The BIG risk of misclassifying employees as independent contractors

A national auto parts distributor has reached a settlement with the Department of Labor to pay a total of $5.6 million in back pay and liquidated damages (plus interest) to 1,398 drivers misclassified as independent contractors. The payments to the individual drivers are as low as $40 and as high as more than $120,000.

Settlement highlights wage and hour risks of remote work

The City of Cleveland has agreed to pay $50,000 to settle the wage and hour claim of a City Hall employee who claimed that she wasn't paid overtime while working from home during the Covid-19 pandemic.

Eve Bonvissuto, an assistant administrator in the city's public safety department's medical unit, had claimed $68,709 in overtime pay. She alleged that the city had misclassified her as exempt, and that city had no timecard or time-tracking system in place at the time for remote workers.

Avoiding liability missteps with year-end bonuses

As employers plan for year-end bonus payments to employees, you need to learn the difference between nondiscretionary bonuses, discretionary bonuses, and special occasion bonuses (such as holiday or other gifts). Otherwise, you risk finding a Department of Labor lump of coal in your wage and hour stocking.

What's the difference between these three types of bonus payments?

What should you do when the DOL shows up at your door?

"I'm an investigator with the Wage and Hour Division of the Department of Labor. I'm here to conduct an investigation into how your pay your employees." He then shows you his badge, and asks to see the following:

Records showing the business's annual dollar volume of transactions in in interstate commerce to establish that the DOL has jurisdiction; and

Payroll and time records for the past three years. 

With that, you're off the races in a DOL wage and hour investigation. The investigator will seek to determine if you've properly classified your employees as exempt or non-exempt, and if you've met your minimum wage and overtime obligations.

What do you do now? 

Pay attention to the industries the Department of Labor is targeting

Take a look at the following headlines, each taken from a Department of Labor news release from just the past month.

• US Department of Labor obtains court judgment ordering Pennsylvania restaurant, owner to pay 68 employees $193K in back wages, damages
• US Department of Labor finds overtime, tip violations; recovers $80K in back wages for 52 workers at 5 Carolina restaurants
• Dollars to doughnuts: Krispy Kreme to pay more than $1.1M to 516 workers after US Department of Labor finds systemic overtime violations

Must an employer pay employees for time spent waiting for computers to boot up?

It's a tale as old as time … or at least as old as employees have been working on computers. You start your work day by turning on your computer, and you wait. Wait for the computer to boot up so that you can then start actually working. That process (which repeats at the end of the work day when you shut the computer down) can take 30 seconds or it can take a few minutes or longer, depending on the age and speed of the machine, the operating system it runs, and the number of apps that need to load during the process. 

Here's the question — Is the time an employee spends waiting for their work computer to boot up compensable working time for which an employer must pay?

According to Cadena v. Connexx LLC (which the 9th Circuit just decided), the answer is an unequivocal yes.

Biden’s Department of Labor proposes significant new independent contractor regulations

Who qualifies as an independent contractor? If the Biden administration's new proposed regulations take effect as drafted, the answer to that question will change significantly. 

Under the proposed new rules, the DOL will use a multi-factor "economic realities test" that considers and balances the following non-exclusive list of six factors to determine whether the worker is truly in business for themselves, or is an employee working for someone else.

Dispelling six common wage and hour misconceptions

19 hours in a workday without overtime pay. That's how one Amazon delivery driver described his experience working for online conglomerate.

To be clear, while it might make for an awful work environment to work a 19-hour shift, there is nothing in the federal wage and hour laws that require overtime pay for a 19-hour workday. 

Overtime under the federal Fair Labor Standards Act is based on hours in a work week, not a workday. (Please check your state laws, employers in Alaska, California, Colorada, and Nevada, as your overtime obligations might be tied to hours in a workday, not work week.) The FLSA only requires time and a half of one's regular rate of pay is required for any hours in excess of 40 in a week. 

While it's easy to imagine 19-hour days quickly adding up to a number over 40 hours in a week, 19 hours in one workday, in and of itself, does not qualify one to overtime pay under the FLSA. 

Employers, repeat after me: “Tips belong to employees, not employers.”

$1,351,253.34. That's the amount a federal judge has ordered the Empire Diner, its owner, Ihsan Gunaydin, and its manager Engin Gunaydin to pay a group of 107 servers and kitchen workers based on an illegal tip scheme.

What rendered the restaurant's tip scheme illegal? It required servers to turn over 10 to 15 percent of their total tips received on any given shift to pay the bussers' wages. That's a clear violation of the Fair Labor Standards Act.

Lyfting independent contractor status

If I asked you to identify Lyft's business, how would you answer? 

"They're a transportation company," you'd say. There's no other correct answer … unless you ask Lyft. 

Lyft will tell you that it's a tech company, not a provider of transportation.

The wage and hour implications of employee electronic surveillance

Every now and again I come across a story that make me question how any in-house counsel blessed a workplace policy or practice.

The following story, taken from yesterday's episode of The Daily on the rise of workplace surveillance, is one of those stories.

Carol works as a Vice President for a bank. Like many white-collar employees these days, she's working remotely from her home. Pretty early on in her employment, she begins to notice that her paychecks are light. Then she figures out why.

Every 10 minutes at random points the company took a screenshot of her computer monitor and a photo of her face. The company was using that information to pay Carol (and every other worker) only for the minutes when they appeared be active according to the photos. If, for example, the photo happened to capture Carol during a moment of inactivity (for example, a 30-second interval when she went to get a cup of coffee), it would dock her for the entire 10-minute span. As you can imagine, the digital tracking actually missed a lot of Carol's work, including any work she did offline. She's working, but the company thinks she's not working, and it's going to dock for that any perceived increments of inactivity. 

There are two HUGE Fair Labor Standards Act red flags here.

Unlike ordering at Chick-Fil-A, legal compliance isn’t chosen from a menu.

"We are looking for volunteers for our new Drive Thru Express!🚘 Earn 5 free entrees per shift (1 hr) worked. Message us for details"

Anyone see anything wrong with this (since deleted) post? I sure do, as does my friend Suzanne Lucas (aka the Evil HR Lady), who correctly points out: "You cannot do this. Even if you want to declare yourself the Lord's chicken, you are still a for-profit business, and for-profit businesses cannot have volunteers. Not ever. Paying in sandwiches does not count."

To put in more succinctly, In a for-profit business, volunteer labor is illegal. Hard stop. 

Let’s play spot the issue

Let's see if you can spot the employment law issue from this story, which I've borrowed from our local police blotter.

On April 26, the owner of a bar came to the police station regarding an ex-employee who stole his daughter's AirPods.

The stealing incident, which took place in February, led the owner to track the pods to a house that just so happened to be the home of the ex-employee's sister.

That's when the owner told the employee he was withholding his last check to cover the cost of the AirPods.

The man needed a police report to document the incident and provide the state justification of docking the ex-employee $250 from his last paycheck.

What do you think? 

Restaurant learns the hard way what an illegal tip pool looks like

Hard Eight BBQ says it misunderstood its obligations under the Fair Labor Standards Act by paying managers a share of tips earned by servers across the restaurant's five locations. As a result, following a Department of Labor investigation it reached a settlement with its managers totaling $867,572. 

Matt Perry, COO of Hard Eight BBQ, told 5 NBCDFW that "managers were part of the tip pool at their five restaurants because they do the same jobs as other hourly employees on any given shift and that because of that they felt like managers should also receive a small portion of the tip share."

Ohio enacts sweeping changes to state wage and hour laws

Beginning July 6, 2022, Ohio employers have a new set of rules under which to pay their employees. 

SB 47 revamps Ohio's wage and hour statute to correct some major differences that have historically existed between it and the federal Fair Labor Standards Act.

Don’t confuse “tips” and “service charges” for hospitality employees

How often have you looked at you bill at a restaurant and have seen an added service fee? Do you think to yourself, "No need to tip; it's already been added to the bill." 

Think again, at least according to the 11th Circuit in Compere v. Nurset Miami, LLC, which held that restaurant service charges are not considered tips under the Fair Labor Standards Act.

I’m going to say this loudly for the people in the back: IT’S ILLEGAL FOR EMPLOYEES TO WORK FOR FREE

I woke up Saturday morning to a tweet asking me for my take on this job posting.

I'm going to say this one time, really loudly, for the people in the back.

FREE WORK IS ILLEGAL

(in almost all cases)

Local bag company learns an expensive lesson on wage and hour compliance

A federal judge has ordered American Made Bags to pay $189,756 to a group of 48 employees, half as unpaid wages and half as liquidated damages.

The allegations that came to light in two separate Department of Labor investigations that date back to 2014 include the misclassification of employees as independent contractors, the payment of the employees' regular rate instead of the statutorily required time and half rate for overtime hours, and the failure to keep records of amounts paid to employees. 

The wage and hour risks of rounding

"Iraene" asks the following question on the Antiwork subreddit.

I was told to round down or round up my time. So if I start work at 7:55 I need to put 8. If I work 37 minutes, I should round down to 30, instead of 45 because this is a common business practice. Is this normal? I have entered exact times on the card and into ADP so idk why it's a problem now.

While this practice as explained appears to be legal, it doesn't necessarily mean it's a good idea for the employer, at least according to this employment lawyer. 

Let me explain.

Tip credits and tip pools — the tip of the FLSA iceberg

No employment law is more misunderstood and misapplied by employers than the Fair Labor Standards Act, our federal wage and hour law. There are more than 8,000 federal FLSA lawsuits filed per year, with nearly one-quarter filed against employers in the accommodation and food service industry … including craft breweries. 

These employers get themselves in legal trouble because of the special manner in which service industry employees are compensated. If you employ workers who customarily and regularly receive more than $30 a month in tips (and every craft brewery does), there are two key FLSA phrases you must understand to avoid FLSA landmines — tip credit and tip pool.