Hunton Employment & Labor Law Perspectives : Employment Lawyers & Attorneys : Hunton & Williams Law Firm : Labor Law Legislative Updates

In a recent decision, a federal district court judge held that Abbott Laboratories, Inc.’s pharmaceutical sales representatives do not qualify for either the outside sales or administrative exemptions of the Fair Labor Standards Act (“FLSA”).  Under the FLSA, employers are required to pay overtime for hours worked over 40 in a week, unless an employee qualifies for an exemption under the Act. While the FLSA contains many such exemptions, the most commonly used exemptions are the executive, outside sales, and administrative exemptions.  Each exemption has specific requirements that must be met.

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For years, employers wrestling with thorny wage and hour issues under the Fair Labor Standards Act (“FLSA”) have used the Wage & Hour Division’s (“WHD”) opinion letters for fact-specific guidance.  To the extent a particular issue was not addressed by a current opinion letter, the employer could submit a request for an opinion letter and obtain definitive guidance from WHD.  Employers who relied on opinion letters were immune from FLSA liability under the Portal Act’s safeharbor provision, which allows an employer to avoid liability for FLSA violations if the employer relied on a written interpretation of the WHD.

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Continuing a trend in Congress to limit employers’ use of independent contractors, on April 22, 2010, Rep. Lynn Woolsey (CA) and Senator Sherrod Williams (OH) introduced the Employee Misclassification Prevention Act (H.R. 5107, S. 3254) (“EMPA”) in the House and Senate respectively.  The EMPA would amend the Fair Labor Standards Act (“FLSA”) and render worker misclassifications a violation of federal law.  Employers would be required to maintain records reflecting hours worked and wages paid for employees and non-employee workers.  They also would be required to provide workers a “notice” that identifies: the worker’s classification, a yet to be created Department of Labor website (containing an on-line complaint link), contact information for the applicable Department of Labor office, and other additional information as prescribed by regulation.  For workers classified as non-employees, the Notice would be required to state: “Your rights to wage, hour, and other labor protections depend upon your proper classification as an employee or non-employee. If you have any questions or concerns about how you have been classified or suspect that you may have been misclassified, contact the U.S. Department of Labor.”

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In its recently published Spring 2010 Regulatory Agenda, the Department of Labor (“DOL”) announced that it plans to propose a rule that would amend the current recordkeeping regulations under the Fair Labor Standards Act (“FLSA”).  Under the proposed rule, any employers seeking to exclude workers from the FLSA’s coverage will be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to provide to Wage and Hour Division (“WHD”) enforcement personnel upon request.  The proposal will also address burdens of proof when employers fail to comply with records and notice requirements.

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With a dearth of job openings for recent college graduates, many have pursued unpaid internships while continuing to search for fulltime employment.  A 2008 survey found that half of all college students hold at least one internship before graduating.  In light of the 18.8% March unemployment rate for American workers aged 16-24—nearly double the 9.7% unemployment rate for the workforce at large—this practice can be beneficial for interns, who gain experience and contacts, as well as for employers, who can benefit from having eager interns ready to learn and contribute.

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On April 1, Secretary of Labor Hilda Solis announced a new campaign aimed at enforcing federal wage and hour laws on behalf of low-wage and immigrant workers and warned employers, “A new sheriff is in town.”

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Employers striving to comply with federal and state wage laws may soon have one more thing to worry about -- local “wage theft” laws.  In Florida, the Board of Commissioners for Miami-Dade County recently approved an ordinance that prohibits private sector employers from failing to pay employees all wages owed and gives the county authority to intervene and seek remedies on behalf of employees.  San Francisco already has a wage theft ordinance, and Los Angeles and New Orleans are considering similar measures.

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Both the Third and the Seventh Circuits are set to address the issue of whether collective actions under the Fair Labor Standards Act are compatible with class actions under state wage and hour laws.  In the Third Circuit, briefing is underway in Parker v. NutriSystem, Inc., No. 09-3545.  And argument is set in the Seventh Circuit for April 2, 2010 in Ervin v. OS Restaurant Servs., Inc., No. 09-3029.  Both courts will address what some have called the “inherent incompatibility” of FLSA collective actions and state law wage and hour class actions that are pursued in the same case.

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In a short and simple opinion by Judge Morton Greenberg, the U.S Court of Appeals for the Third Circuit affirmed summary judgment in favor of Johnson & Johnson against pharmaceutical sales representative Patti Lee Smith, finding that the FLSA’s administrative employee exemption applied to her.  The Third Circuit is the first court of appeals to examine the FLSA exempt status of pharmaceutical sales representatives.  The ruling in favor of the employer represents a significant development for pharmaceutical companies around the country, many of whom are facing similar FLSA lawsuits brought by their pharmaceutical sales representatives.

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Companies doing business in California should note that, on November 23, 2009, the Chief Counsel of the California Division of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on behalf of Labor Commissioner Angela Bradstreet, in which the DLSE modified its position on the issue of making deductions from vacation and sick leave balances accrued by exempt employees for the purpose of covering partial-day absences.  The Opinion Letter brings California law more in line with the federal Fair Labor Standards Act regarding the “salary basis test” and deductions from exempt employee paid time-off accounts for partial-day absences.

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A recent decision from the California Supreme Court has provided a rare victory for companies with employees in that state.  In Schachter v. Citigroup, Inc., the Court ruled that a forfeiture provision in an employee incentive compensation plan did not violate California wage laws.

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Last week, Secretary of Labor Hilda Solis announced the Department of Labor's planned launch of an ambitious new public awareness campaign called "We Can Help."  The campaign, set to debut in early 2010, is designed to help inform workers about their rights under federal wage and hour laws.

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