New Overtime Rule Soon to Make Its Appearance

The DOL’s new overtime rule, intended to replace the rule announced late in the Obama administration but subsequently declared invalid by a federal court, finally has made, or soon will make its way, to the Office of Information and Regulatory Affairs (OIRA), a division of the Office of Management and Budget (OMB), Bloomberg Law has reported. OIRA is responsible for reviewing significant regulations before publication to ensure agency compliance with the principles in Executive Order 12866, which include incorporating public comment, considering alternatives to the rulemaking, and analyzing both costs and benefits. OIRA can take up to 90 days to review a regulation, which can be extended, and there is no minimum period of review required. Last fall, the DOL’s Wage and Hour Division announced that a new notice of proposed rulemaking is scheduled to be released by March 2019. How, if at all, the continuing government shutdown will affect this schedule is unknown.

In May 2016, the DOL issued its long-awaited overtime rule and, in doing so, more than doubled the required salary for the “white collar” exemptions (those individuals employed in an executive, administrative, or professional capacity) from $23,660 to $47,476. That rule also raised the required salary level for the “highly compensated” exemption, from $100,000 to $134,004, and established rules for automatic increases to those levels every three years. The rule was set to take effect on December 1, 2016 but days before it was to become effective, a federal district court in Texas enjoined the rule nationwide and subsequently held that the rule was invalid. The DOL initially appealed these decisions but eventually withdrew its appeals, asserting early in the Trump administration that it intended instead to issue a revised rule. Based on previous comments from Secretary of Labor Alexander Acosta, the new proposed minimum salary level for the white collar exemptions is expected to be in the low $30,000 range – significantly lower than the minimum salary set forth in the now-defunct Obama-era rule.

Jackson Lewis will continue to monitor developments concerning the new overtime rule and will provide updates when available. In the meantime, if you have any questions about the forthcoming rule or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly

California Piece-Rate Law Upheld by Court of Appeal

Rejecting an argument that the use of the phrase “other nonproductive time” rendered the statute unconstitutionally vague, a California Court of Appeal recently upheld the state’s law regarding compensation of piece-rate workers. Nisei Farmers League v. California Labor & Workforce Dev. Agency, 2019 Cal. App. LEXIS 10 (Cal. Ct. App. Jan. 4, 2019). Therefore, the method of pay calculation that has been in place since 2013 remains the law.

California law, as first set forth in two groundbreaking Court of Appeal cases in 2013 and subsequently codified by the California legislature in 2016, does not allow “nonproductive” work time to be lumped together with productive time when determining whether a piece-rate employee has been paid at least minimum wage. Thus, when a piece-rate employee is engaged in nonproductive work, that time must be separately compensated at a rate at least equal to minimum wage for all hours worked. California law differs from, and is more restrictive than, federal law in this respect. Under the FLSA’s piece-rate regulations, nonproductive time does not have to be separately compensated; as long as total pay divided by total hours worked for the week equals or exceeds the federal minimum wage, the law is satisfied. 29 C.F.R. §778.111.

As defined under the 2016 California statute (Labor Code Section 226.2), nonproductive time includes rest and recovery periods and “other nonproductive time,” the latter being defined as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” For example, the time spent waiting for the next assignment, by an auto mechanic who is paid based on each repair or maintenance job performed, would be considered “other nonproductive time.”

In Nisei, the plaintiff-appellees argued that the term “other nonproductive time” was unconstitutionally vague because the statute failed to define precisely what activities constituted such time. The Court of Appeal rejected this argument, noting that to be unconstitutionally void for vagueness, the statute must “either forbid[] or require[] the doing of an act in terms so vague that persons of common intelligence must necessarily guess as to its meaning and differ as to what is required.” Recognizing that demonstrating unconstitutional vagueness is an “exacting” standard, the Court of Appeal added that a statute will not be considered void solely because it contains some level of ambiguity. In this case, the Court of Appeal held that the definition set forth in the statute did not meet that exacting standard of vagueness, but instead “provides an adequately discernable standard that possesses a reasonable degree of specificity.”

Accordingly, California law regarding pay calculation for piece-rate workers, as it has existed for the past several years, remains binding on all employers in the State. If you have any questions about this statute or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Arkansas, Missouri Voters Approve Minimum Wage Increases

By overwhelming majorities, voters in Arkansas and Missouri have approved incremental minimum wage increases over the next several years.

In Arkansas, Issue 5 (the Minimum Wage Increase Initiative (2018)) was approved by a margin of approximately 68% to 32%. With passage of the initiative, Arkansas’s current minimum wage of $8.50 per hour will increase to $9.25 per hour on January 1, 2019; to $10.00 per hour on January 1, 2020; and to $11.00 per hour on January 1, 2021. The minimum wage increase is estimated to affect about 300,000 employees.

Similarly, in neighboring Missouri, Proposition B (the $12 Minimum Wage Initiative (2018)) was approved by voters with a margin of approximately 62% to 38%. With its passage, the minimum wage in Missouri will increase from its current rate of $7.85 per hour to $8.60 per hour on January 1, 2019; to $9.45 per hour on January 1, 2020; to $10.30 per hour on January 1, 2021; to $11.15 per hour on January 1, 2022; and to $12.00 per hour on January 1, 2023. Thereafter, the minimum wage may increase or decrease each year based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). An estimated 677,000 employees will be affected.

In addition to increasing the minimum wage, Proposition B increased the available damages for an employer’s violation of the minimum wage statute, by allowing recovery of liquidated damages in an amount equal to twice the amount of actual damages. Moreover, the new law extended the statute of limitations for bringing a minimum wage claim, from two years to three. Notably, government employers are exempt from the minimum wage increases in Missouri.

For more information on either of these minimum wage initiatives or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

 

DOL Eliminates Employer-Plaguing “80/20” Tip Credit Rule

The Department of Labor (“DOL”) today rescinded its prior guidance that made the tip credit unavailable for tipped employees who spend more than 20% of their time performing allegedly non-tip generating duties. The 20% limitation, contained in an internal DOL Field Operations Handbook, spawned numerous so-called “80/20” lawsuits, claiming servers spent too much time performing allegedly non-tipped work. The DOL rescinded the rule by reissuing Opinion Letter FLSA2009-23, which was first promulgated during the waning days of the George W. Bush administration and which had eliminated the rule. That opinion letter, withdrawn by the Obama administration, has been reissued as Opinion Letter FLSA2018-27. In so doing, the Wage and Hour Division has rendered invalid the Eighth Circuit Court of Appeals decision upholding the Obama-era rule in Fast v. Applebee’s International, Inc., 638 F.3d 872 (8th Cir. 2011), and the recent Ninth Circuit decision in Marsh v. J. Alexander’s LLC, 905 F.3d 610 (9th Cir. 2018). Those decisions were grounded in giving deference to the Obama-era DOL guidance that the DOL has now abandoned.

When an employee is “engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips,” the employer may pay a reduced cash wage (currently $2.13) and claim a “tip credit” to make up the difference between the reduced cash wage and the $7.25 hourly minimum. See 29 U.S.C. § 203(m). Such individuals are referred to as “tipped employees.” Since 2011, the DOL had taken the enforcement position that if a tipped employee spends more than 20% of his or her time on non-tip-producing tasks (even if those tasks were directly related to tip-producing duties), the employee’s time spent on those non-tip-producing tasks must be paid at minimum wage rather than at the sub-minimum “tip credit” rate. As a result, plaintiffs’ attorneys have used the DOL’s enforcement position as the basis for lawsuits – often, collective actions – alleging that the tipped employees in question engage in non-tipped work for more than 20% of their work time and therefore are entitled to the full minimum wage for their work.

“We do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met,” the reissued Opinion Letter notes. The DOL’s newly-announced position is consistent with that taken by Jackson Lewis in private litigation for clients and against the DOL.

A more thorough discussion of this significant agency action will be addressed in a forthcoming Jackson Lewis web article. In the meantime, 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.

U.S. Department of Labor Announces Creation of New Wage and Hour Compliance Outreach Office

Focusing on education to ensure compliance with the Fair Labor Standards Act, on August 28, 2018 Secretary of Labor Alexander Acosta announced the creation of the DOL’s new Office of Compliance Initiatives (OCI). That office has launched two new websites, one to provide employers with resources to assess wage and hour compliance, and the other to provide employees with information regarding their rights and responsibilities under federal wage and hour law. Those websites are named, aptly, employer.gov and worker.gov, respectively.

The stated purpose of the OCI, according to the DOL’s website, is to “promote greater understanding of federal labor laws and regulations, allowing job creators to prevent violations and protect Americans’ wages, workplace safety and health, retirement security, and other rights and benefits. As part of its work, OCI will work with the enforcement agencies to refine their metrics to ensure the efficacy of the [DOL’s] compliance assistance activities.”

Jackson Lewis will continue to monitor the OCI’s actions. If you have any questions about this or any other wage and hour issue, please consult the Jackson Lewis attorney(s) with whom you regularly work.

Department of Labor Issues Additional FLSA Opinion Letters, Acknowledges New “Fair Reading” Standard for Overtime Exemptions

In furtherance of a practice reinstituted earlier this year, on August 28, 2018 the DOL’s Wage Hour Division (WHD) issued four new opinion letters covering FLSA topics. The current administration began that practice when, in January of this year, it reinstated seventeen opinion letters originally issued during the George W. Bush administration but subsequently withdrawn during the Obama administration. The WHD then issued three new letters in April, prior to last week’s issuance. “Opinion letters help provide greater clarity for American job creators and employees,” commented Acting Wage and Hour Division Administrator Bryan Jarrett, and “show the ongoing efforts of the Department to provide the tools employers need to comply with the law and protect workers.”

The most recent opinion letters address (with links to the letters themselves):

FLSA 2018-20: Whether time spent by employees voluntarily attending benefit fairs and undertaking wellness activities such as biometric screening, weight-loss programs and use of an employer-provided gym, are considered compensable working time (it is not).

https://www.dol.gov/whd/opinion/FLSA/2018/2018_08_28_20_FLSA.pdf

FLSA 2018-21: Whether 29 U.S.C. § 207(i), the commissioned sales employee overtime exemption, applies to a company’s sales force that sells an internet payment software platform (under the facts presented, it does). Notably, this opinion letter is the first acknowledgement by the DOL of the Supreme Court’s recent holding in Encino Motorcars LLC v. Navarro, 138 S. Ct. 1134 (2018), that FLSA exemptions are to be given a “fair reading,” rather than a “narrow construction” as previously applied by the Department and many courts.

https://www.dol.gov/whd/opinion/FLSA/2018/2018_08_28_21_FLSA.pdf

FLSA 2018-22: Whether members of a non-profit organization who serve as credentialing examination graders for one to two weeks per year, and who are not paid for their services but are reimbursed for their expenses, may properly be treated as volunteers rather than employees (under the facts presented, they may).

https://www.dol.gov/whd/opinion/FLSA/2018/2018_08_28_22_FLSA.pdf

FLSA 2018-23: Whether 29 U.S.C. § 213(b)(27), exempting from overtime employees who work at a movie theater establishment, likewise applies to those employees who work at dining services operated by, and accessible only within, the theater (it does).

https://www.dol.gov/whd/opinion/FLSA/2018/2018_08_28_23_FLSA.pdf

If you have any questions about the contents or application of the issues set forth in the opinion letters, or any other wage and hour issue, please consult the Jackson Lewis attorney(s) with whom you regularly work.

Just as with the NLRA, the FLSA Does Not Preclude Collective Action Waivers in Arbitration Agreements, Sixth Circuit Holds

In a natural extension of the Supreme Court’s recent conclusion that the NLRA does not preclude the use of class or collective action waivers in employment-related arbitration agreements, the Sixth Circuit Court of Appeals has confirmed that such waivers are likewise permitted under the FLSA. Gaffers v. Kelly Services, 2018 U.S. App. LEXIS 22613 (6th Cir. Aug. 15, 2018). In so holding, the Sixth Circuit followed the lead of the Supreme Court’s decision in Epic Systems Corporation v. Lewis, 138 S. Ct. 1612 (2018). The Sixth Circuit has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee.

The plaintiff, a former Kelly Services employee, brought suit under the FLSA on behalf of himself and his co-workers, alleging that the Company failed to properly pay him for all time worked. Because about fifty percent of the putative class (collective action) members the plaintiff seeks to represent signed arbitration agreements, the Company moved to compel arbitration. Denying the motion, the district court concluded that the NLRA and the FLSA rendered the agreements unenforceable and denied the motion.

On appeal, the Sixth Circuit easily dispensed with the lower court’s determination regarding the NLRA, in light of the Supreme Court’s interim decision in Epic Systems that the NLRA does not in fact preclude enforcement of class or collective actions waivers in employment-based arbitration agreements. Moving on, the Court of Appeals first noted that the plaintiff “faces a stout uphill climb” in his contention that the Arbitration Act and the FLSA’s collective action provision cannot be reconciled.  Noting the Supreme Court’s direction in Epic Systems, “that a federal statute does not displace the Arbitration Act unless it includes a ‘clear and manifest’ congressional intent to make individual arbitration agreements unenforceable,” and that the right to engage in collective action alone does not satisfy this standard, the Sixth Circuit concluded that the FLSA contained no express language precluding the use of arbitration. On the contrary, the FLSA’s collective action provision “gives employees the option to bring their claims together [but] . . . does not require employees to vindicate their rights in a collective action.” Thus, “employees who do not sign individual arbitration agreements are free to sue collectively, and those who do sign individual arbitration agreements are not.” Notably, the Court of Appeals added, long ago the Supreme Court held that the Age Discrimination in Employment Act (ADEA), which contains exactly the same collective action language as (and is patterned on) the FLSA, does not displace the Arbitration Act, and thus there is no reason that such a provision should not be equally enforceable under the latter Act.

Finally, the Sixth Circuit rejected the plaintiff’s argument that the collective action waiver should be deemed unenforceable for public policy reasons, noting that such a basis would be the province of Congress, not the courts, as well as the plaintiff’s argument that the Arbitration Act’s “savings clause” should preclude enforceability of the waiver provision. As the Supreme Court made clear in Epic Systems, the savings clause – which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract” (e.g. fraud or duress) – cannot be used when the defense applies only to arbitration agreements, as opposed to all contracts in general, or when the defense would “interfere with the ‘fundamental attributes of arbitration,’” including the common attribute of individualized proceedings.

For more information about collective/class action waivers (in the wage-and-hour context or otherwise), please contact the Jackson Lewis attorney(s) with whom you regularly work.

Taco Bell’s Prohibition on Discounted Employee Meals Does Not Violate California Meal Break Law, Ninth Circuit Rules

Affirming a district court order dismissing a putative class action, the Ninth Circuit Court of Appeals has held that Taco Bell’s policy of requiring employees to eat employer-discounted meals in the restaurant does not convert the meal period into “on duty” time such that the meal period becomes compensable under California law. Rodriguez v. Taco Bell Corporation, 2018 U.S. App. LEXIS 19825 (9th Cir. July 18, 2018).

California Wage Order 5-2001 requires employers to relieve employees of all duties during required meal periods. During the relevant period, Taco Bell offered 30-minute meal breaks that complied with California’s requirements but also offered, on a strictly voluntary basis, discounted meals to employees, provided the meals were eaten in the restaurant. The stated purpose of this in-store consumption policy was to preclude employees from using the employee discount to purchase meals for relatives, friends, or others, which Taco Bell considered a form of theft. The plaintiff, who worked for Taco Bell for about seven years, filed suit under several state wage statutes, claiming that the “on-premises discount policy subjected the employees to sufficient employer control to render the time employees spent consuming the meals as working time under California law.” If the meal consumption time did qualify as work time, employees would be owed an additional hour of pay at their regular rate of for each workday that a “duty free” meal was not provided.

Agreeing with the district court, the Ninth Circuit concluded that under the discounted meal policy, Taco Bell’s policy properly relieves employees of all duties and relinquishes control over their activities because purchase of such meals is “entirely voluntary.” If an employee prefers to leave the premises and eat elsewhere, he or she may purchase a meal at full price, bring food from home, dine at a different establishment or choose any other option for the meal break. The plaintiff presented no evidence that employees were pressured to purchase the discounted meals, to perform job activities while consuming the discounted meals or otherwise were precluded from doing whatever they wished during their breaks (provided, of course, that they did not interfere with the restaurant’s operations). The cases cited by the plaintiff in support of her arguments were distinguishable, held the Court of Appeals, because in each one the employees were required to participate in the activity in question (e.g. riding employer-provided buses to the work site). In short, held the Court, “[t]he employees are not on call and are free to use the time in any way they wish.” Therefore, the time spent consuming a meal under the employee discount policy does not constitute work time and the case was properly dismissed.

Please contact the Jackson Lewis attorney with whom you work with questions about the decision or any other wage and hour issues you may have.

Restaurant Industry Association Files Suit Challenging “80/20” Rule

The Restaurant Law Center, a public policy affiliate of the National Restaurant Association, has filed suit against the Department of Labor and its Wage and Hour Division, seeking to declare unlawful the DOL’s 2012 revision to its Field Operations Handbook, purporting to establish, through sub-regulatory guidance, the “80/20” tip credit rule or “20% Rule.” Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018). The 80/20 Rule seeks to limit the availability of the tip credit when tipped employees spend more than 20% of their time performing allegedly non-tip generating duties. One of several problems in applying such a rule is identifying what is, and what is not, an allegedly “tip-generating” duty.

The lawsuit alleges that the DOL improperly created the 80/20 Rule by surreptitiously adding it to the Field Operations Handbook used by its agents, rather than abiding by the rulemaking process, thereby violating the Administrative Procedure Act. Noting that the Rule “spawned a nationwide wave of collective and class actions against the restaurant industry,” the lawsuit seeks to have it declared invalid and unenforceable. Last year, a panel of the Ninth Circuit Court of Appeals held as much in Marsh v. J. Alexander’s, LLC, 869 F.3d 1108 (9th Cir. 2017), noting that the purported guidance had become a “de facto [] new regulation masquerading as an interpretation.” However, the Ninth Circuit subsequently granted a rehearing before the full Court of Appeals. The case was argued in March 2018 before the full panel but the Court has yet to issue its opinion. In 2011, the Eighth Circuit deferred to the Rule. Fast v. Applebee’s International, Inc., 638 F.3d 872 (8th Cir. 2011). If the full Ninth Circuit affirms its panel decision, or the Fifth Circuit ultimately holds the 80/20 Rule invalid on an appeal of the just-filed lawsuit, a circuit court split would arise, with the case on a path to the Supreme Court. This is one to watch.

Jackson Lewis will continue to monitor this case for future developments. In the meantime, if you have any questions about this or any other wage and hour issue, please consult the Jackson Lewis attorney(s) with whom you regularly work.

Class and Collective Action Waivers in Arbitration Agreements Do Not Violate the NLRA, Supreme Court Rules

In a closely watched – and closely decided – ruling, today the Supreme Court upheld the enforceability of class and collective action waivers in employment arbitration agreements.  Epic Systems Corp. v. Lewis, 137 S. Ct. 809, 2018 U.S. LEXIS 3086 (May 21, 2018) (consolidated cases). The Court’s decision resolves the circuit split on whether such waivers violate the National Labor Relations Act (NLRA).  In a 5-4 decision authored by Justice Neil Gorsuch, with Justice Kennedy reprising his oft-recurring role as the swing vote, the Court held that arbitration agreement provisions requiring only individualized proceedings are enforceable and neither the Federal Arbitration Act (FAA) nor the NLRA dictate otherwise.

Jackson Lewis was counsel in one of the consolidated cases, where it successfully argued to the Fifth Circuit Court of Appeals that such waiver provisions are enforceable, a ruling that was affirmed by the Supreme Court today.  Conversely, the decisions of two other circuit courts (the Seventh and the Ninth), which recently had deemed the waiver provisions unenforceable, were reversed. Today’s ruling will be of particular benefit to employers with respect to wage and hour claims, where collective action lawsuits under the FLSA, and corresponding class actions under many state laws, have become prevalent (and exceedingly costly) in recent years. For a detailed discussion of today’s ruling, click here.

If you have any questions about today’s ruling, arbitration agreements or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

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