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

By Diane Kimberlin and Joseph Lazazzero

In a decision that is sure to shake up how many employers handle their internship programs, a federal district court has ruled that unpaid interns working in the offices of motion picture production companies were not “trainees” under the federal Fair Labor Standards Act (FLSA) or New York law, but employees who had to be paid.

As is common in the motion picture industry, a “production company” was incorporated to make the movie “Black Swan;” and another was incorporated to make “500 Days of Summer.” Fox Searchlight Pictures, Inc., entered into production agreements with the production companies in which interns were employed to perform low-level office work. These interns took lunch orders, answered phones, arranged employees’ travel plans, and took out the trash. If an intern was not available to perform any of these tasks, they would be completed by a paid employee.

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By Stephen Fuchs

On March 29, 2013, New York Governor Andrew Cuomo signed legislation that will raise the minimum hourly wage in New York in three increments, commencing on December 31, 2013. The legislation, which is codified at New York Labor Law section 652, schedules increases in the New York State minimum wage as follows:

• December 31, 2013: Increase to $8.00 per hour from $7.25 per hour.
• December 31, 2014: Increase to $8.75 per hour from $8.00 per hour.
• December 31, 2015: Increase to $9.00 per hour from $8.75 per hour.

Increase in Minimum Wage for Tipped Employees

The legislation will also increase the minimum hourly wage for service employees and food service workers who routinely receive tips. The New York State Commissioner of Labor has been tasked with issuing a new wage order that will govern food service workers and service employee. This new wage order must address the minimum hourly cash wage for tipped employees, as well as allowances for meals and lodging.

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By Bill Allen

On May 8, 2013, in Wang v. Hearst Corp., the U.S. District Court for the Southern District of New York denied certification under Rule 23 of a class of unpaid interns at Hearst Magazines.

First, the court found that Rule 23(a)(2)’s commonality requirement was not satisfied under the Supreme Court’s standard in Dukes v. Wal-Mart Stores, Inc. because the plaintiffs could not “show anything more than a uniform policy of unpaid internship.” The plaintiffs’ evidence of a corporate-wide policy of classifying the proposed class members as unpaid interns was insufficient to establish commonality because the duties of the interns varied greatly from each other and from magazine to magazine. The court acknowledged that even after Dukes, “courts of this district have routinely found commonality in analogous misclassification cases,” but distinguished this case because the plaintiffs were not able to show a company-wide policy regarding their duties in addition to a company-wide policy regarding their classification. The court rejected the interns’ argument that the court should look to "the nature of the work that interns performed" to find commonality, stating that the “glaring problem” is that there is no common proof from which the court could determine the "nature" of the interns' work.

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By Bill Allen and Steven Kaplan

Relying on AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), the U.S. Court of Appeals for the Fourth Circuit held on April 1, 2013 that an arbitration provision in a franchise agreement prohibiting signatories from participating in class and collective actions is lawful in light of the clear federal directive in support of arbitration. In Muriithi v. Shuttle Express, Inc., the Fourth Circuit further found that: (1) an agreement that provides for a split in the cost of arbitration must be analyzed on a case-by case basis; and (2) a truncated statute of limitations contained outside of the arbitration clause should be reviewed by the arbitrator. The court’s decision overturned the District Court of Maryland’s March 2011 pre-Concepcion ruling that the arbitration agreement was “so permeated by substantively unconscionable provisions” that it was unenforceable. The plaintiff, a driver for a passenger shuttle service, had alleged that he and other putative class members were improperly classified as “franchisees” or “independent contractors,” and were therefore entitled to minimum wage and overtime pay under the FLSA.

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In Gonzales v. Downtown LA Motors, LP, a California Court of Appeal dealt another blow to employers this month when it held automobile mechanics, who earned at least minimum wage for every hour worked, were entitled to separate hourly compensation for any time not spent performing auto repairs. The attorneys for Downtown LA Motors argued it "can't be right" to find that employers who guarantee their employees the minimum wage for every hour worked somehow failed to satisfy their minimum wage obligation. The appellate court disagreed, awarding the class in excess of $1.5M. To learn more about the decision, please see Littler's ASAP, "That Can't Be Right!" California Appellate Court Rules that Piece Rate Workers Are Entitled to Separate Hourly Compensation, by Richard Rahm, Julie Dunne, and Michelle Heverly.

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In Lundy v. Catholic Health System of Long Island, Inc., 2013 U.S. App. LEXIS 4316 (2d Cir. Mar. 1, 2013), the Second Circuit Court of Appeals recently held for the first time that the Fair Labor Standards Act (FLSA) does not provide a claim for uncompensated "gap" time wages even when employees work overtime, provided the alleged uncompensated time does not drop employees' wages below the minimum wage. Gap time is time worked under 40 hours in a week. For example, an employee may work 39 hours in a week but be paid for only 35, in which case she has four hours of uncompensated gap time. If she works 42 hours in a week but is paid for only 38, she has two hours of uncompensated gap time (hours 39 and 40) and two hours of unpaid overtime (hours 41 and 42). In Lundy, the Second Circuit held that employees must plead "some" amount of uncompensated but compensable time worked over 40 in a week, but left open the possibility, depending on the case, that employees may need to also plead an approximation of overtime hours to establish a plausible claim. The decision also bolsters employers' arguments that district courts may exercise supplemental jurisdiction to decide state law claims even where the court dismisses all federal law claims.

To learn more about the decision, please see Littler's ASAP, Second Circuit Rejects FLSA Gap Time Claims and Explores FLSA Pleading Requirements, by Bradley Strawn.

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On Monday, December 10, 2012, the U.S. Supreme Court declined to review a Fifth Circuit Court of Appeals decision, Martin v. Spring Break ’83 Productions, L.L.C., which held that parties may privately settle and release wage claims that result from a bona fide dispute as to liability rather than a compromise of guaranteed FLSA rights. Martin, as we previously discussed, stands in sharp contrast to the Eleventh Circuit Court of Appeals decision in Lynn’s Food Stores, Inc. v. United States, which held that FLSA disputes could only be settled if either the U.S. Department of Labor supervised payment or a court approved a settlement after an employee filed a private lawsuit.

This is positive news for employers that operate within the Fifth Circuit, which includes Texas, Louisiana, and Mississippi. Whether district or other appellate courts will follow the Fifth Circuit’s lead, in light of the Supreme Court allowing the Martin decision to stand, remains uncertain. However, employers who operate within the Eleventh Circuit, which includes Florida, Georgia, and Alabama, are still bound by the Lynn’s Food decision.

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The Colorado Department of Labor and Employment has announced that, effective January 1, 2013, the minimum wage for non-exempt employees will increase from $7.64 to $7.78 per hour. Moreover, the minimum wage that tipped employees must be paid increases from $4.62 to $4.76 per hour, whereas the maximum tip credit employers may apply towards meeting their minimum wage obligation remains $3.02 per hour. Colorado joins Missouri, Vermont, and 7 other states that will have increased minimum wage rates in 2013.

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At this month's general election, 59 percent of the voters in the City of San Jose, California approved an initiative measure to institute a $10 per hour minimum wage for covered employers and employees. The ordinance will take effect in early 2013, raising San Jose's minimum wage to two dollars an hour more than California's minimum wage. To learn more about the San Jose minimum wage ordinance, please see Littler's ASAP, Do You Know the Way to Pay in San Jose? San Jose Becomes the Fifth – and Largest – U.S. City to Enact Its Own Minimum Wage Ordinance, by Christopher Cobey and Karin Cogbill.

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For the first time since July 2009, the Missouri minimum wage will exceed the federal rate. The Missouri Department of Labor & Industrial Relations announced that, effective January 1, 2013, the state minimum wage for non-exempt employees will increase from $7.25 to $7.35 per hour. Moreover, the minimum wage that tipped employees must receive increases from $3.63 to $3.68 per hour, and the maximum tip credit employers may take increases from $3.62 to $3.67 per hour. The Missouri announcement comes a few days after Vermont announced an increased 2013, and shortly after a host of other states announced higher minimum wage obligations for employers in 2013.

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The Vermont Department of Labor has announced that, effective January 1, 2013, the state minimum wage will increase from $8.46 to $8.60 per hour for non-exempt employees. Additionally, the minimum wage for tipped employees increases from $4.10 to $4.17 per hour. Moreover, the maximum tip credit employers may take increases from $4.36 to $4.43 per hour. For a list of states that will also increase their minimum wage in 2013, please see out previous post.

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The 2013 federal minimum wage will remain unchanged at $7.25 per hour for non-tipped employees, and $2.13 per hour for tipped employees. However, 7 states have announced that their minimum wage will increase on January 1, 2013. Moreover, one state has proposed an increase. Additionally, 2013 minimum wage determinations have not yet been announced by two states whose minimum wage is adjusted each January 1.

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By Brian Dixon

The favorable outcome for some employers in Arechiga v. Dolores Press, 192 Cal. App. 4th 567 (2011), which we previously discussed, has been undone by the California Legislature. In Arechiga, a California Court of Appeal ruled that a non-exempt employee’s salary could provide compensation for more than 40 hours of work in a week. This result, however fortuitous for employers, was difficult to reconcile with section 515(d) of the California Labor Code, which stated in fairly specific terms that the hourly rate of a salary-paid, non-exempt employee was the salary divided by 40. Whatever latitude there may have been for the conclusion reached by the court in Arechiga under the statute has been banished by Governor Brown’s signing Assembly Bill  2103 into law on September 30, 2012. That bill adds section 515(d)(2) and slightly revises section 515(d)(1) of the Labor Code with the stated intent to overrule Arechiga. Section 515(d)(2) now states that “Payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee’s regular, non-overtime hours, notwithstanding any private agreement to the employer.” For the typical non-exempt employee, section 515(d)(2) will mean that any salary will not extend beyond providing compensation for five, eight-hour days per week. The amendments to the Labor Code will take effect January 1, 2013. 

Photo credit: Asilvero

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By Sarah Green

In the latest decision concerning service charges and tips in the hospitality industry, the Maine Supreme Court recently addressed whether banquet wait staff may share a “service charge” paid by customers with other employees under Maine law without violating Maine’s tip credit statute. In Hayden-Tidd v. The Cliff House & Motels, Inc., the plaintiff, a former banquet server, appealed summary judgment dismissing her putative class action, which alleged that the employer violated Maine law by not paying her and her fellow servers the entire mandatory “service charge” assessed to customers when the employer instead shared the service charge among other banquet employees. The Maine Supreme Court held that the employer’s practice did not violate Maine law.

Specifically, Maine law in effect during the plaintiff’s employment provided that an employer could pay only half of the minimum wage to its employees who received tips sufficient to raise their wages at or above the statutory minimum ($7.50 per hour during the relevant period). In order to ensure that employees received the entire tip left by the customer, the tip credit statute further required that “[t]ips that [were] automatically included in the customer’s bill or that [were] charged to a credit card must be given to the service employee.”
 

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By Sarah Green

On June 28th, the New York City Council voted to override Mayor Michael Bloomberg’s recent veto of the city’s living wage bill. The bill would increase wages to $11.50 an hour, or $10 an hour with benefits, for employees of companies receiving $1 million or more in city subsidies—an estimated 900 individuals. In response, Mayor Bloomberg has vowed to sue to block the bill from taking effect. Council Speaker Christine Quinn has stated that if Mayor Bloomberg sues, the Council “will defend the bill, and if we defend the bill, we will win.”
 

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Last week a number of bills were introduced in the U.S. House of Representatives and Senate that seek to amend the Fair Labor Standards Act (FLSA) and prevent an FLSA-related regulation from moving forward. Some measures would toughen the statute by adding stronger pay discrimination nonretaliation provisions and increasing the minimum wage, while others target the FLSA’s minimum wage and overtime exemption provisions. To learn more about the bills and their potential implications for employers, please continue reading at Littler's Washington D.C. Employment Law Update.

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By Gregory B. Reilly

Employers faced with wage and hour litigation often seek to condition settlement on the agreement of plaintiffs to keep the settlement and its terms confidential. Confidentiality is often an important condition of settlement because employers may hope to avoid “copycat” claims by other employees and face the possibility that disclosure of a wage and hour settlement may be viewed by the public as an “admission” of liability.

Recently, in an unpublished decision, Brumley v. Camin Cargo Control Inc., the U.S. District Court in New Jersey refused an employer’s unopposed request to seal the terms of a Fair Labor Standards Act (FLSA) lawsuit settlement. The court stated that there is a “presumption” in favor of public access to the settlement terms so that the public knows such cases are fairly resolved.

While it is still possible, depending upon the circumstances, that employers can confidentially resolve FLSA wage and hour lawsuits, it is becoming increasingly clear that courts, as in the Brumley case, are hesitant to do so. Moreover, when an FLSA lawsuit involves a sizable number of plaintiffs, the public’s interest in disclosure of the settlement terms seems more likely to be implicated. In this respect, we note that the settlement in Brumley involved 112 plaintiffs.

Photo credit: YanC

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By Joseph Lazazzero

On March 1, 2012 the minimum wage for employers in Santa Fe, New Mexico will increase to $10.29 per hour. The rate will exceed San Francisco’s $10.24 requirement, becoming the highest minimum wage in the country. The reason for the increase is a city ordinance that ties wage requirements to the consumer price index for the western United States. The consumer price index for the region saw a marked increase, as the cost of living in Santa Fe is 18 percent higher than the national average. 

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By Mary Walsh

In a matter of significance for California employers, in See’s Candy Shops, Inc. v. Superior Court of San Diego, the California Supreme Court recently ordered the California Court of Appeal, Fourth Appellate District, to review a trial court decision holding that rounding employee time entries violated California law.

Last year, in an unprecedented ruling, the San Diego Superior Court held that See’s Candy Shops, Inc. (“See’s") violated California law by rounding employee time entries to the nearest six minutes. The court granted the plaintiff’s motion for summary adjudication on two of See’s rounding affirmative defenses, finding them at odds with sections of the California Labor Code dealing with the timing of wage payments.

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On December 15, 2011, the Department of Labor’s Wage and Hour Division (WHD) issued its much-anticipated proposed rule that could make more than a million domestic caregivers eligible to receive minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). According to the WHD, the home healthcare industry has changed since the FLSA regulations governing home care employees were enacted more than 35 years ago. To that end, the proposal seeks to revise the FLSA’s companionship and live-in worker regulations to limit the types of duties that render a home caregiver exempt from FLSA requirements, clarify the type of activities and duties that may be considered “incidental” to the provision of companionship services, amend the recordkeeping requirements for live-in domestic workers, and specify that the exemption is limited to care givers employed by the individual, family or household using the services only. Third-party employers, including in-home staffing agencies, would not be entitled to claim the exemption even if the worker is jointly employed by the third party and the family/household. To learn more about the proposed rule and its implications for employers, please continue reading at Littler's Washington D.C. Employment Law Update.

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As previously discussed, Colorado proposed increasing its minimum wage rate for 2012. On December 9, 2011, after holding hearings and soliciting comments on the proposed increase, the Colorado Department of Labor & Employment announced the minimum wage rate employees must be paid, effective January 1, 2012: the minimum wage increases 28 cents per hour, from $7.36 to $7.64 per hour; the rate paid to tipped employees also increases 28 cents per hour, from $4.34 to $4.62 per hour.

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The Vermont Department of Labor has announced the state’s 2012 minimum wage rates. Effective January 1, 2012, an employee must be paid at least $8.46 per hour, a 31-cent increase from 2011. Additionally, tipped employees must be paid at least $4.10 per hour, a 15-cent increase from 2011. The maximum tip credit an employer may take increases 16 cents per hour to $4.36 per hour. For a list of 2012 minimum wage rates in other states, please see our previous post.

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Although the 2012 federal minimum wage will remain unchanged at $7.25 per hour, six states have announced that their minimum wage will increase on January 1, 2012. Additionally, one state has proposed an increase, and another will announce its 2012 minimum wage either this month or in December. One state, however, announced that its minimum wage will not change in 2012.

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Bipartisan legislation introduced in the Senate last week would update the Fair Labor Standards Act’s (FLSA) computer employee exemption. Section 13(a)(17) of the FLSA establishes minimum wage and overtime exemptions for computer systems analysts, computer programmers, software engineers, or other similarly skilled workers provided that these employees’ specific job duties and compensation meet certain requirements. To learn more about the legislation and its potential implications for employers, please continue reading at Littler's Washington D.C. Employment Law Update blog.

Photo credit: PressFoto

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By Christopher B. Kaczmarek and Jeanne Barber

Judge Gertner of the U.S. District Court for the District of Massachusetts recently issued an opinion rejecting the Klinghoffer rule, potentially making it easier for a plaintiff to prevail on claims that his or her employer failed to pay the minimum wage. Under the Klinghoffer rule, which takes its name from the case of United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487 (2d Cir. 1980), courts apply a weekly-average method to determine whether an employer is in compliance with the minimum wage requirement of the Fair Labor Standards Act. Applying this rule, courts have declined to find a minimum wage violation as long as the total weekly average wage divided by the hours actually worked is at least equal to the applicable minimum wage. For example, assume an employee works 26 hours per week at a rate of $10 per hour, earning $260 each week. Even if this employee worked an additional four hours for which she was not paid, her average hourly wage would equal $8.67, exceeding the minimum wage.

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By Chris Kaczmarek

New Hampshire recently enacted a number of amendments to its wage and hour laws. Some of these amendments are of great importance to employers in the Granite State.

First, New Hampshire greatly expanded the types of deductions employers may make from employees’ wages. Specifically, an employer may now make such deductions “for any purpose on which the employer and employee mutually agree that does not grant financial advantage to the employer, when the employee has given his or her written authorization and deductions are duly recorded.” The new law provides, however, that such deductions may not be used to offset payments intended for purchasing items required in the performance of the employee’s job in the ordinary course of the operation of the business. In response to this change in the law, which became effective on August 6th, the New Hampshire Department of Labor (NHDOL) has published two new forms for use by employers: (1) a form by which an employee may authorize voluntary deductions; and (2) a form by which an employee authorizes the employer to recoup accidental overpayments of wages. These forms are available on the NHDOL’s website.

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By Ryan L. Eddings

A federal judge in California held this week that employers may lawfully deduct amounts owed by employees on their employer-guaranteed credit cards from the employees’ final pay. In Ward v. Costco Wholesale Corporation, a group of former employees claimed that Costco’s deduction of outstanding amounts owed by these former employees on their Costco-sponsored credit cards from the employees’ final paychecks violated the Fair Labor Standards Act and California minimum wage and overtime legal requirements.

Like many employers, Costco provided a guaranteed credit card program to some employees, guaranteeing the credit card to the issuer in the event of an employee’s default. Each employee signed an authorization permitting Costco to deduct an amount equal to the employee’s credit card then-outstanding balance from the employee’s final paycheck. Each terminating employee received a final paycheck that included pay for all hours worked during the final pay period, as well as accrued vacation and sick leave pay. Costco then deducted an amount equal to the outstanding balance of the employer-sponsored credit card from the employees’ final pay.

At trial, the group of former employees argued that only gross wages for hours worked could be considered in determining whether Costco satisfied its obligation to pay minimum and overtime wages. The court rejected this argument, holding that it could also consider the pay for non-work, such as accrued vacation and sick leave pay. Using this figure, the court concluded that none of the nineteen former employees “had an amount withheld high enough to invade minimum or overtime wages.” Accordingly, the court entered judgment in favor of Costco, holding that plaintiffs failed to prove a violation of the FLSA and California wage and hour laws.

Photo credit: Matthew John Hollinshead

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By Niza Motola

On June 1, 2011, Florida’s minimum wage will increase to $7.31 per hour, a six cent increase from the previous $7.25 calculation effective on January 1, 2011. Employees who receive tips as compensation will see their minimum wage increase to $4.29 per hour, a six cent increase from $4.23. This unexpected increase is the result of a Florida court decision holding that the Florida Agency for Workforce Innovation violated Florida’s Constitution by failing to raise the Florida minimum wage on January 1, 2011. 

In Cadet v. Florida Agency for Workforce Innovation, filed in January 2011, the court agreed with the plaintiffs (including Restaurant Opportunities Center of Miami and Farmworker Association of Florida) that the Florida agency had incorrectly calculated the Florida minimum wage. Specifically, the plaintiffs had argued that in calculating the Florida minimum wage, the state agency improperly decreased the rate based on a decrease in the cost of living. As a result of a decrease in the cost of living from 2008 to 2009, the agency determined that for 2010, the state minimum wage rate should be decreased from $7.21 to $7.06. The agency then used the reduced 2010 state minimum wage rate of $7.06 to calculate an adjusted minimum wage rate for 2011 using the 1.4 percent increase in the cost of living from 2009 to 2010, resulting in a rate of $7.16, less than the federal minimum wage. The court held that under the Florida Constitution, the minimum wage cannot be decreased, resulting in a new calculation and the six cent increase, effective June 1, 2011.

On May 3, 2011, following the court ruling, the agency updated its web page on Florida’s minimum wage to reflect the increase to $7.31. This update may signal that the agency will not appeal the court’s ruling.

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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 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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Addressing an issue of first impression in the Fourth Circuit, a Maryland federal court has held that the owner of a restaurant/tavern—who is also a bartender at his establishment—may not lawfully participate in his employee bartenders’ tip pool under the Fair Labor Standards Act, 29 U.S.C. §§  201 et seq. (FLSA). In Gionfriddo v. Zink, LLC, et al., the court was asked to decide whether an “employer” may also be a “tipped employee” and receive a share of the tip pool. Other bartender employees challenged the employer's acts and the court agreed with the employees, noting that “[e]very court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participation in employee tip pools.” The court left open the “theoretical” possibility that, in some close circumstances, an individual can be an “employer” under the FLSA and at the same time share in a tip pool. This case, however, was not one of those close circumstances.

While the general rule is that employees must be paid minimum wage, i.e., $7.25 per hour under the FLSA, an exception exists for “tipped employees.” Tipped employees are those who are “engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips.” 29 U.S.C. § 203(t). Under these circumstances, an employer satisfies the FLSA requirement if it pays tipped employees at least $2.13 per hour, and that wage, combined with tips, equals or exceeds $7.25 per hour. 29 U.S.C. § 203(m). In this case, the parties agreed that bartending is a tipped occupation.

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The U.S. District Court for the Western District of New York has determined that the Fair Labor Standards Act requires employers to reimburse foreign H-2B visa workers for certain expenses paid by the workers if, after subtracting the costs from the workers’ wages, the workers’ effective net salary would fall below minimum wage. See Teoba v. Trugreen Landcare, No. 10-CV-6132 (W.D.N.Y. filed Feb. 15, 2011). The plaintiffs in Teoba alleged that they had paid for the costs of obtaining an H-2B visa, traveling to the United States, and the services of a third-party recruitment firm, which the employer had retained. The plaintiffs further alleged that after deducting the costs from their earned wages they received a net salary that fell below minimum wage.

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The Seventh Circuit recently reversed the denial of class action certification in a Fair Labor Standards Act (FLSA) collective action, rejecting the notion that FLSA collective actions and state-law class actions are incompatible when filed in the same lawsuit. Ervin v. OS Rest. Servs., No. 09-3029, 2011 U.S. App. LEXIS 863 (7th Cir. Jan. 18, 2011).

In Ervin, the plaintiffs, former and current employees of a popular restaurant, sued the restaurant on behalf of themselves and all others who had previously worked or were currently employed at the restaurant as hourly or tipped employees, claiming that the restaurant’s tipping policy violated both the FLSA and two state wage & hour laws – the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act.

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As we wrote last month, the New York State Department of Labor has issued amended wage regulations for restaurants and hotels effective January 1. The DOL has now issued a notification to employees that the employer must post the regulation’s requirements in a conspicuous place in the establishment. Note that the poster is somewhat misleading with respect to the overtime rate for tipped employees. Overtime for tipped employees is one and one half times the minimum wage less the tip credit.

The poster also mentions call-in pay and spread-of-hours pay. Call-in pay is additional hours at minimum wage owed to employees who are sent home early. Spread-of-hours pay is an additional hour of pay at minimum wage owed to any employee when the length of the interval between the beginning and end of his or her workday exceeds ten hours. It should be kept in mind that while employers will have until March 1, 2011, to implement the required changes, the changes must be retroactive to January 1, 2011. Therefore, it is imperative that employers begin keeping thorough records of hours worked and wages and tips paid.

This entry was written by Andrew Marks.

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New York law has long prohibited employers from paying workers less than the minimum wage or failing to pay proper overtime. This newly enacted piece of legislation, the Wage Theft Prevention Act, now adds strict new penalties for failure to comply with minimum wage and overtime laws. The new law also amends current wage notification requirements for employers.

Under the Wage Theft Prevention Act, in the event of a wage payment violation, an employer may be liable for up to twice the amount that was due as wages as well as other penalties and legal fees. The law also prohibits retaliation against employees who exercise their rights under the statute.

Additionally, the new law requires notifications to be provided to employees in their native language at the time of hire and on or before each February 1st. Previously the law required such a notification to include the rate of pay and regular paydays. The new law adds several additional requirements to the contents of the notification, including more detail on the basis of pay (i.e., whether the employee is paid on a salary, hourly, piece or commission basis, etc.) and information regarding the employer, such as its address and phone number. There are also new detailed requirements concerning the acknowledgment of the required notification, and a new records retention requirement of 6 years.

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The long-awaited revisions to New York's hospitality industry wage regulations have finally become official. They go into effect January 1, 2011, but full compliance is not required until March 1, 2011. Here are some highlights:

Minimum and Overtime Wage: The tip credit rate for food service workers is increased from $4.65 to $5.00 per hour. The new overtime rate for tipped food service workers will be $8.63. All nonexempt employees who work in the hospitality industry, including office workers employed by a hotel or restaurant, must be paid by the hour: shift pay, weekly salary or other non-hourly rate bases will no longer be permitted.

Spread of Hours: All nonexempt employees are eligible for spread of hours pay (i.e., an additional hour of pay at the minimum wage) if the time between the beginning and end of their workday exceeds ten hours.

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The Ninth Circuit Court of Appeals has recently held that the City of Oakland, California did not violate the Fair Labor Standards Act (“FLSA”) when it required its police officers to repay the City for the cost of their training if they voluntarily resigned before completing five years of employment. (Gordon v. Oakland, No. 09-16167 (9th Cir. Nov. 19, 2010)).

In Gordon, the City and the bargaining unit for its police officers had entered into an agreement which required police officers to repay the City a pro rata share of their police academy training costs if they voluntarily separated from the City’s employment prior to completing five years of service. For example, a police officer who resigned after one year of service would have to repay 80% of the training costs whereas a police officer resigning after four years of service would only have to repay 20%. A police officer who resigned after five years of service would owe nothing to the City for training cost reimbursement. The agreement further provided that any repayment would be due at the time of the officer’s separation and that the City could deduct amounts due from the officer’s final paycheck.
 

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On January 1, 2011, six states (listed below) will increase their minimum wage requirement. Two states—along with American Samoa and the Northern Mariana Islands— elected to keep their current rate. Colorado is considering an increase to the minimum wage which, if passed, will also take effect on January 1, 2011. The federal minimum wage rate remains unchanged at $7.25/hr.

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Oregon’s Bureau of Labor & Industries (BOLI) announced that, effective January 1, 2011, the state minimum wage will increase by ten cents, to $8.50 per hour. Oregon employers are required to post the revised minimum wage poster, which BOLI will make available for download. Oregon is one of ten states whose minimum wage is adjusted annually based on inflation and the Consumer Price Index. In 2010, no increase occurred because the cost of living decreased.

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Senator John Kerry (D-MA) and Rep. Jim McDermott (D-WA) have introduced a bill that would curtail the use of a federal “safe harbor” that allows businesses to treat workers as independent contractors for federal employment tax purposes, regardless of the employee’s actual status under the common law test. The Fair Playing Field Act of 2010 (pdf) (H.R. 6128, S. 3786) would, among other things, require the Secretary of the Treasury to issue prospective guidance on worker classification for federal employment tax purposes. The safe harbor provided under section 530 of the Revenue Act of 1978 would continue to be available until the date an individual’s employment status is reclassified. The worker’s reclassification date would be the earlier of (a) the first day of the first calendar quarter beginning more than 180 days after the date of an employee classification determination by the Secretary of the Treasury; or (b) the effective date of the “first application final regulation” issued by the Secretary of the Treasury with respect to such individual (or if later, the first day of the first calendar quarter beginning more than 180 days after such regulation is issued). To learn more about the bill and its potential implications for employers, please continue reading at Littler's Washington, D.C. Employment Law Update blog.

Photo credit: SchulteProductions

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In a recent opinion, Polycarpe v. E & S Landscaping Serv. Inc., No. 08-15154 (11th Cir. Aug. 31, 2010), the Eleventh Circuit held that employees of primarily intrastate businesses may nonetheless be covered under the Fair Labor Standards Act (FLSA) if they can show that, in their employment, they utilized “materials” that had moved at any time in interstate commerce. “This decision makes it easier for low-wage workers to vindicate their rights under the FLSA by permitting workers to prove that they worked for covered enterprises,” said Steven J. Mandel, the Department of Labor’s Deputy Solicitor for National Operations.

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On August 31, 2010, just in time for Labor Day, New York Governor David Paterson signed into law the “Domestic Workers Bill of Rights” (“Bill of Rights”), which grants certain employment protections to household domestic workers such as nannies, caregivers and housekeepers. The Bill of Rights, which takes effect on November 29, 2010, is the first of its kind in the nation and amends New York Labor Law, in addition to other statutes, to entitle domestic workers to receive overtime pay, one day of rest per week or overtime pay when they work on their day of rest, and three days of paid time off after one year of employment. To learn more about the law and its implications for employers, please continue reading Littler's ASAP, "New York Enacts Bill of Rights for Domestic Workers," by Stephen A. Fuchs.

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This week, Rep. Linda Sanchez (D-CA) introduced legislation that would extend the federal minimum wage and overtime protections of the Fair Labor Standards Act (FLSA) to most home care workers, improve federal and state data collection and oversight with respect to the direct care workforce, and create a grant program to help states recruit and train direct care workers. Specifically, the Direct Care Workforce Empowerment Act (H.R. 5902) would limit the “companionship services” FLSA exemption to those who work 20 or fewer hours per week. To learn more about the bill, please continue reading at Littler's D.C. Employment Law Update blog.

Photo credit: AlexRaths

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The Nevada Labor Commissioner announced that, effective July 1, 2010, Nevada’s minimum wage increased as follows:

• Employers not offering qualifying health insurance benefits must pay employees a minimum wage rate of $8.25 per hour (up from $7.55 per hour).
• Employers offering qualifying health insurance benefits must pay employees a minimum wage rate of at least $7.25 per hour (increased from $6.55 per hour).

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The Oregon Bureau of Labor and Industries (BOLI) has amended its administrative rules pertaining to minimum wage, overtime, and working conditions effective June 1, 2010. Generally speaking, the amendments (pdf) conform Oregon’s minimum wage and overtime exemptions to federal law and clarify the rules for meals and rest periods.

First, the amended rules provide that individuals employed in domestic service positions who provide companionship services for individuals who are elderly or infirm (and therefore unable to care for themselves), are not required to be employed by the individual for whom they provide such services in order to be exempt from minimum wage.

Second, under the amendments, Oregon law is consistent with federal law by providing that certain computer system analysts, computer programmers, software engineers, or other similar skilled workers must be paid the equivalent of $27.63 per hour for each hour worked (although not necessarily on an hourly basis).

Third, the amendments state that, except as otherwise provided in the administrative rules, employees who are not relieved of all duties for 30 continuous minutes during their meal period must be paid for the entire 30-minute meal period.

These rules became effective as of June 1, 2010.

This entry was written by Janice Kim.

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On May 19, 2010, the U.S. Department of Labor announced the publication of final regulations concerning child labor. Included in the regulations are increased penalties for child labor violations.

The maximum penalty for repeatedly or willfully violating the Fair Labor Standard Act’s minimum wage and maximum hours provisions, relating to wages, increased from $1,000 to $1,100 per violation.

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After nearly four years, the California Supreme Court has finally issued a unanimous decision in Martinez v. Combs, finding that officers and directors of a corporate employer cannot be held civilly liable for causing the corporation to violate the statutory duty to pay minimum wages where the individual corporate agents acted within the scope of the agency.

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In April 2010, the U.S. Department of Labor (DOL) issued a new Fact Sheet discussing the circumstances under which “interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (FLSA) for services that they provide to ‘for-profit’ private sector employers.” At the same time, California’s Division of Labor Standards Enforcement (DLSE) stated in an opinion letter that it will apply the same rules that the DOL has applied in the past and will continue to apply as described in the Fact Sheet.

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The U.S. Court of Appeals for the Ninth Circuit applied the First Amendment’s “ministerial exception” to the claim of a Catholic seminarian, affirming the district court’s Rule 12(c) dismissal of the plaintiff’s claim for overtime pay under the Washington Minimum Wage Act (WMWA). In Rosas v. Corp. of the Catholic Archbishop of Seattle, the Ninth Circuit adopted a new test for determining whether a person is a “minister” for purposes of the ministerial exception.

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The Washington State Department of Labor & Industries (“L&I”) has approved a number of housekeeping revisions to the Washington state wage and hour regulations contained in Chapter 296-126 of the Washington Administrative Code (WAC). The revisions take effect on March 15, 2010.

As explained by L&I, the purpose of the revisions is to “repeal and delete outdated requirements; remove duplicative provisions; establish rules consistent with current statutory requirements; specify the information for certain requirements; create cross references and update definitions and terms for consistency and clarity.”
 

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The federal minimum wage remains unchanged at $7.25/hr. However, various states will either increase or decrease their state minimum wages come January 1, 2010, whereas other states have elected not to change their current rate.

States that are increasing their minimum wage

Alaska
$7.75/hr. Effective January 1, 2010 the minimum wage must be at least fifty cents more than the federal minimum wage. Alaska Statutes, §23.10.065.

Connecticut
$8.25/hr. Effective January 1, 2010, the Connecticut minimum wage will increase from $8.00/hr to $8.25/hr. General Statutes of Connecticut, §31-58.

Kansas
$7.25. Effective January 1, 2010, Kansas’s minimum wage increases from $2.65/hr to $7.25/hr. Kansas General Statutes § 44-1203.

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On July 24, 2009, the federal minimum wage will increase from $6.55 per hour to $7.25 per hour. This increase is the third and final increase in a three phase process. In light of the impending increase, there are several issues of which employers must be aware to prepare for the change:

• Replace Fair Labor Standards Act (“FLSA”) minimum wage posters. Every employer of employees subject to the FLSA's minimum wage provisions must post, and keep posted, a notice explaining the Act in a conspicuous place in all of its business establishments, so as to permit employees to readily read it. Employers may access new FLSA minimum wage posters on the Department of Labor’s (“DOL”) website

• Double check payroll fail-safes. Fail-safes are devices or features in payroll systems that ensure employees are never paid below the minimum wage. When employees are paid on a fluctuating work week basis, a day rate basis, piece rate basis, or any other basis resulting in a fluctuating “regular rate,” employers must ensure that these employees are paid at least the minimum wage. Employers should check their fail-safes and re-program them so that they do not allow employees to be paid less than $7.25 per hour (or the relevant state minimum wage).

• Employers may also use fail-safes to ensure that deductions taken from employees’ pay, for a variety of reasons, do not take employees’ wage rates below minimum wage. Employers should re-program fail-safes to ensure that deductions are not made that would result in employees being paid less than the new federal minimum wage of $7.25 per hour (or the relevant state minimum wage). 

• Check state minimum wage. Several states have established a minimum wage that is higher than the federal minimum wage. Employers are required to pay the higher required minimum wage, state or federal. Check the minimum wage for the states in which you do business, which may also increase, and make sure employees are paid accordingly.  See our previous post discussing state minimum wage increases in July 2009.

• Make sure employees earn enough in tips to qualify for the tip credit. Employees who receive more than $30.00 per month in tips may be paid less than the minimum hourly rate so long as each employee earns enough in tips to make up the difference between the wage paid and the federal minimum wage. Employers should double check to ensure that employees for whom the tip credit is used are earning enough in tips, combined with his or her direct wages of at least $2.13 per hour to equal the new minimum hourly wage. 

• Consider how the minimum wage increase affects full-time students and other groups of individuals paid special minimum wages. Full-time students employed in retail or service stores, agriculture, or colleges and universities may be paid special minimum wages. Employers hiring students may obtain a certificate from the DOL, which allows the student to be paid not less than 85 percent of the federal minimum wage. The DOL may also issue certificates allowing employment at wages below the minimum wage for apprentices, student learners, messengers, certain employees who receive tips, and workers with disabilities. If you have employees paid a special minimum wage, which is a percentage of the federal minimum wage, the special minimum wage rate must be adjusted to reflect the appropriate percentage of the increased federal minimum wage.

This blog entry was authored by Jamie Kitces.
 

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The federal minimum wage is set to increase to $7.25 on July 24, 2009. Additionally, 23 states will also increase the minimum wage for employers subject to state wage and hour laws. The majority of these increases take effect on July 24, 2009, but three states raise their minimum wage effective July 1, 2009.

In addition to noting the wage increase, employers should ensure that they are properly displaying a copy of the state’s current minimum wage poster in a conspicuous location in the workplace that notes the wage increase, even if the increase will not affect hourly employees at any particular workplace.

The following states have increased their state minimum wage:

Delaware
• $7.25/hr. effective 7/24/09

District of Columbia
• $8.25/hr. effective 7/24/09

Federal
• $7.25/hr. effective 7/24/09

Florida
• $7.25/hr. effective 7/24/2009

Idaho
• $7.25/hr. effective 7/24/09

Illinois
• $8.00/hr. effective 7/1/09

Indiana
• $7.25/hr. effective 7/24/09

Kentucky
• $7.25/hr. effective 7/1/09

Maryland
• $7.25/hr. effective 7/24/09

Missouri
• $7.25/hr. effective 7/24/09

Montana
• $7.25/hr. effective 7/24/09

Nebraska
• $7.25/hr. effective 7/24/09

Nevada
• If health benefits are available:
Effective 7/1/09 $6.55/hr (employers subject to the FLSA should see federal requirements)
• If the employer does not provide qualified health benefits:
Effective 7/1/09 $7.55/hr

New Jersey
• $7.25/hr. effective 7/24/09

New York
• $7.25/hr. effective 7/24/2009

North Carolina
• $7.25/hr. effective 7/24/09

North Dakota
• $7.25/hr. effective 7/24/09

Oklahoma
• $7.25/hr. effective 7/24/09

Pennsylvania
• $7.25/hr. (large employers) effective 7/24/09
• $7.25/hr. (small employers) effective 7/24/09

South Dakota
• $7.25/hr. effective 7/24/09

Texas
• $7.25/hr. effective 7/24/09

Utah
• $7.25/hr. effective 7/24/09

Virginia
• $7.25/hr. effective 7/24/09

Wisconsin
• $7.25/hr effective 7/24/09
 

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Last week Rep. Donna Edwards (D-Md) introduced legislation that would amend the Fair Labor Standards Act (FLSA) to establish a base minimum wage for tipped employees.  Continue reading on Littler's Washington DC Employment Law Update blog.

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Beginning July 1, 2009, every employer subject to Indiana's minimum wage law or any rule or order issued under that law, is required to post a poster providing employees with the following information: the current Indiana minimum wage; a description of an employee’s rights under the minimum wage law; and information regarding how an employee can obtain additional information from, or direct questions or complaints to, the Indiana Department of Labor. The poster is available free of charge from the Indiana Department of Labor.

This blog post was authored by Christopher Kaczmarek.

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Pursuant to an annual adjustment required by the Nevada Constitution, Governor Jim Gibbons has announced the 2009 minimum wage and overtime rates.

Nevada has a two-tiered minimum wage rate dependent on whether an employer offers qualifying health benefits. As of July 1, 2009, the minimum hourly wage for employees who receive qualified health benefits from their employer will be $6.55. For all other employees, the minimum wage will be $7.55 per hour.

In Nevada, employers must pay one and one-half times an employee's regular rate of pay when an employee: (1) is paid less than one and one-half times the applicable minimum wage rate and (2) works more than 40 hours in any workweek or more than eight hours in any workday, unless otherwise exempted by Nevada Revised Statutes 608.018. Therefore, effective July 1, 2009, the daily overtime may apply if the employee to whom qualifying health benefits have been offered by the employer is paid less than $9.825 per hour. For an employee who is not offered health benefits, daily overtime may apply if the employee is paid less than $11.325 per hour.

This blog entry was authored by Roger Grandgenett.

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The Missouri Department of Labor and Industrial Relations has promulgated new regulations to address the 2008 amendments to the Missouri Minimum Wage Law. The new regulations follow a series of changes over the last several years to Missouri law concerning employee compensation. In November 2006, Missouri voters amended the Missouri Minimum Wage law by ballot initiative. See Mo. Rev. Stat. § 290.500 et seq. The amended law, effective January 1, 2007, increased Missouri’s minimum wage and provided for future increases (under its schedule, Missouri’s minimum wage increased to $7.05 January 1, 2009). The ballot initiative changed the law in other important, and possibly unintended ways, including use of language that resulted in rejection of most FLSA exemptions and alternative compliance calculations that had previously been followed in Missouri for decades. In Spring 2008, the Missouri legislature amended the Minimum Wage law to reintroduce certain principles of the FLSA. The Missouri Department of Labor and Industrial Relations published regulations in September 2008, effective March 30, 2009, that address the amendments to the Missouri statute. Except as otherwise specified, the Missouri Department of Labor expressly adopts interpretations of the FLSA; federal regulations are incorporated into the new Missouri regulations by reference. 8 CSR 30-4.010. The Missouri regulations also include a new rule concerning the handling of administrative complaints and notice requirements. 8 CSR 30-4.060.

This blog entry was authored by KIMBERLY YATES.
 

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The Wage and Hour Division of the Department of Labor (DOL) recently released to the public three December 2008 opinion letters that addressed inquiries regarding FLSA exemption issues.

The first letter (FLSA2008-11) concluded that Assistant Athletic Instructors at an institution of higher education are exempt from the minimum wage and overtime requirements of the Act as bona fide professionals, since their primary responsibility (occupying more than 50% of their time) is teaching student-athletes.

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The start of a new year often brings with it changes in governing wage and hour legislation. Effective January 1, 2009, eleven states will increase the minimum wage for employers subject to state wage and hour laws. In addition to noting the wage increase, employers should ensure that they are properly displaying a copy of the state’s current minimum wage poster in a conspicuous location in the workplace that notes the wage increase, even if the increase will not affect hourly employees at any particular workplace.  The following states have increased their state minimum wage, effective January 1, 2009:

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For the past several years, plaintiffs have routinely sought punitive damages in their wage and hour actions under the California Labor Code. A December 3, 2008 decision by the California Court of Appeals for the Fourth Appellate District may put a stop to that practice.

The plaintiff in Brewer v. Premier Golf Properties sued her former employer for denying her meal and rest breaks, failing to pay her minimum wage for all hours worked, and not providing her with accurate itemized wage statements. The jury awarded the plaintiff $26,300 in unpaid wages and penalties and, after finding that the defendant employer had engaged in malice, awarded the plaintiff an additional $195,000 in punitive damages.

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