Ron Flowers with Burr & Forman LLP

1. Wage & Hour
Latest Developments
Ron Flowers
Burr & Forman LLP
rflowers@burr.com
(205) 458-5176

2. EXEMPTIONS AND PROPOSED EXEMPTION
RULES

3. Proposed Regulation Changes
• The DOL’s proposed regulations more than double
the salary requirement: from $23,660 to $50,440 in
2016
• The salary threshold is subject to a required yearly
adjustment by the Secretary of the DOL based on
the 40th percentile of full-time salaried workers
• Asks for comments, but does not propose changes
to the duties tests.

4. • Outside Sales Exemption
• Motor Carrier Exemption
• Retail exemptions
• Home Care
• Doctors
Exemptions/Positions Not Affected by New Rules

5. • Must earn a regular salary of $455 each workweek
• Deductions only for enumerated reasons
• Bonuses, additional pay, does not invalidate
exemption
Salary Basis Test

6. • 60-day comment period ended September 4, 2015
• More than 250,000 comments submitted
• The regulations are high on President Obama’s
agenda and he is facing pressure to implement them
quickly
• Secretary of Perez says the final regulations will be
issued by Spring 2016. Other reports say July.
Likely 60-day implementation period.
Time for Implementation

7. • Increase of salary threshold too dramatic
• Proposed rule ignores significant geographic differences in salaried
pay
• Proposed rule will reduce middle management positions and inhibit
career development
• Threshold should take into account bonuses/incentives
• Yearly indexing is unrealistic and will result in immediate significant
increases due to employer changes to comply with rule
• Duties test should be altered and/or simplified
Most Common Comments/Criticisms

8. 1. Raise Salary to Threshold
2. Limit employee to 40 hours per week
3. Pay Time-and-a-half overtime pay
4. Change the employees’ pay to keep consistent
5. Fixed salary for greater than 40 hours
6. Fluctuating workweek method
Options for Employers

9. • Easier for employees paid close to $50,440.00
• May affect next level of salary pay above threshold
• Increased labor costs are simply the difference in
salaries
• May require an upward adjustment each year base
on DOL action
(1) Raise Salary to Threshold

10. • May not be feasible for some employees
• May require adjusting duties, adding additional staff
• Increase in labor costs more difficult to calculate
• Could potentially lead to litigation problems if not
effectively enforced
• Need strong policy setting forth limitations,
circumstances under which employee can work OT
2. Limit Employee to 40 Hours Per Week

11. • Either keep salary or convert to hourly rate and pay 1.5
times the salary divided by 40 or hourly rate
• Difference between salary and hourly is that hourly does
not get full salary amount for under 40 hours
• Increase in labor costs may be substantial and will vary
significantly depending on salary and number of hours
worked
• For employee $40,000 per year, 50 hours per week,
converting to this method would add $15,000 per year
3. Pay Time and a Half Overtime Pay

12. • Proposed regulations do not require maintaining same pay
• Pay can be converted to reduced salary or hourly rate that
would result in same total pay with current overtime averages
• Method can minimize increased labor costs but might lead to
unhappy employees
• $40,000 salary employee working 50 hours per week can either
be converted to $559.60 salary (from $769.23) or $13.99 per
hour.
4. Pay Overtime at Modified Rate

13. • FLSA does not require pay at 1.5 times employees’ salary
divided by 40 for hours worked over 40
• How many hours is the salary intended to compensate
• Employers can reach written understanding with their
employees that salary covers an amount over 40 hours
• Employee is entitled to 0.5 times overtime for any hours
worked between 40 and the salary amount and 1.5 times
overtime for hours worked over the salary amount
5. Fixed Salary for More Than 40 Hours

14. • Regular rate is calculated by the salary divided by the hours the salary
is intended to compensate
• $40,000 salary employee whose salary is intended to compensate for
50 hours per week must be paid 0.5 times his regular rate ($769.23 /
50 * 0.5 (or $7.69)) for time worked between 40 and 50 hours and 1.5
times the regular rate for time worked over 50 hours
• If the employees worked 50 hours each week would receive an
additional $4,000.00 per year; more if worked over 50 some weeks
• Allows employees to maintain salary with limited increased costs
• May cause some confusion
5. Fixed Salary for > 40 Hours (Cont’d)

15. • Employees receive 0.5 times their regular rate (calculated
weekly) for time worked over 40 hours
• Regular rate = at least salary divided by weekly hours worked
• For employee at $769.23 per week, divide by 50 hours if
worked 50 hours, 60 if 60
• For the methods other than changing pay or hours, this method
limits costs most effectively
• The administrative costs and difficulties of this method are
greater than the others
6. Fluctuating Workweek Method

16. • Need written understanding with employee
• Employee work hours must actually fluctuate
• Some courts have found that employers cannot make
any deductions from salary
• No additional pay, bonuses, etc.
• Total pay must exceed minimum wage
6. Fluctuating Workweek Method (cont’d)

17. • Analyze exempt employees within threshold
difference and their pay compared to others
• Consider attorney-client privileged salary or pay audit
• Create detailed timekeeping policies for employees
who will now record their hours
• Effectively communicate changes to minimize
confusion and dissatisfaction
Preparing for New Salary Rules

18. Definitions of “Employee” and “Employer”

19. • The nature of modern internship relationships is that
both parties may obtain significant benefits
• Proper inquiry is to focus on the benefits to the
student while still considering whether the internship
program takes unfair advantage of or is otherwise
abusive to the student.
• Adopts the non-exhaustive list of seven
considerations utilized by the 2nd Circuit
Eleventh Circuit Rejects DOL’s Intern Test

20. 1. Do parties understand there is no expectation of
compensation?
2. Is the training from the internship similar to that which would be
given in an educational environment?
3. Is the internship tied to the intern’s education program through
integrated coursework or academic credit?
4. Does the internship correspond to the academic calendar?
5. Is the internship’s duration limited to the period it provides the
intern beneficial learning?
6. Does the intern’s work complement, rather than displace, the
work of paid employees?
7. Do the intern and employer understand that the internship is
conducted without entitlement to a paid job at the conclusion of
the internship?
Factors for Modern Internships

21. • On July 15, 2015, DOL issued Administrator’s Interpretation on the
“suffer or permit” standard to the misclassification of employees as
independent contractors
• Directs application of the “economic realities” factors to determine if
the worker is economically dependent on the employer or in business
for him or herself
• The “economic realities” factors should be applied in view of the
“suffer or permit to work” standard.
• Explains that the “suffer or permit to work” standard is broader than
the common law “control” test
• No single factor is determinative – work together to reach overall
determination of nature of relationship
DOL Issues “Independent Contractor” Guidance

22. A. Is the work an integral part of the employer’s
business?
B. Does the worker’s managerial skill affect the worker’s
opportunity for profit or loss?
C. How does the worker’s relative investment compare
to the employer’s investment?
D. Does the work performed require special skill and
initiative?
E. Is the relationship between the worker and the
employer permanent or indefinite?
F. What is the nature and degree of the employer’s
control?
DOL Economic Realities Factors

23. • On January 20, 2016, the DOL issued an Administrator’s
Interpretation on Joint employment under the FLSA
• Specifically targets construction, agricultural, janitorial,
warehouse/logistics, staffing, and hospitality industries
• Horizontal vs. Vertical joint employment
• Horizontal – overlap in organization or supervision
• Vertical – economic realities test
Joint Employment Guidance

24. Collective Actions

25. • Tyson Foods v. Bouaphakeo, (March 22, 2016) upheld a jury
verdict using statistical evidence to determine class damages.
• The parties agreed that the issue of “whether donning and doffing
protective gear is compensable” was common to the class, even
when the amount of time spent varied among the class
• Because the employer did not maintain records of the time, the
statistical evidence was permissible
• Campbell-Ewald v. Gomez (Jan. 20, 2016) held that an
unaccepted offer of judgment does not moot a plaintiff’s action
• Case involved claims under TCPA
• Leaves open question of tenders of payment and mootness
• (Murphy v. Global Resp. Corp., (S.D. Fla. June 5, 2015)
Supreme Court Rulings Affect FLSA Collective Actions

26. • Projected FLSA filings for 2015 (8,820) higher than
any year since the 2008 economic downturn
• Filings up 14.7 percent from 2014
• N.D. Ala had 5th most per capita FLSA lawsuit filings
behind S.D. Fla., S.D.N.Y., D.D.C., D.R.I. Last year,
N.D. Ala. was tenth
• S.D. Fla. more than twice per capita filings than N.D.
Ala.
FLSA Litigation Continues to Rise

27. • In 2011, DOL revised its tip credit regulations to prohibit
tip pool participation by non-tipped employees even when
the employer does not take a tip credit
• A wave of “tip credit” and “tip pool” litigation has followed
• Some courts have rejected the 2011 regulations holding
that “tip pool” restrictions do not apply to employees for
whom a tip credit is not taken –
e.g., Oregon Restaurant & Lodging Ass’n v. DOL
(reversed by Ninth Circuit – Feb. 23, 2016)
“Tip Credit” Update

28. • Tipped employees may be minimum wage by a tip credit
which makes up difference from $2.13 minimum wage to
$7.25.
• To be paid by a tip credit, the employees must be a
“tipped employee” – receives more than $30 per month in
tips
• For employees holding dual jobs, may only use “tip credit”
for time in tipped position
• According to DOL, a “tipped employee” who spends a
substantial amount of time (20%+) performing non-tipped
duties cannot take the tip credit for that time
• Employer must provide oral or written notice to Tipped
employees
“Tip Credit” Requirements

29. • Employees must receive all their tips unless they
participate in a valid tip pool
• A tip pool may not include non-tipped employees,
such as many dishwashers, cooks, chefs, janitors.
• Tipped employees will typically include waiters,
expediters, food runners, busboys, bartenders, as
long as they perform their duties in the presence of
customers and/or interact with customers
• Some courts have held that one employee may
invalidate a tip pool
• Damages may be difference between hourly rate and
minimum wage
“Tip Pool” Requirements

30. Questions?
Ron Flowers
Burr & Forman LLP
rflowers@burr.com
(205) 458-5176