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.

District Judge Stanley Chesler of the United States District Court for the District of New Jersey denied defendants’ Motion for Summary Judgment in a case involving an Airport Manager for Avis Budget Car Rental.  The case, Tahir v. Avis Budget Group, Inc., 2011 U.S. Dist. LEXIS 29729 (D.N.J. March 23, 2011) involved allegations by plaintiff that he was misclassified as an exempt employee under the Fair Labor Standards Act (“FLSA”) and therefore wrongfully denied overtime compensation for hours worked over forty (40) each week.  Defendants moved for summary judgment on the premise that plaintiff was properly classified as exempt as he fit either the executive exemption or the administrative exemption as set forth by the FLSA.  The Court held that defendants had not met their heavy burden in bearing their burden of proof that plaintiff fell into either of these exemptions. 

Regarding the executive exemption, the Court found that defendants had failed to show that plaintiff gave suggestions or recommendations which were given particular weight concerning the “hiring, firing, advancement, promotion or any other change of status” as to other employees.”  29 C.F.R.  § 541.100(a).  The Court noted that even though plaintiff screened applicants for positions at the airport, submitted the applications to his superior, made observations as to intake conversations with prospective applicants, and was authorized to discipline employees, this was simply not enough to conclusively determine at this stage that plaintiff met this factor of the executive exemption. 

Likewise, the Court also found that the third element of the administrative exemption was not met by defendants which requires that an employee’s “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”   29 C.F.R. § 541.200(a)(3).  Determining whether an employee meets this third criterion requires further analysis of ten factors set forth by DOL regulation 29 C.F.R. § 541.202(b).  Specifically, the Court stated that there was evidence that plaintiff “does not have authority to bind the employer in any matter of significance, financial or otherwise; does not provide any expert advice to management and does not become involved in any planning of business objectives.”  Thus, New Jersey wage and hour attorneys should keep in mind the heavy burden that a defendant must overcome in demonstrating as a matter of law that employees, such as Store Managers or Assistant Store Managers,  are properly classified as exempt and therefore not owed any overtime compensation under the FLSA.

Companies continue to attempt to avoid their failure to pay overtime under the FLSA by arguing that other types of payments to the employee should ”offset” the unpaid overtime.  These arguments usually fail.  For the most recent example, check out Mezger v. Price CPAs, PLLC, 2008 U.S. Dist. LEXIS 68859, *11-12 (M.D. Tenn. Sept. 8, 2008), where the federal court easily rejected the company’s argument that an employee’s severance payments should offset his previously unpaid overtime, even though the severence agreement did not in any way connect the severence pay to an FLSA claim.  Do defense lawyers really get paid for making these kinds of arguments?