Wage & Hour Developments. Joint Employment Travel Time Per Visit Pay White Collar Exemptions (Overtime Pay Rules) WAGE & HOUR UPDATE 2016

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1 WAGE & HOUR UPDATE 2016 Staying Current with New Wage & Hour Developments 2016 Gilliland, Maguire & Harper, PC 1 NOTE: The materials and opinions at this breakout session represent the speaker s views, are for educational and informational purposes only, are not intended to be legal advice and should not be used for legal guidance or to resolve specific legal problems. In all cases, legal advice applicable to your organization s own specific circumstances should be sought. The information for this presentation was compiled in April Wage & Hour Developments Joint Employment Travel Time Per Visit Pay White Collar Exemptions (Overtime Pay Rules) 3 1

2 Understanding Joint Employment Are you an unintentional joint employer? 4 Are you sharing your caregivers with other agencies/employers? 5 What is the attraction for this practice? Avoiding Overtime Pay Costs Avoiding Loss of Good Caregivers Believing Your Intentions Are Good 6 2

3 So, Are You ajoint Employer? To not be held a joint employer, you must be completely disassociated from the other agency that is employing your same employee during the same workweek. 7 The FLSA Regulations: Joint employment relationships generally will be considered to exist in situations such as: Where there is an arrangement between employers to share the employee s services, as, for example, to interchange employees; See 29 CFR (b); citations omitted. 8 The FLSA Regulations: Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee; or See 29 CFR (b); citations omitted. 9 3

4 The FLSA Regulations: Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. See 29 CFR (b); citations omitted. 10 What s New? Administrator s Interpretation No (January 20, 2016) Horizontal Joint Employment Vertical Joint Employment 11 Horizontal Joint Employment Horizontal joint employment exists where an employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee. The analysis focuses on the relationship of the employers to each other. 12 4

5 Horizontal Joint Employment Factors Who has ownership of the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners). Do the potential joint employers have any overlapping officers, directors, executives, or managers. Do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs). Are the potential joint employers operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for). 13 Horizontal Joint Employment Factors (continued) Does one potential joint employer supervise the work of the other; Do the potential joint employers share supervisory authority for the employee; Do the potential joint employers treat the employees as a pool of employees available to both of them; Do the potential joint employers share clients or customers; and Are there any agreements between the potential joint employers. 14 Horizontal Joint Employment Is Likely Your Biggest Risk! 15 5

6 Vertical Joint Employment Vertical joint employment exists where the employee has an employment relationship with one employer (typically a staffing company, PEO, subcontractor, labor provider, or other intermediary employer) and the economic realities show that he or she is economically dependent on the other business receiving the benefit of his or her work. 16 Vertical Joint Employment Factors (The following factors use Company A and a staffing company to illustrate.) Does Company A direct, control or supervise the contracted employees work beyond reasonable oversight for the staffing company s performance of it s contract? Does Company A indirectly influence the staffing company s employment decisions? (This term indirectly influence is similar to what the National Labor Relations Board uses in its test for joint employment and is extremely nebulous at this time.) 17 Vertical Joint Employment Factors (continued) How long have the staffing company s employees been performing services important to Company A s business? Is the nature of the contracted employees work rote, repetitive or unskilled? Is the work of the staffing company s employees integral to Company A s business? Does the staffing company s employees work on the premises that Company A owns or leases? 18 6

7 What Are Your Risks When You Share Employees? 19 DOL s Example: Casey, a registered nurse, works at Springfield Nursing Home for 25 hours in one week and at Riverside Nursing Home for 25 hours during that same week. If Springfield and Riverside are joint employers, Casey s hours for the week are added together, and the employers are jointly and severally liable for paying Casey for 40 hours at her regular rate and for 10 hours at the overtime rate. Casey should receive 10 hours of overtime compensation in total (not 10 hours from each employer). See Administrator s Interpretation No , page Common Mistakes To Avoid: Do not have formal or informal agreements to pool your caregivers. Do not share your pre employment screening notes, forms or discussions; Do not share job applications; Do not share on boarding, orientations, training or in services; Do not share any other HR functions; Do not share scheduling functions; Do not suggest to your caregivers that they can only work additional hours during the workweek for an agency that you pick for them. Train all of your management staff about these risks! 21 7

8 Understanding Travel Time When is it Hours Worked? 22 Hours Worked under federal law In general, hours worked includes all time an employee must be on duty, on the employer premises, or at any other prescribed place of work. Also included is any additional time the employee is suffered or permitted to work. Hours Worked Is Defined Very Broadly WHD Fact Sheet #53 The Health Care Industry and Hours Worked (Revised July 2009) 23 Travel Time as Hours Worked Time spent by an employee in travel as part of his principal activity, such as travel from jobsite to jobsite during the workday, must be considered as hours worked. Travel during the workday is generally hours worked. WHD Fact Sheet #53 The Health Care Industry and Hours Worked (Revised July 2009); See also 29 CFR

9 What About Commuting Time? Is commuting time compensable hours worked? 25 Exceptions to Commuting Time: If an employee conducts principal work activities at home for a significant amount of time before or after performing client care or office work. If an employee is called to attend an emergency situation for a client outside of his or her normal working hours. 26 Home to Work on a Special One Day Assignment in Another City An employee who regularly works at a fixed location in one city is given a special one day assignment in another city and returns home the same day. The time spent in traveling to and returning from the other city is work time, except that the employer may deduct or not count that time the employee would normally spend commuting to the regular work site. Special assignments may also be an exception to commuting time. WHD Fact Sheet #22 Other Travel Time as Hours Worked 27 9

10 Travel Away from Home Community Travel that keeps an employee away from home overnight is travel away from home. Travel away from home is clearly work time when it cuts across the employee s workday. The time is not only hours worked on regular working days during normal working hours but also during corresponding hours on nonworking days. As an enforcement policy the Division will not consider as work time that time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus or automobile. WHD Fact Sheet #22 Other Travel Time as Hours Worked 28 Travel Time Pay in Home Care Travel during the workday for the client. Time spent during a client assignment for the benefit of the client is hours worked and should be paid at the rate established for such client services. 29 Travel Time Pay in Home Care Travel during the workday between visits. Time spent traveling between client visits is hours worked and should be paid. However, this type of work is not the same as client work and may be paid at a different hourly rate, such as minimum wage

11 Travel Time Pay With Long Breaks - Before The Turmoil - The traditional view was, if the break between visits is long enough for the employee to engage in purely personal pursuits, the break is not hours worked and the travel time involved is commuting time which also was not hours worked. 31 Travel Time Turmoil In 2014, turmoil arose due to a Q&A added to the Wage & Hour Division s online Domestic Service Final Rule Frequently Asked Questions (FAQs) 32 Travel Time Turmoil In the Q&A, the Division stated that, if an employee has a significant gap in time between client A and client B, long enough to engage in purely personal pursuits, only the time necessary to make a trip between client A and client B is compensable

12 Travel Time Turmoil The Division Explained in it s 2014 Q&A: For example, Tiffany is a direct care worker who is employed by Handy Home Care Agency. She provides services to two of the agency s clients, Mr. Jackson, from 9:00am to 11:30am, and Mr. Smith, from 2:00pm to 6:00pm. Tiffany drives to the two different worksites which are 30 minutes apart. She leaves Mr. Jackson s home at 11:30am and goes to a restaurant for lunch, shops for herself, and then arrives at Mr. Smith s home at 2:00pm. Because Tiffany is completely relieved from duty long enough to use the time effectively for her own purposes (i.e., lunch and shopping) not all of the time is hours worked. The 30 minutes required to travel between the two homes is hours worked. 34 What Happens If You Don t Pay Travel Time? You risk violating minimum wage requirements. You risk violating overtime pay requirements. You risk violating recordkeeping requirements. You risk owing unpaid wages, double that amount for damages and an additional amount for an employee s attorney fees. 35 You Risk Collective Action Lawsuits. Plaintiffs attorneys are actively advertising for collective action lawsuits involving travel time pay violations in other states. DOL investigators are looking for travel time violations

13 Travel Time Settlements: A large Pennsylvania agency settled a class action lawsuit for about $2.2 million. The agency allegedly failed to pay approximately 3,000 home care employees for travel time between client homes. An Illinois agency settled a lawsuit for about $180,000. The agency allegedly failed to pay approximately 30 home care employees for travel time between client homes. 37 Your Defense: A Good Travel Time Policy Tells your employees: Their rate of pay for travel time between client visits. The timing for when their breaks begin and end between client visits in a workday. There is no bright-line rule for this timing! 38 Your Defense: A Good Travel Time Policy (continued) That they are completely relieved of all work duty during their break time between visits. That they must not work during this break time without a supervisor s authorization. That they must not commence work until each scheduled visit starts

14 Your Defense: A Good Travel Time Policy (continued) Describe (and have) an effective tracking system for your employees travel time between client visits. Provide employees with your estimate of the travel time between client visits when long breaks are involved and give them an opportunity to dispute or correct your estimate. 40 Your Defense: Know How To Include Travel Time In Your Overtime Pay Calculations 41 Travel Time Pay Example Fact Scenario for 1 Caregiver in 1 Workweek: Caregiver works 42 hours for multiple clients; Caregiver spends 4 hours in compensable travel time; Caregiver logs 120 miles in compensable travel time; Caregiver is paid $10.00 per hour for client care work; Caregiver is paid $8.00 per hour for travel time; and Caregiver is reimbursed 50 cents per mile for work travel

15 42 hours x $10/hr. = $420 4 hours x $ 8/hr. = $ 32 Total gross pay = $452 Total hours worked = 46 hours Travel Time Pay Example $452/46 = $9.83 reg. hourly rate of pay $9.83 x 0.5 OT premium x 6 OT hours = $29.49 OT pay 43 Travel Time Pay Example $452 gross pay + $29.40 OT pay = $ Total Pay 120 total miles x 50 cents per mile = $ Total Mileage Expense Reimbursement 44 Understanding Per Visit Pay Does Per Visit Pay Meet The Fee Basis Test Under the Professional Exemption? 45 15

16 Per Visit Pay of RNs and Therapists Has Become Dangerous! 46 Fee Basis of Payment An employee will be considered to be paid on a fee basis if the employee is paid an agreed sum for a single job regardless of the time required for its completion. These payments resemble piecework payments with the important distinction that generally a fee is paid for the kind of job that is unique rather than for a series of jobs repeated an indefinite number of times and for which payment on an identical basis is made over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a single task are not considered payments on a fee basis. 29 CFR (a) 47 How to Calculate Dollar Amounts To determine whether an employee meets the dollar test (i.e., the $455 per workweek minimum) to fall into the professional exemption, determine whether the fee payment is at a rate that would amount to at least $455 per week if the employee worked 40 hours. For example, if an RN is paid $50 per visit and a visit takes one hour, the per visit pay when translated to a 40 hour workweek would equal $2,000, far in excess of the $455 per week minimum ($50 X 1 hour X 40 hours = $2,000)

17 Fee Basis of Payment As mentioned earlier, the issue is whether or not per visit pay of an RN or therapist constitutes fee basis of payment for purposes of the professional exemption. Opinions of the Wage & Hour Division and existing court decisions are not encouraging. It is rare for per visit pay to be considered to be fee basis of payment 49 Opinions of the Wage & Hour Administrator The Administrator s opinion letters consistently state that per visit pay of RNs does not constitute fee basis of payment. This is based on its belief that a nursing visit is not unique in character, but, instead is repetitive and not original. The Division also has said, The fact that the employees in question are paid the same predetermined sum for each visit is a strong indication that the visits are not unique. 50 Court Decisions 51 17

18 Court Decisions Fazekas v. Cleveland Clinic Health Care Ventures, Inc., 204 F. 3d 673 (6th Cir 2000) (If visits are unique and the nurse is paid solely on a per visit basis, she can qualify for the professional exemption) Elwell v. University Hospital Home Health Care Services, 276 F.3d 832 (6th Cir 2002) (An RN who is paid on both a per visit basis for visits and an hourly basis for other work cannot qualify for the professional exemption) (6th Circuit decisions are binding in Ohio, Michigan, Kentucky and Tennessee) 52 Court Decisions Rindfleisch v. Gentiva Health Services, 962 F. Supp.2d 1310 (N.D. Georgia 2013) Gentiva paid a majority of its RNs and therapists on a pay per-visit plan. They were paid a set fee for a routine visit to a patient s home; these fees did not vary based on the time it took to complete the visit. In addition, they were paid a flat rate for nonvisit work. In setting the amount of the flat fee, Gentiva factored in the amount of time it took to perform a specific non-visit activity. 53 Court Decisions Rindfleisch v. Gentiva Health Services, - Continued Gentiva believed this arrangement constituted fee basis of payment and the employees were exempt. However, the RNs and therapists sued Gentiva under the FLSA contending the pay arrangement constituted payment on both a fee basis and an hourly basis because the non-visit fees reflected the amount of time it takes to complete specific, non-visit activity. The court held the non-visit fees were not fee basis of payment because the amount of the payments varied based on the amount of time it took the employees to complete the non-visit activity

19 Court Decisions Lukas v. Advocate Health Care Network, 2015 WL (N.D. Illinois 2015) Advocate paid its RNs and therapists on a per visit basis for patient visits and on an hourly basis for administrative activities such as meetings, inservices, case conferences, paid time off. The employees sued for unpaid overtime pay under the FLSA as well as under the Illinois Minimum Wage Law claiming this hybrid pay arrangement did not satisfy the requirements for them to be exempt. 55 Court Decisions Lukas v. Advocate Health Care Network - Continued The case is now proceeding as a class action involving the question of whether a pay arrangement of per visit pay and hourly pay is fee basis of payment. The court has not yet ruled on that issue. 56 What We Know Pure per visit pay not based in anyway on time probably is fee basis of payment provided the visits are unique. Per visit pay plus hourly pay probably is not fee basis of payment. Per visit pay plus flat rates for non-visit activities probably is not fee basis of payment. If you are arguing that your pay arrangement is fee basis of payment, you must be able to prove the visits are unique

20 Uniqueness Uniqueness will be determined on a case by case basis. The Wage & Hour Division does not believe visits are unique. It believes payment of the same predetermined amount for a number of visits is a strong indication that visits are not unique. How will you prove uniqueness? 58 What Are Your Options? 59 Nonexempt Employees 60 20

21 Per Visit Pay of Non-Exempt Employees Merely paying a nonexempt employee on a per visit basis does not make him/her exempt. Records of hours worked must be maintained and overtime pay must be paid. As for any nonexempt employee, overtime pay is time-and-one-half the employee s regular rate for all hours worked over 40 in a workweek. Be sure you calculate the employee s regular rate correctly. If the employee is paid only per visit pay for the workweek, the regular rate is calculated by adding together all the per visit pay for the workweek and dividing that total by the number of hours worked that workweek. Note that, when a nonexempt employee is paid per visit, his/her regular rate must be calculated each week because it can vary from week to week. Define what time is included and not included in the per visit pay payment. 61 DOL s Proposal Concerning the White Collar Exemptions May Impact Your Decision To Continue Paying Your Professional Exempt Employees on a Per Visit Basis! 62 Preparing for White Collar Exemption Changes What We Still Don t Know 63 21

22 Proposed Increase to Salary Threshold $970 per week/$50,440 in 2016 Annual increases thereafter 64 DOL s Request for Comments 65 Unanswered Questions With regard to the Salary Test: Should nondiscretionary bonuses and incentive payments be permitted to count toward partial satisfaction of the salary level test? If so, is payment on a monthly basis the appropriate interval for them to be credited toward the weekly salary requirement? And, is 10% the appropriate limit on the amount of the salary requirement that can be met with such nondiscretionary payments? Should commissions be treated the same way to satisfy a portion of the salary requirement? 66 22

23 Unanswered Questions With regard to the Salary Test (continued): What is the appropriate method for annually updating the salary and compensation thresholds: (1) a fixed percentile of earnings for full time salaried workers; or, (2) changes in the CPI U? How often should updating occur and whether it should occur based on the effective date of the final rule, on January 1 st or some other effective date? 67 Unanswered Questions with regard to the Duties Tests: What, if any, changes should be made to the duties tests? Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be? Should DOL look to the state of California s law, which requires 50% of an employee s time be spent exclusively on work that is the employee s primary duty) as a model? Is some other threshold that is less than 50% of an employee s time worked a better indicator of the realities of he workplace today? 68 Unanswered Questions with regard to the Duties Tests (continued): Does the single standard duties test for each exemption appropriately distinguish between exempt and nonexempt employees? Should DOL reconsider its earlier decision to eliminate the long/short duties tests structure? Is the concurrent duties regulation for executive employees, which allows the performance of both exempt and nonexempt duties concurrently, working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower level executive employees performing nonexempt work? 69 23

24 Unanswered Questions with regard to the Duties Tests (continued): What additional examples should be added to address how the exemptions may apply to specific jobs? 70 Options For Compliance? Increase the employee s salary to equal or exceed the new, required amounts (assuming all other new tests can be met) Treat those paid less than the new dollar amounts as nonexempt employees and pay them overtime pay Schedule nonexempt employees to keep them at or below 40 hours worked per workweek Hire additional nonexempt employees to help cover duties for employees working reduced hours Other options be careful 71 Frequently Asked Compliance Question: Can we pay a nonexempt employee a fixed weekly wage if the employee works fluctuating hours each workweek? 72 24

25 Answer: Maybe Pay arrangements other than hourly pay may be helpful for employees who become nonexempt, but none of them avoid overtime pay. These other pay arrangements have strict and cumbersome rules. Pay a salary for the regularly scheduled hours worked plus additional compensation for additional hours which may include overtime pay. BELO contracts Fixed salary for fluctuating workweek (Beware: not all states recognize the fluctuating workweek method, and DOL appears to be changing its enforcement position on this method as well.) Never build in overtime pay contrary to the compliance rules 73 What to Do Now? Determine the potential operational and financial impact for your organization. Begin planning what you will do. When the final regulation is published, you probably will not have much time to comply. Based on the changes in 2004, employers had only 120 days in which to implement the new requirements. 74 Q&A By Eileen Maguire, Esq Gilliland, Maguire & Harper, PC N. Meridian St., Suite 300 Indianapolis, Indiana Toll Free: thefirm@gillilandlawfirm.com 2015 Gilliland, Maguire & Harper, PC 75 25