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Trending Issues in FLSA
Litigation
Who qualifies as exempt, who is
liable if you get it wrong, and who
decides where you contest it?
Proposed Changes for White
Collar Exemptions
Or, “The End of the World As We Know It”
What did happen?
► March 13, 2014: President Obama instructed
the Department of Labor to review the “White
Collar Exemptions,” which comprise the
executive, administrative, professional
(including computer professionals), and
outside sales exemptions.
What Can We Expect?
Modernize  Raise the Minimum Salary
Requirement
► Most likely change
Modernize & Streamline  Job Duties Test
► Reflect modern economy
► Clarify ambiguous phrases that regularly result in
large-scale litigation
► May result in broadening of exposure that
previous Administration attempted to limit
(deductions from salary, for example)
Dovetails with GAO Findings
FLSA Litigation is increasing sharply
Guidance from the Wage and Hour
Division is declining
Everyone wants more interpretation of the
exemption regulations
Changes Likely
FLSA White Collar Exemptions are a focus
of the Administration
Increasing wages is a focus of the
Administration
This is another way to affect wages, apart
from raising the minimum wage
Can You Inherit Liability?
You’ve been prudent
You’ve reviewed classification of workers
carefully
You’ve erred on the side of caution
Can you still end up with an FLSA
headache?
Successor Liability in Asset
Purchase
Traditionally, seller’s liabilities do not pass
to buyer in an asset deal
But, a buyer may be liable for a seller’s
federal labor and employment liabilities if
found to be a successor employer
Began with Supreme Court application in
NLRB case
The MacMillan substantial continuity test
arises from a Sixth Circuit case
Successor Liability and the FLSA
It’s trending
Three Circuit Courts of Appeal have applied
the federal common law standard for
successor liability to FLSA claims
► 3d, 7th, and 9th
The District Court for the Middle District of
Tennessee has also applied this standard to
FLSA claims
Three of the four cases decided in last 15
mos.
What Does This Mean?
Increasingly Difficult to Avoid Liability for
Improperly Classifying Workers as Exempt
 Failing to Pay them Overtime
Those tasked with pre-merger diligence
and post-merger implementation of
employment issues must be aware they
may inherit not only the practical problems
of integrating a misclassified workforce,
but also liability for past mistakes
Federal Court Lawsuit or
Arbitration?
Current Status under D.R. Horton
► Fifth Circuit Ruling
► NLRB response
NLRB’s current position
Where does that leave us?
Pros and Cons of arbitration to consider
“Arbitrability Issues” – Who decides?
Not Just Federal Concerns
Tennessee is emphasizing enforcement
employer practices that result in a failure
to pay overtime, unemployment insurance
tax premiums, and workers’ compensation
► Typically, misclassified as independent
contractors or paid under the table

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Trending Issues in FLSA Litigation_June 2014

  • 1. Trending Issues in FLSA Litigation Who qualifies as exempt, who is liable if you get it wrong, and who decides where you contest it?
  • 2. Proposed Changes for White Collar Exemptions Or, “The End of the World As We Know It” What did happen? ► March 13, 2014: President Obama instructed the Department of Labor to review the “White Collar Exemptions,” which comprise the executive, administrative, professional (including computer professionals), and outside sales exemptions.
  • 3. What Can We Expect? Modernize  Raise the Minimum Salary Requirement ► Most likely change Modernize & Streamline  Job Duties Test ► Reflect modern economy ► Clarify ambiguous phrases that regularly result in large-scale litigation ► May result in broadening of exposure that previous Administration attempted to limit (deductions from salary, for example)
  • 4. Dovetails with GAO Findings FLSA Litigation is increasing sharply Guidance from the Wage and Hour Division is declining Everyone wants more interpretation of the exemption regulations
  • 5. Changes Likely FLSA White Collar Exemptions are a focus of the Administration Increasing wages is a focus of the Administration This is another way to affect wages, apart from raising the minimum wage
  • 6. Can You Inherit Liability? You’ve been prudent You’ve reviewed classification of workers carefully You’ve erred on the side of caution Can you still end up with an FLSA headache?
  • 7. Successor Liability in Asset Purchase Traditionally, seller’s liabilities do not pass to buyer in an asset deal But, a buyer may be liable for a seller’s federal labor and employment liabilities if found to be a successor employer Began with Supreme Court application in NLRB case The MacMillan substantial continuity test arises from a Sixth Circuit case
  • 8. Successor Liability and the FLSA It’s trending Three Circuit Courts of Appeal have applied the federal common law standard for successor liability to FLSA claims ► 3d, 7th, and 9th The District Court for the Middle District of Tennessee has also applied this standard to FLSA claims Three of the four cases decided in last 15 mos.
  • 9. What Does This Mean? Increasingly Difficult to Avoid Liability for Improperly Classifying Workers as Exempt  Failing to Pay them Overtime Those tasked with pre-merger diligence and post-merger implementation of employment issues must be aware they may inherit not only the practical problems of integrating a misclassified workforce, but also liability for past mistakes
  • 10. Federal Court Lawsuit or Arbitration? Current Status under D.R. Horton ► Fifth Circuit Ruling ► NLRB response NLRB’s current position Where does that leave us? Pros and Cons of arbitration to consider “Arbitrability Issues” – Who decides?
  • 11. Not Just Federal Concerns Tennessee is emphasizing enforcement employer practices that result in a failure to pay overtime, unemployment insurance tax premiums, and workers’ compensation ► Typically, misclassified as independent contractors or paid under the table