CLE -- FIRM CLE SEPTEMBER 2015 FLSA AND HOT TOPICS
1. WHAT TO TELL YOUR CLIENT ABOUT
THE NEW PROPOSED FLSA REGS AND
OTHER HOT TOPICS IN EMPLOYMENT
LAW
Kimberly R. Stuart
Crain Caton & James
September 2015
2. What does the FLSA govern?
• Overtime compensation
• Exemptions to Overtime
• Misclassification of Contract Labor
• Child Labor
• Volunteer pay
• Internship pay, etc.
3. Exempt v. Non-Exempt
• Exempt employees do not get overtime and must meet
the salary basis test and fall within one of the exemptions
• Non-Exempt employees are entitled to overtime for hours
worked in excess of a 40 hour work week
4.
5. What is the Salary Basis?
Enacted 8/23/2004
• Is the employee paid at least $455 per week and not
subject to reductions due to quantity or quality of work?
•
• Minimum weekly salary must be $455
($910 biweekly; $985.83 semi-monthly; $1971.66 monthly;
$23,660 per year)
• Full Salary must be paid for any week in which employee works
that cannot be reduced because of variations in quantity or
quality of work performed (except first and last week)—
Exceptions:
• Absence for full days for personal reasons
• Absence for full days for sickness or disability if bona fide policy
for sick or disability leave, even if employee has not yet
qualified for benefits
• To offset amounts received for jury fees, witness fees, or
military pay
• Penalties for Violating safety rules of “major significance”
• Unpaid disciplinary suspension of one or more full days
imposed in good faith for violations of written workplace
conduct rules. (NOTE: this does not include performance or
attendance issues)
• Unpaid leave (even less than full day) under FMLA
• Does not apply to Outside Sales employees, doctors, lawyers,
teachers, covered computer employees paid at least $27.63/
hour
• Highly compensated employees $100,00 per year including at
least $455 per week.
To Be Enacted
• To qualify as exempt
employee must be paid
minimum $970 / week,
$3880 monthly, or
$50,440 per year
• Highly compensated
employees $122,148
annually including at least
$455 per week
7. Executive
Must meet the following three-part test:
• Have as his or her primary duty the management of the
enterprise or a recognized subdivision of the enterprise;
and
• Customarily and regularly direct the work of two or more
other full-time employees or their equivalent; and
• Have the authority to hire or fire other employees, or the
employee’s suggestions and recommendations as to the
hiring, firing, advancement, promotion or any other
change in status of other employees must be given
particular weight (NOTE: must be authority over “change
in status”)
8. Administrative
• Employee must have the primary duty of performing office
or non-manual work directly related to the management or
general business operations of the employer or the
employer’s customers (admin v. production)
• Must include the exercise of discretion and independent
judgment with respect to matters of significance
• Specific Examples of exempt Administrative Employees:
work in functional areas such as tax, finance, accounting,
budgeting, auditing, insurance, quality control, safety and
health, personnel management, human resources,
employee benefits, labor relations, public relations,
government relations, computer network, internet and
database administration, legal and regulatory compliance
and similar activities
9. Professional
Learned Professionals:
• the employee’s primary duty must be the performance of work requiring advanced
knowledge, defined as work which is predominantly intellectual in character and which
includes work requiring the consistent exercise of discretion and judgment; and
• the advanced knowledge must be in a field of science or learning; and
• the knowledge must be customarily acquired by a prolonged course of specialized
intellectual instruction; and
Creative Professionals:
• The employee’s primary duty must include work requiring invention, imagination, originality or
talent in a recognized field of artistic or creative endeavor as opposed to a routine mental,
manual, mechanical or physical work ; Examples: music, writing, acting and the graphic arts
Computer Professionals:
• The employee’s primary duty must consist of the application of systems-analyst techniques
and procedures, including consulting with users, to determine hardware, software, or
systems functional specifications; or the design, development, documentation, analysis,
creation, testing or modification of computer systems or programs; or the design,
documentation, testing, creation or modification of computer programs related to machine-
operating systems, or a combination of these duties.
• Must meet salary basis, or if paid hourly, $27.63 per hour.
10. Highly Compensated Employees
• Employee’s primary duty must include performing office or non-
manual work; and
• Employee must “customarily and regularly” perform at least one of the
exempt duties or responsibilities of an exempt executive,
administrative or professional employee; and
• Employee’s annual total compensation must equal $100,000 or more,
which includes at least $455 per week paid on a salary basis
• Non-exempt regardless of pay: employees performing manual
work, including non-management production line workers; non-
management employees in maintenance, construction, and similar
occupations such as carpenters, electricians, mechanics, plumbers,
ironworkers, craftsmen, operating engineers, longshoremen,
construction workers, laborers, and other employees who perform
work involving repetitive operations with their hands, physical skill and
energy. Not including duties performed by outside salespersons or
computer employees.
11. Outside Sales
• (Need not be paid $455 salary level or on salary basis)
• Employee’s primary duty must be making sales or
obtaining orders for contracts for services or for the use of
facilities for which a consideration will be paid by the client
or customer; and
• Employee must be customarily and regularly engaged
away from the employer’s place or places of businesses
• Sales by phone, e-mail, or Internet are not considered outside
sales work if they are the principal vehicle for the sale
• To be exempt, promotional activities must relate to the employee’s
own sales
12. Independent Contractor v. Employee
Employee
• The FLSA defines “employee” as “any
individual employed by an employer,” 29 U.S.C.
203(e)(1), and “employer” as including “any
person acting directly or indirectly in the interest
of an employer in relation to an employee,” 29
U.S.C. 203(d). The FLSA’s definition of
“‘employ’ includes to suffer or permit to work.”
29 U.S.C. 203(g).
• Ultimate test is economic dependence
Contractors
• Real focus is economic dependence
• (A) the extent to which the work
performed is an integral part of the
employer’s business;
• (B) the worker’s opportunity for profit or
loss depending on his or her
managerial skill;
• (C) the extent of the relative
investments of the employer and the
worker;
• (D) whether the work performed
requires special skills and initiative;
• (E) the permanency of the relationship;
and
• (F) the degree of control exercised or
retained by the employer.
13. EXAMPLES OF HOW THIS MAY
COME INTO PLAY FOR YOUR
CLIENTS
• Hiring new employees
• Reorganization
• Fired employee
• New WHD opinion or court decision
14. What does raised salary basis mean for
your clients?
• In current proposed regulations bonuses and
commissions are not included in the salary basis
• Whether to raise salaries
• Examine overtime policies and enforcement
• Examine workloads
• Changing exempt salaried employees to non-exempt
hourly employees (morale, record keeping)
• Whether to lower salaries to offset overtime potential
• Remote access, work from home how to track time?
Emails, texts, conference calls? Impact on ADA
accommodations?
15. Ignorance is not a defense:
Why Self Audit?
• Under FLSA statute of limitations is 2 years back wages
• Violation may result in back pay up to 2 years + equal amount
liquidated damages if not in good faith+ attorneys’ fees
• A “Willful violation” results in extending the sol to 3 years of
back pay + equal amount of limited damages if not in good faith
+ attorneys’ fees
• To establish willfulness for the purposes of extending the
limitations period, the employee must prove by substantial
evidence that the employer knew it was in violation of the Act or
acted in reckless disregard as to whether it was in violation of
the Act. The Code of Federal Regulation defines reckless
disregard as the “failure to make adequate inquiry into whether
conduct is in compliance with the Act.” One federal court
upheld willfulness based upon depo testimony manager knew
of the need to meet minimum wage and overtime; thus FLSA
“was in the picture.”
16. The Safe Harbor
Why to Self Audit?
• Safe Harbor enables employers to avoid liquidated
damages if they acted in good faith “under the reasonable
belief it was in compliance with the act”
• Subjectively “an honest intention to ascertain what FLSA
requires and to act in accordance with it”
• Objectively “reasonable grounds for believing its conduct
comported with the act”
• Ignorance does not get you there
• What does? Legal opinion, consultation with DOL or
other authorities
17. The Conundrum: What do you do after
you self audit?
• The FLSA states that claim for wages must be approved
by DOL or a court
• Circuits split
• Fifth Circuit held in Martin v. Spring Break ‘83 Prods.
(2012) that a private settlement agreement which
constituted resolution of a bona fide dispute over the
number of hours worked or compensation due was
sufficient to release parties rights to sue under FLSA
• General waivers not sufficient whether before any dispute
or after an unrelated dispute
18. • Social Media –
• Many states have enacted laws prohibiting requests for passwords
to social media
• Having a good social media policy (discrimination, harassment,
threatening, vulgar, disclosure of trade secrets
• Whether to , what to and how to consult social media in hiring
• Facebook and firing, NLRB
• Concerning conditions of employment or wages; may even be disloyal
insubordinate or defaming – but magnitude and detail of insubordinate
acts may warrant action (Teen Center story)
19. • Why do you care about the NLRB?
• Confidentiality and Nondisclosure policies and
agreements may violate it
• Would employees reasonably construe policy to prohibit
union activity or communication regarding terms and
conditions of employment or wages
