January was another 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 some important recent developments.
On January 7, 2013, the Court of Appeals for the Eighth Circuit (Owen v. Bristol Care Inc., 8th Cir., No. 12-1719, January 7, 2013) reversed the U.S. District Court for the Western District of Missouri’s decision not to enforce an arbitration agreement containing a class action waiver that foreclosed the plaintiff’s proposed Fair Labor Standards Act (“FLSA”) collective action. The plaintiff, a former administrator, alleged that her employer misclassified administrators as exempt under the FLSA and analogous state laws. While the district court concluded that the plaintiff’s statutory claims fell within the scope of the arbitration agreement, it held that the agreement was invalid because it included a waiver of class claims. Although the U.S. Supreme Court previously upheld the enforceability of class waivers in a consumer arbitration agreement, the district court said that AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), was not controlling in the employment context. The Eighth Circuit reversed the district court’s decision, reasoning that the Federal Arbitration Act (“FAA”) requires courts to enforce arbitration agreements according to their terms, absent a “contrary congressional command” in another statute that overrides the FAA’s mandate. Thus, the Eighth Circuit joins five other federal appeals courts that have concluded that arbitration agreements containing class action waivers are enforceable in FLSA cases.
On January 11, 2013, the U.S. Court of Appeals for the Fifth Circuit (Griffin v. S&B Eng’rs & Constructors Ltd., 5th Cir. No. 12-40382, unpublished opinion, January 11, 2013) affirmed the U.S. District Court for the Eastern District of Texas’ decision to grant summary judgment in favor of the defendant where the plaintiff claimed that he was entitled to compensation for travel time spent on mandatory bus rides to and from a construction site. The district court concluded that the plaintiff’s travel time was “ordinary home-to-work-and-back-travel.” While not adopting a per se rule that a mandatory transportation scheme creates compensable travel time, the court noted that the plaintiff received no work-related instructions and could engage in personal activities, such as reading or sleeping, during his commuter bus rides. Thus, a mandatory scheme to transport workers to and from a worksite does not per se make the travel time compensable.
On January 22, 2013, the U.S. District Court for the Middle District of Florida (Rubio v. Fuji Sushi & Teppani Inc., M.D. Fla., No. 6:11-cv-1753, January 22, 2013) partially granted a sushi restaurant server’s motion for summary judgment on her FLSA claim after she presented evidence that the restaurant’s tip pool included employees who are not customarily tipped. The plaintiff brought suit on behalf of herself and other potentially affected employees of the restaurant claiming that they were subject to illegal tip reductions. Specifically, she alleged that the establishment combined servers and kitchen chefs in the same tip pool, in violation of the FLSA. With respect to the inclusion of kitchen chefs in the tip pools, the court granted the plaintiff’s motion for summary judgment because the chefs were not “customarily tipped employees.” The court also concluded that the restaurant president, who had active involvement in its day-to-day operations was jointly and severally liable because he possessed sufficient control over the terms and conditions of the class members’ employment to be held individually liable. Individuals with control of business affairs risk personal FLSA liability.
On January 23, 2013, the U.S. District Court for the Northern District of Illinois (Arenas v. Truself Endeavor Corp. d/b/a Garret/Juarez Cleaning, N.D. Ill., No. 12-cv-5754, January 23, 2013) held that cleaning and janitorial workers who work more than eight hours per week in private households are protected by the minimum wage and overtime provisions of the FLSA, even though they are employed by a cleaning company and not the residents whose homes they clean. The plaintiffs, who brought the lawsuit under the FLSA and the Illinois Minimum Wage Act, admitted that the defendant failed to meet the gross revenue requirement of $500,000 for enterprise coverage under 29 U.S.C § 203(s)(1)(A)(ii). However, the court concluded that the employees’ work in private residences was sufficient to give them protection under several domestic service provisions of the federal wage and hour laws, including 29 U.S.C § 206(f)(2) and 29 U.S.C § 207(l). Accordingly, the FLSA may apply to domestic service workers employed by a firm even if the employer does not satisfy the $500,000 minimum for enterprise coverage under 29 U.S.C § 203(s)(1)(A)(ii).
On January 31, 2013, the U.S. District Court for the Northern District of Ohio (Creely v. HCR ManorCare Inc., N.D. Ohio, No. 09-02879, January 31, 2013) decertified a nationwide FLSA collective action of more than 44,000 hourly nursing home and rehabilitation employees because the class members failed to demonstrate that they were similarly situated. The lawsuit was based on HCR ManorCare Inc.’s policy of automatically deducting 30-minute meal periods from employee time cards. The court noted that the class members’ wide-ranging employment settings and individualized experiences weighed against a determination that they were similarly situated. For example, HCR provided employees with a procedure to report missed meal breaks, and the workers’ knowledge and ability to use the procedure varied with their job duties, supervisors and the facility in which they worked. Thus, despite applying a uniform automatic-deduction policy for meal periods, a court can decertify a class action if the policy is implemented in a decentralized, facility-by-facility fashion, and the employees have varying job duties and different supervisors.
On January 29, 2013, the Montana Supreme Court (Thompson v. J.C. Billion Inc., Mont., No. 12-0244, January 29, 2013) affirmed a lower court’s decision concluding that the plaintiff, who spent the majority of his time selling products and services to customers, was an overtime-exempt salesmen under the FLSA and the Montana Wage Protection Act. Montana joins the Fourth Circuit (Walton v. Greenbriar Ford Inc., 370 F.3d 446 (4th Cir. 2004)) as rejecting the Department of Labor’s (“DOL”) interpretation of the FLSA’s salesmen exemption as an “impermissibly restrictive construction of the statute.”
DEPARTMENT OF LABOR
On January 1, 2013, ten states increased their minimum wage from between ten and 35 cents per hour. Wages in Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont and Washington now all exceed the federal minimum wage of $7.25. These ten states join nine other states and the District of Columbia in having a minimum wage greater than the federal minimum.
On January 2, 2013, the DOL announced that a chain of three restaurants near New York City was ordered to pay more $1 million in back pay to 255 employees and more than $98,000 in civil penalties for minimum wage, overtime and record keeping violations of the FLSA. Two Asian Moon Restaurants, one in Garden City, New York and the other in Massapequa Park, New York, were ordered to pay a total of $772,479 to its employees and $77,429 in penalties to the DOL. Golden Rod Restaurant in New Rochelle, New York, was ordered to pay $313,273 to 54 employees, and a civil penalty of $20,802. Investigators from the DOL’s Wage and Hour Division found that employees working as servers and kitchen staff at the restaurants were paid wages that did not equal at least the hourly minimum wage, and the employees did not receive proper compensation for the overtime hours they worked as well. Furthermore, the restaurants maintained false and incomplete records of employees’ pay rates and work hours.
On January 24, 2013, the DOL announced that Carolina Trail Gold Partners Inc. paid 347 employees a total of $758,465 in back wages for violations of the FLSA at seven golf facilities in North and South Carolina. An investigation by the DOL’s Wage and Hour Division found violations of the FLSA’s minimum wage and overtime provisions because the employer missed several payrolls and issued paychecks to employees five to six weeks late. Minimum wage violations resulted when employees received no wages for the hours they worked during pay periods for which a payroll was missed, and employees who worked more than 40 hours in a work-week were denied overtime compensation because of the missed payrolls.
On January 24, 2013, the DOL announced that it recovered approximately $2.1 million in back wages for 1,800 residential care employees in North Carolina. Violations included failing to pay employees for work they performed outside their scheduled shifts or for time they spent attending staff meetings and training sessions, deducting eight-hour sleep periods from shifts of fewer than 24 hours, paying employees a flat salary without regard to overtime, and making deductions for uniforms that caused workers’ wages to drop below the federal minimum wage.
On January 24, 2013, the California Labor Commissioner ordered a heating and cooling contractor to pay $962,556 in wages, training contributions, and fines for its failure to pay ten workers the prevailing wage for work performed on a community college modernization project. An investigation revealed that Ace Cooling & Heating Corp. “willfully violated the law by failing to pay proper prevailing wages on a public works project at El Camino Community College.” The labor commission also issued an identical wage and penalty assessment against the project’s general contractor because, under California labor law, prime contractors are jointly and severally liable for subcontractors that fail to adhere to the state’s labor laws. However, the Commissioner ruled that if the general contractor can show that it exercised due diligence in choosing the heating and cooling contractor, and it took proper measures once the failure to pay a prevailing wage was disclosed, it could receive a reduced penalty.
On January 28, 2013, the California Labor Commissioner also issued citations to Quetico, LLC, a California based warehouse and distribution company, claiming that the firm failed to pay workers proper overtime wages or provide them with the required 30-minute meal breaks. The commissioner claimed that workers were required to stand in line to punch into work before and after meal breaks, time for which they were not compensated.
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