Wage and Hour

Second Circuit Court of Appeals Holds That CEO Can Be Held Personally Liable for FLSA Violations

July 30, 2013

By Andrew D. Bobrek

The Second Circuit Court of Appeals recently ruled that the Chairman and CEO of a corporate supermarket chain – Gristede’s Foods, Inc. (“Gristede’s”) – could be held personally liable for damages arising from Fair Labor Standards Act (“FLSA”) claims brought by employees of the supermarkets.  Specifically, the Second Circuit ruled that the Chairman and CEO – John Catsimatidis – was an “employer” within the meaning of the FLSA, and could therefore be held jointly and severally liable along with Gristede’s for such damages.

At the time of the case, Gristede’s operated between thirty and thirty-five supermarket stores in the New York City area, and employed approximately 1,700 workers.  In 2004, a group of Gristede’s employees filed a class/collective action lawsuit for unpaid overtime under the FLSA and New York Labor Law (“NYLL”).  The employees prevailed on their claims filed in federal district court, and the parties subsequently entered into a settlement agreement.  However, Gristede’s defaulted on its payment obligations under the agreement, and the plaintiff employees then moved to hold Catsimatidis personally liable for the FLSA damages in question.  The federal district court granted the motion, finding Catsimatidis could be held personally liable, which then prompted an appeal to the Second Circuit.

The Second Circuit affirmed the district court’s decision, holding that, in certain circumstances, an individual may be considered an “employer” under the FLSA and, consequently, held personally liable for violations of the statute.  Further, the court found those circumstances existed with respect to Catsimatidis because, among other things:  (a) he “was active in running Gristede’s, including contact with individual stores, employees, vendors, and customers”; (b) he was ultimately responsible for the employees’ wages and signed their paychecks; and (c) he supervised other managerial personnel, such as the CFO and COO of Gristede’s.

As one might expect in a large corporation employing nearly 2,000 workers, Catsimatidis maintained oversight of Gristede’s business at a high level and was not typically involved in day-to-day operations at the supermarkets.  For example, Catsimatidis did not hire or fire rank-in-file employees, did not fix their specific wages or schedules, and had only limited interaction with his subordinate mangers who handled such matters.  Nevertheless, Catsimatidis’s limited, high level activity was sufficient to find him liable.  The court also alluded that Catsimatidis’s unexercised authority, as Chairman and CEO, to decide these types of issues may also be an “important and telling factor” in whether he could be held personally liable as an “employer” under the FLSA.

Further, the Second Circuit found that it was irrelevant that Catsimatidis was not alleged to have been personally complicit in the FLSA violations at issue and that the FLSA would carry an “empty guarantee” to remediate employees for violations if it did not hold an employer’s controlling individuals accountable to the law.  Notably, the Second Circuit did not decide whether Catsimatidis could also be held personally liable under the NYLL, and instead remanded the case to the original federal district court to decide that issue.

Startling in its potential implications, the Second Circuit’s decision emphasizes the importance of maintaining compliance with the FLSA’s minimum wage and overtime requirements and the risks associated with violations of the statute.

The "Fluctuating Work Week" -- An FLSA Mirage

July 8, 2013

By James Holahan

There are mirages in the labor relations and employment desert.  Concepts and principles that, for a moment, you see and understand, but moments later you have confused or misapplied.  The “fluctuating work week” method of calculating overtime is one of those employment law mirages.  At first glance, it appears as an oasis for employers in the FLSA desert – then, like a mirage, disappears when carefully scrutinized and correctly applied.

The “fluctuating work week” (FWW) method of calculating overtime is an alternative to the familiar “time and one-half” method for paying non-exempt employees who actually work more than 40 hours in a workweek.  It was first recognized more than 70 years ago by the United States Supreme Court in Overnight Motor Transport Co. v. Missel, and was later codified in the federal wage and hour regulations at 29 C.F.R. §778.114.

Often referred to as the “half-time” measure of overtime, it applies:  (1) if there is a mutual understanding between an employer and a non-exempt employee that the employee will be paid a fixed weekly salary no matter how many hours that employee works in a week; (2) if the fixed salary is sufficiently large so that the employee’s regular rate of pay never drops below the minimum wage (federal or state); (3) if the employee’s work week fluctuates both over and under 40 hours per week; and (4) if the employee is paid a “half-time” overtime premium for hours worked beyond 40 in a week.  Using the “half-time” method, the employee’s overtime rate is one-half of the rate determined by dividing the employee’s weekly salary by the number of hours that the employee actually works in a week.  In other words, the overtime rate paid for hours worked in excess of 40 in a week declines the more hours that an employee works.

Not surprisingly, employees are not quick to embrace this system, and employers must consider the “labor relations” and “employee morale” implications of using the FWW method, even in those limited circumstances where it can be lawfully applied.  Employers who do use the FWW method are subject to legal challenges on many fronts.  For example, the USDOL takes the position that the FWW method may only be applied to employees whose weekly hours do not customarily follow a regular schedule and fluctuate both above and below 40 hours per week.  In other words, there must be evidence that the employee’s hours regularly dip below 40 in a week without any diminution in that employee’s fixed salary.  Second, the USDOL insists that the employee be paid a fixed salary – obviously without deductions or offsets, but also without non-discretionary enhancements such as commissions or bonuses.  Note, this “fixed salary” requirement is more stringent than the “salaried basis” test applicable to the “white collar” overtime exemptions.  In 2011, the USDOL considered, but ultimately rejected, proposed amendments to its regulations that would have allowed employers to use the FWW method even if the employer paid employees non-discretionary earned bonuses in addition to the required “fixed salary."  Clearly, the USDOL is not a fan.

Further complicating the use of the FWW method for New York employers is the open question whether this method also applies to overtime payments under New York law.  Several decisions (and an older NYSDOL opinion letter) have suggested that the federal methodology for computing overtime is permissible, but there is no clear precedent on this issue.  Employers should carefully consider whether to use the FWW method to compute overtime, and those who do should regularly review those arrangements to insure that they continue to meet the applicable standards (fluctuating work week, fixed salary, regular rate above the minimum wage, etc.).  Be careful or this FLSA “oasis” may turn out to be a “mirage” that will only produce unhappy employees and costly litigation.

New York State Minimum Wage Increases to Begin December 31, 2013

April 26, 2013

New York State's 2013-2014 budget -- approved on March 29, 2013 -- includes a three-stage increase in the state's minimum wage.  Effective December 31, 2013, the minimum wage will increase from $7.25 per hour to $8.00 per hour.  Effective December 31, 2014, the minimum wage will increase to $8.75 per hour, and effective December 31, 2015, the minimum wage will increase to $9.00 per hour.

These minimum wage increases do not apply to tipped food service workers and service employees who are covered by the New York State Department of Labor's Hospitality Industry Wage Order.  However, the Commissioner of Labor is authorized under the legislation to promulgate a wage order increasing the hourly minimum wage for such tipped employees.

Employers are eligible for a minimum wage reimbursement credit for each employee who:  (1) is between the ages of 16 and 19; (2) is paid at the applicable minimum wage rate; and (3) is a student during the period in which he or she is paid at the applicable minimum wage rate.  During the period of time when the minimum wage is $8.00 per hour, the reimbursement credit is $0.75 per hour for each hour worked by an eligible employee (which is the entire amount of the increase from the current $7.25 per hour minimum wage).  During the period of time when the minimum wage is $8.75 per hour, the reimbursement credit is $1.31 per hour for each hour worked by an eligible employee.  During the period of time when the minimum wage is $9.00 per hour, the reimbursement credit is $1.35 per hour for each hour worked by an eligible employee.  If the federal minimum wage is increased to above 85% of the state minimum wage, however, the reimbursement credit will be reduced to the difference between the federal minimum wage and the New York minimum wage.

The minimum wage reimbursement credit has been criticized because it may create an incentive for employers to hire teenage student employees over adult non-student employees.  Although the legislation creating the reimbursement credit prohibits employers from discharging a non-eligible employee and hiring an eligible employee "solely for the purpose of qualifying for this credit," critics maintain that this provision will be difficult to enforce and point out that nothing in the legislation precludes employers from gradually replacing non-eligible employees with eligible employees through normal attrition rather than by discharging employees.  The reimbursement credit may also create an incentive for employers to keep student employees between the ages of 16 and 19 exactly at the minimum wage because payment of those employees above the minimum wage may result in loss of the reimbursement credit under the language of the legislation.

Based on this criticism, a bill has been introduced in the State Senate to repeal the minimum wage reimbursement credit.  The bill has been referred to the Senate Committee on Investigations and Government Operations.

Reminder: Wage Theft Prevention Act Annual Notices Must Be Issued to Employees By February 1, January 1, 2013.

January 8, 2013

By Subhash Viswanathan

Employers who have employees in New York are required to issue annual notices under the Wage Theft Prevention Act ("WTPA") to all New York employees between January 1 and February 1, 2013.  Although a bill was introduced in the New York State Legislature to repeal the annual notice requirement in early 2012 (which was the first year that the annual notice requirement was in effect), the bill passed in the Senate but remains dormant in the Assembly.  Therefore, the WTPA annual notice requirement continues to be in effect.

As we have summarized in previous blog posts, the annual notice must contain the following information:

  • the employee's rate or rates of pay (for non-exempt employees, this must include both the regular rate and overtime rate);
  • the employee's basis of pay (e.g., hourly, shift, day, week, salary, piece, commission, or other);
  • allowances, if any, claimed as part of the minimum wage (e.g., tips, meals, lodging);
  • the regular pay day; and
  • the name (including any "doing business as" name), address, and telephone number of the employer.

The annual notice must be provided to each employee in English and in the primary language identified by each employee, if the New York State Department of Labor ("NYSDOL") has prepared a dual-language form for the language identified by the employee.  At this point, the NYSDOL has prepared dual-language forms in Chinese, Haitian Creole, Korean, Polish, Russian, and Spanish.  The English-only and dual-language forms created by the NYSDOL are available on the NYSDOL's web site.  If an employee identifies a primary language other than one of the six languages for which a dual-language form is available, the employer may provide the annual notice in English only.  Employers are not required to use the NYSDOL's forms, but employers who create their own forms must be sure that all of the information required by the WTPA is included.

Employers are required to obtain a signed acknowledgment of receipt of the annual notice from each employee.  The acknowledgment must include an affirmation by the employee that the employee accurately identified to the employer his/her primary language, and that the notice was in the language so identified.  Signed acknowledgments must be maintained for at least six years.

Fifth Circuit Finds Private Settlement of FLSA Claims Enforceable

December 6, 2012

It is commonly accepted by employment law practitioners that Fair Labor Standards Act settlements must be approved by the United States Department of Labor or court-supervised to be enforceable.  However, the U.S. Court of Appeals for the Fifth Circuit recently rejected this prevailing belief and upheld a private settlement on the grounds that it resolved a “bona fide dispute as to the number of hours worked,” rather than constituting a waiver of plaintiffs’ substantive FLSA rights.

In Martin v. Spring Break ’83 Productions, LLC, the plaintiffs, who were represented by a union, claimed they were not properly paid overtime while working on the set of a movie.  The union filed a grievance on the plaintiffs’ behalf claiming they had not been paid for all hours worked and conducted an investigation that concluded it would be impossible to determine whether plaintiffs actually worked on all the days claimed.  Plaintiffs subsequently filed a lawsuit in June 2009.  In November 2009, the defendants and plaintiffs’ union representatives entered into a settlement agreement resolving plaintiffs’ FLSA claims.  Because the settlement was not approved by the USDOL or a court, the plaintiffs argued that the FLSA releases were not enforceable.

The district court granted the employer’s motion for summary judgment finding the FLSA releases to be valid and the Fifth Circuit affirmed.  In so holding, the Circuit Court held that the plaintiffs were bound by the terms of the settlement agreement even though they did not sign it because both the settlement and the collective bargaining agreement stated that the union was the plaintiffs’ authorized representative.  The Court further noted that the plaintiffs accepted and cashed their settlement checks, and the fact that the plaintiffs were represented by a union and the settlement was reached during the course of pending litigation minimized any suggestion of unequal bargaining power between the parties.

Employers are often confronted with the issue of how best to resolve an FLSA claim out of court, and specifically whether it should obtain a release knowing that such a release would most likely be unenforceable.  The Fifth Circuit decision is encouraging as it may pave the way for other courts to enforce private FLSA settlement agreements using the specific factual findings there as a road map for employers to follow, particularly in the unionized setting.

The case also serves as a good opportunity to remind New York employers that private settlement agreements releasing minimum wage and overtime claims under the New York Labor Law are generally enforceable.  Furthermore, even if an FLSA release may be deemed unenforceable, there may be certain provisions an employer may want to include in a private settlement agreement that might be helpful in defending any subsequent litigation.  For example, it may be helpful to include certain affirmative acknowledgments with respect to the employee's duties and/or the employee's hours worked depending on the type of claim being asserted.

Governor Cuomo Signs Amendment to Wage Deduction Statute

September 10, 2012

By Andrew D. Bobrek

As we reported in a prior blog post, an amendment to New York's wage deduction statute -- New York Labor Law Section 193 -- was passed by the Senate and Assembly in June.  Governor Andrew Cuomo signed the legislation on September 7.  This amendment – effective on November 6, 2012 – will permit New York employers to make a wider range of payroll deductions than currently enumerated in Section 193 and will impose several new deduction-related requirements.

As many employers are aware, the New York State Department of Labor (“NYSDOL”) in recent years significantly narrowed its interpretation of Section 193.  To summarize, NYSDOL has taken the position that a wage deduction is not permissible unless it is very “similar” to those expressly recognized in the statute as lawful (e.g., deductions for “insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, [and] payments for dues or assessments to a labor organization”).  This interpretation varied from the NYSDOL’s historical focus on whether the deduction is for the “benefit of the employee.”

Diverging from this historical focus, NYSDOL more recently opined that the following types of employee wage deductions, among others, are unlawful:  (a) deductions for loans, wage overpayments, or wage advances owed to an employer; (b) deductions for the recoupment of tuition assistance monies owed to an employer; and (c) deductions for purchases from employers or employer-sponsored stores, cafeterias, and like establishments.  To reiterate, NYSDOL found these types of deductions to be unlawful (even with an employee’s voluntary agreement and written authorization) because they were not sufficiently “similar” to Section 193’s enumerated list of permissible payments.

Fortunately for New York employers and employees, the recent amendment to Section 193 will expand the enumerated list of permissible wage deductions to include deductions for:

  • Prepaid legal plans;
  • Purchases made at events sponsored by a bona fide charitable organization affiliated with the employer, where at least twenty percent of the profits from the event are contributed to a bona fide charitable organization;
  • Discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle an employee to use mass transit;
  • Fitness center, health club, and/or gym membership dues;
  • Cafeteria and vending machine purchases made at the employer’s place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college or university;
  • Pharmacy purchases made at the employer’s place of business;
  • Tuition, room, board, and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions;
  • Day care, before-school and after-school care expenses; and
  • Payments for housing provided at no more than market rates by non-profit hospitals or affiliates.

The amendment will also expressly permit deductions made in conjunction with an employer-sponsored pre-tax contribution plan approved by the Internal Revenue Service or other local taxing authority.  As the above list indicates, some of the new enumerated deductions will only be permitted for certain types of employers (e.g., hospitals, colleges and universities).  It is not apparent why legislative drafters included these limitations.

Importantly, the amendment will additionally permit employers to recover inadvertent wage overpayments and wage advances by payroll deductions under certain circumstances and subject to future NYSDOL rulemaking.  According to the amendment, these forthcoming rules must include provisions governing the terms and conditions under which employers may deduct for wage overpayments and advances and must also include provisions relating to employee notice and dispute resolution procedures.

The amendment also imposes new deduction-related requirements, which New York employers must follow.  For example, the amendment provides that “all terms and conditions of the payment and/or its benefits and the details of the manner in which the deductions will be made” must be provided to employees in advance.  Additionally, employers must give advanced notice to employees if there is a “substantial change” in the terms or conditions of the payment (e.g., a change in the amount of the deduction, or in the corresponding benefits).  The amendment also establishes limitations on the total amount of deductions that may be made for certain purposes each pay period, and requires that employees have access to real-time information regarding certain deduction-related expenses.

Employers must now also keep any “written authorization” required under Section 193 for the respective employee’s entire period of employment and, then, for an additional six (6) years after the end of that employment.  For employers with union-represented workers, the amended Section 193 clarifies that the requisite “written authorization” may be provided pursuant to the terms of a collective bargaining agreement.  Except where a deduction is “required or authorized” in such a current collective bargaining agreement, the amendment further provides that employees are free to revoke their authorization at any time.  In such an event, employers must then cease the wage deduction in question “as soon as practicable” and not later than four pay periods or eight weeks after the employee’s revocation, whichever occurs sooner.

Finally, New York employers should take note that the amendment has a three-year “sunset” provision, and, therefore, would require additional legislation to make the corresponding changes to Section 193 permanent.  As with any new legislation, employers should carefully review the amendment to Section 193 and should prepare accordingly in advance of the pending effective date.

U.S. Supreme Court Affirms Exempt Status of Pharmaceutical Sales Representatives

June 20, 2012

By Katherine R. Schafer

On June 18, 2012, the U.S. Supreme Court affirmed a decision of the Ninth Circuit Court of Appeals finding that pharmaceutical sales representatives at GlaxoSmithKline fall within the outside sales exemption from the overtime pay requirements of the Fair Labor Standards Act ("FLSA").  As reported in a previous blog post, the Second Circuit Court of Appeals had reached the opposite conclusion in July of 2010, finding that pharmaceutical sales representatives employed by Novartis were not FLSA-exempt and that a class of more than 7,000 current and former employees in that position were entitled to pursue their overtime claims.  The Supreme Court's 5-4 decision resolves the split in the Circuit Courts on the scope of the FLSA's outside sales exemption and addresses the amount of deference owed to the Secretary of Labor's interpretation of the U.S. Department of Labor's regulations promulgated under the FLSA.

In amicus briefs filed with both the Second and Ninth Circuits, the Secretary of Labor initially took the position that a "sale" as described in the regulations required a "consummated transaction directly involving the employee for whom the exemption is sought."  Because pharmaceutical sales representatives promote drugs to physicians in exchange for nonbinding commitments to prescribe the drugs in appropriate cases, the Secretary argued that they did not "make sales" and, accordingly, could not qualify for the outside sales exemption.  After the Supreme Court granted certiorari, however, the Secretary argued instead that an employee does not make a sale unless he "actually transfers title to the property at issue."

Although an agency's interpretation of its own ambiguous regulations is normally entitled to deference, the majority found "strong reasons" for not deferring to the Secretary's interpretation in this instance.  Specifically, the majority found that the Secretary's current interpretation would impose potentially massive liability on employers without fair warning, especially given the U.S. Department of Labor's apparent acquiescence in the longstanding pharmaceutical industry practice of treating sales representatives as exempt.  In addition, the majority found that the Secretary's interpretation was not persuasive in its own right for a number of reasons, including that it was first announced in a series of amicus briefs with no opportunity for public comment, that the Secretary's initial interpretation argued before the Second and Ninth Circuits had proven to be untenable, and that it was "flatly inconsistent" with the FLSA's definition of "sale."

The majority held that the FLSA's statutory language regarding the outside sales exemption called for a functional inquiry, taking into consideration an employee's responsibilities in the context of the particular industry in which he or she works.  In light of the unique regulatory environment within which pharmaceutical companies operate, including the prohibition against dispensing certain drugs without a physician's prescription, the majority found that the sales representatives' promotional efforts to obtain non-binding commitments from physicians was "tantamount . . . to a paradigmatic sale of a commodity" within the pharmaceutical industry.  Furthermore, the majority found that its holding comported with the apparent purpose of the FLSA's exemption, because pharmaceutical sales representatives who typically earn over $70,000 per year are hardly the type of employees the FLSA was intended to protect.

Supreme Court Declines to Review Court Decision Rejecting a Job Applicant's FLSA Retaliation Claim

February 27, 2012

By Katherine R. Schafer

On February 21, 2012, the U.S. Supreme Court declined to review a Fourth Circuit Court of Appeals decision rejecting a job applicant's retaliation claim filed under the Fair Labor Standards Act ("FLSA") against her prospective employer.  By declining to review the decision, the Supreme Court left undisturbed the Fourth Circuit's ruling that job applicants are not "employees" who are protected by the anti-retaliation provisions of the FLSA.

In Dellinger v. Science Applications International Corp., the plaintiff alleged that her prospective employer, Science Applications, retaliated against her by withdrawing its conditional job offer after discovering that she had filed an FLSA lawsuit against her former employer.  In a 2-1 decision, the Fourth Circuit affirmed the U.S. District Court's dismissal of her retaliation complaint.  The Fourth Circuit held that the FLSA anti-retaliation provisions applied only within the bounds of an actual current or former employment relationship, but did not authorize prospective employees to file retaliation claims against prospective employers in circumstances where an employment relationship never existed.

The plaintiff argued in her petition for Supreme Court review that the Fourth Circuit's decision conflicted with the Supreme Court's decision in Robinson v. Shell Oil Co., a 1997 decision addressing the scope of the anti-retaliation provisions of Title VII of the Civil Rights Act ("Title VII").  SAIC argued in its opposition to the plaintiff's petition that the Robinson case was factually distinguishable because the statutory language of Title VII expressly covers both employees and applicants and because the Robinson case involved a former employee of the defendant rather than a job applicant who had never been in an employment relationship with the defendant.

Although the Fourth Circuit's decision in the Dellinger case does not constitute binding precedent in the Federal Courts in New York, employers in New York can nevertheless rely on the Fourth Circuit's Dellinger decision as persuasive authority regarding the scope of the FLSA's anti-retaliation provisions.

U.S. Department of Labor Releases Three Fact Sheets Regarding Retaliation

January 29, 2012

By Katherine R. Schafer

Recently, the U.S. Department of Labor's Wage and Hour Division released three new Fact Sheets on unlawful retaliation under the Fair Labor Standards Act ("FLSA"), the Family and Medical Leave Act ("FMLA"), and the Migrant and Seasonal Agricultural Worker Protection Act ("MSPA").  Although the Fact Sheets do not contain any new information on the prohibition against retaliation, they provide a good reminder to employers regarding the scope of the anti-retaliation provisions in these three statutes.

Fact Sheet #77A provides general information concerning the FLSA's prohibition of retaliating against any employee who has filed a complaint or cooperated in an investigation.  The Fact Sheet reminds employers that an employee who files a complaint under the FLSA is protected from retaliation regardless of whether the complaint was made orally or in writing.  The Fact Sheet also states that the anti-retaliation provision of the FLSA applies even in situations where there is no current employment relationship; for example, former employees are also protected from retaliation.  The Fact Sheet further indicates that complaints made to the Wage and Hour Division are protected and that "most courts have ruled that internal complaints to an employer are also protected."

Fact Sheet #77B provides general information concerning the FMLA's prohibition of retaliation against an individual for exercising his or her rights protected under the FMLA.  The Fact Sheet provides examples of prohibited conduct, which include:  discouraging an employee from using FMLA leave, manipulating an employee's work hours to avoid responsibilities under the FMLA, and counting FMLA leave as absences under "no fault" attendance policies.

Fact Sheet #77C provides general information concerning the MSPA's prohibition of discrimination against a migrant or seasonal agricultural worker who has filed a complaint or participated in any proceeding under the MSPA.  The MSPA applies to agricultural employers, agricultural associations, and farm labor contractors who engage in at least one of the following activities:  furnishing, employing, soliciting, hiring, or transporting one or more migrant or seasonal agricultural workers.

Bill Introduced in the New York State Legislature to Repeal the WTPA Annual Notice Requirement

January 24, 2012

By Subhash Viswanathan

A bill has been introduced in the New York State Legislature that would, if enacted, repeal the annual wage notice requirement imposed by the Wage Theft Prevention Act ("WTPA").  The bill would leave intact the requirement that employers provide a wage notice to all new hires, as well as the requirement that employers obtain signed written acknowledgments of the new hire wage notices.  At this point, the bill is in its infant stages, and no vote has been taken.

The Business Council of New York State has submitted a memorandum in support of the bill, and has created a web page for employers to join in the effort to convince the New York State Legislature to repeal the annual wage notice requirement.

Federal Labor Law, the Wage Theft Prevention Act, and Water Cooler Discussions

January 16, 2012

By Tyler T. Hendry

As New York employers should be aware, the first annual notice to employees required by the Wage Theft Prevention Act ("WTPA") must be distributed by February 1, 2012.  Although the requirements of the WTPA have been grabbing recent headlines, this post addresses one unavoidable by-product of the annual notice requirement -- the reality that the distribution of these annual notices is likely to lead to workplace discussions among co-workers regarding wage and salary information.  As a reminder, blanket rules -- whether formal or informal -- prohibiting employees from discussing their pay and benefits with their co-workers are unlawful under the National Labor Relations Act ("NLRA").

The NLRA provides private sector employees the right to engage in protected concerted activity regarding their terms and conditions of employment.  This includes, as a general rule, employees' right to share and discuss information with their co-workers about their wages, benefits, and other working conditions.  This protection extends to both union and non-union workplaces.  Accordingly, employers may not promulgate or enforce any type of policy that prohibits such discussions.  Even a broadly-written confidentiality policy may be found to violate the NLRA if an employee could reasonably view the policy as restricting discussions with co-workers about wages and other working conditions.

Employers should review their policies to ensure that there are no explicit or implicit prohibitions on wage discussions among employees that might be found to violate the NLRA.  In addition, managers should be careful to avoid knee-jerk reactions to hearing such discussions that will inevitably arise from the distribution of the annual WTPA notice to employees.

Second Circuit Rules FLSA Collective Action and State-Law Class Action May Be Brought in the Same Case

October 19, 2011

By Michael D. Billok

At one point in the Hitchhiker’s Guide to the Galaxy series by British author Douglas Adams, Arthur Dent finds himself confronted by a door that will not open unless he can demonstrate a high degree of intelligence. When Dent somehow manages to possess both tea and no tea at the same time, the door opens, noting that Dent must be quite a philosopher to overcome the inherent contradiction of holding and not holding an item at once.

A recent decision by the Second Circuit is reminiscent of Dent’s feat. In Shahriar v. Smith & Wollensky, the Second Circuit Court of Appeals was confronted with the question of whether plaintiffs could simultaneously maintain a collective action under the Fair Labor Standards Act, as well as a class action based on state-law claims under Rule 23 of the Federal Rules of Civil Procedure. If you are wondering why that poses an issue, in a collective action potential plaintiff class members are not in unless they affirmatively opt in, whereas the plaintiffs in Rule 23 class actions are in unless they affirmatively opt out. As a result, the same person could be both a plaintiff and not a plaintiff in the same action; out of the collective action because she did not opt in, but in the class action because she did not opt out.
 

Despite the many potential consequences of permitting both participation and non-participation by the same person in a single action, the Second Circuit found that there is no inherent conflict in a federal court allowing both a collective FLSA action and a Rule 23 class action asserting parallel state law claims. The defendant argued that permitting a state law opt-out class action to proceed concurrently with the FLSA opt-in collective action would be inconsistent with the opt-in scheme created by Congress. The Second Circuit rejected that argument and found no inconsistency, concluding that nothing in the language of the FLSA or its legislative history indicated a Congressional intent to preclude concurrent class actions on state law claims, and that other circuits had reached the same conclusion. Another factor may have also influenced the Court’s decision. Earlier in the opinion, the Court stated that the potential FLSA plaintiffs may decide not to take the step of affirmatively opting into the collective action out of fear of retaliation, but that the same risk is not posed by participation in an opt-out class action.