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.