Monsters of the Deep: Lurking Wage & Hour Issues for 2015?

Biggest FLSA “Monsters” Defining “employee” Defining “employer” Defining “work” Calculating overtime Misclassifying employees as exempt Blowing legitimate exemptions by not following the rules The arsenal of “enforcement” weapons available

Basic Definitions Employee: Any individual employed by an employer Employ: To suffer or permit to work Employer: Any person acting directly or indirectly in the interest of an employer in relation to an employee

Application of Minimum Wage & Overtime provision Individual Employees Engaged in commerce or production of goods for commerce Employed in an enterprise engaged in commerce or production of goods for commerce What is an enterprise engaged in commerce? Has at least employees engaged in commerce, and Has annual gross sales of $500K or more, OR Is a medical facility, nursing home, school, or preschool, or Is a public agency Commerce is between an individual state and any other place outside of that state

Are these employees? Interns Volunteers Independent Contractors Cheerleaders Student athletes?

Are Interns Employees?

Is training similar to that given in a vocational school? Is training for benefit of trainees (vs. employer)? Does the trainee displace a regular worker or instead work under close observation? Does the employer receive any immediate advantage from the actions of the trainees? Are trainees entitled to a job at the conclusion of the training period? Do all parties understand that the trainees are not entitled to wages for time spent in training? Plus or Instead: Totality of Circumstances

Are Volunteers Employees? Excluded by statute: Volunteers for public agencies excluded by statute Volunteers for non-profit food banks Per Department of Labor -3 part test: –Freely donate services –Only for religious, charitable, or other non-profit organizations –No expectation of pay Courts will also look to economic reality

Independent Contractors Economic Realities Test Degree of control Worker’s opportunity for profit or loss Worker’s investment in business Degree of skill required Permanency of work relationship Extent to which work performed is integral part of employer’s business

Independent Contractors IRS 11 Factor Test Instructions business gives the workers Training business gives the worker Unreimbursed business expenses Worker’s investment Services available to relevant market How business pays Realize a profit/loss Written contracts

Independent Contractors IRS 11 Factor Test, cont. Employee-type benefits Permanency Aspect of the regular business of the company Bottom Line: Control

Independent Contractors Liability for Misclassification Wages (Min Wage/OT) Benefits & Other Legal Employee Protections Taxes –Unemployment –Workers’ Compensation –Taxes Penalties –DOL, IRS, and State

What about Cheerleaders & Student Athletes?

Who is an “employer” “Any person acting directly or indirectly in the interest of an employer in relation to an employee” What about... Franchisors Successor entities Individuals

Who is an Employer? Economic Realities Test Does the alleged employer have the ability to... Hire/fire Supervise and direct employee work Determine rate/method of payment Maintain employment records Application of test to franchisors, successor entities, and Individuals

The Difficulty in Defining “Work” Taking a Closer Look at: Travel Training Remote Work Changing Clothes Standing in Security Line? Eating, Sleeping, & Other Breaks Rounding

When is Travel “Work”? Home to Work –Typical commute –When travel is “integral and indispensable” to principal work activity Home to Work on Special Day Assignment in Another City Travel all in a Day’s Work Travel Away from Home Community –Time of Day Traveling –Mode of Travel

When is Training “Work”? Default is that training is work except when: 1.It occurs outside normal working hours, 2.Attendance is voluntary, 3.Training does not directly relate to employee’s job, and 4.Employee does not perform any productive work during training

“Working” Remotely Regular rules apply to work performed at home De Minimus exception: –Practical difficulty in recording time –Aggregate amount of compensable time –Regularity of additional work “Home worker” exception: –Employee has periods of complete freedom –Reasonable agreement re: hours worked

Changing Clothes/Security Lines Portal-to-Portal Act: Time spent on incidental activities before or after employee’s principal activities are not “work” Are the activities “integral and indispensable” to primary work activity? –Protective clothing –Special rule for unions with CBAs Exception for activities required by and benefitting employer? –Post-shift security screenings

Eating, Sleeping & Other Circumstances General rule is meal breaks are not “work” –Minimum 30 minutes –Must be completely relieved of duties Other Breaks –Less than 20 minutes are paid Sleeping –Up to 8 hours excluded only if not working and employee on duty 24 hours+

A Word About Rounding Rule: Rounding up to nearest 15 minutes okay but only if employees properly paid for all time worked Options Rounding both ways – 1-7 minutes round down, 8-14 round up) Start-stop – in favor of employee on punch in/employer on punch out Round in employee’s favor always Tip – Keep Records of Actual Time Worked

When 1 + ½ doesn’t equal overtime Straight time/flat salaries – ONLY if exempt Defining regular rate of pay: –“per diem” payments & other “reimbursements” –Bonuses & Incentive Pay –Piece-rate –Flexible work weeks & fixed salaries Untimely payments

Defining Regular Rate of Pay Gifts Paid time off Expense reimbursements* Discretionary bonuses* Profit-sharing, thrift, and savings plans Benefit plans Overtime Pay Value/Income from stock options or similar plans Rate per hour to be calculated by dividing employee’s total remuneration (less statutory exclusions) in workweek by total number of hours worked Statutory exclusions

Defining Regular Rate of Pay A Focus on Fringe Benefits Per Diem Meals Parking Cell Phone and Other Reimbursements

Regular Rate of Pay – as Applied Convert form of payment to hourly rate Piece rate Salary/Flat Rate Fixed salary for fluctuating hours (flexible work week) Bonuses Commissions Two or more different rates When payments are other than cash

Misclassifying Employees as Exempt New Managers In Training Accounting Clerks/ Bookkeepers Assistant Managers Case Managers Paralegals Computer Technicians Don’t forget about wage minimum and salary basis test! It’s not just about duties.

Changes on the Way for Exempt Employees Home Health Workers Obama’s Directive –Minimum Salary Requirements –“Primary Duty”

How to Lose your Exemption in Ten Days Improper Deductions –Holidays/Partial Personal Days –Credit Card Fees –Lost/Damaged Equipment –Shortages –Furloughs/Closures –Uniforms

The Arsenal of Enforcement Weapons Back Wages plus interest Executives in Handcuffs Federal Debarment (federal contractors) Penalties & Liquidated Damages Civil Enforcement

Questions? Christine Cave, Esq., SPHR (405)