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Responding to Change: Minimum Wage, Overtime Expansion and DC Wage Theft Prevention Act

Joseph Harkins – Littler Mendelson S. Libby Henninger – Littler Mendelson

March 26, 2015

Minimum Wage & Overtime Expansion

The Only Constant in Wage & Hour Law is Change

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Joseph P. Harkins Littler, Washington D.C. jharkins@littler.com (202) 414-6866

S. Libby Henninger Littler, Washington D.C. lhenninger@littler.com (202) 772-2527

• Minimum Wages • Overtime • DC WTPA • Litigation • Other Developments • Questions

Wage and Hour OVERVIEW

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Changes Happening to State, Local and Government Contractor Minimum Wages

Minimum Wages

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Minimum Wage Fairness Act (S. 2223) • $8.20, 90 days after enactment • $9.15, 12 months after enactment • $10.10, 24 months after enactment • Annual increases based on the

Consumer Price Index

Federal Minimum Wages

Increase Unlikely • On April 30, 2014 a vote

in the Senate to close debate on the bill failed 54-42 (60 votes required)

Current Minimum Wage $7.25

By Executive Order signed February 12, 2014 • Minimum wage of $10.10 effective January 1, 2015 • Annual CPI adjustments thereafter • Effective for contracts performed on and after January 1, 2015 • DOL Final Rule effective December 8, 2014. • Impact in DC/MD/VA?

• Many jobs above MW • Some not - CIRCUS EQUIPMENT WORKER

Federal Contractors, Part I

By Executive Order signed April 8, 2014 –

• Federal contractors prohibited from taking adverse action based on employee discussion or disclosure of wages

• DOL Final Rule is set to come out in September, 2015.

By Presidential Memorandum signed April 8, 2014 –

• Federal contractors required to submit summary data on the compensation paid to their employees, including data by gender and race

• DOL Final Rule is set to come out in August, 2015.

Federal Contractors, Part II

State Minimum Wages

Maryland • $8.00 Effective 1/1/15 • $8.25 Effective 7/1/15 • $8.75 Effective 7/1/16 • $9.25 Effective 7/1/17 • $10.10 Effective 7/1/18

Virginia • $7.25 • Bill to raise MW to $10.10 by

2017 failed in Senate

Washington, D.C. • $9.50, as of July 1, 2014 • $10.50, as of July 1, 2015 • $11.50, as of July 1, 2016 • Thereafter, CPI-Urban - Metro Area • Wage Theft Prevention Act - NEW

– Notice to Employees of Wage Calculation – Enhanced Penalties and Damages (3 x $) – Civil Enforcement (more later) – Criminal Sanctions

State Minimum Wages

Each notice must include: • The employer’s name • Any “doing business as” names used by the employer • Physical address of the employer’s main office or principal

place of business • Employer’s mailing address • Employer’s telephone number • Employee’s rate of pay and the basis of that rate (by the hour,

shift, day, week, salary, piece, commission) • Any allowances claimed as part of the minimum wage: tip,

meal, or lodging allowances • A copy or explanation of the company’s tip pool policy (if

applicable)

DC Wage Theft Prevention Amendment Act of 2014

Each notice must include (continued): • The employee’s overtime rate of pay or, in the alternative, the

basis for the employee’s exemption from eligibility for overtime pay

• Living wage applicability, and/or exemptions from the living wage

• Where applicable, the prevailing wage, classification(s) of work the employee is expected to perform, related wage rate, and any fringe benefit applicable

• Information about how to contact the DOES Office of Wage-Hour (OWH), the designated enforcement agency

• Request that the employee disclose his or her primary language; and

• An employee acknowledgment (employers must keep copies of the signed acknowledgment)

DC Wage Theft Prevention Amendment Act of 2014

• All employers with employees based in D.C. should review the template Notices issued by the DOES and issue each employee a written notice containing all necessary information no later than Wednesday, May 27, 2015. Written notices should be signed by each employee and retained for a period of at least three years.

• Employers should take immediate steps to prepare and distribute written notices to all new employees hired on or after February 26, 2015.

• Employers can request template Notices from the DOES for employees who identify languages other than English as their primary language.

• Post the Notice issued by the DOES summarizing the Wage Theft Prevention Amendment Act.

DC Wage Theft Prevention Amendment Act of 2014

Enforcement of the Wage Theft Act

Traditional court track

New administrative

track with ALJ’s

Local Minimum Wages Private Sector

Montgomery County, MD Prince George’s County, MD • $8.40, as of Oct. 1, 2014 • $9.55, as of Oct. 1, 2015 • $10.75, as of Oct 1, 2016 • $11.50, as of Oct. 1, 2017

“Living Wage” Laws for State & Local Government Contractors

• Maryland - $13.39 • Baltimore - $11.29 • Montgomery County - $14.15

$14.35 effective 7/1/2015 • Prince George’s County - $13.39

• Washington D.C. -- $13.80

• Alexandria - $13.13 • Arlington - $13.13 • Charlottesville – $13.00

Minimum Wage Ripple Effects

• Tipped employees • Section 7(i) exemption • Less room to deduct

costs of business expenses (uniforms, mileage, tools) from a higher wage

• Most important …

Changes Coming to the FLSA Overtime Exemption Regulations

Overtime

NYT, March 13, 2014

President Obama, declaring that “Americans have spent too long working more and getting less in return,” ordered the Labor Department to revise federal rules on overtime pay to make millions more workers eligible for extra pay when they work more than 40 hours a week.

29 C.F.R. Part 541

“White Collar” Exemptions Executive Administrative Learned Professional Creative Professional Computer Outside Sales

Likely Changes: Salary Level

• Adjust for past inflation to push minimum salary over $50,000

• Adjust salary level annually, indexing to inflation

Likely Changes: Primary Duty

Current Rule • Principal, main, major or

most important duty • Based on all facts, with

major emphasis on the character of the job as a whole

• Time spent on exempt duties is a “useful guide,” but not determinative

Expected Rule

Likely Changes: Executive

Current Rule • Concurrent performance

of exempt and non-exempt work does not disqualify an employee from exemption

• Requires executives to supervise at least two full-time employees, but does not define “full-time”

Expected Rule • Concurrent duties

provision deleted, so that all non-exempt work counts against the exemption

• “Full-time” could be defined as 80 hours of FLSA compensable work under supervision

• Narrowing the computer exemption • Requiring outside sales employees to spend

more than 50% of time away from the employer’s place of business – Currently only “customarily and regularly” away, which

means “work normally and recurrently performed every workweek”

Other Possible Changes

Who Will Be Impacted

Process & Timeline

2004 Regulations

• March 2003: DOL publishes proposed regulations

• June 2003: Comment period ends

• April 2004: DOL publishes final regulations

• August 2004: Final rules become effective

2015 Predictions • May/June 2015: DOL will

publish NPRM (maybe)

• August 2015: Comment period will end (maybe)

• 2016: DOL will publish the Final Rule (maybe)

• Final rules will become effective (??)

Up, Up and Away!

Litigation

FLSA Litigation At Record High

4,055 3,426 3,464

4,398

6,786

5,302 5,644

6,081

7,008 7,064

7,764 8,126

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Federal FLSA Lawsuits (FY Ending March 31)

Top 5 Settlements of 2013 • Puerto Rico Department of Corrections - $35

million to 4,500 employees for comp time violations • 24 Hour Fitness - $17.5 million to 860 employees

for off-the-clock work by trainers and misclassification of managers

• Roto-Rooter Services - $14.3 million for misclassification of service technicians

• Old Republic Title Company - $12 million to 1,100 employees for alleged meal break violations and off-the-clock work

• Tesoro Refining and Marketing - $11.6 million to 700 employees for meal violations

Staggering Settlement Numbers

Average Settlement $4.5M in 2013

Martin, Plancich and McIntosh, United States: Trends in Wage and Hour Settlements: 2013 Update

DOL Collecting Record Back Wages

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$212.5

$196.7

$166.0 $172.0

$220.6

$185.3 $172.6 $176.0

$224.8

$280.7

$250.0 $240.8

• The Wage and Hour Division’s budget has increased by $62 million since 2008, with 631 additional employees

• DOL has requested a budget increase of over $41 million for FY2015, which would allow 300 additional investigators

DOL Seeks 300 More Investigators

Impact of Potential OT Regulations on Wage & Hour Litigation • Likely increase in FLSA collective actions

given so-called “lenient” standard

• Greater emphasis on allegations that plaintiff performed non-exempt tasks

• Employers subject to two tests, depending on timeframe

• Smaller and smaller employers challenged

Why More Litigation?

• Likely litigation of salary basis issues due to higher salary basis test

• Claims of spending more than 50% of time performing non-exempt work

• With loss of concurrent duties section, plaintiffs’ attorneys more likely to file more complaints

• Difficult for employers to implement new rules if DOL does not offer compliance assistance

… And is about to get even harder • The named plaintiff disclaims any

decision-making responsibility (“I’m a drone” syndrome)

• Courts discount the evidentiary value of evidence traditionally offered by employers

“Here, the Court will not rely on defendants' declarations, which seek to rebut plaintiffs' allegations. . . . Of course, to the extent that any evidence defendants submit actually helps plaintiffs‘ case, the Court will consider it.” Barry v. S.E.B. Service of N.Y., Inc., Case No. 11-CV-5089 (SLT) (JMA), 2013 U.S. Dist. LEXIS 166746 at *10-11 (E.D.N.Y. Nov. 22, 2013)

Defending Misclassification Cases Has Gotten Harder . . .

Employers often lose exemption cases not because the position was misclassified, but because the employer lacked sufficient evidence to contest the plaintiff’s self serving portrayal. • What is “Litigation Armoring”

– Building a strong evidentiary record to defend against misclassification claims and exemption challenges both prior to and during litigation

– Helping employers proactively plan for likely exempt challenges and build a rich evidentiary record to show exempt duties and support good faith defenses

Preparation via Litigation Armoring

• Strengthen Job Descriptions – Discuss expected ratio of exempt to

non-exempt tasks – Expressly direct the delegation of non-

exempt tasks – Cannot convert exempt position to non-

exempt position via poor performance • Train Managers • Annual Job Description Affirmation • Management-Focused Self-Assessment

Litigation Armoring Examples

The Gathering Swarm

Other Wage & Hour Developments

Meet David Weil, New Wage & Hour Administrator The Wall Street Journal

Senate Democrats confirmed Professor David Weil to run the Labor Department’s powerful Wage and Hour Division, and Big Labor is celebrating. AFL-CIO President Richard Trumka tweeted that the 51-41 vote “is an important step toward putting a real cop on the beat to enforce our wage & hour laws.” North America’s Building Trades Union chief Sean McGarvey added: “Need him on the job ASAP.”

Attack on “Fissured Industries”

• Independent Contracting • Subcontracting • Franchising • Third-Party Management • Construction

• Home Health Care • Hospitality • Professional Services • Restaurants • Transportation and

Warehousing

Integrity Staffing Solutions, Inc. v. Busk • On December 9, 2014, the Supreme Court unanimously held

that time spent by warehouse workers waiting for and undergoing antitheft security screening is not compensable time under the FLSA.

• Warehouse employees fulfilling orders placed by Amazon.com customers claimed they should have been paid for time spent at the end of their shifts to go through security screening in which they removed personal belongings from their pockets and walked through a metal detector.

• The Solicitor General filed amicus supporting the employer, noting that many government employees are required to submit to security checks.

In the Supreme Court: Security Screening

Fluctuating Workweek • Under the FWW, a non-exempt employee’s salary is straight-

time pay for all work hours, whether many or few, with overtime calculated as salary / total hours x 0.5

• Issue: Can employees paid on a FWW be paid incentive compensation in addition to salary? – DOL says, “Nope” – Issue on appeal in two circuit courts

• Sisson v. RadioShack (6th Circuit) • Wills v. RadioShack (2nd Circuit)

In the Appellate Courts

Do we have to pay for that?!? • De minimis

• Open enrollment • On-line on-boarding • Booting a computer up/down • Mandated medical treatment • Required training

Hours of Work Issues

• Potential for unrecorded “off the clock” work by non-exempt employees

• Telecommuting challenges • Mobile devices create unique evidence

of time spent working given electronic records and forensic analysis

• New claims by plaintiffs’ counsel supported by new electronic evidence that present preservation concerns

Mobile Workforce Concerns

Mobile Employees

53,000,000 employees own smartphones

90% of American workers use their personal smartphone for work

Mobile Employees 38% of workers check their emails after working hours 35% of workers check their email before working hours 72% of workers check their email on weekends, vacation

• Reading and responding to emails • Checking work schedules • Filling out expense reports and

other paperwork • Picking up equipment or supplies • Transporting equipment or

supplies from home to a work site • Traveling during the work day to

attend a meeting • On-line training

Mobile Work Time

• Clear policies • Electronic timekeeping • Certification of hours worked • Restrict use of mobile devices • Train managers

– Don’t communicate with non-exempt employees outside work hours

– Do take action when become aware of employees working off the clock

Best Practices for Mobile Non-Exempt Employees

QUESTIONS?

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Joseph Harkins Littler Mendelson, P.C. jharkins@littler.com S. Libby Henninger Littler Mendelson, P.C. lhenninger@littler.com Simone Putnam, Partner Raffa Managed Human Resources Practice sputnam@raffa.com