Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

By: Joseph D. Guarino and Jesse G. Pauker

The Supreme Court has once again been asked to address the question of whether time spent by employees donning and doffing has to be compensated. On October 29, 2010, the Court received a petition filed by Kraft Food Global, Inc., asking it to review the Seventh Circuit’s ruling in Spoerle v. Kraft Foods Global, Inc., that Section 203(o) of Fair Labor Standards Act (“FLSA”), allowing unions and employers to agree to forgo pay for donning and doffing, does not preempt state law. 

Section 203(o) of the FLSA provides that time spent putting on (“donning”) or taking off (“doffing”) integral and indispensable safety gear is generally regarded as “working time” and thus must be paid; however, the FLSA allows labor and management to vary that general rule through the collective bargaining process so that the workers get paid a higher hourly rate, in exchange for agreeing to exclude some time as compensable.

In Spoerle, over the previous 25 years the parties’ Collective Bargaining Agreement (“CBA”) had expressly excluded donning and doffing from hours worked in exchange for a higher hourly wage. The employees disagreed with the terms of the CBA and wanted not only to be paid for time spent donning and doffing but also to be paid for that time at the same increased hourly rate stipulated to in the CBA. While Wisconsin state law requires time spent donning and doffing be compensated at or above minimum wage and that this time counts towards the accumulation of overtime, it is silent on the issue of whether parties may collectively bargain to alter the State requirements similar to what is allowed by Section 203(o) of the FLSA. The Court of Appeals held, that because Wisconsin’s own wage-and-hour legislation lacked any equivalent to Section 203(o), the donning and doffing time counted as work time (and overtime) under state law.

The Court of Appeals relied upon Section 218(a) of the FLSA, or the “saving clause”, which provides that no provision of the Act “shall excuse noncompliance” with any state law that establishes a higher minimum wage or a lower overtime threshold.  According to the Court, management and labor acting jointly through a CBA could not override state substantive law, thus the existing state statute required the court to disregard the CBA where the parties attempted to avoid the obligations imposed by state wage and hour law.

According to Kraft, by enacting Section 203(o) of the FLSA, Congress believed that allowing labor and management to alter donning and doffing compensation through collective bargaining was in the best interest of the employees and that any such agreement should be enforceable despite any potential contradictory State law, consistent with Congress’s mandate that collective bargaining be governed exclusively by federal law. Kraft believes the Seventh Circuit’s opinion is inconsistent with Supreme Court precedent and misinterprets federal law

Although Kraft’s petition states that if left to stand, the Seventh Circuit’s opinion “will undermine the very collective bargaining process Congress intended to protect and cause other harms that Congress sought to avoid,” it will also create great potential exposure for employers to donning and doffing claims under state law. Unlike federal law, i.e. Section 203(o) of the FLSA, most state laws and regulations lack any defenses to donning and doffing claims.

by Michael Kun and Aaron Olsen

In recent years, some plaintiffs' counsel bringing wage-hour claims have have made the strategic decision to bring "hybrid" class actions; that is, actions alleging both federal and state wage-hour claims.  These cases can cause logistical nightmares for the courts, and great benefits for plaintiffs, for two primary reasons: (1) the standard for certification of a class is differerent for federal and state claims, and (2) classes in federal claims are "opt in" classes while those for state claims are "opt out" classes.  Indeed, in bringing "hybrid" claims, plaintiffs may seek to take advantage of the lower threshold for achieving conditional class certification under the federal Fair Labor Standards Act ("FLSA"), only to later seek to take advantage of the Rule 23 requirement that one must affirmatively “opt out” of the class.  

The courts appear to be seeing through this gamesmanship.  A number of courts have refused to permit both federal and state wage-hour claims to proceed on the same issues, noting the inconsistencies and practical difficulties raised.  Most recently, on November 3, 2010, the Ninth Circuit denied the plaintiff’s petition to appeal the district court’s order granting defendants’ motion to dismiss the state wage-hour claims that were part of the "hybrid" complaint in Daprizio v. Harrah’s Las Vegas, Inc., Case No.: 2:10-cv-00604-GMN-RJJ (Nev., August 17, 2010.)  

In addressing the claims for alleged violations of  the FLSA and Nevada  law, the district court concluded that the the state law claims could not proceed because of the tension between the "opt in" procedure of an FLSA collective action and the "opt out" procedure of a typical Rule 23 class action.  Simply, those procedures are incompatible. 

The district court’s opinion in Daprizio is important for employers faced with "hybrid" class actions because it may be cited in opposing plaintiffs' efforts to use such claim to pick and choose which class action procedures to follow and when to do so. 

By: Amy J. Traub

The New York State Department of Labor recently issued a proposed rule which would combine the current wage orders for the restaurant and hotel industries to form a single Minimum Wage Order for the Hospitality Industry.  If adopted, the Wage Order would affect requirements related to the minimum wage, tip credits and pooling, customer service charges, allowances, overtime calculations, and other common issues within the restaurant and hotel industries.  Additionally, the Wage Order would provide helpful guidance for traditionally ambiguous wage issues such as the handling of service charges and the definition of an employee uniform for purposes of a laundry allowance.  Highlights of the Wage Order include:

·         Minimum Wage (Effective January 1, 2011) 

o       Food service workers would need to receive at least $5.00 per hour and no more than $2.25 per hour in tip credits; however, the total of tips they receive plus their hourly wages would need to amount to $7.25 per hour

o       Service employees (at non-resort hotels) would need to receive at least $5.65 per hour and no more than $1.60 per hour in tip credits; however, the total of tips they receive plus their hourly wages would need to amount to $7.25 per hour

o       Service employees (resort hotel employees) would need to receive at least $4.90 per hour and no more than $2.35 per hour in tip credits; however their weekly average for tips would need to be at least $4.10 per hour 

·         Notifications to Employees and Customers 

o       Prior to beginning employment, employers now would need to notify employees that they are taking a tip credit from their wages

o       Employers would need to notify employees of any changes to their hourly rate of pay

o       Employers would need to notify customers of any charge that is neither for food/beverage nor a gratuity to a service employee; for example, a banquet or special function charge 

·         No More Set-Off of Wages Paid in Excess of Minimum Wage 

o       Employers would need to pay an additional hour at the rate of minimum wage for each hour the employee works beyond 10 hours per day, regardless of whether the rate of pay for the first 10 hours is above the minimum wage

·         No More Salary for Non-Exempt Employees 

o       Currently, a non-exempt employee can still be paid a salary so long as he/she is paid one and one-half times the regular rate of pay for hours worked beyond 40 hours during the week

o       If adopted, the Wage Order would require that all non-exempt workers (except commissioned salespersons) are paid on an hourly basis 

·         Tip Pooling 

o       Employers could require food service workers to join a tip pool

o       This would not apply to employees who do not provide direct food service to customers (however, a host/hostess who seats guests would be considered a direct food service employee and therefore eligible to participate in a tip pool) 

·         Increased Guidance 

o       Employers would be able to retain service charges if, and only if, they clearly explain to customers that such charges are not distributed to service employees

o       The Wage Order would exclude from the definition of “uniform” any clothing that may be worn as part of an employee’s wardrobe outside of work

o       Employers would not need to reimburse employees for the laundry expenses of any uniform clothing that can be washed with the employee’s non-uniform clothing; for example, a uniform that does not require dry cleaning

The new Wage Order signifies the New York State Department of Labor’s attempt to simplify the wage and hour rules for the restaurant and hotel industries while stepping up its enforcement of overtime and deduction violations, particularly with respect to non-exempt employees who are currently paid a salary as opposed to an hourly wage.   Of course, these highlighted changes are only a portion of the changes that would come into effect in the event the Wage Order is adopted in its entirety.