New York State Department of Labor Rules Uber Drivers Eligible for Unemployment Insurance

 

By: Robert Pagan

The New York State Department of Labor has ruled that two former Uber drivers are eligible for unemployment payment, finding that they should be treated as employees rather than independent contractors, as the company has maintained.[1] Uber has made it clear that they believe their driving “partners” fit the definition of independent contractors rather than employees.[2] Uber drivers on the other hand, have rejected this notion, and assert that they are best described as employees.[3] Classification of Uber drivers has plagued the company and its community of drivers for years.

When we left Uber this past August, a federal judge had rejected a proposed $100 million settlement with drivers in California and Massachusetts who claimed they should be classified as employees instead of independent contractors.[4] According to U.S. District Judge Edward Chen, the deal between Uber and its drivers did not compensate the drivers enough.[5]

Unlike contractors, employees are entitled to a variety of rights and protections, including minimum wage and workers compensation insurance.[6] The recent decision by the New York Department of Labor could make it more difficult for Uber, its rival Lyft, and other new businesses operating in what is known as the gig economy by raising their costs and challenging their business model.[7]

The bout began on July 28^th, 2016, after the New York Taxi Alliance filed suit on behalf of two former Uber drivers challenging New York State’s refusal to investigate or adjudicate claims for unemployment insurance, effectively denying them access to benefits they need to support themselves and their families while they are unemployed.[8] The plaintiffs—two individual drivers and the New York Taxi Workers Alliance—were represented by Legal Services NYC’s Brooklyn program.[9]

The rulings by the New York State Department of Labor apply only to the drivers’ unemployment insurance claims and do not directly affect other drivers or extend to other protections normally accorded to employees.[10] However, worker advocates say they plan to pressure the state to extend the logic of unemployment rulings to other areas.[11]

“I think this is a game-changer,” said Bhairavi Desai, executive director of the New York Taxi alliance.[12] “Uber has depended on the political structure turning a blind eye. What these decisions do is force a microscopic review of drivers’ employment status by elected officials and government agencies.”[13]

It is not clear how far the advocates will be able to push the ruling. Tiffany Potzer, a spokeswoman for the New York Labor Department, said: “unemployment determinations are made on a case-by-case basis, and depending on the facts, decisions have been made supporting both drivers as employees and drivers as independent contractors.”

California has deemed at least two Uber drivers eligible for jobless benefits, but has found others to be independent contractors.[14] The determinations have not led Uber to recast its relationship with drivers in the state.[15] Some observers say the debate over whether Uber divers are contractors or employees is ultimately about a much bigger issue: how our social safety net must adapt to changing work trends.[16]

[1] Noam Scheiber, Uber Drivers Ruled Eligible for Jobless Payments in New York State, New York Times (Oct. 12, 2016),

https://www.nytimes.com/2016/10/13/business/state-rules-2-former-uber-drivers-eligible-for-jobless-payments.html.

[2] O’Connor v. Uber Techs., No. 13-3826, 2015 U.S. Dist. LEXIS 116482, at *5 (N.D. Cal. 2015).

[3] Id.

[4] Alison Griswold, New York just made the case that two former Uber drivers should be treated as employees, Quartz (Oct. 13, 2016),

https://qz.com/808484/new-york-state-has-found-two-uber-drivers-eligible-for-unemployment-payments/.

[5] Chris Isidore, Judge rejects $100 million settlement between Uber and its drivers, CNN Money (Aug. 19, 2016),

http://money.cnn.com/2016/08/19/technology/uber-drivers-class-action-settlement/.

[6] Scheiber, supra note 1.

[7] Id.

[8] Kate Whalen, Former Uber Drivers File Federal Lawsuit against Governor Cuomo and New York State Department of Labor, Legal Services NYC (July 28, 2016),

http://www.legalservicesnyc.org/news-and-events/press-releases/1037-former-uber-drivers-file-federal-lawsuit-against-governor-cuomo-and-new-york-state-department-of-labor-.

[9] Id.

[10] Scheiber, supra note 1.

[11] Id.

[12] Id.

[13] Id.

[14] Chris Roberts, UPDATED: Another Uber Driver Awarded Unemployment Benefits, San Francisco Weekly News (Mar. 4, 2016),

http://archives.sfweekly.com/thesnitch/2016/03/04/uber-driver-awarded-unemployment-benefits-first-known-case-in-state.

[15] Scheiber, supra note 1.

[16] Andrea Peterson, Two Uber drivers are eligible for unemployment payments, New York regulators find, The Washington Post (Oct. 14, 2016),

https://www.washingtonpost.com/news/the-switch/wp/2016/10/14/uber-drivers-eligible-for-unemployment-payments-new-york-regulators-find/?utm_term=.bb252abb852c.

Not All Leave Is Created Equal: A New Father’s Struggle Obtaining Paid Paternity Leave

By: Victoria Massimino

Maternity leave is likely the first topic that comes to mind when an employee has a new baby at home.  Another area of consideration for new parents, and a growing trend, is leave for fathers.  Paternity leave refers to time off of work for new dads at the birth or adoption of a child.[1]  For the companies that do offer some type of leave, it is rarely paid.[2]  Among the U.S. states that do offer paid leave are California, Rhode Island, and New Jersey.[3]  California equally offers paid family leave to of up to six weeks with partial pay.[4] In the states that do not offer paid paternity leave however, the majority of new fathers use vacation or sick time to be with their newborns.[5]

The United States falls sadly behind other countries – including Belgium, Denmark, Finland, Iceland, Norway, Sweden, France and Spain – when it comes to paternity leave.[6]  Iceland, for example, gives 120 days of dedicated paternity leave, while Sweden offers sixty days.[7]  Fathers in Iceland earn eighty percent of their wages while on leave.[8]  Fathers in Norway can choose either twenty-six fully paid weeks or thirty-six weeks with partial pay.[9] Finland, likewise, offers fifty-four days of dedicated paternity leave, plus 158 days for either parent.[10]  Dedicated paternity leave refers to leave that is specifically for fathers, rather than leave that is discretionary for either parent.[11]

There are many benefits to providing new families with paid paternity leave.[12]  Paid leave helps fathers better balance their work and home lives, reducing work-family conflict.[13]  Longer leave means that dads get more time to spend with their children and form bonds.[14]  When fathers are more engaged, it leads to improved health and development for children.[15]  A study of four countries even showed that longer paternity leaves and time spent by fathers caring for children at a very young age was associated with higher cognitive test scores.[16] Finally, paternity leave can help bridge the gender gap at home and in the workplace.[17] Studies show that longer paternity leaves allows for more balance in household responsibilities between mothers and fathers.[18]

While fathers continue to face hardships in gaining paid leave to begin with, they also worry about job security.[19]  Although it is illegal for an employer to discriminate against an employee for taking leave, the effects on their career is a common concern among men who want to take paternity leave.[20]  Secretary Perez takes the opposite stance, stating “[f]athers taking parental leave helps not just children but moms, too, by changing who changes the diapers and the whole culture around work and family.”[21] A national survey demonstrates that perceptions are similarly changing, showing that both men and women find it important for employers to give workers time off for family responsibilities.[22]

[1] Paternity leave: What are the options for dads?, Baby Center (Nov. 2015), http://www.babycenter.com/0_paternity-leave-what-are-the-options-for-dads_8258.bc.

[2]  Id.

[3] Id.

[4] Id.

[5] Id.

[6] Andrew Lord, 8 Countries That Put U.S. Paternity Leave To Shame, The Huffington Post (June 19, 2015), http://www.huffingtonpost.com/2015/06/17/best-countries-for-patern_n_7595946.html.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Paternity Leave: Why Parental Leave For Fathers Is So Important For Working Families, Dep’t of Lab., https://www.dol.gov/asp/policy-development/PaternityBrief.pdf (last visited Feb. 26, 2017).

 

[12] Lord, supra note 6.

[13] Paternity Leave: Why Parental Leave For Fathers Is So Important For Working Families, supra note 11.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Paternity Leave: What are the options for dads?, supra note 1.

[20] Id.

[21] Paternity Leave: Why Parental Leave For Fathers Is So Important For Working Families, supra note 11.

[22] Paternity Leave: What are the options for dads?, supra note 1.

Will The DOL Fiduciary Rule Get Trumped?

By: Justin DiCicco

The Department of Labor (“DOL”) has recently come under fire by various groups since expanding its definition of a fiduciary.  This rule has faced numerous challenges in courts all over the nation, but the DOL rule has held its ground and been found valid.[1]  But will this trend of courts upholding this rule continue, or will its opponents find a new way to get rid of the fiduciary rule?

In April of 2016, the DOL adopted a final rule which expanded and defined who is considered a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (“ERISA”).[2]  The DOL expanded the definition of a “fiduciary” since regulations were issued in 1975 which narrowed the statutory definition of fiduciary investment advice by creating a specific five-part test that had to be satisfied before someone could be considered a fiduciary adviser.[3]  The investment advice marketplace has changed significantly since this test was originally issued and as a result, many investment professionals were not required to adhere to ERISA’s prohibited transaction rules or fiduciary standards, which allowed them to operate with conflicts of interests that did not have to be disclosed.[4]

The final rule adopted by the DOL replaces the narrow five-part test with a new definition that is a better fit with the language ERISA and the Internal Revenue Code of 1986 (“Code”).[5]  Under the new rule, a person gives investment advice when that person makes a recommendation to a retirement plan, plan fiduciary, plan participant and beneficiary or IRA owner for a fee or other form of compensation, either directly or indirectly, as to the holding or exchanging of securities or other investment properties.[6]  Investment advice also includes recommendations as to securities or other investment property after the property has been transferred or been distributed from an IRA or plan.[7]  An essential element of this new rule is whether a recommendation actually occurred.[8]  The final rule states that a “recommendation” is a communication which “based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action,” and is to be judged by an objective standard.[9]

The second part of this final rule establishes the types of relationships that have to exist in order for these recommendations to give rise to fiduciary investment advice responsibilities.[10]  The rule covers recommendations made by people who: (1) acknowledge that they are acting as a fiduciary within the meaning of ERISA or the Code; (2) offer advice pursuant to a written or verbal agreement or understands that the investment advice is based on the particular needs of the advice recipient; and (3) direct recommendations to specific recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the plan or IRA.[11]  For a recommendation to be considered fiduciary investment advice, it must be offered in exchange for a fee or other form of compensation.[12]

In response to the upcoming implementation date of this rule, President Trump signed an executive memorandum which instructed the DOL to reexamine the new fiduciary rule.[13]  The President wants the DOL conduct research and review the legal and economic impact that the fiduciary rule will have on those affected by it.[14]  If the DOL finds that the rule prevents access to retirement information and financial advice or is inconsistent with President Trump’s administrative policies, then the memorandum demands this agency to revise or rescind the rule.[15]  Additionally, it seems likely that the next secretary of labor and head of the DOL will follow the instructions in the executive memorandum and change this rule.[16]

While opponents of the DOL’s fiduciary rule have been finding it difficult to challenge this rule in the courtroom, it looks like the President may be their saving grace to make sure that this rule never takes effect.

 

[1] Matthew Cutts & James Sivon, Financial Services in the 1^st Month of Trump Presidency, Law360 (Feb. 23, 2017, 4:31 PM), https://www.law360.com/articles/895115/financial-services-in-the-1st-month-of-trump-presidency.

[2] Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice, 68 Fed. Reg. Vol 81, 20945.

[3] Id.                                             

[4] Id.

[5] Id. at 20948.

[6] Fact Sheet: Department of Labor Finalizes Rule to Address Conflicts of Interest in Retirement Advice, Saving Middle Class Families Billions of Dollars Every Year, U.S. Dep’t of Lab., https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/dol-final-rule-to-address-conflicts-of-interest.

[7] Id.

[8] Id.

[9] Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice, 68 Fed. Reg. Vol 81, 20948.

[10] Id.

[11] Id.

[12] Id.

[13] Matthew Cutts & James Sivon, Financial Services in the 1^st Month of Trump Presidency, Law360 (Feb. 23, 2017, 4:31 PM), https://www.law360.com/articles/895115/financial-services-in-the-1st-month-of-trump-presidency.

[14] Id.

[15] Id.

[16] Id.

Kennedy v. Chipotle: With A Side of Guac

By: Elana Kalkanis

This past January, Chipotle Mexican Grill filed a brief to the U.S. Court of Appeals, urging them to rule in their favor over the termination of a former employee, Army veteran, James Kennedy.[1]  Following an already tumultuous year, Chipotle once again found itself in hot water; yet this time with the National Labor Relations Board (“NLRB”).[2]  In March of 2016, the NLRB’s administrative law judge rendered a decision in favor of Kennedy, finding that Chipotle violated the National Labor Relations Act (“NLRA”) when it maintained an unlawful social media code of conduct and prohibited Kennedy from engaging in protected concerted activity.[3]  Kennedy’s complaint was ignited by his termination from the fast-food chain, after he posted negative comments to his Twitter account and which he used to criticize his former employer.[4]

The deciding factor for the court was not necessarily based on the content of Kennedy’s tweets, but rather, the context.[5]  In most of his posts, Kennedy actively replied to Chipotle’s customers and their requests for better service and cheaper food.[6]  One of his posts read, “Nothing is free, only cheap #labor. Crew members make only $8.50hr, how much is that steak bowl really?”[7]  Even though Judge Flynn recognized Kennedy’s language as an indication of his frustration with employee wages, she further acknowledged that his tweets represented issues that were common with many Chipotle employees.[8]  For this reason, and because he did not act in cahoots with any of his coworkers, Kennedy’s actions were protected under the NLRA.”[9]

Furthermore, the court found Chipotle’s Social Media Code of Conduct to be outdated and “too restrictive,” in ways which would strongly discourage employees from making appropriate statements about issues in the workplace.[10]  As a way of further protecting the rights of employees, Judge Flynn ordered Chipotle to post signs indicating that their employee policies, specifically its social media rules, were unlawful.[11]  This ruling undoubtedly sparked a movement for the rights of all employees protesting working conditions and wages, through the use of social media.[12]  Indicative of this movement was the Pennsylvania Workers Organization Committee’s “Fight for $15” campaign, which saw this decision as a major victory in their fight for healthcare and a significant raise in wages.[13]

Even though the Court of Appeals has yet to decide on Chipotle’s recent petition, this case has illustrated that the NLRB continues to working aggressively in its approach to extract unlawful employer policies.[14]  The court’s decision has not only protected the rights of Kennedy as an individual employee, but has stressed the importance of reviewing policies to many fast-food chains, in order make sure they consistently comply with the Board’s interpretation of the NLRA.[15]  As a result of their conduct, Chipotle was ordered to offer Kennedy re-employment and compensation of loss wages.[16]  Seemingly happy with the result, Kennedy stated that he was willing to accept his back wages in the form of food vouchers, as he still believes Chipotle’s food is “delicious.”[17]  Maybe guacamole can solve all of the world’s problems after all.

[1] Daniel Weissner, Chipotle Tells Fifth Circuit Worker’s Tweets Weren’t Protected, Reuters (2017), http://www.reuters.com/article/employment-chipotle-idUSL1N1FE443; See also Chipotle Services, L.L.C. v. NLRB, 16-60667 (2017).

[2] Amy McLaughlin, Chipotle Finds Itself In Agua Caliente With the NLRB Over Social Media Policy, 21 No. 2 Vt. Emp. L. Letter 4, (Apr. 2016).

[3] Id.

[4] Saqib Shah, Judge Find’s Chipotle’s Social Media Policy Violates Labor Laws, Digital Trends (Mar. 17, 2016), http://www.digitaltrends.com/social-media/chipotle-social-media-labor-violation/.

[5] McLaughlin, supra note 2.

[6] See Cynthia Correa, Judge Rules Chipotle’s Social Media Policy Is Illegal, Eater (Mar. 17, 2016), http://www.eater.com/2016/3/17/11253672/chipotle-social-media-policy-is-illegal.

[7] Id.

[8] McLaughlin, supra note 2.

[9] Id.

[10] Id.

[11] Shawn Paul Wood, Judge Declares Chipotle’s Social Media Policy Violates Labor Laws, ADWEEK, http:// adweek.com/digital/judge-declares-chipotles-social-media-violates-labor-laws/.

[12] See id.

[13] Id.; See Fight for $15, http://fightfor15.org/about-us/ (last visited Feb 19, 2017). The “Fight for $15” started with a few hundred fast food workers in New York City, a movement striking for fifteen dollars an hour minimum wage and union rights. Now an international cause, over three-hundred cities and six continents have fought together with the common goal of compensating the people who do the “real work”, the low-wage employees.

[14] McLaughlin, supra note 2.

[15] Id.

[16] Shah, supra note 4.

[17] Wood, supra note 11.

 

Who’s Next? Will R. Alexander Acosta Pass Muster for Department of Labor Secretary?

By: Michael Giarratano

Amid losing support from both sides of the aisle, due to the allegations of his past treatment of women he has employed and in his personal life,[1] as well as, admitting that he had employed an undocumented immigrant for years,[2] this past Wednesday, February 17^th CEO of the Carl’s Jr. and Hardee fast-food chain franchises, Andrew Puzder withdrew his nomination to become President Trump’s labor secretary.[3]

President Trump, wasting no time at all, tapped Alexander Acosta on February 17, 2017 to become the next Department of Labor Secretary.[4]  This pick by President Trump is in stark contract with his initial pick of Andrew Puzder.[5]  In tapping Mr. Acosta, it was a much more conventional pick.[6]  Mr. Acosta has a wealth of experience in all different areas, such as labor relations, law and education.[7]  In addition to Mr. Acosta being the first Hispanic in President Trump’s cabinet, it will be hard for democrats to stonewall his nomination.  He has already been vetted and approved by the Senate on three different occasions.[8]  First, he was appointed by President George W. Bush to the National Labor Relations Board from 2002-2003, second, was nominated and appointed to become the assistant attorney general for the Justice Department’s Civil Right Division and third, he went on to be nominated to the position of Untied States Attorney General for the Southern District of Florida.[9]  In addition to lengthy experience in government, clerked for Justice Samuel Alito when he was an Appeals Court judge and he most recently is the chairman of the U.S. Century Bank and the dean of the Florida International University College of Law.[10]

Assuming Mr. Acosta is confirmed by the Senate, what does this mean for labor relations?  If we look into his decisions from his time at the NLRB, it shows that he had more of an academic approach rather than ruling along party lines.[11]  This pick makes political sense if President Trump is trying to keep the support of blue collar workers.[12]  During his short tenure at the NLRB, Mr. Acosta was in the majority of major pro-union decisions.[13]  In Kroger v. United Food and Commercial Workers Union Local 700, the board, including Mr. Acosta, affirmed the administrative law judge’s findings that Kroger violated Section 8(a)(1) of the Act by telling the Union that they could not discuss union business during working hours at Kroger and that they would be fired if they did discuss Union business on company time.[14]  Union leaders have recognized this and believe that Mr. Acosta is a much better option for unions than the previous nominee Puzdner.  Richard Trumpka, the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) was very pleased with President Trump’s new nomination and stated “in one day we’ve gone from a fast-food CEO who routinely violates labor law to a public servant with experience enforcing it.”[15]

Mr. Acosta received an important endorsement from the International Union of Operating Engineers, stating they were happy with Trump’s nomination of Mr. Acosta.  Union President James T. Callahan stated that “[M]r. Acosta has proven himself to be fair and open minded” and “[Mr. Acosta] has proven that he can handle disparate opinions and information in order to make thoughtful decisions on difficult issues.”[16]  Although not all union leaders are as supportive as Mr. Callahan and will still be critical during the nomination process, one thing is for certain, union leaders are very happy that Andrew Puzder is no longer an option.

[1] Dan Merica & Manu Raju, Inside Andrew Puzder’s Failed Nomination, CNN (Feb. 15, 2017 11:31 PM), http://www.cnn.com/2017/02/15/politics/andrew-puzder-failed-nomination/.

[2] Id.

[3] Alan Rappeport, Andrew Puzder Withdraws From Consideration as Labor Secretary, New York Times ( Feb. 15, 2017), https://www.nytimes.com/2017/02/15/us/politics/andrew-puzder-withdrew-labor-secretary.html?action=click&contentCollection=Politics&module=RelatedCoverage&region=Marginalia&pgtype=article.

[4] Alan Rappeport, R. Alexander Acosta, Law School Dean, Is Trump’s New Pick for Labor, New York Times (Feb. 16, 2017), https://www.nytimes.com/2017/02/16/us/politics/alexander-acosta-labor-secretary-trump.html?_r=0.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Shannon Pettypiece, Trump Nominates Ex-NLRB Member Acosta as Labor Secretary, Bloomberg (Feb. 16, 2017 4:28 PM), https://www.bloomberg.com/politics/articles/2017-02-16/trump-said-to-choose-ex-nlrb-member-acosta-as-labor-secretary.

[11] Daniel Wiessner, New Labor Nominee Acosta’s NLRB Record Suggests Nonpartisan Approach, Thompson Reuters (Feb. 17, 2017), https://1.next.westlaw.com/Document/I2057b8c0f4fa11e68ca6b836297c09ca/View/FullText.html?transitionType=SearchItem&contextData=(sc.Category).

[12] Id.

[13] Id.

[14] Kroger v. United Food & Commercial Workers Union Local 700, 339 N.L.R.B. No. 88  (2003).

[15] Nikita Vladimirov, AFL-CIO: Trump’s New Labor Pick Deserves Serious Consideration, The Hill (Feb. 16, 2017 3:10 PM), http://thehill.com/homenews/administration/319949-afl-cio-trumps-new-labor-pick-deserves-serious-consideration.

[16] Sean Higgins, Union Backs Acosta for Labor Secretary, Washington Examiner (Feb. 16, 2017 5:56 PM), http://www.washingtonexaminer.com/union-backs-acosta-for-labor-secretary/article/2615100.

Murphy (Oil)’s Law: Any class action that can be individually arbitrated, will be individually arbitrated

By: Ryan McGinty

Arbitration agreements, used to avoid the often heightened costs associated with litigation in a courtroom, are not uncommon in the world of commercial disputes and employment contracts.[1]  A major form of alternative dispute resolution (“ADR”), employers have abandoned what was initially a voluntary process.[2] The new desire was for a more deliberate forced arbitration clause, which has become a necessary condition for many formal employment agreements.[3]  In 2011, and again in 2015, the Supreme Court reaffirmed a company’s right to bar consumers from uniting together in a class action suit against the company, as permitted by the Federal Arbitration Act of 1925 (“FAA”).[4]  This blog post is concerned with the future applicability of that bar or waiver power as a means to block employee’s collective action suits distinguished from class actions without the employer-employee relation.[5]

Specifically, the issue surrounding arbitration agreements has been reignited in conjunction with the still pending change to the U.S. Supreme Court, which last month agreed to review the validity of class action waiver clauses in employer-employee arbitration agreements.[6] In doing so, our nation’s highest court granted petitions for writ of certiorari in three major cases; Epic Systems Corp. v. Lewis,[7] Ernst & Young v. Morris,[8] and the Fifth Circuit appeal of NLRB v. Murphy Oil USA Inc.[9]

Focusing on the controversial Murphy Oil decision, the question presented is whether or not courts will follow this case as appropriate precedent after its upcoming review with the addition of a new Supreme Court Justice?  After the National Labor Relations Board (“NLRB”) concluded that Murphy Oil had “unlawfully required employees at its Alabama facility to sign an arbitration agreement waiving their right to pursue class and collective actions,” Murphy Oil successfully petitioned the Court which reversed the Board’s ruling in part. [10] With reference to a D.R. Horton analysis,[11] the NLRB was found to have disregarded conflicting evidence and previous rulings before it originally held that Murphy Oil violated section 8(a)(1) of the National Labor Relations Act (“NLRA”).[12]  Creating a further split from the Seventh and Ninth Circuits, the Fifth Circuit Court reasoned that arbitration agreements must be enforced under the FAA since the later enacted NLRA does not contain any overriding congressional mandate as it pertains to arbitrations.[13]  On review, the court will hone in on the legality of companies to include collective action waivers that force plaintiffs to sue individually.[14]  The problem, many argue, is that without larger collective action, corporations will not change their behavior in bad faith.[15]

Currently, eight justices are sitting on the high court, split 4-4 between writing opinions with a more liberal verse conservative brush.[16] Without Justice Antonin Scalia, who authored the 5-4 opinion in AT&T Mobility v. Concepcion,[17] employers are left wondering whether the new Supreme Court Justice will follow in Scalia’s footsteps while inevitably ending the 4-4 deadlock we have become familiar with.[18] If confirmed in time, the conservative approach carried out famously by Scalia may be echoed by a ninth justice to apply not only to consumers but collective action by employees on a federal level.[19]  According to Gerald Maatman, co-chair of the class action defense group at Seyfarth Shaw, “[f]or many CFO’s, this may be the most important thing happening on the law front in 2017.”[20]

President Donald Trump promptly moved to nominate Tenth Circuit Judge Neil M. Gorsuch to fill the vacant Supreme Court seat.[21]  At age forty-nine, Judge Gorsuch has a disciplined approach to labor issues, but has considered the NLRB statutory interpretation to be expansive in certain cases, and might be inclined to favor employers if present during a review of Murphy Oil.[22]  Professor Sample from the Maurice A. Deane School of Law at Hofstra University, has touched on the nomination of Gorsuch calling him a “cautious, very careful, very studious [and] scholarly jurist.”[23]  Further, Professor Sample notes that the consequences of what he has deemed an inevitable confirmation will shape the Supreme Court for decades, especially with how the Supreme Court sits with Justice Ginsberg turning eighty-four and Justice Kennedy entertaining the possibility of stepping down.[24] Presumably, Gorsich being a Trump-nominated justice will be pro-business and uphold the Murphy Oil reversal.[25] This potential change of law would give large companies huge leverage in employer-employee relations, and will essentially stop plaintiff’s lawyers from bringing larger class action cases.[26] Only time will tell if employees will lose the right to act collectively in employment disagreements, so stay tuned.

 

 

[1] Arbitration Agreements, Work Place Fairness (Last visited Feb. 11, 2017) http://www.workplacefairness.org/forced-arbitration-agreements.

[2] Id.

[3] Id.

[4] David McCann, Can Companies Bar Workers from Filing Class-Action Claims?, CFO (Feb. 2, 2017) http://ww2.cfo.com/legal/2017/02/can-companies-bar-workers-from-class-action-claims-arbitration/.

[5] Id.

[6] Jessica Karmasek, SCOTUS To Decide Arbitration Issue; Unclear If Trump Pick Will Be On Bench In Time, FORBES (Jan. 29, 2017) http://www.forbes.com/sites/legalnewsline/2017/01/19/scotus-to-decide-arbitration-issue-unclear-if-trump-pick-will-be-on-bench-in-time/#fd741437ccb9.

[7] Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert. granted, No. 16-285, 2017 WL 125664 (U.S. Jan. 13, 2017) ( stating that health care software company agreement, requiring certain groups of employees to bring “wage-and-hour claims” though individual arbitration only, violated NLRA and is unenforceable under FAA.).

[8] Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted, No. 16-300, 2017 WL 125665 (U.S. Jan. 13, 2017).

[9] Karmasek, supra note 5.

[10] Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015), cert. granted, No. 16-307, 2017 WL 125666 (U.S. Jan. 13, 2017).

[11] In Re D. R. Horton, Inc., 357 NLRB 2277 (2012) (holding that an arbitration agreement under which employees were required to waive their right to bring a class action violated NLRA).

[12] 29 U.S.C. §§ 151-169 (stating that agreements which “requir[ed] . . . employees to agree to resolve all employment-related claims through individual arbitration” were not lawful).

[13] Murphy Oil, 808 F.3d 1013, 1016.

[14] Karmasek, supra note 5.

[15] McCann, supra note 3.

[16] Karmasek, supra note 5.

[17] Karmasek, supra note 5 (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S. Ct. 1740 (2011)). This is touted as a “game-changer” for class action suits that ruled in favor of companies requiring consumers to bring claims solely through individual arbitration.

[18] Karmasek, supra note 5.

[19] Karmasek, supra note 5.

[20] McCann, supra note 3.

[21] Ilyse Schuman & Michael J. Lotito, Who is Neil Gorsuch and Where Does He Stand on Labor and Employment Issues?, LITTLER (Jan. 31, 2017) https://www.littler.com/publication-press/publication/who-neil-gorsuch-and-where-does-he-stand-labor-and-employment-issues.

[22] Id.

[23] Marvin Scott, News Closeup: A look at Trump’s travel ban and pick for Supreme Court Justice, PIX11 (Feb. 4, 2017) http://pix11.com/2017/02/04/news-closeup-a-look-at-trumps-travel-ban-and-pick-for-supreme-court-justice/.

[24] Id.

[25] Schuman & Lotito, supra note 21.

[26] McCann, supra note 3.

Pushback on Form 5500 Proposed Changes

By: Taylor Napoli

In July 2016, the Department of Labor (“DOL”), the Internal Revenue Service (“IRS”), and the Pension Benefit Guaranty Corporation (“PBGC”) proposed changes to the Form 5500 Series in order to modernize and improve the current Forms.^[1]  The comment period on such changes was extended to mid-December, after originally being set for the beginning of October, to appease the many organizations that requested a longer comment period in order to fully understand and analyze the proposed changes.^[2]  The majority of organizations that chose to send in comment letters had mainly negative things to say about what the DOL, IRS, and PBGC have proposed.

Two major plan sponsor organizations, the American Benefits Council (“ABC”) and the ERISA Industry Committee (“ERIC”), are asking the DOL to withdraw the proposed Form 5500 changes.^[3]  Both ABC and ERIC believe that these changes would cause “administrative burdens” for plan sponsors and providers, as well as substantially increasing the operating costs of such plans.^[4]  ERIC submitted a joint comment with the Committee on Investment of Employee Benefit Assets (“CIEBA”) and the Society for Human Resource Management (“SHRM”) to discuss the proposed changes to the reporting requirements for two supplemental schedules that go along with Form 5500, Schedules C and H.^[5]  The Organizations cite four predominant issues with the proposed changes regarding Schedules C and H: (1) substantial additional costs with unclear benefits; (2) consistency in disclosure; (3) Schedule H in its entirety; and (4) biased reporting.^[6]

The Organizations are predominantly concerned about the substantial costs, both monetary and otherwise.^[7]  They believe that the new requirement will greatly increase “legal, compliance, and audit costs” and require many more resources from plan administrators in order to compile the new data that is being proposed.^[8]  The Organizations are worried that the costs will eventually be pushed onto the plan participants because the plan administrators may not be able to cover the increased costs.^[9]  Additionally, CIEBA, SHRM, and ERIC believe that the Agencies’ proposal severely underestimates the additional hours of work that will need to be put in by plan sponsors and administrators to comply with the new reporting requirements.^[10]  While the IRS, DOL, and PBGC believe that the new reporting requirements will only increase the work of large employers by approximately ninety hours, the Organizations have estimated an additional 2,000 hours to complete the form, and another 4,000 hours to be able to adjust to the form changes and comply with them by 2019, which would be the first year that they’re in effect if accepted.^[11]

ABC also submitted their own comment letter to the IRS, DOL, and PBGC voicing their concerns regarding the increased administrative burdens they believe will result from the proposed changes.^[12]  ABC is specifically concerned with the reporting requirements being extended to all group health plans no matter the size, the increase of detail reported on every plan’s financial information, and the expansion of information collected for service provider compensation.^[13]  Rather than giving feedback regarding the problems ABC has with each of the changes, they instead suggested that the Agencies completely withdraw the proposal, take into full consideration all comments received, and re-propose a new, revised proposal at a later date.^[14]  Knowing a complete withdrawal is unlikely, ABC has requested that the IRS, DOL, and PBGC push back the date the proposed changes would become effective to 2020.^[15]

While there is much backlash regarding the proposed changes, one of the Big Four accounting firms, PricewaterhouseCoopers, seems to be supporting the Agencies’ proposal.^[16]  PricewaterhouseCoopers has drafted their own summary of changes to reach out to those who may be affected by the proposal.^[17]  The accounting firm believes that the DOL, IRS, and PBGC will use the new data they are asking for within the proposed changes to help in their enforcement of benefit plans, which will be helpful to plan administrators and participants alike.^[18]

At this time, the Agencies are taking into consideration all comments received.  If the proposed changes had been able to be approved and passed before President Trump had taken office, it is likely that the final, accepted changes would have closely mirrored those that were proposed.  However, because there will likely be a lot of changes to health care plans and the Agencies who propose such changes, the chances of the July 2016 proposed changes to the Form 5500 Series getting approved greatly decreases.

^[1] Proposed Revision of Annual Information Return/Reports, 81 Fed. Reg. 47533 (proposed July 21, 2016) (to be codified at 26 C.F.R pt. 301, 29 C.F.R. pts. 2520 &2590, 29 C.F.R. pt. 4065).

^[2] Proposed Revision of Annual Information Return/Reports; Proposed Rule, 81 Fed. Reg. 65594 (proposed Sept. 23, 2016) (to be codified at 29 C.F.R. pts. 2520 &2590).

^[3] Plan Sponsor Groups Call on DOL to Withdraw Proposed Form 5500 Changes, HR Daily Advisor (Dec. 21, 2016), http://hrdailyadvisor.blr.com/2016/12/27/plan-sponsor-groups-call-dol-withdraw-proposed-form-5500-changes/.

^[4] Id.

^[5] Letter from Ray Kanner, Acting Exec. Director, CIEBA Inc., Will Hansen, Senior VP, Retirement Policy, ERIC, and Michael Aitken, VP, Government Affairs, SHRM, to Assistant Secretary Borzi, Director Choi, and Director Reeder, Employee Benefits Security Administration (Dec. 5, 2016) (on file with ERIC at http://www.eric.org/uploads/doc/retirement/Form%205500%20Letter%20to%20DOL%20IRS%20%20PBGC%20(RIN%201210-AB63)%20–%2012-5-2016.pdf).

^[6] Id.

^[7] Id.

^[8] Id.

^[9] Id.

^[10] Id.

^[11] Id.

^[12] Letter from Jan Jacobson, Senior Couns., Retirement Pol’y, ABC and Kathryn Wilber, Senior Couns., Health Pol’y, ABC, to the Office of Regulations and Interpretations, Employee Benefits Security Administration (Dec. 5, 2016) (on file with the American Benefits Council at http://www.americanbenefitscouncil.org/pub/29025d79-d89d-b636-87d6-3fd99e0cd176) (stating that ABC is a “national nonprofit organization dedicated to protecting and fostering privately sponsored employee benefit plans.” They have about 400 members that provide benefits to active and retired workers and their families).

^[13] Id.

^[14] Id.

^[15] Id.

^[16]Agencies Propose Significant Changes to Form 5500, PwC: Insights from People and Organization (Oct. 11, 2016), https://www.pwc.com/us/en/tax-services/publications/insights/assets/pwc-significant-changes-proposed-to-form-5500.pdf.

^[17] Id.

^[18] Id.

UberEATS; About To Chow Down On Another Lawsuit

By: Samantha Barbere

A controversial issue that has existed in the Uber community for years circles around the classification of Uber drivers.[1]  Uber has made it clear that they believe its driver “partners” fit the definition of independent contractors rather than employees.[2] Uber drivers on the other hand, refuse to accept the stance taken by the company, and assert they are best described as employees.[3] Lawsuits which addressed the issue in California and Massachusetts ended in a settlement.[4] The settlement awarded over $100 million to workers, and in exchange the company will be allowed to categorize them as independent contractors.[5]

After the settlement the tension between the company and their drivers seemed to quiet down for some time.[6] However recently, to the company’s dismay, the issue has resurfaced.[7] The issue reemerged in connection with the creation of Uber’s new sister company UberEATS.[8] UberEATS is a food delivery service which was created by Uber.[9] Users download the Uber app on their phones and once they open the app they are provided with a list of restaurants in their location.[10] They then choose their meal and track the status of its preparation and delivery, all through the app.[11]

The disagreement over the status of its drivers, which caused many issues for Uber in the past, is now spilling over to affect their new project.[12] UberEATS drivers are starting to make assertions that are not unfamiliar to Uber.[13] They are claiming that the company erroneously classifies its drivers as freelancers.[14] The classification disagreement goes deeper than just a dispute between the company and its workers.[15] The way the workers are classified decides what benefits the workers will be allowed to enjoy.[16]

UberEATS workers recently filed a class action lawsuit against Uber regarding their categorization as freelancers.[17] In the suit they claim that the title as “freelancers” deprives them of numerous benefits that they would enjoy as employees. [18] Some benefits they believe they are entitled to include, “minimum wage, worker’s compensation insurance, unemployment insurance, disability insurance and social security.”[19] The claims asserted by the drivers mimic much of the language in the claims that were made in one of the first cases originally brought by drivers in 2015.[20] The complaint accuses the company of using some obscure formula in order to underpay the drivers.[21] The relief sought includes an array of things, but most notably, drivers are seeking “unpaid back wages at the applicable minimum wage rate” dating back three years.[22]

UberEATS driver’s biggest issue is that being classified as freelancers deprives them of receiving the minimum wage that is mandated under the Fair Labor Standards Act.[23] The plaintiff in the suit, Manny Crespo, states that although the company refuses to recognize its drivers as employees, they continue to treat them like employees.[24] For Manny, that’s where the problem lies.[25] He says the company sets their pay rates, retains the right to fire them at their discretion, and requires them to use their personal phones and emails to receive work information.[26]  He believes that if the company is going to treat them like employees, then it’s only fair they receive the benefits that come along with being categorized as such.[27]

The San Francisco based company has faced numerous attacks by drivers all centering on this one classification issue.[28] Other than the most recent case brought by UberEat drivers, Uber is facing five additional suits regarding the same exact issue.[29] It’ll be interesting to see if Uber will finally swallow their pride and categorize their drivers as employees. However, it is foreseeable that the company stands their ground and maintains that the drivers are independent contractors. If they choose to take that route and stand their ground, I think it’s fair to say that this will not be the last suit Uber faces on this classification issue.

[1] O’Connor v. Uber Techs., 2015 U.S. Dist. LEXIS 116482 *5 (N.D Cal. 2015)

[2] Id.

[3] Id.

[4] Rich McCormick, Uber settles lawsuits to keep drivers independent contractors in California and Massachusetts , theVerge (Apr. 21, 2016, 11:57 PM), http://www.theverge.com/2016/4/21/11485424/uber-suit-california-Massachusetts-drivers-employee-contractor.

[5] Id.

[6] See Andrew J. Hawkins, Uber’s labor fight spills over into food delivery service, theVerge (Jan. 25, 2017, 2:39 PM), http://www.theverge.com/2017/1/25/14387256/ubereats-lawsuit-worker-misclassification-benefits-florida.

[7] See Id.

[8] See Id.

[9] What is UberEats- All You Need To Know, rideordriveuber (Sept. 29, 2016), http://rideordriveuber.com/what-is-ubereats-all-you-need-to-know/#.

[10] Id.

[11] Id.

[12] Hawkins, supra note 6.

[13] Id.; see also O’Connor v. Uber Techs., 82 F. Supp 1133 (N.D. Cal. 2015).

[14] Id.

[15] See Id.

[16] Id.

[17] Id.; see also Suevon Lee, UberEATS Drivers Sue Over Alleged Wage Violations, Law360 (Jan. 25, 2017, 5:36 PM), https://www.law360.com/articles/884786/ubereats-drivers-sue-over-alleged-wage-violations.

[18] Id.

[19] Id.

[20] See O’Connor v. Uber Techs., 82 F. Supp 1133 (N.D. Cal. 2015); see also Complaint at 1-4, Manny Crespo v. Uber Tech. Inc., (M.D Fla. 2017)(No.8:17-00187).

[21] Hawkins, supra note 6.

[22] Andrew J. Hawkins, Uber’s labor fight spills over into food delivery service, theVerge (Jan. 25, 2017, 2:39 PM), http://www.theverge.com/2017/1/25/14387256/ubereats-lawsuit-worker-misclassification-benefits-florida.

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] See Id.

[28] See Id.

[29] Suevon Lee, UberEATS Drivers Sue Over Alleged Wage Violations, Law360 (Jan. 25, 2017, 5:36 PM), https://www.law360.com/articles/884786/ubereats-drivers-sue-over-alleged-wage-violations.

Costco Seas Victory in Court on Case about False Prawn Advertisement

Deborah Kick

Retail giant Costco is known for selling appliances and home furnishings, selling products in bulk, and their commitment to employees and “outstanding business ethics.”[1] However, their method of harvesting prawns (shrimp) has come under attack in the past year and half by a class action suit claiming that the prawns are harvested using slave-labor.[2] This class action proved to be unsuccessful.[3]

The class action suit commenced on August 19, 2015, in a federal court in California, with the allegation that Costco “knowingly sold shrimp farmed in Thailand with slave labor, and failed to notify customers about the allegedly illegal practices.”[4] Included as a defendant in the lawsuit is the Thai company that consumers allege “rel[ied] on slave labor.”[5] The other issues in the complaint, according to the representative plaintiff Monica Sud, are not only the manner in which the prawns are harvested, but also that they “come from…human trafficking and other allegedly illegal labor abuses…the feed meal for farmed prawns is the product of pirate fishing….”[6]

The case was heard twice in the Northern District of California, with each case, in part, involving Costco and the other defendants filling a motion to dismiss.[7] In the first case, the defendants (referred to as “CP defendants”) moved to dismiss on various grounds, “for lack of Article III standing.”[8] The court granted the Article III motion to dismiss.[9] However, the court also granted Ms. Sud’s “leave to file an amended complaint.”[10] In the second case, the court granted the CP defendant’s motion to dismiss the entire claim because the plaintiffs failed to show that they relied on a statement Costco made about their shrimps not being slave-farmed.[11]

I believe this case, in terms of legal claims brought forward, to be a fair result. It is standard knowledge that to bring a successful claim, in civil or criminal law, you need to prove all the elements required of that claim. As the lawyers for the class action failed to do so, it was reasonable for the court to ultimately dismiss the claim. As for the social and political conflicts of this case, I do admit I have some bias. I am a big fan of Costco. I am a fan of their products, but I also appreciate that they treat their employees well.[12] Of course, no company, especially one as large as Costco, will ever be without some labor controversy. This is not to say Costco should not be scrutinized for these harvesting practices.[13] For the plaintiffs of the suit, I would suggest exercising their First Amendment rights as opposed to a lawsuit. After all, this worked for with the cage-free chicken eggs Costco now sells.[14]

[1] About Us, COSTCO, https://www.costco.com/about.html (last visited Jan. 30, 2017).

[2] Erik Larson, Costco Sued Over Claims Shrimp Harvested with Slave Labor, BLOOMBERG (Aug. 19, 2015, 11:57 AM EDT) https://www.bloomberg.com/news/articles/2015-08-19/costco-sued-over-claims-shrimp-is-harvested-with-slave-labor.

[3] Nicholas Iovino, Costco Ducks Suit Over Slave-Harvested Prawns, COURTHOUSE NEWS SERVICE (Jan. 25, 2017), http://courthousenews.com/costco-ducks-suit-over-slave-harvested-prawns/.

[4] Kurt Orzeck, Costco Sells Shrimp Farmed By Thai Slaves, Suit Says, LAW360 (Aug. 19, 2015, 5:42PM EDT), https://www.law360.com/articles/692892/costco-sells-shrimp-farmed-by-thai-slaves-suit-claims.

[5] Id.

[6] Id.

[7] See generally Sud v. Costco Wholesale Corp., No. 15-cv-03783-JSW, 2016 U.S. Dist. LEXIS 5524 (N.D. Cal. Jan. 15, 2016) and Sud v. Costco Wholesale Corp., No. 15-cv-03783-JSW, 2017 U.S. Dist. LEXIS 9943 (N.D. Cal. Jan. 24, 2017) (both cases involve Costco and the other defendants attempting to dismiss the claim of the suit).

[8] Sud v. Costco Wholesale Corp., No. 15-cv-03783-JSW, 2016 U.S. Dist. LEXIS 5524 (N.D. Cal. Jan. 15, 2016).

[9] Id. Specifically, the motion was about standing. “[T]o demonstrate she has standing, Sud alleges that she “has purchased and paid for farmed prawns at Costco, which were imported from Thailand…Costco, in turn, puts forth evidence that while Sud was a card-holding Costco member, she did not purchase any farmed prawns.” Id.

[10] Id. The leave was granted so Ms. Sud can “amend her complaint to cure that deficiency” about standing.

[11] Sud v. Costco Wholesale Corp., No. 15-cv-03783-JSW, 2017 U.S. Dist. LEXIS 9943 (N.D. Cal. Jan. 24, 2017) (stating that “given Plaintiffs’…reliance was based on product packaging, rather than on any of Costco’s statements in other contexts….).

[12] See Brian Sozzi, Why Costco Won’t Have Any Problems Handling California’s New $15 Minimum Wage, THESTREET (Mar. 29, 2016, 2:02PM EDT), https://www.thestreet.com/story/13510704/1/why-costco-won-t-have-any-problems-handling-california-s-new-15-minimum-wage.html; see also Kevin Short, 11 Reasons To Love Costco That Have Nothing To Do With Shopping, HUFFINGTON POST BUSINESS, (Nov. 19, 2013, 11:32AM ET), http://www.huffingtonpost.com/2013/11/19/reasons-love-costco_n_4275774.html.

[13] See Margie Mason, Robin McDowell, Esther Htusan, & Martha Mendoza, Shrimp sold by global supermarkets is peeled by slave labourers, THE GUARDIAN (Dec. 14, 2015 13:16 EST), https://www.theguardian.com/global-development/2015/dec/14/shrimp-sold-by-global-supermarkets-is-peeled-by-slave-labourers-in-thailand (the article gives a description in the daily life of the farmers mentioned in the case, and international efforts to curtail the use of such labor).

[14] See Deena Shanker, After months of pressure, Costco commits to a cage-free egg supply, QUARTZ (Dec. 28, 2015), https://qz.com/582427/after-months-of-pressure-costco-commits-to-a-cage-free-egg-supply/; see generally Kim LaCapria, You Gotta Fake a Few Eggs, SNOPES (Apr. 20, 2016), http://www.snopes.com/costco-lying-about-cage-free-eggs/ (even after Costco made the public announcement they were switching to cage-free eggs, there were rumors that this was not followed through by the company; these rumors are “mostly false.”).

Not Much Confidence in Confidentiality: Settling FLSA Claims in the Post-Cheeks Era

By: Alex Reinauer

 

The Hofstra Labor & Employment Law Journal hosted a roundtable discussion at the Harvard Club on January 25, 2017 consisting of nine panelists (the “Panel”). [1] The topic, Post-Cheeks Wage and Hour Settlements, brought the discussion of several issues. The first topic addressed by the Panel, one that also garnered the lengthiest discussion, was the topic of confidentiality agreements.[2] The Panel discussed the framework set forth in Wolinsky v. Scholastic,[3] a framework that is most commonly used by New York Courts but has also been cited in other jurisdictions.[4] While the Wolinksy case was not cited in the Second Circuit Court of Appeals case, Cheeks v. Freeport Pancake House, Inc., the Wolinksy framework is continually used by New York Federal Courts.[5]

In the Southern District of New York, Sarah Wolinksy brought a claim against her former employer, Scholastic Inc., under the Fair Labor Standards Act (“FLSA”) and New York Labor Law alleging that the defendant “misclassified her as an independent contractor during the course of her employment in order to avoid granting her benefits or paying her overtime wages.”[6] Wolinksy and Scholastic did eventually reach a settlement agreement (the “Agreement”) and submitted it to the court for approval,[7] but the Court found issue with the Agreement’s confidentiality provision, one that “prohibit[ed] Wolinksy from disclosing, discussing, or otherwise publishing the existence or terms of the Agreement.”[8] The Wolinksy Court ultimately concluded that “the common law right of access to judicial documents requires that the Agreement be made public.”[9]

As one piece of commentary described the ruling, “Wolinsky reflects the difficult dilemma faced by employers in wage-hour cases: even where the parties are able to agree to amicably resolve their dispute (and thereby avoid a public trial), the agreement cannot receive judicial approval without forcing the parties to air those disagreements in public filings.”[10] Both the Wolinksy Court and the Panel discussed the importance of considering “the totality of circumstances” in determining whether or not a settlement is considered fair and reasonable.[11]

The discussion of confidentiality and the protective nature of the FLSA in the Wolinksy case moved the Panel discussion to settlement approval and the need for some form of oversight in order to prevent employers from taking advantage of employees in a manner that the FLSA was intended to prevent. The Cheeks Court held that the FLSA fell within the “applicable federal statute” exception under the Federal Rules of Civil Procedure section 41.[12] In turn, settlements and dismissals of FLSA claims with prejudice require approval by the district court or the Department of Labor (“DOL”).[13] In the absence of an approved settlement by a proper authority, members of the panel contended that employees are less likely to receive the compensation they are entitled to.[14] The need to enforce minimum wage standards in disputes between the employee and employer, much like the dispute that occurred in Cheeks, cannot be done in the absence of some form of oversight.[15] Some on the Panel proposed the possibility that an employee could negotiate for a larger settlement by agreeing to a confidentiality provision, but others were of the opinion that, much like an employee’s inability to contract for wages under the minimum standards, an employee cannot contract for a lesser settlement than he or she is entitled to.[16]

Since the Cheeks decision, settling FLSA claims in the Second Circuit has become far more difficult.[17] However, the Cheeks court did leave two looming questions concerning the  approval of FLSA settlements: “whether parties may settle without court or DOL approval by dismissing the case without prejudice, and whether court or DOL . . . approval is needed for a dismissal with prejudice before the opposing party serves either an answer or a motion for summary judgment.”[18] The future of FLSA settlements appear even more uncertain in light of a previous decision in the Fifth Circuit Court of Appeals.[19] An agreement to settle employees’ FLSA claims was enforced by the Fifth Circuit in Martin v. Spring Break ’83 Prods., LLC, absent approval by a court or the DOL, finding that a “‘bona fide dispute’ existed and the employees were represented by counsel.”[20] The decision provides a more lenient approach to private FLSA settlements than the one laid out in Cheeks.[21] Only time will tell if the Supreme Court decides to step in to resolve the question between the Circuits.

[1] Judge Seybert is a United States District Judge for the Eastern District of New York. Judge Sullivan is a United States District Judge for the Southern District of New York. Judge Ellis is a United States Magistrate Judge for the Southern District of New York. Judge Locke is a United States Magistrate Judge for the Eastern District of New York. Allan Bloom is a partner at Proskauer Rose LLP. A. Jonathan Trafimow is a partner at Moritt Hock & Hamroff LLP. Molly Brooks is a partner at Outten & Golden LLP. D. Maimon Kirschenbaum is a partner a Joseph & Kirschenbaum LLP. David B. Feldman, a shareholder at Ogletree Deakins Nash Smoak and Stweart P.C. served as the moderator.

[2] Panel at Hofstra Labor and Employment Law Journal Roundtable Discussion: Post-Cheeks Wage & Hour Settlements (Jan. 25, 2017).

[3] Wolinsky v. Scholastic, 900 F.Supp.2d 332, 334 (S.D.N.Y. 2012).

[4] Singleton v. AT&T Mobility Servs., LLC, 146 F. Supp. 3d 258 (D. Mass. 2015).

[5] See, e.g., Vasquez v. 701 W. 135th Café, Inc., No. 16cv692, 2016 U.S. Dist. LEXIS 171464 (S.D.N.Y. Dec. 12, 2016); Xu Chen v. Zaza Japan, Inc., No. 15-CV-3073 (SIL), 2017 U.S. Dist. LEXIS 900 (E.D.N.Y. Jan. 4, 2017).

[6] Wolinsky, 900 F.Supp.2d at 334.

[7] Id.

[8] Id.

[9] Id. at 335.

[10] Robert S. Whitman & Robert T. Szyba, Only one way out of this mess: settlement of FLSA lawsuit may need to be public to receive court’s approval, Lexology (July 23, 2012) (“Although some courts have been willing to approve such settlements on a confidential or in camera basis, this case adds to the line of authority rejecting such a practice.”) http://www.lexology.com/library/detail.aspx?g=bc29fe76-3ad5- 4b00-b786-8cda8b6da1d1.

[11] Wolinsky, 900 F.Supp.2d at 335.

[12] Cheeks v. Freeport Pancake House, Inc. 796 F.3d 199, 206 (2d Cir. 2015).

[13] While the Court in Cheeks acknowledged that the FLSA was silent on the issue, it concluded that previous cases “read in light of the unique policy considerations underlying the FLSA, place the federal statute within Rule 41’s exception.” Id.

[14] Panel at Hofstra Labor and Employment Law Journal Roundtable Discussion: Post-Cheeks Wage & Hour Settlements (Jan. 25, 2017).

[15] Id.

[16] Id.

[17] Robert S. Whiteman, Howard M. Wexler & Meredith A. Berger, District Court Turns the Other “Cheeks” on Parties’ Proposed Stipulation of Dismissal, Seyfarth Shaw LLP: Wage & Hour Litigation Blog (July 11, 2016), http://www.wagehourlitigation.com/settlement/turns-the-other-cheeks/.

[18] Id.

[19] See Martin v. Spring Break ’83 Prods., LLC, 688 F.3d 247 (5th Cir. 2012).

[20] Joshua B. Waxman, Second Circuit Holds that Parties May Not Stipulate to Dismiss With Prejudice FLSA Actions Without Court Approval, Littler (Aug. 14, 2015), https://www.littler.com/publication-press/publication/second-circuit-holds-parties-may-not-stipulate-dismiss-prejudice-flsa.

[21] Id.