Overtime Advisor

AT&T Blindsided by Overtime Litigation

Matthew B. Wolin, Esq. — Fri, 05 Mar 2010 09:09:43 -0500

AT&T is the latest major corporation to get hit with overtime class action litigation. In this case, the communications giant got hit from two sides.

One billion-dollar suit recently filed in Georgia, alleges that former managers of BellSouth Corporation became employees of AT&T when it merged with BellSouth in 2006 were misclassified as exempt even though their primary duties are non-managerial.

The lesson for employers, big and small, cannot be stated enough: The fact that an employee’s job title is “manager” has no bearing on whether the employee is exempt or not. Primary duties are what matter, and in particular whether those primary duties meet the specific exemption criteria.

A separate suit filed in California claims that AT & T misclassified its technical support workers – the ones who, according to their attorney, “keep the technology infrastructure up and running” through hardware and software installation, maintenance or support work.

This suit illuminates the importance of properly applying the so-called computer professional exemption. Meeting that exemption generally requires more than doing basic technical computer-related work as this suit alleges these employees were doing. Employees must satisfy all of the following criteria to qualify as exempt computer professionals:

• Earn a salary of at least $455 per week or a wage of $27.63 or more per hour
• Be a skilled worker, such as a computer systems analyst, computer programmer or software engineer
• Be primarily responsible for systems analysis, computer design, support of computer programs related to machine operating systems, or skills related to the foregoing or a combination of these skills

Employees who are primarily doing tech support likely would not meet this exemption and should be paid overtime.

You Can't Avoid Paying Overtime Wages By Splitting Up An Employee's Tasks

Devora L. Lindeman, Esq. — Tue, 23 Feb 2010 15:35:41 -0500

Unless an employee fits into an exemption under the FLSA, employees who are entitled to overtime need to be paid overtime pay for all hours over 40 worked in a single work week. One Maryland school bus company thought otherwise.

They thought that by recording hours for different tasks separately, they could avoid paying overtime wages. For example, if a driver drove 30 hours and trained other drivers for 20, each task was recorded and paid separately. The employee would be paid in essence for two workweeks—a 30-hour week and a 20-hour week—not a single, 50-hour week which would require the employee receive 40 hours of regular pay and 10 hours of overtime pay. This is a common practice. Often companies do this by splitting the employees work between two commonly owned companies.

Smart? Credible? A workable loophole? Hardly.

The bus company, First Student Inc., paid $1.5 million to settle the class-action lawsuit brought by employees claiming that they were improperly denied overtime pay. While a bus-company spokeswoman “declined to comment” about the settlement, $1.5 million is itself a rather loud—and clear—comment.

It’s hard to see how the company thought this would be acceptable. There does not appear to be ANY support in the law for the proposition that simply by recording different tasks or jobs separately, a company can avoid paying overtime wages. Non-exempt employees “may not be employed for more than 40 hours in a week” without receiving overtime pay. Period. Unfortunately, this bus company is likely not alone in its practices. But keep in mind that just because a practice is “usual” in an industry doesn’t make it legal.

Waiting Time is Often Work Time . . . and Must be Paid

Joel J. Greenwald, Esq. — Tue, 16 Feb 2010 15:05:59 -0500

A Tennessee car wash found out the hard way that “waiting time”—time employees spend between tasks—is paid working time. Employees of the Shur-Brite car wash in Nashville sued claiming that the car wash would clock the workers in and out multiple times a day—clocking them in when a car pulled in to be washed, clocking them out when there were no cars around.

An advocate for low-wage earners went undercover at Shur-Brite and was clocked out more than 10 times during a single eight-hour shift. The result—he was paid for only four of the eight hours. The case settled for $130,000.00.

Shur-Brite’s practice clearly violated the federal regulations requiring that employees who are forced to remain “on call” at or near the employer’s premises must be paid as working. That’s an obvious and intuitive policy for most people: after all, work does include slack or down time. But, if an employee has to be onsite and may have to spring into action at a moment’s notice, that’s “working” by both a common sense definition and the FLSA.

One of the car wash’s owners unsuccessfully argued that the situation fell under an FLSA exception made for employees legitimately free from work or the expectation of work. In that case, the employees would have to have been “completely relieved from duty” for “long enough to enable him [or her] to use the time effectively for his [or her] own purposes.” This was not the case here.

Someone who washes cars has to be there when the cars need to be washed. The employee can’t just “leave word” of “where he [or she] may be reached.” Moreover, the regulation defining off-duty time says that to be considered off duty, a worker must be “definitively told in advance that he . . . will not have to commence work until a definitely specified hour,” which is the antithesis of grabbing soap and a rag whenever a car pulls up.

The take-away is that if employees are at work, waiting for work to come to them, they are likely working and need to be paid. Just because a job may have an uneven work flow does not mean that slow stretches are not work time that must be accounted for, and paid for.

Don't Forget: States Have Penalties for Overtime Violations Too

Laura L. Himelstein, Esq. — Tue, 09 Feb 2010 09:32:45 -0500

Under the federal Fair Labor Standards Act (FLSA), if an employer violates the overtime provisions, employees may either bring their own lawsuit or file a complaint with the Department of Labor. In either case, the potential penalties against the employer are substantial and rectifying the original problem by paying back overtime wages owed to employees may not be the employer’s only concern. Calculations of amounts due include the following:

1) Back Wages – payment of any overtime that an employee earned but was not paid

2) Liquidated Damages – assessed at double the amount of back pay

3) Shifting of Attorneys’ Fees – employer pays for employee’s attorneys’ fees

4) Civil Penalties – if the violation is found to be willful or deliberate, a civil penalty of up to $1,100 per violation may be imposed

5) Criminal Prosecution – possible in egregious circumstances in which willful or deliberate intent can be shown

Employers should not forget, however, that the federal government is not the only level of government that has overtime laws. States have their own overtime laws, and these laws can be even more generous to employees than the FLSA. For example, in Massachusetts, the fine or penalty for a violation is not $1,100 as under the FLSA, but up to $25,000! The employee can also win not just double back wages as provided under the FLSA, but treble back wages —as well as attorneys’ fees.

Even states that do not provide for treble damages may impose steeper fines or penalties. In Connecticut, fines can scale up to $10,000 per offense, be levied directly against corporate management and also may include substantial jail time—all for as little as $2,000 in unpaid overtime.

In New York, employers engaged in willful violations can be fined an additional amount up to one quarter of the unpaid wages and be required to pay the employee’s attorneys’ fees. Company management that engages in willful misconduct also may be subject to misdemeanor charges for a first offense or felony charges for a second offense, with possible jail time up to one year and penalties up to $20,000.

Thus, employers should consider placing as much emphasis on compliance with state overtime laws as with federal law. Employers also should be aware that it is important to do a state-by-state analysis of the applicable laws, as most states have their own criteria and penalty schemes and employers should not simply assume that employees exempt from overtime under federal law will be exempt under state law. Given the penalties available in some states, the cost is worth the benefit of making sure that any overtime program is compliant on both the federal and state levels.

Is your business too small to have to pay overtime?

Joel J. Greenwald, Esq. — Tue, 02 Feb 2010 13:25:30 -0500

The Fair Labor Standards Act, like other federal economic regulation, applies to businesses engaged in interstate commerce. It covers enterprises—businesses—which gross at least $500,000 a year.

The $500,000 threshold would seem to exclude at least the smallest businesses from FLSA requirements. Take your neighborhood specialty toy store or bookseller—they may very well gross less than $500,000 a year, which would seem to exempt those enterprises from federal wage and hour regulation, right?

Wrong - or least, very likely wrong in today’s Internet commerce age. Under the FLSA, even if your business is not covered by the law, individual employees may fall under the law’s protection “in any workweek when they are individually engaged in interstate commerce. . . .”

Almost every business has a website nowadays. And with those websites, businesses that were formerly as local as local could be advertise and sell nationwide—even worldwide. For example, one local specialty toy store—quite a small business; the whole shop is maybe 12’ x 30’—has online shopping available on its website and notes that it will ship anywhere in the continental U.S.

However, order entry and fulfillment don’t happen by themselves—some employee has to do them. That employee is picking up orders from the Internet and then shipping goods interstate—in other words, there’s an employee engaged in interstate commerce at the corner toy store. Even if the business as a whole is exempt from the FLSA, there’s at least one employee who may come under the Act—at least in “any workweek” when he or she is handling interstate orders.

Think that interpretation is too expansive? The Department of Labor doesn’t. The Department consistently interprets individual employee coverage under the FLSA to include any “employee such as an office or clerical worker who uses a telephone, facsimile machine, the U.S. mail, or a computer e-mail system to communicate with persons in another state” and notes that “Interstate commerce includes such activities as transacting business via interstate telephone calls, the Internet or the U.S. Mail. . . .”

In short, even for the smallest, most otherwise-local businesses, having an e-commerce website or taking out-of-state orders can bring employees under the aegis of the FLSA, requiring payment of overtime when appropriate. The employee(s) transacting interstate business may be exempt from the Act under other grounds—for example, it often may be the owner him- or herself who does this. However, if a business has an Internet sales presence of any kind, they may have employees covered by the FLSA even if the business would be otherwise exempt.

What’s the bottom line? Having an online sales presence may effectively gut the $500,000 threshold for coverage under the FLSA, at least for some employees.

Paralegals and the Highly-Compensated Employee Exemption

Matthew B. Wolin, Esq. — Fri, 29 Jan 2010 09:08:31 -0500

A recently decided Southern District case with somewhat unique facts illustrates two important and often overlooked overtime-related concepts: 1) paralegals are generally non-exempt employees; and 2) employees who make $100,000.00 and who perform one or more exempt duties are ordinarily not eligible for overtime pay. This second concept is known as the “highly compensated employee” exemption.

In this case, Renata Magnoni, earned upwards of $65,000.00 a year as a paralegal at Smith & Laquercia, a Manhattan law firm. Magnoni’s suit claimed she was entitled to between six and eight hours of overtime worked per week for the six years preceding her April, 2007 termination. Since she was a paralegal, and paralegals are usually non-exempt, it would seem that Magnoni had an open and shut case.

The wrinkle is that during her employment Ms. Magnoni had also operated a legal process service business, Contessa Legal Process, on the side and her employer, Smith & Laquercia, was a client of her business. As sole proprietor of Contessa, Magnoni was directly paid by Smith & Laquercia for services provided by Contessa. In the two years prior to her termination, the money Contessa received from Smith & Laquercia coupled with Magnoni’s salary exceeded $100,000. Tellingly, Smith & Laquercia did not take taxes out of the money it paid to Magnoni for her process serving and court filing services as it did for her employee wages.

Arguing that Magnoni was not eligible for overtime under the highly-compensated employee exemption (looking at the total amount it paid to Magnoni), Smith & Laquercia moved for summary judgment on Magnoni’s overtime claims. The Court’s basis for denying summary judgment to Smith & Laquercia was straightforward enough: Magnoni did not earn $100,000.00 for her work as a paralegal, and the compensation she received while wearing her independent contractor hat did not count for purposes of the exemption. The Court tossed aside the Firm’s broad reading of “compensation,” stating that it would be “antithetical to the spirit of the FLSA to consider payment received as an independent contractor to constitute ‘employee’ compensation . . . .”

Cases involving such entrepreneurial paralegals are probably few and far between. Even so, Magnoni provides a useful reminder to law firms that paralegals are most likely non-exempt and should be paid overtime wages when they work more than 40 hours in a work week. While the highly compensated employee exemption might be a useful tool in resisting an overtime claim, the employee’s total annual employee compensation must be $100,000.00 or greater – without considering income from separate non-employee roles.

Court Affirms Commissioned Salespeople Entitled to Overtime

Matthew B. Wolin, Esq. — Tue, 26 Jan 2010 10:21:00 -0500

One common mistake that employers make is to consider all commissioned salespeople to be exempt employees. Most companies employ inside salespeople, including those who make telesales or e-mail sales from remote locations. These inside sales people are generally not exempt. Only outside salespeople and retail salespeople are exempt. All other commissioned employees must be paid overtime if they work over 40 hours in a workweek, unless another exemption applies to them.

A recent Second Circuit decision reaffirms the above. The Court found that a Regional Director of Sales could be entitled to overtime in those weeks that she worked over 40 hours. Even though the employer tried to argue that she was an exempt administrative employee, the court found that her primary duty was making sales and not marketing activities. As a result, she could not be an exempt administrative employee and could therefore maintain her claims for overtime.

This decision emphasizes the need for employers to carefully examine the overtime eligibility of their sales staff. If the sales staff does not fit into one of the limited sales categories that are not entitled to overtime, it is very difficult for commissioned salespersons to fit into the other white collar exemptions.

How much influence must someone have in the firing process to qualify as exempt from overtime under the executive exemption to the Fair Labor Standards Act rules?

Joel J. Greenwald, Esq. — Thu, 14 Jan 2010 15:20:21 -0500

Under the FLSA, employees are paid overtime unless they qualify for one of the exemptions in the Act. One of the most common exemptions is the Executive Exemption. While called an “executive” exemption, it’s not limited only to inhabitants of the C-suites and their VP-level direct reports. Instead, it may be available to a wide range of managerial or supervisory employees and should likely be called the “managerial exemption.”

To qualify for this federal exemption from overtime wages (some state law may differ), all four of the following tests must be met:

1) the employee is paid on a salary basis, at least $455 per week;

2) the employee’s primary duty is managing either the business as a whole, or a recognized department or subdivision of the business;

3) the employee must actually manage other employees—at least two full-time staff or FTEs; and

4) the employee must have hiring and firing authority, or at a minimum, “the employee’s suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.”

Requirement (4) can often be particularly problematic—how much firing authority is actually needed?

The Dept. of Labor’s Fact Sheet helps a bit and says that “particular weight” means that—

• It must be part of the manager’s job description to make recommendations regarding firing.

• The manager’s recommendations must be made frequently and generally relied or acted upon.

Thus, merely making “occasional suggestions” about termination does not meet the standard.

There’s very little guidance to clarify just how much authority is required for a mid-level manager to be exempt on this point. However, “managers” who can’t make an actionable firing recommendation probably also fail one or more of the other tests for executive status, so the cases rarely turn on this point alone. Remember, it is a package deal. The employee must satisfy ALL of the tests stated above.

To ensure that their mid-level managers are exempt under this exception, employers should make certain to that all points of the test are met. If it’s business as usual for the manager to recommend a firing and for it to be carried out—and the other requirements are satisfied—then the manager will probably qualify for the Executive exemption from the overtime pay requirements.

Don't Round Time Worked and Deny Employees Overtime Pay

Devora L. Lindeman, Esq. — Wed, 06 Jan 2010 11:15:03 -0500

Non-exempt workers need to be paid for ALL time worked. Failing to do so can lead to substantial liability, especially for unpaid overtime pay. Amazon.com may be in the process of learning that lesson painfully.

In November, a former warehouse worker filed a lawsuit seeking unpaid overpaid overtime plus interest. The suit alleges that Amazon rounded start and end times for shifts to the nearest quarter hour, costing workers up to 15 minutes of overtime pay a day. The lawsuit is seeking class action status, which could draw in up to 21,000 additional plaintiffs, so Amazon’s potential exposure is as great as the Kindle’s hype.

Rounding start and ending times is permitted under the law, as long as “it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” The Department of Labor regulation presumes that “this arrangement averages out so that the employees are fully compensated for all the time they actually work.” And in theory, it should: about half their shifts should be rounded down to the previous 15 minutes, and half the time it should be rounded up to the next 15. However, in practice, any system can be gerrymandered to the employer’s benefit. For example, if employees regularly start 5 minutes early and are held 7 minutes late, that would be 12 minutes per day they are not paid for—which is not allowed. Having a policy in place to clarify this can help which specifies how and when time is rounded.

There’s really no excuse for not tracking time properly—especially for Amazon. Although there is a rule that permits ignoring insignificant periods of time, this is only permitted when “the failure to count such time is due to considerations justified by industrial realities.” However, with today’s time clocks and computer-based time-tracking systems, there’s no reason for rounding off in large increments that create improper records. Amazon can track the tastes and preferences of millions of customers in thousands of product categories—it will be difficult to claim it lacks the technology to record shift lengths accurately.

Do Not Judge Employees by Their Titles: Make Sure Employees Actually Are Managers Before Paying Them Like Managers

Laura L. Himelstein, Esq. — Tue, 29 Dec 2009 15:40:18 -0500

Most employers know that executives do not get overtime. Some people are unaware, however, that it takes more than a title to make a manager. AT&T and its subsidiaries are in the process of finding that out the hard way, as they confront a $1 billion lawsuit brought by “managers” who were not paid overtime. The suit is being brought by seven named plaintiffs, and also seeks class-action status to bring in another 5,000 employees.

The affected employees are called “first level managers” or “level one managers.” According to the lawsuit, first level managers perform primarily clerical duties, such as relaying information between “real” managers and field technicians, and do not have sufficient discretion to be deemed managers. The suit alleges that they are misclassified as exempt employees and given managerial titles specifically to avoid overtime.

According to the Fair Labor Standards Act, the management or executive exemption to the overtime pay requirements includes four criteria, all of which must be met:

• The employee is paid on a salary basis, at least $455 per week (or $23,660/year)

• The employee’s primary duty must be management – that is, the employee either manages the company as a whole or a recognized department or subdivision

• As part of managing, the employee regularly directs the work of at least two full-time employees or their equivalent (for instance, four half-time employees would equal two full-time employees); and

• As part of managing other employees, the claimed manager has either actual hiring and firing authority, or at least substantial input into hiring, firing, retention, and promotion decisions

The Labor Department puts out a very helpful factsheet on the subject. For most purposes, common sense will suffice – a manager must actually manage.

In other words, under the FLSA it is the substance of a job, not the nomenclature, that controls.

Paying Exempt Employees Who Serve Jury Duty

Matthew B. Wolin, Esq. — Thu, 24 Dec 2009 12:45:41 -0500

Employers are often unaware of the requirements under Federal law regarding paying exempt employees who serve jury duty. Failing to comply with these requirements can expose employees to significant risks. The main principle is simple enough:

If an exempt employee is serving jury duty and does any work whatsoever (including the most basic tasks) during the workweek (as the workweek is defined by the employer), the employee needs to be paid his or her full salary.

Consider the following two examples:

1) An exempt employee serves jury duty during the entire workweek, and never sets foot in the office. Nevertheless, during jury breaks at the courthouse, the employee checks her blackberry and periodically reviews and sends work-related e-mail. Although the employee may have done what amounts to minutes of work during the workweek, the employee must receive his or her full salary for that workweek. Any deductions from the employee’s salary risks compromising the employee’s status as being exempt from overtime pay.

2) An exempt employee serves on a jury Monday through Friday for two weeks, but works several hours on Wednesday and Thursday of the second week. The employer defines its workweek for payroll purposes as running from Thursday at 12:01 a.m. to Wednesday at 12:00 midnight. In that situation, where the employee missed an entire week of work and most of a second week, the employee would still be entitled to her full salary because he worked at least some time in each defined workweek.

Beyond these Federal requirements, there may be additional state law requirements such as in New York State that employers need to follow in meeting their obligations to exempt employees who serve jury duty. Companies are free to implement generous jury duty policies (.e.g, “Employees who serve jury duty receive two weeks of full pay”), but they should not assume that guaranteeing employees some amount of paid jury duty leave obviates their legal obligations with regard to exempt employees.

Just Because an Employee is Exempt Doesn't Mean They Can't Be Paid Extra

Kevin M. Doherty, Esq. — Tue, 15 Dec 2009 16:25:05 -0500

Sometimes employees who are exempt from the overtime pay regulation need to work more hours, especially during busy seasons. Or perhaps you need more staff, but less than justifies hiring another person. Or perhaps you want to motivate exempt staff by offering them the opportunity to earn a commission or production bonus.

Can you pay an exempt employee more compensation for taking on extra responsibilities, working extra hours or shifts, or producing above-and-beyond the call?

Yes, you can.

Under 29 CFR 541.604, exempt employees may be provided with “additional compensation without losing the exemption or violating the salary basis requirement.” In short, you can pay them extra without turning them from an exempt to a non-exempt employee who is eligible for overtime pay. The critical requirement is that the employee be guaranteed at least the weekly salary minimum to be considered exempt, currently $455.00 under the federal regulations (although states may require more). The commission or bonus pay must be “gravy”—it must be over and above a consistent salary that meets the exemption threshold requirements, and which is properly paid without improper deductions.

However, as long as that standard is met, a company can offer its exempt employee additional compensation in a wide variety of ways: a sales commission, for example, or a percentage of company profits; or a flat additional sum, a bonus, an hourly rate, or even the opportunity to earn paid time off. You could even pay at a time-and-half or equivalent basis under the regulations, but this is a dangerous practice—it could look too much like overtime wages, and may lead to misunderstandings as to the employee’s status.

The Department of Labor applied this rule in a 2005 advisory letter which said that an exempt nurse could be offered shift differential pay for working evenings or nights—basically, an hourly bonus for the night shift—without affecting her exempt status.

However—and this is vital—if an exempt employee takes on extra work, make sure that the bulk (over 50 percent) of the work he or she does remains exempt work. If not, as we’ve previously written, you may be endangering the employee’s exempt status.

DOL Enforcement Effects on the Rise

Kevin M. Doherty, Esq. — Thu, 10 Dec 2009 13:06:33 -0500

The Department of Labor ("DOL") earlier this year announced that it would be hiring 250 additional investigators in an effort to pursue violators of minimum wage, overtime and meal break laws throughout the country. The news that the DOL is increasing their audits of employers that are not paying employees proper amounts of compensation is nothing new to both labor and employment lawyers as well as employers themselves. It seems that new audits and fines are being reported on a daily basis.

Regardless of the industry, violations occurred on a regular basis. Some industries exceeded 40% violation rates for paying minimum wage, and some occupations were found not to receive overtime pay nine times out of ten.

That being said, employers never need another reason to abide by the proper wage and hour laws, but if they did, the additional resources the DOL is preparing to spend on seeking out violators should be a wake up call loud enough for all to hear.

Perils of Having Employees Work Through Lunch

Joel J. Greenwald, Esq. — Tue, 08 Dec 2009 15:47:56 -0500

It’s tempting to have employees work through lunch—there’s always more to be done, business doesn’t necessarily come to a stop at lunchtime, and anyway, management often works through lunch without additional compensation. So, why not other staff?

The “why not” is that management are generally exempt from the overtime pay regulations and are receiving a salary without regard to how many hours they work a week. Other staff (the receptionist, data entry clerks, administrative assistants, secretaries, billing clerks, customer service reps., etc., etc.) are “non-exempt” and need to (a) be paid for every hour they work and (b) have all hours worked counted towards potential overtime pay. That’s what seven of Philadelphia’s largest health systems are discovering: they were recently sued by employees who were not paid for working through lunch. If history is any guide, the health systems can expect to pay for this failure—the law firm bringing the suit won a $9 million settlement in a similar case against the University of Rochester in 2006.

Even though the federal Fair Labor Standards Act requires that non-exempt employees be paid for all hours worked, it does not actually clarify what is working time and what is not. Regulations have been passed by the Department of Labor to help clarify this, such as the “meal break” and “rest break” rules. Essentially, if a meal break is 30 minutes or more and the employee is relieved from performing all duties (meaning he or she is not eating at their desk with the responsibility to answer the phone if it rings), that meal break time is unpaid. However, “rest periods of short duration, running from 5 minutes to about 20 minutes . . . are customarily paid for as working time [and] must be counted as hours worked.”

Even if the break is greater than 30 minutes, however, if a non-exempt employee is expected to do something for the company’s benefit during this “break,” including catching up on paperwork or answering the phone, the entire period counts as paid time under federal law. Employees need to be completely relieved form any duties in order for a meal period to be unpaid.

Keep in mind, however, that In addition to federal law, many states have their own break laws, as Wal-Mart found out. The company agreed to pay $3 million to settle claims alleging that the retail giant had violated the Massachusetts Break Law by forcing staff to work through lunch. Not only do some of these state laws require payment for working through lunch or other breaks, they also require that the breaks be given and often impose penalties for that omission on top of any wages (including overtime wages) owed to the employees who worked through lunch.

Companies that require nonexempt staff to work during their supposedly unpaid break time could ultimately end up paying far more than they saved by having employees do extra work for “free.”

Learned Professionals-Employers Take Care

Devora L. Lindeman, Esq. — Tue, 01 Dec 2009 12:35:19 -0500

The Second Circuit Court of Appeals (which covers New York, Vermont, Connecticut and Puerto Rico) recently issued a decision regarding the “professional exemption” that provides both guidance and concern to employers. Young v. Cooper Cameron Corporation considered whether an engineer with no formal education beyond high school could satisfy the “learned professional exemption.”

First, the guidance: The plain language of the regulation requires employees to have certain “advanced knowledge” which is “customarily acquired by a prolonged course of specialized intellectual instruction.” The Court determined that on-the-job training was not sufficient to satisfy the requirement in this case, despite the word “customarily.” While there are rare situations, such as the lawyer who studies under a mentor and then is permitted to take the bar exam, most lawyers customarily go to law school (i.e., partake in a prolonged course of specialized intellectual instruction). Here, no engineer in the position under consideration had a college degree. Furthermore, a bachelor’s degree was not even a requirement of the job. Thus, the Court determined that this engineering position could not qualify for the professional exemption. No one in that position “customarily” had an advanced degree and education. Thus, the plaintiff was entitled to overtime compensation.

Next, the concern: This employee was first offered a non-exempt position and declined, seeking higher wages. The company then offered him a similar engineering position that was considered to be exempt from the overtime requirements that paid a higher wage. The employee accepted—then after three years of employment, claimed that the offer of the second job (with duties virtually identical to the non-exempt position initially offered), was a conscious effort to avoid paying overtime wages. The Court agreed and confirmed the lower court’s finding that the employer’s actions to avoid overtime pay were willful (despite efforts the company had allegedly taken to evaluate the positions), extending the statute of limitations from two to three years (see 29 U.S.C. § 255(a)). Indeed, though the positions might have appeared different on paper, it was determined that what this employee actually did was the same as the lower-level job.

Employers should be mindful of the effect job requirements have on proper job classification for overtime wage purposes, and that a court will look at what employees do—not at what their job description says. The result, as here, could be hefty liability for overtime wages.

Employees Are Exempt or Non-Exempt - Not Both

Matthew B. Wolin, Esq. — Tue, 24 Nov 2009 17:11:56 -0500

Since “exempt” employees are not covered by the overtime pay regulations, they do not have the possibility of collecting overtime wages to earn additional money. Many, however, would be happy to take on an extra job for their employer in exchange for more pay. With businesses reluctant to expand payrolls or fill vacant positions during this time of economic uncertainty, it would seem like a win-win situation: the company gets a job done by a proven employee who already knows the organization; the employee gets extra pay.

It is win-win…if it is handled correctly.

Often, the employee’s second job will be a non-exempt position, such as a technical, production, or lower-level administrative role which can be done part-time. When that happens, it would seem logical to pay the employee at the appropriate hourly rate for the additional work. The employee is considered “exempt” with regard to their original job, and “hourly non-exempt” for their additional position. However, that is exactly what a business should not do. Employees cannot be classified as partially exempt and partially non-exempt—they are one or the other.

A Department of Labor FLSA opinion letter provides guidance and discusses the inverse situation. In that case, a non-exempt employee assumed exempt responsibilities in addition to her regular job. The DOL said that the employee’s responsibilities should not be looked at as two different jobs—instead, the “character of the employee’s job as a whole” needed to be analyzed to see whether the entire position is exempt or non-exempt. The key is whether the employee’s “primary duty” consists of exempt work. If it does, the employee is exempt from the overtime pay requirements; if not, the employee is non-exempt and must be paid overtime wages. (And note: overtime pay would not be just on the time spent performing the additional duties, but on any hours worked over 40 in a work week.)

What should an employer do when an employee works two differently classified “jobs”? First, consider that all employees for your company have only one job—although the job may consist of diverse tasks. If an exempt employee wants to take on non-exempt functions, rather than cast it as two separate jobs, rewrite the employee’s exempt job description to encompass all of their duties. Take care to not allow the non-exempt portion to require 50% or more of their time, as this factor could render the entire position non-exempt. Then, figure out what the company should pay this employee for the totality of his or her work and increase the position’s salary accordingly. That way, the employee can be compensated for his or her additional work without compromising an exempt status, and the company avoids yet another overtime pitfall.

Big Costs For Misclassifying Technical Support Workers

Laura L. Himelstein, Esq. — Wed, 18 Nov 2009 17:28:55 -0500

$27.5 million settlement with Siebel Systems. $65 million settlement with IBM. $24 million settlement with Computer Sciences Corporation. Allegations in a recently certified class action against Wells Fargo with up to 3,000 possible class members. These are significant numbers. They come out of settlements and claims against major companies for misclassification of technical support workers.

Many employers used to think that all employees working with computers fell into the “Exemption for Employees in Computer-Related Occupations” under the Fair Labor Standards Act (“FLSA”). However, employees who are using computers or providing services to support computer use are not necessarily exempt from overtime pay requirements. As to an computer professional under federal law, employees must satisfy all of the following criteria:

Earn a salary of at least $455 per week or a wage of $27.63 or more per hour
Be a skilled worker, such as a computer systems analyst, computer programmer or software engineer
Be primarily responsible for systems analysis, computer design, support of computer programs related to machine operating systems, or skills related to the foregoing or a combination of these skills

Employers make a mistake when they assume that someone who is supporting computer use within their organization is exempt from overtime pay requirements (although it is still possible that the person qualifies for another exemption, such as the administrative exemption). Similarly, employees who repair computers may not be deemed exempt either. Even if employees are highly paid or have job titles which sound exempt, they are still not exempt unless they are performing highly skilled work that satisfies the DOL criteria. For instance, technical support or helpdesk employees whose primary responsibilities are to set up computers for new employees and install software updates and patches will likely not be considered to be exempt from overtime pay requirements.

Of course, it is important that employers have an overtime analysis done and properly classify all of their workers in order to avoid costly claims, penalties and attorneys’ fees. This is even more true with computer workers, who are often well-compensated. With significant base salaries, any claim for overtime pay can add up quickly, especially if the claim turns into a class action that encompasses multiple employees.

Employers in California need to be even more cautious. Employees subject to inconsistent federal and state overtime laws get the benefit of whichever law is most favorable. California, nor surprisingly, has very employee-friendly laws, including on the subject of exemptions for computer workers. Indeed, there are plaintiffs’ side law firms that have set up shop specifically to help California-based employees sue their employers, and they are doing so for big money. Employers, be careful out there!

The Pitfalls of Utilizing Volunteers

Devora L. Lindeman, Esq. — Tue, 10 Nov 2009 10:48:27 -0500

In this economy we are seeing employers looking for ways to cut costs (including payrolls) and job seekers looking for ways to get noticed, such as offering to work for free to “show what they’ve got.” While these might seem like good ideas—offering an opportunity to learn in exchange for the person’s labor; offering labor in exchange for a potential job—these situations could run afoul of the Fair Labor Standards Act (“FLSA”), the federal law that governs wage and hour regulations, as well as parallel state laws.

Under the FLSA, employment is defined broadly as “to suffer or permit to work.” If you “employ” someone (i.e., you let them work for you), you need to pay that person according to the often complex and confusing rubric of state and federal wage and hour laws.

Can anyone volunteer? Yes. . . but only in the public or not-for-profit sectors, for example for a religious or charitable organization. People can volunteer for the local library, the homeless shelter, “meals-on-wheels,” or the local hospital. People can volunteer to help with disabled children or can volunteer for their local ambulance corps or fire house. The only caveat is that public and not-for-profit sector employees can only volunteer for their own organization or agency if there is no undue pressure to volunteer and the volunteered services are “not the same type of services which the individual is employed to perform for such public agency.'' A paid firefighter cannot volunteer for his or her own fire company, but can volunteer as a firefighter in another county. An office worker for a hospital may volunteer to sit with a sick patient as an act of charity, but cannot volunteer to perform additional administrative duties. (DOL Field Operations Handbook § 10b03(d), p.5.) Private companies, however, as a matter of law, simply cannot have “volunteers,” no matter how enticing it is.

New York Increasing Transparency of Overtime Pay

Joel J. Greenwald, Esq. — Tue, 03 Nov 2009 13:26:08 -0500

A change to Section 195 of New York State’s labor law goes into effect on October 26^th, 2009. Section 195 contains notice and record-keeping requirements related to the payment of wages. It always required that new employees be notified upon hiring of their rate of pay. However, new language added to Section 195 states that an employer shall:

notify his or her employees, in writing at the time of hiring of the rate of pay . . . and obtain a written acknowledgement from each employee of receipt of this notice . . .[and for] all employees who are eligible for overtime compensation . . . the notice must state the regular hourly rate and overtime rate of pay

The requirement is straightforward enough—written notice, written acknowledgement.  It will require changes to offer letters and hiring documentation, and incrementally increase the record-keeping burden on businesses.  That said, on its face, it is a rather innocuous change, not substantively altering employee rights or benefits, or employer obligations.

The question then is, “Why? What is the reason for this new language?” According to the Purpose section of the bill that became this new law:   “The bill would allow workers to determine whether their paychecks properly reflect the hourly wage rates their employers agreed to at the time of hiring, including the proper overtime rate.”  As elaborated by the bill’s Statement in Support, there’s concern that workers may have difficulty calculating their overtime rate from their paychecks. (Of course, if an employee knows the hourly rate—which employers were already required to divulge—it is not too difficult to determine the overtime rate.)

However, the most significant legislative language—and the best clue to what this new requirement is really about—can also be found in the Statement in Support:  “This new requirement will allow both the employee and the commissioner of Labor to compute the overtime rate to which the employee is entitled.” [Emphasis added]

If the documentation is for the Commissioner’s benefit as well, employers should expect that the Commissioner will in fact make use of it.  We expect that use to be holding employers’ metaphorical feet to the fire to make sure that they are properly paying overtime wages—and properly classifying those who are entitled to overtime pay.  If you look at the constellation of changes together—

provide written notice, including explicit notice of the fact that an employee is eligible for overtime pay and what the overtime rate is;
obtain written acknowledgement of receipt from the employee, which will help make sure that the employee reads and processes the information; and
create a single, easily reviewed document of what employees should be paid,

—the net effect will likely be to increase the number of claims for not paying overtime properly and to facilitate enforcement of the wage rules by the NYS Department of Labor.  Since employees will be more cognizant of when they potentially should receive overtime, they are apt to bring more complaints and when they do, there will be unequivocal documentation of the overtime rate they are supposed to receive (or of the fact that the employer improperly failed to designate the employee as entitled to overtime pay).

This new rule seems motivated by a perception or fear that employers are not honoring their wage and hour obligations. (Given the state of the economy, it is probably not unreasonable to think that some cash-strapped companies might improperly seek to avoid paying overtime wages.)

The bottom line for employers is that they need to be more careful than ever to properly classify their employees with regard to their eligibility for overtime pay and to properly pay overtime wages. Employers should expect that there will be more enforcement actions taken in response to overtime pay violations or complaints, and that employees themselves will be more conscious of their right to overtime pay and more proactive in demanding it.  It is likely that an employer’s failure to specify an overtime rate on a hiring document will be used (in conjunction with a failure to pay overtime wages) as an employer’s knowing intention to violate the wage laws, leading to increased fines and penalties.

New York seems to be in the forefront of increasing overtime enforcement through such documentation. Many other states, such as nearby Delaware, have wage notice requirements like NY’s previous one limited to notifying employees of their base rate of pay.  The new requirements for explicitly listing the overtime rate and obtaining written acknowledgement of receipt from employees do not seem to have yet percolated generally through the states.

Employees Traveling Overnight - Should I Pay them for Sleep?

Kevin M. Doherty, Esq. — Wed, 28 Oct 2009 15:16:23 -0500

In a recent blog, we addressed the confusion over paying non-exempt employees for work-related travel during the day, particularly as part of commuting. This blog covers what happens when a non-exempt employee has to take an overnight trip on behalf of an employer.

In cases where overnight travel is involved, under a DOL regulation, the employee’s travel time generally only has to be compensated when the hours of travel overlap the hours of the day that an employee normally works: However, the employee has to be paid for this travel time even if the travel takes place on a day that an employee does not normally work. Not only is this rule confusing, but there are exceptions to it – and exceptions to the exceptions.

Let’s try an example: Employee Michelle is a non-exempt employee who normally works 9 am to 5 pm for XYZ Company (“XYZ”) in New York. She is going to attend a convention in Las Vegas on XYZ’s behalf. She leaves work at 4 pm EST on Thursday and arrives back at home at 3 pm EST on Sunday. Her flight arrives in Las Vegas at 9 pm EST. It takes Michelle a half an hour to get her bags and another half-hour to take a cab to her hotel, whereupon she checks in and spends the next 8 hours playing craps at the casino. What would be considered compensable time?

Well, first Michelle needs to be compensated for her normal working hours, including time on the weekend. As a result, she must be paid for 8 hours (her normal working schedule) Thursday, Friday and Saturday. On Sunday, she must be compensated for 6 hours, or the 9am to 3pm.

In addition, if Michelle pulls out the laptop and starts doing company work on the plane after 5pm EST, that time becomes compensable as well (if she just watches the movie or does cross-word puzzles all the way to Vegas she doesn’t have to be paid for that time). Once Michelle hits McCarran International in Las Vegas, she’s back on company time, until she gets in the cab (unless she pulls out the iPhone® to check her company e-mail in the cab). Michelle’s gambling time is definitely her own – unless she is taking a key company client to the craps table with her. By the way, if Michelle has to carry “heavy, burdensome equipment, as contrasted with light hand tools” with her to set up the company’s convention booth, all the time Michelle spends lugging stuff around becomes compensable.

The important lesson to take away from this example is simple. If business travel is routinely required of your non-exempt employees, make sure that you instruct them to keep careful track of all of their time during their day and overnight trips. Also make sure that company travel policies reflect federal and state law, and are clear to employees. When in doubt, try to be rational and fair in compensating travel time, and/or call your employment counsel when the expense reports land on your desk.