With the U.S. Department of Labor shrinking overtime exemptions and independent contractor misclassification, interns flexing their legal muscles and technology changing the workplace at a mile a minute, wage-and-hour specialists have to grapple with questions that are as fast-evolving as they are crucial to the bottom line. Here, experts point to four begging questions about wage-and-hour law and offer tips to help employers address them.
What Will Final DOL Regulations Say About Overtime Eligibility?
On June 30, the DOL unveiled a proposed rule that would broaden federal overtime pay regulations to cover nearly 5 million more people and raise the minimum salary threshold required to qualify for the Fair Labor Standards Act's “white collar” exemption to $50,440 per year — more than double the current threshold.
In order to qualify for a white collar FLSA exemption, a worker must be paid a fixed salary that meets the minimum threshold, and his or her primary duty must be the performance of exempt work.
The DOL's proposal didn't suggest changing the duties test that factors into overtime eligibility but instead asked for input on several questions and said the agency was considering whether revisions to the test were necessary.
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Who Exactly Qualifies as an Independent Contractor?
Another regulatory move that made waves this summer was DOL Wage and Hour Division head David Weil's guidance on independent contractor misclassification, which said “most workers” qualify as employees and not contractors.
But the “Administrator's Interpretation” issued by Weil didn't rewrite the law, and figuring out who may be legally deemed an independent contractor and who has to be treated as an employee has been a longstanding source of headaches for employers and attorneys alike.
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So what's an employer to do? First, it should do an analysis of independent contractor issues with its lawyer so that privilege attaches, Segal said. Businesses should also be aware that when it comes to the DOL, Weil's guidance indicates that showing a worker is an independent contractor and not an employer likely won't be easy.
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Rachel Bien, who represents employees as co-chairwoman of Outten & Golden LLP's class action practice, said that the recent guidance would be helpful to courts trying to apply standards developed around more traditional working arrangements to nonconventional business models.
How those standards apply is an important question, particularly for “sharing economy” companies such as Uber Technologies Inc., which is currently facing a class action accusing it of mislabeling drivers as independent contractors.
"Every day, I feel like we encounter a different business arrangement that would not have been conceivable just a few years ago,” Bien said.
The existing standards can accommodate modern changes to the way employers do business, she said, adding that some of the earliest FLSA cases involved plaintiffs who did their work at home.
“The open issues relate to how courts are going to apply these standards to these different work arrangements,” Bien said. “What factors are they going to give more weight to than others?"
When Is an Unpaid Internship Lawful?
The question of what makes a worker an employee for the purposes of wage laws is also key in lawsuits brought by unpaid or allegedly underpaid interns. In January, Bien argued at the Second Circuit on behalf of unpaid interns who brought class claims against Fox Entertainment Group Inc. and The Hearst Corp.
The appeals court, pointing out that the issue of when an unpaid intern is owed pay as an employee under the FLSA was a matter of first impression, struck down a decision in July that granted class certification to the Fox plaintiffs and affirmed the denial of class certification in the Hearst case.
Properly designed unpaid internship programs can be a great benefit to aspiring professionals, but internships can also be used by employers to exploit interns by using labor without giving interns any real benefit in return, the panel opinion said.
“Recognizing this concern, all parties agree that there are circumstances in which someone who is labeled an unpaid intern is actually an employee entitled to compensation under the FLSA,” Circuit Judge John M. Walker wrote. “All parties also agree that there are circumstances in which unpaid interns are not employees under the FLSA.”
The circuit court agreed with Fox and Hearst that a “primary beneficiary test” should be used and laid out seven nonexhaustive factors to be considered when assessing whether an individual is an legitimate unpaid intern or an employee who is owed wages.
Attorneys said the Second Circuit left the door open for potential lawsuits and questions about whether a particular unpaid internships would pass legal muster. The plaintiffs in both cases have sought en banc review.
Exactly how courts will interpret and apply the Second Circuit's factors in varying factual scenarios is an open question, according to Bien.
“We have a new ruling from the Second Circuit laying out a set of factors that have never really been applied anywhere else,” she said.
How Does the FLSA Apply to a Smartphone-Saturated Workforce?
The DOL said in its spring 2015 regulatory agenda that it would be putting out a request for information in August on the use of portable electronic devices and other technology by employees away from the workplace and outside of scheduled work hours.
The planned bid for information sparked curiosity among lawyers about what exactly the DOL was looking to accomplish and whether it would eventually issue a rule regulating workers off-hours use of devices for work-related tasks such as reading and responding to email or answering texts or calls from the boss.
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Employers don't have to keep track of or pay for de minimus — insignificant — amounts of time. There's no bright-line rule for exactly what constitutes de minimis time, and the DOL's website says employers may not arbitrarily fail to count any portion of work time “that can be practically entertained.”
The question of where to draw the line between de minimis time and compensable time may not be new, but today's technology has blurred the line between work time and nonwork time.
"There sure are a lot of people for whom there isn't a clear demarcation between the hours when we're working and other hours, despite our best efforts,” Bien said.
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For exempt workers, there's no question that they aren't owed overtime pay for off-hours time dealing with emails or calling or texting colleagues. But if the salary threshold is raised, and millions more people become overtime-eligible, those workers could have an argument for an overtime claim based on that activity.
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Precisely what, if any, regulations or guidance the DOL will put out on this front is still unclear. But any light the agency could shed would be welcome, Bien said.
“I do think that there is a great need for guidance in this area, and I think certainly to the extent the department has been evaluating and studying that, it should put that information out there,” she said.