Third Circuit Limits Ability to Certify Wage/Hour Class Actions – Making “Off-the-Clock” Matters Difficult to Certify and Likely Increasing Litigation of Wage/Hour Claims Against New Jersey Employers in State Courts

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Salvador Simao

On Christmas Eve, the Third Circuit issued a decision restricting certification of wage/hour classes for off-the-clock cases and increasing the threshold for other wage/hour matters. See Ferreras v. American Airlines, Inc. (Dec. 24, 2019). While this decision may reduce the number of wage/hour class actions certified in the Third Circuit (which covers Pennsylvania, New Jersey, Delaware, and the Virgin Islands), it is predicted to cause an increase in the number of wage/hour class action filings in New Jersey state courts. As discussed in our previous legal alert, the recently enacted New Jersey Wage Theft Act by itself will undoubtedly spark an increase in New Jersey state court filings because of the significant increase in damages and lower burden of proof compared to the federal Fair Labor Standards Act (FLSA). The Third Circuit’s decision will likely result in even more state court wage/hour class action filings. Continue reading

DOL Issues Opinion Letters Providing Guidance on Nondiscretionary Lump Sum Bonuses and Per-Project Payments

 

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Priya Amin

Executive Summary: The U.S. Department of Labor (DOL) issued two Fair Labor Standards Act (FLSA) opinion letters on January 7, 2020, addressing questions regarding overtime calculation for nondiscretionary lump sum bonuses and per-project payments under the salary basis test. In the first opinion letter, the DOL ultimately stated that the appropriate method for calculating overtime pay on nondiscretionary lump sum bonus earnings that cannot be identified with particular workweeks is allocating the bonus equally to each workweek. In the second opinion letter, the DOL concluded that a “per-project” payment may satisfy the salary basis test, even in situations where the employee is earning “extra compensation” working on additional projects. Continue reading

Judicial Approval Not Required for Offers of Judgment in FLSA Cases

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Jeff Shooman

Executive Summary: On December 6, 2019, a sharply divided panel of the Second Circuit (covering New York, Connecticut, and Vermont) ruled that judicial approval of Fair Labor Standard Act (FLSA) settlements resolved under Federal Rule of Civil Procedure 68’s offer of judgment mechanism is not required. In the Second Circuit, FLSA settlements typically require judicial approval for fairness under a 2015 Second Circuit decision called Cheeks v. Freeport Pancake House. However, the Second Circuit held that where FLSA plaintiffs resolve their disputes with employers by accepting an offer of judgment, judicial approval, in that narrow instance, is not required under Cheeks. Continue reading

“Better Ingredients, Better Pay?” – Federal Court Provides Guidance on FLSA Compliance and Reimbursement of Expenses for Pizza Delivery Drivers

Executive Summary: On November 5, 2019, a federal district court in Ohio issued a decision clarifying the law governing whether owners of 73 Papa John’s franchised locations violated the Fair Labor Standards Act (FLSA) by failing to adequately reimburse their delivery drivers for expenses incurred in using their own vehicles to complete deliveries. In deferring to the Department of Labor (DOL) Field Operations Handbook, the court held that where employees are paid at or close to minimum wage and they use their own vehicles to make deliveries, the proper measure of minimum wage compliance for pizza delivery drivers is to either (1) track and pay delivery drivers’ actual expenses incurred or (2) pay the mileage reimbursement rate set by the Internal Revenue Service (IRS). See Hatmaker v. PJ Ohio, LLC, 2019 U.S. Dist. LEXIS 191790 (S.D. Ohio Nov. 5, 2019). Continue reading

DOL Attempts to End Confusion Regarding Bonuses and the Use of the Fluctuating Workweek

Background: The US Department of Labor’s Wage and Hour Division (DOL) is attempting to provide clarity and predictability to one of the most confusing areas of wage and hour law – the fluctuating workweek. The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees time and a half their regular rate of pay for hours worked over forty in each week. However, if certain conditions are met, the DOL allows employers to pay “a fixed salary for fluctuating hours” and overtime at a half-time rate. See 20 CFR 778.114. The general requirements for utilizing the fluctuating workweek method are: 1) an agreement with the employee to pay “a fixed amount” each week regardless of the hours worked, 2) that the employee’s hours fluctuate week to week, 3) that the fixed amount will be greater than the minimum wage for all hours worked in any given week and 4) the overtime rate is equal to half of “the amount of the salary” divided by the total hours worked in a week. The definition of the terms “fixed amount” and “amount of salary” within the regulation has led to disagreement among courts, and arguably the DOL itself, on whether any additional compensation would negate an employer’s ability to use this method of overtime computation. Where some courts have disallowed all bonuses and additional compensation, other courts attempt to resolve this by creating a dichotomy between “productivity based” (for example commissions) bonuses and “hours based” (for example night shift differential) bonuses, finding that only productivity bonuses are compatible with the fluctuating workweek method of compensation. However, there are bonuses (such as for retention, safety and referral) that do not fall neatly into either category. This confusion regarding additional compensation has dissuaded employers from utilizing this method of overtime compensation or not paying any supplemental compensation other than a fixed weekly amount. The DOL’s new proposed rule attempts to address this confusion. Continue reading