On March 5, 2018, the California Supreme Court changed the test for factoring flat sum bonuses into the overtime rate in Alvarado v. Dart Container Corporation of California, ordering a calculation that will increase the costs of overtime for employers who pay such bonuses. Under the federal formula, an employer must divide an employee’s total weekly pay (including non-discretionary bonuses) by the total number of hours the employee worked in a week to get the regular rate; the employer then must pay time-and-a-half that rate for all overtime hours. But under the Alvarado court’s formula, the employer must divide the total weekly pay by only “the number of nonovertime hours the employee [actually] worked during the pay period.” That smaller divisor will lead to higher overtime rates.
Earlier this month, the Wage and Hour Division of the Department of Labor reissued 17 opinion letters from the Bush administration. The letters provide employers important guidance on a wide-range of issues under the Fair Labor Standards Act.
The reinstatement marks the first publication of opinion letters since the DOL announced last June that it would bring back that form of guidance. The Obama administration had eliminated the practice and withdrawn many existing opinion letters, including many of those reissued this month.
The reinstated letters do not upend any existing laws, but they provide important guidance and a possible safety net to employers facing similar situations. Many of the reinstated letters concerned application of Section 13(a)(1)’s overtime exemption for executive and administrative employees. The letters also discussed whether certain bonuses must be included in the regular rate for purposes of calculating overtime and whether certain on-call time qualified as compensable working hours.
The letters contain a cover letter noting that someone had specifically asked the DOL to reissue that particular opinion letter. Thus, employers who would like to rely on previously withdrawn opinion letters should consider asking the DOL to reissue them under its new policy.
The California Court of Appeals held late last week that a plaintiff does not have standing to pursue California Private Attorneys General Act (PAGA) claims on behalf of the state or other employees once he accepts an offer to settle his individual claims. The court in Kim v. Reins International California, Inc. B278642 (Dec. 29, 2017), held that once the plaintiff accepted the settlement offer, he no longer qualified as an “aggrieved employee” within the meaning of the statute. The case expands the potential impact of offers of judgment in California wage-hour class actions.
In a series of recent decisions, courts have weighed in on a spate of ERISA lawsuits challenging retirement plans private universities offer to their employees. These rulings, most of which allowed claims to proceed past the motion to dismiss stage, highlight the variation in standards courts apply when weighing ERISA fiduciary suits. Moreover, they underline the need for plan fiduciaries to review the performance and fees of their plans’ service and investment providers on a regular basis to determine whether the providers’ fees are reasonable and their continued retention is appropriate.
On September 21, 2017, a federal district judge rejected a $19.1 Million proposed deal to end a nationwide wage-hour class action against the TGI Friday’s restaurant chain. In Zorrilla v. Carlson Restaurants Inc., 14-cv-2740 (SDNY), a class of nearly 29,000 tipped workers in nine states alleged violations of the FLSA and state wage-hour laws, including that the restaurant improperly took a tip credit, required an unlawful tip pool, and failed to pay spread-of-hours and uniform-related expenses. After more than four years of litigation, the parties reached perhaps the largest wage-hour settlement for the restaurant industry and sought court approval as required under the FLSA.
On September 28, 2017, the Supreme Court agreed to review whether service advisors at auto dealerships qualify as exempt from overtime under the Fair Labor Standards Act, in Encino Motorcars, LLC v. Navarro. The employer’s petition asks the Court to overturn the Ninth Circuit’s decision that the employees who advise customers about repair work could continue their wage-hour lawsuit against a California Mercedes Benz dealership. A Supreme Court decision could have wide-ranging impact on how lower courts interpret exemptions under the FLSA. (We’ve previously written about misclassification issues here.)
The Court also agreed to rehear the issue of whether requiring non-union employees in the public sector to pay fees to unions violates their First Amendment rights, in Janus v. AFSCME, Council 31. The petitioners seek to overturn the Court’s 1997 decision in Abood v. Detroit Board of Education, which affirmed that unions can require fees from non-members to cover costs of collective bargaining, contract administration, and grievance handling. The Court reheard the issue in March 2016 shortly after Justice Scalia’s death, but the case ended in a 4-4 tie. Newly-appointed Justice Gorsuch is expected to provide the clinch vote to ban to fees.
In related news, the Court will hear oral argument on Monday, October 2, 2017, in the consolidated cases asking whether arbitration agreements that bar employees from pursuing class or collective action claims violate Section 8(a)(1) of the NLRA.
Overtime claims continue to dominate class action filings and cause significant exposure for companies in all industries. In July alone, plaintiffs filed more than 200 class action complaints alleging overtime violations in federal courts across the country (not counting the number also filed in state court). And because courts calculate back wages at time-and-a-half the regular rate, plus liquidated damages and other penalties, overtime mistakes can cause significant damage to a company’s bottom line.
This post kicks off a series for Steptoe’s Labor & Employment blog on the top five overtime pay violations alleged in class action complaints. The first in the series focuses on one of the most common (and most expensive) kinds of overtime blunders: misclassification of employees as exempt.
Today, the Ninth Circuit in Mendoza v. Nordstrom, No. 12-57144, affirmed dismissal of the plaintiffs’ California Private Attorneys General Act (PAGA) claims. The plaintiffs sought to recover from the luxury retailer on behalf of themselves and other employees for violations of California’s day-of-rest rules, Cal. Labor Code §§ 551 and 552. The court rejected the plaintiffs’ arguments that it should remand the case to permit them to name a new PAGA class representative after their underlying claims failed, reasoning that nothing prevented a proper plaintiff from filing a new suit.
Yesterday the Second Circuit cast doubt on whether an arbitrator can certify a class that includes absent class members. The court remanded for the district court to decide “whether the arbitrator exceeded her authority in certifying a class that contained absent class members who have not opted in.” Jock v. Sterling Jewelers, Inc., No. 15-3947-cv (2d Cir. July 24, 2017). The case poses potentially big implications for class arbitration’s ability to resolve cases with finality.
As many people hit the road this summer for vacations and family trips, one recently filed class action serves as a reminder that certain driving activities qualify as compensable time under federal and state wage laws.
In Smith v. Allegheny Technologies, Inc., No. 2:17-cv-00911-RCM (W.D. Pa. filed 7/10/17), a metal manufacturer hired temporary replacement workers during a seven-month lockout with its union at multiple plant locations. According to the complaint, the replacement workers needed to cross active picket lines to get into the plants. To do so safely, the employer required the temporary workers to meet at a central location outside of the plant before work so that they could ride together in company vans to the plant. The company returned the employees to the central location in company vans at the end of the work day. A temporary replacement worker typically drove the van.
The complaint alleges that the time from the central location to the plant and back each day qualified as “integral and indispensable to the principal activities,” and thus counted as working time under the FLSA. The complaint claims underpayment of 10.5 to 14 hours of time, per employee, per week, in violation of the FLSA’s overtime provisions and Pennsylvania and Oregon state law. With potentially thousands of temporary workers, it’s easy to see how liability could reach the millions-of-dollars if the plaintiffs proved their case.
Key Takeaway: Employers should carefully review their travel and commuting practices to ensure that they compensate employees for all travel that qualifies as working time. As illustrated in the Smith complaint, employers should take particular note of any travel where the employer exercises control over the employee, e.g., by requiring him/her to travel from specific locations or in company vans. Of course, employers should have written, lawful travel pay policies in place. But, it’s also important to train on-site managers about potential travel-pay issues so that they know to reach out for advice before implementing a local practice that might expose the company to liability. Regular on-site audits by legal counsel or experienced HR personnel also help to catch potential issues before they turn into litigation.