My colleague, Gabe Jiran, returns the blog today with this quick post updating us on where things stand on the DOL’s proposed changes to the overtime rules (and providing me with an excuse to link to one of the few songs to mention “overtime” in the title.)

As you may recall from some of the prior posts here, employers scrambled to address the Department of Labor’s changes to the salary threshold for white collar exemptions under the Fair Labor Standards Act.  That change would have increased the salary threshold from $23,360 to $47,476 annually in December, 2016.

However, several states challenged this increase, resulting in a federal court in Texas issuing a nationwide injunction stalling the increase.  Of course, many employers had already made changes to address the increase, but the injunction still stands.

Then the election happened. Which changed everything.

Now, the DOL under the new Trump administration has indicated that it will not advocate for a specific salary level under its regulations, but will instead gather information about the appropriate salary levels.

The DOL has thus issued a request for information to get feedback, which can be accessed here.

What does this mean for employers? While this process will most likely result in an increase in the salary levels, it seems that the DOL will do so based on responses to its request for information rather than arbitrarily setting a salary level.

For now, employers should continue to follow the current regulations and the $23,360 salary level while, of course, also following the Connecticut guidelines where applicable too.

But stay tuned here: Developments in this area now seem on the way.

I had a lot of plans this week to do another deep dive into an employment law issue but then, well, let’s just say life happens.

Among the things? Lots of questions from clients about the new overtime rules.  While everyone has had months to plan, there are definitely a few procrastinators out there.

But this may (and I emphasize and underline MAY) work out to those procrastinator’s advantage.   Reports this week are that a Texas court is considering issuing an injunction that would stop the overtime rule in its tracks.  The court has indicated that it will consider the matter by November 22nd. And moreover, even if it doesn’t issue an injunction on that date, it will consider the entirety of the case by 11:59:59p on November 30th.

While I still think the lawsuit may be a reach, it doesn’t seem as far fetched as it did a few weeks ago. Earlier this week, a similar Texas court issued a permanent injunction prohibiting the implementation of the so-called “Persuader Rule” from the NLRB.  Government overreach seems to be a theme in Texas.

What should this mean for employers? Well, I still think planning is very much in order. But if employers haven’t yet flipped the switch on their plans, they may want to hold out for a few more days to see if this Texas case leads to anything.

Why? Because once you raise an employee’s salary, for example, it’d be very hard to roll it back.

So procrastinators take heart! Maybe, just maybe, your tardiness will pay off.

But I still wouldn’t count on it.

Author’s note: I will be proverbially “going fishing” for a few days, so don’t expect any late breaking posts until after Thanksgiving here.  I’ll be posting a few “From the Archives” posts in the interim.

Throw out the release?
Throw out the release?

Yesterday, I had the opportunity to talk at the Connecticut Legal Conference about employment law issues. My talk focused on free speech rights in the workplace — a topic I’ve covered well in some prior posts here and here, for example.

One of the other topics of our discussion was the Cheeks v. Freeport Pancake House case — a recent case by the Second Circuit discussing wage & hour claim settlements under the Fair Labor Standards Act.

I’ve talked about this issue in prior posts as well but the general takeaway from the discussion yesterday was a renewed emphasis on receiving approval from either a federal court or the U.S. Department of Labor on any wage/hour claim settlements.

In most employment law cases filed in federal court, when a settlement is reached, the parties typically stipulate to the dismissal of the claim under a rule of civil procedure (Rule 41).

In Cheeks, the Second Circuit said that wasn’t good enough due to the unique nature of wage/hour claims and that employees were particularly susceptible to bad settlements:

We conclude that the cases discussed above, read in light of the unique policy considerations underlying the FLSA, place the FLSA within Rule 41’s “applicable federal statute” exception. Thus, Rule 41(a)(1)(A)(ii) stipulated dismissals settling FLSA claims with prejudice require the approval of the district court or the DOL to take effect. Requiring judicial or DOL approval of such settlements is consistent with what both the Supreme Court and our Court have long recognized as the FLSA’s underlying purpose: “to extend the frontiers of social progress by insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work.”

The Court pointed out settlements in other cases which might be troubling.

In [one case], the proposed settlement agreement included (1) “a battery of highly restrictive confidentiality provisions ․ in strong tension with the remedial purposes of the FLSA;” (2) an overbroad release that would “waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues;” and (3) a provision that would set the fee for plaintiff’s attorney at “between 40 and 43.6 percent of the total settlement payment” without adequate documentation to support such a fee award….. In [another case], the district court rejected a proposed FLSA settlement in part because it contained a pledge by plaintiff’s attorney not to “represent any person bringing similar claims against Defendants.” … “Such a provision raises the specter of defendants settling FLSA claims with plaintiffs, perhaps at a premium, in order to avoid a collective action or individual lawsuits from other employees whose rights have been similarly violated.”

Would these apply to claims that were not filed in federal court to begin with? The speakers said the decision left that open a bit but still recommended that parties seek USDOL approval or even file the suit in federal court and seek judicial approval at the same time.

While the court noted that this might be difficult, “the burdens…must be balanced against the FLSA’s primary remedial purpose: to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employers and employees.”

Note: These same rules do not apply to settlements under the state wage/hour laws and if you’re not covered by the FLSA, there isn’t much of a need to follow that — at least until the issue is raised in state courts.

But suffice to say that if you get a claim by a current or former employee regarding, say, past overtime wages, be wary of settling the claim without receiving outside approval.

wheelchairOver the weekend, I finished planning for our webinar tomorrow on the new overtime rules.  In digging deeper into the materials produced by the Department of Labor on the final rule, I looked at the use of volunteers as a solution — particularly for non-profit organizations.

For the “for-profit” world, this is probably not a realistic option.  The DOL really frowns on any such designation.

But on the last page of the 10-page guidance for non-profits, is a whole section on how non-profit organizations can use volunteer services if certain conditions are met.

To be sure, the new overtime rule doesn’t change the existing rules governing volunteers, but as non-profits look at how to address the issue internally, the use of volunteers may pop up.

So who is a volunteer? According to the DOL: 

A volunteer generally will not be considered an employee for purposes of the FLSA if the individual volunteers freely for public service, religious, or humanitarian objectives, and without contemplation or receipt of compensation. …  Under the FLSA, a person who works in a volunteer role must be a bona fide volunteer.

Some examples of the many ways in which volunteers may contribute to an organization include:
• members of civic organizations may help out in a community rehabilitation program;
• men’s or women’s organizations may send members to adult day care centers to provide certain personal services for the sick or elderly;
• individuals may volunteer to perform such tasks as driving vehicles or assisting with disaster relief; and
• individuals may volunteer to work with children with disabilities or disadvantaged youth, helping in youth programs as camp counselors, scoutmasters, den mothers, providing child care assistance for needy working parents, soliciting contributions or participating in benefit programs for such organizations, and volunteering other services
needed to carry out their charitable, educational, or religious programs.

So, problem solved right? Well, not exactly. The DOL suggests that volunteers serve on a part-time basis and, here’s the key point:
“should not displace employees or perform work that would otherwise typically be performed by employees.”

And what about having paid employees volunteer their extra time? According to the DOL: paid employees of non-profit organizations may not volunteer to provide the same type of services to the non-profit organization that they are otherwise
typically employed to provide.

The DOL provides two examples:

  1. A non-profit medical clinic has an office manager who handles office operations and procedures. The clinic hosts an annual 5K fun run in order to raise funds for its free services. In past years, the office manager also spent time on race day working by registering runners the morning of the run. Newly non-exempt under the Final Rule, the non-profit clinic may permissibly choose to utilize more volunteers this year to register runners instead of tasking the office manager with that assignment (provided all the conditions for bona fide volunteers are met), thus avoiding the accumulation of overtime hours in that week for the office manager.
  2. Using the same facts as above, many other individuals from the community volunteer on race day. The volunteer activities, such as packet pickups, course marshaling, water distribution, and staffing food tables at the finish line, are activities that are not typically performed by employees of the medical clinic. Based on these facts, the individuals are likely bona fide volunteers.

The use of volunteers can be part of a solution to rising overtime costs at a non-profit, but only just part.  The notion that you can just replace your employees with volunteers is not realistic.

We’ll talk more about this and other overtime issues tomorrow.  Hope you are able to join us.

Making Lemonade Out of Lemons
Making Lemonade Out of Lemons

Are you tired of lawyers commenting already on the new overtime rules?

(The answer should be no, of course, since you’re reading this blog and thus have room for one more view.)

But I think it’s fair to say that we haven’t seen a feeding frenzy like this on employment law in many, many years.  And with the massive publicity of this rule comes an opportunity, as I’ll explain too.

So, dear readers, deep breath time.   We’ll get through it together.

There’s already been lots of pixels spilled about how employers can “solve” their overtime issues that will arise under this rule by making various changes in their workplace.

For example, employers can increase an employee’s salary to $47,476 annually if that employee otherwise meets the duties test, to keep an employee “exempt” from overtime.

Or the employer can limit the overtime that the employee can work, explaining that it is concerned with controlling costs.

But in all the analysis, I think one big thing has been overlooked: Employers can use this announcement as an opportunity to review and re-classify all sorts of employees — even if they are not directly impacted by the new rule.

Too often, employers who discover that they have misclassified employees believe that they are in a conundrum. Keep their head down and hope no one notices, or properly classify the employee and keep their fingers crossed that they don’t get sued for back pay.  Neither option is a great one for employers who need to get into compliance. (I once proposed an amnesty proposal to solve this dilemma.)   Sometimes, employers have legitimate reasons why an employee has been classified as non-exempt but wants to avoid any future issues. Perhaps in other situations the employee isn’t working overtime anyways.

But here is where the opportunity comes in: As I highlighted at the start, the new overtime rule has received unprecedented amounts of publicity in the workplace. No doubt most of your employees have now heard something about it.  So, some won’t be surprised if they are notified that things are changing for their position as a result of the new rule.

While the rule doesn’t provide amnesty for employers who make such changes, the new rule does remove some of the suspicions employees may have about the changes — even when those changes are perfectly legal.  Employees may be more understanding.  Employers can explain truthfully that the new rule has required them to review the classification of all of its employees and the changes are as a result of the rule.

So, yes, the rule may be difficult to comply with. But don’t miss out on the opportunities that may arise from this rule as well.  Full compliance with the law will be so much cheaper than paying for a massive wage-and-hour suit.  And as I’ve said before, compliance is the ultimate goal. You should not be looking for ways to circumvent the law.

So ultimately, perhaps you’ll view the new overtime rule as more about lemonade than lemons, as the saying goes.

USDOL Headquarters in DC
USDOL Headquarters in DC

Late Monday, several reports on Twitter indicated that the Department of Labor would be announcing and releasing the final version of the revisions to the white-collar overtime regulations.  You can see my prior posts on the subject here and here.

This has been a long time coming. It was way back in 2014 (!) that the President indicated that he wanted the USDOL to revisit them.

And the anticipation on Twitter has been breathless with so-called experts predicting for months that the new regulations would be released any day. Or last week.  Or in July.  And speculation on what would be in the final overtime rule has run rampant.

So, rather than predict what will be in the final regulations, I want to highlight three areas that I’ll be looking at in my initial review of the regulation.

  1. Salary Test: The proposed rule last year raised the salary test to $50,440 from its current level of $23,660 (which the vast majority of employees meet in Connecticut due to minimum wage being high.)  The latest thinking is that the final rule will set that threshold at $47,000.  (UPDATED: News reports on Tuesday afternoon indicated that the threshold will be set at $47,476 and be updated every three years.)  What does that mean? It means that any employee who is paid less than that amount regardless of his or her duties would need to be paid overtime for any work over 40 hours.  That would indeed be a big change.  So, when we look at the new rule, first item to look at is the salary threshold set by the USDOL.  There is no question it will be high; it’s just a question of how high.  Bonus item to look at: Will the salary test be tied to inflation? In other words – will the threshold keep up with inflation automatically in future years? The proposed version tied it to the 40 percentile of income; will that remain in the final rule?
  2. Duties Test: The proposed rule did not explicitly change the duties test for overtime — meaning that the administrative, professional and executive exemptions would still apply as current framed — albeit at a higher salary threshold.  However, the proposed rule solicited input from the public about how best to alter the duties part of the test.  Would the USDOL be so bold as to introduce changes to the duties test without first floating it in a proposed rule? The prevailing wisdom is no, but keep an eye on that and any hints about future revisions to this rule. (UPDATED: News reports on Tuesday suggest that no changes to the duties tests will be forthcoming.)
  3. Timing: Another thing to look for in the final rule: How much time will employers have to comply? And how long until the rules go into effect? Back in November 2015, a government official suggested that employers would have 60 days to comply. Will that hold up? (UPDATED: News reports on Tuesday also indicated that employers will have until December 1, 2016.) 

For employers in Connecticut, the new rules will make things particularly challenging. For years, Connecticut’s stricter overtime rules have been the go-to source for employers. However, with the new federal rules being even stricter (or, more favorable to the employee) than the state rule, we may see a return to federal dominance.  So a bonus thing to look for in Connecticut: How will these rules interact with Connecticut’s rule? Don’t just read the federal rule in isolation.

And to be clear, there are other aspects of this rule that we will undoubtedly have to look for.  But I’m not going to make predictions about a rule we haven’t seen.

I will make one overall prediction, however: Publications, blogs and people on Twitter are going to be hysterical over the pronouncements of the new rule. My suggestion? Ignore them.  The hype is designed, in part, on scaring employers into a frenzy.

What to do instead? Employers should view this new overtime rules with a bit of detachment.  Get the facts.  Then, figure out what applies to your business and start work on a plan to meet those requirements.

Walter Olson, who has been blogging at Overlawyered longer than just about anyone, has a very notable story about the Obama administration’s efforts to expand wage & hour law and intensify its enforcement.

In so doing, the U.S. Department of Labor has invoked a little known provision under the Fair Labor Standards Act called a “hot goods” order, “which freezes the physical output of an employer that it suspects of having violated wage & hour law.”

Walter tracks an Oregon case in which the Labor Department labeled an estimated $5 million worth of fresh blueberries as forbidden to enter the commerce stream.  The growers were offered a deal: “fork over a demanded cash settlement [and] this is the kicker — agree not to appeal.”  Given that blueberries are a perishable crop, the growers took the deal and agreed to pay $240,000.

But a federal court threw out that settlement ruling that the government had overstepped its power.   And last month, the government dropped the case against the growers.

The Department of Labor has released its own fact sheet though on the subject, as of October 2014.   In doing so, it has put employers on notice that this is still in play.

While this provision isn’t likely to be used often against employers, it’s worth reading Walter’s post about it.

Yesterday on Twitter, a Connecticut legislator posted this:

State Representative Matt Lesser, be careful what you ask for. But since you asked, here’s a modest proposal that I saw recently that ought to be discussed.  It’s not perfect, but it brings up an important topic that Connecticut should talk about.

(We won’t, of course. The General Assembly hasn’t shown any interest in this.  But humor me just for a minute.)

A former colleague of mine, Michael Kun, of Epstein Becker & Green, recently advanced a proposal to amend federal wage & hour laws to bring them more in line with the way we treat other employment laws.  Namely through compromise and settlement.  Regardless of your political leanings, it’s an insightful and thoughtful post and definitely worth a read.

Michael’s advances an argument based a theory that I’ve talked about before in so-called “wage-theft” cases: That employers are typically trying to comply with a whole host of laws.

The desire of employers and their counsel to comply with the law plays out thousands of times every day, to the great benefit not just of employers, but of employees. All management-side employment lawyers worth their salt have stories about how they worked with their clients to prevent a manager from terminating an employee’s employment, or cutting an employee’s pay, by explaining the law and the potential repercussions.

But there’s a problem, according to Michael.  Federal wage & hour laws “dissuade employers from correcting wage issues.” Why?

Because, unlike other employment laws, the FLSA generally doesn’t permit employers and employees to resolve wage disputes, short of the very litigation or agency complaint that neither employers nor employees really want.

The FLSA forbids the very amicable resolutions that would benefit both employers and employees.

And it’s time to change that.

He proposes a system to resolve complaints with safeguards that are similar to those used in age discrimination cases.  I will readily acknowledge that the proposal is far from perfect, but it tackles a subject that for too long has created litigation without creating a fair escape hatch to avoid expensive litigation for employees and employers alike.

Here’s the thing, Representative Lesser, that same system exists under state law too.  Employers who discover that they may not have been following wage & hour laws have an incentivenot to disclose it because if they do, even voluntarily, the Connecticut Department of Labor can (and, in some instances, will) require penalties and interest to be paid along with it — even if reasonable people could disagree about whether such violations did, in fact occur or were intentional.

Wage & hour case also are challenging to settle in Connecticut because some lawyers representing employees can use any such voluntarily acknowledgments to prove liability and then litigate these cases for high fee awards all the while assuring their clients they should hold out for nothing less than full capitulation by the employer.

A few years back, I floated the idea of an amnesty program for employers to disclose voluntarily wage & hour violations with a Connecticut Department of Labor official.  The official appreciated the sentiment but said it would never fly because the existing legislation would need to be amended.  Maybe such a proposal could be done in conjunction with making the penalties for intentional violations stricter.

Regardless, I agree with Michael’s post that ultimately the only ones who benefit from keeping the status quo are the lawyers.  We’ll do just fine.

Yes, it’s a bit unconventional.  But Representative Lesser — you didn’t want easy proposals right?

When the U.S. Supreme Court rules on an issue in a 9-0 fashion — with a decision penned by Justice Thomas, no less — you can fairly conclude that the issue is not all that difficult.

Indeed, the SCOTUSBlog summed up the employment law decision today pretty succinctly:

Workers who are required to stay after their normal hours on the job to undergo a security screening are not entitled to overtime pay while they wait for that process and then go through it, the Supreme Court ruled unanimously on Tuesday.

The case of Integrity Staffing Solutions v. Busk involved screenings of employees at Amazon.com warehouses after their shifts concluded.

The screenings, which could take up to 25 minutes, were deemed by the court to not be “integral” to the employee’s job.  Those screenings could have been eliminated and it would have had no impact on the employee’s ability to do the job itself.

Contrast that with the “Donning and Doffing” case of earlier this year, where the putting on of personal protective equipment could be seen as necessary for employees to do their jobs (but that some clothes might not be.)

In Connecticut, the decision should have minimal impact.

The Second Circuit has been pretty consistent in its reading (essentially in concurrence with the Supreme Court’s conclusion) and even the U.S. Department of Labor had said that the employee’s arguments were contrary to the established reading of the law.

It’s not very different that the employees who are required take shuttle buses to parking lots after their shift. That is not compensable either.

Nevertheless, if you are an employer that requires your employees to come into work early or stay after and go through some type of screening or process, this is definitely a decision to review to make sure your practice falls within the applicable state and federal laws.

A limo driver believes that he should be paid overtime.  He brings a lawsuit on both state and federal wage & hour laws.  But he believes that other similarly situated drivers should also be part of his lawsuit.

How does that happen? Well, he asks the court to represent all the other drivers as well. Most people know that as a “class action” but in wage & hour cases, there is also a significant difference too.

A new federal district court case in Connecticut illustrates that exact point fairly well.  (You can download the decision in Lassen v. Hoyt Livery here.)   In doing so, it also shows the key difference between federal law and state law.

A federal wage & hour claim on behalf of other employee is known as a “collective” action.   As the Supreme Court has said, a collective action is “fundamentally different” from a class action brought by the procedural rules set up for federal courts.

Unlike typical class action in which putative class members must opt out in order to remove themselves from the class, a FLSA collective action requires employees to affirmatively opt in to the case in order to join the collective action group.

But here’s where things get interesting, under Connecticut law, an employee who believes he is entitled to overtime, can also bring a claim. These claims can sometimes be brought in federal court too as a supplemental claim to the federal one.

In doing so, these claims are class actionsand not collective actions.  Thus, for state wage & hour class actions, the classes are opt-out.

Why is this important? Because in most instances, people do not typically opt out of class actions and are much more likely not to opt in.

In the limo driver case cited above, the court adopted both the collective and class actions into the case, thus requiring an opt-out notice for the state claim, and an opt-in notice for the federal claim.

How that shakes out in that particular case is anybody’s guess, but no doubt it’s a position that employers do not want to be in the first place.

Compliance with wage and hour laws — something I’ve preached for years — should remain a top priority for employers in the coming years.