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©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?
©2017 Warner Norcross & Judd LLP. All rights reserved. Page 3
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
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• 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
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• New white collar salary rules effective December 1, 2016
• Except...
The Pending Rules
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• 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...
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• 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...
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• 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
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• 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
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• 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not withdrawn� No formal word from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?
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Independent Contractor Misclassification
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• 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
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• WHD, IRS and several states working together to combat employee misclassification
DOL Misclassification Initiative
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• 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
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Intern Misclassification
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• 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
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• 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
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Should You Ask Applicants About Salary History?
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• 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...
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• 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
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Bonuses, Travel Time and Other Payments
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• 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
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• 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
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• 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
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• 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
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Employee Classification Review
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SALARYSALARYSALARYSALARY
BASIBASIBASIBASI
Salary Basis
Job Duties
Tests for White Collar Exemptions
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• 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
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• A point of agreement• No real differences
between Obama regulations and existing regulations
Job Duties
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1. Executive2. Administrative3. Learned Professional4. Outside Sales5. Certain computer employees
Job Duties
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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
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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
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Don’t Be a Target
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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
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• 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
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• 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
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• 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
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Questions & Answers
Thank you!
Jon [email protected] Grondzik
These materials are for educational use only. This is not legal advice and does not create an attorney-client relationship.