Advanced Overtime SymposiumAdvanced Overtime SymposiumRisks, Rules and RemediesRisks, Rules and Remedies

Presented by:

Andrea “AJ” Johnson Andrea “AJ” Johnson with Demetri Economouwith Demetri Economou

Let’s Play Overtime . . .Overtime . . .

200

300

400

500

100

200

300

400

500

100

200

300

400

500

100

200

300

400

500

100

200

300

400

500

100

FLSA RisksEmployee

ClassificationDoing the

MathRecording

TimeBest Practices

How far back can an How far back can an employee claim damages employee claim damages

in a lawsuit?in a lawsuit?

The minimum is 2 years.

The possibility exists for 3 years, however.

LimitationsLimitations

• “Willfulness” or “reckless disregard” of legal compliance

• Not negligence• Not mistaken interpretation of the law

• Plaintiff’s burden: Proof of employer’s knowledge of the law.– Prior violation– Records falsification

What damages can a What damages can a plaintiff/employee seek plaintiff/employee seek in an overtime lawsuit?in an overtime lawsuit?

3 main areas of recovery:3 main areas of recovery:

• Back wages/OT

• Liquidated damages

(double damages)

• “Reasonable” attorney’s fees

Damages multiplied . . .Damages multiplied . . .

• Collective actions(class actions)

• Low standard

• “Opt in” – after notice

• Limitations stop when the claim is brought and person “consents” to the lawsuit.

Damages multiplied – Damages multiplied – the statisticsthe statistics

• Lawsuits increasing – 8,119 cases last year (5/13 to 4/14)• The year before – only 7,388 filings• 10 years before – only 3,456 cases

Areas of recovery – Areas of recovery – damagesdamages

Computing the damages may make you feel like you’re in calculus class again….

Besides lawsuits, what other Besides lawsuits, what other overtime risks overtime risks

do employers face?do employers face?

Other risks:Other risks:

• DOL audits

• Other governmental action

• Internal upheaval

• Internal costs

When are the damages When are the damages doubled in overtime cases?doubled in overtime cases?

Doubling of damages?Doubling of damages?• Strong presumption favoring liquidated damages –

some courts say: “automatic”

• Defense of “good faith” – employer’s burden

• Subjective good faith, honesty of action (no knowledge of wrongdoing)

• “Reasonable grounds” to believe you are acting legally

• Not ignorance• Not based on “industry standard”

Can individual managers be Can individual managers be liable under the FLSA?liable under the FLSA?

If so, why?If so, why?

. . . the individual

• Has power to hire/fire

• Supervises and controls schedules and conditions of employment

• Determines compensation

• Maintains employment records

Yes, individual liability. . . ifYes, individual liability. . . if

How many categories of How many categories of workers are there workers are there

for FLSA purposes?for FLSA purposes?And what are they?And what are they?

2 categories: 2 categories: l

All workers are classified as either

employees contractors

Classification QuestionsClassification Questions• Initial evaluation is the most critical:

Is this person an employee or a contractor?

• Only employees are subject to the FLSA.

Therefore, contractors are not.

• Determining contractor v. employee status

– Cost driven?

– Implications?

Classification QuestionsClassification Questions

• If not a contractor, the worker is an employee.

• The typical contractor – the painter

• The typical employee – the “9 to 5-er”

• Sliding-scale fact determination

Classification QuestionsClassification Questions

• “Independent” means, manners, and methods

• “Right of Control” or “Right to Control”

FLSA: Is the worker economically

dependent on the owner?

Classification QuestionsClassification Questions

Factors on the sliding scale:

•Time/permanency•Skills•Limitations on work - hours•Tools, equipment•Ways of operating•Documentation/contracts/invoices•Ability/right to work elsewhere•Manner of payment

Classification QuestionsClassification Questions

True or false: True or false: The FLSA covers The FLSA covers

allall employees. employees.

TrueTrue

• All employees are subject to the FLSA, and overtime is due all employees

UNLESS . . .

They are exempt.

What are the What are the

3 main exemptions 3 main exemptions

under the FLSA?under the FLSA?

1. Executive

2. Administrative and

3. Professional

ExemptionsExemptions

The salary requirement.•Coming within the exemption category is one-half of the equation.

•Generally, to be exempt the worker must also receive a guaranteed salary of $455 a week, minimum.

But the reverse is not true: Just paying a salary is insufficient to consider the worker exempt from overtime.

Classification Classification PLUS. . .PLUS. . .

Other exemptionsOther exemptions

• Outside sales

• Inside sales

• Computer analysts(not “help desk” folks)

• Motor Carrier Act

DAILY DOUBLEDAILY DOUBLE

DAILY DOUBLE

To be exemptTo be exemptwhat does an “executive” what does an “executive”

have to do?have to do?

Exempt v. NonexemptExempt v. Nonexempt

• Executive

Primary duty is managing either the enterprise or a recognized department or subdivision (more than 50% of the time).

Customary and regular supervision of 2 or more people.

Has the authority to hire/fire or provides recommendations that are given weight by management.

What does the What does the “administrative” exemption “administrative” exemption

mean?mean?

Administrative ExemptionAdministrative Exemption

• Administrative (white-collar function manager)

Primary duty is the performance of office or non-manual work related to business operations or employer’s customers.

Is charged to exercise discretion and independent judgment with regard to matters of significance.

Training, accounting, health and safety, HR….etc.

Administrative ExemptionAdministrative Exemption

• “Home office”

• “White collar”

• Leads an essential portion of the business

• Uses business judgment/discretion

Professional ExemptionProfessional Exemption

• Professional (“learned” and “creative”)• The Learned Professional:

Primary duty is the performance of work requiring an advanced degree, predominantly intellectual work.

Is charged to exercise discretion and independent judgment with regard to that intellectual work.

Has advanced knowledge (in science or learning), which generally results from a course of specialized intellectual instruction.

If someone is a If someone is a ““high earnerhigh earner” ”

what does that mean for what does that mean for overtime purposes?overtime purposes?

The “High Earner” The “High Earner” DefenseDefense

1. Does the person earn $100,000 a year or more (including a $455 base per week)?

2. Is his/her primary job duty office or non-manual labor?

3. Does his/her work meet at least one of the requirements for an “executive,” “administrative,” or “professional” exemption?

Bottom line: Lower standard. The DOL assumes the person meets the qualifications.

What is “overtime”?What is “overtime”?

All work hours over 40

in a 7-day workweek.

3 Principal Concepts – 3 Principal Concepts – Overtime CalculationOvertime Calculation

– Regular rate

– Workweek

– Compensable hours

True or false:True or false:

Overtime is computed based on the person’s “hourly rate”?

False.False.

The FLSA requires that we use the “regular rate,”

which may or may not be based on an assigned “hourly rate.”

How is overtime computed How is overtime computed when there is a paid when there is a paid

holiday, vacation day or holiday, vacation day or sick day?sick day?

Do those hours have to be included in the math?Do those hours have to be included in the math?

No. No. Per the FLSA, paid sick time, vacation time, and

holiday time do not have to have to be added into the total weekly hours for

overtime purposes . . .*

Unless there’s an agreement otherwise.

Vacation, sick and Vacation, sick and holiday timeholiday time

• Not time worked

• No requirement under current federal law (or Texas law) to provide vacation, sick and/or holiday time.

Are bonuses included in the Are bonuses included in the overtime computation?overtime computation?

Or are they excluded?Or are they excluded?

• Bonuses are included in the computation of the “regular rate,” generally.

They are excluded only if they are “discretionary.”

BonusesBonuses

BonusesBonuses

Nondiscretionary bonuses1.There is a specified period when the bonus has been promised to be paid.

2.There is an express or implied right to a bonus (or part of it).

3.The bonus is tied to the promise of compensation for work performed.

BonusesBonuses

Discretionary bonuses

•Essentially it is a gift.

•Not related to performance or promised compensation.

•Management awards it at its discretion.

Can a nonexempt employee Can a nonexempt employee be paid a be paid a

guaranteed salary guaranteed salary (not on an hourly basis)?(not on an hourly basis)?

Yes.Yes.

We can have an agreement with nonexempt employees to pay them a

set salary for all hours worked

in a workweek.

The Fluctuating Workweek.The Fluctuating Workweek.

• Understanding

the “fluctuating workweek.”

• How does it work?

• What’s necessary?

• When is it useful?

Computation QuestionsComputation Questions

• The “fluctuating workweek”

• Flat rate for all hours – “straight” and “overtime” hours.

• Salary for the week is fixed, no matter how many hours the employee works each week.

• Overtime rate is one-half of the regular rate for that week.

Computation QuestionsComputation Questions

• The “fluctuating workweek” - example

• Compare typical time-and-a-half situation:

•Assume an hourly rate of $12.50 an hour.

•The overtime rate would be $18.75.

• $12.50 x 1.5 = $18.75

Computation QuestionsComputation Questions

• The “fluctuating workweek” - example

• Under FWW, assuming a guaranteed salary of $500 a week, the computed regular rate lowers as hours increase:

Computation QuestionsComputation Questions

As the regular rate reduces, so does the OT rate.

Computation QuestionsComputation QuestionsFluctuating Workweek - ExampleFluctuating Workweek - Example

Hrs./regular rate Overtime Total

40 hrs., $12.50 an hour No overtime $500

45 hrs., $11.11 an hour $5.55 for each of the 5 hrs. overtime $527.75 [Base $500 with $27.75 OT]

$10.00 an hour$5.00 for each of the 10 hrs. OT $550

60 hrs., $8.30 an hour $4.17 for each of the 20 hrs. of OT $583.40

50 hrs.

• The “fluctuating workweek” – the keys:

•Agreement with employees.

•Determining the weekly rate that makes sense to the business and employees.

•Can’t go below the minimum wage.

Computation QuestionsComputation Questions

TB ONE TAB TWO TAB THREE TAB FOUR TAB FIVE

Overtime computation?Overtime computation?

When, how, and for whom When, how, and for whom must time be recorded for must time be recorded for

FLSA compliance?FLSA compliance?

Recording timeRecording time

• Time records mandatory for all nonexempt employees.

• Must record all hours actually worked.

• No specific form of time records required – time clock or handwritten/signed time sheets.

• Set schedule, as an alternative?

• Keep payroll records for 3 years; time records for 2 years.

If an employee is traveling If an employee is traveling for work, must all the travel for work, must all the travel

time be compensated? time be compensated?

If not, why not.If not, why not.

Travel TimeTravel Time

Travel time is often compensated, but not always. Some basic issues to be considered:

•Is the time required by the job?

•Is the travel done during “normal business hours”?

•Is the employee a driver or a passenger?

• Travel timeTravel time

• Between home and work

• Between job sites

• Out-of-town travel

Computation QuestionsComputation Questions

What “nonproductive” time What “nonproductive” time can be excluded from can be excluded from

compensation time recording?compensation time recording?

• “Nonproductive” time?

• Pre- and post- work activity

• Meals and breaks

• Lectures and training

• Medical treatment and drug testing

Computation QuestionsComputation Questions

If your employees choose to work at If your employees choose to work at home (or you require them to do so), home (or you require them to do so), do you have to compensate them for do you have to compensate them for

the hours spent outside of work?the hours spent outside of work?

If you do, for what hours do you have to cover?

YesYes, all hours worked at the employer’s request,

whether at the work site or at home,

must be compensated.

Who telecommutes?• 3.3 million total U.S. employees work at home

(telecommute).

• 2.6% of the total U.S. employee workforce, and rising…

1 in every 38 U.S. employees.

• There are many reasons for this phenomenon.

Effect on compensation

• General Rule: must pay for the hours actually worked, whether in the office or outside of the office.

– Regular wages, at least minimum wage; plus– Overtime for non-exempt employees.

• Can employers pay telecommuters at a different (i.e., lower) regular rate than similarly situated office employees?

– Yes, as long as not as a result of an ADA reasonable accommodation.

“Hours actually worked”• What is actually worked and how do we track the time?

• Different strategies for different job types:

Computer-based Employees

•Finance/Accounting

•Customer Service

•Technology/Training

•Administrative/Clerical

“Traditional” Telecommuters

•Health Care/Nursing

•Skilled Labor/Trades

•Sales

•Transportation

vs.

Computer-based employees• “Hours actually worked”

• Work performed per clearly communicated guidelines

–When to work;–When to take breaks or to wait; and–Request to perform overtime work (if feasible).

• Recordkeeping strategies:

–Computer timecards/self-reporting –Based on log-in, log-out –Log-in, put in laundry, work, walk the dog, log-out…–Timers (records time actually working/active computing, but, may not capture compensable waiting time)

Traditional telecommuters• “Hours actually worked”

• Work performed per clearly communicated guidelines

• Recordkeeping strategies:– Self-reporting (potential to be abused)– Mobile Device Trackers (based on GPS/time

at particular location)

If an employee must be If an employee must be ““on callon call,” ,”

when (for what hours) when (for what hours) will you have to will you have to

compensate him/her?compensate him/her?

Computation QuestionsComputation Questions

• ““Waiting” timeWaiting” time

• Engaged to wait

• Waiting to be engaged

• “On call” time

Can you fire someone for Can you fire someone for violating a company policy violating a company policy

that prohibits overtime that prohibits overtime without permission?without permission?

Well, maybe, yes, but… be very careful!!

Caution!Caution!

• RetaliationRetaliation under the FLSA

• Having policies in place

• Following the policies consistently

• Better plan: Paying for overtime, writing up the employee – setting the record straight

• Then: Pay for the time and later terminate for failure to follow the policy

Terminating Terminating overtime violatorsovertime violators

How can How can job descriptions help avoid job descriptions help avoid

overtime claims?overtime claims?

Job descriptions and overtimeJob descriptions and overtime

• Understanding exemptions and understanding the job.

• Do the duties of the employee meet the basics of the exemptions? Does the job sound exempt?

• After-the-fact descriptions are difficult.

• The description, of course, must follow reality.

What kinds of policies What kinds of policies might be helpful?might be helpful?

Helpful PoliciesHelpful Policies

State the obvious: “We follow the law.”

Provide yourself a “safe harbor” – a prescribed method for employees to complain and for the company to investigate and remediate, if necessary.

Set rules about overtime that you can live with and that your managers and supervisors can and will follow consistently.

What’s anWhat’s anannual “tune-up” and why annual “tune-up” and why might it help in avoiding might it help in avoiding

overtime issues?overtime issues?

Annual review (“tune up”)Annual review (“tune up”)

• Review of jobs on an annual basis or every couple of years

• New jobs

• Confirm past decisions

• Changes in law?

• Avoid problems ($$$); build corporate credibility.

What steps can an employer What steps can an employer use to control, lessen, or use to control, lessen, or

avoid overtime costs?avoid overtime costs?

• Monitor time – stop overtime before it starts.

• Implement (and consistently follow) policies.

• Train everyone on the rules.

• Hold managers accountable.

• Bottom line: knowledge is powerful!

Controlling overtime costsControlling overtime costs

What is theWhat is theObama administration Obama administration

seeking to do in the seeking to do in the overtime area that overtime area that

will affect business?will affect business?And when?And when?

New DOL regulationsNew DOL regulations • Spring 2014 directive – may be proposed end of

February 2015.

• Implementation may be in summer 2015.

• “Streamlining” of 3 main exemptions.

• Forecasted increase in salary amount (to $1,000 a week??)

• Effect on business? Hiring? Compensation arrangements?. . . To be seen.

Questions/Comments?Questions/Comments?

Andrea M. JohnsonPartner, Co-Chair

Burleson Texas Litigationajohnson@burlesonllp.com

(713) 358-1733

Demetri EconomouAssociate

deconomou@burlesonllp.com713-358-1730

www.burlesonllp.com