The below are summaries of the updates affecting the FLSA and NLRA. For more information on these updates, please do not hesitate to contact our office.
FLSA Update: Employees Paid a Daily Rate Are Not Exempted from FLSA Protections
On February 22, 2023, the Supreme Court held that even highly compensated employees are covered by the Fair Labor Standards Act’s (“FLSA”) overtime protections if those employees are paid based on a daily pay rate. Thus, under the FLSA, employees may be entitled to overtime if they are paid on a daily basis and work over forty hours per week.
The FLSA and the Bona Fide Executive Exemption
Congress enacted the FLSA to protect workers against both substandard wages and oppressive working hours. The statute guarantees covered employees a minimum wage and time-and-a-half pay for any work beyond 40 hours in a week, including those whose regular compensation exceeds the state minimum. However, the FLSA does not cover employees who are employed in a bona fide executive capacity.
An employee is considered to be employed in a bona fide executive capacity, and thus exempted from the FLSA’s protections such as the overtime pay guarantee, if three tests are met:
(1) The salary basis test—which requires compensation on a salary basis.
(2) The salary level test—which requires a salary to meet a specified amount.
(3) The duties test—which requires an employee to perform specific job responsibilities.
Third Circuit Held that PTO is Not Part of an Employee’s Salary Under the FLSA
On March 15, 2023, the Third Circuit held that “an employer doesn’t violate the FLSA when it deducts from an employee’s PTO” [1] based on productivity shortfalls because PTO is distinct from salary.
Overtime Pay Under the FLSA
Generally, the FLSA’s overtime pay provision “requires an employer to pay its employees a minimum of one and a half times their rate of pay for all hours worked in excess of forty hours during a week.” [2] However, this overtime pay requirement does not apply to employees “employed in a . . . professional capacity.” [3]
In order “for an employee to be considered a ‘professional,’ an employer must, among other things, show that the employee is paid on a ‘salary basis.’” [4] The salary basis payment requirement will be met if an employee receives a regular paycheck on a weekly basis in a predetermined amount that “is not subject to reduction because of variations in the quality or quantity of the work performed.” If an employer diverges from paying its employees on this salary basis—such as by docking salary due to productivity shortfalls, those employees no longer qualify as professionals under the FLSA, and they would be entitled to overtime pay under the FLSA.
NLRB Held: Mere Proffer of Overbroad Severance Agreement Can Violate the NLRA
On February 21, 2023, the National Labor Relations Board (NLRB) held that offering a severance agreement that conditions the receipt of benefits on an employee’s acceptance of broad confidentiality and non-disclosure provisions violates Section 8(a)(1) of the National Labor Relations Act (NLRA). The NLRB determined that such an offer constitutes an impermissible choice, forcing employees to choose between receiving benefits and exercising their NLRA-guaranteed rights.
Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collecting bargaining or other mutual aid or protection,” [5] while Section 8(a)(1) prohibits employers from interfering with, restraining, or coercing employees in exercising their Section 7 rights.
In the McLaren Macomb case, the NLRB found that the non-disclosure and confidentiality provisions in the severance agreement interfere with employees’ Section 7 rights. The Board examined the language of the agreement and concluded that the broad restrictions could limit employees from publicizing a labor dispute, helping other employees, or cooperating with Board investigations and litigation. The Board held that such restrictions force employees to choose between their benefits and their NLRA-guaranteed rights, and therefore, violate Section 8(a)(1).
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[1] https://www.hrdive.com/news/flsa-dock-pto-productivity-3rd-Circuit/645139/
[2] Higgins v. Bayada Home Health Care Inc., No. 21-3286, 2023 WL 2518345, at *3 (3d Cir. Mar. 15, 2023).
[3] 29 U.S.C. § 213(a)(1).
[4] Higgins 2023 WL at *3.
[5] https://www.nlrb.gov/about-nlrb/rights-we-protect/the-law/interfering-with-employee-rights-sec