Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

By:  Douglas Weiner

The following sounds like a “win-win” situation, doesn’t it? An enthusiastic and energetic individual approaches you with a proposal to volunteer his or her time and services to gain valuable experience in your industry. “After all,” reasons the prospective volunteer, “how can I get my first job if I have no experience in the field of my choice?” Ambitious job seekers may approach an employer volunteering to work as an unpaid “trainee” or “intern” to gain skills, experience and contacts in their chosen field.

However, vigilant employers will not merely accept the prospective intern’s agreement to do volunteer work, but will apply the required legal analysis.  Despite the individual's offer to work for free, the Department of Labor may reclassify the individual as an employee, and require the employer to pay back wages for all hours worked, including overtime.     

An unpaid internship must be primarily for the benefit of the trainee, rather than the employer. Certain employers have established training programs for interns that do qualify for exclusion from the Fair Labor Standards Act. The criteria an employer must satisfy is set forth in Fact Sheet #71: The Test for Unpaid Interns  When all six criteria are met, an employment relationship does not exist under the FLSA, and the federal minimum wage and overtime provisions do not apply to the individual. 

For employers considering an unpaid internship program for one or more individuals, we recommend certain policies, practices and procedures be implemented as precautionary measures.

• Distinguish interns from employees. Create written policies devoted exclusively to the interns; avoid using the same policies and handbooks for both interns and employees.
   
• Review handbooks to remove terminology from written policies that blurs the line distinguishing interns from employees (for example, written policies should not say that an intern is being “hired”, or refer to interns as “Associates” or “Summer Associates” .).
   
• Require a signed written statement from the prospective intern evidencing the understanding that the intern has no expectation of wages, and the employer makes no guarantee of a job at the end of the internship.
   
• Document expense reimbursements, if any, to specific expenses with receipts to evidence that there were bona fide expenses incurred by the intern that were, in fact, reimbursed. Without records the DOL may conclude the “expense reimbursements” were disguised wages.

Conclusion

Employers must carefully assess the benefits, and risks, of managing an unpaid internship. Unless an employer is able to establish that the criteria set forth in Fact Sheet #71 are met, the DOL is likely to find that an intern is an employee who must be paid minimum wage and overtime.

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By Teresa Maestrelli

The Miami-Dade Board of County Commissioners recently approved a Wage Theft Ordinance designed to make it easier for employees to take legal action against employers that fail to pay (or underpay) them. Under the new ordinance, the county will rely on a streamlined hearing examiner process to address complaints by employees.

The unanimous vote made Miami-Dade the first county in the nation to adopt a countywide wage theft law.[1]  For nearly a year, members of the South Florida Wage Theft Task Force - a coalition of union, immigrant, faith, women’s and legal services organizations - worked with County Commissioner Natacha Seijas, the principal sponsor of the ordinance, to craft and introduce the ordinance. 

The ordinance bars wage theft, and allows the county to use its police powers to intervene and help recover workers’ back pay. The ordinance specifically applies to private sector employees and employers in cases involving at least $60 (the “threshold amount”). Under the ordinance, wages include pay for daily, hourly, or piece work at a rate no less than the highest applicable rate established under federal, state, or local law.

Wage-Theft Violations:

An employer that fails to pay a portion of wages due to an employee, according to the wage rate applicable to that employee, within a “reasonable time” from the date on which the work was performed by the employee, shall be wage theft. The ordinance establishes a presumption that a “reasonable time” is no later than 14 calendar days from the date on which the work is performed. Employers may lengthen the period of time between the date work is performed and the date the employee is paid wages, for a period not to exceed 30 days, upon express written agreement signed by the employee.

Procedures for Wage-Theft Complaints:

An aggrieved employee may file a complaint with the county alleging a violation of the ordinance.  The complaint must set forth the facts upon which it is based with sufficient specificity to identify the employer and for the county to determine both that an allegation of wage theft has been made, and that the threshold amount has been met. Upon determining that the complaint alleges wage theft, the county will then serve the complaint on the employer, which will have 20 days to file an answer.

Hearing Before Hearing Examiner:

Upon request by either party, a hearing will be held before a Hearing Examiner appointed by the county. In conducting any hearing to determine whether a violation of the ordinance has occurred, the Hearing Examiner will have the authority to administer oaths, issue subpoenas, compel the production of and receive evidence. The burden of proof by a preponderance of the evidence rests upon the complainant/employee.

Upon the conclusion of the hearing, an adjudicative final order will be issued and served upon the parties setting forth written findings of fact and conclusions of law.

Enforcement of Violations:

At the conclusion of the hearing and upon a finding of a wage violation, the employer will be ordered to pay wage restitution to the affected employee in an amount equal to three times the amount of back wages that the employer is found to have unlawfully failed to pay the employee. The county will further order the employer to pay the Board of County Commissioners an assessment of costs not to exceed actual administrative processing costs and costs of hearing.  The new ordinance provides for additional penalties for failing to comply with the Hearing Examiner’s order.  

As demonstrated above, the penalties for violation of the ordinance can be costly. Employers in Miami-Dade County need to be sure that they comply with the new ordinance by timely paying wages due to their employees. As stated, the new ordinance establishes a presumption that a reasonable time is no later than 14 calendar days from the date on which the work is performed, however, employers are free to modify that (for a period not to exceed 30 days) by an express written agreement signed by the employee.  

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Florida led the nation in Fair Labor Standards Act lawsuits in 2009. Statistics generated from PACER (Public Access to Court Electronic Records) show that about 2000 new cases were filed in United States District Courts in Florida last year, far more than in any other state. 

Of course, Florida is not the only hotbed of wage-hour litigation. California, which has its own, more rigorous wage-hour laws, has a large number of wage-hour cases filed in its state court system. Texas and New York are also seeing increasing numbers of wage-hour cases.

But when it comes to the FLSA, the Sunshine State rules. The reasons for this are somewhat mysterious. Are Florida employees more litigious than in other states? Do Florida employers violate the FLSA more often? Is there a more active plaintiff-side employment bar in Florida? I suspect the answer is a combination of all these factors, plus good old-fashioned word of mouth. Here’s what I mean: the vast majority of FLSA cases settle before trial. FLSA settlements generally must be approved by a court, see Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982), and many judges refuse to allow FLSA settlements to be confidential. And even if the terms of a settlement are confidential, a settling plaintiff can always disclose that the case has been “resolved amicably,” or words to that effect. Whatever the exact words, the message is clear – the plaintiff got a nice check. It’s like that old shampoo commercial from the 70’s: a settling plaintiff tells two friends, and they tell two friends, and so on and so on… Pretty soon you have 2000 FLSA cases on the docket.

So what can a Florida employer do to avoid being named in an FLSA lawsuit? Well, the best advice I can offer is to make every reasonable effort to comply with FLSA. That may seem obvious, but it’s not as easy as it sounds because the FLSA can be counterintuitive; its rules are often inconsistent with what seem to be reasonable and ethical business practices. But if you learn what the FLSA requires, and adopt policies and practices that are consistent with the law, you will go a long way toward avoiding a lawsuit. And, yes, get the advice of a qualified employment lawyer if you are unsure about what to do. Believe me, it will be far less expensive than litigation.

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It is that time of the year when most companies start thinking about handing out year end or Christmas bonuses to their employees.  For exempt workers, such payments are not a concern.  For non-exempt workers, however, bonus payments raise the prospect of adding to the employee's regular rate, which could result in additional overtime liability.  For example, if an employee works overtime in the week he receives a bonus check of $400.00, the Department of Labor may require the bonus to be included in the "regular rate" upon which the time and one half overtime calculation is based (i.e. add $10 per hour to regular rate).

Companies can easily avoid the overtime problem by carefully crafting their bonus policies to fit within the Department of Labor's exclusion for "discretionary payments" (29 CFR 778.211).  The relevant regulation provides:

The employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid. The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount. If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it. Thus, if an employer announces to his employees in January that he intends to pay them a bonus in June, he has hereby abandoned his discretion regarding the fact of payment by promising a bonus to his employees.

For employers, this means it is critical that bonus policies be scrutinized to ensure there are no promises or guaranties of payment, and that the appropriate discretion language is included.  If not, your Company could be on the hook for a much larger Christmas bonus this year than you anticipated.

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Several of the firm's labor lawyers in our New York office provided the following update on recent changes to New York wage and hour laws.

As we previously reported in our Summer 2009 New York State Employment Law Update, as of October 26, 2009, New York Labor Law Section 195(1) requires employers to notify all newly hired employees of the following: (i) rate of pay, (ii) regular paydays, and (iii) hourly rate and overtime pay rate (for all non-exempt employees). Employees must sign a statement acknowledging receipt of the written notice, and employers must keep the signed statement for at least six years.

On October 28, 2009, the New York State Department of Labor ("DOL") published an official form entitled, "Labor Law Section 195(1) Notice and Acknowledgement of Wage Rate Hourly Rate Plus Overtime," to be used for newly hired, non-exempt, hourly employees. The DOL also published Fact Sheets for both Employers and Workers, each of which state that notice must be given on the official form from the DOL. The notice must be provided to employees at the time of hire, before they do any work. The DOL's Forms and Fact Sheets may be accessed at the DOL Web site.

The DOL has informed us that it is currently preparing additional Notice and Acknowledgment Forms for other categories of employees, such as commissioned salespersons, non-exempt salaried employees and exempt employees. In addition to the forms, the DOL will also publish guidelines to assist employers in complying with the new requirements. The DOL has already published guidelines for temporary employment agencies on its Web site, along with a Notice and Acknowledgment Form to accommodate pay rates that vary for temporary assignments.

The DOL has advised that employers are no longer permitted to satisfy the new-hire notice and acknowledgment requirements by simply incorporating the required terms in offer letters or other "unofficial" forms. According to the DOL, employers must use the recently published official DOL Notice and Acknowledgment Form for all categories of employees (even though this form was created for use with non-exempt hourly employees). Once the DOL publishes its other Notice and Acknowledgment Forms, the appropriate form should be used. We will provide additional information regarding these other Notice and Acknowledgment Forms, as well as the related guidelines, when they are published by the DOL.

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In a recent Client Alert prepared by Jeff Landes, the firm summarized several new laws passed by the New York legislature which will affect employers.  Among these laws was a very important change to the wage and hour laws, which will affect all companies with employees in New York.

Rate of Pay, Regular Pay Day and Overtime Rate Must Be in Writing and Acknowledged by New Hires

Labor Law Section 195(1) currently requires employers to provide newly hired employees with information regarding their rate of pay and the employer's regular pay days – such notice need not be written. On July 28, 2009, however, the New York Labor Law was amended to require employers to provide all employees hired on or after October 26, 2009, with written notice of their rate of pay and the employer's regular pay days. In addition, employees who are eligible for overtime (including non-exempt, salaried employees) must be notified of their regular hourly rate and their overtime rate of pay. Employers will be required to obtain a written acknowledgment of receipt of such notice from each new employee. The legislature has not specified the content and form of the acknowledgment, but indicated that the Commissioner of Labor may provide guidance.

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A client this week asked us to provide an opinion letter regarding the exempt status of certain supervisors, and some tips on how to avoid lawsuits regarding mis-classification.  Although some of the advice was specific to the client's business, much of the advice is applicable to a wide variety of industries.  An excerpt from the memo is below.

• Carefully craft job descriptions to emphasize exempt duties over non-exempt duties – require employees to acknowledge their job descriptions in writing.
• List the two or more employees supervised by an exempt manager in the job description (either by name or by title). This ensures this requirement is not inadvertently overlooked.
• Ensure that managers are involved in both hiring and termination decisions.  The Company should have a paper trail easily proving this element.  Even if managers do not typically make termination decisions, consider having them “sign off” on the termination of employees at their location, thus establishing their participation in the process.
• Supervising two or more employees is a minimum requirement, not necessarily a safe guidepost. Often, supervising only a handful of employees is not a full time job, leaving a manager with most of their time spent on non-exempt work. If the manager does not have a sufficient number of subordinates to justify spending most of his or her time on management, reconsider whether the employee should be classified as exempt.
•  Exempt managers should be paid differently than non-exempt workers. For example, a manager’s pay should be notably different from those he or shesupervises, not only in amount but also in type. A manager’s pay should be related primarily to management performance (i.e. performance of the department or office as a whole), not the performance of non-exempt tasks. Likewise, bonuses and other incentives should not be tied to non-exempt tasks.
• Consider how the number of managers in an office or location will be perceived by a judge or jury reviewing the facts. Someone has to be in charge, and one manager of a department or office is likely to pass muster as a valid exempt employee. As the number of exempt managers in a single location rises, however, the defensibility of the exemptions goes down. 

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As hurricane season is fast approaching, we thought it an appropriate time to offer some thoughts and tips on the wage and hour issues that should be addressed in your company's policies and procedures.  The attached reference tool contains answers to common questions such as:

• Can we dock the salaries of exempt employees who do not come to work during a hurricane or timely return to work afterwards?
• What rules must we follow regarding paying employees who are absent because of weather?
• What do we do if we can't find employees to give them their paychecks?

Although the attached brochure is aimed at Texas employers, if you have operations anywhere along the Gulf Coast, you may find it helpful. 

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