Second Circuit Seal.jpgAuthored by Loren Gesinsky

Employers can benefit from calling out plaintiffs who hide the ball and assert unpaid “gap time” wages in complaints under the Fair Labor Standards Act.

That’s the primary message from the Second Circuit’s opinion in Lundy v. Catholic Health Sys. of Long Island, which affirmed the dismissal of a putative FLSA collective action brought by nurses against a series of health-care providers.

Hiding the Ball Warrants Ejection From the Game

The Lundy plaintiffs alleged that they weren’t paid for missed meal breaks, work done before and after their scheduled shifts, and required training sessions.  But, despite amending their complaint four times, their cagey pleadings never identified even a single week in which they had worked more than 40 hours without receiving overtime.  Instead, they asked the Court to infer overtime violations, because they “occasionally” worked shifts exceeding 40 hours, “typically” missed meal breaks, and “often” did compensable work before and after their shifts. 

The Second Circuit didn’t buy it.  Using the opinion to, for the first time, “consider[] the degree of specificity needed to state an overtime claim under the FLSA,” the Second Circuit held that “a plaintiff must sufficiently allege 40 hours of work in a given workweek as well as some uncompensated time in excess of the 40 hours.”  The Lundy plaintiffs flunked that standard, because they were “hiding the ball” and never “alleged a single workweek” in which they worked uncompensated time beyond 40 hours.  Their generic allegations about sometimes working more than 40 hours a week, sometimes missing meal breaks, and sometimes working other uncompensated time merely “invited speculation” that such weeks had occurred.

The FLSA Supports Neither Gap Time Nor Organized Crime

The Second Circuit also used Lundy to settle an issue that had been simmering in the lower courts: whether the FLSA can permit so-called “gap time” claims for unpaid work below 40 hours a week.  Back in 1960, the Second Circuit held that these claims weren’t viable for weeks in which the employee worked less than 40 hours, unless the employee’s average hourly wage fell below the federal minimum wage.  Over fifty years later, the Lundy Court ruled that, because the FLSA “requires only payment of minimum wages and overtime wages,” it does not authorize a “gap time” claim in weeks where the employee works more than 40 hours but seeks recovery for unpaid work under 40 hours. In so ruling, the Second Circuit created a split with the Fourth Circuit and rejected the U.S. Department of Labor’s interpretive guidance on this issue, finding it lacking in either “statutory support or reasoned explanation.”

For added value, the Second Circuit rejected the plaintiffs’ efforts to masquerade their FLSA claims as RICO violations.  The plaintiffs theorized that the defendants had violated RICO by mailing pay stubs that did not include all hours worked.  The Lundy Court found these allegations woefully vague and noted that, “[a]lmost more fundamentally,” the pay stubs couldn’t have violated RICO because they “would have revealed (not concealed) that Plaintiffs were not being paid for all their alleged compensable overtime.”

Lundy did not, however, reach an issue of critical importance to employers: whether they may face FLSA liability for  automatically deducting time for meal and rest breaks, then “shifting the burden” to employees to cancel the deduction when they work through a break period.  The Lundy district court found that such a policy did not violate the FLSA. (See decision here).  But because Lundy dismissed the FLSA claims on other grounds, employer liability on this question remains an open question within the Second Circuit.

Calling Plaintiffs’ Bluff Has Advantages

Why bother to leverage Lundy into a dismissal if plaintiffs can simply re-plead with more specificity and raise “gap time” claims under the laws of many states, including New York?  When plaintiffs cannot in good faith specify even one week in which they worked uncompensated time, an employer might be spared expensive discovery and the pressure to offer an ill-deserved settlement.  Requiring plaintiffs to plead with greater specificity may also assist employers in crafting arguments for denying or limiting class certification.  And when plaintiffs re-plead with the requisite specificity, knowing that specificity at the outset should help an employer better prepare for depositions and other discovery.   Also, there should now be cases in which at least some of the plaintiffs or putative class members are not covered by a state law that recognizes “gap time” claims, leaving plaintiffs’ counsel with a difficult choice between  embracing this lack of typicality or simply forgetting these claims.  In sum, calling plaintiffs’ bluff on these issues can have advantages, thanks to Lundy.