Source: https://www.wagehourblog.com/page/2/
Timestamp: 2019-04-25 16:07:46+00:00

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Federal overtime provisions are contained in the Fair Labor Standards Act (“FLSA”). Unless exempt, employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek. To be exempt from overtime (i.e., not entitled to receive overtime), an exemption must apply. For an exemption to apply, an employee’s specific job duties and salary must meet certain minimum requirements. The “salary test” presently requires workers to make at least $23,660 on an annual basis to be exempt from overtime.
In March 2014, President Obama directed the Secretary of Labor to update the overtime regulations in the FLSA. In May 2016, after receiving more than 270,000 comments, the Department of Labor issued a final rule that raised the minimum salary threshold to $47,476 per year. That rule was declared invalid by the United States District Court for the Eastern District of Texas, and the Fifth Circuit dismissed the Department of Labor’s appeal – at the Department’s request – in September 2017.
Raises the total annual compensation requirement for highly compensated employees – which are subject to a minimal duties test – from $100,000 to $147,414.
The proposed rule makes no changes to the duties test for executive, administrative, and professional employees. The Department intends to propose updates to the salary levels every four years.
More information about the proposed rule is available here. Employers with salaried employees under $35,308 annually should closely monitor the development of the rule and be prepared to adjust their pay practices. If it goes into effect, the new threshold will likely take effect in early 2020.
The obligations of a district court to analyze conflicting evidence regarding class and collective action certification was recently addressed by the Third Circuit Court of Appeals in Reinig v. RBS Citizens N.A., 912 F.3d 115, (3d Cir. 2018) (“Citizens”). In that case, the Third Circuit opined that Fed.R.Civ.P. 23 class certification orders (i) must explicitly define the classes and claims that are the subject of a certification order and (ii) provide an analysis of how the court reconciled any conflicting evidence supporting class certification.
In addition, the Third Circuit held that while Rule 23(f) permits an interlocutory appeal from a class certification order relating to 10 state law wage hour claims, the court did not have pendent appellate jurisdiction to review a related order certifying a nationwide collective action under Section 216(b) of the Fair Labor Standards Act (“FLSA”).
Plaintiffs, a group of mortgage loan officers, alleged that, among other things, Citizens failed to pay overtime wages in accordance with the FLSA and state law. Plaintiffs pursued a collective action under Section 216(b) of the FLSA and separate Rule 23 class actions under the laws of 10 states.
Each mortgage loan officer was informed of Citizens’ policy that he or she was “required to obtain prior approval from [his or her] supervisor for any hours worked in excess of 40 hours per week,” and could be disciplined for working unapproved overtime. But, plaintiffs claimed, Citizens’ written overtime policy was a “ruse,” and that the company actually had a “policy-to-violate-the-policy.” Specifically, plaintiffs alleged that Citizens’ “coordinated, overarching scheme” was to encourage unreported overtime by: (1) disciplining mortgage loan officers who reported working overtime that was not preapproved; (2) restricting the amount of overtime hours that could be approved; (3) violating its own attendance monitoring and timesheet approval policies so that overtime hours could go unreported; and (4) discouraging or harassing mortgage loan officers who reported or requested overtime.
In May 2016, the District Court for the Western District of Pennsylvania granted plaintiffs’ Section 216(b) motion for conditional certification of a collective action. In August 2017, based on the recommendations of a Special Master, the District Court denied Citizens’ motion to decertify the FLSA collective action, granted the plaintiffs’ motion for certification of the FLSA collective action claims, and granted plaintiffs’ Rule 23 motion for certification of 10 state wage/hour class actions.
Pursuant to Rule 23(f), Citizens appealed from the District Court’s order certifying the state law wage class claims.
Reiterating its earlier decision in Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 592 (3d Cir. 2012), the Third Circuit vacated the District Court’s order, because it failed to define the classes being certified and to define the claims, issues, or defenses accorded class treatment. The District Court’s order stated only that Plaintiffs’ “state law subclasses are for Pennsylvania, Connecticut, New York, Massachusetts, Rhode Island, Illinois, Michigan, New Hampshire, North Carolina, and Ohio,” without defining the scope of those subclasses.
The Third Circuit commented that the District Court’s analysis was insufficient to allow it to determine whether the evidence proffered by the plaintiffs satisfied Rule 23’s commonality and preponderance requirements. It opined that, when ruling on a motion for class certification, a district court must “clearly articulate its reasons,” so that the certification decision can be reviewed on appeal.
Rule 23(a)(2) requires that the putative class members “share at least one question of fact or law in common with each other,” and Rule 23(b)(3) requires that common issues predominate over issues affecting only individual class members. Analyzing these elements together, the Third Circuit stated that the plaintiffs had to demonstrate that (1) Citizens’ managers were carrying out a “common mode” of conduct through the company’s internal “policy-to-violate-the-policy,” and (2) Citizens had actual or constructive knowledge of this conduct.
Rather than conduct its own rigorous analysis, the District Court relied on the Special Master’s reports, which cited to testimony from “roughly two dozen [mortgage loan officers]” that “Citizens’ managers nonetheless regularly and almost uniformly instructed [mortgage loan officers] not to report all the hours that they worked.” The Third Circuit commented that the Special Master’s reports did not specifically identify the testimony relied upon to reach this conclusion and did not reference the evidence showing that knowledge of the purported policy was imputable to Citizens.
The record on appeal failed to support uniform application of the “policy to violate the policy,” but rather evidenced different, individualized experiences. Witness testimony was “confined to interactions with specific managers in distinct offices.” On multiple occasions, the testimony of putative class members contradicted the plaintiffs’ argument that managers “almost uniformly” instructed mortgage loan officers not to report all hours worked. The District Court did not reconcile these record conflicts. The Third Circuit was unable to determine whether the evidence met the commonality and predominance requirements of Rule 23.
Relying on Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1046-47 (2016), the Third Circuit stated that, for the plaintiffs’ representative evidence to satisfy the commonality/predominance requirements of Rule 23, the evidence must be sufficiently representative of the class as a whole, such that each individual plaintiff “could have relied on [the] sample to establish liability if he or she had brought an individual action.” The record on appeal was to the contrary.
The Third Circuit’s decision is also important because it signaled an unwillingness to conflate the FLSA’s similarly situated standard for a collective action with FRCP Rule 23’s more stringent test for class certification. In declining to do so, the Third Circuit recognized that other circuit courts have “treated FLSA and Rule 23 certification as nearly one and the same.” See Epenscheid v. DirectSat USA, LLC, 705 F.3d 770, 772 (7th Cir. 2013), and Theissen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1105 (10th Cir. 2001).
Rule 23(f) permits interlocutory review of a Court’s order granting or denying class action certification. No comparable procedural rule permits review of an order certifying a collective action pursuant to FLSA Section 216(b). In Citizens, defendant sought appellate review of the District Court’s interlocutory order denying defendant’s motion to decertify the collective action through the doctrine of pendant appellate jurisdiction.
Pendant appellate review is available in two limited circumstances, to wit: (i) ‘”inextricably intertwined’” orders and (ii) review of a “non-appealable order when it is necessary to ensure meaningful review of [an] appealable order.” Neither circumstance was met to permit appellate review of the District Court’s order certifying a Section 216(b) collective action, while vacating an order certifying a Rule 23 class.
Pendent appellate jurisdiction allows an appellate court to exercise jurisdiction over issues that are not independently appealable, but that are inextricably intertwined with issues over which that court has independent jurisdiction. The question before the Third Circuit was whether Rule 23(b)(3)’s requirement that common state law issues predominate over issues affecting only individual class members was inextricably intertwined with the issue of whether the plaintiffs were “similarly situated” as required to certify an FLSA collective action. The Third Circuit opined that the doctrine of pendant appellate jurisdiction is “narrow” and “should be used ‘sparing.’” (Citations omitted).
The Third Circuit joined with the Second Circuit in Myers v. Hertz Corp., 624 F.3d 537, 553-54 (2d Cir. 2010), to conclude that FLSA and Rule 23 certification orders were not inextricably intertwined, because the requirements of Rule 23’s predominance standard were significantly higher than the FLSA’s similarly situated standard. Therefore, a court may find that Rule 23 requirements had not been met without addressing whether the lower FLSA standard had been satisfied. The Third Circuit aligned with the Second Circuit in holding that Rule 23 certification is not “inextricably intertwined” with an FLSA collective action certification, and, therefore, declined to exercise pendent appellate jurisdiction over the interlocutory FLSA certification order.
The Third Circuit’s ruling in Reinig will assist employers who are faced with Rule 23 class certification motions that seek to certify ill-defined classes and ambiguous claims based on anecdotal evidence. However, under Reinig, employers will be hard pressed to obtain immediate appellate review of the certification of an FLSA collective action.
Currently, the minimum wage in Illinois is $8.25 per hour. Under the new legislation, the minimum wage will increase to $9.25 by January 1, 2020 and to $10 on July 1, 2020. The minimum wage will then increase by $1 per hour each January 1 until it reaches $15 per hour in 2025.
The business community opposed this across the board increase, arguing that there should be a longer phase-in and a regional approach with a lower minimum wage outside the city of Chicago. Payroll tax credits provided for in the new legislation are supposed to ease the burden for the business community.
On February 1, 2019, the U.S. Department of Labor publicly designated Keith Sonderling as Acting Administrator of the Wage and Hour Division (“WHD”). He joined WHD in September 2017 as a Senior Policy Advisor, receiving a promotion to Deputy Administrator last month. Before joining the Department, he was a shareholder in the Gunster law firm in West Palm Beach, Florida, where he represented businesses in labor and employment matters.
During his time with WHD, Sonderling has been a strong proponent of the agency’s Payroll Audit Independent Determination program (known as “PAID”), which under certain circumstances allows employers to self-report violations to WHD and to make the workers whole in exchange for a release. He has also led numerous public listening sessions for stakeholders to express their views about the forthcoming revisions to the regulations implementing the executive, administrative, and professional exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act (the “FLSA”).
WHD enforces the minimum wage, overtime, and child labor provisions of the FLSA, as well as the Family & Medical Leave Act and several prevailing wage statutes applicable to federal government contracts, among other laws.

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