Wage and Hour Law Update : Wage & Hour Lawyer & Attorney : Jackson Lewis Law Firm : Minimum Wage, Overtime & Service Contracts

While the New York State Department of Labor’s new Hospitality Industry Wage Order clarified many wage and hour issues for industry employers, the appropriateness of tip pool participation of certain categories of employee continues to be an area of uncertainty. On January 13, 2011, Federal District Judge Laura Taylor Swain granted summary judgment to Manhattan restaurant Brasserie Ruhlmann (“Restaurant”), on Plaintiffs’ claims that the restaurant violated the FLSA and N.Y. Labor Law (NYLL) by permitting captains and banquet coordinators to participate in the Restaurant’s tip pool. Garcia v. La Revise Assocs. LLC, 2011 U.S. Dist. LEXIS 3325 (S.D.N.Y. Jan. 13, 2011).

The plaintiffs in Garcia were three servers and one busboy at the restaurant, who participated in its tip pool consisting of servers, runners, busboys, captains, bartenders, and the Restaurant's banquet coordinator. The Plaintiffs alleged that tip pool participation of captains, bartenders and the banquet coordinator violated the FLSA and NYLL because these employees were “employers” (or agents of the employer) within the meaning of the law, or in the alternative were not employees who "customarily and regularly receive tips.” 

Judge Swain disagreed, observing that captains played “a substantial role in customers' dining experience at the Restaurant by assisting servers, answering questions, and overseeing food service…” Judge Swain also found that the captains did not set the terms and conditions of employment for the front-of-the-house employees who provided the food service. Id. at * 22-23. This is a vital recognition of the role of non-managerial captains in food service. In finding the banquet coordinator an employee who customarily and regularly receives tips, the Court noted that the banquet coordinator “dealt directly with private party hosts in advance of events for planning purposes and worked directly with the hosts and their guests during the events to ensure their satisfaction.” Id. at * 20.

This decision represents the first substantive judicial direction on the lawful composition of the tip pool in a New York fine dining establishment in over a decade. See Ayres v. 127 Restaurant Corp., 12 F. Supp. 2d 305 (S.D.N.Y. 1998). While industry employers should be gratified by this favorable ruling recognizing the role of captains and banquet coordinators in providing customer services, they should continue to analyze the composition of their tip pool based on the realities of their workplace, not the job titles assigned to the various service positions.  For example, in order to participate in such a pool, captains must not be managerial employees. With respect to banquet coordinators, each business must conduct a thorough analysis of the banquet coordinator’s service and non-service duties in order to analyze whether including the position in any pool is a viable option.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

It is well understood that employees misclassified as exempt under the FLSA are entitled to overtime pay for hours worked in excess of forty in a week. However, while the United States Department of Labor takes the position that any unpaid overtime is calculated using the “half-time” method, not all of the Circuit Courts have confirmed the appropriateness of such calculation. Last week, the Court of Appeals for the Fourth Circuit (which covers Maryland, Virginia, West Virginia, North and South Carolina), joining the First, Fifth, Seventh and Tenth Circuit courts, held that such calculation is appropriate. Desmond v. PNGI Charles Town Gaming, L.L.C., 2011 U.S. App. LEXIS 702 (4th Cir. Jan. 14, 2011).

Desmond involved three former employees who worked as racing officials at Defendants’ race track who alleged that Defendants had misclassified them as exempt “administrative” employees. The court agreed with Plaintiffs, and held that they were owed “half time” overtime. Under this method, for each week within the limitations period, an employee’s weekly salary is divided by the number of hours they worked to determine their “regular rate,” and the employee receives 50% of that rate for each hour in excess of 40. Plaintiffs appealed, urging that an employer who is found to have misclassified an employee must calculate overtime by dividing the weekly salary by 40, then paying time-and-one-half (150%) of that rate for each overtime hour.

The Court first reviewed the appellate authority from other Circuits authorizing and approving the half time calculation, including the Seventh Circuit’s 2010 decision in Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665 (7th Cir. 2010), discussed here. In reaching its decision, the court also noted “In addition to these decisions from our sister circuits, the Department of Labor also has approved using a 50% overtime premium to calculate unpaid overtime compensation in a mistaken exemption classification case.” Id. at * 11 citing Retroactive Payment of Overtime and the Fluctuating Workweek Method of Payment, Wage and Hour Opinion Letter, FLSA 2009-3 (Dep't of Labor Jan. 14, 2009).

While this decision is positive for employers, the appropriate calculation remains unaddressed in seven federal circuits, including the Second, Ninth and D.C. Circuits. Additionally, the plaintiff in Urnikis-Negro has petitioned the United States Supreme Court to review the Seventh Circuit’s decision, Supreme Court Docket No. 10-745. Employers should continue to monitor the state of the law in this area, given its impact on misclassification exposure. Further, employers should ensure that employees classified as exempt are not told anything other than that their salary covers all hours worked.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As previously discussed here, President Obama’s choice for administrator of the Department of Labor’s Wage and Hour Division is deputy assistant attorney general and chief of staff of the Justice Department's Civil Rights Division, Leon Rodriguez. Mr. Rodriguez was nominated on December 12, 2010, but Congress failed to act on his nomination prior to adjournment of its previous session. His nomination has now been resubmitted.

In addition to the FLSA, the Wage and Hour Division is responsible for enforcement of other federal statutes relating to wage-and-hour issues, including the Migrant and Seasonal Agricultural Worker Protection Act, which creates special wage protections for migrant workers, and the Family and Medical Leave Act. We will report further developments regarding Mr. Rodriguez’s nomination.  Mr. Rodriguez is expected to continue the Division’s aggressive enforcement programs.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As reported here and here, the New York Department of Labor will have a full plate in 2011 enforcing both the new Hospitality Industry Wage Order (applicable to industry employers) and the Wage Theft Prevention Act (applicable to all employers in New York). The Hospitality Wage Order modifies many of the rules governing industry employers, and the dangers of non-compliance are magnified by the Wage Theft Act, which increases the penalties for all violations of Labor Law Article 6. Under the Act, liquidated damages for such violations increase from 25% to 100%. The Act also expands the wage notification requirements of New York Labor Law § 195.

In addition to liability for unpaid wages, penalties and attorneys’ fees, New York employers also could be faced with inclusion on the NYSDOL’s “Non-Compliant Labor Standards Employer Search” Internet database. See http://lsempviolations.labor.ny.gov/LSEmpViolations/index.faces. Violators are listed on this web site for six years.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In the latest decision addressing the applicability of the FLSA’s administrative exemption to claims-handling employees (such as adjusters), last week the Court of Appeals for the Fifth Circuit, affirmed a District Court’s grant of summary judgment, rejecting the assertion of an American Risk Insurance (“ARI”) adjuster that ARI misclassified him as exempt. Talbert v. Am. Risk Ins. Co., 2010 U.S. App. LEXIS 25889 (5th Cir. Dec. 20, 2010).

The Court’s review focused on whether Plaintiff exercised discretion and independent judgment in the performance of his duties. Id. at * 10-15. While ARI argued that Plaintiff’s responsibilities in making recommendations concerning coverage and settlement of claims rendered him exempt, Plaintiff attempted to minimize his involvement in coverage analysis by arguing that close supervision by his supervisor undermined any ability to exercise discretion or independent judgment. Id. The Court sided with ARI, noting that, under DOL regulations, the requirement of supervisory approval for Plaintiff’s claims recommendations does not preclude a finding that he exercised discretion and independent judgment in making those recommendations. Id. 

Though the Talbert opinion does not directly cite to authority from other circuit courts, it is consistent with other appellate authority regarding the classification of adjusters and similar industry positions as exempt. See Robinson-Smith v. Gov't Emples. Ins. Co., 590 F.3d 886, 897 (D.C. Cir. 2010)(collecting cases). Nevertheless, continued uncertainty (and litigation) regarding the proper application of the administrative exemption means that all employers must apply or rely upon the exemption with care.  And, of course, certain state laws with higher exemption standards, potentially muddy the waters.

• Email This
• Print
• Comments
• Trackbacks
• Share Link