The settlement was reached in a putative class action suit originally filed on April 17, 2008.  The suit, Danieli et al. v. IBM Corp., alleged that IBM misclassified thousands of employees as exempt from the Fair Labor Standard Act’s (“FLSA”) overtime pay requirements.  The plaintiffs claim that as a result of this misclassification, they were underpaid and failed to receive credit for overtime compensation for their retirement plan as required by the Employee Retirement Income Security Act.  The settlement provides $7.5 million including up to $2.5 million going towards attorney’s fees and $150,000 for litigation expenses.  The settlement also stipulated that employees in California will receive a higher share due to the stronger claims made under California state law.

According to the settlement agreement, the motivation for the settlement on both sides included the uncertainty in the duration of future litigation as well as amount recovered.  Excess costs predicted and accounted for but not spent as well as un-cashed settlement checks will be donated to the Habitat for Humanity.

A copy the Settlement is available here.  For information on The Employment Law Group® law firm’s Overtime Practice, click here.

This week the Supreme Court denied writ of certiorari in Morgan v. Family Dollar Stores, Inc., thereby allowing the 2006 jury verdict in favor of 1,424 store managers for unpaid overtime to stand.  Among the issues raised on appeal was whether store managers were correctly classified as exempt employees under the Fair Labor Standards Act (FLSA).  The plaintiffs, current and former store managers, alleged that Family Dollar failed to pay its store managers overtime in violation of the FLSA.  Family Dollar claimed that as store managers, the employees were exempt from overtime pay.  The Eleventh Circuit affirmed the district court’s finding that the store managers were misclassified as exempt since they spent 80-90% of their time performing non-managerial tasks such as stocking shelves, running cash registers, unloading trucks, and performing janitorial duties.  The store managers were managers in title only and therefore not exempt from overtime wages prescribed under the FLSA.

The Eleventh Circuit also held that the district court was within its discretion in denying Family Dollar’s motions to decertify the plaintiffs’ class action status because the court carefully followed the two-stage process for evaluating a collective action and found that the evidence demonstrated that the 1,424 managers in the class were similarly situated in at least 14 key areas.

That the Supreme Court denied review is important to potential plaintiffs in unpaid overtime class action suits.  It lets stand the important lenient standard for initial certifications of class action status and ensures that employers cannot take advantage of employees by granting them a greater title than their position deserves.  This protects employees from being deprived of the important rights granted to them under the FLSA.

For more information on the FLSA and The Employment Law Group® law firm’s Overtime Practice, click here.

Maryland’s Workplace Fraud Act of 2009 will go into effect on October 1, 2009.   Under the new law, employers in the landscaping and construction industries that knowingly misclassify employees may be subject to a civil penalty of up to $5,000 per misclassified employee.  An employer that misclassifies an employee three or more times can be assessed an administrative penalty of up to $20,000 for each misclassified employee.  Additionally, employers who fail to produce requested records may be subject to a fine of up to $500 per day for each day the records are not produced.  Although the Act is limited to the landscaping and construction industries, employees in other industries can still seek damages for improper classification under the Fair Labor Standards Act.

A recent study reveals that low-wage employees are routinely denied overtime pay, paid less than the minimum wage, forced to work-off-the clock without pay, and have their meal breaks denied, interrupted or shortened.  The study, which was based on a survey of employees in Chicago, Los Angeles, and New York City, demonstrates that employers continue to ignore and violate the current framework of employee protections under the Fair Labor Standards Act (FLSA).  According to the study, more than two-thirds of the employees interviewed have experienced at least one wage and hour violation in the previous work week.  The study also found that among employees who worked more than 40 hours in their previous work week, more than 75 percent were not paid the mandated overtime rate by their employers.  Other findings include:

1. FLSA violations are more prevalent in certain industries such as apparel and textile manufacturing, personal and repair services, and in private households;
2. African-Americans are three times more likely to experience an FLSA violation than white employees; and
3. Employees employed by companies with less than 100 employees are more likely to experience FLSA violations than those employed by larger companies.

In sum, the FLSA is routinely violated by employers in the low-wage labor market.  For more information on the FLSA and The Employment Law Group® law firm’s Wage and Hour Practice, click here.

The Sixth Circuit has issued a significant decision in O’Brien et al. v. Ed Donnelly Enter., resolving several key issues on class certification under the FLSA.  The case was initiated by two employees who alleged that their employer violated the FLSA by requiring employees to work “off the clock” and by altering employees’ payroll reports to reflect fewer hours than what the employees had actually worked.  The district court initially certified the class of plaintiffs but later decertified the class on the grounds that the opt-in plaintiffs were not “similarly situated” to the lead plaintiff because individualized questions predominated.  Finding that the district court “implicitly and improperly applied a Rule-23 type analysis… a more stringent standard than is statutorily required [for FLSA class certification],” the Sixth Circuit found that the employees were similarly situated because the named employees demonstrated that all employees “suffer[ed] from a single, FLSA-violating policy.” In reaching this result, the Sixth Circuit also clarified that when common theories of liability do not exist among all employees, partial decertification and not a denial of certification may be more appropriate. This is a substantial relaxation of the heightened standards previously employed and thus, greatly increases the chance that employees’ FLSA claims will be certified for collective action. 

The Sixth Circuit also established the following standards:

1. Employees’ refusal of an offer of judgment should not result in the dismissal of employees’ claims.  If an employer offers to satisfy the employee’s demand and the employee refuses the offer, the employee’s claim is moot.  However, a district court should not dismiss the employee’s claim outright.  Instead, the court should enter judgment in favor of the employee for the amount offered by the employer.
2. Courts can impose sanctions on an employer for spoliation of evidence even if the requested records were destroyed prior to the initiation of litigation.  The Court clarified that sanctions can be appropriate for the destruction of evidence, even when records are destroyed prior to the initiation of litigation, where an employer “should have known that the evidence may be relevant to future litigation.”
3. Reaffirming the employee-friendly burden of proof for FLSA plaintiffs.  The Court reiterated the principal that an FLSA plaintiff must prove by a “preponderance of the evidence that he or she ‘performed work for which he [or she] was not properly compensated.”  In doing so, the Court reaffirmed the rule that “the [employee’s] burden of proof is relaxed” when an employer maintains inaccurate or inadequate records, and that upon satisfaction of that relaxed burden, the burden shifts to the employer to negate the employee’s inferential damage estimate.

For information on The Employment Law Group® law firm’s Wage and Hour Practice, click here.

A federal judge has conditionally certified a class action suit of potentially 85,000 current and former employees of the University of Pittsburgh Medical Center (UPMC) for violations of the Fair Labor Standards Act (FLSA).  The suit alleges that UPMC violated the FLSA by denying its employees overtime pay and automatically deducting money from their paychecks for meal breaks even though the employees worked during their entire shift.  Under the FLSA, an employer may not automatically deduct meal breaks from an employee’s wages if the employee has not actually taken the break unless the employer identifies special conditions to support such a policy.  Finding that UPMC failed to identify the special conditions necessary to support the practice of deducting meal breaks regardless of whether employees actually took the breaks, the judge granted conditional certification to the FLSA representative action.  Accordingly, plaintiffs can notify all current and former non-exempt employees from the past three years that they can opt in to the lawsuit.  The case is Camesi et al. v. University of Pittsburgh Medical Center et al and is in the U.S. District Court for the Western District of Pennsylvania.  If you have been subjected to similar unfair practices, visit The Employment Law Group® law firm’s Wage and Hour Practice at http://www.employmentlawgroup.net/PracticeAreas/Non-Payment-of-Wages.asp.

Casey’s General Store Inc. has agreed to pay $12 million to settle two class action suits concerning alleged violations of wage and hour laws.  According to two former assistant managers, the company violated the Fair Labor Standards Act by repeatedly failing to pay them overtime for hours worked in excess of 40 hours per week.  Additionally, the assistant managers alleged that the company denied its employees mandatory meal and rest breaks and required them to work before and after their shifts.  The settlement, which remains subject to state court approval, covers a putative class of over 80,000 employees.   A hearing on the preliminary approvals is scheduled for next Monday, May 18, 2009. 

For more information on wage and hour laws, visit The Employment Law Group® law firm’s Wage and Hour Practice at http://www.employmentlawgroup.net/PracticeAreas/Non-Payment-of-Wages.asp

A California district court has decided that a group of former landscaping employees can proceed with their lawsuit against their former employer, Mega Lighting, Inc. (“Mega”) for violations of the Fair Labor Standards Act (“FLSA”) and the Rackateer Influenced and Corrupt Organizations Act (“RICO”). In Aguilar v. Mega Lighting, Inc., former landscaping employees filed a civil complaint against their former employer, alleging that the company violated the FLSA when it deliberately failed to pay the employees minimum wage and overtime. The employees also alleged that the company retaliated against them when they sought legal counsel regarding possible wage and hour claims. Additionally, the employees alleged that individual members of Mega violated RICO by: (1) engaging in mail and wire fraud, (2) fraudulently obtaining public works projects, and (3) failing to pay the requisite prevailing wages to employees who worked on the public works projects. The district court found that the employees sufficiently alleged Mega’s probable impact on interstate commerce and thus satisfied the jurisdictional requirements under both the FLSA and RICO, and it has let both counts proceed against the company. For more information on wage and hour laws and The Employment Law Group® law firm’s Wage and Hour Practice, click here.

On April 8, 2009, a federal judge ordered Martin & Gass, Inc. (“M&G”) to pay back pay and damages to a former employee for violations of the Fair Labor Standards Act (“FLSA”).  The order  follows a March 2009 verdict, where the jury found that M&G failed to pay the plaintiff, Charles Alford, overtime wages for 288 hours during the time period from June 2005 to March 2008.  After the jury returned a verdict in favor of Mr. Alford, M&G argued that it should not be required to pay liquidated or double damages because it did not willfully violate the FLSA.  The district court rejected this argument, finding that a lack of willfulness by itself is insufficient to demonstrate good faith and negate an award of liquidated damages.  According to the court, an employer may avoid liquidated damages if it can show that its failure to obey the statute was in “good faith and predicated upon such reasonable grounds that it would be unfair to impose…more than a compensatory verdict.”  Finding that M&G failed to make any inquiry before misclassifying Alford as an exempt employee, the court concluded that M&G was “at best extremely careless as to [its] obligation under the FLSA” and thus, it was liable for unpaid overtime as well as liquidated damages. 

This case is significant because it rejects the commonly held notion that liquidated damages under the FLSA can be awarded only where the employer’s conduct is willful and affirms the principle that “liquidated damages…are the norm” rather than the exception for violations of the FLSA.
The order and opinion in Alford v. Martin & Gass, Inc., No. 1:08cv595 (E.D. Va. April 8, 2009) is available here. 

Mr. Alford was represented by Scott Oswald and Nicholas Woodfield, Principals at The Employment Law Group® law firm.  For more information about The Employment Law Group® law firm’s Wage and Hour Practice, visit http://www.employmentlawgroup.net/PracticeAreas/Non-Payment-of-Wages.asp.

Last week, in a Fair Labor Standards Act (“FLSA”) case, a federal judge denied summary judgment to a pharmaceutical company after finding that the former sales representatives were non-exempt employees entitled to overtime payment.  In the complaint, the employees alleged that their employer, Schering Corporation (“Schering”) misclassified them as “exempt” employees and as a result, failed to pay them overtime wages in violation of the FLSA.  In response to the allegations, Schering argued that the former employees were pharmaceutical sales representatives and thus, fell within the FLSA’s outside sales exemption.  The district court rejected Schering’s argument, finding that the pharmaceutical sales representatives did not fit within the outside sales exemption because they did not “make sales or obtain contracts or orders,” as required under the regulations.  Moreover, the court noted that the sales representatives did not have the capacity to carry out sales with the physicians that they visited because their employer prohibited them from entering into contracts with physicians for the prescription or purchase of their employer’s product.  Relying on the plain meaning of the statutory and regulatory texts that define the FLSA’s outside sales exemption, the court concluded that the employees did not “sell” or make a “sale” under the FLSA and must receive time-and-a-half for all hours worked in excess of 40 hours a week.

The takeaway from this case is that the standard for determining whether an employee falls within the “outside sales” exemption is not whether the term “sales” is included in her title, but rather whether the employee actually sells something within the scope of her duties. 

The order and opinion in Kuzinski et al, v. Schering Corp., No. 3:07cv233 (D. Conn. March 30, 2009) is available here.  For information on The Employment Law Group® law firm’s Wage and Hour Practice, click here.