Court Refuses to Conditionally Certify FLSA Action as a Collective Action

September 30, 2012 | Appeals | Employment & Labor | Insurance Coverage

The plaintiffs, former customer service representatives (CSRs) who staffed telephone lines at an Appletree Answering Service call center in St. Louis, Missouri, sued Appletree for allegedly violating the Fair Labor Standards Act (FLSA) by failing to pay them for actual hours worked and corresponding overtime. The plaintiffs alleged that Appletree had a nationwide policy of not paying CSRs for time spent logging onto various computer programs and applications before they were able to clock in and for not paying CSRs for time spent logging out of computer applications after completion of their paid shifts. The plaintiffs alleged they worked at least 40 hours per week and worked overtime on a consistent weekly basis. They submitted four declarations stating Appletree’s alleged policy permitted “off the clock” work, failed to track and record CSRs’ work hours, and failed to compensate overtime hours as required under the FLSA. Each plaintiff indicated that she observed other CSRs performing the same tasks before clocking in and after clocking out.

After filing their lawsuit, the plaintiffs moved for conditional certification as a “collective action” under the FLSA so that they could notify other past and present Appletree employees of their lawsuit and provide them with an opportunity to “opt in” as plaintiffs. In support of their seeking a nationwide class of CSRs who worked for Appletree, the plaintiffs indicated that they worked remotely for Appletree’s call centers outside of St. Louis, Missouri, including Anaheim, California; Sacramento, California; Cincinnati, Ohio; Portland, Maine; and Wilmington, Delaware. The plaintiffs indicated that as a result of their experience working remotely for these call centers, they could verify that CSRs at those call centers provided the same types of telephone answering services and customer support as provided through the St. Louis call center, used the same computer systems and software, and were similarly prevented from clocking in until they accessed the same computer systems.

Appletree opposed conditional certification on the ground that the plaintiffs failed to assert a substantial allegation of a nationwide policy because they lacked personal knowledge of the practices, policies, and procedures in place at Appletree sites outside of St. Louis.

The court explained that conditional certification required nothing more than allegations that the putative class members were together the victims of “a single decision, policy or plan.” The court added that although the burden that had to be met for conditional certification was “not onerous,” the plaintiffs’ allegations in this case were insufficient.

It explained that the plaintiffs sought a nationwide class based on their “unpersuasive argument” that they had “personal knowledge of the practices at other Appletree facilities.” The plaintiffs indicated their personal knowledge was based on their observing and experiencing these policies when they remotely took calls for other Appletree centers, the court added. The plaintiffs, however, had no personal knowledge of policies at other Appletree centers because they remained in St. Louis while taking calls for other Appletree centers and merely used a program that allowed them to take calls that normally would be directed to another Appletree site, the court found.  Without providing any basis to allege Appletree had a nationwide policy of denying CSRs overtime compensation, the plaintiffs failed to assert substantial allegations that the putative class members were the victims of a single decision, policy, or plan, the court concluded. It therefore denied the plaintiffs’ motion for conditional certification as a collective action. [Andrews v. Appletree Answering Service, 2012 U.S. Dist. Lexis 84580 (E.D. Mo. June 19, 2012).]

Insurer that Received and Invested Participants’ Contributions, But that Had no Discretionary Authority, Was Not an ERISA Fiduciary

In this case, the plaintiffs participated in a 401(k) defined contribution retirement plan established by Larry Talbert, the founder of Progix, Inc. Pursuant to an agreement with Progix, Pan American Life Insurance Company received and invested the participants’ contributions.

The plaintiffs sued Pan American for breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), alleging that Pan American had improperly frozen the participants’ plan accounts after an investigation revealed that Mr. Talbert allegedly had failed to forward employees’ contributions to Pan American. The plaintiffs contended that the freeze prevented participants from withdrawing their contributions or from making interfund transfers, and that the participants’ accounts lost value as a result.

After a bench trial on the merits, the district court concluded that Pan American was not an ERISA fiduciary, and the plaintiffs appealed to the U.S. Court of Appeals for the Fifth Circuit.

In its decision, the appellate court agreed with the district court’s conclusion that Pan American was not a fiduciary under ERISA. The Fifth Circuit reasoned that Pan American “did not exercise the requisite discretionary authority” with respect to the plan and was not permitted to exercise discretion under the plan documents themselves. That limited Pan American’s role to the performance of “nondiscretionary, ministerial services,” none of which caused Pan American to be characterized as a fiduciary.

Moreover, the circuit court added, Pan American also did not in fact exercise any discretion. Its refusal to permit participants to make unilateral withdrawals was a ministerial function. Under the plan documents, the plan administrator (Progix) was required to approve all such withdrawals, but it never did so. Because Pan American was not an ERISA fiduciary, the district court properly dismissed the plaintiffs’ breach of fiduciary duty claim, the circuit court concluded. [Turner v. Pan American Life Ins. Co., 2012 U.S. App. Lexis 13961 (5th Cir. July 9, 2012).]

Appellate Court Affirms Evidentiary Rulings against Plaintiff in FMLA Retaliation Case

The plaintiff in this case worked for Station Operators, Inc. (a division of Exxon Mobil), from May 13, 2003, to May 20, 2005, at an Exxon Mobil gas station and convenience store in Smithfield, Rhode Island. The plaintiff was a sales associate, a term for a cashier and clerk. According to the plaintiff, he was regularly scheduled to work 40 hours per week once he became a full time employee, although no employee was entitled to any particular shift and the plaintiff did not have a contract with Station Operators guaranteeing him any shifts or even 40 hours per week.

On January 17, 2005, the plaintiff was injured in a car accident. The next day, he informed his supervisor that he was taking leave under the Family and Medical Leave Act from January 18 to February 15, 2005, due to a back injury sustained in the accident, on his doctor’s recommendation. At some point during this leave, the plaintiff informed his supervisor that his leave would need to be extended until March 14, 2005, and he remained out of work until March 14.

After the plaintiff returned to work, he alleged that he was consistently scheduled to work 32 hours per week – a reduction in scheduled hours that he alleged was in retaliation for his taking FMLA leave. He quit his employment at Station Operators on May 20, 2005, two days after suffering a panic attack at work that sent him to a hospital emergency room for treatment. Thereafter, he sued Station Operators, arguing that he had been fired for asserting his FMLA rights.

A jury returned a verdict in favor of Station Operators, and the plaintiff appealed. His primary argument: the district court had erred in excluding evidence of his work hours before September 2004 and his panic attack. The circuit court affirmed the decision against him.

The plaintiff’s first argument was that it was error to grant Station Operators’ motion to exclude evidence of his work hours and schedules prior to September 2004. The district court had excluded the evidence on the basis that “anything prior to that time would be too attenuated from” the FMLA retaliation claim, which began “in May 2005.”

The circuit court agreed. It found that the district court had reasonably determined that an appropriate cut-off date for evidence as to the plaintiff’s weekly hours was September 2004 because that was when the allegedly retaliatory supervisor became responsible for employee scheduling. The circuit court conceded that evidence of hours before September 2004 might have been marginally relevant, but found that the district court had not abused its discretion in excluding the evidence. Further, it continued, there was no prejudice since the evidence showed that the plaintiff’s supervisor as of September 2004 continued to assign essentially the same hours. The point of the plaintiff’s claim, the appellate court reasoned, had to do not with September 2004 but with the claimed reduction in hours beginning in March 2005, after his FMLA leave.

The circuit court also rejected the plaintiff’s argument that the district court had erred by excluding evidence of his panic attack and trip to the hospital emergency room on his final day of work at Station Operators, along with the corresponding testimony of two medical providers. According to the plaintiff, the evidence was relevant to prove that the alleged FMLA retaliation he suffered amounted to a constructive discharge, and the harm to his health was relevant to whether the working conditions amounted to a constructive discharge.

The circuit court found that the district court had not abused its discretion in excluding the evidence as prejudicial or confusing. As the circuit court concluded, the district court had heard testimony of the mental health provider who treated the plaintiff that the onset of depression and anxiety was four or five months before the May 2005 panic attack – before the plaintiff returned from FMLA leave, and so “necessarily before any purported retaliation took place.” [Cham v. Station Operators, Inc., 2012 U.S. App. Lexis 14550 (1st Cir. July 16, 2012).]

Analyst’s FMLA Retailiation Claim Rejected Where Bank Had Legitimate, Nondiscriminatory Reason for Discharging Her

The plaintiff in this case began working for United Bank in 2006 as a commercial loan administrative assistant and in 2007 was promoted to the position of commercial credit analyst. As a credit analyst, her tasks included evaluating the credit-worthiness of commercial borrowers and making lending recommendations.

In January 2008, the plaintiff began experiencing neck pain, blurred vision, and dizziness, and her physician determined that she was suffering from a spinal cord compression in her cervical spine. With some workplace accommodations provided by the bank, the plaintiff was able to perform her job for a time. These accommodations included, for example, an ergonomic chair and modifications to an air conditioning vent in the plaintiff’s office.  She also compensated for her sedentary position by walking around several times during the day. Despite these adjustments, however, her symptoms worsened, and on the first day of July she had difficulty getting out of bed. That day, the plaintiff went to her primary care physician (PCP), who examined her and completed an “Excuse Slip.” This note, which the plaintiff gave to the bank, stated that she would be on “bed rest until further notice.”

Near the end of July, the plaintiff’s PCP recommended that her leave of absence be extended for three weeks while further tests were performed and a diagnosis reached. In mid-August, the PCP provided an “Attending Physician Statement” to the bank. This statement noted that the plaintiff could not sit all day, that she suffered a decreased range of motion in her neck and back, and that it was “indeterminable” when she could return to work. The plaintiff told the bank’s human resources department that her PCP wanted her to remain out of work until she could see a neurologist on September 24.

Intermittently over the course of the summer, the bank provided her with forms to complete for FMLA leave and short term disability leave. Toward the end of July, the bank informed her that her 12 week “FMLA/Disability leave” had begun on July 1, leaving about nine more weeks of leave time remaining. In early September, however, the bank sent the plaintiff a letter stating that her request for short term disability had not yet been approved, pending “further documentation from [her] doctor,” and, therefore, it was unable to qualify her work absence as FMLA leave. The correspondence included a “Certification of Health Care Provider” form (CHCP form) which was to be completed within 15 days. At the plaintiff’s direction, the bank also sent the form to her PCP’s office. A few days later, the bank’s disability insurance company informed the plaintiff that her request for short term disability had been denied due to a lack of medical documentation showing that she was totally disabled.

Meanwhile, bank executives met in early September to discuss the staffing needs of the credit analysis department. This discussion included the topic of the bank’s ability to continue to hold the plaintiff’s position open indefinitely. The bank opted to wait to make a decision until the end of September.

By mid-month, the bank received the completed CHCP form from the PCP’s office. That certification stated that the plaintiff was “not incapacitated” and was “able to perform [her] job” on a normal work schedule with “no heavy lifting.” On September 22, the bank decided that it was unable to hold the plaintiff’s position open any longer and the plaintiff was told that she was expected to return to work on September 25, after a scheduled September 24 appointment with her neurologist. In correspondence memorializing the bank’s decision, it characterized the plaintiff’s “lengthy absence” as “unexcused” and not FMLA-eligible leave, because it had “not been supported by [her] healthcare providers.”

The morning of September 25, after she saw her neurologist, the plaintiff arrived at the bank with a note authored by him. It stated that the plaintiff was “under my care for a neurosurgical condition (cervical myelopathy). Our office will be scheduling a surgical procedure for her in the next few weeks. Due to extreme pain [the plaintiff] has been unable to go to work since July 1, 2008, she is to remain out of work until further notice.”

The plaintiff left the note at the bank and later told the bank that the surgery referred to in the neurologist’s note was scheduled for October 17. The bank responded by informing the plaintiff that her employment was terminated, noting that the bank “cannot continue to hold [her] position open indefinitely” and that she had been given a full 12 week period of FMLA leave commencing July 1, even though the medical documentation did not support it.

The plaintiff took the position that the CHCP form submitted by her primary care physician in August had mistakenly characterized her as able to work. She never provided a statement from the PCP to modify that form, however, nor did she provide an additional CHCP form completed by the neurologist. The plaintiff did undergo the surgery in October, and in April 2009 she was cleared to work without restrictions.

The plaintiff subsequently sued the bank for retaliating against her in violation of the FMLA, the bank was granted judgment in its favor, and the plaintiff appealed.

As the circuit court explained, although an employee who properly takes FMLA leave cannot be discharged for exercising a right provided by the law, an employee nevertheless can be discharged for independent reasons. The circuit court then considered whether the bank had discharged the plaintiff for a “legitimate, nondiscriminatory reason” – namely, that it could not hold her position open indefinitely.

The First Circuit pointed out that the bank had offered testimony that the credit analysis department was critical to the bank’s business because the analysts performed credit risk assessments with respect to both potential and current commercial loans. The circuit court added that the testimony underscored that, in 2007, an independent auditing company had recommended that the bank maintain three credit analysts, and that the auditors were due to perform their bi-annual review of the bank’s credit functions in the fall of 2008. At the time that the bank made its termination decision, the plaintiff had been out of work for about three months – and the department was strained.

The circuit court also observed that there was testimony that no other employee in the bank was available to temporarily fill the plaintiff’s analyst position and that hiring a temporary employee was not a wise business practice, due to the confidential nature of the client information to which the credit analysts had access and the particularized training involved in preparing an employee to competently perform the job. Additionally, the First Circuit noted, testimony indicated that the analysts’ loan review responsibilities were expected to increase for a variety of reasons, including the fact that the poor state of the economy had created a need for increased financial documentation when scrutinizing credit-worthiness and the fact that an increase in new loans was expected due to the bank having recently hired additional commercial lenders. Finally, the circuit court noted, there was testimony that the neurologist’s note did not change the bank’s decision to terminate the plaintiff’s employment, because the note gave no indication of a date by when she possibly might return to work.

The circuit court then concluded that this “undisputed evidence” demonstrated that the bank’s termination decision was animated by “legitimate, nondiscriminatory reasons.” It also rejected the plaintiff’s contention that the bank’s reason was pretextual, finding that the plaintiff did no more than raise “tenuous insinuations” on the facts surrounding her termination and the bank’s reason for taking that action. That was “insufficient to create a triable issue on discriminatory or retaliatory animus,” the circuit court ruled, noting that the bank had made several workplace accommodations for the plaintiff from the time that she began displaying physical symptoms in January 2008; that while she was out of work, it held her position open for 12 weeks and contributed to her group health insurance during that period, despite its view that she had failed to provide appropriate medical documentation supporting FMLA leave; and that there was no evidence of contemporaneous statements made by the decisionmakers suggesting retaliation for her requesting and taking leave. In the end, the plaintiff’s attempt to establish a triable issue on pretext and motive came “to naught,” the circuit court concluded. [Henry v. United Bank, 2012 U.S. App. Lexis 14424 (1st Cir. July 13, 2012).]

Circuit Explains “Joint Employer” Rule Under Fair Labor Standards Act

A decision by the U.S. Court of Appeals for the Third Circuit, rejecting the argument that Enterprise Holdings, Inc., the sole stockholder of 38 domestic subsidiaries, was a joint employer of the subsidiaries’ assistant managers within the meaning of the Fair Labor Standards Act (FLSA), illustrates the analysis courts frequently use when analyzing the term “joint employer.”

The initial plaintiff in this case was a former assistant branch manager employed at Enterprise-Rent-a-Car Company of Pittsburgh. On December 11, 2007, the plaintiff filed a nationwide collective class action under the FLSA in the Western District of Pennsylvania in which he claimed that Enterprise Holdings, the parent company of Enterprise-Rent-a-Car Company of Pittsburgh, violated the FLSA by failing to pay required overtime wages.

The plaintiff’s action, filed on behalf of all individuals employed during the putative class period as assistant branch managers at the various Enterprise locations, named both Enterprise Holdings and Enterprise Rent-a-Car Company of Pittsburgh as defendants. Similar actions pending in other federal district courts were transferred to the Western District of Pennsylvania.

The plaintiff’s complaint alleged that the defendants had unlawfully classified the assistant branch managers as exempt from the FLSA’s overtime provisions, and sought overtime compensation, liquidated damages, attorneys’ fees, and costs. In addition to the respective subsidiaries for whom the various individuals worked, the complaint also alleged that the parent company, Enterprise Holdings, was liable for the overtime pay as a joint employer of the assistant branch managers.

The district court found that Enterprise Holdings did not directly rent or sell vehicles, but that those activities were carried on only by its 38 subsidiaries. However, Enterprise Holdings directly and indirectly supplied administrative services and support to each subsidiary. These services included, but were not limited to, business guidelines, employee benefit plans, rental reservation tools, a central customer contact service, insurance, technology, and legal services. The business guidelines provided by Enterprise Holdings to its subsidiaries were, in turn, distributed to the subsidiaries’ employees in a manual that stated that “[i]nformation contained in [this manual] refers to employees of: [t]he Crawford Group, Inc., Enterprise Rent-A-Car Company and their various operating subsidiaries.”

The district court found that the use of these services was optional in the discretion of the individual subsidiaries, but that in exchange for these services, each of the subsidiaries paid corporate dividends and management fees to Enterprise Holdings. In addition, Enterprise Holdings had a human resources department, which provided certain services to subsidiaries, including, among other things, job descriptions, best practices, and compensation guides. The human resources department also negotiated health plans that were offered to employees of Enterprise Holdings and to employees of the subsidiaries. Participation in these plans was not required, but if a subsidiary’s employee enrolled in the various benefit programs, Enterprise Holdings billed that subsidiary for the benefits the employee elected. Additionally, the district court found, the human resources department provided assistance in relocation for employees transferring from one subsidiary to another, and maintained a list of available employment opportunities with any of Enterprise Holdings’ subsidiaries.

The district court also found that at a 2005 meeting attended by representatives of Enterprise Holdings and its subsidiaries, Enterprise Holdings “recommended” that the subsidiaries not pay overtime wages to “Assistant Branch Managers” who were employed by subsidiaries other than the California subsidiaries.

The district court granted Enterprise Holdings’ motion for summary judgment on the grounds that it was not a “joint employer” of the plaintiffs, and therefore was not liable under the FLSA, and the plaintiffs appealed.

In its decision, the Third Circuit explained that where two or more employers exerted significant control over the same employees – whether from the evidence it could be shown that they shared or co-determined those matters governing essential terms and conditions of employment – they constituted “joint employers” under the FLSA. The circuit court added that “[u]ltimate control” was not necessarily required to find an employer-employee relationship under the FLSA, and even “indirect” control might be sufficient. In other words, it reasoned, the alleged employer must exercise “significant control.”

The circuit court then ruled that when faced with a question requiring examination of a potential joint employment relationship under the FLSA, courts should consider:

1) the alleged employer’s authority to hire and fire the relevant employees;

2) the alleged employer’s authority to promulgate work rules and assignments and to set the employees’ conditions of employment: compensation,  benefits, and work schedules, including the rate and method of payment;

3) the alleged employer’s involvement in day-to-day employee supervision, including employee discipline; and

4) the alleged employer’s actual control of employee records, such as payroll, insurance, or taxes.

Applying the test, the circuit court concluded that the district court was correct in its determination that Enterprise Holdings was not a joint employer of the initial plaintiff or the other assistant managers. It pointed out that Enterprise Holdings had no authority to hire or fire assistant managers, no authority to promulgate work rules or assignments, and no authority to set compensation, benefits, schedules, or rates or methods of payment. Furthermore, Enterprise Holdings was not involved in employee supervision or employee discipline, nor did it exercise or maintain any control over employee records.

Although the plaintiffs contended that Enterprise Holdings functionally held many of these roles by way of the guidelines and manuals it promulgated to its subsidiaries, the circuit court declared that it was “not influenced by this claim.” Inasmuch as the adoption of Enterprise Holdings’ suggested policies and practices was entirely discretionary on the part of the subsidiaries, Enterprise Holdings “had no more authority over the conditions of the assistant managers’ employment than would a third-party consultant who made suggestions for improvements to the subsidiaries’ business practices,” the circuit court stated. The circuit court concluded that “no reasonable juror could find” that Enterprise Holdings was the plaintiffs’ employer, and it concluded that the district court was correct in its summary judgment conclusion that the plaintiffs failed to demonstrate that Enterprise Holdings, the parent of the 38 subsidiaries, was a joint employer of the branch assistant managers. [In re Enterprise Rent-a-Car Wage & Hour Employment Practices Litig., 683 F.3d 462 (3rd Cir. 2012).]

Reprinted with permission from the October 2012 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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