FLSA and Wage and Hour Developments Joseph A. Ernst, Esq. Kendra K. Kawai, Esq. FLSA Basics Two categories of employees Exempt Non-exempt Distinguish between employees & independent contractors Major Provisions of Law Minimum Wage Overtime Pay Child Labor Record keeping FAIR LABOR STANDARDS ACT Minimum wage Federal law - $7.25/hour State laws vary Hawai`i - $9.25/hour Increases to $10.10/hour in 2018 Overtime for Non-Exempt EEs 1 ½ x “regular rate” for all hours over 40 in a workweek 1
REGULAR RATE Regular rate v. Hourly rate Regular rate includes all forms of compensation paid to EE Noncash benefits (e.g., car) Nondiscretionary v. discretionary bonuses Regular rate = EE’s total remuneration ÷ total number of hours actually worked in week The Law on Overtime Employees must receive overtime pay for all hours worked over 40 hours in a work week at a rate not less than time and one-half their regular rates of pay. 1 ½ x Regular Rate for all hours over 40 for Non-Exempt EEs WHO IS COVERED BY THE FLSA? Applies to employer/employee relationship Independent contractors not protected But be careful… Employer coverage Engaged in interstate commerce Engaged in production of goods for commerce $500,000 annual gross volume of sales 2
DOL’S STRATEGIC ENFORCEMENT PRIORITIES Seemingly continued renewed emphasis on enforcement Increased audits/prosecutions of minimum wage and overtime law violations But, still intensified scrutiny of the classification of workers as independent contractors? Targeted industries – especially “ fissured ” (construction, hospitality, agriculture, home health care) Employers of “low wage” employees are always given a high priority FLSA LAWSUITS FILED EXPECTED TO REBOUND 8,304 FLSA Lawsuits Filed in 2016 In 2015, 8,954 FLSA Lawsuits Slight dip during 2016; however, expect rebound in 2017 Top wage and hour settlements reached in 2016 totaled $695.5 million, up from $463.6 million. Employers should not have false sense of security under Trump administration “WAGE THEFT” Covers a variety of infractions that occur when workers do not receive their legally or contractually promised wages Non-payment of overtime Not giving workers their last paycheck after a worker leaves a job *Not paying for all the hours worked* Not paying minimum wage Not paying a worker at all 3
“WAGE THEFT” Hawaiian Style Café - $53,996 in unpaid overtime wages plus liquidated damages Kazu Construction - $500,000+ in back wages and liquidated damages to 17 employees. Banked hours worked over 40 as straight time hours and applied them to future weeks where employee did not work 40 hours Kazu refused to pay the wages the division determined it owed resulting in lawsuit CLASSIFYING EMPLOYEES: INDEPENDENT CONTRACTOR OR EMPLOYEE? Why does this matter? Must be an “employee” of the employer for FLSA minimum wage and overtime provisions to apply to a worker What is the test? Supreme Court: no single rule or test/must look to totality of working relationship What about DOL Guidance? CLASSIFYING EMPLOYEES: INDEPENDENT CONTRACTOR OR EMPLOYEE? Administrator’s Interpretation No. 2015-1: Examines Economic Realities Test 7/15/15 Is the work an integral part of the employer’s business? Does the worker’s managerial skill affect his or her opportunity for profit or loss? How does the worker’s relative investment compare to the employer’s investment? Does the work performed require special skill and initiative? 4
CLASSIFYING EMPLOYEES: INDEPENDENT CONTRACTOR OR EMPLOYEE? Administrator’s Interpretation No. 2015-1: Cont’d Is the relationship between the worker and the employer permanent or indefinite? What is the nature and degree of the employer’s control? DOL’s conclusion: Most workers are employees under the FLSA’s broad definitions. But Wait! Administrator’s Interpretation No. 2015-1 was rescinded on June 7, 2017 Criticized for creating informal standards outside of the notice-and- comment process required for formal agency rulemaking But Wait! Rescinding the guidance does nothing to clarify standard Might indicate a step away from “fissured workplace” concept 5
Perez v. Cable Equipment Services Inc. (Nov. 2016) Minnesota company provided cable equipment recovery services to leading cable providers such as Comcast and Time Warner. Misclassified 41 drivers and market contractors as independent contractors Failed to pay OT and minimum wage Agreed to pay $350,000 in back wages and liquidated damages R & R Construction Svcs. Corp. (Oct. 2016) DOL found R & R violated OT provisions of the FLSA Misclassified its workers as independent contractors at Waikiki hotel renovation Paid workers fixed rates per day Company paid 95 workers $185,688 in unpaid OT , and an equal amount in damages, for a total of $371,376. DOL also assessed a civil money penalty of $68,680 for willfully violating the OT provision. Three Tests for Exemption Salary Level Salary Basis Job Duties 6
Minimum Salary Level: $455 For most employees, the minimum salary level required for exemption is $455 per week Must be paid “free and clear” The $455 per week may be paid in equivalent amounts for periods longer than one week: Biweekly: $910 Semimonthly: $985.83 Monthly: $1,971.66 Salary Basis Test Regularly receives a predetermined amount of compensation each pay period The compensation cannot be reduced Must be paid the full salary for any week in which the employee performs any work Need not be paid for any workweek when no work is performed Duties Test: “White Collar” Exemptions The FLSA provides an exemption from both minimum wage and overtime pay for employees who are employed as a bona fide: Executive; Administrative; Learned & Creative Professional; Outside Sales; or Certain Computer Employees 7
Update on Department of Labor Revised Rules Final rule raising salary threshold under fire November 22, 2016, Texas court issued nationwide injunction stopping implementation of the rule DOL appealed in December 2016 June 30, 2017 – DOL filed its appellate brief with the Fifth Circuit Update on Department of Labor Revised Rules (cont’d) The Trump Administration brief asked the Court to uphold the DOL’s legal authority to set the salary threshold, but did not address the appropriate salary level. The DOL asked the Court not to address the validity of the specific salary level set by the 2016 final rule. DOL has issued a Request for Information seeking public comment on the update to the salary threshold. Comment deadline: September 25, 2017 What is “Hours Worked”? Work “off the clock” Employer knowledge Actual knowledge Constructive knowledge Training, study, or community project time: Required by employer “Encouraged” by the employer Time record edits 8
COMPENSABLE TIME Waiting/On-call time? Waiting to be engaged vs. Engaged to be waiting? Factors Considered: Number of calls an employee typically receives Required response time Employee’s ability to engage in personal pursuits while on call COMPENSABLE TIME Commute time? Ordinary home to work travel is not compensable Exceptions Emergency call outside normal work hours to travel a “substantial distance” to a location other than normal place of work Random home to job site commute that is “extraordinarily” farther than normal home to job site commute Job site to job site travel is compensable Job site to home travel at end of day is not compensable If employee has to stop by normal place of work to pick up or drop off tools or supplies, travel from normal place of work to job site (or vice versa) is compensable COMPENSABLE TIME Also Compensable: Special one-day assignments Overnight out-of-town travel 9
COMPENSABLE TIME The Walt Disney Co. (Mar. 2017) Agreed to pay $3.8 million in back wages to 16,339 Florida resort employees Deducted a uniform/costume expense that caused hourly rate to fall below minimum wage Employees performing duties during “pre-shift period” and during “post-shift period” Failed to maintain time and payroll records COMPENSABLE TIME Cintas Fire Protection Services (2017) Cintas paid $1.3 million in unpaid wages and damages to 81 workers in Northern California and an additional $44,500 in civil penalties Workers not paid for time spent sending email, completing reports and submitting timesheets Cintas cited several times in the past for similar violations at its locations across the nation COMPENSABLE TIME Roberts v. Marshalls of CA LLC (N.D. Cal. Aug. 3, 2017) T . J. Maxx, Marshalls, and HomeGoods agreed to pay $8.5 million to settle a lawsuit Workers claims they should be paid for the time spent going through anti-theft screenings at the end of the shifts. Estimated 82,500 class members 10
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