DOL Appeals Nationwide Injunction of new FLSA Salary Basis Regulations and Mandatory January 1 Salary Increase for White Collar Employees

Last month, a federal judge in Texas enjoined on a nationwide basis April's new FLSA regulations increasing the minimum salary required for the white collar exemptions (for professionals, executives and administrators) and automatically increasing that threshold every six months.   Texas v. DOL, Case No. 4:24-CV-499 (E.D. Tx. 11/15/24).   The Department of Labor last week appealed that decision to the Fifth Circuit.  While most employers likely already increased their minimum exempt salaries to meet the initial July 1 deadline, employers have time to rescind any scheduled future increases intended to meet with January 1, 2025 deadline.  The Columbus Dispatch reported this week that OSU has so rescinded the scheduled salary increases intended to satisfy the new – now enjoined -- rule.  The court found, among other things, that the DOL exceeded its authority in making automatic increases instead of going through the Administrative Procedures Act route for each increase and refused to defer to the DOL under the Supreme Court’s 2024 Loper decision (rejecting the former Chevron rule). 

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.

DOL Proposes To Increase Exempt Salaries to $55K/year from $35K/year

 At the end August, the federal Department of Labor announced that it was proposing on September 8 to amend 29 C.F.R. 541.600 of the Fair Labor Standards Act regulations to increase the minimum salary for exempt employees from approximately $35K/year to $55K/year.  Under the proposed regulation, employees could not be classified as exempt from the FLSA (under the white collar exemptions for executive, administrative and professional employees) unless they were paid a guaranteed salary of at least $1,059 per week.  In other words, employees would be entitled to be paid overtime compensation whenever they work more than 40 hours in a week if they are paid less than $1,059 per week.   The minimum threshold for highly compensated employees will similarly be increased to $143,988/year from the current $107K in the proposed amendment of 29 C.F.R. §541.601.    The proposed regulation would also automatically adjust the minimum salary threshold every three years.  The DOL will accept comments about the rule for 60 days (or until November 7).  A similar regulation was proposed near the end of the Obama Administration, but was enjoined by a federal court and was later withdrawn.

Ohio's Minimum Wage To Increase on January 1, 2021 and DOL amends FLSA's Tip Pooling Rules

At the end of September, the Ohio Department of Commerce announced that Ohio's minimum wage would increase again on January 1, 2021.  Ohio employers will also need to update the mandatory poster conveying the new wage and employee rights under Ohio's wage laws.  The new minimum wage has increased by a dime to $8.80/hour and a nickel for tipped employees to $4.40/hour plus tips.  With respect to tipped employees, the federal Department of Labor on Tuesday announced that it had issued a final regulation governing tip pools that will take effect in 60 days after publication in the Federal Register (assuming that the incoming administration does not rescind or postpone it before then).   As in prior drafts, employers who take the tip credit must promptly pay the tips and cannot require them to be shared with back-of-the-house workers or managers.  However, if the employer pays everyone at least the minimum wage and does not take the tip credit, then the employer may require that tips be shared with back-of-the-house employees (like cooks and dishwashers), but not with management.    Happily, managers may keep tips that are given to them directly by customers for services provided directly by them.  

The new FLSA regulation more explicitly regulates the meaning of "keeping" tips to restrict the delay in paying employees who participate in a tip pool. 

 (2) Full and prompt distribution of tips. An employer that facilitates tip pooling by collecting and redistributing employees’ tips does not violate section 3(m)(2)(B)’s prohibition against keeping tips if it fully distributes any tips the employer collects no later than the regular payday for the workweek in which the tips were collected, or when the pay period covers more than a single workweek, the regular payday for the period in which the workweek ends. To the extent that it is not possible for an employer to ascertain the amount of tips that have been received or how tips should be distributed prior to processing payroll, tips must be distributed to employees as soon as practicable after the regular payday.

The new regulation also governs and provides examples of when a tip credit can be taken for an employee who dual roles (as a tipped server and a non-tipped regular employee).

(e) Dual jobs. (1) In some situations an employee is employed in a dual job, as for example, where a maintenance person in a hotel also works as a server. In such a situation the employee, if he or she customarily and regularly receives more than $30 a month in tips for his or her work as a server, is a tipped employee only with respect to his or her employment as a server. The employee is employed in two occupations, and no tip credit can be taken for his or her hours of employment in the occupation of maintenance person.  

(2) Such a situation is distinguishable from that of an employee who spends time performing duties that are related to his or her tip-producing occupation but are not themselves directed toward producing tips. For example, a server may spend part of his or her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. Likewise, a counter attendant may also prepare his or her own short orders or may, as part of a group of counter attendants, take a turn as a short order cook for the group. An employer may take a tip credit for any hours that an employee performs related, non-tipped duties contemporaneously with his or her tipped duties, or for a reasonable time immediately before or after performing the tipped duties.  

The new regulation also modifies rules for calculating tip credits and overtime compensation for tipped employees.

531.59 The tip wage credit. (a) In determining compliance with the wage payment requirements of the Act, under the provisions of section 3(m)(2)(A) the amount paid to a tipped employee by an employer is increased on account of tips by an amount equal to the formula set forth in the statute (minimum wage required by section 6(a)(1) of the Act minus cash wage paid (at least $2.13)), provided that the employer satisfies all the requirements of section 3(m)(2)(A). This tip credit is in addition to any credit for board, lodging, or other facilities which may be allowable under section 3(m). (b) As indicated in § 531.51, the tip credit may be taken only for hours worked by the employee in an occupation in which the employee qualifies as a “tipped employee.” Pursuant to section 3(m)(2)(A), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer’s use of the tip credit of the provisions of section 3(m)(2)(A) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section. The credit allowed on account of tips may 141 be less than that permitted by statute (minimum wage required by section 6(a)(1) minus the cash wage paid (at least $2.13)); it cannot be more. In order for the employer to claim the maximum tip credit, the employer must demonstrate that the employee received at least that amount in actual tips. If the employee received less than the maximum tip credit amount in tips, the employer is required to pay the balance so that the employee receives at least the minimum wage with the defined combination of wages and tips. With the exception of tips contributed to a tip pool limited to employees who customarily and regularly receive tips as described in § 531.54, section 3(m)(2)(A) also requires employers that take a tip credit to permit employees to retain all tips received by the employee.

 

§ 531.60 Overtime payments. When overtime is worked by a tipped employee who is subject to the overtime pay provisions of the Act, the employee’s regular rate of pay is determined by dividing the employee’s total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by the employee in that workweek for which such compensation was paid. (See part 778 of this chapter for a detailed discussion of overtime compensation under the Act.) In accordance with section 3(m)(2)(A), a tipped employee’s regular rate of pay includes the amount of tip credit taken by the employer per hour (not in excess of the minimum wage required by section 6(a)(1) minus the cash wage paid (at least $2.13)), the reasonable cost or fair value of any facilities furnished to the employee by the employer, as authorized under section 3(m) and this part 531, and the cash wages including commissions and certain bonuses paid by 142 the employer. Any tips received by the employee in excess of the tip credit need not be included in the regular rate. Such tips are not payments made by the employer to the employee as remuneration for employment within the meaning of the Act. 

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. 

DOL Clarifies FLSA Regular Rate Calculation With New Regulation

Last week, the federal Department of Labor issued a new regulation updating how employers may calculate the “regular rate” for purposes of paying overtime compensation.  The regulation makes explicit that certain types of compensation may be excluded from the regular rate, including paying out unused paid time off and sick time, paid meal breaks (with certain exceptions), certain longevity bonuses, tuition reimbursement, and other perks, etc.  The new regulation will become effective on January 15, 2020.   There is a lot going on in employee compensation in the next month because, as previously reported here, the minimum salary for exempt employees will also rise on January 1 to $35,568/year (or $684/week) and the Ohio minimum wage increases on January 1 to $8.70/hour.  


As explained by the DOL, the new regulation will simplify the calculation of the regular rate by excluding perks that many employers provide to employees so that employers can avoid confusion and litigation, such as:

·       the cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;

·       payments for unused paid leave, including paid sick leave or paid time off;

·       payments of certain penalties required under state and local scheduling laws;

·       reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred "solely" for the employer's benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se "reasonable payments";

·        certain signing bonuses and longevity bonuses;

·       the cost of office coffee and snacks to employees as gifts;

·       discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples and;

·       contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.

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.

Supreme Court Rejects Obama FLSA Regulation

This morning, in a curious decision, a divided Supreme Court rejected a 2011 FLSA regulation on a relatively narrow overtime pay exemption at 29 U.S.C. §213(b)(10)(A) for car dealership service advisors – those employees who meet with you when your car is making a strange noise and sell repair services to you at an extraordinary price.  Eninco Motorcars LLC v. Navarro, No. 15-415 (U.S. 6-20-16).

 

The statute covered  “any salesman, parts-man, or mechanic primarily engaged in selling or servicing automo­biles” at a covered dealership.  Even though no formal regulation had ever been enacted by the DOL on this provision, its initial 1970 interpretation at 29 C.F.R. §779.372(c)  – that service advisors (who do not sell cars or service cars) were non-exempt – was rejected by the federal courts. In 1978, an opinion letter conceded that services advisors could be exempt.   In 1987, the W&H Field Operations Manual stated that DOL would no longer challenge the service advisor exemptions.

 

 In 2008 – 21 years after the statute was passed, the DOL began formal notice-and-comment rulemaking and indicated that it would formally adopt the judicial interpretation of § 213(b)(10)(A).  However, with almost no explanation, the regulation ultimately adopted in 2011 took the same position as in 1970 – that service advisors were non-exempt because they did not sell cars.  29 C.F.R. §779.372(c)(1). The Supreme Court ruled that this 2011 regulation was not entitled to any judicial deference because the DOL failed to explain why it was changing a long-standing interpretation upon which numerous employers and employees had relied.  Accordingly, the case was remanded to the Court of Appeals to revisit the case, interpreting only the statute and not the regulation.  The dissent agreed that the regulation was procedurally deficient and would have reached the final question and interpreted the statute.

 

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 Releases Long-Awaited Regulatory Proposals Governing Overtime Compensation Exemptions and the New Salary Basis Test

This morning, the Department of Labor released its long-awaited proposals to revise the Fair Labor Standards Act regulations governing the entitlement to exemption from overtime compensation.  As expected, the DOL proposes to increase the minimum salary which would qualify a position for an overtime exemption (i.e., exempt jobs) from $455/week (or $23,660/year, which is beneath the poverty rate for a family of four) to $921/week (or $47,892).  (Interestingly, the DOL’s website indicates that the new annual salary would be $50,440 and not the amount listed in its proposed regulations).   Thereafter, and somewhat like Ohio minimum wage law, the DOL proposes to peg the minimum salary amount to “the 40th percentile of weekly earnings for full-time salaried workers” so that the minimum salary level would increase annually.   The DOL also proposes to raise the exempt salary rate for highly compensated workers from $100,000/year to $122,148/year (with a similarly escalator clause pegged at the 90^th percentile), but proposes no other changes to the highly compensated exempt worker regulations.  While the DOL is not currently proposing to modify the duties test for exempt positions, it is inviting comments on whether it should do so in order to further limit the amount of non-exempt work which may be performed by exempt employees.

The DOL discusses for many pages why it substantially increased the minimum salary.  In short, it contends that the 2004 FLSA regulations combined the lower salary level for the traditional long duties test with short duties test (which typically required a higher minimum salary level) to create the standard duties test and, therefore, short-changed many exempt employees.  It also criticizes how the 2004 salary level was set differently than in past years and that it relied on regional instead of national data.  The current proposal also chose a salary level that made the minimum wage approximately same ratio to the minimum exempt salary as it had been in 1958 and 1970.

The DOL notes that many employers prefer to pay their salaried employees a significant portion of their compensation through non-discretionary bonuses and incentive payments to give the employees a sense of ownership in their work and to improve their performance.  Historically, the FLSA regulations have not considered these payments as part of the salary basis test (except for highly compensated employees).  However, the DOL is considering including these bonus and incentive payments into the new salary basis test, so that employers do not entirely eliminate these pay-for-performance systems.  However, if it were to adopt such revisions, the DOL would only permit 10% of such bonuses to be considered as part of the mandated $921 weekly salary amount needed to meet the overtime exemption and would require that such bonuses be paid out weekly or monthly, instead of merely annually or quarterly as most of them currently are.  (This, of course, reflects that most of the bureaucrats making the rules have been paid by the government with steady tax income so long that they have no understanding of how the real world works in the private sector).   The DOL also would not permit “catch up payments” as are currently permitted for highly compensated exempt employees.

Likewise, the DOL seeks comments about whether to include commission payments in the salary level test on the grounds that they are similar to nondiscretionary bonuses.

The proposed new regulation still would not consider discretionary bonuses as part of the salary level test and would still exclude room and board, etc. from the calculation.  It would similarly exclude “payments for medical, disability, or life insurance, or contributions to retirement plans or other fringe benefits.”  It also maintains separate tests for the movie industry and American Samoa.  In addition, certain professions remain outside the salary basis tests, including lawyers, judges, physicians and academic administrative personnel.

All in all, the only surprise in the proposed regulations was that the DOL did not modify the 2004 standard duties test for exempt positions.  The proposed minimum salary rate has been whispered in employment law sectors and the news media for many months.  However, employers should remain vigilant in case the DOL changes its position about the duties test and whether and how it will permit incorporation of bonuses, commissions and incentive payments into the salary basis test.

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.

Supreme Court Upholds DOL Interpretation of Non-exempt Status of Mortgage Loan Officers from APA Procedural Objection

This morning, a unanimous Supreme Court upheld a 2010 administrative interpretation from the Department of Labor explaining that the white collar FLSA administrative exemption regulation excluded most mortgage loan officers and found that administrative interpretations – which are not binding on courts – do not need to satisfy the notice and comment provisions applicable to regulations, or rules, under the Administrative Procedures Act.  Perez v. Mortgage Bankers Ass’n., No.13-1041 (U.S. 3-9-15). Contradictory administrative interpretations had been issued by the DOL in 1999, 2001, 2006 and 2010.  When 2010 interpretative opinion was released, litigation ensued and the appellate court concluded that the interpretative rule could not be changed without prior notice and comment.  The Supreme Court reversed.  “Because an agency is not required to use notice-and-comment proce­dures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or re­peals that interpretive rule.”

According to the Court’s opinion, in 1999, 2011 and 2010, the DOL issued administrative opinion letters that mortgage loan officers did not satisfy the FLSA regulation for the administrative employee exemption.    In 2004, the administrative employee exemption regulation was updated and specifically noted that “an employee whose primary duty is selling financial products does not qualify for the administrative exemption.” However, in 2006, the DOL issued an administrative opinion letter that mortgage loan officers would generally satisfy the regulatory exemption.  That letter was withdrawn in 2010 in favor of a W&H Administrator’s Interpretation which concluded that mortgage loan officers were non-exempt. This litigation ensued.  Without analyzing the substance of the 2010 W&H interpretation, the D.C. Court of Appeals ultimately found that the DOL could not change its administrative interpretation of its own regulation without going through the APA’s notice and comment procedures.  The Supreme Court reversed on the grounds that the notice-and-comment procedures do not apply to administrative interpretations of its own regulations.

The APA define rules broadly to include “statement[s] of general or particular applicability and future effect” that are designed to “implement, interpret, or prescribe law or policy.” Certain rules must go through a notice and comment procedure before being adopted by a government agency.  “Section 4(b)(A) of the APA provides that, unless another statute states otherwise, the notice­ and-comment requirement “does not apply” to “interpreta­tive rules, general statements of policy, or rules of agency organization, procedure, or practice.”  Without defining precisely what constitutes an interpretative rule (vs. a legislative rule), the Court noted that the critical feature of interpretive rules is that they are “issued by an agency to advise the public of the agency’s construction of the statutes and rules which it adminis­ters.”  While “the absence of a notice-and-comment obligation makes the process of issuing interpretive rules comparatively easier for agencies than issuing legislative rules, . . . interpretive rules “do not have the force and effect of law and are not accorded that weight in the adjudicatory process.”  Accordingly, the appellate court erred in not applying the exception in §4(b) of the APA to the W&H Administrator’s Interpretation of the FLSA administrative employee exemption issue.

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.

FLSA Expands in 2015 to Cover Most Home Care Workers

[Editor's Note:  The D. C. District Court temporarily enjoined on December 22, 2014 and January 2, 2015 certain provisions of the new rule, including the definition of "companionship services" and the differing treatment of individuals/families and home health care agencies.]

As the federal government shut down on October 1, the Department of Labor published in the Federal Register the final regulation expanding coverage of the Fair Labor Standards Act to reach most home care/domestic service workers beginning on January 1, 2015. Although the revisions to domestic service worker regulations take only one page in the Federal Register, the DOL’s explanation for the changes takes 104 pages.  Among the most important changes are that the FLSA exemption for individuals providing “companionship services”  will no longer be available to cover individuals employed by third-party employers OR who spend more than 20% of their working time performing personal care services (such as housekeeping, cooking, dressing, bathing, managing finances, grooming, or transportation, etc.).  This means that FLSA coverage could now extend to families which employ a home care worker to care for grandma when that individual spends more than 20% of his or her time each week cooking, cleaning or driving grandma on her errands or to medical appointments, etc.

In 1974, Congress created a FLSA exemption for live-in domestic service workers and those workers who provided companionship services.  29 U.S.C. §213(a)(15) and (b)(21).  These exceptions provide that the minimum and overtime wage provisions do not apply to

·        any employee employed on a casual basis in domestic service employment to provide babysitting services, or

·        any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves

Likewise, the overtime provisions do not apply to “any employee who is employed in domestic service in a household and who resides in such household.”  Since that time, the home care industry has changed considerably and the DOL felt it was necessary to update its 1975 regulations.

Because the regulations are so short, here are a few of the material changes:

·        Domestic service employment. The term domestic service employment means services of a household nature performed by an employee in or about a private home (permanent or temporary). The term includes services performed by employees such as companions, babysitters, cooks, waiters, butlers, valets, maids, housekeepers, nannies, nurses, janitors, laundresses, caretakers, handymen, gardeners, home health aides, personal care aides, and chauffeurs of automobiles for  family use. This listing is illustrative and not exhaustive.

·        Companionship services. As used in [the FLSA]  the term companionship services means the provision of fellowship and protection for an elderly person or person with an illness, injury, or disability who requires assistance in caring for himself or herself.

o   The provision of fellowship means to engage the person in social, physical, and mental activities, such as conversation, reading, games, crafts, or accompanying the person on walks, on errands, to appointments, or to social events.

o   The provision of protection means to be present with the person in his or her home or to accompany the person when outside of the home to monitor the person’s safety and well-being.

o   Persons who provide care and protection for babies and young children who do not have illnesses, injuries, or disabilities are considered babysitters, not companions.

·        The term companionship services also includes the  provision  of care if the care is provided attendant to and in conjunction with the provision of fellowship and protection and if it does not exceed 20 percent of the total hours worked per person and per workweek.

o   The provision of care means to assist the person with activities of daily living (such as dressing, grooming, feeding, bathing, toileting, and transferring) and instrumental activities of daily living, which are tasks that enable a person to live independently at home (such as meal preparation,  driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care).

o   The term companionship services does not include domestic services performed primarily for the benefit of other members of the household and does not include the performance of medically related services provided for the person. The determination of whether services are medically related is based on whether the services typically require and are performed by trained personnel, such as registered nurses, licensed practical nurses, or certified nursing  assistants; the determination is not based on the actual training or occupational title of the individual performing the services.

·        Third party employers of employees engaged in companionship services and of live-in domestic service employees may not avail themselves of the minimum wage and overtime exemptions for such employees even if the employees are jointly employed by an individual, family or household (who remains entitled to claim the exemption) using the services.

·        Employers are required to maintain records of hours worked by each covered domestic service employee. However, the employer may require the domestic service employee to record the hours worked and submit such record to the employer.

·        No records are required for casual babysitters.

The FLSA exemption for babysitters remains unchanged by these changes, but I thought it might be interesting for readers to be reminded that a regulation for babysitters exists:

§ 552.104  Babysitting services performed on a casual basis.

·        Employees performing babysitting services on a casual basis, as defined in § 552.5 are excluded from the minimum wage and overtime provisions of the Act. The rationale for this exclusion is that such persons are usually not dependent upon the income from rendering such services for their livelihood. Such services are often provided by (1) Teenagers during non-school hours or for a short period after completing high school but prior to entering other employment as a vocation, or (2) older persons whose main source of livelihood is from other means.

·        Employment in babysitting services would usually be on a “casual basis,” whether performed for one or more employees, if such employment by all such employers does not exceed 20 hours per week in the aggregate. Employment in excess of these hours may still be on a “casual basis” if the excessive hours of employment are without regularity or are for irregular or intermittent periods. Employment in babysitting services shall also be deemed to be on a “casual basis” (regardless of the number of weekly hours worked by the babysitter) in the case of individuals whose vocations are not domestic service who accompany families for a vacation period to take care of the children if the duration of such employment does not exceed 6 weeks.

·        If the individual performing babysitting services on a “casual basis” devotes more than 20 percent of his or her time to household work during a babysitting assignment, the exemption for “babysitting services on a casual basis” does not apply during that assignment and the individual must be paid in accordance with the Act's minimum wage and overtime requirements. This does not affect the application of the exemption for previous or subsequent babysitting assignments where the 20 percent tolerance is not exceeded.

·        Individuals who engage in babysitting as a full-time occupation are not employed on a “casual basis.”

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.

Divided Supreme Court Upholds Exempt Status of Pharmaceutical Sales Reps

This morning, a divided Supreme Court upheld the outside sales exemption that has traditionally applied to pharmaceutical sales representatives. Christopher v. SmithKline Beecham Corp., No. 11–204 (6-18-12). The pharmaceutical sales reps (aka detailers) focus their sales and promotional efforts on physicians who prescribe medications because the medications cannot be obtained by consumers from pharmacies or pharmaceutical companies without a prescription. Their “primary objective was to obtain a nonbinding commitment from the physician to prescribe those drugs in appropriate cases.” They typically worked 40 hours/week calling on physicians and another 10-20 hours attending special events, reviewing product information, etc. They are typically paid a base salary and incentive pay based on sales in their sales territories. The DOL recently took the position in 2009 that because title to the medications did not transfer from the sales rep to the physician, there was no sale. In other words, the exemption required the consummation of a sale. Therefore, the DOL had argued that the detailers were not entitled to the exemption that applies to outside sales representatives and should be paid overtime for simply providing and promoting information about the medications. However, the Court’s majority concluded that the detailer’s activities constituted sales activity. Moreover, the Court refused to defer to the DOL’s recent interpretation of its regulations as creating “unfair surprise” to an industry practice that had existed for decades. The exemption regulations apply to a variety of activities, including consignment relationships, which do not require the transfer of title. Ultimately, the Court noted that obtaining a nonbinding commitment from a physician to prescribe one of the employer’s drugs is the most that the detailers may legally do to ensure the eventual disposition of the employer’s medical products and constitutes an “other disposition” of the employer’s products for purposes of the outside sales exemption regulation and statute at 29 U. S. C. §203(k). The Court also found it relevant that the detailers were handsomely compensated, obviating a need for overtime wages.

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

DOL Proposes to Limit Exempt Companion Status

Yesterday, the Department of Labor announced that it intends to propose a new regulation which would limit the overtime pay exemption available for individuals employed as companions. “The proposal will revise the companionship and live-in worker regulations under the Fair Labor Standards Act to more clearly define the tasks that may be performed by an exempt companion, and to limit the companionship exemption to companions employed only by the family or household using the services. In addition, the Department proposes that third party employers, such as in-home care staffing agencies, could not claim the companionship exemption or the overtime exemption for live-in domestic workers, even if the employee is jointly employed by the third party and the family or household.” This proposal comes following a 2007 Supreme Court decision in Long Island Care at Home Ltd v. Coke, which found that the FLSA regulatory exemption for individuals employed as companions for the elderly and infirm applied to exempt the employee regardless of whether the employee was employed by a third-party provider or by the client or client family.

The proposed regulation has not yet been published in the Federal Register, which will give the public the opportunity to comment upon the proposed regulation.

Among other things, the proposed regulation would limit to 20% of the employee’s time spent in incidental activities unrelated to fellowship and protection: “The proposed regulation provides an illustrative list of permissible incidental services that may be provided by an exempt companion, such as occasional dressing, grooming, and driving to appointments, if this work is performed in conjunction with the fellowship and protection of the individual, and does not exceed 20 percent of the total hours worked by the companion in the workweek.” Similarly, the proposed regulation would preclude the employee from performing housework if the employer wants to maintain the exemption: “any performance of general household work would result in the loss of the exemption for the week.” Thus, regardless of whether the companion is employed by a third-party provider or an individual family, the companion would be entitled to overtime if s/he performs any household cleaning or any other task (such as driving, grocery shopping, dressing, or grooming), more than 20% of the time.

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 FLSA Child Labor Regulations Become Effective in July 2010.

Last week, the Wage and Hour Division of the federal Department of Labor released revised regulations governing the use of child labor in the United States. The new rules govern the employment of children under the age of 18, become effective on July 19, 2010 and are the first significant revision of the rules in 30 years. Among other things, the new rules will permit older teenagers to operate table-top mixers (like those used in most home kitchens), but otherwise expands the list of prohibited equipment (which now, for instance, prohibit the use of weed-trimmers and most power tools). With respect to younger teenagers, “[i]f a task is not specifically permitted, it is prohibited.” In general, while the new regulations attempt to prohibit younger teenagers from engaging in dangerous activities and prohibits all peddling, street sales and door-to-door sales (other than for charitable causes, like the Girl Scouts and PTOs), it also specifically permits jobs in all other industries covered the FLSA (other than mining, manufacturing and specifically prohibited activities like laundry, waste disposal, mass mailings, dry cleaning and house painting, etc.), including government, food service, financial, insurance and other white collar establishments.

The revised regulations now permit 15 year old minors to be lifeguards at pools and amusement parks if they are certified by the Red Cross. The new regulations also permit younger teenagers to engage in intellectual or artistically creative work like tutoring, writing software, etc. under certain conditions. Finally, the traditional working hours restrictions still apply based on the schedule of the local public school district, regardless if the particular youth attends a private school with a different schedule or is home schooled. Moreover, the revised regulations clarify that the 3-hour restriction on school days includes Fridays.

The Department of Labor has preared a fact sheet on the current rule, hazardous occupations side-by-side comparison of new final rule and current rule, and Reg. 3 side-by-side comparison of new rule and current rule.

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.