Wage & Hour - Development & Highlights : New Jersey Labor and Employment Lawyer & Attorney : Fox Rothschild LLP Law Firm : Serving Essex County, Sussex County, Roseland, New Jersey

Complying with overtime requirements should be relatively “simple” for employers, yet often these requirements cause confusion for the business community or are, perhaps, disregarded.  The FLSA requires that covered, nonexempt employees be paid (at least) the federal minimum wage of $7.25 per hour, and one and one-half times their regular rate for hours worked over 40 per week.  Just this past year, the U.S. Department of Labor’s Wage and Hour Division investigated numerous New Jersey employers.  It obtained a consent judgment to recover $3 million in back wages and $91,000 Civil Money Penalties from a New Jersey employer found to be in violation of the FLSA!

Not only were the employees working up to 84 hours per week without receiving earned overtime pay.  Many of the employees were paid partly “off the books,” and sometimes in cash, to disguise the improper payment of overtime.  As such, the employer failed to maintain accurate records of the hours employees worked.  This second aspect, failing to maintain accurate records of hours worked, led to a consent judgment between the Labor Department and the employer consisting of a three-year monitoring program including the installation of biometric time clocks in each establishment; a notice to workers regarding the terms of the compliance agreement; FLSA training for all employees in English and other languages; an anti-kickback protection clause to ensure that all workers are paid any back wages due; and a toll-free telephone number for workers to report violations to the monitor. 

Failure to follow-up overtime regulations can lead to not only a large judgment of back-pay, but civil penalties as well.  Overtime calculations can also become complicated when an employer gives bonuses, since absent an exception, they must be included in the regular rate of pay.  The calculation in itself is quite complicated.  The proper computation has been addressed in an earlier post and it remains an issue of concern for employers as simply “knowing” that overtime is due is only half the answer.  The other half (perhaps even more important) is the proper computation of that overtime.

 The lesson for employers is to be quite cognizant of the overriding obligation to properly pay overtime, to know what employees are entitled to overtime and to know its proper computation.  These questions are often easier posed than answered, but an internal audit of the employer’s compensation practices is a sure fire way to answer those questions correctly.

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There are many industries where the agreement between the worker(s) and the employer is that the worker will receive a certain fixed lump sum of money, sometimes wholly or partly in cash, for an agreed-upon number of hours. This situation is rife in the gasoline station industry, as evidenced by the fact that a New Jersey gas station operator has recently settled a case, agreeing to pay $3,000,000 in unpaid wages/overtime and penalties to more than four-hundred employees at more than seventy gas stations in New Jersey for violations of the Fair Labor Standards Act . The case is entitled Harris v. Daniyal Enterprises LLC et al and was filed in federal court in New Jersey.

The employer also had to pay $91,000 in Civil Money Penalties. These are assessed for willful conduct or for repetitions of the same type of offending conduct, which occurred in this instance. The owner was also held personally liable.

The Acting Secretary of Labor noted that “this agreement returns hard-earned wages to workers in one of only two states that still mandates full-service gas pumps. All gas station owners and operators in New Jersey should take note of this precedent by reviewing their payroll practices and legal obligations. Gas station attendants are few in number, earn low wages, work long hours and often lack English proficiency — factors that contribute to their vulnerability as well as the importance of protecting their right to be paid properly."

There were fourteen companies named as defendants, all owned by Mr.Chaudhary; these companies operated BP and Shell gas stations in New Jersey. The Complaint alleged that the employees often worked more than eighty hours per week, with no overtime, with payment off the books to disguise the fact that the employees were working in excess of forty hours per week..

There had been two prior investigations by the DOL, both finding that monies were owed. In both instances, DOL officials met with Mr. Chaudhary and explained his obligations for recordkeeping and proper payment of wages, which he evidently did not heed. Under the terms of the agreement, the employer must implement a monitoring program at each station to ensure FLSA compliance, as well as establishing a confidential hotline for employees to report alleged violations.

First lesson---it only takes a single employee to complain to a DOL (or an attorney). Then, anyone in the same boat, i.e. similarly situated, will be included in the action. Second lesson---informal deals or arrangements, i.e. a salary for a set number of hours (often over forty) is a dangerous idea because overtime must still (and always) be paid, regardless of the “agreed-upon” arrangement.
 

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In December, I blogged about off-the-clock work in my post Unreported, Off-the-Clock Work.  Off-the-clock work includes meal break time, and issues arise when employees work during these breaks, or claim that they work during these breaks, but are not paid.  Recently, an Ohio federal judge decertified a class of employees who alleged that their employer’s meal break policy violated the FLSA.  The judge decertified the class action suit because the workers’ experiences were too diverse to justify the class. 

The case, Creely v. HCR ManorCare Inc. et al., was filed in the U.S. District Court for the Northern District of Ohio, the case number is 3:09-cv-02879.

The employer, HCR ManorCare Inc., (“HCR”) has more than 44,000 hourly employees.  A class of 318 nurses, licensed practical nurses, certified assistants, and admissions coordinators claimed that employees missed meal breaks and were not properly compensated because HCR failed to  ensure that employees were paid.  Specifically, the plaintiffs claimed that HCR failed to train employees on how to report incidents where they worked during meal breaks, and even in some instances, actively discouraged employees from doing so.  The judge however, decertified the conditional class because the claims presented varying accounts of what instructions these workers received on claiming wages earned while working through meal breaks (since wages were automatically deducted for meal break time). 

Although this class was decertified, this decision demonstrates the overriding importance for employers to maintain reasonable procedures for employees to report ostensible work performed during meal times.  To avoid incidents like this, employers should ensure that employees are properly trained to report their time and managers are keenly aware of their employees working, or seeking to work, through lunch.

 

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I often post on and discuss working time issues, e.g. travel time, on-call time, automatic lunch deduction cases, training time and, of late, after-hours employee email/blackberry usage and whether it is "work hours."

On Thursday, January 17, 2013, at 11AM, I am giving a one-hour Webcast on the topic "What Is Working Time and When Is It Compensable?"   The link is http://www.hr.com/stories/1354556504350

This is a gray, gray, confusing topic and grist for the mill of class actions!

Hope you can listen in.

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Section 7 of the Fair Labor Standards Act (“FLSA”) was amended by the Affordable Care Act to require employers to provide reasonable break time for an employee to express breast milk for her nursing child for one year after the child’s birth each time such employee has the need to express the milk. This requirement became effective when the Affordable Care Act was signed into law on March 23, 2010.

Under this amendment employers are required to provide a place, other than a bathroom, that is both (1) shielded from the view and (2) free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.  Employers and employees can access the The Wage and Hour Fact Sheet #73 “Break Time for Nursing Mothers under the FLSA” to become familiar with basic information about the law.       

The FLSA prohibits employers from discharging or discriminating against any employee because he or she has filed a complaint.  29 U.S.C. § 215(a)(3).  To establish a retaliation claim under the FLSA, an employee must show that (1) she engaged in statutorily protected activity; (2) she suffered adverse action by her employer; and (3) the adverse action occurred as a consequence of her protected activity.

The 11^th Circuit was the first appellate court to interpret these new provisions.  In Miller v. Roche Surety & Cas. Co., Inc., No. 12-10259 (11th Cir. Dec. 26, 2012) the 11^th Circuit held that an employee’s claim failed as a matter of law because her employer provided her with the necessary breaks and a private space in which to express breast milk.  The court also held that the employer did not retaliate against the employee for filing a complaint under the FLSA since the employee’s e-mail requesting a time and place to express breast milk did not constitute a complaint.  The court found that the circumstances surrounding the employee’s e-mail, would not have informed Roche that Miller was filing a complaint under the FLSA.

This decision offers some direction about these new FLSA provisions.  It informs us that employers must not only develop solutions that comply with these new FLSA, but should also review their current policies to ensure compliance.

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In other blog posts, I have commented on a number of lawsuits, class action suits, filed on behalf of individuals who were hired as “interns” but who then claim that they were actually “employees” under the FLSA and should have been compensated.  There are definite criteria that have to be met for someone to be deemed an intern, rather than an employee, and if the putative employer does not comply with all of the factors, the person is not an intern.

Charlie Rose, the TV personality/interviewer and his production company have recently settled a class action filed by interns who charged that they were, in fact, statutory employees and were not even paid the minimum wage.  The case is entitled Bickerton et al. v. Charles Rose et al. and was filed in state court in New York

The theory was that the interns were being used as “substitutes” for paid employees.  The plaintiffs’ counsel took some joy in noting that “if the court approves the settlement, it will be the first class action settlement of a wage-and-hour case brought by unpaid interns.”  The lawyers for the Company pooh-poohed the action, asserting that cost of defending the suit would be onerous, indeed, more than the settlement value.  Thus, it would certainly appear that, from a pure business perspective, the settlement was the proper decision to make.

The Company issued a statement that observed that “many past interns have gone on to very successful careers.”  [The show's] interns are not employees; they did not perform 'work' for the program, and none of them ever expected to be paid for their internship."

From the settlement, each intern will receive $110 for every week they worked at the show, to a ceiling of ten weeks.  The Company secured the standard (and highly prized) non-admissions language.  The suit had been lodged under the theory that the Company intentionally misclassified these individuals as interns to reduce labor costs.  The plaintiffs maintained that since they were performing productive work, they could not be interns, where the emphasis on education, rather than production.For

This is one of a number of similar lawsuits, filed as class actions on behalf of interns allegedly misclassified (and allegedly misused).  The key here is that when you see a virus has started to spread, you (i.e. employers) should take heed and vaccinate yourselves.  In this case, that “vaccination” would be accomplished by measuring the activities and functions of any interns against the strict criteria under the Fair Labor Standards Act (and corresponding state laws), all of which must be met in order for the individual to truly be an “intern.”
 

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The New Jersey Assembly Budget Committee has approved legislation to enhance penalties and sanctions against employers who illegally withhold wages and benefits from employees.  The proposed legislation sets forth increased fines, penalties, and damages for wage and hour violations.  Additionally, the bill imposes criminal sanctions against employers who retaliate against employees for reporting and/or complaining of violations.

In addition to the existing damages for wage and hour violations (unpaid wages, liquidated damages, fees and costs), employers will now be fined $500.00 and penalized 20% of the unpaid wages for a first offense.  Any subsequent offenses will result in the same penalties/damages as well as an increased fine of $1,000.  Additionally, violations can also result in an employer’s loss of any license issued by the State of New Jersey.  Finally, retaliating against an employee for bringing a wage and hour claim will be considered a disorderly persons offense.

The bill is intended to deter wage and hour violations by implementing “tougher penalties” while providing employees with additional safeguards for reporting abuse.  The New Jersey General Assembly is expected to vote on the bill this week.
 

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The U.S. Department of Labor (“DOL”) has recovered $213,000 in back wages for 1,028 foreign students who were employed at a plant owned by Hershey Co. The foreign students were placed at the plant as part of the State Department’s Summer Work Travel Program. The DOL reached an agreement to settle the matter with SHS Group, LP (the company that hired and placed the students), the Council for Educational Travel-USA (the entity that acted as the students’ sponsor), and Exel (the company that operated the facility at which the students worked).

 

The DOL investigated the plant in response to a complaint filed by the National Guestworker Alliance on behalf of 7 student workers.  The DOL found that these foreign students were not receiving minimum wage or overtime pay as a result of the “excessive housing costs” deducted from their pay.  In fact, the foreign students claimed they earned $1 per hour after deductions for their housing.

While the DOL found that the foreign students were not being paid properly, the regulations do, however, permit employers to deduct the “reasonable cost” of housing from employee paychecks.  In such situations, the employee may be paid partly in cash and partly in room and board.  The question of whether such deductions may be made, as well as how much money can be deducted from the employees’ pay, is quite subjective and has been left open to interpretation.  The general rule is that employers can deduct housing costs from employees' pay if: (1) the deduction does not exceed the actual cost to the employer for the lodging; (2) housing is “customarily furnished” to employees; and (3) the employees' acceptance of the housing is voluntary.

Employers should be careful that any deductions for housing expenses meet the three (3) criteria discussed above.  As illustrated by the DOL’s recovery on behalf of the foreign students, an employer can be subject to significant liability for any improper deductions. 
 

 

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A thorny and confusing issue under the Fair Labor Standards Act is that of when and how an employer can “round” employee work time down (or up) to accurately record employee work time and pay (or not pay) for that time.  In a significant case, a federal judge has dismissed a proposed nationwide class action in which factory workers sued H.J. Heinz Company on a theory that their hours were improperly rounded down and they were not paid for all hours worked.  The case is entitled Mendez v. H J Heinz Company LP and was filed in the Central District of California.

The Court ruled that the charges, i.e. that employees were compelled to report for work early, but this extra time was rounded down and not paid for, had no basis in fact but the Court is allowing the lead plaintiff the opportunity to amend the Complaint and get another bite at the apple or, more aptly, the ketchup bottle.

The Court concluded that, in order for a valid class action to lie, there must exist a pattern of systematic rounding down, or a showing that the rounding policies were applied/implemented in a manner that manifestly favored management.  In other words, if the rounding principles worked as they should (as envisioned by the FLSA) there would be evidence of rounding up as well as rounding down.  The Court found no evidence that this rounding procedure was a one-way street in favor of the Company.

The Court stated that “plaintiff alleges only that defendants have an unspecified 'rounding policy' that, together with defendants’ disciplinary policy, results in the nonpayment of wages for all hours worked, because the disciplinary policy incentivizes employees to arrive at work early.”  However, “plaintiff has not plausibly showed that the alleged policies result in a systematic underpayment of wages.”

The Court also rejected the contention that the matter was appropriate for a class certification, finding that, at worst, the alleged policy applied only to one facility, not to the entire State of California, much less the whole country.  The Court also give some guidance to the plaintiff on what he should “include” in the Amended Complaint (which will undoubtedly be filed).

The takeaway here is for employers to ensure that any rounding policy must be fair, i.e. if time is rounded down, there must/should be examples where time is rounded up, so that employees are fairly compensated over a representative period of time.  Through careful drafting of a policy and watchful and diligent oversight of its implementation, this can be accomplished.
 

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A group of Gold’s Gym employees have filed a FLSA collective action.  Their theory, similar to a rising number of such suits, is that they were required to work off the clock.  The employees claim they have to work between 50-60 hours per week, but are only paid for forty.  The case is entitled Lane et. al. v. Gold’s Gym International Inc., and was filed in federal court in Texas.

In a somewhat ironic twist, the Complaint notes that the Company has a policy prohibiting employees from working more than 40 hours a week without prior approval and so, to comply with this policy, Gold’s general managers allegedly (and routinely) required workers to first clock out and then continue to work off the clock or, allegedly, to falsify their time records to show that they worked fewer hours than they actually did..

The lead plaintiff (still a current employee) alleges that he (and other supposedly similarly situated employees) were compelled to make monthly sales targets and to also train fitness consultants. Those duties required that they often had to work in excess of forty hours, but the Company typically refused to acknowledge any overtime claims.  The plaintiffs claim that this was a company-wide policy, which, under principles of FLSA collective actions, gives the class the commonality and similarity needed for conditional (and ultimate) certification.

On this point, the Complaint asserts that “although the named plaintiffs were employed by Gold’s at two of its San Antonio locations, sales managers at its facilities across San Antonio and the United States are believed to have all worked similar hours and were compensated under Gold’s common policy/scheme of not paying sales managers one and one-half of their regular rate for all hours worked over 40 in a workweek.”

There has been a veritable explosion of these off-the-clock collective/class cases, in many different industries.  We will see where this goes.  The institutional problem in the retail industry, any retail industry, is that oftentimes labor budgets are set tightly and managers (at all levels) are judged by whether they stay within these budgets.  It is this pressure that may drive the “need” for off-the-clock work.  There are procedures that management can implement, to both stay within budget, as well as the law, but a keen self-scrutiny of compensation practices and corporate goals is necessary.
 

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I attended an interesting seminar today, given by a United States DOL official.  The program focused on the application of the Fair Labor Standards Act to entities and organizations that work with disabled individuals, to mainstream them if possible and, also, to provide some income for them for the tasks that are assigned to them.  These employers are able to pay what is referred to as a "sub-minimum wage" for this work, not the $7.25 per hour otherwise mandated.

Section 14, 29 USC 214, of the FLSA covers these workers.  Part 525, 29 CFR 525,  of the Code of Federal Regulations spells out in greater detail the rights and obligations of employers in this industry and what they may do/not do.  As these are (probably universally) non-profit employers, operating on razor-thin budgets, any assessed/alleged deficiency could be devastating, because if the employer is not properly paying the sub-minimum wage,. the measure of damages would be the difference between the wage paid and the current $7.25, for every hour worked.

Some of the more "traditional" FLSA issues, i.e. what constitutes working time, travel time issues, exemption issues are also subsumed in these audits, so it is imperative that these employers scrutinize all of their compensation practices when facing an audit, not just those issues (of which there are many) that pertain to the sub-minimum audit.

Unlike most DOL activity these days, which is primarily complaint driven, these audits are done usually in the form of an entire industry survey, or of all such employers in a given geographic area, without a complaint instigating the audit.  I have good reason to believe that such an audit wave is In effect at this time, so an internal audit, assessing any issues/problems, is a very good idea.

An ounce of prevention....

 

 

 

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A plaintiff raising FLSA claims must show that an employment relationship existed between himself and the putative employers, no matter their number.  Often, a plaintiff will name an individual supervisor or manager as a defendant, in addition to the company.  In the recent case of Montero v. The Brickman Group et al, a District of New Jersey judge outlined what it means, or does not mean, to be an employer under the FLSA. 

Herein, the plaintiff named an individual manager as being someone who "controlled and managed the terms and conditions of employment for employees who worked at Brickman, "including but not limited to their compensation..."   He also alleged that he questioned the manager as to why he was not receiving overtime and expressed a concern that he was not being properly paid.

On these facts,  ruling on a Federal Rule of Civil Procedure 12(b)(6) Motion, the Court dismissed the action against the supervisor.  The Court emphasized that the plaintiff failed to show that the manager had any operational control over him, as to expose him to liability under the FLSA as an employer.  The Court also noted that the only basis for these statements made in the Complaint was "information and belief."

The lesson here is that individual managers who are named in a Complaint can be kicked out early in a case, especially if they are a second-level or higher manager whose relationship to the employee is tenuous.  Only those supervisors who determined the hours worked and how the employee was paid or classified might potentially be on the hook for wages as an "employer."  Tactically, I believe this is a good move for defense practitioners as it shifts the momentum in the case and pushes back.

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Affiliated Computers Services, Inc. (“ACS”), a company owned by Xerox, has agreed to settle a wage and hour dispute with call center employees for $4.5 million.  The call center workers claim that ACS failed to record and pay them for their time spent logging onto their computers each day. The employees allege that ACS’ failure to record this time resulted in them being denied their regular pay as well as overtime pay.  The case is entitled Bell v. Affiliated Computer Services and was filed in the District of Oregon.

At first glance, the Bell settlement is mind-boggling considering that the time spent turning on a computer likely only takes a few minutes each day and does not seem like “work.”  However, there has been a significant amount of litigation on this issue over the past year, and in many instances, these cases have resulted in large settlements.

Employers defending these off the clock cases have principally relied on the de minimis exception set forth in the federal regulations.  This exception provides that “ insubstantial or insignificant periods of time outside scheduled working hours may be disregarded in recording time.”  However, the de minimis exception is only applicable where the work involved is for such a short duration that it cannot be precisely recorded for payroll purposes.

The courts have refused to issue a standard amount of time that would automatically qualify as de minimis.  Rather, the United States Supreme Court and several circuit courts of appeal have determined that periods of time ranging from 7 to 10 minutes is considered de minimis.  The federal regulations, however, provide a more conservative view of de minimis work - - less than 5 minutes each day.

Employers can expect more off the clock cases dealing with “preparatory” work duties, such as turning on a computer at the beginning of each shift, in the near future.  Employers should review their time recording policies in an effort to avoid potential liability.  More importantly, employers should carefully scrutinize what, if any, pre-shift or post-shift activities their employees may be engaging in, as those activities may later be claimed to be “work.”
 

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I just read of a report that notes that a record number of FLSA wage-hour lawsuits were filed in 2012  The report notes that more than seven-thousand FLSA cases were litigated, showing an increase from the year before.  If anyone thought that these kinds of suits were starting to slow down, the truth is they are still abundant, with a knowledgeable plaintiff-side bar looking for them, mostly. I think, on the Internet..

The numbers include both single plaintiff and collective (e.g. class) action cases.  There has been, however, an explosion of class actions, as oftentimes, there are numerous employees performing the same duties or with the same job title, especially if it is a company of size or spread out across the country.  The cases become somewhat formulaic, from a plaintiff’s counsel’s side, coupled with the risk that the employer will have to pay out large attorney fee awards the longer that the case goes on.  That is the reason this (to me) disturbing trend is continuing.

The report cited some reasons for this continuing supply of wage hour/overtime cases, such as the poor economy causing layoffs, sending unhappy workers to lawyers’ offices.  I think that is valid, but I agree more strongly with one of the other listed causes---a general ambiguity and grayness to the FLSA (and state counterparts) that makes it difficult for the most well meaning employer, who wants to comply with the law but makes (reasoned) judgments on exemption and working time issues that are all too easily alleged to be violative of the FLSA.

Coupled with the potential risk of large dollar damage awards and equally large fee applications, employers find it more prudent to settle, especially if there is some real risk and the case has not proceeded that far.

For an employer, the most proactive way to defend against such a lawsuit is to conduct a keen, objective self-audits, scrutinizing job descriptions and matching them up against actual duties, for exemption determinations as well as examining whether, if at all, pre/post shift activities are engaged in as they might be alleged to be “work.”  In this manner, employers can bestow upon themselves some measure of confidence that, although they may have to pay their lawyers to defend a case, they won’t be paying the other side’s!
 

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The issue of claims for alleged working time is on a disturbing trend upwards.  There seems to be no end to the frequency and variety of these claims.  Although the latest case is not in the context of a judicial proceeding, but rather an administrative investigation, the result, and the issues, remain the same.  The US Department of Labor and Norwegian Cruise Line have just entered into a settlement where the Company will pay $526,602 in allegedly owed wages more than two-thousand employees working for the Pride of America cruise ship, based in Hawaii.

The investigation showed that the Company paid straight time for certain work activities, i.e. mandatory weekly emergency drills, without regard for whether these hours brought the employees beyond forty for that week, thereby triggering an overtime obligation.  This included all of the time spent conducting and participating in the emergency drills conducted every Saturday.  Further, as the employer had taken meal and lodging credits against the minimum wage, there were also minimum wage violations.  Other working time included hours spent cleaning cabins between cruises and for chunks of time spent (allegedly) in performing vital preliminary duties, before employees commenced their assigned shifts.

The US DOL District Director (the top DOL official in Honolulu) stated that “employees in many jobs on U.S.-flagged vessels are entitled to the federal minimum wage and overtime protections under U.S. law.”  He continued by complimenting the employer for coming “ into compliance once the issues were identified.”  This means that the Company evidenced that it was ready to now fully comply with wage-hour laws, thus garnering some “good faith” in the settlement discussions with the DOL.

I just posted on another working tine case this week and normally would have looked for another topic.  The veritable explosion of these working time cases, however, has given me much concern and I feel I must trumpet this caution to the business community.  Where an employer compels (in any way, shape or form) employees to perform tasks and treats that time as either wholly uncompensated time or simply “straight time,” liability is sure to be the result.

 

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I have written many times about class actions for claimed working time and the great danger of these “subtle” kinds of violations that then explode on the employer.  Call centers gave been especially hard hit with this new wave of collective actions.  Another example.  A class of customer service representatives has been conditionally certified in Virginia.  Their theory is that their employer refused to pay for extra hours worked “off-the-clock.”  The case is entitled Hargrove v. Ryla Teleservices Inc., and was filed in the Eastern District of Virginia.

The employees claim that they were required to report early, before their shifts and engage in necessary work-related activities, which were not paid for.  They claimed that had to boot up the computers, plan schedules and review and respond to work-related e-mails.  If these preparatory tasks are "integrally related” to performance of the employee’s principal job duty, the tasks may be compensable, especially if the employees are “ordered” to perform these preliminary (or postliminary) duties.

Evidence of the widespread nature of this problem is that this is the seventh class action against this company, with conditional certification already granted in four cases.  The magistrate had originally recommended conditional certification be ordered; the Company appealed to the District Judge, who found the ruling was not clearly erroneous and allowed it to stand.

The Complaint has alleged that “supervisors explained to the employees that performing unpaid work activities was required because it was expected and was part of the job.”  The Complaint also estimates the amount of extra work performed as 10-20 minutes each day.  However, the workers allege that the overtime hours were not recorded or paid for.  The Complaint also maintains that the employees faced poor performance evaluation if they were not ready to take calls when their shifts started, meaning that they had to perform the preliminary work.

The key (again) is the amount of employer compulsion.  It is concerning to me, as a management side advocate, that the employees would allegedly suffer poor performance evaluations if not at their desks, ready to take calls, at their assigned start times.  This would enhance their argument that they were required to perform preliminary tasks that were tied to their main job and were mandated by their employer.  That combination equals (in all likelihood) significant liability.
 

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On January 11, 2012, a Nike, Inc. factory in Indonesia agreed to pay its workers more than $1 million in unpaid overtime.  The factory workers claimed that Nike required them to work an hour of overtime each day for which they were not paid.  The matter was settled prior to a lawsuit being filed following almost a year of negotiations.  The settlement will affect nearly 4,500 factory workers.

Under Indonesian law, a company must pay workers overtime for any hours worked beyond the standard 8 hour work day.  According to the trade union representing the factory workers, Nike had failed to pay the factory workers overtime for the past 18 years.  However, Indonesian law only permits employees to recover unpaid overtime for the previous two years.
 

In addition to the monetary settlement, Nike has agreed to training programs for local managers that includes “cultural sensitivity, respectful supervisory skills, team leadership and human resource management” training.  Moreover, Nike has agreed to hire a third party advocacy group to monitor workplace conditions.

While Indonesian factory workers are not subject to the overtime requirements of the Fair Labor Standards Act, U.S. companies should be careful to rectify any wage and hour violations that may be occurring overseas.  Indeed, Karishma Vawani, a BBC correspondent in Indonesia, states that “The fact that Nike’s Indonesia factory has opted to hand over this million dollars and an apparent admission of some wrong doing at their Indonesia plant, may serve as a warning to other companies here to be more mindful of what happens at their Indonesia subsidiary.”  Not surprisingly, trade unions are threatening to target Adidas and Puma, who both have large factories in Indonesia, for similar overtime violations.

The bottom line is that, as surprising as it may sound, other countries have wage hour laws and believe in the concept of “overtime.”  Nike learned this the hard way, but other companies can benefit from this lesson.
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I am always counseling clients to have very good and strict time reporting systems so that employees cannot claim they performed work and want to be compensated for it.  I also caution clients that if they “see” employees working or “hear” about it, they have an obligation to make them stop or to pay them.

A recent Seventh Circuit case proves this premise admirably.  The Court (in upholding a trial court's ruling) held that an employer did not have to pay overtime to an employee who had been “working” prior to the normal start of her shift but who had neglected to inform her employer that she was doing this work  The case is entitled Kellar v. Summit Seating Incorporated.

The appellate Court affirmed the ruling that no compensation was due to the factory manager, who claimed that she, virtually on a daily basis, arrived for work prior to the start time but was never paid for the extra work.  The Court held, however, that as the plaintiff never informed her supervisor that she was working this extra time.  The Court found no obligation to pay because the Fair Labor Standards Act “stops short of requiring the employer to pay for work it did not know about and had no reason to know about.”

The Court held that the Company “had little reason to know, or even suspect, Kellar was acting in direct contradiction of a company policy and practice that she herself was partially responsible for enforcing.”  Therefore, no jury could reasonably conclude that the Company knew or had a reasonable basis to know that the employee was performing work prior to her shift commencing. The employee had asserted that she often arrived before 5AM to prepare for her day’s work.  She claimed that the pre-shift job duties, i.e. turning on the lights, unlocking doors, taking deliveries, setting up work stations for rank-and-file employees, etc took between 15-45 minutes.

The lower court held that the work was “preliminary” in that it was not integral to the performance of the plaintiff’s duties, but it was for her own convenience.  This, however, is a different basis for denying the claim for compensation.  The trial court also relied on the de minimis doctrine as an alternative basis for dismissing her claim.  Significantly, the Seventh Circuit held, in contrast to the lower court, that the activities engaged in were not preliminary.  Thus, if the employer had known of the work and allowed it to still be performed, it would have been compensable.

The lesson for employers is to have explicitly drawn policies that disallow any preliminary or postliminary work to be performed without express permission of the employer.  The best crafted policy, however, is to no avail because if a supervisor (whether first level or higher up) has knowledge that work is being done, that work will likely be compensable.  To then argue that it is for the convenience of the employee, not the employer, will be quite difficult and if unsuccessful, quite costly to the employer.
 

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On December 1, 2011, the United States Department of Labor (“DOL”) announced that it will be conducting an “enforcement initiative” focused on the residential care industry in North Carolina. The residential care industry consists of group homes, long term care facilities, and other businesses that provide care for individuals who are incapable of caring for themselves.

As part of the initiative, the DOL plans on visiting residential care facilities to interview employees and review their pay practices and records.  The DOL stated that that since 2006, it has investigated 120 residential care facilities and recovered more than $980,6000 in back pay for 1,077 employees.

According to the DOL, businesses in the residential care industry have, among other violations of the Fair Labor Standards Act, failed to pay workers for attending required staff meetings and training.  This practice contradicts the general rule that time spent attending employer sponsored meetings and training is compensable.  Additionally, the DOL claims that residential care employers have consistently deducted 8 hour sleeping periods for employees who work fewer than 24 hours.  The federal regulations are clear that an employee who is on duty for less than a 24 hour period must be paid for all of his or her time, including sleeping time.

Another area of concern not specifically addressed in the press release is whether such facilities, as is often standard practice, automatically deduct a set period of time for lunch periods (e.g. 30 minutes or an hour).  In such instances, employees have successfully filed complaints that they worked through these automatically deducted lunch periods and are entitled to compensation.

Employers in the residential care industry should review their pay practices in anticipation of heightened scrutiny by the DOL.  In particular, businesses within this industry need to carefully examine whether they are paying employees for all time worked in a given day.

 

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I am pleased to announce that I will be speaking in an upcoming Strafford live phone/web seminar entitled "DOL’s Latest Wage and Hour Enforcement Priorities" scheduled for Wednesday, October 19, 1:00pm-2:30pm EDT.  You are eligible to attend this seminar at 50% off.  As long as you use the links in this email, the 50% off price will be reflected automatically in your transaction. 

Wage and hour compliance is a top priority for employers as a result of the Department of Labor’s (DOL) increased enforcement efforts. The DOL reports that 78% of businesses are out of compliance with wage and hour laws, exposing employers to liability for unpaid wages, penalties and fees.

The DOL’s Wage and Hour Division has introduced several new policy initiatives designed to combat wage hour violations and issued several employee-friendly interpretive guidance documents and amicus briefs.

Employment counsel must understand the DOL’s current regulatory and enforcement landscape and advise employers of steps to take to minimize liability risks. Comprehensive self-audits and effective corrective measures are essential to avoid compliance errors.

My fellow panelists and I will explain current trends in DOL enforcement and best practices for employment counsel to ensure wage and hour compliance. We will review the areas currently targeted by the DOL, new DOL policy initiatives, and strategies for employers to conduct self-audits and correct errors.

We will offer our perspectives and guidance on these and other critical questions:

• What areas are currently being targeted by the DOL's Wage and Hour Division for enforcement?
• When should employers take the initiative to notify the Department of Labor of compliance errors discovered during self audits?

After our presentations, we will take questions.  I hope you can join us.  Here is the link:

http://www.straffordpub.com/products/tlveza?trk=ZDFCT

 

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Some months ago, I had posted about the DOL commencing a program by which it was going to make referrals of DOL complaints to private plaintiff attorneys.  I lamented that development, but it appears that is only the beginning.  The DOL has now launched its first smartphone application, a time sheet to help employees independently track the hours they work and determine the wages they are owed.

Available in English and Spanish, users conveniently can track regular work hours, break time, and any overtime hours for one or more employers.  Glossary, contact information, and materials regarding wage-hour laws are easily accessible through links to the Web pages of the Wage and Hour Division.

Additionally, through the application, users will be able to add comments on any information related to their work hours; view a summary of work hours in a daily, weekly, and monthly format; and email the summary of work hours and gross pay as an attachment. Importantly, there is also a “Contact Us” button through which the user (i.e. the employee) can contact the DOL and (perhaps) file a complaint.

The free application is currently compatible with the iPhone and iPod Touch, but the DOL is exploring updates that could enable similar versions for other smartphone platforms, such as Android and BlackBerry, and other pay features not currently provided for, such as tips, commissions, bonuses, deductions, holiday pay, pay for weekends, shift differentials, and pay for regular days of rest.

Employers will need to be increasingly vigilant with their record keeping and wage and hour compliance as now employees are greater empowered to record hours and have immediate access to DOL Wage and Hour laws and provisions.  I am deeply concerned about this development as it indicates that the DOL is actively (some might say, aggressively) facilitating employee complaints to the DOL at the same time giving employees a “simple” means of keeping their own records and using them offensively.  If the employer’s records are not in the best shape, then these employee records, informal and unofficial as they may, will become the “best” evidence of alleged underpayments

I hate technology!
 

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In recent years, there has been a veritable explosion of class actions in which the theory is that the employer has failed to pay for preliminary or postliminary “working time.”  These can be exceedingly difficult cases to defend because if the workers can establish that the activity is integral to the primary job, the violation is essentially proven and all that remains is to calculate damages. A new case (again) highlights this danger for employers.

A federal judge has granted conditional certification to a class of production workers at the wind tower manufacturing plant of a company; the workers allege that they had to perform certain off-the-clock tasks for which they were not compensated and should have been under the Fair Labor Standards Act.  The case is entitled Etter v. Trinity Structural Towers, Inc. and was filed in federal court in Iowa.

Now, notices will be sent out to the potential class members who have the ability to opt in to the case.  Although the Company has agreed to the conditional certification, it maintains that the employees are in fact not similarly situated and a class action is not appropriate.  With the recent Supreme Court holding that has enhanced the “individuality” defense that I have often preached about, the Company may have a better chance to de-certify the class at a subsequent juncture in the litigation.

The plaintiffs charge that the alleged working time was work performed prior to the start of the shifts, so-called preliminary work time.  The allegation is that the workers had to prepare for their work so they could start their shifts at the correct time, so the preliminary time is so connected to the regular job as to render that time compensable.

The Complaint charges that the Company knew its employees routinely worked more than their scheduled time or ore than 40 hours per work week because its agents and employees directed plaintiffs to arrive at least 15 minutes prior to their scheduled shift start time.”

The element of employer compulsion (if proven) is the most dangerous threat in defending this case.  Once employer compulsion is shown, the alleged work almost always becomes “real” work and then liability follows.
 

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On July 14, 2011, several lobbyists and business representatives argued before the House Education and the Workforce Subcommittee on Workforce Protections (“Subcommittee”) that the Fair Labor Standards Act (“FLSA”) needs to be revised.  J. Randall MacDonald, senior vice president of human resources at IBM and chairman of the HR Policy Association, told the Subcommittee that the FLSA is “failing America” because it does not provide employers with enough flexibility in work arrangements with employees, nor does the law provide employers with sufficient certainty regarding their legal obligations.

While the hearing was not called to discuss amending the FLSA, MacDonald and other management side lobbyists blamed the climbing unemployment rate on the influx of wage and hour lawsuits over the past decade.  Similarly, MacDonald argued that employers cannot comply with the law because the standards set forth in the FLSA are not applicable to the modern workplace.  This sentiment was echoed by the chair of the Subcommittee, Tim Walberg, who stated, “It is hard to imagine a law intended for the workforce known to Henry Ford can serve the needs of a workplace shaped by the innovations of Bill Gates.”

Among the proposed changes to the FLSA are: clarification of which computer employees are exempt from overtime; guidance on whether activities such as checking email are considered work; and the designation of well compensated, commissioned “inside” sales employees as exempt.

Judith M. Conti, federal advocacy coordinator for the National Employment Law Project in Washington, D.C., as well as various Democrats on the Committee, opposed these changes to the FLSA.  Ms. Conti stated that revisions to the FLSA could detract from the protections afforded employees.  Rep. Dennis J. Kucinich argued that the business representatives appearing before the Subcommittee were “advocating for a system that is manifestly unfair” and that allowed wages to go down while corporate profits rose.

The proposed changes to the FLSA could provide employers with much needed assistance in complying with the law and avoiding potential lawsuits.  However, employers shouldn’t hold their breath as there is no reason to believe that Congress will be revising the FLSA anytime soon.
 

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Just the other day, I posted about an off-the-clock class action that involved field technicians.  In this off-the-clock FLSA collective action, bus drivers claimed that they were not compensated for time that spent driving routes to become familiar with those routes.  They must have had a case because a federal judge has now approved a settlement between the Chicago Transit Authority (“CTA”) and the class of bus operators in which these plaintiffs will realize some recovery.  The case is entitled Reyes v. Chicago Transit Authority and had been filed in federal court in the Northern District of Illinois.

The settlement will compel the CTA to pay out up to $300,000 to resolve the plaintiffs’ claims. The CTA will also pay $350,000 in attorneys fees.  The entire issue involved claims of worked, but unpaid for, time. It appears that the drivers engaged in a practice labeled “cushioning,” which entails their driving various routes that they shifted over to, so they could learn the routes. Therefore, the service would run efficiently and not be impacted.  There were approximately 1100 current/ former bus operators who opted in to join the lawsuit (which was filed in February 2010.)

The Complaint charged that the CTA shut down a garage as part of a restructuring plan to deal with a budget crisis.  Some employees were laid off, others were transferred to different garages which meant that routes had to be changed.  The plaintiffs allege that the drivers who selected a new garage were ordered to learn (i.e. drive) every route operating from that garage and the drivers staying in their existing garage were mandated to train (i.e. drive) any routes transferred to that garage.

Not only were the drivers required to drive the new routes, the Complaint alleges they were supposed to do it outside of their regular shift and working hours.  The plaintiffs allege that the CTA stated that it would not pay any compensation for this extra driving work

Employers must be very wary of such off-the-clock work.  As I have often stated, if there is any element of employer compulsion in the activity, then the employees feel they must comply with the directive, even though they are not paid, or else they will (possibly) lose their jobs.  If the “work” at issue or being directed is at all related to the primary job (as this work obviously was) a court or an agency will certainly find this time to be compensable.  If the work is preliminary or postliminary and directly tied to performance of the main job, it will be compensable.

There is an explosion of such cases in recent years and I expect more.  Careful monitoring of workplace rules and practices is essential.  If an activity is found to be “work,” it is better to deal with that issue sooner rather than later, such as when standing in front of a federal judge (or jury). .
 

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I have often discussed the issue of lawsuits (usually collective actions) for off-the-clock claims and preliminary and postliminary work claimed to be compensable.  These are usually mundane activities and usually done for only a few minutes, but when the minutes occur every day, every week and there is a large group of employees engaging in the activities, the aggregate exposure can be substantial.  Technician-type employees or field service personnel are a prime breeding ground for such lawsuits. Another example of this phenomenon has now surfaced in the federal courts.

A field representative has launched a class action in federal court in Florida, alleging that he and a large group of similarly situated employees were compelled to work overtime hours, without being properly paid.  The case is entitled Salamanca et al. v. TNC (US) Holdings Inc.

These field representatives performed technical job duties.  They visited customer homes, in their geographic territories, to perform a number of customer-relation as well as technical functions.  For example, they would stay with the customer to show him how to handle and work with the equipment.  They allege they also received nightly error reports, relating to malfunctions in the equipment and they were compelled to remain on call for issues arising for customers in their designated areas.

An interesting twist is that the plaintiffs contend that the company’s GPS records and the Company-issued phones will provide the best evidence of the hours they worked.  This might then be a case where the accuracy of the employer’s records is the “worst” evidence against it for not only would these devices show the actual minutes/hours worked, they would also evidence that there was a fair amount of this “work” and it was necessary for the performance of the plaintiffs’ jobs.

The lesson here is that employers who provide any kind of PDAs or cell phones or any kind of equipment must scrutinize the employees’ usage of those devices and whether any such usage is occurring before or after the “usual” work day ends.  If employees must plan their routes for the next day while at home the evening before, the company may be liable for compensation.  Similarly, any job-related activities that employees are engaging in (e.g. showing customer how to use the equipment after installation) must also be looked at to determine whether the activity is sufficiently related to the primary job to warrant compensation.

 

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On May 9, 2011, the United States Department of Labor (“DOL”) announced the launch of an application for the iPhone and iPod Touch that will record the hours worked by employees and the wages they are owed.  The application will be available in English and Spanish and will allow users to record their regular work hours, break time, and overtime hours for more than one employer.  The application will also enable users to view a summary of their work hours and email the summary of work hours and pay as an attachment.

According to the DOL, “this new technology is significant because, instead of relying on their employers’ records, workers now can keep their own records.”  The DOL has further provided that “this information could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records.”

The DOL is currently exploring making the application available for other smartphones such as BlackBerry and Android.  Additionally, the DOL has stated that it intends to update the application to include wage and hour issues not currently provided for, such as tips, commissions, bonuses, deductions, holiday pay, pay for weekends, shift differentials and pay for regular days of rest.

The DOL’s launch of this application only further highlights the need for employers to keep accurate time and payroll records for employees.  Up to now, employees typically contested the records maintained by employers with nothing more than their opinion and recollection of events. This application, however, should enable employees to challenge the calculation of their pay with detailed records and notes.
 

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In a May 9, 2011 posting in the Connecticut Employment Law Blog, Daniel Schwartz took a look at the recent decision of the Second Circuit in Kuebel v. Black & Decker.  He notes that the Court held that home-to-work commute time does not become compensable time, merely because the employee has performed work-related tasks before commuting in the morning or when he returned to his house at night.

I applaud this decision because it represents another rejection of employee claims and theories in which the employee seeks to transform commute time into compensable time.  Numerous courts have rejected such attempts in a number if scenarios.

The continuous workday theory encompasses both preliminary and postliminary tasks which are defined as those integral to the performance of the employee’s primary task and thus these tasks act to “elongate” the compensable workday.  Here, the Court concluded that there was no employer induced compulsion to perform these activities either just before the employee left for work or in the morning or immediately after he returned home in the evening.

About ten years ago, there were a number of so-called canine cases. In those cases, police officers who used dogs in their work and took the dogs home claimed, in various jurisdictions, that the fact that they transported the dog converted their home-to-work commutes into compensable time.  In an interesting published decision that I handled, which also went to the Second Circuit, Kavanagh v. Grand Union, 192 F.3d 269 (2nd Cir. 1999), the employee, a refrigeration mechanic for a chain of supermarkets, claimed that because he carried specialized tools in the trunk of his car (and his commute was very long), his commute time was compensable.  His claim was rejected on summary judgment and upheld by the Second Circuit.

Employees seem to sometimes look to try to extend their compensable work day and hook things onto their travel time or claim that the attributes of that commute time (e.g. carrying tools in trunk) make it worthy of compensation.  The best defense (as it usually is) is to be proactive.  I recommend implementing a well drafted travel time/ pay policy that specifically outlines the Company’s position on such matters, with an emphasis on the fact that home-to-work commuting is never compensable.  A variation on the theme is to agree to pay for some portion of the travel to work, e.g. after one hour.  By doing that, the Employer is spending a nickel to save a dollar in that it is evidencing that some payment will be made for the commute time, helping to negate any claim that compensation additional to that is legally mandated.

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This past week, Asurion Inc. settled a class action brought under the Fair Labor Standards Act in which employees alleged that the company improperly failed to pay them for time spent turning on and shutting down their computers each day.  According to the complaint, Asurion allegedly maintained a policy and practice of requiring employees to arrive at their work stations before their scheduled start times and perform “critical tasks.”  The alleged tasks, for the most part, consisted of turning on their computers and logging into the company’s network.  Plaintiffs allege that Asurion did not compensate them for this time.  The case is entitled Benson et al. v. Asurion LLC et al. and was filed in the District Court for the Middle District of Tennessee.

There has been significant litigation over the past several years regarding the payment of wages for “preparatory” work duties.  Most of these lawsuits arose in connection with the putting on and taking off of protective gear prior to the start of an employee’s shift.  The courts, including the United States Supreme Court, have consistently found such time to be compensable.

With that being said, employers would face a logistical nightmare if they were required to pay employees for the 2 to 3 minutes spent each day turning on their computers and logging into the network.  Luckily, the regulations provide for a de minimis exception. This exception provides that    “ insubstantial or insignificant periods of time outside scheduled working hours may be disregarded in recording time.”  However, the de minimis exception is only applicable where the work involved is for such a short duration that it cannot be precisely recorded for payroll purposes.

The courts have refused to issue a standard amount of time that would automatically qualify as de minimis.  Rather, the United States Supreme Court and several circuit courts of appeal have determined that periods of time ranging from 7 to 10 minutes is considered de minimis.  The federal regulations, however, provide a more conservative view of de minimis work - - less than 5 minutes each day.
 

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I recently gave a presentation at a national wage-hour conference in Miami on the perils of automatic deductions for lunch and the possibility that such a procedure could lead to class actions, with the allegation that the employee(s) worked through lunch but nevertheless suffered an automatic deductions.  I have also found that many hospitals and health care employers are utilizing this procedure.  Well, it’s happening.

In a federal lawsuit, a judge has granted class certification to a class of employees who allege that meal breaks were deducted from their pay, although they did not eat lunch or were otherwise relieved from duty.  The case is entitled Hamelin v. Faxton-St. Lukes Healthcare and was filed in the federal court in the Northern District of New York.

The plaintiffs claim that a half-hour was deducted from their working time every day for lunch, but patient care demands often necessitated that they miss the lunch break and instead performed productive work.  The employees at issue are Nurses and Certified Nursing Assistants, i.e. those employees with direct patient care responsibilities.

In an interesting procedural twist, the defendant contended that the court should not exercise supplemental jurisdiction over the claims of the plaintiffs under New York law, with the theory being that when plaintiffs must opt in for one statute (FLSA) and opt out of the other (the state claims), confusion will result.  Concomitant to the “confusion” argument, and, to my view, more crucial is that argument that allowing the state claims to proceed deviated from the congressional intent to allow FLSA plaintiffs to opt-in; there was a danger that the state claims and claimants could “overwhelm” the federal claims, according to the defendants.  The judge disagreed, finding precedential support from the Second, Seventh, Ninth and District of Columbia circuits.

I think allowing the claims to proceed together is wrong and represents a contradiction in how these cases fundamentally proceed.  On the merits, it is essential for employers utilizing automatic deduction policies to implement some fail-safe mechanism that allows employees who claim they have worked through lunch to document that, with follow-up by management and, if appropriate, payment to the employee.

 

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There had been an initiative to change the regulations regarding the fluctuating work week ("FWW") computation of overtime found in 29 CFR 778.114 by allowing the payment of non-overtime bonuses and incentives without invalidating the guaranteed salary criterion required to allow an employer to pay half-time overtime under the formula set forth in the regulation.  

There was opposition to this.  The opposition took the view that this change would allow employers to reduce employee fixed weekly salaries and shift the bulk of the employee compensation to bonus and premium pay.  These commenters believed that the change would lead to significant variations in weekly wages based on hours worked and that such variations were inconsistent with the concepts behind the fluctuating work week method of compensation.

The US Department of Labor accepted the view of these opponents, or perhaps, was afraid to make the changes that the new times in which we live might have commanded.  The agency concluded that such incentive and bonus payments were incompatible with the FWW procedure.  The agency feared that the change could have induced employers, intentionally or not, to shift a large portion of employee compensation to such bonus payments, potentially resulting in wide disparities in employees' weekly pay depending upon the number of hours that they worked in a given week.  Thus, other than changing the example in the current regulations to comport with the new minimum wage, the regulation has been left unchanged.

I believe the DOL missed an opportunity to bring this longstanding regulation into the 21st Century.  It is a widespread truism that non-exempt employees are receiving bonuses and other premium-type payments in addition to their salaries and these incentive elements are becoming more and more accepted by employees as components of their compensation.  In my view, it would have been logical and consistent to permit such payments under the FWW compensation method. 

I guess the DOL was afraid that the employer community would seize upon such a change as a "new"  way to hurt their employees.  In my practice, I deal with employers all of the time and I have more faith in the employer community, i.e., there is by no stretch of the imagination the malevolent intent  to use a DOL regulation to hurt people.  Simple as that.   

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Tis Sunday was Daylight Savings Time and we pushed the clocks ahead by one hour. This is, on a human level, a welcome event, as it signals winter’s end.  Now, I can fling away any vestiges of Seasonal Affective Disorder and turn my attention to outdoor activities.  Employers, however, must be vigilant on the particular day that this event takes place, as there is a FLSA implication to it.

The US Department of Labor has issued an Opinion Letter in 1967, but it remains the DOL position, addressing the issue of whether overtime is due when employees work the shift during which the clock changes from 2AM to 3AM.  Ostensibly, this adds on an extra hour to the shift, making an eight hour shift a nine hour shift.  There also is the issue of whether the payment for the extra hour must be included when computing the regular rate for purposes of overtime calculation.

The DOL opined that the payment of the additional hour’s pay to the employee who works the seven hour shift at the beginning of the change to daylight saving time need not be included in the regular rate of pay in accordance with Section 7(e)(2) of the FLSA.  Since this extra compensation is not being given for actual work performed, the payment was not made as compensation for the employee’s hours worked in the workweek and thus it need not be included when the rate for overtime is computed.  Conversely, no part of such payment could be credited toward overtime compensation due, if the aggregate hours worked during the week equal or exceed forty hours.

However, the Opinion Letter also warns that, at the end of the daylight saving period, the employee working the nine hour shift must receive pay for the nine hours and all such time must be counted in determining the hours worked in that workweek.

Enjoy the additional sunshine!
 

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I have believed that it is not illegal form an employer to reduce the wage rate of an employee, even if the objective is to save overtime costs or where as DOL audit has turned up liability and the employer wishes to respond by effecting a reduction in wage rates so the employer’s labor costs do not increase. Not, it seems, that my theory may get a grand “test” in the US Supreme Court.

In a case arising in the Ninth Circuit (California), a plaintiff has petitioned the Supreme Court to hear her case and reverse the decision that the hospital-employer did not violate the Fair Labor Standards Act when it reduced the hourly rates of Nurses so that these reductions would “balance out” or offset anticipated overtime costs for those employees who were scheduled to work twelve-hour shifts. The case is entitled Parth v. Pomona Valley Hospital.

The plaintiff claims that this ruling essentially negates or nullifies the application of the FLSA. The plaintiff alleges that the Ninth Circuit has undermined the “intent” of the statute by providing employers with a loophole to evade the so-called proper payment of overtime. If the employer can lower the rate and then pay time and one-half on that reduced rate, argues the plaintiff, the true intent of the FLSA and its “spirit” is not being complied with.

The dispute had its genesis in requests made by nurses more than twenty years ago that they be allowed to work twelve hour shifts, rather than eight hour days, to cut down on their commuting time and to allow more leisure time for the nurses. The hospital agreed to this, but under California law, any hours worked in excess of eight in a day are deemed overtime hours. In response, the hospital cut the hourly rate so that, with the computation of the four overtime hours, the hospital’s labor costs had not increased.

In the Petition, the plaintiff claims that this policy of the hospital “immunized the hospital from the additional labor costs associated with overtime.” In contrast, the Ninth Circuit had ruled that “there is no justification in the law and no public policy rationale” for declaring the hospital’s policy (which was later embodied in a labor contract between hospital and the nurse union).

I believe this is legal. Certainly, in my view, it is legal if the employees voluntarily agree to the procedure, as they did herein. I also believe the employer, upon adequate notice to the affected employees, may do this unilaterally.

The Supreme Court will tell us, if it accepts the Petition. If not, then the Ninth Circuit decision will stand, a decision that approved of the procedure.

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David LaGasse recently wrote a column in Employment Law 360 that  highlighted some of the wage-hour issues and  problems facing start-up companies.  I agree with these assessments and can comment further as follows.

He mentioned the tendency to classify workers as independent contractors.  On one level, this is tempting and seemingly much easier for a new employer.  No taxes.  No deductions.  No inclusions in benefit plans.  But---the IRS and many state and federal agencies are cracking down on what they perceive as a wholesale misclassification of statutory employees as independent contractors.  Such people must have an independently established business, doing work for other clients and customers.

The tendency to misclassify workers as exempt or non-exempt also is a minefield for new companies.  Just paying someone a salary does not automatically make someone exempt from receiving overtime.  In addition to receiving the requisite salary (and it differs from the federal minimum to the minimum salary levels of various states), the employee must perform certain types of duties.  The key here is an analysis of the job duties of different positions, matched up against the regulatory criteria.

 Another problem, or potential problem, is to know what activity actually constitutes compensable "work time."  Many employees engage in a number of preliminary and postliminary activities that may be so connected to their regular jobs that this extra time is converted or transformed into working time.   One sign of the times--I have noticed an uptake in so-called "off-the-clock" lawsuits involving employees who claim their off-duty use of PDAs, blackberries and checking e-mail constitutes "work time."  

The key is to have a basic understanding of wage-hour laws in the particular State(s) the new entity does business in and then have a study done of compensation policies and practices, with recommendations being made by the drafter for the best way to both comply with these laws and yet be employer-friendly. 

 

 

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We just got clobbered again in New Jersey with a blizzard and many businesses were again closed.  One inquiry I often get from employers at these times relates to their obligations under the Fair Labor Standards Act to pay exempt employees their full salaries when either they take a snow day or the establishment is closed.

This used to be a confusing issue but has now been clarified by the US Department of Labor in its issuance of Opinion Letter No. 2465 (FLSA2005-46) October 28, 2005.   Now, an employer who remains open for business during adverse weather conditions may make a deduction, for full-day absences only, from the salaries of exempt employees who choose not to report to work that day due to the emergency.  Such full day absences are treated as being taken for "personal reasons" and the deduction will not undermine exempt status.

The deduction should be pro rated based on the usual number of days the exempt employee works.  An employee usually working five days would then suffer a one-fifth reduction.

The Opinion Letter also emphasized that if an employer closes the facility for a weather related emergency for less than a full work week, the employer is then obligated to pay the full salary for any exempt employees.

The moral seems to be, at least from the DOL perspective, that it is is better to stay open in a blizzard.

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In the November 30, 2010 issue of Employment Law 360, Alfred Robinson posits three continuing trends in FLSA litigation: 1) donning and doffing cases; 2) exemption misclassification cases; and, 3) off-the-clock work cases.  I concur, with the addition of a group of cases that I will call “blackberry cases” or “checking e-mail” cases.

The issue of donning and doffing concerns clothing and protective gear.  It raises the more global issue, however, which is when are preliminary and postliminary activities sufficiently related to and integral to the main job that the time spent doing them becomes (somehow) compensable.
Mr. Robinson identifies three factors that go into the calculus of whether the time is compensable, but two of them—compulsion by the employer and benefit (if any) to the employer are within the employer’s control.  The third is whether the activity is connected. I go a step further—if the activity is somehow mandated by an outside government agency or other governing body, then the activity will likely be deemed compensable.

The next category are misclassification cases.  He points to the fact that the US DOL has stopped issuing Opinion Letters and now will only be issuing so-called Interpretations.  Interestingly, the first of these involved whether Mortgage Loan Officers fit within the administrative exemption.  I predict that more class actions will target classes of employees deemed administrative.  Of the three white collar exemptions, the toughest one to defend is the administrative exemption.

The last category are “off-the-clock” cases, which means employees allegedly working through lunch and not being paid, especially where the employer has an automatic deduction policy. These cases also include instances where employees claim they started/reported early or stayed late and were never paid.  Again, with the use of smart clocks, which may automatically punch people in and out at their assigned shift times, the employer may have a tough time proving that employees did not report early, did not start work early, but were prevented from punching in to reflect that work was performed because the smart clock would not allow it.  These are dangerous cases.

The blackberry and email cases are going to become a real nightmare, I believe.  Everybody does it, even when they are off work at night and on the weekends.  The pressures of business, of employment in these complicated times and the unceasing desire to show our employers that we dedicated and diligent contribute to this perpetual “need” to check e-mail.  If employers do not have policies addressing such usage, i.e. prohibiting it, I believe a rash of class actions involving claims by dozens/hundreds of workers that their checking of e-mail pre/post work is compensable time is headed for the employer world like a rocketing comment.  That is the specter before us and I fear it will raise its head in the coming year(s).
 

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A North Carolina-based employee has filed a FLSA collective action and a state law class action alleging, among other things, breach of contract, against Foot Locker Incorporated.  The Complaint alleges that the Company essentially deprived sales associates, cashiers and stockers from properly due wages and overtime through a systemwide policy and practice of managers altering and changing time records.  The case is entitled Kennedy v. Foot Locker Inc., and was filed in the Western District of North Carolina.

As evidence of the necessary commonality, the plaintiffs allege that the employment terms are found in the employees’ written employment offers, the Employee Handbooks disseminated by the Company, its corporate policies as well as other documents.  The gravamen of the plaintiffs’ theory is that they were ostensibly required to log work hours into the computer system, but they allege they were prevented from doing so, whether by accident or otherwise.

The Complaint’s most serious allegation is that “managers ... with the knowledge and/or complicity of the company, regularly altered the computerized records .... to reflect a lower number of hours worked by the retail employees.”  This was done because managers are under constant pressure to meet labor costs budgets and if they manipulated the time records to show that no overtime was worked and/or fewer hours were worked, they would be within budgetary constraints.

There may be hundreds of employees, current and former, involved in this matter.  In a similar case, in which a class was certified in September 2009, approximately 5,200 current or former Foot Locker workers have opted into the action.

The Company’s best defense is to show that this was not a widespread or systemic practice, but, at worst, involved but a few “rogue” managers.  The case does highlight, however, the increasing pressure on managers in every industry, but particularly in chain store/franchise situations to stay within imposed labor budgets and what some managers will resort to in order to accomplish that often difficult chore.
 

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A federal judge has conditionally certified a class action which was instituted by a group of production line workers in a turkey processing plant.  They claim they are owed compensation for donning and duffing activities as well as other activities that they claim were “working time.”  They claim compensation for changing into protective gear (the donning and doffing component) washing their tools and time spent in travel to and waiting at their production lines.  The case is entitled McLaurin v. Prestage Foods Inc and was filed in the District of North Carolina.

The plaintiffs claim that the Company paid them only for time that the production lines were supposed to be operating.  The plaintiffs estimate 300-1000 members in the class and wanted individuals who worked “on or near” the processing line to be part of the class.  The Company is contending that the class definition proposed was too broad because employees working “near” the line were paid differently than those who actually worked on the line.

Naturally, the plaintiffs wanted the broader definition to apply, contending that the true parameters could be worked out “later.”  The defendants also contended that there were factual differences in the kinds of protective gear worn by the workers, which hearkens to the individual scrutiny defense, but the judge rejected this contention.  The court held that if there was a common policy or practice that applied to all of the workers, the fact that there might be individual differences from worker to worker would not detract from the validity of the class.

There will be probably considerably more discover in this matter.  The case will likely be settled sometime in the future, as these working time cases are different than and harder to win than an exemption misclassification issues.  In the exemption case, if the employer has strategized correctly and preemptively and is proved correct on the exemption question, the entire class evaporates in a flash.  With working time cases, where there lies any modicum of employer compulsion or compulsion by an outside government agency that operates through the employer (e.g. FDA, Health Department) then there likely will be recovery by the plaintiffs and attorneys fees for their counsel.
 

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In a recent posting in the Wage Hour Blog, Amy Traub has commented on a proposal in New York that would merge the Restaurant and Hotel Wage Order.  If the New York State DOL adopts the merger, this will affect requirements related to the minimum wage, tip credits and tip pooling, customer service charges, overtime calculations and other common issues affecting these related industries.

Significantly, the proposal would prohibit employers from paying non-exempt employees on a salary basis and would mandate hourly payment for all such employees.  This, by itself, is a major shift in the law as the law (state and federal) stands right now, non-exempt employees may be paid on any basis (hourly, salary, piece-rate, etc) provided they are paid overtime properly.  Currently, for salaried employees, this means paying overtime at the half-time rate allowed by the fluctuating work week formula.

This proposal to merge/change the Wage Order highlights the importance of Wage Orders and the absolute necessity for employers to first scrutinize Wage Orders for their particular industry.  Wage Orders cover specific industries and are the "bible" for that industry for wage hour issues.  After the Wage Order, the more generalized state wage hour laws apply, as well as the federal law.   These Wage Orders often have very arcane, unique and industry-specific provisions that can pose trouble for the unwary employer.

Therefore, start by knowing if Wage Orders apply to your industry.  If they do, study them carefully and apply every aspect of them.  Failure to do so will expose the employer to possibly significant liability and the defense that "I didn't know" will not be met with a sympathetic ear by a Department of Labor or a court.   

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When piece-rate workers work more than forty hours, the Fair Labor Standards Act has developed a formula for determining and computing their overtime pay.  It is first essential, however, to realize that such workers are due overtime and to understand that workers who work “with their hands” such as mechanics or technicians, are entitled to overtime.

The failure to comprehend these truisms has been demonstrated in a class action involving satellite television technicians, where a federal judge has just confirmed a $2.33 million settlement in an overtime collective action for such employees in Wisconsin and Michigan.  The case is entitled Wilcox v. Alternative Entertainment, Inc. and was filed in the Western District of Wisconsin.

The satellite installers claimed overtime and also alleged that their wages suffered improper deductions  The workers claimed that they were paid per installation, which is a piece rate, but when they worked in excess of forty hours, they received no additional compensation.  Thus, their theory is not only were they not paid overtime, but there were weeks when they worked so many hours in that particular week that their hourly rate did not even meet the federal minimum wage standard.

To add supposed insult to alleged injury, the workers also charge that the Company improperly deducted monies for poor workmanship, lost/stolen property or damage to the property of the homeowner where the satellite dish was being installed.  Not only was there no written authorization to do so, but the law in many States is clear that such deductions are illegal (although the employer may take disciplinary action against the offending employee).

There are approximately 900 employees who might be involved in the class.  Given that figure, the potential liability is/was geometrical, as the settlement shows.  Significantly, the judge awarded an attorneys' fees award of $776,666.  This is the other big danger in FLSA class actions—the law is a fee shifting statute, meaning that the employer must pay the plaintiffs’ attorney fees, which (as here) is often a large sum.

There has been a sharp rise in lawsuits in the cable and satellite industries.  The lesson to learn is that technicians or installers or similarly titled employees are non-exempt and if they work in excess of forty hours, they are owed overtime, regardless of the mode of their compensation (e.g. piece-rate, hourly, commission).

 

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When employers are compelling employees or “suggesting” to employees that they engage in work-related activities before or after they go on and off the clock, trouble is brewing.  In the latest of these working time class actions, a group of employees working for Lululemon Athletica Inc. have sued the company under the Fair Labor Standards Act ("FLSA"), claiming pay for time worked beyond their normal shifts.  The “work time” at issue is the watching of inspirational DVDs and the taking of exercise classes.  The case is entitled Brown v. Lululemon Athletica Inc. and was filed in the District Court for Northern District of Illinois.

The plaintiffs claim that the company had a system-wide policy on this issue, so the papers filed in court seek a class that may extend to at least three states.  These employees, dubbed “educators,” have alleged that the company, whose primary line of business is yoga-inspired athletic gear/clothing has compelled them to work a number of extra hours each week, which would take all of them into overtime situations and generating considerable liability.

The employees claim that they were required to view inspirational DVDs in their homes and attend mandatory staff meeting on a monthly basis, which took two hours.  They seek compensation for this alleged work time as well.

The employees have filed an amended complaint, where they specify that the possible class encompasses 1,400 current/former Lululemon employees who worked at least two overtime hours per week.  In frightening fashion, the complaint hypothesizes that damages may top five million dollars.

If the employer actually compelled these employees to engage in these activities and the activities can be demonstrated to have some integral connection to their work, there may be liability.  The flip side also applies---if the employees’ positions and their employment would be in jeopardy if they did not partake in these activities, or they reasonably feared their jobs would be in jeopardy, liability might also lie.

The underlying “moral” is for employers to self-audit their compensation practices, particularly as applied to these sideline-type activities, which are often hidden in the compensation radar.
 

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In a September 16, 2010 posting in the New York Labor & Employment Report, John Ho wrote about the issue of joint employer status under the Fair Labor Standards Act (“FLSA”). These are potentially explosive situations, especially if employees work from one facility to another.  When employees float between ostensible joint employers, their hours must be aggregated, meaning that, oftentimes, overtime situations ensue, i.e. employer liability.  John’s posting can be found at http://www.nylaborandemploymentlawreport.com/2010/09/articles/wage-and-hour/jury-not-court-determines-whether-an-entity-is-a-joint-employer-under-the-flsa/index.html

There are a number of factors that a court analyzes to determine joint employer status.  These were enumerated in a Second Circuit case entitled Zheng v. Liberty Apparel Company in 2003.  In Zheng, the entire case turned on whether the entities were joint employers.  The jury found that they were and the employer appealed.

The thrust of the appeal was that since the federal judge in the district court should have been the “decider” in ascertaining whether the entities were joint employers, not the jury.  The Second Circuit has just recently ruled that the proper deciding body was the jury.

There is a bigger question here than just the procedural issue of whether this mixed question of law and fact should have been decided by a judge or jury.  Employers must be aware that if they have a relationship with another entity that is more than a vendor or supplier relationship there could be an issue of joint employer status.  The factors enunciated in Zheng were: 1) do the workers work predominantly for the joint employer; 2) the permanence or duration of the working relationship; 3) if the alleged joint employer’s premises/equipment are used by the employees; 4) the extent of control exercised by the joint employer; 5) whether the workers are an integral part of the business; and, 6) whether the workers had a business organization that could shift as a unit from one putative joint employer to another.

Although these factors were set down in the context of the garment industry, many of them are applicable to any other industry.  The point, as John Ho stated, is that every employer must examine its relationship with other affiliated entities, as well as temporary staffing agencies that it may work with.  It is with these staffing agencies that the biggest danger for a joint employer finding arises.
 

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Since March 2009, it has been a stated objective of the United States Department of Labor (USDOL) to step up prosecutions and investigations of employer wage-hour violators.  I have noted this trend in a number of other posts.  The USDOL is not without (numerous) partners in this initiative.  Many states, all of whom have parallel wage-hours and. In many cases, more pro-employee laws are also stepping up their enforcement of state laws, focusing on what is now being described as “wage theft..”

In a 2009 study entitled “Broken Laws, Unprotected Workers” researchers from Cornell University and Rutgers University opined that workers in New York, Chicago and Los Angeles lose an average of 56 million dollars per week from employer wage violations.  The study’s claim is that 68% of the workers surveyed claim that they are denied proper overtime pay.  These reports, as well as a worsening economy, for everybody, state agencies and individuals alike, have generated intense interest by the state Departments of Labor, leading to numerous more audits and severely cracking down on employers who violate these laws.  That is, more severely than these agencies have, even into the recent past.

States are now enacting so-called wage theft statutes. In Illinois, the Wage Payment Act has been recently amended to provide for enhanced penalties and administrative fees, especially for repeat offenders.  The statute also enhanced the possible criminal penalties from misdemeanors to felonies. New Mexico has passed a law that entitles underpaid and improperly paid workers to collect double damages (i.e. liquidated damages) for wage underpayments.  The governor of Washington has signed a new bill into law, under which civil penalties from $1000-20,000 may now be assessed.  The list goes on and on. Importantly, these penalty and fee monies inure directly to the benefit of the particular State and go into State coffers, not the pockets of the allegedly underpaid.

An employer must always be aware that, whatever State(s) it operates in, there are two bodies of law and DOL enforcement postures, that must be complied with---federal and state. “Mere” compliance with the dictates of the Fair Labor Standards Act is insufficient.  State laws are often quirky, with different little quirks in different sections of different state laws (e.g. wage payment, payment for certain kinds of preliminary/postliminary time, prevailing wage, etc.).

Again, the cure is a proactive approach, an internal wage audit of all compensation practices under federal and state law, in as many jurisdictions as an employer does business in.  Even with that, there may be some gray areas, but the landscape will be better illuminated.
 

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In a recent posting in the Wage Hour Defense Blog, Kara Maciel brought attention to the new, intensified focus by the federal Department of Labor in auditing and inspecting health care facilities.  I represent a number of such facilities and have also noticed an uptick in such investigations, especially as concerns lunch breaks and rounding.  That post is at www.wagehourblog.com/2010/08/articles/wage-and-hour-policies/hospitals and nursing homes

As I have written about before, many health care employers (as well as others) have smart time clocks that automatically deduct thirty minutes every day for lunch.  As Kara notes, if the employee does any work during that otherwise automatically deducted period, the lunch period(s) may then be claimed to be working time.  Since patient care is a top priority and patients may and do need assistance and care at all times of the day, it is possible that employees may be interrupted during their lunch or claim that they are, even if the interruption is only for a moment, e.g. answering a question.

The difficulty of defending these claims is evident, as Kara notes.  Unless employers have built in fail-safe mechanisms to allow for the reporting and concomitant investigation of interrupted lunch claims, it will be virtually impossible to try to prove or disprove whether a certain employee actually took their full thirty minute lunch break on a day or days in the last two years.  I have advised creating a form for this contingency, placing it in boxes or containers by nursing stations or other central points and giving employees either in-service training on the procedure or otherwise documenting that employees are aware of the reporting procedure.  In that manner, employees can be properly compensated and the employer can adequately defend itself against years-later claims of unpaid working time.

The key is to be proactive.  Internal audits of compensation practices, especially those relating to exemption classification issues and working time issues, are essential. If a policy is problematic (or out rightly illegal) it should be changed immediately, so that any applicable statutes of limitations can start being eroded away.

“Eternal vigilance is the price of liberty,” said Thomas Jefferson.  It is also the price to pay for not being caught unawares in a FLSA collective and/or state law class action on issues that with careful planning and foresight could have been completely avoided.

 

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Under the proposed Workforce Empowerment Act (S. 3696), introduced in the Senate on August 3,  2010, in-home direct care workers who work more than twenty hours per week will be covered by the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA).  The bill would amend the FLSA, which currently exempts from its minimum wage/overtime protections individuals who work on a “casual basis in domestic service. 29 USC 213(a)(15).  A companion bill has also been introduced in the House of Representatives.  These workers typically provide assistance to their clients with such activities as bathing and eating.

The proposed bill’s Findings state that in the direct industry “working conditions are often difficult and turnover is high because of low pay, access to health insurance and other benefits, strenuous conditions…”  The Findings also report that 13,000,000 Americans are currently receiving such services and that “two-thirds of older adults will need some form of long-term care at some point in their lives.”

The proposed amendment defines “casual employment” as employment which is irregular or intermittent and which is not performed by an individual whose vocation is the provision of babysitting or companionship services.  Employment will not be considered “casual” if the hours worked in a week, for whatever number of employers, exceeds twenty (20).

Is this an initiative of the Obama Administration?  Any proposed expansion of the coverage of the FLSA is more likely to come from a Democratic Administration in any event.  I know this---there will certainly be record keeping, timekeeping issues if this law goes into effect because many of these workers have significant “down time” during the day, when they are able (?) to have free time to follow their own pursuits.

Are they engaged to be waiting or waiting to be engaged when these “chunks” of down time pop up?  Who knows?  Working time issues are amongst the grayest under the FLSA.  I guess we will see.
 

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In a rather new twist on the working time class action trend, Southwestern Bell Telephone Co. is being sued in a Fair Labor Standards Act (“FLSA”) collective action, where the underlying theory is that the company has denied union representatives compensation for their time performing union-related duties.  The case is entitled Kayser et al. v. Southwestern Bell Telephone Company and was filed in the U.S. District Court for the Eastern District of Missouri.

The workers allege that their time spent representing union members at labor-management meetings are hours worked and they are not being paid, in violation of the FLSA.  The Complaint alleges that shop stewards and other functionaries of the Communications Workers of America (“CWA”) discharge a number of duties, among them the representation of union members at disciplinary, investigatory and grievance meetings.  At all of these proceedings, there is a right to union representation under the National Labor Relations Act (as well as most union contracts).

The investigatory meetings, from which discipline might be imposed, are held by the company during the “accused” employee’s work time.  Such meetings are for the ostensible benefit of the company so it can determine whether employee misconduct has occurred, claim the plaintiffs.  On those occasions when the employee asks for union representation, the Union provides the representative.  An analogous procedure is utilized when the meeting is to impose discipline on a member, hear a grievance presentation, or any other labor-management purpose.  Again, the common denominator, according to the plaintiffs, is that the meetings are held on employee work time.

The employee/representative plaintiffs seek overtime, based on a theory that these hours would take them beyond the statutory threshold for overtime, i.e., 40.  As a “side issue,” the complaint alleges that employees are chilled and deterred from seeking to become union functionaries because they know their compensation will suffer.  The employees seek an injunction, as well as liquidated (i.e. double) damages and attorneys’ fees.  The class purports to cover current/former union representatives in Missouri, Kansas, Oklahoma, Arkansas and Texas.

There is a specific FLSA regulation addressing the issue of whether time spent in union matters is working time. 29 CFR 785.42.  The regulation leaves that determination to “the process of collective bargaining or to the custom and practice under the collective bargaining agreement.” I daresay that the employer will defend by asserting that if this matter is not specifically addressed in the labor contract, it means the parties never intended for the time to be compensable.  The case is interesting because it highlights the interplay or, some might say, the tension, between federal labor law and the FLSA.
 

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I have posted numerous times on the issues of preliminary and postliminary work and whether these activities are compensable.  Part and parcel of this issue is whether such time is compensable.  A recent case highlights (again) this issue and the confusion that well-intending employers face when determining whether or not to pay employees for alleged working time.

A federal judge has granted conditional certification to what could be a class of 8,000 workers employed at Huhtamaki Inc.  The suit alleged that this company, which does consumer packaging, did not pay employees for so-called “off-the-clock” work that it mandated they do.  The case is entitled Shockey v. Huhtamaki, Inc. and was filed in the District of Kansas.

The theory is that the company improperly rounded the time of the workers to reflect their scheduled shift times, when they actually (according to the allegations) engaged in tasks before their shift and after their shifts had ended.  Although the judge found that rounding policies varied amongst the company facilities, which are situate in ten states, there was sufficient similarity to make a granting of conditional certification appropriate.  At a later stage in the case, the employer-defendant will be able to (possibly) make a showing of sufficient dissimilarity as to reverse the designation of the matter as a class action

A serious allegation is that the company erased or wiped out time that was recorded on time cards.  Such a deliberate policy, if proven true, could have serious consequences for this company.  The gravamen of this allegation is that the non-exempt employees were compelled to arrive early and stay late to perform productive work, but the company intentionally erased that extra, what seems like, working time.

The company has defended by asserting that the plaintiffs did not sufficiently set forth the precise tasks they were engaged in.  The company also denied that an overall policy or plan that was intended to preclude employees from getting their rightly due compensation, contending that in numerous instances, the company did in fact compensate employees for working additional time.
 

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In Florida, an Assistant Manager has filed a class action against RadioShack Corporation, alleging that the company has misclassified these managers as exempt executives and has not paid them overtime.  The case is Truax v. RadioShack Corp. and was filed in the U.S. District Court for the Southern District of Florida.

The plaintiff is also claiming that Radio Shack “knowingly and willfully” violated the Fair Labor Standards Act; this is an attempt to extend the otherwise two-year statute to three years and to recover liquidated (i.e. double) damages.  The plaintiff is claiming that the company failed to pay time and one-half for the overtime hours.  The named plaintiff claimed he regularly worked 55 hours every week but was only paid straight pay for the hours, rather than time-and-a-half that is mandated by the FLSA.

In another case, RadioShack is alleged not to have paid workers for attending store meetings. In that case, Kamar et al. v. RadioShack Corp., the U.S. Court of Appeals for the Ninth Circuit has affirmed a lower federal court ruling that granted class certification to the plaintiffs.  That case involved mandatory meetings (on Saturday) that non-exempt employees attended and were not paid for.

On the Assistant Manager issue, the best defense is that these workers are truly exempt. The second best defense is that the class certification motion must fail because individualized assessment of each Assistant Manager is needed because some might have exercised more managerial duties than others.  The need for individual scrutiny is the antithesis of a class action .

As far as the mandatory meetings, this is basic FLSA law.  Non-exempt employees compelled to attend meetings or trainings are on the clock. 
 

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An equipment technician has filed a Fair Labor Standards Act collective/class action against Ingersoll-Rand Company.  The allegation relates to alleged working time, i.e. travel time, that the company did not pay workers for.  These workers drive all over the New England performing installations, service and repairs.  The case is entitled Nelson v. Ingersoll-Rand Co., and was filed in the U.S. District Court for the District of Massachusetts.

The employee’s theory is that the work now being performed off-the-clock work is “integral and indispensable” to his primary job of being a technician.  Under the FLSA, it is the “integral” nature of the preliminary or postliminary activity to the main job that determines its compensability or lack thereof.  The actual, main job involved the repairing of equipment such as hoists, cranes, air compressors and air dryers..

The employee contends that before September 2008, the company did pay the technicians for their travel time, but this abruptly ceased.  The company implemented a new “hours and operations and expectations” policy that specified the daily work hours, but, now, explicitly excluded travel time as compensable hours.  However, the suit charges that although the company stopped paying the workers for travel time, it nevertheless continued to charge its customers for time it took the technicians to travel to and back from the customer location.

The lawsuit also alleges that the technicians are no longer paid for the time it takes them to don and duff what they deem to be protective clothing.  As I posted only a few weeks ago, the United States Department of Labor has recently issued an Interpretation on when such donning and doffing time is compensable.  If these allegations are correct and the gear that must be changed into is for the mens’ safety, the time likely would be compensable. 

The workers also claim that the time they take in powering up their equipment, loading tools, communicating with management, i.e. dispatchers and arranging their job schedules and assignments is also compensable.  Again, the focus of the court will be on whether these activities are so essential to the main job that payment is required or whether they fall under the de minimis doctrine.

I gave a webinair on "What Constitutes Working Time" just yesterday.  See www.foxrothschild.com/redirect_webinair_whatIsWorkingTime_063010.asp

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A few weeks ago, I posted on the new federal Department of Labor policy to now issue position papers, as opposed to responding to requests for opinion letters. On this subject, there has been a rash of cases, many of them class actions, on whether certain preliminary and postliminary activities related to putting on safety equipment and safety clothing is compensable work time. With the position issued on June 16, 2010, the US DOL has taken the position that it is in fact working time.  See Administrator’s Interpretation, 2010-2.

The position paper focused on whether safety equipment can be considered clothing, because under the FLSA, clothes changing is not compensable.  The DOL studied the precedent, mostly arising from the food industry, where employees are mandated (by health laws or agency requirements) to don and duff protective gear.  The agency reviewed earlier Opinion Letters it had issued and rescinded some which were not consistent with the current position paper.  In sum, protective clothing or gear that must be worn is an integral part of the employee’s job and is therefore compensable..

The position paper also addressed the issue of whether clothes changing (which is itself non-compensable) can be deemed a “principal activity” that starts an employee’s continuous work day. The agency ruled that such an activity may start an employee’s work day, meaning that all activities following that “start,” including walking to the work station, then are also compensable. The agency ruled that this activity can start the work day.  This occurs when the activity is deemed essential to the employee’s job.  This is an important ruling because it could require compensation to be paid, whether or not the clothes are safety-oriented or not.

The key issue for employers to focus on is what is the nature of the preliminary/postliminary activity and what is the relation to the main job.  The employer also need not be in the food processing industry to be impacted by this position paper.  For example, in a restaurant, if the employer requires cashiers to report ten minutes early and leave ten minutes late to balance their cash drawers, that activity will be deemed integral to the main job and therefore compensable.

These kinds of activities are likely engaged in by numerous employees, if they are engaged in at all.  This means that there will likely be found (if a class action is filed) a common, overall policy that applies to the activity, which is the necessary component to allow a court to find that a class exists.  Accordingly, employers must scrutinize the job functions of their employees as to whether any “work” or “preparation” is done before/after the main job and analyze the relationship between the two to determine compensability.

I am giving a Webinair on these issues on June 30, 2010. Learn more about the working time webinar.

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I have handled a number of wage-hour class actions where the plaintiffs allege federal (i.e. Fair Labor Standards Act) and parallel/identical state law claims for wages and overtime. Here, in New Jersey,  I have made motions to sever the state claims because they cannot exist as a component of the FLSA action due to the inherent tension in the opt-in (federal) versus opt-out (state) procedures.  Now, the legitimacy of pursuing two actions will be resolved (maybe, maybe not) by at least one Circuit in a case now coming before it.

The Second Circuit will decide whether a collective action can proceed with identical state law claims co-existing with it.  The case is Shahriar et al. v. Smith & Wollensky Restaurant Group, Inc. The Circuit has granted the company special leave to appeal the decision of the federal district judge that has allowed both claims to simultaneously proceed, as the judge certified a class of current and former waiters, who worked at the Park Avenue Café, for their New York State Labor Law claims.

Since the state case is opt-out, the number of plaintiffs in that case is significantly higher than the number of plaintiffs who chose to top in to the federal, FLSA, collective action case.  In fact, only twenty-two (22) employees opted in to the federal case, while the parallel state case contains an employee class of almost 300 employees.  There is, to me, something fundamentally and diametrically wrong with such a construct as it allows the plaintiffs and their lawyers to have the best of both worlds.

The company charges, and I think with some validity, that the plaintiffs are using the state claims to widen the scope of the case and, according to the company, “extort” a massive settlement.  Indeed, the company would be under pressure to settle, if it were, in the end, facing a class of 300 as opposed to two dozen..

The lawyers for the plaintiffs shot back that the defendants should be careful what they wish for when they contend that both suits cannot remain parts of the same litigation.  If the suits are severed, the defendant will have to fight cases in both federal and state court.

The case itself involves allegations that the tip pool was destroyed by inappropriate people sharing in the tips, such as managers.  When this happens, the tip credit that the employer has been allowed to take is destroyed, creating shortages in minimum wage payments and the liability for the company escalates dramatically.

I will be watching this case closely, as will all practitioners of wage hour law, especially on the defense side.
 

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A federal judge has thrown a nationwide collective action against Black & Decker out of court.  The suit alleged that the company did not pay employees for time allegedly worked off the clock.  The court found that the plaintiff did not prove that he had worked overtime.  The case is entitled Kuebel v. Black and Decker (U.S.) Inc. and was filed in the federal district court in the Western District of New York.  There could have been more than 200 employees involved.

This is a rare occurrence.  The granting of so-called conditional certification is usually a fairly easy hurdle for a plaintiff to overcome.  A few affidavits, perhaps some deposition testimony and that’s it. The key remains that some showing of similarity must be made, some showing that an overall policy or practice applied to all of the employees potentially involved.  That this plaintiff could not make the showing is significant.

The court found that the plaintiff “has not explained when and for how long he performed the off-the-clock work.”  The court continued and stated that “ because the undisputed facts demonstrate that plaintiff has failed to meet his burden, his claim for off-the-clock work fail as a matter of law.”

What is interesting in the context of this particular case is that the company had stipulated to the conditional certification of a class that was solely confined to the company policy of paying retail specialists for travel time, but only if the employee’s commute was more than sixty miles or sixty minutes.  The judge had found this policy legal in May 2009. (Note: Home-to-work travel is always non-compensable, so a company can legally implement a policy of paying for some component of this travel time if it so desires).

This does not often happen and that is why I write about it when it does.  The lesson for employers, on the merits of the controversy, is that they must never direct employees to do productive work off-the-clock and should have a policy in place relating to that issue.  Also, maintain accurate records of employee working time and, most importantly, have employees self-certify their working time (e.g. sign off on time card) every week.  That is the employer’s fail-safe, best protection against such suits.
 

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There are employers whose “smart” time clocks automatically make a thirty minute deduction every day for lunch, supposedly and assumedly taken.  I have railed against this practice, advising that the far safer thing is to have employees punch out and then back in for lunch, because someone, somewhere down the line, will assert that they worked through lunch but nevertheless had that half-hour deducted.  That chicken has now come home to roost.

A hospital/nursing home owner, Kindred Healthcare Inc. has been accused, in a proposed class action, of not properly paying employees because this employer has an automatic lunch deduction system, that deducts time for lunch, even if the employee allegedly did not take the lunch.  The case is entitled Samuel v. Kindred Healthcare, Inc. filed in the U.S. District Court for the District of Massachusetts.  It is couched as a collective action under the Fair Labor Standards Act (“FLSA”).

The Complaint alleges that there are “thousands” of potential class members.  This timekeeping system automatically deducts a 30-minute meal period from employees, but the employees contend they often have to work through lunch on patient care issues.

The Complaint also alleges that employees must stay at their desks or posts during their breaks and continue to work.  Work, according to the Complaint, “includes responding to pages, answering the telephones, replying to requests by patients, co-workers and management, and performing all other duties and responsibilities that are required.”

These cases are very tough for the employer to prevail upon, especially in a health care environment, where it is not beyond the realm of possibility that patient tasks and responsibilities might keep a worker (or workers) busy during their lunch.  To the contrary, it is also impossible to imagine that one thousand employees never took lunch for two years.  The worrisome thing is that by making the automatic deduction, without having some “fail-safe” mechanism in place so that employees can report that they worked through lunch, have the claim investigated and, if true, the time paid, then the employer has left itself very little wiggle room and a tough case to defend.

Smart clocks may be silly policy!
 

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I have posted numerous times on the issue of when preliminary or postliminary job “duties” become compensable.  If the employer is unaware that they might, or missed the mark, the result can be and often is a class action lawsuit, oftentimes seeking overtime compensation, as these “work activities” often bring the hours worked to more than forty in a week.  In Rutti v. Lojack, the Ninth Circuit Court of Appeals dealt with an unique variation on this theme, one which has troublesome ramifications for all employers.

The plaintiff sought to bring a class action on behalf of the employer’s nonexempt technicians who travel each day from worksite to worksite in an employer vehicle installing alarms in customers’ cars.  The plaintiff wanted to be paid for his pre-work activities, his commute time and his post-work activities including completing a required report by modem.

The Ninth Circuit found that most of these activities were not compensable work time.  The court found that the plaintiff’s commute time was not compensable, even though he was provided with a company car.  The court rejected the plaintiff’s argument that the restrictions on use of the car imposed by the employer rendered his commute time an integral part of his workday.  The restrictions had included a prohibition on personal use and transporting passengers, a requirement that the employee drive directly from home to work and from work to home and that the employee keep a cellular phone turned on.

The court also found that his preliminary activities of receiving assignments, mapping his route and prioritizing his jobs were not compensable either because such activities were de minimis. The employer required its technicians to transmit data about their daily activities from home by modem at the end of the workday and this took 10-15 minutes, and required the employees to come back later to verify the transmission was received.  Whether these activities are compensable will depend on: (1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and, (3) the regularity of additional work.

There are valuable lessons here for employers.  Giving a company car does not render commute time compensable.  Planning your workday before work is not compensable, nor are minor tasks before or after work.  But the real lesson here for employers, and the safest course, is to avoid mandating any specific pre-work or post-work tasks to be done on the employee’s own time.  If the nature of the work requires such tasks, this case provides guidance on how to structure those tasks to keep them non-compensable.
 

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There is a fine line oftentimes between who is and who is not an employee. This premise especially applies to the issue of “interns.”  As summer approaches, and as jobs may be quite hard for young people to find, there seems to be a rise and we expect to see a sharp rise in companies utilizing unpaid “interns.”  Under the Fair Labor Standards Act (“FLSA”) and state laws, there are definite, specific criteria that a person must fit before they can be deemed an intern and not entitled to (at least) the minimum wage protections of wage-hour laws.

The fear is that employers may view these people as a source of free labor, while using the moniker “intern” to describe them and hopefully not be able to pay them anything.  For example, in New Jersey, there are nine criteria for delineating an intern; the employer must ensure that all nine are met or else the person is an employee.  Under the FLSA, there are six.  Of special note is the requirement that the internship be for the primary benefit of the individual, not the employer.  This may often be a hazy line to draw.

The state DOLs are on to this.  Last year, the New York State DOL investigated many companies’ intern programs to determine compliance with the law.  We are hearing that, on a federal level, there will be more inspections and audits on this issue.  One possible hindrance to these investigations may be the hesitancy of “interns” to come forward and file complaints, as they understand that such complaints might have the untoward effect of endangering future employment opportunities with the company they just turned in.  Although this would be clearly against the law, i.e. retaliation, this is the real world.

Other criteria that probably cut across every state statute/regulation that has addressed this issue are that the internship must be similar to the training given in a vocational school or academic institution and the intern cannot displace any regular, i.e. . paid workers.  Nor can the employer derive any immediate benefit from the “work” of the intern.
 

Remember-if the DOL comes in on this issue, it will not limit itself to an examination of only this issue.  Every other compensation practice will be fair game for scrutiny.

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A federal judge has dismissed a possible class/collective action concerning an alleged failure by Butterball, the giant poultry company, to pay workers for donning and doffing time.  I have written many times on this subject, but this case is different because the court found that the employees’ union had agreed to the policy of not compensating workers for this time. The case is entitled Salazar et al. v. Butterball, LLC and was filed in federal court in the U.S. District Court for the District of Colorado.

The workers are unionized and represented by the United Food and Commercial Workers, Local 7. The court ruled that, during negotiations, the union had waived or given away the right to be compensated for this time.  The employees in this lawsuit maintained that, notwithstanding this provision, it was illegal to force the workers to negotiate for something that they were already legally entitled to, i.e. compensation for donning and doffing time.

Significantly, the court noted that the union had filed a grievance over the nonpayment of donning and doffing time, but never channeled the grievance to arbitration.  Thus, the company also had the argument that the Union had abandoned the grievance and had “doubly” waived its right to press for compensation, i.e. through collective bargaining and the dropping of the grievance and failure to pursue it to arbitration.

The Company argued that since payment for donning and duffing time concerned wages, it was a so-called mandatory subject of bargaining; the union had never pursued the matter at the bargaining table and therefore the Company contended that these unionized workers could now not come after it through the back door.

The plaintiffs argued that if the federal judge adopted the magistrate judge’s findings, that would, “contrary to law, create a requirement that a union must use its right under federal law to be paid for all time worked as a bargaining chip in collective bargaining or lose that right.”  The court rejected that argument and did in fact adopt the magistrate’s findings.

The lesson to be learned---if an employer is unionized, it can, through collective bargaining, either “win” a provision that such time is non-compensable, or agree with the union that “some” modicum of such time is also compensable.
 

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The US Department of Labor has resolved a legal action against a Texas company, Flour Enterprises Inc. for its failure to pay relief workers who participated in the Katrina clean up and rehabilitation efforts. The company will pay one million dollars to 154 workers. The case is entitled Solis v. Universal Project Mgmt., Inc., and was filed in the Southern District of Texas.

The DOL had also secured a default judgment against another Houston, Texas company for wages due workers which arose from the same investigation. That case is entitled Solis v. Universal Project Mgmt., Inc., and was filed in the same federal court..

Fluor, an engineering and construction firm, functioned as the General Contractor when it contracted with the Federal Emergency Management Agency after the devastation caused by Hurricane Katrina.  In turn, Fluor Enterprises subcontracted the work of inspecting trailers for the displaced people who were left homeless by the disaster to Universal Project Management.

The field investigation conducted by the DOL revealed that the companies did not pay time and one-half overtime, but rather (and against the law) paid only straight time for overtime hours.  A DOL official explained that “some employees involved in the inspection of trailers during the hurricane recovery worked up to 84 hours in a week without the required overtime compensation for hours worked over 40 in a workweek.”.

The Secretary of Labor observed that “workers who help rebuild our communities and secure the safety of local residents following natural disasters should be fairly and legally compensated for the work they perform.”

It is shameful that these employers should disregard such a basic tenet of wage-hour law, i.e. paying proper overtime, especially to workers who were likely not earning that high of an hourly wage to begin with. The mind boggles. I often take issue with Departments of Labor when defending/representing clients, but I applaud this use of the agency’s investigative and enforcement powers.
 

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The electronic giant, Best Buy, has requested that a judge approve a $900,000 settlement in a New York State wage-hour class action in which the plaintiffs sought payment for time worked “off-the-clock.”  That working time was the minutes spent going through security clearings at the end of the work day, assumedly to ensure that employees did not steal anything during their shifts.  The case is entitled Turner v. Best Buy Company, Inc.

Although the case was filed in state court, the employer had removed the case to federal court under the Class Action Fairness Act of 2005.  After going through a great deal of discovery, the parties decided to settle the action, although they maintained their respective positions.  The company maintained that it properly paid all employees for all time worked, while plaintiffs took the view that going through the security check was an employer instigated “activity” that required compensation.

Interestingly, and significantly, the employer has agreed to modify its operating procedures to allow all employees to remain on the clock until their manager allows them to leave the store.  Thus, although the employer denied any culpability, the remedial action it took suggests that it knew that there was an issue here.

The key to determining whether preliminary or postliminary activities are compensable is the element of employer compulsion or the lack thereof.  I equate this activity to the employer ordering a retail cashier to report ten minutes early to balance out the cash drawer or to stay ten minutes after the shift ends to do the same.  It is a safe bet that where employer ordering, or direction or compulsion of an activity related to the main job is involved, the activity is working time and compensable.  The other benchmark is how integrally related to the main job is the side activity.

I have often commented on these preliminary and postliminary issues.  They are a real danger to the employer because oftentimes, the employer may not even appreciate that this “little” activity or routine or inconvenience to employees is actually “work,” which can then lead to a single employee filing an action (as was done here) and everybody else coming on board.  The proactive approach is to analyze every non-exempt job and ascertain if there are preliminary or postliminary activities involved or related to it and then apply the above-referenced analysis and make the call on whether it is or is not working time.
 

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If the economy rebounds in 2010, employees will be looking for enhanced raises to offset the dismal or non-existent raises of 2009.  If the economy does not rebound, employers will be faced with tough decisions and even tougher conversations with their employees concerning this lack of increases.

There are legal pitfalls to be avoided in making these decisions and having these (often difficult) talks.  Learn how to manage worker expectations, realistic or otherwise,  interact with employees who are not getting hoped-for raises and, most importantly, what legal issues (e.g. discrimination?) inform these decisions and discussions.

Come join me in a webinair I am conducting on January 27, 2010 from 1:30-3PM, EST, where these issues will be examined.  The registration link is:

hrtrainingcenter.com/showWCDetails.asp

 

 

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I have posted a few times about Fair Labor Standards Act donning and doffing cases. The general rule is that donning and doffing is compensable if these preliminary and postliminary activities are integral to the performance of the employee’s primary job.

For a rule, there is always an exception. In a case entitled Johnson v. Koch Foods Inc., filed in the Eastern District of Tennessee, a federal judge has ruled that because the parties’ labor contract applicable to covering chicken processors working at a cut and kill plant explicitly excluded compensation for time spent donning and doffing certain sanitary and safety gear, the workers were not entitled to compensation for the time it took to put and remove the gear.

The judge analogized the putting on/taking off of the gear to “changing clothes,” which is not compensable under Section 203(o) of the Fair Labor Standards Act. The court did warn, however, that of a jury determined that such activities were integral and indispensable, they then could be compensable under the “continuous workday rule.”

This result seems anomalous because the workers were required to put on the protective gear prior to reporting to the production line, to begin their primary work, but they were only compensated for the time actually on the line.

There is a divergence in the federal Circuits as to what constitutes “clothes.” The Ninth Circuit has held that the “changing clothes” safe harbor applies only when the items at issue are clearly and unmistakably clothing, as is commonly understood. However, the Eleventh Circuit has held that the term applies to hairnets, gloves and hearing protection equipment. The US Department of Labor has issued an Opinion Letter concluding that the Section 203(o) definition of clothes “includes items worn on the body for covering, protection, or sanitation.”

This issue may ultimately have to be decided by the US Supreme Court. In the meantime, employers need to make assessments of the indispensability of the preliminary activity to the main job and start the analysis of compensability from that vantage point.
 

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Under the Fair Labor Standards Act, there is no law requiring employees receive a lunch period or break times. However, when the employer gives time for lunch, the employees must receive at least thirty minutes and the time must be uninterrupted. Put differently, the employees must be completely relieved from duty. When employees are not so relieved, they must then be compensated for that time, i.e. the half-hour, which all becomes “converted” into working time.

This is what the DOL found happened in this investigation, which ultimately included 4000 nurses. Some of the nurses answered phones while on lunch and others performed “some” duties. The result, however, is the same---all of the time is converted.

The hospitals also had an automatic deduction policy, by which one-half hour was automatically deducted from the nurses’ time for that day, on the assumption that the lunch was taken. Although the hospitals had a policy about not working during lunch (i.e. not carrying the hospital-provided phones during meal breaks) and also had a policy that allowed nurses to cancel the automatic deduction if they performed actual, productive work. The hospitals claimed that the nurses did not follow the policy. The result was a supervised settlement providing for 1.7 million dollars to be paid to the affected employees.

I have clients who have these automatic deduction systems for lunch time. As this makes clear, the automatic is not so automatic. There must still be supervisory oversight and intervention in issues where employees may have worked through lunch, to ensure that proper payment is made. The employer must have a system where employees can report that they worked through lunch and the employees, in my view, must be given training on the system, so all productive time is paid for and the DOL does not come knocking on the door.

In sum, a policy, a piece of paper, will not provide a defense to claims of uncompensated working time. More is required of the employer.
 

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A federal judge in charge of a Fair Labor Standards Act (“FLSA”) action involving workers for the turkey producer, Butterball, has rejected an attempt by the workers to compel the poultry company to adopt measures that would provide accurate records of the time workers took donning and doffing their special work clothing. The case is entitled Martinez-Hernandez v. Butterball, LLC. and is being litigated in the Eastern District of North Carolina.

As I have written about numerous times, these donning and doffing, working-time cases, are very difficult to defend, as well as to prosecute, given the problems associated with amount of time actually spent in donning/duffing, as opposed to the amount claimed,

The plaintiffs had sought time records that showed this data but Butterball asserted that it did not keep specific records of those activities. In response to this, the plaintiffs requested that the court to compel Butterball to permit the workers to install timekeeping equipment at the plant to monitor the activity, but the company refused.

The court agreed that there was no legal obligation for Butterball to do that and that the plaintiffs’ request overreached as it would impose new obligations on Butterball to collect this data on the employees.

The claim was employees should be paid for the time walking from one work station to the next, the time putting protective clothing on and the time cleaning up after their shifts ended. The employees also claimed illegal deductions were made in the form of making them pay for their personal protective equipment.  

When do employees start working? The basic rule of thumb is when they undertake activities that are directly connected to their work, that is, that they would be unable to do their primary job if they had not engaged in the preliminary or postliminary activity, such as putting on protective work clothing, especially if mandated by federal or state regulations or health laws.

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In a case entitled Clifton Sandifer et al. v. U.S. Steel Corp. a federal judge has cut out some claims from a work time class action suit, but has allowed one major allegation to remain in the case. That cause of action involves whether the employees should be paid for the time spent in walking from their locker room to their work stations.

The case is in federal court in Indiana; the plaintiffs filed suit in December 2007. Unlike many class actions I have commented upon, this was not a misclassification lawsuit, but rather a work time case. The plaintiffs sought compensation for time spent donning, doffing, walking, showering and laundering personal clothing in excess of the 40-hour workweek. The employees allege that these “work” activities consumed 9-10 hours per week.

The judge threw out the portions of the case pertaining to the donning and doffing of protective clothing, agreeing with US Steel that the compensability of these activities was addressed in the parties’ collective bargaining agreement. The court also found that showering was not required by the company and therefore was a postliminary (i.e. after work) activity for which no compensation was required.

Similarly, even though instructions were provided on how to launder clothing worn under work gear, transporting and laundering clothing was not required by the Company and thus it was not compensable. The judge kept the walking to work station claim, rejecting the company argument that these were non-compensable preliminary and postliminary work. The judge also rejected the de minimis doctrine argument, finding that walking times varied widely throughout the plant.

Judge Miller also did not accept the argument that these claims were preempted under the National Labor Relations Act as they ostensibly involved interpretations of the collective bargaining agreement, rather than statutory violations of the Fair Labor Standards Act.
 

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The Ninth Circuit has largely upheld a lower court's grant of summary judgment to the defendant employer in Rutti et al. v. Lojack Corp., Inc.   This case involved an alleged Fair Labor Standards Act violation that accused the defendant of failing to compensate its technicians for off-the-clock work. While the decision was largely affirmed by ruling that the plaintiffs were not entitled to compensation for time spent driving to work in a company-owned car, one vital part was vacated. 

Indeed, the Ninth Circuit found that the lower court erred in holding that the plaintiff should not be compensated for time spent at home each night uploading data about the installations performed that day on a “personal data terminal” provided by the company. The court found the task appeared to be essential to the plaintiffs' principal work activities and the time spent performing the task (15 minutes) was not de minimis.  

 

Additionally, Plaintiff argued that his commute was compensable because his use of a Lojack vehicle was not voluntary and amounted to a condition of employment, and because Lojack put restrictions on his use of the vehicle, such as not being able to transport passengers. The Ninth Circuit affirmed the lower court's rejection of the both those arguments.

 

Plaintiff also sought compensation for certain activities he performed off-the-clock in the morning and in the evening. The Ninth Circuit affirmed the lower court's ruling that the tasks he performed in the morning, such as mapping and prioritizing work for the day, were not integral to the job and were related to the non-compensable commute.

 

While this is a seeming “win” for employers, it also sheds light on what the courts will consider de minimis for purposes of the Fair Labor Standards Act. Notably, for tasks deemed integral to the job, a 15 minute work requirement each day will not be found to be de minimis and will be compensable.  The lesson for employers is that when preliminary or postliminary activities, i.e. before/after work, take up more than a few moments, a court, or a Department of Labor, will likely view that as productive work time, not de minimis.

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The issue of what constitutes working time is a gray one for employers.  Especially murky is the question of when on-call time, i.e. waiting time, should be compensated.  In a significant development, in a class action case entitled Green v ATT, filed in the Southern District of California ATT has been charged with depriving its information technology staff of overtime wages for on call hours, which are now claimed as working time.

The employees claim they had to be constantly on call, so they could respond to and fix, e.g. troubleshoot, a wide range of problems associated with the computer systems.  The suit alleges that the “employees were placed onto standby, on-call but were not paid the required compensation for these hours worked, regular and/or overtime during the class period.”

One of the downfalls of an employer on-call policy, meaning that all of the on-call hours are converted into working time, is requiring employees to respond in a very tight window.  The allegations herein are that ATT required the affected employees to respond within 15 minutes to a call-in; they were on call twenty-four hours per day, seven days a week.  This was above and beyond the “usual” forty-hour week.

The other component of a bona fide on-call policy is that the employees must be able to pursue their leisure activities, their “lives” in a manner not unduly restricted by the policy.  The employees (naturally) alleged that this was an overly restrictive policy and they unable to enjoy any leisure activities or engage in their own pursuits.  Therefore, they seek to be compensated.

The plaintiff seeks class certification.  Of equal, if not more, concern is that the plaintiff is asking the court to create a “fluid fund” so that the alleged violator can deposit funds for restitution and back pay purposes.

Examine your on-call policies. If the response time is less than thirty minutes and/or if there are other conditions that may be argued as “unduly restrictive” you may need to revise the policy or practice. In the AT&T case, computing the potential damages, i.e. on call pay at hourly and overtime rates for hundreds of employees, for thousands of twenty-four hour days sounds staggering just to contemplate and will be even more frightening to actually undertake.
 

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In the 1960’s, a movie came out entitled “The Russians Are Coming! The Russians Are Coming!” It was about a Russian invasion of the United States. Well, a different kind of Russian invasion has hit our shores, but it takes the form of a class wage-hour action filed by Russian performers in a Las Vegas ice-skating revue, the “Moscow Ice Circus.” They allege they have not been paid for more than 225 performances, that they were docked pay because they gained weight and were not paid overtime.

Twelve former performers filed the lawsuit in the U.S. District Court of Nevada, alleging that Sergey Ryshkoff’s Moscow Ice Circus LLC and Ice Show Corporation violated the Fair Labor Standards Act. The case is entitled Abrosimov v. Sergey Ryshkoff’s Moscow Ice Circus, LLC.

The Circus is a live show that includes jugglers, acrobats, figure skaters, clowns and gymnasts performing acrobatics on an ice skating rink. The plaintiffs claimed they were hired to perform acrobatics and ice-skating routines for the Moscow Ice Circus show at the Riviera Hotel and Casino in Las Vegas, but allege that their employer refused or neglected to pay them for a staggering 225 performances.

They also allege that they were not compensated for the marketing they did for the show on the Las Vegas Strip. When they engaged in these activities, they had to don costumes and present mini performances while skating and handing out fliers to pedestrians. They also allege that their compensation was subject to deductions for tardiness and weight gain.

This case illustrates the different nuances and forms that a class action can take. Although this fact pattern seems, on one level, humorous, it may not turn out to be so funny for Sergey when he has to pay the back wages.
 

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A federal court has ruled that an airline was not required under the Fair Labor Standards Act to compensate a prospective flight attendant for the periods of time that she attended a full-time training program that lasted five weeks. Interestingly, during this period, the trainee received free housing and an allowance for meals. The case was brought in federal court in Washington and was docketed as Ulrich V. Alaska Airlines Inc.

The court dismissed the case because the judge determined that the training was of benefit to the trainee. It enabled her “to qualify for employment by Alaska” Airlines and to gain “first-hand experience in the type of customer service provided by Alaska.” Of equal significance was the concomitant finding that the airline-employer “received no immediate benefit” from her work “serving passengers on board the training flights, because the airline still had to staff the airplane with a full complement of regular flight attendants.” This element, i.e. the employer deriving benefit, meaning productive work, is a key component of the analysis.

Also, the airline made no representation that the trainee would in fact receive a position with it following the completion of the training (although the majority of trainees did receive job offers)

The United States Department of Labor has, through issuance of numerous Opinion Letters, adopted a six-part test for determining whether an individual engaged in a training program is an employee and unless all six factors are satisfied, the person is deemed an “employee” and must receive compensation for his endeavors/efforts for that employer.

The factors are: (1) whether the training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school; (2) whether the training is for the trainees’ benefit; (3) whether the trainees displace regular employees and work under close observation; (4) whether the employer derives an immediate advantage from the trainees’ activities;(5) whether the trainees are entitled to a job after completing training; and (6) whether the employer and the trainees understand that the trainees are not entitled to wages for the training time.

Under the “benefit” test, the court made clear that the benefit to the employer must be “immediate” and cannot be speculative or in the future. Indeed, the court observed that the airline may even have lost money in the training process, because the trainees took up seats that otherwise would have gone to paying passengers. The airline was also required to have a flight fully staffed with regular flight attendants, notwithstanding that the trainees may have performed some minor tasks on the flight, such as service cart work and trash pick-up.” In sum, the employer-airline did not derive the benefit, although the regular flight attendants may have been relieved of some of their usual (tedious) duties.

As with all of these issues, an employer must closely scrutinize the tests applicable to determining employee, as opposed to trainee, status. An incorrect answer will could mean thousands of dollars in potential liability.
 

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Most of my postings about class actions have concerned white collar, service or retail sales occupations and whether employees fit within certain FLSA exemptions. A few have concerned working time (e.g. donning and doffing) in factories. None has concerned so exotic an occupation as loggers, or, as the TV show likes to label them, “Ax Men.”

A FLSA class action lawsuit, entitled Maudlin v. Johnny Kynard Logging, Inc., has been filed by a logger who claims he always worked from about 5AM-6PM, without being paid the required premium rate (i.e. time and one-half) for overtime hours. In an important victory for him and other putative plaintiffs, his case has been granted collective action certification, which means that more plaintiffs will throw their axes in with this gentleman and seek overtime.

Judge Kristi K. DuBose of the U.S. District Court for the Southern District of Alabama granted the plaintiff’s motion for class certification, as well as an Order facilitating notice to other loggers who may wish to join the suit. Evidently, according to the plaintiff’s attorney, there have been a number of suits filed against logging companies and this industry is rife for other overtime suits.

The attorney asserted that failing to pay loggers proper overtime is “somewhat of a common practice” among logging companies. For example, in this case, it is claimed that the employees were all paid on a flat per-day or per-week basis that did not account for the actual number of hours the employees worked, with an appropriate overtime calculation then made. Such a calculation would be based on the total remuneration received (i.e. adding all of the day rate monies) divided by the total hours worked in the week to arrive at a regular rate. Half-time overtime would then computed on that week’s regular rate.

The named plaintiff and the opt-in plaintiffs in this action worked as loggers cutting, gathering and delivering timber. The lesson here is that no occupation, business or industry is immune from these kinds of overtime suits, albeit based on different theories.

If a tree falls in the forest and no one is there, does it make a sound? If the tree is felled by a logger not being paid proper overtime, it will indeed---a big one.
 

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In a recent case entitled Gonzalez v. Tanimura & Antle Inc., a federal court in Arizona ruled that farm workers who waited in their employer’s parking lot until the ice melted from the crops they were going to pick were “engaged to be waiting,” rather than “waiting to be engaged” and therefore entitled to compensation for the time they spent waiting.

The court ruled that the named plaintiff and fifty-five other should have been paid for the time they spent waiting in the parking lot. The fact that they could buy coffee, or play cards or even play soccer while they waited for the crops to de-ice did not turn the time into non-compensable time. The judge stated that these “personal activities” were more like time-filling activities, rather than personal pursuits that the workers would engage in if they had not gone to the parking lot to commence their work for the day.

The workers picked lettuce and broccoli. The majority of them lived in Mexico and walked about an hour to arrive at the parking lot. From that meeting place, they rode on company-provided buses to the fields, some 10-40 miles away. Every day during the harvest season (November-March), the workers were told when to report to the parking lot on the next day. If frost was predicted, the workers were told to report later, as the harvest could not commence until the ice melted. On occasion, ice was found on the crops after the workers got to the parking lot. Thus, they were unable to commence work and they stayed in the parking lot, although some bought coffee, or played cards, dice, or soccer. The plaintiffs alleged that they were required to wait for their employer’s convenience and benefit, turning their waiting time into compensable time.

The employer defended by contending that it did not owe any monies because the ice in the fields was an “act of God.” The court rejected this defense, concluding that “the ice actually was foreseeable because it happened quite often in Yuma during the winter months.” The court noted that the supervisors would set later start times for “the next morning based on their belief that ice would form” and that “because of the predictability of the ice, defendant could have set a later start time during the winter months.

This case raises the difficult and gray issue of what constitutes working time. Again, as in so many of these instances, it is the notion of employer compulsion or direction that is at the heart of the matter. The workers were directed to report by the employer at a certain time to a certain place. That conditions outside their (or anyone’s) control delayed the commencement of their “real” work did not render their waiting time non-compensable.

Engaged to be waiting to waiting to be engaged? It depends.
 

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I have encountered a number of cases where employees do not, whether unintentionally or otherwise, work through their lunch hours (or half-hours) and then later claim they are owed wages or overtime for that work.  It is crucial to understand that it is not enough to simply, merely have a policy that requires employees to take lunch.  The employer must be vigilant that employees are in fact taking lunch and must ensure, to the maximum extent operationally possible, that employees sign out and sign back in when they return from lunch.

A recent US Department of Labor Opinion Letter makes this clear.  The Opinion Letter repeats the age-old adage that time not requested to be worked but yet suffered or permitted to be worked is work time.  Under this rubric, missed meal periods will be counted by the DOL as working time.  If the employee is regularly scheduled to work 35 hours, and with missed lunch periods, claims he worked 37.5 hours (at a half-hour per day), no additional compensation will be owed if the employee is nevertheless paid the minimum wage for all hours worked.  This means that salaried (non-exempt) employees who miss lunches but whose salaries still yield minimum wage payment for all hours are due no additional compensation.

As the Second Circuit Court of Appeals,  in Chao v Gotham Registry, Inc. has recently stated in a similar case, "it is the duty of the management to exercise its control and see that work is not performed if it does not want it to be performed.  It cannot sit back and accept the benefits without compensating for them.  The mere promulgation of a rule against such work is not enough."

The employer must exercise supervisory oversight in this area.  Ensure that employees punch out for lunch and they punch back in.  It will be extraordinarily difficult to prove, at a trial that may ensue several years later, whether or not someone took lunch on August 15, 2008 (or the day after, or the day after that and so on).  Unless the time in question is a minute or two, or such occurrences are isolated, the employer must constantly guard against claims of time allegedlty worked, when, all things being equal, it probably was not.

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As I have written about, many activities may be deemed compensable working time, under the right circumstances.  Some of these activities might not appear immediately visible as working time. For example, a class of almost 200 employees who worked at a facility for sexually violent predators on McNeil Island, Washington State and had to ride a ferry to and from the facility were not entitled to overtime pay for the travel time on the ferry, held an appellate court.

The court ruled that these employees were not “on duty” at the Special Commitment Center during their commute and are not at a “prescribed work place.” There were nineteen scheduled ferry runs per day, with each trip taking approximately 20 minutes. The employees did not have to perform any work during the trip, but they claimed they could be disciplined if they misbehaved on the boat.

As a general rule, home-to-work commutation is not compensable. This case falls into this general rule as the ferry ride was merely an extension of the home to work, ordinary commute.

Conversely, time spent by employees in drug testing and physical examinations required by the Department of Transportation for commercial licensing purposes are engaged in productive work for which they must be compensated, under a ruling of the US Department of Labor. When the employees are engaged in these activities, they are not “free” to do other things and the restriction on their time emanates from a requirement of the employer, in order to serve the employer. Thus, during those times, the workers are subject “to the employer’s discretion and control.”

Interestingly, the DOL ruled that it did not matter whether the drug tests were on duty or off duty. The agency concluded that “whenever an employer imposes special requirements or conditions that an employee must meet before commencing or continuing productive work, the time spent in fulfilling such special conditions is regarded as indispensable” to the principal activity. Therefore, if the US government mandated physical examinations and drug testing as a “condition of the employer’s license to operate its business,” that time spent was for the benefit of the employer and compensable.

These determinations are often close calls and hinge on the relationship of the activity to the primary work activity and whether there is an indispensable relationship. Travel time issues are especially thorny questions.

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Workers have filed a serious class action against the cell phone division of AT&T.  The workers, who received overtime pay at first, have claimed that the Company's supervisors changed the data base so employees could not enter more than 40 hours of working time in a week.  Thus, these employees were doing productive work for the Employer, but were working "off the clock."  Naturally, part of the alleged scheme, according to plaintiffs, was that the Company was not keeping accurate records of time worked.

These are dangerous case for an employer, because intentionally telling workers to work off the clock or making it impossible for them to enter additional working time, evidences a willfulness that could easily garner an extra (third year) tacked onto the two-year statute of limitations. It also would mean that any damages secured would, in all likelihood, be doubled (i.e. liquidated damages).

The plaintiffs estimate that 100 people would be involved.  Given that these employees probably earned considerably more than minimum wage, the resulting damages would be geometric

In the industrial world, there is often a great deal of pressure placed on managers (i.e. first level, middle managers) to stay within labor budgets and keep overtime and other personnel costs down.  Maybe this is what gives rise to doing something like this, but there really is no reason to engage in this kind of behavior, for any employer.  There is no defense to the action.  If the  evidence shows that intentional steps were taken to keep employees from accurately recording their actual working time, it becomes almost impossible to maneuver and find a viable defense.

Long story short-don't do it!

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Food vendors at Fenway Park in Boston have filed a class action against Aramark Sports LLC, their employer, alleging that the company assessed service charges and then did not pay the service charges out to the employees.  The suit also claims improper payment of overtime.

The service charges are added on to anyone buying food at the ballpark.  The workers are paid their hourly wages, but are not given any of the service charge proceeds;  the suit charges that this is "unjust enrichment" to the Company.  The suit also alleges that the Company did not pay wages timely, did not properly calculate overtime and docked employees for breaks they did not take.

The suit was filed in state court, but the Company lawyers have sought to remove it to federal court, based on the theory that this suit is preempted by federal labor law, meaning that the suit is based on interpretations of labor contracts and therefore should not be in a court.  The Company also maintains that as the suit would seek to include more than 100 people, the Class Action Fairness Act of 2005 mandates that the action be heard in federal court.  This fairly new law provides that federal courts have jurisdiction over any class action that involves more than 100 workers and the alleged amount at issue exceeds $5,000,000 must be brought in federal court. 

There have been a number of these service charge/tip cases working their way through the courts.  The recent Starbucks case, that I reported on a few weeks ago, involved similar allegations.  Where a service charge assessed to customers is advertised by the Company (or restaurant) as a "gratuity" or where the company indicates that these service charges will be distributed to employees and they are not, that forms the basis for a lawsuit (and bad employee relations).

Change up or fast ball?  We'll see.

 

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Lawyers for Tyson Foods Inc. have petitioned the United States Supreme Court to hear the case involving the issue of whether "work" must involve some physical exertion.  The Third Circuit Court of Appeals ruled that  the need to put on safety/protective clothing constituted work although no real physical effort was involved.

The Company is contending that this ruling conflicts with a sixty-year old Supreme Court ruling, requiring some exertion by the worker.  Tyson is currently facing more than thirty such class action suits, so the Company has quire a vested interest in taking this case all of the way.

This is a momentous case and the Supreme Court ruling, which may not issue for up to one year, will have a tremendous effect on the world of work.  As the law currently stands, if an activity is integrally related to the primary job function, the time spent engaged in that activity (i.e. donning and duffing clothing) is compensable.  If the Supreme Court ruled that some physical exertion was necessary, that would bode well for employers (and defendants).

I still maintain that the connection between the activity and the work is the key, not whether sweat has to be generated.  We'll all find out. 

 

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How does an employer control overtime costs and ensure that the employees do not take it upon themselves to work overtime when there is no need for it or, more to the point, it has not been authorized.  I have counseled clients for years that they should implement a policy that requires employees to get prior authorization before they work overtime and if they do not, the overtime is unauthorized and will not be paid.

Sounds good, makes common sense and is reasonable, that is until recently when the Second Circuit Court of Appeals issued the decision in Chao v Gotham Registry, Inc.  In this case, a nursing staffing agency had just such a rule and refused to pay employees for overtime they worked that was unauthorized  The Court held that when an employee works overtime, he must be paid for it, notwithstanding that no permission was received to work the overtime under the policy.  This may well create a big boondoggle for employees and will make the employer's task in policing the working of overtime that much more onerous.

I still maintain that such policies should be maintained and enforced, but perhaps in a slightly different manner.  One approach is to discipline the employee for insubordination and/or failure to follow company rules, at the same time paying the employee the overtime.  Concomitant to this is the employer's eternal obligation to be vigilant about the working of overtime and ensure that employees are informed at time of hire, with periodic reinforcement or refreshers, that overtime is not to be worked without prior authorization.

The key is that if the employer has knowledge that an employee is working overtime, or is coming in early and/or leaving late and doing productive work during those times, the employer has, under the law "suffered" and "permitted" the work to be done.  Accordingly, that time must be paid.  This tenet has been part of the FLSA regulations for sixty years and is nothing new.  What is new is the anti-employer tweak that the Second Circuit has placed on this tenet.

Employers--Keep on top of this, or it will fall on top of you.

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A group of San Francisco police officers has filed a class action, seeking compensation for time they allege was working time that occurred before their shifts.  They claim that they should be paid for putting on their uniforms and taking care of their equipment.  The class has been conditionally certified, meaning that the defendant City will have the ability to try to de-certify the class in the coming months.  It is problematic, however, if that endeavor will succeed.

In opposing the conditional certification, the City had also argued that a two-year, rather than three-year, statute of limitations should control but the Court refused to decide that issue at this juncture in the proceeding.  This is a crucial issue to the case, because if the employer's conduct is deemed "willful," the extra, third year is added on to the calculations, significantly increasing the potential liability.  At the end of the case, following trial, the issue of willfulness is decided.  That may be too long to wait, because by the time a trial commences and ends, thousands of more legal dollars have been expended in the defense.

The issue in these working time, preliminary/postliminary cases, always defaults back to the elements of employer compulsion, if any, and the connection between the preliminary activity and the main, primary job.  It is incumbent upon every employer to determine whether it forces employees to come in early to perform any activity even tenuously related to their job.  If so, the employer must make a determination regarding compensability.  Or, allow the employees to first clock in and then get dressed or attend to the other preliminary duties.

Just don't ignore the situation.

 

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Under the Fair Labor Standards Act (“FLSA”), the general rule is that employers must pay overtime to non-exempt employees who work in excess of forty (40) hours per week, at the rate of one and one-half times the employee’s regular rate of pay. As a rule, most non-exempt employees are paid an hourly wage. The overtime calculation on that hourly wage is easy (i.e. time and one-half) and is also fixed by law as being time and one-half of that hourly rate.

It is perhaps a little known fact that the law does not command that employers pay non-exempt employees by the hour. It only mandates that such employees receive overtime, after forty hours of actual work. Employers may pay non-exempt employees by a salary, or per diem, or by piece rate. The overriding constant remains payment of overtime following forty hours of work. There are occasions when employers, for employee morale or “perception” reasons choose to pay non-exempt employees a salary. The FLSA (and most, but not all, state wage-hour laws) allows an employer and employee(s) to agree that they will be paid a fixed weekly wage to compensate them for all hours worked during the week. The calculation of overtime for such employees involves what is known as the “fluctuating work week” (“FWW”) method of overtime.

Employees who are compensated on a salaried basis and whose hours of work fluctuate from week to week may be paid a salary such that the fixed amount covers all straight time pay for whatever hours are worked in a given week. The following conditions must be met: 1) Hours must fluctuate from week to week; and, 2) There must be a clear and mutual understanding between the employee and employer that the fixed salary is compensation for the hours worked each work week, whatever the number; 3) The amount of salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked; and, 4) The agreed-upon salary must be paid even though the workweek is one in which a full schedule of hours is not worked.

Neither the federal regulations nor the case law establish a requirement as to the degree of fluctuation in hours that must occur, but they do state that typically the salary is paid to employees who do not customarily work a regular schedule of hours. Under this method, the salary is intended to compensate the employee at a straight time rate for whatever hours are worked during the workweek. As such, the regular hourly rate of the employee will vary from week to week and is determined by dividing the total number of hours worked in the workweek into the amount of the salary. Overtime is then calculated by multiplying the hours in excess of forty by the regular rate for that week by one-half.

There may be only limited circumstances in which an employer will choose to utilize the FWW method of paying overtime. For one thing, the calculation of the “regular rate,” upon which all overtime is based will change every week. Therefore, the employer must either assign these computational tasks to an employee or buy/devise a software program to accommodate the necessary calculations. Second, there is the quid of paying employees their full salary in weeks in which they perform any work. Balanced against these is the distinct advantage of being able to pay half-time, instead of time and one-half, overtime. This becomes of great significance if the position at issue is borderline from the perspective of exempt status and the employer wishes to lower its exposure if a subsequent Department of Labor audit or lawsuit results in a finding that the position is non-exempt. Perhaps of equal importance, there is the positive employee relations gained through employee perception of their job as a “white collar,” as opposed to a blue collar, position.

Just be aware that if this payment procedure is not implemented correctly, the workers could be transformed into hourly employees and then there would be possible significant liability for the employer

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The general rule under federal law is that employers must pay overtime to employees who actually work over forty hours a week at a rate of one and one half times the employee's regular rate of pay. The FLSA expressly exempts three major categories of employee from overtime requirements: executive employees, administrative employees and professional employees. Whether an employee is exempt depends on: 1) his duties and responsibilities; and, 2) payment of a statutorily prescribed salary, which is now $455 per week under the FLSA.

Employees must be paid for all hours of work, which includes all times they are on duty. Under the FLSA, for a meal or break period not to be counted as on duty time, the meal period must be at least thirty (30) minutes, the employee must be completely relieved of all duties. Some states, such as New Jersey, add the further requirement that employees must have the ability to leave the premises, as well as being relieved of all duties.

Under both federal and state law, employers are required to maintain, among other things, records of hours worked by non-exempt employees, on a daily and weekly basis. The precise manner in which such records must be collected is not specified. Thus, the employer is free to utilize a time clock, sign-in sheet, or any system which will ensure that accurate records are maintained. In this regard, the records should also indicate the time taken for lunch. For example, an employee punching a time clock should punch in at the beginning of his shift, punch out for lunch, punch back in when he returns from lunch and then punch out at the end of his shift. In this manner, controversies concerning the length of the shift or “actual” working time will be eliminated. The employer must also maintain a record of the rate that the employee is being paid and that rate, as well as hours worked each day and week and any overtime hours, must be reflected on the pay stub given to the employee on each pay day, as well as in the employer’s records.

Most importantly, employees may not be directed to, for example, punch out, as if they were finished for the day, but nevertheless continue working, for labor “budget” or “cost” reasons. Neither should any manager direct an employee not to report legitimate overtime hours that have been worked either at the direction of a supervisor or with his permission, explicit or implicit. Note that the FLSA specifically provides that hours of work which are “suffered” or “permitted” are to be counted as compensable working time. It is certainly allowable, however, to mandate that no employees work overtime (or through lunch) without receiving supervisory approval, but once that approval is given, the hours must be properly and accurately recorded and paid at the overtime rate. Failure to do this will most likely result in findings of “willfulness” by an agency or a court, with a dramatic escalation of fines/penalties and wage assessments. Further, employees cannot legally waive their right to overtime or “agree” not to be paid overtime at the proper rate. In short, if the hours have been worked, the employee(s) must be properly paid.

Under the FLSA, the federal Department of Labor may conduct inspections or audits of employer payroll practices and may sue employers to recover back wages, including overtime, liquidated damages in an amount equal to the back wages and attorneys’ fees, as well as seeking injunctive relief If the Department of Labor uncovers even a single violation, it will likely conduct an audit as to all employees in a particular classification or even of the entire company. The limitations period runs two years prior to the date the DOL conducts its inspection or when a complaint is filed (counting backwards), except in the case of a willful violation when it is extended to three years. Thus, if a violation is uncovered in an initial governmental investigation and an employer goes into immediate compliance prior to the filing of a complaint by the Solicitor General, time will run to the employer's benefit up to the date of complaint, i.e., damages will be computed only for the prior two years, less the time period in which the employer was in compliance.

The above highlights the basic principles that every employer must implement in order to be in compliance with wage-hour laws and, more to the point, avoid unjust or exaggerated employee claims. Doing these things is for the employer’s protection, regardless of how tedious or time-consuming the actual steps are.  Remember, a group of employees can easily lodge a claim or class action, alleging that they all worked through lunch for two years and are entitled to compensation for that time.  If the time cards do not show that the employees punch out for lunch and then punch back in, the employer's ability to defend will be greatly hampered. 

The lesson---proactive measures are the best ones to take!

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Everyone knows (all too well) what constitutes “work,” but do we really? Naturally, if we are performing our primary job, we know we are working (and the employer must pay for that time). What about activities that are performed either before the start of the “bell” or following the formal end of a “shift.” Depending on what they are, these activities may or may not constitute compensable working time. Indeed, the focus of numerous class actions is an allegation that such preliminary and postliminary activities are “work.”

The issue of what constitutes compensable working time is often confusing because reasonable minds can differ as to whether the performance of “work” requires some degree (however small) of physical (or mental) effort or exertion. That may not, however, be the best prism through which an employer should consider the matter. The better view, and one recently adopted by the Third Circuit Court of Appeals, is whether the activity at issue is integral or indispensable to the performance of the “primary” duty of the employee. This analysis is often at play in so-called “donning and doffing” cases, such as in De Asencio v. Tyson Foods Inc.

These employees worked in a chicken processing plant of Tyson Foods. Before/after their shift and for their breaks and lunches, these employees had to put on (“don”) and take off (“duff”) safety and protective clothing. The workers filed a collective/class action under the Fair Labor Standards Act (“FLSA”), claiming that the time was compensable. The jury found against them, primarily because the trial judge had instructed the jury that for the activity to be deemed “work,” it had to involve some degree of exertion, rather than being an activity controlled/required by the employer or for the benefit of the employer. The workers appealed and the Third Circuit reversed.

The Third Circuit reasoned that the proper test was not an “exertion” test but rather whether the activity was linked so closely to the principal job performed that the principal job could not be performed if the preliminary/postliminary activity was not engaged in. In this case, the connection was clear—the chicken processors could not engage in their jobs if they did not wear the sanitary/protective clothing. Thus, whether or not they engaged in any physical exertion was of no consequence.

Other activities may well fall into the category of “indispensable” when compared to the main job function. Consider a cashier whom the employer commands to report ten minutes early to count the money in the cash register, before commencing their shift. Similarly, consider a nurse who comes in early, before the start of her shift, to receive information from the nurse finishing her shift on the status and needs of patients. Although these are not donning and doffing cases, the principle espoused in the Tyson Foods case nevertheless remains applicable. Without the early arrivals of these employees, they would not be able to perform their primary job. What is also crucial here, as in Tyson Foods, is the element of employer compulsion---the employer is ordering the early reporting, for its benefit, i.e. ensuring smooth continuation of operations.

The lesson for employers is to ascertain what, if any, preliminary/postliminary activities are engaged in by employees. If employees are doing any such activities, the degree of employer compulsion and, most importantly, the relation of that activity to the principal job must be examined to conclude if the time is compensable

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The treatment of on-call time depends on how much control the employer has over the employee and whether the employee can effectively use on-call time for personal activities. An employee who is required to remain on call on an employer's premises or so close thereto that the employee cannot use the time effectively for his own purposes is "working." An employee who is not required to remain on premises, but is merely required to leave word where he/she can be reached generally is not deemed to be working while on call.

Time spent at home on call may or may not be compensable depending on whether the restrictions placed on the employee preclude using the time for personal pursuits.

 
Litigated cases generally involve the issue of whether various restrictions on an on-call employee so interfere with the ability to use the time for personal pursuits as to render the on-call time compensable. Factors considered include:

1. geographical restrictions;
2. required response time;
3. frequency of calls during the period;
4. use of a pager (which gives the employee freedom to be away from a telephone);
5. extent personal activities are actually engaged in during on-call time;
6. provisions of any employment agreement as to treatment of on-call work;
7. length of time employee is on call (i.e. periodic duty versus continued on-call status);
8. degree to which employees can trade on-call responsibilities; and
9. whether the nature of the work precludes the employee from engaging in certain activities, such as drinking alcohol, while on call.

Court decisions are not entirely consistent in applying these factors. Usually though, an employee who is on call whether by beeper or proximity to a telephone; who is required to be able to report for duty in a sober state within a reasonable response period (e.g. 20-30 minutes); who is not called so frequently as to significantly interfere with personal use of the time; and who is given periodic relief from on-call duty, will not have to be compensated for on-call time.

 
In this regard, the United States Department of Labor, which enforces and interprets the Fair Labor Standards Act has reinforced and re-affirmed these principles. See Wage-Hour Opinion Letter No. 2169 (July 12, 1999) (on-call time not compensable where employees carried pagers and were required to stay within the geographic range of the pager); Wage-Hour Opinion Letter No. 2027 (March 11, 1997) (on-call time not compensable where employee carried pager, even though required response time was only ten minutes); Wage-Hour Opinion Letter No. 1939 (May 28, 1998) (employees who carried beepers and were required to respond within twenty minutes not entitled to compensation for on-call hours).

 
Significantly, whether the employee has volunteered for the on-call assignment and/or has the right to refuse an assignment once called does not impact on the above analysis. In Wage Hour Opinion Letter No. 2169 (July 12, 1999), the employees voluntarily signed up to be on-call and also had the right not to respond to calls when they were in an on-call status. The DOL did not focus at all on the voluntariness aspect of the matter, but simply examined whether the conditions relating to the on-call arrangement were unduly restrictive, concluded they were not, and ruled that the on-call hours were not compensable. In these circumstances, the normal rule applies, meaning that compensable work time begins when the employee gets the call and responds to it.

 

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