News | Mar 25, 2011
Common Wage and Overtime Violations
News | Mar 25, 2011
Common Wage and Overtime Violations
This paper is intended to provide trial lawyers with a very brief and general overview of the federal Fair Labor Standards Act (“FLSA”) and which workers are covered by the FLSA’s overtime provisions, and examples of common wage and hour violations. Of course, what follows does not come close to addressing the many coverage issues arising under the FLSA or every potential violation of the FLSA. However, below is an attempt to summarize some basic violations that are frequently utilized by employers and you may see with your clients.
I. The Purpose Behind the FLSA and the Overtime Pay Requirement?
The FLSA, codified at 29 U.S.C. § 201, et seq., generally prohibits companies from requiring workers to work over forty hours in a workweek unless the worker is compensated for all overtime hours at a rate not less than one-and-one-half times his regular rate of pay. See 29 U.S.C. § 207(a)(1).
Enacted in 1938 by President Franklin D. Roosevelt, the FLSA overtime provision reflects the progressive values underlying so much New Deal legislation. The legislative purpose behind the time-and-one-half overtime premium was two-fold. First, the overtime premium was intended “to ensure that each employee covered by the Act would receive ‘[a] fair day’s pay for a fair day’s work’ and would be protected from ‘the evil of overwork as well as underpay.’” Barrentine v. Arkansas-Best Freight Sys. Inc., 450 U.S. 728, 739 (1981) (quoting 81 Cong. Rec. 4983 (1937) (message of President Roosevelt)). Second, “[i]n a period of widespread unemployment and small profits, the economy inherent in avoiding extra pay was expected to have an appreciable effect in the distribution of available work.” Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 578 (1942). In other words, Congress intended that, by making overtime prohibitively expensive, the FLSA would force companies to hire more workers instead of requiring existing workers to work overtime.
Unfortunately companies large and small are frequently looking for ways to avoid paying workers with their rightfully earned wages. This is especially true during times of general economic strain as we have seen in recent years.
II. Are My Clients Covered Under the FLSA?
According to the Department of Labor, over 130 million American workers are covered by the FLSA. See DOL Wage and Hour Division Fact Sheet No. 14 (available at “www.dol.gov”). For purposes of coverage, the FLSA interprets the term “employee” in the broadest sense to include “any individual employed by an employer.” 29 U.S.C. § 203(e). Covered employees can include, among others, independent contractors, see Cromwell v. Electrical Contractors, Inc., 2009 U.S. App. LEXIS 22389 (5th Cir. Oct. 12, 2009) (describing factors to be considered in deciding whether worker is covered employee or independent contractor), and even trainees, see Chelen v. John Pickle Co., 344 F. Supp. 2d 1278, 1291-92 (N.D. Okla. 2004) (describing factors to be considered in determining whether trainee is covered employee).
Workers fall within the FLSA’s reach so long as they are engaged in covered activity. Covered activity can be established under either the “individual/traditional coverage” doctrine or the “enterprise coverage” doctrine. Under individual/traditional coverage, workers are covered if, based on their job function, they are engaged in commerce or in the production of goods for commerce. See 29 U.S.C. §§ 206(a)(1) and 207(a)(1). Under enterprise coverage, workers, regardless of their job function, are covered if their company is part of a business enterprise that is engaged in commerce or the production of goods in commerce. See id. at §§ 203(r)-(s). In order to qualify for enterprise coverage, the company generally must do at least $500,000 in annual business, see id. at § 203(s)(1)(A)(ii), but this threshold can be reached by combining the company with other business partners in a “common business purpose,” see Chao v. A-One Med. Serv., Inc., 346 F.3d 908, 914-15 (9th Cir 2003) (citing 29 U.S.C. § 203(r)(1)).
Given the extraordinarily broad parameters of the individual/traditional and enterprise coverage doctrines, you generally can assume that most of your clients are covered by the FLSA. Furthermore, even if the FLSA does not cover a particular client, you may practice in a state with its own overtime laws, most of which broadly apply to in-state employers.
III. Are “Salaried” Employees Entitled to Overtime?
One of the myths of the American workplace is that “salaried” workers are not entitled to overtime. Some companies specifically exploit this myth by promoting workers from “hourly” to “salaried” positions with the understanding that, in exchange for the salary, the worker gives up her right to overtime pay. Because these “salaried” job titles often carry an elevated status both in and outside of the workplace, working without overtime may seem reasonable to the worker.
The FLSA exempts certain executive, administrative, professional, outside sales, and computer employees from the entitlement to time-and-one-half overtime benefits. See 29 U.S.C. §§ 213(a)(1) and 213(a)(17). These exemptions commonly are referred to as the “white collar” exemptions, and they have spawned substantial litigation as some American companies choose to push the envelope in increasingly aggressive efforts to deny overtime pay to workers and their families.
The white-collar exemptions – like all FLSA exemptions – are narrowly construed against the employer. See Arnold v. Ben Kanowski, Inc., 361 U.S. 388, 392 (1960); A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945) (“[t]o extend an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretive process and to frustrate the announced will of the people.”); Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008) (“[A]n employer seeking to apply an exemption to the FLSA must prove that the employee and/or employer comes ‘plainly and unmistakably’ within the exemption’s terms.”) (quoting Arnold, 361 U.S. at 392) (emphasis in original); Mudgett v. Univ. of Pittsburgh Med. Ctr., 2010 U.S. Dist. LEXIS 44266, 8 (W.D. Pa. May 6, 2010) (“Exemptions from the overtime provisions of the FLSA are to be construed narrowly against the employer, who bears the burden of proof that a given employee falls within the scope of an overtime exemption.”) (emphasis supplied).
To utilize a white-collar exemption, a company generally must clear two independent hurdles:
A. The “Salary Basis” Requirement
First, the employee must be paid on a “salary basis” at a salary of at least $455 per week. See 29 C.F.R. § 541.600(a); see generally Auer v. Robbins, 519 U.S. 452 (1997) (discussing “salary basis” concept). “An employee will be considered to be paid on a ‘salary basis’ . . . if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.602(a). Generally, the employee “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.” Id. However, under appropriate circumstances (which are described in the regulation), deductions may be made for full-day absences attributable to, inter alia, illness or disciplinary suspensions. See id. at 541.602(b). Hourly or less than full-day deductions has been held to be evidence of a company’s failure to pay someone on a salary basis. See Kinney v. District of Columbia, 994 F.2d 6, 11 (D.C. Cir. 1993) (“Employees paid under a system that subjects them, even theoretically, to docking for absences by the hour lack one of the characteristics explicitly identified in the Department’s regulation on salaried pay.”).
B. The “Job Duties” Requirement
Even if the worker is paid on a “salary basis,” an analysis of the worker’s job duties must reveal that she actually works as an executive, administrative, professional, outside sales, or computer employee, as those terms are defined under the FLSA. Before turning to each of these exemptions, three preliminary points are in order.
First, in 2004, the Department of Labor expanded the reach of the white-collar exemptions in its business-friendly amendments to the overtime regulations. The amended regulations appear at 29 C.F.R. 541.0, et seq.
Second, even where the revised regulations disadvantage particular employees, advocates should remember that many states have their own overtime laws and regulations and that some state regulations contain language that mirrors the pre-2004 federal regulations. You should consult your own state’s law to determine its contents and scope. Importantly, the FLSA does not preempt state laws that offer workers more protection than the FLSA. See 29 C.F.R. § 541.4 (“Employers must comply, for example, with any Federal, State, or municipal laws, regulations, or ordinances establishing a higher minimum wage or lower maximum workweek than those established under the Act”); DeAsencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003) (recognizing that overtime lawsuits may be litigated under both federal and state laws). Also, workers cannot waive their FLSA rights through individual employment contracts or collective bargaining agreements. See 29 C.F.R. § 541.4.
Third, even the new regulations confirm the well-established principle that “[a] job title alone is insufficient to establish the exempt status of an employee.” 29 C.F.R. § 541.2; see also Martin v. Indiana Michigan Power Co., 381 F.3d 574, 585-86 (6th Cir. 2004) (“The FLSA requires the employer to make FLSA exemption decisions based on the employee’s actual job duties, not the employee’s job title.”); Barth v. Wolf Creek Nuclear Operating Corp., 125 F. Supp. 2d 437, 439 (D. Kan. 2000) (quoting previous regulatory language for proposition that “[t]itles can be had cheaply and are of no determinative value”). Moreover, simply being the highest ranking employee at a particular store or location does not automatically make someone exempt. See Ale v. TVA, 269 F.3d 680, 691 (6th Cir. 2001)(“[T]he words ‘in charge’ [or “highest ranked”] are not[, however,] a magical incantation that render an employee a bona fide executive regardless of his actual duties.”); Damassia v. Duane Reade, Inc., 2006 U.S. Dist. LEXIS 73090, at *15 n.7 (S.D.N.Y. Oct. 4, 2006) (“The mere fact that plaintiffs’ job responsibilities differ from, and are more important than, the responsibilities of stock clerks does not necessarily mean that the requirements of 29 C.F.R. § 541.100 and related provisions are satisfied.”)
In other words, a company cannot escape its overtime obligations by giving a worker a salary and a glamorous title but requiring her to perform the same work as her subordinate non-exempt co-workers.
With the above in mind, we turn to the FLSA’s various white-collar exemptions.
1. The Executive Employee Exemption
To qualify for the “executive” employee exemption, the following criteria must be established: (i) the worker’s primary duty must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise; (ii) the worker must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and (iii) the worker must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight. See 29 C.F.R. § 541.100(a); Beamer v. Possum Valley Municipal Authority, 2010 U.S. Dist. LEXIS 28156, *17 (M.D.Pa. Mar. 24, 2010) (“[i]n applying this standard, ‘courts have generally recognized that since the requisite characteristics of executive employment are stated in conjunctive rather than disjunctive, it is necessary . . . that the employee be shown to meet all of the administrative requirements for such exemption.’”) (internal citations omitted and emphasis supplied).
The concurrent performance of executive and non-executive work does not necessarily disqualify a worker from classification as an executive employee. See 29 C.F.R. § 541.106.
In applying the executive exemption, the devil is in the details. Before deciding whether a worker meets the above criteria, one must carefully study the definitions of applicable terms such as “primary duty,” see id. at § 541.700, “customarily” and “regularly,” see id. at § 541.701, “management,” see id. at § 541.102, “department or subdivision,” ,” see id. at § 541.103, “two or more other employees,” see id. at § 541.104, and “particular weight,” see id. at § 541.105. In issuing the 2004 amendments, the Department of Labor generally altered these definitions for the benefit of corporate America. However, there remains ample room to argue that workers do not fall within the revised executive exemption, and, like many regulatory changes, the amended exemption probably is neither as beneficial as business hopes nor as harmful as workers fear. See, e.g., Beauchamp v. Flex-N-Gate, LLC, 2005 U.S. Dist. LEXIS 3108, *10 N. 3 (E.D. Mich. Feb 23, 2005) (suggesting that 2004 regulations did not significantly alter analysis of whether production supervisor was exempt executive employee).
2. The Administrative Employee Exemption
To qualify for the administrative employee exemption, the employee’s primary duty (i) must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers and (ii) must include the exercise of discretion and independent judgment with respect to matters of significance. See 29 C.F.R. § 541.200(a). The regulations, as amended in 2004, define in great detail key terms, such as “primary duty,” see id. at § 541.700, “directly related to management or business operations,” see id. at § 541.201, and “discretion and independent judgment,” see id. at § 541.202.
Also, the 2004 amendments include various “examples” of positions that “generally” fall within the administrative exemption. See id. In addition, due in part to the generalized terminology of these regulations, courts have been split on its applicability to the exact same positions. Compare Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010) (affirming finding that pharmaceutical sales representatives were an exempt administrative employees) with In re Novartis Wage & Hour Litig., 611 F.3d 141, 144 (2d Cir. 2010) (vacating a district court’s finding that pharmaceutical sales representatives were not exempt administrative employees)
3. The Professional Employee Exemption
Workers are classified as exempt “professional employees” if their “primary duty is the performance of work (i) requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or (ii) requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.” 29 C.F.R. § 541.300. Similarly, workers are classified as exempt “learned professionals” if their primary duty is “the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” Id. at § 541.301. Finally, workers are classified as “creative professionals” if their primary duty is “the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” Id. at § 541.302.
As with the administrative exemption, the 2004 regulations gratuitously suggest that various job titles generally fall within the professional exemptions. These include, among others, certain “medical technologists,” 29 C.F.R. § 541.301(e)(1), “registered nurses” (but not “licensed practical nurses”), id. at § 541.301(e)(2) certain “dental hygienists,” id. at § 541.301(e)(3), certain “physician assistants,” id. at § 541.301(e)(4), most “chefs and sous chefs” (but not “cooks who perform predominantly routine mental, manual, mechanical or physical work”), id. at § 541.301(e)(6), some (but not nearly all) paralegals, id. at § 541.301(e)(7), most teachers, id. at § 541.303(b), and medical interns and residents, 29 C.F.R. § 541.304(c). The 2004 regulations were not concerned with the fact that these examples disrespect the well-established principles that a worker’s job title is not determinative of his coverage status under the FLSA and that coverage should be determined on a case-by-case basis depending on the worker’s actual job duties. See, e.g., 29 C.F.R. § 541.2 (“A job title alone is insufficient to establish the exempt status of an employee.”).
4. Computer Employees, Outside Salesmen, and Highly Compensated
The regulations also exempt “[c]omputer systems analysts, computer programmers, software engineers or other similarly skilled workers in the computer field,” 29 U.S.C. § 541.400(a), as well as most “outside salesmen,” see id. at § 541.500, et seq., and most employees with a total annual compensation in excess of $100,000, id. at 541.601.
5. “Blue Collar” Workers and Public Safety Employees
Even though there never was much doubt about the non-exempt status of “blue collar” workers, the 2004 regulations explicitly state that the exemptions do not apply to “manual laborers or other ‘blue collar’ workers who perform work involving repetitive operations with their hands, physical skill and energy.” 29 C.F.R. § 541.3(a). More significantly, the new regulations assert that the following public safety providers generally are not exempt from receiving overtime: “police officers, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, fire fighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers and similar employees, regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.” Id. at § 541(b)(1).
However, if these workers are unionized, be especially mindful that FLSA rights cannot be waived by collective bargaining agreements that provide less generous overtime benefits. See 29 C.F.R. § 541.4.
IV. Are any Other Employees Exempt From Overtime Under the FLSA?
In addition to the white-collar exemptions discussed above, the FLSA contains various statutory exemptions for other types of workers. These exemptions, some of which are quite broad, include, inter alia:
Workers (such as truck drivers) employed by common carriers and whose qualifications and maximum hours are dictated by the federal Motor Carrier Act;
Workers employed in certain “amusement or recreational establishment[s], organized camp[s], or religious or non-profit educational conference center[s];”
See generally 29 U.S.C. § 213.
V. Common Violations for Properly Classified Hourly Employees
In addition to misclassifying workers as exempt, employers will also try various schemes to avoid paying their hourly employees overtime compensation. Often this is attempted through misguided variations of “off-the-clock” violations where employers fail to pay workers for all the time they spending performing work related activities.
However, federal courts have been clear that the FLSA is intended to “guarantee either regular or overtime compensation for all actual work or employment.” Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123, 321 U.S. 590, 597 (1944); accord IBP, Inc. v. Alvarez, 546 U.S. 21, 25 (2005); Andrako v. United States Steel Corp., 632 F. Supp. 2d 398, 404-05 (W.D. Pa. 2009). Whether an activity constitutes compensable work under the FLSA does not depend on the level of exertion required to perform the activity. See 29 C.F.R. §785.7; DeAsencio v. Tyson Foods, Inc., 500 F.3d 361, 370-73 (3d Cir. 2007); In re Cargill Meat Solutions Wage & Hour Litig., 632 F. Supp. 2d 368, 377 (M.D. Pa. 2008); see also Schneider and Stein, Wage and Hour Law §6:04 (“the general rule is that if an employer requires an employee to perform a task for the employer’s benefit, even if it is waiting, the time spent is considered hours worked”).
Regardless, there are numerous ways in which employers try to avoid paying overtime compensation. Some examples include:
A. Refusing to Pay for Pre- and Post-Shift Activities
In order to control labor costs, employers will often require employees to report early for “set up” activities or stay after their scheduled shifts in order to perform “closing down” work but will not pay them for these activities. Examples include, inter alia: (i) donning and doffing of protective gear and equipment at production facilities; (ii) attendance at pre and/or post shift meetings; and (iii) mandatory shop time before leaving to a distant worksite.
However, workers frequently are entitled to compensation for time accrued before or after the scheduled start of the paid workday. In particular, workers are required to be compensated for activities that are “integral and indispensible” to the “principal activities” for which they are employed. See DeAsencio, 500 F.3d at 369 (discussing Alvarez, 546 U.S. at 25, and Steiner v. Mitchell, 350 U.S. 247 (1956)); accord Andrako, 632 F. Supp. 2d at 377. The term “principal activities” is “to be construed liberally . . . to include any work of consequence performed for an employer, no matter when the work is performed,” 29 C.F.R. § 790.8(a), and a worker “may be engaged in several ‘principal’ activities during the workday,” id.
As the Supreme Court has explained, activities that are “integral and indispensible” to a worker’s “principal activities” are, themselves, “principal activities” for which compensation is due. See Alvarez, 546 U.S. at 33; accord De Asencio, 500 F.3d at 369.
Federal courts consistently hold that activities performed before and after paid shifts are compensable as integral and indispensible to the workers’ principal activities. See, e.g., Herman v. Rich Kramer Construction, Inc., 1998 U.S. App. LEXIS 23329, *2 (8th Cir. Sept. 21, 1998) (affirming district court finding that workers should be compensated for time spent at the shop performing activities such as, inter alia, “load[ing] trucks,” “unload[ing] and lock[ing] the trucks,” and “secur[ing] equipment”); Dunlop v. City Elec., Inc., 527 F.2d 394, 397-400 (5th Cir. 1976) (holding that the following activities were compensable: “filling out daily time sheets, material sheets, and supply and cash requisition sheets, checking job locations, removing from trucks trash accumulated during the previous day’s work, loading the trucks with standard materials and any additional materials needed for the particular day’s job, fueling the trucks, and picking up electrical plans for the day’s job”); Chao v. Akron Insulation & Supply, Inc., 2005 U.S. Dist. LEXIS 9331, *24 (N.D. Ohio May 5, 2005) (“Examples of activities that are integral to principal activities include reporting to a designated meeting place, receiving assignments, and loading equipment.”); O’Brien v. Encotech Constr., 2004 U.S. Dist. LEXIS 4696, *17 (N.D. Ill. Mar. 23, 2004) (activities such as, inter alia, gathering, loading, and unloading tools, supplies, and water define the outer limits of the compensable workday); Dole v. Enduro Plumbing, Inc., 1990 U.S. Dist. LEXIS 20135, at *12, 14 (C.D. Cal. Oct. 10, 1990) (activities such as, inter alia, meeting workers and collecting tools trigger the compensable workday); Hodgson v. Frisch’s Dixie, Inc., 1971 U.S. Dist. LEXIS 12029, at *11 (W.D. Ky. Aug. 16, 1971) (holding that the cleaning equipment and preparing for the next day were compensable activities), aff’d, 469 F.2d 82 (6th Cir. 1972).
Moreover, under the FLSA’s “continuous workday” doctrine, “[o]nce an employee engages in a principal activity – or in an activity that is integral and indispensable to a principal activity – the workday has begun and, under the continuous workday rule, that activity and any subsequent activities in which the employee engages prior to the end of the workday are compensable.” Jordan v. IBP, Inc./Tyson Foods, Inc., 542 F. Supp. 2d 790, 802 (M.D. Tenn. 2008); accord Alvarez, 546 U.S. at 28-29; DeAsensio, 500 F.3d at 369-70; Andrako, 632 F. Supp. 2d at 405; In re Cargill Meat Solutions, 632 F. Supp. 2d at 377-78; Lugo v. Farmer’s Pride, Inc., 2008 U.S. Dist. LEXIS 3232, *9 (E.D. Pa. Jan. 14, 2008). As the DOL has explained, under the continuous workday rule, “[p]eriods of time between the commencement of the employee’s first principal activity and the completion of his last principal activity on any workday must be included in the computation of hours worked . . . .” 29 C.F.R. § 790.6(a). In other words, once the bell is rung with the first compensable act of the day, all subsequent acts by the employee must be compensated.
B. Failing to Pay for “Travel Time”
Separate and apart from the continuous workday doctrine, DOL has issued regulations specifically addressing the circumstances under which travel at the beginning and end of the workday will be deemed compensable work under the FLSA. According to the DOL:
Time spent by an employee in travel as part of his principal activity, such as travel from job site to job site during the workday, must be counted as hours worked. Where an employee is required to report at a meeting place to receive instructions or to perform other work there, or to pick up and to carry tools, the travel from the designated place to the work place is part of the day’s work, and must be counted as hours worked regardless of contract, custom, or practice. If an employee normally finishes his work on the premises at 5 p.m. and is sent to another job which he finishes at 8 p.m. and is required to return to his employer’s premises arriving at 9 p.m., all of the time is working time. However, if the employee goes home instead of returning to his employer’s premises, the travel after 8 p.m. is home-to-work travel and is not hours worked.
29 C.F.R. §785.38 (emphasis supplied). Thus, “travel from an employer-designated location to the workplace is compensable under the FLSA.” McGuire v. Hillsborough County, 511 F. Supp. 2d 1211, 1217 (M.D. Fla. 2007); see also Chao, 2005 U.S. Dist. LEXIS 9331, at *27-29 (citing cases). Travel between worksite during the day is also compensable.
C. Allowing Work During Meal Breaks
Many times employers try to squeeze unpaid work out of their employees by having them perform work during parts of an unpaid meal break period or be “on-call” during this time. However, the DOL has promulgated regulations stating that:
Bona fide meal periods are not worktime. Bona fide meal periods do not include coffee breaks or time for snacks. These are rest periods. The employee must be completely relieved from duty for the purposes of eating regular meals. Ordinarily 30 minutes or more is long enough for a bona fide meal period. A shorter period may be long enough under special conditions. The employee is not relieved if he is required to perform any duties, whether active or inactive, while eating. For example, an office employee who is required to eat at his desk or a factory worker who is required to be at his machine is working while eating.
29 C.F.R. § 785.19. Many courts have read this language to require an employee to be “completely relieved” from duty for the entire 30 minute meal period or the employees should be compensated an additional 30 minutes. See Abendschein v. Montgomery County, 984 F. Supp. 356 (D.Md. 1997); Burks v. Equity Group, 571 F. Supp. 2d 1235 (M.D. Ala. 2008).
Meal break violations such as this are typically found with employer timekeeping systems (such as Kronos) that are preprogrammed to automatically reduce an employee’s paid time by 30 minutes for the purported meal break. However, when companies choose to utilize an automatic 30 minute deduction, the DOL has said that “the employer must ensure that the employees are receiving the full meal break.” See DOL Wage and Hour Division Fact Sheet No. 53 (available at “www.dol.gov”).
D. Refusing to Pay for Restrictive “On Call” Time
Generally, the DOL has held that an “on-call” employee who is not required to remain on the employers’ premises, and who is free to enjoy uninterrupted time for personal activities, is not working and does not need to be compensated while for this time. However, “[a]n employee who is required to remain on call on the employer’s premises or so close thereto that he cannot use the time effectively for his own purposes is working while ‘on call’” and should be compensated for this time under the FLSA.” 29 C.F.R. § 785.17
While “[a]n employee who is required to carry a cell phone, or a beeper, or who is allowed to leave a message where he or she can be reached is not working (in most cases) while on-call. Additional constraints on the employee’s freedom could require this time to be compensated.” See DOL Wage and Hour Division Fact Sheet No. 53 (available at “www.dol.gov”).
E. Applying Rounding Rules that Regularly Shortchange Employees
Some companies who use a time clocks or other employee punch-in or sign-in system consistently round workers’ start and end times down to the nearest half or quarter hour. Such rounding practices generally are illegal and can result in substantial underpayment. Generally, the FLSA allows employers to round employee time to the nearest quarter hour. However, the rounding rules must equally benefit the employer and employee. For example, “[e]mployee time from 1 to 7 minutes may be rounded down, and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time.” See DOL Wage and Hour Division Fact Sheet No. 53 (available at “www.dol.gov”) (citing 29 C.F.R. § 785.48(b)).
F. Failing to Pay for “Volunteered” or “Unauthorized” Overtime
Employee activities do not become non-compensable just because the activities are performed “voluntarily” or without the employer’s authorization. According to DOL regulations:
Work not requested but suffered or permitted is work time. For example, an employee may voluntarily continue to work at the end of the shift. He may be a pieceworker, he may desire to finish an assigned task or he may wish to correct errors, paste work tickets, prepare time reports or other records. The reason is immaterial. The employer knows or has reason to believe that he is continuing to work and the time is working time.
29 CFR § 785.11. Thus, the employer – not the employee – is responsible for ensuring that “unauthorized” or “volunteered” work is not tolerated. In particular:
it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.
29 CFR § 785.113. As recognized by federal courts, compensation is due whenever the employer has either “actual or constructive knowledge” of the work activities. See Barvinchak v. Indiana Regional Medical Center, 2007 U.S. Dist. LEXIS 72805 (W.D. Pa. Sept. 28, 2007),
VI. Somewhat Creative Ways to Shortchange Hourly Employees
Employers can be very resourceful in the ways in which they avoid paying full overtime wages. Many of these methods may seem reasonable to the naked eye but are still potential violations of the FLSA.
A. “Comp Time”
It is generally illegal for private sector employers to pay non-monetary compensatory time to employees in lieu of overtime premium pay. See 29 U.S.C. § 207(o); Boyke v. Superior Credit Corp., 2006 U.S. Dist. LEXIS 93928 (N.D.N.Y Dec. 28, 2006). Moreover, even if an employer qualifies under section 207(o), it must provide comp time of 1.5 hours for each hour of overtime. 29 U.S.C. § 207(o). In other words, if an employee works 44 hours one week (4 hours of overtime), they are entitled to six hours (4 x 1.5) of comp time.
B. Averaging Long and Short Workweeks
Employees generally are entitled to “time-and-one-half” overtime pay for all hours worked over 40 in a single workweek, which is defined as a period of seven consecutive days. Companies generally cannot avoid paying overtime by averaging a “long” workweek with a “short” workweek. For example, if an employee works 48 hours in one workweek and only 32 hours in the next workweek, she usually is entitled to 8 hours of overtime pay for the first workweek. It does not matter that the first 48 hour week and the second 32 hour week “average out” to two 40-hour weeks.
C. Failing to Include Separate Hourly Rates, Commissions, Shift Differential Pay, and Other Monetary Payments in the Overtime Calculation
The FLSA entitles employees to overtime premium compensation based on their “regular rate” of pay. See 29 U.S.C. § 207(a)(1). The “regular rate” generally is “deemed to include all remuneration paid to, or on behalf of, the employee.” Id. at § 207(e). Thus, in order to determine a worker’s overtime pay rate, an employer must first determine the worker’s “regular rate” of pay. Under the FLSA, the regular rate is “the hourly rate actually paid the employee for the normal, non-overtime workweek for which he is employed.” 29 C.F.R. § 778.108; accord Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424 (1945); Adair v. City of Kirkland, 185 F.3d 1055, 1059 (9th Cir. 1999). More importantly, “[i]f the employee’s regular rate of pay is higher than the statutory minimum, his overtime compensation must be computed at a rate not less than one and one-half times such higher rate.” 29 C.F.R. § 778.107 (emphasis supplied); accord Tho Dinh Tran v. Alphonse Hotel Corp., 281 F.3d 23, 34 (2d Cir. 2002) (citing additional authority); see also Schneider & Stine, Wage and Hour Law §9:04 (explaining legislative purpose behind the requirement that employee’s actual pay rate – rather than the minimum wage rate – be used in determining the overtime premium rate”). DOL regulations addressing the determination of the “regular rate” of pay under various compensation schemes. See, e.g., 29 C.F.R. §§ 778.108-778.122.
The regulations also expressly address the manner of calculating unpaid overtime wages, where employees receive more than one hourly rate of pay in a particular workweek. In particular, § 778.115 provides, in part:
Where an employee in a single workweek works at two or more different types of work for which different nonovertime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates.
29 C.F.R. § 778.115 (emphasis supplied); see also Hodgson v. Penn Packing Co., 335 F. Supp. 1015, 1021 (E.D. Pa. 1971) (“Where an employee works at two or more different jobs which have different hourly rates, the Wage and Hour Administrator has determined that the rate upon which overtime must be paid is the weighted average of the rates at which he works. This is determined by computing the employee’s entire compensation during the workweek from all such rates and dividing by the total number of hours worked at all jobs.”); see also Parth v. Pomona Valley Hosp. Med. Ctr., 584 F.3d 794, 802 (9th Cir. Cal. 2009); Allen v. Bd. of Pub. Educ., 495 F.3d 1306, 1311-1312 (11th Cir. 2007); Genao v. Blessed Sacrament Sch., 2009 U.S. Dist. LEXIS 95787, *24 (E.D.N.Y. Sept. 30, 2009) Murphy v. Town of Natick, 2008 U.S. Dist. LEXIS 102874, *2-3 (D. Mass. Dec. 19, 2008); Gallucio v. Weiser Sec. Servs., 2008 U.S. Dist. LEXIS 88435, *6-7 (M.D. Fla. Oct. 20, 2008); Estrella v. P.R. Painting Corp., 2008 U.S. Dist. LEXIS 86481, *9-10 (E.D.N.Y. Sept. 16, 2008). The same logic also applies to the inclusion of commissions in the calculation of an employee’s regular rate. See 29 C.F.R. § 778.117.
D. Saying an Employee Worked Two Separate Jobs for Different Corporate Entities
Much like an employer cannot use two separate hourly rates to avoid paying employees full overtime compensation, see 29 C.F.R. § 778.115, an employer cannot circumvent the overtime pay requirement by simply issuing an employee two separate checks from “separate companies” for the same workweek.
Under the FLSA, “if the facts establish that the employee is employed jointly by two or more employers, i.e., that employment by one employer is not completely disassociated from employment by the other employer(s), all of the employee’s work for all of the joint employers during the workweek is considered as one employment for purposes of the Act.” 29 C.F.R. §791.2(a). In making the joint employment determination, courts are mindful that the FLSA contains “the broadest definition [of employment] that has ever been included in any one act.” Zheng v. Liberty Apparel Co., Inc., 355 F.3d 61, 69 (2d Cir. 2003); accord Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992) (recognizing “striking breadth” of FLSA’s definition of “employee”); Falk v. Brennan, 414 U.S. 190, 195 (1973) (recognizing “expansiveness of the [FLSA’s] definition of ‘employer’”); Rutherford Food Corp. v. McComb, 331 U.S. 722, 728-29 (1947) (discussing breadth of FLSA’s definition of “employ”); United States v. Rosenwasser, 323 U.S. 360, 362 (1945) (it “would be difficult to frame” a broader definition of employee than exists under the FLSA).
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