Yesterday, the United States Department of Labor filed an appeal challenging an order which halted DOL’s new overtime regulations. Those new regulations were scheduled to go into effect on December 1, 2016 and would have raised the minimum salary for exempt employees to $47,476.00. I previously wrote about the injunction which stopped the new regulations here: Federal Judge Halts New Overtime Regulations!
In a “normal” case, an appellate court can take a year or longer to issue a decision on an appeal. Most likely, this appeal will be fast-tracked by the Fifth Circuit Court of Appeals. Even so, employers should not expect a decision any earlier than some time in the first quarter of 2017. Here is the DOL’s press release concerning the appeal: https://www.dol.gov/whd/overtime/final2016/litigation.htm
Many of my clients are calling with questions about the new overtime regulations, which become effective on December 1, 2016. Those calls and a recent decision from the Eleventh Circuit Court of Appeals merit a discussion of the “fluctuating workweek” method of calculating overtime. See Garcia v. Yachting Promotions, Inc., No. 16-10095, 2016 WL 6276046 (11th Cir. Oct. 27, 2016). In summary, an employee with a fluctuating work schedule can be paid: (1) a fixed weekly salary; and (2) half-time (instead of time-and-a-half) as overtime compensation for all hours over 40.
This methodology should only be applied to employees who work irregular work hours. Most importantly, their hours must fluctuate both above and below 40 hours per week.
If an employee truly works a fluctuating workweek, then it is possible to pay them overtime at half-time rather than time-and-a-half. But, there are numerous requirements that must be satisfied. Critically, the employee must be paid a fixed weekly salary as straight time pay. The employee receives this amount if they work less than 40 hours in a week, or more than 40 hours. Additionally, the Department of Labor’s regulations provide:
The employee clearly understands that the straight-salary covers whatever hours he or she is required to work;
The straight-salary is paid irrespective of whether the workweek is one in which a full schedule of hours are worked;
The straight-salary is sufficient to provide a pay-rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours worked is greatest; and
In addition to straight-salary, the employee is paid for all hours in excess of the statutory maximum at a rate not less than one-half the regular rate of pay.
In Lopez-Garcia, the issue was whether there was a clear mutual understanding between the employer and the employee to apply the fluctuating workweek methodology. “The employee does not have to understand every contour of how the fluctuating workweek method is used to calculate salary, so long as the employee understands that his base salary is fixed regardless of the hours worked.” Lopez-Garcia, 2016 WL 6276046 at *2. In Lopez-Garcia, the plaintiff possessed limited proficiency in English. Nevertheless, he signed a memorandum acknowledging his understanding of the fluctuating workweek, and he knew that he was a “salary employee who did receive overtime.” Id. Those facts were sufficient for the Court to find that the employee was properly paid under the fluctuating workweek method.
The Department of Labor is concerned that employers might attempt to use the fluctuating workweek methodology to limit overtime paid to employees — particularly employees who do not truly work a fluctuating schedule. Thus, application of this methodology should be approached very carefully. But, if you have employees whose schedule truly fluctuates over and under 40 hours per week, this is a potential alternative method for calculating overtime.
The Eleventh Circuit Court of Appeals recently ruled that attorneys are not entitled to overtime under the Fair Labor Standards Act (“FLSA”). Okonkwo v. The Callins Law Firm, No. 16-10192, 2016 WL 4916850(11th Cir. Sep. 15, 2016).
This ruling really should come as no surprise to any attorney who practices wage and hour law. The FLSA expressly exempts those employees who are “employed in a bona fide … professional capacity.” 29 U.S.C. 213(a)(1). Moreover, the United States Department of Labor (“DOL”) has defined a “bona fide professional” as “[a]ny employee who is the holder of a valid license or certificate permitting the practice of law … and is actually engaged in the practice thereof.” 29 C.F.R. 541.304(a)(1).
Nevertheless, the plaintiff in Okonkwo argued that, as a matter of policy, she should receive overtime because she was paid an hourly wage instead of on a salary basis. The Eleventh Circuit rejected that argument because DOL regulations expressly provide that the salary basis test does not apply to licensed attorneys. 29 C.F.R. 541.304(d). The Court deferred to those regulations.
Okonkwo simply reinforces that professionals like doctors and lawyers are not entitled to overtime.
Recent decisions from the United States District Court for the Northern District of Alabama demonstrate that the Equal Pay Act cannot be used to sue employers for wage disparities caused by discriminatory work assignments. See Crosby v. Massey Hauling, Co., No. 2:16-cv-00383-RDP, 2016 WL 6082047 (N.D. Ala. Oct. 18, 2016).
Generally, the Equal Pay Act prohibits wage discrimination on the basis of gender. An employer cannot discriminate “between employees on the basis of sex by paying wages to employees … at a rate less than the rate at which he pays wages to employees of the opposite sex …for equal work ….” 29 U.S.C. 206(d)(1). In Crosby, the plaintiff was a female truck driver. Her employer paid truck drivers based upon the materials hauled in the trucks. Most of the employer’s trucks were coal trucks, but the employer also used about seven dump trucks. The coal truck assignment were more lucrative for drivers than dump truck assignments. The Plaintiff alleged that she suffered wage discrimination because her employer always assigned her to dump truck jobs, while allowing men to drive the coal trucks.
United States District Court Judge R. David Proctor dismissed the plaintiff’s Equal Pay Act claim. He relied heavily upon an earlier opinion by Senior United States District Court Judge C. Lynwood Smith, Jr. in Caetio v. Spirit Coach, LLC, 992 F.Supp.2d 1199 (N.D. Ala. 2014). Judge Smith found that “the Equal Pay Act does not provide relief for allegations of discriminatory work assignments.” Caetio, 992 F.Supp.2d at 1213. Because the Plaintiff in Crosby was seeking to recover for disparities in pay caused by discriminatory work assignments between coal trucks and dump trucks, Judge Proctor dismissed the Equal Pay Act claim.
Judge Proctor’s decision was only a minor win for the employer. The plaintiff also filed a claim under Title VII of the Civil Rights Act of 1964 which generally prohibits gender discrimination. Potentially, discriminatory work assignments could violate Title VII. The employer in Crosby did not seek dismissal of the Title VII claim, and that claim will proceed through the discovery process.
The minimum wage for employees of many federal contractors will increase to $10.20 per hour effective January 1, 2017. President Obama’s Executive Order 13658 established a minimum wage for contractors working under four major categories of federal contracts:
Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
Service contracts covered by the Service Contract Act (SCA);
Concessions contracts, including any concessions contract excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b); and
Contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.
Effective January 1, 2015, the minimum wage was set at $10.10 per hour, and that wage has seen five cent increases over the last two years. On September 20, 2016, the United States Department of Labor announced the increase for 2017. The notice of wage increase and an updated workers’ rights poster can be found here: Minimum Wage Increase
Frequently, employers will refuse to issue a final paycheck to a terminated employee. Usually, this occurs because the employee has caused damage of some kind (property or financial) to the employer. The Eleventh Circuit Court of Appeals recently held that holding a final paycheck does not convert an overtime-exempt employee into a “non-exempt” overtime-eligible employee. Pioch v. IBEX Engineering Svcs., No. 15-10845, 2016 WL 3254138 (11th Cir. Jun. 14, 2016).
In Pioch, the employee was paid by the hour, but was exempted from overtime by the FLSA’s “computer employee exemption.” Over a four-year period, the employee collected $147,230 in per diem payments for time allegedly traveling from IBEX’s main office in Nevada to a location in Florida. In actuality, the employee had purchased a house in Florida, was not traveling from Nevada and was not eligible for the per diem payments. Thus, IBEX withheld his pay for the last three weeks prior to his resignation.
The employee sued and argued that withholding his pay converted him to a non-exempt, overtime-eligible employee during the three weeks his pay was withheld. After an extensive analysis, the Eleventh Circuit held that an employee’s exempt status “does not evaporate simply because the employer withholds a final paycheck.” Pioch, 2016 WL 3254138 at *6.
In short, holding a final paycheck does not magically confer overtime eligibility on an employee. Nevertheless, this does not mean that employers are immune from all types of liability. In fact, the Eleventh Circuit’s Pioch opinion repeatedly emphasized that Pioch might possess a breach of contract claim against his employer. Such a claim is resolved in state court instead of federal court.
Judge Virginia Emerson Hopkins recently certified a potential class action by store managers seeking overtime compensation from Cato women’s clothing stores. SeePrince v. Cato Corp., No. 1:14-CV-1708-VEH, 2016 WL 2997217 (N.D. Ala. May 25, 2016). Cato contends that its store managers are “bona fide executive, administrative or professional” employees who are exempt from overtime requirements.
The request for a class action was made by Virginia Prince, a store manager at Cato’s Anniston, Alabama store. Ms. Prince claims that she was required to work at least 45 hours per week, but that the overwhelming majority of her time was spent performing manual labor instead of bona fide managerial work. A special provision of the Fair Labor Standards Act regulations permits an executive or administrative employee in the retail sector to spend up to 40% of their time on non-administrative duties without loss of the overtime exemption.
Ms. Prince asked Judge Hopkins to certify a nationwide class of Cato store managers, but Judge Hopkins declined. Instead, she certified a class solely within the Northern District of Alabama consisting of current and former store managers from September 17, 2011 to the present.
Judge Hopkins’s certification is merely the first step in the process for a potential class action. Cato obviously denies that its managers are entitled to overtime and will have the opportunity to de-certify the class at a later dater. Nevertheless, Prince provides a cautionary tale for employers. Large employers with employees performing the same duties in similar locations are potentially subject to class actions for overtime compensation under the FLSA.
In a recent overtime dispute, an employer attempted to use an employee’s LinkedIn profile to establish that the employee was exempt from payment of overtime under the Fair Labor Standards Act. SeeTrammell v. Amdocs, Inc., No. 2:15-cv-01473-RDP, 2016 WL 3618367 (N.D. Ala. Jul. 6, 2016). Unfortunately, Judge David Proctor was forced to send the case to trial.
In Trammell, Scott Trammell worked as a Project Management Office Professional for Amdoc, Inc. and was paid more than $100,000.00 in salary in 2014. He sued for overtime after leaving Amdoc’s employment in 2015. Amdoc attempted to have the case dismissed at the summary judgment stage and argued that Trammell was exempt from overtime because he was a highly-compensated employee. But, the highly-compensated employee exemption only applies if the employee customarily and regularly performs exempt executive, administrative or professional duties.
Trammell flatly denied that he performed executive, administrative or professional duties. Instead, he claimed that he merely generated reports for his supervisor and responded to e-mail correspondence. So, Amdoc pointed to Trammell’s LinkedIn Profile which suggested that his duties included: management of seven employees and two applications; monitoring and coordinating team projects; providing end to end project management; managing team overload; providing overall delivery of multiple projects; and, coordinating, tracking and reporting IT releases.
In an entertaining opinion, Judge Proctor was forced to send the case to trial because the Federal Rules of Civil Procedure required him to believe Trammell’s denials of responsibility — even when contradicted by the LinkedIn Profile. The difficulty of Judge Proctor’s decision is found in the following passage:
Would an employer really pay someone like him over $100,000 to merely answer emails and generate reports? (If so, where can recent college graduates in the IT field obtain an Amdocs application for employment?) It might even be said that his denial lacks credibility. But it emphatically is the [jury] who must say that, not this court ruling on a motion for summary judgment.
Frequently, my clients think that every managerial employee is exempt from overtime. That assumption is dangerous and can lead to liability for overtime — particularly under the new overtime rule which will go into effect on December 1, 2016.
In determining eligibility for overtime, the first hurdle is not the duties performed by the employee. Instead, look at their salary first. Under the current regulations, almost every employee who earns a salary less than $23,660 is entitled to overtime — regardless of whether their duties might make them executive, administrative or professional employees under the Fair Labor Standards Act. On December 1, 2016, that salary threshold will increase to $47,476. Here’s a link to a previous post about the new rule: Breaking News: Final Overtime Rule Released
So, if you have a manager making a salary less than $47,476, you will probably be required to pay them overtime starting December 1, 2016. I strongly encourage you to conduct an audit/review of all of your employees to determine if they will be entitled to payment of overtime under the new rule.
Yesterday, the United States Department of Labor released its highly-anticipated (and much-debated) final rule regarding overtime compensation. Here is a link to the Department of Labor’s Fact Sheet on the new rule: DOL Fact Sheet on New Overtime Rule
Prior to release of the rule, every prognosticator was trying to predict the new threshold salary for exempt employees. Currently, that salary is $23,660. Under the new rule, the threshold salary is $47,476. That is a massive increase for employers.
The new rule becomes effective on December 1, 2016. On that date, employees with an annual salary of $47,476 or less must be paid overtime. I previously advised that employers should begin planning for the new rule here: What Would Saban Do? Preparation for DOL’s New Overtime Rules If you have not done so, it’s time to conduct a wage audit of your employees and make difficult decisions regarding salaries.