Outdated and Antiquated Applying 1930s Wage and Hour Laws to a 2015 Workforce

Transcription

1 Outdated and Antiquated Applying 1930s Wage and Hour Laws to a 2015 Workforce Introduction The Fair Labor Standards Act ( FLSA ) governs various wage and hour issues at the federal level. Among other things, the statute: (1) sets the federal minimum wage ($7.25 per hour); (2) sets overtime at time and a half over 40 hours worked during a particular work week; (3) establishes penalties for violations of the same; and (4) sets forth exemptions from coverage for certain types of employees. Wage and hour claims are the fastest growing type of employment litigation. And, at a time when some experts estimate that as many as 70 percent of employers are failing to comply with the FLSA and 86 percent of the U.S. work force may not be exempt from the law s overtime provisions, it is clear that wage-and-hour liability is a corporate risk that will not soon disappear. Indeed, FLSA complaints are at a record high. Even more daunting is the fact that, in recent years, the Department of Labor has targeted smaller employers, which makes wage & hour litigation much more than just a big company problem. Perhaps the greatest challenge employers face is trying to comply with the FLSA s outdated requirements. Indeed, when President Franklin Roosevelt signed the FLSA into law in 1938, the following did not exist: computers, voic , , smart phones, car phones, etc. Obviously, the use of such devices is prevalent in today s workforce. Modern Challenges FLSA risks abound in most modern workplaces, many of which are attributable to technological advances. While the following is certainly not an exhaustive list of what employers should be mindful of, employers would benefit from paying extra special attention to each: 1. What is work? The FLSA requires that covered ( non-exempt ) employees be paid at least the minimum wage for all hours worked under 40 per week and at least one-and one-half times their regular hourly wage for hours worked in excess of 40 per week. In deciding how much to pay a nonexempt employee, it is critical to determine what is compensable working time. In general, hours worked include all of the time employees are required to be on-duty or on the employer s premises and all the time during which the employer suffers or permits the employees to work. This is so even though there may be periods of inactivity during that time. If the non-exempt employee is unable to use the time effectively for his or her own purposes, then the statute considers the time compensable hours worked. 29 C.F.R The Supreme Court has held that work is 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. Tennessee Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590 KCP

2 (1944). 1 That is, compensable time includes all time during which a covered employee is required to be on duty, on the premises, or at a prescribed workplace. In certain circumstances, that can include time spent preparing for work. In IBP v. Alvarez, the Supreme Court unanimously determined that time spent donning and doffing protective gear required by the employer, as well as any walking and waiting that occurs in the course of this preparation, qualifies as principal activities and is compensable. 546 U.S. 21 (2005). 2. Suffering or Permitting Work and Controlling Managers As indicated above, another common problem that might result in an employee being underpaid is suffering or permitting employees to work without payment of wages. Work not requested, but allowed, is compensable work time. Many times, loyal employees come to work early so that they can get a head start or work late so they can leave their desk clean at the end of the day. They do not include that time on their time cards or time sheets because they do not expect to be paid for the time. Despite the voluntary nature of that work, employees must be paid for their time. Although less common, some supervisors may inform their workers that they must have their work completed by 5:00 p.m., and if it isn t completed, they must clock out and stay to finish it. Again, that time off the clock is compensable. So long as the employer knows, or has reason to believe, that the employee is performing the work, whether at the employer s premises or at the employee s home (including logging in to the computer to check from home), the employer must count the time as hours worked. 3. Off the Clock Work The most common off-the-clock work issues that have arisen as a result of recent technological advances are: (1) remote communications engaged in by non-exempt employees via Blackberry, cell phone, PDA, or online access; (2) remote work performed by nonexempt employees on laptops, personal computers, or PDAs, sometimes by dialing in or otherwise connecting to the employer s computer servers through phone lines or the Internet, and frequently triggered by a remote communication from the employer informing the employee that certain work needs to be done; and (3) time at the workplace that non-exempt employees spend waiting before or after their first or last principal activity for computers or other electronic systems to boot up or shut down. There is little question that all of these activities constitute work under the FLSA. As to overtime, employers should have a policy that prohibits unauthorized overtime. If the employer knows about the extra work time, even though the policy forbids it, then the employer has to pay the employee for that time. An immediate supervisor s knowledge of overtime work can be imputed to the employer. Again, the best way to protect against overtime liability is to have a policy against working unauthorized overtime and to enforce it. Thus, if an 1 Example: An employer s computer network breaks down and will take three hours to fix. The employer tells its non-exempt accounting employees, who work entirely on the computer, to take the next three hours off. The employer does not need to pay the employees for this time as long as it completely and specifically relieves the employees of all duties, allows them to leave the premises, and tells them in advance when they should return to work. KCP

3 employee works unauthorized overtime, while you must still pay the employee, you may discipline the employee for violating the policy How to Manage the Risks No employer wants to become the next target of an FLSA class action. Fortunately, there are practical steps you can take to strengthen your company s wage and hour compliance, and thereby reduce each of the risks discussed above. Generally, employers should, on a fairly regular basis, ask themselves the following questions: o Is every non-exempt employee paid the required minimum wage? o Is every non-exempt employee paid the required overtime? o Are non-exempt employees accurately recording all work time, including preparation time? o Can the company prove that all of its exempt employees meet the requirements? If so, then are they paid properly? o Are all required posters displayed? You should conduct comprehensive internal audits and focus specifically on hiring documentation; categorizing employees; pay practices; bonuses, pay stubs; meal and rest breaks, job descriptions, actual job duties; and performance evaluations. For example, all exempt positions should be reviewed to determine whether the employees in those positions are actually doing exempt work and are being paid correctly pursuant to the applicable exemption. As part of this process, employers should audit job descriptions and performance evaluations to confirm that these employees are actually required to and are doing exempt work. You must publish and enforce policies prohibiting off the clock work, and confirm with periodic audits that employees are abiding by those policies. Employers should require employees to acknowledge in writing that they understand the policies and procedures. In addition, employers should train employees on expectations regarding job duties and timekeeping. The policies themselves should define working time, with examples that target the most common misconceptions among particular employees. Employers should impose appropriate discipline for policy violations. As a general rule, you should always pay employees for all the time that they work, regardless of whether the work was authorized. If an employee does not follow policies on working time, use coaching and discipline (up to termination of employment), not pay withholding, to correct the issue. 2 Example: A non-exempt employee regularly works two hours on Saturday to finish work that she cannot complete during regular work hours. She does not record her time. This unauthorized work is contrary to the company s overtime policy. The employer must pay the employee for this time if it knows that she is doing this extra work. The employer will not have to pay the employee if it had no knowledge of the unauthorized work (because it was not recorded) and it was against company policy. KCP

4 Consider turning off , voic , or other technology access outside of normal business hours to prevent non-exempt employees ability to work at times that you don t want them working. While this could lead to morale issues (i.e. You don t need me anymore? ), it can help to control working outside of normal business hours. Employers should develop a well-publicized complaint procedure that encourages employees to report concerns. At the same time, employers should require prompt reporting of off-the-clock work within 72 hours of its occurrence. Employers must train human resources and supervisors. It is critical to educate your company about the serious nature of these lawsuits, the applicable laws and regulations, and ways to minimize the chances of your company being targeted. Moreover, supervisors should be aware that the FLSA provides for individual liability. Human resources personnel and supervisors should have training about payroll and timekeeping requirements, data retention, job descriptions, and performance evaluations. It is extremely beneficial to companies when their lawyers are able to describe to plaintiffs lawyers the training and audit practices the companies utilize. This sort of behind-the-scenes work on the part of companies can and does serve as a deterrent to these lawsuits. The Supreme Court Chimes In Earlier this month, the United States Supreme Court heard Integrity Staffing Solutions, Inc. v. Buck, which revolves around whether activities are "integral and indispensable" (and so compensable) or "preliminary or postliminary" (and so not). Integrity provides warehouse workers on a contract basis to its clients. At the end of the plaintiffs' shifts, they had to pass through security screening stations designed to reduce employee theft. The plaintiffs claimed lines for the stations sometimes required waits of up to 25 minutes, time for which they sought compensation. After the District Court in Nevada dismissed the case, the Ninth Circuit reversed, using a 2-pronged test to determine whether the screening (and the wait) were "integral and indispensable," namely (1) whether it was "necessary to the principal work performed" and (2) "done for the benefit of the employer." In applying the test, the Ninth Circuit concluded that -- since the screening was not required of all employees (it was required only of those who had access to merchandise) -- there was a sufficient issue as to whether it was "necessary" to the work of filling orders. In its decision, the Supreme Court will have the opportunity to clarify how to determine whether activities occurring at the beginning or end of an employee's workday are "integral and indispensable" to an employee's principal work. Pom Poms and the FLSA For many years, most NFL cheerleaders have received a small payment for each game they work. For the Tampa Bay Buccaneers, the per-game payment is currently $100. The $100 would likely meet the minimum wage requirement if the cheerleaders only worked at the games, since games last only four hours or so. On May 19, 2014, however, a Buccaneer cheerleader questioned the total wage calculation in a complaint filed in federal court. The complaint lists several other time-consuming commitments that the Buccaneers allegedly require their cheerleaders to fulfill. Among them are fifteen hours of practice each week and forty hours of community appearances annually. KCP

5 When the mandatory practice and other hours worked are figured in to the Buccaneer cheerleaders wage, the complaint alleges that the cheerleaders receive far less than the minimum wage for the time they put into their NFL jobs. In fact, the plaintiff s attorney claims the cheerleaders receive just $2 an hour as Buccaneer employees. Lack of fair pay for professional cheerleaders may be the next big thing in wage and hour claims nationally. In fact, in the past few months, wage and hour claims have been filed by cheerleaders against the New York Jets, the Cincinnati Bengals, the Buffalo Bills and the Oakland Raiders. In cases similar to that against the Buccaneers, representatives for professional cheerleaders said the plaintiffs were paid a flat fee per game, with no compensation for other hours worked. 20 Frequently Asked Questions 1. WHAT IS THE CONTINUOUS WORKDAY? The workday is the period between the start and completion on the same workday of an employee s principle activities. Under the continuous workday rule, time spent traveling after the workday has begun is compensable. For example, if an employee reports to work at a central office, completes necessary paperwork, then immediately drives to his or her first work assignment, the time spent traveling is compensable work time, as is time spent traveling between customer locations. However, ordinary time spent commuting from home to and from work is not compensable. 2. GENERALLY, WHAT IS COMPENSABLE TIME? Whether activities such as checking at home or taking calls on a cell phone count as compensable time depends on the following: (1) The activities must be primarily for the benefit of the employer; (2) The activities must be principle activities or integral and indispensable to principle activities; (3) The employer must know or have reason to know that the employee is engaged in such activities; and (4) The activities are not de-minimis. 3. WHAT ACTIVITIES ARE INTEGRAL AND INDISPENSABLE TO PRINCIPLE ACTIVITIES? Activities are integral and indispensable when they are necessary for the employee to perform the work and are performed for the benefit of, or are required by, the employer (or required by law or by the nature of the employee s work). Again, the Supreme Court s decision in Integrity Staffing will presumably articulate a more defined, broadly applicable standard. 4. WHAT IS DE-MINIMIS WORK? An employer can disregard insubstantial or insignificant amounts of time beyond a worker s scheduled hours if it cannot as a practical matter precisely record the small portions of time involved. This rule applies only where there are few minutes or seconds of uncertain and indefinite periods of time involved. An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee s fixed or regular working KCP

6 time or practically ascertainable period of time he is regularly required to spend on duties assigned to him. 5. DO I HAVE TO PAY FOR WORK I DID NOT REQUEST? Maybe. Again, the key concept is whether the employee was suffered or permitted to work. An employer does not need to pay an employee for extra hours worked where the employer has a policy that prohibits unauthorized overtime and the employer neither knows of, nor consents to, the extra work hours. If the employer knows about the extra work time, even though the policy forbids it, the employer has to pay the employee for the time. An immediate supervisor s knowledge of overtime work can be imputed to the employer. The best way to protect against overtime liability is to have a policy against working unauthorized overtime and to enforce it. Thus, if an employee works unauthorized overtime, while you must still pay the employee, you should discipline the employee for violating the policy. 6. DO I HAVE TO PAY OVERTIME FOR WORK OVER 8 HOURS PER DAY? The employer must pay overtime for only hours worked over 40 hours per week under the FLSA. However, some state laws require overtime for work over 8 hours per day, even if the employee will not exceed 40 hours in that particular work week. 7. CAN I FORCE MY EMPLOYEES TO WORK OVER 8 HOURS PER DAY? Generally, yes. However, some states may require overtime pay or limit total working hours in a day. Employers may discipline or even terminate employees who refuse to work scheduled overtime. 8. DO I HAVE TO PAY AN EMPLOYEE OVERTIME FOR WORKING ON A HOLIDAY, SATURDAY, OR SUNDAY? An employer is not required to pay the employee overtime, unless the hours worked are over 40 hours in a week. However, the employer may have to pay a different rate of pay if they have agreed to such a pay rate in a collective bargaining agreement. Other states also have different rules. 9. DO I HAVE TO RECORD EVERY HOURLY EMPLOYEE S TIME EVERY DAY? The employer must keep records that accurately report time worked. That need not necessarily be accomplished with a time clock. For enforcement purposes, the Department of Labor allows rounding to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour, provided that it is used in such a manner that will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked. 10. DO I HAVE TO PAY FOR ALL TIME WORKED IF THE EMPLOYEE DOES NOT REPORT THAT TIME ON HIS/HER TIME CARD? If the employer knew or should have known that the employee worked the time, the employer must pay the employee, whether or not that time is more or less than what is reported KCP

7 on the time card. However, note that if you deviate from the time card, it may go to an inaccurate recordkeeping issue. It is the employer s burden to keep accurate records of time worked. That burden is non-delegable. 11. HOW LONG DO I HAVE TO KEEP MY WAGE AND HOUR RECORDS? 3 years. 12. IF A WORKER AGREES IN WRITING THAT HE/SHE IS AN INDEPENDENT CONTRACTOR, DO I HAVE TO PAY HIM/HER OVERTIME? It depends on whether the worker is actually an independent contractor. Many employers have started using these agreements to create a record of the agreement. A variety of tests are used in these cases, but the ultimate question is whether you assert sufficient control over the worker. Courts will look at actual duties and facts, not the agreement between the parties. It will become only one piece of evidence and not a particularly effective one. Also the director of the wage and hour division is a man who made his name on independent contractor misclassification issues. 13. CAN I GIVE EMPLOYEES COMPENSATORY TIME OFF RATHER THAN PAY OVERTIME? In the private sector, for non-exempt employees, it is impermissible to bank overtime to use as compensatory time. However, such a practice is permissible in the public sector. If the employee works in a public safety activity, an emergency response activity, or a seasonal activity, the employee engaged in such work may accrue not more than 480 hours of compensatory time. If the employee works in any other kind of work, the employee engaged in such work may accrue not more than 240 hours of compensatory time. Any such employee who has accrued 480 or 240 hours, as the case may be, of compensatory time off shall, for additional overtime hours of work, be paid overtime compensation. Such time is in addition to that employee s FMLA leave. 14. IF AN EMPLOYEE WANTS TO WORK OVERTIME AND WILL ACCEPT STRAIGHT TIME, CAN HE/SHE WAIVE HIS/HER RIGHT TO OVERTIME PAY? No. 15. MAY I DEDUCT FOR LOANS OR ADVANCES? Under federal law, an employer may deduct for loans or advances for both non-exempt and exempt employees even if the deduction reduces a non-exempt employee s wages below the minimum wage. This stands in contrast to the general rule that an employer may not make deductions that reduce an employee s wages below the minimum wage. In Missouri, the employer may deduct for loans or advances if the employee provides permission for the same in writing. 16. DO I HAVE TO PAY VOLUNTEERS? KCP

8 A volunteer is an individual who, without promise or expectation of compensation, but solely for his personal purpose or pleasure, works in activities carried on by another person either for their pleasure or profit. Volunteers must meet the following criteria if they are not paid: (1) Their services must be offered freely and without pressure or coercion; (2) They must perform hours of service for civic, charitable, or humanitarian reasons and not receive or expect compensation other than paid expenses, reasonable benefits, or a nominal fee for performing the services; and (3) The services must be different from any service the individual is employed to perform, if applicable. Other factors considered are whether a volunteer displaces an employee and/or whether the activity is less than full time. 17. DO I HAVE TO PAY INTERNS? Interns may be unpaid under the FLSA if: (1) The training is similar to that which he or she would receive at a vocational school; (2) The training is for the benefit of the intern; (3) The intern works under close observation and does not displace regular employees; (4) The employer derives no immediate advantage from the activities of the intern; (5) The intern is not necessarily entitled to a job at the completion of the training; and (6) The employer and intern each understand that the intern is not entitled to wages for the time spent in training. An intern is an employee entitled to pay if: (1) He or she is a substitute for regular workers or to supplement the employer s workforce; (2) But for the intern, the employer would have hired additional employees or asked its existing staff to work additional hours; and (3) The intern is engaged in the employer s routine operations and/or the employer is dependent on his work. 18. DO I HAVE TO GIVE MY EMPLOYEES A LUNCH BREAK? Generally, no. However, under federal law, if the lunch break is 30 minutes or more, it can be unpaid if it is a bona fide meal period. To be bona fide, the employee must be completely released from work. 19. WHEN DO I HAVE TO PAY FINAL WAGES TO A TERMINATED EMPLOYEE? Under federal law, final payment must be made by the next payday or as soon as can be calculated. In Missouri, employers will not be liable for any penalties until they fail to make timely payment in response to an employee s request. Once an employee requests final payment, the employer has seven days in which to make final payment. If the employer fails to do so, it can be liable for liquidated damages under statute. There is an exception regarding the timing of payment for employees who work on commission or whose duties require an audit to determine the amount due. 20. DO I HAVE TO PAY FOR AN EMPLOYEE S ON-CALL TIME? It depends on whether on call time is considered working time ( engaged to wait v. waiting to be engaged ). The Department of Labor will examine whether the time was spent predominantly for the benefit of the employer including consideration of how effectively the employee can use the on call time for him/herself. Factors include things such as the time permitted to respond to the call, the frequency of interruptions, the limits on activities while on call, and geographic limitations on employees. However, the time spent responding to a call is working time. KCP