I’ve never had this issue come up before, and must have overlooked the few reported cases dealing with it. What happens when a plaintiff in an FLSA lawsuit obtains bankruptcy while the FLSA claim is pending, yet fails to disclose the existence of the FLSA claim to the bankruptcy court?
In In re Family Dollar FLSA Litigation, 2011 WL 4899972 (W.D.N.C. 2011), Judge Graham Mullen of the Western District of North Carolina found that the failure to disclose the claim means that the employee loses the FLSA claim. Here’s the high points of his decision:
Martinson opted into Scott v. Family Dollar Stores, Inc. on December 19, 2008. On June 13, 2009, she petitioned for Chapter 7 bankruptcy. Her debts were discharged on October 22, 2009, and the case closed on the same day. Slater was an employee, within the meaning of the FLSA, at Family Dollar in Clinton, Mississippi from March, 2005 to February, 2006. Slater petitioned for Chapter 7 bankruptcy on September 20, 2005. Her debts were discharged on January 11, 2006, and the case closed the same day.
Courts within the Fourth Circuit have explicitly held that a plaintiff’s failure to list a claim on his or her bankruptcy schedule of assets, either initially or through an amendment, judicially estops the plaintiff from pursuing such undisclosed claims in a lawsuit. See Brockington v. Jones, No. 4:05-3267, 2007 WL 4812205 at *4 (D.S.C. Nov. 28, 2007) (“District Courts within the Fourth Circuit have applied the doctrine of judicial estoppel to bar plaintiffs from pursuing claims that were not disclosed to the bankruptcy court during bankruptcy proceedings.”) (citing Thomas v. Palmettor Management Services, No. 3:05-cv-17-CMC-BM, 2006 WL 2623917 (D.S.C. Sept. 11, 2006); see also Casto v. American Union Boiler Co. of West Virginia, No. 2:05-cv-757, 2006 WL 660458 (S.D.W.Va. March 14, 2006).
The Fourth Circuit has held that judicial estoppel applies when: (1) the party to be estopped is advancing an assertion that is inconsistent with a position taken during previous litigation; (2) the position is one of fact instead of law; (3) the prior position was accepted by the court in the first proceeding; and (4) the party to be estopped has acted intentionally and not inadvertently. Folio v. City of Clarksburg, 134 F.3d 1211, 1217 (4th Cir.1998). Slater and Martinson do not deny that each of the first three judicial estoppel factors are satisfied. Instead, they both focus on the fourth factor, claiming that they did not act intentionally. The Court concludes that this factor is readily satisfied.
[With respect to Martinson], Plaintiff is the one bringing these claims against Family Dollar, and debtors are charged with knowledge of their claims when factually aware of the basis for their claims. Plaintiff attempts to demonstrate inadvertence by asserting the chronology of filing for bankruptcy before opting into litigation. In Hamilton v. State Farm Fire & Gas. Co., the Ninth Circuit stated, “The debtor’s duty to disclose potential claims as assets does not end when the debtor files schedules, but instead continues for the duration of the bankruptcy proceedings.” Hamilton v. State Farm Fire & Gas. Co., 270 F.3d 778, 785 (9th Cir.2001); see also Trucks Ins. Co. v. Superior Court, 2002 WL 19044442, *5 (Cal.App. 2 Dist.2002). The Court also stated, “Judicial estoppel will be imposed when the debtor has knowledge of enough facts to know that a potential cause of action exists during the pendency of the bankruptcy, but fails to amend his schedules or disclosure statements to identify the cause of action as a contingent asset.” Id. Martinson had knowledge of her claims against Family Dollar when she filed her opt-in consent form on December 19, 2008, which was during her bankruptcy proceeding. Martinson was required and recognized her obligation to amend her respective bankruptcy schedules. Indeed, she amended, in part, her bankruptcy schedules during her respective bankruptcy proceeding. (Doc. No. 578 at Ex. 17.)
Second, Plaintiff had motive to conceal these claims from the bankruptcy court since proper disclosure would certainly result in less favorable payment plans. Brockington, supra, at *4 (“… Plaintiff had motive to fail to disclose the claims to the bankruptcy court as proper disclosure could have increased the amount of her assets, resulting in less favorable Chapter 13 payment plans.”); see also In re Superior Crewboats, Inc., 374 F.3d 330, 336 (5th Cir.2004) (“The [plaintiffs] had the requisite motivation to conceal the claim as they would certainly reap a windfall had they been able to recover on the undisclosed claim without having disclosed it to the creditors.”). Therefore, Martinson is judicially estopped from recovering under the FLSA because she failed to list these claims on her bankruptcy schedules.
In Hathaway v. Shawn Jones Masonry, 2011 WL 4916532 (W.D.Ky. 2011), Chief Judge Thomas Russell of the Western District of Kentucky faced how to handle the aftermath of a letter sent by the plaintiff to the defendant’s employees urging them to join his lawsuit. The letter stated: “PLEASE BE ADVISED THAT YOU ARE ENTITLED TO MONEY WHICH HAS BEEN ILLEGALLY NOT PAID TO YOU BY SHAWN JONES MASONRY.” The employer asked the Court to prohibit the plaintiff’s attorney “from ever soliciting additional plaintiffs to join this action.”
The matter was complicated by the fact that “Counsel for plaintiff denied that he authorized or had any knowledge of the letter disseminated by his client. Counsel for plaintiff agreed that the letter at issue was improper and should not have been issued. Counsel for plaintiff has also stated that he has directed his client to cease dissemination of this letter, or similar letters.”
The employer argued that “continued communications to its current employees regarding this FLSA collective action would cause irreparable harm. Specifically, current employees may believe that the defendant is not treating them fairly and may quit, leaving defendant short on employees.”
Judge Russell refused to grant the relief sought by the employer. Judge Russell concluded that “weighing the need for the limitation and the potential for interference of the rights of the parties, the Court finds that a limitation on communications would be improper at this time. The rights of the plaintiff to contact and communicate with potential plaintiffs outweighs the need for a prohibition on such communications. Although the letter disseminated by Plaintiff was admittedly improper and possibly in violation of the Kentucky Rules of Professional Conduct, Plaintiff has been instructed to cease dissemination of similar communications. There is nothing to indicate that further communications will be improper, misleading, or in violation of the rules. Additionally, there is no specific harm that has resulted from Plaintiff’s previous communications that would support the need for limiting communications. Therefore, the Court will not restrict communications between parties and potential plaintiffs at this time. The Court cautions that counsel should be careful to avoid making any false representations or misleading statements in future communications. Counsel should also be mindful of the Rules of Professional Conduct and its directives regarding contact with prospective clients.”
Judge Russell made no reference to the offensive use of ALL CAPS in the letter.
An Interesting Regular Rate Case
Am I the only one who finds regular rate issues to be inexhaustibly interesting? If you’re in my camp, read on.
The case was McLean v. Garage Management Corp., 2011 WL 3849495 (S.D.N.Y. 2011), and the judge was Denise Cote of the Southern District of New York. The employer managed parking garages, and employed a number of “garage managers.” Most Garage Managers were regularly scheduled to work about 50 hours per week. Garage Managers used a time clock, which recorded their hours for each day they work. They were also required to make daily drop offs of the cash receipts and related paperwork to a central depot. For at least some Garage Managers the trip to the depot required travel lasting from 15 to 30 minutes after the Garage Manager has “punched-off” the time clock.
Prior to 2010, the employer only paid the Garage Managers straight time for all hours worked. In addition to the compensation for every hour worked, each Garage Manager was also paid a monthly lump sum Extra Compensation bonus called an “EC bonus.” The EC bonus was a pre-determined amount for an employee that did not vary from month to month. The amount of an individual’s EC bonus was determined from a number of factors including garage assignment, merit increases, garage transfers, promotions and seniority. The amount of the EC bonus did not vary because of the hours worked.
The employer sought two rulings from Judge Cote: (1) A finding that the EC bonus could offset its overtime liability; and (2) A holding that the amount of the EC bonus could be excluded from the regular rate of pay. Judge Cote was not impressed with either argument:
The EC Bonus payments are lump sum payments that are regularly made in the same amounts to an individual Garage Manager. Since they do not fluctuate based on the number of overtime hours an employee has worked, they cannot qualify as overtime payments.
The defendants contend that the Garage Managers have waived the right to assert that the EC Bonus was not a payment for overtime work since their union was aware of the monthly EC Bonus payments and agreed that they were an appropriate way to pay overtime. An employee’s rights under the FLSA to overtime pay may not be waived.
The defendants maintain that under Section 207(e)(5), EC Bonus payments need not be included in calculating the regular rate of pay. Section 207(e)(5) provides that “the regular rate at which an employee is employed shall be deemed to include all remuneration” except for
extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or in excess of the maximum workweek applicable to such employee under subsection (a) of this section or in excess of the employee’s normal working hours or regular working hours, as the case may be.
DOL regulations describe the premium payments encompassed by Section 207(e)(5) and properly excluded from the calculation of the regular rate of pay. See 29 C.F.R. § 778.207(a); 29 C.F.R. §§ 778.201 through 778.206. Tellingly, GMC does not identify which exclusion it believes applies to the EC Bonuses. It has therefore failed to show that Section 207(e)(5) permits the exclusion of the EC Bonuses from the calculation of regular pay. As already explained, EC Bonus payments are a type of remuneration that the DOL regulations classify as a component of the regular rate of pay.
Magistrate James Cott of the Southern District of New York faced an interesting question last week in Pippins v. KPMG LLP, 2011 WL 4701849 (S.D.N.Y. 2011) — When an employer is sued in a misclassification case, need it preserve for possible discovery the laptops used by employees?
The case involved a lawsuit by “Audit Associates” who worked for KPMG, a provider of audit, tax and advisory services. The employees claimed that KPMG willfully misclassified them as exempt employees, and asserted claims under both the FLSA and New York State Labor Law. After filing the lawsuit, the employees filed a motion for certification of a nationwide class for the FLSA claim; the certification motion has yet to be decided.
In the meantime, KPMG asked the Court for clarification of its obligation to preserve the hard drives from former and departing Audit Associates’ laptop computers. After extensive negotiations and several mediation efforts by the Court failed to resolve the dispute over KPMG’s duty to preserve these hard drives during the pendency of the litigation, Judge Cott had to decide what KPMG’s obligations were under the circumstances.
Judge Cott’s conclusions were that, at least for the nonce, KPMG had to preserve the hard drives. These extracts from his fairly lengthy opinion indicate why he reached that conclusion:
KPMG’s motion thus requires the Court to balance the company’s interest in avoiding “annoyance, embarrassment, oppression, or undue burden or expense” that would result from its obligation to preserve the hard drives with its duty to preserve, which is rooted in the concern that once potentially relevant materials on the hard drives have been disposed of, their contents will forever be gone.
To determine the scope of KPMG’s preservation obligations, the Court first must determine whether the material Plaintiffs seek to have preserved is indeed relevant. Plaintiffs will ultimately bear the burden of establishing their job duties, which will determine whether they were exempt from overtime payments under the FLSA, and the hours they worked, for which they claim they were underpaid. Accordingly, any material contained on the hard drives that tends to show either the Audit Associates’ job responsibilities or the hours they worked is relevant. Plaintiffs go so far as to suggest that because each and every Audit Associate who may opt-in to the FLSA collective or who is a member of the putative New-York class may have to prove his or her damages, KPMG must maintain the hard drive of each and every Audit Associate.
In response, KPMG relies less on establishing that the material on the hard drives is irrelevant and more on demonstrating the availability of alternative sources of information that may be more authoritative than the materials contained on the hard drives in proving the disputed factual issues. However, at this point it is not entirely clear what the hard drives contain, in part because of KPMG’s own efforts to keep that information at bay. Given the absence of that crucial information and because “relevance” in the context of discovery is “an extremely broad concept,” Condit v. Dunne, 225 F.R.D. 100, 105 (S.D.N.Y.2004), Defendants have failed to establish that the contents of the disputed hard drives are not relevant.
While KPMG’s preservation efforts appear to have been comprehensive and, at a later point in the litigation, the parties and the Court will have to resolve what evidence is most authoritative as to the factual issues in dispute, the documents and other potential discovery materials that KPMG possesses do not appear to be duplicative of the material that Plaintiffs anticipate will be on the hard drives. For example, because the hard drives contain the contents of Audit Associates’ individual laptops, they may contain materials that would not otherwise be preserved by KPMG as the company has described the scope of its current preservation, such as drafts, personal notations or memoranda, or correspondence among Audit Associates and other KPMG employees. In other words, the hard drives may reflect the types of unofficial work materials that would supplement the official company materials KPMG already has preserved, and which might well favor the company. In sum, KPMG has not demonstrated that the materials it seeks to dispose of are duplicative of materials that are already subject to its preservation efforts. Accordingly, KPMG has not established the absence of a duty to preserve the hard drives.
It bears noting that this is a dispute about preservation, not production. Although “[p]rotective orders can take a variety of forms in order to fit the circumstances of the case,” Standard Investment Chartered, Inc. v. National Association of Securities Dealers, Inc., No. 07 Civ.2014(SWK), 2008 WL 199537, at *2 (S.D.N.Y. Jan.22, 2008) (citation omitted), the more common circumstances giving rise to a protective order involve parties seeking to limit the dissemination of otherwise private material and, in effect, preserve the integrity of that material as, for example, privileged or confidential. See, e.g., Puling v. Gristede’s Operating Corp., 266 F.R.D. 66, 74 (S.D.N.Y.2010) (defendants sought order limiting plaintiff employees’ use of employment records produced in discovery, including materials that tended to “implicate privacy concerns and have the potential to embarrass the subject employee if revealed”). Directing KPMG to continue its preservation in this case maintains the integrity of the materials contained on the hard drives by preventing their destruction. Given the finality that would result from granting KPMG’s motion and what stands to be lost–especially as compared to the potential (if not likelihood) that the ongoing preservation can (and will) be limited through sampling once the Motion to Certify is resolved and discovery proceeds-it is not unreasonable that KPMG continue its preservation at this time.
Not referenced in Judge Cott’s opinion is whether the parties had explored what might seem to be a logical compromise — having a third-party store mirror images of the hard drives on a server.
Blogworthy Developments
It’s time for a survey of other FLSA blogs, if only to see what’s catching the eyes of others.
- Andrew Frisch has as summary of Norceide v. Cambridge Health Alliance, a recent D. Mass. opinion. In a holding contrary to that of most courts facing the issuer, Judge Nancy Gertner held that a true “gap time” claim can exist under the FLSA. In other words, simply because the employer has paid above the minimum wage when the week’s wages are divided by hours worked in the week does not mean that the employer is relieved of the obligation to pay at least the minimum wage for every single hour worked. What’s interesting about the Norceide opinion is that, agree or disagree with the result, there’s no challenging that Judge Gertner’s analysis is thoughtful and provocative.
- Robin Weideman reminds those representing California employers that the California Legislature has enacted yet another change in California’s state wage and hour law — this one requiring a written contract for commission pay agreements. While were on the California front, check out Michael Kun’s recent post on the California Supreme Court teeing up for oral argument a much-debated question of whether, under California law, an employer must “ensure” that employers take meal and rest periods, or whether they are only required to make them “available” to employees.
- Womble Carlyle has an update on the Department of Labor’s plans to share misclassification information with the Internal Revenue Service. What does Womble Carlyle think about the idea? Not much:
In what appears to be another example of cracking down on the improper use of independent contractors, the U.S. Department of Labor (“DOL”) recently announced it is entering into agreements with the IRS, as well as some state agencies (including Illinois state agencies), to share information regarding employers who have improperly classified employees. The DOL maintains that these arrangements are necessary to share information and coordinate law enforcement with the participants to end the practice of misclassifying employees. However, it is clear that this collaboration has as much to do with enhancing the inflow of tax revenues as it does with protecting employees.
- Sheppard Mullin summarized the DOL’s crack-down on the treatment of unpaid interns. Shoot — there goes my traditional “summer law clerk” program.
Tribal Sovereignty Bars FLSA Lawsuit
In Larimer v. Konocti Vista Casino Resort, Marina & RV Park, 2011 WL 4526023 (N.D. Cal. 2011), Judge James Ware of the Northern District of California faced an issue that comes up only infrequently – does tribal sovereignty bar an FLSA lawsuit against a company owned by an Indian tribe? The case was brought by a former employee of the Casino, and centered on a claim that the employee had been improperly treated as exempt under the FLSA.
Not so quick, Judge Ware ruled. Tribal Nations are only subject to lawsuits where Congress has authorized the suit or the Tribe has expressly waived its sovereign immunity. Where casinos are wholly owned and operated by a tribe, and their profits inure directly to the tribe, they are generally considered to be functioning as arms of the tribe and entitled to sovereign immunity. The bigger question was whether, through enacting the FLSA, Congress had abrogated tribal sovereign immunity.
Judge Ware found no abrogation of immunity. As Judge Ware reasoned:
Here, the FLSA makes no mention of private enforcement against tribal governments and does not specifically reference tribes anywhere in the statutory scheme. See 25 U.S.C. §§ 201-19. To the contrary, while the statute does expressly abrogate sovereign immunity with regards to public agencies, it expressly limits the definition of “public agencies” to agencies of the United States or state governments. Id. §§ 203, 216. That Congress specifically considered the abrogation issue and did not include tribes among those sovereigns whose immunity was being abrogated is telling evidence of Congress’ decision not to abrogate. Thus, the Court finds that Congress did not abrogate tribal sovereign immunity in the FLSA.
It’s been a while since there’s been an interesting fluctuating workweek case. What? You say there’s never been a fluctuating workweek case? Well, if you’ve never dived into the intricacies of 29 C.F.R. §778.114, then there are unexplored vistas for you on the horizon.
In Perkins v. Southern New England Telephone Co., 2011 WL 4460248 (D.Conn. 2011), Judge Janet Hall of the District of Connecticut wrestled with a question that’s come up quite a bit lately. If the employer treats the employee as exempt and fails to pay the employee overtime, and later the employee is found to be FLSA eligible, can the employer retroactively take advantage of the fluctuating workweek? The stakes can be high. With the fluctuating workweek, the employer need only pay the employee an additional half-time in compensation for overtime hours worked; without the fluctuating workweek, the employer would owe time and one-half.
The legal landscape is littered with contrary points of view on the retroactive use of the fluctuating workweek. Several courts of appeal have held that employers can benefit from retroactive application of the fluctuating workweek. See Clements v. Serco, Inc., 530 F.3d 1224, 1230-31 (10th Cir.2008); Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 40 (1st Cir.1999); Blackmon v. Brookshire Grocery Co., 835 F.2d 1135, 1138 (5th Cir.1988). Another court of appeals, and several district courts, have found to the contrary. Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665, 681 (7th Cir.2010); Russell v. Wells Fargo & Co., 672 F.Supp.2d 1008, 1013 (N.D.Cal.2009); Ayers v. SGS Control Servs., Inc., 2007 U.S. Dist. LEXIS 19634 at *40-42 (S.D.N.Y. Feb. 27, 2007); Rainey v. Am. Forest & Paper Assoc., Inc., 26 F.2d 82, 100-02 (D.D.C.1998).
No doubt wanting to make sure all the bases were covered, the Department of Labor has given opinions on both sides of the dispute. On January 14, 2009, in the waning hours of the Bush Administration, the DOL endorsed the use of an overtime premium of one-half the regular rate in an instance where an employee has been misclassified as exempt. On April 5, 2011, the Obama Administration DOL changed course, stating that it “does not believe that it would be appropriate to expand the use of [the fluctuating workweek method] of computing overtime pay beyond the scope of the current regulation.”
From this mélange, Judge Hall decided the soundest theoretical approach was to not allow retroactive use of the fluctuating workweek. Here’s her rationale:
Although several circuits have applied section 778.114 in a misclassification case, the court does not find those decisions to be particularly persuasive, especially given the lack of analysis regarding the difference between applying the fluctuating workweek method prospectively– where both the employer and the employee have agreed regarding compensation– and retrospectively–when the employer has made a unilateral, and incorrect, decision that an employee is exempt from being paid overtime at all. The court agrees with other district courts that have held that the plain language of section 778.114 requires that, in order to employ the fluctuating workweek method of overtime compensation, an employer–pursuant to a clear agreement– must contemporaneously pay employees an overtime premium of one-half the regular rate for overtime hours. See 29 C.F.R. § 778.114 (“… such a salary arrangement is permitted … if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage … and if he receives extra compensation, in addition to such salary, for all overtime hours worked.”) (emphasis added). As SNET has not paid contemporaneous overtime premiums, section 778.114 is inapplicable to this case.
FLSA Pop Quiz
I’ve remarked before that in putting together the latest edition of my book on the FLSA, it struck me how many results in close cases can be predicted by knowing the political party of the president who appointed the judge. There are exceptions, to be sure, but my informal and wholly unscientific count was that over 90% of close-case results could be predicted by knowing just that one fact. What’s a close case? One where the law isn’t settled, or an area of the law that grants district court judges wide discretion.
And so, a pop quiz. What’s the political party of the president who appointed John Phil Gilbert, a judge on the Southern District of Illinois? All you have to go on is his rationale in his recent certification decision in the admirably tongue-twisterish-named Drew v. Shoe Show, 2011 WL 4387096 (S.D. Ill. 2011):
In order to warrant notice to other potential class members, Drew must make a modest factual showing that other exempt store managers in Shoe Show Inc. stores are similarly situated to her in that they performed the same or similar type of job duties relevant to the exempt classification and that they are victims of a common unlawful policy or plan to misclassify them as exempt. She has pointed to the store manuals for Shoe Show Inc.’s two business divisions that show all store managers are responsible for accomplishing or delegating many of the same core functions. However, there is no evidence that, beyond responsibility for those core functions, all store managers perform similar activities for the same percentage of work time such that they are similarly situated with respect to the question of whether they are properly categorized as exempt under the FLSA, 29 U.S.C. § 213(a)(1). In fact, Shoe Show Inc.’s corporate representative testified that “there is a good deal of difference in the duties even within the exempt group” of store managers. Manning dep. at 75. [FN3]
Here’s the answer. But you guessed, didn’t you?
An article in the New York Post about tip-pooling cases got a little bit of steam coming out of my ears. I know, it was the New York Post, for goodness sakes, why react at all? Perhaps it was the usual breathless headline, Money-Grub ‘Tip’ Suits Driving Eateries Out Of Business. Maybe it was that terrible pun using the word “Grub,” but I usually think terrible puns are the best. Of maybe it was the underlying premise — that complying with the law is driving businesses out of business.
You see the notion sometimes floated that the FLSA is such a complicated law that employers find it impossible to comply with the law, and are unwarily caught in an endless set of minefields. To which I say, “rubbish.” The FLSA has been around 73 years. If anything, the law has become less, and not more, expansive over time. Today, the FLSA covers less employees (courtesy of the “Fair Pay” regulations), requires compensation for less hours (courtesy of the Portal Act and such lesser legislation as the Employee Commuting Flexibility Act), and is dealt with by a much more conservative court system (can anyone really think cases such as Steiner would be decided the same way today?).
The FLSA’s rules are really quite basic. So, here’s my list of five (I can’t even get to 10) FLSA rules that should be learned in business kindergarten. Following these rules would surely put the Post’s “money-grubbing lawyers” out of business.
1. Pay Employees When They Work. If employees come in early or stay late in order to get the job done, pay them. If they work at home, pay them. Pay them for every minute that they work. And stay away from elaborate “rounding” systems for calculating the amount of overtime that was worked; they can get you in trouble. With computers, it’s no more time-consuming to multiply $18.75 by 14 minutes than it is by 10 minutes.
2. Don’t Let Employees Work Off The Clock. For more than 50 years, the Department of Labor and the courts have warned employers that it is the employer’s obligation to stop off-the-clock work from happening. Yet repeatedly we see cases — huge cases — where employers have explicitly or tacitly encouraged off-the-clock time, or have taken the Sergeant Schultz “I see nothing, nothing” approach to the work. If you know or think off-the-clock work is occurring in your business, immediately stop it from happening.
3. Don’t Get Greedy With Exemptions. To be sure, the Fair Pay regulations give employers a much expanded opportunity to claim that middle or low-level employees are exempt. But is it really worth the litigation costs to take advantage of an iffy exemption claim? Why not flip the equation, and pay overtime to everyone who could possibly be treated as non-exempt? I know, it has the potential to be more expensive, and it may require you to lower the hourly wage so that your overall salary costs are the same. That’s a whole lot better than getting embroiled in litigation, and you may even find you inculcate more loyalty in your employees.
4. Don’t Get Cute With How You Pay Employees. Stay away from exotic pay schemes. I understand that you may want to have different bonuses, incentive pays, shift differentials, etc., to reward special work or characteristics. If you’re going to use that form of pay, include it in the overtime rate. Even if it’s iffy and you think you have a principled argument to exclude the pay from the overtime calculus. Including everything in the overtime rate will only cost you pennies, and litigation doesn’t cost pennies. Also, pay employees their overtime on time. The days of overtime being calculated by scribes sitting in tall chairs, perched over worn desks with quill pens at the ready, are long past. Overtime can and should be computed by using, well, computers, and done so immediately after the pay period ends.
5. Don’t Be Aggressive With Minimum-Wage Employees. So much of FLSA litigation today deals with employers trying to be as aggressive as possible with minimum wage employees. Of course, there’s the tip-pooling issue about which the Post was complaining. We’ve seen cases this year about employers spreading tip pools to owners, to general managers, and to just about every possible employee, appropriate or not. Shoot, there’s an entire subset of FLSA jurisprudence I think of as “Manhattan Chinese Restaurant Litigation.” But the “minimum wage employee” issue goes beyond just tip pools. We’ve seen cases on minimum wage offsets, uniforms, housing, and other benefits where you’re just left shaking your head wondering why an employer would think its decisions would be approved by the courts.
But that’s the point, isn’t it? Some employers are simply convinced that their employees won’t sue them no matter what the wage-and-hour practice might be. That’s wrong, though, even in this economy. Minimum-wage employees have little to lose by filing FLSA lawsuits against their employers. Then there are those fee-shifting provisions of the FLSA, that make it profitable for the Post’s money-grubbing lawyers to represent even minimum wage employees. Throw in a dash of the possibility of a large-scale collective action where hundreds or thousands of employees can be represented in one lawsuit, and the days are clearly past of minimum-wage employees being a low risk for an FLSA lawsuit.
Following these rules won’t guarantee you won’t be sued. Nothing can provide such a guarantee. But following these rules will dramatically lower the possibility that you’ll be sued, and will put you in good stead with a court in the unlikely event a lawsuit happens.
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