Earlier this week, in a matter of first impression within the Second Circuit, Judge P. Kevin Castel of the Southern District of New York held that employees who teach English as a second language (“ESL”) at a privately-owned ESL learning center qualify for the professional exemption under the FLSA as “teachers.” Fernandez v. Zoni Language Ctrs., 2016 U.S. Dist. LEXIS 65310 (S.D.N.Y. 2016).
Plaintiffs taught English to students at language learning centers operated by Defendants. They alleged that they performed work outside of their time in the classroom for which they were not compensated and therefore sought damages for unpaid minimum wage and overtime. Plaintiffs conceded that they were employed as “teachers” in that they had the “primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge,” but disputed whether they did so while “employed and engaged in this activity as a teacher in an educational establishment,” as also required under the applicable exemption regulation. 29 C.F.R. § 541.303(a). The Court found that the ESL centers constituted “other educational institutions” – one of the three types of qualifying educational establishments recognized in DOL regulations (along with an “elementary or secondary school system [and] an institution of higher education”). 29 C.F.R. § 541.204(b).
While Plaintiffs maintained that the identification of “special schools for mentally or physically disabled or gifted children” and “post-secondary career programs” within the text of § 541.204(b) meant that these were the only types of “other educational institutions” intended to be covered, the Court rejected Plaintiffs’ narrow reading of the regulation, finding the examples listed in the regulation as merely illustrative, not exhaustive. That threshold question considered, the Court analyzed whether the the Defendants’ ESL centers actually were such an “other educational institution” using eight separate, non-dispositive factors: (1) the title of employees; (2) the certifications required of teachers; (3) the formality of courses; (4) the granting of certificates or degrees; (5) the organization’s charter; (6) the teacher’s involvement in organizing, communicating and delivering curriculum; (7) whether the organization is licensed by a state agency responsible for the state’s educational system; and (8) whether the organization is accredited by a nationally recognized accrediting organization. Although the Court analyzed all eight factors, it was particularly swayed by the evidence that the teachers at Defendants’ language learning centers must possess a “baccalaureate or equivalent degree,” the similarity between the ESL courses offered at Defendants’ learning centers to courses offered at traditional schools and the fact that Defendants’ ESL centers are licensed and certified by the New York State Department of Education and accredited by the Accrediting Council for Continuing Education and Training.
Employers that operate in the education field must analyze whether learning centers constitute “educational institutions” under the regulations to the FLSA, and in turn, therefore, whether the teachers employed by the learning centers are exempt professionals. State law, of course, must be separately analyzed.
News outlets are reporting that the new salary basis rule will take effect on December 1, 2016, and require a salary of $47,476 per year ($913/week). Reports also indicate that the new rule will require an update of the salary threshold every three years, as opposed to annual increases. This effective date provides employers a longer period to analyze and comply with the new rule than previously anticipated, as prior reports had indicated the rule might take effect as early as 60 days after publication.
The Department of Labor is expected to issue its long-awaited Final Rule regarding the white collar exemptions on Wednesday, at an event in Ohio attended by Vice President Biden and Secretary Perez, Politico reports. It is expected the Final Rule will increase the salary level requirement for white collar exemptions to approximately $47,000, and provide for automatic annual increases to that salary level. Earlier reports predicted the Rule would be issued last week, but no action was taken. Jackson Lewis will provide a webinar regarding the Final Rule after its release. Watch this space for details.
While many laws regulate the payment of wages for long hours (the broadest and most famous of these being the FLSA’s overtime requirement), few if any statutes purport to require workweeks of a certain length. However, that is exactly what Jersey City, NJ has now attempted to do in a new ordinance requiring a 30-hour workweek for building services employees to “prevent full-time building service jobs from being unnecessarily broken into part-time jobs.” Full coverage of the ordinance – which may well be subject to court challenge on a number of theories – is available here.
Multiple sources are reporting that the DOL’s Final Rule regarding the exempt status salary basis threshold will set the minimum salary at approximately $47,000 per annum, rather than the previously-reported $50,440. While the Office of Management and Budget (OMB) is still reviewing the proposed rule, the rule may clear OMB within the next few weeks, paving the way for DOL to issue its final rule. Watch this space and the Jackson Lewis web site for continued coverage of the rulemaking.
Over the past few years, numerous states and municipalities have increased the statutory minimum wage. Further, through Executive Order, President Obama increased the federal minimum wage applicable to federal contractors. Consistent with this trend, the governors of both California and New York have now reached new legislative deals with their respective legislative branches which provide for significant increases to the minimum wage in each state.
In California, Governor Brown is expected to sign legislation this week which will eventually raise the state minimum wage to $15 per hour. This will be a 50 percent increase from the current state minimum wage, already the highest current state minimum wage (though the District of Columbia’s minimum wage is slightly higher, at $10.50). The measure will raise California minimum wage to $10.50 in January and to $11 in January 2018. It will then increase by an additional $1 per hour every year until it reaches $15 in 2022. If, however, the state goes through an economic downturn or budget crisis, the governor can choose to slow the implementation. The final bill gives small businesses, with 25 or fewer employees, an extra year to implement the increases. Note that many municipalities have higher minimum wage obligations, so state employers also must consider local law. The tip credit remains unavailable for California employers.
The New York legislation divides the State into three regions: New York City; Downstate (Long Island and Westchester County); and the balance of New York State (meaning, all counties “upstate” from the greater New York City area). The law provides for gradual increases to the minimum wage over the next five years, but with more accelerated increases for NYC, Long Island, and Westchester. NYC is further divided between large employers (those with 11 or more employees) and small employers (those with 10 or less). For large NYC employers, the minimum wage will rise to $15.00 by the end of 2018. Small NYC employers will have another year, until December 31, 2019, before the $15.00 per hour rate applies. In Long Island and Westchester County, the wage would rise to $15 by the end of 2022. In the rest of the State, the wage would hit $12.50 in 2021, then increase to $15 on an as-yet undetermined schedule based on the economic impact of further increases. The New York legislation also retains the tip credit for tipped employees, setting the cash wage at two thirds the applicable minimum wage or $7.50, whichever is higher.
Final regulations will presumably help clarify the minimum wage obligations under these new wage rates for employers operating in multiple jurisdictions (within or outside these states). Now more than ever, employers must regularly review state and local minimum wages to ensure compliance.
Earlier this week, the U.S. Court of Appeals for the Ninth Circuit issued an unpublished decision affirming summary judgment in favor of Wynn Las Vegas with respect to overtime claims asserted by a Slot Marketing Executive Host. Dannenbring v. Wynn Las Vegas, LLC, 2016 U.S. App. LEXIS 5715 (9th Cir. Nev. Mar. 28, 2016).
Concluding that Plaintiff Dannenbring was exempt pursuant to the administrative exemption, the Court agreed with the district court’s conclusion that the undisputed facts regarding the employee’s actual job duties demonstrated her primary duties were administrative in nature and included the exercise of discretion and independent judgment. She promoted the Wynn’s gambling business by cultivating relationships with individual gamblers, promoting specific activities, persuading customers to spend money on gaming products, extending lines of credit and offering complimentary benefits (“comps”). The Court found the employee’s foregoing “marketing” activities were directly related to general business operations of the Wynn’s gambling business consistent with 29 C.F.R. § 541.201(b). Moreover, it also was undisputable that the employee was accountable for the results of her marketing efforts, was able to extend lines of credit up to $25,000, had some managerial responsibilities, and authorized subordinates’ issuance of comps as well, all demonstrating her discretion and judgment with respect to matters of significance. The Court further ruled that the fact that the Wynn had guidelines on the employee’s decision-making did not undercut the satisfaction of this requirement, noting that discretion and independent judgment does not require “unlimited authority and complete absence of review.”
Employers analyzing their work forces ahead of the upcoming revisions to the FLSA’s white collar regulations should continue to take instruction from appellate analyses of exemption questions such as Dannenbring, pending the new proposed final regulations and clarity regarding whether they will modify current duties requirements.
Multiple sources have reported that yesterday the USDOL sent the proposed final overtime rule to the Office of Management and Budget (OMB) for its mandatory review. If OMB’s review is completed on an expedited basis, DOL could disseminate the proposed final rule to the public by mid-April, with an effective date potentially as early as the beginning of June, subject to delay from that date based on Congressional review under the Congressional Review Act.
This announcement moves the anticipated effective date up in time from most prior projections, which placed the date in the third quarter of 2016. An accelerated timetable may be motivated by political pressures related to the upcoming election and potential changes in the White House and Congress. Watch this space for further developments.
Last week, Oregon joined New York, Los Angeles, Birmingham, Seattle and others on the list of states and municipalities continuing to push for a higher minimum wage in the face of stalled federal rulemaking. In Alabama, the state quickly blocked Birmingham’s efforts. Full coverage of the Oregon law is available here.