While the industry awaits a Supreme Court decision on the outside sales exemption, the Seventh Circuit ruled last week that the administrative exemption applies to pharmaceutical representatives.  The Ninth Circuit did not consider this, but the Second Circuit rejected this exemption too.    If the Supreme Court holds that the outside sales exemption does not apply, the applicability of the administrative exemption will take on heightened importance.

In the past, the administrative exemption has been a black hole due to its imprecise parameters.  The primary duty of administrative-exempt employees must be “performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers” and must include “the exercise of discretion and independent judgment with respect to matters of significance.”  The imprecision of these terms led many employers to treat far too many employees as exempt under this rule.  But the imprecision of this exemption saved the employer in the Seventh Circuit pharmaceutical case, where the court found the exemption applied because the employees marketed the employer’s business and exercised meaningful discretion in how they tailored the message, even though their marketing efforts were scripted by the employer and constrained by government regulation.  Only time will tell whether other circuits and the Supreme Court embrace this approach.

Employers seeking to treat employees as exempt under the administrative exemption should proceed with caution.  The law in this area is not well settled, and even innocent mistakes can cost millions.  And, scrutiny is up among administrative agencies, including state and federal labor departments.  Before determining that employees are exempt, particularly under the administrative exemption, employers should consult with counsel experienced in wage-and-hour issues.  While the administrative exemption may spare the pharmaceutical industry, you must independently assess how it will apply to your employees.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage-and-hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.

Hiring should focus on the applicant’s qualifications, not pregnancy, child care, or other family issues.

Assumptions and stereotypes are dangerous.  Not all women take on caregiving roles at home.  Nor do men necessarily lack caregiving responsibilities.  Avoid sex discrimination claims by recognizing the individual needs of your employees.

Parental status is a protected class under many state laws.  Have you checked yours?

Pregnancy is a protected status under federal law and many state laws.  Pregnancy-related disabilities are covered by the Americans with Disabilities Act.

You should be aware of all the state and federal laws that deal with caregiving responsibilities, often indirectly.  For example, Connecticut’s new medical marijuana law prohibits discrimination against certain caregivers and its new sick leave law allows time off to care for a parent, spouse, or child.  The Americans with Disabilities Act prohibits discrimination against individuals who are associated with a person with a disability.

Men can bring sex discrimination claims when they do not receive the same benefits as women for caregiving issues.

Over half of married mothers with children under age 6 are employed.

The Fair Labor Standards Act was recently amended to provide breastfeeding breaks for nursing mothers.

HR Audits should be used to reveal disparities you did not realize existed.  Consider whether employees with caregiving responsibilities are being hired, promoted, and paid on par with other employees.

Employees who have sued for issues related to family responsibilities have a higher success rate in court than employees who sue for most other employment issues.

Review your employee handbook with an eye toward disability and leave policies.  Make sure they are written and implemented in a non-discriminatory manner.

Single people have complained about the scheduling flexibility employers have given to married workers to handle family responsibilities, but this has not evolved into a significant legal concern for employers.  Nonetheless, to boost morale among all employees, consider that single people may have caregiving responsibilities not covered by your policies (e.g. for an elderly aunt or a disabled neighbor) or that they may be resentful of being asked to take on extra responsibilities due to family responsibilities of others. 

Daycare costs are one of the top reasons parents choose not to return to work after the birth of a child.  Some companies provide on-site daycare or discount vouchers as a way to retain their employees.

Assessing employees by results rather than “face time” helps provide flexibility, while holding all employees accountable for their output.

Your obligation under the Family and Medical Leave Act to allow leave to care for a child extends to employees who act as parents, even if they are not the child’s actual parents.  Examples are grandparents caring for grandchildren or Opie’s Aunt Bee from The Andy Griffith Show.

Brody and Associates regularly advises management on complying with the latest state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.

Misclassification occurs when an employer treats a worker as an independent contractor, even though the worker is actually an employee.  The DOL has made this a top priority, seeking $3.8 million and 35 full-time workers to fight misclassification in its 2012 budget proposal.  It costs the government tens of billions of dollars in lost tax revenue, so these agencies have a huge incentive to zealously pursue cases against employers.  

Properly classifying a worker as an “employee” or “independent contractor” is a complicated task.  Different agencies use different tests and no single factor controls.  The tests use a multitude of factors (the IRS looks at 20!), and the tests change over time.

If you wish to hire independent contractors, you should review the tests from different agencies at the state and federal levels and make an honest assessment of the situation.  You should also consult with counsel knowledgeable about this area, particularly if you plan to hire many workers of this type.  An attorney can help determine the correct status of the worker and may draft an “independent contractor agreement” to help protect you if you get audited.  Such an agreement should set forth facts supporting your determination.  However, you cannot transform an employee into an independent contractor by agreement.  If your situation remains unclear, you can request an agency opinion in advance, but remember that different agencies use different tests. 

Finally, using an attorney may help you avoid creating documents that the government can obtain from you which confirm the weakness in your determination that the worker is an independent contractor, i.e., the “smoking gun.  For example, if your HR Director writes your President a memo explaining why the classification may be wrong, and the government sees that memo, it is hard to argue you didn’t know the classification was questionable or, worse yet, simply wrong.  However, if your attorney creates such a document, it is unlikely you will have to produce it to the government as your attorney will claim it is a privileged attorney-client communication. 

While your prospective decisions are a concern, a bigger issue is what you should do if you may have already misclassified employees as independent contractors.  Conduct an internal audit to reconsider old decisions, but be prepared to act on your findings.  If you have already misclassified workers and are not currently being audited, consider the IRS’s Voluntary Classification Settlement Program, which can reduce your liability without triggering an audit.  Being proactive can help you avoid the administrative agency triple threat.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.

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