D'Arezzo et al v. The Providence Center, Inc.
Filing
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MEMORANDUM AND ORDER granting (12) Motion to Dismiss; granting (13) Motion to Dismiss in case 1:15-cv-00120-M-LDA; granting (14) Motion to Dismiss; granting (15) Motion to Dismiss for Failure to State a Claim in case 1:15-cv-00121-M-PAS. - So Ordered by Judge John J. McConnell, Jr. on 10/30/2015. (McGuire, Vickie)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
DARLENE A. D' AREZZO, OLIVIA M.
HOWARD, and JOELLE A. DEPEYROT,
individually and on behalf of other similarly
situated individuals,
Plaintiffs,
v.
THE PROVIDENCE CENTER, INC., alias,
Defendants.
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C. A. No. 15-120-M-LDA
Consolidated with
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DARLENE A. D' AREZZO, STACEY L.
SALYERS and JOSEPH K. REARDON,
individually and on behalf of other similarly
situated individuals,
Plaintiffs,
v.
FAMILY SERVICE OF RHODE ISLAND,
INC., alias,
Defendants.
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C. A. No. 15-121-M-LDA
MEMORANDUM & ORDER
JOHN J. MCCONNELL, JR., United States District Judge.
This case is before the Comt on Defendants' Motions to Dismiss the consolidated
lawsuits brought by two sets of plaintiffs against their current and former employers, alleging
violations of the Federal Labor Standards Act (FLSA) and the Rhode Island Minimum Wage Act
(RIMWA). (ECF Nos. 12, 13). After reviewing the pleadings and the relevant substantive and
procedural law, Defendants' Motions to Dismiss are GRANTED without prejudice.
PROCEDURAL BACKGROUND
I.
Plaintiffs Darlene D' Arezzo, Olivia Howard, and Joelle Depeyrot brought suit
individ\mlly and on behalf of all persons similarly situated in the State of Rhode Island against
their employer, The Providence Center. C.A. 1: 15-cv-00120-M-LDA. On the same date, Ms.
D'Arezzo and two others, Stacey Salyers and Joseph Reardon, brought a nearly identical lawsuit
against their former employer, Family Service of Rhode Island, Inc. C.A. 1:15-cv-00121-MLDA. Both sets of plaintiffs claim violations ofthe FLSA and the RIMWA. (ECF No.1 112-
3).1 Both Defendants moved to dismiss for failure to state a claim upon which relief can be
granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF Nos. 12, 13).
Plaintiffs filed a single objection to both motions, (ECF No. 15), and Defendants filed separate
replies. (ECF Nos. 16, 17).
II.
FACTS ALLEGED IN THE COMPLAINTS
Plaintiffs are social services professionals who refer to themselves as "Fee-For-Se1·vice
Therapists." (ECF No. 1
~
19). They allege that they are non-exempt employees under the
FLSA and the RJMWA, or in the alternative, exempt employees whose rights were nonetheless
violated. Id.
~~
51-55. They provide mental health, marriage and family therapy, and other
counse1ing services to needy families and citizens across the state. !d.
are two institutions that employed Plaintiffs. !d.
~
~1f
5-7, 34. Defendants
8.
Plaintiffs allege that they were ''paid under a purported 'fee for service' arrangement as
described [in the Complaint]." Id
1
1~
5-7, 19. The Complaint describes the arrangement as "a
ECF numbers are the same in both cases unless otherwise noted.
2
purported hybrid compensation plan typically consisting of flat rates for certain tasks and hourly
rates for certain other services provided or work performed." !d. ~ 36.
2
The crux of Plaintiffs' complaint is that they were paid flat fees for recurring, timespecific jobs, but no fees for ce11ain tasks related to those jobs- tasks that Defendants required
For example, while Plaintiffs
them to do, regat·dless of how long they took to complete.
typically t·cccivcd $40 for each 45-minute therapy session, they received no compensation for
various time-consuming tasks attendant to each session. !d.
~
37. Plaintiffs do not specify
whether their employment contract with Defendants contemplated and encompassed these
attendant tasks, or whether Defendants simply required Plaintiffs to complete these tasks in
addition to their bargained-for duties.
Plaintiffs allege the following typical scenario: Because therapy sessions were sometimes
located outside Defendants' facilities, Plaintiffs would have to travel to and from some sessions.
Id
~
45. When they arrived at the location of a session, they were required to wait at least 15
minutes for a c1ient to show 1.1p. Id.
~~
41, 46, 48. If the client did not show up, they had to
complete certain follow up work pursuant to the Defendants' "no show" policies. Id
~
46-49.
This follow up work required Plaintiffs to "1) conduct a famiLy outreach by phone, 2) complete
and submit an encounter form, 3) draft, print, and mail the no-show client a letter, and/or 4)
3
update the no-show client's progress notes and/or discharge paperwork." Id. ~ 42. Plaintiffs
were not paid for any of these tasks because Defendants only permitted Plaintiffs to "repo1t
2
Plaintiffs' description of their compensation plan is difficult to decipher. The Comt' s best stab
at what Plaintiffs mean by the word "hybrid," is that the plan can be described as either per job
or per unit of time. In other words, because Plaintiffs were paid a flat fee for each time-specific
task, such as $40 for a 45-minute therapy session, this arrangement can be characterized as either
fee-for-service ($40 per session) or hourly pay ($40 per 45 minutes).
3
Plaintiffs do not specify how long these tasks typically took.
3
hours/time for client appointments that were actually kept, and not for other work performed."
ld ~ 49.
Relatedly, Plaintiffs were also required to do uncompensated work if a client canceled
within 24 hams of a scheduled session. In those situations, Plaintiffs were "typically reqt1ired"
to "1) provide notice directly or indirectly to the 'canceled client'; 2) complete and submit an
encounter form, and 3) update the progress notes." ld. ~ 43. They were not compensated for
these tasks or the time it took to complete them.
Plaintiffs also allege they were never compensated for "[t]ime spent obtaining insurance
authorizations/' and for
[t]ime spent attending mandatory follow-up paperwork, and record keeping for clients,
including but not limited to calling, emailing and writing letters to clients and others
involved in the care or supervision of the clients, such as schools, hospitals, other
psychotherapists, physicians, other social agencies, authorized family and clients'
associates, [Rhode Island Department of Children, Youth & Families], and law
enforcement as well as writing follow-up notes of such actions.
Id ~50. 4
III.
STANDARD OF REVIEW
At the motion to dismiss stage, the Court accepts as true all well-pleaded factual
allegations in the complaint and makes all reasonable inferences therefrom in favor of the
Plaintiffs. Bergemann v. Rhode Island Dep't of Envtl. lvfgmt., 665 F.3d 336, 339 (1st Cir. 2011)
(citing Dominion Energy Brayton Point, LLC v. Johnson, 443 F.3d 12, 16 (1st Cir.2006)). The
Federal Rules of Civil Procedure only require Plaintiffs to provide Defendants with "a sh01t and
plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P.
4
In another part of the complaint, Plaintiffs admit they were paid for "certain associated
but only if the client showed up for an appointment. Jd ~ 44. It is unclear
whether Plaintiffs were paid for all follow"up documentation or only the follow-up
documentation they completed when the client did show up for an appointment.
documentation,~~
4
8(a)(2). This requirement is satisfied when Plaintiffs include sufficient factual allegations in
their complaint to nudge their claims "across the line from conceivable to plausible.'' Bell At!.
C01p. v. Twombly, 550 U.S. 544, 570 (2007). Nonetheless, to stave off a motion to dismiss,
Plaintiffs are also "required to set fot1h factual allegations, either direct or inferential, respecting
each material element necessary to sustain recovery under some actionable legal theory."
Gooley v. A1obil Oil Corp., 851 F.2d 513, 514 (1st Cir. 1988) (citing Conley v. Gibson, 355 U.S.
41, 45-48 (1957)).
IV.
LEGAL ANALYSIS
Plaintiffs allege they were paid below the minimum wage in violation ofFLSA provision
29 U.S.C. § 206 (2013). 5 "To state a valid FLSA claim, (P]laintiffs had to allege {1) that they
were employed by [Defendants]; (2) that their work involved interstate activity; and (3) that they
performed work for which they were under-compensated." Pruel/v. Caritas Christi, 678 F.3d
10, 12 (1st Cir. 2012). Defendants challenge the sufficiency of the third element of Plaintiffs'
claim.
To satisfy the third element, Plaintiffs must plead that they performed compensable work,
for which they were compensated at a rate below the federal hourly minimum wage. Defendants
argue that Plaintiffs failed this requirement, citing the so-called Klinghoffer rule. United States
v. Kli11ghojJer Bros. Realty C01p., 285 F.2d 487, 490 (2d Cir. 1960) (holding that FLSA
minimum wage claims are only viable when a covered employee's wages for a single workweek
divided by hours worked dip below the federal minimum wage - hereinafter referred to as the
"weekly measuring rod"). Plaintiffs do not allege in their complaints that the wages they eamed
in any given workweek divided by hours worked ever dipped below the minimum wage.
5
Plaintiffs also allege a minimum wage violation under the parallel provision of the state statute
- the RIMWA. R.I. Gen. Laws§ 28-12-3 (2014).
5
Defendants also challenge whether Plaintiffs pleaded the alleged violations with
sufficient factual specificity, and whether Plaintiffs have sufficiently assetted "willful" violations
of the FLSA so that the statute of limitations can be extended from two years to three years under
29 U.S.C. § 255(a) (2013).
Plaintiffs urge the Court to reject the Second Circuit's KUngho.ffor rule in favor of the
"hourly measuring rod'' adopted in 2011 by a First Circuit sister district court in Norceide v.
6
Cambridge Health Alliance, 814 F.Supp.2d 17, 23, 25 (D. Mass 2011). Under the Plaintiffs'
theory, the employer must pay them at least a minimum wage for each hour worked, regardless
of what their contract provides. Relying on Norceide, Plaintiffs claim that Defendants
compensated Plaintiffs with a flat fee for time-specific jobs, but did not compensate Plaintiffs for
the additional time they were required to spend on tasks attendant to those jobs. Plaintiffs do not
state in their complaints whether their employment contracts with Defendants contemplated and
included those attendant tasks.
After reviewing the relevant case law, the controlling
statute~
and the regulations
interpreting that statute, the Court finds that the FLSA does not prescribe a single measming rod
for all covered employees, but rather instructs courts to look to the employment contract between
the pat1ies to determine whether the statute has been violated. Therefore, Plaintiffs could state a
claim under a "contract measuring rod" theory when their employer requires them to put in
additional work, not required by their contract, at a compensation rate below the minimum
See id. ('~[T]he Klinghoffer weekly average method igno.res the plain language of the minimum
wage provision and undermines the FLSA's primary purpose of ensuring a fair wage for
workers. . . . Congress intended for the hour-by-hour method to be used for determining a
minimum wage violation.,)
6
6
wage. 7 Plaintiffs could also state a claim under the "weekly measming rod" theory when the
8
wages they earn in a given workweek, divided by hours worked, dip below the minimum wage.
Because the current versions of Plaintiffs' complaints do not state a claim under either theory,
the Court grants Defendants' motions to dismiss, but allows Plaintiffs leave to amend their
complaints within 14 days.
A.
Bacl{ground on Relevant Cnse Law
If Klinghoffer were a United States Supreme C01.u1 decision, Plaintiffs' federal minimum
wage claims would be dismissed with a one-line order. However, Klinghoffer was a Second
Circuit panel's decision, and therefore this Court finds itself duty-bound to examine Plaintiffs'
claims, and the FLSA provision authorizing it, in a more rigorous fashion.
The First Circuit has not adopted the Klinghoffer rule, which has led to some
disagreement among the First Circuit sister district courts. In a 2010 decision, the District of
Massaclmsetts applied the Klinghoffer rule to grant a defendanes 12(b)(6) motion. Prue/1 v.
Caritas Christi, No. C.A. 09-11466-GAO, 2010 WL 3789318, at *3 (D. Mass. Sept. 27, 2010).
9
On appeal, the First Circuit did not have the opportunity to address the Klinghoffer issue. Pruett
7
The "contract measuring rod» ensures that employers do not leverage their unequal bargaining
rower to require current employees to work unpaid (or sub-minimmn-paid) hours.
The "weekly measuring rod" ensures that employers do not leverage their unequal bargaining
power to require employees, who are not paid by the hour, to work at an effective hourly rate that
is below the minimum wage.
9
In their original complaint, the Pruell plaintiffs alleged FLSA minimum wage and overtime
claims. C.A. 09-11466-GAO. The district court initially dismissed both claims; the minimum
wage claim under the Klinghoffer mle and the overtime claim because plaintiffs did not allege
that they worked over 40 hours per week. Prue/1 v. Carilas Christi, C.A. 09-11466-GAO, 2010
WL 3789318, at *3 (D. Mass. Sept. 27, 2010). The plaintiffs then filed an Amended Complaint,
in which they dropped their minimum wage claim, but still asserted an FLSA overtime claim.
Compare C.A. 09-11466-GAO, Compl. (ECF No. 1 1 75) with Am. Compl. (ECF No. 33 ~,-r 7576); see also Pls.' Mem, of Law in Opp'n to Defs.' Mot. to Dismiss Pls.' Am. Compl. (ECF No.
42 at 5-10). In a subsequent bench order, the district court dismissed with prejudice Plaintiffs'
Amended Complaint - which included the overtime claim, but no longer the minjmum wage
7
v. Cctritas Christi, 678 F.3d 10 (1st Cir. 2012). In 2011, a district judge in the District of
Massachusetts forcefully
~nd
persuasively rejected the Klinghoffer rule in favor of the hourly
10
Norceide, 814 F.Supp.2d at 21 -26.
measuring rod.
In 2014, that judge's decision was
sustained at the summary judgment stage under the law of the case doctrine by a different district
judge who had taken over the case after the original judge's retirement. Norceide v. Cambridge
Health Alliance, No. C.A. 10-11729-NMG, 2014 WL 775453, at *4 (D. Mass. Feb. 24, 2014).
However, in 2015, the District Court ofNew Hampshire cited to the Klinghoffer mle, without
analysis of the underlying Act or Norceide, to dismiss a minimmn wage claim. Chesley v.
DIRECTV, Inc., No. 14-CV-468-PB, 2015 WL 3549129, at *5 (D.N.H. June 8, 2015).
Of the thirteen federal circuits, eight have not taken a position on the Klingho_ffer rule,
wllile five have adopted it. 285 F.2d 487 (2d Cir. 1960); Blankenship v. Thurston Motor Lines,
111
415 F.2d 1193, 1198 (4 Cir. 1969); U.S. Dep'l of Labor v. Cole Enter., Inc., 62 FJd 775,780
(6th Cir. 1995); Hensley v. ivfaci\lillan Bloedel Containers, Inc., 786 F.2d 353, 357 (8th Cir.
1986); Dove v. Coupe, 759 F.2cl 167, 171·72 (D.C. Cir. 1985). Among the Klinghoffer rule
Circuits, all but the D.C. Circuit acquiesced to the rule without any independent analysis of the
claim - apparently for failure to make specific enough allegations of overtime work. The comt
then entered judgment for Defendants. Id, J. in a Civil Case (ECF No. 91). Plaintiffs then
appealed two issues to the First Circuit: whether it was proper for the district court to dismiss the
overtime claim, and if so, whether it was proper to dismiss it with prejudice. Pmell v. Caritas
Christi, 2011 WL 5517812 (C.A.l), 2 (Br. for Pls.~Appellants). The First Circuit upheld the
dismissal, but reversed on the second issue, finding that the plaintiffs must be given an
opportunity to refite the overtime claim. The only relevant takeaway from this procedural
history for the instant case is that the First Circuit did not have the opportunity in Pruell to rule
on the validity of the Klinghojfer rule, because that issue was not before the court.
10
The hourly measuring rod adopted by tl1e Norceide cou1t is also followed by Schmitt v. State of
Kan., 844 F. Supp. 1449, 1456-59 (D. Kan. 1994) and some state courts under their state
equivalents of the FLSA. See, e.g., Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36,
41 (2013), reh'g denied (Apr. 2, 2013), review denied (July 17, 2013); Bot v. Residential Servs.,
Inc., No. C8·96-2545, 1997 WL 328029, at *6 (Minn. Ct. App. June 17, 1997).
8
FLSA. See Norceide, 814 F.Supp.2d at 22 (examining Circuit decisions adopting Klinghoj)'er
rule). And while the D.C. Circuit conducted its own analysis, its decision was no doubt colored
by KUngho,ffer, which is quoted at length in the opinion. Dove, 759 F.2d at 171. Because of the
large influence that the Klinghoffer decision has had on this area of law, this Court now turns to
examining whether that case correctly reached the conclusion that the "weekly measuring rod" is
the only permissible method of alleging minimum wage violations under the FLSA.
B.
Klinghoffer Decision
Upon a close examination of the Klinghoffer decision, this Court is convinced that the
Second Circuit panel's holding was correct, but its dictum, which has become known as the
Klinghoffer rule, was mistaken.
Specifically, this Court finds that the Kfinghoffer rule is
dependent on principles of lenity unique to the criminal aspects of that case, and compromised
by an incomplete, and seemingly results-driven assessment of legislative history.
1. Lenity
Klinghoffer was a criminal case that resulted in a jury verdict, finding violations of the
minimum wage, ove11ime, and false records provisions of the FLSA by corporate and individual
defendants. 11 285 F .2d at 489. The violations arose when defendants, who were in dire financial
straits, asked several of their security guards to work additional hours without pay. The "guards
refused to accede to this, on the ground that it was tantamount to a cut in pay." /d. at 489-90.
The defendants relented, contracting to pay the guards for approximately six overtime hours per
week, with compensation forthcoming at a later date. ld. at 490. After putting in tile ovettime
for less than fom months, the guards stopped doing the extra work, because they had not yet
been paid. Id. The guards did not report the extra ho-urs they worked during this period on their
11
The defendants in that case were the Klinghoffer Bros. Realty Corp., its president Albert
Klingohffer, and vice~president Irving Jacobson. 285 F.2d at 489.
9
time cards. ld After 17 months had passed from the last overtime hour worked by the guards,
they finally submitted their hours to the defendants. !d.
As soon as the guards officially
submitted their hours, the defendants offered to pay them their due. All of the guards accepted
this offer, except one, "who declined upon the advice of the district attorney." !d. The case was
tried, and the jury convicted the defendants on all counts. The Second Circuit subsequently
reversed the mininmm wage and false records convictions, but affirmed the ove1t ime conviction.
Much of the Second Circuit panel's opinion and its subsequent denial of motions for
reheadng are permeated by suspicions of prosecutorial overzealo\Jsness. And that makes sense,
because the FLSA prosecution appeared to have been completely unnecessary to secure the
guards' \mpaid wages -
not only because the employer had offered to pay them, but also
because the employer had so clearly violated the employment contract with the guards. The
goverrunent's only purpose in bringing the minimum wage claim appeared to be punishing the
defendants. In light of this, the Klinghof(er court earnestly admitted that it refused to adopt the
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goverrunent's endorsement of the "hourly measuring rod in that specific criminal case because
of the harshness of the result. !d. at 494. ("[T]he government' s present position [requiring
employers to compensate employees for every hour worked] should not be the interpretation
given a penal statute.,) (emphasis added).
These principles of lenity simply do not apply when employees are required to do unpaid
work without compensation under the ever-present tlueat of losing their livelihood. The guards
in Klinghoffer had sufficient bargaining power to refuse their boss's request to work extra hours
at no extra pay, and instead negotiated for additional pay. When they were eventually not paid,
they did not need recourse to the minitntlm wage provisions of the FLSA because their employer
was ready to provide them with back pay. And if the employer had not been, the guards would
10
still have gotten paid because they had an unassailable contract law claim. Despite all this, the
United States government wanted to punish the employer and charged it and its officers with a
violation of the minimum wage provisions of the FLSA. It is a cruel twist of fate that the
consequence of this prosecutorial decision is now routinely trotted out as the reason to deny
relief to employees who, unlike the Klinghoffer guards, carmot refuse their employers' demands
to put in unpaid hours that they are under no contractual obligation to work.
2. Legis/alive histo1y
To justify its dictum
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adopting the '(weekly measuring rod,, the Second Circuit turned to
the FLSA's legislative history. Analyzing that history, the Comi concluded that the sole purpose
of the FLSA's minimum wage protections "was to guarantee a minimum livelihood to the
employees covered by the Act" and asserted that "th[is] Congressional purpose is accomplished
so long as the total weekly wage paid by an employer meets the minimum weekly requirement of
the statute." 285 F.2d at 490 (citing Conference Report, H.R.Rep. No. 2738, 75th Cong., 3d
Sess. 28 (1938); Sen.Rep. No. 884, 75th Cong., 1st Sess. 1"3 (1937); H.R.Rep. No. 1452, 75th
Cong., 1st Sess. 8-9 (1937)). Thus, the Klinghojfer rule was born.
Upon review, this Com1 finds that Klinghoffer's interpretation of the minimum wage
protections is both overinclusive and underinclusive. The interpretation is overinclusive insofar
as the Second Circuit asserts that the minimum wage provisions ensure covered employees a
minimum livelihood. They do not, because not all covered employees work sufficient hours to
earn a minimum livelihood. It is underinclusive insofar as the Second Circuit asselis that the
12
Klinghoffer held that when employees work additional hours for additional pay, but the
employer does not come up with the extra promised pay, the criminal sanctions of the FLSA's
minimum wage provisions do not apply. To reach that holding, Klinghoffer adopted a much
broader rule in its dictum, stating that the only way to allege a minimum wage claim is by the
"weekly measuring rod." 285 F.2d at 490.
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provisions do not protect employees except to ensure a minimum weekly living wage. They do,
because even an employee who only does one hour of covered work per week, ot· per year, is
protected.
While the Second Circuit's analysis of legislative history permitted it to reach the
conclusion it sought, it does not reflect the actual scope of protections provided by FLSA's
minimum wage provisions. Cet1ainly, these protections help workers earn a living wage, hut that
is not their exact or principal purpose.
"The principal congressional purpose in enacting the
[FLSA] was to protect all covered workers from substandard wages and oppressive working
hours, 'labor conditions [that are] detrimental to the maintenance of the minimum standard of
living necessary for health, efficiency and general well-being of workers."' Norceide, 814
F.Supp.2d at 34 ((quoting Barrentine v. Arkansas-Best Freight Sys. Inc., 450 U.S. 728, 739
(1981)) (citing 29 U.S.C. § 202(a))). The test of Congress' purpose was "whether a worker
received 'a fair day's pay for a fair day's work."' ld (quoting Overnight Motor Tramp. Co. v.
Missel, 316 U.S. 572, 578 (1942) (quoting 81 Cong. Rec. 4983 (1937)) (Message of President
Franklin D. Roosevelt)).
13
When an employee has fulfilled her contractual duties for the day,
and is then required by her employer to do additional work at a compensation rate below the
13
The D.C. Circuit, which is the only appellate court besides the Second Circuit to independently
analyze the measuring rod of FLSA's minimum wage provisions, stated the purpose of those
provisions even more starkly: "[t]he purpose of the minimum wage provisions 'is to protect
certain grOllps of the popu.lation from sub-standard wages . . . due to ... unequal bargaining
power." Dove, 759 F.2d at 171 (citing Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 706
(1945)). When phrased that way, the situation faced by employees who do not have sufficient
bargaining power to refuse an employer's demands to work uncompensated hours not
contemplated by their employment contract is the exact problem the minimum wage laws were
designed to correct. Whlle Dove cited Klinghoffer to hold that the "weekly measuring rod"
satisfies the provisions' purpose, both comts' conclusions suffer from the overinclusiveness and
underinclusiveness discussed supm.
12
minimum wage, (or for no compensation at all), that employee has not received her "fair pay for
[her] fair day's work." /d
The Klinghoffer guards did not need minimum wage protections to receive their fair pay
because they were protected by their employment contract. On the other hand, employees who
are required by their employers to do unpaid work not contemplated by their employment
contract, may need those protections. The Comt now turns to the FLSA to determine whether it
offers employees in that situation the protection of a minimum wage.
C.
The Fedel'al Statute
The relevant pmtion of the FLSA states:
(a)
Employees engaged in commerce ...
Every employer shall pay to each of his employees who in any workweek
is engaged in commerce or in the production of goods for commerce, or is
employed in an enterprise engaged in commerce or in the production of
goods for commerce, wages at the following rates:
( 1) except as otherwise provided in this section, not less than(C) $7.25 an hour, beginning 24 months after th[e] 60th day [after
May 25, 2007];
29 u.s.c. § 206 (2013).
The Act does not specify a measuring rod for minimum wage violations.
14
This omission
is not surprising, because each employee's compensation structure is different. When the Act
was adopted in 1938, many covered employees were paid by the hour. Many others worked
irregular hours for a fixed weekly wage. See generally Ovemight Motor Transp. Co. v. 1Vlissel,
Even courts who have adopted the Klinghojfer rule as a permissible interpretation of § 206
have conceded 1hat the \1Se of the word "workweek" in that provision does not mandate a
"weekly measuring rod." Dove, 759 F.2d at n. 7 c•29 U.S.C. § 206(a) , .. employs the
workweek to determine whether an employee falls within the scope of the federal minimum
wage law. It does not ... follow that, because the workweek is the standard for applicability, it
mt1st also be the standard for compliance.")
14
13
316 U.S. 572 (1942) (discussing application of FLSA to employees drawing a fixed weekly
wage). Yet others were paid per task or per unit produced, similar to Plaintiffs in the case at bar.
See United States v. Rosenwasser, 323 U.S. 360, 361 ~62 ( 1945) (discussing application of FLSA
to such employees and listing entire industries where workers wet:e generally paid pet· unit
produced). It is beyond dispute that the minimum wage protections apply to all such covered
employees, regardless oftheir method of compensation. 29 C.F.R. § 776.5 (2015).
The most natural explanation for why the FLSA does not provide a measuring rod for
minimum wage violations is because a one-size-fits-all measuring rod would not make sense in
light of the varied methods of compensation agreed to by covered employees. Instead, the courts
must look to the employment contract between employer and employee to determine what the
measuring rod is for any specific employee. This variable "contract measuring rod" reflects the
variety of compensation arrangements agreed to by employers and employees, and best accounts
for the lack of a prescribed measuring rod
in the Act. 15 It is also most conducive to ensuring that
each covered employee receives a "fair day's pay for a fair day's work." Message of President
Franklin D. Roosevelt.
Turning next to the regulations interpreting the minimum wage provisions of the FLSA,
the Court finds that they are consistent with a "contract measuring rod" for asserting violations.
15
The Court recognizes that this "contract measuring rod" is not so much a measuring rod, as
recognition that a measudng rod is not needed when an employee is required to do
uncompensated work not included in her contract. The absence of a meas1.1ring rod in the FLSA
is fully consistent with this theory of violation.
The "contract measuring rod" theory also reconciles the Klinghoffer line of cases with the
"gap time" line of cases, insofar as "gap time" constitutes uncompensated work not required by
an employee's contract. This Comt finds that employees required to do such work can state a
claim under the FLSA's minimum wage provision. See Lamon v. City of Shawnee, Kan., 972
F.2d 1145, 1155-59 (1Oth Cir. 1992). But see, e.g., Lundy v. Catholic Health Sys. ofLong Island,
Inc., 711 FJd 106, 115 (2d. Cir. 2013); Davis v. Ab;ngton lvfem. Hosp., 765 F.3d 236, 244 (3d
Cir. 2014) (rejecting "gap time" claims).
14
D.
The Regulations
While the regulations do not directly address the measuring rod question, the relevant
sections of the Code of Federal Regulations suggest that the proper place to look to determine the
measudng rod is to the specific compensation structure governing the relationship between
employer and employee. The Comt pays due heed to those regulati9ns, to the extent they are
controlling, permissible, and reasonable, or otherwise persuasive. See United States v. Mead
Corp., 533 U.S. 218 (2001); Chevron, U.S.A., Inc. v. Natural Res. Def Council, Inc., 467 U.S.
837 (1984); Skidmore v. Sw({l, 323 U.S. 143 (1944).
1. Section 776.5
This provision, which deals explicitly with an employer's minimum wage obligations to
employees paid on a piecemeal basis, states:
The Act's individual employee coverage is not limited to employees working on
an hourly wage. The requirements of section 6 as to minimum wages are that
"each" employee described therein shall be paid wages at a rate not less than a
specified rate "an hour." This does not mean that employees cannot be paid on a
piecework basis or on a salary, commission, or other basis; it merely means that
whatever the basis on which the workers are paid, whether it be monthly, weekly,
or on a piecework basis, they must receive at least the equivalent of the mininu1m
hourly rate. "Each" and "any" employee obviously and necessarily includes one
compensated by a unit of time, by the piece, or by any other measurement.
Regulations prescribed by the Administrator (part 516 of this chapter) provide for
the keeping of records in such form as to enable compensation on a piecework or
other basis to be translated into an hourly rate.
29 C.F.R. § 776.5 (2015).
On its face, this regulation does not answer the question posed by this case, because "the
equivalent of the minimum hourly wage" can be calculated by using either the weekly or the
hourly measuring rod.
What is significant is that the regulation calls for evaluating the
employer's records to determine that employer's obligations to the employee. That suggests that
the way a particular employer compensates a patticular employee is relevant to the minimum
15
wage protections of the FLSA. If the Klinghoffer rule advocated by the Defendants were correct,
this provision would have no reason to direct the comis to the employer's records to determine
whether a minimum wage violation occurred -
instead, it would say that a minimum wage
violation only occurs if the total wages earned by an employee over a workweek divided by total
hours worked equal less than the minimum hourly wage. It simply would not matter how the
employee is actually compensated, all that would matter are the wages earned and the hours
worked in a given workweek.
Because the provision points to the employer's records, it
necessarily contemplates a role for the specific compensation stmcture governing the
employment relationship in determining whether a minimum wage violation occurred. In other
words, the measuring rod for violations depends on the compensation method between employer
and employee -
a so-called "contract measuring rod."
2. Section 516
29 C.P.R. § 516 (20 15), referenced in § 776.5, suppotis this interpretation. Specifically,
§ 516.6(a)(l) requires employers to maintain records of "the amounts of work accomplished by
individual employees on a daily, weekly, or pay period basis (for example, units produced) when
those amounts determine in whole or in pmi the pay period earnings or wages of those
employees," and § 516.6(a)(2) requires employers to keep wage rate tables, "which provide the
piece rates or other rates used in computing straight-time earnings, wages, or salary, or overtime
pay computation." These provisions require employers to maintain records that correspond to
the "pay period basis" of the employee. When read together with Section 776.5, the foc\lS on the
"pay period basis" agreed upon between employer and employee, in the context of minimum
16
wage computations, suggests a variable measuring rod that incorporates the contract between the
6
two parties!
Applied to the case at bar, Defendants would have to keep records of the "amounts of
work" accomplished by the Plaintiffs on a "pay period basis/' which is each discrete therapy
session or job agreed upon in the employment contract. If the Plaintiffs 1tad pled that Defendants
required them to work outside of those discrete sessions without compensation, and that that
additional work was not included in the initial employment contract, Plaintiffs would have stated
a claim for a minimum wage violation.
3. Section 776.4
This section, which extends the protections of the FLSA to all employees who do any
covered work during a given workweek, also explains some of the work done by the term
"workweek" in Section 206 of the FLSA. The provision states:
(a) The workweek is to be taken as the standard in determining the applicability of
the Act. Thus, if in any workweek an employee is engaged in both covered and
noncovered work he is entitled to both the wage and hours benefits of the Act for
all the time worked in that week, unless exempted therefrom by some specific
provision of the Act. The proportion of his time spent by the employee in each
type of work is not material. If he spends any part of the workweek in covered
work he will be considered on exactly the same basis as if he had engaged
exclusively in such work for the entire period. Accordingly, the total number of
hours which he works during the workweek at both types of work must be
compensated for in accordance with the minimum wage and overtime pay
provisions of the Act.
(b) It is thus recognized that an employee may be subject to the Act in one
workweek and not in the next. It is likewise true that some employees of an
employer may be subject to the Act and others not. But the burden of effecting
segregation between covered and noncovered work as between particular
16
This section also references workweek calculations, but these calculations are related to the
employer,s ovextime obligations. Specifically, 29 C.F.R. § 516.2(a)(5) (2015), which requires
employers to maintain records containing the "[t]ime of day and day of week on which the
employee's workweek begins" is immediately followed by§ 516.2(a)(6) (2015), which explicitly
connects the workweek with the employer's overtime obligations.
17
workweeks for a given employee or as between different groups of employees is
upon the employer. Where covered work is being regulal'ly or recurrently
performed by his employees, and the employer seeks to segregate such work and
thereby relieve himself of his obligations under sections 6 and 7 with respect to
pat1icular employees in patiicular workweeks, he should be prepared to show, and
to demonstrate from his records, that such employees in those workweeks did not
engage in any activities in interstate or foreign commerce or in the production of
goods for such commerce, which would necessarily include a showing that such
employees did not handle or work on goods or materials shipped in commerce or
used in production of goods for commerce, or engage in any other work closely
related and directly essential to production of goods for commerce. The
Division's experience has indicated that much so-called "segregation" does not
satisfy these tests and that many so-called "segregated" employees are in fact
engaged in commerce or in the production of goods for commerce.
29 C.P.R.§ 776.4 (2015) (internal footnotes omitted).
When read in its entirety, the meaning and purpose of th~s section is to extend the
protections of the FLSA to all employees who engage in any covered work, and not to
circumscribe employees' minimum wage claims. See Dove, 759 F.2d at n. 7 ("29 C.F.R. § 776.4
. . . . merely restates 29 U.S.C. § 206(a)"); Norceide v. Cambridge Health Alliance, 814
F.Supp.2d 17 at n. 6 (2011) ("[T]his regulation speaks simply to the 'applicability' of the FLSA,
not how to determine hourly wage for purposes of the minimum wage.").
This section serves two functions: (a) it protects employees who engage in ar1y covered
work during the workweek by granting them full wage and hour protections for all time worked
during that workweek; and (b) it puts the burden on the employer to prove that a pat1icular
employee is not covered by the protections of the Act during a particular workweek. It would be
contrary to the protective tenor of this provision to read it in a way that limits minim\lm wage
claims in the way Defendants would have them limited.
This section also explains some of the work done by the term "workweek" in Section 206
of the Act. The regulation explains that the term "workweek" is in the statute to deal with the
potential problem that arises when an employee engages in both covered and lmcovered work for
18
an employer. In those situations, the employer may seek to circumvent the protections of the
minimum wage laws by paying the employee below minimum wage for the uncovered work. By
looking to the "workweek" to assess minimum wage claims in those specific situations, the Act,
as interpreted by 29 C.P.R. § 776.4, extends coverage to any employee who engages in any
covered work during a given workweek. In other words, the term "workweek" serves to protect
employees engaged in covered and uncovered work for the employer.
17
Analogously, a "workweek measuring rod" is an effective way to protect employees who
are not paid by the hour. By looking at the workweek for those employees, the court can have a
large enough sample size to determine whether a particular employee's rights were actually
violated. For example, if an employee contracts to make widgets at $1 per widget, it is not clear
whether this contract violates the minimum wage provisions. If each widget only takes 30
seconds to make, then certainly not, but if each widget takes an hour, then yes, it does. For those
situations, the FLSA can also be read to provide a "workweek measuring rod," so that comis will
have a larger time sample to more accurately determine whether an employer has violated the
wage law. See 29 C.F.R. § 776.4(a) (2015). But this "workweek measuring rod" does not
obviate the need to also protect employees who are required by their employer to do additional
unpaid work that is not encompassed by their employment contract. That is the role of the
"contract measuring rod," which stands alongside the "weekly measuring rod" as an equally
valid, necessary, and powerful pillar of minimum wage protection for all covered employees.
4. Import ofRegulations
17
See Norceide, 814 F.Supp.2d at n. 4 (citing An Act to Amend the FLSA, Pub. L. No. 87-30, §
6(a), 75 Stat. 65 (1961)) ("In 1961, Congress amended the minimum wage provision to include
the plu·ase 'in any workweek' . . . . [A]s the Act's purpose statement makes explicit ... the
amendment was part of Congress' attempt 'to provide coverage for employees of large
enterprises engaged in retail trade or service and of other employers engaged in commerce or in
the production of goods for commerce."')
19
The Code of Federal Regulations is consistent with this Comt's finding that a "contract
18
measuring rod" is the most natural reading of the minimum wage provisions of the FLSA.
While a few scattered Depm1ment of Labor opjnion letters and manuals opt for a "weekly
measuring rod," these documents are "not [entitled to] deference," and are not persuasive
because "they do not engage with the FLSNs [central] purpose.)) Norceide, 814 F.Supp.2d at n.
6.
E.
Contract Measuring Rod
The minimum wage provisions of the FLSA protect covered employees fi·om entering
employment contracts that pay below the minimum hourly wage. How does a comt determine
whether an employee entered into a contract that violates her or his rights? The answer is given
in the question: By looking at the contract. There is no "measuring rod" prescribed by the FLSA
18
The parties point to two other provisions of the C.F.R., neither of which turn out to be relevant
to the issue presented by this case.
Plaintiffs point to 29 C.F .R. § 541.605 (20 15), which explains how to calculate whether
certain employees who are paid on a "fee basisu are paid a sufficiently high wage to meet the
exemption threshold from the minimum wage (and overtime) provisions ofthe Act under Section
13(a)( 1). Plaintiffs argue that this section bears on their minimum wage claims. It does not. It
only answers the question of which employees are covered by the Act and which are exempt, and
nothing else.
Defendants point to 29 C.F.R. § 778.112 (2015), which deals with ovet1ime
compensation. This provision explains how to calculate the base hourly wage of an employee
who is paid by the day or by the job for the purpose of determining that employee's overtime
wage. Defendants argue that this section bears on how minimum wage claims must be plead. It
does not. It deals with a pa11icular problem - how to calculate a rate of "one and one-half times
the regular rate" at which an employee working over fo11y hours per week must be compensated
for purposes of compliance with 29 U.S.C.A. § 207, when that employee is compensated per day
or per job, rather than per hour.
It would be particularly unfair to use this provision to deny Plaintiffs' claims because the
only reason this provision looks to the workweek is to determine an employee's fair overtime
compensation. Otherwise, the FLSA could have mandated that each employee must simply be
compensated at "one and one-half times" the minimum wage for all overtime worked.
Defendants seek to use this provision, which uses the workweek to calculate a higher wage for
ove11ime hours, to instead limit minimum wage claims by employees paid per job or per hour.
That is not the purpose or the meaning of this provision.
20
because the contract is the measuring rod. Said differently> a comt cannot tell whether an
employer has contracted to pay the employee below the minimum wage in violation of the FLSA
without looking at the parties' employment contract.
Employees can certainly contract to work for $7.25 per week, if they only work 60
mhmtes per week. And employees can contract to work piecemeal> doing $40 therapy sessions
for an employer, so long as they are not required to do so much additional work attendant to each
session, that their pay dips below the minimum wage. Only when it is not clear from the
employment contract whether an employee will be paid below the minimum wage for the work
performed, does the need for a "weekly measuring rodn arise. However, that "weekly measuring
rod" is simply not applicable when an employment contract clearly pays an employee below the
hourly minimum wage.
That is what happens when, for example, a part-time employee, who works 10 hours per
week and is paid $10 per hour, is required by her employer to work an additional two hours at
the end of her shift for no compensation. Some may quibble with the word "required" here,
because certainly the employee "can always just say no." But the reality is that if an employee is
faced with this situation, the employer's action is more than just a request- it comes with the
implicit threat that "if you say no, I will find someone else who will say yes." This type of
"unfair method of competition in commerce" is the exact problem that the wage provisions of the
FLSA were designed to correct. 29 U.S.C. § 202 (2013).
Yet the Klinghofler rule says that an employee in that situation does not have a claim.
That must mean the Klingoliffer rule is the wrong interpretation of the law. Because what is
happening in the hypothetical above is that the employer is offerh1g an employee a new contract
-to work for two hours at $0 per hour ~ with the unspoken (and unenforceable) promise that
21
in exchange, the employee will get to keep her job for at least another day. That violates the
wage provisions of the FLSA regardless of whatever else happened between employer and
employee during the "workweek.,
Analogously, if an employee has contracted to do therapy sessions for $45, but is then
required to do additional covered work that the employment contract did not contemplate, that
employee is being unlawfully asked to do work without compensation.
If the contract
contemplated that additional work, then no violation took place unless the hourly wage earned by
that employee over a workweek dips below the minimum wage. In the first instance, it all
depends on what the employee has contracted to do, because anything additional she is required
to do, she does with no compensation and under the implicit threat of losing her job -
which is
19
prohibited by the FLSA.
In sum, this Court agrees with the holding of Klinghoffer, but not with the Klinghoffer
rule. The holding of Klinghoffer concerned a narrow situation: employees contracted to work
extra homs for extra wages, but did not receive their extra compensation. In that situation,
neither the employment contract nor the employer's actions violated the minimum wage laws which represent a contract every employer enters with the U.S. Government; they only violated
the specific contract between that employer and that employee.
20
But when an employer req1.1ires
an employee to do additional work, not required by the employment contract, for compensation
It would not help the employer to argue that asking the employee to do extra work is just a
modification of the existing employment contract, because it would be a modification for
consideration at below the minimum wage ($0), which is as prohibited by the FLSA as an initial
employment contract for consideration below the minimum wage.
20
It would have been a more expansive reading of the minimum wage provisions, had the
Klinghoffer comt said that any time an employer does not pay an employee, that not only
violates the contract between them, but also federal law. Under 1hat interpretation, the criminal
provisions of the FLSA could lead to criminal sanctions for every bankrupt employer faced with
insufficient funds to pay employees' wages.
19
22
that is below the minimum wage -
that does violate the FLSA. To the extent that Klinghoffir
rejected this proposition in its dicta, it was mistaken.
After reviewing the language of the Act, the regulations interpreting it, and always
heeding the maxim that the remedial provisions of the FLSA are to be given a liberal
interpretation, see, e.g., 29 C.F.R. § 790.2 (2015) (citing Roland Elec. Co. v. Walling, 326 U.S.
657 (1946); United States v. Rosenwasser, 323 U.S. 360 (1945); Brooklyn Sew Bank v. O'Neil,
324 U.S. 697 (1945); and A.H Phillips, Inc. v. Walling, 324 U.S. 490 (1945)), this Comt rejects
the Klinghoffer rule in favor of a more nuanced mininmm wage measuring rod that looks to the
compensation structure between employer and employee to determine whether a violation
occurred. In other words, this Court follows an intermediate course between the mandatory
"weekly measuring rod" only position espoused by the Klinghoffer rule and the strict "houl'ly
measuring rod" position adopted by Norceide, by permitting minimum wage claims under the
"contract measuring rod" theory.
F.
The State Statute
Plaintiffs also allege a state claim under the RIMWA, parallel to the federal claim. The
relevant portion of the RIMWA, the state minimum wage provision, states:
(a) Every employer shall pay to each of his or her employees: commencing July 1,
1999, at least the minimum wage of five dollars and sixty-five cents ($5.65) per
hour. Commencing September l, 2000, the minimum wage is six dollars and
fifteen cents ($6.15) per hour.
(b) Commencing January 1, 2004, the minimum wage is six dollars and seventyfive cents ($6.75) per hour.
(c) Commencing March 1, 2006, the minimum wage is seven dollars and ten cents
($7 .1 0) per hour.
(d) Commencing January 1, 2007, the minimum wage is seven dollars and forty
cents ($7.40) per hour.
(e) Conm1encing January 1, 2013, the minimum wage is seven dollars and
seventy-five cents ($7.75) per hour.
(f) Commencing January 1, 2014, the minimum wage is eight dollars ($8.00) per
hour.
23
(g) Commencing January 1, 2015, the minimum wage is nine dollars ($9.00) per
hour.
(h) Commencing January 1, 2016, the minimum wage is nine dollars and sixty
cents ($9.60) per hour.
R.I. Gen. Laws § 28-12-3 (20 15).
Like its federal counterpart, the state statute does not prescribe a measuring rod for
minimum wage violations. No state court decision or regulation explicitly adopts a minimum
wage measuring rod. Because Rhode Island law governing minimum wage is similar to the
federal law, this Co\ll't finds that Plaintiffs can also allege a RIMWA claim under the "contract
measuring rod" theory. Cf Harbor Cruises LLC v. R.l Dep 'I ofLabor, 2008 R.I. Super. LEX IS
142, *8 (R.I. Super. Ct. 2008) (highlighting similarity of FLSA and RIMWA in overtime
context).
G.
Plaintiffs' Claims
Plaintiffs have not stated a federal or state minimlmi wage claim m1der the "weekly
measuring rod" because they have not claimed that the wages they earned in any given
workweek, divided by hours worked, ever dipped below the minimum wage.
Moreover,
Plaintiffs have not stated a claim under the "contract measuring rod" because they have not
claimed that the additional work their employers required them to perform was not bargained for
in their employment contract.21 Therefore, Plaintiffs have failed to state a claim for a minimum
wage violation.
21
Plaintiffs hint at such a claim when they state that "they were required to perform tasks and/or
otherwise perform work for which they were not compensated.'' ECF No. 1 ~ 18. However, to
state a claim under the "contract measuring rod" theory, Plaintiffs must explicitly and plausibly
claim that the covered work they performed was not required by their employment contract.
Plaintiffs do not make this claim in the current versions of their complaints, but the Court is
giving them leave to allege it in amended complaints.
24
. I
I I
Plaintiffs are granted leave to file amended complaints that state a minimum wage claim
under either the "weekly" or "contract measuring rod" theory within 14 days from the issuance
ofthis order.
IV.
CONCLUSION
For the reasons stated above, the Defendants' Motions to Dismiss the Complaints (ECF
22
Nos. 14, 15) are GRANTED without prejudice.
$.
John J. McConnell, Jr.
United States District Judge
October 30,2015
22
The Court need not consider whether Plaintiffs have stated a claim for a willful violation in
light of the dismissal.
25
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