Identifying and Preventing Wage
and Hour Landmines
Jeffrey A. Risch, Esq.
Labor & Employment Group Chair
SmithAmundsen LLC
630.569.0079 – Direct 24/7
jrisch@salawus.com
SIGNIFICANT CASE LAW ACTIVITY

The United States Supreme Court ruled on
April 27, 2011 that plaintiffs can be legally
bound by an arbitration clause in a
contract even when state law permits a
class-action lawsuit for claims arising from
the contract. AT&T Mobility, LLC. v.
Concepcion.
SIGNIFICANT CASE LAW ACTIVITY

A former financial adviser for Ameriprise Financial Services
who alleged the company violated myriad provisions of
California's wage and hour laws must arbitrate her individual
claims and may not pursue class claims on behalf of other
Ameriprise employees, the U.S. District Court for the Central
District of California ruled Oct. 12th 2011 (Dauod v. Ameriprise
Fin. Servs. Inc., C.D. Cal., No. 8:10-cv-00302).
Granting Ameriprise's motion for partial summary judgment in a
suit filed by former employee Iman Dauod, the court said the
U.S. Supreme Court's April decision in AT&T Mobility LLC v.
Concepcion makes clear that a class arbitration waiver
contained in Dauod's signed arbitration agreement with
Ameriprise is enforceable.
SIGNIFICANT CASE LAW ACTIVITY

On January 3, 2012, the NLRB held that a
nationwide home builder committed an unfair labor
practice under the NLRA by implementing a
mandatory arbitration agreement that waived the
rights of employees to participate in class or
collective actions (D.R. Horton Inc. and Michael
Cuda, 357 NLRB 184). In short, the NLRB held
that employers may not compel employees to
waive their right to collectively pursue litigation
of employment claims in all forums --- to do so is
a violation of employees’ right to engage in
CONCERTED ACTIVITY (i.e. file class actions).
SIGNIFICANT CASE LAW ACTIVITY

In Iskanian v. CLS Transp. Los Angeles LLC, 2012 Cal. App.
LEXIS 650 (Jun. 4, 2012), the California Court of Appeals upheld
a lower court’s decision to require a California driver to arbitrate
his wage and hour claims and its dismissal of his class claims
against his employer based on the AT&T Mobility v. Concepcion
case.

Since the “FAA is not a statute the NLRB is charged with
interpreting; we are under no obligation to defer to the
NLRB’s analysis.” The court also pointed to the fact that the U.S.
Supreme Court issued another ruling enforcing arbitration
agreements a week after Horton was decided, holding that
arbitration agreements should be enforced under the FAA absent
a showing that this mandate was “overridden by a contrary
congressional command” (CompuCredit v. Greenwood, 132 S. Ct.
665).
SIGNIFICANT CASE LAW ACTIVITY
Ervin v. OS Restaurant Serv, (7th Cir. Jan. 18, 2011)
Ervin brought a minimum wage and overtime claim under the
Fair Labor Standards Act (“FLSA”) and the Illinois Minimum
Wage Law (“IMWL”). The question on appeal was whether
both a collective action under the FLSA and a class action
under the IMWL could be maintained in the same lawsuit. The
problem, as the lower court saw it, stems from the fact that the
FLSA requires potential plaintiffs to “opt in” to participate in
such an action, while the plaintiffs in a Rule 23(b)(3) class
action are included in the lawsuit unless they affirmatively “opt
out.” The Appellate Court overturned the District Court and
held there is no categorical rule against certifying a Rule
23(b)(3) state-law class action in a proceeding that also
includes a collective action brought under the FLSA.
SIGNIFICANT CASE LAW ACTIVITY

The administrative exemption continues to trouble the financial
services industry. On June 6, 2012, a federal district court in
Washington D.C. rejected the Mortgage Bankers Association’s legal
battle to invalidate the United States Department of Labor’s (DOL)
March 24, 2010 interpretation. As a reminder, the DOL’s March 24,
2010 interpretation boldly reversed its prior September 2006 opinion to
conclude that mortgage loan officers no longer qualify for the
administrative exemption under the Fair Labor Standards Act
(FLSA).
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Not only did this decision permit the DOL to flip-flop on critical
guidance concerning the exemption of loan officers, but it also sends a
reminder that the DOL has its sights on the financial services industry
and the DOL intends to maintain its strict interpretation of wage and
hour laws, making application of the administrative exemption in the
banking industry that much more precarious.
SIGNIFICANT CASE LAW ACTIVITY
On May 29, 2012, a federal district court in Washington, D.C. upheld the
Department of Labor’s (DOL) final rule on the Fair Labor Standards Act
(FLSA) “tip credit.” As a result of the court’s holding, tipped employees
must be notified of the following:
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The amount of the cash wage that is to be paid to the tipped employee
by the employer;
The additional amount by which the wages of the tipped employee are
increased on account of the tip credit claimed by the employer, which
amount may not exceed the value of the tips actually received by the
employee;
That all tips received by the tipped employee must be retained by the
employee except for a valid tip pooling arrangement limited to
employees who customarily and regularly receive tips; and
That the tip credit shall not apply to any employee who has not been
informed of these requirements.
SIGNIFICANT CASE LAW ACTIVITY

On June 18, 2012, the U.S. Supreme Court rejected
the DOL’s interpretation of the “outside salesman”
exemption to the Fair Labor Standards Act and
determined that pharmaceutical sales
representatives who encourage doctors to
prescribe the use of a company’s products are
exempt from the overtime protections of the FLSA.
(Christopher v. SmithKline Beecham Corp. d/b/a
Glaxo SmithKline, U.S. No. 11-204).
SIGNIFICANT CASE LAW ACTIVITY

On December 14, 2011, the Seventh Circuit held that an
employee who claimed that she worked 15 to 45 minutes every
day without pay before the start of her scheduled shift was not
eligible for back pay under the Fair Labor Standards Act (Kellar
v. Summit Seating, Inc., No. 11-1221). The employee at issue,
who was paid by the hour, would show up early to review
employee schedules, make coffee, gather and distribute fabric
and materials to employee workstations, clean work areas, and
perform other preparatory activities.

The Seventh Circuit explained that the FLSA does not go so
far as to require an employer to pay for work that it
“neither knew nor should have known” that the employee
was performing. Also, of note, the company never told the
employee to arrive before her shift to perform these tasks.
SIGNIFICANT CASE LAW ACTIVITY

On February 22, 2012 the District Court in the Northern District of
Illinois granted conditional certification of a collective action under the
Fair Labor Standards Act (FLSA) for a group of hourly employees who
allege that they were required by their employer to perform work while
not on the clock. Smith v. Family Video Movie Club, Inc., 2012 U.S.
Dist. LEXIS 21935.

In Smith, the plaintiffs pointed to evidence that there was an unwritten
policy at Family Video Movie Club (FVMC) requiring employees to
perform work off the clock and after hours including making bank
deposits, running errands and buying store supplies. FVMC argued
that the plaintiffs were not entitled to certification of the collective
action because FVMC’s official policy stated that employees were
required to clock-in for all work performed. The court found that the
written policy alone did not insulate FVMC from an FLSA action
and the fact that there was some evidence that more than a rogue
manager may have required employees to work off the clock was
enough to support certification of the collective action.
SIGNIFICANT CASE LAW ACTIVITY
Can employers “kill” class actions based on “mootness” of the
purported class representatives’ claim? For now, generally, it is
possible in the 7th Circuit (NOTE: U.S. Sup. Ct. is currently
weighing a split amongst the circuits):
Make an offer to make a worker whole before a class is certified;
Clearly establish through hard evidence (a sworn declaration attesting that
the offer is complete and include actual payroll documents) so that the
offer fully satisfies the claims (err on the side of overcompensation); and
Be clear in the FRCP Rule 68 Offer re: whether the offer is exclusive of or
inclusive of attorney's fees (note: this can be tricky).
Example: July 24, 2012, class action dismissed by federal court
Avila v. Watts Electric Co., 2012 U.S. Dist. LEXIS 102425
Illinois’ Equal Pay Act – New Amendment Effective
January 1, 2012
The Equal Pay Act of 2003 prohibits employers from paying
unequal wages to men and women for doing the same or
substantially similar work. It also prohibits employers from
taking any negative action against employees who
share/discuss wages.
2012 Penalty… Amends the Equal Pay Act of 2003.
Provides for a civil penalty of up to $5,000 when any
employer or person violates sections of the Act prohibiting
an employer or person from interfering or discouraging
another from exercising his or her rights under the Act.
Illinois Crackdown!
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Amendments to the Illinois Wage
Payment & Collection Act and Illinois
Minimum Wage & Overtime Laws
Substantially increase employer penalties to
the employee, the employee’s attorney and
the IDOL!!!
“WHITE-COLLAR” EXEMPTIONS
Salary Basis
–
Don’t mess with an exempt employee’s salary! ***
Salary Level
–
$455 gross per week minimum salary! ***
Duties
–
Depends on type of exemption sought.
***Note: “highly compensable” exempt worker under
federal law = $100,000 or more; “outside sales” = no
salary or minimum wage due; and “computer
occupational exempt” can be paid $27.63 per hour.
Executives/Managers
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1.
2.
3.
Executive Exemption
Better Direct/Control two or More Employees
(80 hours per week)
Must Manage
Manual Work Must Be Nominal
Administrators
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1.
2.
Administrative Exemption
Must Make Decisions with Independent
Judgment & Discretion Concerning Matters
of Significance
Manual Work Must Be Nominal
Learned Professionals
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1.
2.
3.
Professional Exemption (Learned)
Should Have Advanced Degree of Higher
Learning or Instruction (i.e. BA/BS)
Must Use Advanced Degree
Manual Work Must Be Nominal
***Certain occupations are automatically
exempt (i.e. doctors, lawyers, teachers).
Outside Salespersons
Outside Salesperson
1. Must Be Engaged In Sales of Products or
Services Away from Employer’s Office
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Computer Professionals
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1.
2.
Computer-Related Occupations
Must Analyze & Develop Software, Technical
Components, Hardware Integration, Related
Systems
Help-Desk Duties Must Be Nominal
COMPENSABLE VS. NON-COMPENSABLE
EXAMPLES FOR NON-EXEMPT STAFF

Compensable
–
–
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–
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changing clothes at facility, if required by nature of work
rest periods of less than 30 minutes
training programs required by employer
travel from office to work site and vice versa
Non-compensable
–
–
–
changing clothes at home
jury duty or witness subpoena
traveling from home to a work site and vice versa
WAITING TIME – NON-EXEMPT STAFF
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Generally, an employer must compensate
employees for all time during which the
employees are required to wait while on duty
or while performing a principal activity.
On vs. Off Duty – Non-Exempt
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On Duty
–
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all time spent in periods of inactivity while on duty
must be counted as hours worked.
Off Duty
–
employees who wait before starting their duties
because they arrive earlier than the required time
are not entitled to be paid for the waiting time.
(however, time cards will control matters in
controversy)
SPLIT SHIFTS AND LAYOVER TIME – NonExempt

If an employee has time off in the middle of a
workday which is long enough to effectively use as
he or she wishes, and the employee understands
that he or she doesn’t have to return until a definite
specified time, the employee does not have to be
considered to be working during the time-off period.
Must be at least 30 minutes…
On-Call Time – Non-Exempt
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Must be compensated when such time is
spent “predominately for the employer’s
benefit”.
Compensability of on-call time involves a
fact-specific, case-by-case analysis.
Use of Pagers and Cell Phones can result in
relaxation of compensability but are HOT
BEDS for litigation.
TRAINING PROGRAMS, LECTURES AND
MEETINGS – Non-Exempt

All of the following must be met for the
activity not to be counted as working time:
–
–
–
–
Attendance must occur outside the employee’s regular
working hours; and
Attendance must in fact be voluntary; and
The employee must do no productive work while attending;
and
The program, lecture or meeting should not be directly
related to the employee’s job.
UNAUTHORIZED WORK – Non-Exempt

Employees who, with the knowledge of their
employer, continue to work after their shift is
over or work before shift begins, are
engaged in compensable working time
but subject to discipline!
Travel Time – Non-Exempt
Extremely fact-sensitive analysis…
Home to Work Travel: An employee who travels from home before the
regular workday and returns to his/her home at the end of the workday is
engaged in ordinary home to work travel, which is not work time.
Home to Work on a Special One Day Assignment in Another City: An
employee who regularly works at a fixed location in one city is given a
special one day assignment in another city and returns home the same
day. The time spent in traveling to and returning from the other city is work
time, except that the employer may deduct/not count that time the
employee would normally spend commuting to the regular work site.
Travel Time – Non-Exempt
Extremely fact-sensitive analysis…
Travel That is All in a Day's Work: Time spent by an employee in travel
as part of their principal activity, such as travel from job site to job site
during the workday, is work time and must be counted as hours worked.
Travel Away from Home Community: Travel that keeps an employee
away from home overnight is travel away from home. Travel away from
home is clearly compensable work time when it cuts across the
employee's workday. The time is not only hours worked on regular
working days during normal working hours but also during corresponding
hours on nonworking days. As an enforcement policy, the DOL will not
consider as work time the time spent in travel away from home outside of
regular working hours as a passenger on an airplane, train, boat, bus, or
automobile.
Record Keeping Requirements
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Employee's full name and social security number.
Address, including zip code.
Birth date, if younger than 19.
Sex and occupation.
Time and day of week when employee's workweek begins,
hours worked each day and total hours worked each workweek.
Basis on which employee's wages are paid.
Regular hourly pay rate.
Total daily or weekly straight-time earnings.
Total overtime earnings for the workweek.
All additions to or deductions from the employee's wages.
Total wages paid each pay period.
Date of payment and the pay period covered by the payment.
MAJOR WAGE/HOUR PITFALLS!
1. OFF CLOCK WORK – TIME NOT RECORDED OR PAID
2. UNEQUAL PAY FOR EQUAL WORK
3. MISAPPLICATION OF WHITE COLLAR EXEMPT
STATUS
4. IMPROPER CALCULATION OF OT PREMIUM RATE
5. NON-DISCRETIONARY UNPAID BONUS OR UNPAID
EARNED COMMISSIONS (and lack of written plan design
re: same)
WORD TO THE WISE…

Review internal documents such as training materials,
performance evaluations, job descriptions, etc. to ensure they
are consistent with the exempt classification relied upon (e.g. the
exempt employee is being evaluated on non-manual work
directly related to the business operations).

It is imperative to have a written policy and complaint mechanism
through which employees can bring issues related to
deductions/docking of exempt classifications (aka “Safe
Harbor”).

Implement policies addressing a commitment to investigating
wage complaints, policies on overtime work, meals and rest
breaks, equal pay issues, travel time as well as payroll integrity
policies for actions such as falsifying time records and working
off the clock.
WAGE/HOUR WAIVERS???

NOT ENFORCEABLE UNLESS
APPROVED BY THE COURT OR DOL (or,
perhaps approved by the union, if
applicable).

However, ACKNOWLEDGEMENTS as to
payment in full or receipt of certain
monies may go a long way in preventing
future/further controversies.
Thank you…

Jeffrey A. Risch
Labor & Employment Practice Chair
SmithAmundsen LLC
www.salawus.com
630.569.0079
www.laborandemploymentlawupdate.com