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Here is how HR can help prevent the missteps that could cost your company big in court.
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Precise evidence can prove that the Fair Labor Standards Act (FLSA) does not cover employees if the employer's revenue is less than $500,000 and the workers didn't engage in interstate commerce, according to the U.S. District Court for the Middle District of Tennessee.
Michael and Janice Davis, a married couple living at the Rest Haven Motel in Goodlettsville, Tenn., performed housekeeping, maintenance and front-desk duties in exchange for a discount on their rent. The motel claimed that these tasks were done on an as-needed basis. The Davises claimed that they were employees who worked 14-hour days, seven days a week, and that the motel violated the FLSA in not paying them the minimum wage or overtime.
The motel denied any FLSA coverage under either enterprise or individual coverage. Regarding enterprise coverage, the motel's annual revenue was far less than $500,000, a point that the Davises did not contest. However, the Davises contended that they were individually covered under the FLSA because their front-desk duties amounted to an engagement of services involving interstate commerce.
The court allowed limited discovery as to whether FLSA coverage existed and ordered briefing on that issue. After conducting written discovery, the motel filed for summary judgment. The Davises did not submit extensive evidence in opposition to the summary judgment motion, as they offered their own declarations that consisted of a general description of the work they performed. The Davises stated that they had handled credit card transactions for out-of-state guests, arranged travel plans for guests, received out-of-state mail and observed out-of-state license plates on the cars in the motel's parking lot.
While the magistrate judge recommended that the motel's summary judgment motion be granted, the district court judge held that the Davises' declarations created a genuine issue of material fact as to the frequency and extent of their front-desk duties.
After additional discovery, including the depositions of the Davises, the motel renewed its motion for summary judgment. This time, the motel presented deposition testimony about the approximate number of credit card transactions handled by the Davises—four to five times per week for Mr. Davis and just once for Mrs. Davis in the entire time she covered the front desk. The depositions also revealed that the travel arrangements made by the Davises consisted of providing directions to local stores and restaurants, to nearby Nashville, and to the bus line.
With this additional evidence, the district court held that the Davises' limited contact with interstate travelers did not constitute engaging in interstate commerce for the purposes of the FLSA. The court granted summary judgment in favor of the motel.
Davis v. Patel, M.D. Tenn., No. 3:14-cv-764 (Aug. 5, 2016).
Professional Pointer: When faced with a complaint for FLSA violations and coverage issues, employers should be mindful that they have marshaled sufficiently particularized evidence that demonstrates the employee's lack of engagement in interstate commerce. When attempting to proceed as efficiently and economically as possible, it is also important to ensure that the necessary discovery is conducted in order to prevent the claim from proceeding to trial.
Jerilyn Jacobs is an attorney with the Worklaw® Network member firm of Lindner & Marsack, S.C. in Milwaukee.
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