FLSA: Cutting-Edge Issues in Wage and Hour Law

Michael D. Jones, Esq.Don A. Innamorato, Esq.John T. McDonald, Esq.

What Do These Have in Common?

Mickey Mouse

Stockbrokers

Strip club dancers

Seminary students

Casino dealers

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(DOL investigation settlement reported Aug. 26, 2010)(Chu v. Wells Fargo, N.D. Cal. No. 05-cv-4526)(In re Penthouse Executive Club, S.D.N.Y. No. 10 Civ. 1145 Oct. 26, 2010)(Rosas v. Corp. of Catholic Archbishop of Seattle, 9th Cir. No. 09-35003(Daprizio v. Harrah’s Las Vegas, Inc., D. Nev. No. 2:10-cv-00604 Aug. 17, 2010)

By the Numbers 1,800 FLSA suits in 2000 4,000 FLSA suits in 2003 6,000 FLSA suits in 2007 More than 7,000 FLSA suits in 2011 DOL claims only 30 percent of employers are

in compliance DOL claims 86 percent of workforce is non-

exempt

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Famous Last Words We don’t have any hourly employees

We don’t pay unauthorized overtime

She makes up / takes off the hours the next week

He agreed to it

Overtime is built into her salary

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DOL Update

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Targeted Industries

Agriculture Day care Restaurants Garment

manufacturing Security guard

services

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Health care Hotels Janitorial / custodial Temporary staffing

DOL Reversals Safety equipment

Mortgage loan officers (administrative vs. production)

Withdrawal of pending Opinion Letters

Creation of “administrator interpretations”

Tip pool rules limiting participation apply even if no tip credit taken

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Shift at DOL Aggressive enforcement

Hired more than 300 additional investigators

Insisting on liquidated damages

Refusal to approve settlements (WH-58 Form) on self-audit, full investigation required

Insisting on three-year (willful violation) limitations

Tolling agreements to protect individual suits in addition to DOL

Referral of Wage and Hour and FMLA suits to plaintiffs’ lawyers via 800-number hotline

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DOL Agenda for 2013 Solis steps down, direction unlikely to change

Revisiting requirement to create written classification analysis for every exempt position, provide it to each employee and DOL during audit, and notify employees of their rights to challenge their classification

MOUs with more states, sharing of information between DOL, IRS and state agencies

Continued focus on independent contractors

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Supreme Court Update

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Supreme Court FLSA Retaliation Kasten v. Saint Gobian Perf. Plastics Corp.,

U.S. Supreme Court Docket No. 09-834 An oral complaint to employer is “protected

activity” FLSA § 15(a)(3) protects a person who has

“filed any complaint” Unique language – contrast to “opposed”

language of Title VII, ADA & ADEA At enactment, did not contain private cause

of action

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Supreme Court Pharmaceutical Sales Representatives Outside sales exemption By law, cannot “sell” Christopher v. Smithkline Beecham “Selling” broadly interpreted No deference given to DOL, shifting of

positions criticized Commissions based on “sales” Broader application?

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Supreme Court – Private Settlements Supreme Court declined to hear challenge to

5th Circuit case permitting private FLSA settlement

Three factors Genuine dispute Employee aware of FLSA rights Employee not disadvantaged by unequal

bargaining power Where do we go from here?

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Advanced FLSA Issues

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Class Certification Federal vs. State – Opt-in / Opt-out

Rule 23/216(b) Low threshold for class certification “Similarly situated” Two-stage analysis:

To opt-in look at pleadings or affidavits (modest factual showing)

After discovery tested by decertification motion

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Why FLSA Class Litigation? Attracting plaintiff’s class action lawyers

Easy / lower threshold for class certification

Cases often settle if class certified

Therefore, easy payday for lawyers

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Why FLSA Class Litigation? (cont’d)

Claims repeatable at different employers Industry assumptions and practices are

being tested – may have evolved from convenience

Common payroll practices / administration across subsidiaries and industries

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The Conspiracy Theory Corporate focus on limiting overtime

Incentivize managers to control costs

Managers commit FLSA violations

Corporation benefits by reduced labor costs

Corporation turns a blind eye

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Failure to Include Items in Hourly Rates Non-discretionary bonuses Shift differential Production bonuses Safety bonuses Attendance bonuses Longevity pay Retention bonuses Bonus as percentage of total earnings already

includes overtime

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Off-Clock Work Training time

Shift hand-off

Travel time

Corporate policy / culture allegations

Waiting to clock, clear security, clean equipment

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Recording Time Traditional timeclocks Wait time Walking time

Log-in records “Boot” time $1 million, $4.8 million, $5.1 million

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Recording Time (cont’d)

Self-report / timesheets

Employer responsibility to maintain accurate records

Employee signature not enough

8, 8, 8, 8, 8 = 40 problem

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Time Rounding Timeclock functions / programming issues

Half of timekeeping increment

e.g.,15 minutes (1/4 hour), round at 7½ minutes

Must round in both directions

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Lunch Breaks Work through breaks

Interrupted

Confined to workstations / work premises permissible but dangerous

Less than 20 minutes

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Lunch Auto-Deduct Automatic deduction for lunch with cancel option Massive wave of litigation Provides commonality across disparate worksites and

job positions Common with timeclock programming Must be completely relieved from work Phone calls, emails, customer / client / public inquiries Brought down by your best employees Hard to prove the negative (key is effective method to

override auto-deduct)

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Rest Breaks Less than 20 minutes must be paid

No federal requirement

Many states require

Creative handbook / contractual claims

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Commuting Time Home to work – non-compensable

Home to client site – non-compensable

Home to work to client site – drive time to client site is compensable

Travel between worksites or client sites is compensable

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Travel Time One-day trip – Travel time is compensable,

time from home to airport excluded

Multi-day trip – Travel time during normal work hours is compensable (including those hours on the weekend) but outside of normal working hours is not

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Partial-Day Docking Hourly – permissible

Exempt – not permissible

Docking of leave balances permissible

Docking of whole days for sickness (sick leave exhausted) or personal reasons permissible

FMLA intermittent leave docking permitted

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Inclement Weather Can dock hourly employees if closed

Cannot dock exempt employees if closed

If company opens, can dock exempt employees’ leave banks if fail to report to work

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Furloughs and Reduced Hours Salary basis requires fixed salary regardless

of hours

One-time adjustment authorized by DOL Opinion Letters

Subterfuge if pattern to avoid OT liability

Prospective changes only

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Cell Phones, BlackBerrys and Email Pager-on-call time generally not

compensable for hourly employees

Engaged to wait vs. waiting to be engaged

Phone, email, BlackBerry time likely compensable

Possible de minimus exclusion

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Leaves of Absence Challenge with exempt employees checking

emails, etc.

FLSA – “any work performed in work week”

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Flex Time and Telecommuting Flex time and work at home require thorough

documentation

Loss of control over hours worked

Salaried employee work week problem

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Compensatory Time Public sector only

Variant for exempt salaried private sector employees

Illegal for private sector hourly employees in lieu of overtime

Time off within same work week (not pay period) is permissible

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Commissioned Employees More than half of income is commissioned

Must be “retail or service establishment”

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Computer Professional Not “Help Desk,” not “Tech Support” $23,600 annually / $455 per week / $27.63

per hour Systems analyst, computer programmer,

software engineer typically exempt

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Outside Sales Exemption Outside – not inside

Home office is not outside

Internet, mail, telephone are not “outside” sales

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State Law Inconsistencies Not all FLSA exemptions mirrored in state

laws

Issues under both old and revised FLSA regulations

PA 8/80

Highly compensated employee exemption ($100K)

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Protective Equipment and Clothing Portal-to-Portal Act – generally excludes

preliminary and postliminary activities like changing clothes

“Donning and doffing”

Must be compensable if “integral and indispensable” to work duties (Steiner v. Mitchell, 350 U.S. 247 (1956)) or a “principal activity” (IBP v. Alvarez, 546 U.S. 21 (2005))

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Protective Equipment and Clothing (cont’d)

De minimus doctrine

CBA can define this aspect of compensable time

DOL Administrator Opinion No. 2010-2 (June 16, 2010) – protective equipment is not clothes

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Protective Equipment and Clothing (con’t) Continuous workday doctrine puts employee

“on the clock”

DOL Administrator Opinion rejected in Franklin v. Kellog, 619 F.3d 604 (6th Cir. 2010), but begins workday (safety glasses, ear plugs, etc.)

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Joint EmployerAggregation of Hours Worked Same employee – related companies

Same employee – staffing agency at regular employer

Same employee – staffing agency hours at multiple employers aggregated

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Independent Contractors Joint Worker Misclassification Initiative

Be wary of staffing agency employees working more than 40 hours per week

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Insurance Coverage Issues EPL claims typically exclude wage claims

May be able to assert coverage based on other claims or attacking contractual exclusion

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Union Organizing Tactic Two-front war

Shows employees results and power of union

Benefits union law firms

No-lose scenario for union, no-win situation for employer

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Strategies Arbitration / class waivers (Oxford Health Plans v.

Sutter pending) Compliance / risk audits Test payroll and timekeeping systems to be

“litigation worthy” Assess corporate culture vulnerability Look hard at agency employees and independent

contractors Work on being “uncertifiable” Think outside your assumptions, justify why you pay

people the way you do

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Questions?

Thank you for attending!Please visit Reed Smith’s Labor &

Employment blog:www.employmentlawwatch.com

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