3,426 federal wage-hour lawsuits in ,046 lawsuits last year And that is just in federal courts There are now more wage class-actions filed than

Size: px
Start display at page:

Download "3,426 federal wage-hour lawsuits in ,046 lawsuits last year And that is just in federal courts There are now more wage class-actions filed than"

Transcription

1 1 1

2 3,426 federal wage-hour lawsuits in ,046 lawsuits last year And that is just in federal courts There are now more wage class-actions filed than discrimination class-actions 2 2

3 The law is ancient and often makes no sense One mistake can be replicated many times over, leading to great exposure Violations are often easily proven, penalties are steep, and fee-shifting is mandatory By far, the hottest area of litigation 3 3

4 Employers must answer key questions correctly: 1. To whom must we pay overtime? ( exempt v. nonexempt ) 2. How many hours were worked? ( hours worked ) 3. How much overtime pay is due for any overtime hours worked? ( regular rate ) 4 4

5 4. When must an employee be given a break? What breaks must be paid? 5. What deductions can we make from pay? 6. What trouble can we get into with vacation, bonus, and commission policies? 7. Wait, that guy s our employee? I thought he was a contractor? 5 5

6 The law presumes that every employee must be paid time-and-one-half if they work >40 hours Theburdenisontheemployertoprovethatan employee is exempt from overtime White collar exemptions: executive, administrative, professional, outside sales The price of getting this wrong? o Damages inflated because no record of hours worked 6 6

7 Can these jobs be classified as exempt? o Manager of ten-employee department in factory o Assistant manager of a large retail store o Insurance claims adjuster o Accounts-payable manager o Accountant at Big 4 firm with three years of experience The answer: Maybe. None of these is obviously exempt. Many are the subject of recent lawsuits. 7 7

8 The three most common executive, administrative, and professional have two primary components: o Salary basis o Duties test Outside sales exemption does not have salary basis requirement only a duties test 8 8

9 Portion of employee s compensation must be a fixed weekly amount that is not subject to reduction based on quantity or quality of the employee s work. No docking the employee for being late, leaving early, or doing poor work. Salary must be at least $455/week ($23,660/year) 9 9

10 Primary duty is the management of the company or of a customarily recognized department or subdivision of the company Customarily and regularly directs the work of (i.e., supervises) two or more employees Has the power to hire and fire employees, or recommendations about hiring, firing, and other changes of status for other employees are given particular weight Customarily and regularly exercises discretionary powers And... The employee does not devote more than 20 percent of his/her time to activities that are not directly and closely related to the above

11 Common problems: o Employee s hiring and firing power is purely theoretical o Employee does not really have much discretion in other matters o 20% test is often a killer on this one Jobs commonly misclassified as exempt here: o Foreman o Crew Leader or Line Leader o Assistant Manager o Shift Manager o [insert name of department here] Manager o [insert verb or noun here] Supervisor 11 11

12 Primary duty is performing office or non-manual work directly related to management policies or general business operations of the company or the company s customers. Customarily and regularly exercises discretion and independent judgment. Does one of the following things: o o o Regularly and directly assists the proprietor of the company or another executive or administrative employee; Performs under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge; or Executes under only general supervision special assignments and tasks. And the employee does not devote more than 20 percent of his/her time to activities which are not directly and closely related to the above

13 Common problems: o Bachelor s degree + office job does not necessarily equal exempt status o Not directly related to management or general operations; production, not management o Independent judgment and discretion! To be distinguished from mere application of skill Jobs commonly misclassified as exempt here: o People who report to someone who fits this exemption, but do not fit it themselves, such as low-level HR, accounting, IT, etc., personnel 13 13

14 Primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction OR Primary duty is the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. And Consistent exercise of discretion and judgment Work predominantly intellectual and varied in character And the employee does not devote more than 20 percent of his/her time to activities that are not directly and closely related to the above

15 Common problems: o Degree not advanced enough o Discretion and judgment Jobs commonly misclassified as exempt here: o Junior accountants o Junior engineers o Social workers 15 15

16 No salary basis requirement Just two duties required: o Primary duty of making sales or of obtaining orders or contracts for services or for the use of facilities; and o Customarily and regularly engaged away from the employer s place or places of business Inside salespeople are very difficult to make exempt

17 One principle, many variations... Non-exempt employees must be paid for all hours they are required, suffered or permitted to work. It does not matter if the time was authorized. If an employer knew or should have known that an employee was working, time must be paid. Employers may discipline employees for unauthorized work, but the time still must be paid

18 Modern Problems Must you pay... o o o A clerk who spends a few minutes per evening checking onapda? A repairman who checks his home computer first thing in the morning to learn which customer he must visit first that day? A home-based customer service rep for the time spent booting up her computer and logging in each morning? 18 18

19 Modern Problems Familiar Principles Did we know about it, or should we have known about it? (Do managers receive s from non-exempt employees after hours?) Is it de minimis? 19 19

20 Time Clocks and Recording Time Time clocks are not mandatory accuracy is. Ifclockused,employermay round byrecording start and stop times to nearest: o Five minutes; o One-tenth of an hour; o Quarter of an hour. Employer must round up and down uniformly. Employer cannot always round down

21 Adventures With Time clocks Employers must be careful with: o Automatic deductions for lunch or breaks o Opportunities for work before and after punching in and out (donning and doffing, etc.) 21 21

22 We ve figured out who is entitled to overtime. We ve figured out how many hours they worked. Now we just pay them the overtime. Simple, right? Time and a half. But... time and a half of what? 22 22

23 Overtime pay is computed on the basis of an employee s regular rate of pay The regular rate is the hourly rate derived by dividing total pay by total weekly hours Rate may/will change if employees are paid multiple rates or multiple incentives, bonuses, commissions or paid via piece rates 23 23

24 If an employee receives other types of compensation in addition to the hourly rate, some of these payments must be included in the regular hourly rate. Payments which must be included: o Awards or prizes won for quality, quantity or efficiency; o Bonuses and incentives based upon quality, quantity or efficiency; o Bonuses based on hours worked; o Commission payments; o Reasonable cost of employer-provided lodgings, meals, and other facilities furnished to employees; o Shift differentials and "dirty" work premiums; o Lump sum on-call payments

25 What does not have to be included in calculating the regular hourly rate: o Suggestion plan awards; o Discretionary bonuses; o Employee referral bonus; o Employee benefit plan contributions; o Paid leave from work; o Expense reimbursements; o Premium payments For work outside normal daily/weekly hours For work on Saturdays, Sundays, holidays or nights if the premium is paid at a rate one-and-one-half times the regular rate paid for work during other hours; and, o Gifts

26 Two questions: o When must an employee be given a break? o Which breaks must be paid and which can be unpaid? When must an employee be given a break? Not required by FLSA Many state laws do have such requirements, and where a state law more stringent, state law must be followed 26 26

27 Which breaks must be paid and which can be unpaid? Rest periods/coffee breaks less than 30 minutes are compensable Meal periods are considered non-working time if: o o 30 minutes in duration; and, employee is completely relieved of duties Meal periods are compensable if the employee is frequently interrupted

28 Employers generally may not deduct the following from employees wages: Bad checks from customers. Improper use of credit cards by customers. Customer walk outs. Cash or inventory shortages. Damage or breakage costs

29 Quick tips on these subjects: Vacation: o PTO, floating holidays, personal days, etc. must be paid out o Make sure sick days are really sick days Bonuses: o Must be employed on date bonus is paid : Could be a problem Commissions: o Be sure to clearly define, in writing, when a commission is earned 29 29

30 Employment status is defined by law, not by the parties agreement or employer s choice to call someone a contractor. The most significant factor is whether company has control over how work is performed Bad signs: o Company is the contractor s only customer o Company provides tools, training, uniform, business cards o Person used to be employee but was outsourced to become contractor o The contract is with a person, rather than with a business entity Also: beware volunteers 30 30

31 Retroactive entitlement to overtime pay for two to three years Employer likely has not kept accurate time records, leading to inability to defend claims Liquidated (double) damages are applied; attorney s fees can be awarded DOL audits and investigations can result Class actions can result in exorbitant costs and settlements 31 31

32 Glatt v. Fox Searchlight Pictures Complaint alleges that the defendant violated wage laws when it used unpaid interns during production of the 2010 film Black Swan. Court grants interns motion for summary judgment, ruling that they should have been classified as employees under the FLSA. Class certification is granted. Bickerton v. Rose Plaintiff (an unpaid intern for The Charlie Rose Show ) claims she should have been paid for time she spent performing duties such as assembling press packets, escorting show guests through the studio, and performing background research. Case settles for $250,000 plus $50,000 in fees

33 The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment; The internship experience is for the benefit of the intern; The intern does not displace regular employees but works under close supervision of existing staff; The employer that provides the training derives no immediate advantage from the activities of the intern; The intern is not necessarily entitled to a job at the conclusion of the internship; An understanding that intern is not entitled to wages

34 Is the internship structured like a classroom or education experience? Will the intern learn skills that can be used in multiple employment settings? Did the intern reduce labor costs through uncompensated work? 34 34

35 Volunteers are not subject to the FLSA. Staff may volunteer, but not to perform the services for which they are customarily paid

36 36 36