Yesterday, the Sixth Circuit Court of Appeals mostly affirmed an approximately $5M verdict in a FLSA collective action for unpaid overtime and liquidate damages due to 156 employees. Pierce v. Wyndham Vacation Resorts Inc., No. 18-5258 (6th Cir. 4-29-19). After a 14-day bench trial with over 50 witnesses, the trial court determined that three categories of sales employees worked on average 52 hours per week, but were denied overtime pursuant to a practice and policy which was supported by testimony and exhibits from some management employees. The employer attempted to dispute that it had a consistent policy by pointing to various reasons that employee time sheets were changed (i.e., failing to record time, working from home, leaving work early, etc.), but this evidence was used to reduce the alleged number of work hours and not to reject the existence of the policy and practice. The divided Court determined that one category of sales employees should not have been included in the same class as the others because they had different functions, started work two hours later, were not required to attend the same events and meetings, and only had one representative testify, who did not support that his experiences and working hours were the same as other employees, etc. Instead, at the least, there should have been a separate sub-class with evidence supporting a verdict. The case was remanded to recalculate damages.
According to the Court’s opinion, the employer had four locations in Tennessee involving the sale of time-share vacation properties. It had three types of sales employees: front-line selling time-shares, inhouse selling upgraded timeshares to existing owners and discovery employees handling leases (but not time shares). All of them were primarily paid on commissions, but were paid minimum wage draws based on hours worked. In 2009, it began paying overtime. The lawsuit was filed in 2013 alleging that the employer had a practice and policy of not paying overtime to the sales force by, among other things, directing employees to not record overtime and by modifying their time cards if they did so.
All of the testifying plaintiffs
consistently said that Wyndham required them to underreport their time or
altered their recorded time. They all
provided an average of the number of hours they worked each week, ranging from
50 to 80 hours per week, and their basis for that number: the mandatory morning meeting, tours
throughout the day, frequent late-night work and special events, and six- or
seven day work weeks. But, through it
all, they didn’t worry about keeping an accurate account of their hours because
the company told them it would recoup any overtime pay from their commissions.
The administrative manager at
the Nashville location testified that upper management instructed that sales
employees could not be paid overtime and that managers should alter employees’
timecards to show no more than 40 hours per week. The vice president of sales and marketing at
the two Smoky Mountain locations acknowledged that Wyndham performed an audit
that showed that salespeople worked off the clock. Several emails from managers also mentioned
Wyndham’s no-overtime-pay policy. The
evidence thus showed that Wyndham executed an across-the-board time-shaving
policy that failed to compensate the employees for the hours they worked.
The trial court concluded that the employees worked on average 52 hours/week, awarded $2,512,962 in unpaid overtime and an equal amount in liquidated damages. Attorney fees for the prevailing employees were not mentioned, but will not be insignificant.
The Court rejected the employer’s challenge to the class certification, with one exception. It agreed that the discovery employees were not similarly situated because they did not sell time-shares like the other employees, were not required to attend all of the same events or work the same hours or work the same days. In addition, they were not required to report to work until approximately two hours after the other employees and the testimony was unclear about when they could leave. While they may have stayed later, there was no evidence on that point. “At the least, the court should have created a separate subclass for the discovery employees.”
“To determine whether plaintiffs are similarly situated, we consider (1) ‘the factual and employment settings of the individual[ ] plaintiffs,’ (2) ‘the different defenses to which the plaintiffs may be subject,’ and (3) ‘the degree of fairness and procedural impact of certifying the action as a collective action.’” The trial court had treated them as one class because they were subjected to the same alleged overtime policy. While the front-line and inhouse sales employees sold the same product (to different types of customers), they also reported to work at approximately the same time for the same meeting, gave tours, attended events, worked the same days, were compensated the same and recorded time in the same payroll system. As mentioned, the discovery sales employees had different working hours.
The Court rejected the employer’s attempt to argue that there was not a consistent policy of avoiding overtime because of all of the different reasons that employee time cards were modified. In light of the evidence introduced, that claim was rejected. Instead, the Court found that these various explanations could be part of the same policy and practice. In addition, this evidence was used to reduce the number of alleged overtime hours.
The Court also rejected the employer’s attempt to discredit the employee testimony because it was permitted to depose and call any witnesses it wanted and almost 30% of the employees testified (which is a far greater percentage than in prior successful lawsuits).
The Court also rejected the employer’s expert (who was the only testifying expert) because the expert relied heavily on employee time sheets, which the employees testified were meaningless in light of the employer’s direction to not record overtime and the practice of modifying time sheets that reflected overtime.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
