Articles Posted in Fair Labor Standards Act (FLSA)

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The Fair Labor Standards Act (FLSA) is a federal law that governs things like the minimum wages employees can be paid, as well as when they should be paid overtime and how much they should be paid for overtime. States also have their own labor laws to govern minimum wage and overtime, among other issues, for all employees working within the state.

In addition to getting paid for all the hours they spend working, many employees expect to receive pay for a certain amount of time off and sometimes bonuses. Paid time off usually includes holidays that the employer is closed, but is still paying the employee. Many employers also give their workers a certain number of sick days or vacation days (sometimes both) for which the employee can be paid in a calendar year. This is all time for which employees can reasonably expect to be paid, and in some cases, the law requires them to be paid for this time. Continue reading

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The federal Fair Labor Standards Act (FLSA) mandates that all employees working in the United States must be paid at least the federal minimum wage of $7.25 per hour. This is true regardless of how the employee is paid. While some workers are paid per piece or on commission, the wages paid to these employees, calculated against the amount of time they spent working, must average out to at least $7.25 per hour.

The FLSA also requires that all non-exempt employees who work in excess of eight hours a day or forty hours a week must be paid the proper overtime compensation of one and one-half times the employee’s normal hourly rate. This also remains true for workers who are paid on commission or on a piece-rate basis. The employer must calculate the employee’s normal hourly rate based on the wages earned and the time spent working, in order to come up with an overtime rate for the employee.

There are many advantages to a company classifying an employee as an independent contractor. The company gets to avoid paying taxes and benefits such as health insurance. However, the law has very specific requirements for the kinds of workers that can be classified as independent contractors. For example, an independent contractor must have more freedom than an employee, such as the ability to choose when and where they perform their work and the type of clothing that they wear while working. Independent contractors also get to choose how many and which clients they work for. Continue reading

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It is a common practice for retail stores to check the bags of their employees for merchandise that the employees might be trying to take home with them illegally. However, since these bag checks are required by the employer, the employees must be paid for all of the time spent having their bags checked and waiting in line, if necessary. While this time may be only a few minutes, it can add up, day after day, to a significant loss of wages on the part of the employees. Several retail stores have already faced wage and hour class action lawsuits from employees who were not compensated for the time that they spent waiting to have their bags checked. Now Urban Outfitter is the latest retail store to face a lawsuit for allegedly failing to pay employees for the time it took to have their bags checked before they were allowed to leave.

According to the lead plaintiff, Zayda Santizo, she was allegedly a non-exempt hourly employee at Urban Outfitters and yet she and other hourly employees were allegedly required to have their bags checked outside of their normal schedules. While employees who qualify for one of the overtime exempt categories under the federal Fair Labor Standards Act (FLSA) are required to stay until their work is done, however long that takes, all hourly employees must be paid the overtime rate of one and one-half times their normal hourly rate for all time that they spend working in excess of eight hours a day or forty hours a week. According to this most recent wage and hour lawsuit, the hourly non-exempt employees at Urban Outfitters allegedly were required by their employer to stay overtime to have their bags checked, but allegedly were not paid the proper overtime rate.

The complaint alleges that the paystubs issued by Urban Outfitters were inaccurate because they allegedly did not reflect the time spent by employees waiting to have their bags checked. Under the FLSA, failure to provide employees with pay stubs which accurately reflect the time spent working and the wages earned by the employee is subject to certain penalties.

In addition to these alleged violations of the FLSA, the wage and hour class action lawsuit also alleges that Urban Outfitters violated certain state statutes as laid out by California labor law.
The wage and hour lawsuit is seeking certification of three sub-classes of current and former employees of Urban Outfitters. The first proposed sub-class includes all employees who worked for Urban Outfitters “at any time beginning four years prior to the filing of the complaint through the date notice is mailed to the class.” According to the complaint, an estimated 400 employees allegedly have the potential to be eligible to fit into this first sub-class.

The second proposed subclass includes all workers “whose employment by [Urban Outfitters] ended within three years of filing the complaint.” The third proposed sub-class includes all workers “whose employment with [Urban Outfitters] included any period of time during the period beginning one year from the date of the filing of this action.” The complaint estimates at least 200 employees have the potential to allegedly qualify for one of these last two sub-classes.

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Before determining the method by which an employee is to be paid, it is usually a good idea for the employer and the employee to reach an agreement as to what exactly all of the employee’s responsibilities are. A social game developer company, Zynga, recently ran into this problem with one of its software engineers. The employee, Andrew Luo, insisted that managing other employees was not part of his job responsibilities. He therefore filed a lawsuit against Zynga for violating the federal Fair Labor Standards Act (FLSA) when it failed to pay him overtime when he worked in excess of forty hours a week. Zynga, which is now owned by Facebook, argues that managing other employees was part of Luo’s job responsibilities, so it was right to classify him as exempt from overtime compensation.

Although the FLSA requires employers to pay all of their employees the proper overtime compensation of one and one-half times the employee’s normal hourly rate of pay for all time that the employee spends working in excess of eight hours a day or forty hours in a week, the act does make exceptions for certain employees. One category of employees which may be exempt from overtime compensation is employees who manage other employees as one of their primary job responsibilities.

Because Luo insisted that he did not manage other employees, he filed a wage and hour class action lawsuit against Zynga on behalf of himself and all current and former software engineers, quality assurance, and other skilled personnel who worked for Zynga in the relevant time period.
Despite continuing to insist that it had done nothing wrong by classifying Luo as exempt from overtime compensation, Zynga proposed to settle the case outside of court. Luo agreed to the settlement on an individual basis because of the uncertainty of his status as an exempt employee under the FLSA while working for Zynga. Even when two opposing parties agree on a settlement, a federal judge is required to approve the settlement before it can be finalized. Initially, Judge Nathanael M. Cousins refused to approve the settlement because it was under seal, despite the fact that the lawsuit had been filed as a putative class action. Cousins worried that failure to make the settlement public might have an adverse effect on similarly situated employees attempting to seek redress for violations of the FLSA committed against them.

Under the terms of the settlement, Luo will receive $12,000, enough to compensate him for 144 hours of unpaid overtime. The settlement also precludes Luo from filing further claims against Zynga for payments for things like family leave. Attorneys for both sides argued that the settlement would not have any undue effect on other putative class members because “the lack of publicity makes it unlikely that similarly situated class members knew of the present lawsuit and relied on it for vindication of their own rights.” Judge Cousins agreed with this assertion. He also agreed that the settlement was fair due to the uncertainty of Luo’s exempt status under the FLSA.

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After a woman filed suit against a fundraising company for alleged payroll violations, the company brought counterclaims against her, including a claim for alleged breach of a covenant not to compete. Fields v. QSP, Inc. (Fields 2), No. CV 12-1238 CAS (PJWx), opinion (C.D. Cal., Jun. 4, 2012). The plaintiff filed the lawsuit as a putative class action on behalf of employees subjected to employment practices that allegedly violated the federal Fair Labor Standards Act (FLSA) and various California statutes. After hearing several competing motions for summary judgment and judgment on the pleadings, the court dismissed some of the plaintiff’s employment law claims and retained others. It also ruled that the covenant not to compete in the plaintiff’s employment contract was unenforceable under California law.

The defendant, QSP, Inc., serves a nationwide clientele of youth organizations and schools. It employed the plaintiff from 1999 to 2010, primarily as a “Sales and Service Specialist.” Her job involved researching and contacting potential clients, assisting “field sales managers” (FSMs), and maintaining a database (the “QSP Database”) of current and prospective school customers. A covenant not to compete in her employment contract stated that she may not contact fundraising organizations that she “solicited or serviced during [her] employment by QSP” for a period of twelve months. Fields 2 at 12. QSP alleged that the plaintiff did not delete the QSP Database from her computer when her employment ended, and used the database to provide services to QSP’s competitors.

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Employees of a bank with multiple branch locations throughout Illinois sued to recover unpaid overtime wages under both the federal Fair Labor Standard Act (FLSA) and the Illinois Minimum Wage Law (IMWL). After the district court certified two classes of plaintiffs, the defendant bank appealed the certification to the Seventh Circuit Court of Appeals. Based in part on a U.S. Supreme Court decision clarifying the requirements for class certification, the Seventh Circuit affirmed the district court’s order. Ross, et al v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012).

The plaintiffs alleged in their lawsuit that the bank had several “unofficial” policies that allowed it to deny overtime pay to employees, id. at 903, such as using “comp time” instead of overtime wages or altering employee timesheets. They also alleged that some assistant bank managers (ABMs), while officially exempt from eligibility for overtime pay, spent most of their time on non-exempt work. The plaintiffs therefore sought to certify two classes: non-exempt employees who were entitled to overtime compensation, and ABM employees who performed non-exempt work and were entitled to overtime pay. A class action requires four basic elements: “numerosity, commonality, typicality, and adequacy of representation.” Id.; Fed. R. Civ. P. 23(a). The district court certified both classes under Rule 23(b)(3) of the Federal Rules of Civil Procedure (FRCP), which applies to cases where the issues affecting all class members supersede those affecting individual members, and where a class action is the best way to resolve the conflict.

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A defendant’s failure to deny allegations in a responsive pleading to a complaint can serve as an admission of those allegations. In Kule-Rubin, et al v. Bahari Group, Limited, the U.S. District Court for the Southern District of New York granted the plaintiffs’ motion for judgment on the pleadings as to four of the claims asserted in their complaint for wage violations. The plaintiffs argued in their motion that the defendant, in its answer to their original complaint, had not expressly denied certain allegations. The court deemed those allegations admitted by the defendants, and granted judgment on the plaintiffs’ claims that were supported by those admissions. The court also dismissed two counterclaims by the defendant.

The defendant is a manufacturer, distributor, and retailer of clothing. The individual owners of the company were also named as defendants. The eleven plaintiffs were employees who began working for defendant at different times beginning in 1994. According to the plaintiffs’ complaint, the defendant began withholding wages from certain plaintiffs in October 2010, and it withheld wages from all of its employees starting that November. The defendant allegedly withheld commission wages, expense reimbursements, and health insurance premiums from some plaintiffs beginning two years earlier. The defendant told the plaintiffs that if they continued to work for the defendant, it would pay them all back wages and current wages later. All eleven plaintiffs continued working for the defendant until November 30, 2010, when the defendant terminated them.

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In Gionfriddo v. Jason Zink, LLC., the District Court for the District of Maryland became the latest in a chorus of courts in business litigation to warn business owners/operators that the Fair Labor Standards Act (FLSA) – and often state law – prohibits them from participating in employee tip pools.

Plaintiffs are three former bartenders at two Baltimore bar and restaurants owned by Defendant Jason Zink: the Don’t Know Tavern and the No Idea Tavern. Mr. Zink also works as a manager and bartender at both establishments. The bartenders at both taverns, including Mr. Zink, participate in a tip pool, through which tips received are contributed to a collective pool and then divided among the bartenders each week based on the number of hours worked. Since Mr. Zink does not draw a salary from the businesses, the court noted that the tip pool “appears to be his primary mode of compensation from his tavern businesses.”

Plaintiffs sued, alleging that because Zink owns the businesses, he’s precluded under both the FLSA and the Maryland Wage and Hour Law from receiving tips from the tip pool. The FLSA establishes a federal minimum hourly wage ($7.25) for employees. “Tipped employees” – those working in positions where they “customarily and regularly” receive more than $30 a month in tips – are exempted from the minimum wage requirement. These employees may be paid $2.13 per hour, so long as their tips make up the difference. The difference between the amount paid to tipped employees and the $7.25 minimum wage is called the employer’s “tip credit.” The FLSA permits tipped employees to participate in a tip pool, as long as each employee customarily receives more than $30 per month in tips. Furthermore, the employer cannot take a tip credit where the tip pool involves employees who don’t usually receive tips.

Both parties filed motions for summary judgment, asserting that there is no dispute over material facts in the case and that each is entitled to judgment in its favor as a matter of law. The court ruled in favor of Plaintiffs, finding that Defendant is not permitted to participate in the tip pool because, as employer, he doesn’t typically receive tips. “Congress, in crafting the tip credit provision…of the FLSA did not create a middle ground allowing an employer both to take the tip credit and share employees’ tips,” the court ruled, quoting the Southern District of New York’s decision in Chung v. New River Palace Restaurant, Inc. For the same reasons, the court concluded that Defendant also violated the MWHL by participating in the tip pool.

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