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FLSA: The dinosaur in the room

With most laws, employers have less difficulty meeting the laws’ mandates as time goes by and they become more familiar with the requirements.

Not so with the Fair Labor Standards Act of 1938 (FLSA), where lawsuits have multiplied as the law has increasingly fallen out of step with the modern workplace, according to Paul DeCamp, an attorney in the Washington, D.C., area office of Jackson Lewis, and former administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division.

Some of the law’s provisions are now irrelevant, while others are either unclear or nonsensical, he told SHRM Online. “Increasingly, it seems that the only real beneficiaries of our wage and hour laws are the lawyers who bring claims -- for a percentage of the recovery -- and the lawyers who get paid by the hour to defend those claims,” he remarked.

The 40-hour workweek

Take the 40-hour workweek. “The continuing relevance of the 40-hour workweek is dubious,” he remarked. “That provision entered federal law at a time when unemployment was around 20%. The main rationales for an overtime penalty were coercing employers to spread work around so that more workers had at least some income and enhancing occupational safety due to higher rates of injuries when factory workers work long hours.”

Times may be tough now for those who remain unemployed, but they aren’t nearly as difficult as they were during the Great Depression. “Despite the uptick in the last decade, unemployment is still less than half of what it was during the Depression,” DeCamp remarked. “On the occupational safety front, we now have much more finely calibrated tools to prevent injuries.”

But employers probably are stuck with paying overtime for nonexempt employees who work more than 40 hours, as “there is no realistic scenario under which that aspect of the law is going to change in the foreseeable future.”

Nebulous exemptions

DeCamp has more hope that some changes will be made to some of the FLSA’s white-collar exemptions, remarking that “many aspects of the current scheme of exemptions are out of touch and good for neither workers nor businesses.”

The white-collar exemptions for executive, administrative and professional employees “continue to generate an enormous amount of litigation, particularly the administrative exemption,” he said. “Having the test for exemption depend heavily on job duties is a recipe for lawsuits, particularly when the issues concern such amorphous and malleable concepts as how much discretion a worker possesses or which of several possible job functions is the primary duty.”

The exemptions don’t have to be so mystifying. “A much more sensible exemption scheme would depend on facts that are objective and easily verifiable, such as an employee’s total compensation,” he remarked.

Of all the exemptions, the most problematic is the administrative exemption, he noted. “DOL and the courts have struggled for years with the meaning and relevance of the production/administration dichotomy, as well as exactly how much discretion and independent judgment is sufficient.” The administrative exemption is “limited to those employees whose primary duty relates ‘to the administrative as distinguished from the production operations of a business,’ ” the DOL noted in its Administrator’s Interpretation No. 2010-1.

“For most industries, the 1930s-era brick-and-mortar factory setting that gave rise to this exemption bears little resemblance to the modern workplace,” DeCamp elaborated. “The reality is that there is much greater diversity today in the types of jobs that people perform than there were 70-plus years ago when the FLSA was enacted.”

For example, DeCamp observed that “We now have large numbers of knowledge workers, often with a college degree or more, performing functions that did not exist even five or 10 years ago. These workers often earn significantly more than the $23,660 in annual salary necessary for the FLSA’s white-collar exemptions, but their duties nevertheless fall into a gray area.”

Now there is much litigation regarding college graduates earning $40,000 to $90,000 per year, he added. “These are clearly not the types of workers Congress had in mind when it sought to protect those vulnerable laborers who toil in the factories and in the field,” he said.

Other exemptions trouble DeCamp. “Another area of great concern is what I think of as professional sales,” he said. “The law currently allows a big-box retailer to exempt salespeople who sell shoes to screaming kids for what may amount to $12 an hour in commissions, but individuals who sell high-end products in a wholesale or other nonretail context and earn several times that amount arguably do not qualify for the Section 7(i) exemption.” He added, “The law should be amended to eliminate the distinction between inside and outside sales, exempting any salesperson regardless of the industry or context, perhaps subject to some baseline compensation threshold.”

Alfred Robinson Jr., an attorney with Ogletree Deakins in its Washington, D.C., office who used to be DOL’s acting administrator for the Wage and Hour Division, agreed that the Section 7(i) exemption is a prime target for amendment. Robinson also said that he would update the definition of what constitutes a retail or service establishment, noting that the current definition “excludes certain financial businesses such as banks, insurance companies and credit unions.”

“Even if the entire FLSA exemption scheme is not scrapped, there should be an exemption for any worker making above a certain amount of money, regardless of job duties,” DeCamp remarked. “We see this concept to a certain extent in the current FLSA regulations with the highly compensated short-cut test to establish compliance with the executive, administrative or professional exemptions for employees earning more than $100,000 per year,” though a lenient duties test applies, according to the DOL, even to these employees. “But the concept is valid across the board,” he added.

DeCamp explained, “Once workers earn a certain amount per year -- whether it is $50,000, $100,000, $200,000 or whatever -- common sense says that the individual no longer needs the protection of the 40-hour workweek. The FLSA was intended to help vulnerable workers at the bottom end of the income curve, not those at the top end.”

Off-the-clock work

Just figuring out what time is compensable is a challenge under the FLSA.

“We also see issues arise regarding attempts to convert normal commuting into compensable travel based on the continuous workday rule,” DeCamp commented. “Employers and DOL continue to struggle with what de minimis means in this context.”

Harley Storrings, an attorney with Arnstein & Lehr in Miami, noted that broad interpretations of what constitutes de minimis work are problematic because often “responding to certain emails and phone calls immediately is not only important -- it is imperative.

“For example, a sales employee may need to immediately respond to a potential client’s concerns,” he explained. “Waiting until he/she is back ‘on the clock’ could mean the difference between landing or losing a huge sale. Some tasks simply cannot wait until Monday morning.”

“The emergence of smart phones, remote e-mail and network access, and an overall 24/7 mentality within some segments of the nonexempt employee population presents great opportunities for increased productivity, workplace flexibility and worker income, but also substantial confusion and complexity regarding tracking and recordkeeping,” DeCamp added. “Employers need clear standards for what to do about employees who have mobile devices with mixed personal and business use, and what the law requires for how to compensate for these relatively small increments of time. They also need certainty regarding whether and when the continuous workday rule applies with respect to activities performed away from the employer’s place of business.”

Allen Smith, J.D., is manager, workplace law content, for SHRM.

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