August 21, 2017

Tenth Circuit: Employer’s Payment of Food Expenses Exempt from FLSA Overtime Compensation Rate

The Tenth Circuit Court of Appeals issued its opinion in Sharp v. CGG Land (USA), Inc. on Friday, November 4, 2016.

CGG is a company that provides seismic mapping services at remote locations throughout the United States. CGG employees are required to travel away from home for several weeks to the remote locations. Generally, employees travel for four-to-eight week intervals, then return home for two-to-four week intervals before returning to the field. While traveling, CGG provides a $35 per diem for meals, except when food is provided. A group of employees filed suit against CGG, arguing CGG violated the Fair Labor Standards Act (FLSA) by not including in their regular reimbursement rates the $35 per diem for food during travel periods.

After stipulating to material facts in district court, including that $35 was a reasonable amount for daily meals, each party moved for summary judgment. The district court granted summary judgment to CGG. The district court agreed with CGG that the per diem payments were exempt travel expenses under 29 U.S.C. § 207(e)(2). The employees appealed.

On appeal, the employees argued the payments were not exempt for days when they traveled to and from remote job sites, because they did not do any work on those days. Employees further claimed the payments were not exempt for days they spent at the job sites because they were no longer traveling over the road. Employees also claimed CGG waived all defenses except its claim that the payments were exempt under § 207(e)(2). The Tenth Circuit rejected each contention in turn.

The Tenth Circuit noted that the Department of Labor rejected the argument that food costs may not be included as “living expenses.” The Tenth Circuit agreed with the DOL that the cost of food is an expense the employee incurs for the employer’s benefit and therefore is an exempt living expense. Employees argued they were not “traveling over the road” once they reached the job site, but the Tenth Circuit characterized this as a hyper-literal construction of the word “traveling.” The Tenth Circuit read “traveling” as all time away from home, not just time in transit. Employees also suggested CGG paid the $35 as part of a scheme to set an artificially low hourly pay rate to underpay overtime pay. The Tenth Circuit found the parties’ stipulation that the $35 per diem was reasonable defeated this argument.

The Tenth Circuit affirmed the district court’s grant of summary judgment to CGG.

Tenth Circuit: H-2A Sheepherders Must Primarily Tend Sheep in Pastures

The Tenth Circuit Court of Appeals issued its opinion in Saenz Mencia v. Allred on Monday, December 14, 2015.

German Wilmer Saenz Mencia, a citizen of Peru, came to Utah to work on the Allreds’ sheep ranch under an H-2A sheepherder visa, and was paid $750 per month plus room and board, the minimum for sheepherders. He brought claims in district court, arguing that the work he performed did not qualify as sheepherding and instead he was entitled to the hourly wage for ranch hands. Mr. Saenz asserted claims in contract and quantum meruit for the lost wages and FLSA minimum wage claims against the Allreds. The district court rejected Mr. Saenz’s claims, denied his summary judgment motion, and granted summary judgment to the Allreds. Mr. Saenz appealed.

The Tenth Circuit first analyzed the H-2A definition of sheepherding and the FLSA definition of range production of livestock. The Tenth Circuit determined that to fit the definitions, Mr. Saenz must have spent over half of his time on the range tending to the sheep and must have extremely variable hours, described as “the constant surveillance of livestock that graze and reproduce on range lands.” The Tenth Circuit found that there was no plausible reading of the definitions that would render Mr. Saenz a sheepherder. Mr. Saenz worked in the vicinity of ranch headquarters where the Allreds could see what he was doing and ask him to help with odd jobs. Mr. Saenz did work with sheep, but they did not graze; they were fed hay. The Tenth Circuit concluded that Mr. Saenz did not work on the range as contemplated by the definitions. The Tenth Circuit found further evidence in the fact that the Allreds and Mr. Saenz were easily able to approximate his hours, and that most of his jobs were incidental to sheepherding. The Tenth Circuit found that Mr. Saenz was a ranch hand, not a sheepherder.

The Tenth Circuit next examined the district court’s finding that Mr. Saenz’s claims were estopped. The district court found that because Mr. Saenz never complained of being underpayed while employed by the Allreds, he was estopped from bringing claims in court. The Tenth Circuit disagreed. The Allreds were employers of more than a dozen H-2A sheepherders, and had obtained the H-2A visas for their employers by vouching for the type of work they would do. The Tenth Circuit concluded the Allreds had both actual and constructive knowledge of the nature and location of Mr. Saenz’s work and rejected their equitable estoppel claim. The Tenth Circuit held that the Allreds had easy access to lawyers and were in the business of importing laborers, and they were therefore not entitled to equitable estoppel under Utah law.

The Tenth Circuit addressed each of the Allreds’ six alternative grounds on which they asked the court to affirm and found none convincing. The Tenth Circuit reversed the district court’s grant of summary judgment to the Allreds and directed it to grant summary judgment to Mr. Saenz. The Tenth Circuit remanded for a calculation of damages and any other proceedings necessary.

Tenth Circuit: One-Time Deduction from Salaried Employee’s Check Not Impermissible

The Tenth Circuit Court of Appeals issued its opinion in Ellis v. J.R.’s Country Stores, Inc. on Monday, March 9, 2015.

Sandra Ellis was a salaried manager for J.R.’s Country Stores, and as such she was required to work 50 hours per week. When she worked 40.91 hours one week, J.R.’s deducted $31.20 from her paycheck for the missed time. Ellis resigned, then sent a letter to J.R.’s claiming she was owed $42,187.50 in overtime wages and that she had lost her exempt status for FLSA purposes when J.R.’s made the one-time deduction. J.R.’s responded by paying Ellis $332.88, which it explained as reimbursement for the deduction plus all the overtime compensation she would have received for that pay period had she been an hourly employee.

Ellis filed a lawsuit in the U.S. District Court for the District of Colorado, alleging she was not a true exempt employee under the FLSA because of the one-time deduction and signaling an intent to certify a class of similarly situated managers. J.R.’s moved for summary judgment, attaching as exhibits all of Ellis’ time sheets and payroll records. Instead of responding to the summary judgment motion, Ellis filed a motion to certify a class. J.R.’s then sought a temporary stay of class certification pending determination of its summary judgment motion, and Ellis filed a response to the summary judgment motion. The district court granted J.R.’s summary judgment motion, finding the one-time deduction did not change the company’s intent to pay Ellis a salary, but even if Ellis were correct, the company was entitled to the window-of-correction defense detailed in the FLSA. The court denied Ellis’ class certification motion as moot. Ellis appealed.

The Tenth Circuit first addressed Ellis’ contention that the district court misapplied the salary-basis test associated with her FLSA exemption. Ellis contended the district court’s order only addressed the frequency factor of the salary-basis test, but the Tenth Circuit found that the district court properly applied all five factors in finding against Ellis. Ellis next disputed the district court’s conclusion that she failed to make findings of material fact concerning the existence of a company practice of making deductions. The Tenth Circuit disagreed, finding the district court properly applied Auer in determining that a one-time deduction could not be considered a practice. Addressing her argument that the company had a policy of enforcing improper deductions against salaried employees, the Tenth Circuit again disagreed, finding instead that J.R.’s policy as stated in its employee handbook essentially disallows improper deductions. Ellis also complained of J.R.’s policy of requiring managers to maintain 50 hour work weeks, but, after examining DOL policy and caselaw, the Tenth Circuit found no error.

The Tenth Circuit next addressed Ellis’ contention that the district court’s reliance on the window-of-correction defense was misplaced, and disagreed. After examining the record, the district court concluded that because J.R.’s reimbursed Ellis for the one-time deduction in a timely manner, it was entitled to the window-of-correction defense. The Tenth Circuit agreed. The Tenth Circuit found that although sister circuits had found the window-of-correction defense only applied to “inadvertent” deductions, it was not bound by those decisions and instead ruled the defense was applicable to “isolated” incidents.

Finally, the Tenth Circuit addressed Ellis’ contention that the district court erroneously denied her motion to defer summary judgment so she could conduct additional discovery. The Tenth Circuit found no error because the affidavit in issue failed to demonstrate a need for any further discovery, and Ellis’ contentions were speculative at best.

The Tenth Circuit affirmed the district court.

Tenth Circuit: Jury Verdict and Attorney Fee Award Upheld in Employee Class Action

The Tenth Circuit Court of Appeals issued its opinion in Garcia v. Tyson Foods, Inc. on Tuesday, August 19, 2014.

Tyson employees were required to don and doff certain protective clothing before and after performing job duties. Tyson originally compensated only certain employees for 4 to 7 minutes of this “K-code” time, eventually changing its policy to compensate all employees for 20 to 22 minutes of K-code time. However, based Tyson’s own study, employees were uncompensated for approximately 29 minutes per shift based on the times they punched in and punched out versus actual compensation.

A group of Tyson employees brought class and collective actions against Tyson, seeking unpaid wages for pre- and post-shift activities. After a jury returned an award for the employees and an attorney fee award, Tyson unsuccessfully moved for judgment as a matter of law. Tyson appealed the district court’s judgment and denial of its motion for judgment as a matter of law. Tyson also argued the attorney fee award was excessive.

The Tenth Circuit addressed Tyson’s first argument – whether the evidence was sufficient to support the verdict – and found it was. The question for the jury was whether the K-code system had resulted in underpayment, and the Tenth Circuit found ample reason in the evidence to support the jury’s decision that it had, including Tyson’s own study. Tyson also challenged the proof of underpayment as to each class member. The Tenth Circuit rejected that challenge, because the proof was unnecessary, the jury could rely on representative evidence, and Tyson’s supporting cases are inapplicable.

The jury awarded less to plaintiffs than they requested. Tyson interpreted this to mean that the jury found some class members were appropriately compensated. The Tenth Circuit disagreed, finding the evidence supported a finding of undercompensation for all class members, and noting that Tyson’s argument was speculative.

Finally, the Tenth Circuit addressed the attorney fee award. The Fair Labor Standards Act provides a right to attorney fees to prevailing plaintiffs. The district court awarded over $3 million in attorney fees, despite the much lower awards to the plaintiffs. Because of ongoing class litigation in another county, the district court adopted a procedure whereby it reviewed the attorneys’ time records in camera, allowed disclosure of the hourly rate and number of hours worked, and allowed each side the chance to depose someone on the other side familiar with the billing process. Tyson objected to this process, instead requesting full discovery of billing records. The Tenth Circuit upheld the process and the award, finding good cause for the district court’s procedure and award.

The judgment was affirmed.