Wage and hour

Snow Day! Issues for Alabama Employers

Robert C. Lockwood
Facebooktwittergoogle_plusredditpinterestlinkedinmail
Snow day Alabama Employment Law FLSA
Snow days present several problems for Alabama employers

Snow Day!  It’s a glorious phrase to school kids everywhere, and a massive pain for employers.  Here in North Alabama, commerce was dragged to a halt yesterday by a dusting of snow.  While my friends in the North scoff, we play it safe in the Deep South even when there’s a possibility of ice.  As a result, employers need to think about the legal ramifications of inclement weather.

Let’s first focus on the “coldhearted” (pun intended) employers out there.  Some businesses cannot or do not close in the face of snow.  While surfing Twitter yesterday, I came across this interesting news story from Memphis:  Employers Can Legally Fire You for Not Coming To Work In Bad Weather.  It provides a correct analysis of the employee-at-will doctrine and its application to snow days — both in Tennessee and Alabama.  In most cases, if an employee does not possess an employment contract, and refuses to come to work because of weather, he or she can be terminated from employment.

Most employers will probably be more concerned about whether they are required to pay employees for snow days.  This question implicates the Fair Labor Standards Act (“FLSA”).  If the employer closes the business because of weather, it is not required to pay hourly, non-exempt employees for the time off.  The employer can allow such employees to use Paid Time Off to cover the absence, or consider the time-off unpaid.  As a practical matter, many employers pay employees, even though it’s not required, in the interest of employee relations.

Weather days for overtime-exempt employees are more difficult.  If an employer is open-for-business, but the employee chooses to stay home, the employee is not entitled to pay for the day.  The employer can dock the employee’s salary in full-day increments without violating the salary-basis test of the FLSA.  In contrast, if the employer closes the business, the employee’s full salary must be paid for the week — even though he or she may not have worked a full work week.

For Alabama employers, I hope that this post helps you to enjoy the snow while understanding your obligations to employees.

 

Take Your Son to Work: Trainee or Employee under the FLSA?

Robert C. Lockwood
Facebooktwittergoogle_plusredditpinterestlinkedinmail
Employee Trainee FLSA Alabama Employment Law
Employees are entitled to pay under the FLSA, but uncompensated trainees are not.

Under the Fair Labor Standards Act (“FLSA”)  “employees” are entitled to pay, but uncompensated “trainees” are not.  The Eleventh Circuit Court of Appeals recently wrestled with the issue of whether a son, who was “learning the business” from his father, was an employee or trainee.  Axel v. Fields Motorcars of Fla, Inc., No. 16-13829, 2017 WL 4461014 (11th Cir. Oct. 6, 2017).

Michael Axel worked as an automobile wholesaler for Fields Motorcars.  He asked the General Manager of Fields to hire his son, Scott Axel, but the General Manager claimed that Fields was not hiring any new employees.  Ultimately, the General Manager and Michael agreed on an arrangement under which Michael would hire Scott as his own employee and teach Scott how to become an automobile wholesaler.  Each day, Scott would arrive at work with his father, review inventory, attend a daily used-car meeting and then go to lunch.  After lunch, Scott posted cars on an internet website for Fields, discussed cars that could be listed for sale, and researched cars that were for sale at auction.  Over the course of his work, Scott purchased sixty or seventy cars for Fields.

After Michael was terminated from employment by Fields, Scott sued and claimed that he was an employee of Fields who was denied pay in violation of the FLSA.  Fields claimed that Scott was not entitled to pay because he was an uncompensated “trainee.”  A trial court in Florida agreed with that argument and dismissed Scott’s claims.  The Eleventh Circuit, however, found that more information was needed.

The court’s analysis borrowed from earlier decisions analyzing whether academic “interns” were entitled to compensation under the FLSA.  The “intern” test analyzes seven factors, which focus heavily on the academic nature of internships.   For non-academic “trainees,” the Court focused on:

  1. The extent to which the trainee and the employer clearly understand that there is no expectation of compensation.  Any promise of compensation, express or implied, suggests that the trainee is an employee — and vice versa.
  2. The extent to which the training period is limited to the period in which the trainee receives beneficial learning.
  3. The extent to which the trainee’s work complements, rather than displaces, the work of paid employees.
  4. The extent to which the trainee and the employer understand that the training opportunity is conducted without entitlement to a paid job at the conclusion of training.

The results of those factors were inconclusive.  The first and fourth favored Fields because Scott clearly understood that he was working without pay, and understood there was no promise of a job at the completion of training.  But, the other factors somewhat favored Scott.  The training period was of indefinite duration, and he did the work of other Fields employees when he did the online work for car sales.

The Court also noted that the analysis was not an “all or nothing” proposition.  Scott could have been a trainee at times and an employee at others.  As a result, the Eleventh Circuit vacated the dismissal of Scott’s claims and remanded the case back to the trial court.

The Axel case demonstrates how complex the issue of “interns” and “trainees” can be.  If somebody is working for you without pay, you need to proceed cautiously and make sure that you are not violating the FLSA.

 

 

Overtime Regulation Struck Down

Robert C. Lockwood
Facebooktwittergoogle_plusredditpinterestlinkedinmail
Overtime DOL Alabama Employment Law FLSA
The Department of Labor’s Overtime Regulation Was Struck Down By a Federal Judge.

Yesterday, United States District Court Judge Amos Mazzant struck down a Department of Labor overtime regulation which increased the threshold for salary exemption under the Fair Labor Standards Act from $23,000 per year to $47,476 per year.  Here’s an article from The Hill discussing Judge Mazzant’s ruling:  Texas Judge Strikes Down Obama Overtime Rule

I wrote about the overtime regulation when it was released, here:  Overtime Rule Released.  After the regulation was released, numerous interested parties filed suit in Judge Mazzant’s court challenging the regulations, and he issued a preliminary injunction, which prevented the regulation from going into effect:  Judge Halts Overtime Regulation

The DOL under the Obama administration was not satisfied with Judge Mazzant’s ruling and filed an appeal with the Fifth Circuit Court of Appeals:  DOL Appeals Overtime Ruling  That appeal remains pending, but many attorneys believe that the DOL under the Trump administration may abandon the appeal.  I will keep you updated as the appeal progresses.

EPL: Does Your Employment Practices Insurance Cover Wage Claims?

Robert C. Lockwood
Facebooktwittergoogle_plusredditpinterestlinkedinmail
EPL coverage wage and hour
Employers should carefully review their EPL policies for coverage of wage claims or risk a denial coverage.

I strongly recommend that my business clients purchase Employment Practices Liability (“EPL”)Insurance.  Employment-related claims are extremely costly to defend — even frivolous claims.   But, it’s important to do your homework when purchasing EPL Insurance.   Many EPL Insurance policies do not cover claims related to employee wage disputes.  So, it’s vital that you ask your insurance agent about the full scope of coverage under your policy.   A Birmingham company learned that lesson the hard way in a recent decision issued in the Northern District of Alabama.  See American Chemicals & Equipment, Inc. v. Continental Casualty Co., No. 6:15-cv-00299-MHH, 2017 WL 2405102 (N.D. Ala. Jun. 2, 2017).

In American Chemicals, the employer purchased EPL Insurance.  But, the insurance policy contained an explicit exclusion for claims arising under the Fair Labor Standards Act as well as any “law anywhere in the world governing wage, hour and payroll practices.”  Also, the definition of a covered “loss” under the policy did “not include any compensation earned by the claimant but unpaid by the Insured ….”

One of American Chemicals’ employees sued in state court claiming that the company failed to pay him the salary and sales commission rate that he was promised when he accepted his offer of employment.  American Chemicals asked its insurance company for a defense of the claim, but the insurance company refused to provide that defense, because the claim was excluded by the policy.  After settling with the employee, American Chemicals sued its insurance company claiming breach of contract, bad faith failure to pay an insurance claim, negligence and wantonness.

The American Chemicals decision focused upon the insurance company’s duty to defend.  Insurance companies frequently have a duty to defend a claim (i.e., pay for the lawyer), even if a claim is not covered.  American Chemicals asked United States District Court Judge Madeline Haikala to enter an order finding that the insurance company breached its duty to defend — even if the wage claim was not covered.  After interpreting the policy, however, Judge Haikala found that American Chemicals was not entitled to a defense — under its primary argument.  Nevertheless, Judge Haikala found an issue that the parties did not argue.  The employee’s underlying claim asked for punitive damages, and Judge Haikala found that a punitive damages request might require a defense from the insurance company.  So, Judge Haikala ordered the parties to submit briefs to her on that issue.  As a result, American Chemicals’ case is severely damaged, but still alive.

The key takeaway here is to ask your insurance agent if wage claims are covered by your EPL policy.  If there is a wage exclusion, you need to seriously consider purchasing a separate wage-based policy.  FLSA claims are becoming more frequent, and some employee-focused law firms are concentrating on wage and hour claims, because employers regularly make inadvertent mistakes in paying their employees.  Here’s a link to a good article discussing the pros and cons of obtaining coverage for wage claims:  EPLI Wage Claims