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The U.S. Court of Appeals for the Second Circuit recently affirmed the dismissal of a plaintiff’s Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) overtime pay claims in federal court, after she previously had obtained relief for substantially similar claims in small claims court. Simmons v. Trans Express, Inc., 2021 U.S. App. LEXIS 32032 (2d Cir. Oct. 26, 2021). The Second Circuit has jurisdiction over the federal courts in New York, Connecticut, and Vermont.

The Underlying Lawsuits

Plaintiff Charlene Simmons, a former driver for defendant Trans Express, filed suit against the company in small claims court in Queens, New York, claiming she was entitled to “monies arising out of nonpayment of wages.” The case subsequently was referred to a small claims arbitrator, who awarded the plaintiff $1,020, which the company paid. Shortly thereafter, the plaintiff filed suit in New York federal court, asserting violations of the FLSA and NYLL arising out of the same non-payment of wages, as well as compensation for the company’s failure to provide her with certain notices required by state law. On motion by Trans Express, the district court dismissed the plaintiff’s lawsuit on the basis of res judicata, that is, that her claims were barred by her prior recovery in small claims court.

The Appeal

On appeal to the Second Circuit, the plaintiff contended that New York City Civil Court Act § 1808 prevented any preclusive effect of her small claims award. Section 1808 states:

A judgment obtained under this article shall not be deemed an adjudication of any fact at issue or found therein in any other action or court; except that a subsequent judgment obtained in another action or court involving the same facts, issues and parties shall be reduced by the amount of a judgment awarded under this article.

Given the language of this provision, the Second Circuit certified the question to the New York Court of Appeals (the highest court in New York) of whether Section 1808 bars application of the claim preclusion doctrine (res judicata) to recoveries in small claims court. Answering in the negative, the New York Court of Appeals held that although “‘[S]ection 1808 abrogates . . . the common-law issue preclusive effect of small claims judgments,’ ordinary rules of claim preclusion apply to the judgments of the small claims court.” The Second Circuit then affirmed the dismissal of the plaintiff’s claims.

First, the Court of Appeals rejected the plaintiff’s argument that claim preclusion, as an affirmative defense, cannot form the basis of a dismissal on the pleadings unless all of the elements of the defense are apparent from the face of the pleadings (i.e., the plaintiff’s judicial complaint). On the contrary, the Second Circuit noted, the district court is permitted to consider documents of  which it may take judicial notice, such as the summons and judgment sheet from the plaintiff’s small claims court case. Notably, those documents showed that the plaintiff filed her small claims court case “to recover monies arising out of nonpayment of wages,” and that she was awarded $1,020 for “unpd. OT” which, the Second Circuit added, was “obviously a notation for unpaid overtime.”

Moreover, given that New York applies a “transactional” approach to the claim preclusion doctrine, it was clear that the wage claims plaintiff was asserting in federal court arose out of the same transaction as her small claims court lawsuit, and therefore were barred. The transactional approach provides that “the claim preclusion rule extends beyond attempts to relitigate identical claims . . . [to] all other claims arising out of the same transaction or series of transactions.” Here, the Court of Appeals held that it had “little difficulty concluding” that the federal court claims and small claims court claims were “nearly identical ‘in time, space, origin, [and] motivation.’” The Second Circuit further joined the conclusion of several other circuit courts, that nothing in the FLSA barred the application of the claim preclusion doctrine.

If you have any questions about this decision or any other wage and hour issue, please contact a Jackson Lewis attorney.

Although it may have intended for a customer charge to be treated as an administrative overhead fee separate from gratuities paid to its employees, a country club’s reference to the amount as a “service charge” in some documents necessarily required that the amount retained be paid to the employees, the Supreme Judicial Court of Massachusetts recently held. Hovagimian v. Concert Blue Hill, LLC, 2021 Mass. LEXIS 507 (Mass. Aug. 23, 2021). The Supreme Judicial Court is the highest appellate court in Massachusetts.

Background

In Massachusetts, an employer that collects a tip or other gratuity is required to remit the total proceeds of that charge to the wait staff and service employees in proportion to the services provided. Mass. Gen. Laws Ann. ch. 149, § 152A. Under this law, which commonly is referred to as the Tips Act, the term “service charge” is defined as “a fee charged by an employer to a patron in lieu of a tip . . ., including any fee designated as a service charge, tip, gratuity, or a fee that a patron or other consumer would reasonably expect to be given to a [tipped employee] in lieu of, or in addition to, a tip.” Any fee determined to be a “service charge” must be given to the wait staff employee(s) providing the services, as such a charge is one that a patron reasonably would assume to be proceeds paid to such employee(s) for the services they provided.

The Lawsuit

In this case the defendant, operating as Blue Hill Country Club, hosts banquets and other events that involve food and beverages. When a patron desires to hold such an event, they first execute an “Event Contract” with the club, setting forth the general provisions of the event, such as deposit and payment schedule, menu options, and pricing. The Event Contract also provides that the patron will be charged a 10% gratuity, to be paid to the wait staff, and an additional 10% “administrative” or “overhead” charge that is kept by the club. Once the details are ironed out, the patron signs a “Banquet Event Order Invoice,” setting forth items such as the number of anticipated guests, the food and beverage selections, and other instructions for the event’s managers. After the event, the patron receives a final bill with all the actual charges set forth. However, whereas the initial Event Contract referred to the club’s additional 10% surcharge as an administrative or overhead fee, the Banquet Event Order Invoice and the final bill documents failed to distinctly identify this fee, placing it instead under the category of “service charges and gratuities” or “service.”

In May 2018, banquet servers filed suit against the club, asserting that the designation of this 10% fee as a service charge required that it be paid to the employees and that the club unlawfully had retained it. Upon cross-motions by the employer and the plaintiffs, the trial court dismissed the case in favor of the club, on the grounds that the “safe harbor” provision of the Tips Act allowed the employer to retain the proceeds from the disputed charge. The Tips Act’s safe harbor provision permits an employer to “impos[e] on a patron any house or administrative fee in addition to or instead of a service charge or tip,” but only if the employer gives the patron a sufficient “designation or written description” of the fee. The plaintiffs appealed and the Appeals Court affirmed the dismissal on the same grounds.

On further appeal, the Supreme Judicial Court concluded that the plain meaning of the Tips Act required the club to remit the disputed charge to the employees. As an initial matter, the high court considered the classification of the disputed charges. Citing longstanding contract law principles, the court noted that any ambiguities in a contract must be construed against the drafter – here, the club. If the employer wanted to retain the additional surcharge as an administrative fee, then it carried the burden of ensuring that all of the contractual documents accurately described the surcharge accordingly. In this case, the club failed to do so in all of its documentation, categorizing the fee instead as a service charge in some documents provided to patrons which, under Massachusetts law, must be remitted to the wait staff.

Moreover, the club could not avail itself of the Tip Act’s safe harbor provision because its own description of the fee at issue was as a “service charge,” at least in some documents provided to patrons. The Court also found particularly relevant that the fee was mislabeled on the final invoice received on the heels of the event’s conclusion, the time when a patron would be most likely to make a decision related to tipping. Conversely, the event contract, which contained the proper language sufficient to invoke the Tips Act safe harbor, had been signed months before the event and the patron could not be expected to base his/her tipping decision on a contract signed months earlier. Accordingly, the Supreme Judicial Court reversed and remanded the case, with direction to enter judgment in favor of the plaintiffs.

The Takeaway

The Supreme Judicial Court’s holding confirms that the best practice for restaurants, hotels, and other hospitality industry employers is to ensure that  event contracts, and all other related documents presented to patrons, consistently, accurately, and specifically describe any administrative fees that the employer intends to both assess and retain. Otherwise, those fees ultimately may be recharacterized as a form of service charge or gratuity that must be paid to the servers and other wait staff.

If you have any questions about this decision, the Massachusetts Tips Act, or any other wage and hour issue, please contact a Jackson Lewis attorney.

Although the employer’s pay system for its auto repair technicians was complicated and at times redundant, it nevertheless constituted a bona fide commissions compensation method subject to exemption from the overtime pay provisions of the Fair Labor Standards Act (FLSA), the Seventh Circuit Court of Appeals has held. Reed v. Brex, Inc., 2021 U.S. App. LEXIS 23573 (7th Cir. Aug. 9, 2021). The Seventh Circuit has jurisdiction over the federal courts in Illinois, Indiana, and Wisconsin.

The Commissioned Salesperson Exemption

The FLSA generally requires that employees be paid overtime, at a rate of at least one and a half times their regular rate of pay for all hours worked beyond 40 in a week. 29 U.S.C. § 207(a)(1). However, this requirement does not apply to employees working in retail or service establishments, if their regular rate of pay is at least one and a half times the statutory minimum wage and more than half of their compensation comes from bona fide commissions on goods or services. Id. § 207(i). The term “commission” is not defined in the FLSA, and litigation has arisen from time to time about whether employees are truly being paid on a commission basis, particularly when the compensation system is not a straight percentage based on sales. According to DOL regulations, if “commissions vary in accordance with the employee’s performance on the job,” he or she may qualify for the exemption, 29 C.F.R. § 779.416(b), whereas a commission is not “bona fide” if the employee “always or almost always earns the same fixed amount of compensation for each workweek.” Id. § 779.416(c).

Background

The latest case to grapple with the issue involves Brex, which operates a chain of auto-repair shops in Illinois and Missouri and where the plaintiffs worked as auto repair technicians. Brex’s pay system for its technicians is a bit complicated. It begins with calculating total receipts for repairs and sales during a pay period. That number is divided by hours worked to yield an average “hourly production” rate. That rate is then converted to an hourly wage, which typically is about 16 to 17 percent of the hourly production rate. The hourly wage may be increased slightly (e.g., by 50 cents), depending on whether the technician has obtained certain repair certifications, and it is then multiplied by the number of hours the technician worked during the week to obtain his or her base wages. On top of those wages, the technician is paid a set amount for each tire installed during the pay period, an amount that increases if the technician installs a certain minimum number during the pay period. If in a given pay period a technician’s production falters, the company applies an hourly wage equal to one and a half times the applicable state minimum wage, rounded up, thereby guaranteeing that the employee’s pay satisfies the first requirement of the commissioned salesperson exemption. Company records undisputedly showed that the commissions pay system was applied about 84% of the time, with the alternative minimum pay system applying the rest of the time.

The Lawsuit

The plaintiffs alleged the company’s pay system is not a bona fide commissions plan because it incorporates the employee’s hours worked into so many steps; because the company’s description of the pay plan makes reference to “hourly” wages; and because the plan does not discourage the company from requiring its technicians to work long hours, as historically has been a purpose of the FLSA. Following discovery, the trial court granted summary judgment to Brex, and the plaintiffs appealed. In affirming summary judgment for the company, the Seventh Circuit noted that the undisputed facts show that Brex pays each technician, including the plaintiffs, based on his or her actual sales and therefore the plan is a valid commissions pay system.

As to the pay plan referring to and incorporating what are described as “hourly wages,” the Court of Appeals reiterated that “the nomenclature is not determinative.” In reality, while “[t]he formula is convoluted, [] it is mathematically identical to paying a straight commission. First multiplying and then dividing by the same number (hours worked) is equivalent to multiplying by one.” Furthermore, the fact that technician pay is partially a function of hours worked does not create a triable issue of fact, the Seventh Circuit added. “Obviously, to some extent, technicians who work more hours are likely to have more repair opportunities and therefore make more money.” Moreover, as was the case here, “small hourly bonuses for certification do not convert an employee’s pay into a standard wage[,] so long as ‘more than half his compensation … represents commissions on goods and services.’”

Finally, the Seventh Circuit addressed the plaintiffs’ “unusual alternative argument that they were paid too much.” In asserting this argument, the plaintiffs relied primarily on the applicable regulations’ use of the phrase “a guarantee or draw against commissions” in the DOL regulations, which they read as containing alternative words with the same meaning. Under their interpretation, the company’s alternative wage floor is prohibited “because the regulations define any wage ‘guarantee’ as a draw against future commissions that requires reconciliation in subsequent pay periods.” Therefore, they asserted, because the company did not “claw back” its technicians’ guarantee payments in subsequent pay periods, “all compensation up to the guarantee was actually fixed hourly wages even in weeks where the guarantee did not apply” and the company’s plan would not satisfy the exemption’s requirement that more than half of an employee’s income must come from commissions.

Rejecting this argument, the Seventh Circuit noted that under the statute, a “draw” and a “guarantee” are not in fact one and the same: “The plain meaning of the Act allows employers to implement either a guarantee or a draw, which are two distinct arrangements.” DOL regulations permit employers to provide employees with “periodic payments, which are described variously in retail or service establishments as ‘advances,’ ‘draws,’ or ‘guarantees,’” as a means of offsetting the fluctuations common in commissioned sales arrangements, and those regulations further allow – but do not require – employers to “claw back” such payments if they exceed actual commissions. Moreover, the regulations explicitly provide that such guaranteed payments may operate as an alternative minimum floor within a bona fide commissions system, as long as there is no evidence that, as a means of avoiding overtime pay, the employer has implemented a sham “guaranteed commission” that employees rarely, if ever, can exceed. Adopting the plaintiff’s interpretation, noted the Court of Appeals, would lead to an “improbable, even perverse, outcome,” as

[t]he entire point of the [FLSA] is to require or encourage employers to pay their employees more, not less. Yet [the plaintiffs] say that Brex should have paid them less by docking their pay during weeks of plenty to compensate for the lean weeks. The statute and regulations do not require us to find that an employer violates the Act by paying its employees more than necessary. We will not strain to read them to arrive at that odd result.

If you have any questions about this decision, the commissioned salesperson exemption, or any other wage and hour issue, please contact a Jackson Lewis attorney.

On April 27, 2021, President Biden issued Executive Order 14026, raising to $15 per hour — with increases to be published annually — the minimum wage certain federal contractors must pay workers performing work “on or in connection with” a covered Federal contract or subcontract. The types of contracts impacted include those covered by the Service Contract Act, the Davis-Bacon Act, certain concession contracts, and certain contracts related to federal property and the offering of services the general public, federal employees and their dependents. The current minimum wage is $10.95 per hour, established by Executive Order 13658 during the Obama Administration.

On July 21, 2021, the Department of Labor (“DOL”) announced the much anticipated Notice of Proposed Rule Making (“NPRM”) detailing the proposed regulations to implement the new minimum wage requirements. The NPRM is scheduled to be published in the Federal Register on July 22, 2021, with the new requirements intended to be effective January 30, 2022. However, contracting agencies are encouraged to implement the new minimum wage requirements in existing contracts.

While the NPRM is substantially similar in key areas to the final regulations implementing Executive Order 13658, it is notably more expansive in critical areas, including coverage of “new contracts,” expanded coverage of geographic areas, and limitations on exclusions of tipped subminimum wage workers.  Most importantly, the NPRM proposes coverage of the same types of contracts as those covered by Executive Order 13658, but for the most part all such contracts likely will be subject to coverage on or after January 30, 2022, including those never covered by Executive Order 13658 requirements.

For more information about the NPRM, and what contractors should do now to prepare, please see our client alert here: Proposed Regulations Implementing $15 Hourly Federal Contractor Minimum Wage Executive Order

A security company did not violate the Fair Labor Standards Act (FLSA) when, under its meal-period policy, it automatically deducted an hour of pay from its security officers on certain flights, the Fifth Circuit Court of Appeals has held. Dean v. Akal Security, Inc., 2021 U.S. App. LEXIS 18621 (5th Cir. June 22, 2021). The Fifth Circuit has jurisdiction over the federal courts in Louisiana, Mississippi, and Texas.

Prior to late December 2017, Akal Security had a contract with the U.S. Immigration and Customs Enforcement agency (“ICE”) to provide security and control of deportees on certain domestic and international flights. These services were undertaken by Aviation Security Officers (ASOs), who were classified as non-exempt hourly employees under the FLSA. On certain return flights for these missions, Akal’s policy provided for a mandatory, unpaid, one-hour meal period on each shift. However, if there were still detainees onboard or if the flight was less than 90 minutes long, the ASOs would be paid for the entire trip without a meal-period deduction.

A group of ASOs filed suit in Louisiana federal court, alleging that the meal periods were not bona fide – and therefore were compensable – under the FLSA. As a result, contended these employees, they were owed additional minimum wages and overtime compensation based on the time deducted for the meal periods. The employees subsequently dismissed their minimum wage claims but pressed forward with their overtime claims. The trial court granted summary judgment to the company and the employees appealed.

In affirming summary judgment for the company, the Fifth Circuit began its analysis with “this simple regulatory sentence: ‘Bona fide meal periods are not worktime.’” The Court of Appeals then applied the “predominant benefit” test to determine if the meal periods provided by Akal were bona fide. The first and second factors of that test ask whether the employees are “subject to real limitations on their personal freedom which inure to the benefit of the employer” or other restrictions on the “employee’s activities.” The ASOs argued that they were subject to multiple limitations and restrictions, including not being able to leave the plane, visit a doctor, go to place of worship, eat at a restaurant, make a phone call, or use the internet. The Fifth Circuit noted, however, that “the effect of any limitations on the ASOs’ activities imposed…must be analyzed in the context of the relevant workplace,” recognizing that the law does not require an employee be allowed to leave the workplace during an unpaid meal period. Moreover, the restrictions complained about by the ASOs are “inherent to working on an airplane.” Thus, these restrictions “do not inure to Akal’s benefit” and “do not undercut the validity of the meal break.”

The remaining factors of the predominant-benefit test ask whether during the meal period the employee remains responsible for “substantial work-related duties” and how frequently the period is interrupted by the employer. In this case, the record established that “the ASOs almost always had at least one hour on the return flight when they had no work-related duties” and that their meal periods were not frequently interrupted. Thus, the meal periods predominantly were to the benefit of the employees and were bona fide.

The Court of Appeals also rejected the employees’ argument that they should be compensated for the meal periods because they did not necessarily eat a meal and because the breaks were not “regularly scheduled.” First, the Fifth Circuit found no requirement in the FLSA that employees consume food for a meal period to be deemed bona fide. Moreover, language from a prior case referring to “regularly scheduled” meals was an explanation of a party’s argument in that case, not a statement that the law requires meal periods to occur at predictable or preset times. Finally, the Court of Appeals concluded that Akal’s failure to record the precise times the meal periods were taken did not, in and of itself, create a violation of the FLSA.

In upholding the company’s meal-period policy, the Fifth Circuit joins the Ninth Circuit Court of Appeals, which upheld the same policy in an opinion issued last year. Alonzo v. Akal Security Inc., 807 Fed. Appx. 718 (9th Cir. 2020). A similar case from a Florida district court remains pending on appeal to the Eleventh Circuit.

If you have any questions about this decision, meal period policies, or any other wage and hour issue, please contact a Jackson Lewis attorney.

Affirming the dismissal of wage and hour claims against “big box” retailer Lowe’s, the Fourth Circuit Court of Appeals agreed that company bonuses, provided to employees following 2018 revisions to federal tax law, were rightly excluded from the “regular rate” used to calculate overtime compensation under the Fair Labor Standards Act (FLSA). The Fourth Circuit further agreed that paid leave provided to employees for time spent on voluntary charitable activities likewise was properly excluded from the regular rate calculation. McPhee v. Lowe’s Home Centers, 2021 U.S. App. LEXIS 18076 (4th Cir. June 17, 2021). The Fourth Circuit has jurisdiction over the federal courts in Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

Generally, the FLSA requires that employers compensate their employees who work in excess of forty hours per week at a rate one and a half times the regular rate at which they are employed. Under the Act, the regular rate “include(s) all remuneration for employment paid to, or on behalf of, the employee,” with some specifically listed exceptions. One such exception is discretionary bonuses, that is, bonuses for which “the employer [] retain[s] discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid.” Another exception is “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency.” 29 U.S.C. §§ 207(e)(1) & (3).

Beginning in 2016, Lowe’s implemented the “Give Back Time” policy, under which eligible employees are paid at 100% of their hourly base rate of pay for up to eight annual hours of time volunteering with the charitable organization(s) of their choice. That policy expressly provides that the time will not be used in calculating overtime hours. Participation in the program is strictly voluntary and while the company does impose some limitations on eligible charities, it does not require that employees volunteer for any specific charity.

Additionally, in early 2018 Lowe’s announced that, as a result of federal tax reforms (i.e., the Tax Cuts and Jobs Act of 2017), it would pay each of its employees a bonus, ranging from $75 to $1000 and depending solely on full-time or part-time status and years of service. Those bonuses were paid in mid-February 2018, approximately two weeks after the bonus announcement was first made, and were not included in the regular rate calculation for the pay period in which they were made. Several employees filed suit, claiming that Lowe’s improperly excluded from the regular rate calculation – and therefore from their overtime pay – both the compensation provided under the Give Back Time policy and for the February 2018 bonuses. The district court dismissed the claims, the employees appealed, and the Fourth Circuit affirmed the dismissal.

First, the Court of Appeals concluded that the tax-reform bonuses properly were excluded as either gifts or discretionary bonuses. The bonuses were given in honor of a special occasion, were not made pursuant to a contract or other agreement, were not based upon the hours or wages of the employees, and were not so substantial as to have been relied upon by the employees. On the contrary, the only basis for an employee’s bonus were years of service and status as either full- or part-time. The Court rejected the argument that the bonuses were non-discretionary retention bonuses, given the brief (two-week) period between the announcement of the bonuses and their payment and the lack of any allegation that a particular reason existed to retain employees during this time. The Fourth Circuit likewise rejected the employees’ contention that the tax reform wasn’t a “special” occasion, adding that the law does not in fact even require there to be such an occasion, as the regulation provides Christmas or other “special occasions” as merely examples of when such a bonus might be paid.

Next, the Court of Appeals agreed that the compensation provided for employee participation in the Give Back Time program likewise was excludable from the regular rate calculation. Rejecting the employees’ contention that this claim should not have been dismissed because they pled that the time spent in the program was “work,” the Court of Appeals noted that work has been defined as “physical or mental exertion . . . controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business.” Here, the employees had not pled any facts suggesting that Lowe’s, as opposed to the charitable organization, was the primary beneficiary of the time spent by the employees in the program. In addition, Lowe’s neither required participation in the program nor determined how long or for whom the employees would donate their time. Instead, this time was comparable to the examples of non-work time set forth in the regulations, such as volunteering as a first responder and donating blood.

If you have any questions about this ruling or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly work.

In a significant victory for California employers, the U.S. Court of Appeals for the Ninth Circuit recently reversed a $102 million award against Walmart, in a suit alleging that the retailer violated the California Labor Code’s wage statement and meal-break provisions. Magadia v. Wal-Mart Associates, Inc., 2021 U.S. App. LEXIS 16070 (9th Cir. May 28, 2021).

The Ninth Circuit’s opinion clarified the cognizable harm required to establish Article III standing under California’s Private Attorneys General Act (“PAGA”) and the Labor Code’s wage statement requirements. Most notably:

  • An employee does not have standing to bring PAGA claims in federal court for alleged Labor Code violations that the employee themselves did not suffer.
  • As a means of retroactively adjusting an employee’s overtime rate resulting from bonuses, an employer may make lump-sum payments without identifying a corresponding “hourly rate” for those payments on the employee’s wage statements.

A detailed discussion of the Ninth Circuit opinion is available on Jackson Lewis’s California Workplace Law Blog, here: $102 Million Pay Stub, Meal Break Judgment Against Walmart Reversed

Answering the first of two certified questions from an Alaska federal court and overturning nearly 30-year-old precedent, the Alaska Supreme Court has held that an employer need only establish an exemption under the Alaska Wage and Hour Act by a “preponderance of the evidence,” rather than “beyond a reasonable doubt.” Buntin v. 00073 Tmb Schlumberger Tech. Corp., 2021 Alas. LEXIS 74 (Alaska June 11, 2021). In answering the second certified question, the Court concluded that those exemptions “explicitly linked” in the State law to the comparable exemptions under the federal Fair Labor Standards Act (FLSA) should be given a “fair reading,” while those exemptions not so linked should continue to be “narrowly construed.”

Nearly three decades ago, the Alaska Supreme Court first held, in Dayhoff v. Temsco Helicopters, Inc., 848 P.2d 1367 (Alaska 1993), that an employer must prove the existence of an exemption to the overtime requirements of the Alaska Wage and Hour Act (AWHA) “beyond a reasonable doubt.” Since then, the Court has reiterated that burden of proof on at least two other occasions. But no more.

In answering the first certified question, the Court acknowledged that, in Dayhoff, it had misconstrued the holding of the federal court of claims case on which it premised its conclusion that the reasonable-doubt standard applied to exemptions under the FLSA, and by extension to analogous claims under the AWHA.  “It was error to take [the federal claims court holding] out of context in Dayhoff, and we should have adopted the preponderance of the evidence standard of proof. The [‘]beyond a reasonable doubt[’] standard of proof adopted in Dayhoff was originally erroneous.” The Court added, “Adopting a preponderance of evidence standard promotes consistency between Alaska and federal law and removes unnecessary confusion from the trial process.”

However, in answering the second certified question, the Court noted that the AWHA has not adopted the FLSA in all respects. Thus, while the U.S. Supreme Court recently held, in Encino Motorcars v. Navarro, 138 S. Ct. 1134 (2018), that exemptions under the FLSA should be given a ”fair reading,” only those exemptions under the AWHA that are directly tied to the same exemptions under the FLSA – notably, the Executive, Administrative, and Professional exemptions – likewise should be fairly interpreted. Otherwise, the longstanding, pre-Encino Motorcars standard of narrowly construing exemptions under the AWHA remains in place.

If you have any questions about this ruling, Alaska wage and hour law, or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Will the DOL again seek to raise the minimum salary level for exempt “white collar” employees?

In testimony before the House Education and Labor Committee on June 10, 2011, Secretary of Labor Marty Walsh stated that the Department of Labor (DOL) is reviewing a Final Rule issued during the Trump administration, in which the DOL increased the minimum salary required to qualify for the Executive, Professional, and Administrative exemptions – a.k.a. the “white collar” exemptions – under the FLSA. Under the Final Rule, which went into effect at the beginning of 2020, the minimum annual salary rose from $23,660 ($455 per week) to $35,568 ($684 per week). In addition, the minimum salary required to satisfy the “Highly Compensated Employee” (HCE) exemption increased from $100,000 per year to $107,432 per year.

In his testimony, Secretary Walsh asserted that the current minimum salary is “definitely too low” and that the Final Rule is under active review by the DOL. However, Walsh provided no further details, other than to add that the DOL was considering a revision to the Final Rule that would provide for regular increases to the minimum salary, a provision that was included in an Obama-era Final Rule but was not part of the current Final Rule. Notably, Walsh did not say whether the Department intended to seek a return to the salary levels set forth in the Obama-era Rule, which would have increased the minimum annual salary for the exemptions to $47,476 – double the minimum salary in effect at the time. That Rule, which also would have increased the minimum salary required for the HCE exemption to $134,004, was struck down by a federal district court in 2016, before it went into effect. During his campaign, then-candidate Biden stated that he wanted to reimplement the Obama-era salary levels. Given the legal challenges that eventually felled the Obama-era Rule, it remains to be seen whether the DOL will attempt such a large increase in the current salary.

Jackson Lewis will continue to monitor and report any updates on this development. If you have any questions about the current Final Rule or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

To paraphrase the lyrics of the classic nursery song, Old MacDonald had a farm and on that farm he had a cow – and a duck, horse, and chicken (e-i-e-i-o). And, of course, to tend to that livestock Old MacDonald had to have farm workers, and those farm workers had to be paid. But were those farm workers, like most other employees, entitled to overtime pay under federal law when they worked more than 40 hours a week? Yes – under some circumstances, the Eleventh Circuit Court of Appeals recently held. Ramirez v. Statewide Harvesting & Hauling, LLC, 2021 U.S. App. LEXIS 15215 (11th Cir. May 21, 2021).

One of the lesser-known overtime, and in some cases minimum wage, exemptions to the Fair Labor Standards Act (FLSA) is the “agricultural” exemption. That exemption, found in 29 U.S.C. § 213(b)(12), applies to “any employee employed in agriculture” and includes primary and secondary definitions. The primary definition of agriculture involves what we envision when we think of farming: “the cultivation and tillage of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities . . . , [and] the raising of livestock, bees, fur-bearing animals, or poultry[.]” Id. § 203(f). The secondary definition pulls in in a broad variety of activities related to the primary farming activities, if they are “performed by a farmer or on a farm as an incident to or in conjunction with [primary] farming operations, including preparation for market [and] delivery to storage or to market or to carriers for transportation to market.” Id. This secondary definition includes important – and in the Statewide case decisive – words: “performed by a farmer or on a farm.”

Statewide harvests fruit from about 1,500 fields on multiple farms across Florida, hauling it to packinghouses and processing plants. Most of its harvesting employees are temporary foreign guest workers through the federal H-2A program. Under that program, labor contractors must provide harvest workers with basic necessities such as housing, meals or kitchen facilities, and laundry facilities. In some cases, the time workers spend traveling between the fields and the housing facilities provided by Statewide is mere minutes, but in other cases could be as much as two hours. As part of its contractual and legal obligations, Statewide provides the workers with kitchen facilities and with transportation to grocery stores and banks. These trips for necessities are provided by Statewide crew leaders (field supervisors) on a weekly basis and last approximately four hours a week.

Plaintiff Ramirez was a crew leader who, along with another crew leader, sued the company alleging they were entitled to unpaid overtime compensation for the time spent driving the harvest workers on these trips to the grocery store, bank, etc. In response, Statewide claimed that the plaintiffs were exempt from overtime under the agricultural exemption. The trial court found for the employees, concluding that the exemption did not apply because the necessities trips were not performed “by a farmer or on a farm.” The company appealed and the Eleventh Circuit affirmed the judgment for the employees.

The Eleventh Circuit first noted that the necessities trips clearly did not fall under any of the farming activities set forth in the primary definition of agriculture and therefore the company had the burden of proving that the trips fell under the secondary definition. The definition of “performed . . . on a farm,” added the Court of Appeals, includes only those “activities performed within the geographical area that constitutes a farm.” Here, the necessities trips took place entirely away from any of the farms being harvested, beginning and ending at the harvest workers’ off-site housing facilities – facilities that in some cases were hours away from the fields being harvested. Moreover, the language of the statute requires that the secondary activities be performed on “a” farm, meaning a singular farm. Here, the workers were assigned to work on multiple farms across Florida and because the necessities trips were not associated with any particular farm, the “work is separate from the agricultural activities themselves.” Accordingly, the Eleventh Circuit concluded that the agricultural exemption was inapplicable to the time spent on these trips and, when the plaintiffs worked more than 40 hours per week, they were entitled to overtime pay for the driving time.

If you have any questions about the agricultural exemption or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.