July 20, 2015

FLSA Misclassification Proves Costly for Local Employer

Posted in Administrative Exemption, Computer-related Occupations Exemption, Enforcement, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Minimum Wage, Outside Sales Exemption, Overtime, Professional Exemption tagged , , , , , , , , , at 10:22 am by Tom Jacobson

US Department of Labor v Patel

Local hotelier ordered to pay $184,000.00 to settle wage violation suit.

A Fargo, ND hotelier with a property in Alexandria, MN will pay nearly $200,000.00 to settle a lawsuit brought by the US Department of Labor (see Court Orders Hotel Owner to Pay More than $180K in Back Wages, Damages to 200 Workers Across North Dakota, Montana and Minnesota, DOL Release No. 15-1294-DAK; Lawsuit Settlement Helps Hotel Workers in Alexandria, Echo Press July 16, 2015). The DOL alleged in the suit that Bharat I. Patel violated the Fair Labor Standards Act by failing to pay minimum wage and/or overtime rates to nearly 200 employees at a number of hotels, including the Country Inn and Suites in Alexandria.

More specifically, the DOL claimed that Patel misclassified nonexempt workers as exempt salaried employees (see US Labor Department Lawsuit Alleges Hotel Owner Owes $200K in Wages, Damages to 192 Workers at 13 Hotels, DOL December 16, 2104). This, the department said, resulted in these workers not receiving minimum wage for all hours worked and not being paid overtime. According to the DOL, the company also failed to combine hours for employees who worked at two locations in the same workweek and failed to maintain accurate records of all hours worked and pay rates.

The lawsuit was resolved via a July 10, 2015 consent judgment in which Patel denied any wrongdoing but agreed to pay $184,000.00 to settle the dispute. In addition Patel agreed to train managers on FLSA wage requirements and to provide workers information on wage laws and contact information for the DOL’s Wage and Hour Division for at least four years.

How are FLSA exemption mistakes made, and why are they so expensive? To answer that, one needs to understand the two basic principles of the FLSA’s overtime rule. First, the FLSA generally requires that employees be paid at 1.5 times their regular hourly rate for their overtime (that is, their hours worked in excess of 40 hours in a workweek). Second, some employees, such as certain executives, administrators and professionals are exempt from that overtime requirement.

Claiming such exemptions may seem simple, but the FLSA has complex definitions of who can lawfully be classified as an exempt executive, administrator or professional. Those definitions all include a requirement that these employees be paid a salary of at least $455.00 per week. They also include a “duties test.” This requires that in addition to the salary requirement, the employees’ actual job duties must meet certain criteria before the employees can be considered exempt.

Thus, one of the most common mistakes starts when employers wrongly assume that by paying someone a salary, they automatically become exempt from overtime. Often, the employers also give that person a title such as “manager.” Then, the employers allow or require those people to work more than 40 hours per week without paying for the overtime.

But paying someone a salary and calling them a manager (or some other authoritative title) does not make them exempt if they do not also pass the duties test for an FLSA exemption.

This mistake is expensive. When non-exempt employees are misclassified as exempt, they are entitled to recover all of the overtime they should have been paid during the preceding two years. Plus, they can recover an additional equal amount as liquidated damages and their attorney’s fees and court costs. These costs are compounded when multiple employees are at issue. And, as was the case in Patel lawsuit, employers can also be ordered to implement other remedial measures such as training.

The DOL’s recent rulemaking actions provide an additional reason for employers to pay close attention to these FLSA exemption issues. On July 6, 2015 the DOL proposed a rule that would raise the salary basis test from around $23,600.00 per year to approximately $50,000.00 per year. If implemented, the new rule would greatly reduce the number employees who would be exempt under the law.

As the Patel case confirms, FLSA exemption mistakes are costly. And, based on recent DOL activity, those mistakes could get even more expensive in the future.

If you are an employer that is wondering if your employees are properly classified under the FLSA, or if you are an employee who wonders if you have been misclassified and underpaid, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2015 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA

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July 28, 2014

Minimum wage hike takes effect Friday

Posted in Minimum Wage, Uncategorized tagged at 11:28 am by Tom Jacobson

Minnesota_State_Capitol_5The first phase of Minnesota’s minimum wage increases will take effect this Friday, August 1, 2014. Starting then, small employers must pay at least $6.50 per hour, and large employers must pay at least $8.00 per hour.

The law also allows for a 90-day training wage and a youth wage, both of which mirror the small employer minimum wage rates. It also includes automatic increases on August 1, 2015 and August 1, 2016, and it allows for inflationary increases starting in 2018.

For minimum wage purposes, state law defines a large employer as any enterprise with an annual gross dollar volume of sales made or business done of $500,000.00 or more. A small employer is any enterprise with an annual gross volume of sales made or business done of less than $500,000.00.

For more information about this article, please see the Minnesota Department of Labor and Industry’s fact sheet on minimum wage rates, the DOLI’s related Employer Fact Sheet, or contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2014 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

July 31, 2013

Things are not always as they seem

Posted in Americans with Disabilities Act, Disability, Discrimination, Fair Labor Standards Act, Minimum Wage, Overtime, Reasonable Accommodation tagged , , , , , , , , , , , , , at 4:50 pm by Tom Jacobson

IMG_5116 Edited“Why is Sam sticking his fingers in Spencer’s mouth?” That’s what ran through my head a couple of years ago when I snapped this picture of one of my sons and a teammate working at a swim meet. When you look closely, you’ll see that things are not always as they seem.

Things are not always as they may seem in the legal world, either. A while back I wrote about an employee who was found eligible for unemployment benefits despite her failure to report to work for two months. For more on that story, click here.

There’s also the more recent case of Lucas v. Jerusalem Cafe, LLC. where a number of workers who were unauthorized aliens sued their employer for overtime and minimum wage violations under the Fair Labor Standards Act. Because they were unauthorized aliens, our first reaction might be to question why they would have a right to sue for a FLSA violation or even collect wages in the first place. That’s what the employer argued, but the court disagreed, noting that “The FLSA does not allow employers to exploit any employee’s immigration status or to profit from hiring unauthorized aliens in violation of federal law.” Interestingly, the court also noted how the employer’s argument rested “on a legal theory as flawed today as it was in 1931 when jurors convicted Al Capone of failing to pay taxes on illicit income.”

But what if an employee sleeps on the job?  Shouldn’t he be fired? Not if waking him would be a reasonable accommodation for a disability under the Americans with Disabilities Act, according to the federal judge in Virginia who is presiding over the case of Riddle v. Hubbell Lighting, Inc.

Unemployment statutes, the ADA and the FLSA are just a few of the many employment laws where outcomes are not always what you might expect them to be. For a better idea of what those outcomes might be, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2013 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

June 14, 2013

Fox outfoxed by interns

Posted in Fair Labor Standards Act, Interns and Internships, Minimum Wage, Overtime tagged , , , , , at 9:42 am by Tom Jacobson

I’ve previously written about the challenges associated with hiring interns. Generally speaking, except in limited circumstances, interns must be paid at least minimum wage under the Fair Labor Standards Act. That means that unpaid (or barely paid) internships may violate the FLSA.

As reported by The New York Times, Fox Searchlight Pictures is learning this the hard way via a lesson from a New York federal judge who has ruled that the movie maker violated the FLSA by failing to pay two interns who worked on the film, Black Swan. The same judge also ruled that a group of interns from various divisions of Fox Entertainment Group may proceed with their class action FLSA lawsuit.

What you need to know: Unless an internship program fits within narrow exceptions under the FLSA, interns will be subject to the minimum wage and overtime requirements of the FLSA.

For more information about this article, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2013 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

September 13, 2012

My Former Life as an Intern

Posted in Fair Labor Standards Act, Interns and Internships, Minimum Wage, Overtime, Trainees tagged , , , , , , , , , at 6:32 pm by Tom Jacobson

Me, at Congressman Oxley’s desk (spring, 1987)

During my final semester at the University of North Dakota, I was lucky enough to land an internship on Capitol Hill.  It was a remarkable experience. I was assigned to work with the press secretary for Rep. Mike Oxley from Ohio (long before Sarbanes-Oxley was ever on the radar). My introduction to the office went something like this. “Hi, Tom, I’m Mike’s press secretary, Sharon, and as you can see, I am very pregnant. I’m going to have this baby any day now, and while I’m on maternity leave, you’ll be doing my job.  Enjoy your time in Washington!”

The baby arrived within days, and so began my three-month stint as college student / intern turned rookie press secretary.

Photo I took of President Reagan entering White House Rose Garden (spring, 1987)

The stipend from the program sponsor didn’t come anywhere close to covering whatever minimum wage was at the time, but the education was priceless. I attended committee meetings and did all kinds of press secretary-ish stuff. I saw President Reagan at a Rose Garden press conference, and once I even shared an elevator with Iowa Rep. Fred Grandy (a/k/a “Gopher”from The Love Boat) (sorry, no photo of that!). I don’t recall if my reaction was being starstruck or realizing how odd politics really are. But I digress …

Internships are  a mainstay in our educational system, for they serve the invaluable purpose of giving students real world experience that simply cannot be taught in the classroom.  However, several companies, such as Fox Searchlight and Hearst Corporation, have recently been sued by interns who claim that their internships violated the Fair Labor Standards Act.

How so? Well, the FLSA generally requires that anyone who is employed must be compensated for the services they perform. The Department of Labor takes the position that in the for-profit private sector, interns are usually considered to be “employees,” and as such, they are entitled to minimum wage and overtime. However, the DOL also recognizes that if an intern fits within a very narrow exception established for “trainees,” the FLSA does not apply.  To meet this exception, all six of the following criteria must be met:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

This test is more fully explained in DOL Fact Sheet # 71, where the DOL also notes that, “This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.”

What you need to know:  As the Hearst, Fox Searchlight and similar cases play out, we will have a better idea of how this exception will be applied in future cases. In the meantime, employers who hire or who are considering hiring interns should be wary of the DOL’s narrow interpretation of “trainee,” which means that for the time being most interns will be considered employees who are entitled minimum wage, overtime, and the protections of the FLSA.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2012 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

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