DOL Today: Wage and Hour Enforcement under the Obama Administration

1. Presented by: Paul DeCamp | Jackson Lewis | Reston, VA Carol Rick Gibbons | Capital One | Richmond, VA June 6, 2012 DOL Today:Wage and Hour Enforcement under the Obama Administration

2. Inside DOL Patricia Smith was confirmed as Solicitor on February 4, 2010 (by 60-37 vote). So far, there have been two nominees for Administrator of the Wage and Hour Division: Lorelei Boylan and Leon Rodriguez. Both nominations have been withdrawn, and there is currently no nominee. Since 2008, WHD has been run by a political Deputy Administrator, Nancy Leppink.

3. Budget and Staffing The Wage and Hour Division has received significant increases in funding and personnel under this Administration.

4. Budget and Staffing • These figures represent increases of > 35% in appropriations and > 52% in agency headcount in just five years. • Investigator headcount has already risen from around 750 at the start of 2009 to between 1,000 and 1,100 now.

5. Budget and Staffing • FY2013 DOL budget request: • Seeks $10.2 million to fund 72 new FTE for WHD to focus on FLSA and FMLA issues, as well as independent contractor misclassification. • Proposes cutting $2.0 million and 12 FTE devoted to toll-free call center, including for employer compliance assistance.

6. Notable Developments • March 2010: Announcement that WHD is abandoning opinion letters in favor of Administrator Interpretations: • “Guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees.” • First two AIs overturned recent opinion letters from the Bush era regarding the administrative exemption in the financial services industry and the status of PPE as clothing under FLSA section 3(o). • No new AIs since June 2010.

7. Notable Developments • Solicitor’s office far more active in trying to change the law and to affect pending litigation: • Amicus briefs regarding pharmaceutical sales representatives, definition of “commissions” under FLSA section 7(i), tipped employees, and hybrid opt-in / opt-out cases. • Amicus briefs have been uniformly pro-worker.

8. Notable Developments • December 2010: “Bridge to Justice” program: • WHD and the American Bar Association announced “an unprecedented collaboration providing for an Attorney Referral System” to pursue litigation against employers. • When FLSA or FMLA complainants receive a section 16(b) letter, they also receive a toll-free number to contact the ABA’s referral hotline. • It remains unclear what information WHD will provide to claimants and their attorneys and when. This raises the stakes for cooperating in an ordinary WHD investigation.

9. Notable Developments • May 2011: WHD announces release of timekeeping application for smartphones: • Encourages workers to keep their own records of hours worked. • Allows workers to forward their time records directly to WHD in electronic form. • Investigators may approach investigations with a presumption that workers’ time records are accurate if there are discrepancies between those records and the employer’s records. • Employers need to understand this and to address the possibility of multiple sets of time records.

10. Notable Developments • September 2011: DOL signs MOU with IRS regarding misclassification issues. • Throughout 2011 and 2012: DOL signs MOU with 13 states regarding misclassification: • California Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah, and Washington.

11. Regulations • April 2011 FLSA Final Rule: • States in preamble that additional non-salary and non-overtime compensation is inconsistent with payment on a fluctuating workweek basis. • Clarifies that there is no limit on the amount of allowable mandatory employee tip pool contributions. • Embodies in regulations WHD’s enforcement position since 1974 that tips are the property of employees and thus that regardless of tip credit, employers cannot retain employee tips. • Imposes significant new record-keeping obligations in connection with tipped employees.

12. Regulations • The Fall 2011 semi-annual Regulatory Agenda, published on January 20, 2012, lists several contemplated rulemakings for WHD: • FLSA Child Labor Hazardous Occupations Order No. 7 (operation of power-driver hoisting apparatus)  anticipates a request for information in February 2012 (not yet issued). • FMLA  anticipates an NPRM in January 2012 (issued January 30, 2012, and comment period closed on April 30). • FLSA Domestic Service exemption  NPRM published December 27, 2011 (comment period closed on March 21).

13. Regulations • Fall 2011 semi-annual Regulatory Agenda (cont’d): • FLSA Child Labor regulations involving agricultural employment  NPRM published on September 2, 2011; comment period closed on December 1, 2011; and final rule expected in August 2012 (NPRM withdrawn on April 26, 2012). • FLSA Right to Know regulation  DOL has gone from anticipating an NPRM in April 2011 to now listing the status as “Next Action Undetermined” and providing no date at all. • SCA Nondisplacement of Qualified Workers  final rule issued on August 29, 2011.

14. Enforcement • First year of wage and hour enforcement under the Obama Administration: all about the American Recovery and Reinvestment Act (i.e., stimulus money and prevailing wages on government contracts). • Since then: focus has been on looking more broadly at the notion of the employment relationship: • Independent contractor versus employee classification. • “Fissured” industries: sub-contracting, third-party management, franchising, and independent contracting.

15. Enforcement • Construction; • Janitorial (FY2013 national initiative); • Home health care; • Child care; • Transportation and warehousing; • Meat and poultry processing; • Hotel / motel (FY2012 national initiative); • Restaurants; • Personnel services; • Agriculture; • Car washes. Main targets of current enforcement efforts:

16. Trends in Investigations “Liquidated damages are the new normal.” Expansion of donning / doffing beyond poultry and meatpacking industries. Heavy focus on pre-shift and post-shift activities such as computer boot-up and power-down, shift exchanges, and safety meetings. WHD is instructing investigators to impose CMPs in first investigations if criteria for willful violation can be established, as well as in virtually all “repeat” violation scenarios.

17. Trends in Investigations • Investigators are insisting on retroactive tolling agreements. • Be very careful about the tolling language. • SOL has been unwilling to negotiate a single word in the tolling agreements. • Much more aggressive use of the MODO procedure to press for company-wide self-audits, even for non-systemic violations. DOL now wants remedies and relief on an enterprise-wide basis whenever possible. Investigations are increasingly non establishment-focused.

18. Legislation • Patient Protection and Affordable Care Act, signed on March 23, 2010, creates FLSA section 7(r)(1) requiring reasonable unpaid breaks for mothers to express breast milk for infants up to one year old. • Employee Misclassification Prevention Act, reintroduced October 13, 2011: • Requires records reflecting accurate classification of employees versus independent contractors. • Double liquidated damages. • Penalties of up to $5,000 per employee.

19. Questions? Paul DeCampJackson Lewis LLPPartner – Washington, D.C. Region Office(703) 483-8305DeCampP@jacksonewis.com Carol Rick GibbonsCapital One Financial CorporationAssistant General Counsel(804) 284-2723carol.gibbons@capitalone.com

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