Workforce Bulletin

Litigators who defend cases brought under the Fair Labor Standards Act (“FLSA”), particularly ‘collective actions” alleging wage-and-hour violations, often have been able to counter, or even sometimes support, allegations that arbitration agreements have been waived where the conduct of a party has caused prejudice to the other side. In the case of Morgan v. Sundance, Inc., a unanimous Supreme Court has now held that the determinant of waiver is solely dependent upon the nature and magnitude of the actions of the party that might be inconsistent with arbitration, without respect to alleged prejudice.

The Biden Administration continues to increase administrative agency enforcement initiatives.

In a recent press release, the United States Department of Labor’s Wage and Hour Division (“WHD”) announced that it now offers new resources “to help combat employer retaliation against workers who exercise their legal rights.” One of those resources is a Field Assistance Bulletin on “Protecting Workers from Retaliation” (“Bulletin”).

As COVID-19 restrictions have continued to loosen or be lifted altogether, employees have gradually resumed working in the office—and traveling away from it for work-related reasons.  When it comes to travel time in the employment context, the answer to the question, “Do I need to pay for that?” often has no straightforward answer.  Rather, under the Fair Labor Standards Act (“FLSA”) and U.S. Department of Labor (“DOL”) regulations, whether time an employee spends traveling is compensable depends on the type of travel.  In this month’s Time Is Money segment, we provide a refresher on when and how employers must pay employees for travel time.

Earlier this month, Governor Mike DeWine signed Senate Bill (SB) 47, which formally adopted sections of the Portal-to-Portal Act (Portal Act) amendments to the federal Fair Labor Standards Act (FLSA), exempting employers from paying overtime under certain circumstances. SB 47 also eliminates so-called “hybrid” collective/class actions for Ohio plaintiffs by adopting the FLSA’s “opt-in” requirement for individuals seeking to join a wage and hour lawsuit on Ohio state law claims for failure to pay overtime. The law takes effect on July 6, 2022.

Portal-to-Portal Act

In a recent post addressing the U.S. Supreme Court oral argument in Viking River Cruises v. Moriana, we mentioned that employers in California will want to consider the “pros and cons” of arbitration agreements should an employer-friendly decision be issued in that case, rather than rush to implement them.

In response, more than a few people have asked the same or similar questions -- What are the “cons” of arbitration agreements? Why wouldn’t an employer want to use arbitration agreements, particularly if they will foreclose Private Attorney General Act (“PAGA”) actions in California?

There are “cons” to these agreements -- and they are not insignificant.

Silence can be telling.

That is especially so in the legal industry.

In the context of a hearing or oral argument, if judges or justices don’t ask an attorney a question, it can be incredibly encouraging – or incredibly discouraging.  It often means that the judges or justices have already made up their minds after having read the parties’ briefs and simply don’t have any questions or don’t need to hear anything more.

As discussed here, in January 2021, in the waning days of the Trump administration, the U.S. Department of Labor issued a Final Rule setting forth for the first time a standard for differentiating employees and independent contractors under the Fair Labor Standards Act.  The scheduled effective date of the new rule was March 8, 2021.

Neither fish nor fowl
Salaried with overtime
Brings pain and regret

We don’t see a lot of wage and hour poetry these days, but if we did, it would probably look a bit like the foregoing example from an anonymous former U.S. Department of Labor official.  When it comes to paying office workers who do not qualify for an overtime exemption, businesses often look for ways to treat those workers as much like exempt personnel as possible, including by paying wages in the form of a salary rather than hourly pay.  Salaried nonexempt status ordinarily starts with good motives, but it frequently ends with claims for unpaid overtime.  In this month’s Time Is Money segment, we explain that although paying overtime-eligible employees on a salary basis is a lawful, available option, it comes with significant risks that an employer must understand and navigate in order to pay these workers correctly.

A number of years ago, I received a kind note around the holidays from my opposing counsel in a wage-hour class action, thanking me and my firm for being their “partners” in addressing employment issues.

Maybe the word he used wasn’t “partners,” but it was something close to it.

At first, I must admit that I thought he was joking.

Then I realized that this attorney, for whom I have great respect, got it.

He got that employers are not looking to violate employment laws, and that the attorneys who represent them are not trying to help their clients violate the laws.

Employers with operations both large and small in California are all too familiar with California’s Private Attorneys General Act (“PAGA”), the controversial statute that permits a single employee to stand in the shoes of the state’s attorney general and file suit on behalf of other employees to seek to recover penalties for alleged Labor Code violations.

The in terrorem effect of PAGA lawsuits, in which a plaintiff need not satisfy class certification criteria to represent an entire workforce, has led many employers to pay large settlements just to avoid legal fees and the possibility of larger awards, even when the evidence of unlawful conduct is spotty or entirely absent.

Will 2022 be the year that PAGA is repealed?

Over the past few years, lower courts in Massachusetts have grappled with determining whether the “ABC test” under the independent-contractor statute provides the proper framework for assessing joint-employment liability. The Supreme Judicial Court (SJC) has finally answered that question.  On December 13, 2021, in Jinks v. Credico (USA) LLC, the SJC held that the independent-contractor statute’s “ABC test” does not apply and instead adopted the Fair Labor Standards Act’s (FLSA) “totality of the circumstances” approach to joint employment.

Credico was a client broker for independent direct marketing companies. It contracted with DFW Consultants, Inc. (DFW) to provide sales and marketing services for its clients in Massachusetts. To provide those services, DFW hired three of the plaintiffs – Kyana Jinks, Antwione Taylor, and Lee Tremblay – as salespeople. DFW classified Jinks and Taylor as independent contractors and Tremblay as an employee.

December is not the shortest month of the year, but it always seems to go by the fastest.

And with holidays and vacations, not to mention employees working remotely, it’s not unusual for matters to be put off until the new year -- or for a project or two to fall through the cracks.

Often times, there are no real consequences if a project gets pushed off into the new year.

But that’s not the case with new state or local wage-hour laws.

As reflected in the charts below, minimum wages increased in dozens of states and localities when the new year rang in on January 1, 2022 – and exempt salary thresholds also increased in some states effective January 1, 2022.

Before ringing in the New Year, employers should carefully evaluate whether they need to adjust their current practices to ensure that they remain compliant with state and local laws, including those relating to minimum wage and salary thresholds for exempt employees.

As reflected in the charts below, in 2022, minimum wages will increase in more than two dozen states and localities, with many changes taking effect January 1st. Accordingly, employers with minimum wage workers should consult with counsel to ensure that their compensation practices are compliant with the laws in all jurisdictions in which they operate. Employers should pay particular attention to the effective date to ensure compliance by the appropriate date.

More than three years after its landmark decision in Epic Systems Corp. v. Lewis, the United States Supreme Court has granted certiorari in Viking River Cruises, Inc. v. Moriana to determine whether Epic Systems extends to arbitration agreements that include waivers of representative actions brought under the California Private Attorneys General Act (PAGA).

Employers with operations in California, who have been plagued by the filing of boilerplate PAGA actions, could be heard to breathe a sigh of relief.

Misclassifying workers as independent contractors rather than employees is a costly mistake.  Among the many issues arising from misclassification is potential liability under federal and state minimum wage and overtime laws.  As the laws continue to change and develop, so do the risks to contracting entities.

Federal Changes

On Friday, October, 29, 2021, the Department of Labor (DOL) issued a final rule regarding how to determine which tipped employees may receive a “tip credit” in lieu of receiving the full minimum wage directly from the employer. The new rule restores the “80/20” rule rescinded under President Trump, requiring employers to pay employees at least the minimum wage if they spend more than 20% of their time working on tasks that do not specifically generate tips such as wiping down tables, filling salt and pepper shakers, and rolling silverware into napkins, or duties referred to in the industry as “side work.” The rule goes into effect on December 31, 2021 and the change represents continuation of a pattern that has continued across administrations with Presidents adopting and rescinding the rule over the past three administrations.

The doctrine “joint employer” liability has received significant attention in recent months, including on this blog. Under the Fair Labor Standards Act, an employee may be deemed to have multiple employers—each of whom would be liable jointly for all aspects of FLSA compliance, including with regard to the payment of wages—in connection with his or her performance of the same work. During the prior administration, the U.S. DOL issued a rule intended to standardize the parameters of joint employer liability.  Months later, however, a federal court invalidated a portion of the new rule, holding that it impermissibly narrowed the scope of the joint employer doctrine. And, in July 2021, the DOL announced its outright repeal of the rule—i.e., whether a business might face joint employer liability will again be governed by the multi-factor “economic reality” test subject to varying judicial interpretations.

On September 27, 2021, California Governor Gavin Newsom signed into law the Garment Worker Protection Act, which makes California the first state to ban piece rate pay for garment workers, requiring instead that they be paid the minimum hourly wage.

The Division of Labor Standards Enforcement Manual defines piece rate as, “[w]ork paid for according to the number of units turned out … [that] must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods.”

On June 1, 2021 the Southern District of Florida granted the motion by Uber Technologies, Inc. (“Uber”) to compel arbitration, finding that the company’s drivers did not engage in sufficient interstate commerce to meet the interstate commerce exclusion in the Federal Arbitration Act (FAA).

Plaintiffs Kathleen Short and Harold White brought a class action against Uber alleging that the company’s policy of classifying its drivers as independent contractors violates the Fair Labor Standards Act and the Florida Minimum Wage Act because the company failed to pay drivers the minimum wage. Uber sought to enforce its arbitration agreement which unambiguously required plaintiffs to pursue any potential claims in an individual arbitration.

Since the Supreme Court issued its seminal 2018 decision in Epic Systems Corp. v. Lewis, acknowledging that the Federal Arbitration Act (“FAA”) permits the use of arbitration agreements with class action waivers, many employers have implemented arbitration programs for their employees. Those arbitration programs have been aimed, in no small part, at avoiding the class and collective actions that have overwhelmed employers, particularly in California.

In response, California passed AB 51, which prohibits imposing “as a condition of employment, continued employment, or the receipt of any employment-related benefit” the requirement that an individual “waive any right, forum or procedure” available under the California Fair Employment and Housing Act (“FEHA”) and Labor Code.

It is no secret that the Private Attorneys General Act (“PAGA”) has been a cash cow for plaintiffs’ counsel in California.

PAGA allows a single employee (and their counsel) to file suit on behalf of other employees for alleged Labor Code violations, without having to go through the class action mechanism.  In other words, a PAGA plaintiff can file suit seeking penalties for hundreds or thousands of employees, yet never need to show that there are common issues susceptible to common proof – or even that their own claims are typical of those of other employees.

As a result, there has been little to prevent plaintiffs and their counsel from filing massive PAGA actions on behalf of all of an employer’s employees, even without having any basis to believe that many those employees suffered any violation at all.

On September 1, 2021, Massachusetts Attorney General Maura Healey approved two versions of a ballot initiative (version 1, version 2) concerning the relationship between app-based drivers (such as those who transport passengers or deliver food) and the companies with which they contract. If passed, the ballot initiative will enact the Relationship Between Network Companies and App-Based Drivers Act (the “Act”) and classify such drivers as independent contractors, not employees. It will also require ride-sharing and food-delivery companies to provide them with certain benefits.

Many New York families employ domestic workers –individuals who care for a child, serve as a companion for a sick, convalescing or elderly person, or provide housekeeping or any other domestic service. They may be unaware of federal and New York requirements that guarantee those domestic workers minimum wage for all hours worked, paid meal breaks, and overtime compensation.

In addition, New York imposes specific requirements on employers regarding initial pay notices, pay frequency, and pay statements that also apply to persons who employ domestic workers.

To avoid inadvertent wage and hour violations, it is important that persons who employ domestic workers in New York understand the relevant laws regarding domestic workers and approach what many understandably consider a personal relationship as a formal, business one for wage and hour purposes.

Many people are employed at airports.  Of those, many individuals work within the terminals for private companies.  Federal law requires that those employees who work in the terminals must go through security checks – just like travelers.

Jesus Cazares was one of those employees, working at Los Angeles International Airport (LAX).  In bringing a lawsuit against his employer, Host International, Inc. – which operates the Admiral Club at LAX – Cazares alleged that he and his fellow employees were not paid for the time they spent passing through airport security checks en route to their work at the Admiral Club.  The district court rejected the notion that such time is compensable under California law and, earlier this month, the Ninth Circuit agreed in Cazares v. Host International, Inc.

Employers grappling with the many questions related to bringing employees back into the workplace safely in the midst of the COVID-19 pandemic should pay close attention to the potential wage-and-hour risks attendant to doing so—including whether to pay employees for time spent waiting in line for a temperature check, verifying vaccination status, or completing other health screening inquiries.

Given the growing trend of COVID-19 lawsuits, ignoring these risks could leave employers vulnerable to costly class and collective action litigation.

What the Law Requires

Under ...

This summer, the Colorado Supreme Court addressed whether employers may implement practices by which employees forfeit accrued, unused vacation pay upon the termination of employment.  In Nieto v. Clark’s Mkt., Inc., 2021 CO 48, 2021 Colo. LEXIS 423 (Colo. June 14, 2021), the Court held that the Colorado Wage Claim Act (“CWCA”) requires employers to pay employees for earned but unused vacation upon the separation of their employment. The requirement applies irrespective of an employment agreement or policy forfeiting an employee’s right to such payment.

In Nieto, the ...

1. Introduction

If you have hourly employees that earn bonuses, commissions, or other performance payments, this article is for you.

Properly compensating such employees is often not as simple as paying “time and a half” or “double-time” for qualifying hours.  Rather, federal law, and the laws of many states, require employers to “recalculate” overtime rates to include certain types of non-hourly compensation and pay overtime at those higher rates.  Many employers fail to make such payments, and of those that attempt to pay overtime (and double-time) at rates which ...

In a decision that seems like to be reviewed by the California Supreme Court or rejected by other California Courts of Appeal, one of California’s appellate courts has issued a perplexing decision holding that even employees whose claims are time-barred can file representative actions under California’s Private Attorneys General Act (“PAGA”).

In Gina Johnson v. Maxim Healthcare Services, Inc., the Fourth Appellate District held that the plaintiff could pursue PAGA claims on behalf of other employees even though her own claims were barred by the statute of limitations.

On July 19, 2021, Delaware Governor John Carney signed legislation that will gradually increase the state’s minimum wage to $15 per hour by 2025. This is a substantial increase from Delaware’s current minimum wage of $9.25 per hour. The minimum wage requirements apply to all employers who employ individuals in the state.

Following the examples set by neighboring Maryland and New Jersey, Delaware’s minimum wage increase will occur in phases. Effective January 1, 2022, the minimum wage will increase to $10.50 per hour. Thereafter, the minimum wage will increase annually on the ...

California law generally requires employers to pay non-exempt employees a premium of one hour of pay for non-compliant meal and rest periods. Employers have typically paid such premiums by using the employees’ standard hourly rates. A new California Supreme Court decision requires employers to pay premiums at a higher rate when employees receive nondiscretionary compensation. This change in the law not only will require employers to adjust how they calculate meal and rest period premiums going forward, but it also exposes some of them to litigation for their past practices if ...

Effective July 1, 2021, Virginia employers must ensure that their pay practices comply with a new stand-alone overtime law called the Virginia Overtime Wage Act (“VOWA”). VOWA largely tracks the federal Fair Labor Standards Act (“FLSA”) in that it incorporates most FLSA exemptions and requires employers to pay 1.5 times a nonexempt employee’s regular rate of pay for all hours worked in excess of 40 hours each workweek. However, VOWA and the FLSA differ in several ways.

Determining an Employee’s Regular Rate of Pay

VOWA’s most significant divergence from the FLSA ...

California law generally requires that non-exempt employees be paid 1.5 times their “regular rate of pay” for work performed beyond 40 hours in a week or 8 hours in a day – and twice their “regular rate of pay” for time worked in excess of 12 hours in day or beyond 8 hours on the seventh day of the workweek.

While “regular rate of pay” is not expressly defined in the California Labor Code, there should be few questions about what that rate is when an employee works at the same rate during the workweek.

But when an employee works at two (or more) different rates of pay during a single ...

On June 16, 2021, Hawaii enacted Senate Bill 793 (the “Act”), which repeals an exemption to the minimum wage for disabled employees, often referred to as “the disability subminimum wage.” The Act took effect immediately and requires all Hawaii employers pay disabled individuals no less than the state minimum wage.

Previously, Section 14(c) of federal Fair Labor Standards Act permitted Hawaii employers to pay individuals with disabilities less than the state minimum wage, which is currently set at $10.10.  However, the Act explains that the exemption, which was intended to ...

As we previously reported, starting in 2016 the District of Columbia by statute gradually increased its minimum wage to $15.00 per hour, and its tipped minimum to $5.00, effective July 1, 2020. However, included in the statute were provisions for subsequent increases of both these rates based on the annual average increase in the Consumer Price Index for All Urban consumers in the Washington Metropolitan Statistical Area. See D.C. Code §32-1003(a)(6) and (f)(2).  The D.C. Department of Employment Services (DOES) recently announced that pursuant to these provisions, effective ...

On June 21, 2021, the U.S. Department of Labor (DOL) announced a new proposed rule related to when an employer may take a tip credit and pay a lower minimum wage to tipped employees performing so-called tipped and non-tipped duties.  The proposed rule appeared in the Federal Register on June 23, 2021 and is open for public comment until August 23, 2021.  The proposal shows employers the new road that President’s Biden’s administration is paving, which is a sharp turn away from the Trump administration’s approach.

The Fair Labors Standards Act (FLSA) allows employers to pay ...

On May 28, 2021, the Ninth Circuit Court of Appeals delivered a win to Walmart in a lawsuit brought by Roderick Magadia (“Magadia”) alleging violations of California’s wage statement and meal break laws.

The Ninth Circuit overturned a $102 million dollar judgment issued by United States District Judge Lucy H. Koh – comprised of $48 million in statutory damages and $54 million in civil penalties under California’s Private Attorneys General Act (“PAGA”).  It did so because it found that Magadia lacked Article III standing because he could not establish that he suffered ...

On May 25, 2021, both houses of the Illinois General Assembly approved an amendment to the State’s Wage Payment and Collection Act (“the Act”).  The change would require employers who violate the Act to pay damages of 5% of the amount of any underpayment of wages, compensation, or wage supplements for each month following the date of payment during which the amount(s) owed remain unpaid.  This represents a 150% increase to the penalty, as the statutory rate before this amendment was 2%.  The measure will take effect immediately upon signature by Governor J.B. Pritzker.

The Act

For decades, the practice of motor carriers arranging for freight to be transported by independent owner-operators—i.e., independent contractors who drive their own trucks—has been ubiquitous. However, this practice is now under threat in California because of a recent court decision.

On April 28, 2021, in California Trucking Ass’n v. Bonta, No. 20-55106 (9th Cir. 2021) (“CTA v. Bonta”), the United States Court of Appeals for the Ninth Circuit addressed whether the broad preemption language of the Federal Aviation Administration Authorization Act of 1994 ...

As we previously discussed, in early January 2021, the U.S. Department of Labor issued a Final Rule regarding independent contractor status under the Fair Labor Standards Act.  On May 5, 2021, in line with the policy goals of the new administration, the Department issued a Final Rule withdrawing the January Final Rule.  The withdrawal went into effect on May 6, 2021, upon the publication in the Federal Register (86 FR 24303).  The January independent contractor rule was originally to go into effect in March, before the Department issued a notice of proposed rulemaking proposing to ...

With the United States in the midst of dealing with the coronavirus pandemic, there has been focused attention on the rollout of vaccines approved for emergency use by the U.S. Food and Drug Administration, and the actual number of individuals being vaccinated. Presently, 250 million COVID-19 vaccine shots have been administered and individuals 16 years of age and older are eligible to receive the vaccine.  Now, in an effort to get more people vaccinated, employers are being encouraged to provide paid time off for employees who have not yet been vaccinated against the virus.

Federal ...

For more than 80 years, federal law has provided a general right to premium pay for working overtime hours, originally just for covered employees, then later for employees of covered enterprises.  The laws of more than 30 states contain a comparable requirement, though in some instances differing in the particulars.

This presumptive right to the overtime premium is, of course, subject to the familiar exemption construct whereby individuals whose employment satisfies one or more of the dozens of exempted categories fall outside the premium pay requirement.  Many of the most ...

I had planned to focus this month’s installment of “Time Is Money” on the practice of rounding timeclock entries, addressing the history behind the practice as well as factors that make rounding today a riskier proposition than it used to be.  Then, while reviewing our previous writings on the subject, I came across my colleague Mike Kun’s treatment of the topic in our July 2019 installment, where he already said pretty much everything I had to say.

Back at the drawing board, it occurred to me that rounding is part of a broader challenge that businesses face: how best to record ...

We have previously discussed on this page how rounding practices can be problematic.  Now, in Donohue v. AMN Services, LLC, the California Supreme Court has provided yet another reason for employers in California to review their time rounding practices, as well as their meal period practices.

As we previously discussed, more than eight years ago in Brinker Restaurant Corp. v. Superior Court, the California Supreme Court clarified many of the general requirements for meal and rest periods under California law.  Relevant to the decision in Donohue, the Court held that employees must be ...

A sometimes-overlooked requirement for classifying an employee as exempt from overtime is that, with limited exceptions, the employee must be paid on a “salary basis.” [1] Indeed, when employers fail to pay their exempt employees on a salary basis, they may be subject to lawsuits alleging exempt misclassification. As such, properly paying employees on a salary basis is critical to classifying employees as exempt.

The General Rule

Among other requirements, in order for an employer to classify an employee as exempt from overtime, the employee generally must be paid on a ...

In November 2020, California voters approved Proposition 22, removing businesses that operate on-demand rideshare and food delivery platforms from the scope of AB 5, California’s controversial independent contractor law.  But before voters approved Proposition 22, the Attorney General of California filed suit against two such businesses, seeking injunctive relief, restitution, and penalties.

As we wrote about here, in August 2020, a California Superior Court judge issued a preliminary injunction prohibiting those businesses from treating drivers who use their ...

On January 29, 2021, the U.S. Department of Labor announced the immediate termination of its Payroll Audit Independent Determination Program (PAID).  Launched in March 2018 by the Wage and Hour Division (WHD), PAID was intended to resolve wage and hour disputes with greater expediency and at lower cost to employers.  However, in the WHD’s press release, Principal Deputy Administrator Jessica Looman indicated that the program had not achieved the desired effect, stating that the PAID “program deprived workers of their rights and put employers that play by the rules at a ...

The Wage and Hour Division of the U.S. Department of Labor (“WHD”) issued six opinion letters in January 2021.[1]  They address a number of important issues under the Fair Labor and Standards Act (“FLSA”).  To ensure wage and hour compliance, we recommend reviewing these letters closely and consulting counsel with any questions as to how they may apply to a specific business situation.

FLSA2021-1

In FLSA2021-1, the WHD addressed whether account managers employed by a life science products manufacturer were properly classified as exempt from the FLSA minimum wage and ...

In a provocative  decision in the case known as  Swales v. KLLM Transport Servs., L.L.C., No. 19-60847 (5^th Cir. 2021), the U.S. Court of Appeals for the Fifth Circuit broke from the pack by upending the standard two-step process for Fair Labor Standards Act (“FLSA” or the “Act”) collective certification. The Court opined that the two-step process followed by many, if not most, district courts throughout the country wrongly permitted conditional certification of collective actions without the appropriate evidentiary support to properly determine whether members of the ...

As part of a “third wave” of executive orders, on January 22, 2021, President Biden issued an executive order instructing the Director of the U.S. Office of Personnel Management to “provide a report to the President with recommendations to promote a $15/hour minimum wage for Federal employees.”  The Biden Administration announced via a Fact Sheet published on the White House’s website that the move is purportedly designed to ensure that the federal government is a model employer:

[Federal employees] keep us healthy, safe, and informed, and their work transcends partisan ...

On January 19, 2021, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued an Opinion Letter applying the Department’s recently-issued Final Rule concerning Independent Contractor Status under the Fair Labor Standards Act (the “Final Rule”).  This Opinion Letter provides helpful guidance to businesses, especially those in highly-regulated industries, on how to properly structure their relationships with independent contractors under the Fair Labor Standards Act (“FLSA”).

As background, the FLSA’s minimum wage and overtime pay ...

As we have previously written here, the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court dramatically changed the standard for determining whether workers in California were properly classified as independent contractors, creating a new “ABC” test that has subsequently been codified as AB 5. A significant question left open was whether Dynamex would apply retroactively.

In Vasquez v. Jan-Pro Franchising International, Inc., the California Supreme Court has concluded that Dynamex indeed applies retroactively ...

To close out 2020, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) recently issued two new opinion letters addressing overtime payments for caregivers and travel time for partial-day teleworkers under the Fair Labor Standards Act (“FLSA”).  We recommend a close review of these opinion letters as they offer a helpful overview of key FLSA principles and may provide answers to questions shared by numerous employers.

FLSA2020-19

In Opinion Letter FLSA2020-19, the WHD addressed whether an employee who voluntarily teleworks for part of the day and works at the ...

On January 6, 2021, the U.S. Department of Labor released its much-anticipated Final Rule addressing independent contractor status under the Fair Labor Standards Act.  The Department indicates that the rulemaking should appear in the Federal Register on January 7, 2021, with an effective date 60 days thereafter.

The Final Rule is, in substance, very similar to the Proposed Rule the Department issued in September 2020 (and discussed here).  Under the Final Rule, the key points are as follows:

• The “ultimate inquiry” is whether an individual is “economically dependent” on ...

At the time we are posting this, we are just weeks away from the inauguration of President-Elect Joseph Biden. Although perhaps not at the very top of the list of questions about the forthcoming Biden administration, somewhere on the list has to be this question: “What changes will we see in wage-hour law?”

We don’t have the proverbial crystal ball, but there are a number of issues that the Biden administration may focus on at some point during the next four years, be it through legislation, new rules implemented by the Department of Labor (DOL) or even executive orders.  They may ...

Rules relating to tip credit and pooling have resulted in a significant amount litigation in the hospitality industry, and, in many cases, substantial liability or settlements. Yesterday, the U.S. Department of Labor (“DOL”) announced its new final rule that revises current regulations pertaining to tipped employees. The final rule specifically addresses tipped occupations that qualify for application of a tip credit, as well as permissible and impermissible tip pooling practices.

Allowance of Tip Credit for Tasks Related to Tip-Producing Occupations

The final rule ...

Many employers may be eager to put 2020 in the rearview mirror.  But before ringing in the New Year, employers should carefully evaluate whether they need to make any changes to their current practices to ensure that they remain in compliance with state and local laws, including those relating to minimum wage.

As reflected in the chart below, in 2021, minimum wage will increase in more than two dozen states, with most of the changes set to take effect on January 1.  Minimum wage will also increase at the local level in a number of counties and cities.  Accordingly, employers with minimum wage ...

Which state’s wage and hour laws apply to Louisiana employers whose employees applied and interviewed for their jobs in Louisiana, acknowledged receipt of employment documents in Louisiana, and resided in Texas, Mississippi, and Ohio while they worked offshore?  The answer, according to the California Court of Appeals, is California if the employees are based in California.

In Gulf Offshore Logistics, LLC et al. v. Superior Court of Ventura County, employees worked on a vessel that provided maintenance services to offshore oil platforms located outside California’s ...

In a continuing trend, employers are abandoning on-call scheduling as states and cities continue to pass predictive scheduling laws.

1. What is Predictive Scheduling?

Predictive scheduling laws require employers to give employees adequate notice of when they will work so that they can plan for and around their work shifts.  The idea is that, unlike on-call scheduling, predictable schedules make it easier for workers, especially part-time retail and restaurant workers, to meet their needs, such as working another job, attending school, or arranging childcare.  The laws generally ...

The legal landscape surrounding independent contractor relationships in California continues to evolve swiftly.

As we wrote here, in January 2020, state court Judge William Highberger issued a decision holding that the Federal Aviation Administration Authorization Act (“FAAAA”) preempts use of California’s version of the “ABC” test (as adopted by the California Supreme Court in Dynamex Operations West Inc. v. Superior Court, and subsequently codified in AB 5) to differentiate between independent contractors and employees in the trucking industry.  More ...

As we have written here before, ride share and food delivery companies doing business in California had a lot at stake in the November 3, 2020 election. In fact, it was possible that those businesses might even cease doing business in California depending on the outcome of the election – or dramatically change their business models in the state.

Specifically, on November 3, 2020, California voters were asked to decide the fate of Proposition 22, the ballot initiative that would remove those companies from the scope of AB 5 and allow drivers to be treated as independent contractors. (As ...

November 3, 2020 has been circled on the calendars of app-based ride share and food delivery companies doing business in California for many months now.  After a new ruling by the California Court of Appeal, those companies have likely gone back and circled that date a few more times in thick red ink.

On November 3, 2020, California voters will decide the fate of Proposition 22, the ballot initiative that, if passed, will allow app-based ride share and food delivery companies to treat drivers as independent contractors rather than as employees, carving them out of California’s ...

With the end of the year just around the corner, many employers may be contemplating giving year-end bonuses to their non-exempt employees. And bonuses, year-end or otherwise, can create problems for employers when it comes to calculating overtime compensation for those employees.

One mistake some employers make concerns calculating an employee’s regular rate for purposes of paying overtime premiums.  Indeed, many employers have found truth in the adage “no good deed goes unpunished” after implementing bonus policies or issuing other forms of compensation intended to ...

In response to the increased use and enforcement of class and collective action waivers, plaintiffs’ attorneys are now relying on a new strategy to gain leverage over businesses.  More specifically, they have started to commence mass arbitrations by simultaneously filing hundreds—and in some cases, thousands—of individual arbitration demands in an effort to trigger a business’ obligation to pay its share of filing fees for the arbitrations.

Depending on the number of arbitration demands at issue, the filing fees alone can add up to tens of millions of dollars.

Postmates ...

On September 22, 2020, the U.S. Department of Labor (“DOL”) released its highly anticipated proposed rule for distinguishing independent contractors from employees under the Fair Labor Standards Act (“FLSA”).

When evaluating independent contractor status under the FLSA, courts have traditionally applied what is known as the “economic realities” test. The test varies slightly from circuit to circuit, and, perhaps, court to court, but courts generally consider the following factors on a non-exclusive basis: (i) the degree of control that the putative employer ...

Many employers may—understandably—view gratuities as discretionary payments that customers leave in exchange for superior service.  After all, federal wage and hour regulations define “tips” as “sum[s] presented by a customer as a gift or gratuity in recognition of some service performed.”  29 C.F.R. § 531.52 (emphasis supplied).  The regulations also state that “compulsory charge[s] for service” are not tips.  29 C.F.R. § 531.55 (emphasis supplied).

But in some cases, a mandatory charge may qualify as a tip that employers must distribute to staff under state or ...

We recently authored “Elections May Decide Fate of Gig Worker Classification Regs,” the first of a series of articles on wage and hour issues for Law360.  Subscribers can access the full version here - following is an excerpt:

As the gig economy has grown, so too have questions about it. One of the most consequential questions in the past several years has been whether workers in the gig economy are properly classified as independent contractors for purposes of various federal and state statutes, or whether they should be classified as employees of the businesses with which they ...

On September 9, 2020, Governor Newsom signed Assembly Bill (“AB”) 736, expanding the professional exemption under Industrial Welfare Commission (“IWC”) under Wage Orders Nos. 4-2001 and 5-2001 to expressly include part-time or “adjunct” faculty at private, nonprofit colleges and universities in California.  The sponsors of AB 736, the Association of Independent California Colleges and Universities, advocated for the bill to address perceived ambiguities in the California Labor Code that had spawned litigation causing some colleges and universities to ...

On September 8, 2020, a federal district court struck down the U.S. Department of Labor’s (“DOL”) Final Rule on joint employer liability, concluding that the Rule violated the Administrative Procedure Act (“APA”) by impermissibly narrowing the definition of joint employment under the Fair Labor Standards Act (“FLSA”), departing from the DOL’s prior interpretations on joint employment without adequate explanation, and otherwise being arbitrary and capricious.  We previously blogged about the details of the Final Rule here.  The DOL published the Final Rule in ...

In a case of first impression for the Fifth Circuit Court of Appeals, a Fifth Circuit panel has ruled that it is the employee, not the employer, who has the burden to establish that bonus payments are non-discretionary and, therefore, must be included in the regular rate of pay for computation of overtime under the Fair Labor Standards Act (“FLSA”).  Joshua Edwards, et al. v. 4JLJ LLC, et al., Case Number 19-40553 (5th Cir. September 3, 2020).

Under the FLSA, a non-exempt employee’s regular rate is the hourly rate actually paid to that employee for all remuneration.  Section ...

At the end of August, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued four new opinion letters addressing various issues arising under the Fair Labor Standards Act (“FLSA”).  The topics covered include the retail or service establishment, highly compensated employee, and professional exemptions; reimbursing non-exempt employees for required use of a personal vehicle; and the fluctuating workweek method of calculating overtime pay.  These opinion letters offer a helpful overview of key FLSA principles and may answer fact-specific questions ...

Many employers with operations in California may already be familiar with Frlekin v. Apple, Inc.  The heavily litigated case, first filed in 2013, involves claims that Apple retail employees are entitled to compensation for time spent waiting for and undergoing mandatory exit searches.

The Ninth Circuit has now concluded that those employees are entitled to be paid for that time, holding that they are entitled to an award of summary judgment in their favor.  That is a far cry from the original 2015 ruling in the case in which United States District Court Judge William Alsup denied the ...

In this installment of Epstein Becker Green’s “Class Action Avoidance” webinar series, attorney Paul DeCamp discusses wage and hour issues that could arise from transitioning out of the work-from-home reality so many businesses have faced and into the return-to-work phase.

Employers across the country should focus on creating a safe working environment. Certain states and localities have required that employers bringing employees back to the workspace provide or pay for any mandatory personal protective equipment (PPE), including thermometers, gloves, and masks ...

We have written frequently here about AB5, California’s controversial law that creates an “ABC” test that must be satisfied in order for a worker to be treated as an independent contractor.  As we explained here, AB5 codified and expanded the “ABC” test adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be classified as employees or as independent contractors.

While the statute was unambiguously aimed at ride share and food delivery companies that treat drivers as ...

In this installment of Epstein Becker Green’s “Class Action Avoidance” webinar series, attorney Michael S. Kun addresses potential wage and hour class actions related to expense reimbursement for employees working from home during the COVID-19 pandemic.

Many employers may have employees working from home for the first time—or at least have employees in certain job categories doing so for the first time. Even employees who sometimes worked from home previously may be doing so for much more time now and, arguably, incurring greater expenses as a result.

This webinar will ...

In this installment of Epstein Becker Green’s “Class Action Avoidance” webinar series, attorney Jeffrey H. Ruzal discusses wage and hour issues that could result from “work from home” policies and practices on account of the ongoing COVID-19 pandemic.

As fall approaches, businesses are deciding whether to fully reopen, maintain a largely remote workplace, or provide employees with the option of working in the workplace or at home through a hybrid approach. Recent reports and surveys have shown that many remote workers throughout the United States have been, on ...

Given the ongoing considerations businesses face with the COVID-19 health crisis, many employers have increased the amount of teleworking for employees, including many roles that ordinarily would not telework.  As the COVID-19 health crisis has progressed, employers have continued to extend their teleworking policies while other employers are gearing up to reopen offices.  With these ongoing health risks, it is important for employers to review their teleworking policies and practices to ensure that they are appropriately compensating employees under the Fair Labor ...

Given the ever-increasing number of wage-hour class and collective actions being filed against employers, it is no surprise that many employers have turned to arbitration agreements with class and collective action waivers as a first line of defense, particularly after the United States Supreme Court’s landmark 2018 Epic Systems v. Lewis decision.

If there is a common misconception about Epic Systems, however, it is that the Supreme Court concluded that all arbitration agreements with all employees are enforceable under all circumstances.  The Court reached no such ...

As we wrote here just several days ago, Californians were facing the seemingly unimaginable this week– the possibility of living without ride share services for the foreseeable future.

In short, a state court judge issue a temporary restraining order (“TRO”) requiring ride share companies to treat their drivers as employees in purported compliance with  AB 5, California’s controversial new law that only permits workers to be classified as independent contractors in most industries if they satisfy an “ABC” test.

After the same judge refused to stay the TRO during the ...

To some, it may feel like it was a lifetime ago when ride share companies did not even exist.  In those seemingly long-ago days, people relied upon friends to drive them to or from the airport, or assigned designated drivers for those nights when they attended events where alcohol would be served, or used other methods of transportation to travel the roadways to their various destinations.

Californians may soon be living like that again.

As we shared the other day, a California Superior Court has issued a temporary restraining order requiring ride share companies to treat their drivers as ...

We have written here frequently about California’s controversial AB 5 law, which permits companies to treat workers as independent contractors only if they satisfy a stringent “ABC” test.

The broad statute, unambiguously written to try to force companies to treat gig economy workers as employees, has been the subject of a great deal of debate and litigation, including a state court action filed by the State Attorney General trying to force ride share companies to treat their drivers as employees.

In the action filed by the State Attorney General, the Superior Court judge has ...

In employment, as in life generally, breaking up can be hard to do.  This is particularly so when a departing employee owes the employer money.  Most employers understand that applicable law often prohibits simply deducting such debts from an employee’s final paycheck.  Consider, for example, a recently terminated employee who refuses to return a $500 printer the employer provided to allow the employee to work from home.  In most states, absent an agreement in writing, wage payment laws prohibit the employer from deducting $500 from the employee’s final paycheck to recover the cost ...

As we wrote here recently,  two federal courts in California rejected Postmates’ attempt to escape having to defend thousands of individual arbitrations filed by drivers contending they have been misclassified as independent contractors. Those decisions require Postmates to pay millions in arbitration fees alone.

A federal court in Illinois has now reached the same conclusion, holding that Postmates must proceed with more than 200 individual arbitrations that will cost Postmates $11 million in arbitration fees.

Arbitration agreements with class action waivers have become ...

The California Labor Commissioner’s Office has taken aim at Mobile Wash, Inc., a business that offers a mobile app for on-demand car washing and detailing services, filing a lawsuit against the company and its president to enforce AB5, California’s controversial law designed to make it more difficult for businesses to engage workers as independent contractors.

As we wrote here, AB5 codified and expanded the “ABC test” adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be ...

While the COVID-19 pandemic remains a challenge to employers nationwide, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) continues to field non-COVID-related wage and hour questions.  On June 25, 2020, the WHD issued five new opinion letters addressing the outside sales, administrative, and retail or service establishment exemptions under the Fair Labor Standards Act (“FLSA”), as well as the relationship between third-party payments to workers and the FLSA’s minimum wage requirement.  Employers should take note of these useful explanations of key ...

The times they are a-changin’ and Washington’s rules relating to overtime pay are changing with them. Effective July 1, 2020, the Washington State Department of Labor & Industries (“L&I”) has updated the criteria for workers to be exempt from receiving overtime pay, paid sick leave, and other requirements under the state Minimum Wage Act. These changes affect executive, administrative, and professional workers, as well as outside salespeople and computer professionals across all industries in Washington State.

Overtime exemption rules generally require “white ...

As employers continue to deal with workplace issues related to COVID-19, you should be aware that the U.S. Department of Labor’s Wage and Hour Division (“WHD”) has indicated that it will be investigating allegations of wage and hour violations that have occurred as a result of the rapid workforce changes undertaken by many organizations earlier this year.   Unfortunately, as you may know, the WHD rarely announces those investigations in advance and, instead, employers typically learn of them when a letter arrives announcing 72 hours’ notice to produce payroll records, or a ...

As we wrote about in more detail here, the ongoing coronavirus pandemic has brought increased attention to the legal and practical distinctions between employees (who are entitled to various compensation and employment benefits under the law) and independent contractors (who generally are not).  The pandemic has also prompted lawmakers at the federal, state, and local level to explore further legislation designed to provide independent contractors with greater protections under the law.

The Seattle City Council has now passed two ordinances—the “Gig Worker Premium Pay ...

Full-Time and Part-Time Employees under the FFCRA

The Department of Labor’s Wage and Hour Division issued standards governing emergency paid sick leave and expanded family and medical leave available to full-time and part-time employees for COVID-19 related reasons in its April 6, 2020 temporary rule on Paid Leave under the Families First Coronavirus Response Act (“FFCRA”) (the “Temporary Rule”).

Of particular interest to this blog is the Temporary Rule’s discussion of what it means to be a “full-time” or “part-time” employee for purposes of taking ...

Our colleague Jonathan Assia at Epstein Becker Green had recently published a post on the Workforce Bulletin blog that will be of interest to our readers: “Class Action Mooted When Class Representative Settles, Ninth Circuit Rules.”

Following is an excerpt:

On June 3, 2020, the Ninth Circuit dismissed a wage and hour class action on the grounds that once the class representative plaintiff settled his individual claims and no longer had any financial stake in the litigation’s outcome, the entire litigation was moot.

In Brady v. AutoZone Stores, Inc. and Autozoners, LLC ...

Faced with the question of whether unionized employees and their employer can bargain away the right to be compensated for employer-mandated travel time, a California Court of Appeal has ruled that they in fact may not do so.  In Carlos Gutierrez v. Brand Energy Services of California, Inc., the Court concluded that Wage Order 16 (Cal. Code Regs., tit. 8, § 11160) requires that employees be paid for all employer-mandated travel time — and that it cannot be negotiated away by a union and the employer.

The plaintiff in the case was a journeyman scaffold worker at gasoline refineries. He and ...

As states across the country start to reopen their economies after COVID-19 shutdowns, many businesses are likewise preparing to have employees return to work.

However, before reopening, businesses will need to comply with numerous state and local protocols designed to ensure the health and safety of employees and consumers, including social distancing, maximum occupancy and one-way flow.

Even if not required, many employers are instituting employee temperature checks upon arrival at the workplace. While the U.S. Equal Employment Opportunity Commission recently endorsed ...

Many hospitality businesses, such as restaurants and bars, have found themselves restructuring their daily operations in light of the current global COVID-19 health crisis, and the subsequent federal, state, and local shelter in place orders. For instance, where restaurants and bars once served customers on a dine-in basis, perhaps they are now restricted to take-out only or delivery options, and, as a result, many employers who are still operating in the wake of the pandemic now have very few employees with customer-facing roles.

Because of the necessary changes in daily ...

During the Covid-19 pandemic, companies should focus in the first instance on health and safety issues for workers, customers, and the public at large during a pandemic, but they cannot lose sight of the wage and hour risks that are lurking in these challenging times.

For a staggering number of U.S. businesses over the past several weeks, the early and middle part of 2020 will look something like this:

Reduced customer demand or government-ordered site closures lead to furloughs or layoffs of a significant part of the workforce. Where feasible, employees work from home. As local ...

California law has specific requirements regarding the payment of overtime to employees. An employer’s failure to pay overtime—or failure to pay the correct overtime rate—can result in a litany of unintended Labor Code violations, which, in turn, can lead to enormous liability. Therefore, it is critical that employers understand when overtime is due and how to calculate the overtime rate of pay.

1.   When is overtime pay due?

In California, the general overtime requirement is that a nonexempt employee shall receive a premium of at least:

• One and one-half times the employee’s ...

From the time of its original enactment in 1938, the Fair Labor Standards Act has contained an exemption for certain employees of a “retail or service establishment.”  In 1961, the Department of Labor’s Wage and Hour Division (“WHD”) issued interpretive guidance to aid in determining whether an establishment is or is not “retail or service” for purposes of what was then the section 13(a)(2) overtime and minimum wage exemption.  Part of the test includes whether the business is in an industry in which a “retail concept” exists.  See 29 C.F.R. § 779.316.  WHD created ...

Let me be the millionth person to say that we are living in unprecedented times.

Well, unless you count the Spanish Flu, which few of us probably dealt with as that was more than a century ago.

And, not incidentally, few if any of the wage-hour laws employers deal with today were in place back then.

As employers navigate issues that they never imagined, there are more than a few myths circulating about wage-hour laws that are worth mentioning here – and worth debunking.

Myth No. 1: “Employees Won’t Sue Over Alleged Wage-Hour Violations Occurring During The COVID-19 Crisis”

The ...

With summer rapidly approaching and COVID-19 shelter-in-place orders still in effect, many companies face an important and difficult decision of canceling this year’s summer programs, delaying start dates or conducting programs virtually. This ultimately will be a business decision with no one-size-fits-all answer.

A good first step is to assess whether the influx of new summer workers will help or hinder current operations. Are temporary summer interns a boost to productivity or a drag on experienced employees who may be called upon to train and mentor them? Will the employer expect to offer employment to these summer recruits following the internship?

In addition, given the seismic nature of COVID-19 that has indiscriminately shaken businesses in most industries, can an employer’s business afford to bring on temporary summer workers and, if so, does the business have the literal and figurative bandwidth to support these workers, especially if they will be teleworking for at least part of the summer?

Below are five compliance and management issues employers should consider for their upcoming summer programs.

Onboarding

Typically employers have a pre-employment screening process in place for summer interns/analysts/associates, which may include, among other things, screening for illegal drugs and controlled substances; investigating and verifying criminal history; and verifying education and prior employment history. Many steps in the screening process take place in person. However, even where new hires may be asked to commence employment remotely, including an incoming summer class, compliance is still possible.

Since the start of COVID-19 pandemic, the federal government has relaxed many of the regulatory requirements for onboarding new hires. On March 20, the U.S. Department of Homeland Security announced that for the next 60 days or for the duration of the National Emergency (whichever is sooner), employers with staff teleworking due to COVID-19 can obtain and inspect new employees’ identity and employment authorization documents remotely rather in the employee’s physical presence, as long as they provide written documentation of their remote onboarding and teleworking policy for each employee.

For those of you who may have been wondering whether the California Attorney General’s office was still open during the statewide stay-at-home order triggered by the coronavirus, the answer is yes – as evidenced by a statewide misclassification lawsuit filed in San Francisco by the Attorney General, along with the city attorneys for Los Angeles, San Francisco and San Diego.

The lawsuit alleges that ride share companies have unlawfully misclassified drivers as independent contractors under AB 5, the controversial statute that went into effect on January 1, 2020.

As we previously wrote here, AB5 codified and expanded the “ABC” test adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be classified as employees or as independent contractors.

To satisfy the “ABC” test, the hiring entity must demonstrate that:

• the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
• the worker performs work that is outside the usual course of the hiring entity’s business; and
• the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Generally, the Fair Labor Standards Act (“FLSA”) requires employers to compensate their non-exempt employees for all time that they are required or allowed to perform work, regardless of where and when the work is done.  However, an exception exists for small amounts of time that are otherwise compensable work time but challenging to record, otherwise known as the de minimis doctrine.  Of course, the million-dollar question is how much time is considered de minimis.  Unfortunately, there is no bright-line rule and the answer may differ under federal law and California law, or ...

We have written here about the efforts of several gig economy companies like DoorDash to avoid having to conduct – and pay for – thousands of individual arbitrations alleging that their workers had been misclassified.

As we have said before, companies that implement arbitration agreements with class action waivers must be careful what they ask for.  By using such agreements, they run the risk of dozens, hundreds or even thousands of individual arbitrations, the cost of which could threaten the companies’ very existence.  (In California, we estimate that the arbitration costs ...