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Archive for the ‘Wage & Hour’ Category

80/20 Hindsight: The DOL Issues Opinion Letter That Concludes The 80/20 Side Work Rule For Tipped Employees No Longer Applies

Posted on: November 15th, 2018

By: Michael Hill

Navigating the laws for paying tipped employees just got a little easier. In a new opinion letter, the U.S. Department of Labor (“DOL”) effectively nullified the “80/20 Rule,” which divided courts throughout the country and became the anchor point for several collective and class actions against employers of tipped employees.

While the federal minimum wage is $7.25/hour, employers of tipped employees, such as waiters, bartenders, and bellhops, are permitted to pay such employees $2.13/hour and take a “tip credit” for the difference between this wage and the federal minimum wage (provided the employees receive notice and the tip credit does not exceed what they actually earn in tips).

The DOL’s 80/20 Rule acknowledged the fact that tipped employees may spend some time performing tasks that do not generate tips. Servers in a restaurant, for example, generally spend time performing “side work” that is incidental but related to serving customers, such as rolling silverware, making coffee, cleaning tables, or sweeping the dining room floor, in addition to waiting tables. Under the 80/20 Rule, an employer still could claim a tip credit for all of such an employee’s time, as long as the employee did not spend more than 20% of his or her time performing “general preparation work or maintenance.”

Strict application of the 80/20 Rule essentially meant employers of tipped employees were expected to monitor each and every task their employees performed and to maintain meticulous time logs accounting for each individual task. Some courts recognized this was infeasible, while others held this to be what the law required. The tide of litigation rolled in, with predictable swearing contests over whether servers and bartenders spent more than 20% of their time performing non-tip-generating tasks.

The DOL now, however, has recognized the confusion its 80/20 Rule generated and clarified that employers may take the tip credit for all of their tipped employees time, no matter how much time is spent on related “side work” tasks, so long as these side tasks are performed contemporaneously with the employees’ customer-service duties or within a reasonable time immediately beforehand or afterwards and the tasks are listed for that job position in the Occupational Information Network (O*NET).

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

 

Panera Assistant Managers Granted Cert. In Overtime Suit Reminds Franchisees that Duties, Not Title, Prevail

Posted on: October 22nd, 2018

By: Brad Adler & Hillary Freesmeier

While retail employers have tightened up their wage and hour practices, there are still too many companies in the retail industry, including fast food and fast casual employers, that have failed to take inventory of their compliance with current wage and hour laws. One such example is how some retail employers classify their assistant managers.  For years, there have been contentious fights over whether assistant managers can be classified as exempt under the administrative exemption.

And that fight continues as a federal judge in the District of Columbia has granted conditional certification of a nationwide collective and D.C. collective of Panera bread assistant managers who have sued the national chain for alleged denial of overtime wages under both the Fair Labor Standards Act and the District of Columbia Minimum Wage Act.

In conditionally certifying the collectives, U.S. Magistrate Judge G. Michael Harvey found that the plaintiffs had presented sufficient evidence that the assistant managers were classified as exempt from FLSA overtime provisions, but the bulk of the work they performed was nonmanagerial – a reminder that under the FLSA an employee’s duties, not title, determine exemption status. The plaintiffs assert that their assistant manager training focused on nonmanagerial tasks that involved customer service, cashiering, food preparation, and cleaning, while general managers took on the actual managerial work, and management issues such as budgets, prices, restaurant layouts, marketing and promotion strategies, hours of operation, and dress code were set by Panera’s corporate headquarters.

This suit is not the first Panera has seen in relation to assistant managers and overtime pay in recent months. In February of this year, Covelli Enterprises, a Panera franchisee which owns and operates approximately 260 Panera bakery-cafes in five states and Ontario, Canada, was sued in an Ohio federal court by a proposed class of assistant managers alleging they were improperly classified as exempt and deprived of overtime wages. This action is still pending. Additionally, in June a federal judge in New Jersey conditionally certified a collective action by Panera assistant managers with similar claims.

As these cases develop, employers and franchisees should be mindful of their management structure and duty assignments to ensure FLSA compliance. These suits serve as a reminder that FLSA exemption does not necessarily rest on an employee’s title, but their duties and responsibilities within their role.

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

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].