By Ronald Miller, J.D.

Agreeing with its sister circuits and the Department of Labor, the Seventh Circuit ruled that under the FLSA, the relevant unit for determining a pay violation is not wages per hour, but the average hourly wage across a workweek. Because none of the flight attendants in this action pleaded a single workweek in which they were paid an average wage less than $7.25 per hour, the appeals court affirmed the dismissal of their FLSA claims. However, because the FLSA itself reserves that authority to the states and localities to regulate the labor of their own citizens and companies, the appeals court reversed the dismissal of the employees’ state and local wage claims (Hirst v. SkyWest, Inc., December 12, 2018, Brennan, M.).

SkyWest charters planes for other airlines. It employs over 2,600 individual as cabin crew. SkyWest flight attendants are based out of airports in ten different states, including the flight attendants in this action who reside in Arizona, California, Washington, and Illinois. A typical workday for a flight attendant is long and varied, including time onboard the aircraft, and in airports before, between, and after flights. SkyWest flight attendants are paid only for their time in the air, known in the industry as “block time.” The amount of block time worked in a given day is much shorter than the “duty day.”

Flight attendants for SkyWest challenged the airline’s compensation policy of paying for their work in the air but not on the ground. Beginning in March 2015, three groups of SkyWest flight attendants filed suit alleging that the airline violated the FLSA and the wage laws of their respective states by failing to pay minimum wage. The also sought to certify a class of similarly situated SkyWest employees. The cases were consolidated in the Northern District of Illinois.

Following multiple amended complaints and limited discovery, the district court dismissed all of the flight attendants’ claims with prejudice. The court determined that, in assessing violations of the federal minimum wage, an employee’s wage is calculated as the average hourly wage across the workweek. Because none of the flight attendants pleaded a single workweek in which they were paid an average wage less than $7.25 per hour, the federal minimum wage, the court concluded that they had not properly pleaded an FLSA claim. Additionally, the district court held that their state and local wage claims were preempted by the dormant Commerce Clause.

FLSA claims. On appeal, the flight attendants first challenged the dismissal of their FLSA claims. The text of 29 U.S.C. § 206 does not state what measure should be used to determine compliance with the minimum wage. Thus, the Seventh Circuit turned to the interpretation of the Department of Labor. In 1940, the DOL issued a policy statement adopting the workweek as “the standard period of time over which wages may be averaged to determine whether the employer has paid [the minimum wage.]” Other circuits have uniformly adopted the Department’s per-workweek measure, including the Ninth, Fourth, Sixth, Eighth, Eleventh, Second and D.C. Circuits. Seeing no reason to deviate from the DOL’s interpretation or the consensus of other federal appellate courts, the Seventh Circuit adopted the per-workweek measuring for determining compliance with the federal minimum wage.

Next, the appeals court applied the per-workweek measure to this case. A plaintiff alleging a federal minimum wage violations must provide sufficient factual context to raise a plausible inference there was at least one workweek in which he or she was underpaid. As found by the district court, none of the flight attendants pleaded a single workweek in which they were paid an average wage less than $7.25 per hour. Claiming that they worked many hours and citing several weeks in which they were paid the minimum wage was not enough to render their claims plausible. Accordingly, the appeals court affirmed the dismissal of their FLSA claims.

State and local claims. Next, the flight attendants argued that their state and local wage claims should be reinstated. Specifically, the contended that the dormant Commerce Clause did not apply to this case. The appeals court agreed that application of the dormant Commerce Clause was not appropriate in this case. Under the dormant Commerce Clause, courts invalidate a state law only where there is a clear showing of discrimination against interstate commerce “either expressly or in practical effect. In this instance, SkyWest failed to allege any discrimination against interstate commerce. This failing precluded application of the dormant Commerce Clause to the flight attendants’ state and local claims.

Moreover, even if minimum wage laws did discriminate against interstate commerce, the dormant Commerce Clause does not apply to state and local laws expressly authorized by Congress. Here, the appeals court observed that the FLSA itself reserves authority to the states and localities to regulate the labor of their own citizens and companies. Thus, the dormant Commerce Clause did not preclude state regulation of flight attendants wages in this case. Accordingly, the court reversed the dismissal of the employees’ state and local wage claims and remand for further proceedings.

Taiwan’s Ministry of Labour announced a national minimum wage draft bill today, which seeks to set a new mechanism to determine the minimum wage, and calls for fines of up to NTD 1 million (USD 32,441) for employers who violate the law, reports Taiwan News. The objective of the draft minimum wage law is to establish a legal framework for the setting of the benchmark for the salaries of employees. The Ministry of Labour also announced that an amendment to the Employment Services Act will take effect from today which will require employers in Taiwan to disclose salary ranges for positions offering less than NTD 40,000 (USD 1,297) monthly salary, or they risk a minimum fine of NTD 60,000 (USD 1,946), with fines as high as NTD 300,000 (USD 9,732) possible. The law was amended to ensure information transparency regarding regular earnings in Taiwan. The Ministry added that it will help improve communication between jobseekers and employers while making talent recruitment more efficient.

By Brandi O. Brown, J.D.

A trucking company that told the IRS per diem travel payments made to truckers were reimbursements for travel expenses, but nevertheless included those payments in its calculation of minimum wages under the FLSA, was not taking an inconsistent position, the Eighth Circuit ruled, affirming dismissal of class claims by the truckers. The two calculations were “done for different purposes and under entirely unique regulatory schemes.” Moreover, there were “seemingly obvious indicators” that the payments made functioned as a wage and the district court did not err in reaching that conclusion. The appeals court affirmed the lower court’s decision dismissing the drivers’ minimum wage claims (Baouch v. Werner Enterprises, Inc. dba Werner Trucking, November 14, 2018, Beam, C.).

More take-home pay as incentive. According to the lawsuit filed by the truckers, their employer implemented a payment plan in 2003, offering drivers an untaxed mileage rate for days spent driving away from home overnight that was intended to attract new employees. The payments were not subject to employment and income tax withholding. Thus, drivers took home more pay each week. Drivers, however, could elect not to participate in the Payment Plan and, if so, could receive all of their pay subject to taxes. The employer included the Payment Plan payments in its minimum wage calculations under the FLSA, the Nebraska Wage and Hour Act, and the Nebraska Wage Payment and Collection Act for the drivers who elected to receive them. Nevertheless, the district court noted that the taxable wage received by participating employees was “suspiciously close” to the total taxable wage of nonparticipants.

Drivers argued wage violations. The drivers argued that the employer should not have included the payments in the minimum wage calculations for the participating drivers. They claimed that had they been properly excluded, the wage rate they received would not satisfy the minimum wage requirements. In making that argument to the district court, the drivers contended that the employer’s stance under the FLSA was also inconsistent with its representations to the IRS. With regard to the FLSA, the drivers argued, the employer described the payments as ones that were not reimbursement for reasonable travel expenses, but to the IRS the employer instead represented that the payments were reimbursement for travel expenses that it reasonably expected its drivers to incur. These representations were inconsistent and legally incongruent, the drivers asserted.

Claims dismissed, appeal. Nevertheless, the district court held that the payments were part of the regular rate, concluding the indicators pointed the court toward a conclusion that the purpose and form of the payments indicated the intended purpose of the payments was remuneration for work performed under the FLSA. The district court rejected the judicial estoppel argument, noting that the IRS regulations that governed such plans were not necessarily compatible with the DOL regulations that governed employees’ regular rates for the purposes of minimum wages. The drivers appealed.

Not estopped. “A primary thrust” of the drivers’ argument on appeal was their claim the employer’s statements to the IRS regarding the payments were binding admissions. Those admissions, the drivers argued, were all that was necessary to exclude the payments from the wage calculations. The appeals court disagreed, however, concluding that as a matter of law judicial estoppel did not apply and the employer was not bound to its statements in such a way that would affect the outcome of the case. The prior representations made by the employer to the IRS were not clearly inconsistent with the position taken by the employer in this litigation, the court explained, because the IRS regulations in question were not identical to the DOL regulations that governed the calculation of regular rates for the purposes of minimum wages. Thus, legal estoppel did not apply.

Moreover, under a “quasi-estoppel” theory, the drivers’ arguments were no more successful. While confusion could result from the similarities in the employer’s representations under each framework, it was reasonable for the district court to hold that the employer was not estopped “nor beholden to earlier representations in a legally binding way.” Each calculation was “done for different purposes and under entirely unique regulatory schemes.” The employer “is not cabined in the instant case to a particular representation of ‘reimbursement’ as might have been germane in previous IRS proceedings,” the court concluded.

Minimum wage paid. A “case-specific factual inquiry” was necessary to determine whether the employer violated the FLSA because whether a per diem could be included or excluded from the regular wage was dependent on several factors. The district court did not err in its analysis, the appeals court concluded. The payments, based on the miles driven, were therefore based on hours worked, the court explained, and therefore correctly included in the regular rate calculation. The DOL Handbook, which is treated as persuasive authority, provides that if the amount of a per diem varies with the number of hours worked, that payment is part of the regular rate. Thus, it supports the understanding that “at the end of the day under the FLSA, one important criterion is whether a payment is remuneration for employment, or not.”

And, notable in this case, the court explained, were the “seemingly obvious indicators that these Payments function as a wage.” The total pay, including the payments plus the applicable taxable wage, provided to participating drivers was “suspiciously close to the taxable wage paid to non-participants.” Other factors—including the form and purpose of the payments, that they were unrestricted in terms of how they were used, the original impetus for offering the plan (market competition), and the goal to maximize take home pay—also led to the conclusion that they were intended to act as remuneration for work.

The same reasoning applied under the FLSA also foreclosed the drivers’ state-law claims, the court added. Thus, it affirmed dismissal of both the federal and state-law claims.

Researchers whose findings last year pointed to a downside from raising the minimum wage have taken another look and the reality is more nuanced.

LabourStart headline – Source: CNBC

Amazon said on Tuesday it is raising its minimum wage in Britain to 10.50 pounds ($13.59) an hour for all employees in the London area and 9.50 pounds an hour for staff in all other parts of the country, effective from Nov. 1.

Amazon.com Inc said on Tuesday it would raise its minimum wage to $15 per hour for U.S. employees from next month, giving ground to critics of poor pay and working conditions at the world’s second most valuable company.

The hike includes Whole Foods employees and part-time workers, and the company also said it would lobby the federal government for a higher minimum wage.

LabourStart headline – Source: ITUC

By Harold S. Berman J.D.

A Marriott hotel employee who claimed that he and his coworkers were paid less than San Jose’s statutory minimum wage was entitled to litigate his claim in state court because his allegations required interpreting the waiver provisions of the San Jose minimum wage ordinance and not the parties’ collective bargaining agreement, which would have triggered federal preemption, the Ninth Circuit ruled. The court reversed and remanded the district court’s decision, which had denied the employee’s motion for remand, and then granted summary judgment for Marriott. The LMRA gives federal courts jurisdiction only for claims that require interpreting a CBA, and the employee’s claim instead turned on whether the San Jose ordinance permitted waiver of its minimum wage requirement. Judge Schroeder dissented (McCray v. Marriott Hotel Services, Inc., August 31, 2018, Diaz, A.).

Paid under minimum wage. Although in 2012, the City of San Jose enacted an ordinance setting the minimum wage at $10 an hour, the San Jose Marriott Hotel continued to pay the employee and his coworkers less. The ordinance purportedly offered employers and employees the option of waiving the minimum wage requirements through collective bargaining. The employee’s union had negotiated with Marriott to waive the minimum wage requirement in exchange for other benefits. They negotiated the CBA before the ordinance had passed, providing an addendum which prospectively opted out of the minimum wage requirement should the ordinance become law.

Removal to federal court and dismissal. The employee sued Marriott in state court, claiming that the ordinance did not permit a waiver, and so Marriott owed him the unpaid amount of the minimum wage. Marriott removed the case to federal court, asserting that the employee’s claims were pre-empted by Section 301 of the LMRA, and so the federal court properly had jurisdiction.

The federal district court held that it did have jurisdiction, denying the employee’s motion to remand. The district court went on to find that the employee failed to first exhaust his claim through the CBA’s required grievance process, and granted summary judgment to Marriott. The employee appealed.

Reversal and remand. The appeals court vacated the district court’s denial of the employee’s motion for remand, and its grant of summary judgment in favor of Marriott, and instructed the district court upon remand, to return the case to state court. The court held that the district court lacked jurisdiction to hear the case, and so had no basis to rule on whether or not the employee had administratively exhausted his claims.

The LMRA gave federal courts jurisdiction to hear suits for contract violations between an employer and a labor organization representing employees, consequently preempting state law for certain labor-related claims. However, claims that did not substantially concern a CBA were not preempted.

Claims arose under state law. The employee’s claims arose under state law and the San Jose ordinance, because he asserted that Marriott did not pay him and his coworkers the minimum wage required by the ordinance. The alleged right to be paid the municipal minimum wage, and to receive compensation for Marriott’s alleged failure to pay minimum wage involved matters of state and municipal law, and would be at issue regardless of whether the CBA existed. The right to be paid a certain minimum wage was established by the municipal ordinance, and so that right existed apart from the CBA, regardless of whether the ordinance contained an opt-out clause.

CBA not required. The employee’s claims not only originated under state and municipal law, but did not require an analysis of the CBA. At heart, the employee’s claims required only an interpretation of the local statute. The employee had claimed that, although the CBA purported to waive the municipal minimum wage requirement, the ordinance allowed for waiver only “[t]o the extent required by federal law,” and because federal law did not mandate that a minimum wage requirement be waivable, the waiver was invalid.

Consequently, the court held, the primary task for a court deciding the case would be to determine whether the minimum wage established by the ordinance was waivable. If a court determined the requirement could not be waived, then whether the CBA contained a waiver would be irrelevant. If a court instead found that the minimum wage was subject to waiver, then the court would merely need to look to the CBA to determine if it contained a valid waiver, but would not be required to interpret the CBA. That the employee had not challenged the substance of the CBA’s waiver, but might possibly do so later in the litigation, was a speculative possibility that was insufficient to warrant preemption.

Dissent. Dissenting, concluded that the district court’s decision was correct, and that the case really concerned whether Marriott was entitled to rely on the CBA’s provisions, which established an hourly pay rate and a waiver of the municipally mandated rate. The ordinance referred to waivers in CBAs, and so resolving the employee’s claims required analysis of the CBA’s waiver provision.