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

By Martha Keon

The FLSA provides that an employer may not:

discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the Act], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee.

The meaning of the phrase “filed any complaint” has been vigorously disputed in the federal courts, resulting in circuit splits on two issues:

1. Does “filed any complaint” protect only complaints to the government or does it also include internal complaints to the employer? The majority view held by the First, Third, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuits is that internal complaints to an employer are protected, while the minority view held by the Second and Fourth Circuits is that only complaints to government authorities are protected.
2. Does “filed any complaint” mean that the complaint has to be in writing or are unwritten, oral complaints also protected? Following the same general pattern, the Second, Fourth and Seventh Circuits have held that unwritten, oral complaints are not protected, while the Fifth, Sixth, Eighth, Ninth and Eleventh Circuits have protected unwritten, oral complaints.

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Addressing an issue of first impression in the Fourth Circuit, a Maryland federal court has held that the owner of a restaurant/tavern—who is also a bartender at his establishment—may not lawfully participate in his employee bartenders’ tip pool under the Fair Labor Standards Act, 29 U.S.C. §§  201 et seq. (FLSA). In Gionfriddo v. Zink, LLC, et al., the court was asked to decide whether an “employer” may also be a “tipped employee” and receive a share of the tip pool. Other bartender employees challenged the employer's acts and the court agreed with the employees, noting that “[e]very court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participation in employee tip pools.” The court left open the “theoretical” possibility that, in some close circumstances, an individual can be an “employer” under the FLSA and at the same time share in a tip pool. This case, however, was not one of those close circumstances.

While the general rule is that employees must be paid minimum wage, i.e., $7.25 per hour under the FLSA, an exception exists for “tipped employees.” Tipped employees are those who are “engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips.” 29 U.S.C. § 203(t). Under these circumstances, an employer satisfies the FLSA requirement if it pays tipped employees at least $2.13 per hour, and that wage, combined with tips, equals or exceeds $7.25 per hour. 29 U.S.C. § 203(m). In this case, the parties agreed that bartending is a tipped occupation.

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In the wave of class litigation flooding the courts in California claiming rest breaks were not permitted, one court recently denied class certification based on a common sense conclusion that the experience of a handful of guards could not be assumed to be the experience of thousands.

In a recent case, Temple v. Guardsmark LLC, two security guards sought penalties on behalf of a class of thousands of guards based on their employer’s alleged failure to provide “off-duty” rest periods and accurate wage statements.

The guards worked “solo” at various client sites and thus had no one to relieve them from duty for breaks. They alleged company policies prohibited them from leaving their posts to take ten minute rest periods, and they supported their motion for class certification with sworn declarations from fourteen guards saying they took no breaks. Defendant Guardsmark countered with 96 sworn guard declarations, each attesting to having regularly taken rest breaks, spending the time engaged in a wide variety of personal activities.

Faced with the dueling declarations, the question before the court was not whether Guardsmark in fact failed to legally provide rest periods, but whether the two security guards who sought to be class representatives could offer common evidence to prove that thousands of guards in fact were illegally denied rest breaks without trying the claims of each guard one-by-one. The court found that the guards had not shown they could resolve these claims based on “common proof.” The evidence instead suggested that many guards—at least the 96 who supported their employer—did in fact take rest breaks, and even the evidence offered by plaintiffs raised questions such as whether idiosyncratic directions of a lone wolf supervisor rather than a common company-wide policy was the reason for some employees being deprived of rest breaks.

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Pursuant to California law, a non-exempt employee is usually entitled to premium pay on the seventh day of work in any one workweek. For example, where an employee works six consecutive days within a workweek, she must be compensated at time and a half for the first eight hours worked and double time for any additional hours worked on the seventh day. A “workweek” is defined as “any consecutive days, starting with the same calendar day each week. ‘Workweek’ is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods.”

Prior to the court’s recent ruling in Seymore v. Metson Marine, Inc., it was presumed that employers had flexibility in defining the “workweek” as applied to their employees. However, in Seymore v. Metson Marine, Inc., the plaintiffs argued that they were entitled to unpaid overtime because the defendant artificially created a workweek to circumvent premium pay requirements. The workweek, as defined by the employer, ran from 12:00 a.m. on Monday to 11:59 p.m. the following Sunday. The plaintiffs worked a 14-day on/14-day off schedule that ran from Tuesday to Tuesday, which resulted in a single seventh day premium at the end of the second week.

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A recent decision by the U.S. District Court for the Southern District of New York illustrates the impact of class waiver provisions in employment agreements. In Sutherland v. Ernst & Young LLP, plaintiff, a former accountant, brought a class action against Ernst and Young (“E&Y”) under the Fair Labor Standards Act and New York law, alleging that she and putative class members were unlawfully denied overtime compensation. E&Y moved to dismiss and compel arbitration of Sutherland’s claims on an individual basis pursuant to the parties’ arbitration agreement which included a class waiver provision.

In denying defendant’s motion, the court relied on In re American Express Merchants’ Litigation, 554 F.3d 300 (2nd Cir. 2009) (“Amex”). There, the Second Circuit invalidated a class waiver provision in an arbitration agreement, finding that it precluded plaintiffs from vindicating their statutory rights. The Amex court held that the enforceability of a class waiver provision should be determined by referencing several factors, including: (1) the provision’s fairness; (2) the individual plaintiff’s cost-to-recovery ratio; (3) the ability to recover attorneys’ fees and costs and thus obtain legal representation; and (4) the waiver’s effect on the company’s “ability to engage in unchecked market behavior.”

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Ten years ago, in Bell v. Farmers Insurance Exchange, 87 Cal. App. 4th 805 (2001), the California Court of Appeal held that insurance claims adjusters in that case were nonexempt administrative employees and, consequently, were entitled to overtime pay. That decision lead to a $90 million dollar judgment against the defendant and a slew of copycat lawsuits. Since then, a number of federal courts have gone in the opposite direction and held that claims adjusters are exempt from overtime. See e.g., Palacio v. Progressive Insurance Company, 244 F. Supp. 2d 1040 (C.D. Cal. 2002); McAllister v. Transamerica Occidental Life Insurance Company, 325 F.3d 997 (8th Cir. 2003); Cheatham v. Allstate Insurance Company, 465 F.3d 578 (5th Cir. 2006); In re Farmers Ins. Exch., Claims Representatives’ Overtime Pay Litig., 466 F.3d 853 (9th Cir. 2006); Roe-Midgett v. CC Services, Inc., 512 F.3d 865 (7th Cir. 2008); Robinson-Smith v. Gov’t Employees Ins. Co., 590 F.3d 886 (D.C. Cir. 2010). In Hodge v. Aon Insurance Services, the California Court of Appeal followed this trend and held that Aon’s claims adjusters were properly classified as exempt administrative employees. In doing so, the court in Hodge limited the holding issued 10 years ago in Bell.

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Carlos Arechiga may have been, as the trial court found, ecstatic when he was first told that he would earn $880 per week as a custodian, but he certainly was dismayed after working six 11-hour days per week for several years and never receiving a separate payment for overtime. Arechiga was undoubtedly more dismayed when the California Court of Appeal, in Arechiga v. Dolores Press, affirmed the trial court’s conclusion that his salary included his overtime compensation and he was due no additional wages. The Court of Appeal concluded that Arechiga’s employer had sufficiently spelled out the six factors needed to have, under California law, an enforceable wage agreement that included all required overtime. Perhaps surprisingly, the Court of Appeal also ruled that the wage agreement prevailed over section 515(d) of the Labor Code, which seemingly outlawed such agreements.

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In the California Supreme Court opinion of Sonic-Calabasas A, Inc. v. Moreno, a 4-3 majority of the court concluded that a pre-dispute employee-employer arbitration agreement requiring the arbitration of employee wage claims, which could otherwise be brought before the state's Labor Commissioner, is contrary to public policy and unconscionable, and is thus unenforceable. The court's majority declared that the 2008 U.S. Supreme Court case of Preston v. Ferrer did not compel a different conclusion and that the court's holding was not preempted by the Federal Arbitration Act (FAA; 9 U.S.C. §§ 1 et seq.). See our recent ASAP for a detailed analysis of the decision's implications for employers.

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