Wage and Hour Case Notes

• Publication year: 2016
• Author: By Leonard H. Sansanowicz

Wage and Hour Case Notes

By Leonard H. Sansanowicz

Leonard H. Sansanowicz is a senior associate with Feldman Browne Olivares, APC and represents employees in all aspects of employment law. He has been a Southern California Rising Star each year since 2013 and in 2015 was named in the Up-and-Coming 100 list. He can be contacted at: leonard@leefeldmanlaw.com.

Unused Benefits Must Be Included in Regular Rate of Pay for Calculation of FLSA Overtime Wages

Flores v. City of San Gabriel, Nos. 14-56421, 14-56514, 2016 U.S. App. LEXIS 10018, 2016 WL 3090782 (9th Cir., June 2, 2016)

The City of San Gabriel provided its employees a Flexible Benefits Plan, under which it designated a certain monetary amount for each employee to purchase medical, dental, and vision benefits. Employees had to use those funds to purchase those benefits, unless they showed they had alternative medical coverages, e.g., through a spouse. Those who declined the City's benefits package received the unused portion of the Plan as a cash payment in their paychecks. The City excluded this cash-in-lieu of benefits from its calculation of employee overtime rates.

The Ninth Circuit affirmed the district court's ruling that this was an improper pay practice, finding that section 207(e)(2) of the Fair Labor Standards Act of 1938 (FLSA) (which exempts from the regular rate of pay payments that are not made to compensate hours worked) did not exclude the cash-in-lieu of benefits from calculation of overtime wages. The appellate court relied on a Department of Labor (DOL) regulation¹ and specified that while certain payments could be excluded from overtime calculations, "It is clear that [Section 207(e)(2)] was not intended to permit the exclusion from the regular rate of payments . . . which, though not directly attributable to any particular hours of work are, nevertheless, clearly understood to be compensation for services."

The court found the City's cash payments to be compensation offered in exchange for its employees performing work. Even if the City had insisted the program was not compensation, the court cited section 207(e)(4) of the FLSA² as a separate basis for its ruling, suggesting that any payments related to benefits should be considered compensation.

Where Common Claims Predominate, Individualized Damages Calculations Alone Do Not Defeat Class Certification

Vaquero v. Ashley Furniture, No. 13-56606, 2016 U.S. App. LEXIS 10365, 2016 WL 3190862 (9th Cir., June 8, 2016)

The district court granted class certification on behalf of plaintiff and other current and former sales associates. Defendants appealed, contending that plaintiff failed to establish the commonality of his claims with those of other plaintiffs or the predominance of class claims. Defendants also asserted that the damages calculations in the case violated their rights under the Rules Enabling Act,³ in that use of representative evidence deprived them of the opportunity to individually cross-examine and challenge the claims of each of the 605 class members.

The Ninth Circuit affirmed the district court's ruling, finding that plaintiff's complaint withstood the test of Wal-Mart Stores, Inc. v. Dukes,⁴ in which the Rule 23(a)(2) "commonality" requirement had to "depend upon a common contention" that was "capable of classwide resolution." The appellate court further held that plaintiff properly alleged predominance under Rule 23(b) (3) because in a wage and hour action, "the employer-defendant's actions necessarily caused the class members' injury"⁵ The court distinguished defendants' reliance on Comcast Corp. v. Behrend,⁶an antitrust case, from the Ninth Circuit's interpretation of Comcast, that plaintiff-employees have to prove that the defendant's conduct created the liability that caused their damages.⁷

The appellate court also drew from its prior holding in Yokoyama v. Midland Nat'l Life Ins. Co.,⁸ and reaffirmed that "damage calculations alone cannot defeat certification . . . the amount of damages is invariably an individual question."⁹ Moreover, recent Supreme Court precedent, Tyson Foods, Inc. v. Bouaphakeo,¹⁰ confirmed that class certification was appropriate even when class members had to prove both liability and damages individually.

The Court also rejected defendants' Rules Enabling Act argument, on the grounds that Tyson Foods specifically held that Dukes does not stand for the proposition that a trial plan relying on statistical sampling is improper, and reaffirmed the holding in Tyson Foods that concerns about failures of proof should be addressed at summary judgment, not certification.¹¹

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2011 DOL FLSA Regulation Not Entitled to Chevron Deference Because Agency Did Not Follow APA Notice Procedures

Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016)

The FLSA requires employers to pay overtime wages to any employee who works more than 40 hours in a workweek.¹² Certain professions or positions are exempted from the overtime requirements.¹³ In 1961, Congress enacted a blanket exemption from FLSA overtime and minimum wage requirements for all automobile dealership employees generally, but narrowed that amendment in 1966, eliminating the minimum wage exemption and specifying the overtime exemption applied only to "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles . . . [employed by an] establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers."¹⁴ Congress also authorized the DOL to "promulgate necessary rules, regulations, or orders" regarding the exemption.¹⁵

In 1970, the DOL, intending to issue a regulation reflecting its own views...