Current Weapon of Choice Against Employers—The Fair Labor Standards Act
Legal Alerts
7.15.10
While the Fair Labor Standards Act has been in existence for quite some time, it rapidly is becoming the current weapon of choice by employees against their employers. The FLSA requires the payment of minimum hourly wages to employees, as well as overtime pay to non-exempt employees who work in excess of 40 hours during a work week, while exempting certain categories of employees from its minimum wage and overtime requirements. Executive, administrative, and professional employees are all considered exempt employees as long as certain requirements and 'tests' established by the United States Department of Labor are met. Similarly, some sales employees can be treated as exempt from overtime if certain conditions exist. Job titles and how people are paid are not controlling; the employer always has the burden to maintain appropriate employment records and be able to prove that an exemption applies.
To add to the issues facing employers, individuals also have begun to more frequently challenge their classification by an employer as "independent" contractors, as well as their designation as exempt rather than non-exempt employees. Federal and State labor and tax officials have joined the fray, directing their attention to businesses that attempt to pass off employees as independent contractors. Michigan (as well as several other states) has created a task force to combat worker misclassification—with one of its less publicized interests being an expected increase in tax revenue. The Internal Revenue Service similarly has raised its interest in what it perceives to be the misclassification of workers.
Thus far in 2010, the number of FLSA lawsuits filed in federal courts has increased more than 20% over the number of cases filed for a similar period in 2009—an increase not seen in other types of litigation. The attorney fee provisions and collective action aspects of FLSA cases present intriguing "opportunities" for the Plaintiff's bar. These "opportunities," when combined with a supportive Department of Labor and the Obama administration initiatives, have created a key area of focus for both individual employees and lawyers looking for something to do.
Overtime eligibility and independent contractor classification are not the only areas experiencing a surge of popularity. Off the clock work performed by individuals, inaccurate overtime rates, discretionary and non-discretionary bonuses, donning and doffing policies, fluctuating work weeks, time clock rounding, telecommuting, and the use of electronic devices (blackberries, i-phones, etc.) all are being used to pursue litigation under this 'newly discovered' (or remembered) law.
It is a dangerous time for all employers. Consider reviewing your pay practices and auditing your current employment relationships, contracts and employee classifications.
If you have any questions, or desire more information, please contact Marty Galvin at 313.568.6912, or your Dykema relationship attorney.
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