Restaurants: Do your employees know that you take the tip credit?

Posted in Tip Credit

Tip-Hand11366723.jpgIf not, you might have a problem.

In 2011, the U.S. DOL published a regulation mandating that restaurants who count tips toward the minimum wage as permitted under the Fair Labor Standards Act have to notify employees that they are taking the credit. (See U.S. DOL Fact Sheet #15 for more information on the current requirement.) Last week, a federal district court in Pennsylvania ruled that a former bartender at Cadillac Ranch All American Bar & Grill could move forward with a hybrid state law / FLSA class/collective action, alleging that the restaurant chain violated the DOL’s notice regulation by failing to tell tipped workers that their wages would be calculated using the tip credit. According to the court’s opinion, the class includes approximately 220 current and former tipped employees. Koenig v. Granite City Food & Brewery, Ltd.

In and of itself, this decision is not particularly surprising or ground-breaking, but that is exactly why it should worry restaurants and other employers of tipped employees. There are certainly areas of business where an informal, “good enough” approach is in fact good enough. Wage and hour law is not one of those areas. The FLSA and state wage and hour law are all about technicalities, which is why they are perfect traps for unwary employers and great sources of business for lawyers.

So, restaurant owners and operators, take heed: If you are not presently notifying all of your employees that you will be taking a tip credit to comply with minimum wage requirements under the FLSA, you may owe all of your tipped employees the difference between the “tipped” minimum wage ($2.13 per hour) and the minimum wage for non-tipped employees ($7.25 per hour), or a total of $5.12 for every hour worked. Over a period of two to three years. Plus liquidated damages (doubling the amount owed) and attorneys’ fees. State law may further increase the liability. If this situation sounds familiar, reach out to your employment counsel today to find out how to protect your business.

 

Do School Employees Get Overtime For Occasional Extra Duty? [Wage & Hour FAQ]

Posted in Overtime, Public Employees

FAQs17489126.jpgQ. Our school district has hourly, non-exempt employees who occasionally perform extra work for the district – for example, chaperoning a school dance, or taking tickets at home games. Do we need to track the hours that employees perform on these tasks and pay them overtime if their total work hours go over 40 for a single week?

A. Usually, when an employee works more than one job for an employer, the rule under the FLSA is that the employer must aggregate all of the employee’s work hours for each workweek. If the employee’s total hours go over 40, they’re entitled to overtime pay, even if the extra work was in a separate job and completely voluntary on the part of the employee. (See our earlier post on this subject for a more detailed discussion.)

However, Section 7(p)(2) of the FLSA creates a limited exception to this rule for state and local government employees. Three conditions have to be met in order for this exception to apply: Continue Reading

Trump Names New Nominee for Secretary of Labor

Posted in Trump Administration

Yesterday, President Trump’s then nominee for Secretary of Labor, Andy Puzder, withdrew his nomination ahead of his confirmation hearing given the increasing opposition to his nomination by both parties. Less than 24 hours later, President Trump announced Alexander Acosta as his new choice for Secretary of Labor. Mr. Acosta is currently the dean of Florida International University College of Law but has experience in both the public and private sector. Some of Mr. Acosta’s prior positions include being appointed by President George W. Bush to serve as a member of the National Labor Relations Board, his appointment to the role of Assistant Attorney General for the Civil Rights Division of the Department of Justice, and a high profile role as U.S. Attorney for the Southern District of Florida. If confirmed, Mr. Acosta will be the first Hispanic member of President Trump’s cabinet.

It’s too early to tell what type of agenda we could see from the DOL if Mr. Acosta is confirmed but he likely will be a little more worker-friendly than Mr. Puzder. We will continue to update you as more information becomes available regarding Mr. Acosta.

Trump leaves DOL OT rules on life support - For Now

Posted in *New Exemption Rules, Trump Administration

President Trump has had a busy week since his inauguration: ordering construction of a wall, starting to unwind the ACA, arguing with the media about how many people attended his inauguration – the list goes on. One thing that he has not yet gotten to is the U.S. DOL’s stalled overtime exemption rules. Right now the rules remain in limbo, temporarily suspended by order of a U.S. District Court in Texas. That order is now on appeal to the 5th Circuit Court of Appeals. Earlier this week, the Department of Justice, representing the DOL in the case, asked the 5th Circuit to extend the due date for the government’s brief in the appeal by 30 days “to allow incoming leadership personnel adequate time to consider the issues.” The coalitions of states and business groups opposing the new rules, not surprisingly, did not oppose that request.

While the new administration has not yet taken an express position on the issue, President Trump has railed against regulations seen as hampering business, and he nominated a vocal critic of the rules, fast food CEO Andy Puzder, to lead the Department of Labor. However, because the rules were passed through a process of “notice and comment” rulemaking, the Trump Administration cannot simply reverse them with the stroke of a pen without going through the same lengthy process of publishing proposed rules, seeking public input, and then issuing final regulations. One way to avoid that process would be to direct the Department of Justice to drop its defense of the pending lawsuit and admit that the rules were improper, allowing the court’s injunction to become final. However, even that might not be the end of the story, as the AFL-CIO has asked for leave to step in and defend the final rules should the government try to bow out.

In short, employers are still stuck right where they’ve been since November. The rules are on life support and it’s likely that the Trump Administration or Congressional Republicans will pull the plug in one way or another sometime soon. But we don’t know exactly when, and we can’t yet completely rule out the possibility of an unexpected recovery that would allow the rules to take effect – possibly retroactive to December 1, 2016.

For more on how changes ushered in by the new administration will affect the workplace, check out our firm’s Navigating Change portal. 

So Long, Secretary Perez: DOL Head's Goodbye Message

Posted in State Regulation, Trump Administration

Last week, outgoing Secretary of Labor Thomas Perez released a farewell “Memorandum to the American People.” It mostly reads as a recap of the DOL’s news releases over the past several years, touting various DOL initiatives and advocating for further changes, like increasing the minimum wage and mandating paid family leave. The memo must strike a bittersweet note for proponents of the current DOL’s direction. One can pretty safely infer that most of the progressive proposals discussed in the memo – other than perhaps some form of paid maternity leave – are going precisely nowhere under the incoming Trump administration. To the contrary, most observers expect the DOL to roll back many Obama-era changes under the leadership of Trump’s pick for labor secretary, fast-food executive Andy Puzder. If, that is, Congressional Republicans don’t beat them to the punch.

That reality is certainly what prompts the most interesting part of the farewell memorandum, which is its repeated references to action at the state and local levels. For example, the memorandum lauds the fact that 18 states have increased their minimum wages since President Obama called for a minimum wage hike in 2013. It also applauds new state and local family and sick leave laws, noting that the DOL has supported state and local action through “several rounds of paid-leave analysis grants to hep state and local officials examine the feasibility of establishing or expanding paid leave policies.”

Secretary Perez goes on to encourage state and local governments to continue this trend:

While we wait for Congress to act, City and state governments should continue their progress in these areas, and voters should continue to exercise their voices in favor of higher wages and more supportive workplace policies, as voters in several states did this year.

In this area at least, Secretary Perez is likely to get his wish, at least in certain parts of the country. This is a legal blog, not a political one, so I’ll leave the debate over whether paid leave and increased minimum wages are good public policy to the economists and politicians. What I can say with some degree of certainty is that this growing patchwork of state, county and city mandates is making things more complicated for employers. Greater complexity means greater opportunity for errors, greater legal risk, and higher legal costs. All of this may or may not benefit workers and the economy, but it’s at least good news for employment lawyers.

OT Exemption Rules Lawsuit Will Proceed Despite Appeal

Posted in *New Exemption Rules, Litigation

Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas has decided that he will not halt the lawsuit challenging the U.S. DOL’s new overtime exemption rules pending a ruling from the 5th Circuit Court of Appeals on his earlier order temporarily blocking the rules from taking effect.

Here’s a quick recap of where things stand and what this means:

On November 22, the District Court granted a nationwide preliminary injunction blocking the rules from taking effect on December 1. This was not a final ruling in the case, but in order to grant the injunction, Judge Mazzant had to find that the states and business groups challenging the rules had a “substantial likelihood of success on the merits of their claims.”

On December 1, the DOL appealed the District Court’s ruling to the 5th Circuit Court of Appeals. Briefing in that appeal is scheduled to be completed by the end of January, with oral argument shortly thereafter. Assuming, that is, that the Trump Administration doesn’t direct the DOL to withdraw the appeal upon taking office. If that happens, the AFL-CIO could step in to defend the rules if the court grants its motion to intervene.

Because the ruling on appeal was not a final judgment in the case, the default rule is for the lawsuit to move forward in the District Court even while the preliminary injunction is being challenged on appeal. However, the District Court has discretion to stay the lawsuit until the Court of Appeals rules. The DOL asked the District Court to do just that, hoping that it might fare better in the Court of Appeals than it did in the preliminary injunction ruling. Judge Mazzant rejected that motion, finding that the DOL’s motion failed “present a substantial case on the merits” demonstrating that the preliminary injunction was improperly issued. Once again, this is not a final ruling on the merits, but like the initial ruling on the motion for preliminary injunction, it does seem to signal that the judge does not think highly of the Department of Labor’s position in defense of the new overtime rules.

So now what? The District Court could issue its final ruling on the merits of the lawsuit at any time. If it does so before the 5th Circuit rules on the motion for preliminary injunction, it may re-start the appeal process. Of course, the Trump administration may direct the DOL to withdraw its defense of the new rules before the courts decide the issue (and the court could deny the AFL-CIO’s motion to intervene), or Congress may short-circuit the whole process by taking action to block the rules. In short, not much has changed since before the holidays.

 

Penn Students Seek Rehearing, DOL Files Brief in OT Rules Appeal

Posted in *New Exemption Rules, Higher Education, Litigation

Just a quick update on a couple of our recent stories for you wage and hour litigation junkies:

Back on December 5, a three-judge panel of the 7th Circuit Court of Appeals affirmed dismissal of a case in which two former University of Pennsylvania student athletes claimed that they and other intercollegiate athletes were employees entitled to minimum wage under the FLSA. (Read our prior post on the decision for more information.) Undeterred, the students are now asking the full 7th Circuit to rehear their case. They argue, among other things, that the district court and the appellate panel erred in dismissing their complaint without allowing them to develop a factual record to support their claims.

The litigation over the FLSA overtime exemption rules marches on. (See the *New Exemption Rules section of the blog for the complete history.) The U.S. Department of Labor filed its initial brief yesterday, December 15. Briefing will continue through January, with a decision in late February or early March at the earliest. Assuming, that is, that the Trump administration and Congress don’t pull the plug before then.

AFL-CIO Seeks To Intervene In Overtime Rules Court Fight

Posted in *New Exemption Rules

The pending court fight between the U.S. DOL and a coalition of states and business groups over the new overtime exemption rules will not be resolved before President Obama leaves office in January, even though the 5th Circuit Court of Appeals has now granted the DOL’s motion to set an expedited briefing schedule on its appeal from a preliminary district court order blocking the rules from taking effect. While we don’t know for sure what position the Trump administration will take on the new rules, the nomination of fast-food executive Andy Puzder as Secretary of Labor seems to be a pretty clear sign. Puzder has been a vocal critic of the new rule.

Anticipating that the DOL will be less than vigorous in its defense of the rule once President Trump takes office, the Texas AFL-CIO has filed a motion to intervene in the lawsuit so that it can carry on in the DOL’s place should the administration change its position. The court has yet to rule on the motion, so we don’t know whether the labor organization will be permitted to defend the new rule in court.

For those taking bets, this somewhat increases the odds that the rules may take effect at some point notwithstanding the results of the election. However, there are still multiple ways in which they might be permanently blocked. At this point, the only sure bet is that employers will be stuck in limbo for at least the near term.

Seventh Circuit Says Student Athletes Are Not Employees

Posted in Higher Education

iStock_000015026880XSmall.jpgBack in August, the National Labor Relations Board threw the higher education community a curve ball ruling that student assistants at Columbia University were employees under the National Labor Relations Act, and were therefore entitled to organize a union. (For more information see our alert on the case.) An obvious question left unanswered by the Columbia University case was whether and under what circumstances students may also be entitled to minimum wage and overtime under the Fair Labor Standards Act. On Monday, December 5, the Seventh Circuit Court of Appeals weighed in on at least part of that issue, holding that two former University of Pennsylvania athletes were not employees of either the University or the NCAA under the FLSA. Berger v. National Collegiate Athletic Association, et al.

Historical Context

The FLSA itself is distinctly unhelpful in assessing when students might be treated as employees, as it defines “employee” as “any individual employed by an employer,” and “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The statute goes on to define “employ” as “to suffer or permit to work.”

Taken literally, that exceedingly broad definition would seem to sweep in all students who perform anything one could describe as “work.” That could include, for example, students who build sets in the drama department, run the student radio station, or do research work as part of a graduate program. However, the U.S. Supreme Court long ago rejected such a sweeping interpretation of the FLSA, holding in Walling v. Portland Terminal Cothat the FLSA “cannot be interpreted so as to make a person whose work serves only his own interest an employee of another person who gives him aid and instruction.”   Continue Reading

Exemption Rules Appeal Won't Be Resolved Before Obama Leaves Office

Posted in *New Exemption Rules, Litigation

It looks like the U.S. Department of Labor’s appeal of the order blocking the new overtime exemption rules won’t be decided before President Obama leaves office. Under the Court of Appeals’ regular rules, the DOL’s opening brief would have been due in mid-January, followed by the response brief 30 days later, and the DOL’s reply 14 days after that, likely taking the briefing process into March. Last Friday, December 2, the DOL filed a motion asking the Court of Appeals to set an expedited briefing schedule, under which the DOL would file its initial brief by December 16, and all briefing would be completed by February 7, 2017. The DOL’s motion further asks the Court of Appeals to set a date for oral argument on “the first available date after close of briefing.”

In short, even under the DOL’s proposed expedited schedule, this appeal would not be resolved until well after January 20, 2017, when Donald Trump will be sworn in as President. While we can certainly speculate that President Trump may pull the plug on further efforts to defend the new rules in court, we don’t know what the new administration will do on this issue once it takes office. There are also still other wild cards that could be played before this drama is over. Congress could step in and overrule the DOL, or the District Court could issue its final ruling on the merits of the case, which could re-start the appeals process regardless of which way the decision goes.

For our thoughts on what employers should do while this all plays out, see our prior post here.

 

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