Misclassification of Independent Contractors

According to the U.S. Department of Labor, the misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers and the entire economy.

Misclassified employees are denied critical benefits and protections to which they are entitled, such as the minimum wage, overtime compensation, family and medical
leave, unemployment insurance, and safe workplaces.   Moreover, employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds.  Individual taxpayers are hurt by this practice.

 

Video:    Am I an Independent Contractor or an Employee?

Rulings go against employers using ‘fluctuating’ workweeks to cut overtime costs

Here’s the rule: If someone works more than 40 hours, their salary covers the first 40 hours and overtime is to be factored at that salaried rate.

But employers often try to reduce their costs by using what is called a “fluctuating work week,” in which workers receive their salary over the entire week — no matter how many hours long that week is — and then overtime is calculated on one hour of that longer week.

Two recent federal cases, however, have helped tilt the playing field in favor of Pennsylvania workers and the traditional overtime calculation.

Here’s how the math shakes out: If a worker gets a weekly salary of $400, under Pennsylvania law that means the wage is $10 an hour for a 40 hour week. So the worker who earns $400 a week, and works 10 hours of overtime, should be paid an extra $150 (time and a half) for the extra 10 hours, for a total of $550 that week.

Under the same scenario, with a fluctuating work week, that base salary would be tabulated $8 at an hour — $400, divided by 50 hours worked. Overtime would then be calculated at a time-and-a-half rate, or 150 percent of the $8 hourly rate, meaning overtime wages are $12 an hour, not $15. The result is that an employee on a “fluctuating work week” would be paid $440 total — $320 in “regular” wages, and $120 in overtime, but just $40 “extra” that week.

Drivers for Frito-Lay, those people who move the bags of Doritos into the stores and arrange the shelves, were being paid by the fluctuating workweek standard, and sued claiming that Frito-Lay violated the Pennsylvania Minimum Wage Act of 1968.

The case was heard by U.S. District Judge Joy Flower Conti, who ruled in 2011 that the workers were covered by Pennsylvania Minimum Wage Law that prohibits the fluctuating workweek for workers who aren’t paid by the job or the day.

And Judge Conti’s decision was cited in an August 2012 decision by U.S. District Judge Cathy Bisson in a case against Kraft Foods Global Inc., in which Kraft admitted to paying employees only half-time for extra hours work with that half being the determined by the base pay divided by the total number of hours worked that week.

Joe Fieschko, the attorney who represented the Frito-Lay workers, said the fluctuating workweek model is popular among employers who want to save money.

“The thing about this fluctuating workweek is the longer you work, the less you are paid,” he said.

Under the fluctuating workweek model, if an employee is paid $400 for the week, then for a 40 hour week his compensation would be $10 an hour. But, once that employee works more, the base hourly rate goes down.

At 50 hours that base rate drops to $8. And if the employee worked double an average week — 80 hours — the compensation would conceivably drop to base rate of $5 an hour (which would be below the minimum wage of $7.25 an hour) for all of the hours. The overtime pay would be $7.50 an hour (an extra $2.50 tacked on to the second 40 hours) for a total of $500 for the week.

The fluctuating workweek is allowed under the U.S. Fair Labor Standards Act, which used to cover the drivers when they were under the Federal Motor Carrier Act. That law still covers long-haul truckers and drivers of large trucks, but it no longer applies to short-route drivers of smaller delivery trucks.

While federal law allows employers to use the fluctuating workweek model, Judge Bisson was clear that Pennsylvania law does not.

“Had the Pennsylvania regulatory body wished to authorize one-half-time payment under [the law], it certainly knew how to do so,” she wrote.

It’s not just trucking companies that have tried to use fluctuating workweeks to reduce overtime costs.

Mr. Fieschko also has successfully represented insurance adjusters, warehouse workers and park rangers who worked at Fort Necessity and at the Friendship Hill National Historic Site’s Albert Gallatin house.

This isn’t a new technique — employers have been trying to make workers put in more hours, for less money, for decades. Mr. Fieschko said a lot of the case law goes back to 1938, 1939 and 1940, as courts ruled against the employers of that day who were testing the original version of the Fair Labor Standards Act.

By Ann Belser, Pittsburgh Post-Gazette

For more information about Overtime, visit Orlando Overtime Pay.

Florida Minimum Wage Act Provides for Personal Liability

The Florida Minimum Wage Act (FMWA) allows a private cause of action against an employer for state-regulated minimum wage and functions analogously to the federal Fair Labor Standards Act (“FLSA”). This Act is cofiied in Section 448.110 of the Florida Statutes and currently sets Florida’s minimum wage at $7.67 per hour . The federal minimum wage is currently $7.25 per hour. As defined by the FLSA, an employer includes “any person acting directly or indirectly in the interest of an employer in relation to an employee . . . .” 29 U.S.C. § 203(d). An officer of a corporation is deemed an “employer” within the meaning of the FLSA and is personally liable under the FMWA if the officer was either “involved in the day-to-day operation” or had “some direct responsibility for the supervision of the employee.” Patel v. Wargo, 803 F.2d 632, 638 (11th Cir. 1986).

For more information about minimum wage and overtime, visit us at: Orlando Overtime Pay.

Co-owner of Business may also be an “Employee” for purposes of FLSA

Plaintiff was a co-owner of Madera Honda Suzuki. After investing $100,000 with her husband she then became a co-owner. Plaintiff was responsible for paying bills and she had authority to pay certain expenses, such as rent and dealership insurance, without consulting the other officers. Plaintiff was authorized to issue payroll checks to herself and others if the company had sufficient funds, and it appears Plaintiff issued a check to herself at least once during her tenure as CFO. Plaintiff interviewed prospective employees and she had a say in everybody the company hired. She also handled employee disciplinary matters 95% of the time and was not required to consult with her co-owner before terminating an employee. Defendants moved for summary judgment contending that plaintiff was a co-owner, not an employee of Madera Honda Suzuki. The Court went on to examine other evidence that plaintiff was not merely a director, officer and shareholder, but was also hired to work as the company’s office manager. She was initially paid hourly wages for working as the office manager, at a rate determined by her co-owner. After reviewing these facts, the Court conceded that its research revealed no authority — stating categorically that a co-owner and shareholder of a closely held corporation, who works for the corporation in another capacity, cannot also be the corporation’s employee for the purpose of the FLSA. Indeed, the Court stated, case law seems to suggest otherwise. The Court then cited Goldberg v. Whitaker House Co-op, Inc. , 366 U.S. 28, 32, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961) (“There is nothing inherently inconsistent between the coexistence of a proprietary and an employment relationship. If members of a trade union bought stock in their corporate employer, they would not cease to be employees within the conception of [the FLSA]. For the corporation would ’suffer or permit’ them towork whether or not they owned one share of stock or none or many”). The Court concluded that the possibility an individual could simultaneously be both an owner/employer and an employee exists. Support for this proposition, one court has observed, may be found in the FLSA itself. As noted, “employee” refers to “any individual employed by an employer. 29 U.S.C. § 203(e)(1).” ’Employ’ includes to suffer or permit to work. 29 U.S.C. § 203(g). “[I]t appears from this language that if an owner or manager performs work, as here,”that person fits within the definition of employee.”

After reviewing several analogous cases involving employees who had a proprietary interest in their respective employers, the Court denied the Motion for Summary Judgment.

The Court expressed no opinion as to whether the plaintiff was an exempt employee under FLSA.

Hess v. Madera Honda, 2012 U.S. Dist. LEXIS 131584 (E.D. Cal. Sept. 14, 2012).

For more information about your rights to receive overtime pay, visit us at Orlando Overtime Pay.

What is a “joint employer” and why is it important under the FLSA

Under the Fair Labor Standards Act, an employee may stand in an employment relationship with more than one entity. As a result of this potential multi-employer relationship, workers frequently seek expanding targets of liability. This concept is known as a joint employer relationship.

In In Re: Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation, 2012 U.S. App. LEXIS 13229 (3d. Cir. June 28, 2012), the Third Circuit Court of Appeals announced a new test for determining whether a joint employer relationship exists under the Fair Labor Standards Act. Courts first must consider: (1) the alleged employer’s authority to hire and fire the relevant employees; (2) the alleged employer’s authority to promulgate work rules and assignments and to set the workers’ conditions of employment, including compensation, benefits, and work schedules, including the rate and method of payment; (3) the alleged employer’s involvement in day-to-day employee supervision, including employee discipline; and (4) the alleged employer’s actual control of employee records such as payroll, insurance, or taxes. The court stated that this is not an exhaustive list of the relevant considerations, and thus it cannot be “blindly applied.” Courts next must consider any other indicia of “significant control” over the employee (by the potential joint employer), which it held may be persuasive to a finding of joint employment when incorporated with the other factors.

Supreme Court rules drug reps not entitled to overtime pay

Two ex-GlaxoSmithKline employees sued their former employer for overtime. GSK and other pharmaceutical companies have historically treated drug representatives as outside salespeople exempt from overtime pay. That classification was challenged by the plaintiffs but the Supreme Court ruled in favor of pharmaceutical companies.

The 5-4 decision will have a significant impact on existing lawsuits against the pharmaceutical industry.

The decision from the Supreme Court originated in the Seventh Circuit Court of Appeals but it wasn’t the first lawsuit about drug representative overtime pay to reach the Circuit courts.

The Second Circuit Court of Appeals previously ruled that drug representatives are entitled to overtime pay. As a result of that decision, drug maker Novartis paid out a settlement to several former employees seeking overtime payment.

However, the Seventh Circuit Court of Appeals’ decision stated that drug representatives are exempt from overtime under the Fair Labor Standards Act. The Supreme Court upheld the Seventh Circuit’s decision.

In his majority opinion, Justice Samuel Alito dismissed the Department of Labor’s arguments for overtime pay. He noted that the Department considered drug representatives exempt from overtime requirements until 2009, as reported by Dow Jones Newswires. Alito disagreed with the Department’s decision to announce its new position in court briefs rather than the typical rulemaking process.

The Court split along ideological lines, with Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan in dissent.

Are small companies covered by the Overtime Laws?

An employer falls under the enterprise coverage section of the Fair Labor Standards Act if it (1) has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person and (2) has at least $ 500,000 of annual gross volume of sales made or business done. 29 U.S.C. § 203(s)(1)(A).

Therefore, if the employee works for a company that grosses more than $500,000 on an annual basis and the employee handles goods or materials that were at any time in the past produced in or moved interstate, then that company is covered by the Fair Labor Standards Act even if it only has a few employees.

Polycarpe v. E & S Landscaping Serv.,  616 F.3d 1217 (11th Cir. 2010)

Are Paralegals entitled to Overtime?

Paralegals and legal assistants generally do not qualify as exempt learned professionals because an advanced specialized academic degree is not a standard prerequisite for entry into the field.  Although many paralegals possess general four-year advanced degrees, most specialized paralegal programs are two-year associate degree programs from a community college or equivalent institution.

Moreover, in numerous opinion letters, the Wage and Hour Division of the U.S. Department of Labor, has taken the position of the that paralegal employees are not exempt employees. Wage & Hour Op., FLSA2006-27, p. 4; see also Wage & Hour Op., FLSA2005-9 (Jan. 7, 2005), Wage & Hour Op., FLSA2006-27 (July 24, 2006), Wage & Hour Op., FLSA 2005-54 (December 16, 2005).

Therefore, if paralegals are not exempt employees under the Fair Labor Standards Act, they are entitled to be paid overtime.

See Paralegals’ Pay Rises Again in 2012, Says ALM/IPMA Survey.

For more information about overtime go to www.OrlandoOvertimePay.com

Internship Programs Under The Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) defines the term “employ” very broadly as including to “suffer or permit to work.” Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.

The Test For Unpaid Interns

There are some circumstances under which individuals who participate in “for-profit” private sector internships or training programs may do so without compensation. The Supreme Court has held that the term “suffer or permit to work” cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction. This may apply to interns who receive training for their own educational benefit if the training meets certain criteria. The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.

The following six criteria must be applied when making this determination:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern. This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.

If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific time periods, these interns should be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek. If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, then the interns will be viewed as
employees and entitled compensation under the FLSA. Conversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience. On the other hand, if the intern receives the same level of supervision as the employer’s
regular workforce, this would suggest an employment relationship, rather than training.

Mortgage loan officers allowed overtime

WASHINGTON, June 7 (Reuters) – The Obama administration acted within its discretion two years ago when it reclassified mortgage loan officers as eligible for overtime pay, a federal judge has ruled in a case that tested the authority of U.S. labor officials to set overtime rules.

The decision on Wednesday was a loss for mortgage lending companies, which had hoped to invalidate the rule change as they face lawsuits from loan officers for back overtime pay.

The U.S. Labor Department said in 2010 that, based on the typical job duties of mortgage loan officers, they should receive overtime wages. The change restored the status of loan officers to what it had been prior to 2006, when the Bush administration termed loan officers ineligible.

The Mortgage Bankers Association, a lobbying group for banks and other lenders, sued, calling the 2010 change “an abrupt reversal” of a policy that it had come to rely on.

U.S. District Judge Reggie Walton in Washington, D.C., disagreed, ruling that the lenders failed to show that they relied on the 2006 policy in ways that had substantially hurt them.

To the extent that lenders did rely on it, it was “short lived” given that they relied for years until 2006 on the idea that loan officers were eligible for overtime wages, Walton wrote.

Bank of America, JPMorgan Chase & Co and Quicken Loans Inc are among the lenders that have faced claims from loan officers who say they are due back overtime pay.

The Mortgage Bankers Association has not decided whether to appeal the ruling, association lawyer Howard Radzely said on Thursday.

The case is Mortgage Bankers Association v. Hilda Solis, et al., U.S. District Court for the District of Columbia, No. 11-cv-73.