USDOL Promulgates 2016 FLSA White-Collar Exemption Final Rules


By Michael J. Killeen and Sheehan Sullivan Weiss

California Governor Jerry Brown Signs $15 Minimum Wage Bill

Today Governor Jerry Brown signed Senate Bill 3, which will gradually increase the state’s minimum wage from its current level of $10 per hour to $15 per hour by 2022.  Both houses of California’s legislature passed the bill on March 31 to great fanfare, but the Governor waited until today to give formal approval, presumably to avoid signing the bill into law on April Fool’s Day.

The new law will increase the state’s minimum wage from $10 per hour according to the following schedule:

For employers with 26 or more employees:

January 1, 2017: $10.50 per hour
January 1, 2018: $11.00 per hour
January 1, 2019: $12.00 per hour
January 1, 2020: $13.00 per hour
January 1, 2021: $14.00 per hour
January 1, 2022: $15.00 per hour

For employers with 25 or fewer employees, each increase will be delayed by one year as follows:

January 1, 2018: $10.50 per hour
January 1, 2019: $11.00 per hour
January 1, 2020: $12.00 per hour
January 1, 2021:  $13.00 per hour
January 1, 2022: $14.00 per hour
January 1, 2023: $15.00 per hour

Beginning in 2024, the minimum wage will increase annually up to 3.5 percent based on the United States Consumer Price Index for Urban Wage Earners and Clerical Workers, rounded to the nearest ten cents.  The new law does not preempt local minimum wage ordinances that have been adopted by several cities in California in recent years, so local governments remain free to enact minimum wages higher than the state minimum.

Beginning July 1, 2018, the new law will also phase in paid sick leave for in-home supportive care workers, who were excluded from the state’s paid sick leave law that took effect in 2015.

The new law will also gradually increase California’s minimum salary for so-called “white collar” (executive, administrative, and professional) exempt employees, which is set at twice the state minimum wage for a 40-hour work week.  Under the current $10 state minimum wage, California’s minimum salary is $800 per week or $41,600 per year.  Unless the legislature acts to de-couple the minimum exempt salary from the minimum hourly wage, the minimum salary for white collar exempt employees in California will rise according to the following schedule:

January 1, 2017:      $840 per week / $43,680 per year
January 1, 2018:      $880 per week / $45,760 per year
January 1, 2019:      $960 per week / $49,920 per year
January 1, 2020:      $1,040 per week / $54,080 per year
January 1, 2021:      $1,120 per week / $58,240 per year
January 1, 2022:      $1,200 per week / $62,400 per year

The minimum salary for white collar exempt employees under the FLSA is currently just $455 per week ($23,660 per year).  However, the Obama administration’s plan to change the FLSA regulations to raise that minimum to at least $970 per week ($50,440 per year), and then annually adjust the minimum to keep pace with inflation, is likely to take effect in the summer or fall of 2016.  Any white collar employee in California must be paid a salary high enough to satisfy both the state and federal minimums to be exempt from overtime for hours worked in excess of eight per day or 40 per week.

Employers should immediately begin planning to adjust to the new law, which critics describe as a “job-killer.” The economic impact of a $15 minimum wage remains to be seen, and given the implementation schedule the new law’s effects will be gradual.  But at a minimum we know this much is true: (1) Minimum wage workers who remain employed will see a wage increase; and (2) Those who are laid off or cannot find employment under the new law will have an effective minimum wage of zero.

Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

Human Resource Professionals Beware — Second Circuit Finds HR Director May Be Individually Liable Under the FMLA

Human Resource Professionals Beware — Second Circuit Finds HR Director May Be Individually Liable Under the FMLA

By John Ho and Robert F. Manfredo, Bond Schoeneck & King, PLLC

On March 17, 2016, the United States Court of Appeals for the Second Circuit issued a decision in Graziadio v. Culinary Institute of America.  In that decision, the Court held that the facts (when viewed in the light most favorable to the plaintiff) could lead a jury to conclude that the Culinary Institute of America’s Director of Human Resources was individually liable for violating the FMLA adopting the “employer” test used under the FLSA.

The plaintiff, Cathy Graziadio, was employed at the Culinary Institute as a Payroll Administrator.  On June 6, 2012, Graziadio’s son was hospitalized due to issues related to Type I diabetes.  Graziadio immediately informed her supervisor that she needed to take leave to care for him.  Graziadio completed the necessary FMLA paperwork and submitted medical documentation supporting her need for leave.  Only a few weeks later, Graziadio’s other son fractured his leg playing basketball and underwent surgery.  Graziadio again notified her supervisor that she needed leave to care for her other son and expected to return to work, at least part time, by the week of July 9.

On July 9, Graziadio’s supervisor asked for an update on Graziadio’s return to work and Graziadio responded that she needed a reduced, three-day week schedule until mid-to-late August and could return July 12 if that schedule was approved.  Graziadio asked whether the Culinary Institute required any further documentation from her.  At that point, Graziadio’s supervisor contacted the Director of Human Resources regarding Graziadio’s request.  Despite several calls and e-mails from Graziadio, the Director of Human Resources did not respond until July 17.  Over the next several weeks, Graziadio and the Director of Human Resources corresponded regarding Graziadio’s need for continued leave, alleged deficiencies in her FMLA documentation, and her expected return to work date.

On September 11, 2012, the Director of Human Resources sent Graziadio a letter notifying her that she had been terminated for abandoning her position.  After being terminated, Graziadio commenced an action against the Culinary Institute, her supervisor, and the Director of Human Resources alleging interference with her FMLA leave and retaliation for taking FMLA leave.  The District Court granted summary judgment to the Culinary Institute and the individual defendants, but the Second Circuit reversed that decision.

Under the FMLA, an individual may be held liable if he or she is considered an “employer,” defined as “any person who acts, directly or indirectly in the interest of an employer to any of the employees of such employer.”  In examining this standard, the Second Circuit applied the economic realities test – which courts apply to determine who may be considered an employer under the Fair Labor Standards Act.  Under this test, the Court must look to whether the individual “possessed the power to control the worker in question.”  The factors include whether the individual:  (1) had the power to hire and fire employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.  In the context of the FMLA, courts look to whether the individual “controlled in whole or in part plaintiff’s rights under the FMLA.”

In the Graziadio case, the Second Circuit held that the Director of Human Resources “appears to have played an important role in the decision to fire Graziadio” and “under the totality of the circumstances, [the Director of Human Resources] exercised sufficient control over Graziadio’s employment to be subject to liability under the FMLA.”  Accordingly, unless the parties reach a settlement, the case will proceed to trial with both the Culinary Institute and its Director of Human Resources as defendants.

This case stands as a stark reminder to human resource professionals involved in making decisions related to employee FMLA requests to proceed with caution and to strictly comply with the requirements of the FMLA when processing requests for leave.  If there is any doubt regarding the appropriate course of action, human resource professionals should consult with counsel.

Supreme Court upholds representative time study in don/doff class action

The U.S. Supreme Court’s decision this week in Tyson Foods, Inc. v. Bouaphakeo et al. came as a surprise to many observers, and has the potential to significantly influence the manner in which wage and hour collective and class actions are litigated going forward. We note that while the decision allowing for use of representative evidence in a donning and doffing class or collective action is not ideal, it is not as bad as it could have been. The Court did, after all, make clear that such evidence is permissible only if each plaintiff could have used the same evidence in an individual action. On the other hand, plaintiffs who clear that hurdle now will be permitted to rely on a time study conducted on a sample of class members to calculate an average donning/doffing time, which is then extrapolated to each member of the class — even if the actual time spent on the activity in question varies dramatically among employees and even if some of the class members failed to prove damages at all based on that time study. Cozen O’Connor offers a comprehensive analysis of the case, including several strategic lessons for employers, at (Jeremy Glenn, Cozen O’Connor)

New Overtime Regulations Closer to Final Roll-Out

On March 14th, the Department of Labor sent its final draft of the new regulations governing the white collar exemptions to overtime pay to the Office of Management and Budget.  The OMB’s review is the final step required for a regulation to be published and implemented.  Consequently, though the details are still “top secret,” the regulations’ release is more imminent.  The OMB’s review may take as long as 90 days, but the review period typically lasts between 30 to 60 days, and sometimes even less.

Once released, the regulations will likely go into effect 60 days thereafter.  Some pundits believe that the DOL is targeting Labor Day for an effective date, in which case, they will be published in final form before July 4th.  In order for the Administration to foreclose a rare but possible congressional override vis-à-vis the Congressional Review Act, they must be published by early July.  Though no one can accurately predict when they will actually be rolled out, based on this latest development it appears that they could be rolled-out as early as late April through early July.

The anticipated impact these regulations will have on employers will be widespread. The DOL appears primed to double the salary threshold for being exempt from overtime, and it may also redefine the types of duties employees may perform to qualify for the exemption.  For details, click here.  Employers may have to redesign their pay structures and reclassify employees from being exempt, to non-exempt.

Bottom line, employers should plan now to avoid being caught “flat-footed” by waiting and then only having 60 days to react.  Experienced counsel should be consulted to weigh options and to make sure all bases are covered.

The Proposed New Overtime Pay Exemption Rules: What’s the Latest Scoop?

For months, crystal balls have been working on overdrive trying to predict when the Department of Labor will roll-out the final version of the new white collar overtime pay exemption regulations and what will be in those regulations. While there is no way to accurately make these predictions, there have been some official comments a recently made about what could be expected, and it’s also not too late for employers to prepare for the new regulations even though the details are still uncertain.


First, as to when – the Secretary of Labor is on record saying that “late Spring” is the goal. During a meeting of the American Bar Association’s Federal Labor Standards Legislation Committee mid-winter meeting held this week, Patricia Smith, the Department of Labor’s Solicitor of Labor, suggested that if one is loose as to what constitutes “late Spring,” a realistic roll-out could be made “around late June or early July.”

What is a “roll-out,” though, is subject to some interpretation and a few procedural steps. First, before the final regulations are published, they must be reviewed by the Office of Regulatory Review.  The public will know when the DOL submits them to the ORR.  The ORR will then undertake its review, which usually takes about 30 days, and in the process, it may make final edits or even substantive changes.  During this period, interest groups will aggressively lobby the White House to urge that certain items be included or excluded in the rules they’ve yet to see.  If the early July roll-out is a good prediction, we should know that it’s before the ORR by late May or early June.  In any event, at that same ABA meeting, the Solicitor of Labor told the audience that the “final rule will not be identical to the proposed rule [of last July].”

Second, after the final regulations are rolled out, i.e., made public, there will have to be some time allowed before they become effective.  The conventional wisdom is that the window for these rules will be 60 days.  Longer periods have occurred as to some new regulations in the past, and employers are urging for more time to be allowed in this instance.  Given the political context, however, more time is not likely.  Specifically, new regulations are always vulnerable to congressional overrides vis-a-vis the Congressional Review Act.  Under the CRA, Congress has a 90-day period during which it may trump a regulation, subject to presidential signature or veto overrides.  Even though such congressional action has been rarely undertaken, let alone successful, to insulate against such a tactic needing presidential action after a new administration takes office in January, the Solicitor implied that the DOL will make sure that this period will close before the end of the year.


As proposed, the regulations would increase the minimum salary level required for salaried employees to be exempt, if they also satisfy one of the “duties tests,” from $455 per week (or $23,660 per year) to $970 per week (or $50,440 per year).  In addition, that salary level amount is proposed to annually adjust, but whether it will be indexed to the CPI or some other factor won’t be known until the regulations are finalized.

Further, while the proposed regulations do not include changes to the “duties tests” for exempt status, when it published the proposed regulations the DOL asked for comments on a few ways the duties tests also could be changed. For instance, the DOL invited comments as to whether the “California rule” should be adopted and applied to exempt employees, and thereby require them to solely perform their exempt duties for more than 50 percent of their workweeks, as opposed to the current rule that their exempt duties merely constitute their primary duties even if performed simultaneously with non-exempt duties.  On this point, the Solicitor of Labor said that some sort of change to the duties test, whether it be the adoption of the California rule or some other test, should not be ruled out as a potential outcome to the rulemaking process.  If this actually occurs, an uproar will likely occur, but the DOL is confident that its legal footing to do so is sound.


Employers should not take a “wait and see attitude.” Instead, they should engage in some serious planning in anticipation of the new rules.  For instance:

  • Positions should be reviewed to identify which employees or positions are vulnerable to being reclassified as non-exempt due to the new standards;
  • Options to increase salaries to retain their exempt status should be weighed;
  • If salaries are not to be increased, employers should consider the various ways as to how wages will be set and if schedules can or will be modified, to mitigate against the exposure to paying overtime premiums;
  • Communication plans should be developed to explain to employees why they are losing their exempt status and how to address the potential morale problems these changes may cause;
  • Plans for training employees being reclassified will need to be developed to make sure these former exempt employees will properly track their work time, not engage in pre- or post-shift work without authorization, not work during lunch, not use their smart phones while not scheduled to work, properly track their travel time, etc.;
  • Decisions will have to be made regarding whether employees who lose their exempt status will be impacted in terms of bonus plans, paid time off, and other benefits;
  • If employees impacted by the new regulations are covered by collective bargaining agreements are covered by collective bargaining agreements, strategies for either increasing their salaries to retain their exempt status, or converting them to non-exempt, may require negotiations;
  • Supervisors will have to be trained as to how to manage the schedules and timekeeping obligations of these reclassified employees; and
  • Plans for dealing with budgeting issues as triggered by the new rules, for not only the immediate roll-out, but also future years due to anticipated annual indexing, can be undertaken.

Waiting until the new regulations are finalized may not leave enough time to implement new structures and procedures during the short period anticipated before the regulations become finalized. The regulations, when finalized, could have significant impact on many employers and employees, and the more preparation done now, the better employers will be able to respond. Options exist with respect to many of the areas discussed above, and experienced wage and counsel should be consulted to assist in this planning process.

Record Number of FLSA Cases Filed In 2015

Many employers are well aware of the increasing number of lawsuits filed under the FLSA in recent years, including a significant increase in collective/class actions. There were a record number of FLSA cases filed in 2015 according to the latest statistics. When cases are filed in federal court, they are categorized by the type of case as well as the statute or claims brought in the case. In 2015, there were 8,954 new cases filed in federal court alleging either claims under the FLSA for unpaid minimum wage, overtime or both. These filings are up by nearly 900 cases from 2014. And, the total number of FLSA cases in federal courts has gone up 450% since 2000.

What has changed? In 2004, the Department of Labor issued new regulations covering the white-collar exemptions (executive, administrative, professional, outside sales and computer-related occupations). In addition to making changes to the salary levels required to meet the exemption, the DOL changed some of the regulations regarding the “duties” tests. This change prompted more litigation, as employees who used to be traditionally considered exempt raised claims for misclassification in one of these white-collar exemption categories. In addition, many employees are misclassified as independent contractors and bring claims for unpaid overtime as well as other employee benefits.

Now, cases include not only misclassification, but more and more cases also include “off-the-clock work.” These are cases where employers usually do not have complete time records to dispute the claims, as employees will often allege that they were required to report early, work through lunch or stay late and the only proof is anecdotal evidence. Other cases involve the so-called “regular rate” calculation where employees allege that the overtime payments did not factor all compensation received, such as bonuses or shift differentials. Since the FLSA permits a prevailing plaintiff to recover reasonable attorneys’ fees, many plaintiff’s attorneys carefully screen cases before filing them to ensure that even if they are stuck in protracted litigation, there is a high chance that they will get all of their fees as part of any settlement or verdict.

What this means for employers, especially when the DOL has published proposed regulations to increase the salary levels for the white-collar exemptions, is that an ounce of prevention is worth a pound of cure. It is important for employers to ensure that employees are classified correctly if they are indeed exempt. Job titles alone are rarely of any significance, as the job duties actually performed are what the DOL and courts will look at to determine proper classification. If employees are entitled to overtime and not exempt, employers need to be cognizant of the different rules for calculating the regular rate to ensure that all compensation is factored in for overtime purposes. Often, these types of cases can result in a very small payment of back overtime to employees, but if it is brought on a collective or class-wide basis, the overall costs can be significant. And, there is of course, liquidated damages in an equal amount and attorneys’ fee to add to cost of the claim.

Contact any one of the members of the Wage & Hour Defense Institute for further information about proper classification and payment of overtime both under the Fair Labor Standards Act and any applicable state law.

Paul Bittner, WHDI Member

California Minimum Wage Ordinances: Employers Cannot Rely on State and Federal Law Alone

California’s minimum wage increased to $10 per hour effective January 1, 2016. This is the second increase in just 18 months under legislation signed by Governor Jerry Brown in 2013. This latest increase to the statewide minimum wage is not the only one facing California employers. At least twelve cities across California have already enacted their own minimum wage ordinances – and several other cities are looking to follow suit.

To complicate matters more for business owners, HR and payroll administrators, and managers, several of these local ordinances also include posting and mandatory sick leave requirements (above and beyond California’s recently-enacted statewide sick leave law). This patchwork of laws creates an administrative quagmire for employers—particularly those with multiple locations across the state.

The twelve cities that have enacted local minimum wage ordinances are listed below, together with their applicable local minimum wage rates and known upcoming increases:


City Local Minimum Wage As of January 2016 Upcoming Increases in Near Future








(effective October 1, 2016)





$12.25/hour for

businesses with 55 or

fewer employees

$14.44/hour for

businesses with more

than 55 employees




$13/hour for

businesses with 55 or

fewer employees

$14.82/hour for

businesses with more

than 55 employees

(effective July 1, 2016)



Long Beach






Los Angeles



for businesses with

26 or more employees

(effective July 1, 2016)



for hotel workers




for business with

25 or fewer employees

(effective July 1, 2017)


Mountain View














Palo Alto











San Francisco







(effective July 1, 2016)



San Jose






Santa Clara












In addition to these cities, which all have active minimum wage laws, Sacramento has a minimum wage ordinance that goes into effect in 2017 and San Diego (via ballot referendum) and Pasadena are among the cities that are close to enacting their own minimum wage ordinances as well.

We will try to keep you posted and update this information regularly. Employers with workers in California should consult legal counsel to make sure they are complying not only with state law, but with any local wage and hour laws as well.

Court Holds California Law Does Not Require Apple to Pay Employees for Bag Checks

Last week a federal district judge in California granted summary judgment to Apple Inc. in a class action brought by employees who claimed they were owed unpaid wages under California law for post-shift security screenings, commonly referred to as “bag checks.” In an effort to deter employee theft of merchandise, Apple applied its bag check policy to employees who chose to bring bags, packages or Apple products to work. The court held the time was not compensable because employees could easily avoid bag checks by not bringing to work bags or other items included within the policy. The case is Frlekin v. Apple Inc., No. C 13-03451 WHA (lead) (USDC, N.D. Cal., Nov. 7, 2015).

The employees filed separate class actions (later consolidated) in July 2013, asserting claims for unpaid wages under the Fair Labor Standards Act (FLSA) and the laws of various states, including California. All claims other than those brought under California law were dismissed after the United States Supreme Court’s decision in Integrity Staffing Solutions, Inc. v. Busk, 135 S. Ct. 513 (2014), which held that time spent during mandatory security screenings was not compensable under the FLSA. The other state laws at issue in the case all mirrored the FLSA, so the case proceeded solely under California law. Earlier this year the district court certified a class consisting of employees who worked at Apple retail stores in California.

In last week’s decision, U.S. District Judge William Alsup denied the employees’ motion for summary judgment and granted Apple’s. Judge Alsup began his analysis by noting that California’s broad definition of “hours worked” includes both “the time during which an employer is subject to the control of an employer” and “the time an employee is suffered or permitted to work, whether or not required to do so.”

Reviewing a line of cases interpreting the “control” theory, the court concluded “the activity must be mandatory and not optional at the discretion of the worker.” In the case of Apple workers, the mandatory element was not met because any Apple worker could avoid bag checks by choosing not to bring to work any bag or other item subject to Apple’s search policy.

The court also found the time the employees spent waiting for or undergoing bag checks was not time they were “suffered or permitted to work, because the bag checks bore no relationship to the employees’ job responsibilities; they were merely waiting while managers or security guards conducted the searches.

While this case is a welcome development for employers, it is not likely to be the last word on the subject of post-shift security screenings. The employees may appeal, and even if the court’s decision stands it will not be binding on other courts, including California state courts. The decision will not be helpful to employers that require all employees to undergo security screenings, regardless of whether they bring to work bags, packages, or other item subject to search. Still, the decision will likely dampen the enthusiasm of the plaintiffs’ bar for filing class actions based on the theory that any time employees spend in security screenings automatically constitutes “hours worked” under California law.

Aaron BuckleyPaul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

Ninth Circuit Adopts California Supreme Court’s Iskanian Rule Prohibiting Enforcement of PAGA Waivers

Last week the Ninth Circuit Court of Appeals held that waivers of the right to bring representative actions under the California Labor Code Private Attorneys General Act of 2004 (PAGA) are unenforceable, essentially adopting the rule established in June 2014 by the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC. Prior to the Ninth Circuit’s decision, district courts in California had been divided on the issue, but most district courts deciding the issue had rejected the Iskanian rule.

The Ninth Circuit’s decision was in Sakkab v. Luxottica Retail North America, Inc., No. 13-55184 (9th Cir. Sep. 28, 2015). In that case, Shukri Sakkab filed a putative class action for unpaid overtime and inaccurate wage statements against his former employer, Luxottica Retail North America, Inc. After Luxottica answered and removed the case to federal court, Sakkab filed an amended complaint adding a representative claim for civil penalties under the PAGA. Luxottica then filed a motion to compel arbitration under the dispute resolution agreement contained in its Retail Associate Guide. The agreement purported to prohibit Sakkab from filing or participating in any “class-based” lawsuit or arbitration, “including any collective action” or “collective arbitration.” The district court granted the motion, holding Sakkab had waived his right to bring a class action or representative PAGA action, and ordering him to arbitrate his individual claims.

After the district court granted Luxottica’s motion and entered judgment, the California Supreme Court issued its Iskanian decision, ruling that PAGA waivers are unenforceable under California law.

On appeal, Luxottica argued the Federal Arbitration Act (FAA) preempts the Iskanian rule. In a 2-1 decision, the Ninth Circuit panel rejected the preemption argument. In reaching its decision, the panel majority explained that the Iskanian rule is a generally applicable contract defense that is not limited to arbitration agreements, and therefore falls within the FAA’s savings clause, which preserves generally applicable contract defenses providing they do not conflict with the FAA’s purposes. Next, the majority determined the rule does not conflict with the FAA’s purposes of (1) overcoming judicial hostility to arbitration and (2) ensuring enforcement of the terms of arbitration agreements, because PAGA claims can be arbitrated, and the Iskanian rule merely prohibits waivers of the right to bring representative PAGA claims in any forum.

In a lengthy dissent, Justice N. Randy Smith stated his view that the FAA does preempt the Iskanian rule, relying on a line of United States Supreme Court cases including AT&T Mobility LLC v. Concepcion, in which the nation’s high court held that class and representative action waivers in consumer contracts were enforceable, reversing a previous Ninth Circuit decision to the contrary.

For the time being, PAGA representative action waivers are not enforceable in either the state or federal district courts in California. But the issue isn’t entirely settled. Luxottica may seek en banc review in the Ninth Circuit, or seek review by the United States Supreme Court. In the meantime, employers should review their arbitration agreements with counsel and make adjustments if necessary.

Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA