Tag: FLSA

Supreme Court Declines to Resolve Circuit Split on Exercise of Personal Jurisdiction in FLSA Collective Actions

On June 6, 2022, the Supreme Court of the United States declined to hear petitions seeking review of whether federal courts may exercise personal jurisdiction over claims of nonresident plaintiffs who join Fair Labor Standards Act (FLSA) collective actions when their claims are not connected to the defendant’s activities in the forum state. The petitions sought review of rulings on the issue by the First and Sixth Circuit Courts of Appeals in Waters v. Day & Zimmermann NPS, Inc. and Canaday v. The Anthem Companies, Inc., respectively. As a result of the Supreme Court’s decision declining to hear the petitions, there remains a circuit split as to whether the Court’s 2017 ruling in Bristol-Myers Squibb Co. v. Superior Court applies to FLSA collective actions, and employers with nationwide footprints remain subject to uncertainty depending on jurisdiction.

To date, only the First, Sixth, and Eighth Circuits have ruled on the issue. On August 17, 2021, the Sixth Circuit was the first to address the issue in Canaday. There, the Court held that federal courts may not exercise personal jurisdiction over claims of nonresident plaintiffs who join FLSA collective actions when their claims are not connected to the defendant’s activities in the forum state. Just one day later, on August 18, 2021, the Eighth Circuit came to the same conclusion in Vallone v. CJS Solutions Group, LLC.

On January 13, 2022, in Waters, the First Circuit held to the contrary, concluding that federal courts do have personal jurisdiction over claims asserted by nonresident opt-in plaintiffs.

The Significance of Bristol-Myers

The Supreme Court’s decision in Bristol-Myers provides the basis for the current circuit split. Bristol-Myers involved a mass tort action under state law for alleged defects in a blood-thinning drug, Plavix, which the company manufactured. Residents and nonresidents of California sued Bristol-Myers in California state court, alleging injuries related to the drug. The nonresident plaintiffs claimed no relationship with the forum state, nor did they purchase Plavix in California or suffer any harm from it in California. The Supreme Court reasoned that any similarity between the resident and nonresident plaintiffs’ claims was an “insufficient basis” to exercise specific jurisdiction. Unless nonresident plaintiffs could demonstrate that their claims arose out of the defendant’s contacts with the forum state, personal jurisdiction over the company did not exist, no matter “the extent of a defendant’s unconnected activities in the State.”

In ruling that the California state court lacked jurisdiction over the claims of the nonresident plaintiffs, the Supreme Court acknowledged that its holding might ultimately generate more litigation in the form of separate actions by nonresident plaintiffs in their respective states. But the Supreme Court also noted that all plaintiffs to the action could have brought a mass tort action against Bristol-Myers in New York (the company’s headquarters) or Delaware (its place of incorporation) because courts in those states would have had general personal jurisdiction over the company. Instead, the California state court could exercise only specific personal jurisdiction over the company based on its activities in the state. Notably, Bristol-Myers was limited to Rule 23 class actions, leaving lower courts to determine whether its holding applied to FLSA collective actions, which differ procedurally.

The Circuit Split

In Canaday, the Sixth Circuit reiterated the basic tenet that, pursuant to the Due Process Clause of the Fourteenth Amendment, the question of whether a court has personal jurisdiction over a defendant depends on the defendant’s contacts with the state in which the plaintiff filed the lawsuit. Because Anthem is both incorporated and headquartered in Indiana and not otherwise “at home” in the state of Tennessee, the district court in Tennessee lacked general jurisdiction over Anthem as a defendant. At issue was whether the district court in Tennessee had specific personal jurisdiction over Anthem, and thus, whether there was a claim-specific and Anthem-specific relationship between the nonresidents’ FLSA claims and the state of Tennessee.

Applying Bristol-Myers, the Sixth Circuit held that there was not. The court found that the nonresident plaintiffs did not bring claims arising out of or relating to Anthem’s conduct in Tennessee, because Anthem neither employed nor paid the nonresident plaintiffs within the state. The Sixth Circuit went on the explain that adherence to this approach should not change the way FLSA collective actions are filed, because plaintiffs traditionally file their actions where courts have general jurisdiction, or where the conduct occurred. Of note, Sixth Circuit Judge Bernice Donald dissented in Canaday, contending that Bristol-Myers does not apply to FLSA collective actions because the Supreme Court in that case addressed only the limitations of state courts, not federal courts, in their exercise of personal jurisdiction over nonresidents.

In Waters, the First Circuit largely followed the reasoning in Judge Donald’s dissent, concluding that the Supreme Court’s decision in Bristol-Myers Squibb “rest[ed] on Fourteenth Amendment constitutional limits on state courts exercising jurisdiction over state-law claims” and thus did not control whether a federal court could exercise jurisdiction over federal claims asserted by nonresident plaintiffs. The First Circuit also observed that the plain language of Rule 4(k) of the Federal Rules of Civil Procedure merely concerns the service of summonses and does not “constrain[] a federal court’s power to act once a summons has been properly served, and personal jurisdiction has been established.”

Key Takeaways

The Supreme Court’s decision to deny the petitions means that employers with nationwide footprints continue to live with potentially inconsistent rulings on the question of whether a federal district court has jurisdiction to hear claims of out-of-state workers when the defendant is neither headquartered nor incorporated in the state. Canaday and Vallone stand to significantly limit the size and geographic scope of FLSA collective actions in the Sixth and Eighth Circuits, absent a district court’s exercise of general jurisdiction over a corporate defendant, while Waters permits nationwide jurisdiction in the First Circuit. For now, at least, multistate employers face continued uncertainty on the issue until courts of appeals in the remaining circuits weigh in.

Article By Maggie (Hanrahan) Santen, Monica Lacks, and Samuel H. Ottinger of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more labor and employment legal news, click here to visit the National Law Review.

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

A Very Simple Proposal to Tweak the FLSA to Benefit Both Employees and Employers

A number of years ago, I received a kind note around the holidays from my opposing counsel in a wage-hour class action, thanking me and my firm for being their “partners” in addressing employment issues.

Maybe the word he used wasn’t “partners,” but it was something close to it.

At first, I must admit that I thought he was joking.

Then I realized that this attorney, for whom I have great respect, got it.

He got that employers are not looking to violate employment laws, and that the attorneys who represent them are not trying to help their clients violate the laws.

He got that the opposite is true – employers are trying to comply with the laws, and their attorneys are trying to help them do so.  No employer is hoping to get sued.  Not one.  And lawyers advising employers on how to violate the laws will soon be looking for new clients.  Or a malpractice attorney.

The general public may not understand this notion, and, unfortunately, many employees and plaintiffs’ lawyers may not, either.

The desire of employers and their counsel to comply with the law plays out thousands of times every day, to the great benefit not just of employers, but of employees.

All management-side employment lawyers worth their salt have stories about how they worked with their clients to prevent a manager from terminating an employee’s employment, or cutting an employee’s pay, or implementing a problematic policy, by explaining the law and the potential repercussions.  Some lawyers have hundreds of these stories.

“You should give the employee another chance,” is an expression that may as well be on a tape recording, it’s used that often.  “Document the problem, sit down with the employee to explain how they need to do things differently, and give the employee another chance.”  “If you make that change, you’re walking right into a class action that you will have difficulty defending.”

Often – usually – employers will understand and follow their counsel’s advice once distanced from the heat of the moment.

They’re looking to do the right thing, to treat their employees fairly.  And, yes, to comply with the law.

It’s an approach that works in virtually every context except perhaps one – the Fair Labor Standards Act (FLSA).

The FLSA actually works to dissuade employers from working with employees to correct many wage issues.

Why is that?

Because, unlike other employment laws, the FLSA generally doesn’t permit employers and employees to resolve wage disputes, short of the very litigation or agency complaint that neither employers nor employees really want.

The FLSA generally forbids the very amicable resolutions that would benefit both employers and employees.

And perhaps it’s time to change that.

In a perfect workplace, if employees have issues, whatever they might be, they would speak with their managers or with human resources and resolve their disputes amicably.

And, for the most part, the law not only permits them to do so, but encourages them to do so.

If employees believe they have been harassed, they can take their concerns to their employer and let their employer investigate and take corrective action, if appropriate.

If employees believe they have been discriminated against, they can share their concerns with their employer and resolve their disputes.

And if part of the resolution is a payment of some sum that the employer and employee agree to be fair, they can enter into a settlement agreement whereby those claims are resolved.  That is, the employee can accept some agreed-upon sum of money and sign a release.  And the employee can review the settlement agreement with his or her attorney beforehand in deciding whether the terms are fair.  If not, the employee won’t sign it.

But these very same employees who are able to amicably resolve virtually any dispute with their employers generally are not allowed to do so with FLSA claims.

If employees believe they were not paid for all time they worked, they cannot simply speak with their managers or human resources personnel to resolve the issue, get the problem fixed, and move on.  No, generally speaking, the only way they can resolve the issue is to file a lawsuit or a complaint with the Department of Labor (DOL).

If employees believe their overtime pay was miscalculated, the only way they and their employers can resolve the claim is by suing or going to the DOL.

If employees believe that they have been misclassified as exempt, they can’t resolve the issue with their manager or human resources personnel.  No, they have to sue or file a DOL complaint.

And if employers identify an issue – an error on someone’s paycheck, or a concern that an employee might have been misclassified – the best they can do is to correct the issue and pay the employee, then sit back and hope that the employee doesn’t turn around and sue about the very issue the employer wanted to resolve, but couldn’t.

It’s a system that is built to increase litigation, often unnecessarily, at the expense of amicable resolutions of issues that may arise.

There is no good reason that employees can be trusted to resolve other employment disputes without litigation or an agency complaint, but can’t be trusted to do so with regard to wage claims.

None.

There is no good reason why employees can be allowed to amicably resolve a race or sex discrimination concern, for instance, but the same employees can’t be allowed to resolve a wage claim – not even as part of the resolution of the race or sex discrimination concern.

None.

The argument that an employee wouldn’t understand the nuances of the FLSA flies about as far as a turkey.  The FLSA is no more nuanced than Title VII or the Americans with Disabilities Act, and employees are allowed to resolve those claims outside of litigation or an agency complaint.

And don’t forget that employees could always have an attorney review a proposed FLSA settlement before they ever enter into it.  If it wasn’t fair, the attorney would surely tell the employee that and try to negotiate better terms, right?

Ultimately, it’s the employees’ decision.  If they don’t like the terms of a proposed resolution of FLSA claims, they can always file suit or a DOL claim then.

If you assume that employers and employees would like to have the opportunity to try to resolve their FLSA disputes prior to litigation or a DOL claim, then it is time to amend the FLSA to give them to right to do so.

And the blueprint for what legislation could look like is easy to find – it’s right in the Age Discrimination in Employment Act (ADEA).  Or, more specifically, it’s right in the Older Workers Benefits Protection Act (OWBPA) amendments to the ADEA.

For reasons that remain somewhat mystifying, releases of age discrimination claims under the ADEA require specific terms that releases of other types of federal discrimination claims do not.  Among other things, such releases must specifically reference the ADEA, they must advise employees that they have the right to consult with an attorney, they must provide the employee with 21 days to consider the release (or 45 days under some circumstances), and they must provide the employees with 7 days to revoke an agreement after signing.

There is no reason that the FLSA couldn’t be amended to permit private settlements along the same lines – with a requirement that the release specifically reference the FLSA, that it advise employees that they have the right to consult with an attorney (or the DOL), that they have 21 days to consider the release, and that they may revoke the release within 7 days.

Don’t like the settlement proposed by your employer?  Don’t sign it.

Don’t understand it?  Talk with a lawyer or the DOL.

Need time to think about it?  You’ve got plenty of time.

Have second thoughts after signing the agreement?  Revoke it.

If such bells and whistles are sufficient to protect older workers who wish to settle age discrimination claims, they should be sufficient to protect all employees who wish to resolve FLSA claims.

Employees would benefit from a system that would encourage employers to address wage issues – and, not incidentally, by which they might not have to share 30-40% of their settlement with lawyers.

Employers would benefit from a system that would help them address those issues while avoiding litigation – saving on paying attorney’s fees to attorneys like me.

The courts and the DOL wouldn’t be clogged with claims that cry out for resolution.

The only people who wouldn’t benefit from this proposed amendment would be the lawyers.

And if you’re worried about us lawyers, you should call a doctor.

©2022 Epstein Becker & Green, P.C. All rights reserved.
For more articles on employment laws, visit the NLR Labor & Employment section.

Another One Bites the Dust: You Might Be Your Brother Employer’s Keeper (Again)

The U.S. Department of Labor (DOL) has announced a final rule rescinding the Trump administration’s “Joint Employer Status Under the Fair Labor Standards Act” rule, which took effect in March 2020 and provides guidance for determining when multiple employers are considered joint employers and, therefore, jointly liable for labor law violations. The repeal of the rule will likely result in more workers receiving minimum wage and overtime protections under the Fair Labor Standards Act (FLSA) and, in turn, greater legal and financial exposure for employers.

The FLSA generally requires employers to pay non-exempt workers at least the federal minimum wage for all hours worked and at least time and one half the regular rate of pay for hours worked more than 40 in a workweek. Under certain circumstances, an employee of one business may be considered a joint employee of a second business. (The joint employer concept can arise in any context when one company’s workers perform work for another company, but most frequently it arises in the context of staffing agency or leased employees).  If the second business is deemed a “joint employer,” both companies might be liable to the worker for minimum wages and overtime pay under the FLSA.

The joint employer rule that became effective in March 2020 established a four-factor balancing test for determining joint employer status under the FLSA. In determining whether a second company is a joint employer of a worker, the test examines:

  1. Whether the company hires and fires the worker;
  2. Whether the company supervises and controls the worker’s work schedules or conditions of employment to a substantial degree;
  3. Whether the company determines the worker’s rate and method of payment; and
  4. Whether the company maintains the worker’s employment records.

In a news release announcing rescission of the rule, the Biden administration’s DOL concluded that the rescinded rule “included a description of joint employment contrary to statutory language and Congressional intent” and “failed to take into account the department’s prior joint employment guidance.”

The final rule repealing the prior rule becomes effective September 28, 2021. The prior rule made it more difficult for companies to be held liable as joint employers and was generally considered a positive development for the business community.

©2021 Roetzel & Andress

Article by Monica L. Frantz of Roetzel & Andress LPA

For more articles on the DOL, visit the NLR Labor & Employment section.

Another One Bites the Dust: You Might Be Your Brother Employer’s Keeper (Again)

The U.S. Department of Labor (DOL) has announced a final rule rescinding the Trump administration’s “Joint Employer Status Under the Fair Labor Standards Act” rule, which took effect in March 2020 and provides guidance for determining when multiple employers are considered joint employers and, therefore, jointly liable for labor law violations. The repeal of the rule will likely result in more workers receiving minimum wage and overtime protections under the Fair Labor Standards Act (FLSA) and, in turn, greater legal and financial exposure for employers.

The FLSA generally requires employers to pay non-exempt workers at least the federal minimum wage for all hours worked and at least time and one half the regular rate of pay for hours worked more than 40 in a workweek. Under certain circumstances, an employee of one business may be considered a joint employee of a second business. (The joint employer concept can arise in any context when one company’s workers perform work for another company, but most frequently it arises in the context of staffing agency or leased employees).  If the second business is deemed a “joint employer,” both companies might be liable to the worker for minimum wages and overtime pay under the FLSA.

The joint employer rule that became effective in March 2020 established a four-factor balancing test for determining joint employer status under the FLSA. In determining whether a second company is a joint employer of a worker, the test examines:

  1. Whether the company hires and fires the worker;
  2. Whether the company supervises and controls the worker’s work schedules or conditions of employment to a substantial degree;
  3. Whether the company determines the worker’s rate and method of payment; and
  4. Whether the company maintains the worker’s employment records.

In a news release announcing rescission of the rule, the Biden administration’s DOL concluded that the rescinded rule “included a description of joint employment contrary to statutory language and Congressional intent” and “failed to take into account the department’s prior joint employment guidance.”

The final rule repealing the prior rule becomes effective September 28, 2021. The prior rule made it more difficult for companies to be held liable as joint employers and was generally considered a positive development for the business community.

©2021 Roetzel & Andress

Vaccine Volunteers: Is “Thank You” Sufficient Compensation?

The Fair Labor Standards Act (FLSA) requires employers to pay nonexempt employees at least minimum wage for all hours worked up to 40 hours in a workweek and time and one-half for all hours worked over 40 hours in the same workweek. An exception to this rule exists for volunteers, who are not categorized as “employees” under the statute. Typically, volunteers are individuals who donate their time to non-profit, civic, religious, and other charitable organizations.

In light of the COVID-19 pandemic and the urgency to administer vaccines as quickly as possible, hospitals and healthcare facilities are relying on volunteers to assist in organizing vaccine distribution. Employers may want to review their program to ensure volunteers are donating their time in a way that does not run afoul of the FLSA.

Unfortunately, no bright-line rule exists to determine whether an individual is volunteering his or her time or performing compensable work under the FLSA. Instead, this determination hinges, in large part, on the type of work performed by the individual.

If an individual is performing service that relates to commercial activities, he or she will likely be considered an employee under the FLSA, and therefore entitled to wages. For example, an individual who “volunteers” his or her time working at the hospital gift shop may be entitled to compensation under the FLSA. Further, if a volunteer performs tasks on a full-time schedule, is retained for an indefinite period, or displaces a regular employee, it is likely the FLSA would categorize this individual as an employee who should be paid wages for all hours worked.

Recently, some hospitals have been faced with situations in which employees offered to volunteer their time after their shifts to perform the same types of services they are otherwise employed to provide. For example, a nurse employed at a hospital to administer the COVID-19 vaccine to patients during her regular working hours may volunteer to continue vaccinating patients after her assigned shift. Because this is likely impermissible “volunteer” work under the FLSA, the nurse may be entitled to compensation for any hours worked after her shift.

Another similar situation would be when a retired nurse wants to assist with clinical aspects or vaccine administration on a volunteer basis. For the same reasons noted above, this may also be problematic. Employers may want to review each situation on a case-by-case basis and proceed with caution. At a minimum, the employer may want to consider the below recommendations before classifying the returning nurse as a volunteer—who will likely be working alongside paid employees performing the same tasks.

So how can hospitals and similar facilities potentially use volunteers? Some ideas that may be permissible under the FLSA include: organizing the hospital’s vaccine distribution process, including ensuring patients waiting for their vaccine are wearing masks and staying six-feet apart in a line (among other safety recommendations); helping with check-in and other administrative work; and answering questions from patients.

If permitting volunteer work, healthcare employers may want to consider asking volunteers to sign authorization or other written forms that acknowledge the volunteers are knowingly and willingly donating their time to specific tasks and that the duration of the work is temporary. This type of acknowledgment may help to verify that the volunteer and employer are aligned in terms of the work performed, their relative expectations, and the (lack of) compensation provided.

With hospitals and other healthcare distribution facilities maintaining a commitment to administer the vaccine as effectively and efficiently as possible, volunteers are a key part of this mission. Many roles may exist for volunteers that comply with the FLSA and applicable state laws. While employers may want to carefully consider each situation and take precautions, the additional assistance provided by volunteers may be worthwhile to service communities and provide a quick and seamless process to administer vaccinations. At the very least, employers may want to ensure that volunteers are receiving proper recognition and resources for their time, even if it is a simple “thank you.”

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved
ARTICLE BY John B. Brown and Jamie E. Brod of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Ohio District Court Delivers Win For Pizza Drivers

Following the guidance set forth in the U.S. Department of Labor (DOL)’s Field Operations Handbook, the U.S. District Court for the Southern District of Ohio recently ruled in favor of pizza delivery drivers and in the process confirmed the standard for reimbursement of vehicle expenses under the FLSA.

In Hatmaker, et al., v. PJ Ohio, LLC, et al., the court granted summary judgment in favor of pizza delivery drivers who incurred costs to “purchase, maintain and operate” their vehicles, and alleged that because they were not paid “their actual expenses or the IRS standard business mileage rate,” they were effectively paid less than minimum wage. According to the decision, the defendant employer operated 73 Papa John’s locations, and paid the plaintiff delivery drivers at or near the minimum wage. The parties filed cross-motions for summary judgment, and the court ruled in favor of the delivery driver employees.

The DOL’s anti-kickback regulation prohibits arrangements that “shift part of the Employer’s business expense to the employees . . . to the extent that it reduce[s] an employee’s wage below the statutory minimum.” For example, as the DOL has explained, if the employer requires that an employee provide his or her own equipment or tools, the FLSA is violated “in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid.” As the court explained, “[i]n the pizza delivery context, the cost associated with delivering food for an employer is a ‘kickback’ to the employer that must be fully reimbursed, lest a minimum wage violation be triggered.”

The DOL recognizes that tracking delivery employee expenses is a potentially cumbersome task. Enter the Field Operations Handbook (FOH), which affords employers the option of either tracking and reimbursing delivery drivers for their actual delivery expenses (such as “gasoline, oil and other fluids, vehicle parts, auto repair and maintenance, registration costs, licensing and taxes”) or simply reimbursing delivery drivers at the IRS standard business mileage rate.

The defendant employer in this case neither tracked and reimbursed drivers’ actual expenses nor reimbursed drivers at the IRS standard rate. Thus, the plaintiff delivery drivers argued that they received less than the FLSA minimum wage. The employer argued that the FOH is not entitled to any deference and that it is based on outdated IRS publications. Moreover, the employer asserted that the IRS daily rate does not pertain to reimbursements under the FLSA.

The court found that while the FOH was not entitled to Chevron deference, Skidmore deference was appropriate, as the FOH is “one of the ‘interpretations, opinions and explanatory Guidelines’ of the Department of Labor, to which a court ‘may properly resort for guidance’…”

Based on the DOL’s guidance, the court explained that employers may not “guess” or “approximate” employee expenses, because some employees would inevitably receive less than the minimum wage. Echoing the FOH, the court held that the “the proper measure of minimum wage compliance for pizza delivery drivers is to either (1) track and pay delivery drivers’ actual expenses or (2) pay the mileage reimbursement rate set by the Internal Revenue Service.”

So, the court concluded, employers may defeat summary judgment by showing “that they tracked and paid actual expenses and paid an amount equal to the minimum hourly wage rate plus actual expenses.”

The decision in Hatmaker provides a roadmap for employers of delivery drivers engaged in similar wage and hour litigation, which have become prevalent across the country. Employers of food delivery drivers or other employees who are required to provide their own tools or equipment may wish to review their practices and policies to ensure compliance with the FLSA.

© 2019 BARNES & THORNBURG LLP

More on employee rights under FLSA, see the National Law Review Employment & Labor law page.

Finally, the Final Part 541 Rule: $35,568 Is the New Salary Threshold for Exempt Employees

In its final part 541 overtime rule, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) set the salary level or amount test at $684 per week/$35,568 per year for exempt executive, administrative, and professional employees of section 13(a)(1) of the Fair Labor Standards Act (FLSA). The total annual compensation test for a highly compensated employee is $107,432. The standard salary level test of $684 is comparable to the amount proposed earlier this year since the WHD used the same methodology as it applied in the notice of proposed rulemaking (NPRM). The total annual compensation level for highly compensated employees of $107,432 is lower than that proposed earlier this year in its NPRM because it is based on the 80th percentile of weekly earnings of full-time salaried employees nationally.

According to the DOL, which released the final rule on September 24, 2019, this final part 541 overtime rule “has been submitted to the Office of the Federal Register (OFR) for publication, and is currently pending placement on public inspection at the OFR and publication in the Federal Register.” These new thresholds for exemption from both the overtime and minimum wage provisions of the FLSA go into effect on January 1, 2020.

This final rule is the culmination of a long-term effort to increase these salary and total annual compensation requirements—set forth in part 541 of title 29 of the Code of Federal Regulations—which were last increased in 2004. These regulations define and delimit the exemptions for bona fide executive, administrative, and professional employees. As we wrote previously, the DOL/WHD published a notice of proposed rulemaking in March 2019, with a 60-day comment period that expired on May 21, 2019. After its review of the comments, the DOL submitted its draft final rule to the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget on August 12, 2019. OIRA completed its review of the final overtime rule and returned it to the DOL on September 13, 2019.

In addition to finalizing the salary amount test for exempt employees and the total annual compensation requirement for highly compensated employees, the final rule also permits employers to apply non-discretionary bonus and other incentive payments to satisfy up to 10 percent of the standard salary level, provided such non-discretionary payments are paid at least annually or more frequently. Also in keeping with its proposed rule, the final overtime rule does not include a provision that automatically would increase the salary level test or total annual compensation amount on some regular or periodic basis. Most significantly, the final overtime (part 541) rule does not make any changes to any of the duties tests for these exemptions.

As you may recall in 2016, employer-aligned interests brought suit to challenge the final overtime rule issued during the final year of the Obama administration. The litigation was successful, and the 2016 final rule was enjoined by a federal district court in Texas and has never gone into effect. The 2019 final part 541 rule formally rescinds the 2016 final rule. At this juncture, it is difficult to predict whether employee advocates will mount a similar legal challenge to this rulemaking. While several have expressed interest in doing so, almost all of these advocates argue that the salary level test in the 2019 final rule is insufficient. Instead, they support a salary level requirement along the lines of that published in the 2016 rulemaking that set the salary level test at $913 per week/$47,476 per year for exempt executive, administrative, and professional employees..

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more DOL regulation, see the National Law Review Labor & Employment Law page.

But I’m in HR – What Do You Mean I Can Go to Jail?

Wage and hour laws.  Child labor laws.  OSHA laws.  Immigration laws.  When employers do not comply with these types of employment laws, civil charges and lawsuits are not the only things that can happen.  In what may come as an unwelcome surprise to employers, and to Human Resources, in particular, these laws have criminal penalties embedded in them too.

For example, willful violations of the Fair Labor Standards Act (FLSA) – the federal wage and hour law that also contains certain child labor provisions – may be prosecuted criminally, with violators subject to potential fines of up to $10,000.  Various states also have their own wage and hour laws, and many of them include criminal sanctions.

Although the Department of Justice and administrative agencies enforce laws like the FLSA less or more vigorously, depending on who is president, a case from 2013, during the Obama administration, is instructive.  In that FLSA matter, a company and its owner, plant manager, and office manager were all convicted of various felony counts.  The facts were extreme, including that the employer had a history of FLSA violations, submitted false payment evidence to the Department of Labor during its investigation, demanded kickbacks from workers while continuing to fail to pay overtime, and kept a second set of time records hidden from investigators.  These facts resulted in criminal convictions for the company and three of its management individuals.

The Department of Justice also enforces certain immigration laws that carry potential criminal penalties for employers.  These laws are especially noteworthy in today’s atmosphere of heightened immigration enforcement.  Employers who unlawfully employ persons who are not authorized to work in the United States could be subject to criminal prosecution.  Federal and state OSHA laws also contain criminal in addition to civil penalty provisions.

We know that Human Resources professionals can sometimes have a hard time convincing other leaders in an organization to listen to their suggestions.  It can be very frustrating, for example, when HR knows that certain employment policies need to be revised or certain payment methods may not comply with legal requirements, and yet other members of the management team will not make the changes.

One way HR can help guide managers who need to make decisions about certain employment policies – and to get their attention – is to point out that not only can failure to follow certain laws result in expensive civil lawsuits; but sometimes they can also result in criminal prosecution.  Though rare, these prosecutions and convictions do happen – something clearly all HR and all managers want to avoid.

Are you likely to go to jail as an HR professional under these laws?  Not likely.  Nonetheless, HR professionals should be aware of the possibilities and be prepared to discuss them when educating management.

© 2019 Foley & Lardner LLP
For more on employment matters, see the National Law Review Labor & Employment page.

State Attorney Generals Brace for Battle with Department of Labor Over Newly Proposed Federal Overtime Salary Exemption Threshold

After the March 7, 2019 unveiling by the U.S. Department of Labor (“DOL”) of its long- awaited proposed rule, which would make more workers eligible for statutory overtime  pay, the attorneys general (“AGs”) of 14 states and the District of Columbia announced on May 21, 2019 that they oppose DOL’s proposed rulemaking. Included among the states opposing DOL’s proposal are New Jersey and New York.

The existing annual salary overtime exemption threshold under the Fair Labor Standards Act (“FLSA”) is $23,600 for full-timers (or $455 per week). Employees who are paid below that salary must be paid overtime if they work more than 40 hours per week. The FLSA salary threshold test has not changed since 2004.

DOL’s newly proposed rule, characterized as an Executive Order 13771 “deregulatory action,” would, among other things, increase the qualifying salary threshold for overtime exemption to $35,308 annually for full-time workers (or $679 per week). In doing so, the rule, if promulgated, would effectively convert an estimated one million workers to hourly wage status and qualify them for time-and-one-half overtime pay for hours they work in excess of 40 in a given workweek.

The newly proposed rule also would clarify the type of compensation (such as payments made for vacations, holidays, illness, or failures to provide sufficient work) which would be excluded from the definition of an employee’s “regular rate” for purposes of calculating whether overtime pay is due, and increase the total annual compensation threshold for “highly compensated employees” (for whom overtime wages generally need not be paid) from $100,000 to $147,414 annually.

The proposed new rule stands in sharp contrast to the final rule promulgated by DOL during the Obama Administration in 2016, which would have raised the annual salary exemption threshold to $47,476 for full-timers (or $913 per week) and require automatic adjustments to the salary threshold standard every three (3) years. However, on November 22, 2016, a federal district court in Texas held that that rule was inconsistent with Congressional intent and issued a nationwide injunction staying its implementation. On October 30, 2017, DOL appealed the district court’s summary judgment decision to the Fifth Circuit Court of Appeals. On November 6, 2017, the appellate court granted the Government’s motion to hold the appeal in abeyance while DOL reexamined the salary threshold test.

The AGs argue that the proposed rule does not go far enough, championing instead the Obama-era 2016 Final Rule, which would have made roughly four million workers newly eligible for overtime pay. In the May 21, 2019 letter signed by each of the AGs, they contend, among other arguments, that the newly proposed rule would be arbitrary and capricious, and therefore unlawful under the  federal  Administrative Procedure Act, because it would unreasonably institute a markedly lower salary threshold level and improperly eliminate mandated periodic reviews of the salary threshold standard. Meanwhile, Congressional Democrats have announced plans to introduce legislation that would revive the Obama-era salary exemption threshold.

On March 29, 2019, DOL published its newly proposed rule, triggering a 60-day public comment period that expired May 28, 2019. Presumably, DOL will be reviewing the comments it received and publishing its final rule, though the final rule’s promulgation date is uncertain. Given the anticipated political and judicial battles over what the new threshold should be, it is not clear what overtime salary exemption threshold ultimately will emerge.

Takeaways for Employers

  • Employers should closely monitor administrative, judicial and legislative developments relating to the proposed increase in the salary exemption overtime threshold.

  • An increase in the threshold is likely, though the amount of the increase and the effective date of same remain uncertain.

  • Once the threshold is increased, certain employees previously exempt from overtime will be eligible for hourly overtime pay depending on what dollar amount is established as the new salary threshold standard, and employers will be required to maintain time worked records for those newly converted hourly employees.

  • In anticipation of the change in the threshold amount, employers should begin the process of identifying job classifications that potentially may be impacted by a change in the salary exemption standard.

© Copyright 2019 Sills Cummis & Gross P.C.
This post was written by Clifford D. Dawkins, Jr. and David I. Rosen of Sills Cummins & Gross P.C.
Read more news on the DOL Overtime Regulations on the National Law Review’s Employment Law Page.

Three Takeaways from DOL’s Proposed New Overtime Rule

On Mar. 7, 2019, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) regarding changes to the “white collar” overtime exemptions under the Fair Labor Standards Act (FLSA).

Here are three key points employers need to know:

1. The salary basis threshold would increase to $679 per week ($35,308 per year).

The DOL set this threshold by using the same methodology from the 2004 revisions, which set the salary level at $455 per week.

In 2004, $455 per week represented the 20th percentile of earnings for full-time salaried workers in the lowest-wage census region and in the retail sector. The new annual salary of $35,308 represents the DOL’s estimate for the 20th percentile standard in January 2020, when it anticipates the rule to become final. The NPRM would also permit employers to count nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more-frequent basis to satisfy up to 10 percent of the standard salary level.

With the prior rule issued under President Barack Obama, the DOL attempted to change the salary basis level from $455 to $913 per week. As we have covered in this blog, the change did not take effect because the United States District Court for the Eastern District of Texas blocked the rule from taking effect. Under President Donald Trump, the DOL ultimately stopped pursuing the rule and dropped its appeal of the Texas court’s ruling.

2. The salary basis threshold for highly compensated employees would also increase from $100,000 to $147,414 per year.

The proposed salary basis threshold represents the 90th percentile of full-time salaried workers nationally, as projected by the DOL for 2020. This was the same methodology used by the DOL for the Obama-era rule.

3. The duties tests for executive, administrative and professional employees remain unchanged.

Assuming an employer has properly classified its exempt employees, the NPRM will not change that classification, unless the employee no longer satisfies the salary basis threshold.

Given how the Obama-era rule met its demise, the NPRM is unlikely to be the final word. Stay tuned for additional developments.

 

Copyright © 2019 Godfrey & Kahn S.C.
This post was written by Rufino Gaytán of Godfrey & Kahn S.C.