Slaaen v. Senior Lifestyle Corp.

ROBERTA SLAAEN and JULIE HOAGLAN, Plaintiffs, v. SENIOR LIFESTYLE CORPORATIONand SL GREENFIELD LLC, Defendants.

Case No. 18-CV-1562-JPS

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

April 9, 2019

ORDER

1. INTRODUCTION

Plaintiffs filed this action on October 3, 2018, alleging violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and Wisconsin's Wage Payment and Collection Laws, Wis. Stat. § 109.01 et seq., Wis. Stat. § 104.01 et seq., Wis. Stat. § 103.001 et seq., Wis. Admin. Code § DWD 274.01 et seq., and Wis. Admin. Code § DWD 272.001 et seq. Plaintiffs seek to bring their FLSA claim on a class basis, which in the parlance of the FLSA is called a collective action. See 29 U.S.C. § 216(b). On February 23, 2019, they filed a motion for conditional certification of their FLSA claim as a collective action. (Docket #25). Defendants oppose conditional certification. (Docket #32). The motion is now fully briefed and, for the reasons explained below, conditional certification will be granted.

2. RELEVANT FACTS

Defendant Senior Lifestyle Corporation ("SLC") operates numerous assisted living centers across the country. Plaintiffs worked at one such facility in Greenfield, known as "Hickory Park." Plaintiffs contend that SLC failed to pay its employees, including Plaintiffs, at the proper rate when those employees worked overtime. Specifically, the FLSA requires employers to calculate overtime pay based on the employee's regular rate of pay. Plaintiffs maintain that SLC and its co-defendant, SL Greenfield LLC, paid certain non-discretionary bonuses to their employees at Hickory Park, but when it came time to pay those employees for overtime, the bonuses were not included in the employees' regular rate. Thus, the employees were shortchanged for their overtime.

Plaintiffs assert that this improper overtime policy is uniform across SLC's national operations. For support, Plaintiffs offer their own testimony about the practices at Hickory Park. They also offer the testimony of Mary Tasche, who worked at SLC's Sheboygan facility as the director of sales and marketing. According to Plaintiffs and Tasche, the bonuses for which they were not properly compensated included Tour Bonuses (or Marketing Bonuses), Move-In Bonuses, Resident Referral Bonuses, Shift Bonuses, Quarterly Net Gain Bonuses, and Quarterly Occupancy Bonuses.

As further support, Plaintiffs point to the testimony of Noel Pakulski ("Pakulski"), the executive director of Hickory Park, and Dave Richey ("Richey"), SLC's vice president of operations. According to Plaintiffs, Pakulski's testimony confirms that they were not properly paid with respect to the bonuses they earned at Hickory Park. As to SLC's national operations, Richey testified that the corporation's approach is to not pay overtime based on the employee's regular wages plus bonuses:

If it's a bonus, it's a bonus. It's not part of the regular pay. . . . You've got a regular rate of pay that's -- your rate of pay is $11 an hour, that's your rate of pay. You work overtime, time and a half, you get time and a half on that. You do something outside of, you know, what your normal processis or you do something different, then there would be a bonus for that.

. . .

So your question, if I remember it, was should bonuses be part of regular pay and I don't - it's a bonus. It's not part of regular pay. So that's my statement. . . . If there's a bonus, it's a bonus. It's outside of normal pay.

(Docket #29-3 at 81-82, 85). Finally, Plaintiffs note that SLC maintains a "FLSA Overtime and Payroll Practices Policy" which is silent on the matter of properly computing bonuses into overtime pay. (Docket #29-2 at 121-22).

Defendants counter that each assisted living facility operates with relative independence. As Defendants describe it, the facilities are like franchises; each executive director runs their own facility as they see fit, and pays SLC for various support services, including human resources, marketing, and sales. Important to this case is the executive directors' freedom to set pay for their employees and determine bonuses. SLC offers various "standards" for certain bonuses, but these are mere suggestions for how a particular bonus should be structured. See id. at 123-28. SLC does not dictate what bonuses must be offered or how bonuses should be paid. Indeed, when told about the Tour Bonus policy at Hickory Park, Richey said that he was not aware that it was being offered. Plaintiffs rejoin that in her deposition, Pakulski indicated that bonuses over a certain dollar threshold would need approval from SLC.

3. ANALYSIS

3.1 Conditional Certification

The FLSA requires that an employee be compensated with overtime pay "at a rate not less than one and one-half times" the employee's regular rate for hours worked in excess of forty in a week. 29 U.S.C. § 207(a). Anemployee's "regular rate" includes "all remuneration for employment paid to . . . the employee," id. § 207(e), subject to eight statutory exemptions. Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir. 2005) (citing Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960)). The FLSA further provides that non-discretionary bonuses must normally be recomputed into an employee's regular rate before calculating her overtime compensation. 29 U.S.C. § 207(e)(3)(a); 29 C.F.R. § 778.211(c); Gilbertson v. City of Sheboygan, 165 F. Supp. 3d 742, 749-50 (E.D. Wis. 2016). Otherwise, an unscrupulous employer could take a portion of an employee's ordinary compensation, call it a "bonus," exclude it from the employee's regular rate, and thereby artificially deflate the employee's overtime rate of pay.

Conditional certification of a collective action is distinct from the procedure normally applied to class litigation under Federal Rule of Civil Procedure 23. Woods v. N.Y. Life Ins. Co., 686 F.2d 578, 579-80 (7th Cir. 1982). It allows a court to conditionally certify a collective action under the FLSA so that notification to putative class members may be made, those putative class members may affirmatively opt in to the collective action, and class discovery may be taken. 29 U.S.C. § 216(b); Woods, 686 F.2d at 579-80. Once this is done, the plaintiff can move for final, full certification of the collective action. Jirak v. Abbott Labs., Inc., 566 F. Supp. 2d 845, 848 (N.D. Ill. 2008). For the initial step of conditional certification, the plaintiff must only make "a minimal showing that others in the potential class are similarly situated," Mielke v. Laidlaw Transit, Inc., 313 F. Supp. 2d 759, 762 (N.D. Ill. 2004), which requires no more than "substantial allegations that the putative class members were together the victims of a single decision, policy, or plan," Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1102 (10th Cir. 2001).

Plaintiffs' allegations satisfy this lenient standard as against the applicable law. They assert that Defendants have a general practice of failing to include non-discretionary bonuses in employees' regular rates of pay when calculating overtime pay. (Docket #1). Plaintiffs have bolstered their allegations with at least a modest factual underpinning via testimony from Pakulski and Richey, as well as the FLSA policy maintained by SLC. This evidence suggests that the allegedly wrongful overtime payment practice applies to all SLC facilities across the country.

Defendants offer two counterarguments, both of which lack merit. First, they maintain that because each facility determines its own bonus policies, the bonuses Plaintiffs received may not even be offered at other facilities. In Defendants' view, the wide variation in bonus practices means that the employees of different facilities cannot be similarly situated for purposes of Plaintiffs' proposed collective. Defendants misunderstand the focus of this case, which is not on the receipt of any particular bonus, but instead whether the non-discretionary bonuses which Defendants' employees received were properly accounted for in determining overtime. Conditional certification will permit Plaintiffs to explore which non-discretionary bonuses were provided to employees at the various SLC facilities. They can also obtain more precise information on how bonuses were (or were not) recomputed into the overtime calculation. As this Court observed not long ago in deciding another motion for conditional certification, though "bonus plans were slightly different at different facilities[,] . . . whether this is a fatal defect in the collective action, . . . or simply a question of differing damages calculations, . . . is a question that can be reserved for the final certification phase." Weninger v. Gen. Mills Operations LLC, 344 F. Supp. 3d 1005, 1013 (E.D. Wis. 2018).

Second, Defendants question whether Plaintiffs have marshalled adequate evidence of any unlawful payment practice, much less one applied to all employees. They imply that the bonuses at certain facilities may fall within an exemption from the "regular rate" determination. Further, even for non-exempt bonuses, Defendants assert that Plaintiffs lack evidence of a failure to properly pay overtime on a widespread basis, beyond Plaintiffs' own experiences. The Court finds that Plaintiffs' allegations and evidence, particularly Richey's statement suggesting a universal policy with respect to including bonuses in employees' regular rates, passes the low bar required for conditional certification. Additionally, the employer bears the burden of establishing that a payment is exempt from the regular rate. Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 209 (1966). "FLSA exemptions are to be narrowly construed against . . . employers and are to be withheld except as to persons plainly and unmistakably within their terms and spirit." Klem v. Cty. of Santa...