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

By Sara Sheinkin and Andrew Marks

Beginning on May 5, 2011, employers in the hospitality industry who take a tip credit against their employees’ wages will be covered by three separate notice requirements, and compliance with all three is critical. Even if the employer does not take a tip credit against an employee’s wages, the first two notices discussed below are still required.

A.                 The New York State Regulations for the Hospitality Industry

1.                  What?

The New York State Regulations for the Hospitality Industry became effective January 1, 2011, and require that employers give employees written notice of their regular and overtime pay rates, the amount of any tip credit taken, if any, and the regular payday. 

This notice must also state that extra pay is required if tips are insufficient to bring the employee up to the basic minimum hourly rate.

See our blog New York Hospitality Wage Orders Revised for more information concerning the requirements of the Hospitality regulations.

2.                  Who?

The notice required by the Hospitality regulations must be given to all non-exempt employees working in New York for an employer who is covered by the regulations, whether or not the employer takes a tip credit against the employee’s wages.

3.                  When?

This notice must be provided to employees prior to the start of their employment and prior to any change in an employee’s rates of pay.

4.                  How?

The employer must provide this written notice to employees in English and any other language spoken by the employee as his or her primary language. This primary language requirement only applies if the Commissioner of the New York Department of Labor has made such notices available to employees in such language on the Department’s website.

Employers must have employees sign an acknowledgment of receipt of the notice and keep the acknowledgment on file for six years.

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By Sarah Green

On April 13, 2011, a federal district court judge in Illinois held, in Mullins v. Target Corp., that “investigators” employed by Target Corporation qualified for the administrative exemption to the FLSA. Accordingly, the court dismissed a putative class action filed against Target by those investigators.

Plaintiff previously worked for Target as an investigator. Her job duties included conducting investigations of fraud and theft occurring at Target’s retail stores in Chicago and Indiana. The employee brought an action individually, and on behalf of all other Target investigators, alleging that she and her fellow investigators were misclassified as exempt and therefore should have been paid overtime.

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By Milton Castro and Jeremy Stewart

On February 22, 2011, the Illinois Department of Labor issued emergency rules to more swiftly implement and enforce the legislature’s amendment to the Illinois Wage Payment and Collection Act (IWPCA or the “Act”) that went into effect on January 1, 2011. The amendment modified the Act by: (1) clarifying an employee’s right to pursue a private right of action; (2) providing a new administrative forum for claims under $3,000; (3) imposing enhanced civil and criminal penalties; and (4) expanding employees’ protection from retaliation. With the emergency rules now in place, the Act has been further modified in some of the following ways:

• The Department has reconfirmed that administrative, executive, and professional exemptions to the Act’s overtime requirements shall be determined based on the regulations to Fair Labor Standards Act as they existed prior to the 2004 amendments;
• The Act now specifically prohibits employers from requiring employees to enroll in a direct deposit arrangement.
• Rather than just keep records for each employee, employers must make and maintain records to include particular information about employees’ hours worked, pay, vacation days earned, etc.
• Claimants now have 1 year to file a wage claim (extended from 180 days) from the time their wages or final compensation are due. Employers are likewise allowed 15 days rather than 10 to respond to a wage claim.

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By Tracy Stott Pyles

A federal district court judge in Wisconsin recently held that the FLSA does not provide a cause of action for “gap” time claims. “Gap” time generally refers to uncompensated, non-overtime hours. Courts are divided as to whether the FLSA permits such claims.

In Espenscheid v. DirectSat USA, LLC, the employer argued that the plaintiffs could not pursue their claims for gap time because the hours in question were not overtime hours and the plaintiffs’ total compensation for any work week divided by the hours worked during that period did not fall below the minimum wage. The court began its analysis by noting that “most” courts prohibit pure gap claims, i.e., claims for straight time in weeks in which the employee worked no overtime. The court also noted that some courts permit gap time claims for weeks in which the employee worked more than 40 hours and the relevant employment agreement does not expressly or implicitly compensate for all non-overtime hours.

The court ultimately granted the employer’s motion for summary judgment on the gap time issue, holding that the FLSA does not provide a cause of action for gap claims “of any kind.” In reaching its conclusion, the court noted that: (1) the failure to pay for non-overtime hours diminishes the employee’s overall compensation, but there is no language in the FLSA creating a cause of action for diminished overall compensation; (2) the FLSA itself only requires the payment of minimum wages and overtime wages; (3) the FLSA not does expressly prevent an employer from requiring employees to work some hours below the overtime threshold for free, provided the employees’ average wage exceeds the minimum wage; (4) the “prohibited acts” listed in Section 215 of the FLSA do not include failure to pay straight or gap time wages; and (5) the FLSA does not provide an avenue for the recovery of straight time pay.

Photo credit: MBPhoto, Inc.

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By Jennifer Nelson

Earlier this week, the Court of Appeals for the Ninth Circuit held that an employer violated Oregon’s wage and hour law by (1) crediting the cost of seasonal workers’ on-site housing toward the Oregon minimum wage, and (2) paying its workers on the day after their last workday instead of on the last workday itself.

The employer in this case, Bear Creek Orchards, Inc., operates peach and pear orchards in Medford, Oregon. The company hires approximately 350 seasonal workers for its month-long harvest. Bear Creek recruits the majority of its workforce from the San Luis, Arizona, area, and offers those workers on-site housing and meals as part of their compensation. Bear Creek charged workers between five and seven dollars a day for the housing, deducted this amount from the workers’ paychecks, and credited that amount toward its minimum wage obligation under Oregon law. In addition, the company generally provided these employees with their final paychecks on the morning after their last day of work.

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By Steven Kaplan

While arbitration agreements are generally enforceable in the Fourth Circuit, a Maryland court recently denied a motion to compel arbitration in a collective action based on three provisions the court believed were “unconscionable. In Gadson v. Supershuttle International employees filed a collective action under the FLSA alleging that the employer misclassified them as independent contractors. In response, the employer filed a motion to compel arbitration because the plaintiffs had executed franchisee agreements that contained a provision to arbitrate disputes arising from the agreement. Plaintiffs opposed the motion asserting that the following three provisions were unenforceable: (1) fee splitting; (2) prohibition of class actions; and (3) truncating the statute of limitations. The court agreed and held that the “severability” clause could not save the agreement because it would require “a near rewrite of the contract.”

The court found the fee splitting provision unlawful because the individual recovery for each plaintiff was projected to be far below the cost of the arbitration. To support this argument, Plaintiffs provided the court with their tax returns which demonstrated that they would not be able to afford the arbitration.

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By Kimberly Yates

On April 5, 2011, the Wage and Hour Division of the U.S. Department of Labor published its final amendments to regulations interpreting the Fair Labor Standards Act of 1938 (FLSA) and the Portal-to-Portal Act of 1947.

The new regulations provide specific guidance pertaining to ownership of employee tips, a description of permissible tip pooling arrangements, and clarification of the required notice to a tipped employee concerning an employer’s intent to utilize the FLSA’s tip credit. The DOL explains the amendments were driven by a need to revise regulations that are out of date as a result of “subsequent legislation.” The final amendments to the regulations, which differ in some significant respects from those the DOL originally proposed in 2008, will be effective May 5, 2011.

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Employers with operations in New York should already be aware of the new law called the Wage Theft Prevention Act (WTPA) that goes into effect April 9, 2011. Among many other new requirements, this law requires that employees are given wage and other information, in writing, at the time of hire, and annually by February 1 of each year. Written notices may also be required when wage information or other information changes; and the law imposes new requirements for wage statements. (For more information, see Littler’s ASAP.)

The New York State Department of Labor has posted on its website template forms intended to comply with the new notice requirements of the WTPA. In addition to English templates, there are dual language forms for Spanish, Chinese and Korean. The forms may be found at http://www.labor.state.ny.us/workerprotection/laborstandards/workprot/lshmpg.shtm. We have been informed that dual language forms in Haitian-Creole, Polish and Russian are forthcoming. The Department has also issued guidelines concerning the WTPA in the form of FAQs that can be found at the same web address.

Upon our initial review, it appears that the sample forms seek to elicit information that is not required under the WTPA, and in other respects might deviate from the technical requirements of the WTPA. It is important to note that these are merely sample forms, and employers are not required to use them "as is" so long as the forms they do use comply with the WTPA's requirements.

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