Category: FLSA

Overtime Exemptions for New York Employers

Overtime Exemptions for New York Employers (Webinar)

On January 23, 2018, I presented a complimentary webinar on Overtime Exemptions for New York Employers. For those who couldn’t attend the live webinar, I’m happy to make it available for you to watch at your convenience.

In the webinar, I discuss the most common overtime exemptions under the Fair Labor Standards Act and New York law, including:

  1. Executive Exemption
  2. Administrative Exemption
  3. Professional Exemption
  4. Outside Sales Exemption
  5. Computer Employee Exemption
  6. Highly Compensated Employee Exemption

Don’t have time to watch the whole webinar right now? Click here to download the slides from the webinar.

Why You Should Watch This Webinar

Most New York employers must ensure compliance with both the New York and federal overtime laws. Improperly classifying an employee as exempt can result in huge financial liabilities. Employees can recover not only the amount of overtime pay they should have received, but also an equal amount in liquidated damages. Plus, they can recover their attorney’s fees from the employer.

Employers with as few as one employee may have to pay overtime unless an exemption applies! And not all salaried employees qualify for exemptions!

The Overtime Exemptions for New York Employers webinar walks you through the various components of each of these categories of exemptions, specifically noting federal and New York State distinctions.

Learn where the duties tests differ between the FLSA and New York law. Find out what happens if an employee is exempt under one law but not the other. Get predictions on what changes may be coming up!

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Outside Sales Exemption

Outside Sales Exemption – A Quick Guide for New York Employers

Most New York employers are subject to both federal and state minimum wage and overtime requirements. Usually, this means the employer must pay its employees at least the minimum wage for all hours worked and time-and-a-half for hours over 40 in a week. There are, however, many exceptions to these requirements. This post addresses the outside sales exemption under both the Fair Labor Standards Act (FLSA) and New York law.

Employers sometimes rely on the “outside sales” exemption to cover all categories of sales employees. But the “outside” component is critical for exemption. Sales employees who do not qualify under the outside sales exemption may still qualify for another exemption, such as the executive or administrative exemptions.

Learn more through this free webinar: Overtime Exemptions for New York Employers: What You Don’t Know CAN Hurt You!

FLSA Outside Sales Exemption

To qualify for the outside sales exemption under the FLSA (the federal minimum wage/overtime law):

  1. The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  2. The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Unlike the administrative, executive, and professional exemptions, the FLSA salary requirements do not apply to the outside sales exemption.

An outside salesperson must travel to customers, usually at their places of business or homes. Selling solely by phone, mail, or the Internet does not qualify as outside sales.

“Sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition. Promotional work that is related to the employee’s own outside sales or solicitation efforts qualifies as exempt work.

New York Outside Sales Exemption

The FLSA and New York outside sales exemptions are very similar.

Under New York State law, employees can be exempt from minimum wage and overtime requirements if they are customarily and predominantly engaged away from the premises of the employer and not at any fixed site and location for the purpose of:

  • Making sales;
  • Selling and delivering articles or goods; or
  • Obtaining orders or contracts for service or for the use of facilities.

Like the FLSA, New York has no salary requirement for outside sales employees. However, New York does require that commissioned salesperson have a written agreement establishing the terms of their compensation. For outside sales employees whose primary compensation comes through a salary or hourly wage, employers still must satisfy the State’s wage notice requirements.

Summary

In the past, this exemption covered more employees who actually went “door-to-door” or at least made home sales calls. Now, since most consumer purchases occur through the Internet, the exemption it is more prevalent among business-to-business sales employees.

But remember, the outside sales exemption only applies to certain employees whose actual job situations meet the requirements! Job titles do not automatically determine exemption, nor does the fact that the employee is involved in making sales.

Employers should periodically review employees’ job duties to determine whether they qualify for exemption.

To learn more, check out my related webinar: Overtime Exemptions for New York Employers: What You Don’t Know CAN Hurt You!

Unpaid Intern FLSA

When Are Unpaid Interns Employees Under the FLSA?

In 2010 the United States Department of Labor (DOL) issued guidance severely limiting for-profit companies’ ability to have unpaid interns. However, courts routinely rejected that rigid 6-part test.

On January 5, 2018, the DOL modified its approach, adopting the “primary beneficiary” standard favored by the courts.

Which test applies and the resulting analysis determines whether a company violates the Fair Labor Standards Act (FLSA) by not paying interns minimum wage and overtime.

Unpaid Interns – 2010 DOL Test

Since 2010, the DOL had taken the position that a for-profit business must pay its interns unless all of the following 6 criteria apply:

  1. The internship is similar to training received in an educational environment.
  2. The experience is for the benefit of the intern.
  3. The intern is not a substitute for regular employees and works under close supervision of existing staff.
  4. The employer derives no immediate advantage from the intern’s activities.
  5. The intern isn’t guaranteed a job at the conclusion of the internship.
  6. Both the employer and the intern understand that the intern is not entitled to pay for the time spent in the internship.

“Primary Beneficiary” Test

In 2015, the United States Court of Appeals for the Second Circuit rejected the DOL’s 2010 test. Instead, it analyzed the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship.

Now, the DOL formally adopts the Second Circuit’s 7-factor analysis in a new Wage and Hour Division Fact Sheet. The seven factors are

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL emphasizes that “Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

Unpaid Interns Under Other Laws

The U.S. DOL’s position relates to whether an intern qualifies as an “employee” under the FLSA. It does not necessarily decide the question under other laws, including state minimum wage and overtime laws.

For example, the New York Department of Labor has adopted the 6 factors previously used by the U.S. DOL and adds these 5 additional factors of its own:

  • Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity.
  • The trainees or students do not receive employee benefits.
  • The training is general, and qualifies trainees or students to work in any similar business. It is not designed specifically for a job with the employer that offers the program.
  • The screening process for the internship program is not the same as for employment, and does not appear to be for that purpose. The screening only uses criteria relevant for admission to an independent educational program.
  • Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

What Should Your Company Do About Unpaid Interns?

First, remember that the above pertains to for-profit companies. Non-profits and governmental organization have more leeway. But if you are a for-profit company, you still shouldn’t rely solely on this information in deciding whether you can use unpaid interns.

Since the DOL’s new position follows several appellate courts, it seems to be reasonably safe guidance regarding minimum wage and overtime under the FLSA. But even at the federal level, other laws could still apply to unpaid employees. For example, anti-discrimination laws may still apply, including those requiring reasonable accommodations based on disability or religion. And, in some cases, a union that represents your employees might claim to represent individuals you classify as employees.

Plus, at the state level, there is not only the minimum wage/overtime issue. You must also consider the impact of employee benefit programs, including unemployment, workers’ compensation and other state-mandated coverages.

Overall, for-profit employees should start by assuming that anyone working for them is an employee. They should only treat workers differently if there is a clear exclusion, e.g., valid intern or independent contractor. An experienced labor and employment attorney can assist in making that determination.