On Monday, April 2, 2018, the Supreme Court of the United States ruled that car dealerships do not have to pay service advisors overtime under federal law. In a 5-4 decision, the Supreme Court held that service advisors, like auto salespersons, partspersons, and mechanics, are exempt from the Fair Labor Standards Act’s overtime requirements.
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.
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.
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.
On July 7, the California Court of Appeals issued a decision in Espejo v. The Copley Press, No. D065397, with potentially far-reaching implications for companies facing current or future expense-reimbursement class action claims. In a superficial analysis, the court ruled that expenses qualify as “wages” for purposes of California’s unfair competition law, Bus. & Prof. Code, § 17200 et seq. That holding potentially expands companies’ exposure in claims for unpaid expenses under California Labor Code § 2802; the ruling paves the way for plaintiffs to bring additional “piggyback” claims for waiting time penalties under California Labor Code § 203 and wage statement penalties under California Labor Code § 226.
The court also ruled that employers who pay employees “enhanced compensation” to cover their expenses must tell employees how much of their pay covers expenses at or near the time of payment. Otherwise, the employer will get no credit for such payments.
The trial court awarded plaintiffs more than $4.95 million in damages on their expense claim and in prejudgment interest, plus an additional $6.1 million in attorneys’ fees. However, the court of appeals remanded for recalculation of the expenses (as well as the attorneys’ fees) to give The Copley Press credit for the expenses that records showed it did pay.
Key Takeaway: Employers in California need to take a close look at their expense-reimbursement policies and practices because the risk of not properly reimbursing expenses just got more costly. In addition, employers who pay employees “enhanced compensation” must correctly identify it to employees.