Our Firm’s Philadelphia Employment Lawyers Recently Prepared and Submitted an Amicus Brief in Support of Dunkin Donuts Managers Who Were Denied Extra Overtime Pay

Our firm recently prepared and filed with the First Circuit Court of Appeals a “friend of the court” brief (commonly known as an amicus in the appeal entitled Marzuq, et al. v. Cadete Enterprises, Inc., No. 14-1744.  The brief is filed on behalf of the following  organizations:  the National Employment Law Project, the National Employment Lawyers Association (“NELA”), and the Economic Policy Institute.

This appeal concerns the district court’s summary judgment order finding that managers of a Dunkin Donuts store are overtime-exempt.  Our brief emphasizes the legislative purpose behind the FLSA overtime pay mandate and arguies that the company’s business model contradicts that purpose.  Here is what we write in the brief:

Amici curiae urge this Court to reverse the district court’s summary judgment decision.  As discussed below, Congress passed the FLSA’s “time and one-half” overtime pay requirement with the intent of benefitting all workers by spreading work hours and increasing employment.  The district court’s application of Donovan v. Burger King, 672 F.2d 221 (1st Cir. 1982), to excuse a detailed analysis of the four “primary duty” factors described in 29 C.F.R. § 541.700(a) threatens to undermine this legislative purpose.  In particular, the district court’s approach makes it far too easy for companies to avoid assigning extra work to the hourly workforce by simply requiring salaried employees to perform the extra work free-of-charge.  Moreover, the district court’s reading of Burger King as excusing a rigorous primary duty analysis cannot be reconciled with decisions from other circuit courts.

A.  The FLSA’s Overtime Pay Mandate Was Enacted for the Purpose of Benefitting All Workers by Spreading Work Hours and Increasing Employment.

The FLSA requires that employees receive extra “time and one-half” pay for working over 40 hours per week.  See 29 U.S.C. § 207(a)(1).  In enacting this requirement, Congress intended “to spread work and thereby reduce unemployment, by requiring an employer to pay a penalty for using fewer workers to do the same amount of work as would be necessary if each worker worked a shorter week.”  Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1176 (7th Cir. 1987) (Posner, J.).

This public policy favoring “work-spreading” is fundamental to the FLSA’s overtime pay mandate.  As the Supreme Court explained shortly after the FLSA’s passage:

The provision of § 7(a) requiring this extra pay for overtime is clear and unambiguous.  It calls for 150% of the regular, not the minimum wage. By this requirement, although overtime was not flatly prohibited, financial pressure was applied to spread employment to avoid the extra wage and workers were assured additional pay to compensate them for the burden of a workweek beyond the hours of the act.  In a period of widespread unemployment and small profits, the economy inherent in avoiding extra pay was expected to have an appreciable effect in the distribution of available work.  Reduction of hours was part of the plan from the beginning.

Overnight Motor Transport v. Missel, 316 U.S. 572, 577-78 (1941) (emphasis supplied); seealsoBay Ridge Operating Co., Inc. v. Aaron, 334 U.S. 446, 460 (1948) (overtime pay mandate intended “to spread employment through inducing employers to shorten hours because of the pressure of extra cost”); Walling v. Youngerman-Reynolds Hardwood Co., Inc., 325 U.S. 419, 423-24 (1945) (overtime pay mandate intended “to reduce the hours of work and to employ more men”); Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of America, 325 U.S. 161, (1945) (“the plain design of § 7(a) to spread employment through imposing the overtime pay requirement on the employer”); Walling v. Helmerich & Payne, Inc., 323 U.S. 37, 40 (1944) (overtime pay mandate intended “to spread employment by placing financial pressure on the employer through the overtime pay requirement”).

In sum, the FLSA’s overtime pay mandate is intended to benefit ALL employees, not just those who actually are called upon to work extra overtime hours.  When a company classifies a salaried employee as an overtime-exempt “executive,” the economic implications are felt by the entire workforce.  This is why overtime exemptions must be narrowly construed.  As this Court has recognized:  “Because of the remedial nature of the statute, the Supreme Court has emphasized that the exemptions should be ‘narrowly construed’ and ‘limited to those establishments plainly and unmistakably within their terms and spirit.’”  Hines v. State Room, Inc., 665 F.3d 235, 242 (1st Cir. 2011) (quoting Arnold v. Ben Kanowski, Inc., 361 U.S. 388, 392 (1960)).

B.  Cadete’s Business Model Contradicts the FLSA’s Purpose of Spreading Work Hours Among the General Workforce.

Mindful of the FLSA’s Congressional purpose of spreading work among all employees, courts should be skeptical of business models in which employers classify a few employees as overtime-exempt managers, pay them modest weekly salaries, require them to work long hours performing non-managerial tasks, and prohibit their hourly co-workers from working additional hours.[1]  Such business models clearly undermine Congress’ intent that the overtime premium foster the spreading of work hours among the entire workforce.

In Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11th Cir. 2008), the Eleventh Circuit affirmed a jury finding that the Family Dollar retail chain violated the FLSA by misclassifying their “store managers” as overtime-exempt.  The Morgan Court put special emphasis on Family Dollar’s use of strict store payroll budgets to force the store managers to perform tasks that otherwise would be performed by the hourly employees.  See Morgan, 551 F.3d at 1251-54, 1270.  The Court offered the following summary:

Because store managers are under orders that overtime labor is not allowed, they are required to do any and all work, even if the payroll budget does not allocate enough hourly employees to get the job done.  Cuts to a store’s payroll budget necessarily reduce a store’s workforce and ensure that the salaried store manager (and not the hourly employees) makes up the difference by working more hours.

Id. at 1252 (footnote omitted).

Here, Cadete has implemented a similar business model.  Plaintiffs were paid modest weekly salaries, see Joint Appendix (“JA”) at 296, and worked alongside other donut shop employees paid on an hourly basis, see id.  Plaintiffs were expected to regularly work at least 48 hours per week and often worked over 60 hours per week.”  See JA 45, 60, 147, 170-71, 219.  During these work hours, Appellants often spent over 90% of  their time performing the same routine tasks as the donut shop’s hourly employees,  See JA 105-06, 168-69, 171-72, 179, 186-88, 193, 198, 217-18, 222, 244-45, 252, 319.

C.  Cadete’s Practices Harm the Very Employees Who Most Need the FLSA’s Protections.

It is easy to view Appellants as the only individuals harmed by Cadete’s overtime-exempt classification.  But such a viewpoint is incomplete.  As already discussed, Cadete’s current and prospective hourly employees also have suffered harm.  Absent the overtime-exempt classification of Appellants, the donut shop’s hourly employees would have worked more hours and received more pay.  Alternatively, Cadete would have hired a new employee, possibly lifting him/her out of unemployment.

The $8.00/hour donut shop employees harmed by Cadete’s practices desperately need the FLSA’s protections.  The food service industry employs almost 10% of our nation’s private sector workers.[2]  Almost half of all food service workers live near or below the poverty level.[3]  As a whole, food service workers earn only one-half of the national average wage for all industries, and the average food service manager’s salary is less than twice the wage of their hourly employees.[4]  Moreover, over 22 percent of restaurant managers can be classified as low-wage employees.[5]

D.  Careful Analysis of Each of the Four “Primary Duty” Factors is Crucial to Ensuring that an Overly-Broad Executive Exemption Does Not Undermine the FLSA’s Work-Spreading Goals.

Whether a purportedly overtime-exempt executive has “management” as her “primary duty” depends on consideration of four separate factors.  As explained in the pertinent regulation:

Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

29 C.F.R. § 541.700(a).

Magistrate Judge Boal’s Report and Recommendation carefully analyzed each of the four primary duty factors.  See JA at 294-309.  Judge Saylor, however, did not undertake any analysis of the primary duty factors.  See JA at 317-27.  Instead, Judge Saylor appeared to read this Court’s decision in Donovan v. Burger King, 672 F.2d 221 (1st Cir. 1982), as requiring a finding that Appellants are exempt executives by virtue of their status as “in charge” of their stores.  See JA at 325-26.

Amici Curiae respectfully disagree with Judge Saylor’s approach.  This Court has never held that Burger King permits a district court to avoid a rigorous analysis of the primary duty factors just because the plaintiff is the person “in charge” of his assigned store or work department.  Such a reading of Burger King would put this Court at odds with circuit courts authority throughout the nation.

For example, in Morgan, the Eleventh Circuit flatly rejected the company’s argument that “its store managers were ‘in charge’ of the store, and therefore, exempt as a matter of law.”  Morgan, 551 F.3d at 1271.  The Morgan Court cogently observed:

In answering the primary duty inquiry, courts do not “simply slap[]on a talismanic phrase.”  Family Dollar’s “in charge” label strikes us as a way to bypass a meaningful application of the fact-intensive factors.

Id. at 1272 (quoting Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259, 1264 (11th Cir. 2008)).

Likewise, in Guthrie v. Lady Jane Collieries, Inc., 722 F.2d 1141, 1145 (3d Cir. 1983), the Third Circuit explained that an employee’s status as the person “in charge” of an entity’s operations does not excuse a thorough analysis of the primary duty factors:

Preliminarily, we reject the implication in the district court’s opinion that by merely holding that the foremen were “in charge” of their respective sections, without analyzing the underlying criteria of the relevant regulation, the district court could properly conclude that the regulation’s requirement that the foremen’s primary duty be management had been satisfied. The regulation clearly directs the court’s attention to several factors, which must be considered before a determination of “primary duty of management” may be made. Thus, the regulation requires more than a conclusory leap from a holding of “in charge” to a conclusion that a “primary duty of management” has been established.

Guthrie, 722 F.2d at 1145.

Similarly, in Ale v. Tennessee Valley Auth., 269 F.3d 680 (6th Cir. 2001), the Sixth Circuit observed:  “The words ‘in charge’ are not a magical incantation that render an employee a bona fide executive regardless of his actual duties.”  Id. at 691; see also Indergit v. Rite Aid Corp., No. 08-09361, 2010 U.S. Dist. LEXIS 32322, *16-19 (S.D.N.Y. March 31, 2010) (store manager’s status as “captain of the ship,” as person “in charge,” and as “highest ranked employee in his store” not relevant to exemption analysis); Kohl v. Woodlands Fire Dept., 440 F. Supp. 2d 626, 634 (S.D. Tx. 2006) (exempt status not determined by “the labels the employee or the employer place on those duties”).

Consistent with the above principles, various circuit courts have held that an employee can be misclassified as overtime-exempt notwithstanding her status as the highest-ranking employee or the person in-charge.  Seee.g., Rodriguez, 518 F.3d at 1263-65 (store managers); Jackson v. Go-Tane Services, Inc., 56 Fed. Appx. 267, 268-72 (7th Cir. 2003) (manager of car wash facility); Aaron v. City of Wichita, No. 96-3091, 1997 U.S. App. LEXIS 13039, *11-17 (10th Cir. May 23, 1997) (fire captains); Dept. of Labor v. City of Sapula, 30 F.3d 1285, 1287-88 (10th Cir. 1994) (fire captains).

In sum, district courts must carefully analyze each specific primary duty factor in deciding whether an employee is properly classified as an overtime-exempt manager.  This Court should not permit employers and trial courts to read Burger King as excusing a detailed primary duty analysis.

E.  Conclusion.

For the above reasons, Amici Curiae submit that the district court’s summary judgment decision should be reversed

[1]   See generally David Jamieson, “Join the Booming Dollar Store Economy! Low Pay, Long Hours, May Work While Injured,” HuffingtonPost.com (Aug. 29, 2013) (available at http://www.huffingtonpost.com/2013/08/29/dollar-stores-work_n_3786781.html​, last accessed on October 28, 2014) (generally describing business model of requiring salaried managers to perform all of store’s extra work).

[2]   See Heidi Shierholz, “Low Wages and Few Benefits Mean Many Restaurant Workers Can’t Make Ends Meet,” Economic Policy Institute Report (Aug. 21, 2014) (“EPI Report”) at p. 5 (available at http://www.epi.org/publication/restaurant-workers/, last accessed on October 28, 2014).

[3]   See EPI Report, supra, at Table 7.  Generally speaking, many of this Nation’s poor are employed.  “In 2009, according to the US Census Bureau’s official definition of poverty, 8.8 million US families were below the poverty line (11.1% of all families). Of these families, 5.19 million, or 58.9%, had at least one person who was classified as working.  In the same year, there were 11.7 million unrelated individuals (people who do not live with family members) whose incomes fell below the official poverty line (22% of all unrelated individuals).  This means that 3.9 million of these poor individuals, or 33%, were part of the working poor.”  (Wikipedia, Working Poor, http://en.wikipedia.org/wiki/Working_poor, last accessed on October 28, 2014.)

[4]   EPI Report, supra, at Table 6, p. 17 [$10.00 ÷ $18.00 = .55], Table 5, p. 14 [$15.42 ÷ $8.23 = 1.87].  By comparison, managers in all employment earn approximately 2.5 times more than hourly employees ($54.66 versus $21.78.).  See Bureau of Labor Statistics, “May 2013 National Industry-Specific Occupational Employment and Wage Estimates For Cross Industries, Private.” (“May 2013 Wages”) (available at http://www.bls.gov/oes/current/000001.htm#00-0000, last accessed on October 28, 2014)

[5]   EPI Report, supra, Table 8, at p. 20.

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