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

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.

With this announcement, Secretary Solis promised, "America's workers should rest assured that protecting worker rights is a top priority at the Department of Labor." Her press release warned, "[t]here is no excuse for employers who disregard federal labor standards--especially those that are designed to protect the most vulnerable in the workplace."

Broad Investigative Powers

The Department's Wage and Hour Division investigates allegations that employers failed to pay minimum wage or overtime, as well as alleged misclassification of employees as exempt or independent contractors.¹ DOL investigations can be triggered by complaints from employees, unions, or competitors, and routine audits also can be performed, often focusing on a particular industry or type of employer.

The Department has broad investigative powers, including the power to subpoena employment records. Assuming wage and hour violations are discovered, the Department will seek a settlement. If an out-of-court agreement is not reached, the Department can sue to enjoin an employer's violation of the law as well as to compel the payment of back pay to all employees. The Department also has the power to seek reinstatement with back pay of any individual employee who was discharged for attempting to enforce the law.

Should the Department bring suit and prevail, it will recover liquidated damages equal to the unpaid wages the employer owes, unless the employer can prove that it acted in good faith with a reasonable belief that its pay practices complied with the law. Interest and attorney's fees are likely to be awarded as well, even if liquidated damages are not.

Significant Settlements

The threat of such enforcement actions can result in employers agreeing to settlements that provide significant recoveries. For instance, in July 2009, the Department announced a settlement of almost $750,000 with a convenience store chain in nine states accused of failing to properly include performance-related bonuses in the regular rate used to calculate overtime pay.

The Department also is planning a "public awareness campaign" to inform workers of their "rights," which presumably also will assist the Department in finding errant employers to investigate and prosecute.

Wake-Up Call

The federal government's increased manpower and desire to enforce federal labor standards should be a wake up call to United States employers to ensure that their procedures and practices comply with federal labor laws.

Audits conducted by or through counsel can catch technical problems with pay practices, recordkeeping, and employee classification that can be corrected to reduce exposure. Training of managers in employment laws such as when overtime is required can avoid violations caused by managers' ignorance of legal obligations.

These proactive steps can save employers the expense and embarrassment of reacting to a government investigation or a costly class action.

This entry was written by Alison Hightower.

¹ The Wage and Hour Division also governs the hours and conditions for employment of children under 16 years old and it enforces the labor standards provisions of the Immigration and Nationality Act (INA) that apply to aliens authorized to work in the U.S. under certain nonimmigrant visa programs.

In the second letter (FLSA2008-17), the DOL concluded that a school district’s Certified Occupational Therapist Assistants (COTAs), who assist occupational therapists in providing therapeutic educational programs for students, are not exempt from the minimum wage and overtime requirements. The DOL reasoned that (1) the 60-credit certification program required to become a COTA does not qualify as “a prolonged course of specialized intellectual instruction” under the professional exemption; (2) COTAs specifically do not meet the DOL’s definition of a “registered or certified medical technologist” under the same exemption; and (3) COTAs do not qualify for the administrative exemption for educational institutions because their jobs relate to the “health of . . . students,” and not academic instruction or training.

In the final opinion letter (FLSA2008-19), the DOL stated that store managers who otherwise satisfy the requirements of the Act's executive exemption do not lose that exemption when they participate in a seven-week training program aimed at preparing them for promotion to a similarly exempt area sales manager position. Despite the fact that the managers do not perform exempt work during some of the weeks of training, the DOL emphasized that the training does not change the character of the manager’s job as a whole – their “primary duty” under the executive exemption remains that of an exempt store manager.

This blog entry was authored by Casey Kurtz.