Baby bottleRegular readers may have noticed a decline in the frequency of our updates around the end of the year. That’s because, in addition to the usual holiday and year-end craziness, my wife and I welcomed a new baby on the day after Christmas. As I get back into the swing of work and blogging, I thought this might be a perfect time to review the federal requirements regarding break time for nursing mothers. 

Before you ask, yes, this really is a wage and hour law issue, as the new rules regarding nursing mothers included in the Patient Protection and Affordable Care Act of 2010 were added as amendments to the Fair Labor Standards Act. 

Here’s what the law requires:

  • Employers with 50 or more employees must provide “a reasonable break time for an employee to express breast milk for nursing her child for 1 year after the child’s birth each time such employee has need to express the milk.”
  • The employer must provide “a place, other than a bathroom, that is shielded from view and free from intrusion of coworkers and the public, which may be used by an employee to express breast milk.”
  • Employers with fewer than 50 employees are subject to the same requirements unless complying with the law “would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation tot he size, financial resources, nature, or structure of the employer’s business.” 
  • Employees do not have to be paid if they take a break during work time under the law.

There are a few important things that employers should keep in mind with respect to this law:

  1. While the additional leave provided by the law can be unpaid, employees who use what would otherwise be a paid break in order to express milk must be compensated in the same manner as other employees for the break time. Additionally, for break time under the law to be unpaid, the employee must be “completely relieved of duty,” and should not perform any work.
  2. The law does not apply to employees who are exempt from Section 7 of the Fair Labor Standards Act, which is the section governing overtime. Accordingly, executive, administrative, and professional employees, as defined under the FLSA, are not entitled to breaks to express milk under federal law. 
  3. While there is an “undue hardship” exception for employers with fewer than 50 employees, there is no such exception for employers with 50 or more employees. In other words, larger employers are required to comply with the law even if doing so would be expensive or disruptive to their operations. 
  4. Many states and localities also have laws relating to nursing mothers. If your business has employees in a jurisdiction that provides more generous rights for nursing mothers than required by federal law, you must comply with those laws. The National Conference of State Legislatures offers a summary of state laws relating to breastfeeding and expressing milk on its website. 

Regulatory Agenda screen clip.pngFor roughly the last two years, the U.S. Department of Labor has been contemplating (some would say “threatening”) revisions to the recordkeeping regulations under the Fair Labor Standards Act that would require an employer who classifies an employee as exempt to prepare a written justification of the basis for the exemption. This document would have to be provided to the employee and would be subject to inspection by the Department of Labor. For obvious reasons, many employers strongly disfavor this proposal.

The Department of Labor’s plans for new regulations are published semiannually in the Unified Regulatory Agenda. The first entry relating to the proposed Right to Know rule, in the Spring 2010 agenda, indicated that proposed regulations would be published in August 2010. That date was later moved back to April 2011, and most recently to October 2011. In the most recent edition of the Unified Regulatory Agenda, published on January 20, 2012, the DOL moved the “Right to Know” rules from the “Proposed Rules Stage” to “Long-Term Actions,” and removes any projected date for issuing proposed rules. “Long-term actions” are defined in the agenda as “items under development but for which the agency does not expect to have a regulatory action within the 12 months after publication of this edition of the Unified Agenda.” That being the case, it appears that the Department of Labor does not plan to move forward with its Right to Know rules at least until January 20, 2013 – hardly surprising given that these will be controversial rules and this is an election year. 

However, once the election is over (and assuming President Obama remains in office), we can expect the Department to move forward once again on this proposal. According to a recent article in BNA’s Daily Labor Report (subscription required), Acting Wage and Hour Administrator Nancy Leppink called the Right to Know rule one of the Wage and Hour Division’s priorities, stating “We’re continuing to work on that regulation,” and that “We’re learning about what the issues are” from the Department’s ongoing misclassification enforcement initiative. This is probably not such good news for the employers who will have to comply with the new regulations. However, I’m certainly looking forward to them, as they will undoubtedly provide plenty of interesting new problems for us to write about on this blog. Stay tuned!

 

Tip jarIn May, my partner Staci reported on a ruling against Applebee’s by the 8th Circuit Court of Appeals, holding that tipped employees who spent more than 20 percent of their working time on nontipped activities like cleaning restrooms were entitled to the federal minimum wage of $7.25 per hour. Applebee’s asked the U.S. Supreme Court to review the ruling, arguing that the Eighth Circuit incorrectly deferred to the U.S. Department of Labor’s “informal interpretation” of its FLSA regulations in its 1988 Field Operations Handbook, and that as a result it applied an “utterly unworkable standard that has no basis in the text or purpose of the FLSA and that will impose crushing administrative and financial burdens on restaurants and other employers of tipped employees.” Last week, the Supreme Court turned down Applebee’s petition, leaving the Court of Appeals’ ruling intact. 

In light of the Supreme Court’s decision not to review this ruling, employers can expect the Department of Labor to continue applying the standard set forth in Chapter 30d of its Field Operations Handbook (.pdf):

Reg 531.56(e) permits the taking of the tip credit for time spent in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips (i.e. maintenance and preparatory or closing activities). For example a waiter/waitress, who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses may continue to be engaged in a tipped occupation even though these duties are not tip producing, provided such duties are incidental to the regular duties of the server (waiter/waitress) and are generally assigned to the servers. However, where the facts indicate that specific employees are routinely assigned to maintenance, or that tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties.

Insights for Employers

  • The rule adopted by the DOL and affirmed by the 8th Circuit will continue to be applied for the time being, subject to possible future challenge in the Supreme Court or other federal appellate courts. 
  • As a result, restaurants and other employers of tipped employees need to be conscious of how much time such employees spend on activities not “directed toward producing tips,” such as setup or cleaning tasks. Under the DOL’s interpretation, employers will have the burden of proving that time spent on these tasks falls below the 20% threshold. 
  • If tipped employees spend more than 20% of their time in non-tip-generating activities, the DOL will take the position that these employees should be paid at least the minimum wage for such time. 
  • However, the employer can still take a tip credit for time spent on duties that are associated with “producing tips,” such as serving customers.

lady-gaga-NYE.jpgImagine you are the personal assistant for the world’s most famous artist, Lady Gaga.  You have the opportunity to travel the world, meet famous people and watch your boss hit the button to drop the “ball” in Times Square on New Years Eve.  What could be better?  Well, apparently, being paid overtime. 

Recently, Lady Gaga’s former personal assistant filed a lawsuit alleging that she was owed hundreds of thousands of dollars in overtime.  The assistant claims that she was paid a salary for working around the clock, 24/7, and is owed overtime pay under FLSA and state law.  Generally, when such challenges arise, the “employer” claims that the assistant is exempt under the administrative exemption.  However, the administrative exemption is the same whether the assistant works a regular “office job” or provides services to a world famous recording artist – that employee must be paid on a salary basis and exercise significant independent discretion and judgment.  This is something to keep in mind for those that employ an executive or personal assistant.

At least employers have the satisfaction of knowing even the rich and famous have to worry about wage and hour laws.  Happy New Year!

ABA Blawg 100-2011_Square.jpgWe are extraordinarily proud and excited to announce that our firm’s FMLA Insights blog has been named to the ABA Journal’s list of the top 100 legal blogs. This is only the most recent honor for FMLA Insights, which finished second in the Lexis Nexis Top 25 Labor and Employment Law Blogs of 2011. 

Congratulations to our friend and colleage Jeff Nowak!

The ABA Journal is conducting a runoff vote to select the number 1 legal blog of the year. Please take a minute to support the blog and Jeff by casting your vote for FMLA Insights!

pillbottle.XSmall.jpgIn a previous post in August, I questioned whether the pharmaceutical companies were losing the exemption battle as it related to pharmaceutical sales representatives and the outside sales exemption.  The Supreme Court had declined to review the Second Circuit’s Novartis holding that pharmaceutical sales representatives do not qualify for the outside sales exemption because they do not make sales, and the District of Connecticut had recently found that Schering’s pharmaceutical sales representatives did not meet the administrative exemption test in contrast to the Third Circuit’s Johnson & Johnson decision.  Now, it looks that the Supreme Court will finally enter this battle. 

This morning, the Supreme Court announced that it has granted certiorari in Christopher v. SmithKline Beecham Corp., where the Ninth Circuit affirmed that Christopher, a pharmaceutical sales representative, was an “outside salesman” exempt from overtime under the FLSA.    In SmithKline, the Ninth Circuit concluded that it owed no deference to the Secretary of Labor’s current interpretation of the outside sales exemption and, in fact, disagreed with the Secretary’s interpretation.  This was in contrast to the Second Circuit’s Novartis decision, which adopted the Secretary’s interpretation.

 The two issues on appeal are as follows: 

  1. Whether deference is owed to the Secretary of Labor’s interpretation of the outside sales exemption and related regulations; and
  2. Whether the FLSA’s outside sales exemption applies to pharmaceutical sales representatives.

While I can’t read tea leaves, I wonder whether the Supreme Court decided to hear the SmithKline case because it disagrees with the Ninth Circuit’s holding.  The Supreme Court had the opportunity to look at this issue with Novartis earlier this year and declined.  On the other hand, with SmithKline, there is now truly a Circuit split on whether pharmaceutical sales representatives meet the outside sales exemption.  I guess we will just have to wait and see how this plays out.  Stay tuned.

XMasBonus.Revised.XSmall.jpgAs the end of the year rolls around, we inevitably are asked questions related to the payment of bonuses, particularly for those employees who are terminated before annual bonuses are paid out.  Of particular interest is whether an employee who has been terminated – voluntarily or involuntarily – is entitled to a pro rata share of the bonus as of the date of termination.  The payment of bonuses is generally governed by applicable state law.

 

Status of the Law in Illinois

Here in Illinois, the Illinois Wage Payment and Collection Act does not define the term “earned bonus,” however, there is a regulation that attempts to address earned bonuses: 

 Section 300.500  Earned Bonuses  

a)  A claim for an earned bonus arises when an employee performs the requirements for a bonus set forth in a contract or an agreement between the parties.  

b)  A former employee shall be entitled to a proportionate share of a bonus earned by length of service, regardless of any provision in the contract or agreement conditioning payment of the bonus upon employment on a particular date, when the employment relationship was terminated by mutual consent of the parties or by an act of the employer through no fault of the former employee.  

(Source:  Added at 16 Ill. Reg. 13828, effective September 1, 1992)

Unfortunately, part (b) of this regulation addressing pro rata payments only specifically relates to a length of service bonus (e.g., longevity) – not a general performance based bonus.  So there is some ambiguity as to whether an employee would be entitled to a pro rata share of a performance bonus.  While Section 300.500(b) has not been heavily litigated, the few cases that have addressed this regulation have looked at two key factors when reviewing a bonus situation – whether the language of the plan provides an unequivocal promise to pay the bonus and whether the employer made it impossible for the employee to fulfill a condition precedent.   See  McLaughlin v. Sternberg Lanterns, 917 N.E.2d 1065 (2d Dist. 2009) and In re Handy Andy Home Improvement Centers, Inc., 1997 WL 401583 (Bkrtcy N.D. Ill. July 9, 1997). 

McLaughlin is the most recent Illinois case and contains some helpful analysis of how bonuses/incentive plans have been treated by Illinois state and federal courts.  There, the court reasoned that Section 300.500(a) indicates that the right to a bonus must be unequivocal as the employee does not have a right to the payment until he or she has performed the requirements in the agreement, whereas Section 300.500(b) refers to a length of service bonus, which is a type of unequivocal bonus to which an employee has a right to unless his or her performance is terminated due to his or her own fault.  The bonus at issue in McLaughlin was more like a production bonus – contingent on sales increases over the previous year and was not guaranteed or paid unless such increases occurred.  Because the bonus was determined not yet “earned” at the time of his termination, the plaintiff was not entitled to a pro rata share of that bonus.  See also In re Comdisco, Inc., 2003 US DIST LEXIS 2982 (Feb. 27, 2003)(Where employees were terminated by the successor employer before the incentive plan bonus was paid, the plan contained a disclaimer that no rights vested prior to payment and should not be construed as a contract, there was no unequivocal statement that employees will be paid the bonus, and the successor employer – not Comdisco – was involved in the employees’ inability to meet the employment requirement, the employees were not entitled to any share of the bonus).

The Second District in McLaughlin distinguished its reasoning from an earlier Fifth District Appellate Court opinion in Camillo v. Wal-Mart Stores, 221 Ill.App.3d 614 (5th Dist. 1991). Camillo was the first time the definition of “earned bonus” was addressed by an Illinois Court, before Section 300.500 was added in 1992.  In Camillo, assistant managers were promised a bonus each year based on length of service and corporate net profit, however, they were required to be on the payroll on January 31 or forfeit the bonus.  The plaintiff had received a bonus every year until his termination on December 31.  The court viewed this length of service bonus similarly to earned vacation and held that the plaintiff was entitled to his pro rata share because the employer made it impossible for the employee to fulfill the condition precedent (that he be employed).  The court considered this to be an unequivocal promised bonus.  The same result occurred in In re Handy Andy Home Improvement Centers, Inc., supra.  Citing Camillo, there, the court determined that the plaintiff was promised a bonus based upon the number of days he was employed in 1995 and, therefore, was entitled to a pro rata share of that bonus.

Insight for Employers

While these cases do not provide a definitive answer to this issue, they do provide some guidance for Illinois employers.  A good rule of thumb for employers to follow is that if no unequivocal promise of a bonus is made or the employee left voluntarily before the date stated in the bonus plan, then the employee would not likely be entitled to any part of the bonus.  If an unequivocal promise was made and the employee was no longer employed on the required date only because of the employer’s action (through no fault of the employee), the employee is likely entitled to a pro rata share of the bonus. 

 

 

Turkey iStock_000001827125XSmall.jpgQ. Our holiday pay policy says that employees must be at work the day before and the day after a holiday. Our office is closed Thursday and Friday for Thanksgiving. If an exempt employee works Monday and Tuesday but calls in “sick” on Wednesday, can we deny the employee holiday pay?

A. Many employers have policies like this one. The intent behind them is to discourage employees from extending their holiday weekends through strategic use of unscheduled sick time or personal days. With hourly employees, the issue is relatively simple from a wage & hour perspective: follow your policy (and any applicable union contract or employment agreement) and make sure the employee is paid for any time actually worked. 

For exempt employees, the problem is a bit more complicated. Remember that to qualify for the most commonly used exemptions – the “white collar” exemptions for executive, administrative, and professional employees – employees must (with some exceptions) be paid on a “salary basis.” This means that an exempt employee must receive his or her full salary for any workweek in which he or she performs any work, regardless of the number of hours worked or the quality or quantity of work performed. Deductions are permitted for some disciplinary suspensions, purely personal absences and, if the employer has a policy providing for paid sick leave, for absences due to personal injury or illness. However, employers cannot take deductions for absences occasioned by the employer or resulting from the operating requirements of the employer’s business. In other words, the fact that the employer is closed for business on a holiday does not permit the employer to deduct from an exempt employee’s salary, even if the employee would not be eligible for “holiday pay” under the employer’s policies. 

So if you cannot take a salary deduction, what can you do to curb abuse of sick or personal leave by exempt employees around the holidays? One solution would be to deduct an additional day or two, as applicable, from the employee’s available paid vacation or personal leave time. This is permissible under the FLSA, as the exempt employee still receives his or her full salary for the week. However, if an employee has exhausted all available paid leave the full salary must still be paid.

Other alternatives for managing this situation include requiring the employee to make up the extra hours (or possibly even work on the holiday), or imposing discipline without any adjustment to pay. Of course, if those alternatives seem too punitive for the holiday season, you could also simply let the issue go, though if you do so you should be sure that all similarly-situated employees are treated in the same manner.  

research assistant iStock_000002528990XSmall.jpgLast month, a federal judge in New York granted preliminary approval for a settlement in which Hofstra University agreed to pay up to $485,000 to a class of 256 undergraduate and graduate students who allegedly were not paid minimum wage and overtime in violation of the Fair Labor Standards Act. The plaintiff class included both students who the University classified as hourly employees and others who received stipends as undergraduate and graduate assistants. Because the case was settled, the court never reached a judgement as to whether the students who received stipends were “employees” entitled to minimum wage and overtime under the FLSA. That begs the question, when must a student be considered an “employee” for purposes of minimum wage and overtime? 

Chapter 10 of the U.S. Department of Labor’s Field Operations Handbook (.pdf) provides some guidance on this subject. In Section 10b18, the manual states the following:

Graduate Students – research assistants.

In some cases graduate students in colleges and universities are engaged in research in the course of obtaining advanced degrees and the research is performed under the supervision of a member of the faculty in a research environment provided by the institution under a grant or contract. Normally the graduate students involved in these programs are simultaneously performing research under the grants or contracts and fulfilling the requirements of an advanced degree. Under such circumstances, WH will not assert an employee-employer relationship between the students and the school, or between the student and the grantor or contracting agency, even though the student receives a stipend for their services under the grant or contract.

In Section 10b24, the manual states:

University or College Students.

(a) University or college students who participate in activities generally recognized as extracurricular are generally not considered to be employees within the meaning of the Act. In addition to the examples listed in FOH 10b03(e) [which relates to students participating in activities such as drama, musical groups, radio stations, and athletics], students serving as residence hall assistants or dormitory counselors, who are participants in a bona fide educational program, and who receive remuneration in the form of reduced room or board charges, free use of telephones, tuition credits, and the like, are not employees under the Act.

(b) On the other hand, an employment relationship will generally exist with regard to students whose duties are not part of an overall educational program and who receive some compensation. Thus, for example, students who work at food service counters or sell programs or usher at athletic events, or who wait on tables or wash dishes in dormitories in anticipate of some compensation (money, meals, etc.) are generally considered employees under the Act. 

Unfortunately, there is little other guidance from the U.S. Department of Labor or the courts regarding when, exactly, a student worker must be considered an employee and paid as such under the FLSA. Further complicating matters, there is an ongoing pitched battle over whether graduate assistants, teaching assistants and similar student employees should be considered “employees” permitted to form unions under state and federal labor law. Several states, including Illinois, have recognized graduate student unions at state universities. At the federal level, the National Labor Relations Board has taken shifting positions, holding in 2000 that graduate students were employees, and reversing itself in 2004. Now, it appears that the pendulum may swing back once more. 

So what does this mean for colleges and universities? 

  • Students who perform work that is closely tied to the institution’s educational program, such as research assistants, can often be treated as non-employees even if they are paid a stipend or receive other compensation such as tuition credits or reduced room and board charges. 
  • However, titles are not controlling. Students who perform work that does not directly relate to the institution’s program of instruction may be regarded as “employees” and entitled to minimum wage and overtime even if they are classified as non-employee graduate or undergraduate assistants. As a general rule, the less educational value the job has for the student, the more likely it is that the student will be considered an employee for wage and hour purposes. 
  • Student assistants who are unionized or who are otherwise recognized as employees by a college or university for other purposes should be treated as such for purposes of minimum wage and overtime compliance. 
  • Colleges and universities should pay close attention to developments not only in wage and hour law, but also traditional labor law, as the status of student assistants as employees remains in dispute.

Timeclock16137386.jpgYou’re a savvy employer. Your timekeeping policies are clear. Your employees know that they are required to report all of their work time. Employees sign off on their time records each week. You even provide a procedure for employees to confidentially report any improper actions by their supervisors. Your records are complete, organized, and show that you’ve fully compensated your employees for all reported work hours. But what happens when an employee claims that his supervisor instructed him not to report overtime unless it was authorized in advance, and to record unpaid lunches even on days that he worked through his lunch break? As a recent ruling from a federal district court in Idaho illustrates, even following best practices with respect to recordkeeping compliance won’t necessarily preclude an employee from taking a claim for unpaid overtime to a jury. 

In Covert v. ITT Educational Services, Inc. d/b/a ITT Technical Insitute, plaintiff Robert Covert worked for ITT as a recruiter / admissions representative from November 2007 through March 2010. Covert alleged that he frequently worked over his lunch hour and beyond his scheduled shift, but that he and his co-workers were told by their supervisors to keep track of overtime separately from regular hours, and that they would receive “comp time”* for the overtime hours. If overtime hours were reported on a timecard, Covert claimed that his supervisors instructed him to edit his time card to remove the overtime. If he did not, his supervisors would not sign the timecard and he would not be paid. ITT moved for summary judgment, pointing out that:

  • ITT maintained a policy requiring Covert to accurately record his time and request overtime in advance; 
  • Covert admitted that the timecards were accurate as to recorded vacation, sick, and holiday time, and even some instances of pre-approved overtime; 
  • Covert knew that he could confidentially report improper actions by his supervisors; 
  • Covert never made any such report; and 
  • Covert signed off on his timecards each week. 

Additionally, ITT pointed out that Covert previously signed a sworn declaration in a prior lawsuit, in which he testified that his time cards were accurate.

Despite this, the District Court held that Covert presented enough evidence to take his case to a jury, including his own deposition testimony and corroborating statements from several employees. While the jury will be free to consider the evidence presented by ITT and might very well conclude that Covert’s claims are not credible, the court found that ITT’s evidence was not sufficient to entitle it to judgment without a trial. 

Insights for Employers

Sometimes, even the best preventive medicine isn’t enough to keep you from getting sick. The same goes with respect to wage and hour claims. If the descriptions in the court’s opinion was accurate, it appears that ITT did a lot of things right. Unfortunately, one of the realities of litigation is that a court can’t step in and dismiss a case before trial if there are issues of credibility or other factual disputes that could affect the outcome. 

That being said, many of the steps that ITT apparently took may ultimately help it prevail at trial, so those efforts should not be seen as futile. Measures to consider for your workplace include:

  • Adopt and communicate clear policies requiring employees to accurately report their work time and prohibiting “off the clock” work.
  • Make sure your time records are complete and accurate for all non-exempt employees. 
  • Have employees review and sign off on their time records each week. 
  • Provide a mechanism for employees to report improper actions by their supervisors, such as directions to work “off the clock” or work through lunch. Of course, prompt follow-up on such reports is essential. 
  • Educate your supervisors on wage and hour law, and take great care to ensure that they do not confuse the perfectly legal practice of controlling overtime hours with the prohibited practice of requiring employees to work overtime hours without pay. 
  • If claims of “off the clock” work do arise, contact your legal counsel immediately, and work with them to determine if you should work to secure declarations from employees confirming the accuracy of their time records. 

Taking steps such as these may not eliminate wage and hour claims or even allow you to obtain dismissal of all such claims without a trial, but they can help. 

 

*”Comp time” generally is not allowed as a substitute for overtime pay outside of the public sector, except in the limited sense of allowing an employee to take time off within a single workweek to keep his or her total hours for that week below 40.