Wage and Hour Litigation on the Rise: Tips for Avoiding Class Action Lawsuits in 2017
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Transcript of 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
Agenda
• Introduction
• FLSA Overview
• Why These Cases Are So Popular?!
• The (Maybe) New Exemption Rules
• Navigating the FLSA’s Choppy Waters
• EPAY Analytics
• Questions
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
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
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
Navigating the
FLSA’s Choppy
Waters
©2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential
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
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
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.
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.
Dashboard Example
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.
Questions?
37
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