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A recent increase in litigation brought under the Fair Labor StandardsAct, 29 U.S.C. 201 et seq. should herald a wake-up call for allemployers and the attorneys who advise them. Passed by Congress at theheight of the Great Depression, the FLSA mandates a federal minimumwage, currently $5.15 per hour, and also requires employers to pay apremium for overtime work in excess of 40 hours in a given work week. While it sounds like a simple and basic statute, the FLSA’s numerousexemptions provide employers with a veritable minefield of potentialfinancial liability. In addition, practitioners would be well servedfamiliarizing themselves with the FLSA’s provisions for a unique form ofcollective-action litigation that is very different from the morefamiliar form of class action under Rule 23 of the Federal Rules ofCivil Procedure. Privately filed collective actions are becoming an increasing threat toemployers. In a presentation made to the American Bar Association’sEqual Opportunity Commission Committee last year, plaintiffs’attorney Richard Seymour reported on a study he made concerningemployment litigation trends. Surprisingly, Seymour’s study noted thatthe number of new case filings under the FLSA’s collective-actionprocedure exceeded the number of new EEO class action cases filed on anationwide basis. The study also was reported in “Wage-Hour ActionsSurpassed EEO in Federal Courts Last Year, Survey Shows.” NancyMontweiler, Daily Labor Report, March 22, 2002, at C-1. Employers should also be concerned by trends in governmentalenforcement. In a press release issued by the U.S. Department of Laborlast month, the Department noted that in fiscal year 2002 itcollected $175 million in back wages for some 263,593 workers. Thedollars recovered in 2002 were a 10-year high. The DOL has indicated itwill continue to target its enforcement activity on low-payingindustries such as health care, garment manufacturing and agriculture. The FLSA is enforced and interpreted by the Wage and Hour Division ofthe DOL. The agency has broad investigative authority that may becommenced from employee complaints or its own leads. The FLSA grants DOLbroad subpoena powers to conduct its investigations including the rightto obtain subpoenas to enter workplaces and inspect employers’ records.29 U.S.C. 211(a). Unlike most labor laws, criminal proceedings may beinitiated against employers who violate the Act. 29 U.S.C. 216(a). TheDOL is also empowered to initiate civil proceedings including thoseseeking injunctive relief. 29 U.S.C. 217. Employees can bypass administrative remedies and proceed directly tocourt on either an individual or collective basis. 29 U.S.C. 216 (b).Frequently, plaintiffs join state law claims in their FLSA litigation.Often, state wage-hour laws have additional requirements concerning themaximum number of consecutive hours or days of work and required breaks.Contrary to popular belief, the FLSA does not require lunch or coffeebreaks. Like most protective employment legislation, the FLSA containsan anti-retaliation provision that makes it a violation of the act foran employer who retaliates against an employee who invokes anyproceeding to remedy a violation of the act. RECORD-KEEPING MATTERS The FLSA requires covered employers to maintain certain minimum recordson each employee. 29 U.S.C. 211(c). In general, in addition to basicdemographic data, employers’ time records must accurately reflect thetime of day and day of the week when the work week begins, the regularhourly rate of pay, hours worked and wages paid and other details. 29C.F.R. � 516. The failure to keep proper payroll records is an independent violationof the FLSA. Furthermore, in the absence of legally required records,the employer will be required to prove that the employee did not workthe amount of time claimed. Anderson v. Mt. Clemens Pottery Co., 328U.S. 680 (1946). In Mt. Clemens Pottery, the U.S. Supreme Court held that when theemployer lacks required records, if the evidence presented by theemployee shows that work was performed, then reasonable inferences as tothe amount of the work claimed will be followed. The burden of proofthen shifts to the employer to rebut the plaintiff’s evidence to showeither the precise amount of work or evidence that negates thereasonableness of the inferences derived from the employee’s testimony. This standard requires employers not only to keep and maintain therequired records, but to be prepared to face the allegation that therecords that the employer maintains are false. One potential way todefend against this type of allegation suggests that employers shouldmake sure that each employee signs off on the hours recorded by theemployer each work week. Perhaps the biggest pitfall for employers is the misclassification ofemployees into one of the numerous categories that exempt employers fromhaving to pay overtime. These FLSA overtime exemptions read like alaundry list of successful industry lobbying efforts running the gamutfrom small country grain elevators, to maple sap processors, toautomotive salespersons and on-air radio and television announcersworking in small media markets — to name just a few. See 29 U.S.C.213(b)(10)(A) (auto sales), 213(b)(15) (maple sap processor), 213(b)(14)(grain elevator) and 213(b)(9) (small media). WHO ARE TRULY WHITE-COLLAR WORKERS? Although any practitioner is well advised to analyze carefully the fulllist of statutory exemptions, the most commonly applied exemptions areexecutive, professional and administrative exemptions, collectivelyreferred to as the white-collar exemptions. The criteria for these areset forth in the DOL Regulations contained at 29 C.F.R. Part 541.Given the fact that the FLSA is a remedial statute, it is well settledthat exemptions from the act’s provisions are to be narrowly construed.Again, it is the employers’ burden to prove that the employee’sactivities are in fact exempt. A.H. Phillips Inv. v. Walling, 324 U.S.490 (1945). While each of the white-collar exemptions has its ownspecific criterion, two common threads join them. First, the employeemust spend a sufficient amount of time performing work of an exemptnature generally involving the regular exercise of independent judgmentand discretion. Second, white-collar employees must be compensated on asalaried, and not hourly, basis. NOT IN NAME ONLY It is important to note that an employer must be able to demonstrate,based upon an analysis of the particular duties and functions, that eachemployee so designated qualifies for exempt status. It is improper foremployers to presume that by merely giving an exempt-sounding title likemanager, supervisor or director, the employee will automatically beexempt. A frequent misconception among employers is the assumption thatif an employee is paid a fixed salary there is no requirement to pay theovertime bonus. To do this ignores the job- function requirement of theexemption tests. Similarly, if an otherwise exempt employee is paid onan hourly, rather than salary, basis, the exempt status is lost. Thisprovides another potential trap for employers who “dock” or deduct fromthe wages of salaried employees. By docking their pay, the argument israised that in reality the employee is not truly salaried, but ratherhourly compensated, hence the exemption is lost. An exception to theno-docking rule is made where deductions from a fixed salary are madefrom accrued leave accounts like paid time off or accrued sick pay. Exemptions as well as the calculation of overtime pay are to be made bythe employer on an individual work week basis. In theory, this requiresevery covered employer to analyze the employees’ job duties each week,giving rise to the potential that an employee could be exempt one weekand nonexempt on another. 29 C.F.R. � 778.103. The regulations are veryspecific in stating that each work week stands alone. 29 C.F.R. �778.104. Overtime pay is owed for all hours worked over 40 in a givenwork week. For both exemption and overtime pay issues it is criticalthat the employer designates by policy the exact start and end of eachwork week. ‘OPT-IN’ RULES Representative lawsuits brought on behalf of a collection of employeesmay be brought pursuant to 29 U.S.C. 216(b). Unlike F.R.C.P 23 “opt-out”class actions, � 216(b) litigation requires that each aggrievedindividual “opt in.” Therefore, unless each potential plaintiff consentsin writing filed with the court, they will not be covered by thelitigation. In order to opt in, plaintiffs must demonstrate that theyare “similarly situated.” The FLSA does not establish a specific procedure for when and how noticeshould be given to prospective plaintiffs. The court may, in itsdiscretion, intervene and supervise the process. Hoffmann-LaRoche Inc.v. Sperling, 493 U.S. 165 (1989). Sperlingwas brought under the AgeDiscrimination in Employment Act, another employment statute that adoptsthe � 216(b) collective action as an available procedure for litigatingclaims. As mentioned above, it appears from a recent study that the number ofcollective actions brought under the FLSA across the country is on therise to the point where the number of these cases filed now exceeds thenumber of class actions filed under the various equal employmentopportunity laws. See Montweiler, id. at C-1. It would appear that plaintiffs’ counsel is finding the simpler form ofopt-in lawsuit that can be brought under the FLSA coupled with thecomplexities of employer compliance are leading to an upswing in thisform of litigation. Any multifacility employer with common methods of operation, relativelylow-paid management and economic pressures to work more than 40 hours aweek represents a potential target for collective lawsuits under theFLSA. A POTPOURRI OF OTHER PITFALLS There are many other common misperceptions about the FLSA that can causeproblems for employers. They include the notion that in lieu of payingthe required overtime premium for hours worked in excess of 40 hours ina week, an employer can give extra time off, commonly referred to as”comp” time. For private-sector employers, such a concept is a violationof the FLSA regardless of the employee’s desires or consent. Refusal to pay an employee for so-called unauthorized overtime isanother common violation. The FLSA requires payment for all time thatthe employee is “suffered or permitted to work” the operative word being”or.” 29 U.S.C. 203(g). Employees who do not obtain prior managementapproval to work overtime must nevertheless be paid for the time”suffered.” Potentially they can be disciplined for failing to obey theemployer’s policies, but employers are cautioned not to run afoul of theact’s anti-retaliation provisions discussed below. The “suffered orpermitted” standard provides other complicated compliance issuesregarding nonexempt employees who travel away from their work site,employees who attend training programs and those who must be “on call”or live at their place of work such as an apartment complexsuperintendent. Attorneys should recognize that the FLSA is a complex, confusing andoften counterintuitive statute. The best defense against liabilityresulting from either DOL investigation or private litigation is to havesomeone knowledgeable in all aspects of this law conduct regular auditsof compensation practices, including classification of jobs andappropriate record keeping. State law considerations must be a part ofthis audit process. However, even the best policies and procedures can be thwarted by therogue supervisor who forces an employee to work off the clock under thethreat of losing his or her job. Accordingly, all management should betrained on FLSA compliance, and additional safeguards must be institutedto ensure no one person controls all aspects of the compensationprocess. Mark J. Neuberger is a partner in the Miami office of Pittsburgh’sBuchanan Ingersoll ( www.buchananingersoll.com). He represents management in all aspects of labor andemployment law. If you are interested in submitting an article to law.com, please click herefor our submission guidelines.

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