending FLSA lawsuit alleging minimum wage and overtime violations against a previous employer.  The offer of employment subsequently was rescinded by SAIC.  Dellinger sued, alleging that the withdrawal was based on her disclosure of her FLSA activity, and that such an employment decision violated Section 215(a)(3)’s prohibition against retaliation by an employer “against any employee.”

In a two-to-one decision, with a dissent from Circuit Judge Robert King, the Appellate Court affirmed the lower court’s dismissal for failure to state a claim, ruling that the scope of the anti-retaliation provision was defined by the FLSA’s definition of an “employee,” contained in 29 U.S.C. § 203(e)(1).  Analyzing applicant Dellinger’s claims under this definition –“any individual employed by an employer” –the Court held that “Dellinger could only sue [SAIC] if she could show that she was an employee and that Science Applications was her employer.” Dellinger, 2011 U.S. App. LEXIS 16635 at * 8 (emphasis added).  In declining to broaden the scope of “employee” for Dellinger, the Court observed that the “core” purpose of the FLSA was to provide minimum wage and overtime protection to workers, and that permitting FLSA lawsuits from applicants on such a novel theory would impermissibly and inappropriately broaden the statute, even though “‘morally unacceptable retaliatory conduct’ may be involved.”

While Dellinger is a positive development for employers, specifically those located in the Fourth Circuit, making employment decisions based on an applicant’s prior attempt to assert his or her workplace rights and protections (as opposed to based on legitimate business criteria such as the qualifications of the applicant) remains fraught with legal risk. 

For further analysis of this decision by Jackson Lewis see here.

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Expanded Jackson Lewis coverage of New York’s Wage Theft Prevention Act is now available here. 

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While the US Supreme Court recently has rejected petitions for certiorari on key FLSA exemption issues, the highest court in the United States did this term elect to take up the scope of the statute’s protection of workers who make complaints of FLSA violations to their employer.  As discussed in greater detail here, the Court has ruled that the FLSA’s anti-retaliation provision, 29 U.S.C. § 215(a)(3), applies to oral complaints, as well as written ones.  The Court did not decide the related issue of whether such a complaint is protected when made internally, to the employer, or only where it is made to a public agency (such as the Department of Labor).  This ruling does not provide the clarification most had hoped for, but makes clear that a cautious employer will treat all such complaints by an employee as protected activity under the statute.

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Jackson Lewis previously advised clients and friends of the Health Care Reform Act’s provision requiring employers to provide employees breaks for breastfeeding: http://www.jacksonlewis.com/legalupdates/article.cfm?aid=2016. (Regulations interpreting such requirements are expected to be issued within the next 6 months.)  Also contained in the over two thousand-page enactment is Section 1558, which adds a new Section 18C to the FLSA.  This new FLSA provision prohibits employers from discriminating or retaliating against any employee who has:

(1) received a credit under section 36B of the Internal Revenue Code of 1986 or a subsidy under section 1402 of this Act; (2) provided, caused to be provided, or is about to provide or cause to be provided to the employer, the Federal Government, or the attorney general of a State information relating to any violation of, or any act or omission the employee reasonably believes to be a violation of, any provision of this title (or an amendment made by this title); (3) testified or is about to testify in a proceeding concerning such violation; (4) assisted or participated, or is about to assist or participate, in such a proceeding; or (5) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any provision of this title (or amendment), or any order, rule, regulation, standard, or ban under this title (or amendment).

Aggrieved current or former employees who assert claims under this provision are entitled to a jury trial.

Employers can expect this cause of action for retaliation to be another tool in the arsenal of Plaintiffs’ lawyers.

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In today’s world, it is not overly difficult for a prospective employer to learn that an applicant has sued a prior employer under the FLSA. Can the prospective employer decide not to hire based on this information? 

In Dellinger v. Sci. Applications Int'l Corp., 2010 U.S. Dist. LEXIS 32861 (E.D. Va. Apr. 2, 2010), Judge Cacheris of the United States District Court for the Eastern District of Virginia, Alexandria Division, held that an employer could do so, finding that the FLSA’s anti-retaliation provision only protects employees, and not applicants. In reaching its decision, the court relied on two district court cases from other jurisdictions with similar holdings – Harper v. San Luis Valley Regional Medical Center, 848 F.Supp. 911 (D. Colo. 1994) and Glover v. City of North Charleston, 942 F. Supp. 243 (D.S.C. 1996). Judge Cacheris continually referred to the express language of the FLSA and declined to expand the definition of “employee” (meaning one who is “suffered or permitted” to work) to include applicants, observing that the plaintiff had never performed any work for the defendant. 

While no appellate court has ruled on this particular issue, Dellinger supports an employer’s right to disqualify applicants based on previous filings of FLSA suits. 

Of course while such information regarding prospective employees can be easily acquired in the era of the online social network, with extensive information about almost any subject only a click or two away through so-called “open source” searches, there are numerous potential pitfalls including potential FCRA violations and violations of “lawful activities” statutes (such as N.Y. Labor Law § 201-d) in gathering such information.

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The Supreme Court, on March 22, 2010, agreed to answer a question that has divided the circuit courts of appeal—whether the FLSA retaliation provision protects verbal complaints made by employees or only written ones. The Court will review the Seventh Circuit’s decision in Kasten v. Saint-Gobain Performance Plastics Corp., 570 F.3d 834 (7th Cir. 2009), where the Seventh Circuit held verbal complaints regarding unlawful pay practices do not fall under the protections of the FLSA’s anti-retaliation provision, 29 U.S.C. § 215(a)(3).  The decision follows the Second and Fourth Circuits, which previously held that an employee is not protected from retaliation under the FLSA where the employee has not complained in writing, based on the statutory requirement that the retaliation be in response to a “filing” (Note: the Second Circuit goes even further -- declining to protect internal written complaints and protecting only formal complaints to the DOL or a court). In Kasten, the Seventh Circuit agreed with this interpretation, and held that since Plaintiff’s complaints were “purely verbal”, this was fatal to his claim.  Id. at 838. 

Several circuit courts, including the First, Fifth, Sixth and Ninth, however, have ruled verbal complaints are sufficient. Three judges dissented in the Seventh Circuit’s subsequent decision in Kasten to deny rehearing en banc, citing these cases. Kasten v. Saint-Gobain Performance Plastics Corp., 585 F.3d 310 (7th Cir. 2009). The dissenters criticized the majority's decision, observing: "the [Seventh Circuit] has taken a position contrary to the longstanding view of the Department of Labor, departed from the holdings of other circuits, and interpreted the statutory language in a way that [we] believe is contrary to the understanding of Congress." Id. at 311.

The Supreme Court’s decision in Kasten, whether accepting or rejecting the Seventh Circuit’s employer-friendly approach, will hopefully provide some clarification regarding whether internal verbal complaints are protected under federal law. As always, state laws may (and do) differ.

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