Federal Court Strikes Down NLRB Joint Employer Rule

On March 8, 2024, just days before it was set to take effect, U.S. District Judge J. Campbell Barker of the Eastern District of Texas vacated the National Labor Relations Board’s (“NLRB’s”) recent rule on determining the standard for joint-employer status.

The NLRB issued the rule on October 26, 2023. It established a seven-factor analysis, under a two-step test, for determining joint employer status. Under the new standard, an entity may be considered a joint employer if each entity has an employment relationship with the same group of employees and the entities share or codetermine one or more of the employees’ essential terms and conditions of employment which are defined exclusively as:

  • Wages, benefits and other compensation;
  • Hours of working and scheduling;
  • The assignment of duties to be performed;
  • The supervision of the performance of duties;
  • Work rules and directions governing the manner, means and methods of the performance of duties and grounds for discipline;
  • The tenure of employment, including hiring and discharge; and
  • Working conditions related to the safety and health of employees.

Set to take effect on March 11, 2024, the NLRB’s decision would have rescinded the 2020 final rule which considered just the direct and immediate control one company exerts over the essential terms and conditions of employment of workers directly employed by another firm. The new rule would have expanded the types of control over job terms and conditions that can trigger a joint employer finding.

In the lawsuit, filed by the United States Chamber of Commerce and a coalition of business groups, the Chamber and coalition claimed that the NLRB’s rule is unlawful and should be struck down because it is arbitrary and capricious. Judge Barker agreed as he held that the NLRB’s new test is unlawfully broad because an entity could be deemed a joint employer simply by having the right to exercise indirect control over one essential term. Judge Barker faulted the design of the two-step test which says an entity must qualify as a common-law employer and must have control over at least one job term of the workers at issue to be considered a joint employer, finding that the test’s second part is always met whenever the first step is satisfied. The Court vacated the new standard and indicated it will issue a final judgment declaring the rule is unlawful.

The NLRB quickly responded to the Court’s ruling. In a statement on March 9, 2024 NLRB Chairman Lauren McFerran said the “District Court’s decision to vacate the Board’s rule is a disappointing setback but is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts.” According to the NLRB, the “Agency is reviewing the decision and actively considering next steps in this case.”

What Employers Need to Know

The legality of the NLRB’s joint-employer standard has been a contested issue since the October 2023 announcement. The rule will not go into effect as scheduled, but Judge Barker’s decision is unlikely to be the final word on the matter.

For more on the NLRB, visit the NLR Labor & Employment section.

An Early Christmas Present from Three Fifth Circuit Judges Who Concluded a Louisiana Property Is Not Subject to Federal Clean Water Act Jurisdiction

Garry Lewis owns 2000 acres in Livingston Parish, Louisiana and he has been fighting with the Army Corps of Engineers over whether any of those 2000 acres are wetlands subject to Federal Clean Water Act jurisdiction for over a decade. On two separate occasions the Army Corps of Engineers has said the answer to that question is “yes”. The first time the Corps made this determination, a District Court Judge disagreed. The second time was before the Supreme Court’s definition of “Waters of the United States”, including jurisdictional wetlands, in Sackett v. EPA and it is that second determination that is the subject of a Fifth Circuit Court of Appeals decision earlier this week.

The Sacketts had been fighting with EPA and the Corps about whether their much smaller property was subject to Clean Water Act jurisdiction for twice as long as Mr. Lewis until the Supreme Court found in the Sacketts’ favor earlier this year. The day the Supreme Court decided Sackett I wrote that “[f]or my entire adult life, the Courts have deferred to EPA’s interpretation of statutes it has been charged by Congress to implement. That era is most certainly over . . .”

This week three Judges of the Fifth Circuit proved my point. Over the Corps’ objection, the Judges took it upon themselves to apply the Supreme Court’s Sackett holding to determine that “based on photographs of [Mr. Lewis’s] property” there is “no ‘continuous surface connection’ between any plausible wetlands on the Lewis tracts and a ‘relatively permanent body of water connected to traditional interstate navigable waters.’”

The Corps had argued unsuccessfully that it should be given the opportunity to apply Sackett for itself before Judges weighed in.

The Fifth Circuit Judges were probably right to conclude that, given the chance, the Corps “could create an ‘endless loop’ of financially onerous regulatory activity” for Mr. Lewis. But the Judges fail to mention that conclusion could be based on the fact that EPA’s and the Corps’ tenth, post Sackett, attempt to determine the reach of the Clean Water Act continues to extend Clean Water Act jurisdiction to “tributaries,” “impoundments,” and “wetlands” that have a “continuous surface connection” to waters that are not “traditional navigable waters, the territorial seas, [or] interstate waters.” That’s a different standard than the Justice Alito-supplied standard the three Fifth Circuit Judges applied in holding that the Lewis property was not subject to Clean Water Act jurisdiction even though a culvert on the Lewis property connects to a “relatively permanent water” which connects to another “relatively permanent water” which connects to a “traditional navigable water.”

Now EPA’s and the Corps’ most recent Waters of the United States regulation is currently being challenged in two Federal District Courts, including on the basis that the regulation is broader than allowed by the Supreme Court in Sackett. But that regulation hasn’t been struck down yet. That apparently didn’t matter at all to these three Judges of the Fifth Circuit. And it may be worth mentioning that one of those challenges to EPA’s and the Corps’ regulation is in Federal District Court in Texas which is in, you guessed it, the Fifth Circuit.

What does this all mean? Well, I think it means we’re going to continue to see some Judges applying the Supreme Court’s Sackett holding to determine the extent of Clean Water Act jurisdiction, ignoring EPA’s and the Corps’ subsequent regulation, unless and until Congress decides to get involved in the longest running controversy in environmental law.

Supreme Court Declines to Resolve Circuit Split on Exercise of Personal Jurisdiction in FLSA Collective Actions

On June 6, 2022, the Supreme Court of the United States declined to hear petitions seeking review of whether federal courts may exercise personal jurisdiction over claims of nonresident plaintiffs who join Fair Labor Standards Act (FLSA) collective actions when their claims are not connected to the defendant’s activities in the forum state. The petitions sought review of rulings on the issue by the First and Sixth Circuit Courts of Appeals in Waters v. Day & Zimmermann NPS, Inc. and Canaday v. The Anthem Companies, Inc., respectively. As a result of the Supreme Court’s decision declining to hear the petitions, there remains a circuit split as to whether the Court’s 2017 ruling in Bristol-Myers Squibb Co. v. Superior Court applies to FLSA collective actions, and employers with nationwide footprints remain subject to uncertainty depending on jurisdiction.

To date, only the First, Sixth, and Eighth Circuits have ruled on the issue. On August 17, 2021, the Sixth Circuit was the first to address the issue in Canaday. There, the Court held that federal courts may not exercise personal jurisdiction over claims of nonresident plaintiffs who join FLSA collective actions when their claims are not connected to the defendant’s activities in the forum state. Just one day later, on August 18, 2021, the Eighth Circuit came to the same conclusion in Vallone v. CJS Solutions Group, LLC.

On January 13, 2022, in Waters, the First Circuit held to the contrary, concluding that federal courts do have personal jurisdiction over claims asserted by nonresident opt-in plaintiffs.

The Significance of Bristol-Myers

The Supreme Court’s decision in Bristol-Myers provides the basis for the current circuit split. Bristol-Myers involved a mass tort action under state law for alleged defects in a blood-thinning drug, Plavix, which the company manufactured. Residents and nonresidents of California sued Bristol-Myers in California state court, alleging injuries related to the drug. The nonresident plaintiffs claimed no relationship with the forum state, nor did they purchase Plavix in California or suffer any harm from it in California. The Supreme Court reasoned that any similarity between the resident and nonresident plaintiffs’ claims was an “insufficient basis” to exercise specific jurisdiction. Unless nonresident plaintiffs could demonstrate that their claims arose out of the defendant’s contacts with the forum state, personal jurisdiction over the company did not exist, no matter “the extent of a defendant’s unconnected activities in the State.”

In ruling that the California state court lacked jurisdiction over the claims of the nonresident plaintiffs, the Supreme Court acknowledged that its holding might ultimately generate more litigation in the form of separate actions by nonresident plaintiffs in their respective states. But the Supreme Court also noted that all plaintiffs to the action could have brought a mass tort action against Bristol-Myers in New York (the company’s headquarters) or Delaware (its place of incorporation) because courts in those states would have had general personal jurisdiction over the company. Instead, the California state court could exercise only specific personal jurisdiction over the company based on its activities in the state. Notably, Bristol-Myers was limited to Rule 23 class actions, leaving lower courts to determine whether its holding applied to FLSA collective actions, which differ procedurally.

The Circuit Split

In Canaday, the Sixth Circuit reiterated the basic tenet that, pursuant to the Due Process Clause of the Fourteenth Amendment, the question of whether a court has personal jurisdiction over a defendant depends on the defendant’s contacts with the state in which the plaintiff filed the lawsuit. Because Anthem is both incorporated and headquartered in Indiana and not otherwise “at home” in the state of Tennessee, the district court in Tennessee lacked general jurisdiction over Anthem as a defendant. At issue was whether the district court in Tennessee had specific personal jurisdiction over Anthem, and thus, whether there was a claim-specific and Anthem-specific relationship between the nonresidents’ FLSA claims and the state of Tennessee.

Applying Bristol-Myers, the Sixth Circuit held that there was not. The court found that the nonresident plaintiffs did not bring claims arising out of or relating to Anthem’s conduct in Tennessee, because Anthem neither employed nor paid the nonresident plaintiffs within the state. The Sixth Circuit went on the explain that adherence to this approach should not change the way FLSA collective actions are filed, because plaintiffs traditionally file their actions where courts have general jurisdiction, or where the conduct occurred. Of note, Sixth Circuit Judge Bernice Donald dissented in Canaday, contending that Bristol-Myers does not apply to FLSA collective actions because the Supreme Court in that case addressed only the limitations of state courts, not federal courts, in their exercise of personal jurisdiction over nonresidents.

In Waters, the First Circuit largely followed the reasoning in Judge Donald’s dissent, concluding that the Supreme Court’s decision in Bristol-Myers Squibb “rest[ed] on Fourteenth Amendment constitutional limits on state courts exercising jurisdiction over state-law claims” and thus did not control whether a federal court could exercise jurisdiction over federal claims asserted by nonresident plaintiffs. The First Circuit also observed that the plain language of Rule 4(k) of the Federal Rules of Civil Procedure merely concerns the service of summonses and does not “constrain[] a federal court’s power to act once a summons has been properly served, and personal jurisdiction has been established.”

Key Takeaways

The Supreme Court’s decision to deny the petitions means that employers with nationwide footprints continue to live with potentially inconsistent rulings on the question of whether a federal district court has jurisdiction to hear claims of out-of-state workers when the defendant is neither headquartered nor incorporated in the state. Canaday and Vallone stand to significantly limit the size and geographic scope of FLSA collective actions in the Sixth and Eighth Circuits, absent a district court’s exercise of general jurisdiction over a corporate defendant, while Waters permits nationwide jurisdiction in the First Circuit. For now, at least, multistate employers face continued uncertainty on the issue until courts of appeals in the remaining circuits weigh in.

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Intra-Class Conflict Dooms Auto Insurance Class Action in Fifth Circuit

Last week the Fifth Circuit issued a short opinion that made an important point that does not arise often in class certification decisions. Class certification failed because the plaintiffs’ proposed theory of liability would benefit only some class members and disadvantage others, who would be overpaid if the plaintiffs’ theory were correct. For that reason alone, the plaintiffs could not adequately represent the class.

Prudhomme v. Government Employees Insurance Company, No. 21-30157, 2022 WL 510171 (5th Cir. Feb. 21, 2022) (per curiam) was similar to another case I recently wrote about—the plaintiffs claimed that their insurer undervalued their vehicles that were deemed total losses, in violation of Louisiana statutes. Sidestepping questions about commonality and predominance, which are usually the focus of class certification decisions, the Fifth Circuit affirmed the denial of class certification because the adequacy of representation requirement was not met. This was because “a portion of the proposed class members received payments above (that is, benefitted from) the allegedly unlawful valuation.” According to the district court opinion, an expert witness opined that approximately one-fifth of the class would have received less on the plaintiffs’ theory than they received from GEICO. While the plaintiffs argued that class members who were overpaid on their theory might still be entitled to some damages under Louisiana law, that would likely create a typicality problem. Class representatives cannot adequately represent a class if they offer “a theory of liability that disadvantages a portion of the class they allegedly represent.”

Look out for this type of issue the next time you are litigating a class action. It might be lurking in your case when you peel back the onion.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.
For more articles about class-action lawsuits, visit the NLR Litigation section.

5th Circuit Rejects Request from United Airlines Employees to Block Company’s COVID-19 Vaccine Mandate

In a decision from the New Orleans-based Fifth Circuit, in a bid to block the company’s COVID-19 vaccine mandate, a divided court rejected an emergency request for an injunction from United Airlines employees. The request came in the wake of a November ruling by a federal judge in Fort Worth, Texas, which also ruled in favor of United Airlines.

United Airlines was the first major air carrier to implement a vaccine mandate and has so far granted about 2,000 exemptions. Its policy would place on unpaid leave any employees who fail to get the COVID-19 vaccine (and who fail to qualify for an exemption). The key question, in this case, is the extent to which United Airlines has accommodated employees’ religious or medical exemptions. The six plaintiffs claim that United Airlines’ policy is a violation of Title VII of the Civil Rights Act of 1964, which, among other things, requires employers to make reasonable accommodations for all aspects of an employee’s religious beliefs, absent “undue hardship on the conduct of the employer’s business.”

While the Fifth Circuit did not rule on the merits, two of the three judges denied the motion for an injunction citing previous decisions but did not offer any additional reasoning. Judge James C. Ho dissented asserting that the mandate placed a substantial burden on one’s religion and calling the harm a “quintessentially irreparable injury, warranting preliminary injunctive relief.” The Fifth Circuit did, however, grant a request from the plaintiffs for an expedited appeal. That hearing and the court’s decision should provide some guidance on the legal constraints and guidelines for COVID-19 vaccine mandates.

This article was written by Nelson Mullins attorneys Mitch Boyarsky and Benjamin Lichtman. For more articles regarding vaccine mandate challenges, please click here.

The Tail of a Dog with Two Hats: Fifth Circuit Upholds “Golden Share” Held by Creditor Affiliate

On May 22, 2018, the United States Court of Appeals for the Fifth Circuit issued its decision in Franchise Services of North America v. United States Trustees (In re Franchise Services of North America), 2018 U.S. App. LEXIS 13332 (5th Cir. May 22, 2018). That decision affirms the lower court’s holding that a “golden share” is valid and necessary to filing when held by a true investor, even if such investor is controlled by a creditor.

The backdrop of mergers and acquisitions leading up to this case need not be retold in detail to understand the holding’s significance, but some context is helpful. Franchise Services of North America, Inc. (“FSNA”), one of North America’s largest car rental companies, filed for chapter 11 bankruptcy without the required consent of its sole holder of preferred stock, Boketo, LLC (“Boketo”). Boketo was a minority shareholder that had invested $15 million in FSNA  making it FSNA’s single largest investor. Boketo is a wholly-owned subsidiary of investment bank Macquarie Capital (U.S.A.) (“Macquarie”), an unsecured creditor of FSNA’s by virtue of an alleged $3 million claim for fees incurred in connection with the aforementioned transactions. When Boketo invested $15 million in FSNA, it required FSNA to re-incorporate in Delaware and add a “golden share” provision to its corporate documents, i.e. Boketo’s affirmative vote of its preferred share was required for certain corporate events, such as filing bankruptcy. Nonetheless, FSNA eventually filed for chapter 11 in the Southern District of Mississippi without seeking Boketo’s consent, fearing that shareholder Boketo—controlled by creditor Macquarie—would not consent to filing.

Macquarie and Boketo filed motions to dismiss the case for a lack of corporate authority under FSNA’s amended corporate charter. In doing so, Macquarie donned two hats—that of a shareholder through Boketo and that of an unsecured creditor with a $3 million claim. FSNA asserted that Macquarie used Boketo as a “wolf in a sheep’s clothing” to equip a creditor with shareholders’ blocking rights under an allegedly unenforceable “blocking provision” or “golden share.” FSNA implied the tail had been wagging the dog—that Macquarie made the $15 million investment through Boketo to avoid the cost and inconvenience of trying to collect some portion of its $3 million claim in FSNA’s bankruptcy. The bankruptcy court denied Macquarie’s motion because case law and public policy forbid a creditor from preventing a debtor’s bankruptcy filing. However, it granted Boketo’s motion, given its status as a voting shareholder. The Fifth Circuit affirmed, and found FSNA’s theory that Macquarie chased $3 million with $15 million “strain[ed] credulity.”

FSNA’s various legal arguments each fell flat. First, FSNA sought a ruling that “blocking provisions” or “golden shares” (similar, but not identical, concepts), in general, are unenforceable under Delaware law. The Fifth Circuit declined to offer such an advisory opinion. Second, FSNA contended that even if Delaware law allowed these types of provisions, federal policy forbids them. This, too, failed to move the court, since the corporate charter did not eliminate FSNA’s ability to file bankruptcy. Instead, it specified which parties’ consent was necessary to authorize a bankruptcy filing, placing the decision with shareholders. Third, because authority to file bankruptcy is a matter of state law, FSNA argued that Boketo could not exercise its blocking right under Delaware law, and that Boketo had owed a fiduciary duty to facilitate the filing. The Fifth Circuit held that Delaware law, flexible by nature, allows a corporate charter to assign rights to shareholders that would ordinarily be assigned to directors/management, but declined to go so far as to determine whether such provision was valid under Delaware law. In addition, the court refuted FSNA’s fiduciary duty argument because only controlling minority shareholders owe fiduciary duties, and here, Boketo was a non-controlling minority shareholder. The court explained that the standard for minority control is a “steep one,” and that courts focus on control of the board—i.e., whether the minority shareholder can exert actual control over the company. While Boketo made a sizeable investment in FSNA, it only had the right to appoint 2 out of 5 directors and therefore could not exert actual control over the board. FSNA pointed to Boketo’s hypothetical ability to prevent bankruptcy as evidence of actual control, but the court distinguished such theoretical control from actual exertion thereof. The court keenly noted that FSNA defeated its own control argument when it filed bankruptcy without Boketo’s consent—if Boketo was a controlling shareholder, then once again the tail must have been wagging the dog.

Franchise Services highlights the potential for a creditor to essentially step into a shareholder’s shoes and assert shareholder rights pursuant to a corporate charter’s blocking provision or “golden share” by virtue of wearing two hats through a parent and subsidiary.

© 2018 Bracewell LLP.

This post was written by Logan Kotler and Jason G. Cohen of Bracewell LLP.

Texas Judge Not Persuaded, Permanently Enjoins DOL’s New Reporting Rule

Stop, Rain, DOL Persuader ruleIn a major victory for the business community, Judge Sam R. Cummings of the U. S. District Court for the Northern District of Texas issued a permanent nationwide injunction blocking the Department of Labor (DOL) from enforcing its new “persuader” rule. National Federation of Independent Business, et al. v. Perez, et al., Case No. 5:16-cv-00066. The rule attempted to expand disclosure requirements by employers and their consultants (including attorneys) related to union-organizing campaigns.

The new rule, which Judge Cummings had preliminarily enjoined prior to its effective date of July 1 of this year, would have greatly increased the reporting requirements under Section 203 of the Labor Management and Reporting Disclosure Act. That section requires employers and their labor relations consultants to disclose the terms (including financial terms) of any arrangement by which the consultant provides services that are intended to directly or indirectly persuade employees concerning their rights to organize a union or to bargain collectively with their employer.

For years, the DOL took the position that no reporting was required unless the consultant had direct contact with employees by way of in-person meetings, telephone calls, letters, or emails. Similarly, no reporting was required if the consultant’s activities were limited to providing sample materials such as speeches, postings, letters to employees, and the like that the employer was free to accept, reject, or modify.

However, the new persuader rule expanded the disclosure requirements to include indirect contact with employees by the consultant, including:

  • Directing, planning, or coordinating the efforts of managers to persuade employees

  • Providing materials such as speeches, letters, or postings that are intended to persuade employees

  • Conducting union avoidance seminars if the consultant assists the employer in developing anti-union strategies

  • Developing personnel policies intended to persuade employees in the exercise of their organizational or collective bargaining rights.

The attorneys general for 10 states as well as various business groups challenged the new rule as infringing on employers’ First Amendment rights and conflicting with the attorney-client privilege. Judge Cummings agreed that the rule is unlawful and should be set aside. Presently, it is unknown if DOL intends to appeal Judge Cummings’ order.

ARTICLE BY Henry W. Sledz Jr. of Schiff Hardin LLP

Breaking News: Refusing to Allow an Employee to Rescind His Or Her Voluntary Resignation Can Get You Sued

Here is the scenario. Your employee decides to voluntarily resign. She gives plenty of notice. Before her scheduled end date, the employee provides information relevant to a sexual harassment investigation involving her supervisor. Before the scheduled end date, the employee tries to rescind her employment. The supervisor refuses. Here’s the question: Is the refusal to allow the employee the opportunity to rescind her resignation an “adverse employment action” for purposes of a retaliation claim?

It could be, at least according to the Fifth Circuit Court of Appeals. A similar scenario played out in Porter v. Houma Terreboone Housing Authority. According to the court:

“Just as an at-will employer does not have to hire a given employee, an employer does not have to accept a given employee’s rescission. Failing to do so in either case because the employee has engaged in a protected activity is nonetheless an adverse employment action.”

This is something employers need to be aware of. Remember: thoroughly investigate all work place harassment claims. Also, separate the subject of the investigation from any decisional process regarding the employee’s employment. In a perfect world, the decision-maker would not have any knowledge regarding the employee’s “protected activity.”

© 2015 BARNES & THORNBURG LLP

Fifth Circuit Rules Employer-Mandated Transit Time May Make Lunch Break Compensable

The Fifth Circuit Court of Appeals, which has jurisdiction over Texas, Louisiana and Mississippi, ruled recently that security guards’ “off-the-clock” meal periods may be compensable when they were required to travel for 10 to 12 minutes from their work stations to get their meals.  Naylor v. Securiguard, Inc., No. 14-60637 (5th Cir. Sept. 15, 2015) available here.

The private security guards in Naylor were required to leave their work sites and travel to other locations for meals or breaks in order to preserve the appearance of the worksite. The court reasoned that a jury could find this mandated transit time predominately benefited the employer, rather than the employee, making it compensable under the Fair Labor Standards Act (“FLSA”).

The court noted that, when this mandated round trip travel time to break areas was only a few minutes in duration, it is “de minimis” and would not transform the 30-minute break to compensable time. However, at some point, employer-mandated travel time during an employee’s lunch break shortens the length of the break enough to make it a compensable “rest” period. Under the FLSA, “rest” periods of 20 minutes or less are generally compensable because they are considered to benefit the employer by rejuvenating the employee. Ten to twelve minutes of transit time cut too much into the “lunch breaks.”

Significantly, the court did not set a bright line rule for the precise number of transit minutes an employer may require away from the work station during a lunch break before the entire break becomes compensable.

The conversion to compensable time may entitle the employees to both compensation for the 30-minute meal periods and resultant weekly overtime once that time is added to other hours worked.

The ruling also raises questions of whether the mandatory transit time rationale applies to breaks required in other contexts, such as offsets to “30-minute” break requirements under collective bargaining agreements or state laws, or to other break activities, such as clothes changing, going through security or reassigning equipment. Providing employees written notice of which break-related activities are required and clearly stating their options to eat meals and engage in other break activities without mandatory transit or other activities that may reduce their meal periods might preclude any such issues.

© 2015 Bracewell & Giuliani LLP

Fifth Circuit Refuses Application of Bright-Line Test in FLSA Seaman Exemption Dispute

Proskauer Law firm

On November 13, 2014, the Fifth Circuit addressed the uncertainty stemming from its decision in Owens v. SeaRiver Maritime, Inc., 272 F.3d 698 (5th Cir. 2001), wherein the Court found that a plaintiff’s unloading and loading of vessels was considered “nonseaman” work subject to the Fair Labor Standards Act’s (“FLSA”) overtime requirements. Subsequent to that decision, plaintiffs have advocated for a broad application of Owens’s rule, and district courts struggled with Owens’s  application to what are often fact-driven cases.

The Fifth Circuit provided necessary clarity in Coffin v. Blessey Marine Services, Inc., No. 13-20144, 2014 WL 5904734 (5th Cir. Nov. 13, 2014), when it reversed the district court on an interlocutory appeal and held that vessel-based crewmembers tasked with loading and unloading vessels are seamen under the FLSA rendering them exempt from the FLSA’s overtime requirements under 29 U.S.C. § 213(b)(6). In so ruling, the Fifth Circuit limited its prior holding in Owens, by finding that the unloading and loading of vessels is not strictly “nonseaman” work, and that each individual and case must be analyzed under a facts-and-circumstances test. Significantly, in dicta, the Court intimated that the Department of Labor’s “twenty percent rule,” which states that an employee loses his seaman status when “nonseaman” work occupies over twenty percent of his time, is also not a bright-line test.

Plaintiffs are tankermen who lived and worked aboard Defendant’s vessels. Though the parties and the court agreed that most of Plaintiffs’ job duties were “seaman” work exempt from the FLSA’s overtime requirements, Plaintiffs filed suit alleging that their job duties related to the loading and unloading of vessels constituted “nonseaman” work for which overtime pay was owed. Plaintiffs and the district court relied on the Fifth Circuit’s prior holding in Owens, and the district court denied Defendant’s motion for summary judgment. The district court and the Fifth Circuit granted Defendant’s interlocutory appeal under 29 U.S.C. § 1292(b).

Following oral argument, the Fifth Circuit issued its decision, which disagreed with Plaintiffs’ and the district court’s interpretation and application of Owens. Importantly, the Fifth Circuit distinguished Owens and emphasized that the analysis under the FLSA’s seaman exemption is a fact-based and flexible inquiry not subject to bright-line, categorical rules. The Court reasoned that the analysis required the consideration of the character of the work performed and the context in which it is performed and not the consideration of where the work is performed or how it is labelled. Unlike in Owens where the plaintiff was a non-crewmember who was not tied to a vessel and who only sought overtime for land-based loading and unloading, the Plaintiffs in this case lived on Defendant’s towboats, and their loading and unloading duties undisputedly affected the seaworthiness of the vessels and were integrated fully with their other seaman duties. Therefore, considering the character and context of the work performed, the Court concluded that the Plaintiffs’ unloading and loading duties were seaman work, thus exempting Plaintiffs from the FLSA’s overtime requirements.  For these reasons, the Court vacated the lower court’s ruling and remanded the matter to enter judgment in favor of Defendant.

OF