Tag: Fair Labor Standards Act

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Salt Bae Sued: Rethinking Time & Attendance for Salaried Employees

Summary

  • Former cooks at Salt Bae’s New York steakhouse sue for unpaid overtime

  • Fair Labor Standards Act classifies over $913 a week as exempt from overtime pay

  • Organizations should not overlook the importance of tracking salaried employee time and attendance

 

The fateful day has finally arrived; our beloved meat-mincing and salt-slinging internet hero Salt Bae, also known as Nusret Gökçe to his parents, has fallen out of the good graces of online society. 

First launched into internet stardom in 2017 via a viral video of him eccentrically sprinkling salt onto strips of freshly sliced steak, Gökçe has since built an empire for himself out of artisanal steakhouses and social media influence. This empire started to crumble on August 9, however. Five of Gökçe’s former employees just sued him for denying them overtime pay after they consistently worked 70-90 hour weeks. 

These are some excessive hours to work with no overtime pay, even for steakhouse grillers. So what happened? Well, unlike many in the restaurant industry, the five employees were salaried. They made $1,125 a week, or around $58,500 a year. The chain also classified the grillers’ positions as managerial so as to avoid paying them for overtime.

Citing the Fair Labor Standard Act, the lawsuit claims that Gökçe’s restaurant owes the five salaried employees overtime pay for consistently working them over 40 hours a week in positions misleadingly designated as managerial in nature. 

Crazy stuff right there. Who knew that such a suave, sunglass-wearing, meat connoisseur could have incredibly manipulative intentions behind closed doors? Where is the outrage? Shall the public riot? 

Not so fast.

It is worth understanding what the Fair Labor Standards Act actually says about overtime for salaried employees. As of 2016, only salaried employees who make up to $913 per week, or $47,476 per year, qualify for overtime pay. If an employee makes more than this, they are classified as exempt from overtime pay. Taking what we know from this recent lawsuit against Gökçe, it is clear that the former grillers made over $47,476 a year in salary, meaning that they are potentially exempt from overtime pay according to the Fair Labor Standards Act.

But wait, there’s more. 

On the other hand, the FLSA provides an exemption, of sorts, to…the exemption. You see, the $913 per week ceiling only applies to “white-collar” workers – people in executive, professional, or managerial roles according to Maduff & Maduff, LLC. The FLSA says that “blue-collar” salaried employees can still qualify for mandatory overtime pay no matter how much they make in salary. Blue-collar in this case is defined by the FLSA as “workers who perform work involving repetitive operations with their hands, physical skill and energy.” Examples would include carpenters, electricians, mechanics, plumbers, ironworkers, craftsmen, etc. 

So, the natural question is this: are artisanal steak grillers technically blue-collar workers? 

Well, I don’t know. I will let the lawyers bicker over the answer in the coming weeks. What I do know, however, is that this whole mess brings up an interesting subject regarding how employers track time and attendance for their salaried employees.

You see, it was revealed that Gökçe’s restaurant chain did not keep records of the five mens’ working hours or wage statements throughout their employment. Obviously, this negligence does not help matters for the chain. When labor lawsuits like this come up, a company must have access to a paper trail that shows how many hours employees have worked and how much they have received in pay. Now, this practice may seem obvious for hourly employees; however, it is not so obvious for salaried workers.

 

Reasons for tracking salaried employee hours

Automated workforce management solutions should not be seen as exclusive to hourly workers; they can encompass all aspects of a company in any industry. Whether your salaried employees are exempt from overtime pay or not, you should consider attempting to track all their hours worked. While I should note that legally you are not required to do so, it still may be beneficial for your company. Here are a few reasons why:

 

One: Overtime Pay

This one is straightforward. If you have salaried employees who make $47,476 a year or less, they are non-exempt and legally entitled to overtime pay whenever they work over 40 hours a week. Using an automated time and attendance system like Workforce.com allows for companies to accurately and easily track how many hours all employees work, both hourly and salaried. 

Also Read: Management tips on overtime equalization and tracking hours

Two: Paid Time Off

If your employees receive PTO as part of their salaries, tracking daily time and attendance is essential for figuring out how much time they accrue as well as how much they have used.

Also Read: Managing employee time-off requests: A guide for business owners

Two: Labor Compliance

In the event of a lawsuit, you want to be sure you have records of how salaried employees have been compensated and classified. Without proof of good practice, a business is extremely vulnerable to legal trouble. Moreover, labor laws are constantly changing; it is a company’s responsibility to stay up to date on them. For instance, the FLSA policy on the ceiling for mandatory overtime is going to be subject to change every three years. If you are accurately tracking your salaried employees’ hours, you will be much better prepared for future changes to the overtime exemption ceiling. 

Three: Understanding Labor Costs

Since salaried employees don’t have clear-cut hours they need to work, it can be hard to track when they arrive, leave, and how much value they provide to the firm relative to the amount of compensation they receive. By keeping time and attendance records via an automated workforce management platform, managers can get a clearer understanding of their labor costs as well as employee productivity. Just keep in mind that legally, this can not lead to reductions in pay. Tracking hours like this should simply be used as a device for understanding employees and improving productivity. 

Also Read: How to reduce labor costs and attract quality staff in a post-Covid market

Four: Employee Burnout

Similar to identifying labor costs, knowing how many hours salaried employees are working as well as the times they start and stop work is important to managing employee burnout. An exhausted and stressed employee working odd hours is never good for productivity or company culture.

Five: Internal Communication

Using workforce management software to track salaried employee hours also opens the door for rich communication options. With Workforce.com, employees and managers alike can easily message one another, receive instant notifications, and give feedback on a vast array of subjects. Having a transparent and unified system to track time and attendance allows for salaried employees and managers to be on the same page regarding hours worked; this leads to open and honest internal communication. 

 

These are only five simple ways tracking time and attendance for salaried workers can benefit a company. To discover if this is something that might work for you, it may be worth chatting with a representative or booking a free trial. 

Let’s all learn from Salt Bae. Nobody, even a peak internet meme persona, can evade common workforce management issues all on their own. Give time and attendance tracking for salaried employees a try with Workforce.com. 

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DOL proposes rules to ease employer classification of workers as independent contractors

employment law, labor law, overtime records

The Department of Labor announced Sept. 22 a proposed rule amending its regulations on how to determine whether a worker is an employee covered by the Fair Labor Standards Act or an independent contractor not covered by the FLSA. This proposed rule is significant because the FLSA lacks clear guidance on these important definitions, which has left employers struggling, scrambling, and risk-taking to properly classify workers for purposes of paying overtime and other wage/hour obligations.

In this rulemaking, the DOL proposes to:

  • Adopt an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for themselves (independent contractor) or is economically dependent on a putative employer for work (employee)
  • Identify and explain two “core factors”: the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine the economic realities if a worker is economically dependent on someone else’s business or is in business for themselves; and
  • Identify three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production.
You can download the entire proposed rule here, and it is open for public comment for 30 days.
As explained by Wage and Hour Division Administrator Cheryl Stanton, “The rule we proposed today continues our work to simplify the compliance landscape for businesses and to improve conditions for workers. The department believes that streamlining and clarifying the test to identify independent contractors will reduce worker misclassification, reduce litigation, increase efficiency, and increase job satisfaction and flexibility.”
I could not agree more. These business-friendly rules would be a significant benefit to employers seeking guidance on a crucial issue that continues to be the focus on costly class action litigation nationwide.
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Overtime and FLSA outside sales exemption

employment law, labor law, overtime records

Eugene Martinez was a sales representative for Superior HealthPlan, Inc. Martinez’s duties included soliciting Medicare Advantage Plans. Superior classified Martinez as an independent contractor pursuant to the terms of his sales agreement. Martinez subsequently filed a lawsuit against Superior, alleging that he was misclassified as an independent contractor and was entitled to overtime pay under the Fair Labor Standards Act. Superior  filed a motion for summary judgment regarding Martinez’s FLSA claim, arguing that even if Martinez was an employee he would not be entitled to overtime pay because he fell under the FLSA’s outside sales exemption.  

The U.S. District Court for the Western District of Texas held that Martinez was not entitled to overtime pay because the outside sales exemption applied. The court assumed that Martinez was an employee for purposes of argument and focused on Martinez’s actual job duties for Superior. The court noted that Martinez spent virtually every weekday in sales appointments away from Superior’s offices. The court deemed that the FLSA’s outside sales exemption applied and Martinez to the extent that he should have been classified as an employee and was not entitled to overtime pay. Martinez v. Superior HealthPlan, Inc., 371 F. Supp. 3d 370 (W.D. Tex. 2019). 

IMPACT: Companies that employ sales representatives should be aware of the fact that such employees are not automatically exempt under the FLSA. Under the FLSA, an employee may be classified as exempt from overtime pay if he or she is paid above the FLSA’s earnings threshold and his or her duties meet one or more exempt “duties test” categories (i.e., executive, administrative, professional or outside sales exemptions).

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Ease compliance concerns with workforce management software

compliance; workforce management software

Ask an HR pro how to reduce compliance risk and you’re likely to get one of two responses: a long, silent stare from beneath a furrowed brow or a finger pointing directly to a floor-to-ceiling shelf of thick binders and the two-word utterance of, “Start there.”

In other words, addressing how to reduce compliance risk is complicated. It can’t be digested over a bagel and coffee or assimilated during a five-minute confab in the conference room.

Many workplace laws, regulations and guidance governing compliance risk date back to the early 20th century. Sorting through federal, state and local workplace regulations is a skill that develops over a career through a variety of sources. A key tool among those sources is workforce management solutions designed to navigate and track the daunting web of regulatory compliance issues that employers face on a daily basis.

Configured for national, state and county labor laws, Workforce.com’s workforce management software integrates with existing human capital management and payroll systems to help reduce compliance risk through seamless workforce automation. To remain compliant and stay protected from unnecessary and costly litigation, there are several issues that employers should be aware of.

Employee classifications

Accurately classifying workers continually draws the attention of state and federal agencies that are laser-focused on enforcement. The risks of worker misclassification can be costly and subject companies to fines and back taxes that can total as much as 100 percent of the employment tax due.

When some employees work more than 40 hours per week, labor laws state that based on that worker’s classification employers are responsible for paying overtime.

Workforce management software helps employers determine who is eligible for overtime and track employees’ hours, as the federal Fair Labor Standards Act divides workers into exempt and non-exempt status. 

  • Exempt workers: Typically receive a salary and employers are not obligated to pay exempt workers overtime.
  • Non-exempt workers: Typically receive hourly pay and are eligible for overtime if they work past 40 hours in a week.

Employee leave

Sorting through the specific types of paid leave that are required by law and those provided voluntarily by employers can be confusing. The Family and Medical Leave Act regulates reasonable amounts of unpaid, job-protected leave such as the birth of a child or to care for a sick family member.

The FMLA and the Fair Labor Standards Act, however, does not regulate sick pay, vacations and paid time off. That time away is voluntarily provided by the employer yet still must be tracked.

Employee safety

You know those safety kits scattered through the office? Virtually all employers must follow the Occupational Safety and Health Administration’s regulations preventing and responding to emergencies in the workplace. Employers must have a first-aid kit on site, and they also must let employees know about hazardous materials in the workplace, although Phil from accounting’s syrup-thick coffee is exempt. Though it probably shouldn’t be.

compliance; workforce management software

Employee pay

Payroll is one of the most regulated functions in an organization that must meet federal, state and local requirements, according to the American Payroll Association.

Government agencies require:

  • Tax withholding and reporting.
  • Timely pay of employees to meet wage and hour law requirements.
  • Withholding child support and garnishments from wages.
  • Ensuring new employees are eligible to work in the U.S.

Wage and hour settlements continue to be a costly compliance issue for businesses. Investing now in workforce management solutions beats spending more money later should a lawsuit arise. Technology can help HR professionals and executives solve the vexing problem of how to reduce compliance risk.

With increased government scrutiny and potential for fines and penalties, it is more important than ever to ensure workforce compliance. Workforce.com tracks compliance and regulatory obligations, ensures accurate pay and maintains a detailed audit trail.

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DOL Provides Employers Much Needed Clarity on Joint Employment

employment law, labor law, overtime records

Joint employment is a legal theory in which the operations of two employers are so intertwined that each is legally responsible for the misdeeds (and the liabilities that flow from those misdeeds) of the other. It’s also a legal theory with which federal agencies and courts have struggled over the past several years.

The struggle started at the NLRB’s broad expansion of the definition of “joint employment,” continued with OSHA, and ended with the Department of Labor, in early 2016, announcing a similar broadening of the definition for wage and hour claims.

More recently, however, more measured and business-friendly federal agencies have ratcheted back these expansions. In December 2017, the NLRB announced that it would require “actual … joint control over essential employment terms” for a finding of joint employment. A few months earlier, the DOL pulled its joint employment rules, leaving the issue in limbo in wage and hour claims.

Earlier this week the DOL announced a final rule to update the regulations interpreting the definition of joint employment under the FLSA.

In the final rule, the department provides a four-factor balancing test for determining FLSA joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual. The balancing test examines whether the potential joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Determines the employee’s rate and method of payment; and
  • Maintains the employee’s employment records.
The DOL adds that this rule “will add certainty regarding what business practices may result in joint employer status,” promote “uniformity among court decisions by providing a clearer interpretation of joint employer status,” and “improve employers’ ability to remain in compliance with the FLSA.” I cannot agree more.
This rule (available here) becomes effective on March 16, 2020.
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Beware Pre-Shift and Post-Shift Workplace Activities

Jon Hyman The Practical Employer

In Integrity Staffing Solutions v. Busk, the Supreme Court held that the FLSA only requires employers to compensate employees for time spent performing pre-shift (preliminary) and post-shift (postliminary) activities that are “integral and indispensable” to an employee’s principal activities.

What are “integral and indispensable?” Those activities that are (1) “necessary to the principal work performed” and (2) “done for the benefit of the employer.”

In Busk, for example, the court held that post-shift security screenings were not “integral and indispensable” for an Amazon warehouse employee, because such screenings are not “an intrinsic element of retrieving products from warehouse shelves or packaging them for shipment,” and the employer “could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.”

In light of these standards, consider Mireles v. Hooters of Am., LLC, filed late last year in a Houston federal court. A Hooters waitress claims that her employer unlawfully withholds pay for “postliminary” activities.

According to the lawsuit, Hooters requires its “Girls” to be “approachable, upbeat, and attentive to the needs of the guests as she socially engages with and entertains each individual guest at the front door and on the floor.” Accordingly, it requires that they spend substantial post-shift time “conversing with customers about topics unrelated to Defendants’ food and beverage offerings or local attractions, and spending substantial time waiting for managers to reconcile their sales receipts and tips towards the end of each shift.”

Are these waitresses entitled to be paid? Who knows. The point to be made runs much deeper.

There is a fine line between what is “integral and indispensable.” If the waitresses are required to be “attentive to the needs of the guests” and “socially engaging,” then I can craft an argument that time spent schmoozing post-shift should be compensated, just as I can make the point that such activities have nothing to do with the principal work of serving wings and beer. These off-the-clock cases are difficult, expensive and risky. If you lose, you’re not just paying your lawyer, but also the plaintiffs’ lawyer.

In other words, before you decide that your employees’ pre-shift and post-shift time is non-compensible, stop, take a deep breath, and call your employment lawyer.

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A Quick Review on Rules for Docking Pay for Exempt Employees

Jon Hyman The Practical Employer

“Can I dock part of an employee’s paycheck?”

It’s one of the questions I get most often from clients.

So, let’s take a quick run through the rules of docking employee’s pay for exempt employees.

Generally speaking, it violates the Fair Labor Standards Act to dock (that is, take a deduction from) the salary of an exempt employee. Under the FLSA, an exempt employee earns their entire salary for a work week as soon as that employee works even one minute during that week.

The logic is simple. Once you start deducting from an exempt employee’s salary for minutes or hours not worked, you are not treating that employee as salaried, but as hourly. And, hourly employees are not exempt. Therefore, if you don’t pay an exempt employee their entire salary for every work week in which any work is performed, then you are treating them as hourly and they are not exempt.

There are, however, seven limited exceptions permitting deductions from an exempt employee’s weekly salary:

    1. When the exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.
    2. For absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability.
    3. While an employer cannot make deductions from pay for absences of an exempt employee for jury duty, attendance as a witness, or temporary military leave, an employer can offset any amounts received by an employee as jury fees, witness fees, or military pay for a particular week against the salary due for that particular week.
    4. For penalties imposed in good faith for infractions of major safety rules.
    5. For unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules imposed pursuant to a written policy applicable to all employees.
    6. For any time not actually worked during the first or last week of employment.
    7. For any time taken as unpaid FMLA leave.

It is critical for employers to understand these rules. A mistaken deduction could prove costly. Generally speaking, if an employer makes an improper deduction from an exempt employee’s salary, the exemption will be lost during the time period during which the improper deduction was made. Critically, the lost exemption does not only apply to the affected employees, but also to all employees in the same job classification working for the same managers responsible for the actual deduction.

Before you consider deductions from an exempt employee’s salary, consult with your employment counsel to make sure you have these rules covered and the deduction is proper.

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The FLSA’s Exemptions Are Becoming More ‘Fair’ for Employers

Jon Hyman The Practical Employer

In Encino Motorcars, LLC v. Navarro, the Supreme Court ruled that overtime exemptions under the Fair Labor Standards Act “are to be given a ‘fair reading,’ meaning they are not to be construed too narrowly” (as had historically been the case).

The court applied this “fair reading” standard to conclude that automobile service advisors are exempt under the FLSA’s automobile-service exemption.

Since Encino, federal courts have applied the “fair reading” standard to find that various classes of employee are non-exempt (or likely non-exempt) under various of the FLSA’s categories of exemptions:

Recently, the Department of Labor itself applied this “fair reading” standard to conclude, in an Opinion Letter [pdf], that the FLSA’s “retail or service establishment” exemption applies to sales representatives who sell credit-card-payment platforms to merchants.

Courts and the DOL are more willing than ever to conclude that employees are exempt under the FLSA. Yet, employers should not read this “fair” construction test as a license to reclassify all of their non-exempt employees as exempt. However, it should give employers some comfort that in closer cases, courts should not be so quick to conclude that they misclassified an employee.

Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. Comment below or email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.

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Court Rules Employers Cannot Take Overtime Credit for Paid Lunches

Jon Hyman The Practical Employer

The Fair Labor Standards Act does not require paid lunches for employees. Indeed, quite to the contrary, the FLSA provides that meal breaks (presumptively defined as breaks of more than 20 minutes during which the employee is totally relieved of his or her work duties) can be unpaid.WF_WebSite_BlogHeaders-11

What happens, however, to an employee’s overtime compensation if the employer pays an employee for non-working lunches? Is the employer entitled to use the extra compensation for the paid lunches to offset other overtime compensation?

According to the 3rd Circuit in a case of first impression — Smiley v. EI DuPont de Nemours & Co. — the answer is “no.”

Nothing in the FLSA authorizes the type of offsetting DuPont advances here, where an employer seeks to credit compensation that it included in calculating an employee’s regular rate of pay against its overtime liability.

Instead, as the court points out, the FLSA only permits employers to take an offset against overtime payments in three limited circumstances, each of which involves some component of premium pay in excess of an employee’s regular hourly rate:

  • Extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because for hours worked in excess of eight in a day or in excess of the employer’s defined maximum workweek.
  • Extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in non-overtime hours on other days.
  • Extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the employer’s defined maximum workweek), where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.
Come Dec. 1, the DOL is adding more than four million employees to the doles of overtime eligibility. Employer are doing to look for ways to limit their overtime exposure to keep payrolls under control. Be aware, however, that taking a credit against overtime for paid lunches is one option not available to you.
Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. To comment, email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.
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Will Work for Beer

WF_WebSite_BlogHeaders-09

According to Boy Genius Report, archeologists in Iraq recently discovered a 5,000-year-old Mesopotamian tablet, which the site artfully describes as a “pay stub for beer due.” If the interpretation of the tablet is to be believed, ancient Mesopotamians were paid in beer for their labor.

“That was 3000 B.C., and this is 2016 A.D.,” you’re saying to yourself. “What possible relevance does this story have to modern employers?” The answer may surprise you.

Believe it or not, it is not illegal under the Fair Labor Standards Act to pay employees in kind, that is, with food or lodging. Thus, this story helps illustrate this lesser known provision of the FLSA.

Section 3(m) of the FLSA provides:

“Wage” paid to any employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees.

The leading case on the issue of meal credits as FLSA wages is Herman v. Collis Foods, Inc. (6th Cir. 1999), which establishes that an employer who wishes to claim the section 3(m) meal credit must establish each of the following four factors:

  1. The meal is regularly provided by the employer or by similar employers;
  2. The meal is furnished in compliance with applicable federal, state, or local law;
  3. The meal is provided primarily for the benefit of the employee rather than the employer; and
  4. The employer maintains accurate records of the costs incurred in furnishing the meal.
Herman specifically rejected the DOL’s argument that the employee must voluntarily accept the meal for it to count as payment in lieu of wages. While the DOL still formally maintains this position, in a Field Assistance Bulletin it makes it clear that because courts have rejected the DOL’s position, it no longer enforces the voluntary requirement. Thus, employees need not voluntarily accept meals instead of cash wages for an employer to count the reasonable cost or fair value of the meal toward its minimum wage obligation.
To calculate an hourly rate including the section 3(m) credit, the value of the meal is added to cash wages (excluding overtime compensation) and divided by the hours worked in a given week. The credit goes toward the employer’s minimum wage obligation and is included in the determination of the employee’s regular rate of pay for purposes of calculating any overtime compensation due for that work week.
So, there you have it. Under the right circumstances, an employer can pay an employee (at least in part) with a meal. And who am I to judge whether beer qualifies as a meal?
Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. Comment below or email editors@workforce.com.