Articles Posted in Wage and Hour

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On April 2, 2018, the U.S. Supreme Court held in Encino Motorcars, LLC v. Navarro that an auto dealership’s service advisors were exempt from overtime under the Fair Labor Standards Act (FLSA), which excludes “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” from the FLSA’s overtime provisions. While the case turned on this fairly specific overtime exemption question, however, the Court’s decision has much greater implications, laying out a new standard for analyzing overtime exemptions under the FLSA and rejecting the longstanding precedent that FLSA exemptions be “narrowly construed” in favor of a broader “fair reading” standard.

The FLSA is a federal wage-and-hour statute which establishes, among other things, minimum wage and overtime requirements for covered employers. Under the FLSA, most employees are entitled to overtime premium pay—pay at one-and-a-half times the regular hourly rate for hours worked in excess of 40 in a given work week. Some workers, however, are exempt from the FLSA’s overtime provisions, including executives, administrative employees, learned professionals (such as doctors and lawyers), and creative professionals (such as musicians and actors), among a number of others.  Encino Motorcars dealt with a less common, more obscure FLSA exemption, set forth in § 213(b)(10)(A) of the FLSA, which states that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements” is exempt from overtime under the FLSA.

In Encino Motorcars, a group of current and former service advisors at an auto dealership brought suit under the FLSA, alleging that they were owed back pay because their employer had misclassified them as exempt from overtime under the FLSA. The defendant then successfully moved to dismiss on the grounds that the plaintiffs fell within the “selling or servicing automobiles” FLSA exemption, which decision plaintiffs appealed to the U.S. Circuit Court of Appeals for the Ninth Circuit. The Ninth Circuit reversed the district court’s ruling, finding the language of the FLSA “ambiguous” and the legislative history “inconclusive.” Encino Motorcars then appealed the Ninth Circuit’s holding to the U.S. Supreme Court, which reversed and remanded in a 5-4 decision.

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Owen Laird, Esq.

Today is Opening Day for the 2018 Major League Baseball season. Spring training is over, and while the Major Leaguers head back to their stadiums, the Minor League players who didn’t make the cut are headed back to work as well. Those Minor Leaguers might be a little worse off this year because of the sweeping $1.3 trillion budget bill that President Trump signed last week. One of the more nuanced aspects of the bill is an amendment to the Fair Labor Standards Act (“FLSA”) known as the “Save America’s Pastime Act.” This amendment aims to “save” baseball by suppressing the wages that minor league teams pay to their players.

While major league baseball players enjoy a minimum annual salary—which amounts to hundreds of thousands of dollars per year, with top players earning tens of millions of dollars a year—minor league baseball players are a different story. Not only do minor league players significantly outnumber major league players, but, unlike major league players, minor leaguers are not unionized. As a result, baseball’s minor leagues are populated with thousands of players, many of whom are barely squeaking by.

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On February 15, 2018, Judge William Alsup of the U.S. District Court for the Northern District of California granted class certification in Dulberg v. Uber Technologies, Inc., a suit filed in February 2017 alleging that Uber’s pricing and payment model deprives drivers of fair pay for their work. This decision will allow as many as 9,197 Uber drivers from across the United States to pursue their claims as a class.

Uber is among the most successful of a number of rapidly growing companies that are part of the so-called “gig economy.” The U.S. Department of Labor defines a “gig” as a “single project or task for which a worker is hired, often through a digital marketplace, to work on demand.” Gig economy and freelance workers, such as Uber drivers, are becoming an increasingly visible and important component of the U.S. workforce; an estimated nearly four million freelancers work in the New York City area alone. Yet while gig economy workers may enjoy certain benefits—such as scheduling flexibility—they are also often at a disadvantage in comparison to traditional employees. Gig economy workers are almost invariably classified as independent contractors and are thereby cut off from most of the legal protections afforded to employees, including minimum wage and overtime laws, as well as employment benefits like health insurance—and many freelancers report difficulty getting paid for their work on time or at all.

Uber’s treatment of its gig economy workers has gained particular attention over the past several years, as drivers have brought a number of lawsuits against the company and have protested many of Uber’s internal policies, such as its recently revoked harsh termination policy, under which any driver with three complaints would be automatically terminated without investigation. Recently, a U.K. court issued a landmark decision, finding that Uber’s London drivers were employees, not independent contractors, and we have previously reported on several lawsuits brought by Uber drivers concerning whether drivers’ on-call time is compensable, drivers’ arbitration agreements with Uber, and class actions challenging Uber’s classification of drivers as independent contractors.

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By Owen H. Laird, Esq., and Edgar M. Rivera, Esq.

Recognizing the unequal bargaining power between employees and employers, employment laws such as the Fair Labor Standards Act (FLSA) create rights and protections for employees. And, while identifying whether a worker is an employee or not may seem relatively straightforward at first glance, the question can, in reality, be surprisingly complicated. Between traditional employees, independent contractors, and paid and unpaid interns, modern workplaces include a variety of different types of workers, only some of whom are entitled to the rights and protections created by laws like the FLSA.

A recent decision by the U.S. Department of Labor (DOL) changed the standard by which the DOL determines whether interns qualify as employees under the FLSA for the purposes of minimum wage and overtime rights. In 2010, the DOL adopted a six-factor conjunctive test for interns, whereby a legitimate internship relationship would exist only if all six factors were met. Those factors were:

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Leah Kessler

On Tuesday, December 5, the Department of Labor (DOL) sent out a Notice of Proposed Rule Making (NPRM) regarding tip regulations under the Fair Labor Standards Act (FLSA). The DOL seeks to rescind an Obama-era regulation that prohibited restaurants and other service-industry employers, specifically those who pay their employees minimum wage and do not take a tip credit, from enforcing a tip-sharing system between tipped and non-tipped employees.

While tips are considered the sole property of the tipped employee under the FLSA, tip-pooling (sharing tips equally among staff) is allowed. There are, however, specific requirements for valid tip-pooling arrangements. When an employer takes a tip credit to satisfy a portion of the minimum wage, the tip pool can only include workers who “customarily and regularly receive tips”, prohibiting the sharing of tips with “back of the house” employees (such as cooks and dishwashers), who do not usually earn tips. Section §203(m) of the FLSA outlines the rules and regulations for tip credits, permitting employers to take a tip credit toward the minimum wage obligation for tipped employees equal to the difference between the required cash wage and the minimum wage. For example, the federal minimum wage is currently set at $7.25 per hour. Under section § 203(m) of the FLSA, an employer can pay his or her tipped employee a minimum cash wage of $2.13 per hour and claim a maximum credit of $5.12 per hour. The employer is obligated to pay the employee if the tips do not amount to the mandatory feral minimum wage. (These are the federal rules for tip credits. Fortunately, the tip credit regulations in New York are better for employees: The minimum cash wage is higher and the maximum tip credit allowed is lower.)

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Owen H. Laird, Esq.

We regularly write about overtime issues for employers and employees.  The Fair Labor Standards Act (FLSA) creates a baseline right to overtime for millions of employees, and many states have enacted their own labor laws to enhance those rights.

However, the FLSA and its state counterparts do not require employers to pay all employees overtime; these statutes include large swaths of workers who are “exempt” from the overtime pay requirements.  For example, the FLSA includes exemptions for “professional” employees, which includes individuals such as doctors, teachers, architects, and most employees who need to have an advanced degree; “executive” employees, which includes many individuals who have managerial or supervisory responsibilities; “administrative” employees, which includes individuals who, roughly, perform office work related to the employer’s business operations and can function autonomously; and more specific exemptions for certain industries, such as outside salespeople and agricultural workers.  These exemptions are complex, and the single-sentence summary above does not do justice to the millions of hours that thousands of attorneys have spent litigating these issues.  In short, lawyers, judges, and administrators must look at an employee’s specific job responsibilities to determine whether they are exempt or not.

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Owen H. Laird, Esq.

The U.S. Supreme Court recently agreed to hear two cases that will have major ramifications for workers across the country. One case threatens one of organized labor’s most important rights, and the other impacts employees of car dealerships nationwide.

The Court agreed to hear arguments on Janus v. American Federation of State, County and Municipal Employees, which concerns a union’s right to take dues from non-members who are in the same bargaining unit as members the union represents. This issue of union dues has been long, and corporate interests have been successful in gradually rolling back organized labor’s ability to raise funds.

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Last week, on September 13, 2017, the U.S. District Court for the Eastern District of Pennsylvania denied Uber’s motion for partial summary judgment in Razak v. Uber Technologies, Inc. This decision allows a putative class of Philadelphia-based Uber drivers to move forward with claims against Uber for failing to compensate them for “on-call” time they spent logged into the Uber app, but not driving customers.

The Fair Labor Standards Act (FLSA) requires employers to compensate employees for all hours worked, including on-call time: hours worked where “the employee is required to remain on the employer’s premises, or […] although not required to remain on the employer’s premises, finds his time on call away from the employer’s premises is so restricted that it interferes with personal pursuits.” The recent rise of gig economy work— individual projects and tasks picked up at a worker’s discretion, often using apps like Uber and TaskRabbit—has presented a challenge to the existing model of on-call time, as courts are asked to consider what constitutes compensable on-call time for workers who may never report to a central place of employment or who are, at least to some degree, able to work whenever they choose.

In Razak, a group of Uber drivers alleged that their time spent logged into the Uber driver app and waiting for ride requests, but not actually driving customers, qualified as on-call time under the FLSA and that Uber’s failure to compensate them for such time had led to minimum wage and overtime violations. Uber moved to dismiss the drivers’ complaint; the court denied Uber’s motion to dismiss and ordered expedited discovery on the issue of whether the drivers’ time spent online qualified as compensable on-call time under the FLSA. After the parties completed expedited discovery, Uber moved for partial summary judgment. The court denied this motion as well, determining that it could not find that this on-call time was not compensable under the FLSA.

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Edgar M. Rivera

On August 31, 2017, in State of Nevada v. United States Department of Labor, the U.S. District Court for the Eastern District of Texas invalidated the Department of Labor’s final rule, which increased the salary threshold for “white collar” exemptions under the Fair Labor Standards Act (FLSA).

Employers claiming that an employee is exempt under the executive, administrative, or professional exemption from FLSA overtime requirements (called the “white collar” exemptions since they pertain to white-collar workers) must show that the employee performs specific job functions (the duties test) and is paid a salary above a certain threshold (the salary test). Under the Obama Administration, the Department of Labor promulgated a final rule that would double the salary threshold, moving it from $455 a week (or $23,660 annually) to $913 a week (or $47,476 annually). The new salary level is based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage and most impoverished U.S. census region—the South—which comprises the states Texas, Oklahoma, Arkansas, Louisiana, Mississippi, Alabama, Georgia, Florida Tennessee, Kentucky, West Virginia, Maryland, Delaware, Virginia, Washington D.C., North Carolina, and South Carolina. The final rule was intended to go into effect on December 1, 2016.

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On August 3, 2017, the U.S. Circuit Court of Appeals for the Seventh Circuit ruled against the plaintiffs in Allen v. City of Chicago, a Fair Labor Standards Act (FLSA) collective action brought by Chicago area police officers. The court found that the officers were not entitled to overtime pay for off-duty work they had performed on their mobile devices because the city had not known that plaintiffs were not being compensated for their work and because plaintiffs had not been prevented from requesting overtime pay.

The FLSA requires employers to compensate employees for all hours worked, and to compensate most employees at the overtime premium rate for all hours worked in excess of 40 in a work week. This requirement is strict: So long as an employer is aware that an employee has performed work, the employer must fully compensate the employee for all hours worked, “even if [the employer] did not ask for the work, even if they did not want the work done, and even if they had a rule against doing the work.” If an employer does not want employees to work overtime hours, it is the employer’s obligation to “exercise its control and see that the work is not performed,” not the employee’s obligation to avoid working overtime hours. However, the FLSA’s mandate does not go so far as to cover work that the employer “did not know about, and had no reason to know about”; employees also have a duty to accurately report their time to their employer, and employees who fail to do so or who actively prevent their employer from learning of their hours worked are not covered by this protection.

Jeffrey Allen was employed as a police officer in in the Chicago Police Department’s Bureau of Organized Crime, where he worked on investigations into criminal matters such as drugs and human trafficking. Allen and other Bureau of Organized Crime officers had scheduled shifts, but were required to work outside their scheduled shifts as needed; this “off-duty” work was sometimes performed on mobile devices. When Chicago Police Department officers worked overtime hours, the department required them to submit “time due” slips, reporting the hours worked and briefly describing the work performed, which were then processed by payroll. However, between 2011 and 2014, Allen and other officers did not report off-duty work performed on their mobile phones as off-duty hours according to the department’s overtime policy.

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