Category: Overtime/Wage & Hour

The most important wage and hour case from the Supreme Court this year was not a wage and hour case at all. Rather, it was a Rule 23 class action involving the Telephone Consumer Protection Act (TCPA), 47 U.S.C. §227(b)(1)(A)(iii). The TCPA regulates text messages that are sent for marketing purposes. In Campbell-Ewald Company v. Gomez, 577 U.S. ___ (2016), which was handed down on January 20, 2016, the Supreme Court addressed the impact of Rule 68 Offers of Judgment on a class action.

The Context of the Gomez Case

To understand the 2016 Gomez case, it is necessary to briefly revisit the Supreme Court’s 20__ opinion in Genesis Healthcare Corp. v. Symczyk, , 569 U.S. ____, (2013). In a 5-4 decision written by Justice Thomas, the Court assumed without deciding that an unaccepted offer of judgment that fully satisfies a plaintiff’s claim is sufficient to render an individual’s claim moot. Based on that premise, the Court then went on to consider whether an FLSA collective action claim can move forward when the underlying individual claim has been rendered moot. The Court ruled that it could not.

For reasons that are not entirely clear, the litigants in the Genesis Heathcare case assumed for purposes of the appeal that an unaccepted Offer of Judgment mooted the plaintiff’s claim. The assumption, which the majority in Genesis Healthcare did not question, caused great frustration to Justice Kagan.

Justice Kagan’s entertaining dissenting opinion, which begins by announcing that the Court has resolved an “imaginary question” and encouraging the reader to “[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][f]eel free to relegate the majority’s decision to the furthest reaches of your mind” since “[t]he situation it addresses should never again arise.” Joined by three justices, Justice Kagan argues fundamental contract principles—that an offer without an acceptance is a legal nullity — in determining that Ms. Symczyk’s claim was not rendered moot, thus undermining the assumption on which the majority’s decision hangs. Indeed, Justice Kagan argues, an FLSA collective action can never be rendered moot by an offer of judgment. This is because acting as a representative for a class of similarly situated persons is a part of the plaintiff’s claim. This part of the claim is not settled by an offer of judgment on the plaintiff’s individual claim alone and thus survives an offer that does not address the collective action.

Therefore, the threshold question – whether an individual plaintiff’s claim can be mooted by an unaccepted Offer of Judgment – remained unanswered. This brings us the Gomez case.

The Facts and Procedural History of Gomez

In Gomez, the plaintiff sued over a United States Navy recruitment program that he alleged violated the TCPA. He filed a Rule 23 class action in the Central District of California. Prior to the deadline for filing a motion for class certification, the Defendant submitted a Rule 68 Offer of Judgment, apparently for the full value of Gomez’s individual claim. The Plaintiff did not respond, and the Defendant filed a motion to dismiss, arguing, “[n]o Article III case or controversy remained . . . because its offer mooted Gomez’s individual claim by providing him with complete relief.”

Prior to Gomez, there was a split among the circuit regarding whether an unaccepted Offer of Judgment for the plaintiff’s full relief mooted the claim. The First, Second, Fifth, Seventh, Ninth, and Eleventh Circuits had held that an unaccepted Offer of Judgment did not moot a plaintiff’s claim. Bais Yaakov v. Act, Inc, 798 F.3d 46, 52 (1^st Cir. 2015); Hooks v. Landmark Industries, Inc., 797 F.3d 309, 315 (5^th Cir. 2015); Chapman v. First Index, Inc., 796 F.3d 783, 787 (7^th Cir. 2015); Tanasi v. New Alliance Bank, 786 F.3d 195, 200 (2d Cir. 2015; Stein v. Buccaneers Limited Partnership, 772 F.3d 698, 703 (11^th Cir. 2014); Diaz v. First American Home Buyers Protection Corp., 732 F.3d 948, 954-55 (9^th 2013). By contrast, the Third, Fourth, and Sixth Circuits had held that an unaccepted Offer of Judgment did moot the plaintiff’s claims. Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 371 (4^th Cir. 2012); O’Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 574-75 (6^th Cir. 2009); Weiss v. Regal Collections, 385 F.3d 337, 340 (3d Cir. 2004).

The Court Holds that Individual Claims Are Not Moot

In Gomez, the majority essentially adopted Justice Kagan’s dissent in Genesis Healthcare. Justice Ginsburg wrote the opinion, which was joined my Kagan, Kennedy, Breyer, and Sotomayor. Justice Roberts wrote a separate opinion, concurring in the judgment. In her majority opinion, Ginsburg wrote, “We hold today, in accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation.” She expressly acknowledged the reasoning of Justice Kagan’s dissent, stating, “We now adopt Justice Kagan’s analysis, as has every Court of Appeals ruling on the issue post Genesis Healthcare.”

The Court noted that “The sole built-in sanction: ‘If the [ultimate] judgment . . . is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.’” ^[1] The Court concluded, “an unaccepted offer of judgment does not moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.”

There was an interesting little nugget at the end of Justice Ginsburg’s Rule 68 analysis. She wrote, “We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to plaintiff, and the court then enters judgment for the plaintiff in that amount.”

Stay tuned.

The Gilbert Firm provides comprehensive representation on behalf of Tennessee employees who have been harmed because of wage and hour violations. Please contact Michael Russell, Clint Scott or one of our offices in Nashville, Chattanooga, Memphis, Jackson or Knoxville by calling 888.996.9731 or filling out our contact form, and scheduling your consultation with an experienced Tennessee FSLA violations attorney today.

[1]           The FLSA defines “costs” and “attorneys’ fees” as separate elements. 29 U.S.C. §216(b)(“The Court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”). “Consequently, unlike attorneys’ fees in civil rights actions governed by Section 1988, which allow a reasonable attorneys’ fee as part of the costs, attorneys’ fees in an FLSA action are not automatically shifted by a Rule 68 offer.” Kearns, Kaufmann, and McClelland, The Fair Labor Standards Act, 16-239 (Bloomberg BNA, 3d ed. 2015)(emphasis in original; internal citations omitted).[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

There has been a lot of handwringing among employee rights advocates over class action waivers. These are documents that are put in front of employees at the time they begin their employment. Employees unknowingly waive their right to participate in any class action, frequently also waiving their right to go to court. In such cases, an employee has agreed to submit their cases to arbitration instead of a jury.

Employees frequently have no idea what the documents say. If they do, they really don’t have a choice. It’s either sign them or remain unemployed. Employee rights advocates have long argued that such agreements are unfair and should not be enforced. We received a new tool in our fight when the United States Court of Appeals for the Seventh Circuit handed down Lewis v. Epic Systems Corp. on May 26, 2016.

The Seventh Circuit became the first Court of Appeals to hold that class action waivers are invalid. The Court ruled – correctly – that such agreements violate §§7 and 8 of the National Labor Relations Act. Under §7 of the NLRA, “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. §157.

Likewise, §8 enforces §7 by deeming that it “shall be an unfair labor practice for an employer….to interfere with, restrain, or coerce employees in the exercise of their rights guaranteed in [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][§7]” Id. §158(a)(1).

The Seventh Circuit recognized that “a single employee was helpless in dealing with an employer.” They further ruled that “collective or class legal proceedings fit well within the ordinary understanding of ‘concerted activities.’” In striking down the class action waiver, the Lewis court noted that “collective, representative, and class legal remedies allow employees to band together and thereby equalize bargaining power.” This is exactly the type of protection that, according to the court, §7 and §8 of the National Labor Relations Act contemplated.

The Seventh Circuit acknowledged that their opinion was at odds with the Fifth Circuit’s decision in D.R. Horton, Inc. v. NLRB. This creates a split among the circuits that is likely to eventually end up in the hands of the United States Supreme Court. How the issue is ultimately decided will hinge largely on who replaces the late Justice Scalia. In other words, the current presidential election is crucial. Until then, however, the Lewis decision gives a bit of momentum to employees who attempt to fight back draconian class action waivers.

The Gilbert Firm advocates on behalf of employees who have been denied their rights because of unfair labor practices. To schedule a consultation with a Tennessee FSLA violations attorney like Michael Russell or Clint Scott, please fill out our contact form, or call 888.996.9731. We maintain offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville for your convenience.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

The much-anticipated revisions to the implementing regulations related to the white collar exemptions should be released in the next 60 to 90 days. Note the emphasis on the “should be.” For those who have not been waiting with baited breath for these regulations, here is a little background.

The Department of Labor has so-called “rule making” authority regarding the white-collar exemptions to the FLSA overtime regulations. These include the professional, administrative, and executive exemptions. President Obama has charged the DOL with issuing amendments to update these regulations. Most of the attention has centered on the expected revisions to the “salary basis” test.

Currently, exempt employees must earn a weekly salary of at least $455.00 per week to qualify for these exemptions. The Obama administration has argued that this threshold amount, which has remained unchanged for an extended period of time, is simply too low. The DOL issued a proposal, pursuant to the Administrative Procedures Act, which would raise this amount to $50,440.00 and index it for future increases.

The proposal elicited more than 270,000 comments. By way of comparison, the 2004 revisions elicited only 70,000 comments. Solicitor of Labor Patricia Smith briefed wage and hour practitioners the recent ABA Federal Labor Standards Legislation Committee meeting in February, which I attended. Solicitor Smith seemed to suggest that the regulations would likely be issued in July, though she walked that back a bit at comments latter in the meeting.

When the regulations are issued, the one thing that we know with a reasonable degree of certainty is that the salary basis test will be amended to establish a new salary threshold of slightly more than $50,000 per year. A number of questions, however, remain outstanding.

• How will it be indexed? The DOL says it will set the original baseline for the salary basis test at 40% of the average salaried wage for exempt employees.[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][1] This is expected to be in excess of $50,000.00 per year annually. The DOL also intends to index the test to allow for future automatic raises. How will that occur? One proposal would be to simply tie it to the consumer price index. Another option being considered is to maintain the threshold at 40% of the average salary of exempt employees.
• What about the Highly Compensated Employee Exemption? Solicitor Patricia Smith has suggested that the salary threshold for the highly compensated employee exemption would also be raised.
• Will Non-Discretionary Bonuses be included in the salary threshold? During the notice and comment period, the DOL asked for comments on this issue. It would obviously be to the benefit of employers to be able to include such bonuses in calculating the minimum salary. The DOL has suggested that if non-discretionary bonuses are allowed to be counted toward the salary threshold in the final regulations, there would be limit of 10%. In other words, the final regulations may say that no more than 10% of the salary necessary to satisfy the salary basis test can be in the form of a non-discretionary bonus.
• Will there be changes to the duties test? This is the big question. It is clearly the elephant in the room whenever this topic is discussed. During notice and comment, the DOL asked for comments on whether some minimum percentage of time must be spent performing non-exempt duties in order for an employee to satisfy the exemption. This would make the FLSA somewhat analogous to California state law.

The Gilbert Firm provides comprehensive representation on behalf of workers. To reserve a consultation with a Tennessee wage & hour attorney, please contact Michael Russell or Clint Scott, or contact the firm directly. We maintain offices in Nashville, Chattanooga, Memphis and Jackson for our clients’ convenience.

[1]                 In 2004, it was set at 20% of the average salary for exempt workers in the South.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

There are 121 Kroger stores in Tennessee. It is the largest supermarket chain in the country. You can purchase almost anything from them: food, jewelry, medications – you can even obtain a credit card. It employs thousands of people across the state and close to half a million across the nation. And now it is at the center of a class-action lawsuit that claims its overtime policies (or lack thereof) violate the Fair Labor Standards Act (FLSA) as well as the Ohio Minimum Fair Wage Standards Act.

The suit stems from three former call center employees. The Dayton Business Journal reports that these workers’ sole job “was to ask job applicants three questions to screen them for possible employment and then arrange for them to interview at the store to which they applied.” Kroger claimed that these employees were exempt from overtime under the category of administrative exemptions. Their lawsuit claims this label was misapplied, and now all three are seeking compensation for the 5-10 extra hours per week that they worked during their respective time there.

What is an administrative exemption?

The U.S. Department of Labor has three main criteria for an administrative exemption:

• “The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
• The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”

Under the law, an employee’s job title may not exempt him or her from overtime pay; it is the work that employee does which matters.

The crux of the argument seems to be that the employees claim they had “no discretion with respect to matters of significance,” whereas Kroger may claim that as these workers determined who would be granted interviews, they did indeed have some input into hiring practices. According to the law, in matters of discretion, “The term must be applied in the light of all the facts involved in the employee’s particular employment situation, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision.” The company may argue that choosing whom to move forward in the application process and whom to deny is a matter of discretion as well, which ultimately is a matter of significance.

The lawsuit was filed in February of 2016, so it is still in its initial stages. Given the importance of Kroger here in Tennessee, you can be sure we will follow this case with interest. If you believe you have been unfairly denied overtime, the Tennessee wage and hour attorneys of the Gilbert Firm can help. To schedule a meeting with Michael Russell, Clint Scott or an FLSA violations lawyer at one of our offices, please contact us. We are proud to serve clients in Nashville, Chattanooga, Memphis, and Jackson, and throughout the state.

It is illegal to misclassify a worker as a contractor or an intern when he or she is actually an employee. Yet this practice runs rampant in industries throughout the country, and it costs an individual worker thousands of dollars each year in lost wages and outside expenses. (Think about the average cost of a doctor’s visit when you do not have health insurance – insurance you are not entitled to receive because you are not an employee – and the difficulties you have playing that cost when you are not entitled to overtime wages, either.)

Under the Fair Labor Standards Act (FLSA), as per the U.S. Department of Labor, there are certain factors that may help a worker prove that he or she has been wrongfully classified as a contractor when he or she is, in fact, an employee. Those factors include:

1. “The extent to which the work performed is an integral part of the employer’s business.
2. Whether the worker’s managerial skills affect his or her opportunity for profit and loss.
3. The relative investments in facilities and equipment by the worker and the employer.
4. The worker’s skill and initiative.
5. The permanency of the worker’s relationship with the employer
6. The nature and degree of control by the employer.”

Some industries are more likely to misclassify than others

Many people, it seems, believe that misclassification exists only within the construction industry, as “contractor” is synonymous in many cases with “construction worker.” However, many businesses that rely on individual contractors or interns in order to operate are guilty of this practice. Some of the more common industries include:

• Marketing and advertising
• Show business: film, TV, music, etc.
• Fashion houses and garment manufacturing
• Home health care
• Tech companies
• Ride-sharing services
• Janitorial and maintenance services

By claiming an employee as a contractor, the business in question will pay lower taxes, and will not need to contribute to workers’ compensation insurance in the event that person is injured. Hiring interns is a simple way for a business to avoid paying anything, claiming that instead of pay the intern will gain valuable insight into how an industry works.

Cases like these are not as simple as the business would believe, however, and misclassification of an employee can come with steep fines and penalties – not to mention retroactive pay for the wrongly classified worker.

The Gilbert Firm helps to protect Tennessee workers whose rights to fair wages have been infringed upon through misclassification. Please contact Michael Russell or Clint Scott to learn more about how a skilled Tennessee wage and hour attorney can help. You can reserve your appointment at one of our offices in Nashville, Chattanooga, Memphis, or Jackson.