Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

Michael Kun, co-founder of this blog and Member of Epstein Becker Green, was recently quoted in Inside Counsel about the impact of the U.S. Supreme Court’s Wal-Mart v. Dukes decision upon wage-hour class actions. 

The article, "Citing Dukes, Court Overturns Class Certification in Wage and Hour Dispute," focuses on the Ninth Circuit’s recent Wang v. Chinese Daily News decision, about which Michael has previously written in this blog.

We are pleased to announce the release of a new version of our Wage & Hour Guide app that puts federal and state wage-hour laws at employers’ fingertips. To download the app, click here.

The new version features an updated main screen design; added support for iOS 6, iPhone 5, iPad Mini, and fourth generation iPad; improved search capabilities; enhanced attorney profiles; expanded email functionality for sharing guide content with others; and easier access to additional wage and hour information on EBG’s website, including the Wage and Hour Division Investigation Checklist  and other resources.    The new version continues to be offered at no cost.   

“The wage-hour app has proved to be an incredibly valuable tool for employers, answering many of their questions in seconds, while also providing them with a link to our wage-hour blog, where they can find developments in this ever important area of the law,”said Michael Kun, co-creator of the app and national Co-Chairperson of EBG’s Wage and Hour, Individual and Collective Actions practice group, in the Los Angeles office.

How Does the App Work?

Rather than searching through a variety of cumbersome resources to locate applicable wage and hour laws, users of the Wage & Hour Guide app can follow easy-to-navigate steps to find the answers to many of their questions, including citations of federal statutes, regulations, and guidelines, as well as those of California, the District of Columbia, Georgia, Illinois, Maryland, New York, Texas, and Virginia. The following state guides were added after the initial launch of the app: Connecticut, Massachusetts, and New Jersey.  To provide the best experience possible, the app enables users to download the guide to their iPhone or iPad device for reference anywhere, at any time, with or without a connection. 

By Michael Kun

“Hybrid” wage-hour class actions are by no means a new concept. 

In a “hybrid” class action, the named plaintiff files suit seeking to represent classes under both the federal Fair Labor Standards Act (“FLSA”) and state wage-hour laws.  As the potential recovery and limitations periods for these claims are often very different, so, too, are the mechanisms used for each. 

In FLSA claims, where classes can be “conditionally certified” if a plaintiff satisfies a relatively low burden of establishing that class members are “similarly situated” – a phrase nowhere defined in the statute – only those persons who affirmatively “opt in” to the lawsuit become class members.  In state wage-hour claims, governed by Federal Rule 23 (or a state law equivalent), a plaintiff generally must satisfy a higher standard – establishing numerosity, commonality, typicality, adequacy and superiority – and, if a class is certified, only those persons who affirmatively “opt out” are removed from the class.

The differences between these two mechanisms can be confusing even for lawyers, particularly in “hybrid” class actions where both are used simultaneously.  It is not difficult to understand how class members would find such proceedings even more confusing, especially if they receive notices telling them how to “opt in” to one type of wage-hour class and “opt out” of another, where the claims themselves sound identical to a layperson.  If class members wish to participate in both classes, they need to figure out that they must “opt in” to the FLSA class and do nothing as to the state law class.  And if they wish to participate in neither, they need to figure out that they should do nothing as to the FLSA class, yet “opt out” of the state class.  Anyone who has every received a class notice in the mail knows that, try as the court and parties might, those notices can be as difficult to navigate as trying to read the instructions for assembling a new bicycle. 

Because of the differences between the two mechanisms, the way the claims proceed under them, and the potential confusion, some employers have successfully argued that the two mechanisms were incompatible – a plaintiff had to choose whether to pursue federal or state law claims.  However, the circuit courts around the country have increasingly weighed in, ruling that the claims are not incompatible and that plaintiffs may pursue “hybrid” class actions.  Now, the Ninth Circuit has joined the chorus, issuing an opinion in Busk v. Integrity Staffing in which it determined that federal and state wage-hour claims may “peacefully co-exist” in the same action.

Unless and until the Supreme Court weighs in with a different opinion, it would seem that they “hybrid” class action is here to stay.  For employers, that means increased potential exposure in wage-hour class actions as plaintiffs can and will pursue both federal and state claims in the same action.  And it also means increased litigation activities, as parties in “hybrid” class actions normally will deal with two separate sets of class certification briefing – one on the FLSA claims, one on the state law claims – as well as two notices if classes are certified on each. 

The upside for employers?  To the extent there is one, it is that the inclusion of the FLSA claim ensures that the case can be removed to federal court at the outset.           

by Stuart Gerson

In Genesis Healthcare Corp. v. Symczyk, the Unites States Supreme Court held that a collective action under the FLSA was properly dismissed for lack of subject matter jurisdiction after the named plaintiff ignored the employer’s Fed. R. Civ. P. 68 offer of judgment. The Court concluded that the plaintiff had no personal interest in representing putative, unnamed claimants, nor did she have any other continuing interest that would preserve her suit from mootness.

The plaintiff’s collective action was originally filed in District Court for the Eastern District of Pennsylvania, and the employer made an offer of judgment that would have fully satisfied the plaintiff’s individual claim before any other claimants joined the case. Although the plaintiff did not respond to the offer of judgment, the District Court dismissed the case as moot.

The Third Circuit reversed and held that, while the plaintiff’s individual claim was moot, her collective action could go forward on the theory that a defendant should not be allowed to “pick off” named plaintiffs and thereby avoid certification of a collective action. 

The Supreme Court stated that the Courts of Appeals disagree over whether a Rule 68 offer that fully satisfies a plaintiff’s individual claim renders that plaintiff’s claim moot even if the offer is not accepted. However, the plaintiff in Symczyk had conceded that issue below. The Supreme Court therefore assumed (but did decide) that the plaintiff’s individual claim was moot even though she had not accepted the offer of judgment.

Distinguishing several cases with regard to headless classes being able to go forward where a named plaintiff’s case becomes moot, Justice Thomas, writing for a 5-4 majority (a straight conservative/liberal breakout) reversed the Circuit, holding that well-settled mootness principles control and that when the named plaintiff’s suit became moot (because the ignored Rule 68 motion covered all of her interests, including attorneys’ fees), she had no personal interest remaining that would allow her to represent others.

In so doing, the Supreme Court’s majority opined that while under Fed. R. Civ. P. 23, a putative class acquires an independent legal status once it is certified, no such independent status is conferred by” conditional certification” under the FLSA.

You may recall that I recently blogged about the Court’s decision in the Comcast case, suggesting that it presented a useful precedent that could be employed, not just in Rule 23 cases, but under the FLSA’s collective action jurisprudence, to require a court to hear merits arguments prior to certification and rule on standing then.  In fact, the Court’s decision today not only punctuates that view, it suggests that the FLSA allows for more stringent analysis of standing, even after “conditional certification.”

By Elizabeth Bradley

This on-going series of blog posts flows from EBG’s publication of its Wage and Hour Division Investigation Checklist for employers. The Checklist, along with this series, is aimed at guiding employers through DOL Wage and Hour Division Investigations. 

We have previously blogged our way through How to Prepare for a Wage and Hour Inspection, What to Do When a Wage and Hour Investigation Team Arrives to Start Auditing, and What Records Must be Provided to the DOL. In this post, we discuss what to expect during the “walk around” inspection portion of the on-site inspection. 

QUESTION: What is the purpose of the “walk around” inspection?

ANSWER: Quite simply, the Investigator is going to observe your employees performing their job duties and look for wage and hour violations. 

QUESTION: What will the Investigator do during the “walk around?”

ANSWER: In addition to observing the normal operations of the facility and the employees performing their job duties, the Investigator will likely stop and talk with a number of your hourly employees as he/she encounters them on the walk through. The Investigator will also provide these employees with his/her business card and advise them that they can contact the DOL directly. While the manager cannot prohibit the Investigator from conducting a “walk around” or speaking with hourly employees, the manager can ensure that these activities are done in a manner that limits the disruption to normal business operations.

QUESTION: Do you have to allow the Investigator access to the facility unaccompanied?

ANSWER: No. A manager should escort the Investigator through the facility at ALL times, except when conducting an interview of a non-management employee. 

QUESTION: What should the manager be doing during the “walk around?”

ANSWER: The “walk around” is a good opportunity for an employer to obtain information about the focus of the investigation. The manager should not be a passive passenger on the walk around. Rather, the manager should take detailed notes including tracking which employees the Investigator asks to interview, the subjects of the Investigator’s questions, and the subjects of the Investigator’s written notes. Essentially, the manager should note everything the Investigator says, does, and asks.

* * * * * * * * * * *

Are you now wondering what your rights are during the employee interviews? If so, subscribe to this blog. As part of this on-going series, in a subsequent FAQ, we will discuss employee interviews including understanding the role of the investigator, your role in the interview process, and how to prepare both management and non-management employees for interview.

Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection. 

By Stuart Gerson

Wage-hour lawsuits filed under the federal Fair Labor Standards Act (FLSA) represent one of the fastest growing and most problematic areas of litigation facing employers today, especially when such cases are brought as collective actions. A recent Supreme Court case based in class action analysis provides a potentially-useful analog for employers to stave off such collective actions.  

Class action criteria are set forth in Fed. R. Civ. P. 23, and they allow for one or more individual named plaintiffs to sue on behalf of a large – sometimes very large – group of unnamed employees, where: 1) the number of putative class members is so large that it would be impractical for them to participate; 2) where the putative class claims are defined by common questions of law or fact; 3) where the representative plaintiffs’ claims or defenses are typical of those of everyone else; and 4) where the named plaintiffs will fairly and adequately represent the interests of the rest of the putative class. 

The courts have long recognized, as did the drafters of Rule 23, that there are good reasons and bad reasons for a class action. Economy is the most prominent of the good reasons. The “opt out” feature of a Rule 23 class results in a single proceeding that allows relief for a large number of claimants. In the wage-hour context, it also protects against retaliation as to workers who benefit from the general anonymity and group force of the collective. All too frequently, however, a class action is brought to raise the economic risk to the defendant employer and so to force a large settlement of a case that might otherwise never have been mounted.

While class actions are not uncommon, it should be remembered that class treatment is an exception to the general way in which lawsuits are presented, and plaintiffs and their attorneys can go too far. The bell-weather case in that regard is Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). However, Wal-Mart was in many ways unique, describing a potential nationwide class so large and crossing so many fields of activity for hundreds of thousands of workers at significantly different levels and locations that the lack of commonality among sometimes- competing claimants was not hard to understand. Still, the Supreme Court was divided and, in subsequent cases, some courts have tried to limit the application of Wal-Mart. The favored technique for that avoidance has been to hold that facts ultimately going to the merits of the suit cannot be explored at the class-certification phase of a case.

Plaintiffs’ lawyers took heart as to gaining such routine certification of class actions when the Supreme Court handed down its decision in Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085 (decided February 27, 2013), upholding virtually-automatic certification of a securities fraud class action. However, it is clear that the holding in that case is dependent upon the unusual, judicially-created fraud on the market theory that essentially forestalls the need to weigh facts that might distinguish the reliance element of class members. The Court has now broken that collective heart.

Within the past few days, on March 27, 2013, the Supreme Court, in Comcast Corp. v. Behrend, No. 11-864, exploded the theory that merits analysis could not be undertaken in considering class certification. Comcast, while an antitrust case, not a wage-hour case, offers an instructive conclusion that should govern at least some of the more complex versions of the latter type.

A divided Court overturned a controversial Third Circuit decision that certified a class action against the cable television provider Comcast because the plaintiffs failed to establish that the case could manageably be tried as a class action. On the required element of money damages, plaintiffs failed to provide reliable evidence that common issues of fact and law predominated over individual issues—an absolute prerequisite for certification of a class action. The case arose from a suit filed by six cable subscribers in the Philadelphia area who claimed that Comcast violated federal antitrust laws. The trial court had certified the plaintiffs as representatives of a class of all Comcast cable television subscribers from the 650 franchise areas that comprise the entire Philadelphia market. A federal district court in Pennsylvania certified the class more than five years ago. A divided panel of the U.S. Court of Appeals for the Third Circuit affirmed the certification order in 2011. The majority was no doubt moved by the apparent fact that the only reason the plaintiffs’ lawyers sought class certification in this case was to coerce the defendant into settling without regard to the merits of the plaintiffs’ claims.

The Supreme Court held that the Third Circuit ran afoul of the Court’s precedents, namely Wal-Mart, when it refused to entertain arguments against respondents’ damages model that bore on the propriety of class certification simply because they would also be pertinent to the merits determination.  Taken in conjunction with Wal-Mart, Comcast should be of clear value, by analogy, in defending against collective action in the wage-hour context,  at least in those wage-hour cases that involve complex issues, numerous potential plaintiffs, multiple locations and, for example, classification issues that depend upon non-uniform employee activities. Where individual issues can be found to predominate over allegedly common ones, or where pleaded damages models don’t adequately reflect variant situations among workers, employers and their counsel have been given useful ammunition by the Supreme Court to examine relevant factual issues and to confine litigation to individual claims where the facts and law compel it before massive litigation costs and expansive risk obtain.

by Michael Kun

In 2005, Congress passed the Class Action Fairness Act (“CAFA”) to ensure that large, interstate class actions could be heard in federal courts.  Under CAFA, federal courts have been given original jurisdiction over those class actions in which at least one party is diverse and the amount in controversy exceeds $5 million once all of the putative class members’ claims have been aggregated.

Likely before CAFA had even gone into effect, some plaintiffs’ lawyers devised a strategy to try to escape federal jurisdiction under CAFA – stipulating that they would seek less than $5 million to stay under the statute’s amount-in-controversy threshold.  Some courts rejected those stipulations, concluding that a plaintiff and his counsel could not stipulate to anything on behalf of a class they had not been authorized to represent, with some courts even suggesting that plaintiffs’ counsel might want to call their malpractice carriers if they stipulated to limit the recovery of persons they did not represent.  But other federal courts accepted the stipulations that the plaintiff would seek less than $5 million and remanded the cases to state courts.

The U.S. Supreme Court has now effectively put an end to this oft-used scheme to avoid federal jurisdiction.  In Standard Fire Ins. Co. v. Knowles, the Supreme Court unanimously held that plaintiffs could not escape federal CAFA jurisdiction by agreeing to seek less than $5 million.  Like some lower courts had done, the Supreme Court concluded that a named plaintiff for had no power to speak on behalf of a proposed class that had not been certified.  And, without such power, the proposed stipulation could not be enforced.

The Court further explained that to hold otherwise would invite gamesmanship, giving the example of a $100 million class action that should be heard in federal court under CAFA being divided into 21 separate class actions wherein the plaintiff stipulated in each to seek less than $5 million.  Such gamesmanship would defeat the purpose of CAFA.

The decision is a victory for employers in the wage-hour class actions that have become so prevalent across the country, ensuring that many of them will proceed in federal courts after all.  To the extent that some commentators are suggesting that this is a negative development for employers because plaintiffs will now be disincentivized to concede that damages be capped at $5 million, those persons are missing an important fact: such a pre-certification stipulation could never be enforced precisely because the plaintiffs and their counsel could not stipulate on behalf of persons they did not then represent.

By Michael D. Thompson

From restaurants in New York to childcare providers in Arkansas to the garment industry in Southern California, Department of Labor investigators continue to uncover FLSA violations by conducting unannounced workplace inspections.

Accordingly, in January, we released our Wage and Hour Division Investigation Checklist for employers and have received terrific feedback with additional questions. Following up on your questions, we will be regularly posting FAQs as a regular feature of our Wage & Hour Defense Blog.

We previously blogged about how to prepare for an audit, and how to develop a general protocol for the investigation.  In this post, we will discuss which records should be made available to Wage Hour Investigators.

QUESTION:  Do we have to allow the DOL to inspect our private business records?  What records do we have to make available, and what documents should we withhold?

ANSWER:  Your company cannot rely on general claims of privacy or property rights as a basis for keeping the DOL from inspecting its wage and hour records .  In fact, Section 11(a) of the FLSA specifically authorizes representatives of the Department of Labor to investigate and gather data concerning wages, hours, and other employment practices:

• The inspector may review documents showing the employer’s annual dollar volume of business transactions, involvement in interstate commerce, and/or work on government contracts.  Those documents are inspected to determine if the employer is a covered enterprise under the FLSA, or if the employees are protected by the FLSA because their work involves them in interstate commerce.

If you are certain that the FLSA applies to your company or its employees, you may wish to discuss with the inspector whether you can stipulate to coverage and therefore eliminate or streamline this part of the inspection.

• Pursuant to Section 11(a), DOL investigators may review the wage hour records required by 29 C.F.R. Part 516.  Accordingly, an inspector may require your company to produce records for each of the company’s employees showing the employee’s (i) total daily or weekly straight-time earnings, and total premium pay for overtime hours; (ii) regular rate or pay for any workweek in which overtime compensation is paid; (iii) hours worked each workday and each workweek; and (iv) date of payment and the pay period covered by that payment.  An employer’s records must also show the amount and nature of each payment which is excluded from the “regular rate”, and any additions to or deductions from wages for each pay period.

Even if an inspection is the result of a specific complaint, the DOL generally will not limit its investigation to that complaint.  Rather, the DOL will likely review all personnel time records and payroll records to determine whether your company is in compliance with all aspects of the FLSA for all current and former employees on the employer's payroll for the past two to three years.

• The DOL’s Wage and Hour Division is responsible for ensuring compliance with the employment eligibility verification recordkeeping requirements.  Thus, the DOL inspector may demand access to your company’s I-9 forms.

Refusing to produce documents requested by DOL investigators will generally do little more than antagonize the DOL.  However, employers should endeavor to avoid producing:    

• Documents that were not specifically requested:  For example, if the inspector only requests records of wages and hours worked, don’t produce your job descriptions.  Similarly, if the investigator asks for employees’ I-9 forms, don’t turn over their entire personnel files.

There is often one exception to this rule.  Hopefully, your company has implemented a policy (i) prohibiting improper deductions and (ii) including a complaint mechanism through which employees may seek reimbursement for any improper deductions.  If followed, such a policy creates “safe harbor” that can protect the exempt status of employees who are subject to improper deductions.  That policy, therefore, should be provided to the DOL investigator.

• Any analysis of the company’s wage hour issues prepared or requested by the company itself:  A self- audit of your company’s wage and hour practices is useful in identifying and correcting violations of the FLSA.  However, the DOL is likely to accept your conclusions about any violations identified in the audit, while giving no deference to any conclusions in your favor.  Therefore, you should not provide DOL investigators with a copy of your self-audit or similar materials.               
• Trade secret or confidential business information:  Question the request to inspect trade secret or confidential business information, and discuss whether confidential information may be redacted from the requested records.  If you do produce such records, label them “Confidential and Proprietary.”

After locating the records to be produced to the DOL inspector, you should retain the original copies of every record produced to the DOL and track all documents produced on a Document Control Log.

In our next FAQ, we will discuss how to handle a “walkaround” inspection of the facility, in which the DOL inspector observes employee duties and looks for wage and hour violations.

Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection. 

By Michael Kun

The Ninth Circuit has just issued an important new opinion that not only makes clear that the Supreme Court’s landmark Dukes v. Wal-Mart decision in fact applies to wage-hour claims, but also provides some very strong language for employers to rely upon in opposing class certification motions in wage-hour cases.

The Ninth Circuit decision decertifying the class that had been certified on overtime and meal break claims in Wang v. Chinese Daily News may be found here. 

The history of Chinese Daily News is a long and torturous one that could only be of interest to those employment lawyers who are already familiar with that history or people who have run out of reading material at the doctor’s office.  What is significant is that a class was certified and judgment entered in favor of the plaintiffs following a jury trial. The Ninth Circuit subsequently affirmed the district court’s rulings.  However, the Supreme Court vacated that decision and remanded it for reconsideration in light of Dukes.  Now, the Ninth Circuit has decertified the class, remanding it to the district court for reconsideration in light of Dukes. 

The decision makes clear that Dukes applies to wage-hour actions brought under Rule 23, contrary to the assertions made by a multitude of plaintiffs’ counsel in pending wage-hour actions that Dukes was somehow limited to its facts or only applied to discrimination class actions.

Addressing the propriety of certification under Rule 23(b)(2), where equitable relief is sought, the Court relied upon Dukes for the proposition that the claims of the proposed class must “depend upon a common contention . .. of such a nature that it is capable of classwide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke.”  (Emphasis added.)  That will be difficult to establish in a great many wage-hour class actions where individualized analyses would require many “strokes,” not just one.

Turning to the propriety of certification under Rule 23(b)(3) in the context of claims that Chinese Daily News employees had been misclassified as exempt, the Court also noted that the conclusion that common questions predominated “rested on the fact … that plaintiffs are challenging CDN’s uniform policy of classifying all reporters and account executives as exempt employees . . . .  In two recent decisions we criticized he nature of the  district court’s Rule 23(b)(3) predominance inquiry in this case….  We observed that the district court in this case ‘essentially create[d] a presumption that class certification is proper when an employer’s internal exemption policies are applied uniformly to the employees.’”  The Court then cited to its prior decisions in  In re Wells Fargo Home Mortg. Overtime Pay Litig. and Vinole v. Countrywide Home Loans, Inc.

Finally, the court cited to Dukes for the proposition that “Trial by Formula” is not permitted in determining damages.

While the Ninth Circuit’s ruling by no means forestalls the possibility that the district court will determine  on remand that a class in fact should be certified under the Dukes analysis, the road would appear to be a much tougher one for the plaintiffs than the one they faced several years ago when the class was originally certified. 

Employers in the Ninth Circuit and elsewhere will likely cite to this decision -- and Dukes, Wells Fargo, and Vinole -- early and often in opposing class cert motions. 

By Michael D. Thompson

The prohibition against private settlements of FLSA claims was scrutinized again last week, when U.S. District Court for the Eastern District of New York held that parties could voluntarily dismiss an FLSA lawsuit without obtaining approval of the settlement agreement from the court.  Picerni v. Bilingual SEIT & Preschool Inc. 

Courts in FLSA cases have historically expressed the concern that individual waivers of FLSA rights would enable employers to use their superior bargaining power to extract individual waivers from their employees and “thwart the legislative policy [that the FLSA] was designed to effectuate.”  Brooklyn Sav. Bank v. O’Neill. 

Accordingly, in 1982, the Eleventh Circuit held that disputes under the FLSA could not be settled without the approval of a court or the Department of Labor.  Lynn’s Food Stores, Inc. v. United States.

However, in August 2012, we blogged about the Fifth Circuit’s decision to uphold the enforcement of a private settlement agreement resolving FLSA claims.  Martin v. Spring Break ’83 Productions LLC.  The United States Supreme Court subsequently declined to review the Fifth Circuit’s ruling and settle the split between the circuits.

Thus, when the issue arose in Picerni, the District Court considered whether a prohibition on private settlements for FLSA cases “runs afoul” of Federal Rule of Civil Procedure 41.  That rule provides that a federal lawsuit, with certain exceptions, may be voluntarily dismissed by the plaintiff before the defendant files an answer, and may thereafter be dismissed through a stipulation signed by all parties.

The District Court held that FLSA claims were subject to F.R.Civ.P. 41 and therefore the parties were allowed to dismiss their own lawsuit.

However, the District Court made it clear that it was offering no opinion regarding the enforceability of the underlying settlement agreement.

The Court cited Lynn Foods for the proposition that “[m]ost courts have at least suggested in dictum, if not held, that a private FLSA settlement will not be enforced without court approval.”  The District Court further noted that “[o]ther courts have allowed private settlements if the circumstances, when examined in subsequent litigation, are found fair” or “when the court finds that a plaintiff has received in settlement 100% of the wages that he should have been paid.”  See Martinez v. Bohls Bearing Equipment Co.; Mackenzie v. Kindred Hospitals East. L.L.C. 

Thus, the District Court stated that the parties could agree to a private settlement and dismiss their FLSA lawsuit.  In settling the matter without court or DOL approval, however, the parties assumed the risk that the settlement agreement might not be enforced to bar subsequent litigation. 

Nevertheless, “if parties want to take their chances that their settlement will not be effective,” the District Court stated that it would permit them to do so.

The ruling by the District Court for the Eastern District of New York in Picerni, in conjunction with the Fifth Circuit’s decision in Martin, signal an increasing willingness to accept the private settlement of FLSA cases.  However, employers should consider whether the need to keep such an agreement private outweighs the possibility that the agreement will not be enforced to preclude further litigation of the same claims.

By Douglas Weiner

Last month, we released our Wage and Hour Division Investigation Checklist for employers and have received terrific feedback with additional questions. Following up on your questions, we will be regularly posting FAQs as a regular feature of our Wage & Hour Defense Blog.

In this post, we address an increasingly common issue that many employers are facing in light of aggressive government enforcement at the state and federal level from the Department of Labor.

QUESTION: If a DOL team of Wage Hour Investigators arrive unannounced demanding the immediate production of payroll and tax records and access to employees for confidential interviews what should we do?

ANSWER: An unannounced arrival to investigate signals some adverse information has been submitted to the DOL concerning your wage and hour practices from either an employee complaint or referral from another law enforcement agency such as a state or federal taxing authority, or even possibly from a competitor or labor union. Effectively managing the investigation from the very beginning is essential to obtaining the best possible results. First, advise the leader of the DOL’s investigation team that you are contacting your designated wage and hour representative  to promptly arrive to provide the investigators with assistance. Courteously direct the investigation team to a comfortable but secure location such as a conference room where normal business operations will not be disrupted.

Upon arrival, our practice is to verify the credentials of the investigators, and conduct an opening conference to ascertain the purpose and focus of the investigation. Our immediate goal is to engage the DOL in a discussion to learn what they are seeking. Clarifying the specific focus of the DOL’s inquiry enhances initial communication, and allows narrowly tailored responses. For clarity, we ask the DOL to provide written requests for documents and employee interviews. Reminding the DOL the employer has the right to cooperate with the investigation in a manner that does not disrupt normal business operations, we ascertain from our client and discuss with the DOL an acceptable protocol for the conduct of the investigation. 

Upon ascertaining the specific focus of the investigation, we advise the DOL we understand what they seek, and propose continuing the investigation in a few days after the identified documents have been gathered (and internally reviewed). We invite the investigators to our firm’s conference rooms where payroll records and other documents may be inspected without returning to our client’s facilities. If the lead investigator is unreasonable in demanding immediate access to records and employees, we consider requiring the DOL to obtain a subpoena. If possible it is preferable to establish an agreed protocol to an investigation to avoid giving the DOL reason to believe you have something to hide, the loss of control over the scope of the investigation and the benefits of good faith cooperation. 

In sum, we suggest three things to do, and three things not to do:

Do:

1.      Notify your representative immediately.

2.      Allow your representative to take control of the management of the DOL’s investigation.

3.      Maintain a courteous and forthright demeanor until your representative arrives.

Do not:

1.      Ask if the investigation has been prompted by a complaint.

2.      Ask the DOL to identify a complainant.

3.      Allow immediate inspection of records or employee interviews to take place before your representative has arrived or an opening conference has been conducted.

* * * * * * * * * *

In subsequent FAQs, we will discuss in more detail a protocol to produce documents, and what information your wage-hour representative needs to respond to DOL audits, whether scheduled or surprise. But, in the meantime, regular internal reviews and audits of your wage and hour practices and documentation is key to protecting against costly exposure from a government investigation.

Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection.

By Michael Kun

We have written previously in this blog about California’s obscure “suitable seating” law, which requires that some employers provide “suitable seating” to some employees. 

In short, the plaintiffs’ bar recently discovered a provision buried in California’s Wage Orders requiring employers to provide “suitable seating” to employees when the nature of their jobs would reasonably permit it.  Although the provision was written to cover employees who normally worked in a seated position with equipment, machinery or other tools, employers in a variety of industries have been hit with class actions alleging that they have violated those provisions – and those cases are typically brought by a single plaintiff who was well aware that the employer expected him or her to be standing while performing the job at the time he or she applied.  Just as typically, those employees have not even requested a seat before filing suit.

Now, reversing a district court decision that dismissed a “suitable seating” class action on the grounds that there had been no request for a seat, the Ninth Circuit has held that an employee need not request a seat to be entitled to one. 

The Ninth Circuit explained that the district court had read into the Wage Orders something that was not there – a requirement that employees affirmatively request seats.  Importantly, the Ninth Circuit expressly declined to comment on whether the nature of the work would reasonably permit seats in the case at issue.  As before, it appears that will be the dispute in most “suitable seating” cases. 

By: Kara M. Maciel

Earlier this month, we released our Wage and Hour Division Investigation Checklist for employers and have received a lot of great feedback with additional questions. Following up on that feedback, we will be regularly posting FAQs as a regular feature of our Wage & Hour Defense Blog.

In this post, we address a common issue that many employers are facing in light of increased government enforcement at the state and federal level from the Department of Labor.

QUESTION: “I am aware that my industry is being targeted by the DOL for audits and several of my competitors in the area are facing wage and hour investigations.  What should I be doing now to proactively prepare my company in the event we are next for an audit?”

ANSWER:  Even though your company may not be in the midst of an investigation, there are still several action items that you can implement to place your company is the best possible position to defend against any DOL investigation.  For example:

• Check current 1099’s as well as all 1099’s going back several years and review the actual job duties of those persons paid as independent contractors to verify that they were not, in fact, employees.
•  Examine all written job descriptions to ensure that they: (i) accurately reflect the work done, (ii) have been updated where necessary, and (iii) indeed justify the applicable exemptions.
• Review time keeping systems to ensure that non-exempt employees are being paid for all work performed, including work pre- or post-shift and during meal breaks
• Ensure that required payroll records and written policies and procedures are current, accurate, and compliant.

Training staff is another key component of protecting your company from costly wage and hour claims. Not only could all managers be familiar with the FLSA and state wage and hour laws, but all employees should understand their role in proper record keeping and overtime. Key managers and personnel should be aware of the DOL’s inspection rights and what the DOL can and cannot do while on your property.

Finally, developing a response team with legal counsel is critical to being prepared if an inspection official knocks on your door unannounced. The response team should be armed with information and protocols so they know how to address the DOL’s subpoenas, questions, document requests, and other investigative demands.

In subsequent FAQs, we will discuss in more detail who should participate in a response team and what information they need to have in the event of an unscheduled DOL audit. But, in the meantime, regular internal reviews and audits of your wage and hour practices and documentation is key to protecting against costly exposure from a government investigation.

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Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection.