Posts Tagged: charlottesville

Virginia’s Independent Contractor Misclassification Law: Control and Independence

On July 20, 2020 by coff5408 With 0 Comments - Insights, Legal Insight, Virginia Cases

Virginia’s misclassification of workers statute allows workers to file suit against their employers who have misclassified them as independent contractors. If the worker prevails, the court may award the worker any wages, employment benefits, or other compensation lost as a result of the employer improperly classifying the worker as an independent contractor.

Difference Between Independent Contractors and Employees

A true independent contractor is someone who is in business for himself or herself. He controls his work environment, invests his own money, and is not economically dependent on the companies for which he works. An employee, by contrast, generally is not in business for himself or herself and, compared to an independent contractor, is more economically dependent on the companies for which he works. Independent contractors have more control over their work than employees, who are generally subject to the control of the companies for which they render services.

The distinction is important. Employees generally are entitled to overtime compensation and minimum wages (if non-exempt), as well as employment benefits like health insurance, worker’s compensation, payroll taxes, and retirement benefits. Some of the specific benefits offered to employees may depend on the employer (like health insurance), whereas other benefits available to employees are determined by the law (like payroll taxes and overtime pay). Independent contractors generally do not receive overtime pay or employment benefits.

Due to the costs of employment benefits and overtime compensation, businesses that use contractors instead of employees can save a lot of money. For this reason, companies may sometimes try to classify workers as independent contractors, such as by having the workers sign independent contractor “agreements,” even though the workers are more properly classified as employees. This works to the detriment of the workers, who miss out on overtime compensation and other employment benefits available to employees.

Remedy for Employees Misclassified as Independent Contractors

Fortunately, Virginia law provides a remedy for workers who are incorrectly classified as independent contractors. The law allows an individual “who has not been properly classified as an employee” or his representative to bring a civil action for damages against his employer “for failing to properly classify the employee if the employer had knowledge of the individual’s misclassification.” VA Code § 40.1-28.7:7(A).

IRS Independent Contractor Guidelines: Control and Independence

The Virginia misclassification law creates a presumption that individuals paid remuneration for performing services are employees of the person paying them, and the payor the employer of the individual, “unless it is shown that the individual is an independent contractor as determined under the Internal Revenue Service guidelines.” VA Code § 40.1-28.7:7(B). This effectively puts the burden on the putative employer to show that the worker was not misclassified under IRS guidelines.

The IRS independent contractor guidelines, including the guidance available here, and the regulation at 26 CFR § 31.3121(d)-1, provide that whether a worker is an independent contractor depends on the worker’s “degree of control and independence.” Generally, the greater the worker’s control and independence, the more likely he is an independent contractor. Conversely, the less control the worker has over his work environment and the more dependent he is on the company or companies he works for, the more likely the worker is truly an employee. In making this assessment, the guidelines call for consideration of three categories of factors: behavioral control and independence, financial control and independence, and type of relationship.

Behavioral Control and Independence

“Behavioral control” refers to who has the right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. Significantly, the business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work. The IRS guidelines identity several categories of behavioral control, including:

Type of instructions given: An employee is generally subject to the business’s instructions about when, where, and how to work.
Degree of instruction: Generally, the more detailed the instructions, the more control the business exercises over the worker. The amount of instruction needed, however, varies among different jobs. Importantly, the key consideration is whether the business has retained the right to control the details of a worker’s performance or instead has given up that right. Where the business retains the right to control the details of the worker’s performance, this supports a finding that the worker is an employee.
Evaluation systems: If an evaluation system measures the details of how the work is performed, that suggests an employment relationship. If, on the other hand, the evaluation system measures just the end result, then this can point to either an independent contractor or an employee.
Training: If the business provides the worker with training on how to do the job, this indicates that the business wants the job done in a certain way. This is strong evidence that the worker is an employee.

The key question on the behavioral control factor, therefore, is does the company control or have the right to control what the worker does and how the worker does his or her job? The IRS’s behavioral control guidelines are available here.

Financial Control and Independence

“Financial control” refers to whether or not the business has the right to control the economic aspects of the worker’s job. The IRS guidelines identity several categories of financial control, including:

Significant investment: An independent contractor often has a significant financial investment in the equipment he uses in working for someone else. However, in many occupations, such as construction, workers spend thousands of dollars on the tools and equipment they use and are still considered to be employees.
Unreimbursed expenses: Independent contractors are more likely to have unreimbursed expenses than are employees.
Opportunity for profit or loss: Independent contractors generally have greater opportunity than employees to lose money (such as by expenses exceeding their income from the work) than employees.
Services available to the market: Independent contractors are generally free to seek out business opportunities. They often advertise, maintain a visible business location, and are available to work for many different companies in the relevant market.
Method of payment: An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job.

The key question on the financial control factor, ultimately, is who controls the business aspects of the worker’s job? These “business aspects” include things like how the worker is paid, whether expenses are reimbursed, and who provides tools, supplies, and equipment for the work. The IRS’s financial control guidelines are available here.

Type of Relationship

“Type of relationship” refers to how the worker and business perceive their relationship to each other. The IRS guidelines identity several categories of facts bearing on this assessment, including:

Written contracts: Although a contract may state that the worker is an independent contractor, this is not sufficient to make the worker an independent contractor. How the parties work together, considering all factors of control and independence, determines whether the worker is an employee or an independent contractor.
Employee benefits: Employee benefits include things like health insurance, pension plans, paid vacation, and disability insurance. Businesses usually do not grant these benefits to independent contractors. However, the lack of these types of benefits does not necessarily mean the worker is an independent contractor.
Permanency of the relationship: If a business hires a worker with the expectation that the relationship will continue indefinitely, instead of for a specific project or period, this is generally considered evidence of an employer-employee relationship.
Services provided as key activity of the business: If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. This would indicate an employer-employee relationship.

The key questions on the “type of relationship” factor include whether there are written contracts or employee-type benefits, whether the relationship continues, and whether the work performed is a key aspect of the business. The IRS’s guidelines on this factor are available here.

Notably, under the guidelines, an agreement stating that the worker is an independent contractor does not make him or her an independent contractor. At most, it is just one factor to consider. And when determining whether a worker is an employee or independent contractor, all of the above factors — behavioral control, financial control, and type of relationship — must be weighed.

Available Relief for Misclassified Workers

Under Virginia’s misclassification law, if a worker is misclassified as an independent contractor, the court may award the worker “damages in the amount of any wages, salary, employment benefits, including expenses incurred by the employee that would otherwise have been covered by insurance, or other compensation lost to the individual,” plus reasonable attorneys’ fees and costs. VA Code § 40.1-28.7:7(A).

This article also appears on TimCoffieldAttorney.net.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

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Steiner v. Mitchell: Integral and Indispensable Equals Compensable

On July 20, 2020 by coff5408 With 0 Comments - Employment, FLSA, Insights

In the oldie-but-goldie decision of Steiner v. Mitchell, 350 U.S. 247 (1956), the Supreme Court held that time workers spend on activities performed before or after regular working hours is compensable under the Fair Labor Standards Act, if the activities are “integral and indispensable parts of the principal activity” of the worker’s employment. This holding, and the reasoning behind it, is an important principle of “donning and doffing,” equipment preparation, security screening, and similar cases, where workers seek compensation for time spent performing work-related activities off the clock or outside of regular work hours.

Facts

Steiner operated a car-battery manufacturing plant. The plant’s production employees worked with some toxic chemicals. These included lead and sulphuric acid. In the manufacturing process, some of the materials gave off dangerous fumes. Some were inevitably spilled or dropped, becoming a part of the dust in the air. In general, the chemicals permeated the entire plant and everything and everyone in it. Id. at 249-50.

In an effort to make the plant safer and thereby increase the efficiency of its operation, Steiner equipped it with shower facilities and a locker room with separate lockers for work and street clothing. Also, Steiner furnished work clothes for the employees to wear. The cost of providing their own work clothing would be prohibitive for the employees, since the acid caused such rapid deterioration that the clothes sometimes lasted only a few days. The employees regularly changed into work clothes before the beginning of the productive work period, and showered and changed back at the end of that period. In addition, the company required the employees to take afternoon baths to minimize the amount of lead oxide absorbed into their blood. These measures were thought to protect the company and the employees. Id. at 250-52.

Steiner did not pay the employees for the time they spent in these activities, which together amounted to about 30 minutes per day. Steiner conceded that the employees’ clothes-changing and showering activities were indispensable to and integrally related to the performance of their productive work. Steiner, however, contended that these activities fell outside the concept of a “‘principal activity’ and that, being performed off the production line and before or after regular shift hours, the time employees spent doing them was not compensable time under the Fair Labor Standards Act. Id. at 250-52.

The Court’s Decision

The question for the Court was whether the time employees spent changing clothes and showering was compensable under the FLSA in light of the Portal-to-Portal Act, which provided that time spent on activities “preliminary to or postliminary to” an employee’s “principle activities” was not compensable under the FLSA.

The Court decided that this time was compensable. As the backdrop to this conclusion, the Court explained Congress passed the Portal–to–Portal Act in response to the “unexpected liabilities” created by a broad judicial interpretation (as in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946)) of compensable time under the FLSA. See 29 U.S.C. § 251(a). Section § 4(a)(2) of the Portal–to–Portal Act therefore exempted employers from FLSA liability for claims based on “activities which are preliminary to or postliminary to” the principal activities that an employee is employed to perform. 29 U.S.C. § 254(a)(2). 350 U.S. at 253-54.

The Court then determined that for Steiner’s battery-plant employees, changing clothes and showering were parts of their “principal,” rather than their “preliminary” or “postliminary,” activities, within the meaning of § 4(a)(2). Therefore, time employees spent in these activities was required to be counted in measuring their compensable working time under the FLSA.

First, after reviewing the Portal-to-Portal Act’s legislative history, the Court determined Congress intended that activities employees performed either before or after the regular work shift, on or off the production line, would be compensable under the FLSA if those activities are “an integral part of and indispensable to their principal activities,” and are not specifically excluded by § 4(a)(1) of the Portal-to-Portal Act. 350 U.S. at 254-56. That section, § 4(a)(1), generally excludes time spent traveling to and from the workplace. 29 U.S.C. § 254(a)(1).

Second, the Court determined the “integral and indispensable” rule was supported by other provisions of and amendments to the Portal-to-Portal Act. 350 U.S. at 254-56.

Finally, the Court concluded that with respect to Steiner’s battery plant employees, changing clothes and showering were integral and indispensable parts of the principal activity of their employment. Therefore, the time the employees spent on these activities was compensable working time under the FLSA.

Analysis

In sum, Steiner stands for the proposition that time workers spend on activities performed before or after regular working hours, on or off the production floor, is compensable under the FLSA, if the activities are integral and indispensable parts of the principal activity of the worker’s employment. The reasoning behind this holding is an important principle of FLSA cases involving donning and doffing, equipment preparation, security screening, and similar claims where workers seek compensation for time spent performing work-related activities off the clock or outside of regular work hours.

This article also appears on TimCoffieldAttorney.com.

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Virginia Values Act: Powerful Protections for Virginia Employees

On June 20, 2020 by coff5408 With 0 Comments - Employment, Insights, Legal Insight

Effective July 1, 2020, the Virginia Values Act (“VVA”) offers sweeping protections for Virginia workers against several categories of discrimination. The law is broader in scope than some similar federal laws, covers smaller employers than federal laws, and unlike most federal employment laws, is not subject to a cap on compensatory damages. In short, it is a powerful law for protecting the rights of Virginia employees.

This post will discuss some of the key provisions of the VVA, which amends the Virginia Human Rights Act (“VHRA”). The bulk of the new law as it relates to employment rights is codified at VA Code §§ 2.2-3900-3908.

Scope of Prohibited Discrimination

The VVA makes it illegal under the VHRA for an employer to:

Fail or refuse to hire, discharge, or otherwise discriminate against any individual with respect to such individual’s compensation, terms, conditions, or privileges of employment because of such individual’s race, color, religion, sex, sexual orientation, gender identity, marital status, pregnancy, childbirth or related medical conditions including lactation, age, status as a veteran, or national origin.

VA Code § 2.2-3905(B). The prohibition against race discrimination includes a prohibition on hairstyle discrimination. This is because a distinct piece of legislative, House Bill 1514, clarified:

The terms “because of race” or “on the basis of race” or terms of similar import when used in reference to discrimination in the Code and acts of the General Assembly include because of or on the basis of traits historically associated with race, including hair texture, hair type, and protective hairstyles such as braids, locks, and twists.

VA Code § 2.2-3901(B). Also notably, House Bill 827 expanded the VHRA’s prohibition against pregnancy discrimination to allow a cause of action against an employer who

refuse[s] to make reasonable accommodation to the known limitations of a person related to pregnancy, childbirth, or related medical conditions, unless the employer can demonstrate that the accommodation would impose an undue hardship on the employer.

VA Code § 2.2-3904(A). Under the law, these reasonable pregnancy accommodations may include:

more frequent or longer bathroom breaks, breaks to express breast milk, access to a private location other than a bathroom for the expression of breast milk, acquisition or modification of equipment or access to or modification of employee seating, a temporary transfer to a less strenuous or hazardous position, assistance with manual labor, job restructuring, a modified work schedule, light duty assignments, and leave to recover from childbirth.

VA Code § 2.2-3904(A). The amended VHRA also makes it unlawful for employers to retaliate against workers for seeking such accommodations. See VA Code § 2.2-3905(B)(7).

Motivating Factor Causation Standard for Discriminatory Employment Practices

The amended VHRA makes discrimination for any of the specified reasons unlawful if the discrimination was a “motivating factor” of an employment practice, even if other, non-discriminatory, factors also played a role in the practice. This generally makes it unlawful, except where provided elsewhere in the law, for

an employer to use race, color, religion, sex, sexual orientation, gender identity, marital status, pregnancy, childbirth or related medical conditions, age, status as a veteran, or national origin as a motivating factor for any employment practice, even though other factors also motivate the practice.

VA Code § 2.2-3905(B)(6).

Employer Defenses and Exceptions

The amended VHRA does include some Title VII-esque exceptions from its prohibitions on certain types of employment discrimination. These include:

Where “religion, sex, or age is a bona fide occupational qualification reasonably necessary to the normal operation” of that particular employer;

Where the employer is a religious educational institution and it hires or employs employees of its particular religion;

Where the employer applies different standards of compensation, or different terms, conditions, or privileges of employment, pursuant to a “bona fide seniority or merit system,” or a system that measures earnings by quantity or quality of production, or to employees who work in different locations, provided that such differences are not the result of an intention to discriminate because of race, color, religion, sex, sexual orientation, gender identity, marital status, pregnancy, childbirth or related medical conditions, age, status as a veteran, or national origin;

Where an employer gives and acts upon the results of any “professionally developed ability test,” provided that such test, its administration, or an action upon the results is not designed, intended, or used to discriminate on any of the prohibited bases;

Where an employer provide reasonable accommodations related to pregnancy, childbirth or related medical conditions, and lactation, when such accommodations are requested by the employee; and

Where an employer to conditions employment or premises access based upon citizenship where the employer is subject to any requirement imposed in the interest of the national security of the United States under any security program in effect pursuant to or administered under any statute or regulation of the federal government or any executive order of the President of the United States.

VA Code § 2.2-3905(C).

Retaliation Prohibited

Importantly, the amended VHRA prohibits retaliation for opposing unlawful employment practices or for filing a complaint or participating in an investigation under the VHRA. VA Code § 2.2-3905(B)(7).

Employer Coverage

The amended VHRA has a slightly broader scope than Title VII and the federal Age Discrimination in Employment Act (“ADEA”) when it comes to which employers are subject to its requirements. Title VII generally applies to employers with 15 or more employees; the ADEA applies to employers with 20 or more employees. In cases of discrimination that are not unlawful discharges, the amended VHRA parallels Title VII, applying to employers “employing 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year, and any agent of such a person.” In cases of unlawful discharge, the amended VHRA covers more employers than Title VII. When the unlawful discharge is not based on age, the amended VHRA applies to employers with more than 5 employees. When the unlawful discharge is based on age, the amended VHRA applies to employers with more than 5 but fewer than 20 employees. VA Code § 2.2-3905(A).

Age Harassment

Unlike the federal ADEA, which only allows recovery of lost wages and liquidated damages, the amended VHRA allows general compensatory/emotional distress and punitive damages for age discrimination. The practical effect of these additional remedies is that the VHRA covers more types of age discrimination than the ADEA. This is because individuals subject to distressing age-based harassment at work, but who do not suffer lost wages, may have a viable legal claim for damages under the amended VHRA, where they did not have a viable claim for damages under the ADEA.

Damages Provisions: Uncapped Compensatory Damages and a Higher Punitive Damages Cap

The amended VHRA allows for a private cause of action in state court. VA Code § 2.2-3908(A). Unlike Title VII claims, which are subject to caps on compensatory and punitive damages ranging from $50,000 to $300,000, depending on the size of the employer, claims brought under the amended VHRA are not subject to a cap on compensatory damages. See VA Code § 2.2-3908(B). Punitive damages are subject to Virginia’s $350,000 cap. VA Code § 8.01-38.1.

Therefore, under the amended VHRA, even a small employer could be required to pay compensatory damages of more than $300,000, plus punitive damages of up to $350,000. This makes the damages provision of the amended VHRA far more powerful than Title VII. This is because Title VII limits the exposure of the smallest employers to $50,000 in compensatory and punitive damages combined, and limits the exposures of the largest employers to $300,000 in compensatory and punitive damages combined. The amended VHRA has no cap on compensatory damages and a $350,000 cap on punitive damages.

In addition, the amended VHRA provides that a prevailing party may be awarded reasonable attorney’s fees and costs.

Administrative Procedure

Similar to Title VII and the ADEA, the amended VHRA requires employees to follow an administrative procedure before bringing their claims in court. Specifically, an employee seeking to pursue a lawsuit against an employer for unlawful discrimination under the VHRA must first file a complaint with the Virginia Division of Human Rights. The complaint should provide sufficient details about “the time, place, and facts surrounding the alleged unlawful discrimination.” VA Code §§ 2.2-3908(A) & 2.2-3907(A).

After the complaint is perfected, the Division will serve a charge on the respondent and send a notice to all parties with important information. VA Code § 2.2-3907(B). The parties have the option of agreeing to submit the matter to voluntary mediation. VA Code § 2.2-3907(C). If the parties do not agree to mediation, or if mediation is not successful, the Division will investigate “to determine whether there is reasonable cause to believe the alleged discrimination occurred.” VA Code § 2.2-3907(D).

If the Division concludes there is no reasonable cause, it will dismiss the charge and issue to the employee a notice of his right to commence a civil action in court. VA Code § 2.2-3907(E). This is similar to the right-to-sue letters issued by the EEOC in federal Title VII cases, which create a 90-day window for filing suit. VA Code § 2.2-3907(E).

If the Division concludes there is reasonable cause to believe discrimination occurred, the Division must notify the parties and “shall immediately endeavor to eliminate any alleged unlawful discriminatory practice by informal methods.” VA Code § 2.2-3907(F). If such a resolution proves “unworkable,” the Division will be given notice of his right to commence a civil action. Id.

During the administrative investigation, either the Division or the complainant may also ask a court for certain temporary relief, pending final determination of the administrative proceedings. VA Code § 2.2-3907(G). However, such a petition must contain a certification by the Division that the particular matter presents exceptional circumstances in which irreparable injury will result from unlawful discrimination in the absence of temporary relief. Id.

Similar to the federal EEOC process, the employee can request that the Division issue notice of suit rights if (1) 180 days have passed since the complaint was filed or (2) the Division determines the investigation is unlikely to conclude within 180 days. VA Code § 2.2-3907(H).

This article also appears on TimCoffieldAttorney.net.

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Tyson Foods v. Bouaphakeo: Representative Proof in Wage Classes

On May 20, 2020 by coff5408 With 0 Comments - Employment, Insights, Legal Insight, Supreme Court Cases

In Tyson Foods, Inc. v. Bouaphakeo, 136 S.Ct. 1036 (2016), the Supreme Court held that representative proof from a sample, based on an expert witness’s estimation of average time that employees spent donning and doffing protective gear, could be used to show predominance of common questions of law or fact for purposes of class certification. The Court also reaffirmed the long-held FLSA principle that where an employer fails to keep accurate time records, an employee can meet her burden by providing evidence showing hours worked as a matter of just and reasonable inference.

Facts

The plaintiffs worked for Tyson Foods. These employees worked in the kill, cut, and retrim departments of a Tyson’s pork processing plant in Iowa. Their work required them to wear protective gear, but the exact composition of the gear depended on the tasks a worker performed on a given day. Tyson compensated some, but not all, employees for this donning and doffing, and did not record the time each employee spent on those activities.

The employees filed suit, alleging that the donning and doffing were integral and indispensable to their hazardous work and that Tyson’s policy not to pay for those activities denied them overtime compensation required by the Fair Labor Standards Act of 1938 (FLSA). They also raised a claim under an Iowa state wage law.

The employees sought certification of their state claims as a class action under Federal Rule of Civil Procedure 23 and certification of their FLSA claims as a “collective action” under 29 U.S.C. § 216. Tyson objected to certification of both classes, arguing that, because of the variance in protective gear each employee wore, the employees’ claims were not sufficiently similar to be resolved on a classwide basis.

The District Court concluded that common questions, such as whether donning and doffing protective gear was compensable under the FLSA, were susceptible to classwide resolution even if not all of the workers wore the same gear.

To recover for a violation of the FLSA’s overtime provision, the employees had to show that they each worked more than 40 hours a week, inclusive of the time spent donning and doffing. Because Tyson failed to keep records of this time, the employees primarily relied on a study performed by an industrial relations expert, Dr. Kenneth Mericle. Mericle conducted videotaped observations analyzing how long various donning and doffing activities took, and then averaged the time taken to produce an estimate of 18 minutes a day for the cut and retrim departments and 21.25 minutes for the kill department. These estimates were then added to the timesheets of each employee to ascertain which class members worked more than 40 hours a week and the value of classwide recovery.

Tyson argued that the varying amounts of time it took employees to don and doff different protective gear made reliance on Mericle’s sample improper, and that its use would lead to recovery for individuals who, in fact, had not worked the requisite 40 hours. The jury awarded the class about $2.9 million in unpaid wages. The Eighth Circuit affirmed the judgment and the award. 136 S.Ct. 1036 at 1039-45.

The Court’s Decision

The Supreme Court affirmed.

First, the Court observed that before certifying a class under Rule 23(b)(3), a district court must find that “questions of law or fact common to class members predominate over any questions affecting only individual members.” Fed R. Civ. R. 23(b)(3). In Tyson Foods, the parties agreed that the most significant question common to the class was whether donning and doffing protective gear is compensable under the FLSA. Tyson claimed, however, that individual inquiries into the time each worker spent donning and doffing predominated over that common question. The employees argued that individual inquiries were unnecessary because it could be assumed that each employee donned and doffed for the same average time observed in Mericle’s sample. 136 S.Ct. 1036 at 1045-46.

Second, the Court observed that whether and when statistical evidence like an expert sample could be used to establish classwide liability depends on the purpose for which the evidence is being introduced and on “the elements of the underlying cause of action.” 136 S.Ct. at 1046 (quoting Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011). The Court then reasoned that because a representative sample may be the only feasible way to establish liability, it cannot be deemed improper merely because the claim is brought on behalf of a class. Thus, the employees could show that Mericle’s sample was a permissible means of establishing hours worked in a class action by showing that each class member could have relied on that sample to establish liability had each brought an individual action. 136 S.Ct. at 1046-47.

Third, and perhaps most importantly, the Court discussed how its decision in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946) showed why the sample was permissible under the circumstances in Tyson Foods.

The Court observed that in Mt. Clemens Pottery, where an employer violated its statutory duty to keep proper time records, the Court concluded the employees could meet their burden by proving that they in fact “performed work for which [they were] improperly compensated and … produc[ing] sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.” Id. at 687. In Tyson Foods, similarly, the employees sought to introduce a representative sample to fill an evidentiary gap created by the employer’s failure to keep adequate records. Had the employees proceeded with individual lawsuits, each employee likely would have had to introduce Mericle’s study to prove the hours he or she worked. The representative evidence was a permissible means of showing individual hours worked. 136 S.Ct. at 1046-47.

Fourth, the Court discussed how its holding was consistent with Wal–Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). In Dukes, as in Tyson Foods, the underlying question was whether a sample could have been used to establish liability in an individual action. In Dukes, the Court pointed out, the employees were not similarly situated, so none of them could have prevailed in an individual suit by relying on depositions detailing the ways in which other employees were discriminated against by their particular store managers. In contrast, the Tyson Foods employees, who worked in the same facility, did similar work, and were paid under the same policy, could have introduced Mericle’s study in a series of individual suits. 136 S.Ct. at 1048.

The Court went on to address the proposed bright-line rules advocated by the parties and their respective amici. The Court determined that the Tyson Foods case was “no occasion” to adopt broad and categorical rules governing the use of representative and statistical evidence in class actions. Rather, the Court observed, the ability of a party to use a representative sample to establish classwide liability depends on the purpose for which the sample is being introduced and on the underlying cause of action. In FLSA actions, the Court emphasized, inferring the hours an employee has worked from a study such as Mericle’s has been permitted by the Court so long as the study is otherwise admissible. 136 S.Ct. at 1049 (citing Mt. Clemens, 328 U.S. at 687).

Finally, the Court addressed Tyson’s argument that the employees were required to demonstrate that uninjured class members would not recover damages awards. The Court declined to address that question, because the damages awarded by the jury had not yet been disbursed and the record did not indicate how it would be disbursed. 136 S.Ct. at 1049-50.

Analysis

In sum, the Tyson Foods Court held that where an employer does not keep accurate time records, the employee can provide a reasonable estimate of time worked for purposes of the FLSA. Thus, representative proof from a sample, based on an expert witness’s estimation of average time that employees spent donning and doffing protective gear, could be used to show predominance of common questions of law or fact for purposes of class certification.

The case reaffirmed the important FLSA principle of Mt. Clemens Pottery that when an employer fails to keep proper time records, the employees could meet their burden by proving that they in fact “performed work for which [they were] improperly compensated and … produc[ing] sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.” 328 U.S. at 687.

This article was also published to TimCoffieldAttorney.com.

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FLSA Executive Employee Exemption: Management and Direction

On April 20, 2020 by coff5408 With 0 Comments - FLSA, Insights, Legal Insight

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of their job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees.

To qualify for a white collar exemption, employees must be paid on a salary basis at not less than $684 per week (as of January 1, 2020) and have job duties that satisfy certain requirements. Importantly, job titles do not determine whether an employee is exempt from the FLSA. For an employee to be exempt, her actual real-life job duties and salary must meet all the requirements of the FLSA and the Department of Labor’s implementing regulations.

This post will focus on the exemption for executive employees. The Department of Labor is also an excellent resource for information about the executive employee exemption. The DOL’s implementing regulations with respect to the executive employee exemption are generally located at 29 CFR §§ 541.100-106.

Executive Employee Criteria

To qualify for the executive employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must meet all of the following requirements:

The employee must be compensated on a “salary basis” (as defined in 29 CFR § 541.602) at a rate not less than $684 per week (lower amounts apply for non-federal employees in U.S. territories);

The employee’s primary duty must be management of the enterprise, or management of a customarily recognized department or subdivision of the enterprise;

The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

29 CFR § 541.100.

These requirements contain several terms of art, which the Department of Labor has defined in its implementing regulations.

Definition of “Primary Duty”

As used in the FLSA regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty is based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitation, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

What Is Management?

Under the FLSA regulations for executive employees, “management” generally includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures. 29 CFR § 541.102.

Department or Subdivision Verses a “Mere Collection of Employees”

The executive employee regulations clarify that the statutory phrase “a customarily recognized department or subdivision” is intended to distinguish between a “mere collection of employees” assigned from time to time to a specific job or series of jobs and a unit with permanent status and function. A customarily recognized department or subdivision must have a permanent status and a continuing function. For example, a large employer’s human resources department might have subdivisions for labor relations, pensions and other benefits, equal employment opportunity, and personnel management, each of which has a permanent status and function. 29 CFR § 541.103.

Customarily and Regularly

The regulations also define the phrase “customarily and regularly.” It means a frequency greater than occasional but less than constant. It includes work “normally and recurrently done every workweek”; it does not include isolated or one-time tasks. 29 CFR § 541.701.

Two or More Other Employees

To qualify as an exempt executive, the employee must customarily and regularly direct the work of “two or more” other employees. The regs delve into the meaning of the phrase “two or more other employees.” It means two full-time employees or their equivalent. For example, one full-time and two half-time employees are equivalent to two full-time employees. The supervision can be distributed among two, three or more employees, but each such employee must customarily and regularly direct the work of two or more other full-time employees or the equivalent. For example, a department with five full-time nonexempt workers may have up to two exempt supervisors if each supervisor directs the work of two of those workers.

An employee who just assists the manager of a particular department and supervises two or more employees only in the actual manager’s absence does not meet this requirement for the executive exemption.

Significantly, hours worked by an employee cannot be credited more than once for different executives. Thus, a shared responsibility for the supervision of the same two employees in the same department does not satisfy this requirement. However, a full-time employee who works four hours for one supervisor and four hours for a different supervisor, for example, can be credited as a half-time employee for both supervisors. 29 CFR § 541.104.

What Is Particular Weight?

If the putative executive cannot hire or fire other employees, then to qualify for the exemption the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given “particular weight.”

The regs attempt to define “particular weight.” To determine whether a putative executive’s suggestions and recommendations about changes in employment status are given particular weight, factors to consider include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations, and the frequency with which such suggestions and recommendations are made, requested, and relied upon.

Generally, an executive’s suggestions and recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include occasional suggestions about the change in status of a co-worker. An employee’s suggestions and recommendations may still be deemed to have “particular weight” even if a higher-level manager’s recommendation has more importance and even if the employee does not have the authority to make the ultimate decision as to the employee’s change in status. 29 CFR § 541.105.

Special Exemption for Business Owners

The executive regulations establish a special exemption for business owners. Under that rule, an employee who owns at least a bona fide 20-percent equity interest in the enterprise in which she is employed, regardless of the type of business organization, and who is actively engaged in its management, is considered a bona fide exempt executive. The salary requirements for executives do not apply to those who qualify as business owners under this regulation.

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which, as of January 1, 2020, must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they “customarily and regularly” perform at least one of the duties of an exempt executive, administrative or professional employee. 29 CFR § 541.601.

As noted above, the term “customarily and regularly” means a frequency that must be “greater than occasional” but which “may be less than constant.” It includes work “normally and recurrently done every workweek”; it does not include isolated or one-time tasks. 29 CFR § 541.701.

This article was also published to TimCoffieldAttorney.net.

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Comcast v. NAAAM: Law of Causation in 1981 Claims

On March 20, 2020 by coff5408 With 0 Comments - Civil Rights, Insights, Legal Insight, Supreme Court Cases

In Comcast Corp. v. National Association of African American-Owned Media, No. 18-1171, __ U.S. __ (March 23, 2020), the Supreme Court held that race-discrimination claims brought under the Civil Rights Act of 1886, 42 U.S.C. § 1981, are subject to a but-for standard of causation.

Background

The Civil Rights Act of 1886, now codified at 42 U.S.C. § 1981, provides that “[a]ll persons … shall have the same right … to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens[.]” The law has been interpreted as, inter alia, prohibiting discrimination because of race in employment and other kinds of contractual relationships.

A similar discrimination law, Title VII of the Civil Rights Act, specifically provides for a “motivating factor” causation standard — that is, an employee can prevail on a Title VII race discrimination claim by proving that her race was a “motivating factor for any employment practice, even though other factors also motivated that practice.” 42 U.S.C. § 2000e-2(m).

The statutory language of 42 U.S.C. § 1981, however, does not specify the causation standard for proving race discrimination under § 1981.

The causation standard under § 1981 is important for employees because this law is, in some ways, more powerful than Title VII. For example, while Title VII race discrimination claims are subject to caps on compensatory and punitive damages, see 42 U.S.C. § 1981a, race discrimination claims under § 1981 are not subject to damages caps.

Facts

An African-American-owned television-network operator (ESN) sought to have Comcast carry its channels. Comcast refused, citing lack of programming demand and various other reasons. ESN sued Comcast for race discrimination under 42 U.S.C. §1981, alleging that Comcast’s refusal to carry ESN’s channels violated the law, which guarantees “[a]ll persons . . . the same right . . . to make and enforce contracts . . . as is enjoyed by white citizens.” 42 U.S.C. § 1981.

The District Court dismissed ESN’s complaint for failing plausibly to show that, “but for” racial animus, Comcast would have contracted with ESN. The Ninth Circuit reversed, holding that ESN needed only to plead facts plausibly showing that race played “some role” in Comcast’s decisionmaking process. Comcast appealed.

The Court’s Decision

The Supreme Court vacated and remanded, holding that a § 1981 plaintiff bears the burden of showing that the plaintiff’s race was a “but-for” cause of its injury.

In so holding, the Court observed that a tort plaintiff typically must prove but-for causation — meaning that the plaintiff’s injury would not have happened in the absence of the offending conduct (in this context, racial animus). See University of Tex. Southwestern Medical Center v. Nassar, 570 U. S. 338, 347 (2013) (discussing tort principles and holding that but-for causation applied to Title VII retaliation claims).

ESN argued that § 1981 creates an exception to this general principle, such that a § 1981 plaintiff only bears the burden of showing that race was a “motivating factor” in the defendant’s challenged decision. No. 18-1171 at 3-12. The Court rejected this argument.

First, the court determined that “several clues, taken collectively,” made clear that a but-for causation standard applied to § 1981. For instance, the Court noted that the statute’s text suggested but-for causation: An ordinary English speaker would not say that a plaintiff did not enjoy the “same right” to make contracts “as is enjoyed by white citizens” if race was not a but-for cause affecting the plaintiff’s ability to contract. Id. at 4-8.

The Court went on to discuss the larger structure and history of the Civil Rights Act of 1866 as providing further clues in support of a but-for causation standard. For example, when § 1981 was first enacted, it did not provide a private enforcement mechanism for violations. That right was “judicially created,” decades later, in Johnson v. Railway Express Agency, Inc., 421 U. S. 454, 459 (1975). The Court observed that during the era of Johnson v. Railway Express, the Court usually insisted that the legal elements of “implied” causes of action be at least as demanding as those found in analogous statutory causes of action.

The Court found this rule useful, as a neighboring section of the 1866 Act uses the terms “on account of” and “by reason of,” and these phrases are often held to indicate but-for causation. Another provision provides that in cases not provided for by the 1866 Act, the common law shall govern. The Court noted that back in 1866, the common law usually treated a showing of but-for causation as a prerequisite to a tort suit. The Court further cited some of its own precedents as confirming its assessment that the statute’s language and history called for but-for causation. See, e.g., Johnson, 421 U.S., at 459–460; Buchanan v. Warley, 245 U.S. 60, 78–79 (1917). No. 18-1171 at 4-8.

Second, the Court rejected ESN’s argument that the “motivating factor” causation test in Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(m), should also apply to § 1981 cases. The Court observed that it had already rejected attempts to extend Title VII’s “motivating factor” standard to other laws. See, e.g., Gross v. FBL Financial Services, Inc., 557 U.S. 167 (2009) (Age Discrimination in Employment Act). The Court saw no reason to think the motivating factor standard would fit § 1981 claims any better.

Third, the Court further supported its conclusion by discussing the history behind Title VII’s motivating factor standard. The Court emphasized that when the motivating factor test was added to Title VII in the Civil Rights Act of 1991, Congress also amended § 1981 without mentioning “motivating factors.” No. 18-1171 at 10. The Court therefore found that even if ESN was correct that the 1991 amendments clarified that § 1981 addresses not just contractual “outcomes” but the whole contracting “process,” its claim that a process-oriented right necessarily pairs with a motivating factor causal standard was mistaken. No. 18-1171 at 10-11.

Finally, the Court rejected ESN’s argument that the burden-shifting framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), supported the application of a motivating factor standard to § 1981 claims. Whether or not McDonnell Douglas has some useful role in § 1981 cases, the Court observed that case was decided in a context and at a time when but-for causation was the undisputed test, and it does not mention a motivating factor test. No. 18-1171 at 11-12.

Analysis

In short, Comcast v. NAAAM held that race-discrimination claims brought under 42 U.S.C. § 1981 are subject to a but-for standard of causation. Although but-for causation does not require a plaintiff to prove racial discrimination was the only cause of an injury, the but-for standard is a somewhat higher standard of causation than the “motivating factor” standard permitted by Title VII. To show but-for causation in the employment context, a § 1981 plaintiff must show that the employment action at issue would not have occurred in the absence of racial discrimination.

This blog was also published to TimCoffieldAttorney.com.

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Families First Coronavirus Response Act: COVID-19-Related Paid Employee Leave Rights

On March 20, 2020 by coff5408 With 0 Comments - Insights, Wage Law

Enacted on March 18, 2020, the Families First Coronavirus Response Act (FFCRA) requires small and medium-sized employers to provide employees with paid emergency sick leave and/or paid expanded family and medical leave for specified reasons relating to the COVID-19 pandemic. The FFCRA also provides that covered employers will be reimbursed for complying with these requirements. The provisions will remain in effect through December 31, 2020.

This post will focus on the basic provisions of the FFCRA as they relate to employee rights to COVID-19-related emergency paid sick leave (under the Emergency Paid Sick Leave Act, which is part of FFCRA) and expanded family and medical leave (under the Emergency Family and Medical Leave Expansion Act, an amendment to the FMLA, and also part of the FFCRA). The Department of Labor is also an excellent resource for information about the FFCRA as it relates to both employee paid leave rights and employer paid leave requirements. Here are FFCRA information posters (non-federal employees and federal employees) prepared by DOL for employers to disseminate to employees.

Covered Employers

The FFCRA’s emergency paid sick leave and expanded family and medical leave provisions apply to private employers with fewer than 500 employees. The DOL has indicated that certain provisions may not apply to certain employers with fewer than 50 employees. For example, small businesses with fewer than 50 employees may qualify for an exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.

The provisions also apply to certain public employers. Most federal government employees are covered by Title II of the Family and Medical Leave Act. Because the FFCRA did not amend Title II of the FMLA, most federal employees are not covered by the FFCRA’s expanded family and medical leave provisions. However, federal employees covered by Title II of the FMLA are covered by the FFCRA’s emergency paid sick leave provisions.

Eligible Employees

As explained below, all employees of covered employers are eligible for two weeks of emergency paid sick time for specified reasons related to COVID-19. Employees employed for at least 30 days are eligible for up to an additional 10 weeks of paid family leave to care for a child under certain circumstances related to COVID-19. The FFCRA also provides some special rules for health care providers and emergency responders. In particular, the law allows employers of health care providers or emergency responders to elect to exclude those employees from eligibility for the leave provided under the FFCRA.

Summary of Emergency Paid Sick Leave Rights

With respect to emergency paid sick leave, the FFCRA generally provides that employees of covered employers are eligible to receive:

Two weeks (up to 80 hours) of paid sick leave at the employee’s full regular rate of pay where the employee is unable to work because she or he is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.

In other words, if an employee becomes quarantined or sick, the employee can receive paid sick leave at her or his full regular rate. If the employee’s child’s school closes because of the pandemic and the employee must take leave to care for the child, the employee can receive paid sick leave at two thirds his or her regular pay rate.

Qualifying Reasons for Emergency Paid Sick Leave

Under the FFCRA, an employee qualifies for emergency paid sick leave if the employee is unable to work or telework due to a need for leave because the employee:

is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
has been advised by a health care provider to self-quarantine related to COVID-19;
is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

Duration of Emergency Paid Sick Leave

Under the FFCRA’s emergency paid sick leave provisions, a full-time employee is eligible for two weeks (80 hours) of leave, and a part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period.

Calculation of Pay During Emergency Paid Sick Leave

The calculation of pay during emergency paid sick leave depends on the reason for the leave. If the employee requires leave because she or he

is subject to a Federal, State, or local quarantine or isolation order related to COVID-19,
has been advised by a health care provider to self-quarantine related to COVID-19, or
is experiencing COVID-19 symptoms and is seeking a medical diagnosis,

the employee is entitled to pay at either her or his full regular rate or the applicable minimum wage, whichever is higher. This emergency paid leave is capped at a maximum of $511 per day and $5,110 in the aggregate (over a 2-week period).

The rate of emergency paid sick leave is lower if the employee requires leave to care for someone else. If the employee requires leave because she or he

is caring for an individual subject to a Federal, State, or local quarantine order or who has been advised by a health care provider to self-quarantine related to COVID-19,
is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19, or
is experiencing any other “substantially-similar condition” specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury,

the employee is entitled to pay at two thirds her or his regular rate or two thirds the applicable minimum wage, whichever is higher. This emergency paid leave is capped at a maximum of $200 per day and $2,000 in the aggregate (over a 2-week period).

Paid sick leave under the FFCRA does not carry over from one year to the next. Employees are not entitled to reimbursement for unused leave upon termination, resignation, retirement, or other separation from employment.

Summary of Paid Expanded Family and Medical Leave Rights

In addition, the FFCRA generally provides that employees who have been employed by covered employers for at least 30 days are eligible to receive:

Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where the employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

In short, if the employee’s child’s school or daycare closes because of the pandemic and the employee must take leave to care for the child, the employee is eligible for up to 10 weeks of paid “expanded” FMLA leave at two thirds her or his regular pay rate.

Qualifying Reasons for Paid Expanded Family and Medical Leave

Under the FFCRA, an employee qualifies for expanded family and medical leave only if the employee requires leave to care for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.

Duration of Paid Expanded Family and Medical Leave

In this situation — where an employee requires leave to care for a child whose school or place of care is closed due to COVID-19 — the duration of leave again depends on whether the employee is full-time or part-time. The difference turns on hours typically worked per week.

A full-time employee is eligible for up to a total of 12 weeks of leave (two weeks of emergency paid sick leave, followed by up to 10 weeks of paid expanded family and medical leave) at 40 hours a week. A part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that same period.

Calculation of Pay During Paid Expanded Family and Medical Leave

In the expanded family and medical leave scenario — where an employee requires leave to care for a child whose school or place of care is closed due to COVID-19 — employees taking leave are entitled to pay at two thirds their regular rate or two thirds the applicable minimum wage, whichever is higher.

However, this paid leave is capped at a maximum of $200 per day and $12,000 in the aggregate (over a 12-week period). An employee has the option to substitute any accrued vacation leave, personal leave, or medical or sick leave for the first two weeks of partial paid leave under this part of the law.

Notice of Need for Leave

As with the FMLA, where an employee’s need for leave under the FFCRA is foreseeable, the employee should provide notice to the employer as soon as is practicable. After the first workday of paid sick time, an employer may require employees to follow reasonable notice procedures in order to continue receiving paid sick time.

This blog was also published to TimCoffieldAttorney.net.

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Genesis Healthcare v. Symczyk: Rule 68 and Collective Actions

On February 20, 2020 by coff5408 With 0 Comments - Employment, Insights, Legal Insight, Supreme Court Cases

In Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66 (2013), the Supreme Court held that a putative Fair Labor Standards Act collective action brought by one employee on behalf of others was no longer justiciable when, as conceded by the employee, her individual claim became moot before others joined the case.

Facts

Symzcyk worked for Genesis Healthcare as a registered nurse. In 2009, Symczyk brought a putative collective action under the FLSA on behalf of herself and “other employees similarly situated.” 29 U.S.C. § 216(b). She alleged Genesis violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks. Symcyzk, who remained the sole plaintiff throughout the case, sought statutory damages for the alleged violations.

After Symczyk filed suit, but before any other employees joined the suit, the employer sent Symczyk an offer of judgment under Federal Rule of Civil Procedure 68, which Symczyk ignored. The offer had proposed to pay all of her statutory damages, plus costs and reasonable attorney’s fees. The District Court, finding that no one else had joined the case, and that the Rule 68 offer fully satisfied Symczyk’s claim, concluded that Symczyk’s suit was moot. The court therefore dismissed the case for lack of subject-matter jurisdiction.

The Third Circuit reversed, holding that while Symczyk’s individual claim was moot, the collective action on behalf of other similar employees was not. The Third Circuit reasoned that allowing employers to use calculated Rule 68 offers to “pick off” named plaintiff-employees before certification would frustrate the goals of collective actions. The court therefore remanded the case to the trial court, with instructions to allow Symczyk to seek conditional certification of the collective action and move forward with the case on behalf of other employees who might join. See 569 U.S. at 69-71.

The Court’s Decision

The Supreme Court reversed. The Court held that because Symczyk had no “personal interest” in representing other putative, unnamed employees, nor any other kind of continuing interest that would render her suit not moot, the trial court properly determined it lacked subject-matter jurisdiction over the case.

At the outset, the Court declined to decide whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot. Symczyk, however, had conceded this point with respect to her claim and did not argue it on appeal. The Court therefore assumed, without deciding, that the employer’s offer to Symczyk mooted her individual claim. 569 U.S. at 72-73.

The Court then determined that “well-settled mootness principles” controlled the outcome of the case. Once Symczyk’s individual claim became moot, the Court determined that the suit became moot because she had no personal interest in representing others in the action. The Court rejected Symczyk’s contrary arguments because they relied on cases that arose in the context of Rule 23 class actions. The Court found those case inapposite, both because Rule 23 actions are “fundamentally different” from FLSA collective actions and because the cases were “inapplicable” to the facts in Symczyk’s case. 569 U.S. at 73-79.

The cases Symczyk rallied behind were Sosna v. Iowa, 419 U.S. 393 (1975) and United States Parole Comm’n v. Geraghty, 445 U.S. 388 (1980). Symczyk argued these cases meant she could seek certification of an FLSA collective action after her individual claim became moot. The Court determined Sosna and Geraghty did not support her position. In short, Sosna held that a class action is not rendered moot when the named plaintiff’s individual claim becomes moot after the class has been duly certified. Geraghty extended those principles to denials of class certification motions, and further provided that, where a putative class action would have acquired independent legal status but for the district court’s erroneous denial of class certification, a corrected ruling on appeal “relates back” to the time of the erroneous denial. See 445 U.S. at 404 and n. 11.

At first glance, these cases seemed like they supported Symczyk’s position. The Court observed, however, that Geraghty’s holding was explicitly limited to cases in which the named plaintiff’s claim remains live at the time the district court denies class certification. See 445 U.S. at 407 and n. 11. Symczyk, by contrast, had not yet moved for “conditional certification” when her claim became moot. Nor had the District Court anticipatorily ruled on any such request. Symczyk therefore had no certification decision to which her claim could have related back. More importantly, the Court emphasized that essential to Sosna and Geraghty was the fact that a putative class acquires an “independent legal status” once it is certified under Rule 23. By contrast, under the FLSA, “conditional certification” does not produce a class with an independent legal status, or join additional parties to the action. 569 U.S. at 73-75.

Second, the Court addressed a line of cases, like County of Riverside v. McLaughlin, 500 U.S. 44, 52 (1991), holding that an “inherently transitory” class-action claim is not necessarily moot upon the termination of the named plaintiff’s claim. The Court found these cases inapplicable. Symczyk argued that an employer’s use of Rule 68 offers to “pick off” a named plaintiff before the collective-action process is complete renders the action “inherently transitory.” But the Court observed the “inherently transitory” rationale was developed to address circumstances in which the defendant’s challenged conduct was effectively unreviewable because no plaintiff possessed a personal stake in the suit long enough for litigation to run its course. For this reason, the Court observed, the McLaughlin line of cases focused on the fleeting nature of the challenged conduct giving rise to the claim, not on the defendant’s litigation strategy. Unlike a claim for injunctive relief, a damages claim (like the FLSA claims at issue in Smyczk’s case) cannot evade review — the damage has been done, and can be measured and compensated. The Court further pointed out that an offer of full settlement cannot insulate such a claim from review. While dismissing Symzcyk’s case before certification would foreclose the putative other plaintiff-employees of Genesis from vindicating their rights in Symzcyk’s suit, those employees would remain free to do so in their own lawsuits. 569 U.S. at 75-77.

Finally, the Court addressed its decision in Deposit Guaranty Nat. Bank v. Roper, 445 U.S. 326 (1980), which Symczyk cited for her argument that the purposes served by the FLSA’s collective-action provisions would be frustrated by defendants’ use of Rule 68 to “pick off” named plaintiffs before the collective-action process has run its course. The Court found Roper did not support this argument. In Roper, the named plaintiffs’ individual claims became moot after the District Court denied their Rule 23 class certification motion and entered judgment in their favor based on defendant’s Rule 68 offer. The Roper Court held that the named plaintiffs could appeal the denial of certification because they possessed an ongoing, personal economic stake in the substantive controversy — namely, to shift a portion of attorney’s fees and expenses to successful class litigants. Symczyk, by contrast, conceded that her employer’s offer provided complete relief, and she asserted no continuing economic interest in shifting attorney’s fees and costs. Moreover, the Roper holding was tied to the unique significance of Rule 23 class certification decisions, distinguishing it from the FLSA collective action context. 569 U.S. at 77-79.

Analysis

In summary, Genesis held that a putative FLSA collective action brought by single employee was no longer justiciable when, as conceded by the employee, her individual claim became moot by an offer of judgment providing complete relief and no other employees had joined the case. The Court, however, declined to decide whether an unaccepted offer of judgment could render a plaintiff’s claim moot.

This blog was also published to TimCoffieldAttorney.com.

FLSA Administrative Employee Exemption: Discretion and Independent Judgment

On February 20, 2020 by coff5408 With 0 Comments - FLSA, Insights, Legal Insight

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of employees’ job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees.

This post will focus on the exemption for administrative employees. The Department of Labor is also an excellent resource for information about the administrative employee exemption. The DOL’s implementing regulations with respect to the administrative employee exemption are generally located at 29 CFR § 541.200-204.

Administrative Employee Criteria

To qualify for the administrative employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must meet all of the following requirements:

The employee must be compensated on a “salary basis” (as defined in 29 CFR § 541.602) or “fee basis” (as defined in 29 CFR § 541.605) at a rate not less than $684 per week (lower amounts apply for non-federal employees in U.S. territories);
The employee’s “primary duty” must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers;
The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

29 CFR § 541.200.

Definition of “Primary Duty”

As used in these regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitations, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

Definition of “Directly Related to Management or General Business Operations”

To meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business. This is different from, for example, working on a manufacturing production line or selling a product in a retail or service establishment. 29 CFR § 541.201(a).

As defined in the DOL regulations, work “directly related to management or general business operations” includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, Internet and database administration; legal and regulatory compliance; and similar activities. 29 CFR § 541.201(b)

Work Directly Related to Management or Operations of Customers

It’s worth noting that an employee may qualify for the administrative exemption if her primary duty is performing work directly related to the management or general business operations of the “employer’s customers.” 29 CFR § 541.201(a). This means that an employee who acts as a consultant to her employer’s clients or customers — as tax experts or financial consultants, for example — may qualify for the exemption. 29 CFR § 541.201(c).

Definition of “Discretion and Independent Judgment”

To qualify for the administrative exemption, an employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. As defined in the regs, the exercise of “discretion and independent judgment” involves comparing and evaluating possible courses of conduct and acting or making a decision after the various possibilities have been considered. 29 CFR § 541.202(a).

The phrase must be applied to all the facts, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision. 29 CFR § 541.202(b)&(c).

In making the “discretion and independent judgment” determination, the regulations provide examples of many factors to consider, including but not limited to:

whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;
whether the employee carries out major assignments in conducting the operations of the business;
whether the employee performs work that affects business operations to a substantial degree;
whether the employee has authority to commit the employer in matters that have significant financial impact;
whether the employee has authority to waive or deviate from established policies and procedures without prior approval
whether the employee has authority to negotiate and bind the company on significant matters; and
other similar factors identified in the regulation.

29 CFR § 541.202(b).The fact that an employee’s decisions may be revised or reversed after review does not necessarily mean the employee does not exercise discretion and independent judgment. 29 CFR § 541.202(c).

The exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources. It also “does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work.” 29 CFR § 541.202(e).

Definition of “Matters of Significance”

As used in the regulations, the term “matters of significance” refers to the level of importance or consequence of the work performed. 29 CFR § 541.202(a). An employee does not exercise discretion and independent judgment with respect to matters of significance just because the employer will experience financial losses if the employee fails to perform the job properly. 29 CFR § 541.202(f). For example, a messenger who is entrusted with carrying large sums of money does not exercise discretion and independent judgment with respect to matters of significance even though serious consequences may flow from the employee’s neglect. Id. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer. Id.

Administrative Employee Examples

The regulations contain many examples and explanations regarding specific categories of employees who typically may or may not qualify for the administrative employee exemption. Those examples and explanations are located at 29 CFR § 541.203.

Educational Establishments

The administrative exemption may also be available to employees who meet the salary basis or fee basis test, or on a salary basis which is “at least equal to the entrance salary for teachers in the same educational establishment,” and whose primary duty is “performing administrative functions directly related to academic instruction or training in an educational establishment.” 29 CFR § 541.204(a).

The term “educational establishment” means an elementary or secondary school system, an institution of higher education or other educational institution. 29 CFR § 541.204(c).

Academic administrative functions include operations directly in the field of education, and do not include jobs relating to areas outside the educational field. 29 CFR § 541.204(c). Employees engaged in academic administrative functions include: the superintendent or other head of an elementary or secondary school system, and any assistants responsible for administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program; the principal and any vice-principals responsible for the operation of an elementary or secondary school; department heads in institutions of higher education responsible for the various subject matter departments; academic counselors and other employees with similar responsibilities. 29 CFR § 541.204(c)(1).

These categories of academic employees may qualify for the administrative exemption because having a primary duty of performing administrative functions directly related to academic instruction or training in an educational establishment necessarily involves exercising discretion and independent judgment with respect to matters of significance.

Highly Compensated Employees

The term “customarily and regularly” means a frequency that must be “greater than occasional” but which “may be less than constant.” 29 CFR § 541.701. Tasks or work performed “customarily and regularly” includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks. Id.

This blog was also published to TimCoffieldAttorney.net.

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Falk v. Brennan: Law of Employment and Control

On January 20, 2020 by coff5408 With 0 Comments - Employment, Legal Insight, Supreme Court Cases

In Falk v. Brennan, 414 U.S. 190 (1973), the Supreme Court held that an entity is an “employer” under the Fair Labor Standards Act when it exercises substantial control over the terms and conditions of the work of the employees at issue.

Background

The Fair Labor Standards Act generally requires a covered “employer” to pay its covered nonexempt employees minimum wages for each hour worked and overtime wages for all hours worked in excess of 40 hours per workweek. 29 U.S.C. §§ 206(a) & 207(a). The FLSA defines “employer” as “includ[ing] any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). With some exceptions, the FLSA generally defines “employee” as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The FLSA defines “employ” as including “to suffer or permit to work.” 29 U.S.C. § 203(g).

The FLSA also provides that for an employer to be covered under the Act’s dollar-volume “enterprise” coverage provision, the employer must receive “annual gross volume of sales made or business done [] not less than $500,000[.]” 29 U.S.C. § 203(s)(1)(A)(ii).

Facts

D&F operated a property management company in Virginia. It rendered management services for the owners of several apartment complexes. Under its contracts with the apartment owners, D&F agreed to perform, on behalf of each owner and under his “nominal” supervision, “virtually all management functions that are ordinarily required for the proper functioning of an apartment complex.” 414 U.S. at 192. Those functions included advertising the apartments; signing, renewing, and canceling leases; collecting rents; instituting and settling all legal proceedings for eviction, possession of the premises, and unpaid rent; making necessary repairs and alterations; negotiating contracts for essential utilities and other services; purchasing supplies; paying bills; preparing operating budgets for the property owners’ review and approval; submitting periodic reports to the owners; and “hiring and supervising all employees required for the operation and maintenance of the buildings and grounds.” Id. at n4.

As compensation, D&F received a fixed percentage of the gross rents collected from each project. D&F deposited the rents it collected in local bank accounts. From these accounts it paid all expenses incurred in operating and maintaining the buildings. After deducting its compensation, as well as other expenses, D&F periodically transmitted payments to the various apartment owners. If disbursements for any apartment complex exceeded the gross rental receipts, the owner was required to reimburse D&F. 414 U.S. at 192-93. D&F collected about $8 million dollars per year in rents for all the buildings it managed. Id. at n6. However, its gross commissions received on those rentals were less than $500,000 per year. Id. at n10.

The Secretary of Labor filed suit against D&F on behalf of the maintenance workers, alleging that D&F violated the minimum wage, overtime, and recordkeeping requirements of the FLSA with respect to those workers. Id. Significantly, these employees worked under the supervision of D&F and were paid from the rents received at the apartment complexes where they worked. Under the contracts between the apartment owners and D&F, the maintenance workers were considered to be “employees of the project owners.” Id.

A central question for the Court was whether the maintenance workers were also employees of D&F, such that D&F was responsible for complying with the FLSA’s minimum wage, overtime, and recordkeeping requirements with respect to those workers.

A secondary question was which figure should be considered in determining whether D&F met the $500,000 threshold for enterprise coverage: D&F’s gross rentals collected ($8M annually), or D&F’s gross commissions on those rentals (less than $500,000).

The Court’s Decision

The Court held that in addition to the apartment owners, D&F was also an FLSA “employer” of the maintenance workers — even though the owners and D&F had agreed that the workers were employees only of the owners. The Court reached this decision by interpreting the operative provisions of the FLSA as speaking to the extent of control a potential “employer” exercises over a worker.

First, the Court observed that Section 203(d) of the FLSA defines “employer” as ‘any person acting directly or indirectly in the interest of an employer in relation to an employee.’ 29 U.S.C. § 203(d). It further noted that Section 3(e) defines ‘employee’ to include ‘any individual employed by an employer.’ 29 U.S.C. s 203(e). Significantly, the Court interpreted these two provisions as providing an “expansive[]” definition of “employer” — meaning that whether an entity was an FLSA employer, with the attendant minimum wage, overtime, and recordkeeping responsibilities, could not be controlled by an agreement between entities that only one of them would be the “employer.”

The Court further indicated that the relevant inquiry, in answering the “employer” question, was whether the potential employer had “substantial control of the terms and conditions of the work” the employees performed. Id. at 195. D&F, for example, appears to have had supervisory powers with respect to the maintenance workers at the buildings it managed. See id. at 193 (“These employees work under the supervision of D&F”). The Court therefore determined that “in view of the expansiveness of [the FLSA’s] definition of ‘employer’ and the extent of D&F’s managerial responsibilities at each of the buildings, which gave it substantial control of the terms and conditions of the work of these employees,” D&F was pursuant to the FLSA an ‘employer’ of the maintenance workers Id.

With respect to the dollar-volume limitation question, the Court observed that D&F “sells” only professional management services, and therefore the gross rentals it collected as part of rendering those services to building owners did not represent sales attributable to D&F. Id. at 197-201. Based on this reasoning, the Court concluded D&F’s commissions were the relevant measure of its gross sales made or business done for purposes of the dollar-volume limitation in Section 203(s)(1). Thus, even though D&F was an “employer” under the the terms of the FLSA, and an “enterprise” under Section 203(r), the FLSA did not apply to D&F because its gross sales were below the Section 203(s)(1) dollar-volume threshold. Id. at 201.

Analysis

In sum, Falk v. Brennan held that an entity is an “employer” under the FLSA when it exercises substantial control over the terms and conditions of the work of employees at issue. This decision later became relevant to the Department of Labor’s development of regulations guiding the analysis of FLSA “joint employment” situations. In those situations, where more than one entity benefits from the work of employees, the extent to which each entity exercises control over the terms and conditions of the workers’ employment is an important consideration in determining the entities’ respective or joint responsibilities under the FLSA. For the DOL’s analysis of its most recent changes to the rule (29 C.F.R. § 791) regarding joint employment, effective March 2020, go here.

This blog was also published to TimCoffieldAttorney.com.

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