wage/hour and flsa issues: 2017 update · • expanding wage/hour protection was a key objective of...

©2017 Warner Norcross & Judd LLP. All rights reserved. 1

©2017 Warner Norcross & Judd LLP. All rights reserved.

Wage/Hour and FLSA Issues:2017 Update

Jon Kok

C. Ryan Grondzik

©2017 Warner Norcross & Judd LLP. All rights reserved. Page 2

Solving the Puzzle:What’s Happening with the FLSA?


A Look Back...

• Under the Obama administration, wage/hour enforcement was at an all time high

Num

ber

of F

LSA

Law

suits

File

d



• Expanding wage/hour protection was a key objective of the Obama Administration

• Wage/Hour Division annual budget increased by $250 million in one year alone, from 2015 to 2016

• Wage/Hour Division budget for 2017 was expected to be $276 Million

• Increased scrutiny of independent contractors

The Obama Administration’s Plans


• New white collar salary rules effective December 1, 2016

• Except...

The Pending Rules


• 21 states sued for a preliminary injunction to halt the rule� Claimed that DOL exceeded its authority by more

than doubling the salary threshold

The Best Laid Plans...



• Federal judge in Texas agreed• Ten days before rule to take effect,

injunction granted� New rules “on hold” pending further review

• Obama DOL appealed

The Best Laid Plans...


• Landscape has changed even more since the court granted the injunction

• Trump: regulatory freeze• Appeal still pending

� But: repeated delays from Trump � No briefs filed

› Originally due March 2› After 2 extensions: June 30

The Trump Administration’s Position


• Passed the House on May 2� Allow workers to choose

› 1.5 hours paid comp time; OR› Time-and-a-half pay

� Opponents worry this system won’t protect employees from coercion

• President Trump expressed support• Awaiting Senate review

Working Families Flexibility Act



• No one knows yet� All signs point to no

new rules in 2017� Appeal still pending –

not withdrawn� No formal word from

Trump admin regarding FLSA regs

So What’s Going On?


Independent Contractor Misclassification


• FLSA and Independent Contractors� FLSA protections only apply to employees� Independent contractors not covered� Temptation is high to misclassify

• “Economic reality” test� Complex set of factors to distinguish

Misclassification 101



• WHD, IRS and several states working together to combat employee misclassification

DOL Misclassification Initiative


• Caregivers in group home• Misclassified as independent contractors• Signed contracts agreeing that they were

independent contractors• Federal appeals court: no, they’re

employees� Employer controlled all meaningful aspects of

employment� Lack of supervision ≠ independent contractor status

Misclassification Case Study


Intern Misclassification



• Almost always employment� “Internships . . . will most often be viewed as

employment”� Rigid six-factor litmus test to determine whether

an intern is an employee or not

Interns as Employees


• Education is the top priority• Clearly define boundaries• Intern work must be tightly

regulated• Interns must be paid at least

minimum wage unless there is no benefit to the employer

Classifying Interns Properly


Should You Ask Applicants About Salary History?



• Equal Pay Act• States are taking action� MA: New law prohibiting salary history

inquiries� Concept: counter the pay discrimination

that can follow a woman through her career

• Courts are divided � Federal court governing Michigan hasn’t

weighed in

It’s Risky...


• Rizo v. Yovino - decided last month (CA federal court)

• Plaintiff, a schoolteacher, sued her employer� Found out she was making less than male teachers

• School district’s defense?� Based her salary on her prior salary

� This was a factor “other than sex,” and thus permissible under EPA

• Court agreed with school district� Prior salary is in some cases related to a “business policy,” not a

teacher’s sex

� Employer thus allowed to inquire, as long as they can identify a business reason

Equal Pay Act Case Study


Bonuses, Travel Time and Other Payments



• Employees often receive various types of compensation� Determining what goes into their regular rates for

overtime calculation can be critical� Standard items: commissions, attendance

bonuses, productivity bonuses, shift differentials, on-call pay

� Nonstandard items?

Determining Total Compensation


• Medical payments� City made cash payments to police officers in lieu

of medical benefits� City argued that these payments were excludable

because not directly related to work performed� Court disagreed: medical pay

counted toward regular rate

Total Compensation Case Study


• Is it working time?� Can be a challenging

calculation� Travel to/from work generally

not compensable� Traveling from job site to job

site generally counts as hours worked

� Special rules for overnight travel

Travel Time



• Employer required laborers to engage in mandatory park and ride scheme

• All workers parked in one lot then rode busses to their work site

• Roughly 40-60 minutes of commute time• Workers were not compensated for their time on the bus• Federal appeals court:

appropriate not to payemployees for their bus time

Travel Time Case Study


Employee Classification Review


SALARYSALARYSALARYSALARY

BASIBASIBASIBASI

Salary Basis

Job Duties

Tests for White Collar Exemptions



• Current rate: $455 per week• Proposed rule:

� New minimum: $913/week› $47,476 per year› Adjustable every three years

› Can include non-discretionary bonuses up to 10%

• Still pending• Unlikely to take effect


• A point of agreement• No real differences

between Obama regulations and existing regulations

Job Duties


1. Executive2. Administrative3. Learned Professional4. Outside Sales5. Certain computer employees

Job Duties



Job Duties

• Store manager classified exempt• Sued Family Dollar, alleging that she spent 60-70% of

her time on non-exempt duties� Unloading freight

� Stocking shelves

• Court held that the manager was nevertheless exempt� “Time alone is not the sole test”

� Even if most of her time was spent stocking, her primary job duties were managing her employees and protecting the store

� “It is misleading simply to add up the time that [Plaintiff] spent unloading trucks, stocking inventory, running cash registers, or sweeping floors and conclude thereby that she was merely a clerk and not a manager.”

Executive Exemption: Case Study


Job Duties

• Class action by “brand advocates”• Responsible for promoting LG products in

stores• Employer’s arguments?

� Advocates operated independently

� Had their own discretionary marketing budget

• Court rejected employer’s rationale� Not enough discretion or independent judgments

� Advocates had to refer to a script

� Independent judgment did not relate to “matters of significance”

Administrative Exemption: Case Study


Don’t Be a Target



Prepare and Maintain• Keep adequate records

• Adopt and distribute written policies concerning time keeping, overtime pay and off-the-clock work (including remote work)

• Train managers in FLSA compliance

• Adopt formal payroll complaint mechanisms

• Handbook must say that salaried employees receive a set salary for all hours worked including all hours over 40 in a work week

Don’t Be a Target


• Value of “creating a process”� Employer established a reasonable process for

employee to follow to report uncompensated work time

� Employee failed to follow the process� Employer not liable for nonpayment

Don’t Be a Target Case Study


• Audit any “independent contractor” or “intern” arrangements to ensure they comply with both the FLSA and tax laws

• Review bonus and travel payment procedures to ensure compliance

Don’t Be a Target



• Conduct regular audits of exempt/nonexempt status of employees

• Utilize attorney-client privilege to do this

• Determine if it is necessary and appropriate to increase salary levels to keep employees exempt

Don’t Be a Target


Questions & Answers

Thank you!

Jon [email protected] Grondzik

[email protected]

These materials are for educational use only. This is not legal advice and does not create an attorney-client relationship.

wage/hour and flsa issues: 2017 update · • expanding wage/hour protection was a key objective of...

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