3 Elements Key To Success Of Recent Overtime Claims

Posted January 2nd, 2019.

As It Appeared On
Law360

By Andrew Melzer

Strauch v. Computer Sciences Corp.[1] is a wage-and-hour misclassification action before the U.S. District Court for the District of Connecticut involving hundreds of system administrators. The case proceeded to a liability trial on behalf of a nationwide Fair Labor Standards Act collective action comprised of roughly 600 opt-ins and Rule 23 state law subclasses — of roughly 200 hundred employees each — under California and Connecticut law. The jury returned a verdict in favor of the employees on Dec. 20, 2017, holding that defendant Computer Sciences Corp., or CSC, had failed to establish its exemption defenses and that the plaintiffs had proven its violations were willful. Following post-trial motions and rulings from the court, the case is slated to proceed to a damages and remedial phase.

Key issues in the case may be generally broken into three categories: class and collective action certification; liability for misclassification; and damages/remedies.

Class and Collective Action Certification

The district court granted conditional certification of an FLSA collective action in June 2015 and Rule 23 certification of the state law classes in June 2017. The court ultimately limited the scope of certification to two titles — professional system administrator and associate professional system administrator — the bottom two of five tiers in CSC’s system administrator hierarchy.[2] The court also denied three separate motions for decertification, including one on the eve of trial and one in post-verdict proceedings.

In granting certification, the court relied on substantial evidence of homogeneity in the class members’ essential job duties and functions. This evidence included CSC’s standard job classification system with common, comprehensive job descriptions for the positions; a set of “core processes” that guided how class members performed their jobs and often restricted their autonomy; manuals and checklists containing step-by-step instructions; testimony of corporate witnesses; and testimony of the named plaintiffs and various opt-in plaintiffs. Together, the evidence supported a conclusion that class members performed a discrete set of duties in relatively rote fashion with limited discretion — i.e., that they performed the same basic tasks in similar ways. The court held that “the work is sufficiently uniformly of a type such that a finder of fact could determine on a class-wide basis whether it was exempt or non-exempt.”

Accordingly, the court rejected CSC’s contentions — routine in misclassification cases — that the exemption analyses were too individualized and class members’ jobs too varied to justify class treatment. The court’s rulings are marked by its focus on the practicalities of the job positions and its refusal to be diverted by minor, even immaterial, variations in testimony. For example, the court highlighted evidence on the troubleshooting duties performed by class members and found that while some professional systems administrators may have performed certain potentially exempt tasks, such tasks comprised only a small percentage of their jobs.

Further, the court did not permit CSC to get away with a damned-if-you-do-damned-if-you-don’t trap in which it loaded its job descriptions with catchwords designed to parrot the exemptions and then used class members’ disavowal of those descriptions to defeat certification. The court indicated that class members were entitled to clarify their duties and pierce the company’s labels and verbiage. Indeed, the court held that CSC’s consistent and “carefully thought-out” descriptions went “a long way to establishing commonality.” And differences in the manner in which class members described their jobs were not dispositive given that the substance was similar.

Finally, the court repeatedly rebuffed CSC’s attempt to decertify the action on the ground that the plaintiffs’ trial plan (and evidence at trial) relied heavily on testimony from a small fraction of class members — with no attempt to ensure an adequate representative sample. As the court noted, the plaintiff relied primarily on common evidence of the class members’ job duties — corporate documents and witnesses — supplemented by illustrative class member testimony. CSC was free to present its own evidence in response but largely refrained from doing so.

In this way, the case is similar to Morgan v. Family Dollar Stores Inc.,[3] in which the defendant objected that the verdict was unreliable because less than one percent of the opt-in plaintiffs testified. The Morgan court noted that, in addition to class member testimony, the parties had presented an “abundance of evidence on the executive exemption issue … The jury’s verdict is well-supported not simply by ‘representative testimony,’ but rather by a volume of good old-fashioned direct evidence.”[4] Further, defendant Family Dollar — like CSC — bore the burden of proof but chose not to present more testimony in the company’s favor.[5]

Thus, CSC’s due process objections are misplaced. Where the court has found essential uniformity in class members’ job functions, a defendant has no entitlement to an individualized assessment of liability in misclassification cases; nor is there any requirement of a statistically significant sample.

The Merits of CSC’s Exemption Defenses

At trial, CSC sought to establish that it properly classified class members as exempt under three exemptions — the computer employee, administrative and learned professional exemptions — as well as the combination exemption. The jury determined that CSC had failed to meet its burden to prove any of these exemptions and the district court upheld the verdict on the defendant’s motion for judgment as a matter of law. The common element running through the court’s analysis of the exemptions is a practical assessment that the jury could have found that the class members essentially performed routine maintenance and troubleshooting, following established techniques and procedures, and that any exempt tasks were not their primary duty.

On the computer exemption, the court held that a reasonable jury could find that the class members’ primary duty did not consist of: (1) determining hardware, software or system functional specifications; and/or (2) the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including machine operating systems. Instead, the evidence supported a conclusion that class members primarily maintained existing systems and answered technical questions from customers.

Similarly, on the administrative exemption, the court held that a reasonable jury could find that the class members’ primary duty did not include the exercise of discretion and independent judgment. The jury could properly conclude that the class members’ primary duty involved following checklists, step-by-step instructions, troubleshooting policies, and similar set processes and directives.

The court proceeded to a similar discussion of the learned professional exemption. It held that a reasonable jury could determine that the class members did not perform work (1) requiring advanced knowledge; (2) in a field of science or learning; (3) customarily acquired by a prolonged course of specialized instruction. Class members’ work — computer maintenance and troubleshooting — did not require a specialized degree or licensing as a standard prerequisite for entrance into the profession; skills are typically acquired through on-the-job training and experience. Moreover, under the applicable regulations, exempt work is predominantly intellectual in character and requires the consistent exercise of discretion and judgment, as distinguished from routine work. Thus, the court’s conclusions in regard to the discretion and independent judgment prong of the administrative exemption were dispositive on this exemption as well.

Finally, the court rejected the defendant’s contention that the jury was required to find the class members exempt under the combination exemption. As the court held, even if some of the work involved in the job was exempt, the jury could reasonably conclude that the class members’ primary duty did not consist of exempt work under any of the three exemptions, individually or in combination.[6]

Damages and Remedial Issues

In post-trial rulings on Sept. 21 and Nov. 9, 2018, the district court issued determinations on several questions related to damages and remedies. Then, on Dec. 5, it entered a scheduling order for remedial proceedings. Based on the parties’ agreement, damages are to be calculated mechanically from individualized time-keeping and salary data. The parties are to exchange damages calculations and supporting data by Jan. 7, 2019, and a status report with the court on Jan. 16 as to any issues remaining for resolution.

The following key rulings are among the determinations guiding the damages calculations.

Fluctuating Workweek Method

The fluctuating workweek, or FWW, defined by 29 C.F.R. § 779.114, is a method of paying overtime that dramatically reduces damages in overtime cases — often by as much as 75 or 80 percent.[7] Instead of dividing an employee’s weekly pay (salary and other applicable payments) by 40 and then paying 1.5 times the resulting “regular rate” for all hours over 40, under the alternative FWW method, the employer divides the employee’s pay by the actual number of hours worked and then provides only a .5 half-time premium for the overtime hours. The basic idea is that, where the FWW applies, the employee’s salary already covers straight time for all hours worked. Ironically, the more the employee works in a week, the lower his or her rate of pay and damages.

The jury in the liability trial determined that one element of the FWW method was satisfied, namely a “clear, mutual understanding” that class members’ salaries were intended as compensation (apart from overtime premiums) for all hours worked. Accordingly, the court proceeded to an issue on which courts are divided: whether the FWW method requires contemporaneous payment of overtime premiums or, on the other hand, may be used as a measure of calculating damages retrospectively in misclassification cases in which overtime has not been contemplated or paid at all.

As the court held, 29 C.F.R. § 779.114 expressly requires the contemporaneous payment of overtime — mandating a salary arrangement that includes payment of overtime premiums. Further, retroactive application of the FWW in misclassification cases creates perverse incentives for employers and is contrary to public policy. It would encourage employers to misclassify workers and require them to work long hours — knowing that if they take the risk and are ultimately held liable, they will only have to pay a fraction of the standard overtime damages.

Strauch is one of a series of cases in the District of Connecticut and elsewhere rejecting the retroactive application of the FWW method in misclassification actions.[8] While the Second Circuit has declined to weigh in on this issue,[9] several circuits have reached the opposite conclusion. A prominent example is Urnikis-Negro v. American Family Property Services,[10] which recognized that 29 C.F.R. § 779.114 did not support such retrospective use of the FWW method as a measure of damages but nevertheless eschewed the regulation in favor of the court’s interpretation of Overnight Motor Transportation Co. v Missel.[11]

Strauch and cases like it reject the reading of Missel adopted by Urnikis-Negro. There are sound reasons for this conclusion. First, Missel itself envisages an agreement for the contemporaneous payment of overtime — indicating that an enforceable FWW agreement must provide for additional pay for overtime hours. This is consistent with Missel’s companion case, Walling v. A.H. Belo Corp.,[12] which reinforces the requirement that such a contract must provide for overtime. Second, allowing the employee to agree to work overtime without additional, contemporaneous overtime pay would amount to an unlawful waiver of the FLSA’s requirements. Third, application of the FWW would run counter to the statute and public policy. Employers would receive a windfall for misclassifying their workers.

Additionally, we have argued, Urnikis-Negro’s contrary reading of Missel is supplanted by 29 C.F.R. § 779.114, which codifies the FWW and would otherwise be rendered superfluous.[13]

Willfulness/Good Faith

At trial, the jury found that CSC’s wage-and-hour violations were willful — resulting in an additional year on the statute of limitations and liability period under the FLSA. The district court upheld this determination on the defendant’s post-verdict challenge. While the defendant relied on the fact that it had engaged outside counsel to evaluate its classifications of the positions, the court held that the jury could have found that the review was a peremptory one designed to affirm and bless the employees’ exemption status. It amounted to a rubber-stamping exercise by an industry advocate — after which the company attempted to further insulate itself from liability by changing the language in its job descriptions to more closely parrot the exemptions. Thus, once again, the court went beyond mere formalities to a deeper look at the practicalities of the situation.

Likewise, the court rejected CSC’s “good faith” defense to liquidated damages as incompatible with and foreclosed by the jury’s finding of willfulness.

Conclusion

In sum, Strauch is an example of a successful challenge to an employer’s classification policies. Notable elements for success are good facts and a judge and jury willing to go beyond superficial labels and defenses to a deeper analysis of the practical realities involved.


Andrew Melzer is a partner and co-chair of the wage and hour practice at Sanford Heisler Sharp LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Joseph Strauch et al. v. Computer Sciences Corp., Civ. No. 3:14-cv-00956-JBA (D. Conn.).

[2] The court denied certification of an additional North Carolina subclass because it deemed the North Carolina claims preempted by the FLSA pursuant to applicable state law.

[3] 551 F.3d 1233 (11th Cir. 2008)

[4] Id. at 1277.

[5] Id. at 1278.

[6] The court further held that the U.S. Supreme Court’s ruling in Encino Motorcars LLC v. Navarro , 138 S. Ct. 1134, 1142 (2018) did not change matters because there is no indication that it would have altered the jury’s verdict. In any case, the defendant did not seek a new trial based on purported errors in the jury instructions.

[7] For example, for an employee who earns $500 a week, use of the FWW would reduce the overtime rate from $18.75 to $5.00 in a 50-hour week, $4.17 in a 60-hour week, and $3.13 in an 80-hour week.

[8] See also Costello v. Home Depot USA, Inc. , 944 F. Supp. 2d 199 (D. Conn. 2013); Hasan v. GPM Investments, LLC , 896 F. Supp. 2d 145 (D. Conn. 2012); Perkins v. S. New England Tel. Co. , No. 07-CV-967, 2011 WL 4460248 (D. Conn. Sept. 27, 2011). See further, e.g., Lindsey v. Tire Discounters Inc. , No. 2:15-cv-3065, 2017 WL 5972104 (S.D. Ohio Dec. 1, 2017); Wilson v. PrimeSource Healthcare of Ohio Inc. , No. 1:16-CV-1298, 2017 WL 2869341 (N.D. Ohio July 5, 2017); Boyce v. Independent Brewers United Corp. , 223 F. Supp.3d 942 (N.D. Cal. 2016); Snodgrass v. Bob Evans Farms Inc. , No. 2:12–cv–768, 2015 WL 1246640 (S.D. Ohio March 18, 2015); Ziegler v. Tower Communities LLC , No. 2:13–CV–872, 2015 WL 1208643 (N.D. Ala. March 17, 2015); McCoy v. North Slope Borough , No. 3:13–CV–64, 2013 WL 4510780 (D. Alaska Aug. 26, 2013); Wallace v. Countrywide Home Loans Inc. , No. SACV 08–1463, 2013 WL 1944458 (C.D. Cal. April 29, 2013).

[9] See Banford v. Entergy Nuclear Operations , 649 Fed. Appx. 89, 91-92 (2d Cir. 2016).

[10] 616 F.3d 665 (7th Cir. 2010).

[11] 316 U.S. 572 (1942).

[12] 316 U.S. 624 (1942).

[13] Cf. Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs. , 545 U.S. 967, 982-83 (2005) (“A court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion … Chevron’s premise is that it is for agencies, not courts, to fill statutory gaps.”).

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