Fair Labor Standards Act

NEW FEDERAL RULE ADOPTED ON WHETHER TO CLASSIFY A WORKER AS AN EMPLOYEE OR INDEPENDENT CONTRACTOR

Published on: January 26, 2024 | by Mashel Law, L.L.C.

On March 11, 2024, the U.S. Department of Labor’s (USDOL) final rule for determining whether a person is an employee or an independent contractor under the federal Fair Labor Standards Act (FLSA) will take effect. 29 CFR part 795. FLSA establishes minimum wage, overtime pay, recordkeeping and child labor standards affecting full and part time workers in both the private and public sectors. Employees receive the protection of the FLSA as opposed to independent contractors who do not because they are considered in business for themselves.

Whether a worker is an employee or an independent contractor under the FLSA is determined by looking at the economic realities of the worker’s relationship with the employer. See generally USDOL, Wage and Hour Division Fact Sheet 13 (Fact Sheet 13). If the economic realities show that the worker is economically dependent on the employer for work, then the worker is an employee. If the economic realities show that the worker is in business for themself, then the worker is an independent contractor.

The new final rule adopted the USDOL a six-factor test that delves into the economic relationship between potential employers and workers: 1) Opportunity for profit or loss depending on managerial skill; 2) Investments by the worker and the potential employer; 3) Degree of permanence of the work relationship; 4) Nature and degree of control; 5) Extent to which the work performed is an integral part of the potential employer’s business; 6) Skill and initiative. Additional factors may be considered if relevant to whether a worker is in business for themselves but economically dependent on the employer for work. See Fact Sheet 13.

THE TENTH CIRCUIT REJECTS AN EMPLOYERS DE MINIMIS DOCTRINE ARGUMENT UNDER THE FEDERAL FAIR LABOR STANDARDS ACT

Published on: October 28, 2021 | by Mashel Law, L.L.C.

As general matter the federal Fair Labor Standards Act (the “FLSA”) requires employers to compensate employees for all the time employees have worked no matter where and when the work is done. However, an exception exists called the De Minimis Doctrine which permits employers not to pay employees when employees spend a small amount of time on tasks that by their nature are difficult for the employer to track or record. Specifically, the Department of Labor (“DOL”) codified the De Minimis defense in 29 C.F.R. § 785.47 which in pertinent part reads:

In recording working time under the Act, insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded. The courts have held that such trifles are de minimis. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). This rule applies 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. An employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time or practically ascertainable period of time he is regularly required to spend on duties assigned to him. Glenn L. Martin Nebraska Co. v. Culkin, 197 F. 2d 981, 987, (C.A. 8, 1952)

(emphasis added)

FEDERAL DISTRICT COURT JUDGE ORDERS WAWA, INC. TO PAY $1.4 MILLION TO SETTLE FLSA MISCLASSIFCATION CLASS ACTION LAWSUIT

Published on: August 14, 2019 | by Mashel Law, L.L.C.

After two years of litigation in federal court, U.S. District Court Judge Peter Sheridan ordered Wawa, Inc. (Wawa) to pay $1.4 million in order to settle a class action lawsuit filed against it by assistant store managers called “Assistant General Managers” (AGMs) who alleged violations of the Fair Labor Standards Act (FLSA). In January 2018, Plaintiffs moved to conditionally certify a collective action based on allegations that Wawa misclassified them along with other similarly situated AGMs as being exempt under FLSA i.e., not eligible for overtime pay, and by doing so, failed to pay them overtime for hours worked in excess of 40 hours per week. Gervasio v. Wawa, Inc., 2018 U.S. Dist. LEXIS 4899 (D.N.J. January 11, 2018).

In filing their 2017 complaint against Wawa, plaintiffs alleged they were deliberately “mislabeled” as managers under the FLSA when their duties did not actually reflect managerial duties and their duties were more akin to the duties of other hourly wage employees working at the stores. Id. at *2. However, because they were labeled as managers by Wawa, they were classified as exempt employees and therefore not entitled to overtime wages they would have otherwise earned under the FLSA. Id. Although Wawa eventually re-classified its AGMs as nonexempt employees in December 2015, plaintiffs continued to seek recovery of backpay for the unpaid overtime hours they worked prior to this reclassification. Plaintiffs claimed they worked between 50-55 hours during weeks in which they worked five or more shifts but did not get paid for any time worked exceeding 40 hours. Id.

While nonexempt employees, i.e., employees eligible to receiver overtime pay, are covered by the overtime protections of the FLSA, exempt employees are not. Exempt versus nonexempt employee status depends on three factors: (1) how much the employee is paid, (2) how the employee is paid, and (3) the type of work that the employee performs for his or her employer. Generally, an employee is exempt if he or she is paid at least $23,600 per year, is paid on a salary basis, and (3) performs exempt job duties, namely executive, professional, or administrative duties for the employer. To fall within the “executive exemption,” an employee must meet the following criteria: “(1) the employee receives compensation on a salary basis, (2) [his or] her primary duty is management of a recognized department, (3) [he or] she customarily and regularly directs the work of two or more employees, and (4) [he or] she has authority to hire or fire employees.” Id. at *7 (quoting Essex v. Children’s Place, Inc., 2016 U.S. Dist. LEXIS 108853 at *9 (D.N.J. Aug. 16, 2016)).