FLSA Considerations for Senior Living Employers

Property & Casualty, Risk, Senior Living & Social Services

Recently, employers have experienced an increase in Fair Labor Standards Act (FLSA) wage and hour class action lawsuits. Senior Living employers are no exception and should take note of the following issues:

Paid vs. Unpaid Meal Breaks

Many senior living employers’ payroll systems include automatic 30-minute deductions for unpaid employee meal breaks. This may be a risk-adverse practice considering the current staffing environment and responsibilities of senior living employees. Employees must be paid for missed or interrupted meal breaks.

Considerations for employers:

  • Discontinue use of automated meal break deductions OR implement a process to account for missed/interrupted meal break time.
  • Require employees to punch in/out for actual unpaid break time or incorporate a paid meal break policy.
  • Designate a separate meal break area away from the work environment.
  • Set clear expectations regarding cellphone/pager monitoring during unpaid break time and whether employees are required to remain on-site during meal breaks.

Employers should ensure that employees and supervisors are educated on any adopted process.

Time Clock Rounding

The “7-minute rule” (rounding down or up to the nearest quarter hour) is permissible according to the Department of Labor (DOL). However, there has been a significant increase in class action lawsuits due to this practice. Rounding must not result in the failure to compensate an employee for the work they actually performed.

Considerations for employers:

  • Record exact time punches instead of rounding.
  • Round up to the nearest quarter hour if rounding is utilized.

Non-Discretionary Bonuses in OT Calculations

Many senior living employers offer non-discretionary bonuses to employees, such as additional pay for picking up shifts and COVID pay. Non-discretionary bonuses must be calculated into the employee’s regular pay rate—not hourly rate—when determining overtime pay.

Considerations for employers:

  • Properly identify non-discretionary bonuses offered to employees.
  • Audit payroll practices to ensure non-discretionary bonuses are included in overtime pay calculation.
  • Regular Payrate = Total Compensation in the Work Week (except for statutory exclusions) ÷ Total Hours in the Work Week.
  • Do not rely solely on your electronic payroll system or third-party payroll companies to ensure that regulatory requirements are met as it is the employer’s responsibility to meet state and federal regulations.

Independent Contractors–Current DOL Rule

  • Independent Contractors are not covered under FLSA –ensure they are classified appropriately per the law.
  • Prepare a formal agreement between the Independent Contractor and the organization.
    • Clearly define the expectation and requirements under the law.
    • Ensure that the rate of pay or the rate for completing a project by an independent contractor is defined in the agreement.
  • Remember that different government agencies (ex: DOL, IRS, Workers’ Compensation, etc.) all have different Independent Contractor tests to determine if an individual is truly an independent contractor vs. employee.

Statute of Limitations and Damages

  • 2-year Statute of Limitations; 3-year Statute of Limitations if an employee can prove that employer “willfully violated the statute.”
  • Employees may be entitled to double damages unless the employer can prove that they:
    • Acted in good faith; and
    • Had reasonable grounds to believe they were in compliance with the law.
  • If successful, Plaintiffs are automatically entitled to attorneys’ fees and costs associated with litigation.

In addition to these issues in the senior living industry, these areas are worth attention as well:

  • Accurate classification of exempt vs. non-exempt employees- DOL Fact Sheet.
  • Non-payment for compensable time, such as travel time during work hours, training and education, investigations/discipline, infection control requirements (onsite vaccination clinics, COVID testing, etc.).
    • Address policy violations through the HR process—an employee may be violating a company policy; however, the employee is still entitled to receive pay for hours worked, overtime, etc.
  • Remote work policies that should include eligibility for remote work, expected work hours, reporting of hours worked and adherence to the employer’s over-time policy.

Key Takeaway

FLSA wage and hour class action lawsuits can be very costly for employers in the senior living industry. These employers would be well-served to address the issues and considerations outlined above and consider internal controls and engagement with an employment law attorney for a comprehensive wage and hour review. A standard Employment Practices Liability insurance policy may include limited wage and hour coverage to recoup attorney fees and defense costs but will not cover any judgments or settlements. Contact your M3 account executive for more details.

This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.

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