When dealing with the FLSA, “administrative” may not mean what you think it means

It's really unfortunate that when Congress, in 1938, enacted the Fair Labor Standards Act it chose the label "administrative" for the law's broadest white-collar overtime exemption. That one word has caused more misunderstanding, confusion, litigation, and legal fees than any other word in the FLSA.

"Administrative" does not mean any employee who performs office or other non-manual work. Instead, it means any employee who earns a minimum salary of $684 per week AND who performs office or other non-manual work for which the employee's primary duty: (i) is directly related to the management or general business operations of the employer or the employer's customers; and (ii) includes the exercise of discretion and independent judgment with respect to matters of significance.

These issues were just front and center in Blackstone v. Dearborn Life Ins. Co.

Baning salary discussion bans

🛑 Employers, for the love of all that is holy, STOP BANNING EMPLOYEES FROM DISCUSSING THEIR WAGES!!! 🛑

A supervisor of subsidiary of Duke University is accused of doing just that, and now the employer is in hot water with the National Labor Relations Board.

According to the just-filed NLRB complaint, the supervisor allegedly instructed workers during a meeting "not to discuss their salaries." When one of those employees later raised "concerns about employees' salaries and equity in pay," they were fired.

Hiring undocumented workers

"Illegal immigrant co-worker got fired for asking about her check." 

That's the headline on Reddit.

Here's the rest of the post: 

"I have a co-worker who doesn't speak English at all so I've always communicated with her through google translate. A week ago, she asked me if I had gotten paid yet and told me that she hasn't seen a penny of her check despite working 50 hours a week since late November. I talked to my manager about it and my manager told me that she would send the check to her later. My co-worker texted me a few days ago and told me that she was fired for being an illegal immigrant and that she won't be paid because of it."

Discussing a couple of pay deductions for service-industry employees

Consider the following two policies, which restaurants and bars have implemented to save a few nickels against their tight margins:  

“Effective Jan. 1, we will begin implementing a tip refund for credit card processing fees for all gratuities left on a customer’s credit card; 2.5% will be deducted from your final check-out for each such gratuity paid.” 

 -and- 

“The full value of the check from which a patron flees the facility (‘dines and dashes’) will be deducted from the server’s paycheck.”  

Each of these policies is 100% legal under federal wage and hour laws. (Check your state laws, however, which may differ.) 

This is what it looks like to kick a business while it’s down

Last week, Corky & Lenny's, a deli that has been a local institution for the past 67 years, closed its doors. The owners cited staffing shortages and burnout as the primary causes.

Just three days later, one of its former employees filed a collective action lawsuit under the Fair Labor Standards Act for unpaid wages against the business and its owners. The named plaintiff, who worked as a server at the restaurant, claims that the business automatically deducted 30 minutes per shift for lunch for all non-exempt employees regardless of whether they took their lunch breaks or worked through them. She further claims that the business no longer had any method for employees to report days on which they did not take a lunch break, and otherwise ignored complaints of unpaid wages.

Do you understand the rules for paying employees for commuting time?

A technician claims her employer owes her pay for time spent traveling to the office to pick up materials on the way to the airport for a flight to visit a customer. According to the employee, the employer only begins paying at the departure time of the scheduled flight.

Is this employee correct? Must an employer pay for that travel time? Is she owed wages for time spent commuting to the airport (including the time spent traveling to the office to pick up the samples)? Or does the law permit the employer to start the pay clock when she boards the flight?

If you’re going to change an employee’s time sheet, make sure it’s an accurate change

🟩 LEGAL: Disciplining or firing a non-exempt employee who works unauthorized overtime.

🟥 ILLEGAL: Failing to pay a non-exempt employee for all hours worked, whether authorized or unauthorized.

🟩 LEGAL: Altering a non-exempt employee's time sheet so that it accurately reflects the actual number of hours worked.

🟥 ILLEGAL: Altering a non-exempt employee's time sheet to reflect a flat 40 hours per work week, no matter how many hours the employee actually worked.

A lawsuit recently filed against Liberty University will test each of these legal principles.

Kickbacks are bad

It's one thing to settle an unpaid overtime claim; it's another entirely to shake down your employees to repay the settlement funds to you.

That's exactly what the Department of Labor claimed Sparklean Laundry and Piper did.

Following a DOL investigation, Sparklean agreed to pay unpaid overtime back wages to its employees. Shortly thereafter, it began demanding kickbacks from its employees to compensate for the overtime settlement, submitted false receipts to showing that it paid the recovered wages, and threatened workers for exercising their rights under the Fair Labor Standards Act.

As a result, the DOL went to court and obtained a $281,870 judgment, which included $87,735 in back wages, $94,135 in liquidated damages, and an additional $100,000 in punitive damages.

Join me tomorrow: Tips on Tips webinar (free)

I spent my Saturday night at 8th Day Brewing Company watching my 17-year-old daughter, Norah, play a killer 3-hour set of music. When we sat down at our table, I was giddy to find the latest issue of The New Brewer, the bi-monthly trade magazine of the Brewers Assocation. That issue features my article on how to legally pay tipped employees.

Since access to the magazine and my article are for BA members only, you won't be able to read it if you're not a BA member (unless you happen to wander into a brewery that has it on display).

I can, however, offer you a great alternative. Tomorrow at 4 pm ET, I'm presenting Tips on Tips: How to Legally Pay Your Tipped Workers, a free webinar for the Craft Beer Professionals Fall Virtual Conference. You can watch live on the Craft Beer Professionals Facebook page or on its YouTube channel. 

The one thing your business can do right now to cut your potential FLSA liability in half

Q: What is the one thing that your business can do RIGHT NOW to cut your potential FLSA liability in half?

A: Hire an employment lawyer to conduct a wage and hour audit.

Case in point: Hendricks v. Total Quality Logistics.

After 13(!) years of litigation, a federal judge recently ruled that TQL violated the Fair Labor Standards Act and must pay unpaid overtime to thousands of misclassified employees.

The judge also ruled that TQL must pay statutory liquidated damages under the FLSA in an amount to the unpaid overtime because TQL did not establish that it acted in good faith in (mis)classifying its employees.

How bad do wage and violations have to be for a federal judge to order you to sell your business? This bad.

A federal district court judge has ordered the owners and operators of 14 Subway restaurants to pay employees nearly $1 million in back wages and damages and further ordered them to sell or shut down their businesses within 60 days.

The wage and hour violations included:

Let’s play FLSA error-spotting

Empire Diner pays its servers a tipped minimum wage of $2.83, the permissible tipped minimum wage in the state in which it's located, Pennsylvania. According to the company's payroll records, each employee earns more than the statutory minimum wage, $7.25 per hour.

So far, so good under the Fair Labor Standards Act. So where did Empire Diner make its FLSA mistakes, according to the 3rd Circuit?

If you bet on which of your employees will get Covid, you probably shouldn’t qualify for a bonus

In late 2020, Tyson Foods fired seven of its pork processing plant managers after they were caught betting on which of their employees would next get sick with Covid. At that time, more than 1,000 Tyson employees had fallen ill, and six had died. In announcing the firings, the company's President and CEO said, "The behaviors exhibited by these individuals do not represent the Tyson core values, which is why we took immediate and appropriate action to get to the truth. Now that the investigation has concluded, we are taking action based on the findings."

Not content with leaving well enough alone, five of the seven fired managers sued Tyson Foods claiming that the company owed them a bonus payment pursuant to the company's Annual Incentive Plan. 

DOL announced proposed rule to increase salary threshold for white-collar exempt employees

$1,059 per week. If the Department of Labor gets its wish, that amount will become the new salary threshold for its various white-collar overtime exemptions. Yesterday, the DOL published a notice of proposed rulemaking seeking to increase the FLSA's salary test from the current threshold of $684 per week ($35,568 annually) to $1,059 per week ($55,068 annually).

You will read a lot over the next couple of months that the DOL increasing its white-collar salary threshold by nearly 55% is a huge deal. I'm here to tell you that it really isn't.

Determining the exempt status of a dual-purpose employee

Tony works at a local brewery as its assistant general manager. In that capacity, he interviews, hires, trains, coaches, disciplines, and fires lower-level employees; recommends employees for promotions; meets with lower-level managers to ensure they are meeting expectations; and reviews sales, hours, labor, and overtime reports. To meet the operational needs, however, Tony also picks up regular shifts in the taproom performing hourly, nonexempt work such as waiting tables and bartending. Despite his $75,000 annual salary, Tony estimates that he only spends approximately 20% of his working time performing his managerial duties, while he spends the balance of his time on non-exempt tasks.

Is Tony FLSA exempt or FLSA non-exempt?

This is why I hate timeclock rounding policies

The rounding of an employee's clock-ins and clock-out to the nearest of a specific increment of time is perfectly legal. It's also a perfectly terrible idea.

Let me explain.

Pro tip: don’t monkey with an employee’s “regular” hourly rate to avoid overtime obligations

Let's say you have an employee who works 40 hours per week at the rate of $13.00 per hour. Now let's say that same employee needs to start working 20 hours of overtime per week to meet your needs. You still, however, want that employee to earn to same effective rate of $13.00 per week, so you reduce the employee's straight-time hourly rate of $11.15. When the need to work overtime ends, you then return the employee to the original $13.00 rate. Is the reduction of the employee's base hourly rate legal under the Fair Labor Standards Act? 

According to the 11th Circuit in Thompson v. Regions Security Services, the answer is "not unless you want a jury to decide the legality of your pay practices under the FLSA."

6th Circuit adopts one-step verification for FLSA collective actions

We hold that, for a district court to facilitate notice of an FLSA suit to other employees, the plaintiffs must show a "strong likelihood" that those employees are similarly situated to the plaintiffs themselves. That standard requires a showing greater than the one necessary to create a genuine issue of fact, but less than the one necessary to show a preponderance. The strong-likelihood standard is familiar to the district courts; it would confine the issuance of court-approved notice, to the extent practicable, to employees who are in fact similarly situated; and it would strike the same balance that courts have long struck in analogous circumstances.

With those words, the 6th Circuit ended decades of uncertainty in Fair Labor Standards Act wage and hour collective action lawsuits in my Circuit on the issue of when in such a lawsuit a district court should determine which employees properly belong in the the class. 

A few wage and hour thoughts for beer festival season

As the weather warms up around the country and spring quickly transitions to summer, festival season will begin … including my personal favorite, the beer festival.

Beer festivals, however, raise a few specific wage and hour traps for participating breweries. Here's the 411.

Tip credits, tip pools, and slutty vegans

Bar Vegan in an affiliate of Slutty Vegan, a plant-based restaurant chain that finds itself in the crosshairs of a wage-and-hour collective action lawsuit challenging how it pays its tipped employees. The issue focuses on the bar claiming a tip credit and paying its tipped bartenders less than the statutory minimum wage. That practice, in and of itself, is legal. What makes it allegedly illegal in this case, however, is how Bar Vegan distributes tips among its staff, and more specifically that it permits non-tipped employees to participate in a tip pool with its tipped bartenders.

That's an FLSA no-no.