If you blinked this week, you will have missed an unusual
amount of activity concerning the Fair Labor Standards Act. First, there were two Administrator Opinion
Letters. Opinion Letter 2018-19 provided
that employers are not required to compensate employees for frequent short rest
breaks that are required by the employees’ medical condition and covered as
intermittent leave under the FMLA, except to the extent that other employees
are provided to paid rest breaks. Opinion
Letter 2018-18 discussed the non-compensability of travel time an employee
spends outside of his or her regular working hours and to commute to and from
home to a job site or regular work location. Yesterday,
a unanimous Sixth Circuit reversed a trial court judgement and admonished the DOL for prosecuting a church for spiritually coercing its members during
Sunday sermons to volunteer without any expectation of compensation in the
church’s for-profit restaurant side-by-side with paid staff. Finally, ten days ago, the DOL issued brief enforcement
guidance to its staff in Field Assistance Bulletin
2018-3 about how it will interpret the recent FLSA amendments concerning
tip pooling until formal regulations are issued and to terminate its temporary
non-enforcement period of the tip-pooling rules.
Opinion Letter on
Medical Accommodation Rest Breaks. Last Thursday, the DOL issued Administrator
Opinion
Letter 2018-19 recognizing an exception to the general rule that short rest
breaks (of under 20 minutes) are generally considered to be compensable time
when those rest breaks are frequent, are covered by the FMLA and, thus,
primarily benefit the employee instead of the employer. As most employers know, short rest breaks
(of up to 20 minutes in duration) are generally considered to be too short to
give the employee an opportunity to use the time for his or her own benefit,
and thus, those breaks primarily benefit the employer by keeping the employee’s
mind and body fresh for work. Thus, is
it common for employers to provide for a couple of paid rest breaks during an
8-hour shift. In the Opinion Letter, however,
the employer asked about a non-exempt employee whose physician certified that
the employee needed to have a fifteen minute rest break every hour. This meant that
the employee only worked 6 hours out of an 8-hour shift. Based on a prior court opinion, the Acting Administrator
concluded that the frequency of the accommodation rest breaks primarily
benefitted the employee and not the employer.
Further, the FMLA provides that FMLA intermittent leave – which would
cover such frequent rest breaks necessitated by a serious medical condition –
need not be paid. Accordingly, where an employee’s medical
condition requires frequent short rest breaks, the employer need not compensate
the employee for those rest breaks except
to the extent that other employees are compensated for short rest breaks. Thus, when an employer provides each
employee two short paid rest breaks per shift, but the employee requires 7
short rest breaks per shift, the employer need not pay for five of those rest
breaks. What is left for interpretation
and handwringing by employers and employees, however, is whether there is a
clear dividing line between when frequency of the rest break breaks stop being
for the primary benefit of the employer and become for primarily for the accommodation
benefit of the employee. The “primary benefit” analysis should also
apply whether or not the employer is governed by the FMLA, but one can probably
expect that to be litigated, as well as claims that other employees are
provided with more than two paid rest breaks per day, etc.
Spiritual Coercion is
Not Economic Coercion. A northeast
Ohio church operated a wholly-owned, but separately incorporated, for-profit
restaurant in its community which employed and paid thirty-five individuals. Accosta v.
Cathedral Buffet, Inc., No. 17-3427
(4-16-18). The church also pressured its members to
volunteer at the restaurant (which never turned a profit and was substantially
subsidized by the church) and to preach the good news to the restaurant’s
patrons. It was stipulated that
not a single volunteer expected any form of compensation or was in any way
economically dependent upon the church or restaurant. “Put simply, there was no
economic relationship between the restaurant and the church member volunteers.“
The DOL prosecuted the restaurant for
failing to maintain records of working hours or minimum wages paid to the
volunteers and obtained a judgment in federal court of $388,508 in back pay and
liquidated damages. This forced the
restaurant to close, laying off all of its 35 employees. The church appealed and the Sixth Circuit
reversed. Adults who volunteer without any expectation
of any sort of economic compensation are not employees under the FLSA and are
not required to be paid any compensation.
The Supreme Court held as much in Portland Terminal when it defined a volunteer as a “person who,
without promise or expectation of compensation, but solely for his personal
purpose or pleasure, worked in activities carried on by other persons either
for their pleasure or profit.” Portland Terminal, 330 U.S. at 152
(emphasis added). The Alamo Court reiterated this test, making
clear that when a religious organization undertakes a commercial endeavor, its
workers are only covered under the FLSA if they “engage in those activities in
expectation of compensation.” Alamo, 471 U.S. at 302.
Further, the Court rejected the DOL argument that spiritual
coercion could be substituted for the lack of compensation expectation and found
that the FLSA only covered economic coercion, not spiritual admonishment or
coercion. Thus, it did not matter if the
church members were afraid of going to hell if they failed to volunteer.
But although the FLSA might aim to curb the societal ills
caused by low wages, it does so through a comprehensive system of economic
regulations. The Act does not go so far
as to regulate when, where, and how a person may volunteer her time to her
church. After all, the giving of one’s
time and money through religious obligation is a common tenet of many
faiths. For instance, the Bible calls
upon Christians to “use whatever gift you have received to serve others, as
faithful stewards of God’s grace in its various forms.” 1 Peter 4:10 (NIV). In the Islamic faith, believers are
instructed to “show kindness unto parents, and unto near kindred, and orphans,
and the needy.” The Qur’an, An-Nisa
4:36.
The Court distinguished this case from Alamo Foundation v. Secretary of Labor, where the individuals
resided for long periods of time at the employer, were economically dependent
on the Foundation and were compensated with clothing, room and board instead of
with money. Those individuals expected
to be compensated, just not in cash, and, thus, were employees. Further,
a for-profit farm with an understanding with a church to provide “volunteer’ child
labor was still covered when the children were coerced by their parents, church
and community to pick nuts.
Finally, the Court rejected the DOL argument that permitting
the church to use volunteer labor gave it an economic advantage over secular
businesses. Pointedly, the Court noted
that the Supreme Court had specifically observed in the Alamo Foundation case that true volunteers are never covered by the
FLSA even if they volunteer for a for-profit business and gave as examples:
“driv[ing] the elderly to church, serv[ing] church suppers,
or help[ing] remodel a church home for the needy.” . . . These activities could all be seen as
competing with other businesses, yet they are still exempted from FLSA coverage
because the workers do not expect to receive an economic benefit in return for
their service. A church van competes
with a taxi service. A Catholic fish fry
competes with a fast food restaurant. A
volunteer homebuilding project competes with a construction company. Granted, Cathedral Buffet was organized to
turn a profit (although there is little evidence that the restaurant ever
generated revenue for the church). But,
as the Court made clear in Portland
Terminal, what matters is not the
object of the enterprise, but instead the purpose of the worker. Portland
Terminal, 330 U.S. at 152-53 (emphasis added).
The concurring opinion admonished the DOL for applying the
FLSA when a “pastor spiritually ‘coerced’” his flock to volunteer and
attempting to “regulate the spiritual dialogue between pastor and congregation”
in violation of “the Free Exercise Clause of the First Amendment.”
One can agree that the Reverend’s comments were in poor
taste, and yet see that the Department [of Labor] has no business regulating
them. For the power that the Department
purports to exercise here is out of bounds even under Employment Div. v. Smith, 494 U.S. 872 (1990). There, of course, the Court held that a
neutral law of general applicability does not violate the Free Exercise Clause
when the law burdens religious exercise only incidentally. . . . But here the Department’s actions meet none
of those criteria. The Department seeks
to regulate spiritual conduct qua
spiritual conduct, and to impose significant liability as a result. The very criterion by which the Department
would impose liability is expressly spiritual.
Hence this is not a case, like Smith,
where illegal conduct (there, smoking peyote) remained illegal even though it
was religiously motivated. Instead, the
Department’s position here is that otherwise legal conduct—such as volunteering
at a church restaurant—becomes illegal if the worker’s pastor spiritually
pressures her to engage in it. (Under
this regime, one supposes, whether a pastor can invoke the Book of James—“a
person is justified by works and not by faith alone[,]” James 2:24—might be determined
on a case-by-case basis.) The Department’s
actions therefore “target[] religious conduct for distinctive treatment[,]” . . . and their burdens upon religious
exercise would come by design.
Nor is the Department even competent to make the spiritual
judgment it purported to make here. . . . .
Hence it is beyond the ken of federal agencies, or the courts, to
determine that congregants were spiritually coerced even though the congregants
themselves say they were not—which is what 134 members of Grace Cathedral said
under oath here.
Tip
Pooling. As previously reported here,
Congress amended the FLSA in March concerning the sharing of tips. Earlier
this month, the DOL issued a brief
Field Assistance Bulletin to address some of the many questions left open by
the statutory amendment. The DOL
indicates that it will proceed with formal APA rulemaking to replace the
existing and superseded regulation. Until that regulation is finalized, however,
the DOL indicates:
employers who pay the full FLSA minimum wage are no longer
prohibited from allowing employees who are not customarily and regularly
tipped—such as cooks and dishwashers—to participate in tip pools. The Act prohibits managers and supervisors
from participating in tip pools, however, as the Act equates such participation
with the employer’s keeping the tips. As
an enforcement policy, WHD will use the
duties test at 29 C.F.R. § 541.100(a)(2)-(4) to determine whether an employee
is a manager or supervisor for purposes of section 3(m).
In addition, an employer’s administration of
a permissible tip pool does not constitute either unlawful
retention of tips or unlawful tip pool participation under the Act by
employers, managers, or supervisors.
Additionally, the provisions in WHD Field Operations Handbook 30d05
concerning tips charged on credit cards still apply.
Finally, the DOL announced that end of its temporary period
of non-enforcement of the tip-pooling rules that has been in place since July
2017:
WHD’s July 20, 2017 non-enforcement policy concerning
retention of tips by tipped employees paid the full FLSA minimum wage will not
apply to new investigations beginning on or after March 23, 2018. When an investigation covers periods before
and after March 23, 2018, and the employee was paid at least the full FLSA
minimum wage, violations of section 3(m) may only be cited if they occurred
after March 23, 2018.
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.
