Per-Project Payments – Salary or Fee Basis Pay? 2020-01-16T11:26:43-07:00

Posted on January 16, 2020

Certain exemptions from employee rights to overtime premium pay require the employee to be paid on a salary basis or on a fee basis. On January 7, 2020, the U.S. Department of Labor (“DOL”) issued opinion letter FLSA2020-2 discussing a specific pay arrangement – where the total compensation is set by the scope of an assigned project, but the amount paid each week is a set amount. According to the DOL, these payments indicate a salaried employee (and exempt from overtime), so long as the payments do not change too often. The letter responds to the specific inquiry posed to the DOL, but the opinion informs payments generally for project-basis workers.

The DOL inquiry addresses an educational consultant hired to perform a specific project. The consultant was to receive a predetermined amount in 20 equal biweekly installments paid throughout the district’s academic year. The DOL found this qualifies as a salaried employee, assuming the educational consultant meets the duties tests of the administrative or professional exemptions and the weekly pay exceeds the salary threshold for those exemptions. The DOL’s opinion focuses on the pre-determined nature of the consultant’s weekly compensation. The weekly pay is the same regardless of actual hours spent and the quality of work performed during the week—the definition of a salary basis pay.

The DOL then considered whether additional compensation changes an employee’s pay status. For example, what if the same employee works, not only the agreed 40 weeks to develop the literacy curriculum, but also on a side project conducting teacher workshops over an eight week period? Because compensation in addition to the salary can be paid on any basis, such as a flat sum, bonus, or hourly amount, without undermining the salary basis test, the employee is still salaried if the employee receives an additional pre-determined amount for the side project in addition to their pay for the 40 week project.

The opinion letter specifically notes that an employee’s exempt status may be undermined, however, “if there are such frequent revisions to the contract that the amount of the employee’s biweekly compensation for a certain project is rarely the same from pay period to pay period and the circumstances suggest the amount of the payment is, in fact, actually based on the quantity or quality of work performed.”

Joint Employer Status Muddied Further 2020-01-15T12:20:53-07:00

Posted on January 15, 2020

By Carissa Davis

On January 12, 2020, the Department of Labor, Wage and Hour Division (“DOL”) announced its revisions to the federal regulation interpreting joint employer status under the Fair Labor Standards Act (“FLSA” or “Act’). The new rule is set to take effect on March 16, 2020.

For decades, federal regulations have recognized two situations in which an employee may have two or more employers. In the first scenario, the employee works two jobs, each for different employers (i.e. a day job and a night job). Here, the employers are not associated with one another and may ignore the employee’s work performed in the other job.

In the second scenario, the employee has one job and two or more employers. In these cases, employment by one employer is “not completely disassociated” from the employment by the other employer. With this newly promulgated rule, the DOL tries to clarify when an employee has two or more employers for the same job.

The DOL adopted a four-factor test fashioned after Bonnette v. California, 704 F.2d 1465 (9^th Cir. 1983). The test considers whether a potential joint employer may:

Hire or fire the employee;
Supervise and control to a substantial degree, the employee’s work schedule or employment conditions;
Determine the employee’s rate and method of payment; and
Maintain the employee’s records.

No single factor is dispositive, and the weight given each factor will vary depending on the circumstances. However, the maintenance of employee records alone will not sufficiently demonstrate employer status. Additionally an employer’s reservation of the right to control the worker’s schedule or conditions alone, will not establish employer status; the employer must actually exert control over the worker. Additional factors may be considered if they indicate whether the employer exercises control over the terms and conditions of the employee’s work.

To round things out, the DOL has specified several factors that are NOT relevant to joint employer status under the FLSA, including:

Whether the organization operates under a certain business model, such as a franchise;
Whether the organization adheres to certain business practices, such as allowing the operation of a store on one’s premises;
Provision of handbooks or other forms;
Offering association health or retirement plans;
Whether the organization entered into contractual agreements, such as requiring a party to institute sexual harassment policies, or requiring quality control standards; and
Whether the employee is economically dependent upon the potential joint employer.

The Final Rule is long. There are many changes and clarifications not detailed above. Moreover, the DOL is clear that this is the rule for the FLSA. A different rule might apply for the National Labor Relations Act or for liability under various federal employment statutes. The situation is as clear as mud.

No New News on Nondiscretionary Bonuses 2020-01-13T16:52:21-07:00

Posted on January 13, 2020

By Beth Ann Lennon

On January 7, 2020, the U.S. Department of Labor (“DOL”) issued a new Opinion Letter on “nondiscretionary” bonuses. When a bonus is offered to employees “to induce them to remain” with the company, the DOL considers the bonus to be “nondiscretionary.” Nondiscretionary bonuses “must be included in the regular rate of pay” for non-exempt employees. Determining how to allocate such bonuses can get a bit more complicated… When employers require that the employee stick around for some set amount of time to get the bonus and the bonus program does not clearly articulate how much of the bonus was earned in which week, the employer may “assume” each week within that period of time “counts equally in fulfilling the criteria for receiving the lump sum bonus.” In short, the employer allocates the bonus equally to each week in the time period covered by the bonus. Then, the employer must calculate overtime – taking into account this added compensation – separately for each workweek in which the employee worked more than 40 hours.

At the end of the day, this new Opinion Letter is not “new” news – it’s just a reminder that employers must carefully analyze what period of time a bonus is intended to cover and fairly and equally allocate the bonus across that period. DO NOT attempt to game the system and allocate a bonus in a manner inconsistent with this directive or you could find yourself in trouble. Another reminder – not covered in the Opinion Letter but still worth noting – don’t forget that state laws, including Colorado’s, often establish overtime requirements in addition to those set by the federal law. Make sure you are doing all of your overtime calculations in accordance with all applicable laws.

DOL Increases Salary Threshold for White Collar Exemptions 2019-09-25T10:24:38-06:00

Posted on September 25, 2019

The U.S. Department of Labor has adopted a new final rule increasing white collar exemption salary rates, which will take effect on January 1, 2020. Click here to read our client advisory about the new rule.

Freeze! Put your hands up and go review your attendance policy ASAP… 2019-08-13T15:34:10-06:00

Posted on August 13, 2019

By Beth Ann Lennon

The Sixth Circuit reminds all employers to carefully review even “no fault” attendance policies for FMLA compliance. Dyer v. Ventra Sandusky, LLC. The employer used a collectively bargained, no-fault, attendance policy that required termination when an employee received eleven or more “points” due to absences. Employees received points whenever they missed all or part of a scheduled shift. Employees who had “perfect” attendance for thirty days, on the other hand, had a point subtracted from their total. Although FMLA-protected absences were expressly excluded from the point-accumulation system, taking such leave reset the “perfect attendance” clock. According to the Sixth Circuit, and the Department of Labor (DOL), this policy may give rise to an FMLA “interference” claim.

Do you have a policy problem? The dispositive question when reviewing your own policy is whether the “practical result” of your company’s policy is that “taking FMLA-protected leave . . . [becomes] a negative factor in employment actions.” For many employers, this will not be news. As the Sixth Circuit was quick to point out, the DOL has repeatedly explained that “point reduction [under an attendance policy] can be viewed as an employment benefit.” Thus, if an employer chooses to provide their employees this benefit, FMLA-protected absences cannot “reset” the “perfect attendance” clock. According to the DOL (and, now, the Sixth Circuit), employers must draft their attendance policies so that FMLA leave “freeze[s] the accrual of attendance.”

OT Exemption Threshold Salary: Take 2 2019-03-08T09:55:15-07:00

Posted on March 8, 2019

By Bill Wright

The news is everywhere: the DOL has issued its new proposal for the salary threshold for executive, administrative, and professional exemptions. Don’t panic – the announcement concerns a Notice of Proposed Rulemaking. The DOL still has to take public comments and prepare a final set of regulations.

The proposal (this time) is to increase the salary threshold from the current $455 per week (annualized to $23,660) to $679 per week (annualized to $35,308). If the proposal makes it to the final form, executive, administrative and professional employees who make less than $35,308 annually will no longer be “exempt.” Employers would have to pay these lower-paid employees overtime premium pay for hours worked over 40 each week. The proposed rulemaking also includes an increase for the highly compensated employee exemption from $100,000 to $147,414. Instead of proposing that the thresholds would increase automatically, the DOL is now proposing scheduling period reviews of the thresholds. The full proposal appears at https://www.dol.gov/whd/overtime/overtime2019-nprm.pdf

For anyone who would like to respond to the DOL’s proposals, comments will be accepted electronically or by mail. Check out the instructions at http://www.regulations.gov/

Dear Santa 2018-12-22T09:00:46-07:00

Posted on December 22, 2018

John Alan Doran

Dear Santa,

We all got together and put together our wish-list for your visit. We realize it’s been a fascinating year on the Labor & Employment front. And we don’t want to seem greedy (and end up on the naughty list) in light of all the recent developments in Labor & Employment law that have started to level the playing field for employers. But much still needs to be accomplished for employers in order to encourage job creation and reinvestment in our workforce. Stemming the tide of frivolous litigation and abuse of agency authority would go a long, long way toward that end. And so, dear Santa, here are just a few things we would like to see in or around our tree next week:

A cooperative Congress that can actually get things done. Employers and employees, alike, suffer from the uncertainty of our current, volatile political climate.
We need more judges. Lots more judges. Federal judicial vacancies are delaying justice for employers and employees at a mind-boggling pace, and the highly politicized process of appointing new judges is a mess.
A national, unified approach to paid leave. For multi-state employers, navigating the hopelessly contradictory state laws governing paid leave is daunting, if not impossible.
An end to certain states “under-turning” the Supreme Court’s arbitration jurisprudence at every opportunity. While some states refuse to believe this, there is a controlling federal policy favoring arbitration agreements even in employment, it’s the law of the land.
Marijuana-induced clarity. As more and more states roll out pro-marijuana laws, employers are increasingly caught between a rock and a hard place given the conflicting state and federal laws governing marijuana use.
An end to EEOC overreach and litigation abuse. Courts have repeatedly called out the EEOC for its over-the-top bullying and litigation abuse. It’s time for something to be done legislatively to curb the agency’s abusive conduct.
Simplified, unified, and practical rules determining the existence or non-existence of independent contractor relationships. The current hodge-podge of separate and distinct contractor tests throughout the states and conflicting tests within the federal government make it nearly impossible to enter into contractor agreements with any assurance that there will not be expensive litigation to follow.
Conclusive guidance on LGBT and related protected categories. Legislative clarity in this arena is long overdue.
A simplified, and realistic approach to FLSA white-collar exemptions, and a less pedantic enforcement strategy from the DOL.
A Senate vote on the countless agency vacancies that remain open but ready to be filled. Positions such as the Assistant Secretary of Labor—OSHA, and many more, could be filled in an instant, but won’t be due to gridlock.

And, for a stocking stuffer, how about amending labor and employment laws to make patently clear that the party who prevails in a lawsuit or agency proceeding shall recover costs and attorneys’ fees. File a bogus unfair labor practice charge, and you pay the price. Initiate a baseless FLSA collective action, and you pay the price. The playing field has been turned on its side in this respect, as employers are forced to settle frivolous or specious claims simply to avoid the costs of litigation. When both sides face the specter of litigation expenses, there will be less abuse and more efficient processing of legitimate claims.

DOL Doubles Back on Interns 2018-01-09T12:50:51-07:00

Posted on January 9, 2018

By James Korte

On January 5, 2018, the US Department of Labor (“DOL”) endorsed the seven-factor “primary beneficiary test”, also known as the “Glatt Test,” to determine whether interns qualify as employees under the FLSA. See DOL Press Release. The DOL scrapped its 2010 six-factor test to better align its guidance with the test adopted by four Circuit Courts. Under the newly-endorsed primary beneficiary test, the DOL (and presumably courts) will look at a non-exhaustive list of seven factors which include, whether there’s a clear understanding that no expectation of compensation exists, whether interns receive training similar to what they would get in an educational environment, and to what extent the internship is tied to a formal education program. In stark contrast, the now-discarded 2010 test began with the presumption that an intern was an employee unless all six-factors were found to be in the employer’s favor. The 2018 primary beneficiary test provides the courts more flexibility to deal with the unique circumstances of each case. It also provides employers with more wiggle room for unpaid interns, but tread carefully.

The More Things Change… The More They Stay The Same. 2018-01-09T11:59:27-07:00

Posted on January 9, 2018

By Chance Hill

On January 5, 2018, the U.S. Department of Labor (DOL) reissued 17 previously withdrawn opinion letters addressing a wide variety of topics under the Fair Labor Standards Act (FLSA). Such letters respond to specific questions submitted to the DOL’s Wage and Hour Division (WHD) and constitute an important form of guidance for employers and employees regarding the application of FLSA requirements and other laws to their workplaces. Employers may be able to use opinion letters for their affirmative defenses and receive deference by the courts if employers act “in conformity with” an opinion letter and in “good faith,” according to the Portal-to-Portal Act of 1947. The aforementioned 17 letters concerned inquiries ranging from questions about the exempt status of civilian helicopter pilots under Section 13(a)(1) of the FLSA to whether bonuses should be included in calculating employees’ regular rates pursuant to Section 7(e) of the FLSA.

The Obama Administration had withdrawn these opinion letters and discontinued the longstanding practice of issuing such letters while in office. (Instead, the Obama Administration issued a handful of documents that it referred to as “Administrator’s Interpretations.”) In his statement regarding these 17 opinion letters, the Trump Administration’s WHD Acting Administrator Bryan L. Jarrett reissued “the verbatim text” of each withdrawn opinion letter and asserted that it “is an official statement of WHD policy and an official ruling for the purposes of the Portal-to-Portal Act, 29 U.S.C. § 259.”

Click here to view DOL’s reissued opinion letters.

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

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.

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