February was another busy month in the world of wage and hour law. In our continuing efforts to keep our clients and friends apprised of recent developments in that often vexing and treacherous legal arena, we highlight some important recent developments.

FEDERAL COURTS

On February 4, 2013, the U.S. Court of Appeals for the Seventh Circuit (Espenscheid v. DirectSat USA LLC, 7th Cir., No. 12-1943, February 4, 2013) affirmed the U.S. District Court for the Western District of Wisconsin’s decertification of an FLSA class action covering approximately 2,341 technicians employed by DirectSat USA LLC. The class was decertified because the manner of compensation and tasks performed varied among the technicians. According to the Court of Appeals, a determination of damages would require 2,341 separate evidentiary hearings. Uniformity among FLSA class members will continue to be a touchstone in determining whether a court will certify a class action.

On February 5, 2013, the U.S. District Court for the Southern District of Ohio (Rutledge v. Claypool Elec. Inc., S.D. Ohio, No. 2:12-cv-00159, February 5, 2013) declined to certify two sets of construction workers’ FLSA collective actions against their employer for unpaid overtime. One group alleged that it was forced to accept paid time off instead of overtime for hours worked above and beyond 40 per week. A second set claimed it worked prevailing wage and privately funded projects in the same week, yet were not paid the weighted average of the pay rates. The court affirmed and adopted the Magistrate Judge’s recommendation not to certify the class of employees allegedly forced to accept paid time off because there was insufficient evidence of a common company policy and the class did not appear to be manageable. The court declined certification of the employees who were not paid the weighted average of the prevailing wage and private project wage because there was no evidence that the practice was widespread or regular. The court thus reinforced two key elements in FLSA class certification cases: commonality and consistency.

On February 8, 2013, the U.S. District Court for the Northern District of California (Minor v. FedEx Office & Print Servs. Inc., N.D. Cal., No. C-09-1375, February 8, 2013) granted preliminary approval of a $9.625 million settlement between FedEx Office and Print Services Inc. and representatives of a statewide class to compensate employees for wage and hour violations under California law. The named plaintiffs asserted numerous claims, including those relating to minimum and overtime wages, along with allegations related to missed meal and rest periods. The court required additional documentation to determine that the settlement was neither collusive nor unfair. The court applied a higher level of scrutiny than normal because the settlement was reached prior to the class being certified. The parties were required to submit the damages analysis used during the settlement process to evaluate whether the agreement was equitable. Thus, courts have indicated again that a more thorough inquiry will be made in instances where settlements are reached prior to class certification.

On February 12, 2013, the U.S. District Court for the Eastern District of New York (Leal v. Masonry Servs. Inc., E.D.N.Y., No. 1:12-cv-00588, February 12, 2013) held that a construction worker sufficiently alleged that multiple individuals were his “employers” under the FLSA because each had operational control over his work. The court applied the “economic reality” test, finding that the individual defendants each had the authority, inter alia, to fire, hire, and supervise the plaintiff. Employers must be careful not to create unwanted employer relationships by establishing work contexts where too many individuals exercise control over an employee’s performance.

On February 13, 2013, the U.S. District Court for the Southern District of Texas (Gate Guard Servs. LP v. Solis, S.D. Tex., No. 10-00091, February 13, 2013) held that oil field gate employees were independent contractors, not employees subject to the requirements of the FLSA. The court found that Great Guard Services did not exercise sufficient control over the attendants to be considered their employer; the workers were hired on a project-by-project basis, could reject assignments without penalty, and received no training, supervision, or discipline. Furthermore, the attendants had the freedom to take other jobs, and their roles with GGS were temporary and not permanent. Employers who do not exercise workplace control may be able to avoid FLSA liability.

On February 13, 2013, the U.S. Court of Appeals for the Eleventh Circuit (Moore v. Appliance Direct Inc., 11th Cir., No. 11-15227, February 13, 2013) concluded that the U.S. District Court for the Middle District of Florida had the discretion to deny liquidated damages to three home appliance delivery drivers who prevailed at trial on their FLSA retaliation claims. The Eleventh Circuit joined the Sixth and Eighth Circuits in concluding that the plain language of § 216(b) of the FLSA mandates liquidated damages only for violations of the statute’s minimum wage and overtime provisions. Accordingly, three United States Circuit Courts of Appeals have held that awards of liquidated damages are discretionary for FLSA retaliation violations.

On February 15, 2013, Merrill Lynch & Co. settled a collective action pending in the U.S. District Court for the Southern District of New York (Martignago v. Merrill Lynch & Co., S.D.N.Y., No. 11-civ-03923, February 15, 2013). Merrill agreed to settle an FLSA overtime case by paying $12 million to approximately 12,000 of its “client associates.” The settlement awaits class member responses and court approval.

On February 19, 2013, the U.S. Supreme Court granted a petition filed by U.S. Steel Corp. employees to review whether time spent putting on and taking off safety equipment falls within the FLSA provision denying compensation for time spent “changing clothes” (Sandifer v. U.S. Steel Corp., U.S., No. 12-417, cert. granted, February 19, 2013). The justices will review the U.S. Court of Appeals for the Seventh Circuit’s decision holding that, under § 203(o) of the FLSA, U.S. Steel need not pay union-represented steel workers for time spent at the plant changing into and out of work clothes. The Supreme Court will resolve a split between the circuits regarding the meaning of “changing clothes” under § 203(o) of the FLSA.

STATE COURTS

On February 8, 2013, a Chinatown restaurant paid $525,000 to settle charges that it violated San Francisco’s minimum wage laws by paying workers as little as $3.02 an hour (City & Cnty. Of San Francisco v. Dick Lee Pastry Inc., Cal. Super. Ct., No. C-GC-11-512391, jury trial calendar vacated, February 11, 2013). A jury trial had been scheduled for February 25, 2013 in California Superior Court, San Francisco; the lawsuit was filed by the City Attorney who alleged that the restaurant failed to pay seven immigrant workers overtime and minimum wage compensation.

DEPARTMENT OF LABOR

On February 14, 2013, the Department of Labor (“DOL”) announced that Lyons Group, a Boston, Massachusetts-area restaurant group, agreed to pay $424,000 to 409 employees to resolve allegations that the workers were not properly compensated for all hours worked. The restaurants will pay $212,000 in back wages and an equal amount in liquidated damages to resolve the DOL’s FLSA violation allegations. Most of the employees worked as kitchen staff, but were paid by Superbite Professional Cleaning, a separate company that no longer exists. The use of contract labor providers does not absolve employers from their responsibility to comply with the FLSA.

On February 20, 2013, the DOL announced that it recovered $216,960 in overtime back wages for 25 mechanics at six retail tire sales and installation stores in Iowa. An investigation by the DOL’s Wage and Hour Division found that DJR Holding Corp. violated the FLSA when it failed to pay overtime wages. According to the DOL, the company reduced the mechanics’ weekly compensation when their hours fell below 40 per week, but did not pay them overtime compensation when they worked more than 40 hours in any week. It is hard to believe in this day and age, but it still appears that employers attempt to unlawfully avoid paying overtime by offsetting employees’ hours against those in another week when the same employee works less than 40 hours.

On February 21, 2013, the DOL announced that Hawaiian coffee growers paid more than $63,000 in back wages and $42,000 in penalties for wage violations affecting 150 workers. The DOL’s Wage and Hour Division found extensive violations of the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”) during investigations of coffee growers in the Kailua-Kona coffee growing and production region on the Big Island of Hawaii. Violations allegedly included payment of piece-rate wages below the federal minimum wage, improper classification of non-exempt employees, failure to pay for all hours worked, and failure to maintain adequate records of employees’ wages and hours.

LEGISLATION

On February 13, 2013, Congresswoman Donna Edwards (D-MD) introduced a bill that would increase the base hourly pay for tipped employees to $3.75 per hour. The Working for Adequate Gains for Employment in Services Act (“WAGES”) would amend the FLSA to eventually require that tipped employees be paid $5 per hour. According to Rep. Edwards’ proposal, within two years, tipped employees would be paid no less than $5.50 per hour.

On February 14, 2013, the New Jersey General Assembly placed a resolution raising the state’s minimum wage into the hands of the voters. In November, the voters will vote on a constitutional amendment to raise New Jersey’s minimum wage to $8.25 per hour, with annual cost-of-living increases tied to inflation.