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Laughlin v. Jim Fischer Inc.

United States District Court, E.D. Wisconsin

March 31, 2019

JOSHUA LAUGHLIN and GREG SCOTTO JR., on behalf of themselves and all others similarly situated, Plaintiffs,
v.
JIM FISCHER, INC., Defendant.

          DECISION AND ORDER GRANTING-IN-PART AND DENYING-IN-PART SUMMARY JUDGMENT

          William C. Griesbach, Chief Judge.

         Plaintiffs Joshua Laughlin and Greg Scotto, Jr., brought this hybrid wage-and-hour collective class and class action against their former employer, Defendant Jim Fischer, Inc. (Fischer), on behalf of themselves and others similarly situated hourly job-site employees. Plaintiffs allege that Fischer violated the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq., and Wisconsin's wage laws, Wis.Stat. § 109.01, et seq. Specifically, Plaintiffs allege that Fischer failed to compensate them for travel time to and from the shop to job sites on those occasions when they did work at the shop, improperly excluded 401(k) contributions on prevailing wage jobs when determining the regular rate of pay for overtime purposes, failed to pay overtime on all hours worked over forty hours due to offsetting weekly overtime hours with daily overtime hours on prevailing wage jobs, violated Wisconsin law by calculating overtime based on the type of work conducted by Plaintiffs during overtime hours rather than based on their regular rate of pay, missclassified work done by Plaintiffs on a prevailing wage job, failed to annualize 401(k) and healthcare contributions when calculating contribution credits on prevailing wage jobs, and failed to compensate Scotto for overtime work the week of January 9, 2016. The court has jurisdiction over the FLSA claims pursuant to 28 U.S.C. § 1331 and supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367.

         The court granted Plaintiffs' motion for conditional certification of an FLSA collective action on October 16, 2017, ECF No. 39, and denied Defendant's motion to decertify the collective action and granted Plaintiffs' motion for Rule 23 certification of their state law claims on June 4, 2018. ECF No. 86. Pending before the court now is Plaintiffs' motion for summary judgment. For the reasons set forth below, I now conclude that Plaintiffs' motion for summary judgment should be denied as to all claims except Scotto's claim for unpaid overtime for the week ending January 9, 2016. I also conclude that I erred in denying Defendant's motion to decertify the FLSA collective action and in granting Plaintiffs' motion for Rule 23 class certification of their state law claims. It has now become clear from the briefs and argument on summary judgment that as to all of Plaintiffs' claims, to the extent they have merit, individual factual issues predominate over any common issues. Plaintiffs' collective FLSA action and Rule 23 class action will therefore be decertified, and the case will no longer proceed as a class action.

         BACKGROUND

         Laughlin and Scotto are former job site hourly employees of Fischer, a concrete contractor that does business throughout northeastern Wisconsin. Laughlin worked for Fischer between July and August of 2016. Decl. of Joshua Laughlin, ¶ 2, ECF No. 25. Scotto worked for Fischer between 2015 and 2017. Decl. of Greg Scotto, Jr., ¶ 2, ECF No. 26. Laughlin filed this action on October 6, 2016, and Scotto was added as an additional named plaintiff in an amended complaint filed on January 31, 2017. Laughlin and Scotto both claim that, when they were working for Fischer, they would complete their own time cards that listed ten different categories of work in which they were required to record their hours. Pl.'s Proposed Findings of Fact (PPFOF) ¶ 1, ECF No. 76. Company policy required that they record their time loading trucks at the company shop under the column designated “loading” and their time loading trucks at the jobsite as “Laborer.” Id. ¶ 2. Plaintiffs assert that on some days, they went to the company shop, they spent time loading a truck at the shop and then traveled to the jobsite. Id. ¶ 3. Although they were paid for their work loading the truck, they contend they were not paid for the travel time from the shop to the jobsite. Id. ¶¶ 3, 4. Both Laughlin and Scotto state that they recorded their time loading the truck on their time cards, but did not record their travel time pursuant to Fischer's policy that an employee is paid for driving between the shop and the jobsite only if he is required to drive a company truck. Id. ¶ 5. Both also state that on another day, they returned from a jobsite to the shop and performed 15 minutes of loading work at the shop. Again they state that they did not include travel time pursuant to Fischer policy and were not paid for their travel back to the shop. Id. ¶¶ 6, 7. Plaintiffs contend that the company Controller, with the assistance of Jim Fischer's daughter in the summer, was responsible for reviewing their time cards and correcting any errors. Id. ¶¶ 7-9.

         Plaintiffs further allege that in certain weeks they received overtime pay but claim that it was not calculated on the proper base pay because Fischer failed to use a blended pay rate when the work performed over the week was paid at different rates. Plaintiffs also contend that Fischer's 401(k) contributions for work paid at the prevailing wage rate required for certain government contracts were not included in the base rate on which the overtime rate of pay was calculated. Additional facts pertinent to the specific issue addressed will be set forth below.

         LEGAL STANDARD

         Summary judgment should be granted when the moving party shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). In other words, the time and expense of the parties and the court should not be wasted on a trial when there are no material facts in dispute, one party is entitled to judgment on those facts, and thus there is nothing to try. In deciding a motion for summary judgment, all reasonable inferences are construed in favor of the nonmoving party. Foley v. City of Lafayette, 359 F.3d 925, 928 (7th Cir. 2004). The party opposing the motion for summary judgment must “submit evidentiary materials that set forth specific facts showing that there is a genuine issue for trial.” Siegel v. Shell Oil Co., 612 F.3d 932, 937 (7th Cir. 2010) (quoted source and internal quotation marks omitted). “The nonmoving party must do more than simply show that there is some metaphysical doubt as to the material facts.” Id. Summary judgment is properly entered against a party “who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial.” Parent v. Home Depot U.S.A., Inc., 694 F.3d 919, 922 (7th Cir. 2012) (internal quotation marks omitted) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).

         ANALYSIS

         A. Compensation for Plaintiffs' Unreported Travel Time Between Fischer's Shop and Job Site When Loading Time Reported on Time Card

         Plaintiffs' class travel time claims deal with two questions: “(1) whether Defendant had a uniform, unofficial policy requiring employees to report to the shop to receive their jobsite assignments and (2) whether filling out time cards at the shop after working at a jobsite constitutes a principal activity.” ECF No. 86 at 6. In their motion for summary judgment Plaintiffs are seeking summary judgment on a very limited question: whether Fischer's failure to compensate them for unrecorded travel time to and from job sites when their time cards indicated they spent time loading or unloading at Fischer's shop violates both federal law, 29 C.F.R. § 785.38, and state law, Wis. Admin. Code DWD § 272.12(2)(g)5. Fischer claims it did not have actual or constructive knowledge of Plaintiffs' alleged uncompensated activities and that even if it did, such activities are exempt from compensation because the time spent was de minimis.

         When Fischer hired an employee, its Controller sat down with the employee to discuss the company's various policies, including how to properly fill out daily timecards. Employees were told that, if they spent time in the shop in the morning loading a company vehicle, their work day commenced at that time, and they should record all of their time on their timecards. Fischer's Employee Handbook states, “Travel time to and from the jobsite is not a part of your hours of pay. If your supervisor has specifically instructed you to drive a company vehicle to or from the job site you will be paid for the travel time.” ECF No. 83-5 at 4. Once timecards were turned in, Fischer's Controller reviewed all employee timecards, and totaled the amount of time spent at the jobsite and the amount of time doing other work, such as loading and driving.

         In support of their claim, Plaintiffs use Laughlin's timecard from August 1, 2016, as an example. On that day Laughlin recorded 15 minutes for loading a vehicle at the shop, recorded no driving time, and recorded 10.5 hours for time spent working at the job site. ECF No. 79-2. Because Laughlin recorded time in the loading column of the timecard, Plaintiffs argue Fischer, through the exercise of reasonable diligence, should have known Laughlin would had to have spent time traveling that day to or from the shop to the work site and that he was not being compensated for that travel time.

         Both the FLSA and Wisconsin's Minimum Wage provide that “[t]ime spent by an employee in travel as part of his principal activity, such as travel from job site to job site during the workday, must be counted as hours worked.” 29 C.F.R. § 785.38; Wis. Admin. Code § DWD 272.12(2)(g)5. Fischer does not contest that any travel time by Plaintiffs after loading or unloading company vehicles at the shop would be compensable. Def.'s Br. in Opp'n, ECF No. 81 at 7. Rather, Fischer claims it did not know about the travel time, and thus is not required to compensate Plaintiffs for the time worked.

         Under the FLSA, “[e]mployers must . . . pay for all work they know about, even if they did not ask for the work, even if they did not want the work done, and even if they had a rule against doing the work.” Allen v. City of Chicago, 865 F.3d 936, 938 (7th Cir. 2017). This strict rule, however, “stops short of requiring the employer to pay for work it did not know about, and had no reason to know about.” Id. “The employer's knowledge can be either actual or constructive.” Id. Wisconsin law likewise provides that work that is suffered or permitted but not requested by the employer counts as work time so long as the employer knew or had reason to believe that the work is being performed. § DWD 272.12(2)(a)1.

         Plaintiffs claim that Fischer had constructive knowledge of Plaintiffs' unpaid work. “An employer has constructive knowledge of an employee's work if it should have acquired knowledge of that work through reasonable diligence.” Id. Relevant to the determination of whether an employer has constructive knowledge of an employee's unreported work time is the cause for the employee's failure to report. While an employer can exercise diligence by “establishing a reasonable process for an employee to report uncompensated work time, ” establishing such a process “will not protect the employer if the employer prevents or discourages accurate reporting in practice.” Id. at 938-39; White v. Baptist Mem'l Health Care Corp., 699 F.3d 869, 876 (6th Cir. 2012) (collecting cases) (On the one hand, “if an employer establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for non-payment if the employee fails to follow the established process.” On the other hand, the existence of a reasonable process or reporting system is not sufficient where an employer prevents or discourages employees from reporting overtime.). “The reasonable diligence standard asks what the employer should have known, not what ‘it could have known.'” Id. at 943 (quoting Hertz v. Woodbury Cty., Iowa, 566 F.3d 775, 782 (8th Cir. 2009)). “The requirements of reasonable diligence depend on the facts of each case.” Id.

         Although Plaintiffs did not record their drive time, they did record time spent loading at the shop in the loading column of their time sheets. Plaintiffs contend that, because Fischer reviewed Plaintiffs' time cards, Fischer should have known that on days Plaintiffs recorded time in the loading column, they needed to travel from the shop to the job site and that they were not being compensated for that driving time despite the fact that it was not reported. The fact that Fischer had access to records alone, however, is not sufficient to establish constructive knowledge as “[a]ccess to records indicating that employees were working overtime, however, is not necessarily sufficient to establish constructive knowledge.” White, 699 F.3d at 874 (quoting Hertz, 566 F.3d at 783). Whether Fischer had constructive knowledge might well depend on the number of and frequency with which violations occurred. Fischer asserts that there was no unspoken company policy that encouraged employees not to report their time and that had Plaintiffs reported time in the driving column they would have been compensated for it. Because there is a dispute of material fact over whether Fischer knew Plaintiffs were not reporting all of the travel time, as well as why Plaintiffs did not report their travel time, Plaintiffs are not entitled to summary judgment on this issue.

         It has also become clear to the court upon examination of the more developed record of the case at this point that certification of Plaintiffs' collective FLSA action and Rule 23 class action on this issue is no longer appropriate. Rule 23(c)(1)(C) states that “[a]n order that grants or denies class certification may be altered or amended before final judgment.” “[T]he district court has the power at any time before final judgment to revoke or alter class certification if it appears that the suit cannot proceed consistent with Rule 23's requirements.” All. to End Repression v. Rochford, 565 F.2d 975, 977 (7th Cir. 1977). “If the evidence calls into question the propriety of defining a class in a particular way, then the definition must be modified or subclasses certified. A class defined early in a suit cannot justify adjudicating hypothetical issues rather than determining the legality of what actually happens.” Fonder v. Sheriff of Kankakee Cty., 823 F.3d 1144, 1147 (7th Cir. 2016). Although FLSA collective-actions are not the same as Rule 23 Class actions, the same standards generally apply to each “and the case law has largely merged the standards.” Espenscheid v. DirectSat USA, LLC, 705 F.3d 770, 772 (7th Cir. 2013).

         Relevant to whether class certification and collective action is appropriate under Rule 23(b) is whether questions of law or fact common to the proposed class or collective group predominate over questions affecting individual class members. “[A] common question predominates over individual claims if ‘a failure of proof on the [common question] would end the case' and the whole class ‘will prevail or fail in unison.'” Bell v. PNC Bank, Nat. Ass'n, 800 F.3d 360, 378 (7th Cir. 2015) (quoting Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 459-60 (2013)). “‘If the same evidence will suffice for each member to make a prima facie showing, then it becomes a common question, '” but “‘[i]f the same evidence will suffice for each member to make a prima facie showing, then it becomes a common question.'” Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 815 (7th Cir. 2012) (quoting Blades v. Monsanto Co., 400 F.3d 562, 566 (8th Cir. 2005)). Similarly, Rule 23(a) requires that “[t]he claims must depend upon a common contention that is capable of class-wide resolution.” Bell v. PNC Bank N.A., 800 F.3d 360, 374 (7th Cir. 2015). “What matters to class certification . . . is not the raising of common ‘questions'-even in droves-but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011) (emphasis in original) (internal citations omitted). “[A] court weighing class certification must walk a balance between evaluating evidence to determine whether a common question exists and predominates, without weighing that evidence to determine whether the plaintiff class will ultimately prevail on the merits.” Bell, 800 F.3d at 377.

         It has also become clear from consideration of this issue that the determination of the claim for each employee will require an individualized consideration of the circumstances surrounding the hiring, training, and behavior of each employee to determine whether they reasonably believed they should not record travel time even if they performed loading work at the shop before or after going to a jobsite. Even to determine the number of occasions on which such travel time went uncompensated will require individualized examination of each employee's time card. The policy of Fischer, as stated in its handbook, copies of which were provided to each employee, clearly states that such travel was to be compensated. As a result, the claims for unpaid travel time to or from the shop prior to or after loading work do not meet the commonality requirement of Rule 23 or what is needed for an FLSA collective action to be justified. For this reason, the collective and Rule 23 classes will be decertified.

         B. Inclusion of Prevailing Wage 401(k) Contributions When Computing Amount of Overtime Pay Owed

         The parties dispute whether Fischer's prevailing wage 401(k) contributions must be included when computing the base pay rate on which the overtime rate is required to be paid. This dispute centers on whether the requirements for exemption under 29 U.S.C. § 207(e)(4) have been satisfied. Under § 207(e)(4), “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement . . . or similar benefits for employees” are excluded when calculating an employees regular rate, which in turn would affect the amount of overtime pay to which an employee is entitled.

         While the statute does not define the term “bona fide plan, ” the Department of Labor's interpretation of that term is set forth at 29 C.F.R. § 778.215. “As an interpretive regulation, it does not have the force of binding law.” Howard v. City of Springfield, Illinois, 274 F.3d 1141, 1146 (7th Cir. 2001) (citing Shaw v. Prentice Hall Computer Publ'g, Inc., 151 F.3d 640, 642 (7th Cir. 1998)). “It is therefore not entitled to deference, although courts may rely on it as persuasive evidence both of Congress's legislative and the Secretary's regulatory intent.” Id. In addition, “[b]ecause the FLSA gives no ‘textual indication' that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a “narrow”) interpretation.'” Encino Motorcars, LLC v. Navarro, 138 S.Ct. 1134, 1142 (2018) (quoting Scalia, Reading Law, at 363).

         1. 29 C.F.R. § 778.215(a)(2): Primary Purpose Test

         Plaintiffs first dispute whether Fischer's 401(k) plan satisfies the second provision of the Department of Labor's guidance of what constitutes a bona fide plan. The provision states “[t]he primary purpose of the plan must be to provide systematically for the payment of benefits to employees on account of death, disability, advanced age, ...


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