FLSA Archives - Page 5 of 7

What Are Your Company’s Wage & Hour Risks?

Wage & Hour class actions are being filed at a pace that dwarfs almost all other types of litigation. With a myriad of federal and state laws and regulation, employers not only need to take steps to minimize the risk of a suit, but also must be prepared to defend themselves. Launch the brief video below to hear how Labor and Employment Group partners Cheryl Orr and Stephanie Gournis are helping employers involved in employment class actions, as well as helping companies to minimize the risk of litigation.

President Obama Signs Two Executive Orders to Limit Workplace Discrimination

On April 8, 2014, at an event commemorating National Equal Pay Day (an annual public awareness event that aims to draw attention to the gender wage gap), President Obama signed two executive orders designed to limit workplace discrimination. The first prohibits federal contractors from retaliating against workers who discuss their salaries with one another, while the second instructs the Department of Labor to establish new regulations requiring federal contractors to submit summary data on compensation paid to their employees, including breaking down the data by gender and race.

The protections offered by the anti-retaliation Order overlap with many already existing under state and federal law. For example, the NLRA protects employees’ right to engage in “concerted activities” and thus already prohibits employer discipline against employees who discuss their wages. Further, some state laws, such as California Labor Code §232, already preclude an employer from disciplining an employee who discloses the amount of his or her wages. Nonetheless, the Order may add to these protections, such as by expanding them to management employees (who are not protected by the NLRA), and providing an alternative option for bringing retaliation claims (i.e., through the Office of Federal Contract Compliance Programs rather than the NLRB).

The effects of the Order requiring the collection of compensation data will be unclear until the regulations themselves are formulated. Based on the Order’s mandate to “avoid new record-keeping requirements and rely on existing reporting frameworks to collect the summary data” and to develop regulations that “minimize, to the extent possible, the burden on Federal contractors and subcontractors,” it is possible that the federal government will require that the data be submitted along with a federal contractors’ annual EEO-1 Report.

The President’s signing of these Orders appears to tie into the White House’s previously announced plans to accelerate change in areas it believes are within the authority of the Executive Branch, without the need for legislation. Indeed, the Orders’ provisions mirror parts of the Paycheck Fairness Act (“PFA”), a proposed piece of legislation that would add procedural protections to the EPA and the FLSA to address male–female income disparity. (The PFA came up for a vote in the U.S. Senate on April 9, 2014, where it was blocked by a Republican filibuster). Similarly, in February 2014, President Obama issued an Order raising the minimum wage for federal contractors, at a time when Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) were urging a bill to raise the federal minimum wage to $10.10 per hour and index it to inflation. Then, in March 2014, President Obama directed the Labor Department to revamp regulations governing which types of employees business may classify as overtime-exempt “executives” or “professionals.” With regard to the Order requiring the collection of compensation data, the OFCCP has been working internally on releasing a proposed compensation data collection tool for the past three years. See http://www.dol.gov/ofccp/Presentation/Compensation_Data_Collection_Tool.htm (publicizing the OFCCP’s August 10, 2011 Advance Notice of Proposed Rulemaking regarding a new compensation data collection tool).

The high profile nature of the Orders provides yet another impetus for employers to evaluate their existing policies, and plan for the future.

Home Care Workers to get Minimum Wage and Overtime Protections, DOL Decides

Effective January 1, 2015, almost 2 million home health and personal care workers will be entitled to be paid at least the federal minimum wage and receive overtime pay, under a final rule announced by the U.S. Department of Labor on September 17. According to new Secretary of Labor Thomas Perez, the final rule will give home care workers “parity” with direct care workers who work at institutional settings and will “ensure that direct care workers are available to elderly people who want to remain in their homes.”

The new rule will apply to all home care workers, including live-in workers, who are employed by a third party such as a home health agency. The rule will also require the family of an elderly or ill person when the worker performs medical duties or primarily performs domestic duties that benefit other household members.

According to DOL, the “vast majority” of the affected workers are employed by third parties and only a “very small” number of workers employed by families will be affected by the rule. Supporters of the rule argue that it will lift home care workers out of poverty and keep them in the workforce, thereby enabling them to help elderly and ill people in the comfort of their homes. Opponents assert the rule will reduce the work hours to avoid overtime and will result in pay reductions to home care workers, force patients out of their homes and into institutions and reduce business for home health agencies. Rep. John Kline (R-Minn.), chairman of the House Education and the Workforce Committee, stated that DOL has estimated the rule would increase the cost of home care by $2 billion over the next decade.

In the Second Circuit, Unpaid Overtime Claims Must Allege Specifics

Earlier this month, the United States Court of Appeals for the Second Circuit, in Dejesus v. HF Management Services, 2013 U.S.App.LEXIS 16105 (2d Cir. August 5, 2013), held that plaintiffs cannot rely solely on vague allegations in asserting claims for unpaid overtime. In this case, the plaintiff alleged that her former employer had failed to pay her overtime, but her Complaint lacked details such as the amount of overtime she had allegedly worked. Instead, it simply parroted the language of the Fair Labor Standards Act (“FLSA”). Affirming dismissal of the Complaint, the Second Circuit agreed with the district court that the allegations failed to state a claim. This decision makes it more difficult for plaintiffs who lack a basis for an unpaid overtime claim to file a lawsuit in the hope of finding one during discovery.

Ramona Dejesus (“Dejesus”) worked for HF Management Services, LLC (“Healthfirst”), a company providing administrative and support services to healthcare organizations. Dejesus alleged that she had worked more than forty hours per week for “some or all weeks” of her employment, but that Healthfirst had failed to pay her time and a half for the hours she worked over forty. The Complaint did not indicate the number of overtime hours Dejesus had worked, her rate of pay or an estimate of the unpaid wages.

Dejesus filed the lawsuit in the United States District Court for the Eastern District of New York, alleging violations of the FLSA and the New York Labor Law (“NYLL”). Both the FLSA and NYLL require an employer to pay non-exempt employees at an hourly rate of at least one and a half times their regular rate for each hour that the employees work in excess of forty hours in a workweek. Healthfirst filed a Motion to Dismiss the Complaint arguing, among other things, that the vague allegations in the Complaint failed to state a claim for unpaid overtime. The district court granted the motion. Dejesus appealed and the Second Circuit affirmed.

In reaching its decision, the Second Circuit quoted the U.S. Supreme Court, which stated in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), that, in order to state a claim, a Complaint must contain more than “‘[t]hreadbare recitals of the elements of a cause of action … supported by mere conclusory statements.’” According to the Second Circuit, a plaintiff asserting an overtime claim must allege that he or she worked more than forty hours in a week without receiving the required compensation. The Court indicated that “an approximation of overtime hours” is helpful, but not necessarily required in every case. The Court further indicated that courts should consider the allegations in context and on a case by case basis to determine if they are sufficient.

The Second Circuit concluded that the allegations in Dejesus’ Complaint “did not plausibly allege that she worked overtime without proper compensation.” The Court observed that Dejesus “did not estimate her hours in any or all weeks or provide any other factual context or content.” The Court further observed that her Complaint “was devoid of any numbers to consider beyond those plucked from the [FLSA].” According to the Court, Dejesus “was required to do more than repeat the language of the statute.” The Court explained that the Complaint “tracked the statutory language of the FLSA, lifting its numbers and rehashing its formulation, but alleging no particular facts sufficient to raise a plausible inference of an FLSA overtime violation.”

The Court emphasized that plaintiffs are not required to “keep careful records and plead their hours with mathematical precision.” However, the Court explained, plaintiffs must “draw on” their “memories and experience” in order to provide “complaints with sufficiently developed factual allegations.” The Court affirmed the dismissal of Dejesus’ Complaint.

In recent years, employers have faced a wave of wage and hour lawsuits. In many instances, it seems that plaintiffs pursue these actions – particularly class or collective actions – without any real knowledge of wage and hour violations but in the hope of finding them during the litigation. The Dejesus decision is a welcome development for employers in the Second Circuit, because it requires plaintiffs, before filing a lawsuit, to at least come up with factual allegations supporting their claims.

Unpaid Interns Deemed Employees Under the FLSA

A federal district court in New York ruled last week that unpaid interns who worked on the production of films for Fox Searchlight Pictures Inc. and Fox Entertainment Group, Inc. were actually employees who should have been paid in accordance with the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”). Glatt v. Fox Searchlight Pictures Inc., Case No. 11-CV-06784 (S.D.N.Y. 2013). This decision comes just weeks after another Southern District of New York judge issued a favorable defense ruling by denying class certification for unpaid interns at various Hearst-owned magazines. See Wang v. The Hearst Corporation, Case No. 12-CV-00793 (S.D.N.Y. 2013).

In Glatt, the court applied the six-factor test set used by the Department of Labor (“DOL”) and determined that two unpaid interns who worked on production of Black Swan were improperly classified and did not come within the “trainee” exception to the FLSA’s coverage. Instead, the interns should have been classified as employees subject to the FLSA and NYLL. Specifically, in applying the DOL test, the court found that:

The internship was not similar to training in an educational environment because the interns did not receive any formal training or education, or acquire any new skills aside from those specific to the Black Swan back office during the internship;
The internship had only incidental benefit to the interns – resume value and references– which were not the result of the structure of the internship, and that Fox also benefitted from the unpaid work;
The interns displaced regular employees and performed tasks that would have otherwise been performed by regular employees, such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking and reconciling purchase orders, making copies, and running errands, among other low-level tasks;
Fox received immediate advantages from the activities of the interns, and there is no evidence that the interns impeded work;
The interns were not entitled to a job at the conclusion of the internship; and
The parties understood that the interns were not entitled to wages for time spent in the internship, although the court noted that this factor was not determinative.

While the plaintiffs to whom the court’s ruling applied did not seek class certification, the court granted another plaintiff’s motion for class certification of her NYLL claims and conditional certification of the FLSA claims. In doing so, the court found that: (1) the class was sufficiently numerous because it included at least 40 plaintiffs whose information was not easily identifiable by plaintiffs; (2) there are common questions or law and fact relating to the DOL’s six-factor test; (3) the plaintiff’s claims are typical of the class because she participated in the same internship program administered by the same set of recruiters as all class members and was classified as an unpaid intern like all class members; (4) plaintiff’s interest are not antagonistic to those of the class; (5) common issues of liability predominate over any individual damages claims; and (6) class action is a more efficient mechanism than individual claims because of the relatively small recoveries available.

The court’s reference to the evidence presented in the case provides a good lesson for employers. The court noted an internal memo in which Fox stated that, in light of the DOL test, Fox would only provide paid internships unless a manager could comply with the six criteria provided by the DOL. The outcome in Glatt demonstrates employers must remain vigilant not only in maintaining proper policies on internships, but also in training and oversight of managers, to ensure compliance with the DOL’s six-factor test and the FLSA.

Unpaid Internships – Training Programs or a Lesson in Class Actions?

Summer is quickly approaching, and eager students are lining up for internship opportunities, some of which may be unpaid. The whole topic has caused a firestorm of news stories lately – including an NYU students’ petition to remove unpaid internship postings from the campus career center, and an auction by an on-line charity website for a six week unpaid internship at the UN NGO Committee on Human Rights (the current bid is $26,000). Do unpaid internships run afoul of federal and state minimum wage laws? The answer potentially is yes, but given recent successful challenges to class certification, employers now have useful guidance in developing defense strategies against such claims.

Last week, in Wang v. The Hearst Corporation, U.S.D.C. S.D.N.Y. Case No. 12-CV-00793, the court denied class certification in a case brought by interns at various Hearst-owned magazines. The interns challenged Hearst’s practice of classifying them as unpaid interns, allegedly to avoid minimum wage and overtime laws under the Fair Labor Standards Act (“FLSA”) and New York state law. The court found that the plaintiffs could not satisfy the commonality requirement for class certification. While plaintiffs could demonstrate a corporate-wide policy of classifying proposed class members as unpaid interns, the nature of the internships varied greatly from magazine to magazine. The court noted there was no evidence of a uniform policy among the magazines regarding the interns’ specific duties, training, or supervision.

Days later, attorneys for the defendant in Glatt v. Fox Searchlight Pictures Inc., U.S.D.C. S.D.N.Y. Case No. 11-CV-06784, made a similar argument to defeat class certification in a case in which Fox interns challenged their unpaid status under federal and New York state minimum wage and overtime laws. In that case, the interns worked on the sets of different films or were based out of corporate offices, and weren’t governed by a centralized policy or procedure. The defendant in Glatt argued that class certification should be denied because of the lack of a uniform policy. While the court in Glatt has not yet ruled, these two cases suggest that, although claims by unpaid interns may persist, plaintiffs may find it increasingly difficult to sustain them as class actions.

In light of these cases, now is a good time to review the rules for internships. According to the Department of Labor, internships in the for-profit private sector will be viewed as employment relationships for which the FLSA minimum wage and overtime rules will apply, unless the intern is truly receiving training which meets six criteria: (1) the internship is similar to training that would be given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern is not replacing employees and works under close supervision; (4) the sponsor of the intern does not derive immediate benefit from intern’s activities and at times, its operations may actually be impeded; (5) the intern is not entitled to a job at the conclusion of the internship; and (6) the sponsor and the intern understand the intern is not entitled to wages for the time spent in the internship. As of 2010, the California Division of Labor Standards Enforcement (“DLSE”) relaxed the multi-factor test it previously applied and now uses the same criteria as the DOL.

While the Hearst ruling is good news for employers, the case did not address the merits of the interns’ claims and does not mean employers can relax their compliance efforts. If an employer improperly classifies an internship as “unpaid,” the employer could be liable for failure to pay minimum wage and overtime, penalties for failure to provide meal and rest breaks, as well as potential liability for violations of anti-discrimination and anti-harassment laws that apply to employees. The bottom line is that employers should apply the DOL/DLSE six-factor test and if their internships do not meet the criteria, the interns should be paid at least minimum wage.

Editors note: Be sure to check out Kate’s guest blog post for thewrap.com on the use of interns by entertainment and media companies.