Wage and Hour Defense Blog

Wage and Hour Defense Blog

DOL Final White Collar Exemption Rule to Take Effect on December 1, 2016

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Overtime Clock Faces - Abstract PhotoNearly a year after the Department of Labor (“DOL”) issued its Notice of Proposed Rulemaking to address an increase in the minimum salary for white collar exemptions, the DOL has announced its final rule, to take effect on December 1, 2016.

While the earlier notice had indicated that the salary threshold for the executive, administrative, and professional exemption would be increased from $23,660 ($455 per week) to $50,440 ($970 per week), the final rule will not raise the threshold that far.  Instead, it will raise it to $47,476 ($913 per week).

According to the DOL’s Fact Sheet, the final rule will also do the following:

  • The total annual compensation requirement for “highly compensated employees” subject to a minimal duties test will increase from the current level of $100,000 to $134,004, which represents the 90th percentile of full-time salaried workers nationally.
  • The salary threshold for the executive, administrative, professional, and highly compensated employee exemptions will automatically update every three years to “ensure that they continue to provide useful and effective tests for exemption.”
  • The salary basis test will be amended to allow employers to use non-discretionary bonuses and incentive payments, such as commissions, to satisfy up to 10 percent of the salary threshold.
  • The final rule does not in any way change the current duties tests.

While it is certainly good news for employers that the duties tests will not be augmented and that non-discretionary bonuses and other incentive payments can be used to partially contribute to the salary threshold, the increase to the salary threshold is expected to extend the right to overtime pay to an estimated 4.2 million workers who are currently exempt.

With the benefit of more than six months until the final rule takes effect, employers should not delay in auditing their workforces to identify any employees currently treated as exempt who will not meet the new salary threshold. For such persons, employers will need to determine whether to increase workers’ salaries or convert them to non-exempt.

Ninth Circuit Approves Time-Rounding Practice – Employment Law This Week

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One of the top stories featured on Employment Law This Week: The U.S. Court of Appeals for the Ninth Circuit reaffirms an employer’s time-rounding practice. A call-center employee in California recently brought a class action lawsuit against his employer for time-rounding practices. The employee claims that the policy caused him to be underpaid by a total of $15 over 13 months. Relying on a California Court of Appeals precedent, the Ninth Circuit found that the company’s facially neutral rounding policy—one that rounds time both up and down—is legal under California law. The employee also argued that he was denied payment for a total of one minute when he logged into call software before he clocked in. The Ninth Circuit found that the de minimis doctrine applied in this case, because identifying a single instance in order to provide payment would create an undue burden on the employer.

View the episode below or read more about this story in a previous blog post.

Ninth Circuit Approves Employer’s Time-Rounding Practice and Confirms That De Minimis Time Is Not Compensable

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Clock FaceOn May 2, 2016, the Ninth Circuit issued a published opinion in Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership. The Corbin Court best summarized the action in its opening sentence: “This case turns on $15.02 and one minute.” The “$15.02” represented the wages the plaintiff claimed he lost over a period of time as a result of the company’s neutral time-rounding policy. And the “one minute” represented the amount of off-the-clock time that the plaintiff worked, which the Court held was de minimis and, therefore, not compensable.

Federal and California authorities have found that an employer complies with the law if it has a facially neutral time rounding policy – one that rounds time both up and down – and if, in practice, the policy is also neutral.

In Corbin, there was no dispute that Time Warner had a facially neutral rounding policy. Rather, Corbin argued that rounding was only permissible under circumstances that would create undue burdens on employers.

Following the California Court of Appeal’s decision in See’s Candy Shops, Inc. v. Superior Court, the Ninth Circuit rejected the employee’s argument that rounding violates California law that requires employees to be paid all wages due for each pay period where the employer does not engage in a “‘mini actuarial process at the time of payroll’ and reconcile the rounding with actual time punches.” The Court held that such a view was too short-sighted: “Employers use rounding policies to calculate wages efficiently; sometimes, in any given pay period, employees come out ahead and sometimes they come out behind, but the policy is meant to average out in the long-term.” The Ninth Circuit also found that such an interpretation would render rounding practices useless because “employers would have to ‘un-round’ every employee’s time stamps for every pay period to verify that the rounding policy had benefitted every employee.”

The employee’s records in Corbin demonstrated that sometimes rounding worked in his favor, and sometimes it did not. The Ninth Circuit determined that is exactly how rounding is intended to work and, thus, found that the company’s time-rounding practice was neutral in its application.

Also at issue in the case was the de minimis doctrine, which permits the non-payment of wages when the employer meets a three-prong test where courts are instructed to “consider (1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work.”

The plaintiff if Corbin – a call center employee – claimed that on one occasion he logged into call software before he clocked in for timekeeping purposes, although at all other times he clocked in before starting the program. The employee claimed that Time Warner should have known about this one-time log-in issue and compensated him for it because it had access to the records. The Ninth Circuit rejected this assertion: “Corbin’s contention that the de minimis doctrine does not apply because [Time Warner] could ascertain the exact log-in/out times by scouring its computer records is baseless; the de minimis doctrine is designed to allow employers to forego just such an arduous task.”

The Ninth Circuit also found that Corbin’s proposed standard would require employers to undermine their policies “prohibiting off-the-clock work by proactively searching out and compensating violations.” And because there was only one minute at issue and it was an irregular practice, the de minimis doctrine applied.

The Ninth Circuit’s opinion reaffirms the long-standing practice of rounding employees’ time so long as it is done in an even-handed manner. The Corbin Court’s opinion also confirms that employers are not required to scavenge through their records to ensure that any off-the-clock work did not occur, and that they need not compensate employees for de minimis time.

Should Training Time Be Compensated? Fourth Circuit Raises Issues

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Our colleague Nathaniel M. Glasser, a Member of the Firm at Epstein Becker Green, has a post on the Hospitality Labor and Employment Law Blog that will be of interest to many of our readers: “Fourth Circuit Decision Highlights Need for Employers to Assess Whether Training Time Should Be Compensated.”

Whether time spent in training is compensable time under the Fair Labor Standards Act (“FLSA”) is an issue that the courts have addressed in a variety of contexts. A new Fourth Circuit decision – Harbourt v. PPE Casino Resorts Maryland, LLC – addressed that issue in the context of pre-hire training provided to some casino workers in Maryland and concluded that the casino workers alleged sufficient facts to proceed with their claims that they should have been paid for pre-hire training. …

While Maryland Live! may still establish that the trainees, and not the casino, were the primary beneficiaries of its dealer school such that their training time is not compensable, the decision to permit the lawsuit to proceed highlights the need for employers to review their own policies and practices relating to training. Employers that have training programs that do not pay attendees for their time should review those programs closely to determine whether they are for the primary benefit of the attendees and, if not, consider either paying the attendees for their attendance or restructuring them so that they primarily benefit the attendees, not the employer.

Read the full post here.

California Passes First $15 Minimum Wage Law – Employment Law This Week

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The top story on Employment Law This Week is California’s statewide $15 minimum wage.

On April 4, Governor Jerry Brown signed a bill that will raise California’s minimum wage to 15 dollars an hour by 2022 for companies with more than 25 employees. The increase will begin next year, moving from 10 dollars an hour to $10.50. California – one of the world’s biggest economies – is the first U.S. state to commit to a 15 dollar minimum wage. And the trend is continuing, with similar legislation signed in New York last week as well. David Jacobs from Epstein Becker Green has more on the trend and what employers in California can do to prepare.

View the episode below or learn more about the New York legislation in an EBG Act Now Advisory.

Minimum Wage Rates Increased in New York

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Evan J. Spelfogel

Evan J. Spelfogel

On March 31, 2016, New York Governor Andrew Cuomo signed into law a bill increasing the statewide minimum wage on a phased in basis over the next five years, to $15.00 per hour in some, but not all New York counties (“Minimum Wage Law”).  This is in addition to a bill enacted on December 31, 2015, that increased the subminimum wage for tipped employees in the hospitality industry from $5 to $7.50 per hour.

The Minimum Wage Law now provides for a tiered increase from the current statewide rate of $9.00, to $11, $13, and $15 per hour effective December 31, 2016, 2017, and 2018 respectively, for work performed in New York City for employers with more than 10 employees.  A slightly longer phase in period, running to December 2019, is provided for New York City employers with 10 or fewer employees and for Westchester, Nassau, and Suffolk counties. For these counties, the minimum wage is set to increase to $10.00 per hour by December 31, 2016, and then $1 every year until reaching $15.00 per hour on December 31, 2021.

For work performed in other counties throughout NY State, the minimum wage increase will be more gradual, increasing to $9.70 per hour on December 31, 2016, followed by a 70 cent increase every year until December 31, 2020, when the minimum wage will reach $12.50 per hour.  After December 31, 2020, the minimum wage in these counties will continue to increase on an indexed schedule to be set by the Director of the Division of Budget (“DOB”) in consultation with the Commissioner of Labor.

Clarification of California’s Obscure “Suitable Seating” Wage Rule Likely to Lead to More Employers Providing Seats – and to More Class Actions Against Those Who Don’t

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Clarification Of California’s Obscure “Suitable Seating” Wage Rule Likely To Lead To More Employers Providing Seats – And To More Class Actions Against Those Who Don’tWe have written previously about California’s obscure wage rule pertaining to “suitable seating,” which requires that some employers provide some employees with “suitable seating” in some circumstances if the “nature of the work reasonably permits it” – and exposes employers to significant penalties if they do not do so.

Faced with a dearth of guidance on the obscure rule and with a wave of class actions following the discovery of the rule by the plaintiffs’ bar, the Ninth Circuit Court of Appeals threw up its hands last year and asked the California Supreme Court to answer a few questions relating to the law.

In a decision issued on April 4, 2016 in Kirby v. CVS Pharmacy, Inc., the California Supreme Court did so.

And the California Supreme Court’s answers to the questions posed to it seem certain to lead to at least two results.

First, many employers will need to reassess their practices and determine whether it is reasonable to provide seats to employees.  This will be a particularly important assessment for employers in the hospitality and retail industries, where employers often expect employees to stand while working in order to show customers that they are attentive and available.

Second, the California Supreme Court’s clarification is certain to lead to a rise in the filing of class actions alleging that employers have unlawfully refused to provide suitable seating.

The questions that were posed to the California Supreme Court, and a summary of the Court’s answers, are as follows:

Question 1: Does the phrase “nature of the work” refer to individual tasks performed throughout the workday, or to the entire range of an employee’s duties performed during a given day or shift?

Answer: The “nature of the work” refers to an employee’s tasks performed at a given location for which a right to a suitable seat is claimed, rather than a “holistic” consideration of the entire range of an employee’s duties anywhere on the jobsite during a complete shift. If the tasks being performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for.

Question 2When determining whether the nature of the work “reasonably permits” use of a seat, what factors should courts consider? Specifically, are an employer’s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?

Answer: Whether the nature of the work reasonably permits sitting is a question to be determined objectively based on the totality of the circumstances. An employer’s business judgment and the physical layout of the workplace are relevant but not dispositive factors. The inquiry focuses on the nature of the work, not an individual employee’s characteristics.

Question 3: If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?

Answer: The nature of the work aside, if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability.

The Court explained, “There is no principled reason for denying an employee a seat when he spends a substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing.”

The California Supreme Court’s opinion should help employers assess whether and when to make seating available to employees.  And employers should review their practices promptly to try to comply with the law.  Now that the California Supreme Court has provided some much needed guidance on the issue, employers can expect that their practices will be challenged, and those challenges will often come in the context of class action lawsuits.

California Minimum Wage Increases Will Affect Exempt Salaries, Too

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Kevin Sullivan

Kevin Sullivan

On March 31, 2016, the California legislature passed a bill that will gradually increase the state minimum wage to $15 per hour by 2022. Governor Jerry Brown is expected to sign the bill on April 4, 2016. This increase will impact employers statewide. Not only will it affect the wages of many non-exempt employees, but it will also result in an increase in the minimum salary paid to employees who qualify for most overtime exemptions.

The bill calls for the minimum wage to increase to $10.50 per hour effective January 1, 2017, $11.00 per hour effective January 1, 2018, and then an additional one dollar per hour each year until it reaches $15 per hour effective January 1, 2022. (For employers with 25 or fewer employees, each of the minimum wage increases would start a year later such that $15 per hour minimum would not go into effect until January 2023.)

Importantly, once the minimum wage reaches $15 per hour, it may then be further increased annually by up to 3.5% to account for inflation based upon the national consumer price index.

Built into the bill is an “off-ramp” provision that allows the governor to pause any scheduled increase for one year if either economy or budget conditions are met. Once the $15 per hour minimum wage has been reached, the “off-ramp” provision expires.

While this increase will certainly have an impact on labor budgets for employers with hourly, non-exempt employees, the impact on employers with salaried, exempt employees cannot be ignored. Because most exempt employees in California must make at least twice the minimum wage on an annual basis, the current minimum salary for exempt employees who work for employers having more than 25 employees will increase from $41,600 to $43,680 effective January 1, 2017. It will then increase to $45,760 effective January 1, 2018, $49,920 effective January 1, 2019, $54,080 effective January 1, 2020, $58,240 effective January 1, 2021, and $62,400 effective January 1, 2022.

FLSA Settlement Terms: Be Sure They’ll Pass Judicial Muster

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Brian W. Steinbach, attorney at Epstein Becker Green, has a post on the Hospitality Labor and Employment Law Blog that will be of interest to many of our readers: “Southern District of New York’s Rejection of FLSA Settlement Highlights Need to Settle on Terms That Will Pass Judicial Muster.”

Following is an excerpt:

In rejecting the terms of a collective action settlement in Yun v. Ippudo USA Holdings, No. 14-CV-8706 (S.D.N.Y. March 24, 2016) the United States District Court for the Southern District of New York has confirmed the significance of last year’s Second Circuit Court of Appeals decision in Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2015)Cheeks held that parties cannot enter into an enforceable private settlement of Fair Labor Standards Act (“FLSA”) claims without the approval of either the district court or the Department of Labor. Yun shows what this means in practice by highlighting the issues that may arise in seeking to obtain approval.

Read the full post here.

High Court Says Statistical Analysis Can Establish Classwide Liability – Employment Law This Week

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The new episode of Employment Law This Week features the U.S. Supreme Court’s easing of class certification standards in a case against Tyson Foods.

In Iowa, a group of Tyson employees brought a hybrid class and collective action for unpaid overtime spent changing clothes and walking to their work area. An expert determined the average amount of time spent on those activities, and the employees relied on those averages to get class certified and prove liability and damages. On appeal, Tyson argued that the employees should never have been grouped into a single class, because each employee took different amounts of time for the unpaid activities. But the Supreme Court ruled that this representative sample could be used to establish classwide liability, and the case will move forward in the district court.

View the episode below or read more about the case in an earlier blog post.

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