Our colleague Adriana S. Kosovych, associate at Epstein Becker Green, has a post on the Hospitality Employment and Labor blog that will be of interest to many of our readers: “Chipotle Exploits Wide Variation Among Plaintiffs to Defeat Class and Collective Certification.

Following is an excerpt:

A New York federal court recently declined to certify under Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”) six classes of salaried “apprentices” at Chipotle restaurants asserting claims for overtime pay under New York Labor Law (“NYLL”) and parallel state laws in Missouri, Colorado, Washington, Illinois, and North Carolina, on the theory that they were misclassified as exempt executives in Scott et al. v. Chipotle Mexican Grill, Inc. et al., Case No. 12-CV-8333 (S.D.N.Y. Mar. 29, 2017).  The Court also granted Chipotle’s motion to decertify the plaintiffs’ conditionally certified collective action under Section 216(b) of the Fair Labor Standards Act (“FLSA”), resulting in the dismissal without prejudice of the claims of 516 plaintiffs who had opted in since June 2013.

The putative class and collective action of apprentices working in certain of Chipotle’s 2,000-plus restaurants nationwide were provisionally employed while being trained to become general managers of new Chipotle locations. The Scott action challenged Chipotle’s blanket exempt classification of the apprentice position, claiming that the duties plaintiffs actually performed during the majority of their working time were not managerial, and therefore, as non-exempt employees they were entitled to receive overtime pay. …

Read the full post here.

A Maine dairy company has received a potentially expensive grammar lesson from the U.S. Court of Appeals for the First Circuit, which held on March 13, 2017, that the company’s delivery drivers may be eligible for up to $10 million in overtime pay, because the lack of a comma in the statute regarding exemptions from the state’s wage and hour law rendered the scope of the exemption ambiguous.

Grammarians have long disputed whether writers should include a comma before the final item in a list—the so-called “serial” or “Oxford” comma.  Opponents of the serial comma consider it superfluous.  Supporters argue that the serial comma is necessary to eliminate potential ambiguity, as in the example, “I’d like to thank my parents, Ayn Rand and God.”  Are Ayn Rand and God the writer’s parents, or are they being thanked in addition to his or her parents?  Without the serial comma, it is impossible to know.

Similarly, this case, O’Connor v. Oakhurst Dairy, arose “[f]or want of a comma” in the Maine law exempting from overtime compensation employees involved in the “canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of” various perishable goods.  Without the controversial serial comma after “shipment,” the court found it unclear whether the exemption was meant to apply to one category of employees (i.e., those who pack goods, whether for shipment or for distribution) or two (i.e., those who pack goods for shipment, and those who distribute the goods).  Because the plaintiff drivers admittedly distributed goods, but claimed they did not pack goods or engage in any of the other activities specified in the exemption, their case could only proceed if the First Circuit reversed the district court’s ruling that the exemption encompassed both packers and distributors.

In an opinion that should appeal to grammar aficionados everywhere, the First Circuit extensively analyzed the language of the statute in light of “certain linguistic conventions,” or “canons,” including: (i) the rule against surplusage, which states that no word in a statute should be treated as unnecessary; (ii) the convention of using a conjunction before the last item on a list; (iii) the parallel usage convention, which requires words performing the same grammatical function to be presented in the same form; and (iv) the use of the serial comma itself, which the Maine Legislative Drafting Manual generally disfavors, except when its omission may cause the sort of ambiguity presented here.  After engaging in this analysis, and proving unable to determine the law’s clear meaning from the statutory text or its legislative history, the court reversed the district court and held it must “adopt the delivery drivers’ reading of the ambiguous phrase . . . , as that reading furthers the broad remedial purpose of the overtime law, which is to provide overtime pay protection to employees.”

While many commentators have viewed this opinion as an ode to, in the court’s words, “the clarifying virtues of serial commas,” ultimately that is a mere subset of the three broader lessons presented by this case, principles that should prove helpful to anyone who communicates via the written word—that is, all of us.

Lesson One — Say What You Mean

Given the context of this case, the first lesson presented by the court’s analysis was likely aimed primarily at the Maine Legislature, which drafted the ambiguous statute at issue. However, it is advice that all writers would be wise to follow—avoid ambiguity.  Whether drafting a statute, a brief, an employment policy, an email, or a Tweet, use language and punctuation (including the serial comma, where necessary) deliberately, to ensure that you actually write what you intend to say.  Review the grammar rules you may have ignored since middle school, and revise your writing as frequently as necessary, to guard against any accidental ambiguities like the one in the Maine wage and hour law.  Especially for attorneys, words are our primary weapons, and it is crucial that we wield them wisely.

Lesson Two — Remember Your Goal

The second piece of advice that arises from this case is somewhat related to the first—always keep the underlying purpose of a piece of writing in mind. Much as courts seek to effectuate the legislative intent of a statute, parties to a dispute should focus on what, specifically, they are trying to accomplish.  The delivery drivers in this case did not win because of a missing comma; they won because the extra compensation they sought was consistent with the broad remedial purpose of Maine’s wage and hour law.  As an advocate, you will be more likely to succeed if you can find a way to align the outcome you or your clients seek with the societal or legislative purpose the court is seeking to advance.

Lesson Three — Be Consistent (a.k.a., Don’t Be Your Own Worst Enemy)

The third lesson drawn from this case, despite being relegated to a seemingly insignificant footnote, may be the most important—make sure all of your messaging is consistent. In this case, the dairy company argued that the statutory exemption should be read as applying to both employees involved in “packing [goods] for shipment” and employees involved in “distribution” of the goods, because “shipment” and “distribution” are synonyms, and unless “packing for shipment” and “distribution” constituted two separate exempt activities, the statute would be redundant.  The court may have been more receptive to this argument, if it hadn’t noticed that the company’s “own internal organization chart seems to treat [shipment and distribution] as if they are separate activities,” significantly undercutting the company’s argument that the two terms were synonymous and redundant.  The company probably never considered the fact that its own organizational chart could be used against it, but any such inconsistency in a party’s messaging, even in a seemingly unrelated context like an org chart, may ultimately prove fatal to a contradictory legal claim the party seeks to assert sometime in the future.  Accordingly, especially for corporate entities, it is crucial to keep a single consistent and coherent viewpoint in mind when drafting any sort of company messaging, to prevent any inconsistencies from being used against the company at a later date.

Conclusion — It’s Not About the Comma

Contrary to the extensive media coverage of the “comma case,” this case offers a far broader lesson than “always use a serial comma.” Instead, the First Circuit’s opinion presents three fundamental principles that should apply in every context where the written word may prove determinative.  In essence, the opinion is a dissertation on the virtues of clarity in writing—a lesson that may cost Oakhurst Dairy up to $10 million, but which has been made available to the rest of us, free of charge.

Overtime Clock Faces - Abstract PhotoBarring some unexpected development or a last-minute injunction in one of the lawsuits challenging the new Department of Labor overtime rules, the new salary thresholds for white collar exemptions will go into effect on December 1, 2016.

That, of course, is now less than two weeks away.

We have written at length about those new rules, as well as the critical decisions that employers will need to make to comply with them:

  • Whether to increase employees’ salaries to meet the new thresholds;
  • Whether to reclassify employees as non-exempt and begin to pay them hourly rates, plus overtime;
  • What hourly rates to set for reclassified employees so as not to pay them more than employers intend – or less; and
  • How these decisions will impact other employees and the employers’ salary structures.

Hopefully, most employers have already addressed these issues internally and will be prepared to comply with the new rules on or before December 1, 2016.

But for those who have not, the clock is ticking, and waiting to address these issues until after December 1, 2016 could lead to potential claims that might be exceedingly difficult to defend.

Time Is Running Out for Employers to Make Important Decisions to Comply with New DOL Overtime Exemption RuleIn May, the Department of Labor (“DOL”) announced its final rule to increase the minimum salary for white collar exemptions.  With little more than two months to go before that new rule takes effect on December 1, 2016, employers still have time to decide how to address those otherwise exempt employees whose current salaries would not satisfy the new rule by either increasing their salaries or converting them to non-exempt status.

But some of those decisions may not be easy ones.  And they may create some unexpected challenges, both financially and operationally.

New Salary Thresholds

Effective December 1, 2016, the salary threshold for the executive, administrative, and professional exemption will effectively double, increasing from $23,660 ($455 per week) to $47,476 ($913 per week).

The total annual compensation requirement for “highly compensated employees” subject to a minimal duties test will also increase from $100,000 to $134,004. The salary basis test will be amended to allow employers to use non-discretionary bonuses and incentive payments, such as commissions, to satisfy up to 10 percent of the salary threshold.  And the salary threshold for the white collar exemptions will automatically update every three years to “ensure that they continue to provide useful and effective tests for exemption.”

Impact Upon Compensation Structures

For otherwise exempt employees whose compensation already satisfy the new minimum salaries, nothing need be done to comply with the new DOL rule.  But that does not mean that those employees will not be affected by the new rule.

If employers are raising the salaries of other employees to comply with the new thresholds, it could create operational or morale issues for those whose salaries are not being adjusted.

Take, for instance, an otherwise exempt senior manager who currently earns $48,000 per year.  Her salary need not be adjusted to comply with the new rule.

But if she is higher in the  organizational hierarchy than a manager who currently earns $36,000 per year, and if that lower-level manager is given a salary increase to meet the new $47,476 threshold, it is not difficult to see how there could be an issue with the senior manager.  The senior manager would now earn only a little more each year than the manager who falls beneath her in the hierarchy.

If the employer then adjusts her salary – and everyone else’s – to maintain its compensation structure, the impact of increasing the salary of a single manager to comply with the new rule will not be just the amount of the increase in his salary to meet the new threshold; it will be the increases in all of the salaries that it triggers.

That is but one example.  It is not difficult to conceive of situations where complying with the rule by only addressing the compensation of those who fall below the threshold would result in a lower level employee leapfrogging over a higher level employee in terms of compensation, or where it results in unwanted salary compression.

And that is to say nothing of the impact that salary shifts could have upon any analysis of whether the new compensation structure adversely affects individuals in protected categories.  In the example above, the female senior manager who is now being paid only several hundred dollars per year more than the lower-level male manager might well raise a concern about gender discrimination if her salary is not also adjusted.

Impact of Increasing Salaries

For otherwise exempt employees who currently do not earn enough to satisfy the new minimum salary thresholds, employers have two choices: increase the salary to satisfy the new threshold or convert the employee to non-exempt status.

Some of those decisions may be relatively simple, particularly when viewed in a vacuum, but some may be more difficult.

If an otherwise exempt employee currently earns a salary of $47,000 per year, the employer may have an easy decision to give the employee a raise of at least $476 to satisfy the new threshold.

And if any employee currently earns $24,000 per year, an employer may have an easy decision to convert the employee to non-exempt status rather than give the employee a raise of more than $20,000.

But what about the employee earning $40,000 per year?  Should that employee be given a raise of more than $7,000 or should she be converted to non-exempt status?  It is not difficult to see how one employer would choose to give an employee a $7,000 raise while another would choose to convert that employee to non-exempt status.

And what if the amount of an increase seems small, but it would have a large impact because of the number of employees affected?  A salary increase of $5,000 for a single employee to meet the new salary threshold may not have a substantial impact upon many employers.  But what if the employer would need to give that $5,000 increase to 500 employees across the country to maintain their exempt status?  Suddenly, maintaining the exemption would carry a $2,500,000 price tag.  And that is not a one-time cost; it is an annual one that would likely increase as the salary threshold is updated.

Impact of Reclassifying an Employee As Non-Exempt

If an employer decides to convert an employee to non-exempt status, it faces a new challenge – setting the employee’s hourly rate.

If the employer “reverse engineers” an hourly rate by just taking the employee’s salary and assuming the employee works 52 weeks a year and 40 hours each week, it will result in the employee earning the same amount as before so long as she does not work any overtime.  The employee will earn more than she did before if she works any overtime at all.  And if she works a significant amount of overtime, the reclassification to non-exempt status could result in the employee earning significantly more than she earned before as an exempt employee.  If she worked 10 hours of overtime a week, she would effectively receive a 37% increase in compensation as a result of her reclassification.

But calculating the employee’s new hourly rate based on an expectation that she will work more overtime than is realistic would result in the employee earning less than she did before.  If, for instance, the employer calculated an hourly rate by assuming that the employee would work 10 hours of overtime each week, and if she worked less than that, she would earn less annually than she did before – perhaps significantly less. That, of course, could lead to a severe morale issue – or to the unwanted departure of a valued employee.

In calculating the new hourly rate for employees they are reclassifying, employers should be careful to do so based upon realistic expectations of the overtime each of those employees will work such that it does not end up paying them significantly more – or significantly less – than they intend.

Whatever employers decide to do, the December 1, 2016, deadline is getting closer each day.

Most of us don’t think of window washers on high rise buildings as employees who qualify for an exemption from overtime pay.  But under an unusual set Clear blue skyof facts, this is precisely what the Seventh Circuit Court of Appeals held in Alvarado v. Corporate Cleaning Services, Inc., 782 F.3d 365 (7th Cir. 2015).

Corporate Cleaning Services (“CCS”) provided window washing services to high rise buildings.  When it received an order for a window washing job, it calculated a number of points, based on the job’s complexity and the number of hours estimated to complete it, to determine the price to charge the customer.  It also used that number of points to determine employees’ pay.  Generally, each window washer received the same number of points, and those points were multiplied by a rate specified in the collective bargaining agreement with the union to determine the amount each employee was paid for the job.  Employees worked primarily in the warmer months and were paid $40,000 to $60,000 per year.

Although the company called this compensation system a “piece rate” system, the Court found the company’s label was not determinative, and the employees actually were paid on a commission basis.  Under 29 U.S.C. §207(i), certain commission paid employees need not be paid time and one half for hours worked over 40 in a work week if they meet three requirements: (1) their regular pay is more than one and one half times the federal minimum wage; (2) more than half their compensation for a representative period of time (not less than one month) represents commission on goods or services; and (3) they are employed by a retail or service establishment.

There appeared to be no dispute that the plaintiffs received more than one and one half times the federal minimum wage, and the Court found that the plaintiffs were paid on a commission basis because they were paid only if there was a sale of window washing services to the public.  The Court had no difficulty in concluding that CCS was a “retail or service establishment”  because it sold its window washing services to building owners and managers who were the ultimate customers—they did not resell the window cleaning services.

Because the window washers met all three requirements for the overtime pay exemption for commissioned paid employees, the Court concluded they were not entitled to overtime pay.

The Court made some interesting observations about commission paid employees.

Work paid on a commission basis involves irregular hours of work, according to the Court.  An employee paid by the sale is not a commission paid worker if his sales are made at a uniform rate, such as one sale each hour.  Because the ratio of his hours of work to his pay is constant, that employee is effectively an hourly paid employee.

The CCS window washers necessarily worked irregular hours because they could not work in high winds, rain, snow, sleet and freezing temperatures.  While many of the workers took long vacations during the winter, they often worked more than eight hours a day during the other three seasons.  Because, among other factors supporting the commission exemption, the window washers could not count on working 40 hours per week for the entire year, the Court reasoned that the employer was exempt from the requirement of paying time and a half for overtime hours.

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.

by Jeffrey H. Ruzal

On September 17, 2013, the U.S. Department of Labor (“DOL”) issued a final rule extending the federal minimum wage and overtime pay protection under the Fair Labor Standards Act (the “FLSA”) to many direct care or domestic service workers, including home health aides, personal care aides and nursing assistants. The rule will take effect on January 1, 2015.

For almost 40 years, an exemption from the minimum wage and overtime requirements of the FLSA has applied to domestic service workers employed to provide “companionship services” for an elderly person or a person with an illness, injury, or disability.

Under the new rule, direct care workers employed by home care agencies and other third parties will no longer be exempt from the minimum wage and overtime requirements. Individual workers who are employed directly by the person or family receiving companionship services will remain exempt under the FLSA.

Furthermore, the tasks that comprise “companionship services” are now more clearly defined. “Companionship services,” according to the DOL, means services for the care, fellowship, and protection of persons who because of advanced age or infirmity cannot care for themselves. Such services include meal preparation, bed making, and clothes washing.

Direct care workers who perform medical or medically-related services for which training is a prerequisite are not considered companionship workers, and thus are not exempt from protection under the FLSA.

General household work can be “companionship services,” as long as it does not exceed 20% of the total weekly hours worked by the companion employee. If this 20% limit is exceeded, the employee must be paid in compliance with the minimum wage and overtime pay requirements of the FLSA.

According to the DOL’s news release, there are an estimated 1.9 million direct care workers in the United States, nearly all of whom are currently employed by home care agencies.