Stark & Knoll Wins Major Supreme Court Victory for Employers 

Friday, April 08, 2016 8:48:39 AM

Stark & Knoll attorneys, John P. Susany and Kathleen A. Hahner, stopped an avalanche of class action lawsuits against Ohio employers by beating back efforts to expand both who gets minimum wage and the types of employment records that employers must be kept.

The case, Haight v. Minchak, arose because former outside sales people of JB Dollar Stretcher magazine sued and tried to bring a class-action lawsuit against the company and its owners, Joan and Bob Minchak. The former employees argued that, even though they were outside sales people and were paid by commissions, they should have received minimum wages too. They also claimed that JB Dollar should have kept detailed time records for all sales people and managers, but did not.

The former employees based their case on the recently amended language of the Ohio Constitution. In 2006, Ohio voters approved the Fair Minimum Wage Amendment. Its purpose was to set a minimum wage and to adjust it annually based upon the consumer price index.

Beyond increasing the minimum wage, however, the Amendment defined the word “employee” by stating that it shall “have the same meanings as under the federal Fair Labor Standards Act or its successor…” This became the crux of the dispute and what provided the opportunity for plaintiffs’ lawyers to raise class-action lawsuits against employers.

In short, the former employees claimed that Ohio’s definition of who is an employee did not include the exemptions and exclusions to minimum wage and record-keeping requirements that the Fair Labor Standards Act provides. That position meant that, in addition for the liability of not paying minimum wages to employees they thought were exempt, every employer in Ohio would have new and expanded record-keeping requirements that would expand to executive and professional employees.

The Minchaks and JB Dollar, admittedly, did not pay minimum wage to commissioned sales people, nor did they keep detailed time records for them. The Minchaks argued they did not have to do either, since the federal Fair Labor Standards Act exempted outside sales people who were paid commissions, and Ohio’s Fair Minimum Wage Amendment adopted the “meanings” of employee under the FLSA. Meaning that Ohio employers enjoyed the same exemptions provided by federal law. Fliers that the state requires employers to post to help employees supports the Minchaks’ position.

The trial court found in favor of the Minchaks, upholding the exemptions, but the appellate court, in a 2-1 decision, reversed. The appellate court’s reversal had the effect of wiping out all of Ohio’s exemptions and imposing additional record-keeping requirements on all employers. The penalties for violating these provisions are steep and include: two times the employee’s back wages, all costs, the employee’s attorney’s fees, and potential punitive damages at a minimum of $150 for each day a violation existed.

Stark & Knoll appealed the appellate decision to the Ohio Supreme Court, and argued the case in September of 2015.

In a 5-2 verdict in favor of the employer issued on March 17, 2016, the Supreme Court found that the exemptions in the Fair Labor Standards Act also applied to Ohio, that outside sales people are exempt from minimum wage requirements, and that the record-keeping obligations contained in the Amendment do not apply to exempt employees.

This case is important because, had the Court come to the opposite conclusion, employers would have lost minimum wage exemptions for almost all employees. This also would have added additional record-keeping requirements to nearly all employees – including executives, professionals, and administrative employees. Since courts could look back three years to find a violation, this would have opened a floodgate of litigation against employers.

Because the Supreme Court ruled the way it did, Ohio employers can be confident that the federal Fair Labor Standards Act exemptions apply to employees in Ohio. That means that Ohio employers do not have to pay minimum wage to commissioned employees, executives, professionals, computer programmers, and managers. It also means that, Ohio employers do not have to keep time records for those exempt employees.

The Supreme Court’s decision provided clarity to Ohio’s wage and hour laws, and protected virtually every employer in the state against class-action lawsuits for minimum wage or record-keeping violations.

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Phone: 330-376-3300 Fax: 330-376-6237

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