FLSA and Wage and Hour Developments Joseph A. Ernst, Esq. Kendra - - PDF document

1 FLSA and Wage and Hour Developments

Joseph A. Ernst, Esq. Kendra K. Kawai, Esq.

FLSA Basics

 Two categories of employees

 Exempt  Non-exempt

 Distinguish between employees &

independent contractors

 Major Provisions of Law

 Minimum Wage  Overtime Pay  Child Labor  Record keeping

FAIR LABOR STANDARDS ACT

 Minimum wage

 Federal law - $7.25/hour  State laws vary Hawai`i - $9.25/hour

 Increases to $10.10/hour in 2018

 Overtime for Non-Exempt EEs

 1 ½ x “regular rate” for all hours over 40

in a workweek

2

REGULAR RATE

 Regular rate v. Hourly rate  Regular rate includes all forms of

compensation paid to EE

 Noncash benefits (e.g., car)  Nondiscretionary v. discretionary bonuses

 Regular rate = EE’s total remuneration

÷ total number of hours actually worked in week

The Law on Overtime

Employees must receive

• vertime pay for all hours

worked over 40 hours in a work week at a rate not less than time and one-half their regular rates of pay.

 1 ½ x Regular Rate for all hours

• ver 40 for Non-Exempt EEs

WHO IS COVERED BY THE FLSA?

 Applies to employer/employee relationship

 Independent contractors not protected

 But be careful…

 Employer coverage

 Engaged in interstate commerce  Engaged in production of goods for commerce  $500,000 annual gross volume of sales

3

DOL’S STRATEGIC ENFORCEMENT PRIORITIES

 Seemingly continued renewed emphasis on

enforcement

 Increased audits/prosecutions of minimum

wage and overtime law violations

 But, still intensified scrutiny of the

classification of workers as independent contractors?

 Targeted industries – especially “fissured”

(construction, hospitality, agriculture, home health care)

 Employers of “low wage” employees are always

given a high priority

FLSA LAWSUITS FILED EXPECTED TO REBOUND

 8,304 FLSA Lawsuits Filed in 2016  In 2015, 8,954 FLSA Lawsuits  Slight dip during 2016; however,

expect rebound in 2017

 Top wage and hour settlements reached in

2016 totaled $695.5 million, up from $463.6 million.

 Employers should not

have false sense of security under Trump administration

“WAGE THEFT”

 Covers a variety of infractions that occur

when workers do not receive their legally

• r contractually promised wages

 Non-payment of overtime  Not giving workers their last paycheck

after a worker leaves a job

 *Not paying for all the hours worked*  Not paying minimum wage  Not paying a worker at all

4

“WAGE THEFT”

 Hawaiian Style Café - $53,996 in unpaid

• vertime wages plus liquidated damages

 Kazu Construction - $500,000+ in back

wages and liquidated damages to 17 employees.

 Banked hours worked over 40 as straight time

hours and applied them to future weeks where employee did not work 40 hours

 Kazu refused to pay the wages the division

determined it owed resulting in lawsuit

CLASSIFYING EMPLOYEES: INDEPENDENT CONTRACTOR OR EMPLOYEE?

 Why does this matter?

 Must be an “employee” of the employer for

FLSA minimum wage and overtime provisions to apply to a worker  What is the test?

 Supreme Court: no single rule or test/must

look to totality of working relationship

 What about DOL Guidance?

CLASSIFYING EMPLOYEES: INDEPENDENT CONTRACTOR OR EMPLOYEE?

 Administrator’s Interpretation No. 2015-1:

Examines Economic Realities Test 7/15/15

 Is the work an integral part of the

employer’s business?

 Does the worker’s managerial skill affect

his or her opportunity for profit or loss?

 How does the worker’s relative

investment compare to the employer’s investment?

 Does the work performed require special

skill and initiative?

5

CLASSIFYING EMPLOYEES: INDEPENDENT CONTRACTOR OR EMPLOYEE?

 Administrator’s Interpretation No. 2015-1:

Cont’d

 Is the relationship between the worker

and the employer permanent or indefinite?

 What is the nature and degree of the

employer’s control?

 DOL’s conclusion: Most workers are

employees under the FLSA’s broad definitions.

But Wait!

 Administrator’s Interpretation No.

2015-1 was rescinded on June 7, 2017

 Criticized for creating informal

standards outside of the notice-and- comment process required for formal agency rulemaking

But Wait!

 Rescinding the guidance does

nothing to clarify standard

 Might indicate a step away from

“fissured workplace” concept

6

Perez v. Cable Equipment Services Inc. (Nov. 2016)

 Minnesota company provided cable

equipment recovery services to leading cable providers such as Comcast and Time Warner.

 Misclassified 41 drivers and market

contractors as independent contractors

 Failed to pay OT and minimum wage  Agreed to pay $350,000 in back wages

and liquidated damages

R & R Construction Svcs.

• Corp. (Oct. 2016)

 DOL found R & R violated OT provisions of

the FLSA

 Misclassified its workers as independent

contractors at Waikiki hotel renovation

 Paid workers fixed rates per day  Company paid 95 workers $185,688 in unpaid

OT , and an equal amount in damages, for a total of $371,376.

 DOL also assessed a civil money penalty of

$68,680 for willfully violating the OT provision.

Three Tests for Exemption

Salary Level Salary Basis Job Duties

7 Minimum Salary Level: $455

 For most employees, the minimum

salary level required for exemption is $455 per week

 Must be paid “free and clear”  The $455 per week may be paid in

equivalent amounts for periods longer than one week:

 Biweekly:

$910

 Semimonthly: $985.83  Monthly:

$1,971.66

Salary Basis Test

 Regularly receives a predetermined

amount of compensation each pay period

 The compensation cannot be

reduced

 Must be paid the full salary for any

week in which the employee performs any work

 Need not be paid for any workweek

when no work is performed

Duties Test: “White Collar” Exemptions

 The FLSA provides an exemption

from both minimum wage and

• vertime pay for employees who are

employed as a bona fide:

Executive; Administrative; Learned & Creative

Professional;

Outside Sales; or Certain Computer Employees

8

Update on Department of Labor Revised Rules

 Final rule raising salary threshold

under fire

 November 22, 2016, Texas court issued

nationwide injunction stopping implementation of the rule

 DOL appealed in December 2016  June 30, 2017 – DOL filed its appellate

brief with the Fifth Circuit

Update on Department of Labor Revised Rules (cont’d)

 The Trump Administration brief asked the

Court to uphold the DOL’s legal authority to set the salary threshold, but did not address the appropriate salary level.

 The DOL asked the Court not to address the

validity of the specific salary level set by the 2016 final rule.

 DOL has issued a Request for Information

seeking public comment on the update to the salary threshold.

 Comment deadline: September 25, 2017

What is “Hours Worked”?

 Work “off the clock”

 Employer knowledge

 Actual knowledge  Constructive knowledge

 Training, study, or community

project time:

 Required by employer  “Encouraged” by the employer

 Time record edits

9

COMPENSABLE TIME

Waiting/On-call time?

Waiting to be engaged vs. Engaged

to be waiting?

Factors Considered: Number of calls an employee

typically receives

Required response time Employee’s ability to engage in

personal pursuits while on call

COMPENSABLE TIME

 Commute time?

 Ordinary home to work travel is not

compensable

 Exceptions  Emergency call outside normal work

hours to travel a “substantial distance” to a location other than normal place of work

 Random home to job site commute that

is “extraordinarily” farther than normal home to job site commute

 Job site to job site travel is compensable  Job site to home travel at end of day is not

compensable

 If employee has to stop by normal place of

work to pick up or drop off tools or supplies, travel from normal place of work to job site (or vice versa) is compensable

COMPENSABLE TIME

 Also Compensable:

 Special one-day assignments  Overnight out-of-town travel

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COMPENSABLE TIME

 The Walt Disney Co. (Mar. 2017)

 Agreed to pay $3.8 million in back wages

to 16,339 Florida resort employees

 Deducted a uniform/costume expense

that caused hourly rate to fall below minimum wage

 Employees performing duties during

“pre-shift period” and during “post-shift period”

 Failed to maintain time and payroll

records

COMPENSABLE TIME

 Cintas Fire Protection Services

(2017)

 Cintas paid $1.3 million in unpaid wages

and damages to 81 workers in Northern California and an additional $44,500 in civil penalties

 Workers not paid for time spent sending

email, completing reports and submitting timesheets

 Cintas cited several times in the past for

similar violations at its locations across the nation

COMPENSABLE TIME

 Roberts v. Marshalls of CA LLC (N.D.

• Cal. Aug. 3, 2017)

 T

. J. Maxx, Marshalls, and HomeGoods agreed to pay $8.5 million to settle a lawsuit

 Workers claims they should be paid

for the time spent going through anti-theft screenings at the end of the shifts.

 Estimated 82,500 class members

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COMPENSABLE TIME

Meal & Coffee/Rest Breaks

 Federal law does not require employers to

provide employees with meal or rest breaks

 Short breaks: breaks between 5-20

minutes are compensable

 “Bona fide” meal periods lasting 30

minutes or longer are not compensable

COMPENSABLE TIME

 The Grand Healthcare System (12/2016)

 Queen’s based operator of residential nursing homes

and adult care facilities paid over $2 million in back wages and damages to 844 employees in NY.

 Had similar prior violations  Misapplied executive and administrative exemptions

to non-exempt employees.

 Paid employees only for scheduled hours rather than

hours actually worked

 Failed to pay employees when worked through meal

breaks.

 Docked employees for short rest breaks.  Failed to maintain accurate records and include shift

differentials.

HOURS WORKED

What can you do with an EE

who works unauthorized hours?

Pay the EE and then: Discipline the EE Unauthorized work policy Fire the EE

12 Timekeeping Rules

 Employer has obligation to

maintain accurate records of “[h]ours worked each workday” by requiring its employees to record the start and end times. See 29 C.F.R. § 516.2(a)(7).

 Employers are obligated to pay for

all hours employees are suffered

• r permitted to work if “the

employer knows or has reason to believe that the work is being performed.” 29 C.F.R. § 785.12.

FLSA – RECORD KEEPING

WHY KEEP RECORDS?



Failure to do so is a violation of the FLSA



Failure to maintain records is extremely detrimental to the employer’s subsequent efforts to defend FLSA claims



Without records, rebuttal presumption that EE’s claim of hours worked is accurate 

Department of Labor may examine them to determine if FLSA violations have occurred

RECORD KEEPING REQUIREMENTS

 Payroll records for non-exempt

employees must show:

• 1. Employee’s full name
• 2. Employee’s Address
• 3. Date of Birth (if under age 19)
• 4. Employee’s sex and occupation
• 5. Regular hourly rate of pay

13 RECORD KEEPING REQUIREMENTS

• 6. Total hours worked each work day

and workweek

• 7. Total Daily or weekly straight time

earnings

• 8. Total premium for overtime hours
• 9. Total additions/deductions from

wages paid each pay period.

RECORD KEEPING REQUIREMENTS

• 10. Total wages paid each pay period
• 11. Date of payment and pay period

covered by the payment

• 12. Retroactive payments required by

Wage and Hour Division Pay Stub must be calculated AND DISPLAYED properly FLSA Violation if not

HOW TO RESPOND TO DOL INVESTIGATION

 Conduct own investigation promptly  Identify relevant documents and preserve

them

 Seek early settlement if complaint appears

to be meritorious

 Respond to complaint as quickly as possible  Don’t limit response to documents

requested by DOL

 DOL rarely exercises subpoena power  Remember that information may become

discoverable in future litigation

14

HOW TO RESPOND TO DOL ON-SITE INVESTIGATIONS

 Conduct thorough investigation in

advance to identify any problem areas

 Investigation should be conducted by

experienced personnel

 Thorough and prompt response to

complaint may preclude on-site investigation

 Explain files or documents at time

they are reviewed

 Attempt to prevent unwanted

expansion of investigation

Time Recording - Rounding

 Rounding is lawful under federal and

state law.

 Recording and computing time to the

nearest five minutes, or the nearest

• ne tenth or quarter of an hour, will

be accepted

 provided that it is used in such a

manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked

• 29 CFR § 785.48(b).

Tips to Avoid These Costly Violations

 Audit Wage and Hour practices –

Prepopulated timecards: lawful but

cards must accurately record ALL time worked

Thus, it is lawful, but almost impossible

to control and likely to incur liability Record Keeping – must accurately

record start and quit times

Simply only recording and reporting

the exceptions is dangerous

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Tips to Avoid These Costly Violations

 Audit wage and hour practices –

 Automatic Deductions: system presumes

30 Minute meal periods, breaks, etc.

 Meals are seldom exactly 30 minutes  Creates exposure  Lots of software defaults to auto deductions  HR loves it but so do plaintiff attny’s

 Rounding

 All Software packages round, most by default  If you have and enforce a tardy policy, strong

likelihood that system is shaving time, violating the law, and creating collective action exposure

Tips to Avoid These Costly Violations

Audit wage and hour practices –

Pay frequency and Timeliness

How often paid, particularly for

• vertime worked but submitted

later

Hawaii law – seven days after end of

pay period

If time is entered after pay period

ends, system may roll hours to next period

 If this is a regular practice, liability

could be looming

THANK YOU!

Joseph A. Ernst, Esq. jae@torkildson.com Kendra K. Kawai, Esq. kkawai@torkildson.com