2014 saw no letup in the deluge of wage and hour litigation. Year-to-year, federal wage and hour lawsuits filed in federal courts increased by another 4.7%, bringing the total increase in federal court wage and hour cases over the past decade to more than 238%. With the increase in litigation in this area, several significant trends emerged or accelerated.
First, in Integrity Staffing Solutions, Inc. v. Busk, the Supreme Court unanimously ruled that for a pre-shift or post-shift activity to be compensable under the Fair Labor Standards Act it must be an “intrinsic element” of the job, something that an “employee cannot dispense if he is to perform his principal activities.” Time passing through post-shift security screening does not meet this standard, the Court concluded, to the relief of retailers and other employers who might otherwise have faced massive exposure,
Second, federal courts applying the Iqbal/Twombly pleading standards have been requiring plaintiffs to include more specific facts in their complaints. For example, complaints that merely allege that plaintiffs worked more than 40 hours and were not paid overtime are likely to be dismissed in a growing number of federal circuits. The Ninth Circuit, most recently joined this trend by requiring “a plaintiff asserting a violation of the FLSA overtime provisions [to] allege that she worked more than forty hours in a given workweek without being compensated for the hours worked in excess of forty during that week.” Landers v. Quality Communs., Inc., 771 F.3d 638, 645 (9th Cir. Nov. 12, 2014). Requiring specific allegations makes it harder for plaintiffs’ counsel to use one-size-fits-all complaints and requires greater investigation before filing a complaint. It may also strengthen defendants’ ability to defeat or limit certification of class or collective actions by highlighting early in a case significant differences among plaintiffs and potential class members or opt-ins.
Third, the law continued to evolve in favor of the enforcement of agreements to submit wage and hour claims to bilateral arbitration. In particular, waivers of the right to participate in class or collective actions or in “class arbitration” are increasingly allowing employers to resolve wage disputes on an individual employee basis. Further, in 2014 the Third Circuit in Opalinski v. Robert Half Int’l. endorsed the Sixth Circuit’s Reed Elsevier v. Crockett decision in determining that the issue of who decides whether an agreement to arbitrate allows for class arbitration is an issue of arbitrability for the court to decide. This trend continued in an unpublished Ninth Circuit opinion in Eshagh v. The Terminix Int’l. Company (12/22/14). With no Circuit taking a contrary view, these circuit court rulings are likely to lead to greater consistency in entrusting the important issue of the availability of class or collective arbitration to courts, rather than arbitrators.
Fourth, plaintiffs’ counsel concerned about their ability to pursue a class or collective action continue to try out the strategy of filing multiple suits or claims against the same employer on behalf of numerous individual plaintiffs or smaller groups of plaintiffs. In at least one large collective action last year that had been conditionally certified, experienced plaintiffs’ counsel agreed to the decertification of the collective and then filed 37 lawsuits throughout the country, in addition to hundreds of arbitration demands, using opt-ins from the collective action as individual plaintiffs and claimants. The strategy backfired, however, when plaintiffs lost a jury trial and several motions for summary judgment in the Eastern District of Virginia, resulting in a finding that mortgage loan officers were properly classified as exempt outside salesmen. Cougill, et al. v. Prospect Mortgage, E.D. Va., No. 13-cv-1433.
Fifth, the Supreme Court heard argument in December 2014 in two cases that will determine not only whether mortgage loan officers satisfy the FLSA’s administrative employee exemption, but also how much weight, if any, courts should give to the pronouncements of the U.S. Department of Labor. In 2010, the DOL–without notice or an opportunity for public comment–withdrew a 2006 Opinion Letter stating that mortgage loan officers are generally exempt, and issued of an Administrator’s Interpretation stating just the opposite. The Supreme Court’s decision is expected in the first part of 2015.
Sixth, President Obama has called on the U.S. Department of Labor to revise its regulations defining the FLSA’s “white-collar” exemptions. The DOL has delayed its target date for issuing proposed revisions, with the current due date now set for February 2015. The administration has stated that the new regulations should significantly increase the number of employees eligible for overtime. Possible changes could include: a substantial increase in the minimum weekly salary requirement (currently $455); a re-definition of an employee’s “primary duty” that requires exempt employees to perform a minimum percentage of their time on exempt work and/or eliminates the ability of managers to engage in management and non-exempt work concurrently. If the proposed revisions survive expected opposition during the comment period from the business community and Congressional leaders and become final, they would be the most significant revisions to the wage and hour regulations in decades.
Last but certainly not least, 21 states have increased their minimum wage effective January 1, 2015. Connecticut’s minimum wage will increase to the highest level, at $9.15 per hour. Massachusetts is not far behind with its minimum wage rising to $9.00 per hour. The Federal minimum wage remains at $7.25 per hour, except for workers on Federal construction and service contracts solicited on and after January 1, 2015 and for those on contracts awarded outside the solicitation process, whose minimum wage rises to $10.10 by President Obama’s Executive Order implemented by the Department of Labor’s final rule. Of course, in those states with a minimum wage greater than federal law, employers must pay their employees no less than the higher applicable state minimum wage.
These developments all but ensure that avoiding and defending wage and hour class and collection actions should remain a high-priority for employers in 2015.
Authored by Kyle Petersen
For years, employers have been frustrated by lengthy and costly FLSA litigation prompted by little more than conclusory allegations that the plaintiff and a putative class were not paid for all of their overtime work. Since the Supreme Court clarified the federal pleading standards in Twombly and Iqbal, the doors to the courthouse may be getting a little heavier as district and circuit courts consider the degree of specificity with which plaintiffs must plead their overtime claims.
Following the Supreme Court’s decisions in Twombly and Iqbal, the 1st, 2d, and 3rd Circuits have all held that a bare-bones complaint for unpaid overtime that simply parrots the text of the FLSA will not do. To survive a motion to dismiss, plaintiffs in the first three circuits must instead include some factual allegations that they actually worked more than 40 hours in a given workweek without being paid for that time. This week, the 9th Circuit joined their bandwagon.
In Landers v. Quality Communications, the 9th Circuit considered the overtime claims of a cable services installer whose complaint alleged that (1) he was paid on a de facto piecework basis; (2) his wages fell below minimum wage; and (3) he was not paid overtime when he worked more than 40 hours. Quality Communications moved to dismiss the complaint because it failed to state a plausible claim for relief. The district court agreed and threw out the case. In doing so, the court noted that the complaint lacked any factual allegations approximating the number of overtime hours Landers worked or the amount of overtime pay he was claiming. Landers’ formulaic recitation of the elements was simply not enough to move his claim from the possible to the plausible. Landers declined to amend his complaint and instead immediately appealed to the 9th Circuit.
On appeal, the 9th Circuit affirmed the district court’s decision but expressly declined to adopt a requirement that an FLSA complaint must include an approximation of the total overtime hours worked or overtime wages allegedly due. Instead, the Court fell in line with the 1st, 2d, and 3rd Circuits and held that to state a viable claim for relief, an FLSA plaintiff at least needs to point to a specific week during which he worked more than 40 hours without being paid for all of that time. Landers failed to do so and the district court was therefore right to throw out his case. Moreover, because Landers explicitly declined to amend his complaint, he was not given the chance to amend his complaint on remand.
This decision is unlikely to put an end to the high volume of FLSA cases filed in the 9th Circuit or elsewhere because most plaintiffs will be given the opportunity to replead their case even if their complaint is challenged on a motion to dismiss. Even so, this is a positive development because a heightened pleading standard should mean that plaintiff’s theory of the case will be less of a mystery and hopefully less of a moving target. As a result, employers faced with an overtime claim should be able to more narrowly focus discovery and hopefully limit or defeat efforts at collective certification.
Last summer, the Second Circuit issued a flurry of decisions clarifying the pleading standard in FLSA cases. In one of those cases, Dejesus v. HF Management Services, LLC, the court held that, in order to state a valid overtime claim after the Supreme Court’s decisions in Iqbal and Twombly, “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 Second Circuit affirmed the dismissal in Dejesus because the plaintiff failed to estimate her hours or provide any factual context for how many hours she worked, and criticized her complaint as merely a “rephrasing” of the FLSA’s requirements made to appear as factual statements.
Picking up where Dejesus left off, Judge Joanna Seybert of the Eastern District of New York last week dismissed a putative class and collective action brought on behalf of automobile damage adjusters under the FLSA and New York Labor Law because “plaintiff pleads no facts that suggest that GEICO failed to pay Plaintiff the proper amount of overtime pay.” Instead, the plaintiff alleged that GEICO failed to pay him (and the putative class) overtime compensation for the time he worked between 38.75 and 40 hours per week – which by itself “does not state a claim that GEICO failed to pay proper overtime.” Judge Seybert further dismissed the plaintiff’s off-the-clock claim because the Amended Complaint provided no facts to support it, such as “an estimate of hours Plaintiff failed to report or who allegedly discourage adjusters from reporting overtime.”
This case shows that employers within the Second Circuit continue to reap the benefits of Dejesus and its progeny. Perhaps the courts’ rejection of bare bones complaints will prod plaintiffs to provide detailed factual allegations – or even decline to sue in the first place – before burdening employers with years of discovery and other litigation costs.
Last summer, the Second Circuit issued a flurry of decisions clarifying the pleading standard in FLSA cases. In one of those cases, Dejesus v. HF Management Services, LLC, the court held that, in order to state a valid overtime claim under the Supreme Court’s decisions in Iqbal and Twombly , “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 Second Circuit affirmed the dismissal of Dejesus because the plaintiff failed to estimate her hours or provide any factual context for how many hours she worked, and criticized her complaint as merely a “rephrasing” of the FLSA’s requirements made to appear as factual statements.
The plaintiff in Dejesus has now filed a petition for certiorari with the Supreme Court, asking the Justices to decide the proper pleading standards for FLSA claims.
The petition is largely based on two 2013 cases arising from alleged underpayment of overtime wages in the healthcare industry: Nakahata v. New York-Presbyterian Healthcare System, Inc. in the Second Circuit and Manning v. Boston Medical Center Corporation in the First Circuit. While neither case involved an approximation of overtime hours as in Dejesus, the petition attempts to identify a Circuit-split by contending that “[t]he Second Circuit in Nakahata found that the FLSA claim was not plausibly stated while the First Circuit in Manning found that the FLSA claim was plausibly stated.” According to the petitioner, this split reflects “what the state of affairs is among the federal district courts in almost every federal circuit.”
The petition also relies on the Supreme Court’s decision in Swierkiewicz v. Sorema N.A., which held that under the notice pleading system, a plaintiff need not plead facts establishing a prima facie case. The petition thus argues that the Second Circuit’s “requirement that plaintiff approximate her hours and provide greater specificity” runs afoul of Swierkiewicz and represents “a reflection of a wider conflict among lower federal courts in several other circuits” regarding the meaning of Swierkiewicz.
Finally, the petition emphasizes that “[t]he need for Supreme Court review is now” based on the large volume of FLSA cases filed each year in federal courts. It states that between 1993 and 2012, the number of FLSA filings ballooned from 1,457 to more than 7,000, each of which has the potential of affecting “hundreds or thousands of individuals.”
Now that the issues and arguments are laid out on the Supreme Court’s operating table, we will eagerly await word as to whether the Court deems Dejesus, and its “bare bones” allegations, ripe for resuscitation.
Authored by Robert T. Szyba
The message in the Second Circuit is clear: a bare-bones complaint for unpaid overtime that just restates the text of the Fair Labor Standards Act will not do. To survive a motion to dismiss, a plaintiff will have to put some factual meat on those bones.
In Dejesus v. HF Management Services, LLC [here], the Second Circuit reviewed an order dismissing an overtime complaint in which the plaintiff claimed that, during the three years she worked for the employer, she “worked more than forty (40) hours in a week for Defendant in some or all weeks, but was not paid at a rate of at least 1.5 times her regular rate for each and all hours worked in excess of forty hours in a week” (emphasis in original). Since this sentence was the extent of the detail of her factual allegations about unpaid overtime, the District Court held that the plaintiff failed to properly allege that she actually worked overtime without the proper pay.
The Second Circuit agreed. Addressing for the third time in the past five months how specific a plaintiff must plead an overtime claim to survive a motion to dismiss [here], the court reiterated 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 court particularly faulted the plaintiff for her failure to estimate her hours in any way or provide any factual context for how many hours she worked. The court also pointed out that much of the text in the complaint was merely a “rephrasing” of the FLSA’s requirements made to appear as factual statements.
The Second Circuit noted that its standard balances competing policy considerations, such as: (1) employees’ frequent difficulty in knowing the details of their hours and pay; (2) the practice of plaintiffs’ attorneys engaging in “fishing expeditions” by filing bare-bones complaints against multiple potential defendants to ferret out the correct entities; and (3) the modern federal pleading requirements, as enunciated by the U.S. Supreme Court in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, that a complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” This “plausibility” standard requires facts and details for context to make out a claim, even if the employee does not have detailed factual records.
Dejesus is obvious good news for employers in the Second Circuit. The bare-bones fishing expeditions referenced by the court might become less effective — and therefore less frequent — if courts hold plaintiffs to the requirement to provide detailed factual allegations before imposing employers with months/years of discovery and other litigation costs. Even where plaintiffs re-plead with sufficient facts, the detailed factual allegations will be more conducive to efficient preparation for depositions and other discovery, and perhaps summary judgment, trial, and settlement.
Authored by Kristin G. McGurn
Following the lead of Judges O’Toole (see 09-cv-11466; 09-cv-11722) and Saylor (see 09-cv-40152; 09-cv-40181) in the District of Massachusetts and Judge Seybert in the Eastern District of New York (see 10-CV-1326), on January 28, 2011, the Honorable Paul A. Crotty in the Southern District of New York dismissed in their entirety four complaints against New York area hospital systems alleging off-the-clock work. The nearly identical Second Amended Complaints sought to recover unpaid wages allegedly owed to hourly-paid employees for unspecified meal periods and breaks during which they allegedly worked, and for allegedly compensable training time and pre-shift and post-shift work. Each of the mirror-image complaints alleged claims under the Fair Labor Standards Act (“FLSA”), the Racketeer Influenced and Corrupt Organizations Act (“RICO”), New York Labor Law and state common law. Megginson v. Westchester Medical Center, et al.; Yarus, et al. v. New York City Health and Hospitals Corp., et al.; Alamu v. The Bronx-Lebanon Hospital Center, Inc., et al. and Nakahata, et al. v. New York-Presbyterian Healthcare System, Inc., et al..
Judge Crotty’s Opinion and Order referred to the complaints’ “strikingly similar allegations and deficiencies,” and described their “generic quality” as lacking “foundation for the legal claims alleged.” Frowning on “copy-cat” methods of pleading and therefore confirming the propriety of Twombly/Iqbal dismissals in each these companion cases, Judge Crotty pointedly noted that “the very fact that this boilerplate complaint has been used, with identically vague and conclusory allegations, in more than a dozen actions in New York and elsewhere is a vivid demonstrative of how not to plead.”
Judge Crotty noted the absence of specific factual allegations about the meal periods through which plaintiffs allegedly worked, and the number of allegedly under- and uncompensated hours, which he called “the heart of the claim.” He held that plaintiffs must plead “the nature of the uncompensated activity” as well as their dates of employment, pay and positions, all of which were notably absent from the nearly identical complaints. Judge Crotty also pointed out the preemption principle that if any of the alleged violations “hinge on [a] collective bargaining agreements’ definition of the terms of employment, they must be brought under the LMRA and in accordance with the [CBAs’] grievance and arbitration provisions.” Skeptical of the plaintiffs’ own claims as pled, Judge Crotty held that there is “no basis for a collective or class action with regard to every other so-called hourly employee in the system.” He also noted that the cited state statutes fail to support Plaintiffs’ claims for unpaid wages or overtime. Judge Crotty ultimately concluded that there was no basis for naming all hospitals within a system or for personal liability on the part of hospital executives; that the RICO allegations fall “woefully short” of stating a claim and are preempted; and that the state claims are insufficiently pled, not viable, duplicative of statutory claims and/or preempted by the FLSA. Judge Crotty held that it would be futile for plaintiffs to re-plead the RICO and common law-claims, and admonished Plaintiffs to replead claims arising under the FLSA and NYLL with specificity, stating that the “complaint should not take a blunderbuss approach to alleged wrongs, multiple defendants who are not employers, and random citation of inapplicable statutes.”