By Erin Dougherty Foley and Craig B. Simonsen

Seyfarth Synopsis: Employer is caught by WHD investigator instructing its employees to lie during interviews, and provides falsified records, containing whited-out and edited time records, in order to conform to the Federal Fair Labor Standards Act standards.

In a recent opinion, the Tenth Circuit ruled that a restaurant chain instructed its employees to lie during interviews, and provided falsified “whited-out” and “edited” employee time records, impeding a Department of Labor investigation, and found that the violation was willful (Perez v. El Tequila, LLC, No. 16-5002 (10th Cir., February 7, 2017).

This case provides a rather stunning look at what, as an employer, you don’t want to do during an official government workplace investigation. In this case the employer edited and changed time records, and then he lied about it, and then directed his employees to lie about it. The Court found that “the records Mr. Aguirre provided during the … Investigation, known as middle sheets, were based on his false summaries of how many hours employees worked, rather than actual clock-in and clock-out times…. Mr. Aguirre withheld [the actual] time sheets during the … Investigation, and many time entries had been “whited-out” and edited to conform with the Federal Labor Standards Act (FLSA).”

In addition, “employees revealed that Mr. Aguirre instructed them to lie in their interviews during the … Investigation.” Subsequently,  “employees told the WHD investigator that they had been working from 60 to 70 hours per week and were paid a salary…. They said the time sheets were not accurate, and ‘that they were forced to sign’ them.” During the litigation, Mr. Aguirre admitted that the time sheets and middle sheets were not correct, and that he “told his employees what to say in their interviews.”

In its post-trial motion, the government argued that the owner willfully violated the FLSA by: (1) falsifying payroll records, (2) withholding records requested by the WHD investigator, (3) lying to the WHD investigator and instructing his employees to lie, (4) recklessly disregarding his duty to determine whether it was violating the FLSA, (5) recklessly disregarding FLSA requirements, (6) and recklessly disregarding his duty to keep accurate records.

The Court concluded that the “evidence indicates that Mr. Aguirre took affirmative steps to create the appearance that El Tequila complied with the FLSA, including adjusting records to suggest that workers were properly paid, withholding documents, misrepresenting how employees were paid, and instructing employees to do the same. A reasonable jury could not conclude El Tequila’s violations were negligent” but willful.

In light of this Circuit Court opinion, employers may wish to consider the ramifications of this case as they analyze their management systems, policies, procedures, and training systems. While this is an extreme case, to the extent that FLSA rules apply to your operations, make sure that all employees understand the requirements, and are following company policies and procedures to ensure FLSA compliance. (And don’t lie during a government agency’s interview – they really, really, don’t like that!)

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Teams.

 

By Steve Shardonofsky and Tiffany T. Tran

iStock_000072969307_MediumSeyfarth Synopsis: In a somewhat rare interlocutory appeal, the Fifth Circuit reviewed and reaffirmed a 40-year old case holding that emotional distress and punitive damages are not available under the ADEA. This decision rejected the EEOC’s own interpretation and is welcomed news for employers doing business in the Fifth Circuit because damages under the ADEA will be limited to front and back pay. This victory may be short-lived, however, as we expect many plaintiffs will file claims under the corresponding state-law statutes, which typically do allow for the recovery of emotional distress and punitive damages. 

In Vaughn v. Anderson Regional Medical Center, Susan Vaughan, a nurse supervisor, alleged that her employer fired her in retaliation for raising age-discrimination complaints.  The district court dismissed Vaughan’s claims for pain and suffering and punitive damages under the Age Discrimination in Employment Act (ADEA) based on Fifth Circuit precedent, Dean v. Am. Sec. Ins. Co., 559. F.2d 1036 (5th Cir. 1977), barring such recoveries.  Noting that the EEOC and other circuits held divergent views on this issue, however, the district court certified the question for a rare interlocutory appeal, and the Fifth Circuit granted review.

The Fifth Circuit rejected Vaughan’s effort to distinguish Dean on the basis that the case involved age discrimination claims, as opposed to retaliation claims under the ADEA. According to the Court, Dean held “in unqualified terms” that the type of damages Vaughn sought are not recoverable “in private actions posited upon the ADEA.”  Because the ADEA contained a prohibition on retaliation since its inception, Dean was controlling unless some intervening change in law “undermine[d] its continued vitality.” The Fifth Circuit rejected Vaughn’s arguments on this issue as well.

Vaughn argued there was a change in law since Dean because of the 1977 amendments to the FLSA, which the Fifth Circuit has interpreted as providing remedies “consistent” with the ADEA. According to the Fifth Circuit, those amendments added language that was identical to the provision in the ADEA allowing for “such legal or equitable relief as may be appropriate,” which Dean had already interpreted as precluding emotional distress and punitive damages. These changes, the Court explained, “brought the FLSA’s remedies for employer retaliation into line with the ADEA’s remedies for similar conduct.”  Notably, however, this explanation seems to conflict with another decision (Pineda v. JTCH Apartments, LLC) issued by a different panel of the Fifth Circuit just a few days later, which held that plaintiffs may recover emotional distress damages in FLSA retaliation claims.

The Fifth Circuit also declined to give deference to the EEOC’s interpretation on this issue, finding that the agency’s reliance on a Seventh Circuit decision was unpersuasive because it mistakenly relied on the 1977 amendments to the FLSA, which the Court had already rejected. Even if  the Fifth Circuit had found the EEOC’s view persuasive, it would not be sufficient to displace Dean because it is not binding precedent. The transfer of ADEA administrative/investigative functions from the Secretary of Labor to the EEOC also did not constitute an “intervening change” in law to override precedent.

Given the apparent conflict between this case and the recent Pineda decision, we may see these issues reviewed by the full panel of the Fifth Circuit.  Because the case also creates a split among the circuits courts, we may also see intervention by the Supreme Court in the future.  Until the full panel or the Supreme Court rules on this issue, claims for emotional distress and punitive damages under the ADEA will be subject to dismissal, at least in the Fifth Circuit.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Team.

By Annette Tyman, Lawrence Z. Lorber, Jaclyn W. Hamlin, and Brent I. Clark

 

Seyfarth Synopsis: The first of several anticipated challenges to Executive Order 13673, “Fair Pay and Safe Workplaces,” has resulted in a preliminary injunction staying the implementation of some – but not all – aspects of the Executive Order and its implementing regulations. In a significant victory for the government contracting community, the Associated Builders and Contractors of Southeast Texas won an injunction staying the application of the reporting and disclosure requirements, as well as the prohibition on entering into mandatory pre-dispute arbitration agreements.  The Judge left the paycheck transparency provisions in effect, however, and as a result, government contractors must still plan for compliance with those requirements.

Introduction

For our readers that are interested in occupational safety and health topics, we are blogging our colleagues “Management Alert” below, with this introductory note. OSHA citations are covered among the labor laws covered by the Executive Order 13673 (Blacklisting Order). The way the Blacklisting Order reads is that the covered violations include citations which are not final, which are being contested by the employer, and which may ultimately be withdrawn through settlement or by a Judge once the employer has had a chance to present its defense.  The Blacklisting Order is another example of the government’s “guilty until proven innocent” approach to regulating businesses and employers.

Note also that the Blacklisting Order will be applicable under:

  • The Fair Labor Standards Act
  • The Occupational Safety and Health Act of 1970 (including OSHA-approved State Plans equivalent to State Laws)
  • The Migrant and Seasonal Agricultural Worker Protection Act
  • The National Labor Relations Act
  • 40 U.S.C. chapter 31, subchapter IV, also known as the Davis-Bacon Act
  • 41 U.S.C. chapter 67, also known as the Service Contract Act
  • Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity)
  • Section 503 of the Rehabilitation Act of 1973
  • The Vietnam Era Veterans’ Readjustment Assistance Act of 1972 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974
  • The Family and Medical Leave Act
  • Title VII of the Civil Rights Act of 1964
  • The Americans with Disabilities Act of 1990
  • The Age Discrimination in Employment Act of 1967
  • Executive Order 13658 of February 12, 2014 (Establishing a Minimum Wage for Contractors)

In a significant victory for the government contracting community, a federal judge sitting in the U.S. District Court for the Eastern District of Texas partially stayed the implementation of Executive Order 13673, “Fair Pay and Safe Workplaces,” referred to in the government contracting community as the “Blacklisting Order.”  As discussed in more detail here, the Blacklisting Order would:

  1. Require government contractors to disclose “labor law violations” under fourteen different statutes and Executive Orders when bidding for or modifying contracts;
  2. Prohibit employers from entering into mandatory pre-dispute arbitration agreements with employees; and
  3. Require certain disclosures to independent contractors and employees concerning their employment status and information related to wages and hours worked.

When the White House issued the Executive Order, the government contracting community expressed concerns about the substantial burdens it would impose on businesses and noted that the Order seemed to exceed the limits of Executive power.  Judge Marcia Crone, a federal judge in Texas, agreed.  Late on October 24, 2016, Judge Crone issued a preliminary injunction blocking: (1) the labor law violations disclosure requirements and (2) the prohibition against entering into mandatory pre-dispute arbitration agreements.  The preliminary injunction applies to all federal contractors subject to the Executive Order and it blocks all aspects of the requirements and the implementing regulations, except the paycheck transparency provision.

The Plaintiffs, an association of government contractors in Texas, argued that the Executive Order and its implementing regulations and guidance exceeded Executive power and would impose irreparable harm on their businesses.  Judge Crone found the Plaintiffs’ arguments compelling with regard to the reporting and disclosure requirements and arbitration clause prohibitions, and stayed the implementation of those requirements.

In her decision, the Judge addressed several of the arguments raised by the contracting community Plaintiffs and the government Defendants.

  • The Judge found that the Executive Order and its implementing regulations and guidance likely exceeded the limits of Executive power.
  • She noted that fourteen statutes and Executive Orders of which the Blacklisting Order requires contractors to publicly disclose “violations” all have their own detailed enforcement mechanisms and penalties.
  • The Judge noted that under the Blacklisting Order, a contractor could face debarment or disqualification even if it was contesting a violation or over nothing more than the issuance of a citation by an individual government agency official.
  • Judge Crone also found persuasive the Plaintiffs’ arguments that the provisions of the Executive Order and Final Rule which restrict or prohibit certain mandatory pre-dispute arbitration agreements are in violation of the Federal Arbitration Act and the government’s general policy in favor of arbitration.
  • The Judge found the reporting and disclosure requirements to be “compelled speech” that likely violates the contractors’ First Amendment rights and also agreed that the Executive Order likely violates contractors’ Due Process rights by “compelling them to report and defend against non-final agency allegations of labor law violations without being entitled to a hearing at which to contest such allegations.”
  • Judge Crone found that the Executive Order is likely arbitrary and capricious “in view of the complex, cumbersome, and costly requirements . . . which hamper efficiency without quantifiable benefits.”

Although the contracting community’s victory is substantial, it was not complete, as Judge Crone left the paycheck transparency provisions to take effect on their regular schedule (starting on January 1, 2017).  The paycheck transparency provisions require that contractors with procurement contracts of $500,000 provide their employees with a document disclosing “the individual’s hours worked,  overtime hours, pay, and any additions made to or deductions made from pay.” For exempt employees, the document may omit information concerning overtime hours worked so long as the individual has been informed of his or her exempt status.  Covered contractors in states with equivalent paycheck transparency laws, such as New York and California, are deemed to be in compliance with the Executive Order’s requirements so long as they comply with their state’s paycheck transparency law.  Contractors should also be aware that there is always a possibility that the preliminary injunction may be lifted – whether by the Fifth Circuit or another federal court – and in that event, the reporting and disclosure requirements could be reinstated.  For that reason, covered contractors may wish to continue to collect data in case they find themselves once again subject to the reporting and disclosure obligations.

The request for – and subsequent partial granting of – a preliminary injunction staying the implementation of certain provisions of the Blacklisting Order is only the opening salvo in what is likely to be a long fight between the contracting community and the federal government.  As we discussed in our previous alert on the topic, multiple court challenges are possible, and the Blacklisting Order’s provisions may appear before Congress at some point.

Meanwhile, thanks to Judge Crone’s preliminary injunction, the reporting and disclosure requirements and the prohibition on mandatory pre-dispute arbitration agreements are enjoined until further notice, while we continue to closely monitor developments.  Preliminary injunctions typically remain in effect at least until the conclusion of the underlying litigation.  The Plaintiffs may petition the court for the preliminary injunction to become permanent, blocking the government from enforcing the reporting and disclosure requirements and the prohibition on mandatory pre-dispute arbitration agreements (unless the injunction is overturned).  Or the government Defendants may appeal to the U.S. Court of Appeals for the Fifth Circuit, perhaps paving the way for an ultimate ruling by the U.S. Supreme Court.  The ultimate resolution of the contracting community’s concerns about the Blacklisting Order remains to be seen.  One thing is clear, however: while government contractors should be pleased with their victory in Texas, they must still plan to comply with the paycheck transparency provisions.  The contracting community has won the first battle, but the war over blacklisting continues.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the OFCCP & Affirmative Action Compliance Team, the OSHA Compliance, Enforcement & Litigation Team, or the Workplace Policies and Handbooks Team.

By Megan P. Toth and Joshua D. Seidman

Seyfarth Synopsis: In case you missed it, on June 22, 2016, Chicago added itself to the growing roster of many major U.S. cities to pass a Paid Sick Leave Ordinance.  

The Council’s Committee on Workforce Development and Audit passed the Chicago Minimum Wage and Paid Sick Leave Ordinance (“PSLO”), which amends the Chicago Minimum Wage Ordinance e (2-25-050).

The new ordinance is effective July 1, 2017.  Thus, employers with employees in Chicago must be aware of the major provisions and requirements of the PSLO, which are summarized below and more thoroughly explained by our colleagues here.

Summary of Major Provisions

  • Effective Date: July 1, 2017
  • Covered Employers: Any individual or entity with one or more employee that maintains a business facility within the city of Chicago or that is subject to city licensing requirements.
  • Covered Employees[1]: Employees working 80 hours within any 120-day period.
  • Eligibility: Employees must be eligible to use paid sick leave (“PSL”) no later than 180 days after the first calendar day of their continuous employment, unless the employer sets an earlier date.
  • Accrual: Employees must begin accruing PSL on the first calendar day after the commencement of their employment, or on the effective date of the PSLO (July 1, 2017) if already employed, at a minimum rate of one hour for every 40 hours worked.[2]
  • PSL Caps: Employers may cap accrual and use of PSL at 40 hours per 12-month period, but are free to set a higher limit.
  • Qualifying Usage: An employee may use paid sick leave for the following purposes: (1) employee or a covered family member is ill or injured, or is receiving medical diagnosis, care, or treatment, or preventive medical or health care;(2) absence of employee or the employee’s family member related to domestic violence or “a sex offense”; and (3) closure of employee’s place of business or the employee’s child’s school or place of care by order of a public official due to a public health emergency.
  • Unused PSL: Employees must be permitted to carry over half of any unused accrued PSL from year to year, up to a max of 20 hours. In addition, if the employer is subject to the Family and Medical Leave Act (FMLA), employees can carry over up to 40 hours exclusively for FMLA-eligible purposes. However, if an employee carries over and uses the additional 40 FMLA hours, they cannot use more than an additional 20 hours of PSL in that 12-month period. Employers are not required to pay out unused PSL from year to year or upon termination.
  • Notice to Employer: If an employee’s need for PSL is reasonably foreseeable, an employer may require up to seven days’ notice. If an employee’s need for PSL is not reasonably foreseeable, an employer may only require notice as soon as practicable on the day intended for PSL.
  • Medical Certification: If an employee is absent for more than three consecutive work days, an employer may require certification that the PSL was in fact used for covered purposes.
  • No Retaliation, Discipline or Coverage: Employers cannot retaliate against or discipline employees for use of PSL and cannot require  employees to find coverage for hours missed due to use of PSL.
  • Notice of the PSLO to Employees: Every covered employer must (1) post notice of the PSLO at each facility where covered employees work (with in the City of Chicago) and (2) provide notice advising covered employees of the PSLO with their first paycheck issues after the PSLO is passed.

Takeaway for Employers:

Employers with employees in the City of Chicago must ensure their leave policies are in compliance. We will continue to monitor news related to the ordinance and will provide any updates here. In the meantime, please contact the author or your Seyfarth attorney if you a have any questions regarding the PSLO, or if you would like help reviewing your paid sick leave policies for compliance with state and local laws.

________________________________________________________________

[1] Specifically excluded employees: (1) certain employees employed in agriculture or aquaculture, (2) outside salesmen, (3) members of a religious corporation or organization, (4) an individual permitted to work “[a]t an accredited Illinois college or university employed by the college or university at which he is a student who is covered under the provisions of the Fair Labor Standards Act,” (5) certain motor carriers, and (6) any employee working in the construction industry who is covered by a bona fide collective bargaining agreement.

[2] Employees who are exempt from overtime requirements are assumed to work 40 hours each week, unless their normal workweek is less than 40 hours, in which case paid sick leave accrues based on the employee’s normal work week.

By Brent I. Clark, Benjamin D. Briggs, and Craig B. Simonsen

iStock_000045960778_MediumSeyfarth Synopsis: Even in the face of a collective bargaining agreement the State of Arkansas reconsiders whether employees should be compensated for time they spend putting on and taking off required protective gear.

A divided Arkansas Supreme Court recently ruled that a food manufacturing company violated Arkansas state law by not paying production workers for time they spent putting on and taking off required protective gear. Gerber Prods. Co. v. Hewitt, et al., 2016 Ark. 222 (May 26, 2016).

We had blogged previously about donning and doffing cases. See If It Looks Like Pants And It Walks Like Pants… Supreme Court Considers Definition of “Clothes” In Section 203(o) Of The FLSA, where the question before the Court was whether the term “clothes” in section 203(o) of the Federal Labor Standards Act — which allows employers to exclude time spent by their employees “changing clothes . . . at the beginning or end of each workday” from compensable time pursuant to the terms of or a custom or practice under a collective bargaining agreement — includes protective clothing. Also, Try This On For Size: Seventh Circuit Rejects Factory Workers’ Donning and Doffing Claims Based On Expansive View Of The “Workday”, where the Seventh Circuit affirmed the dismissal of the workers’ donning and doffing claims, with Judge Posner taking a broad view of the definition of “workday” and the applicability of section 203(o).

Igniting this controversy was DOL Issues New Interpretation of “Clothes” Under FLSA and Expands What Constitutes Compensable Activity, where the DOL’s then new interpretation concluded that the FLSA exception for changing “clothes” did not include protective gear. Specifically, the interpretation states that the definition of “clothes” does not include “the modern-day protective equipment commonly donned and doffed by workers in today’s … industries where protective equipment is required by law, the employer, or the nature of the job.”

In this new state case the employees alleged that the company failed to compensate them for their time spent donning and doffing “clothing and protective gear, sanitizing clothing and equipment, washing their hands, and walking to and from their work stations.” The employees asserted that these activities were “necessary and indispensable” to their principal work, but the employees were not compensated.

In a 4-3 decision, the court affirmed the appellate court decision that the company was liable for approximately $3 million in unpaid overtime and interest to workers at its Arkansas plant.

The company had argued that the FLSA exception excused its failure to pay for donning and doffing time prior to 2013 because the union representing the workers signed collective bargaining agreements that made such time non-compensable. The Court, though, found that Arkansas Minimum Wage Act doesn’t incorporate the FLSA exception. Instead it ruled that the approximately 14 to 20 minutes that the workers spent daily putting on and taking off protective gear is compensable under the state law.

In the dissent, Justice Wood argued that the majority’s opinion will open the floodgates to litigation, and that it “undermines the collective-bargaining process and destroys any confidence employers and employees have in the enforceability of their agreements.” Particularly, the Justice noted that:

For this court to abrogate the collectively bargained agreements between Gerber and its employees, which have customarily and generally excluded donning and doffing from the rate of pay, and afford the employees a windfall, is unjustified, particularly when the agreements do not violate the minimum-wage requirement.

For employers, certainly those in Arkansas, this case indicates that it may be appropriate to re-examine collective bargaining agreements, company safety programs and policies, and corporate employees pay policies.

In our third installment of articles looking at the employment law cases being heard by the US Supreme Court this fall term, Tyson Foods Inc. v. Bouaphakeo will have importance in both the wage & hour and class action litigation worlds. “Donning and Doffing “ – who knew!

 Another Watershed Moment for Class Actions?  SCOTUS to
Address Limits on Statistical Proof In Class and Collective Actions

 By Michael Kopp

In a case that is certain to provide an important sequel to the Dukes decision, the Supreme Court will hear argument next week on Tyson Foods Inc. v. Bouaphakeo, to address (1) the use of statistical averaging in class actions to prove liability and damages, and (2) whether courts may certify a class that includes individuals with no injury.

Tyson Foods is important because it will likely set further markers on how far the court’s prohibitions against statistical modelling extend, and more significantly, how these concepts apply to collective actions under the Fair Labor Standards Act. For this reason, employers’ eyes are on Tyson Foods, as the Supreme Court has not previously addressed how Dukes’ analysis applies to collective actions under the FLSA, and whether the FLSA’s “similarly situated” standard differs from Rule 23(b).

The road to the Supremes.  Tyson Foods reached the Supreme Court by way of a divided Eighth Circuit opinion affirming a $5.8 million verdict on an off-the-clock class wage claim. Plaintiffs claimed that Tyson’s Iowa meat processing facility had not paid over 3000 plant workers for the time they spent changing in and out of their work gear and walking to and from the production line.  The district court found there was a common question as to whether the challenged time was compensable, and certified the case as a collective action as to the FLSA claim, and as Rule 23 class action as to the state law wage and hour claims.

Tyson unsuccessfully attempted to decertify the class, and argued neither liability nor damages were “capable of classwide resolution … in one stroke,” as required by Dukes.  Tyson pointed to variations in the type and amount of equipment worn by employees in the hundreds of classifications at issue, and highlighted the disparities in the routines and amount of time employees spent on these tasks. Unpersuaded, the district court permitted a nine-day jury trial on the class claims, where plaintiffs used a statistical model to calculate the “average” time employees spent on the donning, doffing and walking activities at issue.  These average activity times were then extrapolated to the class members.  Although plaintiffs’ expert conceded that the actual times for these activities varied considerably – and over 200 class members suffered no injury at all – the jury nonetheless awarded a lump sum verdict, to be divided among all class members.

Divided approaches to Dukes.  The divided Eighth Circuit panel’s majority opinion and dissent highlight the inconsistent approaches lower courts have taken in interpreting Dukes. The panel majority found that there was a common question concerning whether the activities were compensable under the FLSA and state law, and that plaintiffs had “prove[n] liability for the class as a whole, using employee time records to establish individual damages.”

The dissent took the majority to task for ignoring the considerable differences in donning and doffing times, employee routes to their work stations, the amount of time Tyson allotted for such activities, shortened time shifts, “and a myriad of other relevant factors.” Using statistical models to gloss over those differences violated Dukes’ requirement that the action generate “common answers apt to drive the resolution of the litigation.”  Moreover, the dissent highlighted the critical problem with the majority’s distinction between the classwide liability determination and the individual damages analysis.  Unlike other class claims, establishing a violation in wage and hour actions generally turns upon and “includes the measure of a class member’s individual damages.”  In other words, an employer is only liable to an individual if the employee has actually suffered an injury, such as the compensable loss of overtime.  For that reason, a verdict that “result[s] in a single-sum, class-wide verdict from which each class member, damaged or not, will receive” compensation, is fundamentally inconsistent with Dukes’ prohibition against “trial by formula.”

Why This Case Matters.  First, the Supreme Court will have the opportunity to clarify the extent of Dukes limitations on the use of statistical techniques to establish damages and liability.  Second, the case has particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to whether the standards for certifying a Rule 23(b) class action apply to collective FLSA actions, and whether the FLSA’s “similarly situated” standard alters the analysis.  Third, the case provides the opportunity for the court to address Tyson Food’s constitutional argument that an award of monetary damages to uninjured class members is impermissible.  This is particularly critical, as it is a common feature for wage and hour actions to include class members with no identifiable actual wage loss or injury.

Stay Tuned … This case is set for oral argument on Tuesday, November 10, so be on the lookout for a follow up blog post here when a decision is reached.

If you would like more information regarding this article, please contact the author or your Seyfarth attorney.

By Erin Dougherty Foley and Craig B. Simonsen

The U.S. Department of Labor (DOL), due to pending litigation, had not begun to enforce the Fair Labor Standards Act (FLSA) final rule on protections relating to most home care workers, which rules had an effective date of January 1, 2015. That litigation has now concluded, and the DOL rule has been upheld.

The DOL had previously announced a time-limited non-enforcement policy because it was a party to a federal lawsuit regarding the revised regulations. The U.S. Court of Appeals for the District of Columbia issued an opinion in that case which upheld the rule that many home care workers may now be subject to minimum wage and overtime pay protections. Home Care Association of America v. Weil, No. 15-5018 (D.C. Cir. August 21, 2015). The Court of Appeals opinion reversing the District Court’s orders and upholding the rule, became effective on October 13, 2015, when the Court of Appeals issued its mandate to the District Court.

In the underlying rulemaking, the DOL had promulgated changes to its regulations governing the FLSA’s Section 13(a)(15) “companionship” exemption, and the Section 13(b)(21) overtime exemption for “live-in domestics.” The final rule provided that third-party employers would no longer be able to rely on these exemptions. The final rule had been published in October 2013. 78 Fed. Reg. 60454 (Oct. 1, 2013).

In a DOL blog about the final rule, the DOL noted that it “gives these nearly 2 million workers the same basic protections already provided to most U.S. workers – including those who perform the same jobs in nursing homes.” Specifically, under the rule, “direct care workers [such as home health aides, personal care aides, and certified nursing assistants] employed by third-party employers, such as home care agencies, will receive minimum wage and overtime protection.” In other words, home care workers may now be entitled to the same wages as employees performing similar duties in professional healthcare and nursing home facilities. “Workers employed solely by a family or individual may be covered if they are performing medically-related duties or are providing more than a limited amount of care in addition to fellowship and protection.” (Emphasis added.)

In further clarification, as explained in the DOL press release, “direct care workers who perform medically-related services for which training is typically a prerequisite are not companionship workers and therefore are entitled to the minimum wage and overtime.” Also under the rule, individual workers who are employed “only by the person receiving services or that person’s family or household and engaged primarily in fellowship and protection (providing company, visiting or engaging in hobbies) and care incidental to such activities, will still be considered exempt from the FLSA’s minimum wage and overtime protections.” (Emphasis added.)

The DOL has now indicated that it will begin enforcement of the FLSA Final Rule on November 12, 2015. At that time, from November 12 through December 31, 2015, the DOL will be in a “second phase of the time-limited non-enforcement policy,” that it had announced in October 2014, during which time it will “exercise prosecutorial discretion” in determining whether or not to bring enforcement actions, with “particular consideration given to the extent to which States and other entities have made good faith efforts to bring their home care programs into compliance with the FLSA since the promulgation of the Final Rule.” 79 Fed. Reg. 60974 (October 9, 2014).

For employers, including home-care agencies and other third-party employers, now would be the time to assess whether these exemptions will be available, as they likely may be, and take steps to come into compliance with the FLSA’s minimum-wage, overtime, and timekeeping requirements. Indeed, employers in these industries should be moving toward promptly completing steps in that direction. Consider also whether state or other local laws might require that these same employees be paid minimum-wage and overtime compensation without regard to these FLSA exemptions.

If you have any questions on this topic contact the authors, a member of Seyfarth’s Health Care Practice Group, or your Seyfarth attorney.