FLSA Litigation and Enforcement: Latest Challenges Complying With Off - - PowerPoint PPT Presentation

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FLSA Litigation and Enforcement: Latest Challenges

Complying With Off‐the‐Clock Work Prohibitions, Tip Credit and Tip Pooling Rules, and Time Reporting Requirements

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUES DAY, DECEMBER 7, 2010

Today’s faculty features: James F . Glunt, S hareholder, Ogletree Deakins Nash Smoak & Stewart, Pittsburgh Richard D. Tuschman, Member, Epstein Becker & Green, Miami, Fla. Matthew W. Ray, Partner, Jones Day, Dallas

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FLSA LITIGATION AND ENFORCEMENT: LATEST CHALLENGES

Enforcement Trends and Best Practices

4

December 7, 2010

FLSA Litigation Surge FLSA Litigation Surge

• In 2003, there were 2,715 FLSA lawsuits filed in federal court

i th U it d St t in the United States

• By 2009, that number had increased to 6,165
• In six years, FLSA filings were up 227%
• Hot spots: Florida California Illinois New York and Texas
• Hot spots: Florida, California, Illinois, New York, and Texas

account for over 70% of FLSA litigation

5000 10000 FLSA Filings 2003 2008 2009 FLSA Filings

5

DOL: Appointments DOL: Appointments

New Faces at the DOL:

• Patricia Smith was confirmed as the DOL’s Solicitor

Patricia Smith was confirmed as the DOL s Solicitor

• Chief Administrative Law Judge John M. Vittone retired on March 3,

2010; Judge Stephen L. Purcell was selected to serve as Acting Chief Judge Judge

• Labor Secretary Hilda Solis (2009)

“New Sheriff in Town”

Smith Purcell

6

• Labor Secretary Hilda Solis (2009) – New Sheriff in Town –

speech to union activists

DOL: Budget DOL: Budget

• Increases in DOL agency budgets
• $121 million increase for the Employee Benefits Security

Administration, the Employment Standards Administration, OSHA, and the Mine Safety and Health Administration – 600 new enforcement and compliance personnel at these agencies

• $25 million increase for the Wage-and-Hour Division

$ g – 100+ new enforcement personnel

• Initiative for misclassification of independent contractors under the

FLSA FLSA

7

DOL: Amicus Briefs DOL: Amicus Briefs

• Cumbie v. Woody Woo, Inc.

(9th Cir.)

• Parth v. Pomona Valley Hospital

Medical Center (9th Cir.)

• tipped employees
• In re Novartis Wage and Hour

Litigation (2nd Cir.)

• pharmaceutical sales reps

OS S

• whether reductions in hourly

rates violate FLSA

• Christopher v. Smithkline

Beecham Corp. (9th Cir.) pharmaceutical sales reps

• Ervin v. OS Restaurant Services,
• Inc. (7th Cir.)
• supplemental jurisdiction in

hybrid case

• Parker v Nutrisystem Inc
• pharmaceutical sales reps
• Fast v. Applebee’s (8th Cir.)
• tipped employees
• Kasten v. Saint-Gobain

Performance Plastics Corp Parker v. Nutrisystem, Inc. (3d Cir.)

• supplemental jurisdiction and

section 207(i)

• Perez v. Mountaire Farms, Inc.

(4th Ci ) Performance Plastics Corp. (S. Ct.)

• retaliation

(4th Cir.)

• donning and doffing

8

DOL: Coordination with Academia and the DOL: Coordination with Academia and the Bar

“I i W k l C diti Th h St t i

• “Improving Workplace Conditions Through Strategic

Enforcement”

• Report funded by DOL to WHD from David Weil at Boston

U i it University

• Suggests “strategic enforcement” in certain industries
• Encourages use of civil litigation to enhance deterrence

and improve ongoing compliance

• November 19, 2010 announcement by Vice President Joe

Biden of initiative by the Labor Department and the ABA to help workers access private legal services

9

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

• Federal government and states are paying more

attention than ever:

• Obama’s 2011 Budget explains that the DOL and

Treasury are proposing a joint initiative that y p p g j “enhances the ability of both agencies to penalize employers who misclassify.”

• DOL - $25 million and 100+ enforcement personnel
• DOL - $25 million and 100+ enforcement personnel
• IRS announced that it plans to audit 6000 randomly

selected employers to ensure compliance with l t FICA d M di bli ti employment, FICA, and Medicare obligations

• 37 states have launched initiatives as well

10

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

• FY 2011 budget request from DOL seeks to raise $7

billion over 10 years by targeting misclassification

• Purpose is enforcement of existing laws

$10 9 illi f il t t d t t ff t

• $10.9 million for pilot program to reward state efforts
• $1.6 million and 10 employees for DOL legal team
• Target: “largest multi-state employers” who
• Target: largest multi-state employers who

misclassify

• Employee Misclassification Prevention Act

(Introduced 4/22/10; in committee)

11

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative Proposed Rule On Misclassification

• Not yet issued, but “high priority” according to Labor

Solicitor Patricia Smith Will d FLSA dk i l

• Will amend FLSA recordkeeping rules
• Current plan to require employers making a

classification decision to complete a written classification decision to complete a written analysis, maintain the analysis as an FLSA record, and provide certain wage and hour information on pay stubs pay stubs

12

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

• Tests for “employee” status

p y – The common-law agency test (i.e. the control test) – The economic realities test – A hybrid test which combines the agency test and economic realities test and economic realities test

• IRS Test

NLRB/Entrepreneurial Opportunity Test

• NLRB/Entrepreneurial Opportunity Test

13

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

Common Law Agency Test

The degree of control over details of work The extent of the worker’s discretion

• ver when and how long to work

Whether a high level of skill is i d b th ti Whether the worker is paid by the job required by the occupation Who supplies the means, tools, and place of work Whether the worker hires and pays her own assistants Location where the task is performed Whether the work performed is part of the hiring party’s regular business Duration of the relationship Whether hiring party provides traditional employee benefits traditional employee benefits Whether the hiring party has the right to assign worker additional projects Worker’s treatment for tax purposes

14

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

Economic Realities

• the degree of control the business has over the way in which the

work is performed

• the worker’s opportunities for loss or profit based on his

managerial skill

• the worker’s investment in equipment, materials, or in hiring

additional workers

• the degree of skill required for the work
• the permanence of the working relationship
• the degree to which the worker’s services are an integral part of

the degree to which the worker s services are an integral part of the putative employer’s business

15

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

• The Hybrid Test
• Examines the “economic realities” of a particular

situation but also asks the control question central to the common-law test

16

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

Internal Revenue Code

• behavioral evidence
• financial evidence
• evidence as to the type of

relationship

17

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

Statute Potential Liability for Misclassification IRC

• employment taxes for misclassified worker(s)

FLSA

• damages for unpaid minimum wages or overtime compensation;
• liquidated damages up to the amount of unpaid wages;
• liquidated damages up to the amount of unpaid wages;
• compensation, costs, and attorney’s fees;
• injunctive relief; and/or
• a fine of up to $10,000 and/or six months of imprisonment (if willful).

p , p ( ) State Law

• employment taxes for misclassified worker(s);
• interest and fines on these taxes; and/or
• stop work orders and disbarment from state contracts.

ERISA

• benefits due to misclassified worker if he/she was denied pension or retiree

health benefits because of his/her misclassification.

18

DOL: Independent Contractor Initiative DOL: Independent Contractor Initiative

• Recent cases
• Jacobsen v. Comcast Corp., 2010 WL 3769120

(D. Md. Sept. 28, 2010). N t f t l i k j i t l – Nature of control is key; no joint employer relationship when supervision and control was

• nly in context of quality control
• Norris-Wilson v. Delta-T Group, Inc. (S.D. Cal.
• Sept. 30, 2010)

Cl tifi d i ht t t l k b – Class certified; right to control work can be susceptible to common proof

19

Independent Contractors: Recommendations Independent Contractors: Recommendations

• Research potential co-employers and analyze reasons for

selecting them g

• Review existing contracts and consider new agreements with

respect to the division of responsibilities affecting the workers and indemnification provisions

• Review employee benefits plans and all employment policies to

determine if they cover the contingent workers

• Ensure that all work rules and standards are clearly identified and

that the contingent workers are aware of their status and that the contingent workers are aware of their status and entitlements (and lack thereof)

• Avoid becoming involved with the supplier’s hiring, training, or

dismissal selections or procedures d s ssa se ect o s o p ocedu es

• Limit duration of any Independent Contractor relationship
• Don’t assume contracts will provide protection

20

DOL: No More Opinion Letters DOL: No More Opinion Letters

• The DOL announced in March 2010 that the

Wage and Hour Division (“WHD”) will no longer issue opinion letters

• The WHD will now issue “Administrator’s
• The WHD will now issue Administrator s

Interpretations” when the administrator believes that an interpretation is warranted p

• Affects good faith reliance affirmative defense

under 29 U.S.C. § 259

21

DOL: No More Opinion Letters DOL: No More Opinion Letters

• March 24, 2010 – Mortgage Loan Officers
• DOL concludes that they are typically not exempt
• DOL concludes that they are typically not exempt
• June 16, 2010 – Donning and Doffing
• DOL concludes that clothing donned and doffed in meat

processing industry is typically not clothes covered by processing industry is typically not clothes covered by 203(o)

• DOL concludes that 203(o) activities can start or end the

“continuous workday” y

• June 22, 2010 – FMLA
• No requirement for a biological or legal relationship to

stand in loco parentis under FMLA

• No restrictions on the number of parents a child may have

22

DOL: Fair Labor Standards Act DOL: Fair Labor Standards Act

Nursing Mothers:

• Employers must provide:
• “a reasonable amount of break time…as

frequently as needed”; and frequently as needed ; and

• “a place, other than a bathroom, that is shielded

from view and free from intrusion from coworkers and the public ” and the public.

• The changes do not preempt state laws that provide

greater protections to employees (e.g., t d b k ti b k ti f t compensated break time, break time for exempt employees, or break time beyond 1 year after the child’s birth).

23

DOL: OFCCP DOL: OFCCP

• The Director of the OFCCP, Patricia Shiu, now

reports directly to the Secretary of Labor

• For 2010, the OFCCP received a 25% budget

increase and more than 200 additional compliance

• fficers
• fficers

24

DOL: OFCCP DOL: OFCCP

• The American Recovery and Reinvestment Act of 2009 (“Recovery

Act”) is a new source of power for the OFCCP Act ) is a new source of power for the OFCCP

• Expands OFCCP jurisdiction to grants
• Full audits regardless of whether the OFCCP finds “indicators” of

potentially unlawful discrimination in the desk audit phase potentially unlawful discrimination in the desk audit phase

• Full three-part audits are being conducted prior to awards of

contracts of $10 million or more of stimulus funds Companies on the pre award registry and contractors who have

• Companies on the pre-award registry and contractors who have

been reviewed in the last two years are no longer exempt from audits

• There is longer a cap on the number of audits that can be

There is longer a cap on the number of audits that can be performed on multi-facility employers

25

FLSA LITIGATION AND ENFORCEMENT

ER

FLSA LITIGATION AND ENFORCEMENT

Latest Challenges, Best

G TOGETHE

Latest Challenges, Best Practices

December 7, 2010

WORKING

December 7, 2010

LAWYERS,

James (Jay) Glunt, Esq.

LOYERS & L

( y) , q Ogletree Deakins Pittsburgh, Pennsylvania 412 394-3339 jay glunt@ogletreedeakins com

EMPL FIRST CLASS SERVICE, COAST TO COAST

jay.glunt@ogletreedeakins.com 26

ER G TOGETHE

Exempt Classification Under the Fair Labor Standards Act

WORKING

the Fair Labor Standards Act

LAWYERS, LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

27

Exemptions From Minimum Wage and Overtime Common Misconceptions

ER

Common Misconceptions

 If any employee is salaried (or paid enough),

he/she is automatically exempt from overtime

G TOGETHE

he/she is automatically exempt from overtime requirements.

WORKING

 All professional employees are, by definition,

exempt from overtime.

LAWYERS,

 Our job classifications must be correct because

they have been in place for many years and no

LOYERS & L

• ne has challenged them.

EMPL FIRST CLASS SERVICE, COAST TO COAST

28

Major Exemptions

ER

 Executive

G TOGETHE

 Administrative

WORKING

 Professional

LAWYERS,

 Outside Sales

Computer Professionals

LOYERS & L

 Computer Professionals

EMPL FIRST CLASS SERVICE, COAST TO COAST

29

To Be Exempt Under the FLSA an Employee Must:

ER

Employee Must:

 Be paid a set salary of at least $455/week

G TOGETHE

p y

 Exemptions:

Outside Sales Computer Professional

M t th “P i D ti ” T t f

WORKING

 Meet the “Primary Duties” Test for an

Executive, Administrative or Professional Employee

LAWYERS,

Employee

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

30

Determining Exempt Status

ER

• QUESTION 1: Is this employee GUARANTEED a

salary of at least $455.00 per week (which equates $

G TOGETHE

to $23,660.00 per year)?

• ANSWER 1: If your answer to this question is

“NO ” there is no need for any further analysis

WORKING

NO, there is no need for any further analysis because employees who are not GUARANTEED at least $455.00 per week must be paid overtime.

LAWYERS,

• ANSWER 2: If your answer to the first question is

“YES,” then proceed to Question 2 below.

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

31

Determining Exempt Status

ER

QUESTION 2 D h d i f d b hi

G TOGETHE

• QUESTION 2: Do the duties performed by this

employee fall within one of the common exemption classifications?

WORKING LAWYERS, LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

32

Salary-Basis Test

ER

 No deductions from salary for absences

• ccasioned by employer or business’s

G TOGETHE

• ccasioned by employer or business s
• perating requirements

WORKING

 Ready, willing, and able to work—whether or

not work available

LAWYERS, LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

33

Primary-Duty Test

ER

 Principle, main, or important duty

G TOGETHE

 Based on all facts in particular case

WORKING

 Emphasis on character of job as whole

LAWYERS,

 Importance of duty vis à vis other duties

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

34

Primary-Duties Test

ER

 Actual Job Duties: does the employee actually

G TOGETHE

 Actual Job Duties: does the employee actually

perform exempt job duties?

WORKING

 Job titles do not control  Job descriptions do not control

LAWYERS,

 Job descriptions do not control  What are the actual duties of the position?

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

35

Executive Exemption

ER

 Primary duties involve managing enterprise or

G TOGETHE

recognized department or subdivision

 Regularly directs work of two or more full-time

WORKING

 Regularly directs work of two or more full-time

employees or equivalent H th it t hi fi th l

LAWYERS,

 Has authority to hire or fire other employees

 Or particular weight given to recommendations about

h i t t f th l

LOYERS & L

changing status of other employees

EMPL FIRST CLASS SERVICE, COAST TO COAST

36

Administrative Exemption

ER

 Primary duties relate directly to the management or

G TOGETHE

 Primary duties relate directly to the management or

general business operations of the employer or the employer’s customers; and

WORKING

p y

 Primary duties involve the exercise of discretion

LAWYERS,

and independent judgment with respect to matters

• f significance.

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

37

Learned Professional Exemption

ER

 Work requires advanced knowledge in field of

science or learning

G TOGETHE

science or learning

 Advanced knowledge = specialized degree

WORKING

 Primary duties are predominantly intellectual

LAWYERS,

 Primary duties involve the consistent exercise of

discretion and judgment

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

38

Discretion & Independent Judgment

ER

 Involves comparing and evaluating possible

f

G TOGETHE

courses of action and then acting or making a decision after considering various possibilities

WORKING

 Employee has authority or power to make an

independent choice, free from immediate di ti i i

LAWYERS,

direction or supervision

 Review process does not negate the exercise

LOYERS & L

 Review process does not negate the exercise

• f discretion and independent judgment

EMPL FIRST CLASS SERVICE, COAST TO COAST

39

Examples of Discretion & Independent Judgment

ER

Independent Judgment

G TOGETHE

 Formulates, interprets or implements policy

C i t j i t

WORKING

 Carries out major assignments  Work substantially affects business operations

LAWYERS,

 Authority to negotiate for or bind the employer in

matters involving significant financial impact

LOYERS & L

g g p

EMPL FIRST CLASS SERVICE, COAST TO COAST

40

More Examples of Discretion & Independent Judgment

ER

& Independent Judgment

G TOGETHE

 Has authority to deviate from established policy  Provides expert advice to management

WORKING

 Provides expert advice to management  Involved in planning business objectives

LAWYERS,

 Investigates and resolves significant matters

H dl l i t l i

LOYERS & L

 Handles complaints or resolves grievances

EMPL FIRST CLASS SERVICE, COAST TO COAST

41

Computer-Professional Exemption

ER

 Computer-systems analyst, computer

f

G TOGETHE

programmer, software engineer, or similarly skilled worker in computer field

WORKING

 Primary duty is systems-analysis techniques

and procedures

LAWYERS,

 And consists of designing, developing,

documenting analyzing creating testing or

LOYERS & L

documenting, analyzing, creating, testing, or modifying computer systems or programs related to machine-operating systems

EMPL FIRST CLASS SERVICE, COAST TO COAST

42

Skilled Computer Exemption

ER

Primary duties must involve:

1 Systems analysis including consulting with users to

G TOGETHE

• 1. Systems analysis, including consulting with users, to

determine hardware, software, or system functional specifications; or

WORKING

• 2. Design, development, documentation, analysis,

creation, testing, or modification of computer systems or programs; or

LAWYERS,

systems or programs; or

• 3. Design, documentation, testing, creation, or

modification of computer programs related to

LOYERS & L

modification of computer programs related to machine operating systems.

EMPL FIRST CLASS SERVICE, COAST TO COAST

43

Outside Sales

ER

 Primary duty is making sales or obtaining

G TOGETHE

• rders or contracts for services or for use of

facilities

WORKING

 Customarily and regularly engaged away from

place of business or other fixed site to sell

LAWYERS,

place of business or other fixed site to sell employer’s products, services, or facilities

LOYERS & L EMPL FIRST CLASS SERVICE, COAST TO COAST

44

Highly Compensated Employees

ER

 Guaranteed $100,000 in total annual

G TOGETHE

compensation—including commissions and nondiscretionary bonuses

WORKING

 Primary duty involves performing office or non-

manual work

LAWYERS,

manual work

 Customarily and regularly performs any exempt

LOYERS & L

 Customarily and regularly performs any exempt

duties or responsibilities

EMPL FIRST CLASS SERVICE, COAST TO COAST

45

Supervisors’ Role

S i i l FLSA li

ER

• Supervisors are essential to FLSA compliance.
• Keep track of hours worked.

 FLSA requires employers to keep detailed and exact records of

G TOGETHE

 FLSA requires employers to keep detailed and exact records of

employees’ hours worked.

 Be mindful of and report unrequested work "suffered or

permitted.“

 Enforce disciplinary policies (evenly among all employees) with

WORKING

 Enforce disciplinary policies (evenly among all employees) with

respect to “off-the-clock” work.

• Monitor non-exempt duties.

Th FLSA ti l d th d ti

LAWYERS,

 The FLSA exemptions are only as good as the duties

performed by the employees.

 Ensure exempt employees do not predominantly perform too

many non-exempt duties. C lt ith HR if b li j b d ti d t t l

LOYERS & L

 Consult with HR if you believe job duties do not accurately

reflect the job description for any exempt position.

EMPL FIRST CLASS SERVICE, COAST TO COAST

46

FLSA Litigation and FLSA Litigation and Enforcement: Enforcement: Latest Challenges

Enforcement Trends and Best Practices

Tip Credit and Tip Pooling

What is the Tip Credit?

Many employees in the service t t d i t b sector are compensated in part by tips rather than wages. In certain circumstances, employers are allowed to claim a “tip credit” toward satisfying state and federal toward satisfying state and federal minimum wage laws. This means that the tips are credited against and thus satisfy a portion of the obligation to pay certain the obligation to pay certain minimum wages.

49

What is the Tip Credit?

However the laws and rules However, the laws and rules regarding eligibility for tip credits are complicated and full of traps are complicated and full of traps for the unwary. Further, rules regarding tip pooling layer on g g g y additional complexity.

50

Federal Law

“Congress chose to allow Congress chose to allow employers a partial tip credit if but only if certain conditions are if, but only if, certain conditions are met.”

Martin v. Tango’s Restaurant, 969 F.2d 1319 (1st Cir. 1992)

51

Federal Law

Under the FLSA, an employer , p y may take a “tip credit” for employees who customarily and employees who customarily and regularly receive tip income of more than $30 more than $30 per month.

29 U.S.C. § 203(m); DOL Field Operations Handbook § 30d00(b) DOL Field Operations Handbook § 30d00(b)

52

Federal Law

All tips must be retained by the employee unless there the employee unless there is a valid pooling arrangement.

29 U.S.C. § 203(m); 29 C.F.R. § 531.54

53

Where State or Local Law Imposes a Higher Minimum Wage

Employers must also consider Employers must also consider the effects of state and local minimum wages Some states minimum wages. Some states require higher minimum wages th th f d l i i than the federal minimum, or limit or prohibit the tip credit.

54

Where State or Local Law Imposes a Higher Minimum Wage

Federal vs. State General Rule: E l t f ll Employer must follow the provision that is most p favorable to employees.

Field Operations Handbook § 30d06(a)

55

Advantages to the Employer

• Employer is allowed to pay

Employer is allowed to pay employees less than minimum wage and take minimum wage, and take credit for tips

• Employer may also claim a

Employer may also claim a Social Security and Medicare Tax Credit Medicare Tax Credit

56

Risks to the Employer

• Employers who fail to follow

tip credit rules may find themselves facing DOL t e se es ac g O investigations and/or private litigation litigation

• Collective and Class Action

Litigation g

57

Risks to the Employer

Unless the employer satisfies its burden of Unless the employer satisfies its burden of showing the applicability of the tip credit, the employee is "entitled to the full minimum wage for every hour worked." Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 467 (5th Ci 1979) (5th Cir. 1979).

58

What is a Tipped Employee?

Employee customarily and regularly receives more than regularly receives more than $30 per month in tips

59

Dual Occupations Versus Duties Related to Tipped Occupation

Waiter who cleans the kitchen at the end of the shift – Dual occupations: employer Dual occupations: employer can take tip credit only for time spent as a waiter time spent as a waiter

60

Dual Occupations Versus Duties Related to Tipped Occupation

Compare Waiter makes coffee, busses tables, washes dishes during , g his shift – Duties incidental to the waiter’s regular duties: the waiter s regular duties: employer can use tip credit for time committed to these tasks time committed to these tasks.

61

Dual Occupations Versus Duties Related to Tipped Occupation

Unless: incidental duties Unless: incidental duties consume more than 20 percent f hift I th t th

• f shift. In that case, the

employer cannot take a tip credit for the employee’s time spent on such duties.

62

Minimum Wage Requirement

• Tips plus wage must equal

$7.25 per hour (or higher state requirement) over state requirement) over course of workweek

• If not, employer must

supplement wages to make up deficiency up deficiency

63

Notice Requirement

M t i i ti f

• Must give prior notice of

tip credit p

• Consequences are harsh:

no notice no tip credit – no notice, no tip credit no exceptions.

64

Notice Requirement

What constitutes adequate notice i t l is not clear

Pellon v. Business representation International, Inc., 528 F.Supp.2d 1306 (S.D. Fla. 2007), aff’d, 2008 U.S. App. LEXIS 19077 (11th Cir. 2008). Posting of a standard DOL poster that contains the customary statement of tipped employees’ rights, coupled with the employees’ receipt of pay stubs showing the with the employees receipt of pay stubs showing the reduced minimum wage and reported tips, constituted sufficient notice.

65

Notice Requirement

Th b tt ti i f th The better practice is for the employer to give written notice to h ti d l th t th each tipped employee that the employee will be receiving a reduced i i d th t th minimum wage, and that the employer will be crediting the l ’ ti i t th employee’s tips against the employer’s minimum wage obligation.

66

Retention Requirement

• Unless there is a lawful tip

Unless there is a lawful tip pooling arrangement, the employee has to keep all the employee has to keep all the tips or the tip credit will be invalidated invalidated E l t h i

• Employer must have no say in

what is done with tips

67

Tip Pooling Rules

Employees’ pooling of tips is expressly recognized and permitted by the FLSA and recognized and permitted by the FLSA and DOL regulation. 29 U.S.C. § 203(m); 29 C.F.R. § 531.54. However, the DOL takes § , the position that an employer cannot recapture the tips or count improperly pooled tips toward the tip credit. Field Operations Handbook § 30d04(c)

68

Tip Pooling Rules

• An employer can require

employees to pool their tips employees to pool their tips.

• And employers are generally free

And, employers are generally free to determine the tip pooling arrangement among the arrangement among the employees in the tip pool. There are two important exceptions are two important exceptions, however.

69

Tip Pooling Rules

Exceptions: p

• An employer cannot require

employees to turn tips over to employees to turn tips over to the employer

• An employee cannot be

required to “tip out” more than required to tip out more than a customary and reasonable amount amount

70

Advantages to Tip Pooling

• Allows the employer to claim a

tip credit for some employees who might not otherwise meet the requirement of customarily and regularly receiving tip income of more than $30 per month.

71

Advantages to Tip Pooling

P id l ith

• Provides employees with

what they may consider a y y fairer distribution of tips among them among them

72

Advantages to Tip Pooling

C t t k

• Can promote teamwork

among employees g p y

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Risks of Tip Pooling

If the employer is found to have If the employer is found to have used an improper tip pool, it t th ti dit f th cannot use the tip credit for the balance of the minimum wage regarding any of the tipped employees participating in the p y p p g pool.

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Who Can Participate in the Tip Pool?

Employees working in

• ccupations in which
• ccupations in which

employees customarily receive tips can participate in receive tips can participate in a tip pool

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Who Can Participate in the Tip Pool?

These occupations include: include:

• Waiters
• Waiters
• Bellhops

B b

• Busboys
• Counter personnel
• Service bartenders

Fi ld O ti H db k § 30d04( ) Field Operations Handbook § 30d04(a)

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Who Cannot Participate in the Tip Pool?

) E l ki i a) Employees working in

• ccupations in which

p employees do not customarily and regularly customarily and regularly participate in tip pooling cannot participate.

77

Who Cannot Participate in the Tip Pool?

These occupations include:

• Janitors
• Janitors
• Dishwashers
• Chefs or cooks
• Laundry room attendants

y

Field Operations Handbook § 30d04(c)

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Who Cannot Participate in the Tip Pool?

Customer Interaction as a Factor Customer Interaction as a Factor

• Salad mixers? Excluded

M C C ll C Myers v. Copper Cellar Corp., 192 F.3d 546 (6th Cir. 1999)

• Kitchen helpers? Excluded

Lixin Zhao v. Benihana, Inc., , , 6 Wage & Hour Cas. 2d (BNA) 1881 (S.D.N.Y. 2001)

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Who Cannot Participate in the Tip Pool?

Customer Interaction as a Factor Customer Interaction as a Factor

• Hosts/Hostesses?

C b i l d d i ti l Can be included in tip pool. Kilgore v. Outback Steakhouse of Fla., Inc., Inc., 160 F.3d 294 (6th Cir. 1998)

• Maitre’ d? Included

Dole v. Continental Cuisine, Inc., 751 F S 799 (E D A k 1990) 751 F.Supp. 799 (E.D. Ark. 1990)

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Who Cannot Participate in the Tip Pool?

b) Employers

“Employers” are excluded from participation in tip pools per se participation in tip pools per se. The FLSA definition of an employer “includes any person acting directly or includes any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. in relation to an employee[.] 29 U.S.C. § 203(m)

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Who Cannot Participate in the Tip Pool? “Economic reality” Test G ldb Whit k H C Goldberg v. Whitaker House Coop., 366 U.S. 28 (1961)

1) Had the po er to hire and fire 1) Had the power to hire and fire employees; 2) Supervised and controlled employee 2) Supervised and controlled employee work schedules or conditions of employment; p y ; 3) Determined the rate and method of payment; and p y ; 4) Maintained employment records.

82

Who Cannot Participate in the Tip Pool?

• Exception to the foregoing rules:

Where employer does not take a tip Where employer does not take a tip credit, the FLSA does not prohibit kitchen staff and management from kitchen staff and management from participating in a tip pool. Cumbie v. Woody Woo Inc et al No 08 35718 Woody Woo, Inc., et al., No. 08-35718 (9th Cir. Feb. 23, 2010). B t t t l hibit thi

• But state law may prohibit this.

Off the Clock Claims: Litigation Trends, Risk Areas Litigation Trends, Risk Areas and Best Practices

Matthew Ray, Jones Day, Dallas mwray@jonesday.com mwray@jonesday.com 214.969.5179

84

Litigation Trends and Risk Areas

• Pre-shift

Pre shift

• Donning and Doffing
• Preparing to Work

W iti t W k

• Waiting to Work
• Breaks
• Post-shift
• Training
• Travel Time
• On Call time

O Ca e

• Work at Home or on Road (Blackberries)
• Addition of Off-the-Clock Claims to single plaintiff discrimination

cases cases

85

Donning and Doffing

• Under Portal-to-Portal Act, employers are not required to pay for

Under Portal to Portal Act, employers are not required to pay for “preliminary or postliminary” activities unless they are “integral and indispensable” to the employee’s principal duties and are not de minimis

• June 2010 WHD Administrator’s Interpretation reversed the DOL’s

understanding of the meaning of “clothes” when it stated that the term does not include protective, safety equipment; therefore, donning and doffing such equipment must be compensated

86

Donning and Doffing Donning and Doffing

• Recent cases and settlements:

F kli K ll C (6th Ci 2010)

• Franklin v. Kellogg Co. (6th Cir. 2010):

– time spent changing into and out of company-provided uniforms and safety equipment is not compensable, but the time spent walking to and f th l k b from the locker rooms may be – No deference to WHD; clothes includes safety glasses, ear plugs, nonslip shoes, and other safety equipment

• Figas v. Horsehead Corp. (W.D. Pa. 2010):

– Zinc production company paid $1.2M to resolve 9 employees’ claims by that it failed to pay workers for time spent donning and doffing protective clothing, showering after work, etc.

• Solis v. Pilgrim’s Pride Corp. (W.D. Ark. 2010):

– Poultry company paid approximately $1M to settle donning y p y p pp y g and doffing claims

87

Preparing to Work

• Same Standard -- is the activity integral

Same Standard is the activity integral and indispensable to employee’s principal activities?

• Computer boot up?

Computer boot up?

• Waiting at time clock?
• Waiting to get in parking lot?

Ch ki i il

• Checking voice mail
• De minimis Doctrine

88

Waiting to Work

• FLSA does not expressly define work

FLSA does not expressly define work

• Waiting time is compensable if it falls within the workday. IBP Inc. v.

Alvarez (2005)

• Whether an employee is waiting to work is a fact specific inquiry; the
• Whether an employee is waiting to work is a fact-specific inquiry; the

key factor is the extent to which the employee’s free will is constrained during the waiting time

89

Breaks

• FLSA does not require breaks
• But, if employer provides breaks (20 minutes or less), breaks must be

compensated

• Lunch breaks (30 minutes or more) not compensable time but

( ) p employee must be relieved of all duties

• State laws

90

Post-Shift Work

• Same issues as Pre-Shift work but in reverse
• When do principal activities end?

91

Training Time

• Training time is compensable under the FLSA unless: 1) the training

Training time is compensable under the FLSA unless: 1) the training falls outside regular work hours; 2) attendance is voluntary; 3) the training is not directly related to the employee’s job; and 4) the employee does not perform productive work during the training.

• Training in preparation for advancement is not compensable if it is not

designed to make the employee handle current job more effectively

• Independent training is generally not compensable

Independent training is generally not compensable

92

Travel

• Depends on nature of travel

Depends on nature of travel

• Normal travel from home to work, whether work is at a fixed

location or different job sites, is not compensable.

• Emergency travel from home to work may be but unclear
• Emergency travel from home to work may be but unclear
• Travel from job site to job site is compensable
• Travel away from home community is generally compensable

t f k ti t i t l f h t id f except for work time spent in travel away from home outside of regular working hours as a passenger on a plane, boat, bus, train,

• r car

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On-Call Time

• Is the time spent predominantly for the employer’s benefit or for the

employee’s benefit?

• Can the employee effectively use time to engage in personal pursuits?

94

On-Call Time Examples

• Required to carry pager and report to work within a reasonable time

Required to carry pager and report to work within a reasonable time period?

• What if call backs are frequent?
• What if required to travel as part of call back?
• What if required to travel as part of call back?
• Restrictions on alcohol?
• Requirements regarding attire?

95

Work at Home or on the Road

• “Voluntary” work counts as long as the employer knew or should have

known

• Blackberries

Blackberries

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Best Practices Best Practices Policies, Policies, Policies

• Adopt clear policies concerning work schedules, expectations for

arrival times, “on call,” blackberry usage, work time

• Adopt clear policy requiring employees to accurately record all time

Adopt clear policy requiring employees to accurately record all time worked

• Adopt clear mechanism for employees to complain if they believe they

are not receiving pay for all time worked are not receiving pay for all time worked

97

Best Practices Training

• Train employees and managers on policies

Train employees and managers on policies

• Require employees and managers to acknowledge training
• Repeat training on consistent basis

98

Best Practices

• Install reliable timekeeping procedure

Install reliable timekeeping procedure

• Require exempt and non-exempt employees to complete timesheets on

weekly basis

• Require employees to review acknowledge accuracy and sign their
• Require employees to review, acknowledge accuracy, and sign their

timesheets

99