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The employees principally argued that Section 203(o) was inapplicable because the union did not “affirmatively” bargain away potential compensable donning and doffing time during negotiations and, therefore, the company could not have a “custom or practice under a bona fide collective bargaining agreement.” In particular, the employees relied on Kassa v. Kerry, Inc., 487 F. Supp. 2d 1063 (D. Minn. 2007), where the court “identified three elements as essential to determine the existence of a ‘custom or practice‘ under § 203 (o): time, knowledge, and acquiescence.” In Kassa, the district court found that the employer’s custom and practice did not meet these requirements because the record only established non-payment by the company for six years. In contrast, in Allen, the company had not compensated its employees for changing time since 1965. Moreover, the court noted that the employees knew that they were not being compensated for that time, and whether they were aware of their legal rights under the FLSA was not a relevant consideration. Consequently, the court affirmed summary judgment.

The court also rejected the employees’ contention that Section 203(o) should be characterized as an “exemption” under the FLSA, thereby shifting the burden of proof to the employer to establish the exemption as an affirmative defense.. The court reasoned that Section 203 “is a list of definitions and subsection (o) addresses how to define and calculate ‘hours worked,’ in contrast to Section 213, which is titled ‘Exemptions.’”

The Fifth Circuit is now in accord with the Third and Eleventh Circuits, which also have concluded that it is not necessary to raise the issue of compensation for donning and doffing time in negotiations. Anderson v. Cagle's, Inc., 488 F.3d 945, 958-59 (11th Cir. 2007); Turner v. City of Philadelphia, 262 F.3d 222, 226 (3rd Cir. 2001). Notably, only the Ninth Circuit has characterized Section 203(o) as an exemption. See Alvarez v. IBP, Inc., 339 F.3d 894, 905 (9th Cir. 2003), aff’d on other grounds, IBP, Inc. v. Alvarez, 546 U.S. 21 (2005); cf. Anderson, 488 F.3d at 957.

This entry was written by Steven Kaplan.

The employees were required to wear steel-toe shoes, a smock, plastic apron, safety glasses, ear plugs, bump cap, hair net, rubber gloves and sleeves, and arm shields. In addition to donning and doffing these items at the beginning and end of each work day, employees were also required to sanitize their gear by dipping their gloves into a tank, splashing the liquid solutions onto their aprons, and stepping through a footbath before and after working and during extended breaks. The company had a long standing practice of paying its employees for time on the production line only.

In 2002, the union proposed that its members be paid for twelve minutes of donning and doffing time per day. The company rejected the union’s offer and continued to pay its employees for production line work only. In 2007, three production employees filed a putative collective action in which they were joined by approximately 250 current and former production workers.

The employees argued that Section 203(o) was inapplicable because the items were not “clothes” and the act of donning and doffing them was not “changing.” For example, they argued that “clothes” encompassed “regular undergarments and outerwear,” i.e., street clothes, and excluded protective safety items in the workplace. The court found the employees’ “cramped” and “narrow” definition of “clothes” and “changing” unpersuasive, reasoning that the purpose behind Section 203(a) was to leave such donning and doffing activities to the collective-bargaining process.

The court noted that Congress recognized that employers and unions are in a better position than either courts or agencies to “thresh out” how much compensable time should be allocated for “changing clothes.” Additionally, the court observed that collective bargaining allows employers and unions to reach agreements that leave both sides more satisfied than a government or court-imposed solution and that unions may be willing to trade higher wages, enhanced benefits, or improved working conditions in exchange for compensation for changing clothes. Notably, in stark contrast to this decision, the Ninth Circuit reached a different result in Alvarez v. IBP, Inc., 339 F.3d 894 (9th Cir. 2003), aff’d on other grounds, 546 U.S. 21 (2005), holding that protective items worn in the beef and pork industries are not “clothes” within the meaning of Section 203(o).

This entry was written by Steven Kaplan.

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.

If this decision is upheld and/or adopted by state courts in California or elsewhere, staffing companies may face claims for unpaid wages for time spent by their employees interviewing with their clients for assignments. Unless a staffing company can show that its employees are not under their control in connection with the interview process or that they do not "suffer or permit" such activity by their employees, they will face potential liability, at least minimum wage, for the time the employee's spend interviewing. This could result in staffing companies not allowing, or limiting, the ability of candidates to interview with clients in advance of the commencement of assignments, or require staffing companies to increase the rates charged to its customers for this added expense.

For an in-depth discussion and guidance on this development, see Littler ASAP, "Staffing Companies Face Potential Exposure for Interview Time."

This entry was written by Michael McCabe.

The court’s decision is comprised of two separate findings. First, the court found that the drivers’ intrastate transportation was a part of the “practical continuity of movement” that resulted in the recyclable material crossing state lines between the point of origin and the point of destination. The plaintiffs argued that the continuity of movement was interrupted when the recyclable materials were processed, which took place in Indiana. The court found otherwise. Crucial to the court’s finding was the fact that the recyclable material at issue—unlike the meat scraps at issue in Goldberg v. Faber Indus., Inc., 291 F.2d 232 (7th Cir. 1961)–was not transformed to a new good when it was processed. The court also relied on Bilyou v. Dutchess Beer Distributors, Inc., 300 F.3d 217 (2d Cir. 2002) (delivery drivers who collected empty beer bottles for recycling center that sold recycled glass to clients out-of-state were exempt under Motor Carrier exemption). Additionally, the court found relevant the policy of the Interstate Commerce Commission (ICC) that the practical continuity of movement is not interrupted by repackaging or reconfiguring, but may be interrupted where a good is substantially modified. Finding that the recyclable materials that the plaintiffs transported were not substantially modified, the court held that the practical continuity of movement was uninterrupted.

Second, the court found that the defendants had a fixed and persisting intent to ship a majority of the recyclables that the plaintiffs transported to out-of-state destinations. Again, the court looked to the ICC. The ICC policy provides that a fixed and persisting intent may exist where a shipper has a factual basis for projecting out-of-state sales. The defendants sold more than 50% of the recyclable material transported by the plaintiffs to out-of-state recipients that executed advance purchase agreements. These facts led the court to conclude that the defendants had the necessary fixed and persisting intent.

The intrastate activities of the plaintiffs were part of a practical continuity of movement across state lines and the defendants had a fixed and persisting intent to ship the recyclables in interstate commerce when the shipment began. Consequently, the plaintiffs’ intrastate activities constituted participation in interstate commerce as required by the Motor Carrier Act exemption to the FLSA. The plaintiffs were therefore not entitled to damages under the FLSA.

This entry was written by Brian Mosby.

Under the California Constitution, a chartered city is exempt from general state laws where its local laws conflict with the general state law over a purely municipal affair, unless the state law is a matter of statewide concern. California Federal Savings and Loan Association v. City of Los Angeles (1991) 54 Cal.3d 1. In City of Vista, the Court of Appeal reviewed the many exceptions and caveats to California’s prevailing wage law and ruled that California’s prevailing wage law does not address matters of “statewide concern.” The court held that the limitations and exceptions to the prevailing wage law “persuade us that municipal public works projects do not have such an extramural dimension as would warrant legislative intervention in an otherwise strictly municipal affair.” This decision was reached over the dissent of one justice. The dissent reached the conclusion that the prevailing wage law was of “statewide concern” and that chartered cities are not exempt from the prevailing wage law. It is likely that one of the losing parties will petition for review at the Supreme Court and it would not be surprising to see the California Supreme Court grant review and address the issue that it avoided in the City of Long Beach case.

This blog entry was authored by Stephen C. Tedesco.

Arizona:

• New minimum wage $7.25 per hour.

Colorado:

• New minimum wage $7.28 per hour. 
• Tipped employees must be paid at least $4.26 an hour starting on January 1, 2009, and tips plus cash wages must equal at least $7.28 an hour.

Connecticut:

• New minimum wage $8.00 per hour.

Florida:

• New minimum wage $7.21 per hour.
• Tipped employees must be paid a direct wage equal to the minimum wage of $7.21 minus $3.02 (the tip credit under the federal Fair Labor Standards Act), or $4.19 per hour effective January 1, 2009.
• State minimum wage will increase again effective on July 24, 2009, when the federal minimum wage increases to $7.25, employers must pay the higher federal minimum wage.

Missouri:

• New minimum wage $7.05 per hour.
• Tipped employees must be paid by their employer at least 50% of the minimum wage rate and tips plus cash wages must equal at least $7.05 per hour as of January 1, 2009.
• Effective July 24, 2009 the federal minimum wage will be $7.25, and employers must pay the higher federal minimum wage.

Montana:

• New minimum wage $6.90 per hour.
• State law prohibits employers from using tips as a credit against the minimum wage owed the employee.
• State minimum wage will increase again effective on July 24, 2009, when the federal minimum wage increases to $7.25, employers must pay the higher federal minimum wage.

New Mexico:

• New minimum wage $7.50 per hour.

Oregon:

• New minimum wage $8.40 per hour.

Vermont:

• New minimum wage $8.06 per hour.
• Tipped employees must be paid at least $3.91 per hour, and cash wages plus tips must equal at least $8.06 per hour. If they do not, the employer is required to make up the difference. 

Washington:

• New minimum wage $8.55 per hour.
• Washington law prohibits employers from using tips as a credit against the minimum wage owed the employee. 

This blog entry was authored by Stacey James.

The court of appeal reversed the punitive damages award on two grounds. First, the court held that the Labor Code statutes regulating pay stubs (§ 226), minimum wages (§ 1197.1), meal breaks (§ 512) and rest breaks all create new rights and obligations not previously existing in the common law. Those statutes also established detailed remedial schemes for the rights they created. Accordingly, the court concluded that those Labor Code provisions fell within the long-standing “new right-exclusive remedy” doctrine, which provides that “where a statute creates new rights and obligations not previously existing in the common law, the express statutory remedy is deemed to be the exclusive remedy available for statutory violations, unless it is inadequate.” The plaintiff did not raise, and the court did not address, the question of under what circumstances a statutory remedy would be deemed inadequate. 

The court also noted that punitive damages are ordinarily limited to actions “for the breach of an obligation not arising from contract.” Although the plaintiff’s claims for unpaid wages, failure to provide meal/rest breaks and improper wage statements were all based upon statutory provisions, the statutory provisions apply only when the parties have entered into an employment contract and are therefore obligations “arising from the employment contract.” Accordingly, the court viewed the defendant’s violation of the Labor Code provisions as a breach of obligations arising from its employment contract with the plaintiff for which punitive damages were not available.

The good news for employers is that the court’s reasoning can be applied to a wide variety of Labor Code provisions, many of which apply only in the context of the employment relationship. 

Marlene Muraco authored this blog entry.

The Court held that California’s overtime laws apply to nonresident employees for those periods of time that the employees worked in California. The Court reasoned that California clearly intended its labor laws to apply to work done in California by nonresidents. 

The Court rejected the employer’s due process arguments, reasoning that the company had a sufficient presence in the state such that it could be required to comply with California law. The Court noted that principles of due process require “significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.” In this case, the Court held that the employer had sufficient contacts with California (including that its headquarters and principal place of business were in California).

The one bright spot for employers was the Court’s holding that California’s Unfair Competition Law did not apply to acts based on alleged federal wage law violations that occur outside of the state.

Following the Court’s decision, multi-state employers who conduct business in California will have to determine whether they have a sufficient presence in California to require them to comply with that state’s Labor Code with respect to nonresidents who temporarily work in the state. Since California law is considerably more strict than federal law and the law of most other states with regard to the classification of employees as exempt or nonexempt, the right to receive daily overtime, and the provision of meal and rest breaks, among other things, the Sullivan decision could prove to be an administrative burden for employers whose employees are assigned to work on a temporary basis in California.

UPDATE: Following this decision, both parties submitted Petitions for Rehearing En Banc to the Ninth Circuit.  On December 5, 2008, the Court ordered both parties to file a response to the other’s Petition. 

Tami Falkenstein-Hennick authored this blog entry.