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COMPS Order 36 takes effect with some changes

Colorado Overtime and Minimum Pay Standards (COMPS) Order 36 took effect March 16, 2020 with some revisions and additional commentary by the Colorado Department of Labor and Employment.

First, in another Statement of Basis, Purpose, Specific Statutory Authority, and Findings for Adoption as Temporary or Emergency Rules, the CDLE issued a multi-page detailed explanation of its opinion that Colorado state wage-hour law on the Joint Employer doctrine is and, in its further opinion, has been contrary to and stricter than federal law. The CDLE announced there it will soon commence regulatory rulemaking on the Joint Employer doctrine to further solidify its reading of Colorado state wage-hour law.

The Statement also clarified what information needs to be included in paycheck statement eliminating prior proposed requirements that CDLE concedes “make() no sense.”

In an email to stakeholders distributing the revisions on March 16, 2020, the CDLE also advised of grace periods it will permit in light of the on-going coronavirus events, as follows:

(B)       Division Operations, and Compliance Grace Periods

            As of now, the Division remains fully operational. Based in part on potential delays to employer internal operations that have been called to the Division’s attention, the Division has adopted the following policies to grant what leniency it can, within the confines of existing law, for the coming weeks.

(1)   COMPS-required paperwork (posters, handbook inserts, acknowledgements, etc.) – compliance by 4/16/20 will be sufficient. To the extent that COMPS requires new paperwork from employers (new posters, handbook inserts, acknowledgement forms, etc.), the Division will deem compliance within the first month of COMPS – i.e., by April 16th – to be sufficient to qualify as compliant.

(2)   No Division-initiated investigations of new COMPS rules until 4/16/20. While the Division by statute must investigate any claims filed with us, the Division’s “Direct Investigations” team launches its own investigations, based on tips, leads, and known problem sectors. For the first month of COMPS being in effect (i.e., until April 16th), Direct Investigations will not launch new investigations based on violations of new COMPS rules.

(3)   Deeming violations of new COMPS provisions rules non-willful if remedied by 4/16/20. As noted above, the Division cannot by statute reject a claim filed shortly after COMPS takes effect. But to the extent that a violation committed within the first month of COMPS is solely of a new obligation under COMPS, the Division will deem the violation not “willful” if the employer remedies it within the first month of COMPS – i.e., by April 16th.

(4)   Starting tomorrow, March 17th, no new “notices of claim” will be sent to employers until April 1st. This is for all wage claims, not just those related to COMPS. Because some employers may be currently struggling to keep up with mail receipt, the Division will postpone mailing any new “notice of claim” – the mailing that tells an employer that a claim has been filed against it – because by statute, a notice of claim starts a 14-day clock for the employer to avoid penalties by paying any wages due. A longer extension would risk backlogging claims, but the Division aims for this period of just over two weeks to postpone employers’ receipt of mail that starts a statutory deadline.

Follow-up on new COMPS Order information from CDLE – 4 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

Employers curious how the CDLE will interpret the new order’s tip credit rules, including its continued use of the 80/20 rule that is being eliminated at the federal level but now being maintained at the Colorado state level, should review the CDLE’s Interpretive Notice & Formal Opinion (INFO) #3, which details the CDLE’s anticipated process for claims handling.

As a reminder, this blog recently noted an article by Bloomberg BNA surveying last year’s court decisions, which reflect an unwillingness by lower courts to accept even the federal government’s efforts to eliminate the 80/20 rule.

Follow-up on new COMPS Order information from CDLE – 3 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

Employers curious how the CDLE will enforce wage claims should review the CDLE’s Interpretive Notice & Formal Opinion (INFO) #2, which details the CDLE’s anticipated process for claims handling.

Follow-up on new COMPS Order information from CDLE – 2 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. As explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

One item included in that email was a link to the CDLE’s own summary of COMPS Order 36. At “only” four pages, this summary is an easy to read introduction to this new law, which all employers should take time to review before the COMPS Order’s effective date of March 16, 2020. As employers do, they should also skim the CDLE’s poster, which is its own summary.

Follow-up on new COMPS Order information from CDLE – 1 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. As explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

One item included in that email is a link to the CDLE’s own summary of COMPS Order 36. At “only” four pages, this summary is an easy to read introduction to this new law, which all employers should take time to review before to note is that the CDLE has now provided its COMPS Order 36 poster, which is to be used in complying with Rule 7.4 of the new order. That Rule 7.4 provides, as follows:

7.4 Posting and Distribution Requirements.

7.4.1 Posting. Every employer subject to the COMPS Order must display a COMPS Order poster published by the Division in an area frequented by employees where it may be easily read during the work day. If the work site or other conditions make a physical posting impractical (including private residences employing only one worker, and certain entirely outdoor worksites lacking an indoor area), the employer shall provide a copy of the COMPS Order or poster to each employee within his or her first month of employment, and shall make it available to employees upon request. An employer that does not comply with the above requirements of this paragraph shall be ineligible for any employee-specific
credits, deductions, or exemptions in the COMPS Order, but shall remain eligible for employer- or industry-wide exemptions, such as exempting an entire employer or industry from any overtime or meal/rest period requirements in Rules 4-5.
7.4.2 Distribution. Every employer publishing or distributing to employees any handbook, manual, or written or posted policies shall include a copy of the COMPS Order, or a COMPS Order poster published by the Division, with any such handbook, manual, or policies. Every employer that requires employees to sign any handbook, manual, or policy shall, at the same time or promptly thereafter, include a copy of the COMPS Order, or a COMPS Order poster published by the Division, and have the employee sign an acknowledgement of being provided the COMPS Order or the COMPS Order poster.

7.4.3 Translation. Employers with any employees with limited English language ability shall:
(A) use a Spanish-language version of the COMPS Order and poster published by the Division, if the employee(s) in question speak Spanish; or
(B) contact the Division to request that the Division, if possible, provide a version of the COMPS Order and poster in another language that any employee(s) need.

Employers are reminded that, while the much-discussed overtime provisions of COMPS Order 36, Rule 7.4 suggests it will take effect on the COMPS Order’s own effective date of March 16, 2020. Employers should consider therefore complying by posting, distributing and obtaining signed acknowledgement pages for the COMPS Order in its entirety or just the poster, and to do so in English or such other language, including Spanish, as employees “with limited English language ability” may speak.

 

BREAKING NEWS: COMPS Order 36

The Colorado Division of Labor and Employment has just advised as follows:

The Division has posted the Colorado Overtime & Minimum Pay Standards (COMPS) Order #36  Poster on our COMPS Order #36 – Informational Page. This is the “Poster” to use to comply with the “Posting and Distribution Requirements” COMPS Rule 7.4. As a reminder, Colorado Overtime and Minimum Pay Standards Order (“COMPS Order”) #36 is effective March 16, 2020.

The Division has also published guidance in the form of three new INFOs (Interpretive Notice & Formal Opinions) available on the Division’s Laws, Regulations, and Guidance webpage. The three INFOs published today are:

INFO # 1: Colorado Overtime & Minimum Pay Standards Order (COMPS Order) #36

INFO # 2: DLSS Wage Claim Investigation Process

INFO # 3 Tips (Gratuities) and Tipped Employees Under Colorado Wage Law

The Division’s INFOs are not binding law, but they are the Division’s officially approved opinions and notices to employers, employees, and other stakeholders as to how the Division applies and interprets various statutes and rules. The Division will continue to post and update INFOs on various topics; to suggest a topic, please email cdle_labor_standards@state.co.us.

Please continue to check this blog, www.l2slegal.com, where additional information regarding the CDLE’s announcement will be posted soon.

COMPS Order 36, SOME of what you need to know

As previously posted here, the Colorado Division of Labor and Employment has issued its COMPS Order no. 36. Here’s some of what you need to know:

  • It probably applies to your company. As previously explained, Colorado Wage Orders have historically been limited to certain industries, now their successor, this “COMPS Order” is generally applicable to all employers with only some exceptions, most notably some aspects of the agricultural industry.
  • It’s long, but you should take the time to read it and review it with experienced employment counsel. If you read the draft, the CDLE published a redline with changes from the draft to the final version.
  • It will be effective March 16, 2020.
  • Ensure your overtime-exempt personnel still qualify for exemption under Colorado law, especially that each is earning more than the required minimum salaries, effective the following dates:

July 1, 2020 $684.00 per week ($35,568 per year)
January 1, 2021 $778.85 per week ($40,500 per year)
January 1, 2022 $865.38 per week ($45,000 per year)
January 1, 2023 $961.54 per week ($50,000 per year)
January 1, 2024 $1,057.69 per week ($55,000 per year)

Effective January 1, 2025, the CDLE advises that salary minimums will increase commensurate with Colorado’s minimum wage, as adjusted by the CPI.

  • Employers must now “authorize and permit” non-exempt workers to take at least one 10-minute paid break as close to the middle of each 4-hour shift. What does “authorize and permit” mean? No one knows, and worse, the phrase is not defined elsewhere in the law. Some options employers might consider, in an abundance of caution, include requiring employees take such breaks, disciplining employees who fail to do so and requiring employees to mark down their break times on timecards even though such time must be paid.
    • Note: The COMPS order has different break requirements for employers that have contrary union-negotiated collective bargaining agreements and some Medicaid-funded service providers.
  • Employers must now pay for certain pre- and post-shift activities, which federal law does not consider compensable time, to include some aspects of time related to donning and doffing (changing in and out of certain clothes and gear), briefings, security screenings, safety and travel-related time, and clocking-in and -out.
  • Companies that use independent contractors in their workforce will want to review this blog’s previous post, as COMPS Order 36, as explained by its Statement of Basis, Purpose, Specific Statutory Authority, and Findings in support of COMPS Order #36, seems to have dramatically narrowed the ability of companies to do so, apparently in an attempt to convert such workers, by administrative fiat, into statutory “employees” of joint employers.
  • COMPS Order 36 has revised the definitions for which salaried personnel may be exempt. Employers should review their current exemptions against this new law. Notably, COMPS Order 36 actually expands the availability of exemptions in some instances for computer professionals and some seasonal camp and outdoor education programs.
  • Post the CDLE’s new COMPS Order 36 poster. Indeed the new poster is so new, that the CDLE hasn’t issued one yet. Recently on a call to CDLE the CDLE advised that it does not know when or if it will issue the poster it refers to itself in its own new order.
    • Not only must it be posted, but the poster or the entire COMPS Order itself must be included in handbooks and signed for.
    • And that non-existent poster and expansive COMPS order must be so distributed not only in English but in Spanish or such other language as workers may speak. Although the COMPS Order suggest the CDLE will distribute the order in such other languages, there are none on CDLE’s website.
  • As noted, review this expansive order in its entirety. Other provisions for example address meal, lodging, top credit, uniform deposits.

Colorado finalizes new wage order, COMPS Order no. 36, 7 CCR 1103-1 (2020)

As noted in a previous post, Colorado proposed a new wage order in 2019. On January 22, 2020, the Colorado Division of Labor and Employment finalized its new order — now called COMPS order #36 — effective March 16, 2020.

As noted in the previous post, COMPS order #36 is  radical overhaul of Colorado’s prior wage orders. Among other things the changes include:

  • A title change: Reflecting the fact that this new order addresses far more than simple wages, its title will change from the “Colorado Wage Order” (WO) to the “Colorado Overtime and Minimum Pay Standards Order” (COMPS).
  • COMPS 36 will now reach almost all private employers in Colorado. Previous WOs had applied only to the following four industries: retail and service, commercial support service, food and beverage, and health and medical. COMPS will apply to all employers as a general rule, unless the employer falls within one of the newly defined exemptions set forth in prosed Rule 2 of COMPS. Therefore employers who previously considered themselves exempt from the WOs should now review COMPS to determine if it will become covered.
  • Minimum guaranteed salary: If covered COMPS will increase the minimum guaranteed salary to $42,500, effective 7/1/20, well above that in federal law. COMPS minimum will rise steeply thereafter, each year, to $57,500 effective 1/1/26 and be adjusted thereafter per the CPI.
  • Changes to particular job-specific exemptions have been proposed.
  • Changes to the timing of required rest periods and a requirement that employees who are not allowed their 10-minute rest period receive pay not only for the 10-minute rest period but an extra 10 minutes pay.
  • Changes to the ability to take credits and the ability to charge for uniforms.
  • Changes to the fluctuating workweek method of calculating overtime.
  • Expansion of anti-retaliation protections.
  • Expansion of employer obligations as to “transparency,” “language inclusiveness” and posters.

In addition, the as-finalized COMPS order #36 dramatically expanded the definition of an “employee” and “employer” in Colorado — in apparent reflection of similar narrowing in California — by mandating that a worker will be deemed an “employee” not an independent contractor who otherwise meets all requirements to be an independent contractor but who performs work that is itself part of the company’s own regular business. The CDLE explained this “entirely new factor to the ’employee’ analysis'” in its Statement of Basis, Purpose, Specific Statutory Authority, and Findings in support of COMPS Order #36, as follows:

For example: if a retail clothing store hires an outside plumber on a one-time or sporadic basis to make repairs as needed, the plumber’s services are not part of the store’s primary work — selling clothes. On the other hand, when a clothing manufacturer hires work-at-home seamstresses to make dresses, from cloth and patterns supplied by the manufacturer, that the manufacturer will sell, or when a bakery hires cake decorators to work on a regular basis on custom-designed cakes, the workers are performing the “primary work” of the hiring business.

Other changes to the prior draft order include a rule that workers who are putting on and taking off work clothes and gear (so-called “donning and doffing” cases) are engaged in work and accordingly must be paid for the such time if it takes “over one minute” and if it is not clothes/gear that is “worn outside work as well. Additionally COMPS order #36 will effectively require that, when a 10-minute break is otherwise required, nearly all such workers will need to be made to take their 10-minute breaks every 4 hours. Only workers who work under collectively bargained agreements that say otherwise will be allowed to take breaks outside a 4-hour period, as can some workers who work for certain Medicaid-funded entities.

Perhaps most importantly the final order also implemented a slower increase in the required guaranteed minimum salary for overtime exempt person in 2020 and 2021, then a steeper climb in 2023 to reach the previously planned 2024 minimum salary of $55,000.

Source: final COMPS Order #36 as redlined by the CDLE against its prior draft.

DOL issues regulations clarifying excludable items from the regular rate of pay

Workers who are not exempt from overtime, in other word, workers who must be paid overtime, under federal law (the Fair Labor Standards Act) must be paid time and one-half of their “regular rate of pay.” The phrase “regular rate of pay” is not what it intuitively sounds like; it is not simply what the worker regularly gets paid. Instead, there are strict rules for what must be included in a regular rate of pay and for what may be excluded. The DOL issued final regulations, to be effective January 15, 2020, “to confirm that employers may exclude the following from an employee’s regular rate of pay:

  • the cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;

  • payments for unused paid leave, including paid sick leave or paid time off;

  • payments of certain penalties required under state and local scheduling laws;

  • reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;

  • certain sign-on bonuses and certain longevity bonuses;

  • the cost of office coffee and snacks to employees as gifts;

  • discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples and;

  • contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.”

(Quoting the DOL’s web page for these final rules, available here, https://www.dol.gov/agencies/whd/overtime/2019-regular-rate.)

The final regulations alsoeliminate() the restriction in (FLSA’s) §§ 778.221 and 778.222 that ‘call-back’ pay and other payments similar to call-back pay must be ‘infrequent and sporadic’ to be excludable from an employee’s regular rate, while maintaining that such payments must not be prearranged.” (Quoting that same web page.)

As the DOL notes in its summary above, some sign-on bonuses are excludable, but not all are. The DOL explains in its final rule and the prefatory comments for that rule that it depends on whether the sign-on bonus requires the recipient to do work. Thus a sign-on bonus that is paid before and irrespective of whether work is actually done is excludable, but if that bonus has a clawback provision (if the worker doesn’t end up working, or doesn’t end up working enough hours/days), then it is payment for work provided and becomes not excludable.

In brief, sign-on bonuses with no clawback provision are excludable from the regular rate; sign-on bonuses with a clawback provision pursuant to collective bargaining agreement (CBA), or city ordinance or policy are included in the regular rate; and sign-on bonuses with a clawback provision not pursuant to a CBA, city ordinance or policy, or other similar document that complies with § 778.212, are excludable from the regular rate.

Likewise, the DOL explains “bonuses contingent upon the employee’s continuing in employment until the time the payment is to be made and the like are” not excludable.

The DOL also spent quite a bit of time in the final rule discussing what is a “discretionary bonus” that may be excluded from the regular rate of pay.

Examples of bonuses that may be discretionary include bonuses to employees who made unique or extraordinary efforts which are not awarded according to pre-established criteria, severance bonuses, referral bonuses for employees not primarily engaged in recruiting activities, bonuses for overcoming challenging or stressful situations, employee-of-the-month bonuses, and other similar compensation. Such bonuses are usually not promised in advance and the fact and amount of payment is in the sole discretion of the employer until at or near the end of the period to which the bonus corresponds.

Employers should consider pulling a list of the payroll codes they use for non-exempt workers, marking which they currently considered excluded versus included in the regular rate of pay calculations, then mapping that against the new regulations. In conducting that mapping, and in order to preserve attorney-client privilege and attorney work product protections, they may wish to involve experienced employment law counsel in their internal audit.

Source: “Regular Rate Under the Fair Labor Standards Act,84 Fed.Reg. 68736 (12/16/19).

Seven Things You Need To Know About The DOL’s Proposed Salary Rules

Here are answers to seven common questions regarding the DOL’s recent proposal to increase the minimum guaranteed salary for overtime exempt positions.

1.    What has the DOL proposed?

As explained in a prior blog post, the DOL has just proposed increasing the minimum guaranteed salary for most overtime exempt positions from $455 per week ($23,660 per annum assuming the employee works some portion of 52 weeks per year, which amount could be less depending on actual vacation/etc.) to $679 per week ($35,308). It is expected this increase will affect approximately one million workers, who will have to be paid either a raise or overtime.

2.    When will the new minimum salary take effect?

Currently the DOL’s proposal is just that, a proposal. If the proposed rule becomes final, it is expected to take effect in January 2020. Many commentators believe that is likely.

3.    What does the DOL’s proposal mean for employers now?

Employers should begin reviewing their workforce for employees who are classified as overtime exempt to ensure that their salaries exceed the proposed new minimum ($679 per week).

4.    What are an employer’s options?

Employers will have two options for employees who are currently overtime exempt but earn less than the proposed minimum:

  1. Increase the employee’s guaranteed salary to meet the new proposed minimum ($679 per week); or,
  2. Convert the employee to hourly and pay overtime.

Technically there are at least two other options:

  •  Continue paying the current sub-minimum salary, but convert the position to overtime-eligible, then pay overtime on an hourly basis, at half-time, in addition to the salary, for workweeks when overtime is worked. This is called the “fluctuating workweek” method.
  • Continue paying the current salary under an agreement with the employee that the salary includes assumed overtime; pay no additional hourly (or salary) amounts to compensate employees for overtime hours. This is called a Belo agreement.”

Unfortunately while the fluctuating-workweek method and Belo agreements are theoretically available, and sound like ways to “build in” overtime into a salary, they are not as practical as employers (and employees) might hope. Each is disfavored by the DOL and the courts. Each is available only in strictly limited circumstances. Both options are beyond the scope of this article. Neither should be implemented except after consultation with experienced legal counsel.

5.    What are some of the most common considerations for employers weighing their options?

Analyzing the impact of these proposed regulations will depend greatly on the circumstances of every workforce. However, here are some of the most common considerations:

  • The number of workers (and the number of positions) currently overtime exempt but paid under the DOL’s proposed minimum.
  • The financial difference between each worker’s current salary and the DOL’s proposed minimum.
  • The likelihood of overtime hours and the feasibility of converting a currently salaried overtime-exempt worker to an hourly overtime-paid worker.
  • The increased cost of benefits that may be tied to pay (assuming a worker’s pay is increased) and any change to the level or type of benefits available (assuming a worker is converted to hourly).

To help employers with the math of comparing options, a number of spreadsheets are available on the Internet.

Additionally, employers are reminded that consideration should be given to two other features of this proposed rule that may affect the math of their analyses:

  • The ability to do a “catch-up” payment, which may help some employers meet the new proposed salary minimum.
  • The ability to exclude certain bonuses from overtime calculations, which may help other employers afford converting workers into overtime-eligible hourly positions.

Finally, employers should consider with their HR professionals the potential impact on workforce morale. This in particular will vary from company to company. Common questions include the following:

  • How will other workers respond to seeing these positions receive raises?
  • Will raises cause salary compression?
    • In other words, will lower level salaried employees start earning nearly as much as workers in skilled or even managerial level positions?
    • Will skilled and even managerial level positions need to be increased accordingly?
  • Is any part of the workforce unionized?
    • If so will converting salaried positions into hourly positions make them more likely to be claimed by union as part of its bargaining unit?
    • For positions already within a bargaining unit, employers are reminded of their collective bargaining obligations and to review with legal counsel, first, any requirements for notice and an opportunity to bargain, as well as the potential impact of a current agreement’s “zipper” clause.

6.    Reminder, employers still have to meet the “duties” tests for overtime exemptions

Employers are reminded that paying the minimum guaranteed salary is not all it takes to be exempt from overtime requirements. Workers must also meet the DOL’s duties tests for the various kinds of exemption.

7.    In what states will the DOL’s proposal affect employers?

If it becomes effective, the increase will take hold nationwide, at a federal level. Although it will apply in all fifty states, employers are reminded that some states, including Alaska, California and New York, already require minimum guaranteed salaries in excess of even this new proposed increase. Accordingly, employers in Alaska, California and New York should confirm with legal counsel but may find no change is required to their workers’ salary levels.

 

Third Circuit expounds on class actions in wage claims

A class action is a way for one or more persons to sue on behalf of a voluminous group of similarly situated persons. The idea is that the claim may not be financially worthwhile for one or a few people to prosecute, but where many people have suffered the same wrong, it makes sense for them to litigate the claims all at once, just as it is more efficient for the courts and defendant.

Wage claims are often for relatively small amounts, when one considers only one plaintiff, but can be for huge amounts when prosecuted on behalf of a claim. Wage claims though aren’t technically called a class action. Wage claims are prosecuted under the Fair Labor Standards Act (FLSA), which provides for “collective” actions; whereas, class actions are prosecuted under Rule 23 of the Rules of Civil Procedure.

What’s the difference between a class action and a collective action? Well, there aren’t many, but the few differences there are, are indeed significant. The biggest difference is conceptual and practical. In a class action, the judge declares a “class,” and members can opt out if they don’t wish to be part of the lawsuit. In a collective action (a FLSA wage claim), the judge declares the potential class, but members have to opt in to become part of the lawsuit.

There are other significant differences in terms of the procedures and standards court follow at the start of the case. Those differences can drive significant outcomes in terms of settlement strategies and litigation approaches.

Still, the differences can be as subtle as they are sometimes significant, triggering relatively frequent litigation in the courts. The Tenth Circuit has, for example, said, in a 2001 decision (Thiessen) that there is “little difference in the various approaches”  under Rule 23 for class actions versus FLSA for collective actions. However the Third Circuit, in a recent decision, Reinig v. RBS Citizens, N.A., held the differences, though often slight, are significant enough that an appeal involving the one did not give it jurisdiction to consider issues related to the other. The Third Circuit, therefore, declined to decide whether certification of a collective action under FLSA was appropriate, even though it did decide that certification of a class under Rule 23 was inappropriate. The court left the collective action certification for the lower court and later litigation.

In so ruling, the court did, though, hold that the class action Rule 23 certification — the issue on appeal before it — had been improper. The Court clarified that, in order to prove that the plaintiffs’ lawsuit alleging “off the clock” work was appropriate for class certification, Rule 23 required them to prove that they, and the requested class members, could all show that their rights were violated using the same evidence of liability. It was not sufficient to prove that they had all been wronged by the same employer, that they had all been shorted wages to which they should have been entitled, or even that they had all been shorted in the same way. Rule 23, the Third Circuit held, requires that they prove they, and the requested class, could establish their cases using common evidence.

As for the merits of their claim, the Third Circuit opined that, to prove an off-the-clock work claim, the plaintiffs would need to show they had worked off the clock, which constituted overtime, and that the employer had at least “constructive knowledge” of the same. The court did not explain what would constitute “constructive knowledge.”

To satisfy their wage-and-hour claims, Plaintiffs must show that: (1) pursuant to Citizens’ unwritten “policy-to-violate-the-policy,” the class MLOs performed overtime work for which they were not properly compensated; and (2) Citizens had actual or constructive knowledge of that policy and of the resulting uncompensated work.  See Kellar v. Summit Seating Inc., 664 F.3d 169, 177 (7th Cir. 2011) (citing Reich v. Dep’t of Conservation & Natural Res., 28 F.3d 1076, 1082 (11th Cir. 1994)); see generally Davis v. Abington Memorial Hosp., 765 F.3d 236, 240–41 (3d Cir. 2014).  Thus, to satisfy the predominance inquiry, Plaintiffs must demonstrate (1) that Citizens’ conduct was common as to all of the class members, i.e., that Plaintiffs’ managers were carrying out a “common mode” of conduct vis-à-vis the company’s internal “policy-to-violate-the-policy,” and (2) that Citizens had actual or constructive knowledge of this conduct.  See Sullivan, 667 F.3d at 299; Dukes, 564 U.S. at 358; see also Tyson Foods, Inc., 136 S. Ct. at 1046 (explaining that, although a plaintiff’s suit may raise “important questions common to all class members,” class certification is proper only if proof of the essential elements of the class members’ claims does not involve “person-specific inquiries into individual work time [that] predominate over the common questions”).  

The Third Circuit’s holding that class and collective actions are sufficient different that it lacked jurisdiction over issues re the one even though it had jurisdiction over issues re the other firmly establishes a split among the Circuits on the issue. Interested readers may wish to check if either party seeks Supreme Court review.

Source: Reinig v. RBS Citizens, N.A.case no. 17-3464 (3rd Cir. 12/31/19).

DOL proposes to overhaul its overtime rules

The Department of Labor issued the much anticipated proposed revisions to its overtime regulations.

Proposed Increase To Minimum Guaranteed Salary For Exempt Employees

The proposals will increase the minimum guaranteed salary that (most) exempt employees must receive from $455 per week ($23,600 per year) to $679 per week ($35,308 per year).

The DOL anticipates this increase will result in 1-million currently exempt employees losing their overtime exemptions, in other words, having to be paid overtime. This compares to the Obama Administration’s 2016 proposal to increase the minimum salary to $913 per week ($47,476 per year), which was anticipated then to result in 4.6-million exempt employees losing their exemptions, in other words, having to be paid overtime.

Proposed Increase to Highly-Compensated Employees

The proposals will increase the minimum guaranteed salary for employees in the Highly-Compensated Exemption from $100,000 per year to $147,414 per year. The DOL anticipates this will convert 201,100 workers into non-exempt employees who must be paid overtime.

Inflationary Adjustments

In contrast with many commentators’ expectation, the proposed rule does not provide for automatic adjustments to the minimum salary to, for example, keep with inflation. Instead, the DOL proposes to revisit these numbers every 4 years through further rulemaking. 

Other Changes

Other proposed changes to the federal overtime rules include a proposal to, now, permit up to 10% of the required minimum salary to be satisfied by the payment of nondiscretionary bonuses and commissions:

(T)he Department proposes to permit nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test for the executive, administrative, and professional exemptions, provided that such bonuses or payments are paid annually or more frequently. Such payments may include, for example, nondiscretionary incentive bonuses tied to productivity and profitability.

The DOL also proposes that employers will be able to make a 1-time annual “catch-up” payment to ensure employees exceed the required minimum salary.

Finally, the Department proposes to permit employers to make a final “catch-up” payment within one pay period after the end of each 52-week period to bring an employee’s compensation up to the required level. Under the proposal, each pay period an employer must pay the exempt executive, administrative, or professional employee 90 percent of the standard salary level ($611.10 per week), and if at the end of the 52-week period the salary paid plus the nondiscretionary bonuses and incentive payments (including commissions) paid does not equal the standard salary level for 52 weeks ($35,308), the employer would have one pay period to make up or the shortfall (up to 10 percent of the standard salary level, $3,530.80). Any such catch-up payment would count only toward the prior year’s salary amount and not toward the salary amount in the year in which it was paid.

Anticipated Litigation

As with previous wage-hour regulatory proposals, these have already been greeted with numerous promises of litigation.

Comments

The DOL has invited comments from the public within a 60-day period.

Source: DOL’s proposed rule “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,DOL RIN 1235-AA2 (3/7/19).

FLSA’s anti-retaliation provisions permit lawsuits against persons, including entities, even if not enterprises within interstate commerce

The Tenth Circuit held that, unlike its other provisions, FLSA’s anti-retaliation provision applies to persons whether or not they are engaged in interstate commerce. In the case, two workers became convinced that their employer owed them overtime under federal law (FLSA, the Fair Labor Standards Act). They complained to the DOL, were fired and the DOL sued the company alleging that the discharges were retaliation for cooperating with the DOL’s investigation.

FLSA’s overtime (and other provisions) apply only to employers who are engaged in interstate commerce. Here the company argued it had established it was not. The Tenth Circuit held that, whether it was or wasn’t was irrelevant in a retaliation claim. The court held that, as written, FLSA’s anti-retaliation provisions do not require proof that the defendant is engaged in interstate commerce. The court held, therefore, the company could be sued for retaliation, whether or not it was engaged in interstate commerce.

Source: Acosta v. Foreclosure Connection, Inc., case no. 17-4111 (10th Cir. 2018).

Supreme Court ruled driver wasn’t required to arbitrate

The Supreme Court held that a driver for a trucking company need not arbitrate wage and related claims, even though the driver is technically an independent contractor, not an employee. In reaching its holding, the Supreme Court, first, decided that such driving falls within the Federal Arbitration Act’s exclusion for transportation workers, meaning, the Court held, the FAA does not apply. The FAA is of course the federal law that permits the arbitration of federal lawsuits. Next, the Supreme Court held that the FAA’s exclusion applies not only to employees but independent contractors.

Applicability of the decision is expected to be argued in a number of pending cases, including lawsuits brought by independent contractors who drive for social media based delivery services.

Source: New Prime, Inc. v. Oliveira, case no. 17-340 (1/15/19).

Tenth Circuit holds that FLSA’ anti-retaliation provision reaches farther than its other clauses

The Fair Labor Standards Act (FLSA) is the nation’s leading wage-hour law. Most notably it includes requirements such as minimum wage, overtime and child labor laws. Those provisions apply onto to an “enterprise” that is engaged in interstate commerce. It also prohibits retaliation against workers who exercise FLSA rights. In a recent case, the Tenth Circuit held that the anti-retaliation provisions apply more broadly than the rest of FLSA.

As the Court explained the bulk of FLSA applies only to “‘an enterprise engaged in commerce.’ 29 U.S.C. § 207(a)(1). ”Commerce’ means trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.’ § 203(b).”

However, the anti-retaliation provision of FLSA does not refer to an enterprise engaged in commerce. It states that “it shall be unlawful for any person . . . to discharge or in any other manner discriminate against any employee because such
employee has filed any complaint . . . related to [FLSA].” § 215(a)(3) (emphasis added). A person is defined as “an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons.” § 203(a).

Accordingly, the Tenth Circuit held that the anti-retaliation provision in FLSA reaches farther than its other protections to apply to any “person,” not just an “enterprise,” that engages in retaliatory conduct.

Source: Acosta v. Foreclosure Connection, Inc., — F.3d —, case no. 2:15-CV-00653-DAK (10th Cir. 8/15/18).

Supreme Court’s new expansive reading of FLSA is applied for first time by a Circuit Court

The Supreme Court held earlier this year in Encino Motorcars, LLC v. Navarro that the Fair Labor Standards Act (FLSA) should no longer be construed narrowly in favor of employees but should, instead, be given a “fair” reading based on its own language. The Supreme Court’s ruling has just seen its first application in a Circuit Court case, entitled Mosquera v. MTI Retreading Co., decided by the Sixth Circuit.

In Mosquera, the employee held an engineering degree but argued he spent less than 50% of his time doing work that required an engineering degree and should, therefore, not have been classified as a professional employee exempt from overtime. The Sixth Circuit disagreed. The Sixth Circuit noted the evidence that had been submitted in support of the employer’s summary judgment motion and dismissed the plaintiff’s own affidavit to the contrary, saying it was “unsubstantiated” and “self-serving.” The Sixth Circuit noted that, prior to Encino Motorcars, it would have looked on the plaintiff’s claim more favorably, interpreting the professional exemption “narrowly,” but under the Supreme Court’s new ruling, it was required to give the law a broader “fair” reading instead. Under the new approach to FLSA, the Sixth Circuit held the employer’s motion for summary judgment was “compelling” and as such, it held, the employee was properly characterized as a professional who was exempt from overtime.

Mosquera is no doubt the first in a long line of cases to come that will take a less “narrow” approach to interpreting FLSA.

Source:  Mosquera v. MTI Retreading Co. (6th Cir. 8/14/18).

California Court of Appeals rejects double-dipping for penalties in certain wage-hour cases

California state law provides for penalties and other liability under California’s Private Attorney Generals Act when an employer fails to provide an accurate, itemized wage statement (which statements must contain certain types of information further specified under California law). But what if the statement was correct when issued but later the employer is held liable for additional amounts, such as overtime or minimum wage amounts? Do otherwise correct wage statements become retroactively inaccurate because the employer is later held liable for additional amounts like overtime or minimum wage? Contending that it does, it has not been uncommon in California for plaintiffs in wage-hour casesto file wage-statement claims demanding the extra penalties.

A division of the California Court of Appeals recently rejected double-dipping, holding that, no, the wages statement do not become retroactively inaccurate, such that an employer becomes liable for extra wage-statement related penalties when they are found liable for amounts like overtime and minimum wage.

Source: Maldonado v. Epsilon Plastics, case no. B278022 (Cal.App. 4/18/18).

Religious accommodation need not preserve overtime opportunities

The Tenth Circuit recently decided a case where the plaintiff’s requested religious accommodation gave him the time he needed off for religious reasons but meant losing overtime. The Court held the employer did not have to allow him to work more later in the week to make up for the lost overtime.

The worker had asked for Saturdays off as a religious accommodation. The employer agreed. However, because Saturdays were the day of the week when the worker (and the other workers apparently) worked overtime, it left him with no overtime opportunity. Wanting to keep his Saturdays off, he asked to be allowed to make up the lost hours by working overtime on Sundays. The employer refused.

The Tenth Circuit recognized that granting the worker his requested accommodation of Saturdays off had cost him his overtime opportunities but held that the company was not required to allow him to work make up hours on Sundays. The Court held that an accommodation is reasonable if it allows the plaintiff “to engage in his religious practice despite the employer’s normal rules to the contrary.” Here letting him take Saturdays off allowed him to engage in his religious practices. The Court rejected the argument that Title VII required the company to then allow him to work make-up overtime on Sundays.

Though (the plaintiff) may have requested an opportunity to make up his overtime hours on Sunday, Title VII did not require (the company) to offer (his) preferred accommodation.

The case illustrates Title VII’s basic principle that a worker may be entitled to a reasonable accommodation of his religious practices, and so long as it is effective at allowing him to engage in his religious beliefs, it need not be his preferred accommodation, even where the difference means lost pay opportunities.

Source: Christmon v. B&B Airparts, Inc., case no. 17-3209 (10th Cir. 5/24/18).

Supreme Court upholds mandatory pre-dispute arbitration agreements, even when they bar class/collective actions

In a 5-4 decision the Supreme Court may have given employers — at least in some states — to block class and collective actions. The Court ruled that mandatory pre-dispute arbitration agreements are enforceable under the Federal Arbitration Act (FAA), even in employment cases, and even as a block against class/collective actions. The Court had previously so ruled in the context of consumer contracts. In this case, the Supreme Court extended that ruling to employment agreements.

This ruling means companies can now lawfully require — at least under federal law — both consumers (as a condition of buying their product or service) and now employees (as a condition of working for the company) to agree,

  • Before any dispute ever arises,
  • To submit any future possible disputes to arbitration,
  • Instead of litigating them in court, and
  • Unless otherwise spelled out in the arbitration agreement, to waive any future rights to participate in class or collective actions.

In extending its ruling to employment cases, the Court rejected the argument that the National Labor Relations Act protects an employee’s right to join class/collective actions.

Perhaps of greatest importance the Court signaled a sharp curtailing of precedent holding that courts must defer to administrative agencies. That principle is called Chevron deference (after the Supreme Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.). Chevron deference has become highly controversial and is seen by conservative legal theorists as the chief vehicle for creation of the so-called administrative state. Here the issue of Chevron deference was raised because the National Labor Relations Board had held that the statute it oversees, the National Labor Relations Act, does include protection for class/collective actions and therefore should have rendered illegal the agreement at-issue. Over a heated dissent, the Supreme Court rejected the argument that the Board’s interpretation of the NLRA was entitled to deference. Whether this portends an end to Chevron deference or will prove an isolated ruling remains to be seen.

A “collective” action is like a class action. Some laws, notably, some wage-hour laws (such as minimum wage and overtime laws) permit “collective” actions instead of class actions. Simply put, the difference is that in a class action, the judge declares the existence of a class, and class members opt out of the class if they do not wish to participate; whereas, in a collective action, members must opt in to join the class.

Employers that have previously been concerned about stepping into the waters of mandatory pre-dispute arbitration agreements may now wish to consult with counsel about doing so. Employers should remember that, although this is a strong case for employers, it does not necessarily apply to claims brought under state laws, and some states, notably both New York and California, have taken strong positions against this type of agreement.

Source: Epic Systems Corp. v. Lewis, case no. 16-285 (5/21/18)

“Spiritual coercion,” “volunteers” and children under federal wage laws

Two recent decisions by the U.S. Circuit Court of Appeals address the applicability of federal labor laws to church volunteers. The Fair Labor Standards Act (FLSA) is the nation’s leading wage-hour law. FLSA requires a minimum wage, overtime pay and prohibits child labor. FLSA applies only to “employees.” Volunteers are generally not considered to be “employees;” therefore, FLSA generally does not apply to volunteers. These two recent cases addressed these concepts in the context of church volunteers.

One case was decided by the Sixth Circuit, Acosta v. Cathedral Buffet, Inc. It involved a restaurant, operated by a church, on the church’s campus, that was open to the public and staffed in part by church volunteers.

The other case was decided by the Tenth Circuit, Acosta v. Paragon Contractors Corp. It involved a pecan ranch, at which church members, including children, harvested pecans.

In both cases, the Courts held the businesses were commercial enterprises subject to FLSA, and that the church members were doing work. Thus both courts were called to decide if the church members were truly volunteering their time, such that FLSA did not apply to their work. Both courts looked to a 1985 Supreme Court decision, Alamo Foundation, where the Supreme Court held that a volunteer is, among other things, someone who works “without promise or expectation of compensation” and “for his own personal purpose or pleasure.” And, there, the Courts split. The Sixth Circuit held that the church members were volunteers, and the Tenth Circuit held they were not.

Why did the Courts split? The Sixth Circuit decided its case after the Tenth Circuit, and it held that the difference was because (a) the Tenth Circuit case involved children and (b) the Tenth Circuit case involved more than “spiritual coercion.”

Under Alamo Foundation, a worker cannot be held a “volunteer” if his work is coerced. A person who is coerced into working is not working purely “for his own personal purpose or pleasure.” The Sixth Circuit held that, in the Cathedral Buffet case, the workers, who were adults, were working because they felt it was expected of them to be “faithful stewards of God’s grace in its various forms.” The Sixth Circuit held that, even if such religious dogma was considered to be coercive, it is “spiritual coercion,” and as such insufficient to transform a volunteer into an “employee” under FLSA. However, the Court held that in the Tenth Circuit’s case, the workers were children and, further, in its own case, the Tenth Circuit highlighted facts suggesting more than mere spiritual coercion. For example, the Tenth Circuit pointed to evidence, including “one child (who) stated that if she had not worked, she would have lost her family and been kicked out of the community.”

Non-profits that benefit from the work of volunteers, especially church-related non-profits, should carefully review these two new cases.

Source: Acosta v. Cathedral Buffet, Inc.case no. 17–3427 (6th Cir. 4/16/18); Acosta v. Paragon Contractors Corp., case no. 17-4025 (10th Cir. 5/13/18).

When an “interstate” driver isn’t, but is …

Both federal law (the Fair Labor Standards Act, “FLSA”) and Colorado law (the Colorado Minimum Wage Act, the Colorado Wage Claim Act, and the Colorado Minimum Wage Order) exempt “interstate drivers.” Under FLSA, a driver can be considered “interstate” if she, like taxi drivers, is subject to the federal Motor Carrier Act, even where she drives only within the state. This means taxi drivers are not entitled to overtime under federal law.

In this case, the Colorado Court of Appeals affirmed the Colorado Department of Labor and Employment’s view that Colorado intended a stricter approach. According to the Court and the DOLE, Colorado’s overtime exemption does require that a driver actually drive across state lines as part of their job. Accordingly, the Court held, Colorado taxi drivers are entitled to overtime under state law, even though they would not be under federal law. As the Court explained, FLSA permits states to adopt stronger protections for employees than federal law. Here, the Court held Colorado did so because Colorado’s overtime exemption is worded slightly differently than FLSA’s.

Remaining issues include the applicability of this ruling to “gig” drivers, like those who drive through Uber or Lyft. Also, while this case has held that taxi drivers who don’t actually drive in and outside the state are entitled to overtime, it did not address whether other parts of Colorado wage law, including minimum wage requirements, also apply to such drivers.

Source: Brunson v. Colorado Cab Company, LLC, case no. 16CA1864 (1/8/18).

DOL revives self-reporting program

The United States Department of Labor (DOL) has revived its Payroll Audit Independent Determination (PAID) program, which is designed to allow employers who suspect they have violated the Fair Labor Standards Act (FLSA) to self-report the suspected violation and get the DOL’s take on the situation. Unfortunately that’s about all an employer gets.

The program is open to employers who suspect they’ve underpaid workers, unless the employer is already involved in an audit, litigation or has received a demand from an employee or their attorney. Unfortunately the DOL doesn’t say what happens if the employer self-reports and then receives the demand, does that kick the employer out of the PAID program?

We aren’t likely to find out because the PAID program offers very little real benefit to a self-reporting employer. On its face, it is supposed to allow an employer to self-report and, in doing so, self-identify their own calculations of backpay owed. If the DOL agrees, it will then process the payments to workers. Although that is likely helpful to mitigate against penalties — especially in cases that involve a large total amount at-issue, consisting of small payments to individual workers, incurred as a result of an inadvertent violation — participation in the program doesn’t result in either the employees or the DOL waiving future claims, audits, litigation, etc.

Participating in the program comes with an especially high price. In order to be eligible, the employer must effectively lay out a plaintiff’s case, by submitting the following information to the DOL (quoting the DOL):

  1. specifically identify the potential violations,

  2. identify which employees were affected,

  3. identify the timeframes in which each employee was affected, and

  4. calculate the amount of back wages the employer believes are owed to each employee.

Source: US DOL PAID program.

Under the Supreme Court’s new “fair reading” doctrine, will FLSA exemptions be interpreted more broadly?

Historically courts have interpreted the overtime exemptions in FLSA (the Fair Labor Standards Act) narrowly in favor of employees. This “narrow construction” doctrine has made it difficult to treat employees who may be exempt as such unless they clearly fit an exemption. Now, the Supreme Court has rejected the “narrow construction” doctrine, ruling that it has not been “a useful guidepost for interpreting FLSA.”

The Supreme Court held that FLSA’s overtime obligations consist of two basic chunks of statutory language: The first requires employees to be paid overtime; the second chunk of language is a series of exemptions from that general rule. The Supreme Court held that FLSA provided courts with no basis for giving the first chunk of language any greater significance than the second chunk, in other words, to read the overtime requirement broadly at the expense of having to read the exemptions narrowly. Instead the Supreme Court held, both chunks of language should be given equal importance. The Supreme Court called this a “fair reading.”

Those exemptions are as much a part of theFLSA’s purpose as the overtime-pay requirement. See id., at ___ (slip op., at 9) (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”). We thus have no license to give the exemption anything but a fair reading.

Having rejected the narrow-construction doctrine, and instead applying its fair-reading doctrine, the Supreme Court then held that, in this case, service advisors at the car dealership in question qualified for an overtime exemption under FLSA’s special exemption for salesmen at car dealerships.

It is likely this ruling will have substantial impact in all FLSA overtime cases. It will not be limited to the FLSA’s exemption for salesmen at car dealerships. Rather the fair-reading doctrine will substantially expand the reach of all of FLSA’s overtime exemptions.

Source: Encino Motorcars, LLC v. Navarro, case no. 16-1362 (2018).

California is at it again, this time, how to calculate overtime

Under federal law (the Fair Labor Standards Act, “FLSA”), a non-exempt employee’s regular rate of pay is calculated, for overtime purposes, for each workweek, by totaling their compensation that week (excluding only certain limited things likely discretionary bonuses) then dividing by their total hours worked that week. They receive half that on top of the pay they’ve already received as compensation for overtime hours worked (in excess of 40).

Under a recent California case, California has decided, yet again, to be the odd jurisdiction out and, now, mandates that the denominator is only non-overtime hours.

What’s the difference? Here’s a simple hypothetical to illustrate. Assume in Week-1 of the year, John works 42 hours at a rate of $10 per hour. He gets paid $420 for that straight time (42x$10). That same week, John also receives an attendance bonus of $42. So far, his pay that week totals $462 ($420+$42). His regular rate is therefore, under FLSA, $11 ($462/42). He still hasn’t been overtime, so for overtime, he gets paid half that regular rate $5.50 ($11/2) for the 2 hours he worked overtime, in other words, an extra $11. His total pay that week, under FLSA, is $473.

Under the California approach, when it comes to calculating the regular rate, the company can only divide by 40. So his regular rate of pay is $11.55 ($462/40), nearly a 10% increase. That means his overtime rate is half that, making his total pay that week is $473.50 ($420+$42+$11.50).

Source: Alvarado v. Dart Container Corp. of Calif., case no. S232607 (Cal. 3/5/18).

DOL adopts Primary Beneficiary test for interns under FLSA

The U.S. Department of Labor has adopted the Primary Beneficiary test for deciding whether an intern must be paid as an employee or can be treated instead as an unpaid intern. This brings the DOL into alignment with a number of circuit courts, including the Sixth, Ninth and Eleventh. The Primary Beneficiary test is generally seen as more favorable towards employers and students who wish to be treated as unpaid interns.

The Primary Beneficiary test asks, given the “economic reality” of the relationship, whether the putative intern or the company is the real “primary beneficiary” of the relationship. When asking that question, the DOL and courts that follow this test consider the following seven factors (quoting new DOL Fact Sheet #71):

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Wonder what a wage-hour class (collective) action complaint looks like?

A group of employees recently filed a lawsuit in federal district court in Denver, Colorado, against DaVita Healthcare Partners, Inc., and Total Renal Care, Inc. Their complaint, which is publicly available in court records, lays out their claims and provides HR professionals with a chance to see what this kind of lawsuit can look like. Reminder as you review, the defendants have yet to respond to the complaint; therefore, the plaintiffs’ allegations are merely, just that, at this time, allegations, which are unproven. The plaintiffs’ allegations have yet to even be tested in litigation.

The complaint alleges violations of the Fair Labor Standards Act (FLSA), which is the nation’s leading, federal wage-hour law.

It was filed as a class action, more specifically, a collective action. Simply put, the difference between a class action and a wage-hour collective action is this: In a class action, representatives can sue on behalf of a group of similarly situated individuals, who can then opt out of the class if they choose not to be involved. FLSA provides for “collective” actions, in which individuals have to opt in to join the class. Either way court approval is required to proceed as a class/collective action, and this Complaint signals the plaintiffs’ intent to seek such approval.

Here the plaintiffs describe their alleged class as a group called the “Trailblazers,” which they describe, as follows:

2. Plaintiffs and those similarly situated are non-exempt hourly employees of Defendants. Plaintiffs and those similarly situated are all located within a geographic area designated and defined by Defendants as encompassing the states of Tennessee and Mississippi, and parts of Indiana, Ohio, Kentucky, Alabama, and Georgia, and are collectively referred to by Defendants as the “Trailblazers.”

3. Plaintiffs and those similarly situated in the “Trailblazers” zone are subject to the same illegal policy and practice of failing to pay workers for all time worked and failing to pay overtime wages. That policy and practice is based, in part, on direct patient care hours per treatment and the calculation of direct patient care hours for each facility established by corporate DaVita that reduces Defendants’ patient to staff ratios and require Plaintiffs and those similarly situated to work more hours for which they are not properly compensated.

They allege, as follows, that wages were not paid for all hours worked and, as a result, overtime is also claimed:

6. Defendants required Plaintiffs and those similarly situated to clock out for
their meal breaks. Plaintiffs and those similarly situated were/are required to perform work-related duties during meal breaks. Plaintiffs and those similarly situated were/are not paid for work-related interruptions that occurred/occur during meal breaks during their shifts wherein they worked more than five consecutive hours. Defendants failed to change Plaintiffs’, and those similarly situateds’, time records to reflect the additional time worked on behalf of the employer even when Plaintiffs and those similarly situated requested that their time records be corrected by management.

7. Plaintiffs and those similarly situated were/are not properly paid for other work-related duties which occurred outside of their scheduled shift hours and/or on weekends. Defendants failed to change Plaintiffs’, and those similarly situateds’, time records to reflect the additional time worked on behalf of the employer even when Plaintiffs and those similarly situated requested that their time records be corrected by management.

Allegedly compounding their claim for failure to pay, they also claim the employer “failed to properly maintain accurate daily records of all hours worked by Plaintiffs and those similarly situated as required by federal law because Defendants are not properly recording all hours worked, including overtime.”

What is sought in a class (collective) action like this under FLSA? These Plaintiffs claim “unpaid wages, overtime compensation, a declaratory judgment, liquidated damages, compensatory damages, punitive damages, costs and attorneys’ fees and pre and post judgment interest associated with the bringing of this action, plus any additional relief that is just and proper for Plaintiffs and those similarly situated under federal law.”

Again, it is emphasized these are merely unproven allegations at this point. Still, the complaint itself, being public, provides HR professionals an opportunity to see what this kind of case can look like.

Court strikes Obama-era DOL overtime rules

After issuing a preliminary injunction freezing the Obama-DOL overtime rules in 2016 before they took effect, the same court struck them on August 31, 2017 as unconstitutional, and in so doing expressly held the DOL had acted outside even Chevron authority. The decision, for now, seems to bring an end to the rules, as it seems unlikely the Trump-DOL will re-visit them.

Source: Nevada v. U.S. D.O.L., — F.Supp.3d —, case no. 4:16-cv-00731-ALM (D.E.D.Tex. 8/31/17).