Should Employers Keep Wage and Hour Records for Independent Contractors? 2018-10-04T10:23:12+00:00

Posted on October 4, 2018

The Department of Labor successfully stated a claim for record-keeping violations against a franchisor, because the franchisor failed to keep records on the hours worked by the specific individuals actually performing work under the franchise agreements. Using a franchise agreement, a janitorial company engaged corporations – and only corporations – to provide services to the company’s clients. The franchisees were typically one or two person operations, and the owners of the franchisees typically did the actual work themselves. The DOL sued the franchisor janitorial company, alleging that it failed to keep required records for those individuals who actually performed work for the company’s clients. At first, its use of franchise agreements protected the janitorial company; the case was dismissed by the trial court. But the Circuit Court reinstated the suit. The DOL’s allegations that the individuals performing the work were economically dependent on the janitorial company were enough to allege that those individuals were, by law, employees of the franchisor janitorial company, and therefore enough to allege the janitorial company was required to keep the FLSA records. Acosta v. Jani-King of Oklahoma, Inc., No. 17-6179 (10^th Cir. Oct. 3, 2018)

Beware! An employer’s corporate structure – including even arguably proper use of independent contractors – might not protect you from record-keeping requirements. This suit will continue and might result in increased record-keeping requirements for all employers who use independent contractors. To be safe, you should know who is doing the work and the hours they keep.

The DOL Can’t Always Get What It Wants 2018-07-06T10:27:56+00:00

Posted on July 6, 2018

By: Lindsay Hesketh

While investigating defendant La Piedad’s FLSA compliance, the Department of Labor subpoenaed, among other things, documents with the names and addresses of other businesses owned by defendant’s shareholders. La Piedad informed the DOL that it did not have responsive records. Rather than investigate that response, the DOL immediately moved for an order holding defendant in contempt. The district court rubber stamped the motion, granted it without a hearing, and didn’t hold the DOL to its burden of proof. On appeal, the Eighth Circuit admonished the lower court’s “misuse of the civil contempt power.” The court highlighted the DOL’s complete failure to meet its clear and convincing burden to show that defendant had custody or control over those documents and reversed the order. Acosta v. La Piedad Corp., No. 17-1845 (8^th Cir. July 3, 2018).

The courts continue to protect employers from government overreach, but consider the cost. Here the employer had to pursue its rights to the court of appeals, all because the DOL couldn’t be bothered to issue its subpoena to the shareholders themselves.

DOL Proposing New Tip Credit Regulations 2017-12-05T10:48:35+00:00

Posted on December 5, 2017

By Bernie Siebert

On December 4, 2017, the U. S. Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking regarding the tip credit regulations under the Fair Labor Standards Act. https://www.dol.gov/newsroom/releases/whd/whd20171204 The proposed new regulation will be published today, and will be available for public comment. The purpose of the new regulation is to alter the regulations issued in 2011 concerning tipped employees. Under the FLSA, an employer is permitted to pay tipped employees $2.13 so long as the employee receives in tips an amount equal to at least $5.12 per hour. One of the biggest problems for employers under the 2011 regulation was that the number of employees for whom the employer could claim the tip credit was limited to only employees who directly received tips. Thus “tip pooling” arrangements were limited. Under the new proposed regulation, tip pools can be expanded to include non-tipped employees such as cooks and dishwashers. According to DOL: “This would likely increase the earnings of those employees who are newly added to the tip pool and further incentivize them to provide good customer service.” The proposed regulation would also address the issue of the propriety of an employer retaining tips paid to employees while paying its employees an hourly wage that exceeds the minimum wage. The 2011 regulation prohibited an employer from retaining tips and paying employees at least the minimum wage even when no tip credit was claimed. It should be noted, that the regulation is proposed, not final. Moreover, employers utilizing the tip credit should check local law to make sure they are in compliance with any applicable law, regulation or ordinance.

Salary Threshold Regs Un-enjoined? 2017-06-09T13:56:36+00:00

Posted on June 9, 2017

By John Alan Doran

Wednesday a group of Chipotle employees brought suit in New Jersey federal court alleging FLSA violations stemming from Chipotle’s failure to follow the Obama-era salary-basis regulations. As you will recall, these regulations doubled the salary threshold for the so-called white collar exemptions, thereby rendering millions of workers eligible for overtime. But, you will also remember that a federal judge entered an order last year enjoining those regulations before they became effective, and that injunction was nation-wide (S&H Blog Post: Salary Threshold Change Stopped). So are these Chipotle employees just sore losers or did we just misunderstand the meaning of “injunction?” The plaintiffs in this case are arguing that, while a federal court did preliminarily enjoin the DOL from implementing and enforcing the salary-basis regs, the regs nonetheless became effective automatically under the Administrative Procedures Act because the court did not enter a permanent injunction. The plaintiff’s argument seems like a real long-shot, but it is yet another twist in the unbelievably circuitous route these regs have taken.

DOL Trashes Obama-Era “Guidance” 2017-06-09T13:11:12+00:00

Posted on June 9, 2017

By John Alan Doran

Wednesday the DOL announced that it was withdrawing two critical pieces of “guidance” issued under the Obama administration. The first piece addressed the DOL’s rather narrow view of who is an independent contractor (S&H Blog Post: DOL Says Employers Are Morons). The second piece established an extremely broad view of joint employment (S&H Blog Post: Joint Employment Wage/Hour). Taken together, the guidance pieces made it much harder for employers to navigate through the gig economy. The withdrawal of these guidance pieces obviously helps employers who use contractors or have potentially joint employer relationships. But the DOL did not suggest what enforcement strategy it may follow in the absence of these guidances, so the impact in real-world terms remains to be seen. Nonetheless, this provides some indication that our new Secretary of Labor is moving forward, at least in some respects, to reverse some of the prior administration’s approaches.

Trump’s Puzder Gets Pulled 2017-02-15T15:23:52+00:00

Posted on February 15, 2017

By John Alan Doran

Andrew Puzder will not be the next Secretary of the DOL. The fast food magnate of Hardee’s and Carl’s Jr. fame “withdrew” his name from the confirmation process a few hours ago. The White House confirmed his withdrawal. When then-President-Elect Trump nominated Puzder to be the next DOL head on December 8, 2016, we all expected a radical turnaround at the DOL. But over the last few weeks Puzder has faced a wave of dramatic setbacks and challenges to his appointment, with some Republicans publicly crossing the aisle to oppose the appointment. Puzder is known for his outspoken views against an increased minimum wage, the Affordable Care Act, Obama-era trade treaties and policies, and more. His prospects diminished recently when it became public that he once employed an undocumented housekeeper, that his ex-wife had previously accused him of spousal abuse, and that his Carl’s Jr. and Hardee’s employees were suing him in dozens of states for alleged wage/hour violations. What President Trump does next to fill the DOL’s top spot is anybody’s guess, but we can be sure that it will be someone with the same political outlook as Puzder, sans the incredible baggage.

DOL Brief Argues Against Injunction 2016-12-16T09:23:44+00:00

Posted on December 16, 2016

By Bill Wright

As we all know, a federal judge blocked the Final Rule from the Department of Labor (“DOL”) that would have roughly doubled the salary threshold for executive, administrative and professional exempt employees. Now, the DOL has filed its appellate brief, looking to overturn that injunction.

The DOL’s arguments are predictable. Although the judge said he was only blocking the new salary threshold, not blocking all use of a salary threshold test, the DOL brief argues that judge’s reasoning would apply to any salary threshold test; but, both the appellate court and the Supreme Court have approved the use of salary threshold tests in the past. In addition, the DOL brief argues that the Final Rule did not merely add context to ambiguous terms in a statute; instead the DOL was exercising authority explicitly granted under the FLSA. The salary threshold test is neither arbitrary, capricious, nor manifestly contrary to law.

We knew the DOL would turn this brief around quickly, but barring a miracle, the new administration will take office before the appellate court reaches a decision in the case. Of course, ‘tis the season for divine intervention.

DOL Worm About to Turn 2016-12-08T16:53:06+00:00

Posted on December 8, 2016

By John Alan Doran

President-Elect Trump continued on his streak of appointing controversial cabinet members today when he announced Andrew Puzder as his choice to head the DOL. Mr. Puzder’s name may be familiar to those of you who crave charcoal-broiled fast food. He is the CEO of Hardee’s and Carl’s Jr. He is also an extremely vocal critic of increasing the minimum wage, the Affordable Care Act, the DOL’s currently-enjoined overtime regulations, and the immigration and trade policies of the Obama Administration. Whatever game employers, employees, and unions have been playing for the last eight years, the rules are about to change. TOTALLY. We can expect Mr. Puzder to do all in his power to recalibrate the employer/employee dynamic in a pro-business paradigm that will make heads spin. In light of the appointment of this very vocal opponent of pro-employee movements such as the $15 an hour campaign, we can’t begin to imagine who the President-Elect will select to fill the two vacancies on the National Labor Relations Board when he takes office. It will be nearly impossible for the President-Elect to “trump” this appointment when he turns his attention to the NLRB. (See what we did there? A Trump pun. Get it?)

Salary Change Stopped – Now What? 2016-11-22T17:05:15+00:00

Posted on November 22, 2016

By Bill Wright

A federal court has ruled that the U.S. Department of Labor might have overstepped its boundaries by implementing a salary threshold of $913 a week for executive, administrative and professional exemptions. But if you have been planning to comply with the regulation by next Thursday, what are you supposed to do about it?

First, there is a possibility that the court of appeals will see the issue differently than the district court. Consequently, we have no certainty about the salary threshold for these exemptions.

Second, the injunction is not permanent. Consequently, again, we have no certainty about the salary threshold for these exemptions.

Third, if you changed previously salaried employees to hourly and made them non-exempt, everything is fine. You can leave them as non-exempt, pay them overtime premium pay, and you will be complying with the law however it turns out.

But, if you gave exempt employees raises, how do you roll them back now? Everything depends on how you communicated the raises. If you made no contracts or other enforceable promises, you can reduce salaries again just as easily as you increased them. The problem is the employee relations – smoothing over the employee’s unhappiness over the bait and switch. At this point, we don’t know whether to laugh or cry.

Given the late date for this ruling, it is hard to see how we could have certainty about this rule before DJ Trump takes office. His administration might decide to drop the appeal, or to accept a permanent injunction.

Salary Threshold Change Stopped 2016-11-22T16:41:03+00:00

Posted on November 22, 2016

By Bill Wright

The U.S. District Court for the Eastern District of Texas has temporarily enjoined the Department of Labor’s new salary threshold test for executive, administrative and professional employees. The court found that the terms – executive, administrative and professional – had functional meanings but did not imply any particular salary or status. The court also found that the new threshold — $913 a week – was so high that it effectively took over the duties test, substituting status for function. Consequently, the court found the plaintiffs had shown a likelihood of success on the merits; the new regulation was likely to be contrary to the Fair Labor Standards Act.

The result is that, as of this moment, employers nationwide do not have to comply with the new regulation on December 1, 2016. Watch for a fast run to the court of appeals!

Nevada et al. v. US DOL, Civil Action No. 4:16-CV-00731 (E.D. Tex. Nov. 22, 2016).

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