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Archive for the ‘Wage & Hour’ Category

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].

Congress Steps Into Tip-Pooling Fight

Posted on: March 23rd, 2018

By: Timothy J. Holdsworth

We wrote previously about the background on the tip-pooling regulations and the DOL’s Notice of Proposed Rulemaking (“NPR”) that would allow tip-pooling arrangements that include employees who do not regularly and customarily receive tips under the Fair Labor Standards Act (“FLSA”). The DOL received a considerable number of comments on the NPR, some of which worried that the NPR would allow employers to keep their workers’ tips.

Buried in the spending bill Congress passed (pages 2025-2027 if you are dying to read it) is a rider that will affect the current U.S. Department of Labor (“DOL”) laws on tips. The bill proposes language that prohibits an employer, including managers and supervisors, from keeping tips received by employees. This prohibition would apply regardless of whether the employer takes the tip credit. The rider also would make employers liable to employees for any tips unlawfully kept by the employer.

If the bill is signed by President Trump, these may substantially affect any tip-pooling arrangements employers planned to enact under the NPR. It is also unclear if the DOL may try to revise the NPR in any way.

The provision would also subject employers to new liability under the FLSA. Just last year, the Eleventh Circuit (Alabama, Florida, and Georgia) in Malivuk v. Ameripark, LLC held that the FLSA does not authorize an employee to sue her employer solely for an employer allegedly withholding her tips when the employee does not allege that she received less than the minimum wage or less than what she was entitled to for overtime work. The rider creates a new cause of action solely for withheld tips.

If you have any questions about what these potential changes may mean for your business or would like more information on navigating wage and hour laws, please contact Tim Holdsworth at [email protected].

Governor Wolf Proposes New Overtime Rules for Pennsylvania

Posted on: February 20th, 2018

By: Christopher M. Curci

Employers may recall the Obama administration’s efforts in 2016 to increase the overtime rule salary exemption from $23,600 annually to $47,476 annually.  By way of background, employers are required to pay overtime to employees who work over 40 hours in a given workweek.  However, many “white collar” employees are exempt from the overtime rules if their salary is above the $23,600 annual threshold.

The Obama administration’s proposed changes in 2016 caused quite a hubbub, finding strong support from pro-employee groups and strong opposition from pro-business groups.  Ultimately, the proposed changes were struck down by a federal court and the Presidential administration turned over to President Trump, largely mooting the issue.

However, Pennsylvania employers should be aware that Governor Wolf recently announced a similar change to Pennsylvania’s wage and hour laws as part of his “Jobs That Pay” initiative.  Governor Wolf’s proposal calls for increasing the salary exemption to $31,720 annually in 2020, $39,832 annually in 2021, and $47,892 annually in 2022.  Thereafter, the salary threshold will continue to increase every three years.

The Governor’s office estimates the proposed changes will increase the wages of 460,000 workers in Pennsylvania.  While the proposed changes have not yet been passed and would not take place for some time, employers should always be aware of the potential for significant change in wage and hour laws.  It is important that employers plan well in advance for such significant change to manage their own business finances and avoid costly wage and hour violations.

Christopher M. Curci, Esq., is a Pennsylvania and New Jersey Labor and Employment Attorney and member of Freeman Mathis & Gary’s Labor and Employment Law National Practice Section.  He represents employers in litigation and advises clients on all aspects of employment law.  If you need help with this or any other employment issue, he can be reached at [email protected].

DOL To Rescind 2011 Tip-Pooling Regulations

Posted on: December 19th, 2017

By: Timothy J. Holdsworth

In 2011, the U.S. Department of Labor (“DOL”) revised its regulations to support its position that the Fair Labor Standards Act (“FLSA”) requires that tipped employees retain all their tips regardless of whether the employer takes the tip credit for those employees. These regulations have repeatedly been challenged in courts, and circuits have split over their legality. In addition, several states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) have enacted legislation requiring employers to pay tipped employees the state minimum wage, effectively abolishing the federal tip credit.

As we predicted, in the wake of this litigation and legislation the DOL has issued a Notice of Proposed Rulemaking (“NPRM”) announcing its intent to reverse these 2011 regulations in part. The DOL now proposes to rescind the portion of the regulations that apply to employers that do not take a tip credit, but instead pay wages of at least the federal minimum wage.

One major effect of this change is that employers would now be able to create tip-pooling arrangements that include employees who do not regularly and customarily receive tips. For example, a restaurant could share tips among both servers and dishwashers. In its NPR, the DOL acknowledges that its proposed changes will allow employers and employees greater flexibility in determining their pay policies and allow employers to reduce wage disparities among all employees that contribute to customers’ experience.

The DOL will be accepting public comments on its proposed changes until February 5, 2018. We will update you once the DOL announces the finalized changes, but we do not expect the DOL to modify the changes significantly (if they decide to do so at all). Until the portions of the regulation are rescinded, employers need to be sure their tip policies comply with the current interpretation of the 2011 regulation in their circuit. Additionally, employers need to comply with any applicable state and local compensation laws and regulations regarding tips and tip-pooling, as they could face liability under those laws regardless of the proposed changes discussed in this blog.

If you have any questions about these changes or would like more information on navigating wage and hour laws, please contact Timothy J. Holdsworth at [email protected].

Are We There Yet?: Auto Service Advisor Exempt Status Under the FLSA Makes Return Trip to the Supreme Court

Posted on: November 28th, 2017

By: Will Collins

Last year, the Supreme Court narrowly avoided a collision with the question of whether service advisors at car dealerships are exempt as “salesmen” under the overtime requirements of the Fair Labor Standards Act (FLSA). However, as Encino Motorcars, LLC v. Navarro returns to the Supreme Court, the case is poised to squarely address this issue and, hopefully, provide much-needed clarity.

As previously discussed, the Supreme Court sent the Encino case back to the Ninth Circuit Court of Appeals to reconsider the exempt status of service advisors, instructing the Ninth Circuit to give no deference to the Department of Labor’s (DOL) regulations providing that service advisors were not exempt.

After considering the case on remand, the Ninth Circuit still held that service advisors do not fall within the FLSA’s exemption for “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” As a result, the Supreme Court will again consider the exempt status of auto service advisors and all indications are that the Court will resolve the discrepancy between the DOL regulations, the Ninth Circuit decision, and prior decisions by the Fifth and Fourth Circuits.

After a long road of uncertainty, many are hopeful that the Supreme Court will provide clarity when it finally resolves this issue. As the case is scheduled for oral argument in January, we will continue to monitor the case and provide an update of any developments.

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