Showing posts with label FLSA. Show all posts
Showing posts with label FLSA. Show all posts

Tuesday, May 23, 2023

DOL Publishes Enforcement Guidance on PUMP Act

Last week, the Department of Labor’s Wage and Hour Division issued a Field Assistance Bulletin to its investigative staff about how to interpret, investigate and enforce the new PUMP Act (aka ‘‘Providing Urgent Maternal Protections for Nursing Mothers Act’”).   As reported here in January,  the PUMP Act amended the FLSA to require most employers with at least 50 employees to provide a private space (other than a restroom) where a new mother can express milk during unpaid breaks (if the employee is completely relieved of working during such breaks) for one year after the birth of a child.  There are limited exemptions for employers with fewer than 50 total employees.  The DOL also published a new FLSA poster last month which all employers are required to post and which now includes information about the PUMP Act.   Here are some of the notable enforcement points from the Field Assistance Bulletin:

  •      The FLSA requires employers to provide nursing employees reasonable break time each time such employee has need to pump breast milk at work for one year after the child’s birth. An employer may not deny a covered employee a needed break to pump. The frequency, duration, and timing of breaks needed will vary depending on factors related to the nursing employee and the child. Factors such as the location of the space and the effort reasonably necessary to express breast milk, e.g., the pump setup, can also affect the duration of time an employee will need to express milk. An employee and employer may agree to a certain schedule based on the nursing employee’s need to pump, but an employer cannot require an employee to adhere to a fixed schedule that does not meet the employee’s need for break time each time the employee needs to pump. Additionally, any agreed-upon schedule may need to be adjusted over time if the nursing employee’s pumping needs change. (bolding in original)
  •      Employees who telework are also eligible to take pump breaks under the FLSA on the same basis as if they were working on-site.
  •      A space temporarily created or converted into a space for pumping or made available when needed by the nursing employee is sufficient provided that the space is shielded from view and free from any intrusion from coworkers and the public and is available each time the employee needs to pump.
  •      Employers must ensure the employee’s privacy, for example, by displaying a sign when the space is in use or providing a lock for the door. Employees who are teleworking receive the same protections, including the right to take a pump break that is shielded from view. For example, an employee must be free from observation by an employer provided or required video system, including a computer camera, security camera, or web conferencing platform, when they are expressing breast milk, regardless of the location they are working from.
  •      The location must be functional as a space for pumping. A space must contain a place for the nursing employee to sit, and a flat surface, other than the floor, on which to place the pump. Employees must be able to safely store milk while at work, such as in an insulated food container, personal cooler, or refrigerator.
  •         Employers with fewer than 50 employees must demonstrate that compliance would impose an undue hardship to claim the small employer exemption from the pump time requirements of the FLSA. All employees who work for the covered employer, regardless of work site, are counted when determining whether this exemption may apply.
  •         Whether compliance would be an undue hardship is determined on an individual employee basis. The employer bears the burden of proof that compliance with the pump at work provisions would be an undue hardship in the particular circumstances. To assert the exemption, an employer must be able to demonstrate that the employee’s specific needs for pumping at work is an undue hardship due to the difficulty or expense of compliance in light of the size, financial resources, nature, and structure of the employer’s business.
  •         Crewmembers of air carriers are exempt from FLSA pump at work protections. “Crewmember” means a person assigned to perform duty in an aircraft during flight time including pilots and flight attendants. The break time and space protections for pumping at work apply as normal to other employees of air carriers.
  •         The PUMP Act delays coverage for certain employees of rail [and motorcoach] carriers. The delay applies to members of a train crew involved in the movement of a locomotive or rolling stock or employees who maintain the right of way of a rail carrier employer. . . .  As with the undue hardship exemption for small employers, these exemptions operate as an affirmative defense, for which the employer bears the burden of proof. It is not considered a significant expense to modify or retrofit a locomotive or rolling stock by installing a curtain or other screening protection.
  •         The FLSA provides protection for any employee “discharged or in any other manner discriminated against” because such employee “filed a complaint or instituted or caused to be instituted any proceeding” regarding the pump at work protections. Employees are protected regardless of whether they have made a complaint orally or in writing. Complaints made to WHD are protected, and most courts have ruled that internal complaints to an employer are also protected. Remedies for retaliation include employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages, compensatory damages and make-whole relief, such as economic losses that resulted from violations, and punitive damages where appropriate.
  •         An employer employing any employees subject to the FLSA’s minimum wage, overtime, or pump at work provisions is required to post and keep posted a notice explaining the FLSA in conspicuous places in every establishment where such employees are employed. See 29 CFR § 516.4. WHD considers an electronic posting to be sufficient to meet the posting requirement if (1) all of the employer’s employees exclusively work remotely, (2) all employees customarily receive information from the employer by electronic means, and (3) all employees have readily available 9 access to electronic posting at all times. See Field Assistance Bulletin No. 2020-7.
  •         WHD has published an updated FLSA poster (April 2023) that reflects current pump at work requirements. This poster may be used to meet the FLSA posting requirement and is available for download at no cost. Employers should ensure that they are posting the current version of the poster.

The PUMP Act does not change other provisions of the FLSA.  Exempt employees still are compensated in full-day increments.  Breaks of less than 20 minutes are still generally considered to be working hours. Employers who provide paid breaks must still pay for the same number of breaks to nursing mothers, etc.

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 change or be 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.

Monday, May 22, 2023

Sixth Circuit Adopts "Strong Likelihood" Standard to Determine When Other Employees Should Be Invited to Join FLSA Collective Action

On Friday, a divided Sixth Circuit addressed the proper standard for determining what “other employees” are “similarly situated” and should be notified of a FLSA collective action and given the opportunity to join the lawsuits as plaintiffs.  Clark v. A&L Homecare and Training Center, LLC, No. 22-3101 (6th Cir. 2023).  The scope of the notification of “other employees” can involve hundreds of employees (and “potential plaintiffs”) and often forces defendant employers to settle the lawsuit prior to any discovery or evaluation of the merits or similarly situatedness.  The Court’s majority rejected the prevailing lax standard first utilized in New Jersey and the Fifth’s Circuit’s recent, more stringent preponderance of the evidence standard.  Instead, the Court determined that “for a district court to facilitate notice of an FLSA suit to other employees, the plaintiffs must show a ‘strong likelihood’ that those employees are similarly situated to the plaintiffs themselves.”  This is similar to the standard already used in preliminary injunction hearings, which is less than a preponderance of the evidence standard, but higher than a summary judgment standard.   The plaintiffs will bear the burden of proving similarly situatedness.  The Court also rejected the employer’s arguments that individualized defenses – such as the existence of arbitration agreements or expired limitations period -- of “other employees” would necessarily prevent them from being similarly situated and exclude them from notification, but those defenses should be considered when evaluating whether they are similarly situated.

The lawsuit was brought by former home health aides who alleged that they were not paid for all overtime hours worked and were under reimbursed for travel expenses, thereby unlawfully reducing their minimum wages.  Under the FLSA, employees may bring suit on behalf of themselves and other employees similarly situated.   The other employees must give written consent to joining the lawsuit.  The Supreme Court had held that a trial court has discretion to notify these other potential plaintiffs of the lawsuit in appropriate cases.  FLSA collective actions are not Civil Rule 23 class actions because the “other employees” who elect to join the lawsuits become party plaintiffs, just like the original plaintiffs.  The original plaintiffs are not class representatives.   

A district court’s determination to facilitate notice in an FLSA suit is analogous to a court’s decision whether to grant a preliminary injunction. Both decisions are provisional, in the sense that the court renders a final decision on the underlying issue (whether employees are “similarly situated” here, success on the merits there) only after the record for that issue is fully developed; yet both decisions have immediate consequences for the parties.  . . . . What the notice determination undisputedly shares in common with a preliminary-injunction decision, rather, is the requirement that the movant demonstrate to a certain degree of probability that she will prevail on the underlying issue when the court renders its final decision.

We adopt that part of the preliminary-injunction standard here; and we hold that, for a district court to facilitate notice of an FLSA suit to other employees, the plaintiffs must show a “strong likelihood” that those employees are similarly situated to the plaintiffs themselves. See, e.g., id. That standard requires a showing greater than the one necessary to create a genuine issue of fact, but less than the one necessary to show a preponderance. The strong-likelihood standard is familiar to the district courts; it would confine the issuance of court-approved notice, to the extent practicable, to employees who are in fact similarly situated; and it would strike the same balance that courts have long struck in analogous circumstances.

In applying this standard, district courts should expedite their decision to the extent practicable. The limitations period for FLSA claims typically is two years. 29 U.S.C. § 255(a). If the plaintiffs in an FLSA suit move for court-approved notice to other employees, the court should waste no time in adjudicating the motion. To that end, a district court may promptly initiate discovery relevant to the motion, including if necessary by “court order.” Fed. R. Civ. P. 26(d)(1).

 . . .

As for the plaintiffs’ argument itself, “the different defenses to which the plaintiffs may be subject” is already a factor when determining whether other employees are similarly situated to the original plaintiffs.  . . .  And for that purpose a defense based on an alleged arbitration agreement is a defense like any other. The parties can present whatever evidence they like as to such a contention; the district court should consider that evidence along with the rest in determining whether the plaintiffs have made the requisite showing of similarity. Moreover, to be clear, “[e]mployees bear the burden of satisfying this requirement.” Id. A defense based on putative arbitration agreements does not shift that burden more than any other defense does. 
 . . . The very point of the “similarly situated” inquiry is to determine whether the merits of other-employee claims would be similar to the merits of the original plaintiffs’ claims—so that collective litigation would yield “efficient resolution in one proceeding of common issues of law and fact arising from the same alleged discriminatory activity.” Hoffman-LaRoche, 493 U.S. at 170. Thus, on remand, the district court should consider the parties’ evidence as to arbitration agreements along with all the other evidence in determining whether the plaintiffs have met the strong-likelihood standard.

Finally, as to the plaintiffs’ remaining argument, a limitations defense is likewise a defense like any other for purposes of determining similarity. Hence the district court should consider the parties’ respective showings on that issue when making its notice determination on remand.

The dissent argued that the Court’s new standard will make it too difficult for plaintiffs and employees to pursue their right to unpaid wages, but agreed with the rejection of the Fifth Circuit’s new standard.   The concurring opinion asserted that equitable tolling of the limitations period should apply to the claims of “other employees.”

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 change or be 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.

Monday, May 16, 2022

Conclusory Allegations Will Not Save FLSA Complaint

 Last week, the Sixth Circuit affirmed the dismissal of a complaint for failing to allege sufficiently detailed facts to state a claim under the FLSA.   Forrester v. American Protection and Security Service, LLC, No. 21-5870 (6th Cir. 5-13-22).   In it, the plaintiff complained about not being paid when the employer required employees to show up 10-15 minutes prior to their shift and stay as late as 10-15 minutes after their shift in order to ensure unbroken coverage.  However, the plaintiff failed to plead what, if any work, she did during this period of time so that the court could determine whether the 15 minutes before and after her shift were compensable under the FLSA.   The allegations in the complaint stated legal conclusions, to which the defendant employer was not required to admit or deny.  Despite having ample opportunity to do so, the plaintiff never formally attempted to amend her complaint or to submit a proposed amended complaint for the trial court to consider whether the deficiencies had been corrected.  Therefore, the trial court was within its discretion to dismiss the complaint without giving the plaintiff the opportunity to try again.

According to the Court’s opinion, the 10-15 minutes before and after each employee’s shift was to ensure an overlap and adequate coverage during the shift hand-offs.  The employer apparently did not keep records of this time or pay employees for this time.   However, the employer had disciplined employees who failed to report early for their shift.   The plaintiff brought a class action to challenge this practice and recover unpaid overtime and attorney’s fees.

The court observed that employers are not required to pay for every minute that an employee is at work.  The Supreme Court had previously held that the Portal-to-Portal Act does not require employers to pay for or record time an employee spends commuting to and from work or for time going through an employer’s security checkpoint after work.   The security checkpoint was not an integral part of the employees’ principal activity which the employees were employed to perform.  However, in this case, the plaintiff never pleaded any facts from which the court could determine whether any work was actually performed during the 10-15 minutes before and after her shift.   At best, she alleged that there were “shift-change duties,” but did not elaborate what those entailed.   The court was left to guess whether those “shift-change duties” could be eliminated without impairing the plaintiff’s ability to work.  If so, the “shift-change duties” would not be compensable.

Despite being on notice that her complaint may be factually deficient, the plaintiff never formally requested to amend her complaint or to submit an amended complaint which would have provided detailed allegations.  Accordingly, the trial court was within its discretion to dismiss the complaint without giving the plaintiff leave to amend her complaint and try again. 

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 change or be 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.

Tuesday, February 2, 2021

DOL Issued FLSA Opinion Letters Concerning Longevity Pay, Referral Bonuses and Employee Education.

 

The DOL was busy in 2020 issuing FLSA opinion letters.  Three of those opinion letters concerned whether referral bonuses should be included in the regular rate for purposes of calculating overtime compensation, one concerned a similar question about longevity bonuses and one concerned whether employers must pay employees for participating in voluntary training during or outside normal working hours.  The Obama Administration did not issue any such opinion letters and it remains to be seen whether the Biden Administration will continue this practice.

In FLSA Op. No. 2020-3, the City employer passed a resolution entitling employees to incentive compensation after five years of full-time employment in the amount of $2/month for each year of employment.  The City currently pays it out every two weeks, but was considering paying it in a year-end lump sum.   The DOL explained that its longevity pay was not a gift because the employees were legally entitled to the payments, even though the legislation left it to the City officials to determine the timing and form of the payments.   If the legislation had indicated that the City “may” provide longevity pay up to a certain amount, instead of “shall” provide longevity pay in a specific amount, then the resolution would have merely authorized the payments instead of requiring them.  Lump sum longevity payments whose amount, if any, would not be measured by or dependent on hours worked, production or efficiency, were not legally required and were awarded, if at all, in the discretion of the employer could be excluded from the regular rate as “payments in the nature of gifts.”  Because the resolution mandated both the payment and amount of the bonus, it was a legally enforceable part of the employees’ wages and must be included in the regular rate when calculating overtime pay.

In FLSA Op. No. 2020-4, the employer paid a generous referral bonus to an employee upon the hiring of a worker whom the employee referred and another generous bonus if both the worker and the employee were still employed a year later.    Because the first bonus was paid upon the hiring of the worker and it was not part of the employee’s duties to recruit or hire the worker, the bonus was not related to the employee’s work and need not be included in the employee’s regular rate.

[S]ums paid to an employee for recruiting another to join his or her employer’s workforce are not part of the recruiting employee’s remuneration for employment, if the following conditions are met (1) participation in recruitment activities is strictly voluntary, (2) the employee’s efforts in connection with recruitment activities are limited to after-hours solicitation among friends, relatives, neighbors and acquaintances as part of the employee’s social affairs.

Otherwise, referral bonuses “generally would constitute remuneration for employment and must be included in the regular rate unless another statutory exclusion applies.”  For instance, there is a statutory exclusion for payments similar to gifts made at Christmas time “or on other special occasions, as a reward for service” and the amount of the payment is not measured by or “dependent on hours worked, production, or efficiency.”  In addition, “if the bonus ‘is so substantial that it can be assumed that employees consider it part of” their wages or is paid pursuant to a legally binding contract, then it would not be considered as a gift.

Nonetheless, because the second part of the bonus was contingent in part on the employee remaining employed, it was similar to a longevity bonus which rewards the referring employee for an additional year of service.   If the bonus was payable regardless of whether the referring employee remained employed or was payable after a brief period of time (like a single pay period), then it would not be contingent on the employee’s longevity and would similarly not be includable in the regular rate.  In addition, if there was no contractually binding obligation to pay the second part of the referral bonus, and the policy merely announced the “timing and amount of the payment,” it may still qualify as a type of gift instead of a longevity bonus.   “Mere preannouncement of the timing and amount of a longevity bonus does not prevent that bonus from being excludable as a gift . . .”

Finally, FLSA Op. No. 2020-15 explored when an employer was required to compensate employees while attending voluntary training (whether continuing professional education, courses directly related to their jobs and courses unrelated to their job).  Generally, training the employee receives during normal working hours is compensable even though the employee could have received the training outside normal work hours.  An employer is permitted to require employees to attend such training outside normal work hours, when it would generally not be compensable.  The DOL did not approve the employer’s practice of requiring employees to use paid time off to attend courses during working hours.

In general, the DOL regulations provide that ‘attendance at lectures, meetings, training programs and similar activities need not be counted as working time” if the following criteria are met: the employee’s attendance is voluntary and not during her regular working hours; the employee does not perform any productive work during the attendance and, with two exceptions, the course/lecture is not directly related to the employee’s job.  One of the exceptions is when the employer establishes educational programs which correspond to courses offered by independent bona fide educational institutions and are voluntarily attended by employees outside of working hours.  Another exception is when the employee voluntarily attends an independent school, etc. after working hours even if the courses are related to her job.

Assuming that employee attendance was voluntary and the employee did not perform any productive work, the DOL addressed the following situations:

1.      The employer is NOT required to compensate an employee who uses tuition reimbursement to attend outside working hours a webinar that is directly related to her job and also satisfies professional continuing educational requirements.

2.      It is questionable whether an employer is required to compensate an employee who uses tuition reimbursement to attend a webinar outside working hours that is directly related to his job, but does not satisfy professional continuing educational requirements because it was unclear whether the webinar corresponds to courses offered by educational institutions.

3.      The employer is required to compensate the same employee who attends the webinar during working hours.  It is irrelevant that the employee could have chosen to attend outside normal working hours.

4.      The employer is required to compensate an employee who uses tuition reimbursement to attend during working hours a webinar that does not satisfy professional continuing education requirements and is not directly related to his job.

5.      The employer is required to compensate an employee who uses tuition reimbursement to attend a webinar during working hours that is required for professional continuing education, but is not directly related to her job.

6.      The employer is NOT required to compensate an employee who uses tuition reimbursement to attend a weekend seminar outside her normal working hours that is directly related to her job and satisfies professional continuing educational requirements and is also not required to compensate her for her personal time traveling to and from the seminar even though the travel occurred during her normal working hours.   The travel at her own option for her sole convenience is not considered to be working hours.

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 change or be 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.

Wednesday, January 6, 2021

DOL Clarifies that Employees Need Not Be Paid for Time Spent Commuting To and From Work Even if Employee Worked from Home Part of the Same Day

 

At the end of the year, the DOL issued a number of FLSA opinion letters of interest to employers.  One involves the common situation where an employee works from home part of the day and works from the office for several hours.  Admn Op. No. FLSA2020-19.  In some scenarios, the situation arises because the employee has a personal appointment (i.e., medical or school or childcare) in the morning or early afternoon and the employer gave permission for the employee to work from home before and/or after the personal appointment.   The employee performs no work while commuting between locations and sets her own schedule. The employer inquired whether it was required to compensate the employee for his or her commuting time to or from the office on those days. “[W]hen an employee (a) chooses to perform some work before traveling to the office or (b) chooses to perform work at home after leaving the office, and in either case has sufficient time in between her telework and office work periods to use effectively for her own purposes, the time she spends traveling between home and office is not compensable.”

It is well known that an employer need not compensate an employee for time spent commuting to and from work before and after his or her workday. An employer also need not pay an employee for time spent on personal pursuits.  The question becomes whether the activity is primarily for the benefit of the employer or the employee.   However, it is also known that employees are supposed to be paid at least the minimum wage for their workday.

In general, the period between the commencement and completion on the same workday of an employee’s principal activity or activities is considered compensable, a principle known as the continuous workday doctrine.  An employee is generally not considered to be on duty, and the continuous workday doctrine does not apply, until she has performed her first principal work activity of the day – that is, her first task that is integral and indispensable to the duties that she was hired to perform.  Unlike ordinary commuting time, travel that is part of an employee’s principal activity, such as travel between different worksites between the start and the end of the workday, is considered to be part of the day’s work and is compensable.

The DOL found that the employee’s travel time in the hypothetical scenarios was not compensable because the employee was either off duty or engaged in normal commuting.  Even though, for instance, the employee left work early to attend a school conference and re-commenced work from home after the school conference, the employee spent the time during her commute and attending the conference for personal reasons.  “Though the off-duty regulation speaks of an employee who has been ‘definitely told in advance that . . . [she] will not have to commence work until a definitely specified hour,’ it applies with equal force here where the employee may freely choose the hour at which she resumes working.”

Similarly, when an employee works from home prior to a personal appointment and then takes a break to visit her physician before driving to work, she has been off duty for the time that she spent driving and visiting her physician.   “Her time remains noncompensable until she reaches the office and resumes working.”

The DOL also concluded that travel time between home and office is not compensable under either the worksite to worksite doctrine or under the continuous workday doctrine.   While employees must be compensated for the time spent commuting worksite-to-worksite, commuting from home to worksite and visa versa is not the same activity, regardless of when it occurs because the employer is not requiring the employee to travel to or from home as part of her job.  Rather, she is travelling for her own purposes during off-duty time.

Off duty time is also not compensable under the continuous workday doctrine whether it occurs in the break room, off site or commuting while conducting personal errands.  The employee was also free to determine her own stop and starting times and was not required to commence work at a particular time during that day.  If the rule were otherwise, the employer could conceivably be required to pay for time that the employee spent napping for more than an hour, etc.

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 change or be 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. 

Tuesday, December 22, 2020

Sixth Circuit Remands Students' FLSA Claim Against Vocational School

 

Last week, a divided Sixth Circuit reversed the plaintiffs’ partial summary judgment and remanded a FLSA minimum wage case brought by cosmetology students against a for-profit vocational school based on janitorial services that the students were required to provide when the educational salons were not serving customers.   Eberline v. Douglas J. Holdings, Inc., No. 19-1781 (6th Cir. 2020).   The court’s majority held that “when a plaintiff asserts an entitlement to compensation based only on a portion of the work performed in the course of an educational relationship, courts should apply the primary-beneficiary test we laid out in Laurelbrook only to that part of the relationship, not to the broader relationship as a whole.”  In re-evaluating the claims, the trial court was directed to consider many factors, including “the plaintiffs’ lack of expectation of payment; the educational value, both tangible and intangible, of the tasks under scrutiny; and the displacement of paid employees to the school’s competitive benefit in the commercial marketplace, . . . . as well as any other considerations that may “shed light on which party primarily benefits from the relationship.”  The “additional considerations might include: the mandatory or voluntary nature of the tasks; the relationship of the work at issue to the school curriculum, state regulations, and the school’s stated mission and educational philosophy; the type of work performed in the corresponding real-world commercial setting; and the academic credit received by the plaintiffs for the work.”  Finally, “before concluding any portion of plaintiffs’ work for [the school’ is compensable, the district court should determine whether the work at issue is for de minimis amounts of time or is practically speaking too difficult to record.”

According to the Court’s opinion, the students were required by state law to obtain a certain number of hours in classroom and practical instruction before graduating and becoming licensed.  The defendant salon operated a salon where only the students provided services to paying customers under the supervision of licensed instructors and were graded on the services provided and guest experience.   The salon also employed (for wages) a janitorial staff and other employees who also maintained the salon.  When there were few or no customers in the salon, the students were required to clean the service stations, and classrooms, etc.  “Students could also be asked to do laundry, restock shelves with products sold to customers, clean various stations where customer services are performed, and clean and replace coffee mugs, among other tasks.”  Students could even come in on weekends to perform cleaning work.  The students’ enrollment agreement with the school does not promise any compensation for the services rendered in the salon and the students did not expect any compensation for attending the school or to be hired by the school following graduation.

Students could attribute the hours spent performing these tasks towards their practical hours graduation requirements and were sent home from school for the day (delaying their graduation) if they refused to perform them.  They received academic credit for performing these tasks.  The time spent performing these tasks varied widely, from 30 minutes to four hours per day.  These tasks were not required by the state and are not mentioned in the school’s curriculum (other than general sanitation).   The students are never graded on how they perform these cleaning tasks.

In the litigation, the plaintiffs sought summary judgment on their entitlement to compensation for the time spent performing general cleaning and janitorial tasks.  The trial court found that the school was taking advantage of the students and held that they were entitled to be compensated for the time spent performing the cleaning and janitorial tasks.  The Sixth Circuit, while agreeing that the trial court should focus on the particular tasks being challenged instead of the parties’ entire relationship, reversed on the grounds that the trial court applied the incorrect analysis and failed to consider a number of factors which could affect the conclusion.

When analyzing FLSA claims brought by students of vocational schools, the Court had previously held that ” “the proper approach for determining whether an employment relationship exists in the context of a training or learning situation is to ascertain which party derives the primary benefit from the relationship.” Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518, 529 (6th Cir. 2011).

But before reaching the primary-beneficiary analysis in this case, we must answer two questions. First, do we apply the primary-beneficiary test at all when the work at issue is not part of the school’s educational curriculum? Second, given that the students claim an entitlement to compensation for some, but not all, of the work they performed during the course of the vocational program, do we apply the primary-beneficiary test to only that targeted segment of the program at issue or to the educational program as a whole? As we explain below, the Laurelbrook test governs this case and applies only to the activities at issue in the claim for compensation.

The trial court had determined that the cleaning and janitorial activities were not sufficiently related to the classroom instruction and therefore were not exempt from the FLSA.  The Sixth Circuit disagreed.

Its error stems from its central premise for departing from Laurelbrook’s test: that the activities at issue are “not within the training or learning situation.” Id. at 645. To be sure, the janitorial tasks assigned to the plaintiffs were not a part of [the school’s] written curriculum, not required by the state regulations governing cosmetology education, and not directly supervised by instructors. But other aspects of the relationship between [the school] and its students lead us to conclude that the janitorial work took place within the educational context, regardless of its ultimate educational benefit. The students were in the salons as part of the educational program, were assigned the tasks at issue by the same instructors who oversaw their practical training, received academic credit for the time spent on the tasks, and were told that they would be sent home—potentially delaying their graduation from the school—if they failed to complete the assigned tasks. We therefore conclude that the tasks spring from the students’ relationship with [the school], meaning that we must analyze this FLSA claim related to those tasks under the primary-beneficiary test as laid out in Laurelbrook.

The Court then concluded that the primary-beneficiary test should be applied only to the discrete tasks being challenged instead of to the parties’ entire relationship.  In Laurelbrook, the court had previously only examined the challenged tasks instead of the entire relationship of the parties.  Similarly, in other context, the FLSA has utilized analyses which separate tasks performed by an employee in determined whether they are exempt.  For instance, employees may volunteer for their non-profit employer  in a different context from their regular job.  Similarly, paid firefighters may volunteer as firefighters and EMS for different units. 

The Court found that its approach

rejects claims for compensation where the school receives an incidental benefit from a student’s work as part of the educational program. But it allows for the possibility of compensation for labor that—although related to the educational relationship in an attenuated way—does not actually provide a benefit to students that exceeds the benefit of free labor received by the school.

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 change or be 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.

Monday, August 31, 2020

DOL Issues New Opinion Letters on Exempt Status and Fluctuating Workweek


This morning, the DOL issued four new FLSA letter opinions.  One concerned the exempt status of part-time corporate trainers and one concerned eligibility for the fluctuating work week method of overtime compensation.

In the first letter, the employer asked about part-time corporate trainers who were paid a day rate and then extra hourly pay for training that they provided to executives of clients and developing materials for those training sessions.   Some trainers work as few as 15 days/year while other work on almost a full-time basis.  They are highly educated with an advanced knowledge in business finance and adult education.  Each trainer has at least a master’s degree and 10 years of experience and some Ph.D degree.  While the employees likely would have qualified for the learned professional exemption, they were not paid on a salary basis and, thus, could not be exempt.  While the extra hourly pay would not defeat the exemption, their payment of a day rate was not consistent with the salary basis test.

In the second letter, the question involved whether a non-exempt employee’s fluctuating work week had to fluctuate both above and below 40 hours/week in order to qualify for that method of calculating overtime compensation with a fixed salary.   While the regulations require that the employee’s working hours fluctuate from week to week, there is no requirement that those hours ever fluctuate below 40 hours per week.  Thus, when the employee’s work hours always fluctuate between 40 and 60 or 70 hours, they are still eligible to be paid on a fluctuating workweek basis.   The DOL also warned, however, that this method of overtime compensation has some restrictions:  employers cannot deduct from the fixed salary personal absences that the employee takes even in full day increments as employers can with other salaried or non-exempt employees.   But, employers can still impose disciplinary deductions from salary under this method of compensation.

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 change or be 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.

Tuesday, December 17, 2019

DOL Clarifies FLSA Regular Rate Calculation With New Regulation


Last week, the federal Department of Labor issued a new regulation updating how employers may calculate the “regular rate” for purposes of paying overtime compensation.  The regulation makes explicit that certain types of compensation may be excluded from the regular rate, including paying out unused paid time off and sick time, paid meal breaks (with certain exceptions), certain longevity bonuses, tuition reimbursement, and other perks, etc.  The new regulation will become effective on January 15, 2020.   There is a lot going on in employee compensation in the next month because, as previously reported here, the minimum salary for exempt employees will also rise on January 1 to $35,568/year (or $684/week) and the Ohio minimum wage increases on January 1 to $8.70/hour.  


As explained by the DOL, the new regulation will simplify the calculation of the regular rate by excluding perks that many employers provide to employees so that employers can avoid confusion and litigation, such as:


·       the cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;

·       payments for unused paid leave, including paid sick leave or paid time off;

·       payments of certain penalties required under state and local scheduling laws;

·       reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred "solely" for the employer's benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se "reasonable payments";

·        certain signing bonuses and longevity bonuses;

·       the cost of office coffee and snacks to employees as gifts;

·       discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples and;

·       contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.



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 change or be 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.

Wednesday, September 25, 2019

Start Your Engines: DOL Amends White Collar Salary Levels


Yesterday, the federal Department of Labor finally announced the issuance of a final regulation on the “white collar” overtime exemptions, raising the minimum required salary from approximately $23,400/year to $35,568/year (or $684/week).   For employees exempt under the “highly compensated” exemption, the minimum total annual compensation increases from $100k/year to $107,432/year (and the minimum salary increases as with the other exempt employees).   The new rule also permits employers to satisfy up to 10% of the minimum salary from nondiscretionary bonuses, incentive pay and commissions that are paid at least annually.  The new rule will take effect on January 1, giving employers three months to adjust their payrolls and examine whether to continue the exempt status of certain employees, or convert them to non-exempt status.  The new regulation replaces the Obama-era regulation that was to take effect on December 1, 2016 before it was stayed by a federal court and which had included annual increases in a higher minimum salary.


The salary basis test has been amended to include a variation of the Obama-era regulation provision permitting the 10% credit for non-discretionary bonuses, incentive compensation and commissions towards the minimum salary in §541.602(a)(3):


Up to ten percent of the salary amount required by § 541.600(a) may be satisfied by the payment of nondiscretionary bonuses, incentives and commissions, that are paid annually or more frequently. The employer may utilize any 52-week period as the year, such as a calendar year, a fiscal year, or an anniversary of hire year. If the employer does not identify some other year period in advance, the calendar year will apply. This provision does not apply to highly compensated employees under § 541.601.

The Obama-era rule required the variable compensation to be paid quarterly, instead of annually, but still only permitted a 10% credit.  


The regulation also almost doubles the minimum exempt salary for exempt employees in the motion picture industry, from $695/week to $1,043/week.

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.

Wednesday, June 12, 2019

FLSA Cases Keeping Sixth Circuit Court Occupied


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.

Tuesday, April 30, 2019

Sixth Circuit Mostly Affirms $5M FLSA Verdict


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.