In addressing a matter of first impression, the Second Circuit Court of Appeals set out a new standard to determine when an unpaid intern is deemed an employee for purposes of the Fair Labor Standards Act (“FLSA”) and thus entitled to compensation, including minimum wage and overtime, under the FLSA. Two appeals were argued in tandem on this issue with the Second Circuit issuing an Opinion on July 2, 2015 in Glatt v. Fox Searchlight Pictures, Inc., and a Summary Order in Wang v. Hearst Corp.
In a long awaited 9-0 decision, the U.S. Supreme Court held that employers are not required to compensate employees for time spent waiting for and undergoing security screenings (aka bag checks) under the Fair Labor Standards Act. It concluded that security screenings were noncompensable postliminary activities because they were not the “principal activities” the employees were employed to perform, nor were they “integral and indispensable” to those activities. The case is Integrity Staffing Solutions, Inc. v. Busk, 574 U.S. ____ (2014) and a copy of the opinion can be found here.
Recently, there’s been a wave of Fair Labor Standards Act (“FLSA”) rulings adverse to employers in the adult entertainment industry. Early this year, a Southern District of New York judge approved an $8 million settlement for a class of dancers at an adult establishment who alleged that they were misclassified as independent contractors. See In re: Penthouse Executive Club Compensation Litigation, Case No. 1:10-cv-01145, 2014 U.S. Dist. LEXIS 5864 (S.D.N.Y. Jan. 14, 2014). And just last month, the court in Hart, et al. v. Rick’s Cabaret Int’l, Inc., Case No. 1:09-cv-03043, 2014 U.S. Dist. LEXIS 160264 (S.D.N.Y. Nov. 14, 2014) which previously had held that dancers at the New York club were employees under the FLSA, denied a motion to decertify the class and awarded almost $11 million in damages to the dancers for FLSA violations.
“Sometimes surrender is the best option.” That is how Judge Raymond J. Dearie of the Eastern District of New York begins his opinion in Anjum v. J.C. Penney Co., Inc., before denying J.C. Penney’s motion to dismiss a putative Fair Labor Standards Act (FLSA) collective action based on the company’s offer to pay the claims of four named plaintiffs with offers of judgment under Federal Rule of Civil Procedure 68—a strategy often referred to as “picking off.” Even though the court rejected J.C. Penney’s picking off attempt in this case, the judge’s opinion in Anjum recognizes the validity of this tactic and provides some practical lessons for defense counsel looking to successfully pick off an FLSA collective in the Second Circuit.
A district court in New York dismissed the putative collective action filed by a contract attorney who performed document review for Skadden, Arps, Slate, Meagher and Flom LLP (“Skadden”) for fifteen months. See Lola v. Skadden, Arps, Slate, Meagher & Flom LLP. Under the Fair Labor Standards Act (“FLSA”), an employee is exempt from overtime as a professional employee if he or she is “the holder of a valid license . . . permitting the practice of law” and “who is actually engaged in the practice thereof.” 29 C.F.R. § 541.3. The named plaintiff and proposed class representative, David Lola, was a licensed attorney, and, therefore, the dispositive question was whether he was practicing law such that he qualified for the exemption.
In an unwelcome, mid-summer surprise for the business community, President Obama signed the Fair Pay and Safe Workplaces Executive Order on Thursday July 31, 2014 requiring federal contractors to report violations of federal and state labor and employment laws and prohibiting certain contractors from requiring that employees arbitrate disputes alleging violations of Title VII or claims for sexual assault or harassment. The Executive Order also requires federal contractors to provide relevant information about hours worked and overtime on employee paychecks.
Following principles that federal courts have applied in similar cases under the Fair Labor Standards Act, a California appellate court recently confirmed that employers are not liable under the California Labor Code for off-the-clock work that occurs without the employer’s actual or constructive knowledge. In Jong v. Kaiser Found. Health Plan, Inc., the California Court of Appeal for the First District affirmed the trial court’s grant of summary judgment for the employer, holding that the employee failed to set forth sufficient evidence to demonstrate that the employer actually or constructively knew that the employee worked unrecorded overtime. READ MORE
Spring training is just around the corner and major leaguers have already reported to their first workout. Meanwhile, an interesting development–three former minor leaguers have filed a lawsuit against Major League Baseball, Bud Selig, and three MLB teams, claiming that the MLB has failed to pay overtime and minimum wages in violation of the FLSA and various state labor laws. According to the plaintiffs, the MLB “has a long, infamous history of labor exploitation dating to its inception” by hoarding players, depressing salaries, and preventing unionization of the minor leagues. See Complaint, Senne v. MLB, No. 3:14-cv-00608-JCS (N.D. Cal. Feb. 7, 2014), ECF No. 1. The case is presently before Magistrate Judge Joseph C. Spero. READ MORE
Late last month, in the Southern District of Florida, adult entertainers at several Rick’s Cabaret locations filed a lawsuit alleging that they were improperly categorized (and thus improperly compensated) as independent contractors rather than employees. See Espinoza, et al. v. Rick’s Cabaret Int’l, Inc., Case No. 1:13-cv-24565-UU. In light of recent decisions, Rick’s—like other employers classifying workers as independent contractors—should proceed with caution.
The past several months have seen a spate of rulings adverse to employers in the adult entertainment context. Early last year, a Southern District of New York judge approved an $8 million settlement for a class of dancers at another adult establishment who alleged that they were misclassified as independent contractors. See In re: Penthouse Executive Club Compensation Litigation, Case No. 1:10-cv-01145. In September 2013, in a different S.D.N.Y. case, the court in Hart, et al. v. Rick’s Cabaret Int’l, Inc. found that dancers at the New York club location were employees, not independent contractors, for purposes of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law. And just last week a Northern District of Georgia judge who previously certified a class of adult entertainers who alleged they were wrongly classified as independent contractors granted the entertainers’ summary judgment motion with respect to their status as employees under the FLSA. See Stevenson, et al. v. The Great American Dream, Inc., No. 1:12-CV-3359-TWT.
In finding no independent contractor relationship in Hart, the court cited the existence of club guidelines that governed dancers’ dress/appearance (e.g., body glitter forbidden, 4-inch stiletto heels required), behavior in the club (e.g., gum chewing or using a cell phone on the dance floor prohibited), when dancers could be scheduled to work, various fees dancers were required to pay, and manner of performance (e.g., prohibition on more than one knee touching the ground when performing on stage). Of virtually no significance was the fact that there were signed agreements between dancers and Rick’s Cabaret expressing that the employment relationship was that of an independent contractor.
Irrespective of industry, companies that utilize independent contractors are well advised to periodically reexamine the economic realities of those relationships.
On July 17, 2013, the California Supreme Court denied review of the Second Appellate District’s decision in Gonzalez v. Downtown LA Motors, 2013 Cal. App. LEXIS 257 (Cal. App. 2d Dist. Mar. 6, 2013), which addressed minimum-wage requirements for piece-rate workers. The Court of Appeal held that the employer had to pay a separate hourly rate of at least minimum wage during work time when piece-rate employees are engaged in compensable activity that does not directly produce piece-rates. READ MORE