By an 11-10 vote, Labor Secretary nominee Julie Su barely garnered the approval of the Senate Committee on Health, Education, Labor, and Pensions, but her chances of success before the full Senate remain unknown.

Recently, we reported that a number of Republican members of the Committee had questioned whether she was qualified for the position. During questioning by the Committee, Su plainly stated that she has no intention of advocating for the employee-friendly “ABC” test for determining independent contractor status. Nevertheless, her time as California’s Labor Secretary – where she enforced such a test – has some Republican Senators and business owners concerned. Notably, neither Senator Joe Manchin (D-WV) nor former Democratic Senator Kyrsten Sinema (I-NV) have declared whether they will support Su’s nomination, and failure to obtain their votes will hamper her chances of approval.

Su now waits alongside Jessica Looman, Biden’s nominee as head of the Wage and Hour Division of the DOL, for the full Senate to vote on her nomination. In the meantime, if you have any questions about this development or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Labor Secretary nominee Julie Su continues to face close scrutiny by Republican members of the Senate Committee on Health, Education, Labor, and Pensions, at least some of whom believe she is not qualified for the position. Notably, however, during the Committee hearing on her nomination, Su plainly stated that , in her view, the DOL has no intention of seeking to implement the “ABC” test for determining independent contractor status, or of issuing a new joint employer rule.

The “ABC” test currently is used by a handful of states, most notably California, to determine whether an individual is properly classified as an employee or an independent contractor, and is a considerably stricter test for establishing independent contractor status than that currently applied under the FLSA. During the Committee hearings, Su noted that any change to the independent contractor analysis currently adopted by the DOL would require Congress to implement. Notably, the DOL issued a Notice of Proposed Rulemaking in 2022 to both withdraw a Trump-era Final Rule regarding the independent contractor analysis and to publish a new rule. The proposed rule, which has yet to be finalized, would return to the multi-factor analysis used by the Department for decades and which, in some variation or another, has been used by the federal courts throughout that time.

Similarly, Su testified that currently the DOL has no intention of issuing a new joint employer rule. The DOL likewise withdrew a Trump-era rule on the issue (subsequently vacated in large part by a New York federal court) and Su stated that the analysis is “fact-specific test” that will continue to “stand [ ] based on case law that has been developed over several decades.”

In addition to the pending nomination of Su as Secretary of Labor, Biden’s nominee for the head of the DOL’s Wage and Hour Division, Jessica Looman, remains to be confirmed by the full Senate, having been favorably reported out of the Committee.

Jackson Lewis will continue to monitor and report any updates on these DOL developments. In the meantime, if you have any questions about these or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Beginning May 1, 2023, the hourly minimum wage for tipped employees in the District of Columbia will increase from $5.35 to $6.00. This increase is the first step in the eventual elimination of the tip credit altogether in the District.

The next phase will occur on July 1, 2023, when the base hourly minimum wage for tipped employees will increase from $6.00 to $8.00. That increase will coincide with an increase in the District’s full hourly minimum wage, from $16.10 to $17.00, for all workers regardless of the size of the employer. If, averaged weekly, a tipped employee’s combination of tips and their base minimum wage do not equal the District’s full minimum wage, the employer must pay the difference.

During the November 2022 elections, the D.C. Council passed the Tip Credit Elimination Act. Under previous District law, employers of tipped workers were permitted to take a credit against tipped wages received by workers to satisfy the minimum wage guaranteed to all workers under the law. The Tip Credit Elimination Act gradually will reduce the tip credit until, in 2027, the tip credit is eliminated altogether and the base wage for tipped workers will match the District’s full minimum wage.

The first step in the reduction of the tip credit originally was scheduled to take effect on January 1, 2023, but was delayed due to the lengthy voting process to elect Representative Kevin McCarthy (R-Cal.) as speaker of the U.S. House of Representatives and its impact on the timeframe Congress is given to review approved D.C. voter initiatives or Council legislation.

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

In an issue of first impression, the U.S. Court of Appeals for the Third Circuit held that paid time off (“PTO”) is not a form of salary under the Fair Labor Standards Act (“FLSA”) and, therefore, deductions from a salaried employee’s PTO balance do not violate the Act. Higgins v. Bayada Home Health Care Inc., 2023 U.S. App. LEXIS 6124 (3d Cir. Mar. 15, 2023).

The Third Circuit has jurisdiction over the federal courts in Pennsylvania, New Jersey, and Delaware.

Background

Plaintiff Stephanie Higgins is a registered nurse who worked for defendant Bayada Home Health Care from 2012 to 2016 as a full-time, salaried employee. Higgins and all other full-time salaried healthcare employees at Bayada were required to meet weekly “productivity minimums.” These minimums are expressed in points, with each point equating to work tasks like patient visits (and thus to hours worked). When a healthcare worker (referred to by the company as Clinicians) exceeds their productivity minimum, they are paid more. Conversely, when a Clinician falls short of the weekly minimum, Bayada reduces their PTO balance based on expected-versus-actual points earned.

An employee may request an increase or decrease in their weekly productivity minimums, with a corresponding increase or decrease in salary, but the company does not deduct from an employee’s guaranteed base salary if they lack sufficient PTO to cover a productivity point deficit. On the contrary, an employee’s salary would only be reduced if they took a voluntary day off without sufficient PTO to cover it.

After her employment ended, Higgins filed a collective action against Bayada, asserting that the reductions in her PTO balance constituted an unlawful salary deduction in violation of the FLSA and the Pennsylvania Minimum Wage Act (PMWA), thereby converting her to an hourly employee entitled to unpaid overtime. The district court granted summary judgment for the company on these claims and certified the matter for immediate appeal to the Third Circuit.

Third Circuit Decision

On appeal, the Third Circuit affirmed the district court’s dismissal. Because the FLSA does not define the terms “salary” or “fringe benefits,” the court of appeals began with a close reading of the Act’s regulations. Those regulations provide that an employee is paid on a “salary basis” when they “regularly receive[] each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 U.S.C. § 541.602(a). Importantly, the employee “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked,” id. at § 541.602(a)(1), and repeated deductions based on the quality or quantity of an employee’s work may transform the employee’s pay from salary-based to hourly. Id. §§ 541.602(a)(2) & 603(a).

Based on these regulations, as well as dictionary definitions of the terms “salary” and “fringe benefits,” the Third Circuit concluded that PTO deductions do not violate the “salary basis” regulations because, “when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of a pay period does not change.” Contrary to the plaintiff’s assertion, there was no evidence that Bayada ever reduced the guaranteed salary of her or any other healthcare worker if their PTO was exhausted.

The Takeaway

While the Third Circuit’s holding clarifies the issue under federal law for the courts in its circuit, the plaintiff did not properly preserve on appeal her corresponding claim under the PMWA and therefore the issue remains undecided under Pennsylvania law, as well as under the law in other federal circuits. Thus, while employers now have guidance as to their options for PTO deductions under federal law in the Third Circuit, they should be cautious in assuming that the same guidance will apply under state law or in other circuits.

If you have any questions about this decision, the “salary basis” regulations, or any other wage and hour question, please contact a Jackson Lewis attorney.

In the wake of the recently-announced and imminent departure of Secretary of Labor Marty Walsh for the National Hockey League Players Association, President Biden is expected to nominate Deputy Secretary of Labor Julie Su as Walsh’s successor to head the Department of Labor (DOL). Su has been in her current position since July 2021, and previously led the California Labor and Workforce Development Agency. This latter experience could create opposition to her nomination from Republican members of Congress. Conversely, Su has received ringing endorsements from a number of employee rights groups.

Secretary Walsh’s pending departure will leave two significant openings at the Department of Labor, as Biden’s nominee for the head of the DOL’s Wage and Hour Division, Jessica Looman, has yet to be confirmed by the Senate.

Jackson Lewis will continue to monitor and report any updates on these DOL developments. In the meantime, if you have any questions about these or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

The U.S. Department of Labor (DOL) has issued guidance on the application of the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) to employees who telework from home or from another location away from the employer’s facility. Field Assistance Bulletin (FAB) 2023-1, released on February 9, 2023, is directed to agency officials responsible for enforcement and provides employers a glimpse into how the DOL applies existing law and regulations to common remote-work scenarios. FAB 2023-1 addresses FLSA regulations governing “hours worked,” rules related to break time and privacy for nursing employees, and regulations regarding FMLA eligibility factors.

The details of FAB 2023-1 can be found at our Disability, Leave, and Health Management blog, here: DOL Issues Guidance on Handling Telework under FLSA, FMLA.

Although not yet officially announced, Secretary of Labor Marty Walsh is expected to leave the Biden Administration soon, to become the Executive Director of the National Hockey League (NHL) Players Association. Secretary Walsh has served as the head of the Department of Labor (DOL) since the beginning of the Biden Administration in 2021.

During Secretary Walsh’s tenure, the Wage and Hour Division (WHD) of the DOL has been quite active, rescinding final wage and hour rules concerning the status of joint employers and independent contractors, issuing a new independent contractor rule, and soon proposing revisions to the overtime rule concerning the salary requirements for the executive, administrative, and professional (EAP) exemptions. Walsh’s expected departure will leave the heads of both the DOL and the WHD vacant, as the Senate has yet to vote on the recent re-nomination of Jessica Looman as the WHD Administrator.

Deputy Secretary of Labor Julie Su likely will head the DOL in the interim and possibly will be the Biden Administration’s nominee to formally succeed Walsh. Prior to her current position, Deputy Secretary Su led the California Labor and Workforce Development Agency.

Jackson Lewis will continue to monitor and report any updates on these DOL developments. In the meantime, if you have any questions about these or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

On January 23, 2023, President Biden re-nominated Jessica Looman to formally become the next Director of the Wage and Hour Division (WHD) of the Department of Labor (DOL). Ms. Looman originally was nominated for the position in August 2022 and made it out of the Senate Committee on Health, Education, Labor, and Pensions in late November 2022, but no vote was held by the full Senate prior to the expiration of the last Congressional term.

Prior to joining the DOL as Principal Deputy Administrator of the WHD at the beginning of 2021, Ms. Looman was executive director of the Minnesota building trades coalition. She had been in position of Acting Administrator of the WHD since June 2021 but, due to regulatory requirements for agency nominees, her official title was removed while she continued to work during the nomination process. Ms. Looman is the second Biden Administration nominee for the WHD Administrator position, following the withdrawal of the original – and more controversial – nominee, David Weil.

Ms. Looman’s tenure at the WHD has been an active one, with the Division rescinding final wage and hour rules concerning the joint employer and independent contractor analyses, issuing a new independent contractor rule, and soon proposing revisions to the overtime rule concerning the salary requirements for the executive, administrative, and professional (EAP) exemptions. For further background regarding Ms. Looman and former nominee Weil, see our blog post, White House Nominates Acting DOL Wage & Hour Administrator to Lead Division.

Jackson Lewis will continue to monitor and report any updates on both Ms. Looman’s re-nomination and the status of the new overtime final rule that is likely to be proposed. In the meantime, if you have any questions about these or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

During the November 2022 elections, voters in several locations across the country approved minimum wage increases. Most notably:

  • District of Columbia voters passed the Tip Credit Elimination Act, which, by 2027, will result in the elimination of the tip credit in the District and require employers to pay tipped employees the full minimum wage.
  • Voters in Nebraska approved an incremental increase in the Cornhusker State’s minimum wage, which will reach $15 per hour in January 2026.
  • Nevada voters similarly passed an initiative to add a minimum wage provision to the state constitution, under which the minimum wage will increase from $10.50 to $12.00 effective July 1, 2024.

More details about these developments may be found in our article, Employers Should Note Post-Midterms State Law Changes.

Employers will need to monitor the effective dates of these increases, to implement systems that will ensure compliance, particularly where multiple adjustments are needed to account for changes that will be incremental over a period of several years, and also should verify that they are properly calculating tipped employee wages and overtime based on the new wage rates. This is especially important when providing any additional compensation or incentives, such as shift differentials, that must be included in the regular rate of pay for overtime purposes. Additionally, these measures may require employers to reevaluate their overall compensation structure, to determine how changes at the lower end of the pay scale affect pay equity in the organization.

If you have questions about any of these developments, please contact a Jackson Lewis attorney.

Since the COVID-19 pandemic began, thousands of pandemic-related lawsuits, including hundreds of putative class or collective actions, have been filed — and the number continues to grow. A large percentage of those lawsuits involve wage and hour claims, centered around issues including, but not limited to, failure to pay for pre-work COVID-19 screening and testing time, or failure to reimburse expenses for remote work.

Jackson Lewis attorneys focus on these and other types of COVID-19-related litigation at this stage of the pandemic, in the Fall 2022 issue of the Class Action Trends Report, available here.