Presenting a live 90-minute webinar with interactive Q&A Exempt or Non-Exempt? Overcoming Latest Employee Misclassification Challenges Conducting Self-Audits, Identifying Vulnerabilities, Correcting Errors, and Minimizing Liability Under FLSA and State Law WEDNESDAY, APRIL 16, 2014 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Brent E. Pelton, Esq., Pelton & Associates , New York Mark E. Tabakman, Partner, Fox Rothschild , Roseland, N.J. Noel P . Tripp, Jackson Lewis , Melville, N.Y . The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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EXEMPT OR NON-EXEMPT? EMPLOYEE MISCLASSIFICATION CHALLENGES Positions Most Vulnerable to FLSA Claims Mark Tabakman, Esq. Fox Rothschild LLP mtabakman@foxrothschild.com April 16, 2014
FLSA EXEMPTIONS: EMERGING CLASS ACTION THREAT AT-RISK POSITIONS Financial Services Industry I.T. Workers/Computer Programmers Sales Staff Clerical/Administrative/Executive Secretaries 5
FLSA SECTION 13(a)(1), GENERALLY • Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for individuals employed as bona fide executive, administrative, professional, and outside sales employees. Sections 13(a)(1) and 13(a)(17) also exempt certain computer employees. – To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. – Job titles do not determine exempt status. – In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the DOL’s regulations. 6
FINANCIAL SERVICES • Over the last several years there has been a torrent of litigation concerning the exempt status of positions in the financial services industry (mortgage brokers, loan originators, etc.). 7
FINANCIAL SERVICES • “DC Circuit Won’t Give En Banc Hearing to Loan Officers Decision,” Oct. 11, 2013 at: http://wagehourlaw.foxrothschild.com – The US Department of Labor’s “white paper” on the status of mortgage loan officers as non-exempt employees was voided by the DC Circuit Court of Appeals. – This decision upheld a 2010 DOL Administrative interpretation which held that the majority of loan officers were not included within the administrative exemption of the Fair Labor Standards Act. 8
FINANCIAL SERVICES • Prior to the DOL’s issuance of its 2010 White Paper (guidance statement) on the matter, employees were deemed exempt as administrative if their duties included work such as collecting and analyzing information regarding a customer’s income, assets, investments, or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of financial products; and servicing, promoting, and marketing the employer’s financial products. 9
FINANCIAL SERVICES • Per the DOL’s 2010 White Paper, except in certain circumstances, mortgage loan officers will not qualify for the administrative exemption under the Fair Labor Standards Act. • If mortgage loan officers perform supervisory duties, they may still fall under the executive exemption, but the most commonly urged exemption for them, i.e. administrative, is now foreclosed. • The DOL concluded that “mortgage loan officers typically have the primary duty of making sales on behalf of their employer; as such, their primary duty is not directly related to the management or general business operations of their employer or their employer’s customers.” – Mortgage loan officers will not qualify for the administrative exemption because their primary duty is production work, i.e. sales. 10
FINANCIAL SERVICES • Casas v. Conseco Financial Credit Corp. (D.Mn. 2002) 146 LC ¶ 34,502 – Loan originators who were responsible for soliciting, selling and processing loans as well as identifying, modifying and structuring the loan to fit a customer’s financial needs were production rather than administrative employees; these duties established that they were primarily involved with “the day -to-day carrying out of the business” rather than “the running of [the] business [itself]” or determining its overall course or policies. 11
I.T. WORKERS/COMPUTER PROGRAMMERS • Computer systems analysts, computer programmers, software engineers, and other similarly skilled workers in the computer field who meet certain tests regarding their job duties may be exempt from minimum wage and overtime requirements of the FLSA. – To be exempt, these employees must be paid at least $455 per week on a salary basis or paid on an hourly basis, at a rate not less than $27.63 per hour. 12
I.T. WORKERS/COMPUTER PROGRAMMERS • To qualify for the computer employee exemption, the following tests must be met: – Employee must be paid at least $455 per week on a salary basis or paid on an hourly basis, at a rate not less than $27.63 per hour; – Employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below; – The employee’s primary duty must consist of: • The application of systems analysis techniques and procedures; • The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, or of programs related to user or system design specifications; or • The design, documentation, testing, creation or modification of computer programs related to machine operating systems. • A combination of the aforementioned duties, the performance of which requires the same level of skills. 13
I.T. WORKERS/COMPUTER PROGRAMMERS • The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. • Exemption also does not apply to employees whose work is highly dependent upon computers, but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations. 14
I.T. WORKERS/COMPUTER PROGRAMMERS • Young v. Cerner Corp. (W.D. Mo. 2007) 155 LC ¶ 35,350 – A Level 6 software engineer who performed defect resolution and transformed data using Informatica was an exempt computer professional: her assertion that she never created or modified “source code” was immaterial to the application of the computer exemption because the regulations do not use the term “code” and her duties still consisted of using systems analysis techniques, design, testing, and modifying of programs. • Clarke v. JP Morgan Chase Bank NA, (S.D.N.Y. 2010) 159 LC ¶ 35,732 – A highly certified IT “guru” who consulted with various users to determine hardware, software, or system functional specifications, handled remediation issues, tested software in live environments to provide feedback to the engineering department, spent ten percent of his time on such special projects as server upgrades or back up migration projects, drafted a troubleshooting guide for the desktop support team, and was the final authority for escalated computer problems was an exempt computer professional. • Hunter v. Spring Corp. (D.D.C. 2006) 153 LC ¶ 35,209 – An employer failed to established that a Managed Network Operation Engineer II was an exempt computer professional: the exemption applies to jobs with a substantially higher technically proficient help-desk employee whose primary duty was customer service. 15
I.T. WORKERS/COMPUTER PROGRAMMERS • FLSA Computer Exemption to Get Revised: A Good Thing For Employers” Nov. 17, 2011 at: http://wagehourlaw.foxrothschild.com • On October 20, 2011, the US Senate introduced the Computer Professionals Update Act. This legislation expanded the coverage of the exemption to those who work in a “computer or information technology occupation, including, but not limited to, work related to computers, information systems, components, networks, software, hardware, databases, security, internet, intranet or websites, as an analyst, programmer, engineer, designer, developer, administrator or other similarly skilled worker.” • Additionally, employees who direct the work of individuals performing these duties would be exempt. 16
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