The Fair Labor Standards Act (FLSA) requires an employer to compensate any employee who is not exempt from its provisions at a rate that is “not less than one and one-half times the regular” wage rate paid to the employee for all work time performed by the employee in excess of 40 hours (“overtime”) during the employee’s “workweek.” The employer retains discretion under the FLSA to set employee workweeks, which can vary depending on an employee’s classification or employer requirements provided the workweek for each employee consists of a consecutive period of 168 hours.Continue reading this entry
Pharmaceutical sales representatives are not in sales, at least for the purpose of wage-and-hour laws. Reversing a lower court’s decision, the Second Circuit Court of Appeals ruled that pharmaceutical sales representatives could not qualify for the “outside sales” or administrative exemptions to the overtime pay requirements of the federal FLSA.
The FLSA (and many states’ laws based upon it) requires employers to pay overtime wages to employees who work more than 40 hours a week, unless the employees fall within certain limited exemptions. To qualify for the outside sales exemption, an employee’s primary duty must be making sales or obtaining orders or contracts. Department of Labor regulations explain that employees “make sales” if they obtain a commitment to buy. Pharmaceutical representatives cannot make direct sales or obtain a commitment to buy because their products can only be sold with a prescription. Instead, the rep calls on physicians with product samples and information to encourage the doctors to prescribe the company’s products. Whether doctors do so is up to their professional judgment. Moreover, while a doctor may “commit” to prescribing a product (sometimes just to get rid of the sales rep), he is under no legal obligation to do so. Indeed, doctors cannot lawfully make such a binding commitment.
The Court acknowledged that the sales reps were engaged in promotional work, but it deferred to regulations stating that “promotional activities designed to stimulate sales that will be made by someone else are not exempt sales work.” Since the sales reps did not actually make the sale, their promotion of the company’s products could not qualify them as exempt salespersons.
The Court also ruled that the pharmaceutical sales reps did not qualify under the administrative exemption. That exemption to the overtime laws requires employees to “exercise discretion and independent judgment with respect to matters of significance” to the business. The regulations define “discretion and independent judgment” as “more than simply the need to use skill in applying well-established techniques and procedures prescribed by the employer.” Since the reps had no role in formulating the message they delivered, no authority to deviate from that message, and no authority to answer any question without a pre-formulated script, the Court ruled that they could not meet the requirement for discretion and independent judgment.
This case should serve as a wake-up call for any employer whose “sales” employees promote products without making actual sales, particularly where their promotional efforts are scripted or controlled. If you are not paying such employees minimum wage and overtime now, you may need to start.
Internships abound. A recent New York Times article indicated that in 1992, only 17 percent of graduating students held internship positions. In 2008 that figure skyrocketed to 50 percent. Businesses across the country have a bevy of internship programs where relatively young and inexperienced students or post-graduates can obtain unpaid work. These interns sacrifice the immediate monetary gain of a paying job in the hopes of gaining job experience that will be more valuable to them in the long haul. But be warned: just because an intern is willing to work for free does not mean that you can legally take them into your business as an unpaid employee.
The U.S. Department of Labor (DOL) has made clear that unpaid interns are often covered by the Fair Labor Standards Act (FLSA). This means that private-sector interns who qualify as "employees" rather than "trainees" typically must be paid at least the minimum wage, and must be paid overtime compensation if they work more than 40 hours in a workweek. Thus some, but not all, interns are employees under the FLSA.
An intern whose work serves only his or her own interest is not an employee of a company that simply provides aid or instruction to the intern. Whether an intern is an employee depends on the facts and circumstances surrounding the internship, and the DOL recently re-published a list of the six factors used to determine whether an intern is an employee under the FLSA (and thus must be paid minimum wage and overtime). These six factors are as follows:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment
- The internship experience is for the benefit of the intern
- The intern does not displace regular employees, but works under close supervision of existing staff
- The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded
- The intern is not necessarily entitled to a job at the conclusion of the internship
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship
If all of the factors listed above are met, then an employment relationship does not exist under the FLSA, and the act’s minimum wage and overtime provisions do not apply to the intern.
Among the least-publicized changes in the recently enacted health care reform bill (Patient Protection and Affordable Care Act, or Act) is an amendment to the Fair Labor Standards Act (FLSA) that will significantly impact the workplace. The new law requires employers subject to the FLSA to provide rest breaks so nursing mothers can express milk. The amendment requires that a break be provided “each time such employee has the need to express the milk” for one year after the child’s birth. It also mandates that the employer provide a place other than a bathroom, shielded from view, and free from intrusion from co-workers or the public where the milk can be expressed.
Departing from DOL regulations, which provide that rest periods of a short duration should be paid as hours worked, the new Act specifically states that these breaks can be unpaid. The Act applies to all employees covered by the FLSA, but those with less than 50 employees are exempt if the requirements “would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, or structure of the employer’s business.” Given the application of similar language in other employment-related legislation, the burden will be placed on the employer and will not easily be satisfied.
The Act raises several practical concerns and questions. For example, the frequency of the need to express milk as well as the length of time needed to do it will vary. It also could be open to abuse and could impact productivity. Providing a suitable place also could be problematic for some businesses. The DOL is expected to issue regulations that might address some of these issues.
It is unclear when this Act will become effective and what the penalty will be for a violation. However, especially in light of the fact that some states already provide protections for nursing mothers, and may even require the breaks to be paid, employers should change their policies to reflect this obligation and train managers accordingly.