Making Law and Sausage

Smithfield Foods and its subsidiary Smithfield Packing are no strangers to legal wrangles. Their long-running battle with the United Food and Commercial Workers was resolved, for the time being, by the settlement of Smithfield's racketeering suit against the UFCW: In exchange for an agreement to hold an election among the 4500 hourly employees of Smithfield's Tar Heel, NC, hog processing facility despite the union's assertions that no fair election was possible, the UFCW has dropped its "corporate campaign" against Smithfield. Specifics of the accord and the date and conditions of the election have not been disclosed.

However, that solution was tarnished by the filing of yet two more FLSA collective actions against Smithfield in eastern North Carolina. Mitchell v. Smithfield Packing targets the company's Kinston, NC processing plant, while Whitley v. Smithfield Packing focuses on a distribution facility in Clayton, NC, just east of Raleigh. The plaintiffs in both cases, represented by the same Raleigh law firm, assert they and their co-workers are not paid for time spent putting on and taking off uniforms and protective gear, as well as "pre-donning and post-doffing walking time."

Other FLSA litigation remains pending in the same court: Lewis v. Smithfield Foods, a challenge to pay practices in the company's enormous Tar Heel operation, is part of the UFCW assault on the company; 67 consents were filed today by class members who have agreed to be bound by the outcome of that case. McNeil v. Smithfield Foods, another Tar Heel-based case, was filed on February 22 of this year and has been consolidated with Lewis. Parker v. Smithfield Foods, which was commenced in October 2007, arose in a hog processing plant in Clinton, NC and remains pending following conditional certification of a class in August. At least some of the same attorneys represent the plaintiffs in all three cases. Smithfield was dismissed out of yet another case, Martinez-Hernandez v. Butterball, LLC, which deals with turkey production and processing in Wayne and Duplin Counties; trial is set for April, 2009. All of these suits challenge pay practices within a 60-mile circle south and east of Raleigh.

It's easy to see that settling cases doesn't always end problems; once you become a target defendant, the hits just keep coming.

To boot or not to boot? Only if you are paid to boot?

In September of this year, UnitedHealth Group Inc. was sued in Missouri state court by employees in a proposed collective action that alleges various wage and hour violations, including that UnitedHealth failed to pay its employees who work from home for time spent booting up their computers. For these violations the plaintiffs are seeking unpaid wages, liquidated damages, attorneys' fees and the litigation costs under the FLSA.

Last week, UnitedHealth successfully removed the case from the Circuit Court of the City of St. Louis to the U.S. District Court for the Eastern District of Missouri on diversity and federal question grounds.

In terms of specific allegations, the plaintiffs alleged that customer service representatives at UnitedHealth and other employees assigned to work from home were not paid for several tasks that were time-consuming at the start and end of each day, such as turning on and booting up their computers and the computers programs in which they worked. The plaintiff further alleged that these activities were “preparatory, integral and indispensable" to the job duties of the customer service representatives. Additionally, plaintiff asserted that customer service representatives working from home were required to complete calls that began prior to their scheduled shift-ending times, but this extra time was not compensated.

It will be interesting to learn whether booting up time for home-based workers is considered time worked under the FLSA, as well as whether the employee's hours must be extended to reflect time spent after normal hours on tasks begun before his or her shift concluded. It is never to early to assess your company's practices on telecommuting and working at home from an employment law compliance standpoint. As economic times continue to be turbulent, employees are likely to seek maximum compensation for any time spent in furtherance of an employer's business.

To read the complaint in Wolfert v. UnitedHealth Group Inc. et al., case number 4:08-cv-01643, click here.

Independence Day May Not Last

One of the most complex classification issues in the modern workplace is the question of what constitutes an "independent contractor." The most recent example of this in the FLSA context is the October 13 Fifth Circuit decision in Hopkins v. Cornerstone America (No. 07-10952). One might have thought the result would be predictable; after all, one of the plaintiffs had previously defended himself in a sexual harassment suit by contending he was an independent contractor. Nonetheless, he joined in the filing of a collective action against his employer in 2005, asserting that "sales leaders" for Cornerstone were employees entitled to overtime. The district court found that all of the other plaintiffs were employees, but dismissed the claims of the individual who had taken inconsistent positions.

Cornerstone appealed the classification ruling, while the odd man out took issue with his having been dropped from the case. Cornerstone lost both arguments. As to classification, the Court of Appeals found pervasive control of the contractors' territories, products and prices, also dictating terms of the hiring and firing of sales personnel who supported the sales effort. Such factors, said the court, rendered the sales leaders "dependent on cornerstone to such an extent that they could not plausibly be considered" to be independent businesspeople.

The dismissed plaintiff was let back into the case because the "semantic inconsistency" of his positions didn't control; one may be an independent contractor for some purposes and yet be a statutory employee under the FLSA, the Fifth Circuit held.

Independent contractor determinations arise under federal and state laws, and each of them entails a different analysis. On a related topic, on the same day as the Hopkins decision a bill was introduced in the Senate to counter independent contractor categorization in order to avoid paying employee benefits. Watch this space for "progress" on this and related issues.

How Inconvenient! 7-Eleven, Inc. Is Sued by a Former Convenience Store Employee under the FLSA for Unpaid Overtime

In a bare bones complaint, Plaintiff Julie Caserio sued her former employer, 7-Eleven, Inc., for unpaid overtime compensation stemming from her employment at a Lee County, Florida 7-Eleven Store. The complaint seeks to recover for unpaid compensation allegedly owed to Ms. Caserio, as well as to those hourly store employees who were or are similarly situated to her within the State of Florida for the past three (3) years. The complaint offers no details about the job duties performed by Ms. Caserio or those similarly situated. 7-Eleven operates 541 stores in Florida (according to its website), so a class of all hourly employees could include thousands of Florida-based employees.

7-Eleven has faced several other overtime lawsuits, including one recently settled in the Southern District of Florida and another recently voluntarily dismissed by the plaintiff in California. To read the complaint in Caserio v. 7-Eleven, Inc., case number 2:08-cv-00782, click here.

Rough Seas for Long John Silver's

The Supreme Court has refused to review Long John Silver's Restaurants, Inc. v. Cole, a Fourth Circuit decision involving arbitration of FLSA class claims under an employment contract. In a classic example of a cruise gone awry, the saga began with the filing of a claimed class action in federal district court in Nashville - Johnson v. Long John Silver's Restaurants, Inc. Kevin Johnson, who had been an Assistant General Manager and then a General Manager for LJS in Missouri over a two-year period, alleged that the company's payroll deduction restitution policy violated the FLSA because it destroyed the "salary basis" of compensation. LJS reminded Johnson of his having signed an arbitration agreement, and the court stayed the litigation until the binding effect of the agreement could be resolved. Part of the stay was a tolling agreement under which members of the alleged class didn't have to file their own claims within the FLSA statute of limitations. The district court then entered an order compelling the parties to arbitrate, 320 F.Supp.2d 656 (M.D. Tenn. 2004), and the Sixth Circuit affirmed, 2005 Fed. Appx. 0288P (2005).

Meanwhile, plaintiffs' counsel were weighing anchor in another port. Three former management employees led by Erin Cole asserted they had been denied overtime pay and instituted an arbitration proceeding in South Carolina. The arbitrator concluded that the claimants represented a true class - that is, one in which members of the certified class were bound by the arbitrator's decision unless they opted out of the case. Arguing that the arbitrator had departed from the FLSA collective action process, under which each plaintiff has to show willingness to participate and be bound by the outcome, LJS sued in US District Court in South Carolina, asking the court to vacate the arbitrator's "class determination partial final award." The court overruled LJS's petition, 409 F.Supp.2d 682 (D.S.C. 2006), and this time the company appealed. On January 28, 2008, the Fourth Circuit rejected LJS's appeal, 514 F.3d 345, saying the arbitrator acted within the authority conferred by the American Arbitration Association's "Supplementary Rules for Class Arbitrations"; accordingly, the lower court's ruling was affirmed.

The Supreme Court's denial of review on October 6 afforded no safe harbor to LJS, which will now be governed by the arbitrator's decision on the merits, with that award controlling as to all class members. The lesson? If you want to ensure that you are free from the time, trouble and expense of litigation, and think arbitration is a preferable means of dispute resolution, consider the voyage of LJS through five courts before it winds up with a procedure it no doubt didn't think it was bargaining for. Beyond here there be dragons!