In a widely publicized move, the U.S. Department of Labor on March 7 proposed an update to the Fair Labor Standards Act (FLSA) regulations governing employees who are exempt from overtime.   The most significant change in the proposal is to raise the minimum salary an employee must earn to qualify as exempt from overtime.  The existing minimum salary is $455 per week; the new proposed minimum salary is $679 per week, a 49 percent increase.    An employee must also satisfy one of the “duties” tests to be exempt from overtime (e.g., executive, administrative, professional), but the proposed rule does not change any of those tests.

Most employers probably remember, with some chagrin, the DOL’s 2016 rule that more than doubled the salary basis to $913 per week.   Businesses were scrambling to adjust their job descriptions and payrolls in anticipation of the new rule’s  December 1, 2016 effective date.   Then, eight days before, on November 22, 2016, a district court in Texas issued a surprise nationwide injunction preventing it from going into effect.   For a refresher on the injunction and its aftermath, see our posts here, here, and here.

On August 21, 2017, the same federal judge, Amos Mazzant, issued a final ruling invalidating the $913 per week salary basis.   Surprising to some, the Department, now with a Trump appointed Secretary, appealed the judge’s final ruling to the U.S. Court of Appeals for the Fifth Circuit.   But, the Court of Appeals agreed to hold the appeal in abeyance while the DOL undertook further rulemaking to consider adjusting the salary basis to something lower than $913 per week in the 2016 Rule, but more than the $455 per week that was previously in effect (and remains in effect today).  Perhaps not coincidentally, the proposed $679 per week proposed salary basis is almost exactly in the middle of $455 and $913.

So, what happens next?   On the rulemaking side, the public will have 60 days to comment on the proposed rule.  The Department will then consider those comments, and issue a final rule, probably sometime in 2020.   More importantly though, what will happen if, as is likely, the DOL’s final rule maintains the $679 per week salary basis?    If challenged, is a court more likely to find a 49 percent increase is valid because it is less of an increase than in the 2016 rule?   Does the validity of the DOL’s rule depend upon something so arbitrary as a federal judge’s opinion about what persons in certain occupations should earn?

Many employers and business advocacy groups agree $455 is probably too low a salary basis given inflation that has occurred since it was established. They can probably also live with the proposed $679 per week (indeed, this salary level was chosen after considerable input from interested parties).   But, despite the DOL’s effort to appease all interested stakeholders, there is a good chance some interest group will file suit to challenge the new rule.   The issue is not so much the amount of the salary threshold, but whether the DOL has the right in the first place to use a minimum salary as part of the test to determine whether an employee is exempt from overtime.    Commenting on Judge Mazzant’s ruling on the Obama era rule, I said in a September 12, 2017 post:

In the ruling on the preliminary injunction, Judge Mazzant questioned whether the DOL has the legal authority to establish a salary basis test.   He reasoned the FLSA itself defines Executive, Administrative, and Professional exemptions only with respect to duties, and says nothing about the employee’s salary.  Therefore, he ruled, Congress did not intend that the amount of an employee’s salary be a factor in determining whether the employee was exempt; only the duties are relevant.   By including a salary basis test in addition to a duties test, Judge Mazzant concluded, at least preliminarily, that the DOL likely exceeded its statutory authority.

It is important to note that, in the final ruling, Judge Mazzant backed away from his initial opinion that questioned the DOL’s authority to use the salary test at all. Instead, he concluded merely that $913 per week too high because it likely would have the effect in many cases of eclipsing the duties test, essentially rendering the duties irrelevant.   In other words, the salary was so high that many employees who satisfied the duties test for one of the executive, administrative, or professional exemptions would still be classified as non-exempt because their salary was less than $913 per week.

In addition to questioning the legal basis for the minimum salary, there are practical reasons the salary basis test should be abandoned.   First, the salary basis applies to the entire country, and does not take into account regional and local economic conditions.   A $679 per week salary means something different in Des Moines than it does in San Francisco or New York.    Second, in the modern era the salary basis has become a political weapon used to benefit favored constituencies, depending upon the party in power.   Third, the proposed rule contains a provision that allows the Department to change the salary basis every three years.   But, the rulemaking process is so slow that it takes at least two years for a rule to get from the proposal to the final stage.  Moreover, once the new salary basis is in place, it could once again be subject to legal challenge.    Lawyers and lobbyists love this process, but whether it actually benefits ordinary employees is questionable.  Finally, lawyer and blogger Jon Hyman makes an excellent point that I have not seen elsewhere, but is important:  that is, the salary basis test simply does not matter.   If an employer pays someone less than $679 per week, that person is probably not the sort of employee who exercises the type of discretion and judgment required to satisfy the duties part of the test.  It is the duties test that employers should really be worried about.

So what’s the takeaway from all this?  Employers, get ready for the new salary basis in 2020, but don’t be surprised if it never goes into effect.

 

On August 31, 2017, Judge Amos Mazzant in the Eastern District of Texas issued a final ruling invalidating the Obama Department of Labor’s increase in the minimum salary for exempt employees under the Fair Labor Standards Act.  This is the same judge that issued the preliminary injunction on November 22, 2016 that prevented the rule from going into effect as scheduled on December 1, 2016.  Even though the DOL appealed the preliminary injunction to the Fifth Circuit, the Court of Appeals did not stay the proceedings in the trial court while the appeal was pending.  Thus, Judge Mazzant issued his final ruling before the Court of Appeals had the opportunity to weigh in on the validity of his preliminary injunction.

You may recall the Trump DOL took the surprising position on appeal that Judge Mazzant erred in issuing the preliminary injunction, and requested that it be reversed.  If the DOL had succeeded it obtaining the relief it requested, the new overtime rules could have gone into effect, which would have caused all kinds of havoc.  Fortunately, on September 5, after Judge Mazzant’s ruling, the Department withdrew its appeal of the preliminary injunction.  At least for the moment, the uncertainty surrounding the status of the minimum salary has been settled.    The fanfare with which the DOL announced the rule last year, the thousands of lawyers hours spent educating our clients about it, and the dread with which employers anticipated its effective date, ended with a relative whimper.

For now, the minimum salary an employer must pay to exempt employees remains $455 per week.   But, it may not stay that way for very long.   The Department of Labor recently requested comments from the public whether it should raise the minimum salary to something more than $455 per week, but less than $913 per week in the now invalid rule.  As of today, the DOL has received over 138,000 comments in response to its request, so there is obviously significant interest in further changes.  The comment period remains open until September 25, so you still have the chance to weigh in if you haven’t already.

All the controversy about the new overtime rule raised an important question that warrants more attention:  that is, should there even be a minimum salary as part of the test for determining whether an employee is exempt from overtime?    In the ruling on the preliminary injunction, Judge Mazzant questioned whether the DOL has the legal authority to establish a salary basis test.   He reasoned the FLSA itself defines Executive, Administrative, and Professional exemptions only with respect to duties, and says nothing about the employee’s salary.  Therefore, he ruled, Congress did not intend that the amount of an employee’s salary be a factor in determining whether the employee was exempt; only the duties are relevant.   By including a salary basis test in addition to a duties test, Judge Mazzant concluded, at least preliminarily, that the DOL likely exceeded its statutory authority.

In his final ruling, Judge Mazzant again cited Congress’ intent that only duties matter.  But, he backed off his preliminary ruling that the DOL lacked legal authority to use salary test at all.  Instead, he concluded merely that the minimum salary in the Obama era rule was too high because it likely would have the effect in many cases of eclipsing the duties test, essentially rendering the duties irrelevant.   In other words, the salary was so high that many employees who satisfied the duties test for one of the executive, administrative, or professional exemptions would still be classified as non-exempt because their salary was less than $913 per week.    So, in the end, the concept of some minimum salary apparently satisfies Congress’ intent, but the amount must still pass Judge Mazzant’s (or some other judge’s) sensibilities to be valid.

Notably, the reason the Department requested the Court of Appeals to reverse Judge Mazzant’s preliminary injunction was this very issue: the DOL did not want to lose the right to establish a minimum salary as part of the test for determining who is an exempt employee.   It appears Judge Mazzant read the Department’s brief and perhaps decided to back off of what seemed to be the logical conclusion of his preliminary injunction ruling.   On the other hand, it appears the Department may still be open to an exemption test that does not include a minimum salary.   One of the questions (No. 7) on which the DOL is seeking public comment is whether an exemption test that relies solely on duties without regard to the employee’s salary be preferable to the current test, and if so, what elements should be included in such a test.

What do you think?  Would exempt employees be harmed if there was no minimum salary as part of the test for determining who is exempt from overtime?   If a minimum salary is essential, what should it be, who should make the determination, and by what criteria?   Is it appropriate that federal judges are the final arbiter of what is or is not an acceptable minimum salary?  Hopefully the Department will be thoughtful in its considerations of these important questions.  Stay tuned…

This time last year many employers were anxious about the new Department of Labor Rule that raised the minimum salary for exempt employees to $913 per week, more than double the existing minimum of $455.   The Rule was scheduled to become effective December 1, 2016.   Then, in a surprising stroke of fortune, on November 22, a federal district court in Texas issued a nationwide preliminary injunction barring the new rule from going into effect.

On December 1, 2016, the then Obama administration Department of Labor appealed the district court’s ruling.   With a new administration arriving January 20, 2017, and an anticipated new Secretary of Labor, the DOL asked the court of appeals to delay the briefing on the appeal.    I and many others expected at that time that the new rule was effectively dead.   Either the DOL would withdraw the appeal, the new Congress would override it, or the Department would take action to rescind the rule.

As it has turned out, none of those three things have happened, at least not yet.   In the meantime, the Department chose not to request further extensions of the briefing schedule beyond the June 30 deadline the court of appeals had established.

Then, in yet another surprise twist in this saga, in its brief filed on June 30, the Department asked the court to reverse the judgment of the district court.   You read that correctly.   The Trump DOL seemingly took the same position on the preliminary injunction you would have expected the Obama DOL to take.   What gives?

It seems the DOL’s position is driven by a concern about the legal basis of the district court’s injunction.   In granting the preliminary injunction, the district court ruled the DOL did not have the legal authority to establish a salary basis test.   The court reasoned section 213(a)(1) of the FLSA defines Executive, Administrative, and Professional exemptions only with respect to duties; the law says nothing about a minimum salary.   As such, the Department exceeded its statutory authority in making a minimum salary a part of the test for determining whether an employee is exempt.  If the injunction stays in place based upon the district court’s reasoning, it will set a precedent the DOL cannot set a salary test at all, regardless of the amount of the salary.

The new Secretary of Labor obviously wants to retain the authority to set a minimum salary for exempt employees, but would prefer a different amount to the $913 per week proposed in the new rule.  The Department has, in fact, commenced the process to revise the overtime rule to set the minimum salary at a different level.   The DOL requested the court not to address the validity of the $913 per week salary in its ruling.

So, what happens if the court of appeals actually grants the relief the Department requested?  In a typical case, reversing the district court’s grant of a preliminary injunction means the injunction is vacated.   But, what if that happens before the Department has issued a new rule modifying the salary basis test?  The agency has not withdrawn the new rule that was scheduled to go into effect December 1, 2016, so in theory the rules goes into effect if the injunction goes away.    If that actually were to happen, another complicating factor is the effective date of the rule.  Would it be effective retroactive to December 1, 2016, or would it take effect on the date the injunction was vacated?  Retroactive effect would be devastating to those employers that relied on the injunction to avoid implementing changes to salaries or re-classifying employees as non-exempt.   An effective date that is only prospective would not be much better, because employers are not expecting it and will have little if any notice.  Even if the Department does not take action to enforce the rule, there are certainly plenty of plaintiff side-lawyers willing to bring private wage and hour suits.

It’s possible the court of appeals could find other grounds to leave the injunction in place, or delay the effect of its ruling pending the DOL’s new rule making efforts.  But there’s no guarantee that will happen.    Given the potentially high stakes impact of the DOL’s approach on employers, it is surprising hardly anyone is talking about it.   Attorney Jim Coleman published an excellent analysis of these issues, but otherwise I have not seen much discussion.

I’m interested to know what others think about the potential for the OT rule being resurrected from the dead.   Could the sky really be falling, or am I just another Chicken Little?

Image Credits: From Google; Alexander Acosta official photo; From flickr, Creative Commons license, Chicken Little/Dave Walker

While “joint employment” is not a new legal concept, federal agencies such as the Department of Labor and National Labor Relations Board have aggressively sought to expand its application in recent years.

A joint employment situation typically occurs when an employer uses an independent contractor or vendor for certain services, or relies upon a staffing agency to supply workers.   The employer relying upon the vendor probably does not consider the vendor’s employees to be its employees as well.  Indeed one of the reasons to use vendors, contractors, or staffing agencies is to delegate to others certain obligations that come with having employees, such as payroll administration, wage and hour compliance, collective bargaining, or workplace safety.     But, if an employer is not careful in how it structures and administers its vendor and contractor relationships, it may unwittingly find itself saddled with legal obligations it thought had been assumed by others.

A recent opinion issued by the U.S. Court of Appeals for the Fourth Circuit (Salinas v. Commercial Interiors, Inc. , No. 15-1915, 1/25/2017) highlights this very risk.  The Fourth Circuit’s opinion purports to clarify the test for determining when a “joint employer” relationship exists under the Fair Labor Standards Act (FLSA).   While this opinion applies only in Maryland, Virginia, and North Carolina, it would not be surprising if other circuits adopted the Fourth Circuit’s new test, which in many cases will make it easier to prove the existence of joint employment.

Summary of the Case

03The plaintiffs in Salinas were employees hired by a company known as J.I. General Contractors, Inc.   J.I. worked almost exclusively on projects for another contractor, Commercial Interiors.  Commercial Interiors offered general contracting and interior finishing services, including drywall installation, carpentry, framing, and hardware installation.    The J.I. employees filed a collective action against both J.I. and Commercial, alleging they were not paid wages, including overtime wages.   The plaintiffs obtained a judgment for unpaid wages and attorneys’ fees against J.I..  But, the district court dismissed the claim against Commercial, finding Commercial had a legitimate independent contractor relationship with J.I. that was not entered into for the purpose of evading its legal wage and hour obligations.

The Court of Appeals reversed, finding the district court incorrectly ruled in Commercial’s favor on the joint employment question.  In a lengthy opinion, the Court of Appeals criticized the trial court for focusing on the legitimacy of the contractual relationship and the good faith of the parties’ intent to comply with the wage and hour laws.  But, the Court also found the existing precedent for FLSA joint employment cases, both in the Fourth and other circuits, unsatisfactory and confusing.   As such, the Court decided to “set forth our own test for determining whether two persons or entities constitute joint employers for purposes of the FLSA,”  guided by the principle that the law “must not be interpreted or applied in a narrow, grudging manner.”

The Court framed the “fundamental threshold question” in these cases as, “whether a purported joint employer shares or co-determines the essential terms and conditions of a worker’s employment.”  In answering the question whether joint employment exists, the Court of Appeals said courts should consider the following, non-exhaustive, list of factors:

  • Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;
  • Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to—directly or indirectly—hire or fire the worker or modify the terms or conditions of the worker’s employment;
  • The degree of permanency and duration of the relationship between the putative joint employers;
  • Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
  • Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and
  • Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.

Applying the six factors to the Commercial-J.I. relationship, the Court found the following facts were important in finding that Commercial jointly employed J.I.’s employees:

  • The Plaintiffs performed nearly all of their work on Commercial job sites and for Commercial’s benefit;
  • Commercial provided the tools, materials, and equipment necessary for Plaintiffs’ work, with Plaintiffs providing only small, handheld tools;
  • On at least one occasion, Commercial rented a house near the job site for J.I. employees to stay in during a project;
  • Commercial actively supervised Plaintiffs’ work on a daily basis by having foremen walk the job site and check Plaintiffs’ progress;
  • Commercial required Plaintiffs to attend frequent meetings regarding their assigned tasks and safety protocols;
  • Commercial required Plaintiffs to sign in and out with Commercial foremen upon reporting to and leaving the job site each day;
  • Commercial foremen frequently directed Plaintiffs to redo deficient work, communicating problems to J.I. supervisors who translated the information to Plaintiffs
  • Commercial foremen told certain Plaintiffs to work additional hours or additional days;
  • Commercial communicated its staffing needs to J.I., and J.I. based Plaintiffs’ jobsite assignments on Commercial’s needs;
  • When J.I. performed certain “time and materials” work for Commercial and was paid on an hourly, rather than lump-sum, basis, Commercial told J.I. how many of its employees to send to the project and how many hours those employees were permitted to work;
  • Commercial provided Plaintiffs with stickers bearing the Commercial logo to wear on their hardhats and vests bearing Commercial logos to don while working on Commercial jobsites;
  • I. supervisors instructed Plaintiffs to tell anyone who asked that they worked for Commercial;
  • Commercial provided J.I. supervisors with Commercial-branded sweatshirts to wear while working on Commercial projects;
  • On at least one occasion, Commercial required J.I. employees to apply for employment with Commercial and directly hired those employees.

Employer Takeaways

It’s typically in the details of doing the job that the relationship get blurred between an employer’s own employees, and those of a contractor or vendor.    The company principals sign an agreement that sets forth the relationship, usually with good intentions.  But, in the effort to get the project or job done, the administration of the relationship does not comport with what it may say in the written agreement.   The following are a few reminders that should help keep the lines between the employer and contractor/vendor more clear:

  • Provide clothing or logos for your employee’s, but not the employees of a contractor/vendor;
  • Do not provide equipment or tools for the contractor/vendor’s employees;
  • You are allowed to exercise quality control over a contractor/vendor’s finished product, but do not instruct a contractor/vendor’s employees about the details of the work;
  • Communication about unsatisfactory work should be to a designated liason with the contractor/vendor, not the employees themselves;
  • Do not discipline or threaten to terminate a contractor/vendor’s employee; issues of conduct or performance of a particular employee should be addressed with the liason;
  • Contractor/vendor employees should comply with general safety protocols of the work site; but, if there are safety protocols unique to the contractor/vendor’s work (e.g., if they use certain chemicals), the contractor/vendor should enforce those rules.
  • Do not directly keep track of contractor/vendor employee hours, or direct those employees when to work, or insist they work overtime.
  • Train supervisors about these rules;
  • Closely following these rules is most important if the employer is the exclusive or nearly exclusive firm that uses the contractor/vendor; even if the contractors has many other customers, the employer should endeavor to follow these practices, but there may be more flexibility.

Image Credit from Google, Creative Commons license, Contractors Plant and Machinery.

 

We posted on November 23 about the surprising temporary injunction issued to stop the new overtime rules from going into effect on December 1.    Many employers breathed a sigh of relief, but still wondered if this injunction was only a short term reprieve that could be taken away next year.  Here are a few things that have happened since the injunction that might shed some light on the future over the new rules:

  • On December 1, the Department of Labor filed an appeal of the district court’s injunction to the U.S. Court of Appeals for the Fifth Circuit.   The court of appeals granted the DOL’s request to fast-track the appeal, which means all briefs must be submitted by January 31, 2017.  That is about 60-90 days sooner than would occur with a normal schedule.   It is likely the court will schedule an argument in February and could have a ruling soon thereafter.
  • On December 8,  President-elect Trump announced Andy Puzder as his nominee for Secretary of Labor.  Puzder is the CEO of the company that owns the Hardee’s and Carls, Jr. restaurant chains, and has been a vocal critic of the DOL’s new rules.
  • The new overtime rules are on the list of 200 regulations that many members of Congress propose eliminating during the first 100 days of the Trump administration.

Dept of LaborWhile we are not making a prediction, employers have every reason to be optimistic the new rules will at least be modified if not eliminated altogether.   It is quite possible the DOL’s appeal will never see the light of day; once Trump is sworn in as president, he can order the DOL to withdraw its appeal and stop defending the underlying litigation, which would effectively make the injunction permanent.   As noted previously, Congress may pass a law to overturn the rule.    If neither of those occur, the new Secretary of Labor could start the process to rescind or rewrite the rule.   The last option would take the longest, as it would first require the Senate to confirm the new Labor Secretary, and then he would have to start the rule-making process.    Whatever course the process takes, if you have not taken action to implement the new overtime rules, there is no reason to do so now.

On November 22, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction prohibiting the Department of Labor from implementing and enforcing the new overtime rule as scheduled on December 1, 2016.

The new rule more than doubled the minimum salary an employee needed to qualify as exempt from overtime under the so-called “white collar” or EAP exemptions (Executive, Administrative, Professional).    The existing minimum salary is $413 per week ($23,460 per year); the new rule increased the minimum to $913 per week ($47,476 per year).    Employers have been scrambling in recent weeks to decide how best to comply with the new rule: whether to increase exempt employees’ salaries to the new minimum or reclassify formerly exempt employees and pay overtime for hours worked over forty per week.    Two lawsuits were filed September 20 challenging the rule but few expected the court to actually stop the rule from going into effect.

What are the practical effects of this ruling?   Most importantly, employers do not have to give raises or re-classify your employees by December 1.   Unfortunately, for many it may be too late.   Some employers have already communicated raises or re-classifications to employees.   There is nothing in the law that prevents those changes from being reversed, but it is difficult to take back what has just been given.

For employers who have not communicated or implemented the changes, the court’s injunction provides some immediate relief.  But, there is still quite a bit of uncertainty about what will happen next.    The future of the overtime rule will be impacted not just by legal but also by political considerations.

On the legal side, it is important to remember this is a preliminary injunction.  That means the court has not entered a final ruling, and it possible (although doubtful) in the end the court will allow the rule to go into effect.     It’s also likely the DOL will appeal this ruling to the U.S. Court of Appeals for the Fifth Circuit, which could result in the decision being reversed.     Neither of those outcomes is likely to occur for many months.   But, if the injunction is dissolved and the rule goes into effect, a thorny question arises: does the preliminary injunction preclude liability under the new rule between December 1, 2016 and the date the injunction is dissolved?   Common sense tells you an employer would not be liable, but that might not prevent employee lawsuits claiming they are entitled to either unpaid overtime or additional salary.

The election of Donald Trump along with a Republican controlled Congress may result in the political branches pulling the plug on the new rule.   That could occur in several ways, some of which take longer than others.    Congress could pass and the president could sign a law repealing the new rule.    The president could direct the Department of Labor to drop an appeal of the injunction and simply let the injunction remain in place.    Finally, the DOL under a new administration could issue rule repealing the new overtime rule.    The first two actions could occur fairly soon after January 20, 2017, while the third is a much longer and more difficult process.

We will continue to monitor the rule and keep you posted.

There remains a surprising number of employers who believe an employee with the title of “supervisor” who is paid a fixed salary is exempt from the federal overtime requirements. While such an employee may be exempt, it is not because of the title, and the salary is only one of the components (assuming the salary exceeds the minimum threshold). To be exempt, the “supervisor” must also satisfy one of the so-called “white-collar” exemptions by performing duties that qualify as “executive”, “administrative”, or “professional.”

A recent ruling from the Eighth Circuit (Garrison v. Con Agra Packaged foods, LLC) addressed whether ten employees who worked in a ConAgra plant as “team leaders” were exempt from overtime under the “executive” exemption. The team leaders claimed they were entitled to overtime when they worked more than forty hours a week.  At the plant in question, a team leader was responsible for, among other things, monitoring the performance and behavior of hourly employees, and identifying rules violations and poor work performance. They had authority to reassign or recommend temporary reassignment of employees and to recommend discipline. If management agreed to the recommended discipline, it would result in a change in status of the employee.images

To qualify under the “executive” exemption, an employee must meet four criteria:

1) compensation at or greater than $455 per week (increasing to $913 per week on December 1);
2) the primary duty is management of the enterprise or a customarily recognized department or subdivision of the enterprise;
3) customarily and regularly direct the work of two or more other employees; and
4) have the authority to hire or fire, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight.

ConAgra and the employees agreed the team leaders satisfied the first three criteria. The dispute was whether they met the fourth. To determine whether the team leaders’ suggestions and recommendations were given particular weigh in personnel decisions, the court examined whether their input into personnel decisions had more influence that the input provided by hourly employees.

The evidence showed the team leaders were told to appraise performance of probationary employees and report good or poor performance to a manager. At least two of the team leaders in the class had recommended the discharge of a probationary employee who was ultimately discharged. Team leaders also gave feedback whether promoted employees could do their new job, and if not the employees were demoted to their former positions. Team leaders were able to fill tempoary vacancies by moving someone from one class to another and managing the scheduling of hourly employees within their areas. Finally, the evidence show management followed the recommendations of team leaders with respect to employee discipline “most, if not all of the time.” The Court of Appeals found this evidence was sufficient to prove, as a matter of law, that team leaders in that plant were exempt from the overtime requirements.

If a front line supervisor is classified as exempt, the ConAgra case shows that reliable evidence the supervisor’s recommendations are actually followed is important. The best practice would be to document their input and show that management actually followed it.

images Credit: from Google images, Creative Commons license, Industrial Plant

The minimum wage has been in the news a lot lately.   Here in central Iowa, the Polk County Board of Supervisors appointed a task force to study whether to raise the minimum wage in the County over and above the federal and state law minimum wage of $7.25 per hour.   Now the task force has come back with a recommendation that Polk County increase the minimum wage to $10.75 per hour in a series of incremental steps over three years.  The proposal is to raise the minimum wage to $8.75 on April 1, 2017, followed by $1 increases on January 1, 2018 and 2019, to a total of $10.75.

While the political momentum seems to favor an increase in the Polk County minimum wage, some have raised the question whether a County in Iowa has the legal right to impose a minimum wage higher than the wage state or federal law requires.

Like many legal questions, the answer is, “it depends.”  Iowa law gives counties the power of what is known as “home rule”.  So long as a county ordinance does not conflict with the requirements of a state law, a county is free to legislate as it deems appropriate for the welfare of its citizens.  Home rule includes the right to set standards and requirements higher or more stringent that those imposed by state law, unless the state law provides otherwise.   On the surface, therefore, it seems there is nothing that would prevent a county from raising its minimum wage above the state mandated minimum.

But, looking below the surface, there could be problems.  For example, Iowa law permits tipped employees to be paid up to 40% less than state mandated minimum wage.    If Polk County were to raise the minimum without an exception for tipped employees, it would conflict with the state law, and subject it to a potential legal challenge.  In addition, Iowa law gives cities virtually the same home rule authority has counties.   Therefore, a city within Polk County could effectively opt out of the county imposed higher minimum wage by enacting its own wage ordinance.    Nor does the proposed wage increase address the practical problem of cities located in more than one county, such as West Des Moines.

Central Iowa employers will be watching this debate closely.

On the Friday before Thanksgiving, Vice-President Biden announced at a Middle Class Task Force event the creation of a collaboration between the U.S. Department of Labor and the American Bar Association.   According to the press release associated with the event, the purpose the collaboration is to “help workers resolve complaints received by DOL’s wage and hour division.

Beginning December 13, 2010, people with unresolved complaints under the Fair Labor Standards Act (FLSA) or Family and Medical Leave Act (FMLA) will be sent a letter explaining their rights, and providing a toll-fee number that will connect them with an ABA approved lawyer referral service in their area. These are complaints that the Department of Labor is otherwise charged with investigating but apparently cannot because of what the Secretary of Labor described as the Department’s “limited capacity.”

While this collaboration may be good for the business of lawyers, it is doubtful it will be good for anyone else, most especially the business community and the middle class employees the program purports to help.   The unspoken assumption of programs like this one is that lots of employers are violating employment laws and short changing their employees.   Indeed, Labor Secretary Solis’ statement that “our nation’s workers deserve full and fair compensation” implies that they are not.  

Contrary to the assumptions underlying this program, in my experience and that of other employer side lawyers I know, the lion’s share of companies are conscientious about complying with the employment laws. The high cost of defending employee claims and the risk of an adverse outcome, regardless of the merits of the suit, give employers an economic incentive to comply with the law.   Nor is the federal government and the ABA encouraging more employment litigation likely increase the income of middle class employees. In fact, it may have the opposite result, as more and more resources are devoted to defending and settling these cases rather than increasing wages and benefits of employees generally.    In a 2008 study by Estreicher and Yost, the median gross settlement in 179 collective or class action employment lawsuits studied was $8,500,000.   This does not include the thousands of individual claims and settlements every year. 

Remarkably, the ABA touts this program as an opportunity to improve the image of lawyers. I don’t know who the ABA thinks this will impress, but it is not likely to be the business community or the majority of the general public who are cynical about lawyers.  If the Department of Labor believes employer compliance with FLSA and FMLA is lacking, there are more constructive ways to address the problem than increasing their litigation risk.

For a thoughtful view on the other side of this issue, see Dan Schwartz’s post at the Connecticut Employment Law Blog.

Wage and hour collective actions remain active in Iowa.  A Judge in Clinton County just approved a collective action settlement in which Wal-Mart agreed to pay $11 million to settle claims that it failed to pay overtime, properly account for breaks, and altered time records.   Employees and former employees who worked for Wal-Mart in Clinton between 1999-2009 will receive between $25-300 each. 

Flu season is officially underway, and the H1N1 virus has been back in the headlines.  Ogletree Deakins has published an informative Question and Answer document concerning an employer’s rights and obligations in dealing with employees who have the H1N1 virus.    In addition, the EEOC recently published a technical advisory entitled "Pandemic Preparedness in the Workplace and the Americans with Disabilities Act."

Also from the EEOC, the Agency released on October 6 an informal opinion letter concerning employee health risk assessments.   The letter, authored by EEOC assistant legal counsel Peggy Mastroianni, takes the position that requiring employees to answer personal health questions as a condition of receiving an employer provided health reimbursement expense benefit violates the ADA.  Although an informal opinion letter is not binding, it provides insight into how the Agency evaluates these issues.   For more analysis see this post at the Washington D.C. Employment Law Update.

Are you a lawyer who regularly uses motions for summary judgment in defending employment claims?  Before you file your next one, check out this post at Workplace Prof Blog.  Lawyers for United Airlines filed a motion for summary judgment in a race discrimination suit pending in California state court.  The Court noted the motion sought "adjudication of 44 issues, most of which were not proper subjects of adjudication.  Defendants’ separate statement was 196 pages long, setting forth hundreds of facts, many of them not material—as defendants’ own papers conceded.  And the moving papers concluded with a request for judicial notice of 174 pages.  All told, defendants’ moving papers were 1056 pages."   Once the plaintiff’s resistance and the defendant’s reply were considered, 5,415 pages of material were presented to the trial judge. The Appellate Court characterized this as  "what may well be the most oppressive motion ever presented to a superior court ".   

In reversing the trial court’s ruling granting summary judgment, the Court spared no criticism of the trial judge.   The reason for the reversal: "what apparently happened is that the trial court did not read all the papers."   However, in the end, the Court gave the trial judge a break: "While not reading the papers cannot be condoned, it can perhaps be understood, as we hesitate to speculate how long it would take a trial court to meaningfully digest over 2200 pages of separate statements, analyze and rule on 764 objections set out in 325 pages, review it all in light of the applicable law, and then write a proper order."

The Court concluded with an admonition we all should heed the next time we file one of these motions: "The incredible volume of material here simply has no place in a system where overburdened trial courts labor long and hard."

Finally, Molly DiBianca at the Delaware Employment Law Blog reports on a survey of employers concerning their use of social networking media as part of applicant screening.    45% of respondents reported using social networking for background checks, with 35% of those having rejected a candidate for what they found there.   What will disqualify a potential employee?  Among other things, provocative photos or information; depiction of drinking or drug use; lying about your background or qualifications; or discriminatory comments.