BLOGS: Fair Labor Standards Act Law

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Wednesday, June 25, 2008, 11:41 AM

Judge Takes Steam Out of Case Against Starbucks

As we have reported, Starbucks, the Seattle coffee giant, has continued to be hit with numerous lawsuits filed by employees and former employees alleging violations of various wage and hour laws. In a case filed by two employees in California, a United States District Court Judge denied class certification and granted summary judgment in favor of Starbucks, providing Starbucks with its first reprieve in quite a while. Roya Koike and Adam Odnert, both employed as assistant managers at Starbucks locations in California, filed claims seeking class certification alleging Starbucks failed to pay them for "off the clock" work in violation of the California wage and hour laws.

The Court granted Starbucks' motion for summary judgment and dismissed Odnert's claims in their entirety. Odnert argued that Starbucks misrepresented the proper legal standard the Court should apply when determining whether an employer is liable for “off the clock” work. He argued that the standard required "an employee to be compensated for all time spent subject to the control of the employer or when the employee is suffered or permitted to work . . . It does not matter under California law whether or not the employer knows that the employee has properly recorded all of his or her working time." The Court found that Odnert's argument was not valid and that he misunderstood California law. In order to prove a violation of wage and hour laws, Odnert must prove that Starbucks knew or should have known that he was performing work for which he was not being compensated. The Court found that the words "suffer" and "permit" as used in the California statute mean “with the knowledge of the employer." (This is the same interpretation given to the words "suffer" and "permit" under the Fair Labor Standards Act.)

Odnert failed to submit evidence that Starbucks knew or should have known of his "off the clock" work. In fact, Odnert's deposition testimony supported that he usually attempted to conceal his "off the clock" work from other Starbucks employees. Furthermore, while Odnert claimed he would work prior to clocking in, the evidence showed that on numerous occasions, he was disciplined for being tardy, a direct contradiction to his claim of pre-shift "off the clock" work. Odnert also received overtime nearly every pay period. For these reasons, the Court found that Odnert put forth little more than speculation and conjecture that Starbucks had knowledge of his alleged "off the clock work." As no genuine issue of material fact existed with regard to his claims, the Court dismissed Odnert's claims. As Odnert could not state a claim on his own, his motion for class certification was also denied.

Koike also filed a motion for a class certification which was denied by the court. Koike made very general statements regarding the reasons assistant managers felt compelled to work "off the clock," but did not offer any evidence that a single assistant store manager had actually worked "off the clock." Koike was not able to establish that common issues predominated since her allegations required individual determinations. Therefore, she could not establish the prerequisites for class certification and her motion was denied.

To read more of this opinion, click here.

Tuesday, June 24, 2008, 10:55 AM

Pharmaceutical Companies Make the News Again for FLSA Suits by Drug Reps

Another week means another decision from the Southern District of New York affecting FLSA suits by former pharmaceutical representatives against their employers! Like the recent Amendola decision, the federal judge in Coultrip et al. v. Pfizer, Inc., case number 06-9952, was not persuaded by Pfizer's argument that the drug reps could never establish an entitlement to overtime pay because of the outside sales exemption, but the judge was also unwilling to rule that the defense raised by Pfizer should be struck in the action.

The end result of this new decision is that pharmaceutical companies and their counsel will have more decisions and opinions to review, distinguish and track in the coming months. Take a look at our recent client alert on this topic, by clicking here.

Wednesday, June 18, 2008, 5:12 PM

No Accounting for Litigation

To be more precise, there's litigation for accounting firms, and Pricewaterhouse Coopers is feeling the heat of union pressure in the form of a website created by Unite Here, the mega-union formed through the merger of the Amalgamated Clothing and Textile Workers and the Hotel and Restaurant Employees. At issue is Campbell v. Pricewaterhouse Coopers, a certified class action pending in the Eastern District of California (2:06-CV-02376) , brought on behalf of "all associates" in PWC's Attest Division who worked at any of the six Attest offices in California between October 27, 2002 and the present. Plaintiffs' theory is that the associates - unlicensed accountants - have been misclassified as exempt. The presiding judge, Lawrence K. Karlton, granted certification last March, but refused to allow the two named plaintiffs to fish in a larger pond, saying that the plaintiffs knew nothing about "what associates in other divisions do."

Why the union cares remains a mystery, although union involvement in wage-hour litigation is a regularly-occurring phenomenon; just ask Wal-Mart, Smithfield Foods and the poultry industry, to name three examples. At any rate, the union - which may know no more about the matter tahn the plaintiffs know about the rest of PWC's operations - characterizes the employer as maintaining a "white-collar sweatshop" where excessive hours are worked without overtime pay. While we hesitate to dignify this with a republication, we'll let you draw your own conclusions.

Tuesday, June 17, 2008, 2:18 PM

FLSA Suits by Drug Reps Face a New Challenge, Maybe They Aren't Outside Salespeople, But They May Be Exempt Administrative Employees!

The United States District Court for the Southern District of New York has recently ruled against a pharmaceutical rep plaintiff Beth Amendola's quest to notify other reps of her pending FLSA suit against pharmaceutical giant Bristol-Myers Squibb Co. ("BMS") because the court found that it appeared that drug sales reps may fall under the administrative employee exemption of the FLSA.

Amendola worked as a pharmaceutical rep for BMS for 8 years. During her time with BMS, Ms. Amendola's principal job duty involved encouraging provider to prescribe BMS products to patients and appropriately distribute drug samples. She was supplied with a list of drugs to promote and a list of medical providers to visit by BMS. Her promotion of BMS products was principally through customized presentations based in part on data provided by BMS about the particular providers prescription habits and practice needs. She visited the providers during the day, preparing for each visit the night before.

By June 2007, Ms. Amendola had enough of her schedule and filed suit against BMS alleging BMS failed to pay her overtime wages for her hours over 40 per week. As part of the discovery of this suit, Ms. Amendola collected information for 350 pharmaceutical representatives and then wished to send notice to them of her lawsuit. The court found such notice was not appropriate under its interpretation of the FLSA's exemptions.

In a mixed bag, the court rejected a commonly offered exemption's applicability to drug reps, while the court offered Big Pharma hope for the applicability of another exemption, the administrative exemption. The court found that the outside sales exemption did not apply to BMS drug reps principally because the reps' promotion of the BMS products did not involve the "sale" of goods or services or the use of purchase orders to sell products. However, the court reasoned that the administrative exemption well apply to drug reps in much the same way that the exemption was held to apply to "medical detailists" for drug companies in a 1945 DOL opinion letter [click here for the text of the 1945 opinion letter]. The applicability of this exemption, as noted previously in this blog, depends on the employee's ability to independently exercise judgment and discretion in his or her job. Because of the likelihood that BMS would succeed in arguing the applicability of the administrative exemption, the court refused Ms. Amendola's request to give notice.

Challenging the outside salesperson exemption for drug reps was a topic of this blog previously on March 27, 2008, and can be read by clicking here.

Tuesday, June 10, 2008, 4:00 PM

Child Labor Penalties Increased By Genetic Information Nondiscrimination Act

The Genetic Information Nondiscrimination Act included an amendment to the FLSA increasing the penalties for child labor violations. The amendment, which became effective immediately on May 21, 2008, increases the penalty for child labor law violations resulting in death or serious injury to employees under the age of 18 in the workplace. Under the amendment, the maximum penalty is $50,000 for each violation; however, the penalty may be doubled to a maximum of $100,000 if the violation is repeated or willful.

For purposes of the FLSA, "serious injury" is defined as the permanent loss or substantial impairment of one of the senses; permanent loss or substantial impairment of the function of a bodily member, organ or mental faculty, including the loss of all or part of an arm, leg, foot, hand or other body part; or permanent paralysis or substantial impairment that causes loss of movement or mobility of an arm, leg, foot, hand or other body part.

The FLSA amendment also raised the civil penalty for other violations of the child labor laws from $10,000 per employee to $11,000 and increased the maximum penalty for willful violations of the overtime and minimum wage provisions to $1,100 per violation.

Third Circuit Revives Paramedics Overtime Claims

On Wednesday, May 28, 2008, the U.S. Court of Appeals for the Third Circuit held that Philadelphia Fire Service Paramedics ("FSPs") do not possess "legal authority and responsibility for fire suppression activities" sufficient to exempt them from the FLSA's time-and-a-half payment requirement. The decision in Lawrence v. City of Philadelphia, which reversed a September 29, 2006, summary judgment entered in favor of the City of Philadelphia by the District Court for the Eastern District of Pennsylvania, ended a five-year feud between approximately 300 FSPs and the City.

The dispute began in July, 2003, when several FSPs filed suit against the City alleging that it had violated §207(a) of the FLSA by failing to compensate them time-and-a-half for those hours worked over 40. The City claimed that the FSPs were exempt from the mandatory payment requirement because they were engaged in "fire protection activities" and according to §207(k) of the FLSA, public agencies are exempt from paying employees who are engaged in such activities the higher overtime rate. The FSPs argued to the contrary, pointing to their Mission Statement and their official job description, neither of which refer to any fire protection or suppression role.

Despite attending the City's Fire Academy and receiving instruction in fire suppression, hazardous-materials, and emergency fire protocols, the Third Circuit held that the FSPs do not satisfy §203(y)'s definition of "fire protection activities." Writing for the majority, Judge Solviter stated that, "An FSP's assistance in moving hose line in an emergency situation does not make the FSP legally responsible for fire suppression. Such minor assistance is not the 'role' or required duty of an FSP and therefore does not fall within the meaning of the term 'responsibility'."

The court's recent decision highlights two important aspects of the FLSA. First, it demonstrates how courts frequently interpret the Act broadly and in favor of protecting employees. Second, it serves as a reminder that not all employees are subject to FLSA protections, some are exempt because of the nature of their profession.

Thursday, June 5, 2008, 9:01 AM

Domino’s pizza delivery drivers in New York win (a slice of) their motion for preliminary class certification

Domino’s pizza delivery drivers at a Coney Island store prevailed in part in their effort to obtain preliminary FLSA class certification in federal court. The drivers contended that they were deprived of wages and overtime as a result of, among other things, store managers “editing” the drivers’ time records to reduce their hours, and requiring them to work off the clock. The plaintiffs sought preliminary class certification for the drivers at the Coney Island store where they worked, as well as those of five other Brooklyn area stores.

The U.S. District Court for the Eastern District of New York granted the preliminary certification as to the Coney Island store drivers. However, the court denied the motion as to the other Brooklyn areas stores. The court concluded that plaintiffs had provided only “thin factual support” and hearsay statements to support extending the certification to "hundreds" of employees at the other stores.

The case is Laroque v. Domino’s Pizza, LLC, No. 06-CV 6387.

Tuesday, June 3, 2008, 5:02 PM

Retaliation for Informal Activity

Robin Hagan, a field service manager in Houston for satellite television company Echostar, expressed concerns when the company announced a new schedule for service technicians including the small group he supervised. Although there was no guarantee of overtime work, some of the group wanted to know if the change was "legal," and Hagan referred them to the HR manager but didn't stay around to hear the discussion. Five days later, Hagan's immediate supervisor met with him to discuss his poor work performance, also criticizing the way Hagan had explained the schedule change to his technicians. The next day, Hagan was fired. The reason given was poor performance, but the HR manager, who was also present for the meeting, took Hagan to task for his handling of the schedule adjustment. Although the only reason on the termination notice was "lack of work performance," Echostar later added insubordination as a contributing factor.

Hagan sued, claiming only that he had been the victim of retaliation for engaging in protected activity. After a four-day trial, the jury was hopelessly deadlocked and a mistrial was declared. The trial judge then granted Echostar's motion for a judgment as a matter of law and dismissed Hagan's claims; he appealed to the US Court of Appeals for the Fifth Circuit.

The issue before the court was simple: whether or not Hagan's conduct constituted "filing a complaint" under the Fair Labor Standards Act so as to confer protected status on him. Since the trial judge had used three alternative tests in making that determination, the appellate court addressed each:

1. The Informal Complaint Rule. Even an informal internal complaint may constitute protected activity. Although "abstract grumblings" or "vague expressions of discontent" are not enough to meet this standard, any informal complaint which concerns some believed violation of the law is enough. But since Hagan didn't think the change was illegal, his conduct wasn't protected.

2. "Stepping Outside the Role." As a manager, Hagan was not concerned with alleged FLSA violations unless he was advocating the rights of those who had those issues. Passing along a complaint is the sort of thing managers do, and Hagan neither acted as a spokesperson or actively took any position at all.

3. "Good Faith." Hagan didn't express any belief that Echostar was in violation of the law. Under some circumstances, a reasonable belief in that regard may earn statutory protection even if the belief turns out to be wrong. Hagan failed that test, and the Fifth Circuit found it unnecessary to discuss the subject at all.

In short: While the Fifth Circuit joined the majority of US appellate jurisdictions in accepting the notion of informal internal complaints as protected activity, Hagan lost anyway because nothing he did rose to the level required for a retaliation claim.

Robin Hagan v. Echostar Satellite, L.L.C. & Echosphere L.L.C...
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