Tag Archives: Fair Labor Standards Act

Is Your Company’s “Flexible Scheduling” Policy a Violation of Wage and Hour Law?

Contributed by Amanda Biondolino, October 25, 2017

An employer who allows its employees the “flexibility” to self-schedule time off the clock must make sure that it is paying its employees for all time worked. And beware, under the Fair Labor Standards Act (FLSA), “hours worked” is not limited to only that time an employee spends performing his or her job duties. Short breaks of twenty minutes or less are also counted as hours worked and must be paid.

The Third Circuit Court of Appeals recently held as a bright-line rule: Where breaks of twenty minutes or less are in question, the time must be paid. The court adopted the U.S. Department of Labor policy rationale that “breaks of twenty minutes or less are insufficient to allow for anything other than the kind of activity (or inactivity) that, by definition, primarily benefits the employer.” There will not be a factual analysis, or a case-by-case determination. Simply stated, if an employee is at the worksite, and is taking time away from their work-related duties for twenty minutes or less, they must be compensated for that time.

In the case decided by the Third Circuit, the employer did not deny that it permitted its call-center employees to log off their computers and use their time free from any work related duties, but it refused to call those time periods “breaks.” Rather, the employer considered it part of a “flexible time” policy, in which employees could take an unlimited amount of unpaid time away from work at any time, for any duration, and for any reason.

The court rejected the employer’s attempt to characterize time in a way that deprived employees of rights they were entitled to under the FLSA and considered the time an employee spent logged off the computer as a “break.” The employer violated the FLSA by not compensating employees for breaks that lasted twenty minutes or less.

Bottom Line: This is a reminder to employers that all policies and procedures should be vetted by experienced labor and employment counsel. In addition, all time worked including break periods should be accurately recorded, not only to comply with the record-keeping requirements of FLSA, but to document any abuse.

Employers should also keep in mind that some states may have their own break requirements that employers in those states must follow. Therefore, it is imperative that employers review their break policies and check applicable laws to ensure compliance with both federal and state law.

Although federal wage and hour laws do not generally mandate employee breaks, and state laws may vary, a strict policy that forces employees to choose between getting paid and basic necessities such as using the restroom runs contrary to “humanitarian and remedial” purpose of the act and will violate the law. These kinds of short breaks must be compensated. The FLSA and corresponding state wage and hour laws are designed to protect employees, and will be liberally construed.

 

 

Court Lays Out Guidance for Ensuring Hourly Workers Are Paid for Off-Duty Work

Contributed by Steven Jados, October 11, 2017

Wage-Hour2

Addressing an employment issue of interest in an increasingly digital world, the Seventh Circuit Court of Appeals (which has jurisdiction over lower federal courts in Illinois, Indiana, and Wisconsin­­) recently upheld a prior ruling that the City of Chicago was not liable for paying wages for certain employees’ off-duty work time.

In the case of Allen v. City of Chicago, employees who alleged they were not compensated for off-duty work performed on their mobile devices were not entitled to recovery for that unscheduled, overtime work. Agreeing with the trial court’s decision that the City was not aware of the overtime work, and that the employees were not prevented or discouraged from reporting off-duty work time and seeking pay, the court ruled that the City should not be held liable.

In the decision, the court stated that the City would have been liable for unpaid wages it knew or should have known about the work at issue through the exercise of “reasonable diligence.” Under the Fair Labor Standards Act, an employer must pay for all work it knew or should have known was being performed. Moreover, an employer is considered to have knowledge of the work if it should have known about it through the exercise of reasonable diligence. The court’s decision further illustrates and offers guidance on how employers can exercise such reasonable diligence:

For instance, it is important that employers institute a method by which any time worked outside of the normal business day can be reported in order to be compensated. In this case, the court found that the City of Chicago exercised diligence by allowing employees to submit “time due slips” on which they listed their off-duty hours worked along with a brief, albeit vague, description of the work performed.

Employers should also establish a reasonable policy and process for employees to report uncompensated work time after noticing a shortfall in pay. Such a process might involve an employee handbook provision that instructs employees to carefully review their paychecks, every pay period, to ensure that the paycheck accurately reflects all time actually worked. The handbook should also instruct employees to contact human resources or another appropriate member of management if a paycheck is short.

Lastly, in order to avoid landing on the wrong side of a legal decision, employers must take employee complaints under such a policy seriously by thoroughly investigating and adjusting compensation due when it is determined that there is a shortfall in the employee’s pay.

Bottom Line: Bearing all of this in mind, especially in the modern workplace, employers that have hourly employees who check e-mail, make calls, or conduct any other work outside of normal business hours on their cell phones, must heed the Seventh Circuit’s guidance by implementing and enforcing strong and clear policies that meet the “reasonable diligence” standard to ensure that employees are properly compensated for all hours worked.

IMPORTANT DOL UPDATE: The Final Rule on Doubling White Collar Salaries Is Shot Down By Texas Judge

Contributed by Heather Bailey, September 6, 2017

31096470 - concept of time with businessman that hold an alarm clock

Concept of time with businessman holding a clock

Previously, we reported to you on the U.S. Department of Labor’s (“DOL”) Final Rule that raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (“FLSA”) “white-collar” exemptions (executive, professional and administrative classification) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) as of December 1, 2016 (see our prior articles: U.S. DOL Publishes Final Overtime Rule and; Are you ready for December 1st? The FLSA Salary Changes Are Almost Here).

The Obama administration’s goal with this Final Rule, announced on 5/23/2016, was to give approximately 4 million workers the ability to earn overtime pay, instead of getting paid a fixed salary since many employers would not be able to afford to pay their otherwise exempt employees $47,476 annually. Implementation of this new rule had been temporarily stalled in a federal court in Texas just prior to it going into effect this past December 1st (see our prior articles: Court Enjoins DOL Overtime Rule and; Business Realities Under the Halted DOL Final Overtime Rule).

However, on August 31, 2017, Judge Amos L. Mazzant of the United States District Court, Eastern District of Texas answered many business owners’ prayers by ruling the DOL indeed exceeded its authority by more than doubling the minimum salary threshold for exempting white-collar employees (see the full case here).

The judge did not say the DOL could not raise the minimum salary at all. Rather, relying heavily on Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), the judge stated that by more than doubling the current minimum threshold, the DOL effectively eliminated the need for looking to the employees’ actual duties and responsibilities—which was the essence of Congress’s intent when it created the FLSA white collar exemptions. The judge looked to the plain meaning of what it means to work in an executive, administrative and professional capacity concluding the primary focus was not the salary minimum but instead the actual duties and responsibilities.

What are the ramifications? The Department of Justice voluntarily dismissed its appeal of Judge Mazzant’s earlier preliminary injunction ruling putting the Final Rule on hold, so it seems unlikely it will appeal this ruling. However, this decision could catapult the Trump administration to issue a new rule providing for a more moderate increase in the minimum salary threshold – one that does not vitiate the primary focus of the “white collar” overtime exemptions: the employees’ actual duties and responsibilities.

Practice Tips:

  • The good news for now is that employers can continue to follow the previous DOL regulations for white collar exemptions (i.e., duties test and salary test).
  • If you did not do so previously, analyze your exempt positions to confirm they meet the duties test and are truly exempt positions. For example, is your manager truly a manager or is she really a lead worker? Is this manager hiring, firing and disciplining two or more employees?  Is your payroll clerk clearly just doing data entry or is he exercising independent discretion and judgment?  If the position does not meet the duties test, you transitioning the position to make it overtime eligible.
  • Ensure management is trained to enforce policies related to overtime pay such as those relating to working time, time clock procedures, meal and rest breaks, working off the clock issues, etc.
  • Did you already make changes to your employees’ pay or duties based upon the final rule going into effect on December 1, 2016?  While there are ways to change those decisions (i.e., you can change an employee’s pay moving forward for work not yet performed), you need to keep in mind morale issues for employees whose compensation may decrease either by way of a salary reduction or loss of overtime pay.  In these situations, it is highly recommended that you work with your counsel on determining the best practices for your business and your workforce.

With the judge’s ruling, many business owners will be able to find some comfort in being able to keep their exempt employees on a reasonable salary without having to break the bank.

For Employee to Be Compelled to Pursue FLSA Claims Pursuant to Contract Grievance Procedures, Language of CBA Must be Clear and Unmistakable

Contributed by Carlos Arévalo, June 6, 2017

On May 15, 2017, the seventh circuit ruled that unless the language in a collective bargaining agreement (“CBA”) explicitly states that the employee must resolve his statutory and contractual rights through the grievance procedures in the contract, an employee is free to file suit in court to resolve his statutory claims.

36419114 - hand about to bang gavel on sounding block in the court room

Judge holding gavel 

After being terminated from employment, Luis Vega, a seasonal employee at Forest Home Cemetery, attempted to collect unpaid wages by resorting to the grievance procedures of his CBA.  When these efforts proved futile, Vega filed a Fair Labor Standards Act (FLSA) claim in the United States District Court for the Northern District of Illinois. Vega’s employer filed a motion to dismiss based on Vega’s failure to exhaust the grievance procedures in the CBA. Judge Charles Norgle agreed with the employer’s argument and entered judgment against Vega.

On appeal before the seventh circuit, the employer asserted that the CBA, by establishing a grievance procedure to resolve disputes over pay, compelled Vega to go through said procedure to resolve his FLSA claim. This argument prompted the question of whether the terms of the CBA required Vega to resolve his FLSA wage claims through its grievance procedures, or whether Vega could pursue a FLSA claim in court even if he had not yet exhausted his contractual remedies.

Writing for the court, Judge Ilana Rovner ruled in Vega’s favor reversing the district court ruling. In the decision, the court noted that an employee has statutory as well as contractual rights and that the former are independent from any rights under the union contract. Moreover, citing 14 Penn Plaza LLC v. Pyett, a 2009 Supreme Court case, the court also stated that an agreement to arbitrate statutory claims is enforceable against an aggrieved employee if the language of the agreement to that end is “clear and unmistakable.” In Vega’s case, the court found that generalized language regarding pay disputes was insufficient and that the agreement could not be read to compel an employee to resolve his rights under FLSA through the grievance process. Accordingly, Vega did not have to exhaust his contractual remedies.

The Vega decision clearly establishes that employers looking to have statutory claims resolved through arbitration grievance procedures must pursue explicit language to that end. However, before doing so, employers should carefully consider if arbitration represents the best method for resolution of such claims. Grievance procedures may be suitable for resolution of some statutory rights, but not for others. And while arbitration may expedite claims and even limit remedies, vacating unfavorable awards can be an unsurmountable task. Bottom line, before bargaining for such language, employers should consult counsel to determine the proper course of action.

Student Interns Do Not Equal Free Labor

Contributed by Noah A. Frank, July 26, 2016

43608970 - internshipFall is around the corner, and with it comes student interns bolstering their resumes. Interns can benefit companies by cutting down some of the workload; however, employers need to be aware that wage and hour laws can apply to interns.

The federal Fair Labor Standards Act (FLSA) mandates that nearly all employees be paid minimum wage and overtime for hours worked over 40 in a week. One FLSA exemption is for bona fide interns.

The U.S. DOL applies a fact-specific inquiry to determine whether an internship may be unpaid because “no employment relationship exists.”

  • The internship, which may include “real work,” is similar to training which would be given in an educational environment;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The intern is not necessarily entitled to a job at the conclusion of the internship;
  • The employer and the intern understand that the intern is not entitled to wages;
  • The internship experience is for the benefit of the intern; and
  • The employer derives no immediate advantage from the intern’s activities, and may even be impeded by the internship.

While the Supreme Court has not spoken on the issue, trial and appellate courts have split between applying the DOL’s test (above), and a flexible “Predominant Benefit Test” (“PBT”). The PBT uses non-exhaustive factors, including the first four factors of the DOL test, to evaluate internships in the modern era. Some additional factors may include:

  • The extent to which the internship is tied to the intern’s formal education by integrated coursework or the receipt of academic credit.
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

While a topic for another day, it bears mention that (1) a for-profit business may never have “volunteers,” and (2) public agency/non-profit employees may not volunteer for the same agency for the same type of work.

Internships Done Right

Employers should continue to embrace internship programs as a means of developing the future labor force, and identifying potential workers without all of the risks associated with employment, including wages and taxes.

Steps to Implement a Successful Intern Program:

  1. Develop the program, considering educational goals, work tasks, and supervision.
  2. Ensure any company benefit from the intern’s work is outweighed by the intern’s benefit. Particular advance analysis may save future headaches.
  3. Use a written engagement agreement clearly stating (i) compensation, if any, (ii) the length of the program, and (iii) that there are no expectations of any future employment at the end.
  4. Employment counsel should audit the program to ensure it will survive administrative agency, plaintiff’s counsel, and judicial scrutiny.

The DOL Issues An Administrator’s Interpretation On Joint Employment Under The FLSA And MSPA

Contributed by Julie Proscia

The Department of Labor’s Wage & Hour Division (“WHD”) issued an Administrator’s Interpretation today that establishes new standards for determining joint employment under the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”) and the Fair Labor Standards Act (“FLSA”). The issue of joint employment and who is the employer, for purposes of liability, is one that has become increasingly more contested and is part of the DOL’s crackdown on issues ranging from independent contractor status to the proposed rules regarding exempt/non-exempt status.

Labor LawA finding of joint employment has significant ramifications on a number of areas of policy and procedure, none more so than to wage and hour practices. The purpose of the Administrator’s Interpretation is to expand the statutory coverage of the FLSA to small businesses and collect back wages from larger businesses. As such, the Administrator’s Interpretation states that “the concept of joint employment, like employment generally, should be defined expansively under the FLSA and MSPA.” While the Administrator’s Interpretation is impactful on all industries, it specifically identifies the construction (workers who work for a sub-contractor and possibly a general contractor), staffing, agricultural, janitorial, warehouse and logistics, and hospitality industries.

So what is joint employment and when is it found? Joint employment exists when an employee is employed by two (or more) employers such that the employers are responsible, both individually and jointly, for compliance with a statute.

While this definition is not new, the DOL interpretation presents two specific categories or routes for joint employment — vertical and horizontal. A vertical joint employment relationship focuses on the employee’s relationship with the employer and another intermediary entity, while the horizontal joint employment is defined as a relationship between or amongst two or more employers that “are sufficiently associated or related with respect to the employee such that they jointly employ the employee.”

Vertical Joint Employment

The most striking announcement occurred in the Vertical Joint Employment arena where the Administrator’s Interpretation adopted the “economic realities” test in lieu of the current evaluation. The crux of the economic realities test is an examination as to who the employee is economically dependent on. There is no hard line rule as to this test but rather multiple factors that can be examined. The MSPA regulations have seven economic reality factors that are examined in this determination. These factors include:

1. Directing, Controlling, or Supervising the Work Performed

Who exercises the direction, control and or supervision of the employee, whether directly or indirectly?

2. Controlling Employment Conditions

Who controls the employees terms and conditions of employment? This factor looks at which entity or entities have the ability to do such things as set wages, discipline, hire or fire the employee.

3. Permanency and Duration of Relationship

How long has the employee worked at the entity? Again, although there is no bright line date for the formation of joint employment a longstanding or permanent, full-time relationship suggests economic dependence.

4. Repetitive and Rote Nature of Work

What is the nature of the work? Positions that are viewed as repetitive and require little or no training are more likely to tip in the favor of economically dependent.

5. Integral to Business

How important is the work to the business? Conversely, if the employee’s work is deemed an integral part of the employer’s business then the employee may be deemed economically dependent on the potential joint employer.

6. Work Performed on Premises

Where is the work performed? Work performed on the potential joint employer’s premises is more likely to be viewed as employment that is economically dependent.

7. Performing Administrative Functions Commonly Performed by Employers

Are the functions administrative or creative? Administrative functions like processing payroll, workers’ compensation insurance or facilities and transportation are areas that are potentially viewed as dependent and thus could be deemed as joint employment.

As in all factor tests, there is a balance and just because the employee meets one factor does not necessarily mean a finding of economic dependence, and thus joint employment, under the vertical analysis. Rather, the factors will need to be examined as a whole.

Horizontal Joint Employment

The horizontal joint employment analysis did not substantially change, rather the DOL will continue to utilize the current joint employment regulations and examine the following non-inclusive factors:

  • who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners)?
  • do the potential joint employers have any overlapping officers, directors, executives, or managers?
  • do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs)?
  • are the potential joint employers’ operations inter-mingled? (for example, is there one administrative operation for each employer, or does the same person schedule and pay the employees regardless of which employer they work for?)
  • does one potential joint employer supervise the work of the other?
  • do the potential joint employers share supervisory authority for the employee?
  • do the potential joint employers treat the employees as a pool of employees available to both of them?
  • do the potential joint employers share clients or customers?
  • are there any agreements between the potential joint employers?

The announcement of the Administrative Interpretation is a continuation of the administration’s expansion of the joint employer definition. This expansion is not exclusive to the DOL and was most notably seen in the 2015 Browning-Ferris decision, where The National Labor Relations Board, through its General Counsel, filed multiple lawsuits against a franchisor for alleged unfair labor practices committed by its franchisees, and by doing so took the broadest possible interpretation of joint employment.

Whether or not joint employment exists is an issue that is fact and position intensive, and one that is not diminishing in the near future. Employers should work with counsel to assess their relationships, employees, and contracts to ascertain potential areas of weakness and diminish liability. It is never a good thing to be on the hook for someone else’s misdeeds.

 

City Not Liable for Overtime with Respect to Police Officers’ Off-Duty Use of Work-Issued BlackBerrys

Contributed by Debra Mastrian

A Fair Labor Standards Act (FLSA) collective action lawsuit, filed over five years ago by Chicago police officers who claimed they were not paid overtime for their off-duty use of work-issued BlackBerrys, went to a bench trial in August, and the federal judge recently ruled in the City’s favor.  Although the court, in Allen, et al. v. City of Chicago, Case No. 10-C-3183 (N.D. Ill. Dec. 10, 2015), found that the police officers were performing compensable overtime work on their devices while off-duty, the police officers failed to prove that there was an unwritten policy to deny them compensation for that work.

pay overtimeThe police officers used their BlackBerrys to communicate by telephone and email with others in connection with police investigations. Some of the police officers testified that they felt obligated to monitor their BlackBerrys while off duty and return phone calls and emails, but were afraid to turn in overtime requests. There was no official policy of denying overtime requests for using the devices while off duty. The city had a policy of requiring police officers to complete and submit overtime reports. Dozens of other police officers had in fact submitted overtime reports for work done on their BlackBerrys, which the city approved and paid. There was no proof the supervisors knew if or when the police officers were working on their devices off duty without submitting overtime reports. There was also no proof that the supervisors had created a culture or unwritten policy discouraging the police officers from reporting any overtime work.

Under the FLSA, an employer must pay overtime to non-exempt employees for all hours worked in excess of 40 in a work week. (There are some exceptions to the standard work week for certain types of workers, including police officers, but not overtime generally). This includes work that is requested not only by an employer, but also work that is “suffered or permitted.” Consequently, if an employee voluntarily continues to work at the end of the work shift, the hours are compensable. This is true even if the employee was not authorized to work overtime and is subject to discipline.

The case highlights the risks associated with issuing mobile work devices to hourly and salaried non-exempt employees. There is a need for employers to have a clear policy setting out a reasonable process for employees to report overtime, including any off-duty work on mobile devices that is necessary for their job. The policy should be uniformly enforced and any attempt to discourage employees from reporting overtime should not be tolerated.