by Judith E. Kramer, Fortney & Scott, LLC

The U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) has a confirmed administrator (finally!), and several recent decisions are of interest to employers.

David Weil confirmed as WHD administrator

For the first time since 2004, the WHD has a confirmed administrator. On April 28, the Senate confirmed David Weil, a professor of economics at Boston University, to head the agency that enforces the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Davis-Bacon Act, and the Service Contract Act, among other laws.

In May 2010, Weil issued a report, commissioned by the WHD, titled "Improving Workplace Conditions Through Strategic Enforcement." The report made recommendations that have become the playbook for this administration's enforcement of the FLSA: It recommended that the WHD focus its attentions on industries with large concentrations of vulnerable workers, where the workforce is particularly unlikely to step forward, and where the agency is likely to be able to change employer behaviors in a lasting and systemic manner.

The report also recommended the following features of a strategic enforcement plan:  

1. The WHD should pursue strategies that focus on the top of industry structures, on the companies that affect how markets operate, and on many of the incentives that ultimately affect compliance.
2. It should enhance deterrence at the industry and geographic levels through, among other things, the collection of liquidated damages and expanded litigation.
3. It should better integrate complaint and directed investigation activity by, for example, reaching out to the worker advocate community.
4. It should enhance the impact of its enforcement activities by, for example, creating new monitoring activities.

We anticipate that Weil's arrival at the WHD will reenergize an already very active agency.

Including per diem payments in regular rate

Under the FLSA, nonexempt employees must be paid overtime for hours worked over 40 in a workweek at the rate of one and a half times their regular rate. When employees are paid an additional amount per diem, that amount can either be excluded from or counted as a part of the regular rate, depending on how the payments are made.

The FLSA provides that the regular rate doesn't include "reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer's interests and properly reimbursable by the employer; and other similar payments to an employee which are not made as compensation for his hours of employment." Thus, if payments are based on the number of hours worked, they must be included in the regular rate when calculating overtime compensation.

In Newman v. Advanced Technology Innovation Corp., two employees signed employment agreements by which they were paid an hourly wage, an overtime rate more than one and a half times that hourly wage, and a "per diem expense reimbursement" in light of their remote work assignments. The employees were eligible for that payment for each day actually worked, with a per diem paid for Saturdays and Sundays if work was actually performed on those days or on the immediately preceding client workday.

The U.S. 1st Circuit Court of Appeals held that since the only factor that mattered in calculating the weekly per diem was the number of hours worked, it must be included in the employees' regular rate.

Court orders DOL to pay attorneys' fees

A federal court has ordered the DOL to pay $521,812.94 in attorneys' fees as well as paralegal fees and travel expenses incurred by a company in defending against a suit filed by the agency alleging that it had improperly classified guards as independent contractors and violated the FLSA in their compensation.

In a declaratory judgment action filed by the company, a federal court in Texas ruled last year in Gate Guard Services L.P. v. Solis that the guards were properly classified as independent contractors rather than employees. The company then sought attorneys' fees from the DOL under the Equal Access to Justice Act (EAJA), and in a recent decision, the court granted the company's request.

Under the EAJA, the court is required to grant attorneys' fees to a prevailing party against the United States unless there are special circumstances that make the award unjust or the government can show it was substantially justified in its legal position. The court found that the DOL's actions were unreasonable — i.e., not substantially justified — during both the administrative investigation of the company and the judicial proceedings.

The WHD investigator determined that the company had violated the FLSA without conducting a fair and thorough investigation, began calculating back wages before conducting interviews of the guards, and shredded or burned all of the interview notes. Then, once the DOL filed suit, its attorneys unreasonably fought the transfer and consolidation of its enforcement action with the company's earlier- filed declaratory judgment action, stonewalled the company by objecting to nearly every question asked at a deposition, and repeatedly withheld evidence based on the government informant privilege.