Overtime Advisor

Misapplied Overtime Exemption Can Result In Millions of Dollars in Payments For Wage Violations

Devora L. Lindeman, Esq. — Tue, 15 May 2012 09:36:52 -0500

The U.S. Department of Labor (DOL) announced on May 1, 2012, that in accordance with a settlement agreement, Wal-Mart Stores Inc. has agreed to pay $4,828,442.00 in back wages and damages to more than 4,500 employees nationwide and $463,815.00 in civil money penalties for misclassifying employees and associated violations of the overtime provisions of the Fair Labor Standards Act (FLSA), the federal wage and hour law.

According to the DOL, 4,500 vision center managers and asset protection coordinators at Wal-Mart Supercenters, Wal-Mart Discount Stores, Neighborhood Markets and Sam’s Club Warehouses were not paid proper overtime wages for hours worked beyond 40 in a work week. Apparently, the workers had been improperly classified as exempt from the FLSA’s overtime provisions.

According to Secretary of Labor Hilda L. Solis, "[m]isclassification of employees as exempt from FLSA coverage is a costly problem with adverse consequences for employees and corporations." Secretary Solis warned: "Let this be a signal to other companies that when violations are found, the Labor Department will take appropriate action to ensure that workers receive the wages they have earned."

Wal-Mart agreed to pay back wages owed in the amount determined by DOL plus an equal amount in liquidated damages, as required by law. In 2007, Wal-Mart, which operates more than 3,900 establishments in the United States, had corrected its classification practices for these workers, and negotiations over the back pay issues have been continuing since then.

As per Secretary Solis’s warning, to avoid any potential ramifications, employers should make sure to properly classify their employees to avoid violating the overtime provisions of the FLSA.

Government Agencies Declare Class(ification) War

Kevin M. Doherty, Esq. — Wed, 02 May 2012 14:14:17 -0500

The level of scrutiny placed on the ways in which employers classify those who work for them is likely to increase in the near future: “the Congressional budget includes $14 million to combat misclassification and recover unpaid taxes and $4 million for personnel at the DOL Wage and Hour Division to investigate misclassification.”

As previously discussed in this space, misclassification typically deals with one of three issues: (1) unpaid interns, (2) independent contractors, and (3) volunteers. The classic unpaid intern misclassification features an individual who, while classified as an unpaid intern, is being asked to handle the responsibilities of a full-time employee. This problem most commonly arises in the for-profit sector. Meanwhile, the classic independent contractor misclassification features workers who are termed independent contractors but get treated by employers in the same fashion an employee would. Volunteers are simply not permitted in the private sector. The problems are similar, though the details of what is necessary for compliance are distinct. Employers should take the time to review the rules for proper classification laid out in our previous blog posts.

The size of the budget allocated to combat misclassification issues should have employers reviewing their practices. It is clear that identifying alleged misclassifications will be a major focus of the DOL and your business could be in the cross-hairs. Government agencies feeling the economic pinch and determining that they have been denied taxes or other payroll benefits inapplicable to independent contractors, volunteers and unpaid interns, have every incentive to inspect worker classifications for compliance. In addition to whatever tactics such government agencies may have utilized in the past, employers should also be aware that there will be a greater deal of government interdepartmental communication on this issue. Strategy and tactics focused on becoming compliant now could be cost effective for employers in the long run.

DOL Clean Up Sweeping the Nation

Matthew B. Wolin, Esq. — Mon, 23 Apr 2012 11:18:37 -0500

Following up on our blog post on the Department of Labor’s (“DOL”) restaurant clean up initiative, recent DOL press releases demonstrate that efforts to penalize restaurant industry employers who are not FLSA compliant are only increasing.

Approximately $132,000.00 of back wages were collected from a Texas restaurant chain , a restaurant in Florida has agreed to pay $177,395.00 in back wages, and a Los Angeles restaurant has been sued by the DOL for $104,807.00 in back wages. The DOL has also put restaurant owners in the San Francisco and Portland areas on notice that they are next in line.

The violations consistently cited by the DOL in raising these charges are minimum wage and record keeping issues. These are compliance issues that are not complex. Because the DOL has made it increasingly clear that this is a hot button issue, employers would be prudent to ensure compliance. In addition, while the DOL’s efforts have thus far focused on restaurants, it is important that employers across all industries pay attention to this developing issue. The DOL states that its efforts are an attempt to be vigilant for workers “who are particularly vulnerable to exploitation.” Surely the DOL would believe that such workers exist outside of the restaurant industry and thus there is no telling which industry the DOL might focus on next.

Scantland Case A Knight in Shining Armor for Cable Companies?

Fanny A. Ferdman, Esq. — Tue, 17 Apr 2012 11:07:57 -0500

In a recent Florida case, Scantland v. Jeffry Knight, Inc., the court handed employers a victory when it applied the economic realities test to find that service technicians for a cable company were properly classified as independent contractors. The court made this finding despite the technicians’ relationship with the employer having several features that could support an employer-employee relationship.

The economic realities test used to determine independent contractor status resolves the issue of whether an employment relationship exists based upon whether the individual is economically dependent upon the employer. Economic dependency is determined by evaluating factors such as determined by evaluating factors such as the following:

· The extent to which the services rendered are an integral part of the employer’s business;

· The permanency of the relationship;

· The amount of the employer’s investment in facilities and equipment;

· The nature and degree of control by the employer; and

· The individual’s opportunities for profit and loss.

No one factor is meant to be determinative, so the courts typically have freedom in assigning weights to the various factors.

The Scantland court found that the services rendered by the technicians were an integral part of the employer’s installation services business. In addition, while there was no clear indication that the relationship between the employer and the technicians was a permanent one, many of the technicians had worked for the employer for a period of years on a full-time basis. There was also a seemingly implicit understanding that the technicians would not, or could not, perform work for competitors. Despite these two findings, the court’s evaluations of the remaining economic dependency factors lead it to conclude that the individuals were independent contractors and not employees.

First, the service technicians heavily invested in their own equipment. This includes spending up to thousands of dollars to acquire vehicles, tools, insurance, and uniforms. Second, the service technicians also controlled the manner and means of the performance of their work. The employer’s close monitoring of the technicians’ scheduling and timing was not found to be controlling because it was a necessary aspect of guaranteeing effective service in the industry in addition to being outside the scope of the type of control the court was concerned with--assigning potential liability from the work. This was directly tied to the technicians’ choices such as whether safety standards were followed and work was performed free from defect. Finally, because the service technicians were paid by the assignment and controlled how many assignments they could do based upon the speed and skill with which they handled their assignments, technicians had the opportunity to control their profits. The technicians were also in control of their losses as they were accountable for taking care of their equipment and making sure not to perform work in a deficient manner that would require future repairs. These factors pointed towards independent contractor status.

While the Scantland court concluded that the workers in question were independent contractors and not employees, employers should be wary to make too much of the decision. As we have previously highlighted, the lack of a bright line rule distinguishing employees and independent contractors means employers should err on the side of caution. Just because the court in this case decided that 3 factors in favor of independent contractor status outweighed 2 factors in favor of employee status does not mean the same conclusion will always be reached. As a result, employers should remain vigilant of the DOL guidelines on proper classification and not take designations for granted.

DOL Restaurant Clean Up Continues

Devora L. Lindeman, Esq. — Wed, 04 Apr 2012 14:22:44 -0500

As part of an ongoing restaurant industry enforcement initiative, the Department of Labor recently levied a total of $1,307,808.00 in fines to Massachusetts area restaurants for various Fair Labor Standards Act violations.

Violations cited by the DOL included failure to properly pay overtime (not paying overtime at all, not accounting for work performed in multiple locations, or incorrect overtime for tipped employees), illegal wage deductions, failure to accurately track employee time , and independent contractor misclassification.

Restaurants throughout Massachusetts were fined for the violations noted above and the DOL indicates that it intends to expand the scope of its efforts to other states. If it was not clear to employers when the DOL launched its smart phone application so that employees could independently keep track of their hours, it should be clear now: the risks posed by non-compliance with the FLSA are not worthwhile. Employers with policies out of line with the FLSA standards for wages, record keeping , or overtime need to make their best effort to move towards compliance, regardless of what industry standard or practice may have been in years past.

Congress Considers New Overtime Laws for Computer Professionals

Kevin M. Doherty, Esq. — Mon, 19 Mar 2012 12:44:15 -0500

In response to concerns about the demand for high-tech computer workers shifting overseas, a newly proposed overtime law would make fewer computer employees eligible to receive overtime pay.

Under the present overtime laws, computer employees are exempt from overtime if the following conditions are met:

The employee is compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
The employee is employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
The employee’s primary duties consist of;

· The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

· The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

· The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

· A combination of the aforementioned duties, the performance of which requires the same level of skills.

The proposed new law seeks to expand the computer professional overtime exemption “to those whose job duties include securing, configuring, integrating and debugging computer systems[.]” The new law will also cover those who direct the work performed by individuals in the industry as well as professionals involved with hardware who are not currently covered. These changes in the new proposed Computer Professionals Update Act, as well as its catch-all clause leaving the door open for further inclusion, make it more difficult to presume overtime eligibility for computer employees under the current standard which only exempts from overtime pay those who fit in the categories described, above.

The bill has received bipartisan support from lawmakers concerned with the overseas flow of high-tech employment opportunities. At present, many multi-national employers are apt to outsource their high-tech work to countries with less restrictive or non-existant labor laws. By broadening the scope of who qualifies as an overtime exempt employee in computer fields, the hope is that American workers can remain competitive for these positions. This bill is currently in committee.

Employers in the high-tech industry should keep track of this bill’s progress as it has the potential to affect both their payroll commitments and the way they schedule and staff projects.

There's More Than One Way to Sink a Ship

Matthew B. Wolin, Esq. — Mon, 05 Mar 2012 12:23:13 -0500

Following an investigation by the Department of Labor’s Wage and Hour Division , Norwegian Cruise Line is being asked to pay $526,602.00 in back wages.

The payment will serve to compensate employees who were not paid for overtime work, work done prior to the start of a scheduled shift, and work done during mandatory emergency drills.

As we have previously detailed, time worked must be paid. This general rule applies to the overtime payments as well as the payment for work done prior to the start of a scheduled shift and work done during emergency drills. So long as an employee is engaged in a task that management has asked them to do they should be receiving payment.

To ensure that employees are compensated for their working time, it is crucial that employers properly maintain time records. Norwegian Cruise Line’s failure to do so resulted in their paying their employees straight time based upon the employees’ scheduled work hours, which was not reflective of their actual work hours. When resolving a discrepancy between hours an employee claims to have worked and hours an employer has paid the employee, the employee is favored , further highlighting the importance of proper maintenance of time records.

Employers would be prudent to ensure proper pay practices and recordkeeping so they don’t wind up like this ship.

The Danger of Unpaid Interns

Fanny A. Ferdman, Esq. — Mon, 06 Feb 2012 13:55:48 -0500

In another of what appears to be a potential series of internship-related wage and hour violation lawsuits, a former intern is suing the Hearst Corporation, claiming that her unpaid internship violated the Department of Labor’s regulations.

As we previously mentioned in our post on the Black Swan intern lawsuit, employers who utilize unpaid interns need to be sure that their internship programs comport with DOL regulations. Unpaid internships abound in certain industries and often serve as a foot in the door. However, the fact that something has “always been done that way” will not save an unwary employer from a DOL investigation or a wage and hour lawsuit, if its internship program does not contain the required educational components, or otherwise fails to comply with the DOL regulations.

The intern who is suing Hearst worked for the fashion magazine Harper’s Bazaar. She claims to have “worked” between 40 and 55 hours per week over a 4 month period without being paid, and is being represented by the same law firm representing the plaintiffs in the Black Swan lawsuit. Once again, they are attempting to pursue a class action suit.

Interestingly, at the time of the publication of this blog post, Hearst’s internship website expressly indicates that internships are for current students and requires that applicants demonstrate the ability to receive academic credit. Compliance with such a rule could potentially shield an employer from this sort of litigation, but (presuming this requirement was in place previously) it does not seem to have deterred the claimant here.

The take-away? Employers should review their internship programs against the DOL regulations to ensure compliance, lest they be the next litigation target.

"Black Swan" Unpaid Interns Raising Legal Issues

Devora L. Lindeman, Esq. — Wed, 18 Jan 2012 09:45:16 -0500

Two former interns on the set of the movie “Black Swan” brought a class action lawsuit against Fox Searchlight Pictures, alleging that their work as unpaid interns crossed the line into work for which they should have been compensated.

Although provided with an opportunity to get first-hand insight into the making of a movie, the “Black Swan” interns were also required to perform tasks such as preparing coffee, cleaning up and fetching food.

The Department of Labor regulations make clear that employers do not have to pay their interns so long as ALL of the following criteria for the intern work are met:

The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;
The training is for the benefit of the trainees or students, not the company;
The trainees or students do not displace regular employees, but work under close supervision;
The employer that provides the training receives no immediate advantage from the activities of the trainees or students and, on occasion, his or her operations may even be impeded;
The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

While the tasks required of the Black Swan interns may be commonplace in the entertainment industry, they also allowed the employer to derive a direct benefit from the interns’ activities. As the interns allege, that may have violated criteria 2 and 4 above.

While intern labor cases have thus far been rare, the growing number of unpaid internships coupled with the high visibility of this case should put employers on warning. Simply acting as others in your industry will not necessarily keep your company safe from potential litigation if those industry standards are not in line with the Department of Labor’s rules on unpaid internships. To avoid any potential ramifications, employers would be prudent to make sure their internship programs comply with the applicable regulations and/or consider either paying interns or partnering with educational institutions so that internships may be structured for academic credit.

Ongoing DOL NY Restaurant Investigation Finding Repeated Violations

Matthew B. Wolin, Esq. — Fri, 02 Dec 2011 16:25:29 -0500

In a further example of industry-specific targeting for wage and hour violations, the Department of Labor issued a press release regarding a multi-year investigation of the full-service restaurant industry on Long Island, NY, finding multiple violations in numerous establishments.

The Department of Labor’s ongoing enforcement initiative found widespread noncompliance with various provisions of the Fair Labor Standards Act including minimum wage, overtime and record-keeping in full-service Long Island restaurants.

Thus far, the DOL has completed 46 investigations and recovered $2,341,507.00 in back wages for 578 employees. The DOL has also found willful and repeated FLSA violations for which it assessed $202,315.00 in civil money penalties.

The investigation is still on-going and is yet another example of the fact that industry practice does not make perfect. Just because others in your field are paying their employees in a particular manner, does not necessarily guarantee that such is acceptable under the law.

New Jersey Gas Stations Target of DOL Investigation

Kevin M. Doherty, Esq. — Wed, 23 Nov 2011 16:37:07 -0500

The federal Department of Labor recently recovered $1,014,895.00 in back wages for 295 gas station employees in New Jersey, according to a recent DOL News Release.

According to the DOL, the stations had engaged in a number of improper pay practices. Specifically, the stations paid employees below minimum wage; paid a flat salary or "straight time" wages for all hours worked, instead of properly overtime compensation requirements; and paid cash wages "off the books," instead of properly keeping track of employees' wages and hours worked.

This is another example of the DOL targeting a specific industry where it believes that wage and hour violations are rampant. It also is another example of why employers should not rely on the practices in their industry as evidence that their own pay practices are compliant with state and/or federal wage and hour law.

New Jersey Inadvertently Eliminates Long-Standing Exemption for Commissioned Sales People and Aligns Exemptions With Federal Law

Devora L. Lindeman, Esq. — Thu, 17 Nov 2011 11:40:57 -0500

In an effort to bring its definitions for white-collar employees exempt from the overtime pay regulations into line with the federal definitions, New Jersey inadvertently eliminated a long-standing exemption for commissioned sales people.

The New Jersey Department of Labor recently modified its wage and hour regulations to adopt certain provisions included in the federal overtime regulations. Specifically, New Jersey eliminated its state definitions of the executive, administrative, professional and outside sales positions and adopted the federal regulations defining these exemptions, which are found in 29 C.F.R. Part 541.

Prior to the modification, New Jersey employers had enjoyed an exemption for commissioned sales people (as distinct from “outside sales people”) which were defined as exempt as part of New Jersey’s administrative exemption. This exemption included employees whose “primary duty consists of sales activity and who receives at least 50 percent of his or her total compensation from commission and a total compensation of not less than . . . $400.00 per week.” This exemption was eliminated with the recent modifications—apparently inadvertently. Supposedly, the New Jersey Department of Labor and Workforce Development is working to reverse this unintended result. However, such a reversal could take months.

Given the broad sweep of the federal Fair Labor Standards Act, which contains only a narrow exemption for commissioned employees in certain retail sales capacities, it is unclear how many employees fell under only the New Jersey law and enjoyed the exemption in any event. New Jersey employers, however, now need not worry about stricter state overtime standards when determining how to properly classify executive, administrative, outside sales and professional (including computer) employees under the overtime regulations—although the federal regulations still provide employers with many challenges to ensure the business has sufficient arguments to support exemption classifications and other New Jersey overtime regulations (such as the stricter standard for the trucking industry) remain unchanged.

IRS Provides Tax Break to Voluntarily Correct Improperly Classified Independent Contractors

Kevin M. Doherty, Esq. — Fri, 14 Oct 2011 11:43:14 -0500

Often, thinking it will save them money, businesses classify individuals providing services for them as independent contractors instead of employees. Independent contractors do not need to be on the company’s health insurance or pension plans, and the business does not need to pay matching FICA taxes. However, often the distinction between a contractor and employee is made for business convenience and economy—ignoring the fact that the law provides standards for distinguishing between the two.

Consequently, many businesses have classified individuals as “contractors” who are in reality, employees. A main factor is control over the manner, method, location and timing of the work performed. Other factors include whether the business provides tools, training, performance reviews, business cards or other indicia of employment. If sufficient control is exerted, and other factors exist, the worker is likely an employee and not a contractor.

Properly reclassifying former contractors as employees can be costly for businesses. To ameliorate such expenses, and ensure proper classification going forward, the IRS has launched a Voluntary Classification Settlement Program (VCSP) which is designed “to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government.”

Under the program, employers who meet certain eligibility requirements can reclassify these individuals and obtain what the IRS calls “substantial relief” on any back taxes otherwise owed, by paying only a fraction of the amount that would otherwise be due. No penalties or fees will be assessed. The employer is required to then abide by certain restrictions going forward, including maintaining these individuals as employees.

However, be mindful that there are areas of exposure for employers here. True independent contractors who work over 40 hours in one workweek are not entitled to overtime pay. But, employees who work that many hours are. If an individual is converted to an employee from a contractor under the IRS Settlement Program, the amnesty involved does not apply to any overtime pay your company may be liable for. For that reason, it may be best to consult with an employment lawyer prior to engaging in any reclassification project—through the IRS or otherwise.

EMPLOYEES MUST BE PAID FOR ALL WORK DONE BEFORE, DURING, AND AFTER THEIR SHIFTS

Matthew B. Wolin, Esq. — Fri, 26 Aug 2011 10:49:51 -0500

Every employee has a core job comprised of the main duties the employee is hired to perform. And just about every job has non-core elements that take up time and (often) seem unproductive—organizing or maintaining tools, putting on protective clothing, cleaning or picking up after work, or attending meetings. Do employees need to be compensated when they are not really working?

Unfortunately, as one Arizona construction company recently found, it doesn’t matter if the actions are not what the company considers “productive.” If an employer requires employees to do something, and the time spent doing it is more than de minimus, that’s work, and nonexempt employees must be compensated for it. Also, time records have to be accurate, and reflect their tasks as working time.

Arizona Pipeline Co. does what its name says: it installs pipelines and other underground utilities. It was not paying its employees for time spent before or after their shifts, loading and unloading materials and supplies, cleaning equipment, etc. They were also not paid for traveling from the company’s location to job sites, or for time spent attending required meetings. As a result, Arizona Pipeline Co. will pay $750,000 in back wages for pre-shift and post-shift work, travel, and meetings for which its employees were not compensated.

Under the Fair Labor Standards Act, employees must be paid for all work time—even for time spent performing tasks that the company does not consider to be productive. Basically, if the only reason employees are engaged in a particular tasks, is because a manager told them to do it, that’s probably work. Non-exempt employees must be paid for that time, and paid overtime for their tasks of they performed after the employee has already reached the 40-hour threshold for the workweek.

Subcontracting Trouble: Can Your Subcontractors' Employees Be Considered Your Employees for Wage and Hour Purposes?

Devora L. Lindeman, Esq. — Thu, 07 Jul 2011 12:06:23 -0500

If a company subcontracts some of its functions, can that company be liable for its contractor’s violations of labor law? In a word—yes. Especially when those functions are provided on-site and the companies are found to be a joint employers.

We blogged about this situation back in 2009 when Partners HealthCare Systems agreed to pay $2.7 million in a case in which employees who were shared between affiliated health care companies were not properly paid overtime wages. The issue was whether there was a “joint employment relationship” between the entities such that all the hours an employee worked counted towards potential overtime pay—rather than splitting their hours among the entities.

The same “joint employer” principal can apply between a company and its contractors. That’s what Google is finding out. The search giant was sued by a facilities coordinator for hundreds of hours of allegedly unpaid overtime wages. It’s not clear, however, that the plaintiff actually worked for Google. She claims to have been hired by Google, and worked at a Google facility, but was apparently on the payroll of two different contractors hired by Google to provide facilities-related services. Thus, according to Google, she was not their employee.

However, regardless of whose name was on her paystubs, if she “really” worked for Google—that is, if looking at all the facts of the situation, she was a Google employee, and her “employment” by one or another contractor was just an accounting and administrative convenience—then Google would be liable for any unpaid overtime . . . or jointly liable if it is found to be a joint employer of the individual it thought was employed by its subcontractor.

Of course, the plaintiff and her attorneys named the other two companies, too, so they can recover from them if a court concludes that Google was not actually her employer—or that they were all joint employers. Better safe than sorry, when litigating.

The lesson for employers, especially given that it’s common now for a company to focus on its “core competencies” and subcontract maintenance, accounting, mail room, etc., is to make sure that your contractors obey labor and employment laws. If not, you may be contracting for liability as well as for services.

Making Employees Work Extended Overtime Hours May Be Imprudent and Costly, But Could Be Legal

Joel J. Greenwald, Esq. — Thu, 23 Jun 2011 15:03:05 -0500

Everyone knows that exempt employees—those who aren’t eligible for overtime pay such as executives and management—can be made to work 24/7/365.

What about nonexempt employees—those who do earn overtime wages? Can you make them work 9, 10, 12, or more hours in a day?

In many states--yes, you can force most adult employees to do just that. You just have to pay them for it (and potentially provide periodic meal or rest periods as required). Child labor laws generally regulate the number of hours children can work per day and workers in some regulated industries (truck drivers and airline pilots for example), may have maximum shift lengths. Collective Bargaining Agreements may also limit the hours unionized employees can be scheduled to work. But for many employees in the private sector, such restrictions on their hours worked do not apply.

Of course, hourly employees must receive their base hourly wage for all hours worked, plus regular overtime pay (time-and-one-half their regular hourly wage) for hours worked over 40 in a work week. In a number of states, additional premium pay may apply. For example, in California, if someone works more than 8, but up to 12, hours in a day, he or she earns daily overtime at time-and-half for hours 9, 10, 11, and 12, and daily double time for any additional hours worked in that day. New York has a “spread of hours” rule, which requires that employees with work days longer than 10 hours (i.e. more than 10 hours from start time to finish time even if there is a long mid-day break) receive an additional hour’s pay at minimum wage. But, that wage requirement, like the California daily overtime pay rule, does not dictate a maximum number of hours employees can work per day or per week.

Federal law, as set out in the Fair Labor Standards Act says nothing about how many hours someone can work in a day or at a time. In fact, under the FLSA, the only limit on how many hours an employee can work in a week is the number of hours in a week. To work an employee more than 168 hours in a week requires breaking the laws of physics, not the FLSA. The result may be different under state law, however. Some states, such as New York, Illinois and Wisconsin, have laws putting a cap on the number of days certain employees can work per week (often called “one-day-rest-in-seven” laws). But, even those laws do not prohibit employers from scheduling long days during the six days those employees work.

In many states, if an employer’s wallet is deep enough, the need great enough, and the employee is not covered by a wage order dictating otherwise for the employee’s position (such as for individuals in certain health care positions, mining or other safety-sensitive positions), or by other regulations, an employee can be required to work all day and night long—as long as the employee is properly compensated under the law (and meal or other rest-break laws are complied with). While it is probably not advisable, it may be permissible.

Keep in mind as well, however that, even if permissible, some states may have laws or regulations making long hour requirements difficult to enforce. For example, in California, employees cannot be disciplined or terminated for refusing to work more than 72 hours in a week—even though the law does not limit the work-week to 72 hours.

Thus, although it may not be prudent to do so, and morale concerns may dictate otherwise, where an employee’s hours are not otherwise limited by applicable regulations or otherwise, an employer can require long work days (and long weeks) so long as the company pays its employees appropriately, under federal and state wage payment law, and provides any required breaks (which generally are not as numerous as most employees believe).

However, if the issue is just “can the company mandate overtime hours?” For the most part, the answer is “yes.”

A BILL TO SEND MISCLASSYING EMPLOYERS THE BILL

Kevin M. Doherty, Esq. — Mon, 13 Jun 2011 13:31:19 -0500

While there has not been a specific law outlawing the misclassifications of employees as independent contractors, employers could be penalized for doing so by the IRS (since the proper withholding taxes would not have been paid), the Department of Labor (since overtime wages may not have been paid), or by Unemployment and Workers’ Compensation (seeking taxes and payments not previously made). A number of U.S. senators are looking to increase the consequences of misclassifications.

It’s easy to understand why employers might prefer to utilize independent contractors. There’s saving on the taxes paid on employee wages. There’s also no health insurance or 401(k) match, no paid leave, no unemployment insurance or employee’s compensation contribution, such as one would pay for an employee. The government, however, sees misclassification as taking money out of government coffers and out of employee’s pockets.

As a result, as Overtime Advisor previously reported, the government has been increasing enforcement of the existing rules about correctly classifying employees.

However, stepped-up enforcement of the existing rules is only part of the picture. There is also a bill currently pending before the U.S. Senate that would enhance protection against misclassification. The Payroll Fraud Prevention Act., introduced by a trio of Democratic Senators, is intended to prevent misclassification of employees as independent contractors, which the sponsors frame as issue of fairness and equity. They say that besides cheating the government and affected employees, misclassification also presents an uneven-playing field, with honest businesses forced to compete with ones that don’t pay their fair share.

Of course, talk is cheap—especially in Congress. How does the proposed bill actually aim to accomplish its goals? As drafted, it would put in place a system of record keeping and notice requirements, backed by fines and penalties, to compel compliance. Highlights include:

• Employers required to keep accurate records as to the classification of each employee

• Employees would have to be explicitly notified of their classification—and directed to a Department of Labor (DOL) website for information about employee rights

• Penalties ranging up to $5,000 per employee would be levied for notice violations or misclassification

• Triple damages would be imposed for willful (i.e. intentional or knowing) violations of minimum wage or overtime law resulting from misclassification

These penalties would be on top of the existing liability that employers face for violation of tax law or the FLSA, making misclassification a very expensive (as well as illegal) way to save money.

Spreading the Pain: New York Hospitality Wage Order Makes All Restaurant and Year-Round Hotel Workers Eligible for Spread-of-Hours Pay

Matthew B. Wolin, Esq. — Tue, 07 Jun 2011 14:35:21 -0500

To state the obvious-- legal terms can be confusing. When mixed in with already confusing state wage and hour laws, employers can be left throwing up their hands in surrender. Take “spread of hours,” for example, which could mean practically anything-- though in practice, it mostly means headaches for well-intentioned employers.

“Spread of hours” is essentially the spread of time from the first hour an employee works in a day, through the end of that employee’s last shift. This is not the same as the number of hours that an employee works in a day. For example, many employees in the hospitality industry work a lunch shift, have a lengthy break, and then return to service the dinner crowd. Their “spread of hours” could be 11 ½ hours — an 11:00 a.m. start for the lunch shift through a 10:30 p.m. end after dinner even if the employee only worked 11:00-2:00 for lunch and 5:30-10:30 for dinner (8 hours).

A New York labor law regulation, § 142-2.4, requires that employees working a “spread of hours” that is more than 10 hours in any working day, receive an extra hour’s pay at minimum wage (currently $7.25/hour under both Federal and New York law). There’s been a difference of opinion, though, as to whether this rule applied to all employees or only those being paid at or near the minimum wage.

The recent New York Hospitality Wage Order eliminates the ambiguity, at least as it applies to certain workers in the hospitality industry. The Wage Order provides that “[s]pread of hours . . . is due to all employees at any pay rate, not just to those paid at or very near to the minimum wage.”

The Wage Order requires that all employees in restaurants and year-round hotels, regardless of pay rate, receive an extra hour pay at minimum wage when their spread of hours in a day is greater than 10. There is no room for discussion—if a restaurant or year-round hotel worker’s beginning and end times in a work day are separated by more than 10 hours in a day, then the employer still owes him or her an extra hour’s pay, even if this person is being paid $10, $15, $20 (or more!) dollars an hour. Failure to pay spread of hours pay can make an employer liable for any amounts found to be due the employee, along with potential fines, fees, penalties and interest.

It remains to be seen whether the DOL will apply this uniformly to all industries, or whether ambiguity will still reign outside the hospitality industry.

Exempt Managers Spending Major Time on Nonmanagerial Duties May Not Affect Exempt Status

Devora L. Lindeman, Esq. — Fri, 27 May 2011 10:51:18 -0500

The 4th Circuit U.S. Court of Appeals (MD, VA, W. VA, NC, SC) provided a significant win for employers in today’s multiple-hat-wearing, everybody-rolls-up-their-sleeves-and-pitches-in style of management, by finding that a store manager who spent most of her time on non-managerial duties is nonetheless exempt from the overtime pay requirements.

Grace, a store manager for Family Dollar claimed she was owed overtime pay and should not have been classified as an exempt store manager. Because she spent most of her workday on nonmanagerial tasks such as running the cash register, putting out stock, and janitorial work, she claimed that her “primary duty” was not management. Thus, despite the fact that she managed two or more other employees, had hiring and firing authority, and was responsible for overall store profitability and management, she asserted that she should receive overtime pay.

Unfortunately for her, no matter how much time she spent ringing up sales or mopping the floor, the Court of Appeals had little difficulty finding she is still the store’s manager and is still an exempt executive employee. The Court’s analysis is particularly well stated, so let’s borrow the Court’s words:

“[T]ime alone ‘is not the sole test’ [of whether someone is an exempt manager or executive] . . .Grace was in charge of a separate retail store, seeking to make it profitable. While she catalogs the nonmanagerial jobs that she had to do, claiming they occupy most of her time, she does so without recognizing that during 100% of the time, even while doing those jobs, she was also the person responsible for running the store. Indeed, there was no else to do so, and it cannot be rationally assumed . . . that the store went without management 99% of the time. Grace also fails to acknowledge the importance of performing nonmanagerial tasks in manner that could make the store profitable, the goal of her managerial responsibility.”

Bottom line: mopping the floor does not necessarily make an employee not a manager for purposes of the Fair Labor Standards Act, at least in the view of the 4th Circuit. If the person’s overall role and responsibilities are managerial, helping out in other ways won’t necessarily remove his or her overtime exemption.

So, while courts in other parts of the country may differ, go ahead . . . make that VP you don’t like take out the trash. Just make sure that 100% of the time, he or she has one or more over-arching exempt responsibilities.

There's An App for That: DOL of iPhone/iPod/iPad App Helps Many Employees Track and Calculate What They're Owed

Kevin M. Doherty, Esq. — Thu, 12 May 2011 12:11:00 -0500

Everyone’s an app developer these days, it seems—your poker buddy, your niece in college, the poorly socialized guy in IT, and the would-be software tycoon down the street, for example. Uncle Sam’s gotten into the act, too: the Department of Labor just released a smartphone timesheet app.

The app is designed to allow employees to keep independent track of—and calculate the wages they’re owed for—hours worked, including overtime. The app also has other employee-helpful features, such as break time tracking and links to DOL web resources, such as information about wage and hour laws or how to contact the Department. Users can annotate their work-related information on the app and view summaries by day, week, or month.

Of course, as with most apps, it doesn’t do everything you might want it to. For example, it’s great so long as the employee only has regular and overtime (at time-and-half) wages to track. However, it does not handle more complex or less common wage calculations, including tips, commissions, bonuses, holiday pay, or shift differentials among others. Actually, given how many employees in the hospitality industry receive tips, and how many employees in some sales capacity receive commissions, the DOL app might not work for many employees.

Also, not surprisingly, the federal DOL focused on the federal labor laws, such as the requirements under the Fair Labor Standards Act. Their app does not help you with state variations, such as California’s requirement for double time when working more than 12 hours in a day.

The DOL’s free app is available in English and Spanish and can be downloaded at http://www.dol.gov/whd. You can view screen shots here.

Like other app developers, though, the Department is not resting on its laurels. It’s planning to expand the app’s capabilities—such as adding the capacity to handle tips, commissions, bonuses, etc.—and to also port it to other smartphone platforms, like Android and Blackberry. With employees now able to track their own hours on this app, employers would be prudent to ensure they’ve got their own “app” in place to track employee hours and properly calculate wages that’s compliant with both federal and applicable local wage and hour laws.