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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

Employers are often surprised to learn that employees may be terminated while on (or after) Family Medical Leave Act (FMLA) or other type of protected leave. The key, however, is that there needs to be some sort of unrelated intervening event such as in the case of Naguib v. Trimark Hotel Corp. On September 12, 2018, the Eighth Circuit Court of Appeals upheld the U.S. District Court for the District of Minnesota’s decision in Trimark, that an employee was not wrongfully terminated while on Family Medical Leave Act (FMLA) protected leave.

In this case, the plaintiff, Isis Naguib, was a long-time (1977-2014) Executive Housekeeper at Millennium Hotel, a Trimark brand hotel. During the past three years of her employment, Naguib essentially testified against the company in an unrelated case, her son filed a discrimination complaint against the hotel, and she took FMLA leave for hypertension. While the FMLA request was approved, she was suspended and terminated soon after her return, as a result of an internal investigation.

While Naguib was on FMLA leave, the fill-in Head of Housekeeping personally observed timekeeping irregularities, and notified management. Notably, it was determined that Naguib told housekeepers to round down their time and not record all overtime hours and Naguib altered time records without the proper company form. In addition, one housekeeper regularly sewed hotel linens at home off the clock. This practice resulted in lower payroll costs, and thus, a bonus for Naguib. Ultimately, Millennium compensated the employees for the docked overtime, disciplined three other managers (who did similar practices on a smaller scale), and terminated Naguib just twelve days after her return from FMLA. The 8th Circuit Court of Appeals agreed with the District of Minnesota (the Honorable Judge Joan N. Ericksen) in its ruling that there were no specific links between her termination any any sort of discrimination, and that the investigation was only conducted as a result of irregularities found in her absence. Thus, the termination proper despite the other recent events.

When a local movie theater started serving food during the movie, I was quite excited (until I realized how loud it would be while watching the movie). Yet, not once did I think about whether my server fell under the “motion picture theater” (movie theater) exemption to the Fair Labor Standards Act (FLSA)…nor had I heard of such a thing, frankly. On August 28, 2018, the U.S. Department of Labor (DOL) addressed the question of what constitutes an “establishment” for purposes of the overtime exemption in opinion letter FLSA2018-23. While the question was asked in the context of a restaurant within a movie theater, the DOL’s opinion provides insight to all employers.

When determining what constitutes an “establishment” for purposes of the FLSA, the DOL looks at the nature of the business, not the work performed by the employee. The DOL also notes that an “establishment” is a “distinct physical place of business” not “an entire business or enterprise”. Thus, so long as business units or portions of a business located on the same premises share bookeeping, records, taxes, invoices, banks, and employees, etc. they are one “establishment” for the exemption. Thus, in this case, the DOL opined that the movie theater and restaurant constituted one “establishment” for purposes of the motion picture theater exemption, and thus employees who work both in theater as an usher, and in the theater’s full-service restaurant as a server are not entitled to overtime. However, don’t forget – just because the FLSA does not apply, does not mean that state law does not (overtime after 48 hours per workweek).

I’m a big fan of volunteering, and am highly involved in several community groups.  In one of them that I’m involved in, we frequently joke about being “voluntold” to do something (go ahead and suggest a good idea…dare you!). Yet, when is volunteering truly volunteering and not compensable work? In another of the U.S. Department of Labor’s (DOL) August 28, 2018 opinion letters, the DOL clarified when a volunteer need not be paid in FLSA2018-22. While this particular opinion letter talks about professional exam graders for a nonprofit organization, the opinion can help other employers who provide volunteer opportunities for employees. In the facts presented, these graders (typically high-level multi-national executives) used to get a fee for taking a week or two to travel overseas to grade professional exams. It was considered an honor to be asked and they are at the top of their profession. The nonprofit wanted to clarify if they could be classified as “volunteers,” even though their travel, room and board, etc. was paid for. The DOL said, “yes”.

The DOL noted that the FLSA does not require payment to an employee who “volunteers without contemplation or receipt of compensation”, as the FLSA, “recognizes the generosity and public benefits of volunteering and allows people to freely volunteer time to religious, charitable, civic, humanitarian, or similar nonprofit organizations as a public service.” However, the volunteer service must be “freely without coercion or undue pressure” (direct or implied). In other words, employees cannot “volunteer” to perform their job, and cannot be pressured to do so (i.e. everyone is expected to volunteer). Seems simple enough, but of course there is always grey – for example, the opinion notes that this is related to a nonprofit. But what about employees that “volunteer” to run or organize a fundraising campaign through work? What if the company has a relationship with the nonprofit and benefits from it (i.e. employee morale, jeans days, etc.). That is where hairs start getting split and the facts should be carefully considered.

On August 28, 2018, in FLSA2018-20, the US Department of Labor (DOL) issued another opinion letter stating that the Fair Labor Standards Act (FLSA) does not require that employers pay employees to attend voluntary wellness activities, biometric screenings, and benefits fairs held during (or outside of) work hours – if some conditions are met. First, they must be voluntary. Second, it must not be related to the employee’s job. Third, they must not be a part of new employee orientation and open to all employees. Fourth, the employer must not receive direct financial benefit as a result of employee participation.  And Lastly, they must be outside of normal work breaks.  In short, the activities must be “predominantly for the benefit of the employee”.

In this instance, “wellness activities” are offered by the employer as a way for employees to potentially decrease monthly insurance premiums through health education classes, gym classes, phone health coaching, participating in Weight Watchers, and engaging in voluntary fitness activities. The biometric screenings measures things such as cholesterol, blood pressure, and nicotine usage. The benefits fairs allow employees to learn about financial planning, college opportunities, and employer benefits.

The DOL concluded that the FLSA does not require payment for such time, as it is “off duty” time per 29 C.F.R. § 785.16. One footnote (literally in the opinion) – this analysis is based on such events taking more than a standard 20 minute break time.  For example, if these events are offered during a break of up to 20 minutes, then they would be compensable (paid) under 29 C.F.R. 785.18, because so long as an employer provides a paid break, it does not matter how the employee spends that time for his or her own benefit.

In another of the six opinion letters issued by the U.S. Department of Labor on August 28, 2018, the DOL clarified in FLSA2018-21, that an employer that sells technology to merchants that allow them to accept credit card payments from mobile devices is indeed, a “retail or service establishment,” for purposes of the Fair Labor Standards Act exemption. While this seems to apply to a pretty limited amount of employers (for which the rest of you are wondering why you care about this and are still reading this post), the opinion letter provides guidance applicable to all.

First, the DOL references the recent U.S. Supreme Court Encino Motorcars case, noting that exemptions under the FLSA should be fairly – not narrowly – interpreted. Thus, the DOL recognizes that it “must apply a ‘fair reading’ standard to all exemptions to the FLSA – including the Section 7(i) exemption”. In doing so, the DOL opines that just because the employer sells its product to commercial entities does not mean it does not qualify for the retail and service establishment exemption. Further, the DOL notes that courts have confirmed that case law does not require a physical location accessed by the public, that a business is open to the public if they receive orders on the phone, for example.

Additionally, the DOL noted that the sales of the product (a credit card reading platform) are indeed retail sales – not wholesale, because the employer does not sell large quantities of the platform to individuals, but instead tailors the product to their customers who then use it for their clients. That being said, the DOL does caution that, while it has “considerable discretion”, the courts have final say with respect to whether sales are recognized as “retail” in a particular industry.

The result? The FLSA’s retail or service establishment exemption applies (and thus, no overtime is due) to employees of an employer that sells customer technology to commercial clients, so long as the employee’s regular rate of pay exceeds 1.5 times minimum wage in the workweeks they work overtime and commissions constitute more than half of their earnings (in other words, usually commissioned inside sales representatives).

The U.S. Department of Labor (DOL) has not forgotten about the proposed overtime regulation overhaul, though it’s been a bit sleepy on this issue this past year since its July 26 2017 Request for Information. On August 28, 2018, the DOL announced it will hold five “listening sessions” (none in Minnesota- the closest being Kansas City, MO). These sessions are open to the public and scheduled between September 7 and 24, 2018. Notably for those of us in Minnesota who are nowhere close to attending one, the DOL is asking for input on the following questions:

  1.  What is the appropriate salary level (or range of salary levels) above which the overtime exemptions for bona fide executive, administrative, or professional employees may apply?  Why?
  2. What benefits and costs to employees and employers might accompany an increased salary level? How would an increased salary level affect real wages (e.g. increasing overtime pay for employees who current salaries are  below a new level but above the current threshold)? Could an increased salary level reduce litigation costs by reducing the number of employees whose exemption status is unclear? Could this additional certainty produce other benefits for employees and employers?
  3. What is the best methodology to determine an updated salary level? Should the update derive from wage growth, cost-of-living increases, actual wages paid to employees, or some other measure?
  4. Should the Department more regularly update the standard salary level and the total-annual-compensation level for highly compensated employees? If so, how should these updates be made? How frequently should updates occur? What benefits, if any, could result from more frequent updates?

Realistically, this indicates it is going to be a long while yet before we see any changes to the overtime regulations, I do believe.

On August 28, 2018, the U.S. Department of Labor (DOL) issued 6 new opinion letters, 2 related to the FMLA which has not occurred since 2009. While I’ll write about them separately, this is exciting news! The letters provide employers with compliance assistance related to the administration of the Fair Labor Standards Act (FLSA) and the Family Medical Leave Act (FMLA). As I tell employers all the time, while their situation may be unique to them, you’d be surprised how frequently we address the same facts/issues (granted, the actual facts are not identical, but you get my drift) and thus we’re able to take our knowledge of how past situations worked out, and use them to handle the current situation. Similarly, the DOL’s opinion letters provide employers with guidance based on similar issues/facts and can be a great tool for employers when handling certain situations.

  1. Compensabilty of voluntarily attending benefit fairs and wellness activities (FLSA2018-20)
  2. Commissioned sales employee overtime exemption related to internet sales (FLSA2018-21)
  3. Volunteer status of nonprofit members when acting as credentialing examination graders (FLSA2018-22)
  4. Movie theater overtime exemption when dining services offered (FLSA2018-23)
  5. “No-fault” attendance policies and roll-off of attendance points related to FMLA (FMLA2018-1-A)
  6. Organ donors’ eligibility for FMLA (FMLA2018-2-A)

Check out my subsequent blogs for more information about the above.

When is the last time you seriously worked on updating your job descriptions…with input from the hiring manager for that job? On May 11, 2018, the Eighth Circuit Court of Appeals (this includes Minnesota), in Faidley v. United Parcel Service of America, Inc., held that the employer, United Parcel Service (UPS), was not required to accommodate an employee’s request to work no more than 8 hours a day, because an essential function of his job position was working overtime. Faidley had been working for UPS roughly 25 years, when a back injury began causing him problems while working shifts longer than 8-hours. Faidley’s doctor issued a permanent work restriction, limiting him to working no more than 8-hours a day. Faidley then requested an accommodation with UPS for his current position (package driver). UPS denied the accommodation request, determining that working overtime was an essential function of the package driver position.

In Faidley, overtime was determined to be an essential function of the employee’s job due to the unpredictable nature of workloads and weather, combined with the adverse effects UPS would suffer if packages were not delivered on time or other drivers had to be sent to finish a person’s delivery because that individual could only work 8 hours. Further, the job description and collective bargaining agreement with the union indicated that working overtime was a requirement for the package driver position. Based on this evidence, the Court agreed that working overtime was an essential function of a package driver, and UPS’s denial of an accommodation was not in violation of the American’s with Disabilities Act.

Thus, when presented with requests to accommodate an employee’s restricted hours due to a disability, keep in mind that you have a much better chance of having it affirmed (if sued) if you have documentation to support your position. The key here is that employers should make sure that this information is explicitly written in the job description and any collective bargaining agreement. Further, employers should be able to articulate objective reasons as to why the overtime is an essential function of the job. In other words, it may be time to dust off your job descriptions and look at them. Make sure they are current (jobs morph over time), and accurately reflect the job duties and essential functions. Be as specific and accurate (and reasonable) as possible. For example: work overtime up to 20 hours per week; lift up to 50 pounds; stand up to 10 hours, etc. The job description must reflect the job to be useful – do not try to be “Minnesota nice” with it and use as a recruiting tool. If 20 hours of overtime is essential, state it. This doesn’t mean you have a lost cause if you don’t specifically have it in there, but it sure will make the defense a lot stronger (and our job a lot easier!).

On April 2, 2018, the Supreme Court ruled in Encino Motorcars v. Navarro that car dealership service advisors (individuals that consult and sell customers on servicing solutions at car dealerships), are exempt from the Fair Labor Standards Act’s (FLSA) overtime requirements. While this is certainly a win for car dealerships, the biggest win for all employers is the Supreme Court’s holding in this ruling that the FLSA is not to be read narrowly, but “fairly”:

Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.'”

Since 1966, service advisors have been deemed exempt under an exemption added to the FLSA covering “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles [. . .].” However, confusion sprung when, in 2011, the Department of Labor (DOL) issued a rule rejecting the interpretation of “salesman” to include service advisors.

Thus, in 2012, relying on the DOL’s rule, current and former Encino service advisors sued the Mercedes Benz dealer, claiming Encino violated the FLSA for failing to pay them overtime. The case has been bouncing around ever since. In 2016, the Supreme Court reversed the 9th Circuit Court of Appeals, finding it improper for courts to defer to the 2011 DOL rule, because “the regulation undermined significant reliance interests in the automobile industry by changing the treatment of service advisors without a sufficiently reasoned explanation.” Accordingly, this ruling finally puts the issue to rest – service advisors are exempt from the FLSA’s overtime requirement.