Tag Archives: FLSA Requirements

Arbitration Clauses, Class Action Litigation

Class Action Waiver and Arbitration Clauses in Limbo

Mandatory arbitration clauses and class action waivers have not yet ripened into the panacea that employers had hoped.  While they can sometimes eliminate or reduce the expense and exposure of legal claims and even eliminate class actions, they also can spawn their own litigation as to enforceability, as three recent decisions illustrate.

First, federal Judge Joseph F. Leeson Jr. in Allentown, Pa., last week issued a stay of a Fair Labor Standards Act lawsuit for overtime pay against U-Haul International and its subsidiaries, pending the outcome of three cases on arbitrability and class action waivers now pending before the U.S. Supreme Court.  That will delay the U-Haul case for months, as the Supreme Court won’t hear oral argument on its cases until October 2, with decisions to follow later this year or next.

Second, a state court in New Jersey rejected a mandatory arbitration clause that was sent to employees electronically, requiring them to click on a box acknowledging that they had read and understood the policy.  Held the court in Dugan v. Best Buy Co. Inc., “Plaintiff’s mouse-click on the acknowledgment box did not manifest his assent to the policy, only that he read and understood the policy.”  Instead, the mouse-click should have said something like, “I agree.”

And third, the U.S. Court of Appeals for the Third Circuit (over federal courts in Pennsylvania, New Jersey, Delaware and the U.S. Virgin Islands) ruled last month that under New Jersey law, in order for an arbitration clause to be enforceable as to statutory claims (such as employment discrimination or wage payment violations), the clause must (1) make clear that the employee is agreeing to arbitrate statutory claims, (2) make reference to the types of claims being waived, such as “workplace discrimination claims,” and (3) explain the difference between arbitration and litigation, including the waiver of the right to a jury trial.  Because the clause in Moon v. Breathless Inc. did not meet all three of these standards, the appellate court ruled it unenforceable.  And so the parties, after a year of litigation over arbitrability, can advance to litigation on the merits.  Fun.

So a word to the wise – check your arbitration clauses closely to be sure they are enforceable under both state and federal law.  Legal review is definitely recommended.  And watch for the Supreme Court’s decision soon on its arbitration trio – NLRB v. Murphy Oil USA, Epic Systems v. Lewis, and Ernst & Young v. Morris.  That could be a game changer.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Fair Labor Standards Act (FSLA), FLSA Requirements

Paralegal Payback.

Most lawyers, especially those who deal with the Fair Labor Standards Act (FLSA), know that paralegals are generally considered non-exempt employees, entitled to overtime pay. One would think that Pasricha & Patel, a law firm in Edison, N.J., that occasionally handles plaintiffs’ FLSA claims, would know that, too.

But maybe not.

Jason Barros, a former paralegal at the firm, has filed a collective action lawsuit alleging he and four other firm paralegals have been paid a flat salary and denied premium pay for hundreds of hours of overtime over the past three years. Barros claims the violations are willful, as the law firm should know better.

The case serves as a reminder to everyone in the legal field – be sure your paralegals are paid by the hour and paid overtime, or be prepared to justify their treatment as exempt professionals through some unusual facts, such as having a principal duty of managing other employees or a requirement that the paralegal have an advanced degree (such as an engineering degree) to perform specialized paralegal work.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Collective Action Claims, Fair Labor Standards Act (FSLA), FLSA Requirements

Human resources managers claim overtime.

In a decision that may surprise readers of this Update (many of whom are human resources professionals), a court this month granted conditional certification of a collective action seeking overtime pay for human resources managers of Lowe’s Home Centers, Inc.

In Lytle v. Lowe’s Home Centers, Inc. , a federal judge in Tampa ruled in favor of human resources manager Lizeth Lytle, basically telling her, “you can do it, we can help,” with regard to her collective action claims under the Fair Labor Standards Act.  Lytle asserts that she and nearly 1,750 salaried human resources managers nationwide should be paid overtime, as they are required to work more than 40 hours every week.  Lytle claims that unlike most human resources professionals, the human resources managers at Lowe’s do not exercise discretion or independent judgment with respect to significant matters, and do not have the authority to make any decisions (such as hiring or firing).  To support her claims, Lytle submitted declarations by nearly 60 current and former HR managers at Lowe’s.

In granting conditional collective action certification, the court noted that a “fairly lenient standard” applies at this first step.  With conditional certification granted, all potential members of the class will get written notice to “opt in,” and discovery will ensue.  Lowe’s can then file a motion for decertification, which applies a much stricter standard.  That being said, a major battle is now lost for Lowe’s, it will be required to expend thousands of hours and dollars in discovery, defending these claims.

The lesson for other employers is basic:  do not presume that just because an employee has a “manager” title or is paid a salary, that he or she is exempt from overtime.  Analyze the position under the FLSA requirements, including those as to independent judgment, discretion and primary duties, and seek legal advice if the case is close.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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