2016 IHA LEGAL FORUM FOR HOSPITAL EXECUTIVE AND COUNSEL

What is Keeping Your Human Resource Leadership Up at Night?

Presented by:Kevin A. Stellakstella@hallrender.com / (317) 977-1426

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. . . or keeping your human resources legal counsel up at night.

1. Fair Labor Standards Act Changes to Salary Basis:

Readying your organization

Who is exempt from overtime?

• “White collar” employees who are  bonafide "Executive," "Administrative," or "Professional" employees

• Paid a salary• Perform certain duties• Others?

The Exemption TestsNEW Salary Basis Test!

$913 per week (up from $455); or…

$47,476 annually (up from $23,660) • Updated every 3 years• Highly Compensated $134,004 (up from $100,000)

• Bonus supplements allowed up to 10%• Effective December 1, 2016

What should organizations be doing to prepare?

• Determine who is now exempt• Review and revise existing job descriptions / handbooks• Increase salary to threshold (*remember that another increase is

likely in January 2020 to maintain the exemption)• Change those necessary to hourly compensation (*effective date is

December 1, which is a Thursday . . . it may make sense to make the change at the beginning of a pay period prior to December 1)

• Prepare communication strategy to employees• Educate “new” hourly employees on expectation of working beyond

normal scheduled hours

Other strategies to consider?

• Reduce or control hours to avoid overtime

• Increase staff or reduce staff to meet needs

• Retain salary but pay overtime for all hours over 40

Can we pay in excess of the salary and keep the exemption?• So long as the minimum salary ($913) is guaranteed, extra compensation based on hourly, daily or shift basis is permitted.

• Do not allow employee's primary dutyto become non‐exempt type work.

2. Wage and Hour Litigation:

Collective Actions Continue

Three Common Wage and Hour Issues:a. Meal and Break Period

b. Rounding Practices

c. Misclassifying Employees

Meal Period Collective Actions on the Rise!• Across the country collective actions filed against large 

and small employers for wage and hour violations.

• Allege failure to pay for interrupted meal periods, rounding practices, and pre and post‐shift activity.

• Such claims can  be very expensive to defend.

• Manager’s practices play a key role.

What Counts as a Meal Period?Regulation 785.19(a): Meal Period“Bona fide meal periods are not work time. Bona fide mealperiods do not include coffee breaks or time for snacks. Theseare rest periods. The employee must be completely relievedfrom duty for the purposes of eating regular meals. Ordinarily30 minutes or more is long enough for a bona fide meal period.A shorter period may be long enough under special conditions.The employee is not relieved if he is required to perform anyduties, whether active or inactive, while eating.”

Meal Period AllegationsMeal Break Deduction Policy and Practices:

• Not completely relieved from duty during meals• Expected or required to work during meals• No rules against working during meals• Work was done during meals in plain sight of management• If work was counted would have resulted in overtime• Management knew the rules and intended to violate the 

FLSA 

Do we have to pay for meal periods?

• No ‐ If completely relieved from duty and at least 30 minutes at a regularly scheduled time.

• Yes ‐ If frequently interrupted – must pay whole meal period.

• Yes ‐ If allowed to work – must pay whole meal period.

• Can restrict to premises if otherwise completely relieved from duty.

• Cannot combine short periods to make one meal period.

What Counts as a Break Period?Regulation 785.18: Rest

“Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked. Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on‐call time.” 

Meal and Break Period Summary• Breaks of 5 to 20 minutes must be counted as hours worked.• FLSA does not require for breaks or meal or rest periods for

employees 18 years of age or older.• 30 minutes or more is a bona fide meal period.• Employee must be completely relieved of duty.• Frequent interruptions: employer must pay for entire meal

period.• Rare and infrequent emergencies can be excluded.• Employer can restrict employees to the premises during

meal period.• Management is responsible for compliance.

Rounding PracticesRegulation 785.48: Use of time clocks.• “. . . where time clocks are used there has been the practice 

for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one‐tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 

Rounding Practices Cont.Example #1: • An employer docks employees by a full quarter hour (15 

minutes) when they start work more than seven minutes after the start of their scheduled shift. Does this practice comply with the FLSA requirements? 

• Yes, as long as the employees’ time is rounded up a full quarter hour when the employee starts working from 8 to 14 minutes before their shift or if the employee works from 8 to 14 minutes beyond the scheduled end of their shift. 

Rounding Practices Cont.Example #2: • An employee’s schedule is 7 a.m. to 3:30 p.m. with a 30 

minute unpaid lunch break. The employee receives overtime compensation after 40 hours in a workweek.  The employee clocks in 10 minutes early every day and clocks out 7 minutes late each day.  The employer follows the standard rounding rules.  Is the employee entitled to overtime compensation?  

• Yes.  If the employer rounds back a quarter hour each morning to 6:45 a.m. and rounds back each evening to 3:30 p.m., the employee will show a total of 41.25 hours worked during that workweek.  

Lessons / Best Practices

• Pull random sample size of hourly employees’ pay records and audit to confirm proper rounding practices and corresponding pay

• Review time and attendance policies – are employees disciplined for clocking in if only minutes late

• Consider engaging legal counsel to establish attorney‐client privilege and provide good faith defense with hopes of minimizing penalties

• Enhance existing wage and hour policies and procedures to address the most common areas of confusion such as missed or interrupted meal periods

• Provide managers and hourly employees with continuous training on key wage and hour policies and proper timekeeping

• Consider prohibiting employees working at their desks during meal periods• Discipline employees for not properly clocking in and out, for working overtime 

without permission, or for failing to follow the required procedures for working through a meal or rest period

3. Misclassifying Employees

Misclassifying EmployeesTwo Types of Misclassification:

1. Employee vs. Independent Contractor

2. Exempt vs. Non‐Exempt

– Most common exemptions are:o Executive, Administrative, and Professional

We will focus on Employee v. Independent Contractor

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Employee vs. Independent ContractorWhy it matters: (i.e. significant impact on potential liability for overtime, inaddition to tax and employee health/retirement benefit liabilities).

In recent years there has been increased scrutiny by federal and stateagencies, as well as cooperation among them. (ex. IRS working with DOL)

There is neither a single nor a simple test used to determine whether aworker is an independent contractor or an employee. The tests applied arecomplex and subjective, and differ depending upon the law at issue.

For example – different test used for FLSA, Title VII, ADA, IRS, etc.

The test most often used for purposes of the FLSA is the “economic realitiestest.” The analysis is fact specific and no single factor is determinative.

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Employee vs. Independent ContractorThe factors that determine whether an individual is anindependent contractor or an employee for FLSA purposesare:

the extent of the individual's investment in equipment andfacilitiesthe individual's opportunities for profit or lossthe degree of control exercised by others over the individual'sworkthe permanency of the relationships between the individual andthe persons for whom he or she performs workthe skill required of the individual in performing his or her workwhether the service performed is an integral part of theemployer's business

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Employee vs. Independent ContractorLessons / Best Practices:

Enter into written contracts before work beginsContract with the entity (LLC, etc.), not the individualAllow independent contractors to provide same services toother businessesUse different badges and business cards for independentcontractorsTry to avoid having independent contractors andemployees do the same workDon’t give independent contractors an employeehandbookHave a check and balance system in place whereproposed new contractor engagements are carefullyreviewed to ensure it is not truly an employmentrelationship

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4. Americans with Disabilities Act:

Reasonable Accommodations in an Unreasonable Legal Environment

THAT WAS THEN… THIS IS NOW!

Employee whose hand had been amputated was notprotected by the ADA; employee testified that he could perform routine daily activities with prosthetic device, so he was not “substantially limited”

Bridge worker’s claim for failure to accommodate his fear of heights can proceed to trial; question of fact regarding whether working at heights is essential function of bridge worker’s job

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ADA Amendments Act (ADAAA)

The ADAAA significantly increased the number of protected individuals by modifying other definitions.

New FocusDid the employer make a reasonable accommodation?If not, can employer demonstrate undue hardship or other defense?

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ADA Amendments ActCongress now says:

“The definition of Disability shall be construed in favor of broad coverage…”“The question of whether an individual's impairment is a disability under the ADA should not demand extensive analysis"

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What Should Employers Do?

AlwaysDisabledAlwaysAssessAccommodation

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Reasonable Accommodation –Recognizing the Request

Not required to be on any particular form, or in any particular formatEmployee request linked to a medical condition should trigger the interactive process

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Reasonable Accommodation –Recognizing the RequestCompletion of employer’s reasonable accommodation formWork restrictionsEmployee tells supervisor, “I’m having trouble getting to work at my scheduled starting time because of the side effect of my medication. Can we work something out?”

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Interactive Process

Informal dialogue and interaction between employer and employee to determine whether accommodation is needed because of a disability and, if needed, whether the accommodation will be effective

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Interactive Process

May vary based upon disability and requested accommodation

Little discussion required where both disability and type of accommodation required is obviousWhere not obvious, employer may request additional documentation about the disability, functional limitations, and alleged workplace barriers

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Interactive ProcessRequesting individual need not specify the precise accommodation

Must describe problems posed by the workplace barrier

Provide medical documentation concerning the nature of the impairment, and its effect on the individual’s ability to perform his or her job

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“Reasonable” AccommodationAcquire or modify equipmentModify policies, exams, trainingProvide readers or interpretersMake workplace accessible**Leave of absence**

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“Reasonable” AccommodationJob restructuring

Redistributing marginal/non-essential job functions which employee cannot perform because of disabilityAltering when, how, or where a job function is performed

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“Reasonable” AccommodationReassignment to vacant position

Job placement v. applicationEmployee must meet minimal job qualifications

Best PracticesConsult with managers to determine essential job functions and discuss business needs prior to placementConversation with employee regarding abilities and desired positions

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“Reasonable” Accommodation

Part-time or modified work schedule or location

Pay/benefits may be adjusted (special concerns with adjustments for exempt employees)

Remember FMLA obligations (reduced schedule leave)

Document effect on business

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“Reasonable” Accommodation –Leave of Absence Issues

Additional leave time/job protection beyond FMLA, and beyond employer’s policy limits can be a reasonable accommodation

Case by case basis

EEOC position: leave from work is not a reasonable accommodation where the employee does not have a job to which to return at the conclusion of leave

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Reasonable Accommodation –Leave of Absence

EEOC Enforcement Guidance:An employer may NOT “apply a ‘no-fault’ leave policy, under which employees are automatically terminated after they have been on leave for a certain period of time, to an employee with a disability who needs leave beyond the set period.”

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Notable EEOC Settlements:$6.2 million – Sears Roebuck & Co. paid to resolve allegations of an inflexible leave policy under which disabled workers were terminated after exhausting workers compensation leave instead of providing reasonable accommodations of their disabilities (N.D. Illinois, 2010)

$3.2 million – Supervalue, Inc. paid to settle allegations relating to an “overly rigid and illegal disability policy” in its Jewel-Osco stores. (N.D. Illinois, 2011). Still in the news due to alleged violations of the consent decree resulting in recommendations for additional damages and extension of conciliation agreement

$20 million – Verizon paid to resolve allegations that it refused to make exceptions to its no fault attendance policy for individuals whose absences were caused by their disabilities. Under the challenged attendance plans, if an employee accumulated a designated number of “chargeable absences,” Verizon placed the employee on a disciplinary step that could ultimately result in more serious disciplinary consequences, including termination (District of Maryland, July 2011)

$135,000 – Alorica, Inc. agreed to pay to resolve claim that predecessor Ryla Teleservices wrongfully terminated and denied employee’s request for a 4-week extension of disability leave to treat bipolar disorder and depression (N.D. Georgia December 2013)

$1.35 million – Princeton Healthcare System will pay to resolve claims that its fixed leave policy failed to consider leave as a reasonable accommodation in violation of the ADA (Dist. New Jersey, June 2014)

When Accommodations Are NOT Reasonable

Employers are not required to:Create positionEliminate or transfer essential job functionsConvert necessary full-time positions to part-time positionsProvide personal need items (hearing aids, eyeglasses)

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ADA Accommodation –Lessons / Best Practices

Remember the current legal environment

Engage in the interactive process to determine if accommodations are necessary

Train your managers to be alert, sincere, and responsive

Revise existing policies to build in flexibility and allow for reasonable accommodation of disability – related absences

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Lessons / Best Practices Cont.For frequent, unpredictable absences causing disruption to business, explore possibility of transfer to vacant position or LOA

Take all requests seriously and be methodical in the approach

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Questions?

Kevin A. Stellakstella@hallrender.comPhone: (317) 977-1426

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