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New Rule for Calculating OVERTIME for Fluctuating Workweeks

We all know (or learn) that not everything in life can be carefully planned.  For example, some weeks an employer may need a worker for just 30 hours, but in another week may need them to put in 50 hours.  The Fair Labor Standards Act (FLSA) has long provided employers with the option to pay nonexempt employees whose hours vary on a salary basis, but at times has offered inconsistent guidance on the impact of bonuses and commissions, or how to calculate overtime.  When courts got involved, sometimes there were conflicting rulings.

Under Secretary Scalia's leadership, the U.S. Department of Labor (DOL) is offering some clarification.  On May 20, 2020, DOL announced a Final Rule https://www.dol.gov/sites/dolgov/files/WHD/fww/FR-FWW.pdf that clarifies that employers may pay bonuses or other incentive-based pay to salaried, nonexempt employees whose hours vary week-to-week. The Final Rule applies to employees who meet the following criteria:

(1)      the employee's hours fluctuate from week to week;

(2)      the employee receives a guaranteed salary that does not vary with the number of hours worked (docking employees in "short weeks" is fatal);

(3)      the amount of the employee's fixed salary is at least equal to minimum wage for every hour worked;

(4)      the employee and the employer have a clear and mutual understanding about the manner of pay; and

(5)      the employee receives overtime pay, in addition to salary and any bonuses, for all overtime hours worked. 

Note that in this scenario the employer pays an overtime premium of one-half - not one-and-a-half - times the regular hourly rate for each overtime hour.  Assuming a worker is paid $400/week for all hours, and works 50 hours and also gets a $50 bonus, pay should be the base salary ($400) plus $50 bonus ($450), divided by the total number of hours worked (50), for a 'regular rate" of $9/hour; plus $4.50 (one-half of $9) per overtime hour, yielding a total paycheck of $495 (base $400 + bonus $50 + 10 hours OT premium = $45).

In addition to changing the title of the regulation from "Fixed salary for fluctuating hours" to "Fluctuating Workweek Method of Computing Overtime," the Final Rule achieves the following:

  • Expressly states that employers can pay bonuses, premiums, or other additional pay, such as commissions and hazard pay, to nonexempt employees compensated on a salary basis using the fluctuating workweek method. (See 29 CFR 778.114(a).) These supplemental payments must be included in calculating the employee's "regular rate" (for purposes of overtime) unless they are excluded under other provisions of the FLSA. This allows employers greater flexibility to provide bonuses or other additional compensation to nonexempt employees whose hours vary from week to week and eliminates any disincentive for employers to make supplemental payments.
  • Illustrates how an employer may pay an employee a shift differential or productivity bonus in compliance with the rules. (See examples in 29 CFR 778.114(b).) This may be particularly valuable guidance for employers who want to reward their workers with more pay for their efforts in dealing with the COVID19 crisis.
  • Clarifies confusing language to make the fluctuating workweek method easier to understand and administer. (See revised 29 CFR 778.114(a).)

There are several other things to understand about the Final Rule.  First, it is not strictly speaking a regulation, but rather a statement of general policy and official interpretation.  This affects the degree of deference a court will give it.  Regulations have more authority than interpretations; this is an interpretation, and some courts may be less willing to find it binding.  Second, there are some surprising omissions.  For example, if a nonexempt employee's hours don't vary weekly, but are regularly scheduled; and the employer wants to pay a guaranteed salary for all hours worked, it's not clear that the rule would apply. 

The new Final Rule also addresses divergent views that have been expressed by DOL and courts in the past, with a view to eliminating legal uncertainty for employers regarding the compatibility of various types of supplemental pay with the fluctuating workweek method, which can generate significant savings in overtime.  In sum, the new rule provides employers concrete guidance to ensure compliance - and avoid punishing employers who give workers extra pay, as the old rules sometimes were interpreted to do.

Federal Appeals Court Finds Lawful Discharge of an Employee Bringing Baseless Harassment Claim

According to the Sixth Circuit Court of Appeals, the U.S. Army's decision to fire a civilian employee because it found her repeated complaints of harassment baseless, does not violate the federal discrimination laws.  Carrethers v. McCarthy, 2020 BL 198271 (5/28/20).  The employer had assigned an investigator, who concluded that it was "extremely clear" that the plaintiff was fabricating her complaints.  All of the 14 witnesses the plaintiff identified to the investigator contradicted her claims.  Thus, the employer had reason to believe the harassment complaints were not made in good faith.  Also, even if they were, the employer still had a legitimate basis for firing the employee.  The judge cited published rulings by the Fourth, Fifth, Eighth and Eleventh Circuits in support of the conclusion.

Editor's Note:  It is extremely controversial, even if legitimate, to fire an employee for making baseless harassment complaints.  Such actions should only be taken with advice of counsel.

Defenses to Employers from Employee Claiming Infection of the Coronavirus on the Job

Employers, along with other establishments all across the country, fear operating under circumstances where employees may claim they became sick with COVID-19 by contracting the Coronavirus at work.  In most states, outside of certain healthcare workers, the federal and state executive orders do not grant any immunity to employers from such claims. 

Nevertheless, a study of certain state laws, like Georgia, reveal numerous defenses to an employer should such a claim arise.  The main defense to court liability would be the exclusive remedy provisions of the workers' compensation laws of virtually all of the states.  Under such systems, an employee contending that he or she got injured or sick at work, can only seek compensation by bringing a workers' compensation claim, known as the "exclusive remedy" concept.  Some states have exceptions for willful safety violations, or in some cases for claims against managers and supervisors as opposed to the employer itself. 

Not immediately apparent is that in many states, like Georgia, the exclusive remedy concept prohibits access to the court system for claims, even where the injury or sickness does not result in a compensable recovery under workers' compensation.  In general, for example, in Georgia, diseases are not compensable unless they result from an accident.  Even in those situations where occupational diseases are part of the workers' compensation system, there may be defenses unless the disease "is not an ordinary disease of life to which the general public is exposed," or "is not of a character to which the employee may have had substantial exposure outside of the employment." 

The bottom line is that in a state like Georgia, an employee claiming the acquisition of COVID-19 at work, may be barred from a court claim, and yet also barred from recovery under the workers' compensation system. 

EEOC Postpones Collection of EEO-1 Data for 2019

On May 7, 2020, the Equal Employment Opportunity Commission (EEOC) announced that it was postponing the collection of EEO-1 data due to the Coronavirus.  The EEO-1 report, which normally applies to employers with at least 100 employees, would have been required to be filed by March 2020, for the 2019 report.  The 2019 report is now not due until March of 2021.

Lessons in Applying The Pregnancy Act to Light Duty Jobs

Many employers limit light duty jobs to workers who have suffered work-related injuries.  However, a new case out of the Eleventh Circuit tells us that the employer that fails to offer these light duty jobs to pregnant employees with medical restrictions risks being liable for discrimination.  Durham v. Rural/Metro Corp., 18-14687 (11th Cir., 4/17/20). 

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Plaintiff's Attorney AVENATTI Convicted of Extortion

While an employer may state publicly or privately that the plaintiff's demands were "extortion," it is extremely rare for a plaintiff's attorney to be convicted of such an offense.  Well, this just happened to a plaintiff's attorney, a high-profile one at that, Michael Avenatti, who rose to national prominence as the attorney for adult-film actress Stormy Daniels, who had apparently settled a claim involving President Trump.  On February 14, 2020, a jury found that Avenatti tried to extort $20 million from Nike by threatening to expose damaging information about the company.  In the negotiation session with Nike's attorneys, the defense attorneys secretly tape recorded the negotiations in which Avenatti allegedly threatened to expose corruption by Nike in connection with high school basketball players if Nike did not pay Avenatti's client a significant amount of money and hire him to conduct an internal investigation at Nike.  Avenatti's defense was that he was just using tough negotiating tactics and wasn't trying to extort the company.  U.S. attorneys saw the situation differently, calling Avenatti's approach "an old-fashioned shakedown."  Avenatti apparently had threatened to expose the alleged payments to high school basketball players at a news conference.

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Traps to Avoid in Obtaining Paycheck Protection Program (PPP) Loan Forgiveness

The PPP allows certain employers (primarily those with less than 500 employees) to obtain low cost (1% interest), short-term (2 years) financing from the federal government for certain operating expenses consisting of payroll costs, interest on certain loans (not principal), rent on real and personal property, and certain utilities.

The limitation on the use of the loan proceeds means that employers cannot use the money to pay suppliers, contractors, or insurers.

In addition, recent regulations impose a requirement that is not in the statute--75% of the loan proceeds must be spent on certain payroll costs to qualify for forgiveness. This requirement ignores the fact that many businesses in normal times do not spend 75% of their revenue on payroll costs and those businesses may not survive if other obligations are not paid.

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DOL Issues Temporary Regulations to Implement Emergency and Paid Sick Leave Provisions

On April 1, 2020, the U.S. Department of Labor (DOL) issued a temporary rule to implement the Public Health and Emergency and Paid Leave Provisions.  There are several areas in the regulations that had not previously been addressed in detail, including the type notice an employee must provide the employer, the documentation the employer may require the employee to provide as to the need for such leave, recordkeeping, and the determination of whether the employer meets the small employer exemption.  The most important particulars of the regulations are summarized below:

1. Employees subject to the new family and medical leave and paid leave provisions may not take paid leave where the employer does not have work for the employee available.

2. Employees subject to a quarantine or isolation order that are able to telework, and therefore may not take paid sick leave if:  (a) the employer has work for the employee to perform; (b) the employer permits the employee to perform the work from another location; and (c) there are no extenuating circumstances that prevent the employee from performing that work.

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The Coronavirus is definitely the most important issue of the day, and so we are devoting the entire newsletter to this subject.  Our firm has issued three Alerts during the week of March 16, 2020 on the above subjects, and this newsletter is intended to consolidate these various Alerts, as well as bring more recent information on the issues as of press time, March 26, 2020. 

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One of the stalwarts of the liberal image for protection of workers is the Southern Poverty Law Center (SPLC), the Alabama-based civil rights legal advocacy group.  However, recently its long-standing president was dismissed and there were rumors of discrimination issues.  More recently, in late 2019, an affiliate local union of the Communications Workers of American attempted to become a bargaining representative at SPLC, but SPLC's Board of Directors voted unanimously to proceed with the union vote rather than voluntarily recognize the union.  Union organizers accused SPLC of hiring a "union avoidance" law firm to resist the unionization attempt, but the union won the final vote anyway.  The union claimed that SPLC was acting counter to its traditional values. 

Wimberly, Lawson, Steckel, Schneider & Stine

3400 Peachtree Road, Ste 400 / Lenox Towers / Atlanta, GA 30326 /404.365.0900

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