The fluctuating rules for the fluctuating workweek

After yesterday’s jaunt through Bikini Bottom, I’m swinging the blogging pendulum back to more academic pursuits. Today’s lesson: the Fair Labor Standards Act’s fluctuating workweek.

Merely paying an employee a salary does not render an employee exempt from the FLSA’s overtime requirements. Indeed. There is a whole class of non-exempt salaried employees. These employees, even though salaried, earn overtime for any hours worked in excess of 40 in a week.

How is that overtime calculated? As an employer, you have two options:

1. Under the standard method, you calculate the employee‘s weekly rate based on the salary divided by the number of hours worked that week, and then pay the employee 1.5 times that rate for all overtime hours. Thus, if a non-exempt employee earns a salary of $1,000 a week, and works 50 hours in a week, the employee would earn an additional $30 per hours worked over 40 ($1000 / 50 = $20 per hour base weekly rate x 1.5 = overtime premium of $30). Thus, in this week, the employee would earn an additional $300 for the 10 hours of overtime, rendering his total pay for that week $1,300, not his customary $1,000 salary. 

2. Under the fluctuating workweek method, you include the base-rate part of the overtime premium in the employee’s weekly salary, and only pay the 0.5 premium kicker as overtime. Using the same example as in number 1 above, the employee would still have an hourly rate of $30, but would only earn an additional $100 for the week, as under this method, $20 of the $30 overtime rate has already been paid as part of the base salary.

As you can see, there is a clear economic advantage to employers using the fluctuating workweek calculation to pay overtime to salaried non-exempt employees. Under the FLSA, however, an employer cannot unilaterally implement the fluctuating workweek calculation. Instead, to pay salaried, non-exempt employees via this advantageous method, you must meet these four elements :

1. the employee’s hours must fluctuate from week to week;

2. the employee must receive a fixed salary that does not vary with the number of hours worked during the week (excluding overtime premiums);

3. the fixed amount must be sufficient to provide compensation every week at a regular rate that is at least equal to the minimum wage; and

4. the employer and employee must share a “clear mutual understanding” that the employer will pay that fixed salary regardless of the number of hours worked.

For a salaried non-exempt employees, the first three elements are usually easy to meet. It’s number four—the clear mutual understanding—that tends to trip up employers. Consider, for example, Black v. SettlePOU, recently decided by the 5th Circuit Court of Appeals. In that case, the court relied both on the company’s employee handbook’s definition of “workweek” as a predefined number of fixed hours, coupled with the company’s refusal to pay any overtime no matter how many hours the plaintiff worked in a week, to conclude that the employer and employee lacked the requisite “clear mutual understanding.” Thus, the court required that the employer to pay back pay for unpaid overtime based on the standard overtime calculation, not the fluctuating workweek calculation.

Employers, there is a clear advantage to paying your salaried non-exempt employees via the fluctuating workweek. You’ll realize a 66 percent savings on your overtime pay. Just make sure you meet the FLSA’s four-pronged test, and, most importantly, that you and your salaried non-exempt employees share a “clear mutual understanding” (best in a written document) that you will pay them a fixed salary no matter the number of hours worked. Otherwise, your efforts to save some dollars in overtime could result in a more costly wage-and-hour lawsuit.

SpongeBob SquarePants, employment law professor

On a cold, snowy night in the suburbs of Cleveland, what is there to do besides snuggle on the couch with your 5-year-old son to watch the world premier of SpongeBob, You’re Fired? That’s exactly what Donovan and I did last night.

Who knew that such high art would provide the inspiration for today’s post?

The story begins with Mr. Krabs firing SpongeBob from his fry-cook job at The Krusty Krab to save a whole five cents by not paying his wage. Minimum wage be damned, SpongeBob offers to work for free to keep his job. Amazingly, the historically cheap Krabs turns him down, telling SpongeBob that he already looked into it, and it’s illegal to let employees work for free.

Bravo to Eugene Krabs for bringing the plight of the unpaid intern to the forefront of pop culture. Unless you meet the very limited test for an unpaid intern, if you have employees, you must pay them. Employees are not allowed to volunteer their time or work for free.

Clothes make the man, and the wage-and-hour lawsuit

Last week the U.S. Supreme Court heard oral argument in its first employment law case of its October 2013 term, Sandifer v. United States Steel Corp., which asks under what circumstances employers are required to treat as compensable the time employees spend putting on and taking off protective clothing.

The heart of the dispute in the definition of “clothes.” Under the Fair Labor Standards Act, the time changing into and out of clothing is not compensable, while time putting on and taking off “protective gear” is.

So, what qualifies as clothing and what qualifies as protective gear?

The employees’ attorney argued to the Court that anything that employees wear for their jobs is “protective gear,” even if it looks like ordinary clothing. Justice Alito, however, was skeptical of that definition:

I don’t know when a human being first got the idea of putting on clothing. Probably the main reason, was for protection. It’s for protection against the cold, it’s for protection against the sun. It’s for protection against thorns. So you want us to hold that items that are worn for purposes of protection are not clothing?

Yet, other Justices expressed equal skepticism over the employer’s argument that anything an employee wears for work is clothes, not protective gear.

• Justice Sotomayor: “Your definition would include somebody spending an hour of putting on a suit of armor if he’s going to be a jouster.”

• Justice Scalia: “The word of the statute is ‘clothes.’ And nobody would consider eyeglasses or a wristwatch or some of this other specialized equipment to be clothes.”

Reading the tea leaves, this is a case that cries out for a compromised result. Neither side seemed to persuade the Court that either polarized position was a reasonable interpretation of the FLSA. Instead, look for the Court to craft a rule that any gear, whether typically worn as clothing or not, is compensable “protective gear” if it’s intended use is for protection for the specific needs of the job in question.

I’ll report back on the Court’s decision when it is published sometime next year.

WIRTW #296 (the “recap” edition)

This week brought us two big stories, each of which I covered, and each of which are big enough to warrant an wrap-up of posts by some of my fellow bloggers.

Senate Clears a Path for Debate on ENDA

• For employers, the practical side of ENDA — from Michigan Employment Law Connection
• Is This The Beginning of ENDA? — from Currents: Hot Topics in Employment Law
• Interviewed on ENDA — from Walter Olson’s Overlawyered
• ENDA Clears Senate Hurdle but House Prospects Look Grim — from Dan Schwartz’s Connecticut Employment Law Blog
• Senate on the brink of approving bill to improve LGBT workplace rights — from Eric Meyer’s The Employer Handbook Blog

Miami Dolphins Suspend Ritchie Incognito for Bullying Teammate

• Can Jonathan Martin Sue the Miami Dolphins for Bullying? — from Businessweek
• To Haze or Not to Haze at Work — from The Tim Sackett Project
• Telling the Victim in a Harassment Case to Just Fight Back or Toughen Up Is Not a Solution — from Dan Schwartz’s Connecticut Employment Law Blog
• The Cost of Workplace Bullying: Legal Risks and Workplace Disruption — from Michigan Employment Law Advisor
• Fired for What!? - Even NFL Locker Rooms Have Limits — from Phil Miles’s Lawffice Space
• A Lesson about Employee Complaints from the Miami Dolphins — from WinWinHR

I’d also be remiss if I did not thank Sue Reisinger, writing at Corporate Counsel, for linking to my post from last week, Yes, it’s legal… (10 more things companies can do without breaking the law).

Here’s the rest of what I read this week: 

Discrimination

• Texas Takes On the EEOC: The Case You’ve Been Waiting For — from employeescreenIQ Blog
• Pretext: the litigation dirty word — from Warren & Associates Blog
• An Indefinite Leave Of Absence May Be A Reasonable Accommodation?! Wait, Just A New York Minute… — from Employment Law Lookout
• “Big Data” Could Create an Big Discrimination Problems — from Texas Employment Law Blog
• Sexual Harassment of Interns is Allowed— from i-Sight Investigation Software Blog
• Employment Law Made Un-Scary: ADEA — from Manpower Employment Blawg

Social Media & Workplace Technology

• Google, The One Stop Shop For All Your Legal Research Needs — from The Sociable Lawyer Blog
• Oops! My Bad! Facebook Firing Based on Mistake — from Molly DiBianca’s Delaware Employment Law Blog
• Facebook Confessions: Will They Hold Up In Court? — from Augmented Legality
• Employer’s social media policy challenged — from Technology for HR
• Generation Y Users Treat BYOD Rules With Contempt — from Ride The Lightning
• How Does Human Resources Use Social Media? — from Unbridled Talent

HR & Employee Relations

• Employees Stealing Your Data - Still an Epidemic — from Ride The Lightning
• Mitigating Your Trade Secret Risk When Hiring an Employee From a Competitor: The Trade Secret Litigator's Five Golden Rules for On-Boarding A New Employee — from Trade Secret Litigator Blog
• When does LinkedIn Activity Violate Non-Solicitation Agreements? — from Trading Secrets
• Trash Your Noncompete Agreement — from HR Examiner with John Sumser
• Guidance on the Use of Biometric Screenings as a Workplace Wellness Tool — from EmployerBrief

Wage & Hour

• Employee or Independent Contractor? How to Tell if Your Workers Are Misclassified — from The Emplawyerologist
• It’s Past Time To Dispel The “Half-Time” Fog — from Wage and Hour Laws Blog
• Wages for Donning Safety Gear Debated at U.S. High Court — from How Appealing
• Hourly Pay for Weekend Work, Identical to Work Performed During Week and Purportedly Paid at “Day Rates,” Rendered So-Called “Hybrid” Day Rates Impermissible — from Overtime Law Blog
• Employers Fear Exemption Audits And Then Some — from Wage & Hour - Development & Highlights

Labor Relations

• SCOTUS to Ask, “What about the Employees?” — from LaborPains.org
• New NLRB GC Begins Building Labor Legal Team — from Corporate Counsel
• Why US non-union employers cannot ignore the National Labor Relations Act — from Employment Intelligence
• Michael Jackson’s “Thriller:” The Pro-Labor Rendition — from Labor Relations Institute

Senate passes ENDA; historic measure likely to die in the House

From CNN.com:

For the first time, the U.S. Senate approved legislation that would protect gay, lesbian and transgender employees from discrimination in the workplace.

The Employment Nondiscrimination Act, or ENDA, passed the Democratic-led chamber on Thursday, 64 to 32.

Unless House Speaker John Boener has a change of heart, however, those (including me) who favor amending Title VII to include protections for sexual orientation and gender identity will have to keep waiting.

The risk companies run when bullying goes incognito

By now, you’ve likely read about Miami Dolphins offensive lineman Richie Incognito and the abusive voicemails and text messages he sent to teammate Jonathan Martin.

Among the voicemails is this gem (per ESPN):

Hey, wassup, you half n----- piece of s---. I saw you on Twitter, you been training 10 weeks. [I want to] s--- in your f---ing mouth. [I’m going to] slap your f---ing mouth. [I’m going to] slap your real mother across the face [laughter]. F--- you, you’re still a rookie. I’ll kill you.

ESPN also report that Incognito did not limit his use of racial epithets to that lone voicemail, and that he also sent Martin a series of texts that included derogatory terms referring to the female anatomy and sexual orientation.

Meanwhile, Fox Sports reports that Dolphins coaches encouraged veterans to toughen up Martin, and knew that some were using hazing as a means to that end.

I’ve never played organized football at any level, and I’m not going to pretend to know of the culture that exists inside its locker rooms. What I do know something about, however, is corporate culture in general. Your company cannot turn a blind eye to hazing and other bullying-related misconduct.

Unless a bully is harassing someone because of a protected class (race, sex, age, disability, religion, national origin…) bullying is probably legal. As the U.S. Supreme Court has famously said, our workplace discrimination laws are not meant to be “a general civility code for the American workplace.” In layman’s terms, our laws allow people to be jerks to each other at work.

Just because it’s legal, however, doesn’t make it right. The question is not whether the law protects the bullied, but instead how you should respond when it happens in your business. If you want to lose well-performing, productive workers, then allow them to be pushed out the door by intolerable co-workers. If you want state legislatures to pass workplace bullying legislation, then ignore the issue in your business. If you want to be sued by every employee who is looked at funny or at whose direction a harsh word is uttered, then continue to tolerate abusive employees.

The reality is that if companies do not take this issue seriously, state legislators will. The high-profile case of Jonathan Martin will only help the cause of those who believe we need workplace anti-bullying laws.

What can you do now to protect your employees?

1. Review current policies. Most handbooks already have policies and procedures in place that deal with workplace bullying. Do you have an open-door policy? A complaint policy? A standards-of-conduct policy? If so, your employees already know that they can go to management with any concerns—bullying included—and seek intervention.

2. Take complaints seriously. These policies are only as good as their enforcement. Whether or not illegal, reports of bullying should be treated like any other harassment complaint. You should promptly conduct an investigation and implement appropriate corrective action to remedy the bullying.

NLRB ALJ upholds workplace ban on recording devices

Two months ago I wrote the following, concerning whether employers should be thinking about implementing bans on employees using recording devices in the workplace:

If you do not have a policy against employees recording conversations in the workplace, you might want to consider drafting one. You never know when an employee is going to try to smuggle a recording device into a termination or other meeting. The proliferation of smart phones has only made it easier for employees to make recordings, both audio and video. Why not address this issue head-on with a policy? Unless, of course, the NLRB gets its way and renders these policies per se illegal.

At least as to the last point (the legality of such bans under the National Labor Relations Act), we now have the beginnings of an answer, via the decision of an NLRB Administrative Law Judge (the finality of which depends on whether the union appeals the decision to the full Board in Washington D.C.).

In Whole Foods Market, Inc. (NLRB Case No. 01-CA-096965 10/30/13) [pdf], the union challenged the following no-recording policy:

It is a violation of Whole Foods Market policy to record conversations with a tape recorder or other recording device (including a cell phone or any electronic device) unless prior approval is received from your store or facility leadership. The purpose of this policy is to eliminate a chilling effect to the expression of views that may exist when one person is concerned that his or her conversation with another is being secretly recorded. This concern can inhibit spontaneous and honest dialogue especially when sensitive or confidential matters are being discussed.

Violation of this policy will result in corrective action up to and including discharge.

The ALJ concluded that this policy did not violate the rights of the employees of Whole Foods to engage in protected concerted activity under the National Labor Relations Act:

I have found no cases, and none have been cited, in which the Board has found that making recordings of conversations in the workplace is a protected right…. Even if recording a conversation is a protected right, the Respondent is entitled to make a valid rule, such as the one in question here, to regulate its workplace, and in doing so, prohibit such activity….

The rule does not prohibit employees from engaging in protected, concerted activities, or speaking about them. It does not expressly mention any Section 7 activity. The only activity the rule forbids is recording conversations or activities with a recording device. Thus, an employee is free to speak to other employees and engage in protected, concerted activities in those conversations….

There is no basis for a finding that a reasonable employee would interpret this rule as prohibiting Section 7 activity.

In light of this decision, what is an employer to do?

1. Review any existing workplace recording policies to ensure that the stated reasons for the policy is clear. For example, in Whole Foods, the company relied on the protection of “candor and forthrightness in employee opinions.”

2. Do not institute a new recording ban, or amend an existing policy, in response to union activity.

3. Do not apply a recording ban to limit or prohibit the recording of protected Section 7 activity (wages, benefits, terms and conditions of employment, union issues, etc.).

4. Limit the prohibition to working time and work spaces.

This case offers hope to employers that there exists a more reasonable analysis of the application of Section 7 rights to workplace policies other than suggested by the Board’s recent actions.