Sixth Circuit Mostly Affirms $5M FLSA Verdict

Yesterday, the Sixth Circuit Court of Appeals mostly affirmed an approximately $5M verdict in a FLSA collective action for unpaid overtime and liquidate damages due to 156 employees.  Pierce v. Wyndham Vacation Resorts Inc., No. 18-5258 (6^th Cir. 4-29-19).   After a 14-day bench trial with over 50 witnesses, the trial court determined that three categories of sales employees worked on average 52 hours per week, but were denied overtime pursuant to a practice and policy which was supported by testimony and exhibits from some management employees.  The employer attempted to dispute that it had a consistent policy by pointing to various reasons that employee time sheets were changed (i.e., failing to record time, working from home, leaving work early, etc.), but this evidence was used to reduce the alleged number of work hours and not to reject the existence of the policy and practice.  The divided Court determined that one category of sales employees should not have been included in the same class as the others because they had different functions, started work two hours later, were not required to attend the same events and meetings, and only had one representative testify, who did not support that his experiences and working hours were the same as other employees, etc. Instead, at the least, there should have been a separate sub-class with evidence supporting a verdict.  The case was remanded to recalculate damages.


According to the Court’s opinion, the employer had four locations in Tennessee involving the sale of time-share vacation properties.   It had three types of sales employees: front-line selling time-shares, inhouse selling upgraded timeshares to existing owners and discovery employees handling leases (but not time shares).  All of them were primarily paid on commissions, but were paid minimum wage draws based on hours worked.  In 2009, it began paying overtime.  The lawsuit was filed in 2013 alleging that the employer had a practice and policy of not paying overtime to the sales force by, among other things, directing employees to not record overtime and by modifying their time cards if they did so.

All of the testifying plaintiffs consistently said that Wyndham required them to underreport their time or altered their recorded time.  They all provided an average of the number of hours they worked each week, ranging from 50 to 80 hours per week, and their basis for that number:  the mandatory morning meeting, tours throughout the day, frequent late-night work and special events, and six- or seven day work weeks.  But, through it all, they didn’t worry about keeping an accurate account of their hours because the company told them it would recoup any overtime pay from their commissions.  

The administrative manager at the Nashville location testified that upper management instructed that sales employees could not be paid overtime and that managers should alter employees’ timecards to show no more than 40 hours per week.  The vice president of sales and marketing at the two Smoky Mountain locations acknowledged that Wyndham performed an audit that showed that salespeople worked off the clock.  Several emails from managers also mentioned Wyndham’s no-overtime-pay policy.  The evidence thus showed that Wyndham executed an across-the-board time-shaving policy that failed to compensate the employees for the hours they worked.

The trial court concluded that the employees worked on average 52 hours/week, awarded $2,512,962 in unpaid overtime and an equal amount in liquidated damages.  Attorney fees for the prevailing employees were not mentioned, but will not be insignificant.


The Court rejected the employer’s challenge to the class certification, with one exception.  It agreed that the discovery employees were not similarly situated because they did not sell time-shares like the other employees, were not required to attend all of the same events or work the same hours or work the same days.  In addition, they were not required to report to work until approximately two hours after the other employees and the testimony was unclear about when they could leave. While they may have stayed later, there was no evidence on that point.   “At the least, the court should have created a separate subclass for the discovery employees.”


“To determine whether plaintiffs are similarly situated, we consider (1) ‘the factual and employment settings of the individual[ ] plaintiffs,’ (2) ‘the different defenses to which the plaintiffs may be subject,’ and (3) ‘the degree of fairness and procedural impact of certifying the action as a collective action.’” The trial court had treated them as one class because they were subjected to the same alleged overtime policy.   While the front-line and inhouse sales employees sold the same product (to different types of customers), they also reported to work at approximately the same time for the same meeting, gave tours, attended events, worked the same days, were compensated the same and recorded time in the same payroll system.  As mentioned, the discovery sales employees had different working hours.


The Court rejected the employer’s attempt to argue that there was not a consistent policy of avoiding overtime because of all of the different reasons that employee time cards were modified.  In light of the evidence introduced, that claim was rejected.  Instead, the Court found that these various explanations could be part of the same policy and practice.  In addition, this evidence was used to reduce the number of alleged overtime hours.


The Court also rejected the employer’s attempt to discredit the employee testimony because it was permitted to depose and call any witnesses it wanted and almost 30% of the employees testified (which is a far greater percentage than in prior successful lawsuits).


The Court also rejected the employer’s expert (who was the only testifying expert) because the expert relied heavily on employee time sheets, which the employees testified were meaningless in light of the employer’s direction to not record overtime and the practice of modifying time sheets that reflected overtime.


NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Affirms Dismissal of FLSA Action Where Employer Paid Twice the Required Overtime Premium Under Fluctuating Work Week Method

This morning, the Sixth Circuit affirmed the dismissal of a collective FLSA action on the grounds that the employer’s fluctuating work week overtime payroll practices did not violate the Fair Labor Standards Act.   Hall v. Plastipak Holdings, Inc. No. 17-1694 (6^th Cir. 2-28-18).   First, the Court noted that the employer paid its employees at twice overtime rate that was legally required under the FLSA regulations.  The plaintiffs’ arguments were based on a misunderstanding of how the fluctuating work week method operates.   Further, it was “absurd” for the plaintiffs to argue that they were not paid a “fixed salary” when their vacation pay banks were docked as they took vacation because that would result in employees being paid twice as much for not working.  The Court also rejected their argument that they were prevented from conducting discovery as to whether the employer would dock their salary if they missed work after exhausting their vacation banks because the plaintiffs never raised this argument before the trial court and cannot raise arguments – even good ones – for the first time on appeal.

As explained by the Court:

Various methods can be used to calculate this overtime premium, depending on the particular employment circumstances.  One such method is the “Fluctuating Workweek” (“FWW”) method, described in 29 C.F.R. § 778.114(a).  Under this approach, employees receive a fixed salary as compensation for all hours worked, whether above or below forty hours, plus an overtime premium for each overtime hour.  Id.

             . . .. .

The FWW method can only be used if four requirements are met: (1) the employee’s hours fluctuate from week to week; (2) the employee receives a fixed salary that does not vary with the number of hours worked (excluding overtime premiums); (3) the fixed salary at least equals the minimum wage; and (4) the employer and employee share a “clear mutual understanding” that the employer will pay the fixed salary regardless of the number of hours worked.  29 C.F.R. § 778.114(a).

The plaintiffs disputed that they were paid a fixed salary or that they had agreed to this method of compensation.    However, the plaintiffs had each signed a detailed agreement specifying how their overtime would be calculated and they would be paid, including numeric examples.  They also accepted paychecks using this method for years without complaint or objection.

The Court observed that the employer paid its employees a higher overtime rate than required by the FWW regulations:

[T]he FWW method calculates overtime premiums according to the following formula:

            overtime premium = ½ x (salary/40 hours +overtime hours) x overtime hours

The parties agree that [the employer] did not use this formula.  Instead, [it] used a different one: 

            overtime premium = (salary/40 hours)          x overtime hours

When compared, these formulae show that [the employer’s] approach was more generous than the FWW’s approach in two ways.  First, [the employer] used a higher base salary rate: it divided base salary by 40 hours, whereas the FWW method divides base salary by the sum of 40 hours and overtime hours.  Second, [it] paid the full salary rate for overtime hours, whereas the FWW method requires only a minimum of half of the salary rate.  Taken together, these changes ensured that Plaintiffs were paid more than twice the minimum overtime premiums.  That was plainly permissible.  § 778.114(a)

The Court rejected as “absurd” the plaintiffs’ argument that they were not paid a “fixed salary” when their accrued vacation pay banks were “docked” after they requested and took time off work.

Reducing an employee’s bank  of vacation time is obviously appropriate in such circumstances.  See DOL Opinion Letter FLSA,   . . .  Indeed, it would be absurd to suggest that a vacationing employee should be paid twice for not working, once because the employee took paid vacation  and a second time because the employee is guaranteed a fixed salary.

The Court also rejected the plaintiff’s objection to being paid the same rate of pay for both overtime and regular 40 hours because they misunderstood the FWW method.  Hourly employees are not guaranteed a “fixed salary” regardless of how many hours they work.  If they work less than 40 hours, they are paid less than 40 hours, whereas  under the FWW, they receive the same pay every week whether they work more or less than forty hours.  So, hourly employees have not been paid at all for the hours worked over 40 in a week, which means that their overtime is time and a half.  In contrast, FWW employees have already been paid a fixed salary for all hours worked, even those over 40.  Because they have already been paid the “time” with the fixed salary, they only get “a half” for the overtime hours.   Nonetheless, the defendant employer in this case paid them twice that amount and gave them not just time and a half, but time and time again.  Still, the employees brought suit because they wanted time and time and a half.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appeals Court Orders Double Damages and Attorneys Fees for Successful Minimum Wage Claim

Yesterday, the Cuyahoga County Court of Appeals reversed the denial of liquidated double damages and attorneys’ fees to two successful plaintiffs who sued for denial of both minimum wage and overtime compensation under Ohio law.  Porter v. AJ Automotive Group, Inc., 2015-Ohio-3769.   The Court found that the employer bore the burden of proving that it was exempt from Ohio’s wage laws and it had not argued that it was exempt.  Therefore, the plaintiffs were entitled to liquidated damages and attorneys’ fees under their minimum wage claim under Ohio Revised Code § 4113.14 and Ohio Constitution Article 34a and to their unpaid overtime compensation under §4113.03.

The plaintiffs worked as car washers for the defendant employer.  They sued for unpaid minimum wages and overtime compensation under state and federal law.  The employer argued that they were tipped employees and that it was not subject to the Fair Labor Standards Act because it did not meet the sales volume or enterprise test.   The trial court concluded that the defendant was not an “employer” under federal or state wage laws, but used its equitable power to award the plaintiffs unpaid minimum wages and overtime compensation.  However, it denied them liquidated damages and attorneys’ fees. They appealed.

On appeal, there was no dispute about the amount of wage liability or applicability of the FLSA.   The trial court had concluded that the plaintiffs failed to prove that the defendant was a statutory employer under §4113.02(D), which is the overtime compensation statute and includes everyone as an employer, except businesses with gross annual sales of less than $150,000.   However, the Court agreed with the Franklin County Court of Appeals that the employer – not the plaintiff – bears the burden of proving its exemption from the statute by proving its sales meet the annual threshold.   Moreover, the defendant had never raised or argued any defense that it was not an employer under Ohio law.   Finally, the minimum wage statute at §4113.14 incorporates by reference the FLSA definition of employer, which is “’any person acting directly or indirectly in the interest of an employer in relation to an employee * * *.’ 29 U.S.C. 203(d).”

 

Accordingly, the Court found that the plaintiffs were entitled to the full remedies of ORC §4114.14 and §34a, which includes liquidated damages of twice the amount of unpaid minimum wages and attorneys’ fees.  (Ohio’s overtime compensation does not provide for liquidated damages).  

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Reverses Employer’s Summary Judgment in FLSA Overtime and Misclassification Case

Last week, a divided Sixth Circuit Court of Appeals reversed an employer’s summary judgment on a FLSA overtime compensation claim brought by satellite technician who had been classified as an independent contractor.  Keller v. Miri Microsystems LLC, No. 14-1430 (6^th Cir. 3-26-15).  After weighing a number of typical and a few new factors to determine the economic realities of the situation, the Court concluded that there was a factual dispute as to whether the plaintiff was an employee or independent contractor.    In addition, the Court found sufficient evidence to show that the plaintiff typically worked more than 60 hours each week – even without payroll records -- based on his testimony and the employer’s admission of how many jobs he generally completed each day and how long each job typically took.

According to the Court’s opinion, the employer provided consumer installation services for two satellite internet providers.  The plaintiff was hired as an independent contractor technician/installer by the employer and was paid by the job based on a percentage of what the employer was paid by its two customers.  He worked six days each week and had completed an installation certification course provided by the employer before he was hired.  He filed this lawsuit after he resigned and went to work directly for one of the customers.

In determining whether the plaintiff’s classification as an independent contractor was appropriate, the Court noted that “‘employees are those who as a matter of economic reality are dependent upon the business to which they render service.’”  Although no single factor is controlling, the Court identified the following eight factors and discussed six of them: 

·        The permanency of the relationship between the parties;

Generally, independent contractors have variable or impermanent working relationships with the principal company because they “often have fixed employment periods and transfer from place to place as particular work is offered to them, whereas ‘employees’ usually work for only one employer and such relationship is continuous and indefinite in duration. . . . . If a worker has multiple jobs for different companies, then that weighs in favor of finding that the worker is an independent contractor.

However, “even short, exclusive relationships between the worker and the company may be indicative of an employee-employer relationship.”  Moreover, it is irrelevant whether the parties have a written contract because the FLSA was meant to “defeat,” not implement, contracts.   Employees – like independent contractors – may work for multiple employers without losing the protection of the FLSA.  Unlike employees, contractors have more control over which days they work and how long they work each day. 

In this case, the Court found mixed indications about the working relationship.  Although the plaintiff worked exclusively for the employer for 20 months and claimed to have so many time-consuming assignments that he did not have time to work for anyone else, there was no exclusivity requirement and he could largely set his own schedule.  Accordingly, there were disputed issues of fact to be resolved by a jury.  

·        The degree of skill required for the rendering of the services;

The principle factor in this analysis is whether the worker’s “profits increased because of the ‘initiative, judgment[,] or foresight of the typical independent contractor,’ or whether his work ‘was more like piecework.’” The Court found “ample evidence” that the technicians were skilled and required specialized training and certification, including knowledge of electrical codes, how to operate power tools and computer software.  Nonetheless, he acquired his skills through the employer and those skills only increased his efficiency and did not affect the amount of his profits.  Accordingly, there were disputed issues of fact to be resolved by a jury, according to the majority.  

It is also important to ask how the worker acquired his skill. . . . If a worker learned his craft through formal education, an apprenticeship, or years of experience, then it is more likely that the worker’s compensation varies with his unique skill and talent. On the other hand, if the worker’s training period is short, or the company provides all workers with the skills necessary to perform the job, then that weighs in favor of finding that the worker is indistinguishable from an employee.

·        The worker’s investment in equipment or materials for the task;

“The capital investment factor is most significant if it reveals that the worker performs a specialized service that requires a tool or application which he has mastered or that the worker is simply using implements of the [company] to accomplish the task.”  Nonetheless, the Court adopted a new standard in this case: mandating a comparison of “the worker’s investment in the equipment to perform his job”  and particularly, “whether that capital investment is evidence of economic independence” with the employer’s “total investment, including office rental space, advertising, software, phone systems, or insurance.”  This is surprising because most small companies will never match the investment or overhead of a large corporate customer which retained them.  In conducting this new analysis, the Court disregarded worker purchases which are commonly purchased by employees, such as cars and laptops.   In examining the facts, the Court noted that while the worker invested in some equipment, the employer’s investment was greater. Accordingly, there were disputed issues of fact to be resolved by a jury.

 

·        The worker’s opportunity for profit or loss, depending upon his skill

The trial court found that the plaintiff had control over this economic success because he controlled the size of his region, how many jobs he took each day, and whether to hire assistants.  Surprisingly, the Court disagreed. Although it conceded that the plaintiff sometimes brought assistants which helped him to finish jobs quicker and might have helped him complete more jobs each day, it concluded that “hiring employees carries additional costs that would have affected [his] ability to earn a greater profit” and there was no evidence that even with assistants, “he could complete more than four installations each day.”   Nonetheless, the Court acknowledged that the plaintiff sometimes made extra income from outside, but related, activities. Accordingly, there were disputed issues of fact to be resolved by a jury.

 

·        The degree of the alleged employer’s right to control the manner in which the work is performed

While the Court acknowledged that the employer never controlled or monitored the manner in which the work was performed on a day-to-day basis, never provided step-by-step guides or uniforms or logos, and the worker could refuse and rearrange assignments, the Court found that other factors created a disputed issue of fact.  For instance, the Court considered how long it took the worker to drive to assignments and perform the work.  In addition, the employer required and provided certain certification courses.   The employer also required to be notified when each project began and ended, and to receive photos of the completed work and shared customer feedback with the worker. The employer also required the worker to guarantee the quality of work and repair any problems identified within 30 days without additional charge.   The employer also controlled how much the consumer paid.

·        Whether the service rendered is an integral part of the alleged employer’s business.

This factor undeniably weighed in favor of employment status since the installation and repair on satellite dishes is the employer’s primary business.

Although the Court initially identified the following two additional factors, it did not discuss them.

·        Whether the business had “authority to hire or fire the plaintiff,” and

·        Whether the defendant-company “maintains the plaintiff’s employment records.”  

Instead, it considered the following factors as weighing in favor of employee status even though none of it was required by the employer:

·        The plaintiff did not obtain an federal employer identification number;

·        He wore a logo hat of the employer’s primary customer (which he purchased from the employer) and identified himself as a representative of that company (instead of as an independent contractor); and

·        He had no business cards.

 As to whether the plaintiff could prove that he was entitled to unpaid overtime compensation if he had been an employee, the Court decided that his testimony alone could establish sufficient evidence.  There were obviously no payroll records in this case.   “In the absence of those employer records, however, a plaintiff’s testimony is enough to create a genuine issue of fact.”  Moreover, the employer’s records confirmed that the plaintiff worked six days each week as he claimed.   In addition, the employer confirmed that the plaintiff typically completed four installations each day and that each installation averaged about 2.5 hours each.  That would end up being approximately 60 hours per week, not including the travel time between each assignment and the time the plaintiff spent completing the employer’s forms.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

DOL Announces $4.8M Settlement with Wal-Mart Over Overtime Pay Owed to Misclassified Employees

Yesterday, the federal Department of Labor announced that it had reached a settlement with Wal-Mart Stores, Inc. over the nationwide misclassification of more than 4,500 individuals employed as asset protection coordinators and vision center managers between 2004 and 2007. The settlement includes payments to the affected employees of unpaid overtime over a three-year period, plus an equal amount as liquidated damages. In addition, Wal-Mart will pay the DOL $463,815 in civil penalties because of the repeated nature of the violations. The settlement follows an investigation by the Wage & Hour Division, re-classification of the employees by Wal-Mart in 2007 and negotiations over the past four years. The DOL did not explain how Wal-Mart had misclassified the employee. For instance, it did not explain whether the employees did not exercise independent discretion, were not paid on a salary basis, or lacked sufficient managerial authority.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

New FMLA Regulations Explain New Exigency and Servicemember Care Leave Requirements and Rights.

As mentioned in the summaries from the past two days, the DOL issued new FMLA regulations on Monday which will become effective on January 16, 2009 and will require employers to modify their employment policies and employee handbooks. Employers should consult with an employment attorney to revise and/or review their FMLA policies and forms before the new FMLA rules become effective in January. In addition to the new rules mentioned at DOL issues Final FMLA Regulations on New Servicemember and Exigency Leaves and Revises Serious Health Condition Rules, the following rules were also revised and the new military servicemember care and exigency leave provisions were explained for the first time:


13. §825.125: Healthcare Provider. The new rule expressly includes Physician Assistants.

14. §825.126: Qualifying Exigency. This leave permits employees to take a leave of absence because of a qualifying exigency associated with a call to active military duty of a family member.

a. Exigency. While exigency leave is implicated based on a call to active duty, this leave entitlement does not extend to family members of regular armed forces or military who are already on active duty or to calls to service by a state governor. The families of regular military are presumed to be accustomed to a career of being called up. Rather, exigency leave applies only when there has been a call to active duty of National Guard, Reserve or retired forces by the President and will cover the following exigencies:
(i) short notice deployment (less than seven calendar days prior to deployment);

(ii) military events and related activities (i.e., official ceremonies, programs, events related to call to active duty, family support or assistance programs, informational briefings sponsored by the military, Red Cross or other service organizations, etc.);

(iii) childcare and school activities (to arrange for alternative childcare or school/daycare for children who are under 18 or incapable of self-care, to attend meetings with school/daycare staff, etc.);

(iv) financial and legal arrangements (i.e., to make or update financial or legal arrangements to address the covered military member’s abence, such as preparing and executing financial and healthcare powers of attorney, etc.);

(v) counseling (i.e., to attend counseling);

(vi) up to five days of rest and recuperation (i.e., to spend time with a cover military member who is on short-term, temporary, rest and recuperation leave during the period of deployment);

(vii) post-deployment activities (i.e., to attend arrival ceremonies, reintegration briefings and events, etc. and to address issues which may arise from the death of a covered military member while on active duty status); and

(viii) additional activities (when the employer and employee agree that such leave qualifies as an exigency and agree to both timing and duration).

b. A covered military member means the employee’s spouse, son, daughter, or parent on active duty or call to active duty status.

c. A covered call to active duty includes a “contingency operation” when it is designated by the Secretary of Defense as an operation in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force or when it result in the call or order to, or retention on, active duty of members of the uniformed services

15. §825.127: Servicemember care leave. This new rule allows “an eligible employee who is the spouse, son, daughter, parent, or next of kin of a ‘‘covered servicemember’’ to take 26 workweeks of leave during a 12-month period to care for the servicemember. Unlike exigency leave, the covered servicemember may be an active member of the regular armed forces, but does NOT cover former members of the Armed Forces or members on the permanent disability retired list. In particular, this leave covers servicemembers who are “(1) undergoing medical treatment, recuperation, or therapy [from any medical provider]; or (2) otherwise in outpatient status; or (3) otherwise on the temporary disability retired list.” The servicemember will NOT be covered if the injury or illness does not manifest itself until AFTER the servicemember has retired from active forces, although there is no other temporal requirement. Unlike a serious health condition in the regular FMLA, a serious injury or illness for servicemember care leave means an injury or illness incurred by the servicemember in the line of active duty that may render the servicemember medically unfit to perform the duties of his or her office, grade, rank or rating. (A later rule permits the employer to require certification for military caregiver leave, through “ a certification that is completed by any one of the following health care providers: (1) A DOD health care provider; (2) a VA health care provider; (3) a DOD TRICARE network authorized private health care provider; or (4) a DOD non-network TRICARE authorized private health care provider. As part of a sufficient certification, these health care providers may be asked to certify that the servicemember is undergoing medical treatment, recuperation, or therapy for a serious injury or illness.”).

There are a few new wrinkles to how the period of leave is calculated:

(i) Unlike regular FMLA leave, the “twelve month period” begins as soon as the employee is eligible for leave, regardless of what kind of FMLA year the employer utilizes. (This makes sense to the extent that the employee may want to leave to care for the servicemember as soon as learning about the injury).

(ii) If the employee does not take the full 26 weeks available in that twelve month period, the unused amount is forfeited and cannot be used again another time for the same injury or illness suffered by that servicemember. The leave is available per injury and per servicemember.

(iii) The employee would be entitled to another 26 weeks of leave in a different twelve-month period if the same servicemember incurs a different covered injury or illness or if another servicemember is injured or ill as covered by the FMLA. However, to the extent that there is any overlap in a single twelve-month period, the employee is still limited to 26 weeks of leave in a single twelve-month period. . “For example, if a covered servicemember incurs a serious leg injury and a serious arm injury in an accident, an eligible employee would not be entitled to separate 26-workweek entitlements for each serious injury. Additionally, if a covered servicemember experiences a later aggravation or complication of his or her earlier serious injury or illness for which an eligible employee took 26 workweeks of leave, the employee would not be entitled to an additional 26 workweeks of leave for the aggravation or complication of the initial serious injury or illness. Finally, if an eligible employee is caring for a covered servicemember whose serious injury or illness extends beyond the employee’s 26-workweek leave entitlement, the employee is not eligible for an additional 26-workweek entitlement to continue to care for the covered servicemember.”

(iv) The employee may use some of the 26 weeks for his or her own FMLA qualifying reason (i.e., birth, adoption, serious health condition), but is still limited to 26 weeks in a single twelve-month period. In other words, the employee may spend 14 weeks caring for an injured servicemember and 10 weeks on the employee’s own serious medical condition. In no event may an employee take more than twelve-weeks of FMLA leave for a regular reason (i.e., birth, adoption, serious medical condition) in a single twelve-month period regardless of how much servicemember care leave the employee takes or has available.

(v) The employer remains responsible for designating leave as qualifying under the FMLA. When leave simultaneously qualifies as servicemember care leave and leave to care for the serious medical condition of a family member, the employer should first designate it as servicemember care leave.

(vi) Spouses who work for the same employer may be limited to a single unit of 26-weeks of servicemember care leave in the twelve-month period when they are caring for the same servicemember. It is irrelevant that they work at different worksites.

16. §825.200: Amount of Leave. This rule remains substantially unchanged, although additional examples of how to calculate a rolling leave year are provided and new provisions concerning exigency and servicemember care leave were inserted. In addition, the DOL “clarified” how to count holidays which fall within FMLA leave workweeks. When the employee was on FMLA leave during the entire workweek, the holiday will count against the employee. However, when the employee only takes a partial workweek for FMLA leave, the holiday may NOT be counted against the employee’s FMLA entitlement when the employee would not otherwise have been required to report to work on that day. In other words, if “an employee is using FMLA leave in increments of less than one week, the holiday will not count against the employee’s FMLA entitlement unless the employee was otherwise scheduled and expected to work during the holiday.”

17. §825.201: Leave to care for parent. This rule was reorganized, but no otherwise substantive changes were made.

18. §825:202: Intermittent or reduced schedule leave. The DOL explains that it only reorganized the rule and made no substantive changes from the prior rule.

19. §825.203: Scheduling intermittent or reduced schedule leave. This rule was also reorganized, but the DOL inserted a “clarification” that “employees who take intermittent leave for planned medical treatment when medically necessary have a statutory obligation to make a ‘‘reasonable effort’’ to schedule such treatment so as not to disrupt unduly the employer’s operations.” Nonetheless, the “scheduling of planned medical treatment is ultimately a medical determination within the purview of the health care provider. While the employee must make a reasonable effort in scheduling the leave, if the health care provider determines that there is a medical necessity for a particular treatment time, the medical determination prevails. If it is just a matter of scheduling convenience for the employee, the employee must make a reasonable effort not to disrupt unduly the employer’s business operations.”

20. § 825:204: Transferring employee during intermittent or reduced schedule leave. This provision was also merely reorganized, although the DOL received many requests to revise it in order to permit employers to transfer employees who take intermittent leave on a regular, but unforeseeable, basis because of a chronic medical condition. The DOL felt that the statutory language did not permit this modification even though it acknowledged that “this standard may seem to discount the fact that some employees may take intermittent leave regularly, frequently, and predictably— even if unforeseeably—and do so on the advice or recommendation from their physician, which some would argue is akin to planned medical treatment.”

21. §825.205: Increments of leave. In addition to reorganizing this rule, the DOL made extensive, employer-friendly changes. The prior rule required employers to keep track of FMLA leave in minimal increments (of as small as 6 minutes or .1 hours) based on how they calculated other absences and based on the ability of their payroll systems. Employers have long objected to a system which would permit an employee to take off one day each week (without prior notice) and still have FMLA leave left to use at the end of the year.

The new rule provides that an employer should account for the use of intermittent or reduced schedule leave “using an increment no greater than the shortest period of time that the employer uses to account for the use of other forms of leave provided that it is not greater than one hour and provided further than an employee’s FMLA leave entitlement may not be reduced by more than the amount of leave actually taken.” Presumably, employers may not account for FMLA leave in 15 or 30 minute increments based on how it calculates other leaves of absences or tardiness. In no event may an employer charge an employee with FMLA leave when the employee was actually working. “The Department has also modified the final rule to recognize policies which account for use of leave in different increments at different points in time, thus, permitting employers to maintain a policy that leave of any type may only be taken in a one-hour increment during the first hour of a shift (i.e., a policy intended to discourage tardy arrivals).”

Physical Impossibility. “Where it is physically impossible for an employee using intermittent [or reduced schedule leave] to commence or end work mid-way through a shift, such as where a flight attendant or a railroad conductor is scheduled to work aboard an airplane or train, or a laboratory employee is unable to enter or leave a sealed ‘clean room’ during a certain period of time, the entire period that the employee is forced to be absent is designated as FMLA leave and counts against the employee’s FMLA entitlement.”

Overtime and Variable Workweeks. The DOL also received many comments about the difficulty of tracking intermittent or reduced schedule leave when the employee’s work schedule varied considerably or s/he worked a significant amount of overtime. Employers also objected to employees using FMLA to avoid working any mandatory overtime. “If an employee’s schedule varies from week to week to such an extent that an employer is unable to determine with any certainty how many hours the employee would otherwise have worked [without FMLA leave], a weekly average of the hours scheduled over the 12 months prior to the beginning of the leave period (including any hours for which the employee took leave of any type) would be used for calculating the employee’s leave entitlement.” With respect to overtime issues, “[i]f an employee would normally be required to work overtime, but is unable to do so because of a FMLA qualifying reason that limits the employee’s ability to work overtime, the hours which the employee would have been required to work may be counted against the employee’s FMLA entitlement.” Only mandatory – and not voluntary – overtime may be counted in such a case.

22. §825.207: Substitution of Paid Leave. The DOL made significant changes to this rule. First, the new rule “clarifies” that ‘‘substitution’’ of paid leave for FMLA purposes means that the unpaid FMLA leave and the paid leave provided by an employer run concurrently.” The DOL believed that the FMLA itself intended “to emphasize the limits on the situations in which an employer must allow the substitution of paid sick or medical leave, but does not preclude requiring compliance with the normal procedural rules pursuant to which the leave was accrued for paid personal or vacation leave. For example, it clarifies that an employer is not obligated to allow an employee to substitute paid sick leave for unpaid FMLA leave in order to care for a child with a serious health condition if the employer’s normal sick leave rules allow such leave only for the employee’s own illness. . . . . The legislative history of the substitution provision indicates that Congress understood that employers commonly restrict the situations in which employees may take paid sick, medical, and family leave.”

Employer may apply procedural rules of paid leave. “An employer may limit substitution of paid sick, medical or family leave to those situations for which the employer would normally provide such paid leave (e.g., such policies may restrict the use of paid leave only to the employee’s own health condition or to specific family members). Employers must allow substitution of paid vacation, personal leave, or ‘‘paid time off’’ for any situation covered by the FMLA. In all cases, however, the normal procedural rules subject to which the leave was accrued apply—unless waived by the employer—regardless of the type of paid leave substituted. For example, if an employer’s paid sick leave policy prohibits the use of sick leave in less than full day increments, employees would have no right to use less than a full day of paid sick leave regardless of whether the sick leave was being substituted for unpaid FMLA leave. Similarly, if an employer’s paid personal leave policy requires two days’ notice for the use of personal leave, an employee seeking to substitute paid personal leave for unpaid FMLA leave would need to provide two days’ notice. Employers, of course, may choose to waive such procedural rules and allow an employee’s request to substitute paid leave in these situations, but they are not required to do so.”

“Where an employer’s paid leave policy requires the use of such leave in an increment of time larger than the amount of FMLA leave requested by an employee, if the employee wishes to substitute paid leave for unpaid FMLA leave, the employee must take the larger increment of leave required under the paid leave policy unless the employer chooses to waive that requirement. The employer is not required to permit the employee to substitute paid leave for the smaller increment of unpaid FMLA leave.” However, when “an employee chooses to take a larger increment of leave in order to be able to substitute paid leave for unpaid FMLA leave, the entire amount of leave taken shall count against the employee’s FMLA entitlement.”

New Notice Requirement. The new rule “requires that employers notify employees of any additional requirements for the use of paid leave” and “this information must be included with the rights and responsibilities notice required under § 825.300(c). At the employer’s option, this information may be included in the text of the rights and responsibilities notice itself, or the employer may attach a copy of the paid leave policy to the notice, or provide a cross-reference to a leave policy in an employee handbook or other source available to employees, where paid leave policies are customarily set forth.”

Disability/Workers Compensation. The new rule also “clarified” that “[e]mployees on paid disability leave due to a FMLA-protected condition are not on unpaid FMLA leave and therefore the statutory provision for the substitution of paid leave does not apply.” Nonetheless, “employers and employees may agree, where state law permits, to have paid leave supplement the disability plan benefits, such as in the case where a plan only provides replacement income for two-thirds of an employee’s salary.” Similarly, employees on workers’ compensation leave are not on unpaid FMLA leave and the leaves do not run concurrently. “However, if the workers’ compensation benefits cease for any reason and the employee is still on leave, the substitution provision may become applicable at that time.”

Less Stringent Rule Eliminated. The new rule no longer requires employers to follow the less stringent policy/plan procedures when “paid leave is substituted for unpaid FMLA leave and the employer’s procedural requirements for taking paid leave are less stringent than the requirements of the FMLA, employees cannot be required to comply with the higher FMLA standards.” As a result, when paid sick leave is substituted for unpaid FMLA leave, employers can now require an FMLA medical certification for absences of less three days even if – as is typical-- its paid leave policy does not similarly require a medical statement. Similarly, the employer can require that the notice requirement of the paid policy be complied with by the employee if s/he wants to substitute paid leave for unpaid FMLA leave.

Compensatory time. The new rule permits public employees to substitute compensatory time for unpaid FMLA leave.

I will continue to summarize additional significant changes in the new FMLA regulations throughout the month on this blog. Additional rules are summarized in Friday's posting at New FMLA Regulations Contain Many Employer-Friendly Revisions. Until then, eager beavers and insomniacs can read the 201 pages of single-spaced, 9-point font new rules and explanatory comment in full at http://edocket.access.gpo.gov/2008/pdf/E8-26577.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.