FLSA Cases to Watch in 2011

In the area of labor and employment law, the case deservedly garnering the most attention is Dukes v. Wal-Mart, 603 F.3d 571 (9th Cir. 2010)(in banc), in which the Supreme Court granted certiorari to consider the propriety of a nationwide sex discrimination class action. Although the case does not directly involve wage-hour claims, employers hope that the Supreme Court will chill judicial enthusiasm for big cases that unfairly create enormous pressure on a defendant to settle.

The Supreme Court heard oral argument on October 13, 2010, in Kasten v. Saint Gobain Performance Plastics Corp., 570 F.3d 834 (7th Cir. 2009) in which the Seventh Circuit held that verbal complaints are not protected by the anti-retaliation provisions of the Fair Labor Standards Act. The Supreme Court has not granted certiorari in any wage-hour case thus far in the current term which started in October 2010. On January 10, 2011, the Supreme Court denied a petition for certiorari seeking review of the Seventh Circuit’s decision in Spoerle v. Kraft Foods, 614 F.3d 427 (7th Cir. 2010) which held that § 3(o) of the FLSA does not preempt state laws which lack a parallel provision. Kraft hoped to quash an emerging trend in which plaintiffs bring donning and doffing cases under state laws which do not incorporate the Portal-to-Portal or § 3(o) defenses.

Two pending petitions for certiorari are especially important. In In re Novartis Pharmaceuticals Corp., 611 F.3d 141 (2d Cir. 2010), the employer is seeking certiorari to review the Second Circuit’s decision holding that pharmaceutical representatives are not covered by the administrative or outside sales exemptions from the FLSA. In Kuzinski v. Schering Corp., 384 Fed. Appx. 17 (2d Cir. 2010), the employer is seeking certiorari to review of a companion Second Circuit decision, decided in tandem with Novartis, again holding that pharmaceutical representatives are not covered by the outside sales exemption. There is a circuit split on the administrative exemption issue. The Third Circuit held, in Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010) that pharmaceutical representatives are covered by the administrative exemption. Novartis and Schering also contend that the Second Circuit erred in deferring to a Department of Labor amicus brief. They argue that courts owe no deference to Department of Labor positions contrary to established industry practice and expressed for the first time in litigation.

Another petition for certiorari worth watching was filed in Urnikis-Negro v. American Family Property Services, 611 F.3d 665 (7th Cir. 2010). In that case, the plaintiff is seeking review of the Seventh Circuit’s ruling that in misclassification cases, backpay should be determined using the fluctuating workweek formula for computing overtime. The use of that formula is highly beneficial to employers: it reduces their exposure to roughly one-quarter of what it would be under the method of computing overtime for hourly employees. There is no circuit split on this issue, however, some lower courts, most notably the Northern District of California in Russell v. Wells-Fargo, 672 F. Supp.2d 1008 (C.D. Cal. 2009) have rejected use of the fluctuating workweek formula in misclassification cases.

At least two important cases are also pending in federal circuit courts. In DeLodder v. Aerotek, 08-cv-6044 (C.D. Cal. Aug. 16, 2010) the Ninth Circuit agreed to hear the plaintiffs’ interlocutory appeal of a district court order denying class certification of claims, brought under state law, that recruiters were misclassified under the administrative exemption. The district court denied class certification on the grounds that the case required individualized determinations concerning the exercise of discretion and independent judgment exercised by the recruiters. This issue comes up frequently in collective and class actions. The appeal was granted November 10, 2010, so it will be some time before an opinion can be expected.

On January 26, 2011, the Fourth Circuit will hear oral argument in Perez v. Mountaire Farms, 610 F. Supp. 499 (D. Md. 2009), which involves the application of the Portal-to-Portal Act and de minimis rule to donning and doffing in a non-unionized poultry plant. As in Novartis, the Department of Labor has filed an amicus brief supporting plaintiffs. In 2009, the Fourth Circuit ruled that donning and doffing claims in a unionized poultry plant are precluded by § 3(o) of the FLSA. Sepulveda v. Allen Family Foods, Inc., 591 F.3d 209 (4th Cir. 2009). Perez was decided by Judge Andre Davis, who has since been elevated to the Court of Appeals.

Eric Hemmendinger, Shawe & Rosenthal


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