Co-authored by Rachel M. Hoffer and John Phillips

Seyfarth Synopsis: Vampire Weekend crassly and rhetorically asked us, “Who gives a f*** about an Oxford comma?” As it turns out, lots of people: First Circuit judges, dairy farmers in Maine, truck drivers, your authors—the list goes on.

And when lists go on—as a Maine dairy company recently learned the hard way in O’Connor v. Oakhurst Dairy—that little comma between the last item and the next-to-last item goes a long way in avoiding any ambiguity. In that case, a group of dairy delivery drivers sued Oakhurst, claiming the company failed to pay them overtime under Maine’s wage and hour laws.

Oakhurst argued that dairy delivery drivers are overtime-exempt under Maine’s “Exemption F.” Under Exemption F, Maine’s overtime law does not apply to:

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.

Now, we can all agree that dairy products are “perishable foods,” and the parties agreed that the drivers were not involved in canning, processing, preserving, freezing, drying, marketing, storing, or packing any food. The case came down to whether the drivers engaged in “packing for shipment or distribution.”

The drivers argued that this phrase refers to a single activity of “packing,” whether the packing be for shipment or for distribution. As they did not pack food, the drivers reasoned, Exemption F did not apply to them. Oakhurst argued that the phrase actually refers to two different activities: “packing for shipment” and “distribution.” As the drivers clearly engaged in the distribution of food, Exemption F did apply to them.

The district court didn’t need a comma between “packing for shipment” and “or distribution” to be convinced that “packing for shipment” and “distribution” are each stand-alone exempt activities under the statute; it granted summary judgment in favor of Oakhurst. On appeal, the dairy company found a much tougher customer in the First Circuit.

The First Circuit set out to determine for itself what the contested phrase means. Because Maine’s high court had not interpreted Exemption F, the court looked to the plain language of the statute. Here, the court had an udder field day, parsing the language of the statute and applying rules of statutory construction. But, for want of an Oxford comma, the First Circuit found the statute ambiguous, no matter what rules or conventions it applied:

  • The Rule Against Surplusage: a court should give independent meaning to each word in a statute and treat no word as unnecessary. Oakhurst argued that “shipment” and “distribution” mean the same thing, so the Maine legislature could not have meant both to modify “packing.” The First Circuit disagreed, noting that Maine includes both “distribution” and “shipment” together in other lists in its statutes and finding that the words do not necessarily mean the same thing. Conclusion? Still ambiguous.
  • The Parallel Usage Convention: “every element of a parallel series must be a functional match of the others (word, phrase, clause, sentence) and serve the same grammatical function in the sentence (g., noun, verb, adjective, adverb.).” The drivers pointed out that every activity in Exemption F is a gerund—“canning,” “processing,” “preserving,” “packing,” etc.—but that both “shipment” and “distribution” are not. If the words “shipment” and “distribution” are read as the object of the preposition “for,” i.e., “packing for shipment” and “packing for distribution,” the statute doesn’t violate the convention—and “packing for shipment” and “distribution” do not constitute stand-alone exempt activity under the statute. But if “packing for shipment” and “distribution” are read as stand-alone activities, then we have gerunds and non-gerunds in a parallel series, which violates the convention and is an affront to grammarians everywhere. The First Circuit seemed to agree that the drivers’ construction wasn’t as messy grammatically but stopped short of saying that the parallel usage convention resolved the ambiguity. In other words, still ambiguous.
  • Maine’s Aversion to the Serial Comma: Maine’s legislative drafting manual instructs drafters of laws and rules not to use the Oxford comma. The dairy company argued that, because of this instruction, its construction must be right; we should just read the statute as if it included the prohibited comma. But, as the drivers pointed out, the manual isn’t “dogmatic on that point,” and it provides guidance on how “to avoid the ambiguity that a missing serial comma would otherwise create.” The court agreed that the missing serial comma—if indeed there was a missing serial comma—created ambiguity, casting doubt on whether this was a case of a missing serial comma at all. So, still ambiguous.
  • The Convention of Using Conjunctions: drafters typically use a conjunction like “and” or “or” to mark off the last item in a list. Oakhurst emphasized that there is no conjunction before “packing” in Exemption F, but there is a conjunction before “distribution.” While the First Circuit considered this “Oakhurst’s strongest textual rejoinder,” that wasn’t the final word on matter. The drivers fought back with asyndeton—a technique in which drafters make a list without using conjunctions, citing zero examples of Maine drafters using this technique—and Latin—specifically, the noscitur a sociis canon, which requires giving words grouped in a list “related meaning.” Like a glass of skim milk, the court found the drivers’ response “hardly fully satisfying,” but it was enough to keep their case alive. Yep. Still ambiguous.

With all this textual ambiguity, and “no comma in place to break the tie,” the First Circuit turned to the legislative history and statutory purpose to guide its interpretation of the statute. After churning out another five or so pages of analysis, the court concluded that these too were unhelpful in resolving the ambiguity.

Finding no other way to resolve the ambiguity, the First Circuit reverted to the default rule of construction under Maine law for ambiguous wage and hour laws: liberally construe the statute to further the purpose for which it was enacted. In other words, the court accepted the drivers’ narrower construction of the exemption and reversed the district court’s summary-judgment ruling.

Now, maybe you’re not an employer in a perishable food industry in Maine; chances are, you aren’t. But courts also narrowly construe the FLSA’s exemptions against employers. For that and other reasons, its always a good idea to periodically review whether the employees you’ve classified as exempt truly qualify for an exemption. Otherwise, like Oakhurst, you may find yourself crying over spilled milk.

Authored by Simon L. Yang

Seyfarth Synopsis: Sometimes, plaintiffs’ attorneys have circumvented a key aspect of the California Legislature’s intent in enacting PAGA: limiting standing to pursue penalties for Labor Code violations to those employees who were actually harmed. Though a new California bill could halt those attempts, PAGA plaintiffs’ wiliness warrants a cautionary comment to the Legislature to ensure that any amendment furthers—rather than further frustrates—the original legislative intent.

A New PAGA Bill: Employers should be optimistic that the California Legislature continues to propose bills seeking to curtail PAGA abuse. One recently introduced bill would advance three laudable goals, to close loopholes and preclude arguments that have encouraged absurd interpretations of the original PAGA statute. But the Legislature should mindfully proceed. While one proposed change is straightforward, a second creates confusion absent a quick fix, and a third requires revisiting PAGA’s legislative intent to consider what amendment would be best.

Extension of Time for Employers to Exercise Right to Cure Violations: The first part of the pending bill proposes a clearly needed fix of an oversight within the 2016 amendment. As previously noted, 2016 legislation provided the LWDA with more time to respond to PAGA letters, but failed to also extend the employer’s time to respond. The pending bill would provide employers with 65 days to cure certain Labor Code violations.

Expansion of Scope of Violations Subject to Right to Cure: The proposed bill would also broaden the availability of the right to cure. Currently, many violations are specifically excluded from the cure provisions. According to the bill, an amendment would “exclude only the health and safety violations from the right to cure provisions.” The proposed text within the bill, however, falls short and would create confusion.

A quick fix is all that would be needed, though. To achieve the declared intent, the proposed amendments within Labor Code section 2699.3(c) (providing procedures for curable violations) should be accompanied with deletion of section 2699.3(a), which currently provides procedures lacking any right to cure but applying to some of the Labor Code violations the bill intends to make curable.

Reemphasis on PAGA’s Standing Requirement: The third proposal is the most interesting. The bill’s suggested amendment would reemphasize that “an aggrieved employee may be awarded civil penalties based only upon a violation by the employer actually suffered by that employee.”

At first glance, the proposal restates a given, but it likely responds to some plaintiffs’ efforts to obliterate PAGA’s standing requirement. These plaintiffs have misled courts into believing that an employee aggrieved by one Labor Code violation can invoke PAGA to seek penalties for other violations that the employee never experienced.

That isn’t right. Even PAGA’s initial proponents, in 2003, explained that a standing requirement meant that a PAGA plaintiff could only be someone who had been subjected to the Labor Code violation for which that plaintiff sought to recover penalties:

Only Persons Who Have Actually Been Harmed May Bring An Action to Enforce The Civil Penalties. Mindful of the recent, well-publicized allegations of private plaintiff abuse of [California’s unfair competition law (the “UCL”)], the sponsors state that they have attempted to craft a private right of action that will not be subject to such abuse. Unlike the UCL, this bill would not permit private actions by persons who suffered no harm from the alleged wrongful act. Instead, private suits for Labor Code violations could be brought only by an employee or former employee of the alleged violator against whom the alleged violation was committed. This action could also include fellow employees also harmed by the alleged violation.

The legislative history is consistent throughout, and the final bill analysis preceding PAGA’s enactment maintained that PAGA plaintiffs must have suffered harm from an alleged violation. Those individuals could seek penalties on behalf of “other current or former employees against whom one or more of the alleged violations was committed.” Simply put, someone who was aggrieved by certain Labor Code violations could be a PAGA plaintiff and could sue on behalf of others who also were subject to any of those violations.

But PAGA plaintiffs argue that the enacted statute is contrary. They seize upon PAGA’s definition of an “aggrieved employee,” which they read to comingle concepts. Specifically, they argue that PAGA confers standing not only on those plaintiffs whom the Legislature intended to have standing to be a PAGA plaintiff (i.e., those “against whom the alleged violation was committed”) but also on those employees on whose behalf the PAGA plaintiff could sue (i.e., those “against whom one or more of the alleged violations was committed”).

The result is that absurd arguments abound. For example, some PAGA plaintiffs assert that a non-exempt employee who suffered an expense reimbursement violation can recover penalties on behalf of employees who have been misclassified as exempt!

Two Cents for the Legislature: The proposed amendment—a new Labor Code section 2699.4 establishing that “an aggrieved employee may be awarded civil penalties based only upon a violation by the employer actually suffered by that employee”—is a welcomed attempt to put an end to the silliness. But the proposal restates what was intended to be an evident truth.

Adding a provision to clarify original intent could be argued is unnecessary, especially since the Legislature could simply revisit the definition of an “aggrieved employee.” The definition presently can and should be read without absurdity, but PAGA plaintiffs contort statutory language to assert illogical arguments (like the ability to recover penalties as being irrelevant to standing).

In sum, enacting section 2699.4 to preclude an award of penalties for a violation that a PAGA plaintiff has not suffered merely restates the standing requirement that precludes such an award in the first instance. To the extent the Legislature finds a need to respond to PAGA plaintiffs’ tactics, enacting section 2699.4 might be unnecessarily complicated. A simple amendment to the definition of an aggrieved employee would have the same result.

N.D. CalAuthored by Eric Hill

Seyfarth Synopsis: Airline customer service representative denied pay for pre-employment 10-day classroom training program under the FLSA and California Labor Law.

The maxim “it is extremely difficult to find someone to pay you to learn” has been proven again! This must be why we, or at least most of us, eventually leave school to enter the working world.

Meanwhile, the trend in the law is clear:

  1. Where trainees are truly “learning,” as a precursor to “working,” and are the primary beneficiary of pre-employment training, there is no duty to pay them.
  2. But, where the trainee’s “on the job” training involves performing work an employee would otherwise perform (to the employer’s financial advantage), the trainee must be paid.

In a January 9, 2017 ruling, Judge Vince Chhabria of the Northern District of California held that a customer service representative for Hawaiian Airlines was not entitled to be paid during a 10-day pre-employment training program that consisted of classroom work and tours of the facilities rather than actual “on-the job” customer service training. The decision is notable for its practical, straightforward analysis regarding when trainees should be paid under federal and California law.

The Court adopted the “primary beneficiary test,” cautioned against a mechanistic application of the six Department of Labor criteria, and granted Hawaiian Airlines summary judgment. (While the lawsuit is a proposed class action, the parties opted to file cross-motions for summary judgment before litigating the class certification question.)

According to the Court, the key question was whether the airline was taking financial advantage of the trainee during the training program by using her to perform work that an employee would otherwise perform. Because the plaintiff did not perform the work of the customer service employees, the Court found no reasonable juror could conclude she was acting as an “employee” during her training course.

The Court noted the classroom instruction and touring were only precursors to performing the work of an employee. The airline did not receive any direct benefit from the training, which taught trainees about FAA regulations, the computer system, and the way the company operated. Because the airline was not using the trainees as “anything close to employees,” the plaintiff was the “primary beneficiary” of the training.

As is the trend, the Court rejected the argument that a trainee is an employee unless the employer can satisfy all six of the DOL’s criteria. Stating that the six criteria are “relevant but not conclusive,” the Court focused instead on whether the trainee or the employer was the “primary beneficiary” of the training. It warned against “mechanistically applying the six criteria,” and called the case “a good illustration” of why “just about every court” has “rejected the Department of Labor’s approach.”

The Court emphasized that the DOL’s criteria seem to be designed for true “on-the-job” training, whereas the plaintiff here was not involved in this type of training. The Court also pointed out there is no difference between the federal and California legal standards for determining whether a worker qualifies as an “employee” during training.

Despite its warnings about reliance on the six DOL criteria, the Court found that application of the criteria would lead to the same result. The criteria are:

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.
  2. The training is for the benefit of the trainees.
  3. The trainees do not displace regular employees, but work under close observation.
  4. The employer that provides the training derives no immediate advantage from the activities of the trainees; and on occasion his operations may actually be impeded.
  5. The trainees are not necessarily entitled to a job at the conclusion of the training period.
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent training.

This decision is not the first “training time” case to grant summary judgment to an employer under these circumstances. Despite the positive trend, these cases are highly fact-driven and do not foreclose the possibility that trainees will be deemed to be employees. But they do signal that, where trainees are not performing the work of the employees and are not engaging in traditional work-alongside-the-employees “on the job” training, they do not cross the line from “trainee” to “employee” and need not be paid as a matter of law.

Authored by Rachel M. Hoffer

It’s a common business model in the fast-food industry: a massive restaurant company provides the menu, the marketing—including catchy slogans and a universally recognized logo—and the basic operational standards for the restaurant,
and a franchisee provides the rest—including hiring, training, and firing restaurant employees. Unfortunately for the fast-food giants (the notorious FFGs, if you will), it’s also common for disgruntled employees to name them in lawsuits—particularly super-sized class-action lawsuits—against the franchisee.

In March 2014, three fast-food workers from Oakland did just that—they sued the family-owned company that operates 8 franchise restaurants in Northern California, and they brought the FFG along for the ride under a joint employment theory, serving up a complaint chock full of California Labor Code, Private Attorneys General Act (PAGA), and negligence claims. Last August, a federal judge in California dismissed the negligence claim on summary judgment and rejected the workers’ theory that the franchisee acted as the FFG’s actual agent. But the judge didn’t toss out the workers’ claims completely, finding the plaintiffs had presented enough evidence of ostensible agency to have their day in court with the FFG.

Determined to have it their way, right away, the plaintiffs settled their claims against the franchisee but moved to certify a class of more than 1,200 hourly workers who had worked at the franchisee’s eight restaurants. Unwilling to pick up the franchisee’s remaining tab, the FFG moved to deny class certification and to strike the representative PAGA claim. And the FFG did what Giants tend to do in San Francisco—it won. Last week, the judge found that the workers’ ostensible agency theory required too many individualized inquiries to be decided on a class basis.

Under an ostensible agency theory, the FFG is on the hook for the franchisee’s actions if the worker can prove: (1) in dealing with the franchisee, the worker reasonably believed the franchisee had the authority to act on the FFG’s behalf; (2) the worker’s belief was caused by something the FFG did or failed to do; and (3) the worker wasn’t negligent in relying on the franchisee’s apparent authority.

The workers argued that the questions of law or fact common to potential class members outweighed the questions that affected only individual members, and that a class action was the best way to fairly and efficiently decide their claims. In support of this argument, the workers asserted that the “belief” prong of the first requirement—that the potential class members believed the franchisee had the authority to act for the FFG—could be inferred from the circumstances. The judge wasn’t convinced that the law allows such an inference, nor was he convinced that the evidence supported such an inference. Instead, the evidence showed that class members received different information about the franchisee’s authority, and some actually understood that the FFG was not their employer. So, the question of belief had to be decided on an individual basis.

The judge also found that there was no way to determine, on a class basis, whether such a belief was reasonable and not negligent. Rather, what each worker knew (or should have known) varied depending on the circumstances. Some workers, for example, were told during orientation that the franchisee was their employer and the FFG was not. Some workers received and read documents informing them that the franchisee, not the FFG, was their employer; others either did not receive or did not read that paperwork. In other words, whether a belief was reasonable and not negligent depended on the information available to each worker.

Likewise, the judge found that reliance can’t be determined on a class-wide basis. The workers—pointing to out-of-context case law—argued that courts often presume reliance when there is no evidence that the plaintiff knew or should have known that the purported agent was not an agent of the principal. But even if that case law applies in the franchise context, the workers’ argument begged the question; the presumption couldn’t apply on a class-wide basis because, as the judge had already explained, the knew-or-should-have-known question couldn’t be answered on a class-wide basis. The order: individualized inquiries, all the way.

The workers also argued that the court should certify a class because they were seeking injunctive relief on a class-wide basis. But the judge didn’t see how an injunction against the FFG could help the franchisee’s employees, when he had found in his summary-judgment opinion that the FFG didn’t control the aspects of their employment at issue in the case. Simply put, where’s the beef?

The workers’ PAGA claim fared no better; the judge found that a representative PAGA action wouldn’t be manageable because it relied on the ostensible agency theory, which could only be established through individualized inquiries. So, while the three plaintiffs can still pursue their individual claims against the FFG on an ostensible agency theory, those are small fries compared to the representative claims they had hoped to bring on behalf of more than 1,200 other workers.

The take-home for the notorious FFGs who franchise independent restaurant owners, of course, is to stay out of the kitchen when it comes to the relationship between the franchisee and its employees. And, for the FFGs’ sake, franchisees should make sure employees know where their bread is buttered.

Co-authored by Gerald L. Maatman, Jr. and Jennifer A. Riley

Seyfarth Synopsis: In McCaster v. Darden Restaurants, the Seventh Circuit affirmed the District Court’s order denying class certification of claims for denial of earned vacation benefits at separation and granting summary judgment on part-time workers’ claims for accrual of benefits under policies that limited eligibility to full-time employees. The decision is an important one for vacation pay claims, as well as defense strategies to block class certification in wage & hour litigation.


Employers who offer vacation benefits have been subject to confusing and inconsistent rulings about eligibility requirements and accrual of benefits, along with litigation from enterprising plaintiffs’ class action lawyers seeking to take advantage of such uncertainty. On January 5, 2017, the U.S. Court of Appeals for the Seventh Circuit provided some welcome clarity when it rendered an employer-friendly decision in McCaster v. Darden Restaurants, Inc., No. 15-3258 (7th Cir. Jan. 5, 2017).

The Seventh Circuit ruled that eligibility requirements, like those limiting paid vacation benefits to full time employees, do not run afoul of “length of service” concepts that prohibit forfeiture of earned vacation benefits upon separation. Further, the Seventh Circuit set the bar for plaintiffs seeking to pursue such violations on a class-wide basis, holding that they may not do so without demonstrating an unlawful practice that spans the entire class of individuals subject to the vacation policy. As such, the Seventh Circuit’s opinion should have far-reaching implications.

Factual Background

Plaintiffs worked intermittently as hourly employees at Darden-owned restaurants for a period of time spanning roughly eight years. Id. at 2. McCaster worked primarily worked at a Red Lobster before June 1, 2008, and Clark primarily worked at an Olive Garden after June 1, 2008. Id. at 2-3.

During this time, Darden paid eligible employees vacation or “anniversary” pay when they reached the annual anniversary of their hiring date. Id. at 3. When an employee ceased working for the company, Darden included in the employee’s final paycheck the pro rata amount of anniversary pay he had earned prior to the date of separation. Id. Starting June 1, 2008, Darden limited vacation pay to full-time employees, defined as those who worked at least 30 hours per week. Id.

In this proposed class action, McCaster alleged that, prior to June 1, 2008, Darden failed to pay him accrued vacation pay when he left his job at Red Lobster, even though he had earned about 12 vacation hours in violation of the Wage Payment Collection Act (“IWPCA”). Id. Clark alleged that, after June 1, 2008, Darden failed to pay her vacation pay when she separated from employment. Id. at 3-4.

Plaintiffs moved to certify a class of “[a]ll persons separated from hourly employment with [Darden] in Illinois . . . who were subject to Darden’s Vacation Policy … and who did not receive all earned vacation pay benefits.” Id. at 4. The District Court rejected this definition because it described an improper fail-safe class. The District Court also rejected the plaintiffs’ proposed alternative definition because it failed to meet the requirements of Rule 23. Id.

Darden moved for partial summary judgment on Clark’s individual claim. Id. The company argued that Clark was not eligible for vacation pay during the relevant time period because she worked part-time. The District Court agreed and granted the motion. Id. at 5. McCaster subsequently settled his individual claim but reserved the right to appeal the denial of class certification. This appeal followed.

The Seventh Circuit’s Opinion

The Seventh Circuit affirmed the District Court’s orders denying class certification and granting summary judgment.

At the outset, the Seventh Circuit held that, because Darden’s vacation-pay policy covered only full-time employees, Clark did not qualify for benefits. Id. at 5. Clark argued that if an employer provides paid vacation to its full-time employees on a pro rata length-of-service basis, it may not deny this same benefit to its part-time employees. The Seventh Circuit rejected Clark’s argument.

The Seventh Circuit held that Clark’s interpretation had no support in the text of the IWPCA, its implementing regulations, or in Illinois cases interpreting it: “[T]he Act merely prohibits the forfeiture of accrued earned vacation pay. Whether an employee has earned paid vacation in the first place depends on the terms of the employer’s employment policy.” Id. at 6. Because Clark did not work full time, she did not accrue benefits subject to forfeiture at separation.

The Seventh Circuit further concluded that the District Court did not abuse its discretion in denying class certification. Id. at 8. The Seventh Circuit held that, under Plaintiffs’ class definition, class membership turned on whether class members had valid claims. As such, Plaintiffs defined “a classic fail-safe class,” which the District Court properly rejected. Id. at 9.

Although Plaintiffs offered an alternative definition free from fail-safe concerns, including “[a]ll persons separated from hourly employment with [Darden] in Illinois . . . who were subject to Darden’s Vacation Policy.” the Seventh Circuit held that the District Court properly rejected it for failure to satisfy the requirements of Rule 23. Id. at 10.

The Seventh Circuit concluded that Plaintiffs’ alternative class failed to satisfy the commonality requirement. Id. at 11. Whereas the proposed alternative class consisted of all separated employees from December 11, 2003, to the present, Plaintiffs failed to identify any unlawful conduct on Darden’s part that spanned the entire class and caused all class members to suffer the same injury. Plaintiffs simply argued that some separated employees did not receive all the vacation pay they were due. The Seventh Circuit noted that “[t]hat may be true, . . . But establishing those violations (if there were any) would not involve any classwide proof.” Id. at 12.

Implications For Employers

The Seventh Circuit provided welcome clarity for employers that maintain vacation policies by cutting through conflicting case law and setting the bar for class certification of supposed violations. McCaster establishes that employers may set eligibility requirements that differentiate workers and rejects the notion that part-time workers accrue vacation benefit under a policy that limits participation to full-time employees. Further, in setting a bar for certification of such cases, the Seventh Circuit made clear that the commonality requirement remains a significant threshold for plaintiffs seeking to litigate their claims on a representative basis. It rejected the notion that mere violations of a pay policy are eligible for resolution on a class basis without some evidence of a state-wide practice that caused all class members to suffer the same injury. As a result, the opinion should have far-reaching and lasting impact.

Authored by

Seyfarth Synopsis: In what many employers will see as a “break” from workplace reality, the Supreme Court, in Augustus v. ABM Security Services, Inc., announced that certain “on call” rest periods do not comply with the California Labor Code and Wage Orders. As previously reported on our California Peculiarities Employment Law Blog, this decision presents significant practical challenges for employers in industries where employees must respond to exigent circumstances.


On December 23, 2016, the California Supreme Court issued its long-anticipated decision in Augustus v. ABM Security Services, Inc., affirming a $90 million judgment for the plaintiff class of security guards on their rest break claim. The Supreme Court found that the security guards’ rest breaks did not comply with the California Labor Code and Wage Orders, because the guards had to carry radios or pagers during their rest breaks and had to respond if required.

The Supreme Court took a very restrictive view of California’s rest break requirements, concluding that “one cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest breaks.” Thus, in the Supreme Court’s view, an employers may not require employees to remain on call—“at the ready and capable of being summoned to action”—during rest breaks.

See our One Minute Memo for more details on the decision and thoughts on the implications of this case for California employers. The Augustus decision presents significant practical challenges for employers, especially in industries in which employees must be able to respond to exigent circumstances.

Workplace Solution:

The holding that “on call” rest periods are not legally permissible should prompt employers to evaluate their rest-break practices. In industries where employees must remain on call during rest periods, employers should consider seeking an exemption from the Division of Labor Standards Enforcement. Lawyers in the Seyfarth California Workplace Solutions group can assist with other suggestions for responding to this decision.

Authored by Robert S. Whitman and Howard M. Wexler

Amid the uncertainty concerning the DOL’s enjoined overtime exemption rules and similar state-led efforts to increase the salary threshold, such as in New York, the Second Circuit recently gave employers an early holiday present when it resolved a long-standing split among New York federal courts and held that “New York’s law does not call for an award of New York liquidated damages over and above a like award of FLSA liquidated damages.”

Under the FLSA, an employer that underpays an employee is liable in the amount of those unpaid wages “and in an additional equal amount as liquidated damages” if it did not act in good faith.  Similarly, under the NYLL, liquidated damages in the amount of 100% total wages due are mandatory unless the employer proves its good faith.  The NYLL is silent as to whether it provides for liquidated damages in cases where liquidated damages are also awarded under the FLSA.

In Chowdury v. Hamza Express Food Corp. et al., an employee challenged the damages award he received after his former employer defaulted in his lawsuit for unpaid wages under the FLSA and New York Labor Law.  The employee sought two discrete liquidated damages awards: one under the FLSA and one under the NYLL.  Noting a split among district courts as to whether such “cumulative” or “stacked” liquidated damages awards are available, the Magistrate Judge recommended denial of a cumulative award, concluding that it would be an unfair double recovery.  The District Court adopted the Magistrate Judge’s recommended ruling.

The Second Circuit affirmed.  It held that “double recovery” of liquidated damages under the FLSA and NYLL was unwarranted. “Had the New York State legislature intended to provide a cumulative liquidated damages award under the NYLL, we think it would have done so explicitly in view of the fact that double recovery is generally disfavored where another source of damages already remedies the same injury for the same purpose.”  Accordingly, the court held, “In the absence of any indication otherwise, we interpret the New York statute’s provision for liquidated damages as satisfied by a similar award of liquidated damages under the federal statute.”

The decision is a big win for employers as it resolves what has frequently been a bone of contention between parties litigating (and trying to resolve) wage and hour lawsuit in New York brought under the FLSA and NYLL, and potentially could be used in other states where penalties under wage-and-hour laws serve the same purpose as the FLSA’s liquidated damages provision.  The potential exposure in New York cases is already high enough to give employers the holiday blahs:  back wages, 100% liquidated damages, 9% pre-judgment interest, a 6-year limitations period, and attorneys’ fees.  This decision at least removes the possibility that plaintiffs will claim, like George Costanza, an entitlement to “double dip.”

Happy Holidays!

NYDOLAuthored by Robert S. Whitman and Howard M. Wexler

As we all know, the revisions to the FLSA’s “white collar” exemptions will take effect December 1 and will increase the salary level required for the executive, administrative, and professional exemptions to $913 per week (or $47,476 per year).  Avid wage and hour practitioners in New York have been waiting to see if the State DOL would propose a similar increase for exempt status under the NY Labor Law.

The wait is over.

On October 19, State DOL proposed amendments to its existing wage orders that would increase the salary threshold from the current $675 per week.  In keeping with the upcoming gradual increase in the State’s minimum wage levels, the proposal would raise the salary threshold in tiers:

Large Employers (11 or more employees) in New York City

  • $825.00 per week on and after 12/31/16;
  • $975.00 per week on and after 12/31/17; and
  • $1,125.00 per week on and after 12/31/18;

Small Employers (10 or fewer employees) in New York City

  • $787.50 per week on and after 12/31/16;
  • $900.00 per week on and after 12/31/17;
  • $1,012.50 per week on and after 12/31/18; and
  • $1,125.00 per week on and after 12/31/19;

Employers in Nassau, Suffolk, and Westchester Counties

  • $750.00 per week on and after 12/31/16;
  • $825.00 per week on and after 12/31/17;
  • $900.00 per week on and after 12/31/18;
  • $975.00 per week on and after 12/31/19;
  • $1,050.00 per week on and after 12/31/20; and
  • $1,125.00 per week on and after 12/31/21;

Employers Outside of New York City, Nassau, Suffolk, and Westchester Counties

  • $727.50 per week on and after 12/31/16;
  • $780.00 per week on and after 12/31/17;
  • $832.00 per week on and after 12/31/18;
  • $885.00 per week on and after 12/31/19;
  • $937.50 per week on and after 12/31/20

If these salary thresholds are adopted, the minimum requirement for exempt employees in New York will surpass the federal threshold of $973 at various points in time, the earliest on December 31, 2017 for “large” New York City employers.  However, the FLSA salary levels are subject to automatic revision every three years, beginning in 2020, based on the 40th percentile of full-time salaried workers in the region in which the salary level is lowest (historically, the South).

In addition to the increased salary threshold, the proposed Wage Orders also adjusts the amount employers can deduct for a uniform allowance and claim as a meal and tip credit in line with the gradual increase of the minimum wage toward $15.

While these are proposed amendments, we expect they will be implemented given that they track the forthcoming minimum wage increases.  The Department of Labor will receive public comments until December 3, 2016.  We will update you once the regulations become effective.

 

Authored by Simon L. Yang

Seyfarth Synopsis: When the California Supreme Court said no to PAGA waivers in its 2014 Iskanian ruling, we asked whether employers would boldly go where few have gone before and implement arbitration agreements requiring arbitration of PAGA claims. A recent California Court of Appeal decision issued in Perez v. U-Haul Company of California warrants revisiting that question.

Many employers stayed the course in 2014 and continued including PAGA waivers within their arbitration agreements, since numerous federal district courts continued disagreeing with and refusing to apply Iskanian’s logic.

And even when in 2015 the Ninth Circuit instructed federal district courts to apply Iskanian, many employers continued using arbitration agreements with PAGA waivers, since PAGA litigation could be severed and stayed while a plaintiff’s individual claims were arbitrated. If the employer prevailed on the individual claims in arbitration, the plaintiff would not be an aggrieved employee, would not have standing under PAGA, and would thus be unable to pursue mooted PAGA claims.

By 2016 plaintiffs have made the availability of that option scarcer. To avoid having to prove standing by prevailing on their individual claims before pursuing otherwise stayed PAGA claims, plaintiffs now commonly prefer to file PAGA-only lawsuits, without alleging individual claims.

The two putative Perez class representatives, however, had pursued both individual and PAGA claims. Predicting and seeking to avoid a stay of their PAGA claims, the Perez plaintiffs hopped onto the PAGA-only bandwagon by amending their complaints to allege a PAGA cause of action only—abandoning their individual claims, their roles as potential class representatives, and putative class members’ individual rights.

U-Haul fought back and sought to require arbitration of the predicate issue of whether the plaintiffs themselves had been subject to any Labor Code violations. Even though U-Haul was not seeking to preclude the PAGA cause of action but only to arbitrate the individual issues determinative of plaintiffs’ standing for their PAGA claims, the Court of Appeal rejected U-Haul’s argument. It reasoned that no individual issues remained at issue and that U-Haul’s arbitration agreement explicitly precluded arbitration of any representative issues.

Though Iskanian explicitly acknowledged that PAGA claims might be arbitrated, the Perez court then went full dictum. It opined that even if U-Haul’s arbitration agreement did not preclude its argument for arbitrating the plaintiff-specific issues determinative of PAGA standing, the PAGA cause of action could not be split between arbitration and litigation. But Iskanian doesn’t preclude this. What it precluded was the waiver of the right to pursue PAGA claims at all.

While it may be the case that an arbitration agreement cannot specify that an individual claim be created in a PAGA-only lawsuit, an arbitration agreement should be able to specify that representative claims be arbitrated—and specify that streamlined procedures be applied. Once again, will some enterprising employers consider going boldly where few have gone before?

Authored by Christopher A. Crosman

We are excited to announce the 16th edition of Seyfarth Shaw’s publication Litigating California Wage & Hour and Labor Code Class ActionsAs in previous editions, this publication reviews the most commonly filed wage and hour and Labor Code class and representative claims and the development of the law over the last several years, and discusses and analyzes the various types of wage & hour class actions that affect many California employers. This new edition has been updated to reflect the latest developments in the law and promises to delight.

Download the publication using this convenient link today!