Supreme Court Adopts Strict Construction of Salaried Test, Even for Highly Paid Exempt Employees

By Greg Mersol on February 22, 2023 Posted in Supreme Court

One relatively common misapprehension by employers is that generous wages or popular methods of payment will satisfy the Fair Labor Standards Act (FLSA). On February 22, 2023, the Supreme Court reiterated the need not simply for “fair” employment policies or high wages but for adherence to the specific tests for exempt employees.

In Helix Energy Solutions Group, Inc. v. Hewitt, Case No. 21-984 (U.S. Sup. Ct. Feb. 22, 2023), the plaintiff was a supervisor working on an oil rig for the defendant. It was undisputed that he performed executive exempt duties as a supervisor and made over $200,000 per year. The issue was the manner in which he was paid. For the so-called white-collar exemptions under the FLSA, the regulations require that the employee be paid “at least $455 per week … on a salary or fee basis.” 29 C.F.R. section 602 (emphasis added). Rather than a weekly salary, the employee was paid a per diem (daily) rate of at least $963. Because the employee typically worked 84 hours per week while on shift, that would have amounted to 44 hours per week of overtime.

The district court granted summary judgment to the employer, but the Fifth Circuit, sitting en banc, reversed, finding that the method of payment did not satisfy the salary test and that the employee therefore was not exempt and should have received overtime.

The Supreme Court, in an opinion written by Justice Elena Kagan (joined by, among others, Justice Clarence Thomas and Justice Amy Coney Barrett), affirmed. The majority found that by regulation the salary test was an essential requirement to meet the exemption. By using a daily rate rather than a weekly salary, the employer had not met that requirement. Based on what it saw as a clear directive in the text of the regulation, the Court rejected arguments asserted by the defendant based on policy, cost, or windfall concerns. Thus, it found that, despite the high wage rate, the employee was not exempt and should have been paid overtime.

Interestingly, the dissent, authored by Justice Brett Kavanaugh, raised the mathematical fact that an employee receiving a daily rate of at least $963 would automatically have received more than the FLSA’s weekly salary requirement of $455. Thus, he asserted, the weekly salary requirement was met.

Hewitt was not a class or collective action, but it is likely to spur the filing of more collective action suits asserting technical FLSA violations for highly compensated employees paid under creative payment arrangements. While it involved the executive exemption, its holding would also apply when the employer is relying on the administrative or professional exemptions. It is a warning to employers to follow the FLSA’s often archaic requirements even when the employee is very highly compensated and the parties have agreed to other kinds of arrangements.

The bottom line: Structure matters under the FLSA, and those seeking to take advantage of the executive, salaried or professional exemptions should make sure that their arrangements satisfy the salaried employee requirements even if they don’t always make sense.

Illinois Supreme Court: Sections 15(b) and 15(d) BIPA Claims Accrue with Each Scan or Transmission

By Joel Griswold, Bonnie Keane DelGobbo and Amy L. Lenz on February 17, 2023 Posted in BIPA

Today the Illinois Supreme Court issued a decision in Cothron v. White Castle System, Inc. 2023 IL 128004, in which the court held that the statute of limitations accrues with each scan or transmission of biometric identifiers or biometric information for claims arising under Sections 15(b) and 15(d) of the Illinois Biometric Information Privacy Act, 740 ILCS 14/1, et seq. (BIPA). Section 15(b) pertains to notice and written consent before collecting, capturing, purchasing, receiving through trade, or otherwise obtaining biometric data. Section 15(d) pertains to the disclosure, redisclosure, or dissemination of biometric data without consent.

Read the original post here.

Illinois Supreme Court: 5-Year Statute of Limitations for BIPA Claims

By Joel Griswold, Bonnie Keane DelGobbo and Amy L. Lenz on February 2, 2023 Posted in Information Privacy

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Earlier today, the Illinois Supreme Court issued a decision in Tims v. Black Horse Carriers, Inc., 2023 IL 127801, in which the court held that a five-year statute of limitations applies to all claims arising under the Illinois Biometric Information Privacy Act, 740 ILCS 14/1, et seq. (BIPA). There are five primary sections under BIPA. Section 15(a) pertains to the establishment and maintenance of and adherence to a retention schedule and guidelines for destroying collected biometric information. Section 15(b) pertains to notice and written consent before collecting or storing biometric information. Section 15(c) pertains to selling or otherwise profiting from collected biometric information. Section 15(d) pertains to the disclosure or dissemination of biometric information without consent. Section 15(e) pertains to the proper storage and transmittal of collected biometric information.

Read full Data Counsel blog post here.

A Recent DoorDash Opinion Addresses Several Pivotal Arbitration Issues

By John Lewis on January 23, 2023 Posted in Arbitration

Two DoorDash delivery drivers filed a class action against the company and two of its employees alleging violations of federal and state wage and hour laws. After removal of the case to the Southern District of New York, the defendants filed motions to compel arbitration, to strike the complainants’ class action allegations and to stay the case pending resolution of the individual claims.

Judge Valerie E. Caproni of the Southern District of New York, a 2013 President Obama nominee, analyzed a number of the critical issues presented in the case before granting the defendants’ motion. Mullo v. DoorDash, Inc. No. 22-cv-2430 (S.D.N.Y. Jan. 17, 2023).

Illinois District Court Refuses to Certify Class Based on Anti-harassment Policy

By Greg Mersol on January 4, 2023 Posted in Anti-harassment

Most employers today have anti-harassment policies covering race, gender and other types of discrimination to help comply with state and federal antidiscrimination legislation and to take advantage of the affirmative defense described in Faragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998). But what happens when employees are dissatisfied with the results of the investigations undertaken pursuant to those policies? That was the question answered by the court in Brown v. The Board of Trustees of the University of Illinois, Case No. 2:19-cv-02020 (C.D. Ill., Dec. 9, 2022).

In Brown, the three plaintiffs were Black employees who worked at the University of Illinois’ Urbana-Champaign campus. They brought a class action against the school under Title VII based on the inadequacy of its investigations of complaints of race discrimination. They argued that the school’s Office of Access and Equity, which investigated claimed violations of its antidiscrimination policies, required too high of a standard of proof and too often found that discrimination had not occurred. They moved the court to certify a class largely composed of nonsupervisory Black employees at the campus.

Much of the court’s opinion was bound up in attempting to determine the theory under which they could proceed and whether commonality could be established based on that theory. The court found that such claims would ordinarily be “highly individualized” because the results of an investigation, and whether those results were appropriate, would necessarily turn on the individual facts. It concluded that such a claim could only be brought on a class basis if the plaintiffs could establish that the university had either “systemic Title VII violations or enforced an illegal policy.”

While the court stated that such claims were often asserted in the hiring context, it expressed skepticism as to whether they could be asserted on a class basis based on the employer’s alleged failure to investigate discrimination claims thoroughly enough. The problem, the court found, is that the sufficiency of the process “has no bearing on whether anyone suffered a Title VII violation.” (Emphasis in original.) While the structure of Title VII encourages employers to develop complaint procedures, it does not mandate them or regulate standards for their sufficiency. Rather, if the employer asserts a Faragher/Ellerth affirmative defense, the plaintiffs could, after establishing that a violation had occurred, assert that the defense was not satisfied. Further, the school had numerous avenues by which aggrieved employees could complain about alleged discriminatory treatment, bypassing the procedure the plaintiffs claimed to be inadequate.

Finding that the claims could meet neither the requirements of commonality nor typicality, the court denied class certification.

The Bottom Line: Employers should have robust procedures to investigate and address complaints of discrimination but claimed weaknesses of those procedures alone does not create a class action claim.

Second Circuit Again Considers if Bakery Goods Drivers Are Excluded Under the FAA Because They Are “Transportation Workers”. The Saga Continues . . .

By John Lewis on October 6, 2022 Posted in Arbitration

While the Supreme Court’s opinion in Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), brought needed clarity to the analysis of the class of workers excluded as “transportation workers” by the residual clause of the Federal Arbitration Act (FAA), many questions remain. We blogged about the Saxon decision on June 8, 2022.

Third Circuit Reverses Certification of ADA Accommodations Class Based on Retail Store Access

By Greg Mersol on July 12, 2022 Posted in Class Action

Class action disability discrimination cases can be particularly difficult. While there is little question of whether a particular individual is in a protected group in a typical case involving race, gender or age, the question of whether an individual is disabled can be more complex. Further, questions may arise regarding the extent of a disability, whether it requires accommodation, the appropriate type of accommodation and how the claimed conduct relates to the disability.

Dead End for Class Certification? Ninth Circuit Provides Roadmap for Defending Independent Contractor Misclassification Class Claims

By Todd Lebowitz and Matthew Goodman on July 8, 2022 Posted in Class Action, Class Certification

For businesses using independent contractor vendors, misclassification claims are usually well-suited for class certification. A plaintiff’s path toward certifying a class can be relatively smooth when all vendors of a particular kind are treated as contractors. The argument goes that if one is misclassified, all are misclassified.

But a new Ninth Circuit ruling may help businesses change the path toward class certification into a dead-end road.

Smoother Sailing Ahead for PAGA Arbitrability Under Viking River Cruises Decision

By Matthew Kane, Sylvia Kim and Amy E. Beverlin on June 15, 2022 Posted in Arbitration, Arbitration Agreements

On June 15, the U.S. Supreme Court finally brought closure to the long-running, unsettled issue of whether California’s prohibition against arbitration agreement waivers of the right to bring representative actions under the California Labor Code Private Attorneys General Act (PAGA) is preempted by the Federal Arbitration Act (FAA). California’s appellate courts and the Ninth Circuit Court of Appeals have long held that such waivers are unenforceable under California state law (the Iskanian Rule). In Viking River Cruises, Inc. v. Moriana (U.S.S.C. Case No. 20-1573) (Viking River Cruises), the Supreme Court held that while the FAA does not preempt the Iskanian Rule’s prohibition on wholesale waivers of PAGA claims, the FAA does preempt the Iskanian Rule insofar as that rule precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.

Supreme Court Resolves Whether an Airline Ramp Supervisor Falls Within the Transportation Worker Exemption of the FAA

By John Lewis on June 8, 2022 Posted in Arbitration

For years courts have been struggling to determine the proper application of the Section 1 exemption of the Federal Arbitration Act (FAA). See 9 U.S.C. § 1. Now the U.S. Supreme Court has brought some clarity to the analysis. In Southwest Airlines Co. v. Saxon, Case No. 21-309 (June 6, 2022), the court unanimously concluded that Latrice Saxon, an airline ramp supervisor, was part of the “class of workers engaged in foreign or interstate commerce” and consequently was exempted from the FAA’s coverage. Saxon alleged that she regularly had to handle baggage, airmail and commercial cargo that had moved throughout the country, although Southwest disputed this on the ground that Saxon was merely a supervisor in charge of managing the people who actually handle baggage. See 993 F.3d 492, 494 (7th Cir. 2021).