Recent Surge In FLSA Filings May Tempt Some Judges To Impose Higher Initial Pleading Standards On Plaintiffs As A Form of Docket Management, Threatening Access To Federal Courts For Many Low Income Workers

            According to the Federal Judicial Center, the research agency of the federal court system, the number of wage-and-hour lawsuit has skyrocketed in the New York federal courts in 2012-13, exceeding already-accelerated national trends. As the federal courts in the Southern and Eastern Districts of New York attempt to manage this surge in new FLSA filings,
the defense bar has invited them to pursue an administratively expedient, but legally and morally unsupportable approach – that of granting early pre-trial motions to dismiss based on uncorroborated “evidence” introduced via accompanying declarations, affidavits and exhibits.

This attempt at “trial” by pre-discovery motion practice is completely antithetical to everything that the FLSA was designed to encourage and accomplish. Indeed it is a due process violation and at odds with basic principles of fairness in dispute resolution. Typically, plaintiffs have, at most, two or three weeks to oppose a defense motion to dismiss, without the benefit of any discovery. In some instances, Courts and defense attorneys have balked at even granting plaintiffs short extensions of time to oppose motions to dismiss, threatening them with dismissal with prejudice if opposition papers are not filed by a particular date. Obviously, an uptick in FLSA filings and the consequent strain on the federal judiciary should not become an opportunity to impose heightened pleading standards on low-wage workers and their legal representatives.

Many alternatives exist that are both fair and administratively efficient. For example, courts may order that any person whose declaration or affidavit is offered in support of a defense motion to dismiss be deposed at least two weeks prior to the due date of any opposition papers, and that any documents not previously in the possession of the plaintiffs may not be offered in support of a motion to dismiss.

Of course, summary judgment remains available post-discovery, and both plaintiffs and defendants retain the ability to make and oppose summary judgment motions with supporting materials, such as affidavits and declarations attaching deposition testimony and document produced during the discovery process.

This blog post outlines some of the history behind the FLSA and the current campaign to shoot down new FLSA action before they even become airborne.

A.        When and Why Was the FLSA Was Enacted.

The Fair Labor Standards Act (the “FLSA”) was enacted in 1938 precisely to protect the interests of low-wage, generally less legally sophisticated working class individuals. The ability of similarly situated persons to collectively file and participate in FLSA actions without each worker having to separately hire an attorney and plead the circumstances of his employment with particularity, the generally lenient standard for granting conditional collective active certification, and the fee-shifting statutory provision, all were designed to make the federal courts accessible to persons who otherwise could never afford to maintain a federal court action on their own.

To understand how the FLSA was designed to be enforced, it is important to keep in mind the world that existed immediately prior to the passage of the FLSA in 1938. According the U.S. Department of Labor’s website:

[T]the Supreme Court, in a series of decisions, invalidated both State and Federal labor laws. Most notorious was the 1936 case of Joseph Tipaldo. The manager of a Brooklyn, N.Y., laundry,
Tipaldo had been paying nine laundry women only $10 a week, in violation of the New York State minimum wage law. When forced to pay his workers $14.88, Tipaldo coerced them to kick back the difference. When Tipaldo was jailed on charges of violating the State law, forgery, and conspiracy, his lawyers sought a writ of habeas corpus on grounds the New York law was unconstitutional. The Supreme Court, by a 5-to-4 majority voided the law as a violation of liberty of contract.

The Tipaldo decision was among the most unpopular ever rendered by the Supreme Court. Even bitter foes of President Roosevelt and the New Deal criticized the Court. Ex-President Herbert Hoover said the Court had gone to extremes. Conservative Republican Congressman Hamilton Fish called it a “new Dred Scott decision” condemning 3 million women and children to economic slavery.

 

B.        How It Works.

The FLSA is an excellent example of a “private attorney general” statue, in that plaintiffs’
attorneys are incentivized to competently and zealously represent low wage claimants who cannot afford retainers (fee deposits) or traditional hourly billing rates. FLSA plaintiffs’ attorneys, who generally practice in small local and regional law offices with limited resources, rather than in 24/7 full-service national “mega-firms” with hundreds of attorneys and support staff, often handle these matters on a de facto contingency fee, common fund, or “lodestar plus” basis. These plaintiffs’ attorneys typically get paid at the end of the process when,
subject to court approval, reasonable attorneys fees are awarded out of the final global settlement or judgment. Plaintiffs’ attorneys’ fees have usually been based on some combination of the time and effort expended by the attorneys and the results obtained for the claimants. In this manner, not only are the rights of the specific plaintiffs vindicated, but overall enforcement of federal labor law is promoted.

FLSA plaintiffs’
attorneys often meet or speak to their clients shortly before litigation is initiated, and often have to work with anxious clients with no pre-existing familiarity with the legal system, many of whom are low-income individuals who are either unemployed or work irregular hours, and may in some instances not be native English language speakers. Some clients may come from cultures where low-income persons are intimidated by employers, attorneys, judges and the legal system in general. The majority of the information conveyed to the attorneys is in verbal form, and is based on the personal recollections of the plaintiffs.

In stark contrast,
defense counsel are often members of the Labor and Employment departments of large, well-established law firms specializing in representing corporations and high net-worth businesspeople. These defense attorneys typically require that retainers be paid in advance of any work, and generally bill their clients “straight-time” for their billable hours, with invoices sent out every 30, 45 or 60 days. In many instances, defense counsel have pre-existing relationships with their clients, and do not have much difficulty being paid promptly by their clients’ in-house legal departments. Other defense attorneys may work at insurance-defense firms which are compensated by large insurance companies for handling their employment liability files as panel counsel. Almost all defense attorneys have at least some access to their clients’ books and records, and management staff.

C.        Traditional Arguments Against FLSA Enforcement.

Perhaps not surprisingly, the policy of making the federal court system accessible to poor and legally unsophisticated workers, including immigrants and first-generation Americans, has not always been viewed as a good thing by certain employers and those who represent them.

At various points in time since 1938, the FLSA and similar state laws have been attacked at threats to the free enterprise system, and disruptive to business. Plaintiffs and their counsel often have been characterized as muckrakers, agitators, radicals or worse.

A May 2013 article in Insurance Journal had the following headline:

Wage and Hour Claims Among Top Threats To U.S. Employers 

D.        The New Campaign Against FLSA Enforcement.

Recently, however, a new argument has been made to attack wage and hour lawsuits. This argument is that these lawsuits are creating a wage-and-hour litigation “epidemic” which is clogging the dockets of the federal courts, and distracting them from other matters.
According to some members of the defense bar, the proposed solution to this epidemic is the wholesale pre-discovery dismissal of FLSA cases. The defense argument is that such cases should only be allowed to proceed past the complaint stage if the plaintiffs – who often are non-record keeping low wage laborers, such as restaurant waiters, delivery drivers, construction workers,
security guards, and retail sales personnel with absolutely no legal training or experience – can allege enough factual details.

The defense bar often contends that low-wage FLSA claimants should be expected to know the names of supervisors and senior managers, dates, terms and conditions of employment,
specific job sites, specific amounts allegedly owed, types of equipment used,
work schedules, internal company policies, corporate organizational structures,
reporting relationships, payroll processing information, information management systems, etc.

If this in fact becomes the new standard for bringing (not litigating) an FLSA lawsuit, not only will many FLSA cases be dismissed, but many workers and plaintiffs’ attorneys will be discouraged from even commencing these actions in the first place. Indeed, very few working-class people possess the information that defendants and their counsel now argue that they should, and even fewer are likely to possess any documentation supporting their claims, apart from a few paystubs. Some have been paid in cash without any record keeping whatsoever. To make matters worse, the small number of plaintiffs in possession of documentation have frequently been attacked for having “stolen” the pertinent materials or otherwise having accessed them in an unauthorized manner. In effect, low wage claimants are caught between the proverbial rock and hard place. If they know too little, they risk being thrown out of court because of their so-called “thread-bare” or “boiler-plate” complaints. If they know too much, they risk being accused of having snooped into confidential areas that were none of their business and possessing wrongfully acquired proprietary information.

In at least one situation that we are aware of, a former employer even sued its former employees months after they had filed an FLSA claim, alleging that the employees had obtained propriety information illegally. To be fair to employers, it is in fact true that many low-wage jobs do not require that employees have access to their employers’ books and records. For such low level employees, simply asking too many questions about their employers’ may be asking for trouble and result in their termination. In certain industries,
intimidation of low income workers is commonplace. This is precisely why expecting employees to possess detailed information about their employers’
payroll processes and organization structure at the time they bring their FLSA actions is both unfair and unrealistic.

E.         “Trial” By Pre-Discovery Motion To Dismiss.

In the past three years, it has become common to see defense motions to dismiss FLSA complaints accompanied by detailed declarations of business owners and their counsel attaching voluminous exhibits obtained from the business’ books and records. Of course at a pre-discovery stage, only the owners and managers (and perhaps their attorneys) have unrestricted access to these materials.

            A typical defense motion includes an interesting and compelling version of reality, as seen from the eyes of the defendants’ owners and managers. The accompanying declarations generally state, in essence, “this is how we do things and have always done things, and we know this because we are in charge, and here are some documents in our possession that support what we have to say, and that’s why we haven’t violated the FLSA, and of course we never would violate the FLSA because our company is run with absolute integrity.” The court then is encouraged to accept this version of reality, and simply dismiss the complaint unless the plaintiffs, in opposition papers that usually must be filed within a few weeks of the motion to dismiss (and without any intervening discovery), can marshal enough exhibits or affidavits of their own to create a genuine issue of disputed materials facts.

Superficially, this type of defense motion may appear very impressive. A thorough, well-written defense motion, on which highly compensated defense attorneys may have spent dozens of billable hours – amounting to tens of thousands of dollars in fees –
can be chock full of “facts.” In comparison, plaintiffs’ complaints, and their opposition papers, superficially may appear to be less impressive “cut and paste” work, simply because, as discussed, much of the information used to prepare the defense motion is under the exclusive control and custody of management. It often is impossible for plaintiffs, and their counsel, who are financing the costs of the litigation, to create their own mountain of evidence in opposition to a motion to dismiss prior to any discovery having taken place.

Obviously, this is not how motions to dismiss under the Federal Rules of Civil Procedure were ever designed to work, and it certainly is not how enforcement of the FLSA was intended to work.

F.         Courts’
Use of Motions To Dismiss As Docket-Management Tools.

In the past,
plaintiffs did not encounter significant difficulties in opposing such patently premature motions to dismiss, and most courts showed little interest in reviewing uncorroborated declarations, affidavits and exhibits offered by the defense to tell their side of the story before a single piece of paper had even been exchanged in discovery. The most common reaction of trial judges was to simply tell the defendants to save it for summary judgment or trial.

Unfortunately, in a few recent instances, courts have indicated a willingness to entertain such motions to dismiss in an effort to aggressively manage their dockets. Not surprisingly, these instances have been celebrated by the defense bar. In one recent article, an active defense attorney wrote that “[i]n yet another example of courts’ increased hostility toward broad boilerplate complaints in FLSA collective actions, a Magistrate Judge recommended dismissal with prejudice of an FLSA collective action.” The same author could hardly conceal her delight at this outcome: “It is encouraging that courts are rejecting what one court called a “blunderbuss” approach to pleading.”