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Wage Theft

Panera Bread Sued for Underpaying Assistant Managers

A former Panera Bread assistant manager filed a complaint against the Warren, Ohio-based Covelli Enterprises Inc. (“Covelli”) in federal district court. Covelli operates more than 300 Panera Bread franchises in Ohio, Kentucky, Pennsylvania, Florida, Georgia, North Carolina, and South Carolina.

Specifically, the lawsuit alleges that Covelli violated both the federal Fair Labor Standards Act (FLSA) and state wage laws by failing to pay its assistant managers overtime. Under the FLSA, employees must be paid at a rate of one and one-half times their regular rate of pay for all hours worked over 40 in a workweek.  The lawsuit further alleges that Covelli knew it was not paying the plaintiff overtime.

The lawsuit seeks to certify a collective class of current and former Panera Bread assistant managers, all of whom may have similar claims. According to the lawsuit, there may be “hundreds—perhaps thousands—of identifiable Ohio Class members.”

The case is titled Kis v. Covelli Enterprises, No. 4:18-cv-00054, in the United States District Court for the Northern District of Ohio, Eastern Division.

 

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DOL Opinion Letters from the Bush Era Are Reinstated

On June 27, 2017, it was announced that the United States Department of Labor reinstated the long-standing practice of issuing opinion letters regarding the application of the Fair Labor Standards Act (FLSA).  For approximately 50 years, opinion letters were issued by the department in fact-specific situations where uncertainty existed on how to apply the FLSA. Opinion letters provided a mechanism for employers and employees to ask officials of the department to provide an official written explanation of what the FLSA or FMLA requires in a specific factual situation. The department ended the practice of issuing opinion letters during the Obama administration and replaced them with Administrator Interpretations (AIs), which only provided general guidance regarding the application of the law.

The department’s decision in 2010 to eliminate opinion letters benefitted employees because employers often relied upon opinion letters to assert a defense that their violation of the FLSA was not willful or that the violation was made in good-faith.  If successful in raising the good-faith defense, an employer could shield themselves from exposure to the liquidated (double) damages provision of the FLSA. Now, employers are once again permitted to argue that their violation of the FLSA was made in good faith, due to their reliance on an opinion letter that may or may not apply to the case at hand.

Recent Developments

On January 5, 2018, the DOL reissued more than a dozen advisory opinion letters that were published during President George W. Bush’s presidency, which were later rescinded. These letters will likely give employers additional ammunition in FLSA lawsuits brought by employees.

The reinstated opinion letters covered a number of topics, including whether certain employees qualify for recognized exemptions of the FLSA and whether certain job bonuses must be included in an individual’s regular pay rate (for purposes of calculating overtime).

After the release of the reissued opinion letters, it is expected that the DOL will not issue additional opinion letters until after a new Wage and Hour Division administrator is in place at the DOL. President Trump recently nominated Cheryl Stanton, a defense attorney who most recently served as the head of the South Carolina Department of Employment and Workforce.  Her nomination is currently pending in the Senate.

 

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Judge Grants Class Certification to Walmart Workers

California law provides a number of protections above and beyond the protections that are afforded to employees under the federal Fair Labor Standards Act (FLSA).  For example, California law requires that employees be provided with a meal and two rest breaks when they work an eight-hour shift. Additionally, if they work over 8 hours in a day, daily overtime premiums kick in. There are also requirements that the employer provide an employee with very detailed paystubs that must contain specific information.

On January 9, 2018, a federal judge in California certified a class of current and former employees of the big-box retail giant Walmart, who alleged violations of the FLSA and the California Labor Code. Three classes were certified, which range in size from 52,000 employees to nearly 76,000 employees. Most courts – including courts in the Ninth Circuit – follow a two-step approach to collective action certification.

Where Walmart Went Wrong

At the first stage, courts do not evaluate the merits of the Plaintiff’s legal claims but instead focus solely on whether the members of the proposed class are similarly situated to each other. According to U.S. District Judge Lucy H. Koh, Walmart made the mistake of attacking the merit of the Plaintiffs’ legal claims instead of arguing that the Plaintiffs were not similarly situated to each other. Judge Koh disregarded Walmart’s merit-based arguments and granted certification to the class.

Collective or class actions are advantageous tools for employees who are the victims of wage theft. They can be a powerful mechanism to deter employers from skimming off their employees’ wages. While an individual employee may have only a few hundred dollars stolen, an employer can easily pay them off and sweep their claims under the rug. This permits employers to continue skimming wages.  However, when the employer faces a collective action, all the aggrieved employees are notified of the violation and provided with the opportunity to join the lawsuit to seek back wages against the employer.

The case is Magadia v Wal-Mart Associates Inc., et al, case number 17-cv-00062, and is pending in the United States District Court for the Northern District of California.

 

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Lids Hat Retailer Faces Overtime from Former Managers

Lids, a store selling jerseys, hats, and t-shirts, is facing a class action lawsuit for failing to pay managers for overtime. Lids’ managers were paid under a fluctuating work week (FWW) method of payment. Under this method of payment, employees are paid a fixed salary amount whether or not they work more or less than 40 hours a week. The FWW method further permits hours worked in excess of 40 hours a week to be compensated at a minimum of one-half time the worker’s regular rate. However, the lawsuit alleges that Lids store managers were not fully compensated for all of the overtime hours they worked and were instead paid a bonus based on meeting sales quotas.

On January 2, 2018, the District Court for the Southern District of Indiana denied Lids’ motion to dismiss the case and granted the plaintiff’s motion for conditional certification of an opt-in class of current and former store managers. The judge wrote that the lead plaintiff in the case, Julia Shumate, “has made a modest factual showing that she and the potential opt-in plaintiffs were victims of a common policy that violated the FLSA.”

The judge ordered Lids to provide a spreadsheet listing the names and last known addresses of non-exempt store managers who were entitled to overtime pay since Feb. 2, 2014.

The lawsuit was filed in the U.S. District Court for the Southern District of Indiana and is titled Julia Shumate, on behalf of all others similarly situated v. Genesco, Inc., Hat World Inc., d/b/a Lids Sports Group, 1:17-cv-3574.

 

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Garment Facilities Are Top Offenders for FLSA Violations

The United States Department of Labor (DOL) has found that 94 percent of 129 investigated garment facilities were violating the Fair Labor Standards Act (FLSA). In the Southland garment industry located in Southern California, $1.6 million in back wages and liquidated damages were assessed by the DOL. The DOL also assessed an additional $36,000 in civil penalties associated with the investigations.

Since the start of 2017, FLSA violations resulted in payments due to 1,377 employees. The DOL discovered many employees were being paid well below the federal minimum wage of $7.25 per hour, with some receiving as little as $4.27 per hour. Investigators also found employers often failed to pay employees overtime at 1.5 times their regular rates of pay when they worked more than 40 hours in a week, as required by the FLSA.

To combat the illegal factories, DOL officials continue to meet with retailers to encourage them to buy only from suppliers that comply with federal labor laws and to avoid non-compliant manufacturers. Still, according to Ruben Rosalez, the Wage and Hour Division regional administrator for Southern California, the agency continues to find wage violations at nine out of every 10 facilities that are investigated.

 

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