New York Federal Court Reiterates Second Circuit's Narrow View of Protected Activity for Purposes of FLSA Retaliation Claims

Posted on October 17, 2011 by Noel Tripp

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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New York Federal Court Denies Early Summary Judgment Motion as to Exempt Status of Financial Analyst

Posted on July 8, 2010 by Noel Tripp

One commonly held misconception in wage-and-hour law is that all investment professionals in the financial industry are categorically exempt from overtime pay. In a decision contrary to such assumption, Judge Denise Cote of the Southern District of New York recently denied summary judgment to a boutique investment bank as to the exempt status of a financial analyst, and conditionally certified a class of similarly situated financial analysts, permitting the Plaintiff to invite them to join the case. Henderson v. Transp. Group, 2010 U.S. Dist. LEXIS 66109 (S.D.N.Y., Jul. 1, 2010).

As a financial analyst, Plaintiff Henderson worked as the junior member of an investment team consisting of financial analysts, associates and vice presidents. Financial analysts, although the junior members of the bank’s deal teams, participated in all major tasks, including “(1) making telephone calls and sending emails to prospective investors in order to market transactions, (2) assisting in the development of financial models using Microsoft Excel spreadsheets, and (3) developing term sheets to finalize a deal.” Henderson received a starting salary of $35,000 per year, sufficient to satisfy the “salary basis” prong of the exempt status test.

The Court acknowledged throughout the opinion that these tasks could give rise to the requisite discretion and independent judgment necessary to qualify for the administrative exemption, but denied the motion based on the bank’s failure to provide specific evidence of how financial analysts exercised discretion in carrying out these tasks. The Court wrote:

“The defendants have not, however, submitted evidence describing the specific tasks performed in providing that support and assistance and in creating term sheets. Similarly, with respect to financial modeling, the defendants' witness opines that ‘[p]utting together such a file is a sophisticated and dynamic process changing frequently in reaction to market and investor demand.’ But the witness does not describe, for example, what, if any, alternatives, variables, or considerations must be weighed to create or apply the model, how an analyst is expected to react to "market and investor demand," or what authority analysts possess to decide any matter of significance.”

Because this evidence of the nature and extent of the analysts’ discretion was lacking, the court denied summary judgment. This decision is consistent with other authority within the Circuit finding summary judgment inappropriate in applying the administrative exemption to analysts. See e.g. DiFilippo v. Barclays Capital, Inc., 552 F. Supp. 2d 417 (S.D.N.Y. 2008)(denying summary judgment as to applicability of administrative exemption to Government Clearance Analysts). 

Henderson is the most recent in a series of decisions pointing out concerns with a uniform exempt classification of financial services employees. Industry employers should review their current classifications of financial professionals as exempt or non-exempt as litigation of classification issues in the industry is expected to continue. 

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New York Magistrate Judge Recommends That Employee of Web Design Company is Ineligible for 7(i) Overtime Exemption

Posted on April 22, 2010 by Noel Tripp

Under 29 U.S.C. § 207(i) of the FLSA, employees of a “retail or service establishment” who receive 1.5 times the minimum wage for all hours worked and receive at least 50% of compensation in commissions for a representative period are exempt from overtime payments.   This exemption is generally referred to as the 7(i) exemption.  Recently, Magistrate Judge Dolinger of the United States District Court for the Southern District of New York issued a Report and Recommendation analyzing whether a “client relationship manager” for a technology company providing web site design was covered by the exemption.  The Company also provided staffing services, though the extent of such services was disputed.  Since the employee received sufficient commissions and 1.5 times the minimum wage, the only disputed issue on summary judgment was whether the employer qualified as a “retail or service establishment.”

While acknowledging that the term “retail or service establishment” was ambiguous, after reviewing legislative and judicial history, and a United States Department of Labor opinion letter, the Court held that the employer had not established, for purposes of summary judgment, that it was a retail or service establishment.  In order for the defendant to establish that its creation of web sites for commercial clients qualified as a retail service, the Court held, “it must demonstrate that there is a notion of retail sales and services in the computer-programming industry of which it is a part, and furthermore that within that industry the activities performed by [defendant] are considered to be retail services.”  In holding the employer failed to meet its burden, the Court distinguished prior cases holding that companies providing computer training to businesses were covered by the exemption.  The Court found designing web sites for businesses is different from providing computer training, relying principally on a 1994 USDOL opinion letter that found the sale of hardware and software to corporate clients was not a retail activity.  The Court also expressed its opinion that providing staffing services to clients (e.g., providing personnel to perform services such as operating help desks for corporate clients) are also not “retail services.” Kelly v. A1 Technology, 2010 U.S. Dist. Lexis 37807 (S.D.N.Y. April 8, 2010),

The Report and Recommendation will now be reviewed by the District Court Judge assigned to the case, Judge Kaplan.  
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Another New York Federal Court Compels Arbitration of Individual Claims

Posted on April 7, 2010 by Noel Tripp

In the Second Circuit, employees generally can waive their right to bring a class or collective action as long as the cost of arbitrating the case on an individual basis is not cost-prohibitive  and does not “remov[e] the plaintiff’s only reasonably feasible means of recovery.”  See In Re American Express Merchants’ Litigation, 554 F.3d 300 (2d Cir. 2009).   In late March, Judge Gleeson of the Eastern District of New York analyzed the viability of such a collective/class action waiver in the wage and hour context.  The court upheld the waiver finding that the plaintiffs did not demonstrate that individual litigation would be “cost-prohibitive.”  Judge Gleeson rejected the plaintiffs’ claim that incurring arbitration costs of up to $1,500 to process the arbitration rendered the agreement substantively unconscionable.” See Reid, et al. v. Supershuttle International, Inc., 2010 U.S. Dist. LEXIS 26831 (E.D.N.Y. March 22, 2010).

This decision parallels the Southern District of New York’s recent decision in Arrigo v. Blue Fish Commodities Inc., 2010 U.S. Dist. LEXIS 9547 (S.D.N.Y. Feb. 4, 2010), in which the court also  dismissed an employee’s Fair Labor Standards Act collective action and required him to arbitrate his claim on an individual basis pursuant to the Federal Arbitration Act.  See “Federal Courts in New York Continue to Enforce Arbitration Agreements” http://www.jacksonlewis.com/legalupdates/article.cfm?aid=1989 for a further discussion of this decision and other recent New York federal court decisions addressing mandatory arbitration.

 

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