Limousine Service Employee Was Properly Classified as Exempt, Second Circuit Holds

Upholding a jury verdict in favor of the defendant “black car” (limousine service) company, the U.S. Court of Appeals for the Second Circuit concluded that the plaintiff-employee was properly classified as overtime-exempt under both the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). Suarez v. Big Apple Car, Inc., 2020 U.S. App. LEXIS 8683 (2d Cir. Mar. 17, 2020). The Second Circuit has jurisdiction over the federal courts in New York, Connecticut, and Vermont.

The plaintiff worked as the driver recruiter, director of driver services, and dispatch manager for Big Apple Car, a limousine service providing corporate transportation. In these roles, the plaintiff recruited over 100 drivers and had unfettered control over the company’s recruitment program. She also played a major role in training the company’s drivers and, according to the company’s president, had hiring, firing, and supervisory authority over them as well. In addition, the plaintiff served as the company’s primary contact with the Taxi and Limousine Commission, and was primarily responsible for ensuring that the company remained complaint with applicable regulations. Following her discharge, the plaintiff filed suit, claiming that she was owed overtime wages pursuant to the FLSA and NYLL. A jury sided with the employer and, after the trial court denied her post-trial motions, the plaintiff appealed.

Under both the FLSA and NYLL, employees who serve in a “bona fide executive administrative, or professional capacity” are exempt from the overtime requirements of these laws, provided that they satisfy certain minimum salary levels and meet the duties requirements of one or more of these categories. With respect to the “administrative” exemption under both laws, an employee’s primary duty must be the “performance of office or non-manual work directly related to the management or general business operations of the employer of the employer’s customers” and that primary duty must include the “exercise of discretion and independent judgment with respect to matter of significance.” 29 C.F.R. § 541.200(a). The NYLL further requires that the employee “regularly and directly assist an employer, or an employee employed in a bona fide executive or administrative capacity” or “perform, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge.” 12 N.Y.C.R.R. § 142-2.14(c)(4)(ii)(c). As with all exemptions, the employer has the burden of proving that an exemption applies.

In this case, the Second Circuit agreed that the employer had sufficiently demonstrated that the administrative exemption was satisfied, in light of the job duties acknowledged by both the plaintiff and the company, particularly given plaintiff’s responsibility for ensuring compliance with the Taxi and Limousine Commission regulations and her authority to hire, fire, and discipline drivers.

If you have any questions about overtime exemptions under federal or state law, or about any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Colorado’s COMPS Order 36 Goes Into Effect, With Some Modifications and Compliance Grace Periods

On March 16, 2020, the Colorado Overtime & Minimum Pay Standards (COMPS) Order 36 went into effect, bringing sweeping changes to Colorado’s wage and hour laws.  COMPS Order 36 represents a dramatic shift from previous Colorado wage orders, significantly increasing the coverage of the rules, placing greater limitations on exemptions from the overtime requirements, expanding the definition of time worked, and imposing other requirements and potential liability on employers. For a comprehensive look at COMPS Order 36, please see our previous article here. On the March 16, 2020 effective date, the Colorado Department of Labor and Employment Division of Labor Standards and Statistics (“Division”) adopted three temporary changes to the Order, as well as a one-month compliance grace period.

Three Modifications to the Order

First, the Division added, in new Rule 2.2.7G, an exemption from the 12-hour daily overtime requirement for direct care/direct support “companions” who are Medicaid-funded and who work shifts of 24 hours or longer, in conformance with a federal appellate ruling issued last month. Additionally, the Division added, in Rule 5.2.1B, a related technical clarification to the definition and scope of Medicaid-funded providers, to whom additional rest period flexibility applies.

Second, and of particular note to all employers, the Division lessened employer obligations as to what information must be included in earnings statements issued every pay period. Under modified Rules 7.2 and 7.3, earning statements must include the (1) employee’s and employer’s names; (2) total hours worked in the pay period; (3) employee’s regular rates of pay, gross wages earned, withholdings made, and net amounts paid; and (4) any credits or tips claimed during the pay period.

Lastly, in modified Rule 1.6, the Division clarified that, for now, the “joint employment” standard remains the same as it has existed under Colorado wage and hour law, notwithstanding the recent adoption by the U.S. Department of Labor of a narrower joint-employment standard under federal wage law. In other words, COMPS Order 36 now provides for a broader standard for joint employment than the standard set forth in the new federal regulation. The Division currently is considering potential permanent changes to the state’s joint employment rules.

One-Month Compliance Grace Period

In light of the unprecedented impact of the COVID-19 crisis, the Division has delayed enforcement of the following requirements until April 16, 2020:

  1. Employers have one month to comply with all documentation and notices required by COMPS Order 36, such as new posters, handbook inserts, acknowledgement forms, etc.
  2. While the Division must investigate any claims filed with it, the Division’s “Direct Investigations” team launches its own investigations, based on tips, leads, and known problem sectors. Direct Investigations will not launch new investigations based on violations of new COMPS Order 36 rules for the first month.
  3. To the extent a violation committed within the first month of COMPS Order 36 is solely the result of a new obligation established under the Order, the Division will deem the violation “non-willful” if the employer remedies it within the first month of the Order’s effective date.

Lastly, the Division has postponed mailing any new claim notices to employers until April 1, 2020, for all wage claims, not just those related to COMPS Order 36, so as to enable employers to catch up with mail receipt and avoid missing the 14-day statutory deadline required to avoid untimely payment penalties.

If you have questions about the requirements of COMPS Order 36 or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Settlement or Dismissal of Individual Claims Does Not Preclude Assertion of PAGA Claims, California Supreme Court Holds

Noting the legal and conceptual differences between, as well as the penalties available in, a claim under the state’s Private Attorneys General Act (PAGA) and an employee’s individual suit for damages and statutory penalties, the California Supreme Court recently held that an employee may bring a PAGA claim even if the employee has settled or dismissed his or her individual claims.  Kim v. Reins International California, Inc., 2020 Cal. LEXIS 1593 (Cal. Mar. 12, 2020).

A full discussion of the decision may be found in the Jackson Lewis California Workplace Law blog, here.

 

New Jersey Independent Contractor Bill Based on “ABC” Test Has Failed – For Now

On January 14, 2020, the latest session of the New Jersey legislature ended and, with it, so did Senate Bill (SB) 4204. The bill, which in many respects mirrored California’s recently-enacted Assembly Bill (AB) 5, sought to codify the “ABC test” as the proper method for determining whether an individual should be classified as an independent contractor or as an employee for purposes of wage claims and unemployment compensation under state law. However, by ending its session without a vote on the bill, the legislature effectively pushed any further consideration of it to the next session.

Under SB 4204, for an individual to be properly classified as an independent contractor, a company must demonstrate all of the following:

(A) The individual has been and will continue to be free from control or direction over the performance of his service, both under his contract of service and in fact;

(B) The service is outside the usual course of the company’s business for which such service is performed; and

(C) The individual is customarily engaged in an independently established trade, occupation, profession, or business.

Significant opposition, in large part by those contractors whom the proposed law purportedly was designed to protect, resulted in the New Jersey legislature pausing to further consider the utility of the bill. Nevertheless, its concept very well may have enough support for a similar bill to gain momentum in the new legislative session. Notably, the senator introducing the bill already has indicated that the measure will be considered again.

Jackson Lewis will continue to monitor this and any related bill for further developments. In the meantime, if you have any questions about the bill or any other wage and hour issue, please contact a Jackson Lewis attorney.

Minnesota Supreme Court Holds Minneapolis Minimum Wage Ordinance to Be Lawful

The Minnesota Supreme Court, the state’s highest 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, 2020 Minn. App. LEXIS 12 (Minn. Jan. 20, 2020).

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. As of January 1, 2020, the minimum wage for “large” employers under the Ordinance (those with more than 100 employees) is $12.25 per hour, while the minimum wage for “small” employers (those with 100 or fewer employees) is $11.00 per hour. By contrast, under the Minnesota Fair Labor Standards Act (MFLSA), the current minimum wage for large employers (those with an annual gross volume of sales or business of $500,000 or more) is $10.00 per hour, while the minimum wage for small employers (less than $500,000 in business) is $8.15.

In November 2017, Graco and others sued the City, asserting that the Ordinance is preempted by state law and should be enjoined. The state 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 Minnesota Court of Appeals affirmed the lower court’s decision. A detailed discussion of the appellate court decision may be found here: Minnesota Appeals Court Upholds Minneapolis Minimum Wage Ordinance.

The plaintiffs then appealed to the Minnesota Supreme Court, which likewise upheld the Minneapolis Minimum Wage Ordinance. First, because the specific language of the MFLSA requires only that employers pay “at least” the minimum wage established by the state statute, the statute clearly contemplates that a higher hourly rate is permissible, noted the Supreme Court. Thus, as the Ordinance mandates such a higher minimum, added the Court, it “does not forbid what the MFLSA permits but instead complements the statute” and therefore is not expressly preempted by the statute. As the Court concluded:

[T]he statute prohibits employers from paying wages less than the statutory minimum-wage rate; it does not set a cap on the hourly rate that employers can pay. If employers comply with the ordinance, which requires minimum-wage rates above the state minimum-wage rates, employers comply with the MFLSA. And if employers can comply with both the municipal regulation and the state statute, the provisions are not irreconcilable, and therefore no conflict exists.

The Supreme Court then addressed, and rejected, the plaintiff’s contention that that the MFLSA impliedly preempts the Ordinance by entirely occupying the field of minimum wage regulation in Minnesota. To determine if express preemption exists, Minnesota courts consider four issues:

(1) What is the “subject matter” . . . to be regulated?

(2) Has the subject matter been so fully covered by state law as to have become solely a matter of state concern?

(3) Has the legislature in partially regulating the subject matter indicated that it is a matter solely of state concern?

(4) Is the subject matter itself of such a nature that local regulation would have unreasonably adverse effects upon the general populace of the state?

As to the first three issues, the Supreme Court reiterated the fact that the MFLSA only sets a “minimum” wage of “at least” an established hourly amount, not a required or maximum hourly rate. Moreover, while state law permits the labor commissioner to adopt rules to protect minimum wage and overtime rates, it does not invest exclusive authority in that office. As to the fourth issue, the Court rejected the plaintiff’s contention that a “patchwork” of local minimum wage ordinances would unduly burden employers, noting that it “previously [had] held that while varied local regulation may be restrictive to businesses, it does not arise to the level of an unreasonably adverse effect on the state.” Moreover, the Court added, if the legislature concludes that such a burden is too onerous on employers, “the problem can be corrected by a clear expression of the legislative will” (i.e. by enacting a local wage preemption law).

Therefore, the Minneapolis Minimum Wage Ordinance and its higher minimum wage rates are now part of settled law, and affected employers need to ensure that they comply with these higher rates.

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

New York Governor Vetoes “Wage Theft” Lien Bill, Promises Replacement

Concluding that it too broadly defined “employer” and raised a myriad of due process concerns that subjected it to risks of unconstitutionality, on December 31, 2019, Governor Andrew Cuomo vetoed a bill that would have allowed a current or former employee (or the New York State Department of Labor), alleging “wage theft” by an employer, to place a lien on the employer’s interest in real or personal property for the value of the wage claim plus liquidated damages. “Wage theft” is defined to include such claims as minimum wage violations, failing to pay overtime, and not paying tipped workers the difference between their tips and the legal minimum wage. The bill was passed by the New York legislature last summer and was discussed in detail in a Jackson Lewis article here: New York Legislature Passes Bill Allowing Liens on Employers For Alleged Wage Claims.

Although the veto comes as a relief to employers operating in New York, the reprieve may be brief.  In his memorandum vetoing the bill, Governor Cuomo made it clear that he intends to propose replacement legislation in 2020 to allow victims of wage theft to use “any and all assets, even personal assets, of the bad actor” to satisfy a judgment.  The Governor noted that his administration has been very aggressive when it comes to providing wage theft protections for vulnerable employees but was concerned that the due process issues inherent in the current bill might lead a court to find it unconstitutional.

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

Full Eleventh Circuit Finds that Plaintiffs Lack Standing in Alabama Lawsuit Challenging State Prohibition of Local Minimum Wage Laws

In a closely-split decision by the full court of appeals, the Eleventh Circuit has held that the plaintiffs lacked standing to pursue their claims against the named defendants in the lawsuit, specifically, the Attorney General for the State of Alabama. As a result, the Court of Appeals had no authority to determine whether the plaintiffs’ equal protection claim might survive on its merits. Lewis v. Governor of Alabama, 2019 U.S. App. LEXIS 36857 (11th Cir. Dec. 13, 2019) (en banc).

At its core, the case involved the validity of a 2015 Alabama law prohibiting cities or other local municipalities from adopting their own laws concerning minimum wages, leave benefits, collective bargaining and other employment-related issues. The law was enacted in response to an ordinance passed by the Birmingham City Council to increase the minimum wage for all employees within the City’s boundaries, from the current federal minimum of $7.25 to $10.10. While local jurisdictions in a number of states have enacted their own minimum wage ordinances in recent years, about half of the states have passed laws prohibiting such ordinances.

The lawsuit originally was filed in 2016 by the NAACP and two Birmingham residents against the Alabama Attorney General, the Governor of Alabama and the Mayor of Birmingham, alleging a variety of Constitutional violations and a violation of the Voting Rights Act, based on allegations that the state law’s passage was rooted in the state legislature’s racial bias against Birmingham’s black-majority city council and citizens. The case was dismissed by a federal district judge in 2017 but was revived in July 2018 by a three-judge panel of the Eleventh Circuit, concluding that the facts as alleged were sufficient to maintain the plaintiffs’ race discrimination claims.

The full Court of Appeals subsequently agreed to hear the appeal and the panel decision was vacated. By a 7-5 vote, the majority held that although the plaintiffs, two African-American workers who were employed in Birmingham, clearly could demonstrate an actual or imminent injury (significant economic harm), they could not demonstrate that these injuries were “fairly traceable” to the attorney general’s conduct or that, even if they prevailed, they would receive the remedy they sought. On the contrary, the majority found such an assertion to be highly speculative, particularly given that in the four years since the municipal ordinance was passed, a new mayor and a majority of the city council were elected, with no subsequent suggestion that the new leadership intended to revive the ordinance even if given the opportunity. Moreover, employers within the city limits, facing a nearly 40% increase in the minimum wage, as well as employers statewide who understandably would be concerned about the creation of a hodgepodge of municipal minimum wage rates, almost certainly would immediately challenge the ordinance as unlawful.

Thus this challenge, to Alabama law prohibiting local wage ordinances and other employment laws, is over and does not appear likely to be rekindled. Jackson Lewis will keep you apprised should any further developments occur. In the meantime, if you have any questions regarding this or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

The California Supreme Court to Decide Dynamex Retroactivity

The California Supreme Court announced that it would decide whether its April 30, 2018 landmark Dynamex decision is retroactive. The Supreme Court’s determination will have a significant impact on companies utilizing independent contractors in California.

In Dynamex Operations West, Inc. v. Superior Court of Los Angeles County, the California Supreme Court adopted the “ABC Test” to for evaluating contractor classifications under California law. On June 20, 2018, the California Supreme Court denied a petition for rehearing to address retroactivity.

Please find the rest of this article on our California Workplace Law Blog here.

Third-Party Bonuses Are Not Necessarily “Remuneration” for Overtime Purposes, Third Circuit Holds

When an employer permits its employees to participate in a bonus program offered by the employer’s client, based on the work performed for that client, those bonuses do not always qualify as “remuneration for employment” that must be included in the employee’s “regular rate” for purposes of calculating overtime pay due under the Fair Labor Standards Act (FLSA), the U.S. Court of Appeals for the Third Circuit has held. Secretary, U.S. Dep’t of Labor v. Bristol Excavating, Inc., 2019 U.S. App. LEXIS 24767 (3rd Cir. Aug. 20, 2019). In so concluding, the Third Circuit rejected the U.S. Department of Labor’s position that any remuneration received by an employee, whether received directly from the employer or a third party, is always “remuneration for employment.”  Instead, the Court of Appeals held, that determination depends on the agreement made between the employer and the employee.

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

Background

Generally, the overtime provisions of the FLSA require employers to pay employees one-and-a-half times their “regular rate” of pay for all hours in excess of 40 per workweek.  29 U.S.C. § 207.  With limited exceptions, the regular rate includes “all remuneration for employment paid to, or on behalf of, the employee.” However, what constitutes “remuneration for employment” is not specifically defined in the FLSA.

Bristol Excavating, a small sole proprietorship, entered into a contract (a “master service agreement”) to provide excavating services to Talisman Energy, a large natural gas production company.  Under the terms of the contract, Bristol employees put in extensive overtime hours.  Talisman Energy offered a bonus program to all employees, including to employees of companies with which Talisman had a service contract, at its sites, so Bristol employees sought and were granted permission to participate in the bonus program.  The program included several distinct bonuses, premised on safety, efficiency, and timely completion of work.

Bristol agreed to undertake the administrative and payday aspects of the Talisman bonus program for its employees, but participation in the program was never formalized, either in the master service agreement or in any separate contract between Talisman and Bristol or between Bristol and its employees.

During a subsequent, routine Department of Labor (DOL) audit, the auditor determined that Bristol was incorrectly omitting the bonuses from its calculation of overtime pay due to its employees. Bristol disagreed and the DOL filed suit.  The district court agreed with the DOL and granted it summary judgment, awarding both actual and liquidated damages.

Third Circuit Decision

Rejecting the DOL’s contention that the FLSA’s silence on what constitutes “remuneration for employment” means that all compensation, from whatever source, must be included, the Third Circuit instead concluded that “the silence of the Act is better understood as evidence that Congress took it for granted that it was only regulating the employer-employee relationship, not re-writing that relationship to impose the effects of decisions made by third parties.”  Instead, the Court of Appeals held:

[A] rule that looks to the contracting parties’ understanding to determine whether a third-party payment (even if transferred to an employee by his employer) is remuneration for employment is the correct approach, as opposed to the Department’s all-third-party-payments-are-always-remuneration rule. Both contracting parties are safeguarded by respecting their actual understanding. Money that employers and employees have agreed – either explicitly or implicitly – is part of regular pay cannot be funneled through third parties to dodge overtime requirements, so employees are protected. At the same time, employers are protected from being on the hook every time a third party chooses to add to an employee’s income.

In reaching its conclusion, the Third Circuit held that “looking to the parties’ agreement protects the employer from having to pay for a third party’s generous actions,” and that it would be unfair to force employers to include promised bonuses from third parties as remuneration in the regular rate of pay unless and until the evidence demonstrates that those bonuses have become part of the pay calculation agreed to in some fashion by the employer and employee.  While the DOL argued that its approach was consistent with the “broad remedial purpose” of the FLSA, the Court of Appeals shot back, noting that this argument ignores another statement in the Congressional findings underlying the FLSA: that protecting the well-being of workers is to be done “without substantially curtailing employment or earning power” and that imposing unexpected costs on employer does not work to the long-term benefit of employees. “The Department completely ignores that statutory purpose reflecting a very short-sighted understanding of worker well-being,” the Court of Appeals noted.  In reaching its conclusion, the Third Circuit cited to Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018), in which the Supreme Court rejected a “narrow interpretation” of the FLSA exemptions in favor of “fair reading” standard.  Notably, the Court of Appeals extended the Supreme Court’s reasoning to the Act as a whole, noting that a “fair reading of the FLSA, neither narrow nor broad, is what is called for.”

The Court of Appeals identified several factors to be considered in determining the existence of an agreement, either explicit or implicit, between the employer and employee. In this case, the Third Circuit ultimately held that the record did not establish, based on the newly-announced rule, that two of the bonuses should have been included in the regular rate of pay, as the district court had held, and thus remanded the case to the district court for further proceedings.

The Takeaway

Based on the Third Circuit’s decision, not all payments to an employee from a third party necessarily must be included in an employee’s regular rate of pay, giving employers more freedom to allow their employees to accept such payments without risking an increase in its labor costs.  However, employers should analyze each such payment carefully to ensure that it satisfies the Third Circuit’s test, and further should consider advising employees in writing whether such payments will, or will not, constitute “remuneration for employment” when calculating any overtime pay due.

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

Truck Drivers’ Sleeper Berth Time Is Presumptively Not Compensable Under the FLSA, DOL Concludes

In a welcome reversal of its prior guidance, on July 22, 2019, the U.S. Department of Labor (DOL) concluded that if a truck driver, or driver’s assistant or helper, is completely relieved of duty and is provided with adequate sleeping facilities (including the truck’s sleeping berth), the individual is not “working while riding” and therefore is not entitled to compensation for that time – regardless of how many hours a particular trip lasts or how much duty-free time is provided on that trip. DOL Wage & Hour Division Opinion Letter FLSA2019-10. Admitting that its most recent prior guidance was “unnecessarily burdensome” on employers, the DOL specifically withdrew five previous opinion letters and directly disagreed with recent judicial opinions that relied on the prior guidance, under which only up to 8 hours of sleeping time could be excluded in a trip 24 hours or longer, and no sleeping time could be excluded for trips under 24 hours.

For many years, a primary issue for long-haul trucking companies has been to what extent the time spent in the sleeper berth by a driver, assistant, or helper is compensable under the Fair Labor Standards Act (FLSA). Like many questions of compensation under both federal and state laws, the issues center on whether the individual is off-duty and on the level of control the employer is exerting on the individual. While in most cases an employee’s off-duty time is clear and he or she is free to leave the physical workplace, in certain working situations – for example, those of long-haul drivers who spend significant hours in the sleeping berths of their trucks – the divide between on- and off-duty is not so clear. Nevertheless, even under its prior guidance the DOL recognized that these employees do experience times when they are completely relieved of duty while remaining physically present in their trucks.

DOL regulations, as set forth in 29 C.F.R. § 785.41, provide that drivers, assistants, or helpers are not “working while riding” when they are “permitted to sleep in adequate facilities furnished by the employer[.]” With the new Opinion Letter, the DOL has issued its support for the clear and plain reading of this regulation. When a truck driver, assistant, or helper is completely relieved of all duties and is provided with an adequate facility to sleep, that time is non-working, off-duty travel time and is presumed, subject to rebuttal, to be non-compensable. In other words, if the employee is sleeping in the sleeper berth (or gaming, reading, or performing any non-work activity) and is completely relieved of all duties, then he or she does not have to be paid for the sleeper berth time.

The new Opinion Letter provides some much needed clarification for transportation industry employers seeking to comply with the FLSA. However, carriers also must ensure compliance with state laws, which might differ from federal law.

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

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