The Lost Art of the title is the ability of a number of Federal agencies to distinguish between “exempt” and “nonexempt” positions under the< Fair Labor Standards Act (FLSA), at least in the view of some arbitrators, and then to effectively manage the overtime of non-exempt employees. The Raiders are self-described “overtime attorney” Michael J. Snider and his law firm, Snider & Associates. They have successfully represented Federal unions in numerous grievances alleging that significant numbers of bargaining unit employees have been categorized erroneously as exempt under the FLSA.
In an admittedly rare coincidence, I actually do know a little bit about the FLSA. More accurately, I used to know something about it. As a classifier and a manager of classification programs for many years, I did or reviewed a large number of FLSA designations, making my best effort to comply with the Office of Personnel Management’s (OPM) guidance. In fact, in the early days after the Civil Service Reform Act, I conducted FLSA training for classifiers and other Human Resources (HR) specialists – at the request of OPM.
To the best of my limited recollection, the OPM guidance in those days was quite mechanistic. Basically, if the position was properly classified at or above GS-9, it was designated exempt. Any positions classified below that level were considered nonexempt.
A friend recently sent me cyberFEDS notes on a number of arbitration decisions which had gone against Federal agencies, resulting in tens of millions of dollars in overtime payments to bargaining unit employees who were found to have been wrongly designated as exempt from the FLSA. One law firm, Snider & Associates, had represented the unions in virtually every successful case, and was clearly earning astronomical legal fees for doing so. The overtime and associated costs paid by multiple Federal agencies in arbitration decisions or in settlements reached by the parties was truly staggering.
Here are just a few examples:
- Department of Housing and Urban Development (HUD). The American Federation of Government Employees (AFGE) and the National Federation of Federal Employees (NFFE) settled an FLSA overtime grievance with HUD when the agency agreed to hand over $24 million in backpay.
- Small Business Administration (SBA). AFGE Council 228 settled a grievance with SBA over FLSA overtime exemptions and pay under the FLSA for $7.6 million to compensate an estimated 1,800 active, retired, deceased and separated employees
- If my calculations are correct, the settlement amounted to just under 1% of SBA’s FY-2009 operating budget.
- Department of Army. AFGE Local 1770 settled an FLSA overtime grievance with Fort Bragg, North Carolina, for $4.1 million, and NFFE Local 273 and Fort Sill, Oklahoma, settled an FLSA overtime grievance for $850,000.
- Department of State. NFFE 1998 settled a class action complaint against the Department of State’s Passport Agency, winning hundreds of thousands of dollars in backpay and damages plus attorney fees, according to Sniderlaw.com.
Many other Federal agencies have had FLSA overtime grievances filed against them by unions represented by Snider & Associates. They include:
- Army Corps of Engineers; Bureau of Indian Affairs; Environmental Protection Agency;
- Department of Labor; Department of Education; Indian Health Service; General Services Administration; Bureau of Land Management; and Department of Agriculture.
If your agency is not already included in this list, don’t be surprised if it is sometime soon. And when there are no bargaining units left to represent, I have to assume Snider & Associates will start focusing on unrepresented groups of employees.
Background: Two major laws govern overtime pay and related matters in the Federal sector – the Fair Labor Standards Act (FLSA) and Title 5. The Office of Personnel Management (OPM) administers the FLSA via regulations that are contained in Part 551 of the Code of Federal Regulations (CFR), while Title 5 overtime pay is addressed under Part 550 of the CFR.
I will start by contrasting the FLSA’s “suffered or permitted” overtime, which is to say work that is allowed by the agency, with overtime under Title 5, which must be specifically directed, ordered or approved.
OPM regulations state that “Each employee is presumed to be FLSA nonexempt unless the employing agency correctly determines that the employee clearly meets the requirements of one or more of the exemptions of this subpart and such supplemental interpretations or instructions issued by OPM.” and that “The burden of proof rests with the agency that asserts the exemption.”
The three basic categories of exempt positions are executive, administrative, and professional.
According to Sniderlaw.com and the website of Washington, D.C., law firm Woodley & McGillivary, there are six primary differences between FLSA and Title 5 overtime:
- Weekend travel: Employees covered by the FLSA are entitled to be paid for travel on weekends if the travel cuts across the same hours as their administrative work hours. In contrast, FLSA-exempt employees receive no pay for weekend travel, except in very limited circumstances.
- Maximum earnings limitation: There is no maximum earnings limitation under the FLSA. Under Title 5, employees cannot earn more money than the maximum level of GS-15 overtime in a particular pay period.
- Pay rate: FLSA-exempt employees receive overtime at the rate of time and one-half the GS-10,
step one, pay rate, or their straight time hourly rate, whichever is higher.FLSA nonexempt employees receive overtime pay at one and one-half times their true hourly rate, which includes other types of premiums, such as Sunday or night shift premium pay that the employee has received that pay period. Under Title 5, the overtime rate does not include these premiums.
- Compensatory time: Under the FLSA, nonexempt employees are entitled to choose between cash overtime pay and compensatory time off or credit hours. Exempt employees, however, can be required to accept compensatory time or credit hours in lieu of overtime pay. Nonexempt employees who choose compensatory time but miss the deadline for its use must be paid in cash.
- Liquidated damages: Employees can recover double damages (called liquidated damages), backpay, attorney’s fees and costs in an FLSA case. In a Title 5 pay case, employees can only obtain backpay, interest, and attorney’s fees and costs.
- Statute of limitations: The statute of limitations in FLSA cases is two years, which is extended to three years in cases where the employer willfully violated the law. The statute of limitations in Title 5 cases is six years.
What has gone wrong? From my perspective, just about everything. I’m pretty sure that when Congress came up with the definition of suffer or permit, it had no idea that the agencies would be suffering this much. I don’t see there being one or two causes for agencies losing at arbitration or having to settle, but multiple reasons, to wit:
Problem: OPM guidance has not kept up with evolving FLSA case law.
I have been hearing different theories from HR colleagues on this issue. The predominant thinking seems to be that OPM’s guidance on FLSA determinations really has not kept up with case law developments in recent years, and that OPM has not exerted any kind of leadership in helping agencies address this financial crisis which is spreading from agency to agency; instead, OPM has maintained a very low profile on this very high-profile issue.
Perhaps, you are thinking, OPM has so many initiatives going at the moment, such as staffing reform, that it simply isn’t aware of the FLSA grievances. Au contraire. One of the cases Mr. Snider filed, on behalf of AFGE Local 32, was against OPM! The union and the Office of Personnel Management settled this FLSA overtime case, with the “overtime attorney” winning nearly half a million dollars in backpay and damages and attorney fees.
One of my friends, a long-time HR professional, has suggested an alternative theory based on what he has heard in his agency – that the main problem is not OPM’s guidance but agencies either ignoring the guidance or not paying adequate attention to the task of categorizing positions under the FLSA.
I suspect that both of those theories have some merit.
I also think OPM’s website could and should be used as a vehicle to alert agencies as to situations like this – meaning the FLSA grievances against so many different Federal agencies – and to let agencies know about the latest OPM guidance in that area.
OPM is the lead Federal HR agency, with responsibility, according to its own Strategic Plan for 2002-2007, for providing “human capital leadership and services for all agencies, in a manner that blends and balances flexibility and consistency across Government.” Accordingly, I keep looking on its website, opm.gov, for references to the unfolding crisis in FLSA overtime, but haven’t found such information under its “HR Practitioners/Agencies” section or anywhere else.
Potential Solution: Agency heads and/or Human Capital Managers may want to ask OPM to update its guidance to agencies on FLSA designations, and to highlight new developments, such as grievance arbitration decisions or settlements, on its website.
Problem: Agencies apparently continue to designate too many positions as exempt when they should be nonexempt.
Based on the success of the unions which have been represented by the Snider & Associates, Woodley & McGillivary, and other law firms in FLSA cases, it would be hard to argue otherwise with a straight face, or to avoid characterizing it as the number one concern in this situation.
Contributing to this problem, I believe, is that many agencies have reduced the number of classifiers as part of a general downward trend in the number of HR staff, and a significant number of senior classifiers have retired or otherwise left the Federal Government in recent years, often resulting in smaller and less experienced cadres of classifiers.
Potential Solutions: One HR colleague recommends that agencies simply designate all positions nonexempt and manage the employees’ time accordingly. This suggestion has a lot of surface appeal for its simplicity and its “stop the bleeding” approach, but I think such designations could create major conflict with the classification of some positions, a concept which I will explore in part two of this article.
This same colleague wondered aloud why Federal agencies have to administer two separate overtime laws. Why, for example, couldn’t Congress exempt Federal executive agencies from the FLSA, making them subject only to Title 5? The latter could be revised to incorporate aspects of the FLSA, such as making travel time on weekends compensable if it cut across an employee’s regular administrative work hours. The odds are against any bill being enacted or existing law being revised, but the idea of simplifying Federal agency overtime might draw some interest in Congress.
Another HR colleague, Wade Frary, suggests the possibility of sending in classification “SWAT teams” to review agency FLSA decisions with regard to nonexempt versus exempt positions. OPM still decides the FLSA appeals of individual employees, which implies that the agency has employees in its headquarters and regional offices with expertise in FLSA designations, and could lead such efforts, but agencies could also establish their own review teams, using classifiers with particular expertise in FLSA designations. This could be done preemptively, meaning before an agency’s determinations are challenged, and/or once a union grievance has been filed.
Classifying positions has, logically enough, long been the top priority of classification specialists and other HR professionals with classification responsibility. However, as these grievance arbitration losses and settlements have indicated, not devoting adequate attention to the function of determining the FLSA status of positions can be extremely expensive. As the grievances keep on coming, agencies are being forced to review their current FLSA designations for accuracy. Assuming that they eventually catch up, I think they will have little choice but to pay
more attention to, and focus more resources on, this responsibility in the future. I believe it would be wise for agencies/organizations to specifically designate several classifiers as experts in FLSA designations, and to provide them with ongoing training designed to allow them to maintain that expertise. Getting geared up in this function may be expensive but, then again, HUD could likely have acquired adequate classification expertise for quite a bit less than $24 million.
Where to get that training is another issue. While private sector firms have developed FLSA training classes, I suggest that this issue has already cost agencies enough to warrant government action. For example, why couldn’t OPM and agency Human Capital Managers cooperate in the development of FLSA classes designed to establish and maintain sufficient classification expertise to allow agencies to consistently make supportable FLSA decisions? As a starting point, I ran across some 1998 OPM training materials titled “How to Make Exemption Status
Determinations Under the Fair Labor Standards Act (FLSA).” Under the headings “Prepare, Analyze, and Conclude,” the guidance recommended, among other things, that classifiers write FLSA exemption status evaluation statements to support their conclusions. I would think the OPM training materials could be updated to reflect case law developments since that time, and any other necessary updates.
Problem: Agencies in many cases do not take adequate steps to prevent nonexempt employees from working “suffer or permit” overtime or to keep track of overtime worked.
This happened in all six Federal agencies for which I worked. Typically, there were written policy statements which said nonexempt employees were prohibited from working overtime without specific authorization. So far, so good. The problem was that managers and supervisors very often did not enforce the policy adequately. A common example was a secretary sitting just outside the supervisor’s office. The supervisor would walk past the secretary’s desk many times a day; often, the secretary would be working at his/her desk while eating lunch, and perhaps before and/or after the secretary’s scheduled tour of duty, but either that fact wouldn’t register on the supervisor or she/he was sure the secretary would not claim overtime – until one day the secretary did so. And when that happened, the employee often had excellent documentation of the number of “suffer or permit” overtime hours worked, which the agency could not effectively refute. Game, set, match to the employee. Case law consistently said that policy statements without enforcement were inadequate.
Potential Solution: Agencies could (and many do) publish, and reiterate on at least an annual basis, policy that clearly prohibits employees from working overtime without the specific authorization of appropriate officials. To make those prohibitions stick, however, agencies need to hold managers and supervisors accountable for effectively enforcing them.
In part two, I will examine an FLSA overtime arbitration case which I think illustrated some of the reasons why Mr. Snider and his law firm are collecting millions of dollars from multiple Federal agencies on behalf of nonexempt bargaining unit members.