From the Courts

July 1, 2015 | Appeals | Insurance Coverage

Court Dismisses Wage-and-Hour Claims against Wal-Mart

The plaintiff in this putative class action alleged that, during the time she had been employed by Wal-Mart Stores, Inc., as a pharmacist, she took the home study and test portions of the APHA Immunization Certification Training Course. The plaintiff contended that the training course was “directly related” to the job of pharmacist but that neither she nor any other Wal-Mart pharmacists who took the training course had received compensation for off-the-clock time spent taking the home study and test portions of the course.

The plaintiff also alleged that Wal-Mart “had a uniform policy” prohibiting any pharmacist from leaving the pharmacy unattended, which discouraged or prevented them from taking “mandated rest breaks.”

Based on these allegations, the plaintiff asserted claims against Wal-Mart under state and federal law, including for unpaid overtime, failure to pay minimum wage, failure to provide itemized wage statements, and failure to provide rest periods. Wal-Mart moved to dismiss.

The court granted the company’s motion.

In its decision, the court first found that the plaintiff’s “scant allegations” were insufficient to permit an inference that the training course was “work time.” The court observed that the only information that the plaintiff had provided about the training course was that it was an immunization certification course that was “directly related” to the job of pharmacist. This, the court ruled, was “not enough.”

Most importantly, however, the court said that it would be “absurd” to conclude that an employer had to pay for “any and all activities” that were “directly related” to its employees’ jobs without considering the employer’s conduct. The court pointed out that many employees “undoubtedly spend hours of personal time educating themselves” on things “directly related” to their jobs so they might be better, more marketable employees. “A scientist might read journals for personal growth. A computer programmer might learn a new programming language. A teacher might attend a seminar,” the court said. It noted that the plaintiff had not alleged that the course had been given by Wal-Mart or under its auspices or that Wal-Mart had required pharmacists to take the course. Without more, the plaintiff had “no claim to payment for that time,” the court ruled.

For the same reasons, the court then rejected the plaintiff’s contention thatWal-Mart could be held liable for failing to provide rest breaks for pharmacists.The court observed that the plaintiff had alleged only that Wal-Mart “had a uniform policy” prohibiting any pharmacist from leaving the pharmacy unattended, thereby discouraging or preventing them from taking mandated rest breaks. The court said that the plaintiff had not alleged any specific incidents of missed rest breaks or any facts connecting Wal-Mart’s purported policy to missed rest breaks. The court added that the plaintiff also had not alleged that she had worked alone in the pharmacy, that Wal-Mart had failed to provide relief for breaks, or that Wal-Mart had prevented or discouraged her from closing down the pharmacy for breaks.

Concluding that there were “obvious possible justifications” for prohibiting pharmacists from leaving pharmacies unattended, theft prevention being a notable one, the court found that the plaintiff had not demonstrated that Wal-Mart could be held liable for allegedly failing to provide rest breaks. [Nikmanesh v. Wal-Mart Stores, Inc., 2015 U.S. Dist. Lexis 52464 (C.D. Cal. March 16, 2015).]

Comment:  Although the court found the plaintiff’s allegations to be insufficient and dismissed the complaint, it granted the plaintiff leave to serve an amended complaint.

Employer Had to Contribute to Benefits Fund for All Hours Employees Worked, Whether or Not Those Hours Were “Covered” by CBA

Bunn Enterprises, Inc., an employer under the Employee Retirement Income Security Act (ERISA), was a signatory to a collective bargaining agreement known as the Ohio Heavy Highway Agreement (the CBA) with the International Union of Operating Engineers Local 18 and its various branches. By the terms of the CBA, Bunn Enterprises paid “fringe benefit contributions” for hours worked by its employees into the Ohio Operating Engineers Fringe Benefit Programs (the Fund), an ERISA fund for Local 18 members.

The Fund provided employees benefits through the Ohio Operating Engineers Health and Welfare Plan. Under the plan, employees became eligible for various health and pension benefits based on complex rules regarding the number of hours they worked in a specific period of time. These rules also governed whether an employee remained eligible for benefits, so calculations of the hours they worked were essential to receipt of benefits under the plan.

In 2012, the Fund conducted an audit of Bunn Enterprises’ payroll records to ensure the company’s contributions were up to date. According to the Fund, the audit revealed that Bunn Enterprises had not contributed to the Fund for a significant number of hours performed by certain Bunn Enterprises employees. The Fund requested payment, but Bunn refused, stating that the employees had not performed “covered” work under the CBA during the disputed hours and, therefore, were not entitled to benefits contributions for those hours. Many of these disputed hours allegedly were worked by Bunn Enterprises employee Delbert Newlon.

Under the Fund’s “oldest outstanding balance policy,” when an employer had a deficit in its contribution payments, the Fund would apply whatever money was available toward the deficient employee accounts in chronological order. Thus, the earliest created debt (as defined by the Fund) was paid off first, then the next chronologically, and so on. Accordingly, the Fund implemented the policy to apply all of Bunn Enterprises’ contributions to the alleged Newlon deficiency, irrespective of whether Bunn Enterprises had identified such payments as corresponding to other employee hours. The Fund then sent a letter to Bunn Enterprises employees explaining that their benefits would be discontinued due to “insufficient employer contributions” and that they had the option of either paying their own way or seeking coverage elsewhere.

Bunn Enterprises and the impacted employees sued the Fund, seeking a declaratory judgment that the CBA did not require contributions for all hours worked by employees under the CBA, but rather only for work “covered” by the CBA, and that the Fund could not withhold coverage from Bunn Enterprises and the employee plaintiffs by crediting “their” contributions to the alleged Newlon deficiency.

The Fund moved for summary judgment on the ground that the CBA required fringe benefit contributions for all hours worked, regardless of whether the work was “covered” under the CBA. The district court granted summary judgment in favor of the Fund, and Bunn Enterprises and the employee plaintiffs appealed to the U.S. Court of Appeals for the Sixth Circuit.

The Sixth Circuit affirmed.

In its decision, the Sixth Circuit pointed out that the provision of the CBA section that addressed “Fringe Benefit Programs” provided that fringe benefit contributions were to be paid at specified rates “for all hours paid to each employee by the Employer under this Agreement.” The circuit court rejected the argument put forward by Bunn Enterprises and the employee plaintiffs that the CBA distinguished between work covered by the CBA and work that fell outside its ambit with respect to benefits contributions.

As the Sixth Circuit explained, the CBA set out the details regarding payment of benefits contributions, explicitly requiring contributions to be made “for all hours paid to each employee by the Employer under this Agreement[.]” In the circuit court’s view, if the parties had wanted to limit benefits contributions solely to “covered” work hours, they could have stated so – but they had not.

The circuit court also pointed out that the concept of “covered” work was absent from the provisions in the CBA that provided detailed wage classifications, rates of pay, and benefit contribution amounts for employees in different work categories. The Sixth Circuit concluded that the CBA unambiguously required employer signatories to contribute the appropriate benefits contributions for all hours worked by their employees, regardless of whether those hours were “covered” under the contract. [Bunn Enterprises, Inc. v. Ohio Operating Engineers Fringe Benefit Programs, 2015 U.S. App. Lexis 5425 (6th Cir. April 1, 2015).]

Circuit Court Affirms Decision Denying Benefits to Discharged Employee Who Had Not Manifested Disability for at Least Seven Days

On July 29, 2011, Janssen Pharmaceuticals, Inc., which was wholly owned by Johnson & Johnson, terminated the plaintiff’s employment. On the same day, the plaintiff requested short and long term disability benefits under plans provided by Janssen, based on what she characterized as her inability to do her work owing to narcolepsy cataplexy syndrome.

After her claims were denied by Reed Group, Janssen’s agent for responding to short term disability claims under Janssen’s self-funded plan, and by Prudential Insurance Company, which administered Janssen’s long term disability plan, the plaintiff sued.

The district court dismissed her complaint on the ground that it failed to address the crucial plan condition that eligibility for a disability benefit required a minimum of seven consecutive days of disability during the period of employment. The district court relied primarily on the following provision in the short term plan:

If Reed Group approves your disability, [short term] benefits begin on your first full day of absence due to a disability if you are unable to work according to your regularly scheduled hours for more than seven consecutive calendar days.

The plaintiff appealed to the U.S. Court of Appeals for the First Circuit, arguing that the seven-day period was not a “condition precedent to whether benefits were paid” but merely governed the timing of commencement of benefit payments.

The First Circuit, in a decision written by retired U.S. Supreme Court Justice David H. Souter, sitting by designation, rejected the plaintiff’s arguments and affirmed the district court’s ruling.

In its ruling, the First Circuit acknowledged that the plaintiff’s interpretation of the policy language was correct inasmuch as the policy imposed at least a seven-day wait if it turned out that a benefit was due. The circuit court found, however, that the plaintiff’s reading of the policy language was “crucially incomplete.” The circuit court stated that, under the short term plan, no benefit ever became payable unless the employee manifested a disability in the manner required for seven consecutive days. Only if a benefit became payable, the circuit court declared, would the policy language also answer the timing question, by the provision that the benefit would be paid retroactively to the first day of inability to work at the regular schedule.

Thus, the First Circuit found, timing and eligibility both were governed by the same language in the policy. By providing that benefits would be paid retroactively after seven consecutive days of inability to work at the regular schedule, the plan language necessarily meant that no benefits actually would be paid unless the employee manifested a disability in the manner required for at least seven days, the First Circuit decided.

Accordingly, the First Circuit reached the same conclusion as the district court: that the plaintiff had failed to state a claim for short term disability benefits as to Janssen and Reed. Because the long term disability plan conditioned eligibility on an employee’s prior receipt of 26 continuous weeks of benefits under the short term plan, the circuit court concluded, the plaintiff’s ERISA claim against Prudential also had to be dismissed. [Clark v. Janssen Pharmaceuticals, Inc., 2015 U.S. App. Lexis 5739 (1st Cir. April 8, 2015).]

Employee’s “Short-Term” Health Conditions Were Not Protected by the FMLA

In this case, the plaintiff served as a nurse at the ManorCare of West Des Moines skilled nursing facility in West Des Moines, Iowa, from May to July 2009. Rehired in March 2010, she was promoted to director of care delivery (DCD) in September.

That summer and fall, the plaintiff said, she began experiencing significant weight gain and edema. The plaintiff said that her primary health care provider discontinued a high blood pressure medication, suspecting her edema was a side effect, but that this did not resolve the problems. In late December, the plaintiff asserted, she gained 14 pounds and had pitting edema. She added that, in January, she was diagnosed with stage one chronic kidney disease (CKD), “secondary to obesity.”

In early 2011, ManorCare nurses supervised by the plaintiff complained about her job performance to her supervisor. The supervisor and the facility’s human resources director met with the plaintiff and issued her a “Third/Final Written Warning” for violating “Major/Type B Work Rules.” The warning cited inappropriate negative comments about her work at the nurses’ station, where patients could overhear; failure to notify staff members she had cancelled a meeting; taking an extended lunch break; and failing to attend patient care conferences. A “Performance Improvement Plan” accompanied the warning, listing actions to correct the deficiencies and setting a meeting “to discuss progress.”

On Friday, February 25, the plaintiff’s supervisor spoke to the plaintiff about a number of unfinished tasks; when the supervisor checked on the plaintiff’s progress later that day, the supervisor said that she learned that the plaintiff had left work without completing all of the tasks.

Early on Monday, February 28, the plaintiff called her supervisor, reporting that she was having chest pains and was going to the emergency room, where she was admitted with complaints of “atypical chest pain.” The plaintiff was discharged at 4:30 without a definite diagnosis of the chest pain, with instructions to follow up with her physicians as soon as possible, and with a physician’s note excusing her from work until Wednesday, March 2, which the plaintiff reported to her supervisor.

The plaintiff’s supervisor instructed the plaintiff to come to work at 1:00 p.m. on March 2, when the plaintiff was advised that she was being suspended pending an investigation into her failure to perform job functions.

She received a “Type C Work Rule” violation that, combined with her prior Third/Final Written Warning, resulted in termination. The plaintiff sued ManorCare, alleging that it had interfered with her statutory rights under the Family and Medical Leave Act (FMLA) by terminating her for failing to perform job duties during an FMLA-protected absence.

The FMLA entitles an eligible employee to 12 weeks of unpaid leave during any 12 month period if the employee has a serious health condition that makes the employee unable to perform the functions of the employee’s position.

After extensive discovery, the district court granted ManorCare’s motion for summary judgment. The district court decided that the plaintiff had “failed to provide evidence she suffered from a serious health condition that made her unable to perform the functions of her position.” Thereafter, the plaintiff appealed the dismissal of her FMLA claims to the U.S. Court of Appeals for the Eighth Circuit.

The Eighth Circuit affirmed the district court’s decision.

In its decision, the circuit court acknowledged that kidney disease could be a serious health condition. The circuit court noted, however, that a kidney specialist who had examined the plaintiff had testified that stage one CKD was a warning that the kidneys were working too hard, not an advanced disease, and that renal testing of the plaintiff had revealed no abnormal kidney functions.

The Eighth Circuit then rejected the plaintiff’s contention that her unexplained edema and substantial weight gain amounted to a “chronic serious health condition.” The Eighth Circuit observed that these conditions had not affected the plaintiff’s ability to perform the functions of her position and that she had not requested leave other than time needed to attend periodic medical appointments, which ManorCare consistently had allowed. The circuit court said that it did not doubt that edema and fluid retention could be signs of a potentially serious condition, such as congestive heart failure, liver disease, or primary kidney disease, but it observed that no such condition ever had been diagnosed and that ManorCare had not interfered with the plaintiff’s medical appointments to obtain needed diagnosis and treatment.

Moreover, the Eighth Circuit declared, the plaintiff’s edema and fluid retention had not resulted in any “incapacity” – inability to work – other than brief absences to obtain medical diagnosis and treatment. The circuit court also was not persuaded by the plaintiff’s argument that she was incapacitated when she had visited a physician complaining about a cough, severe rash, continued fluid gain, and depression and had been diagnosed with pruritus and acute bronchitis, prescribed medication, and told to stay off work for two days. In the Eighth Circuit’s opinion, those were “short-term conditions,” not the kind of “serious health condition” that the FMLA was intended to cover.

The Eighth Circuit also rejected the plaintiff’s argument that her February 28 hospital admission was a second period of incapacity attributable to a chronic serious health condition. According to the circuit court, the plaintiff had no chronic serious health condition at that time, only “recurring health issues” that did not make her unable to perform her job. Finally, the circuit court agreed with the district court that even if the plaintiff had a chronic serious health condition so that her February 28 hospital visit was FMLA protected, Manor Care still was entitled to summary judgment because it terminated her for performance deficiencies unrelated to either her medical condition or her attendance issues. [Dalton v. ManorCare of West Des Moines IA, LLC, 2015 U.S. App. Lexis 5536 (8th Cir. April 7, 2015).]

“Inadequate Wage Statement” Claim Withstands Summary Judgment Motion in California

The plaintiff was a sales associate for Saks & Company at a Saks Off Fifth store in California for about seven weeks, beginning on May 6, 2014. At the beginning of her employment, she received, reviewed, and kept a copy of Saks’ “Associates Handbook.” The handbook stated that hourly associates “are paid weekly and checks are dated on Friday for the previous pay period. The pay period runs Sunday to Saturday.” The handbook provided instructions for how to sign up for direct deposit, stating, “If Direct Deposit is not elected, live payroll checks are distributed via U.S. Mail to all Associates. 2008-current payroll checks can be viewed in Employee Self Service (ESS) via the S Portal at:” It also stated:

There are two sections to paychecks:

  1. The check.
  2. A statement of your earnings for the pay period, as well as deductions that you have authorized and/or the government requires, are itemized.

The plaintiff was informed that hard-copy paychecks would include detachable wage statements, and she chose to receive her checks by mail rather than by direct deposit. Accordingly, she was issued a paper paycheck every Friday from May 16, 2014, to June 20, 2014. Attached to each paycheck was an itemized pay stub that listed, among other things, the number of hours worked, gross earnings, itemized withholdings for taxes and other deductions, net pay, and the end date for the pay period.

The hard-copy pay stubs, however, did not include the beginning date of the pay period.

For each pay period, Saks also uploaded to its ESS website an electronic wage statement. Unlike the pay stubs, the electronic statements included the beginning date of the pay period.

The plaintiff sued Saks, alleging that the company had failed to provide proper wage statements in violation of California Labor Code § 226(a), which required employers to provide accurate itemized wage statements that included, among other things, the inclusive dates of the relevant pay period.

Saks moved for summary judgment, arguing that it had not violated California Labor Code § 226 by providing the plaintiff with a pay stub attached to her paychecks that did not include the beginning pay-period date because it also had issued electronic wage statements that contained the beginning pay-period date.

The court denied Saks’ motion.

In its decision, the court acknowledged that an electronic wage statement might be able to satisfy an employer’s obligations under Section 226(a), at least under some circumstances. The court said, however, that it was “not clear that providing an electronic wage statement” satisfied Section 226(a) when, as in this case, an employee had chosen to be paid by hard-copy check. It concluded by pointing out that the plaintiff had elected to receive a hard-copy paycheck, the handbook she was given stated that live paychecks would be accompanied by a statement of earnings, the stubs she received appeared to be just that – except that they did not list the beginning date of the pay period, thus failing to comply with Section 226(a)(6) – and, according to the plaintiff, she was never told that the online statements had contained anything different from the ones that were mailed to her. It then found that Saks was not entitled to judgment as a matter of law with respect to whether or not it had violated California Labor Code § 226. [Derum v. Saks & Co., 2015 U.S. Dist. Lexis 38790 (S.D. Cal. March 26, 2015).]

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

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