Exempt v. Non-Exemption Likely to Change!

February 23, 2015

The issue of exempt v. non-exempt has reared its ugly head once more. The Department of Labor (Federal) last updated its regulations related to the primary FLSA exemptions (administrative, executive, and professional employees) in 2004. Now, recent activities by the Department of Labor and Office of Information and Regulatory Affairs indicate that the Department of Labor will soon take action to create much stricter guidelines.

Currently, the salary test for these employees requires a minimum annual salary of $23,660 in order to have any chance of qualifying for one of these exemptions.  Pro-union and other pro-employee groups are pushing to move the salary test minimum to $42,000 or higher.  This would raise the minimum for California employers, as the current California minimum is $37,440 annually (rising to $41,600 in 2016).

Here’s the kicker. The expectation is the Department of Labor will seek to modify the duties test such that employers will have to prove that employees who are exempt from overtime are spending more than 50% of their time performing exempt duties in order to be considered exempt.  Currently, under federal law, the employer need only prove that exempt duties constitute the primary (key) duties of the employer’s position.  If such a change is implemented, federal law would be more consistent with California law with respect to the duties test.

Finally, many pro-employee and union groups have criticized the definition of the administrative exemption as being too broad and too vague.  With this in mind, it would not be a surprise if the Department of Labor narrows the definition of administrative employee thereby making it more difficult for employers to utilize this exemption and restricting its applicability to employees who perform high level back office administrative functions that are entirely separate from the employer’s main business focus.   If such a proposal were enacted, the employer would have to prove that the administrative employee is not a production employee who is directly involved in performing the service or making the product that the employer provides to its customers.  This would have a material impact and substantially minimize the applicability of the administrative exemption. Stay tuned!


On-Call Breaks Are Permissable-90 Million Dollar Judgement Reversed!

February 16, 2015

Last week a California Court of Appeal issued its published decision in Augustus v. ABM Security Services, Inc., overturning a $90 million class judgment against ABM based on its purported failure to provide its security guards with proper rest breaks.  Although it was undisputed that the security guards regularly were provided with and took rest breaks, the plaintiff alleged that the rest breaks were not fully compliant with California law because the security guards were required to carry communication devices and remain on-call during their rest breaks.  According to the plaintiff, being on-call (even without any actual interruption) meant that the security guards were still under ABM’s control and “on-duty” during rest breaks and this rendered the rest breaks invalid.  The trial court agreed with the plaintiff and, after certifying a class of 15,000 California security guards, granted the plaintiff’s motion for summary adjudication and then entered a judgment in favor of the class to the tune of $90 million in rest break premium pay, interest, and waiting time penalties.  ABM rightly appealed.

Last week, California’s Second District Court of Appeal reversed the trial court’s judgment against ABM and held that the trial court erred in ruling that ABM’s on-call rest break policy violated California law.  The Court of Appeal held that California law only requires that employees be relieved of “working” during rest breaks, but does not require that they be relieved of being on duty or be relieved of all employer control.  The court noted the distinction between California meal break law and California rest break law, explaining that the requirement that employees be free of employer control and relieved of all duty applies only to meal breaks – because such time is unpaid.  Conversely, rest break time is paid time and nothing in the applicable Labor Code provisions or wage orders states that an employee must be free of all employer control during such time.  Thus, a policy requiring security guards to remain on-call during rest breaks is not unlawful so long as employees are not required to perform work during rest breaks.  According to the court, “working” and “remaining available to work” are not the same thing.  The court also emphasized that the plaintiff had not produced any evidence of any rest break actually being interrupted due to the on-call policy and, to the contrary, plaintiff and many class members admitted to regularly taking uninterrupted rest breaks.  Moreover, ABM had a policy permitting rest breaks to be restarted in the event of any interruption.  In these circumstances, the Court of Appeal held that summary judgment should not have been entered against ABM.

This case will more than likely head to the California Supreme but I would not anticipate them reversing this current decision based upon the language in the Labor Code and Wage Order. This decision has far reaching effects not just with security guard companies.

Note: The Podcast this week discusses actions an employer can or cannot take against employee conduct away from work.


Employer Assessed $227,251.75 for “Technical” I-9 Violation

February 9, 2015

On January 20, 2015, the US Department of Justice Executive Office for Immigration Review handed down a decision against an employer, upholding stiff penalties imposed by Immigration and Customs Enforcement (ICE) on an employer for technical I-9 violations.

In 2011, ICE served the employer with a Notice of Inspection of its I-9 files.  The employer referred ICE to another office where the I-9s were kept. After the audit, ICE did not find any unauthorized workers in ESSG’s workforce.  However ICE found 243 violations of the employment verification provisions of the Immigration and Nationality Act (INA) and proposed a civil money penalty of $935.00 per violation and costs of $981.75, for a total of $227,251.75.  The employer sought review of ICE’s findings from the US Department of Justice.

The INA requires newly hired employees to complete Section 1 of the I-9 form and supply employers with evidence that they are authorized to work in the United States.  The INA also requires employers to review the original documents submitted by the employee and then complete and sign Section 2 of the form.

In this case, the employer’s subdivision handled the I-9 process for the employees it selected. The subdivision presented the employee with the I-9 form and reviewed the original documents presented by the employee.  The subdivision then forwarded the I-9 form as completed by the employee along with a copy of the employee’s documents to the main office.  An employee at the main office would then complete and sign Section 2 of the I-9 form.

On review to the Department of Justice, ICE argued that the individual who signs Section 2 of the I-9 form must review the employee’s original documents.  The employer’s process did not comply with the INA because the individual who signed the I-9 form did not review the employee’s original documents.  The employer argued that the original employees who verified the original documents were the employer’s agents and under the law of agency, the knowledge of the agent could be imputed on the principal.  It also sought to reduce the civil money penalty characterizing this procedure as a “technical violation.” The employer also argued that the assessment should be reduced because ICE did not find any undocumented workers in the employer’s workforce.

The Department of Labor was unpersuaded by the employer’s argument.  It upheld ICE’s finding and its proposed assessment, characterizing the employee’s signature on Section 2 of the I-9 as a false attestation.

The take away from this is that employers should put procedures in place that ensure that the individual who signs Section 2 of the I-9 form on its behalf is the same individual that reviews the original employment verification documents presented by the employee.

In addition, employers need to create a tickler file to ensure that if any of the original documents submitted has an expiration date, a follow up with the employee is scheduled for the employee to bring in the updated information.

If you would like to have an I-9 audit please contact us!


“FMLA Interference”-Are You Guilty?

February 2, 2015

Have you been guilty of “FMLA Interference?” A case recently handed down suggest that employers must be careful with interacting with employees while they are out on, in my opinion, any leave of absence.

The Facts

The plaintiff was a manager and her position required her to investigate alleged ethical violations when they were reported to the Company.  In April 2012, she gave notice that she would need time off for surgery to remove a cyst from her neck. According to the plaintiff, her supervisor then became hostile toward her and, during her absence from work, required her to perform much of her regular work.

During the two-month FMLA leave of absence, the plaintiff claimed that the employer required her to perform 20 to 40 hours of work “updating compliance cases, revising a safety review project and dropping off files at the office.” Based on my rough math, that’s anywhere from 3 to 5 hours worked each week during her FMLA leave.  As the story goes, the plaintiff returned from FMLA leave and resigned one month later. Why? She felt that her supervisor created a hostile work environment upon her return to work.

The plaintiff then sued the employer, claiming that the 20-40 hours worked during her FMLA leave constituted FMLA interference, which she claimed entitled her to a slew of damages. The lawsuit raised the age-old question many of my clients have raised with me: If I ask my employee to perform any work while they are on FMLA leave, does it constitute FMLA interference?

The court reviewing the FMLA claim initially answered it this way, as most courts have done:

…reasonable contact limited to inquiries about the location of files or passing along institutional or status knowledge will not interfere with an employee’s [FMLA] rights; however, asking or requiring an employee to perform work while on leave can constitute interference.

Put another way, there is no right under the FMLA “to be left alone” or be allowed to skirt the employer’s “discrete inquiries.”  But if looks like work, it’s going to be work, and an employee shouldn’t be doing work while on FMLA leave.

The Court Ruling

In light of the work the employee apparently had to perform while on leave, the court in this case determined that the plaintiff had presented enough evidence of FMLA interference that a jury would need to decide whether the employer had violated the FMLA.

 Insights for Employers

As we see above, there is no bright line rule about contact between employee and employer during FMLA leave, but you can start to see where the courts tend to line up on this issue.  As a general rule, an employee on leave should be fully relieved of their work and not asked to perform work while on leave.  That said, as evidenced by the cases highlighted above, it is unlikely to be an FMLA violation when an employer makes sporadic calls to an employee posing general questions or to wrap up a job the absent employee was working on. Similarly, the employer can contact the employee to check on return dates or possible extension of leave.

It is acceptable to contact the employee to negotiate terms or conditions of employment to help the employee transition back to work. As long as the contact is necessary or related to preserving the employee’s position or coordinating a return, the contact arguably is justifiable.

But let’s document it.  Employers should make clear – in writing – to employees on FMLA leave that they are not expected to nor should they perform work, other than simple ministerial tasks, such as advising co-workers or management regarding the location of files or to update the status of work assignments that continue on after leave begins.  Nine out of ten times, we’ll have no need for the document; but the one time we actually need it, we’ll sure be glad we created the paper trail.  Right?

Note: The Podcast this week discusses “Lactation Accommodation.” www.pottsandassociates.com and on iTunes.