Posts Tagged: legal blog

Virginia’s Independent Contractor Misclassification Law: Control and Independence

Virginia’s misclassification of workers statute allows workers to file suit against their employers who have misclassified them as independent contractors. If the worker prevails, the court may award the worker any wages, employment benefits, or other compensation lost as a result of the employer improperly classifying the worker as an independent contractor.

Difference Between Independent Contractors and Employees

A true independent contractor is someone who is in business for himself or herself. He controls his work environment, invests his own money, and is not economically dependent on the companies for which he works. An employee, by contrast, generally is not in business for himself or herself and, compared to an independent contractor, is more economically dependent on the companies for which he works. Independent contractors have more control over their work than employees, who are generally subject to the control of the companies for which they render services.

The distinction is important. Employees generally are entitled to overtime compensation and minimum wages (if non-exempt), as well as employment benefits like health insurance, worker’s compensation, payroll taxes, and retirement benefits. Some of the specific benefits offered to employees may depend on the employer (like health insurance), whereas other benefits available to employees are determined by the law (like payroll taxes and overtime pay). Independent contractors generally do not receive overtime pay or employment benefits.

Due to the costs of employment benefits and overtime compensation, businesses that use contractors instead of employees can save a lot of money. For this reason, companies may sometimes try to classify workers as independent contractors, such as by having the workers sign independent contractor “agreements,” even though the workers are more properly classified as employees. This works to the detriment of the workers, who miss out on overtime compensation and other employment benefits available to employees.

Remedy for Employees Misclassified as Independent Contractors

Fortunately, Virginia law provides a remedy for workers who are incorrectly classified as independent contractors. The law allows an individual “who has not been properly classified as an employee” or his representative to bring a civil action for damages against his employer “for failing to properly classify the employee if the employer had knowledge of the individual’s misclassification.” VA Code § 40.1-28.7:7(A).

IRS Independent Contractor Guidelines: Control and Independence

The Virginia misclassification law creates a presumption that individuals paid remuneration for performing services are employees of the person paying them, and the payor the employer of the individual, “unless it is shown that the individual is an independent contractor as determined under the Internal Revenue Service guidelines.” VA Code § 40.1-28.7:7(B). This effectively puts the burden on the putative employer to show that the worker was not misclassified under IRS guidelines.

The IRS independent contractor guidelines, including the guidance available here, and the regulation at 26 CFR § 31.3121(d)-1, provide that whether a worker is an independent contractor depends on the worker’s “degree of control and independence.” Generally, the greater the worker’s control and independence, the more likely he is an independent contractor. Conversely, the less control the worker has over his work environment and the more dependent he is on the company or companies he works for, the more likely the worker is truly an employee. In making this assessment, the guidelines call for consideration of three categories of factors: behavioral control and independence, financial control and independence, and type of relationship.

Behavioral Control and Independence

“Behavioral control” refers to who has the right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. Significantly, the business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work. The IRS guidelines identity several categories of behavioral control, including:

  • Type of instructions given: An employee is generally subject to the business’s instructions about when, where, and how to work.
  • Degree of instruction: Generally, the more detailed the instructions, the more control the business exercises over the worker. The amount of instruction needed, however, varies among different jobs. Importantly, the key consideration is whether the business has retained the right to control the details of a worker’s performance or instead has given up that right. Where the business retains the right to control the details of the worker’s performance, this supports a finding that the worker is an employee.
  • Evaluation systems: If an evaluation system measures the details of how the work is performed, that suggests an employment relationship. If, on the other hand, the evaluation system measures just the end result, then this can point to either an independent contractor or an employee.
  • Training: If the business provides the worker with training on how to do the job, this indicates that the business wants the job done in a certain way. This is strong evidence that the worker is an employee.

The key question on the behavioral control factor, therefore, is does the company control or have the right to control what the worker does and how the worker does his or her job? The IRS’s behavioral control guidelines are available here.

Financial Control and Independence

“Financial control” refers to whether or not the business has the right to control the economic aspects of the worker’s job. The IRS guidelines identity several categories of financial control, including:

  • Significant investment: An independent contractor often has a significant financial investment in the equipment he uses in working for someone else. However, in many occupations, such as construction, workers spend thousands of dollars on the tools and equipment they use and are still considered to be employees.
  • Unreimbursed expenses: Independent contractors are more likely to have unreimbursed expenses than are employees.
  • Opportunity for profit or loss: Independent contractors generally have greater opportunity than employees to lose money (such as by expenses exceeding their income from the work) than employees.
  • Services available to the market: Independent contractors are generally free to seek out business opportunities. They often advertise, maintain a visible business location, and are available to work for many different companies in the relevant market.
  • Method of payment: An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job.

The key question on the financial control factor, ultimately, is who controls the business aspects of the worker’s job? These “business aspects” include things like how the worker is paid, whether expenses are reimbursed, and who provides tools, supplies, and equipment for the work. The IRS’s financial control guidelines are available here.

Type of Relationship

“Type of relationship” refers to how the worker and business perceive their relationship to each other. The IRS guidelines identity several categories of facts bearing on this assessment, including:

  • Written contracts: Although a contract may state that the worker is an independent contractor, this is not sufficient to make the worker an independent contractor. How the parties work together, considering all factors of control and independence, determines whether the worker is an employee or an independent contractor.
  • Employee benefits: Employee benefits include things like health insurance, pension plans, paid vacation, and disability insurance. Businesses usually do not grant these benefits to independent contractors.  However, the lack of these types of benefits does not necessarily mean the worker is an independent contractor.
  • Permanency of the relationship: If a business hires a worker with the expectation that the relationship will continue indefinitely, instead of for a specific project or period, this is generally considered evidence of an employer-employee relationship.
  • Services provided as key activity of the business: If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. This would indicate an employer-employee relationship.

The key questions on the “type of relationship” factor include whether there are written contracts or employee-type benefits, whether the relationship continues, and whether the work performed is a key aspect of the business. The IRS’s guidelines on this factor are available here.

Notably, under the guidelines, an agreement stating that the worker is an independent contractor does not make him or her an independent contractor. At most, it is just one factor to consider. And when determining whether a worker is an employee or independent contractor, all of the above factors — behavioral control, financial control, and type of relationship — must be weighed.

Available Relief for Misclassified Workers

Under Virginia’s misclassification law, if a worker is misclassified as an independent contractor, the court may award the worker “damages in the amount of any wages, salary, employment benefits, including expenses incurred by the employee that would otherwise have been covered by insurance, or other compensation lost to the individual,” plus reasonable attorneys’ fees and costs. VA Code § 40.1-28.7:7(A).

This article also appears on TimCoffieldAttorney.net.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.  

FLSA Professional Employee Exemption: Learned or Creative or Teaching

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of their job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees. 

To qualify for a white collar exemption, employees must be paid on a salary basis at not less than $684 per week (as of January 1, 2020) and have job duties that satisfy certain requirements. Importantly, job titles do not determine whether an employee is exempt from the FLSA. For an employee to be exempt, her actual real-life job duties and salary must meet all the requirements of the FLSA and the Department of Labor’s implementing regulations.

This post will focus on the exemption for professional employees. There are three general types of exempt professional employees: learned professionals, creative professionals, or teaching professionals. The Department of Labor is also an excellent resource for information about the professional employee exemption. The DOL’s implementing regulations with respect to the professional employee exemption are generally located at 29 CFR §§ 541.300-304.

Learned Professional Exemption 

To qualify for the learned professional employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week, and meet all of the following requirements:

  1. The employee’s primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. This primary duty test has three elements:

    1. The employee must perform work requiring advanced knowledge;
    2. The advanced knowledge must be in a field of science or learning; and
    3. The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. 

29 CFR § 541.301(a)

Definition of “Primary Duty”

As used in the FLSA regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty is based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitation, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

Work Requiring Advanced Knowledge 

The regs define “work requiring advanced knowledge” as work which is “predominantly intellectual” in character, and which includes work requiring the “consistent exercise of discretion and judgment.” Professional work is therefore distinguished from work involving routine mental, manual, mechanical or physical work. A professional employee generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level. 29 CFR § 541.301(b).

Field of Science or Learning 

The phrase “fields of science or learning” includes the professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy and other occupations that have a recognized professional status as distinguished from the mechanical arts or skilled trades. The regs make this distinction where the knowledge involved in a mechanical arts or skilled trades could be of a fairly advanced type, but is not in a field of science or learning. 29 CFR § 541.301(c).

Customarily Acquired by a Prolonged Course of Specialized Intellectual Instruction 

The phrase “customarily acquired by a prolonged course of specialized intellectual instruction”  restricts the learned professional exemption to professions where specialized academic training is a standard prerequisite for entrance into the profession. The regs indicate the best prima facie evidence that an employee meets this requirement is possession of the appropriate academic degree. 

However, the word “customarily” means the exemption may also be available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction. Thus, for example, the learned professional exemption may be available to the occasional lawyer who did not go to law school, or the occasional chemist who does not have a degree in chemistry. 

On the other hand, the regs indicate the learned professional exemption is not available for occupations that customarily may be performed with only the general knowledge acquired by an academic degree in any field, with knowledge acquired through an apprenticeship, or with training in the performance of routine mental, manual, mechanical or physical processes. 

The learned professional exemption also does not apply to occupations in which most employees acquire their skill by experience rather than by advanced specialized intellectual instruction. 29 CFR § 541.301(d).

Examples Applying the Learned Professional Exemption

The regulations discuss several categories of employees whose duties may or may not qualify for the learned professional exemption. For example, depending on the circumstances and levels of academic study, degrees, and certification, registered or certified medical technologists, registered nurses, dental hygienists, physician assistants, certified public accountants, executive or sous chefs, athletic trainers, and licensed funeral directors and embalmers may meet the duties requirement for the learned professional exemption. 

On the other hand, licensed practical nurses, accounting clerks, bookkeepers, and cooks or chefs without culinary arts degrees, paralegals and legal assistants, generally do not meet the duties requirement for this exemption. 29 CFR § 541.301(e).

Practice of Law or Medicine 

The regs further provide that an employee holding a valid license or certificate permitting the practice of law or medicine is exempt if the employee is actually engaged in such a practice. An employee who holds the requisite academic degree for the general practice of medicine is also exempt if he or she is engaged in an internship or resident program for the profession. 

The salary and salary basis requirements do not apply to bona fide practitioners of law or medicine. 29 CFR § 541.304.

Creative Professional Employee Exemption

To qualify for the creative professional employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week, and meet all of the following requirements:

  1. The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor (as opposed to routine mental, manual, mechanical or physical work). 

The exemption does not apply to work which can be produced by a person with general manual or intellectual ability and training. 29 CFR § 541.302(a).

Recognized Field of Artistic or Creative Endeavor 

To qualify for the exemption as a creative professional, the employee’s work must be performed “in a recognized field of artistic or creative endeavor.” This includes such fields as music, writing, acting and the graphic arts. 29 CFR § 541.302(b).

Invention, Imagination, Originality or Talent 

The requirement of “invention, imagination, originality or talent” distinguishes the creative professions from work that primarily depends on intelligence, diligence and accuracy. The duties of employees vary widely, and exemption as a creative professional depends on the extent of the invention, imagination, originality or talent exercised by the employee. Determination of exempt creative professional status, therefore, must be made on a case-by-case basis. 

As explained in the regs, this requirement generally is met by actors, musicians, composers, conductors, and soloists; painters who at most are given the subject matter of their painting; cartoonists who are merely told the title or underlying concept of a cartoon and must rely on their own creative ability to express the concept; essayists, novelists, short-story writers and screen-play writers who choose their own subjects and hand in a finished piece of work to their employers (the majority of such persons are, of course, not employees but self-employed); and persons holding the more responsible writing positions in advertising agencies. 

This requirement generally is not met by a person who is employed as a copyist, as an “animator” of motion-picture cartoons, or as a retoucher of photographs, since such work is not properly described as creative in character. 29 CFR § 541.302(c).

Journalists and Reporters

Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent (as opposed to work which depends primarily on intelligence, diligence and accuracy)

Employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. 

Thus, for example, newspaper reporters who simply rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals. Reporters also do not qualify as exempt creative professionals if their work product is subject to substantial control by the employer. 

However, journalists may qualify as exempt creative professionals if their primary duty is performing on the air in radio, television or other electronic media; conducting investigative interviews; analyzing or interpreting public events; writing editorials, opinion columns or other commentary; or acting as a narrator or commentator. 29 CFR § 541.302(d).

Teaching Professional Employee Exemption

The professional employee exemption is also available to teachers, if their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. The term “educational establishment” is defined in 29 CFR § 541.204(b).

Exempt teachers include, but are not limited to: Regular academic teachers; teachers of kindergarten or nursery school; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrumental music instructors. 29 CFR § 541.303(b).

Faculty members who are engaged as teachers but also spend a considerable amount of their time in extracurricular activities such as coaching athletic teams or acting as moderators or advisors in such areas as drama, speech, debate or journalism are engaged in teaching. 29 CFR § 541.303(b).

The regs further provide that having an elementary or secondary teacher’s certificate provides a clear means of identifying the individuals contemplated as being within the scope of the exemption for teaching professionals. Teachers who possess a teaching certificate generally qualify for the exemption regardless of the terminology (e.g., permanent, conditional, standard, provisional, temporary, emergency, or unlimited) used by the State to refer to different kinds of certificates. However, private schools and public schools are not uniform in requiring a certificate for employment as an elementary or secondary school teacher, and a teacher’s certificate is not generally necessary for employment in institutions of higher education or other educational establishments. Therefore, a teacher who is not certified may be considered for exemption, provided that such individual is employed as a teacher by the employing school or school system. 29 CFR § 541.303(c)

The salary and salary basis requirements do not apply to bona fide teachers. Having a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge includes, by its very nature, exercising discretion and judgment. 29 CFR § 541.303(d).

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which, as of January 1, 2020, must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they “customarily and regularly” perform at least one of the duties of an exempt executive, administrative or professional employee. 29 CFR § 541.601.

“Customarily and regularly” means a frequency that must be “greater than occasional” but which “may be less than constant.” It includes work “normally and recurrently done every workweek”; it does not include isolated or one-time tasks. 29 CFR § 541.701

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

This article was also published to TimCoffieldAttorney.net.

FLSA Executive Employee Exemption: Management and Direction

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of their job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees.

To qualify for a white collar exemption, employees must be paid on a salary basis at not less than $684 per week (as of January 1, 2020) and have job duties that satisfy certain requirements. Importantly, job titles do not determine whether an employee is exempt from the FLSA. For an employee to be exempt, her actual real-life job duties and salary must meet all the requirements of the FLSA and the Department of Labor’s implementing regulations.

This post will focus on the exemption for executive employees. The Department of Labor is also an excellent resource for information about the executive employee exemption. The DOL’s implementing regulations with respect to the executive employee exemption are generally located at 29 CFR §§ 541.100-106.

Executive Employee Criteria

To qualify for the executive employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must meet all of the following requirements:

  1. The employee must be compensated on a “salary basis” (as defined in 29 CFR § 541.602) at a rate not less than $684 per week (lower amounts apply for non-federal employees in U.S. territories);
  1. The employee’s primary duty must be management of the enterprise, or management of a customarily recognized department or subdivision of the enterprise;
  1. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  1. The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

29 CFR § 541.100.

These requirements contain several terms of art, which the Department of Labor has defined in its implementing regulations.

Definition of “Primary Duty”

As used in the FLSA regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty is based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitation, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

What Is Management?

Under the FLSA regulations for executive employees, “management” generally includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures. 29 CFR § 541.102.

Department or Subdivision Verses a “Mere Collection of Employees”

The executive employee regulations clarify that the statutory phrase “a customarily recognized department or subdivision” is intended to distinguish between a “mere collection of employees” assigned from time to time to a specific job or series of jobs and a unit with permanent status and function. A customarily recognized department or subdivision must have a permanent status and a continuing function. For example, a large employer’s human resources department might have subdivisions for labor relations, pensions and other benefits, equal employment opportunity, and personnel management, each of which has a permanent status and function. 29 CFR § 541.103.

Customarily and Regularly

The regulations also define the phrase “customarily and regularly.” It means a frequency greater than occasional but less than constant. It includes work “normally and recurrently done every workweek”; it does not include isolated or one-time tasks. 29 CFR § 541.701.

Two or More Other Employees

To qualify as an exempt executive, the employee must customarily and regularly direct the work of “two or more” other employees. The regs delve into the meaning of the phrase “two or more other employees.” It means two full-time employees or their equivalent. For example, one full-time and two half-time employees are equivalent to two full-time employees. The supervision can be distributed among two, three or more employees, but each such employee must customarily and regularly direct the work of two or more other full-time employees or the equivalent. For example, a department with five full-time nonexempt workers may have up to two exempt supervisors if each supervisor directs the work of two of those workers.

An employee who just assists the manager of a particular department and supervises two or more employees only in the actual manager’s absence does not meet this requirement for the executive exemption.

Significantly, hours worked by an employee cannot be credited more than once for different executives. Thus, a shared responsibility for the supervision of the same two employees in the same department does not satisfy this requirement. However, a full-time employee who works four hours for one supervisor and four hours for a different supervisor, for example, can be credited as a half-time employee for both supervisors. 29 CFR § 541.104.

What Is Particular Weight?

If the putative executive cannot hire or fire other employees, then to qualify for the exemption the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given “particular weight.”

The regs attempt to define “particular weight.” To determine whether a putative executive’s suggestions and recommendations about changes in employment status are given particular weight, factors to consider include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations, and the frequency with which such suggestions and recommendations are made, requested, and relied upon.

Generally, an executive’s suggestions and recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include occasional suggestions about the change in status of a co-worker. An employee’s suggestions and recommendations may still be deemed to have “particular weight” even if a higher-level manager’s recommendation has more importance and even if the employee does not have the authority to make the ultimate decision as to the employee’s change in status. 29 CFR § 541.105.

Special Exemption for Business Owners

The executive regulations establish a special exemption for business owners. Under that rule, an employee who owns at least a bona fide 20-percent equity interest in the enterprise in which she is employed, regardless of the type of business organization, and who is actively engaged in its management, is considered a bona fide exempt executive. The salary requirements for executives do not apply to those who qualify as business owners under this regulation.

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which, as of January 1, 2020, must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they “customarily and regularly” perform at least one of the duties of an exempt executive, administrative or professional employee. 29 CFR § 541.601.

As noted above, the term “customarily and regularly” means a frequency that must be “greater than occasional” but which “may be less than constant.” It includes work “normally and recurrently done every workweek”; it does not include isolated or one-time tasks. 29 CFR § 541.701.

This article was also published to TimCoffieldAttorney.net.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

Genesis Healthcare v. Symczyk: Rule 68 and Collective Actions

In Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66 (2013), the Supreme Court held that a putative Fair Labor Standards Act collective action brought by one employee on behalf of others was no longer justiciable when, as conceded by the employee, her individual claim became moot before others joined the case.

Facts

Symzcyk worked for Genesis Healthcare as a registered nurse. In 2009, Symczyk brought a putative collective action under the FLSA on behalf of herself and “other employees similarly situated.” 29 U.S.C. § 216(b). She alleged Genesis violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks. Symcyzk, who remained the sole plaintiff throughout the case, sought statutory damages for the alleged violations.

After Symczyk filed suit, but before any other employees joined the suit, the employer sent Symczyk an offer of judgment under Federal Rule of Civil Procedure 68, which Symczyk ignored. The offer had proposed to pay all of her statutory damages, plus costs and reasonable attorney’s fees. The District Court, finding that no one else had joined the case, and that the Rule 68 offer fully satisfied Symczyk’s claim, concluded that Symczyk’s suit was moot. The court therefore dismissed the case for lack of subject-matter jurisdiction.

The Third Circuit reversed, holding that while Symczyk’s individual claim was moot, the collective action on behalf of other similar employees was not. The Third Circuit reasoned that allowing employers to use calculated Rule 68 offers to “pick off” named plaintiff-employees before certification would frustrate the goals of collective actions. The court therefore remanded the case to the trial court, with instructions to allow Symczyk to seek conditional certification of the collective action and move forward with the case on behalf of other employees who might join. See 569 U.S. at 69-71.

The Court’s Decision

The Supreme Court reversed. The Court held that because Symczyk had no “personal interest” in representing other putative, unnamed employees, nor any other kind of continuing interest that would render her suit not moot, the trial court properly determined it lacked subject-matter jurisdiction over the case.

At the outset, the Court declined to decide whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot. Symczyk, however, had conceded this point with respect to her claim and did not argue it on appeal. The Court therefore assumed, without deciding, that the employer’s offer to Symczyk mooted her individual claim. 569 U.S. at 72-73.

The Court then determined that “well-settled mootness principles” controlled the outcome of the case. Once Symczyk’s individual claim became moot, the Court determined that the suit became moot because she had no personal interest in representing others in the action. The Court rejected Symczyk’s contrary arguments because they relied on cases that arose in the context of Rule 23 class actions. The Court found those case inapposite, both because Rule 23 actions are “fundamentally different” from FLSA collective actions and because the cases were “inapplicable” to the facts in Symczyk’s case. 569 U.S. at 73-79.

The cases Symczyk rallied behind were Sosna v. Iowa, 419 U.S. 393 (1975) and United States Parole Comm’n v. Geraghty, 445 U.S. 388 (1980). Symczyk argued these cases meant she could seek certification of an FLSA collective action after her individual claim became moot. The Court determined Sosna and Geraghty did not support her position. In short, Sosna held that a class action is not rendered moot when the named plaintiff’s individual claim becomes moot after the class has been duly certified. Geraghty extended those principles to denials of class certification motions, and further provided that, where a putative class action would have acquired independent legal status but for the district court’s erroneous denial of class certification, a corrected ruling on appeal “relates back” to the time of the erroneous denial. See 445 U.S. at 404 and n. 11.

At first glance, these cases seemed like they supported Symczyk’s position. The Court observed, however, that Geraghty’s holding was explicitly limited to cases in which the named plaintiff’s claim remains live at the time the district court denies class certification. See 445 U.S. at 407 and n. 11. Symczyk, by contrast, had not yet moved for “conditional certification” when her claim became moot. Nor had the District Court anticipatorily ruled on any such request. Symczyk therefore had no certification decision to which her claim could have related back. More importantly, the Court emphasized that essential to Sosna and Geraghty was the fact that a putative class acquires an “independent legal status” once it is certified under Rule 23. By contrast, under the FLSA, “conditional certification” does not produce a class with an independent legal status, or join additional parties to the action. 569 U.S. at 73-75.

Second, the Court addressed a line of cases, like County of Riverside v. McLaughlin, 500 U.S. 44, 52 (1991), holding that an “inherently transitory” class-action claim is not necessarily moot upon the termination of the named plaintiff’s claim. The Court found these cases inapplicable. Symczyk argued that an employer’s use of Rule 68 offers to “pick off” a named plaintiff before the collective-action process is complete renders the action “inherently transitory.” But the Court observed the “inherently transitory” rationale was developed to address circumstances in which the defendant’s challenged conduct was effectively unreviewable because no plaintiff possessed a personal stake in the suit long enough for litigation to run its course. For this reason, the Court observed, the McLaughlin line of cases focused on the fleeting nature of the challenged conduct giving rise to the claim, not on the defendant’s litigation strategy. Unlike a claim for injunctive relief, a damages claim (like the FLSA claims at issue in Smyczk’s case) cannot evade review — the damage has been done, and can be measured and compensated. The Court further pointed out that an offer of full settlement cannot insulate such a claim from review. While dismissing Symzcyk’s case before certification would foreclose the putative other plaintiff-employees of Genesis from vindicating their rights in Symzcyk’s suit, those employees would remain free to do so in their own lawsuits. 569 U.S. at 75-77.

Finally, the Court addressed its decision in Deposit Guaranty Nat. Bank v. Roper, 445 U.S. 326 (1980), which Symczyk cited for her argument that the purposes served by the FLSA’s collective-action provisions would be frustrated by defendants’ use of Rule 68 to “pick off” named plaintiffs before the collective-action process has run its course. The Court found Roper did not support this argument. In Roper, the named plaintiffs’ individual claims became moot after the District Court denied their Rule 23 class certification motion and entered judgment in their favor based on defendant’s Rule 68 offer. The Roper Court held that the named plaintiffs could appeal the denial of certification because they possessed an ongoing, personal economic stake in the substantive controversy — namely, to shift a portion of attorney’s fees and expenses to successful class litigants. Symczyk, by contrast, conceded that her employer’s offer provided complete relief, and she asserted no continuing economic interest in shifting attorney’s fees and costs. Moreover, the Roper holding was tied to the unique significance of Rule 23 class certification decisions, distinguishing it from the FLSA collective action context. 569 U.S. at 77-79.

Analysis

In summary, Genesis held that a putative FLSA collective action brought by single employee was no longer justiciable when, as conceded by the employee, her individual claim became moot by an offer of judgment providing complete relief and no other employees had joined the case. The Court, however, declined to decide whether an unaccepted offer of judgment could render a plaintiff’s claim moot. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

This blog was also published to TimCoffieldAttorney.com.

FLSA Administrative Employee Exemption: Discretion and Independent Judgment

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. However, the law contains several exceptions or “exemptions” from these requirements, most of which turn on a combination of the employees’ pay and the nature of employees’ job duties. For example, Section 13(a)(1) of the FLSA, a.k.a. 29 U.S.C. § 213(a)(1), provides an “exemption” from both minimum wage and overtime pay for certain categories of so-called “white collar” employees — namely, employees working as bona fide executive, administrative, professional, or outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain categories of computer employees. 

To qualify for a white collar exemption, employees must be paid on a salary basis at not less than $684 per week (as of January 1, 2020) and have job duties that satisfy certain requirements. Importantly, job titles do not determine whether an employee is exempt from the FLSA. For an employee to be exempt, her actual real-life job duties and salary must meet all the requirements of the FLSA and the Department of Labor’s implementing regulations.

This post will focus on the exemption for administrative employees. The Department of Labor is also an excellent resource for information about the administrative employee exemption. The DOL’s implementing regulations with respect to the administrative employee exemption are generally located at 29 CFR § 541.200-204

Administrative Employee Criteria

To qualify for the administrative employee exemption (and therefore, not be entitled to receive overtime pay under the FLSA), an employee must meet all of the following requirements:

  1. The employee must be compensated on a “salary basis” (as defined in 29 CFR § 541.602) or “fee basis” (as defined in 29 CFR § 541.605) at a rate not less than $684 per week (lower amounts apply for non-federal employees in U.S. territories);
  2. The employee’s “primary duty” must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; 
  3. The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 

29 CFR § 541.200.

Definition of “Primary Duty”

As used in these regulations, “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining an employee’s primary duty include, without limitations, the relative importance of any exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 CFR § 541.700.

Definition of “Directly Related to Management or General Business Operations” 

To meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business. This is different from, for example, working on a manufacturing production line or selling a product in a retail or service establishment. 29 CFR § 541.201(a).

As defined in the DOL regulations, work “directly related to management or general business operations” includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, Internet and database administration; legal and regulatory compliance; and similar activities. 29 CFR § 541.201(b)

Work Directly Related to Management or Operations of Customers

It’s worth noting that an employee may qualify for the administrative exemption if her primary duty is performing work directly related to the management or general business operations of the “employer’s customers.” 29 CFR § 541.201(a). This means that an employee who acts as a consultant to her employer’s clients or customers — as tax experts or financial consultants, for example — may qualify for the exemption. 29 CFR § 541.201(c).

Definition of “Discretion and Independent Judgment” 

To qualify for the administrative exemption, an employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. As defined in the regs, the exercise of “discretion and independent judgment” involves comparing and evaluating possible courses of conduct and acting or making a decision after the various possibilities have been considered. 29 CFR § 541.202(a).

The phrase must be applied to all the facts, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision. 29 CFR § 541.202(b)&(c).

In making the “discretion and independent judgment” determination, the regulations provide examples of many factors to consider, including but not limited to: 

  • whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;
  • whether the employee carries out major assignments in conducting the operations of the business; 
  • whether the employee performs work that affects business operations to a substantial degree; 
  • whether the employee has authority to commit the employer in matters that have significant financial impact;
  • whether the employee has authority to waive or deviate from established policies and procedures without prior approval
  • whether the employee has authority to negotiate and bind the company on significant matters; and
  • other similar factors identified in the regulation. 

29 CFR § 541.202(b).The fact that an employee’s decisions may be revised or reversed after review does not necessarily mean the employee does not exercise discretion and independent judgment. 29 CFR § 541.202(c).

The exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources. It also “does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work.” 29 CFR § 541.202(e).

Definition of “Matters of Significance” 

As used in the regulations, the term “matters of significance” refers to the level of importance or consequence of the work performed. 29 CFR § 541.202(a). An employee does not exercise discretion and independent judgment with respect to matters of significance just because the employer will experience financial losses if the employee fails to perform the job properly. 29 CFR § 541.202(f). For example, a messenger who is entrusted with carrying large sums of money does not exercise discretion and independent judgment with respect to matters of significance even though serious consequences may flow from the employee’s neglect. Id. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer. Id.

Administrative Employee Examples

The regulations contain many examples and explanations regarding specific categories of employees who typically may or may not qualify for the administrative employee exemption. Those examples and explanations are located at 29 CFR § 541.203.

Educational Establishments

The administrative exemption may also be available to employees who meet the salary basis or fee basis test, or on a salary basis which is “at least equal to the entrance salary for teachers in the same educational establishment,”  and whose primary duty is “performing administrative functions directly related to academic instruction or training in an educational establishment.” 29 CFR § 541.204(a).

The term “educational establishment” means an elementary or secondary school system, an institution of higher education or other educational institution. 29 CFR § 541.204(c).

Academic administrative functions include operations directly in the field of education, and do not include jobs relating to areas outside the educational field. 29 CFR § 541.204(c). Employees engaged in academic administrative functions include: the superintendent or other head of an elementary or secondary school system, and any assistants responsible for administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program; the principal and any vice-principals responsible for the operation of an elementary or secondary school; department heads in institutions of higher education responsible for the various subject matter departments; academic counselors and other employees with similar responsibilities. 29 CFR § 541.204(c)(1).

These categories of academic employees may qualify for the administrative exemption because having a primary duty of performing administrative functions directly related to academic instruction or training in an educational establishment necessarily involves exercising discretion and independent judgment with respect to matters of significance.

Highly Compensated Employees 

Highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which, as of January 1, 2020, must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they “customarily and regularly” perform at least one of the duties of an exempt executive, administrative or professional employee. 29 CFR § 541.601.

The term “customarily and regularly” means a frequency that must be “greater than occasional” but which “may be less than constant.” 29 CFR § 541.701. Tasks or work performed “customarily and regularly” includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks. Id.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

This blog was also published to TimCoffieldAttorney.net.

Falk v. Brennan: Law of Employment and Control

In Falk v. Brennan, 414 U.S. 190 (1973), the Supreme Court held that an entity is an “employer” under the Fair Labor Standards Act when it exercises substantial control over the terms and conditions of the work of the employees at issue.

Background

The Fair Labor Standards Act generally requires a covered “employer” to pay its covered nonexempt employees minimum wages for each hour worked and overtime wages for all hours worked in excess of 40 hours per workweek. 29 U.S.C. §§ 206(a) & 207(a). The FLSA defines “employer” as “includ[ing] any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). With some exceptions, the FLSA generally defines “employee” as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The FLSA defines “employ” as including “to suffer or permit to work.” 29 U.S.C. § 203(g).

The FLSA also provides that for an employer to be covered under the Act’s dollar-volume “enterprise” coverage provision, the employer must receive “annual gross volume of sales made or business done [] not less than $500,000[.]” 29 U.S.C. § 203(s)(1)(A)(ii).

Facts

D&F operated a property management company in Virginia. It rendered management services for the owners of several apartment complexes. Under its contracts with the apartment owners, D&F agreed to perform, on behalf of each owner and under his “nominal” supervision, “virtually all management functions that are ordinarily required for the proper functioning of an apartment complex.” 414 U.S. at 192. Those functions included advertising the apartments; signing, renewing, and canceling leases; collecting rents; instituting and settling all legal proceedings for eviction, possession of the premises, and unpaid rent; making necessary repairs and alterations; negotiating contracts for essential utilities and other services; purchasing supplies; paying bills; preparing operating budgets for the property owners’ review and approval; submitting periodic reports to the owners; and “hiring and supervising all employees required for the operation and maintenance of the buildings and grounds.” Id. at n4.

As compensation, D&F received a fixed percentage of the gross rents collected from each project. D&F deposited the rents it collected in local bank accounts. From these accounts it paid all expenses incurred in operating and maintaining the buildings. After deducting its compensation, as well as other expenses, D&F periodically transmitted payments to the various apartment owners. If disbursements for any apartment complex exceeded the gross rental receipts, the owner was required to reimburse D&F. 414 U.S. at 192-93. D&F collected about $8 million dollars per year in rents for all the buildings it managed. Id. at n6. However, its gross commissions received on those rentals were less than $500,000 per year. Id. at n10.

The Secretary of Labor filed suit against D&F on behalf of the maintenance workers, alleging that D&F violated the minimum wage, overtime, and recordkeeping requirements of the FLSA with respect to those workers. Id. Significantly, these employees worked under the supervision of D&F and were paid from the rents received at the apartment complexes where they worked. Under the contracts between the apartment owners and D&F, the maintenance workers were considered to be “employees of the project owners.” Id.

A central question for the Court was whether the maintenance workers were also employees of D&F, such that D&F was responsible for complying with the FLSA’s minimum wage, overtime, and recordkeeping requirements with respect to those workers.

A secondary question was which figure should be considered in determining whether D&F met the $500,000 threshold for enterprise coverage: D&F’s gross rentals collected ($8M annually), or D&F’s gross commissions on those rentals (less than $500,000).

The Court’s Decision

The Court held that in addition to the apartment owners, D&F was also an FLSA “employer” of the maintenance workers — even though the owners and D&F had agreed that the workers were employees only of the owners. The Court reached this decision by interpreting the operative provisions of the FLSA as speaking to the extent of control a potential “employer” exercises over a worker.

First, the Court observed that Section 203(d) of the FLSA defines “employer” as ‘any person acting directly or indirectly in the interest of an employer in relation to an employee.’ 29 U.S.C. § 203(d). It further noted that Section 3(e) defines ‘employee’ to include ‘any individual employed by an employer.’ 29 U.S.C. s 203(e). Significantly, the Court interpreted these two provisions as providing an “expansive[]” definition of “employer” — meaning that whether an entity was an FLSA employer, with the attendant minimum wage, overtime, and recordkeeping responsibilities, could not be controlled by an agreement between entities that only one of them would be the “employer.”

The Court further indicated that the relevant inquiry, in answering the “employer” question, was whether the potential employer had “substantial control of the terms and conditions of the work” the employees performed. Id. at 195. D&F, for example, appears to have had supervisory powers with respect to the maintenance workers at the buildings it managed. See id. at 193 (“These employees work under the supervision of D&F”). The Court therefore determined that “in view of the expansiveness of [the FLSA’s] definition of ‘employer’ and the extent of D&F’s managerial responsibilities at each of the buildings, which gave it substantial control of the terms and conditions of the work of these employees,” D&F was pursuant to the FLSA an ‘employer’ of the maintenance workers Id.

With respect to the dollar-volume limitation question, the Court observed that D&F “sells” only professional management services, and therefore the gross rentals it collected as part of rendering those services to building owners did not represent sales attributable to D&F. Id. at 197-201. Based on this reasoning, the Court concluded D&F’s commissions were the relevant measure of its gross sales made or business done for purposes of the dollar-volume limitation in Section 203(s)(1). Thus, even though D&F was an “employer” under the the terms of the FLSA, and an “enterprise” under Section 203(r), the FLSA did not apply to D&F because its gross sales were below the Section 203(s)(1) dollar-volume threshold. Id. at 201.

Analysis

In sum, Falk v. Brennan held that an entity is an “employer” under the FLSA when it exercises substantial control over the terms and conditions of the work of employees at issue. This decision later became relevant to the Department of Labor’s development of regulations guiding the analysis of FLSA “joint employment” situations. In those situations, where more than one entity benefits from the work of employees, the extent to which each entity exercises control over the terms and conditions of the workers’ employment is an important consideration in determining the entities’ respective or joint responsibilities under the FLSA. For the DOL’s analysis of its most recent changes to the rule (29 C.F.R. § 791) regarding joint employment, effective March 2020, go here.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Wage Law for Fire Protection and Law Enforcement Personnel

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. The rights afforded by the FLSA apply to covered employees of public agencies, including most employees working fire protection or law enforcement jobs for state or local governments. However, the FLSA contains some unique provisions that apply only to fire protection and law enforcement personnel. This post summarizes some of those provisions. The US Department of Labor is also an excellent resource for information about the FLSA rights of state and local government employees.

Characteristics of Fire Protections and Law Enforcement Personnel

Under the FLSA, fire protection personnel include firefighters, paramedics, emergency medical technicians, rescue workers, ambulance personnel, or hazardous materials workers who: (1) are trained in fire suppression, have the legal authority and responsibility to engage in fire suppression, and are employed by a fire department of a municipality, county, fire district, or state, and (2) are engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk. 29 U.S.C. § 203(y).

Notably, the FLSA does not place a limit on how much nonexempt work a worker employed in fire protection activities may perform. As long as the employee satisfies the criteria in Section 203(y), she is “employed in fire protection activities” as far as the FLSA is concerned.

Under the FLSA, law enforcement personnel are employees who are (1) empowered by state or local ordinance to enforce laws designed to maintain peace and order, protect life and property, and to prevent and detect crimes; (2) who have the power to arrest; and (3) who have undergone training in law enforcement. 29 C.F.R. § 553.211(a).

Law enforcement personnel may perform some nonexempt work that is not performed as an incident to or in conjunction with their law enforcement activities. But a worker who spends more than 20 percent of the workweek or applicable work period in nonexempt activities is not considered to be an “employee engaged in law enforcement activities” for the purposes of the FLSA. 29 C.F.R. ¶ § 553.212.

Additionally, fire protection and law enforcement employees may at their own option perform special duty work in fire protection and law enforcement for a separate and independent employer without including those wages and hours in regular rate or overtime determinations for the primary public employer. 29 U.S.C. § 207(p)(1).

Compensatory Time in Lieu of Cash Overtime

Like other employees of other public agencies, firefighters and police officers may receive a certain amount of “compensatory time” in lieu of cash overtime wages. Compensatory time is paid time off. Under certain circumstances, the FLSA allows public fire departments and police departments to give nonexempt employees who work overtime hours compensatory time off, instead of cash overtime pay. The amount of compensatory time off the employer gives should correspond to the overtime rate — that is, firefighters and police officers must receive at least one and one-half hours of paid time off for each overtime hour worked. 29 U.S.C. § 207(o). The FLSA further provides that fire departments and police departments, like other public agencies, must allow employees to use their compensatory time with a “reasonable period” of time after they make a request, unless doing so would “unduly disrupt” the operations of the agency. 29 U.S.C. §§ 207(o)(5). Generally, this means fire departments and police departments in normal circumstances should allow employees to use compensatory time on the dates they request.

Special Limits on Accrued Compensatory Time for Firefighters and Police

Compensatory time can accumulate, similar to vacation time. Importantly, as with other public employees, if firefighters and police officers do not use their accumulated compensatory time, under certain circumstances the FLSA entitles them to receive cash compensation. 29 U.S.C. § 207(o)(3)-(4). The FLSA also places special limits, different from the limits for other public employees, on the amount of compensatory time that fire protection and law enforcement personnel may receive in lieu of cash overtime wages. Law enforcement, fire protection, and emergency response personnel and employees engaged in seasonal activities may accrue up to 480 hours of comp time (representing 320 overtime hours worked). 29 U.S.C. § 207(o)(3)(A). This is different from other public employees, who may accrue up to 240 hours of compensatory time (representing 160 hours of overtime worked). Once a fire protection or law enforcement employee accrues the maximum amount of unused compensatory time hours — 480 — she must be paid cash overtime wages for all additional overtime hours. 29 U.S.C. § 207(o)(3)(A).

Significantly, the Supreme Court has held that the Fair Labor Standards Act does not prohibit public employers from compelling employees to use compensatory time. Christensen v. Harris County, 529 U.S. 576 (2000).

Special Overtime Calculation Rules for Firefighters and Police

The FLSA provides that covered nonexempt employees in most lines of work are entitled to overtime pay (or compensatory time in lieu of overtime pay) for all hours worked in excess of 40 in a 7-day workweek. That is not necessarily the case for firefighters and police officers. Because the work schedules of firefighters and police officers traditionally differ from a standard 40-hour per seven-day workweek, the FLSA provides some special rules for calculating overtime compensation (or compensatory time) for fire protection and law enforcement personnel.

Specifically, fire departments or police departments may establish a work period ranging from 7 to 28 days in which overtime need be paid only after a specified number of hours in each work period. 29 U.S.C. § 207(k). In the case of a 28-day work period, fire protection employees are entitled to overtime pay (or compensatory time) for hours worked in excess of 212 hours during the period, while law enforcement personnel are entitled to overtime pay (or compensatory time) for hours worked in excess of 171 hours during the period. 29 C.F.R. § 553.230(a)-(b).

In the case of fire protection or law enforcement employees who have a work period of at least 7 but less than 28 consecutive days, overtime compensation is required when the ratio of the number of hours worked to the number of days in the work period exceeds the ratio of 212 (or 171) hours to 28 days. 29 C.F.R. § § 553.20129 C.F.R. § 553.230 (conversion table for ratios). For fire protection personnel, that ratio works out to 7.57 hours per day (rounded); for law enforcement personnel, that ratio works out to 6.11 hours per day (rounded).  29 C.F.R. § 553.230(c).

Maximum Hours by Work Period for Fire Protection and Law Enforcement Personnel 

Here is a copy of the maximum hours conversion table, showing the amount of hours fire protection or law enforcement may work during a work period, depending on the length of the work period, above which overtime pay or compensatory time is required:

Work Period (Days) Maximum Hour Standards:
Fire Protection
Maximum Hour Standards:
Law Enforcement
28 212 171
27 204 165
26 197 159
25 189 153
24 182 147
23 174 141
22 167 134
21 159 128
20 151 122
19 144 116
18 136 110
17 129 104
16 121 98
15 114 92
14 106 86
13 98 79
12 91 73
11 83 67
10 76 61
9 68 55
8 61 49
7 53 43

29 C.F.R. § 553.230.

Payment of Accrued Compensatory Time at Termination

At the end of a fire protection or law enforcement employee’s employment, she is generally entitled to receive a cash payment for any unused compensatory time. Because rates of pay may vary over the course of employment, the FLSA provides specific instructions for calculating the cash value of unused compensatory time. Specifically, like other public agency employees, at the time of termination, a fire protection or law enforcement employee must be paid the higher of

(A) the average regular rate during her last three years of employment, or

(B) her final regular rate of pay,

for any unused accrued compensatory time remaining when the termination occurs. 29 U.S.C. § 207(o)(4).

Exemption for Small Fire and Police Departments

The FLSA also provides an overtime exemption for very small fire departments and police departments. Specifically, any employee who in any workweek is employed by an agency employing fewer than 5 employees in fire protection or law enforcement may be exempt from overtime. 29 U.S.C. § 213(b)(20).

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.net.

Christensen v. Harris County: Compelled Use of FLSA Compensatory Time

In Christensen v. Harris County, 529 U.S. 576 (2000), the Supreme Court held that the Fair Labor Standards Act does not prohibit public employers from compelling employees to use compensatory time.

Background

The Fair Labor Standards Act allows public employers (including states and their political subdivisions) to compensate employees for overtime work by granting them compensatory time instead of paying them a cash overtime wage. 29 U.S.C. § 207(o). Compensatory time is paid time off. To comply with this part of the FLSA, the public employer must provide the compensatory time at a rate not less than one and one-half hours for each hour of overtime worked. Id. Compensatory time can accumulate, like vacation time. Importantly, if employees do not use their accumulated compensatory time, under certain circumstances the FLSA requires the public employer to pay the employees cash compensation. 29 U.S.C. §§ 207(o)(3)-(4).

Facts

Employees in Harris County accumulated a great volume of unused compensatory time. This caused Harris County to worry that a budget crisis would result if it had to pay its employees for their accrued unused compensatory time. In an effort to avoid that situation, the county adopted a policy requiring its employees to schedule time off. The county’s reasoning was that requiring time off would reduce the amount of accrued compensatory time among its workers, thereby reducing the likelihood of a budget crisis from having to pay for unused compensatory time.

Ed Christensen was a Harris County deputy sheriff. He and a group of fellow deputy sheriffs sued the county, claiming the policy of requiring employees to use their compensatory time violated the FLSA. Christensen argued that the FLSA does not permit an employer to compel an employee to use compensatory time in the absence of an agreement allowing the employer to do so. The District Court ruled for Christensen and entered a declaratory judgment that the county’s policy violated the FLSA. The Fifth Circuit reversed. It held that the FLSA did not address the issue of compelling the use of compensatory time and therefore did not prohibit the county from implementing its policy.

The Court’s Decision

The Supreme Court affirmed, holding that neither the text of the FLSA nor its implementing regulations prohibits a public employer from compelling its employees to use their compensatory time.

First, the Court rejected Christensen’s argument that § 207(o)(5) of the FLSA implicitly prohibits compelled use of compensatory time in the absence of an agreement. That section provides that an employer must grant an employee’s request to use her compensatory time unless doing so would unduly disrupt the employer’s operations. 29 U.S.C. § 207(o)(5). Citing Raleigh & Gaston R. Co. v. Reid, 13 Wall. 269, 270 (1872) for the proposition that when a statute limits a thing to be done in a particular mode, it implicitly disallows any other mode, Christensen argued that because § 207(o)(5) allowed only an employee to require the use of compensatory time, that section implicitly prohibited an employer from requiring the use of compensatory time. Id. at 583-84. The Court disagreed with that conclusion. Instead, it found that the only “negative inference” to be drawn from § 207(o)(5) was that an employer may not deny a request for any reason other than that provided in § 207(o)(5). Id. Thus, the section did not prohibit employers from compelling the use of compensatory time.

The Court went on to explain that the purpose of § 207(o)(5) was to ensure that an employee receive “some timely benefit for overtime work.” Id. at 584. The FLSA’s nearby provisions reflect a similar concern. For example, § 207(o)(3)(A) provides that workers may not accrue more than 240 or 480 hours of compensatory time, depending upon the nature of the job. This provision “helps guarantee that employees only accrue amounts of compensatory time that they can reasonably use.” Christensen at 584. Similarly, the Court observed that § 207(o)(2)(B) conditions an employer’s ability to provide compensatory time (in lieu of paying cash overtime wages) upon the employee not accruing compensatory time in excess of the § 207(o)(3)(A) limits. Thus, these provisions, like § 207(o)(5), reflect a legislative concern that employees receive “some timely benefit in exchange for overtime work.” Christensen at 584.

The Court therefore concluded that the best reading of the FLSA is that it ensures liquidation of compensatory time. The law places restrictions on an employer’s ability to prohibit employees from using their compensatory time. But it says nothing about restricting an employer’s efforts to require employees to use the time. Id. at 585. Because the FLSA text is silent on this issue and because the county’s policy was compatible with § 207(o)(5), the Court held that Christensen could not, as § 216(b) of the FLSA requires, prove that the county violated the FLSA’s overtime provisions.

The Court further noted that two other features of the FLSA supported its reading that the FLSA did not prohibit employers from compelling the use of compensatory time. First, the FLSA allows employers to decrease the number of hours that employees work. Id. at 585 (citing Barrentine v. Arkansas—Best Freight System, Inc., 450 U.S. 728, 739 (1981) (“[T]he FLSA was designed … to ensure that each employee covered by the Act … would be protected from the evil of overwork …”). And second, the FLSA expressly allows employers to cash out accumulated compensatory time by paying the employee her regular hourly wage for each hour accrued. Id. at 585 (citing 29 U.S.C. § 207(o)(3)(B) & 29 CFR § 553.27(a)(1999). Thus, the FLSA allows an employer to require an employee to take time off work, and to use the money it would have paid in wages to cash out accrued compensatory time. Id. at 585. The Court concluded that Harris County’s policy of compelling the use of compensatory time “merely involves doing both of these steps at once.” Id. at 586.

Christensen also argued, unsuccessfully, that employers were prohibited from compelling the use of compensatory time pursuant a Department of Labor opinion letter. In that letter, the DOL concluded that an employer may compel the use of compensatory time only if the employee has agreed in advance to such a practice. Id. at 586-87. The Court observed that the opinion letter was not entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), because interpretations contained in opinion letters — similar to policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law — do not warrant Chevron deference. While “persuasive” interpretations in opinion letters are “entitled to respect” under Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944) the Court concluded DOL’s interpretation was not persuasive. Id. at 587.

While Chevron deference does apply to an agency interpretation contained in a regulation, the regulation at issue, 29 CFR § 553.23(a)(2), provided only that “[t]he agreement or understanding [between the employer and employee] may include other provisions governing the preservation, use, or cashing out of compensatory time so long as these provisions are consistent with [§ 207(o)].” Id.; Christensen at 587-88. The Court concluded that nothing in 29 CFR § 553.23(a)(2) “even arguably” requires that an employer’s compelled use policy must be included in an agreement. Id. 588. Thus, Chevron deference did not apply. Lastly, deference to an agency’s interpretation of its regulation is warranted under Auer v. Robbins, 519 U.S. 452, 461 (1997), only when the regulation’s language is ambiguous. The Court held that the DOL’s regulation was not ambiguous, and therefore the DOL’s interpretation of that regulation was not entitled to Auer deference. Id. at 588.

Analysis

In sum, Christensen held that the FLSA does not prohibit public employers from compelling their employees to use their accrued compensatory time. While this issue is not specifically addressed in the text of the FLSA, the law does not explicitly prohibit this practice, and the conclusion that public employers may compel the use of compensatory time is consistent with other aspects of the FLSA that allow an employer to require employees to take time off from work and to use the money it would have paid in wages to cash out accrued compensatory time.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Wage Law Basics for Public Employees

The Fair Labor Standards Act requires covered employers to pay minimum wages and overtime compensation to certain categories of employees. The rights afforded by the FLSA apply to employees in the private sector as well as employees of state and local governments. However, the FLSA contains some unique provisions that apply only to state and local government employers and their employees. This post summarizes some of those provisions. The US Department of Labor is also an excellent resource for information about the FLSA rights of state and local government employees.

State and Local Government Employer Coverage 

The FLSA defines a covered “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency[.]” 29 U.S.C. §§ 203(d). It goes on to define “public agency” as “the Government of the United States; the government of a State or political subdivision thereof; any agency of the United States … a State, or a political subdivision of a State; or any interstate governmental agency. 29 U.S.C. §§ 203(x). The FLSA therefore applies to state and local government employers. Notably, the definition of “public agency” does not extend to private companies that engage in activities often performed by public employees, such as government contractors.

Coverage of State and Local Government Employees

The FLSA also makes clear that its rights apply to public agency employees under the law’s “enterprise” coverage provision. 29 U.S.C. § 203(s)(1)(C).

General Requirements 

As with private employers, the FLSA generally requires public agency employers to pay all covered nonexempt employees at least the federal minimum wage, which is currently $7.25 per hour. 29 U.S.C. § 206(a). The FLSA also requires public agency employers to comply with the law’s youth employment standards and recordkeeping requirements. 29 U.S.C. § 206(g) (youth employment standards ) &  29 C.F.R. § 516 (recordkeeping requirements). And as with private employers, the FLSA generally requires public agency employers pay covered nonexempt employees overtime compensation — that is, wages equal to at least one and one-half times the employees’ regular rates of pay for all hours worked over 40 in the workweek. 29 U.S.C. § 207(a).

Compensatory Time for Public Agency Employees

Unlike private employers, however, public agencies may have the option of offering covered employees a certain amount of “compensatory time” in lieu of paying them cash overtime wages. Compensatory time is paid time off. Under certain circumstances, the FLSA allows state and local government agencies to give nonexempt employees who work overtime hours compensatory time off, instead of cash overtime pay. The amount of compensatory time off the employer gives should correspond to the overtime rate — that is, public employees must receive at least one and one-half hours of paid time off for each overtime hour worked. 29 U.S.C. § 207(o). The FLSA further provides that a public agency must allow employees to use their compensatory time with a “reasonable period” of time after they make a request, unless doing so would “unduly disrupt” the operations of the agency. 29 U.S.C. §§ 207(o)(5). Generally, this means public agencies in normal circumstances should allow employees to use compensatory time on the dates they request.

Accrual of Compensatory Time and Limits

Much like vacation time voluntarily offered by some employers, compensatory time can accumulate. Importantly, if employees do not use their accumulated compensatory time, under certain circumstances the FLSA requires the public agency employer to pay the employees cash compensation. 29 U.S.C. § 207(o)(3)-(4). The FLSA also places limits on the amount of compensatory time that a public agency may give an employee in lieu of paying cash overtime wages. Law enforcement, fire protection, and emergency response personnel and employees engaged in seasonal activities may accrue up to 480 hours of compensatory time (representing 320 overtime hours worked). 29 U.S.C. § 207(o)(3)(A). All other state and local government employees may accrue up to 240 hours (representing 160 overtime hours worked). Id. Once an employee accrues the maximum amount of unused compensatory time hours — either 480 or 240, as the case may be — the public agency employer must pay that employee cash overtime wages for all additional overtime hours. 29 U.S.C. § 207(o)(3)(A).

Payment for Accrued Compensatory Time at Termination

At the end of a public agency employee’s employment, she is generally entitled to receive a cash payment for any unused compensatory time. Because rates of pay may vary over the course of employment, the FLSA provides specific instructions for calculating the cash value of unused compensatory time. Specifically, at the time of termination a public agency employee must be paid the higher of (A) the average regular rate during her last three years of employment, or (B) her final regular rate of pay, for any unused accrued compensatory time remaining when the termination occurs. 29 U.S.C. § 207(o)(4).

Possible Differences in Calculation of Overtime Pay – Special Cases

For certain categories of public agency employees, the calculation of overtime pay may differ from the general requirements of the FLSA. For example:

  • For employees who solely at their option occasionally or sporadically work on a part-time basis for the same public agency in a different capacity than the one in which they are normally employed, the hours worked in the different employment may be excluded by the public agency in calculating hours for which the employee is entitled to overtime compensation. 29 U.S.C. § 207(p)(2) & 29 CFR § 553.30;
  • For employees who at their option with approval of the agency substitute for another during scheduled work hours in the same work capacity, the hours the employee worked as a substitute may be excluded by the public agency in calculating hours for which the employee is entitled to overtime compensation. 29 U.S.C. § 207(p)(3);
  • Employees who meet exemption requirements for Executive, Administrative, Professional or Outside Sales occupations may be exempt from overtime pay. 29 U.S.C. § 213(a)(1);
  • Hospital or residential care establishments may, with agreement or understanding of employees, adopt a fixed work period of 14 consecutive days and pay overtime after 8 hours in a day or 80 in the work period, whichever is greater. 29 U.S.C. § 207(j);
  • For mass transit employees who spend some time engaged in charter activities, under certain circumstances the employer, in calculating the overtime rate, may exclude the hours the employee was employed in charter activities if (1) the employee’s employment in such activities was pursuant to an agreement or understanding with his employer arrived at before engaging in such employment, and (2) if employment in such activities is not part of such employee’s regular employment. 29 U.S.C. § 207(n)
  • Employees working in separate seasonal amusement or recreational establishments such as swimming pools, parks, etc., may be exempt from overtime pay. 29 U.S.C. § 213(a)(3).

Importantly, some states with concurrent wage laws may not recognize or allow some or all of the above exemptions. Because employers must comply with the most stringent of the state or federal provisions, it is imperative that employers review applicable state laws before applying any of these exclusions or exemptions.

Special Rules for Firefighters and Law Enforcement Personnel

The FLSA also provides some special rules for fire protection and law enforcement personnel — public employees whose work schedules traditionally differ from a 40-hour per seven-day workweek.

Under the FLSA, fire protection personnel include firefighters, paramedics, emergency medical technicians, rescue workers, ambulance personnel, or hazardous materials workers who: (1) are trained in fire suppression, have the legal authority and responsibility to engage in fire suppression, and are employed by a fire department of a municipality, county, fire district, or state, and (2) are engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk. 29 U.S.C. § 203(y).

Notably, the FLSA does not place a limit on how much nonexempt work a worker employed in fire protection activities may perform. As long as the employee satisfies the criteria in Section 203(y), she is “employed in fire protection activities” as far as the FLSA is concerned.

Under the FLSA, law enforcement personnel are employees who are (1) empowered by state or local ordinance to enforce laws designed to maintain peace and order, protect life and property, and to prevent and detect crimes; (2) who have the power to arrest; and (3) who have undergone training in law enforcement. 29 C.F.R. § 553.211(a).

Law enforcement personnel may perform some nonexempt work that is not performed as an incident to or in conjunction with their law enforcement activities. But a worker who spends more than 20 percent of the workweek or applicable work period in nonexempt activities is not considered to be an “employee engaged in law enforcement activities” for the purposes of the FLSA. 29 C.F.R. § 553.212.

Additionally, fire protection and law enforcement employees may at their own option perform special duty work in fire protection and law enforcement for a separate and independent employer without including the wages and hours in regular rate or overtime determinations for the primary public employer. 29 U.S.C. § 207(p)(1).

For the purposes of calculating overtime worked, the FLSA also allows fire departments and police departments to establish special work periods that differ from the traditional 7-day workweek. Specifically, fire departments or police departments may establish a work period ranging from 7 to 28 days in which overtime need be paid only after a specified number of hours in each work period. 29 U.S.C. § 207(k). In the case of a 28-day work period, fire protection employees are entitled to overtime pay (or compensatory time) for hours worked in excess of 212 hours during the period, while law enforcement personnel are entitled to overtime pay (or compensatory time) for hours worked in excess of 171 hours during the period. 29 C.F.R. § 553.230(a)-(b).

In the case of fire protection or law enforcement employees who have a work period of at least 7 but less than 28 consecutive days, overtime compensation is required when the ratio of the number of hours worked to the number of days in the work period exceeds the ratio of 212 (or 171) hours to 28 days. 29 C.F.R. § § 553.20129 C.F.R. § 553.230 (conversion table for ratios). For fire protection personnel, that ratio works out to 7.57 hours per day (rounded); for law enforcement personnel, that ratio works out to 6.11 hours per day (rounded).  29 C.F.R. § 553.230(c).

The FLSA also provides an overtime exemption for very small fire departments and police departments. Specifically, any employee who in any workweek is employed by an agency employing fewer than 5 employees in fire protection or law enforcement may be exempt from overtime. 29 U.S.C. § 213(b)(20).

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.net.

Independent Contractor v. Employee: Law of Economic Realities

In cases under the Fair Labor Standards Act, a question sometimes arises as to whether a worker is an independent contractor or an employee. The answer can be important, as an employee may have rights to minimum wage and overtime compensation that an independent contractor performing the same basic job tasks does not.  

To determine whether a worker is an employee under the FLSA, courts in the Fourth Circuit look to the “economic realities” of the relationship between the worker and the putative employer.

McFeeley v. Jackson St. Entm’t, LLC, 825 F.3d 235, 241 (4th Cir. 2016) (quoting Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006)). The touchstone of the “economic realities” test is whether the worker is “economically dependent on the business to which he renders service or is, as a matter of economic [reality], in business for himself.” Id. If the practical economic reality is that the worker is “economically dependent” on the putative employer and not “in business for himself[,]” the worker will generally be considered an employee qualified for FLSA rights. Id

Economic Realities Test

In making this determination, courts applying the economic realities test consider six factors:

(1) [T]he degree of control that the putative employer has over the manner in which the work is performed;

(2) the worker’s opportunities for profit or loss dependent on his managerial skill;

(3) the worker’s investment in equipment or material, or his employment of other workers; 

(4) the degree of skill required for the work; 

(5) the permanence of the working relationship; and 

(6) the degree to which the services rendered are an integral part of the putative employer’s business. 

McFeeley, 825 F.3d at 241. These factors are often called the “Silk factors” in reference to United States v. Silk, 331 U.S. 704 (1947), the Supreme Court case from which they derive. See Schultz at 305.

Generally speaking, the greater the degree of control the putative employer has over the manner in which the work is performed, the greater the permanence of the working relationship, and the greater the degree to which the worker’s services are an integral part of the putative employer’s business, the more likely the worker is an “employee” under the economic realities test. Similarly, the fewer opportunities the worker has for profit or loss dependent on his managerial skill, the less the worker invests in equipment, material, or employment of other workers, and the lower degree of skill required for the work, the more likely the worker is an “employee” under the economic realities test. 

Application

For example, in Schultz, the plaintiff security workers worked jointly for a Saudi prince and a security firm. The Fourth Circuit found the prince and security firm exercised nearly complete control over how the workers did their jobs. Further, the workers had no opportunity for profit or loss dependent on their managerial skills, as they were paid a set rate per shift. Additionally, the firm and prince supplied the workers with all the necessary equipment, including cell phones, cars, firearms, and cameras. With respect to the fourth factor, although some security duties required special skills, others did not. As to the permanence of the relationship, the prince employed some workers for several years and preferred to hire workers who would stay with him over the long term. And the services rendered by the workers were integral to the security firm’s business, as the firm’s only function was to provide security for the prince, and workers were hired specifically to perform that task. Considering these facts under the economic realities test, the Fourth Circuit concluded the security workers “were not in business for themselves” and “thus were thus employees, not independent contractors.” Schultz, 466 F.3d at 309.

Similarly, in McFeeley, the plaintiff exotic dancers worked for dance clubs. The Fourth Circuit found that the clubs exercised significant control over how the dancers performed their work. That control included dictating dancers’ schedules, imposing written guidelines that all dancers had to obey during working hours, setting fees the dancers were supposed to charge patrons for private dances, and dictating how tips and fees were handled. Further, the dancers’ opportunities for profit or loss depended far more on the clubs’ management and decision-making than their own; the club owners’ investment in the clubs’ operation far exceeded the dancers’ investment; the job duty of dancing at the clubs required a relatively minimum degree of skill; and the dance clubs could not function without exotic dancers. Therefore, the dancers were employees of dance clubs under the FLSA, rather than independent contractors. McFeeley, 825 F.3d 235, 242-244.

And in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the plaintiff drywall installers worked for a subcontractor of a larger company that offered general contracting and interior finishing services, including drywall installation, carpentry, framing, and hardware installation. The workers were economically dependent on the subcontractor alone, making them necessarily economically dependent on the contractor and subcontractor jointly. Due to the contractor’s daily supervision of these workers, it exercised greater control over their work than the subcontractor exercised alone. Further, the contractor provided all of the materials, supplies, tools, and equipment that workers used for their work. On these facts, the Fourth Circuit determined the drywall installers were employees covered by FLSA, rather than independent contractors, based on their entire employment for both the framing and drywall installation subcontractor and general contractor. Id. at 150-151.

Summary

In summary, Fourth Circuit courts determine whether a worker is an employee or an independent contractor by looking to the “economic realities” of the relationship between the worker and the putative employer. The outcome is important because an employee may have rights to minimum wage and overtime compensation under the FLSA that an independent contractor performing the same basic job tasks does not. The “economic realities” test turns on whether the worker is economically dependent on the business to which he renders service or is, as a matter of economic reality, in business for himself. If the practical economic reality is that the worker is economically dependent on the putative employer and not in business for himself, the worker will generally be considered an employee qualified for FLSA rights. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.net.