Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

On June 11, 2009, the Massachusetts Supreme Judicial Court held in Electronic Data Systems Corporation v. Attorney General, that the employer’s written vacation pay policy violated the Massachusetts Wage Act. The vacation pay policy at issue provided that any employee leaving the company, whether voluntarily or involuntarily, would not be paid for unused vacation time. According to the court, the policy impermissibly deprived employees of earned wages due upon termination under the terms of the Wage Act.

The Wage Act defines “wages” to include “vacation payments due an employee under an oral or written agreement.” Because the written agreement at issue in the case did not allow for payments of unused vacation, the employer argued that such vacation pay was not “due” under the terms of the agreement and, therefore, not “wages.”

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On June 2, 2009, the Fourth Appellate District, Division One, issued an opinion in the class action case of Jou Chau v. Starbucks Corporation, reversing the trial court’s award of over $86 million to a previously certified class of Starbucks “baristas” who had challenged Starbucks’ tip policy on the ground that certain service employees, known as “shift supervisors,” had improperly shared in the customer tips left in a collective tip box.

The facts and legal arguments at the bench trial were fairly straightforward. Starbucks allowed shift supervisors who primarily engaged in barista-type customer service duties to share tips left by customers in a collective tip box. A former barista, Jou Chau, brought a putative class action against Starbucks, claiming that the tip-sharing policy violated California Labor Code section 351. That Section states, in relevant part:

No employer or agent shall collect take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for. . . .

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On May 29, 2009, the California court of appeal held that an admittedly valid employment arbitration agreement would control the disposition of a former employee’s administrative wage claim against his former employer. Sonic-Calabasas A, Inc. v. Moreno, Case No. B204902.

The employee was subject to an arbitration agreement requiring certain claims, including claims for unpaid vacation, be submitted to arbitration. The former employee nonetheless filed an administrative charge with the Labor Commissioner seeking recovery for unpaid vacation. The employer sought to dismiss the administrative proceeding and compel arbitration. The trial court refused to enforce the arbitration agreement, but the court of appeal reversed.

The court of appeal held that the arbitration agreement was enforceable under the Federal Arbitration Act (FAA) because it did not pose a significant obstacle to the vindication of the employee’s statutory rights. In reaching its decision, the court relied on recent authority from the United States Supreme Court. In Preston v. Ferrer, 128 S. Ct. 978 (2008), the Supreme Court held that the Labor Commissioner’s original and exclusive jurisdiction was divested by the FAA with regard to a contract dispute arising under the Talent Agencies Act. Although not entirely on point, the court of appeal found the Preston decision to be persuasive, emphasizing its reasoning that the arbitration clause was binding since it only decided the forum of adjudication without relinquishing any substantive rights. So too in this case, the arbitration provision did not negate any substantive rights, but only required the employee to bring his vacation claim in arbitration rather than before the Labor Commissioner.

This blog entry was authored by Jim Hart.
 

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Many employers record their employees’ starting time and stopping time to the nearest five minutes, or to the nearest tenth or quarter of an hour. For more than 40 years, the U.S. Department of Labor has adhered to its stated enforcement policy that such a “rounding” practice is acceptable “provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b). The Department of Labor requires only that this arrangement “averages out” over time so that employees are fully compensated for all the time they actually work.

Recently, the Division of Wage and Hour Compliance at the New Jersey Department of Labor and Workforce Development has taken the position that it “does not accept the ‘rounding’ policy” of the U.S. Department of Labor for enforcement purposes under New Jersey law. The Division has taken the position that “if an employer does round off to an increment or a fraction of an hour, it must be to the benefit of the employee.”

While it has been reported that the Division’s position represents a change in its enforcement policy, the Division insists that “this has been the enforcement policy [of the Division] since the New Jersey Wage Payment Law was passed in 1965.”

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