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The plaintiff then allegedly spent the remaining amount of time performing other tasks in preparation for the beginning of her subordinates’ shifts. At her deposition, the plaintiff claimed that it would have been “a hassle” to show up at 5 am and still get her subordinates prepared in time for the beginning of their shifts which also began at 5 am. However, the plaintiff never told her supervisors, who would typically arrive 2-3 hours after her, that she was clocking in early or performing any pre-shift work. She also never requested overtime for this work, reported any errors on her paycheck relating to the same nor disclosed at any meetings with her supervisors that her schedule needed to be adjusted to accommodate this work.

The plaintiff later resigned, then sued Summit, claiming unpaid overtime wages under the Fair Labor Standards Act (FLSA). The district court, however, found that the plaintiff’s pre-shift activities were noncompensable, “preliminary” activities under the Portal-to-Portal Act of 1947. The Portal-to-Portal Act, which amended the FLSA, holds that employers cannot be held liable "on account of . . . activities which are preliminary to or postliminary to [principal activities,] which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal [activities]."¹ Accordingly, the district court granted summary judgment in favor of the defendant, which the plaintiff appealed to the 7th Circuit.

On appeal, the 7th Circuit looked as if it would overturn the district court’s holding. First, the court found that the plaintiff’s pre-shift work was actually non-preliminary. The court based this finding, among other things, on the fact that the defendant apparently derived significant benefits from the plaintiff’s pre-shift preparations. Next, the court found that the “de minimis” doctrine did not apply to the plaintiff’s pre-shift work. Under this doctrine, the current consensus among the courts is that a few seconds or minutes of work beyond an employee’s scheduled working hours can be disregarded, when in dispute, even though such time would otherwise be considered compensable. The court noted, though, that the plaintiff had alleged pre-shift time of 15-45 minutes (excluding the 5-minute break), which goes beyond the well-known 10-minute rule-of-thumb. Because the defendant could not point to any caselaw that had found pre-shift time more than 10 minutes in length to be “de minimis,” the court rejected the doctrine’s applicability.

Despite these findings, however, the court ultimately held that the plaintiff’s pre-shift time was not compensable because she failed to show that her supervisors had actual or even constructive knowledge of her overtime work. First, the court noted how the plaintiff conceded that most employees who clocked in early did not perform work until their shift began. Next, the court noted that the plaintiff's behavior did not raise any red flags. For instance, the plaintiff did not record her pre-shift time – rather she consistently indicated on her time cards that she arrived at the beginning of her shift, not before it. Moreover, she attended weekly meetings with her supervisors in which schedules were discussed, but never disclosed that she had worked pre-shift time or complained about the same. In sum, the supervisors had no reason to know that she had worked unpaid overtime. Thus, the court affirmed the lower court’s dismissal of the plaintiff’s FLSA claim.²

Although this case does represent a win for the employer, it is important to note that the 7th Circuit did not side with employers on the “preliminary” argument or the de minimis doctrine. Instead, the employer prevailed only because it did not have actual or constructive knowledge of the employee’s off-the-clock work. Based on these considerations, employers should keep the following in mind:

• A timekeeping system should be comprehensive and accurate. All employees should be trained upon hire regarding how the timekeeping system works.
• If an employee complains to a supervisor about having to work a few minutes before and/or after his or her scheduled shift, it is likely that this will be considered notice such that the pre- or post-shift work time may be compensable under the FLSA.
• Work performed by an employee that is integral and indispensible to his or her principal work, or the principal work of others, such as distributing materials or readying a workstation, is likely not “preliminary” work and thus may be compensable under the FLSA.

¹ 29 U.S.C. § 254(a) (emphasis added).

² The court also affirmed dismissal of the plaintiff’s Indiana Wage Payment Statute claim for the same reasons.

Photo credit: mbbirdy

In affirming the lower court’s decision in favor of the employer, the Seventh Circuit rejected the plaintiff’s claims that her primary duty was not “the performance of office or non-manual work directly related to the management or general business operations of the employer of the employer’s customers,” specifically noting that the Department of Labor’s regulations provide that an employee’s work may be directly related to a “customer’s business,” thus satisfying the primary duty requirement.

Indeed, the court noted that the plaintiff is “a picture perfect example of a worker for whom the Act’s overtime provision is not intended” because she performed duties such as serving as the intermediary between employees of advertising agencies and the software developers at MediaBank, training staff in the use of software, answering questions from customers, and showing the customer how to implement those answers in MediaBank software.

In summary, the plaintiff’s primary duty was to identify customers’ needs, translate them into specifications to be implemented by the developers, and assist the customers in implementing the solutions. The court found that these tasks constituted work exempt from the FLSA overtime provisions pursuant to the administrative exemption.

Photo credit: Chagin-art

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.

Plaintiffs have urged courts to reject the “half time” method in favor of the so-called “time and a half” method, which results in much larger damages awards. The “time and a half” method divides the employee’s weekly salary by a fixed number of hours (typically 40) to determine a fixed weekly regular rate. The employee is then awarded 1.5 times that rate for all hours worked each week in excess of that fixed number.

While some district courts have accepted plaintiffs’ arguments in favor of the “time and a half” method, the Supreme Court’s decision not to disrupt the Seventh Circuit’s endorsement of the “half time” method was not surprising. Four other circuit courts and the U.S. Department of Labor have approved the “half time” method, and no circuit court has taken a contrary position. See Desmond v. PNGI Charles Town Gaming, LLC, 2011 U.S. App. LEXIS 702 (4th Cir. Jan. 14, 2011); Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir. 2008); Valerio v. Putnam Assocs., Inc., 173 F.3d 35 (1st Cir. 1999); Blackmon v. Brookshire Grocery Co., 835 F.2d 1135 (5th Cir. 1988); Wage and Hour Opinion Letter, FLSA 2009-3 (Jan. 14, 2009).

This entry was written by Robert W. Pritchard.

The U.S. District Court for the Northern District of Illinois, Eastern Division, granted conditional certification on the plaintiffs’ FLSA claims, but then denied the plaintiffs Fed. R. Civ. P. 23(b)(3) certification on their supplemental state-law claims based on the court’s finding that FLSA collective actions and state law class actions cannot be litigated together. The court reasoned that the plaintiffs could not satisfy Fed. R. Civ. P. 23(b)(3)’s superiority requirement because the FLSA collective action was now certified and proceeding. According to the court, allowing both types of actions to proceed would mean that some of the individuals included as part of the state-law classes (those who did nothing) would be excluded from the FLSA collective action (for failing to opt-in). The court thought that such a result would undermine congressional intent as expressed in the FLSA.

On appeal, the Seventh Circuit disagreed. First, the court found no categorical rule or case law against certifying a state-law class action in the same proceeding as an FLSA collective action. In addition, the court pointed to the familiar savings clause in the FLSA which states that no provision of the FLSA shall excuse non-compliance with any federal or state law establishing a higher minimum wage or a shorter maximum workweek. In other words, both FLSA collective actions and state-law class actions can peacefully co-exist in the same lawsuit.

On the issue of how to notify potential class members when both types of representative actions are certified (thus requiring opt-in and opt-out notices), the court acknowledged how the potential for confusion was a valid case-management consideration under Rule 23(b)(3)(D), but nonetheless failed to see how this notice problem was “any worse” than numerous other problems district courts face in managing class actions. According to the court:

It does not seem like too much to require potential participants to make two binary choices: (1) decide whether to opt in and participate in the federal action; (2) decide whether to opt out and not participate in the state-law claims.

Finally, the court noted that if an FLSA collective action were allowed to proceed separately in federal court while the state-law class action proceeded in state court, the situation would be much worse as the two courts would send uncoordinated notices to the putative classes. As a general rule, the court explained, it is preferable to have notice issued from a single court and in a unified proceeding.

This entry was written by Milton Castro.

Courtney Gordon, the Plaintiff-Appellant, was hired under this agreement, and resigned after only one year of service. On the day of Gordon’s resignation, the City informed her it was entitled to recover $6,400 (eighty percent of $8,000) in training costs. Accordingly, the City withheld income from Gordon’s final paycheck, but only in partial satisfaction of Gordon’s debt. As a result, Gordon received at least minimum wage income in her final paycheck, but was still accountable to the City for the remaining balance of her training costs.

Gordon then filed a class action lawsuit, seeking damages and declaratory relief under the Fair Labor Standards Act (“FLSA”), 42 U.S.C. § 1983, and various California state laws. At issue was whether the City’s paycheck deduction for training cost reimbursement constituted a “kickback” in violation of FLSA regulations (29 C.F.R. § 531.35: “The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer ... the whole or part of the wage delivered to the employee.”). The district court found that because Gordon’s paycheck still exceeded the minimum wage, despite the deduction, the City’s reimbursement demand did not violate the FLSA. The Ninth Circuit Court of Appeals affirmed.

Gordon is significant because it marks the latest Circuit Court of Appeals to uphold a training cost reimbursement agreement under the FLSA. Following the Seventh Circuit’s reasoning in Heder v. City of Two Rivers, Wisconsin, 295 F.3d 777, 781-82 (7th Cir. 2002), the Ninth Circuit called the City’s reimbursement agreement “a voluntarily accepted loan, not a kick-back.” Thus, the court explained, the cost of the training was a loan the City made to its officers, repayment of which was forgiven after five years of employment. And as long as the City paid its departing officers at least the statutory minimum wage, it could collect the training costs as any other ordinary creditor could, without violating the FLSA.

This entry was written by Milton Castro.

Kevin Kasten worked at a Saint-Gobain manufacturing plant in Wisconsin. He was issued three warnings for failing to properly clock in and out, and was suspended and then terminated in connection with a fourth incident. He claimed that at the time of his warnings and suspension, he told 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 suggested to one supervisor that he might file a lawsuit. Following his termination, 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 the case, holding that unwritten oral complaints are not protected activity under the FLSA’s anti-retaliation provision. The Seventh Circuit Court of Appeals affirmed. The Seventh Circuit first held that “the plain language of the statute indicates that internal, intra-company complaints are protected,” based on the use of the word “any” before “complaint,” joining the majority of Circuit Courts that have considered the issue. 570 F.3d at 838.¹ However, the court then reasoned that the use of the term “filed” implies a writing and held that unwritten oral internal complaints are not protected activity under the FLSA. 570 F.3d at 839. The court rejected the argument made by Kasten and the Secretary of Labor in an amicus brief that “filed” should be interpreted as “to submit.” Id. The court also reasoned that when Congress wants to protect retaliation more broadly, it knows how to do so, for example in Title VII, which prohibits retaliation because one has “opposed any practice.” 570 F.3d at 840. The court thus affirmed the dismissal of the Complaint.

The Supreme Court granted review to address the Circuit split on the interpretation of “filed any complaint.” At oral argument today the Court did not allow much in the way of argument, peppering the attorneys with hypotheticals, and hinting at several possible outcomes:

• Several Justices raised the possibility that the Court could hold that internal complaints are not protected at all, siding with the minority of Circuit Courts on that issue.
• If internal complaints can constitute protected activity, Justice Ginsburg credited the argument that every other time the word “file” is used in the FLSA, it refers to a writing and allowing oral internal complaints would deviate from the standard meaning of the term in the statute at issue. This would be a reason to affirm the Seventh Circuit’s decision, holding that only written internal complaints are protected.
• If internal oral complaints can constitute protected activity, the Justices asked the parties to identify a standard to qualify an oral complaint as protected activity. They used the example of an oral complaint to a supervisor at a cocktail party and seemed uncomfortable with the possibility that this could be protected activity. Justices Alito and Sotomayor probed whether “filed any complaint” may incorporate whatever complaint procedures the company has. Alternatively, Justice Breyer focused on the extent of the formality of the complaint, expressing a concern that a tap on the shoulder raising a complaint could go unnoticed by a supervisor. In response, an objective standard was proposed: “whether a reasonable person would have understood the employee to have submitted a complaint.”

In sum, it appears that if the Court allows internal oral complaints to qualify as protected activity, it is likely to impose a standard that ensures that employers have sufficient notice of the complaint. Stay tuned!

This entry was written by Martha Keon.
 

¹ But see Ball v. Memphis Bar-B-Q, Co., Inc., 28 F.3d 360, 364 (4th Cir. 2000) (the FLSA’s “statutory language clearly places limits on the range of retaliation proscribed by the act.”); Lambert v. Genesee Hosp., 10 F.3d 46, 55 (2d Cir. 1993) (The plain language of this provision limits the cause of action to retaliation for filing formal complaints, instituting a proceeding, or testifying, but does not encompass complaints made to a supervisor”).

Outside Sales

Noting that the FLSA regulations define “an ‘outside salesperson’ as an employee (1) whose ‘primary duty’ consists of ‘making sales’ or ‘obtaining orders or contracts for
services’ and (2) who is ‘customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty,’” and “primary duty” to be the “principal, main, major, or most important duty that the employee performs,” the Seventh Circuit found that the undisputed facts showed that the plaintiff’s primary duty was outside sales.

In reaching this decision, the Seventh Circuit noted that the plaintiff spent four to eight hours a day outside of the office making in-person sales calls. She came into the office on only about half of her workdays and even when in the office, the plaintiff spent much of her time on work relating to sales. The plaintiff maintained a database of customers, which formed the basis for her collections and commission payments. The Seventh Circuit found that this work related directly to her outside sales work and was therefore itself exempt work. Similarly, the plaintiff spent about ten hours a week developing marketing plans and performing promotional work, and an additional five to six hours promoting the company outside of the office, including at chamber of commerce meetings. Aside from the plaintiff, only the company’s president made direct sales; therefore, the Seventh Circuit found that most of the “fruits” of the plaintiff’s promotional efforts were realized in her own sales. As a result, the Seventh Circuit concluded that the additional hours the plaintiff spent performing this promotional work also counted as exempt outside sales work.

“Combination exemption”

The Seventh Circuit also agreed with the district court that even if the plaintiff did not qualify for the outside sales exemption, she qualified as exempt under the FLSA’s “combination exemption.” Under this exemption, employees “who perform a combination of exempt duties” set forth in the regulations for the outside sales and administrative exemptions may be exempt from the FLSA. The Seventh Circuit found that to the extent the plaintiff’s work was not related to outside sales, it was primarily exempt administrative work. Specifically, the Seventh Circuit viewed the plaintiff’s work developing advertising and marketing plans, managing customer complaints, administering the customer database, and dealing with issues during the president’s absence that the president would have dealt with if he was in the office (e.g., approving orders of parts for broken machinery), as work directly related to the management and general operations of the company.

Rejecting the plaintiff’s argument that the president (her sole supervisor) micromanaged her work, the Seventh Circuit found persuasive that the plaintiff negotiated with customers over price and service credits, placed advertisements, created marketing campaigns, collected from accounts, and set her own schedule.

This entry was written by Theresa Waugh.