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.

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.

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.

Upon the termination of her employment with Sears, Ericka Brown was presented with a separation agreement, which she voluntarily elected to sign.  That agreement entitled her to a severance package, and also precluded her from bringing certain waivable claims against the company.  Significantly, the agreement also required her to waive her right to bring, or participate in, a class action relating to her employment with the company.  Despite this agreement, Brown, in her lawsuit against the company, sought to recoup allegedly unpaid wages under a variety of state statutory and common law legal theories, and sought to proceed by way of both a Federal Rule of Civil Procedure 23 class action and a Federal Fair Labor Standards Act (FLSA) collective action.

The court agreed with Sears that even though employees such as Brown cannot waive the right to assert individual FLSA rights—including alleged entitlement to minimum wage, overtime and the recovery of liquidated damages—they can waive other causes of action for alleged non-payment of wages under other laws, including state claims for breach of contract, as well as the right to bring  any variety of class action (including an FLSA collective action) on behalf of others.  Specifically, the court reasoned that the waiver of the ability to bring an action on behalf of others does not diminish an employee’s ability to assert her own rights under the FLSA. This ruling provides protection to employers who have, for valuable consideration, procured these waivers.

This blog entry was authored by Laurent Badoux.