Creative Duties Test

Part
01
of seven
Part
01

Creative Duties Test: Washington

Ten different cases from Washington State, logged between September 2017 and September 2019, were retrieved from the Department of Labor records. Although none of them gave any indication that they related directly to the creative duties test for employee exemption status laws, four of them referred to overtime cases which may or may not have been decided on that basis. The analysis of those four cases follows.

NORTH CENTRAL WASHINGTON RESTAURANT EMPLOYEES RECEIVING $96,995

  • Three restaurants owned by a single employer paid their employees a flat hourly wage regardless of how many hours they worked, resulting in overtime violations.
  • This case was likely NOT decided based on the creative duties exemption.

SEATTLE-AREA RESIDENTIAL CARE COMPANY PAYING $222,426 TO 19 EMPLOYEES FOR OVERTIME VIOLATIONS.

  • The company employs health care workers to provide round the clock care to residents, yet the employer failed to pay the employees for all the hours worked, instead deducting 8 hours for "sleeping" time even if the employee did not sleep.
  • This case was the second time this company was found in contravention of the FSLA. It was also fined $17,442 in civil penalties.
  • This case COULD have been decided on the creative duties test depending upon the professional qualifications of the employees.

TACOMA PROPERTY MANAGEMENT COMPANY TO PAY $255,793 IN BACK WAGES TO EMPLOYEES

  • Workers were not paid the overtime premium for hours worked over 40 hours per week.
  • An argument COULD have been made that some of those employees were exempted because they were managers and technicians.

RESIDENTIAL HOME CARE COMPANY PAYING $213,461 TO 26 EMPLOYEES

RESEARCH STRATEGY

We began our search by looking for information on the creative duties test and any resulting information surrounding repercussions for companies that fail to abide by the creative duties test. We found a comprehensive (ten-page) checklist for employers published by a legal firm.

The list in Source One provided two pieces of information. The first was that when a charge has been laid against a company, and the adjudication is complete, the Department of Labor Wage and Hour Division (WHD) issues a press release disclosing the reason for the charge, and the decision handed down. From the WHD Press Release site, we could search by State and by Date. We extracted all press releases issued between Sept 1, 2017, and Sept 3, 2019 for businesses in Washington State. From that database, we found nine press releases outlining violations of the Fair Labor Standards Act (FLSA). After reading each release, it appeared four of them referenced violations of overtime pay and might apply to the creative duties test.

The second piece of information extracted from the checklist was that it was possible to negotiate the non-issue of a press release and that it was possible to appeal a conviction. Realizing from this that the press release database was incomplete, we went to the two databases with full records of cases.

The first database is called the Administrative Law Judge (ALJ) and the Board of Alien Labor Certification Appeals (BALCA). We performed a search of the database using the filters Washington, creative, exemption and the dates Sept 1, 2017, and Sept 3, 2019. One record was extracted, which did not apply to the creative duties test. We then conducted a second extract using the terms exemption and overtime. Six records were returned. None of them resulted from an employer in Washington State.

We then performed the same search of the Administrative Review Board (ARB). There are no applicable references in that database. A review of the topics under the responsibility of the ARB revealed nothing in the area of creative duties or overtime.

After these deep dives into the Department of Labor records, we are comfortable we have extracted all relevant information for the state of Washington.


Part
02
of seven
Part
02

Creative Duties Test: California

Repercussions for employers mis-classifying their employees in California, as exempt by misrepresenting or mistaken their primary duties, are back-pay for unpaid hours, meal and rest breaks, possibility of double damages (or liquidated damages), waiting time penalty, court and attorney fees, among others.

CALIFORNIA LAW

  • To be considered exempt in California, a creative professional must be primarily engaged in an occupation commonly recognized as artistic, meaning “Work that is original and creative in character in a recognized field of artistic endeavor (as opposed to work which can be produced by a person endowed with general manual or intellectual ability and training), and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the above work”.
  • They also must produce work that is "predominantly intellectual and varied in character (as opposed to routine mental, manual, mechanical, or physical work) and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time".
  • Overtime in California is defined as any hours worked over 8 hours per day and 40 per week.
  • State law requires employers to track the start and end time from the beginning of the shift, meal break start and end, to end of the shift for nonexempt employees; From these time records, the employer will then count the hours worked each workday and workweek.
  • Under California law, overtime is paid at a rate of one and one-half times the employee's regular rate of pay for all hours worked in excess of 8 hours, up to and including 12 hours in any workday, and for the first 8 hours worked on the seventh consecutive day of work in a workweek.
  • They must double the employee's regular pay rate for all extra hours worked of 12 hours in any workday and for all extra hours worked of 8 hours on the seventh consecutive day of work in a workweek. For instance, if an employee worked all seven days of the workweek and worked 10 hours on the seventh day, the first 8 hours are paid at a 1.5x rate and the remaining are paid at the 2x rate.
  • California law requires that overtime wages be paid no later than the regularly scheduled payday of the payroll period following that in which overtime was earned. While the law permits the delay of overtime pay by one payroll cycle, any straight time hours worked must be paid on the regular payday of the payroll period in which they were earned.
  • Exempt employees may be required to work more than 40-hours per week without overtime, rest, or meal breaks. To be classified as exempt, the employee must be primarily engaged in the creative activity (generally, this means dedicate about 50% or more of their time to creative duties), regularly and customarily exercise discretion and independent judgment on the job and earn a salary equivalent to at least twice the state minimum age for full-time work ($49,920 as of January, 2019 for most, for employers with 25 or fewer employees, $45,760).
  • Regarding commissions, employees who earn more than 1.5 times the minimum age and earn more than half of their compensation from commissions may be exempt from overtime as well.
  • California’s criteria for exempt employees are similar to those in the Fair Labor Standards Act (FLSA), with additional requirements and unique exceptions. For example, a professional that would otherwise be exempt under the FLSA, may not be exempt if they are subject to frequent docking of pay for productivity or performance issues.

REPERCUSSIONS

  • Employers who mis-classified employees as exempt may have to pay damages including unpaid overtime, minimum wage violations, missed rest breaks, missed meal breaks, interest, legal fees, and court costs. By federal law, the employee may seek double damages.
  • The most common penalties are unpaid overtime and legal costs and attorney fees the employee incurred while pursuing legal action. The employer may also suffer penalties of $100 or $200 per pay period in which the law was violated, payable to the State of California. In some situations, the employee can recover up to 25% of it.
  • If meal breaks and rest periods were not provided, the employer has to pay one extra hour of pay at the employee’s regular hourly rate. If the employee misses multiple rest or meal breaks, they can reclaim up to one extra hour per workday for their missed rest periods and an additional one hour per workday for their missed deal breaks. In 2007, the California Supreme Court classified this as a premium, not penalty, meaning that the claim can be made for a period of up to three years.
  • If the employer failed to keep proper records of the employee journey, they may have to pay a penalty pay stub, depending on the number of pay periods the violation lasted. "For the first pay stub violation, the employee is entitled to a $50 penalty and then $100 per pay period for every violation after that, up to $4,000". This is penalty is enforced when the employee is not sure how much back pay they are entitled due to the employer’s mistake.
  • If the employer willfully fails to pay wages on time, they can be subject to a waiting time penalty. If an employee has been deprived of their full pay due to being mis-classified as exempt, they may be entitled to receive this penalty as well, up to 30 days of the employee’s wage.
  • Cause of action accrued on each payday and employees generally have three years to make a wage claim under California law, starting from the first wage legally due.
  • Some claims may face a shorter deadline, such as a claim for the breach of an oral contract must be filed within two years. Meanwhile, a claim based on a breach of a written contract may be pursued as late as four years after it began to accrue.
  • To move to a class action in California, the plaintiffs’ burden is not to merely show that some common issues exist, but to show that common issues predominate. Class actions are more common with executive and administrative exemptions.

STATUTE OF LIMITATIONS FOR WAGE AND HOUR CLAIMS IN CALIFORNIA

  • Waiting time penalties: 3 years
  • Wage statement penalties: 1 year
  • Meal and rest premium pay: 3 years
  • Penalties for Violation of Wage Order and Certain Labor Code Sections: 1 year
  • Penalty for Failure to Provide Timely Records and Inspection: 1 year
  • PAGA penalties: 1 year
  • Reimbursement of Employee Business Expenses: 3 years or 4 years under the Unfair Competition Law (UCL).
  • Unpaid wages: 3 years or 4 years under the UCL
  • Unpaid overtime: 3 years or 4 years under the UCL
  • Unfair competition: 4 years

EXAMPLES

  • In 2006, Dani Hoenemier, a technical writer for Sun Microsystem sued the company claiming that he was due overtime. In 2008, the case was certified as a class action, meaning that Hoenemier could now pursue the lawsuit on behalf of all salaried technical writers who worked for sun since 2002.
  • Sun argued that it was typical to classify technical writers as exempt, saying that writers are well-paid, professional employees who are legally exempt from overtime rules because they are highly skilled, work independently and meet other criteria spelled out in the law.
  • Part of the case rested on the argument that technical writers do not exercise discretion or independent judgment. In 2010, 157 writers had joined the lawsuit, which was finally settled for $5 million, approximately $21,000 from the settlement. The exact amount is determined by the number of hours worked and how long the worker had been with the company, according to lawyers for the writers.
  • Since the lawsuit, companies such as Oracle, modified their policies to allow technical writers to receive overtime pay.
  • In 2018, the California Supreme Court changed the rules for independent contractors, including freelance writers. The ruling determines that to classify someone as an independent contractor, businesses must show that the worker is free from the control and direction of the employer; performs work "that is outside the hirer’s core business"; and customarily engages in an independently established trade, occupation or business. This definition work could also affect other classes, such as minor league baseball players, as pointed out by the New York Times.
  • In 2019, Target was hit with a lawsuit, where the plaintiff claims that, despite being employed as an “Executive Team Leader-Human Resources”, most of his duties were not in the administrative sphere, and therefore, could not classify him as exempt.
  • Activision Blizzard was also sued by its artists for mis-classifying them as exempt under the “creative” title. The artists claimed that this classification was inappropriate, considering that the activities performed didn’t require creative input on their end. The case was settled for $1.5 million.
Part
03
of seven
Part
03

Creative Duties Test: Illinois

Repercussions for employers in Illinois that misclassify their employees as exempt are about to change. On February 2019, the Governor signed a new law, SB0001, in which employees could be eligible to receive three times the amount due for missed/underpaid wages plus five percent for each month of delay, among other penalties and costs.

Illinois Law

  • In 2010, the Illinois Wage Theft Enforcement Act was signed, amending the Illinois Wage Payment Collection Act (IWPCA), in order to strengthen employee rights in wage disputes. The act enables The Illinois Department of Labor (IDOL) to adjudicate small wage claims, for employees who prevail on IWPCA to recover attorney’s fees and costs and giving employees the right of civil action in response to an employer's alleged retaliation for complaints about disputed wages, with attorneys' fees available to victorious claimants.
  • When it comes to exemptions, Illinois mostly follows the FLSA requirements for “creative professionals”, with a few exceptions that may apply: individuals working for employers with less than four employees, not including the parents, spouse, children, or other member of the employer’s immediate family and individuals working for religious organizations are exempt from minimum age and overtime requirements.
  • Unless exempt, Illinois labor laws require employers to pay employees overtime at a rate of 1½ time their regular rate when they work more than 40 hours in a workweek and to give each employee at least 24 hours rest in every week calendar.
  • Illinois law requires employers to permit employees who are to work 7½ continuous hours or more to take a meal period of at least 20 minutes. Unlike California, the meal period may be unpaid and it must be given to an employee no later than 5 hours after beginning work. Illinois also does not have a law regarding breaks other than meals, therefore, federal laws apply.
  • Professional employees (such as creative types), covered under the FLSA Act, working for non-profit corporations, may receive a weekly wage rate lower than those working on for profit corporations.
  • One difference from the FSLA, is that under the Illinois law any employer that has one or more gainfully employed employees is covered under the law. (The Federal Law requires that the employer have a gross income of $500,000 irrespective of the number of employees.) The Illinois law also requires a different minimum wage. (S7)
  • Illinois law also required exempt employees and commissions to be paid monthly as opposed to non-exempt employees who can paid bi-monthly (both provisions can be modified by agreements).
  • The IWPCA also extends the time for a claim. A lawsuit under the IWPCA can be filed up to five years after the violation, if there is no written agreements and up to 10 if the contract is in writing.
  • Illinois does not have a highly compensated exemption (usually applied to those who make over $100,000 under the federal law)
  • Repercussions

  • On February 2019, the Senate passed Senate Bill 0001 (SB0001), that will not only increase the minimum age in Illinois from $8.25 to $9.25 in 2020, reaching $15 per hour in 2025, but also severally increase employer’s liability for wage and overtime violations.
  • Under the previous Illinois Minimum Wage Law, employees were entitled to receive the amount of any underpayment, including overtime, plus a statutory penalty of 2% the amount of the underpayment per month that the amount goes underpaid, plus reasonable attorney’s fees and costs, approved by the Court. (S6 corroborated by S2)
  • Under the SB0001, employers that don’t abide by the IMWL, may face up to three times the amount of the underpayment and 5% of the underpayments for each month following the date it should have been paid, besides attorney’s fees and costs. For instance, with the previous law, an employee who was due $100 per month over three years would recover $4,932 (3,600 in wages plus 1,322 in penalties), under the new law, the same employee could end up with $14,310 ($10,800 — 3x the amount owed — plus $3,300 in penalties).
  • When added to the FLSA liquidated damages possibility, the costs for employers found guilty could be astronomical. Some are anticipating that the increased value will make plaintiffs and attorneys less inclined to amicably resolve the case, resulting in more and longer lawsuits in Illinois.
  • The SB0001 also determines two extra penalties, payable to the Illinois Department of Labor’s Wage Theft Enforcement Fund: a $1,500 penalty for violation of the law and a $100 penalty for each employee impacted by failure to maintain accurate payroll records.
  • The employer may also be liable to up to 20% of the total underpayment in damages if proven the misclassification was willful, repeated or with reckless disregard of the Illinois Law.
  • If an employer fails to comply with or timely appeal an IDOL or court order, the employer will also be liable to pay a penalty to the IDOL totaling 20% of the amount owed, along with a penalty to the employee of 1% per calendar day of the amount owed for each day of delay.
  • Another difference between the Illinois law and Federal Law is the statute of limitations. The Illinois overtime law provides that overtime pay that has not been paid can still be collected up to three years from the date the pay was earned, while the Federal Overtime law is two years and up to three years if the employer was consciously and intentionally violating the overtime law.

Cases

Part
04
of seven
Part
04

Creative Duties Test: Texas

Texas does not have overtime regulations and, instead, follows the provisions that the Department of Labor and Fair Labor Standards Act (FLSA) set in place. One of the most common forms of Texas overtime pay violations is employee misclassification where employers misclassify an employee by using a certain job title (i.e., an employer misclassifies an employee as an independent contractor to avoid paying overtime which would be required for an administrator or manager).

OVERVIEW: CREATIVE DUTIES (TEXAS)

  • According to the Texas Workforce Commission website, the exempt duties followed by the state is what has already been set forth by the US Department of Labor (DOL), which as follows:
    • Exempt duties have set forth for "executive, administrative, and professional exemption categories" where the professional category is subdivided into learned professionals and creative professionals.
    • Creative professionals are defined as employees who have a primary duty of performing work which requires "invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor."
    • For creative professionals to qualify for an exemption, the work must be in a recognized field of artistic creative endeavors such as graphic arts, writing, acting, and music.
    • The determination of exemption must be made on a case-by-case basis, but the majority of these workers are self-employed, not employees.
    • Some common forms of Texas overtime pay law violation include employee misclassification where employers misclassify its employee by using a certain job title in order to avoid paying overtime, such as labeling a role as an independent contractor rather than administrator or manager (to avoid overtime pay).
    • But as per DOL, creative professionals are mostly self-employed as their work is not subject to employer’s control and could be labeled independent contractor.
    • Thus, according to a US law firm, there is a fine line in determining between exempt and non-exempt which usually causes employee misclassification and "gets employers into hot water and can cost them significantly in terms of fines, back overtime pay, and future Department of Labor (DOL) monitoring."

DETERMINATION

  • If a work product is substantially controlled by the employer, it does not qualify for exemption such as employees of magazines, newspapers, TV and media who work as copyist, film/cartoon animators, press release writers/journalists, and any individuals who "only collect, organize and record information that is routine or already public."
  • However, if the work product of a journalist/reporter/TV artist has a primary duty like conducting investigative interviews, analyzing or interpreting public events, writing editorials, opinion columns or other commentaries, or acting as a narrator or commentator, they are qualified as exempt creative professionals.
  • Therefore, the general qualifications for exemptions are creative professionals whose primary duty is performed using originality, relying on their creative ability, uses own interpretation and analysis, and that work product is not subject to employer's control.

REPERCUSSIONS OF MISCLASSIFYING EMPLOYEES

  • Texas does not have its overtime laws. The state's overtime provision follows what the DOL and Fair Labor Standards Act (FLSA) has set in place. The same is reported by a US law firm which it states that Texas follows the federal law for overtime regulations.
  • Texas Young Lawyer Association (TYLA) published a recent Employer's Guide to Wages, Overtime and Exemptions which also stated that this is consistent under the Fair Labor Standards Act (FLSA). The contents of creative duties are also similar to what was found in the Texas Workforce Commission.
  • The penalties imposed on employers violating FLSA does not differentiate as to the type of violations. Same penalties are imposed for wages, overtime and exemption violations.
  • According to the TYLA employer’s guide, for any violations relevant to wages, overtime, and exemptions, penalties include employer paying damages for violating FLSA rulings including the unpaid wages and overtime pay. Additional liquidated damages equal to the amount in question may also be imposed to compensate the employee for the delay in receiving the amount due.
  • The employer shall pay the attorney’s fee which is recoverable for a covered employee who will win in an action for violations of the FLSA. This amount sometimes is higher than the back wages and overtime pay owed in question.
  • If an employer was mistaken in good faith upon reasonable grounds, an employer can avoid paying liquidated damages. But if the violation was proven to be deliberate or willful, an employer will pay civil penalties up to 1,000 per violation.
  • A US law firm states that misclassification will cost employers cash as they are liable for back pay, retroactive benefits (such as healthcare, 401(k), memberships) and more. Furthermore, the issue can be turned into worst if a case gets into collective action.
  • Statute of Limitation for overtime claims "is the same as under Federal Law in that claims can be made for the prior 2 years (3 years if the violation is willful)."

WAGE THEFT ACT

  • Wage Theft is considered as the "unlawful practice of employers not paying their employees the full amount for the work they have performed" which also includes overtime pay. It is required for employers to comply with the rulings set by the federal Fair Labor Standards Act (FLSA).
  • El Paso and Houston are the only cities in the state with a wage theft ordinance.
  • According to the National Law Review, the Wage Theft Act is one of the most aggressive mechanisms to combat wage theft and the consequences of violating this act are more severe than the general FLSA penalties. This act makes non-payment of wages a third-degree felony allowing prosecution which also has a chance of jail time.
  • In El Paso and Houston, all guilty employers are prohibited to receive lucrative city contracts and city permits.
  • Additionally, in El Paso, a city government can deny permits and licenses to " to any offending company, not just city contractors". While in Houston, all offending employers will be included in a wage theft database.

Part
05
of seven
Part
05

Creative Duties Test: Florida

Employers in Florida who violate the Fair Labor Standards Act's (FLSA) overtime pay requirements for non-exempt employees including creative workers may be fined up to $1,100 per violation. Florida does not have a state agency enforcing wage and hour laws, but is subject to the federal Fair Labor Standards Act (FLSA). These are outlined below.

FLORIDA AND FAIR LABOR STANDARDS ACT

  • Florida has no state laws covering overtime pay of workers qualified under the creative duties test.
  • However, Florida employers and businesses are subject to the federal Fair Labor Standards Act (FLSA) rule governing overtime pay for creative professionals.
  • According to Workplace Fairness.org, Florida currently has no state agency assigned to implement wage and hour laws.
  • Instead, the state is subject to the Wages and Hours Division, which enforces the FLSA across the US.

REPERCUSSIONS

  • Florida Overtime Lawyer (Richard Celler Legal P.A.) states that if an employer has claimed a wrongful exemption from overtime pay, the employee could be entitled to back pay and additional damages.
  • However, the employee must file their claim within a specific time frame or their rights to the owed overtime wages will be waived permanently.
  • The US Department of Labor Wages and Hour Division presented the following repercussions for employers in violation of the FLSA overtime exemption rule below.
  • The Wage and Hour Division instructs employers to correct violations, secure agreements for future compliance, and supervise voluntary payment of back wages as applicable.
  • The Wages and Hour Division may file a suit to restrain an employer from violating the FLSA regulation as well as withholding minimum wages and overtime pay.
  • The Division may also file a lawsuit to recover an employee's back wages along with liquidated damages.
  • The employee can file a separate lawsuit to claim attorney's fees and other litigation costs in addition to their back pay.
  • Employers who willfully violate the FSLA may be fined up to $11,000 and undergo criminal prosecution.
  • Employers who violate the FSLA overtime pay requirements will be required to pay penalties reaching up to $1,100 per violation.

DYBACH VS FLORIDA DEPARTMENT OF CORRECTION

  • The Dybach versus State of Florida Department of Correction lawsuit concerns a Florida employee who was not receiving proper overtime pay from her employer.
  • The complainant stated that she was not an exempt professional employee which included learned workers, artistic/creative workers, teachers, medical and law professionals.
  • Her employer claimed that she was exempted from overtime pay as she had a degree in a specialized field (criminal justice), which the trial court upheld.
  • However, the Court of Appeals for 11th Circuit reversed the decision based on the fact that the overtime exemption rule applied to the job requirement and not the educational attainment of the employee.
  • Thus, the Florida case shows that employers and businesses are subject to the FLSA requirements in spite of a lack of established legislation within the state.

ADDITIONAL CASE STUDY

  • In Aralar versus Scott-McRae Automotive Group, a Florida federal court ruled in favor of the employer and provided an avenue to recover their attorney's fees.
  • This was based on the FLSA's provision that the employer can recover their lawsuit fees when the plaintiff/employee filed the case in "bad faith, vexatiously or wantonly".
  • This specific court decision resulted from the plaintiff's failure to comply with an arbitration agreement with his employer and that he was in fact an exempted employee under the FLSA definition.
Part
06
of seven
Part
06

Creative Duties Test: Massachusetts

While most of the creative professionals are independent contractors and self-employed, salaried creative professionals, especially in the lower-income bracket in Massachusetts, don't have overtime protection as the minimum salary threshold is too low at $455/week and much lower than the $480/week minimum wage in Massachusetts. Duties test to executive, administrative, and professional employees (EAP) protects non-EAP salaried workers from exploitation as some employers give token managerial responsibilities to line workers and discount retailers to avoid overtime pay.

CREATIVE PROFESSIONALS IN MASSACHUSETTS

  • The Commonwealth of Massachusetts defined professionals who are exempted from overtime pay based on the Fair Labor Standards Act (FSLA) 29 CFR Part 541.
  • FSLA defined creative professionals as those who rely on creative ability in expressing concepts, such as actors, musicians, soloists, conductors, painters, novelists, essayists, and technical writers. FSLA also noted that the majority of these persons are self-employed or independent contractors.
  • Seyfarth's employee guide to Massachusetts' Wage and Hour Law shows that creative professionals' primary work requires invention, imagination, or talent in a known field of artistic or creative endeavor. This is opposed to routine mental, manual, physical, or mechanical work.
  • In order to qualify for Executive, Administrative and Professionals (EAP) exemption from undertime both from Massachusetts state law and FLSA, an employee must satisfy each of three conditions: 1) they must be salaried employees not hourly; 2) they must earn above the salary threshold which is $455 per week; 3) they must pass the "duties test".

PENALTIES AND REPERCUSSIONS FOR VIOLATING OVERTIME LAWS IN MASSACHUSETTS:

  • Misclassification of employees to be exempted from overtime is one of the forms of wage theft.
  • According to Bloomberg, Massachusetts is one of the states that have penalties and remedies related to wage-hour violations such as wage theft.
  • Overtime pay in Massachusetts is 1.5x for more than 40 hours per week.
  • National Conference of State Legislators (NCSL) noted that Massachusetts has a penalty of 3x the unpaid wages for employers violating the state's overtime law.
  • Steffans Legal, a firm which represents employees in overtime cases in Massachusetts, noted that aside from 3x the unpaid wages, employers should also pay for attorneys' fees, costs, and interest. It also notes that the misclassification of employees as exempt for overtime coverage is one of the most common mistakes employers make.
  • The statute of limitations for overtime pay is three years.

COMPLICATIONS OF MASSACHUSETTS' OVERTIME LAW

  • Massachusetts' law is obsolete in a sense that it still applies the federal salary threshold of $455 per week for EAP exemption from overtime. In comparison, the minimum wage in Massachusetts is $12/hour, which translates to $480 per week.
  • Thus, executives, administrators, and professionals, including creatives who are in the lower-income bracket are exempted from overtime because the income threshold is too low and most of them work more than 40 hours for free.
  • It is estimated that 435,000 salaried employees in Massachusetts would have the right to overtime should the threshold be higher.
  • Since most of the creatives are self-employed or independent contractors, they are not entitled to employee compensation, such as overtime, and could not be a case for misclassification.
  • Duties test protects non-EAP employees as Economic Policy Institute (EIP) reported cases to Massachusetts' Joint Committee on Labor and Workforce Development, where line workers or discount retailers are given token managerial responsibilities for them to be exempted from overtime pay.
Part
07
of seven
Part
07

Creative Duties Test: New York

New York regulates the specifics of wage payments based on the New York Labor Law. For creative professionals, as well as administrative and executive positions, it has a higher salary threshold of $832 to $1,125 depending on the company's size and location, as the basis of the state's overtime exemption. If a New York employer was assessed to have a willful and repeated violation of misclassification of its employees to make them exempted for the overtime pay, the US Department of Labor can penalize the employer/company up to $1,000 per violation. Details are presented below.

OVERVIEW

  • The current salary threshold in the United States for the overtime pay exemption is $455 per week or $23,660 per year.
  • Aside from the salary threshold, the "creative duties test" is also needed for a worker to pass to be exempted.
  • "Creative professionals" such as (musicians, writers, actors, etc.) fall under the "Professional" category of employees who can be exempted based on the duties test.
  • An important consideration for the creative duties test is based on the employee's "duties" and not merely based on their "title or designation".
  • It is also important to note that the United States' Department of Labor has proposed an increased salary threshold of $679 per week for exempted employees (currently $455 per week).
  • This proposal is equivalent to a salary of $35,308 per year and will take effect on January 1, 2020.
  • The increase in threshold could make about 4 million workers become eligible for overtime pay.
  • Considering that a small percentage of workers are in creative positions who fall under the $679 per week threshold meets the creative duties test, the purpose of this proposed law is to "to screen out the obviously nonexempt employees".

THE NEW YORK LABOR LAW

  • The New York Labor Law regulates the specifics of wage payments and not the Fair Labor Standards Act (FLSA). However, the more restrictive law governs.
  • New York has a slightly different definition of "employers" as they define it as "any person, corporation, limited liability company, or association employing any individual in any occupation, industry, trade, business or service". New York excludes governmental agencies while the federal law includes it.
  • New York has a different salary threshold for executive, administrative, and professional employees which ranges from $832 to $1,125 which took effect December 31, 2018, depending on the company size and the employer's location.
  • The law has overtime exemptions for employees who are "in a bona fide executive, administrative, or professional capacity, ... or in the capacity of outside salesman."
  • To pass the duties test, a "creative professional" must be performing a work that requires "invention, imagination, originality or talent in a recognized field of artistic or creative endeavor".
  • Examples of creative professionals include film directors, graphic designers, photographers, writers, and illustrators.
  • According to the New York Labor Law, other occupations who are exempted include farm workers, taxi drivers, members of religious orders, part-time babysitters, and camp counselors among others.
  • Since the salary threshold in New York is greater than the threshold of the federal FLSA, employers in New York is required to comply to the state's threshold when it comes to the classification of a position to exempt.
  • However, employers should pay overtime for non-exempt employees from these categories, as required by the FLSA and New York's Minimum Wage Order.
  • The overtime pay should be equivalent to 1.5 times the regular rate for every hour overtime.
  • The New York Labor Law notes that it differs on the basis of overtime obligation:
    • If the employee is outside the employer's premises, the federal overtime compensation will be given to hours worked in excess of 40 hours per week.
    • If the employee is within the employer's premises, the federal overtime compensation will be given to hours worked in excess of 44 hours per week.
  • An employer has the right to exclude lectures and training programs as work time if it was done outside work hours, if the attendance is voluntary, and if it will not directly make the employee more proficient.

REPERCUSSIONS


NEW YORK REGULATIONS
  • If a New York employer fails to pay wages according to the New York Labor Laws, they can be subject to criminal penalties.
  • An employer can be held liable of misclassification or the overtime compensation whether the employer knows or does not know that they misclassified.
  • For a company or employer in New York who failed to comply with the above-mentioned regulations, the limitations for action is 6 years to recover full wages. It is 3 years longer than what the federal law states.

PENALTIES
  • A New York employer is due $50 for the expenses for each Form W-2 that are not filed due to misclassification.
  • For the employers' failure to withhold income taxes, a penalty of 1.5% of the wages is given plus 40% of the Social Security and Medicare taxes.
  • Interest for these penalties will also be accrued from the date it should be given.
  • If the violation is assessed as willful and repeated, the Department of Labor can penalize the company/employer up to $1,000 per violation.
  • The employer will also pay the attorney's fee and liquidated damages on behalf of the employee and recover backpay.
  • If the violation is willful or if the employer knowingly violates the law, a New York employer will pay the employee 25% up to 100% of the total due damages.
Sources
Sources

From Part 03
From Part 04
Quotes
  • "A "creative professional" employee's primary duty must be "the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor." "Learned professionals" perform work requiring "advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction", exercise discretion and independent judgment in performing job duties, and perform work that is generally incapable of standardization with respect to time."
  • "Regarding creative professionals, 29 C.F.R. 541.302(a) notes that "to qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical, or physical work. The exemption does not apply to work which can be produced by a person with general manual or intellectual ability and training.""
Quotes
  • "Overtime Regulations: Texas follows the Federal law. Overtime pay of time and a half is required for all non-exempt employees for hours worked over 40 during a workweek. "
  • "Specific Exemptions: Texas does not have any state specific exemptions to the overtime pay requirements. Federal law exemptions apply, the most common of which Executive, Professional, Administrative, Computer Employee"
  • "Statute of Limitations For overtime claims, the statute of limitations is the same as under Federal Law in that claims can be made for the prior 2 years (3 years if the violation is willful)."
  • "State Law Remedies / Penalties: The same Federal law remedies for overtime violations are available in Texas. Employees can recover all unpaid overtime for two or sometimes three years prior to the filing of a lawsuit."
Quotes
  • "Texas overtime provision strictly follows the rules that are set in place by the FLSA – therefore Texas does not have its own overtime law."
  • "Any questions or concerns about violations of overtime in Texas are a question of federal law. In a situation where federal law conflicts with state law, federal law controls even if federal law prescribes a stricter rule."
Quotes
  • "Damages for violations of the FLSA include unpaid wages and overtime pay, plus an “additional equal amount as liquidated damages.” 29 U.S.C. § 216(b). Liquidated damages compensate the employee for the delay in receiving their wages. 29 C.F.R. § 790.22(a). "
  • "The only way an employer can avoid liquidated damages, which double the amount of back wages owed, is persuades the court that its failure to comply with the FLSA was both in good faith and predicated upon reasonable grounds, such as in reliance on an attorney’s advice."
  • "Additionally, attorneys’ fees are recoverable for a covered employee who succeeds against an employer in an action for violations of the FLSA. 29 U.S.C. § 216(b). Note, there is no “rule of proportionality” with awarding attorneys’ fees. Therefore, attorneys’ fees sometimes exceed the amount of back wages and overtime owed."
  • "Civil penalties up to $1,000 per violation may be assessed for repeated or willful violations of the FLSA. 29 U.S.C. § 216(e)."
Quotes
  • "Employee Misclassification Employers have been known to misclassify employees to avoid paying overtime, as well. Employers may have told workers who hold certain job titles, such as “manager” or “administrator,” they do not qualify for overtime pay due to their job titles. "
  • "Job titles do not affect overtime. However, the rate of salary pay and job duties may disqualify some employees from overtime."
Quotes
  • "Wage theft occurs when an employer fails to pay its workers as agreed, when workers are paid less than the minimum wage, when workers are required to work “off the clock,” and when workers are not properly paid for their overtime work."
  • "To combat these injustices, the Texas legislature, following the lead of a number of other states with wage theft laws, such as California and New York, passed the Texas Wage Theft Act (the “Act”)."
  • "The Act is one of the most aggressive mechanisms to counter wage theft, but it is not the only one. Cities like El Paso and Houston have enacted ordinances that prohibit employers who commit wage theft from receiving potentially lucrative city contracts and/or city permits."
  • "The consequences for wage theft are severe, but there are a number of ways in which employers can be mindful of the pitfalls that lead to wage theft. First, at an absolute minimum, employers everywhere should ensure they are in compliance with the federal Fair Labor Standards Act (FLSA), which establishes, among other things, the minimum wage and overtime pay eligibility."
Quotes
  • "Houston and El Paso are the only Texas cities with a wage theft ordinance. "
Quotes
  • "Although many people generally view “non-exempts” as non-managers and “exempts” as managers, the truth is that there is a fine line between the two. That line often gets employers into hot water and can cost them significantly in terms of fines, back overtime pay, and future Department of Labor (DOL) monitoring."
  • "Employers who misclassify employees may be liable for back pay, retroactive benefits (such as healthcare, 401(k), memberships) and more. The issue can become exacerbated when more than one employee or department is involved, which is generally the case. "
  • "In fact, it can affect thousands of employees if a national company has wrongly classified employees."
From Part 05
Quotes
  • "Since Florida doesn’t have established overtime legislature, the federally-crafted Fair Labor Standards Act (FLSA) specifies workers’ wage and hour rights including for overtime pay. "
  • "As attorneys that understand the overtime rules in Florida, we know that employers must comply with both state and federal laws. Although FLSA establishes overtime pay, not all employees are entitled to additional payment."
  • "Examples of Exempt Positions The creative professional must engage in work that requires “invention, imagination, originality, or talent” in a field of “artistic or creative endeavor.”"
Quotes
  • "One of these exemptions is the “professional exemption,” which was analyzed by the United States Court of Appeals for the Eleventh Circuit in Dybach v. State of Fla. Dep’t of Corr., 942 F.2d 1562, 1564 (11th Cir. 1991). In Dybach, the employee was an adult probation officer employed by the Department of Corrections of the State of Florida, who alleged that her employer violated the FLSA by not paying overtime wages. "
  • "She filed a lawsuit seeking unpaid overtime wages and liquidated damages. The employer fought the lawsuit and contended it owed nothing because the employee was an exempt professional."
  • "In Dybach, although the employee was a probation officer and obtained her Bachelor of Arts degree in the specialized field of criminal justice, the U.S. Court of Appeals for the Eleventh Circuit ruled that the job position itself did not require a specialized college degree, but rather a generalized degree which need not correlate to the field of law enforcement or similar specialty. "
  • "Ultimately, the Court of Appeals for the Eleventh Circuit reversed the trial court which had concluded that the employee was an exempt professional. "
  • "Thus, the determinative factor is the job requirement itself and not the educational level of the employee. The appellate court concluded that since the job did not require advanced knowledge or an advanced degree, the employee was not exempt."
Quotes
  • "(p.7) If your employer has, indeed, claimed an exemption in error, you could be entitled to back pay as well as additional damages; however, you must file a claim within a specific period of time or you will forever waive your right to pursue the overtime wages owed to you."
  • "(p.7) If your employer has been claiming an exemption for you based on your classification as an “Executive”, “Administrative”, Professional”, or “Highly Compensated Employee” and you believe that classification is incorrect you should consult with an experienced Florida employment law attorney as soon as possible to discuss the situation."
  • "(p.2) Specifically, the Fair Labor Standards Act, or FLSA, requires most employers to pay most workers at least minimum wage as well as pay overtime wages when the workweek exceeds 40 hours. As is always the case, however, there are exceptions and exemptions to both the minimum wage and overtime provisions of the FLSA. "
  • "(p.6) Creative Professional o The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week; o The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor."
Quotes
  • "In most lawsuits filed under the Fair Labor Standards Act (FLSA), an employer’s ability to recover any attorney’s fees under the prevailing standard – that a plaintiff filed the case in “bad faith, vexatiously or wantonly” – is much too difficult to satisfy. "
  • "A recent decision from the U.S. District Court for the Middle District of Florida, however, provides an avenue for recovery of such fees – at least in part. Aralar v. Scott-McRae Automotive Group, LLLP, 2018 U.S. Dist. LEXIS 64045 (M.D. Fla. Apr. 17, 2018)."
  • "In Aralar, the plaintiff filed suit in federal court, claiming that his employer had improperly classified his automotive service advisor job as exempt and that as a result he was entitled to overtime pay and other damages under the FLSA. "
  • "The district court subsequently stayed the case pending arbitration and ultimately the arbitrator dismissed the plaintiff’s claims, finding that his job was properly classified as exempt (a decision that pre-dates, yet conforms with, the Supreme Court’s recent ruling on the exempt status of automotive service advisors, discussed here). "
  • " The employer then sought, and the arbitrator awarded, attorney’s fees and costs of nearly $20,000 stemming from the plaintiff’s failure or refusal to dismiss his lawsuit, as provided for in the above provision. "
Quotes
  • "(slide 74) FLSA enforcement is carried out by Wage and Hour staff throughout the U.S. Where violations are found, Wage and Hour advises employers of the steps needed to correct violations, secures agreement to comply in the future and supervises voluntary payment of back wages as applicable. "
  • "(slide 75) In the event there is not a voluntary agreement to comply and/or pay back wages, the Wage and Hour Division may: Bring suit to obtain an injunction to restrain the employer from violating the FLSA, including the withholding of proper minimum wage and overtime. "
  • "(slide 75) Bring suit for back wages and an equal amount as liquidated damages."
  • "(slide 76) Employee Private Rights An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney’s fees and court costs."
  • "(slide 77) Penalties Employers who willfully violate the Act may be prosecuted criminally and fined up to $11,000"
  • "(slide 77) Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,100 for each such violation "
Quotes
  • "Presentations: Prevailing Wage Seminars - 2017 Fair Labor Standards Act (Microsoft® PowerPoint®)"
Quotes
  • "Wage and Hour/Labor Standards Violations Florida has no state agency that enforces wage and hour laws; see the local DOL office(s) below."
  • "U.S. Department of Labor ESA Wage & Hour Division Fort Lauderdale Area Office Federal Building, Room 408 299 East Broward Blvd. Ft. Lauderdale, FL 33301-1976"
  • "U.S. Department of Labor ESA Wage & Hour Division Jacksonville District Office 3728 Phillips Highway Suite 219 Jacksonville, FL 32207-6880"
From Part 06
Quotes
  • "To qualify for the creative professional employee exemption, the employee’s “primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor, as opposed to routine mental, manual, mechanical, or physical work.”75"
Quotes
  • "Some common forms of wage theft are unpaid overtime, denial of meal or rest breaks, withholding tips or underpaying the minimum hourly rate for tipped workers, making illegal deductions from paychecks, misclassification of employees as independent contractors or as exempt from overtime, and simply not paying the full wages due."
Quotes
  • "For an employee to qualify for the EAP exemption from overtime under both the FLSA and Massachusetts state law, they must satisfy each of three conditions: 1) they must earn a salary, i.e. not be paid by the hour; 2) they must earn above a certain salary threshold (the “salary test”); and 3) they must pass the “duties test,” a fairly complicated test of the employee’s tasks and responsibilities that establishes them as a bona fide executive, manager, or highly trained professional."
  • "For nearly 40 years after the FLSA’s passage, the federal salary threshold was regularly raised to ensure it still accurately delimited true executives, administrators, and professionals from workers with less bargaining power. "
  • "Unfortunately, the Massachusetts law on this issue is just as obsolete. The federal salary threshold of $455 per week currently applies for the EAP exemption from overtime in Massachusetts."
  • "Someone working 40 hours at the current state minimum wage of $12 per hour would earn $480—meaning that it would be illegal for a worker in Massachusetts to be paid a salary that would make them eligible for overtime based on the salary test. Thus, one of the essential tests—and arguably the most straightforward and effective test—for determining who is a bona fide executive, administrator, or skilled professional is completely meaningless under Massachusetts law."
  • "Altogether, there are about 435,000 salaried employees in Massachusetts who would have their right to overtime established or clarified by a higher threshold."
Quotes
  • "A compilation of laws, regulations, cases, and web sources on overtime pay law by the Trial Court Law Libraries. For information on shift schedules and work hours, see Massachusetts law about hours and conditions of employment, under Related Links below."
  • "29 CFR Part 541, Defining and delimiting the exemptions for executive, administrative, professional, outside sales and computer employees "White collar'' exemptions from overtime law."
Quotes
  • " This requirement generally is met by actors, musicians, composers, conductors, and soloists; painters who at most are given the subject matter of their painting; cartoonists who are merely told the title or underlying concept of a cartoon and must rely on their own creative ability to express the concept; essayists, novelists, short-story writers and screen-play writers who choose their own subjects and hand in a finished piece of work to their employers (the majority of such persons are, of course, not employees but self-employed);"
Quotes
  • "In the wake of the case, however, Gants called for the Massachusetts Legislature to consider greater uniformity among laws that classify workers. He added that part of the challenge in preventing misclassification is that there is no uniform definition of an employee. Instead, the law defines employees and independent contractors by several different standards depending on the context."
  • "The board had affirmed the findings of an administrative judge by concluding Camargo was an independent contractor not entitled to workers’ compensation. Its decision was based on the definition of an employee in Massachusetts’ workers’ compensation statute. "
Quotes
  • "What are the most common overtime mistakes employers make? There are many mistakes made by employers in this area. The most common are: (1) improperly classifying an employee as exempt from overtime coverage, (2) calculating hours worked by pay period instead of workweek, (3) asking you to work before or after your shift without pay, (4) asking you to work over your lunch break, and (5) refusing to pay you overtime because you worked it without permission or authorization. If these sound familiar, you may have an overtime claim."
  • "What are my damages if I win? Employees that successfully establish that they were misclassified and wrongfully denied overtime are entitled to the Massachusetts Wage Act’s comprehensive remedial scheme. That scheme includes compensation for attorneys’ fees, costs, interest, and a monetary payment equal to three times the amount you should have been paid in overtime."