CLOSE X
RSS Feed LinkedIn Instagram Twitter Facebook
Search:
FMG Law Blog Line

Archive for the ‘Wage & Hour’ Category

Wage & Hour Violations, Family Leave, Discrimination, Harassment

Posted on: May 22nd, 2020

By: David Daniels

These topics continue to generate conversation throughout workplaces across the country. No matter the size of your business, at some point you will encounter one of these regulations. For that reason, it’s important for supervisors and managers to understand the basics of employment laws and regulations to maintain proper compliance.  Here is a 30,000 foot view of the employment areas that can be the most troubling for the employer.

At-Will Employment

We all know that at-will employment means that an employer can terminate an employee at any time for any reason, except an illegal one, or for no reason without suffering legal liability. Likewise, an employee is free to leave a job at any time for any or no reason with no adverse legal consequences.

Most organizations will define their employment policies in an employee handbook or manual, a job application or contract. Though not legally mandated, many employers require new hires to sign the employment handbook acknowledging that they have read and are aware of the policies in place.

State laws offer some general protection from at-will termination since most employers are required to provide the following within 24 to 72 hours of separation:

  • Final Paycheck
  • Benefits an employee is entitled to, such as severance or continued health insurance
  • Any statutory benefits, such as unemployment compensation or other forms of government benefits

If an employer violates the worker’s right through discrimination or harassment, the employee can sue for damages.

Age Discrimination in Employment Act (ADEA)

The Equal Employment Opportunity Commission (EEOC) describes this Act as forbidding age discrimination against people who are age 40 or older.  The law forbids discrimination in any facet of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, benefits and any other term or condition of employment. While this act doesn’t protect employees under the age of 40, some states have established laws that protect younger workers from age discrimination. It’s important to know that it is not illegal for an employer to favor an older worker over a younger one, even if both employees are age 40 or older.  In recent years it has been legal and popular for employers to ‘buy out’ older employees by offering attractive severance packages to workers they wish to replace. If an employee accepts the package, they sign away their rights to sue for age discrimination.

Here are some requirements for employers that choose to take this path:

  • Workers must be given 21 days to review the agreement.
  • They have the right to review with an attorney at the cost of the employer.
  • Even after they have accepted the offer, they must be given 7 days to revoke the deal.
  • If you are letting two or more people go, you must give them 45 days to review and 7 days to revoke the deal if they choose to accept.

Americans With Disabilities Act (ADA)

According to the US Department of Justice, the ADA prohibits discrimination based on disability in employment, public accommodations, commercial facilities, transportation and telecommunications.

A person with a disability is defined by the ADA as:

  • An individual who has a physical or mental impairment that considerably limits one or more major life activities
  • A person with a history or record of such an impairment, or;
  • An individual who is perceived by others as having such an impairment.

In 2008, The Americans With Disabilities Amendments Act (ADAAA) was added to the original law. These amendments make important changes to the definition of the term disability. The purpose of this addition was to make it easier for an individual seeking protection under the ADA to establish that he or she has a disability.

Potential disabilities in the ADAAA include:

  • Alcoholism
  • Asthma
  • Depression
  • Cancer in remission

The Fair Labor Standards Act (FLSA)

According to the Department of Labor, the FLSA establishes minimum wage, overtime pay, record keeping and child labor standards.  Arguably the hottest topic surrounding the FLSA is wage & hour violations. Employers with the best intentions can improperly classify a worker as FLSA exempt and then fail to pay the overtime wages they’re due, leaving the organization open to potential penalties and litigation.  No matter the size of your business, the Department of Labor is keeping close watch on wage and hour violations. Think it can’t happen to you? Here are just a few examples of some businesses that were not spared the wrath of the DOL:

  • A Florida roofing company was required to pay $239,893 in back wages to 259 employees for overtime and recordkeeping violations
  • An Ohio restaurant was ordered to pay $118,354 in back wages and damages to a total of 21 workers
  • A Pennsylvania printing company was required to pay $1.45 million in back wages and damages

Family and Medical Leave Act of 1993 (FMLA)

The FMLA is a labor law requiring covered employers to provide employees with job-protected and unpaid leave for qualified medical and family reasons. Eligible employees are entitled to 12 workweeks of leave in a 12-month period for:

  • Pregnancy/ Birth of a child
  • Adoption
  • Foster Care placement of a child
  • Personal or family illness
  • Family military leave

The FMLA was introduced to balance the demands of the workplace with the needs of families. Should the FMLA be violated by an employer, workers can seek damages for lost wages and benefits, the cost of child care, plus an equal amount of liquidated damages unless an employer can show it acted in good faith and reasonable cause to believe it was not breaking the law.

Title VII of the Civil Rights Act of 1964

This federal law originally prohibited employers from discriminating against workers or applicants on the basis of sex, race, color, national origin and religion. Now protections for physical or mental disability, reprisal and sexual orientation have been included as well.

Employment Class Actions

Class actions brought on behalf of employees for wage and hour violations have been around for decades, but evidence is emerging hinting that these allegedly illegal practices by employers are becoming more prevalent than ever.  

U.S. federal law protects individuals from discrimination or harassment based on the following nine protected classes: sex, race, age, disability, color, creed, national origin, religion, or genetic information (added in 2008). Many state laws also give certain protected groups special protection against harassment and discrimination, as do many employer policies. Although it is not required by federal law, state law and employer policies may also protect employees from harassment or discrimination based on marital status or sexual orientation.  The following characteristics are “protected” by United States federal anti-discrimination law:

    Race – Civil Rights Act of 1964

    Religion – Civil Rights Act of 1964

    National origin – Civil Rights Act of 1964

    Age (40 and over) – Age Discrimination in Employment Act of 1967

    Sex – Equal Pay Act of 1963 and Civil Rights Act of 1964

    The Equal Employment Opportunity Commission interprets ‘sex’ to include discrimination based on sexual orientation and gender identity[2]

    Pregnancy – Pregnancy Discrimination Act

    Familial status – Civil Rights Act of 1968 Title VIII: Prohibits discrimination for having children, with an exception for senior housing. Also prohibits making a preference for those with children.

    Disability status – Rehabilitation Act of 1973 and Americans with Disabilities Act of 1990

    Veteran status – Vietnam Era Veterans’ Readjustment Assistance Act of 1974 and Uniformed Services Employment and Reemployment Rights Act

    Genetic information – Genetic Information Nondiscrimination Act

Individual states can and do create other classes for protection under state law.

To prevent class-action lawsuits, here are some established guidelines for what you cannot do during the hiring and firing process on the basis of  membership in a protected class:

  • Refuse to hire an individual
  • Segregate or force someone to segregate
  • Deny training to an individual
  • Fire or layoff an individual

If you have questions or would like more information, please contact David Daniels at [email protected].

Employers Beware: Payroll Mistakes Are Costly and Self-Audits Will Help Minimize Risk

Posted on: July 1st, 2019

By: Janet Barringer

A six-figure fine recently imposed on an employer by the Massachusetts Attorney General’s Office for wage & hour violation is an eye-opener for a few reasons. First, the financial penalty underscores employers must regularly examine their payroll systems to ensure all employees are coded with the correct rate of pay. Second, employers must communicate with their payroll providers on a regular basis to ensure all employees are coded with the correct rate of pay in compliance with all federal and state wage & hour laws. Third, errors by a payroll company are not necessarily defenses to the employer for inaccurate pay. Regularly conducting a self-audit is an important measure for the employer to help eliminate the risk of a wage & hour violation. A summary of the circumstances leading to one employer’s recent six-figure fine for wage & hour violation is as follows.

On May 23, 2019, Massachusetts Attorney General’s Office (the Commonwealth) imposed a fine of $250,000 on Eversource Energy Service Co. (“Eversource”) after concluding the company violated Massachusetts’ Wage & Hour Law. The Commonwealth determined Eversource underpaid approximately 3,000 of its workers. The Commonwealth’s investigation revealed Eversource paid many workers the incorrect rates for hourly, overtime, Sunday, nighttime, and emergency work. Eversource failed to enter codes for the differing rates in its payroll system, resulting in errors in processing the various hour and pay rates. Eversource discovered issues with its payroll system prior to the start of the Commonwealth’s investigation and had already undertaken efforts to fully compensate its employees when the investigation began. Such corrective measures did not absolve Eversource of liability.

Moreover, as a result of the Commonwealth’s investigation, Eversource conducted a comprehensive self-audit to determine the amount of underpayment, the number of employees impacted and whether wages remained outstanding. The audit revealed Eversource underpaid workers at least $828,000 from June to December 2016. The company paid back all amounts owed and allowed workers overpaid as a result of the payroll system errors to keep those funds. Eversource also agreed to pay the $250,000 fine to resolve the Commonwealth’s investigation.

Eversource’s implemented what turned out to be a faulty payroll system in 2016. The company claimed complexities of the software’s coding system caused errors in assigning rates of pay. Though Eversource made efforts to swiftly compensate employees incorrectly paid and cooperated with the Commonwealth’s investigation, Eversource nonetheless incurred a hefty fine. Moving forward, Eversource will work with its payroll technology provider to prevent this issue from reoccurring.

The recent investigation of Eversource and resulting financial penalty reveal employers must regularly examine their payroll systems to ensure all employees are coded with the correct rate of pay.  Even if employees are coded incorrectly due to an error on the part of the payroll provider, the employer is not necessarily shielded from liability. Accordingly, employers must communicate with their payroll providers on a regular basis in order to remain compliant with all federal and state wage & hour laws. Conducting regular self-audits should help the employer eliminate wage and hour violations.

If you have any questions or would like more information, please contact Janet Barringer in the National Labor & Employment Practice Section at [email protected].

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].