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

In particular, Senate Bill 3568 empowers the Illinois Department of Labor (IDOL) to establish a streamlined administrative procedure for processing “small” wage claims (those under $3,000), which constitute 75% of all wage claims filed each year. Most notably, SB 3568 expressly grants employees the right to pursue their wage claims in either a private civil action or in a class action on behalf of others similarly situated. The employee may not, however, pursue both a claim with IDOL and a civil action.

With SB 3568, Illinois joins a number of states who have passed tougher legislation to address wage and hour violations, which, according to the bill’s advocates, is a growing problem. “Illinois workers deserve every penny they have earned, on-time and in-full,” said Governor Quinn “This important legislation will help Illinois workers recover unpaid wages faster and will further crack down on wage theft throughout our state.”

This entry was written by Milton Castro.

Photo credit: chestnutphoto
 

The plaintiff in Ziotas v. The Reardon Law Firm, P.C., 296 Conn. 579 (2010), was Angelo Ziotas, an associate at The Reardon Law Firm. He claimed he had been denied a bonus and sued his former employer, claiming both breach of contract and violation of Connecticut’s wage and hour statute. The trial court granted the defendant employer’s motion to strike the wage claim, noting that under certain circumstances, bonuses may be subject to the wage statutes. Such bonuses, however, are based solely on individual production or performance. In this case, the bonus was based on a number of factors, including the overall performance of the firm. The appellate court reversed the trial court’s decision.

In reversing the appellate court, the Supreme Court referenced its recent decision in Weems v. Citigroup, Inc., 289 Conn. 769 (2008), in which it held that bonuses awarded solely on a discretionary basis, and not linked solely to the ascertainable efforts of the particular employee, are not wages under Conn. Gen. Stat. § 31-71a. In his hair-splitting position in Ziotas, the plaintiff argued that Weems did not apply to his case because he was contractually entitled to a bonus and only the amount of the bonus was discretionary. The Supreme Court disagreed and held that even where an employee is contractually entitled to a bonus, if the amount of the bonus is indeterminate and discretionary, such a bonus does not constitute wages.

In reaching its decision, the court noted that although Conn. Gen. Stat. § 31-72 is remedial, it carries substantial criminal and civil penalties and any interpretation of the term “wages” that would allow for the imposition of such penalties when the amount of a bonus is indeterminate and discretionary would raise serious questions of fundamental fairness and due process.

Finally, in holding that a discretionary bonus is not subject to the wage statutes, the court noted that a plaintiff would still be able to pursue a breach of contract claim and indeed, Mr. Ziotas’ contract was enforced.

To the extent there was any ambiguity regarding the extent to which bonuses are not considered wages in Connecticut, this decision resolves the ambiguity and gives employers the assurance that discretionary bonuses are not wages subject to Connecticut’s wage statutes.

This entry was written by Patricia Reilly.

Additionally, also effective July 1, 2010, the Illinois minimum wage increased as follows:

• Employees aged 18 and older must be paid $8.25 per hour.
• Employees aged 18 and older may be paid a training wage of $7.75 per hour for the first 90 consecutive calendar days of employment, unless that individual is a day or temporary laborer, or he or she is only occasionally or irregularly employed for less than 90 days.
• Employees under 18 may be paid $7.75 per hour.
• Tipped employees must be paid at least $4.95 per hour after 90 days of employment. During the initial 90-day period, tipped employees can be paid $4.65 per hour.
   

Before the passage of Act 115, Vermont employers could only pay wages by check, direct deposit, or cash. Indeed, the state’s Department of Labor had long maintained that, “A debit card does not fit the definition of cash or check defined by the [Vermont Uniform Commercial Code].” Now, employers have a cost-effective alternative to writing checks for those employees who lack or refuse to use direct deposit.

The problem for employers, however, is that the payroll debit card alternative remains just that – an alternative. Because an employee’s written consent must first be obtained, employers are prohibited from simply mandating payroll debit cards for those employees who lack or refuse to use direct deposit. Thus, employers may still have to incur the expense of paying employee wages with checks. In fact, the average, annual cost to employers in having to generate replacement checks and checks for exception pay is $48 million.

According to its drafters, the Act is a win-win for all parties: “The intent of this act is to provide employees with a convenient, safe, and flexible way to receive wages and to reduce employers’ payroll costs by allowing for the transfer of wages to a payroll card account.”

This entry was written by Milton Castro.

The bill also authorizes the DWD to require an employer to provide proof of maintaining proper employee records, including wage and hour information, and sufficient worker's compensation coverage for its employees. Failure to provide the requested information may result in the DWD serving a notice on the employer of the DWD's intent to issue an order requiring the employer to stop work at the locations specified in the notice. The employer will then have three business days to provide the requested information. Failure to do so may result in the issuance of an order requiring the employer to stop work at the location identified in the order. The employer may appeal the order.

The second piece of legislation -- Assembly Bill 929 -- provides that employers engaged in the painting or drywall finishing of buildings or other structures who willfully misclassify or attempt to misclassify employees, with the intent to evade the unemployment insurance laws, worker’s compensation laws, income tax laws or discrimination laws, shall be fined $25,000 for each violation. This bill amends a current law providing the same penalty for willful misclassifications in other trades in the construction industry. The DWD is required to promulgate rules defining what constitutes willful misclassification of an employee.

This entry was written by Jennifer Ciralsky.

The plaintiffs in Combs worked as seasonal agricultural workers for Munoz & Sons (Munoz). Munoz grew and harvested strawberries in the Santa Maria Valley and employed the plaintiffs during the 2000 strawberry season. Munoz, with the assistance of its foremen, hired and fired its employees, trained them, supervised them, “told them when and where to report to work, when to start, stop and take breaks, provided their tools and equipment, set their wages, paid them, handled their payroll and taxes, and purchased workers’ compensation insurance.”

Apio, Inc. (Apio) and Combs Distribution Co. (Combs) were produce merchants who contracted with Munoz for the purchase of fresh strawberries. Corky and Larry Combs were principals in Combs and Juan Ruiz was Combs’ field representative who inspected the quality of the available strawberries and explained the manner in which the strawberries were packed. Munoz filed and was later granted a discharge in bankruptcy. Therefore, the plaintiffs sought to recover unpaid minimum wages under Labor Code section 1194 against Apio, Combs, its principals and Ruiz.

To do so, plaintiffs argued that the Industrial Welfare Commission's (IWC) Wage Order No. 14-2001 (Wage Order 14) defined each of the defendants (Munoz, Combs, Apio) as employers for purposes of section 1194. The lower courts rejected this argument and the California Supreme Court affirmed.

Before the California Supreme Court, the plaintiffs claimed that pursuant to the IWC, each of the remaining entity defendants (Combs and Apio) “suffer[ed], or permit[ted plaintiffs] to work” because they knew Munoz would need to hire workers to fulfill its contracts with Apio and Combs for their respective benefit. The plaintiffs further argued that the defendants exercised control over the plaintiffs’ wages, hours and/or working conditions as defined by Wage Order 14. Specifically, the plaintiffs contended that the defendants controlled payment of Munoz's share of sales proceeds pursuant to their purchase agreements with Munoz and, therefore, a portion of the income from which Munoz paid his employees.

The defendants argued that Reynolds v. Bement, 36 Cal. 4th 1075 (2005) controlled the issue. In Reynolds, the court held that directors and officers of a corporation are not liable for the corporation’s employees’ unpaid overtime compensation. Alternatively, the defendants requested that the court construe the wage order as if it incorporated the “economic reality” definition developed under the federal Fair Labor Standards Act (FLSA).

After a lengthy analysis of the legislative history and intent behind the creation of the IWC, the court ruled that (1) the scope of the IWC's delegated authority extends to wages, hours and working conditions, (2) the IWC's definition of “employer” could include situations in which multiple entities control different aspects of the employment relationship, and (3) the definition of “employer” was intended to distinguish state wage law from federal law.

The court rejected each of the plaintiffs’ arguments and found that for a business proprietor (such as Apio or Combs) to “suffer or permit” work under the IWC and section 1194, the proprietor must (1) know that persons are working within the “business without being formally hired or while being paid less than the minimum wage . . . [and (2)] fail[] to prevent it, (3) while having the power to do so.”

The court dismissed the theory that a business relationship was sufficient to transform the downstream beneficiary (the purchaser in this case) into an employer under section 1194. The court concluded that the business entity must have the power to prevent the work from occurring and the “specific sense of exercising control over how services are performed” to be considered an employer under section 1194. Accordingly, the court affirmed the appellate court’s ruling that defendants Apio, Combs and Ruiz did not employ or have an employment relationship with the plaintiffs.

This entry was written by Heather Davis and Lauren Howard.

In Jaimez, the plaintiff moved to certify a number of claims on behalf of a class of drivers, including alleged claims for misclassification of drivers as exempt from overtime, failure to provide meal periods to the drivers, failure to authorize and permit drivers to take rest breaks, and failure to provide drivers with compliant pay stubs. In support of his motion, the plaintiff submitted nine declarations from drivers who claimed that: (1) they had been reclassified from exempt to non-exempt, (2) they had not been paid overtime before or after reclassification, (3) their managers had pressured them to complete their route within eight hours, leaving insufficient time for them to take meal periods or rest breaks, and (4) their pay stubs were inaccurate. The defendant submitted 25 declarations from putative class members indicating that the drivers had been paid all overtime wages due, had routinely been provided meal periods and rest breaks, and had been provided accurate pay stubs. The trial court denied class certification, finding: the named plaintiff (a convicted felon) was not an adequate class representative; common questions of fact did not predominate the dispute; and class action procedure would not be superior to individualized litigation.

Despite the high degree of deference California appellate courts routinely give trial court class certification decisions, the Jaimez court: reversed the trial court's order denying class certification; ordered the trial court to certify the class claims; and, because the court agreed the named plaintiff was an inadequate representative, ordered the trial court to permit the plaintiff to find an adequate class representative. The appellate court held that conflicts in putative class members' declarations regarding whether they had been afforded the opportunity to take meal periods and rest breaks did not raise individualized questions of fact. Instead, the plaintiffs’ declarations alone were sufficient to corroborate a common theory of liability – that the defendant failed to provide meal periods and rest breaks – and the defendant's conflicting declarations simply meant the defendant's ultimate liability would be reduced.

Daiohs asked the California Supreme Court to review the appellate court decision, or to at least depublish it. On May 12, the California Supreme Court denied both requests. This decision could have significant ramifications on meal period and rest break practices in California and employers are encouraged to speak to their employment counsel to discuss these issues in detail.

This entry was written by Julie Dunne.
 

It appears that the New Jersey Department of Labor and Workforce Development may be reconsidering its position. The Deputy Commissioner of the Department directed his staff to prepare a notice of proposal for new rules within the New Jersey Administrative Code which would adopt the federal rounding standard. Of course, change takes time. In order to make this change, the Department must undergo full notice and comment rule-making, including the publication of a notice of proposal in the New Jersey Register, the solicitation of comments from the public, and the holding of a public hearing. In the meantime, the Department may still take the enforcement position that rounding practices must be evaluated on a week-to-week basis. We will continue to monitor developments.

This entry was written by Robert Pritchard.
 

Utah is not the only state to permit employers to utilize pay cards for the payment of wages. At this time, many states allow this practice, including: Alaska, Arizona, California, Colorado, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Many of these states, however, have different requirements governing the use of pay cards. Moreover, in a number of these states, it may be unlawful to require employees to accept payment via pay card. As a result, before implementing a pay card system, employers should check the laws in states in which they operate to ensure that any change to existing pay practices complies with state law.

This entry was written by Jennifer L. Mora.

Image credit: Channel R

Second, the General Assembly provided the Maryland Department of Labor, Licensing, and Regulation (“DLLR”) with the authority to investigate and adjudicate wage claims of up to $3,000. Upon receipt of a complaint from an employee, DLLR will send a copy to the employer and require a written response within 15 days. Following an investigation, DLLR may issue an order to pay the wages plus interest or dismiss the claim. Significantly, DLLR is not authorized to order attorney’s fees or treble damages, which would otherwise be available to an employee in court.

Within 30 days after receipt of an order to pay wages, an employer may request a de novo administrative hearing. If an employer is unsuccessful at an administrative hearing, it may appeal the decision to a circuit court. However, the court may overturn the administrative decision only if it “is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or is arbitrary or capricious.”

These changes become effective on October 1, 2010.

This entry was written by Steven Kaplan.

Plaintiff Rosas was a Catholic seminarian in Mexico. The Catholic church required Rosas to participate in a ministry training program at St. Mary Catholic Church in Marysville, Washington, as the next step in becoming an ordained priest. The defendant, the Corporation of the Catholic Archbishop of Seattle, hosted Rosas in the ministry training program. Rosas claimed that as part of the ministry training program he was required to perform “maintenance of the church” and that he “worked many overtime hours he was not compensated for.”

The district court dismissed the plaintiff’s overtime claims on the pleadings under Rule 12(c). On appeal, the Ninth Circuit affirmed. The Ninth Circuit began its analysis by confirming that the “interplay between the First Amendment’s Free Exercise and Establishment clauses creates an exception to an otherwise fully applicable statute if the statute would interfere with a religious organization’s employment decisions regarding its ministers.” The Ninth Circuit then analyzed the potential impact of the WMWA on the interests protected by the Free Exercise and Establishment Clauses, and ruled that the First Amendment’s ministerial exception applies to claims asserted under the WMWA. The Ninth Circuit concluded that (1) subjecting a church to state overtime claims could have an adverse impact on religious liberty, and (2) applying the WMWA to the clergy-church employment relationship would create an unconstitutional entanglement between church and state.

Turning to the plaintiff’s individual claims, the Ninth Circuit held that plaintiff’s state overtime claims were barred as a matter of law under the First Amendment’s ministerial exception because the plaintiff was a “minister” and because subjecting the defendant to WMWA claims would interfere with protected employment decisions. In analyzing the plaintiff’s status, the Ninth Circuit adopted a new three-part test for determining whether a person is a “minister” for purposes of the ministerial exception, which considers the following factors: (1) whether the person is employed by a religious institution, (2) whether the person was chosen for the position based largely on religious criteria, and (3) whether the person performs some religious duties and responsibilities. Applying this test to the allegations in the plaintiff’s complaint, the Ninth Circuit found that the plaintiff was a “minister.”

With respect to interference with protected employment decisions, the Ninth Circuit held that allowing the plaintiff to pursue state overtime claims would interfere with the defendant’s right to select ministers using whatever criteria it deems appropriate, and to determine the duties to be performed by plaintiff in furtherance of the religious mission of the Catholic Church. As explained by the Ninth Circuit, the Catholic Church could “require its candidate for the priesthood to spend a year mostly cleaning sinks without overtime pay.” Such decisions are protected by the Free Exercise and Establishment Clauses, and by the First Amendment’s ministerial exception to statutory claims like overtime claims under the WMWA.

This entry was written by Douglas E. Smith.

The following changes were made to the regulations:

• WAC 296-126-001 was updated to clarify language, delete the reference to the Industrial Welfare Committee, and add notes referring public employers to RCW 49.12.005(3) and employers to the variance rule in WAC 296-126-130.

• WAC 296-126-002 definitions were revised as follows:
  • “Employer” was updated to reflect the amended definition in chapter 49.12 RCW;
  • “Employee” was clarified by restating the exemptions from the definition;
  • “Adult” was updated by deleting “of either sex”;
  • “Minor” was updated by deleting “of either sex”;
  • “Committee” was deleted since the Industrial Welfare Committee no longer exists; and
  • “Department” and “Director” were added to be consistent with chapter 49.12 RCW.

• WAC 296-126-010 was updated by deleting outdated language that refers to the adult minimum wage as $1.80 an hour. In addition, language was added to address the payment of sub-minimum wage rates under special certificates issued by L&I.

• WAC 296-126-015 was revised to add a new section that explains how to calculate wage rates under special certificates.

• WAC 296-126-030(8) was modified by replacing the term “deductions” with “adjustments” in order to be consistent with other rules.

• WAC 296-126-040 was updated to clarify the requirements for employee pay stubs. The revised regulation requires that employee pay stubs be provided in “a separate written statement from the paycheck.” In addition, the revised regulation clarifies that pay stubs “may be furnished or made available electronically provided each employee has access to receive and copy it on the payday.”

• WAC 296-126-050 was updated to clarify the requirement that, upon receiving a written request from a former employee, an employer must furnish a signed written statement stating the reasons for and effective date of the employee’s discharge within 10 days of the former employee’s request. A note was also added to the regulation explaining that additional recordkeeping requirements are stated in WAC 296-128-010 through 296-128-030.

• WAC 296-126-060 was repealed to eliminate duplicative language requiring an employer of minors to obtain a work permit (the requirement is already provided in chapter 296-125 WAC).

• WAC 296-126-080 was revised to add the specific title of the poster employers are required to keep.

• WAC 296-126-090 was revised to replace the term “industrial welfare committee” with “department” in order to be consistent with RCW 43.22.280 and .282 and RCW 49.12.

• WAC 296-126-096 was repealed because it addressed non-wage and hour issues (manual lifting) that are already covered by the L&I Division of Safety and Health.

• WAC 296-126-130 was updated to clarify the process for employers to obtain wage and hour variances from L&I.

This entry was written by Douglas E. Smith.

Image credit: Dbenbenn.

California

A November 3, 2009 California Division of Labor Standards Enforcement (DLSE) memo indicated that the overtime exemption rates for licensed physicians and surgeons, and computer software employees in California will remain unchanged for the period beginning January 1, 2010.

Also, an August 19, 2009 DLSE opinion letter withdrew a 2002 opinion letter that precluded partial week furloughs of exempt employees, and in the process conformed California law on furloughing exempt employees to federal law. For more information, please see our previous entry and ASAP.

Illinois

HB 3634, effective August 14, 2009, amended Illinois’ Equal Pay Act and now requires that an employer preserve personnel records for a specified period of time. Additionally, an action to collect a wage claim must be brought within one year from the date of underpayment.

New York

SB 3357, effective October 26, 2009, requires that employers provide employees with written notice at the time of hire of their regular and overtime hourly wage rates, and to obtain a written acknowledgement of receipt of this notice. Although no particular form is required, the New York Department of Labor has created a form that employers can use to ensure compliance.

New Jersey

New Jersey Administrative Code § 12:55-2.1 was amended, effective September 21, 2009, to permit employers to withhold or divert a portion of an employee's wages for health club membership fees or for child care service. The deduction must be authorized either in writing by the employee, or under a collective bargaining agreement. For more information, please see our previous entry.

If this decision is upheld and/or adopted by state courts in California or elsewhere, staffing companies may face claims for unpaid wages for time spent by their employees interviewing with their clients for assignments. Unless a staffing company can show that its employees are not under their control in connection with the interview process or that they do not "suffer or permit" such activity by their employees, they will face potential liability, at least minimum wage, for the time the employee's spend interviewing. This could result in staffing companies not allowing, or limiting, the ability of candidates to interview with clients in advance of the commencement of assignments, or require staffing companies to increase the rates charged to its customers for this added expense.

For an in-depth discussion and guidance on this development, see Littler ASAP, "Staffing Companies Face Potential Exposure for Interview Time."

This entry was written by Michael McCabe.

Arizona:

• New minimum wage $7.25 per hour.

Colorado:

• New minimum wage $7.28 per hour. 
• Tipped employees must be paid at least $4.26 an hour starting on January 1, 2009, and tips plus cash wages must equal at least $7.28 an hour.

Connecticut:

• New minimum wage $8.00 per hour.

Florida:

• New minimum wage $7.21 per hour.
• Tipped employees must be paid a direct wage equal to the minimum wage of $7.21 minus $3.02 (the tip credit under the federal Fair Labor Standards Act), or $4.19 per hour effective January 1, 2009.
• State minimum wage will increase again effective on July 24, 2009, when the federal minimum wage increases to $7.25, employers must pay the higher federal minimum wage.

Missouri:

• New minimum wage $7.05 per hour.
• Tipped employees must be paid by their employer at least 50% of the minimum wage rate and tips plus cash wages must equal at least $7.05 per hour as of January 1, 2009.
• Effective July 24, 2009 the federal minimum wage will be $7.25, and employers must pay the higher federal minimum wage.

Montana:

• New minimum wage $6.90 per hour.
• State law prohibits employers from using tips as a credit against the minimum wage owed the employee.
• State minimum wage will increase again effective on July 24, 2009, when the federal minimum wage increases to $7.25, employers must pay the higher federal minimum wage.

New Mexico:

• New minimum wage $7.50 per hour.

Oregon:

• New minimum wage $8.40 per hour.

Vermont:

• New minimum wage $8.06 per hour.
• Tipped employees must be paid at least $3.91 per hour, and cash wages plus tips must equal at least $8.06 per hour. If they do not, the employer is required to make up the difference. 

Washington:

• New minimum wage $8.55 per hour.
• Washington law prohibits employers from using tips as a credit against the minimum wage owed the employee. 

This blog entry was authored by Stacey James.