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

The New York State Department of Labor ("NY DOL") is in the process of combining separate restaurant and hotel industry minimum wage orders into a single wage order which will be called the Hospitality Industry Wage Order. Although the NY DOL has not yet issued regulations for this consolidated wage order, a Labor Commissioner Order dated November 5, 2009 foretells the major changes in store for non-exempt employees in the hospitality industry. For more information on the changes, see Littler’s ASAP Here’s A Tip: New York is Overhauling the Restaurant and Hotel Industry Wage Orders by Gerald T. Hathaway and Lisa M. Brauner.

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In Collins v. Heritage Wine Cellars Ltd. (7th Cir., No. 09-1181, Dec. 21, 2009), the Seventh Circuit Court of Appeals analyzed the extent to which drivers who delivered wine exclusively within the State of Illinois were engaged in interstate commerce and, therefore, not entitled to overtime under the Motor Carrier Act exemption to the Fair Labor Standards Act. Specifically, this exemption from overtime applies to employees of a motor carrier if “property ... [is] transported by [the] motor carrier between a place in a State and a place in another State,” provided the employees “engage in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the Motor Carrier Act.” As the court noted, “[t]he shipment itself must be in some sense interstate commerce (transportation between a place in a state and a place in another state).”

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Several new wage and hour bills made it through various state legislatures during the second half of the year. Below is a wrap up of some new developments (including regulatory updates) from July 1st through December 31st. Click here to read our post on changes to state minimum wages.

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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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In Barbosa v. IMPCO Technologies, Inc., the California Court of Appeals for the Fourth District held that terminating an employee for exercising his statutory right to overtime wages out of a reasonable, good faith belief of entitlement to it, (notwithstanding the subsequent discovery that he was wrong), was contrary to California public policy.

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In a putative class action pending in the Northern District of California filed by Catherine Sullivan against Kelly Services, Inc. (Case No. C 08-3893 CW), Judge Claudia Wilken ruled in a summary judgment motion that the time spent interviewing by Kelly Services' employees seeking temporary work assignments with Kelly Services' clients is compensable under California law. However, Judge Wilken also ruled that the time spent preparing for and commuting to the client interviews was not compensable, and that Kelly Services was not required to reimburse the employees for expenses incurred in attending the interviews. Judge Wilken found that under the facts of this case, the employees were "subject to the control" of Kelly Services and that Kelly Services "suffered or permitted" the employees to work in connection with the interviews. She rejected the defense argument that the client interviews were "voluntary," finding that the failure to interview would prevent the employee from being considered for 50% of the job assignments . She also rejected the defense argument that the interviews were not time worked as the employees were not employed in between work assignments, finding this latter argument inconsistent with the position taken by the employer in a prior action between the parties.

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On September 30, 2009, the United States District Court for the Eastern District of Michigan, in Henry v. Quicken Loans, Inc., 2009 WL 3199788, held that a mortgage lender-employer acted in good faith when it demonstrated that it had reasonably relied upon the September 2006 U.S. Department of Labor Opinion Letter when determining whether its loan officers qualified for the “administrative exemption” to the Fair Labor Standard Act and were therefore ineligible for overtime.

As discussed previously, the issue was initially determined in July by a federal magistrate judge who ruled that an employer’s reasonable reliance on the September 2006 DOL Opinion Letter, as established through affidavit testimony of corporate executives, constituted good faith as a matter of law.  This ruling, contained in the magistrate’s report and recommendation, was adopted and confirmed by the district court and, therefore, the employer faces no liability for potentially misclassifying its loan officers from the date of the DOL letter, September 8, 2006, onward. The court also adopted the magistrate’s decision denying the parties’ cross-motions for summary judgment on the merits of the employer’s affirmative defense, based upon the exemption.

This entry was written by Andrew Voss.

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Intrastate haulers and slingers of trash and recyclables are exempt under the federal Motor Carrier Act according to a recent decision by the United States District Court for the Southern District of Indiana, Indianapolis Division. Craft, et al. v. Ray’s LLC and Donald Matthews, 1:08-cv-627-RLY-JMS (S.D. Ind.). The FLSA mandates that employers pay employees one and a half times their regular rate for each hour worked in excess of forty during a work week. 29 U.S.C. § 207(a)(1). Several exceptions to this rule exist, including one for employees “over whom the Secretary of Transportation has power to establish qualifications and maximum hours of service.” 29 U.S.C. § 213(b)(1).The Motor Carrier Act exemption specifically applies to drivers, drivers’ helpers, loaders, and mechanics who participate in interstate commerce within the scope of their employment. 29 C.F.R. § 782.2(b)(2).

In Craft, the plaintiffs transported full containers from customer locations to Ray’s Recycling or a transfer location owned by Ray’s, within Indiana state lines. Trash and recyclables are sorted, with trash being taken by a Ray’s driver to an in-state landfill or incinerator. Recyclable material is shredded, compacted or baled in preparation for delivery to end recipients. Ray’s Recycling does not process recyclable scrap metal. Instead, a Ray’s driver transports scrap metal from Ray’s Recycling or a transfer station to Farnsworth Metals, Inc., an Indiana company owned by the majority shareholder of Ray’s. Ray’s Recycling, the transfer stations, and Farnsworth typically received advance purchase orders and shipping instructions from end recipients. Over 50% of the end recipients are out-of-state.

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Effective September 21, 2009, the New Jersey Department of Labor and Workforce Development, Division of Wage and Hour Compliance, adopted a new rule allowing employers to make payroll deductions for health club membership fees or for child care services if payment is authorized in writing by an employee or pursuant to a collective bargaining agreement and approved by the employer. In promulgating this new rule, the Department of Labor amended New Jersey Administrative Code § 12:55-2.1, which sets forth the very limited circumstances in which an employer may make a payroll deduction.
 

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On September 9, 2009, the California Supreme Court declined to review an appellate court order reversing an $86 million trial award against Starbucks. As discussed in detail in our earlier blog entry, in Jou Chau v. Starbucks Corporation, the court of appeal reversed the trial court's award to a 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. Since a denial of review by the California Supreme Court is done without comment, it is hard to predict what this means for other tip pooling cases. However, it is important to remember that the appellate court made a clear distinction between a collective tip box and service companies that pool tips. According to the appellate court, the Starbucks policy passed muster because (1) “shift supervisors” were part of the “team” of employees who provided service to the customers (along with baristas) and (2) a collective tip box was used.

 This blog entry was authored by Matthew Marca.

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On August 21, 2009, the Massachusetts Supreme Judicial Court unanimously ruled that a worker who has been misclassified as an independent contractor may seek damages from his former employer even if the employer establishes that the worker would have been paid less had he been classified as an employee.

The plaintiff in Somers v. Converged Access , 454 Mass. 582 (2009) worked for a software company as a quality assurance engineer. He was classified as an independent contractor and, as a result, did not receive overtime, vacation pay, or benefits. The company paid him at a rate of $65 per hour. The plaintiff initially agreed to work for a sixty-day term. He later agreed to a ninety-day extension of that term.

The plaintiff subsequently applied for a permanent quality assurance engineer position. After the company did not select him for the position, the plaintiff brought suit claiming, among other things, that he had been misclassified as an independent contractor.

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An important new opinion letter from the California Division of Labor Standards Enforcement (DLSE), issued on August 19, 2009, conforms California’s approach to furloughing salaried “white collar” exempt employees with the federal approach. The opinion approved an employer’s request to reduce its exempt employees’ scheduled work days from five to four days per week, along with a corresponding reduction in salary. This approach was designed to address the employer’s significant but temporary economic difficulties, with the expectation that as soon as business conditions permitted, the employer would restore the full five-day work schedule and the full salaries of its exempt employees. This opinion withdraws a prior DLSE opinion that had concluded that federal and California law “precludes an employer from reducing the salary of an exempt employee during a period when a company operates a shortened workweek due to economic conditions.” DLSE Opinion 2002.03.12 at p. 5. 

For an in-depth discussion and guidance on this development, see Littler ASAP, DLSE Agrees California’s Partial-Week Furlough Options Are Coextensive With Federal Law. 

This blog entry was authored by Dan Thieme and Alison Hightower

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In a recent opinion, a federal trial court in Illinois clarified that an employee can voluntarily waive the right to bring (or participate in) a class or collective action.  Brown v. Sears Holding Mgmt Corp., 09-C-2203 (N.D. Ill. Aug. 17, 2009).  The court also recognized that employees can waive legal rights arising under common law for non-payment of wages (an issue that was not disputed in the case).

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It’s not often that employers get the chance to “peek behind the curtain” into the U.S. Department of Labor’s internal techniques and strategies for conducting wage and hour investigations under the Fair Labor Standards Act (FLSA). The Department usually keeps its investigation methods confidential, and takes the position that such information is protected from disclosure under the Freedom of Information Act and the investigation privilege.

Recently, employers got a rare chance to look inside the Department’s policies and procedures in an FLSA overtime case brought by the Department against the Washington State Department of Corrections (DOC). In Solis v. State of Washington, Case No. 08-5362RJB (W.D. Wash.), the Department brought suit against the DOC for failing to keep proper records and failing to pay overtime wages to 872 state corrections officers. In response to the Department’s claims, the DOC asked the Department to produce its investigation files and records. Surprisingly, as part of its response to the DOC’s discovery requests, the Department produced a copy of its internal “Introduction to Full Investigation and Litigation (FIL) Training.” The Department uses the FIL Training guide to teach wage and hour investigators how to conduct effective investigations. As explained in the guide:

Our goal is to improve our ability to complete quality, full investigations that will convince employers that they have no choice but to change their violative behavior, or failing that, to provide a winning litigation case to the SOL [Solicitor of Labor].

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Kellogg Company (Kellogg) was granted summary judgment and dismissal of claims raised by a manufacturing employee in its Rossville, Tennessee manufacturing plant. In Franklin v. Kellogg Company, C.A. No. 08-2268 (W.D.Tenn.), the district court held that time spent by manufacturing employees changing into and out of company-issued gear was noncompensable under Section 3(o) of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. This is because Section 3(o) excludes time spent by employees donning and doffing “clothes” from compensable hours worked where such time is either explicitly addressed in a collective bargaining agreement, or by custom or practice established under a collective bargaining agreement.

Plaintiff Alice Franklin claimed that she was entitled to compensation for time spent changing into and out of company uniforms and other gear both prior to and after her work shifts. She sought to represent Kellogg employees on a nationwide basis. Ms. Franklin’s motion to certify a collective action under the FLSA, however, was rendered moot by the court’s finding in favor of Kellogg. As an initial matter, the court found that the company uniform and standard equipment used by the plaintiff constituted “clothes” under Section 3(o). The uniforms in question consisted of pants, snap front shirts and slip-resistant shoes and the standard equipment included hair nets, beard nets, safety glasses, ear plugs and bump caps. The court relied on its prior decision in Sisk v. Sara Lee Corp., 590 F. Supp. 2d 1001 (W.D.Tenn. 2008), holding that protective gear worn by meat processing employees fell under the definition of clothes under Section 3(o). It found that plaintiffs failed to present any compelling reason to reconsider that holding.

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On July 23, 2009, the Eleventh Circuit Court of Appeals affirmed a district court’s grant of summary judgment in favor of American Coach Lines of Miami, Inc. (ACLM). The court held that the plaintiffs, current and former bus drivers of ACLM, qualified for the motor carrier exemption to the federal Fair Labor Standard Act (FLSA) and were therefore not entitled to overtime compensation. Walters, et al. v. American Coach Lines of Miami, Inc., No. 08-15636, 2009 WL 2182419 (11th Cir. July 23, 2009). ACLM’s business operations included, among other things, shuttling cruise ship passengers via bus between the Miami and Fort Lauderdale airports and local hotels and cruise ship ports under contract with cruise lines.

In reaching its conclusion, the court first determined that ACLM was subject to the Secretary of Transportation’s jurisdiction under the Motor Carrier Act (MCA) because ACLM was licensed by the Department of Transportation (DOT), held all of the required authorizations from the Federal Motor Carrier Safety Administration, and had been audited in the past by the DOT. Additionally, ACLM provided bus services that crossed state lines, derived approximately four percent (4%) of its revenue from interstate trips, and held itself out as an interstate motor carrier. Notably, the court rejected the plaintiffs’ de minimis argument – i.e. that ACLM did not fall under the Secretary of Transportation’s jurisdiction because it did not engage in a sufficient number of interstate trips – noting that analysis of the de minimis question requires consideration of both the number of interstate trips made and the percentage of revenue generated by those trips, and suggesting that the de minimis requirement may be altogether inapplicable in situations where a company holds the appropriate federal licensing and there is undisputed proof of some travel across state lines.

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On July 27, 2009, the Eleventh Circuit affirmed the district court’s denial of class certification in Babineau, et al. v. Federal Express Corporation, a decision that may impact wage and hour cases brought under state law. The plaintiffs sought Rule 23 certification of a broad class of hourly employees in Florida, alleging state law claims for breach of contract and quantum meruit. The breach of contract claim consisted of allegations that plaintiffs were not paid for: (1) work performed during “gap periods” (any time interval between their manual punch in and their scheduled start time and/or any time interval between their manual punch out and their scheduled stop time); and (2) work performed during unpaid break periods. 

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On July 27, 2009 the Ninth Circuit issued an opinion stating that individual managers can be held liable under the FLSA even though the company that employed the plaintiffs had filed for bankruptcy. Boucher v. Shaw (9th Cir. 05-15454). In Boucher, the company that employed the plaintiffs, Castaways Hotel, Casino, and Bowling Center, that filed for Chapter 11 bankruptcy protection in June of 2003, discharged the plaintiffs in January 2004, and then converted to a Chapter 7 liquidation. Later that year, the plaintiffs filed claims under federal and Nevada state law for unpaid wages against three Castaways managers. The district court dismissed the plaintiffs' claims and the plaintiffs appealed. With respect to the state law claim, the issue was certified to the Nevada Supreme Court, which determined that individual managers could not be found liable as "employers" under the relevant Nevada state law. The Ninth Circuit then addressed whether the defendants could be personally liable despite Castaways' bankruptcy.

It is generally settled law that certain managers, depending on factors such as the amount of interest and control they exert over the structure of an employment relationship, can be individually liable for violations under the FLSA as an “employer.” See Lambert v. Ackerley, 180 F.3d 997, 1011-12 (9th Cir. 1999); Chao v. Hotel Oasis, 493 F.3d 26 (1st Cir. 2007). In this case, there was no dispute that the individual defendants could be considered employers under the FLSA. Instead, they argued that the conversion of Castaways' bankruptcy from Chapter 11 to Chapter 7 terminated their duty to pay the plaintiffs their wages. The Ninth Circuit rejected the argument. First, the court noted that the plaintiffs were terminated prior to the conversion to Chapter 7, meaning that their pay had already been earned. The court held further that the nature of the bankruptcy filing by Castaways was irrelevant because Castaways was not a defendant in the wage and hour case, the defendants (the managers) were not debtors in bankruptcy, and an automatic stay intended to protect a debtor could not affect the plaintiffs' claims.

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The Obama administration recently increased commuter tax benefits making them more appealing to employers. State legislatures are also considering laws requiring employers to provide transit subsidies to employees. If an employer decides to provide commuter benefits to its employees, or such benefits are required by state law, the employer must also consider its wage and hour obligations. Most employers are, unfortunately, not aware that commuter subsidies must be included when calculating an employee’s regular rate for overtime purposes.

The federal Fair Labor Standards Act (FLSA) explicitly includes commuting expenses in the regular rate. "An employee normally incurs expenses in traveling to and from work, buying lunch, paying rent, and the like. If the employer reimburses him for these normal everyday expenses, the payment is not excluded from the regular rate". 29 C.F.R. § 778.21.

There is only one reported decision, under either federal or state law, that addresses this issue. The facts of the case are simple. The Montana Department of Transportation agreed in a collective bargaining agreement to pay its employees’ commuting expenses, but did not include these expenses in their regular rate calculations when computing overtime. See Montana Public Employee’s Association v.Dep’t of Transportation, 954 P.2d 21 (Mont. 1998). The union alleged that the state had violated the FLSA and the Supreme Court of Montana agreed, finding that the commuting expenses should have been included in the regular rate.

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On July 17, 2009, a federal magistrate judge sitting in the Eastern District of Michigan issued two significant rulings on pending motions for summary judgment in Henry v. Quicken Loans, Inc. The plaintiffs in Henry were employed as mortgage loan consultants (or “mortgage bankers”) for Quicken Loans, a large on-line mortgage lender. Quicken Loans classified its loan consultants as exempt from the overtime obligation imposed by the FLSA, in reliance upon the administrative exemption. The plaintiffs claimed, relying upon Quicken Loans’ hiring, training, and process documentation, as well as internal email, that they were primarily responsible for “selling” mortgage loans. If their primary duty was “sales,” the plaintiffs argued, they could not be considered exempt administrative employees.

In his first report and recommendation on cross-motions for summary judgment on the administrative exemption defense, the magistrate judge found an issue of fact regarding the loan consultants’ primary duty. The plaintiffs relied heavily upon internal corporate documents which emphasized the loan consultants’ role in the sale of mortgage loans. Quicken Loans, however, pointed to the U.S. Department of Labor’s September 2006 opinion letter, which found that mortgage loan officers qualified for the administrative exemption if their duties included such activities as working with customers to identify and secure a loan that is appropriate for the customers’ financial circumstances, collecting and analyzing customer financial information, and advising the customer regarding the risks and benefits of loan alternatives. According to the magistrate judge, a jury would have to decide whether the plaintiffs fall within the scope of the opinion letter, or whether they were primarily responsible for sales.

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Michael Truman was a Pennsylvania resident who worked as a management consultant for 16 months for a Texas-based management consulting company. He was assigned to client projects at client sites, including a six-month assignment in England and a one-week assignment in Canada.

After resigning, he sued the company, claiming that he had been misclassified as exempt and was owed overtime under the Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA). The company sought partial summary judgment as to the time periods that Turner had spent working in England and Canada, arguing that the FLSA and PMWA did not apply outside of the United States.

The court granted the motion as to Turner's FLSA claim based on the FLSA's exemption for work performed outside of the United States. 29 U.S.C. 213(f). However, the court denied summary judgment as to Turner's PMWA claim. The court reasoned that, unlike the FLSA, the PMWA contains no express exemption for work performed outside of the United States, and the court would not infer one, noting that the PMWA was originally enacted to protect employees who were not protected by the FLSA and that state law may provide greater protection to employees than the FLSA. The court concluded that while the PMWA was silent as to its extra-territorial reach, it should be construed to provide protection to Pennsylvania based-employees while they are working on assignments outside of the United States.

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Several new wage and hour bills made it through various state legislatures during the second quarter of the year. Below is a wrap up of new developments (including regulatory updates) from April 1, 2009 through June 30, 2009.

Alabama House Bill 144, Effective 5/19/2009. Modifying several aspects of the state child labor laws.

Colorado House Bill 1108, Effective 8/5/2009. Provides that an employer under specified circumstances is subject to penalties if an employee's paycheck is not paid because the employer's bank does not honor the paycheck.

Connecticut House Bill 6185, Effective 10/1/2009. Concerns equal pay discrimination.

Florida House Bill 569, Effective 7/1/2009. Allows wages to be paid by a payroll debit card.

Indiana Senate Bill 465, Effective 7/1/2009. Requires an employer to provide a pay stub to employees and post a notice regarding the state's minimum wage law. The notice must include an employee's basic rights and who to contact for information, questions or complaints.

Iowa House Bill 618, Effective 7/1/2009. Update to civil and criminal penalties, including increase of maximum penalty to $10,000 for the illegal use of child labor, and provides that wage discrimination is an unfair employment practice under the state civil rights act.

Kansas Senate Bill 160, Effective 1/1/2010. Increases the minimum wage from $2.65 an hour to $7.25 an hour.

Maine House Bill 280, Effective 9/18/2009. Requires break time for nursing mothers in the workplace and requires an employer to provide a sanitary space, which must be close to the work area and may not be a bathroom, for nursing mothers to express milk in privacy.

Maryland Code of Administrative Rules 09.12.02.01 -.02, Effective 6/19/2009. Amends rules relating to equal pay for equal work. Requires employers to collect certain employee data, such as the gender and racial classification of their employees and records must be maintained by the employer for 3 years.

Montana House Bill 133, Effective 10/1/2009. Amends the definition of “income” with respect to garnishments to exclude mandatory retirement and disability contributions and union dues.

Nevada Assembly Bill 84, Effective 7/1/2009. Expands exemption for salespersons to any employee in a retail or service business. In order to qualify for the exemption, the employee must earn at least half of his/her compensation through commissions and be paid more than 1½ times the minimum wage.

New Mexico House Bill 489, Effective 6/19/2009. Allows workers to collect treble damages against employers that violate the state's $7.50-an-hour minimum wage law.

North Dakota Senate Bill 2344, Effective 8/1/2009. Exempts the act of breastfeeding from the offense of indecent exposure. An employer may use the designation "infant friendly" on its promotional materials if the employer adopts a workplace breastfeeding policy that includes specific criteria.

Oklahoma Administrative Code sections 380:30-1-7, -3-4, -5, Effective 7/1/2009. Amends rules to clarify the requirements for a valid payroll deduction agreement.

Oklahoma Senate Bill 527, Effective 11/1/2009. Provides that if an employer pays an employee with a check that is subsequently returned by reason of the refusal of the bank to honor the check due to insufficient funds or a stop payment notice, the employer must reimburse the employee for any fees or costs incurred by the employee within 14 days.  Additionally requires employers to post a notice describing the pertinent provisions of the Oklahoma Minimum Wage Act. The notice must be not less than 8 1/2 by 11 inches and must be displayed and accessible to all employees in each establishment under the control of the employer.

Oregon House Bill 2826, Effective 1/1/2010. Increases the hours of the day during which children under 16 years of age may work; provides for additional hours of work during summer.

Oregon House Bill 3474, Effective 1/1/2010. Increases processing fee chargeable to employee by employer for garnishments of employee's wages.

Oregon Senate Bill 373, Effective 1/1/2010. Provides that an obligor and obligee under a support order may bring a civil action for damages against an employer or other person who withholds money under an order to withhold, but who fails to pay the withheld amounts within the time allowed by law.

Vermont House Bill 313, Effective 6/1/2009. Amends the state minimum wage law to clarify that annual adjustments to the state minimum wage are not to result in a decrease in the minimum hourly wage rate.

Washington House Bill 1596, Effective 7/26/2009. Protects a woman's right to breastfeed in a place of public resort, accommodation, assemblage, or amusement.
 

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A federal district court ruled that hourly production and maintenance workers at U.S. Steel’s Clariton, Pennsylvania coke plant were not entitled to compensation for time spent donning, doffing, and showering at the beginning and end of their work days under Section 3(o) of the Fair Labor Standards Act (“FLSA”). Section 3(o) effectively excludes time spent by employees donning and doffing “clothes” or washing time from compensable hours worked where such time is either explicitly addressed in a collective bargaining agreement, or by custom or practice established under a collective bargaining agreement. The FLSA does not define the term “clothes,” and many courts have disagreed over what constitutes changing clothes.

In Andrako v. United Steel Corp., plaintiffs brought an FLSA collective action alleging violations based on the company’s failure to compensate for donning and doffing certain protective equipment, showering time, and time spent walking to and from their working stations. The court held that the items donned and doffed by U.S. Steel workers plainly were clothes within the meaning of the statue. In making its determination, the court noted that it was applying a common and ordinary meaning of the term. The items in question included safety glasses, hard hats, flame retardant jackets and pants, flame resistant gloves, hearing protection, snoods or hoods, wristlets, and respirators. The court rejected plaintiffs’ narrow construction that Section 3(o) should not apply to any apparel or equipment intended for protection and/or required by the employer or law. Similarly, the court rejected the plaintiffs’ argument that showering does not fall with Section 3(o)’s exception for washing time.

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Texas will soon join a growing list of more than a dozen states that have imposed mandatory overtime restrictions on hospitals, including California, Connecticut, Illinois, Maryland, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, and West Virginia. Effective September 1, 2009, Texas hospitals can not, with limited exceptions, require registered or licensed vocational nurses to work mandatory overtime, nor can hospitals use on-call time as a substitute for mandatory overtime. Nurses are expressly authorized to refuse to work mandatory overtime and any such refusal does not constitute patient abandonment or neglect. Nothing in the law prohibits nurses from voluntarily working overtime.

Mandatory overtime means a requirement that a nurse work hours or days that are in addition to the hours or days scheduled, regardless of the length of a scheduled shift or the number of scheduled shifts each week. Pre and post-shift documentation and communication activities regarding a patient’s status, as well as prescheduled on-call time, are not included in making an overtime determination.

The new law contains four exceptions under which hospitals may require nurses to work mandatory overtime, including natural disasters in the hospital’s county or a contiguous county; governmental declarations of emergency in the hospital’s county or a contiguous county; emergencies or other infrequent, unforeseen events that hospital management could not have prudently anticipated that increase staffing needs; and ongoing medical or surgical procedures that necessitate the nurse’s continued attendance for patient care reasons. In the case of emergencies or unforeseen events, hospitals must first, to the extent possible, make a good faith effort to satisfy staffing needs through voluntary overtime, including calling per diems and agency nurses, assigning floats, or requesting an additional day of work from off-duty personnel.

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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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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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On April 29, 2009, the Supreme Court of California granted the petitioner’s petition for review of the Second District Court of Appeal’s opinion in Lu v. Hawaiian Gardens Casino (2009 170 Cal. App. 4th 466, 88 Cal. Rptr. 3d 345), concerning the legality of tip-pooling arrangements with casino dealers.

In granting review, the Supreme Court limited the pure legal question to the following: “Does Labor Code section 351, which prohibits employers from taking ‘any gratuity or part thereof that is paid, given to, or left for an employee by a patron,’ create a private right of action for employees?” The vote for review of the Court of Appeal decision was unanimous.

In addition to the recent Etheridge v. Reins Int’l Cal., Inc. opinion by California’s Second District Court of Appeal, California employers should note the Second District’s recent tip-pooling opinion in Grodensky v. Artichoke Joe’s Casino, 171 Cal. App. 4th 1399 (2009). In Grodensky, the plaintiff, a casino card dealer, filed a putative class action challenging a mandatory tip-pooling policy that Artichoke Joe’s Casino had implemented for its dealers. The trial court determined (and the Court of Appeal affirmed) that the casino had not violated the minimum wage law by the tip-pooling arrangement, but had violated Labor Code section 351 by requiring the dealers to share their tips with shift managers. The Court of Appeal found no error in the trial court’s issuance of a pre-trial protective order prohibiting any communications regarding the lawsuit between the casino and dealers while determination of the class certification motion was pending. The Court of Appeal also affirmed that Grodensky and the putative class had a private right of action under Labor Code § 351 and that the trial court did not abuse its discretion by ordering the disgorgement of the sums taken from the dealers’ tips and distributed to the shift managers. Compare Etheridge v. Reins Int’l Cal., Inc., 2009 WL 794521 (Cal. Ct. App. 2009) with Budrow v. Dave & Buster’s of Cal., Inc., 171 Cal. App. 4th 875 (2009) (restaurant employees who do not provide direct table service may share in tip pool).

This blog entry was authored by Tyler Paetkau.
 

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In a blow to UPS, and other employers in California, a California federal court recently ruled that employers are liable for up to two hours of additional pay when an employee misses both a meal and rest break. California law provides for a one hour premium of regular pay for each day that a non-exempt employee is not provided meal or rest breaks as required by the various California Wage Orders. (California Labor Code sec. 226.7).

Employers have argued that under California law, an employer is only obligated to pay a one hour premium for missed meal and lunch breaks per day, whether there was one or multiple violations in the same day. In the first direct ruling on this issue, the court in Marlo v. United Parcel Service, Case No. CV 03-04336 DDP, held that the employee may recover up to two additional hours of pay on a single work day for meal period and rest break violations: one if any meal period violations occur in a work day and one if any rest break violations occur in a work day. However, if more than one rest period violation occurs in a single work day but no meal period violations occur, the employee may only recover one additional hour of pay for all of the rest period violations combined; likewise, if more than one meal period violation occurs in a single work day but no rest period violations occur on that day, the employee may only recover one additional hour of pay for all of the meal period violations combined.

While the ruling will likely be appealed, employers should evaluate their pay practices with respect to missed meal and rest periods to comply with the ruling until further authority is established. On a positive note, the Court agreed with other recent rulings and held that an employer's obligation with respect to meal breaks is to make a meal period available to employees, but places them under no further obligations to ensure that a meal break is taken. This issue is currently pending a decision by the California Supreme Court in Brinker Restaurant Corp. v. Superior Court (Hohnbaum).

This blog entry was authored by Gregory G. Iskander.
 

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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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Maine recently enacted a new statute designed to protect private sector employees who disclose, compare or otherwise discuss their wages. 26 Me. Rev. Stat. § 628-A. Specifically, Section 628-A provides that "an employee may inquire about, disclose, compare or otherwise discuss employee wages, and the employer may not interfere with, discharge or in any manner discriminate against the employee for such inquiries, disclosures, comparisons or other discussions." Although Maine has chosen to give employees specific protection for discussing and disclosing their wages, the National Labor Relations Board has long considered such conduct by employees -- even in non-union workplaces -- to be "protected concerted activity" within the meaning of Section 7 of the National Labor Relations Act. Thus, an employer in Maine who disciplines an employee for discussing her wages with co-workers could face liability under Section 628-A as well as an unfair labor practice charge before the NLRB.

For the full text of the bill, please follow this link: http://www.mainelegislature.org/legis/bills/bills_124th/billtexts/SP003301.asp

This blog entry was authored by Brian Clarke.
 

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This most recent on the city charter exemption in State Building and Construction Trade Council of California, AFL-CIO v. City of Vista (4/28/09) D052181 (PDF), is a favorable one for city contractors who might do work for chartered cities. The court held that chartered cities are exempted from the requirements of the prevailing wage statute, Labor Code section 1720, et seq. under the municipal affairs clause of the California Constitution. The victory may be short-lived, given the number of amicus on this appellate decision, including California’s Attorney General, which filed a brief in support of the Building Trade Councils. The “municipal affairs exemption” is ripe for Supreme Court review. Those following prevailing wage cases will recall that many anticipated a decision from the California Supreme Court in City of Long Beach v. Department of Industrial Relations (2004) 34 Cal.4th 942 on the municipal affairs exemption but were disappointed when the California Supreme Court reached a decision on other grounds and failed to address the exemption.

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On November 6, 2008, the Ninth Circuit Court of Appeal, issued an opinion in Oracle v. Sullivan, 547 F.3d 1177 (9th Cir. 2008), which came to three important conclusions regarding the reach of California law, including the following:

First, California's overtime laws may apply to nonresident employees (in the case itself, individuals from Arizona and Colorado were involved) for those periods of time that the employees temporarily work in California;

Second, the court found that a company that has a sufficient presence in the state, such as Oracle, can be required to comply with California law without violating that employer's due process rights; and

Third, the court found that California's unfair competition law does not apply to acts based on alleged federal wage law violations that occur outside of the state.  

This opinion was reported in our earlier blog posting, Federal Court Finds California Law Applies to Out Of State Workers.

 

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Several new wage and hour bills made it through various state legislatures during the first quarter of the year. Below is a wrap up of new developments (including regulatory updates) since the beginning of the year.

Arkansas House Bill 1552 Effective 7/17/2009.  Requires employers to provide unpaid break time and reasonable locations for expressing breast milk.

California Assembly Bill x2 5 Effective 1/1/2010.  Eases the requirements for an alternative work week. For additional information see our previous Blog entry, Requirements for Use of Alternative Workweek in California Eased Slightly.

Iowa Senate File 618 Effective July 1, 2009. Updates civil and criminal penalties of up to $10,000 for the illegal use of child labor and from $100 to $500 per violation for workplace labor violations.  For additional information see our previous Blog entry New Mexico and Iowa Toughen Penalties for Wage and Hour Violations.

Massachusetts Senate Bill 2438 Effective 4/9/2009.  A mother may breastfeed her child in any public place or establishment or place which is open to and accepts or solicits the patronage of the general public and where the mother and her child may otherwise lawfully be present. The statute doesn't specifically mention employment, however it can be construed to include places of employment.

Montana House Bill 101 Effective 3/20/2009.  Revises the time period that an employer may withhold money from an employee's final paycheck in cases of theft or property or theft of funds.

Missouri Regulation 8 MO-ADC 4.010 et seq Effective 3/30/2009.  The Missouri Department of Labor's minimum wage regulations expressly adopts interpretations of the FLSA, and federal regulations.  For additional information see our previous Blog entry, New Missouri Wage and Hour Rules Reintroduce Federal Interpretations.

Nevada Minimum Wage and Overtime Rates Announced Effective 7/1/2009. For more details see our previous blog entry here.

New Mexico House Bill 849 Effective Jun 19, 2009.  Allows workers to collect treble damages against employers that violate the state's $7.50-an-hour minimum wage law.  For additional information see our previous Blog entry New Mexico and Iowa Toughen Penalties for Wage and Hour Violations.

North Dakota Senate Bill 2344 Effective September 5, 2009.  Provides that if the woman acts in a discreet and modest manner, a woman may breastfeed her child in any location, public or private, where the woman and child are otherwise authorized to be.  Although this portion of the new law it does not expressly mention employers, its terms are broad enough to apply to the workplace.

Oregon Regulation OR-ADC 839-020-0050 Effective 1/12/2009.  Clarifies meal and rest period requirements in situations where providing a 30-minute uninterrupted meal period is not feasible. For additional information see our previous blog entry here.

US House Resolution 11 Effective 5/28/2007.  The Lilly Ledbetter Fair Pay Act, which Congress made retroactive to May 28, 2007, extends the time period for employees to assert pay discrimination claims by making each paycheck a discriminatory act; not just the initial pay determination. For further information, see Littler ASAP Paycheck Rule Revived for Pay Discrimination Claims with Signing of the Lilly Ledbetter Fair Pay Act.

Virginia Senate Bill 1264 Effective 7/1/2009.  Allows employers to utilize prepaid credit cards or a debit card without employee's consent for employees hired after January 1, 2010, when the employee has not designated a financial institution to receive direct deposit of the employee's wages.

Wisconsin Regulations DWD 272.01 et seq. Effective 7/24/2009.  Changes the state minimum wage to $7.25 an hour effective July 24, 2009. Also changes opportunity wage and allowance for boarding.

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Within days of each other, the governors of New Mexico and Iowa signed legislation that significantly increases the penalties for wage and hour violations in those states. The New Mexico statute also creates new causes of action.

On April 6, 2009, the governor of New Mexico signed House Bill 489 into law. The new law becomes effective on June 19, 2009. HB 489 amends the state Minimum Wage Act to prohibit employers from retaliating against employees for filing claims or asserting rights under the law, for helping someone else pursue a claim, or for notifying someone else about their legal rights.

HB 489 also lengthens the statute of limitations for wage claims from one year to three years after the last violation occurs, and provides that an investigation by the Labor Relations Division of the Workforce Solutions Department tolls the statute of limitations. In addition, HB 489 contains a continuing violations provision, meaning that a civil action brought under the Minimum Wage Act may encompass all violations that are part of a continuing course of conduct, no matter when they occur.

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The California Court of Appeal in Etheridge v. Reins International California, Inc. has held that mandatory tip-pooling policies that allow tips to be shared with staff who do not provide direct table service are enforceable. California restaurant employers and other employers that allow tips would be well advised to review, and if necessary, amend mandatory tip-pooling policies.  See Littler ASAP California Appellate Court Protects Employers Who Allow Tips for Dishwashers for more information.
 

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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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On February 20, 2009 in Ontiveros v. Zamora, the court held that the plaintiff stated a viable claim for individual liability under a joint employment theory for violations of state wage and hour laws.

The court agreed with defendants that a corporate officer could not be held liable for the wage and hour violations of a corporation based on the individual's status alone, including the fact that he owned or otherwise controlled the corporation as was the case here. The court acknowledged California courts have consistently held that individual officers, directors, shareholders, and managers of a corporation cannot be considered personally liable for the corporation's failure to pay wages to employees or for related California Labor Code violations. See, e.g., Reynolds v. Bement, 36 Cal.4th 1075 (2005); Bradstreet v. Wong, 161 Cal.App.4th 1440 (2008). The rationale has been that that none of the Labor Code sections at issue expressly define the term "employer." Rather, the courts have applied the common law definition of "employer," which does not include corporate agents acting within the scope of their agency.

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On March 2, 2009, the California Second District Court of Appeal rejected a putative class plaintiff’s argument that the California “tip pooling” statute, Labor Code § 351 (“§ 351”), prohibits so-called “indirect” servers (in this case bartenders) from sharing tips. Budrow v. Dave & Buster’s of California, Inc., (2d Dist. 3/2/09). The plaintiff and appellant, Aaron Budrow, brought a putative class action against respondent Dave & Buster’s of California, Inc., on the theory that distributions from the “tip pool” to persons who did not provide direct table service violated § 351. After the trial court sustained demurrers (motions to dismiss) to two of appellant’s three causes of action without leave to amend, the employer moved for summary judgment on the remaining cause of action that alleged a violation of California Business and Professions Code section 17200. The trial court granted the motion. The court of appeal affirmed.

The employer owned and operated restaurants throughout the U.S., employing servers, cocktail servers, buspersons and bartenders. The plaintiff was a cocktail server for a brief period of time. (The employer contended that it employed the plaintiff for one month; the employee contended that he worked for the employer for three months.) Dave & Buster’s tipping policy requires that servers contribute 1% of their gross sales to bartenders and other employees.

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The California Court of Appeal recently confirmed the right of an employer to secure a release from claims for unpaid overtime where there exists a bona fide dispute over whether overtime wages were actually due. In Chindarah v. Pick Up Stix, Inc., two former employees of Pick Up Stix brought a proposed class action lawsuit against their former employer asserting claims for unpaid overtime, alleging they were misclassified as exempt from overtime pay. The employer was able to obtain settlements with over two hundred putative class members in exchange for their execution of a general release, wherein the employee acknowledged that he or she spent more than 50% of their time performing managerial duties and released Pick Up Stix from all claims for unpaid overtime and any other Labor Code violations during the relevant time period. Thereafter, the plaintiffs challenged the validity of these releases and argued that the settlement agreements violated Labor Code section 206.5, which provides: "An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee."
 

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We recently reported a significant California Court of Appeals decision, marking what appears to be turning point in the development of California's Labor Code Private Attorney General Act ("PAGA"). In Deleon v. Verizon Wireless, the Second District Court of appeal addressed several unsettled PAGA issues. The Court's analysis has far-reaching consequences with respect to several issues, including (i) the settlement of individual and class-wide PAGA claims, (ii) the status of an "aggrieved employee" as a plaintiff, and (iii) the nature of PAGA representative actions.

On February 23, 2009, the plaintiff's in Deleon filed for review by the California Supreme Court. Employers are advised to monitor the Supreme Court's actions in this case, particularly those currently litigating purported PAGA claims. Unless and until the Supreme Court grants review, however, Deleon may still be cited as good law. For a more thorough analysis of the impact of the Deleon decision, see the Littler ASAP "Bounty Hunters" Lose Their State "Badge" as Court of Appeal Clarifies Several PAGA Issues.

This blog entry was authored by Vincent J. Mersich.
 

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Ten years after it was first enacted, and as part of the resolution of California's budget crisis, California Labor Code section 511 authorizing the use of an alternative workweek was amended for the first time (AB X2 5) last week.

The bill itself was a model of expedited lawmaking - its creation, passage, and signing took less than ten days. AB X2 5 was introduced in the Assembly as a budget trailer bill on February 11, modified to its final form on February 14, and passed finally by the Senate on February 19, with the Governor signing it the next day. The bill was never reviewed by any budget or legislative policy committee.

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California Labor Code section 1776 requires public works contractors and subcontractors to maintain payroll records showing the name, address, social security number, work classification, straight-time and overtime hours worked each day and week, and the actual per diem wages paid to workmen employed on a public works project, and to verify under penalty of perjury in a written declaration the accuracy of such payroll records. These certified payroll records must be prepared on forms provided by the Division of Labor Standards Enforcement or may consist of printouts of payroll data that are maintained as computer records, provided the printouts contain the same information as the forms provided by the Division of Labor Standards Enforcement. Certified payroll records must be made available for inspection and/or furnished to employees and their authorized representative, members of the public, the awarding body, Labor Compliance Programs, the Division of Labor Standards Enforcement and the Division of Apprenticeship Standards of the California Department of Industrial Relations upon request, and generally within 10 days from the date of the request.

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UPDATE: On February 17, 2009, the Ninth Circuit withdrew its decision in Sullivan v. Oracle and remanded the case back to the California Supreme Court for reconsideration.  The Ninth Circuit asked the California Supreme Court to consider the following issues:

First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

Second, does California Business and Professions Code section 17200 apply to the overtime work described in question one?

Third, does section 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?

This blog update was authored by Jim Hart.
 

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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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On January 21, 2009, the City of Phoenix obtained summary judgment in a collective action brought by approximately 600 police officers claiming millions in unpaid work. What were the officers claiming? That the City should have compensated them for time spent putting on and taking off police uniforms and gear. In the matter of Dager et al. v. City of Phoenix, Case No. 2:06-cv-01412-PHX-JWS, the U.S. District Court for the District of Arizona ruled that the City did not have an obligation to pay its police officers for the time spent donning and doffing (i.e., putting on and taking off ) their police uniforms and gear. Specifically, Judge John Sedwick held that under Ninth Circuit precedent and the persuasive guidelines of the U.S. Department of Labor, only those employees actually required to change at work could claim that the time spent donning and doffing was compensable. The evidence in the case showed that the City allowed officers to change at home or at the station, depending on their own preference, and that a significant number of officers, including some of the claimants, regularly changed into their uniforms and/or gear at home. The court also held that, although the City's police department required officers to wear certain specified uniforms and protective gear, the uniform itself was not 'necessary" to the performance of police work (as the term necessary is defined under applicable regulations and case law).

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Deleon v. Verizon Wireless concerns a case where the employer had been previously sued under various sections of the California Labor Code for charging back commissions to its salespeople. No claims under the California Labor Code Private Attorneys General Act (PAGA) were alleged in the original complaint. That case settled in 2006, and the court certified a class for purposes of settlement. Nothing in the settlement agreement made reference to the PAGA. Rather, the agreement defined "released claims" to include all liabilities and penalties arising out of "any conduct, events, or transactions occurring during the class period." After the settlement, the plaintiff in Deleon sued the same employer, purportedly on behalf of the same employees, based on the same violations of the Labor Code, but this time seeking only penalties pursuant to the PAGA. The employer demurred to the second complaint, and the court of appeal upheld the trial court's dismissal of the second complaint based on res judicata. The recent Deleon decision is significant for employers in at least the following three ways:

Settlement Agreements. Even if an employer is settling a class action that has no PAGA claims, provided the employees release all "liabilities and penalties" arising out of "any conduct, events, or transactions” occurring in the class period, Deleon provides that the employer should be protected against any subsequent tag-along PAGA actions. More importantly, the employer need not designate any part of the settlement amount as settling PAGA claims, and no part of the settlement amount need be paid to the State of California in order to release non-asserted PAGA claims. On the other hand, if PAGA claims are a part of the complaint, the parties will most likely be required to designate some portion of the settlement amount as settling PAGA claims, and 75 percent of that amount should be paid to the state.

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On January 21, 2009, the California Court of Appeals denied the plaintiffs' motion for rehearing in the Marin v. Costco Wholesale Corporation case which addressed how to calculate overtime on a bonus. The court modified its opinion to clarify that the only controlling California authority on the issue is the directive that overtime hours be compensated at a rate of no less than one and one-half times the regular rate of pay. The December 23, 2008 opinion, with the January 21, 2009 revisions, was certified for publication.  Marin v. Costco was discussed in further detail in our previous post.

This blog entry was authored by Sandra Dermody.

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On January 22, 2009, a California Court of Appeal, Second Appellate District, issued an opinion upholding casino employers' right to maintain mandatory tip-pooling arrangements with dealers, finding no principled distinction between tip-pooling arrangements in the more familiar restaurant industry and the casino industry. Lu v. Hawaiian Gardens Casino, Inc.,  __ Cal. App. 4th __, (B194209 1/22/09). However, in partially reversing the summary judgment for the casino employer, the court also held that a triable issue of material fact existed as to whether certain "customer service representatives" and "senior customer services representatives" were "agents" of the employer entitled to participate in the mandatory tip-pooling arrangement. Further, although the court agreed with the trial court that California Labor Code sections 351 and 450 do not provide for a private right of action, it held that these sections can provide the predicate violation for an action under the California Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200. The court also recognized that employees could use alleged violations of California Labor Code §§ 351 and 450 to bring an action under the California Labor Code Private Attorneys General Act, Lab. Code §§ 2698 et seq.

The court found that there was sufficient evidence from which a reasonable jury could conclude that the customer service representatives have the authority to, and do, "supervise, direct, or control the acts of" the dealers, making them ineligible to participate in mandatory tip-pooling arrangements.

As reported in our prior blog entry, California employers should ensure that supervisory employees, such as floor managers, do not participate in a tip-pooling arrangement.

This blog entry was authored by Tyler Paetkau.

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On January 14, 2009, the California Supreme Court granted review in Brinkley v. Public Storage, Inc. which, like Brinker Restaurant Corporation v. Superior Court, held that employers are only required to “provide” meal and rest breaks and, absent a policy or practice which discourages or prevents employees from taking their meal and rest breaks, claims for missed meal and rest breaks are not suitable for class treatment. As expected, the Supreme Court is holding the Brinkley case pending determination of the earlier Brinker Restaurant case. This means there will be no activity in Brinkley until Brinker Restaurant is decided.

The opening brief in Brinker Restaurant was filed on January 20, 2009. Respondent and amici (friends of the court) briefs will follow, as well as the final reply brief, a process that can take several months. At that point the case will be scheduled for oral argument. Check back on this blog for the progress of Brinker Restaurant.

This blog entry was authored by AnnaMary Gannon.
 

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In an opinion letter dated December 19, 2008 (FLSA2008-18), the DOL found that itamae-sushi chefs and teppanyaki chefs were tipped employees under the FLSA, eligible to participate in employer-mandated tip pools.

Section 3(t) of the FLSA defines tipped employees as “any employee engaged in an occupation in which he/she customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t). Section 3(m) allows tip-pooling among employees who customarily and regularly receives tips. 29 U.S.C. § 203(m); see also 29 C.F.R. § 531.54.

Itamae-sushi chefs and teppanyaki chefs have direct contact with customers, at the bar counter area (itamae-sushi chefs) and at customer tables (teppanyaki chefs). In support of its opinion, the DOL cited its “longstanding position that counter persons who serve customers may participate in tip pools. Citing FLSA Field Operations Handbook § 30d04(a); Wage and Hour Opinion Letter 1/25/83 (waiter chef who brings food order from kitchen to table and cooks it on hibachi grill in front of customers may share in tip pooling).
 

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Many employers do not know that paying a non-discretionary bonus to non-exempt employees will require the payment of additional overtime. The California Court of Appeal’s decision in Marin v. Costco Wholesale Corporation is a good reminder of the need to pay overtime on such bonuses and of the fact that the method for calculating overtime on a bonus depends upon whether it qualifies as a “production bonus” or a “flat rate bonus.”

As a general matter, the payment of a non-discretionary bonus (one that is not discretionary in either the fact that it will be paid or in the formula for calculating it) to non-exempt employees triggers an additional overtime obligation because it retroactively increases the regular rate of pay for the employee receiving the bonus for the time period covered by the bonus. A non-exempt employee is entitled to be paid overtime at 1.5 times (or double, in some cases) the regular rate of pay for each overtime hour worked. With some specific exceptions not relevant here, the regular rate of pay for overtime purposes includes all compensation earned during the workweek. Thus, an employee who is paid a quarterly bonus has received additional compensation that was not included in the regular rate of pay when he or she was paid overtime for hours worked during the quarter at issue. An employer is required to resolve this issue by calculating a “regular rate” of pay on the bonus itself and then paying some portion of that regular bonus rate for each overtime hour worked during the period in which the bonus was earned. The precise method for calculating the overtime due on a bonus depends upon whether the amount of an employee’s bonus increases with each hour worked (in which case it is a “production bonus”) or whether the amount of the bonus is fixed independent of the hours worked (in which case it is a “flat rate bonus”).

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While large insurance companies reportedly have paid over $100 million each to settle overtime claims brought by claims adjusters, insurance brokerage giant Aon rolled the dice and won a significant trial victory last week. Aon prevailed in an eleven-day trial against a certified class of 1,024 current and former claims adjusters employed by Aon’s wholly-owned subsidiary, Cambridge Integrated Services, Inc. As in most of these cases brought by claims adjusters, Aon’s adjusters sought overtime pay, and Aon successfully relied upon the administrative exemption to justify its failure to pay overtime in a bench trial before retired judge Ronald Sabraw. Since the California Court of Appeal previously rejected the applicability of the administrative exemption to insurance claims adjusters in Bell v. Farmers Ins. Exch. (2001) 87 Cal.App.4th 805, Aon’s adjusters here might have expected a cake walk. But little went their way this time.

Aon had four significant hurdles to overcome to avoid liability. To prove the adjusters were correctly classified exempt, Aon had to prove that: (1) the claims adjusters’ duties involved the performance of office or non-manual work directly related to management policies or general business operations of Aon or its customers; (2) the claims adjusters customarily and regularly exercised discretion and independent judgment; (3) the claims adjusters performed under only general supervision work requiring special training, experience or knowledge; and (4) the adjusters spend at least 50 percent of their time performing these exempt duties. Aon cleared every one of these hurdles.

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A federal district court judge granted partial summary adjudication to SkyWest Airlines, Inc., holding that a former employee’s claims under California wage and hour laws are pre-empted by federal law. Specifically, the court found that the former employee is not entitled to California’s daily overtime and meal and paid rest periods because they conflict with federal law – Railway Labor Act (RLA), 45 U.S.C. § 151-88.

Tiffany Blackwell, a former customer service representative for SkyWest, sought relief for multiple alleged violations of state law including claims that SkyWest failed to compensate her for daily overtime hours and provide her with meal and paid rest periods. SkyWest countered that Ms. Blackwell was a member of SkyWest Airlines’ Frontline Association (SAFA) and was subject to SkyWest-SAFA’s negotiated collective employee contract, which governed the terms of her employment.

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California Labor Code section 515.5 exempts certain employees in the computer software field from the state overtime requirements provided certain criteria are met. Historically, this exemption was only available for employees whose compensation exceeded a minimum hourly rate, which was set annual by the Division of Labor Statistics and Research (DLSR). Effective September 10, 2008, Assembly Bill 10 took effect, which expanded the exemption to include employees who are paid on a salary basis, as long as the salary exceeds certain monthly and annual amounts.

The DLSR has announced the applicable minimum rates for employees to qualify for California’s computer professional exemption. Effective January 1, 2009, the new hourly rate for computer software employees is $37.94 and the minimum annual salary exemption is $79,050.00, which must be paid in amounts no less than $6,587.50 per month. To qualify for the exemption, an employee’s compensation must equal or exceed these amounts and the employee must satisfy each of the elements set forth in section 515.5 of the Labor Code. The employee must be:

• Primarily engaged in duties that consist of at least one of the following: (1) application of system analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (2) the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; and (3) the documentation, testing creation, or modification of computer programs related to the design of software or hardware for computer systems; and
• Highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.

This blog entry was authored by Stacey James.
 

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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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Now that the California Supreme Court has accepted review of Brinker Restaurant Corporation v. Superior Court (Hohnbaum), Supreme Court No. D049331 (2008), California employers are hopeful that the Supreme Court will affirm the well-reasoned decision of the Court of Appeal explaining an employer’s obligation to provide meal and break periods, as opposed to ensure that the meal and break periods are actually taken. Opening briefs in Brinker are due to be filed with the Supreme Court on January 20, 2009.

Immediately following the Court of Appeal’s decision in Brinker, the California Labor Commissioner issued a memorandum to all Department of Labor Standards Enforcement staff to follow the rulings in Brinker. When the Supreme Court granted review, the Labor Commissioner withdrew her memorandum, but directed DLSE staff to follow the numerous federal court decisions that concluded that, under California law, it is an employer’s obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time. For more information on the Labor Commissioner’s memorandum and citations to the federal cases addressing meal and break periods, see the Littler Mendelson ASAP, California Supreme Court Grants Review to Brinker – Employers Await Answers on Meal Period Obligation (October 2008).

The California Labor Federation, which represents more than 1,200 labor unions in California, protested loudly that the Fourth District Court of Appeal’s decision in Brinker merely created a split with the Third District’s earlier decision in Cicairos v. Summit Logistics Inc. (2006) 133 Cal.App.4th 949. In Cicairos, the court quoted a 2002 DLSE Opinion Letter that employers have “an affirmative duty to ensure that workers are actually relieved on duty.” The Supreme Court declined to grant review in Cicairos, as well as a request to have the opinion depublished. The defense bar and, fortunately, the California Labor Commissioner, read Cicairos as in accord with Brinker that an employer need only provide meal and rest breaks but, on unique facts, found that Summit Logistics failed to make meal and break periods available to its delivery drivers.

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The Court of Appeals for the Ninth Circuit recently held that California’s Labor Code applies to work performed in California by non-residents of California. Sullivan v. Oracle Corporation (08 Cal. Op. Serv. 13,881) (Nov. 6, 2008).

The three Oracle plaintiffs were Colorado and Arizona residents who traveled to California to work for periods ranging from several weeks to several months.  The plaintiffs brought a wage and hour class action against their employer, a Delaware corporation headquartered in California, seeking unpaid overtime on behalf of all out-of-state employees who worked complete days in California. The plaintiffs also brought a claim under California’s Unfair Competition Law (aka/ Business and Professions Code § 17200 et seq.), both for violations that occurred in California and throughout the United States.

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