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

Posts Tagged ‘Fair Labor Standards Act’

DOL Releases New Overtime Rule And Increases Minimum Salary To $35,568

Posted on: September 30th, 2019

By: Brad Adler

On Tuesday, September 24, 2019, the U.S. Department of Labor released its long-awaited new minimum salary threshold for the Fair Labor Standards Act’s white collar exemptions (i.e., executive, administrative and professional exemptions).  Under the new rule, which is set to take effect on January 1, 2020, the DOL has set the minimum salary threshold at $684 per week, or $35,568 per year (up from $23,660).  The DOL anticipates that the updated threshold will expand overtime pay obligations to an estimated 1.3 million additional workers.

Commenting on the new rule, acting U.S. Secretary of Labor Patrick Pizzella stated: “For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans. . .This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”

Here are the highlights of the new rule:

  • The minimum salary threshold will be $684 per week, which equates to $35,568 per year.
  • Employers will still be able to use a nondiscretionary bonus, incentive pay or commissions to satisfy up to 10% of the standard salary level for the white collar exemptions (and the highly compensation exemption)
    • A one-time “catch-up” payment of up to 10% of the total standard salary level may be made within one pay period falling at the end of the 52-week pay period for those employees who have not earned enough to maintain their exempt status.
  • The highly compensated employee exemption’s additional total annual compensation requirement will increase to $107,432 per year.
  • The new rule did not make any changes to the duties test of the white collar exemptions
  • There are no automatic increases included within this new rule

Finally, while it seems inevitable that employee advocate groups are going to challenge the threshold, which they wanted to see much higher, we still believe it makes sense for employers to prepare for this new rule now.  As a part of their preparation, employers should be assessing whether they have employees they are classifying as exempt, but are making less than the new $35,568 requirement.  If so, employers need to decide whether to increase the employee’s salary, convert the employee to a non-exempt employee paid on an hourly basis or consider use of the fluctuating workweek method.

Please reach out to Brad Adler (Chair of FMG’s National Labor & Employment Practice Group) at [email protected] if you have any questions or need any assistance in navigating the new overtime rule.

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].

Is Wellness Activity Participation Compensable?

Posted on: September 25th, 2018

By: Joyce Mocek

The Department of Labor (DOL) recently issued an opinion letter on whether employees must be compensated under the Fair Labor Standards Act (FLSA) for the time they spend participating in wellness activities.   In this inquiry, the employer advised the DOL that it allowed its employees to participate in wellness programs including “biometric screening,” (ie cholesterol levels, blood pressure and nicotine usage screening), during and outside of regular work hours.  The screening information could result in a decrease in the employee’s health insurance deductible.  The screening was not related to the employee’s job, there were no restrictions on the time an employee could participate in the events, and participation was not required by the employer.

In its opinion letter, the DOL noted the employer received no financial benefit as a result of the employee participation in the activities, and the employee’s voluntary participation predominantly benefited the employee.  The employer did not require the employee to perform any job related duties while they were participating in the activities.  Thus, since the activities predominantly benefited the employee, the DOL opined that the time the employees spent participating in the wellness program did not constitute worktime under the FLSA.  Further, since the employee was relieved of all duties, and not restricted in the amount of time they could participate in the activities, the time spent was considered non-compensable “off  duty” time.

Employers with wellness programs should review their policies concerning such programs, to ensure they follow the guidance recently outlined by the DOL in this opinion letter to avoid potential FLSA issues.

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

The Side Work Struggle: Nonprofit Restaurant Group Challenges The 80/20 Tip Credit Rule In Texas Federal Court

Posted on: September 19th, 2018

By: John McAvoy

On July 6, 2018, a nonprofit restaurant advocacy group filed suit against the U.S. Department of Labor in Texas Federal Court challenging the rule that governs the compensation of tipped employees; specifically, the DOL’s “80/20 Tip Credit Rule” or “20% Rule” set forth in the 2012 revision to the DOL’s Field Operations Handbook. Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018).

Under the Fair Labor Standards Act (the “FLSA”), employers may pay a “tipped employee”—i.e., “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips”—a cash wage of $2.13 per hour (or more) so long as the employer satisfies certain statutory criteria, including that the employee’s tips plus the cash wage equal the minimum wage. See 29 U.S.C. §§ 203(m), 203(t). That means tips are credited against – and satisfy a portion of – employers’ obligation to pay minimum wage. Congress has noted occupations in which workers qualify for this so-called tip credit: “waiters, bellhops, waitresses, countermen, busboys, service bartenders, etc.” S. Rep. No. 93-690, at 43 (Feb. 22, 1974).

The FLSA tip credit is not available to employers in all situations. Rather, the 80/20 Tip Credit Rule limits the use of a tip credit wage where workers spend more than 20% of their time performing secondary work not directly related to tip-generating activities. Such secondary work is universally known throughout the restaurant industry as “side work.”

Side work encompasses any and all secondary tasks restaurant employees must complete in addition to their primary responsibilities waiting tables, expediting food, bussing tables or tending bar. Side work generally includes things like rolling silverware, restocking glasses and various other items, cleaning and/or any other behind the scenes tasks necessary to ensure that restaurant operations run smoothly.

The 80/20 Tip Credit Rule provides that if a tipped employee spends more than 20% of his or her time during a workweek performing side work, i.e. duties that are not directly related to generating tips, the employer may not take a tip credit for the time spent performing those duties.

Tipped employees and employers throughout the industry share a deep-seated aversion to the 80/20 Tip Credit Rule for three (3) main reasons. First, the Rule is unclear as to what is, and what is not, an allegedly “tip generating” duty. Second, side work varies from restaurant to restaurant and shift to shift and is subject to unpredictable external conditions; most notably, the number of patrons that dine in the restaurant on any given day. For example, a bartender working the Saturday night shift in a chain restaurant may spend 95% of his or her shift serving customers, and a mere 5% on side work. However, that same bartender may open the restaurant the following day (Sunday morning) and spend 40% of his or her shift on side work from the night before, and only 60% serving customers. Third, tipped employees do not generally log their hours separately by task. As a result, tipped employees and their employers have struggled to apply the Rule. Tipped employees have to ask themselves whether they are working for less than minimum wage, and employers have to constantly wonder whether they are in compliance with the current state of the 80/20 Rule.

These issues, among others, have spawned several lawsuits challenging the 80/20 Tip Credit Rule. For example, the plaintiff in Restaurant Law Center contends, among other things, that the DOL “surreptitiously and improperly” created the 80/20 Tip Credit Rule, rather than abiding by the rulemaking process, thereby violating the Administrative Procedure Act.

Restaurant Law Center is worth mentioning because there is a split emerging among the circuit courts as to the 80/20 Tip Credit Rule’s validity. In 2011, the U.S. Court of Appeals for the Eighth Circuit upheld the validity of the Rule. However, in September 2017, a three-judge panel from the U.S. Court of Appeals for the Ninth Circuit concluded that the DOL effectively imposed new recordkeeping guidelines on employers to determine which tasks are tip generating and which are not.  In doing so, the Ninth Circuit held that the DOL had created a new regulation inconsistent with the “dual jobs” regulation. Shortly after the Ninth Circuit’s three-judge panel issued this opinion, the Ninth Circuit granted a rehearing before the full panel. Although the case was re-argued in March 2018, the full panel has yet to issue its opinion. If the Ninth Circuit upholds its prior decision, or the Fifth Circuit (where the July 6, 2018 lawsuit is pending) ultimately invalidates the 80/20 Tip Credit Rule on appeal, there will be a split among the federal appeals courts, opening the doors for the U.S. Supreme Court to decide the validity and enforceability of the 80/20 Tip Credit Rule.

Needless to say, the outcome of these cases will have serious implications to the restaurant industry in all jurisdictions throughout the country.

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

Arbitration Agreement Litigation Wins Continue to Fall Like Dominoes for Pizza Hut

Posted on: June 26th, 2018

By: Tim Holdsworth

Following the Supreme Court’s opinion in Epic Systems that class and collective actions waivers in arbitration agreements are enforceable, a federal court recently granted a motion to compel arbitration to one of the nation’s largest Pizza Hut franchisees in a lawsuit in Illinois.

In Collins et al. v. NPC International Inc., case number 3:17-cv-00312, in the U.S. District Court for the Southern District of Illinois, drivers from Illinois, Florida, and Missouri filed a collective action under the Fair Labor Standards Act asserting that their employer had failed to reimburse them for vehicle expenses. In May 2017, the judge stayed the franchisee’s motion to compel individual arbitration pending the Supreme Court’s ruling in Epic Systems. The franchisee renewed that motion after the Supreme Court’s ruling, and the judge granted it.

The drivers will now have to bring their claims individually against the franchisee in arbitration, likely saving the franchisee expenses and time.

Epic Systems gave credence to arbitration agreements containing class and collective action waivers, and employers using them continue to reap the benefits. If you have any questions about the issues above or want to learn more about implementing arbitration agreements, please contact me at [email protected], or any of Freeman, Mathis & Gary’s experienced labor and employment law attorneys.