Articles Posted in Wage & Hour Issues

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As the first American set to orbit Earth sat in a tiny capsule atop a giant rocket in February 1962, fellow astronaut Scott Carpenter wished him good luck with a succinct, “Godspeed, John Glenn.” Moments before, however, Carpenter was cutting the tension with a line that immediately became part of the Apollo Program’s lore and lexicon: “Remember, John, this was built by the low bidder.”

While very few endeavors will have the gravity of cobbling together millions of parts to build a missile capable of putting a human into space, there are plenty of reasons to wonder if we are getting what we paid for when we go as cheap as possible. There is, of course, the suspicion that lower prices may lead to cutting corners that will be reflected in the quality of materials and even the level of care in craftsmanship. But what if that low bid came at the expense of labor laws and undermined the economic health of a community?

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“McJobs” may soon come with a side of leverage for workers who find themselves the victims of labor law violations. In a surprising move, the general counsel for the National Labor Relations Board (NLRB) last month permitted regional directors to name McDonald’s Corp. as a joint employer along with its franchisees in several pending actions. This marks a major shift to the traditional liability issues in the franchise world, where franchisees are essentially independent contractors who pay royalties to use the systems and products of the parent company, but are solely liable for any labor law violations against their W-2 employees. While this move doesn’t carry the binding power of a ruling, the potential changes it brings caught plenty of attention from the franchise world.

Under this new model, the parent company could share in the responsibility for unlawful labor practices by their franchisees. Lawyers on the corporate sides argue that such responsibility for oversight of what could be tens of thousands of franchisees would be impractical if not impossible. Workers’ and labor groups, on the other hand, point out that the parent companies already exercise a great deal of influence and control in micromanaging almost every other aspect of the businesses, from stock to procedures to store design to intellectual property and advertising. Such strict control of day-to-day operations, they say, voids any industry arguments that ensuring franchisees adhere to labor standards would require extraordinary efforts.

The move by the NLRB goes beyond McDonald’s, fast food, or even restaurants in general and could affect all kinds of retail stores and service providers who operate on the the franchise system. Adding a layer of responsibility to the franchisor-franchisee relationship would come at some financial cost to the corporate home offices, even as the franchise establishment market continues to grow. Naturally, there’s been a collective freak-out by industries and companies around the country. The recurring speculative concern is that a corporate parent ensuring basic labor laws are followed at their franchises will somehow have a negative effect on job creation.

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A federal court in Tennessee recently certified a group of call center employees as a class under the Fair Labor Standards Act (FLSA), clearing the first hurdle in their class-action lawsuit.  While most federal class-action lawsuits must meet the requirements of Federal Rule of Civil Procedure 23, class-action lawsuits under the FLSA must instead meet the standards of FLSA section 216(b). 

In Rice v. Cellco Partnership, the employees seeking to form a class worked in the Cellco Murfreesboro, Tennessee call center, where they claimed that they were routinely required to perform work “off of the clock” that was actually compensable.  In particular, the employees needed to arrive at their desks at least 15 minutes (and most often 20 to 30 minutes) before their shift began for the purpose of preparing to log onto the Rockwell phone system and take their first calls.  The employees were allegedly disciplined if they were not prepared to take their first call at the start time, and were not allowed to include any time not reflected in the Rockwell phone system.  The employees were allegedly required to check for work-related emails before and after work and during their lunch breaks, for which they were not compensated.  If they logged the actual time they spent working, the employees were disciplined.  Finally, the employees claimed that although they were paid for part of their overtime hours, they were not paid for all of them.

The employees requested that the federal court conditionally certify the action as a collective action under the FLSA and authorize them to send notice to all current and former employees who had worked as customer service representatives for Cellco during the past three years.  Meanwhile, Cellco argued that the employees failed to meet their burden for conditional certification, in that they could not establish that they were similarly situated to the proposed class, or that Cellco had a common policy to violate its lawful policies.  Continue reading →