By Fran DeLuca | While many workers are enjoying vacations this summer, the federal department charged with enforcing our nation’s wage and hour laws has been busy. The U.S Department of Labor (DOL), particularly the Wage-and-Hour Division (WHD), has been actively publishing guidance, proposing regulations, investigating industries, and litigating in the courts.
Focus on Misclassification of Employees as Independent Contractors
Reflecting DOL’s continuing focus on the misclassification of employees as independent contractors, WHD’s Administrator recently released an Administrator’s Interpretation stressing that “the scope of the employment relationship is very broad.”
This is a reminder to employers that “most workers are employees under the FLSA.” When determining whether a worker is an “employee” or “independent contractor,” labels are irrelevant. Instead, an employer must ask “whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).”
Employers must pay close attention to answering this question, given the potential penalties for noncompliance and WHD’s enforcement efforts in this arena. For instance, in 2014, alone, misclassification investigations resulted in nearly $80 million in back wages for over 100,000 workers.
Proposed Regulations Regarding White-Collar Exemptions
Earlier this month, DOL proposed to more than double the minimum salary for “white-collar” exemptions under the FLSA. White-collar employees are exempt from the FLSA’s minimum wage and maximum hour requirements if they satisfy two tests: the “salary basis” test and the “primary duties” test.
Currently, employees satisfy the salary basis test if their salary is $455 per week. The proposed regulations, if adopted, would raise the salary threshold to $970 per week and would automatically update that figure going forward to “prevent the level from becoming outdated.” Notably, the proposed regulations do not affect the “primary duties” test or other exemptions not tied to the “salary basis” test, such as the computer-professionals exemption. (Learn more here.) The comment period on the proposed regulation changes ends on September 4th.
Interest in Restaurants
DOL has taken a heightened interest in the restaurant industry over the past year. The laws governing restaurant-employers are not as straightforward as some may think. For instance, though the FLSA permits a restaurant-employer to pay tipped employees $2.13 per hour instead of the federal minimum wage, a restaurant-employer may do so only if it informs employees of this decision and can show that employees receive at least the federal minimum wage when wages and tips are combined.
Also, when calculating overtime pay, a restaurant-employer must remember that the applicable rate is one and one-half times the federal minimum wage, not the $2.13-per-hour wage. These are only some of the pitfalls a restaurant-employer may face.
Second Circuit Rejects DOL’s Test for Unpaid Interns
Students and recent graduates seeking meaningful work experience in New York, Connecticut, and Vermont (states subject to the jurisdiction of the U.S. Court of Appeals for the Second Circuit) may find it easier to land a beneficial internship in the for-profit sector.
In a pair of cases, Glatt v. Fox Searchlight Pictures, Inc. and Wang v. Hearst Corp., the court declined to apply DOL’s six-factor all-or-nothing test to determine whether a worker is an employee or an unpaid intern. (All six factors must be met in order to have no employment relationship with an intern.)
Instead, the Court announced a more flexible “primary beneficiary” test and asked whether the intern or the employer is the primary beneficiary of the internship. If the intern is the primary beneficiary, an unpaid internship is permissible. If the employer is the primary beneficiary, the intern will be classified as an employee, subject to the FLSA’s minimum wage and maximum hour requirements. Though Glatt and Wang may make unpaid internships more widely available to employers in the Second Circuit, it remains to be seen how the decision will influence other courts across the nation.
For more information, contact Roger Hood at Duffy & Sweeney.