Last month, El Azteca, a Wisconsin business which owns four restaurants, reached a consent judgment in U.S. District Court to resolve a lawsuit filed by the U.S. Department of Labor. The U.S. Department of Labor’s Wage and Hour Division conducted an investigation and discovered numerous violations of the Fair Labor Standards Act.  The violations included:

–          Failing to keep records of daily and weekly hours worked.

–          Failing to pay employees the federal minimum wage for all hours worked.

–          Failing to pay overtime.

–          Paying kitchen staff, a flat salary without regard to numbers of hours they worked.

–          Making illegal deductions from servers’ pay for uniform shifts, nametags and aprons.

Under the consent judgment, the restaurant will pay 129 current and former employees $350,000 in back wages, and $350,000 in liquidated damages.  The defendants will also be paying $25,000 in civil penalties.  Additionally, the restaurants are now required to provide to employees:

1)      Several wage and hour division publications in both Spanish and English;

2)      The Wage and Hour division’s phone number; and

3)      Each pay day, a pay stub showing the pay period, hours worked, rate of pay, overtime hours worked, overtime rate and all deductions.

The FLSA provides that employers who violate the law are generally liable to employees for any back pay, and an equal amount of liquidated damages. The law also prohibits employers from retaliating against employees who exercise their rights under the law.

I have blogged in the past about FLSA issues in the food service industry. The Department of Labor has targeted their investigative efforts on FLSA violations.  Take this opportunity to:

1) confirm your business is accurately tracking hours worked and maintaining records of hours worked;

2) all employees are being compensated correctly; and

3) all your required posters are up to date.

US%20Department%20of%20Labor%20logoThe final overtime regulations on exempt employees were issued by the Department of Labor last week, raising the salary test from $23,660 annually to $47,476.  It is estimated this will result in an additional 4.2 million more employees qualifying for overtime.

The new salary threshold has sparked controversy and claims by both labor and management suggesting the sky was falling.  Others have predicted the true impact has yet to be determined.  No one seems to dispute the changes were long overdue.  The previous salary test has not changed in over 10 years.  The good news is they built in an automatic update to occur every three years based on wage growth in the lowest-income census region, which is currently in the south.

The DOL has provided guidance for non-profits, public sector, and private sector employers to assist in applying the new salary test.  In general the DOL suggested options for addressing the new regulation including: 1) limit exempt employee hours to 40 hours per week, 2) pay the employees time and one half for work over 40 hours, or 3) raise the employee’s salary to exceed the new salary threshold..

All employers should review the salaries of their exempt employees and determine the impact of the new DOL regulations now, so they can be ready for implementation December 1, 2016.  

September 4, 2015 is the last day to submit your opinion on the proposed overhaul of FLSA overtime.  The Department of Labor has proposed revising the FLSA, extending overtime protections to nearly 5 million white collar workers.  Under the proposal, salaried managers earning less than $50,440 per year would now be eligible for overtime.  The intended group expected to benefit from the changes include occupations as diverse as graphic designers, assistant store managers, fast-food managers, and business analysts.  The proposed new rule more than doubles the salary test for those eligible to earn overtime from the current $445.00 per week ($23,660.00 per year), to $970.00 per week, ($50,440.00 per year).  Also being proposed is to increase the total annual compensation for highly compensated employees from $100,000.00 per year to $122,148.00 per year. Both new rates would be updated annually.

With only 2 days left to submit comments, the Department of Labor form is simple and fast to use, even though I believe it is a foregone conclusion the proposal will be passed and implemented in 2016.   The wage threshold has not been increased since 1975 and there is no doubt it needs to be fixed.  However, incremental increases over the years would have been easier to tolerate for employers.

The rules won’t be finalized until 2016, but employers are already looking for ways to comply with the law while keeping a lid on labor costs. A few basic ideas to accomplish this is:

  1. for employers to review their time clocks and time tracking software systems to help avoid workers running up overtime;
  2. carefully review job descriptions and where appropriate consider switching salaried employees to hourly employees; and
  3. one last idea is for employers to review their policies and insist employees not check email or return phone calls while they are off work.

While tracking employee work time has always been important, it is now even a bigger concern for employers.  Get ready, I predict big changes in overtime coming your way.  

U. S. Supreme CourtHave you ever thought you did something, but never did?  I am not talking about the recent admission and apology of NBC anchor Brian Williams who mistakenly claimed to have taken enemy fire while in a helicopter covering the Iraq war twelve years ago.  I am talking about something less significant; something that can legitimately just slip your mind.

I thought I had blogged about the Amazon overtime case pending at the U. S. Supreme Court.  It turns out the blog never made it past the draft stage, and I mistakenly thought I had posted it.  I was watching the case filed by Amazon warehouse workers to see how the Court would handle a new overtime twist.   Amazon requires warehouse employees to pass through security at the end of each shift as an anti-theft measure.  Some employees reportedly have waited in security lines for as long as 25 minutes, before they are free to leave work.   The employees filed suit seeking overtime compensation for the time they spend waiting in the security lines.

Justice Thomas ruled the time spent in security screenings was not “integral and indispensable” to the warehouse workers jobs, which involved retrieving products and packaging them for Amazon customers.  This was a big decision as more retailers today are requiring security screening of employees to help reduce employee theft.  The Court unanimously held fast to the 1947 “Portal to Portal Act” which indicates employers are not responsible to pay employees for preparation activities both before and after work.  Employers are only responsible for such preparation activities if they are “integral and indispensable” parts of the principal work of the employee.

Employers should properly pay employees overtime when it is due, but as the Supreme Court sets forth, not everything is compensable time.  

This isn’t the first time I’ve blogged about the importance of making sure your employees are properly compensated under the Fair Labor Standards Act (FLSA), you can find those stories here, here, and here.  Now, it seems that restaurants are on the Department of Labor’s hot seat. 

The Minneapolis District Office for the Wage and Hour Division of the Department of Labor has resolved an investigation involving the Wisconsin Meyer’s Family Restaurant. The Meyer’s Family Restaurant has agreed to pay over $116,000 in back wages to 38 employees. The company was cited for failing to record all hours worked by employees, failing to pay overtime compensation, paying cash for some hours of work and keeping no record of the hours worked or the cash payments made, and keeping no record of tips received.

The FLSA has established a federal minimum wage of $7.25/hour for all hours worked, plus time and one-half for hours worked beyond 40 hours per week. However, an employer of a tipped employee is only required to pay $2.13/hour in direct wages, provided the amount the employee receives in tips equals the federal minimum wage. If the employee’s tips combined with the employer’s direct wages do not equal the minimum wage of $7.25/hour, the employer is require to make up the difference.

On the east coast, 15 Boston-area restaurants and their owners have agreed to pay a total of $424,000 in back wages and liquidated damages to 409 employees, to resolve alleged violations of the FLSA. Most of the employees affected were paid by a separate company, Superbrite Professional Cleaning (later known as Excel Management). George Rioux, the district director for the Boston – Wage & Hour Division stated, “Utilizing contract labor providers does not absolve employers from their responsibility of complying with the FLSA and paying workers the wages they are legally due.” Generally, the use of contract labor through an employment agency does not generate a FLSA problem as long as the agency is properly compensating the contract labor.

If you are in the restaurant industry, make sure you keep complete and accurate records. Appropriate record keeping is crucial in order to establish employees are properly compensated. Additionally, any Employers out there who use contract labor should confirm the workers are being properly compensated, so you don’t get punished with liquidated damages.

The U.S. Department of Labor has been busy this year investigating violations of the Federal Fair Labor Standards Act (FLSA), and has filed lawsuits in both Texas and Massachusetts seeking back wages and liquidated damages on behalf of employees.

In Texas, the suit is against The Christmas Light Co. Inc. to recover almost $250,000 in back wages, liquidated damages, and an injunction to prevent future violations of the FLSA, on behalf of 233 employees who installed and removed Christmas lights for the company. The suit arose following an investigation which revealed The Christmas Light Co. Inc. paid employees a flat rate for installing and removing Christmas lights, without regard to the number of hours the employees actually worked. Additionally, employees were paid “straight time” instead of overtime at time and one-half, for hours worked in excess of 40 in a week. The Christmas Light Co. Inc. also ran into problems for failing to maintain accurate time and payroll records as required by the FLSA.

In Massachusetts, the DOL is seeking at least $500,000 in back wages and liquidated damages from Boston Hides & Furs Ltd. The investigation of Boston Hides & Furs Ltd. determined the company committed willful and repeated violations of the FLSA, specifically not paying minimum wage, not paying overtime and not keeping appropriate records. The company had at least 14 employees who worked approximately 10 hours per day, six days a week, and were paid between $50-$70 per day.

As the year comes to a close, now is a good time to conduct an FLSA audit and make sure you are paying your employees correctly and maintaining the required documentation.

There are a lot of ways to violate the Fair Labor Standards Act, and the U.S. Department of Labor is taking notice and holding employers accountable. Misclassifying employees as exempt, not paying employees who work through breaks or from home, and not paying employees for hours worked over 40 in a week, are just a few of the types of violations in the news.

The U.S. Department of Labor and Wal-Mart have finally reached a settlement as a result of Wal-Mart’s misclassification of vision center managers and asset protection coordinators as exempt. It was determined these Wal-Mart employees were misclassified back in 2007, at which time Wal-Mart corrected the misclassification. However, it has taken until now to resolve the issue of back wages and damages. Wal-Mart has agreed to pay all back wages and liquidated damages owed to more than 4,500 employees, totaling $4.83 million. It will also pay more than $400,000 in penalties to the Department of Labor.

Here in Minnesota, a local landscaping business has agreed to pay almost $500,000 in back wages and damages to 57 workers who were misclassified as independent contractors, instead of employees. The company and its owners will also pay $22,000 in civil penalties.

The Fair Labor Standards Act is a complicated law with lots of room for errors. Businesses would do themselves a favor by conducting a self-audit of employees to make sure everyone is properly classified, and properly compensated. The expense in the short-term will definitely pay off in the long run. Self-audits are less costly than an audit conducted by the Department of Labor after a charge has been filed.

 I’ve blogged in the past about other businesses found to have violated the Federal Fair Labor Standards Act (FLSA), including Walt Disney Parks & Resorts in Orlando, Florida and Umatilla Chemical Depot plant in Oregon. Now, Levi Stauss & Company, the first business to manufacture blue jeans, joins this notable list. The San Francisco District Office of the U.S. Department of Labor’s Wage and Hour Division conducted an investigation and determined Levi Strauss had misclassified several groups of workers, including assistant store managers of newly acquired stores, as exempt from overtime. Additionally, the company failed to record all hours employees worked in its payroll system. Levi Strauss has agreed to pay $1,011,413.00 in overtime back wages to 596 employees nationwide, and upgrade its time and attendance system. 

Very few businesses are immune from following the Federal Fair Labor Standards Act (FLSA). It applies to all employees of certain “enterprises" regardless of the work they perform. Even if your business does not meet one of the definitions of a "covered enterprise", your employees may still be covered if their work duties meet certain interstate commerce requirements, such as the production of goods for interstate or foreign commerce, including any closely related process of occupation directly essential to such production. For example, an office worker who uses the telephone, fax, U.S. mail or e-mail to communicate with persons in another state is engaged in interstate commerce.

It is important to make sure your employees are properly classified under the FLSA, because the likelihood your business is required to comply with the FLSA is almost 100%. Don’t let your business be penalized like Walt Disney & Levi Strauss.

 Earlier this week the United States Supreme Court issued a decision in Kasten v. Saint-Gobain Performance Plastics Corp. holding, ‘[t]he scope of the statutory term “filed any complaint” includes oral, as well as written complaints.’

This case arose when Mr. Kasten was fired, he alleges, for complaining to his supervisors and human resources about the unlawful location of the time clocks at the Saint-Gobain facility. After his termination, he filed an anti-retaliation lawsuit claiming violations of the Fair Labor Standards Act of 1938. The Supreme Court did an extensive analysis of the phrase, “filed any complaint”, before holding in favor of Mr. Kasten and remanding the case for further proceedings.

Saint-Gobain argued, if oral complaints would suffice, then employers will be left in a state of uncertainty about whether an employee is making an actual complaint or perhaps just blowing off steam. The Court agreed with Saint-Gobain and stated, “the phrase “filed any complaint” contemplates some degree of formality, certainly to the point where the recipient has been given fair notice that a grievance has been lodged and does, or should, reasonably understand the matter as part of its business concerns.” But, the Court proceeded to side with Mr. Kasten.

Given how long the Fair Labor Standards Act has been in effect, it is surprising this type of case hasn’t come before the Court earlier. Now, Employers need to be pay attention to any verbal complaints raised by employees, and address them in the same manner as a more formal written complaint.

My law partner, Marylee Abrams has blogged in the past about the importance of properly classifying your employees. Not only is it important to properly classify your employees it is also important to pay them appropriately for the actual hours they work.

An investigation by the U.S. Department of Labor Wage and Hour division at the Umatilla Chemical Depot plant determined 603 employees involved in departments including maintenance, munitions, and warehouse work, were underpaid for their time in the workplace. “In some instances, workers were not relieved for their lunch time, resulting in inappropriate pay deductions for lunch breaks that could not be taken.” These pay deficiencies are violations of federal laws including the Fair Labor Standards Act (FLSA). This investigation has resulted in a payment of more than $4.2 million dollars in back wages and additional civil monetary penalties.

The Fair Labor Standards Act provides an employee must be paid for all of the time considered to be hours worked and all time that is hours worked must be counted when determining overtime hours worked. The FLSA defines the term "employ" to include the words "suffer or permit to work". If an employer knows or has reason to believe that the employees are continuing to work when they are supposed to be on break and the employer is benefiting from the work being done, it should be compensated time.

This was a very costly error in employee compensation. I’m sure the employer is not likely to make this kind of mistake again. The U.S. Dept. of Labor will not hesitate to take action against employers who violate the law. In addition to making sure employees are properly being compensated for all hours worked, the U.S. Dept. of Labor is also investigating if employees are appropriately classified.