On January 9, Hilda Solis abruptly resigned from her post as the Secretary of Labor. Solis presided over one of the most pro-labor periods of the Department of Labor’s history, and no one expects things to change in President Obama’s second term. Solis had deep ties to organized labor, and it is likely that her replacement will have a similar background. Simply, if you are hoping for a person with a business background to be elevated to the post, you will almost certainly be out of luck.
The Department of Labor has been working on a number of controversial regulations which are likely to gain speed in a second administration. One of the most controversial would be a “right to know” regulation, requiring employers to provide a classification analysis to workers advising them of the reasons they were classified as either employee or independent contractor. Obviously, such an analysis would be a goldmine of information for plaintiff’s lawyers to use to sue employers who are alleged to have incorrectly analyzed an employee’s duties. In the last four years, Solis has stepped up enforcement of wage and hour laws by creating a referral system for complainants to a network of plaintiff’s lawyers, and offering an “App” for employees to keep their own time records for use in litigation.
This week, one of Cozen’s clients, Genesis Healthcare, argued before the Supreme Court that employees who are fully compensated for a wage and hour claim should have no right to proceed with a collective action. This case is an important one as it could serve as a vehicle for the Supreme Court to rein in the out of control wage and hour litigation clogging federal courts.
The basic facts are that an employee sued her employer for alleged unpaid work time during lunch breaks. The employer offered to fully compensate the employee for what she claimed she was owed, but the employee refused to accept the payment, choosing instead to pursue a collective action. Justice Breyer best summed up the question facing the court:
“How does that differ from an employee who says — he is annoyed for a variety of reasons at the employer and he sues the employer for his pay, for his pay for the month of October. The employer says: He got his pay; I — I sent him the check; I mean, he gets it every month. And he says: Yes, but I didn’t cash the check.”
Although it is impossible to predict what the Supreme Court might do in this case, the oral arguments seemed to suggest that several Justices are considering taking the common sense view that a court should not proceed with a lawsuit if the plaintiff has been made whole for her losses, and that the courts should not be in the business of stirring up collective action lawsuits. Such a ruling would be beneficial to employers as it would allow an opportunity to settle cases before other employees are solicited to join, and settlement becomes prohibitively expensive.
A decision from the Supreme Court is expected sometime in the Spring.
With the hurricane hitting the East Coast and creating havoc for businesses trying to rebuild as quickly as possible, it is important to remember that there are no emergency exceptions to wage and hour laws. When a company goes into crisis mode, it is important to maintain the normal safeguards and policies that ensure the proper calculation of work time and payment of overtime.
The following are a few tips to avoid the common mistakes and pitfalls that employers face during these difficult times:
- Employers are only obliged to pay non-exempt workers for actual hours worked. If weather shuts down their place of employment, the employer is typically not required to pay any wages, absent a contractual agreement. Exempt employees, however, must be paid for their entire work week if they perform any work during the week and they are prevented from working because of no fault of their own (i.e. the business is closed because of weather).
- Consider allowing or requiring employees to use vacation or other accrued time for weather related absences. Absent a contract or conflicting state laws, an employer typically has flexibility in this area as long as the policy is applied consistently.
- Non-exempt employees working from home must be paid. Similarly, non-exempt employees who perform out of the ordinary tasks for the benefit of the employer (like cleanup or repairs) must be paid. An employee typically cannot volunteer to perform work for the benefit of his or her own employer.
- Many states have deadlines for providing paychecks to employees. There may be exceptions for emergencies, but some are more rigid. If you have other branches which are operational, consider having checks processed or mailed from other sites to avoid delays.
One of the areas of wage and hour law which often creates confusion is payment for travel time. The rules are different, for example, depending on how long the employee is away from home, and whether the employee is driving or taking public transportation. The below list provides a set of helpful practical rules that are gleaned directly from the Department of Labor’s fact sheet on the subject.
- Ordinary travel between home and work is not compensable time, even if the work location changes periodically within the same commuting area.
- If an employee is traveling to a different city (outside normal commute) and back again in one day, you must compensate the employee for all travel time during that day.
- If an employee arrives at any work location, and then travels to another site as part of their work duties, the travel must be counted as work time.
- Travel that keeps an employee away from home overnight is treated differently. The employer must normally only pay for travel time which occurs during normal work hours (even if on a weekend).
- Keep in mind that the above rule for overnight travel only applies if the employee travels as a passenger. If the employee drives himself, or any coworkers, consult your legal counsel on whether the trip is compensable.
Lastly, keep in mind that the Department of Labor does not have a hard and fast rule on the dividing line between a “long commute” and “travel.” The agency and courts look at what is reasonable. For example, giving an employee an assignment in a distant suburb of a metropolitan area is likely not considered travel, but asking a rural employee to travel 50-60 miles to another town may be travel (even if the trip between towns is quicker because of traffic). Also, never forget that state laws may be more expansive than federal law in this area, and legal counsel should always be consulted before drafting any policies in this area.
There has long been some uncertainty in the law over the validity of a private release of wage and hour claims under the Fair Labor Standards Act (FLSA). Most Courts have required that a settlement be approved by the Department of Labor or a federal court to be valid. The reason for such a harsh rule is to prevent unscrupulous employers from pressuring employees into waiving their substantive rights to minimum wage and overtime. In practice, however, this rule has made it difficult to have a full release from a departing employee (as wage claims cannot be included) and led to most settlements in litigation being filed with the court (which destroys confidentiality).
In Martin v. Spring Break ’83 Productions LLC, No 11-30671 (July 24, 2012), the Court found that a settlement agreement between an employer and a union, which resolved a dispute over unpaid wages, was enforceable. The Fifth Circuit explained that its holding was limited to a circumstance, such as this one, where there was a bonafide dispute over how much time the employees actually worked. In other words, both sides agreed that the employees should be paid overtime at the statutory rate, but the question was how many hours the employees worked. The Court concluded that there was no substantive waiver of legal rights and the employees’ interests were adequately protected by their union.
From a practical standpoint, there should be no substantive difference between a union settling an employee’s claim and a lawyer. Both would presumably afford sufficient representation of the employee to ensure a settlement is fair. Therefore, this opinion is likely to be construed to allow private settlements of FLSA claims between private parties represented by counsel. One important takeaway, however, is that this decision will not apply to some categories of FLSA claims. A dispute over off the clock work should be covered by this decision (since the facts are in dispute not the legal rights of the employee) but a dispute over an overtime exemption would not (since the employee would be waiving a right to overtime).
The Supreme Court has agreed to review a decision out of the Third Circuit, Genesis Health Care Corp. v. Symczyk, 656 F.3d 189 (3rd Cir. 2011), where the court held that an employee may proceed with a collective action under the FLSA despite rejecting a Rule 68 Offer of Judgment which would have made the plaintiff whole. The employer argued that the offer resolved the case and, without a controversy, the case is moot and should be dismissed. The court, however, decided that to allow such a tactic would effectively prevent collective actions from getting off the ground as the employer would just “pick off” each plaintiff before a motion to certify could be granted.
This case could give the Supreme Court an opportunity to dramatically reduce wage and hour litigation by making it harder to initiate a collective action. This case is one to watch in the next term.
In what can only be called a refreshing display of common sense, the Supreme Court ruled 5-4 that pharmaceutical representatives are exempt outside salespeople. For those not following the case, the difficulty in analyzing such representatives under the exemption arises because the reps don’t actually sell anything because prescriptions must be written by a doctor. The facts showed, however, that the reps made sales calls and were paid commissions based on the sales of the drugs within their territories, just like salespeople.
Perhaps the most important and far reaching part of the decision is the rejection of the Department of Labor’s hypertechnical analysis of the term “sale” as being non-binding, and instead focusing on the practical reality that these employees are outside sales people for all intents and purposes. The majority summed up its opinion as follows: “Our point is that, when an entire industry is constrained by law or regulation from selling its products in the ordinary manner, an employee who functions in all relevant respects as an outside salesman should not be excluded from that category based on technicalities.” The Court even went so far as to note that pharmaceutical reps have been treated as outside salespeople for 40 years without any intervention or concern from the Department of Labor, which suggests that the practice was lawful.
The takeaway from the case is that the Supreme Court is trying to push the lower courts to close the floodgates on these overtime cases, many of which are based on nothing more than creative legal arguments as opposed to legitimate violations of the law. Highly paid white collar employees are in no way “wronged” by being paid a salary, even if a technical argument can be made as to why their job description does not match a duties test which was crafted by Congress 75 years ago. Hopefully, the lower courts will get the message.
One of the hot issues in the courts is whether an employer can require its employees to sign an arbitration agreement which waives the right to bring a class or collective action. Obviously, such agreements, if valid, would be a game changer in fighting back against the increasing tide of wage and hour litigation. Even if an employer is not a big fan of arbitration generally, one would presumably be able to tailor a limited arbitration agreement for wage and hour claims, which would effectively eliminate the risk of class actions in this area.
In the Fifth Circuit Court of Appeals, the case to watch is DR Horton, where the homebuilder is appealing an NLRB decision finding that such waivers violate the National Labor Relations Act. The homebuilder filed its opening brief last week arguing that the NLRA only protects employee rights to collectively assert legal rights in bargaining and not a non-waivable right to invoke class procedures in the adjudication of those claims under other statutes. Basically, the argument is that the NLRB overstepped its authority in attempting to regulate the procedures for how employees pursue claims under completely unrelated statutes. If DR Horton prevails in this case, it will remove one of the last remaining hurdles in enforcing class action waivers, as the Supreme Court has already ruled that such waivers are allowed under the Federal Arbitration Act (Concepcion v. AT&T Mobility LLC, 131 S.Ct 740 (2011)), which trumps state law.
On a related note, a California appeals court (not the most employer friendly of jurisdictions), ruled last week that class action waivers are valid and that California precedent contrary to the Concepcion ruling had been overruled by the Supreme Court. See Iskanian v. CLS Transportation. The California court likewise rebuffed the NLRB’s controversial DR Horton decision (noted above) and had no trouble finding that the waiver was lawful and not in violation of public policy. Obviously, this case will be appealed to the California Supreme Court, but it is a good sign that these types of waivers just might be the solution that employers have been looking for in this area.
Last week, Judge Buchwald of the United States District Court for the Southern District of New York dismissed an EEOC case against the Port Authority for alleged Equal Pay Act violations related to pay disparities between male and female lawyers working at the Authority. In the decision, Judge Buchwald chided the EEOC for making cursory allegations that all of the nonsupervisory attorneys performed “equal work.” The decision notes that “the jobs need not be identical, but they also may not simply be comparable.” The EEOC’s pleadings failed to adequately plead that all of the lawyers at the Authority, at varying levels of skill and experience, had jobs which were “substantially equal in skill, effort and responsibility,” a requirement for a claim under the Equal Pay Act.
This case is a good example of the difficulties in bringing a claim under the Equal Pay Act, unless the comparators are in lockstep positions with the exact same responsibilities and duties. Here, the EEOC argued that lawyers all must pass the bar exam, and perform roughly the same duties, hence are equal. Not surprisingly, the court easily rejected such an elementary analysis, which would be laughable to anyone who has ever practiced law in a corporate law department or firm. The court concluded: “It strains credulity to argue that the Port Authority, which does not set wages based on a lockstep scale, does not factor into its pay decisions the kind and quality of work its attorneys perform.”
It is good to see a common sense decision in what was clearly a reach by the EEOC. That said, one takeaway from this case is that the EEOC may not look very hard into distinguishing skill sets and experience within job classifications in analyzing equal pay cases. To avoid litigation altogether, employers may want to consider relying on different titles or levels (such as “senior ” or “lead”) to justify significant disparities in pay between workers performing similar work.
IT professionals are some of the more challenging employees to classify under the FLSA. For example, the Computer Professional Exemption is highly technical and not friendly to lay people or juries. The Administrative Exemption also may apply in some cases, however, there is very little legal authority outlining the exact nature of the computer related duties which would meet this exemption.
Last week, Jennifer Cooper and Nelsy Gómez in my office successfully tried a case in Houston where an IT professional claimed he was wrongfully denied overtime. The job duties are, of course, case specific, but the employee’s primary duty was managing access to various networks and software systems for a large healthcare provider, in addition to working on special IT projects, troubleshooting and systems analysis. For comparison purposes, the employee was above a “help desk” level, but not a programmer or coder. Since these cases rarely go to trial, we thought it would be appropriate to share a few takeaways from the jury’s reaction to the evidence:
- The jury in this case found the employee to be covered under the Administrative exemption and never even made it to the Computer Professional exemption (once the jury finds one exemption it’s over). If nothing else, this case shows the importance of deciding the best order for the questions to submit to the jury as the employer will likely want to submit the strongest exemption first.
- Although many employers seek to avoid trying cases involving technical employees because of the difficulty for a jury to understand the job duties, this problem actually cuts both ways. Most technical jobs (like IT) inherently sound complicated to a lay person, and it can be difficult for a plaintiff to describe the duties in such a simple way as to make them sound unimportant or not meeting the “discretion and independent judgment” element of the administrative exemption. A simple line of questioning as to “what happens if you make a mistake” can expose the critical importance of the job duties. For example, the true test of whether a position is exempt is not how simple it is to “push a button or click a box” but how important it is to know “when to push the button and which box to click.”
- In this case, the plaintiff led strongly with an argument that he was “cheated out of overtime.” This argument did not play well once the jury was told that the plaintiff earned in excess of $75,000. Further, upon cross examination, the plaintiff admitted that he was paid the same even if he was late to work or left early on a Friday afternoon. By closing argument, it was the employer who appeared to have been cheated, not the employee.
In sum, there is something to be said for more employers standing up to the never ending wave of wage and hour litigation. These cases may not be as tough to try to a jury as conventional wisdom might suggest. A good lawyer does not hurt either …