New Jersey Employment Lawyer Blog

Articles Posted in Overtime

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The Third Circuit Court of Appeals recently reinstated an employee’s class action overtime pay lawsuit under Fair Labor Standards Act (FLSA) and the New Jersey Wage and Hour Law (NJWHL).  In doing so it recognized successor companies can be liable for their predecessors’ overtime violations, and individual owners and supervisors can be held personally liable under both of those laws.

Real estate concept - business-man signs contract behind househoPatricia Thompson was hired by Security Atlantic Mortgage Company as a mortgage underwriter in June 2009.  Security Atlantic quickly assigned her to provide training at a related company, Real Estate Mortgage Network (REMN).  In February 2010, Security Atlantic stopped doing business and Ms. Thompson began working directly for REMN.  Otherwise, her job and the business remained essentially the same.

Ms. Thompson claims Security Atlantic and REMN both failed to pay her and other mortgage underwriters time-and-a-half when they worked more than 40 hours per week, in violation of both the FLSA and the NJWHL.  Specifically, she alleges mortgage underwriters worked through lunch and at home to complete their assignments on time, but were not paid overtime because the companies misclassified them as exempt employees.

Ms. Thompson sued Security Atlantic, REMN, and two co-owners of Security Atlantic, Samuel Lamparello and Noel Chapman.  However, the United States District Court for the District of New Jersey dismissed the entire case. 

In Thompson v. Real Estate Mortgage Network the Third Circuit reversed, ruling Ms. Thompson’s allegations could support finding that Security Atlantic and REMN were her joint employers.  Joint employment is when two or more companies “exert significant control” over the same employee.  I discussed the test to determine whether a company is a joint employer in a previous article, Third Circuit Holds Parent Company Not Responsible For Wholly-Owned Subsidiary’s Overtime Violations.

In reaching this conclusion, the court relied on Ms. Thompson’s claim that Security Atlantic hired her but an REMN trained her; Security Atlantic called REMN its “sister company;” and virtually every employee of Security Atlantic seamlessly became an employee of REMN in June 2010.  However, it cautioned that additional evidence ultimately might establish that Security Atlantic and REMN were too independent to be considered joint employers.

The Third Circuit also concluded the allegations could support finding REMN liable for REMN’s overtime violations as Security Atlantic’s successor in interest.  Under federal law, the factors to determine successor liability are (1) the continuity between the workforce and business operations of the two companies, (2) whether the successor had notice of the predecessor’s legal obligations, and (3) the predecessor’s ability to pay its legal obligation.  It found support for the first factor since Ms. Thompson claims after February 2010 REMN operated the same as Security Atlantic had in the past.  It found support for the second factor since most of REMN’s former management worked for Security Atlantic, making it likely they were aware of any past overtime violations.  Likewise, it found support for the third factor since REMN is apparently defunct, suggesting it would be unable to pay any damages awarded to Ms. Thompson.

Finally, the Third Circuit reversed the District Court’s decision to dismiss the two individual defendants, Mr. Lamparello and Mr. Chapman, from the case.  It explained that a company’s owner, officer or supervisor can be personally liable as a joint employer under the FLSA if he or she had (1) supervisory authority over the employee and (2) some responsibility for the alleged violation.  Since Ms. Thompson alleges Mr. Lamparello and Mr. Chapman are co-owners of REMN, run the company’s day-to-day operations and make decisions about hiring, firing and compensation, they potentially could be personally liable for the alleged overtime violations.

 

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Earlier this year, the Second Circuit Court of Appeals ruled that a company’s Chief Executive Officer can be held personally liable for a company’s overtime violations even if he had no personal involvement in violating the law.

In Irizarry v. Catsimatidis, a group of employees filed a class action overtime claim against Gristede’s Foods, Inc. They brought federal claims under the Fair Labor Standards Act (FLSA) as well as claims under the New York Labor Law. They also named the company’s Chief Executive Officer, its District Manager, and its Vice President as individual defendants in the lawsuit.

Eventually, the court ruled in favor of the employees, finding Gristede’s failed to pay them time-and-a-half for their overtime hours, in violation of the FLSA and New York State law. At the time the court did not decide whether any of the individual defendants were personally liable.

Employee working overtime class action lawsuit.jpgGristede’s and the employees subsequently agreed to settle the case. However, Gristede’s failed to pay the employees the money they were owed under the settlement agreement. As a result, the employees asked the court to hold the company’s Chief Executive Officer, John Catsimatidis, personally liable for failing to properly pay them for their overtime work. The Court granted the motion, finding Mr. Catsimatidis was an “employer” under both the FLSA and state law. Mr. Catsimatidis appealed.

As explained by the appellate court, when determining whether an individual is an “employer” under the FLSA, the key question is whether he or she had “operational control” over the company. Relevant factor to make that determination include whether the individual (1) had the authority to hire and fire workers; (2) supervised the employee’s work; (3) made decisions about employee compensation; or (4) maintained employment records.

The court further explained that to be held personally liable, an individual’s operation control has to include some personal involvement in decisions about the company’s working conditions, business operations, personnel, or compensation, and has to have some relationship to the employee’s job. However, the individual does not necessarily need have to have been personally involved in the violation of the FLSA and does not have to have been involved in supervising the employees on a day-to-day basis as long as he has to have the authority to do so.

The court found Mr. Catsimatidis had sufficient authority and control over Gristede’s to be held personally liable for its violations of the FLSA. He was responsible for the company’s major long-term decisions, and had the right to close the business if he wanted. He regularly visited stores, made suggestions to managers, addressed individual problems, and reviewed customer complaints. He had the authority to hire and fire employees, even though he rarely exercised it. In addition, his name was electronically signed to all employee paychecks. He had ultimate financial control over the company, and kept track of its total payroll. Accordingly, the court found Mr. Catsimatidis was personally liable for the company’s violation of the FLSA.

Having found Mr. Catsimatidis personally liable, the Second Circuit Court of Appeals chose not to rule whether he also was personally liable under New York State law. Instead, it sent the case back to the District Court to consider that issue.

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Last month, the United States Supreme Court dismissed an overtime case filed by an employee, Laura Symczyk, against her former employer, Genesis Healthcare Corporation. Ms. Symczyk filed the case as a collective action on behalf of herself and other similarly situated employees who were not paid for all of the hours they worked. Specifically, she claims Genesis deducted 30 minutes of pay per day for a meal break, even when they worked during their break. She asserted the company’s policy violates the Fair Labor Standards Act of 1938 (“FLSA”). The FLSA is a federal law that set the federal minimum wage and guarantees overtime pay to non-exempt employees. The FLSA permits employees to sue on behalf of similarly situated employees in what is called a “collective action.”

Supreme Court ruling overtime case and collective action.jpgWhen Ms. Symczyk filed her lawsuit, Genesis made her a formal settlement offer, called an offer of judgment, in the amount of $7,500 plus all of her attorneys’ fees and costs. Ms. Symczyk admits the $7,500 would have full compensated her for all of her own damages. However, she did not respond to the offer because she wanted to continue with her case on behalf of her coworkers, and as a result never received the $7,500. But since the offer would have paid Ms. Symczyk everything she was seeking for herself in the lawsuit, and none of her coworkers had joined the case, the trial court no longer considered her to have a personal stake in the outcome of the case. In other words, it deemed her case to be moot.

On that basis, Genesis sought to have the case dismissed. In response, Ms. Symczyk argued the company was improperly trying to end the case before the collective-action portion of the case even could begin.

The District Court dismissed the case. It ruled the $7,500 offer of judgment fully satisfied Ms. Symczyk’s claim, and a collective action cannot proceed unless there is at least one person who has joined the case whose claim against the company is not moot. The Third Circuit Court of Appeals reversed, finding that even though Ms. Symczyk’s claim was moot, it was improper for the company to try to “pick off” the named plaintiff to defeat the collective action. Genesis appealed the ruling to the United States Supreme Court. However, Ms. Symczyk did not cross-appeal the Third Circuit’s finding that her personal claim was moot.

In its opinion in Genesis Healthcare Corp. v. Symczyk, the Supreme Court ruled that since Ms. Symczyk did not cross-appeal the finding that her case was moot, it was bound by that conclusion whether or not it is correct. It then ruled that since her case is moot, she cannot proceed with the collective action on behalf of her coworkers. However, since the Court did not indicate whether Ms. Symczyk’s case really was moot, and merely assumed it because she did not cross-appeal that ruling, it did not indicate whether the same tactic of offering full damages to each named plaintiff would work in future cases. As a result, it remains unclear whether employees who bring collective actions and are offered settlements that would satisfy their own claims have the right to reject the offer and continue to proceed with the collective action.

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New Jersey’s Appellate Division recently recognized it can be unlawful for a company to reduce employees’ overtime hours in response to an overtime lawsuit. Specifically, the case finds that such a policy could violate New Jersey’s whistleblower law, the Conscientious Employee Protection Act (CEPA).

Howard Flecker III worked as Ferry to Statue of Liberty.jpga Deckhand for Statue Cruises, a company which provides ferry service from New York and New Jersey to Liberty Island and Ellis Island.Under the company’s Collective Bargaining Agreement (CBA), employees were entitled to be paid time-and-a-half only after they worked more than 48 hours per week. The FLSA is a federal law which requires companies to pay “non-exempt” employees overtime pay at the rate of time-and-a-half when they work more than 40 hours per week
In 2009, Mr. Flecker filed a class action lawsuit claiming the CBA violates the Fair Labor Standards Act (FLSA). In direct response to Mr. Flecker’s lawsuit, the company issued a memorandum indicating that none of its employees would work 40 hours per week. For example, the company reduced Mr. Flecker from 50 to 40 hours per week.

As a result, Mr. Flecker’s coworkers lost 8 or more hours of pay per week. Many of his coworkers confronted him about this on a daily basis, and pressured him to withdraw his lawsuit. Mr. Flecker’s lawyer told the company that its policy was a form of unlawful retaliation in violation of CEPA. The company responded that it was attempting to minimize the potential damages in Mr. Flecker’s overtime lawsuit. Eventually, due to the stress caused by his co-workers’ constant pressure to withdraw his lawsuit, he resigned. He also added a retaliation claim to his lawsuit under CEPA.

The trial court dismissed Mr. Flecker’s CEPA claim, finding he had not alleged any retaliatory action. However, in Flecker v. Statue Cruises, LLC , the Appellate Division disagreed, and found two potential retaliatory actions. First, it ruled a jury could conclude the company’s actions were intended to turn Mr. Flecker’s co-workers on him, which in turn forced him to resign. In other words, a jury could conclude the company constructively discharged him. Second, it found reducing Mr. Flecker’s hours because he filed an overtime lawsuit could violate CEPA if the company’s motive was to retaliate against him for filing his lawsuit. The court explained this theory was supported by the fact that, although the company claimed it was going to reduce the hours of all of its employees, it did not reduce the hours of at least two of the employees who had been harassing Mr. Flecker.

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The Court of Appeals for the Third Circuit was recently asked if a parent company is responsible for overtime violations committed by its subsidiary. The lawsuit, In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation, was brought by a group of assistant branch managers who worked for various locations of Enterprise-Rent-a-Car, which are wholly owned subsidiaries of Enterprise Holdings. The employees claimed Enterprise Holdings was liable for their overtime pay under the Fair Labor Standards Act (FLSA) as a “joint employer.” The FLSA is a federal law that requires companies to pay time-and-a-half overtime pay to most “non-exempt” employees.

Car Rental Company sued for overtime violations.jpgJoint employment is when two or more employers share control of an employee. Although joint employment is a well-recognized concept, the Third Circuit was addressing this issue for the first time in the context of an FLSA claim. The court created a new four-part test for “joint employment,” which it named the Enterprise test.

Under the Enterprise test, in deciding if a party is a “joint employer,” courts must consider whether the company has:

(1) Authority to hire and fire employees;
(2) Authority to issue work rules and job assignments, and set conditions of employment like compensation, benefits, and hours;
(3) Authority to supervise and discipline employees on a day-to-day basis; and
(4) Control of employee records such as payroll, insurance, and tax records.

When the court applied this test, it determined Enterprise Holdings was not a joint employer even though there are many indications of joint management. For example, Enterprise Holdings is very involved in running its subsidiaries. It also provides them with administrative services and Human Resources support, including employee compensation guides indicating which employees should be paid salaries, and which employees should be paid by the hour. In addition, both companies are managed by the same Board of Directors. But the Court found that was not enough to make them joint employers.

The court reached this decision because it found Enterprise Holdings did not directly control assistant branch managers working for its subsidiaries, and the guidelines it provided to its subsidiaries were recommendations rather than requirements. Although the court suggested that other factors can also be taken into consideration, in Enterprise it gave those factors very little weight.

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Last month, the United States Supreme Court ruled that sales representatives working for pharmaceutical companies are not entitled to receive overtime pay under the Fair Labor Standards Act (FLSA). The FLSA is a federal law that requires companies to pay employees most of their employees overtime at the rate of one-and-a-half times their normal hourly rate in each week in which they work more than 40 hours.
Thumbnail image for Pharmaceutical Overtime Case.jpgPharmaceutical sales representatives do not directly sell products. Rather, they attempt to convince doctors to prescribe their company’s products to their patients when appropriate. This process is called “detailing.”

At GlaxoSmithKline, sales representatives are paid a base salary plus a commission. Their commissions are based on the total sales of the drugs assigned to them, or the market share in their sales territories. Glaxo does not pay time-and-a-half to its sales representatives when they work overtime. As a result, several salespeople filed a lawsuit claiming they were denied overtime pay in violation of the FLSA.

The issue in the case was whether pharmaceutical sales representatives fall within an exception to FLSA’s overtime requirement under which employers do not have to pay overtime to their outside salespeople. In Christopher v. Beecham Corporation DBA GlaxoSmithKline, the Supreme Court ruled that pharmaceutical sales representatives fall within that exception for a variety of reasons. For example, it recognized that the FLSA uses a very broad definition of the term “sales,” which includes “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” It also concluded that since pharmaceutical sales representatives are not allowed to make direct sales to patients, detailing is the equivalent of sales. Accordingly, it ruled that pharmaceutical sales representatives are not entitled to overtime pay under the FLSA.

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The United States Court of Appeals for the Second Circuit Court recently ruled that an employee who follows his supervisor’s instruction to falsely report that he did not work any overtime hours still can pursue an overtime claim. It reversed a decision from the Western District of New York, which had dismissed the claim because it did not believe the employee could prove how many hours of overtime he had worked.

Overtime Businessman.jpgGreg Kuebel was a Retail Specialist for Black & Decker (U.S.) Inc. He filed class action lawsuit against Black & Decker, claiming the company’s overtime pay practices violate the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL). Specifically, Mr. Kuebel claims Black & Decker violated the law by failing to pay him for the overtime hours he worked but did not record on his timesheet — in other words, his “off-the-clock” overtime hours.

Black & Decker’s official policy required Retail Specialists to accurately record their hours on timesheets that they submit to their managers. There was no official Black & Decker policy which prohibited Retail Specialists from working, recording, or being paid for overtime. However, Black & Decker expected its Retail Specialists to finish their work in a 40-hour work week.

Mr. Kuebel alleges it was impossible to finish all of his work in 40 hours per week, and as a result often worked overtime. However, he did not list any overtime on his timesheets, and therefore was not paid for his overtime hours. Mr. Kuebel explained that he falsified his timesheets because his supervisors instructed him not to record more than 40 hours of work per week because the company could not afford overtime. Mr. Kuebel testified that to the best of his memory he worked more than 40 hours almost every week, and averaged between 1 to 5 hours of overtime per week. After Mr. Kuebel told his supervisor that he had been falsifying his timesheets, Black & Decker fired him for poor performance, dishonesty, and falsification of company records.

In Kuebel v. Black & Decker Inc., the Court explained that to prove an overtime case under the FLSA, an employee has to prove he was not properly paid for working more than 40 hours in a work week, and his employer either actually knew it or should have known about it under the circumstances. To prove the amount of overtime pay to which he is entitled, an employee needs enough evidence to show the amount and extent of the overtime he worked. However, he does not have to prove the amount of overtime he worked with definiteness, and can prove his overtime hours through an inference. Accordingly, the Court ruled that when a company’s time records are inaccurate or inadequate, the solution is not to penalize the employee by denying him any legal recovery.

To summarize, an employee can win an overtime case if (1) he proves he actually worked overtime and was not properly paid for it, and (2) he has enough evidence to show how much overtime he worked through a reasonable inference. An employee can meet this burden through estimates based on his own recollection. This can be true even when the employee admittedly falsified his own timesheets, at least where the employee’s falsification was based on an instruction from a manager or supervisor. That is because it is the employer’s duty to maintain accurate time records for its employees, and employers cannot delegate that duty to their employee. Once an employer knows or has reason to know an employee is working overtime, it cannot deny compensation simply because the employee failed to properly record or claim his overtime hours.

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Champ Mascot.jpgLast Wednesday, a mascot who worked for the Scranton/Wilkes-Barre Yankees minor league team filed a federal lawsuit claiming the team violated the Fair Labor Standards Act (“FLSA”) and state law because it failed to pay him for his overtime hours. Specifically, Brian Bonnor’s lawsuit alleges the team improperly designated him as a “manager” to avoid paying him time-and-a-half when he worked more than 40 hours in a week.

Specifically, Mr. Bonnor, who was laid off by the New York Yankees’ AAA affiliate in January, alleges he was paid a salary of $22,000 per year to dress up as the team’s mascot, Champ, and make appearances at games and other events. However, his lawsuit claims he had no supervisory or managerial job duties. He also claims he sometimes worked 80-hour weeks, but the team never paid him for his overtime. The team denies it violated the law.

The FLSA is a federal wage and hour law. It requires employers to pay most employees time-and-a-half for their overtime hours unless they fall into specifically defined categories, including certain “executive,” “administrative,” and “professional” employees. Companies that violate the FLSA can be required to pay the employee not only for their unpaid overtime, but if the violation is “willful” they also can be required to pay double damages (called “liquidated damages”). An employee who wins a case under the FLSA also can recover his attorney’s fees and litigation costs.

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Starting on October 26, 2009, employers in New York State must give newly hired employees written notice of their regular hourly pay rate. For employees who are entitled to receive overtime pay, employers also must state their overtime rate. Employers also need to obtain written confirmation from new employees, confirming they received the required information.

These new requirements are an amendment to New York Labor Law Section 195(1). Their purpose is to “allow workers to determine whether their paychecks properly reflect the hourly wage rates their employers agreed to at the time of hiring, including the overtime rate.” They are a response to the fact that many employees are only told their annual or weekly salary when they are hired, which makes it difficult to determine their hourly and overtime pay rates. The new law also should help minimize any confusion about whether employees are entitled to receive overtime pay, by requiring employers to address the issue up front.

More information regarding this new law is available here from the New York Department of Labor. The required form employers must provide to newly hired employees is available here.

If you work in New York or New Jersey and believe your employer violated your right to receive overtime pay, or another one of your rights as an employee, you should consider contacting an experienced employment lawyer.

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