Recent Wage and Hour Developments Under the Fair Labor Standards Act

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  • 1. 11/14/2012 Recent Wage and Hour Developments Under the Fair Labor Standards Act NOVEMBER 14, 2012 Mitchell W. Quick, Esq. Steven A. Nigh, Esq.Fair Labor Standards Act Basics The FLSA is the federal law that regulates:  Minimum Wage  Overtime  Child Labor  Recordkeeping 1
  • 2. 11/14/2012FLSA: White Collar Exemptions There are several “white collar” exemptions from the minimum wage and overtime requirements of the FLSA:  Executive Exemption  Administrative Exemption  Professional Exemption  Outside Sales Exemption  Computer Employee ExemptionFLSA: White Collar Exemptions Generally, exemptions have a pay component and a duties component. Method of payment:  Executives: must be paid on a salary basis  Administrative and Professional Employees: salary or fee basis  Outside Salespersons: no method of pay requirement  Computer Employees: may be salary, fee, or hourly 2
  • 3. 11/14/2012FLSA: White Collar Exemptions Duties test  Each white collar exemption looks at the employee’s “primary duty.”  The primary duty analysis is fact-intensive and will probably need to be done on a case-by-case basis.  What matters is what the employee actually does—not necessarily what the employee’s job description says.Outside Salespersons: The Pharma Cases Several cases around the country addressed a similar question: whether pharmaceutical sales representatives (PSRs) were exempt as outside salespersons. PSRs could obtain nonbinding contracts from physicians to buy their company’s products—but they could not enter contracts with physicians or actually make a sale in the traditional sense of the word. 3
  • 4. 11/14/2012Christopher v. Smithkline Beecham Corp. U.S. Supreme Court  Concluded that PSRs are exempt outside salespersons.  Obtaining nonbinding contracts was enough to constitute a “sale” under the Dep’t of Labor’s regulations.  All nine justices refused to defer to the Dep’t of Labor, which argued that the PSRs were non-exempt.  The Dep’t of Labor had changed its longstanding position, and did so in litigation, not through notice-and-comment rulemaking.The Same, Only Different Schaefer-Larose v. Eli Lilly & Co. (7th Cir. 2012)  Involved PSRs, like Christopher.  But the Seventh Circuit considered whether PSRs were exempt administrative employees, not outside salespersons.  The Seventh Circuit concluded that PSRs were exempt because they did nonmanual work directly related to the general business operations of their employer by being the face of the company to physicians.  Furthermore, the PSRs used discretion and independent judgment by working unsupervised and tailoring their customer service to each physician’s circumstances. 4
  • 5. 11/14/2012What Does it All Mean? If you’re a pharma company: you win! If you’re not: employers can be happy about the Supreme Court’s opinion on deference  What the Dep’t of Labor can’t do through regulation, it sometimes tries to do through litigation.  The Supreme Court’s opinion in Christopher may change that and force the Dep’t of Labor to go back to notice-and-comment rulemaking.  And if the Dep’t of Labor must go through notice-and-comment rulemaking, it may not push as hard for extreme (read: employee-friendly) rules.Speaking of Notice-and-Comment Rulemaking… New Proposed Rules for the Companionship Services Exemption  Currently, people “employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves” are exempt from the FLSA’s minimum wage and overtime requirements.  The Dep’t of Labor has proposed a new rule that will narrow the categories of companionship employees that this exemption applies to and the kinds of activities they can do while remaining exempt. 5
  • 6. 11/14/2012Proposed Companionship Services Exemption Changes Proposed Changes to the Regulations:  Third-party employers of companionship employees cannot use the exemption; only the person, family or household employing the employee can use it.  Only employees who provide “fellowship” and “protection” are exempt; employees whose vocation is domestic service are non-exempt.  Only 20% of a companionship employee’s time may be spent on activities “incidental” to providing fellowship and protection, e.g., making meals or general household work.Settling without DOL or Court Approval Martin et. al. v. Spring Break ’83 Productions (5th Cir. 2012). For decades the rule has been, in contrast to discrimination claims, an employer cannot privately settle FLSA wage claims. Court and/or Department of Labor supervision and approval of the terms of a Settlement Agreement is generally required to enforce a release of a wage claim. Martin is the first Court of Appeals case to uphold the enforceability of a private FLSA settlement. 6
  • 7. 11/14/2012Settling without DOL or Court Approval In Martin, the Union signed a settlement agreement with the employer on the Plaintiffs’ behalf, acknowledging a dispute over unpaid hours, and agreeing to certain payments. Meanwhile, the Plaintiffs obtained their own attorneys, filed suit in court, and then cashed the settlement checks. The Court enforced the settlement agreement as a valid release of the Plaintiffs’ wage claims, even though they never signed it.Settling without DOL or Court Approval The Court was influenced by the Plaintiffs’ cashing of the checks when they had lawyers, the authority of the Union to act on their behalf, and the clear dispute over the number of hours they worked. A Petition for Review has been filed with the U.S. Supreme Court. There is a split among the Courts of Appeal, so if the Supreme Court takes the case it will likely settle the issue. 7
  • 8. 11/14/2012Settling without DOL or Court Approval Practice tip: always put in “admission” or estoppel language in any release that purports to waive wage claims under the FLSA. (i.e. employee “admits the number of unpaid hours he is claiming is __[,]” and “admits he has been paid for all hours worked”). So, even if the release may not bar the filing of the action, this language will effectively eliminate any remedy.Significant Wisconsin “Off The Clock” Case Many collective and class actions are filed against employers claiming compensation for “off the clock activities” that are allegedly “work.” In DeKeyser et. al. v. ThyssenKrupp Waupaca, Inc. (E.D. 2012) foundry workers claimed they should be compensated for the time spent before clocking in, or after clocking out, for the “donning and doffing” of hardhats, safety glasses, ear plugs, pants, shirt, safety boots, and the time spent showering at work. 8
  • 9. 11/14/2012Significant Wisconsin “Off The Clock” Case There were 490 Plaintiffs who “opted-in” to the FLSA collective action, and 4,900 class Plaintiffs claiming the same relief under Wisconsin laws. After 4 years of litigation, the Court issued summary judgment to Waupaca dismissing all of the Plaintiffs’ claims. The Plaintiffs have appealed to the Seventh Circuit Court of Appeals. Practice tip: If you require employees to don or doff uniforms before working, do not require that they do so on-site, if at all possible, or such time might be compensable.Automatic Timeclock Deductions for Meal Breaks Many employers utilize an automatic deduction system in which a certain number of hours are assumed to have been worked, and an unpaid meal break is automatically deducted. Such a system is permissible, but not foolproof. In White v. Baptist Memorial Health Care, (6th Cir. 2012), the employer had a policy in which employees working shifts of 6 hours or more received an unpaid meal break that was automatically deducted from their paychecks. 9
  • 10. 11/14/2012Automatic Timeclock Deductions for Meal Breaks The employer’s handbook provided that if an employee’s meal break was missed or interrupted because of work, the employee was to record all such times spent performing work during meal breaks in an “exception log.” Employees signed a document stating that they understood the meal break policy, and had to report time in an exception log in order to be compensated for that time. Plaintiff, an emergency room nurse, claimed that she repeatedly worked through meal breaks without compensation.Automatic Timeclock Deductions for Meal Breaks There was evidence that each time the Plaintiff did file the exception log, the employer did compensate her. The Plaintiff admitted that she stopped reporting her missed meal breaks because she felt it would be “an uphill battle.” The hospital moved for summary judgment, claiming that the employee failed to report such incidents in the exception log. 10
  • 11. 11/14/2012Automatic Timeclock Deductions for Meal Breaks The Sixth Circuit dismissed the Plaintiff’s claim, concluding that if an employer “establishes a reasonable process for an employee to report uncompensated work time the employer is not liable for non- payment if the employee fails to follow the established process.” The Baptist Court found such conduct “prevents the employer from knowing its obligation to compensate the employee and thwarts the employer’s ability to comply.”Automatic Timeclock Deductions for Meal Breaks This decision stands in contrast to some Department of Labor Opinion Letters. See Opinion Letter 2008-7NA (holding that an employer must compensate the employee for all hours worked, including the time worked during the missed meal period, even if, in direct violation of company policy, the employee fails to take a meal break and does not notify a manager. 11
  • 12. 11/14/2012Other Developments: The “We Didn’t Know” Defense Kellar v. Summit Seating (7th Cir. 2011)  Kellar was a sewing manager at Summit Seating. After she was fired, she sued, alleging that she typically arrived 15-45 minutes before her shift and worked without pay until her shift started.  The Seventh Circuit held that Summit Seating was not required to pay for that extra work because it did not know and had no reason to know that Kellar was working extra hours.The “We Didn’t Know Defense”: Don’t Try This at Home The general rule is that the employer must “exercise its control and see that the work is not performed if it does not want it to be performed.” Constructive knowledge of the work counts as knowledge. Summit Seating was able to show that nothing Kellar did alerted it to the fact that she was actually working—this can be very difficult to prove! 12