Updated: Supreme Court to hear Arguments on Outside Salesperson Exemption

Today, the U.S. Supreme Court will hear oral arguments on whether GlaxoSmithKline PLC's offsite and travelling drug sales representatives are entitled to overtime pay. In the past, these representatives have been deemed "exempt" as outside salespeople and not eligible for overtime. Specifically, the Court is presently considering: More ›

Georgia Court Evaluates Executive Exemption Under FLSA

When is a store manager truly a manager, and not just a lead hourly employee, for purposes of the executive exemption of the Fair Labor Standards Act? Employers recently received some positive guidance from the South Carolina district court in Gooden v. Dolgencorp, Inc., 3:10-cv-1059, Dkt. 60, (U.S.D.C. So. Car. Ap. 3, 2012) and Thomas v. Dolgencorp, Inc., 3:10-cv-1061, Dkt. 59, (U.S.D.C. So. Car. Ap. 3, 2012). More ›

Employer’s Lack of Knowledge of Employee’s Overtime Dooms FLSA Claim

A sewing manager at a Midwestern manufacturing company sued her employer for violations of the Fair Labor Standards Act (FLSA), alleging that the employer failed to pay her overtime. The former manager testified that she regularly arrived to work between 15-45 minutes prior to the official start of her shift and spent that time unlocking doors, turning on lights, turning on the compressor, punching-in, preparing coffee for the rest of the employees, reviewing schedules, gathering and distributing materials to her subordinates’ workstations and cleaning up workstations. Her timecards often reflected that she punched in early. The former manager was aware that her employer had a policy requiring employees to request pre-approval to work overtime, and on one occasion she had even reprimanded one of her subordinates for punching in too early. The former employee admitted that she never complained or made her employer aware that she needed to be paid for arriving early. The district court dismissed the claim finding that the employee’s pre-shift activities were preliminary and de minimis, and that her employer did not know that she was engaging in pre-shift work. The U.S. Court of Appeals for the Seventh Circuit disagreed with the district court’s conclusions about the preliminary and de minimis nature of the work. But it affirmed the dismissal because it agreed that the sales manager did not show that the employer knew, or had reason to know, that she was working before her shift. Although the employee had pointed to her timecards to impute knowledge on behalf of her employer, the court noted that punching in early does not necessarily mean that an employee is working pre-shift. More persuasive was the fact that the employee had weekly meetings with her managers where she failed to disclose the pre-shift work or to complain about improper compensation. Additionally, she was aware of the overtime policy and had enforced it. Employers should note that the mere promulgation of a rule against overtime work is insufficient to justify the nonpayment of overtime if an employer has the opportunity through reasonable diligence to acquire knowledge that an employee worked outside of his or her official work hours.

Kellar v. Summit Seating Inc., No. 11-1221 (7th Cir. Dec. 14, 2011)

No Overtime for Banquet Hall Sales Managers

Sales managers for a company that owns high-end banquet halls were expected to maintain relationships with existing clients and secure new clients for custom events, such as weddings or corporate parties. Sales managers functioned as the primary client contact and were responsible for designing, coordinating and executing the event to the client’s approval within the fee structure outlined by their employer. They were given a handbook that contained some sales guidelines, but the handbook did not provide prescribed techniques or “sales pitches.” Also, the sales managers could neither issue discounts to clients nor sign-off on client contracts without the employer’s consent. They received salaries and were not paid overtime if they worked more than 40 hours in a week. A group of former sales managers challenged this practice and sued to recover overtime under the Fair Labor Standards Act (FLSA). The employer claimed that the sales managers were not entitled to overtime because they fit within the statute’s “administrative exemption.” To establish that the sales managers qualified under the administrative exemption, the employer had to demonstrate that the sales managers routinely exercised “discretion and independent judgment with respect to matters of significance.” The U.S. Court of Appeals for the First Circuit held that the sales managers were exempt in spite of their lack of authority to make financial and contractual decisions on behalf of their employer because their work in securing clients and creating a custom product, personalized to individual tastes and budgets, was sufficient to meet the independent discretion requirement. Regarding the handbook, the court concluded that the rules were not so numerous or specific as to restrict the judgment required to engage with clients and prospective clients. Employers are reminded that not all “sales managers” will meet the independent-discretion factor of the administrative exemption. Employers are urged to work with their counsel to review the business practices in place and the responsibilities assigned to a position to determine if the position is properly classified as exempt from the overtime requirements.

Hines v. State Room, Inc., No 10-2298 (1st Cir. Nov. 28, 2011)

CA Supreme Court Issues Insightful Ruling on Application of Administrative Exemption

Today the California Supreme Court issued its ruling in Harris v. Superior Court. This case dealt with whether or not insurance adjusters were properly classified as exempt employees, or whether they should have been entitled to overtime compensation under the California Industrial Welfare Commission’s Wage Orders and the California Labor Code. More ›

Ninth Circuit: Social Workers are not “Learned Professionals” Under FLSA and are Therefore not Exempt From Overtime Requirements

On September 9, 2011, the Ninth Circuit Court of Appeals held that social workers in the state of Washington are not “learned professionals” under the Fair Labor Standards Act and therefore, are not exempt from overtime compensation. More ›

Unlicensed Accountants may be Exempt From Overtime Pay Requirements

Unlicensed junior accounts who performed audits and provided other accounting services for their employer’s clients brought a wage-and-hour class action against the employer for overtime pay they were allegedly owed. The employer argued that the accountants were exempt from the wage-and-hour law’s overtime provisions under the “professional” exemption. Under California law, to claim the “professional” exemption, the employer must show that the employees were: (1) licensed or certified by the State of California and primarily engaged in law, medicine, dentistry, or accounting; or (2) primarily engaged in an occupation commonly recognized as a learned or artistic profession. The U.S. Court of Appeals for the Ninth Circuit held that the accountants could be exempt if their job duties indicated that they were engaged in a “learned profession,” even though they did not have CPA licenses. The court emphasized that when determining whether an unlicensed accountant is exempt or non-exempt, a “fact-specific inquiry” is required. This case serves as a reminder that whether an employee is exempt or non-exempt should not be determined categorically, but should be determined according to the job duties the employee actually performs.

Employee’s Administrative Tasks Performed at home Outside the Coverage of the FLSA

An employee commuting from his home base to various worksites also completed work tasks at home in the mornings and evenings. The company compensated the employee for his home-to-work travel in excess of one hour. Although the company’s policy was for employees to record time spent on at-home tasks, the company expected employees to finish all their work tasks in a 40-hour week. The employee falsified his timesheets, failing to record his overtime work. When the employee was terminated, he sued alleging that the company failed to pay him for his commuting time and overtime work that he failed to report, in violation of the Fair Labor Standards Act (FLSA) and New York Labor Law. A federal trial court found no basis for employer liability and granted summary judgment to the employer. The U.S. Court of Appeals for the Second Circuit rejected the employee’s first argument, finding that his at-home work did not extend his workday under the U.S. Department of Labor’s “continuous workday” rule. Therefore, the court held that the fact that the employee chose to perform his at-home activities immediately before and after his commutes did not mean that the employer was required to pay him for the first hour of those drives, which was “time that was not part of his continuous weekday and that was, in the end, ‘ordinary home to work travel’ outside the coverage of the FLSA.” The U.S. Court of Appeals disagreed with the district court’s finding that the employer was entitled to summary judgment for unpaid overtime work that the employee admittedly failed to report, holding that a jury could reasonably find in the employee’s favor that the employer had actual or constructive knowledge of his off-the-clock work. The court was clear that, “where the employee’s falsifications were carried out at the instruction of the employer or the employer’s agents, the employer cannot be exonerated by the fact that the employee physically entered the erroneous hours into the timesheets.” When dealing with employees who commute, employers must be mindful that tasks deemed “integral and indispensable” to an employee’s principal activities, but which the employee has flexibility in choosing when to perform, do not extend the employee’s workday under the “continuous workday” rule and thus are not compensable. Employers should also be aware that it is unlawful to direct an employee not to record overtime to avoid payment for hours actually worked by him or her.

Sick Leave Buy-Back must be Included in Calculation of “Regular Rate” for Overtime

A city allowed employees who had accumulated a minimum amount of unused sick leave to sell it back to the city. The city did not, however, include buy-back payments when determining the regular rate of pay for purposes of calculating overtime pay. Under the Fair Labor Standards Act (FLSA), overtime hours must be compensated at a rate not less than 1.5 times the “regular rate” at which an employee is paid. The term “regular rate” includes “all remuneration paid” to an employee, with a few exceptions. The U.S. Courts of Appeals for the Sixth and Eighth Circuits are split on whether a sick leave buy-back payment must be included within an employee’s regular rate for overtime purposes. Noting the split, the U.S. Court of Appeals for the Tenth Circuit agreed with the Eighth Circuit and the U.S. Department of Labor in holding that such a payment must be included within the regular rate calculation. In so doing, the court stated that sick leave buy-backs represent compensation for additional service or value received by the employer and are analogous to attendance bonuses. Consequently, such payments must be included within the regular rate calculation. Interestingly, in the same opinion, the court held that vacation buy-backs do not need to be included within the regular rate calculation. Ultimately, this case demonstrates the complexities inherent in complying with wage and hour laws and that employers must carefully consider how the payment of bonuses and other forms of additional compensation impact the calculation of overtime payments to employees.