The Dangers of Using Two Different Time Clocks

It seems it would be a no-brainer.  You have one employee who works two different shifts, or even two completely different jobs.  You set the employee up on two different time clocks so you can track the time the employee spends in each position.  This can be helpful, especially if the employee is working at two different rates.  However, what if the employee works over 40 hours in a workweek on the two positions combined.  Is the employee entitled to overtime pay?  

Absolutely.  Failing to combine the two time clocks to determine the total number of hours worked by a single employee can be quite dangerous and costly.  The time needs to be properly combined as required by the Fair Labor Standards Act (“FLSA”).  Nieman Printing Inc. had to learn this the hard way, after paying $96,335.00 in overtime back wages to 101 employees as well as $26,000.00 in civil penalties, following a U.S. Department of Labor (“DOL”) investigation. 

Specifically, the DOL found that Niemen Printing required employees to record hours worked on two different time clocks at the same site, but did not combine those hours to determine when overtime was due.  In an interesting twist of the “two time clocks scenario,” investigators found that employees were under contract to Niemen by two separate staffing agencies at the same time, with hours worked Monday through Wednesday charged to one agency and hours worked by the same employees Thursday through Sunday charged to the other agency.  The company set up separate clocks for the separate agencies.

As a result, employees did not receive overtime pay of 1.5 times their regular wage for working more than 40 hours a week.  Getting the same employees through different agencies was seen as an improper mechanism to avoid overtime pay.

Employers should learn from Nieman Printing’s mistake.  Two clocks can be used, but make sure you combine the employee’s time when determining the total hours worked for overtime purposes! 

Under New York Law, Are You Required to Pay Your Employees for Their Breaks or Not?

As noted in our recent blog, Under Federal Law, Are You Required to Pay Your Employees for Their Breaks or Not?, various states and localities may have their own break laws and regulations that could apply to your business.  Those laws could cause even more confusion with as to if, whether to pay employees for breaks and/or meal time.  New York is among the states with specific laws on breaks.  

If you are an employer in New York, New York Labor Law (NYLL)generally requires you to provide your employees with at least 30 minutes of an unpaid, uninterrupted meal break during shifts of more than 6 hours.  Specifically, employees are generally permitted to take at least 30 minutes for lunch between 11:00AM to 2:00PM if they work a shift of more than 6 hours, which extends over that time period.  Every person employed for a shift starting before 11:00AM and continuing after 7:00PM is generally permitted an additional 20-minute unpaid meal break between 5:00PM and 7:00PM.  Also, every person employed for a period or shift of more than 6 hours starting between the hours of 1:00PM and 6:00AM is generally permitted at least 45 minutes for a meal period at a time midway between the beginning and end of their shift. 

There are, however, certain exceptions to the above requirements.  For instance, factory employees may be entitled to longer break times.  There are also some instances where only one person is on duty or is the only person performing a specific job duty. In those situations it may be acceptable for the employee to eat on the job without being relieved (in which case the employee needs to be paid for that time).  The New York Department of Labor will generally accept these special situations as compliance with the break laws presuming the employees voluntarily consent to the arrangements.  However, an uninterrupted meal period must be afforded to every employee who requests it from their employer.  If you as the employer have an exceptional situation, it is generally prudent to get the employee’s agreement in writing.

Although the FLSA applies only to non-exempt employees when it comes to breaks, the NYLL does not distinguish between exempt/non-exempt employees.   The NYLL requires employers to provide meal breaks to every "person" in any establishment or occupation covered by the NYLL. 

Given that both Federal and state law addresses employee breaks, it is not surprising that there is so much confusion on this issue.  State law does not necessarily mimic federal law, and the various laws create differences in the length of breaks as well an employer’s general requirements to provide breaks and employees’ entitlement to such breaks.  To ensure compliance with the various wage and hour laws in New York, you should not only offer the required breaks to your employees but also you should require your employees (at least the non-exempt ones) to clock in and out for any breaks longer than 20 minutes so that you: (a) have a record of providing the required breaks, and (b) have a basis not to pay your non-exempt employees for their non-working break time.  It may also be wise to talk to your employment lawyer to avoid paying for your confusion down the road!   

 

Under Federal Law, Are You Required to Pay Your Employees for Their Breaks or Not?

An area of confusion for many employers, and thus an area in which wage and hour laws are often violated, involves breaks and meal periods.  Specifically, are employers required to pay their employees for break and/or meal time, and if so, when? This area of confusion has resulted in Auto Cricket Corp., doing business as AutoCricket.com, paying 414 employees a total of $76,589 in back wages following an investigation by the U.S. Department of Labor's Wage and Hour Division.  

Under the Fair Labor Standards Act (FLSA), employers are not required to give employees meal or rest breaks.   Nonetheless, employers often offer such breaks in order to maintain employee productivity and morale.  Accordingly, when employers do offer short breaks (usually lasting about 5 to 20 minutes), federal law considers the breaks as compensable work hours for which non-exempt employees must be compensated and which are counted towards calculating overtime hours worked.  Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than coffee, snack or short personal breaks and, thus, are not work time and are not compensable or counted towards overtime for non-exempt employees. 

However, to be deemed a bona fide meal break that does not count as working time, the employee must be completely relieved from duty for the purpose of eating regular mealsThe employee is not relieved if he/she is required to perform any duties, whether active or inactive, while eating.That means no greeting customers, no answering the office phone or work emails, and no running errands for work.    

AutoCricket.com apparently did not follow these regulations.  Instead, investigators found that the employer deducted short rest periods as non-work hours from the employee totals of hours worked.  Failure to pay for that break time resulted in the workers being paid less than the required minimum wage for all their hours worked. 

Since the federal regulations are unclear as to counting breaks lasting 21-29 minutes, it is best to set company policy so that breaks longer than 20 minutes are paid, and any shorter breaks are not.  Keep in mind that states and localities may also have break laws and regulations that could apply to your business. 

Bottom line, however, is there is no federal law requiring two 15-breaks per day.  Companies can certainly provide this, but absent a provision in a collective bargaining agreement or applicable law, doing so is through the company’s own generosity. 

Are You Paying Your Workers Enough?

Minimum wage is still an issue for many employers, as two agriculture employers recently learned.  And willful, repeated violations of the law can cause the U.S. Department of Labor (“DOL”) to make a federal case of the issue. 

The DOL recently filed a lawsuit against agricultural employers for failing to pay their workers the minimum wage as required by the FLSA.  An investigation by the DOL’s Wage and Hour Division found that the employers willfully and repeatedly violated the law by paying many employees only $6.25 or $6.50 per hour.  The division estimates that a total of $191,402 is owed to 174 employees.

"We will not tolerate these actions and, as demonstrated by the filing of this lawsuit, the Labor Department will use all enforcement tools available to recover workers' wages and hold accountable employers who demonstrate a clear disregard for the law," said Jose R. Vazquez, the director of the division's district office which conducted the investigation.  As a result, the DOL asked the court to order the employers to pay the full amount of back wages due plus an equal amount in liquidated damages to the affected workers.

Under the FLSA, employers must pay covered, nonexempt employees at least the federal minimum wage of $7.25 per hour. The law also requires employers to maintain accurate records of employees' wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law.

Accordingly, employers need to ensure that they are complying with minimum wage requirements.  Part of that requirement is to ensure that commissions paid to their employees who are paid commission cover minimum wage per hour.  After all, under the FLSA, employees who are paid on commission must be paid at least the minimum wage, just as employees who are paid by the hour or piece.  So, if you want to avoid getting sued, don’t forget to track the hours of those commissioned employees and make sure that they are being paid at least minimum wage per hour, as well!

DOL Investigation Shows Need to Classify Employees Properly

A recent settlement between the US Department of Labor and First Republic Bank aptly illustrates the perils of misclassifying large numbers of employees under the overtime laws. 

Following a DOL Investigation, First Republic agreed to pay just over $1 million to nearly 400 of the Bank’s employees in 5 states (approximately 25% of the total number of employees First Republic has in those 5 states) including New York and Connecticut.  The Bank treated these employees as exempt from the overtime pay regulations and did not pay them time and a half their regular hourly rate when they worked over 40 hours in a workweek.  Operating under the assumption that the employees were exempt, the Bank also did not track their work hours, thereby violating the FLSA’s recordkeeping requirements.  The misclassified employees were also paid bonuses which the DOL determined should have been factored into the employees’ regular hourly rates thereby increasing the amount of overtime pay the incorrectly classified employees were found to be owed. 

The root problem in this situation was the bank’s failure to carefully analyze these employees’ job duties in making an informed assessment of their status under the overtime laws.  According to Secretary of Labor Hilda Solis, “It is essential that employers take the time to carefully assess the FLSA classification of their workforce.  As this investigation demonstrates, improper classification results in improper wages and causes workers real economic harm.”  Large and medium-sizes businesses in particular would be wise to heed the Secretary of Labor’s admonition.  

The Buck Stops Here: Family Dollar Stores Settles Class Action Law Suit for 14 Million Dollars

Family Dollar Stores, a discount retailer chain in multiple states, is no stranger to lawsuits that stem from the executive exemption provision in the Fair Labor Standards Act (“FLSA”).  In order to meet the executive exemption, an employee’s primary duty must be management, they must supervise at least two Full-time employees, and must usually have the authority to hire and fire.  And if a court finds that an employee does not meet this exception, depending upon the size of the company and the length of wrongful classification, a company could incur significant monetary damages in back overtime pay owed. 

Despite two recent decisions involving Family Dollar Stores where it was found  that their employees met the executive exemption provision (and therefore the store was not liable for unpaid overtime wages), Family Dollar Stores recently announced it had reached a preliminary settlement in a class action lawsuit brought by over 1,700 New York store managers.  These managers claimed that because they were improperly classified as executives, they were entitled to lost overtime wages.  While Family Dollar Stores did not explain why they settled, it may be that they did not want to place a great deal of emphasis on the two prior decisions. 

Our prior blog noted that the 4th Circuit held that managers that spent the majority of their time on non-managerial duties can nonetheless be found exempt from overtime pay requirements.   In addition, in August 2012, a federal judge in North Carolina found in Ward v. Family Dollar Stores found that a manager was exempt under the FLSA.  While these two decisions obviously pleased Family Dollar Stores, in deciding to settle, they most likely did not forget that in 2008 the Eleventh Circuit upheld a $35.6 million judgment against them. 

Ultimately, like a snow flake, each case involving whether an employee qualifies under the executive exemption exception is unique.  Despite these two recent decisions, Family Dollar Stores knew there was still a risk for a costly loss.  While Courts will review prior awards for guidance, the facts (i.e., what duties the employees in question perform) will dictate how they rule.   Accordingly, companies still should proceed cautiously by paying close attention to the job duties of employees who can bring claims under the executive exemption provision.   

Supreme Court finds Pharmaceutical Sales Representatives Exempt for Overtime

In February 2011, we predicted that the Supreme Court would resolve differing opinions between the Second and Ninth Circuit as to whether pharmaceutical sales representatives are exempt employees for purposes of overtime.  This June, the Supreme Court held in a 6-3 decision in Christopher v. Smithkline Beecham Corp., that pharmaceutical sales representatives fall within the Fair Labor Standards Act’s (“FLSA”) exemption for “outside sales” employees under the FLSA. 

Notable in this decision was the Supreme Court’s sharp criticism of the Department of Labor’s (“DOL”) interpretation of its own regulations.  The Supreme Court acknowledged that in most instances deference should be given to an agency’s interpretation of their statute when the statue is ambiguous. In this instance, however, the Supreme Court believed that deference was not appropriate for several reasons.  First, the DOL’s new interpretation of the FSLA statute was only set forth for the first time in its amicus curiae briefs to the Supreme Court. This in turn undercut their credibility. Second, employers depend upon a respective agency’s interpretation of their own regulations so as to limit their potential liability.  In this instance, employers had relied for decades on the DOL’s prior interpretation of the FSLA as it related to pharmaceutical sales representatives.  Accordingly, to defer to the DOL’s new interpretation first raised in its briefing to the Court would undermine the concept that regulated parties should receive fair warning as to how to conduct their activities within the law.  Here, such a lack of prior fair warning would likely impose massive liability on employers who had been classifying their representatives in good faith for some time.    

In declining to defer to the DOL’s interpretation of the FLSA, the Supreme Court examined the text of the FLSA in relation to the actions of the pharmaceutical sales representatives.  The Supreme Court held that because the pharmaceutical sales representatives obtain nonbinding commitments from physicians to prescribe respondent’s drugs, they fell into the category of “outside salesmen”. Furthermore, the Supreme Court noted that the employees in question earned on average more than $70,000 per year and only worked 10-20 hours outside normal business hours each week in order to maximize their sales territory.  According to the Supreme Court, the FSLA regulations were not designed to protect these types of employees.  

Here, the Supreme Court declined to defer to the DOL’s interpretation of the FSLA.  However, employers should not view this opinion as a license to disregard  the DOL’s opinion letters and other written guidelines from the DOL on exemption issues.  When questions arise with respect to a particular overtime exemption, it is pivotal to consult with counsel.  This reduces the risk of making a wrong decision that could later on have significant financial consequences.  

Hearst Intern can proceed as an FLSA Collective Action Litigation

 As we reported earlier this year, an unpaid intern had sued the Hearst Corporation asserting that she was improperly classified as an intern and should have been considered to be an entry-level employee entitled to employee pay and benefits.  Her case is proceeding in court in New York and the judge recently issued an Opinion and Order permitting her to proceed with her case as a type of class action. 

Prospective litigants in a case brought under the FLSA (Fair Labor Standards Act) must take action to demonstrate a willingness to participate in that matter.  Unlike the typical class action, where class members are presumed to be included unless they affirmatively “opt-out” of the litigation, prospective plaintiffs in an FLSA “collective action,” such as the interns here, must affirmatively “opt in” to be part of this law suit.  At this early stage in the litigation, the plaintiff only needs to make a modest showing to the Court that there were other individuals who were similarly situated to her who were also likely victims of the employer’s allegedly improper classification, in order for the Court to allow the case to proceed as a collective action.  Whether she will actually win her case in the end still remains to be seen.

In these summer months, this is a good reminder that employers should take care when hiring unpaid interns to provide services for their companies.  In order for those individuals to be truly unpaid, they need to satisfy all of the requirements set forth in the Department of Labor Regulations.  These requirements are also discussed in our prior blog.  As the Hearst Corporation is learning, there are risks to misclassifying interns incorrectly when they should be treated as employees.  Make sure that your company is doing it right.

Misapplied Overtime Exemption Can Result In Millions of Dollars in Payments For Wage Violations

The U.S. Department of Labor (DOL) announced on May 1, 2012, that in accordance with a settlement agreement, Wal-Mart Stores Inc. has agreed to pay $4,828,442.00 in back wages and damages to more than 4,500 employees nationwide and $463,815.00 in civil money penalties for misclassifying employees and associated violations of the overtime provisions of the Fair Labor Standards Act (FLSA), the federal wage and hour law.  

 

According to the DOL, 4,500 vision center managers and asset protection coordinators at Wal-Mart Supercenters, Wal-Mart Discount Stores, Neighborhood Markets and Sam’s Club Warehouses were not paid proper overtime wages for hours worked beyond 40 in a work week.  Apparently, the workers had been improperly classified as exempt from the FLSA’s overtime provisions. 

According to Secretary of Labor Hilda L. Solis
, "[m]isclassification of employees as exempt from FLSA coverage is a costly problem with adverse consequences for employees and corporations."  Secretary Solis warned: "Let this be a signal to other companies that when violations are found, the Labor Department will take appropriate action to ensure that workers receive the wages they have earned." 

Wal-Mart agreed to pay back wages owed in the amount determined by DOL plus an equal amount in liquidated damages, as required by law.  In 2007, Wal-Mart, which operates more than 3,900 establishments in the United States, had corrected its classification practices for these workers, and negotiations over the back pay issues have been continuing since then.

As per Secretary Solis’s warning, to avoid any potential ramifications, employers should make sure to properly classify their employees to avoid violating the overtime provisions of the FLSA.  

 

DOL Clean Up Sweeping the Nation

Following up on our blog post on the Department of Labor’s (“DOL”) restaurant clean up initiative, recent DOL press releases demonstrate that efforts to penalize restaurant industry employers who are not FLSA compliant are only increasing.

Approximately $132,000.00 of back wages were collected from a Texas restaurant chain , a restaurant in Florida has agreed to pay $177,395.00 in back wages, and a Los Angeles restaurant has been sued by the DOL for $104,807.00 in back wages.  The DOL has also put restaurant owners in the San Francisco and Portland areas on notice that they are next in line.

The violations consistently cited by the DOL in raising these charges are minimum wage and record keeping issues.  These are compliance issues that are not complex.  Because the DOL has made it increasingly clear that this is a hot button issue, employers would be prudent to ensure compliance.  In addition, while the DOL’s efforts have thus far focused on restaurants, it is important that employers across all industries pay attention to this developing issue.  The DOL states that its efforts are an attempt to be vigilant for workers “who are particularly vulnerable to exploitation.”  Surely the DOL would believe that such workers exist outside of the restaurant industry and thus there is no telling which industry the DOL might focus on next.

DOL Restaurant Clean Up Continues

As part of an ongoing restaurant industry enforcement initiative, the Department of Labor recently levied a total of $1,307,808.00 in fines to Massachusetts area restaurants for various Fair Labor Standards Act violations. 

Violations cited by the DOL included failure to properly pay overtime (not paying overtime at all, not accounting for work performed in multiple locations, or incorrect overtime for tipped employees), illegal wage deductions, failure to accurately track employee time , and independent contractor misclassification.

Restaurants throughout Massachusetts were fined for the violations noted above and the DOL indicates that it intends to expand the scope of its efforts to other states. If it was not clear to employers when the DOL launched its smart phone application so that employees could independently keep track of their hours, it should be clear now: the risks posed by non-compliance with the FLSA are not worthwhile. Employers with policies out of line with the FLSA standards for wages, record keeping , or overtime  need to make their best effort to move towards compliance, regardless of what industry standard or practice may have been in years past.

Ongoing DOL NY Restaurant Investigation Finding Repeated Violations

In a further example of industry-specific targeting for wage and hour violations, the Department of Labor issued a press release regarding a multi-year investigation of the full-service restaurant industry on Long Island, NY, finding multiple violations in numerous establishments.

The Department of Labor’s ongoing enforcement initiative found widespread noncompliance with various provisions of the Fair Labor Standards Act including minimum wage, overtime and record-keeping in full-service Long Island restaurants.

Thus far, the DOL has completed 46 investigations and recovered $2,341,507.00 in back wages for 578 employees.  The DOL has also found willful and repeated FLSA violations for which it assessed $202,315.00 in civil money penalties.

The investigation is still on-going and is yet another example of the fact that industry practice does not make perfect. Just because others in your field are paying their employees in a particular manner, does not necessarily guarantee that such is acceptable under the law.

EMPLOYEES MUST BE PAID FOR ALL WORK DONE BEFORE, DURING, AND AFTER THEIR SHIFTS

Every employee has a core job comprised of the main duties the employee is hired to perform.  And just about every job has non-core elements that take up time and (often) seem unproductive—organizing or maintaining tools, putting on protective clothing, cleaning or picking up after work, or attending meetings. Do employees need to be compensated when they are not really working?

Unfortunately, as one Arizona construction company recently found, it doesn’t matter if the actions are not what the company considers “productive.” If an employer requires employees to do something, and the time spent doing it is more than de minimus, that’s work, and nonexempt employees must be compensated for it. Also, time records have to be accurate, and reflect their tasks as working time.

Arizona Pipeline Co. does what its name says: it installs pipelines and other underground utilities. It was not paying its employees for time spent before or after their shifts, loading and unloading materials and supplies, cleaning equipment, etc. They were also not paid for traveling from the company’s location to job sites, or for time spent attending required meetings. As a result, Arizona Pipeline Co. will pay $750,000 in back wages for pre-shift and post-shift work, travel, and meetings for which its employees were not compensated.

Under the Fair Labor Standards Act, employees must be paid for all work time—even for time spent performing tasks that the company does not consider to be productive. Basically, if the only reason employees are engaged in a particular tasks, is because a manager told them to do it, that’s probably work. Non-exempt employees must be paid for that time, and paid overtime for their tasks of they performed after the employee has already reached the 40-hour threshold for the workweek.
 

Making Employees Work Extended Overtime Hours May Be Imprudent and Costly, But Could Be Legal

Everyone knows that exempt employees—those who aren’t eligible for overtime pay such as executives and management—can be made to work 24/7/365.

What about nonexempt employees—those who do earn overtime wages? Can you make them work 9, 10, 12, or more hours in a day?
 

In many states--yes, you can force most adult employees to do just that. You just have to pay them for it (and potentially provide periodic meal or rest periods as required). Child labor laws generally regulate the number of hours children can work per day and workers in some regulated industries (truck drivers and airline pilots for example), may have maximum shift lengths. Collective Bargaining Agreements may also limit the hours unionized employees can be scheduled to work. But for many employees in the private sector, such restrictions on their hours worked do not apply.

Of course, hourly employees must receive their base hourly wage for all hours worked, plus regular overtime pay (time-and-one-half their regular hourly wage) for hours worked over 40 in a work week. In a number of states, additional premium pay may apply. For example, in California, if someone works more than 8, but up to 12, hours in a day, he or she earns daily overtime at time-and-half for hours 9, 10, 11, and 12, and daily double time for any additional hours worked in that day. New York has a “spread of hours” rule, which requires that employees with work days longer than 10 hours (i.e. more than 10 hours from start time to finish time even if there is a long mid-day break) receive an additional hour’s pay at minimum wage. But, that wage requirement, like the California daily overtime pay rule, does not dictate a maximum number of hours employees can work per day or per week.

Federal law, as set out in the Fair Labor Standards Act says nothing about how many hours someone can work in a day or at a time. In fact, under the FLSA, the only limit on how many hours an employee can work in a week is the number of hours in a week. To work an employee more than 168 hours in a week requires breaking the laws of physics, not the FLSA. The result may be different under state law, however. Some states, such as New York, Illinois and Wisconsin, have laws putting a cap on the number of days certain employees can work per week (often called “one-day-rest-in-seven” laws). But, even those laws do not prohibit employers from scheduling long days during the six days those employees work.

In many states, if an employer’s wallet is deep enough, the need great enough, and the employee is not covered by a wage order dictating otherwise for the employee’s position (such as for individuals in certain health care positions, mining or other safety-sensitive positions), or by other regulations, an employee can be required to work all day and night long—as long as the employee is properly compensated under the law (and meal or other rest-break laws are complied with). While it is probably not advisable, it may be permissible.

Keep in mind as well, however that, even if permissible, some states may have laws or regulations making long hour requirements difficult to enforce. For example, in California, employees cannot be disciplined or terminated for refusing to work more than 72 hours in a week—even though the law does not limit the work-week to 72 hours.

Thus, although it may not be prudent to do so, and morale concerns may dictate otherwise, where an employee’s hours are not otherwise limited by applicable regulations or otherwise, an employer can require long work days (and long weeks) so long as the company pays its employees appropriately, under federal and state wage payment law, and provides any required breaks (which generally are not as numerous as most employees believe).

However, if the issue is just “can the company mandate overtime hours?” For the most part, the answer is “yes.”
 

A BILL TO SEND MISCLASSIFYING EMPLOYERS THE BILL

While there has not been a specific law outlawing the misclassifications of employees as independent contractors, employers could be penalized for doing so by the IRS (since the proper withholding taxes would not have been paid), the Department of Labor (since overtime wages may not have been paid), or by Unemployment and Workers’ Compensation (seeking taxes and payments not previously made). A number of U.S. senators are looking to increase the consequences of misclassifications.

It’s easy to understand why employers might prefer to utilize independent contractors. There’s saving on the taxes paid on employee wages. There’s also no health insurance or 401(k) match, no paid leave, no unemployment insurance or employee’s compensation contribution, such as one would pay for an employee. The government, however, sees misclassification as taking money out of government coffers and out of employee’s pockets.

As a result, as Overtime Advisor previously reported, the government has been increasing enforcement of the existing rules about correctly classifying employees.

However, stepped-up enforcement of the existing rules is only part of the picture. There is also a bill currently pending before the U.S. Senate that would enhance protection against misclassification. The Payroll Fraud Prevention Act., introduced by a trio of Democratic Senators, is intended to prevent misclassification of employees as independent contractors, which the sponsors frame as issue of fairness and equity. They say that besides cheating the government and affected employees, misclassification also presents an uneven-playing field, with honest businesses forced to compete with ones that don’t pay their fair share.

Of course, talk is cheap—especially in Congress. How does the proposed bill actually aim to accomplish its goals? As drafted, it would put in place a system of record keeping and notice requirements, backed by fines and penalties, to compel compliance. Highlights include:

• Employers required to keep accurate records as to the classification of each employee

• Employees would have to be explicitly notified of their classification—and directed to a Department of Labor (DOL) website for information about employee rights

• Penalties ranging up to $5,000 per employee would be levied for notice violations or misclassification

• Triple damages would be imposed for willful (i.e. intentional or knowing) violations of minimum wage or overtime law resulting from misclassification

These penalties would be on top of the existing liability that employers face for violation of tax law or the FLSA, making misclassification a very expensive (as well as illegal) way to save money.
 

Exempt Managers Spending Major Time on Nonmanagerial Duties May Not Affect Exempt Status

The 4th Circuit U.S. Court of Appeals (MD, VA, W. VA, NC, SC) provided a significant win for employers in today’s multiple-hat-wearing, everybody-rolls-up-their-sleeves-and-pitches-in style of management, by finding that a store manager who spent most of her time on non-managerial duties is nonetheless exempt from the overtime pay requirements.

Grace, a store manager for Family Dollar claimed she was owed overtime pay and should not have been classified as an exempt store manager. Because she spent most of her workday on nonmanagerial tasks such as running the cash register, putting out stock, and janitorial work, she claimed that her “primary duty” was not management. Thus, despite the fact that she managed two or more other employees, had hiring and firing authority, and was responsible for overall store profitability and management, she asserted that she should receive overtime pay.

Unfortunately for her, no matter how much time she spent ringing up sales or mopping the floor, the Court of Appeals had little difficulty finding she is still the store’s manager and is still an exempt executive employee. The Court’s analysis is particularly well stated, so let’s borrow the Court’s words:

“[T]ime alone ‘is not the sole test’ [of whether someone is an exempt manager or executive] . . .Grace was in charge of a separate retail store, seeking to make it profitable. While she catalogs the nonmanagerial jobs that she had to do, claiming they occupy most of her time, she does so without recognizing that during 100% of the time, even while doing those jobs, she was also the person responsible for running the store. Indeed, there was no else to do so, and it cannot be rationally assumed . . . that the store went without management 99% of the time. Grace also fails to acknowledge the importance of performing nonmanagerial tasks in manner that could make the store profitable, the goal of her managerial responsibility.”

Bottom line: mopping the floor does not necessarily make an employee not a manager for purposes of the Fair Labor Standards Act, at least in the view of the 4th Circuit. If the person’s overall role and responsibilities are managerial, helping out in other ways won’t necessarily remove his or her overtime exemption.

So, while courts in other parts of the country may differ, go ahead . . . make that VP you don’t like take out the trash. Just make sure that 100% of the time, he or she has one or more over-arching exempt responsibilities.
 

There's An App for That: DOL of iPhone/iPod/iPad App Helps Many Employees Track and Calculate What They're Owed

Everyone’s an app developer these days, it seems—your poker buddy, your niece in college, the poorly socialized guy in IT, and the would-be software tycoon down the street, for example. Uncle Sam’s gotten into the act, too: the Department of Labor just released a smartphone timesheet app.

The app is designed to allow employees to keep independent track of—and calculate the wages they’re owed for—hours worked, including overtime. The app also has other employee-helpful features, such as break time tracking and links to DOL web resources, such as information about wage and hour laws or how to contact the Department. Users can annotate their work-related information on the app and view summaries by day, week, or month.

Of course, as with most apps, it doesn’t do everything you might want it to. For example, it’s great so long as the employee only has regular and overtime (at time-and-half) wages to track. However, it does not handle more complex or less common wage calculations, including tips, commissions, bonuses, holiday pay, or shift differentials among others. Actually, given how many employees in the hospitality industry receive tips, and how many employees in some sales capacity receive commissions, the DOL app might not work for many employees.

Also, not surprisingly, the federal DOL focused on the federal labor laws, such as the requirements under the Fair Labor Standards Act. Their app does not help you with state variations, such as California’s requirement for double time when working more than 12 hours in a day.

The DOL’s free app is available in English and Spanish and can be downloaded at http://www.dol.gov/whd. You can view screen shots here.

Like other app developers, though, the Department is not resting on its laurels. It’s planning to expand the app’s capabilities—such as adding the capacity to handle tips, commissions, bonuses, etc.—and to also port it to other smartphone platforms, like Android and Blackberry. With employees now able to track their own hours on this app, employers would be prudent to ensure they’ve got their own “app” in place to track employee hours and properly calculate wages that’s compliant with both federal and applicable local wage and hour laws.
 

CATERING HALL FORCED TO PUT MINIMUM WAGE AND OVERTIME ON THE MENU

What some wit once said about gravity—it’s not just a good idea, it’s the law—also applies to the Fair Labor Standards Act (FLSA). The FLSA is not, as some employers seem to think, a set of suggested guidelines or best-practice recommendations. It’s the law. Violating it incurs liability—especially if a company violates the FLSA and a prior court order directing it to obey this very law. That’s exactly what a Long Island, New York restaurant and catering hall did, which is why the Westbury Manor now has to pay F$610,000.00 in back wages, interest, and penalties.

Back in 2005, this restaurant became subject to a federal court order telling it to not violate the FLSA. Six years later, the Manor engaged in further violations. Specifically, it did not pay dishwashers, cooks, waiters, busboys, and bartenders minimum wage or overtime pay when employees worked more than 40 hours in a week. In addition to these violations—which resulted $482,780.00 in back wages, $50,000.00 in prejudgment interest, and $69,330.00 in penalties for overtime and minimum wage violations—the facility also:

•  Violated recordkeeping requirements of the FLSA by not keeping accurate time and payroll records (the restaurant reported the same hours for kitchen employees, for example, week after week for years, even though the actual hours worked varied) and

•  Violated child labor laws by having 14 and 15 year olds work longer than permitted (another $7,920.00 was owed for child labor penalties)

In the consent judgment which it then entered into, the restaurant agreed to pay $610,000.00 and promised (again) not to violate the FLSA in the future. In addition, three officers of the company all also had to agree, personally, to not violate the FLSA. Unlike some other laws, company officers can become personally liable to their employees if the business does not pay those employees properly under the wage and hour laws.

Here’s a hint: it’s bad enough to violate the FLSA, but if there’s already a court order against the company, be extra careful. Not only will the Department of Labor tend to scrutinize past violators more closely, but the courts understandably take a dim view of anyone who ignores them. Companies would be wise to learn about these laws and work out how to be in compliance.
 

IMPROPERLY RECOUPING WORKER'S OVERTIME PAY PUTS ANIMAL HOSPITAL IN THE DOGHOUSE

What do you call it when an employer forces workers to give their overtime wages back to the company?

The U.S. Department of Labor (DOL) calls it a violation of the Fair Labor Standards Act (FLSA). That’s what a Cincinnati-area animal hospital did—and explains why the DOL is looking to recover $108,000.00 from Hamilton Avenue Animal Hospital in back wages, liquidated damages and penalties.

The usual unpaid overtime case involves failing—whether negligently or intentionally—to record or credit an employee with all hours worked, resulting in unpaid overtime hours. Here, the Animal Hospital put its own unique twist on it by paying workers the overtime due to them, then forcing the workers (many of whom did not speak English) to return the overtime pay to the hospital in cash. The hospital then allegedly falsified payroll records to show overtime wages as having been paid.

The 21 workers affected are claimed to be owed $42,628.58 in overtime wages. In addition, the DOL is assessing $23,100.00 in civil penalties, and another $42,628.58 in liquidated damages under the FLSA. (Employers who violate the Act by not paying overtime are liable for double damages plus fines, making FLSA violations one of the costlier ways to break the law.)

This is the hospital’s fourth FLSA violation investigation. And by not paying overtime this time, the hospital may also be in contempt of court for violating a 2007 injunction ordering it to not violate the FLSA. While creativity has its place, dealing with employee wages is not one of them.

The DOL is clamping down on violators, and businesses would be prudent to endeavor to comply with employee wage payment laws, rather than risk the fines, fees and penalties that come with their violation.
 

Reporters are Not "Creative" Professionals

What do you call a reporter who’s “creative” with the news?

A liar—or at least, that’s the traditional, “old school” view of journalism. Reporters are supposed to gather, verify, and relay facts. Right? So, how can they fit under the “creative professional” exemption to the Fair Labor Standards Act (“FLSA”)? 
 

They generally don’t, as a California Appeals Court recently confirmed when upholding a $5.2mm verdict against a newspaper for wage and hour violations.

The Chinese Daily News—an American paper in California, despite the name—had been requiring its reporters to work 12-hour shifts, six days a week. That’s 72 hours per week—which is a lot more than the 40-hour threshold over which overtime pay is required under the FLSA and many states’ laws. The paper’s labor practice left it potentially on the hook for up to 32 hours of overtime pay per reporter per week.

The paper’s chief defense was to claim that its reporters were exempt from the overtime pay requirements as “creative professionals.” The “creative professional” exemption allows certain employees to be exempt from the overtime pay requirements if that professional’s primary duty is “work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.”

Invention? Imagination? In reporting the news? That doesn’t sound right, does it? Or at least, that’s what the Ninth Circuit U.S. Court of Appeals concluded in Wang v. Chinese Daily News.  Not only do the expectations connected to a typical journalistic role run counter to a finding of the requisite level of imagination or invention, but the break-neck pace of Chinese Daily News reporters—writing two to five stories a day—left no time for creativity or even meaningful analysis. Instead, the reporters simply gathered and reported—in the most literal sense of the word—facts about events relevant to the community served by the paper. Under a Department of Labor regulation cited by the Wang Court, journalists “who simply collect and organize information that is already public, or do not contribute a unique or creative interpretation or analysis to a news product, are not likely to be exempt” from overtime pay.

In short, to be a “creative professional,” one must be a “creative professional”—and generally, newspaper reporters aren’t. Any writer whose role, like that of the Chinese Daily News reporters, is primarily to aggregate and repackage facts is probably not exempt from overtime pay. That’s a lesson that many businesses, not only traditional news businesses, should bear in mind as they produce online newsletters and blogs that only report, without analysis or creative insight. If anything, the faster-than-fast pace of online reporting is even less likely to support a finding that reporters are exempt creative professionals than did the newspaper business involved in Wang.
 

New Overtime Suit Involving Outside Sales Exemption

UPS is the latest large employer to be named in a potentially massive class action overtime lawsuit.  The Company’s account managers claim that they were misclassified as exempt outside salespersons or administrative employees, even though they purportedly do not have the authority to enter into sales contracts, nor do they have managerial responsibilities.  The employee who filed the suit claims to have regularly worked sixty-hour workweeks and received only a straight salary.  The suit could eventually include hundreds, if not thousands of account managers who, according to the lawsuit, were mainly responsible for going to local businesses and delivering a pre-scripted promotional message for UPS.

Regardless of the UPS suit’s ultimate disposition, it illustrates the importance of correctly applying the outside sales exemption, particularly as the exemption pertains to employees who engage in promotional work.  Not all “salespersons” are exempt under the Fair Labor Standards Act.  Rather, only “outside salespersons” are exempt.  To qualify for the outside sales exemption, the employee’s primary duty must be making sales (as defined by the statute) and the employee must “customarily and regularly” be engaged away from the employer’s place of business. 

Ordinarily, an outside sales employee will be making sales at a customer’s place of business or at the customer’s home.  Online or telephone sales do not constitute outside sales unless they are incidental to in-person sales calls made by the salesperson to the customer.  There is no requirement that an outside salesperson constantly be away from the office.  For example, if the salesperson returns to the office to prepare sales-related paperwork, that activity by itself usually does not compromise the outside salesperson’s exempt status. 

According to the UPS suit, the Company’s account managers were mainly performing promotional work as opposed to sales.  Promotional work can constitute exempt sales work if the promotional activity is incidental to, or done in conjunction with, the employee’s outside sales work.  However, promotional work done in advance of sales made by someone else is not considered exempt outside sales work.  As with many suits that center around the outside sales exemption, the UPS suit’s success will likely depend on whether account managers made sales or just laid the groundwork for other people’s sales.        

Work for Related Employers Can Cause Joint Employer Liability

Boston-based Partners HealthCare Systems and its 14 affiliated hospitals and health care companies recently signed a consent decree in federal district court agreeing to pay $2.7 million in back wages to 700 employees to resolve an overtime lawsuit filed by the U.S. Department of Labor (“DOL”).

The interesting twist in this lawsuit was that Partners HealthCare contacted the DOL itself after realizing that perhaps affiliated entities sharing employees had run afoul of statutory overtime requirements under the Fair Labor Standards Act. Indeed, they had. The DOL’s investigation confirmed that defendants failed to combine hours worked on separate payrolls for employees who provided services for two or more defendants during a single workweek.  

Evidently, there existed a joint employment relationship between these entities. The analysis was based on some of the following factors:

  • Whether an arrangement existed between employers to share the employee;
  • Whether the companies acted in the interest of one another in relation to the employee;
  • Whether the companies shared control of the employee’s employment;
  • Whether there was common ownership of the employers; and
  • Whether there was common management of the employers.

No single factor is controlling in joint employment cases. Courts, as well as the DOL, look at the “economic realities” of the work relationship to determine if a joint employer relationship truly exists. 

Partners HealthCare may actually have been lucky – or wise – in this situation. By bringing the matter to the attention of the DOL itself, Partners HealthCare may have saved itself liquidated damages and attorneys’ fees that would likely have resulted had the lawsuit been brought by an attorney on behalf of its employees.