Third Circuit: No FLSA "Overtime Gap Time" Claims

 In DOL v. Comprehensive Healthcare Management Services LLC, the Third Circuit held that "overtime gap time" claims under the FLSA are not actionable. Imagine this scenario:

Category	Hours	Rate	Compensation
Straight time paid	38	$20	$760
Overtime paid	3	$30	$90
Straight time unpaid	2	$20	$40
Total paid			$850
Total contractually owed			$890

Under the FLSA, the employee should receive $890. 40 hours straight time at the regular rate of $20/hour (40 * $20 = $800) plus 3 hours at 1.5x their regular rate (3 * $30 = $90). In our hypothetical, the employee was not paid for two of their non-overtime hours and effectively short-changed by $40. 

Can the employee (or in this case, DOL), bring a claim for those unpaid hours? Nope. Why? At the risk of oversimplifying, the Third Circuit effectively held that the FLSA does *two* things: employees must get paid 1.5x their regular rate for overtime, and must be paid at least minimum wage. In our hypothetical, the employer did both. So, no FLSA claim. 

Now, super-important caveat! Other laws exist - so, for example, in Pennsylvania this employee would presumably have a claim for the unpaid wages under the Pennsylvania Wage Payment and Collection Law (WPCL). However, the Third Circuit's decision still matters for a variety of reasons:

• Jurisdiction: WPCL claims will ordinarily be in state court and not federal (unless there is diversity jurisdiction or some other federal claim);
• Liquidated Damages: The FLSA allows for *double* damages as liquidated damages, whereas the WPCL only allows for the greater of 25% or $500 in liquidated damages; and
• Agency Enforcement: The U.S. DOL would not have enforcement authority (though the PA DLI would). 

One final note: This creates a circuit split (the Fourth Circuit allows such claims), so this may be an issue that SCOTUS takes up. 

Third Circuit: Home Health Aide travel time between client sites is compensable under the FLSA

Time spent by Home Health Aides (HHAs) traveling between client sites is compensable time under the FLSA and therefore must be paid time. This remains true even if the HHA has some off-duty time immediately before or after the travel.
DOJ v. Nursing Home Care Management, Inc. (3d Cir., Jan. 31, 2025). 

SCOTUS: Preponderance of the evidence standard for FLSA exemptions

New Supreme Court Decision! Today, the Supreme Court held that employers looking to prove an employee is exempt from the minimum wage and overtime requirements of the FLSA must do so by a "preponderance of the evidence." This is, of course, the standard burden of proof in civil litigation. Some courts, however, had applied a higher standard like "clear and convincing evidence." Here in the Third Circuit, some cases have used language like "plainly and unmistakably." Today's decision makes clear that preponderance of the evidence is the standard.

You can read the full decision here. 

DOL Proposes Phase Out of Subminimum Wages for Some Employees with Disabilities

The Department of Labor announced a proposed rule that would phase out certificates allowing payment of less than minimum wage to some workers with disabilities. Press release here. 

As summarized by the DOL in the proposed rule:

The Fair Labor Standards Act (FLSA or Act) authorizes the Secretary of Labor to issue certificates allowing employers to pay productivity-based subminimum wages to workers with disabilities, but only where such certificates are necessary to prevent the curtailment of opportunities for employment.

The actual proposal is summarized as:

Not official use. 

The Department specifically proposes to cease issuance of new section 14(c) certificates to employers submitting an initial application on or after the effective date of a final rule and permit existing section 14(c) certificate holders, assuming all legal requirements are met, to continue to operate under section 14(c) certificate authority for up to 3 years after the effective date of a final rule. The Department is also requesting comment as to whether, if this proposed rule is finalized, it would be appropriate to grant an extension for existing section 14(c) certificate holders who demonstrate a need and seeks comments on the need for such an extension period, and, if needed, its scope, structure and length. 

Given the pending change of administrations, we will have to wait and see if this actually gets finalized and goes into effect.

Court Strikes Down DOL Overtime Rule

Stop me if you've heard this one! It's just before Thanksgiving, we just had a presidential election (in which Donald Trump got elected), and a new regulation increasing the minimum salary threshold for the white collar overtime exemptions is about to go into effect, when . . . a court strikes the rule down in its entirety nationwide. Yes, that happened in 2016 to the Obama DOL overtime rule. Guess what? It just happened again to the Biden DOL overtime rule. 

Long story short: Certain white collar salaried employees are exempt from the FLSA's overtime requirements (i.e. they do not get paid time and a half for hours over 40 worked in a workweek). To qualify for the exemption the employee's must receive a salary in excess of a minimum salary threshold. It was $684 per week under a Trump administration rule. The Biden administration's rule increased the minimum to $844/week on July 1, 2024 and was scheduled to increase to $1,128/week on January 1, 2025. 

Not official use. 

The new rule would also have increased the minimum for the Highly Compensated Employee (HCE) exemptions ($132,964 on July 1, 2024, and $151,164 on January 1, 2025). The new rule included other more minor changes (future automatic increases, counting nondiscretionary bonuses, catchup payments, etc.).

On Friday, a federal court in Texas struck down the whole rule (opinion via Bloomberg Law). 

Just tell me what this means!

The entire rule has been vacated. Yes, even the part that already went into effect in July. So, we're back to $684/week as the minimum salary threshold for the white collar exemptions. 

Caveat: We may see an appeal, and we don't know how an appeals court will rule. We also don't know how the incoming Trump administration will handle those appeals (and/or whether it will propose a new rule of its own or repeal the Biden Rule). 

Video from Wage and Hour Presentation (FLSA Overtime Regulations)

On August 1, 2024, Jens Thorsen and Valhalla Business Advisors invited me to speak about recent developments in wage and hour law. It was a solid mix of fundamentals, and the new FLSA overtime regulations (with some Pennsylvania Minimum Wage Act thrown in for good measure). You can view the recording of Emerging HR Updates Seminar Overtime Rules '24. 

DOL Issues Final Rule: Employee or Independent Contractor Under the FLSA

On Tuesday, the U.S. Department of Labor announced its Final Rule: Employee or Independent Contractor Under the Fair Labor Standards Act. A quick overview:

Effective Date: 

March 11, 2024

Why it matters: 

The FLSA sets a minimum wage and requires overtime pay (time and a half for hours over 40 worked in a workweek). It also imposes certain recordkeeping requirements, and prohibits retaliation for filing complaints about violations. Simply put, this all applies to employees but not independent contractors. 

Not official use.

Shut up and tell me the test!

The final rule utilizes the "economic realities test," examining the "totality of the circumstances" where "economic dependence is the ultimate inquiry." The rule provides a non-exhaustive list of six factors, none of which is dispositive on its own:

1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and the potential employer;
3. The degree of permanence of the work relationship; 
4. The nature and degree of control; 
5. The extent to which the work performed is an integral part of the potential employer’s business; and 
6. Skill and initiative.

If you're looking for more in-depth guidance on applying these factors - great news! - the final rule is 339 pages long. Sorry, too much? Check out the FAQ page for something in between this very brief overview and the full 339-page rule. 

Overtime and Noncompete Regulations to Plan for in 2024

What better way to kick off the new year than with my latest article in Pennsylvania Business Central? The article addresses Overtime and Noncompete Regulations to Plan for in 2024. Will they actually take effect? We don't know yet. But, employers should start planning just in case.

SCOTUS: Day Rate does not meet salary basis requirement

I'm not sure how this is possible, but I tend to agree with the majority and both dissents in the latest Supreme Court decision. Yesterday, SCOTUS issued its opinion in Helix Energy Solutions Group, Inc. v. Hewitt. 

The case dealt with a highly compensated employee who earned over $200,000 annually and performed executive duties. The employer treated him as an exempt employee and did not pay him overtime. The employee, however, was paid a daily rate of $963 (which changed at one point to $1,341). 

The "critical question," according to the majority, was whether this daily rate met the "salary basis test" - to be an exempt employee under the white collar (and corresponding highly compensated employee) exemptions, an employee must be paid on a salary basis. Per the FLSA regs:

Justice Kagan

An employee will be considered to be paid on a ‘salary basis’ . . . if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to [certain exceptions], an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”

29 CFR §541.602(a). 

Ultimately, the majority (opinion by Justice Kagan) reached the rather uncontroversial conclusion that paying someone a set rate "per day" does not meet the requirement that they be paid a weekly salary. 

Justice Gorsuch, however, had a rather compelling dissent noting that SCOTUS granted certiorari to decide a totally different question (and the briefs barely touched on the majority's "critical question") - he would have dismissed the case as improvidently granted. 

Justices Kavanaugh and Alito likewise make a compelling argument based on the actual facts of this particular employee. Here, the employee was paid more (at least $963) than the weekly salary requirement  (then $455) for any day he worked. Thus, any week in which he worked he would necessarily be guaranteed an amount in excess of the salary requirement for that week. Indeed, "this case would be different if Hewitt had been guaranteed, say, only $250 per day that he worked."

DOL proposes new independent contractor rule

Ah, one of the joys of being an employer (or employment lawyer) . . . the way the law just magically changes depending on who is president. The Fair Labor Standards Act (FLSA) is 84 years old, and yet we still don't quite know how to determine who is a covered "employee." Late last week, the Department of Labor issued a notice of proposed rulemaking (NPRM) for determining employee or independent contractor classification under the FLSA (News Release here).  

Long story, short: more workers will be classified as employees under the new rule. The new rule would apply a "totality-of-the-circumstances" analysis to the "economic realities test." The "ultimate inquiry" is whether the worker is "economically dependent on an employer for work." DOL has identified six factors to use as a "guide" in this analysis:

• Opportunity for profit or loss depending on managerial skill;

• 

  Not official use.

  Investments by the worker and the employer;
• Degree of permanence of the work relationship;
• Nature and degree of control;
• Extent to which the work performed is an integral part of the employer's business; and
• Skill and initiative.

Sound convoluted? Well, wait, there's more! We must also consider "additional factors," which "may be relevant in determining whether the worker is an employee or independent contractor for purposes of the FLSA, if the factors in some way indicate whether the worker is in business for themself, as opposed to being economically dependent on the employer for work."

SCOTUS: The regular rules apply to waiver of arbitration

Yesterday, a unanimous Supreme Court issued an opinion in Morgan v. Sundance, Inc. The plaintiff filed a Fair Labor Standards Act (FLSA), nationwide, collective action, wage and hour claim against her employer, a Taco Bell franchise, in federal court. But, wait! She signed an arbitration agreement as part of her the employment application process.

Justice Kagan authored
the opinion.

Ordinarily, under the Federal Arbitration Act (FAA), the employer could get the suit tossed from federal court and sent to arbitration. Here, the employer first litigated the case for a bit. It filed a motion to dismiss, answered the complaint (without raising arbitration as an affirmative defense), mediated, discussed settlement . . . and only then, after eight months of litigation, did the employer move to stay the litigation and compel arbitration. 

The Eighth Circuit analyzed whether the employer had waived its right to arbitration by looking at two factors:

• Did the party know of the right and act inconsistently with that right?; and
• Was the other party prejudiced by the inconsistent actions?

The first factor is just standard federal waiver analysis for issues other than arbitration. But the second factor was an extra proverbial thumb on the scale that the court only applied to waiver of arbitration. The Eighth Circuit justified this extra factor base on the FAA's "policy favoring arbitration."

Well, SCOTUS disagrees. "the FAA’s 'policy favoring arbitration' does not authorize federal courts to invent special, arbitration-preferring procedural rules." Courts must instead strip away the arbitration-only prejudice requirement and instead focus on the conduct of the party that has potentially waived its right to arbitration. In other words - apply the regular waiver rules, not arbitration-specific rules. 

DOL: Pay employees for job-mandated COVID vaccines, tests, screening during normal work hours

[Update 1/21/2022 2:05 pm: Where did it go? Looks like DOL pulled the Fact Sheet described in this post from its website (although, it still appears in the Department's Index of fact sheets)]. 

Welp, I'm sure this was supposed to coincide with the now-seemingly-dead OSHA vaccine mandate. That said, it it applies to employer mandates more broadly. I'm talking, of course, about U.S. Department of Labor Wage and Hour Division Fact Sheet #84: Compensability of Time Spent Undergoing COVID-19 Health Screenings, Testing, and Vaccinations Under the Fair Labor Standards Act (FLSA) (just rolls right off the tongue, doesn't it?). 

The bottom line:

[I]f an employer requires an employee to obtain a COVID-19 vaccine dose, undergo a COVID-19 test, or engage in a COVID-19 related health screening or temperature check during the employee’s normal working hours, the time that the employee spends engaged in the activity is compensable. Employees must be paid for such time during normal working hours, regardless of where the activity occurs.

Sounds simple enough, but what about mandatory activities that occur outside of normal working hours?

DOL appears to take the general position that employer-mandated COVID-19-related activities are still compensable when done outside of working hours. But, there's a carveout in a vax-or-test scenario for employees who "voluntarily" choose not to get vaccinated and get tested instead - they do not get paid for their time spent testing. Employees with a disability or religious exemption to the vaccine mandate are not voluntarily foregoing the vaccine, so they would get paid for testing.

I should also note that the DOL's position on this seems based on an argument that is very similar to OSHA's (losing) argument at the Supreme Court. Specifically, the DOL fact sheet reads:

As reflected in the OSHA Vaccination and Testing ETS, the Federal Government has determined that vaccination is the most effective and efficient control available to protect employees from becoming seriously ill and dying due to occupational exposures to COVID-19. Employers must pay employees who report to a workplace where other individuals are present and who do not work exclusively outdoors for time spent going to, waiting for, and obtaining a mandatory COVID-19 vaccine dose because it is necessary that employees be able to perform their jobs safely and effectively during the pandemic.

In the context of the OSHA ETS, the Supreme Court specifically rejected this argument that vaccines are workplace employment safety regulations. So, it is not clear if DOL would fair any better - perhaps they would because in this context it would be an employer-issued requirement.

Third Circuit defines "personal staff exception" to FLSA

Post 2 (of 2) on Clews v. Cnty. of Schuykill. Last time, I explained that the County had not waived its affirmative defense that the employees claiming unpaid overtime fell under the "personal staff exception" to the Fair Labor Standards Act (FLSA). This time, let's look at who that exception actually covers. 

The FLSA generally covers "employees," but excludes people who work for a state, political subdivision, or intergovernmental agency; are not covered by the applicable civil service law; and fall within one of several categories listed in the FLSA. That list includes those "selected by the holder of [a public elective office] to be a member of his personal staff.” 29 U.S.C. § 203(e)(2)(C)(ii)(II). Yeah, have I ever mentioned that there are a lot of exceptions to the FLSA and they can be complicated? Anyway, we call this one the "personal staff exception."

The Third Circuit first noted that many courts have looked favorably on Teneyuca v. Bexar Cnty., a Fifth Circuit decision identifying 6 factors:

(1) whether the elected official has plenary powers of appointment and removal, 

(2) whether the person in the position at issue is personally accountable to only that elected official, 

(3) whether the person in the position at issue represents the elected official in the eyes of the public, 

Not official use.

(4) whether the elected official exercises a considerable amount of control over the position, 

(5) the level of the position within the organization’s chain of command, and 

(6) the actual intimacy of the working relationship between the elected official and the person filling the position.

That said, the list was not exhaustive, and even courts that adopted it sometimes added their own factors. The Third Circuit didn't exactly reject the Teneyuca factors, but did note concern raised in other contexts that "[t]oo often the factors in a checklist . . . result[] in rote following of a form containing factors where courts tally up and spit out a score without an eye on the principles."

Thus, the Court endeavored to distill the factors into two overarching themes.

[F]or an employee to be a member of an elected official’s personal staff,  

1) the official must work closely with the employee in a sensitive position of trust and confidence, and  

2) the official exercises personal control over the employee’s hiring, promotion, work conditions, discipline, and termination.

Of course, with the usual caveats and wiggle room.... both themes should (not must) be satisfied, "no single factor is dispositive," the themes "often overlap," and "[c]ontext matters." The Court noted that the Teneyuca factors may still be used but only to the extent they are relevant to the two th
emes. 

Third Circuit on waiver of affirmative defenses in wage and hour claims

In Clews v. Cnty. of Schuykill, three former deputy coroners filed claims under the Fair Labor Standards Act (FLSA), seeking overtime pay and alleging retaliation (firing) for complaining about not getting overtime pay. The employer argued that the employees were not covered by the FLSA because they fell under the "personal staff exception," which excludes people who work as personal staff for elected officials.*

The County, however, did not plead this affirmative defense in its answer to the complaint. Generally, a party must plead affirmative defenses as part of their answer. See, Fed. R. Civ. P. 8.1(c). That said, the Court noted past precedent holding that affirmative defenses may be raised at any time "so long as the plaintiff suffers no prejudice." Sharp v. Johnson, 669 F.3d 144, 158 (3d Cir. 2012).

Not official use.

Here, the plaintiffs "did not explain what could have been developed in discovery with more explicit notice of the exception." Furthermore, they did not request to reopen discovery even after the County  had specifically briefed the issue. The County also consistently asserted that the employees were exempt from the FLSA (while not specifically identifying the personal staff exception in the answer). Finally, the County also questioned each of the plaintiffs about their job responsibilities. 

The Court ultimately held that the county did not waive the personal staff exception affirmative defense by failing to plead it in the answer to the complaint because the plaintiffs could not show any prejudice. 

Lessons for both sides here:

• Defendants should raise affirmative defenses as early as possible to avoid waiver.
• Plaintiffs should request to reopen discovery if a new affirmative defense pops up after discovery. If it's granted, then they can explore the affirmative defense. If it's denied, they have a stronger argument that they incurred prejudice as a result of the defendant raising it late in the game. 

* The Third Circuit also analyzed the scope of the personal staff exception - perhaps an issue for a future blog post. 

You know those FLSA exceptions for postliminary work and de minimis violations? They don't so much apply in Pennsylvania...

The Fair Labor Standards Act (FLSA) sets a floor, not a ceiling. We see this all of the time in the context of minimum wage. The FLSA (aka "federal minimum wage") is $7.25/hour - but more than half of the states set a minimum wage higher than that. Well, this "floor" concept does not just apply to the minimum wage - it applies to the definition of compensable time too. 

Back in 2014, the U.S. Supreme Court ruled that Amazon warehouse workers were not entitled to compensation for the time they spent waiting to undergo anti-theft security screening before leaving work. Why not? Under the FLSA (and more specifically, amendments in the Portal to Portal Act (PTPA)), activities that are postliminary to the employees' principal activities are not compensable. The security screenings were deemed non-compensable postliminary activities. 

It turns out some Pennsylvania employees were going through these same security screenings before leaving their jobs at Amazon warehouses. They have also sued for unpaid wages. There's an important twist though! Their claims were based on the Pennsylvania Minimum Wage Act (PMWA). 

The procedural posture here is too convoluted to bore you with, but ultimately the Sixth Circuit certified two questions to be decided by the Supreme Court of Pennsylvania (SCOPA):

1. "[W]hether time spent on an employer’s premises waiting to undergo, and undergoing, mandatory security screening is compensable" under the PMWA; and 

2. Whether the de minimis exception applies to bar claims under the PMWA.

SCOPA answered those two questions in Heimbach v. Amazon.com.  

Of course, the federal courts - no less than the Supreme Court - have held that the exact security screenings at issue were not compensable under the FLSA, and employers are not liable for de minimis violations. But, SCOPA - applying the PMWA - departed from the federal courts on both issues. 

First, unlike the FLSA, the PMWA was never amended by something like the PTPA. Thus, postliminary activities were never carved out of the definition of compensable time in Pennsylvania. The PMWA regulations (though not the statute itself) broadly define "hours worked" to include "time during which an employee is required by the employer to be on the premises of the employer." SCOPA therefore concluded that the PMWA does not include an exception for postliminary activities. 

SCOPA then went on to eviscerate the de minimis exception. "The PMWA plainly and unambiguously requires payment for 'all hours worked.'" Thus, unlike the FLSA, the PMWA does not include an exception for de minimis violations. 

Bottom line? Two clearly established exceptions to the FLSA now just-as-clearly do not apply to the PMWA. Employers in Pennsylvania must pay their employees for time that is not compensable under federal law. Specifically:  

1. Pennsylvania employers have to pay nonexempt employees for postliminary activities that are not part of their principal activities.

2. Pennsylvania employers can be held liable for de minimis (trivial or insubstantial) violations of the PMWA. 

DOL withdraws Trump-era proposed independent contractor rule

We've got an early contender for least surprising news of the year... DOL is withdrawing the Trump-DOL independent contractor rule. You can read all about the now-dead proposed rule in my prescient January 7, 2021 entry (okay, you didn't need a crystal ball to see this one comin'), DOL publishes new independent contractor rule, but is it DOA? That rule is withdrawn, effective today.

So, where are we now? Well, the "supplementary information" in the formal withdrawal notice in the Federal Register points us to the "economic realities" test. This test distinguishes between independent contractors, who are "engaged in a business of [their] own," and employees, who "as a matter of economic realities are dependent upon the business to which they render service." The notice provides a fair amount of analysis, and identifies some specific factors:

(1) The degree of the employer's right to control the manner in which the work is to be performed; 

Not official use.

(2) the worker's opportunity for profit or loss depending upon his or her managerial skill; 

(3) the worker's investment in equipment or materials required for his or her task, or employment of helpers; 

(4) whether the service rendered requires a special skill; 

(5) the degree of permanence of the working relationship; and 

(6) whether the service rendered is an integral part of the employer's business.

That said, the list is not exhaustive, and different courts have utilized assorted variations. 

Bottom line: If you thought the proposed rule from January was going to make classifying workers as independent contractors easier - well, it's not, because that rule's dead now. There's nothing groundbreaking in the withdrawal though. As always, I have a few caveats:

• This notice applies to classification of workers under the FLSA - different courts and agencies apply different tests when analyzing classification under different statutes;
• Even under the FLSA, the federal courts have tended to do their own thing and not give too much deference to ever-changing views of the DOL;  and
• Even the DOL changes its mind sometimes. 

That said, this latest notice provides insight into the DOL's views on classification, and some factors for businesses to consider when classifying workers. 

DOL Wage and Hour Opinion Letter on Travel Time for Telworkers

The federal government agencies have been unveiling guidance and regs faster than I can even blog about them. I'll try to hit some of the highlights in the next week or so though. Of course, all of this comes with the giant caveat that we have a new administration coming in, and it will likely hold different views on at least some of these issues. 

On the last day of 2020, DOL Wage and Hour issued opinion letter FLSA2020-19. As you probably already know, commute time is generally not compensable. The opinion letter addresses what, frankly, I'd call some no-brainers. If an employee is teleworking and has to drive an hour to a parent-teacher conference and then comes into the office - compensable? Of course not! Why would an employer be responsible for paying its employees to drive to their kid's school?

Employers, however, should be aware of the "worksite-to-worksite" doctrine: 

Travel time must be counted as hours worked when it is part of an employee's principal activity, such as travel from worksite to worksite during the work day.

But, if the employee is not required to travel from home to office (let alone to a parent-teacher conference) as part of their job, then the time is probably not compensable. 

Employers should also note the "continuous workday" doctrine:

[T]he period between an employee's first and last principal activities will "in general" be compensable.

But, again, if an employee is not required to travel between home and office for work, then the employee is effectively relieved from duty during that travel time. From the opinion letter:

When an employee arranges for her workday to be divided into a block worked at home and a block worked at the office, separated by a block reserved for the employee to use for her own purposes, the reserved time is not compensable, even if the employee uses some of that time to travel between the home and office.

The letter does not specifically address a situation where the employee uses all of that time to commute. I do not believe the result would be different though. If an employee arranges to spend some time at home and then some time in the office, that time will likely not be compensable. 

What would make the result different? If the employee were required to do some work from home immediately before or after being required to come into the workplace. In that situation, the employer is effectively controlling the entire bloc of the employee's time for the employer's benefit - probably compensable. 

DOL publishes new independent contractor rule, but is it DOA?

You probably heard the big news out of DC yesterday... the U.S. Department of Labor published its final rule to clarify independent contractor status under the Fair Labor Standards Act (FLSA). What? Did something else happen?

The new rule generally makes it easier to classify workers as independent contractors as opposed to employees under the FLSA (i.e. federal minimum wage and overtime law). The actual rule is here. Short version of a long and complicated issue, the new rule focuses on two primary factors:

(1) the nature and degree of the worker’s control over the work; and 

(2) the worker’s opportunity for profit or loss.

But, if need be, there are three additional "guideposts":

(3) The amount of skill required for the work; 

(4) The degree of permanence of the working relationship between the worker and the potential employer.

(5) Whether the work is part of an integrated unit of production.

But, wait! This comes with so many caveats... I don't know where to begin. 

• The Rule takes effect March 8th; 
• But, we get a new president January 20th and he has already flagged this rule as "an example of the type of last-minute regulation Mr. Biden would seek to halt or delay with a memo he intends to sign on inauguration day;"
• This is *just* the rule for the FLSA - There are countless other laws that require independent contractor vs. employee classification analysis and they each have their own tests (worker's comp., unemployment compensation, collective bargaining, etc.); 
• Also, your state probably has its own minimum wage and overtime law that does not necessarily track with the federal rules; and
• Courts are not bound by agency regulations, and often adopt their own tests (See, e.g., the Obama administration's paid intern rule that was rejected over and over again). 

In other words, although the rule itself is easier to apply, classifying workers remains as frustrating and convoluted as ever. 

DOL proposes new independent contractor rule under the FLSA

 My favorite subject - employee/independent contractor classification! On Tuesday, DOL issued a press release: U.S. Department of Labor Proposes Rule to Clarify Employee and Independent Contractor Status Under the Fair Labor Standards Act. The new rule is part of their efforts to "simplify the compliance landscape."

The proposed rule:

• Adopts an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee); 
• Identifies and explains two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself;
• Identifies three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production; and 
• Advises that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.

You can read the actual rule here. 

Not official use.

Believe me, employers (and their poor attorneys) need simpler rules to follow in this area. A five-factor test in which two factors count more but none of the factors is determinative and even more factors exist because the list is not exhaustive... I'm not sure that's simple. And, of course, that's only the test for the FLSA (maybe, we'll have to see how courts actually apply the rule and whether they even follow it) - employers will still have different tests for state wage and hour laws, another test for UC benefits, and yet another for workers' comp. Simple enough for ya yet?

Oh yeah, we have an election coming up, so let's wait and see if the final rule even crosses the finish line. 

Four new DOL Wage and Hour opinion letters!

 DOL has been super busy the past few months! On Monday, it released four new opinion letters:

1. "An employee's work hours do not have to fluctuate above and below 40 per workweek for an employer to be able to use the fluctuating workweek method of calculating overtime pay." For my Pennsylvania readers, don't forget about this SCOPA decision. 

2. DOL packed several exemption issues into this opinion letter on a corporate-management trainer who works part-time. Some takeaways: a. Paying a day rate does not satisfy the salary basis test (because it varies, is not calculated on a weekly basis, and is not known until after the work is completed); b. employees may maintain their exempt status even if they receive an hourly wage rate for hours on top of the required minimum salary; c. employees must meet the minimum salary threshold for the white collar exemptions (and the minimum annual salary threshold for the highly compensated employee exemption), and this amount may not be prorated for part-time employees.

Not official use.

3. Another opinion letter "[a]ddresses an employer’s compliance with FLSA’s minimum wage requirements when reimbursing delivery drivers for business-related expenses incurred while using their personal vehicles during the course of employment."

4. Finally, an oddly specific letter concluding that truck drivers who provide waste removal service for oilfield operators may qualify for the "retail or service exemption" if the services are "not different from the services furnished to the general public and that its services are recognized as retail within the waste-removal industry."