Does the Shutdown Shut Off FLSA Obligations to Unpaid Government Workers?The U.S. federal government shutdown has continued for more than a month, with no probable end in sight. While many government employees are furloughed, an estimated 420,000 others are deemed “essential employees” and are required to continue working without pay during the shutdown. Several essential employees have recently filed putative collective action lawsuits, claiming that the shutdown violates their wage-and-hour rights under the Fair Labor Standards Act because they are working without pay. Several of the plaintiffs are customs/border protection officers, as well as prison guards, and have been previously classified as non-exempt by the Department of Homeland Security.

Plaintiffs in these new lawsuits are likely to succeed based on precedent from several years ago. Non-exempt, essential employees brought a similar lawsuit during the 2013 government shutdown, and the court held that the government’s failure to pay these employees during the shutdown violated their rights to minimum wage and overtime pay. The court additionally awarded liquidated damages in that case.

Until the government reopens and the purse strings are untied, essential employees are going to continue to work without pay. Thus, it will be difficult for government employers to avoid allegations of wage-and-hour violations. Those employers can control, however, their responses to any employee complaints about pay (or lack thereof) so as to avoid a retaliation claim under the Fair Labor Standards Act. Government employers should proceed with caution in issuing any discipline or otherwise making employment decisions as to non-exempt essential employees until the shutdown ends and those individuals have received back pay for their work during the shutdown.

The Tipping Point:  DOL Rescinds 20 Percent Rule on “Side Work” for Tipped EmployeesIf you see your waiter or waitress grumbling during the holiday season, it could be due to the DOL’s Wage and Hour Division’s revision of the rules dealing with minimum pay due to “tipped” employees. Under the FLSA and accompanying regulations, employers can pay “tipped” employees (those who regularly receive not less than $30 a month in tips) not less than $2.13 per hour and take a “tip credit” for the difference they receive in tips up to the minimum wage. Waiters, bartenders, etc. are very familiar with this rule.

Dual Jobs vs. Side Work

Questions arise, however, when an employee may have “dual jobs.” For example, what if John, a hotel maintenance worker, also serves as a waiter in the hotel restaurant? In that situation, the employer can pay John as a “tipped employee” (i.e., $2.13/hour) only for the time he works as a waiter and must pay him at least minimum wage for the maintenance work.

What if, however, John is a server in the hotel restaurant and has regular “side work” that doesn’t generate tips (e.g., rolling silverware, wiping tables, or cleaning dishes)? Do you have to pay him minimum wage for the side work? Back in 1988, the DOL issued guidance stating that if 20 percent or more of a “tipped” employee’s work involved these non-tip-generating “side work” tasks, then the employer had to pay the full minimum wage for their time doing that side work. It’s not clear that this rule was ever aggressively pursued by the DOL, but it generated a lot of litigation. In January 2009, the Bush administration’s DOL explicitly rejected the 20 percent standard and instituted guidance stating that there was no limitation as long as the non-tip-producing duties were performed contemporaneously with the direct customer-service duties. Several months later, the Obama administration reversed course and re-instituted the 20 percent rule.

More litigation ensued over the 20 percent standard, including suits by restaurant advocacy groups claiming the guidance was unconstitutional. In November 2018, the Trump administration’s DOL went back to the 2009 Bush guidance and revoked the 20 percent standard. The DOL, in fact, simply re-issued the 2009 DOL letter on the guidance. Therefore, as it stands now, an employer can continue to use the “tip credit,” even if a server engages in more than 20 percent of their work in non-tip-generating work. However, that non-tip-generating work has to be contemporaneous with the customer-service work.

What Does All This Flip-Flopping Mean?

One of the reasons the 2009 letter (and now the 2018 letter) gives for changing the standard is to avoid all the confusion surrounding the rule. The letter cited a case where the court felt that the 20 percent rule could require “perpetual surveillance” or “precise time logs accounting for every minute” of an employee’s shift. However, even when the 20 percent rule was in place, it is unclear how much it was actually policed. The best takeaway for an employer faced with this situation is to evaluate the actual jobs being done by your employees. If you have a maintenance person who spends 85 percent of their time fixing things, but occasionally helps out with a shift behind the bar, you should not apply the tip rule to their maintenance duties. However, if you have your wait staff rolling silverware before their shift, you are probably OK continuing to apply the tip credit rule. Unless you have a HUGE amount of silverware.

As we reported earlier, after a hiatus during the Obama Administration, opinion letters are back and the United States Department of Labor (DOL) recently issued six new ones.

Quick Refresher

Opinion letters are official, written opinions from the Wage and Hour Division (WHD) on “how a particular law applies in specific circumstances presented by the person or entity requesting the letter.” The DOL encourages the public to submit requests for opinion letters; however, the request must state that the opinion is not sought by a party in a WHD investigation or for use in any litigation that was initiated prior to the submission of the request.

The Facts about Paying for Wellness

Be Well without Running Afoul of the FLSAOne of the newly issued opinion letters addresses whether the FLSA requires an employer to compensate an employee for time spent voluntarily participating in certain wellness activities, biometric screenings, and benefits fairs. The fact pattern presented to the DOL was as follows:

An employer makes available to its employees opportunities to participate in “biometric screenings,” which test, among other things, cholesterol levels, blood pressure, and nicotine usage. The employer does not require the screening, and it is entirely the employee’s choice to participate. The screenings are in no way related to the employee’s job duties; however, the employee may be screened both during and outside of regular work hours. An employee’s participation in the screening could decrease the employee’s health insurance deductibles.

An employee may also participate in other “wellness activities” to decrease his or her monthly insurance premiums, including (1) attending in-person health education classes; (2) using the employer-provided gym; (3) participating in telephonic and online health education classes facilitated by the employer; (4) participating in Weight Watchers; and (5) voluntarily engaging in a fitness activity. As with the biometric screening, the employer does not require anyone to engage in those wellness activities, and the activities are not related to the employee’s job.

Lastly, the employer allows employees to attend benefits fairs on such topics as financial planning, employer-provided benefits, or college attendance opportunities. Those fairs are not part of an employee’s orientation, are open to all employees, are not related to the employee’s job duties, and are entirely optional.

The DOL’s Opinion

The FLSA requires employers to compensate employees for their work, but does not explicitly define “compensable work.” That said, in reaching its ultimate conclusion, the DOL relies on the U.S. Supreme Court’s 1944 determination in Armour & Co. v. Wantock that the compensability of an employee’s time depends on “whether it is spent predominantly for the employer’s benefit or for the employee’s.” The DOL also relies upon separate regulations relieving employers of their obligation to compensate an employee for “off duty” time, i.e., “periods during which an employee is completely relieved from duty and which are long enough to enable him to use the time effectively for his own purposes.”

Considering all of those factors, the DOL opined that “an employee’s voluntary participation in biometric screenings, wellness activities, and benefits fairs predominantly benefits the employee.” It reached that conclusion, in part, because the activities (1) provide financial benefit to only the employee, (2) help the employee make decisions about matters unrelated to his or her job; (3) are wholly optional; and (4) are not required in conjunction with any job-related duty. As such, the DOL concluded that engaging in those activities does not constitute compensable worktime under the FLSA.

The DOL specifically concluded that participation in those activities was not compensable even during normal work hours, because the activities constitute non-compensable “off duty” time, provided the employee may use the time engaging in those activities “effectively for his or her own purposes.”

Takeaway

Employer wellness programs are all the rage. The DOL’s recent opinion offers clear guidance to employers on how to structure a wellness program in a manner that does not require the employer to pay employees for using the program:

  • Make available financial benefits personal to the employee (not to the company);
  • Provide information that employees need to make decisions related to their lives—not their jobs; and
  • Make it voluntary.