Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

By Diane Kimberlin and Joseph Lazazzero

In a decision that is sure to shake up how many employers handle their internship programs, a federal district court has ruled that unpaid interns working in the offices of motion picture production companies were not “trainees” under the federal Fair Labor Standards Act (FLSA) or New York law, but employees who had to be paid.

As is common in the motion picture industry, a “production company” was incorporated to make the movie “Black Swan;” and another was incorporated to make “500 Days of Summer.” Fox Searchlight Pictures, Inc., entered into production agreements with the production companies in which interns were employed to perform low-level office work. These interns took lunch orders, answered phones, arranged employees’ travel plans, and took out the trash. If an intern was not available to perform any of these tasks, they would be completed by a paid employee.

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By Christopher Kaczmarek

The Massachusetts Supreme Judicial Court recently held that the Massachusetts Independent Contractor Law may apply to individuals who perform services outside of Massachusetts for a Massachusetts company. The decision, Taylor v. Eastern Connection Operating, Inc., significantly expands the potential reach of Massachusetts wage and hour laws.

The plaintiffs in Taylor were New York residents. They worked as couriers in New York for a company headquartered in Massachusetts. The plaintiffs performed their services exclusively in New York. The independent contractor agreements they entered into with the company, however, provided that the agreement “and all rights and obligations of the parties shall be construed in accordance with the laws where” the company was headquartered, i.e., Massachusetts.

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By Robert Friedman

Yesterday, in Oxford Health Plans LLC v. Sutter, the United States Supreme Court issued a unanimous opinion affirming the arbitrator’s construction of an arbitration agreement that did not expressly address class actions. The parties had agreed to allow the arbitrator to decide this issue. The arbitrator ruled that broad language in the arbitration agreement addressing causes of action and remedies in arbitration permitted class arbitration. The Supreme Court, while not necessarily agreeing with the arbitrator’s rationale, held that the arbitrator’s decision under Section 10(a)(4) of the Federal Arbitration Act could not be disturbed unless the arbitrator “strayed from his delegated task of interpreting a contract” and imposed his own policy choice. “All we say is that convincing a court of an arbitrator’s error—even his grave error—is not enough. So long as the arbitrator was ‘arguably construing’ the contract—which this one was—a court may not correct his mistakes under §10(a)(4).”

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By Bill Allen

In an unpublished opinion, the Second Circuit vacated the Southern District of New York’s order in Cuevas v. Citizen’s Financial Group certifying a Rule 23 class of assistant branch managers (ABMs) who claimed they were misclassified as exempt.

The Second Circuit agreed with the company that in deciding the plaintiff satisfied the commonality requirement under Rule 23(a), the district court failed to resolve factual disputes regarding the ABMs’ duties. Although the plaintiff had submitted policy documents and job descriptions that suggested the ABMs performed primarily the same duties company-wide, many of the declarations submitted to the district court from the ABMs, bank managers, regional managers, and others suggested that the ABMs’ primary duties varied in material ways. The Second Circuit held that these factual disputes must be resolved to determine whether the claims in the case were capable of class-wide resolution, as required by Dukes. The Second Circuit instructed the district court, on remand, to conduct a more rigorous analysis to make this determination.

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By Justin Marino*

In another welcome decision for employers, the U.S. District Court for the Southern District of New York denied a motion to conditionally certify a nationwide class of sous chefs who alleged they were misclassified as exempt.

Immediately following the filing of the answer in Ikikhueme v. CulinArt, Inc., and before the initial status conference was held, the sole named plaintiff moved to conditionally certify a nationwide class of food-service workers – a class that could have numbered in the thousands. The plaintiff alleged that he and all other food-service workers did not receive overtime at time-and-one-half for hours worked in excess of 40 in a week. In response to CulinArt’s opposition, which, among other things, attacked the plaintiff’s vague and ambiguous class, the plaintiff then limited the nationwide class to individuals holding the title of sous chef.

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In two companion orders in Pruell v. Caritas Christi, the U.S. District Court for the District of Massachusetts dismissed the claims against multiple healthcare institutions in the Caritas Christi healthcare network because they were not the named plaintiff’s employer; dismissed claims against two high-level individual defendants for failure to plead sufficient facts; and struck the collective action allegations in the complaint based on the submission of false affirmations in support of the plaintiff’s motion for class certification.

As in many recent class actions (see here, here, here, and here), the court dismissed the claims against all of the named defendants except the hospital for which the plaintiff actually worked, finding that none of the other institutions were the plaintiff’s employer, as defined by the Fair Labor Standards Act (FLSA). To be an employer within the meaning of the FLSA, an entity must:

1. Have the power to hire and fire the employee;
2. Supervise and control employee work schedules or conditions of employment; 
3. Determine the rate and method of payment; and 
4. Maintain employment records.

The general allegation that the healthcare system has centralized payroll and human resources globally was not enough, the court held, to state a plausible case of joint employment against any of the defendants other than the hospital where the named plaintiff worked.

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By Stephen Fuchs

On March 29, 2013, New York Governor Andrew Cuomo signed legislation that will raise the minimum hourly wage in New York in three increments, commencing on December 31, 2013. The legislation, which is codified at New York Labor Law section 652, schedules increases in the New York State minimum wage as follows:

• December 31, 2013: Increase to $8.00 per hour from $7.25 per hour.
• December 31, 2014: Increase to $8.75 per hour from $8.00 per hour.
• December 31, 2015: Increase to $9.00 per hour from $8.75 per hour.

Increase in Minimum Wage for Tipped Employees

The legislation will also increase the minimum hourly wage for service employees and food service workers who routinely receive tips. The New York State Commissioner of Labor has been tasked with issuing a new wage order that will govern food service workers and service employee. This new wage order must address the minimum hourly cash wage for tipped employees, as well as allowances for meals and lodging.

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By Bill Allen

On May 28, 2013, in Dixon v. NBCUniversal Media, Inc., the U.S. District Court for the Southern District of New York found that an employee had agreed to arbitrate her FLSA claim and enforced the class action waiver in the arbitration agreement.

As to whether the plaintiff had agreed to arbitrate her claims, the court found the following facts: The plaintiff had been notified by an email that she would be covered by the company’s alternative dispute resolution (“ADR”) program, which covered “all claims that arise out of or are related to an employee’s employment,” and the communication included as an example “[c]laims relating to compensation.” The email contained a link to a PowerPoint training course, which in turn contained a link to the employee manual containing the ADR provisions. The plaintiff also attended an ADR training course that explicitly described the binding nature of the ADR program and its application to wage hour claims, and expressly stated that no class or collective actions would be permitted. The training course also informed the plaintiff that by choosing to continue to work for the company after July 1, 2009, she was agreeing to be covered by the ADR program after that date. The district court found these circumstances sufficient to establish that the plaintiff’s continued employment constituted acceptance of the arbitration agreement provisions. The district court rejected the plaintiff’s argument that she had never assented to a later version of the ADR program which was the basis of the employer’s motion to compel arbitration. The plaintiff had received an email informing her that employees who had been previously covered by the ADR program would continue to be covered by the procedures and attaching a document explaining the few minor changes made to the program she had agreed to be bound by. The court found that it was sufficient for the employer to expressly remind the plaintiff that, despite minor changes made to the ADR program, employees previously covered by the program would continue to be covered.

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By Bill Allen

On May 8, 2013, in Wang v. Hearst Corp., the U.S. District Court for the Southern District of New York denied certification under Rule 23 of a class of unpaid interns at Hearst Magazines.

First, the court found that Rule 23(a)(2)’s commonality requirement was not satisfied under the Supreme Court’s standard in Dukes v. Wal-Mart Stores, Inc. because the plaintiffs could not “show anything more than a uniform policy of unpaid internship.” The plaintiffs’ evidence of a corporate-wide policy of classifying the proposed class members as unpaid interns was insufficient to establish commonality because the duties of the interns varied greatly from each other and from magazine to magazine. The court acknowledged that even after Dukes, “courts of this district have routinely found commonality in analogous misclassification cases,” but distinguished this case because the plaintiffs were not able to show a company-wide policy regarding their duties in addition to a company-wide policy regarding their classification. The court rejected the interns’ argument that the court should look to "the nature of the work that interns performed" to find commonality, stating that the “glaring problem” is that there is no common proof from which the court could determine the "nature" of the interns' work.

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