At a time when many states and localities are increasing the minimum wage, New Hampshire’s Senate passed a bill that would increase the state’s minimum wage to $12 per hour by 2022.  The very next day, New Hampshire Governor Chris Sununu vetoed the bill. In doing so, Governor Sununu issued a veto message that said the bill would have a “detrimental effect” on the state’s residents and would lead to lost jobs, reduced hours, and less money in the pockets of employees.

Governor Sununu boasted that New Hampshire has the lowest poverty rate in the country, along with one of the lowest unemployment rates and some of the highest wages in the country. “In 2018, only 0.0015% of Granite Staters earned a minimum wage or less,” he said. “New Hampshire’s economy is booming, and I will do everything in my power to ensure we continue that trend, not hinder it.”

Governor Sununu’s veto message will likely provide New Hampshire’s employers with some peace of mind. The state is unlikely to see the minimum wage hikes that are currently trending throughout the rest of the country, at least through the end of this gubernatorial term.

The U.S. Department of Labor’s Wage and Hour Division (“WHD”) shows no signs of fatigue as it releases two new opinion letters on the Fair Labor Standards Act (“FLSA”) within the first week of August.  These opinion letters address the FLSA’s partial overtime exemption on a “work period basis” and the status of public agency volunteers.  As we have previously advised, employers should read the WHD’s opinion letters carefully and consult with experienced counsel with any questions about their practices vis-à-vis WHD interpretive guidance.

FLSA Section 7(k)

As background, Section 7(k) of the FLSA has alternative overtime standards for law enforcement and fire protection personnel.  In Opinion Letter FLSA 2019-11, the WHD addressed how to determine the applicable overtime hours threshold when an employee works for the fire department and police department of the same public agency.

The regulations specific to law enforcement and fire protection personnel require overtime if an employee exceeds a certain number of hours within tours of duty of 28 days (rather than the traditional 7-day workweek)—212 hours for fire protection personnel and 171 hours for law enforcement personnel—with proportional reductions for shorter tours of duty.  See 29 C.F.R. § 553.230.  An employer must aggregate work an employee performs in law enforcement and fire protection capacities for the same agency.  If the employee works in these differing capacities for separate agencies, then the hours worked in each role stand alone, unless the situation constitutes joint employment as elaborated in the regulations.  See 29 C.F.R. § 791.2.  The regulations further provide that when an employee performs both fire protection and law enforcement activities, the role in which the employee spends the greater number of hours during the tour of duty determines the applicable overtime threshold.  See 29 C.F.R. § 553.213(b).

The WHD then applied these rules to the two examples provided by the employer at issue.

Public Agency Volunteers

In Opinion Letter FLSA 2012-12, the WHD addressed whether volunteer Reserve Deputies at a county’s Sheriff’s Office who receive referrals for paid security work for third parties from the Sheriff’s Office (at the same hourly rate offered to paid full-time deputies) are volunteers or employees of the Sheriff’s Office under the FLSA.

As a starting point, the WHD emphasized that the FLSA aims not to discourage or impair volunteer activities but rather to prevent employers from coercing individuals to volunteer their services in order to sidestep the FLSA’s minimum wage and overtime requirements.  Under 29 U.S.C. § 203(e)(4)(A), a volunteer at a public agency is not an employee for FLSA purposes if: “(1) the individual receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and (2) such services are not the same type of services for which the individual is employed to perform for such public agency.”  Auxiliary police are among the examples of public agency volunteers listed in the WHD regulations.  See 29 C.F.R. § 553.104(b).

The WHD advised that performing extra work for third parties does not invalidate the Reserve Deputies’ volunteer status because (1) access to paid extra duty work for a third party is not “compensation” where such access was unrelated to the number or quality of volunteer hours, but rather depended on the needs of third parties; and (2) even if such access were, in fact, tantamount to compensation, it would be a “reasonable benefit” for volunteering in that it was offered to all officers on the same general terms, on a non-guaranteed basis and accounted for only about 6% of total extra duty hours.  The WHD noted that its conclusion is consistent with the federal district court’s holding in Todaro v. Township of Union, 27 F. Supp. 2d 517, 539 (D.N.J. 1998), an analogous case finding unpaid special law enforcement officers to be eligible for paid positions with private entities.

This Employment Law This Week® Monthly Rundown discusses the most important developments for employers in August 2019.

This episode includes:

  • Increased Employee Protections for Cannabis Users
  • First Opinion Letters Released Under New Wage and Hour Leadership
  • New Jersey and Illinois Enact Salary History Inquiry Bans
  • Deadline for New York State Anti-Harassment Training Approaches
  • Tip of the Week

See below to watch the full episode – click here for story details and video.

We invite you to view Employment Law This Week® – tracking the latest developments that could impact you and your workforce. The series features three components: Trending News, Deep Dives, and Monthly Rundowns. Follow us on LinkedInFacebookYouTubeInstagram, and Twitter and subscribe for email notifications.

Given the prevalence of wage-hour class actions filed against California employers, the Ninth Circuit Court of Appeals from time to time asks the California Supreme Court to clarify certain California wage-hour laws. Last week, the Ninth Circuit asked again in Cole v. CRST Van Expedited, Inc., seeking clarification on the following two questions:

  1. Does the absence of a formal policy on meal and rest breaks violate California law?
  2. Does an employer’s failure to keep records of meal and rest breaks taken by employees create a rebuttable presumption that the breaks were not provided?

As we reiterated last week in our Time Is Money: A Quick Wage-Hour Tip on … California Meal and Rest Period Requirements, more than seven years ago in Brinker Restaurant Corp. v. Superior Court, the California Supreme Court held that, generally, an employer’s duty is to “provide” meal periods; there is no duty to ensure they are taken. “The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so,” as the Court explained. The Court further opined that “the employer is not obligated to police meal breaks and ensure no work thereafter is performed.” Off-duty rest periods must also be “provided.”

The Ninth Circuit’s first certified question—whether a “formal policy” must be adopted—suggests tension between an employer’s duty to “provide,” and the absence of any duty to “ensure” the taking of, meal periods. A number of district courts, including the district court in Cole, have held that an employer satisfies its meal and rest period obligations by posting a copy of the applicable Industrial Welfare Commission wage order in a conspicuous location frequented by employees during working hours. That the Ninth Circuit has certified this issue for the California Supreme Court to decide suggests that the Ninth Circuit believes something more than posting the wage order may be required.

If the Court were to decide that a formal policy is necessary, it could result in somewhat absurd consequences. That is, if a “formal” policy must be set forth in writing, but an employer has had a longstanding practice where the meal and rest periods that employees have taken satisfy the nature, number, and timing requirements set forth in Brinker, would that result in a violation? Depending on how the Court rules, employees who have taken all required breaks may, in theory, still be able to pursue damages.

Attempting to answer the second certified question—whether an employer’s failure to keep records for meal and rest breaks taken by its employees create a rebuttable presumption that the meal and rest breaks were not provided—involves separate analyses for meal and rest periods. Regarding meal periods, the Ninth Circuit recognized Justice Werdegar’s concurrence, joined by Justice Liu, in Brinker, opining that “[i]f an employer’s records show no meal period for a given shift over five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided.” Because concurring opinions are not binding precedent, courts have treated Justice Werdegar’s concurrence differently, either following or disregarding it. With a slightly different makeup on the California Supreme Court today as compared to when Brinker was decided, it is safe to assume that Justices Werdegar and Liu will vote in favor of adopting this presumption. Such a presumption, however, would appear to be inconsistent with Brinker’s conclusion that an “employer is not obligated to police meal breaks.” That is, if an employee fails to take his or her meal periods despite an express policy providing for them, employers may inevitably be compelled to police meal periods or face a lawsuit where it would be the employer’s obligation to show how a meal period was, in fact, provided for each instance that an employee’s time records reflect no meal period.

Concerning the potential adoption of a presumption that no rest period was provided if one was not recorded, the Ninth Circuit appears to have overlooked how there is no California law obligating employers to keep records of rest periods. And the typical presumption analysis applies only when an employer fails to maintain records expressly required by law. Absent some legal gymnastics, there would appear to be little basis to hold that an absence of rest period records creates a rebuttable presumption that rest periods were not provided. Nevertheless, the Court has surprised employers in the past, and there seems to be at least some support among the justices for creating this presumption.

The California Supreme Court’s anticipated answers to these questions may have a huge impact upon employers in California, regardless of industry or occupation. Should the Court rule, for instance, that an employer may not rely on merely posting the applicable wage order to notify employees of their meal and rest period rights, certain employers will need to change their practices going forward and adopt a formal written policy, along with facing class action lawsuits for past practices where no formal policy was in place.

More than seven years ago in Brinker Restaurant Corp. v. Superior Court, the California Supreme Court clarified many of the general requirements for meal and rest periods under California law. Nothing the California Supreme Court said has slowed the filing of meal and rest period class actions against employers doing business in the state.

California wage-hour law is governed in large part by 18 different wage orders that apply to different industries and occupations. “The number of wage orders, and their internal variations, reflects the reality that differing aspects of work in differing industries may call for different kinds of regulation,” as the California Supreme Court explained in Mendiola v. CPS Security Solutions, Inc. Indeed, as the Court explained in Brinker, “[w]hat will suffice [for meal and rest breaks] may vary from industry to industry.”

With that in mind, this tip is not a one-size-fits-all guide but instead discusses California’s meal and rest period requirements generally.

The Nature of Meal and Rest Periods

An employer’s duty is to “provide” meal periods; there is no duty to ensure they are taken. “The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so,” as the Brinker Court explained. The Court further explained that “the employer is not obligated to police meal breaks and ensure no work thereafter is performed.”

Off-duty rest periods must also be “provided.”

Employers must relieve their hourly employees of all duties and relinquish all control over how they spend their meal and periods. Generally speaking, employees should not be interrupted during their breaks, nor should they be required or expected to keep communication devices with them or to monitor such devices if they voluntarily keep such devices on them.

While meal periods should be at least 30 minutes of uninterrupted time, rest periods should be at least 10 minutes of uninterrupted time. If an employer interrupts an employee’s meal or rest period, the employee should be provided another break so that the employee is then afforded a full, uninterrupted break.

Meal periods should be off the clock and unpaid; however, rest periods must be paid and on the clock. Additionally, employees must be permitted to leave the employer’s premises during meal periods. Whether they must also be allowed to leave the premises during rest periods remains a matter of dispute.

The Number and Timing of Meal and Rest Periods

An employer’s obligations to provide meal and rest periods are triggered when an employee works a certain number of hours. Below is a chart explaining the number of meal and rest periods that should be provided depending on the number of hours worked in a single workday.

Hours Worked 10-Minute Paid

Rest Periods

30-Minute Unpaid

Meal Periods

0:00:00 – 3:29:59 hours 0 0
3:30:00 – 5:00:00 hours 1 0
5:00:01 – 6:00:00 hours 1 1*
6:00:01 – 10:00:00 hours 2 1
10:00:01 – 12:00:00 hours 3 2**
12:00:01 – 14:00:00 hours 3 2
14:01 hours – 18:00 hours 4 2

* If an employee works more than five hours in one workday, the employee may voluntarily waive his or her meal period if the time worked will not exceed 6 hours in one workday.

** If an employee works more than 10 but not more than 12 hours in one workday, the employee may voluntarily waive his or her second meal period, so long as the first meal period was not waived.

It is a best practice to have these meal period waivers in writing, signed, and placed in the employee’s personnel file.

A first meal period should be provided within the first 5 hours of work, and a second meal period should be provided within the first 10 hours of work. Rest periods should be provided in the middle of work periods. An example of appropriate timing and sequence in an 8-hour shift is as follows:

  • 8:30 a.m. – the employee clocks in for work
  • 10:30 a.m. – the employee takes a paid, on-the-clock rest period
  • 10:40 a.m. – the employee ends the rest period and resumes work
  • 12:30 p.m. – the employee clocks out and takes an unpaid, off-the-clock meal period
  • 1:00 p.m. – the employee clocks back in from the meal period and resumes work
  • 3:00 p.m. – the employee takes a second paid, on-the-clock rest period
  • 3:10 p.m. – the employee ends the second rest period and resumes work
  • 5:00 p.m. – the employee clocks out and leaves work

The Penalty for Failing to Meet Meal or Rest Period Requirements

If an employer does not provide an employee with a meal or rest period in accordance with the above requirements, a penalty is owed. These penalties are usually referred to as meal or rest period premiums. They are calculated as one hour of pay at the employee’s base rate of pay. An employee may recover only one meal period premium and one rest period premium per day.

Putting It All Together

Having lawful written policies that accurately set forth employees’ entitlements to meal and rest periods, in addition to implementing practices that do not impede or discourage employees from taking those meal or rest periods, is an effective way of avoiding litigation in the first place. But when an employer finds itself facing a lawsuit alleging meal and rest period violations – one that would surely be brought as a proposed class action on behalf of dozens, hundreds or even thousands of employees – having these lawful policies and practices already in place increases the ability to successfully defending that lawsuit.

The New York State Assembly and Senate have passed a potentially groundbreaking act (S2844B/A486B) (the “Act”) that would allow current or former employees to obtain liens on their employer’s personal and real property based upon only the mere accusation of wage violations.  And it arguably would allow those employees to obtain liens against individuals, including owners, managers and supervisors.

If the Act is signed by Governor Cuomo, New York would join the few states to permit such liens based on an unproven wage violation allegation.

A lien is a legal claim or a right against property. The Act, if passed, would give current and former employees priority in any bankruptcy proceeding involving the employer and, among other things, make it difficult for the employer to sell or transfer ownership of real estate.

The Act would apply to wage claims under both the federal Fair Labor Standards Act (“FLSA”) and the New York Labor Law. That would include claims relating to minimum wage, overtime, spread of hours, call-in pay, uniform maintenance pay, withheld tips, unlawful deductions from wages, or improperly taken meal and tip credits.

The Act defines employer as any person who is an “employer” under the FLSA or New York Labor Law. The definition of “employer” under these statutes is extremely broad – and includes not only the corporate entity that employs the employee, but also managers, executives, supervisors, owners, shareholders, and any other person or entity who exercises control over employees’ working conditions. Thus, this Act creates concerns for anyone who meets this broad definition of “employer.”

Importantly, under the Act, the employee would not have to prove that he or she was underpaid to file the lien. The lien could be filed on the basis of an allegation of underpayment.

If passed, the Act would also streamline the process by which employees could hold the ten largest shareholders of a non-publicly traded corporation, as well as the ten members with the largest ownership interests in a limited liability company personally liable for wage theft.

The Act also contains a provision which would allow employees and their agents to examine a business corporation and LLC’s records to obtain the shareholders’ or members’ names, addresses, and ownership value in the company.  In addition, the Act provides that a lien can remain on a property for the duration of a wage lawsuit, which can exert undue pressure on an employer to settle an otherwise defensible, or perhaps even frivolous wage claim.

Under the Act, employees would be entitled to place a lien equal to the amount of the wage claim, inclusive of damages. However, the lien is limited to the particular employee and not a putative class. Notice of a lien can be filed up to three years after the end of the employment which gave rise to the wage claim. The party seeking the lien is required to serve a copy of the notice upon the employer, as well as affix a copy to any real property identified in the lien within five days before or 30 days after filing the lien notice. The lien is filed for one year, which can be extended by a court order. Absent court approval, if the employee does not commence the foreclosure action within one year, the lien automatically extinguishes.

Employers would not be without recourse, however, as they may purchase a bond to discharge the lien at any time. Additionally, if the employer can prove that the employee willfully exaggerated the lien, the lien will be discharged and the employee would be restricted from obtaining another lien against the employer based on the same claim.

As the Act would permit employees to obtain liens against an employer’s personal and real property based upon a mere allegation of underpayment of wages, employers – including those persons who fall within the broad statutory definition of “employer” –  are incentivized even more than they had already been to ensure full compliance with all applicable wage and hour laws. To that end, employers should consider self-audits through the assistance of counsel to review all of their wage and hour practices.

This post was written with assistance from Christopher R. Shur, a 2019 Summer Associate at Epstein Becker Green.

The U.S. Department of Labor’s Wage and Hour Division (“WHD”) has issued an opinion letter addressing the compensability of a long-haul truck driver time in a truck’s sleeper berth during multi-day trips.  While this question is highly fact-specific, the WHD’s response offers a useful refresher on the widely applicable Fair Labor Standards Act (“FLSA”) concepts of compensability of waiting, sleeping, and traveling time.

In Opinion Letter FLSA2019-10, issued on July 23, 2019, the employer operates a fleet of trucks, licensed by the Department of Transportation to move property in interstate commerce.  The drivers receive pay for time spent driving, inspecting, cleaning, fueling and completing paperwork (55.84 hours at the federal minimum wage), but not for time in the sleeper berth, where drivers can sleep without interruption.  To resolve whether this practice complies with the FLSA,  the WHD focused on whether the drivers’ activities in the sleeper birth constitute “hours worked” within the meaning of the FLSA, assuming, based on the employer’s description of their job, that the drivers were exempt from the FLSA’s overtime requirements under 29 U.S.C. § 213(b)(1), the Motor Carrier Exemption.  To start, the WHD reviewed applicable regulations on waiting time, including those distinguishing between an employee “engaged to wait” or on-duty (compensable) and an employee “waiting to be engaged” (non-compensable).  Essentially, if “waiting is an integral part of the job,” waiting periods are short or unpredictable, or the employee is not completely relieved of his duties during the waiting periods, an employee’s waiting time is compensable.  The implementing regulations provide examples of these principles in the context of truck drivers.  In a footnote, the WHD advised that employees who remain on an employer’s “premises” to sleep and eat out of necessity due to the remoteness of the workplace or the nature of the job, including but not limited to truck drivers, are not continually on duty provided that they have regularly scheduled hours and have periods where they are completely relieved of all duties.

The WHD then considered the question of sleeping time, reiterating principles expressed in the regulations: Sleeping time is compensable if an employee may sleep during an on-duty period when the employee is not busy.  When, however, an employee is on duty for a “continuous” period of 24 hours or more, an employer can agree to designate 5-8 on-duty hours as a non-compensable sleeping period.

Finally, the WHD considered travel time, citing regulations specific to truck drivers that do not require compensation where, as here, one driver of a multi-member driving team sleeps in a sleeper berth and is completely relieved of duties while another driver drives the truck.  See 29 C.F.R. § 785.41.

The WHD ultimately advised that time spent by a driver in a truck’s sleeper berth while otherwise relieved of duty (whether or not the truck is moving) is presumptively noncompensable time.  As the WHD explicitly acknowledged in this opinion letter, this marks a departure from, and withdrawal of, prior guidance in which the WHD interpreted the relevant regulations “to mean that while sleeping time may be excluded from hours worked where ‘adequate facilities’ were furnished, only up to 8 hours of sleeping time may be excluded in a trip 24 hours of longer, and no sleeping time may be excluded for trips under 24 hours.”  By adopting this interpretation, the WHD hopes to provide a bright-line rule that will be less burdensome for employers to follow and consistent with the prevailing practice in the trucking industry.

As we have previously written, the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court dramatically changed the standard for determining whether workers in California should be classified as employees or as independent contractors for purposes of the wage orders adopted by California’s Industrial Welfare Commission. A significant question left open by that ruling was whether Dynamex would apply retroactively.

On May 2, 2019, in Vazquez v. Jan-Pro Franchising International, Inc., the Ninth Circuit concluded that Dynamex in fact applied retroactively. That decision appeared to confirm that employers were exposed to liability for failing to comply with an “ABC” test that they had no reason to believe they needed to comply with precisely because it did not previously exist under California law.

On July 22, 2019, however, the Ninth Circuit issued an order granting a petition for panel rehearing, withdrawing its decision in Vazquez, and stating that it would certify the question of whether Dynamex applies retroactively to the California Supreme Court.

Whether the California Supreme Court elects to answer the question for the Ninth Circuit is entirely up to the Court itself.  Should it choose to do so, employers will have some clarity on whether the Dynamex standard indeed applies retroactively.

After a brief, two-month hiatus, the Wage and Hour Division of the U.S. Department of Labor (“WHD”) has issued another round of opinion letters answering various questions submitted by the public.  Specifically, these opinion letters address the calculation of overtime pay for nondiscretionary bonuses, the application of the highly compensated employee exemption to paralegals, and rounding hours worked under the Service Contract Act (“SCA”).  This guidance marks the first issued by the new Wage and Hour Administrator Cheryl Stanton, who has been in the seat since April.

As is usually the case, despite the fact-specific nature of the questions and resulting analysis for these opinion letters, the WHD’s advice can, in certain situations, have broader applicability.  Accordingly, we encourage employers to take note of these letters and consult with counsel if they have questions about their practices.

Nondiscretionary Bonuses

In Opinion Letter FLSA 2019-7, the WHD addressed the calculation of quarterly and annual nondiscretionary bonuses as part of the regular rate.  The specific question involved whether an employer may, when paying a nondiscretionary bonus pursuant to a collective bargaining agreement (“CBA”), recalculate the regular rate for each workweek of the bonus period by averaging the bonus earnings across the workweeks rather than incorporating the bonuses into the regular rate contemporaneously.

Starting with general legal principles, the WHD advised that a nondiscretionary bonus compelled by a CBA constitutes “remuneration” that an employer must include in the regular rate of pay.  Citing the FLSA’s implementing regulations, the WHD further advised that an employer who bases its nondiscretionary bonus on work performed during multiple workweeks may pay the bonus at the end of the bonus period (when the bonus becomes “ascertainable”) and “disregard the bonus in computing the regular hourly rate until such time as the amount of the bonus can be ascertained.”  At that time, the employer can then retrospectively recalculate the regular rate for each workweek in the bonus period and pay the additional overtime compensation due on the bonus by averaging the bonus earnings across the workweeks during which the employee had earned the bonus.  Thus, for example, an employer which pays a mid-year bonus for performance over the previous six-month period can spread such bonus equally across the six-month period.

The WHD also advised that an employer that pays a fixed percentage bonus that simultaneously pays overtime compensation due on the bonus—e.g., a bonus that is 10 percent of straight-time wages and 10 percent of overtime wages—does not need to recalculate the regular rate.  This is commonly referred to as a percentage of total earnings bonus, which is intended to be inclusive of overtime. The implementing regulations provide that this form of bonus may not be used as a device to evade the overtime requirements of the FLSA.  In this most recent Opinion Letter FLSA 2019-7, the WHD expressed disagreement with certain court decisions interpreting 29 C.F.R. § 778.210 to require an employer to multiply an employee’s total earnings by the same percentage to satisfy the FLSA’s overtime compensation requirements.

Relying on these principles, the WHD concluded that the employer may wait to include the employee’s annual bonus in the regular rate calculation until the end of the bonus period and recalculate the regular rate then.  With respect to the quarterly bonuses, the employer need not recalculate the regular rate for each workweek in the bonus period because the bonuses simultaneously include all overtime compensation due on the bonus “as an arithmetic fact.”

Applicability of Highly Compensated Employee Exemption to Paralegals

In Opinion Letter FLSA 2019-18, the WHD addressed whether the highly compensated employee exemption applies to paralegals of a global trade organization who engage in non-manual work, receive an annual salary of at least $100,000, which includes at least $455 per week paid on a salary or fee basis, and perform a number of administrative duties.

To frame its response, the WHD first reviewed the current qualifications for the administrative and highly compensated employee exemptions.  In describing the highly compensated employee exemption, the WHD emphasized that the exempt duty must not be an isolated or one-time task but need not be the employee’s primary duty.  Here the WHD cited the U.S. Supreme Court’s recent decision in Encino Motocars, LLC v. Navarro, which held that the statutory text of the FLSA must be given a “fair (rather than a narrow) interpretation.”

The WHD ultimately concluded that the paralegals at issue appear to satisfy the highly compensated employee exemption because all of their duties are non-manual, they receive total annual compensation above $100,000, and they customarily and regularly perform at least one exempt duty of an administrative employee.  On the last point, the WHD found that budgeting, auditing, assisting with finance, and legal and regulatory compliance constitute exempt, administrative duties.  Because the highly compensated employee exemption applied here, the WHD did not opine on whether the employee’s salary and duties independently satisfied the administrative exemption, which, it noted, would have required an analysis of the paralegals’ “discretion and independent judgment.”

Notably, the FLSA’s implementing regulations specifically provide that paralegals (and legal assistants) generally do not qualify as exempt learned professionals because an advanced specialized academic degree is not a standard prerequisite for entry into the field.  The WHD has also previously concluded that paralegals do not satisfy the administrative exemption in the absence of the highly compensated employee abbreviated duties test.  Thus, this opinion letter is a welcome development for employers hoping to classify paralegals as exempt under federal law.  However, because the WHD has proposed an amendment to existing regulations that would increase the minimum annual compensation threshold for the highly compensated employee exemption from $100,000 to $147,414, this exemption may soon prove too expensive for some employers to invoke for paralegal positions.

Lastly, it is important for employers to take heed of state-specific laws and regulations that do not provide for the highly-compensated employee exemption, such as California, New York, Missouri, and Pennsylvania.

Rounding

In Opinion Letter FLSA 2019-9, the WHD addressed whether a non-profit organization that employs individuals with disabilities under government contracts that are subject to the SCA can use payroll software that rounds each employee’s daily hours by two decimal points and calculates daily pay by multiplying the rounded daily hours number by the SCA prevailing wage.

The WHD concluded that the employer’s rounding practice was permissible.  As a preliminary matter, the WHD noted that the SCA regulations require contractors to calculate hours worked using FLSA principles.  The WHD then advised that the FLSA allows rounding as long as it “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”  29 C.F.R. § 785.48(b).  The WHD affirmed its policy to accept neutral rounding in any one of the following increments: the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one one-half hour.

For decades, employers have rounded non-exempt employees’ work time when calculating their compensation.  Maybe they have rounded employee work time to the nearest 10 minutes, maybe to the nearest quarter hour, but they done it and, generally, the courts have approved of it.

But the question employers with time-rounding policies should ask themselves today is this:  Why are we still rounding our employees’ time?

If your answer to that question is Because we have always done it, or Because someone told us it is lawful, it might be time to rethink the issue.

(And if your answer is Because rounding time saves us money, then you definitely need to rethink the issue because under-compensating employees is not a legitimate reason to have such a policy.)

It may well be true that your company has always rounded employee work time.  But times have changed, and the reason you did so originally probably no longer exists.

For the most part, necessity was what drove many employers to begin rounding employees’ time decades ago.

Rounding time to the nearest 10- or 15-minute interval was considerably easier than having a bookkeeper punch numbers into a calculator or an adding machine to calculate an employee’s compensation if, for instance, he or she worked 8 hours and 3 minutes in a day — then repeat that process over and over for each employee for each day or week.

If an employee worked 8 hours and 3 minutes, or 7 hours and 57 minutes, the bookkeeper would just round the time to an even 8 hours, calculate the employee’s wages swiftly, and everyone (presumably) would be happy.

Sometimes that time-rounding would benefit the employer (which gained 3 minutes when it rounded time down from 8 hours and 3 minutes, say, to 8 hours), and sometimes it would benefit the employees (who would gain three minutes if time was rounded up from 7 hours and 57 minutes to 8 hours), but it would all “come out in the wash,” the thinking went.  Over time, the time rounded down and the time rounded up would all balance out.

And, not unimportantly, the courts have regularly approved such even-handed time-rounding policies.

But, of course, the days of bookkeepers using calculators or adding machines to calculate employees’ compensation are largely long gone.  It would not take most employers considerable time to calculate to the penny what an employee was owed if he or she worked 8 hours and 3 minutes, or 7 hours and 57 minutes.  No, for most employers, that’s something that can now be computed in split seconds without a bookkeeper manually punching numbers into a machine.  Or it’s something that’s outsourced to a payroll processing vendor.

The use of computerized time and payroll systems has made the process of calculating employee compensation infinitely easier than it once was.  Generally speaking, it is easy to compute and pay each non-exempt employee to the minute, if that is what the employer wants to do.

Not incidentally, those same computerized time and payroll systems make it easier to determine if an employer’s time-rounding policy in fact results in everything “coming out in the wash.”  That is, while it might take some time and effort to run the numbers, an employer’s electronic records can be reviewed to determine if its time-rounding policies in fact result in a “wash” — or if they benefit the employer or the employees over some period of time.

If the policy benefits the employer, that can be problematic.  Very problematic.  In California, for instance, the courts continue to acknowledge that time-rounding policies can be lawful.  But those same courts have held that not only must the time-rounding policies be neutral on their face – rounding time both up and down in an even-handed manner — but they must also be neutral in practice.  In other words, if an employer’s time-rounding policy results in employees being shortchanged with some amount of statistically significant frequency, the employer can be on the hook for underpaying its employees.  And, of course, for penalties and attorney’s fees.

Not surprisingly, the issue of whether an employer’s time-rounding policy results in systematic underpayment to employees comes up often in the context of wage-hour class actions, where it is not unusual for a single plaintiff to seek to represent all of an employer’s employees on a claim that they have been underpaid.

Given the desire to avoid a class action and the ease with which time and compensation can be computed without time-rounding, it would be wise for employers to consider whether they wish to continue to employ time-rounding.

If you don’t have a good answer to explain why you are using a time-rounding policy, it might be time to dispose of it and to pay your employees to the minute.