CURRENT TRENDS AND TOPICS UNDERFAIR LABOR STANDARDS ACT

Don FotyKennedy Hodges, LLP

Background

Significant increase in the number of FLSA filings

1990 – 880 cases filed nationwide

2014 – 8,086 cases filed nationwide

Both the DOL and the Plaintiffs’ Bar have been very active recently

Department of Labor

In 2014, DOL brought over 10,000 cases nationwide

50/50 minimum wage and overtime claims

Most common industries targeted Restaurant –

5,118 Healthcare –

1,581 Agriculture –

1,430 Day Care – 1,144 Hotel – 1,049

Plaintiff’s Bar

4,859 FLSA cases filed in federal court past 6 months Florida – 1,128 New York – 918 Texas – 643 Georgia – 298 Illinois - 228

Does not include wage and hour cases filed in state court – i.e. California

Industries Targeted Nationally

1st - Restaurant Tip Credit Violations Requiring non-tip generating work at less than minimum

wage 2nd - Retail

Off-the-clock claims for bag checks Unpaid meetings Misclassification of store managers as exempt

3rd - Transportation Independent contractor violations Paying by the mile without overtime

Industries Targeted - Texas

Oil and Gas Industry Administrative

Exemption Day Rate Independent

Contractor Regular Rate of

Pay Meal Break

29 C.F.R. § 541.200

Administrative Exemption

Duties Test

A. “primary duty” of performing office or non-manual work directly related to the management or “general business operations” of the employer or the employer’s customers

B. “primary duty” that includes the exercise of discretion and independent judgment with respect to matters of significance

Clark v. Centene Co. of Texas, LLP, 44 F. Supp. 3d 674 (W.D. Tex. 2014)

Hanson, et al. v. Camin Cargo Control, Inc., 2015 WL 1737394 (Apr. 16, 2015)

Zannikos, et al. v. Oil Inspections (USA), Inc., 605 Fed. App’x 349 (Mar. 27, 2015)

Hanson v. Camin Cargo

Class of dispatchers in the oil and gas inspection industry

Summary judgment was granted by Magistrate Judge Smith

Reasoning: Element 2 not satisfied Dispatchers did not perform work related to

“general business operations” but to work related to the “service” provided to customers

Ancillary duties do not matter – only “primary” duty

Did not need to address element 3

Zannikos v. Oil Inspections

Marine superintendents who performed the following tasks:

Monitored oil transfers to ensure that it complied with the law Monitored loading of cargo to ensure that the it complied with the

law Reported losses and errors Ensured that transfers complied with company safety policies and

national standards Performed quality control functions, including inspecting loads

and equipment to identify potential problems with equipment or procedures

Made recommendations for quality control Oversaw the work of independent inspectors during the transfer

process

Ensured that the inspectors were using proper equipment and taking proper measurements

Zannikos v. Oil Inspections

Affirmed summary judgment of the trial court that the administrative exemption not applicable

Reasoning – the plaintiffs did not exercise sufficient “independent judgment and discretion” Observed the process – no independent

judgment and discretion Reported non-compliance – no independent

judgment and discretion Enforced pre-established policies and national

guidelines – no independent judgment and discretion

Day Rate Violations

Day Rate

Question – do the “white collar” exemptions apply to a worker who is paid solely on a day rate basis?

Element 1 – “Compensated on a salary or fee basis at a rate of note less than $455 per week”

Salary/Fee Basis Requirement

Regulations identify at least 7 different methods to pay an employee (1) hourly, (2) piece rate, (3) day rate, (4) job rate, (5)

salary, (6) fee basis, and (7) commissions

Only two are permissible for the “white collar” exemptions

Trahan v. Honghua Am., LLC, No. CIV.A. H-11-2271, 2013 WL 2617894, at *13 (S.D. Tex. June 10, 2013)

“To fall under the highly compensated employee exemption, an employee must be paid on a

salary or fee basis.…Here, Defendant's own evidence makes clear that Plaintiffs were paid on an hourly basis, not on a salaried basis.”

Salary Defined

Guaranteed, pre-determined amount each week that is not subject to variations based upon quantity or quality of work - 29 C.F.R. § 541.602

The employee must receive the same amount each week regardless of the number of hours or days worked.

Worker paid a day rate is not paid a predetermined amount each week

Fee Basis Defined

Set amount paid based upon the accomplishment of a single task. - 29 C.F.R. § 541.605

“[p]ayments based on the number of hours or

days worked and not on the accomplishment of a given single task are not considered payment on a fee basis.” - 29 C.F.R. § 541.605

Paid based upon number of days worked

Conclusion

Do the white collar exemptions apply to a worker paid solely on a day rate basis?

Answer: No

DOL Administrator’s Interpretation 2015-1

Independent Contractors

AI Number 2015-1

July 15, 2015 – DOL Wage and Hour Division issued AI Number 2015-1

Guidance to courts for determining when a worker is an employee or independent contractor

AI concludes – “most workers are employees under the FLSA’s broad definition.”

Control Factor

Minimized control factor “FLSA covers workers of an employer even if

the employer does not exercise the requisite control over the worker.”

“Economic dependence” is all that is necessary for control

Control factor does not take overtake the other factors

Full time worker, deriving all of his income from one employer will likely be considered an “employee”

Deference to AI

Martin v. Cooper Elec., Supply Co., 940 F.2d 896 (3rd Cir. 1991) DOL interpretations of the FLSA – “should be

given ‘considerable and in some cases decisive weight.’”

O’Conner v. Uber Tech., Inc., 2015 WL 5138097 (N.D. Cal. Sept. 1, 2015) Relied upon AI to certify case as Rule 23 Class

Action

Regular Rate of Pay

Regular Rate of Pay

All remuneration for employment must included except for those specifically excluded: Business expense reimbursements Premium payments for overtime Contributions to bona fide plans for

retirement, life, accident, health insurance, or similar benefits

Discretionary bonuses Gifts

29 U.S.C. § 207(e)

Business Expense Reimbursements

Employer bears the burden of proving that a reimbursed expense should be excluded Picton v. Excel Group, Inc., 192 F. Supp. 2d

706 (E.D. Tex. 2001). Two part test:

A. Is the payment primarily for the “benefit or convenience” of the employee or the employer?

B. If the payment is primarily for the “benefit or convenience” of the employer, than was the amount a reasonable approximate of the actual expense

Per Diem Payments

“[I]f the amount of the per diem or other subsistence payment is based upon and thus varies with the number of hours worked per day or week, such payments are part of the regular rate in their entirety.” DOL Field Operations Handbook

Gagnon v. United Technisource

Fifth Circuit affirmed summary judgment for an employee for the employer’s failure to include the amount of a per diem in the regular rate of pay

Amount of per diem was expressed in terms of an hourly rate

Increased depending upon the number of hours worked

Hanson v. Camin Cargo

Employer gave employees $7 per day if they worked 8 hours

Plus an extra $7 for each additional 4 hours worked up to $21 per day

Summary judgment for employees Amount of the payment was “based upon and

varies with the number of hours worked.”

Car/Mileage Payments

Reimbursement for cost of home to work travel always for the “benefit or convenience” of employee

Howe v. Hoffman-Curtis Partners, Ltd., 2005 W. 6443877 (S.D. Tex. 2005) $10,000 per year car allowance Only travel was home to work travel Summary judgment for employee

Car/Mileage Payment

Reimbursement for work related travel, i.e. not home to work travel, must still be a reasonable approximation of actual expenses.

Hanson, et al. v. Camin Cargo Control, Inc., 2015 WL 1737394 (Apr. 16, 2015) Undisputed that workers drove their vehicles for work Reimbursed a combination of an annual car allowance

plus a per mile reimbursement With both payments, reimbursed at a rate of $2.32

per mile on average Summary judgment for workers

Meal Payments

Two regulations 29 C.F.R. § 778.217(d) – employer paying

for employee lunches constitutes wages 29 C.F.R. § 531.32 – “meals are always

regarded as primarily for the benefit and convenience of the employee.“

DOL Field Operations Handbook – meals furnished by employer are wages

Bonuses

Non-discretionary bonuses must be included in the regular rate of pay

Few bonuses are truly discretionary If employer announces in advance the ability to

earn the bonus and sets requirements to earn the bonus, it is non-discretionary

Bonuses designed to encourage more efficient operations or for employees to work harder are not discretionary

Meal Breaks

Regulations

Some breaks are compensable, others are not

“Rest Break” – Compensable 29 C.F.R. § 785.18 – “rest periods of short

durations, running from about 5 minutes to 20 minutes” are compensable

“Meal Break” – Not Compensable 29 C.F.R. § 785.19 – employees do not need

to be paid for actual meal periods of 30 min or more

But Meal Breaks Can Be Compensable

Meal breaks are compensable under the following situations Employee performs work during the meal

break, or

“[T]he meal period is used predominantly for the benefit of the employer” Limitations on the employees’ personal

freedom that benefits the employer Restrictions are placed on the employees’

activities Frequency of the employees being

interrupted for work activities

Naylor v. Securiguard

Fifth Circuit examined whether time spent during a meal break was compensable Employer provided a 30 min meal break Required the guards to drive a company car to

a designated break building 12 min away While driving could engage in any personal

activities such as eating, smoking, or talking on the phone

Result – less than 30 min actually eating meal

Naylor v. Securiguard

Fifth Circuit reversed the trial court’s summary judgment in favor of the employer

Fact issue as to whether the 12 min drive to the break area “predominantly benefited the employer or the employee”

“a jury could find that preventing an employee from eating…for twelve out of thirty minutes during every break is a meaningfuly limitation on the employee’s freedom”

Important Recent Decisions

Offers of Judgment

What happens when an employer tenders a Rule 68 offer of judgment less than full relief?

Answer: Case is not moot Payne v. Progressive Fin. Servs., Inc., 748 F.3d

605 (5th Cir. 2014) An offer of judgment that “does not offer to

meet the plaintiff’s full demand for relief—does not render the plaintiff’s claims moot.”

Offers of Judgment

What happens when an employer tenders an offer of judgment that does meet the individual plaintiff’s full demand in a class or collective action prior to certification?

Answer: Case is not moot Hooks v. Landmark Industries, Inc., 797 F.3d

309 (5th Cir. 2015) “Given that Hooks’ individual claim was not

mooted by the unaccepted offer, neither were the class claims.”

Hooks v. Landmark

Plaintiff made a withdrawal from an ATM and was charged a fee without notice

Plaintiff filed a claim under the Electronic Funds Transfer Act as a class action

Before moving for class certification, Landmark tendered an offer of judgment for the maximum amount available under the statute

Trial court dismissed the case

Hooks v. Landmark

Fifth Circuit reversed relying upon Justice Kagan’s dissent in Genesis “[A]n unaccepted offer of judgment cannot

moot a case.” Fifth Circuit stated: “[i]t is hornbook law that the

rejection of an offer nullifies the offer.” Result – Hooks’ individual claim not moot and the

class claims not moot

Other Circuits

Other Circuit Courts Agree with Fifth Circuit:

Chapman v. First Index, Inc., 2015 WL 4652878 (7th Cir. 2015)

Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948 (9th Cir. 2013)

Stein v. Buccaneers Ltd. P’Ship, 772 F.3d 698 (11th Cir. 2014)

Conditional Certification

Email notice and electronic signature commonplace Dyson v. Stuart Petroleum Testers, Inc., 308 F.R.D. 510

(W.D. Tex. 2015)

“Happy Camper” affidavits not persuasive to contest conditional certification Vassallo v. Goodman Networks, Inc., 2015 WL 3793208

(E.D. Tex. 2015)

Job titles not dispositive Tamz v. BHP Billiton Petroleum, 2015 WL 7075971 (W.D.

Tex. 2015)

Settlement of FLSA Claims

Bodle v. TXL Mortg. Corp., 788 F.3d 159 (5th Cir. 2015) General release of claims not sufficient to

waive FLSA claims Distinguished Martin v. Spring Break #83

In Martin, money was paid to the workers to resolve a genuine dispute over wages and hours worked

In Bodle, the general release did not envision FLSA claims and no money was paid to resolve a genuine dispute concerning wages and hours worked.

Supreme Court Cases

Tyson Foods Inc. v. Bouphakeo, cert granted 135 S.Ct. 2806 (2015)

Campbell-Ewald Co. v. Gomez, cert granted 135 S. Ct. 2311 (2015)

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