Category Archives: U.S. Department of Labor

Walmart Takes a Seat in California

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Walmart reportedly agreed to pay $65 million to settle a case brought on behalf of nearly 100,000 current and former California cashiers who claimed the company violated their rights under a state law dating back to 1911 when it failed to provide them with seating.  The workers claimed Walmart, which denied any wrongdoing, breached its duty to make seating available “when the nature of the work reasonably permits.”

Walmart claimed that the nature of the cashier job did not reasonably permit seating, because placing stools or chairs at the store’s cash registers would pose a safety risk and hinder productivity. However, Walmart had a policy of offering stools to cashiers with medical conditions or disabilities, and store managers had the discretion to provide stools to cashiers on a case-by-case basis.

In a court filing, Walmart and counsel for the cashiers said the settlement, if approved, would be the largest ever under California’s unique Private Attorney General Act, which allows workers to sue their employers on behalf of the state and keep a portion of any award.

Curiously, other major retailers in California faced similar lawsuits, but Walmart did not act proactively to address this issue.  Even putting aside the anticipated benefit of improved employee relations resulting from voluntary compliance, with the benefit of hindsight, one has to wonder if the cost of compliance, even if it were to result in reduced productivity, would have been less than the cost to settle.

Savvy employer takeaways: Employers need to look carefully at their duty to offer reasonable accommodations to employees and to engage in an interactive process to make sure that the employer can justify any denied accommodation.

Questions? Let me know.

U.S. Dept. of Labor Makes Its Move

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As long-time readers of this blog may recall, since 2015, the U.S. Department of Labor  has been trying to update its Fair Labor Standards Act  regulations to qualify more employees for overtime pay. For basic exemptions, meaning those that are not industry-dependent such as the administrative, executive and professional exemptions, employers may generally classify as exempt from overtime pay only employees who meet both a duties test and a salary test.  Since 2004, federal law allowed employers to designate salaried workers who earn at least $455/week (the equivalent of $23,660/year) and meet certain “white collar exemption” duties-test requirements as exempt from overtime.  This month, the DOL issued a proposed rule to increase that salary exemption to $679/week (equivalent to $35,308/year).  If adopted, salaried employees who meet an applicable duties test and earn more than $455/week but less than $679/week will no longer be exempt from overtime under the basic exemptions.  Importantly, the DOL proposed rule will allow employers to use nondiscretionary bonuses (for example incentive bonuses tied to productivity or profitability) and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the salary test.  The DOL is also proposing to increase the exemption that applies to highly compensated employees.  Currently, salaried employees who earn at least $100,000/year in salary are exempt from overtime regardless of whether they satisfy the applicable duties test.  Under the proposed rule, the highly compensated employee salary threshold will increase to $147,414/year, meaning employees paid less than that threshold amount will be subject to a duties test or other exemption.  The proposed rule does not seek a change to any of the duties tests for the basic exemptions.

Savvy employer takeaways: Employers need to evaluate their payroll to identify salaried employees who meet the applicable duties test but may no longer be exempt and assess whether increasing the employee’s salary or making the employee overtime eligible makes more sense.  Employers also need to consider applicable state law, which may be more restrictive than the exemptions permitted under the FLSA.

Questions? Let me know.

Independent Contractor or Employee? The DOL Weights In.

The U.S. Department of Labor is offering its two cents on the big dollar distinction between employees and independent contractors, and it is saying, “most workers are employees under the FLSA’s broad definitions.”   This new advice is consistent with DOL’s continuing campaign to “crack down” on what it deems misclassification of employees as independent contractors  and is important because determining whether an individual is an independent contractor or an employee is one of the most vexing issues employers face, in large part because getting wrong can be so costly.

The DOL’s position is set forth in Administrator’s Interpretation No. 2015-1, released on July 15, 2015, and issued by David Weil, Administrator of the Department of Labor’s Wage and Hour Division (WHD).  The snappy title of the Interpretation is “The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors.”  While the Interpretation does not overtly change DOL policy and is not per se binding on employers or the courts, employers should evaluate their classifications based on this guidance and see how they measure up.  

In support of its conclusion that most workers are employees, the Interpretation focuses on the so-called “economic realities test” (one of the tests used to determine whether a worker is an employee).  The economic realities test, as its name suggests, focuses heavily on the extent to which a worker is economically dependent on the employer – the greater the dependence , the more likely the worker will be found to be an employee. The test examines six factors: 

  1. The nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;
  2. The alleged employee’s opportunity for profit or loss depending upon his or her managerial skill;
  3. The alleged employee’s investment in equipment or materials required for his task, or his or her employment of workers;
  4. Whether the service rendered requires a special skill;
  5. The degree of permanency and duration of the working relationship; and
  6. The extent to which the service rendered is an integral part of the employer’s business.

In this latest guidance, the DOL emphasizes the sixth factor – whether the work is “integral to the business” of the employer.  The Interpretation advocates applying the “integral to the business” prong  through the lens of the FLSA’s definition of the term “employ” (which means to “suffer or permit to work,” 29 U.S.C. § 203(g)) in a way that  broadly construes a worker’s contributions to the business of the employer as integral.

Although this Interpretation is not controlling on the courts, our Supreme Court has recognized that Administrator’s Interpretations reflect a body of experience and informed judgment to which courts and litigants may properly resort for guidance.  Employers also should keep in mind that, while the Interpretation is limited to the independent contractor classification under the FLSA, other federal and state statutes and regulations also govern the classification of employees in relation to taxes, workers compensation coverage, unemployment insurance, and other issues.  Employers obviously need to consider all applicable laws, regulations and guidance when determining whether to classify a worker as an independent contractor, but, in light of this Interpretation should:

  • Evaluate job descriptions and duties to determine whether they are likely to be deemed “integral to the business”;
  • Analyze whether the work independent contractors are performing goes beyond the scope of their stated duties and could be considered integral; and
  • Assess whether workers currently treated as employees may be considered independent contractors due to the non-integral nature of their work.

Questions? Let me know.

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