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The district court granted the defendants’ motion to strike the untimely affidavits, reasoning that the late production of the affidavits was prejudicial to the defendants because the city’s entire litigation posture might have been different if these numbers had been provided earlier. In addition, the court noted, allowing the officers to put forth untimely evidence of damages would prolong the litigation by forcing the district court to allow the defendants to re-open discovery and re-depose the officers, which would be unfair to the defendants, waste judicial resources, and fail to deter future violations of discovery obligations. The district court then granted summary judgment for the defendants because, without the affidavits, the court concluded that the officers could not satisfy their burden of proving the amount and extent of their alleged overtime work.

On appeal, the Eighth Circuit affirmed, finding that the district court did not abuse its discretion in striking the affidavits. Perhaps even more significantly, the Eighth Circuit delineated the standard of evidence required when the employer has not kept accurate time records. The court pointed out that the “relaxed” evidentiary standard under Mt. Clemens only applies when the existence of damages is certain. Thus, in this case, the plaintiffs had an initial burden of showing they carried flex hours forward into a new work week (in violation of the FLSA), or went entirely unpaid for those hours – a burden they did not satisfy. Although the officers provided evidence of the flextime practice, without the untimely affidavits there was no evidence of specific dates and hours worked, or money owed. “The city’s failure to provide accurate time records reduces the officers’ burden, but does not eliminate it,” the court stated. “Even though [Mt. Clemens] relaxes the burden of proof, the officers must still prove the existence of damages . . . . Without record evidence of a single hour worked over forty hours that did not receive overtime wages or flextime, the officers’ unsupported estimations of the unpaid hours due are not enough.”

Carmody provides welcome clarity to the often misconstrued “relaxed” evidentiary standard to be applied when, as in flextime or misclassification cases, employers have not maintained records of hours worked by employees they believed, in good faith, were not entitled to overtime wages.

Photo credit: Matthew John Hollinshead

After a complaint was filed with the U.S. Department of Labor, that agency investigated the situation and found no violation of the FLSA. Likewise, the United States District Court for the Western District of Arkansas found no FLSA violation and granted Redland’s motion for summary judgment.

On appeal to the United States Court of Appeals for the Eighth Circuit, the employees argued that the FLSA prohibits an employer from changing an existing workweek for the purpose of reducing employee overtime, and that Redland’s claim of administrative efficiency was pretextual. The Eighth Circuit affirmed, noting that although the statute does not define workweek, a Department of Labor regulation provides a meaning to the term. Under federal regulations, a workweek is defined as:

a fixed and regularly reoccurring period of 168 hours – seven consecutive 24-hour periods. It need not coincide with the calendar week but may begin on any day and at any hour of the day . . . . Once the beginning time of an employee’s workweek is established, it remains fixed regardless of the schedule of hours worked by him.

Citing numerous cases, the Eighth Circuit opined that “an employer does not violate the FLSA merely because, under a consistently designated workweek, its employees earn fewer hours of overtime than they would if the workweek was more favorably aligned with their work schedules.” The court found the FLSA requires that “the starting date remain constant and that the employees not work more than 40 hours within the 168 hour week without receiving overtime compensation. After noting that it is “aware of no contrary authority,” the court held that “the FLSA does not prescribe how an employer must initially establish its ‘workweek’ for overtime purposes.”

Going further, the Eighth Circuit then held that the FLSA does not limit an employer’s ability to change an existing workweek designation so long as the change is intended to be permanent. Federal regulations provide that: “The beginning of the workweek may be changed if the change is intended to be permanent and is not designed to evade the overtime requirements of the Act.” The court found that no employees had contested the permanence, but rather argued that Redland had changed the workweek to evade the FLSA’s overtime requirement. The court disagreed that there was any such “intent” requirement in the FLSA, reasoning that contemporary authority holds that reducing payroll expenses through a reduction in overtime is not contrary to the FLSA’s purposes. The court explained that an employer can make scheduling changes to avoid overtime and still comport with the FLSA. Thus, the Eighth Circuit concluded that “[s]o long as the change is intended to be permanent, and it is implemented in accordance with the FLSA, the employer’s reasons for adopting the change are irrelevant.”

While the Eighth Circuit’s decision is illustrative on how at least one circuit court interprets the FLSA regulations, it is important to note that the result might be different under state law. In Seymore v. Metson Marine, Inc., a California Court of Appeal evaluated a similar situation under the California Labor Code and determined that employers may designate a workweek that differs from the schedules of their employees if the reason for the modified worksheet has a bona fide business reason “which does not include the primary objective of avoiding the obligations of overtime.”

The Eighth Circuit specifically referenced the analysis from Seymore and noted that that decision was premised on California law, which is more protective than the FLSA. The Eighth Circuit was quick to point out that the FLSA analysis by the Seymore court “was wrong.” The Eighth Circuit’s not-so-subtle language presents a cautionary tale for all wage and hour practitioners: avoid conflating the federal law controlling the application and interpretation of the FLSA with the state law that controls similar state wage and hour laws.

Photo credit: Matthew John Hollinshead

In light of the Circuit split, the U.S. Supreme Court granted review of the Seventh Circuit’s decision in Kasten v. Saint-Gobain Performance Plastics Corp., and has now issued its opinion.

The Kasten case involved an unwritten, oral complaint to the employer, thus implicating both issues (1) and (2) above. Kevin Kasten worked at a Saint-Gobain manufacturing plant in Wisconsin. Kasten claimed that on several occasions he complained to his supervisors and a Human Resources generalist that the location of the time clocks was illegal because it prevented employees from being paid for time spent donning and doffing their required protective gear, and said that he might file a lawsuit. After frequently being warned about not recording his comings and goings on the time clock, Kasten was terminated. He sued Saint-Gobain, claiming that his employment was terminated in retaliation for his complaints in violation of the FLSA. The Western District of Wisconsin dismissed Kasten’s case, holding that unwritten, oral complaints are not protected activity under the FLSA’s anti-retaliation provision. The Seventh Circuit affirmed, holding that while internal complaints to an employer are protected under the FLSA, such complaints must be in writing because the term “filed” implies a writing. The court thus affirmed the dismissal of Kasten’s complaint.

In light of the circuit split surrounding the interpretation of the phrase “filed any complaint,” the Supreme Court granted review. The Court vacated the Seventh Circuit’s decision, holding that unwritten, oral complaints are protected. Justice Breyer (joined by Justices Roberts, Kennedy, Ginsburg, Alito and Sotomayor, with Kagan not taking part) held that while the meaning of the phrase “filed any complaint” was ambiguous, considering the purpose and context of the statute, it should be interpreted to include unwritten, oral complaints. The Court reasoned that excluding oral complaints would: (1) undermine the FLSA’s enforcement scheme as the anti-retaliation provision enables employees to report substandard conditions without fear of economic retaliation, (2) disadvantage those with difficulty making requests in writing such as the illiterate, less educated and/or overworked, (3) prevent government agencies from using hotlines, interviews and other oral methods of receiving complaints, and (4) discourage private employers from using informal workplace grievance procedures to secure compliance.

In order to ensure fair notice to the employer, the Court held that the phrase “filed any complaint” contemplates “some degree of formality, certainly to the point where the recipient has been given fair notice that a grievance has been lodged and does, or should, reasonably understand the matter as part of its business concerns.” The Court articulated the following standard: a complaint is “filed” when “a reasonable, objective person would have understood the employee to have put the employer on notice that the employee is asserting statutory rights under the Act.” The complaint “must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both the content and context, as an assertion of rights protected by the statute and a call for their protection.”

Surprisingly, the Court declined to comment on whether the FLSA protected only complaints filed with the government or whether complaints to an employer are also protected. The Court reasoned that, while the issue was addressed by the Seventh Circuit, it was not raised by the Company in its opposition to Kasten’s petition for certiorari and there was no need to resolve it in order to decide the oral/written issue. In his dissent, Justice Scalia (joined by Thomas) criticized the majority’s approach, noting that the issue was fairly encompassed within the Company’s opposition to the petition for certiorari, and would have been more logically addressed first. Justice Scalia would have affirmed the dismissal of the complaint on the ground that the plain meaning of “filed any complaint” and its context make clear that the anti-retaliation provision contemplated an official grievance filed with a court or agency, not oral or written complaints to an employer. Thus, the circuit split on whether a complaint must be filed with the government to be protected remains. However, employers are cautioned to tread carefully and be mindful that a majority of the circuit courts have extended the FLSA’s protection to internal company complaints.

A vacation or sick leave buy-back program typically affords an employee the opportunity to cash-out his or her unused vacation or sick leave benefits. Such programs incentivize employees to work rather than take unnecessary vacation or sick leave (in order to retain the pay benefits). Employers also utilize these programs to save on the cost of overtime and per-diem workers. In Chavez, the City’s employees were subject to such a vacation and sick leave buy-back program. However, when the City would determine its employees’ overtime rate by calculating the employees’ regular rate to include “straight time” and add-on payments, it did not include vacation or sick leave buy-backs.

In its analysis, the Tenth Circuit first noted that pay for vacation and sick leave actually taken is not part of the FLSA’s regular rate calculation. Regarding the issue that arises when an employee works instead of taking his of her vacation or sick leave day, the court agreed with the Department of Labor’s position on the matter – vacation buy-back is not part of the regular rate, but sick leave buy-back is. According to the Department, vacation leave pay should not be included in the regular rate because it is not compensation for actual work, whereas sick leave pay should be included in the regular rate because it is analogous to an attendance bonus.

There is somewhat of a circuit split as to whether sick leave buy-backs should be included in the regular rate. For instance, the Sixth Circuit has held that sick leave buy-backs should not be included because “awards for nonuse of sick leave are similar to payments made when no work is performed due to illness...” Featsent v. City of Youngstown, 70 F.3d 900, 905 (6th Cir. 1995). Thus, Chavez represents the Tenth Circuit’s split from the Sixth Circuit, and joining with the Eighth Circuit and Department of Labor, in holding that sick leave buy-backs should indeed be included in an employer’s calculation of the FLSA regular rate.

This entry was written by Milton Castro.

Image credit: scherbet