Wage & Hour Law

Supreme Court Rules Offer of Judgment Renders Overtime Collective Action Moot. Or Does it?

May 1, 2013 | by Jonathan I. Nirenberg

Last month, the United States Supreme Court dismissed an overtime case filed by an employee, Laura Symczyk, against her former employer, Genesis Healthcare Corporation. Ms. Symczyk filed the case as a collective action on behalf of herself and other similarly situated employees who were not paid for all of the hours they worked. Specifically, she claims Genesis deducted 30 minutes of pay per day for a meal break, even when they worked during their break. She asserted the company’s policy violates the Fair Labor Standards Act of 1938 (“FLSA”). The FLSA is a federal law that set the federal minimum wage and guarantees overtime pay to non-exempt employees. The FLSA permits employees to sue on behalf of similarly situated employees in what is called a “collective action.”

When Ms. Symczyk filed her lawsuit, Genesis made her a formal settlement offer, called an offer of judgment, in the amount of $7,500 plus all of her attorneys’ fees and costs. Ms. Symczyk admits the $7,500 would have full compensated her for all of her own damages. However, she did not respond to the offer because she wanted to continue with her case on behalf of her coworkers, and as a result never received the $7,500. But since the offer would have paid Ms. Symczyk everything she was seeking for herself in the lawsuit, and none of her coworkers had joined the case, the trial court no longer considered her to have a personal stake in the outcome of the case. In other words, it deemed her case to be moot.

On that basis, Genesis sought to have the case dismissed. In response, Ms. Symczyk argued the company was improperly trying to end the case before the collective-action portion of the case even could begin.

The District Court dismissed the case. It ruled the $7,500 offer of judgment fully satisfied Ms. Symczyk’s claim, and a collective action cannot proceed unless there is at least one person who has joined the case whose claim against the company is not moot. The Third Circuit Court of Appeals reversed, finding that even though Ms. Symczyk’s claim was moot, it was improper for the company to try to “pick off” the named plaintiff to defeat the collective action. Genesis appealed the ruling to the United States Supreme Court. However, Ms. Symczyk did not cross-appeal the Third Circuit’s finding that her personal claim was moot.

In its opinion in Genesis Healthcare Corp. v. Symczyk, the Supreme Court ruled that since Ms. Symczyk did not cross-appeal the finding that her case was moot, it was bound by that conclusion whether or not it is correct. It then ruled that since her case is moot, she cannot proceed with the collective action on behalf of her coworkers. However, since the Court did not indicate whether Ms. Symczyk’s case really was moot, and merely assumed it because she did not cross-appeal that ruling, it did not indicate whether the same tactic of offering full damages to each named plaintiff would work in future cases. As a result, it remains unclear whether employees who bring collective actions and are offered settlements that would satisfy their own claims have the right to reject the offer and continue to proceed with the collective action.

Reducing Employee Hours in Response to Overtime Lawsuit Can Be Retaliatory

November 21, 2012 | by Jonathan I. Nirenberg

New Jersey’s Appellate Division recently recognized it can be unlawful for a company to reduce employees’ overtime hours in response to an overtime lawsuit. Specifically, the case finds that such a policy could violate New Jersey’s whistleblower law, the Conscientious Employee Protection Act (CEPA).

Howard Flecker III worked as a Deckhand for Statue Cruises, a company which provides ferry service from New York and New Jersey to Liberty Island and Ellis Island.Under the company’s Collective Bargaining Agreement (CBA), employees were entitled to be paid time-and-a-half only after they worked more than 48 hours per week. The FLSA is a federal law which requires companies to pay “non-exempt” employees overtime pay at the rate of time-and-a-half when they work more than 40 hours per week
In 2009, Mr. Flecker filed a class action lawsuit claiming the CBA violates the Fair Labor Standards Act (FLSA). In direct response to Mr. Flecker’s lawsuit, the company issued a memorandum indicating that none of its employees would work 40 hours per week. For example, the company reduced Mr. Flecker from 50 to 40 hours per week.

As a result, Mr. Flecker’s coworkers lost 8 or more hours of pay per week. Many of his coworkers confronted him about this on a daily basis, and pressured him to withdraw his lawsuit. Mr. Flecker’s lawyer told the company that its policy was a form of unlawful retaliation in violation of CEPA. The company responded that it was attempting to minimize the potential damages in Mr. Flecker’s overtime lawsuit. Eventually, due to the stress caused by his co-workers’ constant pressure to withdraw his lawsuit, he resigned. He also added a retaliation claim to his lawsuit under CEPA.

The trial court dismissed Mr. Flecker’s CEPA claim, finding he had not alleged any retaliatory action. However, in Flecker v. Statue Cruises, LLC , the Appellate Division disagreed, and found two potential retaliatory actions. First, it ruled a jury could conclude the company’s actions were intended to turn Mr. Flecker’s co-workers on him, which in turn forced him to resign. In other words, a jury could conclude the company constructively discharged him. Second, it found reducing Mr. Flecker’s hours because he filed an overtime lawsuit could violate CEPA if the company’s motive was to retaliate against him for filing his lawsuit. The court explained this theory was supported by the fact that, although the company claimed it was going to reduce the hours of all of its employees, it did not reduce the hours of at least two of the employees who had been harassing Mr. Flecker.

What Compensation Is an Employee Entitled to if His Employer Was Affected By Hurricane Sandy?

November 6, 2012 | by Jonathan I. Nirenberg

As a result of Hurricane Sandy, many businesses in New York and New Jersey had to stop their operations for a considerable period of time. Now that many employees are returning back to work, they are asking whether they should be paid for the days when their offices were closed due to the storm.

The United States Department of Labor provides a clear answer to this question as it relates to employees who are “exempt” under the Fair Labor Standards Act (FLSA). An employee is generally considered exempt if he meets certain requirements regarding his job duties and is paid a salary of at least $455 per week ($23,660 per year based on a full time schedule). The most common exemptions are for employees employed in a bone fide executive, administrative, and professional capacities.

An employer may not withhold pay to an exempt employee because the office was closed as a result of the storm or another natural disaster without jeopardizing the employee’s exempt status. In other words, if a company fails to pay an exempt employee his salary for the period he was unable to work during a natural disaster, then that employee might be entitled to overtime pay if he works more than 40 hours in a week. However, if the employee has accrued vacation or personal time, the employer can require the employee to use that time during his absence from work due to the storm.

As far as non-exempt employees, under the FLSA employers are required to pay them only for the hours they actually worked. Thus, unless they used paid time off, employees who are paid on an hourly basis and other non-exempt employees are not entitled to pay for the days they were unable to work because of the natural disaster. Of course, companies still have to pay employees if they are required to do so under an individual employment contract, a collective bargaining agreement, or a company policy.

Employees who became unemployed as a result of Hurricane Sandy may be eligible for Disaster Unemployment Assistance. The information about the requirements and the application process is available through the New Jersey Department of Labor and the New York Department of Labor.

The Third Circuit Holds Parent Company Not Responsible For Wholly-Owned Subsidiary’s Overtime Violations

August 1, 2012 | by Jonathan I. Nirenberg

The Court of Appeals for the Third Circuit was recently asked if a parent company is responsible for overtime violations committed by its subsidiary. The lawsuit, In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation, was brought by a group of assistant branch managers who worked for various locations of Enterprise-Rent-a-Car, which are wholly owned subsidiaries of Enterprise Holdings. The employees claimed Enterprise Holdings was liable for their overtime pay under the Fair Labor Standards Act (FLSA) as a “joint employer.” The FLSA is a federal law that requires companies to pay time-and-a-half overtime pay to most “non-exempt” employees.

Joint employment is when two or more employers share control of an employee. Although joint employment is a well-recognized concept, the Third Circuit was addressing this issue for the first time in the context of an FLSA claim. The court created a new four-part test for “joint employment,” which it named the Enterprise test.

Under the Enterprise test, in deciding if a party is a “joint employer,” courts must consider whether the company has:

(1) Authority to hire and fire employees;
(2) Authority to issue work rules and job assignments, and set conditions of employment like compensation, benefits, and hours;
(3) Authority to supervise and discipline employees on a day-to-day basis; and
(4) Control of employee records such as payroll, insurance, and tax records.

When the court applied this test, it determined Enterprise Holdings was not a joint employer even though there are many indications of joint management. For example, Enterprise Holdings is very involved in running its subsidiaries. It also provides them with administrative services and Human Resources support, including employee compensation guides indicating which employees should be paid salaries, and which employees should be paid by the hour. In addition, both companies are managed by the same Board of Directors. But the Court found that was not enough to make them joint employers.

The court reached this decision because it found Enterprise Holdings did not directly control assistant branch managers working for its subsidiaries, and the guidelines it provided to its subsidiaries were recommendations rather than requirements. Although the court suggested that other factors can also be taken into consideration, in Enterprise it gave those factors very little weight.

Supreme Court Rules Pharmaceutical Sales Representatives Not Entitled to Overtime Pay

July 1, 2012 | by Jonathan I. Nirenberg

Last month, the United States Supreme Court ruled that sales representatives working for pharmaceutical companies are not entitled to receive overtime pay under the Fair Labor Standards Act (FLSA). The FLSA is a federal law that requires companies to pay employees most of their employees overtime at the rate of one-and-a-half times their normal hourly rate in each week in which they work more than 40 hours.
Pharmaceutical sales representatives do not directly sell products. Rather, they attempt to convince doctors to prescribe their company’s products to their patients when appropriate. This process is called “detailing.”

At GlaxoSmithKline, sales representatives are paid a base salary plus a commission. Their commissions are based on the total sales of the drugs assigned to them, or the market share in their sales territories. Glaxo does not pay time-and-a-half to its sales representatives when they work overtime. As a result, several salespeople filed a lawsuit claiming they were denied overtime pay in violation of the FLSA.

The issue in the case was whether pharmaceutical sales representatives fall within an exception to FLSA’s overtime requirement under which employers do not have to pay overtime to their outside salespeople. In Christopher v. Beecham Corporation DBA GlaxoSmithKline, the Supreme Court ruled that pharmaceutical sales representatives fall within that exception for a variety of reasons. For example, it recognized that the FLSA uses a very broad definition of the term “sales,” which includes “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” It also concluded that since pharmaceutical sales representatives are not allowed to make direct sales to patients, detailing is the equivalent of sales. Accordingly, it ruled that pharmaceutical sales representatives are not entitled to overtime pay under the FLSA.

Novartis Settles Class Action Overtime Lawsuit for $99 Million

March 6, 2012 | by Jonathan I. Nirenberg

Earlier this year, Novartis Pharmaceuticals Corporation agreed to a $99 million settlement of a class action overtime lawsuit brought by its sales representatives. The settlement is still subject to final approval by a judge. A final hearing to approve the settlement is scheduled for May 31, 2012. Novartis, an affiliate of Swiss drug maker Novartis AG, has its headquarters in East Hanover, New Jersey.

The overtime lawsuit against Novartis was filed in 2006 in a federal court in Manhattan. More than 7,000 current and former sales representatives joined the class action. They claim Novartis failed to pay them overtime, in violation of the Fair Labor Standard Act (FLSA). The FLSA is a federal law that requires companies to pay nonexempt employees time-and-a-half when they work more than 40 hours in a week.

Novartis settled the case before the United States Supreme Court could rule whether pharmaceutical companies are required to pay overtime to their salespeople in another similar lawsuit. Specifically, Christopher v. GlaxoSmithKline is an overtime lawsuit against GlaxoSmithKline which is currently on the Supreme Court’s 2012 docket. The outcome of that case is likely to decide whether salespeople working for pharmaceutical companies are entitled to be paid time-and-a-half when they work overtime. The oral argument in Christopher is scheduled for April 16, 2012.

Companies often refuse to pay their employees overtime, either because they are unaware of the requirement, or because they do not realize the employee is entitled to it. But most employees, including both hourly and salaried employees, are entitled to overtime pay when they work more than 40 hours per week.

New Jersey Judge Refuses to Seal Settlement Agreement in Overtime Lawsuit

March 1, 2012 | by Jonathan I. Nirenberg

Earlier this year, a New Jersey Judge refused to file the terms of a settlement agreement in an overtime lawsuit under seal. Specifically, Judge Jose L. Linares of the United States District Court for the District of New Jersey ruled the employer had not overcome the strong presumption of public access to the terms of settlements in cases under the Fair Labor Standards Act (“FLSA”). The FLSA is a federal wage and hour law that requires employers to pay most “nonexempt” employees time-and-a-half when they work more than 40 hours in a work week.

The case, Brumley v. Camin Cargo Control, Inc., involved three separate collective action lawsuits against Camin Cargo Control, Inc. Between the three cases, 112 employees alleged Camin failed to properly pay them overtime wages in violation of the FLSA. Five of those employees also claimed the company retaliated against them in violation of the FLSA.

Last year, the parties agreed to settle the case for $3.9 million dollars, or an average of nearly $35,000 per plaintiff. As is typical in employment law cases, the Settlement Agreement included a confidentiality provision that required the parties to keep the terms of the settlement private. But since the FLSA required a judge to approve the settlement, the parties had to submit the Settlement Agreement to the Court for its approval. As a result, the employer filed a motion requesting permission to file the Settlement Agreement under seal.

But Judge Linares denied the defendant’s motion to file the Settlement Agreement under seal. He explained that settlements under the FLSA are different from most other settlements. First, the public has an interest in seeing the terms of the settlement agreement so they can understand the reasons why the judge approved or rejected it. Second, the FLSA does not merely protect the rights of the individuals who bring claims under it. It also protects the separate public interest in “assuring that employees wages are fair and thus do not endanger ‘the national health and well-being.'” As a result, he ruled there is a strong presumption that settlement agreements in FLSA cases should be publically available. He concluded that Camin failed to sufficiently rebut this presumption, and therefore denied its motion to file the settlement agreement under seal. You can view the Settlement Agreement here.

New York Employees Can Prove Overtime Claim Even if They Falsely Recorded Working No Overtime

July 12, 2011 | by Jonathan I. Nirenberg

The United States Court of Appeals for the Second Circuit Court recently ruled that an employee who follows his supervisor’s instruction to falsely report that he did not work any overtime hours still can pursue an overtime claim. It reversed a decision from the Western District of New York, which had dismissed the claim because it did not believe the employee could prove how many hours of overtime he had worked.

Greg Kuebel was a Retail Specialist for Black & Decker (U.S.) Inc. He filed class action lawsuit against Black & Decker, claiming the company’s overtime pay practices violate the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL). Specifically, Mr. Kuebel claims Black & Decker violated the law by failing to pay him for the overtime hours he worked but did not record on his timesheet — in other words, his “off-the-clock” overtime hours.

Black & Decker’s official policy required Retail Specialists to accurately record their hours on timesheets that they submit to their managers. There was no official Black & Decker policy which prohibited Retail Specialists from working, recording, or being paid for overtime. However, Black & Decker expected its Retail Specialists to finish their work in a 40-hour work week.

Mr. Kuebel alleges it was impossible to finish all of his work in 40 hours per week, and as a result often worked overtime. However, he did not list any overtime on his timesheets, and therefore was not paid for his overtime hours. Mr. Kuebel explained that he falsified his timesheets because his supervisors instructed him not to record more than 40 hours of work per week because the company could not afford overtime. Mr. Kuebel testified that to the best of his memory he worked more than 40 hours almost every week, and averaged between 1 to 5 hours of overtime per week. After Mr. Kuebel told his supervisor that he had been falsifying his timesheets, Black & Decker fired him for poor performance, dishonesty, and falsification of company records.

In Kuebel v. Black & Decker Inc., the Court explained that to prove an overtime case under the FLSA, an employee has to prove he was not properly paid for working more than 40 hours in a work week, and his employer either actually knew it or should have known about it under the circumstances. To prove the amount of overtime pay to which he is entitled, an employee needs enough evidence to show the amount and extent of the overtime he worked. However, he does not have to prove the amount of overtime he worked with definiteness, and can prove his overtime hours through an inference. Accordingly, the Court ruled that when a company’s time records are inaccurate or inadequate, the solution is not to penalize the employee by denying him any legal recovery.

To summarize, an employee can win an overtime case if (1) he proves he actually worked overtime and was not properly paid for it, and (2) he has enough evidence to show how much overtime he worked through a reasonable inference. An employee can meet this burden through estimates based on his own recollection. This can be true even when the employee admittedly falsified his own timesheets, at least where the employee’s falsification was based on an instruction from a manager or supervisor. That is because it is the employer’s duty to maintain accurate time records for its employees, and employers cannot delegate that duty to their employee. Once an employer knows or has reason to know an employee is working overtime, it cannot deny compensation simply because the employee failed to properly record or claim his overtime hours.

U.S. Supreme Court Rules FLSA Forbids Retaliation Against Employees Who Make Oral Complaints

April 1, 2011 | by Jonathan I. Nirenberg

On March 22, 2011, the United States Supreme Court ruled that the Fair Labor Standards Act of 1938 (“FLSA”) prohibits employers from retaliating against employees who make oral complaints about violations of the FLSA. The FLSA is a federal law that sets minimum wages, maximum hours, and overtime pay requirements. It includes an anti-retaliation provision which forbids employers from firing or otherwise discriminating against employees because they “filed any complaint” under the FLSA.

The case, Kasten v. Saint-Gobain Performance Plastics Corp., involves Kevin Kasten’s lawsuit against his former employer, Saint-Gobain Performance Plastics Corporation. Mr. Kasten claimed Saint-Gobain fired him in retaliation for his verbal objections to the company’s violation of the FLSA. Specifically, he repeatedly told his supervisor, several human resources representatives, and other Saint-Gobain officials that the company was violating the law by locating its time clocks in a place where employees could not get credit for the time they spent putting on and taking off their protective gear. In a separate lawsuit, Mr. Kasten proved that Saint-Gobain violated the FLSA because it was required to pay its employees for the time they spent “donning and doffing” their protective gear.

The Supreme Court found that Mr. Kasten is entitled to try to prove his retaliation case because “filing any complaint” under the FLSA can include making a verbal complaint to your employer. The Court noted that the word “filed” has different meanings in different contexts. Sometimes it implies something in writing, but in other contexts it can include verbal statements. It then considered that when Congress passed the FLSA, it recognized enforcement of the law was likely to depend on “information and complaints received from employees seeking to vindicate rights claimed to have been denied,” and that the anti-retaliation provision was intended to encourage employee to come forward by preventing employers from silencing them through “fear of economic retaliation.” Accordingly, the Court concluded that Congress did not intend to limit the FLSA’s anti-retaliation protection to written complaints, since that would make it more difficult for illiterate, less educated, and overworked workers to complain. It also explained that limiting complaints to written complaints would prevent Government agencies from using hotlines, interviews, and other verbal complaint methods, and would discourage employees from using informal workplace grievance procedures.

However, the Supreme Court also recognized that it would not be fair to employers if the FLSA’s anti-retaliation provision applied when the employer did not have fair notice that the employee made a complaint that could subject the company to a retaliation claim. It therefore ruled that an oral complaint must have enough formality that the employer either understood or reasonably should have understood that the complaint was a business concern. In other words, a complaint is “filed” when a reasonable person would have understood that the employee put the employer on notice that he was asserting a right under the FLSA.

Minor League Yankees Play Hardball with Mascot’s Overtime Pay

February 10, 2011 | by Jonathan I. Nirenberg

Last Wednesday, a mascot who worked for the Scranton/Wilkes-Barre Yankees minor league team filed a federal lawsuit claiming the team violated the Fair Labor Standards Act (“FLSA”) and state law because it failed to pay him for his overtime hours. Specifically, Brian Bonnor’s lawsuit alleges the team improperly designated him as a “manager” to avoid paying him time-and-a-half when he worked more than 40 hours in a week.

Specifically, Mr. Bonnor, who was laid off by the New York Yankees’ AAA affiliate in January, alleges he was paid a salary of $22,000 per year to dress up as the team’s mascot, Champ, and make appearances at games and other events. However, his lawsuit claims he had no supervisory or managerial job duties. He also claims he sometimes worked 80-hour weeks, but the team never paid him for his overtime. The team denies it violated the law.

The FLSA is a federal wage and hour law. It requires employers to pay most employees time-and-a-half for their overtime hours unless they fall into specifically defined categories, including certain “executive,” “administrative,” and “professional” employees. Companies that violate the FLSA can be required to pay the employee not only for their unpaid overtime, but if the violation is “willful” they also can be required to pay double damages (called “liquidated damages”). An employee who wins a case under the FLSA also can recover his attorney’s fees and litigation costs.