Tag: Fair Labor Standards Act

Major League Baseball (MLB) All-Star Weekend Volunteers Not Employees Under Fair Labor Standards Act (FLSA)

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Judge John G. Koeltl from the Southern District of New York has dismissed the minimum wage claims of an individual who served as a volunteer at last year’s Major League Baseball All Star Weekend FanFest, held at New York City’s Javits Center, based on the “amusement or recreational establishment” exemption.  Chen v. Major League Baseball, 2014 U.S. Dist. LEXIS 42078 (S.D.N.Y. Mar. 25, 2014).

Plaintiff worked three shifts as a volunteer at FanFest, stamping attendees’ wrists, handing out paraphernalia and directing attendees.  He argued that this work made him an “employee” of Major League Baseball.  Judge Koeltl declined to address whether Plaintiff’s volunteer services made him an “employee”, because even if the court made such a conclusion, Plaintiff’s claim failed as a matter of law as  Plaintiff was “employed by an establishment which is an amusement or recreational establishment . . . [which did] not operate for more than seven months in any calendar year.”

While Chen is a victory for the employer community in light of the widespread series of actions brought by individuals classified as outside FLSA protection, principally asserted by interns,  many businesses are not seasonal in nature and thus cannot readily avail themselves of this exemption.  All potential exemptions and defenses to claims for minimum and overtime wages must be closely analyzed under the FLSA and, as applicable, state law.

Article By:

Noel P. Tripp
 
Of:
Jackson Lewis P.C.

 

Smartphones – 24/7 Access: When are employees off the clock?

The National Law Review recently published an article by Cynthia L. Effinger of McBrayer, McGinnis, Leslie and Kirkland, PLLC regarding Smartphones and Employees:

With instant access to all things via smartphones and the internet, it has become increasingly easy for employees and employers to stay connected to work all the time. Smartphone access and being constantly connected is part of our professional make-up, and necessary to keep pace with the speed of the information highway. Right? Connectivity is firmly woven into everyday business practices but at what price?

If your company issues smartphones or similar devices to all or some of its employees so they can stay in touch, checking emails or responding to phone calls after-hours or on the weekends; your company could be at risk for ‘off-the-clock’ lawsuits.  The Fair Labor Standards Act (“FLSA”) requires employers to compensate non-exempt employees overtime pay for any time worked beyond a 40-hour workweek. Exempt employees (so long as they are classified correctly), are the exception. Under FLSA failure to pay an employee wages and overtime due will result in serious fines, and is a growing area of class action law suits.

Being smart about smartphones usage by employees is crucial. It is essential to have a clear electronic-use policy that outlines specific guidelines explaining work hours and use of any such device (laptops, tablets and phones). As an employer you are financially responsible for work hours that are requested and voluntary. Which means if a non-exempt employee is using a smartphone (company issued or personal) outside of work hours, for work purposes – even when not required or requested – the company is responsible for overtime pay to that employee for the hours worked. So, an electronic use policy needs to be very specific about what is permitted and what is prohibited.

Of course it is not enough to have a policy in place, it must be enforced. To enforce such a policy that applies to work performed after-hours and off-premises, the employer must institute a strong system of reporting and monitoring the activity. This could include a specific time-recording tool, as well as an essential versus non-essential activity list, which could temper an employee’s overtime.

There is a “de minimus” rule, which has been adopted in several federal court proceedings that classifies minimal time spent checking or replying to emails or texts as not compensable.  However, if the employee tracks and presents the aggregate of these de minimus actions, the time often becomes comprehensive enough for an overtime claim.

Having the correct system and policy in place to control smartphone usage is no longer an afterthought; it is an essential element of employment and a critical policy. Smartphones have changed the way we work, and as in many areas of business, technology surpasses our ability to keep up with the changes it creates. If you don’t have an electronic-use policy in place, we recommend you make it priority number one for the HR Department. Have it reviewed by an attorney, educate your staff and enforce its rights and restrictions.

© 2012 by McBrayer, McGinnis, Leslie & Kirkland, PLLC

Supreme Court: Pharmaceutical Sales Reps Are Exempt from Overtime Pay Requirements Per FLSA’S Outside Sales Exemption

An article by David Barmak of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., regarding The Supreme Court’s Ruling about Pharmaceutical Sales Reps, was recently featured in The National Law Review:

In a major win for pharmaceutical companies, the Supreme Court has ruled that pharmaceutical sales representatives (PSRs) are exempt from federal overtime pay requirements under the “outside sales exemption” of the Fair Labor Standards Act (FLSA). The case, Christopher v SmithKline Beecham Corp., DBA GlaxoSmithKline (No. 11-204, Decided June 18, 2012), resolves a conflict between the Second and Ninth Circuit Courts of Appeal and impacts some 90,000 pharmaceutical sales representatives throughout the United States.

Under the relevant provision of the FLSA’s outside sales exemption, the employee’s primary duty must be making sales. But because of the unique regulatory environment that applies to drug companies, PSRs do not actually sell their employer’s products to physicians. Rather, PSRs meet with physicians and provide information about the benefits and uses of the company’s drugs and other medical products in the hope that the physician will be persuaded to prescribe the products to patients, as medically appropriate. Prescription drugs are then sold by pharmacies that dispense the drugs to individual customers who have a physician’s prescription. Therefore, PSRs do not actually make sales in the usual sense of the word.

As the Supreme Court noted, pharmaceutical companies have promoted their drugs through “sales reps” or “detailers” since at least the early 1950s, treating PSRs as exempt from the FLSA’s overtime requirements without objection from the Department of Labor (DOL). In fact, the DOL did not voice any objection to this classification until 2009, when it filed an amicus brief in a case pending against Novartis in the Second Circuit Court of Appeals, In re Novartis Wage and Hour Litigation, 611 F. 3d 141 (2nd Cir. 2010). DOL supported the PSRs’ bid for overtime pay in that case, arguing that PSRs are not exempt under the outside sales exemption because they were not involved in a “consummated transaction,” as contemplated by the regulations issued under the FLSA. The Second Circuit gave substantial deference to the DOL’s interpretation of its regulations and ruled that the exemption did not apply, and the Supreme Court declined to review the Second Circuit’s ruling. Meanwhile, a similar case against SmithKline Beecham (which trades as “GlaxoSmithKline”) had proceeded to the Ninth Circuit Court of Appeals. The DOL supported the PSRs’ claims in that case, too, but the Ninth Circuit ruled that the DOL’s interpretation of the FLSA was not entitled to controlling deference and that the sales repsdid make sales within the meaning of the regulations. The Supreme Court then agreed to review the Ninth Circuit’s ruling. (During the same period that the Novartis and SmithKline Beecham cases were wending their way through the courts, two other pharmaceutical companies, Johnson & Johnson and Eli Lilly, had won rulings in the Third and Seventh Circuits, respectively, that pharmaceutical sales reps qualified as exempt under a separate FLSA exemption, the administrative exemption.)

In a 5-4 decision written by Justice Alito, the Supreme Court affirmed the Ninth Circuit, ruling that SmithKline Beecham’s PSRs qualified as outside salesmen within the meaning of the FLSA exemption, and holding that, at least in the highly regulated environment of pharmaceutical sales, the PSRs were engaged in sales even though physicians do not actually purchase prescription drugs from them. This is so, the Supreme Court reasoned, because the FLSA broadly defines “sale” to include “… any sale, exchange, contract to sell, consignment for sale, shipment for sale or other disposition.” It concluded that the “catchall phrase ‘other disposition’ is most reasonably interpreted as including those arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity,” and that the PSRs’ efforts to persuade physicians to prescribe their company’s drugs met this standard.

Significantly, the Supreme Court’s interpretation of the relevant FLSA and regulatory provisions was contrary to the DOL’s own interpretations. Usually, the agency’s interpretation would have been accorded substantial deference. It was not, in this instance, because the Court found that the DOL’s interpretation was, in effect, ex post facto, arrived at following decades of silence and only after there was litigation between Novartis and SmithKline Beecham and some of their PSRs.

While the Supreme Court was clearly influenced by the unique regulatory environment in which the pharmaceutical industry operates and its decision applies first and foremost to the pharmaceutical industry, the Court’s reasoning may provide the basis for other employers to argue for the application of exemptions in other situations where there has been a long history of treating a particular class of employees as exempt without DOL interpretive guidance or enforcement activity to the contrary.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Unpaid Internships: Free Today . . . Costly Tomorrow

An article by Rachel D. Gebaide and Melody B. Lynch of Lowndes, Drosdick, Doster, Kantor & Reed, P.A. was published recently in The National Law Review:

With the summer season approaching, college and high school students will be looking for opportunities to improve their resumes and gain valuable experience. The prospect of hiring a talented student – or someone transitioning between careers – who is willing to work for free is enticing to many employers.

In many cases, however, the unpaid aspect of the internship violates the Fair Labor Standards Act (FLSA). Lawsuits by unpaid interns to recover wages, including liquidated damages and attorney’s fees, although still uncommon, are on the rise.

Unpaid internship programs can be an appropriate method of providing training if they are designed properly and are primarily for the benefit of the intern and not the employer. However, to paraphrase this week’s Time magazine article titled “Hard Labor: Inside the Mounting Backlash Against Unpaid Internships,” employers are not entitled to free labor just because they slap the title “intern” on the position.

The U.S. Department of Labor uses the six criteria below to determine whether an unpaid internship falls outside the employment context covered by the FLSA.

  • 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.

We recommend that you evaluate your internship programs against these six criteria prior to extending offers of unpaid employment to prospective interns. Interns are unlikely to be exempt employees under the FLSA. As a result, if your internship program does not meet all six criteria, you should plan to pay interns at least minimum wage, currently $7.67 in Florida, and, when necessary, the applicable overtime rate for hours worked over 40 in a work week.

© Lowndes, Drosdick, Doster, Kantor & Reed, PA

Congress Reconsiders Independent Contractor Classification

Posted in the National Law Review an article by Robert B. Meyer and David L. Woodard of  Poyner Spruill LLP regarding Employee MisClassification Prevention Act (EMPA):

 

 

It appears that Congress has again turned its attention to the issue of employee/independent contractor classification.  On October 13, 2011, Rep. Lynn Woolsey (D-CA) reintroduced legislation titled the “Employee Misclassification Prevention Act” (EMPA).  This bill, if enacted, would amend the Fair Labor Standards Act to impose new obligations on employers which utilize independent contractors, and also penalties for employers which misclassify employees as contractors.  Similar legislation was also introduced in the Senate last April, further suggesting that this issue of contractor classification is gaining traction in Congress.  The EMPA, as it is presently drafted, proposes the following:

  • Require employers to keep records of wages and hours worked by independent contractors.  The failure to do so would result in a presumption that the worker is an employee.
  • Require employers to provide written notice to every worker of his/her classification as either an employee or contractor.  The notice must also direct the worker to a Department of Labor website for information regarding worker rights under the EMPA, and encourage workers to contact the DOL if they have questions about classification.
  • Prohibit employers from discriminating or retaliating against workers who exercise their rights under the EMPA.
  • Amend the FLSA to make misclassification a prohibited act, and impose double liquidated damages for violations of the minimum wage and overtime pay provisions of the FLSA resulting from the misclassification.
  • Impose civil penalties upon employers for violating the EMPA (up to $1,100 for first violation, and up to $5,000 for repeat or willful violations).
  • Authorize the DOL to conduct targeted audits of employers in “certain industries with frequent incidence of misclassifying employees as non-employees….”
  • Permit the DOL to share information with the Internal Revenue Service regarding employers found to have misclassified workers.
  • Amend the Social Security Act to establish “administrative penalties for misclassifying employees, or paying unreported wages to employees without proper recordkeeping, for unemployment compensation purposes.”
  • Require state unemployment benefits agencies to conduct worker classification audits of employers.

The potential impact of this proposed legislation is far-reaching.  It is apparent that the EMPA would create a new federal offense for both intentional and unintentional contractor misclassifications.  In addition, the law would create a federal source of new employee rights, and would empower the DOL to seek expanded monetary damages on behalf of workers.  Therefore, employers should not only remain watchful of this legislation as it works its way through Congress, but also cautious about their use and classification of independent contractors.

© 2011 Poyner Spruill LLP. All rights reserved.