In the past month, the Sixth Circuit has issued a number of FLSA decisions affecting employers and employees. Last week, the Court rejected objections to a class action settlement on behalf of exotic dancers. Jane Does 1-2 v. Déjà Vu Consulting, Inc., No. 17-1801 (6th Cir. 6-3-19). In another, the Court rejected claims for overtime compensation by certain Fire Battalion Chiefs on the grounds that they were exempt employees and were not entitled to extra standby pay. Holt v. City of Battle Creek, No. 18-1981 (6th Cir. 6-3-19). In another, the Court affirmed the trial court judgment imposing liability for unpaid overtime compensation for employees of a small lumber company, but remanded for a redetermination of the amount of damages due which did not include time spent on bona fide meal breaks or commuting to and from work. Secretary of Labor v. Timberline South, LLC, No. 18-1763 (6th Cir. 5-29-19). In that case, the Court also refined the test for enterprise coverage for employers which only purchase and use equipment locally, but that which is manufactured out of state. It also rejected the employer’s good faith defense for seeking incomplete advice from a non-expert. Finally, the Court affirmed the dismissal of a FLSA retaliation claim where the plaintiff failed to show that she had ever communicated any complaints about unpaid overtime. Rogers v. The Webstraurant Store, Inc., No. 18-6229 (6th Cir. 5-23-19). Her “vague, non-adversarial conversations about staying late are not sufficiently “serious occasion[s]” to be considered complaints under the FLSA.”
Déjà Vu Consulting involved the settlement of class claims (brought under both Civil Rule 23 and FLSA § 216(b)) that exotic dancers had been misclassified as independent contractors to avoid paying minimum wages and been subject to illegal wage deductions. It was similar to prior litigation which involved many of the same dancers and defendants. Many, if not all, of the 28,177 class members had signed agreements with the defendants containing arbitration clauses with prevailing parties being entitled to recover attorney’s fees, etc. Accordingly, the Court found it was not an abuse of discretion for the trial court to affirm the settlement reached in light of the risk to the plaintiffs of being compelled to individually arbitrate their claims and possibly be financially liable to the defendants. The Court also found that formal discovery was not necessary in light of the extensive discovery conducted in the prior case involving many of the same type of claims and parties. The settlement provided for both injunctive and financial relief. The financial settlement of $6.5M was divided among $1M in cash payments, $4.5 attributed to a secondary settlement pool that could be claimed while working at the defendant clubs in the future and $900K to class counsel. The dissent would have remanded for a recalculation of the counsel fees because she characterized a requirement of the settlement – that the plaintiff dancers work at a defendant club to receive a financial benefit from the secondary pool of monetary relief – as a “coupon” under Class Action Fairness Act which can only be considered for purposes of evaluating attorney’s fees based on the coupons redeemed instead of merely the pool of money set aside.
Holt involved claims for unpaid overtime and standby time by two Fire Battalion Chiefs, the second in command in the Fire Department hierarchy. Their primary job duties involved management and administration. They received an extra 1.5 hours of pay for each day when they were on call during the night shift (in addition to overtime if they were actually called back to work) and were required to monitor the radio and pager while on call. They could not leave town or drink alcohol when on call because they might be called to a fire scene.
In evaluating their exempt status, the Court rejected the plaintiff’s argument that a narrow reading of exemptions should be given in light of the Supreme Court’s prior Encino Motorcar decision. The trial court found that Battalion Chief’s primary duty was managerial in nature because they
were required to directly supervise lower-ranking officers and personnel, evaluate personnel, administer and enforce department policy, and coordinate the day-to-day operations of the department . . . . the battalion chiefs were expected to “take charge and operate as the incident commanders at the scene of a fire.”
Further, one “was ‘in charge’ of all suppression personnel and [the other] was ‘in charge’ or ‘oversaw’ the training division. Approximately 27 lieutenants and captains directly reported to [one] who monitored their adherence to standards. Moreover, Chief [Hausman] testified that if any fire fighter ‘had a problem[,]’ he or she would take it to plaintiff Holt.” In addition, although the trial “court recognized that Plaintiffs did not have independent authority to hire, fire, or suspend fire fighters, it credited certain testimony as showing that Plaintiffs’ “suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees were given ‘particular weight.’” The FLSA regulations do “not require courts to ask whether an employee’s recommendations as to personnel decisions were accepted every single time—instead, it presents the question of whether those recommendations were given “particular weight,” which is precisely what the district court found.”
In light of their management exempt status, the Court decline to evaluate whether they were also exempt administrative employees and whether their standby restrictions were so onerous as to require extra compensation.
Timberline concerned a small lumber company that harvested and transported lumber only inside the state of Michigan and bought and sold only from Michigan companies. The operations manager consulted with an accountant and believed that some the employees were exempt agricultural workers and the transportation were exempt under the Motor Carrier Exemption Act, but did not consult with an attorney or explain why the office employees would be considered exempt. The employer kept track of working hours for the hourly employees, but not the salaried employees. Following a DOL investigation, the DOL filed a lawsuit and was awarded summary judgment in the amount of $439,437.42 in back pay and liquidated damages for unpaid overtime owed to 50 employees.
The first issue to be considered was whether the employer was a covered enterprise under the FLSA. The employer argued that its equipment, though manufactured outside of the state, was purchased locally and, as the end user of that equipment, could not be considered for purposes of §203(s)(1)(A)(1) of the FLSA that covers employers which have “employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person.” The Court ultimately adopted the test utilized by the Eleventh Circuit to evaluate whether equipment used by an employer to create its product constituted goods or materials under the FLSA enterprise test. The Eleventh Circuit considered an amendment to the FLSA to include “materials” as well as “goods” and the exception for “goods” when the employer was the ultimate enduser of the goods. It cautioned that
the same items could be goods in one case, materials in another, and neither goods nor materials in still another case, depending on the use of the item in the context of each case. “Where a catering business uses the china plates at a client’s banquet, the plates count as part of the ‘materials’ necessary for serving a catered meal. But, where a department store sells the same china plates as stand-alone items, the plates count as ‘goods’ for that retailer.” Id. Those same plates hung as decorations on the lobby wall of an accounting firm, however, constitute neither goods nor materials “because the plates have no significant connection to the business’s accounting work.”
. . .
Applying the definition of “materials” from Polycarpe, the logging and harvesting equipment used by Timberline’s employees plainly constitute “materials” because the equipment is necessary to cut down trees and transport the timber, which in turn have a significant connection to Timberline’s commercial activities of harvesting and selling timber.
The Court rejected the employer’s argument that this would effectively impose the FLSA on every business which purchases computers that are all manufactured overseas and pens that are manufactured out of state because the DOL has never sought such broad enforcement. The Court also noted that Polycarpe specifically mentioned that incidental and internal consumption of an item would not satisfy the requirement that the materials be used in the employer’s commercial activity. “[C]overage here is not premised on employees’ incidental use of office items; rather, it is premised on employees’ regular and recurrent use of logging and harvesting equipment that is used to carry out the company’s commercial activity of harvesting timber.”
The Court next rejected the employer’s Motor Carrier exemption because its drivers never left the State of Michigan even though they held CDLs and had DOT registration numbers:
The dispositive inquiry here is not whether Timberline’s employees held commercial driver’s licenses or whether its trucks had DOT registration numbers; rather, the dispositive inquiry is whether Timberline’s drivers transport goods in interstate commerce, thus rendering Timberline a motor private carrier. 49 U.S.C. § 13102(15); Vaughn, 291 F.3d at 904. Courts have consistently interpreted this to mean that drivers must travel or transport the goods across state lines, or transport the goods in a “‘practical continuity of movement’ across State lines from the point of origin to the point of departure.”
Further, the employer failed to show that its timber was used by its buyers in interstate commerce. On the contrary, it disclaimed knowledge of what use was made of the timber it sold.
Third, as for calculating back pay, the DOL had argued that employees’ regular rate include the compensation that they had received for their meal and commuting time – which otherwise is not considered working hours for purposes of the FLSA – because the employer traditionally and customarily paid employees for such time and the Portal-to-Portal Act referred to including such time of customarily compensated. Neither the DOL nor the Court had made any effort to determine how many of the employees’ paid hours constituted such commuting or meal break time. The Court rejected that argument:
Although the plain language of the Portal-to-Portal Act suggests that home-to-work commutes are deemed compensable if the employer has a custom or practice of compensating for such work, 29 C.F.R. § 785.34 explains that “ordinary travel from home to work (see § 785.35) need not be counted as hours worked even if the employer agrees to pay for it.” And, 29 C.F.R. § 785.35 says plainly that “[n]ormal travel from home to work is not worktime.” The reason is that the FLSA only requires overtime compensation for “actual work or employment,” Tenn. Coal, Iron & R. Co., 321 U.S. at 597, “[a]nd even where there is a contract, custom, or practice to pay for time spent in such a ‘preliminary’ or ‘postliminary’ activity, section 4(d) of the Portal Act does not make such time hours worked under the Fair Labor Standards Act, if it would not be so counted under the latter Act alone,” . . . “The general rule . . . is and always has been that the FLSA does not treat ordinary home-to-job-site travel as compensable.” Kuebel v. Black & Decker Inc., 643 F.3d 352, 360 (2d Cir. 2011). The same is true of “bona fide meal periods.” 29 C.F.R. § 785.19; see also Ruffin v. MotorCity Casino, 775 F.3d 807, 811-15 (6th Cir. 2015) (examining whether meal periods were compensable under the FLSA as “work”).
The Court remanded for the DOL and trial court to calculate how many hours the employees had been paid for commuting and meal breaks and to deduct that from the damages calculation. Nonetheless, “Defendants may not use the amounts paid for those otherwise non-compensable work periods as an offset against the amounts owed.”
Fourth, the Court also rejected the employer’s argument that liquidated damages should not be awarded or should at least be reduced because it acted in good faith in consulting with its accountant about the agricultural exemption and in paying its employees well above the industry average. An employer is required to show that it took affirmative steps to comply with the FLSA, but nonetheless violated it. The employer did not provide sufficient information to the accountant about all of the employees and the accountant did not profess to be a FLSA expert. Further, the employer knew that not all of the employees would qualify under the agricultural exemption and did not take reasonable steps to investigate the status of the other workers. It did not even convincingly argue the agricultural exemption before the trial court and did not appeal that issue to the Sixth Circuit. As for the generous compensation, that matter is irrelevant for purposes of FLSA compliance in the absence of good faith and reasonable grounds for non-compliance.
The plaintiff in Rogers had failed to demonstrate appropriate customer service skills and had been placed on a performance improvement plan. She alleged that she had been terminating for complaining about unpaid overtime, but she failed to show that she had made any such complaints that could be objectively perceived as a complaint. Her first “complaint” was really an apology for being late and asking whether she could attribute the 15 minutes that she worked past her shift the prior evening towards the 25 minutes that she had been late. Her second “complaint” related to the tone of her voice when asking if she was supposed to work on her PIP outside of regular work hours. Her third “complaint” related to notes that she sent her manager about how she was engaging in “self-reflection” outside of work hours and that she had been told to do this on “her own time.” Indeed, he manager contacted her about whether she was working unauthorized overtime in order to give her back time that she had worked. The plaintiff then admitted that she had not been recording all of her time working, but did not think that would be a concern.
Even if the allegations were true, the Court found that they could not constitute “complaint” under the FLSA that could support a retaliation claim. “The Supreme Court has said that the act of filing an FLSA complaint must contain ‘some degree of formality,’ such that a reasonable employer would understand it ‘as an assertion of rights protected by the statute and a call for their protection.’” However, “none of them even indicated that Rogers was complaining or used any synonym or similar expression.” Moreover, it is not clear that the employer could have realized that she was making a complaint.
While an employee need not explicitly mention the FLSA, she must do something to give fair notice that she is actually complaining about overtime or a lack of fair compensation, i.e. the core things the FLSA protects. Kasten, 563 U.S. at 14. Rogers’s vague, non-adversarial conversations about staying late are not sufficiently “serious occasion[s]” to be considered complaints under the FLSA.
. . . .
Not every grumble or “expression[] of concern or discomfort or frustration” by an employee constitutes an FLSA complaint. Robinson v. Wal-Mart Stores, Inc., 341 F. Supp. 2d 759, 763 (W.D. Mich. 2004). Instead, an employee’s expressions must be “sufficiently clear and detailed” to count as a complaint. Kasten, 563 U.S. at 14. Rogers’s allegations provide no information on how a mere tone of voice can be that clear. Moreover, no required inference can save her lawsuit from that lack of clarity.
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.
