19 Oct Department of Labor
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The Department of Labor (DOL) recently announced that in the last fiscal year, it had “recovered” a quarter of a billion dollars of back wages due to some 269,250 workers. In late December, the U.S. Senate confirmed the appointment of David Weil to lead the DOL’s Wage & Hour Division. This appointment suggests the intense government scrutiny will not ease up anytime soon. Weil had earlier supported an initiative by the DOL to sniff out noncompliance to the Fair Labor Standards Act, in industries which use a lot of independent contractors. In light of the government’s stepped-up efforts, it’s even more important for employers to be on top of every detail. Here are two examples where the employers prevailed… mostly.
Ma Laboratories, Inc
The verdict in one case made it a little tougher on employees (or their attorneys) who are trying to have their complaints certified for class action status. Class action lawsuits are more lucrative to the attorneys who represent the group, than simply one-off cases on behalf of individual employees. They can also be more costly for you, depending on the outcome.
This case, known as Lou et. al. v. Ma Laboratories, Inc., was heard in a federal district court in San Francisco. It was built on a foundation laid by a 2013 U.S. Supreme Court ruling (Comcast Corp. v. Behrend) which held that to be grouped as a class, plaintiffs must prove a common liability (among other things).
Several employees in the Ma Laboratories case complained they were improperly denied compensation for “off the clock” work. Expert testimony presented on behalf of the employees proposed that a sampling of employees’ time clock, telephone and e-mail records could be analyzed to determine class status.
However, the judge was not satisfied by the statistical validity of such sampling. Also, individual employees, when testifying in the case, presented varying accounts of how they were treated. The court was troubled by these “collective variations” in fact patterns. As a result, the court said the variations “cause plaintiffs’ off-the-clock claims to necessarily dissolve into mini-trials.” On that basis, the court denied the case class action status.
Lesson for employers: it may be advisable to collect individual employees’ assertions of mistreatment early in the process. This way, if there are any significant variations among the complaints, they can be used to strengthen the argument against class action status certification.
Tegrity Personnel Services, Inc.
Another recent case — Silva v. Tegrity Personnel Services, Inc. — was decided in the 5th Circuit Court of Appeal. This case addresses whether employers using a “Rule 68 offer” can preempt a class action case.
Rule 68 of the Federal Rules of Procedure allows a defendant to make a settlement offer. This offer must be made no later than two weeks before the start date of the trial. The offer may cover the plaintiff’s legal expenses up to that point. The plaintiff then has two weeks to accept or decline. If the plaintiff declines the offer, pursues the case and ultimately is awarded an amount less than the defendant’s offer, the plaintiff is then obliged to pay for the defendant’s legal costs incurred after the offer was made. In addition, the plaintiff in this scenario cannot ask the court to reimburse his or her expenses incurred after rejecting the defendant’s settlement offer.
Here’s what happened in this case:
Paula Silva filed a claim for unpaid overtime wages, on her own behalf and on behalf of “similarly situated” coworkers. In a separate action she also claimed her employer had retaliated against her for making an issue of the unpaid wages. Another employee jumped on board that case the same day it was filed. The defendant, Tegrity, made a Rule 68 offer to the two, but the plaintiffs did not accept it. About a week later, Silva asked the court to certify her unpaid overtime wages as a class action case, and several more employees joined the case. They too were offered a settlement under Rule 68 and also rejected it.
Eventually Tegrity asked the court to throw the case out. This request was on the grounds that the Rule 68 offers were expiring, therefore the court no longer had the “subject matter expertise” authority to preside over the case. That would have meant the court could only deal with plaintiffs on an individual basis, not as a class. The decision of the court was fortified by similar, earlier cases. When the dust settled, the ultimate ruling had several implications for other cases.
Lessons for employers: First, the court shot down an earlier ruling which would have allowed plaintiffs more time to pursue their claims after rejecting a defendant’s Rule 68 offer. Second, the court granted other courts within its jurisdiction the authority to rule that a plaintiff’s rejection of a Rule 68 offer blocks a class action case under the FLSA. That is, assuming that the offer in question addresses the damages that the plaintiff (and others who join in on the case) could recover.
Also, the court rejected the contention of the employer that the employees’ claims were moot due to the expiration of the offer under Rule 68. That conclusion was reached because Tegrity’s offer failed to address Silva’s related retaliation claim. This underscores the importance of employers paying close attention to all of their obligations under Rule 68.