2013 Ratwik, Roszak & Maloney, P.A. 300 U.S. Trust Building 730 Second Avenue South Minneapolis, Minnesota 55402

Transcription

1 I. INTRODUCTION Ratwik, Roszak & Maloney, P.A. 300 U.S. Trust Building 730 Second Avenue South Minneapolis, Minnesota (612) Fax (612) APPLICATION OF THE FAIR LABOR STANDARDS ACT (FLSA) Region V Computer Services Spring Conference 2013 April 4, 2013 Joseph J. Langel jjl@ratwiklaw.com The Fair Labor Standards Act ( FLSA ) has applied to public employers for decades. Compliance should be easy at this point, but many entities are finding that it is not. Employees are working in more than one capacity at different pay rates, without the appropriate overtime rate being paid. Stipends are being paid for assistant coaching positions to people working in non-teaching positions in districts without tracking hours. Employees are being allowed or asked to volunteer for special projects or activities doing the type of work that falls within their normal job duties. These issues and many others can create problems for districts in the event of a challenge. This presentation will address common areas of confusion regarding the FLSA, including who is a covered employee, and how to calculate overtime pay for employees who hold multiple different positions within a school district. This presentation will also highlight some of the issues that districts should be addressing to avoid liability for overtime and to comply with the FLSA. NOTE: The purpose of this presentation, and the accompanying materials, is to inform you of interesting and important legal developments. While current as of the date of presentation, the information given today may be superseded by court decisions and legislative amendments. We cannot render legal advice without an awareness and analysis of the facts of a particular situation. If you have questions about the application of concepts discussed in the presentation or addressed in this outline, you should consult your legal counsel Ratwik, Roszak & Maloney, P.A.

2 II. GENERAL LEGAL FRAMEWORK A. The Fair Labor Standards Act (FLSA) is the federal law of most general application concerning wages and hours of work. The FLSA sets minimum wage, overtime, equal pay, child labor, and record-keeping requirements for covered employees. It is enforced by the Federal Department of Labor or by individual plaintiffs filing suit in federal court. B. The Minnesota Fair Labor Standards Act, Minn. Stat , et seq., likewise sets minimum wage, overtime, meal and rest breaks, record-keeping, and prevailing wage standards. It is enforced by the Labor Standards Division, Minnesota Department of Labor and Industry, or by individuals bringing suit in state district court. The federal FLSA and its regulations govern unless the state or local standard is more favorable to the employee. 29 U.S.C C. For purposes of the FLSA, an employee is defined as: 1. Any individual employed by a State, political subdivision of a State including school districts, or an interstate governmental agency, excluding such individuals who are: a. elective office holders; b. elected officials personal staff; c. volunteers to perform services for a public agency, if 1) the individual receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and 2) such services are not the same type of services which the individual is employed to perform for such public agency. 2. Independent contractors who pass the economic reality test. Doty v. Elias d/b/a Eddy s Steakhouse, 733 F.2d 720 (10th Cir. 1984). D. Neither employees nor employers in a written agreement can waive rights under the FLSA, nor can the union bargain away FLSA rights for some other benefit. Barrentine v. Arkansas Best-Freight System, 450 U.S. 728 (1981). 2

3 III. EXEMPTIONS AND EXCLUSIONS FROM COVERAGE A. Exclusions The following positions/persons are excluded from FLSA coverage: 1. Elected officials 2. Volunteers 3. Independent contractors 4. Legal advisors 5. Trainees 6. Policy-making appointees 7. Nuns, monks, priests, and other members of religious orders who serve pursuant to their religious obligations B. The FLSA does not cover or control the following items: 1. Vacation, holiday, or sick pay 2. Premium pay for weekends 3. Pay raises 4. Double pay 5. The number of hours an employee may work C. Exemptions To be exempt from overtime provisions, the employee must perform a certain type of work and be paid on a salary or fee basis. 1. The Salary Basis Test: a. An employee is paid on a salary basis if, under his or her employment arrangement, he or she regularly receives each pay period a predetermined amount constituting all or part of his compensation. This amount is not subject to reduction because of variations of the quantity or quality of the work performed. b. The salary basis test is not met if an actual practice of taking disciplinary or other deductions exists or the employer s personnel policy creates a significant likelihood of such deductions. Auer v. Robbins, 519 U.S. 452 (1997). c. An exempt employee s earnings may be computed on an hourly, daily, or a shift basis without losing the exemption. d. An employer may provide an exempt employee with additional compensation without losing the exemption. For example, an 3

4 employee paid on a salary basis can receive additional compensation based on hours worked for work beyond the normal workweek. The employee can be paid on any basis including a flat sum, bonus payment, or time and one-half. 2. The Executive Exemption Test: a. the employee is paid on a salary basis; b. the employee makes not less than $455 per week; c. the employee's primary duty is the management of the enterprise or a recognized department/subdivision of it; and d. the employee directs the work of 2 or more other employees. 1) Examples include superintendents and principals. 3. The Administrative Exemption Test a. the employee is paid on a salary basis; b. the employee makes not less than $455 per week; c. the employee's primary duty consists of office or non-manual work directly related to management policies or general business operations; and d. the employee's work requires the exercise of discretion and independent judgment. 1) Examples include: business managers, directors of human resources and technology 4. Professional Exemption Test D. Child workers a. A professional is an employee whose position requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study. 1) Examples include: teachers, counselors, psychologists, nurses, and attorneys. 1. Both the FLSA and MNFLSA set a general minimum age of 14 years old for work. However, there are exceptions for certain jobs such as 4

5 agriculture, modeling, delivering newspapers, or acting as referee for youth athletic programs. 2. Hour restrictions: a. No minor under the age of 16 may work during school hours on school days, or before 7:00 a.m. or after 9:00 p.m. on any day, other than the following exception: 1) Under Minn. Stat. 181A.05, a minor 14 or 15 years of age may work on school days during school hours if that student has an employment certificate. Such a certificate is issued by a person designated by the School Board. A certificate may only be issued if the minor s parent consents to the employment and the District individual believes it is in the best interests of the minor. 2) This certificate must show the name and address of the minor and the employer, the work to be performed, the hours of work, and the signature of the minor s parent or guardian. b. No minor under the age of 16 may work more than 40 hours in a week, and more than eight hours in a 24 hour period. c. No high school student under the age of 18 may work after 11:00 p.m. on an evening before the school day, or before 5:00 a.m. on a school day. These hours may be extended by a half hour with a note from the child s parent. IV. OVERTIME PROVISIONS A. The FLSA requires that all covered and nonexempt employees be paid not less than one and one-half times their regular rate of pay for all hours worked over forty in a work week. The FLSA does not require overtime pay for hours worked in excess of eight hours per day. B. Minnesota s FLSA does not require overtime until over forty-eight hours are worked in a workweek. Neither statute requires employers to count payments for time not worked (vacation, sick leave, personal leave, holidays) in computing the 40 or 48 hours. 5

6 C. Application of the Overtime Provisions 1. Overtime requirements cannot be waived. Therefore, an employer cannot refuse to pay overtime based upon a policy or practice, and an employee may not offer to work for less than time and one-half. 2. The United States Supreme Court has defined "work" to be all time spent in "physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business. IBP, Inc. v. Alvarez, 546 U.S. 21, 25 (2005). The work week ordinarily includes all time during which an employee is necessarily required to be on the employer's premises, on duty, or at a prescribed work place. If the employer knows that the employee is working, whether at home or at work, the work is compensable. a. Time spent waiting for and receiving medical attention for illness or injury is considered work if: 1) The medical attention is required on a workday an employee reported for duty and subsequently became ill or was injured; 2) The time spent receiving medical attention occurs during the employee s regular working hours; and 3) The employee receives the medical attention on the employer s premises or at the direction of the employer at a medical facility away from the agency s premises. b. Time spent taking a physical examination that is required for employment with the school district is considered work. c. Meal periods are generally not considered hours of work, except for on-duty meal periods for people who receive compensation for overtime hours of work. By agreement, however, on-duty meal periods may be excluded from hours of work. 3. Applying these principles, the Department of Labor takes the position that any work "suffered or permitted" is work time even if it is not requested by the employer. 29 C.F.R. Section This requires employers to be mindful of those employees who are doing more than is asked of them, or may be working when you do not expect them to. If the employer is 6

7 receiving the benefit of the employee s energy, that employee is entitled to overtime payments. 4. Training Programs a. General rule: attendance at lectures, training programs, and other similar activities is not working time if: 1) Attendance is outside of the employee's regular working hours; 2) Attendance is voluntary; 3) The program or lecture is not directly related to the employee's job; and 4) The employee does not perform any productive work during the session. 29 C.F.R. Section Travel Time a) More often than not, training time will be compensable. It must meet all of the above requirements before it is not compensable. a. General rule: the time an employee spends traveling to work in the morning and away from work in the evening is not compensable. 29 C.F.R. Section (Unless provided by contract or past practice). 1) This is true whether the employee works at a fixed location or at different job sites. 2) Employees are entitled to compensation for travel time that is a principal activity of the employee. Principal activities are those activities performed as part of the regular work of the employees in the ordinary course of business which is necessary to the business as is performed by the employees primarily for the benefit of the employer. 3) Employees who arrive at a work site and then spend their day traveling from one site to another must be compensated for their travel time. 7

8 6. Volunteer time 4) Travel time away from the community overnight is considered work time when the travel occurs during the employee's ordinary hours of work. 5) Wait time is treated similarly to travel time. a) Both travel time and waiting time are issues that can be addressed by a collective bargaining agreement or other employment contract. If addressed by a contract, those provisions are binding on the parties. (Also past practice). a. If the employee volunteers and performs the same type of services as in his/her regular job, the time is compensable. b. If the employee volunteers to perform a different job for which he or she is paid, the time is NOT compensable so long as the employer did not coerce or pressure the employee to volunteer his/her time. c. If an employee volunteers to work overtime, the employee must be paid for that time (or earn compensatory time) because he or she is working for the benefit of the employer. 7. On-call time a. On-call or standby time is not compensable if: 1) the employee is free to use his/her time as he/she pleases, and 2) the employee is not required to remain on work premises or close by. 29 C.F.R b. A beeper requirement or leaving a number to reach an employee is not FLSA compensable time. 8

9 V. COMPENSATORY TIME A. For Non-Exempt Employees. 1. Both the FLSA and MNFLSA provide that public agencies, including states and political subdivisions of states may provide employees compensatory time off in lieu of overtime pay that would otherwise be required. Compensatory time off must be calculated at a rate of not less than one and one half hours of compensatory time off for each hour of overtime work. 2. Certain restrictions apply to compensatory time, as follows: a. There must be an agreement to award compensatory time instead of overtime pay. If there is no agreement, overtime must be paid. 1) Organized: Grant of compensatory time off must be pursuant to the terms of a collective bargaining agreement, memorandum of understanding, or other written agreement between the employer and representative of the employees. 2) Unorganized: There must be a written agreement or understanding between the employee and employer before the work is performed. b. Agreements may provide for part compensatory time and part cash. For example, for every hour of OT, the employer could grant one hour of compensatory time and one ½ hour of pay---this type of agreement will be valid as long as the combination of cash received and the compensatory time off, when taken together, equal time and one-half for every hour of OT worked. c. The employee may accrue a maximum of 240 hours of compensatory time in this manner. Note that because compensatory time is accumulated at time and one-half, 240 hours of compensatory time is earned upon 160 hours of actual overtime work. d. An employee must not be coerced into accepting more compensatory time than an employer can realistically, and in good faith, expect to be able to grant. 9

10 e. An employee who requests to use compensatory time off which he or she has accrued must be permitted to use the time off within a reasonable period of time after making the request, if the time off would not unduly disrupt the operations of the employer. A determination as to whether a request to use compensatory time off has been granted within a reasonable period of time is based upon the circumstances of a particular case after considering 1) the normal schedule of work, 2) anticipated peak workloads based on past performance, 3) emergency requirements for staff and services, and 4) the availability of qualified substitute staff. In order to deny an employee s use of compensatory time off because it would unduly disrupt the operations of the employer, the employer must reasonably and in good faith anticipate that the employee s absence would impose an unreasonable burden on the employer s ability to provide services of an acceptable quality and quantity. An undue disruption must be to the employer s operations, not its finances. Additionally, mere inconvenience to the employer is not a sufficient basis for denying the request. f. Employer cannot force a person to take compensatory time at a particular time. g. Accrued compensatory time may not be made subject to a use it or lose it policy, nor may it be converted to sick or vacation leave. h. Upon termination of employment, the employee must be paid for the unused accrued compensatory time based on either their average rate of pay for the last three years or their final regular rate of pay, whichever is higher. B. For Exempt Employees. 1. There is no requirement that exempt employees be paid overtime or compensatory time under FLSA. 10

11 2. If the employer voluntarily chooses to pay overtime or compensatory time to an exempt employee, it may be at any rate of pay and need not be calculated at time and one-half. 3. Voluntarily paying overtime or compensatory time may be viewed by a court as evidence that the employee is non-exempt under the salary basis test. VI. RECORD KEEPING Know and keep all of the records that are required by the FLSA. If the school district is audited, the school district will need at least the following: all time cards and time records for two years; payroll and pay records for the past two years for all employees, hourly and salary; W-2 forms and other pay deduction forms; I-9 forms; a printout or other records listing all employees by full name, address, social security numbers, telephone numbers, job classifications, and rates of pay for two years which may include former employees; schedules of work; all notices required for posting (the wage and hour poster, the employee polygraph protection act poster, and the Family and Medical Leave Act poster); job descriptions for all positions; a listing of all locations of the employer s buildings and the supervisory hierarchy of each location; and the supervisory/managerial duties, functions, and responsibilities of the personnel in each of the exempt categories. VII. FLSA ISSUES A. Multiple Jobs/Same School District. 1. Even if the jobs held are different occupations, or at different sites, if the work is non-exempt, the two jobs hours count as if they were one job for overtime purposes. 2. The school district must ensure that all hours are properly documented. 3. The overtime rate must be based on either 11

12 a. The weighted hourly rate or b. The employee and employer can agree which rate will be used for calculating overtime. The employee and employer must agree in advance what rate the overtime will be used, or the weighted rate will be used. 4. A weighted hourly rate is mathematical calculation that blends the two rates. As an example, if an employee works 60% of his time at a rate of $20 per hour, and 40% of his time at a rate of $10 per hour, the blended rate if $16 per hour. ((60% x 20) + (40% x 10)). If the employee then works five hours of overtime, he or she must be paid $24 ($16 x 1.5) an hour for those five hours absent an agreement. B. Dual Employment: Athletics and other Extracurricular Activities. 1. A non-exempt district employee who also works as coach or otherwise with extracurricular activities is likely not entitled to overtime pay for his or her time as a coach, even if that coach receives a small fee for that coaching. This matter was recently before the Fourth Circuit Court of Appeals, where a school security guard also worked as a golf coach. The employee claimed he was entitled to overtime pay for hours per year of coaching in Purdham v. Fairfax County School Board, 637 F.3d 421 (4th Cir. 2011). The court held that he was a volunteer for purposes of the FLSA, and thus not entitled to any overtime for his time coaching. This decision was consistent with opinion letters from the Department of Labor. C. Unpaid Breaks. 1. Meal breaks of 30 minutes or more may be unpaid. However, if the meal break is cut short, or is only scheduled for less than 30 minutes, the employee must be paid. 2. Rest breaks of 20 minutes or more may be unpaid. D. Occasional and Sporadic Means Just That. Overtime provisions do not apply to work performed on only an occasional or sporadic basis. This does not mean regular part-time work, and cannot be a condition of employment. Examples of what it does not mean include: 1) bookkeeper collecting tickets for all football games; 2) food service employee providing a cookies and coffee service for parent-teacher conference night. 12

13 E. Inaccurate Time Records. Employees in the Mississippi and Alabama School Districts filled out their time sheets each week showing that they worked exactly to the minute forty hours. Nearly all of the employees stated on their timesheets that they began work at exactly 8:00 a.m. and ended work at exactly 4:30 p.m. with exactly 30 minutes for lunch, each and every day. The employees stated in their lawsuits that they were required to do so by the employers. F. Long/Holiday/Weekend Hours The FLSA does not require overtime payments until an employee works more than 40 hours in a week. The FLSA also does not require overtime for weekend or holiday work. This means an employee could work four ten-hour days, including over a holiday, and still not be entitled to overtime. An employer should still be mindful of any collective bargaining agreements to the contrary. G. Non-requested Work A non-exempt employee doing work at his or her own choosing is entitled to overtime, even if the employer does not request it. If the employee is working through lunch breaks, or putting in extra time before or after his or her normal shift when things are busy, the employer must pay for that extra time. It may seem counterintuitive to tell an employee to not work as hard or help out, but that must be done if the employer wants to avoid paying overtime. This also includes an employee working more than 40 hours to rectify a mistake he or she previously made. H. Volunteers As explained above, employees volunteering are generally not entitled to payment of overtime. However, the person must actually be volunteering and cannot be coerced by the employer to work. Also, the employee must not be doing the same type of work as he or she normally would do. For instance, a school security guard who provides security services at a weekend school carnival is entitled to overtime pay for that carnival, even if it is on the weekend and he or she chooses to be there. Volunteers may be paid a nominal stipend for their time and still be considered volunteers. 13

14 VIII. PENALTIES FOR FLSA VIOLATIONS A. Back wages 1. Overtime violations result in the following: a. Back pay; b. An equal amount as liquidated damages; c. Penalties; d. Possible civil and criminal liability; and e. Possible injunctive relief. 2. Individual liability is possible depending upon the degree of control held by the individual in relation to the wage and hour and practice or the employment relationship. B. Criminal sanctions: $10,000 fine or six months in prison or both. C. Civil penalties: $1,100 per willful and repeated violation. IX. STEPS EMPLOYERS MAY TAKE TO MINIMIZE LIABILITY A. Review personnel practices, policies, rules and manuals, and accounting systems for conformance with the salary basis test. 1. Consider a self audit of your wage and hour practices. 2. After the self audit, develop recommendations for change, if any, in wage and hour practices. 3. Implement approved recommendations. 4. Educate and train other employees and supervisors as may be necessary to effectuate implementation. 5. Consider developing a mechanism to monitor wage and hour practices in the future. 14

15 B. Check records for exempt employees for the past two to three years and determine if an exempt employee has suffered a deduction in pay for absences of less than a day. C. Eliminate hourly pay to exempt employees and annualize salary. D. Consider alternatives to overtime or compensatory time payments to exempt employees such as additional fixed vacation time or payment of a flat fee for performing an extra project rather than payment of compensation based on an hourly basis. E. Reduce indicia of hourly pay to exempt employees such as deductions from pay, hourly pay, overtime, charging of leave banks by the hour and disciplinary policies which result in suspensions without pay of less than a week. RRM: