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

As we have detailed many times, the legal determination as to when an individual providing services is performing work which must be compensated under the minimum wage and overtime provisions of the FLSA is not always simple. This inquiry and related questions were at issue in Rui Xiang Huang v. J&A Entm't Inc., 2012 U.S. Dist. LEXIS 184727 (E.D.N.Y. Dec. 3, 2012), in which Magistrate Judge Viktor V. Pohorelsky of the United States District Court for the Eastern District of New York found a trial necessary to determine whether a tour guide was an independent contractor, rather than  an employee and, if an employee, whether she was “working,” and thus eligible for minimum wage and overtime pay during periods after she arrived at the casino and before the return trip back.   

The duties reviewed by the Court in Huang were relatively straight-forward. Plaintiff was responsible for selling tickets, encouraging individuals to join defendant’s tours to Mohegan Sun, then accompanying the customers on the bus trip to the casino. The parties’ disputed whether Plaintiff was an independent contractor, and thus not covered by the FLSA, or an employee. The court found a question of fact existed regarding her status under the “economic realities” test adopted by the Second Circuit, including the degree of control exercised by the Defendant over Plaintiff, Plaintiff’s opportunity for profit or loss as a tour guide, and the skills required to perform the work. As to whether time at the casino constituted “work time”, the Court also found a question of fact based on the parties’ sharp dispute regarding whether Plaintiff was relieved of duty once she arrived  at the casino or whether she was required to attend mandatory meetings and also advise travelers on the tour.

While the duties at issue here were relatively unique, and not strictly applicable to many other industries, the legal questions discussed in analyzing whether there was an “employment” relationship are common ones: does the putative employer exert control over the service provider in question, and, as to whether time spent must be compensated, is allegedly “mixed benefit” or “mixed time” compensable “work” requiring adherence to the minimum wage and overtime rules? Employers must analyze these questions with respect to their own contractors and employees by reference to FLSA guidance and the laws, regulations and case law of the states in which they operate.

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In light of other case law, a recent pro-employer decision from the Eleventh Circuit Court of Appeals, holding that a salaried dispatcher for a crane rental company qualified as an exempt administrative employee, adds credence to a question often asked by legal and human resources professionals: is the administrative exemption in the eye of the beholder? Rock v. Ray Anthony Int'l, LLC, 2010 U.S. App. LEXIS 10775 (11th Cir. Fla. May 26, 2010).

At the trial court level, the district court found that Rock’s duties as dispatcher included “customer communication, choosing the appropriate crane for specific jobs, assigning operators to cranes, overseeing other employees, preparing and reviewing job tickets, and maintaining the crane rental schedule . . . He was also responsible for selecting the type of materials, supplies, machinery, equipment, and tools that were needed to meet the customers' needs.” Id. at * 5-6. The trial court concluded that these duties “related to servicing or running [defendant’s] general business operations”, rendering him eligible for the administrative exemption. Id. at * 6.

On appeal, Rock argued that the recently issued DOL Administrative Interpretation regarding loan officers (discussed here), which opined that employees performing sales work generally are engaged in “production” and not eligible for classification as exempt “administrative” employees, supported a non-exempt finding, as his responsibilities were “more akin to sales and retail.”

The Eleventh Circuit, relying on precedent within the Circuit, observed that “even when employees engage in sales, their duties are administrative if the majority of their time is spent advising customers, hiring and training staff, determining staff pay, and delegating matters to staff.” Id. at * 9 citing Hogan v. Allstate Ins. Co., 361 F.3d 621, 627 (11th Cir. 2004). Because the trial court found that Rock’s duties “went beyond mere sales” and included management of the crane division, the administrative classification was upheld.  Id.

Rock is welcome news for employers within the 11^th Circuit’s purview of Florida, Georgia and Alabama. However, the general lack of clarity as to what constitutes “administrative” work is highlighted when the Rock decision is juxtaposed with a recent decision involving dispatchers issued by a New York federal court. In Iaria v. Metro Fuel Oil Corp., 2009 U.S. Dist. LEXIS 6844 (E.D.N.Y. Jan. 30, 2009), the court denied the employer’s motion for summary judgment as to its classification of a dispatcher as an exempt administrative employees. In part, the Court’s decision in Iaria was premised on crediting the plaintiffs’ testimony that their duties did not involve supervisory or management responsibilities, but were limited to “monitoring drivers' deliveries, responding to drivers' problems, handling some customer service calls, routing, entering data in the computers, and checking the drivers' logs.” Id. at * 3.  The Court stated that these dispatcher plaintiffs’ “duties relate more directly to the service and product that [defendant] provides -- the delivery of fuel for heating -- than they do to servicing the business.” Id. at * 11.   

Employers utilizing the administrative exemption, especially with sales and quasi-sales position, must closely review the DOL’s current position and the applicable law in their Circuit, as well as applicable state law, to ensure understanding of all potential risks.

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Determining whether an entity is covered by the Fair Labor Standards Act is not an easy analysis. One basis for jurisdiction is "enterprise coverage."

On March 3, Magistrate Judge Azrack of the Eastern District of New York ruled on summary judgment that St. Augustine’s Episcopal Church of Brooklyn is not an “enterprise” for purposes of the FLSA, and accordingly dismissed FLSA claims asserted by a former on site caretaker and custodian. Locke v. St. Augustine's Episcopal Church, 2010 U.S. Dist. LEXIS 18749 (E.D.N.Y. Mar. 3, 2010). In reaching this decision, Magistrate Azrack first declined to treat the church and the Diocese of Long Island (which was not named separately as a defendant) as a single enterprise. The court then focused its analysis on whether St. Augustine’s secular activities (principally, hosting functions and renting an apartment to the plaintiff at a below-market rate) rendered it an enterprise engaged in commerce.

Distinguishing Boekemeier v. Fourth Universalist Soc'y, 86 F. Supp. 2d 280 (S.D.N.Y. 2000) (as well as the Supreme Court’s decision in Tony & Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985)), the court ruled that “The undisputed facts show that St. Augustine's does not perform rental activity as a ‘business operation on the side.’” Id. at * 27. Unlike in Boekemeier and Alamo, the limited rental of St. Augustine’s function hall space (which the church did not advertise or maintain a staff to service and promote) did not make St. Augustine’s an enterprise because the church did not compete with commercial establishments, and the income earned was not substantial. Based on this analysis, the Court held that “Locke has not met the burden of establishing that St. Augustine's performed any activities for a business purpose. St. Augustine's does not constitute an enterprise.”
 

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