President Trump recently signed into law Congress’ $1.3 trillion, 2,232-page omnibus budget bill.  Notably, tucked away on page 2,025 of the bill, Congress amended the Fair Labor Standards Act to address rules affecting tipped employees.  These rules have been a hot topic lately and there is a lot of misinformation floating around.  Here is what you need to know:

To recap, the FLSA requires employers to pay employees the minimum wage, currently $7.25 per hour for most employees.  In the restaurant industry, however, employers are allowed to count up to $5.12 per hour of employees’ tips against their total minimum wage obligation.  In other words, restaurants can pay tipped employees such as servers, bartenders, bussers, and runners as little as $2.13/hour plus customer tips.  The Department of Labor’s rules make it clear that employers cannot take this “tip credit” if the employer uses a tip pooling arrangement where any portion of tips are kept by the house, or if the restaurant requires employees to share tips with managers or employees who do not “customarily and regularly” receive at least $30 per month in tips (e.g., “back of the house” personnel such as cooks, dishwashers, etc.).  These basic rules are still in place.

What was not clear, until now, was whether the FLSA imposes any restrictions on tip pooling arrangements for employers who do not take the tip credit (i.e. pay their employees at least the minimum wage).  In 2011, the Obama administration said yes, tips could never be shared with managers or kitchen staff even if the restaurant paid the servers the full minimum wage and did not take advantage of the tip credit.  In 2017, the Trump administration, and several federal courts, said no, restaurants paying the full minimum wage could do whatever it wanted with customer tips.  The Trump Administration’s 2017 proposed regulation started a process aimed at reversing the Obama Administration’s 2011 regulation.

The 2018 Omnibus Budget Bill settles the tug of war.  Buried deep in the law is an easy-to-overlook provision relating to “Tipped Employees.”  The Tipped Employees provision establishes a compromise and permits tip splitting among and with non-supervisory, non-service employees (such as cooks and dishwashers) where no tip credit is taken. Otherwise, the amendment specifically prohibits employers from requiring employees to share their tips with the employer, including any managers or supervisors, whether or not the employer takes a tip credit. This is significant because it means that an employer can now violate the FLSA through an improper tip pooling arrangement even if it is paying employees the full minimum wage.

Employers who unlawfully keep any portion of an employee’s tips may now be liable to injured employees for the amount of tip credit taken and the amount of the tip unlawfully taken, plus an additional, equal amount as liquidated damages. Furthermore, the amendment authorizes the Secretary of Labor to assess a civil penalty of $1,100 per violation.

Ultimately, Congress’ new amendment means that, for now, employees who are paid at least the minimum wage in cash can be required to share tips with cooks, dishwashers, and other non-management, non-supervisory “back of the house” employees.  When deciding the right tipping strategy, restauranteurs should consult with legal counsel.  Particularly, tip pooling policies should be carefully reviewed with counsel before implementation to ensure compliance with all applicable federal and state requirements.

Please feel free to contact any member of the McNees Wallace & Nurick Labor and Employment Practice Group for assistance with labor and employment law issues and/or if you have any questions regarding this article.

Today, the United States Supreme Court has finally put to rest the issue of whether service advisors are exempt from the overtime compensation requirements of the Fair Labor Standards Act (FLSA).  You may recall an earlier post, discussing the law’s ambiguity in how auto dealers should classify service advisors under the Fair Labor Standards Act (FLSA).  It is an issue that has been before the Supreme Court twice now and a decision to clarify the standard has been much anticipated by auto dealerships across the country.

As a recap, the plaintiffs in Encino Motor Cars were current and former service advisors of a Mercedes-Benz dealership in California.  The service advisors sued the dealership for backpay, alleging that the dealership failed to pay them overtime compensation under the FLSA.  The dealership moved to dismiss the complaint, arguing that the service advisors were exempt from overtime under an FLSA exemption that applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.”

In a 5-4 decision, the Court found that auto service advisors are exempt under the FLSA’s overtime provisions because they are salesmen primarily engaged in servicing automobiles.  Specifically, the Court found that while the term salesman is not defined under the FLSA, it could be defined as “someone who sells goods or services.”  Because service advisors sell customers services for their vehicles, Justice Thomas, authoring the opinion, found that “a service advisor is obviously a ‘salesman.’”

The Court also found that service advisors are primarily engaged in servicing automobiles.  In particular, the court found that they “meet customers; listen to their concerns about their cars; suggest repair and maintenance services; sell new accessories or replacement parts; record service orders; follow up with customers as the services are performed (for instance, if new problems are discovered); and explain the repair and maintenance work when customers return for their vehicles.”  Notably, the Court found that “if you ask the average customer who services his car, the primary, and perhaps only, person he is likely to identify is his service advisor.”  For these reasons, the Court concluded that the service advisors are exempt from overtime compensation.

Please feel free to contact any member of the McNees Wallace & Nurick Labor and Employment Practice Group for assistance with labor and employment law issues and/or if you have any questions regarding this article.

Under the Fair Labor Standards Act (“FLSA”), employers are permitted to pay non-exempt employees a fixed salary to cover straight-time earnings for all hours worked in a week, provided several conditions are met: a) the employee’s hours must fluctuate week to week; b) the employee must be paid the fixed salary in weeks where employee works less than 40 hours; c) there must be a clear understanding that the salary is intended as straight-time compensation for all hours worked; d) the employee’s “regular rate” of pay (calculated by dividing the salary amount by the total weekly hours worked) must be at least the federal minimum wage; and e) for each hour worked in excess of 40 in a week, the employee must be paid an overtime premium of at least ½ the employee’s regular rate for that week.  This pay plan, commonly referred to as the “fluctuating work week” method (“FWW”), was long thought to be lawful in Pennsylvania.  However, in two federal court decisions issued in 2012 and 2014, FWW pay plans were found to violate the Pennsylvania Minimum Wage Act (“PMWA”).  Put another way, a pay practice that is permitted under federal FLSA regulations was found to violate Pennsylvania’s state law governing wages and overtime.

The earlier court decisions striking down FWW pay plans were both authored by federal judges who were interpreting state law.  Some employers have held out hope that the Supreme Court of Pennsylvania might disagree with their interpretation of the PMWA and resurrect FWW pay plans in Pennsylvania.  This issue has not yet reached Pennsylvania’s highest state court.  However, in Chevalier v. General Nutrition Centers, Inc. the Superior Court of Pennsylvania (an intermediate appellate court) considered the status of FWW plans under the PMWA.

In Chevalier, GNC’s store managers and assistant managers were treated as “salaried non-exempt” employees.  That is, they were paid a fixed salary regardless of how many hours they worked.  GNC also paid its managers an overtime premium consistent with the FWW method; i.e., a “regular rate” was calculated for each week (salary divided by total hours worked) and managers were paid ½ of the regular rate as a premium for each overtime hour worked.

Citing the prior federal court decisions referenced above, the plaintiffs argued that GNC’s FWW plan violated the PMWA.  From the plaintiff’s perspective, GNC was required to calculate each manager’s regular rate by dividing his or her weekly salary by 40 hours – and then pay 1 ½ times this rate for each hour worked in excess of 40.

Interestingly, the Superior Court did not side entirely with either party.  The Court found that GNC properly calculated each manager’s regular rate by dividing his or her weekly salary by the total number of hours worked by the manager in the week (and not by 40, as argued by the plaintiffs).  This holding results in a lower regular rate in weeks during which overtime is worked.

However, upon reviewing Section 231.43(b) of PMWA regulations, the Court agreed with the plaintiffs that overtime hours must be paid at a rate of 1 ½ times the regular rate for all hours worked in excess of 40 – or three times more than the ½ time premium that was being paid by GNC to its salaried non-exempt managers.  By way of example, if a non-exempt manager is paid a fixed salary of $1,000 each week, regardless of hours worked – then his or her “regular rate” is $20/hour in a week during which the manager works 50 hours.  Applying the Superior Court’s reasoning, this manager must then be paid $30/hour (1 ½ X $20) for each of the 10 overtime hours worked that week.

Notably, while the Chevalier case was pending, the Superior Court invited the Pennsylvania Department of Labor and Industry (“L&I”) to state its position as to whether the FWW method of calculating overtime pay is permitted under PMWA.  L&I declined to do so, explaining that, by taking a formal position on the issue, the Department would arguably be taking regulatory action without following the required regulatory review process.

In sum, the Chevalier decision makes it clear that employers may realize some wage savings by treating certain employees as “salaried non-exempt.”  However, the PMWA applies a stricter standard for calculating overtime pay than is permitted under FLSA regulations for FWW pay programs.   While Pennsylvania employers may calculate a salaried non-exempt employee’s “regular rate” in the same manner as they would under an FWW, the PMWA requires payment of 1 ½ times that rate for each overtime hour – and not merely payment of a ½ time premium.

Until the Supreme Court of Pennsylvania says otherwise (or the PMWA is amended), employers who employ salaried non-exempt employees in Pennsylvania should be careful to ensure that their overtime pay practices are consistent with the Chevalier decision.  If you have any questions regarding the Chevalier case or any other wage and hour compliance issue, please contact any member of our Labor and Employment Practice Group.

As many will recall, the U.S. Department of Labor issued regulations in May 2016 that would have increased dramatically the minimum salary requirements for the Fair Labor Standards Act’s “white-collar” overtime exemptions.  The 2016 FLSA regulations would have more than doubled the minimum weekly salary requirement for most white-collar overtime exemptions from $455 to $913 and contained a number of additional provisions, the vast majority of which were not viewed favorably by employers.

In November 2016, mere days before those FLSA regulations were set to become law, a federal judge issued an injunction blocking those regulations from taking effect.  Since then, the possibility of those regulations ever taking effect has diminished substantially.

Now, it appears that the changes the 2016 FLSA regulations promised may become a reality for Pennsylvania employers.  Yesterday, Governor Wolf announced that the Pennsylvania Department of Labor and Industry will propose new regulations under the Pennsylvania Minimum Wage Act that will increase the minimum salary requirement for the white-collar overtime exemptions under this state law.

The PMWA is the state-law equivalent of the FLSA.  The PMWA and FLSA both place minimum wage and overtime pay obligations on Pennsylvania employers.  While the laws’ requirements are similar, they are not identical.  Employers in Pennsylvania must meet the requirements of both laws to ensure compliance.  In areas where one law is more favorable to employees than the other, employers must comply with the more pro-employee requirements to avoid liability for unpaid minimum wages or overtime pay.

Governor Wolf announced that the proposed PMWA regulations will raise the salary level to determine overtime eligibility for most white-collar workers from the current FLSA minimum of $23,660 (i.e., $455 per week) to $31,720 (i.e., $610 per week) on January 1, 2020.  If the proposed regulations ultimately take effect, the annual salary threshold will increase to $39,832 (i.e., $766 per week) on January 1, 2021, followed by $47,892 (i.e., $921 per week) in 2022.  Starting in 2022, the salary threshold will update automatically every three years.  (The terms of such automatic increases have not yet been released.)

In addition, unlike the 2016 FLSA regulations, Governor Wolf announced that the new PMWA regulations will “clarify” the duties tests for the white-collar exemptions.  We can only assume that such “clarifications” when issued will not be favorable for employers and will make even more currently exempt employees now eligible for overtime.

The Department of Labor and Industry anticipates releasing the proposed regulations for public comment in March 2018.

For Pennsylvania employers, all of this will feel very familiar.  Should the proposed regulations become final and take effect, employers in Pennsylvania will need to take the following steps:

  • Identify those employees currently treated as exempt from overtime pay and determine whether their salaries will meet the new minimum salary thresholds.
  • For those employees currently treated as exempt who earn less than the new minimum salary thresholds, consider whether to increase their salaries to meet the new salary requirements or convert the employees to non-exempt status and pay them for overtime worked.

Of course, Governor Wolf announced only that proposed regulations containing these changes will be coming in March.  There is no guarantee that the proposed regulations will become final in the same or similar form, and, even if they do, legal challenges may await.  The PA Chamber of Business and Industry already has announced its strong opposition to the proposed changes.  There is also a gubernatorial election in November 2018 that may play a large role in the ultimate fate of these proposed regulations.

Whether and to what extent these changes will become law in 2020 remains to be seen.  We will provide updates on the proposed regulations as the situation warrants.  In the meantime, to quote the late great Yogi Berra, it’s déjà vu all over again.

In a recent change of position, the Department of Labor (“DOL”) has endorsed a new standard for determining when an unpaid intern is entitled to compensation as an employee under the Fair Labor Standards Act (“FLSA”).  We previously reported on an earlier DOL effort to tighten up the restrictions on the use of unpaid interns.  It looks like the DOL has decided to change course.

By way of further background, the United States Supreme Court has yet to address the issue, but several federal circuit and district courts have attempted to determine the proper standard to assess these situations.  Recognizing that internships are widely supported by the education community, these courts have sought to strike a balance between providing individuals with legitimate learning opportunities and the exploitation of unpaid interns.

In keeping with the rulings of the courts, the DOL, stated last Friday that “the Wage and Hour Division will update its enforcement policies to align with recent case law [and] eliminate unnecessary confusion among the regulated community…”

Accordingly, the DOL rescinded a 2010 Fact Sheet and adopted the primary beneficiary test, which considers the following factors to determine whether an intern or student is, in fact, an employee under the FLSA:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

No one factor is determinative and, therefore, the inquiry of whether an intern or student is an employee under the FLSA depends upon the unique circumstances of each case.  The Labor & Employment attorneys at McNees are ready to help employers with the analysis of whether the intern or the employer is the primary beneficiary of the relationship.

The United States Supreme Court will address again whether service advisors are exempt from overtime compensation requirements of the Fair Labor Standards Act (“FLSA”).

In a case involving several procedural twists and turns, the Supreme Court, for the second time, will hear Encino Motorcars, LLC v. Navarro.  That case involves five service advisors who were employed by a California Mercedes-Benz dealership.  In 2012, the employees sued the dealership, under the FLSA, after it refused to pay them overtime compensation.  The employees alleged, among other things, that as a part of their job duties, they were required to upsell customers for additional automobile services, but were not required to actually sell cars or perform auto repairs.  They further alleged that they were only paid by commission and were “mandated” to work from 7 a.m. to 6 p.m. at least five days a week.

The FLSA requires that employers pay employees overtime compensation equal to 1 and 1/2 times their regular rate for all hours worked in excess of forty per week, unless an exemption applies.  Section 213(b) of FLSA is at issue in this case and provides that overtime compensation is not required for an employee who is a “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles…”

A California district court dismissed the case, but the Ninth Circuit Court of Appeals reversed that decision, finding that the service advisors were eligible for overtime compensation, as they did not fall within the meaning of a “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.”  The Ninth Circuit rested its decision on a Department of Labor regulation, issued in April 2011, which the Supreme Court later found invalid.

In its first time reviewing the case, instead of determining the issue of whether the service advisors were qualified for the Section 213(b) exemption, the Supreme Court kicked the question back to the Ninth Circuit for reconsideration, instructing the lower court to rule without considering the Department of Labor’s regulation.  Although the Supreme Court side stepped the issue in 2016, Justice Thomas in a dissenting opinion joined by Justice Alito projected how they would resolve the issue, opining that Section 213(b) covered the employees.

After reconsideration, the Ninth Circuit again found that service advisors do not fall with Section 213(b) of the FLSA.  The Ninth Circuit’s ruling is at odds, as it acknowledged, with several other courts, including the Fourth Circuit, Fifth Circuit, and the Supreme Court of Montana.  Given this discrepancy, the Supreme Court will hear the case yet again to hopefully put this topic to rest by issuing a final resolution.

In the meantime, there is a clear ambiguity in how auto dealers should classify employees in service advisor type roles.  Until this case is resolved, auto dealers who wish to classify service advisors as exempt from overtime should consider the applicability of Section 7(i) of the FLSA.  That section provides an overtime exemption applicable to employees who are employed by a retail or service establishment and are paid primarily on a commission basis.

The federal Fair Labor Standards Act (FLSA) establishes requirements for minimum wages and overtime pay.  The FLSA’s requirements can be complex, and employers can face significant liability for unpaid wages and liquidated damages by failing to ensure compliance with its myriad requirements.

The FLSA contains a somewhat unique quirk regarding its statute of limitations.  The statute of limitations for FLSA violations is two years.  However, if the plaintiff(s) can show that the violation was willful, the statute of limitations is extended to three years.  In other words, employers who commit willful violations face a potential additional year of damages (if the unpaid wages date back at least three years before the filing of the lawsuit).

In an FLSA case filed against Lackawanna County, the Third Circuit recently clarified what constitutes a willful violation to trigger the third year of liability under the FLSA.  In Souryavong v. Lackawanna County , the County failed to aggregate the hours worked by part-time employees who worked multiple jobs for the County.  For overtime pay purposes, all hours worked by a non-exempt employee for an employer must be recorded and counted.  If the total hours worked in any workweek exceeds 40, the employee is entitled to overtime pay, regardless of whether the hours were worked in one or multiple positions for the same employer.

Thus, it was undisputed that the County violated the FLSA by failing to aggregate weekly the hours worked for these part-time employees.  It also was undisputed that the County was liable for unpaid overtime pay and liquidated damages dating back two years from the date the lawsuit was filed.  What was in dispute was whether the County’s violation was willful, which would trigger a third year of damages.

The plaintiffs claimed that the violation was willful and pointed to testimony by the County’s chief financial officer and HR director that the County had been generally aware of its FLSA obligations since 2007.  The plaintiffs also identified an e-mail from the HR director to two other County officials regarding “wage and hour issues.”

The Third Circuit rejected the plaintiff’s willfulness argument.  Specifically, the Third Circuit found that the evidence did not establish that the County was aware of the specific overtime pay issue (i.e., aggregating hours worked by part-time employees who worked multiple jobs for the County) before or at the time that the FLSA violations occurred.  General awareness of the FLSA’s existence and its general requirements is not enough to prove a willful (i.e., intentional) violation of one of its specific requirements.

There are two important takeaways from the Third Circuit’s Souryavong decision:

  • To prove a willful FLSA violation and get that third year of potential damages, employees will need to prove that the employer actually knew of the specific FLSA requirement at issue at the time of the violation and intentionally did not comply with it. General FLSA awareness is not sufficient to prove a willful violation of a specific requirements.
  • Employers should keep this decision in perspective and understand what it means and what it does not.  Even with the Third Circuit’s favorable decision, the County still was liable for two years of unpaid wages for multiple employees, an equal amount in liquidated damages, an additional $56,000 for the plaintiffs’ attorneys’ fees, and an additional undisclosed amount for its own attorneys’ fees.  FLSA violations present significant potential liability for employers, and it is in every employer’s interest to audit its pay practices and ensure compliance before a lawsuit is filed or a Department of Labor investigation begins.  While this decision confirms that it can be hard to establish a willful violation, employees need to prove only a violation of the FLSA (regardless of whether the violation was intentional) to get two years of damages plus their attorneys’ fees paid by the employer.

On August 31, 2017, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas issued an order holding that the 2016 Fair Labor Standards Act white-collar overtime exemption regulations were invalid.  In November 2016, Judge Mazzant had issued a nationwide preliminary injunction blocking the new FLSA white-collar overtime exemption regulations from taking effect on December 1, 2016.  With the order issued on August 31, 2017, Judge Mazzant formally struck down the challenged regulations, granted summary judgment for the plaintiffs, and closed the case.

As you may recall, the 2016 regulations more than doubled the minimum weekly salary requirement for most white-collar overtime exemptions from $455 to $913.  The regulations contained a number of additional provisions, the vast majority of which were not viewed favorably by employers.

In his decision, Judge Mazzant clarified that the DOL has the legal authority to create a minimum salary requirement for the white-collar overtime exemptions, but in this case exceeded that authority by more than doubling the existing minimum salary requirement.  In a separate decision also issued on August 31, 2017, Judge Mazzant denied a motion to intervene in the case filed by the Texas AFL-CIO, finding that the motion was untimely and that the DOL adequately represented whatever interests the Texas union had.

On the same day that the Court issued its order granting summary judgment and closing the case, the DOL asked the appeals court that was set to hear the appeal of the November 2016 preliminary injunction decision to hold that appeal in abeyance “pending further discussions by the parties in an attempt to narrow the dispute and potentially eliminate the need for this appeal.”  It is unclear what the next steps for the parties in this matter will be, but the events of August 31, 2017 decrease significantly the likelihood of the 2016 regulations ever taking effect.

Where are we now and where to we go from here?

A future decision by an appeals court overturning Judge Mazzant’s decision appears unlikely, primarily because the Trump Administration’s DOL likely will not pursue such an appeal and Judge Mazzant denied the Texas AFL-CIO’s motion to intervene in the case.  Thus, the requirements for the white-collar overtime exemptions remain (and should remain for the near future) what they were before the 2016 regulations, with a minimum weekly salary requirement of $455.

The Trump DOL has indicated that it intends to issue new regulations that would revisit, and likely increase, the white-collar exemptions’ minimum salary requirement.  Unless and until those regulations are issued and take effect, $455 remains the minimum weekly salary requirement, and the existing regulations, which date back to 2004, remain in effect.

On April 27, 2017, the Senate confirmed R. Alexander Acosta as the Secretary of Labor.  More than four months after President Trump took office, the U.S. Department of Labor finally had a new leader.

In the ten weeks since Secretary Acosta took office, the DOL has been very busy, with a number of important actions that directly affect employers.

  • Withdrawal of Joint Employer and Independent Contractor Interpretations. On June 7, the DOL announced that it was withdrawing its 2016 and 2015 Administrator Interpretations on joint employment and independent contractors.  With this action, the Trump Administration DOL confirmed that it would walk back from the more expansive interpretations of joint employer status and employment status in independent contractor situations adopted by the Obama DOL.  This action does not mean that employers no longer face risk from possible joint employer or independent contractor situations.  Instead, the DOL has indicated that it will return to the more traditional interpretations of these concepts used by the DOL under prior Administrations.
  • Revising the Persuader Rule. On June 12, the DOL issued a notice of proposed rulemaking to rescind and revise the enjoined so-called Persuader Rule.  The Obama-era Persuader Rule would have greatly expanded the reporting and disclosure requirements imposed on employers and consultants (including lawyers) with respect to labor relations advice and services under the Labor-Management Reporting and Disclosure Act’s “persuader activity” regulations.  The Obama-era Persuader Rule was permanently enjoined in November 2016, and it appears that the Trump DOL will be taking action to formally rescind the blocked rule and perhaps issue new regulations that could further modify existing reporting and disclosure requirements.
  • Return of Opinion Letters. On June 27, the DOL announced that its Wage and Hour Division will reinstate the practice of issuing opinion letters to provide guidance to employers and employees on the laws it enforces.  The Obama DOL had ceased issuing opinion letters in 2010, and the return of opinion letters will be welcomed by employers as a useful tool when interpreting the requirements of the Fair Labor Standards Act and other federal wage and hour laws.
  • Compliance Date Pushed Back for Electronically Submitting Injury and Illness Reports to OSHA. Also on June 27, the DOL’s OSHA announced that it was delaying the compliance date for electronic reporting of injury and illness data set forth in its May 2016 regulations from July 1, 2017 until December 1, 2017.  Under the Obama DOL, OSHA intended to use the electronic submission of this data to post injury and illness data on its website from all workplaces with 20 or more employees and for those in certain high-risk industries, making the information publicly available for unions, plaintiffs’ attorneys, and others.  In its June 27 press release, OSHA indicated that it intends to revisit and further consider the controversial rule.
  • Clarification of Position on the FLSA Overtime Exemption Regulations. On June 30, the DOL filed its Reply Brief with the Fifth Circuit Court of Appeals in the pending appeal of the preliminary injunction blocking the 2016 salary-related changes to the FLSA white-collar overtime exemption regulations from taking effect.  As we have discussed at length in this blog, the Obama-era regulations more than doubled the minimum weekly salary requirement for most white-collar overtime exemptions from $455 to $913.   In November 2016, a federal district court enjoined the regulations from taking effect on December 1, 2016, and the DOL appealed this decision.

In its Reply Brief, which was the first opportunity for the Trump DOL to state its formal position on the controversial regulations, the DOL argued that the injunction blocking the regulations should be reversed, because it was based on the legal conclusion (which the DOL still believes is erroneous) that the DOL lacks the authority to impose any minimum salary requirement as part of the exemptions’ tests.  However, the DOL asked the Fifth Circuit not to address the validity of the specific minimum weekly salary level of $913 set by the 2016 regulations, because the DOL intends to revisit the salary level through the issuance of new regulations in the future.

The DOL’s position, as set forth in its Reply Brief, raises additional questions and seemingly muddies the waters even further.  Specifically, if the Fifth Circuit ultimately agrees with the DOL’s position as stated its Reply Brief, what would be the fate of the challenged 2016 regulations and their $913 weekly salary requirement?  What would be the minimum salary required for the FLSA white-collar overtime exemptions before the DOL could issue new final regulations on the minimum salary level?  On June 27, the DOL sent a Request for Information related to the overtime rule to the Office of Management and Budget for its review, indicating that it intends to initiate the rulemaking process on this issue.  However, it will take many months, if not a year or more, for the DOL to complete the rulemaking process and issue a final rule to supersede the challenged 2016 overtime regulations.

Unfortunately, the DOL’s Reply Brief seemingly raised more questions than it answered, which is not good for employers who simply wish to know the legal requirements they must meet.  We now will await oral arguments on the appeal and a decision sometime in the future.

With a Secretary of Labor now in place, we expect the DOL to continue its recent pace of activity.  Stay tuned.

In September of 2015, two delivery drivers filed a class action lawsuit in the United States District Court for the Middle District of Pennsylvania. The employees alleged that their former employer violated the Fair Labor Standards Act by failing to pay them overtime between 2012 and 2015. The class subsequently ballooned to 474 members (and an additional 588 former and current delivery drivers remain eligible to opt into the class). The members asserted that over that three year period, the employer denied them overtime for five to ten hours per workweek, totaling over $10 million in allegedly unpaid wages.

The employer initially argued that the employees were exempt from overtime requirements. It claimed that in addition to making deliveries, as “Route Sales Professionals,” the drivers could make additional sales, fill orders, and upsell when making deliveries. Therefore, according to the employer, the drivers fell within the FLSA’s “outside sales person” exemption. The drivers maintained that sales were not part of their job duties; they were simply delivery drivers who did not fit within the outside sales exemption.

After two years of discovery, in April of this year, the parties notified the court that they had reached a settlement agreement. They asked the court to approve agreement, as is required with both FLSA claims and class actions lawsuits.

The amount: $2.5 million.

This month, the court approved the FLSA settlement. It also preliminarily granted approval of the class action settlement, subject only to a fairness hearing scheduled for September.

For our blog subscribers that have delivery drivers who also engage in incidental sales, now is the time to reevaluate how you classify those employees. In addition, this case serves as an important reminder for all employers that FLSA classifications turn on the actual job duties of the position, not the job title. In fact, a written job description will not even be controlling, unless it is an accurate reflection of the employee’s job duties.