Overtime Update: Supreme Court Decisions Play Pivotal Role
We are pleased to announce the launch of Overtime Update, a new feature article for Employment and the Law. Each day, we receive new questions from clients regarding the Fair Labor Standards Act ("FLSA"). Whether you are trying to determine the exempt status of an employee, applying the fluctuating workweek method, or weeding through the various state laws, we know that wage and hour issues can be vexing for employers. Even though the FLSA is one of the oldest U.S. employment laws, wage and hour issues remain a "hot topic" that can create hundreds of millions of dollars in liability for employers each year. So, we hope that the Overtime Update provides you with a helpful way to keep up with the constant stream of wage and hour news. To start us off, here is a list of issues you should pay close attention to this year:
Controversy Over Whether Workers Can Agree to Arbitrate Overtime Claims
In three recent decisions in Florida, New York and New Jersey, federal courts have dismissed proposed overtime lawsuits by enforcing "anti- class action" provisions in employment agreements. These provisions typically require employees to submit their employment disputes, including wage and hour claims, to binding arbitration. Many employers prefer the arbitration process as a cheaper and less time consuming alternative to litigation.
The U.S. Supreme Court’s decision last year in AT&T Mobility v. Concepcion spurred the recent trend toward enforcement of arbitration provisions in employment contracts. In that case, the Court held that the Federal Arbitration Act ("FAA") preempts state law regarding the enforceability of arbitration provisions. The FAA, which applies to the vast majority of arbitration provisions, creates a strong presumption in favor of arbitration.
Experts widely viewed the broad language in Concepcion as a turning point in a push-pull battle over conflicting decisions regarding the enforceability of arbitration provisions. However, on January 3, 2012, the National Labor Relations Board ("NLRB" or "Board") issued a ruling that appears to create a loophole in Concepcion. As you may know, the Board is charged with enforcing the National Labor Relations Act ("NLRA"), which protects employees when they engage in certain kinds of concerted activity regarding their working conditions. So, in the case of D.R. Horton, Inc., the Board found that under the NLRA, arbitration agreements must provide some way for employees to join together and bring a lawsuit to protest their working conditions. With this decision, the NLRB has cast serious doubt about the validity of anti-class action arbitration provisions contained in many types of employment agreements. Because of the apparent tension that D.R. Horton, Inc. creates with Concepcion, we expect that the Supreme Court will address this issue again in the near future. For more detail on the holding in D.R. Horton, Inc., see our article entitled " NLRB Decision Finds Arbitration Agreement Prohibiting Class or Collective Action Unlawful."
Wal-Mart v. Dukes is Having a Big Impact on Overtime Claims
The Supreme Court case of Wal-Mart v. Dukes created a lot of buzz last year. The decision rejected the largest proposed class action lawsuit in history. The nation-wide class of plaintiffs in Dukes had accused Wal-Mart of systemic gender discrimination against female workers. Yet, because it was undisputed that Wal-Mart made management decisions involving the plaintiffs on a local level, the Court rejected the proposed class action for failing to demonstrate a common legal claim.
Courts have recently applied Dukes to reject class action lawsuits for overtime. In October 2011, the Supreme Court vacated a $7.7 million dollar wage and hour verdict against a Chinese-language newspaper in California based on the decision. Other courts in California and Illinois have issued similar rulings. The Dukes decision is good news for employers on a number of fronts. Stay tuned to see whether this decision continues to knock out proposed class action lawsuits in 2012.
New Overtime Regulations Proposed for Home Care Workers
The Obama Administration recently proposed changes to regulations associated with the FLSA that would affect nearly two million in-home domestic care workers. The goal, according to the Administration, is to amend the so-called "companionship exemption" to the FLSA as it applies to in-home workers who provide domestic services to the elderly and the infirm. Under the companionship exemption, in-home workers may be exempt from minimum wage and overtime rules if they provide services for the care, fellowship, and protection of persons who, because of advanced age or physical or mental infirmity, cannot care for themselves. The Administration’s push for new regulations was motivated by disagreement with a 2007 Supreme Court decision which found that a staffing agency properly applied the companionship exemption to a domestic worker in New York. The Department of Labor is expected to issue draft regulations based on the Administration’s proposal in the coming months.
Supreme Court Set to Address Exempt Status of Pharmaceutical Sales Representatives
The Supreme Court is set to consider whether pharmaceutical sales representatives can be properly classified as exempt employees under the FLSA. The Court’s decision to grant certiorari in the closely-watched case of Christopher v. Smithkline Beecham Corp. was likely influenced by conflicting rulings from the appellate courts on the status of pharmaceutical representatives. Indeed, courts have struggled to classify pharmaceutical representatives for years, partly because these employees perform many of the duties of the "outside sales representative" exemption, but are legally prohibited from closing sales. Thus, some courts have concluded that pharmaceutical sales representatives are not actually "selling" anything at all. The Court’s decision in Smithkline Beecham has the potential to affect the overtime classification for thousands of sales representatives in the pharmaceutical industry.
As you can see, the Supreme Court is playing a pivotal role in several important wage and hour issues. We expect this trend to continue as the Court issues new decisions in cases like Smithkline Beecham. At the same time, recent decisions such as Concepcion and Dukes will continue to be applied and interpreted by the lower courts. The Troutman Sanders LLP Labor and Employment Practice Group will keep you updated on any recent developments in this field.