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Archive for the ‘Wage & Hour’ Category

Here’s Your Tip Of The Day – Another Appellate Court Defers To DOL On Use Of 80/20 Rule For Tipped Employees

Posted on: September 24th, 2018

By: Brad Adler & Koty Newman

The Ninth Circuit’s recent decision in Marsh v. J. Alexander’s, 2018 U.S. App. LEXIS 26387 (9th Cir. Sep. 18, 2018) is important for employers trying to navigate the FLSA and pay their tipped employees the correct amount.  The Ninth Circuit has joined the Eighth Circuit in deciding that the Department of Labor’s (“DOL”) dual jobs regulation, 29 C.F.R. § 531.56(e) (a/k/a “80/20 rule”), and its interpretation found in the Wage and Hour Division’s Field Operations Handbook are entitled to judicial deference.  This affects what employers must pay their tipped employees in these jurisdictions.

Generally, the federal hourly minimum wage is $7.25 per hour.  However, employers may legally pay their employees in tipped occupations, under federal law, as little as $2.13 per hour.  This is due to the FLSA’s tip credit provision, which permits employers to take a tip credit for employees in tipped occupations, such as serving or bartending.  The tip credit offsets the employer’s duty to pay the minimum wage to their tipped employees.  Even so, when a server’s tipped wages come up short of the hourly minimum wage of $7.25 per hour, the employer has a duty to make up the difference.

But how much is an employer required to pay an employee when that that employee performs some tipped duties and some untipped duties?  With the Ninth Circuit’s recent decision, the wages that an employer must pay an employee who receives tips turns upon whether the employee’s untipped duties are related to the employee’s tipped duties, and how long the employee spends performing each of those duties.

In the case before the Ninth Circuit, Alec Marsh and thirteen other former servers and bartenders challenged their employer’s payment practices under the FLSA.  Plaintiffs alleged that their employers abused the FLSA’s tip credit provision in two ways.  Plaintiffs alleged that employers violated the provision by treating them as tipped employees when they performed work that was unrelated to serving or bartending, such as when they cleaned restrooms or washed windows. Further, plaintiffs alleged that it was a violation for their employers to treat them as tipped employees when they performed untipped tasks related to serving and bartending, such as filling salt and pepper shakers, when those tasks consumed an excess of twenty percent of their time worked during the workweek.

In the Ninth Circuit’s view, the alleged payment practices of plaintiffs’ employers – in essence, crediting an employee’s tips toward the employers’ obligation to pay the full minimum wage for a non-tipped occupation – effectively allowed the employers to treat their employees’ tips as payments to the employers rather than the employees, thereby minimizing the employers’ obligation to pay their employees the full minimum wage for time spent performing work in a non-tipped occupation.  Marsh, 2018 U.S. App. LEXIS 26387, at *6 & n.2.

The Ninth Circuit ultimately determined that this practice is disallowed.  The Ninth Circuit held that the DOL “foreclosed an employer’s ability to engage in this practice by promulgating a dual jobs regulation in 1967, 29 C.F.R. § 531.56(e), and subsequently interpreting that regulation in its 1988 Field Operations Handbook.”  Marsh v. J. Alexander’s, 2018 U.S. App. LEXIS 26387, at *6.  The Court concluded that both the regulation and the DOL’s interpretation of that regulation were entitled to deference.   This result aligns the Ninth Circuit with the Eighth Circuit and its decision in Fast v. Applebee’s Int’l, Inc., 638 F.3d 872 (8th Cir. 2011).

As a result of giving deference to the regulation and its interpretation, the Court concluded that Marsh “stated two claims for relief under the FLSA: first, that he is entitled to the full hourly minimum wage for the substantial time he spent completing related but untipped tasks, defined as more than 20% of his workweek; and second, that he is entitled to the same for time he spent on unrelated tasks.”  Marsh, 2018 U.S. App. LEXIS 26387, at *42.

If you believe that separating employees’ tasks and pay in this manner is unworkable, the Ninth Circuit would disagree.  The Court believes the system is workable because an employer may “keep track of time spent on related tasks by requiring employees to clock in any time spent rolling silverware or cleaning the restaurant before and after the restaurant closes or when business is slow.”  Marsh, 2018 U.S. App. LEXIS 26387, at *38-39.  Of course, it remains to be seen how the other appellate courts will deal with this issue, particularly in light of the arguments asserted in the lawsuit filed by a restaurant group in Texas that the 80/20 rule is invalid (see blog on Texas lawsuit).

Thus, practically speaking, an employer with tipped employees needs to pay careful attention to who is performing tasks unrelated to those tipped occupations, and who dedicates a substantial amount (more than twenty percent) of their working time to tasks that are untipped-yet-related to their tipped occupation.  Because now, payment of those employees is subject to both the DOL’s regulation and interpretation, at least in jurisdictions covered by the Eighth and Ninth Circuits.

If you have any questions or would like more information, please contact Brad Adler at [email protected] or Koty Newman at [email protected].

DOL Guidance On No Fault Attendance Policies

Posted on: September 21st, 2018

By: Joyce Mocek

The Department of Labor (DOL) Wage and Hour Division issued a new opinion letter on an employer’s no-fault attendance policy which effectively froze an employee’s attendance points that had accrued prior to taking the FMLA leave.  The DOL maintained that the no-fault attendance policy did not violate the FMLA if it was applied in a non-discriminatory manner, and applied consistently with other types of leave.

The FMLA prohibits employers from “interfering with, restraining, or denying” an employee’s exercise of FMLA rights, and prohibits employers from “discriminating or retaliating against an employee.. for having exercised or attempted to exercise FMLA rights.”  29 CFR 825.220.  In its opinion letter, the DOL noted that employees cannot accrue points for taking FMLA leave under a no-fault attendance policy.  Further, the FMLA does not entitle an employee to superior benefits simply because they take FMLA leave.

In the opinion letter, the DOL advised that since the employee’s number of accrued points remained frozen during the FMLA leave the employee neither lost a benefit that accrued prior to taking the leave, nor accrued any additional benefit which he or she would not have been otherwise entitled.  The DOL thus advised that this policy would not violate the FMLA.  However, the DOL noted that if the employer counted other types of leave (i.e. active service) under its no-fault policy, then the employer may be discriminating against employees that take FMLA leave as this inconsistency would violate the FMLA.

Employers should be mindful of this recent DOL opinion letter guidance and review their no-fault attendance policy to ensure compliance and consistency with other leave policies.

If you have any questions or would like more information, please contact Joyce Mocek at [email protected].

Salary History And Wage Gaps

Posted on: April 10th, 2018

By: Rebecca J. Smith

The U.S. Court of Appeals for the 9th Circuit, which heard the case of Rizo v. Fresno County Office of Education en banc last year, has changed the 9th Circuit’s position and found that an employee’s prior salary – either alone or in a combination of factors – cannot be used to justify paying women less than men in comparable jobs.

“The Equal Pay Act stands for a principle as simple as it is just:  men and women should receive equal pay for equal work regardless of sex” Judge Stephen Reinhardt wrote in the opinion.   The opinion clearly establishes that an employer cannot justify a wage differential between male and female employees by relying on prior salary.

In the ruling made on Monday, April 09, 2018, the en banc panel overturned the earlier panel’s decision looking at the history of the act and indicating that Congress simply could not have intended to allow employers to rely on past discriminatory wages to justify continuing wage differentials.  One of the biggest issues, going forward after this decision will be whether negotiated salaries are included within the equal pay statutes.  Judge M. Margaret McKeown indicated in her concurring opinion that she was concerned about chilling voluntary discussions between employees or potential employees and employers when an employee is attempting to use prior salaries as a bargaining chip.

If you have any questions or would like more information, please contact Rebecca Smith at [email protected].

Leveling the Paying Field

Posted on: April 5th, 2018

By: Michael M. Hill

The Eleventh Circuit has held differences in work experience and salary history—factors many employers traditionally consider in setting pay rates—may not justify differences in pay between employees performing the same job.

Bowen v. Manheim Remarketing, Inc., No. 16-17237 (11th Cir. Feb. 21, 2018), was a suit under the Equal Pay Act (“EPA”), which requires employers to pay men and women the same for performing equal work on jobs requiring equal skill, effort, and responsibility, and performed under similar working conditions.  The plaintiff in Bowen was a woman who was promoted to a management position previously held by a man, and she alleged she was paid less than he was because of her sex.

The court, however, threw the case out before trial and granted judgment in favor of the employer because the employer showed that the male comparator, when he started in that same position, had been with the employer for twice as long as the plaintiff (6 years to her 3 years).  He also had come into the job from another position earning the same salary, whereas the plaintiff was promoted from a lower-paying position.  (One defense to an EPA claim is that the difference in pay was based on some “factor other than sex.”)

But the Eleventh Circuit reversed the trial court’s judgment on appeal and held the case should go to trial.  Despite these objective and undisputed gender-neutral factors between the two employees, the appellate court held that a jury still may find the employees’ sex played some role in the reason for the pay disparity.

One surprising point about the Eleventh Circuit’s holding is its reasoning that, even if the difference in work experience and salary history could justify starting the plaintiff off at a lower salary, these same factors would not justify maintaining this pay difference once she was performing the job proficiently.

Bowen should serve as a reminder to employers to review their payroll to ensure that men and women performing the same job are being paid equitably.  Factors that may justify a difference in pay at one point might not be sufficient further down the road.

In addition, while the EPA is a federal law, more and more states and cities are passing their own pay equity laws, many of which impose different obligations upon employers, such as prohibitions against asking job applicants their salary history, requiring employers to fully explain even the smallest differences in pay, or even requiring pay equity for protected classes other than gender (such as race, national origin, age, etc.).  As such laws are expected to become more commonplace, now is the time to get ahead of the curve.

If you have any questions or would like more information on navigating pay equity laws, please contact Michael M. Hill at [email protected].

Service Advisors Once Again Exempt From Overtime

Posted on: April 3rd, 2018

By: Brad Adler & Michael Hill

After years of back and forth in the lowers courts, the Supreme Court has ruled that service advisors at auto dealerships are exempt employees under the Fair Labor Standards Act (“FLSA”).  It’s the rare case that goes to the Supreme Court twice.  But after taking the scenic route through the federal court system, the Supreme Court’s Encino Motorcars, LLC v. Navarro decision finally has arrived and brought much-needed clarity to auto dealerships across the country.

As we have written in several previous blogs, the confusion began in 2011, when the U.S. Department of Labor (“DOL”) suddenly (and without explanation) reversed its decades-old position that service advisors were exempt from the FLSA.  The text of the statute at issue provides that “salesman . . . primarily engaged in selling or servicing automobiles” at covered dealerships are exempt.  Since the 1970s, courts and even the DOL itself took the position that a service advisor was such a “salesman.”  In 2011, however, the DOL threw a monkey wrench under the hood by issuing a new rule that “salesman” under the statute no longer would include a service advisor.

This ruling from the Supreme Court, however, applies a straightforward interpretation of the statute’s language and holds that a service advisor is a “salesman . . . primarily engaged in . . . servicing automobiles.”  According to Justice Clarence Thomas, who authored the majority’s opinion, “servicing automobiles” includes more than just working underneath the hood of a car.  “Servicing” is a concept broad enough to encompass meeting with customers, listening to their concerns, suggesting or recommending certain repairs and maintenance, selling new accessories or replacement parts, following up with customers as services are performed, and explaining the repairs and maintenance work to customers when they come to pick up their vehicles.

The Encino Motorcars decision also brought back a special souvenir for employers in other industries.  In reversing the Ninth Circuit’s decision, the Supreme Court expressly rejected the oft-quoted principle that exemptions to the FLSA “should be construed narrowly.”  It now is the Supreme Court’s view that, because the FLSA does not actually say its exemptions should be interpreted narrowly, “there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.”  As there are over two dozen exemptions just to the overtime-pay requirement of the FLSA, Encino Motorcars may provide some ammunition for employers fighting exemption disputes in the future.

For questions about this case or how it may impact your business, or other questions or advice regarding wage and hour laws, please contact [email protected] or [email protected].