Delaware Employment Law Blog

The FLSA has wrecked havoc on many employers, big and small.  Failure to properly pay employees overtime can have devastating consequences.  When trying to determine whether a certain employee should be classified as exempt or non-exempt, the general trend is to play it safe rather than be sorry.  In other words, when in doubt, pay overtime.  Well, this theory has turned out to be not as safe as the Ohio Department of Transportation ("ODOT") probably hoped.

The state's attorney general says that ODOT violated federal labor laws by paying $2 million a year in overtime to managers and other workers who should have been classified as exempt, thereby not being entitled to earn overtime compensation.  State inspectors initiated an audit and concluded that there was no justification for the nearly $6 million in overtime paid out since 2005.

The Fair Labor Standards Act ("FLSA"), presents substantial exposure for employers.  Although must employers are aware of the dangers of the FLSA's overtime regulations, some of the other provisions of the FLSA are less known but equally risky.  One such area is improper deductions taken from the weekly pay of exempt employees.  Here is a quick run down of the basics you need to know.  Remember, these rules govern exempt employees who are paid on a salary basis. 

The general rule is that exempt employees must be paid for the entire week, regardless of whether they work the whole week. There are some exceptions to the rule.

1.    Disciplinary suspensions can be tricky.  A suspended employee need not be paid for the week if he did not work any time during that week. This exception does not work if the employee works even one day, or even a couple of hours, during the week. Further, the suspension must be made in good faith based on workplace conduct-rule infractions.  If no written policy was violated, it is not advisable to deduct that time missed. But, if an employee is suspended or sent home as a penalty imposed in good faith for infractions of safety rules of major significance. 

2.    The employee need not be paid if he is absent from work for one or more full days for personal reasons other than sickness or disability.  Deductions may be made for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness.  Remember, this exception applies only if the employee missed the full day of work. 

3.   Deductions may be made to offset amounts employees receive as jury or witness fees, or for military pay.

4.     The employee need not be paid for the entire week during the first and terminal weeks of employment.  So, if the employee's first day of work is on a Wednesday, he can be paid on a pro rata basis for that week instead of the entire week's salary.  Same goes for the employee's last week.  If the employee quits without notice on Wednesday, you need not pay him for Thursday and Friday.

5.    Finally, deductions may be made for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

The Fair Labor Standards Act (FLSA) requires that employees be paid at an overtime rate for all time worked in a workweek over 40 hours.  Certain categories of jobs are exempt from the overtime requirements.  The Executive Exemption, for example, provides an exemption from the overtime laws for employees who qualify as "executives."  More specifically, an executive for purposes of the FLSA is an employee who:

1. regularly supervises two or more other employees, and
2. has management as the primary duty of the position, and
3. has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments); and
4. is paid a salary of no less than $455 per week.

"Management" means just what you'd probably guess it to mean.  Managerial activities include:

• interviewing, selecting, and training of employees;
• setting and adjusting their rates of pay and hours of work;
• directing the work of employees; maintaining production or sales records for use in supervision or control;
• appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances;
• disciplining employees; planning the work; determining the techniques to be used;
• apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold;
• controlling the flow and distribution of materials or merchandise and supplies;
• providing for the safety and security of the employees or the property;
• planning and controlling the budget; and monitoring or implementing legal compliance measures. 

Also included, . . .

Under a special rule for business owners, an employee who owns at least a bona fide 20% equity interest of the organization, regardless of its formal legal structure (e.g., corporation, partnership, or other), and who is actively engaged in its management, also is considered a bona fide exempt executive.

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Not feeling so confident about your understanding of the FLSA? Our full-day FLSA seminar on November 14 might be exactly what you need to master the challenging world of wage-and-hour compliance.

The Equal Employment Opportunity Commission (EEOC) has been hard at work.  Here's a rundown of some of the latest claims and settlements involving the EEOC and its big sister, the Department of Labor (DOL).

Hotel Heartache

The former owner of a Best Western hotel in Ocean City, Maryland hotel settled a claim for discrimination and retaliation brought by the former executive housekeeper for $36,000.

The owner of the Ramada Inn Wytheville, in Wyethville, Virginia, has settled a claim for unpaid back wages brought by the U.S. Department of Labor.  The hotel owner was alleged to have paid waitstaff the federal tip-credit wage of $2.13 per hour despite the fact that the employees didn't earn enough tips to yield the minimum wage of $5.85 per hour.  The employees were subject to a half-hour meal-break deduction, regardless of whether they actually took, or were permitted to take, any meal break. Finally, the hotel's time records did not reflect the number of hours worked by employees each week.  Improperly paid employees will share in a $23,000 settlement.

Fly Me to the DOL

An aircraft-painting company in New Mexico has agreed to pay more than $227,000 in back wages and fringe benefits to resolve a claim by the U.S. Department of Labor.  Dean Baldwin Painting misclassified employees who worked on an Air Force contract.  Workers assigned to work on military aircraft are paid at a different rate than those who perform work on commercial aircraft.  The company began paying back wages, which will be distributed among 255 current and former employees, four months ago.

And the Last Laugh Goes to. . .

Les Schwab Tire Centers of Montana has agreed to pay $185,000 to settle a racial harassment suit brought by the EEOC on behalf of Earle Nevins, a former Les Schwab employee.  Nevins, a member of the Blackfeet Nation claimed that he'd been subjected to a hostile environment by coworkers who called him derogatory names and made insulting jokes about Native Americans.  The EEOC  suit alleged that, when Nevins complained of the harassment, he was told that the coworkers were merely engaging in "horseplay," and was later fired for his complaints. 

Jin Hua Inc., a restaurant supply company in New York, has agreed to pay 28 employees a total of $110,788 in overtime back wages. in order to resolve a federal lawsuit brought by the Department of Labor.  estigation that disclosed violations of the FLSA’s overtime and record-keeping provisions.

The construction industry should be aware already that the state and federal legislatures, as well as several agencies, have focused (unwanted) attention its way.  The recent wave of immigration reform has targeted construction, especially.  And, because the construction industry is generally considered to have a high rate of misclassified employees working as independent contractors, it has been singled out in a new piece of legislation that has been sweeping silently through state legislatures.  We've written here before about these proposed laws: Pennsylvania House Passes Construction Industry Independent Contractor Act, as well as Construction-Industry Employers Face Criminal Penalties and Increased Fines Under Proposed Law.

Bill Bowser and I spoke yesterday about Construction-Industry Employers Should Be Aware of Proposed Legislation at a seminar for the Delaware Contractors Association. It was clear from the discussion that the Delaware bill proposes a serious risk for employers in the construction industry and beyond.  The Department of Labor reports that the top 4 industries for misclassification are (1) landscaping; (2) nail salons; (3) dental assistants; and (4) construction.  It's likely that the law, if passed, and especially if it starts to generate the revenues advocates claim it will, that similar laws will be passed for other industries, or state-wide generally. 

With potentially criminal penalties and extraordinary fines, this piece of legislation would have a major impact on employers in the construction industry with widespread effects across the other industries, as well.

Dan Schwartz, at the Connecticut Employment Law Blog reported that his State is facing a similar proposal.  Obviously, this is a catchy idea.  Or, more likely, it has some organized supporters who have been lobbying quietly for such a bill. 

The Delaware Employment Law Blog will be posting a series of "Back-to-Basics" articles over the next couple of months.  Each class in the series will focus on the basics of the covered topic.  The posts can be printed and assembled for a handy reference.

After much thought, we've selected the topics that we'll cover.  We've decided to tackle what we think are the Top 3 Toughest Topics in Employment Law, the ADA, the FMLA, and the FLSA.  These are the statutes that give our clients the biggest headaches but we're going to try to reduce the agony with the Back-to-Basic series. 

There will be several mini-topics in each course.  Generally, we expect the "schedule" to look something like this:

ADA 101

• 101  Who Is Covered?
• 102  What Does the ADA Require?
• 103  What Is a "Reasonable Accommodation"?
• 104  What Certification Can I Require?
• 105  Special Disciplinary Problems and Abuses

FMLA 101

• 101  Who Is Covered?
• 102  What Is a "Serious Medical Condition"?
• 103  Do I Have to Act If I Think an Employee May Qualify for FMLA Leave?
• 104  How Do I Handle Intermittent Leave?
• 105  Special Disciplinary Problems and Abuses

FLSA 101

• 101  What Does the FLSA Actually Cover?
• 102  What Is the Difference Between Exempt and Nonexempt?
• 103  What Types of Exemptions Are There?
• 104  How Do I Determine If My Employees Are Exempt?
• 105  Special Disciplinary Problems and Abuses

Get those pencils sharpened and we'll see you in class!

The City of Philadelphia seems to have had more than its fair share of civil rights lawsuits in the last several weeks. The EEOC has had a number of significant successes against employers in Philadelphia and the surrounding areas.

The month of May started on a difficult note for the city. First, there was the backlash when 15 city officers were videotaped beating a suspect just days after a fellow officer was killed in the line of duty.  4 of the officers were later fired for their involvement.

Moore v. City of Philadelphia

Then came the $10m jury verdict in favor of three former Philadelphia police officers.  The officers alleged that they were subject to unlawful retaliation when they opposed racial discrimination and harassment of African-American police officers in their squad.   

Lawrence vs. City of Philadelphia

Then, on May 29, 2008, The Third Circuit reversed and remanded a class action case brought by more than 250 "fire-service paramedics."  The plaintiffs allege that the city's fire department unlawfully withheld overtime pay by misclassifying them as exempt employees under the "fire-service exemption."  A case of indebtedness at the trial court level of the Appellate Court reversed finding that the exemption did not apply.  This narrow reading of FLSA exemption could have broad implications for the City of Brotherly Love.

EEOC vs. NutriSystem Inc.

Not to be outdone by its urban neighbor, Horsham, Pa. has had its own bit of discrimination news.  On May 21, 2008, the EEOC announced that NutriSystem, Inc., had agreed to settle a lawsuit filed by the Commission on behalf of the woman it allegedly fired because she was pregnant.  The pregnancy discrimination settlement cost NutriSystem $82,500.  The employee with initially hired as the temporary recruiter in the company's human resources department and would need a fulltime employee a year later.  One month after she was placed in a leadership training program and three weeks after she announced that she was pregnant, the employee was fired.

NutriSystem, again

The Horsham company saw more problems last week when a former employee and Philadelphia resident filed suit in Federal Court in a class action suit estimated to include that least 400 current and former employees.  The lawsuit alleges that the company violated The Fair Labor Standards Act by underpaying their call center employees.  The company responded that the employees had been properly classified as exempt.

Of course, the first case in this string of settlements was in early May, when Conectiv agree to pay $1.65m to Black workers after the EEOC filed suit against the energy company and its subcontractors for race discrimination.  (See my earlier post, Delaware-based Conectiv Settles Race Discrimination Suit with Philadelphia EEOC for $1.65m.)

After being diagnosed with a malignant brain tumor, long-time advocate of the American worker, U.S. Senator Ted Kennedy, will be released from the hospital today.  Kennedy was hospitalized Saturday morning after suffering a seizure at his family's compound at Hyannisport, Massachusetts.  Following the news of his sudden illness, politicians from both parties spoke highly of the Democratic Senator, including both democratic presidential candidates, Senators Barack Obama and Hilary Clinton. As Washington regulars reflect on Kennedy's contributions during his more than 40 years in public service, U.S. employers may be interested in the initiatives that would have the greatest impact on the American workplace. 

Kennedy's Current Workforce Initiatives

Senator Kennedy is a major employee advocate and many of his initiatives are focused on this goal.  This passage from his senatorial website demonstrates Kennedy's perspective:

The minimum wage is at an all-time low, the Family and Medical Leave Act is under attack, and workers are being stripped of their overtime pay, unemployment insurance, and pensions. The United States must recommit itself to supporting working families to ensure a strong and prosperous America for future generations.

Specifically, Kennedy seeks to achieve these objectives through various proposals.  Here are five of Kennedy's proposals that would have the greatest impact on employers. 

1.   Union Rights

Senator Kennedy is a long-time union supporter.  On the agenda just this month was the Public Employer-Employee Cooperation Act, which focuses on collective bargaining rights for public safety employees.  Currently, 26 states permit public employees to form bargaining unions.  The Cooperation Act would require the other 24 states to do the same. 

2.   Minimum Wage

Kennedy is one of the Senate's most vocal advocates for an increased federal minimum wage. This subject is a sensitive one for most U.S. employers.  If the national minimum wage did increase, it would likely trigger at least some changes in the way employers look at immigration reform, which is also on the Senator's list of proposals.

3.   Immigration Reform:  Illegal Immigrants

Another one of Senator Kennedy's major initiatives is targeting immigration.  Last year, immigration-reform legislation was passed but, according to Kennedy, fell short of achieving the goals it was intended to address. Kennedy has continued to advocate for revisions to the legislation, focusing on these main points:

1. Tougher Border Enforcement.  These changes would include border-enforcement patrols double the current size.  It would also target illegal immigrants currently in the U.S.  Employers who hire illegal workers would be subject to increased enforcement, as well.
2. Earned Legalization.  This initiative would target illegal aliens already in the U.S., giving them opportunities to earn citizenship.  This effort is based on the argument that massive deportation would be seriously disruptive to communities and business in the States.

4.  Immigration Reform:  The Future for Foreign Workers

Temporary-Worker Program.  As many employers are fully aware, getting specialty workers from other countries is a daunting task.  This third prong of Senator Kennedy's proposal is forward looking.  In the future,temporary employees from abroad would be given easier access to come to the U.S. for temporary work with the goal of working towards permanent employment and citizenship. 

5.  IDEA Reform

Another initiative on Kennedy's agenda has been increased funding for the Individuals with Disabilities Education Act (IDEA).  The Senator's position is that, although the goals and purposes of the IDEA are on-track, the lack of federal funding has prevented it from being fully utilized by the states.

Information about these and other initiatives can be found on the Senator's official website.

Employers in Delaware and beyond have at least a small obsession with the Fair Labor Standard Act (FLSA). And rightly so, given the current litigation climate. The posts in the employment and human resources blogospheres reflect the interest in everything related to compensable time.  There were so many great posts over the weekend, in fact, that it's safe to say we'll never get around to devoting an entire post to each one.  Instead, here are the Top 5 issues we think are most important for employers to have on their radars.

Compensatory Time

The Employers' Law Blog and the Washington Labor & Employment Wire both have posts on the new comp-time bill proposed in the House last week.  The Employers' Law Blog has a short post alerting employers of a proposed amendment to the Fair Labor Standards Act (FLSA).  The Family-Friendly Workplace Act was introduced on May 14, 2008.  The Act would permit private employers to "pay" employees in compensatory time for overtime hours worked.  Traditionally this option has been available primarily to public sector employees.  The post, Comp Time in the Private Sector?, is a quick read to ensure your up to speed on the current state of law as well as the potential changes.  The Washington L&E Wire's post offers more comprehensive coverage for those who want the full scoop.

Interns

It's that time of year.  High-school students are looking for summer work.  College students are looking for internships. Ah, interns.  Students seek experience and hands-on-training.  Employers seek enthusiastic, eager, and inexpensive additions to the workforce.  Over the past two or three weeks, I've received several questions about intern compensation and this comprehensive article covers the whole spectrum of issues. The article, How to Protect Yourself From the Hidden Dangers of Unpaid Internships, posted on the Labor and Employment Law Blog, is  a good post for those who want a bit more detail.

The (Non-)Compensable Commute

Another hot topic this week was the decision from the Second Circuit, Singh v. City of New York, which addressed whether carrying documents to and from work was compensable commuting time.  Thankfully, the answer is "No."  Some of the blogs to discuss this important decision include, The California Wage Law Blog, Wait a Second!, the 2d Circuit Civil Rights Blog, The Connecticut Employment Law Blog, and the New York Public Personnel Blog.

Administrative Exemption to Overtime

The U.S. Department of Labor (DOL) issued a new Administrator-signed opinion letter that addresses the administrative exemption.  The letter is discussed at The Laconic Law Blog and back at The Washington Labor & Employment Wire.

FLSA Blog

Although technically, this isn't an FLSA topic, it's still worthy of the Top 5.  This blog regularly posts on current FLSA issues so it's almost guaranteed that a Top 5 topic will show up sooner or later at the Fair Labor Standards Act Blog.

And Don't Forget . . .

Of course, I can't leave our own Scott A. Holt off the list. Scott blogged on two really interesting FLSA issues this week, "Keeping Your Employees In the Loop Via Blackberry May Lead to Overtime Litigation," and "Overtime Lawyer Champion of the Middle-Class Worker."

Employees' Blackberry usage may prompt lawsuits. Claims for unpaid overtime wages have swept the country and put the nation's biggest employers on high alert as the class-action craze shows no signs of slowing.

The rapid growth of the PDA and Blackberry usage among employees may hit employers in the pocket book more than they think. These devices used to be just for lawyers, doctors, and executives. But, in today's techno climate, even rank-and-file employees are using PDAs.

A great deal of this usage occurs after hours and on weekends. Is the time spent by an employee when checking and responding to e-mails and messages is compensable under the Fair Labor Standards Act (FLSA) and state wage laws.

The general rule is that non-exempt employees must be paid for all hours worked. The standard used to determine whether time is actually "hours worked" is whether the employee is "suffered or permitted to work." An non-exempt employee who receives a company-provided PDA and uses it to respond or send work-related e-mails my have an argument that he or she should be paid for that time.

While some employers may balk at the notion of paying an employee for time responding to a few e-mails after hours, all of the time spent texting away may add up. Generally, an employee can claim up to two, and in many cases three, years of back overtime or wages. In addition, the FLSA provides a fairly easy mechanism to bring a class action lawsuit for overtime on behalf of similarly situated employees.

So far, there have been no wage-and-hour suits involving PDAs, but employers would be wise to review their policies regarding use of PDAs by non-exempt personnel. In particular, non-exempt employees should be instructed to report any work time spent using PDAs. And employers may even want to place limitations on when PDAs can be used after hours.

The Wall Street Journal Law Blog has a great post on this topic, "Are Blackberrys the Next Battleground in Wage-and-Hour Litigation"

Overtime lawsuits are the hottest employment lawsuit trend.  Nevada lawyer Mark R. Thierman is a demigod in this corner of the legal world.  Thierman has won hundreds of millions of dollars from companies in unpaid wages.   Beginning in the mid-1990's, Thierman filed the first in a series of lawsuits against California employer after having spent most of his career as a management-side employment attorney. 

The federal Fair Labor Standards Act (FLSA) requires the payment of overtime and minimum wage for most workers. About 115 million employees—86% of the workforce—are covered by federal overtime rules, according to the U.S. Department of Labor (DOL). Plenty of wage and hour lawsuits are filed on behalf of the traditional working class, be they truckers, construction laborers, poultry processors, or restaurant workers. In fact, some would say that wage and hour suits have generated a cottage industry for plaintiffs' lawyers.  But no one has been more successful than Thierman in collecting overtime for employees who are far from the factory floor or fast-food kitchen.

His biggest settlements over the last two years have been on behalf of stockbrokers, many of whom earn well into the six figures. Thierman has teamed up with other lawyers to extract settlements totaling about a half-billion dollars from brokerage firms, including $98 million from Citigroup's Smith Barney and $87 million from UBS Financial Services Inc. (As is typical in settlements, the companies do not admit liability.) With those cases drawing to a close, he and other attorneys already are pursuing new claims on behalf of computer workers, pharmaceutical sales reps, and accounting firm staff.

BusinessWeek.com has a great article titled, "Wage Wars," detailing Thierman's Robin-Hood style ventures and the wave of overtime litigation sweeping major corporations across the country.  Since 2000, overtime litigation has exploded nationwide. The U.S. Chamber of Commerce decried the "FLSA litigation explosion" and its having become the "claim du jour" for plaintiffs' attorneys.

Thierman shrugs at such concerns. The alternative, in his view, would be to have the laws enforced by a government bureaucracy.  Thierman professes to be helping the little guy: "I'm interested in the middle class—those are my folks."

[H/T to George's Employment Blawg and the Ohio Employment Law Blog]

An arbitrator found that the EEOC violate the FLSA by misclassifying as exempt its investigators and mediators.

The arbitration was a result of a greivance intially filed in February 2003 by the American Federation of Government Employees (AFGE) National Council of EEOC Locals, No. 216 on behalf. EEOC had classified these employees as exempt under the Fair Labor Standards Act (FLSA), thereby excusing itself from having to pay these employees for working overtime.

The Union's post-arbitration brief can be found here.