Category Archives: Wages and Hours

Final FMLA Regulations Cover Veterans and More

On February 6, 2013, the Department of Labor issued its final regulations implementing statutory amendments to the FMLA. These regulations incorporate the amendments Congress passed in 2010. Among other things, the 2010 amendments:

  • tweaked the way eligibility and hours are calculated for flight crews
  • expanded the right to take qualifying exigency leave to cover not only employees with family members in the National Guard and Reserves, but also employees with family members in the regular armed forces, and
  • expanded the right to take military caregiver leave to cover not only employees with family members who were seriously injured while on active military duty, but also employees with family members who exacerbated a preexisting injury while on active duty and employees with family members who are veterans suffering from a serious injury incurred while on active duty.

About a year ago, the Department of Labor issued proposed regulations implementing these provisions and seeking input from the public on a few key issues, including how to implement the leave provision to care for a veteran. Rather than issuing proposed regulations on this topic, the Department decided to hold off until it had received comments and issued its final regulations. As a result, the Department delayed the effective date of this provision. Until it issued final regulations defining the key terms (including who qualifies as a veteran and what constitutes a serious injury for a veteran), the Department took the position that employers were not legally required to provide this type of FMLA leave.

That has now changed. As of the effective date of the final regulations (March 8, 2013), employers are now required to provide FMLA leave to employees who need time off to care for a family member who is a veteran and suffered a serious injury while on active duty.

The final regulations have changed military family leave in a few important ways:

  • Veterans defined. One of the reasons why Congress amended the FMLA was to allow time off for employees to care for family members who had served in the military and later manifested serious health problems, notably PTSD. The final regulations define “serious injury,” and make clear that injuries are covered whether they manifest before or after the veteran leaves the military. The veteran must have been in the military in the five years before the employee first takes FMLA leave. However, the time between the Congressional amendments (October 28, 2009) and the effective date of the final regulations (March 8, 2013) doesn’t count against this five-year limit. The Department excluded this time because employers weren’t required to give leave to care for an injured veteran during this period. 
  • Qualifying exigencies expanded. As required by Congress, the final rule expands qualifying exigency leave to cover not only family members who are members of the National Guard and Reserves, but also family members who are in the regular armed forces and are deployed to a foreign country. This type of leave is intended to allow employers to handle practical matters arising from a family member’s deployment. The final regulations make a few changes to this type of leave. For example, employees may take up to 15 days off for a family member’s rest and recuperation leave (the previous limit was five days). The final regulations also add a new type of qualifying exigency leave, to allow employees to take time off to make arrangements for a military family member’s parent who is incapable of self-care. For example, the employee might need to hire a caretaker for the parent, tour care facilities, and so on.

The Department of Labor has issued a helpful FAQ set on the final regulations.

Farewell, CLASS Act — We Hardly Knew Ye

If you’ve gotten a paycheck since the beginning of 2013, you’ve no doubt noticed one effect of the fiscal cliff deal Congress reached last week: It did not extend the payroll tax holiday. Employees had been getting a break on their Social Security taxes, but now it’s over. The tax on Social Security went back up by 2% to its former level, resulting in lower paychecks for everyone.

I’ve fielded a few questions this week from people wondering if there’s anything else in the 11th hour deal that should interest them, given that they don’t earn enough to be affected by the expiration of the Bush tax cuts on very high earners. The answer, as always, is that it depends. There were certainly extensions and changes that trickle down to the 99%, starting with the extension of the Bush tax cuts for the rest of us. Here are a few of the job-related items:

  • If you are out of work, you no doubt know about this one: The federal government extended its emergency unemployment benefits program. For unemployed people who have exhausted the benefits available from their state, this program provides additional weeks of benefits. The program was set to expire at the end of 2012. 
  • Employees can continue to exclude from their income — and therefore,  not pay tax on — certain benefits paid by their employers, including educational assistance and adoption assistance. The bill also allows employers to continue claiming tax deductions or credits for certain benefits, such as child care.
  • The CLASS Act is gone. This program was part of the larger healthcare reform legislation. It created a long-term care insurance program to be paid by payroll withholding from employee paychecks, if employers opted to participate in the program. Critics claimed it was inadequate at both ends, from the funding to be paid in to the benefits to be paid out. I don’t know enough about it to weigh in, but no matter: The program got killed.

Finally, a very restricted group of employees — the ones who created this mess in the first place — got a pay freeze. So if you are a Senator or Congressperson, you will just have to continue living on your $174,000 annual salary. If you are the majority or minority leader of either house, you get $193,400. And if you are John Boehner, you will have to budget yourself to only $223,500 a year. Performance-based salaries? You be the judge.

Supreme Court: Pharmaceutical Reps Not Entitled to Overtime

In a 5-4 split, the Supreme Court decided yesterday that pharmaceutical detailers qualify as outside salespeople and are therefore not entitled to overtime pay. This case was closely watched in the pharmaceutical industry, which estimated that a change in industry practice to require overtime to these employees would cost billions of dollars.

The job of a detailer is to visit doctors in a particular sales territory and explain the uses, benefits, and risks of a particular set of the company’s prescription drugs. In the heavily regulated field of pharmaceuticals, the detailer’s goal is to obtain a “nonbinding commitment” from the doctor to prescribe the company’s drugs when appropriate. A portion of the detailer’s pay is incentive-based, determined by sales of the featured drugs in the detailer’s territory.

In this case, everyone agreed that the detailers routinely worked more than 40 hours a week and did not receive overtime pay. Their employer, GlaxoSmithKline, classified them as “outside salespeople,” a job category that is exempt from the overtime requirements. The issue before the court is whether what they do can really be called selling.

For the majority, Justice Alito found that it could. He determined that the regulations interpreting the outside salesperson exemption were intended to be broad enough to cover various industry practices, including the use of detailers. Although there is no sales contract (other than that oxymoronic “nonbinding commitment”), no money changes hands, and no orders are placed, the detailers were doing all that’s legally allowed in this heavily regulated field to sell the company’s products. Ultimately, doctors must be free to prescribe the medications appropriate to a patient’s condition, and patients may ultimately decide not to follow that advice, or to purchase a generic equivalent. The company can’t control this part of the transaction, but it can promote its products to those who write the prescriptions.

For the dissent, Justice Breyer pointed out that, unlike representatives who sell drugs to doctors for their own use (such as vaccines and medications to be administered in the doctor’s office), the detailers do not make any sales. Rather, their work looks more like promotional work, a category which the regulations treat as separate when the person performing it does not also make sales. The only sale is made at the pharmacy counter, not in the doctor’s office.

Interestingly, all of the Justices agreed that the Department of Labor’s recent efforts to interpret the outside salesperson exception more strictly (to entitle more employees to overtime) had failed. In opinion letters and in amicus briefs, the DOL stated that detailers didn’t qualify as outside salespeople because they did not transfer title to the property in question. (This is the most recent interpretation; the DOL had previously said that the employee would have to be involved in a “consummated transaction” in order to have made a sale.) Both the majority opinion and the dissent disregarded this recent reinterpretation and focused on the language of the statute and regulations, finding that the DOL’s opinion had been too much of a moving target to warrant deference to the agency.

Meal and Rest Break Guidance from California Supreme Court

Last week, the California Supreme Court issued a long-awaited decision in Brinker Restaurant Corp. v. Superior Court, a huge class action lawsuit alleging that employees were denied meal and rest breaks and required to work off the clock. Brinker owns a number of restaurant chains, including Chili’s and Romano’s Macaroni Grill. The lawsuit, initially filed by five employees, turned into a class action on behalf of almost 60,000 Brinker employees statewide. That group was divided into three subclasses: employees who were required to work more than five hours without a meal break; employees who were required to work more than three-and-a-half hours without a rest break; and employees who were forced to work off the clock (that is, to do work for which they were not paid).

California law requires employers to provide a ten-minute paid rest break for every four hours “or major fraction thereof” an employee works. However, no rest break need be provided to employees who work less than three-and-a-half hours total. As for meals, California law prohibits employers from requiring employees to work more than five hours without giving them a 30-minute meal break; this time is unpaid. In the Brinker case, the parties argued about when (that is, in what part of an employee’s shift) these breaks must be provided and what obligation the employer had to make sure the employee didn’t work through breaks. They also disputed whether these issues could properly be decided for the whole class or whether they should instead be decided on a case by case basis.

The Court issued a broad opinion, deciding not only the issues directly before it but a few more that are sure to come up as the lawsuit proceeds. Here’s the upshot:

Rest breaks: The Court had a math fight with the Court of Appeals on the “major fraction” language. (The Court of Appeals found that an employer could provide only one break in a seven-and-a-half hour shift.) The Supreme Court concluded that employees who work at least three-and-a-half hours but no more than six hours are entitled to one rest break; employees who work at least six hours but no more than ten are entitled to a second rest break; and so on. The Court also rejected the employees’ argument that one rest break must be provided before the meal period and one after in an eight-hour shift. Although the Court agreed that this made sense “as a general matter,” it declined to state a rigid rule regarding the timing of meals and breaks.

Meal breaks: There were a couple of big questions here. First, what is the employer’s duty during meal breaks? The Court found that the employer must provide a 30-minute meal break, during which the employee is entirely relieved of duties and is free to leave the work site. The employees wanted to impose an additional requirement that employers ensure employees do no work during their lunch, but the Court refused. If the employer pressures employees to work through their breaks, however, it violates this provision, and is liable not only to pay the employee for the break time, but also to pay a penalty. Second, the employees wanted the Court to require a meal break every five hours, so that if the first one was taken toward the start of a shift, the employee would be entitled to a second break five hours later. The Court disagreed: Employees are entitled to a meal break before they finish five hours of work; if an employee works ten hours, the employee is entitled to a second break. There is no requirement that the meal breaks be no more than five hours apart.

Class claims: The Court decided that the rest break claims could proceed as a class action, because they were based on the employer’s policies and procedures. The Court sent back the meal break claim so the trial court could decide whether a class should be certified under the Court’s interpretation of the five-hour rule. The Court rejected the idea of class certification on the employees’ claim that they were required to work off the clock, finding that it was based not on a company-wide policy, but on the actions of individual employees and managers.

This case has been touted as a win for employers, and it is — but mostly in the sense that adopting the employees’ arguments would have greatly expanded their rights as previously understood under California law. The Court didn’t take away any established employee rights with this opinion. While it’s not fun to have to take your “lunch” shortly after starting an eight-hour shift, then work on without a substantial break for many hours (and trust me, I’ve been there), it’s also a fairly common practice, especially in service industries where employees can’t all take their breaks at the same time. In this case, the trial court found entirely for the employees, then the Court of Appeal reversed and went entirely for the employer. The Supreme Court’s opinion seems to just rebalance the scales to where most people thought they were in the first place.

Connecticut Becomes First State to Require Paid Sick Leave

Last week, Connecticut passed a law requiring private employers to give paid sick days to service employees. Currently, San Francisco and Washington, D.C. mandate paid sick leave; a handful of other states are considering similar legislation. But Connecticut is the first to impose this requirement statewide. The New York Times reports that the new law will cover an estimated 200,000 to 400,000 employees in the state.

Here are some details about the law, Connecticut Public Act 52:

  • It applies only to companies with at least 50 employees. Manufacturers aren’t subject to the law, nor are nationally chartered nonprofits that provide recreation, child care, and education services. Employers that already provide employees with at least 40 hours of paid time off each year that can be used as sick leave (such as sick days, personal days, or vacation time) don’t have to provide any additional time off under the law.
  • Only service workers are covered. This includes those employed in the retail, hospitality, food preparation and service, administrative, health care, janitorial and cleaning, claims processing, and a number of other industries. (You can find the full list of covered job categories in the law, at the link above.) Independent contractors, day laborers, and temporary workers aren’t covered.
  • Services workers are covered only if they are entitled to earn minimum wage and overtime. In other words, exempt employees aren’t covered by the law; only nonexempt employees are protected.
  • Covered employees will accrue one hour of paid sick leave for every 40 hours worked, up to a maximum entitlement of 40 hours per year. Employees may also carry over up to 40 hours into the next year.
  • Employees may use the time off for their own illness, injury, or health condition; for a spouse’s or child’s illness, injury, or health condition; or to handle certain medical, legal, and practical issues stemming from family violence or sexual assault.

The law goes into effect on January 1, 2012.

Wage and Hour App Lets Workers Track Hours on Their Phones

Earlier this week, the federal Department of Labor (DOL) announced the release of its first smartphone application: a timesheet that allows employees to keep track of their work hours and calculate how much they are owed, in straight wages and overtime. (I learned about it over at the Workplace Prof Blog.) The DOL says it hopes to provide updates to the free app that allow employees to keep track of bonuses, commissions, tips, holiday pay, and more.

As the DOL press release says, the information this app helps employees track “could prove invaluable” in a Wage and Hour Investigation. Here’s why: If an employer fails to keep accurate records of hours worked by its employees (as required by the Fair Labor Standards Act), then the DOL will presume that any records the employees can produce are correct. The employer can try to overcome this presumption, but without proper wage and hour records — and facing employees who have tracked their hours in real time on their smartphones, using an app created by the government agency conducting the investigation — it’s going to be a steep uphill battle.

Labor Department Regulations on Tip Credits and More

Last week, the federal Department of Labor (DOL) issued its final “clean-up” regulations, tweaking a number of existing rules to bring them in line with laws that have passed and court cases that were decided since the regulations were last reviewed. Although the proposed regulations (issued during the Bush Administration) included several changes that generated a lot of discussion, the final regulations are more scaled back.

The most significant discussion in the final regulations involves tip credits. Under the Fair Labor Standards Act (FLSA), employers may pay tipped employees less than the minimum wage — down to a floor of $2.13 an hour — as long as employees make enough in tips to bring their earnings up to at least the minimum hourly wage. If there is a shortfall, the employer must make up the difference. (Some states do not allow employers to take a tip credit; in these states, which include California, employers must pay service employees the full minimum wage for every hour worked.) This has long been the law, but the final regulations clarify a few points:
  • Whether or not an employer takes a tip credit, all tips an employee earns belong to that employee, except for any amount the employee is required to “tip out” (contribute to a legitimate tip pool). Employers aren’t entitled to any part of the tip pool. At least one court had held that an employer who doesn’t take a tip credit need not let employees keep their tips, as long as the employees were left with at least the minimum wage. The regulations specifically dispute the holding of this case.
  • Only employees who regularly and customarily receive tips can participate in the tip pool — and again, this rule applies whether or not the employer takes a tip credit. Employees who don’t typically receive tips, such as cooks and dishwashers, may not participate in the pool. The final regulations don’t set a limit on how much of their tips employees may be required to put in the pool; in fact, they state explicitly that the law “does not impose a maximum contribution percentage.” Previous guidance documents and opinion letters from the DOL had put a maximum on the amount employees could be required to contribute, or said that employees could not be required to contribute more than was customary in their industry, but these limits did not make it into the final regulations. Once the employer comes up with an amount, however, it is required to notify employees how much they will be required to contribute to the pool.
  • Employees are entitled to notice if the employer will take a tip credit. This notice must include: (1) the hourly cash wage the employer will pay the employee; (2) the amount of tips that the employer will take as a tip credit (that is, the employer will count that amount toward the employee’s wages, to meet the minimum wage requirement); (3) that the employee is entitled to retain all tips received except any amount the employee is required to contribute to a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and (4) that the tip credit shall not apply to any employee who has not been informed of these requirements. The final regulations do not require this notice to be in writing; employers may inform employees orally, if they wish. As a practical matter, however, employers who plan to take a tip credit should provide written notice, so they can later prove that they properly notified employees, if necessary.

Some other changes included in the final regulations exclude stock options from an employee’s regular rate of pay (used to determine overtime), clarify the exemptions for firefighters and salesmen, partsmen, and mechanics of certain vehicles; exclude volunteers at private nonprofit food banks from the definition of an “employee” covered by the FLSA, even if those volunteers receive groceries from the bank; and clarify that time an employee spends commuting in a company car doesn’t count as compensable work time.

The biggest change the regulations ultimately didn’t make had to do with fluctuating workweeks, in which a nonexempt employee receives a fixed salary that is understood to compensate the employee for all hours worked during the week. If the employee works more than 40 hours in a week, the salary is divided by the number of hours worked that week to come up with an hourly wage, and the employee is entitled to half of that amount for every hour worked over 40 as an overtime premium. The proposed regulations sought to explicitly allow employers to pay these employees bonuses, commissions, and other types of compensation in addition to their set salary, without running afoul of the rule and without having to count those amounts toward the employee’s hourly pay. Ultimately, the final regulations didn’t allow this; in its comments, the DOL reasoned that this would give employers an incentive to reduce set salaries and move that money to bonuses and other types of excluded compensation, to minimize their overtime obligations.