It’s not uncommon for employers to employ workers on various non-immigrant visas. Recently, a high profile case finally settled but it cost the former McDonald’s franchisee a hefty sum as well as a lot of bad publicity. After years, the DOL’s Wage and Hour Division reached a settlement with the former McDonald’s franchisee for back pay, damages as well as a civil penalty for violating the FLSA’s minimum wage and overtime provisions when it underpaid foreign student workers. The settlement is nearly $211,000.
The student workers were working in the US under the J-1 visa program. The Exchange Visitor (J) non-immigrant visa category is for individuals approved to participate in work-and study-based exchange visitor programs. Visas under the J-1 program are available to post-secondary students enrolled full time and pursuing studies at post-secondary accredited academic institutions who come to the U.S. to work and travel during their summer vacation. Many employers employ individuals on a J-1 visa for a variety of reasons including being able to transform their business with international talent or to train individuals to start branches overseas.
The DOL found that the employer violated two main parts of the FLSA: (1) it made improper deductions from employee paychecks, which brought the rate of pay for some employees below the federal minimum wage of $7.25 per hour, and (2) some employees did not receive the required overtime premium.
Employers should be mindful of the FLSA’s requirements when they are employing individuals on any type of visa.
I have been following the series of lawsuits filed by attorneys who claim they were not performing “attorney” work and are therefore entitled to overtime in collective and class actions filed under the Fair Labor Standards Act. Now, the major law firm of Skadden Arps, in defending one such suit, has filed a motion to dismiss the suit, strongly contending that a recent decision by a judge who refused to dismiss a similar case disregarded relevant caselaw and promulgated an “unworkable standard.” The case is entitled Lola v. Skadden Arps Meagher Slate & Flom LLP and was filed in federal court in the Southern District of New York.
In a brief submitted to the Court, Skadden urged that the policy undergirding the FLSA never anticipated that individuals like these would be eligible for overtime pay. “The federal overtime laws were not designed for advanced-degree professionals to accept premium wages and then make ‘gotcha’ arguments that they were misclassified for every period they performed a task a nonprofessional could allegedly also complete.”
The law firm contended that the plaintiff’s reliance on U.S. District Judge Ronnie Abrams’ December decision not to dismiss a similar suit was misplaced. The firm, contrary to Judge Abrams, who concluded that what constitutes the practice of law was one of first impression for federal courts, asserted that federal courts have already ruled on this and found that the work at issue was, in fact, exempt.
The law firm also strongly disagreed with Judge Abrams setting forth (or, perhaps, inventing) a three part test to determine if an individual was practicing law. The firm argued this was beyond the FLSA to determine if someone is engaged in the practice of law. The plaintiff in this case has urged that this “test” be adopted. The “test” is whether the worker gives legal advice to particular clients, whether the individual holds himself out as an attorney and whether the person’s duties compel him to rely on his legal knowledge and judgment. The law firm points out, however, that the FLSA professional exemption does not mandate specific inquiry into the discrete tasks performed by the lawyer.
I believe this “test” is indeed an unworkable standard and not what is intended under the FLSA professional regulations related to the practice of law. I believe that these document reviewers are utilizing their legal judgment and analytical ability, even though the work, on the surface, may be tedious and repetitive.
To be continued….
Sales employees are generally compensated with commission compensation structures. Sometimes a commission is paid in addition to a salary, other times its paid instead of salary. The tech industry employs so many sales reps, that they generally pay with the former compensation structure above (combo base and salary). For both the employer and the employee there are so many questions surrounding how commission structures work. Federal law addresses it, states have their rules own too. Here are some basic facts about commissions in New York:
- The Labor Law requires that a commission salesperson agreement must be in writing and signed by both the employer and the salesperson. It must contain:
- A description of how wages, salary, drawing accounts, commissions, and all other monies earned and payable will be calculated;
- How often the employee will be paid;
- The frequency of reconciliation (if the agreement provides for a revocable draw);
- Any other details pertinent to the payment of wages, salary, drawing accounts, commissions, and all other monies earned and payable when the employment relationship ends.
- The employer must provide the commission salesperson, upon written request, with a statement of earnings paid or due and unpaid.
- When is a commission considered “earned?” Commissions are earned at the time specified in the written employment agreement. If the agreement is silent, a commission is considered to be earned in accordance with the past dealings between the employer and commission salesperson. If none exist, then a commission is considered earned when the commission salesperson produces a person ready, willing, and able to enter into a contract upon the employer’s terms.
- Once a commission is “earned,” it is legally considered “wages” under the Labor Law and subject to all other provisions of
the Labor Law regarding the payment of wages.
- Even if the employment relationship with the employer has ended, the commission is considered wages and still has to be paid to the employee. If the commissions have not yet been earned, the terms of the written employment agreement, which must include language addressing this situation, will control.
Commissions can be complicated. Employers should be extra cautious when using them, and should be educated on not only the federal requirements, but the state’s too. As you can see, New York’s Labor Law directly addresses many of the issues surrrounding Commissions.
Happy Valentine’s Day.
When a class becomes conditionally certified in a FLSA collective action, the only weapon (absent settlement) that the defendant-employer then is left with is a motion to de-certify the class and reduce the litigation to a single plaintiff. Putting all of one’s eggs in that basket is risky, because if that overture fails, the plaintiffs are really in control of the entire litigation and the damages/stakes escalate sharply.
So has learned Avis Budget Car Rental LLC, when the federal district court in New Jersey rejected the defense’s motion to de-certify a class of shift managers bringing overtime claims based upon misclassification. The motion was founded on the standard defendant’s contention that the job duties of the people were too dissimilar to allege that a common pattern or practice prevailed. It is this need for individualization that dooms, or not, a collective action. The case is entitled Ruffin Jr. et al. v. Avis Budget Car Rental LLC et al. in the District of New Jersey.
U.S. District Judge Susan D. Wigenton concluded that there were not sufficient differences in the job duties of the plaintiffs. “Deposition testimony of plaintiffs and defendants’ witnesses demonstrates that plaintiffs performed primarily the same duties, were nearly all given the job title and job description of shift manager, underwent the same training program, and were subject to the same policies — including not being paid overtime wages,” the Court stated.
Although Judge Wigenton acknowledged that there were some differences in job duties performed, they were not “material and ‘any such differences are outweighed by the similarities between those plaintiffs.’ The shift manager’s theory was that they performed menial tasks the majority of their work time and that this amount of time undermined the premise that their “primary duty” was management or supervision.
This outcome highlights the way that one of these cases can spiral out of control, as it were. The plaintiff-side legal fees are probably significant, the damages, which will be doubled, will be significant and there is the extra year added on to the statute of limitations. Although, these days, I believe that a very viable, cost effective strategy is to settle for (only) the named plaintiff and fix what is broken, when an entire class of people is implicated, the stakes become big enough for the employer to roll the dice on a de-cert motion, although the outcome here was not good.
Certain types of employees, who are classified as exempt employees, are not entitled to overtime pay as guaranteed by the FLSA. It follows that non-exempt employee are entitled overtime if they work more than 40 hours per week. A recent settlement highlights some of the issues that can arise when employees are misclassified as exempt, and how employers should take extra caution when classifying their employees.
In a class action suit brought against a national teen tour company, the suit alleged that the trip leaders were less than $2,000 for trips lasting from two weeks to 90 days. The leaders claimed they were not paid overtime or given duty-free meal and rest breaks during their 16 to 18 hour days. More than 85 percent of class members opted into the settlement and will receive payments from the $500,000 settlement.
An interesting note about this case, is that it highlights a misapplication of the “Camp Exception.”
Section 13(a)(3) provides a complete exemption from the minimum wage and overtime requirements of the FLSA “for any employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit education conference center, if (A) it is not open for more than seven months in any calendar year, or (B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33 1/3 per centum of its average receipts for the other six months of such year.”
The case above clarifies that the “camp” exemption for overtime is limited to those organizations centered around an actual site or facilities that provide something like the traditional summer camp experience, and not for any organization principally offering excursions.
Unfortunately the error was massive to the employers in this case, but a reminder to employers operating businesses to carefully asses the classification of their employees, as well as their overall payroll practices.
I often write about the spread and proliferation of FLSA collective and class actions. I just read a study to the effect that the number of these lawsuits rose to even higher levels in 2013, at the same time that other employment lawsuits declined. This trend will continue because there is so much confusion out there as to wage-hour issues, the three biggest problems being exempt vs non-exempt classification, working time issues and independent contractor issues (another variation on the misclassification theme).
The Seyfarth Shaw report states that there were 7,882 Fair Labor Standards Act cases filed, an increase of a few hundred from 2012, while employment discrimination cases dropped to 12,311 cases from the more than 14,000 filed in 2012.
What this means is that no company, big or small, is immune to such suits and they can come from anywhere at any time, usually when an employee is fired or has complained about not receiving overtime or proper payment. The (truly) only way, to “avoid” such suits is to be proactive and ensure that the employer’s payroll and compensation practices are compliant with federal (and State) law. How to do that?
Take a long, hard honest look at these payroll and classification practices. I know there are often internal struggles and turf wars in companies and certain corporate divisions/components may have an often intense desire to “believe” that certain people are exempt (e.g. they exercise “discretion”) or that they are independent “consultants” even though they only consult for the one company (which means they are not independent). Those notions can only come back to bite the employer badly and possibly expose the company to geometric liability, especially in the case of a collective or class action, which are incredibly expensive to defend (even if a good defense exists).
This analysis has to be balanced against existing case law, especially recent US Supreme Court decisions that have (arguably) made it tougher for plaintiffs to secure Rule 23 certification, meaning that they (i.e. plaintiffs’ lawyers) are more inclined to go the FLSA route, with its liquidated (double) damages and a third year of potential liability.
As the cliché goes, discretion is the better part of valor, especially when dealing with and defending FLSA collective actions. So, a word to the wise—internal audits.
Prevailing wage (“PW”) law is an almost anachronistic subset within the field of wage hour law. Prevailing wages mean those wages that “prevail” in union contracts within a defined geographical area (i.e., a county) and are wages that must be paid on all public work, such as construction contracts to build roads, bridges, and, as discussed herein, in ameliorating the damage caused to New Jersey by Hurricane Sandy. Many see these statutes as union boondoggles because they artificially mandate an unusually high level of wages.
The NJ Department of Labor is very aggressive in its enforcement of the State’s prevailing wage law. Individuals (and classes of employees) may bring private lawsuits under the law and now, a construction company reconstructing the Seaside Heights, N.J., boardwalk in the aftermath of Superstorm Sandy has been hit with a class action alleging a failure to pay PW rate. The case is entitled Beza et al v. Jamali Developers LLC and was filed in Superior Court in Middlesex County, New Jersey.
The named plaintiffs, both carpenters, charge that overtime was not paid and more importantly PW rate was not paid. They allege there are 75 workers that are involved in the class, i.e., people who performed public work. The Complaint actually seeks a class wider than just “hands-on” workers at the public works site. It alleged that the “defendants’ actions in failing to pay proper overtime as required by the FLSA was not uniquely applied to the individual plaintiffs, but rather as a policy and practice applied to hourly employees as a whole.”
There are not many defenses against an allegation that prevailing rate was not paid. If the project qualifies as ‘public work,” meaning it was financed by public money beyond a tiny threshold, then (with very few exceptions) the PW rate has to be paid. The defenses lie in arguing that not as many hours were worked as claimed and that the craft rate that is alleged to be owed is the wrong classification and that the proper PW rate is a lower one, e.g. Carpenter (higher) rate vs. Laborer (lower) rate. For this defense to work, the work at issue must be claimed in the work jurisdictions of both unions.
The best option for the employer here is probably a quick settlement, or its money will be blown away by Sandy-force winds of litigation and then, in the end, it will still be liable for back due wages.
This January is an exciting month for several reasons: (1) it’s my birthday month and (2) the NJ DOL issued the new poster promulgated by the 2012 amendment to the NJ Equal Pay Act.
The Amendment was passed about one year ago, and employers have been standing-by, patiently waiting for the DOL to issue it. The Amendment requires employers with 50 or more employees to conspicuously post a form issued by the DOL a poster detailing the right to be free of gender inequity or bias in pay, compensation, benefits or other terms or conditions of employment under the Law Against Discrimination.”
The posting and distribution requirements were triggered yesterday (January 6, 2014) and now the following is required:
- Starting yesterday (1/6/14) employers with 50 or more employees must post conspicuously post the gender equity notice in a place accessible to all employees;
- For each employees who was hired on or before 1/6/14, the employer must provide each employee a notice by February 5, 2014;
- For each employee who was hired after 1/6/14, the employer must provide that employee with a written copy of the gender equity notice at the time of the employee’s hiring;
- The notice must be distributed annually on or before 12/31 of each year;
- If any employee requests the notice, the employer must provide it.
Employers additionally must obtain accompany the Notice with an acknowledgment form, that must be signed and returned to the employer within 30 days of its receipt.
I am sitting in my cozy living room, sipping coffee and watching CNN reports about a possible major snowstorm about to hit the northeast in the next few days. If the storm hits on New Year’s Day, there is no issue related to employer docking of exempt employee salaries. If the storm hits on Thursday, then certain rules apply and employers must take heed. Improper deductions from exempt employee salaries, even if done only to a few exempt workers, may adversely impact the exempt status of all exempts.
Allyson Kurker of Kurker Paget LLC just blogged on this issue and I think the message bears repeating. First, non-exempt employees may be docked more easily than exempts. Second, the DOL has issued guidance (a 2005 Opinion Letter) that outlines the parameters applicable to deductions. If the employer keeps the business open and an exempt employee does not come to work, the employer may make a full day pro rata deduction because the employee has voluntarily chosen to absent himself from work for “personal reasons.” Such a full-day, personal-reason deduction is allowable under the “new” i.e. 2004 FLSA regulations.
If the employer closes down, then no deduction can be made. This is because the employee (ostensibly) is ready and willing to come to work but due to the operating requirements of the business, i.e. bad weather, the employer has closed and therefore no work is available for the employee even though he is ready to work.
If the employer begins the work day open for business and then shuts down as the weather gets progressively worse, the rules change slightly. Although the employer may not make a cash deduction from exempt employee salaries for the few hours that are not worked in an early closing situation, the employer is allowed to compel the exempt employees to take hours from their banks of vacation or PTO time to “make up” for the work hours lost. Note, however, that if the exempt employee exhausts all such time, the employer cannot then make the above-referenced cash deduction from the salary.
Stay warm! Stay legal!
Happy New Year!
I have blogged before about law firms being sued in FLSA class actions by lawyers who claim they were not performing “legal work” and thus are non-exempt, i.e. overtime eligible. Now, the law firm of Quinn Emanuel Urquhart & Sullivan, LLP is asking the Second Circuit to provide guidance on this momentous issue, which can and will have major ramifications for law firms throughout the country. The law firm has filed a motion to certify a December 11 order which denied the firm’s motion to dismiss the class action. The case is entitled Henig v. Quinn Emanuel Urquhart & Sullivan, LLP.
At issue is the definition of what constitutes a professional employee. In its papers, the law firm urged that the case has far wider ranging impact than just the particular employees involved. “Beyond the parties to this case, the legal industry desperately needs the circuit’s guidance on how to compensate contract attorneys hired to perform document review. Although this court has announced one test, another district court recently adopted a test akin to defendants.”
The plaintiff lawyer alleges that he was only reviewing documents and that his work was “extremely routine.” Therefore, he claims that he was not performing exempt work of an attorney and thus he was non-exempt. The law firm urged that practicing lawyers are always considered professionals and exempt. The District Court, however, concluded that it was not clear at this early stage of the case that the exemption was solidly established. The court below stated that the issue would be resolved by deciding whether Mr. Henig (and those similarly situated) were practicing attorneys. Other courts have considered cases in which non-lawyers were acting or functioning as lawyers but this matter is completely different from those cases.
I believe that these individuals are indeed acting and functioning as lawyers. Even though they are ”only” reviewing documents, they are utilizing their years of education and legal training to analyze the documents and determine their importance to the litigation, as well as whether some of the documents should be claimed as privileged.
I think the Second Circuit should take this appeal and decide the matter. Such a decision will provide nationwide guidance. Such guidance is desperately needed as a rash of these litigations is now working their way through various courts in the country.