Under federal law, employers must pay employees time-and-a-half if they work over 40 hours in a workweek, unless the employees are exempt from the overtime law. Employers don’t usually think of an employee who takes home $900,000 in a year as a non-exempt employee who needs to receive overtime pay. But the case of Pierce v. Wyndham Vacation Resorts Inc. shows that these employers may need to think again, especially when those employees are mainly paid on commission.
In Pierce, a class of commissioned sales representatives sued Wyndham—a resort chain—claiming that they were not exempt from the Fair Labor Standards Act’s (FLSA) overtime provisions. Wyndham moved for summary judgment on some of the claims, arguing that certain sales reps earned more than $100,000 per year. Most made well over that amount, with some taking home upward of $700,000 or even $900,000 in a given year. Wyndham also argued that these reps performed “executive duties.”
If you're an employee and you work more than 40 hours a week, you typically have the right to receive time-and-a-half overtime pay for those extra hours.
But there's a significant exception to this rule: it does not apply to white-collar workers, such as executives. As summarized on the Department of Labor's website, to be considered a white-collar worker and thus exempt from the overtime requirement, you have to be paid a salary and not by the hour; you have to make more than $455 per week; and you have to work in a certain kind of job, such as a managerial or professional role.
An earlier generation of Baltimore lawyers used to say that the outcome of a case should not depend on which side of Calvert Street it was filed. This made sense when the federal court was on the east side of Calvert and the state court on the west. The statement was a colloquial expression of the Erie doctrine, which requires federal courts to apply state law when federal jurisdiction depends on diversity of the parties’ citizenship.
The Erie doctrine requires federal judges to figure out how state judges would rule in certain matters. You might imagine a federal judge strolling across Calvert Street to ask for some advice. But that’s not how state and federal judges speak to one another (and not just because the federal court long ago moved to a dismal building on Lombard Street).
Instead, federal judges read the published judicial decisions from the state whose law applies. Under Erie, federal judges are required to follow the holding of decisions from the state’s highest court. They are not required to follow “dicta” – statements in a judicial opinion that are not necessary to the outcome. In many cases, the state’s highest court has not ruled on the particular legal question at issue. In that event, the federal court must predict how the state court would rule based on other sources of state law. One of those sources is “considered dicta” (or well-reasoned dicta) from the decisions of the state’s highest court.
In honor of Halloween, we are looking over our shoulder at some of the most frightening news that we have brought to you this year on Suits by Suits:
The Supreme Court of Washington’s recent decision in Failla v. FixtureOne Corporation is noteworthy on two levels.
First, it involved the surprising claim by a salesperson, Kristine Failla, that the CEO of her employer (FixtureOne) was personally liable for failing to pay her sales commissions. Typically, if an employee had a claim for unpaid commissions, you’d expect the employee to assert that claim against her company, not the chief. But under the wage laws of the state of Washington, an employee has a cause of action against “[a]ny employer or officer, vice principal or agent of any employer ... who ... [w]ilfully and with intent to deprive the employee of any part of his or her wages, [pays] any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract.”
On Friday, we described a lawsuit brought recently by five Buffalo Jills cheerleaders claiming that they should have been paid the minimum wage for all of the hours that they worked for the squad but were not. We said that a key issue in the case is whether the Jills are employees or independent contractors for purposes of New York wage and hour law because employers are required by the law to pay employees – but not independent contractors – the minimum wage. The lawsuit raises another question: is it a valid defense to the Jills’ claims that the defendants required them to sign contracts expressly agreeing that they are "independent contractors"? Here is one of those rare legal issues with a simple answer, at least under the federal wage and hour law called the Fair Labor Standards Act: No. As recently as last year, the U.S. Supreme Court said of the Fair Labor Standards Act: "The FLSA establishes federal minimum-wage, maximum-hour, and overtime guarantees that cannot be modified by contract."
So companies should beware that having people who work for them agree in writing that they are independent contractors does not inoculate the companies from wage and hour claims. And people who work for companies should know that just because they signed something saying that they are independent contractors does not necessarily mean that they are for purposes of the wage and hour laws. They may in fact be entitled under the law to be paid the minimum wage and overtime.
In a lawsuit filed on Tuesday, five Buffalo Jills cheerleaders claim that the Buffalo Bills NFL franchise and two companies that manage the squad are violating New York wage and hour laws. The Jills allege that they are "employees" for purposes of New York law and therefore must be paid the minimum wage - $8 per hour in New York – for their work as Jills. We have explored wage and hour laws – the federal Fair Labor Standards Act and similar state laws – here at Suits by Suits before but not the employee versus independent contractor distinction that is the key to many wage and hour cases and on which the Jills’ case could turn.
If you've ever wondered how Labor Day came to be -- how it got its name, why Americans celebrate it (and what exactly we are supposed to celebrate, between the car sales, barbecues and end-of-summer beach getaways), we've got the answers for you right here, in a look at Labor Day we posted last summer. Enjoy it -- and then go enjoy the day! Our regular posts about disputes between executives and employers will resume once we get past this beach traffic.
Bob Cratchit’s boss, Ebenezer Scrooge, is an “odious, stingy, hard, unfeeling man.” Or, at least that’s what Mrs. Cratchit says of him after feeding her family of eight, including her crippled son, Tiny Tim, a too-small pudding for dessert on Christmas. Readers of Dickens’ A Christmas Carol could easily reach the same conclusion. Bob, a clerk in Scrooge’s business (which some suggest is what we would call a stock brokerage today), is paid a mere 15 shillings weekly to work six days a week in an office that Scrooge refuses to adequately heat. That seems bad. But, today, in say, New London, somewhere in the U.S.A., would it be illegal? For these final days of the holiday season, we explore possible causes of action in Cratchit v. Scrooge. (We are not the only lawyers with these types of holiday musings.)
So it’s Christmas time. And Hanukkah and Kwanzaa time. And it all follows Thanksgiving and then is promptly succeeded by New Year’s Eve and the Feast of the Epiphany.
Yikes. That’s a lot of holidays. For employers and company managers, this means a lot of decisions about what days the business should be closed – and regardless of those decisions, it means lost productivity. It’s hard to estimate how much productivity is lost due to the November and December holidays, but if the Super Bowl is any guide – and $820 million in productivity is lost during Super Bowl week – then it could be in the billions of dollars. As one famous old curmudgeon noted, the whole thing is a poor excuse for picking a business owner’s pocket every December.
My colleague Andrew Torrez wrote recently about the history of the Christmas holiday. But looking at this more generally: how did we wind up with the number of holidays that we have now? Did we always have this many?
As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.
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