Successor Liability in FLSA Collective Action

03/28/2013

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On March 26, 2013, the Seventh Circuit issued a ruling in Teed v. Thomas & Betts Power Solutions, LLC, Nos. 12-2440, 12-3029, a Fair Labor Standards Act (FLSA) collective action where a settlement was reached and the original defendants sold its company.  (2013 U.S. App. LEXIS 5972).  The case questioned whether the federal or state standard for successor liability applies when liability is based on the FLSA.

When a company is sold in an asset sale as opposed to a stock sale, the buyer acquires the company's assets but not necessarily its liabilities.  Whether or not the buyer acquires the liabilities is the issue of successor liability. Most states (including Wisconsin) limit such liability. However, federal common law standard of successor liability is more favorable to plaintiffs than most state-law standards.

The Court held that federal standard of successor liability is appropriate in suits to enforce federal labor or employment laws.  Further, successor liability was properly applied to the successor even though the assets were purchased under the condition that purchasing company would be free of all employer’s FSLA liabilities.
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Espenscheid v. DirectSat USA, LLC

02/06/2013

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On February 4, 2013, the Seventh Circuit issued an opinion in Espenscheid v. DirectSat USA, LLC, No. 12-1943.

The class action was brought pursuant to the Fair Labor Standards Act for failure to pay appropriate wages to 2,341 technicians who were hired to install and repair home satellite dishes.

The record showed that: each technician was paid on per piece basis and had different experiences with respect to hours worked and overtime paid.

However, the record did not show how class representatives were selected. While plaintiffs selected 42 individuals as “representatives”, that did not cure multiplicity problem where the criteria for representative selection was not divulged to the District Court.  Furthermore, the record did not establish that all technicians performed roughly same amount of regular and overtime work. 

Therefore, the Seventh Circuit held that District Court did not err in entering order that de-certified class after finding that necessity to conduct 2,341 separate damages hearings as part of class action would be impractical. 

Read the case here: http://www.ca7.uscourts.gov/tmp/PJ0UKC8S.pdf
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Recent U.S. Supreme Court FLSA Case

06/25/2012

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Christopher et al v. Smithkline Beecham Corp., No. 11-204. (Decided June 18, 2012).

Last week the Supreme Court issued a ruling in an FLSA case.  In the case, two sales representatives of a large pharmaceutical company sued their employer, alleging that they were owed overtime wages. 

The pharmaceutical company argued the sales representatives were not entitled to overtime wages because they were classified as “outside salesmen,” who are exempt from the federal law that requires payment of overtime wages. 

Justice Alito delivered the opinion of the Court wherein the Supreme Court held that the sales representatives were "outside salesmen" under the most reasonable interpretation of the DOL's regulations, and, as such, are not entitled to overtime wages.
More specifically, under the Fair Labor Standards Act (FLSA) employers must pay employees overtime wages, but this requirement does not apply with respect to workers employed "in the capacity of outside salesman," §213(a)(1). Congress did not define the meaning of "outside salesman," but it delegated authority to the Department of Labor (DOL) to issue regulations to define the term. The DOL has three regulations that relate to the term:

1) 29 CFR §541.500 defines "outside salesman" to mean "any employee . . . [w]hose primary duty is . . . making sales within the meaning of [29 U. S. C. §203(k)]." §§541.500(a)(1)-(2). Section 203(k) states that "'[s]ale' or 'sell' includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition." 

2) §541.501 clarifies that "[s]ales within the meaning of [§203(k)] include the transfer of title to tangible property." §541.501(b). 

3) §541.503 provides that promotion work that is "performed incidental to and in conjunction with an employee's own outside sales or solicitations is exempt work," whereas promotion work that is "incidental to sales made, or to be made, by someone else is not." §541.503(a)

In this case, the pharmaceutical sales representatives' primary goal was to obtain a nonbinding commitment from doctors to prescribe the employer's products in appropriate cases. Each week, petitioners spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other miscellaneous tasks.  The employees were not required to punch a clock or report their hours, and they were subject to only minimal supervision. 

The employees were paid both a base salary and incentive pay. The amount of incentive pay was determined based on the performance of employees' assigned portfolio of drugs in their assigned sales territories.

Find the full opinion here.
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Johnson v. GDF, Inc.: Attorneys fees

02/27/2012

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Earlier this month, the Seventh Circuit reversed and remanded the Northern District of Illinois ruling in Johnson v. GDF, Inc., No. 11-1934 (February 13, 2012).

The case brought a Fair Labor Standards Act (FLSA) claim.  The employee (plaintiff) had been awarded $5,000 in compensatory and punitive damages after three-day trial where the employee alleged that he was fired after filing lawsuit seeking overtime wages.  In error, the court then calculated a fee award after striking all but four hours out of the 190-hour request by the employee's counsel and reducing requested hourly rate of $600 per hour to $375 per hour. 

The Seventh Circuit held that the district court could not base reduction in hours on claim that case would have settled earlier in case had counsel accurately told plaintiff of limited potential damages award where liability in instant case was fully contested. Furthermore, the district court could not reduce the hourly rate where: (1) the district court decided on its own that legal market distinguished between FLSA and Title VII cases based on perception that FLSA cases are easier to prosecute; and (2) the district court limited itself to consideration of only fee awards that plaintiff's counsel had received in contested fee requests. 
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