CLOSE X
RSS Feed LinkedIn Instagram Twitter Facebook
Search:
FMG Law Blog Line

Posts Tagged ‘FLSA’

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].

Department of Labor Unveils Its Long-Awaited Proposed Overtime Rule

Posted on: March 11th, 2019

By: Brad Adler

On March 7, 2019, the U.S. Department of Labor (DOL) released its long-awaited proposed rule that would revise the white collar overtime exemption regulations.  In its proposed rule, the DOL proposed raising the minimum annual salary for exempt status from $23,360 to $35,308 (an increase in the weekly rate from $455 to $679).  This is a significantly smaller increase than the increase that had been adopted by the DOL in 2016 ($47,476 per year) while President Obama was in office.  Of course, a court blocked that increase from taking effect.

Like the 2016 final rule, the DOL’s new proposal would allow employers to satisfy up to 10% of the $35,308 minimum salary requirement by the payment of nondiscretionary bonuses, incentives and commissions.  Notably, however, while the 2016 rule required that the bonuses be paid at least quarterly, the new proposal contemplates that they can be paid annually (or more frequently if desired).  Specifically, employers would have one catch-up period at the end of a 52-week period to make up any shortfall in the employee’s salary to bring it up to the required minimum.

As a result of this proposed provision, the employer could pay the employee a guaranteed minimum salary of $611.10 per week (90% of the weekly salary) and, if bonus and incentive compensation do not bring the person up to the minimum salary level by the end of the year, the employer would have one chance to make up the difference.

In addition to increasing the minimum salary, the DOL also proposed increasing the minimum annual compensation to qualify for the FLSA’s “highly compensated employee” exemption, from $100,000 to $147,414 (of which, at least $679 per week must be paid on a guaranteed salary or fee basis).

The public will have 60 days to submit comments on the proposed rule, but the rule ultimately is expected to take effect on January 1, 2020.

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

U.S. Supreme Court Holds All Public Employers Are Covered By The ADEA

Posted on: November 9th, 2018

By: Brent Bean

On November 6, 2018, the U.S. Supreme Court issued its long-anticipated opinion in Mount Lemmon Fire Dist. v. Guido, 586 U.S. __ (2018), which FMG previously discussed here.  At issue was whether the Age Discrimination in Employment Act (“ADEA”) applies to all state and political subdivisions, regardless of the size of their workforce.

The ADEA generally prohibits employers from discriminating in their employment decisions against employees over the age of forty.  29 U.S.C. § 621-634.  The ADEA, however, only applies to private sector employers with more than twenty employees.  To that end, ADEA defines “employer” as:

a person engaged in an industry affecting commerce who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year. . . .  The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State and any agency or instrumentality of a State or a political subdivision of a State, and any interstate agency, but such term does not include the United States.  29 U.S.C. 630(b) (emphases added).

The Supreme Court took this case to resolve the circuit split among the Sixth, Seventh, Eighth, and Tenth Circuits on the one hand, all of which had held that the ADEA’s twenty-employee threshold applies to a State or political subdivision, and the Ninth Circuit, on the other hand, which ruled that the ADEA’s twenty-employee minimum does not apply to those employers.

Writing for a unanimous Court, Justice Ginsburg held that the plain language of the statute, “also means,” is additive, rather than clarifying.  As such, there is no twenty-employee threshold for a State or political subdivisions.  The Court rejected the fire district’s argument that the ADEA should be analogized to Title VII, where numerical limits apply to private and public sector employers with equal force.  Instead, Justice Ginsburg wrote, the ADEA, amended in 1974 to cover state and local governments, was more akin to the FLSA, amended that same year, which has no workforce limit.

Accordingly, the ADEA applies with greater scope to cover all state and political subdivisions without limitation to the size of their workforce.  We recommend that public sector employers, especially those which have smaller workforces, revisit their handbooks and training on complying with, and avoiding litigation under, the ADEA.

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

Panera Assistant Managers Granted Cert. In Overtime Suit Reminds Franchisees that Duties, Not Title, Prevail

Posted on: October 22nd, 2018

By: Brad Adler & Hillary Freesmeier

While retail employers have tightened up their wage and hour practices, there are still too many companies in the retail industry, including fast food and fast casual employers, that have failed to take inventory of their compliance with current wage and hour laws. One such example is how some retail employers classify their assistant managers.  For years, there have been contentious fights over whether assistant managers can be classified as exempt under the administrative exemption.

And that fight continues as a federal judge in the District of Columbia has granted conditional certification of a nationwide collective and D.C. collective of Panera bread assistant managers who have sued the national chain for alleged denial of overtime wages under both the Fair Labor Standards Act and the District of Columbia Minimum Wage Act.

In conditionally certifying the collectives, U.S. Magistrate Judge G. Michael Harvey found that the plaintiffs had presented sufficient evidence that the assistant managers were classified as exempt from FLSA overtime provisions, but the bulk of the work they performed was nonmanagerial – a reminder that under the FLSA an employee’s duties, not title, determine exemption status. The plaintiffs assert that their assistant manager training focused on nonmanagerial tasks that involved customer service, cashiering, food preparation, and cleaning, while general managers took on the actual managerial work, and management issues such as budgets, prices, restaurant layouts, marketing and promotion strategies, hours of operation, and dress code were set by Panera’s corporate headquarters.

This suit is not the first Panera has seen in relation to assistant managers and overtime pay in recent months. In February of this year, Covelli Enterprises, a Panera franchisee which owns and operates approximately 260 Panera bakery-cafes in five states and Ontario, Canada, was sued in an Ohio federal court by a proposed class of assistant managers alleging they were improperly classified as exempt and deprived of overtime wages. This action is still pending. Additionally, in June a federal judge in New Jersey conditionally certified a collective action by Panera assistant managers with similar claims.

As these cases develop, employers and franchisees should be mindful of their management structure and duty assignments to ensure FLSA compliance. These suits serve as a reminder that FLSA exemption does not necessarily rest on an employee’s title, but their duties and responsibilities within their role.

If you have any questions or would like more information, please contact Brad Adler at [email protected] or Hillary Freesmeier at [email protected].