The legality of a given employee’s participation in a tip pool under the FLSA turns on whether the participants are “Tipped employees” under 29 U.S.C. § 203(t). The specific question is whether they “engaged in an occupation in which [they] customarily and regularly receive more than $ 30 a month in tips.” A new decision from the District Court for the Southern District of Florida concludes that poker room cashiers satisfy this standard under its plain language. Palacios v. Hartman & Tyner, Inc., 2014 U.S. Dist. LEXIS 172859 (S.D. Fla. Dec. 15, 2014).
The issue in Palacios was straight-forward: namely, whether Plaintiff poker room poker dealers could be required to pool tips with cashiers engaged in the traditional duties of exchanging chips and currency at the chip cage inside the poker room. Defendants presented unrebutted evidence the cashiers themselves received $30/month in tips directly from customers as set forth in the statute, outside of any tip pool participation. The court held that this established the employee was engaged in a tipped occupation under the plain language of 29 U.S.C. § 203(t). The Court did not require that the employee spend a specific amount of time performing direct customer service to be deemed a tipped employee.
Claims continue to be brought challenging employer tip practices under wage-and-hour laws and, at times, consumer protection statutes. Businesses permitting tipping, whether incorporating such tips into their wage practices through a tip credit or not, must analyze their exposure to such claims.
Business advocacy groups advise that the New York Legislature and Governor Cuomo have reached agreement on the Legislature’s already-passed legislation repealing the Wage Theft Prevention Act’s annual notice requirement. Indeed, the Legislature’s web site confirms that S.5885-B has been delivered to the Governor. Business groups believe a “chapter amendment” will be forthcoming in January, modifying S5885B to be effective immediately and relieving employers of the currently-applicable 2015 notice requirement. Employers should note that this repeal does not modify other notice requirements under the WTPA, or NYDOL Wage Orders as applicable.
Click here for a summary of the wage rate changes triggered by the previously-scheduled December 31, 2014 increase to the New York minimum wage.
Unanimously reversing the Ninth Circuit, today the U.S. Supreme Court held that time spent by warehouse workers undergoing security screenings was non-compensable because it did not constitute a “principal activity,” nor was it “integral and indispensable” to the workers’ other principal activities. Integrity Staffing Solutions, Inc. v. Busk, No. 13–433 (Dec. 9, 2014).
The Court explained that an activity is “integral and indispensable” to the principal activities that an employee is employed to perform only if it is an “intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities.” The Court found undergoing the security screenings did not meet this test because undergoing a security screening was not an intrinsic element of pulling products from warehouse shelves and packing them for shipment, and the security screenings were not “indispensable” to their work either because the employer could have eliminated the security screenings without impairing the employees’ ability to complete their work. The Court rejected the Ninth Circuit’s test which improperly looked only at whether the duty was required and for the benefit of the employee.
The Court rejected the argument that security screenings should be treated differently than safety screenings, citing a 1951 DOL opinion letter addressing both pre-shift safety screenings and post-shift anti-theft screenings, where, the Court held, the Department then “drew no distinction between the searches conducted for the safety of the employees and those conducted for the purpose of preventing theft—neither were compensable under the Portal-to-Portal Act.”
Justice Thomas delivered the 9-0 opinion for the Court, with a concurrence from Justices Sotomayor and Kagan. Monitor this space and www.JacksonLewis.com for further analysis of this decision and its implications for the business community.
Despite passage in June by both chambers of the New York State Legislature, legislation repealing the 2011 Wage Theft Prevention Act’s “annual wage notice” has yet to take effect. In fact, as of this writing, Governor Cuomo has not been presented with the bill for signature. Because the legislation only takes effect 60 days after being signed by the Governor, it is highly unlikely that – absent further legislation – the repeal will take effect before February, 2015, and so the annual notice obligation will apply again this coming January. Accordingly, employers must prepare to issue the notices to New York employees in 2015, as they have for the last three years. While there is no private right of action for failure to distribute the annual notice, failure to comply carries Department of Labor penalties on a per employee basis.
In its new regulatory agenda, the Department of Labor has indicated that its proposed rules remaking the traditional FLSA “white collar” exemptions in response to March’s Presidential directive will not be provided until February, 2015. The employer community eagerly awaits guidance from the Department, particularly given the uncertainty and litigation which followed in the wake of the 2004 revisions.
The scope of the computer professional exemption, enacted prior to the widespread use of the Internet and before the existence of some of the most well-known tech companies (e.g., it was enacted prior to the existence of Google), is often a source of litigation, as employers and the courts attempt to apply the exemption to hundreds of jobs that did not exist when the exemption was created. The exemption applies to those working as a computer systems analyst, computer programmer, or software engineer, but was written broadly to include as well, any “similarly skilled worker,” likely anticipating new positions would emerge as technology rapidly changed. . A new decision, applying the exemption, upholds application of the exemption to a lead technician for a commercial installer of voice and data systems. Haluska v. Advent Communs., Inc., 2014 U.S. Dist. LEXIS 158467 (W.D. Pa. Nov. 10, 2014).
While the plaintiff attempted to characterize his job as a “simplistic form of data entry,” Judge Terrence F. McVerry ruled that “by his own admission, plaintiff’s primary job duties included consulting with customers at precut meetings to discuss and determine hardware specifications and systems functions as well as programming/modifying the related software to meet their needs,” and that even if he was not a computer programmer he was a “similarly skilled worker” and the exemption applied.
Evolution in the information technology sector has outpaced the evolution of the applicable Department of Labor guidance on computer professionals. Practical assessment such as that found in Haluska, is necessary to preserve the purpose of exempt status, namely to permit exclusion from overtime for highly skilled, well-compensated workers.
Joining sister Circuits, on Wednesday the Court of Appeals for the Ninth Circuit ruled that an employee must set forth specific information regarding his or her work hours to properly plead an FLSA claim for unpaid minimum wages or overtime under the Iqbal doctrine. Landers v. Quality Communs., Inc., 2014 U.S. App. LEXIS 21440 (9th Cir. Nov. 12, 2014)
Joining the “trilogy of cases” from the Second Circuit, as well as decisions from the First and Third Circuits (and rejecting an unpublished order from the Eleventh Circuit permitting more conclusory pleading), the Court agreed “with our sister circuits that in order to survive a motion to dismiss, a plaintiff asserting a claim to overtime payments must allege that she worked more than forty hours in a given workweek without being compensated for the overtime hours worked during that workweek.” The Court declined to issue a hard and fast pleading rule that would serve as the “sine qua non of plausibility,” but consistent with the prior opinions from other Circuits required factual specificity. Having articulated that standard, the court affirmed dismissal of the complaint at bar because it “presented [only] generalized allegations asserting violations of the minimum wage and overtime provisions.”
Four Circuits have now adopted a variation of the rule originally set forth by the Second Circuit in Lundy. Practitioners must closely review pleadings and avail themselves of this doctrine as appropriate.
As we have written before the outside sales exemption is arguably one of the more straight-forward FLSA exemptions, having only two requirements: 1) having as the primary duty making sales or obtaining orders; and 2) doing so away from the employer’s place or places of business “customarily and regularly.” Nevertheless, this simple test can be the subject of contested litigation. A recent decision upholds the applicability of the exemption to a salary paid worker for a restoration and cleaning firm. Dooley v. CPR Restoration & Cleaning Servs. LLC, 2014 U.S. App. LEXIS 20918 (3d Cir. Oct. 29, 2014).
Dooley’s primary duty was to monitor a scanner and proceed to the location of fires in order to sell his employer’s services to the affected property owner, including offering “board-up” services as a “loss leader” in hopes of obtaining further, profitable work. Speed was of the essence in order to be the first one on location once the fire department permitted civilian personnel to the site. Plaintiff admitted that the boarding up services he offered (sometimes with agreement to pay the homeowner’s insurance deductible, which he was free to offer), did not make money for the company, but were part of an effort to secure more lucrative work. The court concluded that Plaintiff’s “task of monitoring fire reports was to further CPR’s sales goals and these exempt duties were more important than his non-exempt duties.”
Under recent Supreme Court precedent, employers must apply the outside sales exemption by reference to the sales process prevalent in their industry, mindful of the general FLSA standard and state law tangents.
The “highly compensated” regulation is designed to relax the exempt status tests for the white collar exemptions for individuals who make more than $100,000 per year in total compensation. 29 C.F.R. § 541.601(a). Nevertheless, challenges to exempt classification of such workers can arise, with the employee claiming he or she still was non-exempt based on his or her job duties or arguing the specific compensation arrangement did not satisfy the salary basis requirement. A new decision recently upheld the applicability of the exemption for highly compensated employees and rejected the employee’s argument that the salary basis test was not satisfied. Litz v. St. Consulting Group, Inc., 2014 U.S. App. LEXIS 21055 (1st Cir. Nov. 4, 2014).
In Litz, the Plaintiffs, project managers for the defendant political consultancy, “earned well over $100,000 per year” under a compensation scheme where “their earnings equaled the number of hours they billed to clients multiplied by an hourly rate between $40 and $60.” The compensation plan guaranteed a minimum weekly salary of $1,000, regardless of hours billed. Plaintiffs argued that this did not constitute salary basis payment, citing language on paystubs and several communications from the employer implying that a circumstance could arise where the guarantee would not have been paid. In a strongly worded decision, the First Circuit opined that this view “simply ignores the economic reality of the guarantee . . . The fact that the [actual] pay was usually–but not always–high enough to render the guaranteed stipend unnecessary hardly means that the guarantee was not part of the employee’s compensation.”
Several courts recently have examined these types of exemption challenges and rejected them. Anani v. CVS RX Servs., 730 F.3d 146 (2d Cir. 2013). However, employers must consider their exposure to claims and assess their wage-and-hour compliance, regardless of the level of worker compensation, from tipped employees on up to executives.