When Is a Discharge Not a Discharge?

Section 3(d) of the Fair Labor Standards Act, as well as many state laws modeled on it, defines "employer" as including "any person acting directly or indirectly in the interest of an employer in relation to an employee." This seemingly circular language is the reason that the Department of Labor, as well as many plaintiffs' attorneys, is not content to name only the employer as a defendant in wage-hour litigation; instead, at least one owner, executive or other responsible individual is typically thrown into the mix, a tactic which never fails to gain the attention of the person(s) hailed into court.

That's often as far as it goes; rarely do the interests of the defendants diverge, and the outcome, favorable or not, is usually binding on all parties. However, upon occasion there are distinctions, and they can prove extremely vexing for the individuals. An example of this circumstance is found in the July 27 decision of the US Court of Appeals for the Ninth Circuit in Boucher v. Shaw, http://caselaw.lp.findlaw.com/data2/circs/9th/0515454p.pdf. Thelma Boucher, Ardith Ballard and Joseph W. Kennedy III were employees of a Las Vegas "hotel, casino and bowling center," the Castaways, which filed for Chapter 11 in 2003. Seven months later, the three were among those discharged in conjunction with the failed reorganization of the employer. They filed suit in Nevada state court, claiming unpaid wages and vacation and holiday pay; they were joined in the litigation by their union, Culinary Workers Local 226, which wanted dues payments which the employer had withheld from employee wages but had not forwarded to the union. Named as defendants were the CEO, HR Manager, and CFO of the defunct company; the first two held the entire ownership interest in the Castaways. After the case was removed to federal court, the district court dismissed all claims, and the plaintiffs appealed.

The Ninth Circuit first asked the Nevada Supreme Court for an interpretation of state law, and received the reply that the three managers could not be sued as "employers" under state law since the Nevada definition does not mirror the federal one. That wiped out the appeal as it related to vacation and holiday pay, also disposing of the union's dues claim. As to the unpaid wages count under the FLSA, however, the court reached a different conclusion: While the managers didn't challenge their status as "employers" under federal law, they asserted their wage payment duties ended with the liquidation of the Castaways in the bankruptcy court. While the court said the defendants hadn't explained their defense clearly, that didn't matter; "the managers are independently liable under the FLSA," so the bankruptcy had no effect on their obligations to the plaintiffs.

This decision carries ominous lessons for executives who believe bankruptcy gives everyone a clean slate. In states in which the language of the wage-hour law is like the FLSA's, the implications are that other obligations such as unpaid vacation, holiday and sick pay may evoke a similar outcome. As a cautionary note, please observe that the Ninth Circuit only found that the case shouldn't have been dealt with on a motion to dismiss, but the ruling, unless overturned by a full-bench decision from the Nation's largest appellate panel or by Supreme Court action, will no doubt be relied on far beyond the nine states (AK, AZ, CA, HI, ID, MT, NV, OR and WA) over which the Ninth Circuit has jurisdiction. At the very least, attention may need to be given regarding the wisdom of seeking independent counsel when you're sued.

Spreading the Retaliation Net

We have warned about the expansive view taken by some courts in treating an informal internal wage-hour complaint as a trigger for retaliation protection. You can now add another wrinkle to the fabric: In Cole v. Green Mountain Landscaping Inc. (D.Vt. No. 2:09CV5, 7/22/09), the court found that a complaint filed with a state agency "was related to" the Fair Labor Standards Act even though there was no mention in it of the federal law, thereby rendering a post-complaint firing sufficiently suspect that the employer's motion to dismiss was denied. The employee's written state claim, alleging denial of overtime pay and accrued vacation, was deemed entitled to greater status than informal complaints.

Imitation - the Sincerest Form of flattery

A couple of Q&As lifted from the latest NC Labor Ledger, the official NC Department of Labor publication:

I was recently hired to work at a small company as part of a "stimulus" grant; however, I am told that I am not subject to the protections offered by the N.C. Wage and Hour Act. Why is this so?

You were hired by your city/county and are paid by the city/county; you are simply placed to work at a private-sector establishment. Government employees are exempted from all provisions of the N. C. Wage and Hour Act except the minimum wage provisions.

My boss just informed us that the company does not have the funds to pay for overtime work; therefore, overtime will no longer be approved by management. However, he informed us that we must complete all assigned work before we leave for the day. Is this legal?

If you actually work more than 40 hours in a given workweek, you must be paid overtime even though management has not given approval. Employers who do not want to pay for overtime hours must ensure that employees do not work more than 40 hours in a workweek. [Editor's note: Of course, if the employee is exempt from overtime requirements, no overtime need be paid if all exemption requirements are met.]

Wireless Gadgets and 24/7 Access to Employees: Employers Beware of the Hidden Cost

T-Mobile USA has been sued in the Eastern District of New York by its retail sales associates and supervisors who allege that they were not compensated for "off-the-clock" activities linked to Blackberrys and other hand-held devices. The complaint in Agui v. T-Mobile alleges that employees were issued smartphones and were required to review and respond to communications (telephone calls, conference calls, emails and text messages) from other employees of T-Mobile at all hours. Complaining employees allege that their lunch breaks were interrupted by T-Mobile business, as well as their nights and weekends. The total additional time employees spend "off-the-clock" working was up to 15 hours according to the complaint. This is the second suit against T-Mobile making these types of claims for unpaid wages and overtime. To read the Agui complaint, click here.

In light of the prevalence of smartphones and other wireless technology permitting employers to be in contact with employees at any time of day or night, employers should prepare a policy to address work provided during otherwise non-working hours if the employer does not already have such a policy in place. Employees should be encouraged to report all their time worked, regardless of where, when or by what means, the work is conducted. Making sure all employees, particularly managers and supervisors, are aware of this policy is an important step for an employer to ensure its compliance with FLSA requirements. As always, seeking counsel during the drafting or review stages of employment policies is a proactive means of furthering the company's compliance efforts.

A Verbal Complaint Isn't Worth the Paper It Isn't Written On

Calling to mind the old Samuel Goldwyn quote about verbal contracts, the US Court of Appeals for the Seventh Circuit held in Kasten v. Saint-Gobain Performance Plastics Corp. (No. 08-2820)that the retaliation protections the FLSA extends to those who "file any complaint" under the statute require that the complaint be reduced to writing. Kasten brought two suits against his employer: the first, a donning-and-doffing claim, resulted in a judgment against the company, and the second alleged he was retaliated against for complaining to management about the company's policy of refusing to pay for time spent putting on and taking off safety gear. Saint-Gobain said Kasten had made no such complaints.

The court acknowledged that internal complaints are protected by the law, but said the language of the statute, which is less broad than similar protections in other employment laws, didn't reach "purely verbal" opposition. The court looked to the dictionary definition of "file" in concluding, "One cannot 'file' an oral complaint; there is no document, such as a paper or record, to deliver to someone who can put it in its proper place." The court rejected arguments by the plaintiff and the Department of Labor that "file" and "submit" are synonymous as "overbroad." Now what happens if the complaint is emailed, texted or tweeted? The devil's in the details.

This places the Seventh Circuit, along with the Second and Fourth Circuits (Lambert v. Genesee Hosp., 10 F.3d 46 (1993) and Ball v. Memphis Bar-B-Q Co., 228 F.3d 360 (2000)), at odds with somewhat vague rulings by three other federal appellate courts in which the employees apparently made speaking objections which weren't in documentary form: Brennan v. Maxey's Yamaha, Inc., 513 F.2d 179 (8th Cir. 1975)(employee refused to endorse a check deemed to be an attempted circumvention of the FLSA); EEOC v. White & Sons Enterprises, 881 F.2d 1006 (11th Cir. 1989)(Equal Pay Act opposition activity); EEOC v. Romeo Community Schools, 976 F.2d 985 (6th Cir. 1992)(same). Consequently, there are 11 states in which written complaints are needed, 14 in which documentation seems unnecessary, the the other 25 which have no clear rule. With a likelihood that Supreme Court review may be sought to resolve the conflict, retaliating against a verbal complainer is still a risky venture.

Family Dollar Mounts Vigorous Defense

Originally published May 7, 2009

In another chapter in the hotly-contested multidistrict litigation involving FLSA claims against the discount retailer, Family Dollar has won a battle and continues to press the plaintiffs to comply with procedural rules. Since "class" members have to file written consents to join in federal wage-hour suits, they are subject to discovery requirements, including answering interrogatories. When a number of the consenters failed to provide responsive, signed responses, Family Dollar asked the court for help, and got it: For the ruling by Judge Graham Mullen of the US District Court for the Western District of North Carolina, see http://www.wcsr.com/resources/pdfs/flsa_blog042909.pdf.

Now the employer has filed motions to dismiss noncomplying plaintiffs' claims. Watch these pages for further developments.

Update (7/13/09): Order

Update (6/22/09): Docket and New Filing

Update (6/12/09): Judge Mullen denied the motion to dismiss

Update (6/5/09): The Court on Defendant's Motion to Dismiss

Update (5/14/09): "Judge says plaintiffs' attorneys are spiteful."

Third Time Is Not a Charm for Chicago EMS Paramedics; Great American Sues to Avoid D&O Coverage

EMS paramedics employed by the City of Chicago have brought and had summary granted on three FLSA lawsuits filed by the same attorney. The first two cases were consolidated by a federal judge sitting in the Northern District of Illinois because the cases were "not distinguishable...other than the timelessness of their claim." The same federal judge granted summary judgment to the City of Chicago on the consolidated case holding that the cases were "hopelessly heterogeneous" and therefore not properly collective actions with so many factual distinctions. In granting summary judgment in the newest collective action alleging the same facts by EMS paramedics against the City of Chicago, Judge Darrah also of the Northern District of Illinois noted that the plaintiffs' counsel stated during the earlier cases' consolidation hearing that he was going to file a third suit on "claims [that are] identical" to the consolidated case claims and Judge Hibbler's opinion in the consolidated case was "persuasive based both on the facts (identical to those here) and his analysis and application of controlling authority." To read the Memorandum Opinion and Order in Baley et al. v. City of Chicago, Case No. 09 C 228 (N.D. Ill. July 7, 2009), click here.

As a footnote to our entry on June 25, 2009 regarding an OT claim coverage dispute involving Great American Insurance Co., Great American has sued for a declaratory ruling that oil-and-gas exploration company GeoStar Corp. defendants are not covered by the insurance company's excess D&O liability policies in a suits against GeoStar for alleging defrauding investors. Great American states in the complaint that but for material misrepresentations by GeoStar, Great American would never have issued the policy at the same premium or with the same terms (if at all). To read the Complaint for Declaratory Judgment filed by Great American in Great American Insurance Co. v. GeoStar Corp. et al., case number 1:09-cv-12488 (E.D. Mich.), click here.

Federal Minimum Wage Rate Increase

The Federal minimum wage will increase from $6.55 an hour to $7.25 an hour, effective July 24, 2009.

Employers should note this ten percent increase, take the necessary steps to implement the change and update their required postings, and ensure that they are complying with all applicable minimum wage laws. In doing so, it is important for employers to know the minimum wage laws in each state where they have employees. Some states have higher minimum wage rates than the Federal rate, while many others follow the Federal rate. (For example, under North Carolina law, employers must pay the higher of the Federal minimum wage or $6.15 per hour.) The U.S. Department of Labor makes available this handy chart summarizing the minimum wage laws of each state.