Fair Labor Standards Act

GEICO Insurance Investigators Not Exempt from FLSA


On December 23, 2015, the 4th Circuit, in Calderon v. GEICO, ruled that GEICO insurance investigators are not subject to the administrative exemption of the FLSA and therefore, are entitled to overtime.   The plaintiff investigators follow company procedures and spend 90% of their time investigating potential fraudulent insurance claims.  GEICO has been classifying its investigators as exempt for a long time.

The administrative exemption applies to those who: (1) are paid, on a salary basis, in an amount not less than $455 per week; (2) “whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers;” and (3) whose primary duty involves the exercise of discretion and independent judgment. 29 C.F.R. §541.200(a).

The district court found that GEICO could not establish that the insurance investigators primary duties involved independent judgment and discretion, therefore, summary judgment was granted in favor of the plaintiffs.  The 4th Circuit upheld the decision for plaintiffs but relied upon the second element of the exemption – whether the work was directly related to the management or general business operations – find that their primary duty was “the investigation of suspected fraud, including reporting their findings.”  The court stated “[t]hus, in the end, the critical focus regarding this element remains whether an employee’s duties involve “‘the running of a business,’” Bratt v. County of Los Angeles, 912 F.2d 1066, 1070 (9th Cir. 1990), as opposed to the mere “‘day-to-day carrying out of [the business’s] affairs,’” Desmond I, 564 F.3d at 694 (citing Bratt,912 F.2d at 1070).

The court further stated that “[r]egardless of how [i]nvestigators’ work product is used or who the Investigators are assisting, whether their work is directly related to management policies or general business operations depends on what their primary duty consists of… the primary duty of the Investigators… is not analogous to the work in the “functional areas” that the regulations identify as exempt. 29 C.F.R. § 541.201(b).”  Conversely, the court found that the primary duties were directly analogous to the work the regulations identify as not satisfying the directly relatied element. See 29 C.F.R. §§ 541.3(b)(1), 541.203(j).   Admitting that the issue was very close, the court held GEICO could not establish that the plaintiffs’ primary duties were “plainly and unmistakably” directly related to the company’s management or general business operations.

This case is yet another reminder of the importance of properly classifying your employees pursuant to the FLSA.

For more information on the FLSA or any further employment related matters, please contact Dana Perminas, at 312-334-3474 or dperminas@messerstrickler.com for more information.

Independent Contractor Classification Narrowed by Department of Labor

On July 15, 2015, the Department of Labor (“DOL”) issued new guidance which would allow more workers to qualify for overtime pay.  In the Administrator’s Interpretation No. 2015-1, the DOL is narrowing the definition of an independent contractor taking the position that most work should be performed by employees and independent contractors should be used sparingly. Under this new guidance, the department considers six factors when determining a worker’s status:

■ The extent to which the work performed is an integral part of the employer’s business

■ The worker’s opportunity for profit or loss depending on his or managerial skill

■ The extent of the relative investments of the employer and the worker

■ Whether the work performed requires special skills and initiative

■ The permanency of the relationship

■ The degree of control exercised or retained by the employer

These six factors will be examined in relation to one another and no single factor can determine into which category a worker falls. Additionally, hiring business entities and independent contractors will not consequently protect an employer from liability under the Fair Labor Standards Act.

Finally, the DOL reinforces that the type and scope of work being performed should be reviewed before an independent contractor is hired. When it is appropriate to hire an independent contractor, ensure the correct indemnification provisions are in place to protect a company from any wage and hour claims that may arise. It is an employer’s duty to audit the status of all independent contractors in the event their duties or the work being performed becomes more akin to that of an employee as opposed to an independent contractor.

For more information on the new DOL guidance or any other employment law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.


Under the new Philadelphia law, employers with 10 or more employees will be required to provide up to one hour of paid sick leave for every 40 hours worked (including overtime hours) by an employee in the city.  Employees who are salaried exempt employees accrue sick time based on the employee's normal work week or a 40-hour work week, whichever is less.  Employees may accrue up to 40 hours of sick leave in a calendar year (unless the employer allows more).  Employers with fewer than 10 employees will be required to provide unpaid sick leave on the same terms.  Employers must update their employee handbooks and provide notification to employees of these new provisions immediately as this was required to be done by May 13, 2015. At its discretion, an employer may loan sick leave to an employee in advance of accrual.  The date on which actual accrual of paid sick leave begins should be measured from May 13, 2015, but the time period for an employee to use accrued paid sick leave is measured by the actual date of employment – an employee must be employed for at least 90 days by the employer before being able to use any accrued paid sick leave.

Like the California law, employers must allow employees to carry over all accrued paid sick leave to the next year, without limit, if the employer does not provide all 40 hours of paid sick leave at the beginning of each year.  Although the carry-over has no limitations, an employer may limit use of sick leave in any single calendar year to 40 hours.

Employers must allow employees to use the 40 hours of paid sick leave on either an oral or written request for their own or for a family member’s need.  Employers are not required to pay an employee for accrued, but unused, paid sick leave at the end of employment but keep in mind an employer will likely be required to pay out any accrued but unused vacation or PTO time pursuant to Pennsylvania state law.

If the employer’s current policy allows for paid sick leave of at least 40 hours, or 5 days, in a year, you do not need to change the policy, but must follow the record keeping and notification requirements and be used for the same purposes and under the same conditions as paid sick leave under the new law.

Employers must provide notice to employees of their entitlement to paid sick leave, including the amount, the terms under which leave can be used, the guarantee against retaliation, and the right to file a complaint regarding violations of the ordinance. Notice can be (a) by written notice in English or in any other languages spoken by five percent of the employees, or (b) by displaying a poster prepared by the city.

Employers must also maintain records documenting the hours worked, sick leave used, and payments made to employees for sick time. The failure to maintain or retain adequate records creates a rebuttable presumption against the employer, absent clear and convincing evidence otherwise. In addition, an employer must make these records available to the city enforcement agency upon request.

Under the new law, employers cannot:

■ Require that an employee find a replacement worker to cover the hours during which the employee is absent as a condition of utilizing paid sick leave.

■ Deny the right to use accrued sick leave or discharge, or take any negative employment action including threats to discharge, demotions, suspensions, or discrimination against any employee for using accrued sick time, attempting to use accrued sick time, filing a complaint with the agency or alleging a violation, cooperating in an investigation or prosecution of an alleged violation, or opposing any policy or practice that is prohibited.

For more information on the new Philadelphia law, employer vacation/sick/PTO policies or any other employment law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

Illinois Enacts “Ban the Box” Law Impacting Private Employers


Earlier this year, we discussed the potential for the “Ban the Box” movement to impact private employers in Illinois in 2014.  On July 29, 2014, Illinois Governor Pat Quinn made the movement a reality when he signed into law the Job Opportunities for Qualified Applicants Act (the “Act”).  “Ban the Box” is a movement that eliminates questions about past criminal conduct on initial job applications.  The “box” refers to where an applicant is asked to answer “yes” or “no” about a criminal past on a job application.  The rationale for this movement is to avoid a potential early elimination for ex-offenders that may otherwise be qualified for a position. 

The Act, which will go into effect on January 1, 2015, will restrict the manner and timing of pre-employment inquiries by Illinois employers about a job applicant’s criminal past.  The Act states that an employer “may not inquire about or into, consider, or require disclosure of the criminal record or criminal history of an applicant until the applicant has been determined qualified for the position and notified that the applicant has been selected for an interview by the employer.”  If no interview will be conducted, the employer must wait to inquire about or into, consider or require disclosure of an applicant’s criminal history “until after a conditional offer of employment is made to the applicant by the employer…”.  The Act exempts certain positions, including positions where:

 Employers are required to exclude applicants with certain criminal convictions due to federal or State law;

 A standard fidelity bond or an equivalent bond is required and an applicant’s conviction of one or more specified criminal offenses would disqualify the applicant from obtaining such a bond; or

 Employers employ individuals licensed under the Emergency Medical Services (EMS) Systems Act.

The Act applies to private employers who have 15 or more employees in the current or preceding calendar year, any agent of the employer, and employment agencies.  The Act does not apply to public employers. 

Private employers that fall within the scope of this new Act are still permitted to notify applicants in writing of the specific offenses that will disqualify an applicant from employment in a particular position due to federal or State law or the employer’s policy.  Additionally, employers are still permitted to deny employment to applicants who have been convicted of certain offenses provided that the employer follows the proper rules for such inquiries and does not violate other state and federal laws, such as Title VII of the Civil Rights Act.

Since the Act does not go into effect until January 1, 2015, this is a perfect opportunity for private employers to reevaluate its hiring techniques to ensure compliance.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.


U.S. Supreme Court Unanimously Clarifies Rules in “Donning and Doffing” Lawsuits

In recent years, numerous collective actions against employers have been brought under the Fair Labor Standards Act (“FLSA”) for what is commonly called a “donning and doffing claim” – an action for unpaid wages for time spent by employees changing into clothes/uniforms for work.  In a recent decision, however, the Supreme Court unanimously clarified the rules for such actions by holding that time spent donning and doffing protective gear is not compensable by operation of § 203(o) of the FLSA. 

The FLSA exempts employers from having to compensate employees for off-the-clock “time spent in changing clothes . . . at the beginning or end of each workday” if a collective bargaining agreement so provides.  29 U.S.C. § 203(o).  In Sandifer et al. v. United States Steel Corp., 12-417 (Decided January 27, 2014), the petitioner filed a putative collective action under the FLSA seeking backpay for time spent donning and doffing pieces of protective gear (including fire-retardant jackets and pants, steel-toed boots, goggles, ear plugs, respirators, hard hats, and a flame-retardant head covering and “writslet”) that he asserted his employer required workers to wear due to the hazards at its steel plants.  The employer in turn contended that the donning and doffing time, which would otherwise be compensable under the FLSA, was noncompensable under a provision of its collective bargaining agreement with petitioners’ union. 

Whether petitioners’ donning and doffing qualified as “changing clothes” thus depended on the meaning of that statutory phrase.  In an opinion by Justice Scalia, which was unanimous except as to a single footnote, the Court held that “clothes” for purposes of the FLSA, means “items that are both designed and used to cover the body and are commonly regarded as articles of dress.”  The Court thus found no basis for petitioners’ proposition that the unmodified term “clothes” somehow omitted protective clothing.  The Court’s interpretation, however, left room for distinguishing between clothes and wearable items that are not clothes, such as some equipment and devices.  Accordingly, with the exception of the safety goggles, ear plugs, and respirators, the Court held that all items worn by the petitioners constituted clothes.  As for the time spent by petitioners putting on and off equipment (i.e., the safety goggles, ear plugs, and respirators), the Court concluded that when, as here, the vast majority of time is spent donning and doffing clothes, the entire period qualifies as time spent “changing clothes” even if workers also spent a small amount of time putting on other protective equipment.  In so holding, the Court rejected the doctrine de minimis non curat lex (the law does not take account of trifles) invoked by many Courts of Appeals.  Rather, the Court reasoned that the more appropriate way to proceed under § 203(o) is for courts to ask whether the period at issue can, on the whole, be fairly characterized as “time spent in changing clothes.” 

The Court’s recent decision in Sandifer is likely to reduce the number of circumstances which would allow plaintiffs to succeed in donning and doffing lawsuits in the future.  For more information on this topic, please contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com

Employment Law Tip for Illinois Employers #3 Salary Deductions for Absences – Part 1

The Fair Labor Standards Act (“FLSA”) dictates how and when employers can make deductions from their employees’ pay.  Of course, there are differences when you are dealing with an exempt versus a non-exempt employee.  For the purposes of this blog entry, we will only discuss deductions made to the salaries of exempt employees.

Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees and certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis of more than $455 per week. Exempt status is not determined by job title; an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s regulations. 

As discussed in my first blog containing the 1st tip for Illinois employers, there are restrictions and regulations regarding when and how an employer can deduct from employee’s pay when it comes to damaged or lost equipment. Employers need to be aware that there are additional restrictions regarding deductions, specifically those when an employee misses time from work for illness, vacation or personal reasons.

Deductions from pay are permissible when an exempt employee is 1) absent from work for one or more full days for personal reasons other than sickness or disability; 2) for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; 3)  to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; 4) or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

Oftentimes employers are unclear whether they can deduct from an exempt employees pay if they are absent from work   When an employee misses a full day or more of work due to personal reasons, there is no issue with an employer deducting pay from the employee’s salary for that time missed.  Keep in mind, employers must ensure that time is accurately documented pertaining to an employee’s use of vacation/personal time pursuant to the employer’s policy; where an employee has available paid time off (“PTO”)(including vacation or personal time), those days missed should be deducted first from that employee’s available PTO.  Also, an employer is permitted to deduct from time missed for any reason (including illness) if that employee has not yet qualified for participation in the employer’s PTO plan.  Although there is no bright line rule regarding timing to qualify for an employer’s sick/vacation leave plan, the Department of Labor has found a one year probationary period to be reasonable.  For further reference see, http://www.dol.gov/whd/opinion/FLSA/2006/2006_09_14_32_FLSA.htm

If an employer has a bona fide plan, policy or practice of providing defined sick days to its employees, that has been communicated to eligible employees and the employee has exhausted all of the sick days available under that bona fide plan, policy or practice, it is permissible for an employer to deduct from that employees salary for a full day missed from work due to illness or disability.  If an employer does not have a bona fide plan, policy or practice of providing its employees with paid sick days, then it is not permissible for the employer to deduct from an exempt employees salary for time missed due to illness or disability.  Of course, oftentimes there are issues determining whether an employer’s policy will be considered “bona fide”.   Stay tuned for my next blog regarding what constitutes a bona fide plan, policy or practice and the ramifications of non-compliance with the above discussed regulation of the FLSA.

There are many issues to consider when determining whether or not you can deduct from an exempt employees salary for missing work.  For more information on this topic or questions regarding any further employment related matters, please contact Dana Perminas, at 312-334-3474 or dperminas@messerstrickler.com for more information.

Employment Law Tip for Illinois Employers #1: Paycheck Deductions

Employers may deduct the cost of replacement equipment from an employee’s wages, but they must have the employees provide voluntary written consent to do so.  Il. Admin. Code 300.840 states: An employer may require an employee to pay for required uniforms or necessary equipment, but it cannot deduct the cost from the employee’s paycheck without the employee’s voluntary written consent. 

820 ILCS 115/9 provides further guidance regarding these deductions and states that deductions by employers from wages or final compensation are prohibited unless such deductions are (1) required by law; (2) to the benefit of the employee; (3) in response to a valid wage assignment or wage deduction order; (4) made with the express written consent of the employee, given freely at the time the deduction is made.

In addition, Employers should always be mindful of Federal Law and Regulations that effect employment related matters, specifically the Fair Labor Standards Act (“FLSA”).  Regarding the deduction issue, the FLSA provides that these deductions may be made from an employee’s wage as long as the deduction does not reduce the employee’s wages to below the current minimum wage.  Also, that deduction may never cut into overtime compensation required by the Act.

For example, if an employee who earns the Federal Minimum Wage of $7.25 per hour, the employer may not make any deduction from the employee's wages for the cost of the uniform, or any other required item, nor may the employer require the employee to purchase the item on his/her own.  However, if the employee were paid $7.75 per hour and worked 30 hours in the workweek, the maximum amount the employer could legally deduct from the employee's wages would be $15.00 ($.50 X 30 hours).  Please, note that Illinois Minimum Wage is $8.25.

The employer may prorate deductions for the cost of the required item over a period of paydays provided the prorated deductions do not reduce the employee's wages below the required minimum wage or overtime compensation in any workweek.  Employers may not avoid FLSA minimum wage and overtime requirements by having the employee reimburse the employer in cash for the cost of such items in lieu of deducting the cost from the employee's wages.

Therefore, it would be an employer’s best practices to not only include the specific details regarding the necessary or possible deductions for uniforms, equipment, etc.  in the company’s handbook or written policies, but also to ensure compliance with Illinois state law, and ensure that at the time of the deduction, the employee signs again a voluntary written acknowledgement for that necessary deduction.   Keep in mind the Illinois Department of Labor does not recognize blanket authorization for deductions.  Remember to be specific regarding these deductions.

A helpful tip to put this recommendation into action is to request that an employee fills out an “equipment replacement form”.  That form can include the necessary language to ensure compliance with Illinois and Federal Law to protect the Employer from any potential FLSA and Illinois Wage Claims.

For assistance with the preparation of any corporate handbook, equipment replacement forms, or any further employment related matters, please contact Dana Perminas, at dperminas@messerstrickler.com or by calling Dana at 312-334-3474 for more information.

The Importance of Updating Job Descriptions

Job descriptions are a basic and essential tool for employers as these descriptions concern so many aspects of an organization such as recruiting, succession planning, training, legal, and compliance.  However, job descriptions are often neglected and outdated and do not accurately represent the essential job functions an employee performs.  This can create obstacles in many employment law cases, including employment discrimination cases.  For instance, if an employee is terminated as a result of the employee’s inability to perform necessary work for the job, the employer will want to make sure that this “necessary work” is described in the job description.  Although having an accurate and updated job description will not completely eliminate employee discrimination claims like this, it can act as helpful evidence against discrimination claims. Additionally, the job description is an important tool for an employer’s compliance with the Fair Labor Standards Act (“FLSA”) which prescribes the standards for the basic minimum wage and overtime pay.  The FLSA requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay.  The job description is often the starting point in determining the exempt status of an employee.  In order for an employee to be “exempt” their primary job duties must be exempt.  Therefore, it is important for the job description to accurately reflect an employee’s job duties for this determination of exempt and non-exempt status for wage and overtime pay compliance.

Job descriptions are also an important component for employer compliance with the Americans with Disabilities Act (“ADA”).  The ADA protects qualified individuals with a disability who, with or without reasonable accommodation, can perform the “essential functions” of the employment position.  It is the employer’s judgment as to what are the essential functions of a job that is given consideration.  Thus, it is important for an employer to make sure the job descriptions, specifically the physically demanding positions, describe the essential functions of the job and reflect the actual tasks performed by existing employees performing similar jobs.

Employers should update job descriptions once a year at a minimum.  This can be completed concurrently with the annual performance review process.  Thus, once employers complete reviews and set goals and objectives with their employees, they can update job descriptions to reflect these goals and objectives.  Using the job description during the review process or in disciplinary situations can also be an excellent communication tool because it can clear up any misunderstanding regarding job expectations.

Creating and updating job descriptions is a team effort.  Human resources professionals, managers and even employees should be involved in the creation and update of a job description.  Employees are in the best position to illustrate what they actually do at their job.  Managers are important in the process because they can ensure that the responsibilities and requirements are aligned with actual activities.  The human resources department can act as the coach and facilitator in the process of updating a job description.  Human resources professionals are in the unique position to view how each job description fits into the larger organization and the organization’s legal obligations.

It is important to note that the organization’s mission statement can act as a safety net to poorly drafted or outdated job descriptions.  Including the organization’s mission statement on all job descriptions will ensure employee awareness of the organization’s overarching goals.  Therefore, in the event the job description fails to explicitly mention a particular job expectation and the employee’s conduct is contrary to the mission statement, the employee is on notice of the issue.

For more information on this subject, contact Stephanie Strickler at sstrickler@messerstrickler.com.