On January 25, 2012, U.S. District Judge Paul Crotty issued a preliminary approval of a $99 million settlement agreement between Novartis Pharmaceuticals Corp. and a class of more than 7,000 pharmaceutical sales representatives who allege that the company misclassified them as exempt from overtime pay.

Final approval of the settlement deal awaits the U.S. Supreme Court’s determination of the overtime status of the drug sales representatives involved in another suit.  Final approval of the settlement would resolve the wage-and-hour claims that the sales representatives initially brought in 2006, in addition to later claims pertaining to a more recent period.  The final approval hearing is slated to take place on May 31, 2012.

Pharmaceutical companies have often classified drug sales representatives as being exempt from the overtime protections of the Fair Labor Standards Act (FLSA); however, in recent years many FLSA cases have challenged this policy.

In the present case, In Re: Novartis Wage and Hour Litigation, the U.S. Court of Appeals for the Second Circuit held in July 2010 that the Novartis sales representatives were entitled to receive overtime pay.  The Court relied on an amicus brief filed by the Department of Labor (DOL) that urged the Court to interpret FLSA regulations in a manner that would find sales representatives not exempt from overtime protection.

Last February the Ninth Circuit ruled in a similar class action lawsuit against GlaxoSmithKline that sales representatives are considered ‘outside sales employees’ under FLSA and are therefore exempt from overtime benefits.

The Supreme Court denied Novartis’ petition for certiorari but agreed to review the GlaxoSmithKline decision. The Supreme Court’s decision on whether drug sales representatives are covered by federal overtime protections is expected later this year.

The Employment Law Group® law firm has an extensive nationwide wage and hour practice representing employees whose rights under the Fair Labor Standards Act (FLSA) have been violated.

Last week, health supplement retailer Vitamin Shoppe Industries Inc. (“Vitamin Shoppe”) settled the final portion of a class action lawsuit which had alleged that the company mislabeled many of its store clerks as managers in an attempt to avoid paying them overtime wages.

The settlement involves an agreement between Vitamin Shoppe and the suit’s lead plaintiff, Julio Vasquez, who alleged that the company violated the Fair Labor Standards Act (FLSA) by giving him the title of store manager in order to avoid paying him and others overtime pay.

Vasquez brought suit in the U.S. District Court for the Southern District of New York in November 2010 and claimed that Vitamin Shoppe listed him and over 400 other store clerks as “store managers” so the company could pay the clerks salaries and not be liable for paying overtime wages required by the FLSA.

In July 2011 Judge Laura Taylor Swaine decided not to certify a class of over 400 employees from across the company’s branches in 40 states but instead certified a smaller class consisting of employees from just seven of Vitamin Shoppe’s stores clustered around the New York City area.

In her ruling, Judge Swain wrote that the “plaintiff [did] not meet his burden” of showing that Vitamin Shoppe had misclassified its store clerks across all of the company’s locations sufficient for nationwide class certification.

The current settlement does not reveal the terms of the agreement apart from stipulating that it resolves the lawsuit in its entirety.

Last week the Obama administration unveiled a proposal to extend minimum wage and overtime protections to approximately two million home health aides and other in-home care providers. The Department of Labor released a Notice of Proposed Rulemaking that includes proposed changes to the companionship and live-in worker regulations of the Fair Labor Standards Act (FLSA).

When Congress passed the FLSA in 1938, it established a federal minimum wage and a mandate to pay overtime for hours worked exceeding 40 hours per week. However, some job categories were not initially covered by the FLSA, including domestic service workers employed directly by a household. In 1974 Congress amended the law to extend the FLSA’s wage protections to nearly all domestic service workers but included an exemption for workers who provided companionship for the elderly and for babysitters.

The Department of Labor cited the “dramatic transformation” of the home healthcare industry since 1975, the rapidly increasing demand for in-home care, and the relatively stagnant wage growth of in-home care employees as reasons for the proposed rules. The Department maintains that today’s workers who are employed by home care staffing agencies are not the sort of workers that Congress intended to exempt from FSLA protection when it passed the companionship exemption (i.e. babysitters), but rather are “professional caregivers” who perform medically-related tasks for which training is typically a requirement and should be entitled to FLSA protections.

The issue gained attention in 2007 when the Supreme Court decided in Long Island Care at Home, Ltd. v. Evelyn Coke, that a home care aide who worked up to 70 hours per week did not qualify for overtime compensation under the current FSLA regulations. The court said that any changes to such regulations must come from either Congress or the Department of Labor.

While the proposed changes will broaden FLSA regulations to ensure that home health workers are subject to federal minimum wage and overtime law, the proposed rules still exempt from minimum wage and overtime regulations some workers who are employed as companions by individuals for activities such as engaging in hobbies and talking walks. Under the definition of the proposed rules, companionship services would be limited to activities that directly relate to offering ‘fellowship’ and protection to those who are not capable of caring for themselves. Only workers whose duties include providing personal care (e.g. assistance with dressing and grooming) less than 20% of the time would remain exempt from the FLSA’s minimum wage and overtime protections.

Among the other changes in the proposed rules is a requirement for the employers of live-in domestic workers to keep track of the specific hours that such employees work, instead of merely reaching a work agreement with employees. The proposed rules also clarify that workers employed by third-party employers – such as staffing agencies – are not exempt from the minimum wage and overtime protections.

Currently state minimum wage and overtime protection laws for in-home care providers vary widely. For example, 16 states ensure that most in-home care workers receive minimum wage and overtime protection and 5 states and the District of Columbia require that such workers receive the minimum wage but do not mandate overtime eligibility. However, according to the Obama administration, 29 states do not give home health care workers either minimum wage or overtime protection.

The public is invited to submit comments on the proposed rules at www.regulations.gov. Further information including Frequently Asked Questions answered by the Department of Labor and a Comparison of Current vs. Proposed Companionship Regulations chart can be found at http://www.dol.gov/whd/flsa/companionNPRM.htm.

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.

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Kinder Morgan has agreed to pay roughly $830,000 in unpaid overtime and other back pay to thousands of current and former employees – the result of a U.S. Department of Labor (DOL) investigation into Kinder Morgan business practices that purportedly violate the Fair Labor Standards Act (FLSA).  The lawsuit alleged Kinder Morgan:

• Improperly rounded work hours in Kinder Morgan’s favor;
• Failed to pay employees who attended meetings before their shift began; and
• Used a lower overtime rate by failing to include non-discretionary bonuses in its overtime rate calculation.

The FLSA requires employers to include in the calculation of the overtime rate employee bonuses awarded for meeting productivity, efficiency, or attendance goals.  Secretary of Labor Hilda Solis stated, “Today’s settlement agreement provides back wages, but will also help ensure that Kinder Morgan complies with the law in the future.”

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