Fair Labor Standards Act (FLSA)

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The U.S. Department of Labor, Wage and Hour Division (WHD) recently announced it will no longer automatically pursue pre-litigation liquidated damages from employers.  WHD now takes the position that recovering pre-litigation liquidated damages should only occur in a limited number of cases and it will more selectively pursue such additional recoveries.

WHD issued this new guidance in response to Executive Order 13294.  Per WHD’s announcement, the policy shift represents an effort to help spur economic recovery.  The change also is intended to reduce the time needed to conclude Fair Labor Standards Act (FLSA) administrative cases to facilitate faster payment of back-wages to aggrieved employees.
Continue Reading Pursuit of pre-litigation liquidated damages no longer the DOL’s default policy

The Fair Labor Standards Act (FLSA) exempts certain highly-compensated employees (HCEs) from the requirement that they receive overtime pay for hours worked over 40 in a workweek.  To be considered highly compensated, the employee must receive both (1) at least $684 per week paid on a salary or fee basis; and (2) at least $107,432 in total annual compensation.  To satisfy the HCE exemption, the employee must also (1) customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee; and (2) perform office or non-manual work as part of his or her primary duties.

In a recent opinion, the Fifth Circuit examined the job duties required to satisfy the HCE  exemption.  Smith v. Ochsner Health Sys., No. 18-31264, — F.3d –, 2020 WL 1897186 (5th Cir. Apr. 17, 2020).  Smith, a former organ procurement coordinator for Ochsner, sued for overtime pay under the FLSA.  In response, Ochsner asserted the HCE exemption, arguing that Smith performed one or more administrative duties and received the required level of compensation.  Smith did not contest that he met the compensation requirements, but argued that he did not perform the duties required to satisfy the HCE exemption because he was required to follow exact procedures in performing his organ procurement work and, thus, did not exercise discretion and independent judgment as required to establish the administrative exemption.
Continue Reading Fifth Circuit examines the job duties required for the highly-compensated employee exemption from overtime pay under the FLSA

The Fair Labor Standards Act (FLSA) exempts employees with certain executive, administrative, or professional job duties from the requirement that they receive overtime pay for hours worked over 40 in a workweek. Determining whether one or more of these “white collar” exemptions apply to a particular employee requires a fact-intensive analysis of the employee’s job duties. But there is another, sometimes overlooked, requirement: the employee must be compensated on a “salary basis” at a rate of not less than $684 per week. 29 C.F.R. § 541.600(a). An employee is paid on a salary basis if the employee regularly receives, on a weekly or less frequent basis, a predetermined amount which “is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.602(a). Employers who make improper deductions from their employees’ salaries will lose the ability to claim that the executive, administrative, and professional exemptions apply if the facts demonstrate that they did not pay the employee on a salary basis. 29 C.F.R. § 541.603.

There has been a substantial amount of litigation regarding the types and frequency of deductions from an otherwise exempt employee’s salary that will cause an employer to lose the ability to claim that the white collar exemptions apply. One area of contention has been whether an employer’s policy stating that it will make improper deductions from an employee’s salary is sufficient to defeat exempt status, or whether there must be an actual practice of making such deductions for the employer to lose the exemption. Previously, courts followed the Secretary of Labor’s view that, if an employer’s policy created a “significant likelihood” of improper salary deductions, this could result in a loss of exempt status. Auer v. Robbins, 519 U.S. 452 (1997). But the Department of Labor has since promulgated regulations stating that the focus is on “an actual practice of making improper deductions.” 29 C.F.R. § 541.603.
Continue Reading Fifth Circuit clarifies when improper pay deductions make an employee ineligible for exemptions from overtime under the FLSA

On January 12, 2020, the U.S. Department of Labor (DOL) issued its final rule updating and revising its interpretation of joint employer status under the Fair Labor Standards Act (FLSA). The new rule simplifies the FLSA joint employer analysis with a four-factor test for determining whether workers are jointly employed by associated businesses or persons. The DOL’s changes are the first meaningful revisions since the department’s interpretive regulation was issued 60 years ago. According to the department, the purpose of the rule is “to promote certainty for employer and employees, reduce litigation, promote greater uniformity among court decisions and encourage innovation in the economy.” Although application of this final rule is limited to FLSA wage and hour issues, the National Labor Relations Board and the Equal Employment Opportunity Commission are expected to similarly revisit the joint employer analysis in their respective contexts.

History

The new DOL rule replaces an interpretation that had broadened liability for joint employment under the FLSA. In 2016, former head of the Wage and Hour Division David Weil issued guidance that increased scrutiny of situations in which multiple companies might employ workers jointly. In 2017, the DOL rescinded Weil’s interpretation and in April 2019, provided a “Notice of Proposed Rule Making” relating to the joint employer test.   The final rule adopted on January 12, 2020, makes certain changes to and clarifications of the April 2019 proposed version. The rule takes effect on March 16, 2020.Continue Reading DOL makes historic, pro-business changes to FLSA joint employer test

On December 16, 2019, the U.S. Department of Labor (DOL) published its first significant revision since 1968 to its interpretation of the calculation of the “regular rate” under the Fair Labor Standards Act (FLSA).[1] The regulations address whether certain fringe benefits must be included in calculating an employee’s regular rate for overtime purposes. With the publication of this final rule, the DOL seeks to not only provide clarity as to what is excluded from the regular rate, but also update regulations to better reflect the 21st-century workplace.

The DOL published a Notice of Proposed Rulemaking (NPRM) underlying the new regular rate rule on March 29, 2019. Comments to the proposed rule were submitted by small business owners, individual workers, unions, and professional associations. In response to those comments, the DOL made some modifications to the proposed rule before adopting it.Continue Reading DOL final rule updates exclusions from employees’ regular rate

Shortly after the U.S. Department of Labor’s new overtime rule was finalized, the Pennsylvania Department of Labor and Industry (L&I) followed suit and finalized its own proposed overtime rule. Regulation 12-106 was set to exceed the new federal rule regarding the minimum salary to be paid to employees who are exempt from overtime. The new federal threshold of $684 per week ($35,568 per year) goes into effect on January 1, 2020. Regulation 12-106 would have phased Pennsylvanians in executive, administrative, and professional roles into a new minimum salary requirement of $875 per week ($45,500 per year) by 2022. The threshold would have adjusted automatically every three years beginning in 2023.

The Independent Regulatory Review Commission was set to consider Regulation 12-206 yesterday, November 21, 2019. But about an hour before the meeting was to begin, the regulation was withdrawn. L&I advised in a brief letter that “legislation could be passed before the end of this year that would invalidate portions of this regulation.”Continue Reading Pennsylvania wage rules: Changes on the horizon

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

The National Labor Relations Board (the Board) issued a 3–1 decision in Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019), on Wednesday that provides significant new guidance regarding the intersection of arbitration agreements and the National Labor Relations Act (NLRA). The Board’s decision expressly authorizes employers to implement arbitration agreements that include collective waivers in direct response to employees filing a Fair Labor Standards Act (FLSA) collective action. Further, the Board held that warning employees that they will be discharged if they do not accept such an agreement — even with FLSA litigation pending — does not constitute a violation of the NLRA.

In January 2015, seven employees filed an FLSA collective action against Cordúa Restaurants, Inc., a Houston-based restaurant group, in the United States District Court for the Southern District of Texas. Subsequently, 13 additional employees opted into the lawsuit. In response to the lawsuit, Cordúa implemented a revised mandatory arbitration agreement that was to be executed by all employees. The new agreement expressly required employees to waive FLSA collective rights and arbitrate FLSA claims on an individual basis. Though Cordúa had previously required employees to execute an arbitration agreement that waived class action rights, the new agreement marked the first time that employees were asked to waive collective rights. When the new agreement was presented to employees, managers informed employees that they would not be scheduled for any additional shifts unless and until they executed the new arbitration agreement. The charging parties asserted that both implementing the arbitration agreement because of the litigation and threatening to constructively terminate those who refused to sign the agreement constituted violations of the NLRA.Continue Reading NLRB offers new guidance on mandatory arbitration agreements following last year’s Epic decision

The Acting Administrator for the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued two new opinion letters on Friday, December 21, 2018.

The first opines on whether a home health aide service’s compensation plan, which pays an average hourly rate that may vary from workweek to workweek, complies with the Fair Labor Standards Act (FLSA)., The employer stated that its home health aides travel between client locations during the workday and that the employer calculates weekly pay as follows: it multiplies an employee’s time with clients by the employee’s hourly pay rate, then divides the product by the employee’s total hours worked – including both client time and travel time. Using this calculation, the employer stated that a typical standard rate of pay is $10.00 per hour and that it paid overtime based on that same regular rate of $10.00. The WHD opined that, while the employer’s compensation plan complies with the FLSA’s minimum wage requirements, it might not comply with the FLSA’s overtime requirements if the actual regular rate of pay exceeds $10.00 an hour. The WHD emphasized that the regular rate of pay may not be arbitrarily chosen by an employer or employee, but rather is an “actual fact” based on “mathematical computation.” The WHD further explained, however, that the compensation plan would comply with the FLSA’s overtime requirements for employees with an actual regular rate less than $10.00 per hour as an employer may choose to pay an overtime premium in excess of what is required by law.Continue Reading U.S. Department of Labor issues new opinion letters on overtime compliance with varying average hourly rates and on volunteerism

This post was written by Cindy S. Minniti and Mark S. Goldstein.

Today’s New York employment law landscape is increasingly dynamic, with a constant stream of newly issued legislation and judicial opinions. To keep our readers current on the latest developments, we will share regular summaries of recent developments affecting Empire State employers. Here’s what happened in March and April 2015:

Minimum Wage Hike Suffers a Setback

New York lawmakers recently dealt a significant, but not necessarily fatal, blow to Gov. Cuomo’s plan to raise the minimum wage to $10.50 per hour (and to $11.50 in NYC). In late March, state legislators surprisingly omitted the proposed wage hike from the state’s upcoming annual budget. The debate over whether to yet again raise the state’s minimum wage – which is already slated to increase to $9.00/hour on December 31, 2015 – is now left to unfold in the State Assembly and Senate over the next six weeks, until the 2015 legislative session ends on June 17.

State Assembly Passes “Family Care” Leave Bill

On March 17, the State Assembly passed a bill that would provide up to 12 weeks of partially paid “family care” leave to employees statewide. Under the bill, employees would be able to take a leave of absence, and receive up to one-half of their regular wages: (i) to participate in providing care for a family member’s serious health condition; (ii) to bond with a newly born or newly adopted child; or (iii) because of any qualifying exigency, as interpreted under the Family and Medical Leave Act (FMLA), arising out of the active duty of certain family members. Like FMLA leave, the proposed state family care leave law would allow employees to take family care leave on an intermittent or reduced schedule basis.

The family care leave bill is now under consideration by the Republican-controlled Senate, which earlier this year recommended its own family leave law. That proposal would have provided employees with up to six weeks of leave, with partial pay, for certain qualifying exigencies, but would have required the state to fund the program, at least in the first year. Passage of a family care leave bill – in any form – is hardly a certainty and will likely take a backseat to other initiatives that Gov. Cuomo is supporting, such as the minimum wage increase and the Women’s Equality Act.Continue Reading New York Employment Roundup: March & April 2015