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Avoid Liability! FLSA Compliance A "How To" Webinar
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Avoid Liability! FLSA Compliance A "How To" Webinar

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Mark Neuberger and Larry Perlman employment attorneys at Foley & Lardner LLP, will present a one hour review of some of the more common issues that will be contributing to employers’ sleeplessness …

Mark Neuberger and Larry Perlman employment attorneys at Foley & Lardner LLP, will present a one hour review of some of the more common issues that will be contributing to employers’ sleeplessness this year. Their presentation will include discussion of:
Are you asking your employees to work overtime? Thinking of changing some supervisors over to salaried pay? Deciding whether to take on a few student interns over spring break or the summer? All of these decisions carry potential wage and hour law implications. Wage and hour claims under the Fair Labor Standards Act (FLSA) or similar state law are not only costly, but they continue to be, in some parts of the country, the most commonly litigated forms of employment lawsuits in the federal court system. Seemingly logical decisions as to how to pay employees or account for hours can carry broader implications and potential liability. We will discuss the more commonly litigated claims and provide recommendations to avoid liability.
More and more companies are learning that the use of Big Data is a powerful tool to better manage your organization’s human resources. Like all new and good things, Big Data also brings the potential for increased liability. We will discuss the potential legal traps that come from using Big Data and how to avoid them.
Many employers think that because their workforce is not unionized, they can cross labor law off the list of issues to worry about. Unfortunately, there is no such respite. Did you know that the National Labor Relations Act (NLRA) and its protections extend to most employees, even those in non-union workplaces? Seemingly unrelated employment decisions, such as whether to permit your employees to hawk their kids’ girl scout cookies on premises, or developing a policy as to employee use of Facebook can expose a company to liability under the NLRA.

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  • 1. 1 AVOID LIABILITY! FLSA AND OTHER COMPLIANCE ISSUES Larry S. Perlman Foley & Lardner LLP (305) 482-8429 lperlman@foley.com Mark J. Neuberger Foley & Lardner LLP (305) 482-8408 mneuberger@foley.co m ©2013 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not cli ents but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500
  • 2. 2 Roadmap to Today’s Program General Theme-Compliance Wage-Hour  Independent Contractors  Use of Big Data  Protected Concerted Activity  ©2013 Foley & Lardner LLP
  • 3. 3 Wage and Hour Law Plaintiffs’ Attorneys’ POV ©2013 Foley & Lardner LLP
  • 4. 4 Wage and Hour Law Employers’ POV ©2013 Foley & Lardner LLP
  • 5. 5 History of the Fair Labor Standards Act    Part of FDR’s Campaign pledge to address minimum wage and child labor issues Signed on June 25, 1938 Basic Provisions – Minimum wage – Overtime pay after 40 worked hours – Prohibition on use of ―oppressive child labor‖ – Each workweek stands on its own – Amended 1947 (―Portal-to-Portal Act‖) ©2013 Foley & Lardner LLP
  • 6. 6 Wage & Hour Law - General  State and Local Laws – Most states have some laws on wages and/or hours – FLSA does not preempt state laws or municipal ordinances – Critical because workers are entitled to most favorable treatment—federal, state or municipal ©2013 Foley & Lardner LLP
  • 7. 7 Coverage Under The Act  There are two ways in which an employee can be covered by the FLSA – Employees may work for an enterprise engaged in commerce or in the production of goods for commerce   Annual Gross sales volume of not less than $500,000 Employs at least two persons who are engaged in commerce or in the production of goods for interstate commerce – Individual coverage  ©2013 Foley & Lardner LLP Employee’s work regularly involves him/her in interstate commerce
  • 8. 8 Coverage Issues   Volunteers—There is NO permissible volunteering of services to a for-profit employer in the private sector Internships  Only Employees and not Independent Contractors are covered  Use the Economic Reality Test ©2013 Foley & Lardner LLP
  • 9. 9 OVERTIME  One and one-half times (1½) the regular rate of pay for all hours worked over 40 in any given workweek – What is the work week? – What is the regular rate? – When did they work? – For Salaried employees, can have fixed salary for fluctuating work week  ©2013 Foley & Lardner LLP Overtime is then paid at one-half (½) regular rate for all hours over 40
  • 10. 10 WHITE COLLAR EXEMPTIONS       Executive Administrative Employees Professional Employees Computer Employees Outside Sales Employees Highly Compensated > $100,000 per year ©2013 Foley & Lardner LLP
  • 11. 11 EXECUTIVE EXEMPTION  Employee’s primary duty must consist of the management of the enterprise in which he/she is employed or a customarily recognized department or subdivision thereof  Employee must customarily and regularly direct the work of two or more employees  Employee must have the authority to hire or fire other employees or the suggestions and recommendations as to hiring, firing, advancement, or promotion must be given particular weight ©2013 Foley & Lardner LLP
  • 12. 12 ADMINISTRATIVE EXEMPTION  Primary duty consists of Office or Non-manual Work  Directly Related to Management or General Business Operations of the Employer or Employer’s Customers  Must exercise discretion and Independent judgment with respect to matters of significance – The exercise of discretion and independent judgment generally involves comparing and evaluating possible courses of conduct and acting or making a decision after the various possibilities have been considered ©2013 Foley & Lardner LLP
  • 13. 13 PROFESSIONAL EXEMPTION  The Learned or Creative Professional  Learned Professional  Primary duty includes – Employee must perform work requiring advanced knowledge; – The advanced knowledge must be in a field of science or learning; AND – The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual study. ©2013 Foley & Lardner LLP
  • 14. 14 COMPUTER PROFESSIONAL EXEMPTION   Computer Professional Exemption Primary duty/work includes: – the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; or – The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications. – DOES NOT apply to persons engaged in manufacture or repair of computer hardware or related equipment ©2013 Foley & Lardner LLP
  • 15. 15 OUTSIDE SALES EXEMPTION  Outside Sales Exemption  Primary duty includes: – Making sales or obtaining orders or contracts for services – Employee is customarily and regularly engaged away from the employer’s place of business in performing such primary duty ©2013 Foley & Lardner LLP
  • 16. 16 Bases for W/H Collective Actions  Compensable Time Cases  Exemption Cases  Independent Contractor Cases  Unequal Pay (Disparate Compensation) ©2013 Foley & Lardner LLP
  • 17. 17 Compensable Time Violations  Requiring non-exempt employees to perform tasks prior to the start of their work day.  Requiring non-exempt employees to work through their lunch hour.  Requiring non-exempt employees to perform many tasks during an on-call period. ©2013 Foley & Lardner LLP
  • 18. 18 What Counts As “Hours Worked”?  Can include time spent in: – Unassigned activities self-motivated by employee (if known by employer) – Waiting (if primarily for benefit of employer) – On-call (if employee’s freedoms too restricted) – On breaks less than 20 minutes – Traveling – Sleeping – Training – KEY: Preparatory and concluding activities ©2013 Foley & Lardner LLP
  • 19. 19 Misclassification Cases  Improperly identifying a ―non-exempt‖ employee as an ―exempt‖ employee – Executive, Administrative, Professional, Outside Sales, Skilled Computer Employees ©2013 Foley & Lardner LLP
  • 20. 20 Why W/H Class Actions So Popular  Pay policies and practices often affect groups of employees in a similar way; thus, claims challenging these policies and practices are often suitable for class treatment  Large recoveries: The FLSA (and state laws) provide for penalties on back pay (100% federal)  The FLSA (and state laws) allow the prevailing plaintiffs to recover their attorneys fees from the employer who has failed to pay all wages due ©2013 Foley & Lardner LLP
  • 21. 21 Wage/Hour Collective-Class Actions      In 2013, wage & hour litigation continued its trend of outpacing all other types of workplace class actions. Collective actions pursued in federal court under the FLSA outnumbered all other types of private class actions in employment-related cases 7,764 FLSA cases filed in 2013 10 percent increase from 2012 (7,064 cases) For 2011, FLSA (wage) cases up 1.9%, after being up 10.5% in 2010 and up 19% in 2009 Only 397 cases filed in 2001 ©2013 Foley & Lardner LLP
  • 22. 22 MASSIVE SETTLEMENTS Multi-million dollar settlements to avoid litigation/exposure:  - 24 Hour Fitness USA: Approval of $17.5 million (850 class members) regarding exempt status of managers and personal trainers’ claims they were required to work off the clock. (September 2013)  - Roto Rooter Services: $14 million settlement preliminary approved (December 2013). Service technicians alleged failure to properly pay minimum wage and overtime.  - Puerto Rico Dept. of Corrections: $35 million consent judgment settlement - arising from DOL investigation involving 4500 employees who claimed failure to pay OT. (April 2013) ©2013 Foley & Lardner LLP
  • 23. 23 Enormous Judgments  $187 Million – Hummel et al. v. Wal-Mart Stores, Inc. (Philadelphia, PA state court) – Off-the-clock and breaks  $105 Million – Chou et al. v. Starbucks, Inc. (San Diego, CA state court) – Tip pooling ©2013 Foley & Lardner LLP
  • 24. 24 Independent Contractor Cases       Different Tests (IRS, FLSA, State laws) DOL – overtime compensation issues ERISA benefit issues State – UC account collection opportunities Set off huge State budget shortfalls Neuberger/Perlman test- if it sounds real good, saves lots of money and taxes, it’s probably a bad idea ©2013 Foley & Lardner LLP
  • 25. 25 Enforcement   September 2011 – Then Secretary of Labor Hilda Solis announced Memorandum of Understanding (MOU) between the DOL and IRS – ―The agencies will work together and share information to reduce the incidence of misclassification of employees, to help reduce the tax gap, and to improve compliance with federal labor laws.‖ Agencies from at least 14 states have also signed MOU’s with the DOL’s Wage and Hour Division – ―These MOUs will enable the Department to share information and to coordinate enforcement efforts with participating states in order to level the playing field for law-abiding employers and to ensure that employees receive the protections to which they are entitled under federal and state law. Employers that misclassify their employees may not be paying the proper overtime compensation, FICA and Unemployment Insurances taxes, or workers' compensation premiums.‖ http://www.dol.gov/whd/workers/misclassification/ ©2013 Foley & Lardner LLP
  • 26. 26 What Is an Independent Contractor?  IRS APPROACH: Three categories of facts that provide evidence of the degree of control and independence: – Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? – Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) – Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?  There is no ―magic‖ or set number of factors that ―makes‖ the worker an employee or an independent contractor, and no one factor stands alone in making this determination. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. ©2013 Foley & Lardner LLP
  • 27. 27 What Is an Independent Contractor? IRS STATUTORY EMPLOYEES     Under certain conditions, some workers who are independent contractors under the common law rules may nevertheless be treated as employees by statute for certain employment tax purposes if they fall within one of the following four categories: Full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. Driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. Individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. Full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson's principal business activity. ©2013 Foley & Lardner LLP
  • 28. 28 BIG DATA  Big Data defined: – A process to deliver decision making insights. The process uses people and technology to quickly analyze large amounts of data of different types (traditional table structured data and unstructured data, such as pictures, video, e-mail, and Tweets) from a variety of sources to produce a stream of actionable knowledge. ©2013 Foley & Lardner LLP
  • 29. 29 BIG DATA IN HR    The Human Resource function is especially well-positioned to benefit from the business decision making insights offered by Big Data Provides the ability to gain insight into the future and past behavior of employees Predictive analytics can help make better decisions as to who to hire, who to promote, who to reassign or terminate, and how to compensate ©2013 Foley & Lardner LLP
  • 30. Legal Considerations in the Use of BIG DATA   Anti-discrimination laws Two theories of discrimination have evolved through court decisions: – disparate treatment – disparate or adverse impact; seemingly neutral employment practices may be illegal if they have a disproportionate, or more adverse, impact on members of a protected group ©2013 Foley & Lardner LLP 30
  • 31. Legal Considerations in the Use of BIG DATA    Increased use of tests and other selection devices Uniform Guidelines on Employee Selection Procedures, 29 CFR Part 1607 Requires proper validation of any employee selection procedure which has adverse impact on any protected group ©2013 Foley & Lardner LLP 31
  • 32. Legal Considerations in the Use of BIG DATA    Wellness and medical costs are driving the need to analyze data Employers struggle to contain the cost of providing medical insurance to their employees and also try to maintain the health of an aging workforce Genetic Information and Nondiscrimination Act of 2007, ―GINA,‖ 29 U.S.C. § 2000ff et seq. ©2013 Foley & Lardner LLP 32
  • 33. Legal Considerations in the Use of BIG DATA  GINA – Makes it illegal for employers to discriminate against either employees or applicants because of their genetic information – Prohibits employers from requesting, requiring or purchasing genetic information about their employees – Genetic information is defined in very broad terms and includes genetic testing not only of the individual, but of their family members as well ©2013 Foley & Lardner LLP 33
  • 34. Legal Considerations in the Use of BIG DATA  GINA – The accumulation of anything which constitutes genetic information to predict whether an employee may be more susceptible to disease, or future performance issues because of their genetic makeup, will run afoul of GINA – Includes data about the risk of diseases or disorders the employee or their family members may experience now, any increased risk of disease, disorder or condition in the future ©2013 Foley & Lardner LLP 34
  • 35. Legal Considerations in the Use of BIG DATA  GINA – safe harbor where health or genetic services are ―offered by the employer...as part of a wellness program; the employee provides prior, knowing, voluntary, and written authorization; only the employee (or family member if the family member is receiving genetic services) and the licensed health care professional or board certified genetic counselor involved in providing such services receive individually identifiable information concerning the results of such services; and any individually identifiable genetic information provided is …not [to] be disclosed to the employer except in aggregate terms that do not disclose the identity of specific employees.‖ ©2013 Foley & Lardner LLP 35
  • 36. Non Union Employers Need to Think About the NLRA  ―Employees shall have the right to selforganization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities.‖ - Sec. 7, NLRA ©2013 Foley & Lardner LLP 36
  • 37. 37 This Isn’t New   Employees have the right to act together to try to improve their pay and working conditions, with or without a union – Which is why policies which prevent employees from discussing their pay will likely be held to violate the NLRA These rights were written into the original 1935 National Labor Relations Act and have been upheld in numerous decisions by appellate courts and by the U.S. Supreme Court. ©2013 Foley & Lardner LLP
  • 38. 38 Unions are in Trouble   Union membership in the private sector as a percent of the workforce remains at an all time low According to BLS figures just released: – In 2013, the union membership rate--the percent of wage and salary workers who were members of unions--was 11.3 percent, the same as in 2012 – Public-sector workers had a union membership rate (35.3 percent) more than five times higher than that of private-sector workers (6.7 percent). ©2013 Foley & Lardner LLP
  • 39. 39 Unions are in Trouble   They are not making any headway 143,568,000 in the US workforce who are employed; In a recent six month period, unions organized 65,185 new workers or 0.0005841 of the workforce ©2013 Foley & Lardner LLP
  • 40. 40 The NLRB is Desperate to Stay Relevant  The rise of the enforcement of every employee’s right, union or not, to engage in Protected Concerted Activity – Is the activity concerted? – Does it seek to benefit other employees? – Is it carried out in a way that causes it to lose protection?  See http://www.nlrb.gov/rights-weprotect/protected-concerted-activity ©2013 Foley & Lardner LLP
  • 41. 41 What Has the Board Done So Far  Investigating workplace policies that restrict Section 7 rights because they are ―overly broad‖ – NLRB has rules on policies concerning the use of social media and electronic technologies, confidentiality, privacy, protection of employer information, intellectual property, and contact with the media and government agencies ©2013 Foley & Lardner LLP
  • 42. 42 What is the Board Trying to Do   On February 5, the NLRB proposed amendments to its rules and regulations governing representation-case procedures. In substance, the proposed amendments are identical to the representation procedure changes first proposed in June of 2011. The prior rule was invalidated by a District Court ruling that it had been adopted without a validly constituted quorum ©2013 Foley & Lardner LLP
  • 43. 43 What is the Board Trying to Do     Goal is to have―Quickie‖ elections rules Would shorten time between petition and election from 40 days to 14-21 days For example, by eliminating some tactical options of employers to challenge scope of the unit before the election Shortened period is impediment to management’s efforts to respond to a union campaign ©2013 Foley & Lardner LLP
  • 44. 44 What is the Board Likely to Do  Perhaps overruling Bush-era Decisions such as: – use of company email to unionize, Register Guard – Weingarten rights for unrepresented employees   Who is a supervisor? Challenging Class Waivers (D.R. Horton) ©2013 Foley & Lardner LLP
  • 45. 45 THANK YOU! Larry S. Perlman Foley & Lardner LLP (305) 482-8429 lperlman@foley.com Mark J. Neuberger Foley & Lardner LLP (305) 482-8408 mneuberger@foley.com Follow me on Twitter @neubsthelawyer To subscribe to our Weekly Employment Law Update or any other Foley newsletter, click here: http://www.foley.com/subscribe/ To follow our blog, Labor and Employment Law Perspectives, visit www.laboremploymentperspectives.com ©2013 Foley & Lardner LLP