Proposed FLSA Regulations: The Good, The Bad, The Ugly Bobby Truhe KSB School Law (402) KSB School

FLSA History  Enacted in 1938 to end “oppressive wages” and the “substandard workweek”  Can be tough to apply to modern work practices Telecommuting Flexible hours Use of smartphones outside work

Enforcement  WHD Investigations Lawsuits −Injunctive relief −Back wages and liquidated damages  Private Lawsuits Back wages, liquidated damages, attorney’s fees, and costs Collective actions  DOJ Criminal prosecution and civil money penalties  IRS PPACA audits (tattle tails!)

WHD Getting More Aggressive 350 more investigators from 2009 to 2011

WHD Getting More Aggressive  DOL-ABA “Bridge to Justice” referral program  DOL “apps” for smart phones DOL Timesheet app −Can provide evidence for FLSA lawsuit Even if time recorded on app may be inaccurate Eat Shop Sleep app −DOL: “Access hotel/motel, restaurant and retail industry enforcement data and easily identify violators” iCitizen Labor Report app −Adds OSHA data

Private Lawsuits Continue to Increase  2011 FLSA suits in federal court = 7,000  Approx. 200 class actions  In 10 years, 300% increase in FLSA suits v. 1% increase in all suits  Frequent complaints: Misclassifying employees as exempt Improper deductions from exempt employees’ salaries

FLSA’s Main Provisions  Minimum wage  Recordkeeping  Overtime pay

To be exempt an employee must 1.Be paid a weekly minimum 2.Be paid on a salary basis 3.Perform specific job duties WHD has announced proposed changes to #1; no proposed changes to #2; possible changes signaled regarding #3

Requirement #1: Minimum Amount  Currently: $455/wk. ($23,600/yr.)*  Proposed regulations Increase to $921/week ($47,892/year) $970 for Q1, 2016 Annual adjustments to 40 th percentile of weekly earnings as determined by DOL’s Bureau of Lab. Stats. *Teachers/Admins exempt

Rationale for Changes to Minimum Amount  Minimum salary has not been changed since 2004  Significantly fewer employees entitled to overtime  DOL: if the increase is too much for employers, simply convert employees to hourly and do not permit them to work overtime Ignores employee/employer preferences Assumes employer can hire additional staff to cover the reduced hours Neglects to consider additional expenses of new employees

Significance of Indexing  Districts cannot set specific salary and know that employees will be exempt for the duration of the contract year  Increases may happen in middle of the year  May have to revise contract language to allow for indexing or include an indexing clause  Lake Wobegon effect

Requirement #2: Salary Basis  No reduction in pay for variations in quality or quantity of work Can reduce paid sick or personal leave time  Pay of full salary for any week in which any work performed, regardless of number of days or hours worked Don’t have to pay for any week in which no work performed  No proposed changes to this requirement

Requirement #3: Specific Job Duties  Executive  Administrative  Professional  (Computer)  (Outside sales) Regulations

DOL’s “Duties” Questions DOL asked several questions in the proposed regulations regarding exemptions: What changes should be made to the duties test(s)? How much time should employees have to spend performing exempt duties? 50% like California? Is the “concurrent duties test” for executive employees working? Should exempt employees be permitted to perform non-exempt work concurrently?

What can DOL do?  Stick to salary increase for now  Propose regulations for duties tests  Issue regulations under the “logical outgrowth” doctrine because everyone is “on notice”

Executive Employees  Management: primary duty is management of business or customarily recognized department or subdivision Setting and adjusting employee pay and hours Maintaining production or sales records Evaluating employee performance Handling employee complaints and grievances

Executive Employees  Supervision: customarily and regularly supervises work of two or more other employees in department  Authority: hires or fires other employees Or recommendations as to hiring, firing, or other status changes given particular weight  Administration has expressed concern about managers who perform other work  “Primary duty” may have to be 50% of work time  Documentation nightmare “will get better over time”

Administrative Employees  Primary duty is Performance of office or non-manual work Directly related to management or general operations of employer or employer’s customers  DOL regulation specifically provides that school secretaries are not exempt administrative employees

That’s right: the superintendent’s assistant is NOT EXEMPT under the administrative exemption

Administrative Employees  Discretion: primary duty includes exercise of discretion and independent judgment with respect to matters of significance Exercise of discretion and independent judgment means comparing and evaluating possible courses of conduct, and acting or making decision after various possibilities considered  WHD considering heightened “discretion” requirements

Professional Employees  Primary duty is performance of work requiring advanced knowledge Work must be predominantly intellectual and require consistent exercise of discretion and judgment Advanced knowledge must be in field of science or learning customarily acquired by prolonged course of specialized intellectual instruction Teachers are by regulation deemed “professionals” and are exempt from the salary minimum—this regulation was not proposed for amendment (34 C.F.R. § )

Errors to Avoid  Assuming all employees paid salary are exempt  Improperly applying exemptions  Making improper leave deductions  Job descriptions and employee handbooks are not up to date  Increasing salaries to meet new regulations prior to changes in the duties test(s)  Ignoring or misapplying state law requirements

Ways to Minimize Disruption in Your School from the FLSA 1) Prohibit overtime Amend employee contracts Clarify expectations in job descriptions and contracts Obligated to pay if you “suffer or permit” the employee to work, including overtime Must discipline for working off the clock

“Suffers or Permits”  Employees entitled to be paid if they work extra hours with employer’s: Knowledge, or Acquiescence  Reason for the work is immaterial  Contract provisions are immaterial  Employer must make sure that work not to be performed is not performed  Employer may be liable if reason to believe employee is fudging records to assist employer

Ways to Minimize Disruption in Your School from the FLSA 1) Prohibit overtime 2) Compensatory time

Compensatory Time  Allowed if: 1.5 hours per overtime hour worked Employees agree to it in advance Agreement in writing  Can’t accumulate over 240 hours  Employer can require employees to take comp. time (Christensen v. Harris County, 529 U.S. 576 (2000)  Can pay cash for comp. time “at any time”  No clear answer on negotiability  Adds additional “hours of service” for PPACA purposes

Ways to Minimize Disruption in Your School from the FLSA 1) Prohibit overtime 2) Compensatory time 3) Variable wage rate agreement

Variable Wage Rate Agreement  Set a weekly compensation amount via contract  Wage rate for the week varies based on hours worked  Example: Weekly rate of $800 Hours worked in the week: 50 Straight time rate: $16 Overtime: 10 $8 for “and a half” Total Comp: $880  Option for “community coaches” and non-exempt sponsors

Questions?

Proposed FLSA Regulations: The Good, The Bad, The Ugly Bobby Truhe KSB School Law (402) KSB School