FLSA

After the Eastern District of Arkansas decertified the conditional class of bus drivers on federal claims and denied class certification with regard to state claims in Douglas v. First Student, Inc., 9-cv-652, a group of 87 of the opt-in plaintiffs and potential class members from Douglas filed an action for their individual claims on November 16, 2012  in Abbott, et. al. v. First Student, Inc., 12-cv-726 (E.D. Ark.).  The bus drivers are now each seeking individual relief for unpaid wages and unpaid overtime under both the Fair Labor Standards Act and the Arkansas Minimum Wage Act as joined plaintiffs with common counsel.  This action by the plaintiffs and their counsel represents one means by which class plaintiffs will attempt to aggressively continue pursuit of their claims even after decertification or denial of certification on a class basis.

A Maryland federal judge recently ruled that the Supreme Court class action ruling in Wal-Mart v. Dukes does not bear on an FLSA overtime pay class action suit. The court conditionally certified the collective action, rejecting the argument that the Dukes ruling applies to all aggregate actions. The court stated that the court's holding in Dukes only bears on Rule 23 class actions and is not applicable to FLSA actions.

In Dukes, the Supreme Court held that classes cannot be certified when each class member would be entitled to different relief against a defendant.

At issue was a collective action suit against Wells Fargo, where in the company's loan officers were classified as exempt and were not paid overtime if and when they worked more than 40 hours a week, up until April 1, 2011, when their status was changed to nonexempt, according to the judge's ruling. Prior to the switch, the officers were paid on a "draw and commission" basis ranging from $1,000 to $5,000 per month depending on their performance. After, they were paid $12 an hour, plus net commissions.

 

On March 29th, a federal court in the S.D. Indiana issued an opinion denying class and conditional certification of plaintiffs’ claims in the Scott v. NOW Courier case.  Plaintiffs are five former couriers who brought the action at issue in June of 2010, alleging they were misclassified as independent contractors, along with violations of the Fair Labor Standards Act ("FLSA") and Indiana employment law protections. Plaintiffs sought recovery of minimum wage and overtime under the FLSA and various benefits under Indiana law.

In its analysis, the court stated it found "disingenuous" plainitffs' assertions that NOW controlled the maner and means of deliveries by its drivers.  Furthermore, the evidence revealed that the indvidual drivers had considerable autonomy and independence in choosing the kinds of routes they wish to be assigned and schedules they wanted to work. As to the state claims, the court  stated it was not persuaded that certification was appropriate or necessary based on the same problems addressed in its FLSA analysis.  While the court did provide sub-groups of drivers may be appropriate, it stated no sub-groups were suggested nor were independent facts available upon which the court might determine such subsets exist.

The Department of Labor ("DOL") released it 2012 budget, setting forth a $12 billion discretionary budget authority  and aims increase enforcement of the Fair Labor Standards Act ("FLSA") and Family and Medical Leave Act ("FMLA").

The DOL's Wage and Hour Division ("WHD') is seeking $237.7 million and 1,839 full-time equivalent employees.  The DOL said it wants an increase of $6.4 million and 57 full-time equivalent employees to support greater enforcement of the FLSA's overtime provisions and the FMLA.

Additionally, the WHD seeks $3.8 million and 35 full-time workers for increased enforcement on the worker misclassification front. Overall, the 2013 budget proposal calls for some $14 million to fight misclassification, including $10 million for grants for states, according to the DOL.

The Occupation Safety and Health Administration's ("OSHA") proposed 2013 budget requests $565.5 million and 2,308 workers, representing a small increase — $680,470 and three employees — from the budget enacted in fiscal year 2012.

The Equal Employment Opportunity Commission ("EEOC") is seeking a $373.7 million budget for the 2013 fiscal year, up from $360 million in 2012.

 

The federal judge presiding over the FedEx Ground Package System Inc. (“FedEx Ground”) multidistrict litigation (“MDL”) ruled this week that classes of FedEx Ground drivers in numerous states are independent contractors, not employees. In re MDL-1700 FedEx Ground Package Sys. Inc., Employment Practices Litig., No. 3:05-MD-527 RM (MDL 1700) (N.D. Ind. Dec. 13, 2010) (“Dec. 13, 2010 Order”).   

The court’s decision comes on the heels of its August 11, 2010 ruling that a class of Kansas drivers are independent contractors, not employees, under the Kansas Wage Payment Act. See In re MDL-1700 FedEx Ground Ground Package Sys. Inc., Employment Practices Litig., No. 3:05-MD-527 RM (MDL 1700), 2010 WL 3239363 (N.D. Ind. Aug. 11, 2010) (“August 11, 2010 Order”).  Following that ruling, the Court instructed the parties to file supplemental briefing explaining whether the Court should reach the same result – on claims under the laws of other relevant States relating to overtime, business expense deductions from wages, late payment of wages, meal-and-rest breaks, and similar wage-related statutory and breach-of-contract claims – in the MDL’s many other collected cases in which similar summary judgment motions regarding drivers’ employee-vs.-independent-contractor status were awaiting decision. 

The MDL consists of numerous class action cases filed by drivers against FedEx Ground in courts around the country that were combined for coordinated pre-trial proceedings in the U.S. District Court for the Northern District of Indiana in 2005.  In general, the cases allege that FedEx Ground drivers were improperly misclassified as independent contractors, and that the drivers were therefore covered by state and federal laws applicable to employees.  Some of the cases also alleged violations of federal law, including the FLSA and the FMLA, and common law causes of action for breach of contract.  Eventually, at least 56 separate putative class actions from 40 states were transferred to the Northern District of Indiana as part of the MDL.  In 2008 and 2009, the MDL court certified some of the cases as class actions and declined to certify others.  The parties then proceeded to file summary judgment motions on the issue of the drivers’ employee-vs.-independent-contractor status.  The Court’s ruling this week represents the latest stage of the litigation.

In its August ruling in the Kansas case, the Court summarized its conclusion that drivers were independent contractors as follows:

The plaintiffs have all signed Operating Agreements labeling themselves as independent contractors, they can hire others to perform their assigned work and go work for another delivery company, and they can sell their routes to other qualified drivers; yet, they contend they are employees.  The court sees it differently. Upon review of the evidence in the light most favorable to the plaintiffs, the only reasonable inference is that FedEx hasn’t retained the right to direct the manner in which drivers perform their work. FedEx supervises the drivers’ work and offers numerous suggestions and best practices for performance of assigned tasks, but the evidence doesn’t suggest that FedEx has the authority under the Operating Agreement to require compliance with its suggestions. Further, other factors strongly weigh in favor of independent contractor status; in particular, the parties intended to create an independent contractor arrangement, the drivers have the ability to hire helpers and replacement drivers, they are responsible for acquiring a vehicle and can use the vehicle for other commercial purposes, they can sell their routes to other qualified drivers, and FedEx doesn’t have the right to terminate contracts at-will. Although some facts weigh in favor of employee status, after considering all the relevant factors, the court finds that the plaintiffs are independent contractors as a matter of law.

See Aug. 11, 2010 Ruling at 3.  In this week’s decision, the court repeated this same passage (beginning with “Upon review of the evidence…”).  See Dec. 13, 2010 Ruling at 11-12 (quoting Aug. 11, 2010 Ruling at 3). 

In the vast majority of states involved (AL, AZ, AR, CA, FL, GA, IN, KY, LA, MD, MN, NH, NJ, NY, NC, OH, OR, PA, RI, SC, TN, TX, UT, WV, WI, in addition to KS), the MDL court this week ruled that drivers were independent contractors under each respective state’s legal test. The Court’s detailed reasoning, state by state, is set forth on pages 18-176 of the decision.

The Court noted (at 4-5) that in arriving at both the Kansas decision and this week’s decision, it “has considered evidence common to the drivers’ relationships with FedEx on a nationwide basis:  the Operating Agreement [lease] and generally applicable Policies and Procedures.  As a condition of class certification, the court excluded particularized evidence of actual control between FedEx and the drivers. …These cases might or might not come out differently under a different procedural posture allowing wider scope for review of extrinsic and particularized evidence, but that situation is not before the court today.” 

The Court denied the plaintiffs’ request to give preclusive effect – that is, to treat as already having decided the issue – the California Court of Appeal’s decision in Estrada v. FedEx Ground Package System, Inc., 64 Cal. Rptr. 3d 327 (Cal. Ct. App. 2007) that a FedEx Ground Single Work Area (“SWA”) class of drivers were employees.  The Court stated (at 8): “The facts before the Estrada court and those before this court are dissimilar insofar as the facts available to this court don’t go beyond the Operating Agreement and generally applicable Policies and Procedures…. Also, the SWA class in Estrada was markedly different from the classes before this court because the MDL classes lump together SWA and MWA drivers.  Thus, though the parties litigated a right to control issue in Estrada, the issue decided in Estrada, isn’t identical to issue before this court.”

The Court also rejected the plaintiffs’ assertion that it viewed as dispositive the Operating Agreement’s indication that the parties intended to create an independent-contractor relationship.  The Court said (at 10) that “the intent factor weighed ‘strongly’ because the intent expressed in the contracts was so clear, not because the intent factor had special status or carried dispositive weight.”

The Court went on to declare (at 10-11, citations omitted) that “Most important in Kansas – and the most important under the common law and Restatement tests generally – is the right to control, which typically is the weightiest factor….  This court held that there was no reasonable inference that FedEx retained the right to control the methods and means of the drivers’ work on a class-wide basis. This finding came in light of the distinction between control of means and control of results.  In most states, control of results doesn’t indicate employee status; control of means used to achieve contracted-for results does indicate employee status.  Drawing the line between means and results is a challenging, highly contextual and fact-specific task.  Bright-line rules prove elusive here.  This court held that the controls reserved to FedEx were results-oriented:   FedEx provides work to and pays contractor-drivers to provide the specific result of timely and safely-delivered packages to FedEx customers.  The totality of the circumstances and review of all the relevant facts and factors led to this results-oriented conclusion.”

The Court further explained (at 11) that it “found the drivers’ entrepreneurial opportunities to be highly probative of independent contractor status.”

The drivers are expected to appeal the court’s ruling.  
 

Paycheck comparisons between lead plaintiff and his colleagues failed to satisfy the modest factual nexus standard.

The case arises from allegations, first asserted in October 2009, that Rick Bus denied overtime to all its employees and was imprecise in recording its workers' start and end times.

In deciding not to grant certification the court stated that the plaintiff provided "mere generalizations and legal conclusions,” and failed to “put forth any relevant facts for the court to consider, such as the names of any similarly situated employees." 

The judge pointed to a split within the Third Circuit on which standard should apply at the conditional certification stage. Some judges require only an allegation that plaintiffs are victims of a company-wide policy, but most — Judge Wolfson included — demand a modest factual nexus between the lead plaintiff's circumstances and those of fellow class members.

In addition to plaintiff's proposed class, a second putative FLSA class, which has yet to move for certification, seeks to represent Rick Bus employees who were allegedly victims of "rounding" — the practice of rounding employees' start and end times to the nearest 5-, 10- or 15-minute interval, according to the complaint.

In the recent 11th circuit decision, Abel v. Southern Shuttle Services, Inc., plaintiff, a former driver of Defendant Southern Shuttle Services, Inc.’s airport shuttle vans, filed the action under the FLSA seeking unpaid overtime pay.  Florida airport shuttle company filed a second motion for summary judgment, arguing that its airport shuttle van drivers fell under the Motor Carrier Act exemption, which applies to interstate movements of goods and persons. The district court agreed and granted Southern Shuttle summary judgment and, on appeal, the Eleventh Circuit affirmed.

In its discussion, the court stated that the purely intrastate transport of passengers to and from an airport may, under certain circumstances, constitute interstate commerce and thus bring the transportation company within the jurisdiction of the Secretary of Transportation. Such was the case here. 

Many of the company's passengers have just flown, or about to fly, to places outside of Florida and a large portion of the reservations are made by way of travel websites.  The websites are accessed throughout the country and are not specific to a single state. According to the court, this has a “practical continuity of movement” with the overall interstate journey.

• Ensuring that employers keep records that reflect the accurate status of each worker as an employee or non-employee and clarifying that employers violate the Fair Labor Standards Act when they misclassify workers.

• Increasing penalties on employers who misclassify their employees and are found to have violated employees' overtime or minimum wage rights.

• Requiring employers to notify workers of their classification as an employee or non-employee.
• Creating an "employee rights web site" to inform workers about their federal and state wage and hour rights.

• Providing protections to workers who are discriminated against because they have sought to be accurately classified.