Articles Posted in Overtime

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On April 2, 2018, the U.S. Supreme Court held in Encino Motorcars, LLC v. Navarro that an auto dealership’s service advisors were exempt from overtime under the Fair Labor Standards Act (FLSA), which excludes “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” from the FLSA’s overtime provisions. While the case turned on this fairly specific overtime exemption question, however, the Court’s decision has much greater implications, laying out a new standard for analyzing overtime exemptions under the FLSA and rejecting the longstanding precedent that FLSA exemptions be “narrowly construed” in favor of a broader “fair reading” standard.

The FLSA is a federal wage-and-hour statute which establishes, among other things, minimum wage and overtime requirements for covered employers. Under the FLSA, most employees are entitled to overtime premium pay—pay at one-and-a-half times the regular hourly rate for hours worked in excess of 40 in a given work week. Some workers, however, are exempt from the FLSA’s overtime provisions, including executives, administrative employees, learned professionals (such as doctors and lawyers), and creative professionals (such as musicians and actors), among a number of others.  Encino Motorcars dealt with a less common, more obscure FLSA exemption, set forth in § 213(b)(10)(A) of the FLSA, which states that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements” is exempt from overtime under the FLSA.

In Encino Motorcars, a group of current and former service advisors at an auto dealership brought suit under the FLSA, alleging that they were owed back pay because their employer had misclassified them as exempt from overtime under the FLSA. The defendant then successfully moved to dismiss on the grounds that the plaintiffs fell within the “selling or servicing automobiles” FLSA exemption, which decision plaintiffs appealed to the U.S. Circuit Court of Appeals for the Ninth Circuit. The Ninth Circuit reversed the district court’s ruling, finding the language of the FLSA “ambiguous” and the legislative history “inconclusive.” Encino Motorcars then appealed the Ninth Circuit’s holding to the U.S. Supreme Court, which reversed and remanded in a 5-4 decision.

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Owen Laird, Esq.

Today is Opening Day for the 2018 Major League Baseball season. Spring training is over, and while the Major Leaguers head back to their stadiums, the Minor League players who didn’t make the cut are headed back to work as well. Those Minor Leaguers might be a little worse off this year because of the sweeping $1.3 trillion budget bill that President Trump signed last week. One of the more nuanced aspects of the bill is an amendment to the Fair Labor Standards Act (“FLSA”) known as the “Save America’s Pastime Act.” This amendment aims to “save” baseball by suppressing the wages that minor league teams pay to their players.

While major league baseball players enjoy a minimum annual salary—which amounts to hundreds of thousands of dollars per year, with top players earning tens of millions of dollars a year—minor league baseball players are a different story. Not only do minor league players significantly outnumber major league players, but, unlike major league players, minor leaguers are not unionized. As a result, baseball’s minor leagues are populated with thousands of players, many of whom are barely squeaking by.

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Owen H. Laird, Esq.

We regularly write about overtime issues for employers and employees.  The Fair Labor Standards Act (FLSA) creates a baseline right to overtime for millions of employees, and many states have enacted their own labor laws to enhance those rights.

However, the FLSA and its state counterparts do not require employers to pay all employees overtime; these statutes include large swaths of workers who are “exempt” from the overtime pay requirements.  For example, the FLSA includes exemptions for “professional” employees, which includes individuals such as doctors, teachers, architects, and most employees who need to have an advanced degree; “executive” employees, which includes many individuals who have managerial or supervisory responsibilities; “administrative” employees, which includes individuals who, roughly, perform office work related to the employer’s business operations and can function autonomously; and more specific exemptions for certain industries, such as outside salespeople and agricultural workers.  These exemptions are complex, and the single-sentence summary above does not do justice to the millions of hours that thousands of attorneys have spent litigating these issues.  In short, lawyers, judges, and administrators must look at an employee’s specific job responsibilities to determine whether they are exempt or not.

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Owen H. Laird, Esq.

The U.S. Supreme Court recently agreed to hear two cases that will have major ramifications for workers across the country. One case threatens one of organized labor’s most important rights, and the other impacts employees of car dealerships nationwide.

The Court agreed to hear arguments on Janus v. American Federation of State, County and Municipal Employees, which concerns a union’s right to take dues from non-members who are in the same bargaining unit as members the union represents. This issue of union dues has been long, and corporate interests have been successful in gradually rolling back organized labor’s ability to raise funds.

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On August 3, 2017, the U.S. Circuit Court of Appeals for the Seventh Circuit ruled against the plaintiffs in Allen v. City of Chicago, a Fair Labor Standards Act (FLSA) collective action brought by Chicago area police officers. The court found that the officers were not entitled to overtime pay for off-duty work they had performed on their mobile devices because the city had not known that plaintiffs were not being compensated for their work and because plaintiffs had not been prevented from requesting overtime pay.

The FLSA requires employers to compensate employees for all hours worked, and to compensate most employees at the overtime premium rate for all hours worked in excess of 40 in a work week. This requirement is strict: So long as an employer is aware that an employee has performed work, the employer must fully compensate the employee for all hours worked, “even if [the employer] did not ask for the work, even if they did not want the work done, and even if they had a rule against doing the work.” If an employer does not want employees to work overtime hours, it is the employer’s obligation to “exercise its control and see that the work is not performed,” not the employee’s obligation to avoid working overtime hours. However, the FLSA’s mandate does not go so far as to cover work that the employer “did not know about, and had no reason to know about”; employees also have a duty to accurately report their time to their employer, and employees who fail to do so or who actively prevent their employer from learning of their hours worked are not covered by this protection.

Jeffrey Allen was employed as a police officer in in the Chicago Police Department’s Bureau of Organized Crime, where he worked on investigations into criminal matters such as drugs and human trafficking. Allen and other Bureau of Organized Crime officers had scheduled shifts, but were required to work outside their scheduled shifts as needed; this “off-duty” work was sometimes performed on mobile devices. When Chicago Police Department officers worked overtime hours, the department required them to submit “time due” slips, reporting the hours worked and briefly describing the work performed, which were then processed by payroll. However, between 2011 and 2014, Allen and other officers did not report off-duty work performed on their mobile phones as off-duty hours according to the department’s overtime policy.

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Edgar M. Rivera, Esq.

In McKeen-Chaplin v. Provident Savings Bank, FSB, the Ninth Circuit ruled that mortgage underwriters employed by a bank were entitled to overtime compensation for hours worked in excess of 40 in a work week.  The Ninth Circuit held that, because the mortgage underwriters’ primary job duty did not relate to the bank’s management or general business operations, they did not fall under the administrative exemption to the overtime requirements of the Fair Labor Standards Act (FLSA).

To show that an employee qualifies for the FLSA’s administrative exemption, an employer must demonstrate that the employee’s primary duty involves office or “non-manual work directly related to the management policies or general business operations” of the employer or its customers. This requirement is met if the employee engages in “running the business itself or determining its overall course or policies,” not just in the day-to-day carrying out of the business’ affairs. Said otherwise, “an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.”

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Owen H. Laird

If you are a regular reader of this blog, you are undoubtedly aware of the multi-year effort to raise the salary threshold for the purposes of overtime exemption under the Fair Labor Standards Act. If you are not a regular reader, then the previous sentence may not have made much sense.

To refresh: the Fair Labor Standards Act (FLSA) is the federal law that provides for minimum wage, overtime pay, and other wage-and-hour rights. The FLSA requires employers to pay their employees overtime pay – that is, pay at one-and-a-half times their normal rate – for all hours worked above forty (40) per workweek. However, the FLSA creates a number of exemptions to the overtime pay requirement: categories of workers who are not entitled to overtime pay, even if they work more than forty hours in a workweek. For example, employers are not required to provide overtime pay to certain “exempt” employees: people with professional degrees, managers, executives, artists, administrators, and many tech workers, to name a few. However, in order to qualify as exempt, an employee needs to earn as much or more than the “salary threshold,” which is currently $455 per week, or $23,660 per year. In other words, a manager who earns less than $455 a week would be entitled to overtime pay, while a manager who earns more than $455 a week would not, even if their job duties are identical.

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By Owen H. Laird, Esq.

Last month, President Trump laid out a tax cut plan that, among other things, would lower the corporate tax rate to fifteen percent from the current rate of thirty-five percent. This reduction in the corporate tax rate is one of the most significant changes proposed by Trump; his plan would primarily benefit corporations and the wealthy. Although President Trump is constantly in the headlines, even to the extent that a signature tax proposal is overshadowed, it is important to pay attention to the less sensational actions taken by the Trump administration that will have long-lasting effects on the American public.

A recent article in the New York Times delved into potential effect of the drastic cut to the corporate tax rate: if the corporate tax rate is significantly less than the personal income tax rate, individuals would be incentivized to form corporations and pass any income they earned through that corporate entity, forsaking the traditional employee-employer relationship. Many workers are already considered “independent contractors” rather than employees. If these independent contractors formed a C-corporation and ran their income through it, that income would be taxed at the corporate rate, rather than the normal individual rate. If the tax incentives were high enough, whole classes of workers might choose to restructure their employment by becoming independent contractors and incorporate themselves in order to lower their tax burdens.

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On May 2, 2017, the Republican-majority U.S. House of Representatives passed H.R. 1180, or the “Working Families Flexibility Act.” The bill, which will now move to the U.S. Senate for consideration, would amend the Fair Labor Standards Act (FLSA) to enable employers to offer employees accrued paid time off for overtime hours worked, in place of cash wages.

The act would amend § 207 of the FLSA to add a provision stating that “[a]n employee may receive, […] in lieu of monetary overtime compensation, compensatory time off at a rate not less than one and one-half hours for each hour of employment for which overtime compensation is required.” In other words, the law would allow employees to choose between receiving overtime premium pay and accruing compensatory time off, or “comp time,” for any hours worked over 40 in a work week. According to the terms of the bill, employers cannot force employees to accrue comp time rather than receive overtime pay, and the employer and employee must enter into a written agreement in order for the employee to use the comp time option. Employees’ accrued comp time would be capped at 160 hours, which the employee would be allowed to cash out for its monetary value at any time, and employers would be required to pay employees the cash value of any unused time at the end of the year.

Proponents of the amendment have argued that it would provide workers with greater freedom and is a response to an evolving need for more flexible work schedules in American workplaces. The Republican-led House Committee on Education and the Workforce called the bill “pro-worker” and “pro-family” and said that it would “modernize the law and better meet the needs of the 21st century workforce.” Republican House Representative Virginia Foxx, who serves as chair of the Committee on Education and the Workforce, claimed that workers are hampered by what she described as the FLSA’s “[o]utdated federal rules that demand rigid work schedules” and stated that these wage-and-hour standards are “making it more difficult for workers to find the flexibility they need.”

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On April 12, 2017, the Second Circuit affirmed the district court’s decision in Saleem v. Corporate Transportation Group, Ltd., finding that a group of black-car drivers had been properly classified as independent contractors under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). The court held that the drivers’ significant degree of independence prevented them from establishing that they were employees within the meaning of the FLSA or NYLL.

Under New York law, black cars are defined as a “type of for‐hire vehicle (along with livery vehicles and limousines) that provide ground transportation by prearrangement with customers.” The Saleem plaintiffs are a group of black-car drivers serving clients throughout the tri-state area; the defendants were operators and administrators of a black-car dispatch, which sells black-car franchises to individual drivers and refers the dispatcher’s clients to the driver. Each driver signed an agreement with a franchisor, stating that the driver was not an “employee or agent” but instead a “subscriber to [the franchisor’s] services offered,” that the driver would “at all times be free from [the franchisor’s] control or direction,” and that the franchisor would not “control, supervise or direct” the driver’s work. The agreements did not prohibit drivers from transporting customers for other companies, including competitors, but did require that drivers comply with policies set out by each franchisor, such as rules concerning dress code and vehicle cleanliness.

In November 2012, a group of drivers filed suit in the U.S. District Court for the Southern District of New York, alleging that the franchisors had violated the overtime provisions of the FLSA and NYLL by misclassifying the drivers as independent contractors and thus depriving them of overtime compensation; under the FLSA and NYLL, employees are entitled to overtime pay for hours worked over 40 in a work week, while independent contractors are not. In June 2013, the case was conditionally certified as an FLSA collective action, and in 2014, the parties cross-moved for summary judgment. The district court granted summary judgment in favor of defendants, finding that “all Plaintiffs in this suit — both named Plaintiffs and opt-in Plaintiffs — are independent contractors for purposes of the FLSA and the NYLL.” Plaintiffs subsequently appealed to the Second Circuit.

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