Wage and Hour Litigation on the Rise: Tips for Avoiding Class Action Lawsuits in 2017

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Wage and Hour Litigation on the Rise TIPS FOR AVOIDING CLASS ACTION LAWSUITS IN 2017 April 6, 2017

Transcript of Wage and Hour Litigation on the Rise: Tips for Avoiding Class Action Lawsuits in 2017

Page 1: Wage and Hour Litigation on the Rise:  Tips for Avoiding Class Action Lawsuits in 2017

Wage and Hour

Litigation on the Rise

TIPS FOR AVOIDING CLASS ACTION LAWSUITS IN 2017

April 6, 2017

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About the Speakers

Webinar Host

Michelle Lanter Smith

Chief Marketing Officer

EPAY Systems

Featured Speaker

Jay Kalantar

Chief Operating Officer

EPAY Systems

Featured Speaker

Kevin Young

Partner

Seyfarth Shaw LLP

Featured Speaker

Kara Goodwin

Associate

Seyfarth Shaw LLP

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Agenda

• Introduction

• FLSA Overview

• Why These Cases Are So Popular?!

• The (Maybe) New Exemption Rules

• Navigating the FLSA’s Choppy Waters

• EPAY Analytics

• Questions

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EPAY Systems Overview

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Legal Disclaimer

The contents of this presentation should not be construed as legal advice or a

legal opinion on any specific facts or circumstances.

These materials are intended for general information purposes only, and you are

urged to consult a lawyer concerning your own situation and any specific legal

questions you may have.

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FLSA Overview

©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential

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Requires minimum wage, plus overtime pay for work in excess

of 40 hours per workweek, in addition to rules on recordkeeping

and child labor

• Some states and cities set minimum wage higher than $7.25

• Also, some states define overtime differently than FLSA (e.g., over

8 hours per day)

Some employees are “exempt” from these requirements, but

exemptions are narrowly construed—generally, two factors:

• What is their primary duty

• How are they paid (must be a salary of at least $23,660…or

$47,476?)

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An Overview of

the Federal Fair

Labor Standards

Act

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Most Common Types of Claims

• Pre- or post-shift work

– Boot-up time

– Getting the station ready

– “Volunteering” to come in

early

• Work from home

• Donning and doffing

• Travel time

• Meal/rest breaks

– Not required, but problem

with deducting short or

interrupted breaks

• Payment of all hours at

straight time

• “This hourly rate covers

overtime.”

• Including commissions

in regular rate

• Including bonuses in

regular rate

• Insufficient salary

• No salary basis

– “If I missed an hour, they

deducted an hour’s pay from

my salary.”

• Non-exempt “primary duty”

– “I was a glorified stock boy.”

– “I followed guidelines.”

– “I was an inside salesman.”

• “I was an independent

contractor for 5 years.”

Off the Clock Issues Regular Rate Issues Misclassification

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What “Primary Duty” Can Be Exempt?

• Primary duty must be

management of the business

or a recognized

department/division; and

• Employee must regularly direct

the work of 2 or more full-time

employees; and

• Employee must have authority

to hire or fire, or change in

status recs. must be afforded

serious weight.

• Primary duty must be work

requiring knowledge of an

advanced type in a field of

science or learning

customarily acquired

through an advanced

degree; or

• Primary duty must be work

requiring invention,

imagination, originality or

talent in a recognized artistic

or creative field.

• Primary duty office or non-

manual work directly related

to the employer’s

management or general

business operations; and

• Primary duty must include

exercise of discretion and

independent judgment with

respect to significant

matters.

Remember that: (i) the burden is on the employer to prove an exemption

applies; (ii) exemptions are narrowly construed; and (iii) both the primary duty

test and the salary test must be met.

Executive ExemptionProfessional

Exemption

Administrative

Exemption

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©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential

Why These Cases

Are So Popular?!

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True or False?

The number of wage and hour cases filed in federal courts has increased in 9

out of the past 13 years?

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Why Are These Cases So Popular?

• Employees can recover back

wages, typically with

presumptions cast in their favor

as to hours

• Employees can also recover

liquidated damages in the

same amount as back wages

• Claims can reach back three

years, or more under some

state laws

• If employee prevails, employer

must also pay fees incurred by

the employee’s attorney

• This is in addition to

employer’s own’ fees, which

are almost never recoverable

• Oftentimes, an alleged

unlawful practice that impacts

one employee also applies to

others

• Most plaintiffs’ attorneys

consider bringing FLSA

cases on a “collective action”

basis

• The collective action bar is

very low in the FLSA context

Recovery for the

EmployeeRecovery for the

Attorney

Recovery for a

Collective

Beyond all of this, there’s inherent difficulty in interpreting and applying the text

a statute written for the Depression Era to a far different (and fast-evolving)

workplace.

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Top 10 Private W&H Settlements in 2016

(significant increase in monetary value from 2015 settlements)

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1. $240 million – FedEx

2. $226 million – FedEx

3. $41 million – RS Legacy Corp.

4. $36 million – Bank of America

5. $35 million – Ecolab

6. $28 million – Schneider National

7. $27 million – Lyft

8. $27 million – Children’s Hospital Los Angeles

9. $19 million – Robert Half International

10. $16.5 million – Bob Evans Farms

Source: Seyfarth Shaw LLP Class Action Report

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©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential

The (Maybe) New

Exemption Rules

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December 1: The Day That Wasn’t

• Exempt executive, administrative, and professional

employees can earn a salary of $23,660

• Exempt “highly compensated” employees can earn a total

of $100,000 per year

• These salary levels remained in place for over a decade,

until being affirmatively updated by the DOL

• Exempt executive, administrative, and professional

employees must earn salary of at least $47,476 (though

10% can be non-discretionary bonus)

• Exempt “highly compensated” employees must earn at

least $134,004

• These levels are set to automatically increase for inflation

every three years, starting in January 2020

• The change is intended to extend overtime to 4.2 million

workers

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The new rule was set to take effect on December 1, 2016. It was preliminarily enjoined by a federal

judge in Texas on November 22, 2016. Its status remains uncertain.

Old (But Current) Rule New (But Enjoined) Rulevs.

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Challenges to the New Rules

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• Various measures to delay

or dilute the rule have been

introduced by Republicans

in Congress

• While some delay measures

passed the House, they

never advanced in the

Senate

• Two—one by states,

another by various trade

associations and

chambers of

commerce—have been

consolidated in Texas

• The federal court

granted the states’

motion for preliminary

injunction

• Arguments focused on

legality of rulemaking

and constitutionality of

salary requirements

• President Trump’s new DOL

Secretary may seek to

unwind the new rules

• Many observers expect that

“unwinding” the rules would

entail new rule-making,

designed to set a salary

level between the old one

($23,660) and the new one

($47,476)

Challenge in CongressChallenge in Federal

Court

Challenge by

President Trump

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Navigating the

FLSA’s Choppy

Waters

©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential

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Common Exempt Classification Mistakes

Key issues:

• Office or non-manual work

directly related to

management or general

business operations; non-

production work

• Must exercise discretion

and independent judgment

re: matters of significance

Key issues:

• Number of employees

supervised—one hand

test

• Recommendations for

hiring or firing given

particular weight?

• Too much work like

those supervised?

Key issues:

• Computer employee

exemption is quite narrow

• Developers, designers

• Administrative exemption

might apply, but is there

right/wrong answer?

• Beware of state law

They are office workers so

they must be exempt

We call them “manager” so

they must be exempt

They work a lot with

computers so they must be

exempt

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Caution

• Reclassified employees become NONEXEMPT employees

• This means that, regardless of the method of pay, they are subject to the same wage and hour

rules as other non-exempt employees:

– Must maintain accurate time records (even if no OT worked)

– Must ensure proper control of employee work, such as:

Off-the-clock

Meal and rest breaks

Travel time

Remote access

– Must pay overtime premium for hours worked in excess of 40/week

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• If the employer knows or has reason to believe employee is

working, the time is working time

o Employee may voluntarily continue to work before her shift

starts, during her break, after her shift, or from home or the

road...the reason, excuse, and setting is immaterial

o It is management’s duty to exercise control and see that

work is not performed if it does not want it to be performed

• Simply stated: if a manager has reason to know work is

performed, it is their obligation to ensure the time is recorded

and paid

• What can be done: strong policies, training of management

and employees

Any Work “Suffered or Permitted” is

Work Time, Without Exception

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Common

Mistake:

Off-the-

Clock Work

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• Pay for pre- and post-shift activities (donning

& doffing; computer boot up, etc.)

• Is the activity “integral and indispensable” to

employees’ principal work activities (and

therefore compensable)?

• Do the employer’s rules or the nature of the

work require it?

• Waiting to work - you don’t have to exert

yourself to be working

• Is the time de minimis (and can you count on

this)?

Common Mistake:

Not Including All

Required Time in

the Calculation of

Hours Worked

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• The FLSA does not require that employers provide a

meal break, though some state laws do

• That said, the FLSA does govern whether a break taken

must be treated as work time and paid:

o Rest periods of short duration, usually 20 minutes or

less, must be counted as hours worked

o Bona fide meal periods (typically 30 minutes or more)

generally need not be compensated as work time

Employee must be completely relieved from duty for the

purpose of eating regular meals

Employee is not relieved if she is required to perform any

duties, whether active or inactive, while eating

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Common

Mistake: Meal

Breaks and

Rest Breaks

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• Attendance at lectures, meetings, training programs, and similar

activities need not be counted as working hours, but only if:

o Attendance is outside of the employee’s regular working

hours; and

o Attendance is in fact voluntary; and

o The course, lecture, or meeting is not directly related to the

employee’s job; and

o The employee does not perform any productive work

during such attendance

• Simple safeguards:

o If it is mandatory pay for it

o Otherwise, make sure managers and employees understand it

is completely voluntary

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Common

Mistake:

Meetings,

Training, and

Similar Activities

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• Under federal law (state laws may vary):

o Ordinary home-to-work travel = not compensable (even if in company

vehicle)

o Travel time from designated meeting place where instructions, tools, or

the like are conveyed, to place of work = compensable

o Travel time from job site to job site = compensable

o Travel time for special one-day assignment in another city =

compensable

o For travel that keeps employee away from home overnight, travel time

during normal working hours = compensable

• Note: an established company custom, practice, or policy that is

more generous than the law in its definition of compensable travel

time can create liability where it might not otherwise exist under

the law

Common

Mistake: Not

Paying for Travel

Time

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• Under the FLSA, non-exempt employees must receive 1.5 times “regular rate

of pay” for all hours worked in excess of 40 per workweek

o Regular rate generally means compensation for hours worked (or related to

hours worked) divided by hours worked

o Regular rate calculations include:

pay, whether hourly, piece-rate, salary, commission

shift and weekend differentials

bonuses unless completely discretionary

• There are various pay methods available for non-exempt employees:

o Hourly rate is most common and straightforward

o Alternatives to an hourly rate:

Piece rate

Commission, with min. wage guarantee

Salary for fixed hours

Salary for fluctuating hours

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Common

Mistake: Not

Paying Proper

Overtime

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• Lawsuits challenging IC classification common and on the

rise

• DOL WHD issued guidance concluding that “most

workers are employees under the FLSA”

• Economic realities test - whether the worker is

economically dependent on the employer (employee) or is

in business for him or herself (independent contractor)

o Is the work an integral part of your business?

o Does the worker’s managerial skills affect his/her opportunity for profit and loss?

o How does the worker’s relative investment compare to your investment?

o Does the work performed require special skill and initiative?

o How long has the worker been working with you?

o How much control do you exercise over their work?

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Common

Mistake:

Overuse of

Independent

Contractors

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EPAY Analytics

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How EPAY’s Analytics Can Help

EPAY’s workforce analytics can answer questions and identify root causes of your biggest compliance issues:

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Am I properly compensating employees for off-

the-clock work such as travel time?

Are my employees taking state-required meal

breaks?

Are overtime hours being calculated correctly?

Your time

and

attendance

data

Actionable

Intelligence

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Punches Schedules

/ Budgets

Audits Timesheets

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How We Do It

Identify a core set of data that become the foundation for more complex

analysis. Examples of basic data:

Time changed Missed punches Correction lagsOpen punches

These basic data is combined to create more complex data such as:

Clients use data subsets to analyze trends, review correlations and drill-down

into specific activities.

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Client Case Example

State of MA asked the employer to prove ALL employees were paid

correctly for the past 3 years:

1. Calculated the worked hours based on the original punches

2. Compared with final hours paid on the timesheet

3. Identified ALL discrepancies

4. Audit records identified primary root cause to be supervisor adjustments because

employee forgot to record meal break. Employee sign-offs confirmed employees

had taken their meal-breaks.

5. Client is now closely tracking meal-break adjustments and retro pays.

Correct Pay Validation

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Client Case Example

Key Performance Indicators on these questions:

• Employees that are not punching in and out

• Supervisors that are changing employee time

• Supervisors that are changing employee rates and overtime

• Locations with hours input manually

• No schedules for active locations

• Supervisors addressing exceptions the next day

• Supervisors not signed into time and attendance system 2+ times per week

Week of 11/20/16 to 11/26/16 Value

Raw Score

A (4)

B(3)

C (2)

D (1)

F (0)

Categorized Score

KPI Weight

Weighted Score

Punch Count 100

Open Punch Count 35 35% <10% >10%-30% >30%-50% >50%-100% 100% 2 20% 0.4

Time Change Count 20 20% 0% >1%-5% >5%-10% >10%-20% >20% 1 20% 0.2

Miss Punch Count 12 12% <15% >15%-25% >25%-50% >50%-100% 100% 4 10% 0.4

Rate Change Count 2 4% 0% >0%-2% >2%-5% >5%-10% >10% 3 20% 0.6

Hours Lag Days 2.5 0.5 <1 >1-2 >2-4 >4-5 >5 2 20% 0.4

Budget Hours 1100 10% <2% >2%-5% >5%-10% >10%-25% >25% 2 10% 0.2

Timesheet non-PTO Hours 1000

Timesheet non-PTO Count 50 100% 2.20

Scorecard to grade the

operational performance

across different sites,

employees and managers.

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Dashboard Example

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Workforce Management Dashboard

• Labor/Revenue

Operational Productivity = Ops Input/Business Gain

Ex (Labor $/sq ft., Labor hrs/sq ft.)

• Hours Scheduled/Budgeted vs. Actuals

Projected Hours, Budgeted/Scheduled Hours Hours Variance

Projected $, Budgeted $/Scheduled $ $Amount Variance

• Untagged OT/Excessive OT

OT by Pay Code

Trend Reports (Employee, Manager, Site for excess)

• Anticipated OT for the Rest of the Week

Projected Hours, Scheduled Hours Projected OT

• Laborless Employees Earning Benefits

Active employee w/o hours for the past X days

Active unscheduled employees

Only pull by certain Pay Group or Employee Attribute

• Hours Adjusted/Edited/Entered by Manager

Time Changed Punches

Manual Punches

Invalid Punches

Rate Change

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AlertsNew Employee

OT Overage

Budget Var.

Data In Action:

Alerts

No Show

Tardy

Missing Meal Break

Schedule Changes

Reports

Sign-Off Sheet

PTO Balance

Schedules

Reports

Health Reports

Active No Pay

Manager Corrections

Correction Logs

Reminders

Schedule Confirmation

Task Assignments

Tip Collections

Timesheet Sign-Off

Reminders

Timesheet Status

Open Punches

AlertsAttendance

Attestations

Clock Sync

Reports

Daily Forecast

Weekly Recap

Compliance Scores

Reminders

Shift Start/End Head Count

Missing Timesheets

Manager

EmployeePayroll

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Actionable Intelligence

We’ve made it easier

for clients to work

with their own

information –

whether it’s to share

information selectively

throughout their

organization or to

access “just-in-

time” data to

implement proactive

measures.

Use the insights from analytics to help optimize operational efficiencies.

Provide access to

data in formats that

is both usable and

convenient.

Customizable alerts, reminders and reports enable clients to make well-informed operational decisions.

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Questions?

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www.EPAYsystems.com

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Thank you!

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