Ninth Circuit Authorizes a Practical "Alternative Workweek" Solution -- Parth v. Pomona Valley Hospital

In Parth v. Pomona Valley Hospital Medical Center, the Ninth Circuit authorized employers and employees to exercise some flexibility in attempting to work around the overtime requirements of the FLSA.

In Parth, a group of nurses was originally assigned to work almost exclusively in 8-hour shifts.  The majority of the nurses, however, "preferred working 12-hour shifts in order to have more days away from the hospital."  As a result, the Company implemented a new pay plan.

The pay plan provided nurses the option of working a 12-hour shift schedule in exchange for receiving a lower base hourly salary (that at all times exceeded the minimum wage set forth by the FLSA) and time-and-a-half pay for hours worked in excess of eight per day. The result: nurses, who volunteered for the 12-hour shift schedule, would make approximately the same amount of money as they made on the 8-hour shift schedule (while working the same number of hours and performing the same duties).

Several years later Parth filed a class action claiming that the whole plan was just an artificial scheme to avoid paying overtime, and that the lower base rate for 12 hour shifts therefore violated the FLSA.  The Court disagreed.  It held instead that the use of a lower base rate of pay for longer shifts is permissible so long as the rate is not so low as to be wholly "unrealistic and artificial." 

A number of other factors, while not strictly relevant to its interpretation of the FLSA, also influenced the Court.  For example, the employees had apparently expressed their preference for the longer shifts, the 12 hour shifts were voluntary, and  the whole arrangement was eventually codified in a CBA that was ratified by the bargaining unit.   Under these circumstances it was pretty difficult to paint a picture of employees being unfairly exploited.

Since its passage in the 1930's the FLSA has been one of the preeminent examples of government paternalism designed to protect employees by taking away their right to bargain with their employers over certain working conditions.  The Parth decision is an especially refreshing development because it restores a small degree of discretion to employers and employees to work together to craft "win-win" alternatives to the standard 9 to 5 workweek.  


Employees Are Not Required to Exhaust Internal Expense Reimbursement Procedures Before Suing -- Stuart v. RadioShack

California employees have a right to be reimbursed for their work related expenses, such as business travel, equipment, materials, training, and even legal expenses.  On the other hand, companies typically have their own deadlines, rules, special forms, and  other procedural requirements which must be followed in order to request and receive reimbursement.

So what happens when an employee sues for reimbursement and the Company argues that his claim should fail because he did not make a proper request under its internal rules?

In Stuart v. RadioShack, the Northern District addressed this very question and held, in effect, that the requirements of the statute must override any internal reimbursement rules set by the employer. 

Indeed, California Labor Code section 2802 provides that "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties."  And Section 2804 further provides that "Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void." 

Thus, companies must reimburse employee expenses and the parties can't do anything to forfeit or limit these rights even if they wanted to.  According to the District Court, the employer's duty to reimburse expenses should be triggered by the same standard that applies in cases of "off-the-clock" work:

The Court concludes that a fair interpretation of [Labor Code] §§ 2802 and 2804 which produces “practical and workable results,” consistent with the public policy underlying those sections, focuses not on whether an employee makes a request for reimbursement but rather on whether the employer either knows or has reason to know that the employee has incurred a reimbursable expense. If it does, it must exercise due diligence to ensure that each employee is reimbursed.

The Bottom Line:  Employer's should continue to set internal deadlines and procedures for expense reimbursement.  However, they should also recognize that the failure to follow these procedures will ultimately not  be a defense to legal liability if they know or have reason to believe the expense was actually incurred.

Dan Rather's Wrongful Termination Suit Against CBS is Dismissed Pursuant to "Pay or Play" Clause

Dan Rather was famously terminated following his 2004 "60 Minutes II" report which used forged documents to accuse George W. Bush of evading military service.   And a New York State Appellate Court has just dismissed the last remnants of Rather's wrongful termination lawsuit against the network.

After the 2004 scandal, CBS had continued to pay Rather's $6 million salary even while it stopped using his services for any on-air broadcasts.  Once he was formally terminated in June 2006, CBS accelerated and paid the remaining five-months of compensation due under the term of the contract. 

Rather claimed, however, that if he were not utilized as the CBS Evening News anchor his contract required CBS to reassign him to actual broadcast stories on 60 Minutes or 60 Minutes II.  The Appellate Court disagreed.  It held that the contract's "pay or play" clause clearly allowed the network to keep him off the air so long as it continued to pay the compensation due under the contract.

Rather claims that, in effect, CBS "warehoused" him, and that, when he was finally terminated and paid in June 2006, CBS did not compensate him for the 15 months "when he could have worked elsewhere." This claim attempts to gloss over the fact that Rather continued to be compensated at his normal CBS salary of approximately $6 million a year until June 2006 when the compensation was accelerated upon termination, consistent with his contract.

Contractually, CBS was under no obligation to "use [Rather's] services or to broadcast any program" so long as it continued to pay him the applicable compensation. This "pay or play" provision of the original 1979 employment agreement was specifically reaffirmed in the 2002
Amendment to the employment agreement.

The Court also dismissed Rather's final claim that CBS breached a fiduciary duty on the ground that "employment relationships do not create fiduciary relationships."