Corporate Parent of Railroad Subsidiary Held Not Liable for Overtime
Authored by Rob Carty
It’s been said that when you can’t break through an obstacle, try going around it. That’s exactly what the plaintiffs tried to do (unsuccessfully) in an FLSA case recently decided by the Tenth Circuit Court of Appeals. Dennis v. Watco Companies, Inc., No. 10-6079 (10th Cir. Jan. 21, 2011).
The plaintiffs, two railway employees, filed a collective-action lawsuit to recover unpaid overtime compensation under the FLSA. But they faced a critical problem: They were railway employees, and the FLSA expressly exempts from its overtime requirements “any employee of an employer engaged in the operation of a rail carrier.” 29 U.S.C. § 213(b)(2). Knowing that this exemption threatened to preclude their claims, the plaintiffs concocted a strategy to neutralize it.
Instead of suing their respective employers—two rail carriers—they took aim at Watco, the parent corporation that ultimately owned both companies. The plaintiffs tried to justify their strategy with a two-part argument: first, that Watco and the railway companies were joint employers, thus making Watco liable for overtime pay; and second, that Watco could not assert the rail-carrier exemption because it was not itself a rail carrier. Without the exemption, the plaintiffs reasoned, they could proceed with their suit.
The district court rejected the plaintiffs’ arguments and, finding that the rail-carrier exemption plainly applied, dismissed the case at the outset. The plaintiffs appealed to the Tenth Circuit, which agreed with the district court and affirmed the dismissal. Citing the plaintiffs’ own pleadings, the Court found that they worked for rail carriers and performed railroad work; and that for this reason alone, the rail-carrier exemption barred their claims. It didn’t matter whether Watco was a rail carrier—in FLSA parlance, the plaintiffs were “employee[s] of an employer engaged in the operation of a rail carrier,” and thus were subject to the exemption.
Because it didn’t matter whether Watco was a carrier, the Court didn’t have to decide the joint-employment issue; the same result would have occurred either way. The plaintiffs also tried a few other arguments—none worth mentioning here—but the Tenth Circuit rejected them all. Ultimately, the Tenth Circuit simply relied on the FLSA’s plain language and rebuffed the plaintiffs’ attempts to get around it. Some obstacles are just too big to avoid.