April 16, 2013
Suprem Court Holds That Employer's Offer Moots FLSA Class Action Prior To Certification
Today's second Supreme Court decision, Genesis Healthcare v. Symczyk, dealt with pre-certfication FLSA class actions. The Court (in another 5-4 decision), held that when the employer offered a settlement that would satisfy all of the named plaintiff's claims, the class action is moot. There appeared to be factual questions about whether the settlement would've actually satisfied all the claims, but that issue was not challenged. This holding wasn't a surprise given the Court's precedent on dismissing class actions; the few exceptions to pre-certification mooting were a stretch here. That said, the dissent strongly pointed out many of the problems that this line of reasoning poses for plaintiffs. The Court's syllabus:
Respondent brought a collective action under the Fair Labor Standards Act of 1938 (FLSA) on behalf of herself and “other employees similarly situated.” 29 U. S. C. §216(b). After she ignored petitioners’ offer of judgment under Federal Rule of Civil Procedure 68, the District Court, finding that no other individuals had joined her suit and that the Rule 68 offer fully satisfied her claim, concluded that respondent’s suit was moot and dismissed it for lack of subject-matter jurisdiction. The Third Circuit reversed. It held that respondent’s individual claim was moot but that her collective action was not, explaining that allowing defendants to “pick off” named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions. The case was remanded to the District Court to allow respondent to seek “conditional certification,” which, if successful, would relate back to the date of her complaint.
Held: Because respondent had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness, her suit was appropriately dismissed for lack of subject-matter jurisdiction. Pp. 3–12.
(a) While the Courts of Appeals disagree whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot, respondent conceded the issue below and did not properly raise it here. Thus, this Court assumes, without deciding, that petitioners’ offer mooted her individual claim. Pp. 3–5.
(b) Well-settled mootness principles control the outcome of this case. After respondent’s individual claim became moot, the suit became moot because she had no personal interest in representing others in the action. To avoid that outcome, respondent relies on cases that arose in the context of Rule 23 class actions, but they are inapposite, both because Rule 23 actions are fundamentally different from FLSA collective actions and because the cases are inapplicable to the facts here. Pp. 5–11.
(1) Neither Sosna v. Iowa, 419 U. S. 393 , nor United States Parole Comm’n v. Geraghty, 445 U. S. 388 , support respondent’s position. Geraghty extended the principles of Sosna—which held that a class action is not rendered moot when the named plaintiff’s individual claim becomes moot after the class has been duly certified—to denials of class certification motions; and it provided that, where an action would have acquired independent legal status but for the district court’s erroneous denial of class certification, a corrected ruling on appeal “relates back” to the time of the erroneous denial. 445 U. S., at 404, and n. 11. However, Geraghty’s holding was explicitly limited to cases in which the named plaintiff’s claim remains live at the time the district court denies class certification. See id., at 407, n. 11. Here, respondent had not yet moved for “conditional certification” when her claim became moot, nor had the District Court anticipatorily ruled on any such request. She thus has no certification decision to which her claim could have related back. More fundamentally, essential to Sosna and Geraghty was the fact that a putative class acquires an independent legal status once it is certified under Rule 23. By contrast, under the FLSA, “conditional certification” does not produce a class with an independent legal status, or join additional parties to the action. Pp. 7–8.
(2) A line of cases holding that an “inherently transitory” class-action claim is not necessarily moot upon the termination of the named plaintiff’s claim, see, e.g., County of Riverside v. McLaughlin, 500 U. S. 44 , is similarly inapplicable. Respondent argues that a defendant’s use of Rule 68 offers to “pick off” a named plaintiff before the collective-action process is complete renders the action “inherently transitory.” But this rationale was developed to address circumstances in which the challenged conduct was effectively unreviewable because no plaintiff possessed a personal stake in the suit long enough for litigation to run its course, and it has invariably focused on the fleeting nature of the challenged conduct giving rise to the claim, not on the defendant’s litigation strategy. Unlike a claim for injunctive relief, a damages claim cannot evade review, nor can an offer of full settlement insulate such a claim from review. Putative plaintiffs may be foreclosed from vindicating their rights in respondent’s suit, but they remain free to do so in their own suits. Pp. 8–10.
(3) Finally, Deposit Guaranty Nat. Bank v. Roper, 445 U. S. 326 , does not support respondent’s claim that the purposes served by the FLSA’s collective-action provisions would be frustrated by defendants’ use of Rule 68 to “pick off” named plaintiffs before the collective-action process has run its course. In Roper, where the named plaintiffs’ individual claims became moot after the District Court denied their Rule 23 class certification motion and entered judgment in their favor based on defendant’s offer of judgment, this Court found that the named plaintiffs could appeal the denial of certification because they possessed an ongoing, personal economic stake in the substantive controversy, namely, to shift a portion of attorney’s fees and expenses to successful class litigants. Here, respondent conceded that petitioners’ offer provided complete relief, and she asserted no continuing economic interest in shifting attorney’s fees and costs. Moreover, Roper was tethered to the unique significance of Rule 23 class certification decisions. Pp. 10–11.
656 F. 3d 189, reversed.
Thomas, J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia, Kennedy, and Alito, JJ., joined. Kagan, J., filed a dissenting opinion, in which Ginsburg, Breyer, and Sotomayor, JJ., joined.
March 29, 2013
Sick Leave Updates
Earlier this month, Portland, OR became the fourth city to require employers to provide sick leave to workers. Leave is earned on an hourly basis up to five total days in a year. Employers of six or more employees must provide paid leave while smaller employers can provide the leave unpaid.
New York City is poised to become the fifth. The city council approved a bill that would require employers with 20 or more employees to offer paid sick leaves next year. The requirement would extend to employers with 15 or more the following year. All employers would have to provide at least unpaid leave. Mayor Bloomberg has pledged to veto it, stating that it will hurt job growth, but there is enough support on the city counsel to override that veto. This is a particularly important development for workers and employers, coming on the heels of the state legislature having just raised the state minimum wage to $9.
January 07, 2013
The Next Big Wal-Mart Class Action Wave?
Wage and hour litigation against Wal-Mart is not that unusual, and class actions have been not only brought but won, so maybe my title is a little misleading. Still, the group of workers bringing the class action is new-ish and the case may actually have bigger implications outside of Wal-Mart for other businesses.
Josh Eidelson at the Nation reports that earlier today District Court Judge Christina Snyder issued a "tentative ruling" that she intends to grant a request to add Walmart as a named defendant in a federal class action lawsuit over wage and hour violations, or "wage theft," and at a California distribution center and retaliation for filing a suit about those violations. Judge Snyder is hearing arguments this afternoon, but apparently signaled that unless she hears something pretty compelling, she plans to rule that Wal-Mart is an employer of these employees and can be named as a defendant.
Unlike in the original Dukes litigation, the class is relatively small, so however this case proceeds, it won't present the same kind of problems the Supreme Court identified in its decision in that case. This class is made up of workers from just three warehouses. The interesting twist here, one that could impact Wal-Mart in a way the Dukes plaintiffs were trying to and one that may have very far reaching implications, involves the way Wal-Mart structures its distribution chain. The relationships are complicated. Wal-Mart subcontracts its distribution and storage. In this area it is to Schneider Logistics. Schneider, in turn, subcontracts the work in the warehouses to various subcontractors. Last fall, the District Court for the Central District of California ruled that Schneider was an employer of these workers, and they were not employed solely by the subcontractors. Now the question is whether Wal-Mart is also an employer.
The allegations about the level of control Wal-Mart exercised over the warehouses and the work are similar to the kinds of allegations that made up the Dukes' plaintiffs argument that everything was centralized with a common de facto policy. Here, though, that argument will likely have much more effect, since the issue is the level of control exercised by Wal-Mart over the day-to-day work of these employees.
Logistics warehouse working conditions and efforts by retail giants to keep costs low by using temporary workers or subcontractors have garnered some attention in recent years. We'll have to watch as the case develops.
h/t Matt Dimick (SUNY)
November 12, 2012
Recently Published Scholarship
- Julie L. Newman, One Language, Many Realities: An Interpretation of Language, Law, and Section 215(A)(3) of the Fair Labor Standards Act, 56 St. Louis U. L. Rev. 1283 (2012).
October 23, 2012
Exploiting Au Pairs and Domestic Workers
Janie Chuang (American U.) has just posted on SSRN her article (forthcoming 36 Harv. J. L. & Gender (2013)) The U.S. Au Pair Program: Labor Exploitation and the Myth of Cultural Exchange. Here's the abstract:
The Article exposes how the legal categorization of au pairs as “cultural exchange participants” is strategically used to sustain – and disguise – a government-created domestic worker program to provide flexible, in-home childcare for upper-middle-class families at below-market prices. The “cultural exchange” subterfuge has created an underclass of migrant domestic workers conceptually and structurally removed from the application of labor standards and the scrutiny of labor institutions. On the one hand, the “cultural exchange” rubric enables the U.S. government to house the program under the Department of State rather than Labor, and to delegate oversight of this government program to private recruitment agencies that have strong financial incentives to overlook and even hide worker exploitation. On the other hand, the “cultural exchange” rhetoric used in the au pair program regulations and practice reifies harmful class, gender, racial biases and tropes that feed society’s stubborn resistance to valuing domestic work as work worthy of labor protection. Together these dynamics render au pairs vulnerable to abuse, and threaten to undermine the tremendous gains otherwise being made on behalf of domestic workers’ rights. The Article concludes with a proposal to reform the au pair program with an eye to promoting decent working conditions for all domestic workers.
October 18, 2012
Discovery of Immigration-Status Denied in FLSA Case
He just received a decision denying discovery for his plaintiff’s immigration status: Reyes v Snowcap Creamery, Inc., -- F. Supp. 2d ---, 2012 WL 4888476 (D. Colorado Oct. 15, 2012).
Scott provides some background on the case and his own particular interest in the subject matter of the case:
To try to prove undocumented immigrant status, and to fish for potentially relevant documents, the employer sought, and had been granted by the Magistrate Judge, discovery of not only plaintiff’s immigration status, but plaintiff’s immigration attorney’s files and ICE files; plaintiff actually was to sign releases allowing production of the latter two files. We appealed the Magistrate Judge’s ruling, and the District Judge reversed in full, denying any immigration status discovery with very broad language that “a plaintiff's immigration status is irrelevant in an FLSA action” and that even though there may have been some relevance to some of the discovery (e.g., immigration documents with job descriptions pertinent to whether plaintiff was FLSA-exempt), immigration discovery still should be denied “because of the in terrorem effect that discovery into such issues would have on litigants.”
This issue has been an old passion of mine ever since the Supreme Court in 2002 held in Hoffman Plastic Compounds that undocumented immigration status precludes certain post-termination pay continuation damages; at the time, my plaintiff-side employment law firm was terrified that the ruling would kill our FLSA practice, because so many wage claims are by immigrants. I had to litigate a motion on that issue almost immediately after Hoffman, and I got the first reported decision in the country holding that even if Hoffman makes immigration status relevant to post-termination pay continuation damages, immigration status remains irrelevant, and too prejudicial to be allowed in discovery, in FLSA unpaid wage cases: Liu v. Donna Karan Int'l, Inc., 207 F. Supp. 2d 191 (S.D.N.Y 2002). Liu is cited in our new decision, which is now the first decision District of Colorado holding the same – that in FLSA cases, immigration status is irrelevant and too prejudicial to be allowed in discovery.
This is a very interesting and important FLSA case and we appreciate Scott sharing his litigation experience in this case with us.
Lobel on Unemployment Insurance
Orly Lobel (San Diego) was on Huff Post Live yesterday discussing unemployment insurance. Her discussions start about 4:00, 10:00, 17:00, and 21:00 into the segment. She does a nice job of explaining how unemployment insurance works, on a segment that overall is about fraud/abuse. She also does a nice job of turning the discussion from "how dare millionaires receive UI" to a reminder that UI is an insurance system that everyone who pays into the system is entitled to benefit from.
October 15, 2012
Ruan on Wage Theft
Nantiya Ruan (Denver) has just posted on SSRN her article What's Left to Remedy Wage Theft? How Arbitration Mandates that Bar Class Actions Impact Low-Wage Workers (forthcoming Mich. St. L. Rev.). Here's the abstract:
For low-wage workers who suffer “wage theft” – employers illegally withholding portions of their wages – the dollars missing from their paychecks violate existing law and significantly impact the well-being of individuals, families, and communities. Despite this dire societal problem, the Supreme Court continues “closing the courtroom doors” in two ways: allowing employers to force workers out of court and into private arbitration; and prohibiting aggregate claims. Such trends, in combination, silence wage theft, leaving many claims unheard while unscrupulous employers gain direct advantage.
This Article explains how various procedural rulings have combined to prevent meaningful redress for wage theft. Because of high transaction costs and relatively low potential damages, low-wage workers are likely to recover their lost wages only if they band together with similarly-situated workers in an aggregate lawsuit. However, collective action is under attack: AT&T Mobility v. Concepcion, the latest Supreme Court case to approve of mandatory arbitration clauses, allowed a corporation to impose “agreements” mandating individual arbitration and barring class actions.
This Article brings new insights into the widening blind spot the Supreme Court has for the impact procedural rules have on the substantive rights of low-wage workers. Moreover, it touches upon a greater trend in American jurisprudence of courts shutting out plaintiffs, especially those unlikely to afford legal representation. By drawing attention to the unjust effects of facially neutral rules on low-wage workers, this Article contributes to the national conversation on how Supreme Court precedent limiting judicial access affects society’s most vulnerable.
Yet another reason why Concepcion was wrongly decided.
October 10, 2012
1 Million Pre-Election Pink Slips?
Stone explains that "[u]nder the Congressional budget compromise last year, if no budget deal is reached by January 2, there will be a mandatory cut in the budgets of all federal agencies, including a 10 percent cut in the Defense Department budget." Republican-leaning business groups and defense company executives are threatening to send out a million WARN Act notices 60 days before January 2 -- i.e., on November 2. This is notwithstanding a DOL letter advising companies not to issue such WARN notices. That letter states that any potential layoffs resulting from sequestration arespeculative and the particular workers who might be affected is unknown.
Stone warns that:
Obama is likely to bear the brunt of the blame if nearly one million workers receive layoff notices. If WARN notices are widely issued, it could provide Romney with concrete evidence of the precariousness of any asserted jobs recovery and the dangers of another Obama term.
Democrats need a strategy to stop this storm. They need to explain the facts to the American people and make it clear that any company that issues a WARNing is engaged in unwarranted scare-mongering and political manipulation.
October 02, 2012
Gov. Brown Vetoes Cal. Domestic Workers Bill of Rights
California Governor Jerry Brown vetoed AB 889, the California Domestic Workers Bill of Rights. See here and here. Bad news for some of California's most vulnerable workers, and a setback for the domestic workers rights movement. Governor Brown's veto message expressed concern that 24-hour care would become too costly and would result in fewer jobs especially since some workers would be paid by the state.
September 27, 2012
British Minimum Wage Increases Today
Effective today, the British minimum wage increases to the equivalent of $10.04/hour. Meanwhile, the U.S. is still stuck at $7.25, where it has been since 2009.
September 17, 2012
Support for the CA Domestic Workers Bill of Rights
Noah Zatz (UCLA) writes to tell us of a petition being circulated by academics in California in support of the Domestic Workers Bill of Rights there. Here is the note about the letter being circulated with links to it and to the letter of support from non-academics.
Thank you for agreeing to be one of the sixty-one original signatories to the Letter from Academics to Governor Brown in Support of The Domestic Workers Bill of Rights. Y/our names all appear following the text of the letter, which has now gone live online so that we may invite more colleagues to sign on as well. This is a much appreciated contribution to the campaign and if it is all you can do at this time, thank you! If you do a little more...
The California Domestic Workers Coalition will be delivering our letter to Governor Brown's office next Monday, so if you are willing to forward the link to other interested colleagues, please do so as soon as you are able and they will be added to the letter the Governor receives.
And, finally, if you have time to go to the site yourself and click "sign this petition" online, it will help us track the running tally. This also may in turn make it even easier for you to forward the letter to other colleagues via email, Facebook and Twitter.
Should you know others hoping to sign a petition on this matter, who are not scholars with related interests, please refer them instead to the general petition in support of AB889 atwww.domesticworkers.org.
In Gratitude for your Solidarity,
Kathleen Coll, Stanford & Eileen Boris, UC Santa Barbara
August 24, 2012
Olympics Fosters Flexible Work Schedules
From PJH Law:
An interesting legacy of the Olympic Games may involve London working practices. Many employers, during the period of the Games, embraced flexible working practices to allow employees to watch the Games and to avoid problems travelling to and from work. London law firms were amongst these. Such practices proved to be so successful that the Law Society are now encouraging law firms to adopt flexible working practices beyond the Games and have produced a protocol to assist firms. This includes practical advice, checklists and case studies demonstrating the business benefits and may be of interest to any employers (not just law firms) thinking of adopting such practices. This may not have been a legacy originally envisaged by Team Coe/Beckham etc but will be of significant impact nonetheless.
August 23, 2012
California Domestic Worker Bill of Rights
As you might recall from our post at the time, the California General Assembly passed the California Domestic Workers Bill of rights, AB889. The bill is now before the California Senate, and the California Domestic Workers Coalition is urging people to take action in support if the bill. As part of that, Amy Poehler has made this PSA.
I love Ms. Poehler, not just because I think she's funny, but also because she's one of the creators of Smart Girls at the Party: Change the World by Being Yourself, a website and YouTube channel that provides a positive multidimensional message for and about girls.
We'll keep you posted on any news related to AB889.
August 22, 2012
Maslanka's SCOTUS Predictions
Mike Maslanka (of Work Matters fame) has published in Texas Lawyer his predictions for how the two employment cases on the Supreme Court docket will come out, as well as his thoughts on what issues the Court should take up in its next term. See Hot Employment Law Issues at the High Court. This is worth a read.
August 03, 2012
Litigation Over Unpaid Internships Under the FLSA Heats Up
Thanks to friend of the blog, David Yamada (Suffolk) for brining to our attention been the emerging litigation over unpaid internships during the past year. Apparently, such litigation is starting to heat up.
For a bit more background on what's been going on with this issue, here's a blog post David wrote back in May on the New Workplace blog (which you should check out generally).
July 17, 2012
Runge on Redefining Leave From Work
Robin Runge (North Dakota School of Law) just had an article published in the Georgetown Journal on Poverty Law and Policy.
Here's the cite: Redefining Leave From Work, 19 GEO. J. ON POVERTY L. & POL’Y 445 (2012) (Westlaw Subscription required).
From the Introduction:
The concept of leave from work in the United States has been determined by a collection of social and cultural factors. Workplaces are manifestations of social and cultural beliefs about how work is done, what exceptions or modifications to those norms are acceptable, and how family life is to be conducted. Similarly, the justifiable reasons for taking leave and the qualifications necessary to access leave from work reinforce societal values regarding work and family.
The current leave-from-work laws and policies do not incorporate the work-life and non-work-life experiences of low-wage workers. As a result, the majority of low-wage workers do not have meaningful access to leave from work, and when they do, the leave is underutilized. In this way, the work and family lives of low income workers generally, and low-wage working women in particular, are devalued by effectively denying their existence in the workplace.
Although there has been extensive analysis of how to remedy work-family conflict and workplace discrimination against women as caregivers, there has been limited examination of the work-life experiences of low-wage workers outside their identity as caregivers. Framing low-income working women's issues as “work-family conflict” may not be appropriate or accurate to describe their experiences. Moreover, the focus on leave from work as a primary method for addressing gender equity without discussing employees' control over their work and family lives has ignored the work experience of many low-wage working women, thus rendering the efficacy of this tool less successful in achieving its goal of gender equity.
This Article contributes to this scholarship by incorporating an analysis of low-wage workers' experience with current leave from work laws and policies. This analysis demonstrates that current leave laws and policies have contributed to social and cultural norms about leave that result in inaccessibility and underutilization of leave from work by low-wage workers. Reasons for this underutilization include the lack of control low-wage workers have over their work and family lives, a lack of financial support or incentive to take leave from work, and the mismatch of the permissible reasons for taking leave from work with the lives of low-wage workers. By integrating the work and family life experiences of low-wage workers into leave from work laws and policies, they may become a more effective tool for addressing gender and class inequity in the workplace.
This is a very timely and important article at the intersection of employment, gender, and poverty law. Check it out!
June 27, 2012
Pandya on Wage Theft and Taxes
Sachin Pandya has posted on SSRN his article, "Tax Liability for Wage Theft," which is appearing in the Columbia Journal of Tax Law. The abstract:
This paper shows how, under existing tax law, illegal wage underpayment by an employer (sometimes called “wage theft”) may generate employer tax liability for unreported income or disallowed business expense deductions. Given that the tax authority needs information from the underpaid worker to prove such liability, the paper identifies two ways that a worker can transmit that information to a tax authority: becoming a tax informant, or bringing a qui tam action under a state false claims act. Finally, the paper discusses possible influences on the decision of the unpaid worker to inform on the employer to the tax authority, and considers the conditions under which a tax authority is likely to audit an employer based on such information. In so doing, the paper identifies a new approach to combating wage theft and an undiscovered implication of basic income tax law.
An interesting take on the wage theft problem--and I'm always a fan of anything involving qui tam actions--so check it out.
June 19, 2012
SCOTUS: Pharmaceutical Reps Exempt from FLSA
The Supreme Court issued its opinion in Christopher v. SmithKline Beecham yesterday, holding that pharmaceutical representatives are exempt from the Fair Labor Standards Act's overtime provisions as outside salespeople. Justice Alito wrote the opinion of the majority (Roberts, Kennedy, Scalia, and Thomas joined). Here is the syllabus (warning, it's long):
The Fair Labor Standards Act (FLSA) requires employers to pay employees overtime wages, see 29 U. S. C. §207(a), but this requirement does not apply with respect to workers employed “in the capacity of outside salesman,” §213(a)(1). Congress did not elaborate on the meaning of “outside salesman,” but it delegated authority to the Department of Labor (DOL) to issue regulations to define the term. Three of the DOL’s regulations are relevant to this case. First, 29 CFR §541.500 defines “outside salesman” to mean “any employee . . . [w]hose primary duty is . . . making sales within the meaning of [29 U. S. C. §203(k)].” §§541.500(a)(1)–(2). Section 203(k), in turn, states that “ ‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” Second, §541.501 clarifies that “[s]ales within the meaning of [§203(k)] include the transfer of title to tangible property.” §541.501(b). Third, §541.503 provides that promotion work that is “performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work,” whereas promotion work that is “incidental to sales made, or to be made, by someone else is not.” §541.503(a). The DOL provided additional guidance in connection with its promulgation of these regulations, stressing that an employee is an “outside salesman” when the employee “in some sense, has made sales.” 69 Fed. Reg. 22162.
The prescription drug industry is subject to extensive federal regulation, including the requirement that prescription drugs be dispensed only upon a physician’s prescription. In light of this requirement, pharmaceutical companies have long focused their direct marketing efforts on physicians. Pharmaceutical companies promote their products to physicians through a process called “detailing,” whereby employees known as “detailers” or “pharmaceutical sales representatives” try to persuade physicians to write prescriptions for the products in appropriate cases.
Petitioners were employed by respondent as pharmaceutical sales representatives for roughly four years, and during that time their primary objective was to obtain a nonbinding commitment from physicians to prescribe respondent’s products in appropriate cases. Each week, petitioners spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other miscellaneous tasks. Petitioners were not required to punch a clock or report their hours, and they were subject to only minimal supervision. Petitioners were well compensated for their efforts, and their gross pay included both a base salary and incentive pay. The amount of incentive pay was determined based on the performance of petitioners’ assigned portfolio of drugs in their assigned sales territories. It is undisputed that petitioners were not paid time-and-a-half wages when they worked more than 40 hours per week.
Petitioners filed suit, alleging that respondent violated the FLSA by failing to compensate them for overtime. Respondent moved for summary judgment, arguing that petitioners were “employed in the capacity of outside salesman,” §213(a)(1), and therefore were exempt from the FLSA’s overtime compensation requirement. The District Court agreed and granted summary judgment to respondent. Petitioners filed a motion to alter or amend the judgment, contending that the District Court had erred in failing to accord controlling deference to the DOL’s interpretation of the pertinent regulations, which the DOL had announced in an amicus brief filed in a similar action. The District Court rejected this argument and denied the motion The Ninth Circuit, agreeing that the DOL’s interpretation was not entitled to controlling deference, affirmed.
Held: Petitioners qualify as outside salesmen under the most reasonable interpretation of the DOL’s regulations. Pp. 8–25.
(a) The DOL filed amicus briefs in the Second Circuit and the Ninth Circuit in which it took the view that “a ‘sale’ for the purposes of the outside sales exemption requires a consummated transaction directly involving the employee for whom the exemption is sought.” Brief for Secretary of Labor as Amicus Curiae in In re Novartis Wage and Hour Litigation, No. 09–0437 (CA2), p. 11. The DOL changed course after the Court granted certiorari in this case, however, and now maintains that “[a]n employee does not make a ‘sale’ . . . unless he actually transfers title to the property at issue.” Brief for United States as Amicus Curiae 12–13. The DOL’s current interpretation of its regulations is not entitled to deference under Auer v. Robbins, 519 U. S. 452. Although Auer ordinarily calls for deference to an agency’s interpretation of its own ambiguous regulation, even when that interpretation is advanced in a legal brief, see, id., at 461–462, this general rule does not apply in all cases. Deference is inappropriate, for example, when the agency’s interpretation is “ ‘plainly erroneous or inconsistent with the regulation,’ ” id., at 461, or when there is reason to suspect that the interpretation “does not reflect the agency’s fair and considered judgment on the matter,” id., at 462. There are strong reasons for withholding Auer deference in this case. Petitioners invoke the DOL’s interpretation to impose potentially massive liability on respondent for conduct that occurred well before the interpretation was announced. To defer to the DOL’s interpretation would result in precisely the kind of “unfair surprise” against which this Court has long warned. See, e.g., Long Island Care at Home, Ltd. v. Coke, 551 U. S. 158, 170–171. Until 2009, the pharmaceutical industry had little reason to suspect that its longstanding practice of treating detailers as exempt outside salesmen transgressed the FLSA. The statute and regulations do not provide clear notice. Even more important, despite the industry’s decades-long practice, the DOL never initiated any enforcement actions with respect to detailers or otherwise suggested that it thought the industry was acting unlawfully. The only plausible explanation for the DOL’s inaction is acquiescence. Whatever the general merits of Auer deference, it is unwarranted here. The DOL’s interpretation should instead be given a measure of deference proportional to its power to persuade. See United States v. Mead Corp., 533 U. S. 218, 228. Pp. 8–14.
(b) The DOL’s current interpretation—that a sale demands a transfer of title—is quite unpersuasive. It plainly lacks the hallmarks of thorough consideration. Because the DOL first announced its view that pharmaceutical sales representatives are not outside salesmen in a series of amicus briefs, there was no opportunity for public comment, and the interpretation that initially emerged from the DOL’s internal decisionmaking process proved to be untenable. The interpretation is also flatly inconsistent with the FLSA. The statute defines “sale” to mean, inter alia, a “consignment for sale,” and a “consignment for sale” does not involve the transfer of title. The DOL relies heavily on 29 CFR §541.501, which provides that “[s]ales . . . include the transfer of title to tangible property,” §541.501(b), but it is apparent that this regulation does not mean that a sale must include a transfer of title, only that transactions involving a transfer of title are included within the term “sale.” The DOL’s “explanation that obtaining a non-binding commitment to prescribe a drug constitutes promotion, and not sales,” Reply Brief for Petitioners 17, is alsounconvincing. Since promotion work that is performed incidental to an employee’s own sales is exempt, the DOL’s conclusion that detailers perform only nonexempt promotion work is only as strong as the reasoning underlying its conclusion that those employees do not make sales. Pp. 14–16.
(c) Because the DOL’s interpretation is neither entitled to Auer deference nor persuasive in its own right, traditional tools of interpretation must be employed to determine whether petitioners are exempt outside salesmen. Pp. 16–24.
(1) The FLSA does not furnish a clear answer to this question, but it provides at least one interpretive clue by exempting anyone “employed . . . in the capacity of [an] outside salesman.” 29 U. S. C. §213(a)(1). The statute’s emphasis on “capacity” counsels in favor of a functional, rather than a formal, inquiry, one that views an employee’s responsibilities in the context of the particular industry in which the employee works. The DOL’s regulations provide additional guidance. Section 541.500 defines an outside salesman as an employee whose primary duty is “making sales” and adopts the statutory definition of “sale.” This statutory definition contains at least three important textual clues. First, the definition is introduced with the verb “includes,” which indicates that the examples enumerated in the text are illustrative, not exhaustive. See Burgess v. United States, 553 U. S. 124, 131, n. 3. Second, the list of transactions included in the statutory definition is modified by “any,” which, in the context of §203(k), is best read to mean “ ‘one or some indiscriminately of whatever kind,’ ” United States v. Gonzales, 520 U. S. 1, 5. Third, the definition includes the broad catchall phrase “other disposition.” Under the rule of ejusdem generis, the catchall phrase is most reasonably interpreted as including those arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity. Nothing in the remaining regulations requires a narrower construction. Pp. 16–20.
(2) Given this interpretation of “other disposition,” it follows that petitioners made sales under the FLSA and thus are exempt outside salesmen within the meaning of the DOL’s regulations. Petitioners obtain nonbinding commitments from physicians to prescribe respondent’s drugs. This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies operate, comfortably falls within the catchall category of “other disposition.” That petitioners bear all of the external indicia of salesmen provides further support for this conclusion. And this holding also comports with the apparent purpose of the FLSA’s exemption. The exemption is premised on the belief that exempt employees normally earn salaries well above the minimum wage and perform a kind of work that is difficult to standardize to a particular time frame and that cannot easily be spread to other workers. Petitioners—each of whom earned an average of more than $70,000 per year and spent 10 to 20 hours outside normal business hours each week performing work related to his assigned portfolio of drugs in his assigned sales territory—are hardly the kind of employees that the FLSA was intended to protect. Pp. 20–22.
(3) Petitioners’ remaining arguments are also unavailing. Pp. 22–24.
Justice Breyer dissented (joined by Justices Ginsburg, Sotomayor, and Kagan). He agreed that the Solicitor General's recent change in position was not entitled to any particular difference, but he would have analyzed the relevant regulations differently. The operative language in his reading required that the employee’s “primary duty” be “making sales within the meaning of section 3(k) of the Act.” That section of the Act provides that “‘Sale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 29 U. S. C. §203(k). Because the reps don't get any kind of contract or commitment from doctors to prescribe the drugs, Justice Breyer would have found them not to be outside salespeople. There's a bit more there, too, but I'll let you read it.
In my opinion, the dissent has the stronger reasoning and more classical plain meaning analysis. And I'm a little troubled that inaction alone could estop an agency from enforcing its statute or regulations when agencies have to make choices about where to spend limited resources--and especially where those agencies might depend on private complaints to initiate enforcement. At the same time, I'm sympathetic to the notice issues if this really is a change in interpretation, i.e. there had been an official statement that this was outside selling, and now the agency changed its mind. But that doesn't seem the case.
May 03, 2012
Wal-Mart Settles with DOL in FLSA Investigation to the tune of $4.8 Million
It's my favorite foil for employment classes for a reason. According to the DOL, Wal-Mart has agreed to pay more than $ 4.8 million in back wages and damages to 4500 workers improperly classified as exempt from the FLSA's overtime provisions. The superstore will also pay about $450,000 in civil fines. From the press release,
The violations affected current and former vision center managers and asset protection coordinators at Wal-Mart Discount Stores, Wal-Mart Supercenters, Neighborhood Markets and Sam's Club warehouses. Wal-Mart failed to compensate these employees with overtime pay, considering them to be exempt from the FLSA's overtime requirements. The Labor Department's investigation found that the employees are nonexempt and consequently due overtime pay for any hours worked beyond 40 in a week.
"Misclassification of employees as exempt from FLSA coverage is a costly problem with adverse consequences for employees and corporations," said Secretary of Labor Hilda L. Solis. "Let this be a signal to other companies that when violations are found, the Labor Department will take appropriate action to ensure that workers receive the wages they have earned."
Under the terms of the settlement, Wal-Mart has agreed to pay all back wages the department determined are owed for the violations in addition to paying liquidated damages to the employees and a penalty to the department. The civil money penalties assessed stem from the repeat nature of the violations. Wal-Mart, which operates more than 3,900 establishments in the United States, corrected its classification practices for these workers in 2007, and negotiation over the back pay issues has been ongoing since that time. A third-party administrator will disburse the payments to the affected employees.
"Our department has been working with Wal-Mart for a long time to reach this agreement," said Nancy J. Leppink, deputy administrator of the Wage and Hour Division. "I am very pleased that staff in our Southwest region persevered, ensured these employees will be paid the back wages they are owed and brought this case to conclusion. Thanks to this resolution, thousands of employees will see money put back into their pockets that should have been there all along. The damages and penalties assessed in this case should put other employers on notice that they cannot avoid their obligations to their employees by inappropriately classifying their workers as exempt."
This settlement comes at the same time that Wal-Mart's bribery scandal in Mexico appears to have cost the company more than $10 billion in stock value. At least one pension fund has urged a vote against the current directors. Maybe this is part of an effort to clean up more generally?