Tag: FLSA

Categories
FLSA Overtime/Wage & Hour

Michael’s Take on the Proposed Change to the FLSA Salary Basis Test

The Obama Administration has released its long awaited revisions to the salary basis test under the FLSA’s so-called white collar exemptions. These changes are long overdue. Before we get to the change, let’s review the current state of the law.

The FLSA requires employers to pay one and one-half an employee’s regular rate of pay for any hours they worked over forty during a work week. There are exceptions to this rule. The most prominent group of exceptions is the so-called white collar exemptions. If you are a professional, executive, or fall under the administrative exemption, then you may not be entitled to overtime.

To be sure, employers break the law all the time. In order to fall within the so called white collar exemptions, the employees must perform certain duties. Too many times, employers simply label employees as “salaried” when they don’t actually fall within the duties that permit them to be salaried.

However, before you even get to that issue, employers must pay a minimum salary to employees before they can avoid paying overtime. Currently, that minimum salary is $23,660 per year, or $455 per week. This is a rather draconian number. It is not indexed for inflation, and it has only been raised once since 1975. Therefore, an “executive” who makes the minimum salary under the FLSA and has a family of four would be below the poverty line.

The proposed new regulations bring employers (kicking and screaming) into the 21st Century. It raises the threshold from $23,660 per year to $50,440 per year. With the new regulations, an employer would not be permitted to classify an employee as exempt from overtime without paying them at least this minimum annual salary, which translates to $970 per week.

What will happen? My guess is that many employers will change most employees’ classification from salary to hourly. While these employees would not then get the benefit of the higher salary basis test, they would at least begin receiving one and one-half their regular rate of pay for overtime.

The problem with the old rules is highlighted by a case I had a couple years ago. My client was an employee who was a “store manager” of a convenience store. He was paid a salary. They did not pay him overtime. However, the company did go ahead and keep time records to show the number of hours he worked. As result of the long hours, it was undisputed that his effective hourly rate was around $4.00 per hour. This is simply unconscionable. The proposed new regulations are a step in the right direction. There is absolutely no reason that an employee should work fifty hours a week in America, be classified as an “executive” or “professional” employee, and have a family that lives below the poverty line.

Categories
FLSA Overtime/Wage & Hour

The Supreme Court Tackles Security Screenings: Integrity Staffing v. Busk

Well, the Supreme Court’s term is drawing to a close. Our next few blog posts will address major employment law issues the Court handed down this year. We’ll start with the Busk decision, which addressed whether the time an employee spends waiting in line for a security screening is compensable “work” under the FLSA. These posts are largely drawn form written material that was prepared by Caraline Rickard, an outstanding law clerk at our firm and a third year law student at Vanderbilt. Full credit goes to her.

In Integrity Staffing Solutions v. Busk, the Supreme Court was asked to answer a simple question: If an employee is asked to complete an activity for the employer’s benefit, at the employer’s request, and on the employee’s time, is that work compensable? The activity in question is a security check to ensure that employees do not take merchandise from their place of employment, and I would submit that the obvious answer to the question seems to be yes. As the practice of requiring employees to undergo security checks has become more and more common, a number of plaintiffs and lawyers have thought so, too, and companies ranging from Apple to CVS Health to J.C. Penny, have been hit with lawsuits demanding pay for the time employees must wait to undergo security checks. That is why it came as somewhat of a surprise when the Supreme Court rules in a 9-0 decision that this time was not compensable under FLSA. While a concurring opinion by Justice Sotomayor attempted to limit the reach of the decision, it could still have far-reaching consequences not only on security checks but also on a host of other pre- and post-work requirements.

The plaintiffs in Busk were a class of employees who were employed by the Integrity Staffing agency to work in a Nevada warehouse owned by Amazon.com. Their job was to retrieve products from shelves and package them for delivery. Employees were required to undergo a security screening before leaving each day. This screening required that employees remove items such as wallets, keys, and belts and pass through a metal detector, much like a security screening at an airport. Because employees had to wait in line for their turn to pass through the metal detector, this screening took approximately 25 minutes each day. Integrity Staffing did not compensate employees for this time. The employees argued that, because this screening was the sole benefit of the employer and because the screening took longer than necessary, they were entitled to compensation.   The district court dismissed the complaint for failure to state a claim, but the Ninth Circuit reversed. The Ninth Circuit found that because the post-shift screenings were necessary to the principle work the employees performed and done for the benefit of the employer, the time spent on the screenings was compensable under FLSA.

The Supreme Court, in an opinion again written by Justice Thomas, began by reviewing the history of FLSA. Shortly after the Act’s passage, courts began interpreting its terms broadly. In 1944, the Supreme Court defined work as used in FLSA as “physical or mental exertion . . . controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business.” In 1946, workweek was similarly defined to include “all time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed workplace.” According to the Court’s calculations in Busk, these expansive definitions led to 1,500 lawsuits that sought nearly $6 billion in back pay and liquidated damages for various pre- and post-shift activities. Congress responded to this flood of litigation by passing the Portal-to-Portal Act in 1947, which specifically exempted from FLSA’s overtime requirements time spent “walking, riding, or traveling” to and from the workplace and time spent on “activities which are preliminary to or postliminary to . . . principal activity . . . .” The Supreme Court subsequently interpreted principal activity to “embrac[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][e] all activities which are an integral and indispensable part of the principal activities.” The Court in Busk announced that an activity meets this requirement when it is “an intrinsic element of the [principal activities the employer is employed to perform] and one with which the employee cannot dispense if he is the perform his principal activities.”

Based on this definition of principal activity, the Court determined that because “Integrity Staffing does not employ its workers to undergo security screenings, but to retrieve products from warehouse shelves and package those products for shipment to Amazon customers,” the security screenings were not an “intrinsic and indispensable part of the principal activities” and thus were not compensable under FLSA. It rejected the Ninth Circuit’s test focusing on whether the employer required a particular activity and whether the activity was for the benefit of the employer because such a broad definition would “sweep into ‘principal activities’ the very activities the Portal-to-Portal Act was designed to address.” The Court also rejected the plaintiffs’ argument that they should be compensated for their waiting time because the screenings took longer than necessary, finding that “these arguments are properly presented to the employer at the bargaining table, . . . not to a court in an FLSA claim.”

In a concurrence joined by Justice Kagan, Justice Sotomayor claimed to completely agree with the Court’s decision, but she created some room for interpretation in two significant ways. First, Justice Sotomayor defined an activity as indispensable when “an employee could not dispense with it without impairing his ability to perform the principal activity safely and effectively.” The Court, on the other hand, defined an indispensable activity as “one with which the employee cannot dispense if he is to perform his principal activities”—no mention of safely or effectively. Second, Justice Sotomayor clarifies the Court’s principal activities analysis, stating that “[she] understand[s] the Court’s analysis to turn on its conclusion that undergoing security screenings was not itself work of consequence that the employees performed for their employer.” This interpretation seems to me to flirt with the Ninth Circuit’s test looking at whether the work was performed for the benefit of the employer.

To summarize, Busk is most important for its definition of work that is “integral and indispensable,” and therefore compensable, as an activity that is “an intrinsic element” of the activities a worker is employed to perform and “one with which the employee cannot dispense if he is perform” his job duties. Busk tells us the requiring warehouse employees to undergo screening checks before leaving does not fit this definition. But I do not think Busk is particularly useful in supplying us with an real way to predict what other activities might or might not meet the Court’s test. Immediately following its definition, the Court attempts to both reconcile its definition with its past decisions and offer some guidance by referencing three other situations: battery-plant employees showering and changing clothes, meatpackers sharpening their knives, and poultry-plant employees waiting to don protective gear. The first two activities, the Court decides, are protected, battery-plant employees because “the chemicals in the plant were toxic to human beings” and meatpackers because “dull knives would slow down production . . ., affect the appearance of the meat [and] the quality of the hides, cause waste, and lead to accidents.” On the other hand, the latter was noncompensable because “waiting to don protective gear . . . was two steps removed from the productive activity on the assembly line.”

But the Busk Court succinctly states its position as, “Integrity Staffing did not employ its workers to undergo security screenings . . . .” Surely, the battery factory did not employ their workers to take showers, nor did the meatpacking plant employ butchers to sharpen knives. And even in the case of the poultry plant workers, the court found that the time actually spent donning and doffing protective gear was covered; it was only the time spent waiting that was not. Yet in Busk, the Court finds that the entire security screening is noncompensable; in fact, the Court specifically states that its holding applies to “employees’ time spent waiting to undergo and undergoing Integrity Staffing’s security screens.”

Because the Court’s criteria for finding when an activity is “integral and indispensable” is thus quite ambiguous, courts and parties alike are likely to find Justice Sotomayor’s concurrence especially helpful. Her addition of the words “safely and effectively” to the definition of indispensable activity is the only logical basis on which the examples the Court presents can be reconciled: showering and sharpening knives were necessary for employees to complete their jobs safely and effectively; donning protective clothing does protect the safety of poultry plant workers, while waiting to do so does not; and security screenings do not improve either the safety or effectiveness of Amazon warehouse packers. Given the weight that is likely to be given to Justice Sotomayor’s “integral and indispensable” test, the question must be asked which principal activities analysis will win: the majority’s “productive work that the employee is employed to perform” test or Justice Sotomayor’s “work of consequence that the employees performed for their employer.” If Justice Sotomayor’s opinion is also given weight here, it could potentially reach more activities than the first, since an employee is specifically employed to perform a certain set of tasks but could perform “work of consequence . . . for the employer” outside the tasks she is actually employed for.

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Categories
FLSA Overtime/Wage & Hour

This is a Good Question: Whatever Happened to Overtime?

Whatever happened to overtime? That is the answer that Nick Hanaur of Politco seeks to answer in a recent article. Overtime is protected by the Fair Labor Standards Act, a federal law that dates back to 1938. Under the FLSA, most employees are entitled to 1 ½ their regular rate of pay for any hours worked over forty. There are a few exceptions. Salaried employees who have very specific job duties are exempt from overtime if they make $455.00 per week. This $455.00 per week number has stayed stagnant for a long time. That means that a “manager” or “executive” who works sixty hours per week only has an effective hourly rate of $7.58 per hour if they work a sixty hour work week. As hours have gotten longer and pay has gotten less, this is not unusual. Managers who work especially long hours may make less than minimum wage.

Hanaur’s article makes the argument that the government’s failure to raise the salaried threshold for exempt employees is having a significant impact on the middle class. Indeed, it is decreasing the number of people that are in the middle class. It may come as a surprise that Congress is not the entity that sets this number. Instead, the United States Department of Labor has “rule making” authority to issue regulations that would increase this threshold number. The Obama Administration has signaled that it was going to raise this threshold, but has yet to act. Hanaur makes a persuasive argument that such action is overdue. To read his article, follow this link:

http://www.politico.com/magazine/story/2014/11/overtime-pay-obama-congress-112954.html

Categories
FLSA Overtime/Wage & Hour

SNL NOT LAUGHING: NBC UNIVERSAL PAYS $6.4 MILLION TO SETTLE WAGE AND HOUR CLAIM BY INTERNS

There are more tears than laughs at Saturday Night Live these days. NBC Universal paid $6.4 million to settle a claim by interns who worked on a variety of shows, including SNL. This follows a $110,000 settlement from the producers of the Charlie Rose Show, which also compensated interns for the work they performed.

 In the current job market for college students and new graduates, employers often use the economy as an opportunity to get free work. The Fair Labor Standards Act (FLSA) is clear that most unpaid internships are flat out illegal. If an employer gets the benefit of work from an employee, then the employee probably has to be paid.

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FLSA Overtime/Wage & Hour

UNPAID INTERNSHIPS AND THE FAIR LABOR STANDARDS ACT

It is a tough market for new graduates.  While the job market may not be as tough as it was a couple of years ago, it certainly has not recovered.  My law firm receives resumes from job seekers every week.  Some of those resumes are from students who just want to get their foot in the door. They offer to do unpaid internships. They say they just want experience.  This seems to make sense.  The problem is that this is a ripe area for employer abuse.  Over and over again, we hear stories of students who thought they were getting unpaid internships where they gain valuable work experience.  Instead, they are subjected to long hours, no training, and little experience that would actually benefit them in a future career.

The Fair Labor Standards Act (FLSA) addresses this problem.  Under the FLSA, an intern must be paid a minimum wage and overtime if they are a “covered employee.”  To determine whether an intern is a covered employee, the regulations issued by the Department of Labor look at the following factors:

–          The extent to which the internship provides training similar to the training that would be given in an educational environment;

–          The degree to which the internship experience benefits the intern rather than the employee;

–          Whether the intern displaces regular employees;

–          Whether the intern is closely supervised by existing staff;

–          Whether the company derives immediate advantages from the intern’s activities;

–          Whether the intern is entitled to a job at the conclusion of the internship; and

–          Whether the employer and the intern have reached an agreement that the intern is not entitled to wages for his/her work.

This is a multi-factor test, and no one factor is conclusive.  It is safe to say, however, it is rare that an intern would not be a “covered employee,” and thus entitled  to pay. Students who are working “unpaid” internships would be well-advised to consult with a lawyer to see if they are the victims of wage theft.

Categories
FLSA

Final Thoughts on Boaz: Employee’s Belief is not Determinative

There is another very good nugget in the Boaz case. It is just a single sentence, but it is very important for plaintiff’s lawyers to remember after their client gives his or her deposition. The Sixth Circuit said “an employee’s subjective belief that her position was exempt from the FLSA, however, does not mean the position was exempt as a matter of law.” In other words, if an attorney’s client, who does not have a sophisticated legally trained mind, testifies that she thought she was exempt from the FLSA, this is not a party opponent admission. The question is whether their duties, in light of the evidence, satisfy one of the exemptions. The employee’s belief that they are exempt is not determinative.

This is good language for plaintiff’s counsel to have on hand when their client makes a poorly thought out admission during her deposition because she was not able to match wits with a sophisticated opposing counsel. Remember, “the employee’s subjective belief” is not determinative that she was actually exempt in light of the law.

Categories
FLSA

Boaz v. FedEx Customer Information Services, Inc., et al. Part 2: Effective Vindication for Rights

In my last blog post, I wrote about the recent Sixth Circuit decision in in Boaz v. FedEx Customer Information Services, Inc., et al. That case stands for the proposition that an employer cannot contractually shorten the statute of limitations for claims under the Fair Labor Standards Act or the Equal Pay Act.

There were, however, a couple of additional nuggets worth noting. In Boaz, FedEx relied on a Sixth Circuit case called Floss v. Ryan’s Family Steak House, 211 F.3d 306 (Sixth Circuit 2000). In that case, the court held that an employee asserting an FLSA claim could waive her right to a judicial forum and instead arbitrate the claim. FedEx argued that such waivers are perfectly acceptable in the context of shortening the statute of limitations. The Sixth Circuit noted that “Floss itself said that an employee can waive his right to a judicial forum only if the alternative forum ‘allow[s] for the effective vindication [of the employee’s] claim.’” The court noted that a contract that shortens the statute of limitations does the exact opposite. In other words, it clearly prevents the vindication of an employee’s statutory rights.

This is important because it shows the Sixth Circuit still recognizes the holding in Floss. In other words, in the context of an arbitration agreement, an employee might still be able to challenge the validity of the arbitration agreement if it effectively prevents the employee from vindicating his or her rights. A great example of this is the financial ability to pay. If an arbitration agreement says that the employee must pay for the arbitration, or pay for a substantial part of the arbitration, an employee might successfully be able to argue that their too darn broke to pay for a $400 an hour arbitrator. This might defeat the arbitration agreement. That’s a good point for employee rights advocates to remember.

Categories
Age Discrimination (ADEA) FLSA Title VII

Employment Agreements that Limit a Statute of Limitations. Enforceable?

Employers love arbitration agreements. Employers are beginning to love agreements that have provisions that limit an employee’s statute of limitations. The Sixth Circuit just handed down a decision that addressed such an agreement from Federal Express. In that case, Boaz v. FedEx Customer Information Services, Inc., et al., the Plaintiff filed a Fair Labor Standards Act and Equal Pay Act case. Federal Express tried to convince the court to dismiss the FLSA case because it was brought more than six months after the statute of limitations.

The case involved claims under both the FLSA and the Equal Pay Act. Many people associate the Equal Pay Act with discrimination lawsuits. However, for purposes of this case, it is important to remember that the Equal Pay Act was an amendment to the FLSA. The Sixth Circuit framed the issue as follows: “Although Boaz’s claims were timely under the multi-year limitations. Under those Acts, her claims were untimely under the six month limitations in her employment agreement.”

Her employment agreement said “to the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring to that Complaint within the time prescribed by law or six months from the date of the event forming the basis of my lawsuit, whichever expires first.”

Because the lawsuit was filed after the six month limitation, Federal Express thought they had a get-out- of-jail-free card.

Fortunately for the employee, the Sixth Circuit did not agree. The Sixth Circuit said that “the issue is whether Boaz’s employment agreement operates as a waiver of her rights under the FLSA.” They noted that employees may waive their rights under Title VII. However, employees cannot waive their rights under the FLSA. Therefore, they reasoned that the six month limitation period is not valid in an FLSA case. This left the question of whether the Equal Pay Act claim was also barred. While an employee can waive a claim under Title VII, the Sixth Circuit said that the Equal Pay Act is different. The Equal Pay Act was an amendment to the FLSA. Because the statute of limitation cannot be contractually shortened for FLSA claims, it cannot be contractually shortened for Equal Pay Act claims either.

What is the takeaway? Employers can have contracts that shorten the statute of limitations for some claims, such as Title VII. However, an employer cannot have a contract that shortens the statute of limitations for a Fair Labor Standards Act case in the Sixth Circuit. Likewise, because the Equal Pay Act was an amendment to the FLSA, Equal Pay Act claims also cannot be subject to contracts that shorten the statute of limitations. The court does not say so, but presumably the Age Discrimination in Employment Act is similar to the Equal Pay Act. It also is based on the statutory construction of the Fair Labor Standards Act.

There are two other nuggets the Sixth Circuit addressed in the Boaz case. However, you will have to stay tuned for our next blog post to find out about those.

Categories
FLSA Overtime/Wage & Hour

Donning and Doffing: What are “Clothes”?

                  What does it mean to change clothes? This was the issue in Sandifer v. United States Steal Corp., 678 F.3d 590 (7th Cir. 2012). In Sandifer, Judge Posner found that protective gear was “clothes” within the §3(o) exemption of the FLSA.

                  As you may know the §3(o) exemption excludes changing clothes from compensable time when it is part of the “express terms of or by custom or practice under a bonafide collective bargaining agreement applicable to the particular employer.” In Sandifer, the plaintiffs argued that steal workers were not changing clothes but were changing “safety equipment.” Judge Posner disagreed.

                  That was not, however, the final word. The United States Supreme Court granted certiorari on the issue. Alas, we will get to find out what the Roberts court considers to be “clothes.”

Categories
FLSA Overtime/Wage & Hour

Home Healthcare Workers: New Regulations are on the Way

                 Home healthcare workers work long hours for low pay. They are among the lowest paid employees in our workforce. Unfortunately, they are often exempt from both the minimum wage and overtime requirements of the FLSA. The reason is an accident of history. Thankfully, help may be on the way.

                It is important to note that home healthcare workers are not underpaid because the industry is broke. In 2009, the home healthcare industry had $24 billion in profit. That’s not revenue; that’s profit. They are among the five fastest growing industries in the country.

                Originally, the home healthcare workers’ exemption – known as the companionship exemption – was created for “companions.” In other words, Congress did not want grandma to have a heart attack while she was alone at home. Therefore, Congress thought it would be a good idea to encourage grandma to pay somebody to sit on the couch and watch General Hospital with her. These were companions. However, when Congress passed the exemption, they gave the Department of Labor authority to interpret “companion.”

                The Department of Labor expanded the definition to include workers to perform certain domestic services. The United States Supreme Court reviewed this interpretation and hinted it was a little quirky, but still deferred to the Department of Labor.

                At last, the Department of Labor has now proposed new regulations. While the final version is not out, the drafts did three important things: (1) they said that general household work was not included in companionship; (2) they excluded providing medical care as companionship; (3) they created a rule that no more than 20% of companions’ time can be used performing non-companionship services; and (4) they specifically provide that employees of third party home health agencies are not exempt.

                The fourth provision is especially important. For-profit companies who make a great deal of money providing “companionship services” frequently rely on the FLSA exemptions. They rake in tons of revenue while paying employees a pittance.

                The notice and comment period of the new regulations closed in 2012. We are just waiting to see if the Department of Labor will adopt them. We hope they will come out in April or May of 2013. In the interim, there is at least a bit of hope on the horizon for “companions” of the elderly.