Wage and Hour Defense Blog

Wage and Hour Defense Blog

California Controller Launches “Operation Pay-Up”

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As if California employers were not already besieged with wage-hour class actions and agency complaints, the state’s controller has now decided to get in on the action.

As The Los Angeles Times reported last week, Controller John Chiang has initiated a new program he calls “Operation Pay-Up” to recover unpaid wages.  The article may be found here

In short, the Controller is using California’s Unclaimed Property Law to attempt to gain restitution of wages believed to be withheld from employees.  Any recovered wages that are unclaimed will be transferred to the state treasury, with the controller’s office attempting to locate the employees.

At this stage, it is too early to tell how broad “Operation Pay-Up” will be or the companies or industries that it will focus on – let alone how the program will interact with class actions or agency complaints. 

But, at the very least, it is yet another reminder to employers doing business in California that they need to get up to speed on the state’s intricate wage-hour laws and take steps to ensure compliance.

And for those employers who need a primer on California wage-hour laws, EBG’s free wage-hour app puts those laws — and federal laws and the laws of other states – at your fingertips. 

Illinois Employers Will Soon Be Able To Legally Pay Their Employees by Payroll Cards, But Beware Of The Fine Print

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In August, Illinois Governor Pat Quinn signed into law HB 5622, amending the Illinois Wage Payment and Collection Act (IWPCA), which now recognizes for the first time payment of wages by payroll card. The law goes into effect on January 1, 2015. While the law provides a new option for Illinois employers, they must be careful to comply with the conditions under which payroll cards may be used.

Under the current Illinois law, employers are required to pay employees via check or direct deposit. The current law is silent as to whether payroll cards, which operate like debit cards, can be used to pay wages. Some businesses prefer using payroll cards because, by simply loading the card electronically, they can save the costs involved in preparing physical checks. Employees, however, have been adverse to payroll cards because of fees that have been deducted from their wages. The Illinois Attorney General’s Office found that these fees were both excessive and unfair.

Under the new law, payroll cards will be a recognized method of wage payments, but only if the following criteria are met:

• The employee must voluntarily agree to the use of a payroll card as the method the employee chooses to receive his or her wages and/or final compensation. It is not voluntary if the employee is given to understand that it is a condition for hire or his or her present working conditions or continuance of his or her employment would be adversely affected by non-acceptance. An employer cannot mandate the use of a payroll card.

• If an employee voluntarily chooses to accept the use of a payroll card for the payment of wages and/or final compensation, the employer must disclose in writing to the employee all fees, penalties, and costs associated with the use of the payroll card. The employee must be able to deposit and/or obtain the full monetary value on the payroll card without discount.

• If the employee chooses the payroll card as a method of payment, the employer is required to provide an itemized statement of all hours worked, rate of pay, and all lawful deductions made from the wages and/or final compensation for each pay period.

• An employee can revoke his or her authorization of the payroll card as a method of payment at any time, and the employer is obligated to provide to the employee another alternative method for the payment of wages and/or final compensation.

• An employer is not permitted to offer employees only the choice between two voluntary methods of payment. Because payment by either payroll card or direct deposit must be voluntary, an employer offering either or both of these payment methods must also provide an additional choice of payment by cash or check, in accordance with the IWPCA.

Despite the clear financial and practical benefits of using payroll cards for wages, employers must strictly comply with the specific requirements under the law which takes effect on January 1, 2015. As a new law, it is likely that the Illinois Department of Labor and Office of Attorney General will be watching closely.

David W. Garland to Moderate General Session at NRF’s 2014 HR Executive Summit

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David W. Garland, Chair of Epstein Becker Green’s Labor and Employment Steering Committee and a member of the firm’s Board of Directors, will moderate “It’s In The Bag – Summary of Bag Check Litigation And Strategies For Minimizing Risk” at the National Retail Federation Human Resources Executive Summit at the Hard Rock Hotel in Chicago, Illinois on October 15, 2014.

During this general session, retailers who are grappling with employee bag check litigation discuss what the industry can expect in litigation over employee compensation for time spent in bag checks to deter shrinkage and how retailers can minimize risk through their policies and practices.

Be sure to visit with Epstein Becker Green and share ideas with other retailers and employment law professionals during the networking break sponsored by Epstein Becker Green on October 14, 2014 from 3:00 p.m.-3:15 pm.

Click here for information about NRF’s HR Executive Summit.

If I Was (Still) The Secretary of Labor

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As our readers know, for the purposes of certain blog entries, I have unilaterally declared that I am the Secretary of Labor.

Effective immediately:

  1. The “computer professional” exemption applies to anyone with a salary of at least $800 per week whose primary duty requires “highly specialized knowledge of computers and software.”  The exemption now includes employees who provide help desk services, troubleshooting support, or who install hardware or software.
  2. In regard to New York law, building owners who provide free apartments to their janitors can still count the value of the apartment as wages.  However, that value is no longer based on the rental rate of the apartment on June 1, 1975.
    • Building owners will be credited with the current fair market value of the apartment, and janitors will be paid on an hourly basis.
    • As under federal law, a New York janitor who resides in the employer’s building is not considered as working all the time he is on the premises.  Any reasonable agreement of the parties as to the number of hours worked will be accepted.
  3. To clarify: time spent waiting for a security bag check at the end of a shift is not compensable “hours worked.”Generally, time spent going to or coming from work is not working time.  Preliminary and postliminary activities may be compensable if they are “integral and indispensable” to an employee’s principal duties.  However, general security does not relate to anyone’s particular duties, so it’s not compensable.
  4. California law is preempted.  It’s just time.
  5. The ability to use mobile devices for business communications while an employee is away from the workplace is a benefit to the employee as well as the employer.  Therefore, using a mobile device to read or respond to electronic communications for less than 20 minutes per day shall be considered de minimis amount of time and therefore shall not be compensable

Let’s get to work.

Epstein Becker Green’s Wage and Hour App Is Now Available for iOS, Android, and BlackBerry

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Wage & Hour Guide App for Employersby Michael Kun

We’re very pleased to announce that a brand-new version of our free, first-of-its-kind app, the Wage & Hour Guide for Employers, is now available for Apple, Android, and BlackBerry devices. The new app takes advantage of a software-as-a-service programming platform developed by Panvista Mobile.

Our newest version of the app is not only available to users of a variety of devices, but it offers simpler, faster, and more useful ways for employers to locate wage and hour information at the touch of a fingertip.  As new issues are constantly emerging in this area, we’re pleased to provide updated information and critical tools to help employers address wage and hour laws and regulations, such as recent minimum wage increases.

Key features of the updated app include:

  • The Android version is now available for the first time on the Google Play store – also it is also available for BlackBerry devices
  • Updated iPhone and iPad versions are now available on the App Store
  • New summaries of wage and hour laws and regulations are included, including recent minimum wage increases in California, Connecticut, Georgia, Illinois, Maryland, Massachusetts, New Jersey, New York, Texas, Virginia, and the District of Columbia
  • Direct feeds of EBG’s Wage & Hour Defense Blog
  • Easy sharing of content via email and social media
  • Access to EBG’s @ebglaw Twitter feed
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

Existing iOS users should visit the App Store to download the new iPhone and iPad versions; the previous edition of the app is retired.

If I Were the Secretary of Labor

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By: Michael D. Thompson

ESPN broadcaster Keith Olbermann recently held a mock press conference in which he pretended to be the new Commissioner of Baseball, and explained how he would improve the game in that role.  For example, World Series games would start early enough for kids to watch them, the designated hitter would be eliminated, and Vin Scully would call all World Series games.

I’d like to do something similar.  I am pleased to inform you that, for the rest of this blog entry, let’s assume that I am the new Secretary of Labor.

Effective immediately:

  1. An employer’s liability to inadvertently misclassified employees will be limited to half-time (rather than time-and-a-half) if the employer has a published policy, and receives a signed acknowledgment, stating: ”I understand that my salary is intended to compensate me for all hours worked in any given workweek.”
  2. If an individual has an independently-established business, he or she is an independent contractor. Case closed. Anyone who has the wherewithal to set up his or her own business is capable of making a decision about whether the terms of a business relationship are acceptable.
  3. New Jersey’s child labor law exception allowing minors under the age of 16 to work as beekeepers is preempted by a new federal regulation to the contrary. Okay, this one does not come up much.  But do we really want a law that says a 15-year old can be left in charge of a charge of a swarm of bees?  That sounds like a Hitchcock movie.
  4. The “professional” exemption’s focus on jobs held by employees who get their advanced knowledge in school is expanded.  The exemption now extends explicitly to jobs requiring “knowledge of an advanced type customarily acquired through five or more years of on-the-job experience.”
  5. Employers do NOT have to pay employees who only worked overtime because they played fantasy football or shopped online during regular hours.
  6. The “administrative” exemption will now be called the “independent judgment” exemption, and will apply to any employee with a salary of at least $800 per week who normally exercises discretion and independent judgment. The part of the “administrative” exemption requiring that the employee’s primary duty must be administrative in nature is eliminated because the Courts never seemed clear on how to apply it.

Let’s get to work.

 

 

 

 

Illinois Court Holds That Meal Credit Program Is Valid

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Our colleague Jeffrey H. Ruzal recently wrote an article entitled “Illinois Court Holds That Meal Credit Program Is Valid,” which appears in the September 2014 issue of Hospitality Law.

Following is an excerpt:

Providing an employee meal program may be a nice gesture, but requires companies that do so to maintain proper records in case their meal plans are challenged.  An Illinois appellate court recently affirmed a circuit court’s dismissal of plaintiff restaurant worker’s class action claim that defendant restaurant employer took improper deductions from plaintiff’s wages to fund a meal credit program.

Read the full article here.

Reprinted with permission from Hospitality Law. Copyright 2014 by LRP Publications. Palm Beach Gardens, FL 33418. All rights reserved. For details on this or other related products, visit www.shoplrp.com/hospitality.html or call toll free 1-800-341-7874

D.C. Circuit: Private Settlement Unenforceable Because Plaintiffs Did Not Know They Were Entitled to Overtime

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In Sarceno v. Choi, the defendants operated a supermarket in Washington D.C.  Three of the defendants had previously been sued by different employees in a proposed collective action (“the Munoz suit”) under the FLSA and other statutes. 

The Munoz suit was resolved through settlement decrees approved by the District Court.

At approximately the same time they were settling the Munoz suit, the defendants presented five other employees (who performed activities similar to those of the Munoz plaintiffs) with “settlement agreements” purportedly releasing the defendants from any claims under the FLSA.  The agreements stated that a bona fide dispute existed between the parties with respect to the total hours worked and amounts due.

The employees signed the settlement agreements given to them and received settlement checks, but subsequently filed suit alleging FLSA claims.  The defendants then moved for summary judgment based on the settlement agreements.

The D.C. District Court first cited Lynn’s Food Stores for the proposition that Department of Labor or judicial approval is generally required for the settlement of FLSA claims.

The District Court then cited Martin v. Spring Break ’83 Productions for the proposition that a private settlement of FLSA claims may be enforceable without such approval, when “the agreement resolves a bona fide dispute between the parties and the terms of the settlement are fair and reasonable.”

Based on the circumstances under which the settlement agreements were allegedly entered, the Court found that there were disputed issues of fact as to whether the agreements were fair and reasonable.  For example, the plaintiffs did not have an attorney and had difficulties with English, there were no negotiations over the agreements and the payments were low when compared to those in the Munoz suit. 

More notably, the District Court held that there was no bona fide dispute between the parties because, at the time the settlement agreements were signed, the plaintiffs were not disputing the wages they had been paid.  “This conclusion may seem counter-intuitive in light of the plaintiffs’ initiation of the instant lawsuit, but … the pertinent timeframe for evaluating the agreements is at the time the settlements were reached.”

The plaintiffs claimed that, at the time of the agreements, they were unaware of any dispute and believed that their salaries covered all of the compensation to which they were entitled.  The District Court stated that no bona fide dispute could have existed “when one party to the dispute is unaware of the dispute due to ignorance over his or her legal rights.”

The District Court then concluded that, on that basis alone, the defendants’ motion was denied.

Thus, employers should be mindful of the ruling in Sarceno before attempting to settle FLSA claims outside of litigation.

California Meal and Rest Break Laws Ensnare Trucking Industry

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As if traffic in California was not bad enough by itself, employers in the trucking industry have one more thing to worry about – whether they are complying with California’s meal and rest break laws.  In  Dilts v. Penske Logistics, LLC, the plaintiffs represent a class of delivery drivers and installers.  Defendants had hoped to avoid the claim that they had violated California’s meal and rest break laws by arguing that as “motor carriers” the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) preempts California’s meal and rest break laws.  The trial court agreed and granted the defendants’ motion for summary judgment.  However,  the Ninth Circuit reversed finding that California’s meal and rest break laws are not the type of laws related to prices, routes, or services that Congress intended to preempt.

Defendants argued, among other things, that the requirement that drivers pull over and stop for each break period necessarily dictates that they alter their routes and that finding routes that allow drivers to comply with California’s meal and rest break laws will limit motor carriers to a smaller set of possible routes.  However, the Ninth Circuit was not persuaded.  Thus, motor carriers doing business in California which have relied on the FAAAA preemption, should carefully review their meal and rest break policies and practices to ensure that they comply with California law.

California Employers Must Revisit Exempt Status of Commissioned Employees In Light of Supreme Court Ruling

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By:  Amy Messigian

In a major blow to California employers who utilize a monthly commission scheme but pay biweekly or semimonthly salary to their commission sales employees, the California Supreme Court ruled earlier this week in Peabody v. Time Warner Cable, Inc. that a commission payment may be applied only to the pay period in which it is paid for the purposes of determining whether an employee is exempt from overtime.  Employers may not divide the commission payment across multiple pay periods in order to satisfy the minimum compensation threshold for meeting the exemption in any earlier pay period.  California employers who classify their commission sales employees as exempt should immediately take action to ensure compliance with the law.

The plaintiff in the case, Susan Peabody, worked approximately 45 hours per week as a commissioned salesperson for Time Warner Cable.  Peabody received biweekly paychecks, which included her salary for the pay period, as well as commission wages on a monthly basis.  After leaving her employment, she sued for a variety of wage and hour violations.  Peabody alleged that Time Warner Cable had misclassified her as an exempt employee for which it was not required to pay overtime.

In order to meet the commission sales exemption under California law, among other things, an employee must earn more than one and one-half times the minimum wage.  Peabody was paid less than one and one-half times the minimum wage in any pay period in which she did not also receive her commission payment; however, she was paid far in excess of one and one-half times the minimum wage on each pay period in which she also received her commission payment and her total monthly wages exceeded one and one-half times the minimum wage.  Based on the fact that the commission payment was reflective of commissions earned over the course of a month, Time Warner Cable argued that it should be permitted to split the commission payment between the pay periods in the month for the purposes of determining Peabody’s exemption from overtime.

The California Supreme Court rejected this approach holding that commission wages paid in one biweekly pay period cannot be attributed to other pay periods for purposes of meeting the exemption.  Rather, whether the minimum earnings prong of the commission sales exemption is satisfied depends on the amount of wages actually paid in a pay period.  “An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall.”  This holding further differentiates that California commissioned sales exemption from the federal exemption, which permits employers to defer paying earned commissions so long as the employee is paid the minimum wage each pay period.

The Peabody ruling greatly impacts the manner in which companies structure their commission plans and payroll for commissioned employees.  Because a commission payment may only be allocated to the period in which it is paid for purposes of meeting the exemption, employers should consider adopting biweekly or semimonthly payroll structures for both salary and commission payments or allocating a greater distribution of employee income to base salary as opposed to commissions in order to meet the minimum salary threshold each pay period.

The ruling also forebodes a new wave of misclassification suits for unpaid overtime in cases such as this where an employee may only meet the exemption part of the time.  Of great concern will be the ability of employers to defend such suits where they have not kept good records of the hours worked by the employee, or their meal or rest breaks, due to the mistaken belief that they were exempt from overtime.  Employers with large numbers of commissioned salespeople should consult employment counsel to perform misclassification auditing and assess the risks of class litigation.

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