This document summarizes recent developments under the Fair Labor Standards Act. It discusses white collar exemptions including for executives, administrators, professionals, outside salespeople, and computer employees. It provides an overview of recent court cases related to pharmaceutical sales representatives and whether they qualify for exemptions. The document also discusses proposed changes to regulations for companionship workers and requirements for settling unpaid wage claims without Department of Labor or court approval.

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
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2. 11/14/2012
FLSA: 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 Exemption
FLSA: 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
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3. 11/14/2012
FLSA: 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.
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4. 11/14/2012
Christopher 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.
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5. 11/14/2012
What 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.
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6. 11/14/2012
Proposed 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.
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7. 11/14/2012
Settling 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.
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8. 11/14/2012
Settling 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.
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9. 11/14/2012
Significant 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.
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10. 11/14/2012
Automatic 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.
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11. 11/14/2012
Automatic 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.
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12. 11/14/2012
Other 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!
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