Jump, Jive and Wail: Wage Hour Mania Ups The Ante 1 Presented by: Jake Schwartz, Esq.

Overview Recent developments and coming changes: Legislation Regulation DOL interpretations DOL enforcement Significant court rulings Class and collective action litigation trends Five best practices for effective management of wage and hour issues 2

Legislation Employee versus independent contractor Prevailing wages Minimum wage Private-sector comp time 3

Regulations On the regulatory agenda –Family and Medical Leave Act –Child labor –FLSA recordkeeping Additional priorities –Pre-shift and post-shift tasks –Tipped employees –Part 541 “white collar” exemptions 4

DOL Interpretations “Interpretations” are departure from long-standing practice of issuing opinion letters –Wage & Hour Division will issue “general” interpretations of law and regulations that apply across-the-board to all those affected by a specific provision –Change from opinion letters issued based on a specific set of facts Result? –May alter employers’ ability to defend a classification or practice because the presumption will be that the interpretation governs similar situations, whereas opinion letters could be distinguished on facts 5

DOL Enforcement Government contractors, emphasizing debarment Investigations instead of compliance assistance Penalties instead of cooperative resolution Increased litigation Targeting non-unionized employers Increased coordination with workers’ counsel 6

Key Substantive Issues For Enforcement Misclassification of independent contractors –Construction –Health care Off-the-clock time –Pre-shift and post-shift activity Computer boot-up and power down Donning and doffing Prevailing wages –Contracts associated with stimulus money Child Labor 7

Employers & Industries Targeted For Enforcement Restaurants Agriculture Health care Hotels and motels Day Care Guard services Janitorial services Garment manufacturing Temporary help 8

Civil Money Penalties Two most common scenarios for CMPs: –Minimum wage / overtime violations Repeated or willful violations Up to $1,100 per violation –Child Labor Up to $11,000 per employee Up to $50,000 per violation causing death or serious injury to a minor Up to $100,000 per repeated or willful violation causing death or serious injury to a minor 9

Significant Court Rulings Pharmaceutical Sales Representatives (PSRs) Smith v. Johnson & Johnson (3d Cir. 2010) –Third Circuit affirmed summary judgment finding PSRs exempt under administrative exemption Other appeals docketed in Ninth Circuit and Second Circuit Notably, DOL has filed an amicus brief in support of plaintiffs, contrary to long-standing DOL interpretations 10

Significant Court Rulings Fast v. Applebee’s International (W.D. Mo.) –May 2007: district court attempted to create an analytic framework for tipped employees who perform non-tip- producing duties in short intervals Led to increase of class action filings against the restaurant industry –August 2009: court vacated its 2007 decision on the eve of trial, requested additional briefing from the parties –March 2010: court reiterated analytic framework but certified the ruling for interlocutory review by the Eighth Circuit 11

Significant Pending Appeals Hybrid wage and hour class (state law) and collective (federal law) actions –Ervin v. OS Restaurant Partners, Inc. (7th Cir.) Whether a court can consider the existence of a similar “opt-in class” when determining whether an “opt-out” class is the superior method of adjudication –Parker v. Nutrisystem, Inc. (3d Cir.) Whether a court may strike class claims when claims under state and federal law are interpreted in the same manner 12

Significant Pending Appeals Brinker Restaurant Corp. v. Superior Court (Hohnbaum), 165 Cal. App. 4th 25 (2008) Case History Trial court certified a class of restaurant workers claiming they were required to take meal breaks too early or late in the day Issues Whether California meal-break law is violated when (a) an employee takes a meal break early or late in the workday or (b) an employer makes a meal break “available” although does not ensure each employee takes the meal break 13

Emerging Litigation Trends On the rise –Hybrid class actions with state-law claims and FLSA claims –Outside sales exemption cases –Independent contractor status litigation –Litigation regarding compensable time: donning and doffing, pre- or post-shift tasks, remote access after hours –Tip-credit/tip-pooling cases On the decline – Manager/assistant- manager misclassification cases 14

Five Best Practices For Effectively Managing Wage And Hour Issues 15

1.Address wage and hour concerns aggressively Treat compliance as essential to overall risk management As important as pervasive discrimination, occupational safety and health hazards, and other multi-million-dollar contingent liabilities Wage and hour concerns need to be on your radar screen ever day 16

2. Know your policies, practices and systems Do your corporate-level policies contain non-compliant elements? Do you comply with all applicable state laws as well as federal standards, including changes? What is happening away from the corporate office in the field in terms of local variations and deviations in practice? 17

3.Watch out for practices that can lead to off-the-clock work Labor budgets, especially declining ones as profit margins tighten and the same work needs to get done Bonuses or other compensation tied to efficient use of labor Performance ratings tied to minimizing labor costs, including overtime costs Decreased staffing resulting in employees classified as exempt performing more and more non-exempt duties 18

4.Be strategic about documents How do you prove that an executive had hire/fire authority or input into changing employee status? How do you prove that an administrative employee was involved in planning and analysis? What recordkeeping practices will be more defensible to an investigator or to a jury? 19

5.Train everyone regularly Managers and supervisors need to understand that their authority to improve profitability does not extend to violating wage and hour rules Workers need to be informed that nobody has the authority to direct them to work off the clock Training at least annually is essential, and perhaps more frequently in high-turnover industries 20

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