FAIR LABOR STANDARDS ACT, THE BASICS · labor unions in Central Texas, as well as individual employees in employment cases. He has handled numerous wage and hour claims both under

FAIR LABOR STANDARDS ACT, THE BASICS

CRAIG DEATS Deats, Durst, Owen & Levy, PLLC

1204 San Antonio St., Suite 203 Austin, Texas 78701

State Bar of Texas EMPLOYMENT LAW 101

January 8, 2014 Dallas

CHAPTER 6

B. Craig Deats Deats, Durst, Owen & Levy, P.L.L.C. 1204 San Antonio Street, Suite 203

Austin, Texas 78701

Phone: (512) 474-6200 FAX: (512) 474-7896 [email protected]

www.ddollaw.com

B. Craig Deats is a shareholder in the law firm of Deats, Durst, Owen & Levy, P.L.L.C., of Austin, Texas. He graduated with honors from the University of Texas Law School in 1978. He is licensed to practice and has practiced in all state and federal courts in Texas as well as the U.S. Courts of Appeals for the Fifth and Federal Circuits and the U.S. Court of Federal Claims. Mr. Deats practices primarily in the areas of labor and employment law. He has been board certified in Labor and Employment Law by the Texas Board of Legal Specialization since 1989, and has served TBLS as a member of the Advisory Commission for Labor & Employment Law certification. He has also served as Chair and governing board member of the Labor & Employment Law Section of the State Bar of Texas. He is a member of the National Employment Lawyers Association and its Texas affiliate, the AFL-CIO Lawyers Coordinating Committee, the American Association of Justice, and the Texas Trial Lawyers Association. He was selected by his fellow attorneys to be included in the 1993-2013 editions of "The Best Lawyers in America." Mr. Deats is General Counsel for the Texas State Association of Fire Fighters, and represents many fire fighter locals across the State of Texas. He also represents other public and private sector labor unions in Central Texas, as well as individual employees in employment cases. He has handled numerous wage and hour claims both under the Fair Labor Standards Act and pertinent state statutes, and has been a speaker at numerous CLE seminars on various employment law topics.

TABLE OF CONTENTS

I. INTRODUCTION/SCOPE OF PAPER…..………………………………………………………………...….1 II. AVAILABLE RESOURCES……………………………………………………………………………...…...1 A. The Statute Itself…………………………………………………………………………………...….1 B. Regulations & Interpretations Promulgated by the Department of Labor………………………….....1 C. DOL Opinion Letters and Other Guidance……………………………………………………………1 D. Treatises…..………………………………………...…………………………………………………2

III. THE BASICS………………………………………………………………….………………...……………..2 A. FLSA Coverage….…………………………………………………………………………………….2 1. Covered Employees…………………………………………………………………………..2 2. Employee vs. Independent Contractor………………………………………………….…….3 3. Joint Employers……………………………………………………………………………….3 4. Individual Supervisor Liability……………………………………………………………….3 B. Minimum Wage Protection………………………………………………...………………………….3 C. Overtime Protection……………………………………………………………………………...……4 D. Child Labor Protection………………………………………………………………………………...4 E. Equal Pay Protection…………………………………………………………………………………..4 F. Protection Against Retaliation………………………………………………………………...………4 IV. OVERTIME ISSUES………………………………………………………………………………………..…5 A. Work Week/Period – Maximum Hours…………………………………………………………...…..5 1. Standard 40 Hour Work Week………………………………………………………………..5 2. Hospital & Residential Employees……………………………………………………...……5 3. Police & Fire Fighters……………………………………………………………………..….5 B. “Regular Rate” & Exclusions………………………………………………………………………….5 1. “Regular Rate” Defined…………………………………………………………...………….5 2. Exlcusion/Credit for Extra Overtime Pay…………………………………………………….5 3. Exclusion for Discretionary Bonuses & Gifts…………………………………………….…..6 4. Exclusion for Profit Sharing Plans, Stock Options………………………………….………..6 5. Exclusion for Expense Reimbursements………………………………………………….…..6 6. Exclusion for Pension & Health Contributions…………………………………………….…6 C. Exceptions to Regular Rate……………………………………………………………………………6 1. Basic Rate Agreements [29 U.S.C. §207(g)(3)]………………………………………...……6 2. Belo Plans [29 U.S.C. §207(f)] ………………………………………………………………7 D. Hours Worked……………………………………………………………………………………...….7 1. The “Suffered or Permitted Standard…………………………………………………………7 2. Exclusion of Leave Time…………………………………………………………...………...7 3. Off Duty Time – Split Shifts………………………………………………………………….7 4. Waiting & On Call Time……………………………………………………………..……….8 5. Travel Time……………………………………………………………………………..…….8 6. Training…………………………………………………………………………………….…8 7. Pre- and Post-Shift Activities…………………………………………………………...…….9 8. Rest and Meal Periods………………………………………………………………...………9 9. Time Spent Adjusting Grievances……………………………………………………...…….9 10. The “De Minimus” Rule……………………………………………………………...………9 E. Alternate Methods for Paying Overtime………………………………………………………………9 1. Salaried Employees Generally………………………………………………………………..9

Fair Labor Standards Act, The Basics_________________________________________________________________________________________________________Chapter 6

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2. Fluctuating Work Week………………………………………………………………….….10 3. Commission Employees……………………………………………………………..………10 F. Gap Time………………………………………………………………………………………….….10 G. Regular Rte for Employees Performing Two Jobs…………………………………………………...10 V. MINIMUM WAGE ISSUES………………………………………………………………..…..……………10 A. When Payment Is Due………………………………………………………………………………..10 B. Offset for Board, Lodging or Other Facilities………………………………………………….…….11 C. Tipped Employees……………………………………………………………………………………11 1. General Requirements……………………………………………………………………….11 2. Tip Pooling Requirements…………………………………………………………………...11 D. Calculation for Salaried or Commission Employees……………………………………………..….11 E. Allowable and Prohibited Offsets…………………………………………………………….……...11 1. Payments for Taxes or Pursuant to Court Order………………………………………….…11 2. Voluntary Assignments…………………………………………………………………...…11 3. Shortages……………………………………………………………………………..……...12 4. Debts to Employer……………………………………………………………………..……12 5. Uniforms……………………………………………………………………………..……...12 F. Special Minimum Wage Provisions……………………………………………………………...…..12 1. Students & Apprentices………………………………………………………………...……12 2. Workers Under Age 20………………………………………………………………...……12 3. Interns………………………………………………………………………………….…….12 VI. SELECTED EXEMPTIONS TO MINIMUM WAGE AND/OR OVERTIME REQUIREMENTS…….…..12 A. The “White Collar” Exemptions [29 U.S.C. §214(a)(1)]…………………………………………….12 1. General Principles for All White Collar Categories…………………………………….…..12 a. Salary or Fee Basis………………………………………………………………….12 b. Primary Duty………………………………………………………………………..13 c. Highly Compensated Employees……………………………………………….…..13 d. Trainees……………………………………………………………………………..13 2. Executive or Supervisors…………………………………………………………….………13 3. Administrative Employees……………………………………………………………….….14 4. Learned and Creative Professional Employees…………………………………………...…14 5. Computer Employees……………………………………………………………………….14 6. Teachers……………………………………………………………………………………..15 7. Outside Sales Employees……………………………………………………………………15 B. Agricultural Employees………………………………………………………………………………15 C. Amusement & Recreational Employees………………………………………………………….….15 D. Babysitters & Domestic Companionship Providers……………………………………………...…..16 E. Employees Covered by the Motor Carrier Act………………………………………………..……..16 F. Railroad and Airline Employees……………………………………………………………….…….16 G. Taxicab Drivers………………………………………………………………………………………16 H. Domestic Servants……………………………………………………………………………………16 I. Motion Picture Theater Employees……………………………………………………………….….16 VII. SPECIAL ISSUES FOR PUBLIC EMPLOYEES……………………………………………………………16 A. Compensatory Time Agreements………………………………………………………………….…16 B. Partial Exemption for Police & Fire Fighters…………………………………………………..…….17 C. First Responder Protection…………………………………………………………………………...17 D. Training Exception for Certification Training………………………………………………….……17 E. Substitutions/Trading Time……………………………………………………………………….….17 F. FLSA Application to State Employers…………………………………………………………….…17


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G. Volunteers……………………………………………………………………………………………18 VIII. WAIVERS…………………………………………………………………………………...………………..18 A. General Rule Prohibits Employee/Union Waivers……………………………………………...……18 B. Exceptions – Collectively Bargained Arrangement………………………………………………….19 1. 26-Week Exception [29 U.S.C. §207(b)(1)]…………………………………...……………19 2. 52-Week Exception [29 U.S.C. §207(b)(2)]…………………………………………...……19 3. Comp. Time Agreements [29 U.S.C. §207(o)]………………………………………...……19 4. Basic Rate Agreements [29 U.S.C. §207(g)(3)]………………………………………...…..19 5. Belo Agreements [29 U.S.C. §207(f)]………………………………………………...…….19 IX. ENFORCEMENT……………………………………………………………………….……………………19 A. Administrative Complaints to DOL…………………………………………………………….……19 B. Private Lawsuits………………………………………………………………………………...……19 C. Collective Actions……………………………………………………………………………………20


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FAIR LABOR STANDARDS ACT THE BASICS

I. INTRODUCTION/SCOPE OF PAPER The primary purpose of this paper is to provide the practitioner with no or relatively little experience in the area an overview of the basic wage protections provided to employees by the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. §201 et seq. The paper will focus on the basic minimum wage and overtime protections provided; the more common exemptions from the Act’s protections; common issues that arise in FLSA litigation; special rules applicable to certain employee groups, e.g., public safety employees, tipped employees, etc.; and potential waivers of FLSA rights. The paper is not intended as an exhaustive list of the myriad issues that arise in FLSA litigation. Rather, it is hoped it will provide a starting point enabling the practitioner to more quickly access the various resources available when dealing with common FLSA minimum wage and overtime issues. II. AVAILABLE RESOURCES A. THE STATUTE ITSELF As noted, the Fair Labor Standards Act is located at 29 U.S.C. §§201 – 219. Definitions of terms used in the Act or found in §203. The definitions are important, as they govern who are “employers” and “employees” covered by the Act’s protections. Section 206 provides the basic minimum wage protection. Section 207 provides generally for the payment of overtime for hours in excess of the applicable cap in a work week or work period. Exemptions to the Act’s minimum wage and overtime protections are covered in §213. Child labor protections (which will not be covered in this paper) are found in §212. Protection against retaliation for employees invoking the Act’s protections is found in §215. Finally, §216 provides state and federal courts with jurisdiction to hear FLSA claims and to provide relief. A related statute is the Portal to Portal Act found at 29 U.S.C. §251 et seq. The Portal to Portal Act contains important provisions related to enforcement actions under the FLSA. These include §254, which makes non-compensable certain preliminary and postliminary activities; §255, which contains the applicable statute of limitations; and §§259–60, which limit available damages where certain conditions are met.

B. REGULATIONS & INTERPRETATIONS PROMULGATED BY THE DEPARTMENT OF LABOR. The FLSA establishes a Wage & Hour Division within the Department of Labor to administer and enforce the FLSA. See generally 29 U. S. C. §§204, 211 & 217. The DOL has issued extensive regulations and interpretations in implementation of the statutory scheme. These regulations and interpretations generally are found at 29 C.F.R. Parts 500-899. Throughout the paper, an attempt will be made to reference specific parts of the regulations applicable to the topics addressed. For now, it is important to note simply that the regulations themselves provide an important source of information concerning proper application of the FLSA. The difference between so-called regulations and interpretations may have some significance in the weight they carry with courts in enforcement actions. The Supreme Court addressed the distinction between general regulations and interpretive regulations in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). Generally, where the FLSA delegates to the Secretary of Labor the authority to craft legislative regulations, such regulations are accorded so–called Chevron deference, and thus are controlling where not manifestly contrary to the underlying statute. Interpretive regulations enacted without the APA’s full notice and comment procedures, may nonetheless be accorded deference under the standard enunciated in Auer v. Robbins, 519 U. S. 452 (1997). Under so–called Auer deference, the DOL’s interpretation of its own ambiguous regulation is controlling unless plainly erroneous or inconsistent with the regulation. Thus, regulations and interpretations constitute important sources of information in determining the scope and application of the FLSA’s protections. C. DOL OPINION LETTERS AND OTHER GUIDANCE. In addition to promulgating regulations and interpretations, the DOL provides guidance concerning the proper interpretation of the FLSA by several other means. Until 2010, the DOL issued opinion letters in response to particular inquiries about application of the Act. However, in March 2010 the Wage & Hour Division announced that it will no longer attempt to provide definitive opinion letters in response to fact–specific requests, choosing instead to issue Administrator Interpretations providing general guidance to all those affected by a particular


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provision. Nonetheless, prior opinion letters generally are available on the DOL website. The Solicitor’s office of the DOL occasionally files amicus briefs in court actions when requested to do so by the courts themselves or by litigants seeking support in cases involving significant FLSA matters. Such amicus briefs, like regulations and interpretations, may be entitled to Auer deference. E.g., Mullins v. City of New York, 653 F.3d 104 (2d Cir. 2011), cert. denied 132 S. Ct. 1744 (2012) (view in Secretary’s amicus brief entitled to Auer deference where not plainly erroneous or inconsistent with the regulation, and there existed no other reason to suspect the interpretation did not reflect the agency's fair and considered judgment); but see Christopher v. Smithkline Beecham Corp., 132 S. Ct. 2156 (2012) (declining to defer to Secretary’s view expressed in amicus brief). The Wage & Hour Division’s Field Operations Handbook (FOH) is the basic manual used by Wage & Hour personnel in the administration and enforcement of the FLSA. Parts of the FOH are available on the DOL website. Courts occasionally look to the FOH for guidance, e.g., Belt v. Emcare, Inc., 444 F.3d 403 (5th Cir. 2006), although the FOH itself states that it is not intended to establish interpretive policy. Other DOL materials include the Wage & Hour Field Assistance Bulletins, Compliance Assistance materials, Fact Sheets, and Pamphlets among others. Courts have accorded some level of deference to various of these publications. E.g., In re Cardinal Health, Inc. ERISA Litig., 424 F. Supp. 2d 1002, 1037-9 (S. D. Ohio 2006) ( Skidmore deference accorded to Field Assistance Bulletin regarding ERISA); Ramos v. Lee county School Board, 2005 WL 2405832 at *4 (M. D. Fla. 2005) (Fact Sheet entitled to some respect). Additional information can be found on the DOL Wage & Hour Division’s website at www.dol.gov/whd. D. TREATISES. A treatise that the author has found quite helpful is The Fair Labor Standards Act (2d Ed. 2010), a BNA two-volume publication that is authored by the ABA Section of Labor & Employment Law and is supplemented periodically.

III. THE BASICS. A. FLSA COVERAGE. 1. COVERED EMPLOYERS. The minimum wage and overtime protections provided by the FLSA apply only in the context of an employer–employee relationship. Both terms are defined in Section 203. Since 1961, coverage of the FLSA has been based upon an “enterprise standard” whereby coverage is determined based on the interstate activities of the business as a whole. For purposes of this paper, it is sufficient to note that the very great majority of private-sector employers are covered. Since the Supreme Court’s decision in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), it has been clear that state and local government employees likewise are covered. However, as a practical matter private enforcement of FLSA rights against state as opposed to local governments is difficult if not impossible because of Eleventh Amendment problems. E.g., Alden v. Maine, 527 U.S. 706 (1999) (including use of state court lawsuits to prosecute claims on behalf of State employees). Since 1974, the FLSA has also covered most federal employees. See §203(e)(2)(a). 2. EMPLOYEE VS. INDEPENDENT CONTRACTOR. Determination of whether an individual is an employee as opposed to, for example, an independent contractor, is determined based upon the “economic reality test” set forth in United States v. Silk, 331 U.S. 704 (1947). The 5 factors include: (1) degree of control, (2) investment in facilities, (3) opportunity for loss and profit, (4) permanency of the relationship, and (5) required skill. Id. at 716. Other courts since have added a sixth factor for consideration: whether the service rendered is an integral part of the putative employer’s business. E.g., Schultz v. Capital International Security, Inc., 466 F.3d 298 (4th Cir. 2006). One should keep in mind that the definition of the term “employee” in the Act is extremely broad; it was described by the Supreme Court in an early case as “the broadest definition that has ever been included in any one act.” United States v. Rosenwasser, 323 U.S. 360, 363 n. 3 (1945). Nonetheless, there is a plethora of case law going both ways in cases involving the issue of whether a worker is an employee or an independent contractor. For example, compare the recent decisions concerning workers


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http://www.dol.gov/whd

hired to perform clean-up work in the Gulf area following Hurricane Katrina. Cromwell v. Driftwood Electric Contractors, Inc., 348 Fed. Appx. 57 (5th Cir. 2009) (cable splicers repairing damaged communication lines deemed employees); Thibault v. Bellsouth Telecommunications, Inc., 2008 WL 4877158 (E. D. La. 2008), aff’d. 612 F.3d 843 (5th Cir. 2010) (splicer hired to repair damaged wiring found to be independent contractor). Obviously, these are fact specific inquiries. 3. JOINT EMPLOYERS. The courts have frequently confronted the issue of who is to be considered the workers’ employer where the workers are nominally employed by a contractor but they labor for the benefit of a larger principal company who engaged that contractor. E.g., Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947); Reyes v. Remington Seed Hybrid Seed Co., Inc., 495 F.3d 403 (7th Cir. 2007); Charles v. Burton, 169 F.3d 1322 (11th Cir. 1999); Torres-Lopez v. May, 111 F.3d 633 (9th Cir. 1997); Antenor v. D&S Farms, 88 F.3d 925 (11th Cir. 1996); Beliz v. McLeod & Sons Packing Company, 765 F.2d 1317 (5th Cir. 1985); Castillo v. Givens, 704 F.2d. 181 (5th Cir. 1983), cert. denied 464 U.S. 850 (1983); Hodgson v. Griffin & Brand of McAllen, Inc., 471 F.2d 235 (5th Cir. 1973), cert. denied 414 U.S. 819 (1973); Zavala v. Wal-Mart Store, 393 F.Supp. 2d 295 (D.N.J. 2005). The U.S. Department of Labor, the administrative agency charged with enforcing and interpreting the FLSA, has adopted a long-standing interpretive regulation identifying joint employment relationships. 29 C.F.R. Part 791. The regulation reads, in relevant part, at 29 C.F.R. §791.2(b):

Where the employee performs work which simultaneously benefits two or more employers,…a joint employment relationship generally will be considered to exist in situations such as:…(2) Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relationship to the employee; or (3) Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer is controls, [or] is controlled by…the other employer.

In all FLSA cases the defining principle for determining who the employer is the same: An entity “employs” an individual under the FLSA “if, as a matter of economic reality, the individual is dependent on the entity.” Charles, 169 F.3d at 1328; Antenor, 88 F.3d at 929 (quoting Goldberg v. Whitaker House Coop, Inc., 366 U.S. 28, 34 (1961)); Accord, Brock v. Mr. W Fireworks, 814 F.2d 1042 (5th Cir. 1987); Beliz, 765 F.2d 1317, 1327; Castillo, 704 F.2d 181, 189-190. 4. INDIVIDUAL SUPERVISOR LIABILITY. The FLSA defines the term “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to any employee.” Thus, a corporate officer, manager, supervisor or shareholder can be held individually liable for an FLSA violation where that individual was responsible in whole or in part. 29 C. F. R. §791.2(b)(2); Donovan v. Agnew, 712 F.2d 1509 (1st Cir. 1983); Donovan v. Grim Hotel, 747 F.2d 966 (5th Cir. 1984), cert. denied 471 U.S. 1124 (1985). Note that lack of ownership does not preclude a corporate officer from being liable as an employer. Solis v. Universal Project Management, Inc., 2009 WL 4043362 (S.D. Tex. 2009). B. MINIMUM WAGE PROTECTION. 29 U.S.C. §206 requires that a minimum wage be paid for all hours worked. Regulations related to the payment of the minimum wage are found primarily in 29 C.F.R. Parts 553 & 778. The current federal minimum wage, effective July 24, 2009, is $7.25 per hour. Of course, many state and local laws establish higher minimum wage rates. Payment of the federal minimum wage does not excuse an employer from compliance with these higher wage rates. Courts reject minimum claims where the employee claims s/he was not paid for all hours worked, if the total compensation, divided by the number of hours worked, yields a rate in excess of the minimum wage. E.g., Green v. Dallas County Schools, 2005 WL 1630032 (N. D. Tex. 2005) (rejecting bus monitor’s claim for unpaid additional hours where total remuneration divided by total hours exceeded minimum wage). For tipped employees, 29 U.S.C. §203(m) allows payment of a lower minimum wage provided that tips received by such employee are sufficient to make up the difference between the lower amount and


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the federal minimum wage. Since 1996, the minimum wage for tipped and always has been $2.13 per hour. In addition, there are special minimum wage payments for certain types of learners or apprentices employed under a special certificate issued by the Secretary of Labor, and for employees under age 20. This issue is discussed more fully in Section V. F below. C. OVERTIME PROTECTION. 29 U.S.C. §207 generally requires that employers pay their non-–exempt employees an overtime premium equal to one and one–half times their “regular rate” for all overtime hours worked in any given work week or work cycle. Regulations related to payment of overtime are found primarily in 29 C.F.R. Parts 778, and 547–550. For most employees, overtime pay is required for hours worked in excess of 40 in a 7-day workweek. Other types of work cycles for certain types of employees are described below in Section IV.A. The workweek is not required to be a calendar week, but the start of the work week must be fixed and cannot be varied to avoid payment of overtime.1 Likewise, different workweeks can be established for different groups of employees. Further discussion of specialized terms, such as what constitutes “hours worked” and the “regular rate” are described further in Section IV below. D. CHILD LABOR PROTECTION. Any significant discussion of the FLSA’s child labor provisions is beyond the scope of this paper. However, the Act’s provision prohibiting “oppressive” child labor is found at 29 U.S.C. §212(a). Regulations implementing the statute’s prohibition are found at 29 C.F.R. Parts 570, 575, 579 & 580. Since 2008, the Department of Labor has used the term “youth employment” in place of “child labor” to discuss permitted and prohibited employment of persons under age 18. The DOL has 2 websites that address youth employment: Youth & Labor(www.dol.gov/dol/topic/youthlaborindex.htm) YouthRules! (www.youthrules.dol.gov)

1 However, the beginning of the work week can be changed if the change is intended to be permanent and the change is not designed to avoid the FLSA’s overtime requirements.

E. EQUAL PAY PROTECTION. In 1963, the Equal Pay Act was added to the FLSA to prohibit pay discrimination on the basis of sex. See 29 U.S.C. §206(d). Again, significant discussion of the EPA is beyond the scope of this paper. Generally, the provision prohibits paying the employees of the opposite sex a higher wage for the same or similar jobs. F. PROTECTION AGAINST RETALIATION. 29 U.S.C. §215(a)(3) prohibits an employer from discharging or otherwise discriminating against an employee because the employee has filed a complaint or testified in a proceeding related to enforcement of FLSA rights. In a recent decision, the Supreme Court clarified that the anti–discrimination provision protects employees who make oral as well as written complaints alleging violations. Kasten v. Saint-Gobain Performance Plastics Corporation, 131 S. Ct. 1325 (2011). In In addition to the back pay, liquidated damages and attorney fees generally available in FLSA minimum wage and overtime cases, available relief in retaliation cases also includes “such legal or equitable relief as may be appropriate,” including re–employment and reinstatement. The prevailing, but not universal, view is that available legal relief comprehends compensatory damages, including such non–economic damages as mental anguish. E.g., Moore v. Freeman, 355 F.3d 558 (6th Cir. 2004); Lambert v. Ackerly, 180 F.3d 997 (9th Cir. 1999), cert. denied 528 U.S. 1116 (2000); Randolph v. ADT Security Services, Inc., 2012 WL 2234362 (D. Md. 2012); but see Douglas v. Mission Chevrolet, 757 F. Supp 2d 637 (W.D. Tex. 2010) (mental anguish damages not available). The courts are more split on the issue of whether punitive damages are available. In Travis v. Gary Community Mental Health Center, 921 F.2d 108 (7th Cir. 1990), cert. denied 502 U.S. 812 (1991), the court held that punitive damages are available. However, in Snapp v. Unlimited Concepts, Inc., 208 F.3d 928 (11th Cir. 2000), cert. denied 532 U.S. 975 (2001), the court held that they were not. Recent district court decisions continue to be split on the issue. Compare Campbell-Thomson v. Cox Communications, Inc., 2010 WL 1814844 (D. Ariz. 2010) (allowing punitive damages) with Allen v. Garden City Co-op, 651 F. Supp. 2d 1249 (D. Kan. 2009) (disallowing punitive damages in EPA case).


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http://www.dol.gov/dol/topic/youthlaborindex.htm

http://www.youthrules.dol.gov/

IV. OVERTIME ISSUES. A. WORK WEEK/PERIOD – MAXIMUM HOURS. 1. STANDARD 40 HOUR WORK WEEK. As noted above in Section III.C, most employees, especially in the private sector, are entitled to overtime pay for hours in excess a 40 worked in a single workweek. Each workweek is judged separately. An employer is not allowed to average hours over 2 or more workweeks to avoid payment of overtime. For example, an employee who works 45 hours in one workweek must be paid over time for 5 hours even though s/he works 35 hours in the preceding or subsequent workweek. The daily schedule within the week is a different matter. Employees are not entitled over time because they work more than 8 hours in the day. Thus, an employee scheduled to work four 10–hour days during the workweek is not entitled to overtime pay. Similarly, an employee who is held over 2 extra hours after the conclusion of his/her regular work day is not entitled to overtime pay if allowed to leave 2 hours early during another work day in the same work week. 2. HOSPITAL & RESIDENTIAL EMPLOYEES. 29 U.S.C. §207(j) authorizes hospital and residential care employers to utilize a 14–day period in place of the 7–day work week provided three conditions are met: (1) there is an agreement or understanding between the employer and employee prior to commencement of the work; (2) the employee is paid overtime for all hours in excess of 8 per day or 80 per 14–day period; and (3) the 14–day period is used to calculate the employees’ regular rate of pay. 29 C.F.R. §778.601. 3. POLICE & FIRE FIGHTERS. 29 U.S.C. §207(k) authorizes use of a different work cycle for public employers who employ fire fighters and police officers. The work cycle can be established by the employer at any length between 7 and 28 days. Police officers are entitled to overtime pay for hours in excess of the ratio of 171 hours to 28 days. Fire fighters are entitled to overtime pay for hours in excess of the ratio of 212 hours to 28 days. For example, a fire fighter who has a 14-day work cycle is entitled to overtime pay for hours worked in excess of 106 during the 14–day work period. A police officer who has a 21–day work cycle

is entitled to overtime pay for hours worked in excess of 128. B. “REGULAR RATE” & EXCLUSIONS. 1. “REGULAR RATE” DEFINED. As noted earlier, the premium pay due for overtime hours worked is one and one-half times the employee’s “regular rate.” 29 U.S.C. §207(a). The regular rate is statutorily defined at 29 U.S.C. §207(e), and is further described in the regulations at 29 C.F.R. §778.107 et seq. Generally, the “regular rate” is an hourly rate “determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.” 29 C.F.R. 778.108. Calculation of the regular rate for hourly employees generally is described in §778.109. Calculation of the regular rate for salaried employees generally is described in §778.113. Calculation of the regular rate for pieceworkers generally is described in §778.111. Generally, all remuneration received for the employee’s regular work must be included in determination of the regular rate, unless specifically excluded in one of the specific exclusions listed in §207(e). Some of those exclusions are discussed in more detail below. But pay supplements that do not fall within one of the listed exclusions must be added to base pay in determination of the regular rate. This means that pay supplements for things such as seniority, certifications, educational achievement, and incentive pay generally must be included along with base salary before dividing that salary by the number of hours it was designed to compensate in order to find the hourly rate which constitutes the regular rate. The major exclusions from this rule are discussed below. 2. EXCLUSION/CREDIT FOR EXTRA OVERTIME PAY. Under 29 U.S.C. §207(e)(5)-(7), the regular rate excludes additional compensation paid by the employer for specified types of overtime work. Under Subsection (e)(5), overtime pay received by the employee for working hours in excess of the cap established by the FLSA it is excluded from the pay used to calculate the regular rate. This same Subsection also excludes from pay used to calculate the regular rate any pay that the employer provides to the employee for work in excess of the employee’s regular workday or work week. For example, if an


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employee is regularly scheduled to work 8 hours per day, and receives a pay supplement 4 hours over 8 worked in the day, the pay supplement is excluded from the calculation of the regular rate. Likewise, an employee who has a regular work week of 35 hours, and receives premium pay for hours in excess of 35 work each week has such premium pay excluded from the regular rate calculation. Under Subsection (e)(6), premium pay that an employee receives for working on a Saturday, Sunday, or holiday; or for working on the 6th or 7th day of the employee’s workweek; is excluded from the pay used to establish the employee’s regular rate if “such premium rate is not less than one and one-half times the rate established in good faith for like work performed in non-overtime hours on other days.” An example of how this exclusion works is provided in the regulations at 29 C.F.R. §778.205. Finally, Subsection (e)(7) provides an exclusion for contractual premium pay received for certain hours outside the employee’s normal workday or work week. This is referred to as “clock pattern” premium pay. Three conditions must be met for exclusion of such pay. The premium must be provided pursuant to an employment contract or collective bargaining agreement; it must be paid for hours outside the contractually established hours; and it must equal one and one-half times the rate established by the contract for regularly scheduled work. Application of this exclusion is discussed in 29 C.F.R. 778.206. 3. EXCLUSION FOR DISCRETIONARY BONUSES & GIFTS. Under 29 U.S.C. §207(e)(3)(a), bonuses paid at or near the end of the period for which the employee is being rewarded are excluded from the compensation from which the regular rate is determined if the bonuses are discretionary. To be considered discretionary, both the amount of the bonus and the fact that it is made must be at the sole discretion of the employer. The payment must not be made pursuant to a contract, agreement, or promise causing the employees to expect such payments regularly. Similarly, gifts such as Christmas gifts are excluded where they are not measured by or dependent on hours worked, production or efficiency. 29 U.S.C. §207(e)(1).

4. EXCLUSION FOR PROFIT SHARING PLANS, STOCK OPTIONS. Under 29 U.S.C. §207(e)(3)(b), payments made pursuant to a bona fide profit-sharing plan, or a thrift or savings plan are excluded from the compensation upon which the regular rate is based. The DOL by regulation has set forth the minimum requirements that such plans must meet in order to qualify for this exclusion. See 29 C.F.R. Parts 547, 549. Under 29 U.S.C. §207(e)(8), value received by employees from stock option grants is excludable from compensation upon which the regular rate is calculated if the statutory conditions are met. 5. EXCLUSION FOR EXPENSE REIMBURSEMENTS. Under 29 U.S.C. §207(e)(2), the regular rate likewise excludes reimbursements received by employees for expenses incurred in furtherance of the employer’s business. Such payments likewise cannot be credited toward any statutory overtime due the employee. 6. EXCLUSION FOR PENSION & HEALTH CONTRIBUTIONS. Under 29 U.S.C. §207(e)(4), employer contributions to employee pension and health insurance accounts are excludable from compensation from which the regular rate is calculated. As with expense reimbursements, such payments cannot be credited toward overtime due the employee. Special issues concerning so-called “cafeteria plans” have been covered by DOL in 29 C.F.R. §778.215(a)(5). C. EXCEPTIONS TO REGULAR RATE. 1. BASIC RATE AGREEMENTS [29 U.S.C. §207(g)(3)] “Basic Rate” agreements are an authorized exception to the use of the regular rate to compensate employees for overtime hours if all statutory requirements are met. The statute, 29 U.S.C. §207(g)(3), establishes six statutory requirements before a basic rate may be used. First, the employer and employee must agree to the basic rate before the work is performed. The employer may make this agreement with the employee individually, or with the collective bargaining representative. Such agreement may be implied where the employee continuously accepts the basic rate as overtime pay for an extended


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period of time. E.g., McCrary v. Weyerhaeuser Co., 457 F.2d 862 (9th Cir. 1972). Second, the basic rate must be a rate above the minimum wage required by the FLSA or other law that is a specified rate or one that can be derived from applying a specified method of calculation. Third, the basic rate must be authorized by one of the DOL methods described in 29 C.F.R. §548.4 or 548.4. Fourth, the employee’s average straight-time earnings, less allowable offsets, must exceed the FLSA minimum wage during the period covered by the basic rate agreement. Fifth, all overtime earnings must be paid at 1 ½ times the basic rate. Sixth, additional overtime compensation must be paid on other forms of pay not covered by the basic rate agreement but which are included in determining the regular rate, such as seniority or shift differential pay. If an employer wants to use a basic rate agreement different from those specifically authorized by the regulations (29 C.F.R. §548.3), advance approval by the DOL is required. 2. BELO PLANS [29 U.S.C. §207(f)] So-called “Belo plans,” named after the Supreme Court’s decision in Walling v. A. H. Belo Corp., 316 U.S. 624 (1942), provide another authorized exception to use of the regular rate to compensate employees for overtime work. The purpose of a Belo plan is to allow an employer to pay employees who work irregular hours the same pay amount each week without regard to the number of hours worked, unless the hours worked in a week exceed 60. Again, in order to use this exception, all statutory requirements set forth in 29 U.S.C. §207(f) must be met. Those requirement are: (1) the employees’ duties must require irregular hours of work from week to week; (2) the existence of an individual or collective bargaining agreement specifying a regular rate of pay not less than minimum wage, and requires payment of 1 ½ times the regular rate for overtime hours; and (3) a weekly guarantee of pay for all hours up to 60 worked in a week. The idea is that the weekly guarantee must be set at a rate that equals what would be paid for 60 hours of work at minimum wage, if overtime compensation were paid for hours in excess of 40. If this is true, then the employee is paid the guaranteed wage in all weeks where s/he works 60 or fewer hours, and receives overtime compensation for hours in excess of 60 in a week. The regulations that describe permissible Belo plans are found at 29 C.F.R. §§778.402 - .414.

D. HOURS WORKED. Obviously, an employee is entitled to be paid overtime for all hours worked in excess of the statutory cap, usually 40 in a week. However, numerous questions have arisen over what constitutes “hours worked.” Some of the more common questions that arise are discussed below. 1. THE “SUFFERED OR PERMITTED” STANDARD. What happens if the employee performs work that benefits but was not specifically authorized by the employer? Occasions arise in which an employer claims that s/he did not authorize or even know of work being performed by the employee. To deal with this situation, the DOL and case law have developed a “suffered or permitted” standard. Generally, work that is not requested, but is suffered or permitted by the employer, constitutes compensable work. See 29 U.S.C. §203(g) (defining “employ” as including “to suffer or permit to work”); 29 C.F.R. §785.11. Under this standard, if the employer knows or has reason to believe that the work is being performed, then the time spent performing the work constitutes hours worked. E.g., Donovan v. American Airlines, 686 F.2d 267 (5th Cir. 1982); Doe v. United States, 372 F.3d 1347 (Fed. Cir. 2004). 2. EXCLUSION OF LEAVE TIME. Under 29 U.S.C. §207(e)(2), amounts received for paid leave time (holiday, sick and vacation leave) are not counted in determining the regular rate. Similarly, such leave hours are not counted as “hours worked” for purposes of determining whether the employee has worked hours in excess of the statutory overtime cap. 29 C.F.R. §778.218(a); Joseph G. Moretti, Inc. v. Boogers, 376 F.2d 27 (5th Cir. 1967). Thus, e.g., if an employee receives a Monday holiday but works 4 hours on Saturday, the employee has actually worked only 36 hours and no overtime compensation is due for the Saturday work. 3. OFF DUTY TIME – SPLIT SHIFTS. Where employees are scheduled to work split shifts rather than a continuous 8-hour day, the time between the two parts of the employee’s work day are generally deemed non-compensable if the employee is completely relieved of duty and the period is long enough to allow the employee to effectively use the time for his/her own purposes. 29 C.F.R. §785.16(a);


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United Transportation Union Local 1745 v. City of Albuquerque, 178 F.3d 1109 (10th Cir. 1999). 4. WAITING & ON CALL TIME. In an early case, the Supreme Court established that whether an employee is entitled to be paid for “waiting time” depends on whether the employee is engaged to wait, and thus entitled to compensation, or waiting to be engaged, and thus not. Skidmore v. Swift & Co., 323 U.S. 134 (1944). The regulations concerning the compensability of waiting time are found at 29 C.F.R. §§785.14 - .16, and cover waiting time both while on- and off-duty. Waiting time while on duty is, of course, more likely to be found compensable, and will be found compensable “where the time belongs to and is controlled by the employer.” 29 C.F.R. §785.15. For example, periods of waiting due to mechanical failures requiring repair before the workers can resume work is compensable. Mireles v. Frio Foods, 899 F.2d 1407 (5th Cir. 1990). Time spent away from the work site but in an “on call” status is much less likely to be compensable. The applicable regulation is 29 C.F.R. §785.17. An employee who must remain within reach by phone or pager for call to return to work, but is otherwise generally free to use the time as his/her own, is usually not entitled to compensation for the time. For example, in Bright v. Houston Northwest Medical Center Survivor, Inc., 934 F.2d 671 (5th Cir. 1991), cert. denied 502 U.S. 1036 (1992), a technician was not compensated for hours spent on call and subject to return to make emergency repairs to medical equipment despite being required to wear a pager, to refrain from use of alcohol to the extent he would be unable to do such work, and to be able to respond within about 20 minutes. A good list of factors considered in determining compensability of on call time is Owens v. Local No. 169, Association of Western Pulp and Paper Workers, 971 F.2d 347 (9th Cir. 1992). 5. TRAVEL TIME The regulations pertaining to the compensability of travel time are found at 29 C.F.R. §§785.33 - .41. Employees are generally not entitled to travel time spent commuting to and from work. 29 U.S.C. §254(a)(1); 29 C.F.R. §785.35. However, travel from home to work in an after-hours emergency is compensable. 29 C.F.R. §785.36. Travel from the general office to a work site, or from one work site to another during the work day, is compensable work time. 29 C.F.R. §785.38. Work performed during otherwise non-compensable travel time makes such

time compensable. For example, in Reich v. New York City Transit Authority, 45 F.3d 646 (2d Cir. 1995), the court ruled that the compensability of time spent by canine officers traveling to work with their dogs turned on whether the officer performed any duties in caring for the dogs during the commute. Travel away from an employee’s home city raises additional considerations. Where travel to a different city occurs during a single work day, the travel is considered compensable because it is indispensible to the work performed. 29 C.F.R. §785.37 uses the example of a person who lives in Washington and who travels to New York City for the day to perform a work assignment. Travel time in this example is considered compensable. However, travel away from the home city for a multiple day assignment is considered compensable only if occurring during the employee’s regular working hours: “As an enforcement policy the Divisions will not consider as work time that time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus, or automobile.” 29 C.F.R. §785.39. 6. TRAINING. Whether time spent in training classes is compensable generally is determined under the standard set forth in 29 C.F.R. §785.27. Training time generally is considered compensable unless each of four criteria are met: (1) attendance is outside the employee’s regular working hours; (2) attendance is in fact voluntary; (3) the training is not directly related to the employee’s current job; and (4) the employee does not perform any productive work during the training. If any of the four criteria is absent, the employee must be paid for the training time. There is a special regulation governing apprenticeship training – 29 C.F.R. §785.32 – that renders the time spent in an apprenticeship training course non-compensable if the criteria are met. The apprenticeship program must meet standards established by the DOL’s Bureau of Apprenticeship and Training. There is a special training rule for public employees engaged in training necessary for a certification required to perform their job. 29 C.F.R. 553.226(b). Such time may be considered non-compensable even if the employer bears the cost of training. However, §553.226(c) appears to exempt from this requirement time spent by police officers and fire fighters at a training academy.


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7. PRE- AND POST-SHIFT ACTIVITIES. In 1947, the Congress amended the FLSA by passage of the Portal to Portal Act, 29 U.S.C. §251 et seq. Section 254(a)(2) therein specifically addresses preliminary and postliminary activities such as changing clothes, preparing equipment, or receiving reports from the prior shift. The statute states that, in the absence of a contrary custom or agreement, such as a collective bargaining agreement, “activities which are preliminary to or postliminary to said principal activity or activities” need not be counted as hours worked. Despite the statutory language, the Supreme Court concluded in two cases in 1956 that preliminary and postliminary activities remain compensable work hours if they are an integral and indispensable part of the employees’ principal activities. Steiner v. Mitchell, 350 U.S. 247 (1956); Mitchell v. King Packing Co., 350 U.S. 260 (1956). In Steiner, the Court found compensable the employees’ activities in showering and changing clothes prior to working in a plant producing dangerous materials. In King Packing, the Court held compensable pre-shift time spent by a plant’s knifemen in sharpening their knives. Not surprisingly, this area remains a heavily litigated one, with cases going both ways depending on the courts’ determination of whether the preliminary activity is indispensible to the principal activity. In 2005, the Supreme Court again weighed in on the subject in IBP, Inc. v. Alvarez, 546 U.S. 21 (2005). In Alvarez, the Court held that time spent by meat processing plant employees in donning specialized gear, and time spent by poultry employees in doffing protective clothing, constituted compensable hours of work, notwithstanding the Portal to Portal provision. The DOL regulations implementing the Portal to Portal Act are found at 29 C.F.R. Part 790. The regulations related to preliminary and postliminary activities are found at §§790.3 - .12. Other pertinent regulations are found at 29 C.F.R. §§785.24 - .26. 8. REST AND MEAL PERIODS. Short rest periods and coffee breaks constitute compensable hours of work. 29 C.F.R. §785.18. However, bona fide meal periods do not constitute compensable hours of work. To be considered bona fide, the employee must be completely relieved of duties for a sufficient period of time, generally 30 or more minutes. 29 C.F.R. §785.19(a). A meal period can be deemed compensable if the employee is required to engage in work-related activities during the meal period. For example, in AFSCME Local 889

v. Louisiana, 145 F.3d 280 (5th Cir. 1998), correctional officers who were required to eat at the prison cafeteria and respond to inmate disturbances. 9. TIME SPENT ADJUSTING GRIEVANCES. Time spent on the employer’s premises in adjusting grievances between employer and employee generally is considered compensable work time. 29 C.F.R. §785.42. However, where employees are represented by a union, the DOL has taken the position that whether such time constitutes hours worked is left to the collective bargaining process. 10. THE “DE MINIMUS” RULE. The “de minimus” rule, first articulated by the Supreme Court in Anderson v. Mt. Clemens Potter Co., 328 U.S. 680 (1946), holds that insubstantial and insignificant periods of time need not be counted as hours worked for FLSA purposes. Under the regulation promulgated by the DOL, the rule is applied only “where there are uncertain and indefinite periods of time involved of a few seconds or minutes duration, and where the failure to count such time is due to considerations justified by industrial realities.” 29 C.F.R. §785.47. A seminal case identifying factors used to determine if time is de minimus is Lindow v. United States, 738 F.2d 1057 (9th Cir. 1984). Factors include (1) the amount of time spent daily on the additional work; (2) the practical administrative difficulty of recording the actual time; (3) the aggregate amount of compensable time; and (4) whether the work is performed on a regular basis. E. ALTERNATE METHODS FOR PAYING OVERTIME. 1. SALARIED EMPLOYEES GENERALLY. Determination of the overtime wage for hourly employees is simple and straightforward. However, where employees are not paid on an hourly basis, a different calculation is required. For salaried employees, the regular rate is determined by dividing the weekly salary by the number of hours it is designed to compensate, and then paying for overtime at 1 ½ times the rate thus established. Where the salary covers a period other than a week, it must be reduced to its workweek equivalent. For example, a monthly salary can be reduced to its workweek equivalent by multiplying it by 12 and then dividing by 52. The regulation covering determination of the regular rate for salaried employees generally is 29 C.F.R. §778.113.


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2. FLUCTUATING WORK WEEK. An alternative method for paying salaried employees, described in 29 C.F.R. §778.114, is the fluctuating workweek (FWW) method. This method is disadvantageous for employees, and thus is strictly construed. Under the FWW method, available when the employees’ hours vary from week to week, the regular rate is determined by dividing the weekly salary by the actual hours worked, whether few or many. The salary is deemed to pay straight time for all hours worked, including overtime hours. Then an additional ½ hour of pay is due for all overtime hours. Obviously, the regular rate, and the additional amount due for overtime, declines as hours increase. Nonetheless, use is permissible if the regular rate does not fall below minimum wage; the weekly salary is guaranteed even if the employee works fewer than 40 hours; and there is an agreement to use the FWW method reached before the work is performed. The “meeting of the minds” is generally considered an important factor, although the employees’ agreement can sometimes be inferred from his/her conduct over a period of time. Cash v. Conn Appliances, Inc., 2 F. Supp. 2d 884 (E. D. Tex. 1997). In 2008, the DOL issued a Notice of Proposed Rulemaking on a proposed change to §778.114 to allow employers to provide additional non-overtime compensation to employees (e.g., bonuses and premium pay) without defeating application of the FWW overtime payment method. After consideration of comments, the DOL in 2011 decided NOT to change the provision, 76 Fed. Reg. 18850, thus leaving in place prior case law ruling that payment of such pay supplements was inconsistent with the FWW method. E.g., O’Brien v. Town of Agawam, 350 F.3d 279 (1st Cir. 2003); Dooley v. Liberty Mutual Ins. Co., 369 F. Supp. 2d 81 (D. Mass. 2005). 3. COMMISSION EMPLOYEES. Where employees are paid solely on a commission basis, or receive commissions in addition to other salary, the commission must be included in determining the hourly rate. Of course, often commissions are deferred, and are paid on some periodic basis other than a workweek. Where the commission payments nonetheless can be attributed to particular workweeks, they must be added to other compensation in determining the regular rate for those workweeks. More often, the commissions cannot be attributed to specific workweeks. In this case, the DOL regulations provide two alternate methods for attributing the commission payments to workweeks

for determination of the regular rate. One method is to divide the commission payment evenly between the workweeks of the period for which the commission is paid. 29 C.F.R. §778.120(a). The other is to allocate equal amounts of the commission payment to each hour worked by the employee. 29 C.F.R. §778.120(b). The regulations provide illustrative examples of both methodologies. F. GAP TIME “Gap time” is a term used to describe straight-time hours in excess of the employee’s regularly scheduled hours but below the statutory overtime cap. Questions have arisen about whether a claim may be made under the FLSA when the employer fails to pay the employee for these gap-time hours. The DOL takes the position that a claim will lie for payment of the employee’s regular straight-time rate for gap hours in weeks where the employee works some statutory overtime hours, reasoning that the employee cannot be said to have received all overtime due until s/he has first been paid all compensation due for straight-time hours. 29 C.F.R. §778.315. However, in weeks where no statutory overtime is worked, the DOL contends no FLSA claim will lie unless the total pay received, divided by the number of hours worked, produces a regular rate below the minimum wage. 29 C.F.R. §778.322. Accord Monohan v. County of Chesterfield, 95 F.3d 1263 (4th Cir. 1996). G. REGULAR RATE FOR EMPLOYEES PERFORMING TWO JOBS. 29 U.S.C. §207(g)(2) deals with the situation where an employee performs two jobs with different pay rates. In this situation, the employer and employee can agree in advance that the employee will be paid one and one-half the regular rate for the job s/he is performing during overtime hours. V. MINIMUM WAGE ISSUES. A. WHEN PAYMENT IS DUE. Minimum wage payments are due on the first regular payday following completion of the workweek. However, the pay period may cover more than one workweek.


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B. OFFSET FOR BOARD, LODGING OR OTHER FACILITIES. An employer is entitled to a credit for meals furnished to the employees, although such credit cannot exceed the actual cost to the employer of providing the meal. 29 C.F.R. §531.3(b). Housing cost may be included as part of an employee’s wage only if the housing is provided primarily for the benefit of the employee. 29 C.F.R. §531.3(d)(1). However, when the employer requires the employee to live on-site to meet the employer’s needs, or the employee is required to be on call, such credit may be unavailable to the employee. E.g., Bailey v. Pilots’ Association, 406 F. Supp. 1302 (E. D. Pa. 1976) (cost of onsite lodging provided to apprentice pilot could not be included in wages where provided primarily for employer’s benefit). C. TIPPED EMPLOYEES. 1. GENERAL REQUIREMENTS. The statute concerning tipped employees is found at 29 U.S.C. §203(m). As noted above in Section III.B, since 1996 the minimum wage for tipped employees is $2.13 per hour, provided that tips received are sufficient to cover the difference between $2.13 and the minimum wage under 29 U.S.C. §206(a). In order to take advantage of the so-called tip credit, the employer must provide its tipped employees a notice containing certain information. After a period for notice and comment, the DOL amended 29 C.F.R. §531.59(b) in 2011 to require that the notice contain the following information: the amount of the cash wage that is to be paid to the employee; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer; that all tips collected by the employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements. See 76 Fed. Reg. 18856. 2. TIP POOLING REQUIREMENTS. A tip pool is an arrangement in which tipped employees contribute a portion of their tips to a general pool to be shared by others. Persons sharing in the tip pool are limited to those who customarily and regularly receive tips, e.g., waiters, bartenders, bussers, and the like. Prior to the 2011 amendment, the DOL limited the amount by which tipped employees could

be required to contribute to a tip pooling arrangement, but several courts had disapproved of this rule. In 2011, the regulation, 29 C.F.R. §531.54, was amended. As it now reads, the regulation does not impose a maximum contribution percentage on valid mandatory tip pools. However, the employer “must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.” 76 Fed. Reg. 18856. D. CALCULATION FOR SALARIED OR COMMISSION EMPLOYEES. As noted, where an employee receives a salary, the weekly salary is divided by the hours worked to determine compliance with the minimum wage. Where the salary is, e.g., a monthly salary, it must be reduced to its weekly equivalent (E.g., monthly salary x 12 ÷ 52 = weekly salary). Commission employees present special problems. Although commissions are often determined on a monthly or longer basis, an employee must receive the minimum wage for all hours worked in each workweek by the first payday following completion of the workweek. An example of a case dealing with some of these issues is Olson v. Superior Pontiac-GMC, 765 F.2d 1570 (11th Cir. 1985). E. ALLOWABLE AND PROHIBITED OFFSETS. 1. PAYMENTS FOR TAXES OR PURSUANT TO COURT ORDER. Taxes assessed against the employee and deducted by the employer and sent to the appropriate governmental entity may properly be included in determining compliance with the minimum wage. 29 C.F.R. §531.38. Similarly, deductions pursuant to a valid court order may be counted toward compliance with the minimum wage. 29 C.F.R. §531.39(a). 2. VOLUNTARY ASSIGNMENTS. If the employee voluntarily authorizes the employer to make deductions for payment to a third party, and the employer derives no benefit from the transaction, the amount deducted may be counted toward compliance with the minimum wage. 29 C.F.R. §531.39 - .40. Deductions for union dues are an example of such a voluntary assignment.


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3. SHORTAGES. Deductions for cash register shortages cannot be counted toward compliance toward the minimum wage. Mayhue’s Super Liquor Stores v. Hodgson, 464 F.2d 1196 (5th Cir. 1972), cert. denied 409 U.S. 1108 (1973). 4. DEBTS TO EMPLOYER. Deductions made by the employer to recoup amounts provided by the employer to the employee generally may not have the effect of reducing the employee’s pay below the minimum wage. 29 C.F.R. §531.35. However, this does not include recoupment of advanced but unearned vacation leave if the employee has been informed in advance of the employer’s policy to recoup such advances. WH Op. Letter FLSA2004-17NA (10/6/04). 5. UNIFORMS. It is unlawful for the employer to deduct the cost of uniforms or uniform maintenance where the deduction reduces the employee’s wages below the minimum wage. 29 C.F.R. §§531.3(d)(2), 531.32(c). F. SPECIAL MINIMUM WAGE PROVISIONS. 1. STUDENTS & APPRENTICES. Under 29 U.S.C. §213(a)(7), an employer can pay less than the minimum wage required by §206(a) if the employer obtains a certificate from the Secretary of Labor pursuant to §214. Employees covered by this provision include learners, apprentices and students. 2. WORKERS UNDER AGE 20 In 1996, the FLSA was amended to provide for an “opportunity wage” for employees under age 20 in their first 90 consecutive days of employment. 29 U.S.C. §206(g) now allows payment of a wage not less than $4.25 per hour. However, use of such employees cannot operate to displace other employees or reduce their hours. 3. INTERNS Internships generally are viewed as employment, and at least the minimum wage must be paid. However, the DOL allows unpaid internships if all of the following six criteria are met: (1) the internship is similar to training which would be given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern does not displace regular employees; (4) the employer derives no immediate advantage from the activities of the intern; (5) the intern is not necessarily

entitled to a job at the end of the internship; and (6) the employer and intern both understand that the intern will not be paid for the internship. The DOL has a Fact Sheet on its website that provides additional information. VI. SELECTED EXEMPTIONS TO

MINIMUM WAGE AND/OR OVERTIME REQUIREMENTS.

29 U.S.C. §213 contains a number of positions deemed “exempt” from the minimum and/or overtime provisions of the FLSA. §213(a) contains a listing of employees exempt from both the minimum wage and overtime provisions. §213(b) lists a number of additional categories that are exempt from the Act’s overtime requirements. Some of the more common exemptions are discussed below. A. THE “WHITE COLLAR” EXEMPTIONS [29 U.S.C. §213(a)(1)] Possibly the most-litigated exemptions under the FLSA are the so-called “white collar” exemptions found in 29 U.S.C. §213(a)(1). These include supervisors, administrative employees, professional employees, teachers, computer, and outside sales employees. In 2004, the regulations for the white collar exemptions were extensively modified. See 69 Fed. Reg. 22260. Described below are the requirements as reflected in the post-2004 regulations. 1. GENERAL PRINCIPLES FOR ALL WHITE COLLAR CATEGORIES. There are some general principles applicable to all of the white collar exemptions – to qualify for exemption, these general principles must be satisfied. a. SALARY OR FEE BASIS Except for teachers, lawyers, and doctors, an employer claiming a white collar exemption for an employee must pay the employee on a salary basis. The minimum salary that must be paid is $455 per week. 29 C.F.R. §541.600. The salary basis requirement is discussed in the regulations at 29 C.F.R. §541.602. Generally, the employee must be paid a pre-determined salary on a weekly or less frequent basis (e.g., bi-weekly, monthly) that is not subject to deductions because of the quantity or quality of the work performed. The employee must receive his/her full salary for each week in which s/he performs any work, without regard to the number of hours or days worked. However, the salary basis is not defeated where the employee receives no pay for a week in which s/he performed no work.


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§541.602(b) lists the exceptions to the prohibition against deductions from the salary. For example, deductions for disciplinary reasons constitute an exception to the general rule against deductions. Similarly, deductions for absences of a full day or more for illness are permitted if there is a sick leave policy in effect to provide compensation for such illness. 29 C.F.R. §541.603 deals with the situation where the occasional impermissible deduction is made. Such impermissible deductions will not defeat an employer’s salary basis claim if they are infrequent and the employer reimburses the affected employee when such accidental deductions are made. b. PRIMARY DUTY. Obviously, there exist many positions in which the employee performs both exempt and non-exempt work. In such cases, the employer is still entitled to claim the exemption for the employee if the employee’s “primary duty” is the performance of exempt work. The term “primary duty” is discussed at 29 C.F.R. §541.700. Primary duty is defined as the “principle, main, major, or most important duty that the employee performs.” Id. Determination of the principle duty is not simply a calculation of how much time the employee performs exempt vs. non-exempt duties. Although performance of exempt duties more than 50% of the time is indicative that exempt duties are the primary ones, performance of exempt duties less than 50% of the time does not in and of itself defeat exempt status. E.g., Soehnle v. Hess Corp., 399 Fed. Appx. 749 (3d Cir. 2010) (sole manager at site found to be exempt manager even though 85% of her duties were non-exempt). c. HIGHLY COMPENSATED EMPLOYEES. Under 29 C.F.R. §541.601, employees who customarily and regularly perform one or more of the exempt duties of executive, administrative or professional employees are considered exempt if they are “highly compensated,” i.e., if they earn more than $100,000 annually. However, under §541.601(d), this provision is limited to employees who perform office or non-manual work, and does not apply to employees who work in the field in, for example, construction or production jobs.

d. TRAINEES. Under 29 C.F.R. §541.705, trainees for white collar positions that are not performing the duties of the position may not be claimed as exempt employees. 2. EXECUTIVES OR SUPERVISORS. In order to be classified as an exempt executive or supervisory employee, the employee must meet all of the following requirements: (1) be paid a salary of at least $455 per week; (2) have as his/her primary duty management of the enterprise or recognized department or subdivision thereof; (3) customarily and regularly direct the work of 2 or more employees; and (4) have authority to hire and fire employees, or to make recommendations regarding hiring, firing, advancement, promotion, or other change of status of other employees that are given particular weight. 29 C.F.R. §100(a). Many cases turn on whether management duties are the employee’s primary duties. Relevant factors in determining this question include the relative importance of the exempt duties, the amount of time spent performing exempt work, the employee’s relative freedom from direct supervision, and the relationship of the employee’s salary and wages paid to other employees who perform the type of non-exempt work performed by the employee. E.g., Rodriguez v. Farm Stores Grocery, Inc., 518 F.3d 1259 (11th Cir. 2008); Thomas v. Speedway SuperAmerica, LLC, 506 F.3d 496 (6th Cir. 2007). The last requirement listed above, that concerning whether the employee has effective influence over personnel matters, was added to the new test in 2004 from the old “long test” for the executive exemption. Although the regulation does not define “change of status” as used therein, the DOL indicated that its intent to give the term the same meaning given to the term “tangible employment action” by the Supreme Court in Burlington Industries v. Ellerth, 524 U.S. 742 (1998). See 69 Fed. Reg. 22131. The term “particular weight” is further defined in the regulation at 29 C.F.R. §541.105. Generally, the recommendations must concern the employees the alleged manager regularly and customarily supervises. Factors considered in determining whether the manager’s recommendations are given particular weight include whether the manager’s job duties include making recommendations, their frequency, and the reliance given to them. Finally, managers must be distinguished from “working foremen,” described in 29 C.F.R. §541.105(c) as “working supervisors.” An employee whose primary duty is performing non-exempt work


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on, e.g., a production line, does not become exempt merely because s/he directs the work of other employees who perform the same type of non-exempt work. The regulation uses as another example an electrician whose primary duty is performing electrical work even though s/he performs some duties that are exempt. 3. ADMINISTRATIVE EMPLOYEES. This category of exempt employees includes positions such as human resources or labor relations personnel, public relations employees, confidential employees, accountants, auditors, and the like. The regulations concerning this exemption are found at 29 C.F.R. §§541.200 - .204. To qualify as an exempt administrative employee, the employee must be paid a salary of at least $455 per week, have the primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and have a primary duty that includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. §541.200(a). Note that the primary duty performed must be office or non-manual in nature. A list of activities considered related to the management or general business operations is found at §541.200(b). The 2004 regulations have maintained the dichotomy between work that is considered administrative and that considered to be production-type work. 69 Fed. Reg. 22141. An oft-cited case concerning this difference is Dalheim v. KDFW-TV, 706 F.Supp. 493 (N. D. Tex. 1988), aff’d. 918 F.2d 1220 (5th Cir. 1990). What is meant by the ability to exercise discretion and independent judgment is described in 29 C.F.R. §541.202. The term implies that the employee has freedom to make an independent choice, free from direct oversight and supervision. §541.202(c). A list of factors used by DOL in determining whether an employee meets this criterion is found in §541.202(b). 4. LEARNED AND CREATIVE PROFESSIONAL EMPLOYEES. In order to be considered exempt as a learned professional, an employee must meet all of the following criteria: (1) be paid a salary of at least $455 per week; (2) the primary duty must involve work requiring advanced knowledge, i.e., knowledge that is predominantly intellectual in character, and exercise of discretion and judgment; (3) the advanced

knowledge must be In a field of science or learning; and (4) the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. 29 C.F.R. §541.301. Whether an employee’s work is of a type that requires advanced knowledge is decided on a case-by-case basis. Compare Paul v. Petroleum Equipment Tools, 708 F.2d 168 (1983) (pilot requiring commercial license held exempt) with Dybach v. Florida Department of Corrections, 942 F.2d 1562 (5th Cir. 1991) (Adult Probation Officer who engaged in criminal investigations held not exempt). The consistent exercise of discretion requirement is best considered by way of example, too. See Owsley v. San Antonio Ind. Sch. Dist., 187 F.3d 521 (5th Cir. 1999) (athletic trainers who established emergency procedures and determined when athletes could return from injury held exempt); Vela v. City of Houston, 276 F.3d 659 (5th Cir. 2001) (paramedics who adhered to protocols and standing orders held not exempt). Finally, the specialized intellectual instruction requirement connotes that specialized academic training is a standard prerequisite for entrance into the profession. 29 C.F.R. §541.301(d). Creative professionals are those whose primary duty is the performance of work requiring invention imagination, originality, or talent in a recognized field of artistic or creative endeavor. 29 C.F.R. §541.302. A good deal of litigation under this exemption has centered on the exempt status of print and television journalists and broadcasters. Compare Freeman v. National Broadcasting Co., 80 F.3d 78 (2d Cir. 1996) (TV newswriters, editors, producers and field producers held exempt) with Wang v. Chinese Daily News, Inc., 623 F.3d 743 (9th Cir. 2010) (reporters not among small minority of journalists who can be considered exempt). 5. COMPUTER EMPLOYEES. The FLSA was amended in 1990 to provide that certain computer occupations be included in the professional exemption. It was amended again in 1996, see 29 U.S.C. §213(a)(17), and the 2004 regulations follow the 1996 amendment. The regulations pertaining to computer employees are found at 29 C.F.R. §§541.400 - .402. The computer professional exemption is limited to systems analysts, programmers, software engineers and similarly skilled workers in the computer field. §541.400(a). To qualify for the 13(a)(1) exemption, the computer employee must be paid a salary of $455 per week or more. 29 C.F.R. ¶400(b). A computer


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employee may be paid on an hourly basis, provided that s/he receives at least $27.63 per hour, and qualify for exemption under 29 U.S.C. §213(a)(17). Id. To be exempt, the computer employee must meet one of the following requirements: (1) application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (2) the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; (3) the design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or (4) a combination of the above three duties, the performance of which requires the same level of skills. 29 C.F.R. §541.400(b); 29 U.S.C. §213(a)(17). Persons who qualify for the exemption are those primarily engaged in systems analysis of programming. See, e.g., Martin v. Indiana Michigan Power Co., 381 F.3d 574 (6th Cir. 2004) (IT Support Specialist not exempt where main functions were to install, upgrade and maintain computer workstation software, and similar tasks). 6. TEACHERS. The 13(a)(1) exemption specifically includes “any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools.” As noted, teachers do not need to be paid on a salary basis. 29 C.F.R. §541.303(d). Possession of a teaching certificate is deemed a clear means of identifying exempt teachers. §541.303(c). However, the exemption may extend beyond traditional academic teachers. E.g., Ramos v. Lee County School Board, 2005 WL 2405832 (M. D. Fla. 2005). 7. OUTSIDE SALES EMPLOYEES. Like teachers, outside sales employees are specifically mentioned as a group of exempt employees under the 13(a)(1) exemption, except that the statute gives the DOL specific authority to “delimit and define” the term by regulation. The outside sales exemption, like that for teacher, contains no salary or salary basis requirement. 29 C.F.R. §541.500(c). The term “sell” or “sale” is defined in the FLSA at 29 U.S.C. §203(k). To qualify for the outside sales exemption, an employee’s primary duty must be to make sales within that definition, or to obtain orders or contracts for services or the use of facilities for which a fee will be paid. The employee must also customarily and regularly be employed

away from the employer’s place(s) of business. 29 C.F.R. §541.500(a). The regulations further define each of these requirements. §§541.501 - .503. An outside sales case currently is before the Supreme Court after a disagreement between the 2nd and 9th Circuits over the level of deference to be accorded the DOL’s interpretation of these terms. In In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2d Cir. 2010), cert. denied 131 S. Ct. 1568 (2011), the Second Circuit deferred to the Secretary’s opinion, expressed in an amicus brief, that Pharmaceutical Sales Representatives did not qualify as outside sales employees. However, in Christopher v. Smithkline Beecham Corporation, 635 F.3d 383 (9th Cir. 2011), the 9th Circuit rejected the DOL interpretation. The Supreme Court granted certiorari in Christopher, see 132 S. Ct. 760, and heard oral argument on April 16, 2012. The Court’s decision may give important guidance both on the level of deference to be accorded to DOL, and the meaning of the outside sales exemption. B. AGRICULTURAL EMPLOYEES. There are numerous agricultural exemptions contained in the FLSA, and a detailed description of all categories is beyond the scope of this paper. However, it should be noted that the following sections of the Act provide exemptions for various types of agricultural employees that include: §213(a)(6) – certain employees employed in agriculture; §213(b)(5) – outside buyers of agricultural products; §213(b)(12) – other agricultural workers; §213(b)(13) – livestock auction operations; §213(b)(14) – certain grain elevators; §213(b)(15) – maple sap production; §213(b)(16) – Intrastate transportation of fruits & vegetables or fruit & vegetable harvesters; §213(b)(28) – small scale forestry or lumbering operations; §213(h), (i) & (j) – employment in ginning of cotton, processing sugar beets, or sugar cane; and §207(k) – tobacco industry employees. Pertinent regulations are found at 29 C.F.R. Parts 780 (Agricultural exemptions); 570 (Child Labor); and 788 (Forestry Operations). C. AMUSEMENT & RECREATIONAL EMPLOYEES. Under 29 U.S.C. §213(a)(3), employees of amusement or recreational establishments that operate on a seasonal basis are considered exempt. The relevant regulation is found at 29 C.F.R. §779.385.


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D. BABYSITTERS & DOMESTIC COMPANIONSHIP PROVIDERS. Another exemption from the minimum wage and overtime provisions of the FLSA is for “any employee employed on a casual basis in domestic service employment to provide babysitting services or any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).” 29 U.S.C. §213(a)(15). In Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), the Supreme Court considered whether to enforce a DOL regulation (29 C.F.R. §109 that applies the exemption to employees providing companionship service who are hired by a third party agency rather than the family to whom they are providing services. The Court enforced the regulation. However, on December 27, 2011, the DOL gave notice of proposed rulemaking to revise the regulations to exclude such employees from the exemption. See 76 Fed. Reg. 81190 (2011). Thus, there may soon be a change regarding this issue. E. EMPLOYEES COVERED BY THE MOTOR CARRIER ACT. Until 2008, 29 U.S.C. §213(b)(1) exempted from the FLSA’s overtime protections employees regulated by the Secretary of Transportation under the Motor Carrier Act (MCA). However, in 2005, Congress amended the MCA, effectively eliminating the 13(b)(1) exemption except as to commercial vehicles weighing in excess of 10,000 pounds in interstate commerce. See 49 U.S.C. 31132(1). Thus, drivers, drivers’ helpers, loaders and mechanics on vehicles of less than 10,000 pounds appear to no longer be under the 13(b)(1) exemption, even if their employers still operate some vehicles over 10,000 pounds. E.g., Tews v. Renzenberger, Inc., 592 F. Supp. 2d 1331 (D. Kan. 2009). The relevant regulations are found in 29 C.F.R. Part 782. F. RAILROAD AND AIRLINE EMPLOYEES. Under 29 U.S.C. §213(b)(2), the FLSA’s overtime protections do not extend to “any employee of an employer engaged in the operation of a rail carrier subject to part A if subtitle IV of Title 49.” The exemption applies to employees of common carriers engaged in interstate commerce wither exclusively by rail or partly by rail and partly by water. Under 29 U.S.C. §213(b)(3), the FLSA’s overtime protections do not extend to “any employee

of a carrier by air subject to the provisions of title II of the Railway Labor Act.” This includes employees of carriers that engage in interstate or foreign commerce or transport U.S. mail. FOH §24j01. G. TAXICAB DRIVERS. Under 29 U.S.C. §213(b)(17), the FLSA’s overtime protections do not extend to taxicab drivers employed by “an employer engaged in the business of operating taxicabs.” However, employees other than drivers are not within the exemption. FOH 24h03. H. DOMESTIC SERVANTS. Under 29 U.S.C. §213(b)(21), the FLSA’s overtime protections do not extend to “any employee who is employed in domestic service in a household and who resides in such household.” Domestic service employees include cooks, waiters, butlers, maids, housekeepers, nurses, janitors, gardeners, babysitters employed on other than a casual basis, and similar employees. 29 C.F.R. §552.3. I. MOTION PICTURE THEATER EMPLOYEES. Under 29 U.S.C. §213(b)(27), the FLSA’s overtime protections do not extend to “any employee employed by an establishment which is a motion picture theater.” Legitimate theaters engaged primarily in stage productions are not included within the exemption. 29 C.F.R. §779.384. VII. SPECIAL ISSUES FOR PUBLIC EMPLOYEES. A. COMPENSATORY TIME AGREEMENTS. Unlike private employers, public employers are authorized to provide compensatory time rather than cash overtime payments when the statutory conditions for use of compensatory time are met. The statute authorizing such compensatory time arrangements is 29 U.S.C. §207(o). The statute establishes a number of standards which must be met. The regulations governing compensatory arrangements are located at 29 C.F.R. §§553.20 - .28. Under the statute and regulations, use of compensatory time arrangements must be agreed upon either in a collective bargaining agreement, or for unrepresented employees, an agreement between employer and employee reached before the work is performed. 29 U.S.C. §207(o)(2). However, the regulation states that, for unrepresented employees, the “agreement” may “take the form of an express


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condition of employment” provided certain procedures are followed. 29 C.F.R. §553.23(c). One and one-half hours of compensatory time must be provided for each overtime hour worked. 29 U.S.C. §207(o)(1). The maximum accrual is 480 hours for public safety and emergency response employees, and 240 hours for other public employees, after which cash overtime must be paid. §207(o)(3)(A). An employee who is compensated for accrued compensatory time must be paid at his/her pay rate at the time compensation is paid, rather the rate in effect at the time the compensatory time was earned. 29 U.S.C. §207(o)(3)(B). An employee who is compensated for accrued compensatory time upon termination is entitled to be paid at the higher of his/her then current rate, or his/her average regular rate over the last three years of employment. In Christensen v. Harris County, 529 U.S. 576 (2000), the Supreme Court ruled that the employer can require employees to use their accrued compensatory time. Under 29 U.S.C. §207(o)(5), an employee’s request to use accrued compensatory time must be granted within a reasonable time is such use does not unduly disrupt agency operations. Finally, use of compensatory time may be excluded from the calculation of the regular rate for overtime purposes. 29 U.S.C. §207(e)(2). B. PARTIAL EXEMPTION FOR POLICE & FIRE FIGHTERS. 29 U.S.C. §207(k) provides a partial exemption from §207(a)’s overtime requirement for fire fighters and police officers. For such employees, a work period of between 7 and 28 days can be established. For fire fighters, the number of hours that may be worked without incurring overtime liability bears the same ratio that 212 hours bears to 28 days. For police officers, the ratio is 171 hours to 28 days. 29 U.S.C. §203(y) establishes a definition for employees engaged in fire protection that extends to fire fighters who engage in emergency medical response. Thus, where EMS is provided by a governmental entity’s fire department, the 7(k) schedule may be used for fire fighters performing these duties. C. FIRST RESPONDER PROTECTION. The 2004 amendments added a “first responder” provision that prevents extension of the 13(a)(1) exemption to first responders (e.g., fire fighters, police officers, paramedics) who engage in supervisory duties but whose primary duty is to

respond to emergency situations. See 29 C.F.R. §541.3(b). Recent case law indicates that some supervisory personnel who perform these duties may not be classified as exempt even though they supervise the work of other employees engaged in such activities in the field. E.g., Mullins v. City of New York, 653 F.3d 104 (2d Cir. 2011), cert. denied, 2012 WL 82133 (2012) (police sergeants held non-exempt despite supervisory duties); Maestas v. Day & Zimmerman, LLC, 664 F.3d 822 (10th Cir. 2012) (reversing summary judgment for employer where fact issue existed as to police lieutenants and captains who worked in the field). D. TRAINING EXCEPTION FOR CERTIFICATION TRAINING This issue is covered in IV.D.6 above. 29 C.F.R.§553.226(c) provides an exception to the general training provision in §778.29 that may render some certification training non-compensable. E. SUBSTITUTIONS/TRADING TIME. Under 29 U.S.C. §207(p)(3), public employees can voluntarily substitute for each other or trade time without the employer incurring additional overtime liability. The substitution or trade must be voluntary and approved by the employer. Where the conditions are met, the time worked by the substituting employee is not counted towards his/her hours worked for purposes of determining entitlement to overtime pay. Each employee will be considered to have worked his/her normal schedule. F. FLSA APPLICATION TO STATE EMPLOYERS. Due to decisions by the Supreme Court, there appears to be no private right of action to enforce FLSA rights against a State employer. However, this does not prohibit bringing such actions against local governmental entities. After the Supreme Court’s decision in Seminole Tribe v. Florida, 517 U.S. 44 (1996), several lower courts held that the Eleventh Amendment barred FLSA actions in federal court because Congress lacked power under the Commerce Clause or the Fourteenth Amendment’s enforcement clause to abrogate the State’s immunity. E.g., Close v. New York, 125 F.3d 31 (2d Cir. 1997); Balgowan v. New Jersey, 115 F.3d 214 (3d Cir. 1997). Subsequently, in Alden v. Maine, 527 U.S. 706 (1999), the Court precluded private actions in state courts to enforce FLSA rights against States. Thus, it appears that there is no private cause of action to


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enforce FLSA rights against State agencies, universities, etc. G. VOLUNTEERS. 29 U.S.C. §203(e)(4) authorizes individuals to volunteer for perform services for a public employer at the State or local level without implicating FLSA protections provided that certain statutory conditions are met. Importantly, volunteers who are themselves public employees may not volunteer to perform services for their own employer that are of the same type the employee is employed to perform. However, the employee may volunteer to provide services for other public employers with whom his/her employer has a mutual aid agreement. The regulations governing such volunteer services are found at 29 C.F.R. §§553.100 - .106. VIII. WAIVERS A. GENERAL RULE PROHIBITS EMPLOYEE/UNION WAIVERS. It was long ago decided that employees generally cannot waive their statutory rights to the Act’s minimum wage and overtime protections. Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945). In Brooklyn Savings, two employees signed releases of FLSA rights in exchange for stipulated sums for unpaid overtime wages. The employees later filed suit, seeking liquidated damages and attorney fees under §216(b). The employer asserted the releases as a bar to the FLSA lawsuit. The Court rejected this argument, holding that the rights guaranteed by the FLSA could not be waived, and that any private agreement purporting to do so was void as against public policy. Id. at 704. The Court reasoned: “[W]here a private right is granted in the public interest to effectuate a legislative policy, waiver of a right so charged or colored with the public interest will not be allowed where it would thwart the legislative policy which it was designed to effectuate.” Id. See also D. A. Schulte, Inc. v. Gangi, 328 U.S. 108 (1946) (releases obtained in settlement of a bona fide dispute as to FLSA coverage held void).

The rule against waiver of FLSA rights remains fully in force today. E.g, Gordon v. City of Oakland, 627 F.3d 1092 (9th Cir. 2010) (citing Brooklyn Savings). There are two exceptions: (1) waivers obtained as part of a settlement administratively supervised by the Department of Labor, see 29 U.S.C. §216(c); and (2) settlements entered as stipulated judgments following initiation of a court action under the FLSA. Jarrard v.

Southeastern Shipbuilding Corp., 162 F.2d 960 (5th Cir. 1947); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982).

The rule against waiver applies to employee-employer agreements. For example, in Baker v. Barnard Construction Co., Inc., 146 F.3d 1214 (10th Cir. 1998), the employer required employees to sign agreements stating that travel time associated with refueling and maintaining construction equipment would be paid for by a rig rental fee that thereafter was not included in determining the employees’ regular rate. The court ruled “no mutual agreement could waive the application of the FLSA minimum wage and overtime provisions to that work,” Id. at 1216, reasoning: “[R]egardless of whether employer-employee agreements classified the return travel associated with maintaining the rigs as noncompensable or compensated through rig rental, if payment for that return travel is required by the FLSA, Defendants must apply the minimum wage and overtime provisions of the FLSA to that return travel.” Id. at 1217. Accord Dunlop v. Gray-Goto, Inc., 528 F.2d 792, 794-5 (10th Cir. 1976) (“private agreement or understanding between the parties cannot circumvent the overtime pay requirements of the [FLSA].”)

This same rule applies to purported waivers alleged to have been made by the employees’ union through collective bargaining or otherwise. In Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981), the Court stated:

This Court’s decisions interpreting the FLSA have frequently emphasized the non-waivable nature of an individual employee’s right to a minimum wage and to overtime pay under the Act. Thus, we have held that FLSA rights cannot be abridged by contract or otherwise waived because this would “nullify the purposes” of the statute and thwart the legislative policies it was designed to effectuate. [citations omitted]. Moreover, we have held that congressionally granted FLSA rights take precedence over conflicting provision in a collectively bargained compensation arrangement. [citations omitted].

Id. at 740-1. Barrentine is repeatedly cited for the proposition that unions cannot waive the statutory FLSA rights of their members. E.g., McGrath v. City


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of Philadelphia, 864 F. Supp. 466, 473-4 (E. D. Pa. 1994) (“An employee’s right to receive overtime compensation after working forty hours in a workweek is an important right, and, indeed, is one which a labor union cannot agree to waive on behalf of its members,” citing Barrentine); Gordon v. City of Oakland, 627 F.3d 1092, 1095 (9th Cir. 2010) (“[e]mployees cannot waive the protections of the FLSA, … nor may labor organizations negotiate provisions that waive employees’ statutory rights under the FLSA,” citing Barrentine). See also Featsent v. City of Youngstown, 70 F.3d 900, 905 (6th Cir. 1995) (“Union representatives may not bargain away employee rights under the FLSA. [citation omitted] Furthermore, there is no collective-bargaining exemption from the FLSA.”) Thus, unless there is some specific provision in the FLSA that allows an exception, unions cannot waive employee rights under the FLSA. B. EXCEPTIONS - COLLECTIVELY BARGAINED ARRANGEMENTS. 1. 26-WEEK EXCEPTION [29 U.S.C. §207(b)(1)] One such exception is the 26-week exception found at 29 U.S.C. §207(b)(1). Under this apparently rarely-used exception, an employer need not pay employees at the overtime rate for hours in excess of forty if the employer reaches, with an NLRB-certified representative, a collectively-bargained agreement that guarantees the employees will not be required to work more than 1040 hours in a 26-week period. 2. 52-WEEK EXCEPTION [29 U.S.C. §207(b)(2)] This exception also applies when an employer reaches a collectively bargained agreement with an NLRB-certified representative. 29 U.S.C. §207(b)(2) allows the employer to avoid paying overtime for hours in excess of 40 in a week if the following conditions are met: (1) that no more than 2240 hours will be worked in a specified 52-week period; (2) that guarantees to the employees a minimum of 1840 – 2080 hours of work during that same period; (3) provides compensation at a guaranteed rate for all hours worked or guaranteed; (4) provides overtime compensation for all hours worked in excess of the guaranteed hours which are also in excess of 40 in a week; (5) provides overtime compensation for all hours over 12 in a day or 56 in a week; and (6) provides overtime compensation for all hours in excess of 2080 during the 52-week period. Again, this appears to be rarely used.

3. COMP. TIME AGREEMENTS [29 U.S.C. §207(o)] Public sector unions can collectively bargain compensatory time agreements within the parameters specified in 29 U.S.C. §207(o). The statutory requirements for such agreements are discussed above in Section VII.A. 4. BASIC RATE AGREEMENTS [29 U.S.C. §207(g)(3)] Basic rate agreements are discussed above in Section IV.C.1 above. Such basic rate agreements may be entered into through the collective bargaining process. 5. BELO AGREEMENTS [29 U.S.C. §207(f)]. Belo Agreements are discussed above in Section IV. C.2 above. Such Belo agreements may be entered into through the collective bargaining process. IX. ENFORCEMENT A. ADMINISTRATIVE COMPLAINTS TO DOL The DOL’s Wage & Hour Division is charged with investigating and enforcing the requirements of the FLSA. A list of Wage & Hour offices is available on the DOL website. If a violation is found, and voluntary compliance is not obtained, the Secretary of Labor may bring an enforcement action. See generally 29 U.S.C. §216(c). However, it is important to note that the filing of an administrative complaint does not automatically toll the FLSA statute of limitations (29 U.S.C. §255). See Abbott v. United States, 144 F.3d 1 (1st Cir. 1998), citing Unexcelled Chemical Corp. v. United States, 345 U.S. 59 (1953). Moreover, each payday in which an overtime or minimum wage violation occurs is a new occurrence. See Section IX.B below. Thus, where an employee is in danger of losing claims under the statute of limitations, consideration must be given to filing suit individually to avoid claim loss. B. PRIVATE LAWSUITS. Private lawsuits to enforce FLSA rights are governed by 29 U.S.C. §216(b). Under the statute, the employee must give consent to suit that must be filed with the court. Suit may be filed either in state or federal court, although the Supreme Court has ruled that a defendant may remove state-filed actions to federal court. Breuer v. Jim’s Concrete of Brevard,


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Inc., 538 U.S. 691 (2003). Available relief includes the unpaid or underpaid wages, an equal amount as “liquidated damages,” and attorney fees. As noted in Section III.F above, additional legal and equitable relief may be obtained in retaliation cases. Although a liquidated damages award is the norm, under 29 U.S.C. §260, the court has discretion to abate all or part of the liquidated damages award if the employer demonstrates that its actions were taken in subjective good faith and that the employer had objectively reasonable grounds for believing its actions did not violate the FLSA. This is an affirmative defense, and the employer’s burden has been described as a difficult one. E.g., Herman v. RSR Security Services, Ltd., 172 F.3d 132 (2d Cir. 1999). The statute of limitations for FLSA actions is normally two years. 29 U.S.C. §255. A separate cause of action accrues on each regular payday following a workweek or work period for which a minimum wage or overtime claim is alleged. Halferty v. Pulse Drug Co., Inc., 821 F.2d 261 (5th Cir. 1983). In cases of a “willful” violation, the limitations period is extended to three years. 29 U.S.C. §255. In McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1988), the Court stated a violation is deemed willful if the employer knew its conduct violated the FLSA, or showed reckless disregard for whether its actions complied with the statute. Id. at 133. An individual plaintiff’s statute of limitations is not tolled until his/her consent is filed with the court. Atkins v. General Motors Corp., 701 F.2d 1124, 1130 n. 5 (5th Cir. 1983). C. COLLECTIVE ACTIONS. Under the FLSA, collective actions cannot be filed as traditional “opt out” class actions, but may only be filed as “opt in” class actions. 29 U.S.C. §216(b). Complete discussion of the class certification issues presented, and the relationship to state law traditional class action claims, is beyond the scope of this “basics” paper. However, this is a rapidly growing area of law and attorneys representing large employers especially should familiarize themselves with the framework for these opt-in actions. A description of the most commonly used class certification procedure is found in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987); see also Mooney v. Aramco Services Co., 54 F.3d 1207 (5th Cir. 1995).


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FAIR LABOR STANDARDS ACT, THE BASICS · labor unions in Central Texas, as well as individual employees in employment cases. He has handled numerous wage and hour claims both under