By Gerald L. Maatman, Jr., Maria Caceres-Boneau, and Gregory Slotnick
Duane Morris Takeaways: In Carabajo v. APCO Insulation Co Inc., Case No. 22-CV-04175 (E.D.N.Y. June 9, 2023), Magistrate Judge Sanket J. Bulsara of the U.S. District Court for the Eastern District of New York granted Plaintiffs’ motion for conditional certification and found an employer’s enforcement of a written policy, unlawful on its face, was evidence enough to secure a conditional certification of a collective action under the Fair Labor Standards Act, despite questions of fact concerning supporting declarations. The ruling is a warning and reminder to employers, especially those in the Second Circuit, that a written policy on its own may support conditional certification where enforcement of the policy would violate the law on its face.
Case Background
On July 15, 2022, Miguel Carabajo (“Carabajo”), a former insulation prep and installer working at APCO Insulation (“APCO”), a building insulation and construction company in New York City, filed a class and collective action claiming APCO and its president (“Defendants”) violated the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”) by failing to pay him and others similarly situated overtime pay for weekly hours worked over 40, unlawfully deducting 30 minutes per day for meal breaks they did not actually take, and requiring them to come into work 15 minutes early before they could clock-in. On December 8, 2022, Carabajo moved for conditional certification of a collective action under the FLSA consisting of all current and former employees employed by APCO as non-exempt laborers or similarly situated employees between July 15, 2016 and December 8, 2022. Carabajo filed a declaration in support of his motion, and APCO filed a brief and declarations in opposition.
The Court’s Ruling
As detailed in the Court’s ruling of June 9, 2023, the Magistrate Judge found Carabajo met his burden to show that while employed by APCO and its owner, he and others similarly situated were subject to a policy running afoul of the FLSA per se from at least March 2019 forward: “the practice of not paying for all hours worked (including overtime) when workers failed to clock in and out correctly.” Id. at 4. In support of its conclusion, the Court pointed to APCO’s written policy notifying Carabajo and other laborers they would not be paid for a day’s work if they did not clock-in or clock-out properly. The Court also found support in APCO’s Employee Agreement, which stated that if laborers fail to punch-in when they get to a job site, or fail to punch-out when they leave the job site, they “will not be paid.” Id. The Magistrate Judge found it significant that APCO did not dispute the existence and application of the policy to Carabajo and other similarly situated laborers.
The Court faulted Defendants for attempting to “skirt liability” under the FLSA by justifying implementation of their unlawful policy in a number of ways, such as stating the policy was necessary to convey to workers the importance of clocking-in and out each day and that overtime and breaks will be compensated, except if there is a failure to correctly log their time. Defendants did not contest that their employees worked overtime and did not unequivocally state the policy was not enforced or deductions were not taken under its application. The Court explained that if an employee believed the policy to be lawful and was docked pay for improperly clocking-in or out, the employee would mistakenly believe they were paid correctly; however, they would still have a FLSA claim, be entitled to such docked pay, and the policy would still be illegal on its face.
Carabajo claimed Defendants enforced the policy against him and other similarly situated workers, that he did not receive payment for at least 8 overtime hours a month as a result, and that discussions with other workers revealed Defendants failed to pay them for all the days they worked.
The Magistrate Judge found that resolution of the merits of Defendants’ denials and contradictory declarations in response to Carabajo’s motion was inappropriate at the conditional certification stage of a lawsuit, and that the only pertinent question was whether Carabajo satisfied the required modest factual showing there was an illegal policy that applied to him and others. The Court ruled in the affirmative and determined that Defendants’ written policy was illegal on its face and that Defendants applied it to Carabajo and others similarly situated. The Magistrate Judge also held that the existence of the illegal written policy rendered much of the parties’ briefing and arguments irrelevant. The Court noted even if Defendants could prove Carabajo never spoke with other employees about the issues, the policy alone was sufficient to warrant conditional certification because it was illegal on its face and applied to all employees.
Although the Court granted the motion for conditional certification in part, the Court agreed with Defendants that the scope of the collective action that Carabajo sought to conditionally certify was overbroad. Since Carabajo alleged he only worked as a mechanical engineer and had not shown that other workers to whom he had spoken worked in a different position, notice to “all non-exempt employees at APCO” was not appropriate. Id. at 10. The Court limited the collective action to non-exempt mechanical insulators or individuals who had the same job duties as Carabajo since he had only demonstrated enforcement of the illegal written policy as to those individuals. The Magistrate Judge also reduced the six-year notice period sought by Carabajo to three years, differentiating between the appropriate statute of limitations periods under the NYLL and the applicable FLSA.
Implications Of The Decision
The Carabajo decision is a stern reminder that employers must always analyze their internal wage and hour policies for potentially widespread compliance issues based on enforcement. While APCO’s written policy of not paying wages to employees for days on which they did not properly clock-in or clock-out was on its face improper, the ruling is an example of a Court using such an implemented per se unlawful policy as the sole basis to grant conditional certification of an FLSA collective action regardless of factual concerns based on plaintiff-supplied declarations and allegations. As a result, and in light of the minimal burden district courts in the Second Circuit require plaintiffs meet to satisfy the first step of conditional certification, employers are reminded of the need to consult with experienced wage and hour counsel well in advance of enforcing internal policies. It also bears noting that under the law, employers must pay employees for all of their hours worked, regardless of timekeeping issues and employees incorrectly punching-in or out.