District of New Jersey Finds Driver Entitled to Overtime Compensation under the SAFETEA-LU Technical Corrections Act (Posted March 26, 2013)
The United States District Court for the District of New Jersey issued an opinion today finding that a driver represented by Winebrake & Santillo was entitled to overtime premium compensation even though she periodically drove vehicle weighing more than 10,000 pounds. In a case titled McMaster v. Eastern Armored Services, Inc., the company argued that the plaintiff was exempt under the Motor Carrier Act exemption to the Fair Labor Standards Act because she occasionally drove vehicles weighing more than 10,000 pounds. As a result, Plaintiff was paid just her regular rate or “straight-time” for her overtime hours while employed with the company. Plaintiff argued that under the SAFETEA-LU Technical Corrections Act of 2008, she was a “covered employee” entitled to overtime premium compensation for hours worked over 40 because 51% of her employment was spent driving vehicles weighing less than 10,000 pounds. The Court found in favor of the plaintiff and held that she was entitled to overtime pay. The Court also held that all hours worked should be counted towards the calculation of any overtime premium compensation owed, not just those hours in which the plaintiff drove vehicles weighing less than 10,000 pounds. Click here for a copy of the opinion.
Pennsylvania Court of Common Pleas Rules that 8/80 Rule Violated Pennsylvania Minimum Wage Act(Posted January 22, 2013)
The Court of Common Pleas for Lehigh County recently issued an order finding that a senior care provider violated the Pennsylvania Minimum Wage Act (“PMWA”) by paying its hourly employees represented by Winebrake & Santillo under the “8/80 Rule.” In a case titled LeClair v. Diakon Lutheran Social Ministries, the Court held that prior to a July 2012 amendment, the PMWA required that employees receive overtime premium pay for all hours worked over 40 in a “workweek” defined as “a period of 7 consecutive days.” Diakon had paid its hourly employees pursuant to the 8/80 Rule where they received overtime premium pay for hours worked either in excess of eight in one 24 hour day or in excess of 80 hours in a 14 day pay period. This pay practice, the Court held, violated the PMWA prior to July 2012 when Governor Corbett signed an amendment into law that would allow Pennsylvania healthcare providers to utilize the 8/80 method of pay. Click here for a copy of the opinion. The federal Fair Labor Standards Act allows healthcare providers to utilize the 8/80 Rule to calculate overtime compensation so long as certain prerequisites are fulfilled. The LeClair opinion follows the March 2010 ruling of the Philadelphia Court of Common Pleas in a similar challenge to the 8/80 method of compensation that Winebrake & Santillo and co-counsel obtained in a case called Turner v. Mercy.
Who We Represent (Posted January 14, 2013)
The attorneys at Winebrake & Santillo, LLC have extensive experience representing workers from various employment fields and backgrounds to help them recover unpaid wages. Just a few examples of the types of employees we have previously represented are:
Computer Technicians and IT Employees: Many employers will automatically pay their IT employees a salary and classify them as exempt from federal and state overtime laws. However, those individuals who generally do not write code or spend the majority of their time performing basic helpdesk functions may be entitled to overtime compensation.
Construction Workers and Skilled Laborers: Workers in the building and trade industries are often denied proper payment of wages. Often individuals performing work on government contact jobs are not paid the required “prevailing wage.” Similarly, they may not be paid time and a half for hours worked over 40 or are simply told that their employer “does not pay overtime.” These individuals may be entitled to unpaid wages.
Home Health Workers: Pennsylvania home health workers are often not paid “time and a half” for hours worked over 40 in a workweek. This may be a violation of Pennsylvania wage and overtime law.
Hospital and Assisted Living Workers: Workers at hospitals and assisted living facilities will often be required to work “off-the-clock” during unpaid meal breaks due to the emergency nature of their job. These individuals may be entitled to unpaid wages.
Independent Contractors: Companies, regardless of field, will often improperly classify workers as “independent contractors” to avoid paying minimum wages, overtime compensation and other benefits typically provided to “employees.” Just because an employer labels someone as an independent contractor or even requires him/her to an independent contractor “agreement” does not automatically mean that he/she is not entitled to the protections of federal and state wage and hour laws.
Mortgage Loan Officers: Mortgage loan advisors and officers are often paid either a salary or 100% commissions and do not receive overtime compensation. These workers are often misclassified as exempt from federal and state overtime laws and may be entitled to unpaid wages.
Landscapers and Maintenance Workers: Workers for landscape and maintenance companies are often paid “straight time” for hours worked over 40 and not “time-and-a-half.” These individuals are often required to report to a “shop” or central location at the beginning and end of his/her shift and travel to and from assigned worksites throughout the day without being paid for this time. Workers may be entitled to unpaid wages for such work.
Manufacturing Workers: Employees at factories and laboratories will often be required to put on, take off and maintain certain protective clothes and equipment before and after their paid work hours. This time, even if it only takes a few minutes to perform, may be compensable.
Mechanics and Technicians: Mechanics and technicians are often required to work “off-the-clock” and not receive pay for all the hours they work. Also, many times employers do not include commissions or shift differentials in calculating their hourly rate for purposes of paying overtime premium compensation. These are each potential violations of federal and state wage and overtime laws.
Office Workers: Workers in an office setting will often be paid a salary and classified as exempt even though they primarily perform non-managerial functions. These individuals may be entitled to overtime pay for hours worked over 40 in a single workweek. Just because you are paid a salary does not me you are automatically not entitled to overtime compensation.
Retail Employees: Retail workers who are paid on an hourly basis will often be required to work during unpaid meal breaks or before or after their paid shift in order to address customer needs. Employers will either refuse to pay workers for this “off-the-clock” time or offer “comp time” instead of paying overtime wages. These are each potential violations of federal and state wage and overtime laws.
Service Technicians and Installers: Service technicians are often paid on a “piece rate” or not compensated for work performed at the company’s shop at the beginning and end of the day. In addition, many times employers do not include commissions or shift differentials in calculating their hourly rate for purposes of paying overtime premium pay. These are each potential violations of federal and state overtime laws.
Social Workers: Social workers are often paid a salary and not compensated for hours worked over 40 in a single workweek. Unless you have a master’s degree in your field of specialization you may be entitled to overtime compensation under federal and sate law.
Telemarketers: Workers performing phone banking and help-desk services are often required to “log on” and “log off” his or her employer’s computer system before they can begin making or taking calls as part of his/her paid shift. This time, even if it only takes a few minutes to perform, may be compensable under federal and state overtime law.
Tipped Restaurant and Hotel Workers: Workers paid primarily with tips are often improperly classified as exempt from federal and state minimum wage and overtime laws. If you are paid from a “tip pool” with other employees you may still be entitled to minimum wages and overtime compensation.
Transit Drivers: Individuals who drive buses or vehicles transporting passengers are often classified as exempt from overtime pay and will only receive their “straight” hourly wage for working over 40 hours in a single workweek. If you do not regularly cross state lines as part of your driver duties, you may be entitled to overtime premium compensation.
Warehouse Employees: Workers in warehouses will often be classified as exempt from federal and state overtime laws and will only receive their “straight” hourly wage for hours worked over 40 in a single workweek. However, this classification is often incorrect entitling warehouse workers to unpaid overtime compensation.
First Circuit Refuses to Hear Appeal of Order Certifying Class of Massachusetts Citizens Bank Assistant Branch Managers. (Posted December 19, 2012)
As we reported this past July, Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout Massachusetts. The lawsuit, entitled Lyons v. Citizens Financial Group, Inc., 11-cv-11187-GAO (D.Mass.), is pending in the United States District Court for the District of Massachusetts. The ABMs allege that they were misclassified as exempt from Massachusetts overtime rights laws. Citizens Bank asked the First Circuit Court of Appeals to review the district court's certification order. On December 18, 2012, the First Circuit Court of Appeals issued an order denying Citizens' request to review the class certification decision. Click here for a copy of the opinion.
Middle District Court of Pennsylvania holds that the Settlement of Overtime Claims under the Fair Labor Standards Act Requires Court Approval. (Posted December 19, 2012)
On December 13, 2012, U.S. District Judge Christopher Conner issued an opinion concerning whether settlements of overtime claims in FLSA cases requires approval from either a district court or the Department of Labor to be binding. In Deitz v. Budget Innovations & Roofing, Inc., the Court concluded that such oversight was necessary, stating: “The undersigned concurs with the majority of courts who cite Lynn's Food for the premise that bona fide disputes of FLSA claims may only be settled or compromised through payments made under the supervision of the Secretary of the Department of Labor or by judicial approval of a proposed settlement in a FLSA lawsuit. It is simply impossible to ensure that an agreement settles a bona fide factual dispute over the number of hours worked or the regular rate of employment in the absence of judicial review of the proposed settlement agreement.” 2012 U.S. Dist. LEXIS 177878, *12-14 (M.D. Pa. Dec. 13, 2012). Winebrake & Santillo had filed a brief at the Court's request regarding whether FLSA settlements required Court approval.
Utah District Court Judge Holds that Language About Potential Cost Shifting Should Not be Included in Collective Action Notice. (Posted December 18, 2012)
On December 13, 2012, Judge Tena Campbell of the District of Utah refused to allow the notice to potential FLSA class members to include language stating that if unsuccessful, plaintiffs may be subject to paying a pro rata portion of the costs incurred by a defendant. The Court held that “[g]iven the small amount of costs compared to the overall stakes, and the rarity of fee-shifting, the disputed language proposed by Cellular Sales risks chilling participation in the collective action.” Bolletino v. Cellular Sales of Knoxville, 2012 U.S. Dist. LEXIS 177217, *4 (D. Utah Dec. 13, 2012)
Plaintiff Bolletino is represented by Winebrake & Santillo as well as Barrett Johnston, LLC (Nashville, Tenn.) and Barkan Meizlish Handelman Goodin DeRose Wentz, LLP (Columbus, OH). Mr. Bolletino alleges that he and other Sales Professionals for Cellular Sales were misclassified as independnt contractors, rather than employees, and should have received overtime premium compensation when they worked over 40 hours in a single workweek. A copy of Judge Campbell's order is attached here.
Some Cases Addressing the Importance of the FLSA's Fee Recovery Provision.
(Posted November 15, 2012)
Pennsylvania overtime lawyers and wage lawyers should keep the follwing cases in mind when they think about filing cases involving the overtime rights of employees: The FLSA explicitly provides that “[t]he court in [an FLSA] action shall . . . allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (emphasis supplied); see also 43 P.S. § 333.113 (a prevailing party under PMWA shall recover “reasonable attorney’s fees as may be allowed by the court”). The FLSA’s language mandatesthat prevailing parties under the FLSA recover attorney’s fees and costs. See Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir. 1994); Albers v. Tri-State Implement, Inc., 2010 U.S. Dist. LEXIS 23450, *67 (D.S.D. Mar. 12, 2010). In fact, “attorney fees are an integral part of the merits of FLSA cases,” Shelton v. M.P. Ervin, 830 F.2d 182, 184 (11th Cir. 1987), and, as courts repeatedly explain, the ability of FLSA claimants to recover a reasonable attorney’s fee is crucial to the statute’s enforcement scheme, see, e.g., Fegley, 19 F.3d at 1134-35 (the “purpose of the FLSA attorney fees provision is ‘to ensure effective access to the judicial process by providing attorney fees for prevailing plaintiffs with wage and hour grievances,’” and, furthermore, “an award of attorney fees here ‘encourages the vindication of congressionally identified policies and rights’”); United Slate, Local 307 v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 502 (6th Cir. 1984) (FLSA attorney’s fee analysis “must reflect the obvious congressional intent that the policies enunciated in FLSA Section 2 be vindicated, at least in part, through private lawsuits charging a violation of the substantive provisions of the wage act”); Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir. 1946) (“Obviously Congress intended that the wronged employee should receive his full wages plus the penalty without incurring any expense for legal fees or costs.”); Estrella v. P.R. Painting Corp., 596 F. Supp. 2d 723, 727 (E.D.N.Y. 2009) (FLSA fee-recovery provision is “designed in part to secure legal representation for plaintiffs whose wage and hour grievances were too small, in terms of expected recovery, to create a financial incentive for qualified counsel to take such cases under conventional fee arrangements”); Mezger v. Price CPAs, PLLC, 2008 U.S. Dist. LEXIS 55311, *12-13 (M.D. Tenn. Jul. 21, 2008) (same as Fegley); see also Heder v. City of Two Rivers, 255 F.Supp.2d 947, 952 (E.D. Wis. 2003) (FLSA’s fee-recovery provision “exists to enable plaintiffs to employ reasonably competent lawyers without cost to themselves if they prevail and, thereby, to help ensure enforcement of the substantive provisions of the FLSA”). Consistent with the above principles, it is commonplace (and entirely consistent with the FLSA’s legislative purpose) for FLSA attorney’s fee awards to far exceed the amount of the plaintiff’s recovered unpaid wages. See Howe v. Hoffman-Curtis Partners Ltd. 215 Fed. Appx. 341, 342 (5th Cir. Jan. 30, 2007) (“Given the nature of claims under the FLSA, it is not uncommon that attorney fee requests can exceed the amount of judgment in the case by many multiples.”). For example, after one recent FLSA trial handled by our co-counsel at the Winebrake & Santillo firm, the federal court awarded $73,195.00 in attorney’s fees even though the plaintiffs recovered only $18,495 in unpaid wages. See Gonzalez v. Bustleton Servs., 2010 U.S. Dist. LEXIS 85153 (E.D. Pa. Aug. 10, 2010). Similar outcomes abound. See, e.g., Fegley, 19 F.3d at 1134-35 (upholding award of $40,000 in fees even though Plaintiff recovered only $7,680 in damages); Cox v. Brookshire Grocery Co., 919 F.2d 354, 358 (5th Cir. 1990) (upholding award of $9,250 in attorney’s fees even though Plaintiff recovered only $1,698.00); Bonnette v. Cal. Health & Welfare, 704 F.2d 1465, 1473 (9th Cir. 1983) (affirming award of $100,000 in attorney’s fees for a recovery of $20,000); Albers, 2010 U.S. Dist. LEXIS 23450, at *66-86 (awarding $43,797 in fees even though plaintiffs’ combined damages totaled only $2,137.97);King v. My Online Neighborhood, Inc., 2007 U.S. Dist. LEXIS 16135 (M.D. Fla. Feb. 20, 2007) (approving a settlement for $4,500 in unpaid wages and $10,500 in attorney’s fees); Heder, 255 F. Supp. 2d 947, 962 (E.D. Wis. 2003) (awarding $36,204.88 in fees even though plaintiff’s damages totaled only $3,540.00); Griffin v. Leaseway Deliveries, Inc., 1992 U.S. Dist. LEXIS 20203 (E.D. Pa. Dec. 31, 1992) (awarding attorney’s fees of $33,631.00 for a plaintiff’s award of $17,467.20); Holyfield v. F.P. Quinn & Co., 1991 U.S. Dist. LEXIS 5293 (N.D. Ill. Apr. 22, 1991) (awarding $6,922.25 in attorney’s fees for a judgment in the amount of $921.50); seealso Singer v. City of Waco, 324 F.3d 813, 829 (5th Cir. 2003) (affirming fee award despite the fact that plaintiffs recovered less than 4% of the damages sought).
Pennsylvania Court of Common Pleas Issues Order in Favor of Home Health Workers Under Pennsylvania Minimum Wage Act. (Posted November 14, 2012)
The Court of Common Pleas for Dauphin County Pennsylvania recently entered an order finding that Home Health Workers, represented by Winebrake & Santillo, were entitled to overtime premium under the Pennsylvania Minimum Wage Act as a matter of law. In a case titled Grajales v. Safe Haven Quality Care, LLC , the Court held that the Pennsylvania Supreme Court's ruling in Bayada Nurses, Inc. v. Commonwealth, 8 A.3d 866 (Pa. 2010) applied retroactively. The Bayada decision affirmed Home Health Workers entitlement to overtime premium pay for hours worked over 40 in a workweek under the Pennsylvania Minimum Wage Act. Under the Court's decision, Home Health Workers in Pennsylvania should be paid overtime both before and after the Bayada decision. Click here for a copy of the opinion.
District of Massachusetts reiterates Certification of Class of Citizens Bank Assistant Branch Managers. (Posted November 14, 2012)
As we reported this past July, Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout Massachusetts. The lawsuit, entitled Lyons v. Citizens Financial Group, Inc., 11-cv-11187-GAO (D.Mass.), is pending in the United States District Court for the District of Massachusetts. The ABMs allege that they were misclassified as exempt from Massachusetts overtime rights laws. On November 9, 2012, the District of Massachusetts responded to a request from the First Circuit Court of Appeals and issued an opinion reaffirming its original class certification decision. Click here for a copy of the opinion.
Ohio District Court Conditionally Certifies FLSA Class of Over 1,600 Mortgage Loan Officers Seeling Unpaid Overtime. (Posted October 7, 2012)
On September 29, 2012, Southern District of Ohio Judge Edmund Sargus conditionally certified a class of over 1,600 Mortgage Loan Officers who alleged that they were misclassified as exempt from the overtime laws. The Loan Officers worked for US Bank. As a result of the conditional certification order, the loan officers will be m=notified of the lawsuit and of their right to join. In granting conditional certification, Judge Sargus relied, in part, ofn the fact that the bank recently reclassified the loan officers in an accross-the-board manner, a fact that contradics the bank's litigation argument that individualized inquiry is necessary to determine whether eor not loan officers are overtime-exempt. The Judge also rejected the banks arguments that plaintiffs' counsel acted improperly by contacting loan officers prior to obtaining conditional certification. By now it should be clear: mortgage loan officers generally are entitled to overtime pay under the FLSA. Mortgage loan officers also may be entitled to overtime under many state's laws. Click here for a copy of Judge Sargus's decision: http://docs.justia.com/cases/federal/district-courts/ohio/ohsdce/2:2011cv00593/147732/71/0.pdf?ts=1348842983
Kansas District Court Affirms Jury Verdict Awarding Overtime to Meat Workers. (Posted October 7, 2012).
On August 21, 2012, a Kansas District Court denied post-trial motions by Tyson Foods in a donning and doffing case in which a jury found that it violated the FLSA by failing to pay Kansas beef workers for all time spent working. The district court's opinion addresses various issues, including the propriety of conditional certification, the propriety of representative testimony, and propriety of liquidated damages. This is just the latest victory for wage and overtime lawyers seeking to vindicate the wage rights of food processing workers. Click here for a copy of the Court's decision: http://docs.justia.com/cases/federal/district-courts/kansas/ksdce/2:2006cv02198/56745/1098/
THE PURPOSE BEHIND OUR OVERTIME LAW (Posted September 14, 2012).
Many of you know that our federal overtime law – the Fair Labor Standards Act (“FLSA”) – was enacted during the Great Depression and that the law ensures that employees are fairly compensated for working long hours. This, however, is not the only purpose behind the FLSA.
In these times of high unemployment, it’s especially important to remember that the FLSA’s primary purpose was to spur employment by making it expensive for companies to pay employees for working over 40 hours per week. In a fair world (one in which employers don’t skirt the overtime laws) the costs to the company of paying all that extra overtime often will tilt the scales in favor of hiring additional employees and spreading work among more employees.
A few years ago, our firm came out on the losing end of a split-decision in Parker v. NutriSystem, Inc., 620 F.3d 274 (3d Cir. 2010). While the Court of Appeals’ decision was very disappointing, it did contain an excellent summary of the purpose behind the FLSA:
The legislative history of the overtime compensation provisions of the FLSA reveal a threefold purpose underlying them: (1) to prevent workers who, perhaps out of desperation, are willing to work abnormally long hours from taking jobs away from workers who prefer shorter hours, including union members; (2) to spread available work among a larger number of workers and thereby reduce unemployment; and (3) to compensate overtime workers for the increased risk of workplace accidents they might face from exhaustion or overexertion.
Id. at 279 (citing Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1175-76 (7th Cir. 1987)).
In sum, the FLSA’s important role in fighting unemployment is more important than ever. So next time you hear someone whining about the supposed proliferation of overtime rights lawsuits, try to remind them of the FLSA’s important role in fighting unemployment.
“DAY-RATE” EMPLOYEES ARE ENTITLED TO OVERTIME PREMIUM PAY. (Posted September 14, 2012).
Many workplace advocates and Trial Lawyers assume that only “hourly” employees are entitled to time-and-one-half overtime pay for hours worked over 40 in a workweek. It’s time to bust this myth. In fact, the right to overtime pay extends to all kinds of employees who are not paid on a traditional hourly basis.
For example, many employees are paid a fixed amount per day. These “day-rate” employees are especially common in the construction, landscaping, and natural gas industries. Many of these employees assume that, because they are paid by the day, it does not matter how many hours they work during the week. In fact, in many of these industries, the Boss does not even keep track of the hours worked by the employee. This lack of recordkeeping perpetuates the employee’s mistaken belief that no extra overtime pay is due.
Under the federal overtime laws and regulations, most day-rate employees are entitled to extra overtime pay. See generally 29 C.F.R. § 778.112. In order to figure out the amount of extra overtime pay due to a day-rate employee, we need to convert the employee’s day-rate into an hourly rate by dividing all the pay received during the week by all the hours worked during the week. The employee is then entitled to an extra payment equaling one-half of the regular hourly rate for every hour worked over 40 during the week.
I know this is pretty confusing, so here’s an example: Joe works in the northern tier of Pennsylvania for a natural gas company. He is paid $150 for every day worked. The seven-day workweek runs from Sunday through Saturday. Joe does not work on Sunday or Saturday. But he works the following hours on Monday-Friday: Monday = 9 hrs.; Tuesday = 11 hrs; Wednesday = 6 hrs; Thursday = 13 hrs; Friday = 9 hrs. Because Joe worked five days during the week, the Boss pays him $750 ($150 X 5 days). However, Joe is entitled to an extra overtime payment because he worked over 40 hours during the workweek. Specifically, Joe worked a total of 48 hours (9 + 11 + 6 + 13 + 9) during the week. He is entitled an extra overtime payment for eight hours.
Based on the above, here’s how Joe’s extra overtime payment is calculated: [$750/48] X .5 X 8 hrs. Put differently, the Boss owes Joe an extra overtime payment of $62.50.
Many of our Trial Lawyer and community activist friends who receive this Newsletter are too busy focusing on their own practice areas to delve into complicated FLSA regulations. If you fall within this category, its OK to put away your calculator. Just remember one thing: day rate employees are entitled to extra overtime pay when they work over 40 hours in a week.
If you encounter a current or former day-rate employee who might not have received extra overtime pay, be sure to give us a call. We would be delighted to evaluate the situation and, if appropriate, file suit in federal court. As so many of you know, we always pay a fair referral fee.
FEDERAL COURTS ARE STARTING TO CATCH-ON TO THE “INDEPENDENT CONTRACTOR” SCAM. (Posted September 14, 2012).
Our law firm continues to file federal court lawsuits challenging the corporate scam of misclassifying workers as “independent contractors” rather than “employees.” This practice enables corporations to: (i) cheat workers out of basic benefits (such as, for example, overtime pay, worker’s compensation insurance, and unemployment insurance), (ii) cheat the government out of tax dollars, and (iii) gain an unfair advantage over competitors who comply with the law.
Make no mistake about it: the practice of misclassifying employees as “independent contractors” is a disaster for American workers and their families. Congress’ failure to effectively crack down on this practice is a national embarrassment.
Since our politicians are incapable of protecting working families against the independent contractor scam, it’s up to Trial Lawyers and the hard-working (but under-resourced) Department of Labor to protect working families.
Based on our review of the recent caselaw, Federal Court decisions appear to be trending in favor of workers in lawsuits alleging independent contractor misclassification. It seems that Federal Judges are becoming more skeptical of the independent contractor business model.
We see hints of the growing judicial skepticism in a Seventh Circuit Court of Appeals opinion issued in the massive, multi-district litigation involving thousands of FedEx package delivery drivers allegedly misclassified as independent contractors. (Our firm has the privilege of working on the FedEx litigation alongside many excellent law firms throughout the United States.)
The Seventh Circuit opinion, issued on July 12, 2012, made some very cogent observations about the importance of the independent contractor misclassification issue:
The question [of whether the drivers were properly classified as independent contractors] appears to be a close one. And the issue is of great importance not just to this case but to the structure of the American workplace. The number of independent contractors in this country is growing. There are several economic incentives for employers to use independent contractors and there is a potential for abuse in misclassifying employees as independent contractors. Employees misclassified as independent contractors are denied access to certain benefits and protections. Misclassification results in significant costs to government: “[B]etween 1996 and 2004, $34.7 billion of Federal tax revenues went uncollected due to the misclassification of workers and the tax loopholes that allow it.” And misclassification “puts employers who properly classify their workers at a disadvantage in the marketplace[.]” FedEx has approximately 15,000 delivery drivers in the U.S. This case will have far-reaching effects on how FedEx runs its business . . . throughout the United States. And it seems likely that employers in other industries may have similar arrangements with workers, whether delivery drivers or other types of workers. Thus, the decision in this case will have ramifications beyond this particular case and FedEx's business practices, affecting FedEx's competitors and employers in other industries as well.
Craig v. FedEx Ground Package System, Inc., 686 F.3d 423 (7th Cir. 2012).
The Seventh Circuit hit the nail on the head. In these tough economic times, the fight against independent contractor abuse is more important than ever.
If your firm represents current or former independent contractors in workers compensation lawsuits or other types of litigation, we would be delighted to speak with your clients about whether, due to a misclassification, they might be able to recover overtime wages and other valuable benefits. As you know, we always pay a fair referral fee.
Some Court Decisions Holding that Allegedly Misclassified Managers Resumes Are Not Dispositive in Overtime Rights Lawsuit. (posted September 13, 2012)
Here are some cases you can cite to the next time a defense firm tries to use your client's resume against them in an overtime misclassification case under the executive, administrative, or professional exemptions: Schaefer v. IMPC, 358 F.3d 394, 400-01 (6th Cir. 2004) (“[W]e have recognized that resumes may not provide the most accurate picture of an employee's job because resumes are typically designed to enhance the employee’s duties and responsibilities in order to obtain a job.”); Wolfslayer v. IKON, 2005 U.S. Dist. LEXIS 1106, *29 (E.D. Pa. Jan. 26, 2005) (recognizing “statements [in resumes] must be taken with a grain of salt.”); Smith v. Bank of N.Y. Mellon Corp., 2011 U.S. Dist. LEXIS 21996 (W.D. Pa. Jan. 20, 2011) (“The focus is on the evidence of the plaintiff's day-to-day duties, and not on job descriptions, resumes, or performance evaluations.”); Chicca v. St. Lukes Episcopal Health Sys., 2012 U.S. Dist. LEXIS 32399 (S.D. Tex. Mar. 12, 2012) (“To discern what an employee's actual, day-to-day job activities are, general job descriptions contained in an employee's resume or prepared by the employer may be considered, but are not determinative.”);Johnston v. Robert Bosch Tool Corp., 2008 U.S. Dist. LEXIS 80053 (W.D. Ky. Oct. 6, 2008) (“A plaintiff seeking recovery of unpaid overtime therefore is not precluded from arguing that his or her day-to-day activities differed from those described in his or her job description, resume or other documents.”); Ale v. TVA, 269 F.3d 680, 689 n2 (6th Cir. 2001) (“there is reason to believe that these resumes may not provide the most accurate picture of an employee's job because resumes are typically "’designed to enhance the employees duties and responsibilities in order to obtain a job.’").
Western District of Pennsylvania Holds that the Fluctuating Workweek Method of Pay is Impermissible Under Pennsylvania Overtime Law (posted September 6, 2012)
On August 27, 2012, Judge Cathy Bissoon of the Western District of Pennsylvania issued an opinion in Foster v. Kraft Foods Global, Inc. holding that the Fluctuating Workweek method of paying overtime compensation was not permissible under the Pennsylvania Minimum Wage Act.
Under the Fluctuating Workweek method, an employee is paid a salary and then receives additional compensation for hours worked over 40 in a workweek. However, the overtime pay is calculated by dividing the employee’s salary by all the hours worked in a week to come up with a regular hourly rate of pay. The regular hourly rate of pay is then divided by two to come up with a “half-time” rate. The employee then receives half-time pay for each worked hour over 40 that he or she works in a particular week. Many times this method of paying overtime is referred to by employees as “‘Chinese Overtime.’” See Evans v. Lowe's Cos., 2004 U.S. Dist. LEXIS 8335, *8 (M.D. Pa. Apr. 29, 2004).
Federal overtime law allows employers to pay employees under the Fluctuating Workweek method. However, inFoster v. Kraft Foods Global, Inc., 2012 U.S. Dist. LEXIS 121282 (W.D.Pa. Aug. 27, 2012), Judge Gissoon held that Pennsylvania employers are not allowed to pay workers under the Fluctuating Workweek method without violating 34 Pa. Code § 231.43(d)(3) of the Pennsylvania Minimum Wage Act which requires that workers receive overtime pay equal to 150% of their hourly rate for all hours worked over 40 in a workweek.
The attorneys at Winebrake & Santillo have successfully litigated cases against some of the nation’s largest retailers on behalf of workers challenging the Fluctuating Workweek of paying overtime compensation.
Our Recent Third Circuit Victory (Posted August 27, 2012)
Our firm is especially proud of our role in Knepper v. Rite Aid Corp., 675 F.3d 249 (3d Cir. 2012), wherein the Third Circuit held that workers participating in FLSA collective actions may simultaneously assert class action claims under state wage and hour laws. The decision rejects the reasoning of at least 15 separate district court opinions. The opinion, which received nationwide attention, is one of the year’s most important employment rights opinions. Pete Winebrake argued the appeal at the Third Circuit, and our winning brief was written by both our firm and our friends at Klafter Olsen & Lesser LLP (Rye Brook, NY). Please do not hesitate to call if you ever need assistance litigating wage and overtime claims on a class-wide basis.
New Jersey Federal Judge Refuses to Decertify Overtime Lawsuit Brought by Salespeople. (Posted August 24, 2012)
A defendant’s motion for decertification as to a collective class consisting of “front-line salespeople and “travel club salespeople” was recently denied by the New Jersey District Court in William Zanes, et al. v. Flagship Resort Development. See 2012 U.S. Dist. LEXIS 22191 (D.N.J. Feb. 22, 2012). The Court also granted the plaintiffs’ motion for summary judgment holding that the plaintiffs are employees, and not independent contractors, pursuant to the Fair Labor Standards Act (“FLSA”).
The plaintiffs in this case consisted of travel club salespeople and front-line salespeople who worked over 40 hours each week and did not receive any overtime compensation. The front-line salespeople sold timeshare units in the Atlantic City area and the travel club salespeople sold trial memberships in the timeshare program. Both the front-line salespeople and travel club salespeople were paid on a draw against commission. Plaintiffs argued that based upon the job duties performed by the plaintiffs, they were not exempt from the overtime mandates of the FLSA and the New Jersey State Wage and Hour Law, and were therefore required to be paid overtime for all hours spent working over 40 each workweek.
In ruling upon whether the present and former employees could pursue a collective action against their employer, Judge Irenas held that the plaintiffs were similarly situated despite minor differences in their job duties: “All Plaintiffs had similar job duties, responsibilities and compensation structures. All Plaintiffs assert common claims of failure to properly pay overtime compensation in violation of the FLSA. Although differences between the Plaintiffs in the travel club and front-line departments exist, any such differences are outweighed by the similarities between those Plaintiffs.”
Moreover, in granting the plaintiffs’ motion for summary judgment as to the plaintiffs’ status of employees, and not independent contractors, the court noted that the large amount of control with which the defendant exerted over the plaintiffs’ work demonstrated that plaintiffs are properly classified as employees: “The Court finds that Defendant controlled the overall manner of Plaintiffs’ work by setting Plaintiffs’ compensation structure, establishing working hours and approving days off, and by requiring Plaintiffs to adhere to its policies in performing work. While Defendant has identified specific ways that Plaintiffs exercise discretion in making and recording sales of trial-memberships, this limited discretion over the manner in which sales were pitches does not alter the fact that Defendant exercised control over the day-to-day operations of the travel club department.”
Eastern District of Tennessee Grants Plaintiff’s Motion to Toll the Running of Statute of Limitations for Sales Professions Formerly Classified as Independent Contractors. (Posted August 21, 2012)
On August 9, 2012, Magistrate Judge H. Bruce Guyton of the Eastern District of Tennessee granted Plaintiff Nicholas Bolletino’s motion to toll the running of the statute of limitations for Sales Professionals who worked for Cellular Sales of Knoxville, Inc. Plaintiff Bolletino is represented by Winebrake & Santillo as well as Barrett Johnston, LLC (Nashville, Tenn.) and Barkan Meizlish Handelman Goodin DeRose Wentz, LLP (Columbus, OH).
The lawsuit alleges that Cellular Sales violated the FLSA by misclassifying its Sales Professionals who worked in Verizon Wireless stores as “independent contractors” who were exempt from overtime pay when in reality they were “employees” entitled to such compensation. Cellular Sales denies any wrongdoing. The Complaint also alleges that Cellular Sales reclassified its Sales Professionals as employees in January 2012 entitled to overtime pay.
In Bolletino v. Cellular Sales of Knoxville, Inc., 2012 U.S. Dist. LEXIS 112132 (E.D.Tenn. Aug. 9, 2012), the Eastern District of Tennessee held that tolling the statute of limitations as of June 6, 2012 for potential opt-in plaintiffs to this FLSA collective action was appropriate because each of the factors articulated by the Sixth Circuit in Allen v. Yukins, 366 F.3d 396, 401-02 (6th Cir. 2004) were fulfilled. The Court also cited to similar decisions to toll the running of the statute of limitations in FLSA collective actions in Abadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978 (M.D.Tenn. Dec. 14, 2010) and Baden-Winterwood v. Life Time Fitness, 484 F. Supp.2d 822 (S.D. Ohio 2007). A copy of the opinion is available here.
District Court Denies Motion to Decertify Class of FedEx Delivery Drivers who Allege they Were Misclassified as Independent Contractors. (Posted August 20, 2002)
On August 13, 2012, the United Sattes District Court for the District of Maine issued an opinion in Scovil v. FedEx Ground Package System, Inc., 2012 U.S. Dist. LEXIS 113558 (D. Me. Aug. 13, 2012). In Scovil, the plaintiffs are package delivery drivers who allege that FedEx violated the FLSA by misclassifying them as independent contractors and failing to pay them the overtime premium. The district court denies the company’s motion to decertify the FLSA class. See Scovil, 2012 U.S. Dist. LEXIS 113558, at *31-37. For a copy of the opinion, click here.
District Court Holds that FLSA Notice Form Should Be Delivered to All Class Members Employed During the Time Period Beginning Three Years Prior to the Filing of the Complaint. (Posted July 13, 2012)
In the wake of conditional certification, lawyers often argue about whether the conditionally certified FLSA class period should run from (i) three years prior to the issuance of the notice form or (ii) three years prior to the filing of the complaint. Southern District of New York Judge John G. Koeltl recently issued a decision squarely addressing this issue. In Winfield v. Citibank, N.A., 2012 U.S. Dist. LEXIS 16449 (S.D.N.Y.), the Court held that notice should be sent to all individuals who fall within the definition of the conditionally certified class within three years of the filing of the complaint. The Court reached this conclusion even though at most opt-in plaintiffs can only recover for the three years prior to actually filing a consent to join the lawsuit, stating “because equitable tolling issues often arise for prospective plaintiffs, courts frequently permit notice to be keyed to the three-year period prior to the filing of the complaint, ‘with the understanding that challenges to the timeliness of individual plaintiffs’ actions will be entertained at a later date.’” In fact, due to the plaintiff’s Rule 23 claims under the New York Labor Law (“NYLL”) in Winfield, the allowed the notice to go out to individuals who worked as personal bankers during the six years prior to the filing of the complaint.
Winebrake & Santillo Obtains Class Certification in Overtime Rights Lawsuit on Behalf of Citizens Bank Assistant Branch Managers in Massachusetts. (Posted July 9, 2012)
Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, recently obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout Massachusetts. The lawsuit, entitled Lyons v. Citizens Financial Group, Inc., 11-cv-11187-GAO (D.Mass.), is pending in the United States District Court for the District of Massachusetts. The ABMs allege that they were misclassified as exempt from Massachusetts overtime rights laws. The federal court's class certification decision allows the lawsuit to go forward on behalf of hundreds of ABMs. Click herefor a copy of the Court's class certification decision.
Winebrake & Santillo Obtains Conditional Certification in Overtime Rights Lawsuit on Behalf of Transit Bus Drivers for Krapf's Coaches, Inc. (Posted July 2, 2012)
Winebrake & Santillo, recently obtained conditional certification for a class of Transit Bus drivers for Krapf's Coaches, Inc in Pennsylvania. The lawsuit is pending in the United States District Court for the Eastern District of Pennsylvania. The plaintiff alleges that he and other Transit Bus drivers were misclassified as exempt from federal and Pennsylvania overtime rights laws and thus were not paid overtime premium compensation for all hours worked over 40 in a single workweek. The federal court's certification decision allows notice of the lawsuit to be sent to other Transit Bus drivers so that they will have the opportunity of joining the lawsuit. Click here for a copy of the Court's conditional certification decision.
Here Is Some Authority for the Proposition that, Under the FLSA, the Running of the Statute of Limitations Period Should Be Tolled When the Court Fails to Promptly Rule on a Conditional Certification Motion. (Posted June 26, 2012)
Equitable tolling should be granted in the instant litigation as Plaintiff has diligently been pursuing her rights on behalf of the potential collective class. See Abadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978, *9 (M.D. Tenn. Dec. 14, 2010). Indeed, as demonstrated by the procedural history set forth above, “extraordinary circumstances” exist here which warrant equitable tolling as Plaintiff is seeking relief on behalf of putative opt-ins whose statute of limitations have been and will continue to run, until they are afforded the opportunity to affirmatively opt-in to this case. See id. As such, equitable tolling is needed to prevent further running of potential class members’ claims.
Courts routinely hold that when a motion for conditional certification is pending in a Fair Labor Standards Act (“FLSA”), the statute of limitations should be tolled for those opt-ins that have not affirmatively opted in to the action. Courts reach this conclusion because of the recognition that opt-ins suffer prejudice as their statute of limitations continues to run due to reasons beyond their control until their notice of written consent is filed with the court. Specifically, Section 256 provides that in a collective action, an opt-ins’ claim is commenced upon filing of the notice of written consent with the court. See 29 U.S.C. § 256(b) (providing that “in the case of a collective or class action instituted under the Fair Labor Standards Act [ . . . ] it shall be considered to be commenced in the case of any individual claimant [ . . . ] on the subsequent date on which such written consent is filed in the court in which the action was commenced.”). As such, signed consents donot relate back to the original filing date of the complaint. See id.; see also Symczyk v. Genesis Healthcare Corp., 656 F.3d 189, 200 (3rd Cir. 2011).
Indeed, there is often a lengthy amount of time that elapses from the granting of a conditional certification motion until the filing of an individual’s notice of consent form, because before an opt-in’s notice of written consent can even be filed with the court, a number of procedural steps must first occur. Firstly, plaintiff’s counsel must move for conditional certification before the court. Secondly, the court must then grant conditional certification. Thirdly, the parties must agree upon a Notice form which requires court approval is then mailed to all potential opt-ins. Potential class members must then review, complete, and mail the notice of consent forms back to Plaintiff’s counsel. Lastly, Plaintiff’s counsel must file the notice of consent forms with the court. It is only upon the filing of the notice of consent form that an opt-ins’ statute of limitations stop running. It is no surprise then, the courts routinely will grant tolling to putative opt-ins starting from a much earlier date, such as the date plaintiffs’ counsel moved for conditional certification.
The Middle District of Tennessee in Abadeer v. Tyson Foods, Inc. granted an additional 120 days of tolling on behalf of potential opt-ins following the date of the Court’s Order granting conditional certification. SeeAbadeer v. Tyson Foods, Inc., 2010 U.S. Dist. LEXIS 136978, *15 (M.D. Tenn. Dec. 14, 2010). The Court had previously already granted tolling on behalf of putative opt-ins for seven (7) months, which represented the time period during which plaintiff’s motion for conditional certification was pending before the court. See id.at *7-8. Relying in part upon other caselaw from the Sixth Circuit, the Court found that equitable tolling was warranted. See id. at *9-14. Specifically, the Court found tolling was appropriate as “the members of this collective action are low wage workers, members of this group [who already opted in] had the assistance of counsel, and the necessity of time for the Court’s ruling.” Id. at *10-11; see also Roslies-Perez v. Superior Foresty Service, Inc., 652 F. Supp. 2d 887, 899 (M.D. Tenn. July 28, 2009) (tolling the statute of limitations for putative class members).
In a recent FLSA action, the Southern District of New York held that the statute of limitations should be tolled as of the date of the plaintiff’s filing of the motion for conditional certification. See McGlone v. Contract Callers, Inc., 2012 U.S. Dist. LEXIS 49702, *16-17 (S.D.N.Y. Apr. 9, 2012). In McGlone, plaintiff moved for conditional certification on behalf of approximately 500 individuals in October of 2011 and the Court did not rule on the motion for conditional certification until nearly six (6) months later. See Civil Docket attached hereto as Exhibit A. The Court recognized that equitable tolling was appropriate as “putative class representatives and their counsel are diligently and timely pursuing the claims should also not be penalized due to the court’s heavy dockets and understandable delays in rulings. Accordingly, the statute of limitations will be tolled as of the date of the filing of this motion.” Id.
Similarly, in Yahraes v. Restaurant Associates Events Corp., the Eastern District of New York granted equitable tolling of the statute of limitations on behalf potential opt-ins for the period of time that plaintiff’s two separate motions for conditional certification was pending which amounted to a total of approximately three (3) months. Yahraes v. Restaurant Associates Events Corp., 2011 U.S. Dist. LEXIS 23115, *9-10 (E.D.N.Y. March 8, 2011). In doing so, the Court held that “plaintiffs have vigorously pursued their claims and, through no fault of their own, have been delayed in prosecuting their action and distributing 216(b) notice to potential opt-in plaintiffs.” Id. at *8. Significantly, the Court noted that equitable tolling would not prejudice the defendants as they had been on notice since the complaint was originally served that they would be potentially liable for FLSA claims going back three years. See id. at *9.
In Stickle v. SCI Western Mtk. Support Ctr., the Court granted plaintiffs’ motion for equitable tolling for the period of time from when defendants filed their motion to dismiss until the date that plaintiffs re-file their motion for conditional certification. See Stickle v. SCI Western Mtk. Support Ctr., 2008 U.S. Dist. LEXIS 83315, *61-65 (D. Ar. Sep. 30, 2008). The Court held that the delay caused by defendant’s motion to dismiss was prejudicial to potential opt-ins should the case be certified: "The commencement of a lawsuit does not act to toll the statue of limitations under the FLSA for putative class members. Instead, the statute of limitations continues to run until putative class members file consent forms. Court have equitably tolled the statute of limitations in a FLSA action when doing so is in the interest of justice. [Citing cases] The Court finds it appropriate in the interest of justice to toll the statute of limitations here. Defendants here will not be prejudiced by an equitable toll. If not tolled, the statute of limitations could act to deprive consenting employees of their right of action." Id. at *63-64 (internal citations omitted).
Likewise, the Court in Antonio-Morales v. Bimbo’s Best Produce, Inc. granted plaintiff’s motion to toll the statute of limitations during the pendency of a stay requested by the U.S. Department of Justice. See Antonio-Morales v. Bimbo’s Best Produce, Inc., 2009 U.S. Dist. LEXIS 51833, *6 (E.D. La. April 20, 2009). In granting the motion, the Court noted that “[c]ourts routinely grant equitable tolling in the FLSA collective action context to avoid prejudice to actual or potential opt-in plaintiffs that can arise from the unique procedural posture of collective actions under 29 U.S.C. § 216(b).” Id. at *4.
Lastly, in Owens v. Bethlehem Mines Corp., the Court granted tolling of the statute of limitations as to two opt-ins to an action involving Age in Discrimination Employment Act (“ADEA”) claims. See Owens v. Bethlehem Mines Corp., 630 F. Supp. 309, 312-313 (S.D. W. Va. 1986). The ADEA operates pursuant to the same statutory framework applicable to the FLSA concerning how potential opt-ins must join a collective action. See id. at 311; see also 29 U.S.C. § 256. The Court found the claims of the two opt-ins timely, even though the notice of consent forms filed by both opt-ins did not meet the ADEA’s three-year statute of limitations. See id. at 310-311. In granting equitable tolling to both opt-ins’ claims, the Court stated that “[t]hrough no fault of the Plaintiffs or the Defendant, the motion to certify was not ruled upon until November 21, 1985. In a Rule 23 class action, the running of the statute of limitations for the individual plaintiffs is suspended during the pendency of the class certification question.” Id. at 312 (internal citations omitted). Although recognizing that Rule 23 principles did not apply, the Court followed the holdings of other courts and granted tolling, in part, no doubt to the approximately 16 month time period between the motion to conditionally certify the class and the Court Order granting conditional certification. See id. 310.
Winebrake & Santillo Obtains Class Certification in Overtime Rights Lawsuit on Behalf of Citizens Bank Assistant Branch Managers in New York. (Posted June 23, 2012).
Winebrake & Santillo, working with co-counsel from the Kansas City law firm of Donelon PC, recently obtained class certification for a class of Assistant Branch Managers (ABMs) employed at Citizens Bank locations throughout New York state. The lawsuit, entitled Cuevas v. Citizens Financial Group, Inc., 10-cv-5582-FB (E.D.N.Y.), is pending in the United States District Court for the Eastern District of New York. The ABMs allegethat they were misclassified as exempt from New York overtime rights laws. The federal court's class certification decision allows the lawsuit to go forward on behalf of hundreds of ABMs. Click Here for a copy of the Court's class certification decision.
Here is Text From a Brief We Recently Filed in Support of the Argument that FLSA Settlements Must be Approved by the Court. We Hope Wage and Overtime Rights Lawyers Will Find This Useful. (Posted June 23, 2012).
As discussed below, all FLSA settlements (regardless of whether they concern collective action claims) should be subjected to judicial oversight. Moreover, even if the Court declines to endorse such a rule, it nonetheless should require FLSA collective action settlements to be judicially approved.
A. All FLSA Settlements (Regardless of Whether They Concern Collective Action Claims) Should be Subjected to Judicial Oversight.
Shortly after the FLSA’s enactment, the Supreme Court issued two separate decisions prohibiting the waiver of FLSA rights through private agreement. First, in Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945), the Court held that employees were not bound by private agreements with their employers in which they purport to waive FLSA rights. See id. at 698-714. The Court based its holding on the FLSA’s legislative purpose:
The legislative history of the Fair Labor Standards Act shows an intent on the part of Congress to protect certain groups of the population from sub-standard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce. The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate commerce. To accomplish this purpose standards of minimum wages and maximum hours were provided. Neither petitioner nor respondent suggests that the right to the basic statutory minimum wage could be waived by any employee subject to the Act. No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.
Id. at 706-07 (footnotes omitted). The Court left open the issue of whether bona fide settlements of bona fide FLSA disputes may, under some circumstances, be deemed valid. See id. at 714.
Next, in Schulte Co. v. Gangi, 328 U.S. 108 (1946), the Supreme Court addressed “whether the [FLSA] precludes a bona fide settlement of a bona fide dispute over the coverage of the Act on a claim for overtime compensation and liquidated damages where the employees receive the overtime compensation in full.” Id. at 110. Relying on O’Neil, the Court held that such private settlements are not enforceable. See id. at 110-16;see also Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 740 (1981) (“We have held that FLSA rights cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”).
Importantly, O’Neil and Gangi concerned instances in which employees released FLSA rights privately and outside of the context of either adversarial court litigation or an active Department of Labor (“DOL”) investigation. Neither the Supreme Court nor the Third Circuit has addressed the circumstances under which FLSA claims may be released at the post-litigation stage. Thus, we look to other circuit courts for guidance.
In this regard, the Eleventh Circuit’s opinion in Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir, 1982), is recognized as the seminal case addressing the circumstances under which FLSA claims may be released at the post-litigation stage. The Lynn’s Food Court recognized that neither O’Neil nor Gangiresolve this issue. See id. at 1353 n. 8. The Court also recognized that an employee can waive his FLSA rights by accepting wage payments supervised by the United States Secretary of Labor. See id. at 1353.
Most importantly, the Lynn’s Food Court explained:
The only other route for compromise of FLSA claims is provided in the context of suits brought directly by employees against their employer under section 216(b) to recover back wages for FLSA violations. When employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.
Lynn’s Foods, 679 F.2d at 1353 (footnote omitted; emphasis supplied). The Court further explained why judicially approved settlements further the FLSA’s purpose:
Settlements may be permissible in the context of a suit brought by employees under the FLSA for back wages because initiation of the action by the employees provides some assurance of an adversarial context. The employees are likely to be represented by an attorney who can protect their rights under the statute. Thus, when the parties submit a settlement to the court for approval, the settlement is more likely to reflect a reasonable compromise of disputed issues than a mere waiver of statutory rights brought about by an employer's overreaching. If a settlement in an employee FLSA suit does reflect a reasonable compromise over issues, such as FLSA coverage or computation of back wages, that are actually in dispute; we allow the district court to approve the settlement in order to promote the policy of encouraging settlement of litigation. But to approve an ‘agreement’ between an employer and employees outside of the adversarial context of a lawsuit brought by the employees would be in clear derogation of the letter and spirit of the FLSA.
Id. at 1354 (footnote omitted; emphasis supplied); see also Taylor v. Progress Energy, Inc., 493 F.3d 454, 460 (4th Cir. 2007) ( “there is a judicial prohibition against the unsupervised waiver or settlement of [FLSA] claims”); O’Connor v. United States, 308 F.3d 1233, 1243-44 (Fed. Cir. 2002) (discussing Lynn’s Foods);Walton v. United Consumers Club, Inc., 786 F.2d 303, 306 (7th Cir. 1986) (courts “have refused to enforce wholly private [FLSA] settlements”).
By the undersigned’s estimate, at least 100 federal district courts have cited Lynn’s Foods for the general proposition that settlements of individual (i.e. non-collective) FLSA lawsuits must be judicially approved. See,e.g., Baker v. D.A.R.A. II, Inc., 2008 U.S. Dist. LEXIS 81347, *4-5 (D. Ariz. Sept. 24, 2008); Yue Zhou v. Wang’s Restaurant, 2007 U.S. Dist. LEXIS 60683, *2 (N.D. Cal. Aug. 8, 2007); Ferguson v. Upscale Saturday Night, Inc., 2006 U.S. Dist. LEXIS 63663, *2 (M.D. Fla. Sept. 6, 2006); Carey v. Space Coast Quality Lawn, 2006 U.S. Dist. LEXIS 45957, *3-5 (M.D. Fla. July 6, 2006); Cooks v. Osmose, Inc., 2004 U.S. Dist. LEXIS 29346, *3-4 (M.D. Tenn. Feb. 13, 2004).
Within the Third Circuit, the undersigned is aware of at least one reported opinion in which a district court explains that FLSA settlements of individual FLSA lawsuits should be judicially approved. See Morales v. Pepsico, Inc., 2012 U.S. Dist. LEXIS 35284, *2-3 (D.N.J. Mar. 14, 2012). This lack of reported opinions is not surprising because court orders approving individual FLSA settlements are routine and do not generate substantive opinions. Indeed, the undersigned estimates that he has obtained at least 50 such orders over the past several years. Some examples from the Middle District of Pennsylvania are attached as Exhibit A.
Importantly, in individual FLSA cases, the court approval process can be done in a manner that does not burden the Court or the parties with formal motion practice. In the undersigned’s experience, FLSA approval orders in individual cases generally can be entered after the Court presides over a brief telephone conference in which the parties’ counsel represent the terms of the settlement. See Exhibit A. It is the accountability created by judicial oversight (not procedural formalities) that matters under the FLSA.
B. Even if the Court Declines to Endorse a Rule Subjecting All FLSA Settlements to Judicial Oversight, the Court Nonetheless Should Require FLSA Collective Action Settlements to be Judicially Approved.
FLSA collective action settlements should require judicial approval for all of the reasons described in Section A above. Moreover, as discussed below, there are some additional reasons why the Court should require FLSAcollective action settlements should be judicially approved.
a. Judicial Approval of FLSA Collective Action Settlements is the Common Practice in the District Courts of Pennsylvania.
The undersigned’s law firm has represented FLSA classes in at least 26 FLSA collective actions that have settled in the federal courts of Pennsylvania. A listing of these collective actions, as well as copies of the orders approving the settlements as fair and reasonable, is attached as Exhibit B. As indicated, judicial approval has been obtained in every FLSA collective action settlement involving the undersigned’s firm.
Moreover, no defense lawyer in any of these cases has ever sought to avoid judicial approval. On the contrary, lawyers who settle FLSA collective action lawsuits welcome the judicial approval process because, among other reasons, it protects them against potential allegations that the settlement was somehow unfair or inadequate. Simply put, lawyers and parties who negotiate in good faith and reach fair and reasonable settlements have nothing to fear from the court approval process.
b. Outside of Pennsylvania, Judicial Approval of FLSA Collective Action Settlements is the Common Practice.
The undersigned also has been involved in many FLSA collective actions that have settled outside of Pennsylvania. Some of these non-Pennsylvania actions have been “large-scale” matters involving numerous plaintiffs co-counsel and “large firm” defense counsel. See, e.g., In re Tyson Foods, Inc., 2012 U.S. Dist. LEXIS 7335 (M.D. Ga. Jan. 23, 2012); Gatewood v. Kock Foods of Mississippi, LLC, 569 F. Supp. 2d 687 (S.D. Miss. 2008); In re Pilgrim’s Pride FLSA Litig., 2008 U.S. Dist. LEXIS 40360 (W.D. Ark. May 14, 2008). Never, in any previous case, has any co-counsel or defense counsel suggested that a FLSA collective action settlement should proceed without judicial approval.
Indeed, research reveals an overwhelming number of opinions (literally too many to reference here) in which district courts recognize the need to review FLSA collective action settlements as fair and reasonable. See,e.g., Brumley v. Camin Cargo Control, Inc., 2012 U.S. Dist. LEXIS 40599, *4-8 (D.N.J. Mar. 26, 2012); Barker v. City of Troy, 2012 U.S. Dist. LEXIS 12779, *1-2 (N.D.N.Y. Feb. 2, 2012); Bredbender v. Liberty Travel, Inc., 2011 U.S. Dist. LEXIS 38663, *50-52 (D.N.J. Apr. 8, 2011); Goudie v. Cable Communications, Inc., 2009 U.S. Dist. LEXIS 1907, *2 (D. Or. Jan 9, 2009); Baker v. D.A.R.A. II, Inc., 2008 U.S. Dist. LEXIS 81347, *4-5 (D. Ariz. Sept. 24, 2008); Collins v. Sanderson Farms, Inc., 568 F. Supp. 2d 714 (E.D. La. 2008). Moreover, the seminal FLSA treatise does not seriously question the need for parties to obtain judicial approval of FLSA collective action settlements. See Ellen C. Kearns, The Fair Labor Standards Act, 2d Ed., at 19-197-207 (attached as Exhibit D).
c. FLSA Class Members Need the Protection of Judicial Oversight.
It is well-known that traditional Rule 23 class action settlements are subjected extensive review and approval. See Fed. R. Civ. P. 23(e); see generally In re GMC Pick-Up Truck Fuel Tank Products Liability Litig., 55 F.3d 768 (3d Cir. 1995). Thus, when FLSA collective action claims proceed alongside Rule 23 class action claims asserting state law violations (these are known as “hybrid” actions), the parties enjoy all the benefits and protections of Rule 23 judicial review. The undersigned has obtained court approval of such “hybrid” settlements. See, e.g., Duval v. Tri-County Access Co., Inc., 2:10-cv-00118-RCM (W.D. Pa. Nov. 22, 2010 and Mar. 30, 2011); Sisko v. Wegmans Food Markets, Inc., 3:06-cv-00433-JMM (M.D. Pa. Aug. 27, 2007);Rodriguez-Fargas v. Hatfield Quality Meats, Inc., 2:06-cv-01206-LS (E.D. Pa. May 29, 2007).
Stand-alone FLSA collective actions are procedurally different from Rule 23 class actions, primarily because an FLSA class is limited to those class members who affirmatively join (or “opt-in”) to the lawsuit, while a Rule 23 class (upon certification) automatically includes all class members except those who affirmatively exclude themselves from (or “opt-out” of) the lawsuit. See Knepper v. Rite Aid, Corp., 675 F.3d 249, 257 (3d Cir. 2012); DeAsencio v. Tyson Foods, Inc., 342 F.3d 301, 306 (3d Cir. 2003). Notwithstanding, these FLSA collective actions carry the same basic public policy rationale as their Rule 23 counterparts. As the Supreme Court has observed, FLSA collective actions provide employees with “the advantage of lower individual costs to vindicate rights by the pooling of resources” and benefit the judicial system by facilitating the “efficient resolution in one proceeding of common issues of law and fact.” Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 170 (1989); see also Symczyk, 656 F.3d at 200 (collective actions “‘avoid multiple lawsuits where numerous employees have allegedly been harmed by a claimed violation or violations of the FLSA by a particular employer.’”). These are the same basic policy interests underlying the Rule 23 class action device. See In re GMC, 55 F.3d at 783-84.
In In re GMC, Judge Becker explained how judicial approval of Rule 23 class actions is required in order to protect the rights and interests of class members who are not intimately involved in the litigation and, therefore, do not have either the information or the motivation to independently evaluate whether the settlement is fair. See In re GMC, 55 F.3d at 783-86. Thus, “‘the district court acts as a fiduciary who must serve as a guardian of the rights of absent class members . . . . The Court cannot accept a settlement that the proponents have not shown to be fair, reasonable and adequate.” Id. at 785 (quoting Grunin v. International House of Pancakes, 513 F.2d 114, 123 (8 th Cir.), cert. denied, 423 U.S. 864 (1975)); see alsoManual for Complex Litigation, Fourth at § 21.61 (“Because [in a Rule 23 class action] there is typically no client with the motivation, knowledge, and resources to protect its own interests, the judge must adopt the role of a skeptical client and critically examine the . . . proposed settlement terms, and procedures for implementation.”).
Several courts have cogently observed that FLSA settlement approval standards need not be as rigorous as Rule 23(e) standards because collective action settlements do not bind absent class members who never join the lawsuit. See Bredbender, 2011 U.S. Dist. LEXIS 38663, at *50-51; Reyes v. Altamarea Group, 2011 U.S. Dist. LEXIS 115984, *16 (S.D.N.Y. Aug. 16, 2011); deMunecas v. Bold Food, LLC, 2010 U.S. Dist. LEXIS 87644, *16 (S.D.N.Y. Aug. 23, 2010); Collins, 568 F. Supp. 2d at 719. This observation is surely correct. Notwithstanding, the policy concerns raised by Judge Becker in In re GMC apply to FLSA collective actions as well as Rule 23 class actions. See Collins, 568 F. Supp. 2d at 719 (approval of FLSA settlements is focused “on ensuring that an employer does not take advantage of its employees in settling their claim for wages”).
It is important to appreciate that FLSA collective actions usually involve numerous class members who are geographically dispersed. The great majority of these individuals simply are not engaged in the day-to-day litigation in the same way that an individual litigant is engaged. For example, in Craig v. Rite Aid Corp., 4:08-cv-02317-JEJ (M.D. Pa.), Judge Jones presides over an FLSA collective action involving over 1,000 opt-in plaintiffs from throughout the nation. While the undersigned and his co-counsel work very hard to communicate with these class members and keep them informed, a “traditional” attorney-client relationship simply is not possible. As with Rule 23 class actions, it is crucial to know that any settlement effecting the rights of so many individuals will be scrutinized by a judge to assess fairness. Indeed, the mere prospect of judicial scrutiny often enhances the fairness of FLSA settlements.
Also, many FLSA collective actions settle before “conditional certification,” and, therefore, before the potential opt-in plaintiffs are even notified of the settlement. Under these circumstances, Court approval ensures that potential opt-in plaintiffs receive a written notice that clearly explains the lawsuit and the settlement. Several examples of such notice forms are attached as Exhibit F. It is important for the Court to review such materials to ensure accurate notice. Both the Supreme Court and the Third Circuit have encouraged district court judges to be engaged in the notice phase of FLSA collective litigation. See Symczyk, 656 F.3d at 198-99 (citing Hoffman-LaRoche, 493 U.S. at 170-71.
d. Court Approval of FLSA Actions Is Necessary to Prevent Potential Attorney’s Fee Abuses.
As with Rule 23 settlements, FLSA collective actions can provide opportunities for lawyers to shortchange a class (or abandon class claims entirely) for excessive attorney’s fees. Thus, judicial approval of FLSA collective actions includes the consideration of whether attorney’s fees are fair and reasonable. See In re Tyson Foods, 2012 U.S. Dist. LEXIS 7335, at *8-12; Brumley, 2012 U.S. Dist. LEXIS 40599, at *28-38; Collins, 568 F. Supp. 2d at 728-29.
Moreover, many FLSA collective actions are “high-stakes” lawsuits that have been vigorously litigated for years on behalf of many opt-in class members. If and when such cases settle, the attorney’s fee recovery (which often is a percentage of a common settlement fund) can be substantial and can significantly impact the monies payable to the class. Such fee distributions should not be made without any judicial oversight.
On the other end of the spectrum, judicial approval of collective action settlements ensures that plaintiffs’ counsel (who almost always work on a contingency-fee basis) are not “left out in the cold” through “private,” post-litigation settlements between employers and opt-in class members. The FLSA’s language mandates that prevailing parties under the FLSA recover attorney’s fees and costs. See Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir. 1994). Moreover, “attorney fees are an integral part of the merits of FLSA cases,” Shelton v. M.P. Ervin, 830 F.2d 182, 184 (11th Cir. 1987), and, as courts repeatedly explain, the ability of FLSA claimants to recover a reasonable attorney’s fees and costs is crucial to the statute’s enforcement scheme, see, e.g., Fegley, 19 F.3d at 1134-35. Judicial approval prevents both employers and opt-in class members (who generally do not enter into fee agreements with class counsel) from circumventing these important provisions by settling collective action claims without the involvement of class counsel.
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