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

I am pleased to report that the United States Court of Appeals for the Eleventh Circuit has affirmed the district court's summary judgment in favor of our client, a bus company, in a case involving the motor carrier exemption.  The case is Walters v. American Coach Lines of Miami, Inc. (11th Cir., July 23, 2009).

 I first reported on this case and discussed the basics of the motor carrier exemption in a September 2008 post on the Florida Employment Law Blog.  My EBG colleague, Brian Molinari, recently summarized the Walters decision in a post on the Prima Facie Law Blog.

A quick refresher:  The motor carrier exemption is one of several exemptions from the Fair Labor Standards Act which generally requires employees engaged in commerce to be paid at least time and a half for the time worked above forty hours in one week. The motor carrier exemption provides:

The provisions of section 207 [maximum hours] of this title shall not apply with respect to. . . any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of Title 49.”  29 U.S.C. § 213(b)(1). 

49 U.S.C. section 31502 grants “the Secretary of Transportation the power to regulate the qualifications and maximum number of hours for employees of motor carriers engaged in interstate transportation.”

The principal question in Walters was whether the ACLM's drivers, by driving trips to and from local airports and seaports, all of which are in Florida, were engaged in interstate transportation so as to trigger the Secretary of Transportation's jurisdiction over them.  If so, the motor carrier exemption would apply, and the drivers would not be entitled to overtime pay.

In answering that question in the affirmative, the court's opinion breaks some new ground in the Eleventh Circuit, which covers Florida, Georgia and Alabama. Among the court's holdings are the following:

• The Secretary of Transortation's jurisdiction is not limited to transportation that crosses state lines, but extends to transporation that is part of the broader concept of "interstate commerce."
• Purely intrastate transportation can constitute part of interstate commerce if it ispart of a “continuous stream of interstate travel."
• The "incidental-to-air" exemption does not limit application of the motor carrier exemption. The court held that this exemption to the Secretary of Transportation's jurisdiction applies to economic regulation, not to safety regulation. Thus, the Secretary of Transportation has jurisdiction to prescribe safety regulation for transportation that is "incidental-to-air," i.e. within 25 miles of an airport.

The motor carrier exemption is complicated and has been the subject of much litigation. For employers in the Eleventh Circuit, the Walters decision clarifies several key issues. Still, the opinion leaves open a couple of issues:

• Does a company have to engage in more than de minimus interstate transportation, where it has the appropriate federal licensing and indisputably performs some transportation crosses state lines? The court declined to answer this question, finding that even if such a test applied, ACLM engaged in more than de minimus interstate transportation.
• Do airport-to-seaport trips constitute interstate commerce if they are not performed pursuant to formal contractual arrangements with airlines or cruise lines? The court declined to answer this question, finding that even if such a test applied, ACLM had contractual arrangements with cruise lines to transport passengers on its buses.
   

Litigation of these open issues is bound to occur as the proliferation of FLSA lawsuits continues. But for now, Walters is the latest word on the status of the motor carrier exemption in the Eleventh Circuit.

A number of recent lawsuits illustrate how changing workplace technology can form the basis for creative FLSA lawsuits.  A wave of claims have been brought against Fortune 500 companies alleging that non-exempt employees have not been paid for "off the clock "duties such as logging into computer systems and responding to email and text messages after work hours and on weekends.

Putting aside the merits of these cases, this trend illustrates the legal implications of introducing technology into the workplace, especially when used by non exempt employees to work remotely.  These cases are a good reminder of why every company should make sure that its payroll practices keep up with the fast pace of technological change, and capture all work related activities, whether they occur at work, at home, or via new channels of communication like blackberries or text messaging.

Some practical tips to minimize these types of claims include:

• Implement a clear "off the clock" policy requiring employees to report all work time regardless of where and when it occurs.
• Train supervisors to never request an employee to work off the clock.
• If issuing blackberries or remote access technology to non-exempt employees, consider requirement for them to sign an acknowledgment form noting the obligation to report all work time.
• If non-exempt employees log in and out of work on their computers, consider allowing employees to manually input time instead of automatic time stamping (which will eliminate claims for lost time due to lengthy start ups or other required steps before accessing payroll software).

Staying one step ahead of creative FLSA attorneys is no doubt difficult in today's ever changing workplace.  For that reason, we strongly recommend annual audits of payroll practices to ensure that polices and procedures are updated to adapt to technological or other changes which might have significant wage and hour implications.

By now, you are probably aware that the minimum wage under the federal Fair Labor Standards Act goes up to $7.25 on July 24, 2009. Employers with operations in Florida know that this is four cents more than the current Florida minimum wage of $7.21.  Florida employers must pay the higher of the two wages.

But what's the minimum wage for tipped employees in Florida as of July 24th?  The answer is not as simple as you might think, and you might be misled by reading the Florida Agency for Workforce Innovation web page on the minimum wage.  That web page states the new federal minimum wage, and also states that tipped employees must be paid a direct minimum wage of $4.19 as of January 1, 2009.  While that's not inaccurate as far as it goes, the AWI web page does not explain how much tipped employees must be paid in direct wages as of July 24, 2009.

First, some background.  Under the FLSA, employers are allowed to claim a “tip credit” toward satisfying state and federal minimum wage laws for their tipped employees. This means that tips are credited against, and satisfy a portion of, the employer’s obligation to pay the minimum wage.  Under the FLSA, if an employee retains all tips, and the employee customarily and regularly receives more than $30 a month in tips, an employer may pay a tipped employee not less than $2.13 an hour in direct wages if that amount plus the tips received equal at least the federal minimum wage. If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.  As the federal minimum wage increases, so does the federal tip credit; the direct wage that must be paid to the employee ($2.13) stays the same. (You can read an article I co-authored on FLSA tip credit and tip pooling rules here. )

Not so under Florida law.  The Florida Constitution  provides that "For tipped Employees meeting eligibility requirements for the tip credit under the FLSA, Employers may credit towards satisfaction of the Minimum Wage tips up to the amount of the allowable FLSA tip credit in 2003."  The FLSA tip credit in 2003 was $3.02, i.e. the difference between the minimum wage in 2003 ($5.15) and the reduced minimum wage ($2.13).  Therefore, under the Florida Constitution, the tip credit can be no more than $3.02.  So, in Florida, as the minimum wage increases, the $3.02 tip credit stays the same, and the direct wage that must be paid to the employee increases. As of January 1, 2009, the direct wage equals the Florida minimum wage ($7.21) minus the 2003 tip credit ($3.02), or $4.19.

As you can see, however, $4.19 is not enough as of of July 24, 2009, because under Florida law the maximum tip credit remains $3.02.  An employer that paid only $4.19, and took a tip credit of $3.02, would leave the employee four cents short of the federal minimum wage of $7.25.  So, as of July 24, 2009, Florida employers must pay their tipped employees a direct wage of no less than $4.23. 
 

By Michael Kun and Matthew A. Goodin

California employers are celebrating a new California Supreme Court decision that effectively prevents unions from filing suit under the Labor Code Private Attorneys General Act ("PAGA") and the Unfair Competition Law ("UCL").

 There is no reason to celebrate.

What appears to be a major victory for employers is, in fact, no victory at all once one considers the practicalities of litigation.

On June 29, 2009, the same day that it issued its highly anticipated opinion in Arias v. Supreme Court, holding that employees need not bring representative actions under the PAGA as class actions, the California Supreme Court also affirmed the Court of Appeal’s decision in Amalgamated Transit Union, Local 1756, AFLCIO v. Superior Court (First Transit, Inc.). In Amalgamated Transit, the Court concluded that a labor union that had not suffered actual injury under California’s UCL and that was not an “aggrieved employee” under PAGA could not bring a representative action under either of those laws.

Cause to celebrate, right?

Wrong.

While the decision would seem to suggest that there will be fewer UCL and PAGA lawsuits because unions may not bring them, the practicalities are very different. Instead of bringing UCL or PAGA claims themselves, it would seem that unions need only find a single employee to act as the named plaintiff in such actions in order to proceed with identical claims.

Think a union is going to have difficulty finding that one person?

Think again.

As such, an apparent victory for employers may not be any victory at all.

Case Overview

California’s UCL allows a private party to bring an unfair competition action on behalf of others, but only if the person “has suffered injury in fact and has lost money or property as a result of the unfair competition.” Similarly, PAGA provides that an “aggrieved employee” may bring an action to recover civil penalties for violations of the Labor Code “on behalf of himself or herself and other current or former employees … .”

Amalgamated Transit presented the question whether a labor union that has not suffered actual injury under the UCL and is not an “aggrieved employee” under PAGA may nevertheless bring a representative action under those laws either as the assignee of employees who have suffered an actual injury and who are aggrieved employees, or as an association whose members have suffered actual injury and are aggrieved employees. The California Supreme Court has confirmed that a union may not do so.

The UCL prohibits “any unlawful, unfair or fraudulent business act or practice … .” Before 2004, the UCL allowed “any person acting for the interests of itself, its members or the general public” to seek restitution or injunctive relief against unfair acts or practices. But California voters changed the law in 2004 by passing Proposition 64. The law now requires that a representative claim seeking relief on behalf of others may be brought only by a “person who has suffered injury in fact and has lost money or property as a result of the unfair competition.”

In Amalgamated Transit, the union conceded that it did not suffer any actual injury, but instead contended that employees who had suffered an actual injury could assign their claims to the union. The Court reasoned that allowing employees to assign such claims to a labor union would defeat the entire purpose of Proposition 64, which was specifically amended to require that a person asserting an unfair competition claim must have suffered an actual injury or have lost money as a result of the alleged unfair competition.

In September 2003, California’s Legislature enacted PAGA. PAGA permits a civil action “by an aggrieved employee on behalf of himself or herself and other current or former employees” to recover civil penalties for violations of other provisions of the Labor Code. An “‘aggrieved employee’” is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was [sic] committed.” Again, the union conceded that it was not an “aggrieved employee,” but argued that an aggrieved employee’s claim could be assigned to the union. The Court noted that an individual may assign a legal claim to another only when the claim arises out of a legal obligation or a violation of a property right. The court observed that PAGA does not create property rights or any other substantive rights. Rather, it is simply a procedural statute allowing an aggrieved employee to recover civil penalties for Labor Code violations that otherwise would be sought by state labor law enforcement agencies. Under existing case law, the right to recover a statutory penalty may not be assigned.

The union next argued that unions may maintain the actions as entities in their own right based on the legal concept of associational standing. Under this concept, an association, such as a labor union, may bring an action on behalf of its members when the association itself would not otherwise have standing. Associational standing exists when: (a) the association’s members would otherwise have standing to sue in their own right; (b) the interests the association seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. The Court reiterated, however, that a plaintiff has standing to bring an UCL action only if the plaintiff has suffered “injury in fact” and a plaintiff has standing to bring an action under the PAGA only if the plaintiff is an “aggrieved employee” The court concluded that associations suing under either law are not exempt from these express requirements.

Looking Ahead: What Does This Case Mean To Employers?

While many may believe Amalgamated Transit to be a major victory for employers, the practicalities may be otherwise. While unions may not bring UCL or PAGA lawsuits themselves, it may not be difficult for them to find employees willing to act as the named plaintiffs in such actions.