Do you pay your employees overtime pay? No? Is it because your employees don’t work for you more than 40 hours a week? Maybe your employees are exempt from overtime? Are you sure? Just because they pay their employees a fixed amount each week doesn’t automatically render employees exempt from overtime pay. Join The Emplawyerologist after the jump, for a look at some of the reasons…
We know the general rule that under federal law an employee who works more than 40 hours a week must be paid one and one-half times his/ her regular pay rate (overtime pay) for each hour that exceeds the forty – unless the employer can show that the employee is exempt from being paid overtime wages. (Click here for review.) How do you as an employer prove that a particular employee is exempt? The FLSA and the Department of Labor regulations enumerate certain job categories that are exempt (more on that next week). While ultimately, whether an employee is exempt from overtime or minimum wage pay depends on the specific functions s/he performs, paying the employee a set amount equal to at least $455 a week on a salary basis will usually be a prerequisite.
What is a “salary basis”? The aforementioned minimum pay must be a regular, pre-determined amount . It cannot be subject to reduction based on quality or quantity of work produced, or hours worked by the employee, as long as the employee performed some work in a given week. If you make deductions from an employee’s pre-determined salary that are based on your operating requirements, (e.g. lack of available work) then you are not paying your employee on a salary basis, and s/he most likely is not exempt from overtime or minimum wage payments.
I do have a little bit of good news here for employers though:
- Assuming one or more of your employees are exempt, not paying him or her for any weeks where s/he does not work at all and/or if s/he is on leave under the FMLA or state medical leave laws does not defeat the “salary basis”. Yes, that’s common sense but you probably don’t need me to tell you that the law and common sense do not always overlap! Other similar exceptions allow deductions while keeping the salary basis and exemption intact. You can find the DOL’s Fact Sheet on this issue here.
- Possible salary deductions imposed as disciplinary penalties do not necessarily jeopardize the “salary basis”, according to the United States Supreme Court in Auer et al v Robbins et al 519 US 452 (1997). The Supreme Court, upholding the Secretary of the Department of Labor’s interpretation of federal regulations, essentially said that a policy suggesting a potential disciplinary deduction is not sufficient to defeat an employee’s salaried status. Those who want to know more about the Court’s specific reasoning can find the opinion here.
So, if you pay an employee on a “salary basis” to perform job functions that fall within at least one exemption category are you “safe”? Lady Gaga now knows that the answer to that question is “No”. Yep, even the rich and famous can get caught up in those pesky wage and hour laws. What’s up with that? Jennifer O’Neill worked as Lady Gaga’s personal assistant from 2009 through most of 2011. Ms. O’Neill originally received a fixed annual salary of $50,000. By 2011 she received an annual salary of $75,000. Not bad for a personal assistant, right? That could depend largely on the specific job tasks and work hours, which this case, Jennifer O’Neill v. Mermaid Touring Inc., 11-CV-99128, shows.
According to Ms. O’Neill, her employment with Lady Gaga included being on call 24/7. Some of the many tasks the singer expected of her included serving as her “personal alarm clock”, ensuring that she kept to her schedule, that her costumes were available for performances that she had a towel after showers, that “special food” was available for her on demand at every location, that she had ample time for hairstyling, make-up and voice warm-ups, monitoring email and telephone communications, handling luggage (usually about 20 bags), assisting with costume changes, arranging for ice packs, tea, showers, dinners and exits from performance venues. Sometimes, Ms. O’Neill alleged, she worked without a break and had to sleep in Lady Gaga’s bed with her, often being woken in the middle of the night. What’s so bad about a 20-something-year-old having a super-demanding $75,000 a year job that allows her to travel the world and stay in luxury hotels? It’s honest work, with some not-so-shabby-perks, no? The parties were consenting adults. Don’t we have freedom to contract under the Constitution? Yes—up to a point. Even constitutional rights are subject to reasonable limits.
The FLSA requires that employees be paid for all time they work. Assuming the allegations to be true, the above list of actual tasks that Ms. O’Neill performed did not fit within any of the exemption categories. Moreover, if Ms. O’Neill was on call 24/7 and had no ability to effectively use any of that time for her own purposes, then according to DOL regulations (specifically 29 CFR 785.15, 16 and 17) such time is compensable as work. Ms. O’Neill sued for $19,200 in back pay for 2009 and almost $360,000 in back pay for 2010 and 2011 under the FLSA as well as back pay under New York State’s wage and hour laws. Lady Gaga moved to dismiss the case. With respect to the federal claims, the judge refused, because he felt there was enough factual dispute regarding whether the on-call time was “work” (meaning was Ms. O’Neill so restricted during that time that she could not attend to her own affairs) and if so, how to calculate the amount of overtime owed. These issues, the judge ruled are fact questions that a jury should decide. Lady Gaga herself may have answered that question when, in a pre-trial deposition, she testified as follows:
“You don’t get a schedule. You don’t get a schedule that is like you punch in and you can play … at your desk for four hours and then you punch out at the end of the day. This is when I need you, you’re available.”
After that hat statement and the judge’s refusal to dismiss the claims the parties settled on October 21 for an undisclosed amount.
So what can us “ordinary” people take away from the US Supreme Court, the Department of Labor and Lady Gaga? a) If you don’t want to pay overtime, i) you must pay a regular, pre-set salary equal to at least $455 a week–and with specific exceptions you cannot mess with that; ii) you cannot require your employee to work more than 40 hours in any week (or more than the law of your State allows) and b) if you need an employee to be on-call beyond normal working hours under the FLSA that time may in fact be “work” for which you may have to pay overtime. (Even someone whose regular job is exempt might be allowed overtime, if, while working additional hours performs primarily non-exempt tasks. More on that next week).
Which tasks and categories are exempt from overtime, what are the criteria and how does one meet them? That’s next week’s topic. I promise!!
Disclaimer: This post’s contents are for information purposes only, are not legal advice and do not create an attorney-client relationship. Always consult with competent local employment counsel on any issues discussed here.
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