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Author: Christine Duignan

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Retaliation Clarication

Shavitz Law Group

A recent Ninth Circuit decision clarified an important part of federal wage and
hour law: retaliation under the Fair Labor Standards Act (FLSA) does not have to come
from your direct employer.

What is Retaliation Under the FLSA?

The FLSA makes it illegal to punish workers for filing complaints about their
wages (i.e., unpaid wages, overtime violations, misclassifications, etc.) against their
employers, whether formal or informal. Retaliation can include firing, cutting hours,
canceling work, or blocking future opportunities because an employee filed a complaint.

The Ninth Circuit’s Recent Clarification

In Hollis v. R&R Restaurants. Inc, the plaintiff, an exotic dancer at a club called
Sassy’s, sued the club’s owners and managers under the FLSA for misclassifying
dancers as independent contractors to avoid paying minimum wage and overtime.
When Hollis filed the complaint, Frank Faillace, a partner and manager of both Sassy’s
and another club, Dante’s, canceled Hollis’ agreement to perform at Dante’s. Hollis then
amended the complaint to include Faillace’s cancellation, alleging that the cancellation
was retaliation and in violation of the FLSA.

The Ninth Circuit Court held that an FLSA retaliation claim may proceed against
any person acting “directly or indirectly in the interests of an employer.” For example,
this expands retaliation claims to include owners, managers, or affiliated business
partners. The bottom line is that the person retaliating does not need to be the
employee’s direct employer.

The Impact of Hollis

Hollis’ holding prevents employers from attempting an end-around the FLSA’s
anti-retaliation provision by having others (managers or affiliates) do their dirty work for
them. By expanding the definition of whose conduct can be imputed to the employer,
the Ninth Circuit has ensured that the FLSA’s anti-retaliation provision reaches its
intended scope of protecting employees and plaintiffs from being penalized for enforcing
their rights.

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Employee vs. Independent Contractor – New Rules

Shavitz Law Group

On May 1, 2025, the United States Department of Labor (“DOL”) published FAB Np. 2025-1, providing guidance for analyzing whether a worker is an employee or independent contractor. While the economic realities test remains the standard, with the new guidance the focus has shifted with specific reliance on older guidance, including Fact Sheet #13 (July 2008) and Opinion Letter FLSA2019-6.

Fact Sheet #13 provides a broader perspective of the concept of “employment relationship.” It specifically states that an employee under the FLSA in “one who . . .  follows the usual path of an employee and is dependent on the business he or she serves.” Pursuant to Fact Sheet #13, factors to consider in the economic realities test include: (1) the extent to which the services rendered are an integral part of the principal’s business; (2) the permanency of the relationship; (3) the amount of the worker’s investment in facilities and equipment; (4) the nature and degree of control by the principal; (5) the worker’s opportunities for profit and loss; (6) the amount of initiative, judgment and foresight by the worker; and (7) the degree of independent business organization and operation.

Importantly, factors which are irrelevant include (1) where the work is performed; (2) the absence of a formal employment agreement; and (3) whether the worker is licensed.

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Retaliation Frustration?

Shavitz Law Group

Did you ever feel that your employer treated you differently after you questioned your pay or overtime? After making such an inquiry, maybe your hours got cut or perhaps it’s something more significant like an undeserved reprimand. The Fair Labor Standards Act (FLSA) provides essential protections for workers, including the right to not be retaliated against for asserting a good faith belief that you’re being underpaid.

The anti-retaliation provisions of the FLSA cover variety of adverse employment actions. This basically means that an employer cannot “punish” employees for asserting their legal right to be lawfully paid for all of their hours worked. Employees can assert their legal rights in a variety of ways, including raising a pay issue informally, contacting the Department of Labor, filing a claim or lawsuit, or even participating in an investigation about an employer’s wage and hour practices. “Adverse employment action” includes a variety of negative consequences, including firing, demotion/failure to promote, pay cuts, or even more subtle changes like reducing an employee’s hours or responsibilities.

The FLSA ensures that employees can seek fair treatment without putting their job in jeopardy. Retaliation is a separate claim that employees can bring along with their original wage dispute and provides additional damages.

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AI May Make More Employees Eligible for Overtime

Shavitz Law Group

With the recent implementation of artificial intelligence (AI) in the workplace, the line between who is performing those duties — people or AI — can become less clear. While AI is undoubtedly a useful tool, it also can create shifts in workers’ duties which may raise issues concerning employees’ classification. Specifically, when AI replaces certain duties of employee classified as exempt, some of those employees may not maintain their exempt status and therefore would be entitled to overtime.

By way of example, if AI assumes managerial tasks such as decision-making, scheduling, supervision, or planning, previously exempt classified employees may be eligible for overtime compensation. One of the hallmarks of a managerially-exempt employee is the authority to hire or fire other employees. Similarly, one of the criteria for administratively-exempt employees is the ability to exercise discretion over matters of significance. However, when AI is utilized to determine employees’ productivity through tools like tracking keystrokes, mouse clicks, presence in front of webcam, and website browsing, previously managerially/administratively exempt employees may find themselves simply implementing AI suggestions rather than exercising discretion over those decisions, including hiring and firing, as well as others.

If you are an exempt employee who has had some duties assumed by AI, your exempt status may be in question and you may be entitled to overtime. Should you have any concerns about how AI has affected your eligibility for overtime, please contact Shavitz Law Group.

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How to Be Correctly Paid in the “Always-On” Culture of Remote Work

Shavitz Law Group

After the Covid lockdown, many employees transitioned to remote or hybrid work. While this new work setting has been beneficial to many, it has also brought new complications, including complications related to compensation.

The standard rule for overtime compensation is that a non-exempt employee must work more than 40 hours a week to be eligible for overtime compensation. Under most scenarios, such an employee is entitled to time-and-a-half of their hourly rate for the hours worked over 40 in a work week.

Tracking hours worked remotely can be difficult, especially if an employer fails to implement policies and practices to track all of the time worked by employees.  For example, answering phone calls or responding to messages on days off or before or after work hours has become the norm.  Although employees may feel like such duties are simply expected by employers, such tasks count as work for which employees should be compensated. And, if that extra time spent answering calls or responding to texts puts an employee over 40 hours  for that work week, then the employee is entitled to be paid time-and-a-half for those hours worked over 40.

The desire to meet employers’ expectations can make it difficult for employees to differentiate between work time (which is compensable) and their own leisure time (which is not). When the line between work time and leisure time is blurred it can foster an “always-on” culture. “Always-on” manifests in a variety of ways, including constantly checking and responding to emails (even during dinner or other non-working time), responding to messages and calls when not working, and even joining  Zoom calls while on vacation. Because employees can feel that they are “always-on,” these activities often results in unpaid overtime hours. However, employers must pay for all hours worked, regardless of when or where, and this is  particularly true for employers which presume that employees are available at all times.

In order to ensure that they are paid for all of their hours worked in this “always-on” culture, it is helpful for employees working remotely to keep track of all of the time they work, including time associated with tasks performed while they are off-the-clock. Importantly, even if employees do not log or track their own time and the employer does not provide the means for capturing all hours worked – including hours worked remotely —  the law permits such employees to rely on their best estimate of their actual, total hours worked.

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Artificial Intelligence and OT

Shavitz Law Group

Artificial Intelligence (AI) and Your Overtime Rights

As more employers start to use AI to keep track of time, tasks, and other work data, it is important to keep in mind that AI logs can be inaccurate, causing employees to miss out on overtime hours worked. The Department of Labor (DOL) recently issued a Field Assistance Bulletin (FAB) which outlines possible issues that may arise in the workplace with the rising use of AI and technology.

Tracking Work Time:

Employers can utilize AI to track whether an employee is “active” or “idle.” This can be done through tracking keystrokes, mouse clicks, presence in front of a web camera, and website browsing. However, the FAB cautions that without proper human supervision, AI tracking of work time can cause issues in determining the true amount of time an employee has worked because these tracking methods are not determinative of hours worked under the FLSA.

Monitoring Break Time:

AI can be used to create time slots for breaks based on previous data entries, such as prior time entries, usual shift times and break times, business rules, and other data. Again, however, this data may not always be accurate given an employee’s workload. It is imperative that human oversight is involved.

Work Performed at Multiple Geographic Locations:

Some employers use location-based monitoring to determine if an employee is working. However, complications may arise if the system fails to account for work done in different locations (i.e. employer asking employee to pick up supplies before heading to designated workspace).

AI and Prohibited Retaliation:

AI should not be used to “bust” employees engaging in protected activities, such as web searches regarding overtime rights, and taking adverse actions against said employees. In addition, AI should not be used to track employees who have filed a complaint with DOL investigators.

In sum, if an employer uses AI then employees must ensure that they are being properly credited for all of their hours worked. If employees are unsure, they can ask their employer if it is using AI and if it is, for what purpose. It should be noted such inquiries are themselves protected activity that an employer cannot retaliate against.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

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When High Earners are Eligible for Overtime

Shavitz Law Group

Highly Compensated Managers, Administrators, and Other Employees May Be Entitled to Overtime

While many believe highly compensated managers, administrators, and other employees are not entitled to overtime under the federal law known as the Fair Labor Standards Act (FLSA), that notion is incorrect. In the recent case of Helix Energy Solutions v. Hewitt, the Supreme Court held that if highly compensated employees do not satisfy the “salary basis test” – one of the essential elements for key exemptions to the FLSA – then the employees may be entitled to overtime notwithstanding their high salary. In Hewitt, the plaintiff earned over $200,000 per year. Nonetheless, the high Court held that because he was compensated on a day rate (per diem) basis instead of a salary basis, he was entitled to overtime.

Pursuant to the FLSA, in order for managers and administrators, as well as some other “white-collar” workers to be considered exempt from overtime they must (1) be paid on a salary basis; (2) earn above the minimum salary threshold which is, as of July 1, 2024, $844 per week (or $43,888 per year); and (3) have management or administration as their primary duty.

The issue in Helix Energy related to the first requirement. Specifically, the Court considered whether Hewitt’s day rate passed the salary basis test. The salary basis test requires employees to be paid a predetermined amount of money that is not subject to reduction based upon the quality or quantity of work done. Because Hewitt’s day rate varied depending on the number of days he worked each week, his compensation was not “predetermined” as required and therefore he was entitled to overtime for the hours he worked over 40 in a work week.

Helix Energy makes clear that the amount of money an employee makes is not dispositive of certain FLSA exemptions. Indeed, based upon his compensation and hours worked, Hewitt could be entitled to upwards of $11,500 per week in overtime. Thus, even employees making significant annual compensation can be overtime-eligible if their employer does not guarantee them an unvarying salary. This means that many engineers, banking and finance workers, and other high-income earners and professionals, may be entitled to overtime if they are not paid a salary.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

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Non-Competes No Longer Valid

Shavitz Law Group

Understanding the FTC’s New Rule on Non-Compete Agreements

The Federal Trade Commission (FTC) has introduced a new rule that significant changes the landscape for non-compete agreements in the workplace. Effective September 4, 2024, most non-compete agreements with employees will no longer be enforceable.

Here’s a breakdown of what the new rule means for both employers and employees:

What is a Non-Compete Agreement?

A non-compete agreement is a contract between an employee and employer that restricts the employee from working for competitors or starting a competing business for a certain period after leaving the company. Non-competes typically are contained in employment contracts or agreements. While non-compete agreements aim to protect the employer’s business interests, but they can also limit employees’ job opportunities and mobility.

What’s Changing?

Pursuant to the new rule, employers can no longer enter into new non-compete agreements with employees. This includes senior executives—employees earning more than $151,164 per year who hold policy-making positions. However, existing non-compete agreements with these senior executives will remain valid. For all other employees, any existing non-compete agreements will become void. So the new rule is retroactive, except for C-suite, upper-level management employees.

Notice Requirements

Employers must inform both current and past employees that their non-compete agreements will not be enforced. This ensures that employees can seek or accept new job opportunities without fear of legal repercussions.

Exceptions

There are a few exceptions to the new rule:

1. Existing non-compete agreements with senior executives remain valid.

2. Non-compete agreements related to the sale of a business are still enforceable.

3. Any legal actions that arise before September 4, 2024, will not be affected by the new rule.

What the New Rule Means for Workers

Workers who previously remained with companies because of a non-compete would deprive them of other employment opportunities will no longer be restricted by the non-compete agreement. This gives employees more employment opportunities and mobility. As a consequence, employees should be in a better position to negotiate more favorable terms from their present employers.

If you or someone you know has been subject to a non-compete and you have questions about the new rule or any other aspect of your employment, please contact Shavitz Law Group at [email protected]

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California Employee Expense Reimbursements

Shavitz Law Group

The federal statute known as the Fair Labor Standards Act (FLSA) requires employers to pay overtime and minimum wage for non-exempt employees.  As a federal law, the FLSA applies nationwide. However, some states offer more protection than the FLSA. For example, in California, employers are required to reimburse employees for necessary expenses incurred while performing their jobs.

This requirement comes from Section 2802 of the California Labor Code, which ensures that employees are not forced to pay out-of-pocket for work-related expenses. Section 2802 specifically states: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties . . .” The protections of § 2802 are broad and apply to all employees.

Here are a few examples of how § 2802 operates:

Personal Vehicles

When employees use their personal vehicles for work purposes, employers must reimburse them for the associated costs. Reimbursement should cover all expenses related to the vehicle’s use, including maintenance, insurance, and wear and tear. The most common method for calculating this reimbursement is by using the IRS standard mileage rate, which provides a per-mile rate that factors in all these costs.

For example, if the IRS mileage rate is 67 cents per mile and an employee drives 100 miles for work, the employer would reimburse $67.

Use of Personal Cell Phones

Similarly, if employees use their personal cell phones for work, employers must cover a fair share of the costs. This includes voice calls, text messages, and data usage necessary to perform their job.

One approach is for employers to reimburse a reasonable percentage of the employee’s phone bill. For example, if it’s determined that 30% of the phone usage is work-related, then 30% of the monthly bill should be reimbursed. If you work in California and believe you have not been properly reimbursed for expenses you incurred as a direct result of your job duties, please contact Shavitz Law Group at [email protected].

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Minutes May Add Up to Unpaid Overtime

Shavitz Law Group

The practice of rounding hours is a topic that often raises questions and concerns among employees. Rounding involves adjusting the recorded time worked to the nearest interval, typically in increments of five, ten, or fifteen minutes. While this practice may seem straightforward, it’s important to consider the legal effects of rounding.

The significance of rounding hours worked lies primarily in its adherence to federal, such as the Fair Labor Standards Act (FLSA), and state labor laws. Under these rules, rounding is allowed as long as it does not systematically undercompensate employees over time. Essentially, the rounding method employed must be fair and neutral, treating both overages and shortages of time worked equally.

For example, if rounding consistently results in underpayment or non-compensation for significant periods of time worked it may raise legal issues. For instance, an employee who consistently clocks in at 8:53 AM and clocks out at 5:07 PM, accumulates an additional 30 minutes of work over a two-week period. If the employer consistently rounds down in such instances, the employee could be unfairly deprived of compensation for those extra hours worked, leading to wage theft and violation of labor laws.

Because not all rounding policies violate the law, if you have been consistently “shorted” hours worked based upon an employer’s rounding policy, the best option is to have a lawyer evaluate your situation to determine if you have a claim for unpaid wages.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].