Posts Tagged ‘DOL’

New FLSA Salary Test Halted

A federal court in Texas has temporarily blocked the implementation of the new FLSA regulations set to take effect on December 1, 2016. On hearing an Emergency Motion for Preliminary Injunction filed by 21 State Plaintiffs, the Court reasoned that a temporary injunction was appropriate. In a decision filed November 22, the Court said that the States could show that when Congress enacted the FLSA, based on the plain language in the statute, it intended for the executive, administrative, and professional exemptions to depend on the employee’s duties and not the employee’s salary, and that in the new FLSA regulations, the DOL “exceeded its delegated authority and ignored Congress’s intent by raising the minimum salary level such that i t supplants the duties test.” The Court observed that DOL itself said that employees who currently fall below the salary threshold would automatically become eligible for overtime without a change to their duties, but Congress did not intend the amount of salary to categorically exclude employees from exempt status. Because the Court found the new regulations unlawful, it also found that the DOL lacked the authority to implement the automatic updates to the salary level.

In granting the preliminary injunction, the Court stated that it would preserve the status quo while it determines the merits of the case. It is likely that the decision will be appealed. However, the future of the regulations is uncertain as the matter is not likely to be resolved before the new Trump Administration takes over, and the new Administration could revise the regulations. For now, employers do not have to comply with the new regulations which would require overtime for employees paid under the new minimum salary threshold, which was $47,476.

This article is authored by attorney Laura Bailey Gallagher and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

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DOL Sues Employer for Unpaid Pre- and Post-Shift Work

The Department of Labor (DOL) filed a lawsuit against Five Star Automatic Fire Protection in the Western District of Texas on July 7th, alleging the company failed to properly compensate its workers for labor they performed prior to and following their standard shifts. The DOL is seeking $321,000 in back pay and damages—a sharp reminder that the Fair Labor Standards Act (FLSA) requires employers to fully compensate their employees for all the work they do, including work done before and after they are on the job site.

The DOL’s attempted application of the rule is not new or even surprising, but it should grab employers’ attention, because it is a prime example of the type of wage and hour practices that put an employer on the wrong end of a costly lawsuit.

According to the DOL complaint, Five Star required its workers to begin their day at its office, where they loaded materials into a company vehicle before driving to the job site. After they were done at the jobsite for the day, Five Star required them to return the company vehicle to the office. The DOL has filed a complaint because it alleges Five Star did not compensate employees for this pre-shift and post-shift work.

FLSA requires employers to pay employees for all hours worked. Generally, any activity performed for an employer, whether it is done on the job site, at the office, or even off work premises, counts as time worked if the employer knows or has reason to believe work is being done. Activities such as preparing materials integral for work—the kind of pre-shift and post-shift work performed in this case—must be compensated as work. Even if Five Star did not intend to purposefully shortchange its workers, that fact alone will not shield it from liability. Remember: An employer must pay workers for all hours the employer knew or “should have known” the employee worked, and for hours that exceed 40 in a workweek, the employer must pay time-and –a-half. The unpaid pre-shift and post-shift hours, if properly counted, most likely cause the employees’ hours worked to exceed 40, and therefore the failure to pay for both the hours and overtime hours worked may be deemed a significant violation.

Employers can avoid placing themselves in Five Star’s position by ensuring that all hours are recorded accurately and that employees are not performing work outside of the time they are clocked in. Contractors can give their employees an option of riding to the jobsite in a company vehicle but employees cannot be allowed to perform any work before they arrive at the jobsite—or they will be in the same position as Fivestar is in this case.  If you have any questions about travel policies or any other FLSA issues, please contact us at Harmon & Davies, P.C.

This article is intended to provide general information, not a specific legal opinion or advice. Any particular questions should be directed to your legal counsel. If you do not have legal counsel, please feel free to contact Harmon & Davies, P.C.

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PA Workplace Misclassification Act

In March 2016 the Pennsylvania Department of Labor and Industry produced a white paper report on the “Administration and Enforcement of the Construction Workplace Misclassification Act in 2015.” Under the Act, the DLI investigates and penalizes construction companies that misclassify employees as independent contractors.

Here’s a quick snapshot from the Report:

pic for 4-29-16 blog

But in 2013, under similar circumstances, the Pennsylvania Commonwealth Court held that the general contractor’s payments to the subcontractor did not afford protection, and the Prompt Payment Act did not shield the contractor and the surety from liability. Berks Products Corp. v. Arch Ins. Co., 72 A.3d 315.

Those are the cases of Workplace Misclassification that the Bureau of Labor Law Compliance has investigated in the past five years. Notably, there were more investigations in 2015 than the previous four years combined. Also, the investigations netted $217,450 in penalties, which is a 1,612% increase from the 2014 penalty amount. In fact, the Bureau only collected $12,700 in penalties in 2014. Point being, DLI is emphasizing the enforcement of this Act, and all construction companies should take a very close look at how they supply manpower to their projects.

The Workplace Misclassification Act applies to all construction companies working on all types of projects—public, private, residential, or commercial. The Act sets forth a checklist of considerations that are scrutinized when determining if a laborer on a project is actually an independent contractor. If the laborer is misclassified as an independent contractor—when in fact he is really an employee—DLI will levy a fine. In some instances, DLI has the authority to seek criminal prosecutions.

To comply with the Act, every independent contractor must have a written contract. Further, every laborer should be analyzed with consideration of the numerous other requirements under the Act. DLI generally receives its leads from (1) complaints filed by laborers; (2) findings made during construction site visits; and (3) referrals from other government agencies, particularly the Office of Unemployment Compensation Tax Services. To avoid penalties, it is best to review your laborers and seek legal advice as necessary.

What’s Happening Now . . .

11.2 % Increase

  • Increase in construction spending for first two months of year, comparing 2015 to 2016.
  • Construction spending for January & February 2015 was $141.3 billion.
  • Construction spending for January & February 2016 was $157.1 billion.

Source: U.S. Census Bureau News, February 2016 Construction at $1,144.0 Billion Annual Rate, U.S. Dept. of Commerce (Apr. 1, 2016).

Newsletter written by Jeffrey C. Bright, Esq. , an attorney licensed in Pennsylvania and Maryland. For more information, contact an attorney at Harmon & Davies, P.C.


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Classification Crackdown

The United States Department of Labor estimates that 30% of employers are misclassifying employees as independent contractors, which results in billions of dollars in lost revenue every year. Citing a desire to minimize losses in contributions to unemployment insurance funds, protect workers’ rights and “level the playing field” for employers that abide by the law, the DOL has launched the Federal Misclassification Initiative, where they are partnering with the IRS and a number of state governments to share information. The memoranda of understanding contain an agreement to share information, in order to determine when workers are being misclassified.  The cooperative efforts will likely lead to multi-pronged scrutiny and enforcement proceedings.

The initiative will ensure that a worker classified as an independent contractor does not have to bring a claim against his or her employer to allege misclassification.  Instead, the DOL, IRS and/or state agency may initiate directed investigation which could lead to an audit of the employer’s payroll practices.  The DOL expects this initiative will increase the percentage of DOL-directed investigations to approximately 35% of all its investigations.  In particular, the DOL stated that they will be targeting certain industries, including delivery companies, construction companies, companies with installation workers, sales organizations, companies that provide on-site computer technicians and those companies that hire them, and cleaning franchises.

The difficulty comes in defining an independent contractor, because no unified definition exists. Despite the difficulty in defining independent contractor, the pitfalls are significant. Employers who misclassify their employees as independent contractors risk numerous potential claims including tax claims (state, federal, and FICA); wage (e.g., overtime), indemnification, and benefit claims,; claims for civil penalties, including penalties for failing to withhold taxes or pay final wages, or failing to provide itemized wage statements; unanticipated tort claims to third parties and wrongful discharge claims; and criminal investigations.

There are a number of steps that employers can take to prevent misclassification. Most importantly, employers must show that they do not exercise direction or control over their independent contractors. Employers should negotiate the rate of payment, require a signed agreement stating the independent contractor status, and require the worker to provide transportation, tools and equipment. Employers should never require reporting, issue handbooks, provide evaluations or prohibit the worker from working for or with others.

If you believe that employees may be misclassified, or you have any questions regarding classification in general, you should contact legal counsel as soon as possible.

This article is authored by attorney Casey L. Sipe and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

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