WAGE AND HOUR UPDATE

Transcription

1 WAGE AND HOUR UPDATE The Coming Storm Solutions at Work Andrew X. Froman Matthew D. Westerman August 25, 2015

2 Our Agenda Why the FLSA Matters FLSA Basics Overview of White Collar Exemptions Proposed Changes to Salary Requirements Employees vs. Independent Contractors Questions and Answers

3 Why the FLSA Matters More than 50,000 FLSA lawsuits filed nationwide since 2000 Wage and hour lawsuits have outpaced all other types of workplace claims since 2010 Since January 2010, more than 3,000 lawsuits have been filed in the Middle District of Florida alleging violations of the FLSA FLSA collective actions in federal court outnumbered all other types of private class actions FLSA claims are easy to litigate and replicate for plaintiffs attorneys mandatory attorneys fees for the employee

4 Why the FLSA Matters The Wage and Hour Division of the DOL has increased its workplace investigations/audits, as well as enforcement actions USDOL hired more than 350 new investigators Now trained and experienced, true believer mindset We can help program, community outreach" Aggressively pursuing enforcement not assistance Adversarial, employers-are-scofflaws attitude Demanding, intrusive investigative approach

5 The Basics Minimum Wage Overtime after 40 hours worked Time records of all hours worked Recordkeeping Child labor restrictions

6 Minimum Wage Covered employees must receive at least the applicable minimum wage for all hours worked in a workweek: Federal minimum wage is now at $7.25 per hour Florida minimum wage is now $8.05 per hour The minimum wage must be paid to employees in cash (check) or the equivalent (e.g., room, board and other facilities provided to the employee)

7 Minimum Wage Minimum wages must be paid free and clear Most deductions or payments cannot cut into the minimum wage: Examples: tools, equipment, supplies, mileage costs, shortages, uniforms, unreturned property

8 Overtime Employers must establish and document a seven-day "workweek" Employers must pay nonexempt employees 1.5 times the regular rate for time worked over 40 hours in the workweek " The regular rate is all remuneration for employment divided by all hours the pay covers This usually includes things like bonuses, commissions, incentive pay, and exclusions are very limited

9 Hours Worked All time that the employer suffers or permits an employee to work. Includes all work that you know or have reason to know is being performed, even if not requested or approved.

10 Hours Worked Includes: Punching in early Working through lunch Leaving late Taking work home Making calls from home Coming in on an off day Working off the clock

11 Hours Worked Also includes: Short rest or coffee breaks Sales meetings Training sessions Drug test and initial workers comp treatment Eating lunch while performing job duties

12 Hours Worked Also includes: Traveling between office locations during day Running by the bank or post office on the way home Responding to texts and s from supervisor after business hours

13 Not Hours Worked Lunch breaks of at least 30 minutes Normal commute to and from work Vacation or holidays Sick days On call at home

14 White Collar Exemptions The exemptions set forth in Section 213(a)(1) of the FLSA are the most common exemptions to both the minimum wage and overtime requirements: Executive Exemption Administrative Exemption Professional Exemption Outside Sales Exemption These exemptions generally require the employer to establish that both the employee s compensation (salary test) and job duties (duties test) meet the requirements of the exemption

15 Executive Exemption To qualify for the executive exemption, all of the following tests must be met: The employee paid on a salary basis of least $ per week The employee s primary duty must be managing the enterprise, or managing a customarily recognized department The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent The employee must 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 of status of other employees must be given particular weight.

16 Executive Examples EXEMPT NOT EXEMPT CEO General Manager Department Manager Assistant Manager? Shift Supervisor? Working Foreman Line Supervisor Shift Lead Development Manager Finance Manager

17 Administrative Exemption To qualify for the administrative exemption, all of the following tests must be met: The employee paid on a salary basis of least $ per week The employee s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer s customers The employee s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

18 Administrative - Examples EXEMPT NOT EXEMPT Marketing Manager Office employees Human Resources Manager Insurance Adjusters Director of Finance Bookkeeper Accounts Payable Receptionist Payroll Clerk

19 Professional Exemption To qualify for the learned professional exemption, all of the following tests must be met: The employee paid on a salary basis of least $ per week 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 The advanced knowledge must be in a field of science or learning The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction

20 Professional - Examples EXEMPT NOT EXEMPT Attorney Teacher Doctor RN Accountant Engineer Law Clerk/Paralegal Teacher s Aide CNA and LPN Accounts Payable Engineering Technician

21 Outside Sales To qualify for the outside sales exemption, all of the following tests must be met: The employee s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer The employee must be customarily and regularly engaged away from the employer s place or places of business No salary or compensation requirements

22 Highly-Compensated Employees Performs office or non-manual work, and Is paid a salary or guarantee of at least $455/wk, and Is guaranteed total annual compensation of at least $100,000 per year, and Customarily and regularly performs any one of the exempt duties of an executive, administrative or professional employee.

23 Salary Basis Test (General Rules) Employee must receive a minimum weekly salary of at least $ Salary must be a predetermined amount Weekly salary must be paid free and clear Salary cannot be subject to reduction based on variations in the quality or quantity of the employee s work Employee must be paid the full salary in any workweek in which work is performed No salary is required for a workweek in which employee performs no work Deductions only allowed for reasons set forth in the regulations (exemption can be lost due to impermissible deductions)

24 Do Not Rely On Job Titles Administrative Assistant Assistant Service Manager Business Manager Foreman Team Leader (technician) Floor Manager/Tower Manager Customer Relations Manager

25 A Change Is Coming

26 DOL Proposed Regulations In March 2014, the President directed DOL to modernize and streamline its regulations governing white collar exemptions The new regulations are necessary because millions of Americans lack the protections of overtime and even the right to minimum wage. The new regulations were released on June 30, 2015

27 DOL Proposed Regulations The DOL currently intends to increase the minimum salary threshold by approximately 200% If the new rules go into effect, the minimum salary requirement will be $921 per week ($47,892 annually) DOL has also proposed an increase to the total-annualcompensation threshold for the highly compensated employees exemption from its present $100,000 minimum to a new level of $122,148. The salary requirements will be updated (increased) annually. DOL s accompanying remarks suggest that this might result in a $970 threshold (annualizing to $50,440) as early as next year. No proposed changes to the duties requirements of the exemptions.

28 DOL Proposed Regulations The new regulations do not automatically take effect Best guess: Early 2016 Comments on and criticisms of the DOL s proposals must be submitted to DOL by no later than September 4, We urge employers to consider preparing comments for submission to DOL (copies of which might perhaps be sent to an employer s Senators and Representatives). Comments can be submitted electronically through the Federal erulemaking Portal at

29 What should you do? Employers need to evaluate how these new rules will impact their businesses. Employers who have not already done so should start considering: Whether and how to bolster the FLSA exemption status of those currently treated as exempt under Section 13(a)(1); Evaluate whether other FLSA exemptions might apply to one or more employees; and Determine whether alternative FLSA-compliant pay plans would serve your needs if it is necessary to convert one or more employees to non-exempt status. We recommend our clients to conduct an internal wage and hour audit by the end of the year

30 New Guidance on Employee Status

31 Employee Vs. Independent Contractor More companies are treating regular workers as nonemployees: Independent Contractors Contract Employees (an oxymoron!) Owner/Operators Freelancers

32 Benefits of ICs Big savings on labor costs: Unemployment, workers comp, taxes, benefits, etc. No concerns over wage & hour law compliance Avoid liability for most employment discrimination laws Avoid issues under OSHA and immigration laws Many workers prefer the freedom of being classified as independent contractors, as well as possible financial incentives.

33 Who Cares? IRS: Estimated loss of $3 to $5 Billion each year due to misclassification State Unemployment Tax Agencies Department of Labor Works in tandem with IRS Labor and Unions Potential dues-paying members Class Action Lawyers

34 Risks of Misclassification Minimum wage, overtime, and other unpaid wages Back taxes Unemployment audits Social Security contributions Unpaid benefits Employment law violations Workers Compensation coverage Penalties and fines Litigation costs and attorney fees

35 So What Rules Should I Follow? Difficult to provide blanket recommendations, because different tests are applied in different situations: IRS & State tax departments Department of Labor NLRB Unemployment claims Workers compensation claims State and federal courts

36 New Guidance from the USDOL On July 15, 2015, the DOL issued an Administrator s Interpretation stating that most workers [who are classified as independent contractors] are employees under the FLSA s broad definitions. The new guidance concludes that the FLSA s language of to suffer or permit to work, interpreted through the economic realities test, is significantly broad, and as a result, the DOL concludes that most workers are employees under the FLSA. The defining question is whether the worker is truly operating a separate business that is economically independent from the employer. If the worker is economically dependent on the employer, the worker is an employee in the DOL s eyes.

37 Economic Realities Test The USDOL will evaluate the following factors to determine whether a worker is an employee or an independent contractor: The extent to which the work is an integral part of the employer s business The worker s opportunity for profit or loss The extent of the investments of the employer and the worker Whether the work requires special skills The permanency of the relationship The degree of control exercised by the employer

38 What Does This Mean? An IC classification is more likely for a worker who: Can earn a profit or suffer a loss from work Furnishes needed tools/equipment Is paid by the job Works for more than 1 organization Invests in equipment/facilities Pays his/her own business and traveling expenses Hires and pays assistants Sets his/her own working hours

39 On The Other Hand An IC classification is unlikely for a worker who: Can be fired at any time Is paid by the hour Receives instructions from the organization Receives training from the organization Works only for the hiring organization Receives employee benefits Has the right to quit without incurring liability Provides services that are integral to the organization s purpose

40 What If I Think An IC Is Misclassified? 3 Options: Do nothing Reclassify the worker to employee status Retain as IC but restructure the working relationship

41 What Are The Consequences? Misclassifying an employee as an IC may require you to pay: The employer and employee s share of Medicare and Social Security Federal and state income taxes that should have been withheld Federal and state unemployment taxes Overtime Benefits

42 Final Questions?

43 THANK YOU F O R T H I S O P P O R T U N I T Y Andrew Froman afroman@laborlawyers.com (813) Matthew Westerman mwesterman@laborlawyers.com (813)