841374.1

Frequently Encountered Wage and Hour Issues Arising Under the Fair Labor Standards Act

ABA Section of Labor & Employment Law 3rd Annual CLE Conference

Washington, D.C.

November 6, 2009

Hope J. Singer, moderator Bush, Gottlieb, Singer, López, Kohanski, Adelstein & Dickinson

hsinger@bushgottlieb.com

Jason C. Marsili Posner & Rosen LLP

jmarsili@posner-rosen.com

Charles A. Powell IV Baker Donelson Bearman

cpowell@bakerdonelson.com

Jahan C. Sagafi Lieff, Cabraser, Heimann & Bernstein

jsagafi@lchb.com

Table Of Contents Page

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I. The Fair Labor Standards Act – Overview ............................................................ 1

A. Covered Employers .................................................................................... 1 B. Employee ................................................................................................... 2 C. Minimum Wage ......................................................................................... 3 D. Overtime Requirements ............................................................................. 3

II. White Collar Exemptions ....................................................................................... 4

A. Executives .................................................................................................. 4 B. Administrative............................................................................................ 5 C. Professionals .............................................................................................. 5

III. Record Keeping Requirements .............................................................................. 6

A. Mandatory Data ......................................................................................... 6 B. Recording Issues ........................................................................................ 8

IV. Enforcement ........................................................................................................... 8

A. Department of Labor .................................................................................. 9 B. Civil Litigation ......................................................................................... 10

V. Collective Actions ................................................................................................ 10

A. Background .............................................................................................. 10 B. Collective Action Certification Is A Two-Stage Process ........................ 12 C. The Standard For First-Stage Certification .............................................. 13 D. Notice ....................................................................................................... 15 E. Equitable Tolling ..................................................................................... 16

VI. The Fluctuating Workweek Damages Method .................................................... 17

VII. Determining Hours Worked Under The Fair Labor Standards Act ..................... 19

A. Waiting Time ........................................................................................... 20 1. On Duty ........................................................................................ 20 2. Off Duty ....................................................................................... 21

B. On-Call Time ........................................................................................... 21 C. Rest Periods ............................................................................................. 21 D. Meal Periods ............................................................................................ 22 E. Sleeping Time and Certain Other Activities ............................................ 22 F. Preparatory And Concluding Activities ................................................... 23 G. Travel Time .............................................................................................. 24

1. Preliminary and Postliminary Travel ........................................... 24 2. Emergency Or Call-Back Situations ............................................ 25

H. Recording Working Time ........................................................................ 25 1. “Rounding Off” Practices ............................................................ 25 2. The De Minimis Rule................................................................... 26

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Frequently Encountered Wage and Hour Issues Arising Under the Fair Labor Standards Act

With the rising tide of wage and hour suits, every labor and employment attorney needs

to be aware of the scope of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., its

minimum wage and overtime provisions, exemptions and defenses, and the common issues

which arise under the statute and its implementing Regulations. This panel is designed to

provide an overview of the FLSA’s key provisions. This paper provides a basic outline of the

FLSA, and it should be read in conjunction with the other papers presented at this conference.

I. The Fair Labor Standards Act – Overview1

The FLSA2 requires an employer to pay its employees minimum wage and overtime for

all hours worked in excess of forty in a week unless the employee is exempt. Because these are

defined terms, any analysis of the FLSA starts with an understanding of the applicable

definitions.

A. Covered Employers

Generally, all employers in the United States are covered by the FLSA. Specifically, the

FLSA applies to any entity with over $500,000 in annual revenue, or any other entity during

weeks in which it is engaged in:

• Interstate Commerce;

• Production of Goods or Services for Interstate Commerce; or

1 The first four sections of this paper were adapted from The Elephant in the Room: Understanding the FLSA in the Construction Industry prepared by Steven Griffith, Jr. and Cameron S. Hill for a Lorman Education Services program on September 18, 2008. Mr. Griffith is an attorney in the New Orleans, Louisiana office of Baker Donelson. Mr. Hill is an attorney in Baker Donelson’s Chattanooga, Tennessee office. 2 29 U.S.C. §§ 201-19.

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• Any Activity Closely Related to the Production of Goods or Services for Interstate Commerce.3

The effect of this broad definition is that most employers are considered to be covered by the

obligations of the FLSA, regardless of the size of a particular job. In addition, because the

statute defines employer to mean “any person acting directly or indirectly in the interest of an

employer in relation to an employee,”4 individual managers may be liable for unpaid minimum

wages and overtime. Donovan v. Agnew, 712 F.2d 1509, 1511 (1st Cir. 1983); Dole v. Elliott

Travel & Tours, Inc., 942 F.2d 962, 965 – 66 (6th Cir. 1991).

B. Employee

An “employee” is “any individual employed by an employer.”5 To employ means “to

suffer or permit to work.”6 The Regulations make it clear that “[w]ork not requested but suffered

or permitted is work time.”7 Put another way, if a company knows or has reason to know that an

employee is performing services for its benefit, the time spent by that employee likely will

constitute compensable work time. However, independent contractors are not covered under the

statute. Whether an individual is an employee or independent contractor is determined by

applying an economic realities test.

3 29 U.S.C. § 203(s). 4 29 U.S.C. § 203(d). 5 29 U.S.C. § 203(e)(1). 6 29 U.S.C. § 203(g). 7 29 C.F.R. §785.11.

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C. Minimum Wage

Under the FLSA, every employer must pay a minimum wage to its employees for every

hour worked.8 The current federal minimum wage is $7.25 per hour.9 Many states have

established their own minimum wage rates which often are higher that the federal rate.

This is the hourly rate to which an employee is entitled (at a minimum) regardless of

whether the employer elects to pay on a daily, weekly, or monthly basis. Further, “the ‘workday’

is generally defined as ‘the period between the commencement and completion on the same

workday of an employee’s principal activity or activities.’”10 This is what is commonly called

the “continuous workday rule.”11

D. Overtime Requirements

All non-exempt workers are required to be paid “time and a half” the regular rate for

every hour worked over forty in a week.12 The “regular rate” of the employee is calculated based

upon all remuneration for hours worked during the week, except for gifts, vacation, discretionary

bonuses, or similar payments.13 Similarly, amounts that an employer contributes to a third

person for the benefit of an employee (such as payment of a health or workers’ compensation

insurance premium) shall not be considered as part of the regular pay.14

8 29 U.S.C. § 206(a). 9 29 U.S.C. § 206(a)(1)(C). 10 IBP, Inc. v. Alvarez, 546 U.S. 21, 29 (2005) (quoting 29 C.F.R. § 790.6(b)). 11 Id. 12 29 U.S.C. §§ 207(a)(1) & 215(a)(2). 13 29 U.S.C. § 207(e). 14 29 U.S.C. § 207(e).

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II. White Collar Exemptions

Effective August 23, 2004, the Department of Labor amended its Regulations defining

the white collar exemptions. Although there are a host of other exemptions applicable to the

FLSA, the most common exemptions at issue in investigations and litigation involve the white

collar exemptions. The exemptions are important because the FLSA’s rules for minimum wage

and overtime do not apply to “any employee employed in a bona fide executive, administrative,

or professional capacity.”15 Each of these exemptions is dependent on an analysis of that

employee’s actual role in the organization, not the title assigned to an employee,16 and they are

not designed to apply to a person that performs manual labor of any kind.17 The employer bears

the burden of proof on the exempt status of an employee.

A. Executives

• Bona fide executives are employees that meet the following criteria:

• Compensated on a salary basis of $455 per week;

• Primary duty is management of the employer or a recognized department;

• Customarily and regularly directs the work of two or more full-time employees or their equivalent; and

• Possesses the authority to hire or fire employees (or have meaningful input into the decision to do so).18

The executive exemption also includes an owner of over 20% of the business enterprise.19

15 29 U.S.C. § 213(a)(1). 16 29 C.F.R. § 541.2. 17 29 C.F.R. § 541.3. This regulation specifically notes that “carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the Fair Labor Standards Act, and are not exempt under the regulations in this part no matter how highly paid they might be.” Id. 18 29 C.F.R. § 541.100.

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B. Administrative

The administrative exemption applies to employees that meet the following criteria:

• Compensated on a salary basis of $455 per week;

• Primary duty is the performance of office or non-manual work directly related to management or general business operations; and

• Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.20

This exemption typically applies to employees working in personnel management, human

resources, employee benefits, labor relations, database administration, or similar activities.21 Or,

stated another way, managers within a business (including project managers) will often meet this

standard.22

C. Professionals

To qualify for the professional exemption, employees must meet the following criteria:

• Compensated on a salary basis of $455 per week;

• Primary duty is the performance of work that:

• Requires knowledge of an advanced type in a field of science or specialized instruction; or

• Requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.23

The application of this exemption is a bit limited because the primary duty test requires

proof that (1) the employee performs work requiring advanced knowledge; (2) the advanced

knowledge must be in a field of science or learning; and (3) the knowledge must be acquired by a

_________________________ 19 29 C.F.R. § 541.101. 20 29 C.F.R. § 541.200. 21 29 C.F.R. § 541.201. 22 29 C.F.R. § 541.203. 23 29 C.F.R. § 541.300.

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prolonged course of specialized intellectual instruction.24 But, it can apply to actuarial

computation, engineering, architecture or similar areas, assuming that formal educational

training (as opposed to on-the-job training) was received.25

III. Record Keeping Requirements

The FLSA imposes an affirmative obligation on employers to maintain certain types of

records which must include the “wages, hours, and other conditions and practices of

employment . . . .”26 The recordkeeping Regulations are set forth in 29 C.F.R. § 51627 and

require every employer to maintain the specified documents for all employees, exempt and non-

exempt.28

A. Mandatory Data

There are certain records all employers are required to keep for all hourly employees.

1. Full name as used for social security purposes and any other number or

symbol used to identify that employee “on any time, work, or payroll records,” 29 C.F.R.

§ 516(a)(1);

2. Home address and zip code, 29 C.F.R. § 516(a)(2);

3. Date of birth, but only if under 19, 29 C.F.R. § 516(a)(3);

4. Gender and occupation, 29 C.F.R. § 516(a)(4);

5. An indicator of the day of the week and time of day at which the

workweek begins, 29 C.F.R. § 516(a)(5);

24 29 C.F.R. § 541.301(a). 25 29 C.F.R. § 541.301(c). 26 29 U.S.C. § 211(c). 27 The applicable Regulations are available on the Department of Labor’s website at ww.dol.gov. 28 Brock v. Circle “A” Construction, Inc., 680 F. Supp 1460 (D. Idaho 1987) (exemptions from overtime do not also include exemption from recordkeeping obligations).

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6. The regular hourly rate of pay for that workweek, 29 C.F.R. § 516(a)(6);29

7. Hours worked each day and for the workweek, 29 C.F.R. § 516(a)(7);30

8. Straight time earnings, either by the day or week, 29 C.F.R. § 516(a)(8);

9. Overtime earnings, 29 C.F.R. § 516(a)(9);

10. Total additions to or deductions from wages paid each pay period,

including in individual employee records, the dates, amounts, and nature of these items,

29 C.F.R. § 516(a)(10);

11. Total wages paid each pay period, 29 C.F.R. § 516(a)(11); and

12. Pay period and date of payment, 29 C.F.R. § 516(a)(12).

For individuals who qualify under one of the white collar exemptions, the hourly rate

information is inapplicable. As such, the Regulations only require the employer to maintain the

data referenced in paragraphs 1 – 5 above. Please note, however, that the absence of hours

worked data on salaried employees will be a significant issue in the event of a misclassification

case. See Morgan et al. v. Family Dollar Stores, Inc., 2008 U.S. App. Lexis 25187 at *115 (11th

Cir. 2008). The Regulations include record keeping requirements related to the various other

exemptions available under the Act.31

In addition to delineating the types of records required to be maintained, the Regulations

instruct employers to maintain those records for certain periods of time.32 Payroll records, for

example, must be maintained for 3 years. Also, these records may need to be maintained for

much longer periods of time if an employer has knowledge of actual or threatened legal action

29 The regular rate is defined in 29 C.F.R. §§ 778.108 and 109. 30 For a discussion of the “workweek,” see 29 C.F.R. §§ 778.103 - 105. 31 See 29 C.F.R. §§ 516.11 through 516.34. 32 29 C.F.R. §§ 516.5 and 516.6.

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involving these types of records. All such records must either be maintained at the place of

employment or at a central location utilized by the employer for that purpose.33

B. Recording Issues

The duty to record hours worked is straight forward. Time suffered or permitted to work

is compensable time. The Regulations, however, recognize two situations regarding rounding

off and de minimis time. Pursuant to 29 C.F.R. § 785.48(b), an employer may elect to round start

and stop times (exs., to the nearest hour). To be permissible, the rounding practice must adjust

time both up and down so the system does not favor the employer over the employee. For

example, an employer who elects to round work time to the nearest 5 minutes, may round down

time from zero to 5 minutes so long as they round up to 10 for work between 6 and 9 minutes.

“In recording working time under the Act, insubstantial or insignificant time beyond the

scheduled working hours, which cannot as a practical administrative matter be precisely recorded

for payroll purposes, may be disregarded.”34 This is commonly known as the de minimis rule.

Because employees are entitled to be compensated for all legitimate work time, reliance on this

rule is fraught with risk. The prudent practice is to ensure that all proper work time is recorded

and to train supervisors and hourly employees so each knows what is expected of them by the

company.

IV. Enforcement

The FLSA is enforced through two primary means: the United States Department of

Labor and civil litigation.

33 29 C.F.R. §§ 516.7. 34 29 C.F.R. §§ 785.47.

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A. Department of Labor

The United States Department of Labor is established with a broad purpose: “The

purpose of the Department of Labor shall be to foster, promote, and develop the welfare of the

wage earners of the United States, to improve their working conditions, and to advance their

opportunities for profitable employment.”35 The DOL has within it a separate Wage and Hour

Division dedicated to enforcement of the statutes at issue in this article.36 The FLSA specifically

grants the DOL the authority to file suit against employers that fail to comply with its

requirements.37

The DOL has the authority to impose monetary penalties upon willful violators of the

FLSA – such penalties may be up to $1,100 per violation.38 Willful, in this context, means that

the employer knew that its conduct was prohibited by the FLSA or showed reckless disregard for

the requirements of the FLSA.39 In assessing the penalty, the DOL will consider all relevant

circumstances, including the employer’s actions after the violation was identified, previous

history of violations, commitment to future compliance, the number of employees affected, and

other relevant information.40 For the most egregious of situations, the FLSA also provides for

criminal penalties to include up to a $10,000 fine and six months imprisonment.41

35 29 U.S.C. § 551. 36 29 U.S.C. § 557. 37 29 U.S.C. § 216(c). 38 29 C.F.R. § 578.3(a). 39 29 C.F.R. § 578.3(c). 40 29 C.F.R. § 578.4(b). 41 29 U.S.C. § 216(a).

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B. Civil Litigation

Under the FLSA, the failure of an employer to make payments owed under the Act

exposes the employer to liability for the unpaid amounts, as well as a penalty equal to the amount

not paid, plus attorneys’ fees and costs, including injunctive relief.42 These suits may be brought

by the workers deprived of the amounts otherwise owed, and they can be brought in a

representative capacity on behalf of similarly-situated workers.43 Such suits are typically brought

in federal court, and they are subject to special standing orders by some courts.44

V. Collective Actions

A. Background

In addition to bringing individual suits, aggrieved employees may bring a collective

action “on behalf of themselves and other employees similarly situated” who file written

consents to join the action.45 In other words, in contrast to cases under Title VII and other causes

of action that can be certified as opt-out classes under Federal Rule of Civil Procedure 23, cases

42 29 U.S.C. § 216(b). 43 The defense of a collection action lawsuit – as the term is utilized in the context of the FLSA – is a topic well-beyond the “nuts and bolts” approach of this article. However, for purposes of basic understanding, the collective action lawsuit functions much in the same way that a class action would operate. 44 In an apparent effort to encourage resolution of the suits, some United States District Courts, such as the Middle District of Florida, use a standing order for the management and disposal of these types of cases. 45 Valladon v. City of Oakland, No. C-06-07478 SI, 2009 U.S. Dist. LEXIS 74439, at *22, 2009 WL 2591346, at *7 (N.D. Cal. Aug. 21, 2009) (citing 29 U.S.C. § 216(b)). Section 216(b) states, in part: “An action to recover the liability [for unpaid overtime wages and liquidated damages] may be maintained against any employer . . . in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employees shall be [part of] any such action unless he gives his consent in writing . . . and such consent is filed in the court in which such action is brought.”

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under the FLSA are certified as opt-in classes. The statute of limitations runs on each

employee’s claims until her consent form is filed.46

In Hoffmann-La Roche, Inc. v. Sperling, a case brought under the Age Discrimination in

Employment Act, which has a comparable opt-in procedure, the Supreme Court endorsed the

collective action procedural device as a means of enabling the “efficient resolution in one

proceeding of common issues of law and fact.”47 Collective actions thus provide employees an

opportunity to “lower individual costs to vindicate rights by pooling resources.”48 Courts have

noted that the alternative would be a “multiplicity of duplicative suits,” which risks burdening

courts unnecessarily and risking inconsistent judgments.49

The United States Supreme Court has expressly held that district courts have the

authority to help manage the process of joining additional parties in FLSA collective actions by

facilitating the sending of notice to potential collective action members early in the proceedings

informing them about the pendency of the action and their right to participate.50 After granting

conditional certification of the case as a collective action, the court supervises efficient issuance

of an accurate, neutral notice.51

46 Gerlach v. Wells Fargo & Co., No. C 05-0585 CW, 2006 U.S. Dist. LEXIS 24823, at *15, 2006 WL 824652, at *5 (N.D. Cal. March 28, 2006). 47 493 U.S. 165, 170 (1989). 48 Id. 49 Lynch v. United Services Auto. Ass’n., 491 F. Supp. 2d 357, 367 (S.D.N.Y. 2007). 50 Hoffmann-La Roche, Inc., 493 U.S. at 165, 170-71; Adams v. Inter-Con Sec. Sys., 242 F.R.D. 530, 539 (N.D. Cal. 2007); Braunstein v. E. Photographic Labs., Inc., 600 F.2d 335, 336 (2d Cir. 1978); Lynch, 491 F. Supp. 2d at 367; Hoffmann, v. Sbarro, Inc., 982 F. Supp. 249, 260 (S.D.N.Y. 1997). 51 Hoffmann-La Roche, Inc., 493 U.S. at 170-71; Labrie v. UPS Supply Chain Solutions, Inc., No. C-08-3182 PJH, 2009 U.S. Dist. LEXIS 25210, at *21-22, 2009 WL 723599, at *7-8 (N.D. Cal. Mar. 18, 2009); Braunstein v. E. Photographic Labs., Inc., 600 F.2d 335, 336 (2d Cir. 1978).

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B. Collective Action Certification Is A Two-Stage Process

Collective action certification under the FLSA is a two-step process.52 At the initial

“notice stage,” the court determines, on the basis of pleadings and affidavits and perhaps

documentary evidence, whether to conditionally certify the class.53 “The standard for

certification at this stage is a lenient one that typically results in certification.”54

If a court finds that this standard is met, it conditionally certifies the case as a collective

action and orders dissemination of notice to the class members, allowing them an opportunity to

affirmatively opt in by filing “consent to join” or “consent to sue” forms.55 The case proceeds as

a representative action throughout the course of discovery.56

52 Wynn v. National Broadcasting Company, Inc., 234 F. Supp. 2d 1067, 1082 (C.D. Cal. 2002); Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1102-03 (10th Cir. 2001). 53 Lynch, 491 F. Supp. 2d at 368; Torres v. Gristede’s Operating Corp., No. 04 Civ. 3316, 2006 WL 2819730, at *7 (S.D.N.Y. Sept. 28, 2006); Chowdhury v. Duane Reade, Inc., No. 06 Civ. 2295, 2007 WL 2873929, at *2 (S.D.N.Y. Oct. 2, 2007); Gjurovich v. Emmanuel’s Marketplace, Inc., 282 F. Supp. 2d 104 (S.D.N.Y. 2003); Young v. Cooper Cameron Corp., 229 F.R.D. 50, 54 (S.D.N.Y. 2005). 54 Gerlach, 2006 WL 824652, at *2 (granting conditional certification) (citing Wynn, 234 F. Supp. 2d at 1082); Romero v. Producers Dairy Foods, Inc., 235 F.R.D. 474, 482 (E.D. Cal. 2006) (“The decision is made under a ‘fairly lenient standard’ and the usual result is conditional class certification.”) (citing Leuthold v. Destination Am., Inc., 224 F.R.D. 462, 467 (N.D. Cal. 2004)); Church v. Consolidated Freightways, Inc., 137 F.R.D. 294, 298 (N.D. Cal. 1991). 55 Wynn, 234 F. Supp. 2d at 1082; Garner v. G. D. Searle Pharmaceuticals & Co., 802 F. Supp. 418, 423 n.4 (M.D. Ala. 1991); Cuzco v. Orion Builders, Inc., 477 F. Supp. 2d 628, 635 (S.D.N.Y. 2007); Sipas v. Sammy’s Fishbox, Inc., No. 05 Civ. 10319, 2006 WL 1084556, at *1 (S.D.N.Y. April 24, 2006) 56 As with class certification under Rule 23, conditional certification does not require any adjudication of the merits of plaintiffs’ claims. Thiessen, 267 F.3d at 1106-07; Garner, 802 F. Supp. at 422-23.

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At the conclusion of discovery, defendants often bring a motion for decertification of the

class, at which point the district court must make a second stage determination, concerning

whether all opt-in plaintiffs’ claims should be tried in a single proceeding.57

C. The Standard For First-Stage Certification

“[T]he standard for certification at the notice stage is a lenient one.”58 This standard

“typically results in certification.”59 To win conditional certification, plaintiffs must establish the

existence of other employees who were “similarly situated” to them.60

The “similarly situated” requirement “is considerably less stringent than the requirement

of Fed. R. Civ. Proc. 23(b)(3) that common questions predominate.”61 As with Rule 23

57 Thiessen, 267 F.3d at 1102-03; Brown v. Money Tree Mortg., Inc., 222 F.R.D. 676, 679 (D. Kan. 2004) 58 Gerlach, 2006 WL 824652, at *2 (citing Wynn, 234 F. Supp. 2d at 1082); Lynch, 491 F. Supp. 2d at 368 (describing the initial burden as “very low” and “minimal”); Damassia v. Duane Reade, Inc., No. 04 Civ. 8819, 2006 WL 2853971, at *3 (S.D.N.Y. Oct. 5, 2006); Beauperthuy v. 24 Hour Fitness USA, Inc., No. 06-0715 SC, 2007 U.S. Dist. LEXIS 21315, at *20, 2007 WL 707475, at *5 (N.D. Cal. March 6, 2007) (“Given that a motion for conditional certification usually comes before much, if any, discovery, and is made in anticipation of a later more searching review, a movant bears a very light burden in substantiating its allegations at this stage.”); Gerlach, 2006 WL 824652, at *2 (requiring “little more than substantial allegations, supported by declarations or discovery”); Romero v. Producers Dairy Foods, Inc., 235 F.R.D. 474, 482 (E.D. Cal. 2006) (requiring only “detailed allegations supported by affidavits which ‘successfully engage defendants’ affidavits to the contrary’”) (quoting Grayson v. K Mart Corp., 79 F.3d 1086, 1096 (11th Cir. 1996)); Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1260 n.39 (11th Cir. 2008) (same quote); Morton v. Valley Farm Transport, Inc., No. C 06-2933 SI, 2007 WL 1113999, at *2 (N.D. Cal. April 13, 2007) (same quote); Barron v. Henry County Sch. Sys., 242 F. Supp. 2d 1096, 1105 (M.D. Ala. 2003). 59 Gerlach, 2006 WL 824652, at *2. 60 Realite v. Ark Rests. Corp., 7 F. Supp. 2d 303, 306 (S.D.N.Y. 1998). Gil v. Solectron Corp., No. C-07-06414, 2009 U.S. DIST. LEXIS 3413, at *6, 2009 WL 88346, at *2 (N.D. Cal. Jan. 9, 2009). 61 Church v. Consol. Freightways, Inc., 137 F.R.D. 294, 305 (N.D. Cal. 1991); Hoffmann v. Sbarro, 982 F. Supp. 249, 261, 263 (S.D.N.Y. 1997).

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certification decisions, the court must focus on the existence or lack of similarity, rather than

evaluating the merits.62

It is important to note that “plaintiffs need show only that their positions are similar, not

identical, to the positions held by the putative class members.”63 There is dispute as to whether

across-the-board classification of employees as exempt is sufficient, on its own, to support

conditional certification,64 or not.65

62 Vaicaitiene v. Partners In Care, Inc., No. 04 Civ. 9125, 2005 WL 1593053, at *3 (S.D.N.Y. July 6, 2005). 63 Morton v. Valley Farm Transport, Inc., No. C 06-2933 SI, 2007 WL 1113999, at *2 (N.D. Cal. April 13, 2007) (quoting Grayson v. K Mart Corp., 79 F.3d 1086, 1096 (11th Cir. 1996)); Scott v. Aetna Servs., Inc., 210 F.R.D. 261 (D. Conn. 2002); Mowdy v. Beneto Bulk Transp., No. 06-05682 MHP, 2008 U.S. Dist. LEXIS 26233, at *7, 2008 WL 901546, at *2 (N.D. Cal. March 31, 2008); Church v. Consol. Freightways, Inc., 137 F.R.D. 294, 298 (N.D. Cal. 1991); Edwards v. City of Long Beach, 467 F. Supp. 2d 986, 990 (C.D. Cal. 2006) (quoting Freeman v. Wal-Mart Stores, Inc., 256 F. Supp. 2d 941, 945 (W.D. Ark. 2003)); Herring v. Hewitt Associates, Inc., No. 06-267, 2007 U.S. Dist. LEXIS 53278, 2007 WL 2121693, at *1, *6 (D.N.J. July 24, 2007); Champneys v. Ferguson Enters. Inc., No. IP 02-535-C, 2003 U.S. Dist. LEXIS 4589, at *13-14, 2003 WL 1562219, at *5-6 (S.D. Ind. March 11, 2003); Camp v. Progressive Corp., No. Civ.A. 01-2680, 2002 WL 31496661, at *4-5 (E.D. La. Nov. 8, 2002); Realite v. Ark Rests. Corp., 7 F. Supp. 2d 303 (S.D.N.Y. 1998); Gerlach, 2006 WL 824652; Wong v. HSBC Mortg. Corp. (USA), No. C-07-2446 MMC, 2008 WL 753889, at *1 (N. D. Cal. March 19, 2008); Masson v. Ecolab, Inc., No. 04-CIV-4488, 2005 WL 2000133 (S.D.N.Y. Aug. 17, 2005); Carter v. Indianapolis Power & Light Co., No. 1:02-CV-01812, 2003 WL 23142183 (S.D. Ind. Dec. 23, 2003). 64 Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1263 (11th Cir. 2008); Delgado v. Ortho-McNeil, Inc., No. 07 Civ. 263, 2007 WL 2847238, at *2 (C.D. Cal. Aug. 7, 2007) (labeling as “disingenuous” defendants’ request that the court review all class members individually while treating class members as one “homogenous group for purposes of the FLSA [classification]”); Nerland v. Caribou Coffee Co., 564 F. Supp. 2d 1010, 1024 (D. Minn. 2007); Wang v. Chinese Daily News, Inc., 231 F.R.D. 602, 613 (C.D. Cal. 2005); Tierno v. Rite Aid Corp., No. 05-CV-02520 TEH, 2006 WL 2535056, at *8 (N.D. Cal. Aug. 31, 2006); Krzesniak v. Cendant Corp., No. 05-CV-05156 MEJ, 2007 WL 1795703, at *17 (N.D. Cal. June 20, 2007); Scott, 210 F.R.D. at 264-65; Pendlebury v. Starbucks Coffee Co., 518 F. Supp. 2d 1345, 1352 (S.D. Fla. 2007); Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 159 (S.D.N.Y. 2008). 65 Recently, in the Rule 23 context, the Ninth Circuit held that across-the-board classification alone is insufficient to support Rule 23 class certification. In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953 (2009); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935 (2009). It remains to be seen whether the same concept can be applied where the more lenient FLSA standard applies.

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D. Notice

Notice under FLSA certification, as with notice under Rule 23 certification, must be clear

and neutral, and disseminated in a manner reasonably calculated to reach the class members.66

Mail is a common mode of dissemination, though posting of notice at work sites67 and provision

of class members’ e-mail addresses to plaintiffs’ counsel68 are also ordered when appropriate.

Class member contact information is generally provided directly to plaintiffs’ counsel, counsel

are allowed to contact the class members, and class members are usually directed to submit the

consent to join forms to counsel for filing with the court.69 The court generally sets a period of

time during which class members may opt into the action, after which they may no longer opt in.

That period is generally in the range of 60-100 days, to allow for remailing of notices that

bounce back, discussions between class members and counsel, and deliberation by class

members.70

66 Lynch, 491 F. Supp. 2d at 371 (requiring the notice to be “timely, accurate, and informative”) (quoting Hoffmann-La Roche Inc., 493 U.S. at 172). 67 Romero v. Producers Dairy Foods, Inc., 235 F.R.D. 474, 493 (E.D. Cal. 2006) (“Multiple district courts have approved this method of notice.” (citing Johnson v. Am. Airlines, Inc., 531 F. Supp. 957, 961 (N.D. Tex. 1982), and Lantz v. B-1202 Corp., 429 F. Supp. 421, 424 (E.D. Mich. 1977)); Soler v. G&U, Inc., 86 F.R.D. 524, 531 (S.D.N.Y. 1980); Frank v. Capital Cities Communications, Inc., 88 F.R.D. 674, 679 (S.D.N.Y. 1981) (ADEA). 68 Cranney v. Carriage Services, Inc., No. 2:07cv-1587-RLH-PAL, 2008 WL 608639, at *5 (D. Nev. Feb. 29, 2008); Fast v. Applebee’s International, Inc., 243 F.R.D. 360 (W.D. Mo. 2007); Underwood v. NMC Mortgage Corp., 245 F.R.D. 720 (D. Kan. 2007); Stillman v. Staples, Inc., No. 07 CV 849, 2007 U.S. Dist. LEXIS 58873 (D.N.J. July 30, 2007); Fasanelli v. Heartland Brewery, Inc., 516 F. Supp. 2d 317 (S.D.N.Y. 2007); Hallissey v. America Online, Inc., No. 99-CIV-3785 (KTD), 2008 WL 465112 (S.D.N.Y. Feb. 19, 2008). 69 Gerlach, 2006 WL 824652, at *7; Gjurovich v. Emmanuel’s Marketplace, Inc., 282 F. Supp. 2d 91, 100 (S.D.N.Y. 2003); Barnett v. Countrywide Credit Indus., Inc., No. CIV.A.3:01-CV-1182-M, 2002 WL 1023161, at *2 (N.D. Tex. May 21, 2002); Soler v. G&U, Inc., 86 F.R.D. 524, 531 (S.D.N.Y. 1980); Williams v. Trendwest Resorts, Inc., No. CVS05-0605, 2006 WL 3690686, at *7 (D. Nev. Dec. 7, 2006). 70 Prentice v. Fund for Public Interest Research, Inc., 2007 WL 2729187 (N.D. Cal. Sep. 18, 2007) (120 days); Cryer v. Intersolutions, Inc., No. 06-2032 (EGS), 2007 WL 1053214 (D.D.C.

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E. Equitable Tolling

Under the FLSA, the statute of limitations for each individual party plaintiff is not tolled

until he or she files written consent to join the action, or until the court issues an equitable tolling

order.71 However, equitable tolling is appropriate under the FLSA where similarly situated

plaintiffs, through no fault of their own, have been unable to join the lawsuit. “Equitable tolling

applies when the plaintiff is prevented from asserting a claim by wrongful conduct on the part of

the defendant, or when extraordinary circumstances beyond the plaintiff’s control made it

impossible to file a claim on time,” such as its excusable ignorance of the statute of limitations.72

Courts sometimes order that the statute of limitations period be equitably tolled based on the

defendant’s delays in discovery or other wrongful conduct.73 Plaintiffs sometimes request a list

of class members early in the litigation to trigger an argument for equitable tolling, arguing that

defendant had the ability to facilitate class members’ learning of the pendency of the action well _________________________ Apr. 7, 2007) (90 days); Lima v. International Catastrophe Solutions, Inc., 493 F. Supp. 2d 793 (E.D. La. 2007) (90 days); Gerlach, 2006 WL 824652, at *4 (75 days); Balyasny v. Bayer Corp., No. CV 06-7594-JFU (PLAX) (C.D. Cal.) (60 days). 71 29 U.S.C. § 216(b); Partlow v. Jewish Orphans’ Home of Southern Cal., Inc., 645 F.2d 757, 760 (9th Cir. 1981), abrogated on other grounds by Hoffmann-La Roche, 495 U.S. 165. 72 Stoll v. Runyon, 165 F.3d 1238, 1242 (9th Cir. 1999); O’Donnell v. Vencor, Inc., 465 F.3d 1063, 1068 (9th Cir. 2006) (applying the doctrine when “defendants created the situation which impeded” the plaintiff’s filing of her claim). 73 See, e.g., Mowdy v. Beneto Bulk Transport, No. C 06-05682 MHP, 2008 WL 901546, at *12 (N.D. Cal. Mar. 31, 2008) (ordering equitable tolling beginning 30 days after plaintiffs’ first request for class member information and ending 30 days after entry of conditional certification order); Madrid v. Peak Construction, 2:09-cv-00311 JWS, 2009 U.S. Dist. LEXIS 77493 (D. Ariz. July 22, 2009) (granting equitable tolling); Adams v. Inter-Con Sec. Sys., 242 F.R.D. 530, 543 (N.D. Cal. 2007) (Patel, J.) (same); Baldozier v. Am. Family Mut. Ins. Co., 375 F. Supp. 2d 1089, 1092-93 (D. Colo. 2005) (granting tolling to the date of the filing of the original complaint where the defendant had refused “to provide contact information for former employees”); Partlow, 645 F.2d at 760 (granting equitable tolling where original consents found invalid based on improper attorney solicitation of the plaintiffs); Owens v. Bethlehem Mines Corp., 630 F. Supp. 309, 312-13 (S.D. W. Va. 1986) (granting equitable tolling where the court did not rule on plaintiff’s motion for collective action certification for over a year, during which time other potential plaintiffs were effectively precluded from filing Consents to Join).

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before the eventual conditional certification ruling. Some courts reject this as a basis for

equitable tolling, noting that the text of the FLSA has no requirement that a class list be

produced.

VI. The Fluctuating Workweek Damages Method

The FLSA established the general rule that employees must be compensated at one and

one-half times their regular rate of pay for each hour worked in excess of 40 hours per week.74

This method, is sometimes referred to as the “traditional” or “statutory” method because it is the

only statutorily accepted method for calculating overtime.75

In 1968, in response to the Supreme Court’s 1942 decision in Missel striking down a

fluctuating workweek arrangement and setting forth minimum protections that must be met

before an employee’s fluctuating workweek arrangement with his employer can be allowed

under the FLSA, the U.S. Department of Labor’s Wage & Hour Administrator issued an

interpretation of that Supreme Court opinion codifying the requirements that employers seeking

to calculate pay using the fluctuating workweek must meet.76 In Missel, the employer paid the

nonexempt employee a fixed salary, but failed to pay overtime premiums for all overtime hours

worked. The Missel Court struck down the overtime scheme because it undercut the FLSA’s

remedial goals and provided no protections for the employee.77

74 29 U.S.C. § 207(a)(1); Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 578 (1942) (“The provision of section [207(a)] requiring this extra pay for overtime is clear and unambiguous. It calls for 150% of the regular . . . wage.”). 75 Christopher L. Martin et al., The Fair Labor Standards Act and the Fluctuating Workweek Scheme: Competitive Compensation Strategy or Worker Exploitation?, 44 Lab. L.J. 92, 93 (1993). 76 29 C.F.R. § 778.114. 77 Missel, 316 U.S. at 581.

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Following the Missel requirements, the DOL set forth several prerequisites for use of the

fluctuating workweek method in its interpretative regulation: (1) “a clear mutual understanding

of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours

worked each workweek, whatever their number,” (2) the pay exceeds the minimum wage, and

(3) the employee “receives extra compensation, in addition to such salary, for all overtime hours

worked at a rate not less than one-half78 his regular rate of pay.”79 An employee’s regular hourly

rate of pay is determined for any given week by dividing her fixed weekly wage by the total

number of hours she worked that week.80

The DOL provided an example in the regulation, which is recapitulated in the following

chart:81

Hours Worked

Hourly Rate ($250/week)

Overtime Premium Under FWW

Total Pay For The Week

40 $6.25 0 hours $250.00

44 $5.68 4 hours x $2.84 $261.36

50 $5.00 10 hours x $2.50 $275.00

48 $5.21 8 hours x $2.61 $270.88

As is evident from the text of the regulation, under the fluctuating workweek, by virtue of the

employee’s agreement with the employer, her take-home pay varies from week to week as her

hours of work vary. This variation in pay from week to week results from the addition of

halftime overtime payments calculated and paid contemporaneously, based on the overtime

78 The reasoning underlying the additional half hourly pay rate for the hours worked over forty is that, by way of the agreement, the employee has already been compensated for all base hourly pay including the hours worked over forty. See 29 C.F.R. § 778.114. 79 29 C.F.R. § 778.114(a); Condo v. Sysco Corp., 1 F.3d 599, 601-02 (7th Cir. 1993). 80 Id. 81 These are the actual figures used in 29 C.F.R. § 778.114(b).

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hours worked and paid each week. In short, the regulation assumes contemporaneous payment

of overtime premiums.

Interestingly, the fluctuating workweek method results in significantly lower overtime

rates as the employee works longer and longer hours. The employee’s overtime rate for the 41st

hour in the week starts at one-third the time-and-a-half rate, and it then drops steadily for each

additional hour worked in the week. For example, the following chart shows the calculation of

overtime rates using the conventional and fluctuating workweek methods for an employee

earning $500 per week:

Hours Worked

Conventional Method Fluctuating Workweek MethodRegular Rate Overtime Rate Regular Rate Overtime Rate

40 $12.50 $18.75 $12.50 $6.25

41 $12.50 $18.75 $12.10 $6.10

50 $12.50 $18.75 $10.00 $5.00

60 $12.50 $18.75 $8.33 $4.17

70 $12.50 $18.75 $7.14 $3.57

80 $12.50 $18.75 $6.25 $3.13

VII. Determining Hours Worked Under The Fair Labor Standards Act

Two fundamental concepts of the Fair Labor Standards Act (“FLSA” or “the Act”)

require payment of an established minimum wage and payment of overtime. Section 6 of the

Act requires that each covered employee be paid at least the specified minimum wage for each

hour worked.82 Section 7 provides that an employee may not be employed longer than forty

hours in a workweek unless the employee receive at least one and one-half times his or her

82 29 U.S.C. 206.

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regular rate of pay for each additional hour.83 Consequently amount of money an employee is

entitled to receive cannot be determined without determining the number of hours the employee

worked.

The FLSA defines the term “employ” to suffer or permit to work.84 To suffer or permit

to work means that if an employer requires or allows employees to work, the time spent is

considered hours worked. Therefore, time spent doing work not requested by the employer, but

still allowed, is generally considered hours worked, since the employer knows or has reason to

believe that the employees are continuing to work and the employer is benefiting from the work.

A. Waiting Time

Although it is clear that employers must compensate employees for time actually spent

working, questions arise as to whether the minimum wage and overtime provisions of the FLSA

also apply to time spent waiting to perform productive work. Under the regulations, whether

waiting time is time worked depends on the particular circumstances.85

Time spent waiting for work is compensable if it is spent primarily for the benefit of the

employer and its business. Conversely, time is spent primarily for the benefit of the employee is

not compensable. In determining whether waiting time constitutes hours worked, courts examine

the amount of control the employer has over the employee during the waiting time, and whether

the employee can effectively use that time for his own purposes.

1. On Duty

Waiting time while on duty is included in compensable time, especially when it is

unpredictable, or is of such short duration that the employees cannot use the time effectively for

83 29 U.S.C. 207. 84 29 U.S.C. 203(g). 85 29 C.F.R. § 785.14.

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their own purposes. In those instances, the employees are to be compensated whether their work

is on or off the employer’s premises, even if the employees spend the time engaging in leisure

activity.86

2. Off Duty

Periods during which an employee is completely relieved from duty and are long enough

to enable him to use the time effectively for his own purposes are not hours worked.87 Whether

time off work is truly sufficient to enable employees to effectively use the time for their own

purposes is a factual issue dependent upon the circumstances. Circumstances considered by the

courts include the duration of the time off and any other facts which may place restrictions on the

employees.

B. On-Call Time

The test for determining whether employers must compensate employees for on-call time

is a fact-based question of whether the employees are required to remain on the employer’s

premises, or so close to the premises that the employees cannot use the time effectively for their

own purposes.88 Courts also examine the facts of each case to determine whether the time in

question is primarily for the benefit of the employer or whether the employee was waiting to be

engaged.

C. Rest Periods

Although breaks promote the efficiency of workers, the Act does not require employers

to grant rest periods. If an employer does grant rest periods or coffee breaks, those of a short

86 29 C.F.R. § 785.15. 87 29 C.F.R. § 785.16(a). 88 29 C.F.R. § 785.17.

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duration of five to about 20 minutes must be counted as hours worked.89 Employers may not

offset any compensable rest or coffee breaks against other types of work time, such as paid

waiting or on-call time. Conversely, a 30-minute or longer break does not have to be

compensated if the employee is completely relieved from duty for the duration of the break.

D. Meal Periods

A “bona fide” lunch or meal period is not work time.90 For a meal period to be bona fide,

it ordinarily must last at least 30 minutes and the employee must be relieved of all duty.

Although 30 minutes is ordinarily sufficient to constitute noncompensable time, the applicable

regulation notes that a shorter period may suffice under special circumstances.91

It is not necessary that an employee be permitted to leave the premises if he or she is

otherwise relieved of all duty during the meal period.92 However, if meal periods are frequently

interrupted by calls to duty, the entire period must be counted as hours worked.93

E. Sleeping Time and Certain Other Activities

Under certain conditions an employee may be considered to be working even though

some of his or her time is spent in sleeping or engaged in other activities.94 In some occupations,

employees remain continuously at the workplace for many hours. Some employees reside for

extended periods on the employer’s premises, or work full time out of the employee’s home. In

the private sector, different compensability rules apply to employees who are at work less than

24 hours and those that are working 24 hours or more.

89 29 C.F.R. § 785.18 (1996). 90 29 C.F.R. § 785.19(a). 91 29 C.F.R. § 785.19(a). 92 29 C.F.R. § 785.19(b). 93 Id. 94 29 C.F.R. § 785.20.

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Under the regulations, employees who are on duty for less than a 24-hour period must be

paid for all their on-duty time, even if they are permitted to sleep or engage in other personal

activities when not busy.95 Where the employee is on duty for 24 hours or more, the employer

and the employee may, by agreement, exclude from time worked a regularly scheduled sleeping

period of not more than eight hours, provided adequate sleeping facilities are furnished by the

employer, and provided the employee can usually enjoy an uninterrupted night’s sleep.96

The entire sleeping period must be counted if the employee is interrupted so often that a

reasonable night’s sleep is impossible. The regulations state that if the employee cannot get at

least five hours of sleep during the scheduled time, the entire time must be counted as hours

worked.97

F. Preparatory And Concluding Activities

Principal activities embrace all activities which are an integral and indispensable part of

the principal activity.98 The Portal-to-Portal Act prohibits employees from being compensated

for activities that are preliminary or postliminary to the principal activities of their

employment.99 The regulations, however, identify certain preparatory and concluding activities

that are outside the purview of the Portal-to-Portal Act and therefore compensable:

[i]f . . . a preparatory or concluding activity is closely related to an employee’s principal activities, and is indispensable to the performance of the principal activities, and that the total time spent in that activity is more than 10 minutes per workday, . . . all of the

95 29 C.F.R. § 785.21. 96 29 C.F.R. § 785.22(a). 97 29 C.F.R. § 785.22(b). 98 29 C.F.R. § 790.8(b). 99 29 U.S.C. § 254(a).

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time spent in that activity, including the 10 minutes, as hours of work.100

Any activity that is integral and indispensable to a principal activity is itself a principal

activity and therefore compensable.101

G. Travel Time

Although the walking time that occurs after the beginning of an employee’s first principal

activity and before the end of an employee’s last principal activity is covered by the FLSA, the

principles which apply in determining whether time spent in travel constitutes work time

depends on the kind of travel involved.102 The employee’s activities during travel and the

purpose of the travel are factors included in the analysis.

1. Preliminary and Postliminary Travel

The FLSA, as amended by the Portal-to-Portal Act, provides that the following activities

need not be compensated by employers:

(1) walking, riding, or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform, and

(2) activities which are preliminary or postliminary to said principal activity or activities, which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity or activities.103

Due to the difficulty of fixing a definitive standard of what employee activities are

“principal,” and further which are “integral and indispensable” to an employee’s principal

100 5 C.F.R. § 551.412. 101 IBP, Inc. v. Alvarez, 546 U.S. 21 (2005). 102 29 C.F.R. § 785.33. 103 29 U.S.C § 251, et seq.; see also 29 C.F.R. § 785.34.

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activities, each case involving compensation for travel time must be decided on its own

particular facts.

2. Emergency Or Call-Back Situations

Under certain emergency situations, travel from home to work is compensable.104

Specifically, when an employee who has gone home after completing a day’s work is

subsequently called out at night to travel a substantial distance in order to handle an emergency

for one of the employer’s customers, all of the time spent while traveling is working time.105

H. Recording Working Time

Regardless of the type of time keeping system an employer uses, problems can arise over

the proper treatment of small amounts of scheduled or unscheduled time which is worked or

missed by employees. Employees must be paid for all time worked, and employers cannot use

rough estimates or arbitrary formulas to compute the hours worked by employees. The

regulations establish two rules, the “rounding off” and “de minimis” rules, to address these

issues.106

1. “Rounding Off” Practices

Employers may record employees’ starting or stopping times to the nearest five minutes,

or to the nearest one-tenth or quarter of an hour, provided the amounts rounded off average out

over time.107 This practice may not result in the failure to properly compensate employees for all

time actually worked. In general, an employer’s policy of rounding off is permissible if both

rounding up and rounding down occur so that employees are not disadvantaged over time.

104 29 C.F.R. § 785.36. 105 Id. 106 29 C.F.R. §§ 785.48 and 785.47 (1996). 107 29 C.F.R. § 785.48(b).

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Rounding off practices that only benefit the employer and result in employees’ not being

compensated for all of their time are improper.

2. The De Minimis Rule

Under the FLSA, insubstantial or insignificant periods of time beyond an employee’s

scheduled working hours which cannot, as a practical administrative matter, be recorded for

payroll purposes, may be disregarded.108 Such time is considered de minimis. This rule applies

only when uncertain and indefinite periods of time of a few seconds or minutes duration are

involved, and where the failure to count such time is due to considerations justified by industry

realities.109 An employer may not arbitrarily fail to count as hours worked any part, however

small, of the employee’s fixed or regular working time, or any practically ascertainable period of

time the employee is regularly required to spend on duties he or she is assigned.110

108 29 C.F.R. § 785.47. 109 Id. 110 Id.