Category Archives: Fair Labor Standards Act

NEW RULE: DOL Eliminates “80/20” Tip Credit Rule

On November 8, 2018, the US Department of Labor issued a new Opinion letter (Opinion Letter FLSA 2018-27) wherein the DOL rescinded the 80/20 tip credit rule.  Under this rule, employers were not able to use the tip credit for tipped employees who spend more than 20% of their time performing allegedly non-tip generating duties.

In lieu of this rule, the DOL has stated that ““We do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

NEW GUIDANCE: Department of Labor Publishes 6 New Opinion Letters

The US Department of Labor has certainly been busy as of late.  In addition to creating a new agency and developing two new websites, the DOL has also issued six new opinion letters, which interpret various issues under the federal Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA).

FMLA Opinion Letters

#1.  Can organ-donation surgery qualify as a “serious health condition” under the FMLA?

In the first letter, the DOL addressed the question of whether an organ donor qualifies as an individual with a serious health condition for purposes of the FMLA.

The DOL concluded that organ donation does qualify as a serious health condition because the donor often will often require an overnight stay in the hospital.

#2.  Does this employer’s no-fault attendance policy violate the FMLA?

In the second letter, the DOL addressed the question of whether a no-fault attendance policy that “freezes” during an employee’s FMLA leave (i.e. remains at the number of attendance points that the employee accrued prior to taking FMLA leave) violates the FMLA. Continue reading NEW GUIDANCE: Department of Labor Publishes 6 New Opinion Letters

Supreme Court (Finally) Rules Auto Dealership Services Advisors Are Exempt from Overtime

On April 2, 2018, the US Supreme Court settled a contentious battle of interpretations under the Fair Labor Standards Act (FLSA): are auto dealership service advisors exempt under the FLSA? To the relief of dealerships across the country, the court held that they are exempt. While addressing a narrow range of employees (service advisors), this case was a victory for employers and arguably establishes (or re-establishes) an employer’s right to reasonably interpret the law in its employment practices.

Some Brief History

The FLSA provides that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” is exempt from overtime. Until 2011, the US Department of Labor had interpreted this provision to mean that auto dealership service providers were exempt because such employees were engaged in servicing automobiles by determining the service needs of vehicles and selling supplemental services to customers.  In 2011, the DOL reversed course (and 40 years of precedent) and stated that service advisors are non-exempt, thus entitling them to overtime pay and creating significant wage and hour liability for auto dealerships.

Various service providers took this opportunity to bring a class action lawsuit against Encino Motorcars for unpaid overtime and other wage and hour violations.  After making it all the way to the Supreme Court, back down to the Ninth Circuit Court of Appeals, and back up to the Supreme Court again, the case has been settled.

In short, the Supreme Court held that the law was clear: service advisors are exempt from overtime pay under the FLSA because they are “salesme[n]…primarily engaged in…servicing automobiles.”

An Important Note

In ruling for the dealership, the Supreme Court rejected the commonly cited principle of interpretation that the FLSA’s exemptions should be interpreted narrowly. Instead, the court held that a court’s role in reading the FLSA exemptions is to give them a fair reading.  This means that moving forward, instead of interpreting the law in a manner that all but assumes an employer has misclassified an employee as exempt, courts should afford employers a fair opportunity to demonstrate that their interpretation of the law is reasonable.

FLSA Requirements for Tip Pooling Quietly Changed

Buried in its 2,232 pages, the 2017 Omnibus Budget Bill contains a short provision making important amendments to the Fair Labor Standards Act as it relates to tip pooling arrangements. These amendments may have immediate and important ramifications for employers and may require changes to existing tip pooling arrangements in order to remain in compliance with the law.

The Long and Short of It

First, the bill makes it unlawful for employers, including managers and supervisors, to keep any portion of tips received by their employees, regardless of whether or not the employer takes a tip credit. Previously, the FLSA was vague on whether an employer could retain a portion of employee tips when the employer did not take a tip credit (i.e., when the employer paid the employee at least minimum wage not including tips). This update to the law brings the FLSA in line with previous Department of Labor (DOL) regulations that prohibited employers from sharing in employee tips at any time.

The second significant change brought about by the bill is that the FLSA now permits employers to require tipped employees to share their tips with back of house employees when the employer does not take a tip credit.  Thus, under the FLSA, employers who pay their tipped employees at least the full federal minimum wage may now require tipped employees such as severs and bartenders to share their tips with employees who are not customarily tipped, such as dishwashers, cooks, and bussers. This amendment invalidates previous DOL regulations prohibiting employers from requiring such tip sharing with non-tipped employees.

DOL Guidance Continue reading FLSA Requirements for Tip Pooling Quietly Changed

NEW GUIDANCE — DOL Issues New Guidelines Regarding Intern vs. Employee Question

On January 8, 2018, the US Department of Labor issued a revised Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, which sets forth an employer-friendly standard for determining whether an intern is considered an employee for purposes of the FLSA.

The new guidance materials were issued in response to the federal courts’ widespread rejection of the DOL’s former guidelines on this issue where the DOL had set forth 6 required factors that must be met before an unpaid intern could be categorized as such and excluded from pay requirements of the FLSA.  These old guidelines also emphasized that internships in the “for-profit” private sector “will most often be viewed as employment” unless all 6 required factors were met.

With the revised Fact Sheet #71, the DOL’s position now aligns with that of the Courts who had previously rejected the DOL’s more stringent 6-factor test.  Under these new guidelines, the DOL now instructs employers to consider the following 7 factors when determining whether an intern is an employee for purposes of the FLSA:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL has clarified that “no single factor is determinative” and the ultimate answer depends on the “unique circumstances of each case.”

Take home for employers

With this new test, the DOL has made it easier for a private employer to create an unpaid internship program that is lawful under the FLSA provided that an analysis of the 7 factors shows that, on balance, the intern benefits more from the relationship than the employer does.  This means that employers need to try to structure their internship programs in such a way that all 7 factors lean toward an internship—rather than an employer-employee relationship.

PENALTY INCREASE — STOP Before Violating These Laws

The US Department of Labor recently announced that it is increasing the penalties associated with violations of several employment laws.  The penalty increase applies to all penalties assessed after January 2, 2018 for violations that took place after November 2, 2015.

The increase in penalties applies to the following violations, among others:

Law Violation Type Old Maximum Penalty New Maximum Penalty
Family Medical Leave Act Failure to post required FMLA notices $166 $169
Fair Labor Standards Act Willful or repeated violations the FLSA minimum wage and/or overtime provisions $1,925 $1,964
Violations of the FLSA child labor law provisions $12,278 $12,529
Violations of the FLSA child labor law provisions that result in serious injury or death $55,808 $56,947
Willful or repeated violations of the FLSA child labor law provisions that result in serious injury or death $111,616 $113,894
Occupational Safety and Health Act Violations of the OSHA provisions $12,675 $12,934
Willful or repeated violations of the OSHA provisions $126,749 $129,336
Failure to post required OSHA notices $12,675 $12,934
Failure-to-abate violations of the OSHA provisions $12,675 $12,934

In addition to the above-listed laws, the DOL also increased the penalties for violations of several other laws, including the Employee Retirement Income Security Act, the Immigration and Nationality Act, and the Employee Polygraph Protection Act, among others.

For a complete table of the increased penalties, click here.

Is The Minimum Pay Required For Commissioned Employees To Qualify For An Overtime Exemption Increasing In Your State In 2018?

While the minimum pay required for commissioned employees to qualify for an overtime exemption is not changing in 2018, there are several states where the minimum pay requirements for a “commissioned employee overtime exemption” are increasing.

These increases (i.e. in California, Colorado, Minnesota, Oregon, Washington, and Washington DC) are occurring because the pay an inside or commissioned salesperson must receive to qualify for the inside or “commissioned” sales exemption (as established under state law) are scheduled to increase in 2018 (December 31st for New York employers).

Under the Fair Labor Standards Act (FLSA), in order for a commissioned salesperson to qualify for the FLSA’s 7(i) overtime exception (Commissioned Salesperson Exemption), the following three conditions must be met:

  1. The employee must be employed by a retail or service establishment, and
  2. The employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and
  3. More than half the employee’s total earnings in a representative period must consist of commissions.

Unless all three conditions are met, the Commissioned Salesperson Exemption is not applicable, and overtime premium pay must be paid for all hours worked over 40 in a workweek at time and one-half the regular rate of pay.

The below table sets forth the changes to the minimum salary requirements for exempt employees in these states.  In those instances where the state minimum salary requirements are lower than the above-listed FLSA requirements, the higher salary threshold applies for employers who are subject to FLSA in order for employees to qualify for an exemption under the FLSA. Continue reading Is The Minimum Pay Required For Commissioned Employees To Qualify For An Overtime Exemption Increasing In Your State In 2018?

Check to See if the Minimum Required Salary For Exempt Employees is Increasing In Your State

While the minimum salary requirements for “white collar” employees (executive, administrative, or professional employees) is not changing in 2018 (at least not until/unless the Department of Labor announces a new Overtime Rule), there are several states where the minimum salary requirements for exempt employees is increasing in 2018 (December 31st for New York employers).

These increases (i.e. in Alaska, California, Colorado, Maine, New York, and Oregon) are occurring because the minimum exempt salary rates for these employees (as established under state law) are scheduled to increase in 2018 (December 31st for New York employers).

Under the Fair Labor Standards Act (FLSA), the minimum salary requirements for white collar employees is as follows:

Payment Schedule Minimum Salary
Weekly $455
Bi-Weekly $910
Semi-Monthly $985.83
Monthly $1,971.66
Annual $23,660

Continue reading Check to See if the Minimum Required Salary For Exempt Employees is Increasing In Your State

Watch for These Wage and Hour Challenges this Holiday Season

It’s the most wonderful time of the year!  While the holiday season certainly brings joy, it can also cause employers a lot of stress – particularly with respect to wage and hour issues that can arise.  Avoid this unwanted holiday headache by keeping an eye out for the following wage and hour challenges that can arise during the holiday season:

 

  1. Holiday Parties Could Be Considered Working Time.

Everyone enjoys a good party and the holiday season presents a good reason to celebrate a profitable year and boost employee morale.  However, to avoid a potential wage and hour issue, employers need to exercise caution with scheduling and communicating with employees about the holiday party.

Under most state laws, a holiday party that is scheduled during an employee’s regular working hours is considered working time; therefore, employees must receive compensation if they attend the party.  In addition, if an employee is required to attend a holiday party (or made to feel that they are required to attend – e.g. through a manager’s encouragement), the time an employee spends at the party can also be considered compensable.

To avoid these issues, schedule the holiday party outside of regular working hours (and consider holding it in an offsite location).  In addition, make it abundantly clear to your nonexempt employees that attendance at the party is 100% voluntary.

  1. Special Holiday-Related State Wage and Hour Laws

While under federal law (the FLSA) employers are not required to provide any time off or additional compensation (i.e. holiday pay) to employees during the holiday season, there are laws in some states that impose special requirements on employers.

For example, a few states require certain types of employers to provide employees with time off on specific days (i.e. Christmas and New Year’s Day).  Other states require that certain employers pay employees overtime if they are required to work on specific holidays (i.e. Christmas and New Year’s Day) – regardless of the amount of time worked by the employee in that week.

In addition, several states have “day of rest laws” where employers are required to provide a day of rest, which require an employer to provide employees with a day of rest on their Sabbath or when they have worked a certain number of hours or days in a row.  Due to the busyness of the holiday season, an employee’s work schedule can violate a state’s day of rest law.

Finally, some states have enacted “reporting time laws” (where an employer must pay an employee additional wages if he/she shows up for work and is not provided a full shift of work) and several large cities (San Francisco, San Jose, Seattle and, New York City) have enacted “scheduling laws” (which limit how and when employers can change employees’ schedules).  Due to the unpredictable nature of the holidays, employers should be aware of these laws and exercise caution when scheduling employees for the holidays – otherwise they run the risk of wage and hour penalties.

Trick or Treat! DOL Treats Employers with the promise of a new Overtime Rule

On October 30, 2017, the US Department of Labor announced that it will soon “undertake new rulemaking with regard to overtime.”   This announcement comes after the public comment period on the DOL’s Request for Information (RFI) regarding the Overtime Final Rule (where the DOL was seeking public input on what changes should be made to the overtime rule) closed.

In addition to this announcement, the Department of Justice, on behalf of the Department of Labor, filed a notice to appeal the Court’s ruling on the motion for summary judgment challenging the Overtime Rule.  In this ruling (which was issued on August 31, 2017), the Court held that the Overtime Rule’s salary level exceeded the DOL’s authority, and concluded that the Final Rule is invalid.  The DOJ does not, however, intend to proceed with this appeal until the DOL determines what the new exempt salary level should be.

At this time, the DOL has not released any further information regarding the release of a New Overtime Rule.  However based on previous comments made by Secretary Acosta, it is expected the new salary level will be in the low $30,000 range.

The next step in the rulemaking process will be for the DOL to issue a proposed rule.  Once that proposed rule is published, there will be a public comment period followed by the issuance of a final rule.

It is recommended that all employers keep on the lookout for this new rule.  In addition, we will continue to report developments here.