Wage and Hour Defense Blog

Wage and Hour Defense Blog

Ninth Circuit Requires Plaintiffs To Plead Facts In Support Of Their Wage-Hour Claims

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In a great many wage-hour complaints alleging unpaid overtime or failure to pay minimum wage, plaintiffs will bring suit without identifying any specific instances in which the plaintiffs ever worked unpaid overtime or worked for a period of time without being paid at least the minimum wage.  The absence of such basic facts plagues many class action and collective action complaints, in particular.  The Ninth Circuit’s recent opinion in Landers v Quality Communications rejects the notion that plaintiffs can survive a motion to dismiss by relying on cookie-cutter allegations.  The Ninth Circuit has made it clear that plaintiffs must plead facts in support of their wage-hour claims.

To provide some context to the Landers decision, the Ninth Circuit stated that before the Supreme Court’s decisions in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, a complaint for unpaid minimum wages or overtime wages merely had to allege that the employer failed to pay the employee minimum wages or overtime wages. No other facts were necessary at the pleading stage. After Iqbal and Twombly, which discussed what types of facts must be pled in cases where there is no heightened pleading standard, district courts were split. Some required plaintiffs to approximate the overtime hours worked while others have foregone such a requirement. Until Landers, the Ninth Circuit had not addressed the degree of specificity required to state a claim for failure to pay minimum wages or overtime wages.

In Landers, the Ninth Circuit held that, at a minimum, the plaintiff must allege at least one workweek when he or she worked in excess of 40 hours and was not paid for the excess hours in that workweek, or was not paid minimum wages.  However, the Ninth Circuit stated that it was not imposing a requirement that a plaintiff alleging failure to pay minimum wages or overtime wages must approximate the number of hours worked without compensation.

The Ninth Circuit’s opinion in Landers is a welcome development for employers.  Although the pleading standard would not seem difficult to meet, forcing plaintiffs to plead some facts may help weed out frivolous lawsuits – and, in the class action and collective action context, it may demonstrate the differences in employees’ claims and circumstances.

Non-specific Testimony Regarding “Typical” Hours Cannot Sustain a Claim for Unpaid Overtime

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In Holaway v. Stratasys, Inc., the plaintiff was employed as a field service engineer and classified as exempt from the FLSA’s overtime requirements.  Based on that classification, the plaintiff’s employer did not keep records of his hours worked.

After being discharged, the plaintiff filed lawsuit in the U.S. District Court for the District of Minnesota claiming he was non-exempt, seeking overtime wages and alleging that he worked sixty hours per week every week of his employment.  The District Court concluded that the plaintiff failed to produce sufficient evidence to show he worked more than forty hours per week, and granted the employer’s motion for summary judgment.

Standard of Proof in the Absence of Timekeeping Records

On appeal, the Eight Circuit Court of Appeals noted that an employee who sues for unpaid overtime has the burden of proving that the employee performed work for which he or she was not properly compensated.  However, if an employer has failed to keep records, an employee need not prove “the precise extent of uncompensated work,” but instead may establish his or her entitlement to compensation “on the most accurate basis possible.”

Specifically, the Eight Circuit relied on the U.S. Supreme Court’s longstanding decision in Anderson v. Mt. Clemens Pottery Co.  In Anderson, the Supreme Court stated that once the employee has shown work hours for which the employee was not compensated, and “sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference,” the employer must provide evidence to rebut that interference.

Sweeping Assertions about Hours “Typically Worked” are Insufficient

In Holoway, the Eighth Circuit stated that the plaintiff’s testimony regarding his hours worked was often contradictory and, at various times, estimated his work hours from forty-five to seventy hours per week.

Furthermore, the plaintiff did not attempt to establish his entitlement to compensation “on the most accurate basis possible.”  In fact, he failed to check his hours worked against any business records kept by his employer, and failed to take into account any paid holidays, any paid vacation or any days he was on duty at home without receiving a service call.

Thus, the plaintiff failed to put forth any evidence regarding specific weeks where he worked beyond forty hours, and failed to provide a meaningful explanation of how he arrived at his final estimate of sixty hours per week for every week of his employment.Most importantly, the plaintiff offered no specific evidence regarding the amount and extent of his overtime work.  Rather, he offered only bare assertions that he “typically worked” five to seven hours per week before the official start of his workday, “typically worked” eleven to fifteen hours per week after his official quitting time and “typically worked” two to three hours each weekend.

The Eighth Circuit concluded that the plaintiff therefore failed to come forward with sufficient evidence to allow a fact-finder to determine the amount of any overtime hours “as a matter of just and reasonable inference.”  Thus, summary judgment in favor of the employer was affirmed.

The Eight Circuit’s decision offers some support for the proposition that employers who fail to keep records of hours worked are not always bound by an employee’s assertions regarding hours worked.  However, the decision also suggests that employers will have difficulty defending against reasonably specific allegations that make a minimal effort to address the evidence that is available.

Accordingly, employers should continue to make every effort to keep accurate wage and hour records for all non-exempt personnel.

NLRB’s Murphy Oil Decision Reaffirms Board’s Position on Class or Collective Action Waivers Despite Rejection by Federal Courts

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By Jill Barbarino

On October 28 a three-member majority of the National Labor Relations Board in Murphy Oil revisited and reaffirmed its position that employers violate the National Labor Relations Act (the “Act”) by requiring employees covered by the Act (virtually allnonsupervisory and non-managerial employees of most private sector employees, whether unionized or not) to waive, as a condition of their employment, participation in class or collective actions.

As previously reported in an Act Now Advisory, in 2012 the NLRB held in D.R. Horton that the home builder unlawfully interfered with employees’ Section 7 right to engage in concerted activity by requiring them to sign an arbitration agreement prohibiting class or collective claims in any judicial or arbitral forum.  As we have also previously reported, however, on December 3, 2013, the Fifth Circuit rejected the NLRB’s position and held that the Act does not prohibit employers from requiring employees to sign class or collective action waivers.  The Second Circuit and the Eighth Circuit have likewise rejected the Board’s position.

Notwithstanding having “no illusions” that the Board’s decision would be the “last word on the subject”, in a 59-page decision, it reiterated and endorsed its prior position and addressed its critics head on, including the two lengthy dissents from Members Harry Johnson and Philip Miscimarra.

The Decision

Murphy Oil is the owner and operator of over 1,000 retail fueling stations.  Prior to March 6, 2012, Murphy Oil required all job applicants and current employees to execute a “Binding Arbitration Agreement and Waiver of Jury Trial,” which provided in pertinent part that all disputes related to an individual’s employment shall be resolved by binding arbitration and that the parties to the agreement “waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum.”  The Charging Party, Sheila Hobson, signed this Agreement when she applied for employment in 2008.  Two years later, Hobson filed a collective action pursuant to the Fair Labor Standards Act alleging that Murphy Oil failed to pay her and others for work-related activities performed off the clock.  Murphy Oil moved to compel arbitration and to dismiss the FLSA claims based on the plaintiffs having signed the Agreement.  Hobson, thereafter, filed an unfair labor practice charge and the NLRB’s General Counsel issued a complaint, alleging that Murphy Oil had violated Section 8(a)(1) of the Act.

At the heart of the dispute between the Board and its critics is the interpretation of Section 7 and 8(a)(1) of the Act as well as the application of the Federal Arbitration Act (“FAA”) and Supreme Court jurisprudence interpreting same.

Section 8(a)(1) of the Act states that it “shall be an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees” in the exercise of their Section 7 rights.  Section 7 of the Act states that employees shall have the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection[.]”  

The Supreme Court, on the other hand, in CompuCredit Corp. v. Greenwood, 132 S.Ct. 665, 673 (2012), held that where there is no specific “contrary congressional command” as to whether a claim can be arbitrated, the FAA “requires the arbitration agreement to be enforced according to its terms.”   The CompuCredit decision, however, only addressed the enforcement of an arbitration clause that barred access to courts, not a waiver of class or collection actions.  Moreover, the CompuCredit decision was not an employment-related dispute and did not involve the NLRA.  Thus, the specific issue at play in D.R. Horton and Murphy Oil remains unaddressed by the Supreme Court.

The Board’s rationale for upholding D.R. Horton is as follows:

(1)   Section 7 of the Act grants employees the  substantive right to act “concertedly for mutual aid or protection” and mandatory arbitration agreements that bar an employee’s ability to bring join, class, or collective workplace claims restrict this substantive right.

(2)   The conclusion that mandatory class action waivers are unlawful under the Act does not conflict with the FAA or its underlying policies because:

(a)    such a finding treats arbitration agreements no less favorably than any other private contract that conflicts with federal law;

(b)   Section 7 rights are substantive, which means that they cannot be waived under the FAA like procedural rights found in other statutes;

(c)    the “savings clause” in the FAA affirmatively provides that an arbitration agreement’s conflict with federal law is grounds for invalidating an agreement;

(d)   if there is a direct conflict between the NLRA and the FAA, the Norris-LaGuardia Act – which prevents private agreements that are inconsistent with the statutory policy of protecting employees’ rights to engage in concerted activity – requires the FAA to yield to the NLRA as necessary to accommodate Section 7 rights.

The Board criticized the Fifth Circuit’s decision for, among other things, giving too little weight to the “crucial point” that “the Board, like the courts, must carefully accommodate both the NLRA and the FAA” and not treat the FAA and its policies as “sweeping far more broadly than the statute or the Supreme Court’s decisions warrant.”

As to Member Johnson’s argument in his dissent that “there was no such thing as a class or collective action in any modern sense when the Act was passed in 1935” the Board majority found this point to be irrelevant because the language of “Section 7 is general and broad.”  As an example, the Board stated that the pursuit of unionization is “obviously protected” through the use of “modern communication technologies such as social media . . . regardless of whether workers during the Depression had access to Facebook.”

The Board also stated that contrary to the suggestion in Member Miscimarra’s dissent, it has not taken the position that the Act creates a guarantee to class certification or the equivalent; it does, however, create a right to “pursue joint, class or collective claims if and as available, without the interference of an employer-imposed restraint.”

What Does This Mean for Employers

After Murphy Oil, it is clear that the Board’s position and the position of at least some federal courts on this issue remain at odds.  If employers require employees covered by the Act to sign class action waivers, they should be aware that it could take significant time and money to ultimately have such an agreement upheld in federal court.  Clearly the last word on this issue will come only when the Supreme Court, as it is likely to do, considers the issue.  Until then employers that require such waivers should recognize that challenges through unfair labor practice charges will remain a fact of life.

California Controller Launches “Operation Pay-Up”

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As if California employers were not already besieged with wage-hour class actions and agency complaints, the state’s controller has now decided to get in on the action.

As The Los Angeles Times reported last week, Controller John Chiang has initiated a new program he calls “Operation Pay-Up” to recover unpaid wages.  The article may be found here

In short, the Controller is using California’s Unclaimed Property Law to attempt to gain restitution of wages believed to be withheld from employees.  Any recovered wages that are unclaimed will be transferred to the state treasury, with the controller’s office attempting to locate the employees.

At this stage, it is too early to tell how broad “Operation Pay-Up” will be or the companies or industries that it will focus on – let alone how the program will interact with class actions or agency complaints. 

But, at the very least, it is yet another reminder to employers doing business in California that they need to get up to speed on the state’s intricate wage-hour laws and take steps to ensure compliance.

And for those employers who need a primer on California wage-hour laws, EBG’s free wage-hour app puts those laws — and federal laws and the laws of other states – at your fingertips. 

Illinois Employers Will Soon Be Able To Legally Pay Their Employees by Payroll Cards, But Beware Of The Fine Print

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In August, Illinois Governor Pat Quinn signed into law HB 5622, amending the Illinois Wage Payment and Collection Act (IWPCA), which now recognizes for the first time payment of wages by payroll card. The law goes into effect on January 1, 2015. While the law provides a new option for Illinois employers, they must be careful to comply with the conditions under which payroll cards may be used.

Under the current Illinois law, employers are required to pay employees via check or direct deposit. The current law is silent as to whether payroll cards, which operate like debit cards, can be used to pay wages. Some businesses prefer using payroll cards because, by simply loading the card electronically, they can save the costs involved in preparing physical checks. Employees, however, have been adverse to payroll cards because of fees that have been deducted from their wages. The Illinois Attorney General’s Office found that these fees were both excessive and unfair.

Under the new law, payroll cards will be a recognized method of wage payments, but only if the following criteria are met:

• The employee must voluntarily agree to the use of a payroll card as the method the employee chooses to receive his or her wages and/or final compensation. It is not voluntary if the employee is given to understand that it is a condition for hire or his or her present working conditions or continuance of his or her employment would be adversely affected by non-acceptance. An employer cannot mandate the use of a payroll card.

• If an employee voluntarily chooses to accept the use of a payroll card for the payment of wages and/or final compensation, the employer must disclose in writing to the employee all fees, penalties, and costs associated with the use of the payroll card. The employee must be able to deposit and/or obtain the full monetary value on the payroll card without discount.

• If the employee chooses the payroll card as a method of payment, the employer is required to provide an itemized statement of all hours worked, rate of pay, and all lawful deductions made from the wages and/or final compensation for each pay period.

• An employee can revoke his or her authorization of the payroll card as a method of payment at any time, and the employer is obligated to provide to the employee another alternative method for the payment of wages and/or final compensation.

• An employer is not permitted to offer employees only the choice between two voluntary methods of payment. Because payment by either payroll card or direct deposit must be voluntary, an employer offering either or both of these payment methods must also provide an additional choice of payment by cash or check, in accordance with the IWPCA.

Despite the clear financial and practical benefits of using payroll cards for wages, employers must strictly comply with the specific requirements under the law which takes effect on January 1, 2015. As a new law, it is likely that the Illinois Department of Labor and Office of Attorney General will be watching closely.

David W. Garland to Moderate General Session at NRF’s 2014 HR Executive Summit

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David W. Garland, Chair of Epstein Becker Green’s Labor and Employment Steering Committee and a member of the firm’s Board of Directors, will moderate “It’s In The Bag – Summary of Bag Check Litigation And Strategies For Minimizing Risk” at the National Retail Federation Human Resources Executive Summit at the Hard Rock Hotel in Chicago, Illinois on October 15, 2014.

During this general session, retailers who are grappling with employee bag check litigation discuss what the industry can expect in litigation over employee compensation for time spent in bag checks to deter shrinkage and how retailers can minimize risk through their policies and practices.

Be sure to visit with Epstein Becker Green and share ideas with other retailers and employment law professionals during the networking break sponsored by Epstein Becker Green on October 14, 2014 from 3:00 p.m.-3:15 pm.

Click here for information about NRF’s HR Executive Summit.

If I Was (Still) The Secretary of Labor

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As our readers know, for the purposes of certain blog entries, I have unilaterally declared that I am the Secretary of Labor.

Effective immediately:

  1. The “computer professional” exemption applies to anyone with a salary of at least $800 per week whose primary duty requires “highly specialized knowledge of computers and software.”  The exemption now includes employees who provide help desk services, troubleshooting support, or who install hardware or software.
  2. In regard to New York law, building owners who provide free apartments to their janitors can still count the value of the apartment as wages.  However, that value is no longer based on the rental rate of the apartment on June 1, 1975.
    • Building owners will be credited with the current fair market value of the apartment, and janitors will be paid on an hourly basis.
    • As under federal law, a New York janitor who resides in the employer’s building is not considered as working all the time he is on the premises.  Any reasonable agreement of the parties as to the number of hours worked will be accepted.
  3. To clarify: time spent waiting for a security bag check at the end of a shift is not compensable “hours worked.”Generally, time spent going to or coming from work is not working time.  Preliminary and postliminary activities may be compensable if they are “integral and indispensable” to an employee’s principal duties.  However, general security does not relate to anyone’s particular duties, so it’s not compensable.
  4. California law is preempted.  It’s just time.
  5. The ability to use mobile devices for business communications while an employee is away from the workplace is a benefit to the employee as well as the employer.  Therefore, using a mobile device to read or respond to electronic communications for less than 20 minutes per day shall be considered de minimis amount of time and therefore shall not be compensable

Let’s get to work.

Epstein Becker Green’s Wage and Hour App Is Now Available for iOS, Android, and BlackBerry

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Wage & Hour Guide App for Employersby Michael Kun

We’re very pleased to announce that a brand-new version of our free, first-of-its-kind app, the Wage & Hour Guide for Employers, is now available for Apple, Android, and BlackBerry devices. The new app takes advantage of a software-as-a-service programming platform developed by Panvista Mobile.

Our newest version of the app is not only available to users of a variety of devices, but it offers simpler, faster, and more useful ways for employers to locate wage and hour information at the touch of a fingertip.  As new issues are constantly emerging in this area, we’re pleased to provide updated information and critical tools to help employers address wage and hour laws and regulations, such as recent minimum wage increases.

Key features of the updated app include:

  • The Android version is now available for the first time on the Google Play store – also it is also available for BlackBerry devices
  • Updated iPhone and iPad versions are now available on the App Store
  • New summaries of wage and hour laws and regulations are included, including recent minimum wage increases in California, Connecticut, Georgia, Illinois, Maryland, Massachusetts, New Jersey, New York, Texas, Virginia, and the District of Columbia
  • Direct feeds of EBG’s Wage & Hour Defense Blog
  • Easy sharing of content via email and social media
  • Access to EBG’s @ebglaw Twitter feed
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

Existing iOS users should visit the App Store to download the new iPhone and iPad versions; the previous edition of the app is retired.

If I Were the Secretary of Labor

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By: Michael D. Thompson

ESPN broadcaster Keith Olbermann recently held a mock press conference in which he pretended to be the new Commissioner of Baseball, and explained how he would improve the game in that role.  For example, World Series games would start early enough for kids to watch them, the designated hitter would be eliminated, and Vin Scully would call all World Series games.

I’d like to do something similar.  I am pleased to inform you that, for the rest of this blog entry, let’s assume that I am the new Secretary of Labor.

Effective immediately:

  1. An employer’s liability to inadvertently misclassified employees will be limited to half-time (rather than time-and-a-half) if the employer has a published policy, and receives a signed acknowledgment, stating: ”I understand that my salary is intended to compensate me for all hours worked in any given workweek.”
  2. If an individual has an independently-established business, he or she is an independent contractor. Case closed. Anyone who has the wherewithal to set up his or her own business is capable of making a decision about whether the terms of a business relationship are acceptable.
  3. New Jersey’s child labor law exception allowing minors under the age of 16 to work as beekeepers is preempted by a new federal regulation to the contrary. Okay, this one does not come up much.  But do we really want a law that says a 15-year old can be left in charge of a charge of a swarm of bees?  That sounds like a Hitchcock movie.
  4. The “professional” exemption’s focus on jobs held by employees who get their advanced knowledge in school is expanded.  The exemption now extends explicitly to jobs requiring “knowledge of an advanced type customarily acquired through five or more years of on-the-job experience.”
  5. Employers do NOT have to pay employees who only worked overtime because they played fantasy football or shopped online during regular hours.
  6. The “administrative” exemption will now be called the “independent judgment” exemption, and will apply to any employee with a salary of at least $800 per week who normally exercises discretion and independent judgment. The part of the “administrative” exemption requiring that the employee’s primary duty must be administrative in nature is eliminated because the Courts never seemed clear on how to apply it.

Let’s get to work.

 

 

 

 

Illinois Court Holds That Meal Credit Program Is Valid

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Our colleague Jeffrey H. Ruzal recently wrote an article entitled “Illinois Court Holds That Meal Credit Program Is Valid,” which appears in the September 2014 issue of Hospitality Law.

Following is an excerpt:

Providing an employee meal program may be a nice gesture, but requires companies that do so to maintain proper records in case their meal plans are challenged.  An Illinois appellate court recently affirmed a circuit court’s dismissal of plaintiff restaurant worker’s class action claim that defendant restaurant employer took improper deductions from plaintiff’s wages to fund a meal credit program.

Read the full article here.

Reprinted with permission from Hospitality Law. Copyright 2014 by LRP Publications. Palm Beach Gardens, FL 33418. All rights reserved. For details on this or other related products, visit www.shoplrp.com/hospitality.html or call toll free 1-800-341-7874

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