Misclassified “Exempt” Employees

Employees improperly classified as “exempt” by their employers make up the largest group of workers owed overtime wages for their employees. Exempt status misclassifications take place throughout many different industries including healthcare, office employees, analysts, administrative assistants, secretarial, bookkeeping and certain working-foreman and in other manual labor-styled jobs.

Companies who have misclassified their employees will frequently tell employees that they simply don’t pay overtime for the job, and that if you don’t like it you may leave. Managers may tell employees that they were required to work long hours for little pay and certainly no overtime wages when they were starting out, without regard to the work actually performed by the employee.

Employee Misclassification Challenge

Current Trends & Vulnerable Positions

Presented by Brent E. Pelton for a Strafford CLE Webinar

April 16, 2014

I. Introduction (slide 1)

A. Broad subjects: Categories of employees bringing cases and the factors Courts look at to examine their classification as exempt versus non-exempt and employee versus independent contractors.

B. Current trends: Employees are questioning long-established traditions of how certain types of workers are paid and classified, from assistant managers to sports players and interns. Courts are emphasizing the fact-specific nature of the inquiry.

C. Changes in federal and New York state law.
A. Research assistants

II. “Workers in the News” (slides 2-4)

1. The fact that a research assistant is a student is not dispositive. More important is the extent of the educational versus employment aspects of the relationship between the research assistant and the school - in general and in the context of potential claims. Al-Maqablh and Summa show this difference.

2. Al-Maqablh v. Univ of Cincinnati College of Medicine

Discrimination case, summary judgment was granted because Plaintiff was not an employee of the University

-No contract between Al-Maqablh and the University

-Plaintiff’s complaint related to his academic activities with the university, not his work as a lab assistant.

-Payment he received was described as a scholarship and was contingent upon his good standing.

-The “dominant purpose of Plaintiff’s relationship with the University was educational.”

3. Compare with Summa v. Hofstra University, 07-cv-3307 (EDNY 2010).

-Conditional certification granted because four plaintiffs showed that they worked more than 40 hours per week without receiving prevailing minimum wage or overtime. Lead Plaintiff received a $700 stipend one semester despite working 40 or more hours per week.

-Lead Plaintiff worked several jobs including football team manager, safety representative, research assistant.

-Court did not reach employment status, but jobs worked by plaintiffs seem less related to their status as students and they sued specifically based on the work performed and the wages received.

-Case settled in 2011 for almost $500,000.

B. Remote Work

1. Accurate time-keeping and clear policies as to expectations regarding off-duty remote work are crucial where employees perform work at home, such as responding to calls/messages and performing administrative/paperwork tasks. Other types of remote work that have been the subject of cases: on-duty wait time, on-call time (important question is how much freedom employees have to do other things while on-call).

2. Allen v. City of Chicago, 10-cv-3138 (N.D.Ill. 2010):

-In 2013 Court granted conditional certification

-MJ stated that plaintiffs “believed that they were expected to check and possibly respond to emails and calls made to their Dept-issued BlackBerry while they were off-duty.”

3. Kuebel v. Black & Decker, 643 F.3d 352 (2nd Cir. 2011):

-Court reversed summary judgment on off-the-clock work claims (mostly administrative work at home)

-Court affirmed that “an employer’s duty under the FLSA to maintain accurate records of its employees’ hours is non-delegable.” Once employer knows of overtime work, it cannot deny compensation because of improper recording especially where employee falsified hours at repeated instructions of managers – even though there were official policies requiring accurate time keeping.

-Case settled in 2012 with a $600,000 fund.

C. Exotic Dancers (Slide 3)

1. Courts frequently find exotic dancers to be employees, not independent contractors. Exotic dancers are typically not paid any wages by the club, receive money directly from customers, and pay part of their tips as fees/fines to the employer.

2. Significant factors:

-Dancers had relatively little opportunity for profit and loss

(Butler: fee was waived where dancers did not earn enough to pay it; Stevenson: club “bore the vast majority of overhead costs” and “Plaintiffs’ control over profits was minimal compared to [Defendants’]”)

-Dancers had little investment in equipment

(Butler: maintenance fee for use of facilities applied to cleaning; Stevenson: investment in make-up, hair, clothing “minor compared to the club’s investment”; Hart: Court compared millions of dollars for business operations and marketing with dancers’ money spent on clothes, make-up, house fees, and tips)

-Relatively little specialized skill

(Butler: dancers not required to take classes, primary considerations in hiring are personality and presence; Stevenson: getting better with experience not sufficient, dancers have “limited initiative”; Hart: no need for training or prior experience dancing; “hustling” to build customer relationships not skilled work).

-Dancing is an integral part of nightclub’s business (Butler; Stevenson; Hart).

-Control over dancers

(Hart, dancers received “Entertainer Guidelines” with behavioral guidelines, dress code, requirements as to how often and how long dancers worked, check-in and check-out procedures, fines for non-compliance, mandatory monthly meetings; supervisor cautioned dancers about weight; dancers received schedule; Stevenson, dancers received “General Policies and Procedures” with dress code, behavioral guidelines; DJ had final control over music; house moms ensured compliance with dress code)

-Control over the business – advertising, marketing, atmosphere, food and drink offerings, staffing, facilitiy – in general exclusive to Defendants with no input from dancers (Stevenson; Butler). In Hart, Defendants also controlled pricing.

-Courts gave little weight to the transient nature of employment, comparing it to waiters and bartenders.

3. Butler v. PP&G, 13-cv-430 (D.Md. 2013).

-Court granted partial summary judgment, finding that plaintiff was employee. –Although club exercised less supervision and control than some, Defendant nevertheless “alone is responsible for advertising and creating the atmosphere of the club” and therefore dancers are “entirely dependent on Defendant to provide [them] with customers.”

D. Cheerleaders

-Cheerleaders for Cincinnati Bengals and Oakland Raiders allege that they earn significantly less than minimum wage and are paid per game or per season. Work time includes practice, games, and charitable/promotional appearances.

-Cheerleaders may be subject to fines for violation of team’s rules.

-Cheerleaders are required to pay expenses including make-up, stylists, clothing.

-Teams exercise control over cheerleaders’ weight, “physique improvements,” mandatory practices and appearance at outside events, acceptable undergarments and hosiery, permissible make-up.

E. Direct care workers (Slide 4)

1. New Rules, effective January 1, 2015

-Definition of “companionship services” is “fellowship and protection” and may include provision of care (help with daily activities) if such care does not exceed 20% of total hours worked per week, per patient. Exempt employees cannot perform general household or medical services.

-Exemptions for live-in domestic, companionship services can only be claimed the household in which they work, not a third party employer.

-Live-in domestic workers must be paid minimum wage but are overtime exempt.

2. Changes from Previous Law

-“Companionship services” definition is narrowed to “fellowship and protection” with no more than 20% daily living care from “fellowship, care and protection” with no more than 20% general household work.

-Third party employers may not take minimum wage, overtime exemptions, only the individual, household or family employer may take the exemptions.

-Medical services employees are not exempt under companionship exemption

F. Personal Assistants

1. Common issues

-Administrative exemption: independent judgment and discretion

-On-call time compensable?

2. O’Neill v. Mermaid Touring, 11-cv-9128 (SDNY 2011)

-Lady Gaga admitted in deposition that O’Neill was basically on call all the time and that she did not pay overtime. Instead, she touted the perks of traveling with her (luxury hotels, luxury restaurants, high fashion).

-Duties included confirming Lady Gaga’s schedule, reconciling credit card statements, ordering meals, unpacking luggage, keeping Lady Gaga on schedule, addressing Lady Gaga’s needs at all times.

-Case settled shortly before trial in 2013

G. Energy Sector (Slide 5)

1. Oil drilling workers

-Day rates: must still pay overtime

-Off-the-clock work: Tyger v. Precision Drilling Corp., 11-cv-1913 (M.D.Pa.): Conditional certification granted in 2013 for time spent donning and doffing protective gear (hard hats, coveralls, goggles, ear plugs, boots, gloves) required by Defendants and OSHA and attending pre- and post-shift safety meetings (Portal to Portal).

2. Tankermen

-Tankermen are often classified as “seamen” and therefore assumed to be exempt

-However, duties tend to focus more on the cargo (petrochemicals) than on the ships qua ships.

-Department of Labor: a seaman “performs…. Service which is rendered primarily as an aid in the operation of a vessel as a means of transportation.” Depends on the character of work performed, not location of duties. Employee is not a seaman if nonseaman work exceeds 20% of workweek.

-Owens v. SeaRiver Maritime, Inc., 272 F.3d 698 (5th Cir. 2001)

-During the period in question, plaintiff’s main duties were loading and unloading petrochemicals from barges. He was not assigned to any particular barge but instead was stationed on the company’s landing barge.

-Court concluded that plaintiff’s “loading and unloading duties related almost exclusively to removing petroleum products from the barge, not to moving or mooring the barge…. Because the primary purpose of Owen’s position was to accomplish non-seaman’s work, Owens was not a seaman under the FLSA.”

-Coffin v. Blessey Marine Services, Inc., 11-cv-214 (S.D.Tex. 2013)

-Duties include: preparing barges for loading and unloading, ensuring proper documentation, maintenance, training, handling lines and rigging.

-Court denied defendants’ motion for summary judgment. Although many duties were seaman’s duties, loading and unloading is non-seaman. Question remained open whether non-seaman’s duties were substantial portion of work.
A. As with cheerleaders, a major issue is the FLSA seasonal amusement, recreation exemption

III. Sports Players and Other Employees (Slide 6)

-Exemption applies for “any employee employed by an establishment which is an amusement or recreational establishment if (A) it does not operate for more than seven months in any calendar or (B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33.33% of its average receipts for the other six months of the year

-Maintenance, ordering supplies is not considered “operating” for this exemption

-33.33% test: six months with highest receipts compared to six months with lowest

-Employees who work at a central office, warehouse, garage serving a chain of such establishments not exempt.

-Unionizing is a big question right now in sports. While this does not directly impact FLSA issues, one major question raised by unionization disputes is whether athletes are employees.

B. Northwestern: NLRB concluded in March 2014 that football players who receive scholarships are employees and eligible to unionize.

-Special rules apply to players: freshmen and sophomore must live on campus and upperclassmen desiring to live off campus must submit lease to Coach Fitzgerald; players must have permission to obtain outside employment; players must disclose info relating to their vehicle; players must accept Coach’s social media “friend” requests so Coach can monitor their postings; players may not swear in public; players may not give media interviews except those arranged by Athletic Dept; players cannot otherwise profit off their image or reputation; players must permit the Big Ten Conference and Northwestern to use their name and image for any purpose; players must agree to drug testing; players are subject to anti-hazing, anti-gambling policies; players must wear suits and travel sweats at home, away games; players must attend study hall for infractions of policy; all freshmen players must attend six hours of study hall per week.

-Players attend intensive training camp, which requires 50-60 hours per week, and during the football season players spend 40-50 hours per week on football-related activities including mandatory practices, meetings and “training table.” Work-outs, drills, and meetings continue during the off-season as well for 12-25 hours per week.

-Players are chosen for scholarships based on football abilities, not academic achievement. However, Players at Northwestern have the highest Academic Progress Rate in the country.

-Players testified that coaches discouraged classes that were deemed too demanding or that interfered with football activities.

-Players request re-scheduling of tests that interfere with games, which is usually granted.

-Football generated $235m in revenue and incurred $159m in expenses between 2003 and 2012.

-NLRB highlighted that scholarships are received in exchange for football services and are revocable on that basis; the high degree of control over players. Comparing to a graduate student case, NLRB distinguished players on the basis that they spend substantially more time on football versus academic activities; football is not a core element of their academic activities; the academic faculty does not supervise football activities; and scholarships are not financial aid and are dependent on football duties.

-However, NLRB found that “walk-on” players, who have greater flexibility and do not receive compensation, are not employees and thus cannot unionize.
A. Assistant Managers

IV. Assistant Managers and Managers (Slides 6, 7)

Two major issues: Duties and wages

1. Duties: Executive exemption

-Primary duties are management-related

-Supervise at least 2 full time employees

-Authority or strong influence in hiring and firing, discipline, promotion decisions

-Whittington v. Taco Bell, 10-cv-1884 (D.Co.)

-Plaintiffs claimed extensive non-exempt work of lower level employees such as bussing tables, cleaning, checking inventory, cashier work, cooking.

-Court granted conditional certification in 2012

-Depo of corp rep: standardized job description, performance assessments, code of conduct, training materials, software program that instructs assistant managers as to steps they must follow in their duties.

-Settled in 2013 for $2.5 million

-Hickton v. Enterprise Rent-a-Car, MDL 2056 (W.D.Pa. 2008)

-Plaintiffs claimed did not have authority to hire and fire, did not recommend job candidates, did not handle employee issues or mete out formal discipline. Primary duties were writing tickets and renting vehicles, cleaning and moving cars, picking up customers. Also supervised employees, approved time entries, trained employees.

-Discretionary issues were dictated by policy; branch managers had authority to deviate from these policies. Policies were set out in highly detailed manuals.

-Defendants’ motion for summary judgment denied

-Settled in 2013 for $7.75 million

2. Wages

-Salary basis: salary cannot be pro-rated based on partial days, number of hours worked. If salary depends on time worked, it is considered hourly rate.

Pendergrass v. City Gear, 12-cv-1287 (M.D. Tenn.)

-Managers and asst managers alleged that company required them to work at least 45 hours per week and that when they work fewer hours, their checks were pro-rated based on the difference.

-Settled in 2013 for $1.9m

B. Managers (slide 8)

1. Duties: Again, executive exemption is the primary inquiry

-Madden v. Lumber One Home Center, No. 13-2214 (8th Cir. Mar. 2014)

-Three plaintiffs: two found non-exempt, one found exempt (correction from slide). Worked as managers/supervisors at lumber store.

-Store owner asked all employees for their input as to hires and there was no evidence that owner put any special weight on plaintiffs’ recommendations.

-Two plaintiffs not exempt because they did not participate in the hiring process in any way. Defendant’s argument that owner meant to involve them but the store didn’t hire during that time was not sufficient.

-One plaintiff was exempt because he provided a recommendation regarding two hires, which owner found valuable. If plaintiff had given that applicant a bad reference, owner would not have hired them. Court found this sufficient.

2. Family Dollar cases comparison

-Morgan v. Family Dollar, 551 F.3d 1233 (11th Cir. 2008)

-In 2006, jury found that store managers not exempt

-11th Circuit agreed: “store managers exercise little discretion and spend 80 – 90% of their time performing manual tasks such as stocking shelves, running the cash registers, unloading trucks, and cleaning the parking lots, floors, and bathrooms.” Certain non-exempt tasks are described as “essential.” More managerial tasks were “strictly prescribe[d]” by the store manual and “closely scrutinize[d]” by district managers. Classification as exempt is “across the board.” Hourly asst mgrs can fill in for mgrs. Mrgs have little discretion in the narrow areas of their managerial duties.

-Ct also noted that salary was within a dollar or two of asst mgr’s hourly rate.

-Ct upheld total jury award of $35.5m consisting of overtime and liquidated damages.

-In re Family Dollar FLSA Litigation, 637 F.3d 509 (4th Cir. 2011)

-Summary judgment upheld because plaintiff “remained the highest level Family Dollar employee at the store, and her income depended on the success of her performance and the profits of the store.”

-In addition, store manager supervises asst mgrs and hourly employees, sets own hours of employment, is authorized to make decisions that affect profitability of the store, supervises all operations, made personnel recommendations that were usually followed.

-Even though Plaintiff performed non-exempt duties during most of her time, “she concurrently performed the managerial duties of running the store” including supervising operations, looking out for theft, thinking about paperwork and money issues, supervising employees, addressed any customer or employee problems.
-Unlike the most common exemptions, computer workers can be paid hourly and still be exempt.

V. Computer Workers (Slide 9)

A. Wages

1. Must be paid at least $455/week salary or $27.63 hourly rate.

2. Jones v. Judge Technical Systems, 11-cv-6910 (E.D. Pa.)

-In 2013, court denied defendants’ motion for partial summary judgment based on wages

-Dispute was whether hourly rate is calculated as average hourly rate or hour-by-hour calculation

-Plaintiff’s pay structure was called “Professional Day” – “employee will not be paid for more than eight hours in a day, unless that employee works more than ten hours in a day,” at which time employee is entitled to extra wages for services after 11th hour.

-Court concluded that hour-by-hour calculation was appropriate since the wages test “is not a minimum wage test, but rather a compensation test for applicability of the exemption pertaining to overtime… § 207 is concerned with deterring long hours by making those hours more expensive for the employer.”

-Since Plaintiff was paid $0 for hours 9-10 in a day, Court concluded that he was not exempt.

B. Duties

-Heffelfinger v. Electronic Data Systems, 492 Fed. Appx. 710 (9th Cir. 2012)

-Two plaintiffs exempt, one non-exempt.

-1st exempt plaintiff: main duty was installing, maintaining, managing a personnel records database for the Dept of Defense, which was “servicing a business” and therefore exempt. He also developed and enforced database standards and procedures, participated in physical database design and affected policy by recommending improvements, advising systems engineers, updating management, researching new technologies. He also suggested solutions to problems and advised on different technologies.

-2nd exempt plaintiff: servicing custory (DOD) by maintaining and managing same personnel records database. Also responsible for high-level problem solving, implementing specialized tools, provided solutions to technical problems, lead and coordinating operational support, was responsible for keeping the database running, participated in design and major upgrades, provided technical leadership.

-Non-exempt plaintiff: primary duty was creating or modifying computer programs based on customer’s business requirements.
A. Walling v. Portland Terminal Co., 330 U.S. 148 (1947)

VI. Unpaid Interns (Slide 10)

-Issue was railroad training program for brakemen.

-Training is necessary to job, and applicant cannot work until training complete.

-Training lasts 7-8 days.

-Applicant assigned to yard crew where he first observed activities, then was permitted to do work under close supervision.

-Those who complete training and are certified as competent as put on a list from which company draws workers as needed.

-Court compared trainees to students: regulations “cannot be interpreted so as to make a person whose work services only his own interest an employee of another person who gives him aid and instruction.”

B. Department of Labor test:

-Internship is similar to training that would be had in an educational environment: skills received should be those that can be used in multiple employment setting, not just one employer’s operation.

-Internship experience is for benefit of intern

-Intern does not displace regular employees but works under close supervision of staff: would employer have needed to hire additional staff to complete intern’s work?

-Employer does not receive immediate advantage from intern’s activities

-Intern is not necessarily entitled to a job at the conclusion of internships: fixed duration, not a trial or probationary period.

-Employer and intern understand that intern is not entitled to wages

B. Wang v. The Hearst Corp., 12-cv-793 (SDNY)

-Plaintiffs worked for Harper’s Bazaar, Cosmopolitan, Marie Claire, Esquire, Rebook, and Seventeen magazines.

-Tasks included online research, cataloguing and organizing samples, maintaining clothing and accessories, organizing files, assisting at photo shoots, running errands, responding to emails, creating and editing content, contacting public relations, and managing pick-ups and deliveries.

-Some interns attended seminars during internships and most received academic credit.

-Court denied class certification because duties of interns and policies of the employers were too varied between magazines to create a cohesive class.

-Court did not rule on whether internship programs violated the FLSA

-Second Circuit accepted interlocutory appeal in November 2013.

C. Glatt v. Fox Searchlight Pictures, 11-cv-6784 (SDNY)

-Plaintiffs worked on production of “Black Swan” and “500 Days of Summer” and at a corporate office of Fox Searclight.

-Mostly administrative tasks: picking up documents, tracking orders and invoices, obtaining signatures, drafting cover letters, organizing files, making copies, running errands, assembling office furniture, arranging travel plans, taking lunch orders, disposing of trash, answering phones, making deliveries, watermarking scripts.

-Court decided that interns were regular employees

-Few new skills except for minor aspect of particular film’s operations

-Internships benefitted employer because otherwise it would have needed to pay employees for work performed

-General benefits of resume lines, references, office experience not sufficient and are the same kind of benefits received from any job

-Significant joint employer issue: Court found that production studio was joint employer of interns who worked on films, which create their own corporations for filming that cease operations afterward. Fox Searchlight exercised significant control over staffing and working conditions.

-Appeal pending before Second Circuit as of September 2013

D. Mark v. Gawker Media, 13-cv-4348 (SDNY)

-Plaintiffs claim that they spent at least 15 hours per week writing, researching, editing, creating stories and multimedia content, promoting stories, moderating comments managing the Gawker community. Such work allowed Gawker to keep costs low.

-Conditional certification pending before district court as of December 2013

Mode

E. Davenport v. Elite Model Mgmt Corp., 13-cv-1061 (SDNY)

-Plaintiff alleges that they performed tasks such as preparing modeling books, chaperoning models, advertising photo shoots, organizing model files, performing general administrative duties.

-Case settled in 2014 for $450,000.

F. Ballinger v. Advance Magazine Publisher (d/b/a Conde Nast), 13-cv-4036 (SDNY)

-Plaintiffs worked for W Magazine, The New Yorker

-Tasks included packing and unpacking accessories, organizing accessories, running errands, filing out paperwork, reviewing submissions and passing them along to his supervisor, responding to emails, proofreading, line editing, sending pieces between writers, cartoonists and editors

-Plaintiffs were paid about $1/hour or less

-Case settled in 2014 for undisclosed amount
A. Department of Labor guidelines:

VII. Volunteers (Slide 11)

-“Individuals who volunteer or donate their services:

-usually on a part-time basis

-for public service, religious or humanitarian objections

-not as employees and without pay

…are not considered employees of the religious, charitable or similar non-profit organizations that receive their service.” (Emphasis in original)

-Individuals cannot volunteer to for-profit private employers

-Individuals may volunteer to public employers except that public employers may not allow their employees to volunteer with the same work as they are paid to do

B. Chen v. Major League Baseball, 13-cv-5494 (SDNY)

-Plaintiff volunteered at All-Star FanFest in NYC, which is a 5-day “fan experience” event

-Plaintiff received “in-kind benefits” including t-shirts, caps, etc, free admission to FanFest for himself and a guest, and a chance to win a ticket to the All-Star game

-Plaintiff’s tasks included attending an information session and orientation, stamped attendees hands, handed out bags of gear to attendees, placed flyers in bags, re-directed attendees to the correct entrance, organized liability waivers, worked at an amusement station.

-In 2014, Court dismissed claim based on seasonal amusement/recreational establishment exemption to FLSA. Court agreed that FanFest was such an establishment: a for-profit commercial operation described by MLB as an “interactive baseball theme park” which took place in a discrete location for a discrete duration. Control, operation by MLB and not relevant to consideration of whether FanFest was an “establishment.”
A. Pharmaceutical sales is an odd field because sales reps do not actually sell the medicines. Instead, they procure nonbinding agreements from doctors to prescribe product as appropriate.

VIII. Pharmaceutical Sales (Slide 12)

B. Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156 (2012)

-Question was whether pharma sales reps are outside salespeople

-Law requires that drugs are dispensed only with a physician’s prescription

-DOL interpretation stated that employee does not make “sales” unless he actually transfers title. However this new interpretation was issued after SCOTUS granted cert; reasoning behind DOL’s interpretation had changed ; pharma industry had no reason to suspect that this longstanding practice was improper; DOL never suggested until then that it was investigating the practice; DOL announced its interpretation in amicus briefs, without public notice or comment

-Text of FLSA states that sales includes “consignment of sales” and exempt are persons “employed… in the capacity of [an] outside salesman.”

-Dissent: sales reps engage in promotional work since pharmacists sell drugs, not doctors, and sales reps primarily provide information. A commitment to sell is not a commitment to advise a patient to buy a product.

C. Post-Christopher

-Possible expansion of “sales” activities in other fields?

-Less deference toward DOL interpretations made in amicus briefs or that issue after a case is filed?
A. NYS Construction Fair Play Act: effective October 2010

IX. New York Fair Play Acts (Slide 13)

B. NYS Commercial Goods Transportation Fair Play Act: effective April 2014

-Applies to any driver who possesses a commercial driver’s license, transports goods for compensation in NY, and operates a vehicle weighing 10,000 lbs or more.

-Civil and criminal penalties for willful misclassification

C. Construction workers/truck drivers are presumed to be employees, not independent contractors, unless they meet one of two tests

1. “ABC” test: The worker A) is free from control and direction in performing work, B) performs duties outside employer’s usual course of business, and C) engages in independently established business similar to the service they provide to employer; OR

2. “Separate business entity” test: 12 criteria, all must be met

1) Worker must receive a Form 1099, not W-2

2) SBE is free from direction and control over means and manner of duties except as to result and applicable federal rules

3) SBE not subject to cancellation or destruction when relationship with the transportation contractor ceases

4) SB has substantial investment in its business, including tools and equipment

5) SBE owns or leases the capital goods, gains profits, bears losses of the entity

6) SBE can make services available to public or industry on a continuing basis

7) reports services rendered on federal tax materials as an independent business

8) Must be a written contract and it must identify SBE by the business name and identify relationship as IC or SBE

9) If permit needed, SBE pays for the license in business name or pays for use of transportation contractor’s license

10) As needed, SBE hires its own employees, pays them without reimbursement from transportation contractor, reports employees’ income

11) Transportation contractor does not require SBE to be represented to customers as an employee

12) SBE has right to perform similar services for others however it chooses

D. Posting requirement for both
A. Immigration Status not relevant to entitlement to FLSA-mandated wages

X. Other Misclassification Issues (Slide 14)

1. Lucas v. Jerusalem Café, 721 F.3d 927 (8th Cir. 2013)

-FLSA requires that every employer correctly pay each of his employees

-DOL position that FLSA covers undocumented workers has been longstanding, consistent

-Immigration Reform and Control Act of 1986 (IRCA) prohibits employment of

undocumented workers. To read IRCA to limit FLSA would be counter-productive and would give employers financial incentive to employ undocumented workers.

-Concurrence noted that appellants did not challenge award of liquidated damages, which “is not free from doubt.”

2. Lamonica v. Safe Hurricane Shutters, 711 F.3d 1299 (11th Cir. 2013)

-Court held that Hoffman Plastics Compounds v. NLRB, 535 U.S. 137 (2002) limited remedies available to undocumented workers under the Nat’l Labor Relations Act, did not re-define broad definition of “employee” to exclude undocumented workers.

-Court rejected in pari delicto argument on the basis that the improper actions alleged (failure to pay taxes) is not the subject of the suit – plaintiffs did not participate in employer’s decision of how to pay them.

-Court concluded that undocumented workers may recover under FLSA

B. Joint Employer issues

1. Individual liability of business owner

Irizarry v. Catsimatidis, 722 F.3d 99 (2nd Cir. 2013)

-Owner of Gristede’s subject to personal liability for settlement payments, based on his participation in business operations

-Court focused on operational control: “A person exercises operational control over employees if his or her role within the company, and the decisions it entails, directly affect the nature or conditions of the employees’ employment.”

-Operational control need not be exercised daily or necessarily often

-Catsimatidis did not report to anyone, owns store’s headquarters building, made big-picture decisions as to marketing, merchandising, operations

-Catsimatidis visited 5-10 stores on Saturday mornings to discuss sales, merchandising, general problems and improvements, suggest display or lay-out changes; personally received complaints and forwarded to responsible parties; had some involvement with hiring and firing; had power over payroll as part of the profit and loss equation; spoke with vendors about issues

Lamonica v. Safe Hurricane Shutters, 711 F.3d 1299 (11th Cir. 2013)

-Jury had basis to find owners of business individually liable based on: visits to company several days per month, visits to work sites, distribution of work orders, meeting with employees to discuss payroll, use of personal funds to satisfy business obligations, supervisory powers.

2. Control over employees

Glatt v. Fox Searchlight Pictures, 11-cv-6784 (SDNY 2013)

-Production studio is joint employer of interns because of studio’s close control over film corp, not because of studio’s direct control over the interns themselves: -Film corporation needed studio’s approval to hire key staff; studio reserved the right to require film corp to fire any employee; film corp sent studio crew lists with contact info; studio required daily “call sheets” and “wrap reports” listing scenes filmed; studio required telephone calls twice each day to report on shooting; film corp sent schedules and cost reports to studio; studio set budget and allocations for line items; film corp needed studio’s permission to have intern who was not receiving academic credit; studio withheld pay until employees signed employment agreements; studio required some staff to sign various documents.

Layton v. DHL, 686 F.3d 1172 (11th Cir. 2012)

-Employees were drivers who worked for a courier company, which in turn was hired by DHL to deliver packages

-Court concluded that DHL was not a joint employer because DHL gave only broad directions to courier company

-DHL told drivers what time packages were available for pick-up, sent certain info to drivers, oversaw loading and inspected trucks and uniforms, received info from scanners drivers used, owned warehouse and scanners.

-DHL did not apportion tasks, assign drivers to particular routes, structure a chain of command, supervise drivers while they delivered packages, had little involvement with hiring process except requiring drivers to pass background check; did not set pay rate or participate in payroll

-Courier company owned the vans
A. Minimum wage increases:

XI. Overtime & Minimum Wage Updates (Slide 15)

-New York went up to $8.00 in 2013 and will go up again in 2015 and 2016

-California is currently $8.00 as of 2008 and will rise to $9.00 July 2014 and to $10 in 2016

-As of January 2014, 21 states and DC have minimum wages above the federal minimum. 10 states’ minimum wage levels are tied to inflation.

B. Fluctuating workweek applied to misclassification continues to be debated

1. Ransom v. M. Patel Enterps, 734 F.3d 377 (5th Cir. 2013)

-Fluctuating workweek approved for calculating overtime owed

-Court found that employees understood that hours would fluctuate around a rough number and that salary would not vary based on hours worked

-Court added that if FWW calculations yielded less than minimum wage for straight time pay, regular hourly rate for unpaid hours should be minimum wage

2. Blotzer v. L-3 Communications, 11-cv-274 (D.Ariz. 2012)

-To invoke FWW, following must all be met: 1) hours fluctuate week to week, 2) employee must receive fixed salary, 3) salary must meet minimum wage standards, 4) employee and employer must have clear agreement that salary is fixed regardless of hours worked, and 5) employee must receive extra overtime compensation of at least 50% regular rate of pay.

- FWW intended to be forward-looking only to structure future compensation, not as remedial calculation

-FWW cannot be used where employee did not receive any additional compensation for overtime hours

-FWW intended to cover situations where employee has some long weeks and some short weeks, not where all weeks are over 40 hours

-Misclassification as exempt means that 4th and 5th factor cannot be met. There’s no clear agreement because parties have not contemplated overtime pay, and there’s no contemporaneous overtime compensation provided.

-Permitting FWW calculations creates a “perverse incentive” since FWW rate decreases with each additional hour worked
A. In March 2014, President Obama ordered the DOL to revise federal rules regarding overtime. Possible changes include:

XII. FLSA Overhaul (Slide 16)

-Raising salary threshold from $455 per week ($23,600 per year)

-Modifying or eliminating some of the white collar exemptions

-Limiting % of non-exempt work that exempt employee can perform

B. Businesses likely to be affected are particularly those with relatively low-paid salaries employees who perform borderline exempt duties: managers of fast-food restaurants, discount stores, grocery stores; lower-level financial services workers such as mortgage loan officers, help desk employees
A. In February 2014, President Obama raised minimum wage for federal contractors to $10.10 per hour, beginning in 2015, with annual inflation adjustments

XIII. FLSA Trends (Slide 17)

B. States are raising minimum wage above federal minimum, and there is a push to raise federal to $10.10 by 2016

C. President Obama requested a $41m increase for the DOL’s Wage and Hour Division

D. Courts examining whether security screenings are compensable time

-Integrity Staffing v. Busk: Under Supreme Court review

-9th Circuit found that FLSA and Portal-to-Portal Act may require Amazon to pay its warehouse employees for security screenings

-In 2014 Walgreens settled similar consolidated claims for approximately $20 million
A. Just over 1,000 in 1990

IX. FLSA Filings (Slide 18)

B. About 1,800 in 2000

C. Just over 6,000 in 2010

D. Over 7,500 in 2013

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