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Eleventh Circuit Weighs in on FLSA Individual and Enterprise Coverage

The Eleventh Circuit Court of Appeals has issued an opinion that provides a good primer on individual and enterprise coverage under the Fair Labor Standards Act.  But the decision leaves the tough questions unanswered.

In Josendis v. Wall to Wall Residence Repairs, Inc., Case No. 09-12266 (11th Cir., November 17, 2011), the Eleventh Circuit affirmed the trial court’s entry of summary judgment in favor of the employer, holding that the plaintiff, a former employee of a home restoration and repair business, failed to show that he was covered as an individual under the FLSA, or that his employer was covered as an enterprise.

 “An employee is subject to individual coverage,” the court wrote, “if he is directly and regularly “engaged in” interstate commerce.” (citing Thorne v. All Restoration Servs., Inc., 448 F.3d 1264, 1266 (11th Cir. 2006). This means that an employee must be directly participating in the actual movement of persons or things in interstate commerce by (i) working for an instrumentality of interstate commerce, e.g., transportation or communication industry employees, or (ii) by regularly using the instrumentalities of interstate commerce in his work, e.g., regular and recurrent use of interstate telephone, telegraph, mails, or travel. 

Since Josendis was not working directly for an instrumentality of interstate commerce, he had to produce evidence that, as a part of his work duties, he repeatedly traveled to and from job sites outside of Florida or used an item moving in interstate commerce.  But Josendis never traveled outside of Florida for purposes of his employment with Wall to Wall, and he produced no evidence to indicate that he ever directly participated in the actual movement of any object in interstate commerce. Therefore, his claim of individual coverage failed.

To prove enterprise coverage, the court continued, Josendis had to show that his employer: “(1) has at least two employees engaged in interstate commerce or the production of goods for interstate commerce, or who handle, sell, or otherwise work on goods or materials that had once moved or been produced for in interstate commerce, and (2) has gross sales of at least $500,000 in sales annually.” (citing 29 U.S.C. § 203(s)(l)(A)(i)–(ii)). To meet this test, the court held, Josendis needed to provide concrete, admissible evidence that Wall to Wall met both statutory requirements.” (my emphasis). 

Josendis speculated, based on certain jobs he worked on or was aware of, that his employer’s gross sales were higher than its tax returns indicated, and exceeded $500,000 annually. The court held that such conjecture was insufficient to defeat the employer’s motion for summary judgment.

The court went on to note that because Josendis could not meet the gross sales test, it was unnecessary to decide whether Josendis met the first prong of the test for enterprise coverage.  Citing its own 2010 decision in Polycarpe v. E&S Landscaping Service, Inc., 616 F.3d 1217 (11th Cir. 2010) (per curiam), which provided the framework for analyzing the first prong, the court (practically breathing a sigh of relief), wrote that it “need not engage in the herculean task of determining whether vehicles, such as cars and trucks; parts of a GPS unit; and other tools and supplies, such as paint, tape, drywall, or nails are best characterized as ‘goods’ or, alternatively, ‘materials’ under the FLSA.  Likewise,” the court wrote, “we need not then determine whether the ‘goods’ were subject to the ultimate-consumer exception.”

All of these issues – What is a material? What is a good? When is a good subject to the ultimate-consumer exception? – were discussed and analyzed in Polycarpe, but were not definitively resolved.  They remain vexing issues that are the subject of much litigation.  And a definitive opinion from the Eleventh Circuit that resolves them will have to wait another day.


Florida's Mini-Cobra Statute -- It's Up to the Employee

Like many states, Florida has a mini-COBRA statute that is designed to ensure continued access to health insurance coverage for employees of small employers (fewer than 20 employees) and their dependents who are not protected by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). 

A client recently asked us about this statute, which is entitled the Florida Health Insurance Coverage Continuation Act,” and I was surprised to find many web sites that contained misinformation about it.  Under the statute, a qualified beneficiary has 63 days -- not 30, as reported on several web sites -- to notify the insurance carrier of a qualifying event. The insurer then has 14 days to send the beneficiary an election and premium notice form.  The beneficiary then has 30 days to pay the initial premium and elect continuation coverage.  The procedure seems pretty straightforward, provided the employee knows about it.  The statute does not obligate the employer to notify employees of their rights under the statute, though it does require insurers to do so through an "initial notice."  After that, it's up to the employee to know his or her rights.




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Michael W. Casey III, Kevin E. Vance, Mark J. Beutler, and Teresa M. Maestrelli practice labor and employment law, with a particular focus on labor and employment litigation, including Title VII, ADEA, ADA, Florida Civil Rights Act, and whistleblower claims, as well as non-compete litigation, in state and federal trial and appellate courts in Florida and throughout the United States. They also represent employers before the National Labor Relations Board (NLRB), the National Mediation Board (NMB), the U.S. Department of Labor, including the Wage and Hour Division and the Occupational Safety and Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC), and various state and local agencies, as well as in arbitrations, collective-bargaining negotiations and union representation elections. Hector A. Chichoni practices in the area of US and global immigration law. He chairs Duane Morris's Florida Immigration Practice. The editors of Chambers USA 2010 also selected Mr. Chichoni as a "Leader in the Immigration Field." He has represented a vast number of corporate and individual clients throughout his career ranging from premier US health care organizations, Fortune 100 and Fortune 500 companies, multinational corporations and universities to doctors, professors, researchers and students. His international experience includes handling matters relating to export controls and global corporate compliance and business transactions. He has represented clients in a wide variety of cases before the US Immigration Court.
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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.