Wage & Hour Insights - Guidance & Solutions for Employers

As a working mom, I am lucky to have a husband who is a stay-at-home parent.  Rarely do I have to worry about being late to work because I have to drop my child off at school, or leaving work early to take my child to an after-school activity or doctor’s appointment.  However, many of my co-workers, friends and neighbors employ nannies to watch their children while both parents work all day.  Most of the nannies I know do not live at the family’s house, but they can work long and varied hours.  Nannies are generally paid hourly or are given a weekly salary intended to cover all hours worked.  Recently, I have discovered that many of those who employ nannies do not realize that their nannies are entitled to minimum wage and overtime protection under the FLSA just like any other non-exempt employee.

While the FLSA does not use the modern term “nanny,” the regulations specifically provide that domestic services employees (housekeepers, maids, governesses, etc.) are non-exempt employees covered by the FLSA.  This definition also includes babysitters employed other than on a casual basis (i.e., a few hours or less a week).  Nannies must be paid at least minimum wage for all hours worked, and overtime compensation coverage depends on whether the nanny lives on the premises or lives outside the home.  A “live-in” nanny must receive at least minimum wage for each hour worked but need not receive overtime for hours worked over 40 in a work week.  On the other hand, a nanny who lives outside the home must receive at least the minimum wage for all hours worked and be paid overtime (time-and-a-half) for those hours worked over 40 in a workweek.  It does not matter if the nanny is paid an hourly wage or salary – if the nanny is entitled to overtime, his/her wage will need to be converted to an hourly rate to determine the proper overtime compensation.

In general, hours worked includes all time the nanny is required to be at the employer’s home, the time spent away from the home during which the nanny is performing services, and all time that the nanny is required to be “on call” in the course of his/her duties.  “Down time” will not be considered working time if the nanny is completely relieved from duty and the period is long enough for him or her to engage in personal activities.  However, it is important to note that if the nanny is required to remain on the premises during meal time or remains “on call” for school emergencies, this would likely be considered “hours worked” for overtime purposes.

The rules governing compensation of domestic services employees can be complicated, particularly for those employers who are not familiar with the FLSA requirements.  The proper compensation of domestic service employees has piqued the interest of the Department of Labor, as well as the employees themselves.  These days, employees are more knowledgeable about their right to minimum wage and overtime.  So if you employ a nanny, it might be beneficial to review your payment records to ensure that he/she is being properly compensated. 

Shortly after my co-author, Bill Pokorny, wrote about celebrity and Iron Chef Mario Batali’s multi-million dollar settlement of a class action tip pooling lawsuit, another celebrity chef here in Chicago was sued for violating tip pooling laws.  In March 2012, a lawsuit was filed against Master Chef Graham Elliot by 14 former employees over tip pooling requirements at his self-titled restaurant.

Gregory Curtis, a former waiter at Graham Elliot, claimed that he and others were forced to participate in a tip pool that included bartenders, bussers, food runners and cooks.  Under federal law, employees may be required to participate in a tip pool only if the tips are distributed among employees who “customarily and regularly receive tips,” and this generally is limited to personnel such as servers, bussers and service bartenders.  Curtis alleged that food runners and cooks do not customarily and regularly receive tips and so they may not participate in a tip pool.  Due to the inclusion of such “back of the house” employees in the tip pool, Curtis claimed he was entitled to lost wages.  For a good summary of tip pooling rules, see Bill’s prior blog post. 

After litigating this case for over a year, this week, Graham Elliot reached an undisclosed settlement with Curtis and the other waiters.  If the allegations are true, Graham Elliot’s tip pool did not appear to meet the requirements of federal law. 

While tip pooling is generally limited to the hospitality industry, this is another example of a celebrity experiencing some difficulty navigating wage and hour laws.  Employers can feel better knowing that not even the rich and famous are exempt from compliance with the FLSA and related state laws.  Even the most brilliant chefs must ensure that their businesses comply with wage and hour laws.  More than ever, employees are aware of their rights, particularly as it relates to wages.  While I truly enjoy the brilliance of these celebrity chefs and the meals they create (Bobby Flay is a favorite!), the regulatory side to running a restaurant cannot take a back seat.    

The lesson learned here is this - whether you are a celebrity chef or a more run-of-the mill type of business, all employers must comply with applicable federal and state wage and hour laws.  Given the complexities of wage and hour laws, employers should seek the advice of employment counsel for effective ways to comply with those laws.