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Santa and The FLSA by my colleague: NATALIE HRUBOS

Santa and the FLSA – Natalie F. Hrubos – 12-16-12



Delivering presents to the well-behaved children all over the world in a single night is hard work.  Sure, Santa Claus makes it look easy with his jolly disposition, magical sleigh and team of nine flying reindeer.  But does that mean he is any less entitled to compensation? Of course not!  Let’s just assume that Santa’s employer – the North Pole, obviously – is covered by the Fair Labor Standards Act (FLSA).  To comply with the law, the North Pole, like any other employer, has to ask itself certain questions.



First, is Santa’s position exempt or non-exempt?  There’s no doubt that Santa works more than 40 hours per week during the holiday season.  Think of all the letters pouring in from kids across the globe.  Think of how much time it takes to figure out who’s been naughty and who’s been nice.  The guy sees you when you’re sleeping.  If Santa’s non-exempt, the North Pole owes him some serious overtime. 



Santa may qualify for one of the FLSA’s white collar exemptions.  For instance, Santa likely meets the duties test of the executive exemption if his primary duty is managing the North Pole enterprise, he customarily and regularly directs the work of at least two or more full-time elves, and he has the authority to make employment decisions, such as when to promote someone to lead reindeer.  But if it’s really Mrs. Claus and the head elf who perform these duties, then Santa likely does not qualify for the executive exemption.



Santa may however qualify for the administrative exemption.  He probably meets the duties test for this exemption if his primary duty is the performance of office or non-manual work that is directly related to the management of the North Pole or its general business operations and if his work involves the exercise of discretion and independent judgment with respect to matters of significance.



Who goes on what list (naughty or nice) is certainly a matter of significance for the North Pole.  But how clean must a child’s bedroom be to earn her a spot on the nice list? How often must she share her toys with her siblings?  And what if she tells the truth most, but not all of the time?  Santa necessarily uses his discretion and independent judgment when making these determinations.



That said, to qualify for the exemption, Santa’s primary duty must be the performance of office or non-manual work.  Traveling from house to house, sliding down chimneys and placing presents under Christmas trees would surely be considered non-exempt, manual work.  But Santa does that only one night per year.  Responding to letters from children could qualify as office work, but is that Santa’s primary duty and is it directly related to the running or servicing of the North Pole’s business?  If either answer is no, Santa may not qualify for the administrative exemption. 



The reality is that even though the North Pole may pay Santa on a salary rather than an hourly basis, that doesn’t mean Santa qualifies as exempt from the FLSA.  If he doesn’t meet the duties test for one of the FLSA exemptions, Santa is non-exempt and must be paid overtime compensation for every hour he works over 40 hours per week.



If Santa’s position is non-exempt, then his Christmas Eve responsibilities present a number of additional compensation issues, such as whether the North Pole has to provide and/or pay Santa for his milk and cookie breaks, whether Santa is “on the clock” when he’s using his iPhone to check in with the head elf, and whether his travel time to and from the North Pole and from house to house is compensable.



In some cases, the law of the North Pole may be more restrictive than the FLSA and Santa’s employer will be required to comply with whichever law is more beneficial to employees.  The same is true with state law.  For example, if a certain state requires employers to provide meal breaks, an employer is required to comply with the state law even though federal law does not impose such a requirement. 



It doesn’t take three wise men to figure out that an underpaid Santa Claus could put a real damper on the holiday season.  But even if you’re not the North Pole, you don’t want to be on the wage and hour naughty list.  Much like Santa, costly wage and hour lawsuits keep coming to town, so check with counsel on how best to review and if necessary correct your pay practices. Happy holidays!







Time is Money: On or Off the Clock Work?

As published by SHRM's HR Magazine:.  

12/1/2012  By Jonathan Segal 

Time Is Money: On or Off the Clock?  Vol. 57     No. 12  Many managers still don’t understand the Fair Labor Standards Act.  





By Jonathan Segal 








Virtually every week I hear about another employer allegedly requiring, encouraging or tolerating situations in which nonexempt employees are working off the clock. Even large employers with robust compliance programs are not immune to such legal missteps.


Of course, it is not just larger employers being sued. Employers with relatively few workers—that literally cannot afford the cost of defense—are being sued, too.


The goal for employers is not to win "off-the-clock" cases but to avoid them.


Consider these suggestions for minimizing your exposure to such claims and maximizing your chances of winning if such a claim is brought.


Basic Principles


Some strategies for avoiding off-the-clock cases should take employers back to the basics, including training and retraining, enforcing policies that prohibit off-the-clock work, and encouraging managers to report suspected off-the-clock work to HR.


Train and retrain.

Provide supervisors with training that makes clear they cannot require, encourage or even suggest that nonexempt employees work off the clock.


The most important message to convey is that supervisors cannot direct someone to work off the clock, explicitly or implicitly. Also, include guidance on how to address restrictions on overtime.


The untutored have said, "We cannot pay for any overtime." Some employees have heard "work it but don't record it."


Where overtime is not permitted, make clear that "No one is permitted to work any overtime" as opposed to saying, "We cannot afford any overtime."


Let supervisors know that if they break the foregoing rule, they will be subject to discipline up to and including discharge.


Carry a big stick.

Let supervisors know that if they require, encourage or even suggest that an employee work off the clock, they will be subject to discipline up to and including discharge. This prohibition will help prove that deviations were those of a rogue supervisor and not part of an established corporate culture.


Make clear that among the most serious violations would be altering an employee's time to reduce the amount owed to him or her to stay within budget. Almost always, such "wage theft" should result in immediate discharge.


Don't go it alone.

Train supervisors to report incidences to HR if they know, or have reason to know, that an employee may have worked off the clock, even if the employee has not said anything.


In harassment cases, it is not enough to avoid objectionable conduct. If employers have actual or constructive knowledge of it and ignore it, they are condoning it. Doing nothing is not a defense; it is an admission.


The same principle has been adopted in the wage and hour context. Even if employers don't require, encourage or suggest that an employee work off the clock, employers cannot allow it if they have reason to believe it may have occurred.


Supervisors need training on the obligation to report to HR potential off-the-clock work so that HR professionals can talk with the employee and determine whether and what is owed to him or her. If there is a pattern of working extra hours without permission, this may be cause for discipline of the employee, but the employee almost always should be paid.


Clear Policies


Don't leave employees guessing about the organization's policy on off-the-clock work. Spell out the employer's policy on payment for time worked, but make it clear that off-the-clock work is not permitted and that there may be disciplinary action for it. That said, set up a process encouraging employees to report off-the-clock work to HR without fear of retaliation.


Pay up.

Develop a procedure HR professionals can use when they speak with employees who report off-the-clock work.


Use the procedure to determine if they are telling the truth, and then make sure they are properly paid.


If a supervisor reports that an employee has or may have worked off the clock, an HR professional should contact the employee. HR needs to determine whether the employee performed any off-the-clock work and how much time is involved. An appropriate adjustment must be made.


Sometimes, HR professionals make the mistake of assuming that no money is owed as long as the employee does not go over 40 hours in a workweek or eight hours in a day in California. Payment may be owed for off-the-clock work, even if the employee does not become eligible for overtime.


For example, assume that an employee is paid a salary for working 35 hours for a workweek. If the employee works additional hours but is short of 40, the employee generally must be paid for the "gap time."


Be specific.

Develop a policy that prohibits off-the-clock work. Leave no doubt that employees must record all time worked.

Make clear that you will not tolerate any off-the-clock work.


Make clear that you will not tolerate any off-the-clock work and that all work must be on the clock.


A general rule is not enough. Spell it out. For example:


An employee may not do any work before clocking in, and, if he or she does, management must be contacted to override the start time so that he or she will be paid for all time worked.


An employee may not do any work after clocking out, and, if he or she does, management must be contacted to override the stop time so that he or she will be paid for all time worked.


Have an open-door policy.

Develop a complaint procedure with appropriate assurances of nonretaliation so that employees can report concerns without fear of retribution.


There must be a strong policy and a robust complaint procedure. Contacting their supervisors should not be employees' only option. After all, supervisors often are the perceived perpetrators.


At a minimum, employees should be given the option of speaking with HR as an alternative. Employers may want to go one step further and provide another option outside of HR, just in case the problem employee works for HR.


Of course, the policy should prohibit retaliation, which should be defined broadly. If employees don't feel comfortable raising their concern in-house, they could consult with a plaintiffs' lawyer and you could end up in court.


Automated Backup


Technology can be HR's friend or foe in preventing off-the-clock work. On the one hand, time-keeping systems may be adjusted to provide HR with notifications about interrupted meal breaks or other off-the-clock work



While technology may facilitate telework, however, telecommuting poses unique compliance risks to employers, particularly regarding their nonexempt employees.


Tweak time-keeping system.


Determine whether questions should be included in your time-keeping system that ask employees if they have done work off the clock, so that you can follow up with the employees, capture any time worked but not recorded, and then pay them for it.


Most employees are honest, but some are not. How do you protect yourself against those who may claim later that they worked hours off the clock but then bring bad-faith claims?


Most modern time-keeping vehicles include the potential for questions at the beginning or end of each shift. The answers may be helpful in ensuring that employees are paid in real time, as they should be, and in defending against false claims.


For example, at the beginning of every shift, employees can be asked before they clock in if they have done any work since they clocked out on their last shift. If they answer yes, HR should receive notification and speak with the employees.


Similarly, at the end of the day, ask a question about the employee's meal break, such as "Did you enjoy an uninterrupted meal break of 30 consecutive minutes?" If the answer is no, either HR would be contacted to determine if payment is owed or the unpaid meal break would be automatically converted to paid time.


If an employee who responds affirmatively to the meal break query later claims that he or she was interrupted almost every day but not paid, any subsequent allegations are inconsistent with his or her prior answers, sometimes referred to as attestations. This should weigh heavily against an employee's credibility.


Limit telework.

Establish clear rules about whether and when employees may work remotely, such as checking e-mail, and how to ensure that time is properly documented and paid.


Sometimes it is your hardest-working employees who can cause trouble in this area because they log in at all hours and perform work. While their intentions are likely noble, you could pay a handsome price for such dedication.


Set boundaries for remote work, even for stellar employees. For example, you could block remote access to your network by nonexempt employees. Or, you could allow access only if approved and provide guidance on how to record the time to ensure proper payment.


A similar issue arises with personal digital assistants. The safest policy legally is to deny your nonexempt employees smartphones, BlackBerry devices and the like. But is that smart from a business perspective?


There may be times when nonexempt employees need these devices, so set limits as to when they can use the devices and pay them appropriately.


For example, you might set a specific block of time outside of working hours when a marketing employee away on business can use his or her BlackBerry. If you allow such periodic use, under the continuous day rule your duty to pay could be continuous, too.


Even if you have not developed specific policies yet, if you have reason to know an employee may have done work remotely, you must speak with the employee and pay him or her accordingly.


To illustrate this point: A client forwarded me an e-mail from her assistant regarding information that we needed to respond to a U.S. Equal Employment Opportunity Commission charge. The message was "Good news. See below."


My response: "Not really. See when your nonexempt assistant sent it to you!"


The author, a partner with Duane Morris in Philadelphia and managing principal of the Duane Morris Institute, focuses on counseling, training and strategic planning to minimize litigation and unionization.






















































































































Sisyphus Had It Easy


Sisyphus Had It Easy

by Jonathan Segal on November 9, 2011   

In Greek mythology, Sisyphus was a king punished by being compelled to roll an immense boulder up a hill, only to watch it roll back down. No matter what he did, Sisyphus could not get to the top of the hill.

We can all feel Sisyphus' pain as HR and other executives. We are constantly rolling up against regulatory boulders, plaintiffs' lawyers and labor unions marketed by the NLRB.

But Sisyphus had it easy in one respect. He did not have to worry about the FLSA.

We are in the middle of a wage and hour revolution. More specifically:

The number of FLSA cases filed per year has nearly quadrupled since the late 1990's

DOL back wages collected in 2010: $175,652,665

Employees receiving back pay wages in 2010: 208,615

DOL concluded cases in 2010: 26,815

FLSA cases filed in district courts in 2010: 6,081

FLSA cases filed so far in district courts in 2011 so far are close to 5,000.

One of the most common allegations is that employees are required to work "off the clock" but are not paid. Indeed, it is often now referred to as wage theft.

Although only one area of exposure, it is a big one. And, it is one that can be addressed readily quickly and easily.

Here are five recommendations that will minimize your organization's exposure in this area:

  1. Have a wage and hour policy that includes a statement that no manager, supervisor, etc. can require, encourage or even suggest that an employee work off the clock.
  2. Develop a complaint procedure for employees to report any circumstances in which they believe that they have been required, encouraged or even suggested to work off the clock (with appropriate assurances, such as non-retaliation).
  3. Educate your supervisors and managers on their need to contact HR if they have actual or constructive knowledge that an employee may have worked off the clock so that HR can talk with the employee and ensure that the employee is properly paid.
  4. Focus on "off hours" work, for example, limit use of PDAs or access to your e-mail and make sure that, when use is permitted, employees record and are paid for their time.
  5. Develop a mechanism for employees to report or record time they have worked but which may not be reflected on their hard copy or electronic time card or record (for example, an edit form for employees to add time that they have worked between shifts).

Remember, earlier this year, the U.S. Department of Labor announced the launch of its first application for smartphones, a timesheet to help employees independently track the hours they work and determine the wages they are owed. The DOL also has even developed and published an old fashion hard copy calendar for employees to use to record their time.

Want to trade roles with Sisyphus for a day?

This blog post should not be construed as legal advice, pertaining to specific factual situation or establishing an attorney-client relationship.

Jonathan A. Segal is a partner at Duane Morris LLP in the Employment, Labor, Benefits and Immigration Practice Group . He is also the managing principal of the Duane Morris Institute . The Duane Morris Institute provides training for human resource professionals, in house counsel, benefits administrators and managers at Duane Morris, at client sites and by way of webinar on myriad employment, labor, benefits and immigration matters. Read Jonathan's blog at the Duane Morris Institute or follow him on Twitter @Jonathan_HR_Law .




Reminder of wage and hour rules:

1.                  As a result of the FLSA’s salary basis requirement, if as a result of the hurricane, you close for less than a full work week, you must pay an exempt employee for days that you are closed (unless an employee did not do any work for the company in the work week). However, you can require that an exempt employee use PTO during a day in which you close.

2.                  If you remain open and an exempt employee does not come to work, you do not have to pay the employee for the day; this can be treated as an absence for personal reasons, provided it is a full day.  If an exempt employee arrives late or leaves early, he or she must be paid for the full day, but you can require that he or she use PTO, if available, to cover the non-working time.  You also must pay him or her if he or she works from home.

3.                  No legal obligation under the FLSA to pay non-exempt employees who do not work because you close due to the hurricane; however, there is an exception for  non-exempt employees who are paid under the fluctuating work week.

4.                  Further, under some state laws, such as in New Jersey, there are call-in requirements; that is, if an employee comes to work and is sent home, there is a minimum number of hours' pay the employee must receive. Plus, there may be CBA obligations.

5.                  Even if there is no duty to pay non-exempt employees, consider the employee relations message of paying exempt but not paying non-exempt employees for a day on which you are closed. 

6.                  Also, if non-exempt employee works at home, you must pay for all time worked.  Systems must be put in place to state who can work remotely and how they must record their time so that they are properly paid.  Remember, break rules apply to working at home too.

7.                Keep in mind state law may impose additional requirements.






Jonathan Segal

Business Ally. Help clients achieve business goals and manage legal risks. Areas of focus include: gender equality; wage and hour compliance; social media; leadership training; union avoidance; performance management; and agreements

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