Proposed FLSA Regulations: The Good, The Bad, The Ugly

Bobby TruheKSB School Law(402) 804-8000

bobby@ksbschoollaw.com

KSB School Law

@btruhe

FLSA History

Enacted in 1938 to end “oppressive wages” and the “substandard workweek”

Can be tough to apply to modern work practices• Telecommuting• Flexible hours•Use of smartphones outside work

Enforcement WHD• Investigations• Lawsuits

−Injunctive relief−Back wages and liquidated damages

Private Lawsuits• Back wages, liquidated damages, attorney’s fees, and costs• Collective actions

DOJ• Criminal prosecution and civil money penalties

IRS• PPACA audits (tattle tails!)

WHD Getting More Aggressive

350 more investigators from 2009 to 2011

WHD Getting More Aggressive

DOL-ABA “Bridge to Justice” referral programDOL “apps” for smart phones• DOL Timesheet app

−Can provide evidence for FLSA lawsuit• Even if time recorded on app may be inaccurate

• Eat Shop Sleep app−DOL: “Access hotel/motel, restaurant and retail industry

enforcement data and easily identify violators”

• iCitizen Labor Report app−Adds OSHA data

Private Lawsuits Continue to Increase

2011 FLSA suits in federal court = 7,000Approx. 200 class actionsIn 10 years, 300% increase in FLSA suits v. 1% increase in all suits

Frequent complaints:•Misclassifying employees as exempt• Improper deductions from exempt employees’ salaries

FLSA’s Main Provisions

Minimum wageRecordkeeping Overtime pay

To be exempt an employee must

1. Be paid a weekly minimum2. Be paid on a salary basis3. Perform specific job duties

WHD has announced proposed changes to #1;no proposed changes to #2;

possible changes signaled regarding #3

Requirement #1: Minimum Amount

Currently: $455/wk. ($23,600/yr.)*

Proposed regulations • Increase to $921/week

($47,892/year)• $970 for Q1, 2016• Annual adjustments to 40th

percentile of weekly earnings as determined by DOL’s Bureau of Lab. Stats.

*Teachers/Admins exempt

Rationale for Changes to Minimum Amount

Minimum salary has not been changed since 2004Significantly fewer employees entitled to overtimeDOL: if the increase is too much for employers, simply convert employees to hourly and do not permit them to work overtime• Ignores employee/employer preferences • Assumes employer can hire additional staff to cover the

reduced hours• Neglects to consider additional expenses of new

employees

Significance of Indexing

Districts cannot set specific salary and know that employees will be exempt for the duration of the contract year

Increases may happen in middle of the yearMay have to revise contract language to allow for indexing or include an indexing clause

Lake Wobegon effect

 Requirement #2:

Salary Basis 

No reduction in pay for variations in quality or quantity of work• Can reduce paid sick or personal leave time

Pay of full salary for any week in which any work performed, regardless of number of days or hours worked• Don’t have to pay for any week in which no work performed

No proposed changes to this requirement

Requirement #3:Specific Job Duties

ExecutiveAdministrativeProfessional(Computer)(Outside sales)

Regulations

DOL’s “Duties” Questions

DOL asked several questions in the proposed regulations regarding exemptions: •What changes should be made to the duties test(s)?• How much time should employees have to spend performing exempt duties? 50% like California? • Is the “concurrent duties test” for executive employees working?• Should exempt employees be permitted to perform non-exempt work concurrently?

What can DOL do?

Stick to salary increase for nowPropose regulations for duties testsIssue regulations under the “logical outgrowth” doctrine because everyone is “on notice” 

Executive Employees

Management: primary duty is management of business or customarily recognized department or subdivision •Setting and adjusting employee pay and hours•Maintaining production or sales records•Evaluating employee performance•Handling employee complaints and grievances

Executive Employees

Supervision: customarily and regularly supervises work of two or more other employees in department

Authority: hires or fires other employees• Or recommendations as to hiring, firing, or other status

changes given particular weightAdministration has expressed concern about managers who perform other work

“Primary duty” may have to be 50% of work time Documentation nightmare “will get better over time”

Administrative Employees

Primary duty is • Performance of office or non-manual work•Directly related to management or general operations of employer or employer’s customers

DOL regulation specifically provides that school secretaries are not exempt administrative employees

That’s right: the superintendent’s assistant is NOT EXEMPT under the administrative exemption

Administrative Employees

Discretion: primary duty includes exercise of discretion and independent judgment with respect to matters of significance• Exercise of discretion and independent judgment means comparing and evaluating possible courses of conduct, and acting or making decision after various possibilities considered

WHD considering heightened “discretion” requirements

Professional Employees

Primary duty is performance of work requiring advanced knowledge• Work must be predominantly intellectual and require consistent exercise of discretion and judgment• Advanced knowledge must be in field of science or learning customarily acquired by prolonged course of specialized intellectual instruction• Teachers are by regulation deemed “professionals” and are exempt from the salary minimum—this regulation was not proposed for amendment (34 C.F.R. §541.303)

Errors to Avoid

Assuming all employees paid salary are exemptImproperly applying exemptionsMaking improper leave deductionsJob descriptions and employee handbooks are not up to date

Increasing salaries to meet new regulations prior to changes in the duties test(s)

Ignoring or misapplying state law requirements

Ways to Minimize Disruption in Your School from the FLSA

1) Prohibit overtime • Amend employee contracts• Clarify expectations in job descriptions and contracts•Obligated to pay if you “suffer or permit” the employee to work, including overtime•Must discipline for working off the clock

“Suffers or Permits”

Employees entitled to be paid if they work extra hours with employer’s:• Knowledge, or • Acquiescence

Reason for the work is immaterialContract provisions are immaterialEmployer must make sure that work not to be performed is not performed

Employer may be liable if reason to believe employee is fudging records to assist employer

Ways to Minimize Disruption in Your School from the FLSA

1) Prohibit overtime 2) Compensatory time

Compensatory Time

Allowed if:• 1.5 hours per overtime hour worked

• Employees agree to it in advance

• Agreement in writing

Can’t accumulate over 240 hours Employer can require employees to take comp. time

(Christensen v. Harris County, 529 U.S. 576 (2000) Can pay cash for comp. time “at any time” No clear answer on negotiability Adds additional “hours of service” for PPACA purposes

Ways to Minimize Disruption in Your School from the FLSA

1) Prohibit overtime 2) Compensatory time 3) Variable wage rate agreement

Variable Wage Rate Agreement

Set a weekly compensation amount via contractWage rate for the week varies based on hours workedExample:• Weekly rate of $800

• Hours worked in the week: 50

• Straight time rate: $16

• Overtime: 10 hours @ $8 for “and a half”

• Total Comp: $880

Option for “community coaches” and non-exempt sponsors

Questions?

Proposed FLSA Regulations: The Good, The Bad, The Ugly

Bobby TruheKSB School Law(402) 804-8000

bobby@ksbschoollaw.com

KSB School Law

@btruhe