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Fair Labor Standards Act
U.S. Supreme Court Hears Oral Arguments In Two Employment Law Cases
Written by admin
Tuesday, 04 December 2012 22:53

The 2012-2013 term of the United States Supreme Court is currently in session, and the High Court recently heard oral arguments for two cases involving employment law issues.

The first case, Vance v. Ball State University, deals with the issue of what type of authority must an employee possess to constitute a “supervisor” for purposes of imposing strict liability on an employer for the actions of its supervisors, under Title VII of the Civil Rights Act of 1964.  The specific question in this case is whether an employer is strictly liable under Title VII for harassment by (a) employees who have authority to oversee and direct the work of the alleged victim, or (b) only those who have the authority to “hire, fire, demote, promote, transfer, or discipline” the alleged victim.

This issue is significant, because of the landmark cases of Faragher v. City of Boca Raton and Burlington Industries, Inv. v. Ellerth, where the Supreme Court ruled that an employer is vicariously liable for severe or pervasive workplace harassment committed by a supervisor of the victim.

Currently, the different federal circuit are split on this issue.  The Second, Fourth, Ninth and Tenth Circuits have adopted a broader approach, and ruled that strict liability under Title VII extends to employees who have the authority to direct and oversee their victim’s daily work.  Additionally, the EEOC Guidelines also set forth a broader definition of “supervisor” as somebody who has the authority to direct employees’ daily work activities.  On the other hand, the First, Third, Sixth, Seventh, and Eighth Circuits have adopted a narrower approach, and ruled that strict liability applies only for supervisors who have authority to “hire, fire, demote, promoted, transfer, or discipline” the alleged victim.

The Supreme Court heard oral arguments for this case on November 26, 2012.

The second case, Genesis Health Care Corp. v. Symczyk, deals with the issue of whether a collective action under the Fair Labor Standards Act (“FLSA”) becomes moot when the lone plaintiff receives an offer of judgment from the employer that fully satisfies the FLSA claim.

In this case, the Third Circuit Court of Appeals ruled that the employer’s offer of judgment did not render moot a plaintiff’s claim under the FLSA.  The court reasoned that it did not want to enable employers to “pick off” individually-named plaintiffs in order to avoid FLSA collective action claims.

The Supreme Court heard oral arguments for this case on December 3, 2012.

 
Court Stays Implementation Of New Rule On Mortgage Loan Originator Compensation
Written by admin
Friday, 01 April 2011 11:26

Last last night, the Court of Appeals for the District of Columbia Circuit issued a stay of the implementation of the new rules that would have changed the way mortgage loan originators needed to be compensated.  The news rules were scheduled to take effect today, April 1, 2011.

The final rules, if enacted, would apply to all persons who originate loans, including mortgage brokers and the companies who employ them, as well as mortgage loan officers employed by depository institutions and other lenders.

Among other things, the final rules:

  • Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms.  Compensation that is based on a fixed percentage of the loan amount is permitted.
  • Prohibit a mortgage broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.  This means that the loan officer must either be “borrower paid” or “lender paid.”
  • Prohibit a mortgage broker or loan officer from “steering” a consumer to a lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation.

The court’s stay was in response to a motion for emergency relief filed by the National Association of Mortgage Brokers (“NAMB”).  The court has also ordered the government to file a response to the motion for emergency relief by April 4, 2011, and ordered NAMB to file any reply by April 5, 2011.  The court will issue a decision after receiving the submissions from the parties.

You can view a copy of the final rules here.  You can view the court’s stay order here.

 
Oral Complaint (Still) Protected From Retaliation Under FLSA
Written by admin
Tuesday, 22 March 2011 10:55

Just this morning, the US Supreme Court issued its decision in Kasten v. Saint-Gobain Performance Plastics Corp., and ruled that an oral complaint is protected from retaliation under the Fair Labor Standards Act (“FLSA”).  By reaching this decision, the high Court concluded that the statutory phrase “filed any complaint” as used in the FLSA includes oral, as well as written, complaints.  The Court’s decision resolved a split among different federal circuits (and agreed with what had been the law in the 9th Circuit since 1999.)

Specifically, the FLSA contains an anti-retaliation that makes it unlawful for employers:

to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the Act], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee.

In addressing whether the phrase “filed any complaint” includes an oral complaint, the Court opined that the word “filed” has different relevant meanings in different contexts.  As an example, the Court noted that some dictionary definitions of the word contemplate a writing, whereas other dictionaries “permit the use of the word ‘file’ in conjunction with oral material.”  The Court then stated that this meant that dictionary definitions of the word “file” do not necessarily limit the scope of the phrase to written complaints.  The Court also noted that some other laws have used the word “file” in conjunction with oral statements, and that regulations promulgated by various federal agencies sometimes permit complaints to be filed orally.

Additionally, the Court reasoned that the purpose of the FLSA would not be met if its anti-retaliation provisions applied only to written complaints.  To support this reasoning, the Court asked the rhetorical question of “Why would Congress want to limit the enforcement scheme’s effectiveness by inhibiting use of the Act’s complaint procedure by those who would find it difficult to reduce their complaints to writing, particularly illiterate, less educated, or overworked workers?”  The Court also reasoned that limiting the anti-retaliation provisions to written complaints would prevent Government agencies from using hotlines, interviews, and other oral methods of receiving complaints.

Based upon this reasoning, the Court ruled that the phrase “filed any complaint” under the FLSA includes the use of oral complaints.

It appears that the Court’s decision was more “result-based” than “law-based.”  First, to reason  that the FLSA protects against retaliation for oral complaints because the word “file” is not “necessarily limited to written complaints” is a bit of a stretch.  Additionally, although the Court is correct that other laws permit the filing of oral complaints, the laws cited by the Court are different from the FLSA because they expressly provide that a complaint may be filed orally (the FLSA contains no such language.)  Finally, the Court’s reasoning regarding illiterate or less-educated individuals, or the Government’s use of hotlines and interviews, indicates that the Court was basing its decision on the result it wanted to achieve, and not on the specific language of the FLSA.

Nevertheless, the Supreme Court is the final decision-maker on this issue, and the Kasten decision is now the law of the land.  I should also note that although this decision resolved a split among several different federal circuits, it doesn’t change the law in Hawaii.  Specifically, in a case called Lambert v. Ackerley, the 9th Circuit had previously ruled that oral complaints made to a supervisor were protected from retaliation under the FLSA.  Therefore, the Kasten decision really just means that oral complaints are still protected in the 9th Circuit (which includes Hawaii), and employers should continue to take caution when receiving any type of oral complaints under the FLSA.

You can read a copy of the Court’s decision here.  You can also read some history of this case in an earlier blog post here.

 
Pharmaceutical Sales Reps Exempt Under FLSA, For Now
Written by admin
Tuesday, 01 March 2011 11:30

The Ninth Circuit Court of Appeals recently ruled that Pharmaceutical Sales Representatives (“PSR”) constituted “outside salesmen” who were exempt from overtime under the Fair Labor Standards Act (“FLSA”).

Specifically, in Christopher v. SmithKline (9th Cir., Feb. 14, 2011), a PSR sued his employer under the FLSA alleging a failure to pay overtime.  The employer responded that the PSR was not entitled to overtime because he was an “outside salesman” under the FLSA.  The district court agreed with the employer and ruled that the PSR was not entitled to overtime under the FLSA.  The court also noted that the PSR was not an hourly employee, but instead earned salaries well above the minimum wage – sometimes up to $100,000 a year – and received bonuses in lieu of overtime as “an incentive to increase their efforts.”

On appeal, the PSR argued that he did not engage in “sales” as defined by the FLSA.  The Ninth Circuit Court of Appeals rejected this argument, and noted that the phrase “other disposition” in Section 3(k) of the FLSA’s definition of “sale” was open-ended and applied to the activities that were performed by PSR’s.  The court also recognized that PSR’s were hired for their sales experience, were trained in sales methods, encouraged physicians to prescribe their products, and received commissions-based compensation.  The court then explained that the fact that the “buyer” in such transactions is really the physician, and not the ultimate end-user (the patient), because it is the physician who makes the decision on what medication to prescribe to a patient.  Therefore, pharmaceutical sales are “unlike conventional retail sales” and, in this context, the “sale” is “the exchange of non-binding commitments between the PSR and physician at the end of a successful call.”

The Christopher decision is good news for pharmaceutical companies, for now.

Just yesterday, in a case involving the same issue, the U.S. Supreme Court declined to review a decision by the Second Circuit Court of Appeals in Novartis v. Lopes (2nd Cir., July 6, 2010).  In that case, the court ruled that pharmaceutical sales representatives did not “sell” drugs, and therefore, were not outside salesmen who would be exempt from overtime under the FLSA.  The fact that the Supreme Court declined to review the decision in Novartis is very interesting, because it could mean that the high Court is content to let the decision stand.  If the Supreme Court later accepts an appeal for the Christopher case, however, it could be bad news for pharmaceutical companies because it could mean that the high Court might be inclined to reverse the Ninth Circuit’s decision.  We will need to stay tuned to see what happens with this case.

You can read a copy of the Christopher decision here, and a copy of the Novartis decision here.

 
Demand for Repayment of Training Costs Did Not Violate FLSA
Written by admin
Monday, 22 November 2010 12:06

In Gordon v. City of Oakland (9th Circuit, Nov. 19, 2010), the Ninth Circuit Court of Appeals recently ruled that the City of Oakland did not violate the minimum wage provisions of the Fair Labor Standards Act (“FLSA”) when it required its employees to repay a portion of their training costs if they voluntarily left employment from the city before completing five years of service.

In Gordon, the city paid $8,000 in training costs for the plaintiff when she began working for the city.  Under an agreement between the plaintiff and the city, the plaintiff agreed to pay back a pro-rated amount of the training costs if she voluntarily left work before completing five years of service.  Before completing her second year of work, she resigned.  Under the agreement, she was required to repay the city $6,400.

The city gave the plaintiff a final paycheck of $2,385, which reflected her hourly pay for 60 hours of work.  The city also gave the plaintiff a notice that she needed to repay $6,400 for her training costs.  In partial satisfaction of her training costs, the city withheld the paychecks for the plaintiff’s accrued and unused vacation ($1,295) and compensatory time off ($654).  The city also demanded a repayment of the remaining balance ($4,449, plus a collection fee) from the plaintiff.

The plaintiff paid the costs of her training, and then sued for violation of the FLSA.  She argued that she technically received “negative” pay for her last pay period, because she was required to “kick back” the cost of repayment to the city.  Therefore, she argued, that by paying back money to the city, she received less than the minimum wage for her last pay period.

The court disagreed with the plaintiff, and ruled that it was lawful for the city to require the plaintiff to repay the costs of training.  The court also stated that the city did not violate the FLSA, because it paid the plaintiff an amount exceeding the minimum wage in her final paycheck.   Finally, the court stated that the demand for repayment was not a “kick back,” as defined by the FLSA’s regulations.  Rather, the city was acting as any ordinary “creditor” in seeking repayment of the training costs.

You can read a copy of the court’s decision here.