Greater Sumter Chamber of Commerce FLSA: Exempt or Not Exempt, That is the Question

1. Greater Sumter Chamber of CommerceFLSA: Exempt or Not Exempt, That is the Question May 23, 2012 David Dubberly Certified Specialist in Employment and Labor Law

2. A Dramatic Question “To be or not to be [exempt], that is the question [for HR Managers].” [With apologies to] William Shakespeare

3. Overview • FLSA review and enforcement trends • “White collar” exemptions • Executive employees • Administrative employees • Professional employees • Computer employees • Outside sales employees • Salary basis rule and safe harbor • Business owners • Highly compensated employees

4. FLSA History • Enacted in 1938 • Can be tough to apply to modern work practices • Telecommuting • Flexible hours • Use of smartphones outside work

5. Main Provisions • Minimum wage • Overtime pay • Exemptions—mostly for “white collar” employees • Focus of most FLSA litigation • Regulations updated 2004 • Youth employment • Recordkeeping

6. Enforcement • WHD • Investigations • Lawsuits • Injunctive relief • Back wages and liquidated damages • Private Lawsuits • Back wages, liquidated damages, attorney’s fees, and costs • Collective actions • DOJ • Criminal prosecution and civil money penalties

7. WHD Getting More Aggressive • 350 more investigators since 2009 • 13,500 more investigations since 2009

8. WHD Getting More Aggressive • DOL-ABA “Bridge to Justice” referral program • DOL “apps” for smart phones • Timesheet app • Can provide evidence for FLSA lawsuit • But time recorded on app may be inaccurate • Eat Shop Sleep app • DOL: “Access hotel/motel, restaurant and retail industry enforcement data and easily identify violators” • iCitizen Labor Report app • Adds OSHA data

13. WHD Getting More Agressive • Investigation information on internet at http://ogesdw.dol.gov • MSHA, OSHA, EBSA, OFCCP, and WHD • On WHD: • Employer names and addresses • Back wage amount • Employees due back wages • Penalties

15. Private Lawsuits Continue to Increase • 2011 FLSA suits in federal court = 7,000 • Approx. 200 class actions • In 10 years, 300% increase in FLSA suits v. 1% increase in all suits • Frequent complaints: • Misclassifying employees as exempt • Improper deductions from exempt employees’ salaries

18. Executive Employees • Pay: salary basis at least $455/week ($23,600/year) • Management: primary duty is management of business or customarily recognized department or subdivision • Setting and adjusting employee pay and hours • Maintaining production or sales records • Evaluating employee performance • Handling employee complaints and grievances

19. Executive Employees • Supervision: customarily and regularly supervises work of two or more other employees in department • Authority: hires or fires other employees • Or recommendations as to hiring, firing, or other status changes given particular weight

20. Jobs that May Qualify* • Plant manager • Department supervisor • Store manager • Construction project superintendent *Depending on facts—job title alone insufficient to establish status

21. Jobs that Typically Don’t Qualify* • Working foreman • Relief supervisor • Store “manager” who spends only small part of time on exempt work

22. Case Study: Gooden v. Dolgencorp Inc. and Thomas v. Dolgencorp Inc. • Decided Apr. 3, 2012 by federal court in SC • Two DG store managers covered by executive exemption • Primary duties were managerial • Hiring, supervising, and disciplining employees • Promoting, demoting, and firing employees • Providing training and setting and adjusting work schedules • Delegating and prioritizing tasks and assignments

23. Case Study: Gooden v. Dolgencorp Inc. and Thomas v. Dolgencorp Inc. • Spent over 50% of time on these managerial duties • These duties important to ensure success of stores • Mostly exercised discretion in performing these duties • Not overly limited by district managers or SOP • Paid more than nonexempt employees • And could earn bonuses based on store profitability

24. Salary Basis • No reduction in pay for variations in quality or quantity of work • Can reduce paid sick or personal leave time • Pay of full salary for any week in which any work performed, regardless of number of days or hours worked • Don’t have to pay for any week in which no work performed

25. Permitted Deductions • Absence for one or more full day for personal reasons other than sickness or disability • Absence for one or more full days for sickness or disability if employee is covered under sick leave policy • Offset equal to amount received for jury fees, witness fees, or military pay

26. Permitted Deductions • Penalties imposed in good faith for violating safety rules of major significance • Unpaid disciplinary suspension of one or more full days imposed in good faith for violation of written workplace conduct rules • Partial workweek during first or last week of work • Unpaid FMLA leave

27. Safe Harbor Policy • Exemption not lost over salary basis if: • Clearly communicated policy prohibiting improper deductions with complaint mechanism • Reimburse employees for improper deductions • Good faith commitment to comply • Not available if employer willfully violates policy by continuing to make improper deductions after complaints

28. Business Owners • Own at least a “bona fide” 20% equity interest in business where works • Actively engaged in management of business • Salary level and salary basis requirements don’t apply • No duties test

29. Highly Compensated Employees • Pay: total annual compensation of at least $100,000/year  • At least $455/week paid on salary basis • Including commissions, non-discretionary bonuses, and other non-discretionary compensation • Excluding cost of benefits

30. Highly Compensated Employees • Duties: customarily and regularly performs at least one exempt duty of an EAP employee • Primary duty includes performing office or non-manual work

31. Administrative Employees • Pay: salary or fee basis at least $455/week ($23,600/year) • Duties: primary duty is • Performance of office or non-manual work • Directly related to management or general operations of employer or employer’s customers

32. Administrative Employees • Discretion: primary duty includes exercise of discretion and independent judgment with respect to matters of significance • Exercise of discretion and independent judgment = comparing and evaluating possible courses of conduct, and acting or making decision after various possibilities considered

33. Jobs that May Qualify* • Insurance claims adjuster • Certain financial industry employees • Team leader for major projects • Administrative assistant to senior executive • HR manager • Purchasing agent

34. Jobs that Typically Don’t Qualify* • Inspector • Examiner/grader • Comparison shopper • Personnel clerk • Mortgage loan officers

35. Case Study: Foster v. Nationwide Mutual Insurance Co. • Decided Jan. 5, 2012 by federal court in OH • 91 “special investigators” administratively exempt • Primary duty was conducting investigations to resolve indicators of fraud in suspicious claims • Interviewed witnesses • Gathered information • Recommended and sometimes supervised vendors

36. Case Study: Foster v. Nationwide Mutual Insurance Co. • Involved exercise of discretion and independent judgment • Used “experience and knowledge … to distinguish relevant from irrelevant, fact from untruth, to resolve competing versions of events” • Had “nearly unilateral discretion” in referring cases with unresolved fraud indicators to law enforcement • Related to matters of significance • Helped determine if claims paid or not

37. Learned Professional Employees • Pay: salary or fee basis (some professionals exempt from this) at least $455/week ($23,600/year) • Duties: primary duty is performance of work requiring advanced knowledge • Work must be predominantly intellectual and require consistent exercise of discretion and judgment • Advanced knowledge must be in field of science or learning customarily acquired by prolonged course of specialized intellectual instruction

38. Jobs that Typically Qualify* • Medical doctor, osteopathic physician, podiatrist, dentist, optometrist • Registered nurse • Certified medical technologist • Dental hygienist • Certified physician assistant • Pharmacist • Lawyer • Engineer • Teacher • Accountant • Executive chef, sous chef • Certified athletic trainer

39. Jobs that Typically Don’t Qualify* • Licensed practical nurse • Nurse aide • Paramedic • Paralegal, legal assistant • Engineering technician • Accounting clerk, bookkeeper • Cook

40. Creative Professional Employees • Pay: salary or fee basis (film industry employees exempt from this) at least $455/week ($23,600/year) • Duties: primary duty is performance of work requiring invention, imagination, originality, or talent in recognized field of artistic or creative endeavor

41. Jobs Typically Qualify* • Musician, composer, conductor, soloist • Novelist, play writer • Writer for ad agency • Actor • Painter, photographer • Investigative news reporter Typically Don’t* • Beat reporter

42. Computer Employees (Other than those qualifying for EAP exemptions) • Pay • At least $27.63/hour for every hour worked, including overtime, or • Salary or fee basis at least $455/week ($23,600/year) • Duties • Apply systems analysis techniques • Design, document, analyze, create, or modify computer systems or programs • Modify computer programs

43. Jobs Typically Qualify* • Computer systems analyst • Most computer programmers Typically Don’t* • Entry level programmers • Computer manufacture and repair • CAD operators • Help desk workers

44. Outside Sales Employees • Pay: no requirement on basis or amount • Duties: primary duty must be making sales or obtaining orders or contracts for services or use of facilities • Location: customarily and regularly engaged away from employer’s place of business

45. Jobs that Typically Qualify* • Most sales reps • Pharma sales rep case heard by U.S. Supreme Court on Apr. 16, 2012 (Christopher v. SmithKlineBeecham Corp. d/b/a GlaxoSmithKline) • Some real estate agents

46. Common Errors to Avoid • Assuming all employees paid salary are exempt • Improperly applying exemption • Making improper deductions from salary • Job descriptions and employee handbook not up to date

47. Questions/Comments? David Dubberly 803-253-8281 ddubberly@nexsenpruet.com