CVS Pharmacist Found Exempt from FLSA’s Overtime Rules

December 31, 2013 | Appeals | Employment & Labor | Insurance Coverage

The plaintiff in this case was employed as a pharmacist by CVS RX Services, Inc. His base weekly salary, which was calculated on a 44 hour work week, exceeded $1,250. CVS guaranteed his base salary and classified him as a salaried employee exempt from the time-and-a-half overtime requirements of the federal Fair Labor Standards Act (FLSA).

The plaintiff also received additional compensation because he invariably, or almost invariably, worked hours in addition to the base 44 hours each week. His additional hours worked usually ranged from 16 to 36 hours per week, increasing his total compensation to over $100,000 per year. The plaintiff worked these extra shifts voluntarily, and compensation for the work in excess of 44 hours was paid according to an hourly “compensation rate” determined by dividing the plaintiff’s weekly guaranteed salary by 44, multiplying the number of hours worked over 44 by the resultant amount, and then adding “premium pay” of $6 per hour.

The plaintiff brought suit against CVS, seeking overtime payments under the FLSA. The trial court granted CVS’ motion for summary judgment, ruling that the plaintiff was exempt from the FLSA’s time-and-a-half overtime requirements because of the statute’s exemption for highly-paid employees. The plaintiff appealed.

The U.S. Court of Appeals for the Second Circuit affirmed. In its decision, it explained that FLSA Section 207(a)(1) provides that employees who work more than 40 hours in a given week must receive time-and-a-half compensation for excess hours except as “otherwise provided.” One exemption from this requirement, the circuit court continued, was in FLSA Section 213(a)(1), which provides an exemption for “any employee employed in a bona fide executive, administrative, or professional capacity.” To qualify for this exemption, an employee’s work must satisfy both a “duties” requirement and a “salary” requirement. The circuit court found no dispute about the “duties” requirement in this case. It then decided that the “salary” requirement also was met, pointing out that the plaintiff’s base salary exceeded the minimum provided by federal regulations of $455 per week, there were no impermissible deductions, and there was no dispute about whether his base weekly salary was guaranteed, i.e., whether it was to be paid regardless of the number of hours the plaintiff actually worked in a given 44 hour shift.

Finally, the Second Circuit also found that the plaintiff fell within the “safe harbor” for employers relating to “highly compensated employees” because the plaintiff received an “annual base salary” in excess of $455 per week, earned over $100,000 annually, and no improper deductions were made.

Accordingly, the Second Circuit concluded that the FLSA’s time-and-a-half requirement did not apply to the plaintiff, and it affirmed the trial court’s decision in favor of CVS. [Anani v. CVS RX Services, Inc., 730 F.3d 146 (2d Cir. 2013).]

Reasonable Accommodation Need Not Facilitate Essential Functions of Employee’s Position to Constitute an ADA Violation

The plaintiff in this case, a former assistant attorney general for the Louisiana Department of Justice (LDOJ), claimed that the LDOJ discriminated against her in violation of the Americans with Disabilities Act (ADA) by declining to provide a free on-site parking space to accommodate her disability (osteoarthritis of the knee). The district court granted the LDOJ’s motion for summary judgment, holding that the plaintiff failed to explain how the denial of on-site parking had limited her ability to perform the “essential functions” of her job. The plaintiff appealed, arguing that the ADA did not require a link between a requested accommodation and an essential job function.

The U.S. Court of Appeals for the Fifth Circuit vacated the district court’s decision and remanded the case to the district court for further consideration.  In its decision, the circuit court rejected the district court’s conclusion that the plaintiff could not show that her proposal was reasonable because she had not alleged or demonstrated that “the parking situation limited her ability to perform the essential functions of her job.” Instead, the Fifth Circuit determined, reasonable accommodations were “not restricted to modifications that enable performance of essential job functions.”

The circuit court found that the ADA gave “no indication that an accommodation must facilitate the essential functions of one’s position.” Moreover, it continued, the reserved on-site parking requested by the plaintiff “would presumably have made [the plaintiff’s] workplace ‘readily accessible to and usable’ by her, and therefore might have been a potentially reasonable accommodation.”

The Fifth Circuit added that federal regulations implementing the ADA also indicated that reasonable accommodation “need not relate to the performance of essential job functions.” In fact, the circuit court noted, the Equal Employment Opportunity Commission had issued guidance that stated that “providing reserved parking spaces” might constitute reasonable accommodation under some circumstances. 

Accordingly, the circuit court concluded that the district court had erred in requiring a nexus between the requested accommodation and the essential functions of the plaintiff’s position, and it vacated the district court’s judgment and remanded for further proceedings. It should be emphasized that the circuit court did not determine that the accommodation – the parking spot – that had been proposed by the plaintiff was reasonable, only that the district court should examine that issue on remand. [Feist v. Louisiana, 730 F.3d 450 (5th Cir. 2013).]

Family Could Not Recover Value of Stem Cell Transplant Therapy that Had Not Been Provided to Beneficiary before His Death

Dean Hamann was diagnosed with chronic lymphocytic leukemia and later developed myelodysplatic syndrome. Physicians treating him requested that his employee benefits plan approve stem cell transplant (SCT) therapy along with a trial study. Although his plan covered SCT therapy, the request was denied because the plan excluded coverage for trial studies. In their denial of coverage, the defendants did not state that SCT therapy would be approved if requested without the trial study.

Hamann’s doctors appealed the denial, again requesting SCT therapy along with a trial study; that request was again denied. Hamann’s wife contacted the plan’s administrators directly and was told that coverage for SCT therapy had been denied because it had not been requested apart from the trial study, which was not covered under the plan. Hamann’s doctors once again appealed the denial of coverage, requesting SCT therapy combined with a trial study, or, in the alternative, SCT therapy alone.

This time, more than three months after the initial request, the request for SCT therapy was approved, but not the trial study. By that point, however, Hamann’s health had deteriorated, he could not undergo SCT therapy, and he died shortly thereafter.

Hamann’s family sued under ERISA, alleging that the plan and the plan’s administrator had violated their duty to fairly and timely approve the benefits due Hamann under the plan. As damages, the plaintiffs requested the full value of the SCT therapy that Hamann had sought and that ultimately had been approved, but which had not been provided.

The district court dismissed the plaintiffs’ complaint, finding that they could not recover the value of the benefits due when the beneficiary never had received the SCT therapy. The plaintiffs appealed, arguing that although Hamman had never received and had never paid for the requested treatment, they should be permitted to recover the value of the SCT therapy as a “benefit owed” under the plan. 

The Fifth Circuit affirmed the district court’s decision. It explained that Congress had enacted ERISA to “protect … the interests of participants in employee benefit plans and their beneficiaries.” The Fifth Circuit stated that, under ERISA, when a participant or beneficiary believed that benefits promised to him or her under the terms of a plan were not provided, the participant or beneficiary could bring suit for those benefits. Moreover, the circuit court continued, this statutory provision has been interpreted narrowly, and did “not permit the recovery of extracontractual damages or damages based on undue delay in administration of a disputed claim.” The Fifth Circuit also pointed out that the right to sue to receive benefits (or reimbursement for payments made) was exclusive of other remedies. 

The Fifth Circuit then declared that it had to reject the plaintiffs’ contention that ERISA also permitted recovery of the value of benefits that should have been approved and paid for under the plan. Although plan participants and beneficiaries could recover benefits to which they were entitled under ERISA, the court stated that the law did not provide that beneficiaries could recover benefits they did not, and could not, receive. ERISA allowed an individual to “recover the value of benefits wrongly withheld only as reimbursement if [the individual had paid] for the wrongfully denied treatment,” the Fifth Circuit ruled. The plan and the plan administrators could not be required “to pay the value of a benefit that was never received.”

The circuit court concluded, therefore, that the only remedies that would have been available in this case were for Hamann to have petitioned for the benefits or to have paid for the treatment and then have sought reimbursement under the plan. [Hamann v. Independence Blue Cross, 2013 U.S. App. Lexis 19248 (5th Cir. 2013).]

Suit for LTD Benefits Filed More than Three Years after Claimant Discovered Benefits Had Been Terminated Found Barred by Contractual Limitations Period

The plaintiff in this case, a ballistics technician for the University of Dayton, sought and was granted long term disability (LTD) benefits. The plan administrator subsequently determined that the plaintiff was eligible for vocational rehabilitation and said that it made numerous attempts to contact him. On January 11, 2007, the plan administrator allegedly advised the plaintiff in writing that his LTD benefits had been terminated, effective immediately, “based on his failure to apply for state rehabilitation services and failure to cooperate with [the rehabilitation company] by not responding to repeated attempts to communicate with him.”

On October 16, 2007, the plaintiff contacted the plan administrator regarding his LTD claim and was advised that his benefits had been terminated. The plan administrator then mailed the plaintiff a copy of the January 11 letter.

The plaintiff subsequently retained an attorney. On December 20, 2007, the attorney advised the plan administrator that he represented the plaintiff and that the plaintiff intended to comply with any reasonable requirements demanded by the plan administrator. The attorney explained that the plaintiff had not received the plan administrator’s letters or other modes of communication, and indicated that the January 11, 2007 termination letter had not been received until the copy arrived on October 20, 2007.

The plan administrator treated the attorney’s letter as a notice of appeal and, on January 16, 2008, informed the attorney that it was upholding the termination of the plaintiff’s LTD benefits with an effective termination date of January 11, 2007. The letter also indicated that the plaintiff had exhausted his administrative remedies under the plan, and that the plan administrator would not consider additional appeals.

On July 18, 2011, approximately three years and six months after the denial of the appeal, the plaintiff filed suit in federal district court against the plan administrator and the University of Dayton Long Term Disability Plan for Salaried Associates. The district court granted the defendants’ motion for summary judgment, holding that the plaintiff’s suit was not timely, and he appealed.

The U.S. Court of Appeals for the Sixth Circuit affirmed. In its decision, the circuit court first rejected the plaintiff’s argument that Ohio’s 15 year statute of limitations for breach of contract applied. It found that the plan contained a three year contractual limitations period and confirmed that it was reasonable and enforceable. Then, the circuit court analyzed when the limitations period had begun to run. 

The circuit court pointed out that the policy itself did not explain when the three year period began to run. In the absence of a contract accrual date, the Sixth Circuit said, it would apply the federal rule that an action for benefits accrued when the claimant discovered, or in the exercise of reasonable diligence should have discovered, the acts constituting the alleged violation. As such, it decided, the three year limitations period accrued, at the latest, on October 20, 2007, the date when the plaintiff allegedly first received a copy of the January 11 letter terminating his LTD benefits. It then found that because the plaintiff had not filed suit until July 18, 2011 – nearly nine months after the expiration of the three year limitations period – his claim was time barred. [Williams v. Metropolitan Life Ins. Co., 2013 U.S. App. Lexis 19880 (6th Cir. Sept. 26, 2013).]

Failure to Timely File Motion Dooms Plaintiff’s Request for Attorney’s Fees and Costs

After a federal district court in Michigan found that a plan administrator’s decision to deny the plaintiff long term disability (LTD) benefits was arbitrary and capricious, it entered an order remanding the matter to the plan administrator to perform a functional capacity evaluation to determine the plaintiff’s physical capabilities and to provide a “full and fair review” of the plaintiff’s LTD benefits claim.

Seventy-eight days after the court’s order remanding the case to the plan administrator, the plaintiff filed a motion requesting that the court award her attorney’s fees and costs for her successful appeal. The court denied her motion, finding that it was “not timely.”

As the court explained, the Federal Rules of Civil Procedure provide that, unless a statute or court order provides otherwise, a motion for fees and costs must be filed “no later than 14 days after the entry of judgment.” The court then pointed out that the Eastern District of Michigan’s local rules extended the period during which the plaintiff had to file her motion for attorney’s fees and costs to 28 days after the entry of judgment. Therefore, the court found, the plaintiff was required to file her motion 50 days before she actually had filed it. Because the plaintiff had not complied with this deadline, had not requested an extension of this deadline, and had not put forth any evidence indicating that her delay was a result of “excusable neglect,” the court concluded that she could not seek fees and costs. [Magdziak v. Metropolitan Life Ins. Co., 2013 U.S. Dist. Lexis 142384 (E.D.Mich. Oct. 2, 2013).]

Trial Ordered for Lady Gaga’s Personal Assistant’s Claim for Overtime

The plaintiff in this case was employed as a personal assistant to Stefani Germanotta – who also is known as “Lady Gaga.” The plaintiff asserted that she initially was paid $1,000 per week as Lady Gaga’s personal assistant and that she expected to be working a “24/7 job.” She subsequently was given a raise and was paid $75,000 per year.

The plaintiff described her duties for Germanotta as entailing:

anything and everything that [Germanotta] needed, from cleaning the hotel room and cleaning up after her to helping her put her makeup out, have her makeup done, making sure her hair looked right before she went on stage, making sure she drank water, making sure she had tea, making sure that she ate, making sure she was hopefully on time to places. And just being there for her.

The plaintiff said that she monitored Germanotta’s email, handled certain of her email and telephone communications, and was responsible for setting up her computer and printing out documents she wanted. She said that she also handled all of Germanotta’s luggage – generally 20 bags – clothes, accessories, makeup, and toiletries as the tours proceeded. She also said that she was responsible for ensuring that Germanotta received her “special food” at every location. For performances, the plaintiff said she was responsible for ensuring that Germanotta arrived on time, had ample time for hair-styling, makeup, and voice warm-ups, and then appeared on stage on time. She said that she assisted with costume changes during performances and that after a performance she was responsible for having ice packs, tea, and a shower ready at the venue, for ensuring that dinner was available, and for arranging the exit from the venue.

CVS Pharmacist Found Exempt from FLSA’s Overtime Rules

The plaintiff sued Germanotta and her company, Mermaid Touring, Inc., alleging that they had violated the Fair Labor Standards Act by failing to pay her overtime wages. She alleged that she was “expected to be working and/or on call every hour of every day” during her employment with Lady Gaga and, as a result, that she was owed overtime pay for every hour of every day beyond 40 hours per week for every week of her employment.

The defendants moved for summary judgment, asserting, among other things, that the plaintiff could not recover for “on-call” time when she was able to engage in activities of her choice while “on-call.”‘

In its decision denying defendants’ motion for summary judgment, the court first found that “on-call” time could constitute work and could be compensable under the FLSA where the employer restricted an employee’s ability to use the time freely for his or her own benefit. Thus, the court ruled that the plaintiff’s “on-call” time potentially qualified for overtime compensation.

The court then ruled that questions of fact precluded any determination concerning how much of the plaintiff’s “on-call” time constituted “work” within the meaning of the FLSA. It found that the plaintiff was Germanotta’s only personal assistant for most of the time in dispute and that both sides agreed that she was expected to be available as needed “throughout each hour of each day.” The court ruled that a jury had to decide how much of the plaintiff’s “on-call” time was “so circumscribed [by Germonatta]” that the plaintiff was restricted from “effectively using the time for personal pursuits” and therefore entitled to overtime pay for that time.  Thus, the court concluded, the defendants were not entitled as a matter of law to judgment on this issue. [O’Neill v. Mermaid Touring Inc., 2013 U.S. Dist. Lexis 129750 (S.D.N.Y. Sept. 10, 2013).]

Reprinted with permission from the January 2014 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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