wage & hour claims and class actions - conference materials

American Conference Institute’s 17th National Forum on

Wage & Hour Claims and Class Actions

January 24, 2013 — Miami, Florida

Department of Labor Update:

Responding to Enhanced Enforcement

Initiatives and Aggressive Investigations Presented by:

Dr. Elizabeth Becker

NERA ECONOMIC CONSULTING

Jeffrey D. Patton

Paul DeCamp

Glenn G. Patton

Leadership Changes at DOL

• Secretary of Labor Hilda L. Solis resigned in early January 2013. President Obama has not yet nominated her replacement (as of mid-January 2013).

• There has been no Administrator of the Wage and Hour Division since December 2007. The second of President Obama’s two nominees withdrew in August 2011.

• Nancy Leppink resigned as Deputy Administrator in mid-December 2012.

• Acting Deputy Administrator Mary Beth Maxwell is currently running the Wage and Hour Division (as of mid-January 2013).

2

Semi-Annual Regulatory Agenda

• The Fall 2012 agenda, issued December 24, 2012,

contains five items involving WHD:

– Amendments to the FMLA regulations: NPRM

issued in February 2012, comment period closed in April

2012, and final action projected for March 2013.

– FLSA and domestic service: NPRM issued in

December 2011, comment period closed in March 2012,

and Final Rule projected for April 2013; rule would deny

companionship services exemption for third-party

employment and narrow the scope of exempt duties.

3

Regulatory Agenda (cont’d)

– FLSA Right to Know: Agenda for first time acknowledges that this rulemaking contemplates addressing disclosure to workers of not only “their status as the employer’s employee or some other status”, but also “if an employee, how their pay is computed”; “Next Action Undetermined”.

• Very likely in conjunction with this item, WHD issued a Proposed Information Collection Request on January 11, 2013, contemplating a 30-month survey to be completed in March 2014 assessing “employment experiences and workers’ knowledge of basic employment laws and rules”.

4

Regulatory Agenda (cont’d)

– FLSA Child Labor Hazardous Occupation

Order No. 7: WHD seeks information regarding its

non-enforcement position as to power-driven

patient/resident lifts in health care establishments;

“Next Action Undetermined”.

– FLSA Child Labor regulations involving

agricultural hazardous occupations: NPRM

issued in September 2011, comment period closed in

December 2011, and proposed regulation withdrawn

in May 2012; regulatory item listed as “completed”.

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New Guidance From DOL

• Two new (Deputy) Administrator’s Interpretations:

– AI 2013-1 (Jan. 14, 2013): Addresses several issues

involving meaning of phrase “son or daughter” as

applied to adults incapable of self-care under the FMLA.

– AI 2012-1 (Dec. 12, 2012): Addresses application of

MSPA, FLSA, and OSH Act field sanitation standards to

“raking, gathering, baling, and loading of pine straw

gathered from pine trees grown for commercial timber”.

– First AIs since the three issued in 2010 (two reversing

Bush-era FLSA positions and one involving the FMLA).

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DOL Amicus Briefs

• DOL’s web site lists nine amicus briefs filed in wage and hour cases since January 1, 2012 (through mid-January 2013). All nine briefs side with the workers.

• Positions taken:

– Transportation and visa expenses for H-2A workers are primarily for the employer’s benefit. (9th Cir.)

– Arbitration agreements with class action waivers are unenforceable because they prevent vindication of FLSA rights. (2d Cir.)

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DOL Amicus Briefs (cont’d)

– In treating tips beyond the tip credit as “earnings” subject to garnishment, the employer violated Title III of the Consumer Credit Protection Act and the FLSA’s minimum wage provision. (11th Cir.)

– A contractual waiver of the FLSA’s statute of limitations is void as against public policy. (6th Cir.)

– Volunteer firefighters are employees under the FLSA and the FMLA. (6th Cir.)

– Cable installers are employees, not independent contractors, under the FLSA. (11th Cir.)

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DOL Amicus Briefs (cont’d)

– Undocumented workers may sue for FLSA

minimum wage and overtime for hours worked, and

immigration status is irrelevant at trial. (8th Cir.)

– An individual owner of an employer corporation is

personally liable as an employer under the FLSA

based on control. (2d Cir.)

– Two-step collective action certification procedure is

proper under the FLSA, so the court should deny

the employer’s mandamus petition. (5th Cir.)

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Enforcement Priorities

• Independent contractor misclassification:

– Memoranda of Understanding with 13 states and the IRS for information sharing and coordination.

– Focus: workers with no W-2 employer.

– WHD now routinely asks for Form 1040 records.

• Call centers: Pre-shift and post-shift activity.

• Next stop: Challenges to fluctuating workweek compensation for employees who receive bonuses, commissions, or other types of non-salary, non-overtime compensation?

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Targeted Industries

• Restaurants

• Health care

• Car washes

• Janitorial (especially in hotels and motels)

• Construction (residential and commercial)

• Retail franchisors as joint employers / integrated enterprises

• Government contracting

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Issuance of WH-58 Forms

• Form WH-58 both a receipt and release of future claims.

• Prior to 2008, DOL routinely provided WH-58 forms.

• Since 2008, WH-58 forms not provided unless DOL has conducted a “full investigation.”

• May not be available in self-disclosure situations.

• DOL also issuing WH-58 forms limited to specific time periods that may be shorter than 2 years.

• Creates uncertainty about scope of release/waiver.

12

Liquidated Damages & 3rd Year

• Historically, DOL focused on obtaining 2-years of back wages during investigations.

• DOL investigators now investigating potential liability during third year where violation(s) may be willful.

• Asking for liquidated damages as condition to settlement of investigation.

• Liquidated damages most likely to be pursued in independent contractor misclassification situations.

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Beware of Civil Money Penalties

• CMPs are the DOL’s new secret weapon.

• They’re not just for child labor violations anymore!

• Repeat: Prior notice of violation from Wage and

Hour Division or previous adjudication. 29 CFR §

578.3(b)

• Willful: Employer either knew that its conduct was

prohibited or showed reckless disregard for the

requirements of the Act. 29 CFR § 578.3(c)

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Beware of Civil Money Penalties

• Relevant Factors: See 29 CFR § 578.4

– Size of employer;

– Existence of good faith efforts to comply;

– Whether there is bona fide dispute as to violation;

– Previous history of violations;

– Commitment to future compliance;

– Amount of time between violations;

– Number of employees affected; and

– Any pattern to the violations.

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Amount of Civil Money Penalties

• CMPs up to $1,100 per violation.

• CMPs up to $5,000 for failure to cooperate.

• Higher penalties for child labor violations ($11,000 per worker).

• DOL has secret formula for valuing CMPs (formula for repeat violations is lower than willful violations).

• CMPs for OT and minimum wage violations go back to WHD to fund additional enforcement efforts!

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DOL’s CMP Procedures

• Timing: DOL generally waits to address CMPs until after agreement is reached on payment of back wages.

• Objections: Must object to CMPs and request hearing in writing within 15 days.

• Meeting: DOL may meet to discuss objections.

• Hearing: If no agreement reached, then CMP assessment goes to ALJ for hearing.

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DOL’s CMP Procedures

• Pleadings: DOL’s notice acts as complaint and employer’s objection serves as the answer.

• Decision: ALJ reviews entire record (hearsay rules do not apply to prior investigation files) and issues written opinion.

• Appeal: Employer has 30 days to appeal ALJ decision to Administrative Review Board.

• Collection: DOL can deduct CMPs from any amounts owed to employer or file a civil action.

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Individual Defendants

• DOL naming owners and senior managers as defendants.

• Employer: “Any person acting directly or indirectly in the

interest of an employer in relation to an employee …” 29

U.S.C. § 203(d).

• Requires showing of “operating control” over employees:

• Power to hire and fire;

• Ability to supervise;

• Power to set or adjust wages; and

• Maintenance of employment records.

19

Frequency and Types of Claims Brought

by DOL*

• FLSA: Minimum Wage and Overtime – 2,696

• FMLA – 261

• Migrant Seasonal Agricultural Protection Act – 150

• Davis-Bacon and Related Acts – 150

• FLSA: Child Labor – 110

*As of October 2012

http://ogesdw.dol.gov/results.php

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Types of Employers

(NAICS Coding)*

• Full Service Restaurants – 493

• Hotels and Motels – 248

• Limited Service Restaurants – 243

• Child Day Care Services – 217

• Supermarkets and Grocery Stores – 188

• Other – 3,553

*As of October 2012

http://ogesdw.dol.gov/results.php

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Enforcement Data 2.5

• Online data base – public access to workplace-

related information.

• Multiple agencies report to the same website.

• Non-compliant employers more easily

discoverable from other types of violations.

http://ogesdw.dol.gov/

http://ogesdw.dol.gov/data_catalogs.php

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Enforcement Data 2.5:

Wage and Hour Compliance Data

• Contains all concluded WHD compliance actions

since 2007.

• Includes:

– Whether violations were found;

– Back wage amount;

– Number of employees due back wage; and

– Civil money penalties assessed.



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Enforcement Data 2.5

Search & Share

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Enforcement in 2013:

Increased Budget Request

• WHD asked for an additional $10 million from

2012

• Purpose: “[A] continued shift to greater

directed and complaint activity in priority

industries.”

• Shifting funds to increase enforcement of

entities likely to have overtime violations.

http://www.dol.gov/dol/budget/2013/bib.htm#whd

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Wage and Hour Case Settlements, 2007 - 2011

20

34

91 92

107

0

20

40

60

80

100

120

2007 2008 2009 2010 2011

Nu

mb

er

of

Cas

es

Mean Settlement Values by Year, 2007 - 2011

Overall Mean: $8,508,358

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

2007 2008 2009 2010 2011

Sett

lem

en

t A

mo

un

t

Settled Wage and Hour Cases by

Settlement Amount, 2007-2011

0

10

20

30

40

50

60

70

Nu

mb

er

of

Cas

es

Settled Wage and Hour Cases by Average

Settlement Amount Per Employee, 2007-2011

0

20

40

60

80

100

120

140

160

Nu

mb

er

of

Cas

es

Drivers of Variability in

Wage and Hour Settlements

Duration of Violation Period

Number of Employees in Settlement

Statute (FLSA/State Laws)

Jurisdiction of Case

Nature of Allegations

Industry

Settled Wage and Hour Cases by

Number of Employees, 2007-2011

48

66

36 41

22

14

23

7 2 4

0

10

20

30

40

50

60

70

Nu

mb

er

of

Cas

es

Average Settlement Value Per Employee

2007-2011

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2007 2008 2009 2010 2011

Ave

rage

Se

ttle

me

nt

Val

ue

Average Settlement Value Per Employee

Per Class Period Year, 2007-2011

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2007 2008 2009 2010 2011

Ave

rage

Se

ttle

me

nt

Val

ue

Settled Cases by Type of Allegation

Overtime, 244

Off-the-Clock, 117

Misclassification, 109

Missed Meals and Breaks, 96

Donning and Doffing, 27

Minimum Wage, 20 Tip Pooling,

10

2007 - 2011

Overtime, 78

Off-the-Clock, 13

Misclassification, 28

Missed Meals and Breaks, 36

Donning and Doffing, 8

Minimum Wage, 9 Tip Pooling,

5

2011

Settlement Dollars by Industry, 2007-2011

Telecommunications/Utilities, 5.55%

Other, 12.37%

Financial Services/Insurance,

21.44%

Food & Food Services, 5.49%

Transportation/Shipping, 6.70%

Retail, 35.17%

Technology, 7.49%

Healthcare/Healthcare Services, 4.25%

Manufacturing, 1.54%

Thank you!

Questions?

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Dr. Elizabeth Becker NERA Economic Consulting 1166 Avenue of the Americas 29th Floor New York, NY 10036 212.345.5096 [email protected] Jeffrey D. Patton Spilman Thomas & Battle, PLLC 110 Oakwood Drive Suite 500 Winston-Salem, NC 27103 336.725.4491 [email protected]

Paul DeCamp Jackson Lewis LLP 10701 Parkridge Boulevard Suite 300 Reston, VA 20191 703.483.8305 [email protected] Glenn G. Patton Alston + Bird LLP 1201 West Peachtree Street Atlanta, GA 30309-3424 404.881.7785 [email protected]

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