May 18, 2016

Long Awaited New Overtime Rules Issued

Posted in Administrative Exemption, Computer-related Occupations Exemption, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Outside Sales Exemption, Overtime, Professional Exemption, Uncategorized tagged , , , , , , , at 1:15 pm by Tom Jacobson

time clockThe much-anticipated new overtime rules have been issued by the United States Department of Labor. The new rules will go into effect December 1, 2016 so employers will have until then to prepare.

The Society for Human Resource Management (SHRM) has published an excellent summary of the new rules, and I encourage you to review that. Then, contact me to discuss how to implement the new rules in your workplace.

Also, the new rules will be discussed at the 13th Annual West Central Minnesota Employment Law Update. There are still a few seats available at the seminar — click here for registration information.

For more information about these or other employment law issues, please contact me at taj@alexandriamnlaw.com.

The comments posted in this article 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 2016 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA.

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February 18, 2016

New Overtime Rules Could Result in Loss of Exempt Status for Salaried Employees

Posted in Administrative Exemption, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Professional Exemption tagged , , , , , , , , , at 4:58 pm by Tom Jacobson

new flsa overtime rules

Many salaried employees would lose their exempt status under the DOL’s new overtime rules.

The U.S. Department of Labor’s proposed changes to the nation’s overtime pay rules would have a profound impact on workplaces throughout the country. The impact would be the potential loss of exempt status for many salaried employees. To prepare, employers should familiarize themselves with the proposed new rule and review their pay practices to ensure compliance in case the new overtime rules take effect.

The new rules would increase the minimum salary an employee must be paid before s/he may be classified as exempt from overtime pay under the Fair Labor Standards Act. This means many employees who are now properly classified as exempt will no longer be exempt. Consequently, they would then be eligible for overtime pay if they work more than forty hours in a workweek.

The change would come about because the FLSA generally requires most U.S. employers to pay overtime (that is, one and one-half times the employee’s regular rate of pay) when employees work more than forty hours in a work week. However, certain categories of employees are exempt from that requirement. To qualify for some exemptions, those employees must not only perform certain duties as specified in the FLSA, but they must also be paid a minimum salary.

Currently, that minimum salary is $455 per week ($23,660 per year). Under the new rule, that threshold would more than double to $970 per week ($50,440 per year).

The impact can be illustrated with a hypothetical workplace where an employee is currently paid a salary somewhere between $24,000 and $50,000 per year and works an average of 45 to 50 hours per week. Assuming that employee meets one of the FLSA’s “duties” tests, the employee would likely be considered exempt and not entitled to overtime pay. Therefore, the employee would be paid the same regardless of how many hours s/he works in a week.

If the new rules take effect, the same employee would no longer be exempt, and s/he would be entitled to overtime pay for the extra five to ten hours of work each week. Therefore, the employer would need to increase the employee’s salary to meet the new threshold and maintain the exemption, or the employer would need to convert the employee to an hourly-rate employee and pay time and a half for any overtime.

The new rules have not yet gone into effect, and it is not entirely clear if and when they will. They were initially slated to take effect this spring. However, the Society for Human Resource Management reports that this may not happen until later this year. SHRM also reports there is a remote chance that Congress could overturn the rules using the Congressional Review Act and/or that the rules will be challenged in court.

In the meantime, employers should pay attention to the potential rule change and be prepared to change their pay practices to remain in compliance. Suggestions include:

  • Determine which currently exempt employees would no longer be exempt if the salary threshold increases;
  • Assuming an employee’s exemption would be lost under the new rules, decide whether to increase the employee’s salary to meet the new threshold or convert the employee’s salary to an hourly rate basis;
  • Budget for any increased overtime costs resulting from employees who would become eligible for it under the new rules;
  • Review scheduling issues to determine whether hours can be reduced to limit the overtime liability for an employee who must be treated as non-exempt;
  • Address morale issues that could result from any perceived “demotion” of employees from exempt/salaried to non-exempt/hourly status.

In addition, although the proposed new rules do not alter the “duties” test for FLSA exemptions, employers would be wise to take this opportunity to review their exempt employees’ duties to determine whether they actually meet those duties tests. This is because even if an employee meets the salary test (whether under the current or proposed new standards), that does not automatically mean the employee is exempt from the law’s overtime pay requirements.

For more information about FLSA exemption issues, 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 2016 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA

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

December 9, 2014

Supreme Court sides with employers in security screenings pay case

Posted in Fair Labor Standards Act, Hours Worked, Principal activities, Security screenings tagged , , , , , , at 3:02 pm by Tom Jacobson

time clockThe United States Supreme Court today ruled unanimously in favor of employers in a case relating to whether or not employees must be paid for time spent in security screenings. The case is Integrity Staffing Solutions, Inc. v. Busk.

Integrity Staffing Solutions required its hourly workers to undergo security screenings before leaving the warehouse each day. The workers were not paid for this time, which took about 25 minutes per day. A group of former employees sued, claiming the practice violated the Fair Labor Standards Act (as amended by the Portal to Portal Act). This law generally requires employers to pay employees for all hours worked.

The high court rejected the employees’ claims. Specifically, the court noted that under the FLSA, employers do not have to pay for activities that occur before or after “the performance of the principal activities that an employee is employed to perform.” Under the court’s precedents, compensable “principal activities” include tasks that are “integral and indispensable” parts of the principal activity.

Thus, the legal question was whether or not the screenings were part of the employees’ principal work activities (which would be compensable) or mere pre- or postliminary activities (which would not be compensable).

In siding with the employer, the court ruled that the screenings were not the principal activities the employees were hired to do. Rather, the court said, the employees were hired “to retrieve products from warehouse shelves and package them for shipment,” not to undergo security screenings. The court also ruled that the screenings were not “integral and indispensable” to their retrieving and packaging responsibilities.

The court expressly rejected the employees’ argument that the focus should be on whether the particular activity was required by the employer. Rather, the court said, the focus must be on whether the task was tied to the productive work that the employee was employed to perform.

The decision is a victory for employers in that it re-affirms decades of precedent that hourly employees do not have to be paid for mandatory pre- and postliminary activities that are not the employees’ “principal activities” and are not “integral and indispensable” to those activities. Employers should, however, use caution when applying this standard and should carefully analyze any pre- and post work tasks to determine whether they are or are not compensable.

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 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

June 19, 2012

Drug Reps’ Overtime Claims Rejected by US Supreme Court

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Outside Sales Exemption, Overtime tagged , , , , , , at 9:57 am by Tom Jacobson

In a much-anticipated decision, the United States Supreme Court has rejected the overtime claims brought by pharmaceutical sales representatives in the case of Christopher v. Smithkline Beecham Corp.

The case centered around a group of drug reps whose primary objective was to obtain nonbinding commitments from physicians to prescribe Glaxosmithkline’s products in appropriate cases. Each week the reps spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other tasks. They were not required to punch a clock or report their hours, and they were subject to only minimal supervision. The reps were well compensated, and their gross pay included a base salary plus incentives determined based on the performance of their assigned portfolio. Because they were not paid time-and-a-half wages when they worked more than 40 hours per week, they brought claims for unpaid overtime under the Fair Labor Standards Act (FLSA).

In a 5-4 decision filed June 18, 2012 the nation’s highest court threw out the reps’ claims. To reach this conclusion, the Court first rejected the Department of Labor’s interpretations of the FLSA on this issue. This is a very important aspect of the case because it sends a signal that comparable DOL interpretations on related issues (for example, that mortgage loan brokers are not exempt under the FLSA) may not be given the deference that is often afforded to the DOL.

After declining to adopt the DOL’s interpretation of the FLSA’s outside sales exemption as applied to these employees, the Court then analyzed the language of the FLSA itself and concluded that these sales reps were subject to the FLSA’s outside sales exemption and, therefore, were not entitled to overtime pay.

What you need to know: The Supreme Court’s decision provides some much-needed clarification of the FLSA. In particular, it indicates that the outside sales exemption is to be broadly applied. Therefore, it is likely that more sales reps will be found to fall under this exemption.  Even so, whether an employee actually falls under this exemption will depend on the specific facts and circumstances of each case.  Therefore, any employer employing a sales force should carefully analyze those jobs to determine if they fall under the FLSA’s outside sales exemption.

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

September 15, 2010

DOL to Disney: Failing to pay for hours worked ain’t no Mickey Mouse

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Record Keeping tagged , , , , at 5:00 pm by Tom Jacobson

Sixty-nine employees of Disney World in Orlando, FL will be receiving $433,819.00 in back wages after a U.S. Department of Labor investigation uncovered violations of the Fair Labor Standards Act.

The workers were a group of non-exempt inventory control clerks in the park’s food and beverage department who were not paid for work done before and after their normal shift, during meal times, and when working from home.

The FLSA requires that non-exempt workers be paid for “hours worked.”  Generally speaking, “hours worked” include all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work, from the beginning of the first principal activity of the workday to the end of the last principal work activity of the workday.  This includes time spent working when employees are supposed to be on their breaks.

“While Walt Disney has specific rules regarding off-clock work, an investigation conducted by the Department of Labor’s Wage and Hour Division found that managers within the company were not adhering to those important policies,” said Wage and Hour Deputy Administrator Nancy Leppink. “It is not enough to have policies. Management must also ensure that all supervisors are implementing them.”

The DOL’s investigative findings stress how important it is for employers to have and enforce policies for tracking and paying for the  “hours worked” by their non-exempt employees, even the time spent working from home and on breaks.

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.

September 7, 2010

DOL targets health care & other industries in FLSA enforcement campaign

Posted in Aggregating Work Hours, Enforcement, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Independent Contractors, Independent Contractors, Meal Periods, Overtime, Rounding, Travel Time tagged , , , , , , , at 3:35 pm by Tom Jacobson

As a part of its stepped up efforts to enforce the Fair Labor Standards Act, the Department of Labor has taken aim at certain industries.  The health care industry now appears to be one of the DOL’s targets.

In a recent article published in the Workplace Law Bulletin, the Society for Human Resource Management noted that when common FLSA issues permeate an industry, the DOL will target that industry with its enforcement efforts.  In the health care industry, for example, SHRM listed the following common violations:

  • Meal period violations;
  • Rounding time in the employer’s favor;
  • Failing to pay for pre-shift/post-shift time;
  • Mistakes about what is “off the clock” time;
  • Travel time errors;
  • Failure to aggregate work hours;
  • Employee/independent contractor misclassifications;
  • Exempt/non-exempt employee misclassifications.

As a result, some DOL Wage and Hour Division district offices have started local initiatives targeting health care employers.  These initiatives have been costly for non-compliant employers.  For example, the DOL  reported earlier this year that $2.2 million in back wages was awarded to health care workers in New York, while over $2 million was awarded late last year to their colleagues in Connecticut and Rhode Island.

The health care industry is not alone.  SHRM reports that other low-wage industries, such as agriculture, day care, restaurants, garment manufacturing, hotels and motels, janitorial, and temporary help have also been targeted.    Given the DOL’s March, 2010 administrative interpretation that most mortgage loan officers are not exempt from the FLSA’s overtime standards, it appears that the financial services industry is also in the department’s sights.

Although certain industries may be DOL targets, all employers must be aware of what the FLSA requires, for violations can lead to not only DOL enforcement, but also private lawsuits brought by employees or classes of employees.  For these reasons, employment policy development and review, education, training,  and proper record keeping are musts for all employers.

The SHRM article, “Health Care Industry Targeted in FLSA Enforcement,” can be found at http://www.shrm.org/LegalIssues/FederalResources/Pages/HealthCareIndustry.aspx.

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.

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