DOL: Employers May Have to Pay for COVID Vaccine and Testing Time

DOL Fact Sheet Wage and Hour COVID Alabama Employment Law
The DOL released a Fact Sheet providing guidance to employers on their duty to pay for employee time spent getting vaccinated or tested for COVID-19.

Since the beginning of the COVID-19 pandemic, my clients have asked a lot of questions about paying employees for time spent testing for COVID-19 and receiving the COVID-19 vaccine.  The United States Department of Labor previously provided some guidance on their web page of Questions and Answer Related to COVID-19 and the Fair Labor Standards Act.  Here’s what DOL said:

COVID-19 Testing

7. If my employer requires COVID-19 testing during the workday, do I need to be paid for the time spent undergoing the testing?

Yes, under the FLSA, your employer is required to pay you for time spent waiting for and receiving medical attention at their direction or on their premises during normal working hours. Other laws may offer greater protections for workers, and employers must comply with all applicable federal, state, and local laws.

8. My employer is requiring me to undergo COVID-19 testing on my day off before I can return to the jobsite. Do I need to be paid for the time spent undergoing the testing?

It depends, under the FLSA, your employer is required to pay you for all hours that you work, including for time on your vacation day if the task you are required to perform is necessary for the work you are paid to do. For many employees, undergoing COVID-19 testing may be compensable because the testing is necessary for them to perform their jobs safely and effectively during the pandemic. For example, if a grocery store cashier who has significant interaction with the general public is required by her employer to undergo a COVID-19 test on her day off, such time is likely compensable because it is integral and indispensable to her work during the pandemic. Other laws may offer greater protections for workers, and employers must comply with all applicable federal, state, and local laws.

Here’s a link to the Q&A web page:  FLSA Q&A

DOL and its Wage & Hour Division have now released “Fact Sheet  #84,” which provides an additional level of detail for employers struggling with these issues.  Here’s a link to the DOL Fact Sheet:  DOL Fact Sheet #84.  Here are the rules from that Fact Sheet in a nutshell:

  1. If an employer requires an employee to get vaccinated or tested for COVID-19 during normal working hours, the employer must pay for the time spent engaging in that activity.
  2. If an employer requires an employee to get vaccinated or tested outside normal working hours, the employer must pay for that time if the vaccine or testing is necessary for them to safely and effectively perform their job. Although not explicit, it appears that DOL is assuming that vaccines and testing are necessary for virtually all employees to safely and effectively perform their jobs.  The example used by DOL involves assembly line workers and says: “the vaccine is necessary for them to safely and effectively perform their assembly line jobs.”
  3. Some employers have implemented vaccine mandates and granted accommodations to employees who cannot receive the vaccine for health-related or religious reasons.  If the employer requires COVID-19 testing of those accommodated employees outside normal working hours, the employer must pay for the time.
  4. Some employer have adopted vaccine mandates with a voluntary test-out option.  If an employee voluntary declines to be vaccinated (without a religious/health exemption), and the employer requires testing outside normal working hours, the employer is not required to pay for the time.
  5. Where vaccination or testing is not required by an employer, an employee’s voluntary decision to be tested or vaccinated outside normal working hours is not compensable.

My strong suggestion is that employers should follow this guidance from DOL.  Nevertheless, stubborn employers might have an argument that they are not required to pay for testing and vaccination outside normal working hours.  The general rule is that employers must pay for time outside of working hours if that time is “integral and indispensable” to the employee’s job.

And, DOL clearly considers vaccine/testing time to be “integral and indispensable” in most circumstances.  But, at the end of the day, only a federal judge can decide if an employer has violated the Fair Labor Standards Act.  And, generally, federal judges in the Eleventh Circuit (which includes Alabama) tend to be more conservative than the DOL.  See Bonilla v. Baker Concrete Constr. Inc., 487 F.3d 1340 (11th Cir. 2007)(time spent by construction workers waiting to go through airport security was not “integral and indispensable” to their work.)  So, it might be possible to argue, on a case-by-case basis, that vaccine/testing time is not “integral and indispensable” to a particular job.  Again, I would not recommend this course of an action.  But, it’s an argument that employers can make if push-comes-to-shove.


You May Be Required to Pay Employees for Voluntary Training

training FLSA wage and hour overtime Alabama Employment Law
If training is directly related to an employee’s job, the employer probably has to pay for the time spent in training.

Often, questions from clients provide the opportunity for a new blog post.  Recently, I was asked whether a client was required to pay employees who attended voluntary, after-hours training.  Most people would think that voluntary training is just that:  voluntary.  Surely, you don’t have to pay for something that is voluntary, right?  Unfortunately, the answer is not so simple.  In fact, the general rule for most employers is:  If the training directly relates to the employee’s job, the employer must pay for the time spent in training — even if attendance is voluntary.

The Fair Labor Standards Act requires that employees receive compensation for their work time.  And, in many circumstances, training time is work time.  The FLSA’s implementing regulations provide that time spent at lectures, meetings, training programs and similar activities is not work time if four criteria are met:

(a)  Attendance is outside of the employee’s regular working hours;

(b)  Attendance is in fact voluntary;

(c)  The course, lecture or meeting is not directly related to the employee’s job; and,

(d) The employee does not perform any productive work during such attendance.

29 C.F.R. § 785.27.  In most circumstances, an employer wants an employee to attend training to benefit the job.  As  result, most employee training must be compensated (even if “voluntary”) because it will be “directly related to the employee’s job.”

But, there are always exceptions.  And, in this case, the regulations recognize “special situations” where voluntary training is not compensable even if it directly relates to the employee’s job:

There are some special situations where the time spent in attending lectures, training sessions and courses of instruction is not regarded as hours worked. For example, an employer may establish for the benefit of his employees a program of instruction which corresponds to courses offered by independent bona fide institutions of learning. Voluntary attendance by an employee at such courses outside of working hours would not be hours worked even if they are directly related to his job, or paid for by the employer.

29 C.F.R. § 785.31.

That regulation is clear as mud.  Fortunately, the Wage and Hour Division of the United States Department of Labor provided some clarification last year.  In Opinion Letter FLSA2020-15, WHD addressed six hypothetical scenarios focused on voluntary training and “special situations.”  Here is a link to the letter:  FLSA2020-15.  Most significantly, WHD found that a nurse who enrolled in a webinar directly related to her job, but who viewed the webinar in her off-work time, would not be entitled to compensation under the FLSA.

In summary, employers generally must pay for time spent in training that is directly related to an employee’s job.  But, employers may be excused from payment if “special situations” occur.

Most Employers Are Subject To The FLSA’s Overtime Rules

overtime flsa commerce hourly Alabama employment law
The Fair Labor Standards Act applies to most employers and requires payment of overtime to hourly employees.

Sometimes, my clients ask if they are required to pay overtime to their hourly employees.  Some of the more-savvy clients know that most federal employment laws only apply to businesses of a certain size.  For example, Title VII of the Civil Rights Act of 1964 only applies to employers with fifteen or more employees.  So, these legal-oriented clients will ask about the size-requirement for the Fair Labor Standards Act, which requires overtime.

The answer:  there is no size requirement.  Instead, the FLSA looks at the business of the employer and the employee.  Employers must provide overtime for any employee “who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce ….”  29 U.S.C. §207(a)(1).  That language provides “individual coverage” for employees who work in commerce and also “enterprise coverage” for employers whose business  is engaged in commerce.

Last week, the Eleventh Circuit Court of Appeals made clear that it doesn’t take much for an employee to get “individual coverage.”  See Elien v. All County Enviro. Svcs., Inc., No. 2021 WL 1034800 (11th Cir. Mar. 18, 2021).  The Court concluded that an employee who “makes three to five phone calls per week to out-of-state customers and vendors” can receive “individual coverage” under the FLSA.

Wendy St. Elien was an administrative assistant for a pest control company in Florida.  She called out-of-state customers and vendors on the phone between three and five times a week.  She called “snowbird” property owners to ask for permission to charge their credit cards for services rendered at their Florida properties or to get permission to enter their premises.  She also called the out-of-state corporate headquarters of vendors to discuss billings and payments.  St. Elien sued her employer under the FLSA claiming that she was not paid overtime.  Her employer claimed that she was not covered by the FLSA.

The Eleventh Circuit’s opinion boiled-down to whether St. Elien was “engaged in commerce.”  The FLSA defines “[c]ommerce” to mean “trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.” 29 U.S.C. § 203(b) (emphasis added).  Because St. Elien was engaged in “communication” between States, the Court found that she was entitled to individual coverage under the FLSA. Despite that clear language, the trial court in St. Elien’s case relied upon an earlier Eleventh Circuit decision to require that an employee seeking individual coverage must be “directly participating in the actual movement of persons or things in interstate commerce ….”  But, the St. Elien court reversed the trial court because its reliance upon the earlier decision was overbroad.

St. Elien is a reminder to employers that they have broad obligations to pay overtime to their employees.  There are a few, rare employers who are truly intra-state — with no business conducted with other states.  But, in most cases, employers are required to pay overtime to their hourly employees.

Should You Defer Your Employees’ Payroll Taxes?

tax taxes payroll Alabama Employment Law
Employers can defer payroll taxes. But, is deferral a smart choice?

On August 8, 2020, President Trump issued a Presidential Memorandum authorizing employers to defer withholding, deposit and payment of payroll tax obligations.  The idea behind that memorandum was to “put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most.”  Here is a link to the memorandum: Payroll Tax Memorandum

The Internal Revenue Service is responsible for implementing the details of the memorandum.  On August 28, 2020, the IRS issued Notice 2020-65 to provide some additional guidance.  Here is a link to that notice: Notice 2020-65. Full disclosure:  I am not a tax attorney.  Nevertheless, the Presidential Memorandum is important to employers.  My accountant-friends at Anglin, Reichmann & Armstrong have published a client bulletin discussing Notice 2020-65 and it can be found here: Anglin Reichmann Update.

In summary, the memorandum allows employers to defer withholding payroll taxes from employee paychecks from September 1, 2020 to December 31, 2020.  In concept, this would result in more money in each employee’s pocket.  Other important aspects of the guidance include:

  1. Employees are entitled to defer on the 6.2% employee portion of payroll tax (i.e., Social Security tax).
  2. Only employees with pre-tax wages less than $4,000 per bi-weekly pay period are eligible for deferral.
  3. THIS IS ONLY A DEFERRAL. Employees must re-pay the deferred tax through payroll tax deductions between January 1, 2020 and April 30, 2021.

At this point, there are more questions than answers.

  1. The White House is hoping that the deferred payroll taxes will ultimately be forgiven.  But, only Congress has the power to authorize forgiveness. Nobody knows if that legislation will actually be passed.  If not, employees will face a double-tax at the start of 2021.
  2. What happens if an employer defers the payroll tax and then the employee leaves/quits/is terminated by the employer?  Potentially, the employer will be left holding the bag.
  3. If an employer adopts payroll tax deferral, will individual employees be able to opt out?

In my opinion, the current risks associated with payroll tax deferral outweigh the benefits.  Without a guarantee of forgiveness legislation from Congress, employees will receive no real benefit and face substantial monetary difficulties next year.  Employers get no real benefit and run the risk of paying deferred taxes for people who are no longer employees.

Like all COVID-related issues, payroll tax deferral is an evolving process.  Please follow this blog and my friends at Anglin, Reichmann for future updates.


DOL: Employers Should Use Reasonable Diligence & Document Telework

reasonable diligence telework covid flsa alabama employment law
Employers should use reasonable diligence to determine the amount of work performed by employees who telework.

In the age of COVID-19, many employers are allowing employees to work-from-home — also known as telework.  And, employers are required to pay hourly workers for all work they perform — whether at home or a specific job site.  Moreover, employers also have to pay for work they didn’t request  — unscheduled work.  But, how is an employer supposed to know exactly how much unscheduled work was performed from home?  On August 24, 2020, the United States Department of Labor’s Wage & Hour Division (“WHD”) issued guidance on that issue.  The guidance (known as Field Assistance Bulletin 2020-5) can be found at this link: FAB 2020-5.

Bulletin 2020-5 focuses on the concept of “reasonable diligence.”  Essentially, the bulletin says that employers should establish a system and use “reasonable diligence” to determine the amount of unscheduled work performed. But, the “reasonable diligence” standard also puts obligations on employees.   Employees who fail to follow reasonable time reporting procedures may not be entitled to be paid under the terms of the Fair Labor Standards Act.

As with almost all legal issues, the devil is in the details of each situation.  Employer’s can’t “bury their head in the sand” and ignore unscheduled work.  They also can’t implicitly or overtly discourage or impede accurate time reporting.  For example, employers shouldn’t tell employees:  “Don’t write down any work that you performed after 5:00.”  At the same time, employees can’t ignore well-published time keeping requirements and then complain about not being paid for unscheduled, unreported work.

So, how can employers engage in “reasonable diligence”?  Here are some basic steps:

  1. Employers should create a simple time-keeping policy that requires all hourly employees to document all scheduled or unscheduled work.
  2. Any time keeping policy should have a disciplinary component. Employers have to pay for unscheduled, and even unauthorized work.  But, in most circumstances, an employer can impose discipline if the time keeping policy is violated. IMPORTANTLY: NEVER WITHHOLD PAY WITHOUT CONSULTING A LAWYER.
  3. Employers should do more than just adopt a policy.  They should educate hourly employers and their supervisors on the requirements of the policy.  This can be done with e-mails, memoranda and/or employee meetings. Employers should keep any available documentation to prove that the time keeping policy was effectively disseminated.

Obviously, WHD’s guidance is aimed at ensuring that hourly employees are properly paid when they work from home.  Yet, the WHD guidance also dovetails nicely with the IRS’s guidance requiring employers to keep adequate documentation to support any award of paid leave under the Families First Coronavirus Response Act.  Here’s a link to a blog post that I wrote discussing the IRS’s requirements for documentation of telework: IRS Documentation Requirements.


Overtime Salary Exemption Set at $35,568

FLSA DOL overtime exempt exemption Alabama Employment Law
The DOL’s final overtime rule certainly deserves your attention.

Yesterday, the United States Department of Labor Wage and Hour Division issued its final rule with updates to the Fair Labor Standards Act’s overtime requirements.  The most-awaited update was the dollar amount for an employee to be considered exempt from overtime.  DOL set the exemption at $684 per week — which is equivalent to $35,568 per year.  Here is a link to DOL’s summary of the new rule:  DOL Overtime Rule.

Regular readers may recall that DOL, under the Obama administration, proposed raising the exemption from $23,660 to $47,476 in 2016.  Here is a link to a summary of that proposed rule: 2016 Overtime Post.  Implementation of that rule was halted in court and the DOL under the Trump administration later rescinded it.

The new rule is effective January 1, 2020.  Hopefully, Alabama employers have already reviewed their exempt employees to ensure that they comply with the imminent changes to the FLSA.  If you have not done so, you need to immediately review all of your exempt employees to ensure that they comply with the new rule.

Government Shutdown: Salary/Overtime Issues for Contractors

government shutdown wage and hour Alabama Employment Law
The government shutdown causes issues with payment of employees for government contractors.

The federal government is in another shutdown.  Obviously, there are many thorny political issues behind the shutdown.  But, there are also practical and legal issues that arise for employers.  In particular, government contractors have employees that want to work and be paid.  One particularly difficult area involves payment of employees who are exempt from overtime.  Contractors need to make sure that they do not accidentally lose the exemption for employees who only work part of a week because of the government shutdown.

In order to be exempt from overtime, executive, administrative and professional employees must paid on a “salary basis.”   To be paid on a “salary basis,” an employee must receive in each pay period a predetermined amount that constitutes all or part of their compensation, and that compensation cannot be reduced because of variations in quality or quantity of work. In other words, you must pay an exempt employee their full salary for any week in which they perform any work regardless of the number of days or hours they actually work.

So, what if you have an exempt employee who is required to report to their government facility today, only to be told that they are non-essential and must return home.  Do you have to pay that employee a full week’s salary, even though they reported to work for an extremely short period of time?  In short:  “Yes.”

But, what about next week?  If the shutdown continues, and the exempt employee performs no work at all next week, are your required to pay them their full salary?  In short:  “No.”  The Fair Labor Standards Act’s implementing regulations provide: “Exempt employees need not be paid for any workweek in which they perform no work.”  Here, it is crucial that employees perform no work at all.  In this electronic age, there is an argument that checking work e-mail can constitute “work.”  Therefore, if government contractors want to ensure that they are not responsible for salary during the government shutdown, they should explicitly instruct exempt employees not to check e-mail or conduct any work-related activities during the shutdown.

Some of my clients believe there are exceptions for partial-week “furloughs” of employees.  In the vast majority of cases you cannot “furlough” an exempt employee without risking loss of the exemption.  If you want to require exempt employees to work for a partial-week, and only pay the for the partial week, you should consult with your employment attorney.

How to Pay “By the Hour” Without Losing the Overtime Exemption

by the hour flsa overtime exemption
Employees can be paid “by the hour” and still be exempt from overtime under the FLSA

Many employers believe that all salaried employees are exempt from overtime:  “I pay them a salary.  So, I don’t owe them overtime.”  That belief is dangerous.  The salary requirement is only one part of the FLSA’s overtime exemption.  The employee must also fit within the FLSA’s categories of Executive, Administrative or Professional (“EAP”) employees.   The EAP analysis can be extensive, and that analysis is outside the scope of this blog post.  For our purposes, assume that you have an employee who is an Executive, Administrative or Professional employee, and they are promised an annual salary of $23,660 or more.  It may be possible to compute that employee’s salary “by the hour” without losing the overtime exemption.

On November 8, 2018 the U.S. Department of Labor’s Wage and Hour Division (“DOL”) published an opinion letter that provides some guidance.  Here is a link to that opinion letter: FLSA2018-25.

The “salary basis” test is satisfied when an employee “regularly receives each pay period … a predetermined amount … not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.602(a).  This is the key:  a “salaried” employee must receive a guaranteed amount that is not subject to reductions based upon quality or quantity of work.  So long as the employee receives that “predetermined amount,” employers have great discretion in their method for calculating the amount.

An exempt employee’s earning may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days, or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount earned.

Snipes v. Northeast Pharmaceuticals, Inc., No. 2:11-cv-1000-SRW, 2013 WL 757628 at * 6 (M.D. Ala. Feb. 27, 2013) (citing 29 C.F.R. § 541.604(b)).

DOL Opinion FLSA2018-25 goes a step further and analyzes whether an employee loses the overtime exemption by working too many hours beyond the guaranteed “predetermined amount.”  In that opinion, an employer paid engineers a guaranteed weekly salary of $2,100, determined by multiplying $70 per hour by 30 hours per week.  Even if the engineer worked less than 30 hours, he/she still received $2,100.  The employer also paid the engineers an extra $70 per hour if they worked beyond 30 hours.

DOL found that the extra pay  beyond 30 hours was permissible, so long as there was a “reasonable relationship” between the guaranteed amount and the amount actually earned.  “A ‘reasonable relationship’ exists when ‘the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly … rate for the employee’s normal scheduled workweek.'”  Ultimately, the DOL found that an employee can earn up to 1.5 times the guaranteed “predetermined amount” without losing the exemption.  But, if an employee received as much as 1.8 times the guaranteed “predetermined amount,” they might be considered an hourly employee who is not exempt.

Obviously, these issues are complex.  If you want to compute your salaried employees’ pay “by the hour,” you should consult with your employment attorney.



Warning: You Might Be Required to Pay Employees for Meal Breaks

meal breaks flsa overtime Alabama Employment Law
If you require employees to work during lunch, they may be entitled to pay.

Are you paying employees for the time they spend on meal breaks?  Most employers don’t.  That’s because the Fair Labor Standards Act and its implementing regulations clearly provide:  “Bona fide meal periods are not worktime.”  29 C.F.R.§ 785.19(a).  Some employers rely upon that general regulation and simply refuse to pay employees who take a meal break.  That over-generalization can be costly, because it ignores the requirement that a meal period be “bona fide.”  A meal break is only bona fide if the employee is “completely relieved from duty for the purposes of eating regular meals.”  Id.

The United States Department of Labor provides some guidance on this issue here:  Breaks and Meal Periods.  Typically, a bona fide meal period lasts at least 30 minutes. Short breaks of 5 to 20 minutes are generally considered compensable work time.

The key issue here is whether the employee is “completely relieved from duty” during meals.  That was the focus of the Eleventh Circuit’s recent opinion in Cooley v. HMR of Alabama, Inc., No. 18-10657, 2018 WL 4232041 (11th Cir. Sep. 6, 2018).  In Cooley, the plaintiffs were nursing assistants and licensed practical nurses.  They claimed that during meal breaks they “cared for patient needs” and “tended to patients,” but were not paid for that time.  They sued under the FLSA, but a trial judge dismissed their complaint — finding that it failed to adequately state a claim under the law.

The Eleventh Circuit reversed that decision.  The court found that the employees’ allegations stated a plausible claim that they were not “completely relieved from duty.”  Even so, the employer raised an additional defense.  In order to be compensated, the nurses needed to be performing an activity that was a “principal activity” or “integral and indispensable to the principal activities that an employee is employed to perform.”  The employer argued that the nurses’ allegations were so vague that it could not determine if they were performing a “principal activity” during the meal breaks.  The Eleventh Circuit quickly rejected that argument, finding that “[i]t is reasonable to assume that caring for and tending to patients during the workday is a ‘principal activity’ of a nursing home employee, especially when that employee is employed in at least some capacity as a nurse.”

The Eleventh Circuit’s opinion does not mean that the nurses have won their lawsuit.  Instead, they are simply being given the chance to proceed and prove their case.  The employer still might win if it can demonstrate that the employees were “completely relieved from duty,” or not performing a “principal activity” during the meal breaks.  Nevertheless, Cooley provides an important reminder that employers should carefully review their meal break policies and ensure that employees are “completely relieved from duty” if they are not being paid.

Employer Pays $25K in Arbitration Admin. Fees for $7K FLSA Claim.

Fees arbitration cost FLSA Alabama Employment Law
Sometimes, the fees associated with arbitration will cost more than the actual claim made by the employee.

Just because you’ve got the right to arbitrate a claim doesn’t mean that you have to arbitrate that claim.  If you’ve read my blog before, you know that arbitration is a great form of alternative dispute resolution for many claims.  But, employers should think carefully before arbitrating employment disputes:  Arbitration Isn’t Always Good for Employers.  In conducting that analysis, one factor for employers to consider is the amount of fees that they will pay to an arbitrator in comparison to the value of the employee’s claim.

In Hernandez v. Acosta Tractors, Inc., No. 17-13057, 2018 WL 3761126 (11th Cir. Aug. 8, 2018), the Eleventh Circuit Court of Appeals confronted an employer who was having second-thoughts about the wisdom of arbitrating a claim under the Fair Labor Standards Act.  (“FLSA”).  Julio Hernandez claimed that his employer, Acosta Tractors, failed to pay him overtime.  Mr. Hernandez sued in federal court and Acosta Tractors moved to dismiss the case because he signed an arbitration agreement.  The judge agreed, and dismissed Mr. Hernandez’s case in favor of arbitration.

Acosta Tractors soon began to experience sticker-shock with the arbitration process.  Mr. Hernandez was one of three employees who were arbitrating FLSA claims.  Acosta Tractors asked the arbitrator to consolidate the three proceedings into one, but the arbitrator refused.  The arbitrator also ordered 29 depositions to be taken in the three separate proceedings.

At this point, I need to be clear:  an arbitrator is essentially a paid judge.  Every time the arbitrator works on a case, he bills the parties for his work — usually at rates of $350.00 per hour or more.  Additionally, if a third-party organization, like the American Arbitration Association is involved, they will charge for their work on the case.  As a result, administrative fees quickly add up.

In Acosta Tractors’ case, it received bills for administrative fees in the amount of $33,100 and $43,640 in the other two cases, and $25,875 in Mr. Hernandez’s case.  At this point, faced with over $100,000 in administrative fees, Acosta Tractors cried “uncle,” and tried to go back to federal court.  It refused to pay the arbitration fees, and asked the federal judge to re-assert control over the case.  But, the judge was not pleased.  He found that Acosta Tractor defaulted in arbitration, and thus was also in default in federal court.  Ultimately, the judge entered a default judgment in Mr. Hernandez’s favor in the amount of $7,293.00.

On appeal, the Eleventh Circuit vacated the judge’s ruling for further consideration.    The Eleventh Circuit found that the trial judge should not have entered a default judgment based solely upon the failure to pay administrative fees in arbitration.  Instead, the Eleventh Circuit directed the trial judge to determine whether Acosta Tractors “acted in bad faith in choosing not to pay its arbitration fees.”  The court suggested that a “good faith inability to afford the arbitration fees” would be a factor in Acosta Tractors’ favor, but also noted that its decision “to abandon arbitration after getting adverse rulings from the arbitrator certainly looks like forum shopping.”

To me, the biggest lesson for employers to learn from Hernandez is:  “look before you leap.”  Arbitration is going to be expensive for everybody involved.  In Mr. Hernandez’s case, Acosta Tractors was billed $25,875 in administrative fees on an overtime claim that was worth $7,293.  With the benefit of hindsight, it looks like Acosta Tractors could have saved money by keeping this FLSA case in federal court.