Seven FLSA Quirks – Unanticipated and Costly
Would it concern you to know that you might have individual responsibility forcompliance failures of your company? If you or your entity were to be sued for
back wages, how would you feel about a six-year statute of limitations? What if a minimum wage or overtime suit accuses you of being a racketeer? Certain types of compliance failures, or the results of them, can be completely unexpected. Let’s examine these (and other) FLSA nuances.
1. You might believe that your relationship with another employer, such as a subcontractor, should not result in an obligation regarding that employer’s practices with respect to wages or employment of minors. Similarly, you would not expect to be held responsible for FLSA practices of the entity by which you are employed. However, Joint employment concepts allow for multiple entities and/or individuals to be held simultaneously responsible for the same violations. Most back wage suits filed by DOL or by plaintiffs’ attorneys cite, as defendants, individuals believed to have been “acting directly or indirectly in the interest of an employer in relation to an employee.” The same is
true when the DOL assesses civil money penalties. When I was with the Wage and Hour Division, one of my investigations, of one establishment, resulted in
civil money penalty assessment against three entities and four individuals. http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=48d6ee3b99d3b3a97b1bf189e1757786&rgn=div5&view=text&node=29:220.127.116.11.50&idno=29 explains FLSA joint employment principles.
2. Interns and trainees are often
treated as non-employees. In a business setting, this is usually not an accurate determination. See http://www.dol.gov/whd/regs/compliance/whdfs71.htm. When an employment relationship exists, failure to pay minimum wage and/or overtime compensation obviously results in a back wage liability. Likewise, allowing under-aged children to work – even when it is believed that they are “interns” – results in an assertion of child labor violations. Prior to retirement, I investigated a veterinary clinic and kennel. Minors, under fourteen years of age, worked on weekends – feeding and caring for the animals. These children were treated as “interns” or “volunteers.” They received no compensation, and there was no record of their employment. Child labor, record keeping, and minimum wage violations were charged against the employers.
3. Record keeping provisions of the FLSA are explicit, but they are often ignored. There is no civil money penalty for failure to maintain proper records, but insufficient records often lead tomonetary or child labor violations. For example, failure to record time devoted to preparatory or concluding activities, checking emails and voice mail after scheduled hours, or compensable travel time, can result in a significant number of unrecorded (and uncompensated) hours worked. As I previously mentioned, certain workers might not even appear on the records. The lack of records is never a good thing, and perceived concealment will be treated as an indication of willfulness (increasing the civil money penalties). The penalties are even greater when child labor violations result from minors working “off the records.” Required records: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=48d6ee3b99d3b3a97b1bf189e1757786&rgn=div5&view=text&node=29:18.104.22.168.13&idno=29.
4. Exemption misclassification errors are familiar to most employers. However, the possibility that an inapplicable exemption might be claimed is not limited to “white collar” scenarios, and the result is not always limited to an overtime issue. Child labor violations can also occur because of exemption misclassification. Agricultural employment is generally exempt from overtime provisions, and employment of minors is less restrictive. However, the determination of agricultural status is sometimes difficult. An example of such a quandary is Christmas tree planting, maintenance, and harvesting. Christmas tree production is not “agricultural” for FLSA purposes unless the activities qualify under the complex explanations of “secondary agriculture.” See §§ 780.105, 780.159 – 780.205, and 780.208 at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=48d6ee3b99d3b3a97b1bf189e1757786&rgn=div5&view=text&node=29:22.214.171.124.41&idno=29#29:126.96.36.199.41.2.355.6. Not only are employees owed overtime pay (unless another exemption applies), but the non-agricultural child labor standards apply. In a non-agricultural setting, a minor must be at least eighteen years of age to operate a power saw (including a chain saw). In a true agricultural operation, a minor may legally operate such a saw at sixteen years of age. Of interest to Christmas tree
growers in Maryland, North Carolina, South Carolina, Virginia, or West Virginia – the United States Court of Appeals for the Fourth Circuit ruled that the production of Christmas trees is “agricultural” for FLSA purposes. It is improbable that DOL will attempt to enforce its position within the Fourth Circuit, but you should consult with your attorney. The FLSA § 13(b)(28) overtime exemption applies to non-agricultural Christmas tree production and harvesting operations when eight or fewer employees are involved. See § 788.10 at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr;sid=97db7fbc09311d3382f49aade5cfaa82;rgn=div5;view=text;node=29%3A.188.8.131.52;idno=29;cc=ecfr.
5. How the FLSA applies is sometimes dependent on other laws under which the employer has obligations. For example, if your state’s minimum wage is higher than the FLSA minimum wage, and you have failed to comply with that higher wage rate, DOL will compute any FLSA overtime back wages at the state minimum wage plus the half-time premium. Similarly, if you are subject to state “prevailing wage” laws, the wage determination wage rate will be treated as the regular rate (if you paid less than that rate) when computing overtime back wages. The same is true with regard to federal contract laws (Davis-Bacon Act, laws related to the DBA, and the Service Contract Act),
but the DOL Wage and Hour Division has full enforcement authority regarding those statutes and a related non-FLSA overtime law.
6. An even stranger quirk involving another law is the FLSA effect of the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). That law requires farm labor contractors and joint employers to comply with the FLSA. MSPA has no statute of limitations. While this law ordinarily involves agriculture, it also applies to certain non-agricultural employment (e.g., forestry restoration and maintenance crews, employed by a labor contractor, are treated as “agricultural” for purposes of MSPA). In such a case, the FLSA overtime standards apply, but the FLSA statute of limitations does not apply to legal actions filed under MSPA. If a “farm labor” contractor fails to comply with the FLSA, litigation to recover back wages may be pursued by employees (plaintiffs) without regard to the FLSA three-year maximum statute of limitations. By alleging MSPA violations (i.e., that failure to comply with the FLSA equals failure to comply with MSPA), the plaintiffs may take advantage of the lack of a MSPA statute of limitations. I assisted the defense attorneys on one such case, in which the court allowed a six year statute of limitations (based on the state’s applicable statute of limitations under contract law). I have no reason to believe that DOL would deviate from its customary two-year (three-year in the event of willfulness) litigation practices, but employers
who are subject to MSPA are very vulnerable to an extended statute of limitations when employee plaintiffs sue for FLSA back wages.
7. The FLSA provides, via the liquidated damages provision, that the back wage award may be doubled. An employer informed me that he owes FLSA back wages, but that the plaintiffs’ attorney sought to recover treble damages by filing a civil suit under the Racketeer Influenced and Corrupt Organizations Act (RICO). This might have been a stretch, but the threat of a RICO suit is another potential aggravation and expense for employers.
The child labor provisions were referenced on several occasions. This topic was discussed in the June 2012 BIZWatch.
An FLSA compliant employer with no joint employment exposure is not likely to be affected by any of the described FLSA quirks. If there is doubt, “getting your house in order” is always advantageous (instead of waiting for DOL or a court to become involved). If there is a possibility of joint employment, it is to your benefit that such other employers take the initiative to ensure that there is not a continuing accrual of back wages. Whether you are seeking to enhance compliance within your own area of control, or assisting a joint employer in a compliance review, the www.bizkeys.com FLSA self-audit area will be very beneficial.