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

In contrast, in 2007, in Long Island Care at Home, Ltd, v. Evelyn Coke, the U.S. Supreme Court held that Fair Labor Standards Act (FLSA) regulations exempted home care agencies from having to pay overtime to its employees who worked in clients' homes. The Pennsylvania Supreme Court, however, rejected Bayada’s argument that it should be subject to the exemption standards under the FLSA, not Pennsylvania Minimum Wage law.

The decision means that, in Pennsylvania, home health agencies must now pay overtime to aides who work more than 40 hours in a workweek. The decision also has broader implications for any employer relying on the domestic services exemption. To come within the domestic services exemption: (1) the worker must be providing domestic services in or about a private home; and (2) the work must be performed in the home of the employer, not a third party. Employers in the state should carefully review their overtime exemptions and be sure that they are not erroneously relying on FLSA provisions where there are differing Pennsylvania requirements.

This entry was written by Thomas Benjamin Huggett.
 

Labor Code section 512 prohibits employers from requiring an employee to work more than five hours per day without providing a meal period, or ten hours per day without providing a second meal period.

AB 569, signed by Governor Schwarzenegger on September 30, 2010, creates a potential exemption from these requirements for commercial drivers and employees in the utilities, security and construction industries, instead allowing them to negotiate mutually agreeable meal period rules through the collective bargaining process.

The new law defines a “commercial driver” for purposes of the exemption as “an employee who operates a vehicle described in Section 260 or 462 of, or subdivision (b) of Section 15210 of, the Vehicle Code.”

Security guards are also exempted from the meal period requirements of Labor Code section 512. The exclusion applies to “[a]n employee employed in the security services industry as a security officer who is registered pursuant to Chapter 11.5 (commencing with Section 7580) of Division 3 of the Business and Professions Code, and who is employed by a private patrol operator registered pursuant to that chapter.”

The law similarly covers employees in a construction occupation, which includes work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, and repair, and any other similar or related occupation or trade. Finally, the law includes employees of electrical and gas corporations or local publicly owned electric utilities, as defined in Section 218 and 222 of the California Public Utilities Code.

Employees in these occupations/industries will fall within this new exemption if they meet the following requirements:

1. the employee is covered by a valid collective bargaining agreement;
2. his collective bargaining agreement expressly provides for wages, hours of work, working conditions, meal periods, final and binding arbitration of disputes concerning application of the CBA’s meal period provisions, and premium wage rates for all overtime hours worked; and
3. the employee’s regular hourly rate of pay of not less than 30 percent more than the state minimum wage rate (currently $10.40/hour based on a minimum wage of $8.00/hour).  

Assuming AB 569 goes into effect, California employers engaged in collective bargaining negotiations will be empowered to negotiate meal periods that fit the particular needs, demands and realities of their industry. The new statute also potentially puts a powerful tool in the hands of many unionized employers who have been swept up in the wave of litigation brought by unionized employees who claim meal period violations despite receiving meal periods that are consistent with their collective bargaining agreements. We can expect further litigation over the extent to which this new law affects ongoing litigation or cases extending back before the law becomes effective.

This entry was written by Kevin Lilly and Gregory Wong.

Image credit: skodonnell

The plaintiffs requested the court take judicial notice of six state and federal court decisions which granted motions for class certification, and the defendant requested the court take judicial notice of two federal court cases denying class certification. The court granted the requests, but ultimately relied on two different federal court decisions: Vinole v. Countrywide Home Loans, 571 F.3d 935 (9th Cir. 2009) and In re Wells Fargo Home Mortgage, 571 F.3d 953 (9th Cir. 2009). In Vinole, the appellant sought to represent a class of external home loan consultants on the basis that the class was misclassified as exempt under the outside sales exemption. In Wells Fargo, the appellants were home mortgage consultants who claimed they were misclassified as administrative and outside salespersons.

In both cases, the Ninth Circuit court found that denial of class certification was proper because individual, not common, issues were likely to predominate. The court specifically noted that the issue as to an employee’s exempt or non-exempt status requires an individualized analysis of the way each employee actually spends his/her time, and not simply a review of the employer’s job description. Likewise, the court concluded that a defendant’s uniform exemption policy may not be used to satisfy predominance. The fact that an employer may classify a group of employees as exempt does not warrant a rule in favor of class certification given the necessity for individualized analyses.

In this case, the plaintiffs attempted to establish predominance by relying on the defendant’s staffing models and requirements for the position. The court noted that while the defendant’s staffing models and job requirements may prove susceptible to common proof, they do not establish predominance. Even if the defendant had some expectation based on staffing models as to how the branch managers would perform their daily tasks, the court concluded that this does not nullify the need for individualized inquiries as to how the branch managers actually spent their time. Citing Wells Fargo, the court noted that in wage and hour disputes where a defendant claims exemptions, like the administrative and outside salesperson exemptions, individualized inquiries about the actual hours worked, percentage of exempt versus non-exempt work performed, particular job experiences, and other inquiries are critical.

The court also pointed out that the plaintiffs’ own arguments weighed against class certification. The plaintiffs contended that the defendant had no expectation as to how branch managers met their goals, treated them as owners of their individual branches, and gave them nearly limitless discretion as to how to achieve company goals. The court noted that with substantial discretion as to how to operate one’s branch comes the likelihood of substantial differences—rather than common proof—as to how each purported class member spends his/her workday. Because the staffing models were recommendations as to how branch managers should perform their tasks and they were given nearly limitless discretion, the court concluded that individual issues are likely to predominate. Having failed to meet their burden under Rule 23(b), the plaintiffs’ motion for class certification was denied.

This blog entry was written by Michele Z. Stevenson.

In Collins, drivers working for a wholesale importer and distributor of wine picked up the wine from its employer’s warehouse in Chicago and delivered the wine to retail stores in Chicago and other areas of Illinois. Although the employees never made deliveries outside of Illinois, their employer controlled the wine from the time its independent contractors picked up the wine from the state or country of origin until the time its drivers (the plaintiffs) ultimately delivered the wine to a retail outlet in Illinois. The wine did not undergo any alteration on its trip from the vineyard to a retail store, nor was it subject to any processing, deliberate aging, adding of preservatives, or re-labeling. Rather, “[w]hen the wine arrives at the warehouse, it is taken off the shrink-wrapped pallets on which it is delivered and shelved in the warehouse, period.”

In concluding that the drivers were engaged in interstate commerce bringing them within the Motor Carrier Act exemption from overtime, the Seventh Circuit found that the drivers’ delivery of wine exclusively within Illinois amounted to the last segment of an uninterrupted single interstate shipment originating from the locations where the wine had been produced. According to the Seventh Circuit:

“It seems to us that when a shipper transports his product across state lines for sale by him to customers in the destination state, and the product undergoes no alteration during its journey to the shipper’s customer, and interruptions in the journey that occur in the destination state are no more than the normal stops or stages that are common in interstate sales, such as temporary warehousing, the entire journey should be regarded as having taken place in interstate commerce within the meaning of the Motor Carrier Act’s exemption from the [FLSA]."

As a result, the court affirmed the district court's holding that the drivers were engaged in interstate commerce and, therefore, exempt from overtime under the FLSA.

While at first blush the decision in Collins appears to be favorable to employers, the Seventh Circuit’s conclusion that the drivers were engaged in interstate commerce was limited to the facts before it. Accordingly, employers with drivers who deliver goods within a single state must evaluate the overall process for delivery of goods from start to finish before concluding that the Motor Carrier Act exemption applies.

This entry was written by Jennifer L. Mora.

Photo credit: MobiusDaXter
 

California

A November 3, 2009 California Division of Labor Standards Enforcement (DLSE) memo indicated that the overtime exemption rates for licensed physicians and surgeons, and computer software employees in California will remain unchanged for the period beginning January 1, 2010.

Also, an August 19, 2009 DLSE opinion letter withdrew a 2002 opinion letter that precluded partial week furloughs of exempt employees, and in the process conformed California law on furloughing exempt employees to federal law. For more information, please see our previous entry and ASAP.

Illinois

HB 3634, effective August 14, 2009, amended Illinois’ Equal Pay Act and now requires that an employer preserve personnel records for a specified period of time. Additionally, an action to collect a wage claim must be brought within one year from the date of underpayment.

New York

SB 3357, effective October 26, 2009, requires that employers provide employees with written notice at the time of hire of their regular and overtime hourly wage rates, and to obtain a written acknowledgement of receipt of this notice. Although no particular form is required, the New York Department of Labor has created a form that employers can use to ensure compliance.

New Jersey

New Jersey Administrative Code § 12:55-2.1 was amended, effective September 21, 2009, to permit employers to withhold or divert a portion of an employee's wages for health club membership fees or for child care service. The deduction must be authorized either in writing by the employee, or under a collective bargaining agreement. For more information, please see our previous entry.

Under the FLSA, compensation for overtime need not be provided to “any employee...in the capacity as an outside salesperson.” 29 U.S.C. § 213(a)(1). To qualify as an outside salesperson, (1) the employee’s “primary duty” must be “making sales” or “obtaining orders or contracts,” and (2) he or she must customarily and regularly be engaged away from the employer’s place of business in performing such duty. 29 C.F.R § 541.500(a). Both parties agreed that PSRs met the second requirement, so the only disputed issue was whether their primary duty was making sales.

The FLSA defines sales as “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 29 U.S.C. § 203(k). Moreover, sales include “the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.” 29 C.F.R. § 541.501(b). Whether an employee makes sales requires an objective analysis, and according to the U.S. Department of Labor (DOL) making sales includes “obtain[ing] a commitment to buy from the customer,” which resulted in the salesperson being “credited with the sale.” U.S. Department of Labor, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed. Reg. 22122, 22162 (Apr. 23, 2004). According to the court, under the DOL regulations, there is no requirement that commitments be binding. All that is required is that a sale be made “in some sense.”

In Christopher, the PSRs argued that they did not make sales because they did not consummate transactions or take orders. Instead, they claimed they merely promoted products. Moreover, PSRs contended their activities did not constitute sales because the U.S. Food and Drug Administration expressly prohibited pharmaceutical companies from selling directly to physicians or patients. According to the PSRs, sales only occurred between the pharmaceutical company and wholesalers.

The court noted that opinions differed among the federal courts whether PSRs made sales. A federal court in Connecticut concluded that PSRs did not qualify for the exemption because they could not sell, and physicians could not buy, products. Ruggeri v. Boehringer Ingelheim Pharms., Inc., 585 F. Supp. 2d 254, 268 (D. Conn. 2008). However, a court in New York held that PSRs were exempt because they were credited with sales when physicians wrote prescriptions. In re Novartis Wage & Hour Litigation, 593 F. Supp. 2d 637, 648 (S.D.N.Y. 2009) (on appeal to the United States Court of Appeals for the Second Circuit). To determine whether PSRs qualified as outside salespeople, the court in Christopher looked to the rationale behind the outside sales exemption and also examined the position in the context of the pharmaceutical industry.

According to the court, the characteristics of PSRs justified exemption. PSRs were compensated well above the federal minimum wage (up to $100,000 per year), received fringe benefits like incentive bonuses in lieu of overtime, were unsupervised, and had better opportunities for advancement than non-exempt employees. Additionally, the kind of work they performed was “difficult to standardize to any time frame and could not be easily spread to other workers after 40 hours in a week, making compliance with overtime provisions difficult.” (quoting U.S. Department of Labor, 69 Fed. Reg. at 22124.)

The court observed that although the FLSA was enacted prior to the development of the pharmaceutical sales industry, it was intentionally broad to “address a multiplicity of industries found in the national economy and accordingly provide flexibility in the definition of a ‘sale.’” Moreover, the industry’s unique nature, i.e., the prohibition of direct sales, shifted the focus of sales efforts from the consumer to the physician, thereby making “[a] PSR’s ultimate goal [the] close [of] an encounter with a physician by obtaining a non-binding commitment from the physician to prescribe the PSR’s assigned product.” PSRs worked longer and irregular hours to generate sales in their territory for which they received compensation in the form of bonuses. The court concluded that PSRs “plainly and unmistakably fit within the terms of the exemption” because they engaged in “the functional equivalent of an outside salesperson and to hold otherwise is to ignore reality in favor of form over substance.”

The exempt status of pharmaceutical sales representatives continues to be litigated in courts across the country, and the issue is not settled. In the Novartis appeal referenced above, the U.S. Department of Labor filed an amicus brief arguing that pharmaceutical sales representatives do not qualify for the “outside sales” exemption. 

This entry was written by Robert Pritchard.

¹ Note: In the decision, SmithKlineBeecham is spelled as SmithKleinBeecham, which is an error.

Image credit: Alan Smithee