BLOGS: Fair Labor Standards Act Law

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Monday, October 29, 2007, 4:25 PM


"FORT LAUDERDALE, FLA. -- A south Florida labor and employment attorney is working to convince a U.S. District Court judge here that Starbucks managers are entitled to overtime pay based on the number of hours they spend performing nonmanagerial duties."

In fact, this case has been going on for more than three years. Pendlebury v. Starbucks, filed in June 2004, has consumed some 464 docket entries (separate actions and filings) in the US District Court for the Southern District of Florida. For a flavor of this litigation, consider this: Plaintiffs' counsel have served a total of seven sets of interrogatories. The court granted Starbucks' request to be relieved from answering requests for admission numbered 212 to 633. Every step of this process multiplies the defense costs - perhaps even exponentially - and also ups the ante for any settlement or judgment since the law enables successful plaintiffs' attorneys to be paid by the defendant employer. Imagine how many vente caramel lattes it will take to recoup that level of cost! (Charlie Edwards)

Information from Nation's Restaurant News

Now comes word of certification of a nationwide class action suit, alleging that Starbucks managers are owed overtime premiums under the FLSA. Judge Marra of the Southern District of Florida has certified a class of about 900 managers who allege that Starbucks improperly classified them as executives under the FLSA. The court denied Starbucks' motion to decertify the class, holding that the managers are similarly situated in most relevant respects, despite some differences in managers' influence over personnel decisions. In his ruling, Judge Marra emphasized that the FLSA is a remedial statute and should be read broadly. In particular, he noted that the importance of class actions and that class members need only be similarly situated, not identical. Music to plaintiffs' ears.

Information from Workplace Prof Blog

Case link

Thursday, October 25, 2007, 4:17 PM

Workers Can Pursue Iowa Pay Claims

Meat processing plant workers who filed a Fair Labor Standards Act collective action for unpaid wages and overtime can proceed in the same lawsuit with a class action allegation that Agriprocessors Inc. violated the Iowa Wage Payment Collection Law, a federal court in Iowa rules (Salazar v. Agriprocessors Inc., N.D. Iowa, No. 07-CV-1006-LRR, 10/22/07).

Denying the employer's motion to dismiss the state law allegations, Judge Reade of the U.S. District Court for the Northern District of Iowa says combining the state and federal allegations in the same lawsuit is appropriate and consistent with the purposes of the FLSA.

Reade finds that a lawsuit that combines the FLSA's opt-in procedure for federal claims and the opt-out process for class actions may be confusing for potential class members, but the court is "well-equipped" to handle the "unique procedural challenges." (205 DLR A-8, 2007; 205 DLR Text E-1, 2007) .

The court may believe it can explain this to the prospective plaintiffs, but from the vantage point of nearly 40 years of class action litigation, I can assert that few would-be claimants have any idea what a class notice means. The more typical class action - one in which, if the class is certified, everyone described in the class definition is included and will be bound by whatever happens - at least has the virtue of requiring little if any comprehension on the part of the individual. That's what the courts refer to as the "Book-of-the-Month Club" approach: if you don't take any action to opt out, you get whatever happens. But a Fair Labor Standards Act class is a collective proceeding, requiring those who want to try for a share of the recovery to opt in. This case will be a hybrid, with opt-outs for the state law claims and opt-ins for the federal ones. If I can't explain it any more clearly than that, I suggest the class members won't have a clue. Whatever.

Additional information from Employment Law360.

Wednesday, October 24, 2007, 9:56 AM

On the BlackBerry, On the Clock: Overtime Liability in This Connected Age

Do you or someone you know have a BlackBerry, PDA, cell phone with email or text-messaging capability, or other similar device? If so, you know how easy it can be for both employers and employees to communicate about business issues in what traditionally have been considered non-working hours.

With the increasing prevalence of this technology, the boundary between work time and non-work time is becoming more obscure and harder to define. The problem for businesses is that if non-exempt employees, who are eligible for overtime, answer business emails and calls outside of their normal work time, then they are likely performing compensable work for which they should be paid. Experience has shown that both employers and employees tend not to track and document this time, which means that the employees are not being paid for that time, or any resulting overtime.

Those emails and phone calls add up. This recent article by The New York Times reports about one non-exempt employee working for Oprah Winfrey’s production company, who submitted a time sheet documenting more than 800 hours in 17 weeks. That work amounted to $32,000 in overtime pay.

The article does a good job of outlining the situation and the potential consequences for employers—and may be a good tool to begin discussions of what practices and policies your business has in place to address these issues.

Be Careful of What You Take from Your Employees: Tipped Employee Issues Can Be Scandalous!

Scores Holding Co., Inc. has gotten into some legal trouble this month for allegedly taking part of its employees' tips and failing to follow minimum wage and overtime compensation requirements according to allegations in a proposed class action filed October 9, 2007 in the U.S. District for the Southern District of New York. Scores promoted "Diamond Dollars"--play money used to tip workers--on its website and in its club to customers. Scores processed the Diamond Dollar tips and retained a portion of the money when employees went to cash in their Diamond Dollars. Scores owns and/or operates nightclubs in New York City, Chicago, Las Vegas, and New Orleans.

The lawsuit also alleges that Scores did not pay minimum wage to its employees for all hours worked and did not pay overtime rates for hours worked over 40 hours in a week. Allegations also include Scores' failure to maintain proper time records and failure to pay or reimburse employees for the cost of uniforms and their laundering, which allegedly led to the workers making less than the minimum wage.

This proposed class action could prove to be significant for employers in the restaurant and entertainment industries who routinely face issues of how to handle minimum wage in light of tip compensation, uniform costs and maintenance, and recording hours worked. Employers of "tipped employees" are permitted to claim a tip credit against their minimum wage requirements, but employers must still pay a cash wage of at least $2.13 per hour and make up any difference between the employee's tips combined with the cash wage and the minimum hourly wage. The requirements for tipped employees can be found on the Department of Labor's website under Fact Sheet #15. Many state departments of labor have articles and guidelines on what deductions and withholdings an employer may and may not use if these reduce the employees' wage rate below the minimum wage, for examples, see the webpages for North Carolina, Georgia, and South Carolina.

Thursday, October 18, 2007, 10:29 AM

Unsupervised Notice to Potential Plaintiffs in Case against The Body Shop

In a case filed against The Body Shop, a New York District Court refused to sanction the plaintiff's attorney or strike consent forms filed by potential class members even though the court found the attorney's mass mailing to potential plaintiffs to be misleading and inaccurate. In Rubery v. Buth-Na-Bodhaige, Inc. ("The Body Shop"), another misclassification case, the plaintiff alleged that The Body Shop failed to pay its shop managers overtime in violation of the FLSA.

In an effort to find additional plaintiffs without supervision by the court, plaintiff provided her counsel with a list of shop managers she had obtained during her employment at The Body Shop. Using the list, along with publicly-available address listings, plaintiff's counsel sent letters to individuals believed to be shop managers at The Body Shop seeking participation in the case. The letter stated that the attorney had obtained the recipients names "from documents provided by The Body Shop and the Plaintiff" even though The Body Shop had never provided any such information to the Plaintiff and had specifically refused to provide such information. The attorney also enclosed an offer of judgment served by The Body Shop on Plaintiff. Although the letter contained disclaimers attempting to explain that the offer of judgment was not an admission of guilt, the enclosure of the letter was clearly intended to convince potential plaintiffs that the case had merit. The court admitted that the enclosure of the offer posted a potential danger of misleading potential plaintiffs "into believing that defendant ha[d] at least partially conceded the merits of plaintiff's case, or that the plaintiffs may reasonably expect to receive similar offers or similar damages if they join the lawsuit."

Instead of sanctioning the attorney or striking the consent forms filed as a result of the letter, the court held that the inaccuracies could be remedied by the issuance of a corrective notice in the event class certification was granted. Counsel was directed to ensure that any and all future contacts with the potential class members were "straightforward, accurate, and free of misleading omission."

The court’s decision in the Rubery case illustrates how important the initial certification stage of FLSA collective actions is and why courts should be involved in the notice to potential plaintiffs. Although the court indicated that the inaccuracies could be remedied at a later stage, the damage is already done and The Body Shop will be forced to fight an expensive discovery battle with additional plaintiffs.

Wednesday, October 17, 2007, 9:59 AM

Misclassification and Class Certification: Exposure to Potentially Higher Damage Awards

Recently, employees (assistant managers) of retailer Duane Reade asked for consolidation and class certification to adjudicate whether their job positions have been misclassified by Duane Reade to avoid overtime pay. Class certification may be appropriate when individual cases involve a common set of facts and claims. While established as a device designed to simplify large litigation, the spector of class action no longer brings simplicity to cases. Instead, defendant employers are often exposed to aggregated multimillion dollar settlements or damages awards, with plaintiffs' attorneys angling to obtain a sizable percentage of such funds. Employers must beware of the potential pitfalls of class certification and seek legal counsel in assessing threatened class actions when misclassification claims first arise.

Employees bringing misclassification claims challenge an employer's decision to classify them as "exempt" and the employees assert that their jobs were misclassified and therefore, they are entitled to overtime pay. The problem is that many times, employers don't keep good records of the time worked (as required), which results in the court accepting the employee's word as to hours worked. Industries that have been targeted for misclassification include insurance, financial services, retail, pharmaceutical, among others. We expect the trend in misclassification cases to continue to rise, along with the threat of class certification.

Thursday, October 11, 2007, 12:29 PM

The Clock And The Paycheck (BusinessWeek)

Many readers cheered workers getting their due; others lamented a litigious and indolent America

BusinessWeek provides public feedback on their cover story entitled "Wage Wars," which looked at overtime lawsuits.

Click here to read more from Business Week.

Click here to read Wage Wars (October 1, 2007).

Thursday, October 4, 2007, 9:11 AM

Off-the-Clock Work - What It Can Really Cost Employers

Employers are increasingly vulnerable to overtime claims under the Fair Labor Standards Act, as well as state wage and hour laws, for off-the-clock work performed by employees. While based on state laws not the federal FLSA (Wal-Mart entered into a $33M settlement agreement with the DOL for FLSA violations in April 2007), Pennsylvania workers who successfully proved that they did not receive overtime pay for overtime work were able to obtain a total judgment of $141M from retail giant, Wal-Mart, including $62.3M in liquidated damages for the delay in payment. Charges that employers do not pay for all the work performed plague not only the retail industry, but also is a common problem in other industries, such as the health care industry. Uncompensated so-called "off-the-clock" time frequently occurs when employers fail to pay for work performed at vulnerable times:

  • Before and after a worker's scheduled shift;

  • During an employee's scheduled meal period; and

  • While employees are attending staff meetings and compensable training sessions.

The Wal-Mart cases and other off-the-clock cases (police departments, nursing facility workers, and insurance claims investigators have high-profile class actions pending) offer a clear warning to employers to evaluate their own practices and seek legal counsel to develop clear policies and expectations in compliance with not only the FLSA, but also applicable state laws. If an overtime complaint has been raised against an employer, engagement of skilled legal counsel is critical to minimize legal exposure and protect against class action certification. For more information on wage claims that can be brought against an employer and steps to maintain compliance with wage laws, see this article.

Tuesday, October 2, 2007, 3:06 PM

Wage Wars (Business Week)

The October 1 edition of Business Week has an article which shows the landscape facing employers: Plaintiffs' attorneys are well aware of the high cost of litigation, which is magnified by the assertion of a class and the expense of electronic discovery, exacerbated by the general lack of liability insurance coverage, and made even worse by the difficulty of litigating with your current workforce. Add all this together and it becomes apparent that once litigation has commenced, the employer is playing catch-up. So if you don't want to be the first kid on your block to have one of these, it's a good idea to check this blog regularly and learn the lessons of experience in this fast-paced world. And remember: It was Business Week, not this blog, which claimed that a wage-hour plaintiff law firm can be more profitable than a brothel or a casino....

Click here to read the article.
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