The U.S. Labor Department has officially published the proposed provisions that would drastically limit the federal Fair Labor Standards Act's exemptions for "companionship" workers and live-in domestic employees.  As we have reported, adopting these proposals in their current form will mean that the proportion of such companions and domestic-service workers who are exempt from that law's minimum-wage and/or overtime requirements will be far smaller than it is today.

The deadline for submitting objections or other comments is February 27, 2012.

The Labor Department has been essentially unresponsive to employers' questions about its intentions as it developed these proposals.  However, it is now clear that, all along, officials have been working closely with proponents and other employee-advocacy groups.  A December 20 telephone conference hosted by the Paraprofessional Healthcare Institute revealed that communications with the Secretary of Labor and others at the Labor Department by those who favor the practical elimination of the exemptions have been "intensive."  This extended to an earlier submission of "thousands" of comments urging the kinds of changes that have now been proposed.

PHI favors restricting the exemptions despite the organization's acknowledgement that these revisions could well be "painful"; that they "may force some consumers to pay more, or receive fewer hours of service"; that "some profit margins may indeed become narrower for a while"; and that "some workers will have fewer hours".

The coalition of proponents will be coordinating another round of numerous statements favoring the changes.  Moreover, one teleconference presenter disclosed that the Labor Department will be keeping tabs on how many incoming comments there are, which is likely a hint that officials are inviting reason to characterize support as having been overwhelming.

Indications are that the result might be preordained.  But even if this is so, employers who are against the proposals have all the more reason to submit their objections and recommendations.  Failing to do so could provide fuel for a later argument (such as in any future litigation questioning the authority for and/or attacking the contents of the revisions) that the "regulated community" expressed little disagreement.

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Various news items published last Friday afternoon intimated that a part of the 2012 federal omnibus appropriations law now exempts automobile-dealership service writers and similar employees* from the federal Fair Labor Standards Act's overtime requirements.  Those reports appear to have been mistaken so far as we can tell, but the spending provision does contain at least some good news in this respect.

As we noted previously, in April the U.S. Labor Department decided against acknowledging the FLSA Section 13(b)(10)(A) overtime-exempt status of dealership employees doing the typical work of service writers, service advisors, etc.  DOL thus revived its previously-disavowed interpretation that "[e]mployees variously described as service manager, service writer, service advisor, or service salesman who are not themselves primarily engaged in the work of a salesman, partsman, or mechanic as described above are not exempt under section 13(b)(10)."  29 C.F.R. § 779.372(c)(4)(emphasis added).

Section 113 of Friday's "Department of Labor Appropriations Act, 2012" says, "None of the funds made available by this Act may be used by the Secretary [of Labor] to administer or enforce 29 CFR 779.372(c)(4)."  This directive does not change the Section 13(b)(10)(A) exemption itself, but the provision does preclude DOL from devoting any of its 2012 funding to efforts to "administer or enforce" this service-writer interpretation.

However, Section 113 does not prevent current or former service writers or similar employees from pushing DOL's service-writer interpretation in support of their own FLSA overtime lawsuits.  Whether and to what extent DOL officials might explore the limits of Section 113's "administer or enforce" language by offering background assistance to any such individuals remains to be seen.  Employers facing lawsuits of this kind should certainly be alert for signs that DOL is doing so.

^*  At least one such report erroneously referred to "service technicians".

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As we suspected, efforts to eviscerate the federal Fair Labor Standards Act's Section 13(a)(15) "companionship" exemption have now formally moved to the regulatory arena.  The U.S. Labor Department has proposed a regulation that would limit the exemption to a far-narrower segment of those employees who work as in-home caregivers.  This move no doubt reflects a political judgment that legislative measures to amend the FLSA itself (about which we wrote in June) would not emerge from Congress.
 
The Proposed Limitations Are Substantial
 
The exemption provides that the FLSA's minimum-wage and overtime requirements do not apply to employees "employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves . . .."  One of DOL's stated goals is to limit this exemption to companions employed only by the individual, family, or household using the worker's services. Under the proposal, third-party employers, such as those companies existing for the purpose of providing companionship services, apparently could not assert the exemption for their employees engaged in this work.  This would be true even if the employee is jointly employed by both the third party and the individual/family/household.
 
The proposed regulations would also reduce the scope of exempt activities from "fellowship, care, and protection" to "fellowship and protection".  DOL's examples of what would qualify as "fellowship and protection" include walks, watching television, and "incidental, personal care services, such as dressing and grooming."  However, if the companion provided "incidental, personal care services" to an extent that exceeded 20 percent of his or her total hours worked in a workweek, the exemption would be lost for that workweek.  "[G]eneral household work", such as vacuuming and laundry, would also destroy the exemption for the workweek in which it occurs.
 
So What's The Justification?
 
Congress authorized DOL to "define[] and delimit[]" the exemption.  However, DOL's two principal rationales for the proposal appear to have more to do with legislative considerations falling within Congress's bailiwick than with appropriate interpretative rulemaking.
 
First, DOL says that the earnings of in-home caregivers have not grown commensurately with those of the in-home-care services industry generally since the exemption was promulgated in 1975. In addition, DOL predicates its changes upon a perception that today's in-home workers are more properly characterized as professional caregivers as compared to their predecessors in the 1970s, when the statutory exemption was enacted.
 
Objections Must Be Registered Promptly
 
Many believe that the proposal will have significant negative consequences.  If the revision is adopted, they say, this will substantially increase labor costs for third-party employers who can no longer rely upon the exemption.  In turn, this will translate into an far-greater financial burden for individuals, families, and households who have been depending upon those service providers.  Both developments are likely to result in an appreciable drop in companionship jobs and employment opportunities – in other words, the revision would by no means be a job-creator.
 
Anyone wanting to comment on or object to this proposal should act quickly.  Submissions must be tendered within 60 days following the proposed rule's publication in the Federal Register.

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A bill introduced in the U.S. Senate (S. 1747) would significantly expand the scope of the current exemption for certain computer employees that is found at Section 13(a)(17) of the federal Fair Labor Standards Act.  The proposed "Computer Professional Update" Act (or "CPU" Act) was submitted by North Carolina Senator Kay Hagan and three co-sponsors.  It is now pending in the Senate's Committee on Health, Education, Labor, and Pensions.

A Little History

The FLSA exemption status of employees in the computer field has been a bone of contention since the mid-1960s.  The application of the FLSA's executive exemption in the computer field has been no different over that time, but for many years the U.S. Labor Department took a particularly narrow view of what sort of computer-oriented work qualified for the FLSA's administrative or professional exemption.

Then, in 1990, Congress directed DOL to issue regulations under which computer systems analysts, computer programmers, software engineers, and other similarly-skilled workers could be exempt.  DOL finalized professional-exemption regulations for this purpose in 1992.  However, the only employees in the running for exempt status were those meeting these descriptions whose work required "theoretical and practical application of highly-specialized knowledge in computer systems analysis, programming, and software engineering . .  .."

One might infer that Congress was not satisfied with DOL's efforts, because in 1996 it amended the FLSA itself to add Section 13(a)(17) (link to reproduction below).  Among other things, Congress's own version did not require "theoretical and practical application of highly-specialized knowledge . . ..".  In 2004, DOL modified the regulatory exemption to harmonize it with the statutory one.

Still Behind The Times

The rapid evolution of computer technology, the Internet, and other areas has arguably left even these most-recent exemptions in the dust.  For example, to a considerable extent their definitions of exempt work incorporate outmoded terms and concepts dating to the early 1990s or even before.  Many believe that the exemptions, along with DOL's restrictive interpretations of them, fail to take into account substantial changes in the computer field and the occupations it encompasses.

The CPU Act would address this in a variety of ways.  For instance, unlike the present versions, it would incorporate "information technology" occupations and would expressly refer to work involving things such as databases, the Internet, intranets, networks, debugging, components and hardware, security, configuration, and systems integration and continuity.  It would also create an exemption for employees who are "directing the work of individuals" performing exempt computer or information-technology duties; presumably this would apply more-broadly than does the FLSA's executive exemption.

Even if the CPU Act becomes law, states and other jurisdictions need not provide such an exemption from their own minimum-wage and overtime laws.  Moreover, a jurisdiction that has its own computer-employee exemption would not be required to harmonize it with the CPU Act.

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FLSA Section 13 a 17.pdf (20.46 kb)

Among the famous last words in the federal Fair Labor Standards Act Hall of Infamy are, "Let's write the job descriptions to make them exempt." The problem is this:  Job descriptions do not "make" employees exempt.

Instead, most FLSA exemptions apply, if at all, only on an employee-by-employee basis according to the nature of each individual's actual work as judged against specific and often-detailed requirements.^*  Moreover, in any U.S. Labor Department investigation or in a lawsuit, the legal burden of establishing that a person is exempt rests with the employer, who must prove that each exemption requirement is met as to any individuals whose exempt status has been challenged.  The Labor Department and the courts construe FLSA exemptions very narrowly, and doubt is often resolved against the employer.

So no job description, irrespective of what it says, will bring about exempt status for an employee whose actual work does not meet the legal tests.  Does this mean that job descriptions are irrelevant to FLSA exemptions?  Absolutely not!

Job descriptions that are vague, ambiguous, jargonized, out-of-date, or poorly-written can lead to ill-considered and incorrect decisions about who is or is not exempt.  Those that are puffed-up for ego purposes, or that are unrealistic or inaccurate, can have a similar impact.  Flawed job descriptions can also seriously undercut efforts to defend against legal challenges to exempt status.

On the other hand, job descriptions that are accurate, specific, realistic, clear, well-crafted, and current can contribute appreciably to management's proper analysis of whether one exemption or another may legally be applied to an employee.  They can also play a significant role in defending against a claim that employees should not have been treated as exempt.

For example, one requirement for the FLSA's executive exemption is that an employee who has no authority to hire or fire must at least make suggestions and recommendations about those actions (or about other status changes) that carry "particular weight".  29 C.F.R. 541.100(a)(4).  The fact that making these suggestions and recommendations is truly part of an employee's job helps to show that they are indeed given "particular weight", and listing these responsibilities in the job description is some evidence that they really are part of the individual's work.  29 C.F.R. 541.105; 69 Fed.Reg. 22122, 22135 (April 23, 2004).

The bottom-line is that job descriptions standing alone are not enough to establish or refute exempt status, but poor ones are useless (or worse), whereas good ones are useful.

      ^*  Of course, some FLSA exemptions also impose compensation requirements.

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Section 3(m) of the federal Fair Labor Standards Act allows a portion of the employee's FLSA-required minimum wages to consist of tips.  Unfortunately, it is all-too-common for employers to make expensive mistakes where tips are concerned.

Fundamental Rules

Tipped employees are those engaged in occupations in which they customarily and regularly receive more than $30 a month in tips.  Tips they actually receive may be counted as FLSA wages up to a current maximum of $5.12 per hour; the employer must pay them at least $2.13 an hour in addition to tips.  The FLSA requires an employer to tell each tipped employee about the law's tip-credit provisions in advance.  And, as we reported in May, the U.S. Labor Department now says that other notifications are also required.

The employee's creditable-tips-plus-wages total must come to at least the current minimum wage of $7.25; the employer must make up any shortfall.  Employees must be allowed to keep their tips, except that they can be required to contribute to a tip-pool participated in only by other employees who customarily and regularly receive tips.

Pitfalls and Misconceptions

Among the typical problems are:

♦   Failing to provide the necessary tip-credit notification;

♦   Not ensuring that the total of an employee's hourly wage plus his or her creditable tips equals at least the minimum wage; or

♦   Not being able to document that employees actually received enough in tips to cover the credit taken.

Employers also find themselves facing liability for:

♦   Taking the tip-credit for hours a "dual function" employee spends in non-tipped work (learn more here);

♦   Calculating overtime at 1.5 times only the employee's $2.13-per-hour cash wage;

♦   Taking a larger tip-credit for overtime hours than for non-overtime ones;

♦   Withholding uniform costs, shortages, breakage, "walk-outs", and so on from an employee's tips; or

♦   Maintaining invalid tip-pools.

Trouble can also result from lumping both tips and service charges under the catch-all term "gratuity".  An FLSA tip-credit "tip" is a payment the patron decides whether to make, and as to which the patron decides how much to give and to whom to give it.  No tip credit may be taken for a compulsory service charge imposed by the employer.  What's more, service charges paid to employees must be included when figuring any FLSA overtime pay they are due.

What About Other Laws?

Some states do not permit taking a tip-credit, while others allow one but restrict the amounts in ways which are different from the FLSA's provision.  Also, an increasing number of states and other jurisdictions prescribe what employers may, may not, and must do where sums representing tips and service charges or fees are concerned.

Employers should immediately check to see whether tips and tip-credit matters are being handled in the proper way.  Even if things used to be fine, management is not always aware of changes in the law or in day-to-day procedures that can lead to major problems.

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Many employers find nowadays that at least some workers are unable to read, write, or do simple arithmetic beyond the lowest levels (if at all).  Management wants to give the employees mandatory training in these areas, but not if that means incurring overtime costs when the instructional time causes the employees' hours worked to exceed 40 in a workweek.  But, under the right circumstances, there is a little-known way to increase employees' basic academic abilities without having to pay FLSA overtime premium for the time they spend learning.

The General FLSA Training Rules

The U.S. Labor Department (DOL) says that time spent in employer training generally must be considered compensable work, unless four criteria are met.  That is, the training time has to be added together with the employee's other hours worked (including for overtime-pay purposes), except where:

♦   The employee's attendance is truly voluntary;

♦   The employee's attendance is outside his or her regular working hours;

♦   The training is not directly related to the employee 's current job; and

♦   The employee performs no productive work during attendance.

29 C.F.R. § 785.27.  Where remedial education is concerned, an employer offering the instruction typically wants to require employees to undergo it.  Also, it is often necessary to schedule the classes at some point during the employee's normal workday.

The Section 7(q) Overtime Exception

The FLSA's Section 7(q) (link to reproduction below) allows the employer to pay for up to ten overtime hours of qualifying instruction at the employee's straight-time regular rate of pay.  In creating this exception, Congress wanted to encourage employers to help provide the fundamental educational background some employees need to succeed in the job market, both now and in the future.  The exception is therefore available for certain basic education offered to employees who lack a high-school diploma or educational attainment at the eighth-grade level.  The training provided cannot be job-specific.

DOL says that the remedial training must be designed to provide reading and other basic skills at an eighth-grade level or below, or to fulfill the requirements for a high-school diploma or a General Educational Development ("G.E.D.") certificate.  29 C.F.R. § 778.603.  Also, DOL rules state that the training has to occur during discrete periods of time set aside for it and must be conducted away from the employee's work station "to the maximum extent practicable".  Id.  DOL regulations require employers to keep accurate records of both an employee's time spent in the remedial education each workday and each workweek and the compensation the employee is paid for this time.  29 C.F.R. § 516.34.

Don't Forget Other Overtime Laws

Of course, the Section 7(q) exception does not override overtime obligations imposed by any different federal law or by any other jurisdiction's requirements.  An employer considering a remedial-training program designed around Section 7(q) should carefully evaluate whether the program will meet the requirements of all other applicable overtime provisions.

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 FLSA Section 7q.pdf (14.69 kb)

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 late June, we noted legislation introduced in the Senate and in the House of Representatives that would essentially repeal the federal Fair Labor Standards Act's Section 13(a)(15) "companionship" exemption in any practical sense.  U.S. Labor Department regulations and interpretations elaborate upon how and to whom the exemption may be applied.

Recent correspondence (link below) from the 28-member Eldercare Workforce Alliance to U.S. Secretary of Labor Hilda L. Solis suggests that proponents of such a change are re-directing their focus from legislation to regulatory limitations.  This letter urges DOL to take "timely action" by imposing a "revised interpretation of the exemption that will extend greater federal minimum wage and overtime protection under FLSA to the more than 1,500,000 paid home‐ and community‐based care workers who provide essential services to our nation's older adults and people with disabilities."  It is highly likely that the "revised interpretation" this advocates will amount to gutting the exemption by regulation.  Perhaps this reflects a political calculation that the legislative prospects are unfavorable.

For some time now, DOL's regulatory agenda has included a very general item expressing an intention to revisit the exemption.  A number of questions were raised about this in the U.S. Wage and Hour Division's July 13 short-on-transparency "webchat", but these were met repeatedly with DOL's reply that it is "premature" to discuss whatever the looming "proposal" is.  The sole detail to emerge is that DOL expects to publish a Notice of Proposed Rulemaking in October.

While of course it remains to be seen what actually transpires, one may reasonably suspect that at least some of the forthcoming proposal will consist of concepts that also appear in the pending legislation.  For example, the proposal might well say that the exemption cannot apply to a worker who is employed by the agency supplying his or her services to an elderly person or to the person's family.

It is also probable that the time period for commenting on and registering objections to this proposal will be relatively brief.  Those who oppose cutting-back on the "companionship" exemption must be vigilant and should be prepared to act on short notice.

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Eldercare Workforce Alliance Letter.pdf (184.20 kb)

The answer to our July 11 Quick Quiz is, "One And One-Half Days' Worth".

To qualify for the federal Fair Labor Standards Act's executive, administrative, or professional exemption, employees usually must be paid on a "salary basis".  This means that the employee must regularly receive each pay period a predetermined amount (of not less than $455 per week) constituting all or part of his or her compensation.

With limited exceptions, this fixed amount cannot be subject to reduction based upon either the amount of time the employee works or how well he or she performs the work.  The circumstances under which this salary can be reduced for part-days missed are even more restricted.

One exception to this so-called "no-docking rule" is that deductions may be made from the salary for absences of one or more full days caused sickness, disability, or work-related accidents, if the deduction is made under a bona fide plan, policy, or practice that provides compensation for such absences.  As a practical matter, this usually means that, so long as an exempt employee has a paid-time-off allotment to cover the absence, he or she is paid the normal salary, and the absence is charged against the PTO balance.

The sick-day exception also permits proportional deductions to be made from the salary itself for whole-workday absences of this kind during the period:

♦   Before the employee qualifies for PTO, and

♦   After the employee exhausts the PTO allowance.

However, the sick-day exception does not authorize salary deductions for part-days missed.^*

But this part-day restriction does not prevent charging these absences against PTO allotments.  As the U.S. Labor Department has said, "Where an employer has a benefits plan (e.g., vacation time, sick leave), it is permissible to substitute or reduce the accrued leave in the plan for the time an employee is absent from work, whether the absence is a partial day or a full day, without affecting the salary basis of payment, if the employee nevertheless receives in payment his or her guaranteed salary."  Opinion Letter of Acting Wage-Hour Administrator FLSA2005-7 (January 7, 2005).  Consequently, Alice's employer is permitted to subtract the three half-days she missed, that is, the full one and one-half days' worth, from her PTO balance.

If Alice had no PTO balance remaining, then her employer could not dock her salary for any of the sick-time missed.  This is true because she would not have been absent for a whole day on any of the three days she was out sick.

Of course, employers should also review these matters under any applicable wage laws of a state or other jurisdiction.  For example, a state might take a more-restrictive position under the "salary basis" rules applying to exemptions from its own overtime requirements.

__________

^*  A different exception for an employee's absences covered by the federal Family and Medical Leave Act might permit part-day salary deductions under the proper circumstances.

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