Employment Law Bits

What is the Fair Labor Standards Act?

The Fair Labor Standards Act, commonly referred to as FLSA, is the federal law that sets the minimum wage, overtime, recordkeeping, and youth employment standards. 

So how do you know if the FLSA applies to you? There are two ways: “enterprise coverage” and “individual coverage.” 

Enterprise Coverage 

Businesses must have at least two employees and have an annual dollar volume of sales or business done of at least $500,000. Hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies are also covered by the FLSA. 

Individual Coverage 

This includes employees whose work regularly involves them in commerce between states. This includes those who produce goods (such as a work assembling components in a factory or a secretary typing letters in an office) that will be sent out of state, those who make phone calls to persons in other states, those who handle records of interstate transactions, those who travel to other states on their job, and those who do janitorial work in buildings where goods are produced for shipment to another state. 

If you have any questions regarding FLSA and if it applies to you, please speak to an employment law lawyer.

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Why would I want to offer a severance benefit to a terminated employee?

Employers are not required to offer severance benefits, but it is common practice among businesses. So why would you want to offer a severance package to a past employee? Well, there a quite a few reasons why it might be a good idea:                

• To provide an income continuation to a specific group of employees if they are terminated because of an event beyond their control
• To reassure current and prospective employees that they will have some protection from unanticipated job loss
• To avoid litigation- severance benefits can be offered in exchange for a terminated employee’s release of claims against the employee
• Because it is custom
• To show a sense of loyalty to the employees
• To attract new employees and retain existing employees

If you have any questions regarding severance benefits, please speak to an employment law lawyer.

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Does every second really count? - What counts as compensable time under the Fair Labor Standards Act (FLSA)

In order to determine how much an employee should be compensated, it helps to know the amount of hours they worked. But what hours count as compensable time under FLSA? Normally the “workday” is the period of time between the start and completion of the employee’s “principal activity”. However, occasionally, the line blurs between what it counted as compensable time during that workday. 

• Suffered or Permitted to work: an employee may voluntarily continue to work at the end of the shift to finish the assigned task or to correct errors. This time is compensable.
• Waiting time: if the employee is engaged to wait, that is compensable time; if the employee is waiting to be engaged, that is not compensable time.
  Example of engaged to wait- a fireman playing checkers while waiting for an alarm.
• On-Call time: an employee who is required to remain on call while on work premises is compensable time; an employee who is required to remain on call while at home is not compensable time.
• Rest and Meal Periods: short rest periods, typically 20 minutes or less, are compensable; bona fide meals, typically 30 minutes or more, are not compensable. However, if the employee is not completely relieved from their duty while eating, it is compensable.
• Sleeping time: when an employee works for less than 24 hours, but is allowed to sleep when not busy, that is compensable; an employee who works for 24 hours or more, may agree to exclude hours worked bona fide regularly scheduled sleeping periods of not more than 8 hours as long as there are adequate sleeping facilities provided by the employer, and if the employee can usually have an uninterrupted night’s sleep.
• Lectures, Meetings, Training Programs: is not compensable if (1) it is outside of normal hours, (2) it is voluntary, (3) it is not job related, AND (4) no other work is concurrently performed.
• Travel time: this depends on the travel involved; home to work travel is not compensable; home to work on a special one day assignment is compensable; time spent by an employee in travel as part of their principal activity (such as travel from one job site to another) during the workday is compensable; travel that keeps the employee away from home overnight is compensable.

If you have any questions regarding what time is considered compensable under FLSA, please speak to an employment law attorney.

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Holiday hours and pay – employers beware tripping up here

Holidays can be hectic. For employers, holidays are even more complex when one considers the intricacies of the holiday employment laws. Violations of holiday laws can be costly, so it is important for employers to know the laws as they pertain to their business. Unfortunately, navigating through the laws is not always easy.

In Massachusetts, holiday employment laws can vary depending on the nature of the business. For example, retail establishments are subject to unrestricted holidays, partially restricted holidays, and restricted holidays, while non-retail businesses have unrestricted and restricted holidays.

Additionally, holidays do not always fall within the same restriction category. New Year’s Day, for example, is an unrestricted holiday in non-retail, while it is a partially restricted holiday in retail. Retail’s partial restriction also applies to Memorial Day but that is a restricted holiday in non-retail. Further, if one is in manufacturing, or if the holiday occurs on a Sunday, the rules can change.
The obligations under a restriction can also vary. In retail, a partial restricted holiday means that the employer may be subject to paying time and one half wages and that the employees must actually volunteer to work the shift. A non-retail business may be subject to the “special permit” rule if it decides that it would like to operate on a restricted holiday.

Staffing around the holidays can also prove difficult. Many employers overstaff in anticipation of a high volume of business, but let employees leave early when the anticipated levels flop. This practice, however, can lead to issues because Massachusetts code requires that when an employee is scheduled for a shift of three or more hours, so long as the employee arrives for the shift, he or she must be paid for at least three hours of work, regardless of whether the employee worked less than 3 hours of their scheduled shift.

In short, holidays can present employers with legal issues, and it is not always wise to do what one’s neighbor is doing. Each employer should seek to understand the holiday employment laws as they specifically pertain to the employer. If this proves to be challenging or confusing, the employer should seek the advice of counsel.

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Law prohibits federal contractors from retaliating against employees who discuss their compensation

On April 8, 2014, President Obama issued an executive order prohibiting federal contractors from retaliating against employees who discuss their compensation. But this executive order only applies to federal contractors, so what about all other employees?

The National Labor Relations Act, passed in 1935, allows private sector employees to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

Not all employees are covered by the National Labor Relations Act though. First, it only covers private sector employers, so employees of federal, state, and local governments are not covered. Second, supervisors who can make recommendations to hire and fire employees are not covered, nor are agricultural works or employers subject to the Railway Labor Act. Additionally, human resource employees cannot disclose the salaries of other employees, but can discuss their own salaries.

While there are social reasons why employees may not feel comfortable discussing pay, some employers also have pay secrecy policies – whether written or undocumented. The National Labor Relations Board has long found pay secrecy policies to be in conflict with the act and has brought action against employers for retaliating against employees for discussing their pay. However, only the NLRB can act on an employee’s complaint – the employee cannot sue the employer in court – and the damages that may result are back pay and reinstatement of the employee.

The new executive order raises the stakes for federal contractors: if a federal contractor retaliates against an employee, he or she risks losing the federal contract they are awarded as well.

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The Push for Overtime Pay for Exempt Employees

President Obama continues to push for reform in wage and hour law. Discussions about the Federal Minimum Wage are always popular, and the president has asked the labor department to revamp its regulations to include paying overtime to “executive or professional,” also known as “exempt,” employees. Currently, under the Fair Labor Standards Act (FLSA), employees that meet the requirements may be classified as exempt, and therefore, not entitled to overtime pay.

Certain employees qualify as “exempt” from the overtime provisions of state and federal wage laws. In addition to specific occupations that fall within the exemptions, there is general exclusion for executive, administrative, or professional employees. Classifications must be made properly because the consequences for misclassifying employees can be expensive. Job titles alone are not sufficient to determine whether an employee is exempt. The FLSA sets forth specific tests for determining whether an employee qualifies as exempt.

Massachusetts uses the same tests that the Department of Labor has established. Under the current regulations, an employee that meets the “duties” test and is paid at least $455.00 per week can qualify as exempt. The duties tests are not always easy to determine, and exemptions may be incorrectly applied.

Exempt Characteristics

In general, under the test, executive employees have the primary duty of management, they direct the activities of two or more other employees, and an executive possesses the authority to hire and fire other employees. Administrative employees perform non-manual, office work that relates directly to the management or operations of the organization, and their duties include using discretion and independent judgment for matters of significance. Professional employees can be learned or creative professionals. These positions require an advanced knowledge in a field or a high level of creative talent and can include positions such as doctors, lawyers, teachers, musicians, and actors. Exemptions may also apply to certain high compensation employees and also to computer analysts and outside salespeople.

While it is uncertain exactly what changes might come, it is clear that many employees may be impacted by the proposed expansion. Under current law, determining the exemption status of an employee can be challenging, and a wrongful classification may lead to the extensive penalties under Massachusetts wage and hour law. Therefore, it is highly recommended that when reviewing the exempt/non-exempt status of employees and consultants, legal representation is in order, to be sure that the classifications are appropriate.

 

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Restaurant owners and managers beware deducting servers' pay

Can a restaurant employer deduct from an employee’s paycheck when a customer leaves without paying the bill? If a glass is broken during a shift, can a server be charged to replace it? These are common practices in the restaurant industry and it is unclear whether it is a violation of Massachusetts employment law.

Recently, the International House of Pancakes in West Springfield, Massachusetts, reached a settlement with servers who claim their rights were violated because the company reduced their pay for walkouts, breaks that were never taken, and employee meals that were never provided. The settlement, which totaled more than $100,000.00, provides relief to the aggrieved IHOP employees, but it is unclear what employment laws were broken, if any.

Under federal labor standards, employers may reduce employee pay for uniforms and meals that are provided to employees, unless the deduction causes the employee’s wages to fall below minimum wage, which is especially likely in the restaurant industry where employees usually receive very low wages and the bulk of employee payment comes in the form of tips.

The Fifth Circuit has held that an employer is not entitled to the minimum wage exception, known as the “tip credit,” for employees who receive gratuities unless they pay their employees at least $2.13 per hour in addition to ensuring that employee tips plus wages is at least the federal minimum wage of $7.25 per hour. By deducting for broken glasses, the court held that the employer failed to be eligible for the tip credit because the deduction brought employee wages below $2.13 per hour. Therefore, if employer deductions cause an employee’s hourly wage to fall below the minimum $2.13, then the employer is in violation of federal law, whether or not tips bring the employee’s wages above minimum wage. Chisholm v. Gravitas Rest. Ltd., 2008 WL 838750 (S.D. Tex. Mar. 25, 3008).

A municipal law in Washington, D.C., prohibits even the voluntary payment by employees for “breakages, walkouts, mistakes on customer checks, and similar charges,” whether the employer deducts from employee wages directly or accepts payment separately. D.C. Mun. Regs. tit. 7, § 915. This protection is not afforded by statute to Massachusetts employees. But the IHOP settlement implies that an employer may be vulnerable to a claim by disgruntled employees who feel their rights were violated.

Employers can take several steps to mitigate the risk of being held in violation of labor laws. Most importantly, an employer should never deduct from an employee’s paycheck if it causes the total employee income to fall below minimum wage. Moreover, a restaurant employer should not deduct below $2.13 per hour, even where tips are sufficient to bring total income above minimum wage. An employer may also wish to consider avoiding deductions from employee pay where the cause of the deduction is outside the direct control of the employee, like a customer who leaves without paying. Finally, an employer would be wise to make sure that all employees are informed of the policy of deductions upon hiring the employee, in addition to specifically notifying employees of the basis for deductions as they occur.

Lipsitt v. Plaud: The Wage Act does not prevent breach of contract claims for unpaid wages

The Massachusetts Wage Act provides that employees who are improperly paid, may report the violation to the Attorney General’s office and subsequently receive the right to sue their employer. Under the Wage Act, employees who win their suit are entitled to mandatory treble damages and attorney’s fees. Additionally, Wage Act claims must be brought within three years of the employee not being paid properly.

A recent case decision by the Supreme Judicial Court has found that the Wage Act is not the exclusive remedy for employees claiming wages were incorrectly paid. In Lipsitt v. Plaud, the president of a museum hired a director in 2004. They agreed in writing that the director would receive a salary of approximately $4,000 per month. Due to financial difficulties, the director was never fully paid, however, he continued to work in part because of the president’s continued representations that the arrears owed him would eventually be paid.

When the museum folded in 2007, there were still outstanding wages owed to the director. The director filed a complaint with the Attorney General’s office in September 2008, he was issued a right to sue letter in April 2010, and he filed suit in Superior Court in September 2010. His complaint alleged not only violations under the Wage Act, but also, among others, a claim for breach of contract. The Superior Court dismissed his breach of contract claim, finding that the Wage Act was the exclusive remedy for recovery of unpaid wages under Massachusetts law.

However, the Supreme Judicial Court reversed finding there is no express or implied intention within the Wage Act that it provide the exclusive remedy for employees seeking unpaid wages. The court further found that the common law breach of contract claim was wholly independent from the Wage Act. The court noted that while most employees are best served by the mandatory treble damages and attorney’s fees under the Wage Act, a claim for breach of contract allows an employee to collect unpaid wages up to six years past. Thus this decision opens the door for additional wage related claims to be brought outside the 3-year window under the Wage Act.

 

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When must employers pay for commuting time?

Time spent commuting is generally not considered “on the clock” if not specifically part of an agreement between an employer and employee.  Employers need not pay employees for the time spent getting to work, whether it is by car, foot, or public transportation.  Nor would an employer be expected to compensate an employee for the time spent getting ready for work.  This is well-established under the Fair Labor Standards Act of 1937 and the Portal-to-Portal Act of 1947.

However, there are exceptions to the general rule.  For example, when an employee is required to wear safety gear to work, and it takes an exceptionally long time to get ready every day, an hourly employee must be paid for the time spent preparing for work.

There is an exception for time spent commuting when an hourly employee performs preliminary and postliminary activities that are an “integral and indispensable” part of an employee’s “principal activity.”  Of course, it is not easy to distinguish between less significant activities and those that are “integral and indispensable.”  When an employee spends twenty to thirty minutes each day before work checking e-mail, scheduling tasks, and otherwise preparing for work, then not only does the time spent working become compensable, but also the time spent commuting after the day’s work has begun. 

However, simple tasks that an employee must perform, especially if the tasks are infrequent or do not need to be done at a specific time, probably fall into the category of less significant tasks.  This may include dropping a letter in a mailbox on the way home or sending a summary of work performed to an employer at some point between shifts.  Employees are not entitled to wages for time spent commuting before or after these minor tasks are performed. 

An employer would be wise to set policies with this in mind.  If possible, tasks should be performed within the regular workday to avoid creating a liability for time spent commuting.  Where it is important that hourly employees perform certain activities at home, before going to work or after returning at the end of the day, the employee should be paid for the time spent working at home, in addition to the time spent commuting.

 

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Supreme Court to decide whether employees will be compensated for time spent changing in and out of protective clothing

Employers should note that the United States Supreme Court will likely tackle complex issues in 2013 that could have a significant impact on the way business is conducted throughout the country.

One such case, Sandifer v. United States Steel Corp., considers whether the Fair Labor Standards Act (FLSA) requires employers to pay regular and overtime wages to employees who are required to spend time changing in and out of protective clothing at the beginning and end of each work shift. Currently, the FLSA allows employers to exclude time spent changing clothes from the payroll. However, recently there has been a great debate over what “changing clothes” actually means.

In Sandifer, which originated in North Dakota, employees of U.S Steel brought a collective action complaint under the FLSA for the company’s failure to pay wages for time spent removing articles of clothing in the company locker room. Such articles included flame-retardant jackets, hardhats, safety-glasses, and protective footwear. U.S. Steel cited the FLSA noting that it was not liable for time spent changing clothing. The employees argued the article were not “clothing” as intended by the act, but highly specialized safety equipment specific to job performance.

 The court of appeals agreed with U.S Steel and found that the time it took each employee to remove each article was de minimus and non-compensable. However, since that decision, the Supreme Court has granted Certiorari to determine what constitutes “changing clothes” under the FLSA. Currently, there is a Circuit split on the issue. The 4^th, 6^th, 10th, and 11^th Circuits have concluded that clothing is anything worn by an employee—including safety gear. On the other hand, the 7^th Circuit, in the Sandifer case, ruled that not everything an employee wears is clothing for purposes of the FLSA and specifically excludes safety gear.

Thus, this decision will have to be determined by the Supreme Court.

Regardless of the results, this case will affect both employers and employees in construction and other industrial professions.

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