House Committee on Education and the Workforce Evaluates the FLSA in the 21st Workplace; Seyfarth Wage & Hour Chair Sole Management-Side Attorney to Testify

The Fair Labor Standards Act affects 130 million workers, but it is complex and difficult to apply, especially in the twenty-first century technological workplace.  This results, in part, from the fact that the statute, which was enacted in 1938, was devised to fit the needs of a pre-World War II economy. 

The House Committee on Education and the Workforce Subcommittee on Workforce Protections, chaired by Rep.  Tim Walberg (R-MI), will hold a hearing titled, “The Fair Labor Standards Act: Is It Meeting the Needs of the Twenty-First Century Workplace?” on Thursday, July 14, 2011.  The Committee, which has oversight of laws affecting American workers, has scheduled Thursday’s hearing as the first in a series of discussions on the FLSA and ways in which it should be revised to better serve both employers and employees in the modern economy.

Richard Alfred, Chair of Seyfarth Shaw’s Labor and Employment Department’s National Wage & Hour Litigation Practice Group, is the only management-side attorney who has been invited by the Subcommittee to testify regarding the current state of the FLSA and the challenges it presents for American employers.  Richard will present both oral and written testimony, which will focus on the need to clarify employers’ obligations under the FLSA to increase compliance and decrease the burdensome litigation that currently plagues even the best-intentioned employers. 

Ambiguities that have existed in the FLSA since its enactment, coupled with the fact that the statute and the Department of Labor’s regulations have never been comprehensively reevaluated in light of the changing American workplace, have led to inconsistent judicial and regulatory interpretations and an explosion of litigation. 

From 2000 through 2010, the number of FLSA lawsuits filed in the federal courts increased by more than 300%, and in 2010 alone, more than 6,000 lawsuits were filed in the federal courts claiming violations of the Act.  The liability faced by employers in these lawsuits can be catastrophic – the highest reported settlement for alleged violations of the FLSA topped $210,000,000.  There have been numerous other seven-, eight- and nine-figure settlements and verdicts in recent memory, and six-figure settlements, potentially fatal to smaller employers, are common place. Overwhelmingly, these lawsuits are the result of employers’ good faith attempts to apply a pre-World War II statute in the context of a fast-paced technological and service-oriented workplace.  

Other witnesses invited to testify before the Subcommittee include J. Randall MacDonald, Senior Vice President, Human Resources for IBM; Nobumichi Hara, Senior Vice President of Human Capital for Goodwill of Central Arizona; and Judy Conti, Federal Advocacy Coordinator for the National Employment Law Project.

While these Subcommittee hearings may foreshadow possible changes to the FLSA in the future, statutory or regulatory reform is far from a certainty.  For this reason, employers should continue to implement current best practices.  Some steps employers can take include:

• Conducting rigorous assessments or audits of their current exempt status classifications, particularly with respect to any employees classified as meeting the administrative exemption.  Employers should keep in mind that, as currently interpreted by the DOL, the administrative exemption applies to employees who (a) exercise a high level of discretion and independent judgment, and (b) cannot be characterized as “production” or “sales” (with limited exceptions) employees.
• Reviewing their pay practices, especially practices concerning deductions from pay for exempt employees, which may result in violations of the salary basis test.  PTO practices that call for deductions at the end of employment may be particularly dangerous.
• Maintaining a comprehensive time keeping policy that applies to all their non-exempt workers, and working to minimize any work performed during meal breaks, untracked work performed outside the employer’s premises, or pre- and post-shift work or waiting time.
• Monitoring the legal trends in their industries, in conjunction with their employment counsel.  Successful lawsuits against one employer frequently lead to “copycat” lawsuits against other employers in the same industry.

For more information, please contact the Seyfarth attorney with whom you work or any Labor & Employment attorney on our website.