Fair Labor Standards Act | Labor and Employment Law blog

Free and Clear? Not Quite: Court Hangs FLSA Liabilities on Purchaser

Posted on April 11, 2013 by smithamundsen

Contributed by Beverly Alfon

The term successor liability tends to make business owners uneasy – and rightly so, considering that it treads on our general notions of free enterprise. Last week, the Seventh Circuit federal appellate court issued a decision that will undoubtedly increase those apprehensions (Teed v. Thomas & Betts Power Solutions, LLC, 7^th Cir., No. 12-2440, 3/26/13).

JT Packard & Associates defaulted on a $60 million bank loan. The company’s assets were sold at auction to Thomas & Betts Power Solutions, LLC. Thomas & Betts entered into an asset transfer agreement with Packard that included standard language indicating that the transfer of assets was “free and clear of all liabilities” of Packard, and specifically included any liabilities arising from a pending Fair Labor Standards Act (federal wage and hour law) lawsuit that Packard employees filed before the company auctioned its assets.

Eventually, the employees who brought the FLSA lawsuit against Packard settled their claims for $500,000. However, in order to collect on that settlement, the former Packard employees successfully convinced a district court that Thomas & Betts should be substituted as the defendant in that case. Thomas & Betts appealed the decision to the Seventh Circuit federal appellate court (which covers Illinois, Indiana and Wisconsin).

The Seventh Circuit agreed with the lower court. While most state laws tend to limit an acquiring company’s exposure to a predecessor’s legal obligations, the Seventh Circuit held that a broader federal standard for successor liability applies to liability under any federal labor statutes, including the FLSA. The court explained that in labor and employment cases, “the imposition of successor liability will often be necessary to achieve the statutory goals because the workers will often be unable to head off a corporate sale by their employer aimed at extinguishing the employer’s liability to them.” Simply put, an employer’s disclaimer to successor liability is no defense to these claims.

The court looked to several factors in determining that Thomas & Betts was a successor:

whether it had notice of the pending lawsuit prior to the auction;

whether Packard would have been able to provide the relief sought by the FLSA plaintiffs either before or after the sale;

whether Thomas & Betts could provide the relief sought; and,

whether Packard operations and workforce continued through Thomas & Betts.

Interestingly, the court acknowledged that there may have been good reasons to withhold successor liability. However, Thomas & Betts either failed to raise them or there was no evidence to support the reasons. For example, Thomas & Betts did not argue that the FLSA plaintiffs had another viable option of filing wage claims in Packard’s bankruptcy proceedings if the court imposed successor liability after Packard defaulted on the bank loan. Their wage claims would have been treated as priority claims superseding the claims of the bank. The court also indicated that a good reason for denying successor liability would be if the FLSA plaintiffs set out to file lawsuits for the mere hope of substituting a solvent successor as the defendant. However, the court determined that in this case, the plaintiffs were not maneuvering for this result when they initially filed their lawsuit.

Bottom line: Regardless of “free and clear” language in asset transfers, an acquiring business may be left holding the bag on federal labor and employment liabilities incurred by the predecessor company. Avoiding successorship factors, such as continuance of workforce and operations, must be contemplated if due diligence reveals a potential liability under federal labor and employment laws.

Filed under: Federal Labor Standards Act (FLSA) | Tagged: Asset Transfer, Fair Labor Standards Act, Successor Liability | Comments Off

Employers Could be Held Liable for Supervisors’ Comments and Use of Facebook

Posted on April 3, 2013 by smithamundsen

Contributed by Michael Wong

One of the biggest issues for employers is how much the internet and social media can be used to find information posted by or about employees. However, how many employers consider their own social media footprint and who is contributing to it? While an employer may be cognizant of what it posts on the internet, it should also be concerned about what managers and supervisors are posting on the internet and social media (Facebook, LinkedIn, MySpace, Google+, blogs, etc.).

As what has generally come to be recognized as the “Cat’s Paw” theory, the actions of a supervisor, even one who is not a decision maker, could be conveyed upon an employer to support the imposition of liability. Staub v. Proctor Hospital, 131 S.Ct. at 1193. As explained in Staub, because a supervisor is an agent of the employer, when he or she causes an adverse employment action the employer causes it; and when discrimination is a motivating factor in the supervisor doing so, it is a motivating factor in the employer’s action. 131 S.Ct. at 1193.

Under the Cat’s Paw theory it is possible that an employer could be subjected to liability based on its owners’, directors’, managers’ and supervisors’ personal use of social media, including Facebook. This became even more evident when the District Court for the Middle District of Tennessee held that posts on a company blog, posts on a manager’s personal Facebook page (even when removed) and a manager’s verbal comments, were sufficient evidence to create a genuine dispute of facts concerning one employee’s retaliation claim and another employee’s constructive discharge retaliation claim in a FLSA class case. Stewart v. CUS Nashville, LLC, 3:11-CV-0342, 2013 WL 456482 (M.D. Tenn. Feb. 6, 2013).

In Stewart, the court found that a blog entry on the company’s website by its founder and president that “referenced a lawsuit initiated by someone who had been previously terminated for theft and contained the following statement directed to that individual: ‘Fu** that b*tch’” was sufficient evidence to allow a jury to find retaliation in violation of the FLSA. The court went on to find that the company’s Director of Operation’s post on Facebook, while intoxicated, stating “Dear God, please don’t let me kill the girl that is suing me . . . that is all . . .” and similar verbal comments while the employee was present, were sufficient evidence to allow a jury to find the employee was constructively discharged in retaliation for joining the FLSA lawsuit. While the court did not find the evidence was enough to grant either party summary judgment, the use of social media lead to the employer being faced with the uncertainty of liability and costs of a trial.

Bottom line: Employers must be aware that they could be held liable not only for what they post on the internet, but what their directors, managers and supervisors post on the internet.

Filed under: Social Media | Tagged: Employment, facebook, Fair Labor Standards Act, LinkedIn, MySpace, social media | Comments Off

Time to Revisit Employee Handbooks…Again?

Posted on December 27, 2012 by smithamundsen

Contributed by Jon Hoag

The Chief Judge of the Northern District of Illinois recently issued a decision that should get the attention of employers throughout Illinois. The Judge determined that statements in an employee handbook may be enough to constitute an “agreement” under the Illinois Wage Payment and Collection Act (IWPCA). The Judge ruled that the handbook statements were enough for the plaintiffs to avoid dismissal of their IWPCA claims. So what’s the big deal?

The “big deal” is that the IWPCA has a statute of limitations of 10 years compared with other wage and hour laws (e.g. Illinois Minimum Wage Law, Fair Labor Standards Act, etc.) that carry 2-3 year statute of limitation periods. In addition, the courts have determined that an “agreement” under the IWPCA does not require the formalities and accompanying legal protections of a contract. As such, the standard disclaimer language that the statements in the handbook do not create a “contract” does not effectively disclaim an “agreement” under the IWPCA.

Most employers outline general compensation guidelines in the employee handbook, including general statements about legal requirements related to employee compensation. For example, employers might include a statement that non-exempt employees will receive overtime at 1.5 times their wage for all hours worked over forty in a week. This is a fairly innocuous statement that simply mirrors the general requirements under the law. However, employers now have to be concerned that a statement such as this in an employee handbook exposes the employer to possible liability over a 10-year period instead of a 2-3 year period. And what if the statement is simply that employees that work over forty hours in a week are entitled to overtime? Does that mean that exempt employees might have a claim for overtime under the IWPCA? The bottom line is that defending a claim under the IWPCA is going to prove more difficult than defending that same type of claim under the Illinois Minimum Wage Law or Fair Labor Standards Act.

We expect to receive more clarity from the courts on this topic in the coming years. In the meantime, Illinois employers should review and revise employee handbooks to limit unnecessary legal exposure under the IWPCA.

Filed under: Employment Policies | Tagged: employee handbook, Fair Labor Standards Act | Comments Off

Similarly Situated? Not So Fast…

Posted on November 13, 2012 by smithamundsen

Contributed by Samantha Esmond

On October 22, 2012, the U.S. District Court for the Northern District of Alabama held that a class of Dollar General store managers failed to show they are “similarly situated” for purposes of the Fair Labor Standards Act’s collective action provision (Richter v. Dolgencorp Inc., N.D. Ala., No. 06-1537, 10/22/12).

On August 7, 2006, a large, nationwide collective action was filed by store managers of the retail chain alleging the retailer improperly classified them as FLSA-exempt and denied them overtime compensation based on the prevalence of non-managerial duties they performed. In March 2007, the collective action was conditionally certified. Dollar General moved to decertify the conditional class. The court granted Dollar General’s Motion and decertified the collective action for the following reasons.

First, the court distinguished the oft-cited case of Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233 (11^th Cir. 2008). The court reasoned that the Eleventh Circuit merely decided whether the district court abused its discretion by finding plaintiffs similarly situated – but it did not hold that a contrary ruling given the same evidence would have been an abuse of discretion. In other words, even though the Eleventh Circuit upheld class certification in Morgan, it did not necessarily mean that it was right.

Second, the court recognized that the FLSA executive exemption turns on the employee’s actual managerial duties and should be decided on a case-by-case basis. The court noted that managers with larger stores would spend more time managing associates and a larger stock room, while managers with smaller stores would have more time for manual labor. The court further noted that managers in high-crime locations may spend more time managing safety and protecting company assets, while managers in high-income or highly competitive locations might spend more time interviewing and training associates. The court concluded that, unlike the employees in Morgan, some managers were given significant authority to run their stores, while others could be described as shelf-stockers. Accordingly, the court concluded that the managers were not similarly situated.

Finally, the court recognized that “[i]t would be fundamentally unfair to Dollar General if the class were to remain certified,” as there is an abundance of evidence concerning the differences among the managers in the class. The court reasoned that due to “the differing of amounts and wide variety of exempt work performed,” if each Plaintiff’s claim were tried separately, some would be found exempt and some would not. The court concluded that while a single collective action trial may be the most efficient; such efficiency “cannot be obtained at the expense of Dollar General’s due process rights.”

IMPACT: While this is an important decision for employers facing the continuing threat of FLSA collective actions, it is unlikely to signal the end of these misclassification cases. This decision highlights that even where two people are ostensibly performing the same job, the possibility remains for one person to be classified as exempt and the other person to be classified non-exempt based on the actual duties performed. Employers should routinely review employee job descriptions and FLSA exemptions to ensure that each individual employee is actually performing the job duties stated therein.

Filed under: Federal Labor Standards Act (FLSA) | Tagged: exempt, Fair Labor Standards Act, non-exempt, overtime | Comments Off

Nursing Mothers Do Not Have The Right to Bring A Private Cause Of Action Against Employers For Substantive Violations Of The Express Breast Milk Provision Of PPACA

Posted on July 27, 2012 by smithamundsen

Contributed by Allison Chaplick

In early 2010, the Patient Protection and Affordable Care Act (PPACA) amended the Fair Labor Standards Act, 29 U.S.C. 207, to include the “express breast milk provision.” Under 207(r), an employer is required to provide:

(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child’s birth each time such employee has need to express the milk;

and

(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.

However, an employer does not have to compensate an employee for time spent expressing breast milk. The enforcement provisions of PPACA, which are found at 29 U.S.C. §216(b), entitle an employee to unpaid minimum wage, overtime and liquidated damages for violations of §207.

On December 21, 2010, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued a Notice explaining that under PPACA’s enforcement provisions “[i]f an employer refuses to comply with the requirements of section 7(r), [. . .] the Department may seek injunctive relief in federal district court.”

Relying Sections 207(r)(2) and 216(b) and the WHD’s Notice, a district court sitting in the Northern District of Iowa dismissed a plaintiff’s complaint alleging that her employer—a convenience store—substantively violated PPACA when it failed to provide her with a private place to express breast milk. In Stepheni Salz v. Casey’s Marketing Co., plaintiff alleged that she took a leave of absence after the birth of her child and that when she returned to work she needed to express breast milk. While the employer did allow her to use the convenience store’s office to express breast milk, after a few months, plaintiff noticed that the office had a working video camera. Plaintiff complained about the presence of the video camera in the office and was subsequently reprimanded for poor performance. Plaintiff ultimately quit.

The Salz court concluded that because §207(r)(2) did not require an employer to compensate an employee for time spend expressing breast milk, and §216(b) provides that enforcement of §207 is limited to unpaid wages, there was no private “manner of enforcing the express breast milk provision,” and dismissed her claim. Notwithstanding the fact that the plaintiff did not have any recourse for the substantive violation claim, the district court did permit her retaliation and constructive discharge claim to proceed because §215(a)(3) of the FLSA makes it unlawful for a employer to discharge or discriminate against an employee for filing a complaint under §207.

With more and more mothers returning to work after maternity leave, it is important for employers to understand their obligations under PPACA, and Illinois’ equivalent the Nursing Mothers in the Workplace Act. However, the enforcement provisions for substantive violations seem to be more “bark than bite” as they are limited to injunctive relief (i.e., requiring reasonable break times, private place to express breast milk).

Filed under: Healthcare, News & Tips | Tagged: breastfeeding, Fair Labor Standards Act, FLSA, PPACA | Comments Off

Internships: As the Tulips emerge so do the Interns….

Posted on March 12, 2012 by smithamundsen

Contributed by Julie Proscia

As the tulips begin to pop-up, so do the students applying for internships. In a sluggish economy this is even more prevalent as students are now examining any option that would give them that “experience” edge following graduation. Unpaid internships are a great opportunity but can subject a company to liability if not administered correctly. If administered incorrectly the hopeful doe-eyed unpaid intern can quickly turn into a green-eyed plaintiff looking for back wages and unpaid overtime.

The basic principle behind an unpaid internship is simple – unpaid interns cannot do any work that contributes to a company’s core operations. This includes any tasks that predominately help you run your business, like documenting inventory, filing papers, answering emails, etc. These principles are for “for profit” organizations and are not applicable to “not-for-profit” entities.

So what does that leave? Unpaid interns are allowed to shadow other employees and perform duties that don’t serve a business need. The Department of Labor has developed six factors that should be used to determine if the unpaid intern is really an intern or an employee. ALL six factors must be met in order for an internship to be properly classified as unpaid. If any of the six factors are not met the intern is considered an employee.

Here are the factors:

Training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

Training is for the benefit of the trainee;

The trainees do not displace regular employees, but works under close observation;

The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;

The trainees are not necessarily entitled to a job at the completion of the training period; and

The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

If an intern fails to meet any of the six factors they should be paid minimum wage for all hours worked and overtime, if overtime is applicable. It is also prudent to require that the intern receive college credit and their internship should be conducted through an approved program at their school or university. The latter will not absolve the company from wage and hour liability if the factors are not met, but it will go a long way in protecting the employer if questions are raised.

Filed under: Employment Policies, Internships | Tagged: Fair Labor Standards Act, Internship | Comments Off

Pro-Union NLRB Contradicts U.S. Supreme Court: Declares Employee Class-Action Waivers Violate Labor Law

Posted on January 11, 2012 by smithamundsen

Contributed by Jeff Risch

On January 3, 2012, the NLRB held that a nationwide home builder committed an unfair labor practice under the National Labor Relations Act (NLRA) by implementing a mandatory arbitration agreement that waived the rights of employees to participate in class or collective actions (D.R. Horton Inc. and Michael Cuda, 357 NLRB 184, 1/3/11). In short, the NLRB held that employers may not compel employees to waive their right to collectively pursue litigation of employment claims in all forums, arbital and judicial.

Michael Cuda, a superintendent for Horton, claimed that he and other similar superintendents for the company were prevented from pursuing a wage and hour class-action/collective-action under the Fair Labor Standards Act (FLSA); alleging that they were misclassified as exempt employees. Horton required Cuda and other employees to execute an arbitration agreement whereby they individually agreed to forego class-action relief of all types relating to any employee dispute. NLRB Chairman Mark Gaston Pearce (D) and Member Craig Becker (D) found that this mandatory arbitration procedure violated Section 8(a)(1) of the NLRA because it interfered with the statutory right of employees to engage in “protected concerted activity for their mutual benefit.”

In so holding, the NLRB took issue with the U.S. Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion, U.S., No. 09-893, 4/27/11. In Concepcion, the court, in a 5-4 decision, enforced AT&T’s customer cellular telephone contract that provided for mandatory arbitration on an individual basis and prohibited class action proceedings despite conflicting California state law. The court essentially held that the Federal Arbitration Act (FAA) preempts state laws that prohibit contracts from preventing class-action lawsuits. In judicial decisions that have since followed Concepcion, courts throughout the U.S. have concluded that employees may waive class-action rights by agreeing to individualized arbitration through employment arbitration agreements.

In distinguishing Concepcion, the NLRB held that employment arbitration agreements (unlike consumer contracts) cannot prevent employees from waiving their rights protected by the NLRA (i.e. collectively pursue wage/hour claims and/or disputes over terms and conditions of employment). The NLRB also reasoned that Concepcion involved a conflict between the FAA and a California state law, which implicated the U.S. Constitution’s Supremacy Clause; whereas in D.R. Horton the Supremacy Clause was not called into question as the issues involved purely federal statutes (FAA vs. the NLRA).

Filed under: Labor, National Labor Relations Board | Tagged: AT&T Mobility, D.R.Horton, Fair Labor Standards Act, Federal Arbitration Act, Inc., National Labor Relations Act, National Labor Relations Board, NLRA, NLRB | Comments Off

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Free and Clear? Not Quite: Court Hangs FLSA Liabilities on Purchaser

Time to Revisit Employee Handbooks…Again?

Similarly Situated? Not So Fast…

Nursing Mothers Do Not Have The Right to Bring A Private Cause Of Action Against Employers For Substantive Violations Of The Express Breast Milk Provision Of PPACA

Internships: As the Tulips emerge so do the Interns….

Pro-Union NLRB Contradicts U.S. Supreme Court: Declares Employee Class-Action Waivers Violate Labor Law

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