Tag Archives: Fair Labor Standards Act

It’s Here … The DOL’s New Overtime Rule is (Finally) Published

The days of speculation regarding the changes to the salary requirements for the FLSA overtime exemption have (finally) come to an end.

The US Department of Labor has released its new overtime regulations, resulting in the following changes:

  • The minimum salary threshold for the FLSA overtime exemption is increasing from $23,660 per year to $47,476 per year (or $913 per week);
  • Employers will be permitted to use an employee’s nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level — subject to the following guidelines:
    • nondiscretionary bonuses and incentive payments must be paid on a quarterly or more frequent basis and
    • the employer may make a “catch-up” payment on the first payday following the close of the quarter, if the nondiscretionary bonus/incentive payment falls short of the salary level;
  • The total annual compensation requirement for highly compensated employees is increasing to $134,004 annually; and
  • The salary threshold will be updated once every three years

The new rule goes into effect December 1, 2016.  It is strongly recommended that employers start thinking about how this change impacts their current exempt workforce as soon as possible.

The new rule is over 500 pages long, so to help employers digest these regulations, the Department of Labor has released the following guidance materials:

In addition, the White House has released the following guidance:

US Supreme Court Confirms Donning and Doffing Claims are Incredibly Expensive

If the US Supreme Court intended to send a message regarding “donning and doffing”– then message received.

In Tyson Foods, Inc. v. Bouaphakeo, the US Supreme Court upheld a $5.8 million judgment against Tyson Foods in a donning and doffing class action lawsuit filed against the company by a class of more than 3,000 workers. The workers had sued the company to be paid for the exact amount of time they spent putting on and taking off protective work clothes and equipment before slaughtering and processing animals.

The Company’s practice was to pay employees an additional 4-8 minutes of time for donning and doffing to some, but not all, employees. In their lawsuit, the workers claimed that the donning and doffing activities took longer than the time for which they were compensated and alleged that they should be paid for the exact time spent donning and doffing.

The company did not track/record the actual time each employee spent changing in to (and out of) the safety equipment. Therefore, to prove their case, the workers wanted to rely on statistical evidence regarding the length of time it took them to put on and take off protective equipment to establish that these claims could proceed on a class-basis. The District Court agreed and allowed the lawsuit to proceed as a class action. The end result – a $5.8 million jury verdict against the company.

On appeal, the company argued that the Court’s certification of the class was improper. Specifically, the company argued that the workers’ use of a representative sample to establish a commonality of claims between class members was inappropriate because that sample does not take into account the differences that make the case inappropriate for classwide resolution (e.g. the differing lengths of time it takes each individual employee to change)

The Supreme Court disagreed. Instead, the Court held that the workers were permitted to rely on statistical evidence regarding the length of time it took them to put on and take off protective equipment to prove their case, even though there would be individual variability in time spent among the workers.

Take home message for employers

The FLSA requires employers to pay employees for activities “integral and indispensable” to their regular work, even if those activities do not occur at the employee’s workstation. In circumstances where an employee is required to change at the employer’s facility into protective gear and/or a required uniform, employers must consider whether activity is “integral and indispensable” to the employee’s regular work; and, if it is, employees must be compensated for that time.

The FLSA also requires an employer to “make, keep, and preserve . . . records of the persons employed by him and of the wages, hours, and other conditions and practices of employment.” This means that in a donning and doffing situation, employers are required to record the time employees spend in the donning and doffing activities and pay the employees for the actual time spent performing that task. Employees should be required to clock in before engaging in any donning and doffing and should be discouraged from clocking out until after they have changed back into their street clothes.

As proven by this case, an employer’s failure to have time records can prove costly, as employees will be permitted to use statistical evidence to establish “commonality” for purposes of class certification – a result that can prove costly for an employer.

 

ETA Of DOL’s New Overtime Rule — July 2016

In two previous blog entries (DOL Announces Intended Release Date for New Overtime Rule and DOL Pushes Up Anticipated Release Date of New Overtime Rule), we reported that the US Department of Labor had announced that it anticipated that the new overtime rule would be published either as early as “spring of 2016” or by “late July 2016.”

However, today at the American Bar Association’s Midwinter Meeting of the Federal Labor Standards Legislation Committee, DOL Solicitor of Labor M. Patricia Smith announced that the DOL’s new overtime rule will be published in July of 2016 and will become effective 60 days after the rule is published.

While a precise July date was not announced, this timeline should not come as a surprise to employers, since the DOL has been promising all along that when the rule was published, the “turnaround time” to the rule going into effect would be rather short.

What are the changes with this new rule

The proposed rule (and a fact sheet explaining the proposed rule), which was released in August 2015, stated that the minimum salary for exempt status would increase from $455 per week ($23,660 per year) to $970 per week ($50,440 per year). In addition, the minimum salary level for exempt employees would automatically increase on an annual basis using either a fixed percentile of wages or the Consumer Price Index.

What should employers do to prepare for this increase?

To prepare for this change, it is suggested that all employers take the following steps:

  1. Identify all exempt employees and determine if their current salary is above the proposed new minimum salary requirement. If their salary is not, determine whether you wish to increase salary levels of the affected employees or change these employees to non-exempt status (i.e. make them hourly and begin paying overtime);
  2. For those employees who are converted to non-exempt:
    1. Verify that these employees are completing timecards and, if applicable under state law, receiving required rest periods and/or meal periods;
    2. Verify that these employees are not performing any off-the-clock work and, to the extent off-the-clock work is performed, these employees are properly reporting the off-the-clock work;
    3. Verify that these employees are properly reporting and receiving payment for all travel time.

When should employers make these changes?

With a release date more clearly announced, it is strongly recommended that employers start thinking about how this change impacts their current exempt workforce as soon as possible.  As with any changes to employee classification, we recommend that you consult with an HR Professional or qualified legal counsel about how best to present these changes to the affected workforce.

Guidance Issued On Room and Board Deductions for Home Care Workers

In mid-December 2015, the US Department of Labor (“DOL”) issued guidance materials regarding room and board deductions for Home Care Workers entitled “Credit toward Wages under Section 3(m) of the FLSA for Lodging Provided to Employees.” This guidance clarifies the circumstances under which an employer can count the “reasonable cost” of room and board as part of a Home Care Worker’s wages.

The guidance sets forth five requirements that must be met in order for employers to be able to claim this deduction, which are:

  1. The lodging is regularly provided by the employer or similar employers;
  2. The employee voluntarily accepts the lodging;
  3. The lodging is furnished in compliance with applicable federal, state, or local law;
  4. The lodging is provided primarily for the benefit of the employee rather than the employer; and
  5. The employer maintains accurate records of the costs incurred in furnishing the lodging.

If all five of these requirements are not met, then the employer cannot legally claim the deduction.

Recommendation

Any employers who claim a room and board deduction for their Home Health Care Workers should review these new guidance materials carefully and verify that its practices are compliant with the standards set forth in the materials.

DOL Announces Intended Release Date for New Overtime Rule

Over the past several months, the US Department of Labor (“DOL”) has indicated that it intends to significantly increase the salary level required to qualify for the executive, administrative and/or professional exemption from a minimum salary of $455 per week / $23,660 per year to a higher threshold that is yet to be determined.

In August 2015, the DOL issued a proposed rule (and a fact sheet explaining the proposed rule), wherein it was suggested that the minimum salary for exempt status increase to $970 per week / $50,440 per year. This proposed rule also suggested a formula that could be used by the DOL to automatically update this minimum salary level on an annual basis using either a fixed percentile of wages or the Consumer Price Index. This proposed rule has not been adopted, but it gives an indication of the intention of the DOL to dramatically increase the salary requirement with its issuance of its Final Rule.

Knowing the DOL’s intentions is one thing, but, until recently, the question that has plagued employers regarding this change has remained unanswered – when can employers expect the DOL to issue the final rule. In early December, the DOL finally gave a more definitive answer to this question and has indicated that the Final Rule will be issued in July 2016.

In earlier statements, the DOL has stated that the Final Rule will become effective shortly after it is published. Therefore, in order to prepare for this change, it is suggested that all employers take the following steps:

  1. Identify all exempt employees and determine if their current salary is above the proposed new minimum salary requirement. If their salary is not, determine whether you wish to increase salary levels of the affected employees or change these employees to non-exempt status (i.e. make them hourly and begin paying overtime);
  2. For those employees who are converted to non-exempt:
    1. Verify that these employees are completing timecards and, if applicable under state law, receiving required rest periods and/or meal periods;
    2. Verify that these employees are not performing any off-the-clock work and, to the extent off-the-clock work is performed, these employees are properly reporting the off-the-clock work;
    3. Verify that these employees are properly reporting and receiving payment for all travel time.

Supreme Court – Time Spent in Security Isn’t Compensable Time

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The United States Supreme Court held that employers do not have to pay employees for time spent in employer mandated security lines.

Yesterday, the Court decided Integrity Staffing Solutions, Inc. v. Busk and held that employees are not entitled to pay under the Fair Labor Standards Act for time spent in post-shift security checkpoints.  The Court reversed the Ninth Circuit Court of Appeal’s earlier finding that the employer was required to pay for the time.

The Facts

Integrity Staffing Solutions, Inc. (Integrity), located in Nevada, provides warehouse staffing to Amazon.com throughout the United States.  Hourly employees of Integrity were responsible for packaging products from the warehouse and preparing those products for delivery to Amazon.com customers.

Integrity requires every warehouse employee undergo a security screening before leaving the warehouse at the end of each day.  Employees must remove personal items (i.e., wallets, keys, and belts) in order to pass through metal detectors.  The process takes approximately 25 minutes per day and occurs post-shift.

The Allegations

Employees brought a class-action suit alleging that employees should be paid for the time spent in the security checkpoint.  According to the employees, the sole reason for the security check is to prevent theft, which directly benefits Integrity.  Employees claimed the process could have been expedited by adding additional metal detectors and screening staff.

The Ninth Circuit Court of Appeals found the post-shift screening was “necessary” to the employees’ primary work as warehouse employees and done for Integrity’s benefits, making it compensable time.

The Supreme Court reversed.

The Supreme Court’s Reasoning

Justice Thomas, writing for the Court, held that “the security screenings at issue here are noncompensable postliminary activities” because the screenings are not an integral part of the employees’ principal activities.

The Court reasoned:

We hold that an activity is integral and indispensable to
the principal activities that an employee is employed to
perform—and thus compensable under the FLSA—if it is
an intrinsic element of those activities and one with which
the employee cannot dispense if he is to perform his principal
activities. Because the employees’ time spent waiting
to undergo and undergoing Integrity Staffing’s security
screenings does not meet these criteria, we reverse the
judgment of the Court of Appeals.

Accordingly, Integrity does not have to pay for the time spent in the required post-shift security checkpoint as it is de minimis and not part of the warehouse employees’ principal activities.