Presentation By: Scott M. McElhaney 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-6147 (214) 953-5822 (fax)

1. Presentation By: Scott M. McElhaney 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-6147 (214) 953-5822 (fax) smcelhaney@jw.com The Fair Labor Standards Act:Recent Developments and Issues of Interest Presentation By: Jay K. Rutherford 301 Commerce Street, Suite 2400 Fort Worth, Texas 76102 (817) 334-7246 (817) 334-7290 (fax) jrutherford@jw.com Written By: Ray C. Clark 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-5956 (214) 953-5822 (fax) rclark@jw.com

2. Amendments to the FLSA Minimum Wage Presently $5.15 $5.85 as of July 24, 2007 $6.55 as of July 24, 2008 $7.25 as of July 24, 2009

3. FLSA Audits, Litigation & Other WHD Activities 2002 – $143 million for 242,000 ees 2003 – $182.1 million for 315,000 ees 2004 – $165.4 million for 266,000 ees 2005 – $134.2 million for 219,000 ees 2006 – $135.7 million for 222,000 ees

4. FLSA Audits, Litigation & Other WHD Activities • FLSA wage & hour cases in federal court increased by 137% since April, 1999 • 4,389 FLSA cases filed between April 2005 and March 2006 (more than in any other recent 12 month period)

5. FLSA Audits, Litigation & Other WHD Activities • Still far more civil rights cases (15,408) and ERISA cases (10,417) • FLSA filings increased from 2000 – 2003 • In the years 2003 – 2005, FLSA filings declined or remained constant • In 2006, FLSA filings increased again

6. FLSA Audits, Litigation & Other WHD Activities Will there be increased WHD audit activity and litigation to ensure that employers honor the first phase of the minimum wage increase scheduled to take place next month?

7. FLSA Audits, Litigation & Other WHD Activities WHD Opinion Letters: • Since the 2004 FLSA Regulations, more than 100 attempting to explain exemptions • from 2001 to 2003, only 35 such letters

8. FLSA Audits, Litigation & Other WHD Activities Opinion Letter FLSA2006-7 (March 10, 2006) • Deductions from exempt employees’ salaries for damage to or loss of company equipment violates FLSA salary requirement • Deductions from non-exempt employees’ salaries can violate minimum wage and OT provisions

9. FLSA Audits, Litigation & Other WHD Activities Does your company have a policy requiring employees to reimburse the company for damage or losses of company equipment, such as cell phones, lap tops, or other tools?

10. FLSA Audits, Litigation & Other WHD Activities Opinion Letter FLSA2007-6 (Feb. 8, 2007) • Full-day deductions from exempt employees’ salaries pursuant to state leave acts are permissible • Partial-day deductions are not permissible unless expressly authorized by the FLSA regulations • Leave under state leave acts may not qualify as FMLA leave, so no partial-day deductions

11. FLSA Audits, Litigation & Other WHD Activities Be careful when administering state law leave. Partial-day deductions for such leave are permissible only if the leave also qualifies as FMLA leave.

12. FMLA & the FLSA Salary Requirement Partial-day deductions are permitted for partial-day absences due to intermittent or reduced schedule FMLA leave If an exempt employee performs work while on FMLA leave, pay for only the hours worked (instead of full-day pay) is permissible

13. Intern Programs Interns must be compensated unless the internship program that satisfies all six of the following criteria: 1. The training is similar to that which would be given in a vocational school. 2. The training is for the benefit of the trainee. 3. Trainees do not displace regular employees, but work under close observation.

14. Intern Programs (continued): 4. The employer derives no immediate advantage from trainees’ activities and on occasion operations may actually be impeded. 5. Trainees are not necessarily entitled to a job at the completion of the training period 6. There is an understanding that trainees are not entitled to compensation

15. Review of FLSA “Exemptions”and the 2004 FLSA Regulations FLSA exemptions exist for: Executives Administrators Professionals Computer Systems Analysts & Programmers Outside Salespeople Combination Exemption Highly-Compensated Employees

16. The Two-Pronged Test Prong 1: The Salary Requirement Paid on a fee or salary basis on a weekly or less frequent basis With certain limited exceptions, pay must not be subject to deductions Prong 2: The Duties Requirement “Primary duties” must be those of the applicable exemption

17. The Salary Requirement Safe harbor for improper salary deductions is now permitted where employers: 1. promulgate a clear policy (with an employee complaint mechanism) prohibiting improper deductions; reimburse employees for improper deductions; and commit in good-faith to comply with the FLSA overtime provisions in the future.

18. The Salary Requirement Does your company have an FLSA “Safe Harbor” policy?

19. Executive Employees Prong 1: Salary $455 per week Prong 2: Duties Manages enterprise or department thereof Directs the work of two or more other employees May hire or fire or make recommendations that are “given particular weight”

20. Administrative Employees Prong 1: Salary Paid $455 per week Prong 2: Duties Performs office or non-manual work directly related to the employer’s or customer’s management or general business operations Exercises discretion and independent judgment with respect to matters of significance

21. Professional Employees Prong 1: Salary Paid $455 per week Prong 2: Duties Learned Professional - work requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, or Creative Professional - performs work requiring invention, imagination, originality or talent in a field of artistic or creative endeavor

22. Computer Employees Prong 1: Salary • Paid $455 per week or $27.63 per hour Prong 2: Duties • Performs systems analysis techniques and procedures, including consulting with users to determine hardware, software or system functional applications; or

23. Computer Employees Prong 2: Duties (continued) • Designs, develops, documents, analyzes, creates, tests, or modifies computer systems or programs, including prototypes, based on and related to user or system design specifications; or • Designs, documents, tests, creates or modifies computer programs related to machine operating systems; or • A combination of all of the above

24. Computer Executives & Administrators Prong 1: Salary • Not specified Prong 2: Duties • Performs a combination of exempt duties for exempt computer employees, executives, and/or administrators

25. Outside Sales Employees Prong 1: Salary • No compensation requirement Prong 2: Duties • Making sales or obtaining orders or contracts for services or for the use of facilities • Customarily and regularly engaged away from the employer’s place or places of business

26. Combination Exemption Prong 1: Salary • Not specified Prong 2: Duties • Performs a combination of exempt duties for exempt executives, administrators, professionals, outside sales and/or computer employees

27. Highly Compensated Employees Prong 1: Salary • $100,000 annual compensation, at least $455 weekly Prong 2: Duties • Performs any one or more of the exempt duties for exempt executives, administrators or professional employees • Does not apply to employees who perform manual labor

28. Calculating FLSA Overtime Common Errors • Confusion over the workweek • Omission of non-discretionary bonuses • Confusion over activity that counts as “hours worked” under the FLSA

29. The Fair Labor Standards Act:Recent Developments and Issues of Interest Presentation By: Scott M. McElhaney 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-6147 (214) 953-5822 (fax) smcelhaney@jw.com Written By: Ray C. Clark 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-5956 (214) 953-5822 (fax) rclark@jw.com