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Posts Tagged ‘FLSA’

Spring Cleaning: Department Of Labor Scraps Confusing Categorizations Regarding Retail And Service Establishments

Posted on: June 4th, 2020

By: Michael Hill

As part of an ongoing effort to clarify the laws governing how employers may pay their employees, the U.S. Department of Labor (DOL) removed some outdated and confusing rules it had introduced in the 1960s and 1970s.

The law at issue is known as the “retail-sales exemption” to the Fair Labor Standards Act (FLSA). Generally, the FLSA requires employers to pay their employees time and a half for hours worked over 40 in a week. Retail and service establishments, however, may take advantage of an exemption to this rule if (1) more than half of its employee’s compensation represents commissions, and (2) the employee’s regular rate of pay is 1½ times the federal minimum wage.

But what exactly counts as a “retail or service establishment”? The DOL long has required such a business to have a “retail concept,” meaning it typically “sells goods or services to the general public,” “serves the everyday needs of the community,” “is at the very end of the stream of distribution,” disposes its products and skills “in small quantities,” and “does not take part in the manufacturing process.”

While the foregoing descriptions may sound straightforward enough, the DOL in the 1960s and 1970s introduced lists of hundreds of types of businesses that, in its view, either lacked a “retail concept” or “may be recognized as retail” (but also may not be). The “not retail” list included businesses such as dry cleaners, tax preparers, laundries, roofing companies, travel agencies, blue-printing establishments, and telegraph companies; while the “may be retail” list included coal yards, fur repair and storage shops, household refrigerator service and repair shops, massage establishments, piano-tuning establishments, and taxidermists. These lists came with little to no explanation for why any establishment was categorized as it was.

These lists now are gone. Current DOL leadership has recognized that these lists, while perhaps initially intended to offer clarification, only served to confuse people. (For example, why is a dry cleaner not retail, but a coal yard “may be” retail? Does a taxidermist “serve the everyday needs of the community” more so than a laundry?)

Going forward, businesses seeking to invoke the retail-sales exemption still have to assess whether they satisfy the “retail concept,” but they no longer will have to check whether they fall on either of the former “not retail” or “may be retail” lists.

If you have questions or would like more information, please contact Michael Hill at [email protected].

U.S. Department of Labor Issues COVID-19 Guidance on FLSA and FMLA

Posted on: March 20th, 2020

By: Catherine Scott

As the federal government continues to grapple with questions from employers regarding COVID-19, the federal agencies have begun to roll out new guidance. The latest comes from the U.S. Department of Labor (DOL), which has issued guidance for employers seeking answers concerning their obligations pursuant to the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA).

DOL Guidance for FLSA

The FLSA provides rules and regulations concerning how employees must be paid, including the payment of wages and overtime. Employers around the country have wrestled with whether they can reduce salary and/or hours or furlough or lay off employees as the economy slows down due to COVID-19 and whether employees are required to be paid and in what manner.

The DOL has answered several frequently asked questions concerning these issues. The latest guidance provides as follows:

  • For non-exempt, hourly employees, employers can reduce their hours and/or pay, so long as minimum wage and overtime requirements are met. Non-exempt, hourly employees also can be placed on an unpaid leave of absence or furlough or be laid off due to an economic slowdown;
  • For exempt employees, employers are generally required to pay these employees their full weekly salary if any work is done during the workweek (subject to exceptions, such as when the employer is open for business and an employee, who has no PTO remaining or hasn’t qualified, misses an entire day of work).  Of course, exempt employees can be required to use any accrued, unused vacation or paid time off under the FLSA for any missed time so long as they are still being paid their salary.
  • All employees must generally be paid for telework performed at home, subject to the limitations described above;
  • Employees of private organizations are generally not allowed to volunteer their normal services without pay, subject to a few limited exceptions. Employees may volunteer for public organizations without pay if they (a) perform such services for civic, charitable or humanitarian reasons without promise, expectation, or receipt of compensation; (b) offer their services freely and without coercion, direct or implied; and, (c) are not otherwise employed by the same public agency to perform the same services as those for which they propose to volunteer.

Pay issues can be complicated and very fact-specific (and state-specific) so if you have a question about furloughs, layoffs, or schedule or compensation reductions (whether temporarily or permanently), please contact us so we can assess the individual factual and legal circumstances of your situation.

DOL Guidance for FMLA

Similarly, employers have wrestled with their obligations under the FMLA and whether they must provide job-protected leave to employees who need time away for a qualifying reason.  Initially, it is important to understand that any employer that has between 50 – 500 employees should first familiarize itself with the Families First Coronavirus Response Act as that Act (which will be effective April 2, 2020) substantially expands some of the obligations traditional imposed on employers under the FMLA.  For those employers, however, that are below 50 or above 50 employees, you should keep the following principles in mind in dealing with the Coronavirus.

  • Employees who develop complications from COVID-19 may have a “serious health condition” that would trigger FMLA leave. The same is true of a “family member,” defined by the FMLA as a spouse, child, or parent, who develops complications from COVID-19;
  • However, leave taken by an employee to avoid exposure to COVID-19 would not be covered by the traditional principles of the FMLA;
  • The traditional FMLA does not currently cover employees who require leave to tend to healthy children or children who have been dismissed from school or childcare by their state governments;
  • The traditional FMLA provides only for unpaid leave to employees who qualify; however, the FMLA allows for employees to substitute paid leave in place of unpaid leave in certain circumstances and if the employer’s policies provide for such paid leave;
  • Employees seeking to use FMLA leave are required to provide 30-day advance notice of the need to take FMLA leave when the need is foreseeable and such notice is practicable.  In addition, employers may require employees to provide:
    • medical certification supporting the need for leave due to a serious health condition affecting the employee or a spouse, son, daughter or parent, including periodic recertification;
    • second or third medical opinions (at the employer’s expense);
    • periodic reports during FMLA leave regarding the employee’s status and intent to return to work; and
    • consistent with a uniformly-applied policy or practice for similarly-situated employees, a fitness for duty certification. (Employers should be aware that fitness-for-duty certifications may be difficult to obtain during a pandemic.)

The Department of Labor is generally encouraging employers to be flexible in dealing with situations involving employees affected by COVID-19, including re-examining both paid and unpaid leave policies in place at the employer and allowing paid telecommuting to occur.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Securing the Bag: California Supreme Court Rules Exit Searches Compensable

Posted on: March 2nd, 2020

By: Gregory Blueford

Shunning the position of the United State Supreme Court’s decision in Busk v. Integrity Staffing Solutions, Inc., the California Supreme Court has ruled that time spent on the employer’s premises waiting for and undergoing company-mandated exit searches of bags and personal technology devices brought to work purely for personal convenience by employees is compensable as “hours worked” in California.

In Frlekin v. Apple, Inc., the employer, Apple, had a bag search policy that required search of employees’ bags, packages, purses, backpacks, briefcases, and personal Apple technology devices whenever the employee left the store. Apple said the time spent waiting for and undergoing these searches was not compensable as “hours worked” in California, in part because employees could opt not to take a bag and therefore would not be required to undergo the search; in other words, the decision to bring a bag to work was “voluntary.”

The California Supreme Court said that the California Wage Orders had to be reviewed “liberally” and with an eye towards “protecting and benefiting employees.” The Court ruled that Apple’s search policy “controlled” employees by (1) requiring employees to comply with the policy under the threat of discipline, including termination, (2) confined employees to the premises as they waited for and underwent a search, and (3) required employees to complete tasks while awaiting and during the search like finding a manager and waiting for that person to conduct the search, thus, making the time is compensable. The California Supreme Court reasoned that the wage and hour standards of the Fair Labor Standards Act and subsequent decision in Busk, which generally exempts non-required work activities, “differs substantially” from California law, and that a State may enact law that provides employees greater protection than the FLSA, which California has done.

Employers with bag or any similar exit searches must be weary of this decision and ensure that this time is considered compensable and employees stay on the clock until the conclusion of the search.

If you have questions or would like more information, please contact Greg Blueford at [email protected].

New Federal Test Relaxes Standards for Unpaid Internships

Posted on: May 6th, 2019

By: Zinnia Khan

In a recent announcement, the U.S. Department of Labor loosened the Obama-era federal test for determining if an intern should be classified as an employee. That is good news for employers, although there still remain other potential risks for employers including inadvertent misclassification of interns and stricter state laws.

The new standard, known as the “primary beneficiary” test, examines whether unpaid interns or their employers get the primary benefit of the internship. If the intern gets the primary benefit, he or she may be unpaid. The test has seven equivalent factors, which include the degree to which both parties recognize the work is unpaid and whether the internship is for academic credit. The DOL has added whether an intern or student is an employee under the Fair Labor Standards Act necessarily depends on the unique circumstances of each case. For a program to satisfy the new test, there must be an emphasis on the educational benefit to the intern, which often means the intern receives academic credit for the internship.

At the same time, unpaid internships for public sector and nonprofit charitable organizations, where the intern volunteers are working without expecting to be paid, are generally acceptable.

Previously, employers were required to look to a six-factor test for determining intern status. Generally speaking, if any single factor went against the employer, it had to pay the intern. One particularly challenging requirement of the old test was that employers could not properly classify a worker as an unpaid intern if the employer derived “immediate advantage” from the individual’s work.

Although the new test is less stringent than its predecessor, there are still risks of misclassification. The FLSA authorizes misclassified interns to bring suit for back pay, liquidated damages and attorney fees. Furthermore, some states may continue to have more rigorous tests for unpaid interns under their own wage and hour laws.  Employers must adhere to the strictest requirements in each state where they have employees.

As a result of these additional considerations, employers need to be comfortable when using interns that they can satisfy their burden in establishing the individual truly is an intern, even under the more relaxed test. Useful steps that could mitigate an adverse determination include hiring interns who receive academic credit, memorializing the unpaid nature of the internship in a written offer letter and creating a formal internship program that coordinates with the intern’s academic schedule.

If you have any questions or would like more information, please contact Zinnia Khan in the National Labor & Employment Practice Section at [email protected].

New Rule, Who Dis? DOL Proposes Changes to Joint Employment Regulations

Posted on: April 8th, 2019

By: Will Collins

On April 1, 2019, the U.S. Department of Labor (“DOL”) announced notice of proposed rulemaking, amending the DOL regulations addressing joint employers under the federal wage and hour law (i.e. the Fair Labor Standards Act (“FLSA”)) and providing guidance and clarification long sought by employers.

The proposed changes announced last week mark the first revision to the DOL’s joint employment regulations since originally promulgated in 1958.

The proposed changes, which seek to address the situation where an employee works for his or her employer and that work simultaneously benefits another person or entity, offer a Four-Part Test to determine if an organization is a joint-employer by assessing whether that organization:

  1. Hires or fires the employee;
  2. Supervises and controls the employee’s work schedule or conditions of employment;
  3. Determines the employee’s rate and method of payment; and
  4. Maintains the employee’s employment records.

The DOL’s proposed changes also makes clear that only actual actions taken, “rather than the theoretical ability to do so under a contract, are relevant to joint employer status.”

The proposed changes also clarify that certain business models (such as franchises), practices, and agreements do not make joint employment more likely.

Under the proposed changes, examples activities not indicative of joint employment include:

  • Providing a sample handbook or other forms as a part of a franchise agreement;
  • Allowing employer to operate a facility on its premises; or
  • Offering or participating in an association health or retirement plan.

And examples of agreements that do not indicate joint employment include contractual provisions requiring an employer to maintain:

  • workplace safety practices;
  • a wage floor;
  • sexual harassment policies; or
  • other measures to encourage compliance with the law or to promote desired business practice

Take Away

The proposed changes would provide welcome clarity for employers and, through its articulation of a Four-Part Test, examples of business models, practices, and agreements that do not indicate joint employment, and the list of illustrative hypotheticals addressing specific joint employment scenarios, the proposed changes would provide needed guidance and certainty to joint employment in the FLSA context.

Now subject to a 60-day public comment period, we will continue to monitor the DOL’s proposed changes to the joint employment regulations.

If you have any questions or would like more information, please contact Will Collins at [email protected].