Tag: FLSA

Proposed Labor Violation Reporting Rules Target Government Contractors

Proposal makes agency allegations of employment law violations reportable events that could result in denial of federal contracts or termination of existing contracts.

Executive Order 13673 (the Order), signed by US President Barack Obama in July 2014, imposed three new requirements addressing the labor and employment practices of federal contractors and subcontractors: (1) an obligation to report employment law violations, which would be used by contracting officers to determine whether to award a new federal contract or terminate an existing contract; (2) a requirement to provide notices to workers about their Fair Labor Standards Act (FLSA) exemption or independent contractor status; and (3) a requirement that federal contractors agree that claims arising under Title VII or any tort related to or arising out of sexual assault or harassment by their employees and independent contractors will not be arbitrated without the voluntary postdispute consent of an employee or independent contractor, with certain limited exceptions.

E.O. 13673 directed the Federal Acquisition Regulatory Council (FAR Council)—which consists of the Administrator for Federal Procurement Policy, the Secretary of Defense, the Administrator of National Aeronautics and Space, and the Administrator of General Services—to publish implementing regulations through the Federal Acquisition Regulation (FAR) system. The Order also directed the Department of Labor (DOL) to publish guidelines that address transactions deemed to be reportable employment law violations, as well as how contracting officials should use such reported information to determine whether to award a federal contract (or terminate an existing contract). The Order, while effective upon issuance, expressly applies to all solicitations for contracts only as set forth in any final rule issued by the FAR Council.

On May 28, 2015, the FAR Council published a Notice of Proposed Rulemaking implementing E.O 13673.[1] On the same day, the DOL published proposed guidance.[2] The proposed rule and guidelines contain many potentially alarming provisions for employers seeking federal contracts, some of which appear to violate contractors’ due process and Fourth Amendment rights. If adopted, the proposals would impose administrative burdens on contractors, increase the complexity of obtaining and keeping federal contracts, and likely lead to an increase in bid protests and litigation.

The proposals offer employers a 60-day period to submit comments in opposition to these provisions. We strongly encourage employers that have or may seek federal contracts to take advantage of this comment opportunity. If you are interested in sponsoring comments, please contact us in the near future; the period for filing comments only runs through July 27, 2015.

Proposed Implementation of the Employment Violation Reporting Obligations

E.O. 13673 requires employers who are prospective awardees of federal contracts to report certain labor law violations that occurred within the prior three years. Awardees of federal contracts must submit reports of labor law violations every six months during the performance of the contract. The reportable violations include “administrative merits determinations,” “arbitral awards or decisions,” and “civil judgments” involving claims or enforcement actions under many federal employment laws.[3]

The proposed guidelines define “administrative merits determinations” by reference to the specific types of determinations made by a federal enforcement agency, such as the Wage and Hour Division (WHD), Office of Federal Contract Compliance Programs (OFCCP), Occupational Safety and Health Administration (OSHA), Equal Employment Opportunity Commission (EEOC), and National Labor Relations Board (NLRB). Reportable determinations also include, broadly, complaints that a federal enforcement agency files and administrative orders issued through agency adjudication. However, complaints that private parties file with enforcement agencies or in court alleging employment law violations would not trigger a reporting obligation.

Under the proposed guidance, “administrative merits determinations are not limited to notices and findings issued following adversarial or adjudicative proceedings such as a hearing, nor are they limited to notices and findings that are final and unappealable.” Thus, contractors will be required to report mere agency allegations, such as OSHA citations, WHD investigation finding letters, OFCCP show cause notices, EEOC reasonable cause determinations, and NLRB complaints. These disclosures are required even if a contractor is challenging an allegation through formal proceedings. If, at the time of the required reporting, the enforcement agency allegation is withdrawn or reversed in its entirety through additional proceedings in the matter, then there is no reporting obligation.

The DOL will publish additional proposed guidelines that address administrative determinations that state enforcement agencies make under laws that DOL deems to be equivalent to the above-referenced federal laws.

The proposed DOL guidelines define “civil judgments” as any judgment or order entered by any federal or state court in which the court determined that an employer violated any provision of the above-referenced employment laws or enjoined the employer from committing a violation. Civil judgments include orders or judgments that are not final and are appealable, and the employer must report such judgments even if an appeal is pending. Consent judgments are subject to the reporting obligation if they contain a determination that an employment violation occurred or enjoin the employer from violating any provision of the employment laws. However, a private lawsuit that a court dismissed without a judgment would not be a reportable event.

The proposed DOL guidelines define “arbitral awards and decisions” as any award or order by an arbitrator or arbitral panel in which the arbitrator or panel determined that an employer violated any provision of the above-referenced employment laws or enjoined the employer from committing a violation. Arbitral awards include awards and orders that are not final and are appealable, and the employer must report such judgments even if an appeal is pending. Arbitral awards and orders must be reported even if they are subject to a confidentiality agreement.

Under the proposed DOL guidelines, the same alleged violation may trigger several successive reporting obligations. Each transaction must be reported even if the same alleged violation was the basis for a prior report. For example, where an initial agency allegation was reported, the same allegation must later be reported if it is sustained through an administrative order, and must be reported yet again if a federal court affirms it in a review action. However, if the initial reported transaction is reversed or vacated in its entirety through later proceedings, there is no obligation to continue to report the initial transaction in any future contract bid.

The proposed FAR regulations simply incorporate the DOL guidelines by reference and do not modify or expand on the definitions regarding reportable events.

Mechanics of the Contracting Process Under the Proposed FAR Rule

Prior to awarding a government contract, a contracting officer is required to make an affirmative responsibility determination that includes a determination that the apparent successful offeror or bidder has a satisfactory record of integrity and business ethics. The proposed rule requires that the contracting officer consider a prospective contractor’s labor violations in determining whether that contractor has a satisfactory record of integrity and business ethics. Under the proposed FAR rule, all employers bidding on a federal contract would initially provide a representation that there have been or have not been reportable employment law violations. Thereafter, once the contracting officer has initiated a responsibility determination for the prospective contractor, if the employer has indicated covered employment law violations, that employer would be required to enter detailed information describing the violations in the System for Award Management (SAM), including (1) the employment law that was allegedly violated; (2) the relevant matter or case number; (3) the date that the determination, judgment, award, or decision was rendered; and (4) the name of the court, arbitrator(s), or agency that rendered the decision. Further, the contracting officer would be required to solicit from the employer additional information that the prospective contractor views as necessary to establish affirmatively its responsibility, such as mitigating circumstances; remedial measures, including labor compliance agreements; and other steps taken to comply with labor laws.

The contracting officer would review the data provided, and, in consultation with agency Labor Contract Advisors, would determine whether the employer is a responsible source eligible to receive the federal contract. The proposals contemplate that most entities would not be deemed nonresponsible, but instead would be required to agree to a “labor compliance agreement” as a condition of award of the federal contract. The proposals provide little discussion or framework for labor compliance agreements, apparently vesting broad authority in enforcement agencies, the DOL, agency Labor Contract Advisors, and contracting officers to develop, negotiate, and monitor such agreements. Employers should pay particular attention to these proposals because they would place powers in the hands of federal regulators to extract extra-legal “remedial actions” by leveraging an award or continuation of federal contracts. The outlook for those prospective offerors found nonresponsible is equally grim; the likelihood of successfully challenging contracting officer responsibility determinations in the procurement process is very low given the high level of deference accorded such determinations by both the Government Accountability Office (GAO) and the Court of Federal Claims (COFC). Moreover, because the proposed regulation’s definition of “administrative merits determinations” effectively includes notices or findings that amount to little more than alleged violations, it is unclear whether GAO or the COFC could readily find a determination of nonresponsibility to be without a rational basis, even if that decision was predicated on alleged violations that, after contract award, may not be proven.

Post-Award Implications of Labor Violations

Employers awarded contracts would be required to enter current information regarding labor violations in SAM on a semi-annual basis. If, based on this information, the Labor Contract Advisor determines that further consideration or action is warranted… click to continue reading Proposed Labor Violation Reporting Rules Target Government Contractors

ARTICLE BY

William E. Doyle, Jr. & E. Ruscus of Morgan, Lewis & Bockius LLP
Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Fifth Circuit Refuses Application of Bright-Line Test in FLSA Seaman Exemption Dispute

Proskauer Law firm

On November 13, 2014, the Fifth Circuit addressed the uncertainty stemming from its decision in Owens v. SeaRiver Maritime, Inc., 272 F.3d 698 (5th Cir. 2001), wherein the Court found that a plaintiff’s unloading and loading of vessels was considered “nonseaman” work subject to the Fair Labor Standards Act’s (“FLSA”) overtime requirements. Subsequent to that decision, plaintiffs have advocated for a broad application of Owens’s rule, and district courts struggled with Owens’s  application to what are often fact-driven cases.

The Fifth Circuit provided necessary clarity in Coffin v. Blessey Marine Services, Inc., No. 13-20144, 2014 WL 5904734 (5th Cir. Nov. 13, 2014), when it reversed the district court on an interlocutory appeal and held that vessel-based crewmembers tasked with loading and unloading vessels are seamen under the FLSA rendering them exempt from the FLSA’s overtime requirements under 29 U.S.C. § 213(b)(6). In so ruling, the Fifth Circuit limited its prior holding in Owens, by finding that the unloading and loading of vessels is not strictly “nonseaman” work, and that each individual and case must be analyzed under a facts-and-circumstances test. Significantly, in dicta, the Court intimated that the Department of Labor’s “twenty percent rule,” which states that an employee loses his seaman status when “nonseaman” work occupies over twenty percent of his time, is also not a bright-line test.

Plaintiffs are tankermen who lived and worked aboard Defendant’s vessels. Though the parties and the court agreed that most of Plaintiffs’ job duties were “seaman” work exempt from the FLSA’s overtime requirements, Plaintiffs filed suit alleging that their job duties related to the loading and unloading of vessels constituted “nonseaman” work for which overtime pay was owed. Plaintiffs and the district court relied on the Fifth Circuit’s prior holding in Owens, and the district court denied Defendant’s motion for summary judgment. The district court and the Fifth Circuit granted Defendant’s interlocutory appeal under 29 U.S.C. § 1292(b).

Following oral argument, the Fifth Circuit issued its decision, which disagreed with Plaintiffs’ and the district court’s interpretation and application of Owens. Importantly, the Fifth Circuit distinguished Owens and emphasized that the analysis under the FLSA’s seaman exemption is a fact-based and flexible inquiry not subject to bright-line, categorical rules. The Court reasoned that the analysis required the consideration of the character of the work performed and the context in which it is performed and not the consideration of where the work is performed or how it is labelled. Unlike in Owens where the plaintiff was a non-crewmember who was not tied to a vessel and who only sought overtime for land-based loading and unloading, the Plaintiffs in this case lived on Defendant’s towboats, and their loading and unloading duties undisputedly affected the seaworthiness of the vessels and were integrated fully with their other seaman duties. Therefore, considering the character and context of the work performed, the Court concluded that the Plaintiffs’ unloading and loading duties were seaman work, thus exempting Plaintiffs from the FLSA’s overtime requirements.  For these reasons, the Court vacated the lower court’s ruling and remanded the matter to enter judgment in favor of Defendant.

ARTICLE BY

Nicole A. Eichberger
Lindsey H. Chopin
OF
Proskauer Rose LLP

Wage Deductions in West Virginia

Steptoe Johnson PLLC Law Firm

Most West Virginia employers must comply with two wage and hour laws: the federal Fair Labor Standards Act (“FLSA”) and the West Virginia Wage Payment and Collection Act (“WPCA”).  Both laws restrict the ability of employers to make deductions from employees’ wages.

The FLSA

When an employer makes impermissible deductions from an exempt employee’s pay, the employer risks losing the exemption from the FLSA’s overtime requirement.  Generally, to be exempt, the employee must perform certain exempt duties and must be paid at least $455 per week on a salary basis.  A salary is a predetermined, fixed amount of compensation that does not fluctuate because of changes in the amount of hours worked from week to week.  The general rule is that employers must pay exempt employees the full salary amount for any week in which the employee performs any work regardless of the number of hours worked.

However, there are some exceptions that allow for an employer to make deductions:

  1. If the employee is absent from work for one full day or more because of personal reasons other than sickness or disability;

  2. For absences caused by sickness or disability if the deduction is made in accordance with a bona fide plan that provides compensation for the lost time;

  3. As penalties for violating safety rules of major significance;

  4. For unpaid, disciplinary suspension; and,

  5. To offset amounts an employee receives as a jury or witness fee, or for military pay.

  6. Employers are also permitted to make deductions from an employee’s paid time off as long as the employee receives his or her standard weekly salary.  If the employee performs no work in a given workweek, then the FLSA does not require that the exempt employee be paid for that week.  Similarly, an employer is not required to pay the full salary in the first and last weeks of employment or when the employee takes unpaid leave under the Family and Medical Leave Act.

The FLSA also contains a provision that allows employers to correct an impermissible deduction and thereby preserve the exempt status of the employee.  To take advantage of this “window of correction,” the employer must have a policy that is clearly communicated to employees that prohibits improper deductions.  The policy should be in writing and must provide a mechanism by which employees can file complaints.  Once a violation is found, the employer must reimburse the employee and make a good faith commitment to comply in the future.

The WPCA

The WPCA limits an employer’s ability to make deductions from an employee’s wages after the wages have been earned, unless the employer and employee have completed a statutorily-required authorization.  This includes situations where the employee owes the employer a debt, such as when the employee has charged a purchase to an employee account.  Unlike the FLSA, the WPCA restrictions apply to both salary and hourly employees.

An authorization is not required if the deduction is for union or club dues, pension plans, payroll savings plans, credit unions, charities, hospitalization and medical insurance.  In addition, deductions without an authorization are permitted when the deduction is for “an amount required by law to be withheld.”  This exception is very narrow.  Wages that must be garnished pursuant to a court order, such as child support obligations, would meet the exception.

If the deduction is for any reason other than those listed above, then the employer must use a wage assignment form.  The West Virginia Division of Labor has posted a sample form on its website, and employers should use this form.  The assignment cannot exceed one year.  It must be signed by the employer, acknowledged by the employee, and notarized.  It must also specify the total amount due and collectible by virtue of the assignment and state that three fourths of the employee’s periodical wages are exempt from the assignment.

© Steptoe & Johnson PLLC. All Rights Reserved.

ARTICLE BY

Joseph U. Leonoro
OF
Steptoe & Johnson PLLC

Second Circuit Finds that Entry-Level Audit Associates at Accounting Firm are Exempt from Federal Overtime Requirements

Sheppard Mullin Law Firm

In Pippins v. KPMG LLP, No. 13-889 (2d Cir. July 22, 2014), the Second Circuit Court of Appeals unanimously held that entry-level audit associates (“Plaintiffs”) at KPMG LLP qualify for the Fair Labor Standards Act’s (“FLSA”) “learned professionals” overtime exemption.  The Second Circuit explained that, while the closely-supervised employees were “the most junior members” of the KPMG accountancy team and did not “make high-level decisions,” their work still required sufficient knowledge and judgment to qualify for the exemption.

The FLSA exempts employers from paying overtime to workers whose “primary duty” is “the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.”  Such workers may qualify for the FLSA’s “learned professional” exemption provided that their work is: (i) “predominantly intellectual in character, and requires the consistent exercise of discretion and judgment”; (ii) in a “field of science or learning,” such as accounting; and (iii) of a type where “specialized academic training is a standard prerequisite for entrance into the profession.”

While the parties in Pippins agreed that accounting qualifies as a field of “science or learning” under the FLSA, the Second Circuit’s decision provides guidance for employers seeking to determine whether an employee’s position may meet the other two necessary elements for the learned professional overtime exemption to apply.

The “Discretion and Judgment” Prong

Noting the lack of guidance in the FLSA’s regulations expounding on the “discretion and judgment” prong, the Court held that, in the learned professionals context, employees need not “exercise management authority,” particularly where they work for firms that provide professional services to other businesses, such as KPMG.  Rather, “what matters is whether [employees] exercise intellectual judgment within the domain of their particular expertise.”  As applied to the field of accounting, the Court explained that accounting requires the consistent application of a “professional skepticism” throughout the process of collecting and analyzing data in order to ensure that audits expose potential financial irregularities or accounting improprieties.

The Plaintiffs maintained that they merely exercised simple “common sense,” made only “obvious” observations, followed strict templates and guidelines, and exclusively conducted routine work that was reviewed by supervisors before being assimilated into final audit reports.

However, the Court largely characterized Plaintiffs’ contentions as “confus[ing] being an entry-level member of a profession with not being a professional at all.”  Indeed, the Court observed that the existence of guidelines and supervision is characteristic of professional firms and organizations and is simply intended to provide training and ensure quality work.  The fact that junior professionals are subject to close supervision and must adhere to guidelines “does not relegate [them] to the role or status of non-professional staff.”  The Court further explained that employees can “exercise professional judgment when their discretion in performing core duties is constrained by formal guidelines or when ultimate judgment is deferred to higher authorities.”

With respect to Plaintiffs, the Court found that their use of templates, the specific guidelines they were required to follow and the supervision of their work, did not deprive them of the need to exercise professional skepticism throughout the auditing process.  In the Court’s view, the Plaintiffs were still required to exercise their specialized knowledge of accounting in order to determine when to deviate from such guidelines, or when to bring questions to superiors. “It is a hallmark of informed professional judgment,” the Second Circuit explained, “to understand when a problem can be dealt with by the professional herself, and when the issue needs to be brought to the attention of a senior colleague with greater experience, wisdom, or authority.”

The “Specialized Academic Training” Prong

With respect to the “specialized academic training” prong of the learned professional exemption, the Court held that “the requirement will usually be satisfied by a few years of relevant, specialized training,” and that “a bachelor’s degree in a germane field [often] suffices.”   By contrast, the Second Circuit observed that generic, non-specialized educational requirements, such as a requirement that an employee possess a general bachelor’s degree in “any field,” are insufficient to establish the prerequisite.  Finally, the Court explained that to determine whether the exemption applies, the educational prerequisites for entry into the particular profession must be customary.  Because the audit associates were generally required to either be eligible or nearly eligible to become licensed Certified Public Accountants (“CPAs”) and the “vast majority” of them possessed accounting degrees and could take the CPA exam, the Court held that the Plaintiffs work required specialized educational instruction.

Plaintiffs contended, however, that they did not meet the specialized academic training requirement because their job duties didn’t actually call on them to employ the knowledge they acquired in the course of their studies.  The Court acknowledged the potential merit of this argument in the case of  a well-educated professional who is never expected to draw on her education in practice.  However, the Court quickly dispatched the argument as it pertained to Plaintiffs, finding that the “average classics or biochemistry major” would not be able to adequately perform or fully understand the auditors’ work functions.

Conclusion

The Pippins decision offers greater clarity to employers in  applying the “learned professional” exemption.  The decision establishes that, even where low-level employees are closely supervised, regularly perform routine tasks, and follow established templates and guidelines, their work can still demand enough professional judgment to qualify them as learned professionals.

ARTICLE BY

Kevin J. Smith
Jonathan Sokolowski
Of:
Sheppard, Mullin, Richter & Hampton LLP

Working Through Lunch: An Update on the Legal Risks

Barnes Burgandy Logo

Regular readers of this blog know that we’ve previously alerted you to the risks of using timekeeping software that automatically deducts the lunch hour from employees’ paychecks.  As we’ve explained before, such software can expose employers to liability under the Fair Labor Standards Act because, for one reason or another, employees sometimes work through lunch. And, even if an employer has a system in place for employees to request pay for lunchtime work, that is no “get out of jail free card,” because employees who bring FLSA lawsuits commonly argue that they did not use – or were discouraged from using – the system.

A lawsuit that was filed earlier this month in Texas federal court gives us another reason to sound the alert.  In Corcione v. Houston Methodist, the plaintiff alleges that she – and a class of some 5,000 nurses, nurses assistants, patient care assistants and other employees at seven different medical facilities – were required to keep their cellphones on hand during their meal breaks in case they were needed to respond to emergencies. And, even though the employers had systems in place for requesting pay for lunchtime work, the plaintiff claims that managers discouraged employees from making such requests. The plaintiff seeks to recover the unpaid wages (for the time claimed to have been worked, including overtime pay), liquidated damages, and legal fees.  In other words, the plaintiff wants tens of millions of dollars.

A policy requiring nurses (and similar employees) to be available so that they can respond to emergencies probably seems reasonable to you, and we feel the same way. Work “emergencies” aren’t limited to the medical field, of course, and many other types of employers have similar policies – written or unwritten. If you’re one of them, just remember that the ramifications of such policies can land you on the wrong side of the FLSA if you’re not careful. We’ve said it before, and we’ll say it again:  Work time must be compensated.  Even if that “work time” comes during what – on a normal day – would have been “lunch time.”

Article By:

James F. Ehrenberg
Of:
Barnes & Thornburg LLP