BLOGS: Fair Labor Standards Act Law

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Friday, November 3, 2017, 1:16 PM

Welcome to Womble Bond Dickinson!

We are proud that our firm, US-based Womble Carlyle Sandridge & Rice, LLP, and UK-based Bond Dickinson LLP have combined to create Womble Bond Dickinson. Effective November 1, 2017, our combined platform now includes:

  • 24 offices in key commercial and financial markets across the US and UK, including the firm’s newest offices in Boston and Edinburgh as well as access to Europe through existing relationships;
  • The bench strength of 1,000 lawyers. By size, the combined firm is a Top 20 firm in the UK, Top 80 firm in the US, as well as a Global Top 100 firm by annual revenue ($410 million/£340million);
  • A client base that includes more than 250 publicly traded companies.

The combined firm will have eleven key sectors: Energy & Natural Resources, Financial Institutions, Healthcare, Insurance, Manufacturing, Real Estate, Retail & Consumer, Transport & Infrastructure, Pharmaceuticals Biotechnology & Life Sciences, Communications & Technology and Private Wealth. Womble Bond Dickinson will use its global strengths in these areas to advance and protect clients’ interests; provide hands-on, switched-on legal advice; give outstanding personal service, and offer exceptional value.

We have great Employment practice.  We understand that people are your most important asset and that careful management of employment law matters can mean the difference between achieving your organizational objectives and opening yourselves up to financial and reputational risk. We advise clients across the full spectrum of general employment advice including:

  • Fair Labor Standards Act and state and local wage laws
  • Wage and hour compliance
  • Litigation and agency investigations
Across our substantial, experienced employment team, we support your needs whatever the urgency and level of advice required. Our experience enables us to spot critical issues quickly and present solutions that help you achieve your business objectives.  Our new website is, and the Fair Labor Standards Act Law blog will stay right here. Cheers!

Wednesday, September 20, 2017, 7:00 AM

Proposed 2016 “White Collar” Regulations Struck Down; DOL Starts Work on New Regulations

The winding legal path of the 2016 “white collar” regulations has come to an end.  On August 31, 2017, the Honorable Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas struck down the U.S. Department of Labor’s (“DOL”) regulation that would have, among other things, doubled the minimum salary requirements for workers classified as exempt from overtime under the FLSA’s executive, administrative, and professional exemptions.  The court held that the DOL overstepped its rulemaking authority by increasing the salary threshold to a point that rendered employees’ duties irrelevant.

As widely reported and commented upon (including here), the new regulations were to have gone into effect on December 1, 2016.  However, a group of states and business groups challenged the rules in federal court, asserting that the DOL exceeded its rulemaking authority and that only Congress had the authority to so greatly change the regulations.  To the surprise of many, the federal court agreed, and issued a preliminary injunction that prevented the regulations from taking effect.  The DOL, under the President Obama administration, appealed the preliminary injunction to the United States Court of Appeals for the Fifth Circuit.  However, following the election of President Trump, the DOL changed course, ultimately informing the Court of Appeals that the DOL would not advocate for the higher salary level, but instead intended to undertake further rulemaking to determine the appropriate salary level.

While that appeal remained pending, the lower court issued its final decision on August 31, granting summary judgment to the states and groups, and striking down the new regulations.  The court based its holding on the fact that Congress defined the FLSA’s executive, administrative, and professional exemptions with a focus on employees’ duties.   As a result, the DOL’s “authority is limited to determining the essential qualities of, precise signification of, or marking the limits of those bona fide executive, administrative, or professional capacity  employees who perform exempt duties and should be exempt from overtime pay.”  For this reason, the court held that the DOL “does not have the authority to use a salary-level test that will effectively eliminate the duties test.”  The court clarified that the DOL “has the authority to implement a salary-level test,” but the rule’s “significant [salary] increase would essentially make an employee’s duties, functions, or tasks irrelevant if the employee’s salary falls below the new minimum salary level.” 

Following the court’s decision, on September 5, 2017, the DOL filed an unopposed motion with the Fifth Circuit Court of Appeals asking it to dismiss its appeal of Judge Mazzant's preliminary injunction order invalidating the overtime rule, given that the lower court's new summary judgment decision rendered the preliminary injunction moot.  The Fifth Circuit granted the DOL’s motion and dismissed the appeal on September 7, 2017.  This leaves Judge Mazzant’s order striking down the regulations as the final legal word on the 2016 regulations.

However, that is not end of the story.  The DOL is committed to updating the white collar exemptions, and new regulations are in process.  This past summer, on July 26, 2017, the DOL issued started the rulemaking process anew with a request for information soliciting public comments on the overtime exemptions for certain executive, administrative, professional, outside sales, and computer employees.  The DOL’s Request for Information specifically acknowledges stakeholders’ concerns that “the new salary level [proposed in the 2016 regulations] inappropriately excludes from exemption too many workers who pass the standard duties test” and “would adversely impact low-wage regions and industries.”  The DOL hopes to receive comments regarding “whether the standard salary level set in [the final] rule effectively identifies employees who may be exempt, whether a different salary level would more appropriately identify such employees, the basis for setting a different salary level, and why a different salary level would be more appropriate or effective.”  The comment period closes September 25, 2017, and those interested in commenting can find the Request for Information in the Federal Register.

By:  John E. Pueschel and Patricia I. Heyen

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Friday, April 7, 2017, 10:49 PM

Waiting Game: Future of Proposed "White Collar" Rules Remains Uncertain

There is still no decision on when—or if—the proposed “white collar” regulations will go into effect.  On November 22, 2016, a federal court in Texas issued an order that blocked the U.S. Department of Labor’s (“DOL”) proposed regulations that would have doubled the minimum salary for many “white collar” workers just before the regulations were to go into effect.   As expected, on December 1, 2016, the Department of Justice (then under the President Obama administration), on behalf of the DOL, filed a notice with the U.S. Circuit Court of Appeals for the Fifth Circuit to appeal the order. The DOL sought to fast-track the appeal, asking the Fifth Circuit Court of Appeals for an expedited schedule.  The Fifth Circuit initially granted the request, and issued an order to expedite the legal arguments, with the DOL's reply brief to be filed by February 7, 2017. 

However, on January 25, 2017, shortly after the inauguration of President Trump, the DOL asked the Fifth Circuit for an extension of time to file its legal arguments in order “to allow incoming leadership personnel adequate time to consider the issues.”  The Fifth Circuit ultimately agreed to extend the deadline for the DOL to file its legal argument until May 1, 2017.

It will be interesting to see what position that the DOL will take under the President Trump administration.  President Trump has endeavored to demonstrate that he is an advocate for American workers, while at the same time also espousing a pro-business agenda.  This issue of increasing the minimum salary under the FLSA is one where advocates for workers and business groups have sharply disagreed.  (For example, the AFL-CIO and the Center for American Progress previously argued the increased salary would allow adjustments for inflation, strengthen the middle class, and help Millennials attain financial stability.  On the other hand, business organizations, like the United States Chamber of Commerce and the National Retail Federation, have argued that the proposed regulations would hinder industry and job growth.)  In addition to the possible significant change in the law if the regulations are upheld, how the DOL navigates these differing viewpoints will likely provide important insight into the DOL’s approach to wage issues under the new administration.

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Wednesday, May 18, 2016, 1:47 PM

New "White Collar" Final Rule Issued; Takes Effect December 1, 2016

Updated, September 19, 2017:  The proposed 2016 "white collar" regulations were struck down in federal court, and never went into effect.

Today, the U.S. Department of Labor issued its much-anticipated final rule changing the regulations for the so-called "white collar” exemptions under the FLSA, and significantly increasing the minimum salary level necessary for employees to be properly classified as exempt executive, administrative, and professional employees.

The final rule and its increased salary requirements will take effect on December 1, 2016. The new regulations will:

  • Increase by slightly more than double the minimum salary level for exempt “white collar” employees from $455/week ($23,660/year) to $913/week ($47,476/year);
  • Raise the highly compensated employee (“HCE”) threshold from $100,000 to $134,004; and
  • Automatically update every three years (1) the minimum salary level to the 40th percentile of full-time salaried workers in the lowest income region of the country; and (2) the HCE threshold to the 90th percentile of full-time salaried workers nationally.
No exception is made for small businesses.  The final rule does not make any changes to the duties tests for executive, administrative and professional employees.  The final rule also allows for up to 10 percent of the minimum salary level for non-HCE employees to be met by non-discretionary bonuses, incentives, or commissions, if these payments are made on at least a quarterly basis.

As a practical matter, these changes to the “white collar” regulations mean higher wages to employees, higher wage costs for employers, and likely increased exposure and risk to employers in wage and hour cases.

A "pre-publication" version of the final rule can be found here.

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Thursday, February 18, 2016, 8:50 AM

Final "White Collar" Overtime Regulations Expected Soon

The final rule for the new "white collar" overtime regulations from the U.S. Department of Labor (“DOL”) is likely to be published in spring or summer of 2016.
As we previously reported, the DOL issued proposed regulations in July 2015 announcing significant changes to the law governing certain “white collar” workers who are exempt from minimum wage and overtime pay.  The DOL’s proposed regulations more than double the current minimum salary level for exempt employees, significantly increase the salary level required for employees to be exempt from overtime as highly compensated employees, and automatically adjust the minimum salary level each year to account for the increase in the cost of living.  

The DOL’s Fall 2015 Semiannual Regulatory Agenda indicates that the timetable for publishing the final rule is July 2016.  However, there is reason to think that the final rule might come sooner.  In an interview with Bloomberg BNA on December 16, 2015, Labor Secretary Thomas Perez stated, “I'm confident we’ll get the final rule out by the spring of next year.” 

The final rule is expected to increase the minimum salary level for "white collar" exempt employees, and to add a mechanism for an automatic annual increase of that minimum level.  It is expected that fewer employees will meet the requirements to be exempt from overtime, and thus either will be entitled to receive overtime pay, or will have to receive a higher salary in order to remain exempt under the FLSA. 

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Monday, September 7, 2015, 4:39 PM

Labor Day Hot Topics

Happy Labor Day 2015!  In the spirit of the day, we thought it fitting to reflect on the three, hot topics that have been dominating the labor and employment news this summer, and which are certain to impact employers and employees in 2016. 
  1. Revision to FLSA's "White Collar" Regulations. In summary, these proposed amendments to the Fair Labor Standards Act regulations more than double the minimum salary level (from $23,660 to over $50,000 per year in 2016) for certain employees deemed to be exempt from overtime as administrative workers, executives, professionals, and computer employees.  The amendments also increase the minimum pay level necessary to be deemed an exempt "Highly Compensated Employee" from the current $100,000 to $122,148 per year. These proposed regulations are a compliance and budgeting issue for many businesses. Barring some unexpected event, the regulations are likely to become effective in 2016. 
  2. New DOL Guidance on Contractor Misclassification. The U.S. Department of Labor issued a new administrative interpretation for the legal test of whether a worker is an independent contractor or an employee.  The bottom line is that under the new interpretation, it will be more difficult than ever to properly classify a worker as a contractor.  This new guidance has significant implications for businesses who rely on contract labor, as there are substantial tax, wage and hour, and benefits consequences for misclassification.
  3. Expansion of NLRB's Test for "Joint Employment." The National Labor Relations Board (NLRB) announced in an August 27, 2015 decision that it was changing the test to determine whether two related businesses are "joint employers." In sum, the federal position announced in the NLRB decision is that many more businesses, like franchisors-franchisees, manufacturers-distributors, and staffing agencies and their clients can be held jointly liable for employment claims (wage and hour violations, discrimination and harassment, etc.) and could more easily organized by labor unions. This new legal test will be a major change for many businesses if it survives the expected court challenge. 
We will be watching these changes in the law closely in the coming months as businesses begin making adjustments to comply with them and to mitigate their legal risks.

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Thursday, September 3, 2015, 9:16 AM

Be Warned: Federal Guidance on Misclassification States that “Most Workers Are Employees,” Not Independent Contractors

On July 15, 2015, the United States Department of Labor (“DOL”) released official guidance addressing the misclassification of employees as independent contractors.  The guidance, Administrator’s Interpretation No. 2015-1 (“AI 2015-1”), explains how the legal test for classifying workers as either employees or contractors will be interpreted by the DOL, and states that most workers are employees covered by the Fair Labor Standards Act (“FLSA”), which is the federal wage and hour law. 

Strictly speaking, AI 2015-1 is not a new statute or regulation.  Rather, it sets forth how the DOL will apply the FLSA and the “economic realities test” used to determine whether a worker is a contractor or employee under the law.  The guidance makes clear that when the DOL considers the issue of classification in an enforcement action, employers will face a higher bar to establish that a worker should be treated as an independent contractor.  In addition, because the guidance is an official pronouncement of the agency charged with administering and enforcing the FLSA, courts will give weight to the DOL’s interpretation.  To the extent that courts consider and defer to the guidance, defending such classifications in lawsuits will be more difficult.

What is Misclassification?
Generally speaking, workers are deemed to be either employees or independent contractors, and different legal rules apply to each class.  Employees are subject to host of legal protections related to minimum wage and overtime pay, benefits, equal employment opportunity, on-the-job injuries and other issues.  Likewise, businesses are obligated to pay certain state and federal taxes for their employees.  On the other hand, workers who are contractors are considered independent of the business that engages them for work.  As such, contractors lack the legal protections afforded to employees, and no employment or payroll taxes are paid for contractors. 

There is an increasing focus by state and federal agencies, as well as by lawyers for workers who are treated as independent contractors, to challenge the classification of the contractors.  In those challenges, the worker is alleged to have been misclassified as a contractor when in reality, the worker should have been classified as an employee.  The exposure to the business for which he or she worked is often significant, in terms of claimed damages for unpaid wages, overtime pay, employment law violations, etc., as well as often substantial back-tax and penalty liabilities arising from the improper classification of the work for tax purposes.  The largest risk is for companies that use large numbers of similarly situated workers classified as contractors.  In those cases, a company may face the risk of a large, collective action suit that can imperil its entire business model.

The Economic Realities Test
The legal test to determine whether a worker is an employee or a contractor varies depending on the legal context, as there can be varying tests applied under tax law, employment law, workers’ compensation law, etc., and those tests can be different from state to state.  At bottom, the analysis typically turns on control, i.e., whether the worker is truly an independent agent who controls his or her own work (contractor), or whether the worker’s service was controlled and directed by the business (employee).
Relevant to this discussion, AI 2015-1 starts with the proposition that under the FLSA, the definition of “employ” includes to “suffer or permit to work.”  The FLSA’s “suffer or permit to work” standard is construed broadly, and brings within the coverage of the FLSA not only work that an employer directly requests or demands of an employee, but also work that the employer allows (i.e., suffers or permits) to be performed.

When analyzing whether there is an employment relationship under the FLSA, courts follow “the economic realities test.”  This test requires an analysis of all of the relevant factors concerning the work relationship. As AI 2015-1 notes, under the economic realities test, the factors include: “(A) the extent to which the work performed is an integral part of the employer’s business; (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; (C) the extent of the relative investments of the employer and the worker; (D) whether the work performed requires special skills and initiative; (E) the permanency of the relationship; and (F) the degree of control exercised or retained by the employer.”  The test is a flexible one, judged on a case-by-case basis.  While all of the factors are to be considered, none are determinative.

AI 2015-1
The DOL’s interpretation announced in AI 2015-1 does not change the formulation of the economic realities test.  However, as it explains how the factors under the test should be considered, AI 2015-1 makes clear that the DOL’s interpretation will result in most workers being classified as employees under the FLSA.  As AI 2015-1 states:
All of the factors must be considered in each case, and no one factor (particularly the control factor) is determinative of whether a worker is an employee. Moreover, the factors themselves should not be applied in a mechanical fashion, but with an understanding that the factors are indicators of the broader concept of economic dependence. Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor). The factors are a guide to make this ultimate determination of economic dependence or independence.

As the DOL applies the test, “a worker who is economically dependent on an employer is suffered or permitted to work by the employer.”  Accordingly, in the DOL’s view, such workers fall within the FLSA’s “suffer or permit to work” standard, and should thus be treated as employees.
What is perhaps dramatic, but certainly not unexpected to those who have been following the issue of misclassification, is the DOL’s conclusion that in most cases, the economic realities test will demonstrate economic dependence (rather than independence).  As the DOL directly states: “[A]pplying the economic realities test in view of the expansive definition of ‘employ’ under the Act, most workers are employees under the FLSA.”  Id. (emphasis added).

AI 2015-1 provides specific examples of workers in hypothetical cases and how the DOL says the cases should be analyzed under each of the six factors of the economic realities test.  These examples demonstrate that many typical facts (at least in the DOL’s view) necessarily weigh in favor of classification of workers as employees.  Indeed, following the DOL’s guidance on each factor of the test will, in most cases, make it very challenging to reach a conclusion other than the worker should be classified as an employee.  In addition, it seems plain that AI 2015-1 will serve to assist workers and plaintiffs’ attorneys with arguments and citations when bringing misclassification claims.

Unsurprisingly, reactions to the Administrator’s Interpretation have varied, with businesses and industry groups expressing concern and workers and advocates expressing approval.  For example, The Wall Street Journal reported that the National Association of Home Builders “blasted the new guidance as improperly introduced without public vetting and a boon to labor unions seeking to organize various industries.”  Melanie Trottman, Employees vs. Independent Contractors: U.S. Weighs In on Debate Over How to Classify Workers, Wall Street Journal, July 15, 2015.  On the other hand, National Employment Law Project (“NELP”) Executive Director Christine Owens praised the guidance, stating that it is “a wake-up reminder to companies playing fast and loose with labels and overusing 1099 hiring.”  NELP Commends U.S. Department of Labor’s Independent Contractor Misclassification Guidance, (July 15, 2015),

AI 2015-1 can be found in its entirety at
Action Items
As we have been suggesting to businesses for some time, and as AI 2015-1 underscores, it is imperative for businesses who classify any workers as contractors to evaluate whether there is a risk of misclassification.  The ideal time to address the issue (and correct any misclassification) is before the business is faced with a tax audit, DOL complaint or investigation, or a lawsuit.  For businesses whose model is premised on contract labor, particularly those with many similarly situated workers, they must understand that the legal environment is a hostile one and take steps to ameliorate the risks to the extent possible.  Dealing with these issues is never easy, but becomes exceedingly more difficult when trying to address them in the midst of a government investigation or a lawsuit

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