Now that the election is behind us, employers should consider what they might anticipate in the field of wage-hour law, which is already one of the largest sources of employment-law claims.  While the nature and number of the possible developments are practically unlimited, some of the foreseeable ones include these:

♦   The push to increase the minimum wage under the federal Fair Labor Standards Act, which was at fever-pitch before going dormant as the election season approached, will now re-emerge.  There will be similar efforts under many analogous state and local laws and ordinances.

This will probably include proposals to increase the FLSA's cash-wage requirement for tipped employees for whom employers take that law's tip-credit.  The public-relations approach will be that this increases "the minimum wage for tipped workers", despite the fact that the FLSA minimum wage for tipped employees is already the same as it is for everyone else.

 ♦   Analogous moves might well seek to increase the salary amount required for some of the FLSA's exemptions from minimum-wage and overtime, as well as to impose paid-leave requirements.  Recall the March bill introduced by Iowa Senator Tom Harkin which proposed both, including requiring most employers of at least 15 employees to accrue an hour of paid "sick time" for every 30 hours an employee works, up to at least 56 hours each calendar year.

Another possible measure might involve an attempt to raise the FLSA overtime-pay multiple from its current 1.5 times the regular rate to 2.0 times that rate.  This might be joined with reducing the threshold number of hours for FLSA overtime from 40 hours in a workweek to, say, 35 hours.  Similar FLSA amendments were proposed in the late 70s and early 80s, during another period of high unemployment and persistent economic stagnation.  A further impetus this time around might be the already-burgeoning rates of part-time employment, taken in conjunction with what could be a further trend toward part-time work driven by looming Affordable Care Act requirements.

 ♦   Aggressive government enforcement at federal and state levels is likely to expand.  There will be an even-more-intensified focus upon whether workers treated as independent contractors should instead be viewed as employees.  Employers should expect further national or regional enforcement initiatives undertaken with respect to entire industries.  These initiatives will include (among others) those directed at what the U.S. Labor Department has called "low wage" sectors, such as hospitality businesses and food retailing, retailing in general, some healthcare segments, landscaping, some construction segments, temporary-help agencies, daycare/homecare, agriculture, janitorial services, garment manufacturing, and guard services.

 ♦   Following a noisy notice-and-comment period that ended in March, proposals that would essentially spell the end of the FLSA exemptions for companions and live-in domestic-service workers suddenly dropped from view as the election season commenced.  These provisions will probably be released in their final form in the not-too-distant future.

Another distinct possibility is the revival of the so-called "Right to Know" regulations, which USDOL said would require "notification of workers' status as employees or some other status such as independent contractors, and whether that worker is entitled to the protections of the FLSA."  USDOL further said that the proposal would "also explore requiring employers to provide a wage statement each pay period to their employees," apparently so as to convey to employees "how their pay is computed."  The reach of these provisions would likely be even broader than USDOL has so far disclosed.

 ♦   The "wage theft" movement toward increasingly-draconian penalties and punishments will move forward with renewed energy, especially at the state and local levels.  For proponents of these measures, wage-law violations are unrelated to the multi-jurisdiction, patchwork nature of differing, obscure, sometimes-conflicting, ambiguous and ill-defined, rapidly-changing requirements that are proliferating across the nation.  No, as this publication [Editor's Note:  Link Apparently Taken Down] illustrates, in their eyes employers are instead "dishonest", unscrupulous scofflaws who are "stealing" money from workers.  Employers who remain disengaged on this front and who acquiesce in these pejorative campaigns do so at their peril.

It has never been more important for employers to remain vigilant, informed, and assertive about all of these matters.  It is also essential that each employer ensure right now that it is in compliance with all applicable wage-hour requirements.

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In thinking-through and implementing their recovery plans in the wake of Hurricane Sandy, employers will want to review our August post summarizing a number of federal Fair Labor Standards Act issues that typically arise following a natural disaster.

Readers will recall our typical reminder that the requirements and limitations of other laws must also be taken into account.  This is especially important where Sandy's impact is concerned, because the laws and regulations of some jurisdictions in the hardest-hit areas are often different and/or much tougher on employers than the FLSA is.

As just one example, New Jersey law provides, "No employer shall terminate, dismiss or suspend an employee who fails to report for work at his or her place of employment because he or she is serving as a volunteer emergency responder during a state of emergency declared by the President of the United States or the Governor of this state or is actively engaged in responding to an emergency alarm . . .," subject to certain notices and verifications.  This law does not require an employer to pay for the time missed (although treating some such time as unpaid might create problems under other requirements, such as the "salary basis" principles applying to certain exemptions under the FLSA), but it does say that "a volunteer emergency responder may charge his or her absence as a vacation day or a sick day, if the volunteer has such days available."  N.J. Stat. Ann. § 40A:14-214 (link to reproduction below).

The important take-away is that employers should be sure to consider all of the relevant directives and prohibitions as they decide how to proceed.  Haste and conventional wisdom could lead to trouble down the road.

 N.J. Volunteer Responder Statute.pdf (17.01 kb)

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Recurring wage-hour issues tend to arise during the recovery from a natural disaster.  We posted the following item last year in connection with Hurricane Irene, and the points are equally relevant this time around:

*     *     *

Affected employers will no doubt have a variety of wage-hour questions in the aftermath of Hurricane Irene.  The number and scope of the issues raised might well be practically endless.  In this post, we address in very general ways the federal Fair Labor Standards Act topics that experience suggests will be among the most-pressing.

◊   What do we do about lost time records for work already performed but not yet paid?

If the only records of hours worked are lost or unusable, then there is no perfect solution.  Re-create the most accurate accounting you can under the circumstances.  Perhaps the preferred approach is to ask each employee to make the best-possible estimate of his or her hours worked. You should obtain the employee's written acknowledgement of his or her best recollection and should include the employee's authorization allowing later corrections in worktime and pay should more accurate hours-worked information become available.

◊   How do we track employees' worktime without our electronic/computerized time clocks?

Employees may record all hours worked by using handwritten timesheets.  To ensure accuracy, each employee should enter his or her own time and should record the actual times when the employee's work starts and stops each workday.

◊   As we recover, must we keep paying overtime on top of our other burdens?

At this time, there is no FLSA "emergency" exception that relieves the obligation to pay FLSA-required wages.  Employees subject to the FLSA's overtime provision must receive overtime premium at a rate of at least 1.5 times their regular rates of pay for all hours worked over 40 in the designated seven-day workweek.

If employees are covered by a collective bargaining agreement, it might contain additional overtime provisions requiring more than the FLSA does.  Perhaps the terms of the agreement relax those requirements in emergencies.  However, a collective bargaining agreement cannot override the FLSA's requirements.

◊   Can an employee volunteer to perform recovery services for us without pay?

The FLSA does not permit employees to "volunteer" unpaid time to the employer under any but the narrowest of circumstances.  For example, if a manufacturing facility sets up a hotline or makes other arrangements to provide a clearinghouse for information about the status of the workplace and employee reporting times, non-exempt employees volunteering to perform such services are engaged in compensable hours worked for FLSA purposes.  Employers considering any kind of unpaid "volunteer" services by their employees should evaluate the legality of doing this carefully and in advance.

◊   Must we keep paying employees who are not working?

Under the FLSA, for the most part the answer is "no".  FLSA minimum-wage and overtime requirements attach to hours worked, so employees who are not working are typically not entitled to the wages the FLSA requires.

One possible FLSA-related exception is for employees treated as FLSA-exempt whose exempt status requires that they be paid on a "salary basis".  Generally speaking, if such an employee performs at least some work in the designated seven-day workweek, the "salary basis" rules require that he or she be paid the entire salary for that particular workweek.  There can be exceptions here, too, such as might sometimes be the case where the employer is open for business but the employee decides to stay home for the day.

Also, non-exempt employees paid on a "fluctuating-workweek" basis under the FLSA normally must be paid their full fluctuating-workweek salaries for every workweek in which they perform any work.  There are a few exceptions, but these are even more-limited than the ones for exempt "salary basis" employees.

Of course, an employer might have a legal obligation to keep paying employees because of, for instance, an employment contract, a collective bargaining contract, or some policy or practice that is enforceable as a contract or under a state wage law.

◊   What can we do about charging missed time to vacation and leave balances?

The FLSA generally does not regulate the accumulation and use of vacation and leave.  The "salary basis" requirements for certain FLSA-exempt employees can implicate time-off allotments under various circumstances, some guidance on which the U.S. Labor Department has provided in opinion letters accessible here and here.

Again, however, what an employer may, must, or cannot do where paid leave is concerned might be affected by an employment contract, a collective bargaining contract, or some policy or practice that is enforceable as a contract or under a state wage law.

◊   When is travel time "hours worked" for purposes of computing FLSA wages due?

FLSA travel-time "rules" are not seamless, up-to-date, or necessarily logical or consistent with common sense.  The best-known ones are that:

•   Normal commuting between home and work typically is not considered to be hours worked, and

•   Travel between one assignment and another during a workday typically is hours worked.

However, even these principles are subject to exceptions and elaboration.  The best starting point is to consider each scenario an employer faces under the U.S. Labor Department's basic interpretations on travel time.  They are compiled at 29 C.F.R. §§ 785.33-785.41 and may be accessed here.

Remember that other requirements, such as those applying to government contractors or subcontractors and those of states or other jurisdictions, can also be relevant to these questions.

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A compressed schedule colloquially called a "9/80" pay plan seems to be making a comeback.  Under this arrangement, the federal Fair Labor Standards Act "workweek" and the schedule for non-exempt employees are set so that the employees work:

♦   Nine days in a two-workweek period, but

♦   Not more than 40 hours in either workweek.

How Does It Work?

Under a typical 9/80 arrangement, the non-exempt employee works four 9-hour days, followed by an 8-hour workday day that is split into 4-hour portions by the mid-day ending of the first workweek, and then works four more 9-hour days in the second workweek.  The key is that the employee's workweek ends during the 8-hour workday, causing the first four hours worked that day to fall into one workweek and the remaining four hours worked that day to fall into the next workweek.  In this way, the employee's hours worked in each workweek do not exceed 40.

If the employee actually works exactly what the schedule calls for during the two workweeks, then no FLSA overtime pay is due for either workweek.

But whatever management's expectations might be as to the scheduled, usual, or ordinary worktime for the employees, the employer still must pay FLSA overtime to every non-exempt employee who ends up working more than 40 hours in either workweek.  For example, if in one workweek an employee works three 9-hour days, one 10-hour day, and one 5½-hour day for a 42½-hour total in the workweek, the worker would be entitled to 2½ hours of FLSA overtime pay for that work.

Other Important Considerations

Most employers must change the affected employees' FLSA workweek in order to adopt a 9/80 plan.  As we have said in another post, employers changing the workweek should follow a U.S. Labor Department protocol used to evaluate whether an employee has worked any FLSA overtime during the pay-period in which this change occurs in order to ensure that the worker receives the proper FLSA compensation for any such overtime.

An approach that passes muster under the FLSA must still be evaluated against, and take into account the implications of, the applicable laws of other jurisdictions in which the employer employs people.  For instance, if a state's law requires overtime premium pay for hours worked over 8 in a workday, then the 9/80 plan will result in an obligation to pay daily overtime to employees in that state.

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Readers of our earlier post have asked whether there are additional ways to control or even reduce labor costs consistently with the federal Fair Labor Standards Act.  There are, and we will again divide our discussion between mistaken beliefs and possible opportunities.

Avoid Expensive Misconceptions

There are other recurring points of "conventional wisdom" that can drive up wage costs.

One is the erroneous view that an employer must pay the same hourly rate for compensable travel time or training time that it pays for the employee's normal or principal work.  But the fact is that nothing in the FLSA prevents an employer from paying a different and lower hourly rate (of not less than the minimum wage) for different kinds of worktime.  How the employer figures overtime compensation in those situations is beyond this post's scope, but it can be done without great difficulty.

Another example is the proposition that employees must be paid overtime compensation for working beyond their scheduled stopping times.  This is not the case under the FLSA, which (with a few specialized exceptions) only requires overtime pay for hours worked in excess of 40 in a workweek.  It is of course possible that a union contract, an employer's policy, an employment contract, or a state daily-overtime law might call for a different answer.

Consider Additional Alternatives

The FLSA does not say that non-exempt employees must be paid at an hourly rate or in any other particular way.  It simply requires that, whatever the pay plan is, the employer must still comply with the FLSA's minimum-wage, overtime, and timekeeping requirements.  This leaves a lot of room for a variety of approaches, such as:

♦   A salary-plus-overtime arrangement, which can take different forms depending upon what number of hours worked the salary is paid to compensate;

♦   A day-rate plan, which is based upon an employee's receiving a fixed amount for each workday in which he or she performs any work, without regard to the number of hours worked in the workday;

♦   A piece-rate or job-rate plan, under which employees receive a fixed amount for each piece or item produced or job completed; or

♦   A commission plan, which calls for employees to receive sales-based compensation.

Naturally, an employer should be careful in designing, implementing, and administering any pay plan to ensure that the plan actually produces FLSA-compliant wages.  For instance, the employer still must compute and pay the necessary FLSA overtime premium under a day-rate, piece-rate, job-rate, or commission method.

And, as we said last time, employers must be certain that whatever they decide to do is also permitted under all applicable state and local laws, under special "prevailing wage" requirements, and so on.

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Employers' continued struggles with labor costs have led to additional hourly-rate cuts, salary reductions, furloughs, layoffs, and similar conventional measures.  But are there other potentially less-disruptive and legal options?  There might well be.

What Does The Law Really Require?

For one thing, management should purge pay plans and policies of any expensive misconceptions about what the law does and does not require.  For instance, some employers believe that non-exempt employees' unworked paid-time-off for holidays, sick days, or even vacation days must be counted as hours worked when computing overtime under the federal Fair Labor Standards Act.  This is not so, and eliminating this unworked paid-time-off from FLSA overtime calculations could result in appreciably lower wage costs.

Also, some state wage-hour laws are considerably more employee-favorable than either the FLSA or similar laws in other jurisdictions.  Whether through misunderstanding or for other reasons, some organizations employing people in multiple states pay all employees as if they work in the jurisdiction with the highest wage requirements.  As an example, a multi-state company might pay non-exempt Georgia employees overtime for hours worked over eight in a workday (even though Georgia does not require this), because the company is legally obligated to do so for similar California workers.

What Pay Alternatives Might There Be?

Employers should also consider relatively-straightforward measures that could cut or at least minimize labor expense.

One illustration relates to the seven-day "workweek" that employers must select and document in order to comply with the FLSA's overtime requirement.  Most employers must of course pay non-exempt employees FLSA overtime premium for all their hours worked over 40 in a single workweek.  While the workweek cannot be changed retroactively or frequently to evade the FLSA's obligations, the workweek can be re-established on a lasting, going-forward basis.  And employers can choose different workweeks for different groups of employees or for different locations.  If patterns of activity unique to a particular department or facility typically add up to overtime hours under the workweek that applies company-wide, then the employer could consider whether adopting a separate workweek just for that department or facility would decrease or eliminate the overtime costs.

Management should also consider whether helpful FLSA exemptions, exceptions, or refinements might be available.  Some of these measures might affect wage costs directly.  Others might streamline the payroll process so as to reduce administrative expense.  Still others might tie compensation more closely to productivity so as to increase revenue (see our post on the Section 7(i) exemption, for example).  Of course, in today's legal environment, it is essential to evaluate these matters carefully before acting.  Possible missteps flowing from near-term financial pressures will ultimately be self-defeating or worse if they provoke million-dollar litigation.

As always, employers must be certain that whatever they decide to do for FLSA purposes is also permitted under all applicable state and local laws, under special "prevailing wage" requirements, and so on.

And whatever the law permits, employee morale is obviously an important consideration.  However, employees might well react favorably to measures that avoid more-stringent steps, such as layoffs.

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Affected employers will no doubt have a variety of wage-hour questions in the aftermath of Hurricane Irene.  The number and scope of the issues raised might well be practically endless.  In this post, we address in very general ways the federal Fair Labor Standards Act topics that experience suggests will be among the most-pressing.

◊   What do we do about lost time records for work already performed but not yet paid?

If the only records of hours worked are lost or unusable, then there is no perfect solution.  Re-create the most accurate accounting you can under the circumstances.  Perhaps the preferred approach is to ask each employee to make the best-possible estimate of his or her hours worked. You should obtain the employee's written acknowledgement of his or her best recollection and should include the employee's authorization allowing later corrections in worktime and pay should more accurate hours-worked information become available.

◊   How do we track employees' worktime without our electronic/computerized time clocks?

Employees may record all hours worked by using handwritten timesheets.  To ensure accuracy, each employee should enter his or her own time and should record the actual times when the employee's work starts and stops each workday.

◊   As we recover, must we keep paying overtime on top of our other burdens?

At this time, there is no FLSA "emergency" exception that relieves the obligation to pay FLSA-required wages.  Employees subject to the FLSA's overtime provision must receive overtime premium at a rate of at least 1.5 times their regular rates of pay for all hours worked over 40 in the designated seven-day workweek.

If employees are covered by a collective bargaining agreement, it might contain additional overtime provisions requiring more than the FLSA does.  Perhaps the terms of the agreement relax those requirements in emergencies.  However, a collective bargaining agreement cannot override the FLSA's requirements.

◊   Can an employee volunteer to perform recovery services for us without pay?

The FLSA does not permit employees to "volunteer" unpaid time to the employer under any but the narrowest of circumstances.  For example, if a manufacturing facility sets up a hotline or makes other arrangements to provide a clearinghouse for information about the status of the workplace and employee reporting times, non-exempt employees volunteering to perform such services are engaged in compensable hours worked for FLSA purposes.  Employers considering any kind of unpaid "volunteer" services by their employees should evaluate the legality of doing this carefully and in advance.

◊   Must we keep paying employees who are not working?

Under the FLSA, for the most part the answer is "no".  FLSA minimum-wage and overtime requirements attach to hours worked, so employees who are not working are typically not entitled to the wages the FLSA requires.

One possible FLSA-related exception is for employees treated as FLSA-exempt whose exempt status requires that they be paid on a "salary basis".  Generally speaking, if such an employee performs at least some work in the designated seven-day workweek, the "salary basis" rules require that he or she be paid the entire salary for that particular workweek.  There can be exceptions here, too, such as might sometimes be the case where the employer is open for business but the employee decides to stay home for the day.

Also, non-exempt employees paid on a "fluctuating-workweek" basis under the FLSA normally must be paid their full fluctuating-workweek salaries for every workweek in which they perform any work.  There are a few exceptions, but these are even more-limited than the ones for exempt "salary basis" employees.

Of course, an employer might have a legal obligation to keep paying employees because of, for instance, an employment contract, a collective bargaining contract, or some policy or practice that is enforceable as a contract or under a state wage law.

◊   What can we do about charging missed time to vacation and leave balances?

The FLSA generally does not regulate the accumulation and use of vacation and leave.  The "salary basis" requirements for certain FLSA-exempt employees can implicate time-off allotments under various circumstances, some guidance on which the U.S. Labor Department has provided in opinion letters accessible here and here.

Again, however, what an employer may, must, or cannot do where paid leave is concerned might be affected by an employment contract, a collective bargaining contract, or some policy or practice that is enforceable as a contract or under a state wage law.

◊   When is travel time "hours worked" for purposes of computing FLSA wages due?

FLSA travel-time "rules" are not seamless, up-to-date, or necessarily logical or consistent with common sense.  The best-known ones are that:

•   Normal commuting between home and work typically is not considered to be hours worked, and

•   Travel between one assignment and another during a workday typically is hours worked.

However, even these principles are subject to exceptions and elaboration.  The best starting point is to consider each scenario an employer faces under the U.S. Labor Department's basic interpretations on travel time.  They are compiled at 29 C.F.R. §§ 785.33-785.41 and may be accessed here.

________________

Remember that other requirements, such as those applying to government contractors or subcontractors and those of states or other jurisdictions, can also be relevant to these questions.

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In all her 20 years in human resources, Janice has never seen anything like it.  Bigtime Electronics fired its Production Manager Fred Smith last week, and now his lawyer has sent Janice a letter demanding that Fred be paid more than $20,000 for overtime worked during his employment.  Fred clearly met the requirements for exemption from overtime under federal and state wage-hour laws.

But the attorney refers to a sentence in Fred's hiring letter saying, "For payroll and withholding purposes, Bigtime Electronics will comply with all federal and state compensation laws and regulations."  The lawyer says that, even if Fred was otherwise exempt from overtime, this was a contract in which Bigtime nevertheless agreed to abide by those requirements.  Janice picks up the phone to call Bigtime's employment lawyer so that they can share a good chuckle.  Unfortunately, Fred might have the last laugh; at least one court has ruled that a similar sentence meant an employee was entitled to overtime under state law.

Increasingly, employees and former employees are invoking the words of a hiring letter, a compensation policy, a bonus memo posted on the bulletin board, and so on to make pay claims.  These contentions are often based, not upon minimum-wage or overtime laws, but instead upon things like contract law or state wage-payment statutes requiring employers to pay what they say they will.  For example, some courts have said that an employer's meal-break policy could be interpreted to mean that employees are contractually entitled to pay for unworked meal periods, even though a wage-hour law would not require this.

Cases like these typically allege that management has failed to do something it said it would do or has done something different from what it committed to do.  Also, employees often try to exploit ambiguities, vagueness, or inconsistencies in compensation plans or policies in making their allegations.  It is not unusual for them to contend after-the-fact that words or phrases meant something different from what the employer believed everyone understood them to mean.

Employers should think carefully about what they are saying in documents that cover compensation matters or that could arguably affect employees' pay.  Management should be sure that these materials say things as clearly and as accurately as possible, and that they neither say nor imply anything different from what the employer intends.  These documents should be drafted to give the employer maximum control and flexibility, including with respect to the interpretation of the terms used.  This doesn't mean that pay documents have to be "lawyered-up"; being clear and accurate does not necessarily translate to being longer and more-complicated.