Courts around the country have consistently held that declarations submitted by an employer on behalf of current employees are of little value in deciding whether a class should be certified.  This is because it should be of no surprise that these “Happy Camper” statements hold questionable value when they are obtained in the context of an employer-employee relationship.  Notably, the Southern District of Alabama in Longcrier v. HL-A Co, Inc., 595 F. Supp. 2d 1218 (S.D. Ala. Dec. 10, 2008) struck declarations obtained by a defendant where such statements were obtained in a manner that mislead and deceived the employees – employees who happened to also be potential class members.

Moreover, in determining whether potential class members are similarly situated or whether their claims are capable of classwide resolution, individual statements from employees created at the bequest of the employer have little value toward determining that issue.  For example, the Northern District of Ohio in Creely v. HCR Manor Care, Inc., 2011 U.S. Dist. LEXIS 61376 (N.D. Oh. June 9, 2011), a case involving inter alia overtime violations under the Fair Labor Standards Act (FLSA) and uninterrupted meal break violations, stated that it was not persuaded by 35 “happy camper” affidavits submitted by the defendant.  The court explained: “These affidavits are of little use at this juncture.  Just as courts have not traditionally required a plaintiff seeking conditional certification to come forward with some threshold quantity of opt-in plaintiffs [ . . . ] it is no more helpful for the employer to round up a small sample of favorable statements form employees.  [ . . . ]  While it is likely true that not all hourly employees will opt-in to the collective action, the Court’s function at this stage of conditional certification is not to perform a detailed review of individualized facts from employees hand-picked by [Defendant].”  Creely, 2011 U.S. Dist. LEXIS at **62-63.  See also Rindfleisch v. Gentiva Health Services, Inc., 2011 U.S. Dist. LEXIS 57949 (N.D. Ga. April 13, 2011).   In West v. Lowes Home Centers, Inc., the Western District of Louisiana granted conditional certification despite employer-obtained declarations stating that plaintiffs had not yet had the chance to depose the employees providing the declarations and further noted that such deposition testimony was not needed to support collective adjudication.  West, 2010 U.S. Dist. LEXIS 139737 (W.D. La. Dec. 16, 2010).

U.S. Department of Labor (“DOL”) regulations interpreting the FLSA’s Administrative exemption provide three criteria that an employer must demonstrate for an employee to fit within its narrow confines. These are: (1) the employee must earn at least $ 455 a week; (2) the employee’s “primary duty” is the performance of “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers”; and (3) the employee’s “primary duty” must “include[] the exercise of discretion and independent judgment with respect to matters of significance.” Novartis, 611 F.3d at 155 (citing 29 C.F.R. § 541.200(a)). Moreover, the term “primary duty” is defined as the employee’s “principal, main, major or most important duty.” 29 C.F. R. §541.700. In determining an employee’s primary duty, courts look to “all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.” Id.
With respect to the requirement that the employee’s primary duty include the performance of work “directly related to the management or general business operations of the employer or the employer’s customers,” DOL regulations state:
(a) . . . The phrase “directly related to the management or general business operations” refers to the type of work performed by the employee. To meet this requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.
(b) Work directly related to management or general business operations includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities. Some of these activities may be performed by employees who also would qualify for another exemption.
(c) An employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. Thus, for example, employees acting as advisers or consultants to their employer’s clients or customers (as tax experts or financial consultants, for example) may be exempt.
29 C.F.R. §541.201 (emphasis supplied).
The Second Circuit Court of Appeals has been especially strict in applying the above principles so that the administrative exemption is limited to employees who primarily are involved in the functional operation of a business and the implementation of company-wide policy and strategy. For example:
In Novartis, supra, the Court refused to extend the exemption to highly-compensated pharmaceutical sales reps. See Novartis, 611 F.3d at 155-57. In so holding, the Court emphasized the lack of evidence “that the Reps have any authority to formulate, affect, interpret, or implement Novartis management policies or its operating practices, or that they are involved in planning Novartis long-term or short-term business objectives, or that they carry out major assignments in conducting the operations of Novartis business, or that they have any authority to commit Novartis in matters that have significant financial impact.” Id. at 156; see also Reiseck, 591 F.3d at 105-08 (advertising salespersons not covered by exemption).
Likewise, in Davis v. J.P. Morgan Chase, 587 F.3d 529 (2d Cir. 2009), the Court refused to extend the administrative exemption to bank underwriters. The Court reasoned that the underwriters’ work was “primarily functional rather than conceptual.” Id. at 535. Moreover, the Court emphasized that the underwriters “were not at the heart of the company’s business operations” and “had no involvement in determining the future strategy or direction of the business, nor did they perform any other function that in any way related to the business’s overall efficiency or mode of operation.” Id.
Finally, Reich v. State of New York, 3 F.3d 581 (2d Cir. 1993), the Court refused to extend the administrative exemption to State Police Investigators. See id. at 586-89. Notably, the Court reached this conclusion notwithstanding “the broad discretion enjoyed by the Investigators in the conduct of investigations.” Id. at 589. What matters, the Court explained, is “the relationship of the Investigators to the management policies or general business operations of the [State Police].” Id.
The Circuit Court decisions discussed above are consistent with the outcomes of many district court decisions within the Second Circuit. These district courts, like the Circuit Court, focus on whether the purportedly administrative employee is involved in implementing company policy. See, e.g., Kuzinski v. Schering Corp., 2011 U.S. Dist. LEXIS 86575 (D. Conn. Aug. 5, 2011); Harper v. GEICO, 754 F. Supp. 2d 461 (E.D.N.Y. 2010); Ruggeri v. Boehringer Ingelheim Pharms., 585 F. Supp. 2d 254 (D. Conn. 2008).

To calculate unpaid overtime wages under the FLSA, one must first determine the employee’s “regular rate” of pay for the relevant workweeks. See 29 U.S.C. § 207(a)(1). For salaried employees, such as the ICs here, the rate “is computed by dividing the salary by the number of hours which the salary is intended to compensate.” 29 C.F.R. §778.113(a). Importantly, it is improper for a court to simply “assume as a fact that the weekly salary was intended to compensate the [salaried employees] for however many hours they actually worked.” Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259, 1269 (11th Cir. 2008); see also Giles v. City of New York, 41 F. Supp. 2d 308, 316-17 (S.D.N.Y. 1999) (“The fact an employee regularly works 60 or more hours does not, without more, indicate that the employee’s weekly salary was intended to include the FLSA overtime premium for all hours in excess of 40.”); Yourman v. Dinkins, 865 F. Supp. 154, 165 (S.D.N.Y. 1994) (“Plaintiffs’ hourly rates are supposed to be determined by reference to the parties intent.”).
Courts within the Second Circuit hold that “there is a rebuttable presumption that a weekly salary covers 40 hours; the employer can rebut the presumption by showing an employer-employee agreement that the salary cover a different number of hours.” Giles v. City of New York, 41 F. Supp. 2d 308, 317 (S.D.N.Y. 1999); accord Jiao v. Chen, 2007 U.S. Dist. LEXIS 96480, *45 (S.D.N.Y. Mar. 30, 2007); Doo Nam Yang v. ACBL Corp., 427 F. Supp. 2d 327, 334-35 (S.D.N.Y. 2005); Keun-Jae Moon v. Joon Gab Kwon, 248 F. Supp. 2d 201, 207 (S.D.N.Y. 2002). Thus, “[u]nless the contracting parties intend and understand the weekly salary to include overtime hours at the premium rate, courts do not deem weekly salaries to include overtime premium for workers regularly logging overtime, but instead hold that weekly salary covers only the first 40 hours.” Giles, 41 F. Supp. 2d at 317.
New York District Courts have followed Giles in calculating the overtime wages owed to salaried employees. For example, in Aguilar v. E-Z Supply Corp., 2008 U.S. Dist. LEXIS 112585, *8-9 (E.D.N.Y. Mar. 13, 2008), the district court followed the 40-hour methodology because the defendant defaulted and, therefore, could not counter the rebuttable presumption that the weekly salary covers 40 hours.
Applying the above principles to this lawsuit, it is unlikely that Defendant can defeat the 40-hour rebuttable presumption discussed in Giles and other New York district court cases. Simply put, there is no “employer-employee agreement that the salary cover a different number of hours.” Giles, 41 F. Supp. 2d at 317. Here, Defendant admits that it does not have a specific agreement as to how many hours their salary is intended to compensate them for working. See Moore Dep. (Ex. C) at 120:02-120:07. In fact, Defendant’s corporate designee assumes that an IC’s salary is for a 40-hour work week. Id. (testifying that 2,080 hours annually (52 weeks X 40 hours per week) is “what I am accustomed to as a full-time role”).
Notwithstanding the above, Defendant contends that ICs’ regular pay rate is arrived at by dividing the weekly salary by all hours worked and that the IC is merely entitled to an extra payment equaling one-half of the regular rate for all hours worked over 40. While this methodology has been endorsed by some courts, it is inconsistent with the approach taken by courts within the Second Circuit, as demonstrated by Giles and the other decisions referenced above.
Moreover, New York district courts have refused to adopt Defendant’s preferred methodology in the absence of specific evidence that Defendant can actually satisfy each of the requirements codified in the DOL’s Fluctuating Workweek Method (“FWM”) regulation, including the requirement of a “clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number.” 29 C.F.R. § 778.114. For example, in Dingman v. Friedman Fisher Associates, P.C., 3 F. Supp. 2d 215 (N.D.N.Y. 1998), Judge Kahn refused to apply the FWM after holding that a misclassified salaried employee was entitled to overtime pay. See id. at 221. Instead, Judge Kahn used the 40-hour methodology. See id. at 222. Likewise, in Yourman, supra, Judge Preska refused to apply the FWM and elected, instead, “to fall back on the FLSA’s default position, which is to calculate hourly and overtime rates based on a regular workweek consisting of a fixed number of hours.” Yourman, 865 F. Supp. at 165.
Judge Kahn’s holding in Dingman is consistent with the analysis of other district courts which have flatly refused to apply the FWM methodology to compute damages in overtime misclassification cases. As these courts cogently explain, because the FWM applies to non-exempt employees and requires the actual payment of overtime premium compensation, it is simply impossible to satisfy the FWM’s requirements for an employee who (due to his exempt classification) did not contemporaneously receive any overtime pay. See, e.g., Russell v. Wells Fargo and Co., 672 F. Supp. 2d 1008, 1013-17 (N.D. Cal. 2009); Hunter v. Sprint Corp., 453 F. Supp. 2d 44, 58-62 (D.D.C. 2006); Scott v. OTS Inc., 2006 U.S. Dist. LEXIS 15014, *32-39 (N.D. Ga. Mar. 31, 2006); Cowan v. Treetop Enters., 163 F. Supp. 2d 930, 941-42 (M.D. Tenn. 2001); Rainey v. American Forest & Paper Assoc., 26 F. Supp. 2d 44, 58-62 (D.D.C. 1998).

I recently came across Zivali v. AT&T Mobility, LLC, 08-cv-10310-JSR (S.D.N.Y. June 6, 2011), in which SDNY Judge Jed Rakoff, after decertifying an FLSA class, tolls the running of the statute of limitations for 45 days in order to give the opt-ins time to file individual cases. On one hand, its great that the Judge gave some tolling. On the other hand, 45 days is not a lot of time to notify class members of the decertification decision, obtain individual representation agreements, and file new complaints. I think this demonstrates the importance of getting together (in advance) a contingency plan for dealing with decertification in our FLSA collective actions.

The Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., and the Pennsylvania Minimum Wage Act (“PMWA”), 43 P.S. §§ 333.101, et seq., generally entitle employees to overtime premium pay calculated at 150% of their regular pay rate. See 29 U.S.C. § 207(a)(1); 43 P.S. § 333.104(c). Here, it is uncontroverted that Defendant did not pay Plaintiff overtime premium compensation because it considered him exempt under the “executive” and “learned professional” exemptions to the FLSA’s and PMWA’s overtime pay mandate. See 29 U.S.C. § 213(b)(1); 43 P.S. §§ 333.105(a)(5); see also Stipulated Facts (Doc. 36) at ¶ 5.
The unresolved issue in this case is whether Defendant properly classified Plaintiff as overtime-exempt. If the Court upholds Defendant’s classification, Plaintiff is entitled to nothing. If the Court rules that Plaintiff was misclassified, Plaintiff is entitled to overtime premium pay.
1. Defendant’s Heavy Burden of Proof.
Plaintiff respectfully submits that, in deciding this case, the Court should be mindful of two overriding principles:
First, overtime exemptions are construed “narrowly against the employer.” Davis v. Mountaire Farms, Inc., 453 F.3d 554, 556 (3d Cir. 2006); accord Madison v. Resources for Human Dev., Inc., 233 F.3d 175, 183 (3d Cir. 2000) (citing Mitchell v. Kentucky Fin. Co., 359 U.S. 290, 295 (1959)). Thus, Defendant bears the burden of proving that Plaintiff is overtime-exempt. See Davis, 453 F.3d at 556 (citing Fredrich v. U.S. Computer Serv., 974 F.2d 409, 412 (3d Cir. 1992).
Second, Defendant’s burden is heavy. In particular, Defendant must prove that Plaintiff “comes ‘plainly and unmistakably’ within the exemption’s terms.” Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008) (quoting Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960)) (emphasis in original); see also Pignataro v. Port Authority of New York and New Jersey, 593 F.3d 265, 268 (3d Cir. 2010); Plaunt v. Dolgencorp, Inc., 2010 U.S. Dist. LEXIS 132135, *19-20 (M.D. Pa. Dec. 14, 2010) (Munley, J.). As the Supreme Court has observed, “[t]o extend an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretive process and to frustrate the announced will of the people.” A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945).
2. Defendant Fails to Meet its Burden of Proving that it Plainly and Unmistakably Satisfies the Salary Basis Requirement of the Applicable Overtime Exemptions.
Under both the FLSA and PMWA, employees must be paid on a “salary basis” in order to be covered by either the executive or the learned professional exemption. See 29 C.F.R. § 541.100(a)(1) (FLSA executive); 29 C.F.R. § 541.300(a)(1) (FLSA learned professional); 34 Pa. Code 231.82(6) (PMWA executive); 34 Pa. Code 231.84(5) (PMWA learned professional).
The pertinent Department of Labor regulations define compensation on a salary basis as follows:
An employee will be considered to be paid on a salary basis within the meaning of these regulations if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to the exceptions provided in paragraph (b) of this section, an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.
29 C.F.R. §541.602(a) (emphasis supplied).
Next, the regulations specifically list permissible deductions from an exempt employee’s salary. Only one of the enumerated deductions is relevant to the instant lawsuit:
Deductions from pay may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.
29 C.F.R. §541.602(b)(1) (emphasis supplied).
Federal courts considering the salary basis requirement consistently hold that the overtime exemption is lost where the employer makes improper deductions for absences of less than one day. See, e.g., Auer v. Robbins, 519 U.S. 452 (1997); Bowman v. City of Indianapolis, 133 F.3d 513 (7th Cir. 1998); Kinney v. District of Columbia, 994 F.2d 6 (D.C. Cir. 1993); Brock v. The Claridge Hotel and Casino, 846 F.2d 180 (3d Cir. 1988); see also Ellen C. Kearns, The Fair Labor Standards Act (2d Ed. 2010) at 4-46 (“When an employer deducts from the wages of an employee for partial-day absences taken for personal reasons or illness, the employee cannot be considered exempt.”).
[Case-Specific Factual Arguments Omitted]
First, as a practical matter, there is no meaningful difference between leave bank deductions and monetary deductions. For example, in Klein v. Rush-Presbyterian-St. Luke’s Med. Ctr., 990 F.2d 279 (7th Cir. 1993), the Seventh Circuit saw no distinction between monetary deductions and deductions from a “comp time” bank, observing that “[w]hen [plaintiff] was forced to go into negative comp time, she may not have been actually paid less, but she was going into a form of debt since any later accumulated comp time had to pay off that debt.” Id. at 284. Indeed, Defendant’s own written deduction policy characterized the deduction of leave time as a “charge” against the employee. See Plf. Ex. 12 (“If this becomes abusive, the employee will then be charged for every hour.”).
[Case-Specific Factual Arguments Omitted]
In Oral v. Aydin Corp., 2001 U.S. Dist. LEXIS 20625 (E.D. Pa. Oct. 31, 2001), the Eastern District of Pennsylvania addressed “whether [an employer] is entitled to an exemption from the FLSA for those employees classified as salaried who were not actually docked pay but either (1) made up for partial day absence by working extra hours, or (2) used sick or vacation leave to cover the absence.” Id. at *18. In ruling against the employer, the court reasoned that it was enough that the employees merely “face[d] a threat that their pay would be docked for a partial day absence unless they used sick or vacation leave to cover the absence.” Id. at *22. Moreover, as the district court observed, the policy of making partial-day deduction to leave banks “is inconsistent with the definition of what it means to be a salaried employee,” since truly exempt managers and professionals should not be required to answer for every hour worked within a day. See id. at *22-23 (citing Kinney, 994 F.2d at 11).
Here, as in Oral, Defendant publicized and distributed a deduction policy emphasizing that employees must “use time” for partial-day absences of less than one day. See, e.g., Plf. Ex. 12; see also Sharer v. Tanderberg, Inc., 2007 U.S. Dist. LEXIS 14246, *16-17 (E.D. Va. Feb. 27, 2007) (single written communication sufficient to establish illegal deduction policy). Defendant offers no explanation for why an employee reviewing this policy would assume that he would receive his full pay if he exhausted his leave time. Nor does Defendant explain why (even after the commencement of this lawsuit) it did not provide clear guidance to its employees. See Tr. at 51:20-52:5; 93:6-93-14; 94:8-94:10. Instead, Defendant deliberately took a “keep them guessing” approach that discourages salaried employees from availing themselves of a primary benefit of salaried employment: the ability to take partial day absences without fear of being docked pay.
As the Supreme Court observed in Auer, the onus is on employers to implement “a clear and particularized policy – one which ‘effectively communicates’ that deductions will be made in specified circumstances.” Auer, 519 U.S. at 461. Defendant has failed to meet this standard. As such, Defendant fails to meet its heavy burden of proving that it “plainly and unmistakably” satisfied the salary basis test.
3. Alternatively, Defendant Cannot Satisfy its Burden of Proving that it Plainly and Unmistakably Falls Outside of the Pay Scheme Prohibited By the Third Circuit in Brock v. The Claridge Hotel and Casino, 846 F.2d 180 (3d Cir. 1988).
In addition to guarding against illegal pay deductions, federal courts also refuse to find salaried employees exempt when employers utilize certain pay schemes that combine salaried pay with hourly pay. In this regard, the Court is directed to the Third Circuit’s opinion in Brock v. The Claridge Hotel and Casino, 846 F.2d 180 (3d Cir. 1988).
In Brock, supra, the Third Circuit refused to find casino supervisors to be overtime-exempt where they were paid pursuant to a “Weekly Salary Guarantee” plan under which they were “guaranteed a weekly salary of $250.00 for any week in which [they] perform[ed] any service.” Brock, 846 F.2d at 182. “Wages over the $250 minimum were paid by the hour, according to the number of hours [they] worked.” Id. The supervisors almost always worked sufficient hours to exceed their guaranteed salary. See id. at 182. For this reason, “[t]he district court found the instances when the guaranteed payment applied ‘rare.’” Id.
The Third Circuit rejected the casino’s “Weekly Salary Guarantee” plan:
From the record, it is plain that the district court’s finding that the supervisors’ wages were actually calculated on an hourly basis is not clearly erroneous. That fact is supported by the payroll records, which show that a supervisor’s wage can be calculated by multiplying an hourly wage by the number of hours worked. The underlying issue in this case is whether an otherwise hourly wage can be transformed into payment on a salary basis within the meaning of the regulations by virtue of the guaranteed minimum weekly payment. We hold that, in these circumstances, it cannot.
Claridge claims that this minimum was a salary under 541.118(b), and that all wages above that level were “additional compensation.” The concept is fundamentally incoherent. Salary is a mark of executive status because the salaried employee must decide for himself the number of hours to devote to a particular task. In other words, the salaried employee decides for himself how much a particular task is worth, measured in the number of hours he devotes to it. With regards to hourly employees, it is the employer who decides the worth of a particular task, when he determines the amount to pay the employee performing it. Paying an employee by the hour affords that employee little of the latitude the salary requirement recognizes. Thus, a basic tension exists between the purpose behind a salary requirement and any form of hourly compensation.
Brock, 846 F.2d at 184; accord Kinney, 994 F.2d at 9 (“Payment on salary basis is thought to identify executive, administrative, and professional personnel precisely because it indicates employees who are given discretion in managing their time and their activities and who are not answerable merely for the number of hours worked or number of tasks accomplished.”).
Furthermore, the Third Circuit explained why the casino’s “Weekly Salary Guarantee” conflicted with the very nature of overtime-exempt employment:
The “additional” compensation claimed by Claridge . . . varies with the number of hours worked. If an incentive at all, it does not encourage the supervisor to make better use of his time, but only to work more hours. Such encouragement is inconsistent both with salary payment and executive employment. Where, as here, the employee’s usual weekly income far exceeds the “salary” guarantee, the guarantee can have no impact on the employee’s performance or his status.

Id. at 185; accord Kinney, 994 F.2d at 11. Based on these considerations, the Third Circuit held that the casino supervisors were entitled to overtime premium pay under the FLSA. See Brock, 846 F.2d at 186-87.
[Case-Specific Factual Arguments Omitted]
4. Because Defendant Has Failed to Plainly and Unmistakably Prove that Plaintiff is Overtime-Exempt, Plaintiff is Entitled to Unpaid Overtime Wages of $32,373.00.
The parties have stipulated that Plaintiff, who routinely worked overtime hours, see Stipulated Facts (Doc. 36) at ¶ 6, is entitled to unpaid overtime wages totaling either $22,038.32 or $32,373.00, depending on whether the Court utilizes a two-year or three-year limitations period, see Post-Trial Stipulation (Doc. 40).
Under the FLSA, non-willful violations are governed by a two-year limitations period, while willful violations are governed by a three-year period. See 29 U.S.C. § 255(a). In this lawsuit, however, Plaintiff also asserts claims under the PMWA, which carries a three-year limitations period for all violations, regardless of willfulness. See Gonzalez v. Bustleton Services, Inc., 2010 U.S. Dist. LEXIS 23158, *15-21 (E.D. Pa. Mar. 5, 2010). Thus, applying the stipulated damages amounts, the Court should award Plaintiff $32,373.00 in unpaid overtime wages.
5. The Court Should Award Plaintiff an Additional $32,373.00 in Liquidated Damages.
Unlike punitive damages in other civil lawsuits, “liquidated damages [under the FLSA] are the norm and denial of liquidated damages is the exception.” Schneider & Stine, Wage and Hour Law §21.03 (citing cases); accord Reich v. Southern New England Telecommunications Corp., 121 F.3d 58, 71-72 (2d Cir. 1997); Williams v. Tri-County Growers, Inc., 747 F.2d 121, 129-30 (3d Cir. 1984). However, a “district court in its sound discretion can withhold or reduce the amount of liquidated damages ‘if the employer shows . . . that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the [FLSA].’” Brooks v. Village of Ridgefield Park, 185 F.3d 130, 137 (3d Cir. 1999) (quoting 29 U.S.C. §260).
The employer (not the employee) bears the “‘plain and substantial’ burden of proving he is entitled to discretionary relief from the FLSA’s mandatory liquidated damages provision.” See Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 908 (3d Cir. 1991); see also Stillman v. Staples, Inc., 2009 U.S. Dist. LEXIS 42247, *78 (D.N.J. May 11, 2009). In order to meet this burden,
the defendant must show that [it] took affirmative steps to ascertain the Act’s requirements but nonetheless violated its provisions. The conduct is judged under an objective standard and thus the absence of affirmative evidence that the employer willfully intended to avoid compliance with the FLSA does not meet the objective component of the good faith requirement. In short, good faith means that the employer attempted to comply and due to mistake or inadvertence failed to do so.

Stillman, 2009 U.S. Dist. LEXIS 42247, at *82-83 (internal quotations omitted); see also Martin, 940 F.2d at 908 (“A defendant employer’s burden of proof [to avoid liquidated damages] is ‘a difficult one to meet’”).
[Case-Specific Factual Arguments Omitted]

Judge Nanette Laughrey of the Western District of Missouri recently enterd a decision conditionally certifying a nationwide FLSA class of State Farm hourly employees holding the job titles of Claims Service Assistant, Claims Processor, Claims Representative, Underwriter, Auditor, and Account Representative. The judge also certified, under rule 23, these employee’s claims under the Missouri Minimum Wage Law. The employees claimed that State Farm maintains a policy and practice of requoring them to work without pay during unpaud meal breaks, and before and after their scheduled shifts. Notably, this is yet another case where a federal judge was unimpressed by the company’s assertion that the Supreme Court’s Dukes v. Wal-Mart decision precluded class certification.

Corporate defense lawyers, all caught up in their Dukes v. Wal-Mart hysteria, continue to attempt to use the Supreme Court decision as a basis to ask district courts to reconsider FLSA conditional certification decision. Our firm recently defeated such a motion in an Eastern District of Pennsylvania lawsuit brought on behalf of Pennsylvania delivery drivers who allege that they are entitled to overtime apy because they have been misclassified as independent contractors instead of employees. In another case, entitled Butcher v. United Airlines, Inc., 1:09-cv-11681-NG (D. Mass), Massessusetts District Court Judge Nancy Gertner similarly rejected a reconsideration motion. Here is the text of Judge Gertner’s electronic order: Judge Nancy Gertner: ELECTRONIC ORDER entered denying 42 Motion for Reconsideration. The Defendant moves the court to reconsider its order granting conditional certification of the class. United principally argues that the plaintiffs have failed to show that the alleged violation of the Fair Labor Standards Act was the result of a policy or practice that affected employees nationwide. First, United asserts that according to Trezvant v. Fidelity Employer Servs. Corp, in order to receive conditional certification for a national class, the plaintiffs must produce evidence from each work site nation-wide. 434 F. Supp. 2d 40 (D. Mass. 2006). Trezvant, however, explicitly rejected such a high burden: the court would not adopt such a hard-and-fast rule as to how plaintiffs seeking conditional certification must meet this lenient similarly situated standard at this initial stage. Id. at 44-45 (finding that plaintiffs had failed to show that the policy was common nation-wide where plaintiffs produced affidavits from only one site and did not have personal knowledge of other sites). Here, the plaintiffs have presented evidence from three cities, including Dallas/Fortworth, Boston, and Chicago. They have more than met their burden — at this stage — to show that United’s decision to require that skycaps pay $2 per bag out of their tips even when the customer did not pay the required fee was executed nation-wide. The purpose of conditional certification is precisely to identify potential plaintiffs and gather evidence from other sites. To require that evidence at the outset would be to undo conditional certification altogether. Of course plaintiffs will have a higher burden at the next stage of litigation upon a motion to de-certify the class. The motion to reconsider is DENIED. I pause to note that the defendant’s citation to Dukes v. Wal-Mart Stores, Inc., 2011 WL 2437013, *1 (Jun. 20, 2011), is misplaced. Dukes does not involve the FLSA, and its holding does not apply to conditional certification. It is well settled that Rule 23 is more stringent than § 216(b) generally, see Lewis v. Wells Fargo Co., 669 F. Supp. 2d, 1124, 1127 (N.D. Cal. 2009) (The requisite showing of similarity of claims under the FLSA is considerably less stringent than the requisite showing under Rule 23 of the Federal Rules of Civil Procedure, quoting Wertheim v. Arizona, 1993 WL 603552, at *1 (D. Ariz. 1993)), and especially so at the conditional certification stage. (Gertner, Nancy) (Entered: 07/22/2011)

Companies will often argue that conditionally certifying classes under the FLSA is not appropriate because some discovery has occurred. However, courts often reject such arguments.
For example, in Bunyan v. Spectrum Brands, Inc., the Southern District of Illinois only abandoned the two-step conditional certification approach following over 15 months of discovery by the parties during which the plaintiffs acquired a list of potential class members. 2008 U.S. Dist. LEXIS 59278, *13 (S.D.Ill. July 31, 2008). Other courts have also reluctantly applied an intermediate analysis only after (i) significantly more discovery was completed compared to this case; or (ii) informal notice was sent to potential opt-ins by the plaintiffs. See Bouaphakeo v. Tyson Foods, Inc., 564 F. Supp. 2d 870, 894-901 (N.D. Iowa 2008) (applying an intermediate analysis only after 300 individuals had joined the case and 22 depositions had been conducted by the parties); Basco v. Wal-Mart, 2004 U.S. Dist. LEXIS 12441 (E.D. La. July 2, 2004) (applying the intermediate analysis after approximately five years of litigation including six amendments to the complaint and the plaintiffs moving for Rule 23 class certification); Williams v. Accredited Home Lenders, Inc., 2006 U.S. Dist. LEXIS 50653, *11-12 (N.D. Ga. July 25, 2006) (“The Plaintiffs short circuited the process first by disseminating informal notice of the lawsuit and the opportunity to opt-in. Without court supervised notice, about 150 current or former loan officers, have filed consent forms to opt-in as Plaintiffs. The Defendant then sought and obtained the Court’s permission to take depositions of about 20 of the opt-in Plaintiffs.”).

Second, Maryland district courts have noted that it is improper to move beyond the initial conditional certification stage analysis until after the completion of all discovery. See Mercado v. N. Star Founds., Inc., 2011 U.S. Dist. LEXIS 43229, *3-4 (D. Md. Apr. 21, 2011) (second stage occurs after completion of discovery); Syrja v. Westat, Inc., 756 F. Supp. 2d 682, 686 (D. Md. 2010) (“in the second stage following the conclusion of discovery”). This is consistent with other federal courts that have rejected the application of a more stringent analysis following the completion of similar limited initial discovery concerning conditional certification. See e.g. Helmert v. Butterball, LLC, 2009 U.S. Dist. LEXIS 116460, *23 (E.D. Ark. Dec. 15, 2009) (refusing to apply a heightened analysis prior to the close of merits discovery); West v. Border Foods, Inc., 2006 U.S. Dist. LEXIS 96963, *9 (D. Minn. June 12, 2006) (analyzing the plaintiff’s motion for conditional certification under the initial stage despite the exchange of interrogatories and document requests, and three depositions of employees of the defendant); Lyons v. Ameriprise Fin., Inc., 2010 U.S. Dist. LEXIS 98496, *8-9 (D. Minn. Sept. 20, 2010) (“As an initial matter, [the defendant] argues for a ‘heightened’ or ‘intermediate’ standard rather than the lenient standard typically applied at the first stage, since some discovery has been conducted. The Court rejects this suggestion.”) (internal citations omitted).

Defendants will often argue that conditional certification is not appropriate because it possesses written policies in place to prevent the FLSA violations based on an automatic meal break deduction – thus the proposed class is not similarly situated.  However courts have held that “the existence of written policies setting forth proper rules for the payment of overtime does not itself immunize an employer from a finding that the employer willfully violated the FLSA.”  Monroe v. FTS USA, LLC, 763 F. Supp. 2d 979 (W.D. Tenn. 2011); see also Carter v. City of Charleston, 995 F. Supp. 622, 626 (D.S.C. 1997) (having a written overtime policy is not dispositive as there can be a “failure to implement and/or enforce written policy”); 29 CFR 785.13 (“The mere promulgation of a rule against such work is not enough.  Management has the power to enforce the rule and must make every effort to do so”).  Furthermore, a number of courts have conditionally certified classes alleging similar off-the-clock claims by corporate defendants with similar “prevention” policies.

            For example, in Lindberg v. UHS of Lakeside, LLC, the plaintiffs alleged that the defendants “violated the FLSA by subjecting all hourly employees to a common policy that deducted a 30-minute meal period for each shift, regardless of whether or not employees had the opportunity to take a break, and made no effort to ensure that the employees were relieved of duty during that time.”  761 F. Supp. 2d. 752, 754 (W.D.Tenn. 2011).  The defendants did not dispute the existence of the automatic 30-minute meal break deduction, but argued that the conditional certification was inappropriate because their auto-deduction policy on its face did not violate the FLSA since it provided “a mechanism for employees to reverse the automatic deduction.”  Id. at 759; see also id. at 755 (noting that “employees were instructed and expected to record their missed meal[] break on a Time Adjustment Form, have their supervisor sign the form, and submit it to payroll for processing.”).  The Lindberg court ultimately granted conditional certification of the class.  Id. at 761.  In reaching this conclusion, the court relied heavily on the fact that, as in this case, the automatic 30-minute deduction policy and correction mechanism “placed the burden of correction on hourly employees.”  Id. at 760; see also id. at 761 (noting that Defendant “abandoned their duty ‘to ensure that non-qualifying meal breaks [were] not deducted from [employees’] pay.’”).

            Similarly, the Western District of Pennsylvania conditionally certified a class of 30,000 non-exempt employees at separate facilities who were also subjected to an automatic 30-minute meal break deduction.  See Camesi v. Univ. of Pittsburgh Med. Ctr., 2009 U.S. Dist. LEXIS 40571 (W.D. Pa. May 14, 2009).  As in this case, the defendant in Camesi utilized a policy where the employee could take steps to effectively cancel the automatic deduction if he or she were not able to take the allotted break.  Id. at *3.  However, the Camesi court held:

UPMC’s written policies arguably shift the burden from Defendants to their employees to ensure that non-qualifying meal breaks are not deducted from their pay. See discussion supra (“employee[s’] time record[s are] set up to automatically deduct a 30 minute meal period after 5 hours worked,” and “it is the employee’s responsibility to make sure the automatic lunch deduction is cancelled” as appropriate). The law is clear that it is the employer’s responsibility, not its employees’, to ensure compensation for work “suffered or permitted.”  See Chao v. Gotham Registry, Inc., 514 F.3d 280, 288 (2d Cir. 2008) (“[a]n employer who has [actual or constructive] knowledge that an employee is working, and who does not desire the work [to] be done, has a duty to make every effort to prevent its performance,” and “[t]his duty arises even where . . . the employee fails to report his . . . hours”) (citations omitted); Reich v. Brenaman Elec. Serv., 1997 U.S. Dist. LEXIS 4163, 1997 WL 164235, *3 (E.D. Pa. Mar. 28, 1997) (“[w]ork not requested but suffered or permitted is work time” and, so long as “[t]he employer knows or has reason to believe that [the employee] is continuing to work,” “[t]he [underlying] reason is immaterial”) (citations omitted).

Irrespective of whether or not UPMC’s “employee cancellation” policy ultimately is consistent with the FLSA, Defendants’ arguable attempt to shift statutory responsibilities to their workers constitutes an “employer policy” susceptible to challenge at this stage in the proceedings.  As for Defendants’ denial of actual or constructive knowledge regarding employees’ noncompliance with the cancellation policy — a denial Plaintiffs have refuted through both allegations and evidence — this question also cannot be resolved through the conditional certification ruling. See discussion supra (“the court does not weigh the merits, resolve factual disputes, or make credibility determinations”).

Id. at *10-12 ; see also Abendschein v. Montgomery County, 984 F. Supp. 356, 359 (D. Md. 1997) (“Not paying employees for meal time is an exception to the FLSA compensation requirements that must be narrowly construed, and the burden is on the Defendant to show that it is entitled to the exception”) (Williams, J.).

In a decision last month from the District Court for the District of New Jersey, Judge Irenas denied a defendant’s Motion to Decertify an FLSA Collective Action comprised of 100 loan officers and 20 loan processors.  See Garcia v. Freedom Mortgage Corp., 2011 U.S. Dist. LEXIS 62212 (D.N.J. June 10, 2011).  Conditional certification was previously granted to two subclasses – one for the loan officers and one for the loan processors.    Plaintiffs argued that under the federal Fair Labor Standards Act (FLSA) and the state New Jersey Wage and Hour Laws, they were wrongfully denied overtime compensation for hours worked over 40 within a single workweek. The loan officers were compensated either solely based on commission or through a combination of a salary and commission.  The loan processors were compensated with a salary and also by a bonus based on the number of loans successfully closed.  Generally, the loan officers would gather general information from potential customers, obtain a copy of the potential customer’s credit report, and pass the information along to a loan processor.  The loan processor generally organized the potential customer’s application after collecting information pertaining to compensation and tax history, passed the information to an underwriter, scheduled the closing, and arranged for appraisal and title work. 

In denying defendant’s motion for decertification, the court held that although there were differences between the individual plaintiffs within each subclass, the similarities outweighed such differences, and, as such, the class members were indeed similarly situated.  Moreover, the Court noted that “[a]ll Plaintiffs within each subclass had similar job duties, responsibilities and compensation structures.  All Plaintiffs within each subclass were subject to the same policy and practice of Defendant to treat such Plaintiffs as employees exempt from the overtime requirements of the FLSA.”  Also, the Court rejected defendant’s argument that damages would be “nearly impossible” to calculate.  Instead, the Court noted that it is the employer’s burden to maintain proper employee records and if the employer failed to keep such records, damages may still be calculated based upon other evidence before the Court.

Lastly, the Court also denied defendant’s motion for summary judgment noting that there were genuine issues of material fact concerning whether loan officers and loan processors were exempt from the overtime mandates because they were, as alleged by defendant, administrative employees.  Plaintiffs will be able to defeat this administrative exemption defense if they can, among other things, show that the loan officers and loan processors typically did not utilize discretion or independent judgment in their daily work.