“Catalyst” Test Applicable to Awarding Attorney’s Fees for State Wage and Hour Claims, Massachusetts Supreme Judicial Court Holds

Rejecting the federal standard for determining whether a party has “prevailed” on his or her claim under the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, §§ 148 & 150, the Massachusetts Supreme Judicial Court has held instead that the less-stringent “catalyst” test applies. As a result, plaintiffs who received $20,500 in a settlement under the Act were entitled to an award of attorney’s fees. Ferman v. Sturgis Cleaners, Inc., 481 Mass. 488, 2019 Mass. LEXIS 96 (Feb. 19, 2019).

Nearly twenty years ago, the U.S. Supreme Court held that to be considered a “prevailing” party in a private settlement of a lawsuit, a plaintiff would have to obtain judicial approval, or “imprimatur,” of the settlement. Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep‘t of Health & Human Resources, 532 U.S. 598 (2001). In so holding, the Court rejected application of the “catalyst” test, which requires a plaintiff only to show that his or her lawsuit was a necessary and important factor in causing the defendant to grant a material portion of the plaintiff’s requested relief.

In the instant case, the plaintiffs originally sought approximately $28,000 in regular and overtime wages, plus treble damages and attorney’s fees and costs, under the Massachusetts Wage Act. Following a two-year period of discovery and pretrial motions, the parties mediated the case and agreed to settle for $20,500, leaving the issue of attorney’s fees for the court. Applying the catalyst test, the trial court awarded about $16,000 in fees to the plaintiffs, finding that a recovery in settlement of nearly 70% of the actual damages sought sufficiently satisfied that test so as to render the plaintiffs prevailing parties.

On appeal, the Massachusetts Supreme Judicial Court agreed that the catalyst test was the proper test to be used with respect to the State’s Wage Act, finding that it better promotes the purposes of the Act – creating a powerful disincentive against unlawful conduct and establishing an incentive for plaintiff’s attorneys to undertake cases they might not otherwise deem financially prudent – than does the judicial imprimatur test set forth in Buckhannon. The Supreme Judicial Court added that the catalyst test also promotes prompt settlements, as it removes an incentive to employers to engage in protracted litigation as a tactic, when the amount of actual damages sought might be readily ascertainable and discrete, and prolonging litigation would result in nothing more than additional legal fees. Given that the Wage Act itself includes fee-shifting provisions – “deemed necessary ‘to prevent the unreasonable detention of wages’ by ‘unscrupulous employers,’” the Supreme Judicial Court found no difficulty in concluding that the catalyst test was the appropriate standard under the Wage Act.

If you have any question about this development or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Minnesota Appeals Court Upholds Minneapolis Minimum Wage Ordinance

The Court of Appeals of Minnesota, the state’s intermediate appellate court, has upheld a minimum wage ordinance enacted by the City of Minneapolis in 2017, providing for a higher minimum wage than that provided by state law. Graco, Inc. v. City of Minneapolis, 2019 Minn. App. LEXIS 84 (Minn. Ct. App. Mar. 4, 2019).

Following its review of a socioeconomic study it commissioned in 2016 and a period of public comment, listening sessions and a survey, in June 2017 the Minneapolis City Council enacted that Municipal Minimum Wage Ordinance, providing for higher minimum wage rates for hours worked by employees within the City’s geographic boundaries. Currently under the Ordinance, the minimum wage for “large” employers (those with more than 100 employees) is $11.25 per hour, while the minimum wage for “small” employers (those with 100 or fewer employees) is $10.25 per hour. By contrast, the Minnesota Fair Labor Standards Act (MFLSA) establishes statewide minimum wage rates based on an employer’s annual gross volume of business. Currently under that Act, the minimum wage for large employers (those with an annual gross volume of sales or business of $500,000 or more) is $9.86 per hour, while the minimum wage for small employers (less than $500,000 in business) is $8.04.

In November 2017, Graco and others sued the City, asserting that the Ordinance is preempted by state law and should be enjoined. The district court denied the injunction and ultimately ruled that the Ordinance neither conflicts with, nor is preempted by, the MFLSA. The plaintiffs appealed and the Court of Appeals affirmed the lower court’s decision.

First, the Court of Appeals concluded that the MFLSA merely prohibits employers from paying less than the minimum wage established by the statute, rather than permitting them to pay the state minimum wage. The Court of Appeals added that the Minnesota legislature explicitly recognized the possibility of a local minimum wage in a 2015 statute defining “non-competitive work” and that to the extent the MFLSA was ambiguous as to whether it provided a minimum wage floor or ceiling, “well-established rules of statutory construction” required it to read that Act in alignment with other related statutes. In short, the Minneapolis Ordinance could not be voided based on an express preemption by state law.

The Court of Appeals then addressed the plaintiffs’ contention that the MFLSA impliedly preempted the Ordinance by entirely occupying the field of minimum wage regulation in Minnesota. Likewise rejecting this argument, the Court concluded that the “MFLSA does not expressly prohibit a municipality from setting higher minimum wages, and it does not give the [state] commissioner exclusive authority to safeguard the state minimum-wage rates; it merely permits the commissioner to do so.” Thus, despite the fact that the legislature had amended the MFLSA formula nine times since its enactment in 1973, and has set forth the procedures for establishing any future rate increases, the Court of Appeals was “not persuaded that this constitutes the all-encompassing regulations that Minnesota appellate courts have found to preempt local regulations.” Further rejecting the additional factors to be considered when analyzing a statute for implied preemption, the Court ultimately found that the Minneapolis ordinance does not conflict with, and is not preempted by, the MFLSA.

Therefore, the Minneapolis Ordinance and its higher minimum wage rates remain in effect, unless and until the Supreme Court of Minnesota concludes otherwise. To that end, we will continue to follow any further developments with respect to the Ordinance. If you have any question about this development or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

DOL Issues New Proposed Overtime Rule

The U.S. Department of Labor (DOL) has issued a new proposed rule raising the salary level requirements for the white collar exemptions.  A full article discussing the proposed rule will be published later but here is what you need to know now:

  • The new standard salary level will be $35,308 annually ($679 per week).  This is an increase from the current level of $455 per week, but less than the now-invalid Obama-era rule, which was $913 per week.
  • The DOL will permit employers to satisfy the new salary level requirement by using nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary level test.  This would be an addition to the current regulations but a similar provision was included in the Obama rule.
  • The new salary level for the Highly Compensated Employees (HCE) will be $147,414, which is higher than under the Obama-era rule.  The current level is $100,000 and the level under the Obama-era rule was $134,004.
  • There are no changes to the duties requirements.
  • There are no automatic increases, but the DOL proposes that the salary level will be revisited every four years.
  • The new salary level does not apply to employers in Puerto Rico, the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands; the current salary level of $455 will continue to apply.

DOL expects that the new rule will be effective January 2020.  Comments will be received for 60 days after it is published in the Federal Register.

Illinois Governor Signs $15 Minimum Wage Law

As anticipated, today Governor J.B. Pritzker signed the “Lifting Up Illinois Working Families Act,” under which the state’s minimum wage will increase to $15.00 per hour over the next six years. Under the law, the hourly minimum wage will increase to $9.25 on January 1, 2020; to $10.00 on July 1, 2020; to $11.00 on January 1, 2021; and an additional $1.00 per hour each January 1st thereafter, until reaching $15.00 on January 1, 2025.

More details about the new Illinois minimum wage law may be found here.

If you have any questions about the Illinois minimum wage law, or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

USDOL’s Wage & Hour Division Issues Internal Guidance Regarding Elimination of the “80/20” Tip Credit Rule

Last November, the United States Department of Labor (USDOL) issued Opinion Letter FLSA2018-27, rescinding the so-called “80/20” Tip Credit Rule, a provision that during the last decade had spawned a cottage industry of “80/20” cases.  These cases sought to dissect the duties of a server between those that allegedly generated tips and those that did not (e.g., refilling condiment bottles while waiting for customers to arrive), and to invalidate the tip credit for the period during which a server performed such non-tip-generating duties. The Acting Administrator of the Wage and Hour Division (WHD) has now updated the Division’s Field Operations Handbook (FOH), the genesis of the 80/20 Rule, thereby removing all traces of the Rule. Notably, the Rule was never contained in the statute or DOL regulations and instead first appeared, without prior opportunity for public comment, in the FOH.

As confirmed in new Field Assistance Bulletin (FAB) No. 2019-2 (Feb. 15, 2019), “WHD will no longer prohibit an employer from taking a tip credit based on the amount of time an employee spends performing duties related to a tip-producing occupation that are performed contemporaneously with direct customer-service duties or for a reasonable time immediately before of after performing such direct-service duties.” Reiterating the FLSA amendment passed by Congress last year, however, the FAB notes that regardless of whether an employer takes a tip credit, it may not keep tips received by its employees.

The Bulletin adds that WHD staff should apply the new guidance to all investigations on or after November 8, 2018, and that the DOL will follow the revised guidance in any open or new investigation concerning work prior to the issuance of the November 8, 2018 Opinion Letter.  The FAB explains that the prior DOL guidance “created confusion” about what duties requires certain related non-tipped duties to be excluded from the tip credit, and now clarifies that the FLSA and its regulations allow employers to take a tip credit based on whether the employee’s job or occupation is tipped, and not on whether a particular duty is tipped.

FAB No. 2019-2 reaffirms that the WHD will employ the following principles:

    • Duties listed as examples in Section 531.56(e) of the Code of Federal Regulations, and duties listed as “core” or supplemental” for the appropriate tip-producing occupation in the Tasks section of the Details report in the Occupational Information Network (O*NET), will be considered tip-related duties (even though they might not directly generate a tip).
    • An employer may take a tip credit for any time spent by the employee on such tip-related duties if they are performed contemporaneously with, or within a reasonable time before or after, direct customer-service duties.
    • Employers may not take a tip credit only for time spent performing any tasks that are not contained in 29 CFR 531.56(e), or in the O*NET task list for the employee’s tipped occupation. The WHD notes, however, that if the time spent on these duties is small enough, the de minimis rule may still apply.

The DOL’s abandonment of the 80/20 Rule came as a great relief to restaurant and hospitality industry employers, who routinely struggled to comply with the confusing Rule. A full discussion of the tortured history of the 80/20 Rule may be found here. If you have any questions about this development or any other wage and hour question, please consult the Jackson Lewis attorney(s) with whom you regularly work.

Illinois Legislature Approves Bill to Raise Minimum Wage to $15.00, Sends to Governor for Signature

(Update from an earlier post)

The Illinois legislature has now passed the “Lifting Up Illinois Working Families Act,” under which the state’s minimum wage will increase to $15.00 per hour over the next six years. Governor J.B. Pritzker has stated that he intends to sign the bill into law prior to his first budget speech on February 20th.

Under the new law, the hourly minimum wage will increase to $9.25 on January 1, 2020; to $10.00 on July 1, 2020; to $11.00 on January 1, 2021; and an additional $1.00 per hour each January 1st thereafter, until reaching $15.00 on January 1, 2025. Employers may pay a slightly lower wage rate to employees under the age of 18, provided they work less than 650 hours a year. The law also provides a tax credit to those employers with less than 50 full-time-equivalent employees.

In addition to increasing the minimum wage, the law increases the remedies available to employees who are paid less than minimum wage. Employees will now be able to recover triple the amount of the underpayment; reasonable attorney’s fees and costs; and an additional payment (effectively, interest) of 5% of the amount of the underpayment for each month it remains unpaid. In addition, an employer that violates the minimum wage provisions will have to pay a statutory penalty of $1,500 to the Illinois Department of Labor Wage Theft Enforcement Fund, as well as a penalty of $100 per affected employee if it fails to maintain proper payroll records.

If you have any questions about the Illinois minimum wage law, or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Second Circuit Shears Cosmetology Student’s Claims in Intern-or-Employee Case

Concluding that a student at a for-profit cosmetology academy was the “primary beneficiary” of the hours he spent training at the academy’s salon, the Second Circuit Court of Appeals has upheld the district’s court’s determination that the student was an intern, and not an not employee entitled to minimum wage or overtime under the FLSA or the New York Labor Law. Velarde v. GW GJ, Inc., 2019 U.S. App. LEXIS 3536 (2d Cir. Feb. 5, 2019). The Second Circuit has jurisdiction over New York, Connecticut and Vermont.

In 2011, the plaintiff enrolled in the Academy, a for-profit cosmetology training school operating in Erie County, New York. That same year, he completed the training program, a 1000-hour course of study approved by the state. The Academy program included about 300 hours of classroom instruction and 700 hours of supervised practical experience in the school’s student salon, where members of the public can receive discounted cosmetology services while the students refine their skills. Several years after completing the program and obtaining his cosmetology license, the plaintiff sued the Academy, claiming that it violated the FLSA and state law by failing to pay him for the work that he did in the salon while enrolled as a student.

Upholding the district court’s grant of judgment on the pleading to the defendants, the Second Circuit reviewed the “totality of the circumstances” of the plaintiff’s training program, in light of the multi-factor analysis it set forth in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016). Those non-exhaustive factors include:

(1)        the extent to which the intern and employer clearly understand that there is no expectation of compensation;

(2)        the extent to which the internship provides training similar to that given in an education environment, including clinical or other hands-on training;

(3)        the extent to which the internship is tied to the intern’s formal education program through integrated coursework or credit;

(4)        the extent to which the internship accommodates the intern’s academic calendar;

(5)        the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;

(6)        the extent to which the intern’s work complements, rather than displaces, that of paid employees; and

(7)        the extent to which the intern and employer understand that there is no entitlement to employment following the internship.

The Second Circuit noted that some of these factors were less applicable in the vocational training context than in other internship programs (for example, the absence of an expectation of future employment with the institution). Nevertheless, the Court of Appeals readily concluded that the plaintiff was the primary beneficiary of the school’s program, including the time spent at the salon honing his practical skills, given that without such a program, the plaintiff would not satisfy the state’s requirements to obtain his cosmetology license. The mere fact that the Academy derived some benefit from the practical training (i.e. any profits it received from the salon services provided to the public) did not necessarily mean that the school was the primary beneficiary.

In reaching its decision, the Second Circuit cited a very similar opinion from the Seventh Circuit, discussed here, in which that Court of Appeals likewise concluded that cosmetology students were interns and not employees. While the Second Circuit and other courts have noted that such intern-or-employee lawsuits must be assessed on a case-by-case basis, Velarde nevertheless provides practical guidance to businesses constructing both vocational training programs and general internship programs. Employers establishing such programs should benchmark them against Velarde and other appellate guidance.

If you have any questions about internships or other wage and hour issues, please contact the Jackson Lewis attorney with whom you work.

Illinois Legislature Fast-Tracks Bill to Raise Minimum Wage to $15.00

Following up on its recently-elected governor’s campaign pledge, the Illinois legislature has fast-tracked the “Lifting Up Illinois Working Families Act,” under which the state’s minimum wage will increase to $15.00 per hour over the next six years. First introduced on February 6th, the bill already has been passed by the state senate and likely is to be passed quickly by the state house of representatives as well. Governor J.B. Pritzker has stated that he would like to sign the bill into law prior to his first budget speech on February 20th.

Under the bill, the hourly minimum wage will increase to $9.25 on January 1, 2020; to $10.00 on July 1, 2020; to $11.00 on January 1, 2021; and an additional $1.00 per hour each January 1st thereafter, until reaching $15.00 on January 1, 2025.  Absent further revision by the house of representatives, the law will permit employers to pay a slightly lower wage rate to employees under the age of 18, provided they work less than 650 hours a year. The law also will provide a tax credit to those employers with less than 50 full-time-equivalent employees.

In addition to increasing the minimum wage, the law will increase the remedies available to employees who are paid less than minimum wage. Employees will now be able to recover triple the amount of the underpayment; reasonable attorney’s fees and costs; and an additional payment (effectively, interest) of 5% of the amount of the underpayment for each month it remains unpaid. In addition, employers will have to pay a statutory penalty of $1,500 to the Illinois Department of Labor Wage Theft Enforcement Fund and, on top of already-existing statutory penalties, the law will now impose a penalty, of $100 per each affected employee, on an employer who fails to maintain proper payroll records. That penalty likewise will be paid to the Wage Theft Enforcement Fund.

If, as expected, the bill becomes law, Illinois will become the third largest state (employee-wise) to have passed a $15 minimum wage bill, surpassing New Jersey (which itself enacted a similar law earlier this week) and behind only California and New York in this respect. Notably, two localities within Illinois already have minimum wage rates higher than the state rate: Chicago, at $12.00 an hour ($13.00 beginning in July) and Cook County, at $11.00 an hour. These local rates would be superseded if and when exceeded by the state rate.

Jackson Lewis will continue to monitor the bill’s development and will report any changes to its expected passage. If you have any questions about the impending Illinois minimum wage law, or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Miami Minimum Wage Ordinance Remains Invalid after Review Denied by Florida Supreme Court

A 2016 Miami ordinance, intended to increase the City’s minimum wage to more than $13.00 an hour by 2021, remains invalid after the state’s highest court denied review of a lower appellate court decision.

In 2003, the Florida legislature enacted a statute establishing the federal minimum wage as the minimum wage for the state of Florida and prohibiting local governments from passing ordinances that would seek to raise the minimum wage above the federal rate. The following year, Florida voters passed an initiative to amend the Florida Constitution to establish a statewide minimum wage higher than the federal minimum. Based on its interpretation of the amendment, the City of Miami believed that it now had the authority to establish a higher minimum wage than was provided under state law and, in 2016, enacted such an ordinance.

Representatives of a business federation brought suit, however, alleging that the local ordinance violated the 2003 state preemption statute. The Miami-Dade County Circuit Court agreed and declared that the Miami ordinance was unenforceable. The City appealed but the Third District Court of Appeals affirmed the lower court’s decision, holding that the constitutional amendment merely allowed the state to change the state minimum wage and said nothing about preempting the preexisting statutory prohibition on local municipalities enacting a different minimum wage. Absent such explicit language, the appellate court concluded, it was not going to assume that the purpose of the amendment was to supersede the earlier statutory prohibition on local minimum wage ordinances.

The City then sought review by the Florida Supreme Court and last year, in a 4-3 vote, the state’s high court agreed to do so, setting oral arguments for next month. In the interim, however, several justices retired under a state mandatory age law and Florida’s newly-elected governor appointed new justices. On February 5th, the Florida Supreme Court dismissed the petition for review on a 5-2 vote, with all of the new justices joining in the dismissal. Thus, Florida remains one of nearly twenty states that have enacted laws prohibiting municipalities or other local jurisdictions from implementing their own minimum wage rates.

If you have any question about this development or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

New Jersey Becomes Latest State to Enact a $15 Minimum Wage Law

With its governor’s signature yesterday, New Jersey became the latest – and the third largest – state to pass a $15.00 per hour minimum wage bill.  The only states with larger populations than New Jersey passing such $15 minimum wage bills are California and New York, which enacted similar laws in 2016 and 2017, respectively.

Under the New Jersey law, the state’s current minimum wage of $8.85 per hour will rise to $10.00 per hour on July 1, 2019; to $11.00 per hour on January 1, 2020; and an additional $1.00 per hour on January 1st of each successive year until reaching $15.00 per hour in 2024. Each year thereafter, based on state constitutional provisions, the minimum wage may increase further depending on the national Consumer Price Index. The New Jersey law does carve out a handful of exceptions, such as for seasonal employers and small employers (those with 5 or fewer employees), but most of those exceptions merely extend by a few years the schedule for implementing the $15 per hour minimum.

At the federal level, meanwhile, a bill to gradually increase the federal minimum wage to $15.00 per hour was introduced by Democratic leaders in the House of Representatives in early January. The current federal minimum wage has been $7.25 for nearly a decade. Backed by House Speaker Nancy Pelosi, Senate Minority Leader Charles Schumer, and Senator Bernie Sanders, among others, the bill has 181 co-sponsors in the House and 31 co-sponsors in the Senate.

Contrary to the minimum wage stagnancy at the federal level, the arrival of 2019 saw even more states and municipalities implementing higher minimum wage rates, including increases in Arkansas, Massachusetts and Missouri, and an upcoming increase in Michigan. In addition, through the first month of 2019, bills to raise the minimum wage to $15.00 an hour have been introduced in Virginia, Hawaii, New Mexico, and Maryland. The Virginia bill subsequently was defeated by a narrow, two-vote margin in the state senate.

Jackson Lewis will continue to monitor these and other wage and hour issues. If you have any questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

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