On January 17, 2019, New Jersey Governor Phil Murphy and legislative leaders announced an agreement to raise New Jersey’s minimum wage to $15 an hour by 2024. Under the agreement, and presuming enactment, effective July 1, 2019, the state’s minimum wage for most workers will increase from $8.85 to $10 an hour; thereafter, it will increase $1 an hour every January 1 until reaching $15 on January 1, 2024.

For seasonal workers and employees of small businesses (i.e., five or fewer workers), the ramp-up to $15 an hour would extend to 2026. For farmworkers, the base minimum wage would increase incrementally to $12.50 by January 1, 2024. Then, a special committee would review to determine whether to raise the farmworkers’ minimum wage to $15 an hour. …

Read the full Advisory online.

For years, EBG’s free wage-hour app has put federal, state and local wage-laws at your fingertips.

One of the most significant developments in wage-hour law in recent years has been the implementation of new state and local minimum wages, many of which just went into effect on January 1, 2019.

EBG’s free wage-hour app includes those new 2019 minimum wages.

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On January 15, 2019, the U.S. Supreme Court issued a unanimous decision in New Prime Inc. v. Oliveira, a case concerning the enforceability of arbitration agreements.

Petitioner New Prime Inc. (“New Prime”) is an interstate trucking company that engaged Dominic Oliveira to perform work as a driver pursuant to an “Independent Contractor Operating Agreement,” containing both an arbitration clause and a delegation clause giving the arbitrator authority to decide threshold questions of arbitrability.

Oliveira filed a putative class action against New Prime in federal court in Massachusetts alleging failure to pay truck drivers minimum wage pursuant to the Fair Labor Standards Act and Missouri and Maine labor laws. New Prime filed a motion to compel arbitration under Section 4 of the Federal Arbitration Act (“FAA”). In response, Oliveira argued that New Prime cannot compel arbitration because Section 1 of the FAA excludes “contracts of employment of . . . seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” commonly known as the transportation workers exclusion.

The district court determined that although the parties agreed to arbitrate gateway questions of arbitrability, the applicability of the transportation worker exclusion is not a question of arbitrability that the parties may delegate to an arbitrator. The court concluded that the exclusion does not extend to independent contractors and therefore ordered the parties to conduct discovery as to whether Oliveira was an independent contractor or an employee.

On appeal, the First Circuit agreed that applicability of the transportation worker exclusion is an “antecedent determination” that must be made by the court before arbitration can be compelled under the FAA. However, the First Circuit overturned the district court’s holding that the exclusion does not apply to independent contractors, relying on the ordinary meaning of the statutory phrase “contracts of employment” at the time Congress enacted the FAA.

The Supreme Court focused on two legal issues:

  1. Should a court determine whether a Section 1 exclusion to the FAA applies before ordering arbitration where the parties’ contract contains a delegation clause?
  2. Does the transportation worker exclusion apply to independent contractors as well as employees?

The Court answered both inquiries in the affirmative. On the question of arbitrability, the Court reasoned that courts do not have limitless power to compel arbitration of all private contracts. Rather, Section 2 of the FAA states that such power is limited to arbitration agreements involving commerce or maritime transactions, which is informed by Section 1. Thus, in order to properly assert its power to compel arbitration, a court must first determine whether the FAA applies to the contract at issue. The Court rejected the proposition that courts are barred from making this threshold determination when the parties’ contract contains a delegation clause, emphasizing that a delegation clause is “merely a specialized type of arbitration agreement,” enforceable only to the extent that the “involving commerce” requirement under Section 2 of the FAA is satisfied and the exclusion under Section 1 is inapplicable.

On the merits of the New Prime’s Section 1 challenge, the Court looked to the meaning of “contracts of employment” as that phrase was used at the time the FAA was adopted in 1925. The Court sought to avoid ascribing new meaning to “old statutory terms” in a way that would effectively and improperly amend legislation. The Court looked at dictionary entries from the time for this phrase and, in finding none, concluded that the phrase was not a term of art and was construed broadly to cover any “work,” not just work in a formal employer-employee relationship. The Court found further support for this conclusion in early twentieth-century case law and statutes that construe this phrase to cover work agreements involving independent contractors. The Court also noted that Section 1’s statutory text also includes—in close proximity to the phrase “contract of employment”—the term “workers” (i.e., “workers engaged in interstate commerce”). Finally, the Court refused to stray from the statutory text in favor of indiscriminately enforcing the policy behind the FAA, concluding that even a liberal federal policy favoring arbitration agreements has limits, and that courts must respect such limits.

While the New Prime decision is being heralded by some as a great victory to employees, likely because it is the first Supreme Court decision in years to ultimately reject a claim for arbitration, its impact on employers and employees appears to be rather limited in scope. First, the Court took no position as to whether Oliveira was an independent contractor or an employee, as Oliveira assumed for purposes of appeal that his contract established only an independent contractor relationship. Second, the Court did not affirmatively find that Oliveira qualified as a “worker[] engaged in . . . interstate commerce,” as again, the parties did not dispute this point. Third, the Court declined to address New Prime’s argument that courts have inherent authority to stay litigation in favor of the alternative dispute resolution of parties’ voluntary agreement.

Most importantly, the Court’s decision in no way broadens the transportation workers exclusion to cover workers in other industries. The decision does not curtail earlier rulings in which the Court construed Section 1’s language “any other class of workers engaged in . . . commerce” as excluding from the FAA only contracts of employment of transportation workers. Nothing in New Prime suggests that the Court would now deviate from this position. Although there is no longer a distinction between employee and independent contractor for purposes of Section 1, New Prime does not allow all contractors to suddenly bypass arbitration and vindicate their rights in court because this exception is limited to transportation workers.

The Court’s decision resolves only questions of federal law, meaning that courts presented in the future with arbitration agreements involving transportation workers will need to determine the enforceability of the agreements under state law. This issue will turn on state arbitration statutes, as well as contract law, public policy, and other considerations. Significant variation by jurisdiction seems likely.

The Illinois State Legislature expanded the Illinois Wage Payment and Collection Act to include a new section (820 Illinois Compiled Statues 115/9.5) (“Amendment”) that now requires every Illinois employer to reimburse an employee for all “necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.” The Amendment became effective January 1, 2019.

“Necessary expenditures” include any reasonable expenses or losses that the employee incurs that primarily benefit the employer and are a result of the employee discharging the duties of his or her position (e.g., required travel to an off-premises work site or required usage of a personal data plan, but not an ordinary commuting expense). Importantly, the Amendment allows employers to establish written guidelines for “necessary expenditures,” and an employer is not required to reimburse any expenses exceeding those guidelines. For example, employers that reimburse for an employee’s data or Internet charges for a personal device may establish a certain limit on the amount that is reimbursable.

Read the full Advisory online.

On December 12, 2018, in Furry v. East Bay Publishing, LLC, the California Court of Appeal held that if an employer fails to keep accurate records of an employee’s work hours, even “imprecise evidence” by the employee “can provide a sufficient basis for damages.”

In the case, not only did the employer in Furry not keep accurate records of the employee’s time, but only the amount of damages, and not the fact of the underlying violation, was in dispute. Under those circumstances, the Court held that the employee’s “imprecise evidence” of the unpaid hours that he worked was permissible to establish the amount of unpaid overtime.

The Court found that the level of detail that the employee advanced regarding his uncompensated hours was sufficient to shift the burden of proof to the employer to either give specific evidence of the hours actually worked or disprove the employee’s recollection. The Court stated that the fact “[t]hat [the employee] had to draw his time estimates from memory was no basis to completely deny him relief,” overruling the trial court’s complete denial of damages for the employee’s overtime claim.

In reaching reversing the trial court’s ruling on this issue, the Court rejected the employer’s argument that the trial court’s ruling was merely a credibility determination that was entitled to deference. Instead, the Court held that the trial court had a duty to draw “reasonable inferences” from the employee’s evidence – and had failed to do so.

Notably, the Court expressly distinguished this case from one where the underlying violation was in dispute. Therefore, this decision should only apply to disputes regarding damages.

While it reversed the trial court’s finding on that issue, the Court of Appeal upheld the trial court’s denial of relief on the employee’s meal period claim. The employee argued that although he was provided the opportunity to take off-duty meal periods and chose to take them at his desk, he was still entitled to regular compensation for time and meal period premiums when he worked through his meal periods. The Court held that the employee failed to show that the employer “knew or reasonably should have known” that he was working through his meal periods. Therefore, he was not entitled to relief on his meal period claim.

This decision reinforces for employers the importance of keeping and maintaining accurate time and payroll records. Of course, this decision is not binding on other Courts of Appeal, and it is possible that the California Supreme Court would reach a different conclusion, should it hear this case.

True to its promise last year, the U.S. Department of Labor’s Wage and Hour Division (the “WHD”) continues to issue a steady stream of opinion letters designed to offer practical guidance to employers on specific wage and hour issues solicited by employers. This past week, the WHD issued two new opinion letters concerning the Fair Labor and Standards Act (“FLSA”), where one addresses an employer’s hourly pay methodology vis-à-vis the FLSA’s minimum wage requirement, and the other the ministerial exception to the FLSA. While not universally applicable, employers should consider the general principles set forth in these opinion letters, and then further research the underlying relevant regulations and the DOL’s interpretive guidance to more fully understand the basic requirements to ensure legal compliance.

Varying Average Hourly Rate:

In Opinion Letter FLSA2018-28, the WHD examined a compensation plan in which a home-health aide employer paid employee aides on an hourly basis for each of their client appointments. While the employer did not specifically pay aides for their travel time between client locations, the hourly rate they received for the client appointments was sufficiently large enough when averaged among all hours worked, including travel time, to satisfy the minimum wage requirements of the FLSA. Specifically, the employer multiplied each employee’s time with clients by his or her hourly pay rate (typically $10 per hour) and then divided the product by the employee’s total hours worked (which includes both the client time and the travel time). Employees who work over 40 hours (including travel time) in any given workweek are paid time and one-half for all time over 40 hours based on a regular rate of $10.00.

Based on these facts, the WHD concluded that this payment scheme complies with the FLSA’s minimum wage requirements, reaffirming the principle that an employee’s average hourly rate can vary from workweek to workweek as long as it exceeds the FLSA’s minimum wage requirements for all hours worked. On the issue of overtime pay, however, the WHD cautioned that the employer’s compensation plan may not comply with the FLSA because the employer assumed a regular rate of $10 when, in fact, certain of its employees have actual regular rates of pay greater than $10. In other words, the regular rate cannot be arbitrarily selected; it must be based on an actual “mathematical computation.”

Ministerial Exception:

In Opinion Letter FLSA2018-29, the WHD advised that members of a Christian cooperative who share all personal property and funds and work for the organization, either in the schools, kitchens, or laundries or for two onsite non-profits that generate income for the organization, are not “employees” under the FLSA. As a preliminary matter, the WHD emphasized that the members of the cooperative do not expect to receive compensation for their services, which is the hallmark of an employment relationship.   The WHD further reasoned that the organization’s members are similar to nuns, priests, and other members of a religious order who work for church-affiliated entities, who typically fall within the FLSA’s ministerial exception. The WHD reasoned that like priests and nuns, the members of the religious cooperative share resources, gather for communal meals and worship, and provide for their own education, healthcare, and other necessities. In light of these similarities and the absence of any expectation of compensation, the WHD determined that the members of the cooperative were not employees for purposes of the FLSA.

The Opinion Letter further noted that the fact that some members work for non-profit, income-generating ventures did not alter the WHD’s conclusion. Relying on U.S. Supreme Court precedent exempting religious activities from the FLSA’s reach, the WHD explained that the members consider the work indivisible from prayer and reiterated that individuals can work for entities covered by the FLSA without being deemed employees under the FLSA.

Almost four years ago, we wrote about how a California Court of Appeal’s decision exposed health care employers to litigation if they relied upon IWC Wage Order 5 for meal period waivers. That decision was Gerard v. Orange Coast Memorial Medical Center (“Gerard I”), where the Court of Appeal concluded that IWC Wage Order 5 was partially invalid to the extent it authorized second meal period waivers on shifts over 12 hours.

Last year, we wrote about how the California Court of Appeal in Gerard II reversed its previous decision after the Legislature enacted SB 327 shortly after Gerard I. SB 327 amended Labor Code section 516 to state in pertinent part that “the health care employee meal period waiver provisions in Section 11(D) of [IWC] Wage Orders 4 and 5 were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. This subdivision is declarative of, and clarifies, existing law.” In Gerard II, the California Court of Appeal held that SB 327 is effective retroactively. As a result, the second meal period waivers that the plaintiffs had signed were valid and enforceable.

The Gerard plaintiffs appealed to the California Supreme Court. Last week, the California Supreme Court issued its decision affirming the lower court’s decision in full. Not only did the California Supreme Court confirm that second meal period waivers are valid for employees in the health care industry who work more than 12 hours in a shift, but it also confirmed that the SB 327 is effective retroactively.

The Gerard decision is a welcome development for California health care employers who have relied upon IWC Wage Order 5 for second meal period waivers, reinforcing the use of such waivers for employees who work more than 12 hours in a shift.

On December 7, 2018, Governor Andrew M. Cuomo signed into law an amendment to New York Labor Law (“NYLL”) Section 193 (“NY Wage Deduction Law”) extending the NY Wage Deduction Law, which had expired on November 6, 2018, until November 6, 2020.

Introduced in 2012, the NY Wage Deduction Law amended the NYLL to permit employers to make certain deductions from the wages of their employees, including deductions for accidental overpayments, salary advances (including advances of vacation time), and insurance premiums. The NY Wage Deduction Law also introduced rules regulating the scope and limitations on such deductions, as well as the required authorization that employers must obtain from employees prior to making a deduction.

Additional information about the regulations pertaining to wage deductions under the NY Wage Deduction Law is provided in Epstein Becker Green’s Act Now Advisory titled “New York Wage Deduction Rules Extended for Three Years.”

Read the full Advisory online.

In recent years, a growing number of states and localities have enacted unique minimum wage laws and ordinances entitling employees to be paid more – in some cases, substantially more – than the federal minimum wage, which has stood at $7.25 for nearly a decade.

As these minimum wages become more particularized, multi-jurisdictional employers face an increasing challenge to maintain compliance.

Below is an overview of notable increases slated to take effect on January 1, 2019, unless otherwise noted.

Please note that, at this late date, the 2019 minimum wage remains the subject of debate in several jurisdictions, including Michigan, where the modification of a bill in December 2018 has stirred controversy as it awaits executive signature.

Minimum Wage Hikes Applicable in the States and Territories

   

Current

New

State

Categories
(if any)
Minimum Wage Tipped Minimum Wage Minimum Wage

Tipped Minimum Wage

Alaska $9.84 $9.89
Arizona $10.50 $7.50 $11.00 $8.00
Arkansas $8.50 $9.25
California 26 or more employees $11.00 $12.00
25 or fewer employees $10.50 $11.00
Colorado $10.20 $7.18 $11.10 $8.08
Delaware $8.25 $8.75
District of Columbia $13.25 $14.00
Florida $8.25 $5.23 $8.46 $5.44
Maine $10.00 $5.00 $11.00 $5.50
Massachusetts $11.00 $3.75 $12.00 $4.35
Minnesota Large employer (annual gross revenue of $500,000 or more) $9.65 $9.86
Large employer 90-day training wage $7.87 $8.04
Large employer youth wage (under 18 years of age) $7.87 $8.04
Small employer (annual gross revenue of less than $500,000) $7.87 $8.04
Missouri $7.85 $3.93 $8.60 $4.30
Montana $8.30 $8.50
New Jersey $8.60 $8.85
New York (effective December 31, 2018)* $10.40 $7.85 (when tips are $2.55 or more)

$8.85 (when tips are at least $1.55, but less than $2.55)

11.10 $8.40 (when tips are $2.70 or more)

$9.45 (when tips are at least $1.65 but less than $2.70)

Ohio** Employers with gross revenues equal to or exceeding $314,000 (previously $305,000) $8.30 $4.15 $8.55 $4.30
Employers with gross revenues less than $314,000 (previously $305,000) $4.15 $4.30
Rhode Island $10.10 $10.50
South Dakota $8.85 $4.43 $9.10 $4.55
Vermont $10.50 $5.25 $10.78 $5.39
Washington $11.50 $11.50 $12.00 $12.00

* The minimum wages identified herein with respect to New York State and its localities are the general minimum wages. Different rules apply to certain categories of employees within certain regions and industries, including hospitality and building services.   Employers in New York State should take extra care to consult the state or local rules that may apply within their industries.

** Employees under the age of 16 may be paid no less than the federal minimum wage.

Localized Minimum Wage Hikes

Current New
Locality Categories
(if any)
Minimum Wage Tipped Minimum Wage Minimum Wage

Tipped Minimum Wage

Arizona          
Flagstaff, AZ $11.00 $12.00
California          
Belmont, CA $12.50 $13.50
Cupertino, CA $13.50 $15.00  
El Cerrito, CA $13.60 $15.00  
Los Altos, CA $13.50 $15.00  
Mountain View, CA $15.00 $15.65  
Oakland, CA $13.23 $13.80  
Palo Alto, CA $13.50 $15.00  
Redwood City, CA N/A $13.50  
Richmond, CA+ Without specified medical benefits $13.41 $15.00  
With specified medical benefits $11.91 $13.50  
San Diego, CA $11.50 $12.00  
San Jose, CA $13.50 $15.00  
San Mateo, CA 501(c)(3) non-profit $12.00 $13.50  
Other businesses $13.50 $15.00  
Santa Clara, CA $13.00 $15.00  
Sunnyvale, CA $15.00 $15.65  
New Mexico          
Albuquerque, NM++ Specified benefits not provided $8.95 $5.35 $9.20 $5.50
Specified benefits provided $7.95 $5.35 $8.20 $5.50
Bernalillo County, NM $8.85 $9.05
Las Cruces, NM $9.20 $3.68 $10.10 $4.04
New York

(effective December 31, 2018)

NYC more than 10 employees $13.00 $9.80 (when tips are $3.20 or more)

$11.05 (when tips are at least $1.95, but less than $3.20)

$15.00 $11.35 (when tips are $3.65 or more)

$12.75 (when tips are at least $2.25, but less than $3.65)

NYC 10 or fewer employees $12.00 $9.05 (when tips are $2.95 or more)

$10.20 (when tips are at least $1.80, but less than $2.95)

$13.50 $10.30 (when tips are $3.30 or more)

$11.45 (when tips are at least $2.05, but less than $3.30)

Nassau, Suffolk, & Westchester Counties, NY $11.00 $8.30 (when tips are more than $2.70)

$9.35 (when tips are at least $1.65, but less than $2.70)

$12.00 $9.05 (when tips are more than $2.95)

$10.20 (when tips are at least $1.80, but less than $2.95)

Washington          
Seattle, WA+++ Small employer (500 or fewer employees) $14.00

(or $11.50, with difference made up in tips or benefits)

$15.00

(or $12.00, with difference made up in tips or benefits)

 
Large employer (501 or more employees) – with medical benefits $15.45

(or $15.00, with difference made up in benefits)

$16.00  
SeaTac, WA Hospitality and transportation employees $15.64 $16.09  
Tacoma, WA $12.00 $12.35  

+ An employer may pay employees $1.50 less than the minimum hourly wage provided that the employer pays at least $1.50 per hour, per employee, towards an employee medical benefits plan that allows employees to receive employer-compensated care from a licensed physician.

++ Employers may offer a lower minimum wage if they provide the employee with healthcare and/or childcare benefits equal to or greater than an annualized cost of $2,500.00.

+++ In 2019, the two-tier system in which employees that offer certain benefits may offer a lower minimum wage will no longer apply to large employers.

Featured on Employment Law This Week:  The Department of Labor (“DOL”) rolls back the 80/20 rule.

The rule prohibited employers from paying the tipped minimum wage to workers whose untipped side work—such as wiping tables—accounted for more than 20 percent of their time. In the midst of a federal lawsuit challenging the rule, the DOL reissued a 2009 opinion letter that states that the agency will not limit the amount of side work a tipped employee performs, as long as that work is done “contemporaneously” with the tipped work or for a “reasonable time” before or after that work. The letter was previously withdrawn by the Obama administration.

Watch the segment below and read our recent post.

Watch Paul DeCamp’s full segment here.