The U.S. Department of Labor (“DOL”) published a final rule addressing independent contractor status under the Fair Labor Standards Act (“FLSA”). Independent contractor status is a critical question under the FLSA because eligible employees are entitled to the law’s protections (for example, minimum wage and overtime for non-exempt employees) but independent contractors are not. Incorrectly
Department of Labor Publishes Final Rule Regarding Tip Pools and Tip Credits
After a lengthy and contentious rulemaking process, the Department of Labor (“DOL”) published its final rule revising its tipped-employee regulations under the Fair Labor Standards Act (“FLSA”) last week. The new rules take effect 60 days from their publication in the Federal Register, which will occur shortly. Here is a summary of the new rules’
Ninth Circuit Refuses to Entertain En Banc Review of its Decision Rejecting Tip-Pooling Arrangements
Earlier this year, we wrote about the Ninth Circuit Court of Appeals decision in Oregon Rest. & Lodging Ass’n v. Perez, which prohibited tip-pools that include “back-of-the house” employees. Last week, the Court rejected a petition to review the decision en banc. This means that, unless the Supreme Court weighs in on the issue,
Ninth Circuit Declares Tip Pools Invalid Under FLSA Even Where Employers Pay More Than Minimum Wage
In Oregon Rest. & Lodging Ass’n v. Perez, the Ninth Circuit ruled this week that federal law restricts a restaurant employer from maintaining a tip pool that includes “back-of-the-house” employees and requires directly tipped employees to share their tips, regardless of whether a tip credit is taken and employees are paid at least minimum wage.
The FLSA permits an employer to count a tipped employee’s tips toward its hourly minimum wage obligation. This is known as a “tip credit.” Section 203(m) of the FLSA requires employers who take a tip credit to give notice to employees and allow employees to retain all of the tips they receive, unless such employees participate in a valid tip pool. Under section 203(m), a tip pool is valid if it is comprised exclusively of employees who are “customarily and regularly” tipped, commonly referred to as “front-of-the-house” employees.
The employers in Oregon Rest. & Lodging Ass’n, however, did not take a tip credit against their minimum wage obligation. (Indeed, Oregon does not permit a “tip credit,” and requires that all employees receive the state-mandated minimum wage.) Rather, the employers in Oregon Rest. & Lodging Ass’n paid their tipped employees at least the federal minimum wage and required their employees to participate in tip pools. Unlike the tip pools contemplated by section 203(m), however, these tip pools included both front- and back-of-the-house employees.
It’s a Trap! Students Receiving Credit Need Not Be Paid?
As colleges and universities begin new terms, not all students are returning to the classroom. Some students are headed into the “real world,” to work alongside corporate titans, small-business owners, or moms and pops in their shops, while receiving academic credit—and not wages—for their efforts. These students are applying the lessons learned in their prior studies to real-world scenarios to gain valuable experience, build their skills, and make connections to help them succeed upon graduating. Or at least they should be. If they are instead used merely as a source of labor, they must be paid. But many employers mistakenly assume that because these students are getting school credit, they need not be paid. That is a trap into which employers reading this blog will not fall.
The Fair Labor Standards Act (“FLSA”) and state laws require employers to pay all employees for work performed. If students who participate in unpaid internships with private employers do not qualify as “employees,” they need not be paid. Whether those students qualify as “employees” depends on several factors, but the general rule is that these programs are lawful as long as the student, not the employer, is the primary beneficiary of the internship program.
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U.S. Supreme Court Finds Post-Shift Security Checks Noncompensable in Integrity Staffing v. Busk, But Employers Shouldn’t Get Too Excited
The U.S. Supreme Court, in a rare unanimous decision earlier this week in Integrity Staffing Solutions v. Busk, held that time spent by warehouse employees at Amazon.com warehouses waiting to go through security checks at the end of their shifts was “postliminary” activity not compensable under the federal Fair Labor Standards Act (“FLSA”) and its major amendment, the Portal to Portal Act (“PPA”). While Busk may provide welcome clarity for employers who wish to implement such screens, the case probably does little to radically change the analysis of compensability of other pre- and post-shift activities beyond its narrow set of facts.
Amazon.com’s Warehouse Security Checks
Integrity Staffing is a staffing agency that provides employees to Amazon.com. Those employees work in the company’s warehouses pulling products from shelves and getting them packaged for mailing to buyers. Because of concerns related to employee theft, Integrity Staffing required employees to go through security checks before leaving the warehouse at the end of their shift, but did not pay employees for that waiting time. Waiting in line and going through these security checks took about 25 minutes.
9th Cir. Finds FedEx Delivery Drivers Are Employees, Not Contractors
Last week, the 9th Circuit held in two related cases from California and Oregon that FedEx misclassified approximately 2,600 delivery truck drivers as independent contractors, rather than as employees. The cases—Alexander v. FedEx and Slayman v. FedEx—are an important reminder for employers that reality matters more than labels when it comes to classifying workers.
On that note, the most succinct (and most memorable) summary of the rulings appears in Judge Trott’s short concurrence in Alexander:
“Abraham Lincoln reportedly asked, ‘If you call a dog’s tail a leg, how many legs does a dog have?’ His answer was, ‘Four. Calling a dog’s tail a leg does not make it a leg.’ . . . Labeling the drivers ‘independent contractors’ in FedEx’s Operating Agreement does not conclusively make them so . . . .”
The two cases dealt with virtually identical facts. FedEx’s Operating Agreement (“OA”), which principally governed its business relationships with the 2,300 California drivers and 363 Oregon drivers in each class, contained several generalized clauses that suggested the drivers were independent contractors. For example, the OAs provided that “the manner and means of reaching [the parties’ “mutual business objectives”] are within the discretion of the [driver], and no officer or employee of FedEx . . . shall have the authority to impose any term or condition on the driver . . . which is contrary to this understanding.” The two opinions noted, however, that neither California nor Oregon law views a contract’s description of a worker as an independent contractor as dispositive of the worker’s true status.
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US Supreme Court Gives Green Light For Employers To Use Offers Of Judgment To Moot FLSA Collective Actions
Today the US Supreme Court issued its long-awaited opinion in Genesis Healthcare v. Symczk. In the case, the Court held that employers could effectively end collective action lawsuits under the Fair Labor Standards Act (FLSA) by agreeing to pay the named plaintiffs in those lawsuits whatever they claim they are owed. The Court held that because the named plaintiff was made completely whole by the employer’s offer her individual claim was moot, and because the named plaintiff’s claim was moot the entire collective action litigation was dismissed. This decision provides a helpful tactical weapon for employers that face the prospect of long and expensive collective action litigation.
How To “Pick Off” A Big FLSA Collective Action Lawsuit
Laura Symczk was employed as a nurse for Genesis, and was non-exempt under wage laws like the FLSA. She filed an FLSA “collective action” against Genesis claiming that it unlawfully failed to pay her and other nurses for meal breaks in which she had to work (the FLSA requires that employers pay employees for all their work time, including during meal breaks when the employee is not relieved of all work duties). Very early in the litigation, Genesis Healthcare issued what is called an “offer of judgment” under Federal Rule of Civil Procedure (FRCP) 68, offering to pay Symczk everything she claimed she was owed for her own unpaid work time (about $7,500, plus her attorney fees to date). The trial court then dismissed her entire collective action lawsuit, finding that because Symczk was made completely whole by Genesis’ offer and no others had yet joined the collective action, the case was “moot.”
OSHA Issues Interim Final Rules on Whistleblower Protection Provisions Under ACA
The Occupational Safety and Health Administration (OSHA) issued an interim final rule and request for comments regarding procedures for handling employee whistleblower complaints under the Affordable Care Act (ACA), Section 1558. This part of the ACA added a new Section 18c to the Fair Labor Standards Act (FLSA), which protects employees from retaliation for exercising certain rights under the ACA, including (1) receiving a federal tax credit or subsidy to purchase insurance through the employer or a future health insurance exchange, (2) reporting a violation of consumer protection rules under the ACA (which, for instance, prohibit denial of health coverage based on preexisting conditions and lifetime limits on coverage), and (3) assisting or participating in a proceeding under Section 1558.
The interim final rule states the time frames and procedures for bringing a whistleblower complaint under Section 18c and covers the investigation, hearing, and appeals processes. An employee has 180 days from the date of the alleged retaliation to bring a whistleblower complaint to the Secretary of Labor. Where a violation is found, remedies can include reinstatement, compensatory damages, back pay, and reasonable costs and expenses (including attorneys’ fees). If the employee brought the complaint in bad faith, an employer may recover up to $1,000 in reasonable attorneys’ fees.
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Washington Court Affirms That Anti-Retaliation Laws Protect HR Employees
The Washington Court of Appeals recently determined that state anti-discrimination laws prohibit retaliation against human resources and legal professionals who oppose discrimination as part of their normal job duties. The court also declined to extend the same actor inference, a defense against discrimination claims, to retaliation claims.
Lodis worked at Corbis Holdings as a vice president