Jonathan A. Segal

Case: Sandifer v. United States Steel Corporation

Background:  As a general rule, the FLSA requires employers to pay their employees for time spent changing into required protective clothing/gear at work.

Statutory Exception: Section 203(o) of the FLSA provides that time spent changing clothes or washing at the beginning or end of each workday may be excluded from compensable time if it is treated as non-work time by a collective bargaining agreement.

Key issue in the case: does protective gear constitute clothing subject to the statutory exception?

Monday’s Supreme Court decision: In construing section 203(o), the Court came up with its own definition of clothes, finding protective gear falling within it: “Dictionaries from the era of §203(o)’s enactment indicate that ‘clothes’ denotes items that are both designed and  used to cover the body and are commonly regarded as articles of dress.”

Limitation of decision: opinion interprets FLSA provision that applies only to union employees under collective bargaining agreement. Further, many  state laws do not include a  provision comparable to the exclusion under the FLSA so the potential benefit of the decision will not even be available to all unionized employers.

So, be careful of headlines that suggest a broader reach than the decision itself.

A more detailed alert to follow.

This short alert does not constitute legal advice, is not applicable to factual situations and does not establish attorney-client relationship. 

About Jonathan A. Segal
Jonathan A. Segal is a partner at Duane Morris LLP in the Employment Group. He is also the managing principal of the Duane Morris Institute. The Duane Morris Institute provides training for human resource professionals, in-house counsel, and other leaders at client sites and by way of webinar on myriad employment, leadership labor, benefits and immigration topics. Jonathan has served intermittently as a consultant to the Federal Judicial Center in Washington, D.C. for more than 20 years, providing training on employment issues to federal judges around the country. Jonathan also has provided training on harassment on behalf of the EEOC as well as providing training on diversity to members of the United States intelligence agencies. Jonathan is also frequently a featured speaker at national, state and local human resource, business and legal conferences, including conferences sponsored by the Society for Human Resource Management and the Pennsylvania State Chamber of Business and Industry. Jonathan’s practice focuses on maximizing compliance and minimizing legal risk. Jonathan’s particular areas of emphasis include: equal employment opportunity in general and gender equality in particular: social media; wage and hour; performance management; talent acquisition; harassment prevention and correction; and non-competes and other ways to protect your business. You can find him on Twitter @Jonathan_HR_Law .
Natalie F. Hrubos

If you’ve got kids, grandkids, nieces or nephews in the age range of 7 to 12, you may have found yourself in search of a certain toy loom this past holiday season, or perhaps you received a lovely loom bracelet as a holiday gift. For those of you scratching your heads, this “loom” is a plastic, rectangular toy with hooks that kids (well, anyone) can use to make bracelets (and other jewelry items) out of colorful little rubber bands.

Loom bracelets are now everywhere. In fact, I’ve spotted colleagues sporting these bracelets in the office. My niece made me three: a starburst, a triple single and a butterfly. As she was churning them out, I commented: “you should charge for each bracelet.” Later, I thought: was I suggesting a piece-rate or commission-based compensation structure? There’s a big difference. Certain employees paid by commission are exempt from the FLSA’s overtime requirements. Employees paid on a piece-rate basis are not.

There’s a three-part test to qualify for the FLSA’s “commission exemption,” and, not surprisingly, one requirement (among others) is that the employee must be paid by “commission.” A recent district court case from the Northern District of Illinois provides some guidance what it means to be paid by commission. The case, Alvarado et al. v. Corporate Cleaning Service, Inc. et al, involved 24 current and former window washers seeking overtime pay, and the ultimate issue was whether the window washers were paid by commission or on a piece-rate basis.

The court said they were paid by commission because, in a commission-based system, “a sale is a precondition for the worker getting paid,” and, here, “the window washers can count on compensation only when a sale is made.” The court acknowledged that it was “less obvious” that the washers were paid by commission because they were one step removed from sales and had no control over whether a sale was made; however, the court said that an employee’s compensation can depend on sales even if the employee is not directly involved in sales.

The Alvarado court illustrated the distinction as follows (except that the court’s illustration involved a quilt maker, not my niece): Imagine that my niece has a contract to supply her colorful rubber band bracelets to a gift shop, and the shop will automatically pay her each time she provides a rubber band bracelet, regardless of whether a customer in turn buys that bracelet from the shop. To be sure, over time, the shop might tell my niece to make fewer rubber band bracelets if customer demand decreases. But in the end, my niece will still be paid for each bracelet made, instead of being paid for each bracelet sold by the gift shop.

Getting paid for each bracelet made is getting paid on a piece-rate basis whereas getting paid for each bracelet sold is getting paid on a commission basis (even if the employee getting paid had nothing to do with the actual selling).

The take-away here is that employers in retail and service industries may want to take a second look at their compensation structures to determine whether certain employees are getting paid by commission (even if in a “less obvious” way) and, if so, whether they qualify for the FLSA’s commission exemption. For those employers thinking about reclassifying their own rubber band bracelet makers (or any other employees) as exempt, be sure to consult an attorney before making changes to discuss the legal risks as well as to consider other jurisdiction-specific issues including applicable state law.

This blog should not be construed as legal advice, as pertaining to specific factual situations or as establishing an attorney-client relationship.

About Natalie F. Hrubos
Natalie F. Hrubos represents and counsels management clients in all aspects of labor and employment law. Her litigation experience ranges from single plaintiff employment discrimination cases to multi-state wage and hour class and collective actions. Ms. Hrubos also counsels and trains management on a wide range of employment law matters, including wage and hour compliance, personnel policies and procedures, and diversity and inclusion initiatives.