Texas Employment Law Update : Texas Employment Lawyer & Attorney : Russell D. Cawyer : Kelly Hart & Hallman Law Firm : Dallas TX Labor Updates

Last year I wrote about the risks associated with providing company issued cell-phones or PDA's to nonexempt employees.  Since that post, there continues to be lawsuits filed seeking unpaid overtime for the off-the-clock time nonexempt employees spend reading and responding to work-related e-mails.  The most recent example is that of a police sergeant for the City of Chicago who filed a collective action on behalf of all similarly-situated police officers who were provided PDA's by the City and who were required to review and respond to work-related e-mails after hours.  A copy of the complaint can be downloaded here.

Company's providing their non-exempt employees with PDA's should carefully review their policies and procedures to ensure that they have defensible positions in the event they are confronted with an overtime suit based on the time spent reading and responding to e-mails after hours.  Some considerations that I proposed last summer include:

• Do not provide nonexempt, hourly employees with company issued phones capable of reading or responding to e-mail (i.e., smart phones). 
• Purchase a technology solution that captures the amount of time the user spends reading and responding to e-mail and pay nonexempt employees for that time.
• If the employer does not intend to pay for this off-hours review of e-mails, it should clearly set out its expectations that employees should not read and review those messages outside regular work hours.  For example, implement policies that prohibit employees from reading and responding to e-mails outside of regular working hours; require employees to leave company issued smart-phones at work; require employees to program the smart phones to turn themselves off during non-working hours. 
• Limit the employees that are provided with company issued cellphones to those who have a legitimate business need to be routinely contacted outside of business hours and limit that outside contact for matters where it is necessary.
• Pay employees who submit time for the non-business hours review of e-mail and then discipline the employee for violating the employer's policy prohibiting business use of company cellphones outside working hours (if the employer has implemented such a policy).

Employers need to be proactive to ensure that the efficiencies provided by technology are not swallowed by the inconvenience and costs associated in the defense of overtime lawsuits

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Lawyers prosecuting and defending wage and hour misclassification cases (i.e., exempt/nonexempt and employee/contractor) will emphasize how fact intensive these inquiries can be.   The importance of factual distinctions in litigating misclassification cases is demonstrated by two cases recently decided by the Fifth Circuit.  In Cromwell v. Driftwood Electrical Contractors, a panel of the court of appeals held that workers performing cable splicing work in New Orleans were not independent contractors and were employees entitled to overtime.  Contrast Cromwell with Thibault v. BellSouth, where a different panel of the court concluded that a cable splicer performing the same work in the same geographic area under similar circumstances, was an independent contractor not entitled to overtime.  This table summarizes some of the relevant facts in Cromwell and Thibault. 

Despite the similarities of the work, subtle differences in the facts resulted in different outcomes.  In misclassification cases over overtime exemptions or employee/contractor status, facts matter.

Full copies of Cromwell and Thibault can be accessed here and here.

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Recently I wrote about the risks posed by misclassifying employees as independent contractors.   In an unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit (the federal appellate court that hears appeals from Texas) reversed a summary judgment awarded in favor of a company that had classified two cable splicers who performed post-Katrina telecommunications repair work for an AT&T contractor as independent contractors.  In reversing the judgment for the company, the Court remanded the case to the trial court for a determination of the damages the "employees" are entitled to recover.  A copy of the opinion can be accessed here.

Two cable splicers brought an action under the Fair Labor Standards Act seeking unpaid overtime that they were not paid due to their classification as independent contractors rather than employees.  The individuals worked for the Driftwood Electrical Contractors for 11 months following Huricane Katrina.  Theyworked twelve days on and one day off.  Twelve-hour days were the norm.  They were paid a fixed hourly wage for their work.  Each day they reported to the BellSouth location to receive their assignments unless they had not completed their jobs from the prior work day. They were given prints describing the type of work needed and were instructed by BellSouth supervisors to follow certain general specifications.  Neither cable splicer was trained by BellSouth or Driftwood and the splicers controlled the details of how they performed their assignment.  During this 11 month period, the splicers worked exclusively for the Driftwood Electrical.

To emphasize how fact intensive the independent contractor/employee analysis is, consider the following:  the cable splicers provided their own trucks, testing equipment, connection equipment, insulation equipment and hand tools totaling $16,000 and $50,000 in value.  They were also responsible for their own vehicle liability insurance and employment taxes.  The company, on the other hand, provided workers' compensation insurance and liability insurance for the cable splicers' work.

It appears that the most significant aspect in the Court's determination that the individuals were employees rather than individual contractors was the fact that they worked exclusively for the company for 11 months rather than in a temporary, project-by-project, on-again-off-again relationship.  Consequently, the Court concluded that as a matter of economic reality, the cable splicers were economically dependent on the company they worked for and were not in business for themselves.  Therefore, they were employees rather than independent contractors and were entitled to be paid overtime for their work.   

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Employees frequently stay connected with work through company issued smart phones.  Smart phones, like the iPhone, Blackberry, and Treo, allow employees to have access to their work e-mails, calenders and contacts --in addition to making and receiving calls.  In my practice, a smart phone is incredibly useful in staying in touch with my client's needs when I'm in court or out  of the office.  However, with every advance in technology, come employment law challenges.

As recently reported in the WSJ.com, several lawsuits have been filed seeking damages for unpaid work time spent reading and responding to e-mails and customer complaints outside of regular business hours.  For example,T-Mobile USA Inc. was sued in July 2009 by three current and former employees for unpaid working time claiming they were required to use their T-Mobile issued phones to read and respond to message outside of working hours. (View the Complaint here).  In March 2009, CB Richard Ellis Group, Inc. was sued by a maintenance worker for unpaid work time after hours that included reading and responding to e-mails on his company-issued smart phone.  (View the Complaint here). 

Jon Hyman at the Ohio Employer's Law Blog argues that even if employees use smart phones for isolated and sporadic short-term reading and responding to business e-mails, that time is not necessarily compensable time.   Hyman argues that:

Most messages can be read in a matter of seconds or, at most, a few short minutes.  The Fair Labor Standards Act calls such time de minimus, and does not required compensation for it.  "Insubstantial or insignificant periods of time beyond the scheduled working hours, which cannot as a practical administrative matter be precisely recorded for payroll purposes, may be disregarded."

Hyman's point is a good one; however, can this time be precisely recorded for payroll purposes?  Redwood Technologies, for example, has a smart phone application (Momentum) that allows the user to capture time spent reading and responding to e-mails and time spent on the telephone.  It allows the user to allocate that time to different client accounts.  Although this same technology could be used by employers to capture the time nonexempt, hourly employees spend reading and responding to e-mails.  This may not resolve the administrative impracticality of determining which e-mails are personal or business related, I suppose that there are applications out there which would allow an employer to capture this time if it was so inclined. 

While is remains to be seen whether the time spent reviewing and responding to e-mails outside of normal business hours will be recoverable in an FLSA lawsuit, some commentators have suggested implementing polices to either pay employees for this time or to prohibit (by policy) employees from using company issued smart phones outside of working hours.  The following is a menu of options employers may consider in deciding how to deal with the issue of providing company issued smart phones to nonexempt, hourly employees. 

• Do not provide nonexempt, hourly employees with company issued phones capable of reading or responding to e-mail (i.e., smart phones). 
• Purchase a technology solution that captures the amount of time the user spends reading and responding to e-mail and pay nonexempt employees for that time.
• If the employer does not intend to pay for this off-hours review of e-mails, it should clearly set out its expectations that employees should not read and review those messages outside regular work hours.  For example, implement policies that prohibit employees from reading and responding to e-mails outside of regular working hours; require employees to leave company issued smart-phones at work; require employees to program the smart phones to turn themselves off during non-working hours. 
• Limit the employees that are provided with company issued cellphones to those who have a legitimate business need to be routinely contacted outside of business hours and limit that outside contact for matters where it is necessary.
• Pay employees who submit time for the nonbusiness hours review of e-mail and then discipline the employee for violating the employer's policy prohibiting business use of company cellphones outside working hours (if the employer has implemented such a policy).

If the lawsuits referenced above conclude with successful results for the employees (or in class certification), employers can expect to see many more of these kinds of cases filed. 

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Following a GAO report that concluded that the Department of Labor inadequately investigated complaints from low-wage and minimum wage workers who claimed that their employers failed to pay the federal minimum wage, required overtime, and failed to pay employees their last paycheck the DOL has reacted. 

This week, Secretary of Labor Hilda Solis  announced that the DOL Wage and Hour Division would increase the number of investigators at its field offices by 150 to refocus the department on its enforcement responsibilities.  Since Texas has three field offices of the forty-five nationwide, on a prorata basis, Texas could see a net increase of ten investigators.

Additionally, Secretary Solis announced the intent to hire 100 new investigators to enforce the compliance of contractors receiving assistance under the American Recovery and Reinvestment Act. This renewed emphasis on enforcement efforts and an increased number of investigators will undoubtedly result in more frequent and active DOL investigations.  Texas employers should ensure that their classifications of employees as exempt are accurate and that their pay practices comply with the Fair Labor Standards Act to avoid being targeted by a more active DOL.

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