Certification of Insurance Inspectors’ Overtime and Minimum Wage Claims Denied

On May 21, 2014, the United States District Court for the Northern District of Indiana issued an Opinion and Order in Harris v. Reliable Reports Inc. denying class certification on the Fair Labor Standards Act (FLSA) claim brought by a former field reporting specialist who claimed his former employer failed to properly pay overtime wages to field reporting specialists and failed to pay the same class of employees at least the federal minimum wage as a result of inadequate mileage reimbursements and unreimbursed work equipment expenses.

In seeking class certification that would have allowed court-supervised notice to be sent to all eligible employees of Reliable Reports Inc., Mr. Harris, who worked out of a home office in Fort Wayne, Indiana, and another field reporting specialist, who worked out of Des Moines, Iowa, submitted signed declarations alleging they were paid an hourly rate of $13.32/hour during training and then via a “piece rate” method post-training. The employees were required to report hours worked to the company and the company would use those reported hours to ensure the employees were paid at or above the federal minimum wage of $7.25/hour; if they were not, Reliable Reports Inc. would pay a minimum wage supplement to the field reporting specialist.

On its face, there is nothing unlawful about this policy. Companies are entitled to pay employees in the described manner so long as they receive no less than the applicable minimum wage for all hours worked up to 40 in a workweek and no less than one and one half times the applicable minimum wage for all hours worked in excess of 40 in a workweek. However, the two former employees claimed they were directed to report fewer hours than they actually worked and that time spent driving from their home offices to their first inspection of the day and driving home from their last inspection of the day should be included in his hours worked. If true, Reliable Reports Inc. would be in violation of the FLSA’s record-keeping provisions, not to mention the possible underpayment of minimum and/or overtime wages to Mr. Harris and his former co-workers. Mr. Harris also claimed the company’s mileage reimbursement policy and failure to reimburse certain equipment expenses resulted in the net wages received falling below the federal minimum wage and overtime requirements.

In denying Mr. Harris’ efforts to obtain class certification, the court focused on the lack of details provided by Mr. Harris and the other potential plaintiffs in the case. The main issue the court identified was their knowledge, or lack thereof, of how other field reporting specialists were paid. Specifically, the court took issue with their lack of personal knowledge of how other field reporting specialists were paid, focusing on their declarations statements that they “believed” other employees were subjected to the same policies and treatment as opposed to demonstrating some type of knowledge about the circumstances and treatment of other employees. Specifically, the court found: “That three field [reporting specialists] believe they were not properly compensated does not warrant the inference that Reliable had a company-wide policy of violating the FLSA with regard to all field [reporting specialists].”

The court also took issue with the lack of details provided by Mr. Harris and the other potential plaintiff with respect to the mileage reimbursement policy and work equipment expenses. Despite finding that the company’s own affidavit established a uniform policy with respect to those issues, the court was troubled by the fact that neither former employee “has so much as estimated the amount of his claimed unreimbursed expenses nor demonstrated that his expenses actually reduced his wages to below minimum wage in any work week.” The court also found that the employees “have failed to present their claims regarding expenses with sufficient specificity to satisfy even the modest requirements of the collective action standard.”

The takeaway from Harris is pretty simple. Even at the initial certification stage which imposes a rather lenient set of requirements on employees seeking conditional certification and class notice, employees must be able to establish actual knowledge of a company-wide policy that would violate the FLSA as opposed to relying only on speculation or beliefs. Additionally, employees must provide the court with enough information to establish the FLSA may have actually been violated instead of merely demonstrating the existence of a company-wide policy that could potentially result in violations of the FLSA.