Kansas City Employment Lawyer Blog

In an effort to get a head start on the quest for gainful employment upon graduation from college, many students participate in internship programs offered by businesses through college and university career centers. Students use the internship programs to accumulate work experience while in school in order to enjoy a significant advantage over the competition. Unfortunately, for the studends, a great many of these internships are unpaid. Regardless, in a very uncertain job market, students are accepting no pay in exchange for the experience and a competitive edge.

The volume of available internships has grown substantially in the last few years. This growth results from many factors including cost containment by employers and the students' desire to add experience to their resumes. At Stanford University alone, the number of unpaid internships has tripled in the past two years. Estimates in 2008 indicate that as many as 50 percent of graduating students had worked in unpaid internship positions, whereas the figure from 1992 was 17 percent.

Federal and state regulators are worried that many employers are taking advantage of these programs in order to get free labor. The concern is that, depending upon how the internship is structured, it may be in violation of minimum wage laws. Many states are already investigating and fining employers for these violations. When M. Patricia Smith was the labor commissioner for New York, she ordered many investigations into various internship programs. Now in her capacity as the federal Labor Department's top law enforcement official, she is working with the wage and hour division to increase enforcement on a nationwide basis.

It is not always easy to enforce the rules, given that many students are hesitant to file complaints since they do not wish to begin their careers on the wrong foot or to develop a reputation within their field as a complainer or troublemaker, thus ruining their opportunities for full time, paid employment. However, two individuals in the film industry have filed a lawsuit in federal court in Manhattan against Fox Searchlight Pictures, the producer of "Black Swan." The suit alleges that the producer hired the interns and then directed them to perform menial work that should have been the responsibility of paid employees, rather than providing them with the necessary experience and following the specific rules that exempt employers from paying interns. The interns were hired as production assistants and bookkeepers, yet they were actually responsible for such duties as preparing coffee, delivering lunch orders for the staff, cleaning the office and removing the trash.

The federal labor department has very specific criteria for unpaid internships. Among them are that the intern does not displace a regular employee, the position must benefit the intern, and the training must be similar to what the student would gain through an educational system or apprenticeship program. Unfortunately, lawyers for many companies believe the criteria are obsolete and believe that the rules are rarely enforced.

Besides the issue of adherence to the labor department's criteria for unpaid internships, in many of these cases the intern is not considered an employee. Because of this misclassification, the intern may not be protected by employment laws regarding harassment and discrimination.

Nancy J. Leppink, the acting director of the Labor Department's wage and hour division said, "If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law." Her department is going after firms that do not follow the rules, while also seeking to educate employers, students and universities on the laws regarding internships.

Sources:

The Unpaid Intern, Legal or Not, The New York Times, by Steven Greenhouse, April 2, 2010

Interns, Unpaid by a Studio, File Suit, The New York Times, by Steven Greenhouse, September 28, 2011,

The Labor Department is cracking down on employers who cheat their employees out of wages. In so doing, the Department is entering agreements whereby information will be shared between the Department, several states, and the Internal Revenue Service. The Labor Department's top attorney, Patricia Smith, has indicated that when state and federal agencies share information, businesses can then be assessed multiple fines. She explained, "There's more of an incentive to be in compliance because the cost of what we consider to be illegal activity has increased." So, for example, a company that in the past might have paid only a single fine to a state agency for improper unemployment insurance payments will now pay additional fines and penalties to the Labor Department and the IRS.

This information sharing targets specific illegal wage and hour practices that deprive employees of minimum wage and overtime pay as well as other benefits. These practices include misclassification of workers as exempt employees and improper labeling of employees as independent contractors. Such misclassifications result in the denial of employees' rights to workers' compensation benefits, unemployment insurance, overtime pay, and social security benefits. Additionally, employers engaging in independent contractor misclassification do not make proper deductions for federal taxes. So, the reporting of these violations by any state to the IRS allows the IRS to go after the company for unpaid taxes. The states cooperating with the Labor Department on these issues include Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. The states of New York and Illinois are expected to follow suit in the near future.

Since taking office in 2009, Labor Secretary Hilda Solis, has made increased enforcement of federal wage-and-hour laws a top priority. The industries that are the focus of such "wage theft" by the Department include the hotel, restaurant, janitorial, health care and day care industries. Additionally, the Department has targeted homebuilders for failing to pay workers the minimum wage or overtime. The head of the Department's Wage and Hour Division, Nancy Leppink, recently stated, "The urgency of addressing this issue has become more pronounced because we're seeing these illegal business practices used by more and more industries, like restaurants."

The stepped up enforcement comes at a time when businesses are favoring the employment of independent contractors or freelancers in order to save money or avoid hiring staff in an uncertain economy. Figures and estimates from some government agencies indicate that 20 to 35 percent of all employers have classified people as independent contractors either mistakenly or intentionally, when they really should be classified as employees.

Notwithstanding the losses borne by misclassified employees, these illegal employment practices have broad implications for both business and government. For example, when an employer classifies an employee as a contractor, that employer maintains a competitive advantage since his or her total labor costs are lower. Richard A. Sebeck, program manager for the Maryland Department of Labor, Licensing and Regulation's Division of Labor and Industry explained, "It's bad for all honest businessmen." From a Government perspective, millions of dollars in payroll tax and other revenues are lost. For the worker, many benefits are lost, including Social Security, health care and unemployment insurance. Mr. Sebeck also added that when employees are misclassified as contractors and get hurt on the job, they are not entitled to workers' compensation.

It is very important that workers be properly classified as employees to prevent the employer from being potentially subject to thousands of dollars in fines and back wages. If a company's so called "independent contractors" are required to follow the company's specific instructions for completing tasks and are also required to clock in and out on a routine basis, it is likely that they are misclassified, and are, in the eyes of the law and the various enforcement agencies, employees.

Frank Vasquez, with Case & White law firm, states that, "The penalties for this misclassification [are] so severe that every employer is wise to consider it." If a complaint is filed by a contractor that is really an employee, the employer could be liable for any overtime wages owed, back payroll taxes, plus unemployment insurance. Mr. Vasquez suggests that if an employer wishes to utilize temporary workers, the employer should consider hiring them through arrangements with a temporary employment agency.

Just since 2009, upwards of $9 million in back wages for 15,000 workers have been collected by the Labor Department just in cases where misclassification of independent contractors was alleged.

Sources:

Labor Department Expands Enforcement of Wage Violations, Associated Press, by Sam Hananel, September 19, 2011

Working: U.S. and Local Governments Crack Down on Employers Who Pay Workers as Contractors, The Washington Post, Capital Business, by Vickie Elmer, October 9, 2011.

The New York Times published an editorial during the Labor Day weekend of 2010, written by former Labor Secretary, Robert Reich. The article addressed the issues this country continues to endure one year later. Specifically, Mr. Reich states that, "this dismal state of affairs is unlikely to improve until we address the deep structural flaws in our economy; flaws that have made it impossible for the American consumer - i.e. the middle class American worker - to sustain the level of spending needed to keep our economy going." The state of affairs includes the low population of organized labor relative to total private work force, high unemployment, and little hope for recovery.

Added to this dismal state of affairs is the fact that the U.S. poverty rate has now risen faster during the last 3 year period than any similar period since the early 1980's, a time when this country was suffering from an energy crisis, unemployment and out of control, spiraling interest rates. According to the census, there are 46 million now living in poverty, which is the largest number since the census started tracking poverty in 1959.

The average American worker's ability to consume continues to erode, as working wages have been on a steady downward trend during the past three decades. During this timeframe, we have seen major U.S. manufacturing firms invest in technology to reduce labor expenses and move manufacturing overseas in order to take advantage of a non-unionized, low wage labor pool. Mr. Reich goes on to predict that full employment, when calculated in conjunction with real income decline, would not be enough to provide the demand necessary for the products that the U.S. is capable of producing. He cites the structure of the economy as the real culprit, not the business cycle. The wealthiest 1% of our population in 1970 earned about 9 percent of the nation's total income, compared with 23.5 percent of the nation's total income by 2007. Reich theorizes that the rich spend much smaller portions of their income than the rest of the population, and so the economy loses much of the demand needed to continue to grow.

As Harry Truman once said, "There is nothing new in the world except the history you do not know." As we watch the U.S. poverty rate rise and as wages continue to stagnate, perhaps we need to stop and look back on our history of success. What structure really worked? What were the very basic building blocks that led to the financial strength of the United States?

The reform that was the New Deal provided the necessary tools for long term economic prosperity for both the American worker and the American economy. The New Deal was not just about relieving the unemployed with WPA projects. It introduced labor legislation in the form of The National Labor Relations Act, passed in 1935, which in turn, put into place the National Labor Relations Board, and along with it, the right to collective bargaining. Additionally, the Fair Labor Standards Act (FLSA) set a minimum wage and mandated the 40 hour work week, along with the right to overtime pay. All of these laws, in conjunction with financial reform and investment in education through the GI bill, led to a much larger and better paid middle class with access to post secondary educational opportunities.

On July 1, 2011, Janice M. Nittoli offered solutions in her op-ed piece in the New York Times. She realistically assumes that our government is unlikely to generate good paying jobs. Instead, Nittoli hones in on the jobs already financed with federal dollars and the fact that nearly one fourth of workers are employed by companies that have contracts with the federal government to supply goods and services. Many of these contractors violate wage and hour laws, so not only do workers not get paid properly, but they are likely to utilize government subsidies such as food stamps and Medicaid in order to survive. Employers should have to certify adherence to wage and hour laws or risk the loss of large, multimillion-dollar contracts.

Instead of arguing against jobs bills and solutions such as that offered by Nitolli, our Washington politicians should consider the ongoing expense of entitlements and low economic demand in the face of high unemployment and low wages. Why not diligently enforce the rules implemented with the FLSA, especially for employers providing jobs with Federal money, and improve the structure of the economy with an environment that entices manufacturing back to the United States, and once again build a strong middle class? The proven lessons of history should not have to be relearned at so great a cost to our society and its members.

Sources:

FDR and Labor: Earning Our Way Out of the Great Recession, Huffington Post, September 1, 2010

How to End the Great Recession, New York Times, September 2, 2010

Pay Workers Fairly and Save Money, NY Times, July 1, 2011

Income Slides to 1996 Levels, Wall Street Journal, September 13, 2011

In 1974 Congress added domestic workers to the Fair Labor Standards Act (FLSA), however, those employees that provided "companionship services" were exempted. At that time, the business of providing home care was barely a cottage industry with companions described as "elder-sitters."

Fast forward to present day. In the 37 years since the 1974 change to the FLSA with respect to domestic workers when the companionship exemption was enacted, the home health care industry has grown exponentially. With the baby boomer generation sandwiched between caring for children and aging parents and making a living, the services provided by these agencies are high in demand. It is also these types of services that extend the possibilities for elders to have the freedom to stay in their own homes and remain independent, thus postponing the expensive alternative of an assisted care or skilled nursing facility.

These home health workers provide a very valuable service, that if performed in an assisted living facility or nursing home would be covered by the minimum wage and overtime provisions of the FLSA. As it is, these home health workers are some of the lowest paid jobs. Additionally, due to the nature of the work and its physical demands, these workers are more prone to injury and are generally not covered by health insurance. The turnover rate is very high, thus making the consistency and quality of care unstable. Most importantly, because they are not covered by the FLSA, their employers are not required to pay them a minimum wage or overtime pay for all hours worked in excess of 40 in a work week.

A bill has recently been introduced by Rep. Linda Sanchez (D-CA) and Sen. Robert P. Casey, Jr. (D-PA) on June 23, 2011. The Direct Care Job Quality Improvement Act [S. 1273/H.R. 2341] promises to provide the framework to allow for higher valued home care workforce.

This bill should be considered in the long run as a vehicle that could provide government savings. It is estimated that more than 75% of long-term care is financed by federal programs. If the value of these home health care jobs were protected and promoted by FLSA rights, the quality of home health care would increase due to a more stable and trained workforce, which would, in turn, provide savings to our health care system by postponing the use of nursing homes and decreasing hospitalizations. In addition to minimum wage and overtime provisions, the proposed bill would implement data collection and reporting requirements and provide for grants to states in support of recruitment, training and supply of these workers.

On the other side of the issue Paul Hogan, who is chairman of Home Instead, a very large company that employs more than 65,000 caregivers in the United States, is seeking a Congressional sponsor for another bill. This competing bill would enforce the companionship exemption in the FLSA and would go another step further by preventing any future administration from changing the rules. "We're asking that the decision-making be removed from the Department of Labor," Mr. Hogan said.

Sources:
A Fair Wage for Home Care Workers, NYTimes.com, July 20, 2011.

Fair Pay for Quality Care, Direct Care Alliance, Inc.

The Fair Labor Standards Act or "FLSA" is a federal statute, enacted by congress that protects many workers' rights to fair pay. Under the FLSA, covered employees have minimum wage protections as well as rights to receive overtime compensation for hours worked over 40 in a workweek. The act, originated during the Great Depression, was passed in 1938, and has protected workers' rights to fair pay for over 70 years. Republican lawmakers are now indicating a willingness to reform the FLSA, this evidenced by a Congressional hearing held mid-July.

The hearing was called by Rep. Tim Walberg (R-Mich.), the chair of the House education and workforce committee, in order to discuss the FLSA, relative to today's work force and business environment. Specifically, the purpose was to investigate if the FLSA is "meeting the needs of the 21st century." Two business executives and a lawyer testified and said, "The statute has become too onerous for contemporary employers, leading to an explosion of costly lawsuits brought by workers."

Walberg said, "The law was a significant expansion of the government's authority when it was created in the midst of the Great Depression. Good intentions can often lead to unintended consequences. It is hard to imagine a law intended for the workforce known to Henry Ford can serve the needs of a workplace shaped by the innovations of Bill Gates."

At the time of Henry Ford, the assembly line was a huge innovation in the manufacture of automobiles, just as Bill Gates' Microsoft continues to lead innovation today. So, are workers any less deserving of fair pay for a fair day's work today than they were during the Great Depression? Are workers today less deserving of rightful protection under the law? Are today's workers less deserving of overtime pay for all hours worked over 40 in a work week?

Henry Ford said himself, "Where people work longest and with least leisure, they buy the fewest goods. No towns were so poor as those of England where the people, from children up, worked fifteen and sixteen hours a day. They were poor because these overworked people soon wore out -- they became less and less valuable as workers. Therefore, they earned less and less and could buy less and less." Ford also said, "There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." Henry Ford wanted to assure that any man working on his assembly line could afford to buy one of his automobiles.

The major topic of Walberg's hearing was with regard to exempt vs. non-exempt employees and how these categories of employment relate to employees' protection under the FLSA. Non-exempt employees are protected by the law's provisions, that provides for federal minimum wage plus overtime pay for any hours worked in excess of 40 in a week. Exempt employees that are predominantly white-collar workers and paid on a salary basis, are not protected by the law and can be worked overtime without being paid for it. The issue involves the definitions for exempt and non-exempt.

Republican witnesses at the hearing used large, million dollar law suit settlements as evidence that employees and their attorneys exploit the FLSA. This is because non-exempt employees that think they have been cheated out of pay can sue an employer.

A senior vice president at IBM, J. Randall McDonald said "Our ability to use technology has dramatically changed the workplace". His opinion is that the FLSA statute needs to be amended so that some workers now covered by the law would no longer be able to rely on its protections.

Again, Henry Ford's assembly line dramatically changed the workplace. Just because a worker slaves over a computer instead of an assembly line, that worker is not less deserving of protection under the law.

Aaron Albright, who was the spokesman for the Democrats, commented that Republicans would like to "roll back" the FLSA so that fewer workers are covered by its provisions. He feels the Republican goal is to diminish the number of workers that are eligible for overtime or the minimum wage. He said, "What's the purpose for the tinkering? It's basically to reclassify workers so they're not eligible for overtime or minimum wage."

Rep. Dennis Kucinich (D-Ohio) asked all the witnesses if the federal minimum wage (7.25) should be raised, lowered or kept the same.

J. Randall McDonald said he did not understand the question and the other two Republicans dodged the question altogether.

Does this exchange tell us anything about the Republican intent toward the Fair Labor Standards Act?

Source:
Minimum Wage, Overtime Laws Due For Reform: Republicans, Huffington Post, Dave Jamieson, July 14, 2011

"Tipped employees," such as restaurant servers and bartenders, are often paid a minimum wage of only $2.13 by their employer. The federal minimum wage is $7.25 an hour, but allows for a "tip credit" of up to $5.12 an hour for a tipped employee. As long as the tipped employee receives at least $7.25 an hour in combined wages and tips during the pay period, such an arrangement is generally lawful. But "generally" is a tricky word when it comes to the law and tipped employees. If fact, there are several exceptions to the general rule, and when any of those exceptions apply, employers frequently violate their employees' rights. Here are some common violations of the rights of tipped employees.

First, only employees who directly serve the public are allowed to be paid the lower tipped minimum wage. Thus, dish washers and cooks, for example, must be paid the full minimum wage from their employer. Also, only employees who directly serve the public may be included in a "tip pool." A tip pool is where tips received during a shift are pooled and then distributed to employees on a pro rata or some other basis. Paying out part of a tip pool to employees who don't directly serve the public nullifies the employer's right to the tip credit, entitling all employees participating in the tip pool to be paid $7.25 per hour by their employer. For example, some employers unlawfully include "expediters" in their tip pools. An expediter typically inspects plates of food just before they are delivered to customers to make sure that orders are filled correctly and presented in an appetizing way. Such expediters don't directly serve the public, and cannot lawfully be included in a tip pool.

Second, some states have a higher minimum wage for tipped employees than federal law. In Missouri, for example, an employer must pay tipped employees at least $3.63 an hour, $1.50 more than the federal requirement.

Continue reading "Real Tips for Tipped Employees " »

With the advent of electronic time clocks, employers have been able to track the hours employees work with greater accuracy and efficiency. However, the use of electronic time clocks and computers have also made it easier than ever for employers to monitor and sometimes modify when employees clock in and out.

It's a little known fact, but the law allows employers to round employees' hours just as long as it doesn't result in the loss of money to the employee. An employer can round to the nearest five, ten or even fifteen minute increment at the beginning or end of an employee's shift. However, it is illegal for the employer to round so that it is always in the employer's favor. So rounding forward at the beginning of a shift and backwards at the end of a shift would not be allowed.

For example, let's assume the employer wants to round to the nearest five minutes. If an employee's shift begins at 9:00 and the employee clocks in at 8:56, the employer can automatically round that employee's time to 9:00. However, if the employee clocks out at 5:03, the employer must round the employee's time to 5:05, the nearest five minutes. If the employee's time is rounded to 5:00, the rounding would be in the employer's favor and is likely illegal.

The theory behind rounding is that over long periods of time the rounding sometimes favors the employer and sometimes favors the employee. It is generally thought that the rounding will average out and neither the employer nor the employee will gain any advantage.

However, rounding becomes tricky because the only way that it is legal for an employer to round an employee's time is to ensure that the time clock rounding is done in an equal and fair way. Unfortunately, many employers get this wrong and employees are left with losing money on their paychecks.

This week, Senator Robert Casey (D. Pennsylvania) introduced legislation to afford minimum wage and overtime coverage to the home care worker industry. The legislation aims to protect many employees who went without minimum wage and overtime protections since the law was enacted in 1938.

If the legislation passes, thousands of home health care workers may now be protected by the Fair Labor Standards Act (FLSA), and eligible to receive the federal minimum wage of $7.25 per hour and time and a half for all hours worked over 40 in a workweek.

The legislation was introduced for the purpose of expanding the home care workforce, as needs grow for these services. It is estimated that by 2030, 78 million individuals from the "baby boom" generation will have qualified for Medicare. As the generation reaches 65, large demands will be placed on America's current health care system, creating new demands for the home health care industry.

Source:

The Senate gets its home care bill

On June 16, 2010 the U.S. Department of Labor (DOL) issued Administrator's Interpretation No. 2010-2, Section 3(o) of the Fair Labor Standards Act, 29 U.S.C. § 203(o), reversing two prior DOL opinions relating to under what circumstances employees should be paid for time spent donning and doffing uniforms, and the Supreme Court's ruling in IBP v. Alvarez. The Department of Labor concluded that Personal Protective Equipment such, but not limited to, arm guards, protective aprons and hard hats, which are required by the employer to be worn or as a result of some regulation, generally do not constitute clothing within the meaning of Section 3(o).

23 U.S.C. 203(o) allows employers to avoid paying its employees for time spent donning and doffing clothing, if the employees are subject to a collective bargaining agreement, and the Union has acquiesced to such time being non-compensable either by agreement or by custom and practice. Section 203(o) generally does not apply to non-union employees, and non-union employees generally must be paid for time spent changing clothes.

The result is that an employee does not get paid for the time spent putting on or removing required safety equipment at the beginning and end of a work shift if an employee's union agreed with the employer that workers would not be paid for that time. Also, an employee does not get paid for this time if custom or practice in an industry was or has been to exclude this activity from an employee's compensation.

The DOL further concluded that even if clothes changing activities are considered non-compensable within the meaning of Section 203(o), any time spent walking to and from employees' workstations generally should be compensated, because "...clothes changing covered by section 203(o) may be a principal activity. Where that is the case, subsequent activities, including walking and waiting, are compensable."

In some instances, the process of donning and doffing materials, equipment and garb, and traveling to and from one's workstation can amount to thirty minutes a workday or more, resulting in two and a half hours or unpaid work time per week. Such uncompensated time can result in a windfall to the employer, saving the company vast sums of money which it would otherwise be obligated to pay to its employees.

Frequently, the employer provides a changing room for employees to put on and take off safety equipment. The employee walks to a time clock very close to his or her work station and clocks in to start the workday. This deprives the employee of the time putting on safety gear and walking to the workstation.

In her February 2010 presentation of the 2011 budget request for the U.S. Department of Labor, Secretary Hilda L. Solis included funding to hire 90 new investigators for the department's Wage and Hour Division. These increases will allow the Labor Department's worker protection agencies to "vigorously protect wages and working conditions of 135 million workers in more than 7.3 million workplaces."

Secretary Solis' presentation also includes plans for budget increases for a Misclassification Initiative to address misclassification with 100 additional enforcement personnel and grants to increase states' incentives to address the problem. Misclassification of employees as "independent contractors" deprives the employee of benefits and protections such as overtime and unemployment benefits.

Continuing the message on April 1, 2010, Secretary Solis unveiled the U.S. Department of Labor's "We Can Help" campaign. This campaign is to be led by the department's Wage and Hour Division and will focus on employees in industries such as construction, janitorial work, hotel/motel services, food services and home health care.

Courts have used what is called the Economic Realities Test to determine whether individuals are properly classified as independent contractors under the Fair Labor Standards Act. Under this test, the Court considers the following factors: (1) the degree of control which the alleged employer exerts over the worker; (2) the worker's opportunity for profit or loss; (3) the worker's investment in the business; (4) the permanence of the working relationship; (5) the degree of skill required to perform the work; and (6) the extent to which the work is an integral part of the alleged employer's business. None of the factors alone is dispositive; the Court assesses the totality of the circumstances. See, Lewis v. ASAP Land Express, 554 F. Supp. 2d 1217 (D. Kan., 2008).

Source:
Secretary Hilda L. Solis presents US Department of Labor budget request for fiscal year 2011

US Labor Secretary sends message to America's under-paid and under-protected: 'We Can Help'