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

While states generally are free to enact wage and hour laws providing greater protections than contained in the Fair Labor Standards Act, sometimes such laws run afoul of federal statutes governing particular industries. In a recent decision exemplifying this type of preemption, a judge in the United States District Court of the Southern District of California ruled that the oppressive meal and rest break provisions of the California Labor Code (which will be clarified by the California Supreme Court following oral argument on November 8), conflict with and are preempted by the Federal Aviation Authorization Act of 1994 (FAAA), because the state requirements interfere with interstate commerce. Dilts v. Penske Logistics LLC, 2011 U.S. Dist. LEXIS 122421 (S.D. Cal. Oct. 19, 2011). This is a significant victory for industry employers as class action lawsuits alleging violation of these requirements have been prevalent in California.

Dilts concerned the meal and rest statute’s interference with the FAAA provision providing that “a State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.” Id. at * 13 quoting 49 U.S.C. § 14501(c)(1).  California’s strict meal and rest break laws, which the Court characterized as fairly rigid, force drivers to alter their daily routes while searching out appropriate places to pull off the highway and park their vehicles, preventing them from making some daily deliveries. Allowing California to “insist exactly when and for exactly how long carriers provide meal breaks for their employees would allow other states to do the same, and do so differently,” Judge Janis L. Sammartino observed. Id. at * 27.

Navigating the maze of federal, state and local regulation of wage-hour laws is never easy, particularly in heavily regulated industries such as trucking or aviation. Employers in these industries must monitor the status of the law to determine how best to comply with potentially competing provisions on the state and federal level. This decision points that the first step of any analysis is first to determine a statute or regulation’s enforceability.

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As we previously discussed, the airline industry, like the hospitality industry, has been assailed with lawsuits alleging that tips from customers intended for certain employees—in this case, baggage handlers, a/k/a skycaps—have been misappropriated by the employer, in violation of state statutes and common law. In the airline industry, conflicting authority has emerged even within the same federal judicial district as to whether such claims are preempted by federal law. Compare Brown v. United Air Lines, Inc., 656 F. Supp. 2d 244, 249-51 (D. Mass. 2009)(preempted) with DiFiore v. Am. Airlines, Inc., 688 F. Supp. 2d 15 (D. Mass. 2009)(not preempted). Recently, the Court of Appeals for the First Circuit reversed the lower court’s DiFiore decision and vacated the jury’s award to Plaintiffs.based federal on preemption DiFiore v. Am. Airlines, Inc., 2011 U.S. App. LEXIS 10306 (1st Cir. Mass. May 20, 2011).

The central issue in these cases is whether the Airline Deregulation Act, 1978 legislation designed to ensure that the federal de-regulation of the airline industry did not result in a body of inconsistent state regulations governing air carriers, preempts state statutes and common law theories relating to the tips through its language preempting all state laws “related to a price, route, or service.” Id. at 11, citing 49 U.S.C. § 401713. Observing that this preemption provision is “broad but vague,” and citing three Supreme Court cases providing general guidance regarding construction of the Act, the court concluded that while the Supreme Court would be unlikely to utilize the preemption clause to free airlines from many, if not most common law and wage law claims, the Massachusetts tip statute at issue in the court’s view had a direct connection to both price and service – the baggage handling at issue itself constituting a service – and thus fell within the preemption clause. 

Jackson Lewis Partner Roger Briton, a leading expert on all aspects of employment law within the aviation industry, observes “The DiFiori decision opens the door a bit further to allowing employers in the aviation industry to fight wage/hour claims based on ADA preemption. While most wage claims are remote from issues ‘related to a price, route or service’, this potential defense should be considered in all cases.” 

Litigation over gratuities and tip practices continues to assail all industries where the practice is prevalent, including hospitality, aviation and car washes. Employers must ensure they understand all applicable federal and state requirements related to gratuities.

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As discussed here, the FLSA contains a provision relating to the compensability of time spent donning and doffing uniforms, when the compensability of such time is addressed in a collective bargaining agreement. 29 U.S.C. § 203(o). However, even where a unionized employer through a collective bargaining agreement is not required to pay for such time, if the time is otherwise compensable under state law, the FLSA is no defense, held Judge Easterbrook of the Seventh Circuit this week. Spoerle v. Kraft Foods Global, Inc., 2010 U.S. App. LEXIS 15960 (7th Cir. Wis. Aug. 2, 2010).

Spoerle concerns the compensability of time spent putting on and taking off “safety gear, such as steel-toed boots and hard hats, plus a smock that keeps other garments clean” as well as hair nets and beard nets” at an Oscar Mayer plant in Wisconsin. Id. at * 2. The Court noted that it “takes a few minutes at the start of every day to put these items on, and a few more at day's end to take them off.” Id. Kraft Foods and the union agreed that this time is not compensable. Id. at * 2-3. However, Kraft Foods also conceded within the context of Spoerle that, but for the existence of a CBA, the time in question would be compensable under Wisconsin’s state wage law. 

As observed by the district court and reiterated by the Seventh Circuit, 29 U.S.C. § 218(a) of the FLSA states:

No provision of this chapter . . . shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter or a maximum work week lower than the maximum workweek established under this chapter …. No provision of this chapter shall justify any employer in reducing a wage paid by him which is in excess of the applicable minimum wage under this chapter, or justify any employer in increasing hours of employment maintained by him which are shorter than the maximum hours applicable under this chapter.

This provision codifies an unequivocal proposition: the FLSA does not prevent states from enacting wage laws which provide greater rights to employees. The Court also specifically noted that 203(o) by its plain language is limited to calculating hours worked “for the purposes of sections 206 and 207 of this title.” Id. at * 5. Finally, as explained by the Court, the existence of the CBA did not itself preempt the state wage law because state rules that disregard, rather than interpret, collective bargaining agreements are not preempted by federal labor policy. Id. citing Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399 (1988).

Spoerle highlights the need for every organization to develop a full and complete understanding of both the FLSA and all relevant state wage and hour laws. Employers with multi-state operations must be particularly careful to mind the niceties of individual state laws.

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While a significant percentage of employees’ claims for gratuities emanates from the food service and hospitality industries, other industries, including Aviation, are not immune. Baggage handlers in Massachusetts, New York and Pennsylvania all have asserted claims challenging industry tip practices, alternatively alleging that the amounts paid by customers for curbside check-in are gratuities (which allegedly have been misappropriated by the employer) or that they are service charges which discourage the payment of additional gratuities (thereby decreasing their compensation below the minimum wage). In a recent decision, a federal court ruled that the Federal Airline Deregulation Act does not preempt the plaintiffs’ Pennsylvania state law claims for service charges allegedly misappropriated by their employer. Thompson v. US Airways, Inc., 2010 U.S. Dist. LEXIS 59088 (E.D. Pa. June 15, 2010).

In Thompson, the plaintiff skycaps alleged that the airline’s 2005 imposition of a mandatory $2 fee per bag (paid to the airline) caused a sharp decrease in tip income, causing their income to dip below the minimum wage and serving as a functional misappropriation of tips. Id. at * 4. As a threshold legal matter, the airline argued that the plaintiffs’ claims for wages under state law would have a "forbidden significant effect" on airline prices, and thus were preempted by the federal law (which was designed to ensure that states did not undermine federal airline deregulation through state regulation). Analyzing three different decisions on the issue with different reasoning from federal courts in Massachusetts, Judge Gene Pratter denied the airline’s motion to dismiss and determined that a verdict in favor of the plaintiffs would simply result in a modification of baggage handling practices, and would have only a tangential, remote impact on price, if any. 

While the court’s decision did not address the merits of the Thompson skycaps’ claims, the litigation reminds .all employers of tipped employees of the need to ensure legal compliance and transparency in regard to gratuity practices.

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