BOSTON HARTFORD STAMFORD NEW YORK NEWARK EAST BRUNSWICK PHILADELPHIA WILMINGTON WASHINGTON, DC REDUCING RISKS OF OVERTIME LAWSUITS AGAINST HOME CARE AGENCIES Presentation for the Home Care & Hospice Association of New Jersey Christopher S. Mayer Thomas F. Doherty June 22, 2017 www.mccarter.com
Introduction Topics for today: Increase in Lawsuits Against Home Care Agencies alleging overtime violations Summary of common alleged wage and hour violations in those cases Tips for avoiding lawsuits and mitigating liability and damages
Fair Labor Standards Act Some quick background on the Fair Labor Standards Act ( FLSA ): The FLSA is the federal law that requires employers to pay employees minimum wage and overtime. The minimum wage and overtime requirements apply to domestic service employees, i.e., workers providing services of a household nature in or about private homes. For example, home health aides, nannies, and housekeepers are domestic service employees.
FLSA Basics The FLSA requires that an employer: Pay minimum wage for all hours worked, Unless an employee is exempt from overtime, he or she is entitled to overtime compensation for all hours worked over 40 in a workweek, and Keep employment records.
FLSA Basics Minimum wage. The federal minimum wage, enforceable under the FLSA, is $7.25. The NJ minimum wage is higher -- currently $8.44. Recordkeeping. The FLSA requires that employers keep records regarding their employees and hours worked. The so-called Final Rule applicable to home care workers (to be discussed) mandates that employers of live-in employees comply with the recordkeeping obligations.
FLSA Basics White Collar Exemptions FLSA provides for exemptions from overtime pay for, among others, employees such as: Executive employees Professional employees Administrative employees The applicability of an exemption requires consideration of the employee s primary job duties and whether she/he is paid over a threshold salary set forth in the USDOL rules.
New FLSA Regulations Increasing Salary Level for White Collar Exemptions Responding to President Obama s view that the white collar overtime exemptions have not kept up with our modern economy, the DOL published new regulations in May 2016 intended to take effect on December 1, 2016 to change the salary level for those overtime exemptions under the FLSA The new rules more than doubled the minimum salary companies must pay employees to make them exempt from overtime (no change to duties tests) DOL estimated that over 4 million additional employees would now qualify for overtime
New FLSA Salary Level Regulations Currently Enjoined Salary Basis: Employee gets the same pay each week regardless of quality or quantity of work performed New Salary Level: Salary level must be a certain minimum 2004 Regulations: $455/week ($23,660 annualized) New Regulations: $913/week ($47,476 annualized)
New FLSA Salary Level Regulations Currently Enjoined Salary minimum under new regulation would now be indexed Automatic adjustments once every 3 years Tied to 40th percentile of wages in lowest Wage Census Region Non-discretionary bonuses and incentive payments (e.g., commissions) can account for up to 10% of the salary Paid at least quarterly
New FLSA Salary Level Regulations Currently Enjoined Not well-received by employers and many States Potentially significant increased labor costs All newly non-exempt employees would need to start tracking time Potential need to expand time-keeping infrastructure and payroll staffing to track Many states impose fines for record-keeping violations Anticipated emotional impact to employees being switched to hourly pay
New FLSA Salary Level Regulations for Overtime Exemptions Currently Enjoined A number of States and business groups filed a federal lawsuit in Texas before the new rule took effect On November 22, 2016, the Texas court entered a nationwide injunction halting the new DOL rule from being implemented and enforced Court ruled that the new salary level and automatic updating mechanism were without statutory authority under the FLSA DOL, under President Obama, filed an appeal to the U.S. Court of Appeals for the Fifth Circuit Briefing on appeal currently on hold to allow President Trump s administration to consider the issues
FLSA Lawsuits FLSA claims have increased year over year for the past 15 years. Plaintiffs bar loves the FLSA. Main reasons: collective actions, liquidated damages, and the ability to recover attorneys fees in a settlement or if plaintiffs prevail at trial.
FLSA USDOL Enforcement Before discussing private plaintiff lawsuits, keep in mind that there has been increased Department of Labor enforcement activities during President Obama s Administration. [Uncertain how President Trump s Administration will proceed.] Back Wages Collected by DOL Wage & Hour Division -- FY 2016: $172 million in overtime FY 2016: $35 million in minimum wages Employees Receiving Back Wages FY 2016: $210,000 for overtime FY 2016: $82,000 for minimum wage Source: U.S. Dept. of Labor, Wage & Hour Division statistics
FLSA Lawsuits Against Home Care Agencies Home Care agencies are squarely within the sites of the plaintiffs bar. Why? The loss of the live in/companionship exemption. Now that it has been a year or more since the effective date of the DOL s Final Rule, damages for potential claims have begun to mount.
FLSA Lawsuits Against Home Care Agencies Example: Amedisys settled a FLSA collective action in Connecticut federal court in September 2015 claiming liveins were misclassified and not paid overtime for $8 million, including $2.66 million in attorneys fees. Example: FLSA collective action against Advocate Health Care Network, in which 185 home health aides opted in, settled in July 2016 for $4.75 million, with $1.4 million in attorneys fees.
FLSA Lawsuits Against Home Care Agencies Volume of federal court individual and collective action lawsuits have increased dramatically over last two years against home care agencies. In certain jurisdictions such as Maryland, New York, and Ohio scores of new FLSA lawsuits have been filed since 1/2016. Countless other lawsuits in state courts that cannot be tracked.
FLSA Lawsuits Against Home Care Agencies New Jersey landscape: only 2 individual lawsuits and 1 collective action have been filed in NJ federal court since January 1, 2016. Collective action was not certified and resolved inexpensively. We suspect that MORE LAWSUITS ARE COMING.
DOL Final Rule Timeline October 1, 2013: Publication date January 1, 2015: Original effective date of DOL Rule October 13, 2015: Effective date of appeal upholding Final Rule November 12, 2015: DOL enforcement begins November 12-December 31, 2015: Discretionary enforcement period 18
Final Rule Live-in Domestic Service Employees Permanent basis = works and sleeps on the employer s premises seven days per week and therefore has no home of his/her own other than the one provided by the employer. Extended periods of time = works and sleeps on the employer s premises for five days a week (for a total of 120 hours or more) OR works and sleeps on the employer s premises for five consecutive days or nights.
Final Rule Record-keeping What are the recordkeeping requirements for live-in domestic service employees? An employer and a live-in domestic service employee may enter an agreement regarding the employee s meal, sleep, and other breaks (i.e., time for which the employee, if completely free from work, need not be paid). The employer must keep a copy of this agreement. Under the Final Rule, the employer must also keep accurate records of hours actually worked by the live-in domestic service employee. The employer may assign the employee the task of creating and submitting those records to the employer, but the employer is ultimately responsible for having them.
Additional FLSA Principles Hours Worked Usual rules for how to determine for what time a worker must be paid, and special rules for live-in domestic service employees FLSA Compliance Regarding minimum wage, overtime, and room & board credit
Hours Worked Under the FLSA, an employee must be paid for all hours worked. Hours worked includes all time spent performing tasks for the employer or waiting to perform such tasks. Examples: dressing a consumer, waiting at a doctor s office to drive a consumer home from an appointment. Hours worked includes time spent working outside of scheduled/assigned hours if the employer knows or has reason to know that the work was occurring. 22
Hours Worked Meal Breaks Meal periods, usually of 30 minutes or more, are NOT hours worked. But if the employee works during his/her meal, for example, by helping a consumer eat, he/she must be paid for the time. A 5- to 20-minute rest period is not a meal break; it is hours worked that must be paid.
Hours Worked Travel Time Travel from home to work or from work to home (i.e., commuting time at the beginning and end of a work day) is NOT hours worked. Time spent traveling between different sites of work for the same employer is hours worked. For example, driving for 30 minutes between the private homes of two consumers where a county or other public entity is the employee s joint employer. Travel between jobs for different employers is NOT hours worked. For example, driving for 30 minutes between the home of a consumer who receives services through a state program and another who hired and pays the worker privately.
Hours Worked Training Time Time employees spend in meetings, lectures, or training is usually hours worked. Training time is not hours worked if: Attendance is outside regular working hours, Attendance is voluntary, The course, lecture, or meeting is not job-related, and The employee does not perform any productive work during attendance.
Hours Worked Live-In Domestic Service Employees Because it can be difficult to distinguish between a live-in employee s on-duty and off-duty time, there are special rules for applying hours worked principles to live-in workers. Specifically, an employer and live-in employee may enter a reasonable agreement that describes the work the employee is to perform and the time designated as excluded from hours worked. Particularly in the shared living context, a clear and specific reasonable agreement will benefit all parties.
Hours Worked Live-In Domestic Service Employees For a live-in domestic service employee, the employee and the employer may make an agreement excluding from hours worked: sleep time, meal time, other periods of complete freedom from all duties when the employee may either leave the premises or stay on the premises for purely personal pursuits. The live-in domestic service employee still must be paid for all hours worked. In other words, if the reality is different than what the agreement says, the reality controls.
Hours Worked Live-In Domestic Service Employees Some tasks are easy to classify as work or off-duty activities. For example, time spent helping a consumer bathe is hours worked; time spent taking an online college course while completely relieved from duty and free to leave the home is not.
Hours Worked Live-In Domestic Service Employees Other activities may occur during either on-duty or off-duty time, depending on the context. For example, going to a community event together at a time when the provider could choose to be apart from the consumer could be unpaid if a reasonable agreement only requires the provider to assist the consumer at certain times of day. But going to the event together could be hours worked if the reasonable agreement states that the provider s duties include engaging the consumer in community activities. The actual time spent performing work must be compensated, even if it is greater than anticipated in the reasonable agreement.
Hours Worked Live-In Domestic Service Employees It may be permissible for the reasonable agreement between the employer and live-in employee to exclude from hours worked up to eight hours per night of the provider s sleep time. As with non-live-in workers, sleep time may only be excluded if: The employee is on duty for 24 hours or more. The employer furnishes adequate sleeping facilities. The employee usually enjoys uninterrupted sleep. Any interruptions to sleep time must be paid.
Hours Worked Live-In Domestic Service Employees The sleep time rules for domestic service employees vary depending upon whether a worker lives at the home permanently (i.e., has no other home) or for extended periods of time (i.e., does not live there exclusively but meets the residency requirements previously described). Extended periods of time: up to eight hours of sleep time may be excluded as long as the worker is paid for eight hours of work time in the same 24-hour period. Permanently: The provider must typically be paid for some hours during non-sleep time. The agreement must be reasonable. See examples on next two slides.
Hours Worked Live-In Domestic Service Employees Sleep time examples for a live-in domestic service employee who resides permanently at the home: If a provider is paid for services performed between 8:00pm and 10:00pm each evening and 6:00am and 8:00am each morning, the eight hours of sleep time in between may be excluded. If a provider is required to sleep at the residence five nights a week, and four hours per day on two weekdays and each weekend day are paid, up to eight hours of sleep time per night may be excluded.
Hours Worked Live-In Domestic Service Employees Sleep time examples for a live-in domestic service employee who resides permanently at the home: If a provider s sole responsibility is to be at the residence five nights a week from 10:00pm to 8:00am, it will likely be reasonable to agree to treat two of those ten hours as hours worked and exclude the remaining eight hours as sleep time. But if a provider s sole responsibility is to be at the residence overnight five nights a week, excluding all of that time or considering just one hour per night to be hours worked would not be reasonable.
Typical Allegations in FLSA Lawsuits Typical claims/allegations in lawsuits alleging FLSA wage and hour violations for live-ins: Some employers still have not classified live-ins as nonexempt; in other words, not paying live-ins overtime These are the easiest targets for lawsuits
Typical Allegations in FLSA Lawsuits Lawsuit that alleges that DOL Final Rule is retroactive to January 1, 2015 Several districts have ruled that it is retroactive (despite period of time when rule was enjoined by a federal trial court judge who was later overturned), but no NJ court to our knowledge Expect all lawsuits to claim retroactivity
Typical Allegations in FLSA Lawsuits Meal breaks/sleep time are interrupted regularly Some lawsuits claim that live-ins are working 24 hours a day and are owed regular pay and overtime on a 168 hour workweek Seems to be based on NY Andryeyeva decision, which has no applicability in NJ
Typical Allegations in FLSA Lawsuits Travel time Home health aides not properly compensated for travel between jobs Training time Home health aides not compensated for mandatory training No overtime policies Allegations that employer has no overtime policy and that employees can quit if they don t like it
Typical Allegations in FLSA Lawsuits Sliding pay scale Home health aides compensated at different rates depending on the hours worked more hours worked, lower the effective regular and overtime rates Fluctuating workweek illegal under Pa. law, so popping up against NJ employers Employer attempts to avoid overtime liability by issuing 2 paychecks
Typical Allegations in FLSA Lawsuits Other common allegations: Improper classification: that certain live-ins are misclassified as exempt from overtime such as nurses and physical therapists Paying exempt workers on per visit basis does not comply with salary basis test and does not compensate for paper work and other work performed outside of patients visits
How to Minimize Liability and Risk of Lawsuits Keep accurate time records Maintain agreements with employees about work time Conduct regular audits Enter into arbitration agreement with employees *** Caution: NJ court decisions impose highly technical requirements before an arbitration agreement will be enforced
Self-Audits Carefully review time records, live-in agreements, pay records, and other documentation of time worked for compliance. Conduct regular interviews with clients and live-ins to determine whether time records are accurate focusing in particular on whether breaks are interrupted and if time/pay records accurately reflect those interruptions. Broader self-audit of all employees should include (i) a review of job descriptions and (ii) interviews with employees to determine actual job responsibilities.
Audits/Reducing Exposure Consult with employment law counsel to assist in FLSA compliance, especially if the employer is contemplating large scale alterations to exempt/non-exempt classifications and/or wage and hour policies. Investigate potential insurance coverage under D&O and EPLI policies, as well as newer wage-and-hour policies with very high retentions.
Questions?