Each month when I start to put together an article I try to decide which area of the Fair Labor Standards Act is most on everyone’s mind and each month it gets harder to decide because I continue to see much litigation concerning many different areas. According to an article in the Daily Labor Report earlier this month it is expected that more than 8,800 Fair Labor Standards Act suits will be filed in Federal Courts during the fiscal year ending September 30, 2015. This is an increase of almost 500 suits above the number filed in the previous year. Thus, this month I am going to try to touch on the highlights of several different sections of the law.
Litigation and Wage and Hour investigations under the Act continue to generate large judgments and/or settlements. One area that is very much in the forefront is whether persons are bona fide independent contractors or whether they should be treated as employees. On July 15, 2015, the Wage and Hour Administrator issued a position paper explaining how they determine who is to be considered an employee. The document stressed several points including whether the person is in business for himself and an “economic realities” test. Additionally, Wage and Hour has signed agreements with more than 20 states to share information regarding the use of independent contractors. It appears that Wage and Hour will be looking very closely at persons that are working for you that you are treating as independent contractors. If you have persons in this category I suggest that you obtain a copy of the position paper which is available on the Wage and Hour web site and review it closely to ensure that you are not misclassifying workers. I just saw where an Alabama Logging and Trucking Contractor was required over $100,000 in back wages and liquidated damages to some 45 employees that he had misclassified as independent contractors.
There continues to be a push by the President and the Secretary of Labor to increase the minimum wage. Previously the push was to increase the wage to $10.10 per hour but current bills are proposing to increase it to still higher levels. Also several cities either have passed legislation or are considering raising their local minimum wage. For instance, the Birmingham City Council passed an ordinance to raise their minimum wage to $8.50 in July 2016, and $10.10 in July 2017. The specifics of the statute were published in The Birmingham News on August 30, 2015.
In addition to pushing for an increase in the minimum wage, Wage and Hour has published some proposed changes to the regulations defining the executive, administrative, professional and outside sales exemptions. When the proposal was issued in July the agency invited the public to submit comments by September 4, 2015. They are now in the process of reviewing those comments and it is expected they will issue the final regulations either late this year or in early 2016 with an effective day during the first or second quarter of 2016. The major change set forth in the proposal is an increase in the minimum salary from $455 to more than $900 per week. Employers need to begin evaluating their salary structure for exempt employees so they can make any necessary changes before the effective date of the new regulations. I understand that more than 250,000 comments were submitted.
Class Action v. Collective Action Litigation: I know that frequently you see articles about “class action” suits against employers for various issues such sex, race or religious discrimination and occasionally you may see one using the term “collective action”. This probably makes you wonder what the difference between the two types of suits is. The FLSA, which was passed by Congress in 1938, does not allow the filing of a “class action” where the employee is automatically covered by the suit unless he/she chooses to opt out of the suit. Thus you see “collective actions” under the FLSA which is where the employee must choose in writing to be a party of the suit.
In the “collective action” process a small group of employees (even one or two) may file a suit against a company alleging violations of the FLSA and then file a motion with the Court seeking to get the establishment of a collective action on behalf of all employees performing similar duties. If the Court approves the collective action it normally will allow the Plaintiff Attorney to send a letter to each employee in the similarly situated group to join in the litigation. For example, I am involved in a case in another state where one employee alleged non-payment of proper overtime in a few weeks in 2010 and 2011. At this point some 15 employees have joined the suit but the court has allowed the plaintiff’s attorney to notify other employees of the pending suit and is expected up to 400 current and former employees may join the suit.
Recently, DOL posted some statistics on its website regarding activities during several previous years. In FY 2014 they collected almost $240 million in back wages for some 270,000 employees. For the past several years Wage and Hour has looked at several “low wage” industries which include agriculture, restaurants, guard services and janitorial services. In looking at some specific industries I note that by far the industry where they found the most underpayments were restaurants with almost $35 million in back wages paid to some 44,000 employees. Based on their findings I would expect they will continue to take a close look at the restaurant industry and hospitality industry in upcoming years. If you would like to take a more detailed view of their activities you can find a link on the home page of their web site.
Note for employers who have government contracts: I am sure you are aware that the President issued an Executive Order requiring employees working on those contracts to be paid at least $10.10 per hour. The Order also said that the minimum rate would be adjusted each year to keep up with increases in the cost of living and required the Department of Labor to issue the rates for the following year by October 1st. This month Wage and Hour issued the rates beginning January 1, 2016 to be $10.15 per hour and the rate for tipped employee’s increases from $4.90 per hour to $5.85 per hour.