The Wage and Hour Litigation Blog

Authored by Arthur Rooney

Under FLSA section 203(o), time spent “changing clothes or washing at the beginning or end of each workday” is excluded from compensable time if it is treated as non-work time by a collective bargaining agreement.  Accordingly, to determine whether the exemption applies, courts often have to decide whether certain items, such as protective boots and aprons, are “clothes” under the FLSA. 

In June 2010, the Department of Labor (“DOL”) issued an Administrator’s Interpretation addressing the definition of “clothes.”  The DOL concluded that the exception for changing “clothes” does not include protective gear, i.e., changing into and out of protective equipment is compensable. 

Moreover, the DOL stated that changing clothing--even if not itself a compensable activity--may nevertheless be considered a “principal activity” sufficient to trigger the continuous workday.  Under such an interpretation, subsequent activities performed by an employee after he or she changes “clothes,” such as waiting, walking or other travel time, could be compensable under the FLSA. 

Unlike the Opinion Letters that the DOL has issued in the past, the Administrator’s Interpretation was issued without prompting by an employer and represented a new, more proactive approach by the DOL.  Whether courts would follow the DOL’s new positions or afford its new approach for offering them any deference was unclear.

On Tuesday, Judge Posner answered these questions for the Seventh Circuit.  In a collective action brought against U.S. Steel, the plaintiffs claimed they were owed wages for time spent changing into and out of their work clothes in a locker room at the plant, and for time spent walking between the locker room and their work stations at the start and end of the day.  The company was not required to compensate for such time under the parties’ collective bargaining agreement. 

The Seventh Circuit rejected both of the plaintiffs’ claims.  First, the Court rejected the plaintiffs’ position that personal protective equipment cannot be “clothes” under the FLSA: “Protection--against sun, cold, wind, blisters, stains, insect bites, and being spotted by animals that one is hunting--is a common function of clothing, and an especially common function of work clothes by factory workers.  It would be absurd to exclude all work clothes that have a protective function from section 203(o), and thus limit the exclusion largely to actors’ costumes and waiters’ and doormen’s uniforms.”  Accordingly, the Court concluded that the work clothes at issue (flame retardant pants and jacket, work gloves, protective hood, and metatarsal boots) are “clothes” under the FLSA and, therefore, the company did not have to pay employees for donning and doffing them.  To the extent the other items (glasses, ear plugs, and a hard hat) are not “clothes,” the Court opined that time spent putting them on was not compensable because de minimis. 

Next, the Court rejected the plaintiffs’ argument that the company had to pay employees for travel time to and from the locker room even if the clothes-changing time is not compensable (i.e., they argued that a noncompensable activity nevertheless could be a “principal activity” that triggers the continuous workday).  As the Court explained, “[i]f clothes-changing time is lawfully not compensated, we can’t see how it could be thought a principal employment activity, and so section 254(a) [the Portal-to-Portal Act] exempts the travel time in this case.”  In sum, the plaintiffs’ workday started when they arrived at their work site, and not when they changed their clothes or started walking to their work areas. 

Finally, the Seventh Circuit acknowledged that its decision conflicts with the current position taken by the DOL, both in its 2010 Administrator’s Interpretation and in an amicus brief that it submitted.  Nonetheless, the Court refused to give the DOL’s views any weight because the DOL failed to adduce any institutional knowledge that might help the Court and its views changed by presidential administration.  To defer to the DOL, therefore, “would make a travesty of the principle of deference to interpretations of statutes by the agencies responsible for enforcing them . . . since that principle is based on a belief either that agencies have useful knowledge that can aid a court or that they are delegates of Congress charged with interpreting and applying their organic statutes consistently with legislative purpose.” 

This decision is important to employers in two ways.  Not only did the Seventh Circuit refuse to expand the scope of what is considered compensable time under the FLSA, but it dealt a blow to the deference given to the DOL’s interpretations of the Act.

Co-authored by Jon Meer and Brandon McKelvey

On Tuesday, a California trial court judge in Los Angeles issued a tentative ruling denying class certification in a proposed meal and rest period class action relying on the Supreme Court's recent decision in Brinker. This appears to be the first court in California to deny class certification in a proposed wage-hour class action following Brinker. If the tentative ruling is upheld, this may be a good signal for employers as to how courts will analyze class certification in meal and rest period cases following Brinker.

The lawsuit alleged that a proposed class of engineers working on cellular telephone cites throughout California were allegedly misclassified as independent contractors and not provided with meal and rest periods. Plaintiffs sued Telecom Network Specialists ("TNS"), and a variety of staffing agencies who provided engineers to TNS were also named in the suit. Seyfarth Shaw represents one of the staffing agencies named in the suit and opposed class certification along with attorneys for TNS.

At the hearing on plaintiffs' class certification motion, the Honorable John Shepard Wiley, a Los Angeles County Superior Court complex litigation judge, issued his tentative ruling denying the class certification motion and appeared inclined to adopt the tentative ruling as the final ruling. Relying heavily on Brinker, the court found that class treatment for meal and rest breaks is inappropriate based on evidence in the record showing no uniformity of policy or circumstance. The court explained that, "There is no single way to determine whether TNS is liable to the class for failure to provide breaks.  Some workers did not get breaks.  Other workers were on their own and at complete liberty to take breaks as they pleased, with no time or management pressure."  The court indicated that it would take "hundreds of witnesses" to sort this out and determine whether there was or was not liability for improper breaks.  The court went on to say, "This is not a practical trial. It is unworkable. The proposal to analyze these disputes as a class matter does not make common sense."

The court also rejected plaintiffs' reliance on the concurrence in Brinker. The court said, "[plaintiff] repeatedly cites the Brinker concurrence. The concurrence commanded only two votes. It is not the law."  This may be a good initial sign for employers who wondered how trial courts would interpret the Brinker concurrence, which seemed to suggest a lower bar for class certification in meal period cases than was provided by the actual unanimous decision.

Seyfarth Shaw will provide an update on this blog once the decision is final.

As readers of this blog know, Seyfarth Shaw is presenting a series of webinars following the publication of our book, Wage & Hour Collective and Class Litigation (Law Journal Press, 2012).  The first of this series last month, “Modeling An Effective & Efficient Defense to Wage & Hour Collective and Class Actions,” was extremely well attended. 

Our webinar series continues next Wednesday, May 2 at 1:00 p.m. EDT and will address one of the most important issues facing employers in wage and hour lawsuits, “Fighting to Win: Deconstructing Conditional & Class Certification.”   Once again the co-authors of our book, Noah Finkel, Brett Bartlett and Andrew Paley, with Senior Editor Richard Alfred, will present on this topic.  This webinar is intended only for subscribers to this blog.  If you already subscribe, all you need to do to register for this webinar is to click here.  If you are not yet a subscriber and would like to attend next week’s webinar, we invite you to join our Wage & Hour blog community by clicking here and then register for this webinar.

Our webinar will focus on strategies, options and approaches for defeating conditional certification or limiting the scope of a conditionally certified collective.  Specifically, the topics that we will discuss include:

• Piercing the Plaintiff's Cookie-Cutter Declarations: Using Early Depositions to Defeat or Limit Conditional Certification;
• A New Arrow in the Quiver Opposing Conditional Certification -- Applying Wal-Mart v. Dukes;
• Losing the Battle, But Winning the War: Negotiating a Favorable Conditional Certification "Class" Definition, Notice and Protocols during the notice period;
• Maximizing Discovery Tools for Decertification and Preventing Ultimate Certification;
• Opposing Rule 23 Class Certification of State Law Claims in Hybrid Cases Following a Ruling on Conditional Certification of the FLSA Collective Claim. 
• How the Top Three Arguments Against Ultimate Certification Are Trial, Trial, and Trial

Save the Date:  The 3rd of our webinar series, “‘Winning’ the Case: The End Game,” will be held on  Wednesday, June 6 , 2012 at 1 p.m. EDT.  A separate announcement and registration link will be distributed for that event.

Authored by Noah Finkel and Abad Lopez

Last month, a federal district court in Maryland rejected a proposed FLSA settlement as unreasonable based on the amount of the proposed attorney’s fees.  In Gionfriddo v. Zinc, et al., the Court compared the amount the individual plaintiffs were to recover ($15,000.18) to the proposed attorney’s fees ($100,000), and found the disproportionate figures unpalatable.  Review of attorney’s fees provisions in pure-FLSA settlements occurs when settling parties submit their agreement to the court for approval as a “fair and reasonable compromise” of a bona fide dispute.  Without such approval, there is a significant risk that the plaintiff will have been deemed to have never waived their FLSA claims, and thus can sue their employer again even after already having received a payment pursuant to settlement.

In rejecting the proposed settlement, the Court here used the lodestar method to evaluate the plaintiffs’ proposed attorney’s fees.  To determine the reasonable hours expended and a reasonable hourly rate, the Court considered “the amount in controversy and the results obtained in the case.”  In doing so, the Court found that the low recovery for Plaintiffs compared to the high attorney’s fees was improper.  The Court noted that “because the proposed settlement agreement provided a fee award greatly in excess of the amounts to be paid to the individual plaintiffs, that request was likely not reasonable.” 

The Court rejected Plaintiffs’ position that comparing the damages award to the attorney’s fees was improper.  In doing so, the Court adopted the “proportionality” approach to the loadstar analysis.  The Court noted that because Plaintiffs obtained only a partial victory through summary judgment, the proposed fees were unwarranted.  By accepting a small percentage of the maximum available recovery, the Court held that Plaintiffs’ attorney achieved only a limited success.  Therefore, awarding the hours expended for the entire case would be unreasonable.   The Court directed the parties to reassess the proposed fees to account for the degree of success achieved by Plaintiffs or face a hearing on the issue of damages and fees. 

There is good news and bad news for employers in this opinion.  On the one hand, it can help employers negotiate settlements with lower fee amounts -- and thus a lower total payout -- when the plaintiff achieves, or appears headed to achieve, only partial success.  On the other hand, this ruling, if followed by other courts, makes it more difficult to settle FLSA cases because it demonstrates a reluctance to approve relatively early settlements where the payment to the plaintiffs is less than the payments to the attorneys. 

Such reluctance may be misplaced.  Here, the Court applied the stringent standard for approving class action settlements under Federal Rule of Civil Procedure 23.   For class actions under Rule 23, a court may compare the proposed payment to the class with the proposed attorney’s fees.  A disproportionate attorney’s fee award may suggest a “collusive settlement,” which may be rejected.  This serves to protect absent class members.  This concern, however, is nonexistent in FLSA collective actions, because those who did not opt in to the case are not bound by the settlement.  Further, several courts have recognized that whether a compromise of a claim for back pay is a “fair and reasonable” has nothing to do with the amount of attorneys fees in the settlement.  So long as the money received by the plaintiffs is sufficient given the maximum value of their claim and the risks they face, a settlement should be approved as “fair and reasonable,” even if the attorney’s fees are high.

To avoid this situation, employers should ensure that FLSA settlement agreements provide that the underlying agreement is enforceable even if a court rejects or reduces the proposed attorney’s fees, and that plaintiffs’ counsel are obligated to dismiss the case even with a reduced fee amount.  Employers also should consider other creative approaches to avoid a court rejecting settlements due to attorney’s fee agreements that could be considered disproportionate.

By Richard Alfred, Alex Passantino, and Jessica Schauer

Seasoned advocates, an engaged bench, and the hottest area of employment law made for an exciting oral argument this morning at the U.S. Supreme Court in the matter of Christopher v. SmithKline Beecham Corp. d/b/a GlaxoSmithKline.  As readers of this blog are aware, the Christopher case involves the application of the FLSA’s outside sales exemption to pharmaceutical sales representatives (PSRs).  It also – perhaps more significantly – addresses the appropriate degree to which courts should defer to statements made by the Department of Labor (DOL) in amicus briefs filed in pending litigation.

Clearly weighing on the minds of the Justices was the significant impact this decision would have on the 90,000 PSRs and their employers.  With massive retroactive liability at stake in the event that DOL’s position is accepted by the Court, the Justices were extremely engaged, asking questions that tested both the substantive definition of  “sale” under the FLSA, as well as the limits on DOL’s interpretive authority.

At the outset, all parties and the Justices themselves seemed in agreement that the PSR job has many of the typical attributes of a sales position.  Rather than belabor that point, the Justices focused on the limits of the term “sale” and whether a binding commitment or transfer of title are required.  The Justices asked the PSRs, represented by Tom Goldstein, founder of SCOTUSBlog, whether the PSRs’ position is consistent with language in Section 3(k) of the statute that defines “sale” to include “consignments for sale.”  In addition to examining whether DOL is correct in requiring a sale to include a “transfer of title,” the Justices questioned what kind of commitment PSRs obtain, noting that any promise to prescribe that they receive from physicians is necessarily non-binding.  Justice Scalia commented that application of the exemption in the pharmaceutical industry should take account of the peculiarities of that line of commerce.

SmithKlineBeecham’s counsel, former Solicitor General Paul Clement, noted the absurdity of DOL’s “transfer of title” rule:  imagine two PSRs, sitting side by side in a physician’s office, making the same types of pitches to the same doctor, compensated on the same basis, and working for the same company.  Under DOL’s bright-line rule, a PSR who sells drugs will not be exempt, but a PSR who sells medical devices would be exempt.    

Several Justices’ questions indicated concerns about the fact the DOL’s position was set forth in a series of amicus briefs, rather than in regulations promulgated by notice-and-comment rulemaking.  After 75 years in which DOL took no action challenging the exempt status of hundreds of thousands of PSRs, the Justices seemed reluctant – to varying degrees – to sign off on DOL’s newly-stated position.  Justice Scalia questioned DOL’s authority to expand the definition of sales beyond that set forth in the statutory definition found in section 3(k) of the FLSA.  Justice Kagan probed the issue of the existence of yet another (arguably inconsistent) regulatory definition of “sales” (found in Part 779 of 29 CFR).  Justice Breyer stated that the “right way” to effect a regulatory change is through notice and comment rulemaking.  And, Justice Kennedy suggested that filing amicus briefs as a way to effect regulatory change is not fair to the regulated community. 

As Justice Scalia noted, it is part of DOL’s plan to “run around” the country and file amicus briefs, and the unfair surprise and associated sudden and unexpected retroactive liability resulting from that strategy was a theme throughout the argument.  Rather than representing careful consideration by the policy-making officials at DOL, these briefs – and many other recent DOL positions – were advanced by lawyers in the Solicitor’s Office of DOL without input from all potentially affected parties.  Obviously well short of notice-and-comment rulemaking, the Justices will now determine how much to defer to statements in DOL’s amicus briefs; with that decision may lie the fate of DOL’s amicus program.

Ultimately, the Court's questions indicated that not only the Court, but the Justices themselves, are divided, with Justice Breyer calling the issue before them a "hard question."  A written decision is expected by the end of June.  We will update readers when that opinion issues.