On August 26, the United States Court of Appeals for the Third Circuit affirmed the District Court’s dismissal of the Fair Labor Standards Act (FLSA) overtime claims brought against a myriad of health care systems and their affiliates in the Greater Philadelphia area.1 Pepper Hamilton LLP represents two of the defendants, Albert Einstein Healthcare Network and Abington Memorial Hospital, and their affiliates.
In November of 2009, Thomas & Solomon LLP, a plaintiffs’ firm that has filed dozens of nearly identical cases around the country, alleged that area health care systems had failed to appropriately compensate their employees for all hours worked, in violation of the FLSA. In particular, the complaints alleged that the plaintiffs, nurses and other patient-care professionals, were not compensated properly when defendants maintained three unlawful timekeeping and pay polices: (1) a “Meal Break Deduction Policy,” whereby plaintiffs allege that the defendants’ timekeeping system automatically deducted 30 minutes of pay daily for meal breaks without ensuring that the employees actually received a break; (2) the “Unpaid Pre- and Post-Schedule Work Policy,” whereby plaintiffs allege that the defendants prohibited employees from recording time worked outside of their scheduled shifts; and (3) the “Unpaid Training Policy,” whereby plaintiffs allege that the defendants did not pay employees for time spent at “compensable” training sessions. Because of the policies, the plaintiffs alleged that they regularly worked hours both under and in excess of 40 per week and were not paid for all of those hours.
Judge Cynthia M. Rufe of the U.S. District Court for the Eastern District of Pennsylvania dismissed the initial complaint, and the two subsequent amended complaints filed by the plaintiffs. After the dismissal of the Third Amended Complaint, the plaintiffs appealed the decision to the United States Court of Appeals for the Third Circuit.
In its 16-page opinion, the Court of Appeals held that plaintiffs did not “plausibly plead” that they worked over 40 hours in a particular week and were not paid overtime. In deciding the level of detail necessary to plead an FLSA overtime claim, the court agreed with the Second Circuit’s approach in Lundy v. Catholic Health System of Long Island, Inc., where it held that “in order to state a plausible FLSA overtime claim, a plaintiff must sufficiently allege  hours of work in a given workweek as well as some uncompensated time in excess of the  hours.” 711 F.3d 106, 114 (2d Cir 2013). The court then analyzed the allegations of hours worked for each named plaintiff and stated that:
Of the four named plaintiffs who allege that they “typically” worked at least forty hours per week, in addition to extra hours “frequently” worked during meal breaks or outside of their scheduled shifts — Davis, Erica Williams, Gerardina Ilaria, and Diane Read — none indicates that she in fact worked extra hours during a typical (that is, a forty-hour) week. Their allegations are therefore insufficient.
While affirming, the court did not hold that a plaintiff must identify the exact dates and times that she worked overtime to sufficiently allege an FLSA overtime claim. Rather, the court stated that “a plaintiff’s claim that she ‘typically’ worked forty hours per week, worked extra hours during such a forty-hour week, and was not compensated for extra hours beyond forty hours he or she worked during one or more of those forty-hour weeks, would suffice. But no such allegation is present in this case.”
In addition to overtime claims, plaintiffs brought “gap time” claims, which are claims for straight time wages for unpaid work during pay periods without overtime. The court ruled that “gap time” claims are not cognizable under the FLSA, which requires payment of minimum wages and overtime wages only. The Court of Appeals noted that the District Court did not address the possibility that plaintiffs’ gap time claims might constitute claims for “overtime gap time.” However, the Third Circuit ruled that it need not resolve this issue because the plaintiffs had failed to plausibly allege that they had worked overtime in any particular week.
In addition to appealing the District Court’s dismissal of their FLSA claims, the plaintiffs appealed from the District Court’s order denying the plaintiffs’ motions to remand the parallel state cases on the basis that they were completely preempted by Employee Retirement Income Security Act § 502(a) and Labor Management Relations Act § 301. The Court of Appeals, however, found that it was not necessary to rule on whether the District Court’s preemption ruling was correct.
Finally, the court held that the District Court did not abuse its discretion in denying plaintiffs leave to amend because plaintiffs were on notice of deficiencies in their complaints. To support its ruling on this issue, the court noted that Judge Rufe had advised plaintiffs of the need to remedy the “gaping deficiencies” identified by “at least seven other district courts” that “had dismissed similar complaints filed by the same counsel.”