Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

In three opinion letters issued during the final weeks of the Bush administration, the Wage and Hour Division of the U.S. Department of Labor (DOL) provided further guidance as to what does and does not constitute compensable training time under 29 C.F.R. § 785.27.

Pursuant to section 785.27, participation in training programs need not be counted as working time if four criteria are met: (a) attendance is outside of the employee’s regular working hours; (b) attendance is in fact voluntary; (c) the course, lecture, or meeting is not directly related to the employee’s job; and (d) the employee does not perform any productive work during such attendance. 29 C.F.R. §785.27.

In FLSA 2009-13 and FLSA 2009-15, the DOL confirmed that required study for required training classes – even when the studying occurs outside of the normal work day – is nonetheless compensable time. In 2009-13, employees were required to take four 10-hour web-based prerequisite classes for a job-related training course that would be completed during normal work time. While participation in the job-related training course was entirely voluntary, completion of the course would result in the employees being able to better and more efficiently perform the functions of their jobs. Accordingly, because their web-based requisite classes were a mandatory part of the job-related training course, the DOL concluded that time spent completing those web-based prerequisite classes was directly related to the employee’s job and, therefore, failed the third criterion of section 785.27.

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The Department of Labor (DOL) announced on Friday, March 6, 2009, that they were simultaneously publishing and withdrawing 18 wage and hour opinion letters issued during the waning days of the last administration.

Former Acting Wage and Hour Administrator Alexander J. Passantino signed the letters between January 14 and 16, but according to the DOL they do not appear to have been mailed before President Obama’s inauguration. “In any event,” the DOL stated, “we have decided to withdraw [these opinions] for further consideration by the Wage and Hour Division.”

The Department can always reconsider and withdraw a previously-issued opinion letter, but this kind of mass withdrawal appears to be unprecedented. The DOL has not withdrawn 18 other opinion letters issued around the same time, but that apparently were mailed. The Administrator issued a total of 36 opinion letters during the Bush Administration’s final two weeks in office, half of which have now been withdrawn. By contrast, only 19 opinions were issued during all of 2008.

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In three new opinion letters, FLSA2009-2, FLSA 2009-14 and FLSA 2009-18, the DOL answers questions about the potential effect of temporary plant shut downs and reduced workweeks on the exempt status of executive, administrative and professional employees under section 13(a)(1) of the Fair Labor Standard Act (FLSA). All three letters address application of the salaried basis test set forth in 29 CFR § 541.602(a).

FLSA2009-2 affirms that an employer may require exempt employees to use accrued vacation time during a plant shutdown of less than a workweek without destroying exempt status. The FLSA does not require employers to provide paid vacation time. If employers choose to do so, they are free to require employees to use the time for any absence— including a plant shutdown of any duration—without harming exempt status. Aside from a few exceptional situations not relevant to this letter, in order to be paid on a “salaried basis” and maintain an exemption, the employee must “receive a payment in an amount equal to [his] guaranteed salary” for any workweek during which he performs any work. It does not matter if the amount is part regular salary and part vacation pay.

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In the last days of the Bush administration, the Department of Labor (DOL) issued an opinion letter, recognizing that insurance agents might qualify for the FLSA’s outside sales exemption and/or the administrative exemption. In its letter, which came in response to a request from a trade association representing life insurance companies, the DOL cautioned that such a determination would depend on the specific facts of the particular case. FLSA2009-28.

With respect to the outside sales exemption, the DOL noted that insurance agents who are responsible for making sales and obtaining orders for life insurance and other financial products could qualify for the exemption. In general, to qualify for the outside sales exemption, the agent must “normally and recurrently” – meaning every workweek – meet with clients face-to-face and engage in sales or solicitations away from their employer’s place of business. The performance of some activities at the employer’s workplace, such as sending e-mails, making telephone calls and preparing for meetings, will not jeopardize the exemption, provided this work is merely incidental to and in conjunction with the qualifying outside sales activity.

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The Wage & Hour Division of the U.S. Department of Labor recently issued an opinion letter that could produce substantial savings for employers who have misclassified employees as exempt from the overtime provisions of the FLSA and who need to retroactively compensate those employees for unpaid overtime.

An employer may pay its employees a fixed salary. But, when a non-exempt employee works more than forty hours in any workweek, the Fair Labor Standards Act (FLSA) requires his or her employer to pay overtime at one and one-half times the regular rate of pay. 29 U.S.C. section 207(a)(1).

If an employer and a non-exempt salaried employee have a “clear mutual understanding” that the employee’s salary is compensation for all hours worked each week (whether many hours or few), then the FLSA permits the employer to use the “fluctuating workweek” method to calculate overtime. Applying this method, the employee’s salary is deemed to constitute straight-time pay for each hour of work (including overtime hours), and the employer must pay the employee only the additional “half time” premium for each overtime hour. 29 C.F.R. § 778.114.

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On February 20, 2009 in Ontiveros v. Zamora, the court held that the plaintiff stated a viable claim for individual liability under a joint employment theory for violations of state wage and hour laws.

The court agreed with defendants that a corporate officer could not be held liable for the wage and hour violations of a corporation based on the individual's status alone, including the fact that he owned or otherwise controlled the corporation as was the case here. The court acknowledged California courts have consistently held that individual officers, directors, shareholders, and managers of a corporation cannot be considered personally liable for the corporation's failure to pay wages to employees or for related California Labor Code violations. See, e.g., Reynolds v. Bement, 36 Cal.4th 1075 (2005); Bradstreet v. Wong, 161 Cal.App.4th 1440 (2008). The rationale has been that that none of the Labor Code sections at issue expressly define the term "employer." Rather, the courts have applied the common law definition of "employer," which does not include corporate agents acting within the scope of their agency.

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On March 2, 2009, the California Second District Court of Appeal rejected a putative class plaintiff’s argument that the California “tip pooling” statute, Labor Code § 351 (“§ 351”), prohibits so-called “indirect” servers (in this case bartenders) from sharing tips. Budrow v. Dave & Buster’s of California, Inc., (2d Dist. 3/2/09). The plaintiff and appellant, Aaron Budrow, brought a putative class action against respondent Dave & Buster’s of California, Inc., on the theory that distributions from the “tip pool” to persons who did not provide direct table service violated § 351. After the trial court sustained demurrers (motions to dismiss) to two of appellant’s three causes of action without leave to amend, the employer moved for summary judgment on the remaining cause of action that alleged a violation of California Business and Professions Code section 17200. The trial court granted the motion. The court of appeal affirmed.

The employer owned and operated restaurants throughout the U.S., employing servers, cocktail servers, buspersons and bartenders. The plaintiff was a cocktail server for a brief period of time. (The employer contended that it employed the plaintiff for one month; the employee contended that he worked for the employer for three months.) Dave & Buster’s tipping policy requires that servers contribute 1% of their gross sales to bartenders and other employees.

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