Hungry office workersQ. A company provides employees with a 30-minute unpaid lunch break. An employee, who is a smoker, has asked if she can take two 5-minute unpaid smoking breaks – one in the morning and one in the afternoon – and reduce her unpaid lunch break to 20 minutes. Is this allowed?

A. No. Under the FLSA, “bona fide meal periods” are not regarded as work time and can be unpaid. For a break to qualify as a bona fide meal period, “[t]he employee must be completely relieved from duty for purposes of eating regular meals,” and the break must generally be at least 30 minutes or longer. The rules do allow that a period shorter than 30 minutes “may be long enough under special circumstances.” For example, in a 2004 opinion letter, the DOL found that an employer could permissibly reduce its 30-minute unpaid lunch break to 20 minutes and provide an extra 10 to 15-minute paid break, given that the employer and employees’ union agreed to the arrangement and that it took employees only one to one and a half minutes to reach the break room once they were relieved from duty. 

The question above states that the two additional 5-minute smoking breaks would be unpaid. Under the FLSA rules, this is likely to be problematic, as breaks of short duration – running from 5 to 20 minutes – are regarded as working time and must be paid. Further, although the DOL has recognized situations in which a meal break of less than 30 minutes can be treated as unpaid time, there are no clear rules for determining when this is permissible. Thus, while an employer might be able to get away with treating a 20-minute break as unpaid, particularly if it makes this agreement in exchange for additional paid break time under a union contract, the safer course is to treat any break under 30 minutes as paid time. 

Do you have a wage and hour question that you would like us to answer on this blog? If so, contact us! Leave a comment, or e-mail us at wageandhourinsights@franczek.com.(Please, general and hypothetical questions only as inquiries may be posted publicly. If you are an employer and need legal counsel, please contact the authors or any of our attorneys directly to discuss your situation.)

Supreme Court building.JPGBy now most of you who follow developments in employment law have likely heard about and possibly read the U.S. Supreme Court’s decision in Wal-Mart v. Dukes, overturning certification of a class action sex discrimination case brought on behalf of 1.5 million current and former female Wal-Mart employees. (If not, our recent FR Alert on this case will get you up to speed.) While Dukes is a sex discrimination case, it is likely to have a major impact upon class actions in other areas of the law, including wage and hour lawsuits. 

Continue Reading What Wal-Mart v. Dukes Means for Wage & Hour Law, Employers

DOL April 5 final regs cover screenshotOn April 5, 2011, the U.S. Department of Labor published new final regulations that among other things require employers to give new detailed notices to tipped employees in order to credit tips toward the minimum wage. The new regulations took effect on June 5, 2011. Yesterday, June 16, 2011, the National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Businesses filed a lawsuit against the DOLseeking to block enforcement of the new rules. National Restaurant Association v Solis (PDF).

The Tip Credit and the New Rules

Under the Fair Labor Standards Act (FLSA), employers must pay all employees a minimum hourly wage, currently $7.25 per hour. 

However, for tipped employees (i.e., those who customarily and regularly earn more than $30 per month in tips), the FLSA allows employers to pay a lower cash wage and take a “tip credit” to bring the employee’s total compensation up to the minimum wage. Currently, federal law allows employers to take a tip credit of up to $5.12 per hour. (Many states provide for a higher minimum wage. In Illinois, for example, the minimum is $8.25 per hour. The tip credit in Illinois is limited to $3.30 per hour, and tipped employees must receive a cash wage of $4.95 per hour.)

The FLSA has long required employers to inform employees of the tip credit. However, the new final regulations published on April 5 provide that an employer may not take the tip credit unless it first provides all of the following information to each tipped employee:

  • The amount of the cash wage that is to be paid to the tipped employee by the employer;
  • The additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee;
  • That all tips received by the tipped employe must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
  • That the tip credit shall not apply to any employee who has not been informed of these requirements. 

Although the rules do not specify that this information must be provided in writing, employers who fail to do so are taking a serious risk, as it will be their burden to provide that the required notice was provided to each and every tipped employee. 

The Associations’ Lawsuit

In their complaint challenging the new regulations, the plaintiffs allege that the new regulations violate the Administrative Procedure Act (APA), the federal law which governs how administrative agencies adopt new rules, because the DOL failed to provide adequate notice and opportunity for public comment, and because the rules contradict the FLSA as it has been construed by the courts and, previously, by the DOL itself. Additionally, the associations claim that the DOL failed to comply with Executive orders 12866 and 13563, which require federal agencies to assess costs and benefits of regulations, including the costs of compliance, and failed to conduct a regulatory flexibilty analysis required by the APA. The complaint asks the court to declare the regulations invlalid and to enjoin the DOL from enforcing, applying or implementing the new rules. 

What does this mean for employers?

This lawsuit is at its very earliest stages, and its outcome is anything but clear. In the mean time, unless the DOL announces that it will delay implementation of the new rules, employers with tipped employees are strongly advised to provide the notices required by the new regulations, and to do so in writing. If you have tipped employees and have not yet provided this notice, you should do so without delay – or risk being found liable for minimum wage violations. 

Hand knocking on doorTwo federal agents arrive at your workplace and ask to interview all of your employees and see all of your payroll records for the last two years. Their business cards say that they are investigators from the U.S. Department of Labor Wage & Hour Division. What do you do? 

The unannounced on-site visit is a common tactic employed by Wage & Hour Division investigators, particularly when dealing with small employers who may not fully understand their legal rights. Often, employers simply comply with the investigator’s requests, calling their lawyers only after the fact. This is usually a mistake. As with other law enforcement officers, employers are generally not obligated to immediately turn over records or allow DOL investigators into non-public areas of their premises without a warrant.

So how should you respond?

While cooperation with DOL investigations is usually advisable and you can be compelled to provide records by subpoena, it is important to have your attorney involved from the beginning of the process. This will help ensure that (a) you are providing the investigators with all of the records and accurate information needed to favorably present your position and (b) your attorney knows what information the investigators have so that he or she can effectively represent you in the audit.

So remember, when the Department of Labor pays you a visit:

  • Be polite to the investigators. If you are not moved to do so out of common courtesy, remember that being disrespectful to a government agent with the power to make your life very difficult and assess large financial penalties is not a wise business decision.
  • Contact your lawyer immediately. Make sure he or she has experience handling DOL audits. If not, get a referral to someone who does. 
  • Don’t turn over any records, arrange employee interviews, or answer any other substantive questions until you’ve talked to your lawyer.
  • Don’t talk to your employees about the DOL visit until you talk to your lawyer. Even questions that seem innocent to you can give the impression that you are pressuring employees or possibly retaliating against them for cooperating with the DOL. 
  • Most importantly, make sure your time and payroll records are in good order BEFORE the DOL comes knocking. This means that they should be accurate, organized, and in a format that allows you to easily provide them to your lawyer and the DOL on short notice. 

Groupon Logo.jpgIs Groupon’s June 3 announcement of its intent to launch an IPO  a sign of another looming “tech bubble”  or an “entrepreneurial renaissance”?  Either way, entrepreneurs seeking to ride the next wave of technological innovation must be aware of the significant personal risks arising from failing to comply with wage and hour laws. 

Can’t pay your suppliers or rent on the swanky new office space you rented to impress potential venture capital investors?  If the business fails, at least the budding entrepreneur might be able to avoid or limit personal liability for these unpaid debts. Not so for unpaid wages owed to employees. 

Continue Reading Entrepreneurs Beware of Personal Liability for Wage & Hour Violations

intern_000006060548XSmall.jpgAs summer break is about to begin, there is a significant decrease in the number of paid summer jobs available for students.  As an alternative, there are a number of students hoping to land internships in the private sector.  Given the number of students vying for these positions and the country’s continued slow economic recovery, many companies are considering offering unpaid internships.  However, simply because the student is willing to work for free does not necessarily mean that the company can do so without violating the Fair Labor Standards Act (FLSA) and related state wage and hour statutes. 

Last year, the Department of Labor (DOL) issued a fact sheet providing general information to help determine whether interns must be paid for their services under the FLSA.  Whether the FLSA applies to an internship depends on whether there is an employment relationship between the intern and the company.  The FLSA defines the term “employ” very broadly and internships in the private sector will most often be viewed as employment unless the work is for the benefit of the intern.  And if the interns qualify as employees, they must be paid at least the minimum wage and overtime compensation for hours worked over 40 in a work week.  

In order to make this determination, the DOL applies a six factor test with particular focus on the work environment, primary beneficiary of the activity, displacement of employees, supervision and job entitlement.  While helpful, the DOL does not require that a student receive academic credit to keep the internship from following under the auspices of the FLSA.

If you do choose to hire an intern on an unpaid basis, best practices dictate that the intern and employer have a written communication that outlines the learning objectives of the internship, the type of training provided and the fact that the internship is unpaid.

Wage & Hour Confusion.jpgDespite the tremendous amount of federal and state law governing the employment relationship, a business that follows the following core values can avoid significant liability under most labor and employment laws:

  • Follow the golden rule
  • Don’t make employment decisions for reasons  that are not related to the employee’s ability to do the job such as race, age, disability or sex
  • Employees have a right to band together to demand better treatment and higher wages from their employer
  • Provide a safe working environment

 But Wage and Hour Law is Different! 

Unlike most employment laws, which give employers and employees a fair amount of flexibility to come up with mutually beneficial and fair employment relationships, the FLSA and state wage and hour laws set out a strict rules which usually cannot be altered even if doing so would be best for both the employer and employee.   

Continue Reading Why is Wage & Hour Law Different from Other Employment Laws?