New York District Court Denies Summary Judgment As To Applicability of Administrative Exemption To "Research Associate"

Posted on September 22, 2011 by Noel Tripp

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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Southern District of New York Judge Ratifies Legality of Participation in Tip Pool By Captains and Banquet Coordinator

Posted on January 24, 2011 by Noel Tripp

While the New York State Department of Labor’s new Hospitality Industry Wage Order clarified many wage and hour issues for industry employers, the appropriateness of tip pool participation of certain categories of employee continues to be an area of uncertainty. On January 13, 2011, Federal District Judge Laura Taylor Swain granted summary judgment to Manhattan restaurant Brasserie Ruhlmann (“Restaurant”), on Plaintiffs’ claims that the restaurant violated the FLSA and N.Y. Labor Law (NYLL) by permitting captains and banquet coordinators to participate in the Restaurant’s tip pool. Garcia v. La Revise Assocs. LLC, 2011 U.S. Dist. LEXIS 3325 (S.D.N.Y. Jan. 13, 2011).

The plaintiffs in Garcia were three servers and one busboy at the restaurant, who participated in its tip pool consisting of servers, runners, busboys, captains, bartenders, and the Restaurant's banquet coordinator. The Plaintiffs alleged that tip pool participation of captains, bartenders and the banquet coordinator violated the FLSA and NYLL because these employees were “employers” (or agents of the employer) within the meaning of the law, or in the alternative were not employees who "customarily and regularly receive tips.” 

Judge Swain disagreed, observing that captains played “a substantial role in customers' dining experience at the Restaurant by assisting servers, answering questions, and overseeing food service…” Judge Swain also found that the captains did not set the terms and conditions of employment for the front-of-the-house employees who provided the food service. Id. at * 22-23. This is a vital recognition of the role of non-managerial captains in food service. In finding the banquet coordinator an employee who customarily and regularly receives tips, the Court noted that the banquet coordinator “dealt directly with private party hosts in advance of events for planning purposes and worked directly with the hosts and their guests during the events to ensure their satisfaction.” Id. at * 20.

This decision represents the first substantive judicial direction on the lawful composition of the tip pool in a New York fine dining establishment in over a decade. See Ayres v. 127 Restaurant Corp., 12 F. Supp. 2d 305 (S.D.N.Y. 1998). While industry employers should be gratified by this favorable ruling recognizing the role of captains and banquet coordinators in providing customer services, they should continue to analyze the composition of their tip pool based on the realities of their workplace, not the job titles assigned to the various service positions.  For example, in order to participate in such a pool, captains must not be managerial employees. With respect to banquet coordinators, each business must conduct a thorough analysis of the banquet coordinator’s service and non-service duties in order to analyze whether including the position in any pool is a viable option.

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A Reminder Of The Importance Of Salary Basis Compliance

Posted on April 12, 2010 by Noel Tripp

Often when analyzing whether a position is exempt, we only focus on whether the job duties are sufficient for exempt status. However, in most instances, there is a second requirement: compliance with the salary basis test.   A recent decision issued by Judge Larimer of the Western District of New York is a reminder to not overlook salary basis test compliance. Simply put, deductions from the salary of an exempt employee must be carefully monitored to ensure that they comply with the FLSA regulations and do not destroy the exemption. 

At issue in Scholtisek v. Eldre Corp., 2010 U.S. Dist. LEXIS 26664 (W.D.N.Y. Mar. 22, 2010) was evidence presented at the summary judgment stage that the employer “both engaged in an actual practice of making unlawful deductions, and maintained a policy that created a significant likelihood of such deductions [from the salary of exempt employees]”, and that such a practice and policy destroyed the plaintiffs’ exempt status, entitling them to overtime under the FLSA. The Court granted plaintiffs’ motion for summary judgment, based on documentary evidence and admissions from the HR professionals responsible for the company’s payroll which together demonstrated that there had been a policy of making partial day deductions from the salaries of exempt employees for missed work time, in contravention of 29 CFR § 541.602. Defendant was not entitled to the “window of correction” to remedy the error, because the window is available to correct payroll mistakes, not unlawful policies.

The Court did not rule as to the appropriate remedy for this violation, observing that “[o]n the record before me, however, the Court cannot determine as a matter of law during what periods those improper deductions did occur, the extent to which they occurred, exactly which employees or job classifications were affected by this practice, or the number of hours for which plaintiffs are entitled to overtime pay. The amount of damages therefore remains to be decided.” The Court will ultimately need to rule as to whether the exemption loss was limited to only those who were subject to an actual deduction and/or whether for the period of time for which the exemption was lost is limited only to those individual workweeks in which the deduction was taken.

 

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