Coyote Blog

So a bunch of bloggers agree to write for the HuffPo, a profit-seeking venture, for free.  The HuffPo gets bought by another profit-seeking company, though this one is less successful in shrouding its financial goals in a cloud of feel-good progressivism.  So the bloggers get mad.  But instead of just quitting, they are actually suing the HuffPo for back wages under the Fair Labor Standards Act.

A few observations:

• I blog for free at Forbes.  It's not like the arrangement was hard to figure out.  They get some free content, I get some exposure and a bit of cache from being associated with Forbes.   Seemed like a good deal to me.  When it ceases to be so, I will quit.
• The fact that everyone agreed to the deal in advance and it was completed by both parties to their mutual self-interest is NOT a defense under the Fair Labor Standards Act (FLSA).  I have employees who beg to work for free all the time (e.g. they have a disability arrangement that allows no outside income).  I have to tell them no.  Any defense from the HuffPo will come through convincing a court that the writers were somehow exempt or not actually employees.
• This same problem arises with internships as well as in my work.  In short, people sometimes value non-monetary aspects of jobs that are not given any credit in the FLSA.  My son would love to have a good summer job and for the right one would work under minimum wage for the experience.   Even the experience of showing up on time, functioning in an organization, working in a hierarchy, etc.  are important skills those outside of the work force gain from obtaining.  (In an interesting parallel to this, probably the most important skill I am gaining at Forbes is simply writing to a regular weekly deadline.  It's harder than it seems from the outside).

In short, I would say that these folks are utterly without personal honor for filing the suit, but in the current state of labor law they potentially have a case.  How sad that would be.  And what would be next?  A class action suit by product reviewers at Amazon for back wages?

Earlier today I posted that:

People often think of the minimum wage as a restriction on employers "” that they cannot pay less than a certain number for a job.  But it is also equally a restriction on job seekers "” my son cannot legally offer to take a job for less than $7.25, even though he would probably gladly do so.  For teenagers, just gaining the experience of working and building basic skills (like showing up on time, following procedures, interacting with customers and fellow employees) has enormous value, such that even a nominal payment of a few dollars an hour would more than compensate him for his labor.

Ann Althouse has found the Fair Labor Standards Act (FLSA), which contains the minimum wage, also can lead to restrictions on employee behavior:

Everyone at The University of Wisconsin will have their pay cut by about 3% and will be "furloughed""”told they do not have to work"”for a corresponding period of time. But it turns out that we not only don't have to work, we are being told we cannot work. The guidelines ban any kind of work during furloughs, anywhere. This means that even if you are at home you are not supposed to read professional material, get and send emails, make calls, use a smart phone, etc. Employees who violate the work ban can be disciplined.

She goes on to describe her voyage of discovery as to why so irrational-sounding a policy might exist, but I alredy knew.  To furlough exempt (meaning exempt from hourly bookkeeping) workers, they must become non-exempt.  And non-exempt workers have to be paid for time worked, even if the time worked was not ordered by the employer and even if the time worked was against the wishes of the employer.

We face this situation all the time.  We have hourly workers in campgrounds.  Unlike in a factory (for which the FLSA was written and where there are fairly strict controls on how people work), my campground workers have a lot of leeway to set their own schedule and determine their work patterns.   But I have to set very clear guidelines - "at the end of the day you have to get x and y and z  done and you are not authorized to work more than t hours doing it."

But we nearly always have folks who want to go do whatever they want to do.  I had an employee who loved to arrange river rocks around camp sites as borders after he had finished his other work.  His work looked really nice.  But I could not afford to pay him to arrange river rocks around camp sites.  His manager told him to stop.  He kept doing it.  You know what?  I still had to pay him for his time to arrange river rocks, despite the fact the company had specifically told him not to and despite the fact that this time exceeded the guidelines I gave him  (once his work exceeds X hours, he has to get management permission to work more in a certain time period).  In fact, the only way I eventually was able to stop paying him to arrange river rocks at work was to fire him.

This is part 3 in a series of my real-world experience in dealing with the Department of Labor (DOL). If you have not already, you should also check out part 1 and part 2 for background.

In this post, I will show you how we defended ourselves in a case where the DOL was extremely reluctant to grant us a legal exemption to the Fair Labor Standards Act (FLSA). It is highly unlikely that this exemption is relevant to you - it is narrowly directed at seasonal recreation businesses, but I think the process and what we learned from it may help you out in your own interactions with the DOL.

Continue reading ‘Working with the Department of Labor: Part 3’ »

In part 1, we discussed general expectations you should have as a business owner in working with the Department of Labor. In this installment, I will discuss a typical audit and some of the things we did to protect ourselves. In part 3, I will discuss a specific example of how it is possible to win your case with the DOL, but it may take a LOT of effort.

Continue reading ‘Working with the Department of Labor: Part 2’ »

Note that this is part 1 of a three-part series. Here are part 2 and part3.

Over the past several years, we have been audited a couple of times by the Department of Labor (DOL). One of the audits was standard procedure (as a concessionaire to the US Forest Service, audits are sometimes required on certain contracts) and one was based on employee complaints. It never ceases to amaze me that some folks never even bother to call our HQ to complain and try to get it paycheck mistakes fixed -- they go straight to the government rather than our labor department if something looks wrong on their check.

Many times I have heard other small business owners say that the DOL is not "fair". If you were to ask me if I think they are fair, I would answer "yes" and "no". If you want to know if DOL employees are generally honest, well-intentioned, and law-abiding, my experience is that they are. However, if you expect, as a business owner, that the DOL will act as some kind of neutral court of law, in which you and your workers have equal status and equal rules of evidence, then you are in for a surprise. The DOL is not on the employers side and doesn't really pretend to be.

This should not come as a surprise to you. Young lawyers out of school generally don't seek out lower government pay scales with a vision of helping businesses manage their cost structures. They join the DOL because they are interested in defending downtrodden workers against rapacious capitalists who seek to exploit them (etc. etc.) The main mission of the DOL is to enforce labor laws like the Fair Labor Standards Act (FLSA). However, overlaying this mission is a strong institutional culture that mission 1A is to defend workers against employers. This culture will have a number of implications in any dealings you, as an owner or employer, have with the DOL:

1. Workers claims will almost always be believed by the DOL, and the DOL will generally not require much documentary evidence to back up workers claims. The flip side of this is that employers claims that contradict workers will always require extensive documentary evidence. For example, we had several weeks of time sheets burn up in an office fire. In cases like this, the DOL will generally always side with the worker's recollection of time worked rather than the employers, even if the time claimed is completely inconsistent with hours worked in all other documented weeks. The burden of proof, in almost any dispute, will be on the employer.

2. The DOL's first answer to any employer's claims of an exemption under FLSA or other labor laws will be "NO". Congress has granted a number of exemptions to labor laws for certain business situations. For example, one that applies to our business in some cases is the FLSA has relaxed standards for overtime for "seasonal recreation businesses". From my experience, the DOL hates to admit that these exceptions apply to your particular situation. Back to the fairness point, they CAN be convinced, but sometimes it takes a lot of work to do so. In part 2 and part 3 of this series, I will give more specific examples of how to do this.

3. The DOL will never point out to you an exemption or saving that you are missing. I know that many people get frustrated with the IRS, but I have actually had experiences where the IRS found a mistake where I had overpaid. I have never had this experience with the DOL. The DOL does not really have very good staff or tools to help employers comply with the law in the most efficient manner. They have LOTS of tools and people dedicated to making sure workers get every bit of what the law guarantees them.

If you recognize this culture and context, and put any frustration that you might have as a tax-paying citizen and business owner aside, you can get a fair shake from the DOL. You just have to be prepared in advance to argue your case and bring lots of evidence to bear. And, if worst comes to worse, and you are willing to pay the attorney fees, you can always refuse the DOL's finding and take the case to a court of law, where there are much more neutral evidence standards.

The next part of this series will discuss further some examples and lessons learned in making your case to the DOL. Part 3 of the series will include a specific example.

Note: These are my observations as a business owner and are not specific recommendations. I am not a lawyer, and, even if I were, I am not your lawyer.