On-Call Employees

Under the Fair Labor Standards Act (“FLSA”), employees must be compensated for actual work performed, whether on or off the job site.  But with the many technology advancements in the workplace, employers can now effectively run their businesses around the clock by keeping employees “on-call” after regular business hours, requiring them to work only if needed.  Hospital employees, for instance, have to remain in the hospital premises when on-call.  Other employees may be able to leave work when on-call, but are still subject to restrictions.  For example, on-call firefighters are often not required to remain at the station, but they may have only a 30 minute time frame to respond to a call.  Under the FLSA, on-call employees may be eligible for compensation—but only under certain circumstances.  Thus, employers have struggled with determining when to pay employees for working on-call.  Here are the relevant principles to keep in mind:

Under the general test set forth in Skidmore v. Swift & Co., 323 U.S. 134 (1944), an employee that is “engaged to wait” is entitled to compensation, but an employee “waiting to be engaged” is not.  The regulations interpreting the FLSA provide some insight, requiring compensation for on-call time when (1) employees are required to stay on the premises, or (2) when employees must remain so close that they cannot use their time away from the premises for their own purposes.

It’s easy to see how this is a confusing area of wage and hour law.  Realistically, it is difficult to apply a simple 2-part test to the countless job positions in today’s workforce.  These cases are very fact-specific and are typically decided on a case-by-case basis.  Courts have relied on various factors in determining whether on-call time is considered work time.  These factors include: whether the employee had actually engaged in personal activities during the on-call time; the flexibility of trading on-call responsibilities with another employee; agreements between the parties that provide some amount of compensation for waiting time; the frequency of calls; and whether the fixed time limit for response was unduly restrictive.

Source:  Joseph U. Leonoro, On-Call Time – When Is It Compensable? (July 13, 2012), http://www.sjlaboremploymentblog.com/when-is-on-call-time-compensable/.
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Joint Employers

This past August, the National Labor Relations Board’s (NLRB) Office of General Counsel issued an administrative decision that could have a significant effect on joint employer status.  Following several complaints submitted by McDonald’s employees, the NLRB named corporate McDonald’s USA, LLC—in addition to the McDonald’s store owners—as a joint employer.  This means that as a joint employer, McDonald’s would be liable for each of its franchisees’ unlawful acts.  Clearly, if this decision stands, the number of cases alleging joint employer liability against franchisors will escalate.

Some employers even fear that the decision could lead to changes in the area of wage and hour law, where workers have sought to expand the definition of joint employer status under the Fair Labor Standards Act (FLSA).  The current regulations interpreting the FLSA provide that an individual may be an employee of more than one employer at the same time.  Courts apply various “joint employer” tests, considering the totality of the circumstances surrounding the employment relationship.  If a joint employment relationship exists, both employers are responsible, individually and jointly, for FLSA compliance.

Source:  Bloomberg BNA, Franchisors and the Specter of Joint Employer Liability for Franchisee Misconduct (September 19, 2014), http://www.bna.com/franchisors-specter-joint-n17179895132/.
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Independent Contractors

Last month, a New York federal court in Saleem v. Corporate Transp. Grp., Ltd., 2014 WL 4626075 held that drivers for a “black car” business were independent contractors, rather than employees, under both the FLSA and New York Labor Law.  The drivers claimed that their employer misclassified them as independent contractors, entitling them unpaid overtime and other wage claims.

We’ve explained the test for determining independent contractor versus employee status in a few of our earlier posts.  The “economic realty test,” which is one of the various tests courts apply, considers (1) the degree of control exercised by the employer over the worker; (2) the worker’s opportunity for profit or loss and investment in the business; (3) the degree of skill required to perform the work; (4) the permanency of the working relationship; and (5) whether the worker contributes services that are an integral part of the business.  The analysis in Saleem provides a good illustration of how courts will apply these factors to determine employee or independent contractor status.  Here is what the Saleem court considered:

(1) Control—this factor weighed in favor of classifying the drivers as independent contractors.  The employer only exercised limited control over the drivers.  The drivers could set their own schedules, hire other drivers to work on their behalf, and take vacations whenever they wanted—even without notifying the employer.  They had no obligation to accept any job, and they could also freely work for other transportation companies. Even though the employer did require the drivers to periodically inform them of the status of their assignments, the court still found that this factor weighs slightly in favor of independent contractor status.

(2) Opportunities for loss or profit—the court found that the drivers had an opportunity for profit or loss.  Because they were not guaranteed a set amount of work under their franchise agreements, the drivers could ultimately control their income with the amount of jobs they accepted.  The drivers also invested money into the business by buying, renting, or maintaining cars and paying fees associated with their for-hire drivers licenses.

(3) Skill—this factor did not weigh in favor of employee or independent contractor status. While the drivers were not required to have a high degree of skill, they did need to exercise a high degree of independent initiative.  Because the drivers were not required to accept any particular job, they had to independently take affirmative steps to secure jobs in order to be successful.

(4) Permanence of the relationship—this factor weighed in favor of independent contractor status.  Even though the drivers had franchise agreements with the employer for many years, they could quit working at any time.  The fact that the drivers could work for other companies also weighed in favor of independent contractor status.

(5) Integral part of the business—this last factor favored employee status, as the employer could not operate the business without the drivers’ work.

After weighing the factors and looking to the totality of the circumstances, the court determined that the drivers were properly designated as independent contractors and accordingly dismissed the drivers’ FLSA claims.

Source: Larry S. Perlman & Tamar N. Dolcourt, FLSA Case Is A Guide To Using Undependent Contractors, LAW360 (Oct. 17, 2014) https://www.law360.com/classaction/articles/586551/flsa-case-is-a-guide-to-using-independent-contractors

Wage and Hour Violations: The Oil and Gas Industry

In the rapidly growing oil and gas industry, wage and hour violations have become more common as companies seek ways to lower their labor costs.  In response, the Wage and Hour division of the Department of Labor (“DOL”) has focused its investigations and enforcement initiatives on oil and gas employers to address one violation in particular: misclassifying workers as independent contractors.  This practice is especially pervasive in the oil and gas industry, where much of the work is sub-contracted out to smaller companies.

Under the Fair Labor Standards Act (“FLSA”), nonexempt employees must be paid at least the minimum wage for all hours worked, plus overtime pay at a rate of one and one half times the regular rate for hours worked in excess of 40 in a workweek.  Some employers try to sidestep these obligations by classifying workers as independent contractors, rather than employees.  Of course, hiring independent contractors, when done correctly, certainly eliminates many costs and workplace restrictions.  Independent contractors are not subject to the overtime provisions of the FLSA, and employers can also avoid tax obligations otherwise owed to employees.

But it is the actual employment relationship—not the label—that controls whether an individual is an employee or an independent contractor for the purposes of the FLSA.  Although there is no single way to make this determination, the bottom line is that defining employee status can be complex, and simply handing a worker a 1099 rather than a W-2 will not suffice.  It all depends on the circumstances surrounding the employment relationship as a whole.  Workers are employees if they are economically dependent upon the employer, rather than in the business for himself or herself.  One of the various tests applied by the courts, the “economic reality test,” considers the following factors: (1) the permanency of the relationship; (2) the degree of skill required; (3) whether the worker contributes services that are an integral part of the business; (4) the employer’s control over the worker; (5) the worker’s opportunity for profit or loss; and (6) the worker’s investment in materials and equipment.

When undetected, worker misclassification denies individuals crucial benefits and protections such as family and medical leave, unemployment insurance, workers’ compensation, and the minimum wage and overtime pay.  Additionally, it exposes employers to serious liability—back wages, liquidated damages, and attorneys fees—when violations are found.  For example, an oil and gas equipment manufacturer paid nearly $700,000 in back wages to misclassified employees following an investigation by the DOL’s Wage and Hour Division.  Another company, Morco Geological Services, Inc., recently agreed to pay $595,000 in back wages to employees for minimum wage, overtime, and record-keeping violations.  Specifically, the investigation reported that the employees, new mud logging technicians, were only paid $75 per day for working 24-hours shifts.

Over the past decade, this industry has faced a 71% increase in employment, leaving much room for wage and hour violations.  The DOL has stepped up its enforcement initiatives by signing memoranda of understanding with state government agencies to organize investigations, providing compliance assistance information to employers, and reaching out to employees to increase awareness of worker misclassification.

Source: Naveena Sadasivam, Oil and Gas Companies Are Rigging Wages and Cheating Their Workers (September 27, 2014), http://www.truthdig.com/report/item/oil_and_gas_companies_are_rigging_wages_and_cheating_their_workers_20140927.

Travel Time Under the FLSA

Under the Fair Labor Standards Act (“FLSA”), there is no black-and-white rule for determining when travel time is compensable—it all depends upon the type of travel and when it occurs.  The regulations interpreting the FLSA don’t provide much clarity either, stating that travel “all in a day’s work” must be counted as compensable hours worked.  29 C.F.R. § 785.38.  Not surprisingly, this vague terminology offers little guidance to most employees.  What if the employee is called back to work after returning home for the day? What constitutes “hours worked?”  As a general rule, the commute between an employee’s worksite and home is a “normal incident of employment” and thus is not compensable “working time” under the FLSA.  But, of course, many exceptions apply, and it is important for employees to be aware of circumstances when such travel is compensable.

Here are a few quick examples:

• Work-related duties while commuting. The travel time between home and work is compensable if an employee is required to perform work during the commute (picking up supplies on the way to work or reporting to a meeting place, for example) that must be counted as hours worked. When that happens, the employee is considered to be “on the clock” when the initial work-related duty begins.  29 C.F.R. § 785.38.

• Emergency jobs. If an employee is required to travel “a substantial distance” to perform an emergency job after the employee has completed the day’s work, the travel time to and from the work site is compensable. 29 C.F.R. § 785.36.

• Out of town travel. Travel time is also compensable when employees are given special one-day assignments in another city.  For example, an employee that regularly works at a fixed location in Columbus will be compensated for travel time if required to make a one-day trip to Cincinnati.  This does not fall under the ordinary home-to-work rule, as the trip is performed the employer’s benefit and at the employer’s request.  However, the time that the employee normally spends commuting to and from their regular worksite can be deducted from the out of town travel.   29 C.F.R. § 785.37.

Source: Ed Zaleqski, When does a commute become paid working time? (Oct. 14, 2014) http://www.bizjournals.com/nashville/blog/2014/10/when-does-a-commute-become-paid-working-time.html

Wendy’s – In the news

A former employee recently brought a class action lawsuit against Wendy’s for violations of the Fair Labor Standards Act (FLSA).  The lawsuit, filed on behalf of all service technicians, alleges that the technicians routinely reported fewer hours than they actually worked, and seeks compensation for unpaid work hours worked and overtime hours from December 2011 to the present.

Under the FLSA, employees must be paid at least the federal minimum wage for all “hours worked,” whether clocked in or not.  All covered employees must be paid overtime for all hours worked in excess of forty (40) in one workweek.  With the exception of higher management or other exempt positions in the fast food chain, Wendy’s must pay employees who work over 40 hours at week overtime at a rate of one-and-one-half times their regular rate of pay.  Employers may be required to pay unpaid minimum wage, unpaid overtime compensation, or liquidated damages as a consequence of violating the FLSA.

Source:  Former employee files FLSA class action against Wendy’s, Dec. 18, 2014

Barkan Meizlish DeRose Cox, LLP Files FLSA Collective Action Against S&E Flag Cars, LLC


Last week, law firms Barkan Meizlish DeRose Cox, LLP and JTB Law Group, LLC filed a class and collective action against S & E Flag Cars, LLC (“S & E”), a Kentucky limited liability company in the race track operations business.  The lawsuit, Perkins et al. v. S & E Flag Cars, LLC et al., was filed in the United States District Court for the Southern District of Ohio as a class and collective action on behalf of all non-exempt current and former employees of S & E over the past three years.  Under Ohio and federal wage and hour law, nonexempt employees must be paid at least the minimum wage for all hours worked, plus overtime pay at a rate of one and one half times the regular rate for hours worked in excess of 40 in a workweek.  The Complaint asserts that S & E violated the Fair Labor Standards Act (“FLSA”) and the Ohio Minimum Fair Wage Standards Act (“Ohio Wage Act”) by failing to pay Plaintiffs overtime compensation at a rate of one and one half (1.5) times their regular rate of pay.  Plaintiffs seek to recover monetary damages, liquidated damages, and costs, including attorney’s fees, for themselves are all others similarly situated.

Barkan Meizlish DeRose Cox, LLP focuses on wage and hour litigation, workers’ compensation, Social Security disability, and personal injury/medical malpractice.  Over the past fifty years, Barkan Meizlish DeRose Cox, LLP has represented the rights of working people on and off the job through representation of labor unions, individual employees, and the injured and disabled.  The lawsuit was filed by attorney Bob DeRose (bderose@barkanmeizlish.com).  Learn more at www.barkanmeizlish.com, or visit our Facebook page at https://www.facebook.com/pages/Barkan-Meizlish-Handelman-Goodin-DeRose-Wentz-LLP/197862930238456.

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