Wage Theft

The United States Supreme Court has overturned a Ninth Circuit Court of Appeals ruling that would have permitted auto service advisers (employees at car dealerships who advise customers about repair work) to receive overtime.  The Supreme Court held the service advisers were exempt from the overtime benefits of the Fair Labor Standards Act (FLSA) because they are “salesmen … primarily engaged in … servicing automobiles,” according to Justice Clarence Thomas.

The lawsuit seeking overtime pay under the FLSA was filed nearly six years ago.  It has worked its way up and down the judicial system on more than one occasion.  However, the Supreme Court has finally put the case to bed.

The Supreme Court’s ruling that auto service advisors are overtime-exempt under the FLSA seemingly contradicts the longstanding legal principal that required exemptions to be narrowly construed.  In the past, Court have narrowly construed exemptions to the FLSA against the employer and limited their application to situations that are plainly and unmistakably within the exemptions terms and spirit.  Instead, the Supreme Court analyzed the exemption by employing “a fair reading” of the exemption standard.

Some experts have argued that this case is one of the most significant decisions on exemptions because it ends the narrow construction principle, which in the past was applied to every exemption case.  The Supreme Court’s analysis places less of a burden on an employer who seeks to avoid paying their employees overtime by classifying them as exempt.  Arguably, the decision allows employers to apply exemptions in situations where, in the past, they otherwise would not have been applicable.

In fact, at oral argument, when asked about whether the exemption should be narrowly construed, Paul Clement of Kirkland & Ellis LLP (attorney for the employer), responded “it may be time to put that canon to rest.”

The Supreme Court appears to have done just that.  Over the past several years, disputes between employer and employee that reach the ultra-conservative United States Supreme Court have overwhelmingly been decided in favor of the employer.

The case is Encino Motorcars LLC v. Navarro et al., case number 16-1362.

The “GIG Economy” once referred to a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.  However, that description is out of date.  Today, more and more people are turning to companies like Lyft or Grub Hub as their primary employment.  Moreover, the GIG companies are exercising more and more control over those employees, which has greatly diminished the number of instances when the individual can properly be classified as an independent contractor.

With more and more GIG companies treating workers as employees rather than independent contractors, claims of unlawful wage and hour practices have skyrocketed.

In March 2018, the ride sharing company Lyft, Inc. (“Lyft”) agreed to pay $1.95 million to a class of nearly 246,000 drivers.  The settlement class consists of any driver that provided at least one ride in California at peak busy times from August 2014 to April 2017, when the app had allegedly incentivized drivers to drive prime-time hours by telling customers the premium “goes entirely to your driver.”  That turned out not to be true.  Lyft was still taking a commission surcharge.

The preliminary approval papers submitted by the parties urged the court to approve the settlement as it resulted from arm’s-length negotiations between the parties.  The settlement provides $10,000 as an incentive award for the named plaintiffs and up to $650,000 in attorney fees for class counsel.  To receive a settlement payment, class members must submit a claim form and calculate the number of non-refunded commissions on prime-time rides they are eligible to receive back.

Many states, such as California, have very strict laws about deductions from employees’ pay.  The California Labor Code also requires employers to provide employees with accurate wage statements.

It is suspected that as new GIG companies form, wage and hour violations will persist in the industry.  The ever changing employment landscape continues to uncover new violations of state and federal wage and hour laws.

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A restaurant kitchen manager recently filed a federal lawsuit seeking overtime pay from his former employer, an operator of a restaurant chain.  The lawsuit contends that the restaurant’s pay practices violated both the Fair Labor Standards Act (FLSA) and Arizona’s wage statutes, which mandate a minimum wage of $7.25/hour and $10.50/hour, respectively.

Specifically, the plaintiff’s suit alleges that he was hired at the restaurant for a flat rate per week. However, after six weeks on the job, he had still received no pay. When the plaintiff inquired about his owed wages, the restaurant immediately fired him, the suit contends.  About one month later, the restaurant sent him a check, claiming that the check amount was “fair” compensation for all six weeks of his employment.  But when divided over six weeks, the plaintiff’s check resulted in only $2.36 per hour—well below the mandated federal and state minimum wage, the suit alleges.

Further, the plaintiff contends that the restaurant violated Arizona law by failing to pay him all wages due within seven days of termination. The state statute provides that any party violating this rule “is guilty of a petty offense.”

Wage and hour violations such as the ones described above occur quite frequently in the restaurant industry. In addition to FLSA violations, it is important to be aware that many states have additional wage laws providing further rights to workers.  If you believe you are not being paid the wages to which you are entitled, contact an experienced FLSA attorney to discuss what options may be available to you.

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