Industrial Board of Appeals Hears Arguments Regarding New York Fast Food Wage Order

Last week, the New York Industrial Board of Appeals (an arm of the New York Department of Labor) heard oral argument on the National Restaurant Association’s petition to invalidate the Department of Labor’s recent Fast Food Wage Order. If implemented, the Wage Order, which is scheduled to take effect on December 31, 2015, would increase the minimum wage for “fast food employees” in covered “fast food establishments” on a phase-in schedule culminating in a minimum wage rate of $15/hour by December 31, 2018 in New York City and by July 1, 2021 in the balance of the state. Randy Mastro, former Deputy Mayor for Operations during the Giuliani administration, argued on behalf of the National Restaurant Association that the proposed Wage Order violates Constitutional principles because it (among other issues) arbitrarily identifies a subset of employers meeting the Department’s definition of a covered “fast food establishment,” creating an uneven playing field among restaurants. Notably, the proposed wage order contains a 30-location threshold for coverage. The Industrial Board of Appeals, an administrative body whose hearing officers are appointed by the Governor, has until December 10, 2015 to make a decision. Following the Board’s decision, the Association may continue its appeal, as necessary, in a New York court.

Home Care Fallout: Increased Institutionalization?

Five days into the DOL’s enforcement of the new rule rendering most home health aides eligible for overtime under the FLSA, questions abound regarding how state Medicaid and Medicare-funded programs will comply with the rule within their current budgets.  One new report cautions consumers of home health care and their advocates to be aware of the rule so they can stave off “unintended harms” including, among others, the potential for “cuts in service hours [to] make it very difficult to remain in the community and avoid institutionalization, particularly if [consumers] cannot find additional workers to fill their [needed] hours.”

Seldom does wage/hour policy have such an impact on the everyday lives of thousands of vulnerable Americans.  Watch this space for continued coverage.

DOL Enforcement of Home Care Rule to Commence November 12, Subject to “Prosecutorial Discretion”

Chief Justice Roberts’ denial of the Home Care Association of America’s request for stay of issuance of mandate confirms that the new rule rendering many home health aides overtime-eligible is effective, pending appeal. In response to that denial, Wage-and-Hour Administrator David Weil issued a new policy statement confirming that the Department’s “non-enforcement period” for the new rule will end on November 12, 2015.  After that, the policy statement indicates the Department will “exercise prosecutorial discretion pursuant to its previously announced time-limited non-enforcement policy” through December 31, 2015.

Industry employers continue to wrestle with compliance (and budgetary) questions in the wake of the D.C. Circuit’s ruling upholding the validity of the new rule under the Administrative Procedure Act, and the Home Care Association of America’s appeal to the Supreme Court still awaits. We will continue to cover developments affecting FLSA compliance under the new rule.

Trauma Registrar Properly Classified As Exempt Administrative Employee Due To Exercise Of Discretion

Rejecting a claim that the position lacked “discretion and independent judgment,” an Indiana Federal Court recently found a trauma registrar for a Level III Trauma Center to be an exempt administrative employee. Brown v. Ind. Univ. Health Ball Mem’l Hosp., 2015 U.S. Dist. LEXIS 141921 (S.D. Ind. Oct. 19, 2015).

In Brown, plaintiff was a trained EMT who worked in various hourly capacities in the emergency department of the defendant, a tertiary referral center and teaching hospital in East Central Indiana. She applied for and was promoted to the Trauma Registrar position, a salaried exempt position which, per the job description, was “accountable for prioritizing and coordinating the activities for the Trauma Registry in order to meet schedules and deadlines, maintain current and accurate procedures and practices.” After her employment ended, she brought suit alleging she had been misclassified as exempt from overtime in the Trauma Registrar role, specifically alleging that the position did not require “discretion and independent judgment with respect to matters of significance.” Judge Jane Magnus-Stinson rejected this claim, characterizing it as an “attempt to recast her main duties as only related to data entry” which ignored Plaintiff’s decision-making role in 1) developing procedures for the trauma registry, 2) serving as the “voice” of the hospital for various community outreach program; and, 3) independently developing community programs targeted towards injury prevention (such as bicycle safety programs).

The administrative exemption remains the least concrete – and thus hardest to define – of the “white collar” exemptions, giving rise to continued questions in its application for compliance purposes and in litigation.

Federal Court Finds Intrastate Travel Part of “Stream of Commerce,” Applies Motor Carrier Exemption to Truck Driver

Although applicability of the Motor Carrier Act (MCA) exemption from overtime is predicated on “interstate commerce,” interstate commerce can include wholly intrastate travel by a covered employee when shipped in a “practical continuity of movement” across state lines. A new opinion highlights this doctrine. Kennedy v. Equity Transp. Co., 2015 U.S. Dist. LEXIS 143565 (N.D.N.Y Oct. 22, 2015).

Plaintiff Kennedy was a shuttle driver for Equity Transportation Company, Inc. His primary duty was to drive and deliver trailers from a client’s facility in Latham, New York to a compound located at Exit 24 of the New York State Thruway. The trailers were ultimately taken from the Exit 24 compound to the client’s facilities in New Jersey, New England and Pennsylvania. On cross motions for summary judgment, the Court addressed whether Plaintiff was engaged in interstate commerce within the meaning of the MCA.

Observing that Plaintiff’s failure to engage in interstate travel was not dispositive because “the interstate commerce requirement is satisfied if the goods being transported within the borders of one State are involved in a practical continuity of movement in the flow of interstate commerce,” the court concluded that Plaintiff’s driving activity “was essentially one leg of a route to an out of state destination.” Therefore, the MCA applied and excluded Plaintiff from the FLSA’s overtime requirement.

Employers covered by the MCA must analyze whether their employees’ work comes within the “flow of interstate commerce” under the MCA to determined FLSA compliance. State law, of course, must be separately analyzed.

Oklahoma Federal Court Finds Expense Reimbursement Need Not Be “Rolled In” To Overtime Calculation

Fixed payments made on other than an hourly basis to non-exempt (i.e., overtime eligible) workers often must be included in the regular rate of pay for purposes of calculating overtime.  One type of payment that may be excluded from the regular rate calculation is payment for “reasonable payments for travel expenses, or other expenses, incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer,” a provision interpreted by Judge Claire V. Eagen of the Northern District of Oklahoma in a new decision. Sharp v. CGG Land (U.S.) Inc., 2015 U.S. Dist. LEXIS 141658 (N.D. Okla. Oct. 19, 2015).

In Sharp, Judge Eagen rejected plaintiff’s argument that because the “hot shot” fixed travel reimbursement payments at issue were made to reimburse them for “traveling to the remote work site,” they were not payments for “expenses [incurred] while actually in transit” and thus not probably excludable from the overtime rate.  The Court called this a “hyper-literal interpretation of the term ‘traveling,’” and found that payments made for expenses incurred during “time spent ‘away from home’ on an employer’s business” are excludable.  Thus, the fixed reimbursement payments Defendant, a seismic surveying firm, made to its drivers and vibe operators properly were excluded from the regular rate.

The regulations governing the regular rate calculation are an example of just one hyper-technical facet of FLSA compliance.  Employers must be vigilant regarding FLSA requirements.

California Federal Court: Cosmetology and Hair Design Students Not “Employees” Entitled to Minimum Wage

Joining decisions from other parts of the country, a California federal judge has held that former cosmetology and “hair design” students were not “employees” under the Fair Labor Standards Act or the wage-and-hour laws of California and Nevada entitled to minimum wage. Benjamin v. B & H Education, Inc., et al., 2015 U.S. Dist. LEXIS 144351 (N.D. Cal. Oct. 16, 2015).

In Benjamin, the court rejected plaintiffs’ claim that while enrolled at Defendants’ beauty schools they were employees who essentially functioned as workers, entitling them to minimum wage protection. The plaintiffs were enrolled in clinical training program in which they were to receive “hundreds of hours of clinical training” while cutting hair and applying makeup. Although patrons paid for these services, the plaintiffs were unpaid.

Applying the Second Circuit’s “primary beneficiary” test (recently adopted by the Eleventh Circuit), the court found that the evidence put forth by the plaintiffs regarding the duties they performed and economic impact of their alleged “work” was too “vague and sparse” to rebut Defendants’ cross-motion for summary judgment. The court noted that the plaintiffs failed to provide specific evidence that they did not receive an educational benefit from their work, nor did they submit sufficient evidence that a large portion of their time was taken up by non-cosmetological work related to their studies, such as cleaning up around the salon, doing laundry or covering the phones. Further, the court noted that “professional cosmetologists and hair designers can expect to do similar work in most professions, so such work is relevant in preparing for the plaintiffs’ chosen professions.”

The Benjamin decision is further support for the position that, properly constructed, unpaid vocational programs such as Defendants’ beauty school do not run afoul of the FLSA and state wage-and-hour statutes.

Court Finds Commissioned Jewelry Salesman Qualifies For Outside Sales Exemption Based On His Own Complaint’s Allegations

Because most FLSA exemptions are affirmative defenses, their applicability is not often established by the Plaintiff’s Complaint, of which s/he is “master” and can shape to avoid addressing exemption-triggering duties. There are exceptions. In a recent opinion, a Manhattan federal district judge ruled that a commissioned salesman who traveled from his home office to conduct jewelry sales at customers’ places of business qualified as an exempt outside salesperson under the FLSA and New York Labor Law based on his own Complaint’s allegations. Cangelosi v. Gabriel Bros, Inc., 15-cv-3736 (JMF), 2015 U.S. Dist. LEXIS 140579 (S.D.N.Y. Oct. 15, 2015).

To be an exempt outside salesperson, an employee’s primary duty must be to make sales and the employee must be “customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.” The parties disputed both whether the plaintiff customarily and regularly worked away from the employer’s place of business, here, plaintiff’s home office, and whether the plaintiff’s “primary duty” was to make “sales.” Although the plaintiff claimed that much of his time spent working was “on tasks other than making sales,” such as creating sales reports and travel itineraries, the court found that these “other” tasks all related to his primary duty of selling jewelry, with the vast majority of them being “plainly performed incidental to and in conjunction with’ Plaintiff’s sales efforts and thus qualified as exempt outside sales work.” The court further found that the plaintiff was “customarily and regularly engaged” away from the employer’s place of business (in this case, the plaintiff’s home office) because “the Amended Complaint makes plain — and there is no dispute — that he conducted sales at customers’ places of business with ‘a frequency . . . greater than occasional,’” the standard applicable under the DOL regulation defining “customarily and regularly.” Thus, Plaintiff’s Complaint established his exempt status.

Applicability of the outside sales exemption, made notorious through a decade-long wave of litigation involving pharmaceutical sales representatives, must focus on both aspects of the legal test: performance of sales-related duties, and “customary and regular” sales activity away from the employer’s place of business. Applicability of exemption defenses – and the proper juncture in litigation to invoke them – must be analyzed in all FLSA cases.

Prominent NY Restaurateur Eliminates Tipping

As New York’s hospitality industry prepares for a reduced tip credit and a fast food minimum wage, one New York restaurateur has announced its intention to eliminate tipping and thus, by extension, use of the tip credit: New York City’s Danny Meyer.  This lengthy Eater feature discusses Meyer’s audacious new Hospitality Included program, noting the pitfalls encountered by other fine dining establishments which have moved away from American dining’s deep-rooted tipping conventions.  Watch this space for further developments regarding NYS Department of Labor regulation of the hospitality industry and industry responses thereto.

Sixth Circuit Holds That Worm Farmers Exempt from Overtime Requirements of FLSA

The Fair Labor Standards Act exempts “employee[s] employed in agriculture” from its overtime requirement. Recently, the Court of Appeals for the Sixth Circuit applied this exemption to the operations of an employer who “moved to the United States from his native France in 1992 to grow worms,” and affirmed the district court’s decision holding that workers at Defendant’s Silver Bait worm farming operation were exempt from overtime under 29 U.S.C. § 213(b)(12). Barks v. Silver Bait, LLC, 2015 U.S. App. LEXIS 17310 (6th Cir. 2015).

As the parties agreed that Silver Bait was “engaged in the business of growing and raising worms” and that the Plaintiffs were engaged to grow and raise worms, the sole disputed issue was whether worms fell within the exemption’s definitional phrase “farming in all its branches.” Relying on the ordinary meaning of “agriculture,” illustrative examples provided in DOL guidance, the court concluded that “although not a specifically enumerated farming activity, there is little to distinguish Silver Bait from a traditional farm other than the unfamiliarity of worm farming. We agree with the Department [of Labor] and the district court that the growing and raising of worms is a form of farming within the FLSA’s agricultural exemption.” The Court rejected a rigid view of the exemption offered by Plaintiffs which would have limited the scope of the agriculture exemption to the production of only certain types of animals enumerated in the statute such as hogs or cattle.

Employers in the agricultural industry, as in all industries, must understand and properly apply applicable state and federal wage-and-hour laws, including the highly technical agricultural exemption.