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Fair Labor Standards Act settlements must be supervised by a court or the Department of Labor even in cases where the employee no longer works for the employer.


In Nall v. Mal-Motels, Inc., the 11th Circuit held that the rule of Lynn’s Food Stores establishing that Fair Labor Standards Act (“FLSA”) settlements must be supervised by a court or the Department of Labor (“DOL”) applies to former employees. 

The plaintiff in Mal-Motels claimed that she periodically worked more than forty hours per week but was not paid one and one-half times her regular hourly wage for that overtime work, in violation of the FLSA.  Wal-Motels conceded that it owed Nall some unpaid overtime, but Wal-Motels disputed the number of hours that Nall worked and the amount of damages owed.   Nall eventually quit her job and filed a lawsuit against Mal-Motels. 

Mohammad Malik (owner of Mal-Motels) then contacted Nall to discuss a settlement of her lawsuit.  The two agreed to meet at a hotel.  Malik told Nall not to bring her attorney, and Nall complied.  During the meeting, Malik proposed a settlement of a certain sum in exchange for Nall’s dismissal of her lawsuit.  Nall accepted and signed a voluntary dismissal with prejudice and a letter to her attorney informing him that the case had been settled.  

The district court rejected the dismissal because it had not been filed by Nall’s lawyer.  Malik then hired a lawyer who filed a motion to enforce the settlement agreement.  After a hearing on the motion, the magistrate judge issued a report recommending that the district court approve the settlement and dismiss the case because the agreement that Nall and Malik had reached was “a fair and reasonable resolution of a bona fide dispute under the FLSA.”  The district court adopted the magistrate judge’s report and dismissed Nall’s complaint with prejudice.

On appeal, the 11th Circuit Court reversed.  In doing so, the court revisited its holding in Lynn’s Food Stores.  In that case, the court held that “[t]here are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees.”  679 F.2d at 1352.  The first is under the supervision of the Secretary of Labor.  Id. at 1353.  The second, which is “[t]he only other route for compromise of FLSA claims[,] is provided in the context of suits brought directly by employees against their employer . . . to recover back wages for FLSA violations.”  Id. at 1353.

The Mal-Motels court noted that although Lynn’s Food Stores involved a settlement agreement between employees and their current employer, the reasoning behind the Lynn’s Food Stores decision was applicable to the present case.  The court explained as follows:

“An employee is subject to the supervision and personnel decisions of her employer and the possibility of retaliation may pervade the negotiations.  That is not the case, however, because Nall no longer worked for Mal-Motels when she negotiated the settlement agreement with Malik, or when she filed the lawsuit for that matter.  Still, we believe that the rule of Lynn’s Food applies to settlements between former employees and employers . . . Ensuring that each FLSA plaintiff receives the damages, including liquidated damages, to which she is statutorily entitled is no less important when the plaintiff is a former employee . . . The purposes of the FLSA are undermined whenever an employer is allowed to escape liability for violations of the statute, regardless of whether those who were victimized by those violations are still employees.”

Although the holding in Mal-Motels comes as no surprise to many employment attorneys, it nonetheless reinforces the importance of obtaining court or DOL supervision of any settlements under the FLSA.  Additionally, Mal-Motels serves as a reminder that employers should involve an attorney in the settlement process.  As the court noted in Mal-Motels, “a few dollars saved can lead to a lot more dollars spent.”  Last, employers would be wise to include language in their settlement agreements to the effect that the employee has received all wages due and is owed nothing more than the consideration paid under the agreement.

 
 
 
 

Judge Rules That Fox Should Have Paid Interns


A New York federal district judge recently ruled that Fox Searchlight Pictures Inc. (“Fox”) violated federal and state (New York) minimum wage laws by failing to pay two interns who worked on production of the film “Black Swan”.  The case was the first in a series of recent lawsuits filed by unpaid interns to be decided by a court.  

In the decision, the Court held that Fox should have paid the interns because they were regular employees entitled to be paid at least the minimum wage.  In so ruling, the Court looked closely at the Department of Labor’s (“DOL”) Fact Sheet #71: “Internship Programs Under The Fair Labor Standards Act,” and rejected the argument that a “primary benefit test” should be used to determine whether an intern should be paid. 

Following the criteria set forth by the DOL for unpaid internships, the Court found that: (1) the interns received no formal training or education during their internships; (2) although the interns received some benefit from their internships, those benefits were incidental to working in the office like any other employee and were not the result of internships intentionally structured to benefit the interns; (3) the interns performed routine tasks that would otherwise have been performed by regular employees; and, (4) Fox obtained an immediate advantage from the interns’ work.

Additionally, the Court concluded that although the interns understood that they would not be paid, employees are not allowed to waive their wages under the federal Fair Labor Standards Act (the “Act”).  “The purpose of the Act requires that it be applied even to those who would decline its protections,” the Court opined.

The ruling affects employers who rely on the use of unpaid interns especially during the summer months.  If your company uses unpaid interns, you should make sure that your internship program complies with the law.

The case is Glatt et al. v. Fox Searchlight Pictures, Inc., case number 1:11-cv-06784, in the U.S. District Court for the Southern District of New York.

 

 

 
 
 
 

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.

 
 
 
 

Another Court Dismisses FLSA Case As Moot… But Questions Still Remain About the Mootness Doctrine Following Dionne v. Floormasters


A Florida federal court recently dismissed an FLSA action as moot, thereby denying plaintiff’s counsel a fee recovery, after plaintiff’s counsel deposited a check representing full compensation for plaintiff’s actual and liquidated damages.

But in her decision in Craig v. Digital Intelligence Systems Corp., Case No. 8:10-CV-2549-T-EAJ (M.D. Fla., November 2, 2011), Judge Elizabeth Jenkins of the United States District Court for the Middle District of Florida ruled that the Eleventh Circuit Court of Appeals’ decision in Dionne v. Floormasters, 647 F.3d 1109 (11th Cir. 2011) – in which the Eleventh Circuit affirmed the dismissal of an FLSA case on mootness grounds – was not controlling, because “plaintiff in Dionne agreed that his claim was moot and should be dismissed. . . .  As a result, the Eleventh Circuit did not address the district court’s ruling that the action was rendered moot by the defendant’s tender of full compensation.”

In deciding that issue, Judge Jenkins declined to follow a recent ruling by Middle District Judge James Whittemore in Klingler v. Phil Mook Enters., Inc., No. 8:11-CV-1586-T-27TGW, 2011 U.S. Dist. LEXIS 110205 (M.D. Fla. Sept. 14, 2011).  In Klingler, Judge Whittemore ruled that allowing the defendants to avoid responsibility for attorney’s fees would run counter to the FLSA’s goal of fully compensating a wronged employee and that the tender was an attempt to circumvent the requirements of Rule 68.  Judge Jenkins wrote that “the issue of attorney’s fees is collateral to the merits of Plaintiff’s FLSA claim. And Klingler is distinguishable from the present case because the plaintiff in Klingler denied receiving the tender payment.”  In contrast, Judge Jenkins noted:

Plaintiff’s acceptance and endorsement of a check for full compensation for damages, coupled with the deposit of the funds in the law-firm trust account, rendered his claims moot. Here, it is undisputed that Plaintiff and his counsel accepted the check even though his counsel was on notice that the check was tendered for the purpose of mooting Plaintiff’s claim. Plaintiff endorsed the check, and his counsel deposited it in the law-firm trust account. That the check was in Plaintiff’s name and he endorsed it strengthens the conclusion that Plaintiff accepted the tender of full compensation for damages.

Judge Jenkins went on to hold that plaintiff did not have a right to an award of attorney’s fees and costs under the FLSA because plaintiff was not the prevailing party:

There has been no adjudication on the merits of Plaintiff’s claim, and Digital’s tender of damages does not include an offer of judgment on specified terms pursuant to Rule 68, Fed. R. Civ. P. Further, the parties are not seeking judicial approval of a settlement of Plaintiff’s claim. Consequently, none of the three conditions that would entitle Plaintiff to prevailing party status have been met.

But would Judge Jenkins have ruled differently if plaintiff had not endorsed the check? Perhaps. In her decision, Judge Jenkins cited approvingly to Judge Kenneth Ryskamp’s decision in Gathagan v. Rag Shop/Hollywood, Inc., No. 04-805200-CIV, 2005 WL 6504749, at *1 (S.D. Fla. May 9, 2005), in which the court commented that instead of trying to revoke the acceptance, the proper procedure for protecting a plaintiff’s right to an attorney’s fee award would be for counsel to “instruct his client to delay acceptance of a tender until a satisfactory fee arrangement is reached or the parties agree that the tender represents an offer of settlement or judgment.”

So where does that leave us in the post-Dionne world of FLSA litigation?  Suppose the defendant tenders full compensation to the plaintiff, but the plaintiff rejects the tender, or delays it in an attempt to reach a fee arrangement with defense counsel, or an agreement that the tender represents an offer of settlement or a judgment.  What should the defendant do then?  Shouldn’t defendant take the position that the tender of full compensation itself renders the case moot, regardless of whether the plaintiff accepted the tender?  Judge Ryskamp’s earlier decision in Gathagan suggests that this is exactly what the defendant should do:

The mootness doctrine applies to FLSA actions. Cameron-Grant v. Maxim Healthcare Services, Inc., 347 F.3d 1240, 1244 (11th Cir. 2003).  Defendant's tender of Plaintiff's maximum recoverable damages has rendered her case moot, and the motion to dismiss with prejudice is granted.  Buckhannon, 532 U.S. at 601, 121 S.Ct. at 1838.

Gathagan v. The Rag Shop/Hollywood, Inc., 2005 U.S. Dist. LEXIS 47235, 6-7 (S.D. Fla. Feb. 9, 2005).  Precedents from other circuits hold that a plaintiff cannot avoid mootness by rejecting an unconditional tender of amounts owed. See Rothe Development Corp. v. Department of Defense,  413 F.3d 1327, 1331 (Fed. Cir. 2005)(a plaintiff may not prolong a case merely by refusing to accept a valid tender); Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994) (a plaintiff “may not spurn this offer of all the damages he is owed and proceed to trial”).  This appears to be true in FLSA cases. See Thomas v. Interland, Inc., 2003 WL 24065651, *3 (N.D. Ga. 2003)(“Courts have repeatedly held that a plaintiff's claim becomes moot when a defendant offers the plaintiff all relief he could receive if his claim were fully litigated, even if the plaintiff does not accept such offer.”).

 

Is that the law in FLSA cases that are decided post-Dionne, or isn’t it?  It may take another decision by the Eleventh Circuit to resolve this issue once and for all.  Until then, I think we are going to see many district court decisions in the Eleventh Circuit grappling with these questions. 

 

 
 
 
 

Florida’s Third DCA (Once Again) Narrowly Construes Protected Activity Under the FLSA


Defense lawyers should always remove Fair Labor Standards Act cases to federal court, right?

I thought so until last October, when Florida’s Third District Court of Appeals, relying on the U.S. Seventh Circuit Court of Appeals’ decision in Kasten v. Saint-Gobain Performance Plastics Corp., 570 F.3d 834, 838-40 (7th Cir. 2009), ruled that to “file” a complaint under the FLSA, the employee must complain in writing.  See Alvarado v. Bayshore Grove Mgmt., LLC, 2010 Fla. App. LEXIS 15020 (Fla. 3d DCA 2010).  This decision was at odds with precedent in the U.S. Court of Appeals for the Eleventh Circuit (which covers Florida, Georgia, and Alabama).  I wrote a blog post at the time recommending that defense attorneys reconsider their practice of removing FLSA retaliation cases to federal court.  If the employee did not make a written complaint, the employer was probably better off in state court, where the employer could argue that the employee did not engage in protected activity under the FLSA.  

In March of this year, the United States Supreme Court vacated the Seventh Circuit’s decision in Kasten, holding that oral complaints can suffice under the FLSA.  See Kasten v. Saint-Gobain Performance Plastics Corp., 131 S. Ct. 1325 (U.S. 2011).  I thought that it was back to business as usual, and that defense attorneys should resume their practice of removing FLSA retaliation cases to federal court. 

Now I’m re-thinking that strategy again.  Last week, the Third DCA issued a new decision in Alvarado that acknowledges the Supreme Court’s holding in Kasten, but once again seems to  construe the concept of protected activity under the FLSA more narrowly than Eleventh Circuit precedents.  See Alvarado v. Bayshore Grove Mgmt., LLC, 2011 Fla. App. LEXIS 12136 (Fla. 3d DCA. Aug. 3, 2011).

In Alvarado, the plaintiff described his complaint to his employer as follows:

Just before I was fired on July 11, 2007, I complained to Defendant's management that I was not receiving the correct amount of pay since my time records were altered and/or falsified so as to avoid having to pay me overtime.

The Third DCA held that “[i]t is obvious that this ‘complaint’ fell far short of the degree of specificity and reference to the statute required by the Supreme Court [in Kasten].”  In Kasten, the Supreme Court held that “[t]o fall within the scope of the antiretaliation provision, a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.”

The Alvarado decision once again seems at odds with Eleventh Circuit precedents and other federal court decisions, under which employees can engage in protected activity by complaining about a practice that is regulated by the FLSA without mentioning the FLSA by name.  See, .e.g,  EEOC v. White & Son Enters., 881 F.2d 1006, 1011-12 (11th Cir. 1989) (finding that employees' informal complaints concerning unequal pay, which did not involve citation of the Equal Pay Act or the FLSA, constituted protected activity); Debrecht v. Osceola County, 243 F. Supp. 2d 1364, 1374 (M.D. Fla. 2003) (finding that employees' informal complaints to employer concerning unpaid overtime constituted protected activity under the FLSA). 

I do not believe the Supreme Court’s decision in Kasten changed this legal standard. But apparently, in the Third District Court of Appeals, an employee must do something more than complain about not receiving overtime pay.  That’s good news for employers, and suggests (once again) that employers may be better off defending FLSA retaliation claims in state court. 

 

 
 
 
 

FLSA Fee Claim Denied by 5th DCA


A trial court's award of $72,000 in attorney's fees to the successful plaintiffs in a Fair Labor Standards Act (FLSA) overtime case was in error and must be vacated, according to a recent decision by Florida's Fifth District Court of Appeals, Van Diepen v. Brown (Fla. 5th DCA, January 28, 2011).   

The problem with the fee claim was that plaintiffs' counsel was unable to separate the fees he incurred in prosecution of the successful FLSA claims from the fees incurred in the unsuccessful prosecution of numerous state law claims in the same case. Plaintiffs argued that all  the claims were intertwined and that it was impossible for their counsel to identify the time spent on the overtime claims.  But the court rejected this argument, holding that "[w]here the claims are as distinct from each other as overtime is from fraud or negligent misrepresentation, no attorney's fees are awardable if the attorney billing records do not support the fee." 

The Van Diepen case serves as a reminder to plaintiffs' attorneys that their fee records must be sufficiently detailed to allow the court to distinguish fees incurred on successful claims from those incurred on unsuccessful claims, or at least those claims that are not intertwined with successful ones.  A failure to do so can be an expensive lesson in record keeping -- and a boon to the defense.

 

 
 
 
 
 

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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.