Toyota Lawsuits Consolidated

A panel of federal judges announced on Friday that sudden acceleration cases will be consolidated in the United States District Court for the Central District of California in Santa Ana, California.  Judge James V. Selna will preside over the lawsuits, which will be combined as In Re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation, MDL 2151, U.S. District Court, Central District of California (Santa Ana).

The decision impacts at least 177 consumer and shareholder lawsuits seeking class-action status and at least 57 individual suits claiming personal injuries or deaths caused by sudden acceleration incidents.

The consumer lawsuits seek damages for Toyota owners whose vehicles have lost value since the company initiated recalls in September 2009.  The shareholder lawsuits allege that the company hid damaging information from investors, fraudulently inflating the company’s share price.

Regulators Crack Down on Unpaid Internships

Labor regulators from California, New York and the U.S. Department of Labor are cracking down on employers’  improper use of unpaid interns.  Meanwhile, sources such as the National Association of Colleges and Employers report that the number of unpaid intenships continues to rapidly grow.

The Fair Labor Standards Act requires employers to pay employees the federal minimum wage, plus overtime, unless their jobs qualify for a statutory exemption.  The FLSA creates a limited exemption for “trainees,” the category into which unpaid interns should fall.  To qualify for the exemption, a trainee’s position must satisfy a six part test, excerpted below.  Essentially, the job must be educational; primarily for the benefit of the trainee; not at the expense of paid employees; and not a prerequisite to permanent employment. 

The Six Part FLSA “Trainee” Test

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
2. The training is for the benefit of the trainees;
3. The trainees do not displace regular employees, but work under their close observation;
4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

 Other states impose different or additional requirements.  In California, for example, unpaid interns must receive college credit.

The temptation exists, particularly in this economy, to take this issue lightly.  Arguably, giving an unpaid intern “real work” is not only a victimless crime, it is mutually beneficial to the intern and the employer.  Students need experience to enter the work force and unpaid internships are a low risk, low cost avenue for employers to provide students with such experience.  But there is another potential set of victims here: employees who are displaced by illegal, unpaid labor.  Is it fair for an employer to dump paid employees in favor of interns who are willing to work for free?  The labor laws say it is not.

Transportation Seeks Max Fine From Toyota

U.S. Transportation Secretary Ray LaHood announced on Monday that the government would seek the maximum available civil penalty–$16.4 million dollars–from Toyota for its failure to notify it about safety problems with the accelerators in its vehicles.  Click here to read Secretary LaHood’s  press release.

The fine is being sought under the Tread Act.  The U.S. enacted the Tread Act in the wake of the Firestone tire recall.  The Act requires car makers to notify the National Highway Traffic Safety Administration of safety defects within five business days of their discovery.

In Toyota’s case, it issued repair instructions for sticky accelerators in European countries and Canada back in September 2009.  It did not, however, initiate recalls of American sold cars with sticky accelerators until several months later.   This, according to LaHood, proves that “Toyota failed to live up to its legal obligations. Worse yet,” he added, “they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.”

Toyota has two weeks to accept or contest the proposed fine.  The company will likely contest the fine.  Although $16.4 million is a modest sum for Toyota–especially weighed against the billions they stand to lose in civil lawsuits–paying the fine would be tantamount to an admission of guilt both in the public consciousness and, potentially, in related litigation against the company.

Service Sector Expands at Greater Than Predicted Rates

The Institute for Supply Management  announced on Monday that its service index rose from a rating of 53 in February to 55.4 in March, beating the 54 rating projected by economists surveyed by Thomson Reuters.  Any reading above 50 signals expansion.

The numbers indicate that the service sector, which includes 80 percent of U.S. jobs (including restaurant workers), grew at its fastest pace in more than two years, perhaps suggesting a broader economic recovery.  Since the service sector is highly dependent on consumer spending, the numbers likely reflect an uptick in consumer confidence.  

Good news for service industry employers…and their employees.