FLSA Hot Topics—2013 and Beyond

Panelists included Susan Webman, Of Counsel with FortneyScott in Washington, DC., John Husband, senior partner with Holland & Hart in the firm’s Denver, Colorado office, Linda Walton, attorney with Perkins Coie LLP in Seattle, and panel moderator Charles Plumb, partner with McAfee & Taft in the firm’s Tulsa, Oklahoma office.

Hot Topic: Fallout of Christopher v. SmithKline Beecham Corp.

The issue in the case was whether the pharmaceutical sales reps (PSRs) could be exempt as outside sales reps because they don’t actually make the sale of the drugs. They get physicians to agree to prescribe the drug, but the actual sale is made at the drug store by the pharmacist.

The Supreme Court found that the PSRs were outside sales reps under the Fair labor Standards Act, and thus not entitled to overtime.

Interestingly, the Court did not give deference to DOL’s interpretation of its regs, which may prove helpful to employers in future cases.

MOUs and Independent Contractor Misclassification—Still Hot

More states are entering Memoranda of Understanding (MOU) with the federal government. This means more agencies are exchanging information, and in turn, that means ramped up enforceability by state agencies, DOL, and IRS. (State taxation agencies and the federal IRS are particularly interested because they can collect more taxes when independent contractors are reclassified as employees.)

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Hot Topic: Unpaid Internships

Many employers think it’s OK to have unpaid interns, while in most cases it is not OK, says panelist attorney Susan Webman, Interns may be unpaid only in limited circumstances. The government has a six-point test:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
2. The internship experience is for the benefit of the intern.
3. The intern does not displace regular employees, but works under close supervision of existing staff.
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.
5. The intern is not necessarily entitled to a job at the conclusion of the internship.
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.

Unpaid interns, independent contractors just a couple of, what, a dozen wage/hour challenges on your desk? Joint employers, off-duty phone use, overtime, and a host of other picky other issues—compensation just won’t be as simple as we want it to be.

And complying with the Fair Labor Standards Act (FLSA) is one of the most confusing and challenging things comp managers have to do.

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Why are aggressive attorneys so eager to file claims on behalf of employees? Because there’s so much money to be made:

• $4.75 million: Hospital in Thousand Oaks, California settles wage and hour lawsuit over miscalculated overtime pay and failing to compensate workers for missed meal and rest periods.
• $1.15 million: Las Vegas construction company to pay in back wages to 1,060 current and former employees.
• $976,327: New Mexico aerospace company settles with 900 employees who were routinely required to work through lunch breaks without compensation.
• $340,400: New Jersey convenience store to pay back wages and damages for violations of overtime and recordkeeping.
• $84,541: New York physical therapist agrees to pay 22 employees for minimum wage violations
• $30,000: Texas chain of four gas stations to pay their six hourly employees, again for recordkeeping and overtime violations.

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