Employees whose job it was to investigate and determine the likely cause of damage to the equipment of broadband service providers were misclassified as exempt by their employer, the Eleventh Circuit Court of Appeals recently held. Therefore, the employees’ overtime claims under the Fair Labor Standards Act (FLSA) were improperly dismissed by the trial court. Fowler v. OSP Prevention Group, Inc., 2022 U.S. App. LEXIS 17679  (11th Cir. June 27, 2022). The Eleventh Circuit has jurisdiction over the federal courts in Alabama, Georgia, and Florida.

The FLSA generally requires that employees be paid no less than minimum wage for all hours worked and overtime at one-and-a-half times their “regular rate” for all work in excess of 40 hours per workweek. However, the FLSA also includes a number of exemptions from overtime, including what is commonly referred to as the “administrative” exemption. To qualify for that exemption, an employee must earn at least $684 per week ($35,568 per year) and their primary duty must be “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers” and include “the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a).

In this case, the plaintiffs were employed by OSP Prevention Group (OSP) as property damage investigators, who were assigned to investigate and determine the likely cause (e.g., backhoe digging, rodent infestation, fallen tree branch) and cost of damage to property or equipment (such as fiber optic lines, overhead wires, and cable housings) belonging to broadband service providers. The investigators were not responsible for notifying the party liable for the damage (if any) about possible subrogation or for attempting to settle with that party, as those responsibilities were handled by other OSP employees. OSP billed the broadband service providers by the hour for the plaintiffs’ work but classified them as overtime-exempt under the FLSA’s administrative exemption.

The plaintiffs sued OSP, claiming they were improperly classified as exempt and therefore were entitled to overtime wages, liquidated damages, prejudgment interest, attorney’s fees, and costs. Following discovery, OSP moved for summary judgment, asserting that the plaintiffs were in fact administrative employees. The district court agreed with OSP that the plaintiffs were administrative employees and granted summary judgment to the company. The plaintiffs appealed and the Eleventh Circuit reversed.

The Court of Appeals concluded that the plaintiffs did not satisfy the first element of the FLSA’s administrative exemption because, “for all practical purposes[,] the liability determination was akin to plugging data into a formula. OSP’s Area Manager and Supervisor of Damage Investigators in Georgia testified that if a thousand different investigators each investigated the same damage, they should all reach the same conclusions and have roughly the same measurements, even though they might arrive at their answers by slightly different methods.” Moreover, the investigators used a cost sheet furnished by the broadband service provider to calculate the monetary value of the damages and had no discretion to determine how much a repair might cost.

To satisfy the administrative exemption, noted the Eleventh Circuit, in addition to meeting the salary requirement (undisputed in this case), OSP was required to demonstrate that the investigator’s “work directly related to [the company’s] management or general business operations” and (2) “include[d] the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a). “To meet [the first] requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” Id. at § 541.201(a). Examples of what the applicable Department of Labor (DOL) regulations consider to be such administrative support work include areas such as accounting, human resources, safety and health, and information technology.

“By contrast,” the Court of Appeals stated, “investigative duties primarily involve investigation (of course) and factfinding, compiling reports, and making calculations and recommendations about liability according to prescribed criteria.” Employees who perform such duties fall among the categories of jobs the DOL regulations cite as not qualifying for the administrative exemption — categories such as “[o]rdinary inspection work” using “well-established techniques and procedures” often derived from manuals, 29 C.F.R. § 541.203(g), and “inspectors or investigators of various types” whose work involves using “skills and technical abilities in gathering factual information.” Individuals performing these jobs typically are considered “production” employees because they “help the business run by following the standards that have been set for them,” as opposed to the administrative employees who develop those standards.

Here, the plaintiffs were performing one of the core products that the company sells: property damage investigation. The Eleventh Circuit concluded that the case involving insurance claims adjusters, on which the district court heavily relied in its summary judgment ruling, was inapposite because those employees had “significant, policy-infused, decision-making authority, including evaluating and making recommendations about coverage for claims, negotiating settlements, and making recommendations about litigation.” By contrast, the plaintiffs in this case only undertook factfinding and left decisions regarding the outcomes of their investigations to others. Thus, the plaintiffs were more akin to the insurance fraud investigators in Calderon v. GEICO General Insurance Co., 809 F.3d 111 (4th Cir. 2015), where the Fourth Circuit concluded that the investigators did not meet the requirements of the administrative exemption. (For further discussion of Calderon, see the Jackson Lewis article, Fourth Circuit Holds Insurance Fraud Investigators are Not Exempt from Overtime Pay, Creating Circuit Split).

Accordingly, the Eleventh Circuit concluded that the summary judgment ruling should be vacated and the case remanded to the district court. Because OSP could not establish the first “duties” element of the administrative exemption, the Court of Appeals elected not to address the second element, that is, whether the plaintiffs’ duties “include[ed] the exercise of discretion and independent judgment with respect to matters of significance.”

If you have any questions about the administrative exemption, other exemptions under the FLSA or state law, or any other wage and hour question, please contact a Jackson Lewis attorney.

As previously reported in this blog, Connecticut’s minimum wage will increase $1.00, to $14.00 per hour, beginning tomorrow, July 1. It is the penultimate step of a 2019 law enacting a series of tiered minimum wage increases that will reach the law’s goal of $15.00 per hour in June 2023.

Beginning in January 2024, the State’s minimum wage will be adjusted by the percent change in the federal Employment Cost Index (ECI) for all civilian workers’ salaries and wages for the one-year period ending on June 30 of the previous year.

In addition to enactment of the minimum wage increases, the 2019 law froze, at the then-current levels of $6.38 per hour for hotel and restaurant staff and $8.23 per hour for bartenders, the sub-minimum hourly cash wage that hospitality employers must pay employees who customarily receive tips. Any shortfall, between the standard hourly minimum wage rate and what these employees make in a combination of tips plus the sub-minimum hourly rates, must be borne by the employer. The law also eliminated a lower “training wage” that employers previously could pay for learners and beginners, while retaining a “youth wage,” of no less than 85% of the standard minimum wage, for the first 90 days of employment for unemancipated minors.

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

Citing poverty concerns in, and the economic effects of the COVID-19 pandemic on, the Aloha State, Hawaii Governor David Ige has signed House Bill 2510, gradually raising the State’s minimum wage to $18.00 per hour on January 1, 2028. Although, given HB 2510’s nearly six-year phase-in period, other states may reach that mark first, Hawaii nevertheless becomes the first state to officially enact an $18 minimum wage.

Under the Act the minimum wage, which was last increased to $10.10 in 2018, will increase to $12.00 per hour on October 1, 2022; to $14.00 per hour on January 1, 2024; to $16.00 per hour on January 1, 2026; and finally to $18.00 per hour on January 1, 2028.

In addition, the tip credit an employer may take for traditionally tipped employees will increase from its current level of 75 cents per hour to $1.00 per hour on October 1, 2022; to $1.25 per hour on January 1, 2024; and to $1.50 per hour on January 1, 2028. As already is the law in Hawaii, the employer may take the tip credit only if the combined amount the employee receives from the employer and in tips is at least $7.00 more than the applicable minimum wage.

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

A forensic photographer who enrolled in a county training program was an intern and not an employee, a three-judge panel of the Eleventh Circuit Court of Appeals has held in a divided opinion. As a result, her minimum wage and overtime claims under the Fair Labor Standards Act (FLSA) were properly dismissed by the trial court. McKay v. Miami-Dade County, 2022 U.S. App. LEXIS 15910 (11th Cir. June 9, 2022). The Eleventh Circuit has jurisdiction over the federal courts in Alabama, Georgia, and Florida.

Plaintiff Brandi McKay was enrolled in a 6-month, unpaid program sponsored by Miami-Dade County, Florida to train photographers in forensic imaging (taking photos of deceased individuals during autopsies, at crime scenes, etc.). The plaintiff elected to enroll in this program rather than undertake the time and expense to obtain a four-year undergraduate degree that would have provided comparable training. She understood that she would work full-time, uncompensated, five days a week and sometimes on the weekend. After the first two months of the program, she and other trainees often would work unsupervised during their weekend assignments.

The plaintiff resigned from the program about a month before completing it and, a few months later, filed a lawsuit in federal court, asserting that during her time in the training program she was a county employee and therefore was due minimum wage and overtime pay. The County responded that the plaintiff was an intern, or alternatively that she was a volunteer, as those terms have been defined under the FLSA, and was not entitled to any pay. Both parties subsequently filed motions for summary judgment. Although it rejected the County’s assertion that the plaintiff was a volunteer, the trial court agreed that she was categorized correctly as an intern and dismissed her claims.

The plaintiff appealed and the Eleventh Circuit affirmed the lower court’s summary judgment ruling in favor of Miami-Dade County. First, the Court of Appeals agreed with the trial court that the plaintiff did not meet the definition of a volunteer of a public agency. The FLSA excludes from the definition of employee “any individual who volunteers to perform services for a public agency . . . if (i) the individual receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and (ii) such services are not the same type of services which the individual is employed to perform for such public agency.” 29 U.S.C. § 203(e)(4)(A). However, the FLSA does not further define “volunteer,” leaving that determination instead to the U.S. Department of Labor (DOL). The DOL in turn has defined volunteer as “an individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered.”

In this case, both parties had stipulated before the trial court that the plaintiff did not participate in the training program for civic, charitable, or humanitarian reasons, and the Eleventh Circuit rejected the County’s argument that the DOL’s definition was unreasonable and ambiguous. On the contrary, applying the Chevron standard, the Court of Appeals noted that they were bound to follow the DOL’s regulation unless it is “procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute.” The County had not demonstrated that any of these conditions existed, the Eleventh Circuit concluded.

However, the Court of Appeals agreed that the plaintiff was properly characterized as an intern. Under the law of the Eleventh Circuit (and all other courts of appeal), whether an individual is an intern or an employee depends on who the primary beneficiary is of the relationship, the individual or the employer. Although the courts and the DOL have developed somewhat differing tests to make this determination, all apply a number of similar factors. In the case of the Eleventh Circuit, those non-exclusive factors are:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation;
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the 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, the work of paid employees while providing significant educational benefits to the intern; and
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

No one factor is dispositive and, as was the case here given that the plaintiff was participating in a program that did not involve formal academic training, not all factors necessarily will apply.

Applying the factors, the Eleventh Circuit agreed with the trial court that the plaintiff was the primary beneficiary of her relationship with the County’s training program. First, the parties agreed that the plaintiff understood there was no promise or expectation of compensation for her participation in the program. Second, her participation in the program provided her with valuable training similar to what she would have received in a formal forensic degree program. The seventh factor also weighed heavily in the County’s favor, as the plaintiff did not expect a job with it following completion of the program.

The trial court properly excluded consideration of the third and fourth factors, the Court of Appeals noted, because the plaintiff was not participating in a formal academic program, and further properly determined that the fifth factor at most “very weakly” favored the plaintiff because, while the program arguably may have been longer than necessary, it was not so long as to be “ grossly excessive in comparison to the period of beneficial learning.” The trial court also correctly determined that the sixth factor “weakly” weighed in the plaintiff’s favor, given that the work she did on weekends sometimes displaced that of the County’s staff photographers, but noted that both parties benefited from this work. Thus, considering all of the relevant factors, the plaintiff was properly deemed to be an intern and her minimum wage and overtime claims were due to be dismissed.

If you have any questions about the volunteer or intern analysis, or any other wage and hour question, please contact a Jackson Lewis attorney.

The U.S. Department of Labor (DOL) has announced its intention to issue a new final rule regarding the employee-vs.-independent contractor analysis under the Fair Labor Standards Act (FLSA). That announcement came by way of a June 3, 2022, blog post from Jessica Looman, Acting Director of the DOL’s Wage and Hour Division. The current Independent Contractor (IC) Final Rule, issued during the previous administration and set to go into effect in March 2021, initially was delayed and then ultimately was withdrawn by the DOL in May 2021. However, in March 2022, a federal court in Texas held that the DOL’s delay and withdrawal was unlawful, and that the current Final Rule has been in effect since its original March 2021 date. The DOL recently appealed that ruling, and the appeal is pending in the U.S. Court of Appeals for the Fifth Circuit.

Over the years, both the courts and the DOL had developed similar, yet somewhat varying, standards for determining whether an individual is an employee or an independent contractor, most of which focused on the “economic reality” of the relationship between the employer and the individual. Those standards were derived from six, non-exclusive factors originally presented by the Supreme Court in two cases decided on the same day, United States v. Silk, 331 U.S. 704 (1947), and Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947). The factors are:

  • The employer’s versus the individual’s degree of control over the work;
  • The individual’s opportunity for profit or loss;
  • The individual’s investment in facilities and equipment;
  • The permanency of the relationship between the parties;
  • The skill or expertise required by the individual; and
  • Whether the work is “part of an integrated unit of production.”

Rather than treat the analytical factors as unweighted or affording them equal weight, the IC Final Rule elevates the comparative value of two “core” factors: “the nature and degree of the individual’s control over the work” and “the individual’s opportunity for profit or loss.” According to the IC Final Rule, when both of these factors support, or contradict, the existence of an independent contractor relationship, courts routinely have relied on them as controlling the determination. The IC Final Rule states that these factors are the “most probative” and therefore should be “afforded greater weight.” However, if these two factors are inconclusive, then three other factors should be considered: the skill or expertise required by the individual; the permanency of the relationship between the parties; and whether the work is “part of an integrated unit of production.”

The current DOL concluded that the IC Final Rule’s assignment of greater weight to two of the factors was inconsistent with the purposes and text of the FLSA and sought, ultimately unsuccessfully, to withdraw the Final Rule. Now, stating that it “remain[s] committed to ensuring that employees are recognized correctly when they are, in fact, employees so that they receive the protections the FLSA provides[,]” while “recogniz[ing] the important role legitimate independent contractors play in our economy,” the DOL has announced public forums in late June 2022 for both employers and employees to express their views on the independent contractor analysis, prior to the Department proceeding with the formal rulemaking process.

However, should the DOL eventually publish a new final rule, it would apply only to the analysis under federal law and would not affect how states (e.g., California) determine who qualifies as an independent contractor under their statutes. Moreover, just as with the current IC Final Rule, a new final rule would not redefine who qualifies as an independent contractor under the Internal Revenue Code, the National Labor Relations Act, or other federal laws.

Jackson Lewis attorneys will continue to keep you informed of further developments. In the meantime, if you have any questions about the current Independent Contractor Final Rule, the independent contractor analysis, or any other wage and hour issue, please consult the Jackson Lewis attorney(s) with whom you regularly work.

In April 2020, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit held that paying an employee a set amount for each day that he works (i.e., on a “day rate” basis) does not satisfy the “salary basis” component required to qualify as overtime-exempt under the Fair Labor Standards Act (FLSA), regardless of whether the employee earns the weekly minimum salary (currently, $684) required for the exemption. The full Fifth Circuit subsequently heard the case and, in a 12-6 opinion, reached the same conclusion. Hewitt v. Helix Energy Sols. Group, Inc., 15 F.4th 289 (5th Cir. 2021), cert. granted, No. 21-984 (U.S. May 2, 2022). The Sixth and Eighth Circuit Courts of Appeal previously had arrived at the same conclusion. The U.S. Supreme Court has now granted certiorari and, presumably during next Fall’s term, will determine whether the analysis of Fifth, Sixth, and Eighth Circuits regarding the FLSA’s salary-basis requirement was sound.

The FLSA Regulation

The relevant U.S. Department of Labor (DOL) regulation provides:

[A]n employee will be considered to be paid on a “salary basis” within the meaning of this part if the employee regularly receives 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 C.F.R. § 541.602(a). The regulation further provides that “an exempt 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. § 541.602(a)(1). Furthermore,

[a]n exempt employee’s earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily or shift rate for the employee’s normal scheduled workweek.

29 C.F.R. § 541.604(b) (emphasis added).

The Lawsuit

In Hewitt, the plaintiff worked on an offshore oil rig for periods of about a month at a time, known as “hitches.” The company paid the plaintiff a set amount for each day that he worked, and he received bi-weekly paychecks. Despite earning over $200,000 during each of the two years he was employed, and admittedly being paid at least $455 for each week in which he worked (the minimum salary required for exempt status under the FLSA during the time of his employment), the plaintiff filed suit, claiming he was entitled to overtime for each week he worked in excess of 40 hours.

Citing the DOL’s regulations, the en banc Fifth Circuit concluded that “respect for text forbids us from ignoring text. As a matter of plain text, we hold that, when it comes to daily-rate employees like Hewitt, Helix must comply with § 541.604(b).” Because the Company admitted that it paid the plaintiff strictly on a day-rate basis without a weekly guarantee, it failed to satisfy the “salary basis” requirement of the FLSA’s overtime exemption provisions. The Court of Appeals added that Helix easily could have complied with this requirement by guaranteeing the plaintiff $4,000 or so weekly, which reasonably would have equated to the $963 daily rate it actually paid. The Fifth Circuit noted that the Sixth and Eighth Circuit Courts of Appeal, as well as the U.S. Department of Labor and most federal district courts, likewise have concluded that Section 541.604(b)’s weekly guarantee must be satisfied, even for highly paid employees like the plaintiff.

The Takeaway

Because “day rate” pay is a longstanding common practice in the energy industry, the Supreme Court’s decision on this issue is particularly important. We will continue to provide updates on this case but in the meantime, if you have any questions about this decision, exemptions under the FLSA, or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Business development managers, whose job was to convince corporate customers to purchase General Motors vehicles for their corporate fleets, qualified for the administrative exemption from the overtime provisions of the Fair Labor Standards Act (FLSA), the Eleventh Circuit Court of Appeals recently held. Brown v. Nexus Bus. Solutions, LLC, 2022 U.S. App. LEXIS 8777 (11th Cir. Apr. 1, 2022). While not establishing new law, the decision nonetheless is an excellent primer on the FLSA’s administrative exemption. The Eleventh Circuit has jurisdiction over the federal trial courts in Alabama, Florida, and Georgia.

Background

The FLSA generally requires that employees be paid overtime, at a rate of at least one and a half times their regular rate of pay for all hours worked beyond 40 in a week. 29 U.S.C. § 207(a)(1). However, there are some exceptions to that general rule and one of those is the “administrative” exemption. The requirements of the administrative exemption are easy enough to recite but often difficult to apply. To qualify for the exemption, an employee must (1) be paid, on a salary basis, at least $684 per week; (2) perform office or non-manual work directly related to the employer’s general business operations; and (3) have as a primary duty “the exercise of discretion with respect to matters of significance.” 29 C.F.R. § 541.200(a).

The Lawsuit

In Brown, the business development managers did not actually sell vehicles – that was done by local dealerships – but were charged with connecting potential corporate buyers with the local dealers by generating leads and making sales presentations. A group of these managers filed a collective action under the FLSA, asserting that the company had misclassified them as exempt and therefore that they should have been paid overtime for the hours they worked in excess of 40 per week, which were considerable. The employer moved for summary judgment, contending that the business development managers were exempt under both the FLSA’s administrative exemption and its outside sales exemption. The trial court denied summary judgment with respect to the outside sales exemption but agreed that the managers qualified for the administrative exemption and granted summary judgment in favor of the company.

The Eleventh Circuit’s Decision

The employees appealed and the Eleventh Circuit affirmed the trial court’s dismissal. As is common in scenarios involving the administrative exemption, there was no dispute that the first two requirements were met, that is, that the managers were paid at least $684 a week on a salary basis and that they performed non-manual work related to the company’s general business operations. Thus, the focus of the appeal was whether the business development managers’ primary duties included the “exercise of discretion with respect to matters of significance.”

In concluding that the business development managers did, in fact, possess and exercise such discretion, the Court of Appeals looked to the regulations of the U.S. Department of Labor (DOL) for guidance. The DOL regulations provide when applying the administrative exemption, only those employees who engage in “the comparison and the evaluation of possible courses of conduct, and act[] or mak[e] a decision after the various possibilities have been considered,” qualify for the exemption. 29 C.F.R. § 541.202(a). Citing the DOL regulations, the Eleventh Circuit noted that the analysis is “ultimately a holistic determination, but several factors guide the inquiry,” including that:

  • the employee should have the “authority to make an independent choice, free from immediate direction or supervision,” even though their choices may still be subject to review, revision, or reversal;
  • the work must involve “more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources” and cannot be “mechanical, repetitive, recurrent or routine;” and
  • must relate to “matters of significance,” which “refers to the level of importance or consequence of the work performed.”

29 C.F.R. §§ 541.202(a) – (e).

Applying those principles here, the Court of Appeals concluded that the business development managers met the requirements for the administrative exemption because they “had a hand in choosing which leads to develop, performed customized research before meeting with selected leads, and delivered presentations that necessarily required some amount of customization.” Moreover, based on testimony from some of the managers, the Eleventh Circuit determined that the position’s primary role is to “develop business leads and opportunities for the dealerships,” with a focus on “developing those new relationships and bringing them to the dealer.” Unquestionably this was a matter of significance for the employer’s business, concluded the Court of Appeals, because the business depended on bringing in new customers for its financial success. Thus, in dismissing the case, the trial court had properly concluded that the administrative exemption applied.

If you have any questions about the administrative exemption or any other wage and hour question, please contact a Jackson Lewis attorney.

On April 6, 2022, Governor Mike DeWine signed Senate Bill (S.B.) 47, thereby formally adopting Sections 2 and 4 of the Portal-to-Portal Act (PPA) amendments to the federal Fair Labor Standards Act (FLSA). In addition, S.B. 47 incorporates the FLSA’s “opt-in” requirement for individuals seeking to join a class (collective) action based on state law claims for failure to properly pay overtime wages. The law becomes effective on July 6, 2022.

Because Ohio law (O.R.C. § 4113.03) expressly incorporates by reference Section 7 of the FLSA “as amended,” and because the PPA is an amendment to Section 7, Ohio federal courts routinely have assumed that the PPA applies to Ohio state law claims. See, e.g. Baughman v. KTH Parts Industries, 2021 U.S. Dist. LEXIS 62059 (S.D. Ohio Mar. 31, 2021). S.B. 47 now expressly recognizes that longstanding assumption.

Portal-to-Portal Provisions

Under SB 47 (and the PPA), an employer is not required to pay overtime wages to an employee for time spent:

  • “walking, riding, or traveling to and from the actual place of performance of the principal activity or activities that the employee is employed to perform,” e., normal commuting time;
  • “performing activities that are preliminary to or postliminary to the principal activity or activities; or
  • “performing activities requiring insubstantial or insignificant periods of time beyond the employee’s scheduled working hours,” that is, de minimis

These provisions apply to activities “performed either prior to the time on any particular workday that the employee commences the employee’s principal work activity or after the time on any workday that the employee ceases performing the employee’s principal work activity.” In other words, the provisions do not apply to activities performed on a non-workday. With respect to the law’s provision declaring de minimis time as non-compensable, the law does not define what constitutes “insubstantial or insignificant” time but more importantly – and unlike its federal counterpart – does not state that the activity must be performed infrequently.

Consistent with the PPA, S.B. 47 clarifies that employers must still pay employees for preliminary or postliminary activity performed “during the employee’s regular workday or during prescribed hours” or “at the specific direction of the employer.” In addition, employers must pay for employee time performing activities “pursuant to an express provision of a contract in effect at the time the employee performed the activity” and activities “pursuant to a custom or practice, not inconsistent with a contract, in effect at the time the employee performed the activity.”

Opt-In Requirement

S.B. 47 provides that employees shall not join an Ohio overtime lawsuit as plaintiffs unless they first give written consent to become a plaintiff and file that consent with the court in which the action is brought. This requirement is consistent with the FLSA’s “opt-in” provisions for collective actions and eliminates the so-called “hybrid” collective/class wage lawsuits that combine both “opt-in” plaintiffs under the FLSA and “opt-out” plaintiffs under parallel state law claims.

The Takeaway

S.B. 47 provides clarity to Ohio employers and establishes consistency between federal and state overtime laws. Moreover, as more employers embrace virtual or hybrid workplaces, the law should assist employers and employees in better understanding when brief activities (e.g., reading e-mails) outside of the regular workday constitute compensable time.

If you have any additional questions or concerns about this development, please contact the Jackson Lewis attorney(s) with whom you regularly work.

On March 30, 2022, Governor Jay Inslee signed Senate Bill (SB) 5761, updating Washington’s existing pay transparency law. Previously, after an employer made an initial job offer to an external applicant, the employer was required to provide the minimum wage or salary to the applicant if the applicant requested the information. Under the revised law, an applicant’s request is no longer required.

Now, an employer must proactively disclose in each posting for a job opening not only the wage scale or salary range, but also a general description of all of the benefits and other compensation associated with the position. A “posting” is defined to include “any solicitation intended to recruit job applicants for a specific available position, including recruitment done directly by an employer or indirectly through a third party, and includes any postings done electronically, or with a printed hard copy, that includes qualifications for desired applicants.” Thus, presumably, a generic “now hiring” or “help wanted” advertisement would not be subject to the disclosure requirements.

While these new disclosure requirements apply to external applicants, the law retains disclosure requirements for internal job candidates. Upon request of an employee offered an internal transfer to a new position or promotion, the employer must provide the wage scale or salary range for the employee’s new position.

The revised law takes effect on January 1, 2023, and applies to employers with 15 or more employees. For an established violation of the law, an employer may be subject to civil penalties imposed by the Department of Labor and Industry, as set forth in RCW 49.58.060. In addition, an employee may bring a civil action pursuant to RCW 49.58.070 and may recover actual damages; statutory damages equal to the actual damages or five thousand dollars, whichever is greater; interest of one percent per month on all compensation owed; and costs and reasonable attorney’s fees. Recovery of any wages and interest for violations of the pay transparency requirements is calculated from the first date wages were owed to the employee.

Employers in Washington should begin taking steps now to ensure that their job posting methods comply with these new proactive disclosure provisions by the January 2023 effective date. If you have any questions about Washington’s pay transparency law or any other wage and hour issue, please consult a Jackson Lewis attorney.

Generally, the Fair Labor Standards Act (FLSA) requires employers to pay at least minimum wage (currently $7.25) for all non-overtime hours in a workweek. However, subject to any contradictory state laws, an employer may pay a “tipped employee” – one who customarily and regularly receives at least $30 per month in tips – a reduced minimum wage of $2.13 per hour, with the employee’s tips making up the difference. This difference commonly is known as the “tip credit.” But to claim the tip credit, the employer must comply with certain notice requirements, and failure to do so may result in a claim that the employer violated the FLSA by not paying the required minimum wage. A recent case involving a Houston, Texas pizza parlor exemplifies the potential perils of failing to satisfy those tip credit notice provisions, as well as for overcharging employees for the cost of uniform cleaning. Ettorre v. Russos Westheimer, Inc., 2022 U.S. App. LEXIS 7295 (5th Cir. Mar. 18, 2022). The Fifth Circuit has jurisdiction over the federal courts in Louisiana, Mississippi, and Texas.

The Law

When an employer elects to take a tip credit under the FLSA, it must inform tipped employees of its use of the tip credit, including (1) the amount of the employee’s cash wage; (2) the amount of the tip credit claimed by the employer; (3) that the amount claimed may not exceed the value of the tips actually received; (4) that all tips received must be retained by the employee except for a tip pooling arrangement limited to employees who customarily and regularly receive tips; and (5) that the tip credit shall not apply to any employee who has not been informed of all of these requirements. 29 U.S.C. § 203(m); 29 C.F.R. § 531.59(b). An employer may not take the tip credit for any period of time during which these notice requirements are unmet.

The Lawsuit

Plaintiff Chiara Ettorre was employed as a server at a Russos pizza restaurant in Houston from May 2016 until December 2018. Throughout that time, Russos paid her $2.13 per hour plus tips and claimed the FLSA tip credit. In addition, Russos deducted a mandatory $10 “linen fee” per pay period from Ettorre and other servers to cover the cost of cleaning their work aprons, which they were required to wear. That fee also covered the cost of providing unlimited soft drinks to the employees while they worked. Following her discharge, Ettorre sued Russos, alleging it failed to provide her the FLSA’s requisite notice before claiming the tip credit and that the linen fee was an improper pay deduction. The district court granted summary judgment to Ettorre, finding no evidence that Russos had ever satisfied the required tip credit notice provisions. The trial court further concluded that the linen fee was an unreasonable charge for merely laundering an apron and that Russos had failed to show the actual cost of providing free drinks, as opposed to the menu price it charged customers for such drinks. Accordingly, Russos was liable for the full amount of the tip credit and the linen fee for the time Ettorre was employed, as well as liquidated (double) damages and attorney’s fees.

Russos appealed and the U.S. Court of Appeals for the Fifth Circuit affirmed summary judgment for Ettorre in all respects. In response to Ettorre’s affidavit asserting that she was not informed of the tip credit notice provisions other than that she would be allowed to keep her tips, the company’s corporate designee admitted she did not know whether the restaurant informed Ettorre of the required tip credit notice provisions and further admitted there was no policy of informing employees about these provisions at the time of hiring. Rather, Russos demonstrated only that Ettorre was aware that her hourly rate was $2.13 and that she could retain her tips. Moreover, even if Ettorre was provided with an employee handbook (which she denied), the Court of Appeals ruled that there was no evidence that the tip credit notice provisions were included in it. In sum, the Fifth Circuit held that Russos had failed to produce sufficient evidence to survive Ettorre’s summary judgment motion.

As for the linen fee, the Fifth Circuit noted that under Section 203(m)(1) of the FLSA, an employer may count toward wages “the reasonable cost . . . of furnishing [an] employee with board, lodging, or other facilities, if [they] are customarily furnished by [the] employer to his employees” but “reasonable cost” in this respect means “actual cost” absent any employer profit. 29 C.F.R. §§ 531.3(a)-(b). The Court of Appeals held that Russo’s failed to produce any evidence of the cost of providing unlimited drinks to an employee. Regardless, concluded the Fifth Circuit, if an item is “primarily for the benefit or convenience of the employer,” it is per se not a reasonable cost to impose on employees. 29 C.F.R. § 531.3(d)(1). In this case, the cost of providing and cleaning uniforms was primarily for the benefit of Russos and therefore could not reasonably be imposed on Ettorre or other employees. Moreover, even if some portion of the linen fee was reasonably imposed on employees, Russos failed to maintain and preserve adequate records to separate out that cost. Finally, the Court of Appeals held that Russos produced no evidence that it had reasonable, good-faith grounds to believe that its actions complied with the FLSA. Thus, an award of liquidated damages was appropriate.

The Takeaway

The Fifth Circuit’s holding serves as a cautionary tale for any employer that takes the FLSA tip credit or who imposes a uniform cleaning fee or similar charge on its employees. Employers must ensure that they regularly comply with the FLSA’s tip credit notice provisions (and state provisions, where applicable) and that they understand the legal limits on deducting fees from employee wages.

If you have any questions about this decision or any other wage and hour issue, please contact a Jackson Lewis attorney.