Third Circuit Ruling FLSA Overtime Wages

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On May 23, 2016 the Third Circuit Court of Appeals held that truck drivers who mainly drove intrastate, and only incidentally or occasionally drove interstate during their business, were entitled to the benefits of the Fair Labor Standards Act (FLSA) and Pennsylvania Minimum Wage Act (PMWA) regarding overtime pay rates. Mazzarella v. Fast Rig Support, LLC, 823 F.3d 786 (3d Cir. 2016). Drivers for a trucking company claimed that they often worked over forty hour weeks, and yet were only compensated for overtime when they worked over forty-five hour weeks. The trucking company attempted to argue that because it was a motor carrier, under the Department of Transportation’s jurisdiction, and its business transporting water to fracking sites involved transporting an item between “a State and a place in another State” it was consequently exempt from the FLSA through the Motor Carrier Act (MCA).

The Third Circuit however rejected the trucking company’s representation and classification of the nature of its business. The Court found that the operations of the drivers in their work was not part of a “continuous stream of interstate travel” that would fall under the MCA’s exemption to the FLSA. All evidence presented by the trucking companies demonstrated that their operations only occasionally and incidentally impacted interstate commerce. Their operations that only occasionally entailed driving to other states were not part of a “practical continuity of movement in interstate commerce”. The Court ruled that exemptions to FLSA should be narrowly construed against the employer to ensure employees are properly protected. The high burden of proving an exemption to the FLSA’s overtime requirements was not met by the mere statements and unspecific evidence put forward by the company to demonstrate the interstate nature of its employees’ operations. The truck drivers’ award of $31,000 was affirmed by the Court to compensate them for the overtime worked and guarantee their protection under the FLSA.

For more information, call our Philadelphia employment lawyers at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Superior Court Upholds PA Overtime Rate Method  

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The Superior Court of Pennsylvania recently ruled in a case that dealt with the proper method of calculating overtime wages paid to non-exempt employees. In Chevalier v. General Nutrition Centers, Inc., 177 A.3d 280 (Pa. Sup. Ct. 2017) employees at GNC, a company selling health and nutrition related products, brought suit against the company alleging that the calculation of their overtime pay violated Pennsylvania Minimum Wage Act (PMWA).The PMWA requires “a payment of at least one and one-half of the employees’ regular rate” for each hour worked in excess of forty hours. Id. GNC’s method of calculating overtime pay is called the fluctuating workweek (“FWW”) method. Id. The FWW method takes the salaried employee’s weekly pay and divides it by the total number of hours worked (including overtime hours) which produces a certain dollar amount which is considered the “regular rate”. This regular rate is then halved (.5) and multiplied by the number of hours of overtime worked which produces the final overtime dollar amount. The employees’ method of calculation, also referred to as the forty-hour method, takes the forty-hour work and divides it by the hourly rate (yielding a higher “regular rate” than the FWW). The regular rate plus half of the regular rate (1.5) is then multiplied by the hours worked (which produces a substantially higher dollar amount than the FWW).

GNC argued that the United States Supreme Court held that the FWW method was lawful under the FLSA (“Fair Labor Standards Act”) and the PA General Assembly adopted the “regular rate” terminology in the PMWA’s overtime provision. In addition PA case law instructs that, unless a contrary intent appears, when a PA statute tracks the language of a federal statute, PA courts should consult federal authority for guidance in ascertaining the meaning of the term in question. Notably, nothing in the text of the PMWA suggest that the General Assembly intended to give a meaning to “regular rate” different from that establishes under the FLSA. GNC further argued that while the PMWA does authorize the PA Department of Labor and Industry to promulgate regulations defining “regular rate”, it hasn’t done so, which shows there was no intent to bar the FWW method.

The employees countered that the important difference between the PMWA and the FLSA is that the policy statements in the preamble to the PMWA demonstrate that it was intended to provide greater protection for employees in Pennsylvania. They also emphasized that although there may be no regulation that prohibits the FWW method, Pennsylvania has not promulgated regulation that authorizes the FWW. Id. Lastly, the employees argued that the FWW method runs directly counter to the purpose of the PMWA which is promoting employment by incentivizing employers to hire more workers as opposed to paying existing workers overtime.

The Court, in its analysis, quickly disposed of the issue pertaining to the “one and one half” premium on overtime hours. It concluded that the trial court correctly determined that the second part of GNC’s FWW method, paying an overtime premium of one-half the regular rate, violated the PMWA. The Court reasoned that had the Department wanted to authorize one-half time payment it surely knew how to do so. Rather, the Department adopted the “one and one-half times” language from the FLSA overtime provision. Clear rules of statutory construction demonstrate that the General Assembly intended the multiplier to be one and one half as opposed to one-half.

In addressing the proper calculation of “regular rate”, the Court concluded that absent legislative or regulatory action, GNC’s calculation of the “regular rate” did not violate the PMWA. The Court began by examining the history of the overtime provisions in both the FLSA and the PMWA. The Court said that by the time the PMWA was enacted, the FLSA was clearly understood to permit employers to calculate the “regular rate” of salaried employees by reference to the total hours worked. This idea was affirmed in a Supreme Court case and then codified in a series of federal regulations. The Court concluded further that the General Assembly was aware of the FLSA, knew how to deviate from the FLSA, but did not do so. Finally, the Court said that the Employees argument based on the PMWA’s general purpose is unavailing. Therefore, the Court upheld the GNC’s FWW method of calculating overtime hours but struck their half multiplier in a win-lose situation for both parties.

For more information, contact the Philadelphia overtime lawyers at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

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Supreme Court holds “Service Advisors” exempt under FLSA

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On April 2, 2018, the United States Supreme Court held that service advisors at car dealerships are exempt from the FLSA’s overtime-pay requirements under 29 U.S.C. 213(b)(10)(A). Encino Motorcars, LLC v. Navarro, 138 S.Ct. 1134 (2018). In Encino Motorcars, the Court considered the scope of the Fair Labor Standards Act (FLSA) which requires employers to pay overtime to covered employees who work more than 40 hours a week. The FLSA exempts from the overtime-pay requirements “any salesman, parts man, or mechanic primarily engaged in selling or servicing automobiles” at a covered dealership. Service advisors at car dealerships “meet customers; listen to their concerns about their cars; suggest repair and maintenance services; sell new accessories or replacement parts; record service orders; follow up with customers as the services are performed and explain the repair and maintenance work when customers return for their vehicles.”

The Court held that a service advisor is “obviously a salesman”, since the statute did not provide a definition for “salesman” the court construed the term based off its ordinary meaning. The ordinary meaning of “salesman” is someone who sells goods or services. The Court concluded that service advisors sell service to customers for their vehicles. In addition, they are primarily engaged in servicing automobiles because they are integral to the process of providing maintenance and repair even if they don’t physically repair the car. The Court rejected the distributive canon employed by the Ninth Circuit to match “salesman” with “selling” and “parts man and mechanic” with “servicing”. The Court then examining the Ninth Circuits reliance on legislative history which it found unpersuasive. Even for “those [Members of the Court] who consider legislative history, silence in legislative history . . . cannot defeat the better reading of the text and statutory context.”

The Court relied heavily on the text of 29 U.S.C. 213(b)(10)(A), concluding that service advisors are exempt from the overtime-pay requirement because they are “Salesman . . . primarily engaged in servicing vehicles. The case was reversed and remanded for further proceedings.

For more information or to discuss an issue regarding overtime, call Sidkoff, Pincus & Green at 215-574-0600 or contact us online. Our Philadelphia overtime lawyers represent clients in Pennsylvania and New Jersey.

PA Superior Court Strikes Down Non-Hire Clause

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In the recent case of Pittsburgh Logistics Systems, Inc. v. BeeMac Trucking, LLC, No. 134 WDA 2017 (Pa. Super. Ct. 2018), the Pennsylvania Superior Court voided a non-hire clause contracted between two companies. The non-hire clause stated that the contracting companies could not hire each other’s employees. The non-hire clause put the burden of employment on the employers as opposed to a traditional non-competition agreement, which is a contract between an employer and its employee.

In this case, Pittsburgh Logistics Systems contracted with BeeMac, a competitor, an agreement with the following language:

“CARRIER agrees that, during the term of this Contract and for a period of two years after the termination of this Contract, neither CARRIER nor any of its employees, agents, independent contractors or other persons performing services for or on behalf of CARRIER in connection with CARRIER’s obligations under this Contract will, directly or indirectly, hire, solicit for employment, induce or attempt to induce any employees of PLS or any of its Affiliates to leave their employment with PLS or Affiliate for any reason.”

The Court gave several reasons why the non-hire clause was unenforceable, including: (1) the companies’ employees are put under hiring restrictions they never agreed to, (2) the employees received no consideration for being part of such a non-hire clause, which is usually required by a non-compete, and (3) the scope of the non-hire clause was not reasonable and necessary to protect the legitimate business interests of the company.

For more information, call Sidkoff, Pincus & Green at 215-574-0600 or contact us online. Our Philadelphia employment lawyers represent clients in Pennsylvania and New Jersey.

PA Superior Court Requires High Burden of Proof When Challenging Nursing Home Arbitration Agreement Provisions

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A recent Pennsylvania Superior Court ruling found that nursing home patients who challenge the validity of arbitration agreements due to mental incapacity have a high burden to prove their case. In Cardinal v. Kindred Health Care, No. 1547 MDA 2014 (Pa Super. 2017), the plaintiff, Bret Cardinal (“Cardinal”) brought suit on behalf of the estate of the decedent Carmen Cardinal against the defendant, Kindred Nursing Centers (“Kindred”). The decedent was admitted as a patient to a Kindred facility on June 21, 2012.They then signed a contract the next day agreeing that any disputes related to their admission at the facility would be resolved through arbitration. The plaintiff brought suit alleging claims of negligence, custodial neglect and wrongful death of the decedent, and challenged the arbitration agreement due to the decedent’s lack of mental capacity to enter into the agreement at the time of signing it. The plaintiff alleged that on the day of the decedent’s admission to the Kindred facility, medical records indicate the decedent was lethargic and disoriented. Furthermore, the following day when the agreement was signed, records also show that the decedent had trouble signing the agreement. The plaintiff argued that the facts taken collectively make it clear the decedent was not of sound mental capacity to comprehend the agreement and thus wasn’t able to enter into the agreement knowingly and voluntarily.

The court disagreed; it ruled that Pennsylvania law requires the patient challenging the agreement to prove by “clear, precise and convincing” evidence the patient’s mental incapacity, and “mere weakness of intellect resulting from sickness is not legally sufficient grounds to set aside an executed contract if sufficient intelligence remains to comprehend the nature and character of the transaction.”

For more information, call our business lawyers in Philadelphia at 215-574-0600 or contact us online. The legal team at Sidkoff, Pincus & Green represents clients in Pennsylvania and New Jersey.

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Third Circuit Court Adopts “Honest Belief” Defense in FMLA Case

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When an employer reasonably believes an employee may be misusing FMLA leave, evidence of why the employer came to that “honest belief” can serve as a defense to a retaliation claim under the FMLA. See Capps v. Mondelez Global, LLC, 847 F.3d 144, 152 (C.A.3 (Pa.) 2017).

In the above-mentioned case, the employer fired an employee after it believed he intentionally misused intermittent FMLA leave.  After enduring bilateral hip replacement in 2003, the employee developed arthritis that would cause severe pain, sometimes lasting for days or weeks at a time. This condition required the employee to request intermittent FMLA leave to cover any time he could not work and continued to be recertified for leave every six months. In early February of 2013, on a day the employee requested off due to his condition, he was arrested for DUI. After spending the night in jail the employee also requested leave the next day. The employee never reported this arrest to the employer and subsequently began requesting leave multiple times after that for his condition. About a year later, when a HR manager became aware of the employee’s DUI conviction, the employer investigated and noticed on certain days of requested leave the employee had corresponding court dates.

The employee ultimately was terminated for misusing FMLA leave and violating a company policy on dishonest acts. On appeal, the employee argued the employer was mistaken in their belief to fire him and instead it retaliated against him for taking intermittent FMLA leave. The Third Circuit affirmed the lower court’s decision to grant summary judgment on behalf of the employer, finding the employer had an “honest belief’ of the employee’s misuse of intermittent FMLA leave.

For more information, call our employment lawyers in Philadelphia at 215-574-0600 or contact us online. The legal team at Sidkoff, Pincus & Green represents clients in Pennsylvania and New Jersey.

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Supreme Court to Rule on Legality of “Fair-Share Fees”

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On February 26th, the Supreme Court heard arguments in Janus v. American Federation of State, County, and Municipal Employees, Council 31, 851 F.3d 746 (7th Cir. 2017). Although the Court will not circulate a decision until summer of 2018, commentators are speculating that Janus will succeed in overturning the precedent set in Abood v. Detroit Board of Education, 431 U.S. 209 (1977).

In Abood, the Supreme Court allowed a public employer to require its non-union member employees to pay a fee because they benefitted from the unions collective bargaining agreement with the employer. The fees were not permitted to cover any political funding whatsoever, only the proportionate costs incurred during contracting.

In this case, Mark Janus, a public employee, is challenging an Illinois state law that requires non-union members to pay a “fair share” fee to the union that negotiated on the non-members’ behalf. The “fair share” fee was enacted to cover a proportionate share of the costs the union accrued in negotiating the contract. The fee combats against “free-riding”, whereby a non-union member enjoys the benefits of the contractual work performed by a union without having to pay a fee for those benefits. Janus contends that the fee violates his First Amendment rights because the fees are a form of compelled speech and association which should be reviewed under heightened scrutiny.

The Supreme Court’s ruling could prove costly for unions in America. Invalidating the “fair share” fee could drastically reduce union funding and membership.

For more information, call our Philadelphia business lawyers at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Philadelphia Court Refuses to Enforce Arbitration Provision

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On April 3, 2017, the Philadelphia Court of Common Pleas refused to uphold an arbitration provision in a Responsible Person Agreement (“RPA”) signed by a nursing home resident’s daughter, but not signed by the resident herself. Clementson v. Evangelical Manor, Civil Action No. 160601775 (C.P. Philadelphia 2017). On September 17, 2014, Plaintiff, Elsie Clementson, was a resident of Defendant Evangelical Manor’s nursing home when she suffered a serious fall, resulting in a tibia fracture. When Plaintiff was admitted to the nursing home in 2012, Plaintiff’s daughter signed an RPA, which stated that the person signing the agreement may be “the Guardian, the Agent under a Power of Attorney, or any person authorized by the Resident to serve as Resident’s Responsible Person.” The RPA also contained a mandatory arbitration provision. At the time the RPA was signed, Plaintiff’s daughter did not have power of attorney over her mother, nor was she authorized by her mother to serve as her mother’s “Responsible Person.”

Plaintiff filed her Complaint on June 17, 2016. On November 3, 2016, Defendant filed a Petition to Compel Arbitration. On December 19, 2016, the Court denied Defendant’s Petition, which it timely appealed. On appeal, the Court upheld the decision to deny Defendant’s Petition, as Pennsylvania law does not allow an agent, by his own words, to invest himself with apparent authority, as such authority has to derive from the action of the principal, not the agent. The Court ruled that Defendant failed to provide any evidence that Plaintiff was present at the time that her daughter signed the RPA, or that her daughter could sign for her. Defendant also failed to offer any evidence of actions taken by Plaintiff that would create an agency relationship.

For more information, call our business lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Overtime and the Fluctuating Workweek Method

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Calculating Overtime Using the Fluctuating Workweek Method Does Not Violate the Pennsylvania Minimum Wage Act

The Pennsylvania Superior Court recently resolved a case regarding the method of calculating overtime compensation under the Pennsylvania Minimum Wage Act (PMWA). In Chevalier v. Gen. Nutrition Centers, Inc., 177 A.3d 280 (Pa. Super. Ct. 2017) employees filed a class action against General Nutritional Centers (GNC) for unpaid overtime, specifically that GNC’s method of calculating overtime violated the PMWA. The PMWA provides that employees must be paid overtime at not less than 1½ times their regular rate for every hour worked over 40 in a workweek.

GNC calculated overtime compensation using the fluctuating workweek method (FWW). The FWW determines an employee’s “regular rate” of compensation for the workweek by dividing each employee’s pay by the number of hours the employee worked during the workweek. Therefore, employees’ regular rates fluctuated each week. GNC then paid employees at one-half of their regular rate for each hour of overtime worked. The employees argued that, (1) an employee’s regular rate should have been calculated using a fixed 40-hour workweek, not the fluctuating workweek method, and (2) the overtime pay should have been 1½ times their regular rate for each hour of overtime instead of one-half their regular rate

The Superior Court found that using the FWW to calculate an employee’s regular rate did not violate the PMWA, however, paying overtime of only one-half the regular rate did violate the PMWA. In support of the FWW not violating the PMWA the court mentioned that the Pennsylvania Generally Assembly borrowed the term “regular rate” from the Fair Labor Standards Act, which permitted the FWW method of calculation when the PMWA was enacted. In support of paying overtime of one-half the regular rate violating the PMWA the court cited a Pennsylvania regulation requiring employers to pay employees not less than 1½ times their regular rate of pay for all hours exceeding the 40 hours threshold. In conclusion, the FWW is permissible under the PMWA, however overtime must still be paid at 1½ times the employee’s regular rate.

For more information, call our overtime lawyers in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.

Pennsylvania Supreme Court Rules Discharged Predecessor Law Firm Can Collect Fees from Succeeding Firm in Wrongful Death Action

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The Pennsylvania Supreme Court recently ruled that predecessor law firms who are discharged by a client can recover damages in quantum meruit from a successor law firm that takes over the case. In Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman, P.C., 137 A.3d 1247 (Pa. 2016), the case involved a dispute between two law firms about attorney’s fees earned in a wrongful death litigation settlement. Plaintiff, Meyer, Darragh, Buckler, Bebenek & Eck law firm, (“Meyer”) brought a breach of contract and quantum meruit action against Defendant, Law Firm of Malone Middleman (“Middleman”).

In the case, an attorney named William Weiler, Jr. formally represented the Eazor estate in March 2005. Later that year, Weiler became associated with Meyer, and entered into a written employment agreement acknowledging that “any and all legal work performed by him will be deemed work on behalf of the firm.” Weiler brought to the firm the Eazor estate litigation, and along with other Meyer attorneys and staff, worked on the case over the course of 19 months. 2 years later, Weiler resigned from Meyer and agreed Meyer would receive two-thirds of attorney’s fees arising from the Eazor estate litigation. Weiler then subsequently became affiliated with Middleman. The Eazor estate discharged Meyer, and entered into a contingency fee agreement with Middleman without addressing payment or protection of attorney’s fees to Meyer. Middleman ultimately obtained settlement for the Eazor estate. Meyer filed this action claiming entitlement to two-thirds of attorney’s fees.

The court ruled that Meyer could not recover under a breach of contract claim because Middleman, as the successor firm, was not bound by the predecessor firm’s employment agreement with Weiler. However, Meyer was not deprived of its right to recover under quantum meruit the proper amount for the services which they had rendered for the litigation.

For more information, call our Philadelphia business lawyers at Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.