The close of 2023 treated us to Wonka, a prequel to the beloved childhood classic, shedding light on the origins of the iconic Chocolate Factory. Although Willy Wonka initially began his chocolate empire with good intentions, he inadvertently concocted a recipe for labor and employment violations. As employers aim to sweeten their practices in 2024, gleaning insights from Wonka’s missteps might just be the golden ticket!
Misclassification of Workers
Now, let’s address the Oompa Loompa in the room: Are they employees or independent contractors?
On January 9, 2024, the Department of Labor (DOL) introduced a six-factor test to determine worker classification under the Fair Labor Standards Act (FLSA): (1) opportunity for profit or loss depending on managerial skill; (2) investments by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) nature and degree of control; (5) extent to which the work performed is an integral part of the potential employer’s business; and (6) skill and initiative.
An examination of these factors paints a grim picture for Wonka. First, he controls virtually every aspect of the factory, and there’s evidence suggesting substantial investments throughout his career, as seen in the closing scene of Wonka when he purchases the abandoned castle that’s transformed into the famed Chocolate Factory. Second, the Oompa Loompas, who live full time in the factory and are compensated in cocoa beans instead of cash, seem to have no opportunity for profit or loss, indicating an indefinite, continuous, and exclusive work relationship. Even their undeniable skill doesn’t tip the scales in favor of independent contractor status, as it would be inapposite to suggest the work they perform isn’t integral and indispensable to Wonka’s business.
Wonka better keep his head on a swivel—this new rule takes effect on March 11, 2024.
Wage and Hour Violations
If the Oompa Loompas are deemed employees, compensating them in chocolate instead of cold, hard cash raises concerns about minimum wage, overtime, and fair compensation practices. Unless specifically exempted, employees covered by the FLSA must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay.
Should Wonka attempt to make Oompa Loompas exempt employees to sidestep wage and hour violations, he faces another hurdle. The DOL announced in August 2023 a notice of proposed rulemaking that would restore and extend overtime protections to 3.6 million salaried workers. As proposed, the rule increases the minimum salary requirements for the executive, administrative, and professional exemptions from the current $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year)—a 55% increase from the current level. The minimum salary for application of the highly compensated employee exemption would jump by 34%, from $107,432 per year to $143,988 per year. However, the DOL has indicated the actual salary threshold will be based on earnings data as of the date the final rule takes effect, potentially exceeding the projected $55,068.
With the Loompas burning the midnight oil, Wonka’s payroll—and potential damages—could skyrocket.
Discrimination Against Non-Oompa Loompa Workers
Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment based on age, race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, disability, or genetic information. The Chocolate Factory’s exclusive employment of Oompa Loompas may be a violation of equal employment opportunity laws, as the factory appears to discriminate against applicants based on race, size, and national origin.
As a good reminder to all employers, discrimination in the workplace can occur before a hire is even made. The laws enforced by the Equal Employment Opportunity Commission (EEOC) prohibit an employer from using neutral employment policies and practices with a disproportionately negative effect on applicants or employees of a protected class if the policies or practices at issue aren’t job-related and necessary to the operation of the business.
While Wonka’s attorneys will certainly try to argue that the exclusive hire of Oompa Loompas is a bona fide occupational qualification (BFOQ), justifying this as reasonably necessary to the normal operation of that particular business or enterprise may prove challenging, as an employer may not base hiring decisions on stereotypes and assumptions about a person’s protected class.
In Wonka’s world, where cocoa dreams turn into legal dilemmas, employers should take a lesson in labor and employment practices. As we unwrap Wonka’s chocolatey tale, let’s ensure our workplaces remain sweet, steering clear of the bitter aftertaste of legal violations and potential litigation.
Joyce Dos Santos is a dedicated and compassionate employment defense attorney at Constangy, Brooks, Smith & Prophete focused on counseling and advising employers on a broad range of issues in the workplace, including discrimination, harassment, retaliation, and wrongful termination. To get in contact, please e-mail her at jdossantos@constangy.com.