A number of states and localities are about to implement mid-year hikes in the minimum wage. Below is a summary of the minimum wage increases (and related tipped minimum wage requirements, where applicable) that go into effect on July 1, 2018.

Current New
State Special Categories Minimum Wage Tipped Minimum Wage Minimum Wage Tipped Minimum Wage
Maryland $9.25 $3.63 $10.10 N/A
Nevada Employees with qualified

health benefits

$7.25 N/A
Employees without

health benefits

$8.25 N/A
Oregon General $10.25 $10.75
Urban (Portland Metro Urban Growth Area) $11.25 $12.00
Rural (Nonurban) $10.00 $10.50
Washington, D.C. $12.50 $3.33 $13.25 $3.89

 

Current New
Locality Categories Minimum Wage Tipped Minimum Wage Minimum Wage Tipped Minimum Wage
CA          
Belmont, CA N/A $12.50
Emeryville, CA 56 or more employees $15.20 $15.69
55 or fewer employees $14.00 $15.00
Los Angeles, CA (City) 26 or more employees $12.00 $13.25  
25 or fewer employees $10.50 $12.00  
Los Angeles, CA (County) Unincorporated areas of LA County, 26 or more employees $12.00 $13.25  
Unincorporated areas of LA County, 25 or fewer employees $10.50 $12.00  
Malibu, CA 26 or more employees $12.00 $13.25  
25 or fewer employees $10.50 $12.00  
Milpitas, CA $12.00 $13.50  
Pasadena, CA 26 or more employees $12.00 $13.25  
25 or fewer employees $10.50 $12.00  
San Francisco, CA Generally $14.00 $15.00  
Government-supported employees $12.87 $13.27  
San Leandro, CA $12.00 $13.00  
Santa Monica, CA 26 or more employees $12.00 $13.25  
25 or fewer employees $10.50 $12.00  
IL  
Chicago, IL $11.00 $6.10 $12.00 $6.25
Cook County, IL $10.00 $4.95 $11.00 $5.10
ME          
Portland, ME $10.68 $5.00 $10.90 N/A
MD
Montgomery County, MD 51 or more employees $11.50 $4.00 $12.25 N/A
11-50 employees, and provides certain home health services or is tax-exempt under 501(c)(3) $11.50 $4.00 $12.00 N/A
10 or fewer employees $11.50 $4.00 $12.00 N/A
MN
Minneapolis, MN 101 or more employees $10.00 $11.25
100 or fewer employees N/A N/A

This post was written with assistance from John W. Milani, a 2018 Summer Associate at Epstein Becker Green.

In most wage and hour cases, each workweek gives rise to a separate claim, at least for statute of limitations purposes. Thus, an employee seeking payment for alleged off-the-clock work or an independent contractor claiming misclassification and entitlement to overtime ordinarily may seek back wages and related recovery only for work performed within a set amount of time—usually two to six years preceding the filing of the complaint, depending on the jurisdiction—preceding the filing of the complaint. But what happens to the statute of limitations when a plaintiff tries to bring a class action under state law, the court denies class certification, and a new plaintiff seeks to bring a subsequent class action presenting the same claims?

On June 11, 2018, the Supreme Court provided the answer in China Agritech, Inc. v. Resh. In short, the Court held that although a class action suspends the running of the limitations period for individual potential class members who subsequently seek to join a suit or to file their own individual case, the class action does not permit the filing of subsequent time-barred class actions.

American Pipe Tolling

The Supreme Court first addressed the interplay of class actions and statutes of limitations more than four decades ago. In American Pipe & Construction Co. v. Utah, the Court concluded that a timely-filed complaint seeking relief on behalf of a class under Rule 23 of the Federal Rules of Civil Procedure suspends the running of the statute of limitations for potential class members, and that, upon the denial of class certification, members of the unsuccessful class may intervene in the original case without erosion of their claims to the statute of limitations. 414 U.S. 538, 544, 552-53 (1974).

Nine years later, the Court concluded that so-called American Pipe tolling applies not only when members of the pleaded class intervene in the original suit, but also when they file their own individual cases. Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350, 353-54 (1983). An open question following American Pipe and Crown, Cork is whether these tolling principles also apply to subsequent class actions.

The Supreme Court’s Ruling

In China Agritech, a company’s stock price dropped following public disclosure of allegedly fraudulent conduct by the company. Claims accrued on February 3, 2011, and on February 11, 2011, a plaintiff filed a putative class action under the Securities Exchange Act of 1934, which provides for a two-year statute of limitations. The court denied class certification in May of 2012, and the original case settled in September 2012, leading to dismissal.

The following month, the same counsel filed a second putative class action against the company alleging the same claims on behalf of a new named plaintiff. The court again denied class certification, leading to another settlement and dismissal.

On June 30, 2014—more than two years after the February 3, 2011 accrual of the claims—yet another plaintiff, represented by new counsel, commenced a third putative class action, which made its way to the Supreme Court. The district court dismissed the complaint as untimely, holding that the first two class complaints did not toll the time to bring further class claims. The U.S. Court of Appeals for the Ninth Circuit reversed.

The Supreme Court granted certiorari to resolve a three-way split among the federal appellate courts on the tolling issue. The Court framed the question presented as follows: “Upon denial of class certification, may a putative class member, in lieu of promptly joining an existing suit or promptly filing an individual action, commence a class action anew beyond the time allowed by the applicable statute of limitations?” (Slip Op. at 2.) Justice Ginsburg’s answer, in a decision joined by seven other justices, was that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” (Id.)

The Court noted that the reason for American Pipe tolling for individual claims is that “economy of litigation favors delaying those claims until after a class-certification denial. If class certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually.” (Slip Op. at 6.) If a court denies class certification, “only then would it be necessary to pursue claims individually.” (Id.)

But when a case involves class claims, “efficiency favors early assertion of competing class representative claims. If class treatment is appropriate, and all would-be representatives have come forward, the district court can select the best plaintiff with knowledge of the full array of potential class representatives and class counsel.” (Slip Op. at 7.) In cases in which “the class mechanism is not a viable option for the claims, the decision denying certification will be made at the outset of the case, litigated once for all would-be class representatives.” (Id.)

The Court cautioned that the plaintiffs’ “proposed reading would allow the statute of limitations to be extended time and again; as each class is denied certification, a new named plaintiff could file a class complaint that resuscitates the litigation.” (Slip Op. at 10.) The Court observed that although “[t]he Federal Rules [of Civil Procedure] provide a range of options to aid courts” in managing complex litigation, “[w]hat the Rules do not offer is a reason to permit plaintiffs to exhume failed class actions by filing new, untimely class actions.” (Id. at 14-15.)

The Concurrence

Concurring in the judgment only, Justice Sotomayor took issue with the Court’s holding as applied to cases outside the securities context. She addressed several differences between the procedures required by the Private Securities Litigation Reform Act, including publication of notice of the filing of a putative securities class action, designed to encourage active participation early in the case by other potential lead plaintiffs and counsel, not required for other class actions under Rule 23. (Concurrence at 2-4.) Justice Sotomayor agreed with the denial of tolling in the case before the Court, but she would have limited the ruling to cases subject to these additional procedural requirements and would not have issued a decision applicable to all Rule 23 cases. (Id. at 1, 7.)

What the Decision Means for Employers

In light of China Agritech, employers should expect courts to reject the use of American Pipe tolling to allow plaintiffs in wage and hour putative class actions to seek relief for workweeks that are outside the applicable limitations period. Courts will likely continue to allow individual claims for those otherwise time-barred workweeks when supported by American Pipe tolling. In addition, courts may continue to allow subsequent class actions by members of previously denied classes, but without the benefit of tolling. As always, employers faced with a wage and hour putative class action should carefully consider all available defenses, including the statute of limitations as to individual and class claims.

More than 7 months after hearing oral argument on an issue that will affect countless employers across the country – whether employers may implement arbitration agreements with class action waivers — the United States Supreme Court has issued what is bound to be considered a landmark decision in Epic Systems Corp. v. Lewis (a companion case to National Labor Relations Board v. Murphy Oil USA and Ernst & Young LLP v. Morris), approving the use of such agreements.

The decision will certainly have a tremendous impact upon pending wage-hour class and collective actions, many of which had been stayed while the courts and parties awaited the Supreme Court’s decision.  And it is likely to lead many more employers to implement arbitration agreements with class action waivers going forward, if only to avoid the in terrorem effect of those types actions.

In a 5-4 vote along the very lines that many commentators had predicted, with newest Supreme Court Justice Neil Gorsuch penning the majority opinion, the Supreme Court determined that the law is “clear” that class action waivers are enforceable under the Federal Arbitration Act (“FAA”) – and that they are not prohibited by the National Labor Relations Act (“NLRA”), as several Circuit Courts had concluded following the National Labor Relations Board’s (“NLRB”) DL Horton decision.

In reaching this decision, the Court took great pains to address – and reject – the various arguments presented by the former NLRB General Counsel, the related labor union and various amicus briefs submitted by the plaintiffs’ bar.  In so doing, the Court noted that for the first 77 years of the NLRA, the NLRB had never argued that class action waivers violated the Act; instead, the FAA and the NLRA had coexisted peacefully.  In fact, as the Court pointed out, as recently as 2010 the NLRB’s General Counsel had asserted that class action waivers did not violate the NLRA.

The decision is an unqualified victory for employers, particularly those who already have such arbitration agreements in place.  Given the prevalence of wage-hour class and collective actions, and the potential exposure in even the most baseless of suits, other employers would be wise to consider whether they, too, wish to implement such agreements.

Not unimportantly, the decision might give employers new grounds to argue that employees who sign such agreements are prohibited from pursuing representative claims under California’s Private Attorneys General Act (“PAGA”).  Even if those new arguments prove to be unavailing – to date, the California state courts have held that such claims cannot be compelled to arbitration because they belong to the state, not the employee –the Supreme Court’s decision could be used to require that an individual arbitrate his or her individual claims first such that he or she would not have standing to pursue the PAGA claims if the employer prevailed in arbitration.

And employers should be mindful that in some states (California again), an employer must pay virtually all of the costs of the arbitration process, a reality that has led more than a few plaintiffs’ lawyers to file multiple individual arbitrations in order to drive up employers’ costs to try to force them to the settlement table.

Our colleagues Jeffrey H. Ruzal, Adriana S. Kosovych, and Judah L. Rosenblatt, attorneys at Epstein Becker Green, co-authored an article in Club Director, titled “Recent Trends in State and Local Wage and Hour Laws.”

Following is an excerpt:

As the U.S. Department of Labor (DOL) appears to have relaxed its employee protective policy-making and enforcement efforts that grew during the Obama administration, increasingly states and localities have enacted their own, often more protective, employee-protective laws, rules and regulations. To ensure full wage and hour compliance, private clubs should consult their HR specialists and employment counsel and be mindful of all state and local requirements in each jurisdiction in which they operate and employ workers. Here are just some of the recent wage and hour requirements that have gained popularity among multiple jurisdictions.

Click here to download the full version in PDF format.

When California employees bring lawsuits alleging minimum wage, overtime, meal period or rest period violations, they typically bring additional claims that are purportedly “derivative” of these substantive claims.  One of these derivative claims is for wage statement (i.e., paystub) violations, alleging that because the employee was paid not all wages he or she allegedly earned, the wage statements he or she was provided were not accurate.

The maximum penalty for a wage statement violation under the California Labor Code is $4,000 per employee.  With such a significant potential penalty, it is no wonder that plaintiffs’ attorneys typically tack on these types of claims, especially in proposed class actions, driving up the potential value of a case.

On May 8, 2018, however, the California Court of Appeal published an employer-friendly decision that could operate to defeat these claims in many cases – if it is not reversed by the California Supreme Court.

In Maldonado v. Epsilon Plastics, Inc., ___ Cal.App.5th ___ (B278022, Apr. 18, 2018), the Court of Appeal confirmed that a wage statement claim fails as a matter of law when it is based on the alleged failure to show all wages purportedly “earned” but the wage statements accurately reflect the wages paid to the employee.  The Court agreed with the employer’s “commonsense position that the pay stubs were accurate in that they correctly reflected . . . the pay received” and held that a failure to pay wages “does not mandate that [employees] also receive penalties for the wage statements which accurately reflected the[] compensation” they were paid.

The Court of Appeal’s decision in Maldonado is a welcome one for employers that have had to face wage statement claims that are tacked on by plaintiffs’ lawyers for the purpose of increasing potential exposure.  Because this is the first published opinion directly deciding this issue, employers now have the tool necessary to seek to strike these claims.

Of course, it is possible that the California Supreme Court will review Maldonado.  If it were to do so, it would not be entirely surprising for the Court to reverse the decision, as the Supreme Court has done in other employment cases in recent years where the Court of Appeal had issued employer-friendly interpretations of the California Labor Code.

On May 3, New Jersey Governor Phil Murphy signed an executive order (“Order”) establishing a Task Force on Employee Misclassification (“Task Force”) to address concerns surrounding the misclassification of employees as independent contractors. The Order estimates that misclassification may deprive New Jersey of over $500 million yearly in tax revenue and deprive workers of employment-related benefits and protections to which they are entitled.

The Task Force’s mandate is to provide advice and recommendations to the Governor’s Office and Executive Branch Departments and agencies on both strategies and actions to fight misclassification, including:

  1. Examining and evaluating existing misclassification enforcement by executive departments and agencies;
  2. Developing best practices by departments and agencies to increase coordination of information and efficient enforcement;
  3. Developing recommendations to foster compliance with the law, including by educating employers, workers, and the public about misclassification; and
  4. Conducting a review of existing law and applicable procedures related to misclassification.

The Task Force will be comprised of at least 12 members, including three representatives from the Department of Labor and Workforce Development; three representatives from the Department of the Treasury; and one representative each from the Department of Law and Public Safety, the Department of Agriculture, the Department of Banking and Insurance, the Department of Human Services, the Department of Transportation, and the Economic Development Authority.

The Order calls for the Task Force to organize and meet as soon as possible to begin its work and is a likely harbinger of increased governmental audits and enforcement actions. Accordingly, the time is ripe for employers to review their policies and practices with respect to consultants and other independent contractors to ensure they meet New Jersey’s stringent ABC Test for classification of independent contractors, which we have previously discussed.

On April 30, 2018, the California Supreme Court issued its long-awaited opinion in Dynamex Operations West, Inc. v. Superior Court, clarifying the standard for determining whether workers in California should be classified as employees or as independent contractors for purposes of the wage orders adopted by California’s Industrial Welfare Commission (“IWC”). In so doing, the Court held that there is a presumption that individuals are employees, and that an entity classifying an individual as an independent contractor bears the burden of establishing that such a classification is proper under the “ABC test” used in some other jurisdictions.

Depending on the applicable statute or regulation, California has a number of different definitions for whether an individual is considered an entity’s employee. In Dynamex, the Court concluded that one of these definitions – “suffer or permit to work” – may be relied upon in evaluating whether a worker is an employee for purposes of the obligations imposed by the wage order. But the Court held that the Court of Appeal had gone too far in providing a literal interpretation of “suffer or permit to work” that would encompass virtually anyone who provided services.

The Court held that it is the burden of the hiring entity to establish that a worker is an independent contractor who was not intended to be included within the applicable wage order’s coverage.

To meet this burden, the hiring entity must establish each of the following three factors, commonly known as the “ABC test”:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The Court concluded that the “suffer or permit to work definition is a term of art that cannot be interpreted literally in a manner that would encompass within the employee category the type of individual workers . . . who have traditionally been viewed as genuine independent contractors who are working only in their own independent business.”

Following Dynamex, entities doing business in California that treat some workers as independent contractors will want to review their relationship under the “ABC test” to determine whether any or all such workers should be reclassified.

In 2012, we were proud to introduce our free wage and hour app.  Over the years, thousands of clients and potential clients have downloaded the app on their mobile phones and tablets.

For 2018, we are pleased to introduce a brand-new version of the app, available without charge for iPhoneiPad, and Android devices. See our press release here.

Importantly, the 2012 and 2014 versions of the app have been retired.  If you had downloaded them, you will need to download the new version.

The new version of the app includes wage-hour summaries for all 50 states, as well as D.C. and Puerto Rico.  And it includes updates for 2018, including new state minimum wages and tipped employee rates.

Now more than ever, we can say that the app truly makes nationwide wage-hour information available in seconds. At a time when wage-hour litigation and agency investigations are at an all-time high, we believe the app offers an invaluable resource for employers, human resources personnel, and in-house counsel.

Key features of the updated app include:

  • Summaries of wage and hour laws and regulations, including 53 jurisdictions (federal, all 50 states, the District of Columbia, and Puerto Rico)
  • Available without charge for iPhoneiPad, and Android devices
  • Quick access to, and a direct feed of, Epstein Becker Green’s award-winning Wage and Hour Defense Blog, which provides up-to-date commentary on wage and hour developments
  • Social media feeds from Twitter, Facebook, LinkedIn, and YouTube
  • Quick links to Epstein Becker Green’s attorneys and practices – and more!

If you haven’t done so already, we hope you will download the free app soon.  To do so, you can use these links for iPhoneiPad, and Android.

On April 12, 2018, the Wage and Hour Division of the U.S. Department of Labor (“DOL”) issued the first Opinion Letters since the Bush administration, as well as a new Fact Sheet.  The Obama administration formally abandoned Opinion Letters in 2010, but Secretary of Labor Alexander Acosta has restored the practice of issuing these guidance documents.  Opinion Letters, as Secretary Acosta states in the DOL’s April 12 press release, are meant to explain “how an agency will apply the law to a particular set of facts,” with the goal of increasing employer compliance with the Fair Labor Standards Act (“FLSA”) and other laws.  Not only do Opinion Letters clarify the law, but pursuant to Section 10 of the Portal-to-Portal Act, they provide a complete affirmative defense to all monetary liability if an employer can plead and prove it acted “in good faith in conformity with and in reliance on” an Opinion Letter.  29 U.S.C. § 259; see also 29 C.F.R. Part 790.  For these reasons, employers should study these and all forthcoming Opinion Letters closely.

Opinion Letter FLSA2018-18 addresses the compensability of travel time under the FLSA, considering the case of hourly-paid employees with irregular work hours who travel in company-provided vehicles to different locations each day and are occasionally required to travel on Sundays to the corporate office for Monday trainings.  The Opinion Letter reaffirms the following guiding principles: First, as a general matter, time is compensable if it constitutes “work” (a term not defined by the FLSA).  Second, “compensable worktime generally does not include time spent commuting to or from work.”  Third, travel away from the employee’s home community is worktime if it cuts across the employee’s regular workday.  Fourth, “time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus, or automobile” is not worktime.

With these principles in mind, this letter provides two non-exclusive methods to reasonably determine normal work hours for employees with irregular schedules in order to make an ultimate judgment call on the compensability of travel time.  Under the first method, if a review of an employee’s hours during the most recent month of regular employment reveals typical work hours, the employer can consider those the normal hours going forward.  Under the second method, if an employee’s records do not show typical work hours, the employer can select the average start and end times for the employee’s work days.  Alternatively, where “employees truly have no normal work hours, the employer and employee … may negotiate … a reasonable amount of time or timeframe in which travel outside the employees’ home communities is compensable.”  Crucially, an employer that uses any of these methods to determine compensable travel time is entitled to limit such time to that accrued during normal work hours.

Opinion Letter FLSA2018-19 addresses the compensability of 15-minute rest breaks required every hour by an employee’s serious health condition (i.e., protected leave under the FMLA).  Adopting the test articulated by the Supreme Court in the Armourdecision—whether the break primarily benefits the employer (compensable) or the employee (non-compensable)—the letter advises that short breaks required solely to accommodate the employee’s serious health condition, unlike short, ordinary rest breaks, are not compensable because they predominantly benefit the employee.  The letter cautions, however, that employers must provide employees who take FMLA-protected breaks with as many compensable rest breakers as their coworkers, if any.

Opinion Letter CCPA2018-1NA addresses whether certain lump-sum payments from employers to employees are considered “earnings” for garnishment purposes under Title III of the Consumer Credit Protection Act (the “CCPA”).  The letter articulates the central inquiry as whether the lump-sum payment is compensation “for the employee’s services.” The letter then analyzes 18 types of lump-sum payments, concluding that commissions, bonuses, incentive payments, retroactive merit increases, termination pay, and severance pay, inter alia, are earnings under the CPA, butlump-sum payments for workers’ compensation, insurance settlements for wrongful termination, and buybacks of company shares are not.

Finally, Fact Sheet #17S addresses the FLSA’s minimum wage and overtime requirement exemptions for employees who perform bona fide executive, administrative, professional, and outside sales duties (known as the “white collar exemptions”) in the context of higher education institutions.  Specifically, the letter provides guidance as to the exempt status of faculty members, including coaches, non-teacher learned professionals (e.g., CPAs, psychologists, certified athletic trainers, librarians, and postdoctoral fellows), administrative employees (e.g., admissions counselors and student financial aid officers), executive employees (e.g., department heads, deans, and directors), and student-employees (i.e., graduate teaching assistants, research assistants, and student residential assistants).  Of note, the letter confirms that the DOL is undertaking rulemaking to revise the regulations that govern the white collar exemptions.

In November 2017, four convenience store franchisees brought suit in federal court against 7-Eleven, Inc., alleging that they and all other franchisees were employees of 7-Eleven. The case was filed in the United States District Court for the Central District of California, entitled Haitayan, et al. v. 7-Eleven, Inc., case no. CV 17-7454-JFW (JPRx).

In alleging that they were 7-Eleven’s employees, the franchisees brought claims for violation of the federal Fair Labor Standards Act (“FLSA”) and the California Labor Code, alleging overtime and expense reimbursement violations. The trial court granted judgment in 7-Eleven’s favor, concluding that 7-Eleven was not the four franchisees’ employer under California law or federal law.

The court noted that the franchisees’ “basic legal theory underlying [their] claims [wa]s that 7-Eleven’s restrictive policies and practices created an employment relationship between the parties.” The court concluded that because the franchisees could not establish an employment relationship, each of their claims failed.

For example, while 7-Eleven required the franchisees to keep their stores open 24 hours per day, 364 days per year, the court was persuaded by the fact that the franchisees themselves were not “actually required to work at the stores a particular number of hours or on particular days” – they could hire employees to meet these requirements. And while the franchisees argued that 7-Eleven controls the payment of all wages and instructs franchisee on pay practices, performance appraisals, and disciplinary actions, including worker terminations, that did not persuade the court because “the fact that a franchisor pays a franchisees’ employees’ wages does not create an employment relationship,” and the franchisees admitted that they have unfettered discretion to hire and fire employees and set wages.

Because the franchise agreements explicitly provided that franchisees “control the manner and means of the operation” of their stores and “exercise complete control over and all responsibility for all labor relations and the conduct of [franchisees’] agents and employees, including the day-to-day operations” of franchisees’ stores and employees, the court concluded that such minimal control was insufficient to make franchisees common law employees of 7-Eleven.

The federal court’s decision is a welcome one for franchisors that have sound franchise agreements and practices in place. It is certainly possible that the court would have reached a different conclusion had 7-Eleven’s franchise agreement or practices provided for 7-Eleven to have a greater right to exercise control over franchisees.  In light of this decision, franchisors should review their agreements and practices to ensure they do not have a right to control the wages, hours, or working conditions of franchisees.