• Overtime Update: The Supreme Court Tackles Collective Action Issues While Lower Courts Provide Clarity Regarding Work Schedules and the Proper Classification Of Executive Assistants
  • December 17, 2012 | Author: Richard Gerakitis
  • Law Firms: Troutman Sanders LLP - Atlanta Office ; Troutman Sanders LLP - Richmond Office
  • Wage and hour litigation remains an active area of employment law. The Overtime Update is committed to condensing the issues that we believe are most important to employers into a single, easy-to-read, time-saving article. In this installment of Overtime Update, we examine three key cases that employers should look to for guidance on how to avoid liability under the Fair Labor Standards Act ("FLSA").

    Changing the Designation of a Workweek to Reduce Costs Does Not Violate the FLSA

    In the recent case of Abshire v. Redland Energy Services, LLC, the Eighth Circuit Court of Appeals ruled that an employer’s attempt to minimize the amount of overtime worked by its employees did not violate the FLSA. The employees in Redland Energy operated natural gas drilling rigs in Arkansas. Prior to a scheduling change, the employees typically worked twelve-hour shifts for seven consecutive days, followed by seven days off. The employer used a Tuesday-to-Monday workweek to calculate overtime. Under this schedule, the employees frequently worked over 80 hours in one week and therefore received 40 or more hours of overtime pay during that period.

    Realizing that this was not a cost-efficient work schedule, the employer decided to re-designate the work schedules so that the workweek began on a Sunday and ended on a Saturday. This had the effect of lowering the employees’ number of overtime hours worked in a single workweek, which decreased the amount of overtime pay they were due. The employees sued, alleging that their employer had improperly changed their work schedules to avoid payment of overtime in violation of the FLSA.

    The Eighth Circuit ruled in favor of the employer, finding that an employer’s effort to reduce its payroll expense is not contrary to the FLSA’s purpose. According to the Court, employers may change their designation of a workweek, even if it reduces the amount of overtime hours that an employee works, as long as (1) the change is intended to be permanent, and (2) the change is not designed to evade the purposes of the FLSA. In this case, the Court determined that the employer was within its rights to permanently change the workweek designation in order to avoid unnecessary payroll expense, which did not constitute efforts to "evade" the FLSA.

    The decision in Redland Energy is a clear victory for employers, who should proceed with caution before making any major changes to their workweek designations to ensure compliance with the FLSA.

    Executive Assistants May Qualify as Exempt from Overtime

    In most cases, administrative assistants do not qualify as exempt from the overtime provisions of the FLSA. However, if an administrative or executive assistant works for a sufficiently high level executive, and exercises discretion in running that executive’s office, the employee may be exempt from the FLSA’s overtime provisions, as evidenced by the recent decision of Altemus v. Fed. Realty Inv. Trust from the Fourth Circuit Court of Appeals.

    To qualify for the administrative exemption under the FLSA, the Department of Labor ("DOL") regulations require that an executive or administrative assistant to a business owner or senior executive of a large business perform his or her duties "without specific instructions or prescribed procedures" and that he or she be "delegated authority regarding matters of significance." In Altemus, the Fourth Circuit determined that a senior executive’s assistant was properly classified as exempt because her primary duty involved the performance of administrative duties directly related to the management of the employer’s business, rather than performing the executive’s day-to-day tasks.

    Altemus is another victory for employers, and provides instructive guidance for considering whether key administrative assistants are exempt or nonexempt under the FLSA.

    Supreme Court May Address Key FLSA Issues in New Case

    The U.S. Supreme Court recently heard arguments in a new and potentially important FLSA case: Genesis Health Care Corp. v. Symczyk. In Genesis Health, the Supreme Court may address critical differences between class actions under the Federal Rules of Civil Procedure and collective actions under the FLSA. Generally, the named plaintiff in a class action represents all other "similarly-situated" plaintiffs unless those individuals opt-out. In a collective action under the FLSA, however, the named plaintiff does not represent anyone else unless those individuals opt-in to join the lawsuit.

    The question in Genesis Health is whether employers may use a procedural tool referred to as an "offer of judgment" (essentially a settlement offer) to pay all amounts allegedly owed to the named plaintiff before other plaintiffs opt-in and the collective action grows into a larger lawsuit. If an employee rejects an offer of judgment, but ultimately receives a judgment less favorable than the offer of judgment, the employee must pay the employer’s costs incurred after the offer was made.

    In Genesis Health, the named plaintiff, a registered nurse, filed a collective action alleging that her employer improperly charged her with automatic 30-minute meal break deductions (regardless of whether she actually took the unpaid breaks). The lawsuit was filed on behalf of the nurse and other similarly-situated individuals. However, the employer made an offer of judgment of $7,500 (which represented all amounts owed to the named plaintiff) before other employees opted-in to join the lawsuit. The district court dismissed the lawsuit because the offer of judgment rendered the issues "moot" - i.e., there was no longer any case or controversy for the court to decide, therefore the court no longer had jurisdiction over the matter.

    The named plaintiff in Genesis Health received a payment for her unpaid wages, but what about the other, similarly-situated individuals whom the collective action was intended to represent? The district court found that the case should still be dismissed because no other similarly-situated plaintiffs joined the case. According to the district court, the other potential plaintiffs were free to file their own lawsuits, but the employer was not required to pay anything beyond the $7,500 in order to moot the collective action.

    On appeal, the Court of Appeals for the Third Circuit overturned the dismissal, holding that a defendant cannot "frustrate" the purpose of collective actions by mooting the lawsuit through an offer of judgment. In reaching this decision, the Third Circuit relied on a pair of Supreme Court cases involving class actions (but not collective actions). Other federal appellate courts, including the Ninth and Eleventh Circuits, have distinguished those cases and upheld the dismissal of collective actions as moot.

    The Supreme Court will soon have an opportunity to resolve this split of decisions between the circuit courts and clarify the nature and purpose of collective actions under the FLSA when the Court issues a decision in Genesis Health next spring.