Employers do some crazy things, sometimes. One employer in New Braunfels has been paying “volunteers” with gift cards and fabric. Quilt Haus and Way to Sew have been paying some workers with gift cards payable to the store itself. The workers would receive one gift card valued at $8 for each hour of work. The worker could then use the card to buy fabric. The store referred to the workers as “volunteers.” But, as I understand the Fair Labor Standards act, there is no such thing as a volunteer worker. If the employer accepts your work, then the employer must pay for it.

Apparently, some of the workers complained. Because, the Department of Labor investigated. DOL then found violations. And, now, DOL has now filed suit. See San Antonio Express News report.

It is not that hard to get legal advice about wages. The DOL and Texas Workforce Commission both provide free advice regarding how to pay employees. A person might have to wait on the phone a bit, but it is free. And, an employer can point to that advice later if the business is investigated. I expect these two businesses did not seek legal advice. This method of payment is nowhere close to kosher.

“You get a rest break every four hours,” the seasoned warehouseman told me back in the 1970’s.  He knew everything. I just assumed he was right about this, too. But, since then, I have never seen anything in law or regulation stating that workers were entitled to a 15 minute break every 4 hours. But, there is a regulation encouraging employers to provide a rest break every so often. See 29 C.F.R. Sec. 785.18.This regulation tells employers that rest breaks improve efficiency. The regulation states that rest breaks of 5 to 20 minutes are common in industry. Any such rest break must be compensated. But, no rest break is required.

The regulations do provide that if a meal break is provided, it must be free of work duties. See 29 C.F.R. Sec. 785.19. Federal regulations do not require meal breaks. See Department of Labor’s Questions and Answers about the Fair Labor Standards Act here.

Texas Workforce Commission is supposed to enforce the Texas statutes regarding wages. TWC provides a helpful summary of the Texas Pay Day statute. See the TWC summary here. But, their summary does not answer one frequently asked question, when must an employer pay the last paycheck?  I am asked this often, since many employers withhold the last paycheck until the employee turns in his tools, pays for a damaged rear view mirror, turns in her uniforms, or whatever.

The employer has no choice. The employer must pay the last paycheck within six days of the last day of employment. See Texas Labor Code. Art. 61.014. But, what happens to an employer if they do not meet the six day deadline? Not much. The employer can incur a criminal penalty, but who will enforce that law and seek a criminal penalty? In reality, no one does. Most District Attorney’s are far too busy to prosecute a crime they see as relatively minor.

I wrote about this McDonald’s lawsuit a couple of years ago. See my prior post here. The lawsuit represented a new approach to franchisees. For years, even decades, persons suing franchisees could not also sue the parent company. A person could sue the local McDonald’s, but not the parent company. The theory was that the parent corporation sells work systems, but does not otherwise exert control over the franchisee. That theory started to change in 2015 when the National Labor Relations Board found that a company that hired a management company could indeed be liable in those rare situations when the first company retained some minimal management control. The first company and the new company would be a joint employers, said the NLRB.

In 2016, some McDonald’s workers walked off the job to call for higher wages. They suffered retaliation and then filed complaints with the NLRB. As I mentioned in my 2016 post, a simple franchisee agreement does not normally provide enough indicia of control to justify a joint employer relationship. McDonald’s settled the investigation with the NLRB. See Reuter’s report here. McDonald’s agreed to pay $3.75 million to settle the back wage claims. See Fortune report. According to the Fortune report, a judge ruled in 2017 that McDonald’s could not be liable as a joint employer, but said the company could be found liable if the employees believed the parent company was their employer.

Jon Hyman, an employer side blogger, seems to believe the matter settled in terms favorable to the McDonald’s parent company. See his post here. Regardless, it is likely that the joint employer theory has legs and will not go away soon.


In a recent decision, the Fifth Circuit reversed the award of attorney fees to a prevailing plaintiff. In Cervantes v. Cotter, the lower court severely reduced the plaintiff’s fee request by some 75% because the plaintiff’s success was, in the view of the trial court, small. The plaintiffs, noted the trial court, were only warded $409 in lost overtime payments. The district court rejected the plaintiffs’ claim for liquidated damages and their claim for retaliation. So, their recovery was just the $409. Yet, the plaintiffs’ attorneys sought $14,000 in attorney fees. The trial court considered that to be an “extraordinary” amount in light of the relief obtained.

But, the purpose of the attorney fee provision in the Fair Labor Standard Act is to to encourage attorneys to accept these small cases. No attorney would accept a case in which the hard, economic damages was a mere $409. And, as the Fifth Circuit noted on appeal, there are twelve factors in assessing attorney’s fees, not just the one factor involving success at trial. See the Fifth Circuit decision here.

The lower court’s decision is not well thought out. The Magistrate discussed the settlement offers and lack of counter-offers by the parties. The Magistrate then concluded that the plaintiff lawyers were “greedy” and the defense attorney was “penny-pinching.” It is an extraordinary decision. The district court ignored eleven of the twelve factors in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). Johnson requires lower courts to look at twelve factors, including the success of the plaintiff, when it assesses a request for attorney’s fees.

The lower court in Cervantes looked just at one factor, the success of the plaintiffs. Then, it went beyond that and looked at the relative settlement success of the two parties. It mentioned one offer of $17,000 in attorney fees and a second offer of $22,000 in attorney fees. It noted the response by the employer of $210 in overtime pay and $1,000 in attorney fees. It almost seemed like the judge was annoyed at having to hear a small case when the parties could have easily settled the matter. I find that unfortunate. These “small” cases are quite large to those involved. The Fair Labor Standards Act is a federal law. If federal courts will not enforce federal laws, who will? In truth, these apparently small cases are not small, at all. These relatively small cases reflect a wider problem with many employers underpaying their employees and generally getting away with it. The Department of Labor can enforce the FLSA, but it rarely does. It is left to these “small” lawsuits to stand up for the little guy whose pay is being stolen by employers. If there is one plaintiff filing a case for a lost overtime of $210, then there are ten others who also suffered similar losses, but chose not to file suit. There was a time when I was working my way through college and law school. In those days, $210 was a very large amount to me indeed.

In effect, the trial court imposed some new requirement that appears to involve second-guessing settlement strategy. I think it was this that caught the eye of the Fifth Circuit. It vacated the trial court’s ruling in a per curiam, unpublished decision. “Per curiam” decisions are those which the court views as simple, routine, not needing extensive explanation. The higher court is saying this should be a simple issue. Courts cannot truly second-guess settlement strategy. There are just too many unknowns.

Judges matter. The life experiences they bring to the bench matter. So, when I see a concurrence like the one written by Judge Jones of the Fifth Circuit, I become concerned. In Pineda v. JTCH Apartments, LLC, No. 15-10932 (5th Cir. 12/19/2016), the employee recovered some $5,000 in damages. Santiago Pineda was a maintenance worker for the apartments. He and his wife lived in the apartments. He sued to recover unpaid overtime. Three days after filing suit, the apartment owner evicted Mr. Pineda and his wife for nonpayment of rent. The eviction action sought repayment of the rent from Maria Pena, Mr. Pineda’s wife. After being evicted, Maria Pena joined the lawsuit and alleged retaliation. After a three day trial, the jury awarded the plaintiff $1400 in lost wages and $3700 for the retaliation claim. The judge awarded liquidated damages, which in effect doubled the lost wage award.

The judge then awarded the plaintiff’s attorney some $76,000 in attorney’s fees. The judge reduced the attorney fee request by 25% because, said the trial court, the amount sought was “grossly” disproportionate to the amount recovered.

Both parties appealed. The plaintiffs appealed because they believe the court should have allowed emotional damages. Many courts have allowed a claim for emotional distress damages under the Fair Labor Standards Act. This three-judge panel concluded there was no reason why the district court could not have done so. It found the lower court should have allowed a claim for emotional distress damages.

The defendant argued that the claim for attorney’s fees was too high. It claimed the plaintiff’s attorney did not settle the case when he could have. This is a claim unique to Texas state law, described as the “doctrine of excessive demand.” They also claimed the complaint was filed in bad faith. But, said the court, the defendant waived this argument by not bringing it before the trial court. The higher court then ordered the case be remanded to address the claim for emotional distress damages. But, cautioned the court, the attorney’s fees are already quite high. So, counsel should proceed expeditiously.

Judge Jones then dissented, accusing the plaintiff’s attorney of engaging in hardball tactics in freezing the bank account of the employer during the lawsuit. Judge Jones accused the plaintiff attorney of freezing the bank account ex parte – meaning it was done without notice to the defendant. She also claimed that testimony “implied” that Mr. Pineda may have sued for this “tiny” sum only because the apartment manager reported Mr. Pineda for possible child abuse. She described the attorney’s efforts as possible procedural abuse. My concern is that having done collections type legal work, I know that freezing bank accounts is exceedingly difficult. It is possible to freeze the account ex parte, but if so, one must provide notice to the defendant immediately. Too, this vase reflects the purpose of having a statute that allows for attorney fees. If there were no attorney’s fees available, then such smaller claims would not be pursued.

Too, I do not know how many maintenance workers Judge Jones has known throughout her lifetime, but at least to the maintenance workers I have known, $1400 is not a “tiny” sum. In truth, Judge Jones may have never spoken to an actual maintenance worker. Yes, a judge’s life experiences do matter.

As I review the Docket Sheet, I do not see anything out of the ordinary in this lawsuit. It was not over-worked in some way. Neither party seems to have filed unnecessary motions. The defendant did not seek dismissal or summary judgment. The reality is that even relatively small amounts require a great deal of attorney time. If there is a problem of some sort, it may be that the plaintiff did not accept the amount offered in settlement. But, that is not unusual. Judge Jones appears to be looking for issues with which to cast the plaintiff in a negative light.


In federal court, sanctions are a real possibility. A state court can also award sanctions if a lawsuit is found to be frivolous. But, state court judges are more reticent about awarding sanctions than federal judges. In federal court, sanctions rarely occur, but they do occur. The law firm representing the plaintiffs in Elfoulki v. Brannons Sandwich Shop, No. 14-cv-5964 (S.D.N.Y. 6/22/16),  found that to be true. They filed the lawsuit alleging failure to pay minimum wage at a small sandwich shop. They filed suit on behalf of two named plaintiffs and sought collective action certification. The court approved the collective action. But, no other employees opted in to the lawsuit. So, the collective action was later decertified.

The employer then asked for sanctions. The employer did not actually gross more than $500,000 in sales and had not grossed more than $159,000 in sales since it opened about ten months before the lawsuit. Grossing more than $500,000 in one of the way a business qualifies for coverage under the FLSA. The employees would still be covered by the Fair Labor Standards Act if they could show the employees were directly involved in interstate commerce. But, the plaintiffs did not make such an allegation. In accordance with federal rules, the Defendant submitted a notice to the Plaintiffs declaring their gross revenues were way below the $500,000 threshold and invited the plaintiffs to dismiss their lawsuit. The plaintiffs did not respond. The Defendant moved for summary judgment.

To award sanctions, there must be a showing of “objective unreasonableness.” The court does not want to chill any future FLSA lawsuits. So, it asked the question, in a run-of-the-mill wage lawsuit, how would the plaintiffs find out how much the employer had in gross sales? The court suggested the plaintiff firm could have simply looked at the menu and interviewed customers. The law firm could also look at other shop locations, review court filings of similar businesses, review plans for expansion, etc. The court would not limit the inquiry and did not expect the investigation to be perfect. The plaintiff law firm explained various factors that the court found unpersuasive. The defendant had not submitted its “safe harbor” notice until a year into the lawsuit. The lawyers had assumed the employer was interested in settling. The two attorneys could not be sure the owner’s gross income was below $500,000 until he had been deposed. But, the court noted it was the pre-lawsuit investigation that was at issue, not what transpired after they filed the lawsuit.

So, the court sanctioned the law firm $4,000 under Fed.R.Civ.Pro. Rule 11. The defense attorneys had billed its client some $8,500.  See decision here. There are some things every lawyer should be sure of before filing suit. Whether the lawsuit will survive a motion for summary judgment is critically important.

Pres. Obama updated the rules on overtime. He essentially brought them forward to allow for inflation. I wrote about that change in the overtime rules here and here. Well, now many states and business groups are filing suit to stop the changes. Of course, Ken Paxton and Texas are one of the leaders of the lawsuit. See San Antonio Express News report. Otherwise, the new rules would go into effect on December 1, 2016.

So, fewer “managers” will be eligible for overtime. The Department of Labor raised the salary rate at which overtime would apply. I previously wrote about this change here. The salary level for certain low level managerial jobs is currently $23,660. If a low level manager is paid that amount or less, s/he would be entitled to overtime. So, employers had some incentive to make persons who should be hourly “managers” in name only. See CBS news report.

The new regulation takes effect in December. Employers have time to become familiar with the new requirements.

On-call scheduling has not been well received. It is a new trend in reducing personal costs. But, it causes workers substantial stress, since they do not know until a few hours before or the night before whether they will be working. This late notice makes arranging child care virtually impossible. Attorneys general from eight states and the District of Columbia are investigating the practice. So far, they have simply sent letters seeking payroll records and policies. But, those letters prompted some large companies to drop the practice. See ABA Bar Journal report.

I would expect on-call scheduling would have greater impact on female workers, since they are more often the workers arranging child care. So, this sort of practice would impose a greater burden on women. The practice would then constitute disparate impact on female workers. I could also see how such scheduling could also aversely impact workers with disabilities. This sort of business practice may cost an employer much more over the long-term than it saves near term.