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The Fifth Circuit Court of Appeals issued an opinion last week holding for the first time that a “day rate” in excess of $455 paid to a highly compensated employee meets the requirements of the “salary basis” test under the Fair Labor Standards Act (FLSA).

Specifically, in Faludi v. U.S. Shale Solutions, No. 17-20808, 2019 WL 3940878 (5th Cir. Aug. 21, 2019), the plaintiff, a consultant, brought suit alleging that his former client and employer[1] owed him overtime under the FLSA because the plaintiff had not been paid on a salary basis. Instead, the plaintiff received $1,000 per day for any day on which he performed any amount of work in Houston and $1,350 per day for any day in which he performed any amount of work outside of Houston. However, under the plaintiff’s arrangement with the defendant-employer, if he worked more than 40 hours in a week, he did not receive any overtime premiums. In the district court, the defendant-employer argued, and the district court found, that the plaintiff’s claims failed as a matter of law because he fell within the FLSA’s “highly compensated employee” exemption.

On appeal, the plaintiff argued that he did not qualify for the “highly compensated employee” exemption because the day rate payment system used by his employer did not satisfy the “salary basis” test. In support of his claim, the plaintiff argued: (1) the day rate system did not calculate pay “on a weekly, or less frequent basis” in violation of 29 C.F.R. § 541.602(a); (2) the plaintiff voluntarily reduced some of his day rate payments on invoices he submitted to the defendant-employer for days that he performed less than a full day’s work; and (3) the day rate system did not satisfy the “reasonable relationship” test articulated in 29 C.F.R. § 541.604(b).
Continue Reading Fifth Circuit approves day rates for some highly compensated employees

In a recent Wage and Hour development, the Fifth Circuit held that the “fluctuating workweek method,” which allows employers to decrease their liability for overtime payments in situations where they misclassify exempt employees, should not automatically be used where the employee works a different number of hours each week, based on a recurring, fixed schedule.

Calculating Hourly Rates: Fixed Method vs. Fluctuating Workweek Method

Since overtime pay is computed in terms of an hourly rate based on an employee’s regular rate of pay, to determine how much overtime pay a misclassified employee may be due, courts must first determine an employee’s regular rate of pay. Where the misclassified employee is paid on a salary basis, courts must convert the employee’s salary compensation to an hourly rate.

The “fixed” or “standard” method of calculating a salaried employee’s regular hourly rate of pay is to divide the employee’s salary by the number of hours that the salary is intended to compensate. However, for some salaried arrangements, the employee is not expected to work a fixed number of hours each week.  Many salaries are intended to compensate however many hours the job demands in a particular week, with the weekly salary staying the same whether many or few hours are actually worked.  When an employee agrees to such an arrangement, the hours worked in each workweek fluctuate, and the appropriate way to determine the regular hourly rate of pay is through what is called the “fluctuating workweek method.”  Using this method, the regular rate of pay is calculated by dividing the salary paid in a workweek by the total of number of hours worked.  As a result, the use of the “fluctuating workweek method” almost always results in a lower regular rate of pay than under the “fixed method.”
Continue Reading Employers Beware: Fifth Circuit Narrows ‘Fluctuating’ Workweek

In a strong blow to employers, the Ninth Circuit Court of Appeals recently released its opinion in Stephen Morris, et al. v. Ernst & Young, et al., No. 13-16599, D.C. No. 5:12-cv-04964-RMW (August 22, 2016), holding that agreements precluding employees from bringing “concerted actions” such as class and/or collective actions relating to their wages,…

The Occupational Safety and Health Administration’s (OSHA) new reporting rule goes into effect August 10, 2016. Although it does not expressly address post-accident drug testing, OSHA’s commentary related to the new rule makes clear that such testing will now be squarely in the agency’s crosshairs. Accordingly, many employers may want to consider updating their drug-testing policies to ensure OSHA compliance.
Continue Reading New OSHA Rule May Require Employers to Update Drug-Testing Policies

As technology accelerates and electronic information theft becomes more difficult to detect and prevent, vigilant companies constantly look for ways to protect the trade secrets they consider their “crown jewels.” The passage of the Defend Trade Secrets Act of 2016 (DTSA) will help company management and counsel sleep better knowing that federal courts will be empowered to provide consistent, uniform trade secret protection across the country.

The House voted yesterday to pass the DTSA, which the Senate had unanimously passed.  President Obama is expected to sign it into law.

The DTSA amends the Economic Espionage Act of 1996 (EEA) by allowing plaintiffs to file civil lawsuits for trade secret misappropriation in federal court.  Thus, the DTSA provides an option to bring claims for misappropriation of trade secrets in federal court when federal jurisdiction would not otherwise exist. It also provides uniformity in the law regarding trade secrets at a federal level, and should result in the development of national case law in an area that is often viewed as patchwork at best. This consistency, along with the benefit of access to federal courts, is one of the main reasons company management strongly supported the DTSA.
Continue Reading Landmark Federal Trade Secrets Legislation on Its Way to President Obama for Signature

We round out our series on recent federal agency action by discussing the U.S. Department of Labor’s (DOL) recent Notice of Proposed Rulemaking for the Workforce Innovation and Opportunity Act (WIOA). The Proposed Rules would update existing nondiscrimination and equal opportunity provisions of the WIOA, which is the DOL’s primary mechanism for providing job training funding. Thus, the proposed rules would only impact organizations funded by the DOL to provide job training under the WIOA. This is not a small number. There are approximately 34,450 recipients of WIOA funding annually, and those organizations serve approximately 56 million individuals.

Currently, the WIOA “prohibits the exclusion of an individual from participation in, denial of the benefits of, discrimination in, or denial of employment in the administration of or in connection with, any programs and activities funded or otherwise financially assisted in whole or in part under Title I of the WIOA because of race, color, religion, sex, national origin, age, disability, political affiliation or belief, and for beneficiaries only, citizenship status, or participation in a program or activity that receives financial assistance under Title I of WIOA.” The Proposed Rules would update the WIOA, as the DOL believes that “the current rule does not reflect recent developments in equal opportunity and nondiscrimination jurisprudence.” 
Continue Reading DOL Seeks to Expand the Definition of Illegal Discrimination

This installment of our ongoing series on federal regulatory actions impacting employers examines the U.S. Equal Employment Opportunity Commission’s (EEOC) Proposed Enforcement Guidance on Retaliation and Related Issues.

The proposed update would replace the 1998 version of the EEOC Compliance Manual on Retaliation and address the courts’ significant rulings in the decades following the current Manual’s publication. This Manual is particularly significant as the percentage of EEOC charges alleging retaliation has virtually doubled since 1998. Today, retaliation is the most frequently alleged basis of discrimination. 
Continue Reading EEOC Guidance on Retaliation: Make It Easier For Employees To Prove Their Case

The past few weeks have brought us a flurry of activity from federal agencies poised to re-shape the employment landscape, from upending traditional notions of the employment relationship to re-defining what it means to engage in unlawful retaliation. Now, as the dust settles, we will take a look at each of these administrative actions in this four-part series.

In this first installment, we discuss an Administrator’s Interpretation (Interpretation) issued by the U.S. Department of Labor (DOL) concerning joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The Interpretation is perhaps most impactful for companies that rely on third-party contractors, such as staffing agencies, to regularly provide services outside of the companies’ core businesses. According to the DOL, such companies are likely no longer shielded from employment-related liability merely by their use of third-party contractors, but instead are joint employers liable for workplace violations as if they were the primary employer.
Continue Reading DOL Issues New Guidelines on Joint Employment

The recent hacking attack against the Houston Astros is a wake-up call for all employers: no organization is safe from its adversaries’ attempts to steal proprietary information to gain a leg up in the competition. The infiltration of the Houston Astros’ network reportedly was carried out by employees of the Cardinals – an Astros’ arch…

It’s no secret that the EEOC—and even some courts—read Title VII to prohibit discrimination against transgender employees. A growing number of state and city laws also specifically include gender identity and/or expression as protected characteristics. But while employers may understand the legal dangers of firing someone for “coming out” as transgender, the extent of employers’ day-to-day obligations with respect to transgender employees in the workplace is far less clear. For example:

  • Are transgender employees entitled to access particular bathrooms or change their company employment records? And, if so, at what point in an employee’s gender transition must an employer accommodate such requests?
  • How should employers address negative reactions and attitudes from coworkers?

Two recent EEOC cases provide initial guidance for employers trying to navigate these tricky—and still relatively uncharted—employment law waters.Continue Reading Transgender at Work: How Employers Can Stay Off the EEOC Radar Screen