SCOTUS Rejects Narrow Construction FLSA Overtime Exemption

FLSA Overtime Exemption

The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation to covered employees, but provides numerous categories of workers an overtime exemption. On April 2, 2018, the Supreme Court of the United States (SCOTUS) rejected the longstanding principle that these FLSA exemptions must be construed narrowly, holding that service advisors at a California automobile dealership are exempt from the overtime requirements under the FLSA.

Background

As we covered in previous posts about overtime exemptions, at issue in Encino Motorcars, LLC v. Navarro was the “exempt” classification of service advisors at a car dealership. The service advisors premised their argument for overtime on a 2011 Department of Labor rule that expressly excluded service advisors from the definition of “salesman.”  The specific section of the FLSA is section 213(b), which exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles ….” Service advisors sell, but they sell mechanic service rather than cars, and they are not mechanics themselves. The advisors argued that they fall into a gap in 213(b): they are not “salesm[e]n … primarily engaged in selling … automobiles,” and they are not “partsmen, or mechanic[s] primarily engaged in … servicing automobiles.” In response, the dealer argued that service advisors are plainly “salesm[e]n … primarily engaged in … servicing automobiles ….”

The district court found that the FLSA overtime exemption applied to service advisors. The Ninth Circuit reversed, deferring completely to the 2011 DOL rule.  The Supreme Court rejected this conclusion, holding that the regulation was procedurally defective and courts should not defer to it or rely upon it.  The Supreme Court remanded the case to the Ninth Circuit for reconsideration. The Ninth Circuit again found that service advisors were entitled to overtime because they do not fall within the exemption.

SCOTUS Opinion  FLSA overtime exemption

In its second look at this particular exemption in recent years, the Supreme Court again reversed, basing its conclusion on what it called a “best reading” of the statute’s text. The Court held 5-4 with its opinion reading, “We reject this principle as a useful guidepost for interpreting the FLSA…. Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a “narrow”) interpretation.’”

Justice Clarence Thomas’ opinion noted that the FLSA contains “over two dozen” exemptions, that the exemptions “are as much a part of the FLSA’s purpose as the overtime-pay requirement,” and that “[w]e have no license to give the exemption[s] anything but a fair reading.” The Court further held that the exemption was not limited to sales employees primarily engaged in selling automobiles and ultimately held that service advisors were exempt because they are “salesm[e]n . . . primarily engaged in . . . servicing automobiles.”

In dissent, Justice Ginsburg, along with Justices Breyer, Sotomayor, and Kagan, sought to emphasize how the majority’s holding was a stark departure from precedent. Underscoring the importance of the Court’s holding regarding the interpretation of FLSA exemptions, Justice Ginsburg wrote that the Court was overruling “half a century” of precedent by rejecting the narrow construction principle.

Conclusion

The Court’s decision is significant as it abandons the longstanding principle that FLSA exemptions are to be construed narrowly in favor of non-exempt status. Generally speaking, courts will now need to place exemptions on the same statutory and interpretive footing as the substantive overtime requirements in the statute. For example, the more common FLSA exemptions, such as the executive, administrative and professional employee exemptions may now be subject to the broader “fair reading” standard in cases that come before the High Court. 

The lawyers at Kingsley & Kingsley will continue to monitor SCOTUS opinions on FLSA exemptions. In the meantime, should you have questions about California’s wage and hour laws, don’t hesitate to contact one of our leading California employment lawyers.

Call and speak to an experienced California lawyer toll-free at (888) 500-8469.

Kingsley & Kingsley
16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

2018 California Minimum Wage Rates

Background on California Minimum Wage Rates – Increases  

california minimum wage rates

On April 4, 2016, California Governor Jerry Brown signed a new minimum wage bill. The bill raised the state’s minimum wage for employers with more than 25 employees to $10 per hour effective July 1, 2016 and $10.50 per hour effective January 1, 2017. The minimum wage will then increase by an additional $1 per hour every year until it reaches $15 in 2022.

2018 Minimum Wages

Effective January 1, 2018, California minimum wage rates increased to $11.00 per hour (from $10.50) for employers with 26 or more employees and $10.50 per hour (from $10.00) for employers with 25 or fewer employees. However, depending on where you work, your employer might be required to pay you more than the state minimum wage. The chart below outlines the change in minimum wage for each California locality in which an increase takes place in 2018.

California City / CountyEffective Date of Increase2018 Minimum Wage2017 Minimum Wage
BerkeleyOctober 1, 2018$15.00$13.75
BerkeleyOctober 1, 2018$13.25 (Employer youth
works & job training)
$12.00 (Employer youth
works & job training)
CupertinoJanuary 1, 2018$13.50$12.00
El CerritoJanuary 1, 2018$13.60$12.25
EmeryvilleJuly 1, 2018$15.60 (56 or more
employees)
$15.20 (56 or more employees)
EmeryvilleJuly 1, 2018$15.00 (55 or fewer
employees)
$14.00 (55 or fewer
employees)
Los AltosJanuary 1, 2018$13.50$12.00
Los Angeles (city)July 1, 2018$13.25 (26 or more
employees)
$12.00 (26 or more
employees)
Los Angeles (city)July 1, 2018$12.00 (25 or fewer
employees)
$10.50 (25 or fewer employees)
Los Angeles (county)July 1, 2018$13.25 (26 or more
employees)
$12.00 (26 or more
employees)
Los Angeles (county)July 1, 2018$12.00 (25 or fewer
employees)
$10.50 (25 or fewer employees)
MilpitasJanuary 1, 2018$12.00$11.00
MilpitasJuly 1, 2018$13.00$11.00
Mountain ViewJanuary 1, 2018$15.00$13.00
OaklandJanuary 1, 2018$13.23$12.86
Palo AltoJanuary 1, 2018$13.50$12.00
PasadenaJuly 1, 2018$13.25 (26 or more
employees)
$12.00 (26 or more
employees)
PasadenaJuly 1, 2018$12.00 (25 or fewer
employees)
$10.50 (25 or fewer
employees)
RichmondJanuary 1, 2018$13.41 without benefits$12.30 without benefits
RichmondJanuary 1, 2018$11.91 with benefits$10,80 with benefits
San FranciscoJuly 1, 2018$15,00$14.00
San JoseJanuary 1, 2018$13.00$12.00
San LeandroJuly 1, 2018$13.00$12.00
San MateoJanuary 1, 2018$13.50$12.00
San MateoJanuary 1, 2018$12.00 (non-profit)$10.50 (non-profit)
Santa ClaraJanuary 1, 2018$13.00$11.10
Santa MonicaJuly 1, 2018$13.25 (26 or more
employees)
$12.00 (26 or more
employees)
Santa MonicaJuly 1, 2018$12.25 (25 or fewer employees)$10.50 (25 or fewer employees)
SunnyvaleJanuary 1, 2018$15.00$13.00

California Employment Law

Employees in California should remain aware of wage and hour laws to ensure they are compensated appropriately under California law.  Should you have questions about California’s employment laws, don’t hesitate to contact leading California employment lawyers at Kingsley & Kingsley. Call and speak to an experienced California lawyer toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

Grubhub Independent Contractors

Judge Rules Grubhub Drivers Independent Contractors Not Employees

In a significant court decision on the status of gig-economy workers, U.S. Magistrate Judge Jacqueline Scott Corley concluded on February 8, 2018, that drivers for Grubhub Inc. are independent contractors and not employees under California law. The ruling may have implications for other sharing economy companies, including Uber and Lyft, whose business models are built on pairing customers with products and services through apps while avoiding the personnel costs of traditional employment.

Lawson v. Grubhub Inc.
The case against Grubhub was brought by Raef Lawson, who worked as a food-delivery driver for less than six months while pursuing a career as an actor and writer. In 2015, Lawson sued Grubhub claiming the company violated California labor laws by not reimbursing his expenses, paying him less than minimum wage and failing to pay overtime. Lawson claimed he should have been classified as an employee, not a contractor.

The case was originally filed as a proposed class-action lawsuit, but the judge never granted that status, so it was only limited to him and his claimed $600 in damages–consisting of back wages, overtime, and expense reimbursement. Both sides had agreed that Judge Corley, rather than a jury, would decide the case in her San Francisco federal courtroom. Closing arguments were heard in late October 2017.

Borello Test
A key element of the case centered around the Borello test, which is used to determine whether a worker is a 1099 contractor or a W-2 employee. The Borello test considers workplace circumstances like whether the work performed is part of the company’s regular business, the skills required to do the job, payment methods, and whether the work is done under the supervision of a manager.

Elements of the case in Lawson’s FavorGrubhub Independent Contractors “Grubhub did control some aspects of Mr. Lawson’s work,” Judge Corley commented. “Grubhub determined the rates Mr. Lawson would be paid and the fee customers would pay for delivery services. While the Agreement states that a driver may negotiate his own rate, this right is hypothetical rather than real. The Court finds that Mr. Lawson could not negotiate his pay in any meaningful way and therefore this fact weighs in favor of an employment relationship.”

Elements of the case in Grubhub’s Favor
In Judge Corley’s estimation, in addition to working for other gig economy companies while simultaneously working for Grubhub, Lawson was fundamentally “not credible.” By his own admission, Lawson “gamed the app” by scheduling himself for a work shift (a “block” in company parlance) but received few, if any, actual delivery orders by putting his phone in airplane mode, among other tactics.

“Mr. Lawson’s claimed ignorance of his dishonest conduct is not credible,” Judge Corley wrote. “Mr. Lawson would remember if after he filed this lawsuit against Grubhub he cheated Grubhub. If he had not moved his smart phone to airplane mode, intentionally toggled available late, or deliberately engaged in other conduct to get paid for doing nothing he would have denied doing so at trial. But he did not.”

Other aspects that were not in Lawson’s favor of being treated as an employee included 1) he could set his own schedule, 2) largely wear whatever clothes he wanted, and 3) he could choose his own route.

The Decision
Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” Judge Corley concluded.

“If Mr. Lawson is an employee, he has rights to minimum wage, overtime, expense reimbursement, and workers compensation benefits. If he is not, he gets none. With the advent of the gig economy and the creation of a low-wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy. In the meantime the Court must answer the question one way or the other. Based on what the Court observed at trial and the facts found, and after applying the Borello test, the Court finds that during the four months Mr. Lawson performed delivery services for Grubhub he was an independent contractor.”

Reaction
Shannon Liss-Riordan, Lawson’s lawyer, said she plans to appeal the ruling. “Among other issues, the California Supreme Court is considering adopting a more protective test for employee status, so I was surprised the decision was issued before the Supreme Court has issued that decision…we should have prevailed even under the Borello standard,” Liss-Riordan said. 

Matt Maloney, chief executive officer of Grubhub, said the company is pleased with the ruling, “which validates the freedom our delivery partners enjoy from deciding when, where and how frequently to perform deliveries…We will continue to ensure that delivery partners can take advantage of the flexibility that they value from working with Grubhub,” Maloney said.

Conclusion
People who work as 1099 contractors can set their own schedules, and decide when, where and how much they want to work. Employers utilizing 1099 contractors avoid paying taxes, overtime pay, benefits and workers’ compensation. However, some companies have recognized that some people don’t want to be independent contractors, and prefer the benefits that come with employee status. 

Additional Resources: Daily Journal article by Eric B. Kingsley: Let’s talk about a ‘hybrid’ worker. 

Employers are advised to review independent contractor relationships and evaluate agreements with third parties, and contact an employment lawyer with questions. To discuss these laws, or a potential claim on your behalf, feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

Kingsley & Kingsley Elevates Attorney Liane Katzenstein Ly to Partner

February 13, 2018

News Release Contact:
Kingsley & Kingsley
16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)


Kingsley & Kingsley Attorney Names Liane Katzenstein Ly as Partner
• Ms. Ly has been practicing employment law since 2008
• Ms. Ly focuses her practice on wage and hour law and complex class action litigation cases


california employment lawyer LyThe law firm of Kingsley & Kingsley is pleased to announce that Liane Katzenstein Ly has been named partner in the firm. A graduate of the University of California Davis School of Law, Ms.Ly has been representing plaintiffs in a wide range of employment cases since 2008.

Ms. Ly represents plaintiffs in employment litigation including class actions and individual employment cases. She concentrates her practice on wage and hour law, class action litigation, and employment law. Ms. Ly’s experience includes consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases, among others. Ms. Ly also litigates representative action cases pursuant to the Private Attorneys General Act (PAGA).

We are thrilled to announce the election of Ms. Ly as a partner in our firm,” said firm co-founder and managing partner Eric B. Kingsley. “We have an experienced and incredibly accomplished group of employment litigators, and Liane’s results speak for themselves. She has dedicated her career to protecting employees’ rights and she will continue to benefit all of our clients in their fight against corporate wrongdoing.

Ms. Ly is an honors graduate of Florida State University, and while at University of California Davis School of Law, she was an editor of the Environmental Law Journal and a board member of the King Hall Negotiations Team.

Ms. Ly is admitted to practice in all California state courts as well as the United States District Court for the Central District of California.

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Since 2001, the lawyers at Kingsley & Kingsley have been dedicated to helping workers harmed by the wrongdoing of employers throughout California. The firm is well-respected statewide for its work in successfully representing plaintiffs with wage and hour disputes and protecting their rights. Kingsley & Kingsley exclusively represents employees and focuses its practice on wage & hour and consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases. Kingsley & Kingsley also regularly litigates representative action cases pursuant to the Private Attorneys General Act (PAGA). Kingsley & Kingsley also handle cases involving sexual harassment, discrimination, pay inequity, and wrongful termination cases. The firm also serves individuals dealing with disability claims and an insurance company’s denial of benefits. Based in Los Angeles, California, Kingsley & Kingsley handles cases in state and federal courts across California and nationwide.

Facebook: Kingsley & Kingsley
LinkedIn: Kingsley & Kingsley

Los Angeles, California

Kingsley & Kingsley Elevates Attorney Kelsey M. Szamet to Partner

February 12, 2018

News Release Contact:
Kingsley & Kingsley
16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)


Kingsley & Kingsley Attorney Names Kelsey M. Szamet as Partner
• Ms. Szamet has been practicing employment law since 2008
• Ms. Szamet focuses her practice on complex class action litigation and individual employment cases


Kelsey M. Szamet - California employment lawyer

The law firm of Kingsley & Kingsley is pleased to announce that Kelsey M. Szamet has been named partner in the firm. A graduate of the UCLA School of Law, Ms. Szamet has been representing plaintiffs in a wide range of employment cases since 2008 and has been recognized as a “Rising Star” by Super Lawyers magazine each year since 2014.

Ms. Szamet represents plaintiffs in employment litigation including complex class actions and individual employment cases. She concentrates her practice on wage & hour and consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases, among others. Ms. Szamet also frequently litigates representative action cases pursuant to the Private Attorneys General Act (PAGA). In addition to her robust class and representative action experience, Ms. Szamet successfully represents plaintiffs in wrongful termination, sexual harassment, and discrimination cases. She is also well-versed at the appellate level and has authored several appellate briefs in both state and federal court.

“We are thrilled to announce the election of Ms. Szamet as a partner in our firm,” said firm co-founder and managing partner Eric B. Kingsley. “We have a very accomplished group of employment litigators, and Kelsey’s experience speaks for itself. She has dedicated her career to protecting employees’ rights and she will continue to benefit all of our clients in their fight against corporate wrongdoing.”

Ms. Szamet received her Bachelor of Arts degree, cum laude, from the University of California San Diego, where she majored in Human Development and minored in Communications. While attending UCLA School of Law, Ms. Szamet was active in the Women’s Law Journal and various community-based legal clinics.

In addition to her work with the firm, Ms. Szamet dedicates her time to several non-profit organizations, and recently concluded her tenure as Vice President of the Board of Directors for the YWCA – Greater Pasadena Foothill Valley. She currently sits on the Board of Directors for the Child Educational Center.

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Since 2001, the lawyers at Kingsley & Kingsley have been dedicated to helping workers harmed by the wrongdoing of employers throughout California. The firm is well-respected statewide for its work in successfully representing plaintiffs with wage and hour disputes and protecting their rights. Kingsley & Kingsley exclusively represents employees and focuses its practice on wage & hour and consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases. Kingsley & Kingsley also regularly litigates representative action cases pursuant to the Private Attorneys General Act (PAGA). Kingsley & Kingsley also handle cases involving sexual harassment, discrimination, pay inequity, and wrongful termination cases. The firm also serves individuals dealing with disability claims and an insurance company’s denial of benefits. Based in Los Angeles, California, Kingsley & Kingsley handles cases in state and federal courts across California and nationwide.

Facebook: Kingsley & Kingsley
LinkedIn: Kingsley & Kingsley

workplace discrimination

Google Accused Of Workplace Discrimination Against White Conservative Men

Workplace Discrimination Case

The engineer who was fired by Google after he criticized its diversity policies last August claims in a lawsuit that he and others at the internet giant faced harassment and workplace discrimination due to their conservative political views. This latest lawsuit against Google comes on the heels of a lawsuit brought against the company in December citing violations of the California Equal Pay Act. That suit alleges that Google discriminates against its women employees by systematically paying them lower compensation than their male peers for performing substantially similar work under similar working conditions. 

Damore v. Google, LLC. (Cal. Sup. Ct., Santa Clara Cty.)

On January 8, former Google engineer James Damore, who famously circulated a memo about Google’s so-called “ideological echo chamber,” and a fellow former Google employee filed a discrimination class action complaint against Google on behalf of all employees of Google discriminated against “due to their perceived conservative political views,” “their male gender,” and/or “their Caucasian race.” 

The other ex-Googler named as a plaintiff is David Gudeman, who says he was an engineer for three years until he was wrongfully terminated in December 2016. The two men claim they were “ostracized, belittled and punished for their heterodox political views, and for the added sin of their birth circumstances of being Caucasians and/or males.”

The complaint alleges the following:

  • that employees who deviated from the “majority view” at Google regarding issues such as “‘diversity’ hiring policies, ‘bias sensitivity,’ or ‘social justice,’” were singled out, mistreated, and systematically punished and terminated from Google.
  • that the company’s “open hostility” to conservative thought leads to discrimination in hiring, promotion, and termination decisions on the basis of race and gender because of the “extreme” lengths Google allegedly goes to in taking race and/or gender into consideration as determinative hiring factors, to the detriment of white males.
  • that several of Google’s diversity initiatives, including, among other things, a “Diversity and Inclusion Summit” and a “diversity training class,” as evidence of bias against conservative white men.
  • “Google’s current method of increasing diversity resulted in what is known as reverse discrimination, because Caucasian and Asian males were not being selected for jobs and promotions due solely to their status as non-females or non-favored minorities.”

Damore’s Attorney

workplace discrimination

Damore’s attorney is Harmeet Dhillon, a civil rights lawyer who has taken on cases that push back against the Bay Area’s progressive tendencies. As part of a press conference, Dhillon, a California representative for the Republican National Committee, elaborated more on the very lengthy complaint and argued that her current clients are far from alone. Dhillon suggested that she had spoken with “dozens” of employees at Google to formulate the lawsuit and that she expects there will be “future lawsuits” to explore, as well.

California Employment Law

Protected classes called out in both state and federal statutes, such as sex, religion, race, etc. are broadly defined. As such, every person can face discrimination, and it is just as unlawful if targeted against white men as it would be against any other group. As long as an employee is negatively impacted because of his or her membership in a protected class, that counts as discrimination and could form the basis for a lawsuit. Further, California law also bans private employers from discriminating against workers due to their political views, affiliations, or activities.

If you are living in Los Angeles, San Francisco, Sacramento, or San Diego and feel you have been a victim of workplace discrimination, contact Kingsley & Kingsley to speak with one of our experienced lawyers.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)