The assessment is harsh, but the gist of the decision is the Labor Department fundamentally has misunderstood under both Democratic and Republican Presidents the Fair Labor Standards Act and its overtime provisions for the 70+ years its been on the books; not likely, Judge -- you missed this one badly.
Truck drivers are often perhaps usually exempted from overtime pay requirements by the federal Motor Carrier Act (MCA). But a recent Fifth Circuit decision, Olibas v. Native Oilfield Services, shows the limits of that exemption, and the perils an employer creates for itself by failing to maintain or by destroying documentary evidence including payroll records.
Truck drivers for Native Oilfield Services filed an overtime suit claiming that they should have been paid overtime for (1) their off the clock hours waiting to be assigned a truck, and (2) their off the clock hours spent waiting for their trucks to be loaded/unloaded. The trucking company answered that the MCA exempted the drivers from overtime pay requirements.
The MCA exempts drivers of trucks weighing greater than 10,000 pounds and other employees whose regular duties require them to "engage in activities of a character directly affecting" the safe operation of such vehicles and interstate commerce. Interstate commerce under the MCA doesn't just mean across state lines but includes "the ant trust state transport of goods in the flow of interstate commerce." But not just any duties or possible such duties are enough; where the drivers or other employees duties are so "trivial, casual, and insignificant as to be de minimis" the exemption does not apply. But again and in the way that the law is complicated generally, the exemption does apply if employees are, or are "likely to be, called upon in the ordinary course of their work to perform, either regularly or from time to time, safety affecting activities that are interstate in nature."
So here is where the drivers stood: (1) if they did actually regularly drive the trucks across state lines, they would be exempt; (2) if they were likely to be called upon in the ordinary course of business from time to time to drive the trucks across state lines, they would be exempt; (3) aside from driving the trucks across state lines, the drivers, if the drivers drove the trucks only intrastate but a regular part of the company's business would be to deliver goods across state lines, the drivers would be exempt.
There was conflicting testimony at trial regarding whether the drivers regularly and/or were subject to being required to drive their trucks across state lines. The jury resolve that issue in the drivers' favor. As the Fifth Circuit put it, "it was a pure jury question whether to believe the employees or the employer."
It was likely helpful to the drivers that the company was unable to produce documentary evidence supporting its position. The company could not at trial "produce drivers logs, bills of lading, time sheets, or other documents" showing interstate travel by the drivers. The company claimed that the logs had been destroyed by a third-party but also admitted that the logs had been destroyed after they had been requested by the drivers in pretrial discovery. Daily trip reports and driver time sheets, according to the company president, were supposedly stored in a banker's box after the drivers requested them but, inexplicably, were later destroyed. The company also failed to produce any customer orders supporting its claim that goods it transported intrastate were bound for interstate delivery. So not only did the company failed to produce documentary evidence supporting its position, it also offered incredible explanations for its failure to do so.
The Fifth Circuit upheld an award of $1,673,145 in unpaid overtime compensation, $1,673,145 in liquidated damages, $371,759.59 in attorney's fees and $10,564.32 in costs. There were 108 drivers covered by the case.
A common dodge to overtime claims is the assertion by the employer either that it prohibited or did not know of the overtime work by the employee. A good example can be found in the recent Sixth Circuit decision in Craig v. Bridges Brothers Trucking. There a bookkeeper for the trucking company filed suit seeking payment of the overtime she had earned and the district court, Judge Edmund A. Sargus, granted summary judgment to the employer finding that it "did not know or have reason to know" that the employee had worked overtime hours. This was a major and, frankly, a perplexing error by the district court given the evidence in the case, which the Sixth Circuit described as follows:
... the undisputed evidence demonstrates that [plaintiff] kept meticulous records, reporting not only how many hours she worked each week, but also where she was working and the tasks she completed each day. She then placed those records, along with the time cards of the other Bridges Brothers employees and a summary report, directly onto the chair of Mr. Bridges for his approval each week. While she may have miscalculated her pay rate, she did not miscalculate her time.
Although the employer had been regularly presented with "meticulous" records detailing the work performed and task completed by the plaintiff, the Sixth Circuit still saw fit to announce a general rule applicable to situations where the employer asserts that it did not know or have reason to know that an employee was working overtime:
If an "employer knows or has reason to believe" that an employee "is continuing to work" in excess of 40 hours a week, "the time is working time" that must be compensated at a time-and-a-half rate, even if the extra work performed was "not requested" or even officially prohibited.
In other contexts, we have found that a "reason to believe," or constructive knowledge of something, exists when the employer "should have discovered it through the exercise of reasonable diligence." We now adopt the reasonable diligence standard for FLSA cases. (citations omitted)
Given the court's description of the "undisputed evidence" regarding the "meticulous" time worked records that the plaintiff provided to the president of the trucking company each week, one might expect the Sixth Circuit to have also ordered that a partial summary judgment be entered on the employee's behalf. However in that one would be wrong:
No one disputes that Craig worked overtime or that she was not compensated at the statutory rate. As such, this case turns entirely on whether Bridges Brothers "knew or had reason to believe" that Craig was working overtime. Whether a party had the requisite knowledge is a question of fact. It requires "credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences," all of which "are jury functions, not those of a judge." While a jury could conclude that an employer exercising reasonable diligence should know what is on its own timesheets and payroll records, we cannot say as a matter of law that a jury could not conclude otherwise here. (citations omitted).
The court does not explain how a reasonable jury could reject the undisputed evidence, although the ruling denying summary judgment to the employee is remarkable since the Sixth Circuit regularly affirms summary judgment in favor of employers where the evidence is much stronger for the employee.
But you take what you can get. And so it goes.
The Sixth Circuit's opinion was authored Senior District Judge Robert Cleland of the Eastern District of Michigan joined by Circuit Judges Richard Griffin and Raymond Kethledge, who was recently cited by Donald Trump as a Supreme Court short-lister.
The Fair Labor Standards Act (FLSA) is unique among employment -related laws, because it requires judicial approval of settlement agreements. The parties in a recent Second Circuit case, Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), tried to get around this requirement by reaching a confidential settlement and tendering a joint stipulation and order of dismissal with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). The district court didn't go for it, and, somewhat surprisingly, the parties appealed.
The Second Circuit affirmed, essentially on the grounds that the remedial purposes of the FLSA could be undermined without either judicial approval or Department of Labor supervision of overtime settlements. The Second Circuit also noted some recent cases that illustrated "why judicial approval in the FLSA setting is necessary":
Cheeks is in overtime case that both plaintiff and defense attorneys should pay attention to when they are crafting settlement agreements and FLSA overtime cases.
The Supreme Court will review a $2.8 million judgment against Tyson Foods in an overtime class action suit. It appears the Court will consider two questions: (1) whether and how statistical evidence and methods may be used to determine damages on a class-wide basis; and, (2) whether individuals may be included in a class, even if they've sustained no damages. Read the petition for certiorari here.
My estimation is that Tyson will find the Roberts Court quite receptive to their arguments. The Republican-appointed majority on the Court has been more than solicitous of business and corporate interests and almost unfailingly hostile toward individuals and employees. The Court is likely to use the case to virtually eliminate class actions in at least two ways: (1) it will practically eliminate the use of statistical methods, which, in turn, will practically eliminate class actions, since every class member's particularized damages would have to be proved individually just as it would in a non-class action suit; and, (2) while the second point is practically irrelevant, the Court will use it as a vehicle to restrict more generally the formation of class actions by creating some requirement erecting a barrier to being an eligible class member.
Overtime claims arise where there are no records kept of the hours the employee works, or where the records are incomplete and therefore false or are just false, as in fabricated for purposes of litigation. So it can develop that a plaintiff's claim for unpaid overtime may rest on his or her testimony alone regarding the hours he or she worked. Is this enough for a jury to find in the plaintiff's favor? "Yes" answered the Sixth Circuit recently in Moran v Al Basit LLC (June 1, 2015).
The plaintiff, Moran, worked for a couple of different auto repair shops owned by defendant. He claimed that he worked every week 65-68 hours. The defendant offered time sheets purporting to show that Moran worked "exactly thirty hours a week, despite his schedule varying notably from week to week." Furthermore, one of defendant's agent offered that he customarily reviewed security camera footage to verify/determine the employees' work hours, which he then recorded on paper, but, as it happened, these papers could not be located by the time of suit. Moran asserted that their existence had been fabricated in any event.
So Moran's main nearly only evidence was his word. The district judge, Hon. Judith Levy, granted summary judgment to the defendant. The issue before the Sixth Circuit was whether Moran's word alone good enough for a jury to find in his favor:
This appeal raises one simple question: Where Plaintiff has presented no other evidence, is Plaintiff’s testimony sufficient to defeat Defendant’s motion for summary judgment? We hold that it is. Plaintiff’s testimony coherently describes his weekly work schedule, including typical daily start and end times which he used to estimate a standard work week of sixty-five to sixty eight hours. The district court characterized this testimony as “somewhat vague.” However, while Plaintiff’s testimony may lack precision, we do not require employees to recall their schedules with perfect accuracy in order to survive a motion for summary judgment. It is unsurprising, and in fact expected, that an employee would have difficulty recalling the exact hour he left work on a specific day months or years ago. It is, after all, “the employer who has the duty under § 11(c) of the [FLSA] to keep proper records of wages [and] hours,” and “[e]mployees seldom keep such records themselves.” Defendants emphasize the fact that Plaintiff’s testimony is inconsistent with the allegedly contemporaneous timesheets Defendants provided to the court. But these timesheets do not amount to objective incontrovertible evidence of Plaintiff’s hours worked. Plaintiff denies the validity of these timesheets, which were handwritten by Defendants, and contends that Defendants sanctioned his overtime work. Whether his testimony is credible is a separate consideration that is inappropriate to resolve at the summary judgment stage.
Can an employer that knows or has reason to know an employee has worked overtime get out of paying overtime if the employee does not complain immediately about not being paid the overtime? "No" answered the Eleventh Circuit recently in Bailey v. Titlemax of Georgia in reversing a summary judgment granted by U.S. District Judge Marvin H. Shoob of the Northern District of Georgia.
Santonias Bailey was a victim of wage theft while working for Titlemax of Georgia. His supervisor told him that Titlemax did not pay overtime and made him work off the clock. His supervisor also altered his time cards to reduce the amount of time they reported Bailey had worked. Bailey sued for his overtime pay after leaving Titlemax's employment.
Titlemax's answer was, basically, so what? It blamed Bailey and pointed out that he had not followed its policies of reporting his supervisor's misconduct and accurately reporting his time worked on his time cards. According to Titlemax, Bailey was to blame for having his wages stolen and was entitled to nothing. This succeeded in the district court, which granted Titlemax summary judgment and dismissed Bailey's overtime claim.
The Eleventh Circuit reversed. It framed the question as follows:
if an employer knew its employee underreported his hours, can it still assert equitable defenses based on the employee's conduct in underreporting as a total bar to the employee's FLSA claim?
Put another way, the question is whether an employer can get away with intimidating an employee into letting wage theft slide? The FLSA was intended to police and prevent just that sort of abuse the Eleventh Circuit observed: "the goal of the FLSA is to counteract the inequality of bargaining power between employees and employer." This principle guided the court's holding:
If an employer knew or had reason to know that its employee underreported his hours, it cannot escape FLSA liability by asserting equitable defenses based on that underreporting. To hold otherwise would allow an employer to wield its superior bargaining power to pressure or even compel its employees to underreport their work hours, thus neutering the FLSA's purposeful reallocation of that power.
The court also noted that it could find no case where an employer's wage theft had been excused where the employer knew the employee's work hours were underreported and still it got away with wage theft because the employee did not immediately demand full compensation.
The Eleventh Circuit's unanimous opinion was authored by Circuit Judge Beverly Martin joined by Circuit Judge Lanier Anderson and visiting District Judge Denise Cote of the Southern District of New York.
To me the issue of whether an employee's time doing something should be compensated by his or her employee reduced itself to a simple question:
Did the employer require it at the pain of firing the employee if the employee did not do it?
If the answer to this question is "yes," the employee should be paid for the time. But the Supreme Court's decision earlier in this week in the Amazon security checkout line case, where it ruled that the 25 minutes or so employees at Amazon warehouses spend waiting to clear a security checkout to make sure they're not stealing anything is not compensable worktime, casts at least substantial doubt on this seemingly obvious principle.
The Court analyzed the case as turning on what was or is the "principal activity" for which the employees were employed. The answer, the unanimous Court concluded, was fetching goods from around the warehouse and readying them for shipping, not waiting in line at a security checkout line.
But this evades reality: if the employer orders the employee to fetch 7 blue bathtubs or get fired, the principal activity for which the employee is employed is fetching blue bathtubs. Likewise, if an employee orders the employee to stand in and clear the security checkout or get fired, the principal activity for which the employee is employed is standing in and clearing that line. It's not one thing: whatever the employer says the employee has to do to keep his or her job is the principal activity for which the employee is employed. And employees should get paid for the time spent doing what their employers require them to do.
There is an excellent discussion and analysis by Anna North on the Op-Talk blog for the New York Times: What the Supreme Court's Decision in the Amazon Case Means.
The Supreme Court ruled unanimously yesterday that time spent by employees at an Amazon warehouse checking out through security after the end of their shift was not compensable work time. The decision is Integrity Staffing Solutions v. Busk, No 13-433.
The Court based its ruling on two main points: (1) it likened standing and waiting in the security checkout line to walking out of the workplace after the end of the shift; and, (2) if the time spent on the security checkout were eliminated, neither the employee's effectiveness nor productivity would be affected. These two factors distinguished the time spent waiting in the security checkout line from cases where the Court has held (1) that the time spent by workers in a chemical plant putting on protective clothing was compensable, because without the protective clothing the workers could not do their job safely, and, (2) the time spent sharpening knives by employees in a meat-processing plant was compensable because sharp knives made the butchers more effective.
There is additional coverage of the decision: Supreme Court Rules Against Worker Pay for Screenings in Amazon Warehouse Case in the New York Times; No Overtime Pay for After-Work Security Check at SCOTUSblog.