Readers will recall that, in April 2011, the U.S. Labor Department declined to adopt an interpretation proposed in 2008 that would have acknowledged the federal Fair Labor Standards Act overtime-exempt status of employees doing the typical work of service writers, service advisors, etc. in automobile dealerships and truck dealerships.  Prospects were that USDOL would reverse an enforcement policy of two decades' standing and would begin challenging the FLSA Section 13(b)(10)(A) overtime exemption as applied to these workers.

However, Congress's 2012 Department of Labor Appropriations Act specifically prohibited USDOL from using any appropriated funds for this purpose.  Later comments by a U.S. Wage and Hour Division investigator led us to conclude that, unless Congress renewed this limitation in 2013 appropriations, dealerships should anticipate USDOL attacks on their treating these employees as being overtime-exempt.

Although the 2013 appropriation does not expressly refer to such a restriction, we conclude that the prohibition has been extended.  Among other things, Division F, Section 1105 of the recent appropriation calls for the continuation through September 30, 2013 of "the requirements, authorities, conditions, limitations, and other provisions" of the 2012 law.  Another example is Section 1104's statement that money allocated for 2013 may not be used to "initiate or resume any project or activity for which appropriations, funds, or other authority were not available" during the federal government's 2012 fiscal year.

Even if USDOL is unable to pursue such claims, current or former service writers or similar employees remain free to argue against overtime-exempt status in their own FLSA lawsuits.  And, as we said previously, employers embroiled in these lawsuits should be alert for any signs that USDOL is extending background assistance to these individuals.

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As we have been reporting, March 12 was the deadline for submitting comments regarding the U.S. Labor Department's proposal "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."  Despite our having asked for a copy of the proposed survey in a letter to USDOL dated January 14, we never received one.  Those who responded to our February 20 straw poll said that neither had they received a copy.

We have now submitted a comment (link to reproduction below) taking the position that the proposed collection of information should not be cleared, approved, or undertaken.  As we said to USDOL:

[the] circumstances strongly suggest that the Labor Department has failed to provide an adequate opportunity for public comment on this proposed information collection.  The Labor Department has clearly failed to do so with respect to members of the public who have expressed their interest in commenting by requesting copies but to whom it has provided none.  This state of affairs does not comport with the requirements and purposes of the Paperwork Reduction Act of 1995.

If USDOL nevertheless proceeds with its proposal at this point, the design and content of the survey, as well as the results produced by it and the use to which that outcome is put, might well be tainted and subject to challenge in light of the inadequate opportunity afforded for public comment on the proposal.

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Worker Classification Survey Comment 03 12 13 .pdf (47.81 kb)

Readers will recall our January post concerning the U.S. Labor Department's announced intention to "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."  As we said then, this is likely to be a precursor to a renewed "Right to Know" initiative.

USDOL did not publish the actual proposed survey along with its January 11 Federal Register entry.  On January 14, we requested a copy from the official to whom USDOL directed that these requests be sent (link to reproduction below).  As of this writing, 38 days later, and after appreciably more than half of the comment period has elapsed, we have received neither a copy nor any other response.

The end of the comment period is March 12, 2013, 21 days from now.  As matters stand, one may reasonably conclude that the public has had no adequate, fully-informed opportunity to evaluate the proposed survey or to formulate and submit substantive comments.

We are led to wonder whether our experience is representative of the public's at-large.  If you requested a copy of the proposed information collection also, please respond to our poll to let us know whether you received one.

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Request For Proposed Information Collection.pdf (62.35 kb)

As we speculated in November, the U.S. Labor Department apparently does intend to reinvigorate its so-called "Right to Know" initiative.  This vague and ambiguous proposal first surfaced in 2010 but was eventually shelved.  USDOL has now announced its intention to conduct a survey "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."

"Right to Know" About What?

In 2010, USDOL said that such a rule would require among other things the "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 [federal Fair Labor Standards Act]."  Many wondered at the time whether the provision would extend to disclosures about management's decisions as to which employees are considered to be exempt from the FLSA's pay requirements, and Wage and Hour Division officials seemed to be avoiding the question.  USDOL's recent announcement says, "Worker misclassification can be understood as the practice, intended or unintended, of improperly treating a worker who is an employee under the applicable law as in a work status other than an employee (i.e., an independent contractor)."  For the moment, then, the focus appears to be upon erroneously deeming workers to be independent contractors or incorrectly considering them to be functioning in some other non-employee capacity.

The announcement also provides at least some hint of what a "Right to Know" regulation will entail.  USDOL notes that "federal labor laws" do not require an employer to:

♦   Inform workers of their status as employees or non-employees;

♦   Provide the basis for these status determinations; or

♦   Notify the workers of their hours worked, pay rates, and wages paid.

Presumably, any "Right to Know" rules will obligate employers to provide this information, although to whom, when, in what form, to what extent, and at what level of detail remain unknown.

What Happens Next?

USDOL seeks comments on its proposed information collection by March 12, 2013.  However, it did not publish the actual information request.  Instead, a copy of this document must be obtained separately, raising the question of whether USDOL's announcement complies with the notice requirements of the Paperwork Reduction Act.  In any event, we have asked for a copy and will post the document when we receive it.

The notice specifies 30 months as the evaluation timeframe but then says in the same sentence that the period ends in March 2014.  Perhaps USDOL will later clarify which of these is its intention.

Businesses and other organizations (particularly those whose operational models include the use of non-employee workers) would be wise to take the opportunity to weigh-in on this proposed survey, to participate in the survey when it occurs, and otherwise to follow these developments closely.  It is foreseeable that the actual information collection might be orchestrated so as to provide a predicate for unprecedented new requirements.

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It might sometimes seem from the parade of headline-grabbing, employee-favoring court decisions that employers are destined to lose in so-called "off-the-clock" cases under the federal Fair Labor Standards Act.  These lawsuits involve claims by non-exempt employees that the employer has failed to pay the FLSA-required wages for work that went unrecorded.  But a ruling by the Tenth Circuit U.S. Court of Appeals (with jurisdiction over Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming) in Brown v. ScriptPro shows that, with the right policies, systems, and practices in place, it is possible for an employer to prevail.

The Good News . . .

Brown claimed that he was entitled to overtime compensation for work he performed at home.  However, he produced no evidence of the amount and extent of this work, including that he did not record any of it in ScriptPro's timekeeping system, which he could have accessed from home.  ScriptPro required employees to record all worktime, and apparently it enforced this requirement.

The court ruled that Brown had no FLSA claim.  In the court's view:

◊   ScriptPro kept accurate records of employees' hours worked;

◊   Brown could have recorded his work in ScriptPro's system, but he did not;

◊   Brown had kept no other records to document the amount of time he worked; and

◊   Brown did not otherwise carry his burden to demonstrate as a matter of just and reasonable inference how much time he claimed to have worked.

. . . But Keep It In Perspective

The soundbite point drawing attention to this case in the news is the court's statement that, "where the employee fails to notify the employer through the established overtime record-keeping system, the failure to pay overtime is not a FLSA violation."  However, the court's lead-in qualifier for that statement was, "[u]nder these circumstances".  Had there been a dispute about whether ScriptPro kept accurate time records, for example, the result might have been different.

Employers should not assume that courts will decide this way no matter what the situation is, or that meeting their FLSA timekeeping obligations is simply a "set it and forget it" matter of publishing a policy.  Instead, the prospects for a positive outcome will be improved by:

♦   Determining all the activities that count as FLSA "hours worked";

♦   Developing systems and policies for accurately capturing all such worktime;

♦   Communicating those systems and policies to the employees;

♦   Requiring managers and supervisors to enforce those systems and policies; and

♦   Monitoring time records to evaluate whether they are accurate.

Brown v. ScriptPro represents a sound, commonsense result on a particularly good set of facts for the employer.  Other employers would be wise to do all they reasonably can to see that their circumstances will be similarly favorable if there is an off-the-clock claim.

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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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Readers will recall that, in 2010, the U.S. Labor Department announced that it would pay particular attention to multi-party business arrangements that it sees as obscuring or diluting responsibility for complying with the federal Fair Labor Standards Act.  USDOL's "fissured industry" enforcement effort seeks to tie together all of the participants, including subcontractors, vendors, suppliers, and the like.

Recent developments underscore that the Wage and Hour Division is indeed looking for opportunities to assert that different entities are sufficiently integrated with one another to make each participating business a joint-employer.  The Division is also making good on its warning that it would "bring pressure to bear" upon brand owners to induce them to insist upon and monitor FLSA compliance by others with whom they share a business relationship.

Joint-Employment Allegations

USDOL recently sued DirecTV, one of DirecTV's service contractors, and the contractor's owner for alleged FLSA violations.  The lawsuit contends that installers compensated on a piece-rate basis received less than the minimum wage, were not paid overtime premium, and were not paid the FLSA-required wages for all hours worked.  USDOL asks for back-wages, an equal amount as liquidated damages, and a court injunction requiring future compliance.

The Wage and Hour Division also claims that these alleged violations were "willful".  It intends to assess civil money penalties (which can be as much as $1,100 for each violation) against the defendants.  A Division official stated that, "[The defendants] were found to be responsible, as joint employers, for underpaying these employees.  The bottom line is that subcontracting labor does not absolve an employer from responsibility for compliance . . .."

Pressure To Oversee Compliance

A different approach is exemplified in connection with USDOL's having recovered more than $200,000 in FLSA back wages for the employees of five vendors and staffing agencies working at Gaylord Hotels' Texan Resort and Convention Center.  While there is no indication that the Wage and Hour Division asserted an FLSA joint-employment as to Gaylord, the Division nevertheless prevailed upon the company to agree to:

♦    Require vendors and suppliers to enter into FLSA compliance agreements,

♦    Provide compliance information to vendors and suppliers, and

♦    Maintain a toll-free complaint hotline.

The Division has earlier expressed its willingness to engage in adverse publicity and to work in conjunction with advocacy or consumer groups if it feels that this is warranted.  Reports do not indicate whether these prospects played a role here.

As these scenarios demonstrate, an employer could find itself embroiled in USDOL enforcement efforts initially undertaken against another participant in a collaborative business activity.  This is especially possible in targeted areas like construction; retailing, services, and manufacturing arrangements involving a variety of contractors or subcontractors; food retailing; and the hospitality industry.

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The scope of potential punishments in federal Fair Labor Standards Act lawsuits brought by the U.S. Labor Department apparently is being limited only by the imaginations of its lawyers.  A recent consent judgment against an operator of residential-care facilities for developmentally disabled adults suggests that employers should not be surprised by unorthodox USDOL settlement demands.

The court order agreed to in Solis v. Jasmine Hall Care Homes contained terms requiring the defendants to pay $850,000, to comply with the FLSA in the future, to accept particular interpretations of relevant FLSA principles, and to produce upon demand whatever documents USDOL decides to "request".  These provisions are within the reasonable parameters of FLSA enforcement.

Beyond The Pale

However, a provision entitled, "Surrender of License Upon Adjudicated Violation" obligates Jasmine Hall and its owners to "surrender their care home operating license if any of them or any entity they own or control is adjudicated in a final, enforceable judgment to be in violation of any state or federal minimum wage or overtime law . . . in any proceeding before a state or federal court or any state or federal administrative tribunal . . .."  Moreover, the provision says that "[USDOL] may intervene and participate in any proceeding in which Defendants' licensing status is at issue . . . so that it may raise any wage and hour concerns or objections that it may have."

This is remarkable for a number of reasons, including that:

♦   Nothing in the FLSA calls for or so much as even contemplates compelling an employer essentially to go out of business as a remedial measure;

♦   A triggering violation will not be limited to one involving the FLSA but could instead arise under a state law as to which USDOL has no enforcement authority whatsoever;

♦   Presumably, license surrender will be necessary no matter how trivial, arcane, isolated, or unintentional a violation might be; and

♦   USDOL is prepared to insert itself into future state- or local-level license proceedings to "raise" unspecified varieties of "wage and hour concerns or objections" without any express limitation to those involving laws USDOL enforces, or indeed to any particular laws at all.

Of course, the defendants need not have agreed to this provision.  They could have chosen instead to litigate into the indefinite future to an uncertain conclusion against an opponent with essentially unlimited resources.

What Might The Future Hold?

If USDOL settlement demands are to be unconstrained by the remedies provided for in the FLSA, then any number of interesting conditions could be in the offing.  For instance, might another ultimatum require:

♦   An employer to seat a USDOL-specified representative on its Board of Directors?

♦   A resignation from or the termination of one or more management members?

♦   The forced divestiture of an individual's ownership interest in a business?

At some point, USDOL's proposed terms could become so harsh, oppressive, and disconnected from the FLSA that simply letting the lawsuit move forward to an expeditious ruling on the merits might be a preferable alternative.

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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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