Minnesota Supreme Court Holds Minneapolis Minimum Wage Ordinance to Be Lawful

The Minnesota Supreme Court, the state’s highest appellate court, has upheld a minimum wage ordinance enacted by the City of Minneapolis in 2017, providing for a higher minimum wage than that provided by state law. Graco, Inc. v. City of Minneapolis, 2020 Minn. App. LEXIS 12 (Minn. Jan. 20, 2020).

In June 2017, the Minneapolis City Council enacted that Municipal Minimum Wage Ordinance, providing for higher minimum wage rates for hours worked by employees within the City’s geographic boundaries. As of January 1, 2020, the minimum wage for “large” employers under the Ordinance (those with more than 100 employees) is $12.25 per hour, while the minimum wage for “small” employers (those with 100 or fewer employees) is $11.00 per hour. By contrast, under the Minnesota Fair Labor Standards Act (MFLSA), the current minimum wage for large employers (those with an annual gross volume of sales or business of $500,000 or more) is $10.00 per hour, while the minimum wage for small employers (less than $500,000 in business) is $8.15.

In November 2017, Graco and others sued the City, asserting that the Ordinance is preempted by state law and should be enjoined. The state district court denied the injunction and ultimately ruled that the Ordinance neither conflicts with, nor is preempted by, the MFLSA. The plaintiffs appealed and the Minnesota Court of Appeals affirmed the lower court’s decision. A detailed discussion of the appellate court decision may be found here: Minnesota Appeals Court Upholds Minneapolis Minimum Wage Ordinance.

The plaintiffs then appealed to the Minnesota Supreme Court, which likewise upheld the Minneapolis Minimum Wage Ordinance. First, because the specific language of the MFLSA requires only that employers pay “at least” the minimum wage established by the state statute, the statute clearly contemplates that a higher hourly rate is permissible, noted the Supreme Court. Thus, as the Ordinance mandates such a higher minimum, added the Court, it “does not forbid what the MFLSA permits but instead complements the statute” and therefore is not expressly preempted by the statute. As the Court concluded:

[T]he statute prohibits employers from paying wages less than the statutory minimum-wage rate; it does not set a cap on the hourly rate that employers can pay. If employers comply with the ordinance, which requires minimum-wage rates above the state minimum-wage rates, employers comply with the MFLSA. And if employers can comply with both the municipal regulation and the state statute, the provisions are not irreconcilable, and therefore no conflict exists.

The Supreme Court then addressed, and rejected, the plaintiff’s contention that that the MFLSA impliedly preempts the Ordinance by entirely occupying the field of minimum wage regulation in Minnesota. To determine if express preemption exists, Minnesota courts consider four issues:

(1) What is the “subject matter” . . . to be regulated?

(2) Has the subject matter been so fully covered by state law as to have become solely a matter of state concern?

(3) Has the legislature in partially regulating the subject matter indicated that it is a matter solely of state concern?

(4) Is the subject matter itself of such a nature that local regulation would have unreasonably adverse effects upon the general populace of the state?

As to the first three issues, the Supreme Court reiterated the fact that the MFLSA only sets a “minimum” wage of “at least” an established hourly amount, not a required or maximum hourly rate. Moreover, while state law permits the labor commissioner to adopt rules to protect minimum wage and overtime rates, it does not invest exclusive authority in that office. As to the fourth issue, the Court rejected the plaintiff’s contention that a “patchwork” of local minimum wage ordinances would unduly burden employers, noting that it “previously [had] held that while varied local regulation may be restrictive to businesses, it does not arise to the level of an unreasonably adverse effect on the state.” Moreover, the Court added, if the legislature concludes that such a burden is too onerous on employers, “the problem can be corrected by a clear expression of the legislative will” (i.e. by enacting a local wage preemption law).

Therefore, the Minneapolis Minimum Wage Ordinance and its higher minimum wage rates are now part of settled law, and affected employers need to ensure that they comply with these higher rates.

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

New York Governor Vetoes “Wage Theft” Lien Bill, Promises Replacement

Concluding that it too broadly defined “employer” and raised a myriad of due process concerns that subjected it to risks of unconstitutionality, on December 31, 2019, Governor Andrew Cuomo vetoed a bill that would have allowed a current or former employee (or the New York State Department of Labor), alleging “wage theft” by an employer, to place a lien on the employer’s interest in real or personal property for the value of the wage claim plus liquidated damages. “Wage theft” is defined to include such claims as minimum wage violations, failing to pay overtime, and not paying tipped workers the difference between their tips and the legal minimum wage. The bill was passed by the New York legislature last summer and was discussed in detail in a Jackson Lewis article here: New York Legislature Passes Bill Allowing Liens on Employers For Alleged Wage Claims.

Although the veto comes as a relief to employers operating in New York, the reprieve may be brief.  In his memorandum vetoing the bill, Governor Cuomo made it clear that he intends to propose replacement legislation in 2020 to allow victims of wage theft to use “any and all assets, even personal assets, of the bad actor” to satisfy a judgment.  The Governor noted that his administration has been very aggressive when it comes to providing wage theft protections for vulnerable employees but was concerned that the due process issues inherent in the current bill might lead a court to find it unconstitutional.

Jackson Lewis will continue to monitor the situation for any further developments. In the meantime, if you have any questions about this or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Full Eleventh Circuit Finds that Plaintiffs Lack Standing in Alabama Lawsuit Challenging State Prohibition of Local Minimum Wage Laws

In a closely-split decision by the full court of appeals, the Eleventh Circuit has held that the plaintiffs lacked standing to pursue their claims against the named defendants in the lawsuit, specifically, the Attorney General for the State of Alabama. As a result, the Court of Appeals had no authority to determine whether the plaintiffs’ equal protection claim might survive on its merits. Lewis v. Governor of Alabama, 2019 U.S. App. LEXIS 36857 (11th Cir. Dec. 13, 2019) (en banc).

At its core, the case involved the validity of a 2015 Alabama law prohibiting cities or other local municipalities from adopting their own laws concerning minimum wages, leave benefits, collective bargaining and other employment-related issues. The law was enacted in response to an ordinance passed by the Birmingham City Council to increase the minimum wage for all employees within the City’s boundaries, from the current federal minimum of $7.25 to $10.10. While local jurisdictions in a number of states have enacted their own minimum wage ordinances in recent years, about half of the states have passed laws prohibiting such ordinances.

The lawsuit originally was filed in 2016 by the NAACP and two Birmingham residents against the Alabama Attorney General, the Governor of Alabama and the Mayor of Birmingham, alleging a variety of Constitutional violations and a violation of the Voting Rights Act, based on allegations that the state law’s passage was rooted in the state legislature’s racial bias against Birmingham’s black-majority city council and citizens. The case was dismissed by a federal district judge in 2017 but was revived in July 2018 by a three-judge panel of the Eleventh Circuit, concluding that the facts as alleged were sufficient to maintain the plaintiffs’ race discrimination claims.

The full Court of Appeals subsequently agreed to hear the appeal and the panel decision was vacated. By a 7-5 vote, the majority held that although the plaintiffs, two African-American workers who were employed in Birmingham, clearly could demonstrate an actual or imminent injury (significant economic harm), they could not demonstrate that these injuries were “fairly traceable” to the attorney general’s conduct or that, even if they prevailed, they would receive the remedy they sought. On the contrary, the majority found such an assertion to be highly speculative, particularly given that in the four years since the municipal ordinance was passed, a new mayor and a majority of the city council were elected, with no subsequent suggestion that the new leadership intended to revive the ordinance even if given the opportunity. Moreover, employers within the city limits, facing a nearly 40% increase in the minimum wage, as well as employers statewide who understandably would be concerned about the creation of a hodgepodge of municipal minimum wage rates, almost certainly would immediately challenge the ordinance as unlawful.

Thus this challenge, to Alabama law prohibiting local wage ordinances and other employment laws, is over and does not appear likely to be rekindled. Jackson Lewis will keep you apprised should any further developments occur. In the meantime, if you have any questions regarding this or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

The California Supreme Court to Decide Dynamex Retroactivity

The California Supreme Court announced that it would decide whether its April 30, 2018 landmark Dynamex decision is retroactive. The Supreme Court’s determination will have a significant impact on companies utilizing independent contractors in California.

In Dynamex Operations West, Inc. v. Superior Court of Los Angeles County, the California Supreme Court adopted the “ABC Test” to for evaluating contractor classifications under California law. On June 20, 2018, the California Supreme Court denied a petition for rehearing to address retroactivity.

Please find the rest of this article on our California Workplace Law Blog here.

Third-Party Bonuses Are Not Necessarily “Remuneration” for Overtime Purposes, Third Circuit Holds

When an employer permits its employees to participate in a bonus program offered by the employer’s client, based on the work performed for that client, those bonuses do not always qualify as “remuneration for employment” that must be included in the employee’s “regular rate” for purposes of calculating overtime pay due under the Fair Labor Standards Act (FLSA), the U.S. Court of Appeals for the Third Circuit has held. Secretary, U.S. Dep’t of Labor v. Bristol Excavating, Inc., 2019 U.S. App. LEXIS 24767 (3rd Cir. Aug. 20, 2019). In so concluding, the Third Circuit rejected the U.S. Department of Labor’s position that any remuneration received by an employee, whether received directly from the employer or a third party, is always “remuneration for employment.”  Instead, the Court of Appeals held, that determination depends on the agreement made between the employer and the employee.

The Third Circuit has jurisdiction over the federal district courts in Pennsylvania, New Jersey, and Delaware.

Background

Generally, the overtime provisions of the FLSA require employers to pay employees one-and-a-half times their “regular rate” of pay for all hours in excess of 40 per workweek.  29 U.S.C. § 207.  With limited exceptions, the regular rate includes “all remuneration for employment paid to, or on behalf of, the employee.” However, what constitutes “remuneration for employment” is not specifically defined in the FLSA.

Bristol Excavating, a small sole proprietorship, entered into a contract (a “master service agreement”) to provide excavating services to Talisman Energy, a large natural gas production company.  Under the terms of the contract, Bristol employees put in extensive overtime hours.  Talisman Energy offered a bonus program to all employees, including to employees of companies with which Talisman had a service contract, at its sites, so Bristol employees sought and were granted permission to participate in the bonus program.  The program included several distinct bonuses, premised on safety, efficiency, and timely completion of work.

Bristol agreed to undertake the administrative and payday aspects of the Talisman bonus program for its employees, but participation in the program was never formalized, either in the master service agreement or in any separate contract between Talisman and Bristol or between Bristol and its employees.

During a subsequent, routine Department of Labor (DOL) audit, the auditor determined that Bristol was incorrectly omitting the bonuses from its calculation of overtime pay due to its employees. Bristol disagreed and the DOL filed suit.  The district court agreed with the DOL and granted it summary judgment, awarding both actual and liquidated damages.

Third Circuit Decision

Rejecting the DOL’s contention that the FLSA’s silence on what constitutes “remuneration for employment” means that all compensation, from whatever source, must be included, the Third Circuit instead concluded that “the silence of the Act is better understood as evidence that Congress took it for granted that it was only regulating the employer-employee relationship, not re-writing that relationship to impose the effects of decisions made by third parties.”  Instead, the Court of Appeals held:

[A] rule that looks to the contracting parties’ understanding to determine whether a third-party payment (even if transferred to an employee by his employer) is remuneration for employment is the correct approach, as opposed to the Department’s all-third-party-payments-are-always-remuneration rule. Both contracting parties are safeguarded by respecting their actual understanding. Money that employers and employees have agreed – either explicitly or implicitly – is part of regular pay cannot be funneled through third parties to dodge overtime requirements, so employees are protected. At the same time, employers are protected from being on the hook every time a third party chooses to add to an employee’s income.

In reaching its conclusion, the Third Circuit held that “looking to the parties’ agreement protects the employer from having to pay for a third party’s generous actions,” and that it would be unfair to force employers to include promised bonuses from third parties as remuneration in the regular rate of pay unless and until the evidence demonstrates that those bonuses have become part of the pay calculation agreed to in some fashion by the employer and employee.  While the DOL argued that its approach was consistent with the “broad remedial purpose” of the FLSA, the Court of Appeals shot back, noting that this argument ignores another statement in the Congressional findings underlying the FLSA: that protecting the well-being of workers is to be done “without substantially curtailing employment or earning power” and that imposing unexpected costs on employer does not work to the long-term benefit of employees. “The Department completely ignores that statutory purpose reflecting a very short-sighted understanding of worker well-being,” the Court of Appeals noted.  In reaching its conclusion, the Third Circuit cited to Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018), in which the Supreme Court rejected a “narrow interpretation” of the FLSA exemptions in favor of “fair reading” standard.  Notably, the Court of Appeals extended the Supreme Court’s reasoning to the Act as a whole, noting that a “fair reading of the FLSA, neither narrow nor broad, is what is called for.”

The Court of Appeals identified several factors to be considered in determining the existence of an agreement, either explicit or implicit, between the employer and employee. In this case, the Third Circuit ultimately held that the record did not establish, based on the newly-announced rule, that two of the bonuses should have been included in the regular rate of pay, as the district court had held, and thus remanded the case to the district court for further proceedings.

The Takeaway

Based on the Third Circuit’s decision, not all payments to an employee from a third party necessarily must be included in an employee’s regular rate of pay, giving employers more freedom to allow their employees to accept such payments without risking an increase in its labor costs.  However, employers should analyze each such payment carefully to ensure that it satisfies the Third Circuit’s test, and further should consider advising employees in writing whether such payments will, or will not, constitute “remuneration for employment” when calculating any overtime pay due.

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

Truck Drivers’ Sleeper Berth Time Is Presumptively Not Compensable Under the FLSA, DOL Concludes

In a welcome reversal of its prior guidance, on July 22, 2019, the U.S. Department of Labor (DOL) concluded that if a truck driver, or driver’s assistant or helper, is completely relieved of duty and is provided with adequate sleeping facilities (including the truck’s sleeping berth), the individual is not “working while riding” and therefore is not entitled to compensation for that time – regardless of how many hours a particular trip lasts or how much duty-free time is provided on that trip. DOL Wage & Hour Division Opinion Letter FLSA2019-10. Admitting that its most recent prior guidance was “unnecessarily burdensome” on employers, the DOL specifically withdrew five previous opinion letters and directly disagreed with recent judicial opinions that relied on the prior guidance, under which only up to 8 hours of sleeping time could be excluded in a trip 24 hours or longer, and no sleeping time could be excluded for trips under 24 hours.

For many years, a primary issue for long-haul trucking companies has been to what extent the time spent in the sleeper berth by a driver, assistant, or helper is compensable under the Fair Labor Standards Act (FLSA). Like many questions of compensation under both federal and state laws, the issues center on whether the individual is off-duty and on the level of control the employer is exerting on the individual. While in most cases an employee’s off-duty time is clear and he or she is free to leave the physical workplace, in certain working situations – for example, those of long-haul drivers who spend significant hours in the sleeping berths of their trucks – the divide between on- and off-duty is not so clear. Nevertheless, even under its prior guidance the DOL recognized that these employees do experience times when they are completely relieved of duty while remaining physically present in their trucks.

DOL regulations, as set forth in 29 C.F.R. § 785.41, provide that drivers, assistants, or helpers are not “working while riding” when they are “permitted to sleep in adequate facilities furnished by the employer[.]” With the new Opinion Letter, the DOL has issued its support for the clear and plain reading of this regulation. When a truck driver, assistant, or helper is completely relieved of all duties and is provided with an adequate facility to sleep, that time is non-working, off-duty travel time and is presumed, subject to rebuttal, to be non-compensable. In other words, if the employee is sleeping in the sleeper berth (or gaming, reading, or performing any non-work activity) and is completely relieved of all duties, then he or she does not have to be paid for the sleeper berth time.

The new Opinion Letter provides some much needed clarification for transportation industry employers seeking to comply with the FLSA. However, carriers also must ensure compliance with state laws, which might differ from federal law.

If you have any questions about the contents or application of the issues set forth in the opinion letter, wage and hours issues, or transportation law, please consult the Jackson Lewis attorney(s) with whom you regularly work.

U.S. House of Representatives Passes $15 Minimum Wage Bill

After six months of primarily internal Democratic Party wrangling, on July 18, 2019 the House of Representatives passed the Raise the Wage Act, which, if it became law, would progressively increase the federal minimum wage to $15.00 per hour over a six-year period. The House passage of the Bill comes at a time when an increasing number of states and local jurisdictions already have enacted minimum wage laws well above the federal minimum, which has been set at $7.25 per hour for a decade. Currently, more than half of the States have minimum wage rates higher than the federal minimum.

Despite House passage of the Act, the Bill almost certainly will not be passed by the Republican-controlled Senate, if it even comes up for a vote. Likewise, there is no expectation that President Trump would sign the Bill into law even if it Congress passed it.

Jackson Lewis will continue to monitor this and other wage and hour issues. If you have any questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Lack of Alignment Between Employer’s Payroll Workweek and FLSA “Workweek” Results in Overtime Liability, First Circuit Holds

Although the Fair Labor Standards Act (FLSA) includes an overtime exception for employees who reside on the work premises for an “extended” period of time – at least 120 hours in a “workweek” – that exception is inapplicable if an employer’s payroll workweek does not coincide with an employee’s scheduled workweek for at least that many hours. Giguere v. Port Resources, Inc., 2019 U.S. App. LEXIS 18391 (1st Cir. June 19, 2019).

Generally under the FLSA, an employer must pay for all time that it requires an employee to spend at a worksite, including sleep time. 29 C.F.R. § 785.7. However, U.S. Department of Labor (DOL) regulations provide that an employer may exclude sleep time if certain conditions are met. One such exception applies to “live-in” employees, defined as those who “reside[] on [the] employer’s premises on a permanent basis or for extended periods of time.” 29 C.F.R. § 785.23. In a 1988 enforcement memorandum, the DOL defined “extended periods of time” as “resid[ing] on the premises for a period of at least 120 hours in a workweek.” Further, the memorandum defined “workweek” as “seven consecutive 24-hour periods.” The memorandum added that the employer’s workweek “need not coincide with the calendar week,” but once the employer has established the day its workweek begins, the following seven-day period “remains fixed regardless of the schedule of hours worked by [the employee].” 29 C.F.R. § 778.105.

In Giguere, the employer ran group homes for adults with developmental disabilities and its employees included “long-term” staff, who worked shifts of seven days on, followed by seven days off. Each week-long shift included four 4-hour unpaid breaks and eight hours of nightly unpaid sleep time. Consistent with the language of Section 785.23, the employer implemented a “Sleep Time Agreement,” which governed the conditions of the sleep-time exception to the paid work time of the long-term staff.

However, the employer computed its payroll workweek from Sunday to Sunday, while the shift schedule for the long-term staff ran from Thursday to Thursday. Thus, each long-term shift spanned two payroll workweeks and, after subtracting the unpaid break hours and eight hours of unpaid sleep each night, the employer paid its long-term staff for 40 paid working hours during the first payroll workweek (Thursday to Saturday) and for 56 paid working hours during the second payroll workweek (Sunday to Wednesday). Believing this pay structure to unlawfully deny him all overtime due, a former long-term staffer filed a collective/class action suit, alleging violations of the FLSA and comparable Maine state law. The district court agreed with the employee, granting him and the class summary judgment on the FLSA claims, and the First Circuit Court of Appeals affirmed.

The employer’s sleep-time policy failed to comply with the FLSA because its payroll workweek did not sufficiently overlap with the shift schedule of the long-term employees to whom the sleep-time policy applied. As a result, the long-term staff did not reside on the premises for at least 120 hours during the employer-established workweek. Instead, at most these employees resided for 96 hours on-site in a given payroll workweek (56 paid hours plus 32 unpaid sleep-time hours and 8 unpaid break hours during the four-day period from Sunday to Wednesday).

While acknowledging that the DOL regulations could benefit from some clarification, the First Circuit nonetheless concluded that, lacking anything suggesting a repudiation of the Department’s 1988 memorandum opinion, and in light of the clear-cut language of the definition of “workweek” in the DOL regulations, the plaintiff “has the better reading” of the applicable law. Curiously, in support of its decision, the Court of Appeals cited to the “narrow construction” principle previously applicable to the analysis of overtime exemptions under the FLSA. Last year, that principle was uniformly rejected by the U.S. Supreme Court in Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2018), in favor of a “fair reading” approach to such exemptions.

As Giguere illustrates, employers need to ensure that when considering the application of an exception to the FLSA’s general rules, all of the conditions necessary for that exception are met. If you have any questions about treatment of sleep time under the FLSA, or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Nevada Enacts Minimum Wage Increase to $12 Per Hour

Nevada’s minimum wage will increase to $12.00 per hour (or $11.00 for employees offered health insurance) by mid-2024, based on a new bill signed into law by Nevada Governor Steve Sisolak. Beginning July 1, 2020, Nevada’s current minimum wage rates of $8.25 (without health insurance) and $7.25 (with health insurance) will increase by $0.75 to $9.00 and $8.00 respectively per hour, and will increase annually at that same rate until reaching $12.00 (or $11.00) per hour on July 1, 2024.

D.C.’s Economic Policy Institute estimates that about 300,000 Nevadans will be affected. At the signing, Governor Sisolak noted Nevada’s current minimum wage has not increased since 2010, and that “Keeping working Nevadans stuck in a 10-year-old minimum wage erodes the real value and purchasing power of the wages of hardworking Nevadans.” There are now only 21 states whose minimum wage is equal to or lower than the federal minimum wage of $7.25 per hour.

Jackson Lewis will continue to monitor minimum wage changes and other wage and hour issues. If you have any questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

 

Timber Harvesting Company Cannot Escape Overtime Liability, But Commute and Meal Break Time Should Not Have Been Included, Sixth Circuit Holds

Rejecting employer Timberline South’s argument, among others, that FLSA coverage did not apply because all of its timber harvesting occurred only within one state, the Sixth Circuit Court of Appeals nevertheless concluded that the commuting and meal break times should not have been included in the trial court’s calculation of overtime damages. Secretary of Labor v. Timberline South, LLC, 920 F.3d 1065 (6th Cir. 2019). The Sixth Circuit includes the federal courts in Michigan, Ohio, Kentucky and Tennessee.

In Timberline, the U.S. Department of Labor (DOL) brought a collective action against the company, alleging violations of the overtime and recordkeeping provisions of the FLSA. Following discovery, the district court granted summary judgment in favor of the DOL, awarding nearly $440,000 in unpaid overtime and an equal amount in liquidated damages. Timberline appealed the district court’s decision on several grounds.

First, the company argued that it was not subject to FLSA coverage because it harvests timber only in Michigan; it transports the timber to mills located only in Michigan; its contracts included cutting timber only in Michigan; and its heavy equipment was purchased from Michigan dealers. Therefore, asserted the company, it was not engaged in interstate commerce, a prerequisite to FLSA coverage. Rejecting that argument, the Sixth Circuit noted that Timberline’s large trucks and other heavy equipment were manufactured outside of Michigan, and therefore the company’s employees “handled” goods or materials produced in commerce. Similarly, in an issue of first impression in the Sixth Circuit, the Court of Appeals concurred with the Eleventh Circuit’s broad definition of the term “materials” under the FLSA, to mean not just raw components such as plastic or metal, but to encompass “the tools or other articles necessary for doing or making something.” Thus, because Timberline was using materials – i.e. its heavy equipment – in a manner significant to its operations (as opposed to the incidental use of materials such as pens, paper and other office consumables), the company was subject to FLSA coverage.

Next, the company contended that even if some of its employees were subject to the FLSA, others – its drivers – were exempt because they fell under the Motor Carrier Act (MCA), given that Timberline’s trucks are operated under U.S. Department of Transportation (DOT) registration numbers, its drivers maintain commercial driver’s licenses, and Timberline was involved in “a practical continuity of movement” in interstate commerce because its timber “is an ingredient in the goods manufactured by the mills to which it is delivered.” Rejecting these arguments, the Sixth Circuit noted that the company had presented no evidence that their timber was eventually shipped in interstate commerce. Moreover, the fact that the timber would have been altered (e.g. converted into paper products) before crossing state lines weighed against an MCA exemption. In addition, the Sixth Circuit previously had ruled that the mere maintenance of a commercial drivers’ license and/or registering vehicles with the DOT was an insufficient basis for applying the exemption.

Interestingly, in so holding the Sixth Circuit erred in stating that the FLSA’s overtime exemptions “are narrowly construed against the employer,” as this standard unequivocally was rejected, in favor of a “fair reading” of the Act’s exemptions, by the U.S. Supreme Court last year in Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2018). More recently, the Sixth Circuit acknowledged the current “fair reading” standard in Holt v. City of Battle Creek, 2019 U.S App. LEXIS 16561 (6th Cir. June 3, 2019), concluding that this standard was to be applied broadly to FLSA exemptions and was not limited to the particular exemption at issue in Encino Motorcars.

Despite affirming the district court’s finding of overtime liability, the Sixth Circuit agreed with the company that the time employees spent commuting from home to work or for meal periods should not have been included in the damages calculation. Citing the regulations and cases interpreting the Portal to Portal Act, 29 U.S.C. § 254, the Court of Appeals held that an employer cannot be found liable to pay overtime based on regular commute time and other “non-work” time such as meal breaks, even if the employer has a custom or practice to pay for such otherwise non-compensable time. Accordingly, the case was sent back to the trial court for a recalculation of damages.

Finally, the company asserted that liquidated damages were inappropriate because the company’s director had reasonably and in good faith relied on advice from the predecessor company’s accountant – that logging companies are exempt from the FLSA’s overtime provisions – and because the company’s pay structure, which resulted in higher-than-average compensation for its employees, made an award of liquidated damages “particularly unjust.” Rejecting these arguments, the Sixth Circuit noted that the director never sought any advice or conducted any research to support his conclusion that the MCA exemption applied, despite knowing that his drivers never crossed state lines, and never discussed the duties of any particular employee with the accountant such that the accountant (who admittedly was not an FLSA expert) could have provided advice as to the applicability of any exemption. Moreover, held the Court of Appeals, the company’s compensation of its employees might be relevant to the amount of liquidated damages, but that comes into play only if the employer has established the “good faith” and “reasonable grounds” elements for determining that its employees were exempt from overtime. As Timberline had failed to satisfy these elements, the level of its employees’ pay was irrelevant.

If you have any questions about the issues discussed in this case or any other wage and hour questions, please consult the Jackson Lewis attorney(s) with whom you regularly work.

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