7 summaries to keep you up to date on the law in PA and NJ.

COM. v. MAGUIRE

Supreme Court of Pennsylvania

41 MAP 2018

Filed 8/15/19

Keywords: Warrantless Inspection; Commercial vehicle; Motion to suppress

The Pennsylvania State Police set up a commercial vehicle inspection program at a landfill. The inspections were authorized by Subsection 4704(a)(2) of the Vehicle Code. See 75 Pa.C.S. § 4704(a)(2). Maguire’s truck entered the landfill and a state trooper began to inspect the vehicle. During the inspection, after the trooper had smelled alcohol on Maguire’s breath and Maguire admitted to drinking one beer, the trooper noticed a cooler on the floor of the truck near the gearshift. The trooper inquired as to the contents of the cooler, and Maguire responded that he had placed water and beer in it. The trooper observed that the cooler contained a yellow plastic bag that was wet from ice, three twelve-ounce cans of Busch Light beer, and one or two bottles of water. The trooper administered a field sobriety test, which Maguire failed. The trooper then arrested Maguire.

Maguire filed a motion to suppress, cited to the Superior Court’s decision in In re J.A.K., 908 A.2d 322 (Pa. Super. 2006) (applying the Tarbert/Blouse guidelines to a seatbelt checkpoint), and argued that, like checkpoints applicable to the general public, commercial vehicle safety checkpoints must comply with the Tarbert/Blouse guidelines to survive a constitutional challenge. Maguire argued that the inspection checkpoint to which he was subjected on May 20, 2015, failed to meet these guidelines. The trial court denied the motion and convicted Maguire of DUI. The Superior Court and the Supreme Court affirmed the conviction.

On appeal, Maguire argued that the Tarbert/Blouse guidelines apply with equal force to government inspection programs of both commercial and non-commercial vehicles. The Commonwealth argued that the three-factor Burger test is specifically designed to address the constitutionality of statutorily authorized warrantless inspections of commercial vehicles, rendering the Tarbert/Blouse guidelines inapplicable to such inspections.

In a case of first impression, the Supreme Court of Pennsylvania held that warrantless inspections of commercial vehicles should be scrutinized in accord with the test outlined by the United States Supreme Court in New York v. Burger, 482 U.S. 691 (1987), and adopted by the Supreme Court of PA in Commonwealth v. Petroll, 738 A.2d 993 (Pa. 1999).

From the Court’s review of Tarbert, Blouse, Petroll, and Burger, it was clear that the Tarbert/Blouse guidelines test the constitutionality of government-conducted checkpoints to which all drivers are subjected. Conversely, the Burger/Petroll test is designed to examine the constitutionality of statutorily authorized government inspections that are aimed at, and limited to, closely regulated industries, which have a lesser expectation of privacy than the public generally. Because the trucking business is a closely regulated industry, the Burger test applied to Maguire’s case.

The Court then ruled that Maguire waived his statutorily-based arguments, because he raised those arguments for the first time on appeal. 

CONCUR

Justice Saylor agreed with the Majority’s holding but would have arrived at the same result by addressing the merits of Maguire’s arguments and would not have ruled that Maguire waived any arguments. 

DISSENT

Justice Wecht concurred that the warrantless and suspicionless seizure of both Maguire and the truck must be reviewed for constitutionality pursuant to the guidelines established by this Court governing vehicle checkpoints in Burger and Petroll. 

The Dissent disagreed with the Majority’s ultimate determination that Maguire waived one of his arguments and would have concluded that Maguire adequately preserved his challenge to the systematic nature of the checkpoint to which he was subjected. The Dissent would hold that the manner in which the checkpoint was conducted was unconstitutional.

The Dissent wrote that Maguire’s argument that the checkpoint did not satisfy subsection 4704(a)(2) was a fair argument in response to the Superior Court’s Burger/Petroll analysis and was an argument that fairly was encompassed in the Supreme Court’s grant of allocatur. Moreover, because the argument reasonably arose from the Superior Court’s analysis of the Burger/Petroll criteria, the first time that such examination occurred in the case, Maguire was under no obligation to raise the issue previously. Indeed, it is well-settled that, as appellee before the Superior Court, Maguire was not required to raise this issue beforehand. See Commonwealth v. Shaffer, ___ A.3d ___, 2019 WL 2509345, at *11 (Pa. 2019) (citation omitted).

Turning to the merits of the issue, the Dissent agreed with Maguire that the protocol employed by the trooper was not sufficiently systematic, because it did not limit the discretion of the officers effectuating the warrantless and suspicionless seizures of the vehicles approaching the landfill.

COM v. THOMAS

Supreme Court of Pennsylvania

760 CAP

Filed 8/20/19

Keywords: Death Penalty; Competency; Sufficiency

A jury convicted Thomas of two counts of first-degree murder, one count of attempted murder, and one count of burglary. After finding a number of aggravating and mitigating circumstances and determining the aggravating circumstances outweighed the mitigating circumstances, the jury returned two verdicts of death. A direct appeal followed and, the Supreme Court of PA affirmed the judgment of sentence.

Because Thomas was sentenced to death, the Court independently reviewed the record to determine whether the Commonwealth presented sufficient evidence to sustain the convictions of first-degree murder. The Court found that the evidence was sufficient to sustain the verdicts.

Thomas argued that the trial court erred in denying his pre-trial requests for a competency hearing, related discovery, and evaluation by an expert. The Court concluded the trial court did not abuse its discretion when it denied the requested pre-trial competency hearing, because Thomas did not demonstrate a compelling need for the hearing. Thomas also argued that the competency colloquy the court conducted was deficient, because it was too “brief” and because the witness “provided no verbal response to the majority of the questions.” The Court was satisfied the trial court properly conducted its inquiry and did not commit an abuse of discretion in determining the witness was competent to testify.

Thomas next claimed the trial court erred in denying his request to present the testimony of a cognitive psychologist and expert in the reliability of eyewitness identification. The expert would have testified to specific factors affecting perception and memory that may have influenced the witness’s identification. The Court ruled Thomas’s case was not the type of case in which the primary evidence of guilt is the testimony of an eyewitness based on an encounter under circumstances in which the witness’s memories and perceptions might be affected by psychological and experiential factors, an understanding of which could aid a jury in determining the accuracy and believability of the identification. In those types of cases, expert testimony is warranted. But, because Thomas’s guilt and his identity as the perpetrator were established by many facts apart from the witness’s eyewitness testimony, there was no need for expert testimony regarding eyewitness identification, and the trial court did not abuse its discretion in denying the request.

Thomas alleged the trial court erred in permitting the Commonwealth to introduce evidence of his potential deportation if convicted of the charges he sexually molested two of the victims to establish a motive for the killings. The Commonwealth presented no evidence Thomas was aware of his potential deportation. The Court ruled that there was no proper inference to be drawn between potential deportation and motive to commit the killings if Thomas, in fact, did not know deportation was a potential consequence if convicted of the sexual charges. But, the trial court’s error was harmless.

Finally, the Court reviewed the entire record and determined that the sentences of death were not the product of passion, prejudice, or any other arbitrary factor.

CONCUR

Justice Wecht concurred in the decision. On several points underlying the decision, the Justice’s reasoning differed from the Majority’s. 

FELECCIA v. LACKAWANNA COLLEGE

75 MAP 2017

SUPREME COURT OF PENNSYLVANIA

Filed 8/20/19

Keywords: Duty of care; Personal injury; Waiver

In this discretionary appeal, which arose from the dismissal of personal injury claims on summary judgment, the Supreme Court of Pennsylvania considered whether the Superior Court erred in 1) finding a duty of care and 2) holding a pre-injury waiver signed by student athletes injured while playing football was not enforceable against claims of negligence, gross negligence, and recklessness. The Court affirmed the Superior Court’s order to the extent it reversed the trial court’s entry of summary judgment on the claims of gross negligence and recklessness.

Appellees were student athletes. who played football at Lackawanna College. Lackawanna had customarily employed two athletic trainers to support the football program. However, both athletic trainers resigned in the summer of 2009. The Lackawanna AD then hired two people, who were not certified as athletic trainers, because they had failed the certification exam.

In mid-January 2010, Appellees filled out and signed various documents in a “participation packet” before they could play with Lackawanna’s football team. The packet included a “Waiver of Liability and Hold Harmless Agreement” (the Waiver) and a form including an “Information/Emergency Release Consent” (the Consent). Appellees also signed a Consent that provided, in pertinent part: “(1) I do hereby off[er] my voluntary consent to receive emergency medical services in the event of an injury during an athletic event provided by the athletic trainer, team physician or hospital staff.”

On the first day of spring football tryouts, both Appellees were injured while practicing with the team. Appellees sued the school as well as school officials and claimed damages caused by negligence, including negligence per se. The complaint also sought punitive damages, alleging appellants acted “willfully, wantonly and/or recklessly.” The trial court cited to the Waiver and granted summary judgment to Lackawanna. The Superior Court reversed the trial Court’s grant of summary judgment.

The Supreme Court of PA ruled that Lackawanna’s “affirmative conduct” created a “special relationship” with and increased risk of harm to its student athletes such that Lackawanna had a duty to “exercise reasonable care to protect them against an unreasonable risk of harm arising” from that affirmative conduct. Dittman v. UPMC, 196 A.3d 1036, 1038 (Pa. 2018). The record supported a finding that Lackawanna undertook a duty to provide duly licensed athletic trainers for the purpose of rendering treatment to its student athletes participating in athletic events, including the football practice during which Appellees were injured. It remained to be determined whether the steps actually taken by Lackawanna satisfied that duty.

The Supreme Court then analyzed the effect of the Waiver on Appellees’ claims of negligence and gross negligence. The Court reversed the Superior Court and affirmed the trial court’s grant of summary judgment to Lackawanna as to the claim of ordinary negligence. 

The Waiver did not bar a claim of recklessness, though. The same policy concerns that prohibit the application of a waiver in cases of recklessness—i.e., allowing it would incentivize conduct that jeopardizes the signer’s health, safety and welfare to an unacceptable degree—required a similar holding with regard to gross negligence. Thus, the Waiver was not enforceable to preclude liability arising from Appellees’ claims of gross negligence.

CONCUR and DISSENT

Justice Saylor joined the Majority Opinion to the extent it reversed the Superior Court’s creation of a generalized duty of care owed by Pennsylvania colleges to student athletes to have medical personnel available at all football practices. The Justice disagreed with the Majority’s holding that, under an assumption-of-duty theory as reflected in Section 323 of the Second Restatement of Torts, Lackawanna College definitively owed a duty of care to Appellees.

CONCUR AND DISSENT

Justice Wecht believed that Lackawanna College had a duty to ensure that certified athletic trainers were available to treat student-athletes injured during the football tryouts. The Justice wrote separately because, while the Majority limited Lackawanna College’s duty to the obligation it undertook through its own actions and representations, principles of Pennsylvania tort law required the Court to go farther. Based upon the factors that this Court articulated in Althaus ex rel. Althaus v. Cohen, 756 A.2d 1166 (Pa. 2000), as well as the persuasive opinion of the United States Court of Appeals for the Third Circuit in Kleinknecht v. Gettysburg Coll., 989 F.2d 1360 (3d Cir. 1993), colleges owe a duty to their student-athletes to ensure that qualified medical personnel3 are available to render needed assistance during school-sponsored and supervised intercollegiate contact sport activities.

IN RE: PETITION FOR ENFORCEMENT OF SUBPOENAS ISSUED BY THE HEARING EXAMINER IN A PROCEEDING BEFORE THE BOARD OF MEDICINE

Supreme Court of Pennsylvania

35 EAP 2016

Filed 8/20/19

Keywords: Subpoena; Commonwealth Court; Original jurisdiction; Indispensable party

From August 2011 through February 2013, Dr. DeMichele provided psychiatric care to M.R. On September 24, 2015, the Pennsylvania Department of State’s Bureau of Professional and Occupational Affairs (“Bureau”) filed an order directing Dr. DeMichele to show cause as to why the Board should not suspend, revoke, or restrict her medical license, or impose a civil penalty or the costs of investigation. Dr. DeMichele filed a counseled response to the order, denying the allegations and requesting a hearing before a hearing examiner. 

In advance of the hearing, relying upon the authority provided under 63 P.S. § 2203(c), Dr. DeMichele requested that the hearing examiner issue subpoenas for the testimony of M.R. and the medical records of other caregivers. The hearing examiner issued the requested subpoenas. However, when served with the subpoenas, all of M.R.’s treatment providers refused to release their records absent a court order or M.R.’s authorization. M.R. subsequently refused to authorize the release of her records.

On July 1, 2016, Dr. DeMichele filed a Petition to Enforce Subpoenas (“Petition”) in the Commonwealth Court and asked that court to order compliance with the subpoenas. Dr. DeMichele did not specify whether she commenced the action in the Commonwealth Court’s original or appellate jurisdiction. See 42 Pa.C.S. §§ 761 (original jurisdiction); 763 (direct appeals from government agencies). Dr. DeMichele’s Petition did not name any party, but she served the Petition on the Board and the Bureau (collectively, the “Commonwealth”). Dr. DeMichele did not serve the Petition upon M.R. or the treatment providers against whom she sought enforcement of the subpoenas. However, upon receiving a courtesy copy of the Petition, M.R. retained counsel and sought to intervene in the enforcement action. The Commonwealth Court  granted Dr. DeMichele’s Petition and ordered that each subpoena be enforced.

After the Commonwealth Court denied her motion for reconsideration, M.R. filed a notice of appeal to the Supreme Court of PA. On appeal, M.R. argued for the first time that the Commonwealth Court lacked subject matter jurisdiction to entertain Dr. DeMichele’s Petition. The Supreme Court agreed and reversed the Commonwealth Court.

Case law has long established that, in order for the Commonwealth Court to exercise original jurisdiction under 42 Pa.C.S. § 761(a)(1), the Commonwealth must be an indispensable party to the action. The Supreme Court of PA held that the Commonwealth Court lacked subject matter jurisdiction to entertain Dr. DeMichele’s Petition. The Supreme Court rejected Dr. DeMichele’s argument that the Commonwealth Court properly exercised its appellate jurisdiction, because the action was not, as the doctor claimed, an appeal from a final order issued by the hearing examiner.

Although the underlying disciplinary action was commenced by the Bureau, which is a Commonwealth party, Dr. DeMichele’s Petition initiated a distinct cause of action. Thus, Dr. DeMichele, a private party, commenced the instant enforcement proceedings against other private individuals and entities. Plainly, this was not an action “[b]y the Commonwealth government.” 42 Pa.C.S. § 761(a)(2). For similar reasons, Dr. DeMichele’s Petition did not commence an action “[a]gainst the Commonwealth government.” 42 Pa.C.S. § 761(a)(1). Dr. DeMichele’s Petition did not seek relief from the Board or the Bureau. Rather, it sought to compel private parties to comply with the subpoenas. The Court ruled that neither naming nor serving a Commonwealth party alone is sufficient to establish indispensability. See Ballroom, LLC v. Commonwealth, 984 A.2d 582, 588 (Pa. Cmwlth. 2009) (“[I]t is well settled that merely naming the Commonwealth or a Commonwealth party as one of several defendants does not necessarily establish this Court’s original jurisdiction under Section 761.”); see also PSEA, 50 A.3d at 1281-82 (Todd, J., concurring) (“[C]ase law clarifies that naming a Commonwealth agency is not enough to satisfy the jurisdictional requirement; the agency must also be an indispensable party.”).

The Court then reviewed four factors to consider when inquiring as to the indispensability of a party and concluded that the Commonwealth was not an indispensable party to Dr. DeMichele’s enforcement action. 

Finally, none of the statutes regarding enforcement of subpoenas applied to the doctor’s action and, therefore, “original jurisdiction did not thereunder lie in the Commonwealth Court.”

CONCUR

Justice Dougherty concurred and expressed the view that a motion to quash the subpoenas duly filed with the Board might have succeeded on numerous grounds, including relevance and privilege. See, e.g., 63 P.S. §422.9(c) (“Medical records may not be subpoenaed without consent of the patient or without order of a court of competent jurisdiction on a showing that the records are reasonably necessary for the conduct of the investigation.”); 42 Pa.C.S. §5944 (psychotherapist/patient privilege); 50 P.S. §7111(a)(1) (confidentiality of treatment records).

CONCUR

Justice Mundy wrote separately, because the Justice believed the question of the indispensability of the Commonwealth as a party was a closer question than was apparent from the Majority’s discussion.

DISSENT

Justice Saylor dissented, because, in his view, the issue presented did not relate to subject matter jurisdiction, but rather, concerned standing, which “focuses on the party seeking to get his complaint before a . . . court and not on the issues he wishes to have adjudicated.” Flast v. Cohen, 392 U.S. 83, 99, 88 S. Ct. 1942, 1952 (1968). The subject matter in this case was the enforcement of subpoenas, and the statutory specification concerning who may bring the action is a matter of standing. After examining the textual and contextual cues, the Dissent found no evidence that the Legislature intended to curtail the jurisdiction of the Commonwealth Court relative to such enforcement. 

WOLFINGTON v. ROTHMAN INSTITUTE

3rd Circuit

17-3500 & 18-1182

Filed 8/20/19

Keywords: Truth in Lending Act; Rule 12(c); Rule 11; 

Wolfington agreed to have surgery provided by Rothman. As part of the agreement, Wolfington signed a document titled “Financial Policy.” The Policy provided that Wolfington agreed to pay any outstanding deductible not covered by his insurance before his surgery took place. The day before Wolfington’s surgery, Wolfington’s father informed Rothman that Wolfington was unable to pay his deductible, then around $2,000. Rothman orally agreed to accept a $200 “initial payment” by Wolfington and to permit him to pay the remaining deductible in monthly installments of $100 (the “January 20 Agreement”). Wolfington received two emails on January 20, one confirming the $200 payment and the other confirming the establishment of the payment plan and listing the credit card to which payments would be charged. Wolfington had surgery as scheduled but subsequently failed to make any further payments on his outstanding deductible.

Wolfington filed a putative class action in the district court and alleged that Rothman had extended him credit in the January 20 Agreement, subject to the Truth in Lending Act, but failed to provide disclosures required by the Act. The Complaint set forth two claims, including one for violation of the Act. His second claim, for violation of the Electronic Funds Transfer Act, was later withdrawn. Rothman filed an Answer with counterclaims for breach of contract and a Motion for Judgment on the Pleadings, which included a copy of the Financial Policy, along with other documents.

During a telephone conference, which occurred before the district court issued its decision, the court asked if there was “anything in writing confirming this arrangement?” Wolfington’s counsel replied, “[T]he only information that we have is the confirmation receipts with respect to an online bill payment plan . . . that indicated the $100 a month payments.” Defense counsel then stated, “That’s correct . . . . There’s no signed agreement by the plaintiff to make the payments.” Eight days later, the district court granted Rothman’s Motion for Judgment on the Pleadings. The district court relied, in part, on Defense counsel’s statement at oral argument, stating, “[U]nder the concession of Plaintiff’s counsel . . . there is no longer any dispute as to any material fact, establishing that there was no finance charge and no ‘written agreement’ between the parties.” Based on that evidence, the district court concluded that Wolfington failed to allege the existence of a written agreement for the extension of credit. In its memorandum, the district court framed its decision as a judgment on the pleadings under Rule 12(c). 

In granting Rothman’s Motion, the district court also sua sponte initiated sanctions proceedings under Rule 11 against Wolfington’s counsel. Prior to imposing sanctions, the district court accepted declarations from Wolfington’s counsel, conducted a hearing, and received supplemental briefing. The district court concluded that sanctions in the form of attorneys’ fees were appropriate, reasoning that counsel could have reasonably discovered both the lack of a written agreement and Wolfington’s failure to make any payments on the deductible before filing the Complaint.

On appeal, Wolfington challenged the district court’s entry of judgment on the pleadings under Rule 12(c) and imposition of sanctions under Rule 11. The Court of Appeals for the Third Circuit concluded that Wolfington failed to adequately allege a violation of the Truth in Lending Act, but that his counsel’s investigation and conduct were not unreasonable. Therefore, the Court affirmed the entry of judgment on the pleadings and reversed the imposition of sanctions.

The Court ruled that, when it granted Rothman’s Motion, the district court improperly relied on Defense counsel’s purported admission during the telephone conference that there was no written agreement between the parties. The district court erred for 3 reasons: 1. Counsel’s admission was a “matter[] outside the pleadings” and improperly considered in deciding a motion for judgment on the pleadings; 2. An admission must be “unequivocal” to be binding, but counsel’s purported admission was not; 3. When it considered matters outside of the pleadings, the district cour converted Rothman’s Motion for Judgment on the Pleadings into one for summary judgment under Rule 12(d) but failed to provide Wolfington with the required notice.

Despite the erroneous conversion of the Motion for Judgment on the Pleadings into one for summary judgment, the error was harmless. Rothman raised three arguments that Wolfington failed to state a claim under the Truth in Lending Act: (a) there was no extension of “credit” by Rothman to Wolfington; (b) any extension of credit was not “consummated” under the Act; and, (c) any credit agreement was not in writing. The Court agreed with Rothman’s third argument.

Wolfington failed to sufficiently plead the existence of a written credit agreement, because he failed to allege that he executed or signed such an agreement. Instead, he merely alleged that the January 20 Agreement was negotiated by his father. Nowhere did he allege that he signed a written agreement, and the January 20 email correspondence was merely “confirming” the “previously discussed” agreement.

The district court imposed sanctions on Wolfington’s counsel for three reasons: (1) Counsel failed to investigate and obtain Wolfington’s bank records; (2) Counsel alleged that there was a “written agreement” between the parties and an “extension of credit”; and, (3) Counsel alleged that Wolfington could serve as an adequate class representative. The Court analyzed each of the district court’s grounds for imposing sanctions as well as whether a district court may sua sponte award attorneys’ fees. The Court concluded the district court erred and reversed the district court’s imposition of sanctions.

SECRETARY UNITED STATES DEPARTMENT OF LABOR v. BRISTOL

3rd Circuit

17-3663

Filed 8/20/19

Keywords: FLSA; Remuneration; Bonus 

This case presented a matter of first impression: whether, within the meaning of the Fair Labor Standards Act (the “FLSA” or “Act”), 29 U.S.C. § 203 et. seq., an employer must treat bonuses provided by third parties as “remuneration for employment” when calculating employees’ overtime rate of pay.

Bristol entered into a master service agreement with Talisman to provide equipment, labor, and other services at Talisman drilling sites. Due to the nature of the business, Bristol employees at those sites put in extensive overtime hours. At some point, Bristol employees became aware of a bonus program sponsored by Talisman (the “Talisman Bonuses”), which was offered to all workers at its drilling sites, including employees of contractors. The program rewarded employees with distinct bonuses for safety, for efficiency, and for completion of work, the last being called the “Pacesetter” bonus.

Bristol then agreed to undertake the clerical work necessary for its employees to receive the bonuses. Talisman emailed Bristol when workers at a particular site had earned a bonus, and Bristol identified whether any Bristol employees were working at that site, submitted invoices for the bonuses to Talisman for payment, accepted bonus payments from Talisman, deducted taxes and other costs and fees, and distributed the bonus payments to its employees. Bristol and Talisman never added the bonus arrangement to their master service agreement, and neither Bristol nor Talisman entered into a formal contract with Bristol’s employees with respect to the bonuses. Of particular relevance, Bristol did not include the Talisman Bonuses in the regular rate of pay when calculating overtime compensation for its employees.

An auditor from the Department of Labor visited Bristol’s offices as part of a routine inspection to assure Bristol was properly calculating overtime compensation. Following that inspection, the auditor determined that the Talisman-paid bonuses must be added in the calculation of the Bristol employees’ regular rate of pay. The Department of Labor endorsed that determination and, as a consequence of Bristol’s decision to allow employees to receive the Talisman Bonuses, the Department insisted that Bristol pay for overtime at a higher rate. When Bristol refused, the Department sued, alleging that Bristol violated the FLSA’s overtime provisions.

The parties filed cross motions for summary judgment, which the district court resolved in a single order, granting the Department’s motion for summary judgment and denying Bristol’s motion for summary judgment. The court concluded that Bristol violated the FLSA’s overtime provisions by failing to include the Talisman Bonuses in the “regular rate” and that the violations are subject to the statute’s mandatory liquidated damages provision. Bristol appealed, and the Court of Appeals for the Third Circuit affirmed in part and reversed in part. 

Whether a payment qualifies as remuneration for employment depends on the employer’s and employee’s agreement. There was a genuine dispute of material fact as to whether the efficiency and Pacesetter bonuses were remuneration for employment, so the Court vacated in part the district court’s judgment and remand for further consideration of those bonuses. But, the Court concluded that the safety bonus was remuneration for employment and not subject to a statutory exemption. Thus, the Court affirmed the district court’s judgment as to that bonus.

The Court held that there was no explicit agreement between Bristol and its employees that the Talisman Bonuses would serve as remuneration for employment. In evaluating the existence of an implicit agreement, the question is whether there has been a course of dealing sufficient to characterize the payment as one that is legitimately expected by the employees and legitimately understood as being sponsored in a meaningful way by the employer. 

As to the efficiency and Pacesetter bonuses, the record showed there was reason to question whether employees knew the specific requirements to earn a set bonus in advance of performing the relevant tasks, so as to give rise to the requisite expectation. Regardless of the degree of Bristol’s involvement in the bonus program, there remained the question of whether the course of dealing was long enough and consistent enough to amount to an implicit agreement that the bonuses would serve as remuneration for employment. Therefore, summary judgment was not warranted for the efficiency and Pacesetter bonuses.

In contrast, the record adequately established that the safety bonus was remuneration for employment. The parties did not dispute that Bristol employees knew the specific conduct necessary to earn the bonus—the safety bonus was attained if there were no accidents or injuries during the job. Bristol tracked which of its employees earned a bonus and reported that information to Talisman. Bristol regularly invoiced Talisman for payment on behalf of its employees. And finally, Bristol conceded that it was responsible for getting those invoices approved by lower level Talisman employees and sending the information to Talisman’s contracted invoice processor. Bristol also collected a “a reasonable processing fee” for its efforts. That level of involvement was enough to support the conclusion that Bristol effectively adopted Talisman’s bonus program and implicitly agreed to make it part of the employment agreement with its employees. Therefore, the safety bonus was remuneration for employment.

STONE v. TROY CONSTRUCTION

3rd Circuit

18-1825

Filed 8/20/19

Keywords: FLSA; Willfulness

Stone sued Troy Construction Inc. (“Troy”), on behalf of herself and others similarly situated, alleging a willful violation of the Fair Labor Standards Act (“FLSA”). She claims that Troy paid local employees per diem compensation that should have been classified as wages and included in the regular rate of pay, which would in turn have affected the calculation of overtime pay. 

The district court granted summary judgment for Troy, holding that, as a matter of law, there had been no willful violation of the FLSA. Whether a violation is willful determines the length of the applicable statute of limitations. In light of its holding that there had been no willfulness in this case, the district court applied a two-year statute of limitations and concluded that Stone’s claims were time-barred. 

The Court of Appeals for the Third Circuit vacated the district court’s ruling, because the district court, in effect, applied an incorrect standard in deciding the willfulness question.

In McLaughlin v. Richland Shoe Co., the Supreme Court concluded that a violation of the FLSA was willful if, at minimum, the employer “showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA.]” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 132-33 (1988) (citations and internal quotation marks omitted). In Stone’s case, the district court required a showing of conduct worse than the recklessness identified in McLaughlin. 

While the district court did not explicitly state that Stone had to demonstrate that Troy’s actions were worse than reckless, that is what it in effect required. The district court was evidently looking for something egregious. But any requirement for a degree of egregious behavior conflicts directly with Supreme Court precedent. Willfulness under the FLSA is established where “the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA.]” McLaughlin, 486 U.S. at 133. It does not require a showing of egregiousness. Hazen, 507 U.S. at 617.

The Court then held that, when the proper standard for determining willfulness was applied, it became apparent that summary judgment should not have been granted. Genuine disputes of material fact existed as to Troy’s willfulness. Lastly, two of Stone’s claims fell within the three-year statute of limitations. Thus, not all of her claims were time-barred.