Readers will recall our January post concerning the U.S. Labor Department's announced intention to "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."  As we said then, this is likely to be a precursor to a renewed "Right to Know" initiative.

USDOL did not publish the actual proposed survey along with its January 11 Federal Register entry.  On January 14, we requested a copy from the official to whom USDOL directed that these requests be sent (link to reproduction below).  As of this writing, 38 days later, and after appreciably more than half of the comment period has elapsed, we have received neither a copy nor any other response.

The end of the comment period is March 12, 2013, 21 days from now.  As matters stand, one may reasonably conclude that the public has had no adequate, fully-informed opportunity to evaluate the proposed survey or to formulate and submit substantive comments.

We are led to wonder whether our experience is representative of the public's at-large.  If you requested a copy of the proposed information collection also, please respond to our poll to let us know whether you received one.

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Request For Proposed Information Collection.pdf (62.35 kb)

As we speculated in November, the U.S. Labor Department apparently does intend to reinvigorate its so-called "Right to Know" initiative.  This vague and ambiguous proposal first surfaced in 2010 but was eventually shelved.  USDOL has now announced its intention to conduct a survey "to collect information about employment experiences and workers' knowledge of basic employment laws and rules so as to better understand employees' experience with worker misclassification."

"Right to Know" About What?

In 2010, USDOL said that such a rule would require among other things the "notification of workers' status as employees or some other status such as independent contractors, and whether that worker is entitled to the protections of the [federal Fair Labor Standards Act]."  Many wondered at the time whether the provision would extend to disclosures about management's decisions as to which employees are considered to be exempt from the FLSA's pay requirements, and Wage and Hour Division officials seemed to be avoiding the question.  USDOL's recent announcement says, "Worker misclassification can be understood as the practice, intended or unintended, of improperly treating a worker who is an employee under the applicable law as in a work status other than an employee (i.e., an independent contractor)."  For the moment, then, the focus appears to be upon erroneously deeming workers to be independent contractors or incorrectly considering them to be functioning in some other non-employee capacity.

The announcement also provides at least some hint of what a "Right to Know" regulation will entail.  USDOL notes that "federal labor laws" do not require an employer to:

♦   Inform workers of their status as employees or non-employees;

♦   Provide the basis for these status determinations; or

♦   Notify the workers of their hours worked, pay rates, and wages paid.

Presumably, any "Right to Know" rules will obligate employers to provide this information, although to whom, when, in what form, to what extent, and at what level of detail remain unknown.

What Happens Next?

USDOL seeks comments on its proposed information collection by March 12, 2013.  However, it did not publish the actual information request.  Instead, a copy of this document must be obtained separately, raising the question of whether USDOL's announcement complies with the notice requirements of the Paperwork Reduction Act.  In any event, we have asked for a copy and will post the document when we receive it.

The notice specifies 30 months as the evaluation timeframe but then says in the same sentence that the period ends in March 2014.  Perhaps USDOL will later clarify which of these is its intention.

Businesses and other organizations (particularly those whose operational models include the use of non-employee workers) would be wise to take the opportunity to weigh-in on this proposed survey, to participate in the survey when it occurs, and otherwise to follow these developments closely.  It is foreseeable that the actual information collection might be orchestrated so as to provide a predicate for unprecedented new requirements.

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Various websites now provide questionnaires, checklists, programs, decision-trees, and so on to guide an employer in trying to decide who qualifies as an exempt executive, administrative, professional, or outside-sales employee under the defining federal Fair Labor Standards Act regulations.  These tools are fine as far as they go, but their usefulness is normally very limited.

No such approach (whether online or otherwise) can substitute for the indispensable analysis and judgment required to determine whether one of these "white collar" exemptions applies.  Typically, these systems simply break-down the regulations into their component parts and then take the responder through them one-by-one, asking him or her to indicate whether the requirement is satisfied by clicking "Yes" or "No" or some other abbreviated answer.

You Need More Than An Outline

But many important regulatory requirements and concepts are vague or ambiguous and do not lend themselves to such quick/easy/short responses.  Moreover, most of the controlling principles have been the subjects of years or even decades of definition, refinement, explanation, elaboration, and application in numerous court decisions and in U.S. Labor Department interpretations and opinions.  These authorities have often revealed or established exemption nuances, variations, and pitfalls that are by no means readily apparent in the regulations themselves, and some of which do not actually appear in the regulations at all.  A person who can effectively bring to bear the knowledge, expertise, and experience necessary to apply the exemption rules probably has no need for an online questionnaire in the first place.

And sometimes the questions raised in or statements made by these online resources can be inaccurate and potentially misleading.  For example, even the U.S. Labor Department's "FLSA Overtime Security Advisor" asks as to the executive exemption, "Does the employee's primary duty involve management . . .."  [Emphasis added].  However, the regulatory requirement is that an exempt executive employee's primary duty must BE management; this is not a trivial difference.

Furthermore, while these websites often provide what might seem to be definitive and reliable answers, employers should not take these statements at face value.  As an illustration, after a series of exemption-supporting responses, USDOL's Advisor pronounces that the employee "appears" to meet an exemption's duties-related tests.  Even if an employer could someday prove that it had relied upon the Advisor in deciding that an employee was exempt, one likely counter-argument will be that management's Advisor responses did not reflect the proper application of the relevant legal principles to the actual content of the employee's work.

"Garbage In, Garbage Out"

No software magic is at work in these online resources.  Their results do not transcend the user's own, independent and essential understanding and analysis of each determining factor and fact.  The best these tools can do is serve as preliminary, very-general guidance to an evaluator who is undertaking:

♦   To elicit all of the relevant, current, clear, accurate, detailed, and specific facts and circumstances from someone who thoroughly understands the job in question;

♦   To evaluate those facts and circumstances against, and with a thorough knowledge and understanding of, the controlling legal tests, requirements, and related refinements and interpretations; and

♦   To make his or her own, independent judgments about what exemption-related conclusions should be drawn from this process.

Finally, remember that state and local laws might not recognize all of the exemptions available under the FLSA or might recognize them only on different or more-limited terms.  Consequently, FLSA-focused online resources do not necessarily address whether an employee is also exempt from wage-hour requirements imposed by a different jurisdiction.

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A bill introduced in the U.S. Senate (S. 1747) would significantly expand the scope of the current exemption for certain computer employees that is found at Section 13(a)(17) of the federal Fair Labor Standards Act.  The proposed "Computer Professional Update" Act (or "CPU" Act) was submitted by North Carolina Senator Kay Hagan and three co-sponsors.  It is now pending in the Senate's Committee on Health, Education, Labor, and Pensions.

A Little History

The FLSA exemption status of employees in the computer field has been a bone of contention since the mid-1960s.  The application of the FLSA's executive exemption in the computer field has been no different over that time, but for many years the U.S. Labor Department took a particularly narrow view of what sort of computer-oriented work qualified for the FLSA's administrative or professional exemption.

Then, in 1990, Congress directed DOL to issue regulations under which computer systems analysts, computer programmers, software engineers, and other similarly-skilled workers could be exempt.  DOL finalized professional-exemption regulations for this purpose in 1992.  However, the only employees in the running for exempt status were those meeting these descriptions whose work required "theoretical and practical application of highly-specialized knowledge in computer systems analysis, programming, and software engineering . .  .."

One might infer that Congress was not satisfied with DOL's efforts, because in 1996 it amended the FLSA itself to add Section 13(a)(17) (link to reproduction below).  Among other things, Congress's own version did not require "theoretical and practical application of highly-specialized knowledge . . ..".  In 2004, DOL modified the regulatory exemption to harmonize it with the statutory one.

Still Behind The Times

The rapid evolution of computer technology, the Internet, and other areas has arguably left even these most-recent exemptions in the dust.  For example, to a considerable extent their definitions of exempt work incorporate outmoded terms and concepts dating to the early 1990s or even before.  Many believe that the exemptions, along with DOL's restrictive interpretations of them, fail to take into account substantial changes in the computer field and the occupations it encompasses.

The CPU Act would address this in a variety of ways.  For instance, unlike the present versions, it would incorporate "information technology" occupations and would expressly refer to work involving things such as databases, the Internet, intranets, networks, debugging, components and hardware, security, configuration, and systems integration and continuity.  It would also create an exemption for employees who are "directing the work of individuals" performing exempt computer or information-technology duties; presumably this would apply more-broadly than does the FLSA's executive exemption.

Even if the CPU Act becomes law, states and other jurisdictions need not provide such an exemption from their own minimum-wage and overtime laws.  Moreover, a jurisdiction that has its own computer-employee exemption would not be required to harmonize it with the CPU Act.

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FLSA Section 13 a 17.pdf (20.46 kb)

Among the famous last words in the federal Fair Labor Standards Act Hall of Infamy are, "Let's write the job descriptions to make them exempt." The problem is this:  Job descriptions do not "make" employees exempt.

Instead, most FLSA exemptions apply, if at all, only on an employee-by-employee basis according to the nature of each individual's actual work as judged against specific and often-detailed requirements.^*  Moreover, in any U.S. Labor Department investigation or in a lawsuit, the legal burden of establishing that a person is exempt rests with the employer, who must prove that each exemption requirement is met as to any individuals whose exempt status has been challenged.  The Labor Department and the courts construe FLSA exemptions very narrowly, and doubt is often resolved against the employer.

So no job description, irrespective of what it says, will bring about exempt status for an employee whose actual work does not meet the legal tests.  Does this mean that job descriptions are irrelevant to FLSA exemptions?  Absolutely not!

Job descriptions that are vague, ambiguous, jargonized, out-of-date, or poorly-written can lead to ill-considered and incorrect decisions about who is or is not exempt.  Those that are puffed-up for ego purposes, or that are unrealistic or inaccurate, can have a similar impact.  Flawed job descriptions can also seriously undercut efforts to defend against legal challenges to exempt status.

On the other hand, job descriptions that are accurate, specific, realistic, clear, well-crafted, and current can contribute appreciably to management's proper analysis of whether one exemption or another may legally be applied to an employee.  They can also play a significant role in defending against a claim that employees should not have been treated as exempt.

For example, one requirement for the FLSA's executive exemption is that an employee who has no authority to hire or fire must at least make suggestions and recommendations about those actions (or about other status changes) that carry "particular weight".  29 C.F.R. 541.100(a)(4).  The fact that making these suggestions and recommendations is truly part of an employee's job helps to show that they are indeed given "particular weight", and listing these responsibilities in the job description is some evidence that they really are part of the individual's work.  29 C.F.R. 541.105; 69 Fed.Reg. 22122, 22135 (April 23, 2004).

The bottom-line is that job descriptions standing alone are not enough to establish or refute exempt status, but poor ones are useless (or worse), whereas good ones are useful.

      ^*  Of course, some FLSA exemptions also impose compensation requirements.

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The U.S. Labor Department's most-recent regulatory agenda now targets April 2011 for the release of a proposed rule that DOL says is intended to, among other things, "update [federal Fair Labor Standards Act] recordkeeping requirements to foster more openness and transparency in demonstrating employers' compliance with applicable requirements to their workers, to better ensure compliance by regulated entities, and to assist in enforcement."  Elsewhere, DOL has stated that this forthcoming "Right To Know Under The Fair Labor Standards Act" would address "notification of workers' status as employees or some other status such as independent contractors, and whether that worker is entitled to the protections of the FLSA."  The proposal would "also explore requiring employers to provide a wage statement each pay period to their employees," apparently so as to convey to employees "how their pay is computed."

These current notifications include even fewer specifics than their predecessors, about which we reported in May.  At that time, DOL expressed an intention to require employers to notify workers of their FLSA rights in some unidentified way and to provide unspecified "information" about hours worked and wage computations.
 
DOL also said earlier that employers would be required to prepare some sort of "classification analysis" for a worker whom the employer will "exclude . . . from the FLSA's coverage," to disclose this analysis to the worker, and to provide the analysis to a DOL investigator upon "request."  Judging from the latest notices, this is still on the table.  It is less than transparent whether such an analysis would be restricted to situations in which a worker is categorized as being or not being an employee for FLSA purposes.  For example, there is concern that it will also extend to an employer's decisions about which employees it will treat as being exempt from the FLSA's pay requirements.  At a May "Stakeholder Forum" in Washington, D.C., DOL officials declined to address this question.

We continue to recommend that employers remain on the alert for this proposed rule.  When it is published, employers should evaluate each provision in detail, should carefully consider all potential ramifications, and should be prepared to submit suggestions, comments, and any objections.  In light of the recent "Bridge to Justice" initiative, there is every reason to anticipate that information compiled under the requirements of any final regulation will wind up in the hands of claimants and their lawyers.

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The U.S. Labor Department has now provided additional, disquieting insight into its "Plan, Prevent, Protect" program that we first reported on in our April 30 post.  Part of DOL's Spring Regulatory Agenda 2010 announces an intention to issue a Notice of Proposed Rulemaking ("NPRM") proposing significant amendments to the FLSA recordkeeping regulations.

There are as yet no details.  But DOL says that its new rules will, among other things, seek to require employers:

•    To notify workers of their FLSA rights (apparently, the longstanding requirement to display DOL's prescribed poster somehow does not accomplish this);

•   To provide currently-unspecified "information" about hours worked and wage computation; and

•    To perform and document some kind of "classification analysis" for a worker whom the employer will "exclude . . . from the FLSA's coverage", to disclose this analysis to the worker, and to provide the analysis to a DOL investigator upon "request".

DOL's amendments will also undertake to "address burdens of proof when employers fail to comply with record and notice requirements."  It will be interesting to see whether and to what extent DOL will presume to instruct the courts as to what proof burdens they must apply and how and when to apply them.

These proposals are likely to raise a host of substantial and troubling questions.    For instance, must a "classification analysis" be done for each worker, rather than simply for a group of similarly-classified ones?  What level of detail will be necessary?  Must the analysis directly or indirectly reflect the advice of in-house or outside counsel so as to implicate the attorney/client privilege?  Must it contain confidential business information where this might be linked to a decision to treat an employee as being exempt from the FLSA's minimum-wage, overtime, and timekeeping requirements?  What assurance will DOL give (indeed, what assurance can it give) that a written analysis turned over in response to an investigator's demand will not be disclosed outside of DOL?

We recommend that employers remain on the alert for this NPRM.  Once the document is published, each proposed amendment and its potential ramifications should be closely scrutinized and carefully considered.  We strongly suspect that there will be provisions as to which comments, and perhaps even strenuous objections, will be advisable before any revisions are adopted.

Keep in mind also that, as we have noted earlier, pending legislation would attach potentially burdensome penalties to an employer's being found not to have complied with whatever any final recordkeeping amendments turn out to be.