CLICK ON EACH FILE IN THE LEFT HAND COLUMN TO SEE INDIVIDUAL PRESENTATIONS. If no column is present: click Bookmarks or Pages on the left side of the window. If no icons are present: Click V iew, select N avigational Panels, and chose either Bookmarks or Pages. If you need assistance or to register for the audio portion, please call Strafford customer service at 800-926-7926 ext. 10 FLSA Exemptions: Emerging Class Action Threat Navigating the Complexities of Executive, Professional and Administrative Exemptions presents Today's panel features: Angelo Spinola, Shareholder, Littler Mendelson, Atlanta Mark E. Tabakman, Partner, Fox Rothschild, Roseland, N.J. Douglas Weiner, Senior Trial Counsel, Epstein Becker & Green, New York Thursday, November 19, 2009 The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific Please refer to the dial-in/log-in instructions emailed to registrants to access the audio portion of the conference. A Live 90-Minute Teleconference/Webinar with Interactive Q&A
Transcript
CLICK ON EACH FILE IN THE LEFT HAND COLUMN TO SEE INDIVIDUAL PRESENTATIONS.
If no column is present: click Bookmarks or Pages on the left side of the window.
If no icons are present: Click View, select Navigational Panels, and chose either Bookmarks or Pages.
If you need assistance or to register for the audio portion, please call Strafford customer service at 800-926-7926 ext. 10
FLSA Exemptions: Emerging Class Action Threat
Navigating the Complexities of Executive, Professional and Administrative Exemptions
presents
Today's panel features:Angelo Spinola, Shareholder, Littler Mendelson, Atlanta
Mark E. Tabakman, Partner, Fox Rothschild, Roseland, N.J.Douglas Weiner, Senior Trial Counsel, Epstein Becker & Green, New York
Thursday, November 19, 2009
The conference begins at:1 pm Eastern12 pm Central
11 am Mountain10 am Pacific
Please refer to the dial-in/log-in instructions emailed to registrants to access the audio portion of the conference.
A Live 90-Minute Teleconference/Webinar with Interactive Q&A
For CLE purposes, please let us know how many people are listening at your location by
• closing the notification box, • clicking the chat button in the upper
“White Collar” Exemptions Section 13(a)(1) of the FLSA provides an
exemption from both minimum wage and overtime pay for employees who are employed in a bona fide:– Executive;– Administrative;– Professional; or– Outside Sales capacity.
Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17) of the FLSA.
3
Three Tests for Exemption
Salary Level
Salary Basis
Job Duties
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Salary Level
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Minimum Salary Level: $455 For most employees, the minimum salary level
required for exemption is $455 per weekMust be paid “free and clear” The $455 per week may be paid in equivalent
amounts for periods longer than one week:– Biweekly: $910– Semimonthly: $985.83– Monthly: $1,971.66
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Salary Basis
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Salary Basis Test
Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis)
The compensation cannot be reduced because of variations in the quality or quantity of the work performed
Must be paid the full salary for any week in which the employee performs any work
Need not be paid for any workweek when no work is performed
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Deductions From Salary
An employee is not paid on a salary basis if deductions from the predetermined salary are made for absences occasioned by the employer or by the operating requirements of the businesses
If the employee is ready, willing and able to work, deductions may not be made for time when work is not available
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Additional Compensation
An employer may provide compensation in addition to the $455 minimum guaranteed weekly salary, such as:– Commissions– Bonuses– Additional pay based on hours worked
beyond the normal workweek
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Executive Duties
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Executive Duties
Primary duty is management of the enterprise or of a customarily recognized department or subdivision;
Customarily and regularly directs the work of two or more other employees; and
Authority to hire or fire other employees or whose suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of other employees are given particular weight.
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Primary Duty The principal, main, major or most important
duty that the employee performs. Factors to consider include, but are not
limited to: – Relative importance of the exempt duties;– Amount of time spent performing exempt work;– Relative freedom from direct supervision; and– Relationship between the employee’s salary and
the wages paid to other employees for the same kind of nonexempt work.
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Primary Duty
Employees who spend more than 50% of their time performing exempt work will generally satisfy the primary duty requirement
However, the regulations do not require that exempt employees spend more than 50% of time performing exempt work
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Management
Interviewing, selecting, and training employees Setting and adjusting pay and work hours Maintaining production or sales records Appraising employee productivity and efficiency Handling employee complaints and grievances Disciplining employees Planning and apportioning work among
employees
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Management
Determining the techniques to be used; the type of materials, supplies, machinery, equipment or tools to be used; or the merchandise to be bought, stocked and sold
Providing for the safety and security of employees or property
Planning and controlling the budget Monitoring or implementing legal compliance
measures
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Department or Subdivision
A “customarily recognized department or subdivision” must have a permanent status and continuing function– Need not be physically within the employer’s
establishment, and may move from place to place
– Continuity of the same subordinate personnel is not essential to the existence of a recognized unit.
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Department or Subdivision
Examples of customarily recognized departments or subdivisions include:
Human Resources
Compensation Benefits
Recruitment Training
EEO Labor Relations
Sales
New YorkRegion
ChicagoRegion
BostonDistrict
AtlantaDistrict
St. LouisDistrict
ClevelandDistrict
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Customarily and Regularly
A frequency that must be greater than occasional but which, of course, may be less than constant
Includes work normally and recurrently performed every workweek
Does not include isolated or one-time tasks
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Two or More
The phrase “two or more other employees” means two full-time employees or the equivalent
Full-time generally means 40 hours per week
The supervision of the same employees can be distributed among two or more exempt executives, but the hours worked by an employee cannot be credited more than once
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Staffing Does Not Meet the “Two or more” Requirement
AssistantManager
AssistantManager
Full-timeEmployee
Full-timeEmployee
Full-timeEmployee
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Particular Weight
Factors include, but are not limited to:– Whether it is part of the employee’s job
duties to make suggestions and recommendations
– The frequency with which suggestions and recommendations are made or requested
– The frequency with which the employee’s suggestions and recommendations are relied upon
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Concurrent Duties
Concurrent performance of exempt and nonexempt work does not automatically disqualify an employee from exemption
Exempt executives generally decide when to perform nonexempt duties and remain responsible for the success or failure of business operations
Nonexempt employees generally are directed by a supervisor to perform the exempt work or perform the exempt work for defined time periods
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Administrative Duties
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Administrative Duties
Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
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Management or General Business Operations
Refers to the type of work performed by the employee
Work must be directly related to assisting with the running or servicing of the business
Does not include working on a manufacturing production line or selling a product in a retail or service establishment
Research Safety and Health Human Resources Employee Benefits Labor Relations Public and
Government Relations Legal and Regulatory
Compliance Computer Network,
Internet and Database Administration
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Discretion and Independent Judgment
The comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered
Must be exercised with respect to “matters of significance,” which refers to the level of importance or consequence of the work performed
Decisions and recommendations may be reviewed at a higher level and, upon occasion, revised or reversed
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Discretion and Independent Judgment
Discretion and independent judgment does not include:– Applying well-established techniques,
procedures or specific standards described in manuals or other sources
– Clerical or secretarial work– Recording or tabulating data– Performing mechanical, repetitive, recurrent
or routine work
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Use of Manuals
Exempt employees may use manuals, guidelines or other established procedures if they:
– contain or relate to highly technical, scientific, legal, financial or other similarly complex matters
– that can be understood or interpreted only by those with advanced or specialized knowledge or skills
Employees are not exempt if they use manuals to apply well-established techniques or procedures within closely prescribed limits
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Human Resources
Human resource managers who formulate, interpret or implement employment policies generally meet the administrative duties requirements
Personnel clerks who “screen” applicants to obtain data regarding minimum qualifications and fitness for employment generally are not exempt administrative employees
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Learned Professional Duties
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Learned Professional
The employee’s primary duty must be the performance of work requiring advanced knowledge
In a field of science or learningCustomarily acquired by a prolonged
course of specialized intellectual instruction
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Advanced Knowledge
Predominantly intellectual in character Includes work requiring the consistent
exercise of discretion and judgment The advanced knowledge is generally used
to analyze, interpret or make deductions from varying facts or circumstances
Not work involving routine mental, manual, mechanical, or physical work
Cannot be attained at the high school level
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Field of Science or Learning
Occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades
Over the last several years there has been a torrent of litigation concerning the exempt status of positions in the financial services industry (mortgage brokers, originators, etc.).
FINANCIAL SERVICES Employees will be deemed exempt as
administrative if their duties include work such as collecting and analyzing information regarding a customer’s income, assets, investments, or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of financial products; and servicing, promoting, and marketing the employer’s financial products.
However, when the primary duty of an employee is selling financial products, the employee does not qualify for the administrative exemption. Thus, the dilemma remains -- where is the line drawn between the exempt work and “straight” selling.
Non-exempt: loan originators who plug in numbers (e.g. income, monthly bills/debts) and then ascertain, from established guidelines, whether an individual qualifies for a mortgage and then, if so, how much of a mortgage.
Non-Exempt: loan processors who coordinate appraisals and title work and review customer’s supporting financial documents (e.g. W-2s, pay stubs, etc.) to determine whether they meet the documentation requirements associated with the mortgage loan.
Non-Exempt: a loan officer who applies specific standards (such as loan-to-value ratios and debt ratios) in choosing an already established loan package that best meets the customer’s needs and financial abilities.
FINANCIAL SERVICES Exempt: loan officer who advises customer about risks
and benefits of various mortgage loan alternatives in light of their individual financial circumstances and advises the customer about avenues to obtain a more advantageous loan program. Even though the loan officers utilize software programs that display various financial products, as the software did not select the mortgage loan product for the loan officer, the loan officer was still responsible for assessing the alternatives and making recommendations and the software enhanced the loan officer’s ability to make such recommendations.
The exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals. It does not include seemingly complex decisions that are made pursuant to a pre-established menu which dictates results.
INSURANCE Insurance marketing representatives were exempt.
They were John Alden's primary contact with the insurance market, through agent contacts and they represented the company by keeping the market informed of changes in John Alden's product offerings and pricing structure. By advising agents as to which products to market against competing products, and by helping them put together proposals for bidding on new business, marketing representatives were engaged in something more than routine selling efforts focused simply on particular sales transactions. Reich v. John Alden Life Insurance Co., 126 F.3d 1 (1st Cir. 1997).
Similarly, employees who spent the majority of their time servicing existing customers and whose duties included promoting sales, advising customers, adapting policies to customer’s needs, deciding on an advertising budget and techniques, and hiring and training staff were performing administrative, rather than production, tasks. Hogan v. Allstate Insurance Co., 361 F.3d 621 (11th Cir.
INSURANCE Plaintiff interacted with clients in order to provide
quotes and product information, processed applications for new insurance, underwrote policies, reviewed existing policies, sold renewals, amended policies, collected and accounted for premium payments, worked with clients on initiating claims and entered the information into Allstate's computer system. Plaintiff determined the products and coverages that he would recommend and emphasize to customers. Wilshin v. Allstate Insurance Co., 212 F. Supp. 2d 1360 (M.D. Ga. 2002).
A working supervisor does not become exempt merely because he has some occasional responsibility for directing the work of nonexempt employees on a production line.
Similarly, an employee whose primary duty is an electrician does not become exempt because he orders parts and materials for the job, handles requests from the prime contractor or directs the work of other employees at the job site.
Where there was unrefuted evidence that mundane janitorial duties and non-managerial tasks comprised well over 50% of a putative supervisor’s work hours and he testified that he spent 95% of his time at work performing the same tasks as the car wash attendants, he was a working supervisor and non-exempt. To the extent that he performed any managerial responsibilities, no evidence was presented establishing that such duties were overwhelmingly important as compared to the regular car wash attendant tasks that he performed 95% of the time. Jackson v. Go-Tane Services, Inc., 56 Fed. Appx. 267 (7th Cir. 2003).
Where supervisory duties of alleged supervisors were ensuring that all employees were properly trained and performing all required duties; providing a direct point of contact for the Government 24-hours a day; briefing/debriefing employees and ensuring that security guards were properly uniformed, groomed, fully instructed in their duties, and standing their watches as appropriate; maintaining a continued state of proper training; maintaining radio contact with stationary and roving guards; andreporting deficiencies and disciplinary recommendations to the Project Manager, but guard shift supervisors performed supervisory duties only 2-3 hours per guard shift, they were non-exempt. Opinion Letter, U.S. Department of Labor, 200) DOL WH LEXIS 25 (July 21, 2000).
RESTAURANT As assistant manager in a McDonald’s restaurant was
not entitled to overtime pay as she was an exempt executive employee, meeting all the requirements of the old short test. While she claimed 75 percent of her shifts consisted of non-exempt work, she took her managerial work home and performed approximately 58 percent of non-exempt work, but the evidence showed that management was her primary function. McClain v. McDonald’s Corp., 2007 U.S. Dist. LEXIS 5461 (E.D. Pa. 2007).
RESTAURANT Chefs, such as executive chefs and sous
chefs, who have attained a four-year specialized academic degree in a culinary arts program, generally meet the duties requirements for the learned professional exemption. The learned professional exemption is not available to cooks who perform predominantly routine mental, manual, mechanical or physical work. 29 CFR 541.301(e)(6).
RESTAURANT A chef claimed that he was entitled to overtime. The
restaurant argued that the chef was in charge of a kitchen staff of between ten to twenty employees, and that other cooks and dishwashers reported to him.
The chef argued that he was not hired as a head chef or kitchen manager, but simply was responsible for cooking and preparing food for the salad bar. He claimed that he had no supervisory authority over other employees, that cooks and dishwashers did not report to him and that he devoted 75-100 percent of his time to cooking. Thus, summary judgment was denied. Noble v. 93 Univ. Place Corp., 303 F.Supp.2d 365 (S.D.N.Y. 2003).
RESTAURANT An employee claimed that his primary duties were cooking and
working as a cashier, and therefore, he was entitled to overtimeunder the FLSA. The court granted summary judgment in favor of the employer, finding that the employee was exempt under both the administrative and executive exemptions to the FLSA. The evidence established that the employee was a manager of the restaurant because: (1) he wore a different colored uniform thanthe other employees; (2) he filled in for the day-shift manager; (3) he held himself out as a manager; (4) he had no on-the-job supervision other than brief visits from the owner for 15-20 minutes each night; (5) he took inventory; and, (6) he was involved in hiring and firing decisions. Kahn v. Superior Chicken & Ribs, 331 F.Supp. 2d 115, 120 (E.D.N.Y. 2004).
III. MAINTAINING THE EXEMPTION - FURLOUGHS- DOCKING TIME FOR ABSENCES- DEDUCTIONS FROM WAGES
PRESENTED BY:DOUGLAS WEINER
EPSTEIN BECKER & GREEN NEW YORK, NY
FURLOUGHS: AN ALTERNATIVE TO LAYOFFS DURING ECONOMIC DOWNTURN
• Strategy to retain the experienced workforce at a reduced costExample: Payroll expenses must be cut by 20% for 100 exempt employees
- Option #1: Reduce headcount by 20%, eliminating 20 jobs and associated costs
- Option #2: Implement a mandatory furlough with 20% pay cuts for all 100 employees
The furlough strategy potentially saves 20 jobs while achieving the intended cost-saving objective
FURLOUGHS: OTHER ADVANTAGES
• Employees would prefer a reduction in pay and hours to losing their job
• Furloughs are better for employee morale than reduction-in-force
• Both employer and employees are better positioned to take advantage of increase in business activity as economy recovers
FURLOUGHS AND THE EXEMPT EMPLOYEE: THE FLSA CHALLENGE
• Executive and administrative exemptions require the payment of a fixed, predetermined salary without deduction for the quality or quantity of work performed
• Exempt employees, under federal and state laws, may be required to take full work weeks off where they perform no work, and receive no salary
• But: May not take deductions from the fixed salary for work weeks where any work is performed
IMPLEMENTING PARTIAL-WEEK FURLOUGHS FOR EXEMPT EMPLOYEES
• FLSA allows a prospective salary reduction without violating the “salary-basis”test for exempt employees
- Pay may be reduced proportionate to a reduction in the number of days worked
- But employer is not required to proportionately reduce time worked to salary reduction
• Employer may reduce the number of work days and proportionately reduce salary, as long as employee’s salary is reduced first
• California was an exception, but has now become consistent with the FLSA
• Check state/local wage & hour laws
IMPLEMENTING PARTIAL-WEEK FURLOUGHS FOR EXEMPT EMPLOYEES
Where salary and days are reduced:
• The new salary is effective in every week in which any work is performed
TO PROPERLY IMPLEMENT A SALARY REDUCTION OR FURLOUGH
• Determine the economic objective:
- How much in salary reduction is necessary to achieve the required financial objective?
- Prospectively reduce salary by the percent reduction needed to achieve target
EXAMPLES OF PROPER SALARY REDUCTION AND FURLOUGH
• An exempt employee receives a salary of $1,000 a week; company needs to reduce payroll costs by 10% - May the employer require the employee to take every other Friday off, and pay $800 for weeks where only 4 days are worked?
• No. May not take deductions from the fixed salary for work weeks where any work is performed
• But, FLSA permits prospective reduction of salary from $1,000 to $900 a week- Company realizes same financial benefits of a 10% reduction of payroll costs, without taking improper deductions from the predetermined salary
IMPLEMENTING AN EXEMPT EMPLOYEE FURLOUGH: OTHER CONSIDERATIONS
• Salary adjustments may not be designed to circumvent the FLSA
• Salaries may be prospectively reduced so long as not so frequent as to appear designed to circumvent the FLSA - One appellate court: Quarterly adjustments okay- More frequent salary adjustments are risky
• Give employees advance written notice of the salary change
• Advise employees of reasons for furlough, e.g., to save jobs during economic downturn; avoid more drastic action, such as reduction-in-force
PERMITTED PERFORMANCE-BASED BONUS INCENTIVES THAT AFFECT WEEKLY PAY
• FLSA permits commission agreements or bonus compensation plans based on quantity or quality of work, which do not increase or decrease the “predetermined amount” of employee’s salary
- Predetermined salary can be as low as $455 per week, while employee’s compensation can be substantially higher and vary from week to week based upon
- sales commissions- incentives for meeting production goals, or - bonuses for achieving other performance criteria
- To preserve salary basis, the predetermined component of salary has to be paid for workweeks in which any work is performed, even when sale not made or production goals not achieved
• Check terms of the plans
FOR MORE INFO ON FURLOUGHS AND SALARY REDUCTIONS
“Amid Tough Times, Furloughs Can Save Employers Money and Employees Jobs”
Available at: http://www.ebglaw.com/showclientalert.aspx?Show=10131
DOCKING TIME FOR ABSENCES and DEDUCTIONS FROM WAGES
• May result in finding that employees are paid hourly, rather than on salary basis
• Loss of salary basis = Loss of exemption
• Loss of exemption = Requirement to pay overtime
FLSA EXEMPTIONS: EMERGING CLASS ACTION THREAT
III. MAINTAINING THE EXEMPTION - FURLOUGHS- DOCKING TIME FOR ABSENCES- DEDUCTIONS FROM WAGES
