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    Edwards Wildman Client Advisory: Recent Developments in Wage and Hour Law

    Publications

    June was a busy month in the world of wage and hour law. In our continuing efforts to keep our clients and friends apprised of recent developments in that often vexing and treacherous legal arena, we highlight below important developments in June of 2012.

    United States Supreme Court

    On June 18, the United States Supreme Court found that pharmaceutical dealers (a/k/a "drug reps" or "pharmaceutical sales representatives") are ineligible for overtime pay because they are "outside salesmen" within the FLSA. In an unusual move, the Court (by 5-4 vote) rejected the Department of Labor's interpretation of the statute and applied a functional analysis to the plaintiffs' roles at SmithKline Beecham Corporation. This decision should be helpful to employers, especially pharmaceutical companies. For more on the implications of this opinion, go to "Supreme Court Rejects Department of Labor’s Definition of 'Outside Salesman:' Drug Reps Lose FLSA Case Demanding Overtime Pay."

    In what could portend a momentous decision for employers, on June 25, the Supreme Court announced that it would consider whether an employer's offer of judgment that fully satisfies a plaintiff's FLSA claims moots collective action allegations when the employee is the only named party. By taking on this case, the Court characteristically intends to resolve differences among the United States Courts of Appeals on the issue.

    Other Federal Courts

    On June 1, the United States District Court for the Northern District of New York denied General Interior Systems Inc.'s motion for summary judgment, finding that whether more than 300 drywall installers were or were not independent contractors merited a trial.

    On June 6, a federal judge in the District of Columbia upheld the Wage and Hour Division's view that a mortgage loan officer generally does not qualify as an administrative employee under the FLSA.

    Demonstrating that issues can arise anywhere in this country, on June 14, a federal judge in Alaska ruled that three exotic dancers in an Anchorage strip club were owed $150,000 for violations of federal and state minimum wage and overtime laws. The court reasoned that the club's system of charging the dancers' hourly fees was deliberately designed to "shift the risk of poor business to, and impose the expenses of running the business on the individual dancers as if they were independent contractors . . ."

    In Connecticut, on June 14, four restaurants and their owners agreed to pay $372,000 in back wages, interest, and fines in a case brought by the Department of Labor alleging FLSA violations. Among other allegations, the DOL had asserted that the G. D. Diner of New Haven, and the Athenian Diners of Middleton, Milford and Waterbury had failed to pay their employees for hours worked weekly in excess of 40.

    On June 15 in Hawaii, Judge Susan O. Mollway issued a ruling in favor of the Boy Scouts of America, finding that a campground employee was exempt from the FLSA because he was employed by a seasonal organized camp and also performed administrative functions, thus invoking two of the FLSA's exemptions.

    In fifteen cases, most of which arose out of the United States District Courts for the Middle District of Pennsylvania and the Southern District of New York, a federal court in Pennsylvania on June 18 preliminarily approved a $20.9 million settlement on behalf of former Rite Aid assistant managers and co-managers in 30 states and the District of Columbia. The core allegations in these cases was that Rite Aid had misclassified employees as exempt from overtime pay in excess of 40 hours/week.

    Manifesting the impact decisions of the Supreme Court have on the lower federal courts, on June 25 due to the Court's ruling in the SmithKline Beecham Corp. case (see above), Judge Alvin K. Hellerstein of the United States District Court for the Southern District of New York, dismissed, at the parties' urging, a proposed FLSA case against Novo Nordisk Inc.

    In an important ruling for employers, on June 28, the United States Court of Appeals for the Third Circuit upheld a decision of the United States District Court for the Western District of Pennsylvania, finding that assistant managers cannot assert FLSA claims against the parent company of Enterprise Rent-A-Car. The court reasoned that joint employer liability requires contemplation of, among other things, the putative employer's ability to hire and fire, promulgate rules and assignments, set conditions of employment, supervise, discipline, and control employment related records. Applying those factors, the court found that Enterprise Holdings was not an employer because while it could make recommendations to its subsidiaries, the subsidiaries were free to accept or reject those suggestions.

    State Courts

    A settlement of $2.5 million involving the Hilton Los Angeles Airport hotel was announced on June 4, settling a class action alleging that the hotel had deprived 1200 workers of wages and overtime compensation and meal breaks.

    Federal Action

    On June 4, the Department of Labor sued Chang & Sons Enterprises and its alleged principal, Sidney Chang, in the United States District Court for the District of Massachusetts. In its complaint, the Department asserts that Chang & Sons (a grower and seller of bean sprouts, soy beans and other agricultural products) had failed to pay its employees minimum wages and, at least in one instance, overtime compensation.

    Also on June 4, the DOL announced that a San Antonio, Texas car wash company had paid nearly $250,000 in back minimum wage and overtime pay to more than 300 employees. In substance, the DOL charged Vizza Wash LP, doing business as Wash Tub, with having deducted from employees' paychecks the cost of uniforms, insurance claims, and cash register deficiencies that reduced their compensation to less than the minimum wage.

    The Department of Labor's Wage and Hour Division announced on June 7 that it had initiated an enforcement effort to remind workers in the landscaping industry in Southern California of their rights to minimum wage and overtime payments. As with many of its other recent initiatives, the DOL expressed its concern for "low-wage, vulnerable workers. . ."

    Similarly, on June 15, the DOL announced an enforcement initiative in Colorado aimed at the agricultural nursery industry.

    Local Action

    The Board of Supervisors in San Francisco approved legislation establishing a task force to address wage theft. The bill defines wage theft to include nonpayment of overtime, failure to pay for hours worked or the minimum wage, and misclassification of employees as independent contractors. It resulted in part from the efforts of several Chinese community groups.

    Congressional Legislation

    Together with 20 Democratic sponsors, Rep. Jesse Jackson on June 6 introduced a bill to raise the federal minimum wage to $10/hour. The legislation also would elevate the minimum wage for tipped workers to at least $5.50 from $2.13/hour.

    Three members of Congress introduced a bill (the "Equal Opportunity Restoration Act") on June 20 to reverse the Supreme Court's decision in the Dukes case that barred a lawsuit by employees of Wal-Mart Stores on the ground that the workers had to show "convincing proof of a companywide discriminatory pay and promotion policy." While most pundits do not consider passage likely, it will be interesting to watch the politics of this legislation as it is considered by both the House and Senate.

    State Legislation

    The Rhode Island General Assembly voted to increase the minimum wage in the Ocean State to $7.75/hour and Governor Lincoln Chafee signed the legislation on June 20.

    Elsewhere

    The Progressive States Network issued a report on June 6 finding that state laws regarding wage theft are "grossly inadequate" in preventing millions of workers from receiving the compensation they are owed.

    Also on June 6, the National Employment Law Project reported that giant retailers, among others, are causing workplace wage and hour abuses by outsourcing or subcontracting specific labor functions and "squeezing [their] suppliers and contractors, so that contracted workers at the bottom of the supply chain are forced to accept poverty wages and harsh working conditions."


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