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

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

Relying on the U.S. Supreme Court’s recent decision in Comcast Corp. v. Behrend, the U.S. District Court for the Central District of California denied Rule 23 class certification of California state law claims for off-the-clock work and unpaid work time during meal periods in Forrand v. Federal Express Corp.*

First, the plaintiff alleged that she and other hourly employees were not paid for work performed during the time between their clock-in times and their scheduled start times. The district court had previously denied class certification on this claim, but in 2010 the Ninth Circuit reversed and remanded that decision to “determine whether the level of FedEx’s control over employees within the proposed general class when they are on-the-clock but off-shift” was sufficient to render that time compensable under California law. On remand, the district court noted that Comcast requires a plaintiff “to bring forth a measurement method that can be applied classwide and that ties the plaintiff’s legal theory to the impact of the defendant’s illegal conduct.” The court found that the plaintiff’s proposed damages methodology, which assumed the entire gap between clock-in and the start of paid time was compensable, could be applied classwide, but failed “to tie California law to liability and a reliable measure of damages.” The court found that the plaintiff’s proposed class claim raised factual questions regarding whether each individual employee was in fact working and/or under the employer’s control during the gap period, and therefore individual factual inquiries predominated over classwide inquiries.

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By Stephen Fuchs

In a welcome decision for employers, Tracy v. NVR Inc., the federal District Court for the Western District of New York granted the employer’s motion to decertify a collective action under the FLSA and denied the plaintiffs’ motion to certify a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure. The case involved a putative class of Home Sales and Marketing Representatives (SMRs) who claimed they were misclassified as exempt outside sales representatives.

The key issue in the case was whether the SMRs satisfied the outside sales exemption requirement that they work away from the employer’s business for the requisite period of time each week. In denying certification of the Rule 23 state law class action, the Tracy court cited the U.S. Supreme Court’s recent decisions in Comcast Corp. v. Behrend, which held that class certification requires a classwide method of measuring damages, and Dukes v. Wal-Mart Stores Inc., which held that commonality requires not only common questions, but also common answers to those questions. Applying these principles, the court found that because the SMRs worked in different locations, under different supervisors, and performed duties outside of their offices in varying degrees and in different ways, their claims “as well as any determinations to be made concerning damages – are too highly individualized to form the basis for a class action.” Moreover, the court concluded, “the interests of judicial economy would not be served by the hundreds of fact-intensive ‘mini-trials’ that a class action of this nature would require.”

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By Bill Allen

In Martin v. Citizens Financial Group, Inc., No. 2:10-cv-00260 (E.D. Pa. Mar. 27, 2013), Judge Goldberg of the Eastern District of Pennsylvania decertified an FLSA collective action involving 843 opt-in plaintiffs who had worked in a variety of hourly positions at over 1,000 bank branches in nine states. The plaintiffs alleged that the defendant’s unlawful practices included prohibiting employees from recording all time worked in excess of 40 hours in a week, erasing or modifying employees’ time records to eliminate or reduce overtime hours, providing “comp time” in subsequent weeks in lieu of paying overtime, and requiring employees to work during unpaid breaks. The district court held that the plaintiffs had failed to establish they met the FLSA’s “similarly situated” requirement.

Although the court found the plaintiffs’ evidence tended to establish that the putative class members may have been denied overtime, the plaintiffs were unable to produce “substantial evidence of a single decision, policy, or plan” that affected employees in the same way. Rather, the plaintiffs reported that the overtime denial decisions were made independently, either at the branch or regional level, and were in direct conflict with the company’s written policy requiring compliance with all state and federal overtime compensation rules. The court noted that the 435 declarations submitted by the plaintiffs themselves showed frequent disparities in the methods in which the plaintiffs alleged they were denied overtime.

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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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By Jennifer Ciralsky and Sophia Behnia

In Wang v. Chinese Daily News, Inc., on remand from the U.S. Supreme Court, the Ninth Circuit Court of Appeals applied the Supreme Court’s decision in Dukes v. Wal-Mart to reverse and remand a federal district court decision certifying a California state wage law class action. Like Dukes, Wang has had a somewhat protracted history. Following certification as an FLSA collective action, and prior to the Supreme Court’s decision in Dukes, the district court certified the plaintiffs’ state wage law claims as a class action under Rule 23(b)(2) of the Federal Rules of Civil Procedure (FRCP) or, in the alternative, under Rule 23(b)(3). Following a 16-day jury trial, the plaintiffs were awarded over $2.5 million. The company appealed and the Ninth Circuit affirmed. On appeal to the U.S. Supreme Court post-Dukes, the Court vacated the Ninth Circuit decision and remanded for reconsideration in light of its decision in Dukes.

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By Christopher Kaczmarek

On March 4, 2013, the Massachusetts Supreme Judicial Court resolved a dispute regarding the effect of after-the-fact gratuitous payments on wages due under state law. In Dixon v. City of Malden, the court held that gratuitous, after-the-fact payments by the City did not extinguish the City’s obligation to pay an employee for the value of his accrued, unused vacation time.

The plaintiff in the case had been the director of a nursing home owned by the City of Malden. After over 20 years of employment, the City’s board voted not to reappoint him to the position. The City agreed to negotiate regarding retirement and severance issues, but the parties were unable to reach an agreement prior to the employee’s departure. At the time, he had accrued 50 days of unused vacation time, amounting to $13,615.54.

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By Edward Berbarie and Henry Lederman

Last week, the U.S. District Court for the Eastern District of New York upheld a class action waiver in an employment arbitration agreement, sending the plaintiffs’ FLSA collective action claims to arbitration on an individualized basis. The plaintiffs, former sales representatives for United HealthCare, claimed that the class action waiver was unenforceable for several reasons. First, the plaintiffs claimed that participating in a collective action under the FLSA is a statutory right that cannot be waived. The court disagreed, finding that nothing in the FLSA or its legislative history establishes that the right to participate in a collective action is a non-waivable right. To the contrary, the court reasoned that because an employee is required to file a consent form in order to participate in a collective action under the FLSA, an employee certainly has the power to waive their participation in such an action. The plaintiffs next attempted to rely upon the Second Circuit’s opinion in In re American Express Merchants’ Litigation, 667 F.3d 204 (2d Cir. 2012), which found a class action waiver to be unenforceable because the practical effect of enforcing the waiver in that case would have precluded the plaintiffs from bringing their claims. The court also rejected this argument, noting that the Second Circuit made clear that class action waivers are not per se unenforceable, and finding that the plaintiffs in this case failed to show that arbitrating their FLSA claims on an individual basis would have been cost prohibitive. Lastly, the court rejected the plaintiffs’ argument, under the NLRB’s D.R. Horton decision, that class action waivers violate employees’ rights to engage in concerted activity. The court instead agreed with the Eighth Circuit’s recent decision in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. Jan. 7, 2013), which rejected the NLRB’s rationale in D.R. Horton and held that class waivers are enforceable in relation to claims brought under the FLSA.

Photo credit: Logan Simmons

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The Massachusetts Supreme Judicial Court (the “SJC”) recently answered two important questions that have vexed lower courts, and employers, in recent years. First, the SJC concluded that employees may release claims under the Massachusetts Payment of Wages Law, Mass. Gen. Laws Chch. 149, § 148 (the “Wage Act”), provided that the release is “stated in clear and unmistakable terms” and specifically refers to the Wage Act. Second, the SJC held that, although plaintiffs may pursue claims for overtime under the Wage Act, which has a longer statute of limitations than the state overtime law, a plaintiff only may recover the straight-time value of such claims, not the premium rate provided for by the overtime law. To learn more about the decision, please see Littler's ASAP, Massachusetts High Court Permits Employees to Release Wage Claims, by Christopher Kaczmarek and Jeanne Barber.

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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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Washington's highest court has ruled that missed paid rest breaks count as "hours worked" that trigger overtime obligations for employers. According to the court, employers must add missed rest break time to their employees' hours actually worked, and pay an overtime premium for any resulting hours over 40 in a workweek. Thus, an employee who works 40 hours in a workweek and misses a required 10-minute paid rest break is owed compensation at the overtime rate of one and one half times the regular rate for the missed 10-minute rest break. To learn more about the decision, please see Littler's ASAP, Washington State Supreme Court Orders Overtime Payment for Missed Breaks, by Daniel Thieme and Breanne Sheetz.

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By Stacey E. James

Effective January 1, 2013, California’s new Labor Code section 2751 requires employers to provide written commission plan agreements to all employees who perform services in California and whose compensation involves commissions. The agreement must explain the method by which the commissions shall be computed and paid. The commission plan must also be signed by the employer and the employer must obtain a signed receipt from each employee.

The new law incorporates the definition of commissions from California Labor Code section 204.1, which defines commission wages as “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Types of payments that are specifically excluded from this definition include:

• Short-term productivity bonuses such as are paid to retail clerks;
• Temporary, variable incentive payments that increase, but do not decrease, payments under the written commission contract; and
• Bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

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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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California Labor Code sections 515.5 and 515.6 provide that certain computer software employees, as well as licensed physicians and surgeons, are exempt from state overtime requirements if they receive a minimum hourly, monthly, or yearly rate. The rate is determined annually based upon changes to the California Consumer Price Index for Urban Wage Earners and Clerical Workers. Because the Index experienced a 2.6% increase from August 2011 to August 2012, the California Division of Labor Standards Enforcement (DLSE) adjusted the rates these individuals must be paid to be considered overtime-exempt.

Computer Software

Effective January 1, 2013, the DLSE announced a $1.01 increase in the hourly rate for computer professionals, from $38.89 to $39.90 per hour. The monthly rate increases $175.56, from $6,752.19 to $6,927.75 per month. Finally, the annual salary increases $2,106.68, from $81,026.25 to $83,132.93 per year.

Licensed Physicians or Surgeons

Effective January 1, 2012, DLSE announced a $1.84 increase in the hourly rate for licensed physicians and surgeons, from $70.86 to $72.70 per hour.

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By Laura Hayward

In See’s Candy Shops, Inc. v. Superior Court, the California Court of Appeal for the Fourth Appellate District explicitly held that in California employers are entitled to use a timekeeping policy that rounds employee punch in/out times to the nearest one-tenth of an hour (a “nearest-tenth rounding policy”) if the rounding policy is “fair and neutral on its face” and “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.” The court adopted the standard used by both the United States Department of Labor and the California Division of Labor Standards Enforcement, bringing “sweet” news to employers who use rounding policies.

The very existence of these policies had been called into question by the trial court in this case when it granted summary adjudication to the plaintiffs on several of See’s key affirmative defenses in a certified wage and hour class action challenging See’s timekeeping policy. Two of these defenses encompassed See’s claims that: (1) its nearest-tenth rounding policy was consistent with state and federal laws permitting employers to use rounding to compute and pay wages and overtime; and (2) that its rounding policy did not deny the plaintiff or class members full and accurate compensation. In response to the trial court decision, See’s filed a writ of mandate petition challenging the court’s decision on these two defenses, which was summarily denied by the appellate court. 

Undeterred, See’s filed a petition for review with the California Supreme Court, which granted the petition and ordered the appellate court to vacate its prior order and issue an order to show cause in the matter. After extensive further briefing of the issues by both parties, and the filing of several briefs by amici curiae, See’s got its just desserts when the appellate court ordered the trial court to vacate its decision and enter a new order denying summary adjudication to the plaintiffs as to See’s affirmative defenses. Of course, while the ruling leaves open the issue of whether See’s will ultimately prevail in proving its rounding policy is fair and neutral, it does spare rounding policies from what could have been a death knell.

To learn more about the decision, please see Littler's ASAP, Sweet News on Rounding for California Employers: See's Candy Shops, Inc. v. Superior Court, by Laura Hayward.

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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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In Rindfleisch v. Gentiva Health Services, Inc., five former home healthcare clinicians brought claims on behalf of a class of thousands of registered nurses, physical therapists, and occupational therapists for alleged overtime violations, asserting they were misclassified as exempt employees and therefore denied overtime compensation for hours worked over 40 in a workweek. A federal district court recently denied class certification of the plaintiffs’ state law misclassification claims, finding the claims were too individualized and that proceeding as a class action would render the case unmanageable. To learn more about the decision, please continue reading at Littler’s Healthcare Employment Counsel.

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Courts are continuing to reject class and collective actions asserting claims against hospitals for automatic meal-break deductions. Most recently, in Camilotes v. Resurrection Health Care Corporation, a federal district court in Illinois decertified an FLSA collective action and denied certification of a state law class action asserting such claims. This case, and others like it that have denied certification or granted decertification in automatic meal-break deduction cases, provide guidance on steps that healthcare employers can take to reduce the risk of class actions in these types of cases. To learn more about the decision, please continue reading at Littler's Healthcare Employment Counsel.

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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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The California Legislature was active this past session. As a result, numerous wage and hour laws have been enacted that will take effect January 1, 2013. Highlights include:

• Revised provisions concerning penalties for wage statement violations.
• Increasing the amount of wages that are exempt from wage garnishment.
• Specifying that fixed salaries paid to non-exempt employees only provide for an employee’s regular, non-overtime hours, regardless of the parties’ agreement.
• Additional wage statement and Wage Theft Prevention Act notice requirements for temporary services employers.

To learn more about these and other new California laws, please see Littler’s ASAP, What's New? California's Major 2012 Employment Laws Affecting Private Sector Employers, by Christopher Cobey and Tomomi Glover.

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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 Julie Adams

On August 22, 2012, Governor Beverly Perdue issued Executive Order 125 establishing a task force to address concerns that North Carolina employers are allegedly misclassifying employees as independent contractors to avoid obligations under federal and state laws, including laws governing wage and hour issues. According to the Order, the primary purposes of the “Task Force on Employee Misclassification” are “to enhance coordination and communication among various state agencies,” and “to identify effective mechanisms to combat unlawful practices like employee misclassification that harm workers.” The Task Force will be chaired by the Commissioner of Insurance and include heads of various state agencies, or their designees, and representatives of other entities with expertise on these issues, such as the Commissioner of Labor.

Of particular significance to North Carolina companies who use independent contractors, Governor Purdue directed the Task Force to “[i]dentify sectors of the economy where misclassification occurs most frequently” and “[i]dentify ways to increase the filing of complaints by employees and other members of the public against noncompliant employers.” One goal of the Task Force is to “utilize a cooperative approach in working with employers and community groups” in an effort “to reduce the prevalence of employee misclassification” through the promotion of education materials explaining the distinction between employees and independent contractors, and raising public awareness of the problems arising from misclassification.

The panel will also consider changes to North Carolina laws and regulations and work with state and local investigators and prosecutors to enhance enforcement and develop procedures to ensure that “appropriate” misclassification cases are referred for criminal prosecution.

Reports regarding the Task Force’s activities, including summaries of the panel’s accomplishments and proposed legislative and regulatory changes are due to the Governor every six months.

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By Robert Pritchard

In a pair of recent decisions, the United States District Court for the Western District of Pennsylvania held that the “fluctuating workweek” method of calculating overtime is not lawful under Pennsylvania law when the employer pays an overtime premium of one-half of the employee’s regular hourly rate, in addition to the employee’s salary. Foster v. Kraft Foods Global, Inc., 2012 U.S. Dist. LEXIS 121282 (W.D. Pa. Aug. 27, 2012); Cerutti v. Frito Lay, Inc., 777 F. Supp. 2d 920 (W.D. Pa. 2011). While these cases do not necessarily represent the last word on the subject (indeed, the Foster case is still pending in district court), employers who utilize the fluctuating workweek method in Pennsylvania should take note of these developments.

Under federal law, the fluctuating workweek method allows an employer to pay an employee a fixed weekly salary for all hours worked, so long as the employer also pays an overtime premium equal to one-half of the employee’s regular hourly rate for hours worked in excess of 40 per week. In order to determine the employee’s regular hourly rate, the employee’s salary is divided by all hours worked during the week. Because the employee has already been paid (by the salary) at that regular rate for all hours worked (including the overtime hours), the employee is only owed an additional “one-half” the regular rate for the overtime hours. This method of calculating overtime is expressly authorized under the federal Fair Labor Standards Act (FLSA). 29 C.F.R. § 778.114.

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By Richard Rahm and Angela Rafoth

In a significant victory for trucking companies operating in California, a superior court judge decertified a class of California truck drivers who challenged the legality of compensating drivers on a “combined” piece rate that covers both driving and non-driving duties, when compensation for the “piece” is based generally on the number of miles driven. The decertification order in Carson v. Knight Transportation is particularly significant not only because it is the first state-court order addressing the legality of a combined piece rate, but also because three federal courts in the Northern and Central Districts of California concluded that such a combined piece rate runs afoul of California’s law prohibiting the “averaging” of hours worked.

The plaintiffs made two arguments against decertification, which were both rejected by the Superior Court. First, the plaintiffs argued that based on Cardenas v. McLain FoodServices, Inc., 796 F. Supp. 2d 1246 (C.D. Cal. 2011), a combined piece rate that covers both driving and non-driving activities is illegal. In its May 8, 2012 ruling, the Superior Court rejected the Cardenas decision, finding its reasoning “to be circular” because the district court simply assumed that a piece-rate contract that calculates compensation based on mileage does not cover non-driving work. Because the Superior Court found that such a combined piece rate was not “illegal on its face,” the Court held that Plaintiffs’ claims were essentially contractual.

Second, the plaintiffs argued that even if the claims were contractual, the terms of the contract were ambiguous and therefore there was no contract providing that the piece rate covered non-driving work. Thus, the plaintiffs claimed, they were owed payment for non-driving work. In its ruling on August 30, 2012, the Superior Court found the argument illogical. If there was a lack of mutual agreement, then there would be “no contract at all,” and if there was no contract at all, the plaintiffs could not have a contractual claim. Thus, their only claim could be that they were paid less than minimum wage. But, the court stated, “[t]here is no way to determine whether any driver was not paid at least minimum wage without an individual inquiry into each trip and/or day.” Accordingly, The Superior Court found the case inappropriate for class action treatment and decertified the class.

To learn more about the decision, please see Littler's ASAP, California Court Validates Piece-Rate Pay for Drivers, by Richard Rahm and Angela Rafoth.

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On August 6, 2012, Governor Deval Patrick of Massachusetts signed into law Senate Bill 2400, "An Act improving the quality of healthcare and reducing costs through increased transparency, efficiency and innovation." The law is primarily intended as a healthcare cost containment measure and has received some fanfare for that aspect. What has received considerably less attention are two provisions of the law that apply to hospitals as employers, one of which prohibits mandatory overtime for nurses. To learn more about the law and its potential implications for hospital employers, please continue reading Littler's ASAP, Massachusetts Healthcare Bill Bans Mandatory Overtime for Nurses and Limits Spending to Oppose Unionization, by John Doran and Carie Torrence.

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By Mhairi Whitton

In a consolidated decision in three actions against Bayer Corporation, Wyeth Pharmaceuticals, and Roche Laboratories, the Ninth Circuit Court of Appeals affirmed summary judgment for the pharmaceutical companies, holding that their pharmaceutical sales representatives (PSRs) were properly classified as administratively exempt under California law.

Specifically, the court found that:

• The employees’ duties involved “the performance of . . . non-manual work directly related to management policies or general business operations” of their employers, in that they were involved in representing their respective employers and “promoting sales of prescription drugs within their assigned territories.”
• In terms of the so-called “administrative/production worker dichotomy,” the court found that the sales representatives were not involved in developing or manufacturing pharmaceuticals and therefore fell squarely on the administrative side of the dichotomy.
• The duties they performed, which included improving market share and generating a large amount of business for the company, were of “substantial importance to the management or operations of the business.” The court found it “not determinative” that the PSRs did not participate in the formulation of their employers’ sales and promotional policies at the corporate level.
• he PSRs “customarily and regularly” exercised “discretion and independent judgment,” in applying their training, customizing their messages based on their knowledge of individual physicians, and distinguishing their products from those of their competitors.
• The sales representatives performed their functions under only general supervision, controlling how they spent their time, and the work they did required specialized sales training.

As the plaintiffs did not contest the fact that they earned more than twice the California minimum wage, the Ninth Circuit concluded that they satisfied each aspect of the administrative exemption.

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The New York State Senate and Assembly recently passed a bill amending New York Labor Law section 193 to expand an employer's ability to make deductions from employee wages. The bill is currently awaiting delivery from the New York State Assembly to the governor's office for his approval. The governor's approval is virtually certain as his office previously submitted a memorandum supporting the amendment.

Once effective, the new law will amend Labor Law section 193 to allow employers to make additional wage deductions, with an employee's written consent, for:

• Prepaid legal plans;
• Purchases at certain charitable events;
• Discounted parking or passes, fare cards, or vouchers related to mass transit;
• Fitness, health club or gym memberships;
• Cafeteria, vending machines and pharmacy purchases at the employer's premises;
• Tuition, room, board and fees related to certain education institutions; and
• Certain child care expenses.

To learn more about the legislation and its potential implications for employers, please continue reading Littler's ASAP, Wage Deductions Almost Legal in NY? Legislation Allowing Employers to Make Wage Deductions Awaits Governor's Signature, by Bruce Millman and Adam Colón.

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UPDATE: On July 5, 2012, the Governor signed the 8/80 bill (HB 1820). While the legislature’s action was certainly welcome news for Pennsylvania employers who had been using the 8/80 method, the amendment is prospective only, so employers may continue to face litigation over this issue for prior use of the 8/80 method. Also, this incident stands as a stark reminder to all Pennsylvania employers that wage and hour compliance is not just a federal issue. Where Pennsylvania law differs from the FLSA (and there are many such differences, even now that the 8/80 issue has been reconciled), employers must be aware of their obligations under both federal and state law.

In what would bring an end to a recent rash of class actions aimed at healthcare employers, the Pennsylvania Legislature presented Governor Corbett with a bill on June 28 that would amend the Pennsylvania Minimum Wage Act (PMWA) to specifically allow healthcare employers to pay employees overtime on a 14-day workweek, as opposed to a 40-hour workweek. The amendment would bring the PMWA into compliance with a provision of the Fair Labor Standards Act (FLSA) that permits medical facilities to pay employees overtime for hours worked in excess of 8 hours per day or 80 hours in a 14-day period. To learn more about the legislation and its potential implications for employers, please continue reading at Littler's Healthcare Employment Counsel blog.

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By Karin M. Cogbill

In a much anticipated decision, a federal judge in California's Southern District ruled last week that CVS Pharmacy was not required to provide its cashiers with seats to use while operating cash registers. The plaintiff is a former customer service representative (“clerk/cashier”) at CVS who filed a lawsuit on behalf of all California customer service representatives alleging that CVS violated Wage Order 7–2001, section 14(A) when it failed to provide its clerks/cashiers with suitable seats during the performance of their job duties. Section 14 of Wage Order 7–2001 provides:

1. All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.
2. When employees are not engaged in the active duties of their employment and the nature of the work requires standing an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

In ruling on the motion for summary judgment, the court first considered the interplay between subsections A and B, and ultimately held that the two subsections were mutually exclusive. In doing so, the court rejected the plaintiff's argument that the phrase “nature of the work” refers to any particular duty that an employee performs during the course of her work. Instead, the court agreed with the defendant that the “nature of the work” performed by an employee must be considered in light of that individual’s entire range of assigned duties in order to determine whether the work permits the use of the seats or requires standing. It is not enough to simply look at certain tasks in isolation to determine whether those tasks could be performed while seated, the court held. Instead, the court's inquiry was whether or not the job as a whole permitted the use of a seat or required standing. The court held that if the nature of the work requires standing, subsection B applies.

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Last week, in Cash v. Winn, a California Court of Appeal flatly rejected an exception to the personal attendant exemption from overtime for individuals who provide in-home “health care services.” Under California Industrial Welfare Commission Wage Order No. 15-2001 (“Wage Order”). individuals employed as “personal attendants,” defined to mean employees who “supervise, feed, or dress” the client, are exempt from overtime pay requirements. However, if the caretaker performs a “significant amount of work” in addition to these tasks, the caretaker is not exempt from overtime pay requirements. In addition, with certain exceptions, if the caretaker is a registered nurse employed to engage in the practice of nursing in the home, the nurse is not exempt from overtime pay requirements.

The issue the court addressed in Winn was whether there exists an additional exception to the personal attendant exemption rule if a caretaker, who is not a licensed nurse, performs any form of health care related services for an elderly client. After conducting a thorough analysis of the relevant case law and statutory authority, the Fourth District Court of Appeal concluded that such an exception was inconsistent with the spirit and letter of the Wage Order. To learn more about the decision and its potential implications for employers please continue reading at Littler’s Healthcare Employment Counsel.

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By Christopher Anderson

The Tennessee General Assembly recently amended the state’s meal and rest break law to require meal breaks for tipped employees in the food and beverage industry. Fortunately, the new law also allows tipped employees to waive their right to meal breaks as long as employers follow a very specific process.

Under Tennessee law, employers must grant employees a 30-minute unpaid meal break unless the nature of the business provides “ample opportunity [for employees] to take an appropriate meal break.” Before the recent amendment, Tennessee employers in the food and beverage industry were not obligated to grant rest breaks to their tipped employees. In the interest of providing regulatory guidance to employers in the industry, the Tennessee Department of Labor determined that waiters and waitresses fall within the exception to the meal break requirement because, by the nature of the business in which they work, there is ample opportunity to take a meal break. As a result of the Tennessee DOL’s guidance, employers in the food and beverage industry were able to avoid disruptions in service caused by meal breaks and provide the uninterrupted attention that is vital to customer satisfaction.

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By Julie Dunne and Alison Hightower

The California Supreme Court’s much-anticipated decision regarding how employers are supposed to manage meal periods and rest breaks is finally here! The unanimous decision in Brinker Restaurant Corporation v. Superior Court was issued today, and it is largely a win for California employers. Littler will sponsor webinars providing a detailed analysis of the decision on April 17, 2012, from 10 to 11 a.m. PST, and on April 26 from 10 to 11 a.m. PST. In the meantime, here are the highlights.

Duty to Relieve Employees of Duty

The California Supreme Court held that an employer must relieve employees of all duty during their meal period, with the employee thereafter at liberty to use the meal period for his or her own purpose. Importantly, the court rejected the plaintiffs' argument that the California Wage Order requires employers to ensure that no work is done during an employee’s meal period. If an employee continues to work after the employer relinquishes control, the employer will be liable for straight pay only when it knew or reasonably should have known that the worker was working through the authorized meal period. The court thus clarified that premium pay (an extra one hour’s wage) is not owed when the employer relinquishes control and the employee nevertheless continues to work.

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By Jeanne Barber

As we reported earlier, the New Jersey Department of Labor and Workforce Development (DLWD)amended its wage and hour regulations in September 2011 to eliminate inconsistencies between state and federal overtime law. In so doing, the DLWD inadvertently omitted the exemption for commissioned sales employees, commonly referred to as the “inside sales” exemption, from the amendment. The DLWD’s mistake, which it acknowledged was inadvertent, potentially put employers at risk for misclassification lawsuits.

Now, however, the DLWD has corrected its error, and on February 21, 2012, the exemption was fully restored. The regulation now defines “administrative” employee to include an employee whose: (1) primary duty is sales; (2) total compensation is comprised of at least 50% commissions; and (3) total compensation is $400 or more per week.

Notably, the restored New Jersey “inside sales” exemption differs from the exemptions available under federal law. As a result, employers should carefully analyze whether their commissioned sales employees qualify as exempt under both state and federal law.

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By Chris Kaczmarek

In a case of first impression, a Massachusetts Superior Court judge recently held that an employer may adopt a policy prohibiting employees from accepting tips from customers without violating the Massachusetts Tips Law. Any such policy, however, must clearly and conspicuously be announced to customers, such that a reasonable customer would understand that any money left by the customer would not be given to employees as a tip.

In Meshna v. Scrivanos, a number of employees who worked at Dunkin’ Donuts franchises sued the owner/operator of those franchises, claiming that the stores’ no-tips policy violated Massachusetts law. The policy required employees to return tips to customers. According to the complaint, if the employee was unable to return a tip to a customer, then the employee was required to put the tip in the register to be retained by management.

The defendant moved for judgment on the pleadings, arguing that Massachusetts law permits employers to have a no-tipping policy. The court agreed with the defendant’s argument in principle, holding that the Massachusetts Tips Law does not prohibit “a no-tipping policy that is clearly and conspicuously announced” to customers such that a reasonable customer would understand that any money left by the customer would not be given to employees as a tip.

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By Laurent Badoux

On January 27, 2012, the United States District Court for the District of Arizona granted AutoZone’s motion for summary judgment in a case brought on behalf of a nationwide class of current and former store managers seeking overtime pay under the Fair Labor Standards Act (FLSA). In so ruling, the court rejected the store managers’ argument that they were not bona fide executive employees under the FLSA.

The store managers contended they spent as much as 90% of their time working on manual (i.e., non-managerial) tasks that required rote compliance with AutoZone’s detailed, standardized policies and procedures. Therefore, the store managers contended, they were not exempt executive employees.

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In Duran v. U.S. Bank National Association, the California Court of Appeal, First Appellate District, overturned a $15 million judgment against U.S. Bank ("USB") entered in a case tried before Alameda County Superior Court Judge Robert Freedman. In its lengthy and very detailed opinion, the court shredded all the major trial management and evidentiary rulings made by the trial court, holding that its use of flawed statistical evidence and refusal to admit relevant testimony in support of USB's defense of exempt status denied USB its right to due process. In the first California appellate decision to apply the U.S. Supreme Court's 2011 Wal-Mart Stores v. Dukes decision, the court determined that the trial management plan was a fatally flawed exercise in "Trial by Formula." As a final repudiation of the trial court's rulings, the Duran court also ruled that the class should be decertified. To learn more about the decision and its potential implications for employers, please continue reading Littler's ASAP, "Trial by Formula" Rejected and $15M Overtime Judgment Overturned, by Diane Kimberlin.

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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 Diane Kimberlin

On January 24, 2012, the California Court of Appeal, Fourth Appellate District, issued an important decision providing new and needed guidance on the commissioned sales exemption. In Muldrow v. Surrex Solutions Corporation, the court concluded that a class of “senior consulting service managers” was exempt from overtime pay requirements.

Although California courts require an employee be “involved principally” in “selling” in order to qualify for the commissioned sales exemption, there has been very little guidance on the meaning of this requirement. Muldrow supplies that guidance. It also addresses another previously unanswered question: must a commission be based solely on the price of goods or services sold, or may it include other factors? 

The plaintiffs were employed by Surrex to locate candidates to fill job orders placed with Surrex by its client companies. They used an internal database, made cold calls, and used other resources to find suitable candidates. They worked to convince the candidate that the job was desirable and convince the client company that the candidate was a good fit for the job. The plaintiffs were required to “nail down” the client’s rate, the candidate’s rate and to make sure that deals held together. Surrex was paid only when a placement was complete.

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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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By James Oh, Andrew Voss and Tracy Stott Pyles

After a trial to the court in September 2011, the United States District Court for the Southern District of Ohio entered judgment on January 5, 2012 in favor of Defendant Nationwide Mutual Insurance Company, on all claims alleged against it by a nationwide class of Special Investigators who claimed they were misclassified as exempt from the overtime requirements of the FLSA and New York and California state wage laws.

The case was initially filed in September 2007 in federal court in California, and venue was transferred to the Southern District of Ohio, where Nationwide is headquartered. Notice to opt-in was issued nationwide to current and former Special Investigators, and ninety-one joined the action.

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By William Hays Weissman

In Arnold v. Mutual of Omaha Insurance Company, a California appellate court issued a published decision holding that insurance agents are not employees under the California Labor Code. This appears to be the first time the court has addressed the status of insurance agents.

The plaintiff filed a putative class action asserting that she was misclassified as an independent contractor and therefore denied reimbursement of business related expenses under Labor Code section 2802, and was not paid all wages in a timely fashion. She also asserted that failure to pay business expenses constituted an unfair business practice.

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By Alison S. Hightower

In a long-awaited decision, the California Supreme Court unanimously gave California employers a holiday present in an opinion that follows the majority of federal courts in finding that insurance claims adjusters are exempt administrative employees.

At issue in Harris v. Superior Court was the exempt status of a certified class of Liberty Mutual insurance claims adjusters who the California Court of Appeal found did not satisfy the requirements of the administrative exemption as a matter of law. Under California law exempt administrative employees must receive a minimum compensation of not less than two times the minimum wage, and also (1) perform office or non-manual work “directly related to management policies or general business operations of his/her employer or his/her employer’s customers,” and (2) “customarily and regularly exercise discretion and independent judgment.”

The administrative exemption has been one of the most hotly-contested and litigated of California’s overtime exemptions. This decision provides more clarity on the application of the exemption, and the role of the “administrative/production worker dichotomy” as an analytical tool in assessing exempt status.

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By Steven Kaplan

On December 23, 2011, the U.S. Court of Appeals for the Fourth Circuit in Kunda v. C.R. Bard, Inc. held that employers in Maryland may have their employees execute employment agreements with a choice of law provision other than Maryland, so long as the other jurisdiction has a “substantial relationship” to the parties and the application of the law would not be contrary to a fundamental Maryland public policy. This case settles the issue, at least for now, of whether an employee who works in Maryland has a fundamental right to sue for wages under the Maryland Wage Payment and Collection Law (“MWPCL”) – generally a law favorable to employees.

In Kunda, the plaintiff fervently argued that the MWPCL, not New Jersey’s wage payment and collection law, should apply to her employment agreement because the MWPCL constitutes a fundamental Maryland public policy. The Fourth Circuit disagreed. Citing to two other Maryland laws that contain express language concerning whether those laws contain a strong public policy, the court noted that “by contrast, the MWPCL contains no express language of legislative intent that the law is a fundamental Maryland public policy.”

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UPDATE: On the morning of January 3, 2012, the Labor Commissioner changed the FAQs on this notice requirement to clarify that the notice does not need to be given to current employees except under certain circumstances. The Labor Commissioner did so by simply deleting the following sentence formerly in the answer to FAQ 2: “The notice should be given to all current employees and then to all new employees at the time of hire.”

By Christopher Cobey

The California Labor Commissioner posted its template wage notice form required by Labor Code section 2810.5 of the California Wage Theft Protection Act (WTPA), and accompanying FAQs. Beginning January 1, 2012, the form must be provided to certain newly hired employees, and at least certain current employees whose specified employment information changes on or after January 1. The Labor Commissioner’s FAQ 2 takes the position that the notice must be provided to "all current [covered] employees," although section 2810.5’s language does not explicitly require such notice.

The form requires more information than is specified in section 2810.5. The new law authorizes the Labor Commissioner to include “any other information the Labor Commissioner deems material and necessary,” so employers should complete all information included on the form.

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By Brian Dixon

In Aleman v. Airtouch Cellular, a California Court of Appeal ruled on December 21, 2011 that one class representative was not entitled to additional reporting pay or split shift premiums and a second class representative could not pursue such claims because she had signed a release in exchange for enhanced severance compensation. The court did, however, reverse the award of attorneys’ fees to the employer.

The first class representative was scheduled for store meetings which occurred once or twice a month before the store opened. The meetings were scheduled at least four days in advance and were scheduled to be an hour to an hour-and-a-half in length. The class representative always worked for at least one half of the meeting time.

The first class representative sought reporting time pay under the provision of the California Wage Orders that states: “Every work day an employee is required to report for work and does report but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage.”

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By Jim Hart

On December 13, 2011, the Ninth Circuit Court of Appeals reconsidered the case, Sullivan v. Oracle Corp., after the California Supreme Court had decided several certified questions of law. The Ninth Circuit had previously delayed ruling, and instead asked the California Supreme Court to decide three questions of California law, including whether a company with its principal place of business in California was required to pay out-of-state employees temporarily working in California according to California’s daily overtime rules. The California Supreme Court took up the issue, and according to the Ninth Circuit, “[t]he California Supreme Court agreed with the answers we had given in our original opinion to these three questions” – that Oracle was required to pay daily overtime to its instructors temporarily working in California. The Ninth Circuit took up the case again after the California Supreme Court’s ruling, and considered several constitutional arguments raised by Oracle. Oracle argued that applying California’s daily overtime rules to out-of-state employees temporarily in the state violates the Due Process Clause of the Fourteenth Amendment and the Dormant Commerce Clause of the United States Constitution. The Ninth Circuit rejected these arguments and remanded the case to the district court.
 

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By Karin Cogbill

In the first significant ruling of its kind, the Los Angeles Superior Court in Bright v. 99¢ Only Stores granted the defendant’s motion to strike the plaintiff’s representative Private Attorneys General Act (PAGA) allegations. The plaintiff, Eugina Bright, filed a complaint against 99¢ Only Stores in June 2009 alleging that the store failed to provide her, and all other cashiers, with suitable seating. In October 2009, the court granted the store’s demurrer prohibiting the plaintiff from pursing a suitable seating claim through PAGA (California Labor Code §§ 2698 et seq.). In November 2010, the court of appeal reversed and remanded the case.

Back at the trial court, the plaintiff represented that she intended to seek class certification for her PAGA claim; yet she ultimately failed to move for certification. Instead, the store proactively moved to strike the plaintiff’s representative allegations in order to prevent her from seeking to recover penalties on behalf of all other alleged “aggrieved” employees. The store first argued that the plaintiff was an inadequate representative of its other cashiers. The store submitted declarations from 376 of its cashiers, all of whom indicated they disagreed with the plaintiff’s demand that they be provided seats, and the plaintiff failed to provide even a single rebuttal declaration. The store also noted the plaintiff’s independent interests in recovering lost wages and her failure to reach out to even a single “aggrieved” employee she sought to represent.

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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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By Christopher Kaczmarek and Joseph Lazazzero

The First Circuit Court of Appeals recently held that banquet sales managers qualified for the administrative exemption to the Fair Labor Standards Act (FLSA). The court reached this holding in the case of Hines v. State Room, Inc. even though the banquet sales managers were bound by a price schedule established by their employer and therefore had virtually no authority to make financial decisions.

In this case, the banquet sales managers were responsible for contacting potential clients, assisting clients in selecting the appropriate venue, and designing a function so as to meet the client’s objectives and budgetary constraints. The “vast majority” of their work involved “unscripted conversations” with current and potential customers regarding the details of the event.

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By Alison Andolena

On November 16, 2011, the New Jersey Appellate Division affirmed a finding that registered nurses who were paid on an hourly basis were exempt from the overtime requirements of the New Jersey Wage and Hour Law (“NJWHL”), even though the regulation applicable at the time only extended the “professional” exemption to employees compensated on a “salary or fee basis.”

In Anderson v. Phoenix Health Care, Inc., the court explained that while the regulation specifically provides that exempt professionals must be paid on a salary or fee basis, for the past 40 years the New Jersey Division of Wage and Hour Compliance’s enforcement policy had been “consistently administered” to extend the exemption to professionals paid on an hourly basis so long as their total weekly compensation exceeded the minimum set forth in the regulation. Deferring to the Division’s longstanding interpretation, the court stated that a change to such a longstanding policy must come from an amendment of the regulation or through the legislative process. In addition, the court found that the good faith exception would have applied even if the exemption was held not to apply to hourly-paid nurses. 

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As previously discussed, in recent amendments to its overtime regulations, New Jersey had inadvertently eliminated the exemption for sales employees paid on commission, which closely tracked an exemption in Section 7(i) of the Fair Labor Standards Act (sometimes known as the "inside sales" exemption).

After Littler assisted in drawing attention to this issue, the New Jersey Department of Labor and Workforce Development published on November 21, 2011, a proposed amendment to its regulations designed to restore the exemption. A public hearing on the proposed amendment is scheduled for Tuesday, December 13, 2011, and written comments are due by January 20, 2012. Final regulations, then, could issue as early as February.

To learn more about the proposed amendment and its implications for employers, please continue reading Littler's ASAP, New Jersey Issues Proposed Regulations to Restore Its Exemption for Commissioned Sales Employees, by Tammy McCutchen.

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A federal district court in California recently issued a decision in Dilts v. Penske Logistics, LLC, holding that motor carriers that transport property are not subject to California’s meal and rest break laws because such laws are preempted by the Federal Aviation Administration Authorization Act. To learn more about the decision and its implications for employers, please continue reading Littler's ASAP, Federal District Court Holds Motor Carriers Are Not Subject to California's Meal and Rest Break Laws, by Michael Gregg.

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By Michael Kessel

In 2009, New Jersey passed a law requiring the Department of Labor and Workforce Development (“DLWD”) to issue regulations providing that any employer who is required to maintain and report records regarding wages, benefits, and taxes pursuant to state law “shall conspicuously post notification” of the obligation to maintain and report those records.

The DLWD has now issued those new regulations and a sample notification that complies with the law.

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UPDATE: In an unusual move, the California Supreme Court accepted a post-argument brief concerning the “rolling 5” issue – whether meal periods must be provided for every 5 consecutive hours of work, e.g., in an 8-hour shift, if an employee takes a meal period after 3 hours, then works a further 5 hours after the meal period, must a second meal period be provided. Also, the brief addresses whether the court’s decision will apply prospectively or retroactively. If applied retroactively, the statute of limitations for meal period violations is 3 years, but challenges could also be filed under California’s unfair competition law, which has a 4-year statute of limitations.

By Alison Hightower

The long awaited oral argument in the seminal meal and rest break decision involving Brinker Restaurant finally occurred today. Before a packed courtroom, lawyers for a hopeful class of waiters and waitresses and the representatives of California employers battled it out before the seven justices of the California Supreme Court.

At issue are critical issues of interpretation that plague California businesses daily, and have sparked literally thousands of lawsuits, most brought as class actions seeking to recover the one hour “premium pay” owed for every missed meal or rest period.

• What does it mean to “provide” an uninterrupted 30 minute off-duty meal period—is it sufficient to make that meal period “available” to the employees and allow the employee to decide whether to take that time off, or must the employer “ensure” that the employee in fact did no work for 30 minutes?
• When must that meal period be taken to be legally compliant—could Brinker require employees to take that meal period within the first two hours of their shifts so they would be available to service customers during busy periods?
• “Must a meal period be provided every five hours? If an employee takes an early meal period after the second hour, would the employee be entitled to two meal periods in one eight-hour shift?”
• Must a rest period be offered within the first four hours of a shift, or could Brinker delay the rest period until after 4 hours had been worked?
• Must that rest period be offered before the meal period is made available?

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• Brinker Restaurant Corp. v. Superior Court">Share Link

Under the California Labor Code, certain computer software employees, as well as licensed physicians and surgeons, are exempt from state overtime requirements if they receive a minimum hourly, monthly or yearly rate. The rate is determined annually based upon changes to the California Consumer Price Index for Urban Wage Earners and Clerical Workers. Because the Index experienced a 2.5% increase over the past year, the California Division of Labor Standards Enforcement (DLSE) adjusted the rates these individuals must be paid to be considered overtime-exempt.

Computer Software Employee

Effective January 1, 2012, DLSE announced a 95-cent increase in the hourly rate for computer professionals, from $37.94 to $38.89 per hour. The monthly rate increases $164.69, from $6,587.50 to $6,752.19 per month. Finally, the annual salary increases $1,976.25, from $79,050 to $81,026.25 per year.

Licensed Physicians or Surgeons

Effective January 1, 2012, DLSE announced a $1.73 increase in the hourly rate for licensed physicians and surgeons, from $69.13 to $70.86 per hour.

Photo credits: arakonyunus and Inkastudio

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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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In 2011, for the first time since 2003, California's legislative process was controlled by a governor and a legislature of the same party. Yet the results at the end of this year's session were not as one-sided as some had predicted or expected. In the first year of his second administration as Governor of California, Jerry Brown stayed true to his promise to paddle on both sides of the canoe when deciding which of the 889 bills presented to him he would sign, and which he would veto. For California private sector employers, the results reflect the governor's methodology. To learn more about the bills signed into law this month by California's governor that affect all, or many, California private sector employers, please continue reading Littler's ASAP, Paddling on Each Side: How California Private Sector Employers Must Change Their Operations in 2012, by Christopher Cobey and Isela Pérez.

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By Bruce Sarchet, Dylan Wiseman, and Eric Ostrem

When an employee is sued by his or her employer for alleged wrongdoing related to the job, and the employee wins, does the employer have to pay the employee's attorney fees? In Nicholas Laboratories, LLC v. Chen,¹ published on October 12, 2011, a California Court of Appeal answered “no,” at least not under California Labor Code section 2802.

In that case, Nicholas Labs sued its own director of information technology, Christopher Chen, alleging that he engaged in a side-business that competed with the company, diverted business opportunities away from the company, stole certain computers and printers, and misused a company credit card, among other things.² Chen responded with a cross-complaint against his employer, arguing that the company should have to pay his legal bills if he wins the case. On the verge of trial, Nicholas Labs agreed to dismiss its claims against Chen as long as Chen agreed to let the judge, instead of a jury, decide his cross-complaint for attorneys’ fees.

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By Jennifer Robinson, Eric Stevens and Rachel Ross

As a general rule, the Fair Labor Standards Act does not require an employer to pay an employee’s travel time between home and their regular place of work. However, Tennessee employers should be aware of another travel time issue – Are employees serving on jury duty entitled to compensation for travel time to and from jury duty when the employee is not compensated for travel as part of the employee’s usual compensation? According to an Opinion just issued by the Tennessee Attorney General, the answer is YES, “subject to certain limited exceptions.”

TCA 22-4-106(b) requires, in pertinent part:

(b) Notwithstanding the excused absence as herein provided in subsection (a), the employee shall be entitled to the employee's usual compensation received from such employment; however, the employer has the discretion to deduct the amount of the fee or compensation the employee receives for serving as a juror. Moreover, no employer shall be required to compensate an employee for more time than was actually spent serving and traveling to and from jury duty. 

On its face, the new Opinion seems straightforward – employees should be paid their travel time for jury duty even if that same travel time would not be compensable if the employee was traveling to or from work. However, as with most broad “clarifications,” this Opinion leaves several open questions.

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By Tammy McCutchen*

There has been an important change in New Jersey law which may require employers to take immediate action: In recent amendments to its overtime regulations, New Jersey eliminated the exemption for sales employees paid on commission, which closely tracked an exemption in Section 7(i) of the Fair Labor Standards Act (sometimes known as the “inside sales” exemption). Because New Jersey law is now more protective than the FLSA, at present, it appears likely that employers cannot classify commissioned inside sales employees as exempt from overtime pay.

Like the FLSA, the New Jersey overtime pay statute includes exemptions for executive, administrative, professional and outside sales employees. See New Jersey Statutes § 34:11-56a4. Although the New Jersey statute does not contain an exemption similar to the FLSA Section 7(i), the New Jersey regulations had defined “administrative” employees as including “an employee whose primary duty consists of sales activity and who receives at least 50 percent of his or her total compensation from commissions and a total compensation of not less than $400.00 per week.” N.J.A.C. § 12:56-7.2(b).

New Jersey recently amended 12:56-7.2 of their regulations so that it simply adopts the federal regulations at 29 C.F.R. Part 541; the regulation now states: “Except as set forth in (b) below, the provisions of 29 CFR Part 541 are adopted herein by reference.”

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Three years after review was initially granted, on November 8, 2011, the California Supreme Court will hear oral arguments in Brinker Restaurant Corporation v. Superior Court and determine whether under California law an employer's obligation is to provide meal and rest periods, or to ensure that meal and rest breaks are actually taken.

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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 Christopher Cobey

In September, Governor Brown signed a bill (A.B. 240) that will equalize the penalties available to employees and the defenses available to employers on certain employee wage claims, brought either in court or in the administrative system.

Under current California law, an employee who wishes to bring a claim alleging payment of less than the minimum wage has a choice of making that claim either in California Superior Court or in an administrative proceeding before the Labor Commissioner (the chief of the Division of Labor Standards Enforcement). A significant difference in the remedy available to a successful claimant between the court and the administrative agency is that a judge in a court proceeding could award the claimant liquidated damages equal to the amount of the wages unlawfully unpaid and the interest on that sum. The Labor Commissioner, however, had no authority to award liquidated damages as a remedy to a successful claimant.

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By Milton Castro

California Governor Edmund G. Brown recently signed Assembly Bill No. 587 (AB 587) into effect, one of two recent amendments to the California Labor Code. Before AB 587, volunteer workers were exempted from the Code’s requirement that all workers employed on public works projects be paid not less than the general prevailing rate of per diem wages, but only until January 1, 2012. AB 587 extends the exemption by five years, to January 1, 2017.

When the exemption was first introduced in 2004, proponents argued that a public works exemption for volunteers was needed due to the “importance of volunteers in building community support for local projects,” many of which included environmental projects such as restoration of streams and wetlands. AB 587’s proponents claim that the exemption has since proven successful and thus its extension is necessary to allow volunteers, many of whom are students, to continue participating in preservation activities on public lands.

Photo credit: Mangostock

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By Alison Hightower

A social worker required to hold a bachelor’s degree in social or human services, behavioral science or an allied field does not necessarily qualify as a “learned professional,” properly exempt from overtime under the Fair Labor Standards Act, the Ninth Circuit recently held in Solis v. State of Washington DSHS (No. 10-35590 (Sept. 9, 2011).

The social workers in question were public employees of the State of Washington’s Department of Social and Health Services (DSHS), tasked with identifying the needs of children and their families and arranging for services to assure the children’s safety and well-being. Their obligations included investigating child abuse and neglect, developing treatment plans and recommending such plans to the courts, evaluating the progress children and families made in following those treatment plans, making placement decisions, and even recommending whether parental rights should be terminated.

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By Christopher Kaczmarek and Jeanne Barber

In July 2008, Massachusetts amended its state wage and hour laws to provide for mandatory awards of treble damages for plaintiffs who prevailed under those statutes. Since then, lawyers have disagreed as to whether this treble damages provision should apply retroactively. On August 31st, the Massachusetts Supreme Judicial Court resolved this dispute by unanimously holding that the treble damages provision does not apply retroactively.

In Rosnov v. Molloy, the plaintiff, an attorney, filed a complaint on April 17, 2007, claiming that her former partner withheld commissions from her in violation of the Massachusetts Payment of Wages Law. A jury found in favor of the plaintiff in March of 2009.

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In Zelasko-Barrett v. Brayton Purcell, LLP, No. A130540 (Aug. 17, 2011), California's First District Court of Appeal affirmed the trial court's order granting summary judgment in favor of the employer, Brayton Purcell. The appellate court held that California's professional overtime exemption applied to the plaintiff during the period of time he was employed as a law clerk at Brayton Purcell and had not yet passed the California Bar Examination. To learn more about the decision and its implications for employers, please continue reading Littler's ASAP, California Court Finds Professional Overtime Exemption Applies to Law Clerks, by Alan Levins, Kurt Bockes and Rachelle Wills.

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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 Diane Kimberlin

In Kuzinski v. Schering Corp, the U.S. District Court for Connecticut has dealt another blow to Schering Corporation’s efforts to prove that its pharmaceutical representatives are not entitled to overtime pay under the federal Fair Labor Standards Act. In ongoing litigation, the court had already rejected Schering’s argument that its pharmaceutical representatives were exempt outside sales employees. Schering tried another tactic, arguing that its sales representatives qualified as exempt from overtime under the administrative exemption. The plaintiffs filed their own motion for summary judgment. Acting on these cross motions for summary judgment, the court issued a decision on August 5, 2011, finding that the sales representatives are not exempt administrative employees.

Employers seeking to apply the FLSA’s administrative exemption must prove that: (1) the employees are paid a salary of at least $455 a week; (2) their “primary duty” is “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers;” and (3) the employees’ “primary duty” includes the “exercise of discretion and independent judgment with respect to matters of significance.” According to the district court, Schering’s sales representatives did not meet the second or third parts of this test.

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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 William Hays Weissman

Effective on July 20, 2011, employers in Arizona can mandate electronic payment of wages. Employees that do not elect direct deposit may be paid by payroll debit card, which now can be treated as the default option.

HR 2151 amends Ariz. Stat. sections 23-350 and 23-351 by allowing employers to choose one of four methods of payment of wages: (1) cash; (2) check; (3) if elected by the employee, direct deposit into a financial institution of the employee’s choice; or (4) if an employee does not designate a financial institution for direct deposit, by payroll debit card.

If an employer chooses to pay wages by payroll debit card, the employee must be entitled to withdraw his or her full wages without fee at least one time per pay period, but not more than once per week. The employer must also provide the employee with a list of all potential fees an employee may incur. Also, if the employee is paid by direct deposit or payroll debit card, the employer must furnish the employee with a written or electronic statement of the employee’s earnings and withholdings.

Payroll cards can be a win-win option for both employers and employees. Employers are given greater flexibility in methods of paying wages at reduced cost, and with greater security than cash or traditional checks. Employees no longer have to incur check cashing fees, and also have protection against lost cash. While it is not clear that Arizona’s bill represents any kind of trend by the states toward mandating electronic payment of wages, Arizona’s law should definitely be welcome by Arizona employers.

Photo credit: MBPHOTO, INC.

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By Jim Hart

On June 30, 2011, the California Supreme Court in Sullivan v. Oracle Corporation (S170577) considered a claim by three nonresidents of California. The plaintiffs brought claims of unpaid overtime against Oracle, a Delaware corporation with its headquarters in California. The three plaintiffs traveled to California from Colorado and Arizona for periods of time ranging from several weeks to several months to instruct customers on Oracle products. The California Supreme Court issued rulings concerning the reach of California's overtime laws to employees temporarily working in the state:

• First, California's overtime laws were found to apply to the non-resident plaintiffs for the time they were temporarily working in California, particularly since Oracle was a California-based employer and the employees worked at least a full day in the state;
• Second, the court also found that the plaintiff's temporary work in California provided a basis to seek overtime compensation under California's unfair competition law; and
• Third, the court found making a decision in California to classify the plaintiffs and others as exempt did not, standing alone, justify applying California's unfair competition law to alleged violations that occurred outside the state.

For more information about the decision and its implications for employers, please continue reading Littler's ASAP, California Supreme Court Finds Out-of-State Employees Working in California Are Protected by California Overtime Laws.

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By Mary Walsh

In Campbell v. PricewaterhouseCoopers, LLP, the Ninth Circuit Court of Appeals held that unlicensed accountants in California were not ineligible, as a matter of law, from being exempt from overtime under either the professional or administrative exemptions.

Two former unlicensed accountants in a subdivision of PricewaterhouseCoopers (PwC) filed a class action lawsuit alleging that PwC violated California wage and hour laws by improperly classifying them as exempt from overtime. Plaintiffs claimed they performed predominately routine and menial work and that strict instructions, computer software, and a work review-system precluded them from exercising any significant degree of discretionary judgment or analytical thinking. PwC argued that plaintiffs performed work integral to PwC’s services and to the extent that they did not exercise discretion and independent judgment, they were failing to meet the firm’s expectations. Both parties filed motions for partial summary judgment on whether plaintiffs were exempt under the professional, executive, and administrative exemptions. The district court granted plaintiffs’ motion for partial summary judgment, finding that as a matter of law, PwC could not classify plaintiffs as exempt from overtime under the applicable IWC Wage Order on the grounds that: (1) unlicensed accountants categorically are ineligible for the professional exemption; and (2) PwC had not established an issue of triable fact on whether plaintiffs’ work was performed “under only general supervision,” an essential element of the administrative exemption.

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By Sarah Green

On May 31, 2011, Maine Governor Paul LePage signed into law legislation easing restrictions on the state’s standards for child labor. Originally, the proposed legislation sought to remove all hour restrictions on 17-year-old employees, as well as summer work restrictions on 16-year-old employees. This sparked a lengthy debate among lawmakers.

Ultimately, many of the more controversial elements were struck from the legislation. As passed, the law increases the number of hours sixteen and seventeen-year-old employees can work during the school year from 20 to 24 hours per week. The law also raises the number of hours a minor may work per day from four hours to six hours. The law also permits minors to work until 10:15 pm on school nights.

The new law goes into effect 90 days after the adjournment of the Maine Legislature.

Photo credit: GRC Visuals

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By Gregory Iskander

Making new law on what qualifies as a “commission” for purposes of the overtime exemption for salespeople, a California Court of Appeal upheld a pay plan that compensates sales employees at a fixed rate for each product sold as opposed to relying on a percentage of the sales price.

In Areso v. CarMax, Inc.¹ a former sales consultant of CarMax filed a class action against the company alleging that CarMax violated the California Labor Code by classifying her and other sales consultants in California as exempt and failing to pay her overtime. CarMax utilized a compensation plan for its sales consultants, who sold used vehicles, warranty plans, and vehicle accessories, with a uniform dollar payment for each sale of a vehicle or service plan. Concerned with the applicability of the California salesperson overtime exemption, CarMax modified its pay plan for California employees and used a formula which took into account the number of vehicles sold and the average price of the vehicles – such that a sales consultant would earn approximately the same uniform payment per vehicle sold. CarMax used this uniform payment based on the number of vehicles sold instead of a percentage of the sales price so that its salespeople did not push higher priced cars.

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By Milton Castro

In a collective and putative class action under New York’s overtime and minimum wage laws, the U.S. District Court for the Southern District of New York recently held that the act of being a registered representative pursuant to the Financial Industry Regulatory Authority (FINRA) does not in itself absolve an insurance agent from the “outside salesman” exemption under the Fair Labor Standards Act (FLSA). Gold v. New York Life Insurance Co.  In Gold, the plaintiff worked for New York Life Insurance Co. as an insurance agent. During his employment, the plaintiff was compensated on a purely commission basis and received no remuneration based on the number of hours he worked. In addition to selling traditional “fixed” insurance policies and annuities, the plaintiff also obtained “Series 6” and “Series 63” licenses, which permitted him to sell “registered” products, including variable life insurance policies and other products regulated by FINRA. With these licenses, Gold became a “registered representative” – a title which requires enhanced duties to clients under FINRA, such as the “Know Your Customer Rule” and the “Suitability Rule.” It was based on these enhanced duties that Gold, in an attempt to escape summary judgment, argued that he should not be considered an “outside salesman” under the FLSA, but rather a financial advisor. The court disagreed.

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By R. Brian Dixon

The time period for the California Supreme Court to grant review of Arechiga v. Dolores Press, 192 Cal. App. 4th 567 (2011), has expired without review being granted. This is mixed news for employers, as the result in Arechiga, while favorable to employers, does not resolve the questions posed by the Court of Appeal’s decision.

In Arechiga, the court concluded that an employer can include overtime in a fixed salary amount. The court found that each of the requirements for doing so under older California case law was met as the employer had, before the work at issue was performed, specified: (1) the days that the employee would work each week; (2) the number of hours the employee would work each day; (3) the specific amount of the guaranteed salary; (4) the hourly rate on which the salary was based; and (5) that the salary covered both regular and overtime hours.

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On May 11, 2011, the California Supreme Court denied review of a state appellate court's decision in Price v. Starbucks. As we previously discussed, in that case, the California Court of Appeal, Second District, upheld the lower court’s orders striking the plaintiff’s itemized wage statement claim for failure to show injury and his reporting time pay claim finding no violation of law.
 

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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 Wayne Hersh and Heather Peck

In February 2011, the California Court of Appeal rejected an employer’s use of an "artificial" workweek where the workweek ran from 12:00 a.m. on Monday to 11:59 p.m. the following Sunday and where the employees worked a 14-day shift from Tuesday to Tuesday.¹ In its opinion, the court held that while an employer "may designate any workweek it wishes" it cannot "require its employees to work one workweek, such as from Tuesday noon to Tuesday noon, and designate another workweek, such as Monday to Sunday night, for the purposes of calculating overtime compensation."²

The employer subsequently filed a motion for reconsideration, which was granted, and the court re-issued its opinion on April 14, 2011.³ In its re-issued opinion, the court affirmed its prior decision, rejecting the artificial workweek utilized by the employer.⁴ The court’s reasoning, however, was significantly modified. Rather than flatly rejecting the artificial workweek, the court acknowledged that an employer may designate a workweek which differs from the work schedules of the employees if it has a bona fide business reason for doing so, "which does not include the primary objective of avoiding the obligations of overtime."⁵

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By Sara Sheinkin and Andrew Marks

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

A.                 The New York State Regulations for the Hospitality Industry

1.                  What?

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

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

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

2.                  Who?

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

3.                  When?

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

4.                  How?

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

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

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By Milton Castro and Jeremy Stewart

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

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

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

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

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

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In the wave of class litigation flooding the courts in California claiming rest breaks were not permitted, one court recently denied class certification based on a common sense conclusion that the experience of a handful of guards could not be assumed to be the experience of thousands.

In a recent case, Temple v. Guardsmark LLC, two security guards sought penalties on behalf of a class of thousands of guards based on their employer’s alleged failure to provide “off-duty” rest periods and accurate wage statements.

The guards worked “solo” at various client sites and thus had no one to relieve them from duty for breaks. They alleged company policies prohibited them from leaving their posts to take ten minute rest periods, and they supported their motion for class certification with sworn declarations from fourteen guards saying they took no breaks. Defendant Guardsmark countered with 96 sworn guard declarations, each attesting to having regularly taken rest breaks, spending the time engaged in a wide variety of personal activities.

Faced with the dueling declarations, the question before the court was not whether Guardsmark in fact failed to legally provide rest periods, but whether the two security guards who sought to be class representatives could offer common evidence to prove that thousands of guards in fact were illegally denied rest breaks without trying the claims of each guard one-by-one. The court found that the guards had not shown they could resolve these claims based on “common proof.” The evidence instead suggested that many guards—at least the 96 who supported their employer—did in fact take rest breaks, and even the evidence offered by plaintiffs raised questions such as whether idiosyncratic directions of a lone wolf supervisor rather than a common company-wide policy was the reason for some employees being deprived of rest breaks.

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Pursuant to California law, a non-exempt employee is usually entitled to premium pay on the seventh day of work in any one workweek. For example, where an employee works six consecutive days within a workweek, she must be compensated at time and a half for the first eight hours worked and double time for any additional hours worked on the seventh day. A “workweek” is defined as “any consecutive days, starting with the same calendar day each week. ‘Workweek’ is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods.”

Prior to the court’s recent ruling in Seymore v. Metson Marine, Inc., it was presumed that employers had flexibility in defining the “workweek” as applied to their employees. However, in Seymore v. Metson Marine, Inc., the plaintiffs argued that they were entitled to unpaid overtime because the defendant artificially created a workweek to circumvent premium pay requirements. The workweek, as defined by the employer, ran from 12:00 a.m. on Monday to 11:59 p.m. the following Sunday. The plaintiffs worked a 14-day on/14-day off schedule that ran from Tuesday to Tuesday, which resulted in a single seventh day premium at the end of the second week.

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A recent decision by the U.S. District Court for the Southern District of New York illustrates the impact of class waiver provisions in employment agreements. In Sutherland v. Ernst & Young LLP, plaintiff, a former accountant, brought a class action against Ernst and Young (“E&Y”) under the Fair Labor Standards Act and New York law, alleging that she and putative class members were unlawfully denied overtime compensation. E&Y moved to dismiss and compel arbitration of Sutherland’s claims on an individual basis pursuant to the parties’ arbitration agreement which included a class waiver provision.

In denying defendant’s motion, the court relied on In re American Express Merchants’ Litigation, 554 F.3d 300 (2nd Cir. 2009) (“Amex”). There, the Second Circuit invalidated a class waiver provision in an arbitration agreement, finding that it precluded plaintiffs from vindicating their statutory rights. The Amex court held that the enforceability of a class waiver provision should be determined by referencing several factors, including: (1) the provision’s fairness; (2) the individual plaintiff’s cost-to-recovery ratio; (3) the ability to recover attorneys’ fees and costs and thus obtain legal representation; and (4) the waiver’s effect on the company’s “ability to engage in unchecked market behavior.”

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Ten years ago, in Bell v. Farmers Insurance Exchange, 87 Cal. App. 4th 805 (2001), the California Court of Appeal held that insurance claims adjusters in that case were nonexempt administrative employees and, consequently, were entitled to overtime pay. That decision lead to a $90 million dollar judgment against the defendant and a slew of copycat lawsuits. Since then, a number of federal courts have gone in the opposite direction and held that claims adjusters are exempt from overtime. See e.g., Palacio v. Progressive Insurance Company, 244 F. Supp. 2d 1040 (C.D. Cal. 2002); McAllister v. Transamerica Occidental Life Insurance Company, 325 F.3d 997 (8th Cir. 2003); Cheatham v. Allstate Insurance Company, 465 F.3d 578 (5th Cir. 2006); In re Farmers Ins. Exch., Claims Representatives’ Overtime Pay Litig., 466 F.3d 853 (9th Cir. 2006); Roe-Midgett v. CC Services, Inc., 512 F.3d 865 (7th Cir. 2008); Robinson-Smith v. Gov’t Employees Ins. Co., 590 F.3d 886 (D.C. Cir. 2010). In Hodge v. Aon Insurance Services, the California Court of Appeal followed this trend and held that Aon’s claims adjusters were properly classified as exempt administrative employees. In doing so, the court in Hodge limited the holding issued 10 years ago in Bell.

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Carlos Arechiga may have been, as the trial court found, ecstatic when he was first told that he would earn $880 per week as a custodian, but he certainly was dismayed after working six 11-hour days per week for several years and never receiving a separate payment for overtime. Arechiga was undoubtedly more dismayed when the California Court of Appeal, in Arechiga v. Dolores Press, affirmed the trial court’s conclusion that his salary included his overtime compensation and he was due no additional wages. The Court of Appeal concluded that Arechiga’s employer had sufficiently spelled out the six factors needed to have, under California law, an enforceable wage agreement that included all required overtime. Perhaps surprisingly, the Court of Appeal also ruled that the wage agreement prevailed over section 515(d) of the Labor Code, which seemingly outlawed such agreements.

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In the California Supreme Court opinion of Sonic-Calabasas A, Inc. v. Moreno, a 4-3 majority of the court concluded that a pre-dispute employee-employer arbitration agreement requiring the arbitration of employee wage claims, which could otherwise be brought before the state's Labor Commissioner, is contrary to public policy and unconscionable, and is thus unenforceable. The court's majority declared that the 2008 U.S. Supreme Court case of Preston v. Ferrer did not compel a different conclusion and that the court's holding was not preempted by the Federal Arbitration Act (FAA; 9 U.S.C. §§ 1 et seq.). See our recent ASAP for a detailed analysis of the decision's implications for employers.

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The California Court of Appeal, Second District, affirmed yet another ruling in favor of employers in the state. In Price v. Starbucks, case number B219501, the court upheld the lower court’s orders striking the plaintiff’s itemized wage statement claim for failure to show injury and his reporting time pay claim finding no violation of law.

Plaintiff Drake Price was employed by Starbucks as a barista for a brief period in late 2007. When Price failed to show up for a shift he was taken off the work schedule for the week, and was told to come in to “have a talk” with the manager five days later. When Price reported to Starbucks on the designated date, he was told his employment was being terminated in a “45 second” meeting. On the day of his termination, Price was paid his final wages and also paid two hours of “reporting time pay” for the termination meeting, as required by Cal. Code Regs., tit. 8, § 11050, subd. 5(A). He thereafter sued on behalf of himself and all others similarly situated, asserting claims for reporting time pay pursuant to the California Wage Orders, inaccurate wage statements in violation of California Labor Code section 226, and for various other Labor Code violations, as well as unfair business practices under the California Business and Professions Code.

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In the same week that one California court held that employees are entitled to two hours pay for any day in which they did not receive required meal and rest breaks, employers received welcome news from another California appellate court, which found employers do not have to ensure employees receive their meal breaks to avoid class claims for extra pay.

California’s Labor Code requires employers to “provide” meal periods to employees, but the precise obligation that provision imposes has been the subject of conflicting court opinions. Employees contend that the employer must ensure that they actually receive a break of at least 30 minutes, whereas employers argue that the word “provide” means that employers must merely make meal periods available to employees.

A California court of appeal has now agreed with employers, holding that the word “provide” should be construed according to its dictionary meaning of “to supply or make available.” In Tien v. Tenet Healthcare, an employee sought to certify a class of hourly non-exempt employees who supposedly were denied 30-minute meal periods and ten-minute rest breaks. The trial court waffled, first certifying several classes, then reversing itself, eventually agreeing with the employer.

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A California Court of Appeal rendered a potentially significant blow to California employers on Wednesday. In the first reported decision of its kind from a California appellate court, the court in United Parcel Service, Inc. v. Superior Court, held that California Labor Code section 226.7 permits an employee to recover up to two premium payments per work day: one for failure to provide a meal period and another for failure to provide a rest period.

Labor Code section 226.7 provides:

(a) No employer shall require an employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.

(b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.

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On February 10, 2011, the California Court of Appeal for the Second District affirmed summary judgment in favor of Costco Wholesale Corporation (Costco), in Head v. Costco Wholesale Corp., case number B222841, finding that Costco properly calculated the regular rate of pay of its salaried, nonexempt ancillary managers.

In 2001, Costco reclassified its ancillary managers from salaried exempt to salaried non-exempt, using a conversion formula to ensure that their incomes would remain the same after the reclassification. Specifically, Costco calculated the managers’ regular rates of pay using their salaries prior to the reclassification, based upon a 40-hour workweek, which resulted in reduced hourly pay rates for the managers. The reduced hourly pay rates were listed on the managers’ wage statements as their regular rates of pay. Costco then calculated new salaries for the managers based on this regular rate of pay, adding as additional compensation an anticipated five hours of overtime pay per week at the premium rate, as such overtime hours were expected of these employees. The revised salaries were listed on Costco’s internal personnel forms as the managers’ reported salaries. After reclassification, an ancillary manager would receive the revised salary for hours worked up to 45, plus overtime compensation for any hours worked beyond 45 per week.

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The Massachusetts Supreme Judicial Court recently held that the state’s Payment of Wages Law prohibits employers from reducing employee wages to recoup employee debt obligations unless the deduction can be considered a “valid set-off,” which it proceeded to interpret in a very restrictive manner. As the Payment of Wages Law provides for mandatory treble damages and attorneys’ fees, employers should immediately review their payroll practices to ensure that they are not making improper deductions. See our recent ASAP for a detailed analysis for the implications of this decision for employers.

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On January 26, 2011, the California Supreme Court created more uncertainty regarding meal and rest period obligations in California by granting review of the Court of Appeal’s published decision in Hernandez v. Chipotle Mexican Grill, Inc. As we discussed more fully on November 5, 2010, in Hernandez, the Court of Appeal affirmed the trial court’s ruling that an employer need only make meal periods available to employees, and affirmed the denial of class certification, holding that individual issues predominated over common issues as some employees received both meal and rest breaks, some missed only rest breaks, some missed only meal breaks, some missed both, and even the named plaintiff admitted that the ability to take breaks depended on the location where he worked.

With the grant of review and depublication of Hernandez, employers are once again left to read the tea leaves while waiting for the California Supreme Court to decide Brinker Restaurant Corporation v. Superior Court. In October 2010, the Court granted review in Faulkinbury v. Boyd & Assocs., which had affirmed an employer’s duty to make meal periods available, but held that certification was improper in that case. In May 2010, the Court let stand the published decision in Jaimez v. Daiohs, which affirmed the lower court’s rulings that meal periods must be made available, and that in certain cases, certification of such claims is proper.

Oral argument has not been scheduled yet in Brinker.

This entry was written by Erica H. Kelley.

Photo credit: shirhan

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On January 20, 2011, the Governor of Maine, Paul R. LePage, issued an Executive Order abolishing the State’s Joint Task Force on Employee Misclassification. The Task Force was established by former Governor John Baldacci in 2009 to address concerns that employers allegedly were misclassifying employees as independent contractors to avoid obligations under federal and state laws, including laws governing wage and hour issues. According to the Executive Order issued by Governor LePage, the Task Force added an unnecessary “extra layer of bureaucracy, to take actions on a matter within the shared jurisdiction of the Legislature, the Executive Department and the Judicial Department.” The Executive Order also notes that future legislation could negate or alter the Task Force’s determinations and that the Task Force has created uncertainty within the business community. Governor LePage has expressed concern that the various definitions and rules governing independent contractors under state and federal law have gone “too far” and caused some businesses to virtually eliminate their use of independent contractors. Accordingly, the Governor asked his staff to draft legislation addressing the varying classification standards and establishing the same definition of “independent contractor” for all agencies and businesses.

This entry was written by Sarah Green.

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In a parting "holiday gift" to New York employers, Governor David Paterson, as one of his last official acts in office, signed on December 13, 2010, a sweeping reform of the New York Labor Law entitled the Wage Theft Prevention Act (the "WTP Act"). The WTP Act, which becomes effective on April 9, 2011, modifies numerous sections of the New York Labor Law and imposes new recordkeeping and notice obligations on virtually every company that employs people in the state. To learn more about the Act and its implications for employers, please continue reading Littler's ASAP, Lame Duck Reform: New York's Wage Theft Prevention Act, by Barbara E. Hoey and Gary D. Shapiro, and read our previous post: New York Enacts Wage Theft Prevention 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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There is good news for New Jersey employers who utilize rounding. The New Jersey Department of Labor and Workforce Development has reconsidered its prior rejection of federal "rounding" rules. After a public comment period, the Department formally adopted a new rule which adopts, verbatim, the federal regulation regarding the use of time clocks and rounding practices. Under the new rule, rounding is lawful under New Jersey law so long as it "averages out ... over a period of time." This development means that New Jersey employers no longer need to assess the impact of rounding on a week-to-week basis. While this is a welcome development, employers who utilize rounding should remain vigilant to ensure that rounding is not "one sided" and that it does, in fact, average out over time.

This entry was written by Robert W. Pritchard.
 

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In a significant victory for Massachusetts healthcare employers, on December 20, 2010, the Massachusetts federal court applied the state overtime exemption available to hospitals, nursing homes, and certain other healthcare employers, and dismissed all 13 state wage-law claims in Cavallaro v.UMass Memorial Health Care. Plaintiffs in the case, a class action filed on behalf of 13,000 current and former employees of UMass Healthcare and its subsidiaries, claimed the hospital did not compensate them for time worked: (1) during meal breaks that were automatically deducted from wages; (2) before and after scheduled shifts; and (3) time spent in training sessions. To learn more about the Cavallaro decision and its implications for employers, please continue reading at Littler's Healthcare Employment Counsel blog.

Photo credit: MSRPhoto

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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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Pennsylvania’s Minimum Wage law requires that employees who work in excess of 40 hours in a workweek be paid overtime at the rate of 1½ times the worker’s regular rate of pay. The law exempts “ [d]omestic services in or about the private home of the employer” from the minimum wage and overtime requirements. According to regulations enacted by the PA Department of Labor and Industry (“DOLI”), however, the exemption applies only to the services of aides who are hired directly by the householder, not to the services of aides who work for a third party agency. On November 17, 2010, in Bayada Nurses, Inc v. Department of Labor and Industry, the Pennsylvania Supreme Court unanimously upheld DOLI regulations as consistent with the intent of state law and held that a home health agency cannot rely on the “domestic services” exemption to avoid paying overtime to its home health aides because it is a third party agency employer.

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On Thursday, the state Supreme Court dealt another blow to California employers in Pineda v. Bank of America, N.A. In a unanimous opinion, the Court announced that the penalties recoverable under section 203 of the California Labor Code are subject to a three-year statute of limitations rather than a one-year statutory period, irrespective of whether the employee seeks to recover unpaid pages along with the penalties.

Under section 203, if an employer willfully fails to timely pay final wages to an employee after termination or resignation, the employee is entitled to a penalty in the amount of a day’s wages for each day the wages remain unpaid, to a maximum of 30 days. Following a review of the statutory language, legislative history, and public policy underlying section 203, the Supreme Court ruled that all section 203 penalties are subject to a three-year statute of limitations, as specified within the statute itself. With this decision, the California Supreme Court increases the potential for wage and hour class actions seeking section 203 penalties alone, as such cases can now clearly be brought as much as three years after the alleged failure to timely final wages.

This entry was written by Dominic Messiha and Lauren Howard.

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In a case of first impression, a California court of appeal held in Bright v. 99¢ Only Stores, No. B220016 (Cal. Ct. App. Nov. 12, 2010) that the “suitable seats” provision of Wage Order 7-2001 may be enforced through the Private Attorneys General Act of 2004, California Labor Code § 2698 et seq. (PAGA).

Plaintiff’s Complaint and Procedural Background

The plaintiff, Eugina Bright, filed a class action complaint against her former employer 99¢ Only Stores. The plaintiff alleged that while employed as a cashier at 99¢ Only Stores she was not provided with a seat despite her contention that the nature of her work as a cashier reasonably permitted the use of a seat. The plaintiff based her claim for a seat on Wage Order 7-2001, Section 14 (entitled “Seats”), which provides:

A. All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.

B. When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

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A California federal court gave final approval to a $2.91 million settlement between Kaiser Foundation Hospitals and approximately 500 information technology employees who alleged they were misclassified as exempt under both the Fair Labor Standards Act and California law, and denied overtime for working through meal periods and working in excess of 40 hours per week, 8 hours per day or on the 7th consecutive day of a workweek. To learn more about the case, please continue reading at Littler's Healthcare Employment Counsel blog.

Photo credit: Bartek Szewczyk

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The Texas Workforce Commission recently amended its regulations to clarify the types of compensation that must be paid to employees upon the termination of the employment relationship.

The new rules state that vacation, sick pay, paid time off (“PTO”), and paid days off “(“PDO”) accrue and must be paid to separated employees only if required by a written agreement or policy. In addition, accrued leave time does not carry over from year to year unless a written agreement or policy provides for such carry over.

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On July 7, 2010, Alaska enacted a law restricting the amount of overtime nurses can work at private and public health care facilities. Many of the law’s provisions do not take effect until 2011. The law does provide, however, that a health care facility must file a report with the Alaska Department of Labor and Workforce Development’s Division of Labor Standards and Safety prior to February 1, 2011. The report, which covers the time period from July 2010 through December 31, 2010, must identify, for each nurse employed by the health care facility or under contract with the health care facility, the number of overtime hours worked and the number of hours the nurse was on call. The Department just recently made the required form available on its web site. 

Health care facilities whose nurses have not worked overtime hours and have not been on call during the reporting period may simply indicate on the form that there are no reportable hours.

This entry was written by Christopher Kaczmarek.
 

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A California Court of Appeal has upped the ante in the ongoing legal debate concerning meal and rest period obligations in California (pdf), unambiguously asserting that an employer is only obligated “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.” This holding is all the more notable given the court’s subsequent order certifying its opinion in Hernandez v. Chipotle Mexican Grill, Inc. (pdf), No. B216004, as suitable for publication. Consequently, it is currently citable and available as precedent.

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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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On October 13, 2010, Governor Rendell signed into law the Construction Workplace Misclassification Act. The Act curtails the circumstances under which a construction worker may be classified as an independent contractor for purposes of workers’ compensation and unemployment insurance.

Under the Act, to be classified as an independent contractor, a construction worker must meet three criteria: (1) have a written contract to perform services; (2) be free from the hiring party’s control or direction when performing such services; and (3) be customarily engaged in an independently established trade, occupation, profession or business.

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Employers of unionized commercial truck drivers and unionized employers in the security services, construction and public utilities industries received some welcome relief from burdensome California meal period regulations with the recent enactment of Assembly Bill 569.

AB 569 was introduced by state representative for Riverside/San Bernardino District 63 Bill Emmerson in February of 2009. It was one of many bills attempting to deal with the complex thicket of regulation of meal and rest breaks, which has resulted in a deluge of class action litigation in California in recent years. Attempts to enact broader relief have not thus far succeeded. However, the current law was passed by the State Assembly by a 72-2 margin on May 21, 2009. It will go into effect on January 1, 2011 assuming it is not overturned or otherwise suspended pending judicial resolution of any challenge during a 90 day period following its enactment.

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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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New York recently enacted the “New York State Construction Industry Fair Play Act.” Under this law, which becomes effective on October 26, 2010, a construction worker is presumed to be an employee—as opposed to an independent contractor—unless the worker is a separate business entity, as defined by the law, or the worker: (1) is free from control and direction in performing the job, both under his or her contract and in fact; (2) the service performed is outside the usual course of business; and (3) the worker is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue. If all three criteria are met, the worker may be considered an independent contractor.

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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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On August 8, 2010, in Lu v. Hawaiian Gardens Casino (pdf), the California Supreme Court held that employees do not have a private right of action under Labor Code § 351 to pursue remedies for misappropriated tips. The decision does not, however, address whether or not a cause of action for unfair competition may be predicated on Labor Code § 351, leaving employers exposed to unfair competition law (UCL) claims for providing tips to “agents” of the employer.

While the decision finally puts to rest the issue of whether the Legislature created a private cause of action under Labor Code § 351, employers should still carefully review their tip pooling policies. As a practical matter, this decision does not prevent employees from filing suit alleging a UCL cause of action based on Labor Code § 351. For a detailed discussion of this decision, please see Littler ASAP, “California Supreme Court Rejects Employees Right to Sue for Misappropriated Tips But Unfair Competition Law Cause of Action Remains" by Matthew Marca and Guissu Raffat.

This entry was written by Matthew Marca.

Photo credit: Thomas_EyeDesign

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The City of Austin, Texas recently passed an ordinance requiring that employers in the construction industry give employees a rest break of no less than 10 minutes for every four hours worked. The rest break must be scheduled as near as possible to the midpoint of the work period, and an employee may not work more than 3.5 hours without a rest break. Narrow in scope, the new ordinance applies only to employees performing construction activities at a construction site. An employee is not entitled to a rest break if he or she works less than 3.5 hours or spends more than half of his or her time engaged in non-strenuous work in a climate-controlled environment. Employers must post a sign (in English and Spanish) describing the rest break requirements in a conspicuous place or in areas where notices to employees are customarily posted. An employer that fails to give the required rest break or that fails to post the required sign can be found guilty of a Class C misdemeanor. The ordinance also provides for civil fines of $100 to $500 for each day a violation occurs. The ordinance does not expressly provide for a private right of action. Enacted on July 29, 2010, the ordinance amends Title 4 of the Austin City Code and becomes effective immediately upon enactment.

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On July 30, 2010, Illinois Governor Pat Quinn signed Senate Bill 3568, the most extensive change to the state’s wage theft statute in decades. The amendment to the Illinois Wage Payment and Collection Act, which goes into effect on January 1, 2011, focuses on the following:

• Broader coverage;
• Efficient enforcement mechanisms;
• Enhanced civil and criminal penalties; and
• Increased protection from retaliation.
   

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The Connecticut Supreme Court recently issued a decision in which it unanimously concluded that a year-end bonus, the amount of which is discretionary, does not constitute wages under Connecticut’s wage and hour statute, Conn. Gen. Stat. § 31-71a. Therefore, Connecticut’s private right of action for wages, Conn. Gen. Stat. § 31-72, which provides for double damages and attorney’s fees, does not pertain to claims for discretionary bonuses.

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New Hampshire recently amended its wage and hour law to permit employers to make deductions from employees’ wages for “legal plans and identity theft plans without financial advantage to the employer when the employee has given his or her written authorization and deductions are fully recorded.” The amendment becomes effective on August 13, 2010.

Although this amendment is modest in nature, it does clarify an issue that previously had confused many New Hampshire employers. Prior to this amendment, the New Hampshire Department of Labor had taken the position that employers could not make deductions from employees’ wages for legal services plans or identity theft plans, even though employees had voluntarily enrolled in those plans and authorized the requisite deductions, because these plans were not identified as permissible deductions under the state’s wage and hour law. This law makes clear that such deductions are now permissible.

This entry was written by Christopher Kaczmarek.

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Following a Connecticut district court’s denial of summary judgment to the employer in Ruggeri v. Boehringer Ingelheim Pharmaceuticals, Inc., a collective action brought by pharmaceutical sales representatives who claimed the were improperly classified as exempt employees, the pharmaceutical company has been hit with another putative collective action by sales representatives seeking overtime wages. But in this new case, Lopez-Lima v. Boehringer Ingelheim Pharmaceuticals, filed on July 21, 2010 in the federal District Court for the Southern District of Florida, plaintiffs allege that Boehringer hired them as “non-exempt commission-paid pharmaceuticals sales representative[s].” To learn more about the case, please continue reading at Littler's Healthcare Employment Counsel blog.

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On July 19, 2010, in Jackson v. Alpharma Inc., the United States District Court for the District of New Jersey held that Alpharma, Inc.’s pharmaceutical sales representatives qualify as exempt administrative employees under the Fair Labor Standards Act (“FLSA”). The court’s unpublished opinion relies in part on the Third Circuit’s holding in Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010).

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The Ninth Circuit Court of Appeals recently rejected a Texas corporation’s argument that drivers who performed services for the company were independent contractors—and therefore not subject to the requirements of the California Labor Code—because their contracts with the company contained a Texas choice of law provision. In Narayan v. EGL, Inc., the Ninth Circuit reversed the district court’s decision to grant the company’s motion for summary judgment and instead remanded the case for trial. In so holding, the Ninth Circuit demonstrated the heavy burden imposed on companies seeking to establish an independent contractor relationship, even when the company has a written contract designating the workers as independent contractors.

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Back in April, we reported that the Division of Wage and Hour Compliance at the New Jersey Department of Labor and Workforce Development was reconsidering its prior enforcement policy rejecting federal “rounding” rules under New Jersey law. On July 6, the Department formally announced its proposal to adopt a new rule which would adopt, verbatim, the federal regulation regarding the use of time clocks and rounding practices. The Department explained that

“[The proposed new rule would] eliminate any possible confusion regarding the Department’s wage and hour enforcement policy relative to the use of time clocks and ‘rounding’ practices.”

Specifically, the proposed rule will bring New Jersey back into conformity with federal law, creating a “straight forward and simple approach” for employers in New Jersey.

A public hearing on the proposed new rule will be held on July 29, 2010, at the office of the New Jersey Department of Labor and Workforce Development in Trenton, New Jersey.

This entry was written by Robert W. Pritchard.

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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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A court recently held that the Massachusetts overtime law, Mass. Gen. Laws Ch. 151 § 1A, may apply to work performed outside of Massachusetts by employees of a Massachusetts company. This is a significant ruling, given that the overtime law provides for mandatory awards of treble damages and attorneys’ fees to successful plaintiffs.

The plaintiff in Gonyou v. Tri-Wire Engineering Solutions, Inc. (pdf) lived in Massachusetts. He worked as a “technician supervisor” at the company’s facility in Danbury, Connecticut. After the company terminated his employment, the plaintiff sued, alleging that the company failed to pay him overtime while he worked in Connecticut.

After removing the case to federal court in Massachusetts, Tri-Wire moved to dismiss the plaintiff’s claim under the Massachusetts overtime law. Specifically, Tri-Wire argued that there is a presumption against extra-territorial application of statutes and the place of employment is the crucial factor in determining which state’s law is applicable. The plaintiff responded by arguing that nothing in the language of the statute compels such a result and that his proposed approach “does no more than ask this employer to stay abreast of the employment laws of its own home state.”

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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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As of May 21, 2010, Vermont joins a growing number of states who now allow employers to pay employee wages with payroll debit cards. The new law, Act 115 (S.58), amends Vermont State Code §§ 342 and 343 to permit an employer to credit an employee’s wages to a “payroll card account directly or indirectly established . . . in a federally insured depository institution.” Before the employer can do so, however, it must obtain the employee’s written consent, and fully disclose the terms and conditions of the payroll card account option. Furthermore, the employer may not pass on any of the expenses associated with the payroll card account to the employee nor may the employer receive any remuneration for using the card at the employee’s expense. Also, Vermont’s Department of Banking, Insurance, Securities, and Health Care Administration, the agency charged with regulating the Act, may impose additional obligations on employers who utilize payroll debit cards.

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Employers who conduct business in Maryland recently received good news when the Maryland court of appeals overturned the lower court decision in Catalyst Health Solutions, Inc. v. Magill (pdf) and held that unvested stock options are not wages under the Maryland Wage Payment and Collection law. The court reasoned that the unvested stock options at issue were not wages because the employee “did not fulfill the continued service condition,” as set forth in the stock option agreement.

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Effective March 1, 2011, retailers who conduct business in Maryland must provide their employees with mandatory shift breaks or be subject to substantial fines of up to $300 per employee for a first offense. The Healthy Retail Employee Act (the "Act"), was signed into law by Governor Martin O'Malley on May 20, 2010. To continue reading about the new law and its implications for employers, see Littler's ASAP Maryland Enacts "The Healthy Retail Employee Act" and Amends Its Wage Payment and Collection Law by H. Tor Christensen and Steven E. Kaplan.

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On May 12, 2010, Wisconsin Governor Jim Doyle signed into law two pieces of legislation regarding the misclassification of employees. Senate Bill 672, which will become effective January 1, 2011, requires the Department of Workforce Development (DWD) to establish a system ensuring the proper classification of workers under unemployment insurance, worker’s compensation and labor standards laws. Specifically, the DWD is required to educate employers, employees and the public about the proper classification of persons performing services for an employer; receive and investigate complaints alleging misclassification; conduct investigations on its own initiative; inform other state or local agencies of misclassification of employees; and appoint attorneys to conduct hearings and issue decisions as appeal tribunals.

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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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Effective July 1, 2010, Tennessee has amended its wage payment statute, Tennessee Code section 50-2-103, to allow employers to pay their employees using prepaid debit cards if the following conditions are met:

• The employee has the ability to make at least one withdrawal or transfer each pay period without cost to the employee for any amount contained on the card; and
• The employer provides the employee with a full written disclosure of any fees that may apply.

Employees must be provided the option of being paid via direct deposit or prepaid debit card. If an employee elects to be paid by direct deposit but does not designate an account at a financial institution in a timely fashion for the transfer to occur, the employer may arrange to pay the employee via prepaid debit card.

This entry was written by Andrew Voss.

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For those of you following the Jaimez v. Daiohs USA, Inc. case, on May 12, the California Supreme Court denied defendant Daiohs' requests for review and depublication of the appellate court's decision. For those of you who have not been following the Jaimez case, read on. The decisions of both the California court of appeal and California Supreme Court are as significant as they are discouraging.

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On May 5, 2010, Connecticut Governor Jodi Rell signed into law "An Act Implementing the Recommendations of the Joint Enforcement Commission on Employee Misclassification." The legislation will increase the state's civil penalty for independent contractor misclassification, currently $300 per violation, to $300 per day per violation. It also will expand criminal liability for employers who knowingly misclassify workers with the intent to injure, defraud or deceive the state because of their failure to pay workers' compensation or second injury fund assessments. The new act is scheduled to become effective on October 1, 2010. Nothing in the legislation reconciles the conflicting interpretations of independent contractor status under state and federal law. To continue reading about this development, see Littler’s ASAP Stiffer Penalties on the Horizon for Independent Contractor Misclassification in Connecticut? by GJ Stillson MacDonnell and Stephen Rosenberg.

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As we reported last year, the Division of Wage and Hour Compliance at the New Jersey Department of Labor and Workforce Development rejected federal “rounding” rules for enforcement purposes under New Jersey law. Specifically, while the U.S. Department of Labor assesses the impact of rounding “over a period of time” (and allows rounding practices that “average out” over time), the Division announced that it would evaluate the impact of rounding on a week-to-week basis. According to the Division, if an employer rounds, it must be to the benefit of the employee each week in order to comply with New Jersey law.

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Effective March 24, 2010, employers in Utah are now permitted to use pay cards to compensate their employees for their wages or salary. The new regulation (Utah Admin. Rule R610-3-22) defines a pay card as a “stored value card that can be used at an ATM-type machine to access wages that are credited to the card.” If an employer in Utah intends to pay employees with a pay card, it must ensure that this new practice meets the following conditions:

1. With one use, or a single transaction, the employee must be able to withdraw the full amount of earned wages without incurring a fee.
2. The full amount of wages for a pay period shall be available for the employee via the pay card on the applicable payday.
3. On each payday, the employer must provide the employee with a written or electronic statement of deductions from the employee’s gross wages for the pay period at issue.
    

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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 Maryland General Assembly recently amended the Maryland Wage Payment and Collection Law (MWP&CL) in two significant ways. The MWP&CL governs the timing of payment and payment of wages (such as salary, bonus or commissions) upon the termination of employment.

First, the General Assembly added “overtime wages” to the definition of “wage.” Accordingly, if a court now finds that an employer withheld overtime wages, other than as a result of a bona fide dispute, the employee may be entitled to treble damages. This represents a change from existing court precedent, which provided that an employee could sue for overtime wages only under the Fair Labor Standards Act and the Maryland Wage and Hour Law, but not under the MWP&CL. Notably, the new law fails to provide any guidance to courts about how the conflicting penalty sections of these statutes should be reconciled.

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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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In Bergman v. Monarch Construction Company, the Ohio Supreme Court considered whether, in an employee-initiated enforcement action, the penalties set forth in Ohio Revised Code section 4115.10(A) are mandatory and must be imposed against a party found to have violated the prevailing wage law. In a 5-2 majority opinion, the supreme court rejected the reasoning adopted by the trial court and the Twelfth District Court of Appeals, both of which had interpreted the language in section 4115.10(A) as giving the trial court discretion to enforce the prevailing wage penalties. The supreme court observed that in section 4115.10(A), the phrase “may recover” refers to the choice the underpaid employee can make to enforce his or her right to recover the underpayment, not the court’s choice to enforce the penalties. Therefore, if the employee chooses to enforce his or her statutory right to recover unpaid wages, and successfully proves his or her case, a 100% penalty must be assessed against the employer for violating the prevailing wage law. For further analysis, see Littler’s ASAP Ohio Supreme Court’s Ruling on Penalties Ups the Ante for Contractors Subject to Ohio’s Prevailing Wage Law by Heidi Alten and Neil Grindstaff.

This entry was written by Neil Grindstaff.

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In its ongoing enforcement efforts of California's public works laws, the State Labor Commissioner's Office issued a press release on March 10, 2010, announcing that two Southern California contractors would be prohibited from bidding on or receiving any public works projects for three years beginning April 19, 2010. California Labor Commissioner Angela Bradstreet explained that the Orders of Debarment were necessary due to the contractors’ “deliberate and willful attempts to skirt the law,” which “will not be tolerated as they take unfair advantage of employees as well as tax payers who fund these public works projects.”

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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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