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

By Sarah Green

In a case of first impression, the Ninth Circuit recently held that “house parents” at a home for mentally troubled children are not entitled to the overtime protections of the Fair Labor Standards Act (FLSA).

Plaintiffs were a married couple formerly employed by Family Centered Services of Alaska (FCSA), a non-profit organization that provides housing for “severely emotionally disturbed” children. Plaintiffs claimed that they often worked almost 100 hours per week and filed suit, asserting that the FCSA was subject to the overtime requirements of the FLSA because it was operating “an institution primarily engaged in the care of the . . . mentally ill or defective who reside on the premises of such an institution.” The district court agreed, granting summary judgment on the issue, and the defendant appealed.

The Ninth Circuit reversed, finding that FCSA was not covered by the statute for two primary reasons. First, the court held that the homes were not “primarily engaged” in the type of “care” contemplated by the statute. The court noted that the FCSA’s main function was to provide the children with housing, not treatment. While children “presumably benefited from Plaintiffs’ ‘care’ as house parents,” they received their psychological and medical treatment almost exclusively outside the home. In addition, the court determined that the FCSA was not the type of “institution” contemplated by the statute, which refers to hospitals and nursing homes. The court further observed that both legislative history and interpretive guidance from the Department of Labor was consistent with its ruling. As such, the court remanded for further proceedings consistent with its decision. 

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By Mary Walsh

In Campbell v. PricewaterhouseCoopers, LLP, the Ninth Circuit Court of Appeals held that unlicensed accountants in California were not ineligible, as a matter of law, from being exempt from overtime under either the professional or administrative exemptions.

Two former unlicensed accountants in a subdivision of PricewaterhouseCoopers (PwC) filed a class action lawsuit alleging that PwC violated California wage and hour laws by improperly classifying them as exempt from overtime. Plaintiffs claimed they performed predominately routine and menial work and that strict instructions, computer software, and a work review-system precluded them from exercising any significant degree of discretionary judgment or analytical thinking. PwC argued that plaintiffs performed work integral to PwC’s services and to the extent that they did not exercise discretion and independent judgment, they were failing to meet the firm’s expectations. Both parties filed motions for partial summary judgment on whether plaintiffs were exempt under the professional, executive, and administrative exemptions. The district court granted plaintiffs’ motion for partial summary judgment, finding that as a matter of law, PwC could not classify plaintiffs as exempt from overtime under the applicable IWC Wage Order on the grounds that: (1) unlicensed accountants categorically are ineligible for the professional exemption; and (2) PwC had not established an issue of triable fact on whether plaintiffs’ work was performed “under only general supervision,” an essential element of the administrative exemption.

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By Sarah Green

On May 31, 2011, Maine Governor Paul LePage signed into law legislation easing restrictions on the state’s standards for child labor. Originally, the proposed legislation sought to remove all hour restrictions on 17-year-old employees, as well as summer work restrictions on 16-year-old employees. This sparked a lengthy debate among lawmakers.

Ultimately, many of the more controversial elements were struck from the legislation. As passed, the law increases the number of hours sixteen and seventeen-year-old employees can work during the school year from 20 to 24 hours per week. The law also raises the number of hours a minor may work per day from four hours to six hours. The law also permits minors to work until 10:15 pm on school nights.

The new law goes into effect 90 days after the adjournment of the Maine Legislature.

Photo credit: GRC Visuals

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By Gregory Iskander

Making new law on what qualifies as a “commission” for purposes of the overtime exemption for salespeople, a California Court of Appeal upheld a pay plan that compensates sales employees at a fixed rate for each product sold as opposed to relying on a percentage of the sales price.

In Areso v. CarMax, Inc.¹ a former sales consultant of CarMax filed a class action against the company alleging that CarMax violated the California Labor Code by classifying her and other sales consultants in California as exempt and failing to pay her overtime. CarMax utilized a compensation plan for its sales consultants, who sold used vehicles, warranty plans, and vehicle accessories, with a uniform dollar payment for each sale of a vehicle or service plan. Concerned with the applicability of the California salesperson overtime exemption, CarMax modified its pay plan for California employees and used a formula which took into account the number of vehicles sold and the average price of the vehicles – such that a sales consultant would earn approximately the same uniform payment per vehicle sold. CarMax used this uniform payment based on the number of vehicles sold instead of a percentage of the sales price so that its salespeople did not push higher priced cars.

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By Whitney Ferrer

In Verkuilen v. MediaBank LLC, the U.S. Court of Appeals for the Seventh Circuit held that an account manager for a company that provides computer software to advertising agencies qualified for the administrative exemption to the Fair Labor Standards Act and was therefore exempt from overtime.

The plaintiff in this case worked as an account manager for MediaBank LLC. In this position, she acted as a “bridge” between the software developers at MediaBank and its customers. As account manager, the plaintiff was responsible for determining the customer’s needs, relaying those needs to the software developers in order to facilitate the customization of the software, and helping the customer use the customized software.

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By Milton Castro

In a collective and putative class action under New York’s overtime and minimum wage laws, the U.S. District Court for the Southern District of New York recently held that the act of being a registered representative pursuant to the Financial Industry Regulatory Authority (FINRA) does not in itself absolve an insurance agent from the “outside salesman” exemption under the Fair Labor Standards Act (FLSA). Gold v. New York Life Insurance Co.  In Gold, the plaintiff worked for New York Life Insurance Co. as an insurance agent. During his employment, the plaintiff was compensated on a purely commission basis and received no remuneration based on the number of hours he worked. In addition to selling traditional “fixed” insurance policies and annuities, the plaintiff also obtained “Series 6” and “Series 63” licenses, which permitted him to sell “registered” products, including variable life insurance policies and other products regulated by FINRA. With these licenses, Gold became a “registered representative” – a title which requires enhanced duties to clients under FINRA, such as the “Know Your Customer Rule” and the “Suitability Rule.” It was based on these enhanced duties that Gold, in an attempt to escape summary judgment, argued that he should not be considered an “outside salesman” under the FLSA, but rather a financial advisor. The court disagreed.

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