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EMPLOYMENT LAW UPDATE

Edward ArmstrongAssistant Attorney General

edward.armstrong@arkansasag.gov

Amber SchubertAssistant Attorney General

amber.schubert@arkansasag.gov

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WAGE AND HOUR LAWS

FAIR LABOR STANDARDS ACT (FLSA)

ARKANSAS MINIMUM WAGE ACT (AMWA)

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Fair Labor Standards Act (FLSA)

• Federal Law 29 U.S.C. § 201, et seq.• Regulates wages and hours of employees.• Sets a minimum wage requirement ($7.25/hr).• Covers most employers that are engaged in

interstate commerce.• No limitations on the number of hours an adult

employee may work.• Requires that most employees must be paid a

minimum rate for all hours worked.• In addition, nonexempt employees must be paid

overtime pay for all working hours over 40.

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Unique Features of the FLSA

Two-year statute of limitations, three if plaintiff proves willfulness

Anti-retaliation provisionIndividual liability of employersFee-shifting provisionDoes not pre-empt state wage laws (Arkansas

Minimum Wage Act)Can be brought as hybrid 216(b)/Rule 23 actions

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When Does the FLSA Apply?

Enterprise Coverage:Employees who work for certain business or organizations (or “enterprises”) are covered by the FLSA. These enterprises, which must have at least two employees are:

(1) those that have an annual dollar volume of sales or business done of at least $500,000

(2) hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies.

Individual Coverage:Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involved them in interstate commerce.

State of Arkansas has sovereign immunity.

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Arkansas Minimum Wage Act (AMWA)

• State Law A.C.A. § 11-4-201, et seq.• Similar provisions to the FLSA.• Sets a minimum wage requirement ($6.25/hr).• Minimum Wage increased passed November 4, 2014:

• $7.50 per hour effective January 1, 2015;• $8.00 per hour effective January 1, 2016;• $8.50 per hour effective January 1, 2017.

• May rely on interpretations of the U.S. DOL and precedent under FLSA “except to the extent a different interpretation is clearly required.”

• Do not have to exhaust administrative remedies.• As between FLSA and AMWA, the law most favorable to

the employee applies pursuant to “liberal construction” provision of A.C.A. § 11-4-201.

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AMWA vs. FLSAAMWA applies to employers with 4 or more

employees regardless of annual dollar volume of sales.

Both allow for comp time for employees of federal and state government at the rate of 1.5.

Three-year statute of limitations under AMWA regardless of willfulness.

Both include fee-shifting provision.Both statutes provide for liquidated damages up to

the amount of the back wages owed.

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Record-Keeping Requirements

FLSA record-keeping requirements (29 CFR 516) include:• Name, address, date of birth, sex, and social security number• Hours worked each day and total hours worked each week• Hourly pay rate and basis on which wages are paid (e.g., per hr/wk)• Total daily/weekly straight-time earnings and total weekly OT earnings

Must maintain records for three years under both FLSA and AMWA

No private cause of action for violation of record-keeping provisions; however, failure to keep accurate records shifts the burden of proof. See Anderson v. Mt. Clemens Pottery, 328 U.S. 680 (1946)

Burden-shifting often a factor in misclassification cases

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Typical FLSA Plaintiffs• Hourly “non-exempt” employees: employees classified by their

employer as non-exempt from FLSA overtime provisions, who allege they have worked more hours than they have been paid for.

• Salaried “exempt” employees: employees classified by their employer as meeting the requirements of one or more of the FLSA exemptions and therefore not entitled to overtime who allege they should be classified as non-exempt and entitled to overtime.

• Independent Contractors: individuals classified by an employer not as employees entitled to FLSA protections but as independent contractors in business for themselves who allege they should be classified as employees and entitled to FLSA protections.

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Litigated Issues

Target Areas

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Off-the-clock Work• Generally: working on premises, but not “clocked in.” • Examples:

• Preliminary/Postliminary activities – time spent before & after your “principal” work activities is generally not compensable (e.g. traveling to and from work)

• Integrity Staffing Solutions, Inc. v. Busk, 574 U.S. ___ (2014): Court held that passing through post-shift security screening was not an “intrinsic element” (something that an employee cannot dispense of if he is to perform his principal activities) of the job and therefore not compensable time.

• Travel and Training – sometimes compensable• Meal Breaks – interrupted meal breaks • Donning and Doffing – pre- and post-shift activities that

are integral and dispensable to the job

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Common Problems• Meal Breaks: Federal and State laws do not require employers to

provide meals or breaks. Breaks of 20 min. or less must be paid.

• Interrupted Meal Breaks: Employees being forced or expected to work during unpaid meal times.

• Lopez v. Tyson Foods, Inc., 690 F.3d 869 (8th Cir. 2012): Court rejected the “completely-relieved-from-duty” standard in favor of the “predominantly-for-the-benefit-of-the-employer standard.

• Auto-Meal Deductions: claims that meal breaks were automatically deducted from employees’ pay even when an employee worked through all or part of the meal break.

• Quickley v. Univ. of Maryland Medical System Corp., 2012 WL 4069757:Court held the employer’s auto-deduct policy shifts the burden onto the employee to record and report time worked during meal breaks. Employers must create a reasonable process for employees to report and/or reclaim time worked.

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Common Problems, cont.• Training Time: An employee’s time attending a meeting,

seminar, lecture, or training must be counted as hours worked unless it meets each of four requirements:

• the attendance is outside the employee’s regular working hours;• the attendance is in fact voluntary (the employee wouldn’t suffer adverse

employment action if he did not attend);• the meeting or training is not directly related to the employee’s job; and• the employee does not perform productive work while attending the meeting.

• Exception to the directly-related requirement: If the employee’s decision to attend was independent from any notice, prompting, or encouragement from his employer. For example, if the employee completes online training at home after work based solely on his own initiative.

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Common Problems, cont.• Travel Time: Portal-to-Portal Act (29 U.S.C. § 251-262) Employers do not

need to pay employees for time spent traveling from home to work before and after the workday.

• Exception: If an employee has to travel an unusually long distance to a worksite after normal work hours, it may be counted as hours worked.

• Must compensate for time spent traveling from one workplace to another during the same workday. This DOES NOT include travel from home to work before the start of the workday, but DOES include time spent traveling from a central meeting place to a final work location.

• Overnight Travel: Must include in hours worked the time it actually spent traveling (e.g. in a care or on airplane) ONLY if it occurs during the employee’s normal work hours, UNLESS the employee actually performs work while traveling.

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Misclassification

Misclassification claims continue to be the number one problem for employers.

Courts and administrative agencies construe exempt employee classifications very narrowly.

Employers would be well served to conduct a vulnerability audit of all exempt positions to ensure strict compliance with the FLSA and state laws (proactive action).

Exempt or Non-Exempt

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Overview

Employee must be paid overtime UNLESS he/she qualifies for an exemption.

Exempt status is determined by the duties actually performed, not by the title of his or her job.

Burden is on employer to establish the exemption.Five general categories of exempt jobs:

Executive Administrative Professional Computer Professional Outside Sales

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Executive Exemption

Salary: $455 per week

Duties: Primary duty is the management of the enterprise or a

recognized department or subdivision. Customarily and regularly directs the work of two or more

other employees. (FTEs) Has authority to hire or fire other employees (or effectively

makes recommendations as to hiring, firing, promotion or other change of status of other employees).

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Administrative Exemption

Salary: $455 per week

Duties: Primary duty is performing office or non-manual work directly

related to the management or general business operations of the employer or the employer’s customers.

Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

This exemption applies to employees in top level management positions who do not necessarily supervise other employees, but perform functions the owner/president would otherwise perform.

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The Learned Professional Exemption

Salary: $455 per week

Duties: Primary duty of performing work requiring knowledge of an

advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.

The employee must perform work requiring advanced knowledge; The advanced knowledge must be in a field of science or learning; and The advanced knowledge must be customarily acquired by a prolonged

course of specialized intellectual instruction.

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Computer Professional Exemptions

Salary of $455 per week or $27.63 per hourPrimary duty of:

(a) application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional applications; or

(b) design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or

(c) design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

a combination of duties described in (a), (b), and (c), the above, the performance of which requires the same level of skills. Employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field.

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IC Misclassification

• Properly classifying an individual as an employee or independent contractor (IC) can be one of the most difficult employer tasks.

• Although an IC is thought to be “in business for him or herself,” in reality, distinguishing between an employee and an IC can be hard.

• Many employers intentionally skirt the FLSA’s employee benefits requirements, including medical leave and unemployment insurance.

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IC Misclassification• Determining whether someone is an independent contractor

includes the following factors:

• The degree of control exercised in performing the work

• The worker’s opportunity for profit or loss

• The worker’s investment in materials and/or equipment necessary in performing the work

• The level of skill necessary to perform the work

• The permanency of the relationship between the worker and the alleged employer

• Whether the worker is an integral part of the business

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Interns• FLSA broadly defines “employ” as including to “suffer or permit to

work.” • Private Sector: The DOL and courts have set forth a six-factor test

for the use of unpaid interns by private employers.• Public Sector: FLSA provides that internships may be unpaid for an

individual who performs service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services if:

• the individual in fact receives no compensation or is paid only expenses, reasonable benefits or a nominal fee;

• their services are offered freely and without pressure or coercion; and

• the individual is not otherwise employed by the local government to perform the same type of services.

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Upcoming Changes

US DOL revision of regulations defining the “white-collar” exemptions were due February 2015.

Proposed changes will have to go through notice, comment and consideration before becoming law.

New regulations should significantly increase the number of employees eligible for overtime.

Possible changes could include: An increase in the minimum weekly salary requirement (currently

$23,660; expected to increase to $42,000-$69,000). A re-definition of “primary duty” that requires exempt employees to

perform a minimum percentage of their time on exempt work and/or eliminates the ability of managers to engage in management and non-exempt work concurrently.

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Pro Tip

Question: Must management justify treating exempt employees as non-exempt?

Answer: No. There is a misconception that if an employee meets the criteria for an exemption, they must be treated as exempt. Nothing in the FLSA compels an employer to treat an employee as being exempt from that law’s compensation requirements, despite the fact that there is no question that the employee could satisfy all of an exemption’s prerequisites.

The burden runs the other way: if an employer intends to rely on an exemption, then it must be able to establish that every exemption requirement is met as to each employee being treated as exempt.

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Questions?