From the Courts

June 1, 2015 | Appeals | Insurance Coverage

Court Limits Prejudgment Interest on Plaintiff’s Award to Federal Interest Rate

A jury reached a verdict in favor of the plaintiff in this case and against Pfizer, Inc., on her claims of discrimination and retaliation based on her disability under Title I of the Americans with Disabilities Act (ADA) and the Oregon Rehabilitation Act. The jury awarded the plaintiff $2,700,660 in economic damages resulting from her termination, which it reduced by $2,025,495 because it found that the plaintiff had violated a Pfizer policy regarding use of certain medication without informing Pfizer. This resulted in a net economic damages award of $675,165. The jury also awarded the plaintiff $500,000 in emotional distress damages.

The plaintiff proposed a judgment that included prejudgment interest at Oregon’s statutory rate of nine percent rather than the substantially lower federal post-judgment interest rate.

For its part, Pfizer maintained that an award of prejudgment interest was not appropriate at all. It also argued that if the court decided to award prejudgment interest, the rate should be calculated pursuant to federal law.

In its decision, the court explained that prejudgment interest was an element of compensation, not a penalty, and that prejudgment interest had the primary purpose of making an aggrieved party whole. The court also stated that an award of prejudgment interest was within its discretion and was guided by the “balancing of equities.”

The court then rejected Pfizer’s contention that an award of prejudgment interest would represent a penalty to Pfizer and not compensation for the plaintiff, explaining that the economic damages awarded by the jury likely represented the plaintiff’s lost wages. The court pointed out that the jury had determined that Pfizer had wrongfully terminated the plaintiff’s employment, depriving her of her pay from the date of her termination. The court noted that, from the date of the plaintiff’s termination, Pfizer had use of the money it otherwise would have been paying to the plaintiff in salary. The court ruled, therefore, that awarding prejudgment interest in this case served to “fully compensate” the plaintiff for her lost wages.

With respect to the interest rate, the court observed that, generally, the interest rate prescribed for post-judgment interest under federal law was appropriate for fixing the rate of prejudgment interest. It then found that the plaintiff had not demonstrated substantial evidence sufficient to require application of the Oregon statutory rate of nine percent rather than the federal rate.

The court reasoned that although the plaintiff had prevailed on her state law claims, she also had prevailed on her federal ADA claims. More importantly, the court continued, the jury had not allocated damages based on violations of state or federal law. Thus, the court declared, it had no basis on which to conclude that the plaintiff’s economic damages were based exclusively on state law. The court also pointed out that the plaintiff had brought her claims in federal court, declaring that that weighed in favor of applying a federal rate to her claims.

Accordingly, the court awarded prejudgment interest at the federal rate on the plaintiff’s economic damages award from the first full month following her termination through the last full month prior to the date Pfizer had discovered that she was using sedating medication.

The court also awarded prejudgment interest on the plaintiff’s emotional distress damages from the date of the verdict until the date of entry of the final, appealable judgment. The court reasoned that awarding prejudgment interest on the plaintiff’s non-economic damages only from the date of the verdict recognized the jury’s substantial reduction of her damages because of her continued medication use. [Arnold v. Pfizer Inc., 2015 U.S. Dist. Lexis 33216 (D. Ore. March 18, 2015).]

District Court May Not Refuse to Certify a Class Merely Because Damages Have to be Ascertained on an Individual Basis, Second Circuit Decides

The plaintiffs in this case, four former employees at certain Applebee’s restaurants owned and operated in upstate New York by T.L. Cannon Corp., sued Cannon in a federal district court in New York. The plaintiffs asserted a collective action for violation of the federal Fair Labor Standards Act and a putative class action for violations of the New York Labor Law. Among other things, the plaintiffs alleged that Cannon had a policy of not paying hourly employees an extra hour of pay when working a 10-hour work day as then was required by New York law (the spread-of-hours claim). The plaintiffs also alleged that Cannon required its managerial staff to subtract pay for statutorily-mandated rest breaks that the employees did not actually take (the rest-break claim).

Following discovery, the plaintiffs moved to certify subclasses corresponding to each New York Labor Law claim pursuant to the Federal Rules of Civil Procedure. They argued that issues common to the question of liability predominated over any individual questions relating to damages.

The district court found that damages were “highly individualized” and it rejected the plaintiffs’ argument that the presence of individualized damages was not fatal to the predominance inquiry. Declaring that the plaintiffs had failed to offer a damages model that was “susceptible of measurement across the entire class,” the district court denied certification on the plaintiffs’ spread-of-hour and rest-break claims.

The plaintiffs appealed to the U.S. Court of Appeals for the Second Circuit, which reversed.

In its decision, the Second Circuit explained that, in the Second Circuit, the fact that damages may have to be ascertained on an individual basis was not sufficient in and of itself to defeat class certification under the Federal Rules of Civil Procedure. Rather, it continued, the fact that damages might have to be ascertained on an individual basis simply was one factor that a court had to consider in deciding whether issues susceptible to generalized proof outweighed individual issues when certifying a case as a whole. The circuit court concluded that the recent decision by the U.S. Supreme Court in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), which involved damages and class certification, did not foreclose the possibility of class certification in cases involving individualized damages calculations.

Having rejected the district court’s sole reason for denying the plaintiffs’ motion for class certification, the Second Circuit returned the case to the district court for it to consider the plaintiffs’ motion. [Roach v. T.L. Cannon Corp., 778 F.3d 401 (2d Cir. 2015).]

Plaintiff’s Failure to Demonstrate “Serious Health Condition” Dooms His FMLA Claims

The plaintiff in this case worked at a U.S. Steel Tubular Products, Inc., plant in Pine Bluff, Arkansas, and was scheduled to work May 12 through May 15, 2011. On May 12, he informed his supervisor that he was not feeling well. He left a voicemail message for the company’s employee-relations supervisor, left work, and went to a health care clinic.

A physician assistant diagnosed the plaintiff with high blood pressure, prescribed blood pressure medication, and told him to follow up with his regular physician. He signed a note that stated that the plaintiff was seen at the clinic and could return to work on May 16, 2011.

The plaintiff returned to the plant and gave the note to a supervisor, explaining that he would be back on May 16. He also left another voicemail for the company’s employee-relations supervisor, in which he stated that he had been taken off work for a few days and that he had left a work excuse with his supervisor.

The next day, May 13, the employee-relations supervisor called the plaintiff and asked him to come in to discuss the note from the physician assistant. She asked him who had written his name on the note, and he explained that he had filled in his own name at the physician assistant’s request. She instructed him to return to the clinic and get another excuse.

Later that day, the plaintiff returned with a second note, which a paramedic at the clinic had signed because the physician assistant was busy. The employee-relations supervisor rejected the note, telling the plaintiff that it was not acceptable and that he needed to obtain another note that stated the reasons for being off work. She said that she would prefer if he brought the note back before the end of the day.

U.S. Steel’s attendance policy also required that, under certain circumstances, employees provide written documentation from their health care providers stating that they were “totally disabled from working” on the days of their absence, and the employee-relations supervisor claimed that the note violated this policy, although she never communicated this to the plaintiff. He went to obtain a third note, but the clinic would not give a more detailed explanation for his absence.

According to the employee-relations supervisor, the plaintiff was suspended on May 16, 2011 and was terminated on May 18. Emails, memoranda, and letters by the employee-relations supervisor and other agents of U.S. Steel indicated that the plaintiff had been suspended and then terminated for altering, falsifying, or forging the work excuse. From May 12 until the time of his termination, U.S. Steel never provided him with notice of his rights and obligations under the Family and Medical Leave Act of 1993 (FMLA); neither was such notice included in the company’s employee handbook.

On May 18, 2011, the physician assistant faxed new copies of the work excuses to the employee-relations supervisor and explained that he had, in fact, given the excuses to the plaintiff. Later, the physician assistant provided a personally signed letter explaining that the plaintiff had been to see him in the clinic and that, to his knowledge, none of the work excuses were falsified. The plaintiff was not reinstated to his position.

Sometime after his termination, the plaintiff saw a physician at his regular doctor’s office, who found that his blood pressure was normal and who advised him to use exercise to control it. The plaintiff did not offer any evidence to show the specific date on which this follow-up visit took place, nor did he offer evidence that he had any further communication or appointments with the physician assistant regarding treatment for or updates on his condition.

The plaintiff sued U.S. Steel, alleging that U.S. Steel had interfered with his FMLA rights, failed to provide him with notice of his rights and obligations under the FMLA, failed to reinstate him when his leave ended, and retaliated against him for taking FMLA leave. The district court granted summary judgment in favor of the company, concluding that the plaintiff had not provided sufficient notice of his need for FMLA leave and that he had not established that the company’s proffered reason for terminating him was pretextual.

The plaintiff appealed to the U.S. Court of Appeals for the Eighth Circuit, which affirmed.

In its decision, the circuit court explained that, as a prerequisite to succeeding on his FMLA claim, the plaintiff had to demonstrate that he had a “serious health condition,” defined in the applicable federal regulations as “an illness, injury, impairment or physical or mental condition” that involved either inpatient care or “continuing treatment by a health care provider.” The circuit court determined that the plaintiff had not demonstrated that he had a serious health condition and, therefore, could not demonstrate that he was entitled to FMLA benefits.

First, the Eighth Circuit rejected the plaintiff’s argument that because he had been treated for high blood pressure on May 12 and then treated for a second time at his regular doctor’s office after his termination, he met the “two-treatments definition” of a serious health condition. The circuit court pointed out that the plaintiff had offered no evidence that his follow-up visit had occurred within 30 days of May 12, his first day of incapacity, as the regulations required. Moreover, the circuit court added, the plaintiff had not shown that the physician assistant had determined that a second visit was necessary within 30 days, as the regulations required.

The Eighth Circuit also was not persuaded by the plaintiff’s argument that because he had been treated for high blood pressure, had received prescription medication, and had been instructed to follow up at some point with his regular doctor, he met the “regimen definition” of a serious health condition.  The circuit court acknowledged that a course of prescription medication could qualify as a “regimen of continuing treatment” and that a single treatment by a health care provider resulting in a prescription, coupled with the requisite period of incapacity, could establish a serious health condition under the regimen definition. The circuit court stated, however, that the regimen of continuing treatment – in this case, a course of prescription medication – had to be “under the supervision of the health care provider.” It then decided that to interpret the regulation as requiring only a single visit to a health care provider, followed by a course of prescription medication, would be to read the “supervision” language out of the provision.

Because the physician assistant did not oversee, watch, or direct any part of the plaintiff’s treatment regimen, but simply prescribed medication and “sent him on his way,” he did not meet the “supervision” requirement. The circuit court also decided that no physician at the plaintiff’s regular doctor’s office had supervised a regimen of continuing treatment.

Accordingly, the circuit court concluded, the plaintiff had not met his burden of establishing a genuine issue of material fact on the issue whether he met the regimen definition for a serious medical condition.

Finally, the plaintiff also claimed that U.S. Steel had failed to provide him with notice of his rights under the FMLA.  Assuming that were true, the circuit court stated, the plaintiff had to show that U.S. Steel’s alleged failure to provide him with this information had prejudiced him, noting that technical violations of the FMLA were not actionable unless they harmed the employee.  Here, the plaintiff could not demonstrate how any alleged violation had harmed him because his condition did not qualify him for FMLA leave in the first place, the Eighth Circuit found. [Johnson v. Wheeling Machine Products, 2015 U.S. App. Lexis 2567 (8th Cir. Feb. 20, 2015).]

Court Rules that the FLSA’s “Administrative Exemption” Did Not Apply to IT Employees

The three plaintiffs in this case had been employed by Bloomberg L.P. as service desk representatives (SDRs) – information technology (IT) support staff members who provided technical support to Bloomberg’s employees, such as its sales representatives.

SDRs fielded inquiries from employees about their technical support needs, including questions related to computers (hardware and software), mobile technology, and telephone issues. Employee inquiries submitted to SDRs were referred to as “tickets.” When an SDR received a ticket, he or she had to decide whether it presented a problem that he or she could solve and, if so, how to solve it, or whether it presented a problem that had to be “escalated” to a department other than the service desk. As they worked on tickets, SDRs were expected to enter notes regarding the latest status of the resolution of the inquiry, known as “updating.”

Although responding to employee inquiries was an SDR’s primary responsibility, it was not the SDR’s only responsibility. One of the plaintiffs, for example, worked on a six-month-long special project to package and to test connectivity software. Another played a leadership role in a number of special projects, on which he estimated he spent “30 percent” of his working time.

SDRs were hired as full-time employees and generally were assigned to daily shifts totaling 40 hours of work per week. SDRs, however, sometimes would work more or fewer than 40 hours in a given week. When an SDR’s shift began, the SDR was expected to be logged in to Bloomberg’s telephone and ticket systems, ready to field requests; logging in to those systems took about one minute.

A badge system used by Bloomberg required employees to “badge in” when they entered Bloomberg office buildings and “badge out” when they left. The system maintained electronic data. Throughout the day, SDRs took breaks for any number of reasons, including to visit Bloomberg’s “pantry” to get breakfast, drinks, and snacks, to smoke, to make personal telephone calls, or to socialize. Unless SDRs left the building, these breaks were not reflected in the badge data.

SDRs were not explicitly required or encouraged to work from home before or after their shifts; Bloomberg did not expect SDRs to check Bloomberg email anytime outside of their shifts; and Bloomberg did not provide SDRs with mobile devices to remotely access Bloomberg email or systems.

Bloomberg paid the plaintiffs an annual salary as well as a potential annual bonus based on company performance, department performance, and individual metrics. Those bonuses were not tied directly to hours worked, and neither the badge data nor the system login data was part of the individual metrics used in determining bonuses.

Bloomberg apparently classified the SDR position as exempt from the overtime requirements of the federal Fair Labor Standards Act (FLSA), as Bloomberg did not pay SDRs overtime.

The plaintiffs sued Bloomberg, claiming that they had been denied overtime pay at the rate of time-and-a-half for hours they had worked in excess of 40 in a week in violation of the FLSA.

The plaintiffs moved for summary judgment on whether they were covered by, and not exempt from, the FLSA. Bloomberg contended that they were exempt as employees “employed in a bona fide … administrative … capacity.”

The court agreed with the plaintiffs and found that SDRs were not exempted from the wage and hour provisions of the FLSA.

In its decision, the court explained that the FLSA’s “administrative exemption” applied to any employee:

(1) Compensated on a salary or fee basis at a rate of not less than $455 per week;

(2) Whose primary duty was the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

(3) Whose primary duty included the exercise of discretion and independent judgment with respect to matters of significance.

It then ruled that Bloomberg could not show that the third element was satisfied, and that, as a result, the administrative exemption did not apply to the SDRs.

The court explained that, notwithstanding any special projects that the plaintiffs may have undertaken, their primary duty consisted of troubleshooting and fixing problems with other Bloomberg employees’ information technology. This duty, according to the court, did not include “the exercise of discretion and independent judgment with respect to matters of significance.” The court found that neither the level of importance nor consequence of the work the plaintiffs performed rose to the level of a “matter of significance.” As the court explained:

Plaintiffs did not have authority to formulate, affect, interpret, or implement management policies or operating practices. Plaintiffs did not carry out major assignments in conducting the operations of the business. Plaintiffs did not perform work that affected business operations to a substantial degree. Plaintiffs did not have authority to commit Bloomberg in matters that had significant financial impact. Plaintiffs did not have authority to waive or deviate from established policies and procedures without prior approval. Plaintiffs did not have authority to negotiate and bind Bloomberg on significant matters. Plaintiffs did not provide consultation or expert advice to management. Plaintiffs were not involved in planning long- or short-term business objectives. Plaintiffs did not investigate or resolve matters of significance on behalf of management. And plaintiffs did not represent Bloomberg in handling complaints, arbitrating disputes, or resolving grievances.

The court added that the plaintiffs worked on troubleshooting and fixing the computer systems of other Bloomberg employees but said that there was no indication that the plaintiffs designed or developed the hardware and software that formed the basis of the Bloomberg Terminal product.

Accordingly, the court concluded that the plaintiffs were entitled to the summary determination that they did not fall under the administrative exemption to the FLSA. [Siegel v. Bloomberg L.P., 2015 U.S. Dist. Lexis 5602 (S.D.N.Y. Jan. 16, 2015).]

Reprinted with permission from the June 2015 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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