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

On July 27, 2009, the Eleventh Circuit affirmed the district court’s denial of class certification in Babineau, et al. v. Federal Express Corporation, a decision that may impact wage and hour cases brought under state law. The plaintiffs sought Rule 23 certification of a broad class of hourly employees in Florida, alleging state law claims for breach of contract and quantum meruit. The breach of contract claim consisted of allegations that plaintiffs were not paid for: (1) work performed during “gap periods” (any time interval between their manual punch in and their scheduled start time and/or any time interval between their manual punch out and their scheduled stop time); and (2) work performed during unpaid break periods. 

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On July 27, 2009 the Ninth Circuit issued an opinion stating that individual managers can be held liable under the FLSA even though the company that employed the plaintiffs had filed for bankruptcy. Boucher v. Shaw (9th Cir. 05-15454). In Boucher, the company that employed the plaintiffs, Castaways Hotel, Casino, and Bowling Center, that filed for Chapter 11 bankruptcy protection in June of 2003, discharged the plaintiffs in January 2004, and then converted to a Chapter 7 liquidation. Later that year, the plaintiffs filed claims under federal and Nevada state law for unpaid wages against three Castaways managers. The district court dismissed the plaintiffs' claims and the plaintiffs appealed. With respect to the state law claim, the issue was certified to the Nevada Supreme Court, which determined that individual managers could not be found liable as "employers" under the relevant Nevada state law. The Ninth Circuit then addressed whether the defendants could be personally liable despite Castaways' bankruptcy.

It is generally settled law that certain managers, depending on factors such as the amount of interest and control they exert over the structure of an employment relationship, can be individually liable for violations under the FLSA as an “employer.” See Lambert v. Ackerley, 180 F.3d 997, 1011-12 (9th Cir. 1999); Chao v. Hotel Oasis, 493 F.3d 26 (1st Cir. 2007). In this case, there was no dispute that the individual defendants could be considered employers under the FLSA. Instead, they argued that the conversion of Castaways' bankruptcy from Chapter 11 to Chapter 7 terminated their duty to pay the plaintiffs their wages. The Ninth Circuit rejected the argument. First, the court noted that the plaintiffs were terminated prior to the conversion to Chapter 7, meaning that their pay had already been earned. The court held further that the nature of the bankruptcy filing by Castaways was irrelevant because Castaways was not a defendant in the wage and hour case, the defendants (the managers) were not debtors in bankruptcy, and an automatic stay intended to protect a debtor could not affect the plaintiffs' claims.

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The Obama administration recently increased commuter tax benefits making them more appealing to employers. State legislatures are also considering laws requiring employers to provide transit subsidies to employees. If an employer decides to provide commuter benefits to its employees, or such benefits are required by state law, the employer must also consider its wage and hour obligations. Most employers are, unfortunately, not aware that commuter subsidies must be included when calculating an employee’s regular rate for overtime purposes.

The federal Fair Labor Standards Act (FLSA) explicitly includes commuting expenses in the regular rate. "An employee normally incurs expenses in traveling to and from work, buying lunch, paying rent, and the like. If the employer reimburses him for these normal everyday expenses, the payment is not excluded from the regular rate". 29 C.F.R. § 778.21.

There is only one reported decision, under either federal or state law, that addresses this issue. The facts of the case are simple. The Montana Department of Transportation agreed in a collective bargaining agreement to pay its employees’ commuting expenses, but did not include these expenses in their regular rate calculations when computing overtime. See Montana Public Employee’s Association v.Dep’t of Transportation, 954 P.2d 21 (Mont. 1998). The union alleged that the state had violated the FLSA and the Supreme Court of Montana agreed, finding that the commuting expenses should have been included in the regular rate.

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On July 17, 2009, a federal magistrate judge sitting in the Eastern District of Michigan issued two significant rulings on pending motions for summary judgment in Henry v. Quicken Loans, Inc. The plaintiffs in Henry were employed as mortgage loan consultants (or “mortgage bankers”) for Quicken Loans, a large on-line mortgage lender. Quicken Loans classified its loan consultants as exempt from the overtime obligation imposed by the FLSA, in reliance upon the administrative exemption. The plaintiffs claimed, relying upon Quicken Loans’ hiring, training, and process documentation, as well as internal email, that they were primarily responsible for “selling” mortgage loans. If their primary duty was “sales,” the plaintiffs argued, they could not be considered exempt administrative employees.

In his first report and recommendation on cross-motions for summary judgment on the administrative exemption defense, the magistrate judge found an issue of fact regarding the loan consultants’ primary duty. The plaintiffs relied heavily upon internal corporate documents which emphasized the loan consultants’ role in the sale of mortgage loans. Quicken Loans, however, pointed to the U.S. Department of Labor’s September 2006 opinion letter, which found that mortgage loan officers qualified for the administrative exemption if their duties included such activities as working with customers to identify and secure a loan that is appropriate for the customers’ financial circumstances, collecting and analyzing customer financial information, and advising the customer regarding the risks and benefits of loan alternatives. According to the magistrate judge, a jury would have to decide whether the plaintiffs fall within the scope of the opinion letter, or whether they were primarily responsible for sales.

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In the case of Kasten v. Saint Gobain Performance Plastics Corp., the Seventh Circuit Court of Appeals recently considered the question of whether verbal complaints may constitute protected activity under the FLSA. In this case, the plaintiff alleged that he verbally complained to his supervisors and the company’s human resources department about the legality of the location of the company’s time clocks. The plaintiff alleged that he told two supervisors and a human resources employee that the placement of the clocks was illegal because it prevented employees from being paid for time spent donning and doffing required protective gear.

The Seventh Circuit first affirmed the district court’s conclusion that internal, intra-company complaints may be protected activity for purposes of the anti-retaliation provision of the FLSA. The Court then turned to the question of whether verbal, intra-company complaints may be protected activity.

The Seventh Circuit held that because the FLSA prevents employees from being retaliated against for filing complaints, the statute could not be interpreted as intending to protect unwritten complaints. The court viewed the “natural understanding” of the phrase “file any complaint” to connote the use of a writing. Therefore, to constitute protected activity under the FLSA, the “complaint” must involve the submission of a writing to an employer, court, or administrative body. Notably, other courts have reached a different conclusion.

This blog entry was authored by Theresa Waugh.
 

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On July 24, 2009, the federal minimum wage will increase from $6.55 per hour to $7.25 per hour. This increase is the third and final increase in a three phase process. In light of the impending increase, there are several issues of which employers must be aware to prepare for the change:

• Replace Fair Labor Standards Act (“FLSA”) minimum wage posters. Every employer of employees subject to the FLSA's minimum wage provisions must post, and keep posted, a notice explaining the Act in a conspicuous place in all of its business establishments, so as to permit employees to readily read it. Employers may access new FLSA minimum wage posters on the Department of Labor’s (“DOL”) website

• Double check payroll fail-safes. Fail-safes are devices or features in payroll systems that ensure employees are never paid below the minimum wage. When employees are paid on a fluctuating work week basis, a day rate basis, piece rate basis, or any other basis resulting in a fluctuating “regular rate,” employers must ensure that these employees are paid at least the minimum wage. Employers should check their fail-safes and re-program them so that they do not allow employees to be paid less than $7.25 per hour (or the relevant state minimum wage).

• Employers may also use fail-safes to ensure that deductions taken from employees’ pay, for a variety of reasons, do not take employees’ wage rates below minimum wage. Employers should re-program fail-safes to ensure that deductions are not made that would result in employees being paid less than the new federal minimum wage of $7.25 per hour (or the relevant state minimum wage). 

• Check state minimum wage. Several states have established a minimum wage that is higher than the federal minimum wage. Employers are required to pay the higher required minimum wage, state or federal. Check the minimum wage for the states in which you do business, which may also increase, and make sure employees are paid accordingly.  See our previous post discussing state minimum wage increases in July 2009.

• Make sure employees earn enough in tips to qualify for the tip credit. Employees who receive more than $30.00 per month in tips may be paid less than the minimum hourly rate so long as each employee earns enough in tips to make up the difference between the wage paid and the federal minimum wage. Employers should double check to ensure that employees for whom the tip credit is used are earning enough in tips, combined with his or her direct wages of at least $2.13 per hour to equal the new minimum hourly wage. 

• Consider how the minimum wage increase affects full-time students and other groups of individuals paid special minimum wages. Full-time students employed in retail or service stores, agriculture, or colleges and universities may be paid special minimum wages. Employers hiring students may obtain a certificate from the DOL, which allows the student to be paid not less than 85 percent of the federal minimum wage. The DOL may also issue certificates allowing employment at wages below the minimum wage for apprentices, student learners, messengers, certain employees who receive tips, and workers with disabilities. If you have employees paid a special minimum wage, which is a percentage of the federal minimum wage, the special minimum wage rate must be adjusted to reflect the appropriate percentage of the increased federal minimum wage.

This blog entry was authored by Jamie Kitces.
 

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Michael Truman was a Pennsylvania resident who worked as a management consultant for 16 months for a Texas-based management consulting company. He was assigned to client projects at client sites, including a six-month assignment in England and a one-week assignment in Canada.

After resigning, he sued the company, claiming that he had been misclassified as exempt and was owed overtime under the Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA). The company sought partial summary judgment as to the time periods that Turner had spent working in England and Canada, arguing that the FLSA and PMWA did not apply outside of the United States.

The court granted the motion as to Turner's FLSA claim based on the FLSA's exemption for work performed outside of the United States. 29 U.S.C. 213(f). However, the court denied summary judgment as to Turner's PMWA claim. The court reasoned that, unlike the FLSA, the PMWA contains no express exemption for work performed outside of the United States, and the court would not infer one, noting that the PMWA was originally enacted to protect employees who were not protected by the FLSA and that state law may provide greater protection to employees than the FLSA. The court concluded that while the PMWA was silent as to its extra-territorial reach, it should be construed to provide protection to Pennsylvania based-employees while they are working on assignments outside of the United States.

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The Employment Standards Administration (or “ESA” in DOL-speak) is not well-known outside the Beltway and the community of wage and hour practitioners. ESA is an umbrella organization responsible for management and oversight of four subordinate agencies:

• The Wage and Hour Division (“WHD”)
• The Office of Federal Contract Compliance Programs (“OFCCP”)
• The Office of Labor-Management Standards (“OLMS”), and
• The Office of Workers' Compensation Programs (“OWCP”)

The Assistant Secretary of ESA and the Administrator of the Wage and Hour Division are both positions whose incumbents must be nominated by the President and confirmed by the Senate. The Directors of the OFCCP, OLMS and OWCP are appointed by the Secretary of Labor.

On July 8, 2009, Acting Assistant Secretary of ESA, Shelby Hallmark, announced that the ESA will be abolished in November, with the leaders of the four agencies – WHD, OFCCP, OLMS and OWCP reporting directly to the Secretary of Labor.

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Several new wage and hour bills made it through various state legislatures during the second quarter of the year. Below is a wrap up of new developments (including regulatory updates) from April 1, 2009 through June 30, 2009.

Alabama House Bill 144, Effective 5/19/2009. Modifying several aspects of the state child labor laws.

Colorado House Bill 1108, Effective 8/5/2009. Provides that an employer under specified circumstances is subject to penalties if an employee's paycheck is not paid because the employer's bank does not honor the paycheck.

Connecticut House Bill 6185, Effective 10/1/2009. Concerns equal pay discrimination.

Florida House Bill 569, Effective 7/1/2009. Allows wages to be paid by a payroll debit card.

Indiana Senate Bill 465, Effective 7/1/2009. Requires an employer to provide a pay stub to employees and post a notice regarding the state's minimum wage law. The notice must include an employee's basic rights and who to contact for information, questions or complaints.

Iowa House Bill 618, Effective 7/1/2009. Update to civil and criminal penalties, including increase of maximum penalty to $10,000 for the illegal use of child labor, and provides that wage discrimination is an unfair employment practice under the state civil rights act.

Kansas Senate Bill 160, Effective 1/1/2010. Increases the minimum wage from $2.65 an hour to $7.25 an hour.

Maine House Bill 280, Effective 9/18/2009. Requires break time for nursing mothers in the workplace and requires an employer to provide a sanitary space, which must be close to the work area and may not be a bathroom, for nursing mothers to express milk in privacy.

Maryland Code of Administrative Rules 09.12.02.01 -.02, Effective 6/19/2009. Amends rules relating to equal pay for equal work. Requires employers to collect certain employee data, such as the gender and racial classification of their employees and records must be maintained by the employer for 3 years.

Montana House Bill 133, Effective 10/1/2009. Amends the definition of “income” with respect to garnishments to exclude mandatory retirement and disability contributions and union dues.

Nevada Assembly Bill 84, Effective 7/1/2009. Expands exemption for salespersons to any employee in a retail or service business. In order to qualify for the exemption, the employee must earn at least half of his/her compensation through commissions and be paid more than 1½ times the minimum wage.

New Mexico House Bill 489, Effective 6/19/2009. Allows workers to collect treble damages against employers that violate the state's $7.50-an-hour minimum wage law.

North Dakota Senate Bill 2344, Effective 8/1/2009. Exempts the act of breastfeeding from the offense of indecent exposure. An employer may use the designation "infant friendly" on its promotional materials if the employer adopts a workplace breastfeeding policy that includes specific criteria.

Oklahoma Administrative Code sections 380:30-1-7, -3-4, -5, Effective 7/1/2009. Amends rules to clarify the requirements for a valid payroll deduction agreement.

Oklahoma Senate Bill 527, Effective 11/1/2009. Provides that if an employer pays an employee with a check that is subsequently returned by reason of the refusal of the bank to honor the check due to insufficient funds or a stop payment notice, the employer must reimburse the employee for any fees or costs incurred by the employee within 14 days.  Additionally requires employers to post a notice describing the pertinent provisions of the Oklahoma Minimum Wage Act. The notice must be not less than 8 1/2 by 11 inches and must be displayed and accessible to all employees in each establishment under the control of the employer.

Oregon House Bill 2826, Effective 1/1/2010. Increases the hours of the day during which children under 16 years of age may work; provides for additional hours of work during summer.

Oregon House Bill 3474, Effective 1/1/2010. Increases processing fee chargeable to employee by employer for garnishments of employee's wages.

Oregon Senate Bill 373, Effective 1/1/2010. Provides that an obligor and obligee under a support order may bring a civil action for damages against an employer or other person who withholds money under an order to withhold, but who fails to pay the withheld amounts within the time allowed by law.

Vermont House Bill 313, Effective 6/1/2009. Amends the state minimum wage law to clarify that annual adjustments to the state minimum wage are not to result in a decrease in the minimum hourly wage rate.

Washington House Bill 1596, Effective 7/26/2009. Protects a woman's right to breastfeed in a place of public resort, accommodation, assemblage, or amusement.
 

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A federal district court ruled that hourly production and maintenance workers at U.S. Steel’s Clariton, Pennsylvania coke plant were not entitled to compensation for time spent donning, doffing, and showering at the beginning and end of their work days under Section 3(o) of the Fair Labor Standards Act (“FLSA”). Section 3(o) effectively excludes time spent by employees donning and doffing “clothes” or washing time from compensable hours worked where such time is either explicitly addressed in a collective bargaining agreement, or by custom or practice established under a collective bargaining agreement. The FLSA does not define the term “clothes,” and many courts have disagreed over what constitutes changing clothes.

In Andrako v. United Steel Corp., plaintiffs brought an FLSA collective action alleging violations based on the company’s failure to compensate for donning and doffing certain protective equipment, showering time, and time spent walking to and from their working stations. The court held that the items donned and doffed by U.S. Steel workers plainly were clothes within the meaning of the statue. In making its determination, the court noted that it was applying a common and ordinary meaning of the term. The items in question included safety glasses, hard hats, flame retardant jackets and pants, flame resistant gloves, hearing protection, snoods or hoods, wristlets, and respirators. The court rejected plaintiffs’ narrow construction that Section 3(o) should not apply to any apparel or equipment intended for protection and/or required by the employer or law. Similarly, the court rejected the plaintiffs’ argument that showering does not fall with Section 3(o)’s exception for washing time.

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Texas will soon join a growing list of more than a dozen states that have imposed mandatory overtime restrictions on hospitals, including California, Connecticut, Illinois, Maryland, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, and West Virginia. Effective September 1, 2009, Texas hospitals can not, with limited exceptions, require registered or licensed vocational nurses to work mandatory overtime, nor can hospitals use on-call time as a substitute for mandatory overtime. Nurses are expressly authorized to refuse to work mandatory overtime and any such refusal does not constitute patient abandonment or neglect. Nothing in the law prohibits nurses from voluntarily working overtime.

Mandatory overtime means a requirement that a nurse work hours or days that are in addition to the hours or days scheduled, regardless of the length of a scheduled shift or the number of scheduled shifts each week. Pre and post-shift documentation and communication activities regarding a patient’s status, as well as prescheduled on-call time, are not included in making an overtime determination.

The new law contains four exceptions under which hospitals may require nurses to work mandatory overtime, including natural disasters in the hospital’s county or a contiguous county; governmental declarations of emergency in the hospital’s county or a contiguous county; emergencies or other infrequent, unforeseen events that hospital management could not have prudently anticipated that increase staffing needs; and ongoing medical or surgical procedures that necessitate the nurse’s continued attendance for patient care reasons. In the case of emergencies or unforeseen events, hospitals must first, to the extent possible, make a good faith effort to satisfy staffing needs through voluntary overtime, including calling per diems and agency nurses, assigning floats, or requesting an additional day of work from off-duty personnel.

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The federal minimum wage is set to increase to $7.25 on July 24, 2009. Additionally, 23 states will also increase the minimum wage for employers subject to state wage and hour laws. The majority of these increases take effect on July 24, 2009, but three states raise their minimum wage effective July 1, 2009.

In addition to noting the wage increase, employers should ensure that they are properly displaying a copy of the state’s current minimum wage poster in a conspicuous location in the workplace that notes the wage increase, even if the increase will not affect hourly employees at any particular workplace.

The following states have increased their state minimum wage:

Delaware
• $7.25/hr. effective 7/24/09

District of Columbia
• $8.25/hr. effective 7/24/09

Federal
• $7.25/hr. effective 7/24/09

Florida
• $7.25/hr. effective 7/24/2009

Idaho
• $7.25/hr. effective 7/24/09

Illinois
• $8.00/hr. effective 7/1/09

Indiana
• $7.25/hr. effective 7/24/09

Kentucky
• $7.25/hr. effective 7/1/09

Maryland
• $7.25/hr. effective 7/24/09

Missouri
• $7.25/hr. effective 7/24/09

Montana
• $7.25/hr. effective 7/24/09

Nebraska
• $7.25/hr. effective 7/24/09

Nevada
• If health benefits are available:
Effective 7/1/09 $6.55/hr (employers subject to the FLSA should see federal requirements)
• If the employer does not provide qualified health benefits:
Effective 7/1/09 $7.55/hr

New Jersey
• $7.25/hr. effective 7/24/09

New York
• $7.25/hr. effective 7/24/2009

North Carolina
• $7.25/hr. effective 7/24/09

North Dakota
• $7.25/hr. effective 7/24/09

Oklahoma
• $7.25/hr. effective 7/24/09

Pennsylvania
• $7.25/hr. (large employers) effective 7/24/09
• $7.25/hr. (small employers) effective 7/24/09

South Dakota
• $7.25/hr. effective 7/24/09

Texas
• $7.25/hr. effective 7/24/09

Utah
• $7.25/hr. effective 7/24/09

Virginia
• $7.25/hr. effective 7/24/09

Wisconsin
• $7.25/hr effective 7/24/09
 

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