cutting edge wage and hour issues for the hr...

11/20/2012

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Cutting Edge Wage and Hour Issues for the HR ProfessionalIssues for the HR Professional

Alison G. [email protected]

Amy Steketee [email protected]

574 234 4149

Michiana SHRM LuncheonNovember 20, 2012

574.234.4149www.FaegreBD.com

What’s the big deal?

►Increased litigation of wage and hour issues► 90% of all class or collective actions in state or federal ► 90% of all class or collective actions in state or federal

court are wage and hour claims

► 2009 – 6,073 federal wage and hour lawsuits (single plaintiff and class or collective actions) filed

► 2012 – 7,064 lawsuits filed

►Why?

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►Department of Labor is focused on these issues► Funding investigations and enforcement suits up► Funding, investigations and enforcement suits up

► “We Can Help” public awareness campaign

► “Plan/Prevent/Protect: The Beginning of a Broader Regulatory and Enforcement Strategy” campaign encouraging employers to “find and fix” violations

► Smartphone app – electronic timesheet that allows employees to record hours worked and calculate amounts owed by their employers


► What percent of employers are not in compliance with the Fair Labor Standards Act?► 11%► 11%► 30%► 54%► 70%► 92%

► Fairly easy to certify FLSA collective action► Potential for high damages and attorneys feesg g y

► 2010 – average settlement in top 10 reported wage and hour class and collective actions was $34 million

► FLSA suits can carry individual liability► Individuals may be subjected to significant monetary penalties► Courts take a broad approach in defining individuals as employers

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Off-the-Clock Work and the 24 Hour Workplace

The 24 Hour Workplace

►18% of Americans report working from home every day

►25% of employees check email when taking a sick day

►22% of employees check their work email “often” during the weekend (17% of employees in jobs < $50,000; 34% of employees in jobs >$75,000)

►35-61% check email while on vacation

►66% of people read email 7 days/week and expect to receive a reply the same dayy

►41% of Americans check email first thing in the morning

►Average professional spends 1-5 hours a day sending and receiving work related email after hours

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What do you think?

►Before leaving for work, employee uses home computer to log in for 10 or 15 minutes to read emails She or 15 minutes to read emails. She does not respond to the emails, but thinks about them on her way to work.

► Is the time she spends reading the emails every morning compensable?compensable?

►What about the time she spends thinking about the issues raised in the emails while she commutes to work?

General Rules

►A nonexempt employee must be compensated for all hours worked in a work week.

M t b id f ll ti t k b h lf f th i l dl ► Must be paid for all actions taken on behalf of their employers regardless of the location of the work

► Includes work performed at home, before or after scheduled shift or hours, and work done electronically when off site

►What constitutes hours worked?► Activities primarily for the benefit of the employer and suffered or

itt d b lpermitted by an employer

► Employer generally liable for off-the-clock work if the employer knew or should have known the employee was working► Who is the “employer”?

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What About the “De Minimis Rule”?

► Infrequent and insignificant periods of time►DOL says:

“U t i ” “i d fi it ” i d f ti► “Uncertain” or “indefinite” periods of time► Failure to account based on “industrial

realities”► DOL example: After clocking in you were

assigned to another job. You transported your tools to the new job area and then informed the foreman that you were ill and

t h ith t d i dditi l went home without doing any additional work or clocking out. The time spent transporting the tools would be considered de minimis or insignificant because it was limited to this one time only.

Is it compensable work time?

►Whether activities such as checking email at home or taking calls on a cell phone count as compensable time depends on the following:

Th ti iti t b i il f th b fit f th l► The activities must be primarily for the benefit of the employer.

► The activities must be principal activities or integral and indispensible to principal activities in order to count as work.

► The employer must know or should have known that an employee was engaged in such activities.

► The activities are not de minimis.

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What do you think?

►Before leaving for work, employee uses home computer to log in for 10 or 15 minutes to read emails She or 15 minutes to read emails. She does not respond to the emails, but thinks about them on her way to work.

► Is the time she spends reading the emails every morning compensable?compensable?

►What about the time she spends thinking about the issues raised in the emails while she commutes to work?

Recent Electronic Overtime Cases

►Sears Roebuck entered a $15 million settlement for failing to properly pay employees who began their workday at home by checking computerscomputers

►T-Mobile also settled a collective action brought by employees who alleged they were required to use company issued smart phones to respond to work messages after hours without pay

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Compliance Checklist

►POLICY► Prohibit “off the clock” work► Prohibit off the clock work

► Require complete, accurate, and signed time records for all work performed

► Address approval and record-keeping for all overtime and all off-premises work

► Require employees to disregard and report any instruction not to record time accuratelyinstruction not to record time accurately

► Prohibit work at home for non-exempt employees?

► Require supervisor to be copied on all off-hour emails?


►ADDRESS POLICY VIOLATIONS►SUPERVISOR TRAINING►SUPERVISOR TRAINING

► Do not assign work that would need to be completed overnight or between shifts

► No pressure to violate policies

► Report and address violations

►DEVICES► Consider providing only

to exempt employees

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Flexible Work Arrangements and Telecommuting

►According to SHRM’s 2012 National Study of Employers:

77% f i it ► 77% of companies permit flextime work arrangements

► Nearly 2/3 allow employees to work occasionally from home

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Case Study

►Merchandising and marketing employee responsible for six stores in his territory

Did t t t ffi k d f h ffi d t d ►Did not report to any office; worked from home office and commuted to stores from home

►Always reported 40 hours of work per week

►Admitted that his time records were false because he actually worked more than 40 hours per week

►Filed lawsuit for overtime claiming he worked more than 40 hours gevery week

Case Study – A Few More Facts

►Employer’s policy requires employees to accurately record all the time they spend working at home

E l it t d t ll l (i il) th t ti d t ►Employer reiterated to all employees (in an email) that timecards must be honest and complete and provided phone number for anonymous reporting of violations

►CHANGE RESULT?

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Case Study – A Few More Facts

►Employer expects employees to budget their time for a 40 hour workweek and not to incur overtime to complete duties

E l l i i t ld hi h “ t t t th 40 ►Employee claims supervisor told him he “was not to put more than 40 hours” on his time sheet because the company couldn’t afford overtime

►CHANGE RESULT?

Kuebel v. Black & Decker (2nd Cir. 2011)

►Court found employer could be liable:► An employer’s duty under the FLSA to maintain accurate records of its

l ’ h i d l blemployees’ hours is non-delegable.

► Once an employer knows or has reason to know that an employee is working overtime, it cannot deny compensation simply because the employee failed to properly record his time.

► “At least where the employee’s falsifications were carried out at the instruction of the employer or the employer’s agents, the employer cannot be exonerated by the fact that the employee physically entered cannot be exonerated by the fact that the employee physically entered the erroneous hours into the timesheets.”

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►ALLOW TELECOMMUTING?► Limit to exempt employees?► Pilot program to establish practices► Pilot program to establish practices

►POLICY► Address time-keeping requirements for those who

regularly work outside premises► Written authorization for overtime

► Report hours daily?

► Require employees to disregard and report any instruction not to record time accurately

► Prohibit work at home for non-exempt employees?

►ADDRESS POLICY VIOLATIONS


►SUPERVISOR TRAINING► Specific to telecommuters

► No pressure to violate policies

► Report and address violations

►RECORD-KEEPING► Use the most accurate method possible

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Volunteering and Interns

What do you think?

►A manufacturing facility is damaged in a hurricane. The employer sets up a hotline to provide a clearinghouse of information abo t the stat s of operations None empt information about the status of operations. Nonexempt employees volunteer to help coordinate the clearinghouse of information. Is this time compensable?

►A nonexempt clerical employee is invited to attend her firm’s annual holiday client reception and when she gets there, she is asked to assist with greeting guests, escorting guests to their tables and taking coats Is that escorting guests to their tables, and taking coats. Is that time is compensable?

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General Rules for Public Sector and Not-for-Profit Employers

►Volunteer: “an individual who, without promise or expectation of compensation, but solely for his personal purpose or pleasure, works in activities carried on by another person either for their pleasure or in activities carried on by another person either for their pleasure or profit”

►To qualify as a volunteer, the following criteria must be met:► The services must be offered freely and without pressure or coercion,

► The volunteer must perform hours of service for civic, charitable, or humanitarian reasons and not receive or expect any compensation other th b i id bl b fit i l f f than being paid expenses, reasonable benefits, or a nominal fee for performing the services, and

► The services must be different from any service the individual is employed to perform.

General Rules for Public Sector and Not-for-Profit Employers

►Other factors:► Whether a volunteer displaces employees

► Whether the activity is less than full-time

►Volunteers in the public sector (and likely for not-for-profit employers too) may be paid expenses, reasonable benefits, and nominal fees without losing their volunteer status► Nominal fee is generally less than 20% of prevailing wage► o a ee s ge e a y ess t a 0% o p e a g age

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General Rules for Private For-Profit Employers

►Under no circumstances will an individual be considered a volunteer.

►An individual may perform services as an intern/trainee, but only if certain specific criteria are met.

What do you think?

►A manufacturing facility is damaged in a hurricane. The employer sets up a hotline to provide a clearinghouse of information about the status of operations Nonexempt employees volunteer to help coordinate of operations. Nonexempt employees volunteer to help coordinate the clearinghouse of information. Is this time compensable?

►A nonexempt clerical employee is invited to attend her firm’s annual holiday client reception and when she gets there, she is asked to assist with greeting guests, escorting guests to their tables, and taking coats. Is that time is compensable?

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►Examine “volunteer” situations, including employees involved in charitable work supported by employer.

A id i l ti f l ti it i b d ►Avoid implementing performance evaluation criteria based on completion of charitable work.

►Train supervisors about applicable volunteer standards and practices.

Unpaid Interns

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What do you think?

►A college student lands an opportunity to spend the summer interning at Harper’s Bazaar in New York. It is unpaid and long hours, but she will get to know key people in the magazine and fashion industry while will get to know key people in the magazine and fashion industry while she answers phones, runs errands and makes deliveries, and organizes clothing and other materials.

►Does this count as an “unpaid internship”?

Unpaid Interns

►Several class actions have been filed just in the past year on behalf of unpaid interns (many in the year on behalf of unpaid interns (many in the employment industry). For instance:► Wang v. The Hearst Corporation (2012)

► Glatt v. Fox Searchlight Pictures Inc. (2012)

► Bickerton v. Charles Rose and Charlie Rose, Inc. (2012)

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General Rules

► Interns may be unpaid under the FLSA if the following criteria are met:

► The training is similar to that which would be given at a vocational school

► The training is for the benefit of the trainees

► The trainees work under close observation and do not displace regular employees

► The employer providing the training derives no immediate advantage from the activities of the trainees (and its operations may actually be impeded)

► The trainees are not necessarily entitled to a job at the completion of the training

► The employer and trainees understand that the trainees are not entitled to wages for the time spent in training

► Criteria relaxed for public employers and not-for-profit employers

General Rules

►An intern is actually an employee (entitled to pay) when:► Used to substitute for regular workers or to

supplement the employee’s workforce

► But for the intern, the employer would have hired additional employees or asked its existing staff to work additional hours

► The intern is engaged in the employer’s routine operations and/or the employer is dependent on the operations and/or the employer is dependent on the intern’s work

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►Work with educational institutions that provide academic credit.

Obt i itt ifi ti f th h l ►Obtain written verification from the school stating the internship is approved by the school as educationally relevant.

►Make sure the intern is providing benefit to the employer less than 50% of the time.

►Make sure the intern is shadowing and supervised by a staff member.

►Make clear that a job is not guaranteed upon completion.

►Develop an internship agreement.

Automatic Deductions for Meal Breaks

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What do you think?

►To discourage its nursing staff from working through their meal breaks, a health care provider adopts a policy of automatically deducting a 30 minute meal break (per 8 hour shift) from the time records for all nonexempt nurses.

►Employer notifies nurses that they are not able to take such breaks, they must make a notation in their time records.

►Can an employer take automatic meal deductions as long as the burden is on the employee to report if he/she does not take a meal break?

General Rules

►No meal or rest breaks required by the FLSA or Indiana law

►BUT, the FLSA regulates whether a break must be treated as bl ki ticompensable working time

►To be unpaid, meal period must be 30 minutes or longer, uninterrupted, and employee must be completely relieved of duties► Note: You must pay employees during rest breaks of less than 20

minutes and meal breaks of less than 30 minutes.

► If meal break is interrupted, employer should not treat any of the meal break as unpaid.

► Prevent interruptions by requiring employees to leave work station

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General Rules Recap

►Can employer require employees to stay on premises for meal break and not pay on premises for meal break and not pay them?

►Can employer require employees to stay at their desks or work area for meal break and not pay them?

►Can employer allow an employee to volunteer to work during meal period?

►Many lawsuits in the t f past few years

challenging automatic deductions for meal breaks

►Filed as class actions because based on because based on policies that apply to groups of employees

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What do you think?

►To discourage its nursing staff from working through their meal breaks, a health care provider adopts a policy of automatically deducting a 30 minute meal break (per 8 hour shift) from the time records for all nonexempt nurses.

►Employer notifies nurses that they are not able to take such breaks, they must make a notation in their time records.

►Can an employer take automatic meal deductions as long as the burden is on the employee to report if he/she does not take a meal break?

Automatic meal break deductions

►NOT per se unlawful, but difficult to monitor

►What circumstances would lend themselves to automatic meal break ded ctions?break deductions?

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►Consider eliminating automatic meal break deductions unless work stops for all during the break

►If you use automatic meal deductions:► Clear, written policy on reporting missed

meal breaks (make it mandatory and easy)

► Train managers on policy and risks

► Audit employee and manager compliance (consistently and accurately correcting timesheets when meal breaks missed)

Preliminary/Postliminary and Preparatory/Concluding Activities

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What do you think?

►An employee’s shift begins at 8:00 a.m. Does her workday begin when she walks into the plant at 7:45 and puts on her safety glasses and hard hat? Or, at 7:50 a.m. when she puts on her protective boots and coveralls? Or, at 8:00 a.m. when she starts working?

►What if an employee checks email at 7:30 a.m., then drives one hour to work and gets to her desk at 8:30 a.m. (her normal starting time)? Is time spent

?checking email compensable? Is time spent commuting compensable?

General Rules

►Continuous workday rule: Workday is the period between the start and completion on the same workday of an completion on the same workday of an employee’s principal activity or activities

►Preliminary and postliminary activities that occur outside of the continuous workday do not count as compensable work time

F i t lki b t ti ► For instance: walking between a time clock and the employee’s work area

►Preparatory and concluding activities integral to the employee’s principal job are compensable

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Donning and Doffing

►Whether time spent changing clothes and/or donning and doffing equipment are compensable depends on a variety of factors:

Wh t i th l h i i t /d i ?► What is the employee changing into/donning?► Is it necessary or required?

► Where does the donning occur?

► Is changing into the clothing or equipment integral and indispensible to a principal activity?

► If so, does the activity fall within an exception?► Is there a collective bargaining agreement that contain provisions

addressing the compensability of clothes changing time?

► Is there a custom or practice on this issue?

Integral and indispensible?

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Donning and Doffing

►Whether time spent changing clothes and/or donning and doffing equipment are compensable depends on a variety of factors:

Wh t i th l h i i t /d i ?► What is the employee changing into/donning?► Is it necessary or required?

► Where does the donning occur?

► Is changing into the clothing or equipment integral and indispensible to a principal activity?

► If so, does the activity fall within an exception?► Is there a collective bargaining agreement that contain provisions

addressing the compensability of clothes changing time?

► Is there a custom or practice on this issue?


► Examine employee pre- and hif l hi / i post-shift clothing/equipment

activities

► Consider time and effort it takes to don and doff

► Consider whether the clothes, uniform, or equipment is optional (rather than required)(rather than required)

► Consider whether employees can perform activities before arriving

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Turning on Computers, Equipment, Tools

►Generally compensable if an integral and indispensible part of the principal job activities

E l b ti t i X hi ►Examples: booting up computer, powering up an X-ray machine, logging onto a network

►Generally, once employees engage in these activities, the workday has started and, under the continuous workday rule, any subsequent waiting must be counted as time worked.

Generally Not Compensable

►Checking in and out

►Waiting in line to check in ►Waiting in line to check in or out or get paid

►Turning on your light

►Passing through security checkpoints

►Commuting

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Waiting time

► In July 2012 a Xerox affiliate agreed to pay up to ► In July 2012, a Xerox affiliate agreed to pay up to $4.5 million to settle claims by call center employees that they were not paid for time spent logging into computers, looking for headsets and work stations, and waiting for passwords to be reset.

Kuebel v. Black & Decker (2nd Cir. 2011)

►Merchandising and marketing employee responsible for six stores in his territory

►Performed administrative tasks (reading and responding to email, checking voicemail, preparing for store visits) before leaving for store

►Claimed that his commute time to the first store was compensable because under the “continuous workday” rule, his workday began when he started these duties

►Court found that employee had flexibility regarding when these tasks were performed, and fact that he chose to perform these tasks immediately before and after his commute did not mean that B&D had to pay for it

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What do you think?

►An employee’s shift begins at 8:00 a.m. Does her workday begin when she walks into the plant at 7:45 a.m. and puts on her safety glasses and hard hat? Or, at 7:50 a.m. when she puts on her protective boots and coveralls? Or, at 8:00 a.m. when she starts working?

►What if an employee checks email at 7:30 a.m., then drives one hour to work and gets to her desk at 8:30

( )?a.m. (her normal starting time)? Is time spent checking email compensable? Is time spent commuting compensable?


►Examine pre- and post-shift activities and compensation

►POLICY► Require employees to engage in personal activities

(using restroom, getting coffee, talking with friends) before starting work activities

► Prohibit employees from arriving at their work stations before start time

►ADDRESS POLICY VIOLATIONS

►TRAIN SUPERVISORS

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Rounding

Why Round?

►Long lines at time gclocks

►Payroll done manually

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Does Rounding Matter?

► In the last 3 years, there have been at least 15 reported decisions or settlements in federal courts involving allegations of improper rounding.

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General Rule

►Rounding allowed as long as the arrangement averages out so employees are “fully compensated for all the time they have actually worked”worked

►Rounding is acceptable as long as: ► It works both ways (both for and against the employer);

► The rounding increments do not exceed a quarter of an hour; and

► The rounding “is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all h i h h ll k d ”the time they have actually worked.”► What about rules against tardiness?

Problem for Employers

►Employee’s time is always rounded down, but never rounded up (i.e., the employer obtains the primary or sole benefit of the system)

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What do you think?

►Employee paid $10/hour is scheduled to work 8 hours per day Monday through Friday (40 hours a week).

►Employer’s policy says employees are paid for time worked in full 15 minute increments. The employee always clocks out 12 minutes after the end of her shift.

►Does the employer owe the employee overtime?

►What if the employer rounds employee’s clock-in and ►What if the employer rounds employee s clock-in and clock-out times to the nearest quarter hour? Would that policy violate the FLSA?


►Consider using integrated ►Consider using integrated recordkeeping and payroll software

►Consider not using rounding► Or use rounding only on a pay period

basis

►Consider effect of strict attendance and tardiness policies to make sure they tardiness policies to make sure they don’t render a rounding policy improper► Round only in favor of employees?

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Properly Calculating the Regular RateRegular Rate

►Overtime is calculated at a 50% premium rate from the regular rate of pay (i.e., one and one-half times the regular rate of pay)

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►Regular rate includes the hourly wage AND other forms of non-discretionary compensation, such as:

B ti d t d ti it l it tt d lit f k► Bonuses tied to productivity, longevity, attendance, or quality of work

► Premium pay for weekend/holiday work (if paid at less than time and one-half)

► Flat sums for working extra shifts

► On-call pay regardless of whether the on-call time is deemed working time

► Incentive pay

► Commissions

► Shift differentials

► Retroactive pay increases

►Non-discretionary compensation must be apportioned back over the period in which it was earned.

Thi i t ti l l l ti th l t f f ►This requires retroactively calculating the regular rate of pay for every work week in which overtime was paid

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Bonus Example

►An employee receives a bonus of $2,600 at the end of the year based on production or tt dattendance.

►A supplemental overtime paycheck must be issued at the end of each year for overtime earned but not paid during the year based on the annual bonus

►$2,600 annual bonus ÷ 52 weeks/year = $50 bonus per weekbonus per week

►Need to recalculate regular rate and overtime due in weeks in which overtime was worked► Credit for overtime already paid


►Review types of non-discretionary compensation that must be included in determining regular rate

►Consider whether bonuses and other compensation that is non-discretionary can be restructured► Discretionary (not counted for regular rate)

► Percentage of total earnings (including overtime earnings) as bonus

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FLSA COMPLIANCE—DON’T BE THE 70%

►Review timekeeping policiesDi i t d bt i k l d t►Disseminate and obtain acknowledgment

►Consistently enforce timekeeping policies►Investigate complaints and reports of off the

clock work►Evaluate timekeeping mechanics►Evaluate timekeeping mechanics►Regularly audit policy effectiveness►Train supervisors and employees

cutting edge wage and hour issues for the hr...

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