Edwards Wildman Client Advisory - Recent Developments in Wage and Hour Law
March 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 March 6, 2013, the Court of Appeals for the Eleventh Circuit (Lamonica v. Safe Hurricane Shutters Inc., No. 0:07-cv-61295-JIC, 11th Cir., March 6, 2013) ruled that the U.S. Supreme Court’s ruling in Hoffman Plastic Compounds Inc. v. NLRB, 535 U.S. 137 (2002), does not prevent undocumented workers from seeking unpaid overtime compensation under the FLSA. The defendants contended that the plaintiffs were not entitled to recover because they failed to report their income to the IRS. In affirming the U.S. District Court for the Southern District of Florida’s jury verdict, the Court of Appeals ruled that the plaintiffs were entitled to wages for work already performed. Accordingly, courts may award undocumented workers overtime compensation, despite the U.S. Supreme Court’s 2002 decision regarding back pay.
On March 7, 2013, the U.S. District Court for the Western District of Arkansas (Teramura v. Walgreen Co., No. 5:12-cv-05244-JLH, W.D. Ark., March 7, 2013) granted conditional class status to a group of lower level management Walgreen employees who alleged that the company wrongfully denied them overtime pay. The class consisted of current and former Walgreen executive assistant managers who claimed that the company violated the FLSA by incorrectly classifying them as exempt employees. The court concluded that there was sufficient evidence suggesting similarities between the members of the class – including that they all were classified as salaried employees, were expected to work more than 40 hours per week without overtime and took on similar tasks – to justify conditional certification. According to the complaint, Walgreens had a uniform, company-wide practice of making improper deductions from compensation. This decision highlights factors the courts will consider in determining whether sufficient similarities exist among employees to justify class recognition.
On March 7, 2013, the U.S. District Court for the Central District of California (Solis v. Forever 21 Inc., No. 2:12-9188, C.D. Cal., order enforcing subpoena entered March 7, 2013), ruled that Los Angeles-based apparel retailer Forever 21 Inc. must produce documents in accordance with a DOL administrative subpoena seeking information related to minimum wage and overtime violations in shops that produced goods for major garment retailers. Under § 215(a)(1) of the FLSA, also known as the “hot goods” provision, employers are prohibited from shipping in commerce any goods produced in violation of the statute’s minimum wage, overtime, or child labor standards. Forever 21 argued that the investigation concerned companies two levels downstream from Forever 21. The enforcement of the subpoena underscores the principle that every employer in the supply chain has the responsibility to ensure that all workers receive the federal minimum wage and earned overtime.
On March 11, 2013, Katherine Dohanicz brought suit against South Jersey Healthcare and its Underwood-Memorial Hospital facility in the U.S. District Court for the District of New Jersey (Dohanicz v. Underwood-Memorial Hospital and South Jersey Healthcare, No. 1:13-cv-01464, D.N.J., March 12, 2013), alleging that the defendants’ practice of rounding clock-in and clock-out times by up to eight minutes unlawfully denied its hourly employees overtime pay. This case joins a growing list of actions recently asserting that employers have improperly rounded down time employees worked. Employers must ensure that any “time rounding” policy does not deprive workers of compensation otherwise due.
On March 11, 2013, the U.S. District Court for the Eastern District of Missouri (Lindsay v. Wells Fargo Advisors LLC, No. 4:12-cv-00577-JAR, E.D. Mo., March 11, 2013) granted certification to a class of Wells Fargo employees who claimed that the brokerage firm failed to pay them overtime. The named plaintiff, Michelle R. Lindsay, claimed that Wells Fargo forced her to under-report her hours in violation of the FLSA. The court concluded that Ms. Lindsay established the existence of a common, nationwide policy whereby Wells Fargo required non-exempt employees to report only an eight-hour workday, even if they worked overtime.
On March 15, 2013, Tesoro Refining & Marketing Co. agreed to pay $11.6 million to more than 700 California refinery employees who had accused the petroleum refiner of denying them proper meal breaks. The agreement ended years of contentious litigation in two consolidated lawsuits pending in the U.S. District Court for the Central District of California (Burgess v. Tesoro Refining & Marketing Co., 2:10-cv-05870, C.D. Cal., March 19, 2013) that claimed that Tesoro violated California wage-and-hour laws by not fully relieving employees for two 30-minute breaks during 12 hour shifts. Employers who fail to strictly comply with meal break requirements continue to face stiff consequences.
On March 20, 2013, Citigroup Inc. and Ernst & Young LLP requested that the United States Court of Appeals for the Second Circuit (Raniere v. Citigroup Inc., C.A. No. 11-5213, 2nd Cir.; Sutherland v. Ernst & Young LLP, C.A. No. 12-304, 2nd Cir.) overturn a lower court decision that allowed employees to sue them collectively, arguing that employee contracts that bar class actions trump other provisions in the law that appear to allow them. The decision by the Court of Appeals likely will have a substantial impact on contractual clauses that purport to bar class actions given the large number of financial institutions and businesses that utilize them.
On March 21, 2013, the Court of Appeals for the Sixth Circuit (Foster v. Nationwide Mut. Ins. Co., No. 12-3107, 6th Cir., March 21, 2013) ruled that special investigators for Nationwide Mutual Insurance Co. were properly classified as exempt under the FLSA and, therefore, are not entitled to overtime pay. Affirming the U.S. District Court for the Southern District of Ohio’s decision, the Court of Appeals concluded that the special investigators’ primary job duties involved sufficient discretion and independent judgment on matters significant enough to fall within the FLSA’s exemption for administrative employees. The Sixth Circuit also noted that the DOL regulations specifically mention insurance claims adjusters as fitting within the administrative exemption. In short, insurance firms’ special investigators likely fall outside the scope of the FLSA.
On March 22, 2013, Time Warner Entertainment-Advance/Newhouse Partnership and a group of its California field technicians settled a proposed class action for $1.35 million, ending allegations that the cable company had failed to pay overtime and other compensation. (Gillespie v. Time Warner Cable Inc., No. 3:12-cv-01214, S.D. Cal., March 22, 2013). The plaintiffs alleged that Time Warner did not pay them for time spent preparing for and driving to their first appointment of the day, and instead insisted that the employees clock in only after they reached their initial daily assignment. The employees were also purportedly instructed to clock out once they finished their last appointment of the day, but before they began their return trip in a Time Warner van.
On March 13, 2013, it was announced that the California Division of Labor Standards Enforcement (DLSE) issued citations against a number of California restaurants for wage law violations. The DLSE stated that two Northern California restaurants, owned in part by the same person, were cited $439,605 for failing to provide workers with overtime pay, meal breaks, minimum wage and child labor violations. Ikebana Restaurant of Salinas, California, was assessed $186,146 for failing to pay 42 workers minimum wages, overtime, split shift premiums and failure to provide meal breaks. Seoul Jung of Santa Clara, California, was assessed $165,709 for failing to pay overtime premiums to five workers. A restaurant in Beverly Hills, Urasawa, was fined $27,000 and ordered to pay workers $38,585 in unpaid wages.
On March 19, 2013, a Los Angeles, California, Superior Court judge (Zabala v. McKesson Corp., C.A. No. BC-476124, Cal. Super. Ct., March 19, 2013) refused to dismiss a putative wage-and-hour class action (alleging that a health care IT provider failed to provide meal breaks for hourly workers) after the lead plaintiff reached a settlement. The court ruled that the resolution of the plaintiff’s case could not deprive the unrepresented class members of their day in court. Notably, a court may refuse to dismiss a class action even when the named plaintiff has settled his or her own claims.
On March 20, 2013, the California Court of Appeals for the Fourth District (Dailey v. Sears Roebuck and Co., D-061055, Cal. Ct. App., March 20, 2013) ruled that a group of Sears Auto Center managers could not bring a class action based upon the retailer’s alleged misclassification of them as exempt from overtime. In affirming the trial court’s decision, the appellate court ruled that the managers failed to demonstrate how common issues of company-wide policies predominated. Courts will continue to require plaintiffs to demonstrate commonality before certifying a class.
DEPARTMENT OF LABOR
On March 7, 2013, it was announced that a New Jersey gas station operator must pay unpaid overtime wages and damages of $3 million to more than 400 employees at 72 gas stations, according to the U.S. Department of Labor’s Wage and Hour Division. (Harris v. Daniyal Enterprises LLC, 2:13-cv-00914, D.N.J., March 7, 2013). Daniyal Enterprises LLC and its owner, Waseem Chaudhary, agreed to pay $2 million in overtime back wages, $1 million in liquidated damages and $91,000 in civil penalties.
On March 20, 2013, Pennsylvania state representative Mark Cohen introduced legislation that would raise the state’s minimum wage from $7.25 an hour to $9 an hour. Cohen stated that the measure is an effort to match Pennsylvania’s minimum wage with President Obama’s call to increase the federal minimum wage to the same figure. Cohen’s legislation would also provide subsequent increases in line with the Consumer Price Index.
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