US Department of Labor logo.jpgAs if the DOL’s new Fair Labor Standards Act regulations weren’t enough to fill your plate this year, a recent interview (subscription required) that the DOL’s Wage and Hour Division Administrator David Weil gave to BNA’s Daily Labor Report has added to what portends to be a monumental shift in wage and hour law.

In an interview with BNA’s Gayle Cinquegrani, Weil teed up another “emerging issue” on the DOL’s radar: the concept that workers should have some rights to a predictable, stable work schedule, or at least to advance notice of it. Weil said that the Division is “looking very actively at that issue now” because of the “big work life balance issues” it raises.

This latest blip on DOL’s “radar screen” of issues appears to be an extension of its so-called “Right to Know” initiative from late 2012 and early 2013. You may recall that the DOL announced its intention to conduct a survey “to collect information about employment experiences and workers’ knowledge of basic employment laws and rules so as to better understand employees’ experience with worker misclassification.” Among the rights the DOL was considering was an employee’s right to be notified of their hours worked, pay rates, and wages paid. The DOL’s Right to Know initiative never got off the ground, but Weil may be moving the Wage and Hour Division back in that direction.

Weil conceded that “It’s an open question” as to whether the FLSA covers predictable scheduling. Certainly, the DOL has not published anything to date that would suggest it has found that the FLSA regulates work schedules. Weil does not elaborate further, noting only that he believes that computerization should enable employees to give “input” on their scheduling by going online and voluntarily filling employer requests for shift openings. Weil’s comments may seem to display a misunderstanding of the way employers set schedules, but could just reflect a Utopian view of the workplace.

The upshot appears to be that the Wage and Hour Division would like to find a way to transform a good business practice (maintaining employee relations by maintaining predictable schedules) into an administrative mandate. For now, this is just an issue on the radar screen, not a definitive target for the Wage and Hour Division. However, employers should keep watch on this front as well, in case the DOL makes a formal predictable scheduling proposal.

At the end of last year, we discussed the Pay Period Leap Year and what it means for employers. If your first weekly paychecks will issue on Thursday, January 1, 2015, you will have a fifty-third pay period on December 31, 2015. If your first bi-weekly paychecks will issue on Thursday, January 1, 2015, you will have a twenty-seventh pay period on December 31, 2015, depending on payday holiday processing rules. This means that for employers who pay employees weekly or bi-weekly, 2015 could be a Pay Period Leap Year, but it doesn’t mean that all of your employees will have one. We discussed three options for handling Pay Period Leap Years if you pay employees on a weekly or bi-weekly basis, each of which we discussed in detail in our December post:

  1. Pay the same amount in each pay period as you did in the non-Pay Period Leap Year. Under Option 1, employees will receive an effective increase of approximately 2% (weekly pay periods) or 4% (bi-weekly pay periods).
  2. Divide the total salary by 53 (or 27) pay periods rather than 52 (or 26). This ensures that employees get the same compensation as in non-Pay Period Leap Years, but it also means employees would get slightly less per paycheck. 
  3. Adjust only the last paycheck of the year. 

Many employers have chosen Option 2, which is a sensible middle ground. As we warned in the original post, this covers only the most common situation. You must ensure that each of your employees actually have 27 pay periods before proceeding with Option 2!  If you chose Option 1, you get a break here because your employees’ paychecks never change.

Under Option 2 (or 3, for that matter), while the majority of your employees will leap in a Pay Period Leap Year, not all of your employees will. Let’s take the example of employee “John Newbie.”  John started at your company on January 1, 2015, and your offer letter gives him a $100,000 annual salary paid in bi-weekly increments, paid in arrears per your usual practice. When he started on January 1, 2015, you also informed him that because of the Pay Period Leap Year, his $100,000 annual salary would be divided into 27 bi-weekly payments this year, rather than 26. Maybe you even gave him a copy of my Pay Period Leap Year post. No problem, right? Wrong!  You might have inadvertently created a wage and hour problem. If you’re thinking, “But Doug, John is working the entire year, and we’re in a Pay Period Leap Year!” then let’s look at this on a simple spreadsheet:

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You should see the problem right away. The issue here is that, like nearly all employers, you pay in arrears. That means that pay period #1 this year is actually for time worked in 2014. John started on January 1, 2015. Because he was not working in December 2014, he did not get a paycheck on January 2, 2015. With only 26 pay periods and an annual salary divided into 27 parts, John isn’t getting $100,000 this year. His next check is properly pro-rated for the days worked in 2015, and he ends up with just $94,973.54 on his W-2 (you can see the entire calculation on the full spreadsheet). That’s $5,026.46 short of the $100,000 that you agreed to pay John in your offer letter, which is a problem.

If you ever took an accounting or bookkeeping class, you might be tempted to conclude that this is just a cash versus accrual problem that only shows up on a W-2, and that John will make up the $5,000 difference with his paychecks in January 2016. Except that he doesn’t. To simplify things, let’s assume that John works exactly one year, leaving after December 31, 2015. His first paycheck in 2016 looks like this:

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That $1,322.75 paycheck does not make up for the shortfall. John is still $3,703.71 short for his 2015 compensation, even if you look at it on an accrual basis. In fact, he’s short exactly one paycheck because you made John “leap” by dividing his salary in 27 paychecks when, owing to his start date, he would only receive 26 of them in 2015.

The lesson is this: not every employee will have a Pay Period Leap Year. This group (employees who did not work in the prior year) is just one of several groups that will not leap with the rest of your employees. If this year is a Pay Period Leap Year, you should have already notified employees how you plan to handle it. Due to the various ways that bi-weekly paychecks in particular can be calculated, not every employer will face a Pay Period Leap Year this year. Some may experience it in 2016, and some may have experienced it in 2014. Even if you do have a Pay Period Leap Year in 2015, though, remember to look at each individual employee to ensure that they will really receive 27 paychecks before you selection Options 2 or 3 above.

coins_20bill_14741128.jpgIf you read this blog regularly, you know that since last spring, we have been telling you about what to expect from the new Fair Labor Standards Act regulations. The regulations were delayed, but what we expect hasn’t changed, as I explained in November. According to the Fall 2014 Agency Rule List, the DOL’s “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” regulation should be ready this month. The regulation is intended to implement President Obama’s directive to modernize and streamline FLSA regulations for executive, administrative, and professional employees. Although the calendar has changed to February, the page where the regulations, or at least a final release date, would be announced has yet to change.

We can be relatively certain that the revised regulations will increase—and probably substantially—the $455 minimum weekly salary threshold for exempt workers ($455 per week translates to $23,660 per year). That prediction is supported by the almost weekly publication of various groups’ attempts to lobby the Obama administration for a new, substantially higher salary threshold.

As we noted late last month, Ross Eisenbrey at the Economic Policy Institute, a union-aligned think tank, gave an interview to the Huffington Post advocating for a $51,000 threshold, but noting that administration sources told him that they had planned a more “modest” $42,000 threshold. Around the same time, EPI posted a letter signed by EPI president Lawrence Mishel, Jared Bernstein, an economist from the Center on Budget and Policy Priorities, and a group of economic professors that it had sent to Secretary of Labor Thomas Perez. The letter referred to “various proposals” circulating in “the media” that recommended salary levels as low as…the same $42,000 cited by EPI’s own Eisenbrey. The EPI letter pushed for a $50,000 salary threshold, nearly identical to Eisenbrey’s, that would “restore the 1975 threshold, adjusted for inflation.” To bring things full circle, Eisenbrey and Bernstein have teamed up before, too. In December 2013, on the occasion of the 75th anniversary celebration of the FLSA, they presented a paper to the DOL proposing a significant expansion of eligibility for overtime pay and arguing for a $50,440 threshold.

Eisenbrey’s comments and the EPI letter must have raised eyebrows on Capitol Hill, too. Representative Mark Takano (D-CA), sent a letter signed by 31 House Democrats to both President Obama and Secretary Perez. Rep. Takano’s letter endorsed political activist Nick Hanauer November essay in POLITICO Magazine, which argued that the FLSA’s salary threshold should increase to at least $69,000.

Finally, a group of 25 Democratic Senators, along with Senator Bernie Sanders (one of the independent senators who caucuses with the Democrats) sent a letter to President Obama last week requesting that the DOL increase the salary level to at least $56,680 per year. Working behind the scenes

Whether the administration settles on $42,000; $50,000; or $69,000, the increase would be substantial and have a wide-ranging impact on a range of industries, particularly in the service and retail sectors. As we continue to learn more over the coming weeks, we will continue to give you the latest scoop.

In our last post, we looked at the rules governing volunteers at for-profit entities. As we discussed, for-profit organizations have almost no latitude to accept volunteer services. However, nonprofit employers face a more relaxed regulatory scheme under the FLSA when it comes to volunteers. Unlike their for-profit brethren, nonprofit employers can accept volunteer services without running afoul of the FLSA’s minimum wage and overtime requirements. The FLSA regulations contain an exception for individuals who undertake volunteer activities for their own “personal, civic, charitable, humanitarian, religious, or public service reasons.”

To this end, the DOL has recognized that “ordinary volunteerism” to religious, charitable, and nonprofit organizations and schools does not create an employment relationship. Truly volunteer services come without the expectation of compensation in cash or in-kind benefits and are given freely without coercion. In addition to ensuring that individuals are truly volunteering, the DOL and federal courts look to:

  1. The nature of the entity receiving the services
  2. The character of the services themselves
  3. The amount of control the employer exerts over the volunteer
  4. Compensation or benefits provided to the individual, or that the individual expects
  5. Whether the volunteer work displaces paid work by regular employees

The first factor examines what the volunteers do. For instance, “volunteers” who operate a nonprofit’s business selling goods or services to the public, such as a resale shop or a restaurant may not qualify as volunteers because of their direct participation in commerce. The DOL and courts are more likely to find individuals in a non-sales role, such as docents providing information at a nonprofit hospital or servers passing out free food at a homeless shelter, to be volunteers.

For the same reason, a person who already performs the same or related services for a nonprofit on a paid basis cannot perform those services on a volunteer basis at any time, whether during or outside regular working hours. Similarly, a person who receives significant gifts or monetary stipends to perform work (even if less than minimum wage) is more likely to be an employee than a volunteer.

Just as with independent contractors, the third factor looks to the amount of control an employer exerts over a volunteer. A nonprofit that gives a worker a part-time schedule with no set hours can more easily establish that the person is a volunteer, all other things being equal. The DOL and courts are more likely to find a nonprofit that gives a “volunteer” regularly scheduled, full-time hours or that requires “volunteers” to get approval to change or miss shifts has employees, not volunteers. In general, the DOL’s past FLSA decisions have held that the more restrictions nonprofit employers put on volunteers, the more likely those employees would be deemed employees.

The flipside of restrictions is benefits, and both of the last two factors work the way you would expect. First, nonprofit volunteers should be just that—volunteers of their time without payment. Nonprofits that pay employees regular and significant amounts, whether described as wages, barters, stipends, allowances or something else make volunteers look more like employees, even if the payments amount to less than minimum wage.

Finally, a paid employee can never provide the same or similar services to a nonprofit as a volunteer, regardless of whether the “volunteer” services come during regular working hours or outside of them. Similarly, a “volunteer” cannot provide the same or similar services to your nonprofit organization as your regular employees do: those volunteers are simply employees.

As we said in our last post, no single factor is determinative here. The unique facts of your situation weighed against the factors above will determine the outcome. Whenever you consider taking on a volunteer, consider all of the circumstances before accepting their services and get some good wage and hour legal advice first!

Over the past year or so, we have discussed the Fair Labor Standards Act’s application to both paid interns and unpaid interns, as well as independent contractors. One area we have covered briefly in the past, but not explored in depth, is the issue of volunteers. If you have been reading along, you know by now that if an individual is an employee (as opposed to a properly classified unpaid intern or independent contractor, for example), he or she cannot waive the protections of the FLSA. In other words, unless the employee is subject to an exemption, an employer must pay the employee at least the minimum wage for all hours worked, plus an overtime premium for all hours worked over forty in a week. State laws, too, provide similar requirements. But what about volunteers? Many nonprofit organizations, public agencies, schools, churches, and other similar entities would cease to exist, or at least be severely crippled, if not for the contributions and involvement of volunteers. Can an individual volunteer their services? The answer might surprise you.

For-Profit Employers Cannot Accept Volunteers

In our next post, we’ll dig into the rules for nonprofits, but let’s focus first on for-profit employers. The short answer: don’t crank up your new volunteer program just yet. The Department of Labor (DOL) has clearly expressed that nonexempt employees cannot volunteer their services to for-profit, private sector employers. In one of the few places where the FLSA is absolutely clear, the DOL provides no exceptions to this rule. Even if the non-exempt employee offers to volunteer services to your company, you must gracefully decline.

Volunteering at Outside Events

That does not mean that all charity must be sacrificed in pursuit of the almighty dollar. Many companies conduct community service events or volunteer days during the year. For-profit (and nonprofit) employers often sponsor events ranging from career days at schools to charity races to volunteer days at local aid organizations or shelters. Under the right circumstances, you do not need to compensate non-exempt employees for this volunteer work, even if you are a for-profit entity. Non-exempt employees can participate in your business’s charity events if:

  • The volunteer or charity event is unrelated to the your usual business and participation does not bring direct economic benefit to you;
  • The event takes place outside of regular working hours;
  • Employees’ participation is truly voluntary, meaning that you neither treat volunteer participants more favorably nor treat non-participants less favorably;
  • You do not employ and regularly pay workers to participate in that event.

No single factor is determinative here. Like so much in wage and hour law, the unique facts of your situation will determine the outcome. The two ends of the spectrum are easy: non-exempt employees cannot be forced to “volunteer” their services and (unfortunately) you may have to tell them that they cannot volunteer their services to your for-profit business. Between these two ends, though, you will find a range of gray areas, particularly for nonprofits, the subject of our next post.

If you missed the Golden Globes, and you can’t wait for the Oscars or the Razzies, you always have the Employment Law Blog Carnival for January! As your fearless emcee, let me first thank the #ELBC family for letting me host this month. You have no idea what you have done are kind, and I am honored to introduce blogdom to the best of what we have been writing this past month. Let’s get started!

Best Visual Effects
Our first ELBC award goes to a blog post that gave readers everywhere Whiplash looking at the rapid growth of lawsuits under the FLSA. The award even comes with a little controversy. Can the emcee really give himself an award? Yes, yes he can.

Wage and Hour Insights: FLSA Minimum Wage, Overtime Lawsuits Smash Records in 2014

Best Writing – Adapted Screenplay
Sometimes, The Unexpected Virtue of Ignorance isn’t enough when “Mr. Turner” gives notice he is quitting. The winner in our next category shows us the true meaning of “reasonable” notice, adapted from an original post he prepared for another blog.

Stuart Rudner (Rudner MacDonald): Notice of Resignation – Too Much or Too Little?

Best Short Film – Animated
It really is another legal world out in California, or as our next winner puts it “the most complicated and least employer-friendly state in the country.” It certainly gets employers animated. Fortunately, our next winner is always here to give us The Bigger Picture:

Ari Rosenstein (CPEhr Small Biz HR Blog): New 2015 California Labor Laws

Best Film Editing
Our next award recipient reminds us again that even when editing your (legal) art, you can’t miss deadlines; waiting even Two Days, One Night could be too long in a constructive discharge case.

Robert B. Fitzpatrick (Fitzpatrick on Employment Law): Statute of Limitations Starts Running Before Constructive Discharge

Best Music – Original Song
My colleague Jeff channels his Boyhood with employment law songs he writes, so this award could go to no one else. Mixed among the songs, though, is some helpful advice on leave matters, including an employer paying the price for the Inherent Vice of an ADA violation.

Jeff Nowak (FMLA Insights): Employer Fails to Provide Leave of Absence to Probationary Employee, Pays the Price

Best Costume Design
SCOTUS was busy this past week in Mach Mining v. EEOC, where our winner says the EEOC did its best to avoid President Obama’s call for transparency and to end what seems like an Unbroken string of setbacks in the courts. Transparent costumes wouldn’t work in film (at least not the kind of films suitable for this blog), but transparent federal agencies would be a real win-win for employers.

Lorene F. Schaefer (Win-Win HR): EEOC’s Arguments to Supreme Court Antithesis of Transparency and Open Government

Best Short Film
Some award winners are a complete surprise, just like SCOTUS opinions on denials of certiorari. Our next recipient takes an award for explaining in short why Justice Alito was living A Single Life last week.

Philip K. Miles (Lawffice Space): Surprise! Justice Alito issues one-man employment law opinion

Best Documentary Feature
As the release of Selma and this week’s MLK holiday reminded us, Coretta Scott King saw LGBTQ issues as the civil rights issue of our time. That point is poignantly made by our next winner.

Heather Bussing (HR Examiner): Transgender: The Ultimate Form of Gender Discrimination

Best Directing
She assures me she is not Still Alice, and never was, but that when it comes to new years and new beginnings, The Imitation Game is the last thing we want to play. Our next winner encourages employers to use 2015 to work on managing their relationships with employees.

Allison B. Williams (Employment Essentials): Start Off the Year With Both Reflection and Resolution

Best Actor – In a Supporting Role
Best Actress – In a Supporting Role
The best artists in the legal field seem to have figured out The Theory of Everything. Our winners for Best Supporting Actor and Actress are no different, particularly when it comes to determining when you will need a Big Hero to help you:

Daniel Schwartz (CT Employment Law Blog): Three Times When You Should Call an Employment Lawyer
Suzanne Lucas (Evil HR Lady): How to Hire An Employment Lawyer

Best Actor – In a Leading Role
President Obama has been everywhere this week, pushing the proposed Healthy Families Act announcing six weeks of paid sick leave for federal employees after childbirth, and more. No, you won’t be able to use your sick leave to convalesce at The Grand Budapest Hotel or any other exotic foreign destination, but our next winner will lead you to what these changes will mean for American businesses.

Eric B. Meyer (The Employer Handbook): President Obama to push for paid sick leave for American workers

Best Actress – In a Leading Role

What would awards season be without prognostication? Our next winner is fearless in making her annual predictions about employment law. Unlike most pundits, though, it isn’t just song and dance: her posts lead you through useful ideas you can use to avoid ending up in Wild Tales of your own!

Donna Ballman (Screw You Guys, I’m Going Home): How I Did On My Employment Predictions For 2014

Best Picture

Could there be any other winner? Turns out, it wasn’t an American Sniper or anything Wild, just some not-so-menacing dirt drawings on a 747 tail that transformed United flight attendants into Gone Girls:

image for blog.jpg

John Holmquist (MI Employment Law Connection): Safety and today’s workplace: Lessons from the friendly skies

Thanks for joining us for the Employment Law Blog Carnival: Awards Season Edition. Remember to stay tuned here at Wage & Hour Insights for more great employment law coverage and tune in this February for the next ELBC, currently being drafted at an undisclosed location by the one Cabinet member who couldn’t attend the State of the Union and a super-secret ELBC blogger.

iStock_WageIncrease.XSmall.jpgLast spring, I made some predictions about what the new FLSA regulations would likely include when they were finally released. The regulations were delayed, but what we expect hasn’t changed, as I explained in November. On Twitter this past Friday (and you should be following @WageHourInsight, if you aren’t already), I highlighted an article that gives employers the first glimpse at what the Obama administration has planned.

According to the Fall 2014 Agency Rule List, the DOL’s “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees” regulation should be ready within the next month. The regulation is intended to implement President Obama’s directive to modernize and streamline FLSA regulations for executive, administrative, and professional employees.

As I noted from the beginning, any revised regulations will include an increase to the $455 minimum weekly salary threshold for exempt workers. At $455/week, workers earning as little as $24,000 per year currently meet the minimum salary threshold. Last year, the White House observed that just 12% of salaried workers now fall below this threshold, compared to 65% in 1975 when the regulations set a $250/week minimum. California and New York already require employers in those states to pay higher minimums to meet the exemption ($600 in New York, increasing to $675/week by 2016; $720/week in California, increasing to $800/week by 2016).

In the last week, we have seen the first hints of the administration’s apparent plans for changes to the white collar exemptions. Specifically, the Huffington Post reported that the administration is “leaning toward” setting the minimum salary for the overtime exemption at $42,000 per year (just over $800/week), roughly in line with California’s 2016 threshold. Ross Eisenbrey, a former Capitol Hill staffer and OSHA administrator who is now a vice president for the left-leaning Economic Policy Institute (EPI), has pushed for a $51,000 threshold, but says administration sources have told him that they plan to advance the more “modest” 75% increase to $42,000. The same article notes that the DOL’s chief economist, Heidi Shierholz, advocated when she was at EPI just before joining the DOL last August that the administration should increase the minimum salary to $58,000 ($1,115/week). Democratic Senators have lobbied the administration for an increase to $54,000.

A substantial increase even to the anticipated $42,000 would have the most impact on production, service and retail industries that have substantial numbers of low paid supervisors. As we learn more over the coming weeks, we will keep you up to date. Of course, we will provide a full analysis of the proposed regulations once they are released.

The dawning of a new year means it is time to look back at the number of cases filed in federal courts during the past year under the Fair Labor Standards Act. Every year seemingly without fail, that number goes up. 2014 was no exception. 

According to figures from PACER, litigants filed a total of 8,086 FLSA cases between January 1, 2014, and December 31, 2014. For comparison purposes, plaintiffs filed 7,904 FLSA cases in 2013. That is an increase of more than more than 19% since 2011, and not just breaching the 7,500 case mark, but also the 8,000 case mark for the first time. Just for reference, PACER reports just 3,606 FLSA cases were filed a decade ago in 2004. Part of this increase is due in part to plaintiffs, plaintiffs’ attorneys and the government (Secretary Perez’s administration alone brought more than 150 cases last year) being both more familiar with workers’ rights under the FLSA and more aggressive in asserting those rights.

For the visual learners, you can see the sharp growth in FLSA filings over the past 20 years as FLSA minimum wage and overtime lawsuits have increasingly crowded the federal civil docket.

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The chart shows that litigants filed 888 FLSA lawsuits in 1990, according to PACER. The number barely fluctuated over the next 10 years until the numbers began their sharp upward swing. In 2002, plaintiffs filed 3,886 FLSA lawsuits, more than double the 2001 total. Filings quickly reached the 5,000 case plateau, held generally steady, and then resumed their rise with the onset of the so-called Great Recession, jumping to 6,120 in 2009, and 6,786 in 2010. FLSA lawsuits crossed 7,000 and 7,500 annually in 2012, and over 7,900 in 2013. In 2014, FLSA lawsuits topped their 2013 all-time high with 8,086 lawsuits, breaching 8,000 for the first time.

Importantly, these statistics do not capture any wage and hour lawsuits based on state law claims or brought in state courts. Anecdotally, we can report that those cases have continued to increase as well. The totals above would look even more ominous if you added lawsuits filed under state wage and hour laws, too. 

As in prior years, the majority of FLSA lawsuits focused on uncompensated or miscalculated overtime, uncompensated “off the clock” work, and misclassification of employees. The growth of these lawsuits continues to present challenges to employers, particularly given the FLSA’s dusty, 1930s- and 1960s-era statutory and regulatory language that is increasingly ill-suited to today’s workplaces. Combined with the DOL’s decision to stop issuing FLSA opinion letters or other regular guidance, employers face the triple threat of a lack of clarity, potentially lucrative recoveries (for plaintiffs and their attorneys) beyond any actual damages, and an enforcement environment where the hot “wage theft” buzzword is used to tar every employer, regardless of intent. 

With any luck, an improving economy and a common sense regulatory rewrite by the DOL this year (hey, a guy can hope, right?) will blunt some of these dismal numbers when we revisit this topic early in 2016.

On Tuesday, we discussed Congress’s passage of the Consolidated and Further Continuing Appropriations Act, 2015, nicknamed CRomnibus in the waning days of the 2014 legislative session. The omnibus spending bill avoided another government shutdown and funded most federal agencies (save for the Department of Homeland Security) through the end of the federal government’s  fiscal year on September 30, 2015. As we discussed, the DOL—which earned funding increases across the board—and the trucking industry—which earned a temporary reprieve from maximum hours-of-service regulations—both came out big winners. However, we note that the insurance industry also benefitted from a provision tucked into the DOL appropriations in CRomnibus.

Congress’s omnibus spending bill effectively created a new exemption to the FLSA’s overtime rules for insurance adjusters during the two-year period after a major disaster. Section 111 of the appropriations bill for the DOL directs the agency that the FLSA “shall be applied as if” there is an overtime exclusion for certain workers who are employed to adjust or evaluate claims resulting from or relating to a major disaster. The law defines a “major disaster” as “any disaster or catastrophe declared or designated by any State or Federal agency or department.”

During that two-year period, the FLSA’s overtime requirements would not apply to any person employed to adjust or evaluate claims if:

  • The employer is not an insurance company itself (“engaged, directly or through an affiliate, in underwriting, selling, or marketing property, casualty, or liability insurance policies or contracts”);
  • The employer maintains all legally required workers’ compensation coverage and withholds taxes from the employee’s wages;
  • The employee receives average weekly compensation during the relevant period of at least $591.00 per week (or any higher amount established by the DOL, such as in the upcoming FLSA regulation rewrite we have covered recently);
  • The employee has all necessary licenses to perform the work; and
  • The employee’s duties include “any” of a range of insurance adjusting activities outlined in Section 111, including interviewing parties, inspecting property, evaluating claims, negotiating settlements; or making litigation recommendations.

Similar provisions have appeared in prior bipartisan House legislation, but were never enacted into law. Section 111 helps clarify the application of the FLSA to insurance adjusters. In recent years, federal courts have been split on whether to apply the FLSA’s administrative exemption to insurance adjusters. Importantly, Congress did not amend the FLSA directly, opting instead to simply add the “shall be applied as if” language instead. Accordingly, the interpretation could be temporary if similar language is not included in a future appropriations bill or other law.

Another side effect of not enacting a change to the FLSA is that Congress did not expressly or impliedly preempt contrary state and local laws. Accordingly, as a California court did this year, state courts may reach different conclusions about whether insurance adjusters would be exempt under state or local laws. Particularly given the lack of preemption, the interpretation should have only a narrow impact on the insurance industry in 2015.

In the run-up to the holidays, Congress rushed a Continuing Resolution (CR) to President Obama’s desk entitled the Consolidated and Further Continuing Appropriations Act, 2015. The omnibus spending bill, nicknamed “CRomnibus,” avoided another government shutdown and funded most federal agencies (save for the Department of Homeland Security) through the federal government’s 2015 fiscal year, which ends on September 30, 2015. As with many omnibus spending bills, Congress buried in the CRomnibus a number of actions intended to restrict federal agencies’ activities and, in some cases, to make substantial changes to existing laws. Of particular note to readers of this blog, both the Department of Labor and the trucking industry came out winners in the wage and hour world. CRomnibus increased funding for the Department of Labor and several of its subagencies, and handed motor carriers a temporary reprieve from the FMCSA’s 2013 maximum hours-of-work regulations.

Congress Increases DOL Funding Across the Board in 2015

CRomnibus allocated an additional $3.17 million to the DOL’s Wage and Hour Division, for a total 2015 budget of $227.5 million. OSHA received a small increase as well, with a bump up from $552.247 million in 2014 to $552.787 million in 2015. But the big winner in the CRomnibus was the Office of Federal Compliance Contract Programs (OFCCP). Congress authorized an extra $1.5 million ($106.476 million total) in 2015 to OFCCP. All three agencies received less than what the Obama administration had sought, but still fared better than agencies like the NLRB that had their budgets frozen or cut.

Motor Carriers Win Roll Back of Maximum Hours of Work Regulations

Congress also included language that is a big win for the trucking industry. A CRomnibus rider added by Senator Susan Collins (R-Maine) includes language that suspends the Federal Motor Carrier Safety Administration’s (FMCSA) 2013 maximum hours-of-work regulations for property-carrying commercial motor vehicles in 49 C.F.R. Sections 395.3(c) and (d). The American Trucking Association had previously criticized the new service rules as “unjustified” and hailed the Collins Amendment as a “common sense” fix.

Under the appropriations bill, these regulations have no force or effect from December 16, 2014 (the date the bill was enacted) until either September 30, 2015, or the submission of a report on a “naturalistic study of the operational, safety, health and fatigue impacts of the restart provisions in sections 395.3(c) and 395.3(d) of title 49, Code of Federal Regulations, on commercial motor vehicle drivers,” whichever is later. During the suspension, the former “restart” regulations governing drivers’ required hours of rest promulgated by the Bush administration in 2003 will apply instead. Public safety and law enforcement groups, as well as the current Secretary of Transportation, had opposed the suspension.

Congress’s decision to suspend these regulations provides the motor carrier industry with significant relief from the two new restrictions in the hours-of-service restart regulations that apply to commercial drivers. Specifically, according to the FMCSA, CRomnibus suspends the requirement that limits qualifying 34-hour restarts to once every 168 hours (7 days) and requires that any driver using the 34-hour restart have two consecutive off periods between 1 a.m. and 5 a.m. Instead, drivers need only follow the simple 34-hour restart rule that was part of the regulations between 2003 and 2013.

While it likely was the biggest, the trucking industry wasn’t the only wage and hour winner in CRomnibus. In our next post, we’ll discuss Congress’s insertion of language that effectively grants a temporary FLSA exemption for certain insurance adjusters.