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© 2013 Winston & Strawn LLP

Wage and Hour Strategies

Brought to you by Winston & Strawn’s Labor and Employment Practice Group

© 2013 Winston & Strawn LLP 2

Today’s eLunch Presenters

Joan B. Tucker Fife Winston & Strawn, LLP

Labor & Employment

San Francisco

[email protected]

Jennifer Rappoport Winston & Strawn, LLP

Labor & Employment

Los Angeles and Houston

[email protected]


What We Will Cover:

Wage and Hour Litigation Background Wage and Hour Trials Annual Update: Significant Cases

Genesis Healthcare Corp. v. Symczyk American Express Co. v. Italian Colors Oxford Health Plans LLC v. Sutter Comcast Corp. v. Behrend Alexander v. Caraustar Wang v. Chinese Daily News

New Filings and Trends Intern cases FLSA meal break claims Payroll cards

California Update


Wage and Hour Litigation Background


Wage and Hour Claims

Fair Labor Standards Act (“FLSA”) Federal statute that covers minimum wage, hours worked,

overtime, classification issues Enforced by the Department of Labor

State Wage and Hour Laws Vary considerably from state to state Can impose more employer obligations than federal law


Common Wage and Hour Claims

“Off the Clock” cases “Misclassification” – Exempt vs. Non-exempt “Misclassification” – Independent Contractor vs.

Employee Meal and Rest Break cases


“Off the Clock” Cases: Common Issues

Mandatory pre- and post-work activities Managers not reporting all of subordinate’s time Travel time Unpaid training and meetings Supervisor encourages or pressures employee to

work “off the clock” Time records not accurate


Misclassification: FLSA Exemptions

Executive Administrative Professional/creative Computer professional Outside sales


Misclassification: FLSA Exemptions Common Exemption Cases Entry-level professionals Sales employees Computer-related professionals “Working” managers “White collar” office workers whose duties do not

actually include the “exercise of discretion and independent judgment with respect to matters of significance”


Misclassification: Independent Contractors

• Company has the right to control or direct only the result of the work

Independent Contractor

• Company has the right to control or direct the means and methods of accomplishing the result

Employee


Misclassification: Independent Contractors, cont. Common positions/industries affected:

Drivers Computer employees Long-term “consultants”

The general rule is that the company has the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result


Misclassification: Independent Contractors, cont. Consequences of misclassified independent

contractors Increasingly aggressive government enforcement on state

and federal levels as well as enforcement by the plaintiffs’ bar

Individual would be entitled to overtime (if non-exempt) and expense reimbursement, and may be entitled to company benefits

Company may be required to make retroactive employer contributions and tax payments (i.e., unemployment)


Meal and Rest Break Cases

• Does not require lunch or coffee breaks • “Bona Fide” meal periods (30+ minutes) ≠

worktime (29 C.F.R. § 785.19) • Rest periods of short duration (5-20

minutes) must be counted as hours worked (29 C.F.R. § 785.18)

FLSA

• If employee works more than 5 hours, 30-minute meal break must be “provided”

• 10-minute rest break “authorized” for every 4 hours of work, or major portion thereof

California


Meal and Rest Break Claims

FLSA does not require lunch or coffee breaks (although some states do require them)

“Bona Fide” meal periods (30 minutes or longer) are not work time. 29 C.F.R. § 785.19 Employees must be completely relieved from duties – if

required to perform any duties while working, then working Not necessary for employees to be permitted to leave

premises if otherwise completely freed from duties during meal periods

Rest periods of short duration (5-20 minutes) must be counted as hours worked. 29 C.F.R. § 785.18


Meal and Rest Break Claims, cont.

California law requires that a 30-minute meal break be “provided” when an employee works more than 5 hours and that a 10-minute rest break be “authorized and permitted” for every 4 hours of work, or major portion thereof

Can be waived for “on duty” under certain circumstances One hour of premium pay owed for violations of meal and

rest break requirements DLSE holds that employers owe a maximum of one hour of pay

each day for meal break violations and one hour of pay each day for rest break violations, even if multiple breaks are missed


Meal and Rest Break Cases: Steps to Take Have a clear written policy requiring meal and rest

breaks, and conduct periodic training on policy Accurately document when meal breaks are taken

Use caution with systems that default to automatically deducting a 30-minute meal period and have a mechanism to report and pay for meals not taken

Do not allow employees to record same break time each day (e.g., 12:30 p.m. – 1:00 p.m.) unless accurate

Discipline supervisors who do not provide meal and rest breaks


Other Common Issues

Not including bonuses or other incentive compensation in calculating regular rate of pay for overtime purposes (for non-exempt employees)

CA: Not paying all wages owed on the day of termination (or as required for resignations)

CA: Improper wage statements


Wage and Hour Trials


Cases That Have Made It Through Trial: Verdicts for Plaintiffs Urga v. Redlands Community Hospital, Case No. SCVSS 123769 (Cal. Super. Ct. 2010)

$17M; Misclassification: hospital employees; approx. 1,000 plaintiffs, so approx. $17K/class member

Daniels v. Premium Capital Funding, Case No. 08-cv-04736 (E.D.N.Y. 2011) $9M; Misclassification: loan officers

Monroe v. FTS USA LLC, Case No. 2:08-cv-02100 (W.D. Tenn. 2011) $3.8M; Piece rate: cable installation technicians; 296 class members, so approx. $12.8K/class

member Morgan v. Family Dollar, Case No. 7:01-cv-00303 (N.D. Ala. 2007)

$35.5M; Misclassification: retail store managers; approx. 1,400 class members, so approx. $25K/class member

Affirmed by Eleventh Circuit; cert denied by Supreme Court Alfaro v. Vardaris Tech, Inc., No. 109673/05 (N.Y. Sup. Ct. 2005)

$3.7M; Misclassification: construction workers; approx. 70 class members, so approx. $52.8K/class member

Bouaphakeo v. Tyson Foods, Inc., Case No. 5:07-cv-04009-JAJ (N.D. Iowa 2011) $2.89M; Donning/doffing at poultry production plant; approx. 3,334 class members, so approx.

$866/class member Braun v. Wal-Mart, Inc., 3373 EDA 2007 (Super. Ct. Penn. 2007)

$187M; Missed breaks; affirmed by court of appeals


Cases That Have Made It To Trial: Verdict for Defendants Dimas Lopez v. Tyson Foods, Inc., Case No. 8:06-CV-459 (D. Neb. 2008)

Donning/doffing

Maria Guyton v. Tyson Foods, Inc., Case No. 3:07-cv-00088 (S.D. Iowa 2012) Donning/doffing

Bell v. Citizens Financial Group Inc., Case No. 2:10-cv-00320 (W.D. Penn. 2013) Misclassification: assistant bank branch managers Nearly 3-week jury trial

Joseph M. Langer v. DeWolff Boberg & Associates Inc., Case No. 3:10-cv-00956 (N.D. Tex. 2012) Misclassification: management consultants

Henry v. Quicken Loans Inc., Case No. 2:04-cv-40346 (E.D. Mich. 2011) Misclassification: loan officers


Recent Class Action Settlements

Alan Krumbine v. Schneider National Carriers Inc., Case No. 2:10-cv-04565 (C.D. Cal. 2013) $3.5M settlement for 200 trucking company mechanics

Approx. $17,500 per employee

Allegations that Schneider failed to pay overtime compensation owed to class members who worked an alternative workweek schedule, and failed to provide meal and rest breaks

Summer York v. Starbucks Corp., Case No. 2:08-cv-07919 (C.D. Cal. 2013) $3M settlement for Starbucks workers Allegations that Starbucks denied California workers off-duty breaks

because its coffeehouses were always busy and understaffed


Settlements, cont.

Average settlement in 2012: $4.8 million (approx. $6,373 per plaintiff) AT&T: $12.5M to 816 employees in technical support, network engineering, IT

analysts, and project management in six different states Approx. $15,300 per employee

Dreyer’s: $13.5M to 4,200 plant employees and technicians for overtime and donning/doffing Approx. $3,200 per employee

Spearmint Rhino: $10M to 11,000 exotic dancers nationwide for minimum wages and tips Approx. $900 per employee

Target: $3.25M to 1,215 pharmacists for overtime and meal/rest claims Approx. $2,700 per employee

CVS: $34M to 12,604 assistant store managers Approx. $2,600 per employee

Large National Bank: $6.72M to 304 technical support workers Approx. $22,000 per employee


Annual Update: Significant Cases


Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) Issue: Can the district court certify a class action without resolving

whether class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis?

5-4 decision Reinforces Wal-Mart Stores, Inc. v. Dukes, 133 S. Ct. 1426 (2011): class

certification under Rule 23(b)(3) cannot be granted where plaintiffs failed to demonstrate that damages could be proved on a class-wide basis

Employer-friendly decision: employers can argue that individual damages calculations should defeat class certification

Class actions should be exceptions rather than the rule for litigation


Genesis HealthCare Corporation v. Symczyk, 133 S. Ct. 1523 (2013) Issue: Does a case become moot when the named

plaintiff receives a Rule 68 offer of compromise from the defendant?

5-4 decision Named plaintiff’s putative FLSA collective action over the

company’s automatic meal break deduction policy had been properly dismissed for lack of subject matter jurisdiction because plaintiff no longer had an interest in case after Genesis made an offer of full relief for her individual claims

Supreme Court did not rule on whether an unaccepted Rule 68 offer actually moots an individual FLSA claim


Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) Issue: whether arbitrator exceeded his powers under

§ Section 10(a)(4) of the Federal Arbitration Act when he found parties’ contract provided for class arbitration

Unanimous decision Broad contractual language did not expressly discuss class

actions or class arbitration, but parties agreed to allow arbitrator determine scope of arbitration agreement, so he did not exceed his powers

In such circumstances, court may vacate the arbitrator’s decision only in very unusual circumstances


American Express Co. v. Italian Colors, 133 S. Ct. 2304 (2013) Issue: Whether contractual waiver of class arbitration is

enforceable under the FAA even if the cost of proving an individual claim in arbitration exceeds the potential recovery

5-3 decision FAA does not permit courts to invalidate contractual waiver of

class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery

Builds upon AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) — FAA preempts state law

Win for employers


Supreme Court 2013: Takeaways

Employer-friendly decisions Genesis Healthcare: seems to leave door open for employers

to nip some wage and hour lawsuits in the bud But does it really?

Comcast: individualized damages overwhelm questions common to class New argument to defeat class certification

Oxford Health Plans: importance of including explicit class waiver if employer wants to avoid class arbitration

American Express: class action waivers can be utilized


Alexander v. Caraustar, Case No. 11 C 1007 (N.D. Ill. March 19, 2013) Hybrid state law and FLSA class/collective action alleging

unpaid overtime and unlawful deductions Before start of discovery, Caraustar limited conditional FLSA

certification to one facility only After discovery, Caraustar moved for summary judgment

and/or to dismiss case as a sanction for plaintiffs’ perjury Plaintiffs lied in their sworn affidavits about their donning, doffing,

and walking times; these lies constituted core of their cases

Court granted Caraustar’s motion and dismissed plaintiffs’ claims as sanction


Applying Dukes: Wang v. Chinese Daily News, No. 08-55843 (9th Cir. Mar 4, 2013)

Affirms that Dukes is controlling in wage and hour class actions Procedural history:

District court certified class under Rule 23(b)(2) or, in the alternative, Rule 23(b)(3)

$2.5M damages award for plaintiffs for claims under FLSA and California law of wrongfully denied overtime and meal and rest breaks

Ninth Circuit affirmed, and defendant petitioned Supreme Court for certiorari Supreme Court granted cert, vacated and remanded to Ninth Circuit for

reconsideration in light of Dukes On remand, Ninth Circuit:

Vacated and remanded commonality finding under Rule 23(a)(2) Reversed certification under Rule 23(b)(2) because Dukes makes clear that

individualized monetary claims cannot be certified under Rule 23(b)(2), but instead belong under Rule 23(b)(3)

Remanded for reconsideration as to whether common questions predominated over questions affecting only individual class members under Rule 23(b)(3)


New Filings and Trends


Intern Cases

Glatt v. Fox Searchlight Pictures Inc., Case No. 1:11-cv-06784 (S.D.N.Y. 2013) Interns on set of Black Swan movie Interns ran errands, photocopied, made coffee, etc. “They [allegedly] worked as paid employees work, providing

an immediate advantage to their employer and performing low-level tasks not requiring specialized training.”

Court held they were misclassified and should have been “employees” under FLSA


Intern Cases, cont.

Other lawsuits filed after Fox Aulistar Mark v. Gawker Media LLC, Case No. 1:13-cv-04347

(S.D.N.Y.) (filed June 21, 2013) Interns at Gawker’s blogs Work included researching, writing, and editing stories for the websites

Moore v. NBCUniversal Inc., Case No. 13-4634 (S.D.N.Y.) (filed July 3, 2013) Former interns for MSNBC and “Saturday Night Live” Duties included booking cars for guests on the channel’s morning shows,

answering phones, escorting guests to the set and providing them with “dub” copies of the shows, completing paperwork for extras, going on errands to get props, food and coffee, “locking down” sets during shooting


Intern Cases, cont.

Lucy Bickerton v. Charles Rose, Case No. 650780/2012 (Sup. Ct. N.Y. 2013) Unpaid interns for PBS television host Charlie Rose $250,000 settlement approved

Approx. $110/week that intern worked

Wang v. The Hearst Corp., Case No. 1:12-cv-00793 (S.D.N.Y. 2013) District court denied class certification but granted

plaintiff’s bid for an interlocutory appeal to Second Circuit


Intern Cases, cont.

U.S. Department of Labor’s 2010 Fact Sheet: Determining Whether Unpaid Internship Passes Muster Under FLSA

1. Internship must be similar to training that would be given in an educational environment

2. Experience must be primarily for intern’s benefit 3. Intern must work under close supervision without displacing regular

employees 4. Employer can’t derive any immediate advantage from intern’s

activities 5. Intern is not necessarily entitled to a job at internship’s conclusion 6. Employer and intern must both understand that intern is not

entitled to wages


Meal Periods and Compensation: “Auto-Deduct” Policies CA: Employers have a duty to provide duty-free,

unpaid meal periods Penalty of one hour’s “pay” is not added to the regular

rate/overtime calculation

FLSA: does not require employer to provide meal periods Only requires that all work be paid “Auto-deduct” policies (i.e., “pay to the schedule” plans)

Not illegal per se, but often challenged


Meal Periods and Compensation: “Auto-Deduct” Policies, cont.

Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 111 (2d Cir. 2013) Alleged that CHS used “an automatic timekeeping system that

deducted time from paychecks for meals and other breaks even though employees frequently were required to work through their breaks.”

White v. Baptist Mem’l Health Care Corp., 699 F.3d 869, 873 (6th Cir. 2012) “An automatic meal deduction system is lawful under the FLSA.”


Payroll Cards

Employers (including fast food chains, Walgreens, and Wal-Mart) using ATM-style cards to pay hourly employees instead of paper paychecks Issue: use of payroll cards can generate range of fees (for

balance inquiries, use of out-of-network ATMs, etc.) which may reduce employees’ take-home pay

Employees may be automatically enrolled in the program

New York attorney general is investigating the practice New York law requires that employees have an option for

getting their wages without incurring any fees


Payroll Cards, cont.

Gunshannon v. Albert/Carol Mueller, Case No. 7010-2013 Court of Common Pleas of Luzerne County, Pennsylvania

Alleged class of fast food chain hourly workers who have been paid via debit cards is approximately 750 individuals

Alleges violation of Pennsylvania’s Wage Payment and Collection Act



Senate democrats sent letter to Consumer Financial Protection Bureau and U.S. Department of Labor on July 11, 2013 Requesting clarification about whether current laws permit

practice of paying employees with prepaid payroll cards is lawful

Issue: Employers may receive commission payments for signing up their employees for payroll cards



Benefits of Payroll Card System Saves employer cost of check printing and processing Earlier payout – cards load at beginning of payday (not at

end) Safety – cards insured by FDIC Ease of replacement Flexibility – cards can be used to pay by phone, online, or by

mail Fewer fees than processing unbanked pay at check-cashing

places or cost of getting money orders


California Update


Seating Cases

Under California Private Attorney General Act (“PAGA”), employee can bring claims on behalf of others potentially without meeting class certification standards

Almost any Labor Code (or Wage Order) violation can form the basis of PAGA claim

Unclear what, if any, pleading standards apply PAGA is attractive to plaintiffs’ lawyers

Attorneys’ fees available Penalties “stack” quickly – $100 per pay period per employee

for initial violation, $200 per pay period for subsequent violations


Seating Cases: California Seating Requirements Wage Order 7-2001 requires:

(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats

(B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties

Spate of seating claims against retail, retail banking, and other industries where employees traditionally stand

Courts have confirmed the validity of seating claims


Seating Cases Green v. Bank of America NA, Case No. 2:11-cv-04571 (C.D. Cal. May 20, 2013)

Bank tellers Wage order preempted by National Banking Act

Providing a stool or seat would affect the efficiency of banks’ operations

Case dismissed


Seating Cases Henderson v. JPMorgan Chase Bank, Case No. 2:11-cv-03428 (C.D. Cal. 2013)

Bank tellers claimed bank failed to provide them seats

District Court denied certification of Rule 23 class 9th Circuit accepted review of that decision

Pending before 9th Circuit

District Court denied motion to strike PAGA allegations


Milton Brown v. Morgan Tire & Auto LLC, Case No. H037271 (Cal. Ct. App. 2013)

Concepcion does not mean that an arbitration agreement can waive a worker’s right to bring class claims under PAGA Concepcion does not deal with public rights

Court of appeals allowed Morgan Tire to arbitrate workers’ wage and hour claims, but workers can’t be forced to arbitrate their claims for civil penalties under PAGA

Similar issues in Iskanian v. CLS Transportation Los Angeles LLC (pending before California Supreme Court)


Kimberly Murphy v. Caremark CVS Corp., Case No. BC464785 (L.A. Sup. Ct.)

Statewide class of 40,000+ CVS Caremark Corp. workers certified on June 21, 2013

Allege that drugstore chain unlawfully failed to pay them for time spent in security inspections CVS had a uniform employee bag check policy


Recently Filed Lawsuits

Hoagland v. Brooks Brothers Group Inc., Case No. BC511534 (filed in L.A. Superior Court, June 7, 2013) Alleges company denied employees adequate breaks for meals and unfairly deducted

their wages Mano v. Smart & Final Stores LLC, Case No. BC 512631 (filed in L.A. Superior Court, June 19,

2013) Alleges company miscalculated workers’ overtime pay and gave them pay stubs that

didn’t reflect the higher hourly rate they received for coming in on Sundays Aguilar v. Marriott International Inc., Case No. BC513197 (filed in L.A. Superior Court, June

25, 2013) Alleges company denied its cleaning staff rest breaks and gave them wage statements

that didn’t reflect all hours worked Jones v. Sysco Corp., Case No. BC513368 (filed in L.A. Superior Court, June 26, 2013)

Former truck driver alleges he was denied rest periods and accurate wage statements as required by state law

Lawsuit filed in S.F. Superior Court, July 15, 2013 Alleges clothing retailer denied hourly workers overtime, and made them work through

rest and meal breaks


Questions?


Thank You.


Contact Information

Joan Fife Labor & Employment

San Francisco (415) 591-1513

[email protected]

Jennifer Rappoport Labor & Employment

Los Angeles and Houston (213) 615-1794

[email protected]

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