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

Confusion continues to reign throughout the federal district courts as to the scope of the administrative exemption as set forth in the regulations at 29 C.F.R. §§ 541.200-202. In a decision highlighting this lack of clarity, Federal District Judge Kevin Castel of the Southern District of New York recently denied cross-motions for summary judgment as to the applicability of the exemption to “research associates” for Gerson Lehrman Group, a company devoted to assisting clients to “find and engage experts in various industries and disciplines.” Cohen v. Gerson Lehrman Group, Inc., 2011 U.S. Dist. LEXIS 104551 (S.D.N.Y. Sept. 15, 2011).

The parties could agree only that Plaintiffs’ duties as Research Associates related to “interview[ing] clients and match[ing] them with appropriate experts, and perform[ing] research tasks delegated by more senior employees.” Observing that the parties submitted a record “laden with factual disputes,” the Court ruled that while certain disputes were “little more than disagreements about seemingly irrelevant jargon” others were “integral toward determining the application of the administrative exemption.” The Court identified numerous factual disputes relating to the primary duties of Research Associates, and whether they exercised independent judgment and discretion in performing such duties, which in the Court’s view rendered it impossible to determine on summary judgment whether they met the test for the administrative exemption. In short, the Court could not determine whether the duties were exempt duties related to the “general business” of Gerson Lehrman and its clients (and thus potentially eligible for exemption) or were “production” work as defined in Davis v. J.P. Morgan Chase & Co., 587 F.3d 529 (2d Cir. 2009). Nor could the Court determine whether the requisite discretion and independent judgment was present. 

Cohen, like last year’s sister court decision in Henderson v. Transp. Group, 2010 U.S. Dist. LEXIS 66109 (S.D.N.Y. July 1, 2010), highlights the uncertainty in applying the administrative exemption to junior white collar professionals in numerous industries. While these employees have college degrees, possess substantial skills, and often are assigned important client responsibilities, the plaintiffs’ bar asserts that they are simply “producing” the white collar employer’s product, and that, as junior employees, they cannot possibly be involved in decision-making with respect to those clients requiring discretion and independent judgment. Unless and until the Supreme Court provides clarity regarding the scope of the exemption (by addressing one of the Circuit splits developing in particular industries), employers must continue to apply the exemption cautiously after review with counsel and with a full understanding of potential liabilities.

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In the latest installment in a long running dispute regarding compensation of certain mid-level managerial employees at the Gristede’s chain of New York-area grocery stores, federal Judge Paul Crotty ruled last week that Gristede’s corporate CEO, John Catsimatidis, is an individually liable “employer” under the FLSA and New York Labor Law. Torres, et al. v. Gristede’s Operating Corp., et al., 04-CV-3316 (S.D.N.Y. Sept. 9, 2011).  

The Gristede’s litigation, settled on the eve of trial in 2009 but has persisted due to the corporate defendants’ failure to adhere to the payment schedule set forth in the settlement agreement. As the suit was initially filed against numerous corporate defendants and individuals, including Mr. Catsimatidis, the CEO of the operative corporation, Plaintiffs’ counsel renewed its motion to hold Mr. Catsimatidis individually liable when the payment scheduled was not adhered to.  In finding that Mr. Catsimatidis met the test for an “employer” as an individual under the FLSA’s “economic realities” test and the Second Circuit’s decision in Herman v. RSR Sec. Services Ltd., 172 F.3d 132 (2d Cir. 1999), Judge Crotty relied on undisputed evidence regarding his individual control and involvement in the management of the business, as well as on an affidavit submitted by Mr. Catsimatidis in an unrelated litigation attesting to his operational control of the company as CEO. 

Consistent with the FLSA’s broad, remedial purpose, courts have fashioned tests which seek to hold individuals liable for wages as employers (even without application of the corporate veil doctrine) where they exercise sufficient control and have sufficient authority to warrant imposition of such personal liability. As the Torres decision demonstrates, management of small, medium and large businesses (along with their employment and corporate governance counsel) must be aware of this potential liability, and take steps to ensure wage and hour compliance and minimization of personal risk.

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We previously discussed New York courts applying the FLSA’s executive exemption, which exempts employees whose primary duty is management (and who are paid on a salary basis) from minimum wage and overtime pay obligations. Recently, Judge Berman of the Southern District upheld the application of the exemption to a group of warehouse “Captains.” Ramos v. Baldor Specialty Foods, Inc., 2011 U.S. Dist. LEXIS 66631 (S.D.N.Y. June 16, 2011)(Berman, J).

Ramos concerned warehouse captains who oversee a team of 3-6 “pickers,” the employees responsible for compiling orders of merchandise within defendant’s warehouse and loading that merchandise onto trucks for delivery to defendant’s customers. Relying heavily on the testimony of plaintiff Jose Barranco, whom the parties stipulated would serve as the representative deponent for all eight Captain plaintiffs, the court observed that this testimonial evidence (along with other affidavits submitted by defendant from other Captains) established that each Captain was “in charge” of his pickers because captains:

·         Ensured that pickers arrive to work on time;

·         Ensured that pickers performed their job duties correctly and at an acceptable productivity level;

·         Counseled pickers who worked too slowly or made too many mistakes;

·         Gave particular assignments to specific pickers based on his or her belief that that individual picker could carry out the assigned task (i.e., obtain the correct product for the order);

·         Participated in the performance evaluations for those on their team and served as the primary source of information for the night warehouse manager (the Captains’ own supervisor) concerning pickers’ performance;

·         Could request transfer of pickers away from his or her team;

·         Had the authority to issue a warning to a picker; and,

·         Completed a picker production report for every picker on his team each night, and conducted a final sign-out and inspection of the pickers equipment. 

Calling these tasks “clearly managerial,” the court ruled, in line with DOL regulations, that these managerial tasks constituted the pickers primary duty and that each captain’s team constituted a recognized “department or subdivision” over which that captain had managerial control. Finally, the court found that while the credible evidence established that a Captain could hire or fire pickers, such finding was not determinative as “courts uniformly reject arguments that an employee cannot be an exempt executive if he cannot make hiring or firing decisions.” Id. citing Pollard v. GPM Invs., LLC, 2011 U.S. Dist. LEXIS 24199 (E.D. Va. Mar. 10, 2011) (collecting cases).

This decision highlights the fact- intensive inquiry necessary to determine if an individual is an exempt executive, especially if the individual is a “front line” supervisor responsible for hands-on review of the work performed by non-exempt employees. Employers must continually analyze the appropriateness of their classification of managers as exempt executives under both federal and state law. 

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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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