Hang Up After Hours? The Spring 2015 Regulatory Agenda Tackles This and Other Overtime Issues

On Thursday, May 21, 2015, the White House, through its executive branch and other federal agencies, issued the Spring 2015 edition of the Semiannual Regulatory Agenda. Published twice a year, the agencies’ regulatory agendas provide an outlook on regulatory activity, identify agency priorities, and offer additional details about the most significant actions the agencies intend to take in the coming year. The Spring 2015 Regulatory Agenda incorporates plans for the executive departments and various federal agencies, including the U.S. Department of Labor (DOL). In particular, the DOL’s Wage and Hour Division (WHD) includes a regulatory item related to the time employees spend on their electronic devices after-hours and outside of the workplace, and continues to include the item on overtime exemptions.

Technology and Phone Use Outside of Work

The DOL’s regulatory agenda for WHD includes a new item, “Hours Worked Under the Fair Labor Standards Act,” that includes plans to issue a Request for Information (RFI) through which the agency will solicit comments “on the use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours.” The compensability of time spent by nonexempt employees replying to emails and fielding calls at home, after scheduled work hours, is a topic that is gaining attention, as well as being litigated. The increasing ability of employees to telecommute has raised new questions about the compensability of these types of activities.

Also, employers and courts have relied on the de minimis rule to avoid or minimize finding that certain activities, such as responding to emails or fielding brief telephone calls, are compensable. In its 1946 decision in Anderson v. Mt. Clemens Pottery Co., the Supreme Court of the United States recognized that “trifles” of time such as “a few seconds or minutes of work beyond the scheduled working hours” could be disregarded as compensable time under a de minimis doctrine. In a footnote in its 2014 decision in Sandifer v. United States Steel Corp., the Supreme Court observed that the WHD’s regulation contains a “stricter de minimis standard” than the Anderson case articulated. Employers should be alert to the possibility that the DOL may use this RFI as a basis to rework its de minimis regulation and eliminate it as a defense to compensability claims for trifling increments of time that employees spend answering emails or fielding calls at home after scheduled work hours. The WHD indicates that it will issue its RFI in August of 2015. 

Overtime Regulations

The WHD’s other significant regulatory item is the revision of the exemptions contained in section 13(a)(1) of the Fair Labor Standards Act (FLSA). On May 5, 2015, the DOL sent the draft proposed part 541 overtime regulations to the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) for review. This item states that “section 13(a)(1) provides a minimum wage and overtime exemption for any employee employed in a bona fide executive, administrative, professional capacity, or in the capacity of an outside salesperson.” As this item states, President Obama issued a presidential memorandum to the Secretary of Labor on March 13, 2014, “directing the Secretary to modernize and streamline the existing overtime regulations for executive, administrative, and professional employees,” which the DOL last updated in 2004. The DOL has indicated that it expects to publish a notice of proposed rulemaking in June of 2015. 

In the list of regulatory items under OIRA review pursuant to Executive Order 12866, this proposal is denoted as a “Proposed Rule,” which is consistent with the regulatory agenda item. Significantly, however, OIRA’s assessment as to whether the proposal is “economically significant” is “No.” This assessment contradicts the DOL’s regulatory agenda item, which states that it is “economically significant.” This raises a question of OIRA’s review of the proposal and whether it is a mistake, an assumption, or a failure to comprehend the broad impact of the proposal.

Under Executive Order 12866, an economically significant regulatory action is defined as one that has an annual impact on the U.S. economy of at least $100 million. In 2004, when the part 541 regulations were last revised, the economic impact was estimated at $1.1 billion for the first year. 69 Fed. Reg. 22227. This cost was broken down into first-year implementation costs totaling $738.5 million, consisting of $627.1 million to review the regulation and revise overtime policies, and $111.4 million to conduct job reviews. 69 Fed. Reg. 22191, 22223, and 22224. The economic impact also included an estimate of $375 million for the annual impact of increased payroll costs. Notwithstanding OIRA’s assessment, the economic impact of the part 541 proposal will be a major factor in the comment process, drafting of a final rule, and review of a final rule, just as it was in 2004. Hopefully, the administration will be sufficiently transparent and satisfy the requirements of Executive Order 12866 by providing a detailed impact analysis, including quantification of the potential benefits as well as likely costs of its regulatory action. Any revision by the current administration to the part 541 regulations is important not only to the DOL and WHD, but also to employees and employers for many, many reasons that are not just limited to the financial impact of the revisions. The FLSA accords the Secretary of Labor broad discretion to define and delimit these exemptions, so stay tuned as the DOL may publish its proposal within the next two to three weeks.