Special Series on Managing the Challenging Employee

Transcription

1 Special Series on Managing the Challenging Employee Polsinelli PC s Labor and Employment practice group has embarked on a year-long journey with human resource professionals and in-house legal counsel throughout 2016 with its fivepart webinar series, The Ruby Files: Managing the Challenging Employee. Panels made up of the practice group s lawyers engage in discussions with webinar participants, as the webinar series follows Ruby, a fictional employee whose workplace behavior confounds a succession of employers, based on scenarios ripped from the headlines involving various industries, including health care, financial services, and technology. The series, which includes audio clips of Ruby interacting with management and human resources professionals, as well as government investigators, explores challenging situations including: Ruby s reentrance into the workforce at a hospital in a supervisory role and a Department of Labor investigation she initiates when she complains about her exempt status; Ruby s posts on social media about her medical condition and subsequent termination for performance issues; Ruby s misrepresentation about her work history, her flirtatious behavior with a supervisor that results in sexual harassment claims, as well as her failure of an aptitude test that results in her claiming it disparately, and improperly, impacts people over age 40; Ruby s move to a technology company where, after a short stint, she leaves and takes proprietary information with her; and Ruby s move to a new company, her life-altering decision, and its impact on workplace issues such as her fight for bathroom equality. 1 This Employment Relations Today series will follow Polsinelli s webinar series, and the everchallenging Ruby. Each article will focus on the general and legal background to the topics presented by Ruby s actions and include suggestions on how HR managers might navigate through the hot-button issues raised Wiley Periodicals, Inc. Published online in Wiley Online Library (wileyonlinelibrary.com). DOI /ert

2 The Ruby Files: Part 1 Exempt or Nonexempt and the DOL Audit Emma R. Schuering The first installment of The Ruby Files series introduces fictional Ruby and her reentry into the workforce as a unit supervisor at a hospital, with an exploration of her exempt versus nonexempt status under the Fair Labor Standards Act (FLSA). The Polsinelli panel was moderated by Eric Packel and included Robert J. Hingula (Kansas City), Teeka Harrison (Atlanta), and Joan Killgore (St. Louis). Panel members initially explored the importance of concise, accurate, and specific employee job descriptions, including defined essential versus nonessential functions and minimum requirements. For example, defining an employment position s essential and nonessential job functions may critically affect the employer s obligations to provide reasonable accommodations (and potential liability risk for not doing so) under the Americans with Disabilities Act (ADA) to qualified employees with a disability. The importance of well-defined employee job descriptions may be well known, but the importance cannot be overstated. Proactive employers should focus on developing specific descriptions that accurately reflect an employee s actual job duties and requirements. The job description may then become a useful tool for both an employee and employer to address everyday workrelated questions and provide guidance concerning any potential accommodations. A well-defined job description may also provide support for an employer claiming that an employee is exempt from the FLSA minimum wage and overtime requirements and, ultimately, prove useful to defend the employer s actions. Proactive employers should focus on developing specific descriptions that accurately reflect an employee s actual job duties and requirements. THE FLSA AND EXEMPT VS. NONEXEMPT EMPLOYEES Generally, the FLSA requires most employees in the United States be paid at least the federal minimum wage rate, currently $7.25 per hour (though some states and cities require higher minimum wage rates) for all time worked and overtime pay for all time worked over 40 hours in a workweek. To qualify as exempt from the FLSA minimum wage and overtime requirements, an employee must meet certain tests regarding his or her job duties. Of critical importance, neither job titles nor any understanding between an employee and the employer determines exempt or nonexempt status under the FLSA. Rather, the FLSA provides six specific exemptions, the so-called white-collar exemptions, for executive, administrative, professional, computer, outside sales, and highly compensated employees. The Ruby 26 Emma R. Schuering

3 Summer 2016 Files panel focused on the FLSA s executive and administrative employee exemptions. To be considered exempt from the FLSA s minimum wage and overtime requirements as an executive, an employee s job position must meet the following criteria: An employee must be compensated at a salary of not less than $455 per week; An employee s primary duty (the principal, main, major, or most important duty the employee performs, as a whole) must be managing the employer s enterprise or a customarily recognized department or subdivision of the enterprise; An employee must customarily and regularly (greater than occasional but less than constant, and including work normally performed every workweek, but not isolated tasks) direct the work of at least two or more other full-time employees or their equivalent; and An employee must have the authority to hire or fire other employees, or the employee s suggestions and recommendations as to the hiring, firing, advancement, and promotion of other employees must be given particular weight. 2 To be considered exempt from the FLSA s minimum wage and overtime requirements as an administrative employee, an employee s job position must meet the following criteria: An employee must be compensated at a salary of not less than $455 per week; An employee s primary duty must be the performance of office or nonmanual work directly related to the management or general business operations of the employer (the employee s work must assist with the running or servicing of the business, as distinguished from, for example, working in retail sales); and An employee s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 3 Regarding the FLSA s professional exemption, an employee s job position must meet the following criteria: An employee must be compensated at a salary of not less than $455 per week; An employee s primary duty must be the performance of work requiring advanced knowledge, defined as work that is predominantly intellectual in character and includes work requiring the consistent exercise of discretion and judgment; The advanced knowledge must be in a field of science or learning (such as law, medicine, theology, accounting, actuarial computation, engineering, etc., that have a recognized professional status and are distinguishable from the mechanical arts or skilled trade, where the requisite knowledge could be of a fairly advanced type); and The advanced knowledge must customarily be acquired by a prolonged course of specialized intellectual instruction. 4 Highly compensated employees, or employees who are paid an annual salary of more than $100,000, are exempt if (1) the employee s primary duty includes performing office or nonmanual work, and (2) the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee. 5 The Ruby Files: Part 1 Exempt or Nonexempt and the DOL Audit 27

4 Employment Relations Today Employees in computer-related occupations may be exempt under the FLSA where the following criteria are met: An employee must be compensated either on a salary or fee basis at a rate not less than $455 per week, or not less than $27.63 per hour; and An employee must be employed as a computer system analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing the following duties: The application of systems-analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications; 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; The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or A combination of the above-mentioned duties, the performance of which requires the same level of skills. 6 The exemption specifically excludes employees engaged in the manufacture or repair of computer hardware and related equipment. Employees engaged in outside sales are also exempt under the FLSA if (1) the employee s primary duty is making sales or obtaining orders or contracts for services or the use of facilities for which a consideration will be paid; and (2) the employee is customarily and regularly engaged away from the employer s place of business, such as for door-to-door sales. 7 A few webinar participants raised questions about, alternatively, inside salespeople. Generally, inside sales employees are not exempt, but one limited overtime exemption exists for employees paid commissions by retail and service establishments. Retail and service establishments are defined as establishments for which 75 percent of their annual dollar volume of sales of goods or services is not for resale and not recognized as retail sales or services in the particular industry. Specifically, the following requirements must be met for the exemption to apply: (1) the employee must be employed by a retail or service establishment; (2) the employee s regular rate of pay must exceed one-and-onehalf times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and (3) more than half the employee s total earnings in a representative period must consist of commissions. 8 Generally, inside sales employees are not exempt, but one limited overtime exemption exists for employees paid commissions by retail and service establishments. As many employers are aware, and as reviewed by the panel in discussing Ruby, the Department of Labor (DOL) proposed new FLSA rules in mid-2015 to increase the salary requirements for the white-collar exemptions from $455 per week to $970 per week. The DOL reportedly based its proposed increased minimum-salary requirement off the 40th percentile of weekly earnings as reported by the Bureau of Labor Statistics. 28 Emma R. Schuering

5 Summer 2016 By the close of the required comment period on the proposed changes in September 2015, the DOL had received more than 250,000 comments from employee and employer advocates alike. One contentious issue raised to the DOL through the comments process, as noted by the panel, is a disparate impact of the proposed minimum required salary increase depending on differing geographic locations of similarly situated employers. When, and if, the proposed changes go into effect, likely in late 2016 according to the panel (based on reported DOL projections), employers will be forced to carefully evaluate which employees are exempt and possibly make changes in employee salaries and substantial adjustments to job descriptions. A compliance grace period after implementation of the changes, if any, will likely be short, making it imperative for employers to remain abreast of the status of the proposed changes. RUBY S JOB DESCRIPTION Ruby s employer, a hospital, maintains a unit supervisor job description, which specifically requires Ruby to participate in decision making. The description also describes Ruby s essential job functions, for ADA purposes, such as Demonstrating competence in critical thinking, interpersonal relationships, and technical skills; Supervising efficient, economic, and competent performance of the unit; and Assisting in the development of the clinic goals and objectives in collaboration with the unit manager. Conversely, Ruby s job description defines her nonessential functions to include other duties assigned by the executive director. The minimum requirements for Ruby s position include a high school diploma, a bachelor s degree in nursing, and three to five years of nursing experience, specifically defining relevant skills and experience in the nursing field. The job description also defines minimum physical, mental, and vision requirements. RUBY FILES A DOL COMPLAINT Despite her job description requirements, after beginning her employment, Ruby quickly begins spending more of her work time performing floor duties, menial work as she describes it, and less of her work time supervising other employees. Ruby engages in a telephone call with her friend Rachel in which Ruby complains about the nonsupervisory tasks she regularly performs, requiring her to work, in her estimate, 50 total hours per week without being paid any overtime. Ruby says she is unhappy, and Rachel encourages Ruby (as friends and family of real employees often do) to file a complaint with the DOL. Ruby s job description, on its face, indicates she would likely qualify for the FLSA executive exemption. However, if Ruby s description of the tasks that occupy her actual working time is true, then the facts on the ground may not support the hospital successfully claiming she is exempt from the FLSA overtime requirements as an executive employee, and it may owe her back pay for the time worked over 40 hours per workweek. If Ruby truly does not regularly perform managerial work, it is not her primary duty. As the panel noted, the job description for Ruby s job may not accurately reflect her actual job duties, and the hospital may have difficulty establishing that Ruby is The Ruby Files: Part 1 Exempt or Nonexempt and the DOL Audit 29

6 Employment Relations Today managing, as required to qualify Ruby s position for this particular exemption. As the panel noted, the job description for Ruby s job may not accurately reflect her actual job duties, and the hospital may have difficulty establishing that Ruby is managing, as required to qualify Ruby s position for this particular exemption. Alternatively, the panel noted that the FLSA administrative exemption may provide the answer for the hospital to exempt Ruby from the FLSA s overtime requirements. Matters of significance, as required by this exemption, depend greatly on the employer and refer to the level and importance of the work performed by the employee. With respect to Ruby s job position, any FLSA inquiry regarding the administrative exemption would turn on whether (1) she uses her discretion in performing her day-today work tasks, in addition to her managerial work, and (2) these tasks are directly related to the hospital s management or business operations. More broadly, the panel reviewed micromanagers and go-getters, such as Ruby, and how these employees can make the application of FLSA exemptions challenging for employers like the hospital. Employers value such employees for their willingness to jump in and perform tasks beyond the scope of their responsibilities when they see tasks falling uncompleted. However, an employee s choice to perform tasks not otherwise required by his or her job description is irrelevant to the legal analysis. Effectively, the DOL, when examining applicability of FLSA exemptions to employees, could penalize an employer for its employees willingness to go above and beyond their required job duties. Thus, the webinar panel noted, it is imperative for an employer, like the hospital, to keep its finger on the pulse of its operations on the ground, know what tasks are being performed by which employees, such as Ruby, and reevaluate and potentially restaff accordingly. Accurate job descriptions, and adhering to them, are critical to the success of this process. Back to Ruby. Ruby becomes so disaffected with her salary and job that she contacts the DOL and complains to a DOL wage-hour investigator concerning her work at the hospital. Ruby tells the investigator she works 80 total hours per week and suggests she is unable to take time off work for her in-vitro procedure appointments because she does not have enough paid time off under the hospital s PTO policy. 9 Ruby offers to provide the investigator a thumb drive containing relevant documents. RUBY S COMPLAINT LEADS TO A DOL AUDIT Based on Ruby s complaint, the DOL begins a wage-hour audit. The DOL investigator next sends a letter to the hospital setting an appointment to investigate Ruby s complaint. The letter details extensive information and documentation the DOL investigator expects the hospital to collect and make available for inspection. The DOL investigator, following the agency s procedure, does not provide the hospital information about Ruby or the basis for her complaint. The webinar panel noted that the DOL investigator s letter was modeled from a real-world DOL notice of complaint and audit. The panel reminded webinar participants that any employer receiving a DOL notice should first consider contacting outside legal counsel, collect the requested 30 Emma R. Schuering

7 Summer 2016 documents, and analyze the perceived impetus for the announced investigation to be as prepared as possible for the coming DOL wage-hour audit. During a wage-hour audit, a DOL investigator can interview witnesses, review records, and conduct site visits to an employer s workplace. Any employer receiving a DOL notice should first consider contacting outside legal counsel, collect the requested documents, and analyze the perceived impetus for the announced investigation to be as prepared as possible for the coming DOL wage-hour audit. Returning to Ruby s complaint and the DOL audit, once on-site at the hospital, the DOL investigator begins reviewing payroll and other requested records and notices a lunch deduction from one employee s wages, and a separate witness interviewed by the investigator mentions being deprived of FMLA leave. Both fall beyond the strict scope of Ruby s complaint, but well within the DOL s jurisdiction. POSSIBLE IMPACTS OF NEGATIVE DOL WAGE-HOUR AUDITS The webinar panel noted that the DOL investigator can expand the scope of a wage-hour audit beyond the subject of the original complaint as the audit progresses and evaluate the employer s compliance with laws other than the FLSA, including the Family Medical Leave Act (FMLA) and the Employment Retirement Income Security Act of 1974 (ERISA), for any employee in any position. Because a DOL wage-hour audit can extend beyond the scope of a specific complaint, an employer should ensure all proper procedures and policies are in place and are being followed, and, if not, have a reasonable explanation for its practices and a plan of action (potentially already in motion) to take corrective action as necessary, depending on the direction the DOL s audit takes. After completing its audit of an employer s wage-hour practices, the DOL may determine an employer has improperly classified an employee as exempt under the FLSA when the employee should have been treated as nonexempt and determine the employer is liable to any affected employee for back pay for unpaid overtime for up to two years (three years if the violation is deemed willful). Should the DOL, or the individual, proceed to litigate against the employer based on the DOL s investigation findings, an employer could be found additionally liable for the employee s attorneys fees and costs, as well as civil penalties to the DOL of up to $1,000 for repeated or willful violations. An employer found to be in violation of the FLSA could be subjected to an injunction regarding payroll practices in lawsuits brought by the DOL. Additionally, aggravated FLSA violations can result in criminal prosecution in which first offenders could be subjected to fines up to $10,000, and second offenders could be subjected to fines and possible prison terms of up to six months. An employer found to be in violation of the FLSA could be subjected to an injunction regarding payroll practices in lawsuits brought by the DOL. Once the DOL announces its audit findings, employers commonly pose questions about settlement. Discussions The Ruby Files: Part 1 Exempt or Nonexempt and the DOL Audit 31

8 Employment Relations Today developed during this webinar installment noted that settlement of a DOL wage-hour complaint similar to Ruby s is always an option available to an employer subjected to a DOL wage-hour audit. A settlement may include back pay or reclassification of certain employees. The panel noted if the hospital does not settle after attempting negotiations, it must accept the DOL s findings and potentially defend a lawsuit, which could be challenging, given the extensive discovery mechanisms into the employer s payroll and employment practices available to the DOL. Following discussions with webinar participants of possible negative DOL wagehour audit outcomes, the panel wrapped up the details of Ruby s DOL complaint, and the resulting DOL audit, leaving Ruby to continue her employment at the hospital, where she continues to complain about her job, only now complaining about her job on social media. Ruby s story will continue in the second installment of this series in the next issue of Employment Relations Today. NOTES 1. For more information on The Ruby Files: Managing the Challenging Employee webinar series, visit polsinelli.com/newsevents/press-release-ruby-webinars 2. US Department of Labor, Wage & Hour Division, Fact Sheet #17B: Exemption for Executive Employees under the Fair Labor Standards Act (FLSA), available at dol.gov/whd/overtime/fs17b_executive.pdf 3. US Department of Labor, Wage & Hour Division, Fact Sheet #17C: Exemption for Administrative Employees under the Fair Labor Standards Act (FLSA), available at 4. US Department of Labor, Wage & Hour Division, Fact Sheet #17D: Exemption for Professional Employees under the Fair Labor Standards Act (FLSA), available at pdf 5. US Department of Labor, Wage & Hour Division, Fact Sheet #17H: Exemption for Highly-Compensated Workers and the Part 541-Exemption under the Fair Labor Standards Act (FLSA), available at whd/overtime/fs17h_highly_comp.pdf 6. US Department of Labor, Wage & Hour Division, Fact Sheet #17E: Exemption for Employees in Computer- Related Occupations under the Fair Labor Standards Act (FLSA), available at fs17e_computer.pdf 7. US Department of Labor, Wage & Hour Division, Fact Sheet #17 F: Exemption for Outside Sales Employees under the Fair Labor Standards Act (FLSA), available at US Department of Labor, Wage & Hour Division, Fact Sheet #20: Employees Paid Commissions by Retail Establishments Who Are Exempt under Section 7(i) from Overtime under FLSA, available at whd/regs/compliance/whdfs20.pdf 9. This is an ongoing hot topic for employers, as discussed during this webinar installment. Whether Ruby is entitled to leave under the Family and Medical Leave Act (FMLA) for in-vitro procedure appointments will depend on the specific circumstances surrounding her treatments (such as whether Ruby suffers from a serious health condition under the FMLA for which she requires inpatient care or continuing treatment). The FMLA empowers the DOL to investigate FMLA complaints, such as the complaint voiced by Ruby to the investigator. An employer might additionally be required to provide reasonable accommodations under the ADA if Ruby is medically diagnosed with a physical condition requiring in-vitro procedures that is further considered a disability under the Act. 32 Emma R. Schuering

9 Summer 2016 Emma R. Schuering is an associate attorney in the Kansas City, Missouri, office of Polsinelli, PC ( ), where she practices nationwide, in federal and state courts and before administrative agencies, in the areas of management-side labor and employment law, commercial litigation, and appellate practice. She may be contacted via at eschuering@polsinelli.com. The Ruby Files: Part 1 Exempt or Nonexempt and the DOL Audit 33