Chicago Overtime Lawyer Blog

This blog has mentioned the dispute between employers and employees as to whether changing into and out of clothes or protective equipment should be compensable. One post discussed the opinion published by the U.S. Department of Labor, which decided that changing clothes was considered a principal activity and, therefore, was compensable. Additionally, any and all activities performed after changing into and before changing out of work clothes was compensable, including walking and waiting.

This post will discuss a case in which hourly steel makers in Gary, IN allege that United States Steel Corporation is unlawfully refusing to pay them for the time spent putting on and taking off their clothes ("clothes changing time") and time spent walking from the locker room to their work stations and back ("travel time")

The collective bargaining agreement between U.S. Steel and the steelmakers union does not require compensation for that time and no contract between U.S. Steel and the union since 1947 (9 years after the FLSA was enacted) has required payment for that time. Yet the plaintiffs insist that the FLSA requires payment for that time.

The district judge ruled that the clothes changing time was not compensable but that the travel time might be compensable and so he refused to dismiss the suit and he certified the issue of the compensability of travel time for an appeal.

The plaintiffs cross-appealed, maintaining that the clothes changing time is compensable. The cross-appeal did not fulfill procedural requirements as the plaintiffs did not ask either court for permission to cross-appeal. The cross-appeal was therefore dismissed. However, the plaintiffs were still able to argue their case for the compensability of the clothes-changing time in opposition to the appeal.

In 1947, Congress passed the Portal-to-Portal act and, two years later, in the spirit of the Act, added section 3(o) of the Fair Labor Standards Act, 29 U.S.C. Section 203(o) which excludes, from the time during which an employee is entitled to be compensated, "any time spent in changing clothes or washing at the beginning or end of each work day which was excluded from measured working time ... by the express terms of or by custom or practice under a bona fide collective bargaining agreement applicable to the particular employee." The plaintiffs argue that the section is inapplicable because their changing time consists of safety equipment rather than clothes. The statute does not define "clothes". The alleged clothes, in this case, consist of flame-retardant pants and jacket, work gloves, metatarsal boots (work boots containing steel or other strong material to protect the toes and instep), a hard hat, safety glasses, ear plugs, and a "snood" (a hood that covers the top of the head, the chin and the neck).

Workers who change at the beginning and end of each work day are changing into and out of work clothes and if they are governed by a collective bargaining agreement which makes that time noncompensable, then the agreement must apply to work clothes, otherwise the provision would have almost no applications.

The fact that the clothing exclusion is operative only if it is agreed to in collective bargaining agreements, implies that workers are normally compensated for the time they spend changing and washing. Section 203(o) provides for this by permitting unions and management to trade off the number of compensable hours against the wage rate - in effect, the workers get more, per hour, in exchange for agreeing to exclude some time from the time for which they get paid.

In one case, the Ninth Circuit Court decided it was important that protective clothing is "different in kind from typical clothing" which the court defined as "warm clothing". The Court of Appeals thinks this is just to say that work clothes are not street clothes but determines that this is an insufficient analysis. Since workers very rarely change at work from street clothes into street clothes, section 203(o) would be obsolete if the Ninth Circuit were correct. Therefore, the appellate court was correct in determining clothes changing time noncompensable.

The Court of Appeals points to the decision of another court in a similar case, in which the Court noted the significance of "the clear implication ... that clothes changing and washing, which are otherwise a part of the principal activity, may be expressly excluded from coverage by agreement", and the Court of Appeals maintains that such is the case here. Therefore, if clothes changing time can be legally noncompensable, the court fails to see how it could be considered a principal activity and, consequently, the travel time is also legally noncompensable.

The Court also maintains that to grant the plaintiffs the case would be harmful to the workers in the long run. The employer would have to pay more money or the same amount of money for less work which would result in higher costs for the employer. The employer would compensate for these higher labor costs by lowering hourly wages and so the employees would ultimately end up bearing the weight of these higher costs.

The Court resolved by finding in favor of U.S. Steel and dismissing all charges.

Continue reading "New 7th Circuit Case On Failing to Pay Workers for Clothes Changing Time Where Collective Bargaining Agreement Did Not Require Pay for Such Time" »

Previous blog posts have discussed the process for filing a class-action lawsuit under the Fair Labor Standards Act (FLSA). A class-action lawsuit is a lawsuit where several plaintiffs in similar positions have a grievance against the same defendant. For the sake of efficiency, all of the separate claims are combined into a big claim that is headed by a "lead plaintiff." The award, if any, is later distributed among members of the "class." If you are interested in hiring an Illinois class action attorney and filing a class-action lawsuit, you should know that class actions for employees fall under Section 216(b) of the FLSA. Courts considering whether to certify a class action will go through a two-step process. First the plaintiffs must make "a modest factual showing sufficient to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law." If the plaintiffs meet that burden, a court will conditionally certify the class. Plaintiffs would then be allowed to notify other potential members of the class. On the second step, both parties may conduct discovery, during which they examine the other party's documents. If the defendants can then point to evidence that the plaintiffs are too dissimilar, they may ask the court to decertify the class.

In Larsen v. Clearchoice Mobility, Inc., the plaintiffs filed suit against the defendant over "uniform policies, practices, and schemes" that deprived the plaintiffs of regular wages, commission pay, and overtime compensation in violation of the FLSA and Illinois wage laws. The plaintiffs worked as retail sales consultants for defendant, a corporation in the business of providing wireless telephone services, products, and accessories in Illinois. The plaintiffs claimed that defendant never paid the premium hourly rate for overtime hours, automatically deducted time for meal breaks whether or not the break was taken, required consultants to attend -- without pay -- meetings and conference calls, made improper deductions from the consultants' commissions', and withheld earned commissions from retail consultants who left the defendants' employment. The plaintiffs sought to have their claim certified as a punitive class action under FLSA Section 216(b), alleging that 50 other consultants were affected by the defendants' policies.

Judge Charles Kocoras of the Northern District of Illinois followed the two-step process in determining whether to certify the class. First, the judge looked at the members of the possible class and found, based on the evidence, that the plaintiffs met the standard for a modest factual showing "sufficient to demonstrate a factual nexus" that bound the plaintiffs together with similarly situated consultants. Any of them could be a victim of a common policy or plan that violated the FLSA. The judge therefore conditionally certified the class, paving the way for the second step, where both parties would conduct discovery.

Continue reading "Northern District Finds That Retail Sales Consultants Meet the First Requirement for a Class Action in Larsen v. Clearchoice Mobility, Inc." »

Facing a class action now are Apple, Google, Pixar, Intel, Intuit, Lucasfilm and Adobe. The plaintiffs are five former employees, two who worked for Adobe during the relevant time period, one for Lucasfilm, one for Intel, and one for Intuit. The class is defined as "everyone employed by Defendants in the US on a salaried basis during the period from January 1, 2005 through January 1, 2010 (the "Class Period"). Excluded from the class are: retail employees; corporate officers, members of the boards of directors; and senior executives of Defendants who entered into the illicit agreements alleged herein; and any and all judges, justices, and chambers' staff, assigned to hear or adjudicate any aspect of this litigation." The plaintiffs believe there could be tens of thousands of potential class members.

The seven companies allegedly formed identical agreements with one another to not cold call each other's employees. Cold calling is a form of recruitment wherein direct contact is made (either orally, in writing, telephonically, or electronically) with an employee who has not otherwise applied for a job opening. This method of recruitment is very effective because employees are often unresponsive to other forms of recruitment.

Upon receiving a cold call, employees are given access to employee benefit information from rival companies. Armed with this information, they can either move to the rival company, or they can inform their current employer of what the rival company is willing to offer and use that to negotiate a higher pay rate. Employees who receive cold calls can also pass on the information to their colleagues who can then use it to negotiate higher pay for themselves, even if they did not receive a cold call. When companies expect that their employees could get poached by rival companies, they will pay them at a higher base rate in order to provide an incentive to stay. By allegedly agreeing not to cold call each other's employees, the Defendants allegedly kept their employees' salaries artificially low.

According to Plaintiffs, the alleged conspiracy began began in 2005 between Lucasfilm and Pixar (which was under the control of Steve Jobs at the time) and consisted of three parts:
1. each company allegedly agreed not to cold call the other's employees,
2. each company allegedly agreed to notify the other if making an offer to an employee of the other company if that employee applied for a job without having received a cold call, and
3. each company allegedly agreed that if either company made an offer to such an employee of the other company, neither company would counteroffer above the initial offer.
These alleged agreements were not limited by geography, job function, product group, or time period.

Shortly after this, Apple (also under the control of Steve Jobs) allegedly entered into an identical agreement with Adobe. The alleged agreement expanded to include Google no later than 2006. Beginning in April of 2006, Apple allegedly entered into an identical agreement with Pixar. In September of 2007, Google allegedly entered into an identical agreement with Intel and then, in June of 2007, Google allegedly entered into an identical agreement with Intuit. None of the employees of these companies were ever aware of these agreements.

Beginning in 2009, the Antitrust Division of the US Department of Justice (DOJ) conducted an investigation into the employment practices of the Defendants and on September 24, 2010, the DOJ filed a complaint regarding the Defendants' agreements against Adobe, Apple, Google, Intel, Intuit, and Pixar. On December 21, 2010 the DOJ filed another complaint regarding the Defendants' agreements, this time against Lucasfilm and Pixar. In both cases the DOJ filed stipulated proposed final judgments in which the seven companies agreed that the DOJ's complaints "state a claim upon which relief may be granted" under federal antitrust law. The US District Court for the District of Columbia entered the stipulated proposed final judgments on March 17, 2011 and June 3, 2011.

The Plaintiffs are seeking three times their damages caused by the Defendants' agreements, the costs of bringing the suit, and attorneys' fees. In their joint motion to dismiss, the Defendants argued that there was no "overarching agreement" because each agreement existed only between two of the Defendants. Intuit, for example, had an agreement with Google and only Google. Intuit was still free to cold-call employees from the other five defendants and there was nothing in the agreements which prevented the Defendants from ever hiring each other's employees.

The Court disagrees, having found that the Plaintiffs have given enough evidence to support a claim of damages to convince the Court that even a single such agreement as is alleged here could have a ripple effect. The existence of six such agreements, therefore, could have extensive repercussions.

The Defendants deny any evidence of collusion between the Defendants. Despite the fact that Steve Jobs owned or controlled two of the companies involved in the agreements and that several of the companies shared board members on their boards of directors, the Defendants maintain that this is not sufficient evidence of collusion.

Continue reading "Tech Companies Facing Class Action for Alleging Fixing the Price of Employee Wages" »

If an Illinois wage and hour attorney is representing you in an employment claim, chances are that at some point, he or she will submit a list of interrogatories to the opposing party. Interrogatories, or requests for further information, are a formal set of written questions that require a written answer. You will likely have to answer the other side's interrogatories as well. Interrogatories help clarify facts and determine which facts will be presented at trial. Usually the number and type of interrogatories depend upon the state you live in: while the federal rules limit interrogatories to 25, Illinois Rule 213 allows up to 30. If you fail to answer interrogatories, you could find yourself in trouble with the court, no matter how strong your case is.

This was the situation in Jacks v. DirectSAT USA, LLC. The plaintiffs filed suit in federal court against the defendants for wage and hour violations related to the Fair Labor Standards Act (FLSA) and Illinois Minimum Wage Law (IMWL). Plaintiffs later asked the court to compel the defendant to respond -- or in some cases, respond more thoroughly -- to certain interrogatories. Judge Joan Gottschall of the Northern District of Illinois looked at each interrogatory to determine whether the defendant's responses were sufficient.

One asked for identification of "all people with knowledge of the factual basis for Defendants' answer and each of its affirmative defenses." The defendants responded with a list of names, and argued that they did not need to provide those individuals' addresses and corporate titles. The judge found that the defendants' response was inadequate: just because the defendants provided some of the information elsewhere did not relieve them of the obligation to submit a complete written response. She also thought that the information was inadequate because it did not identify any supervisors, project managers or dispatch personnel who directly oversaw the plaintiffs.

For Interrogatories Nos. 14 through 22, the judge found that it was valid for the plaintiffs to have subparts to their questions and still have them count as one interrogatory, as long as the subparts were all part of a common theme. In this case, the plaintiffs' subparts were all part of one larger question, so it was fine. However, the plaintiffs mistakenly ended up with 26 interrogatories rather than the required 25. Finally, the plaintiffs complained that the defendant did not identify whether it has produced documents to satisfy plaintiffs' documents requests, and also that the defendant has not produced any emails. While the judge denied the plaintiffs' motion to compel defendants to identify documents that are responsive to the plaintiffs' requests, the judge granted their motion for compelling defendant to use emails intended for a different litigation to also be used here.

Continue reading "Northern District of Illinois Compels Defendants to Provide Better Answers to Interrogatories in Jacks v. DirectSAT USA, LLC" »

Yet another class action lawsuit is being filed for unpaid wages. Two former employees have filed a class action against the Indian company for breach of employment contracts and violating California Labor Code against Tata Consulting Services, India's largest information technology services center.

The complaint is being brought by Gopi Vedachalam and Kangana Beri, who were sent to the United States from India to work on projects for the defendant. Vedachalam and Beri, among others who were sent to the US to work for the defendant, have alleged that the company unlawfully forced employees to sign over to the company their state and federal tax returns. The non-US employees were promised both a US gross salary and an additional Indian salary but the defendant allegedly made unlawful deductions from their Indian salaries.

Tata America International Corporation and its parent corporations, TCS and Tata Sons, filed a motion to dismiss the case, arguing that the case should be arbitrated in India rather than the US.

The California Federal Court certified one national class of 13,000 members of non-US citizens who worked for the defendant between 2002 and 2005 with Vedachalam and Beri named as representatives of the class. The court also certified a separate class of employees to sue for violating California labor laws which consists of 6,000 employees who are also included in the national class.

Continue reading "Class Action Lawsuit Filed in California Against Tata Consulting of India" »

This blog has already discussed an opinion released by the U.S. Department of Labor on the definition of clothes. That opinion included the concept of a "principal activity", defined as an activity which is "integral and indispensable" and activities occurring "after the first principal activity and before the last principal activity are compensable".

Forever 21 might want to keep this in mind as it is beginning to look like bag checking could be considered a principal activity. While it is a standard practice in many retail stores to check employee bags before allowing them to leave in order to prevent theft, this can become an issue for the employees when it cuts into their breaks and post-shift hours.

Five employees of Forever 21 (four former, one current) have filed a class action in California against the company. They allege that waiting to have their bags checked could take ten minutes or more, making for significant time for which they were kept at the store without getting paid. This allegedly is a wide-spread practice within the company and so the class could potentially consist of thousands of Forever 21 employees from all over California.

The plaintiff's lawyers are also asking the State of California to appoint them as private attorneys general so they may prosecute penalty claims on behalf of the state.

One of the plaintiff's attorneys pointed out the susceptibility of these plaintiffs. "Sales associates at Forever 21 stores are often still in high school and under the age of 18 when they begin their employment. These young people are vulnerable and often do not understand their employment rights. This lawsuit is meant to give these young people a voice about how they were treated while employed by Forever 21 in California."

Continue reading "Forever 21 Sued In Class Action For Allegedly Forcing Employees to Wait at Work to Have Their Bags Checked to Prevent Employee Theft" »

As previously discussed in this blog, all hourly employees are entitled to overtime pay for time worked over 40 hours per week. This is also true of salaried workers who earn less than $455 per week and/or are not fulfilling roles which are administrative (office work related to general business operations), executive (manage employees and be in charge of hiring and firing), or professional (has a specialized degree or skills, such as a lawyer or physician). Also exempt are information technology workers and sales representatives whose hours cannot be easily tracked.

However, many employers have taken advantage of the tough job market to exploit their employees, making them work harder for essentially less money. Inflation adjusted wages fell about 2% in 2011 and the percentage of workers reporting no wage change is at its highest level in 30 years. S&P 500 companies made an average of $420,000 in revenue per employee in 2011: 11% more than in 2007. While millions of Americans are still searching for work, corporate profits are reaching record highs.

A sign of a returning economy however, is the fact that employees are beginning to fight back. More employees quit their jobs in February than in any month since November 2008 and workers have filed 32% more lawsuits against their employers for unpaid overtime last year than in 2008.

Workers' main grievances are that they were forced to work more than 40 hours a week by:
• Being forced to work off the clock,
• Having their jobs misclassified as exempt from overtime requirements, and
• Because of smartphones and other technology, work bled into their personal time.

In 2011 just over 7,000 wage and hour suits, many of them class actions, were filed in federal court, nearly quadruple the number of lawsuits filed in 2000. In fiscal 2011, the Labor Department recovered $225 million in back wages for employees, 28% more than in 2010.

The Labor Department added 300 wage and hour investigators in the past two years, thereby increasing its staff by 40%. This was done in an effort to step up the department's efforts to protect workers, particularly in high-risk industries that employ low-wage and vulnerable workers such as hotels and restaurants.

The recession put more pressure on businesses to cut costs, which they often did by getting more out of their employees for less money. If they had had to pay the overtime costs, it is likely that many of them would have hired more workers in the economic recovery.

Businesses have been retaliating by converting many positions which were previously salaried, to hourly wage positions, creating a lower baseline pay rate in order to take into account losses from expected overtime. They have also been drawing clearer lines between workers and managers and, in many cases, reining in modern privileges such as company issued smartphones and telecommuting.

Meanwhile, courts are trying to reconcile decades-old laws with ever-evolving technology. The spread of BlackBerrys and smartphones has workers tied to employees even during off hours and vacations.

Employers say the dramatic increase in lawsuits is a reflection that the 1938 Fair Labor Standards Act has become outdated in an age when most employees want the flexibility to work at home or answer office e-mails on their free time.

Continue reading "More Workers Filing Lawsuits To Claim Unpaid Overtime " »

Something this blog has not yet covered is the list of responsibilities of a plaintiff who might wish to bring an employer to court for unlawfully failing to hire or promote a candidate. Plaintiffs need to show that an employment practice resulted in a disparate impact on the candidates. In the case of Pippen v. the State of Iowa, the issue is race. Pippen claims that she and other African Americans were passed over for jobs in favor of less qualified white candidates.

If the plaintiff is successful in showing that the employment practice had a disparate impact on the basis of race, then it falls to the defendant to prove that the challenged practice is job-related for the position in question and consistent with business necessity. If the defendant can successfully prove this then the burden shifts back to the plaintiff to show another employment practice which would meet the defendant's business necessity with a less disparate impact.

If the plaintiff cannot identify a specific employment practice, then the plaintiff must prove that the decision-making practices of the employer cannot be separated for analysis, in which case the decision-making process can be analyzed as one employment practice.

Federal law dictates that "a particular employment practice" is distinct from the "decision-making process". One is a component of the other. Only if the components that make up the whole are so indistinguishable can the process itself be deemed "an employment practice".

The plaintiffs argued that:
• The State's system has "integrated and intertwined" policies, making the various steps of the decision-making process inseparable for analysis.
• Throughout the process there are "downstream effects": decisions at one stage that may have impact at a later stage
• The State system includes both objective and subjective evaluations of job applicants which are so closely interrelated in reaching the ultimate decision to hire or promote that they cannot be independently examined
• The "steps" of the State's hiring process cannot be separated for analysis because the Department of Administrative Services does not have the necessary records to determine if any particular step causes adverse impact to a protected class.

The plaintiffs argued that three previous federal cases have found that failure to follow set procedures is, in itself, a particular employment practice for purposes of a disparate impact claim but the judge maintained that one of the cases is not relevant to the present case and, as regards the other two, the plaintiffs misinterpreted the legal ruling.

However, a number of the expert witnesses were able to separate data for the referral stage, the interview stage, and the hiring stage for African-Americans and the hiring files themselves permitted a focused view of the different screening devices and practices in referral, interview, or hiring of applicants for any given job between the departments. Given these facts, the judge ultimately determined that the plaintiffs had failed to prove that the components of the whole were indistinguishable.

Continue reading "Polk County Judge Rules That Plaintiffs Fail to Show Inseparability in Class-Action Against the State of Iowa" »

By Faith Inc., which owns a number of Subway restaurants in California, is now facing a class action lawsuit from current employees for allegedly failing to pay overtime and for allegedly forcing employees to work off the clock. The action was filed in March in the Superior Court for the State of California, County of Riverside, Central District, by two employees of the Subway franchise (one current, one former). The proposed class includes employees of By Faith Inc.'s Subway franchise who worked in a Subway restaurant, were paid an hourly wage, and held the title of "sandwich artists". The prosecuting attorneys believe there are more than 50 employees working for Subway in California who could potentially be members of the class. They are suing for:

• Unpaid time worked off the clock
• Unpaid overtime
• Employees worked more than 7 consecutive days and were not paid overtime
• Employees were required to come in on scheduled days off and were not paid the required minimum 2 hours
• Employees were not allowed to take their 30 minute meal breaks for every 6 hours they worked and they were not allowed 10 minute rest breaks
• Failing to post applicable Wage Orders
• Failing to provide employees with accurate itemized pay stubs
• Failing to provide employees with documents contained in their employment file

Employees were told they needed to complete closing tasks 1 hour after closing. The tasks required to close took more than 1 hour to complete. If they did not clock out after 1 hour they were written up and threatened with termination. If they did not finish their tasks they were written up and threatened with termination. Additionally, employees were regularly required to take out the trash after clocking out because the trash can was on the way to their car. These practices resulted in employees conducting tasks after they had clocked out which, over time, culminated in hours of unpaid work.

You can view a copy of the Class-Action complaint by clicking here.

Continue reading "California Subway Franchisee Facing Unpaid Overtime Class Action" »

Meal breaks are an important part of an employee's compensation. Under California law, anyone working a minimum of four hours is entitled to a ten minute rest break; five hours or more earns a thirty minute meal break; and ten hours or more in a single day earns two meal breaks. If the employee cannot or does not take their meal breaks, then the employer is required to pay the employee the equivalent of one hour of the normal pay for each day that they worked without a meal break.

In August of 2004, Adam Hohnbaum on behalf of himself and on behalf of others similarly situated, filed a complaint against Brinker International Inc. The complaint asked for certification of a class which consisted of employees of Brinker International, over the past four years, who had worked for five hours or more without a meal break or paid compensation for said meal break. A subclass was included which consisted of employees who worked four hours or more without a 10 minute rest break. Due to the number of employees Brinker has and the widespread nature of this practice, the defendants believe that the class could potentially consist of thousands of members.

The plaintiffs allege that managers working in restaurants owned by Brinker pressured them to work through their meal breaks by failing to adequately staff the restaurants or by threatening to cut or change their hours.

However, the California Supreme Court recently ruled that employers are not required to enforce that meal break. This decision has come to clarify matters after an onslaught of lawsuits against California employers regarding meal breaks. The case will now go back to the trial court to determine whether the meal break claims can remain part of the class action.

You can view a copy of the Complaint in the Brinker lawsuit by clicking here.

Continue reading "California Supreme Court Dismisses Meal Break Claims" »

As this blog has discussed previously, while the Fair Labor Standards Act (FLSA) requires that employees be paid 1.5 times their hourly wage for every hour worked over eight per day or 40 per week, not every employee receives these benefits. Instead, many employees fall into one of the FLSA "exemptions." Employees who fit the characteristics of an "executive," "administrative," or "professional" employee are considered exempt employees. The criteria for determining whether an employee is exempt considers the salary level ($23,600 and above is exempt) and the types of duties the employee performs. For example, an "executive" employee might plan the work and hire other employees, while an "administrative" employee may do office work related to general business operations. A professional has specialized education and skills (like a lawyer or physician). Contact an Illinois overtime attorney if you believe that you have been wrongly denied overtime pay and want to find out whether you meet an exemption.

In Mullins v. Target Corporation, Plaintiff Christine Mullins sued her employer, Defendant Target Corporation, for unpaid overtime wages under the FLSA and Illinois Minimum Wage Law (IMWL). Plaintiff worked for the defendant as Asset Protection Team Leader and was later promoted to Investigator. Plaintiff's job was to identify and conduct investigations of fraud and theft related to Target's business at several stores in southern Chicagoland and northern Indiana. This involved analyzing all of the data at each store and pulling out items that plaintiff believed could be a case. Plaintiff admitted that her first duty was to "analyze all of the information" and "evaluate potential strategies for approaching the investigation," and "come up with a recommendation" to present to her supervisor, the Investigations Team Leader. Plaintiff was the lead investigator in several complex cases, including one where the defendant recovered $1.2 million in merchandise from a criminal warehouse. Nonetheless, plaintiff argued that she did not fit into one of the FLSA exemptions to receiving overtime pay.

Judge John Grady of the Northern District of Illinois disagreed. He looked at the requirements for the administrative exemption and found that the plaintiff met them. First he found that plaintiff's earnings exceeded the minimum of $455 per week. Second, he looked at whether plaintiff's primary duty was to perform office or non-manual work "directly related to the management or general business operations of the employer or the employer's customers." Judge Grady found that plaintiff's job tasks fit the description of "perform[ing] work directly related to assisting with the running or servicing of the business" required of the administrative exemption. Finally, Judge Grady found that plaintiff exercised discretion and independent judgment through her work. Therefore, he found that plaintiff was an administrative employee and exempt from receiving overtime wages. Per the defendant's wishes, Judge Grady dismissed the case.

Continue reading "Northern District of Illinois Finds That Target Store Investigator Meets the Administrative Exemption in Mullins v. Target Corporation" »

On March 24, 2010, the United States Department of Labor released a letter stating their opinion that mortgage loan officers do not qualify for the administrative exemption under Section 13(a)(1) of the Fair Labor Standards Act. The section maintains that administrators do not qualify for overtime.

First, the Administrator clarifies that there are a number of job titles held by employees who perform the functions of a mortgage loan officer. Those job titles include mortgage loan representative, mortgage loan consultant, and mortgage loan originator. However, it takes more than a job title to determine whether someone qualifies for the exemption; it is the employee's actual job duties and compensation which determine such exemption and employees with all of these titles generally perform the same duties and receive the same compensation as a mortgage loan officer. To simplify matters, mortgage loan officer is the title used in the letter and the title we shall use in this blog.

To fall within the category of an "employee employed in a bona fide administrative capacity" an employee's job duties and compensation must fulfill all of the following requirements: 1)The employee must be compensated on a salary or fee basis as defined in the regulations at a rate at or above $455 per week; 2)The employee's primary responsibility must consist of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers: and 3)The employee's primary responsibility must include the exercise of discretion and independent judgment with respect to matters of significance. The administrator's interpretation focuses largely on the second requirement.

To elaborate on this definition, the Administrator further enumerates that the work of an employee must be "directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment" in order to qualify for the FLSA exemption. This includes work in areas such as accounting, budgeting, quality control, purchasing, advertising, research, human resources, labor relations, etc. This definition is aimed at differentiating "between work related to the goods and services which constitute the business' marketplace offerings and work which contributes to 'running the business itself'" as cited in Bothell v. Phase Metrics Inc.

The court in Casas v. Conseco used this definition to maintain that mortgage loan officers were "production rather than administrative employees" because "Conseco's primary business purpose is to design, create and sell home lending products. As loan originators making direct contact with customers, it is plaintiffs' primary duty to sell these lending products on a day-to-day basis".

Belton v. Premium Mortgage, Inc. further supported that assertion by stating that, in determining whether an employee's primary duty is making sales, the work performed in relation to sales should also be considered sales work. This includes compiling and analyzing potential customers' financial data because "doing so is necessary to evaluate the customers' qualifications for a loan, i.e. to make a sale." Taking into account these factors of the job duties typically performed by loan officers supports the conclusion that their primary duty is to make sales.

An additional consideration in this matter is the fact that historically, mortgage loan officers were often compensated entirely by commissions, and that today many mortgage loan officers continue to be paid primarily by commissions, sometimes with a base wage, salary, or draw against the commissions. This lack of salary or low salary also makes them ineligible for the FLSA overtime exemption.

With all of the preceding evidence, the Administrator reached the conclusion that mortgage loan officers, in performing the duties described above, have a primary duty of making sales for their employers, and, therefore, do not qualify as bona fide administrative employees exempt under 13(a)(1) of the Fair Labor Standards Act.

Continue reading "The United States Department of Labor Releases Their Opinion as to Whether Mortgage Loan Officers Qualify for the Administrative Exemption Ender Section 13(a)(1) of the Fair Labor Standards Act" »

As previously discussed in this blog, the Fair Labor Standards Act (FLSA) requires employers to pay their workers "time and a half" or 1.5 times their normal hourly wage for each hour they work over 8 hours per day or 40 hours per week. However, certain employees are exempt from this requirement. The FLSA considers anyone earning a salary $23,600 and above to be exempt and it also takes into account the employee's job description. Anyone working in an "executive", "administrative", or "professional" position are also exempt from this requirement. These duties include managing employees or doing office work related to general business management.

A class and collective action complaint has been filed in the U.S. District Court for the Southern District of New York against Novo Nordisk, Inc., a Danish pharmaceuticals company. Two plaintiffs and a class of sales representatives ("reps") currently or formerly employed by Novo, are demanding $70 million in overtime pay and allege that Novo willfully misclassified its reps as exempt salaried workers when, in fact, they should have been eligible for overtime.

The two plaintiffs are New Jersey resident McKenzie Stepe and Texas resident Karen Woolen. The two pharmaceutical sales reps were allegedly required to work more than 40 hours a week by the company, but allegedly were never paid the overtime compensation required by the FLSA. Two classes of employees are defined in the complaint: An FLSA class which includes all Novo Nordisk sales reps employed in any state or territory in the U.S. from March 2009 until the present, and a New York State law class which includes all sales reps who worked for the company in New York for at least one day from March 2006 to the present and who do not opt out of the action.

Continue reading "Class Action Filed Against Novo Nordisk, Inc." »

This blog has discussed both overtime and class-action litigation. Currently filed in federal court in New York is a case which deals with both. Top fashion designer, Alexander Wang, has his factory in New York City's Chinatown and is now facing a lawsuit by 30 of his current and former employees who allege that he is running a sweatshop in which employees are regularly forced to work 16-hour days without overtime.

Wenyu Lu was allegedly forced to work 25 hours straight without a break. Exhausted, Lu was hospitalized and then fired. Flor Duante is the second plaintiff and she alleges she was forced to work 90 hours a week in Wang's factory and that she and Lu were both fired after filing for worker's compensation due to work-sustained injuries.

Wang dismisses the allegations as a retaliation from a disgruntled employee. A representative of Wang's company claims that Lu was fired for "serious harassment issues" and that the company stands by its decision to "promote a safe work environment for all employees".

However, this doesn't hold up against the fact that the claims of thirty different Wang employees are included in the initial suit. Many of the members of the class action have asked to remain anonymous because they still work for Wang and do not want to lose their jobs.

The case, initially filed in Queens Supreme Court, has changed plaintiff's counsel and the charges were dropped so that it could move into federal court. The plaintiff's have asked Federal Judge Harold Baer to certify the case as a class-action suit. As previously discussed in this blog, a case can be certified as a class-action when (1) the class is so numerous that joinder of all members is impracticable; (2) the class shares common questions of law or fact which predominate over any questions affecting only individual members; (3) the class representatives' claims are typical of those of the class; (4) the representative parties will fairly and adequately protect the interests of the class; and 5) a class action is superior to other available methods for the fair and efficient adjudication of the controversy. A plaintiff seeking class certification needs to prove that these requirements have been met, but does not need to prove that it is likely to succeed on the actual merits of the lawsuit.

Continue reading "Class Action Filed in Federal Court Against Fashion Designer Alexander Wang" »

When filing a class action law suit the plaintiffs must be able to prove that the case qualifies as a class action before it can move forward to trial. Class-action cases can result in higher recoveries and lower costs than when plaintiffs sue individually. In order to qualify, the plaintiffs must be able to prove that they incurred damages as part of a company policy rather than actions taken by individual managers.

Such is the case in McReynolds et al v. Merrill Lynch, Pierce, Fenner & Smith Inc. in which George McReynolds is suing the defendants on behalf of himself and approximately 700 current and former employees of Merrill Lynch (a branch of Bank of America) for discrimination which led to them getting paid less and having fewer opportunities for advancement than their white co-workers. The defendants allegedly steered African-American employees into clerical positions, assigning the larger accounts to white brokers and creating a hostile work environment.

In January of 2009, Bank of America bought Merrill Lynch and, as part of that acquisition, Bank of America and Merrill Lynch announced that they would pay retention and awards under an Advisor Transition Program ("ATP") to Merrill Lynch's Financial Advisors. In a company-wide broadcast to all Financial Advisors, Merrill Lynch's executives allegedly explained that the retention awards would be based on "projections of Financial Advisors' future contributions or 'production,' in essence, future commissions earned on client assets managed by the Financial Advisors." Merrill Lynch used a formula to base the retention awards on "annualized production" through September 2008.

The plaintiffs allege that Merrill Lynch's decision to design the retention awards based on annualized production credits are intentionally racist. The allegation is that African-Americans were grossly under-represented in the top quintiles and over-represented in the lowest quintiles of production credits. As a result, the plaintiffs allege that African-American Financial Advisors were disproportionately excluded from receiving retention awards and that the retention awards given to African-American Financial Advisors were lower than they would have been absent this racial discrimination.

The defendants have moved to dismiss the case for failure to state a claim. The plaintiffs countered that, while a court must rule on class certification early in the litigation, there is nothing to suggest that the merits of the case must be determined before class certification.

While recognizing that the individual actions of managers played a key role in discrimination, Judge Richard Posner also said that common issues made it more efficient to handle the brokers' cases as a group. His decision to allow the suit to proceed as a class action over-turned the ruling of a lower court which had determined that the plaintiffs had not provided sufficient evidence to justify allowing the case to proceed as a class action. The case will now return to the federal district court in Chicago.

Continue reading "Federal Appeals Court Finds That Brokerage Case is Eligible for Class Action in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith Inc. " »