Alaska residence managers who are employed to house and care for mentally ill children petitioned the Supreme Court to reverse the Ninth Circuit’s ruling that the residence managers were not covered under the Fair Labor Standards Act (FLSA).  The FLSA requires that employers pay employees  a minimum wage and overtime pay.  Congress amended the FLSA in 1966 to cover employees of hospitals, schools and institutions “primarily engaged in the care of the sick, the aged, the mentally ill or defective who reside on the premises of such institution.”

The appellants assert in their brief that they provide “care” for the mentally ill children by administering psychotropic medications and by providing for the children’s basic needs, working up to 98 hours a week and being on duty 24 hours a day, seven days a week.  They further argue that the residence housing the mentally ill children constitutes an “institution” for the purposes of the FLSA, because the federal Medicaid regulations define an “institution” as “an establishment that furnishes. . . food, shelter, and some treatment or services to four or more persons unrelated to the proprietor.”  Numerous other federal and state statutes (including Alaska’s) would also define these homes as “institutions.”

Should the Supreme Court grant certiorari and agree to hear this case, the Supreme Court could very well decide the wage and tax treatment for employees throughout the country – there are currently similar facilities in every state.  The case is Probert v. Family Centered Services of Alaska, Inc.

The Supreme Court agreed to hear the appeal of a Ninth Circuit ruling that the Fair Labor Standards Act’s outside sales exemption applies to GlaxoSmithKline (GSK) pharmaceutical sales representatives and that they are not entitled to overtime compensation.  The Ninth Circuit’s opinion directly conflicts with a Second Circuit opinion where that court held the exact opposite – that the outside sales exemption did not apply to pharmaceutical sales representatives at Novartis Pharm. Corp. and Schering-Plough Corp.

The GSK sales representatives are also asking the Supreme Court to advise federal courts to give deference to the amicus briefs filed on by the U.S. Department of Labor supporting thier position that the outside sales exemption does not apply to them.

Since the Supreme Court has yet to rule on the outside sales exemption or any other white collar exemptions under the FLSA, the Court’s analysis will likely shed light on the status of those individuals who perform sales but are uncertain if they qualify for mandatory overtime pay under federal law.

Panera Bread Company has agreed to pay $5 million in order to settle two putative class action lawsuits filed by former restaurant workers who allege that the company failed to pay them overtime and forced them to work without pay during their meal breaks.

According to regulatory filings with the Securities and Exchange Commission (SEC), Panera has allocated funds to be used for the settlement agreement after reaching a deal with the former employees last week. Panera denies any wrongdoing or liability in the lawsuits.

The first of the legal actions was brought by Nick Sotoudeh who filed suit against Panera in California Superior Court in 2009. Sotoudeh claims that Panera refused to pay him overtime, failed to provide meal and rest breaks and further alleged that Panera violated state labor and unfair competition laws. Another former employee, Gabriela Brizuela, was added to Sotoudeh’s amended complaint later that year.

Ms. Brizuela claims that she routinely worked more than 8 hours daily and 40 hours weekly and did not receive appropriate overtime compensation. Additionally, Ms. Brizuela alleges that Panera forced her to work during her meal and rest breaks to which she and other employees are entitled under California state law. Prior to the settlement with Panera, Ms. Brizuela sought to form a class action lawsuit comprised of employees who worked at Panera restaurants in California since 2007.

The second suit addressed by the recent settlement agreement was brought by two former employees against Panera in San Bernadino County Superior court in July 2011 and made similar allegations.

The California Superior Court would have to approve the settlement before it would go into effect, but according to Panera’s filings with the SEC, the company has reserved $5 million for the claims.

California passed a new law authorizing the California Labor and Workforce Development Agency (LWDA) to stiffen penalties for employers that misclassify their employees.

Many employers misclassify their employees as independent contractors in order to cut costs. Employers attempt to save on their Federal Insurance Contributions Act (FICA) costs, unemployment contributions, workers’ compensation insurance costs, and benefit contributions by misclassifying their employees as “independent contractors.” Employers also try to avoid paying “independent contractors” minimum wage, overtime, payroll tax, and paid and unpaid leave.

Under California’s new law, LWDA will fine employers who misclassify $5,000 to $25,000 for each violation. Those companies that repeatedly misclassify employees will be fined from $10,000 to $25,000 for each violation. Additionally, an officer or the owner of the company must post a signed notice, somewhere visible to all employees, stating that the company has violated the law and will effectively change their practices.

The strengthened penalties will further deter negligent and scrupulous employers from cheating employees out of their duly earned wages and benefits.

On September 26, 2011, the Second Circuit Court of Appeals held that both a Fair Labor Standards Act (FLSA) collective action and a state class action can be part of the same lawsuit. As a result, the Second Circuit has joined the Seventh, Ninth and District of Columbia Circuits in allowing supplemental jurisdiction of federal/state hybrid wage claims.

Shahriar, et al. v. Smith & Wollensky Restaurant Group, Inc. involved a group of waiters working at a restaurant in Manhattan. They filed a complaint against their employer for violating federal FLSA minimum wage and overtime provisions and various state law provisions of the New York Labor Law (NYLL).

The plaintiffs alleged that the restaurant required the waiters to share their tips with employees that did not interact with customers and would otherwise be tip-ineligible. In doing this the restaurant violate the tip-credit provisions of the FLSA.  Similarly, the NYLL prohibits requiring tipped employees from sharing their tips with non-service employees and managers. The waiters also alleged that the restaurant violated the NYLL by “failing to pay waiters for an extra hour’s work when their workdays lasted more than ten hours.”

According to court documents:

FLSA and NYLL claims usually revolve around the same set of facts, plaintiffs frequently bring both types of claims together in a single action using the procedural mechanisms available under 29 U.S.C. § 216(b) to pursue the FLSA claims as a collective action and under Rule 23 to pursue the NYLL claims as a class action under the district court’s supplemental jurisdiction

Under FLSA members must affirmatively opt-into the federal representative action lawsuit. But, under state law members of the state law class action must affirmatively opt-out of the class.  However, the restaurant argued that the number of employees in the state law opt-out class would be inherently larger than the number of employees in the FLSA opt-in representative action and that it would lead to “inherent conflict.”  The court ultimately held that:

1. The fact that there are more class members in the state law class action than those in the FLSA collective action “should not lead a court to the conclusion that a state claim ‘substantially predominates’ over the FLSA action”
2. Noting in the language of the FLSA prevents the exercise of supplemental jurisdiction over Plaintiffs’ state law wage claims
3. FLSA’s “saving clause” makes clear that states may enact laws that are more protective than those that are provided in the act
4. The legislative history surrounding the FLSA’s opt-in provision also provides no support for precluding joint prosecution of FLSA and state law wage claims in the same federal action
5. Finally… the Seventh, Ninth, and District of Columbia Circuits all have determined that supplemental jurisdiction is appropriate over state labor law class claims in an action where the court has federal question jurisdiction over FLSA claims in a collective action

As such the Second Circuit joined the growing list of jurisdictions that have approved of hybrid wages actions as a means of securing unpaid compensation.

A class-action lawsuit was filed last week against Groupon, well known for daily online deals. A former employee, Ranita Dailey will be the lead plaintiff in this lawsuit, claiming that she and nearly 1,000 other employees failed to receive overtime pay for nearly three years. Moreover, the employees assert that even after they started to receive overtime pay, Groupon failed to meet federal requirements under the Fair Labor Standards Act (FLSA).

Dailey submitted a bimonthly pay stub that revealed that out of 106 hours worked, Groupon only paid her for 19.75 hours of overtime pay. However, as non-exempt employee the law requires that she be paid at a rate of no less than time and one-half of regular pay rates for any work over 40 hours in one work week.

The former employees are demanding three years in back wages and liquidated damages.

Four U.S. Open umpires filed a putative class action lawsuit in the U.S. District Court for the Southern District of New York, alleging the U.S. Tennis Association (USTA) misclassifies them as independent contractors instead of employees and failing to pay them overtime.  The USTA pays umpires roughly between $115 and $200 a day without regard for the number of hours worked each day, which often exceeds 8 hours.

The case is Meyer v. U.S. Tennis Association, Case No: 11-CIV-6268.

In Pitts v. Terrible Herbst, Inc., the Ninth Circuit Court of Appeals ruled that a putative class action cannot be rendered moot by a defendant’s Rule 68 offer of judgment to the class representative.  In April 2009, Gareth Pitts filed a class action complaint in Nevada state court against his employer, Terrible Herbst, Inc.  The complaint alleged that Terrible failed to pay Pitts and other similarly-situated employees overtime and minimum wages.  The employer responded by filing a motion to dismiss the case on the grounds that Pitt’s rejection of the Rule 68 offer of judgment mooted the entire class action.

The court was presented the following issue: does a rejected offer of judgment for the full amount of a putative class representative’s individual claim moot a class action complaint where the offer precedes the filing of a motion for class certification?  The Ninth Circuit held that it does not.

Article III of the Constitution limits the jurisdiction of the federal courts to “Cases” or “Controversies.”  Accordingly, the doctrine of mootness requires that an actual ongoing controversy exist at all stages of federal court proceedings.  The Ninth Circuit distinguished between issues that have become moot and situations like the instant case where a party’s interest in the issue has become moot.  A plaintiff who brings a class action presents two separate issues for judicial resolution.  One is the claim on its merits; the other is the claim that he is entitled to represent a class.

The Ninth Circuit concluded that an unaccepted Rule 68 offer of judgment – for the full amount of the named plaintiff’s individual claim and made before the named plaintiff files a motion for class certification – does not moot a plaintiff’s claim that he is entitled to represent a class.

A Japanese Restaurant chain, Bishamon Group Restaurants-based in Los Angeles, has agreed to pay $144,721 in unpaid overtime to 66 employees, all of whom were non-English speaking employees.

After the company refused to pay a former employee his final paycheck he called the Employment Education and Outreach partnership (EMPLEO), “an alliance of organizations and government agencies that assist Spanish-speaking workers and employers with work-related concerns.” This lead to an investigation conducted by DOL, which uncovered that the dishwasher, prep cooks and cooks would get paid “straight time,” even though, they worked an average of 45 to 50 hours per week.

The Wage and Hours Division of the DOL found that the company systemically violated the Fair Labor Standards Act (FLSA) overtime, minimum wage and record-keeping provision. The FLSA requires that all employees must receive time and one-half for all hours exceeding 40 hours in a workweek. To avoid any future violations of the FLSA, the company must implement a time-keeping system that will better track overtime wages for all employees.