Avoiding Liability Under the Fair Labor Standards Act

Posted by Anthony E. Cooch Jr. on January 16, 2013

Liability PhotoThe Fair Labor Standards Act (FLSA) establishes requirements regarding the compensation of employees working in the private sector and in federal, state and local government positions. To protect employees, the FLSA prohibits retaliation by employers against employees who complain that their rights have been violated. 

In the past, the FLSA anti-retaliation provision has applied to cases where an employee was fired or discriminated against after filing a formal complaint with a governmental agency, resulting in the commencement of formal proceedings against the employer.  Recently, the U.S. Court of Appeals for the Fourth Circuit found that the anti-retaliation protections could also apply to informal “intra-company” complaints made by an employee. 

The case was Minor v. Bostwick Laboratories.  Minor, an above-average performing employee, met with a Bostwick executive to complain that her supervisor was violating the FLSA because she was altering employee timesheets.  The executive promised to investigate.  About a week later, Minor was terminated.

Minor filed suit, claiming that she was terminated because she complained about an FLSA violation.  Bostwick argued that Minor’s FLSA complaint did not qualify under the FLSA anti-retaliation provision because it was an oral intra-company complaint and not a formal proceeding.

The Court of Appeals disagreed and found that for a complaint to qualify under the FLSA anti-retaliation provision, it can be in oral or written form, but must have some degree of formality such that it provides reasonable notice to the employer that it is an FLSA complaint.  A formal proceeding is not required.  Here, the meeting between Minor and the Bostwick executive was sufficient notice of the FLSA concern and, therefore, qualifies for protection under the FLSA anti-retaliation provision.   

Practice Pointers

When an employee complains that their rights are being violated, the concern should be addressed whether it is expressed orally or in writing.   Employers can better prepare supervisors and managers for dealing with complaints through training, preparation and documentation.

  • Train supervisors and managers to recognize when an employee may be “blowing off steam” or expressing a concern that should be handled in a more formal manner.
  • Update the employee handbook to ensure that it has a specific procedure in place that an employee can follow if he or she feels that their rights are being violated.
  • Document meetings with employees.  If possible, the supervisor/manager and a human resources representative should be present.  If further investigation is warranted, take it seriously and document all actions that are taken.  When in doubt, consult with outside counsel or engage outside counsel to investigate. 

Furthermore, lessen the strength of a retaliation claim by documenting employee discipline.  Employees are generally not terminated for a single offense.  Termination usually occurs after several incidents.  Each incident should be documented.  Documentation should include:

  • Description of the incident
  • Time of incident, location, and individuals present
  • Employee statement
  • Action taken
  • Signatures of supervisor, human resources representative and employee

Are Managers Who Perform Non-Managerial Duties Entitled to Overtime Pay?

Posted by Anthony E. Cooch Jr. on April 05, 2011

The Fair Labor Standards Act requires employers to pay overtime to employees who work more than forty hours in a given week.  The Act provides several exceptions or “exemptions” to the forty hour rule.  If an employee falls under one of these exemptions, they are not entitled to overtime compensation.

businessman checking inventory

One exemption that is commonly used by employers and which has become the subject of recent debate is the “executive exemption”.  An employee falls under the executive exemption and is not entitled to overtime when he or she is an employee employed in a bona fide executive capacity. 

Under the FLSA and its associated regulations, an employee qualifies under the executive exemption when the following criteria are met:

  • The employee is compensated on a salary basis at a rate not less than $455 per week
  • The employee’s primary duty is management of the enterprise, department or subdivision
  • The employee customarily and regularly directs the work of two or more employees
  • The employee has the authority to hire or fire other employees or their suggestions as to hiring, firing, advancement or promotion or any other change in status are given particular weight 

The second factor, whether the employee’s primary duty is management, has become the subject of controversy in recent years.  Many companies attempting to cut costs will require managers to serve dual roles, acting in both a managerial and employee capacity.  For example, a manager may spend part of their day interviewing employees and arranging schedules and then spend another part helping stock shelves or greet customers.  This multitasking has brought into question whether such an employee still qualifies under the “executive” exemption when performing dual roles.  

Recent Developments in the Law 

In Grace v. Family Dollar, Inc., the Fourth Circuit Court of Appeals recently upheld a decision of the U.S. District Court for the Eastern District of Virginia finding that a manager engaged in the dual role of manager and employee qualified under the executive exemption.  

Grace, a former employee of Family Dollar filed suit claiming that she was entitled to overtime compensation because she spent the majority of her working time completing nonexecutive tasks.  Grace was the manager and highest level employee of a Family Dollar Store.  She was responsible for managing employees, managing store operations, dealing with customer and employee complaints and was responsible for the overall profitability of the store.  

Grace argued that she was entitled to overtime because even though she was responsible for managing, the majority of her time was spent on nonexecutive tasks such as unloading freight, stocking shelves, operating cash registers and cleaning the store.  Grace estimated that she spent 95% of her time on these tasks.  

The Court held that Grace concurrently managed the store while performing these nonexecutive tasks and that her performance of these tasks was in furtherance of the larger goal to make the store profitable.  Grace operated the store with little supervision and her management was essential to the function of the store.  As a result, despite the amount of time she spent on nonexecutive tasks, her primary duty was management and as such exempt status was appropriate.

The Family Dollar case is instructive in that in its analysis the Court spent a large part of the analysis looking at the duties actually performed by the employee and not just what was listed in the job description.  

Practice Pointers 

Managers can be expected to perform executive and nonexecutive duties.  If the employee is to be classified under the executive exemption, it is incumbent upon the employer to ensure that the employee is primarily performing managerial tasks.  Remember, it is not just what a job description may say, but what the employee actually does that is important. 

Below are several points that will help ensure that a manager is primarily performing managerial tasks:

  • How much time is does the employee spend performing managerial duties?
  • What are the specific managerial duties performed by the employee?
  • How important are these managerial duties to the overall operation of the company, store or department?
  • How often is the employee exercising managerial duties?
  • What is the level of supervision of the manager employee?  Is the manager closely supervised?
  • What company procedures are in place to control manager decision making?  Do these procedures give managers discretion?
  • How is the employee compensated when compared to non-manager employees?  If the manager is salaried, what is their actual compensation when the actual hours worked in taken into account?
  • Develop a comprehensive job description that lists the major duties, both executive and nonexecutive, that will be performed by the employee.
  • Conduct periodic internal reviews of the employee’s performance, paying special attention to the actual tasks performed and the amount of time spent on the specific tasks.

Restaurant Charged $780,000 Due to Wage and Overtime Violations

Posted by Anthony E. Cooch Jr. on March 14, 2011

On February 24, Mama's Pizzeria and Restaurant of Copiague, New York entered into a settlement with the Department of Labor.  In the settlement, Mama's agreed to pay $780,000 in minimum wage and overtime compensation to 40 employees. Pizza.jpg 

Mama's was charged with paying employees wages less than the minimum wage and requiring employees to work more than 40 hours per week without paying overtime.  Mama's also failed to keep accurate records of wages paid and hours worked by employees.

This case serves as a warning and opportunity for employers to review who is entitled to overtime and what records must be maintained by a business.

Virginia businesses follow the Fair Labor Standards Act ("FLSA") with regards to overtime and minimum wage standards.  The FLSA specifies that employees required to work more than 40 hours in a week are entitled to overtime at a rate no less than 1.5 times the normal hourly rate. Additionally, certain employees are exempt and not entitled to overtime.  

The types and number of jobs that are exempt is lengthy.  Jobs that are of particular relevance to Virginia include:

  1. Executives
  2. Administrative employees
  3. Professional employees
  4. Outside salesmen
  5. Seasonal employees under certain conditions
  6. Switchboard operators
  7. Babysitters, companions, and other "domestic service employees"
  8. Some technology employees when certain conitions apply - computer system analyst, computer programmer, software engineer
  9. Commissioned retail/service employees
  10. Delivery drivers who receive "trip" rates

The FLSA and associated regulation also defines what types of employee records employers are required to maintain.  Below are some of the highlights:

Records that must be kept for three years

  1. Payroll Records.
  2. Certificates, agreements, plans, notices, etc. - this includes employment agreements, summaries of any oral agreements entered into with the employee and any collective bargaining agreements.
  3. Sales and Purchase Records for the business.

Records that must be kept for two years

  1. Basic Employment and Earning Records:  timesheets or other method used by employee to track the time worked.
  2. Rate tables used by the employer in the calculation of piece rates and overtime.
  3. Copies of customer orders and invoices received and sent.
  4. Records of additions and deductions to wages paid to employees.