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.

Conditional certification of a collective action under the Fair Labor Standards Act (“FLSA”) was recently granted in a New Jersey case involving approximately 100 employees who worked in the construction industry holding job titles such as hazardous abatement workers, demolition workers, and teamsters.  In Kristic v. J.R. Contracting & Environmental Consulting, et al., 2011 U.S. Dist. LEXIS 28121 (D.N.J. March 16, 2011) United States District Judge Peter Sheridan of the District of New Jersey held that conditional certification was proper where the approximately 100 hourly employees were similarly situated and were  not paid overtime compensation for working over forty (40) hours per week.  Judge Sheridan granted conditional certification despite the presence of signed arbitration agreements on behalf of some of the construction workers and held that Defendant’s Motion to Dismiss was procedurally improper.  Thus, New Jersey overtime lawyers should not automatically assume that the presence of an arbitration agreement necessarily precludes a plaintiff from seeking relief in federal court, notably an order granting conditional certification under the FLSA.  In granting conditional certification, the Court noted that four plaintiffs claimed, apparently based on their general recollection and routine, that they worked 8 to 10 hours per day.  Plaintiffs also sued two individual officers of defendant for the overtime violations alleging that the officers not only controlled the company but also controlled payment of the employees’ compensation.   Lastly, plaintiffs also sought to recover payment for wages and benefits allegedly owed to them as the result of working on publically-funded contracts – apparently a claim for payment of what is sometimes referred to as the “ prevailing wage.”

Overtime lawyers and attorneys in Pennsylvania, New Jersey, and Delaware should be aware of two recent Third Circuit holdings that pharmaceutical sales representatives fell within the FLSA’s administrative exemption to overtime coverage. In the first decision, Smith v. Johnson and Johnson, 593 F.3d 280 (3d Cir. 2010), the court emphasized that it was not adopting a per se rule that pharmaceutical sales representatives can never fall outside of the exemption. See 593 F.3d at 293 n.1. The court then concluded, based on the underlying factual record, that the plaintiff was exempt based on her own admissions during deposition that she exercised significant discretion and independent judgment. After reading the opinion, one is left puzzled as to why this plaintiff thought she could win an appeal. In the second case, Baum v. Astrazeneca, 2010 U.S. App. LEXIS 6047 (3d Cir. Mar. 24. 2010), the court affirmed the grant of summary judgment against another pharmaceutical sales rep after observing that her duties “were very similar to the palintiff’s duties in Smith.” As usual, bad facts make bad law.

I recently handled an overtime lawsuit in Northeastern Pennsylvania in which the defense attorney seemed to view the recovery of attorney’s fees under FLSA Section 16(b) as a privilege rather than a right.  And this lawyer is not alone.  We get the same reaction from overtime lawyers and attorneys in Philadelphia and New Jersey.  

These defense attorneys are simply wrong, and they fail to understant that the FLSA’s fee-recovery provision is absolutely essential to the statute’s enforcement scheme.  “A successful FLSA claim carries with it the recovery of attorney’s fees.”  Gumecinda v. Ruiz, 808 F.2d 427, 429 (5th Cir. 1987) (citing 29 U.S.C. sec. 216(b)); see also Hilton v. Executive Self Storage Assocs., Inc., 2009 U.S. Dist. LEXIS 51417, *27 (W.D. Tex. June 18, 2009) (“Fee awards are mandatory for prevailing plaintiffs in FLSA cases.”); Pratter v. Commerce Equities Mgmt., Co., 2008 U.S. Dist. LEXIS 98795,*6 (S.D. Tex. Dec. 8, 2008) (same).  The Congressional purpose behind this provision “is to insure effective access to the judicial process by providing attorney fees for prevailing plaintiffs with wage and hour grievances.”  Fegley v. Higgins, 19 F.3d 1126, 1143 (6th Cir. 1994) (internal quotations omitted).  As federal courts repeatedly recognize, the FLSA’s fee recovery provision is crucial to Congress’ intent that workers be able to vindicate their FLSA rights through private litigation.  See, e.g., Fegley, 19 F.3d at 1134-35 (FLSA fee award “‘encourages the vindication of congressionally identified policies and rights’”); United Slate, Tile and Composition Roofers v. G&M Roofing and Sheet Metal Co., Inc., 732 F.2d 495, 502 (6th Cir. 1984) (purpose of FLSA fee award “is to insure effective access to the judicial process”); 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.”); Shannon v. Saab Training USA, LLC, 2009 U.S. Dist. LEXIS 52677, *8 (M.D. Fla. June 23, 2009) (“To encourage private enforcement of statutory rights under the FLSA, Congress created a fee-shifting provision”).

In Shelton v. Ervin, 830 F.2d 182 (11th Cir. 1987), the Eleventh Circuit Court of Appeals explained that the FLSA’s fee recovery provision is not collateral to the merits of an FLSA lawsuit but, rather, is an “integral part of the merits” of the lawsuit.  The Court held:  “[FLSA] Section 216 provides for an award of attorney’s fees, as opposed to granting the court discretion in awarding such fees, to the prevailing plaintiff in FLSA cases. In consideration of the language of section 216(b) and its underlying purpose, we hold that attorney fees are an integral part of the merits of FLSA cases and part of the relief sought therein. Thus, a final determination as to the award of attorney fees is required as part of the final appealable judgment.”  Id. at 184; accord Ellison v. LeGrande, 2009 U.S. Dist. LEXIS 14127, *6 n. 3 (M.D. Fla. Feb 24, 2009).