David P. Mastagni Interviewed About Independent Contractor Ruling

Earlier this year, the California Supreme Court cracked down on companies taking advantage of workers by calling them independent contractors when they're really employees.  Before the ruling, many employers claimed their employees weren't really employees at all, meaning they did not have any right to overtime or could be fired if they got sick, for example.  This Court's ruling means employers can't shirk their responsibilities for overtime, unemployment insurance, workers' compensation, payroll taxes, the right to join a union, and other benefits of employment status.

Mastagni Holstedt founding partner David P. Mastagni was interviewed in response of some companies objection the ruling hurts their profits.  He explained calling employees independent contractors "is cheap and they're cheap and they want to make a greater profit on the back of someone else.  But he explained, "after this case, there's a glimmer of hope and responsible employers will embrace it."  Watch the full interview at https://sacramento.cbslocal.com/2018/09/13/independent-contractors-whats-next-california/.

In Dynamex Operations West v. Superior Court of Los Angeles, the Court held workers only count as independent contractors if "(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

Court Holds Punitive Transfer Does Not Require Administrative Appeal

In Perez v. City of Westminster, the Court of Appeal held that even if an officer is accused of misconduct by his department, loses overtime opportunities, is transferred from SWAT and honor guard, not assigned trainees despite being a FTO, does not get to appeal  his discipline.  The Court relied on a strained interpretation of "punitive" action, chipping away at POBR rights and the well-established right to a White hearing.  The decision creates a conflict in the courts that will likely have to be resolved by the Supreme Court.

Internal affairs interviewed Officer Perez regarding a citizen complaint of excessive force during an arrest. The complainant claimed another Westminster officer had hit him in the face. Perez stated that he did not see this happen. The investigators told Perez the video and other officers’ testimony suggested Perez did see it. Perez reaffirmed he did not see the alleged excessive force.

Then, the City served Perez with a Notice of Intent to fire him. After a Skelly hearing, the Chief of Police reversed the findings based on insufficient evidence to sustain them. However, the Chief removed Perez from the SWAT team and honor guard. In addition, he refused to assign Perez and trainees in the FTO program and Perez lost significant overtime opportunities.

Perez argued the transfer from SWAT and loss of overtime opportunities was “punitive action” under POBR and that he should get to appeal. At trial, the Chief testified he removed Perez from the SWAT team because he had "lost confidence" in Perez’s honesty and ability to work cooperatively with others. He also testified Perez was removed from the honor guard because he thought there “was compelling information he had not been truthful” in the investigation. Ultimately, the Chief admitted his “lack of confidence” stemmed from the interval affairs investigation that he was unable to sustain, but denied Perez the right to appeal and have a neutral person decide. 

However, the court held that the loss of overtime and prestige did not render the transfers punitive, and that the Chief’s testimony showed the transfer was not “punitive,” but based on his lack of confidence in Perez.

This decision chips away at POBR rights long-established since White v. Sacramento.  In 1982, the California Supreme Court held that it violated POBR to transfer an officer to a lower paid position without giving them an opportunity to rebut the allegations against them.  The Court emphasized why POBR and the right to appeal are so important, noting "Erroneous action can only foster disharmony, adversely affect discipline and morale in the workplace, and, thus, ultimately impair employer-employee relations and the effectiveness of law enforcement services."  David P. Mastagni represented Dep. White.

But here, the Court of Appeal permitted a Department to discipline an officer based only on the Chief's personal hunch and without any right to appeal.  As a result, it is likely the Supreme Court will have to resolve the conflict.    

Cash-in-Lieu of Health Benefits is Included in Rate Calculations Under FLSA

If you receive cash in lieu of healthcare benefits, you may be entitled to additional overtime compensation from your employer.  The Ninth Circuit Court of Appeal recently ruled that cash payments made to employees who declined medical coverage had to be included in the regular rate used to calculate the employees’ overtime compensation.

In Flores v. City of San Gabriel, the Ninth Circuit ruled the City of San Gabriel willfully violated the Fair Labor Standards Act (“FLSA”) by failing to include cash payments for unused medical benefits in police officers’ overtime calculations. The court also ruled that money the City paid out to third parties for officers’ benefits had to be included in their overtime rate. Under 29 U.S.C. section 207(e)(4), payments to third parties or trustees made pursuant to a “bona fide plan” for providing health insurance benefits could be excluded from the regular rate used to calculate overtime. The court found that the City’s plan was not a “bona fide plan” because approximately 40% of the City’s total contributions were paid directly to employees, rather than received as benefits.

Many public employers give employees a cash incentive for opting out of employer-provided medical coverage. The court’s ruling in Flores establishes that such incentives must be included in the regular rate used to calculate overtime for employees who receive them.  Not many employers do this.

If your agency offers cash in lieu of medical benefits, you may have a claim for unpaid overtime and liquidated damages in an amount equal to the unpaid overtime (e.g. double damages) under the FLSA. While your agency may fix this issue going forward, you will likely need to file a lawsuit to recover backpay. Under the FLSA, an employee can only recover damages for unpaid wages that occurred within the last three years. As such, it is important to pursue an FLSA claim immediately.

If you are represented by our office and your agency offers cash in lieu of medical benefits, you should call our office or your union immediately to discuss the matter.

Officers' Off-Duty Use Of Cellphones Not An FLSA Violation

A federal court ruled the Chicago Police Department did not violate the Fair Labor Standards Act by requiring police officers to respond to work-related calls, emails, and texts on their department-issued cellphones while off duty.

In early 2010 several members of the Chicago Police Department's Organized Crime Bureau filed a lawsuit against the City of Chicago alleging it willfully denied them overtime pay for off-duty work. The department  issued the officers cellphones. The officers alleged the city knew the officers often worked overtime hours responding to work-related communications on these cellphones but refused to pay them for their work.

In Allen v. City of Chicago, the U.S. Northern District Court of Illinois conditionally certified a class of police officers who alleged the city owed them overtime pay and penalties under the FLSA.  The court then held a bench trial, after which Magistrate Judge Sidney Schenkier ruled the officers had failed to prove that the city knowingly violated the FLSA.

The court found the officers did in fact perform compensable work by using their cellphones while off duty. The court ruled responding to communications from their superiors, their subordinates, confidential informants, and other law enforcement agencies involved in police investigations or task forces was compensable work.

However, the court also found the department generally did not know about the officers' off-duty work using their cellphones. The evidence supporting the officers' claims was weak. No officer was ever denied an overtime request related to off-duty use of their cellphone, nor did any officer ever complain to the department about this issue. The few times that an officer submitted a request for overtime pay for off-duty work, the department was not told it was for work on a cellphone and the department always paid.

Because the city did not know about the extent of officers' off-duty work using their cellphones, the court ruled the officers could not recover penalties from the city for violating the FLSA. Instead, the officers could only recover unpaid overtime wages for the hours they worked. An employer is liable under the FLSA when it suffers or permits its employees to work overtime but does not pay them overtime wages. If an employer does not know its employees are working overtime, it is not suffering or permitting the employees to work and has not knowingly violated the FLSA.

Ninth Circuit: Time Spent Transporting Gear is Noncompensable Under the FLSA

On September 4, 2015, in Balestrieri v. Menlo Park Fire Protection District, the Ninth Circuit ruled the time firefighters spent transporting their gear to temporary duty stations for overtime shifts was noncompensable under the Fair Labor Standards Act ("FLSA").

Under the FLSA, as amended by the Portal-to-Portal Act, employees are not paid for time before and after work that is not "integral and indispensable" to the employee's principal duties. Since a firefighter is free to take his or her gear home and go straight to the "visiting station" for the overtime shift without having to return to the "home station" to retrieve the gear, this activity was not integral and indispensable to the firefighter's duties. By way of analogy, the court stated, "no one would expect to pay an office worker for the time it takes to shave and put on a tie.." Similarly, the District was not required to pay firefighters for time transporting their gear.

In addition, the court held payments for unused leave time were not part of the firefighters' "regular rate" of pay and should not be used to calculate overtime rates under the FLSA. It is well settled that payments for vacation buyback are not included in regular rate of pay for overtime. However, circuit courts are split on whether sick leave buyback is excluded from regular rate of pay. In Balestrieri, the parties' Memorandum of Understanding did not separate sick leave and vacation leave. The court was unable to differentiate between unused sick leave buyback and unused vacation buyback. Consequently, the issue of whether sick leave buyback should be included in an employee's regular rate of pay remains unsettled in the Ninth Circuit.

Court of Appeal Rules Overtime is Defined By Collective Bargaining Agreement

The California Court of Appeal issued an opinion in Vranish v. Exxon Mobil Corporation. The Court ruled collective bargaining agreements (CBA) meeting certain requirements define overtime for covered employees, not the California Labor Code.

In Vranish, Exxon Mobil employees regularly worked 12-hour shifts. They worked 7 consecutive days followed by 7 days off. The employees were represented by a labor organization and had a CBA. Under the CBA, employees only received overtime compensation if they worked more than 12-hours in a workday, or more than 40 hours in a workweek. However, Labor Code section 510 states employees must receive overtime pay if they work more than 8 hours in a single day.

The employees filed suit to recover overtime pay for regularly working more than 8 hours in a workday. But the Court ruled the Labor Code’s definition did not apply to the employees. Labor Code section 514 states the Labor Code’s definition of overtime does not apply to employees covered by a valid CBA meeting certain requirements. Since the CBA in this case met all of the requirements under section 514, the CBA defined overtime rather than the Labor Code.

Ninth Circuit Rules Fire Department Dispatchers and Aeromedical Technicians Are Entitled to Standard Overtime Pay Under FLSA

On March 18, 2014, the Ninth Circuit issued an opinion in Haro v. City of Los Angeles. The Ninth Circuit found standard overtime rules under the Fair Labor Standards Act (FLSA) apply to fire department dispatchers and aeromedical technicians. This case distinguishes fire department dispatchers and aeromedical technicians from firefighters in calculating overtime.

Under the FLSA, employees who work more than 40 hours in a workweek are entitled to overtime pay. However, Section 207(k) exempts certain job classifications from this general rule. Section 207(k) requires certain employees, such as firefighters, to work a total of 212 hours in a 28-day period before earning overtime pay. In this case, the City of Los Angeles classified dispatchers and aeromedical technicians as employees “engaged in fire protection.” Classifying dispatchers and aeromedical technicians as employees “engaged in fire protection” subjected them to the same overtime rules as firefighters.

L.A. City dispatchers and aeromedical technicians filed suit. They argued that they are not actively engaged in fire protection as defined by the FLSA, and should receive standard overtime pay. The City argued because dispatchers and aeromedical technicians contribute in a direct and vital manner to the fire department’s suppression of fires, Section 207(k) applies.

Although dispatchers and aeromedical technicians occupy a vital role in fighting fires, they are not employees “engaged in fire protection” as defined by the FLSA. The Court pointed out dispatchers do not actively engage in fire suppression. Rather, dispatchers send firefighters to the scene to suppress the fire. Similarly, the Section 207(k) exemption does not apply to aeromedical technicians. Their duties include medical support, setting up equipment, loading hoses and fittings onto helicopters, filling helicopters with water, and establishing secure landing sites. These are not duties of an employee “engaged in fire protection.” Since dispatchers and aeromedical technicians are not exempt under the FLSA, they were awarded backpay for unpaid overtime.

The City has participated in much FLSA litigation in recent years. The litigation caused the City to reconsider its pay practices for many employees, but the City never investigated its pay practices for dispatchers and aeromedical technicians. The Court concluded the City willfully violated the FLSA by failing to investigate whether dispatchers and aeromedical technicians were exempt under Section 207(k).

Supreme Court Rules on Donning and Doffing

FLSA section 203(o) allows employers and unions to bargain about whether to pay employees for time spent “changing clothes” on employer.  However, courts have struggled with interpreting the meaning of “changing clothes” under the section 203(o) exception.  The question is whether “clothes” includes work-related gear not commonly regarded as clothes.  In Sandifer v. United States Steel Corporation the Supreme Court defined “changing clothes” under the FLSA to provide guidance to courts interpreting the section 203(o) exception.

In Sandifer, steelworkers challenged a provision in their collective bargaining agreement about  donning and doffing protective gear.  The steelworkers argued the Fair Labor Standards Act required them to be paid for the time.  The employer argued the steelworkers’ protective gear fell within the Section 203(o) exception, letting them bargain with the union about donning and doffing.    

The court had to decide whether the steelworkers’ gear fell within the statute’s definition of “clothes.”  The gear at issue was a flame-retardant jacket, pair of pants, hood, hardhat, “snood”, “wristlets”, work gloves, leggings, steel-toe boots, safety glasses, ear plugs, and a respirator.  The Court said “clothes” are “items that are both designed and used to cover the body and are commonly regarded as articles of dress.”  Rather than broadly defining “clothes” to include anything worn on the body, the Court distinguished between clothes and wearable items that are not clothes, such as equipment and devices.  Using this definition, most of the steelworkers’ protective gear constituted “clothes” under the statute.  But the eyeglasses, ear plugs, and respirator, were not “clothes” because they are not commonly regarded as articles of dress. 

Since not all of the steelworkers’ gear fell within the statute’s definition of “clothes”, the Court had to decide if employers and courts should separate the minutes spent donning and doffing the non-clothes items from the clothes items.  The Court said this would be tedious and impractical.  The Court’s solution was to group the items together depending on the time spent donning and doffing each article of clothing or gear. 

The Court’s opinion clarifies when employers must compensate employees for time spent donning and doffing work-related clothing and gear.  Under the Court’s meaning of “clothes,” even time spent donning and doffing unique gear can be excluded from compensation if the majority of time is spent “changing clothes.”  Using the same reasoning, if employees spend a vast majority of their time donning and doffing unique gear on the employer’s premises, the time spent changing articles of clothing may also be compensable.