We have been waiting and waiting…
The USDOL has been tasked with revising the Fair Labor Standards Act (“FLSA”) white collar exemptions, but evidently these revisions will not be ready by the (initial) November 2014 deadline. The Solicitor of Labor M. Patricia Smith has stated that she anticipates they will be presented early in 2015.
Several months ago, the President instructed the Secretary of Labor to “modernize and streamline” the current overtime regulations, which were just revised in August 2004, which, in the world of law, is but a moment ago. The Administration had concluded that, as millions of Americans are ostensibly not eligible for overtime under these 2004 regulations, the current regulations are “already” outmoded and the rules need to be made stricter, to allow more overtime coverage for more workers.
Plaintiff lawyers will likely view this as an untoward development. The delay might cause some people to still remain “improperly” classified in their view. One plaintiff lawyer stated that “in the long run, the content matters more than the timing” and that it was “important that the changes be made and that they be effective, so we’re looking forward to seeing what the amendments actually accomplish.”
One extension of the overtime rules that is occurring is the extension of the minimum wage and overtime protections of the FLSA to in-home workers who provide care for aged, sick and disabled individuals. It is anticipated that this extension will give up to two million such workers (in a burgeoning industry) these rights and protections. In addition to raising wages, this modification, in the agency’s eyes, will hopefully attract more workers to the field.
I await with eagerness the new exemption rules. Hopefully the new regulations will dispose of the “discretion and independent judgment” component of the administrative exemption, which makes it pretty hard, right now, to categorize workers as “administrative employees.”
I bet they won’t…
On Wednesday, October 8, 2014, The New York State Attorney General announced the arrest of Elisa Parto for failure to pay wages under N.Y. Labor Law § 198-a(1). Ms. Parto is the owner of a restaurant in Port Chester N.Y., who is accused of failing to pay some $35,000 in minimum wage and overtime pay to five former employees. Ms. Parto opened her restaurant in 2010 and hired several cooks, cleaners and cashiers, who were entitled to be paid minimum wage and one and a half times their regular rate of pay for all hours worked in excess of 40 hours a week.
Ms. Parto was charged with an unclassified misdemeanor that could result in a maximum jail term of one year and a maximum fine, in addition to the required restitution, of $5,000.00 per count. This arrest is significant because nothing suggests that the alleged misconduct was part of a continued pattern of abuse or something that was done as a conscious disregard for the law – there is no suggestion of any prior Department of Labor investigations, wilful destruction of records or any history of complaints. Simply put, within four years of opening a business, the owner may be facing jail time for failing to comply with Wage and Hour regulations.
Attorney General Eric Schneiderman explained: “My office will take aggressive action, including criminal charges, where appropriate, against business owners who fail to properly compensate their employees for hours worked. Protecting the livelihoods of hardworking New Yorkers is a priority for my office.”
With such increased scrutiny, and threatened “aggressive action,” small business owners need to carefully review their payroll practices. In light of yesterday’s arrest, proper payroll practices are more important than ever. Small business owners be warned: the ante has been raised.
Small business owners now have additional wage and hour concerns that need to be addressed in deciding where to open for business in New York City. The minimum wage could be higher right across the street.
On Tuesday, September 30th, New York City Mayor Bill de Blasio signed an Executive Order which expands the “living wage” requirements for real estate projects that receive $1 million or more in New York City subsidies. Previously, only direct recipients of City subsidies in excess of $1 million had to pay the “living wage” to their employees. The September 30th Executive Order greatly expands this requirement beyond the direct recipients. Now tenants, subtenants, leaseholders, subleaseholders, and concessionaires of buildings/properties that receive at least $ 1 million in City subsidies on or after September 30, 2014 will also have to pay the “living wage” to their employees. The Executive Order does not impact buildings/properties that received such subsidies prior to September 30, 2014. Further, the executive Order will also not apply to certain residential properties that provide 75 or more “affordable units,” manufacturers, or businesses with less than $3 million in gross income.
Businesses that take space in subsidized buildings/properties will now be required to pay a minimum wage of $13.13 per hour for employees who are not offered health care, and $11.90 for employees that are offered health care. These wage levels are expected to increase every year. This Executive Order will have the greatest impact on restaurants, bars and retailers that take space in the major developments substantially raising labor costs for such businesses which have a large number of minimum-wage or near-minimum wage employees. Moreover, the regulation permits private causes of action, which can include punitive damage awards and attorney’s fees, against businesses that violate these higher minimum wage requirements.
The Executive Order creates significant concerns as to how the order’s directives will be implemented. Oversight of the implementation will be handled by the Department of Consumer Affairs, whose mission and training has not been in labor relations, wages or the workplace. These concerns include how prospective tenants will be placed on notice of the new increased wage requirements, who will be responsible for violations of the regulation, and how does this regulation impact other labor issues such as tip and meal credits, which are currently permitted under federal and state law, and collective bargaining agreements.
As a result of this new Executive Order, small businesses will again be asked to bear heavier and heavier burdens. The small business owner will now need to think long and hard about where to open for business in New York City. Thus, giving new meaning to the familiar real estate mantra: location, location, location.
Arbitrate or litigate? Like everything else in the law, it depends…
Whether a claim for overtime should be arbitrated rather than fought out in court depends on whether the claim necessitates examination and interpretation of the labor contract. Under well-established legal principles, workers have an independent right to sue in court, rather than arbitrate, but if the employer successfully argues that contract interpretation is required, the lawsuit is preempted by labor law and arbitration ensues.
Indeed, I believe most employers that I deal with would rather be in arbitration than a full-blown FLSA litigation involving claims for overtime, but in a case entitled Independent Laboratory Employees’ Union Inc. v. ExxonMobil Research & Engineering Co., the Company argued that arbitration was inappropriate. A New Jersey District Court judge disagreed, holding that the grievances seeking compensation for travel time to/from job-related conferences did fall under the aegis of the parties’ labor contract.
The judge stated that “the question presented by the ILEU is whether travel time is included in those circumstances. This is an issue that requires interpretation of the CBA, and particularly in light of the broad language of the arbitration clause, is a matter which falls within the zone of interests receiving protection under the CBA.” The company defended by asserting there was no explicit reference to travel time in the labor contract and thus there was no obligation to arbitrate; the Union then moved to compel arbitration.
I am somewhat surprised. I have been faced with this situation a few times and I have been the one, on behalf of a client, to argue that arbitration was required, rather than allowing a FLSA lawsuit (with its fee shifting component, doubling of damages and possible extra year of liability) to proceed. In arbitration, the Company, in addition to having the “usual” FLSA defenses (i.e. the travel time was not working time) will also have any contractual defenses it can muster.
To the Union—-Don’t wish for something because you just may get it!
There are some interesting cases going on right now about whether employees who work in electronic retail stores need to be paid for the time they spend waiting to get their bags checked when they clock in and out of their shifts. Currently, these security checks are “off the clock” but sometimes these employees are spending 45 minutes a day waiting to get their bags checked. Should they be getting paid for that time? The courts are now deciding that question.
One of those employers is Apple, who is currently defending itself against a class-action case by store workers who say they were not paid for time spent waiting for Apple security to check their bags each time they left a store, whether for lunch breaks or at the end of their shift. Understandable, Apple retail locations house some pretty expensive and tiny electronics (…not including the iPhone 6+ which just seems oddly huge).
I’ve been keeping an eye on this California class-action to see what happens because there are several other retail employers that have similar practices and have smaller class actions also pending. The outcome may require employers to seriously modify their policies.
You can check out the Apple case by clicking this link.
I told you so!
A federal judge dismissed the putative collective action against the huge law firm, Skadden Arps, which was filed by a lawyer claiming he was working as a non-lawyer and was entitled to overtime. Judge Sullivan ruled that the lawyer(s) were exempt from the FLSA under the professional exemption in 29 USC 213(a) as licensed attorneys practicing law. The case is entitled Lola v. Skadden Arps Meagher Slate & Flom LLP and had been filed in the Southern District of New York.
The named plaintiff claimed his document review work was routine and “mechanical” in nature and did not require any legal knowledge or training. Interestingly, the Judge stated that it seemed unfair that these lawyers should not receive overtime when a properly trained and supervised non-lawyer could have done this work, but as the plaintiff was a licensed attorney he was, in fact, engaged in the practice of law and therefore exempt.
The plaintiff’s attorney stated that they will appeal, on the theory that in order to be considered practicing law, an individual had to use/apply his legal knowledge and be exercising discretion. This was hotly contradicted by the defendants who contended, in their motion to dismiss papers, that the assertion that a licensed attorney doing document review was not practicing law was “flawed and refuted by the FLSA, overwhelming legal authority and common sense.” Plaintiff rebutted by claiming that the exemption applies only to those “actually engaged in the practice thereof.”
The Judge stated that the Congress and the US Department of Labor could revisit the regulations and law given the circumstances (e.g. many lawyers doing document review as their job) that the legal profession faces. This is, perhaps, most especially so for young lawyers starting out, faced with oftentimes a long and grueling process of finding a “real” job.
The plaintiff’s lawyer will appeal to the Second Circuit. I “boldly” predict the result will be the same.
To be continued…
Picture this: you’re enjoying a lovely evening with friends inside a hole-in-the-wall restaurant in Brooklyn. As the evening is winding down, the clouds open up and give way to a torrential down-pour. You think to yourself, “How am I possibly going to hail a cab in this weather…and in Brooklyn of all places.”
Luckily, you remembered, you downloaded Uber, the mobile application that connects you with a personal driver. Within minutes, you receive a notification that your driver is outside waiting for you!
What does this vignette have to do with wage and hour recent developments and highlights?
Earlier this month, a California judge held that out-of-state drivers for Uber Technologies Inc. could not participate in a putative class action that alleged the company violated various California laws, despite a choice of law provision in their licensing agreement with Uber that designated California as the governing law.
Uber drivers in 3 states: California, Georgia and Washington brought a class action suit against Uber claiming it violated CA law by falsely advertising that customers did not need to tip drivers since a gratuity is included in the total cost of the service. The drivers claimed that Uber did not in fact provide the full gratuity to drivers. The second part of the claim was that Uber misclassified them as independent contractors instead of employees.
Uber sought to dismiss the claims as they applied to drivers who both lived and worked outside of California arguing that CA law applied nationwide because the relevant state laws did not include geographical limitations. Uber also argued that the choice of law provision in the licensing agreement overcame any presumption against extraterritorial application of those laws.
The Judge found that the licensing agreement’s choice of law provision did not overcome the “presumption against extraterritorial application” of the state laws the drivers claimed Uber violated. The judge found the lower court reached the wrong conclusion by interpreting Gravquick A/S v. Trimble Navigation International, Ltd., 323 F.3d 1219 (9th Cir. 2003) incorrectly.
The decision held that a contractual agreement to apply California law “must yield” to laws containing explicit geographic limitations, the court said. “There is no logical reason to reach a different result where that limitation is implicit.”
For employers, it will be interesting to monitor the outcome of this case. Many companies contain similar choice of law provisions, and so far this case is educational in how those provisions will be applied when employees from other states seek to join a class suit.
Employees must receive overtime pay at the rate of 1½ times their regular rate of pay for all hours worked over 40 in a workweek.
A common question we see is that “what is the regular rate of pay?”
First of all, the regular rate of pay can never be less than the minimum wage. An employee’s regular rate is the amount that the employee is regularly paid for each hour of work. When an employee is paid on a non-hourly basis, such as via salary or piece work, the regular hourly wage rate is found by dividing the total hours worked during the week into the employee’s total earnings. The New York Department of Labor provides the following example:
For example, a non-residential employee who (before overtime) has piece rate earnings of $500 in a workweek for 50 hours work has a regular rate of $10 per hour.
Seem simple enough? Turning to the situation where an employee has multiple rates of pay…
The regular rate is the weighted average of the worker’s multiple rates of pay for the week based on the number of hours worked at each rate. The weighted average is the total regular pay divided by the total hours worked in the week. It is important to know that the overtime rate may vary weekly depending on how many hours the employee worked at each rate of pay. The New York Department of Labor provides the following example:
For example, if an employee works 20 hours for an employer as a janitor for $10.00 per hour, and 30 hours for an employer as a groundskeeper for $20.00 per hour, that employee’s regular rate is $16.00 per hour.
To conclude this brief lesson in what constitutes regular rate of pay, employers should know that certain payments are not part of the regular rate. These include true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, pay for expenses incurred on the employer’s behalf, premium payments for overtime work, gifts, payments in the nature of gifts on special occasions, payments for occasional periods when no work is performed due to vacation, holidays, or illness.
While overtime administration seems fairly intuitive, employers run into situations where employees later claim they are owed overtime. Thus, it is essential that employers have a real understanding of overtime implications.
In an important decision, a New Jersey federal district court has ruled that the statute of limitations for claims under the New Jersey Wage Payment Act is six years, not the two year period that specifically governs overtime and other wage claims specified in the New Jersey Wage-Hour Law. In Meyers v. Heffernan, (Civ. No. 12-2434) the Plaintiffs were commissioned sales representatives for a now-defunct Mortgage Lenders Network USA, Inc., a mortgage banking company until approximately February 2007. The plaintiffs sought unpaid commissions.
The defendants argued that the Wage Payment Law (WPL) contained a two year statute limitations period and, as the claims were three years old, they were untimely. The Supreme Court of New Jersey had not yet considered the limitations period applicable to claims arising under the WPL. USDJ Cooper looked to an earlier NJ Appellate Division decision for guidance. Troise v. Extel Commc’ns, Inc., 345 N.J. Super. 231 (N.J. App. Div. 2001).
In Troise, the Court considered whether a two or six year limitations period applied to an employee’s private cause of action for underpayment of prevailing wages. The Appellate Division observed that where the Legislature creates a statutory cause of action without including a limitations provision the court should apply the general limitations provisions which governs that category of claims
The plaintiffs herein were seeking to vindicate their economic rights through recovery of unpaid, accrued commissions. As the nature of these injuries were more analogous to a breach of contract claim rather than an injury to the person, the Court concluded that the WPL is subject to the six-years statute of limitations that is provided by NJSA 2A:14-1 for breach of contract claims.
This is exciting news, so to speak. At least it (definitively) clarifies the statute of limitations, unless and until the state Supreme Court rules differently. Which it likely would not.
Better safe than sorry is the old adage. Nowhere is this maxim more applicable than for an employer’s compensation practices, especially on issues of classification, working time, and record keeping protocols and obligations.
In the last several years, there has been an escalation of wage hour lawsuits, single and class action. These cases can be grouped into certain categories that correspond almost exactly to particular payroll practices and corporate/financial decisions that impact the FLSA and state law. Some of these flashpoint areas are:
- Overtime claims arising from classification of employees as exempt or non-exempt;
- Independent contractor/consultant classification;
- Preliminary and postliminary work claims (e.g. donning and doffing, travel time);
- Automatic deductions for lunch (the curse of the smart clock)
- On-call cases; and
- The Blackberry/E-Mail Claims (a “new” type of preliminary and postliminary work).
There is no way to tell when a claim will arise. Usually, they come from workers fired for eminently good reasons but who complain to the DOL or file suit and, bad luck, have, not been properly paid. If the “policy” at issue affects a group or, class, of workers, the snow ball rolls downhill.
The best, really, the only protection employers have is to self-audit all of their compensation practices and if there are issues, fix them, but do so in ever so subtle a manner as to “not arouse suspicion.” The focus should be not only on having/drafting the legally correct (and employer friendly) policies but to exercise oversight to ensure they are implemented and maintained in a consistent manner.
The best defense is a good offense. Another adage but, here, the best defense is proactive planning. Such audits do not cost a great deal and the report that I submit to the employer when I do one highlights areas of concern and suggested remedial measures. Such an audit also provides the ability to mount a “good faith” argument/defense.
An ounce of prevention….