Posts Tagged: lawyer

Genesis Healthcare v. Symczyk: Rule 68 and Collective Actions

In Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66 (2013), the Supreme Court held that a putative Fair Labor Standards Act collective action brought by one employee on behalf of others was no longer justiciable when, as conceded by the employee, her individual claim became moot before others joined the case.

Facts

Symzcyk worked for Genesis Healthcare as a registered nurse. In 2009, Symczyk brought a putative collective action under the FLSA on behalf of herself and “other employees similarly situated.” 29 U.S.C. § 216(b). She alleged Genesis 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. Symcyzk, who remained the sole plaintiff throughout the case, sought statutory damages for the alleged violations.

After Symczyk filed suit, but before any other employees joined the suit, the employer sent Symczyk an offer of judgment under Federal Rule of Civil Procedure 68, which Symczyk ignored. The offer had proposed to pay all of her statutory damages, plus costs and reasonable attorney’s fees. The District Court, finding that no one else had joined the case, and that the Rule 68 offer fully satisfied Symczyk’s claim, concluded that Symczyk’s suit was moot. The court therefore dismissed the case for lack of subject-matter jurisdiction.

The Third Circuit reversed, holding that while Symczyk’s individual claim was moot, the collective action on behalf of other similar employees was not. The Third Circuit reasoned that allowing employers to use calculated Rule 68 offers to “pick off” named plaintiff-employees before certification would frustrate the goals of collective actions. The court therefore remanded the case to the trial court, with instructions to allow Symczyk to seek conditional certification of the collective action and move forward with the case on behalf of other employees who might join. See 569 U.S. at 69-71.

The Court’s Decision

The Supreme Court reversed. The Court held that because Symczyk had no “personal interest” in representing other putative, unnamed employees, nor any other kind of continuing interest that would render her suit not moot, the trial court properly determined it lacked subject-matter jurisdiction over the case.

At the outset, the Court declined to decide whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot. Symczyk, however, had conceded this point with respect to her claim and did not argue it on appeal. The Court therefore assumed, without deciding, that the employer’s offer to Symczyk mooted her individual claim. 569 U.S. at 72-73.

The Court then determined that “well-settled mootness principles” controlled the outcome of the case. Once Symczyk’s individual claim became moot, the Court determined that the suit became moot because she had no personal interest in representing others in the action. The Court rejected Symczyk’s contrary arguments because they relied on cases that arose in the context of Rule 23 class actions. The Court found those case inapposite, both because Rule 23 actions are “fundamentally different” from FLSA collective actions and because the cases were “inapplicable” to the facts in Symczyk’s case. 569 U.S. at 73-79.

The cases Symczyk rallied behind were Sosna v. Iowa, 419 U.S. 393 (1975) and United States Parole Comm’n v. Geraghty, 445 U.S. 388 (1980). Symczyk argued these cases meant she could seek certification of an FLSA collective action after her individual claim became moot. The Court determined Sosna and Geraghty did not support her position. In short, Sosna held that a class action is not rendered moot when the named plaintiff’s individual claim becomes moot after the class has been duly certified. Geraghty extended those principles to denials of class certification motions, and further provided that, where a putative class action would have acquired independent legal status but for the district court’s erroneous denial of class certification, a corrected ruling on appeal “relates back” to the time of the erroneous denial. See 445 U.S. at 404 and n. 11.

At first glance, these cases seemed like they supported Symczyk’s position. The Court observed, however, that Geraghty’s holding was explicitly limited to cases in which the named plaintiff’s claim remains live at the time the district court denies class certification. See 445 U.S. at 407 and n. 11. Symczyk, by contrast, had not yet moved for “conditional certification” when her claim became moot. Nor had the District Court anticipatorily ruled on any such request. Symczyk therefore had no certification decision to which her claim could have related back. More importantly, the Court emphasized that essential to Sosna and Geraghty was the fact that a putative class acquires an “independent legal status” once it is certified under Rule 23. By contrast, under the FLSA, “conditional certification” does not produce a class with an independent legal status, or join additional parties to the action. 569 U.S. at 73-75.

Second, the Court addressed a line of cases, like County of Riverside v. McLaughlin, 500 U.S. 44, 52 (1991), holding that an “inherently transitory” class-action claim is not necessarily moot upon the termination of the named plaintiff’s claim. The Court found these cases inapplicable. Symczyk argued that an employer’s use of Rule 68 offers to “pick off” a named plaintiff before the collective-action process is complete renders the action “inherently transitory.” But the Court observed the “inherently transitory” rationale was developed to address circumstances in which the defendant’s challenged conduct was effectively unreviewable because no plaintiff possessed a personal stake in the suit long enough for litigation to run its course. For this reason, the Court observed, the McLaughlin line of cases focused on the fleeting nature of the challenged conduct giving rise to the claim, not on the defendant’s litigation strategy. Unlike a claim for injunctive relief, a damages claim (like the FLSA claims at issue in Smyczk’s case) cannot evade review — the damage has been done, and can be measured and compensated. The Court further pointed out that an offer of full settlement cannot insulate such a claim from review. While dismissing Symzcyk’s case before certification would foreclose the putative other plaintiff-employees of Genesis from vindicating their rights in Symzcyk’s suit, those employees would remain free to do so in their own lawsuits. 569 U.S. at 75-77.

Finally, the Court addressed its decision in Deposit Guaranty Nat. Bank v. Roper, 445 U.S. 326 (1980), which Symczyk cited for her argument that the purposes served by the FLSA’s collective-action provisions would be frustrated by defendants’ use of Rule 68 to “pick off” named plaintiffs before the collective-action process has run its course. The Court found Roper did not support this argument. In Roper, the named plaintiffs’ individual claims became moot after the District Court denied their Rule 23 class certification motion and entered judgment in their favor based on defendant’s Rule 68 offer. The Roper Court held that the named plaintiffs could appeal the denial of certification because they possessed an ongoing, personal economic stake in the substantive controversy — namely, to shift a portion of attorney’s fees and expenses to successful class litigants. Symczyk, by contrast, conceded that her employer’s offer provided complete relief, and she asserted no continuing economic interest in shifting attorney’s fees and costs. Moreover, the Roper holding was tied to the unique significance of Rule 23 class certification decisions, distinguishing it from the FLSA collective action context. 569 U.S. at 77-79.

Analysis

In summary, Genesis held that a putative FLSA collective action brought by single employee was no longer justiciable when, as conceded by the employee, her individual claim became moot by an offer of judgment providing complete relief and no other employees had joined the case. The Court, however, declined to decide whether an unaccepted offer of judgment could render a plaintiff’s claim moot. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

This blog was also published to TimCoffieldAttorney.com.

FLSA Administrative Employee Exemption: Discretion and Independent Judgment

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of employees’ job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees. 

To qualify for a white collar exemption, employees must be paid on a salary basis at not less than $684 per week (as of January 1, 2020) and have job duties that satisfy certain requirements. Importantly, job titles do not determine whether an employee is exempt from the FLSA. For an employee to be exempt, her actual real-life job duties and salary must meet all the requirements of the FLSA and the Department of Labor’s implementing regulations.

This post will focus on the exemption for administrative employees. The Department of Labor is also an excellent resource for information about the administrative employee exemption. The DOL’s implementing regulations with respect to the administrative employee exemption are generally located at 29 CFR § 541.200-204

Administrative Employee Criteria

To qualify for the administrative employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must meet all of the following requirements:

  1. The employee must be compensated on a “salary basis” (as defined in 29 CFR § 541.602) or “fee basis” (as defined in 29 CFR § 541.605) at a rate not less than $684 per week (lower amounts apply for non-federal employees in U.S. territories);
  2. 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; 
  3. The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 

29 CFR § 541.200.

Definition of “Primary Duty”

As used in these regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitations, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

Definition of “Directly Related to Management or General Business Operations” 

To meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business. This is different from, for example, working on a manufacturing production line or selling a product in a retail or service establishment. 29 CFR § 541.201(a).

As defined in the DOL regulations, work “directly related to management or general business operations” includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, Internet and database administration; legal and regulatory compliance; and similar activities. 29 CFR § 541.201(b)

Work Directly Related to Management or Operations of Customers

It’s worth noting that an employee may qualify for the administrative exemption if her primary duty is performing work directly related to the management or general business operations of the “employer’s customers.” 29 CFR § 541.201(a). This means that an employee who acts as a consultant to her employer’s clients or customers — as tax experts or financial consultants, for example — may qualify for the exemption. 29 CFR § 541.201(c).

Definition of “Discretion and Independent Judgment” 

To qualify for the administrative exemption, an employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. As defined in the regs, the exercise of “discretion and independent judgment” involves comparing and evaluating possible courses of conduct and acting or making a decision after the various possibilities have been considered. 29 CFR § 541.202(a).

The phrase must be applied to all the facts, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision. 29 CFR § 541.202(b)&(c).

In making the “discretion and independent judgment” determination, the regulations provide examples of many factors to consider, including but not limited to: 

  • whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;
  • whether the employee carries out major assignments in conducting the operations of the business; 
  • whether the employee performs work that affects business operations to a substantial degree; 
  • whether the employee has authority to commit the employer in matters that have significant financial impact;
  • whether the employee has authority to waive or deviate from established policies and procedures without prior approval
  • whether the employee has authority to negotiate and bind the company on significant matters; and
  • other similar factors identified in the regulation. 

29 CFR § 541.202(b).The fact that an employee’s decisions may be revised or reversed after review does not necessarily mean the employee does not exercise discretion and independent judgment. 29 CFR § 541.202(c).

The exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources. It also “does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work.” 29 CFR § 541.202(e).

Definition of “Matters of Significance” 

As used in the regulations, the term “matters of significance” refers to the level of importance or consequence of the work performed. 29 CFR § 541.202(a). An employee does not exercise discretion and independent judgment with respect to matters of significance just because the employer will experience financial losses if the employee fails to perform the job properly. 29 CFR § 541.202(f). For example, a messenger who is entrusted with carrying large sums of money does not exercise discretion and independent judgment with respect to matters of significance even though serious consequences may flow from the employee’s neglect. Id. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer. Id.

Administrative Employee Examples

The regulations contain many examples and explanations regarding specific categories of employees who typically may or may not qualify for the administrative employee exemption. Those examples and explanations are located at 29 CFR § 541.203.

Educational Establishments

The administrative exemption may also be available to employees who meet the salary basis or fee basis test, or on a salary basis which is “at least equal to the entrance salary for teachers in the same educational establishment,”  and whose primary duty is “performing administrative functions directly related to academic instruction or training in an educational establishment.” 29 CFR § 541.204(a).

The term “educational establishment” means an elementary or secondary school system, an institution of higher education or other educational institution. 29 CFR § 541.204(c).

Academic administrative functions include operations directly in the field of education, and do not include jobs relating to areas outside the educational field. 29 CFR § 541.204(c). Employees engaged in academic administrative functions include: the superintendent or other head of an elementary or secondary school system, and any assistants responsible for administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program; the principal and any vice-principals responsible for the operation of an elementary or secondary school; department heads in institutions of higher education responsible for the various subject matter departments; academic counselors and other employees with similar responsibilities. 29 CFR § 541.204(c)(1).

These categories of academic employees may qualify for the administrative exemption because having a primary duty of performing administrative functions directly related to academic instruction or training in an educational establishment necessarily involves exercising discretion and independent judgment with respect to matters of significance.

Highly Compensated Employees 

Highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which, as of January 1, 2020, must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they “customarily and regularly” perform at least one of the duties of an exempt executive, administrative or professional employee. 29 CFR § 541.601.

The term “customarily and regularly” means a frequency that must be “greater than occasional” but which “may be less than constant.” 29 CFR § 541.701. Tasks or work performed “customarily and regularly” includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks. Id.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

This blog was also published to TimCoffieldAttorney.net.

Falk v. Brennan: Law of Employment and Control

In Falk v. Brennan, 414 U.S. 190 (1973), the Supreme Court held that an entity is an “employer” under the Fair Labor Standards Act when it exercises substantial control over the terms and conditions of the work of the employees at issue.

Background

The Fair Labor Standards Act generally requires a covered “employer” to pay its covered nonexempt employees minimum wages for each hour worked and overtime wages for all hours worked in excess of 40 hours per workweek. 29 U.S.C. §§ 206(a) & 207(a). The FLSA defines “employer” as “includ[ing] any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). With some exceptions, the FLSA generally defines “employee” as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The FLSA defines “employ” as including “to suffer or permit to work.” 29 U.S.C. § 203(g).

The FLSA also provides that for an employer to be covered under the Act’s dollar-volume “enterprise” coverage provision, the employer must receive “annual gross volume of sales made or business done [] not less than $500,000[.]” 29 U.S.C. § 203(s)(1)(A)(ii).

Facts

D&F operated a property management company in Virginia. It rendered management services for the owners of several apartment complexes. Under its contracts with the apartment owners, D&F agreed to perform, on behalf of each owner and under his “nominal” supervision, “virtually all management functions that are ordinarily required for the proper functioning of an apartment complex.” 414 U.S. at 192. Those functions included advertising the apartments; signing, renewing, and canceling leases; collecting rents; instituting and settling all legal proceedings for eviction, possession of the premises, and unpaid rent; making necessary repairs and alterations; negotiating contracts for essential utilities and other services; purchasing supplies; paying bills; preparing operating budgets for the property owners’ review and approval; submitting periodic reports to the owners; and “hiring and supervising all employees required for the operation and maintenance of the buildings and grounds.” Id. at n4.

As compensation, D&F received a fixed percentage of the gross rents collected from each project. D&F deposited the rents it collected in local bank accounts. From these accounts it paid all expenses incurred in operating and maintaining the buildings. After deducting its compensation, as well as other expenses, D&F periodically transmitted payments to the various apartment owners. If disbursements for any apartment complex exceeded the gross rental receipts, the owner was required to reimburse D&F. 414 U.S. at 192-93. D&F collected about $8 million dollars per year in rents for all the buildings it managed. Id. at n6. However, its gross commissions received on those rentals were less than $500,000 per year. Id. at n10.

The Secretary of Labor filed suit against D&F on behalf of the maintenance workers, alleging that D&F violated the minimum wage, overtime, and recordkeeping requirements of the FLSA with respect to those workers. Id. Significantly, these employees worked under the supervision of D&F and were paid from the rents received at the apartment complexes where they worked. Under the contracts between the apartment owners and D&F, the maintenance workers were considered to be “employees of the project owners.” Id.

A central question for the Court was whether the maintenance workers were also employees of D&F, such that D&F was responsible for complying with the FLSA’s minimum wage, overtime, and recordkeeping requirements with respect to those workers.

A secondary question was which figure should be considered in determining whether D&F met the $500,000 threshold for enterprise coverage: D&F’s gross rentals collected ($8M annually), or D&F’s gross commissions on those rentals (less than $500,000).

The Court’s Decision

The Court held that in addition to the apartment owners, D&F was also an FLSA “employer” of the maintenance workers — even though the owners and D&F had agreed that the workers were employees only of the owners. The Court reached this decision by interpreting the operative provisions of the FLSA as speaking to the extent of control a potential “employer” exercises over a worker.

First, the Court observed that Section 203(d) of the FLSA defines “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). It further noted that Section 3(e) defines ‘employee’ to include ‘any individual employed by an employer.’ 29 U.S.C. s 203(e). Significantly, the Court interpreted these two provisions as providing an “expansive[]” definition of “employer” — meaning that whether an entity was an FLSA employer, with the attendant minimum wage, overtime, and recordkeeping responsibilities, could not be controlled by an agreement between entities that only one of them would be the “employer.”

The Court further indicated that the relevant inquiry, in answering the “employer” question, was whether the potential employer had “substantial control of the terms and conditions of the work” the employees performed. Id. at 195. D&F, for example, appears to have had supervisory powers with respect to the maintenance workers at the buildings it managed. See id. at 193 (“These employees work under the supervision of D&F”). The Court therefore determined that “in view of the expansiveness of [the FLSA’s] definition of ‘employer’ and the extent of D&F’s managerial responsibilities at each of the buildings, which gave it substantial control of the terms and conditions of the work of these employees,” D&F was pursuant to the FLSA an ‘employer’ of the maintenance workers Id.

With respect to the dollar-volume limitation question, the Court observed that D&F “sells” only professional management services, and therefore the gross rentals it collected as part of rendering those services to building owners did not represent sales attributable to D&F. Id. at 197-201. Based on this reasoning, the Court concluded D&F’s commissions were the relevant measure of its gross sales made or business done for purposes of the dollar-volume limitation in Section 203(s)(1). Thus, even though D&F was an “employer” under the the terms of the FLSA, and an “enterprise” under Section 203(r), the FLSA did not apply to D&F because its gross sales were below the Section 203(s)(1) dollar-volume threshold. Id. at 201.

Analysis

In sum, Falk v. Brennan held that an entity is an “employer” under the FLSA when it exercises substantial control over the terms and conditions of the work of employees at issue. This decision later became relevant to the Department of Labor’s development of regulations guiding the analysis of FLSA “joint employment” situations. In those situations, where more than one entity benefits from the work of employees, the extent to which each entity exercises control over the terms and conditions of the workers’ employment is an important consideration in determining the entities’ respective or joint responsibilities under the FLSA. For the DOL’s analysis of its most recent changes to the rule (29 C.F.R. § 791) regarding joint employment, effective March 2020, go here.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Christensen v. Harris County: Compelled Use of FLSA Compensatory Time

In Christensen v. Harris County, 529 U.S. 576 (2000), the Supreme Court held that the Fair Labor Standards Act does not prohibit public employers from compelling employees to use compensatory time.

Background

The Fair Labor Standards Act allows public employers (including states and their political subdivisions) to compensate employees for overtime work by granting them compensatory time instead of paying them a cash overtime wage. 29 U.S.C. § 207(o). Compensatory time is paid time off. To comply with this part of the FLSA, the public employer must provide the compensatory time at a rate not less than one and one-half hours for each hour of overtime worked. Id. Compensatory time can accumulate, like vacation time. Importantly, if employees do not use their accumulated compensatory time, under certain circumstances the FLSA requires the public employer to pay the employees cash compensation. 29 U.S.C. §§ 207(o)(3)-(4).

Facts

Employees in Harris County accumulated a great volume of unused compensatory time. This caused Harris County to worry that a budget crisis would result if it had to pay its employees for their accrued unused compensatory time. In an effort to avoid that situation, the county adopted a policy requiring its employees to schedule time off. The county’s reasoning was that requiring time off would reduce the amount of accrued compensatory time among its workers, thereby reducing the likelihood of a budget crisis from having to pay for unused compensatory time.

Ed Christensen was a Harris County deputy sheriff. He and a group of fellow deputy sheriffs sued the county, claiming the policy of requiring employees to use their compensatory time violated the FLSA. Christensen argued that the FLSA does not permit an employer to compel an employee to use compensatory time in the absence of an agreement allowing the employer to do so. The District Court ruled for Christensen and entered a declaratory judgment that the county’s policy violated the FLSA. The Fifth Circuit reversed. It held that the FLSA did not address the issue of compelling the use of compensatory time and therefore did not prohibit the county from implementing its policy.

The Court’s Decision

The Supreme Court affirmed, holding that neither the text of the FLSA nor its implementing regulations prohibits a public employer from compelling its employees to use their compensatory time.

First, the Court rejected Christensen’s argument that § 207(o)(5) of the FLSA implicitly prohibits compelled use of compensatory time in the absence of an agreement. That section provides that an employer must grant an employee’s request to use her compensatory time unless doing so would unduly disrupt the employer’s operations. 29 U.S.C. § 207(o)(5). Citing Raleigh & Gaston R. Co. v. Reid, 13 Wall. 269, 270 (1872) for the proposition that when a statute limits a thing to be done in a particular mode, it implicitly disallows any other mode, Christensen argued that because § 207(o)(5) allowed only an employee to require the use of compensatory time, that section implicitly prohibited an employer from requiring the use of compensatory time. Id. at 583-84. The Court disagreed with that conclusion. Instead, it found that the only “negative inference” to be drawn from § 207(o)(5) was that an employer may not deny a request for any reason other than that provided in § 207(o)(5). Id. Thus, the section did not prohibit employers from compelling the use of compensatory time.

The Court went on to explain that the purpose of § 207(o)(5) was to ensure that an employee receive “some timely benefit for overtime work.” Id. at 584. The FLSA’s nearby provisions reflect a similar concern. For example, § 207(o)(3)(A) provides that workers may not accrue more than 240 or 480 hours of compensatory time, depending upon the nature of the job. This provision “helps guarantee that employees only accrue amounts of compensatory time that they can reasonably use.” Christensen at 584. Similarly, the Court observed that § 207(o)(2)(B) conditions an employer’s ability to provide compensatory time (in lieu of paying cash overtime wages) upon the employee not accruing compensatory time in excess of the § 207(o)(3)(A) limits. Thus, these provisions, like § 207(o)(5), reflect a legislative concern that employees receive “some timely benefit in exchange for overtime work.” Christensen at 584.

The Court therefore concluded that the best reading of the FLSA is that it ensures liquidation of compensatory time. The law places restrictions on an employer’s ability to prohibit employees from using their compensatory time. But it says nothing about restricting an employer’s efforts to require employees to use the time. Id. at 585. Because the FLSA text is silent on this issue and because the county’s policy was compatible with § 207(o)(5), the Court held that Christensen could not, as § 216(b) of the FLSA requires, prove that the county violated the FLSA’s overtime provisions.

The Court further noted that two other features of the FLSA supported its reading that the FLSA did not prohibit employers from compelling the use of compensatory time. First, the FLSA allows employers to decrease the number of hours that employees work. Id. at 585 (citing Barrentine v. Arkansas—Best Freight System, Inc., 450 U.S. 728, 739 (1981) (“[T]he FLSA was designed … to ensure that each employee covered by the Act … would be protected from the evil of overwork …”). And second, the FLSA expressly allows employers to cash out accumulated compensatory time by paying the employee her regular hourly wage for each hour accrued. Id. at 585 (citing 29 U.S.C. § 207(o)(3)(B) & 29 CFR § 553.27(a)(1999). Thus, the FLSA allows an employer to require an employee to take time off work, and to use the money it would have paid in wages to cash out accrued compensatory time. Id. at 585. The Court concluded that Harris County’s policy of compelling the use of compensatory time “merely involves doing both of these steps at once.” Id. at 586.

Christensen also argued, unsuccessfully, that employers were prohibited from compelling the use of compensatory time pursuant a Department of Labor opinion letter. In that letter, the DOL concluded that an employer may compel the use of compensatory time only if the employee has agreed in advance to such a practice. Id. at 586-87. The Court observed that the opinion letter was not entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), because interpretations contained in opinion letters — similar to policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law — do not warrant Chevron deference. While “persuasive” interpretations in opinion letters are “entitled to respect” under Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944) the Court concluded DOL’s interpretation was not persuasive. Id. at 587.

While Chevron deference does apply to an agency interpretation contained in a regulation, the regulation at issue, 29 CFR § 553.23(a)(2), provided only that “[t]he agreement or understanding [between the employer and employee] may include other provisions governing the preservation, use, or cashing out of compensatory time so long as these provisions are consistent with [§ 207(o)].” Id.; Christensen at 587-88. The Court concluded that nothing in 29 CFR § 553.23(a)(2) “even arguably” requires that an employer’s compelled use policy must be included in an agreement. Id. 588. Thus, Chevron deference did not apply. Lastly, deference to an agency’s interpretation of its regulation is warranted under Auer v. Robbins, 519 U.S. 452, 461 (1997), only when the regulation’s language is ambiguous. The Court held that the DOL’s regulation was not ambiguous, and therefore the DOL’s interpretation of that regulation was not entitled to Auer deference. Id. at 588.

Analysis

In sum, Christensen held that the FLSA does not prohibit public employers from compelling their employees to use their accrued compensatory time. While this issue is not specifically addressed in the text of the FLSA, the law does not explicitly prohibit this practice, and the conclusion that public employers may compel the use of compensatory time is consistent with other aspects of the FLSA that allow an employer to require employees to take time off from work and to use the money it would have paid in wages to cash out accrued compensatory time.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Independent Contractor v. Employee: Law of Economic Realities

In cases under the Fair Labor Standards Act, a question sometimes arises as to whether a worker is an independent contractor or an employee. The answer can be important, as an employee may have rights to minimum wage and overtime compensation that an independent contractor performing the same basic job tasks does not.  

To determine whether a worker is an employee under the FLSA, courts in the Fourth Circuit look to the “economic realities” of the relationship between the worker and the putative employer.

McFeeley v. Jackson St. Entm’t, LLC, 825 F.3d 235, 241 (4th Cir. 2016) (quoting Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006)). The touchstone of the “economic realities” test is whether the worker is “economically dependent on the business to which he renders service or is, as a matter of economic [reality], in business for himself.” Id. If the practical economic reality is that the worker is “economically dependent” on the putative employer and not “in business for himself[,]” the worker will generally be considered an employee qualified for FLSA rights. Id

Economic Realities Test

In making this determination, courts applying the economic realities test consider six factors:

(1) [T]he degree of control that the putative employer has over the manner in which the work is performed;

(2) the worker’s opportunities for profit or loss dependent on his managerial skill;

(3) the worker’s investment in equipment or material, or his employment of other workers; 

(4) the degree of skill required for the work; 

(5) the permanence of the working relationship; and 

(6) the degree to which the services rendered are an integral part of the putative employer’s business. 

McFeeley, 825 F.3d at 241. These factors are often called the “Silk factors” in reference to United States v. Silk, 331 U.S. 704 (1947), the Supreme Court case from which they derive. See Schultz at 305.

Generally speaking, the greater the degree of control the putative employer has over the manner in which the work is performed, the greater the permanence of the working relationship, and the greater the degree to which the worker’s services are an integral part of the putative employer’s business, the more likely the worker is an “employee” under the economic realities test. Similarly, the fewer opportunities the worker has for profit or loss dependent on his managerial skill, the less the worker invests in equipment, material, or employment of other workers, and the lower degree of skill required for the work, the more likely the worker is an “employee” under the economic realities test. 

Application

For example, in Schultz, the plaintiff security workers worked jointly for a Saudi prince and a security firm. The Fourth Circuit found the prince and security firm exercised nearly complete control over how the workers did their jobs. Further, the workers had no opportunity for profit or loss dependent on their managerial skills, as they were paid a set rate per shift. Additionally, the firm and prince supplied the workers with all the necessary equipment, including cell phones, cars, firearms, and cameras. With respect to the fourth factor, although some security duties required special skills, others did not. As to the permanence of the relationship, the prince employed some workers for several years and preferred to hire workers who would stay with him over the long term. And the services rendered by the workers were integral to the security firm’s business, as the firm’s only function was to provide security for the prince, and workers were hired specifically to perform that task. Considering these facts under the economic realities test, the Fourth Circuit concluded the security workers “were not in business for themselves” and “thus were thus employees, not independent contractors.” Schultz, 466 F.3d at 309.

Similarly, in McFeeley, the plaintiff exotic dancers worked for dance clubs. The Fourth Circuit found that the clubs exercised significant control over how the dancers performed their work. That control included dictating dancers’ schedules, imposing written guidelines that all dancers had to obey during working hours, setting fees the dancers were supposed to charge patrons for private dances, and dictating how tips and fees were handled. Further, the dancers’ opportunities for profit or loss depended far more on the clubs’ management and decision-making than their own; the club owners’ investment in the clubs’ operation far exceeded the dancers’ investment; the job duty of dancing at the clubs required a relatively minimum degree of skill; and the dance clubs could not function without exotic dancers. Therefore, the dancers were employees of dance clubs under the FLSA, rather than independent contractors. McFeeley, 825 F.3d 235, 242-244.

And in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the plaintiff drywall installers worked for a subcontractor of a larger company that offered general contracting and interior finishing services, including drywall installation, carpentry, framing, and hardware installation. The workers were economically dependent on the subcontractor alone, making them necessarily economically dependent on the contractor and subcontractor jointly. Due to the contractor’s daily supervision of these workers, it exercised greater control over their work than the subcontractor exercised alone. Further, the contractor provided all of the materials, supplies, tools, and equipment that workers used for their work. On these facts, the Fourth Circuit determined the drywall installers were employees covered by FLSA, rather than independent contractors, based on their entire employment for both the framing and drywall installation subcontractor and general contractor. Id. at 150-151.

Summary

In summary, Fourth Circuit courts determine whether a worker is an employee or an independent contractor by looking to the “economic realities” of the relationship between the worker and the putative employer. The outcome is important because an employee may have rights to minimum wage and overtime compensation under the FLSA that an independent contractor performing the same basic job tasks does not. The “economic realities” test turns on whether the worker is economically dependent on the business to which he renders service or is, as a matter of economic reality, in business for himself. If the practical economic reality is that the worker is economically dependent on the putative employer and not in business for himself, the worker will generally be considered an employee qualified for FLSA rights. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.net.

ADA Job Restructuring Law

Can federal employment laws require an employer to change an employee’s job duties, as an accommodation for a disability? The answer is sometimes, depending on the circumstances. The analysis often turns on whether the duties at issue are “essential functions” of the employee’s job, and whether co-workers are available to take on the duties (in exchange for the disabled employee taking on some of their duties). 

Both Title I of Americans with Disabilities Act and Section 504(a) of Rehabilitation Act of 1973 (for employers receiving federal funds) require employers to “mak[e] reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability.” 42 U.S.C. § 12112(b)(5)(A); Hooven-Lewis v. Caldera, 249 F.3d 259, 268 (4th Cir. 2001) (holding that discrimination under Rehabilitation Act includes failure to accommodate and applying same standard as that used for ADA failure-to-accommodate claims).

Reasonable Accommodation Defined 

A reasonable accommodation is one that “enables [a qualified] individual with a disability … to perform the essential functions of [a] position.” 29 C.F.R. § 1630.2(o)(1)(ii). The ADA expressly contemplates that a reasonable accommodation may require “job restructuring.” 42 U.S.C. § 12111(9)(B). The Fourth Circuit holds that job restructuring to shift a marginal, nonessential task to other employees can be a reasonable accommodation, especially where replacement tasks are shifted back to the disabled employee to avoid increasing the overall workload of other employees. Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 580-81 (4th Cir. 2015) (“Jacobs’s proposed accommodation was to work fewer days at the counter and more days microfilming or performing other deputy clerk tasks. This proposed accommodation did not require the AOC to increase the workload of Jacobs’s coworkers; Jacobs merely asked that her employer change which deputy clerk was assigned to which task … A reasonable jury could therefore conclude that Jacobs’s requested accommodation was reasonable.”)

To prevail on a failure to accommodate claim, an employee must show: “(1) that [he] was an individual who had a disability within the meaning of the statute; (2) that the employer had notice of [his] disability; (3) that with reasonable accommodation [he] could perform the essential functions of the position; and (4) that the employer refused to make such accommodations.” Jacobs, 780 F.3d at 579 (quoting Wilson v. Dollar Gen. Corp., 717 F.3d 337, 345 (4th Cir. 2013).)

The Essential Functions Questions

Job-restructuring implicates the third element, which asks whether the proposed restructuring accommodation would allow the employee to perform the “essential functions” of the position. Employers sometimes believe that if a duty is included in an employee’s job description, it is an “essential” function of the job, and therefore the ADA cannot require the employer to shift that duty to other employees. This is not necessarily true. While job descriptions may be relevant evidence in determining the essential functions of a job, they are not dispositive. As the Fourth Circuit holds:

Not all job requirements or functions are essential. A job function is essential when “the reason the position exists is to perform that function,” when there aren’t enough employees available to perform the function, or when the function is so specialized that someone is hired specifically because of his or her expertise in performing that function.

Jacobs, 780 F.3d at 579 (quoting 29 C.F.R. § 1630.2(n)(2)). “[I]f an employer has prepared a written description before advertising or interviewing applicants for the job, this description shall be considered evidence of the essential functions of the job.” Id. (quoting 42 U.S.C. § 12111(8) (emphasis added)). “Other relevant evidence can include ‘the employer’s judgment as to which functions are essential,’ ‘the amount of time spent on the job performing the function,’ ‘the consequences of not requiring the incumbent to perform the function,’ and the work experience of people who hold the same or similar job.” Id. (quoting 29 C.F.R. § 1630.2(n)(3)).

Jacobs involved a court clerk with social anxiety who sought to have her job restructured so she did not have to work at the counter in the clerk’s office, and would perform additional clerk’s duties instead. Jacobs at 580. The Fourth Circuit held that even though the clerk’s job description named “customer service” as a function, working at the counter was not necessarily an “essential function” of the clerk position because, inter alia, “many employees were available to perform that function.” Jacobs, 780 F.3d at 580.

Job-Restructuring Accommodations

If applying these factors indicate the job duty at issue is not an essential function, the employer may have an obligation to shift that duty to other employees as a disability accommodation, with the disabled employee taking on some replacement duties so her co-workers do not have to do more work overall. Federal appellate courts applying the ADA consistently hold that job restructuring to shift non-essential functions can be a reasonable accommodation. In addition to Jacobs, see Rorrer v. City of Stow, 743 F.3d 1025, 1044 (6th Cir. 2014) (“Shifting marginal duties to other employees who can easily perform them is a reasonable accommodation.”); Henschel v. Clare County Road Com’n, 737 F.3d 1017, 1023–24 (6th Cir. 2013) (The “ADA requires job restructuring of non-essential duties as a reasonable accommodation in appropriate circumstances”; hauling the excavator not necessarily an essential function of the excavator operator position, as there were a number of other employees who could perform this task); Benson v. Northwest Airlines, 62 F.3d 1108, 1112 (8th Cir. 1995) (stating that reasonable accommodation may “involv[e] reallocating the marginal functions of a job”); U.S. EEOC v. AIC Sec. Investigations, Ltd., 55 F.3d 1276, 1284 (7th Cir. 1995) (“The ADA defines ‘reasonable accommodation’ to include restructuring a job, such as by removing non-essential functions from the job.”) (citing 42 U.S.C. § 12111(9)(B) and 29 C.F.R. § 1630.2(o)); Davidson v. Am. Online, Inc., 337 F.3d 1179, 1192 (10th Cir. 2003) (“a restructuring of the non-essential requirements” of a job could be a reasonable accommodation); Hill v. Assocs. for Renewal in Educ., Inc., 897 F.3d 232, 240 (D.C. Cir. 2018), cert. denied, 139 S.Ct. 1201 (2019) (“an employer may be required to accommodate an employee’s disability by ‘reallocating or redistributing nonessential, marginal job functions,’ or by providing an aide to enable the employee to perform an essential function without replacing the employee in performing that function.” (quoting 29 C.F.R. Pt. 1630, App.) (emphasis in original)).

To recap, under the ADA or Rehab Act, a reasonable disability accommodation could therefore entail shifting certain “non-essential” tasks to other employees and shifting from those employees to the disabled employee additional work that she can perform independently. See Jacobs at 580-81. Because this kind of accommodation would shift additional tasks back to the disabled employee and therefore not increase the overall workload of other employees, cases like Crabill v. Charlotte Mecklenburg Bd. of Educ., 423 Fed.Appx. 314, 323 (4th Cir. 2011) (noting that “an accommodation that would require other employees to work harder is unreasonable”) would not apply.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call (434) 218-3133 or send an email to info@coffieldlaw.com.

This blog was also featured on TimCoffieldAttorney.net.

IBP, Inc. v. Alvarez: Law of Compensation for Waiting

The Fair Labor Standards Act requires employers to pay minimum wages and overtime wages based on time worked by covered employees. Oftentimes, an employee has to spend time waiting to put equipment, walking to a worksite, or doing other preshift tasks necessary to perform her job. Is the employee entitled to compensation under the FLSA for that time? Trial courts routinely address various iterations of this question. In IBP, Inc. v. Alvarez, 546 U.S. 21 (2005), the Supreme Court answered one of them. It held that the FLSA requires employers to pay employees for time spent walking to and from stations that distributed employer-mandated safety equipment.

Facts

Alvarez involved two separate but similar cases. Employees of IBP filed suit under the FLSA  seeking compensation for time they spent putting on and taking off (“donning and doffing”) required protective gear and walking between the locker rooms and the production floor of IBP’s meat processing facility. The trial court decided these activities were compensable. The Ninth Circuit affirmed. IBP appealed.

In the companion case, employees of Barber Foods sought compensation under the FLSA for time they spent donning and doffing required protective gear at Barber’s poultry processing plant, as well as time they spent walking and waiting associated with picking up and returning the gear. The trial court found in favor of Barber on the walking and waiting claims, finding those activities were not compensable. The First Circuit affirmed, finding that the walking and waiting times were preliminary and postliminary activities excluded from FLSA coverage by §§4(a)(1) and (2) of the Portal-to-Portal Act of 1947. The employees appealed.

The U.S. Supreme Court consolidated the cases to address the question of whether the FLSA requires employers to pay employees for time spent walking to and from stations that distributed required safety equipment.

Legal Background

In Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 691–692 (1946), the Supreme Court held that a “workweek” under the FLSA included the time employees spent walking from time clocks near a factory entrance to their workstations. In response to that decision, Congress passed the Portal-to-Portal Act. The Portal-to-Portal Act excepted from FLSA coverage walking on the employer’s premises to and from the location of the employee’s “principal activity or activities,” §4(a)(1), and activities that are “preliminary or postliminary” to “said principal activity or activities,” §4(a)(2).

The Department of Labor subsequently issued regulations which interpreted the Portal-to-Portal Act as not affecting the computation of hours within a “workday,” 29 CFR §790.6(a), which includes “the period between the commencement and completion” of the “principal activity or activities,” §790.6(b).

In a subsequent Supreme Court decision, Steiner v. Mitchell, 350 U.S. 247, 256 (1956), the Court explained that the “term ‘principal activity or activities’ … embraces all activities which are ‘an integral and indispensable part of the principal activities,’ ” including the donning and doffing of specialized protective gear “before or after the regular work shift, on or off the production line.”

The Court’s Decision

In the 2005 Alvarez decision, the Court held that an employee putting on employer-required safety equipment qualified as a “principal activity” under the FLSA. The continuous “workday” for purposes of calculating compensable time began when employees started that activity. Therefore, compensable time included the subsequent time employees spent walking to and from the worksite after donning their protective gear, and time spent waiting to doff the gear. The Court further held that the previous time spent waiting to put on the safety equipment, however, was not included in the workday, and not compensable time, because it was a “preliminary” activity under the Portal-to-Portal Act. 546 U.S. at 28-38.

Time spent walking to and from the worksite after donning and before doffing protective gear is compensable time

First, the Alvarez held that the time the IBP employees spent walking after changing into protective gear from the locker room to the production floor was compensable under the FLSA.  546 U.S. at 33-37.

The Court explained that Section 4(a)(1) of the Portal-to-Portal Act text does not exclude this time from the FLSA. IBP had argued that, because donning is not the “principal activity” that starts the workday, walking occurring immediately after donning and immediately before doffing is not compensable. That argument, the Court pointed out, was foreclosed by its decision in Steiner, which clarified that §4 does not remove activities that are “integral and indispensable” to “principal activities” from FLSA coverage because those activities are themselves “principal activities.” 350 U. S. at 253. The Court went on to explain that that these identical terms cannot mean different things within the same law (§4(a)(2) and in §4(a)(1)). According to the normal rules of statutory interpretation, identical words used in different parts of the same statute are generally presumed to have the same meaning. Further, with respect to §4(a)(2)’s reference to “said principal activity or activities,” “said” is an explicit reference to the use of the identical term in §4(a)(1). Alvarez, 546 U.S. at 33-35.

The Court also rejected IBP’s argument that Congress’s repudiation of the Anderson decision (by passing the Portal-to-Portal Act) reflected a legislative purpose to exclude the walking time at issue from the FLSA. The Court found this argument unpersuasive because it observed the time at issue in Alvarez, which occurred after the workday begins (by donning) and before it ends (by doffing), was more comparable to time spent walking between two different positions on an assembly line than to the walking in Anderson, which occurred before the workday began. Id. at 34-35.

The Court also pointed out the DOL regulations supported the compensable nature of the IBP employees’ walking time. For example, 29 CFR §790.6 did not strictly define the workday’s limits as the period from “whistle to whistle.” And 29 CFR §790.7(g), n. 49, which provides that postdonning walking time is not “necessarily” excluded from  §4(a)(1) of the Portal-to-Portal Act, does not mean that such time is always excluded. Therefore, the Court determined those regulations could not overcome clear statements elsewhere in the regulations that supported the compensable nature of postdonning walking time. 546 U.S. at 35-37.

Time spent waiting to doff is compensable time

With respect to the Barber Foods employees, the Court similarly held that because donning and doffing gear that is “integral and indispensable” to employees’ work is a “principal activity” under the FLSA, the continuous workday rule required that the time the Barber Foods employees spent walking to and from the production floor after donning and before doffing, as well as the time spent waiting to doff at the end of the day, are not affected by the Portal-to-Portal Act. Therefore, this time was compensable under the FLSA. 546 U.S. at 37-39.

Time spent waiting to don is not compensable time

Finally, however, the Court held that time spent waiting to don protective gear before work is not compensable time. The Court’s reasoned that §4(a)(2) of the Portal-to-Portal Act excluded from the FLSA the time employees spend waiting to don the first piece of gear that marks the beginning of the continuous workday. The Court determined that this qualifies as a “preliminary” activity because it was “two steps removed” from the productive activity on the assembly line. While certain preshift activities were necessary for employees to engage in their principal activities, the Court found that this does not mean that those preshift activities are “integral and indispensable” to a “principal activity” under Steiner. The Court expressed a concern that it could not conclude that Barber employees predonning waiting time was a compensable “principle activity” without also reaching the necessary (but untenable) conclusion that the walking time in Anderson would also be a “principal activity” unaffected by the Portal-to-Portal Act. The Court observed that 29 CFR §790.7(h) (differentiating between being “engaged to wait,” which is compensable, and “wait[ing] to be engaged, which is not compensable) did not support a finding that time spent waiting to don protective gear was compensable. 546 U.S. at 39-42.

Analysis

In short, Alvarez held that an employee putting on employer-required safety equipment qualified as a “principal activity” under the FLSA. The continuous “workday” for purposes of calculating compensable time began when employees started that activity.

This determination, that the workday begins with donning, has two important implications. First, FLSA compensable time included the subsequent time employees spent walking to and from the worksite after donning their protective gear, and time waiting to doff their gear. Second, however, the previous time employees spent waiting to don the protective equipment was not included in the workday, and not compensable time, because it was a “preliminary” activity under the Portal-to-Portal Act.

This blog was also published at TimCoffieldAttorney.com.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call (434) 218-3133 or send an email to info@coffieldlaw.com.

Law of Joint Employment

Law of Joint Employment

A worker’s joint employers are jointly and severally liable for any violations of the Fair Labor Standards Act. Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 134 (4th Cir. 2017). This means that for purposes of the FLSA’s requirements that an employer pay minimum wages and overtime wages to non-exempt employees, a worker may have more “employers” than just the company who issues her paychecks. In short, if more than one entity has the ability to help determine the conditions of a workers’ employment, more than one entity may be liable if the worker is not paid the minimum wages or overtime compensation required by federal law.

DOL Joint Employment Regulations

The Department of Labor regulation implementing the FLSA distinguishes “separate and distinct employment” from “joint employment.” 29 C.F.R. § 791.2(a). “Separate employment” exists when “all the relevant facts establish that two or more employers are acting entirely independently of each other and are completely disassociated with respect to the” individual’s employment. Id. By contrast, “joint employment” exists when “employment by one employer is not completely disassociated from employment by the other employer(s).” Id. When two or more entities are found to jointly employ a particular worker, “all of the employee’s work for all of the joint employers during the workweek is considered as one employment for purposes of the [FLSA].” Id. (emphasis added). Thus, for example, all hours worked by the employee on behalf of each joint employer are counted together to determine whether the employee is entitled to overtime pay under the FLSA. Id; Hall v. DIRECTV, LLC, 846 F.3d 757, 766 (4th Cir. 2017).

Fourth Circuit Factors

In Salinas, the Fourth Circuit observed that the joint employment regulations speak to “one fundamental question: whether two or more persons or entities are ‘not completely disassociated’ with respect to a worker such that the persons or entities share, agree to allocate responsibility for, or otherwise codetermine — formally or informally, directly or indirectly — the essential terms and conditions of the worker’s employment.” 848 F.3d at 141 (quoting 29 C.F.R. § 791.2(a) and citing In re Enter. Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462, 468 (3d Cir. 2012) (“[W]here two or more employers … share or co-determine those matters governing essential terms and conditions of employment — they constitute ‘joint employers’ under the FLSA.” (internal quotation marks omitted)).

With these principles in mind, courts in the Fourth Circuit consider six factors in determining whether entities constitute joint employers:

(1) whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;

(2) whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to, directly or indirectly, hire or fire the worker or modify the terms or conditions of the worker’s employment;

(3) the degree of permanency and duration of the relationship between the putative joint employers;

(4) whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;

(5) whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and

(6) whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll, providing workers’ compensation insurance, paying payroll taxes, or providing the facilities, equipment, tools, or materials necessary to complete the work. Id. at 141.

Salinas at 141.

The Fourth Circuit in Salinas observed that these six factors may not constitute an exhaustive list of all potentially relevant considerations. Id. at 142. “To the extent that facts not captured by these factors speak to the fundamental threshold question that must be resolved in every joint employment case — whether a purported joint employer shares or codetermines the essential terms and conditions of a worker’s employment — courts must consider those facts as well.” Id.

As these factors illustrate, the Fourth Circuit’s joint employer test turns on whether the entities in question codetermine the essential conditions of a worker’s employment. Salinas at 143. Thus, the existence of a general contractor-subcontractor relationship “has no bearing on whether entities … constitute joint employers for purposes of the FLSA.” Id. 143–44.

Application of Salinas Factors

For example, in Salinas, the Fourth Circuit held that a drywall installation subcontractor and general contractor were joint employers under the FLSA because, inter alia, the subcontractor provided staffing for the contractor based on the contractor’s needs; the employees performed the work for the contractor’s benefit; the contractor supervised the employees’ progress daily and provided feedback; and the employees wore uniforms bearing the contractor’s logo. 848 F.3d at 146.

For another Fourth Circuit case on the joint employer issue, see Hall v. DIRECTV, LLC, 846 F.3d 757, 762 (4th Cir. 2017). In that case, the plaintiff technicians sufficiently alleged DIRECTV as a joint employer, even though the technicians were nominally employed by a subcontractor. The court held that DIRECTV could be liable as a joint employer along with the subcontractor because, inter alia, the technicians were required to “obtain their work schedules and job assignments through DIRECTV’s centralized system,” to check in with DIRECTV after completing assigned jobs, and to “wear DIRECTV uniforms…when performing work for the company.” Similarly, in Young v. Act Fast Delivery of W. Virginia, Inc., 2018 WL 279996, *8 (S.D. W.Va. Jan. 3, 2018), the court held that under Salinas, a pharmaceutical delivery company was a joint employer of the plaintiff couriers, even though the couriers were nominally employed by a third party subcontractor.

As the Fourth Circuit emphasized in Salinas, “Separate employment exists when … ‘two or more employers are acting entirely independently of each other and are completely disassociated with respect to’ the individual’s employment.” 848 F.3d at 133-34 (emphasis in original) (quoting 29 C.F.R. § 791.2(a)). “By contrast, joint employment exists when ‘the facts establish … that employment by one employer is not completely disassociated from employment by the other employer.’” Salinas at 134 (emphasis in original).

Summary

Therefore, under the Fourth Circuit’s framework, the “fundamental question” guiding the joint employment analysis is “whether two or more persons or entities are ‘not completely disassociated’ with respect to a worker such that the persons or entities share, agree to allocate responsibility for, or otherwise codetermine — formally or informally, directly or indirectly — the essential terms and conditions of the worker’s employment.” Id. at 140. If the facts show that two related companies were not “completely disassociated” or “acting entirely independently” with respect to a worker’s employment, they may be joint employers. If the entities shared control over the conditions of employment, they may both be potentially jointly and severally liable for FLSA violations as joint employers.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

McKennon v. Nashville Banner: Law of After-Acquired Evidence

McKennon v. Nashville Banner: Law of After-Acquired Evidence

What happens when an employer, having wrongfully terminated an employee (in violation of federal employment law), discovers in litigation that the employee did something that would have legitimately and lawfully lead to termination, had the employer known about it before wrongfully firing the employee? Does the employer still have to pay lost wages for the wrongful termination, or does this “after-acquired evidence” excuse the violation?

The Supreme Court addressed these questions in McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (1995). The Court rejected the argument that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, the Court also indicated that such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination.

Facts

McKennon worked thirty years for Nashville Banner Publishing Company until she was terminated at age sixty-two. McKennon filed suit, alleging that her discharge violated the Age Discrimination in Employment Act of 1967 (ADEA). McKennon’s suit sought a variety of legal and equitable remedies available under the ADEA, including backpay. In her deposition, McKennon admitted that during her final year of employment she had copied and taken home several of the Banner’s confidential financial documents. 513 U.S. 354-56.

For the purposes of summary judgment, the Banner conceded that it had discriminated against McKennon because of her age. Id. The District Court, however, granted summary judgment for the company, holding that McKennon’s misconduct in taking the confidential documents was grounds for termination and that neither back pay nor any other remedy was available to her under the ADEA. The Court of Appeals affirmed on the same reasoning. McKennon appealed. Id. at 355-56.

The Court’s Decision

The Court reversed. It held that an employee who is fired in violation of federal employment law is not barred from all relief when, after her discharge, her employer discovers evidence of wrongdoing that would have led to her termination on lawful and legitimate grounds had the employer known of it. 513 U.S. 356-360.

After-Acquired Evidence Not a Complete Bar

First, the Court held that this kind of “after-acquired evidence” is not a complete bar to recovery. The Court reasoned that even if the employee engaged in misconduct that would have prompted a termination, the employer’s discrimination that actually prompted the discharge cannot be disregarded. The Court assessed the purposes of the ADEA’s remedial provisions, 29 U.S.C. § 626(b) and 29 U.S.C. § 216(b), which (like the remedial provisions of other employment laws) were designed both to compensate employees for injuries caused by unlawful discrimination and to deter employers from discriminating in the first place. The Court concluded that allowing after-acquired evidence to bar all relief would frustrate both of these important objectives. Therefore, the Court held that after-acquired evidence did not bar all relief for unlawful discrimination. Id. at 358-360.

Relevance to Crafting an Appropriate Remedy

Second, however, the Court observed that trial courts should take into account after-acquired evidence of an employee’s wrongdoing in determining the specific remedy for the employer’s discrimination. To hold otherwise, and bar any consideration of employee misbehavior in the relief analysis, would be to ignore the employer’s legitimate concerns about employee misconduct. The ADEA, like other employment laws, just prohibits discrimination. It does not limit employers from having legitimate rules and exercising appropriate lawful discretion in hiring, promoting, and firing employees. Therefore, the Court noted, employee wrongdoing is relevant in taking due account of such lawful prerogatives and the employer’s corresponding equities arising from the wrongdoing. Id. at 360-61.

General Rule: No Reinstatement or Front Pay

Third, the Court discussed how trial courts might balance these competing concerns — on one hand, the prohibition against unlawful discrimination, and on the other, the employer’s right to address legitimate employee misconduct in an appropriate manner. The Court decided that remedial relief in such cases should be addressed on a case-by-case basis. However, the Court stated that as a general rule, if the employer proves the employee engaged in misconduct that would have prompted a lawful termination had the employer known about it, neither reinstatement nor front pay is an appropriate remedy. Id. at 362. This is because “it would be both inequitable and pointless to order the reinstatement of someone the employer would have terminated, and will terminate, in any event and upon lawful grounds.” Id.

Possible Limitations on Back Pay

The Court indicated that the more difficult issue, in after-acquired evidence cases, is the proper measure of back pay. This is because even a guilty employer cannot be required to ignore information it learns about employee wrongdoing that would lead to a legitimate discharge, even if it is acquired during the course of a discrimination lawsuit and might have gone undiscovered in the absence of the discrimination that led to the lawsuit. Id. at 362. The Court stated that the “beginning point in formulating a remedy should therefore be calculation of backpay from the date of the unlawful discharge to the date the new information was discovered.” Id. In determining the appropriate relief, the court can consider extraordinary equitable circumstances that affect the legitimate interests of either party. But an “absolute rule barring any recovery of backpay, however, would undermine the [federal employment law’s] objective of forcing employers to consider and examine their motivations, and of penalizing them for employment decisions that spring from … discrimination.” Id. Thus, as a general rule, after-acquired evidence does not bar back pay, but it might limit the amount of back pay an employee can recover.

No Bar to General Compensatory, Punitive, or Liquidated Damages

It is also worth noting that McKennon did not state or suggest that compensatory damages for past or future emotional harm should be time-limited. The decision only addressed possible limitations on lost wages and reinstatement. Allowing full emotional distress damages even if the defendant prevails on an after-acquired evidence defense makes good sense in light of McKennon’s reasoning. This is because no legitimate business prerogative would be served by allowing a proven discriminator to avoid paying the full cost of the emotional damage caused by the discrimination. The same reasoning supports the conclusion that after-acquired evidence does not bar punitive damages or liquidated damages, in cases where the usual standards for awarding punitive or liquidated damages are met. Here is a link to EEOC’s guidance on this issue.

Employer’s Burden of Proof

Finally, the Court discussed the employer’s burden in attempting to prove an “after-acquired evidence” defense. When an employer seeks to use this defense, it must first establish that the wrongdoing was of “such severity that the employee in fact would have been terminated on those grounds alone had the employer known of it at the time of the discharge.” Id. at 362-63. The Court also expressed concern that, due to the possibility of uncovering after-acquired evidence, employers might routinely undertake extensive discovery into an employee’s background or job performance to resist employment discrimination claims. Id. at 363. However, the Court concluded the trial courts’ authority to award attorney’s fees under §§ 216(b) and 626(b) and to invoke the appropriate provisions of the Federal Rules of Civil Procedure would likely deter most abuses of the discovery rules. Id.

Analysis

The Court in McKennon rejected the notion that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination. To use this defense, an employer must prove that the employee engaged in misconduct of such severity that the employee would have been terminated on those grounds alone had the employer learned of it during her employment. As a general rule, if the employer meets this burden, reinstatement is not an appropriate remedy and back pay may be limited.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

Corning Glass Works v. Brennan: EPA Law Requires Equal Pay for Equal Work

In Corning Glass Works v. Brennan, 417 U.S. 188 (1974), the Supreme Court addressed the allocation of proof in pay discrimination claims under the Equal Pay Act of 1963. This was the first Supreme Court decision applying the Equal Pay Act. The Court held that to prevail on an EPA claim, the plaintiff must prove that the employer pays an employee of the one sex more than it pays an employee of the other sex for substantially equal work. The opinion addressed what it meant for two employees to perform “substantially equal work” for the purposes of the Equal Pay Act, including what it means for work to be performed under “similar working conditions.” 

Facts

Corning was a glassworks company. It employed night shift inspectors and day shift inspectors at its plants. For many years, Corning allowed only men to work the night shift, and it paid night shift inspectors more than it paid the day shift inspectors, who were women. In June 1966, three years after the passage of the Equal Pay Act, Corning began opening the night shift jobs to women, allowing female employees to apply for the higher-paid night inspection jobs on an equal seniority basis with men.  

In January 1969, Corning implemented a new “job evaluation” system for setting wage rates. Under that pay system, all subsequently-hired inspectors were to receive the same base wage (which was higher than the previous night shift rate) regardless of sex or shift. With respect to employees hired before the new pay system went into effect, however, the pay plan provided that those employees who worked the night shift would continue to receive a higher (“red circle”) rate. Because of this “red circle” rate, the new pay system perpetuated the previous difference in base pay between day and night inspectors, thereby also perpetuating the previous disparity in pay between female (day) inspectors and male (night) inspectors. 

The Equal Pay Act prohibits an employer from paying different wages to employees of opposite sexes “for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions,” except where the difference in payment is made pursuant to a seniority or merit system or one measuring earnings by quantity or quality of production, or where the differential is “based on any other factor other than sex.” 29 U.S.C. § 206(d)

The Secretary of Labor brought suit, asserting that Corning’s pay practices violated the EPA by paying male and female inspectors differently for equal work. 

The Court’s Decision

The Court addressed the question of whether Corning’s pay practices violated the EPA by paying different wages to employees of opposite sexes for “equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions[.]” The Court found that they did. 

First, the Court held that Corning’s pay practices from the passage of the EPA in 1963 to June 1966 violated the EPA, because during that period the night shift inspectors (all male) were paid more than the day shift inspectors (female) and the night shift and day shift inspectors performed equal work “under similar working conditions.” 29 U.S.C. § 206(d). Corning argued the difference between working at night and working at day meant the different positions did not entail similar working conditions. The Court rejected this argument, holding that the EPA’s legislative history established that the statutory term “working conditions,” as used in the EPA, encompasses only physical surroundings and hazards, and not the time of day worked. 417 U.S. 197-204.

Corning also argued that the pre-1966 pay disparity was lawful because the higher pay to (male) night inspectors was intended as additional compensation for the inconvenience of night work, and thus the pay disparity was based on a “factor other than sex[.]” 29 U.S.C. § 206(d). The Court rejected this argument, holding the evidence showed the pay disparity in fact arose because men would not work for the low rates paid to women inspectors. The pay disparity therefore “reflected a job market in which Corning could pay women less than men for the same work.” 417 U.S. 204-05.

Second, the Court held that Corning did not remedy its violation of the EPA in June 1966 simply by permitting women to work as night shift inspectors, because the violation could only be cured by increasing the base wages of female day inspectors to meet the higher rates paid to night inspectors. Corning’s action in allowing women to work the night shift did not accomplish this, as “Corning’s action still left the inspectors on the day shift — virtually all women — earning a lower base wage than the night shift inspectors because of a differential initially based on sex and still not justified by any other consideration[.]” 417 U.S. 207-08. In effect, “Corning was still taking advantage of the availability of female labor to fill its day shift at a differentially low wage rate not justified by any factor other than sex.” Id. Thus, Corning’s allowing women to work the night shift, without increasing base pay to the female day shift workers, did not remedy the EPA violation. 

Finally, the Court held the Corning did not remedy its violation of the EPA in January 1969 with its pay plan equalizing day and night inspector rates, because the plan’s higher “red circle” rate paid to employees who previously worked the night shift only perpetuated the previous unlawful pay disparity. This was because the previously-hired male night shift workers would receive the higher red circle rate based on their pre-1969 pay — before day and night wage rates were equalized. Thus, the pay plan had the unlawful effect of continuing the pay disparity between men and women for equal work. As the Court observed, “the company’s continued discrimination in base wages between night and day workers, though phrased in terms of a neutral factor other than sex, nevertheless operated to perpetuate the effects of the company’s prior illegal practice of paying women less than men for equal work.” 417 U.S. 209-10.

Analysis

This case was important because it marked the first time the Supreme Court addressed the requirements of the Equal Pay Act. The Court held that to prevail on an EPA claim, the plaintiff must prove that the employer pays an employee of one sex more than it pays an employee of the other sex for substantially equal work. The opinion addressed what it meant for two employees to perform “substantially equal work” for the purposes of the EPA, and held that the requirement for work to be performed under “similar working conditions” referred to physical surroundings and hazards, and not the time of day worked. If a male employee and a female employee perform equal work at different times of the day, they should therefore be given equal pay — unless the pay disparity is based on a seniority or merit system or one measuring earnings by quantity or quality of production, or where the differential is “based on any other factor other than sex.” 29 U.S.C. § 206(d). If an employer’s pay practices violate the EPA, the only way to cure the violation is to equalize wages between men and women — simply offering women the same job titles is not sufficient. And pay systems that have the effect of perpetuating prior discrimination may still violate the EPA — even if the pay system is neutrally-worded and made without intent to discriminate. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.