Our colleagues Jeffrey H. Ruzal, Denise M. Dadika, Maxine H. Neuhauser, and Eduardo J. Quiroga have co-authored an Act Now Advisory that will be of interest to our readers: “Department of Labor Issues OSHA, Wage/Hour, and FMLA Guidance Addressing COVID-19.”

Following is an excerpt:

In response to the spreading 2019 novel coronavirus (“COVID-19”) pandemic, which has now been declared a national emergency by President Trump, the Department of Labor has released guidance to employers, summarized more fully below:

    • The Occupational Safety and Health Administration (“OSHA”) issued Guidance on Preparing Workplaces for COVID-19 (“OSHA Guidance”), which identifies measures that employers can take to reduce worker exposure to COVID-19 and help reduce its spread.
    • The Wage and Hour Division published questions and answers (“FAQs”) providing information on common issues that employers and employees face when responding to COVID-19, including effects on wages and hours worked under the Fair Labor Standards Act (“FLSA”) and job-protected leave under the Family and Medical Leave Act (“FMLA”). As detailed in our recent Advisory, the FMLA guidance may soon change significantly for certain employers based on recent federal legislation, the Families First Coronavirus Response Act (H.R.6201) (“Bill”), which passed in the House of Representatives and is currently making its way to the Senate. The Bill, as currently drafted, would require private employers with fewer than 500 employees to provide expanded FMLA benefits and paid sick leave to employees in specific emergency circumstances.

Read the full Advisory here.

Employers grappling with workplace attendance issues in the wake of the COVID-19 coronavirus may soon face additional challenges resulting from a potential economic downturn.  Media stories are already beginning to report on potential furloughs and layoffs.  For some employers, reducing the workweek (e.g., from 5 working days to 4 working days) could be a reasonable business response.  But would reducing the workweek affect the overtime exemption for exempt employees?

That question has been answered by the Tenth Circuit in In re Wal-Mart Stores, Inc., 395 F.3d 1177 (10th Cir. 2005), and the Illinois Appellate Court in Robinson v. Tellabs, 391 Ill. App. 3d 60 (1st Dist. 2009) (Illinois expressly incorporates the FLSA’s overtime exemptions, and this decision provides a thorough analysis of the federal regulations, court decisions, and relevant U.S. DOL opinion letters).  Both courts held that:

(a) prospectively reducing the base hours of exempt employees;

(b) with a commensurate reduction in base salary;

(c) for the purpose of addressing a genuine, bona fide business need;

does not destroy the overtime exemption.

Notably, these decisions relied upon, and applied “Auer deference” to, U.S. DOL Opinion letters finding that such reductions in workweek and salary are permissible when the reduction is made prospectively, for a proper purpose, and not so frequently that the employee is effectively transferred from a salaried to hourly.  See DOL Opinion Letter WH-93, Nov. 13, 1970; DOL Opinion Letter, March 4, 1997; and DOL Opinion letter, Feb. 23, 1998.  The Supreme Court’s affirmance of “Auer deference” in Kisor v. Wilke, 139 S. Ct. 2400 (2019), supports continued reliance on these opinion letters and decisions.

Prospective reduction of workweeks with a commensurate reduction in salaries is thus another potential arrow in the quiver for employers responding to the economic impact of COVID-19.

As the number of U.S. states reporting cases of COVID-19 coronavirus increases, many employers are imposing mandatory work from home (“WFH”) policies to mitigate risk of contamination and ensure business continuity.  Some employers are requiring employees who have travelled to or received visitors from mainland China (or other areas with high infection rates) and those with fever or other flu-like symptoms to remain at home for 14 days, while others are instructing half or more, up to their entire workforce, to work remotely until further notice.  Whatever the form, employers enacting WFH policies need to make sure they are appropriately compensating their workers and are otherwise complying with all applicable federal, state, and local wage and hour laws.

Exempt Employees

As a preliminary matter, all employees who perform work for an employer while out of the office must be paid.  Other than teachers, doctors, lawyers, or employees paid on a “fee basis,” employees who are exempt from overtime must be paid for the entire workweek during which they perform any amount of work, unless the regulations authorize a deduction, such as where an exempt employee is absent from work for one or more full days for personal reasons, or for absences of one or more full days on account of sickness or disability if in accordance with a bona fide plan, policy, or practice of providing compensation for loss of salary occasioned by such sickness or disability.  If exempt employees perform no work in any given workweek, they need not be paid for that week of work; however, if any absences are at the employer’s direction or the operating requirements of the business, exempt employees must be paid their full weekly salaries.

In addition, it is important for employers to track the type of telework performed by their exempt workforce.  In order to maintain exempt status, an employee must perform exempt work as his or her “primary duty.”  While federal regulations do not strictly quantify the term “primary duty,”  federal law views time spent as a significant factor, and California law views time as integral to that state’s exemption standard.  It is therefore important that employers ensure that the nature of the tasks being performed remotely by their exempt personnel are largely exempt-qualifying.

In an actual emergency situation, however, an exempt employee does not lose exempt status by performing work of a normally non-exempt nature for a relatively limited period of time.  Emergencies include those that threaten the safety of employees or a cessation of operations or serious damage to the employer’s property.  However, federal regulations provide that an “emergency” does not include “events that are not beyond control or for which the employer can reasonably provide in the normal course of business.”  As a general rule, exempt employees performing non-exempt work on a prolonged basis will jeopardize the exemption.

Non-Exempt Employees

Generally, employers must pay non-exempt employees the applicable minimum wage (or promised wage, if higher) for all hours worked and at least and one-half times an employee’s regular rate of pay for all hours over 40 in a work week, as well as daily overtime in certain states.  Similar to exempt employees, non-exempt employees paid on a “fluctuating-workweek” basis under the Fair Labor Standards Act (“FLSA”) normally must receive their salary for each workweek in which they perform any work.

Employers are free to reduce their non-exempt employees’ regularly scheduled hours due to temporary closures or reduced demand.  However, in certain jurisdictions, if an employer sends staff home after the start of the workday, it may need to pay their workers a minimum amount of pay for that day.  In New York, for example, certain non-exempt workers are entitled to “call-in” pay equal to the lesser of a specified hours of pay (four or three hours), or the hours of pay in the employee’s regularly scheduled shift, at the state minimum wage rate. Thus, in New York, if an employer sends home an employee for lack of work after they have already arrived, the employee is entitled to a minimum amount of “call-in” pay for the day.

For employers considering extending their non-exempt employees’ regularly scheduled hours due to increased demand, reduced staff, etc. during the coronavirus outbreak, be aware that certain state laws require extra pay.  For example, in New York, employers other than those in the building service and farming industries must pay hourly, nonexempt employees whose workday begins and ends more than 10 hours (including any time off-duty) apart an extra hour of pay at a minimum wage for that day, known as a spread of hour payment.

When non-exempt employees work from home, it can be difficult for an employer to monitor their hours, thereby increasing the risk of off-the-clock and overtime claims.  To ensure that non-exempt employees are paid for all time they are working outside the office, consider taking the following steps:

  • Direct non-exempt employees to use software that allows them to accurately record and submit their hours remotely (and confirm in advance that the software can be accessed remotely).  There are a number of easy-to-use timekeeping smartphone applications.  Some are even free.  In addition, have non-exempt workers agree in writing that they will use the firm-recommended software to document time spent working.
  • Adopt or reiterate, as applicable, a written policy requiring all workers, including those working from home, to record all hours worked contemporaneously. The policy should also make clear the employer’s expectations for tracking break and meal times.  To that end, employers should instruct non-exempt workers not to work during any unpaid meal breaks and to record accurately all such periods.  Keep in mind that any state laws requiring paid/unpaid mandatory meal and/or rest breaks (e.g., California) will apply equally to non-exempt employees working remotely in that jurisdiction.
  • Encourage non-exempt workers to work their regularly scheduled hours (e.g., 9 a.m. to 5 p.m.) and instruct managers to try not to communicate requests for work to non-exempt employees outside regularly scheduled hours. Remind non-exempt employees that time spent reading and/or responding to emails constitutes “work.”
  • Adopt or reiterate, as applicable, a written policy prohibiting unauthorized overtime, strictly monitor for compliance with that policy, and impose discipline for any violations. While an employer may still have to pay overtime upon an employee’s first infraction, if the employee continues to work overtime following discipline, the employer can credibly argue that it did not “suffer or permit” the work, so long as the employer does not simply accept the benefit of the employee’s labor without promptly correcting the behavior and ensuring compliance with the timekeeping policy.
  • “Test” your WFH protocols, including time-keeping software, to identify any areas for remediation or improvement.

 

Recently, we wrote here about a federal court order requiring DoorDash to conduct more than 5,000 individual arbitrations under the terms of its mandatory arbitration agreements, with each arbitration to address claims that it had misclassified its drivers as independent contractors.

The order would fall in the category of “Be Careful What You Wish For.”  In seeking to avoid class or collective actions by having employees sign arbitration agreements with class action waivers, employers face the possibility of hundreds or thousands of individual arbitration for which they likely will have to foot the bill.

For those who thought the DoorDash decision was an aberration and that it was unlikely other companies would be ordered to conduct thousands of individual arbitrations, they may want to think again.  It may not be an aberration at all — Postmates is facing a virtually identical situation.

Judge Saundra Brown Armstrong of the United States District Court in Oakland has refused to stay her order requiring Postmates to conduct more than 5,000 individual arbitrations, which Postmates argued would require it to pay more than $10 million just in arbitration filing fees.

Judge Armstrong rejected Postmates’ argument that it would be too expensive for it to pay for more than 5,000 arbitrations.  Like Judge William Alsup in the DoorDash case, she criticized Postmates for arguing that it should not be held to the terms of an arbitration agreement that it required drivers to sign.

She wrote: “Postmates’ obligation to tender $10 million in filing fees as a result of those arbitration demands is a direct result of [its own] agreement — which Postmates drafted and which Postmates required each courier to sign as a condition of working for Postmates. It strains credulity for Postmates to argue that the amount of filing fees due constitute irreparable harm when that ‘harm’ is entirely of its own making.”

From experience, we can tell you that the arbitration fees alone for an individual arbitration are typically about $60,000.  That does not include the attorneys’ fees or potential exposure.

So if you assume that Postmates would have to pay $60,000 in arbitration fees for each of the 5,000-plus individual arbitrations, the arbitration fees alone would be more than $300 million.

It seems highly unlikely that Postmates would agree to pay such sums, and more likely that it will either try to find a way to appeal the order or resolve the claims on a classwide basis before the arbitrations commence.

Whatever happens next, and whatever the ultimate outcome, Judge Armstrong’s order should be read by all employers that have implemented arbitration programs or are considering doing so because, like Judge Alsup’s order in the DoorDash case, it succinctly demonstrates how employers must “be careful what they wish for” when it comes to such agreements.

We encourage our readers to visit Workforce Bulletin, the newest blog from our colleagues at Epstein Becker Green (EBG).

Workforce Bulletin will feature a range of cutting-edge issues—such as sexual harassment, diversity and inclusion, pay equity, artificial intelligence in the workplace, cybersecurity, and the impact of the coronavirus outbreak on human resources—that are of concern to employers across all industries. EBG’s full announcement is here.

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With the March 16, 2020 effective date of the new rule interpreting joint employer status under the Fair Labor Standards Act (“FLSA”) almost upon us, employers should brush up on the updated guidance and review their relationships with workers to ensure compliance.  Otherwise, they may face the expensive possibility of being held jointly and severally liable under the FLSA for all of the hours the individuals worked in the workweek, including hours worked for a different company.

The New Rule

A joint employment relationship may arise under two potential scenarios.

Scenario 1:  one company employs an individual to work and a second, independent company also employs the individual or simultaneously benefits from that work.

A four-part balancing test analyzes whether the putative joint employer actually exercises control, directly or indirectly, in one or more of the following ways:

  1. Hiring or firing the employee;
  2. Supervising and controlling the employee’s work schedule or conditions of employment to a substantial degree;
  3. Determining the employee’s rate and method of payment; and
  4. Maintaining the employee’s employment records.

The power or reserved right to exercise this control may be relevant to the joint employer determination, but it will not confer joint employer status where there is no actual exercise of control and none of the other factors is present.  Additional factors also may be relevant if they indicate whether the putative joint employer exercises significant control over the terms and conditions of the individual’s work.  As with most balancing tests, no single factor is dispositive, and the weight of each factor will vary depending on the circumstances.

In contrast to the four (or more) factors that may inform the determination of joint employer status, certain other factors are definitively not relevant under the revised FLSA regulations—namely, those assessing an employee’s economic dependence on the putative joint employer, including:

  • Whether the employee is in a specialty job or in a job that requires special skill, initiative, judgment or foresight;
  • Whether the employee has the opportunity for profit or loss based on his or her managerial skill;
  • Whether the employee invests in equipment or materials required for work or the employment of helpers; and
  • The number of contractual relationships the putative joint employer has entered into to receive similar services.

Nor do any of the following contractual arrangements or business practices make FLSA joint employer status any more or less likely:

  • A particular business model (including a franchise model);
  • Entering into, monitoring, and enforcing contractual agreements requiring the employer to comply with specific legal obligations or to meet certain health and safety standards, and requiring inclusion of such policies and standards in an employee handbook (e., mandating compliance with the FLSA and similar laws, institution of sexual harassment policies, and implementation of workplace safety protocols and training);
  • Entering into, monitoring, and enforcing contractual agreements with the employer requiring quality control standards;
  • Providing the employer a sample employee handbook or other forms to the employer;
  • Offering an association health or retirement plan with the employer;
  • Allowing the employer to operate a business on the putative employer’s business; and
  • Jointly participating in an apprenticeship program with the employer.

Scenario 2:  one employer employs a worker for one set of hours in a workweek, and another employer employs the same worker for a separate job in a separate set of hours in the same workweek.  In this scenario, each employer may disregard all work performed by the employee for the other if they act independently of each other and are disassociated with respect to the employment of the employee.

By contrast, employers that are sufficiently associated with respect to the employee’s employment must aggregate all hours worked for each in determining their respective compliance with the FLSA.  “Sufficient association” between two putative joint employers turns on whether:

  1. There is an arrangement between them to share the employee’s services;
  2. One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
  3. They share direct or indirect control over the employee.

Employers that are sufficiently associated will be jointly and severally liable for compliance with the FLSA (including overtime) for all hours worked by the employee in a particular workweek by any of the associated joint employers.  However, each joint employer may take credit toward minimum wage and overtime payments by the other.

Key Takeaways

Under both scenarios, the key to the joint employer analysis is the putative joint employer’s sufficient control over the employee or sufficient association with the employer, and either scenario can potentially lead to unanticipated liability for overtime based on aggregated hours about which a putative joint employer may not have even been aware.  To mitigate against a finding of joint employer status, employers should carefully consider existing (or potential) situations in which they may come into contact with other employers’ workers or where their own workers may be coming into contact with other employers.  This should include a review of any contractual arrangements for the performance of work or provision of services (whether with entities providing workers or individuals).  By identifying these situations, a potential joint employer may then make informed decisions about how to manage the risks:  either by treating a situation as joint employment and tracking and paying for work time accordingly, or by potentially reducing the amount of control or association to lessen the risk of a joint employment finding.

It is not unusual for businesses at risk of employee theft to implement security screenings for employees as they exit the employer’s facilities.  Such screenings are especially common in industries where small, costly items could easily be slipped into a pocket or handbag – jewelry, smartphones, computer chips, etc.

In light of the California Supreme Court’s decision in Frlekin v. Apple, Inc., those security screenings now seem likely to lead to even more litigation wherein employees claim that they were not paid for their time spent waiting to be screened, at least in California.

We have written about security screening cases a few times before – e.g., here, here and here – because they are claims that often arise in wage-hour class actions in California.

Importantly, claims regarding security screenings are exceedingly rare under federal law following the United States Supreme Court’s decision in Integrity Staffing Solutions, Inc. v. Busk, holding that time spent awaiting bag checks was not compensable time under the Fair Labor Standards Act (“FLSA”).

But generally, California law has broader coverage than federal law concerning what constitutes “hours worked” for purposes of compensation.  And the California Supreme Court reaffirmed that broad coverage in Frlekin.

Frlekin has a long history.  As we wrote about more than four years ago, the significant part of the case started in federal court, where District Judge William Alsup granted summary judgment to Apple, concluding that the time spent in exit searches was not “hours worked” under California law because the searches were peripheral to the employees’ job duties and could be avoided if the employees chose not to bring bags to work.  The plaintiffs appealed to the Ninth Circuit, which then asked the California Supreme Court to decide whether such time is compensable.

The relevant California wage order applicable in FrlekinWage Order No. 7 – defines “hours worked” as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so[.]”

In Frlekin, the California Supreme Court held that the “time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages, bags, or personal technology devices voluntarily brought to work purely for personal convenience by employees [is] compensable as ‘hours worked’” under California law concerning the mercantile industry.

In reaching that conclusion, the Court found that Apple’s “employer-controlled activity primarily serves the employer’s interests.  The exit searches are imposed mainly for Apple’s benefit by serving to detect and deter theft.  In fact, they are an integral part of Apple’s internal theft policy and action plan.  The exit searches burden Apple’s employees by preventing them from leaving the premises with their personal belongings until they undergo an exit search – a process that can take five to 20 minutes to complete – and by compelling them to take specific movements and actions during the search.”

The Court also made broad observations regarding compensability, reaffirming that “‘[t]he level of the employer’s control over its employees, rather than the mere fact that the employer requires the employees’ activity, is determinative’ concerning whether an activity is compensable,” and also “emphasiz[ing] that whether an activity is required remains probative in determining whether an employee is subject to the employer’s control.  But, at least with regard to cases involving onsite employer-controlled activities, the mandatory nature of an activity is not the only factor to consider.”  That is, “courts may and should consider additional relevant factors – including, but not limited to, the location of the activity, the degree of the employer’s control, whether the activity primarily benefits the employee or employer, and whether the activity is enforced through disciplinary measures – when evaluating such employer-controlled conduct.”

Significantly, the Court expressly stated that its ruling applies retroactively.  This means that even if an employer doing business in California were to revise its exit search policy today in light of Frlekin, it may still be subject to a claim for unpaid wages, with the relevant statutes of limitations reaching back as far as four years.

In light of Frlekin, California employers should reexamine their policies and practices to determine whether they place any off-the-clock control similar to that determined to be compensable in Frlekin.

It’s no secret that many employers have employees sign arbitration agreements with class and collective action waivers in the hopes of avoiding the massive wage-hour lawsuits that have become so prevalent in the past two decades.

Nor is it any secret that, following the U.S. Supreme Court’s decision in Epic Systems affirming that such agreements can be valid, even more employers have chosen to use them with their workforces.

But, in discussing with clients whether to implement such agreements, lawyers worth their salt have always told their clients this: “Be careful what you wish for because there is always the possibility that you could be hit with hundreds or thousands of individual arbitrations – and you will have to pay for each of them.”

That is because in jurisdictions like California, employers must pay all of the arbitration fees except for the filing fee itself.

They must pay the administrative fees, which typically are about $2,000 per case.

And they must also pay the fees of the arbitrator, who is often a retired judge.

From experience, the arbitrator’s fees alone for a single case are typically about $60,000, at least in California.

That, of course, does not even take into account the employer’s legal fees to defend the case or the potential exposure.

As you can see, an individual arbitration can be expensive for an employer.

Hundreds or thousands of them, at $60,000 apiece, could be back-breaking.

Knowing this, when faced with arbitration agreements with class action waivers, it’s not unusual for plaintiffs’ counsel to threaten to initiate hundreds or thousands of individual arbitrations in order to force an employer to agree to forego trying to enforce the agreements and instead defend – and settle — a class or collective action in court.

Most of the time, those threats are just that – threats.

But sometimes they are more than that, as food delivery company DoorDash has learned.

In a proposed class action lawsuit in the United States District Court for the Northern District of California alleging that DoorDash misclassified drivers as independent contractors, the named plaintiffs had arbitration agreements with class action waivers.  So, too, did most, if not all, of the company’s other drivers.

More than 5,700 of those drivers wished to pursue individual arbitrations before the American Arbitration Association (“AAA”).

Faced with administrative fees alone of more than $12 million from AAA, DoorDash chose not to pay the fees, and AAA closed the matters.  Typically, that would result in the cases being litigated in court, where DoorDash would escape having to pay those administrative fees, much less the arbitrators’ fees for those cases.

That was when plaintiffs’ counsel turned the tables, filing a motion to compel DoorDash to conduct more than 5,700 individual arbitrations pursuant to the terms of its own arbitration agreements.

DoorDash’s strategy to try to escape the arbitration to which it had agreed by not paying the fees to AAA did not sit well with Judge William Alsup.

In sometimes harsh language in which he spoke of the “hypocrisy” of DoorDash trying to enforce the arbitration agreements when it suited the company but avoid arbitration when it did not,  Judge Alsup ordered DoorDash to conduct individual arbitrations for 5,010 of its drivers, excluding the remaining 700-plus drivers for technical reasons.

Let me save you from doing the math.  If you assume that the company were to have to pay $60,000 in arbitrator fees for each of the 5,010 individual arbitrations, the arbitrators’ fees alone would be more than $300 million.

It seems highly unlikely that DoorDash would agree to pay such sums, and more likely that it will either try to find a way to appeal the order or resolve the claims on a classwide basis before the arbitrations commence.

Whatever happens next, and whatever the ultimate outcome, Judge Alsup’s order should be read by all employers that have implemented arbitration programs or are considering doing so because it succinctly demonstrates how employers must “be careful what they wish for” when it comes to such agreements.

As we recently wrote here, Uber and Postmates (and two of their drivers) to file an eleventh-hour lawsuit seeking to enjoin the enforcement of California’s controversial new independent contractor law – known as AB 5 – against them.

In a significant blow to the challenge to the companies’ challenge to the new law, the court has denied Uber and Postmates’ request for a preliminary injunction to block the enforcement of AB 5 against them.

In denying the request for a preliminary injunction, the court concluded that Uber and Postmates were not likely to succeed on the merits of their various constitutional challenges to the statute, and that they had failed to demonstrate that they would suffer irreparable harm.

The court found that the companies had offered no evidence showing that the Legislature could not have reasonably conceived that AB 5 would further the state’s interest in reducing the misclassification of workers as independent contractors such that they were likely to succeed on their equal protection clause challenge.  And the court rejected the argument that there is no rational basis for AB 5’s exemptions, under which an individual who directly sells products is exempted from the scope of AB 5, while an individual who earns income by offering driving services is not.  In considering the rationale for AB 5’s exemptions, the court found that exempted workers, such as direct salespersons, exert independence and control in performing their jobs.

The court also rejected the companies’ argument that AB 5 deprives gig economy workers of the right to pursue their chosen occupation.

The ruling does not signal the end of the case, or of Uber, Postmates and other companies’ challenges to AB 5.  Should they not succeed in the trial court, an appeal is likely. But perhaps more importantly, ride-share and delivery companies have reportedly earmarked more than $110 million to a campaign to have California voters exclude them from application of AB 5 in a referendum to take place later this year.

As previously discussed, Colorado has taken steps to increase the salary threshold for employees that fall under the “white collar” exemptions, following in the footsteps of Alaska, California, New York, Maine, and Washington State – and the federal Department of Labor. On January 22, 2020, the Colorado Department of Labor adopted the final Colorado Overtime and Minimum Pay Standards Order #36 (“COMPS Order”), which makes significant changes for both exempt and non-exempt employees. Most provisions become effective March 16, 2020, with the exception of the increased salary thresholds, which begin on July 1, 2020.

Under the COMPS Order, which goes into effect on March 16, 2020, there will be an increase in salary thresholds for exempt employees, surpassing the threshold provided by federal law. Below is an annual breakdown of the minimum salary for Colorado employees, with the first changes effective beginning July 1, 2020 (which differs slightly from a previously proposed breakdown we discussed in our last post):

Date

Minimum Salary Threshold

  July 1, 2020   $684.00 per week ($35,568 per year)
  January 1, 2021   $778.85 per week ($40,500 per year)
  January 1, 2022   $865.38 per week ($45,000 per year)
  January 1, 2023   $961.54 per week ($50,000 per year)
  January 1, 2024   $1,057.69 per week ($55,000 per year)
  January 1, 2025   The 2024 salary adjusted by the same   Consumer Price Index as the Colorado   Minimum Wage

The COMPS Order also imposes changes for non-exempt employees. The prior wage and hour rules applied only to employees in certain industries (including the retail, commercial, food & beverage, and health & medical industries); the COMPS Order will cover all employees in Colorado, unless a specific exclusion applies. Among those excluded employees are (i) in-residence workers, (ii) interstate transportation workers, (iii) owners or proprietors who are full-time employees “actively engaged in managing the business” and own at least a bona fide 20% equity interest in the employer, and (iv) work-study students.

This expansion means that all non-exempt employees will be subject to Colorado’s daily overtime, meal, and rest break rules.  Colorado’s overtime rule requires overtime for hours worked in excess of (i) 12 hours per workday, (ii) 12 consecutive hours regardless of the start and end time of the workday, or (iii) 40 hours per workweek, whichever results in a greater payment for the employee. Colorado’s meal break rule requires a 30-minute uninterrupted break for shifts exceeding 5 hours, which, to the extent practical, must be at least one hour after the shift begins and one hour before the shift ends. Colorado’s rest break rule generally requires a 10-minute rest period for each 4 hours of work, or major fraction thereof, which to the extent practical must be in the middle of each 4 hour work period. Additionally, the COMPS Order adds new components to Colorado’s break time rule, by allowing for employers and employees to enter into certain agreements concerning break time and clarifying that employees who are not permitted the required 10-minute rest period for each four hours of work will receive an additional 10 minutes of compensation.

Additional changes provided in the COMPS Order concern the employee notification and posting requirements. With respect to posting, every employer must display a COMPS Order poster published by the Division of Labor Standards and Statistics (“Division”), unless the workplace conditions make physical posting impractical, in which case employers may distribute it to employees upon hire and must make the COMPS Order available to employees upon request. The poster is not yet available, so employers should monitor the Division’s poster website. Employers who provide a handbook or policies to their employees must include a copy of the COMPS Order or poster in the handbook or policies.  Further, if the employer requires acknowledgment of the handbook or policies, the employer must at the same time or promptly thereafter include a copy of the COMPS Order or poster and have the employee sign an acknowledgment of being provided with the COMPS Order or poster.  Employers with any employees who have limited English language abilities must provide those employees with a version of the COMPS Order and poster in Spanish (if applicable to the employee) or contact the Division to request such materials in the appropriate language.

Employers in Colorado should evaluate their employees’ exemption status to ensure compliance with state and federal requirements in anticipation for the July 1, 2020 changes, and revise their handbooks and acknowledgment procedures for the March 16, 2020 effective date.