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.

Bright Future in Sales? The Outside Salesperson FLSA ExemptionWith minimum wage increasing at federal, state, and local levels and with wage and hour cases on the rise, we receive many questions about exemptions to overtime laws. One such exemption that does not get as much coverage as others is the “outside sales exemption.” If your company has an outside salesperson – selling goods or services – this may be an exemption for you.

The Federal Basics

The federal law governing wages and hours is called the Fair Labor Standards Act (FLSA). The FLSA requires minimum wage for all hours worked and wages at one and one half times the base rate of an employee for all hours worked over 40 in a work week. There are exemptions from the minimum wage and overtime requirements that fall into two basic categories. One is for supervisory employees who are paid a salary, and the other is for employees in “outside sales” positions. In general, to meet the exemption, an employee’s “primary duty” must be “making sales” or “obtaining orders” and he or she must be “customarily and regularly engaged” away from the employer’s place of business. Notably, there is no particular pay method required to meet this exemption as there is for other FLSA exemptions.

For clarity, the regulations define these important terms as follows:

  • Primary Duty: The primary duty is the principal, main, majority, or most important duty that the employee performs.
  • Sales: Sales include any sale, exchange, contract to sell, shipment for sale, or other disposition.
  • Away: Away can mean the customer’s place of business or home or some other selling location (a hotel is an example) but not the employer’s place of business whether by telephone or by internet or in person.

Check State Laws

Companies wishing to use the outside sales exemption must be careful of state laws regarding overtime as well. Many states have no law at all or else have a law but follow the federal requirements for the exemption exactly. Other states, however, have a unique test for the exemption or even have very specific limits on how much non-sales work an employee can perform without losing the exempt status. For example, an employee can spend no more than 20 percent of his time on non-sales activities in Pennsylvania or else the exemption is lost.

Some tips:

  1. Make sure your employee is selling something. Needless to say, this is fairly important. Job descriptions should have the word “sell” in them a lot.
  2. Limit administrative or clerical work.
  3. Emphasize that the work should be performed at the customer’s place of business or the customer’s home if applicable.
  4. Make sure that the compensation structure is commission based and distinguishable from the pay methodology for other employees.
  5. Minimize direct supervision of your exempt outside salesperson, especially over “tasks” or repetitive work. The supervisor’s focus should be on sales goals.
  6. If some sort of tracking is used, make sure the tracking is of sales goals and not hours worked.
  7. Minimize work “on the phone” from the office or a fixed location.
  8. Make sure that any promotional work is done for the employee’s own sales.

Cooperate or Pay: Recovering Attorneys’ Fees to Get to ArbitrationDoes your arbitration agreement allow you to recover attorneys’ fees if the employee rebels against arbitration and you have to compel it? Maybe it should. In Aralar v. Scott McRea Automotive Group, a court in Florida recently affirmed an arbitrator’s award of nearly $20,000 in attorney’s fees for the defendant’s hassle of moving for arbitration. Employers with arbitration agreements should be encouraged that the fees incurred for moving for arbitration (when it should be clear cut) may be recoverable with the contract clause.

The Facts and the Arbitration Clause

Aralar worked in the McRea auto service center and filed a lawsuit in court under the FLSA for unpaid overtime and back wages. Pursuant to an arbitration agreement Aralar signed as a condition of employment, McRea notified Aralar’s counsel multiple times that he could not pursue the matter in court — it had to go to arbitration.

The arbitration clause provided that if one of the parties filed an action in court that was subject to arbitration, the other party would provide notice of the arbitration requirement and request to have the case dismissed. If the party who filed the court action did not dismiss the case within 10 days and the case ultimately ended up in arbitration following a motion, the moving party could recover reasonable attorneys’ fees incurred “because of the filing of the complaint.”

Aralar did not respond, and McRae filed a motion to dismiss the case and compel arbitration. Yet again Aralar failed to respond, although he eventually agreed to the arbitration forum about six weeks after it was filed. The court then compelled the matter to arbitration and stayed the case pending the results. Aralar did not end up filing his request for arbitration for another six months after the court’s ruling.

About a year later, the arbitrator granted McRae’s motion for judgment on the pleadings, finding that Aralar’s job as a service advisor was exempt from FLSA requirements. A few months later, the arbitrator awarded McRae the fees and costs incurred up through the time the case was stayed by the court, a sum totaling $19,291.58. The fees and costs awarded were about half of the amount requested.

After no further response was received from Aralar, McRae filed a motion with the court to confirm the arbitration award. Aralar finally woke up and filed to vacate the attorneys’ fee award.

The Court’s Decision

In his ruling, the judge conveyed that any party seeking to vacate an arbitrator’s findings must clear a high hurdle because federal courts defer to an arbitrator’s decisions whenever possible. Then the judge said the same standard applies for award of attorneys’ fees. Aralar contended that (1) fees should only be awarded as a sanction, and (2) that because his FLSA claim was not frivolous, the awarding of fees was inappropriate based on rulings in civil rights cases. The judge rejected those contentions and found that because the parties contractually agreed to the arbitration agreement’s fee shifting provision and Aralar did not withdraw his lawsuit within 10 days of notice, McRae was entitled to enforce the contract terms and recover the fees incurred to get the matter into arbitration.

Takeaways

The decision makes sense and these fee shifting clauses could be a useful tool to avoid fights about arbitration. Where the employer has to have its attorneys compel a matter into arbitration when the employee should have agreed to it, that unnecessary expense should come out of the plaintiff’s pocket. Employers should find some small encouragement that fee recovery provisions will be enforced. At the very least, the Aralar decision provides leverage towards peaceful agreements into arbitration rather than a fight. No plaintiff wants to pay a former employer—especially when they filed a lawsuit to try and get money.