BLOGS: Fair Labor Standards Act Law

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Friday, February 20, 2015, 3:11 PM

Womble Carlyle Launches Resource Page for Proposed Rules on "White Collar" Exemptions

The last week of February is upon us, and the Department of Labor has not yet issued the highly anticipated new FLSA regulations which will propose changes to the white collar exemptions.  Announced by President Obama nearly a year ago, the proposed rules (which have already been postponed once) are currently scheduled for release sometime this month.  If the FLSA proposed rules become law, they are expected to dramatically change which employees can be classified as exempt, which in turn may significantly impact wages and overtime pay to workers.

Womble Carlyle is pleased to announce a Resource Page to help businesses prepare for these proposed rules, which will be the most significant change to the FLSA in more than a decade.  The Resource Page provides businesses with the latest information and updates on these proposed rules, including background information and references to key materials. 

The Resource Page can found here.

When the proposed rules are finally released, we look forward to offering our analysis and practical recommendations to assist businesses with understanding the proposed rules, and meeting the expected compliance challenges if the proposed rules become law.

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Friday, February 13, 2015, 8:46 AM

As Intern Season Approaches, Remember That Unpaid Internships Can Be Risky

Right now, many organizations are getting ready for a new class of interns to arrive in May when schools and colleges finish for the summer.  With fully laudable intentions, many organizations offer summer internships as a chance to allow students to get their feet wet in a business or industry, fully recognizing that the students’ contributions and added value, if any, are not that great.

Experience teaches that many organizations do not pay interns.  However, this is often a risky proposition.  Under the Fair Labor Standards Act, the legal standard to qualify as an unpaid internship is actually quite high.  The consequence of failing to meet that legal standard—and in our experience many may not—is that the “intern” is deemed to be a misclassified employee, and would be entitled to be paid minimum wage and overtime for all of the hours worked as an unpaid intern. 

This exposure, including liquidated (i.e., double) damages and potential penalties and attorneys’ fees, can be significant. In addition, there could be tax exposure for any unpaid employment taxes and withholdings that were not made because the wages that should have paid were not.

So, if you are considering an unpaid internship program this summer, take the time to ensure it is legally compliant.  For those that want to take a closer look at their internship programs, our Client Alert on this issue provides a detailed summary of the compliance issues and risks, and practical tips for employers.  The Client Alert can be found here.

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Wednesday, February 4, 2015, 2:10 PM

Wisconsin Joins DOL’s Worker Misclassification Initiative

On January 20, 2015, the U.S. Department of Labor announced that Wisconsin has also joined the growing list of states that have entered into formal agreements with the DOL to share information about worker misclassification.  Under the terms of a "partnership agreement," the DOL and the Wisconsin Department of Workforce Development agreed to share information about workers who may be improperly classified as independent contractors instead of employees.  The DOL's news release can be found here.

As noted here previously, workers who are misclassified as contractors may be denied benefits, minimum wage, and overtime pay that they might receive if properly classified as employees.  Likewise, the federal government and state taxing authorities miss out on payroll and other taxes that they would receive if the workers were properly classified. 

By sharing information, the DOL and the states participating in the initiative hope to reduce misclassification and increase compliance with employment, wage and hour, and tax laws.  The DOL reports that similar agreements have been entered into with the states of Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah and Washington.

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Wednesday, January 28, 2015, 8:21 AM

U.S. Supreme Court Rules That Time Spent In Mandatory Security Screening at the End of a Workday Is Not Compensable


The United States Supreme Court issued an interesting decision last month on whether employees who are required to undergo security screening after their work was done should be paid for that time. The Supreme Court found in favor of the employer, and concluded that workers did not have to be paid for that that time because the screening was a non-compensable “postliminary” activity under the Portal-to-Portal Act.

In Integrity Staffing Solutions, Inc. v. Busk, the employer was a company that provided staff to work in warehouses for the online giant, Amazon. A group of workers filed a class action in 2010 against the staffing company seeking unpaid wages under the FLSA. According to their complaint, workers were required to pass a security screening at the end of the day in order to deter theft of product from the warehouse. The workers alleged that it could take workers up to 25 minutes to compete the screening process, for which they were not paid. Because the screening was allegedly necessary and for the employer’s benefit, the workers claimed they should have been compensated for the time.

Initially, the federal district court dismissed the workers' case for failing to state a viable legal claim. The district court ruled that the security screening was a non-compensable "postliminary" activity under the Portal-to-Portal Act because it was not an "integral and indispensable part" of the warehouse duties the workers were hired to perform. The U.S. Court of Appeals for the Ninth Circuit disagreed and reversed, holding that the screening was a postliminary activity, but was compensable because it was necessary to the warehouse work and for the benefit of the employer. The employer successfully petitioned the U.S. Supreme Court to hear the case.
In a unanimous opinion written by Justice Thomas, the Supreme Court reversed. The Court started with the proposition that the Portal-to Portal Act makes noncompensable "activities which are preliminary to or postliminary to said principal activity or activities" of a worker’s job. Citing its long-standing interpretation of the Act, the Court stated that “the term ‘prin­cipal activity or activities’ [embraces] all activities which are an ‘integral and indispensable part of the prin­cipal activities.’”

The Court held that under the Portal-to-Portal Act, employers were not required to pay workers for postliminary activities that were not integral to the workers' warehouse duties. In a succinct analysis, the Court concluded:
The security screenings at issue here are noncompensa­ble, postliminary activities. To begin with, the screenings were not the “principal activity or activities which [the] employee is employed to perform.” 29 U. S. C. §254(a)(1). Integrity Staffing did not employ its workers to undergo security screenings, but to retrieve products from ware­house shelves and package those products for shipment to Amazon customers.

The security screenings also were not “integral and indispensable” to the employees’ duties as warehouse workers. As explained above, an activity is not integral and indispensable to an employee’s principal activities unless it is an intrinsic element of those activities and one with which the employee cannot dispense if he is to per­form those activities. The screenings were not an intrinsic element of retrieving products from warehouse shelves or packaging them for shipment. And Integrity Staffing could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.
As savvy HR professionals and in-house counsel know, this case does not create a blanket rule that renders noncompensable every activity after a worker leaves his or her work station. Each situation is different and will generally require a detailed analysis of the particular facts. Indeed, in this case, it took about half a decade in the federal courts to come to a final answer.

The case is a relatively straightforward read, and contains a good history and discussion of the Portal-to-Portal Act. For those who are interested, the Supreme Court's decision can be found here.

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Thursday, January 22, 2015, 8:57 AM

Because you are asking . . . DOL Says New Proposed Rule On White Collar Exemptions Under The FLSA Will Be Issued In February 2015


As many of you know, last year President Obama directed the DOL to issue new regulations to “modernize and streamline” the white collar exemptions to the minimum wage and overtime requirements under the FLSA.  (Keep in mind that under federal rulemaking procedures, the DOL will first issue a “Notice of Proposed Rulemaking” and allow a period of public comment before issuing a final rule.)  We have been waiting for the proposed rule so that we can see what changes the DOL has in mind for these key provisions of the FLSA, which are expected to revise the current regulations for the executive, administrative, and professional exemptions.

Initially, the DOL said the proposed rules would be issued last Fall, but the DOL later announced the notice would be delayed.  Currently, the DOL’s expected release date is sometime in February 2015, according to a notice from the Office of Management and Budget.  Like you, we will be watching closely for these highly anticipated rules which (if finalized) are likely to significantly impact workers and businesses.

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Monday, January 19, 2015, 2:51 PM

Florida Joins U.S. DOL’s Worker Misclassification Initiative


On January 13, 2015, the U.S. Department of Labor announced that Florida joined the ranks of states that have entered into formal agreements with the DOL to share information about worker misclassification.  Under the terms of a memorandum of understanding, the DOL and the Florida Department of Revenue agreed to share information about workers who may be improperly classified as independent contractors instead of employees.  The announcement can be found here.

Workers who are misclassified as contractors may be denied benefits, minimum wage, and overtime pay that they might receive if properly classified as employees.  Likewise, the federal government and state taxing authorities miss out on payroll and other taxes that they would receive if the workers were properly classified. 

By sharing information, the DOL and the states participating in the initiative hope to reduce misclassification and increase compliance with employment, wage and hour, and tax laws.  The DOL reports that similar memoranda of understanding have been entered into with the states of Alabama, California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington.

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Monday, January 14, 2013, 3:20 PM

New Year Resolutions for North Carolina Staffing Firms (A Legal Perspective)

Like most of us, recruiting and staffing firms prioritize their New Year resolutions to ensure a prosperous and successful year. Here are a couple of legal compliance issues to keep in mind when considering your “resolutions” as you kick-off the New Year:

E-Verify
As you are aware by now, North Carolina law requires some private employers to use the federal E-Verify program to verify the work authorization of all new hires. As of January 1, 2013, private businesses with more than 100 employees are required to enroll in the Internet-based E-Verify system.

The E-Verify program is operated by the Department of Homeland Security in partnership with the Social Security Administration. It verifies a new hire’s work eligibility by comparing the employee’s I9 Form information with the Social Security Administration’s database. It is free, and it has been designed to be user-friendly for employers.

The final phase of the NC E-Verify law goes into effect on July 1, 2013 and requires private business with more than 25 employees to enroll in the E-Verify system. North Carolina businesses should be aware of the E-Verify requirements including recordkeeping requirements for storing and retaining E-Verify results and the I9 Form.

Fair Credit Reporting Act (FCRA)
Beginning January 1, 2013, businesses, including staffing firms, must begin using new FCRA forms to notify applicants and employees of their legal rights. FCRA sets forth the procedural requirements that employers must adhere to when conducting background checks through Consumer Reporting Agencies. A Consumer Reporting Agency (“CRA”) is any third party that handles your background checks for new hires.

While there are no substantive changes to the FCRA forms (which consist of the consent form for obtaining a background check, preadverse decision notification, and adverse action notification), the forms must be updated to reflect that the Consumer Financial Protection Bureau has taken over enforcement of FCRA (which was previously handled by the Federal Trade Commission).

Conclusion
While a legal forecast for 2013 cannot be fully addressed in this article, we will touch upon some of the 2013 legal trends facing employers at the NCASP Annual Spring Conference (April 25-27, 2013).
The new E-Verify and FCRA requirements went into effect on January 1, 2013. Accordingly, all North Carolina employers should be prepared to comply with these changes immediately.

This article first appeared in the Jan./Feb 2013 issue of
Staffing Now, the North Carolina Association of Staffing Professionals (NCASP) Ezine.

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