Kentucky Employment Law Blog

No "Inherent Incompatibility" Between FLSA Collective Action & State Law Class Action In Same Suit, Third Circuit Rules

The Fair Labor Standards Act (FLSA) requires in a collective action that each claimant affirmatively opt-in to the suit to join the action and obtain relief. A state law class action under the Class Action Fairness Act (CAFA) and Federal Rule of Civil Procedure 23(b)(3), on the other hand, has an affirmative opt-out procedure. Are these conflicting procedures inherently incompatible in the same suit? Does a FLSA collective action pre-empt a state law class action based on the same conduct and facts? "No" to both questions answered the Third Circuit recently in Knepper v. Rite Aid Corporation, Nos. 11-1684 & 11-1685 (March 27, 2012). 

The suits were filed by assistant managers of Rite-Aid claiming that they were misclassified as exempt from overtime pay requirements. After a collective action suit was filed under the FLSA in the Middle District of Pennsylvania, a separate class action suit was filed in federal district court in Maryland claiming that the misclassification violated Maryland's state wage and hour law; it was dismissed and then refiled in the Middle District of Pennsylvania. Another class action suit was filed in federal district court in Ohio claiming that the misclassification violated Ohio's state wage and hour law; this case was transferred to the Middle District of Pennsylvania.  The district court then dismissed both suits reasoning that the opt-in procedures for an FLSA collective action and the opt-out procedures for a Rule 23(b)(3) class action were "inherently incompatible."

The Third Circuit reversed. First, the Court observed that the plain statutory language of the FLSA applied its affirmative opt-in procedures only to claims brought under the FLSA, saying nothing about causes of action for relief under state employment law. The Third Circuit joined the Second, Seventh, Ninth and DC Circuits in this ruling. 

Second, the Third Circuit held that the FLSA does not preempt the state wage and hour laws. The FLSA's savings clause, the court noted, "evinces a clear intent to preserve rather than supplant state law."  The court also rejected Rite Aid's argument that the FLSA's opt-in procedure preempted the opt-out procedures under CAFA observing that "federal law cannot preempt another federal law, and a statute from 1947 cannot impliedly repeal a law from 2005[.]"

Robert L. Abell
www.RobertAbellLaw.com 

 

Are Social Workers Exempt from Overtime Pay Requirements?

One of the exemptions to the overtime pay requirements is the "learned professional" exemption, which applies to jobs requiring "advanced knowledge customarily acquired by a prolonged course of specialized intellectual instruction."  The Ninth Circuit Court of Appeals ruled recently that the "learned professional" exemption did not apply to social workers in Solis v. State of Washington DSHS, No 10-35590 (9th Cir., 9/9/11).  

Key to whether the "learned professional" exemption applies is the degree to which a required course of instruction is directly related to the job's duties, the Court asserted, citing to several authorities including the following:

• Dybach v. State of Florida Department of Corrections, 942 F.2d 1562 (11th Cir.1991), which held that probation officers, who were required to have a bachelor's degree in "any field," did not qualify for the  “learned professional” exemption despite a requirement of one year of prior experience in law enforcement or corrections. 
• Fife v. Harmon, 171 F.3d 1173 (8th Cir. 1999), where the Eighth Circuit held that aviation operation specialists did not meet the "learned professional" exemption, because the employees acquired theiradvanced knowledge  “from a general academic education or from an apprenticeship” and not from a “prolonged course of specialized study.”
  
  
• Vela v. City of Houston, 276F.3d 659 (5th Cir. 2001), where the court held that emergency medical technicians and paramedics, who were required to complete 200 to 880 hours of didactic training, clinical experience, and field internship, did not satisfy the education prong of the “learned professional” exemption.

The Ninth Circuit ruled that the social workers for the state of Washington did not meet the "learned professional" exemption, because the education requirements for the position were not sufficiently and specifically tailored to the job duties, as the court explained:

An educational requirement that may be satisfied by degrees in fields as diverse as anthropology, education, criminal justice, and gerontology does not call for a “course of specialized intellectual instruction.” Moreover, in this case the net is cast even wider by the acceptance of applicants with other degrees as long as they have sufficient coursework in any of these fields. 

Robert L. Abell
www.RobertAbellLaw.com 

Kentucky Cities & Counties Are Not Immune From Wage & Hour Law

Counties and cities in Kentucky are not immune from the Kentucky wage and hour law, KRS Chapter 337. These local government entities are subject to overtime pay requirements the Kentucky Supreme Court ruled unanimously in Madison County Fiscal Court v. Kentucky Labor Cabinet, No. 2010-SC-00032 (August 25, 2011).

Robert L. Abell
www.RobertAbellLaw.com 

Oral Complaints of Overtime Violations Protected from Retaliation, Supreme Court Rules

Does the Fair Labor Standards Act's antiretaliation provision protect complaints of violations that are made orally? It does the Supreme Court ruled in Kasten v. Saint-Gobain Performance Plastics, No 09-834 (March 22, 2011).

The Fair Labor Standards Act establishes federal wage and hour requirements as well as overtime compensation requirements. A protected complaint regarding a possible violation of the law, the Court ruled, must provide "fair notice" of its intended substance and meet the following criteria:

a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected bythe statute and a call for their protection. This standard can be met, however, by oral complaints, as well as by written ones.

Justice Breyer wrote the opinion for the Court's 6-2 majority; Justices Scalia and Thomas dissented. 

Robert L. Abell
www.RobertAbellLaw.com

Drug Sales Reps Not Exempt From Overtime, Second Circuit Rules

Sales reps for the phamaceutical giant, Novartis, are not exempt from overtime requirements the Second Circuit ruled recently In re Novartis Wage & Hour Litigation, No 09-0437 (July 6, 2010). The court rejected arguments that the reps were exempt under either the "outside sales" exemption and/or the "administrative" exemption.

The court ruled that the reps were not exempt from overtime under the "outside sales" exemption because they did not actually make any sales, they function as promoters and the "sales" calls typically go as follows:

The meetings are brief -- generally less than five minutes -- and the physicians neither buy pharmaceuticals from the Reps nor commit to buying anything from the Reps or from Novartis.

The reps do not fall under the "administrative" exemption the court ruled because (a) they have no authority to formulate, affect, interpret or implement Novartis's management policies or its operating practices; (b) they are not involved in planning Novartis's long or short term business objectives; (c) they do not carry out major assignments in conducting the operations of Novartis's business; and, (d) they do not have any authority to commit Novartis in matters that have significant financial impact.

Robert L. Abell
www.RobertAbellLaw.com

Per Diem Payments Ruled Part of Employee's Regular Wage Rate for Purposes of Calculating Overtime Rate

The Fair Labor Standards Act (FLSA) requires that non-exempt employees who work more than forty hours in a work week by paid an overtime rate of one and one-half times their regular rate of pay. In suits for unpaid overtime compensation, a central issue, therefore, is determining the employee's "regular" wage rate. In Gagnon v. United Technisource, Inc., No 09-20098 (May 27, 2010), the Fifth Circuit decided whether "per diem" payments to an employee should be included in calculating his regular wage rate.

Gagnon, a skilled and experienced craftsman, contracted with United Technsource, Inc. (UTI) to perform prepping and painting work on aircraft for $5.50 per hour "straight time" plus a "per diem" of $12.50 per hour for each hour worked each week up to 40 and an overtime rate of $20.00 per hour. After about a year, Gagnon's "per diem" and "overtime" rates were raised by $1 per hour. Gagnon later sued for unpaid overtime and the issue was whether the "per diem" payments should be included in and considered as part of his regular wage rate.

The court ruled that the "per diem" payments must be considered part of Gagnon's regular hourly wage rate. First, both federal regulations and precedent require that determination of an employee's regular wage rate be determined by what actually happens, not by the parties' agreed designations. Second, the Department of Labor has recognized that when the amount of per diem varies with the amount of hours worked, the per diem payments are part of the regular rate in their entirety. Third, the structure of the straight time, per diem and overtime payments were suspicious since Gagnon's "straight" time rate was so close to the minimum wage rate when similar craftsmen were being paid $20 per hour and over. Finally, the court observed that the ruse was similar to schemes where part of an employee's wage rate was considered a "bonus" or where employees were paid low "straight rates" for the first hour or two worked, then paid one and one-half times the so-called straight rate after that and, as a consequence, paid no overtime.

Robert L. Abell
www.RobertAbellLaw.com

The Administrative Exemption: Loan Underwriters Are Not Exempt from Overtime Requirements

Loan underwriters are not exempt from overtime compensation requirements established by the Fair Labor Standards Act the Second Circuit has ruled in Davis v. JP Morgan Chase & Co., No. 08-4892-CV (November 20, 2009). The court framed the question as follows: "whether underwriters tasked with approving loans, in accordance with detailed guidelines provided by their employer, are administrative employees exempt from overtime requirements of the Fair Labor Standards Act."  In answering this question in the affirmative the court identified the following primary factors:

• Chase expected an underwriter to evaluate each loan application under its credit guide and approve the loan if it met the guide's standards
• exemptions from overtime requirements are to be narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit
• the administrative exemption applies to an employee performing work directly related to management policies or general business operations and customarily and regularly exercises discretion and independent judgment
• production and sales work does not fall within the administrative exemption
• nonexempt production work does not require production of tangible goods
• the loan underwriters did not advise customers; they determined, based on criteria established by the bank, whether the customers financially qualified for their loans
• the payment of production incentives supported the conclusion that the underwriters job function was production rather than management related

Robert L. Abell
www.RobertAbellLaw.com

Call Center Employees Sue For Overtime

Call center employees for APAC have filed a class action lawsuit seeking overtime pay reports the LaCrosse Tribune, "Former APAC Employees Sue Call Center."  The suit claims that the employees are required to log onto their computers before and after their shifts and during breaks to review frequently changing billing rates, equipment prices and repair policies so they can answer questions from client customers during their shift.  

The federal Fair Labor Standards Act and Kentucky wage and hour law require that nonexempt employees be paid for all hours worked over 40 in a week at a rate one and half times their regular hourly rate.  

Robert L. Abell
www.RobertAbellLaw.com

Overtime Suit Settled By Police Canine Handlers

Police canine handlers have settled an overtime compensation lawsuit against National City, California reports the San Diego Union-Tribune, "Overtime Approved For Police Dog Handlers." The lawsuit claimed that the federal Fair Labor Standards Act required they be paid overtime for the time they devoted after the end of their shifts in caring for the canines. This time included about an hour a day devoted to grooming, feeding and training the dogs as well as taking them to the vet and other duties.

Robert L. Abell
www.RobertAbellLaw.com

Recoupment of Previously-Paid Bonuses Eliminates Overtime Exemption

An exemption from overtime was eliminated by a compensation policy where the employer reserved the right to make (or actually made) deductions from employees' base salaries to recover earlier bonus overpayments the Sixth Circuit has ruled in Baden-Winterwood v. Life Time Fitness, Inc., Nos. 07-4457/4438 (May 19, 2009). 

The employees were paid a base salary and, in addition, were paid monthly bonuses on year-to-date performance guidelines. So if an employees' sales were ahead of their performance plan for the year, he or she would be paid a bonus. If their production later slipped under 80% of their plan, the employer, Life Fitness, could recoup previously made bonus payments by reducing an employees' base salary.

The employer claimed that the employees' positions were exempt from overtime under the "bona fide executive, administrative, or professional capacity" exemption. To be exempt under this provision a job must satisfy three tests: (1) a duties test; (2) a salary-level test; and, (3) a salary-basis test.

The Sixth Circuit ruled that the employees' exemption from overtime was eliminated because the company's compensation policy carried a significant likelihood of deductions. This was in accord with the Supreme Court's decision in Auer v. Robbins, 519 U.S. 452 (1997). The "salary-basis" test was not met for the entire time the employees' were subject to the significant likelihood of deduction from their base pay. However, after August 23, 2004, the effective date of new regulations, the overtime exemption was lost only during those pay periods where deductions were actually made from the employees' base pay.

Robert L. Abell
www.RobertAbellLaw.com