As 2018 comes to a close, it is a great time for employers to address lingering issues that have been on the back burner and start “fresh” in the new year. A new year is a great time to roll out changes for both administration purposes and for employees; new year, new policies. Here are some items you may want to consider auditing internally and bringing up to current if need be for a January 1, 2019 revision date:

  • Wage disparities (male/female/minority)
  • Job classification (exempt, non-exempt, independent contractor)
  • Job descriptions (should reflect what the employee actually does – jobs morph over time)
  • Incentive compensation / bonus plans (the far majority I review need significant modification as they are written by sales folks and not HR/legal and thus leave out at-will language, deductions, prepayments, “earned” versus “accrued” and payout terms with absences, discipline, termination, etc.)
  • Minimum wage increases (State, Minneapolis, St. Paul)
  • Safe and Sick Leave Act ordinances (Minneapolis, St. Paul, Duluth)
  • Changing paid time off methods / calculations (from up front to accrual, etc. – and in compliance with any applicable ordinance)
  • Overtime (calculated weekly, all hours paid, no flex time between workweeks) – also, the new federal overtime rule is expected to be published in March 2019 – stay tuned on that (I would only be guessing as to how the DOL is going to roll it out).
  • Recordkeeping (best practices being followed; exempt/salaried employees can be made to record their time – which is very good to have if their classification is challenged in the future)
  • Wage deduction / loans / tuition reimbursement policies

In one of two DOL Opinion Letters issued on April 12, 2018, the DOL clarified an extremely frequent question employers have – when to pay a non-exempt (hourly) employee for travel time (and gave me a great excuse to finally post a picture of a Jeep!). In other words, when is travel time “work”.  DOL Opinion Letter FLSA2018-18 finally provides some guidance regarding the DOL’s interpretation with three very common scenarios. Specifically, we know compensable work time generally does not include commute time, but what happens when an hourly worker does not have a normal business to commute to but rather goes to different job sites? Well, we know that travel away from home communities is worktime when it “cuts across the employee’s workday”, which includes the same normal work hours on a Weekend day as well (i.e. 9 to 5). Thus, the DOL has long held it does not consider work time that time spent as a passenger outside of regular working hours (see my earlier blog). However, what happens when employees don’t have a fixed location or set hours each day?

OPINION LETTER FACTS: At this employer, hourly technicians do not have a fixed location but work at varying customer locations each day. They have no fixed schedule, though they often start at 7 am, and often work between 8 and 12 hours, sometimes having to spend the night and complete the service the following morning. Occasionally technicians travel out of town for training. They are provided with vehicles to use for personal and business and covers all fuel and maintenance.

Scenario 1: “An hourly technician travels by plane from home state to New Orleans on a Sunday for a training class beginning at 8:00 a.m. on Monday at the corporate office. The class generally lasts Monday through Friday, with travel home on Friday after class is over, or, occasionally, on Saturday when Friday flights are not available.”

  • The key question is how to determine when travel time is compensable when there is no regular workday.
  • The DOL “scrutinizes” claims that employees don’t have regular or normal work hours, as after reviewing time records usually work patterns emerge (in other words it is a loosing argument for 99% of employers that there is no normal workday)
  • Assuming there is no regular workday, an employer can choose the average start and end times for the employee’s workday.  The employer and employee (or representative) can also negotiate and agree on a reasonable amount of time which travel outside of home community is compensable. When these methods are used, no violation will be found for compensating employees only during those hours.
  • If the employee chooses to drive instead of ride as a passenger in a plane, the employer may count as “hours worked” time spent driving the car or time that would have had to have counted as hours worked if the employee had taken the plane.
  • Time between a hotel and the remote work site is considered home-to-work travel and not compensable.

Scenario 2: “An hourly technician travels from home to the office to get a job itinerary and then travels to the customer location. The travel time from home to office varies depending on where the technician lives and can range from 15 minutes to 1 hour or more. All of this travel is in an assigned company vehicle.”

  • Time spent commuting between home and work is not compensable. Travel between site after arriving at work is. If an employee is required to report to a meeting place or pick up tools, travel from that site to the job site is part of the day’s work, regardless of contract, custom or practice.

Scenario 3: “Hourly technicians drive from home to multiple different customer locations on any given day.”

  • Same outcome as above.

Again, it’s still very fact specific, so keep in mind that this is an opinion letter related to one employer – but can be used as guidance for the rest.

On April 12, 2018, the U.S. DOL issued Opinion Letter FLSA2018-19 regarding the compensability of frequent breaks. As the DOL notes, most employers provide employees a 20 minute (or less) paid break in the morning, a 30 minute (or more) unpaid lunch break, and 20 minute paid afternoon break. In this case, several employees had a serious medical condition under the Family Medical Leave Act (FMLA) that required a 15 minute break every hour.  Accordingly, out of an 8 hour day, the employees were only working 6 hours. The question posed by the employer was whether that time needed to be paid since it was less than 20 minutes (and the Supreme Court has held that rest breaks up to 20 minute are ordinarily compensable as they are for the benefit of the employer).

The DOL opined that an employee who uses intermittent FMLA for additional breaks need not be paid for that time outside of the normal 20 minute break provided to all employees (i.e. the morning and afternoon break).  The DOL concluded that neither the Fair Labor Standards Act (FLSA) nor the FMLA requires that the breaks be paid, except that “employees who take FMLA-protected breaks must receive as many compensable rest breaks as their coworkers receive”. This opinion letter is a great reminder to employers of the interplay between the FMLA and FLSA (and often ADA).

On March 23, 2018, President Trump signed into law the Consolidated Appropriations Act. As you may remember, earlier this year the U.S. Department of Labor (DOL) sought comments related to rescinding portions of the 2011 Obama Administration’s ban on tip-sharing arrangements (see my earlier blog here). However, the Act eliminated the issue before the DOL could address it. Under the Act, “employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools.” However, there are two important caveats worth mentioning. First, the Act does not eliminate the prohibition on managers and supervisors from participating in tip pools. Second, the Minnesota Fair Labor Standards Act (MnFLSA) prohibits employers from requiring employees to share tips (it has to be their choice to tip pool).  Thus, while the FLSA now allows tip pooling, employers in Minnesota are still prohibited from requiring employees to share tips.  Additionally, the Act amends the FLSA to prohibit employers from keeping tips.

The DOL issued a Field Assistance Bulletin on April 6, 2018, further detailing the impact of the amendment, noting it expects to proceed with rulemaking in the near future to address what this means exactly. Importantly, the DOL stated that when determining whether an employee is a supervisor or manager for purposes of tip pooling, it will use the duties test set forth at 29 CFR 541.100(a)(2)-(4). This test looks at whether the individual’s primary duty is management of the business or a department or subdivision, whether that person customarily and regularly directs the work of two or more employees, and whether the individual may hire or fire other employees or whose suggestions and recommendations as to hiring/firing/promotions/other change of status is given particular weight. Violations of the amended Act may result in recovery of all tips unlawfully held by the employer plus an equal amount as liquidated damages as well as possible civil money penalties.

Being the wage and hour geek that I am, which I have fully embraced, I subscribe to the Minnesota Department of Labor and Industry Bulletin. Today’s bulletin speaks directly to employers, so I thought, why not pass it along. Besides, now I have completed No. 10 (keep reading), and feel like I have accomplished something today after I made my bed this morning (watch at 4:45: Naval Adm. William H. McRaven, Ninth Commander of U.S.Special Operations Command 2014 Commencement Address to the University of Texas at Austin).

So, here you go, courtesy of MnDOLI, 10 tips to not steal from employees:

Ten tips to help employers avoid committing wage theft

  1. Pay your employees at least the state minimum wage. New rates became effective Jan. 1, 2018 (see current requirements at www.dli.mn.gov/LS/MinWage.asp).  Employers operating in the city of Minneapolis need to be aware of the Minneapolis Minimum Wage Ordinance (see http://minimumwage.minneapolismn.gov).
  2. Pay your employees for all hours worked. Employees must be paid for employer-required training and for time needed to prepare to perform work, such as restocking supplies and performing safety checks. If you require employees to meet at a centralized location before driving to a worksite, pay the employee for the drive-time from the location to the worksite. Employers cannot require employees to remain at work and “punch in” only when it gets busy, “punching out” when business gets slow.
  3. Pay your hourly employees for overtime when their work hours exceed 48 hours in a work week. Federal law requires some hourly employees to receive overtime after working 40 hours in a work week. Some employees are exempt from this requirement. More information about federal and state overtime requirements is online at www.dli.mn.gov/LS/Overtime.asp.
  4. Pay your employees at least every 31 days.
  5. Do not misclassify employees as independent contractors. Such misclassification not only adversely impacts the employees, it also creates a competitive disadvantage for employers that comply with state laws related to workers’ compensation, unemployment insurance and tax withholding.
  6. Do not take unlawful deductions from your employees’ paychecks. Deductions for lost or damaged property, cash shortages, tools or uniform expenses generally cannot be made.
  7. Do not require your employees to pool or share tips.
  8. If you have a question, call us. We are available by phone at (651) 284-5070, Monday through Friday, 7:30 a.m. to 6 p.m.
  9. Get more information online. Visit www.dli.mn.gov/LaborLaw.asp for information about all Minnesota labor standards laws.
  10. Share these tips. Encourage other employers and associations to subscribe to our Wage and Hour Bulletin at www.dli.mn.gov/LS/Bulletin.asp.

That about sums it up (though we know it is never that easy), and I have accomplished making my bed and No. 10.

checklistThe old adage is right on – prepare for the worst and hope for the best. In this case, my spring cleaning tip #3 is to review your policies, practices and records as if the U.S. Department of Labor (DOL) were to investigate your business practices tomorrow.  A few issues I’ve dealt with (a lot) this year are listed below:

  • Verify employees are properly classified as exempt/non-exempt.
    • Pay particular attention to sales employees, marketing, and office workers.
    • The DOL overtime regulations overhaul is still on hold pending the Trump administration’s decision whether to pursue the appeal. However, as I mentioned before, the DOL’s revised salary threshold was not all that far from what is usually reality for what an exempt person makes in many industries (excluding small business owners, small towns, etc.). Point is, just because it is on hold does not mean you shouldn’t ensure that salaried employees meet the duties test (and current salary threshold).
  • Ensure independent contractors are properly classified.
    • Have a contract with the entity, and keep records of payments made and Form 1099s.
    • Think twice before a former employee is made an independent contractors…no matter how badly the individual asks for it.
  • Be sure you are properly calculating travel time for non-exempt employees.  I’ve blogged about this in the past as this can get very tricky.
  • Ensure employees are provided “sufficient time” to eat a meal.  Record meal time on time cards for hourly employees.
  • Recordkeeping – these are the easiest violations to spot. You’ve either kept the required records or not.
    • Have a document retention policy and use it.
  • Have employee time cards accessible for three years.
  • Have payroll stubs/history and employee wages accessible for three years, including W-2s.

Keep in mind that, should you receive a visit, the DOL investigator is just there to address and audit compliance with federal wage and hour laws. I just sat in an audit where the DOL investigator instructed the employer as to a withholding issue that is inconsistent with Minnesota law. Accordingly, recall that just because the FLSA permits something, does not mean that Minnesota law allows it. If Minnesota laws are more strict (advantageous to employee), Minnesota law must be followed instead.

Money2Well, by now everyone is aware of the injunction on the December 1, 2016 FLSA overtime Final Rule. Many employers had decided (a/k/a were forced) to increase an exempt employee’s salary to $47,476 to meet the DOL’s new (and now on hold) $47,476 threshold. So, now what? Can an employer just revert the employee’s salary, or not increase it as planned? Let’s put employee morale aside too…because certainly any reversion of a salary is not going to sit well with the employee who now may feel undervalued (and/or question whether he or she is properly classified anyway).

The Fair Labor Standards Act (FLSA) doesn’t address “promised” wages; accordingly, there is no federal requirement that an employee be paid a promised wage following an intervening event. Similarly, the Minnesota Fair Labor Standards Act (MnFLSA) does not impose any requirements on “promised wages”. But, Minnesota law does provide employees some protections in certain circumstances.

In Minnesota, “wages” is defined as: “Compensation due to an employee by reason of employment”.  Minn. Stat 177.23, Subd. 4.  Further, an employer cannot “directly or indirectly and with the intent to defraud…(2) directly or indirectly demand or receive from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer…” or the employer can be liable for twice the amount in dispute.  Minn. Stat. 181.03. Why do I bring up this statute? Well, a salaried employee who is told she is getting a raise may try to argue she has a contract that she is “owed” those wages for the work she performs during the time frame she was told she’d get the raise. Is this a stretch? Probably, but then again, I’ve heard more far-fetching arguments than that. Also, notice the bold – “intent to defraud” – I think it’s safe to say, no employer was attempting a bait-and-switch here; it was all regulation driven and employers had the full intent (at the time) to increase a salary just to meet the new threshold.

In any event, for the cautious employer, you may want to provide the employee notice of the decrease prior to the period in which the employee would earn that money. So, for example, if the employee was told on November 25 that she would be getting a raise to $47,476 effective December 1, and the next payroll cycle is for the workweeks of November 21 to December 4 and paid on December 9, you may want to consider reverting back during the next payroll cycle that is for the workweek of December 5 to December 18 (so long as the employee is notified prior to December 5). That being said, this approach is being cautious – certainly in this instance there would be no “intent to defraud”, however, with this delayed decrease, there is no arguable “contract” with the salaried employee for the following payroll cycle (they may argue there is a contract for the payroll cycle encompassing December 1-5).

Yes, I’m fully aware that I did not address hourly employees here. Given they are hourly, and “earn” wages on an hourly basis, I would not expect the same argument to ever even remotely pop up. Finally, don’t forget to document the payroll change, preferably with the employee signing that he or she understands the change and applicable start date of the change.

clickAs a result of President Obama’s White House Summit on Worker Voice, on October 28, 2016, the U.S. Department of Labor’s Wage and Hour Blog announced its new beta website – Worker.gov. This website is, according to the DOL, designed to provide “easy-to-access” solutions for employees who need answers “fast”. The DOL admits that “Even the best government websites can be difficult to navigate” – true, true. That being said, it makes it only about 4 clicks for a worker to file a claim electronically.

In short, the website, which is in beta and therefore undergoing constant changes, is designed to provide employees with an easy way to determine whether their rights are being violated, then provides them with a simple click to file a claim against an employer. Partnering with the NLRB, EEOC, and DOJ, the DOL wants the website to provide “critical information” to employees about their rights, who may not know whether they have a “FLSA” or “FMLA” problem, but an “unfairness-on-the job problem”. Employees answer a “few simple questions” and voila! The website will supposedly provide the relevant information, expanding in the weeks and months to come, and “learning” from the workers that use it about what kind of information is being sought – and the site will supposedly begin to feature that information prominently for similar workers.

The beta site provides a drop down, under which five job titles are currently available – day laborer; office worker; nail salon worker; restaurant worker; and construction worker. From there, it takes to you a “Tell Us what happened. We can help.” screen with several options such as – “You have the right to be treated equally.”, “You have the right to engage with others to improve wages and working conditions”, “You have the right to a safe and healthy work environment”, and “You have the right to be paid.”  From there, the employee can chose what happened (i.e. suggestions – all are in the negative – such as “I was not paid for work I performed”) , and then be taken to a “File a Claim” screen.

What does this mean for employers? I have to believe we will see an increase in filed complaints, as that is the whole purpose of the website – to make it easy for employees to complain about unfair work treatment – and provide a simple click to do so.

Sleep breakSeems simple enough, right? Not so fast! In Minnesota, “hours worked” is generally defined as “training time, call time, cleaning time, waiting time, or any other time when the employee must either be on the premises of the employer or involved in the performance of duties in connection with his or her employment or must remain on the premises until work is prepared or available.”  Minn. Rule 5200.0120. As always, this definition is not entirely helpful. For example, does “training time” include seminars that the employee wants to go to outside of normal work hours, or a free seminar during work hours? What about non-mandatory training opportunities? As is frequently the case – it depends, and often depends on the facts. However, a few general rules of thumb follows:

Rest & Meal Breaks 

Employees who work 4  consecutive hours must be provided time to use the nearest restroom. Rest breaks of less than 20 minutes are counted as “hours worked”. Employees who work at least 8 consecutive hours must be provided a meal break (sufficient time to eat a meal). Meal breaks are not counted as hours worked – but should “generally” be 30 minutes or more (so says the State), so the employee is “completely relieved from duty” to eat. Minor interruptions in meal time is okay, but frequent interruptions would convert this to paid work time. Thus, it is a good idea to require employees to step away from their workstation during meal times. Fun fact – there is no mandatory “smoke break” – employees have no right to a smoke break, but certainly they may chose to use their meal break or other provided rest break for such a purpose.

On-Call Time

Under Minnesota law, employees who must remain on premises or so close that they cannot use time “effectively” for personal purposes, must be paid for on-call time. Employees on-call away from work are not working, unless called to work. There is, of course, much more to this (for example, paramedics who may work 24 hour shifts are not always “working” during the 24 hours shift), but for purposes of this quick overview, that’s the general rule – whether the employee is “engaged to wait” (paid) or “waiting to be engaged” (unpaid).

Sleep Time

If an employee is scheduled for less than 24 hours per day, sleep time (with some exceptions – see below) is work time, even if you allow them to sleep. Minn. Rule 5200.0121. Employees scheduled 24 hours or more do not need to be paid for meals and a sleeping period (less than 8 hours), so long as there are adequate sleeping facilities and the employee can usually get at least 5 hours of uninterrupted sleep. However, it is critical that there is an understanding/agreement (doesn’t have to be in writing – but very good practice). Work performed during the sleep time must be compensated and if the sleep time is interrupted so the employee cannot get at least 5 hours of sleep, the entire period is work time.

On-Site Employees

Here is one of the exceptions to the above sleep time rule. Caretakers, managers and other on-site employees of residential buildings, whose principal place of residence is the residential building, and who receive the residence as full or partial compensation for duties performed, must be paid for time spent on duties, but no other time. Minn. Stat. 177.23, Subd. 10.

Companionship Service

Another exception to the above sleep time – employees who provide companionship services (29 CFR 552.6 and 552.106) to individuals unable to care for their own needs, who are employed to stay overnight in the home with the individual(s), and who are paid at least minimum wage for 4 hours for the overnight stay. For those, the term “hours” worked does not include nighttime hours of 10 pm to 9 am – for a total of 8 hours per night, during which the employee is able to perform duties, but is not in fact performing such duties and can sleep or do other things in the home.  Minn. Stat. 177.23, Sub. 11.

As always, the law is not super clear, and there is certainly case law and other guidance to support any one situation. The exceptions to the rule almost always overshadow the rule in wage and hour law. For example, there is a plethora of guidance about paramedics, EMT’s and other first responders, and of course, on-call time is particularly contentious. When in doubt, as I always say, dig deeper!

woman wage dataIn only 18 months, federal contractors and subcontractors with 100 or more employees will be forced to report wage data to the EEOC via the new EEO-1 report, in order to show that there is no discrimination in pay. While this seems a long way away, employers whose data may not be so kind to them could benefit greatly from reviewing (and fixing) the pay disparities now. The “workforce snapshot period” is between October 1 and December 31, 2017. Thus, employers needing to review their pay practices (this is code for – employers whose data would show that females or minorities are paid less than their counterparts) would be wise to do so before the relevant period (one of the payrolls in that window) in order to make adjustments prior to reporting.

Further, if an employer were to be very on the ball, any such adjustments would best be made at the next annual merit increases, or performance reviews prior to the reporting period (preferably before December 1, 2016 – read more on that below). Thus, a little pre-planning could go a long way in not drawing any red flags to those who might otherwise receive a random raise without job justification. Further, if an employer has a bucket of money come raise time, it should use that opportunity to allocate more to those positions that are underpaid and less to those overpaid to control overhead costs. Additionally, employers should familiarize themselves with the relevant pay bands. It may not take much to raise a female employee from one pay band to another, or similarly, keep an male employee at a pay band when on the bubble (I recognize this sounds horrible, but it is reality – the EEOC is looking at pay bands, not actual salary so paying a woman 1 cent more to bump her up a pay band and a male 1 cent less to keep him in a pay band will fall in the employer’s favor all things being equal).

Also, keep in mind that employers would greatly benefit from reviewing the various pay bands at the same time you are reviewing the overtime revisions and make all the changes in one fell swoop come December 1, 2016. As I’ve said before, the December 1, 2016 deadline is really the best excuse employers have to change pay practices without much mystery as to why. There is hardly an employee that doesn’t know about the amendments and is waiting for the change.

Finally, in addition to reporting pay data in 10 EEO-1 job categories, employers will need to report the hours worked that year by each pay band. Employers can find more information on the EEOC’s website here. In the end, employers may be surprised to find after an internal audit that their pay rates are misaligned (not necessarily because of anything intentional) – and so now is the best opportunity to get that corrected and on the right path.