In Opinion Letter FLSA2021-7, the second of four opinion letters released today, the U.S. Department of Labor clarified that journalists – no matter whether they work for a major newspaper or small-town community paper – may qualify for the creative professional exemption. In order to qualify, journalists must have a primary duty that requires, “invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.” 29 C.F.R. 541.300(a)(2)(ii). Referencing Encino Motocars, LLC v. Navarro, 138 S. Ct. 1134 (2018), the DOL noted that it no longer reads the FLSA’s exemption strictly, as the Supreme Court has made it clear that is an incorrect reading. In short, while the opinion letter goes through the history of this exemption for journalists (including the DOL’s historical view that the majority of journalists were non-exempt), the takeaway is that, the DOL has confirmed that any journalist may qualify, no matter the circulation, so long as they meet the salary level, primary duties test, and whose work product is not subject to the employer’s substantial control.
Here’s one I didn’t see coming – the U.S. Department of Labor (DOL) issued Opinion Letter FLSA2021-6 today, along with three others (see my other blog posts), which concluded that staffing firms that recruit, hire, and place employees on temporary assignments with clients may qualify as a “retail or service establishment” for purposes of an overtime exemption under 29 U.S.C. 7(i) – commonly referred to as the “retail sales exemption”. What makes this opinion so notable is that prior to May 2020, the DOL actually had “employment agencies” on its list of examples of establishments that categorically could not qualify for the retail sales exemption (the DOL withdrew the list as it was called a “mindless catalog” and incohesive buy several courts).
Citing Encino Motorcars, LLC v Navarro, 138 S.Ct. 1134 (2018), the DOL reiterated that the U.S. Supreme Court’s holding now requires the FLSA be given a “fair”, rather than “narrow”, interpretation. In order to determine whether a staffing firm is a “retail or service establishment” three factors must be met: (1) it must engage in sales of goods and services; (2) 75% must be retail (as recognized in its industry); and (3) not more than 25% of such sales may be for resale. Thus, under a “fair” reading of 7(i), the DOL noted that staffing firms may qualify as a “retail or service establishment when the three factors are met:
- A staffing agency provides temporary staffing and permanent recruitment services – this qualifies as “sales of goods or services”.
- While not opining as to whether the staffing industry recognizes such services as “retail”, that is not (by itself) controlling, and that “WHD sees no reason why staffing firms cannot also qualify” as having a retail concept – meeting the second factor. The DOL noted that the “sales of recruitment and staffing services may be properly recognized as retail by the staffing agency.”
- The third factor will be met unless the particular staffing company refers a worker (for a fee) to a second staffing company (that ultimately assigns the individual worker to a business).
Finally, as exciting as this may be, keep in mind that even if the employer (temporary staffing agency) meets the exemption requirements, the employee must also meet three factors to be exempt from overtime under the 7(i) exemption: (1) work at a retail or sales establishment (see above analysis); (2) their regular rate must be at least 1.5x minimum wage; and (3) more than 50% of their earnings must be commissions based. Thus, the only individuals this would practically apply to are likely temporary salespersons who make at least 1.5 times minimum wage, but obtain most of their compensation based on commissions.
On January 8, 2021, the U.S. Department of Labor (DOL) issued opinion letter FLSA2021-1. Spoiler alert – the DOL determined that account managers at a life science products manufacturer were properly classified as exempt from overtime based on the administrative exemption. These employees have at least a bachelor’s degree in a life science (or a bachelor’s and 5 years experience in life sciences). They consult with scientists, learn what they need, research what company products would meet those needs, and communicate how the products could fit the scientist’s needs. They are not closely supervised, have autonomy, are not required to follow laid out script or sales processes and must independently develop account plans and strategies and decide how to respond to potential customers. They assist the customer in developing scientific protocols for using the equipment and ensuring reproducible results. Seems pretty straight forward to me, so nothing new and earth-shattering in this opinion letter if you are not a life science business. Notably, however, I did find it interesting that the DOL did not address the professional exemption. Perhaps that is what this particular employer was hung up on. In any event, the administrative exemption test was met.
The EEOC announced today that it will start collecting 2019 and 2020 EEO-1 Component 1 Data (employment data categorized by race/ethnicity, gender and job category) for private employers beginning in April 2021. Note, this still does not include the controversial Component 2 Data (compensation data). While 2019’s data would have normally been due last year, it was delayed due to COVID-19. Specific collection opening dates will be announced on the EEOC’s website, as well as on the new dedicated website for the agency’s EEO data collections at https://EEOCdata.org. As in previous years, a notification letter will (should) be sent to eligible filers. If you have questions on what an EEO-1 report is or if your business needs to complete one, you can check out other posts on this blog.
As I blogged about a few months ago, on September 22, 2020, the U.S. Department of Labor (DOL) announced a proposed rule simplifying the test to determine whether a worker is considered an “employee” under the Fair Labor Standards Act (FLSA) or an “independent contractor”. On January 6, 2021, the DOL announced the final rule, effective March 8, 2021.
The new rule clarifies that the DOL will use the “economic reality” test as the basis for whether a worker is an employee or independent contractor. The “economic reality” test considers whether a worker is: 1) in business for him/herself (thus, an independent contractor); or 2) economically dependent on an employer for work (thus, an employee). The DOL identifies two “core factors” in the analysis: 1) the nature and degree of the worker’s control over the work; and 2) the worker’s opportunity for profit or loss based on initiative and/or investment. These core factors hold the greatest weight in this determination. However, three lower impact factors to consider include: 1) the amount of skill required for the work; 2) the degree of permanence of the working relationship between the worker and the potential employer; and 3) whether the work is part of an integrated unit of production. Nonetheless, the DOL notes that treatment of the worker is more relevant than what is included in the worker’s contract (where applicable).
In addition, the DOL clarified in the summary (but not the actual rule) that the offering of certain benefits is not determinative by itself of a certain classification. For example, just because a worker is offered health and retirement benefits does not necessary mean the individual is an “employee” – so long as the offering is not the same as employees (i.e. the contribution should not be the same for employees and independent contractors). However, PTO, vacation and sick time benefits are indicative of an employer-employee relationship (as there is control over the work schedule). Additionally, whether a bonus is indicative of an employment relationship depends on the terms of the bonus – for example, a bonus or profit sharing plan based on performance over a period of time suggests economic dependence, but a contractual fixed bonus for completing a job by a deadline or a certain number of taxes over a fixed period is not more of a business relationship.
Again, employers should keep in mind that the IRS has its own test regarding whether a worker is an independent contractor or employee. Thus, employers should not only analyze the position based on the DOL test but the IRS test as well.
Effective today, December 11, 2020, the State of Minnesota will start processing and allowing unemployment compensation applications from high school students. While state law has not allowed high school students unemployment compensation since 1998, the Minnesota Court of Appeals recently held that they are eligible for Pandemic Unemployment Assistance (PUA). This is federal monies as opposed to state, thus, the exception to the rule. More information is available here. PUA is set to expire December 26, 2020 (as of now). Accordingly, employers (especially those that rely heavily on high school students such as fast food chains), may see a quick spike in such unemployment compensation awards; keep in mind that PUA is the monies that is not ultimately charged back to the employer, however.
On November 30, 2020, the U.S. Department of Labor (DOL) issued Opinion Letter FLSA2020-17, concerning how to calculate the regular rate of an employee paid on a piece-rate basis. In this situation, the employees are warehouse unloaders, and are paid based on the number and types of trucks they unload. Some of them have waiting time during their shift, and these hours are tracked as “hours worked” for minimum wage/overtime purposes. However, they are not paid a separate hourly rate for this waiting time. The question is whether those hours count towards “hours worked” for determining overtime.
The law has long been clear that the “regular rate” is a mathematical formula of dividing total hours worked by the total compensation received. 29 U.S.C. 207(e). Further, 29 C.F.R. 117.318(a) requires that nonproductive working hours be paid for and counted towards hours worked. However, the DOL notes that 29 CFR 117.318(c) clarifies that, when no hourly rate is paid at all (as with a piece-rate) and the employer and employee have a “clear and mutual understanding” that the pay received is for all hours (worked or not productive), the regular rate is determined by dividing all piece-rate earnings by the total hours worked in a workweek (both productive and nonproductive). Because more hours are counted towards “hours worked”, the regular rate (and thus, overtime rate) will be less.
Thus, the DOL concluded that the regular rate for the employees paid a piece rate is properly calculated by adding all piece-rate earnings plus any non-excludable supplemental pay, and dividing that by the total number of hours worked in the workweek, both productive and waiting time (since there was never an understanding that they would be paid for waiting time). 29 C.F.R. 778.111(a). I know this is still muddy, and the DOL notes that several courts disagree with how to interpret the law, but at least employers now know where the DOL stands with respect to enforcement actions of the same.
Happy New Year (almost)! Minnesota employers should be reminded that, effective January 1, 2021, minimum wage rates increase to $10.08 per hour for large employers and $8.21 for small employers (as well as a 90-day training wage for those under 20 and youth wage for those under 18).
Also – don’t forget to update your minimum wage rate poster that must be displayed in your workplace for employees to view. You can download here in various languages (along with other state-required posters).
Further, recall that Minnesota does not allow a tip credit (i.e. it does not matter if an employee receives tips, you must still pay the minimum wage). Since Minnesota’s minimum wage is greater than federal minimum wage, the state minimum wage applies.
On November 3, 2020, the U.S. Department of Labor’s (DOL) Wage and Hour Division issued opinion letter FLSA2020-16, regarding the compensability of travel time for non-exempt (hourly) foreman and laborers. These are issue that frequently arise with construction employers, so it is nice the DOL has finally provided some additional guidance. Especially where, as the DOL finally acknowledged, the employee benefits from the arrangement.
This opinion letter considers three commute scenarios. The first is local job sites close to, or within the same city as employer’s principal place of business, wherein the foreman hops in a company vehicle at the principal place of business and drives to the job site and laborers either ride with the foreman or drive directly to the job site. The second is remote job sites, which the DOL describes as a job site between 1½ to 4 hours away from the business. Here, the employer pays for hotel accommodations and a per-diem meal stipend, foreman receive and return a company vehicle at the beginning and end of the job, and laborers drive their own vehicles to and from the remote job site (or ride with foreman). The third scenario is the same as the second, except that the laborers decide to drive home instead of staying at a hotel.
In these scenarios, the DOL opined that the foremen’s travel time between the employer’s principal place of business and job sites is compensable, while their travel time to and from home and the employer’s place of business is not. The DOL’s opinion turns on the fact that the foremen are required to report to the central location as they need the company truck (which the inquiring company required to be secured at its place of business) to transport tools and materials around the job site—an integral part of the job. This is not earth-shattering, and is the scenario that is most easiest to identify and answer.
Regarding laborer’s time in these scenarios, their time is not compensable under the first scenario as this travel constitutes normal commuting between work and home. In the second, it is compensable regardless of whether they drive or are passengers and the travel time cuts across their normal work hours. Passenger travel time is generally not compensable outside of the employee’s normal working hours, unless it was during normal working hours on a day the employee normally has off. In the third scenario, laborers would not be compensated for anything beyond the first and last drive to the remote job site as it is deemed time at their personal disposal. These examples (detailed in the opinion) do help ferret out common situations otherwise somewhat murky.
On November 3, 2020, the U.S. Department of Labor’s (DOL) Wage and Hour Division issued opinion letter FLSA2020-15 regarding compensation under the Fair Labor Standards Act (FLSA) for time employees spend attending voluntary training programs such as outside, ongoing continuing education classes (CEUs). The employer at issue is a non-profit hospice care provider with clinical staff such as nurses, social workers, health aids and providers, all of whom have ongoing continuing education requirements for their profession’s licensing. However, the employer does not require certain classes be attended; attendance is always voluntary. Yet, if an employee wants to maintain his/her license, they need to keep up on their CEUs. The employer provides each employee funds to use for CEUs, though they do not need to use the CEU Funds.
The DOL explains that there are 4 factors to consider whether training programs and other similar activities count as working time. It is not “work time” if:
- Attendance is outside of the employee’s regular working hours;
- Attendance is voluntary;
- The course, lecture, or meeting is not directly related to the employee’s job; and
- The employee does not perform any productive work during such attendance.
There are two exceptions where training may not count as work time even though it directly relates to the employee’s job: (1) an employer established program that corresponds to independent programs; and (2) where an employee attends an independent school, college, or trade school after hours on their own initiative. The DOL then addresses six detailed hypothetical situations to further clarify the above, largely related to on-demand viewing of webinars. If you find yourself analyzing the compensability of online training, you may find some further guidance there.