Many businesses routinely face the question of what to do when a nursing employee asks that she be allowed to take a break to express milk at work and that she be allowed to do so in a private space? Does an employer have to grant her request? What if a business does not have a private place for a mother to use? How many breaks is she allowed to take? For how long? Does an employer have to pay for the break time? This blog post answers these and many other questions that arise from this simple but very common situation and explains why, even when not required to do so under the law, it might be wise for a business owner to permit its female workers to nurse at work. Continue reading “Break Time for Nursing Mothers at Work – A Right or a Privilege?”
Tag: fair labor standards act
Employers Do Not Have to Pay Employees for the Time Spent in a Security Screening After Work, Says the U.S. Supreme Court.
Amazon warehouse employees can’t seem to catch a break. A few years ago, the media was abuzz with the stories about the grueling conditions inside the company’s warehouses. This year, the United States Supreme Court ruled that the warehouse employees are not entitled to overtime pay for the time spent waiting to undergo and going through the required security screenings after the end of their normal work hours.
In Integrity Staffing Solutions, Inc. v. Busk, Integrity Staffing Solutions, Inc. required its hourly warehouse workers, who retrieved products from warehouse shelves and packaged them for delivery to Amazon.com customers, to undergo a security screening before leaving the warehouse each day.
The employees argued that they spent roughly 25 minutes each day waiting to undergo and undergoing the screening that was meant to prevent employee theft and that since such screening was conducted for the sole benefit of the employer and its customers, the employees had to be paid for their time under the Fair Labor Standards Act of 1938 (FLSA).
The employees’ argument was based on the Portal-to-Portal Act (PPA), which provides that employers do not have to pay their employees for (1) “walking, riding, or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform,” and (2) “activities which are preliminary to postliminary to said principal activity or activities.” The employees argued that the screening time was an integral and indispensable part of their principal activity – retrieval and packaging of Amazon products – and, therefore, was compensable time under the PPA.
The U.S. Supreme Court sided with the employer after finding that the security screening was neither the principal activity for which employees were hired, nor the “integral and indispensable” part of the employees’ duties as warehouse workers. The Court explained that it did not matter whether a particular post- or pre-shift activity was required by an employer, but whether such additional activity was indispensable to the performance of employees’ work. In this case, the security screening, although required by the employer, was not integral part of the work for which the warehouse employees were hired – packaging of Amazon products. Thus, the employer did not have to pay for such time.
Compensable Pre- and Post-Workshift Activities
Here are some examples of what pre-shift and post-shift activities the Court has previously held to be compensable because they were indispensable to the main work activities:
- The time battery-plant employees spent showering and changing clothes because the chemicals in the plant were “toxic to human beings” and the employer conceded that “the clothes-changing and showering activities of the employees [were] indispensable to the performance of their productive work and integrally related thereto.” Steiner v. Mitchell, 350 U.S. 247, 252-253 (1956).
- The time the meatpacker employees spent sharpening their knives because dull knives would “slow down production” on the assembly line, “affect the appearance of the meat as well as the quality of the hides,” “cause waste,” and lead to “accidents.” Mitchell v. King Packing Co., 350 U.S. 260, 262 (1956)
Non-Compensable Pre- and Post-Shift Activities
On the other hand, the Department of Labor regulations explain that the following post- and pre-workshift activities are generally non-compensable:
- When performed under the conditions normally present, activities including “checking in and out and waiting in line to do so, changing clothes, washing up or showering, and waiting in line to receive pay checks” See 29 CFR Sec 790.7(g) (2013).
Practical Implications
Those employers who have facilities where employees must pass through gates, security checks, or take other steps before entering or leaving the workplace, should apply the test that the Court formulated in Integrity Staffing Solutions, Inc. v. Busk to any such activities to determine whether they should be compensable or not. If the activity is a “principal” activity or is an “integral and indispensable” part of such “principal activity,” then the employer should pay employees for the time they spend performing such activities. Additional guidance as to what is considered compensable post- and pre-work activity is provided by the Department of Labor here.
For more information regarding compliance with the wage and hour requirements of the Fair Labor Standards Act, contact Leiza Dolghih at Leiza.Dolghih@GodwinLewis.com.
U.S. Supreme Court Employment Cases to Follow in 2015
In 2015, the U.S. Supreme Court is posed to rule on the following important employment law issues:
1. Integrity Staffing Solutions, Inc. v. Busk – must employers compensate employees for the time spent undergoing security screenings at the end of the workday under the Fair Labor Standards Act?
The employees in this case allege that Integrity requires post-shift security screenings lasting up to 25 minutes, yet fails to compensate them for the time spent undergoing the screenings, which is a violation of the Fair Labor Standards Act (FLSA).
Integrity claims that it is immune from liability under the Portal-to-Portal Act of 1947, which provides that employers are not required to compensate for activities that are postliminary to an employee’s primary work activities.
The Ninth Circuit sided with the employees and ruled that the employees stated a plausible claim for relief because the security clearances were for Integrity’s benefit and necessary for the employees’ job performance. Specifically, the Court noted that the prevention of employee theft—a concern specific to the employees’ warehouse work duties—motivated the security clearances, thereby benefiting Integrity. Therefore, Integrity was required to compensate its employees for the time spent in the security screening.
UPDATE (12/9/2014) – The U.S. Supreme Court ruled that the time spent undergoing a security screening is not compensable under the FLSA.
2. Young v. United Parcel Service, Inc. – must an employer accommodate a pregnant woman with work restrictions related to pregnancy in the same manner as it accommodates a non-pregnant employee with the same restrictions?
UPS offered “light duty program” to workers who were injured on the job, but refused to provide any light duty accommodations to pregnant employees. Young challenged the policy and argued that the Pregnancy Discrimination Act (PDA) requires an employer to provide pregnant employees light duty work if it provides similar work to other employees in other circumstances.
The Fourth Circuit sided with UPS and ruled that: (1) the employer did not “regard” a pregnant employee as disabled under the Americans with Disabilities Act (ADA); and (2) employers are not required under the PDA to provide pregnant employees with light duty assignments so long as the employer treats pregnant employees the same as non-pregnant employees with respect to offering accommodations.
3. EEOC v. Abercrombie & Fitch Stores, Inc. – does an employee have to provide a direct, explicit notice to the employer of the need for a religious accommodation?
In this case, EEOC has alleged that Abercrombie violated Title VII when it failed to hire a prospective employee, Samantha Elauf, because of her religious practice without offering her a reasonable accommodation. Elauf, a Muslim, interviewed for a sales position at Abercrombie while wearing a black hijab (headscarf), a practice inconsistent with Abercrombie’s policy prohibiting sales employees from wearing black clothing or “caps.” Although the assistant manager interviewing Elauf assumed that Elauf wore her hijab because she was Muslim, Elauf did not say that she needed to wear it for religious reasons or request a religious accommodation. There was evidence that Abercrombie did not hire Elauf because of her attire.
The Tenth Circuit sided with Abercrombie and explained that plaintiffs claiming religious discrimination based on a failure to accommodate ordinarily must prove that they informed the employer that they engage in a particular practice for religious reasons and require an accommodation. It rejected the EEOC’s position that Title VII may be satisfied by notice short of an explicit communication from the applicant. The Tenth Circuit’s decision is in tension with decisions of the Seventh, Eighth, Ninth, and Eleventh Circuits, which have adopted the EEOC’s position that the element of notice is established where the employer has actual knowledge of an employee or applicant’s religious practice even if there is no an explicit request for an accommodation.
Leiza Dolghih frequently advises employers on how to handle troublesome employees, assists with responding to EEOC charges, and litigates employment disputes. For more information, e-mail Leiza.Dolghih@GodwinLewis.com.
When Can a Franchisor Be Liable for Overtime and Minimum Wage Violations at a Franchisee’s Business?
Earlier this month, the Fifth Circuit Court of Appeals addressed when a franchisor might be liable for its franchisee’s overtime and minimum wage violations as a “joint employer” under the Fair Labor Standards Act (FLSA). Given the recent rise in the FLSA litigation and rather sizable penalties and damages awards assessed against the violators, Orozco v. Plackis serves as a reminder to franchisors that the more control they retain over their franchisees’ employees the more likely they are to share liability under the FLSA.
In this case, Craig Plackis owned several Craig O’s restaurants around Austin, Texas. In 2005, he entered into a franchise agreement with the Entjers to open a location in San Marcos. In 2011, Ben Orozco, a cook at the San Marcos location, filed a lawsuit against the Entjers and their company alleging that he was not paid overtime or minimum wages as required under the FLSA. After the Entjers settled, Orozco added Craig Plackis as a defendant alleging that the franchisor was also his employer. The jury agreed with Orozco, but the Fifth Circuit reversed after finding that there was legally insufficient evidence for a reasonable jury to find that Plackis was Orozco’s employer.
Under the FLSA, covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009, and overtime pay at a rate not less than one and one-half times the regular rate of pay for hours worked above 40 hours in a workweek. The FLSA defines an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. §203(d).
Often, when an employee works for a subsidiary, a franchise, or a professional employer organization (PEO), the question arises which entity is considered the employer for purposes of the FLSA. The courts, therefore, use the “economic reality test” to answer that question. They look at “whether the alleged employer: (1) possessed the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” A party need not establish every element in every case, and the dominant theme in the case law is that those who have operating control over employees within companies may be individually liable for the FLSA violations committed by the companies. In joint employer contexts, each employer must meet the economic reality test.
Did the franchisor possess the power to hire and fire employees?
Orozco testified that the Entjers, and not Plackis, hired him and had the authority to fire him. He also failed to introduce any evidence showing that Plackis ordered the Entjers to pay Orozco a particular amount or work for a specific number of hours. Furthermore, Orozco’s attorney admitted during oral argument that there was no direct evidence to support that Plackis had authority to hire or fire Orozco.
Regardless, Orozco argued that the following indirect evidence could have supported the jury’s finding that Plackis was the employer: (1) several employees worked at both the San Marcos location and the location owned by Plackis; (2) Plackis provided advice to the Entjers regarding how to improve the profitability of the San Marcos location, which resulted in the Entjers adjusting the schedule of their employees. The Fifth Circuit found such indirect evidence legally insufficient to show “power to hire and fire” on behalf of the franchisor.
Did the franchisor supervise and control employees’ work schedule and conditions?
Orozco argued that because the Entjers changed their employees’ schedule after a meeting with Plackis, the original franchisor had the authority to supervise or control employees’ work schedule and conditions at the San Marcos location. However, aside from the temporal connection between the meeting and the changes in the schedule, Orozco failed to introduce any other evidence of control. To the contrary, both the Entjers and Plackis testified that the franchisor’s advice to the franchisee was non-binding, and Orozco himself admitted that Plackis did not set his schedule and never discussed his responsibility or position.
Importantly, the Fifth Circuit explained that the mere fact that the franchisor trained the owners of a particular franchise or reviewed their employees’ schedule in order to increase the franchisee’s profitability, or met with the franchisees and their shift managers frequently, did not mean that the franchisor controlled employees’ work schedule and conditions.
The Fifth Circuit also found that the franchise agreement stating that the Entjers had to follow “policies and procedures promulgated by the franchisor for ‘selection, supervision, or training of personnel,” was insufficient to support a finding that Plackis fired or hired employees or supervised or controlled their work scheduled or employment conditions.
Did the franchisor determine the rate and method of payment?
Orozco testified that Plackis did not control his rate of pay and the Entjers set his rate and method of payment.
Did the franchisor maintain the employment records?
Orozco conceded that Plackis did not maintain his employment records.
CONCLUSION: Things worked out well for the franchisor in this case, but consider the following statement by the Fifth Circuit: “We do not suggest that franchisors can never qualify as the FLSA employer for a franchisee’s employees; rather, we hold that Orozco failed to produced legally sufficient evidence to satisfy the economic reality test and thus failed to prove that Plackis was his employer under the FLSA.” Had Plackis maintained the employment records for the San Marcos location or directed the Entjers regarding how much they should pay their employees or what work schedule they should implement at their franchise location, the outcome of this case could have been different.
Thus, to avoid a potential exposure under the FLSA as a “joint employer” with its franchisees, a franchisor should make sure that the franchise agreement makes it clear that the franchisees and not the franchisor control the hiring and firing process, employees’ work schedule and conditions, determine the rate and method of payment, and maintain the employment records for their operations. Also, the franchisor should make it absolutely clear that any type of training, advice or guidance that it provides to the franchisees is non-binding and cannot be interpreted as an expression of control over their employees.
For more information regarding minimum and overtime wage requirements, contact Leiza Dolghih.
The Fifth Circuit Triples an Overtime Payment Award; Says the Fluctuating Workweek Method Was Not Warranted in a FLSA Misclassification Case
Last Friday, the Fifth Circuit in Black v. SettlePou, PC ruled that the Northern District of Texas erred in applying the Fluctuating Workweek (FWW) method of calculating an overtime payment award where there was no evidence that the employee had agreed to the flexible work hours. The Court of Appeals remanded the case and ordered a recalculation of damages using 1 1/2 times the regular hourly rate of pay instead of 1/2 under the FWW, which would result in a tripling of the actual and liquidated damages.
Black was employed as a legal secretary and paralegal at SettlePou, P.C. from 2005–2010. She was first hired as a non-exempt legal secretary, then promoted to a paralegal, but remained a non-exempt employee, as defined by the Fair Labor Standards Act, 29 U.S.C. §§ 201–19 (FLSA), earning overtime at 1 1/2 regular rate of pay. In 2007, SettlePou informed Black that she was to begin supervising one of their legal secretaries, therefore, she would be reclassified as exempt, making her ineligible for overtime pay as an exempt employee. Immediately following her reclassification Black complained both verbally and in writing to her supervisor and to the human resources department stating that she thought she should be paid overtime for her extra hours worked. After she was terminated in 2010, she filed a suit against SettlePou on behalf of herself and all other similarly situated paralegals for violations of the FLSA.
The jury found that SettlePou had willfully violated the FLSA by misclassifying Black as exempt and the she was owed 274 hours of overtime pay. Apparently, when Black was promoted to a supervisor position, she was told that she would be given supervisory authority, but was never actually given one. Thus, she continued to perform the same duties, but was now ineligible for overtime.
The district judge calculated the amount of overtime premium due to Black by multiplying her 274 overtime hours by one-half of her hourly pay rate. Black filed a motion to alter or amend the judgment, arguing that the district court should have used 1 1/2 times the regular hourly rate of pay instead of 1/2 in its calculation of damages, but the district court denied the motion.
In overruling the district court, the Fifth Circuit explained that “[t]he FWW method of calculating overtime premiums in a misclassification case is appropriate when the employer and the employee have agreed that the employee will be paid a fixed weekly wage to work fluctuating hours,” and that the existence of such agreement is a question of fact. The record evidence in this case – both the parties’ initial understanding and their course of conduct – showed that there was no such agreement between Black and her employer because:
- SettlePou’s Human Resources Director testified that she was unaware of any fluctuating workweek agreement with Black
- Black testified that her understanding was that she would be compensated with a fixed weekly wage for working a regular schedule of 37 1/2 hours
- the payroll records showed that Black was being compensated for full time employment, which was defined in the Employee Handbook as 37 1/2 hours per week
- the Employee Handbook only stated that exempt employees would not be compensated for overtime, but did not explain that the full-time paralegals like Black were expected to work a fluctuating work week or overtime
The critical issue in this case, was “not only whether SettlePou paid Black a fixed salary for varying hours, but whether SettlePou and Black had agreed that a fixed salary would compensate her for all of the hours she worked each week.” The fact that Black complained to the Human Resources Director and her supervisor about having to work overtime without receiving overtime payment, showed that she did not agree to compensation based on the fluctuating work week.
MORAL OF THE STORY: First, make sure your employees are classified correctly as exempt or non-exempt. Second, if you expect employees to work flexible hours, make sure that they are made aware of that, preferably in writing, and that the compensation system reflects this arrangement. It won’t hurt to have employees sign a statement acknowledging that they are expected to work fluctuating hours. Third, make sure that your employee handbooks, employment applications, payroll records, and other paperwork associated with the fluctuating work week positions reflect the specific nature of that arrangement. Finally, make sure that the human resources department is knowledgeable about any fluctuating work week positions.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.
Unpaid Internships Are Mainstream, But Are They Legal?
During the last few years of tough economy, many companies have been tempted to save a penny by offering unpaid internships to the eager hoards of college graduates, who have often been forced to accept unpaid positions because of lack of paid work in their chosen field. While some of these unpaid positions offered true training and educational experience, others consisted entirely of menial tasks – ranging from stuffing envelopes and picking up dry cleaning to sanitizing door handles and sweeping bathrooms.
A publicized lawsuit by unpaid interns against the company that produced Black Swan and 500 Days of Summer filed in New York in 2011, began a rush of class and collective actions brought by interns under state and federal wage and hour laws. To avoid being part of this litigation trend, any company that offers unpaid internships in Texas needs to make sure that it complies with both federal and state wage and hour laws.
Federal Law
The Fair Labor Standard Act (FLSA) requires that an employer pays a minimum wage and overtime wages to anybody classified as its employee. The Department of Labor issued a Fact Sheet in 2010 describing six factors that are used to determine whether a worker should be qualified as an intern/trainee or an employee under the FLSA. If an employer offers an unpaid internship, it must make sure that the internship position meets the following criteria:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern and, on occasion, its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Texas Law
Texas does not have separate regulations at the state level regarding unpaid internships. Instead, the Texas Workforce Commission advises employers to adhere to the six-prong test established by the DOL. Additionally, the Commission has specifically clarified that the key fourth factor on the list – that an employer receive “no immediate advantage from the activities of the intern” – requires that an intern receive more benefits from the work then the employer.
Unpaid Internship Class Actions (examples of what has triggered litigation so far)
1. Glatt v. Fox Searchlight Pictures (NYSD, 2013) – interns “performed routine tasks that would otherwise have been performed by regular employees” such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking and reconciling purchase orders and invoices, drafting cover letters, organizing filing cabinets, making photocopies, running errand, assembling office furniture, arranging travel plans, taking out trash, taking lunch orders, answering phones, watermarking scripts, and making deliveries. (held: the unpaid internship violated the FLSA).
2. Rabenswaay v. Kamali et al. (NYSD, 2013) – interns did photo retouching, photographed products, edited brand books, created visuals, signage, and labels, and other tasks requested by supervisors. The job involved no training (ongoing).
3. Ballinger et al. v. Advance Magazine Publishers (NYSD, 2013) – interns packed and unpacked accessories and jewelry, sorted through and organized accessories and jewelry, ran errands, filled out insurance forms, reviewed submissions, responded to emails, proofread, line-edited and relayed pieces between writers and editors (ongoing).
4. Bickerton v. Charles Rose (NY S. Ct. 2012) – interns performed background research for the show, escorted guests for interviews, assembled press packets, broke down the interview sets, and performed other productive tasks (settled for $250,000).
5. Wang v. Hearst Corporation (SDNY 2012) – interns coordinated pickups and deliveries of samples, provided on-site assistance at magazine photo shoots, managed reimbursement reports, etc. (dismissed due to lack of commonality).
CONCLUSION: In light of the rise of litigation related to unpaid internships, employers should modify their internship programs to comply with the DOL’s requirements described above. Although the above cases deal with the fashion and publishing industries, where unpaid internships have historically been the norm, the FLSA requirements apply to all industries and all businesses need to ensure that they are compliant.
Update (7/19): After running a quick search for unpaid internships on the local Craigslist, I have found a great example of a Marketing & Events Intern position advertisement that appears to violate the DOL requirements. In contrast, this unpaid internship for a Solutions Consultant seem to comply with the FLSA as long as they actually do offer the described training.
Update (7/25): And here is Dallas Observer advertising an unpaid Marketing Internship position with a description that on its face appears to violate the FLSA’s minimum wage requirements.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.
Firing a Mother for Breast Feeding is, Indeed, Sexual Discrimination
Seems like a no-brainer, right? Well, a Texas District Court judge did not think so, so the Fifth Circuit Court of Appeals had to step in and set him straight in Equal Employment Opportunity Commission v. Houston Funding II, Ltd.
Back in February 2012, a Texas federal judge held that a woman who claimed that she was fired for seeking to use a breast pump at work had no viable claim under Title VII‘s prohibition against discrimination based upon pregnancy, childbirth or a related medical condition. He dismissed her claims on summary judgment stating that “lactation is not pregnancy, childbirth, or a related medical condition,” therefore, “firing someone because of lactation or breast-pumping is not discrimination.” Needless to say, the opinion caused an uproar and resulted in the Equal Employment Opportunity Commission (“EEOC”) filing an appeal with the Fifth Circuit.
The EEOC explained that “lactation discrimination” violates Title VII of the Civil Rights Act of 1964 (“Title VII”) as amended by the Pregnancy Discrimination Act (“PDA”) because lactation is a medical condition related to pregnancy. Furthermore, the disparate treatment on the basis of breastfeeding, an inherently female function, constitutes “the essence of sex discrimination” under Title VII. As stated in the EEOC’s appellate brief, “[l]actation is a female-specific function. Thus, firing a female worker because she is lactating (i.e., producing and/or expressing breast milk) imposes a burden on that female worker that a comparable male employee simply could never suffer. That is the essence of sex discrimination.”
The Fifth Circuit agreed with the EEOC and explained that a dismissal of a female employee motivated by the fact that she is lactating “clearly imposes upon women a burden that male employees need not – indeed, could not – suffer.” The Court held that “lactation is a related medication condition to pregnancy for purposes of the PDA,” and thus, cannot be used as a reason to fire or discriminate against an employee.
Additional Protections for Breastfeeding Mothers in Workplace
The Patient Protection and Affordable Care Act (“Affordable Care Act”), which amended Section 7 of the Fair Labor Standards Act (“FLSA”), requires employers to provide reasonable break time for employees to express breast milk for nursing children for one year after a child’s birth. The Act also requires employers “to provide a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which can be used by employees to express breast milk.” More details about this requirements can be found at the Department of Labor website here.
Texas does not have a similar statute. However, Texas Health Code §165.002 (1995) authorizes a woman to breastfeed her child in any location, which would include a work place, and Texas Health Code §165.003 et seq. provide for the use of a “mother-friendly” designation for businesses who have policies supporting worksite breastfeeding. (HB 340) The law provides for a worksite breastfeeding demonstration project and requires the Department of Health to develop recommendations supporting worksite breastfeeding (HB 359), which can be found at www.texasmotherfriendly.org.
Finally, the EEOC provides its Caregiver Best Practices Guidance (2011) for employers, in which it explains what employers can do above and beyond what is required by federal law in order to avoid discrimination claims and create a productive work environment.
BOTTOM LINE: In the day and age when women make up 46.9% of the total labor force, and 51.5% of management, professional, and related positions, and when 55.8% of all mothers with children under the age of 1 are in the labor force, employers can no longer afford to ignore pregnancy-related issues in the workplace and need to familiarize themselves with the relevant law or face unpleasant consequences.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.
The Supreme Court Renders an Important Pro-Employer Decision
In the past two weeks, both the United States Supreme Court and the Fifth Circuit Court of Appeals have rendered decisions that will add roadblocks to certain employee lawsuits. Last week, the Supreme Court decided Genesis Healthcare v. Symczyk, which I have previously identified as a case to watch in 2013 (here).
In Genesis Healthcare v. Symczyk, the Court held that when an employee brings a collective action under the Fair Labor Standards Act (FLSA) against an employer, and the employer makes an offer of judgment to the employee under Federal Rule of Civil Procedure 68 prior to class certification, if such offer fully settles the employee’s individual claim, the collective action becomes moot as well.
In this case, Symczyk, a nurse, brought a collective action on behalf of herself and “other employees similarly situated” and alleged that the medical center violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks. When Genesis Healthcare answered the complaint, they simultaneously served upon Symczyk an offer of judgment under Rule 68.
The District Court found that this offer of $7,500 provided Symczyk a complete relief on her individual damages claim, and, since no other individuals had joined her lawsuit, the case was rendered moot. The Third Circuit Court of Appeals reversed the District Court and held that while the individual claim had become moot, the collective action had not. The Court explained that allowing defendant employers to “pick off ” named plaintiffs with strategic Rule 68 offers before class certification, would frustrate the goals of collective action under the FLSA.
The Supreme Court, however, reversed the Third Circuit Court of Appeals and found that where a judgment offer under Rule 68 completely satisfies the named employee’s individual claim, and the class has not yet been certified, both the individual claim and the collective actions are rendered moot.
HOW WILL THIS AFFECT EMPLOYERS AND EMPLOYEES?
Now, anytime an employee brings a collective action under the FLSA against an employer, all the employer has to do to get the collective action dismissed, is to make a Rule 68 judgment offer prior to the class certification, and the collective action will be mooted, if the district court finds that the amount of the judgment offer fully satisfies such employee’s individual claim. Note, however, that the federal circuit courts are split about the question the Supreme Court did not decide: whether an unaccepted offer of judgment moots the named plaintiff’s FLSA claim (and thus the collective claim). The four dissenting members of the Court said “no.” The Rule 68 offer strategy will work only in those judicial circuits that find an unaccepted offer of judgment to moot the claim.
The Court’s decision makes it more difficult for employees to bring the FLSA collective actions because they are now forced – prior to class certification – to either identify a sufficient number of class members or claim a sufficiently large amount of damages so that the employer is not willing to make a Rule 68 offer or the employer’s offer is not large enough to satisfy all the individual claims.
The Court specifically pointed out that the judgment offers under Rule 68 might not work in class actions governed by Federal Rule of Civil Procedure 23. Thus, employees might want to try to bring lawsuits that allege both a collective action under FLSA as well as Rule 23 class actions, or bring only state-law claims as class actions.
It will be interesting to see if, as a result of this decision, the Congress attempts to amend the FLSA to close the loophole created by Rule 68 offers that many employers are now sure to use to dismiss collective actions brought under the FLSA.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.
Important Employment Law Cases to Follow in 2013
Vance v. Ball State University (7th Cir. 2011) – Who is a “Supervisor” under Title VII?
The U.S. Supreme Court will resolve a split between federal appellate courts regarding the definition of a “supervisor” for purposes of liability under Title VII. Specifically, the Court will decide whether “supervisor” under Title VII includes only those employees who have the power to “hire, fire, demote, promote, transfer, or discipline” or whether it includes any employee who has “the authority to direct and oversee the harassed employee’s daily work.”
The decision is of tremendous importance to employers, who are strictly liable for harassment inflicted by supervisors, but are liable for harassment by employees only when they were negligent in either discovering or remedying such harassment. If the Supreme Court expands the definition of “supervisor” to include anybody who has the authority to direct and oversee an employee’s daily work, the potential for strict liability for employers will expand significantly.
D.R. Horton Inc. v. NLRB (NLRB, 2012) – Are Class Action Waivers in Arbitration Agreements Unlawful?
The Fifth Circuit is going to review the decision by the NLRB in D.R. Horton that an arbitration agreement requiring employees to waive “as a condition of employment” their right to bring a joint, class or collective action violated Section 8(a)(1) of the National Labor Relations Act, which protects the rights of employees to engage in concerted, protected activity. The controversial NLRB decision called into question the growing practice of including class action waivers in employee arbitration agreements and is likely to reach the U.S. Supreme Court.
This is a significant case for employers because it impacts an employers’ ability to contract with its employees up front, as a condition of employment, over the issue of whether its employees may bring class or collective actions, which are notoriously expensive to litigate, expensive to settle, and financially risky to try in court.
Genesis HealthCare v. Symczyk (3rd. Cir. 2011) – Does Offering to Pay the Lone Plaintiff’s FLSA Claim Moot the Lawsuit Before Other Class Members Can Be Added?
In this important Fair Labor Standards Act (“FLSA”) case, the U.S. Supreme Court will resolve another split among the federal appellate courts when it determines whether an FLSA collective action becomes moot after the named plaintiff receives an offer of judgment that provides full relief. The Third Circuit Court of Appeals held that such an offer does not moot a putative action. By contrast, the Ninth and Eleventh Circuits have held that a full offer of judgment to the named plaintiff does moot a putative collective action.
The Court’s resolution of this circuit split is expected to impact an important tool that employers have relied upon in an effort to confront the recent deluge of collective wage-and-hour litigation – the payoff of the plaintiff’s claim before a class action is certified. The decision could greatly limit the ability of plaintiffs to use discovery to determine the existence of other similarly situated individuals, and will determine whether defendants can avoid a collective action by satisfying the claims of individual plaintiffs before they can join other members of their class.
University of Texas Southwestern Medical Center v. Nassar (5th Cir. 2012) – What is the Causation Requirement in a Title VII Retaliation Claim?
The U.S. Supreme Court has agreed to decide whether Title VII’s retaliation provision, and similarly worded statutes, require a plaintiff to prove a more arduous but-for causation – that an adverse action would not have been taken by an employer but for a retaliatory motive – or instead require proof only that the employer had a mixed motive, meaning that a retaliatory motive was one of several reasons for the adverse employment action. The Court’s decision is expected to provide much-desired clarity on the standard of proof.
Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. His practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.
