Misclassifying workers as independent contractors rather than employees is a costly mistake.  Among the many issues arising from misclassification is potential liability under federal and state minimum wage and overtime laws.  As the laws continue to change and develop, so do the risks to contracting entities.

Federal Changes

On January 6, 2021, the United States Department of Labor (DOL) announced its proposed Independent Contractor Rule to address the distinction between independent contractors and employees.  After a delay for consideration of comments received in response to the proposed rule, it was scheduled to go into effect on May 7, 2021.  However, on March 12, 2021, the DOL published a notice of proposed rulemaking to withdraw the Independent Contractor Rule.  The DOL withdrew the rule on May 5, 2021 before it ever took effect. DOL Fact Sheet #13 continues to constitute the DOL’s guidance on the distinction between employees and independent contractors.  Whether those factors are satisfied for a particular workers will require industry- and jurisdiction-specific analysis.

President Biden’s DOL also withdrew Trump-era opinion letters on independent contractor status as having been issued prematurely, before the proposed Independent Contractor Rule became effective.  The withdrawn opinion letters include:

  • FLSA2021-9 (insisting that tractor-trailer owner-operators comply with legal, health, and safety standards to which they are already bound does not affect the control analysis for independent contractor classification purposes, but that control over their schedules, the non-exclusive working relationship, and their discretion over freight selections, hiring decisions, insurance, and capital investments supported their independent contractor status);
  • FLSA2021-8 (perishable food product distributors were independent contractors based in part on their control over their schedules and assignments, non-exclusive working relationship, freedom from supervision, and discretion over purchases, target customers, marketing, and billing arrangements); and
  • FLSA2019-6 (service providers for a virtual marketplace company (VMC) were independent contractors based in part on the fact that they could choose their own hours, cancel a job, and work for competitors, had to purchase all necessary resources to perform their work, and were not operationally integrated into the VMC’s referral business).

Thus, despite significant activity by the DOL, none of the above Trump-era guidance is in effect.

California Developments

In 2018, the California Supreme Court adopted the “ABC test” for evaluating whether a worker is properly classified as an independent contractor.  Under the ABC test, which is considerably more difficult to satisfy than the flexible Borello test that it replaced, a worker is considered an employee and not an independent contractor, unless the hiring entity meets all three of the following conditions:

  1. The person 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
  2. The person performs work that is outside the usual course of the hiring entity’s business; and
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

The California legislature codified the ABC test in AB5, which became effective January 1, 2020.

Entities defending misclassification cases on the basis that they were correctly classifying employees before Dynamex, were dealt a significant blow.  In January 2021, the California Supreme Court held in Vazquez v. Jan-Pro Franchising that the ABC test it articulated in Dynamex was an interpretation of existing law, and therefore, applied retroactively.

The Ninth Circuit rejected the argument that California’s independent contractor test is preempted by federal law.  In April 2021, California Trucking Ass’n v. Bonta, the Ninth Circuit held that the Federal Aviation Administration Authorization Act did not preempt California’s independent contractor test. The California Trucking Association filed a writ of certiorari seeking review by the United States Supreme Court in August 2021.

Even California’s successful ballot initiative, Proposition 22, which exempted app-based drivers from AB5, is facing a challenge.  California voters passed this ballot initiative in November 2020.  In August 2021, a California state court found the law unconstitutional, and a coalition of the companies that funded Prop 22, the Protect App-Based Drivers & Services Coalition, has promised to appeal the decision.

The ABC Test Exists In Other States

Several other states have adopted the ABC test for employee classification as it pertains to compliance with state wage and hour laws (either completely for certain industries only) including:

  • Connecticut
  • District of Columbia (for construction)
  • Illinois (for construction)
  • Maryland (for construction and landscaping)
  • Massachusetts
  • Nebraska
  • New York (for construction)
  • New Jersey (for construction)
  • Vermont

Due to the proliferation of the ABC test under state law, and the fluctuation in federal guidance, companies should consult legal counsel before designating workers as independent contractors no matter where they operate.

On Friday, October, 29, 2021, the Department of Labor (DOL) issued a final rule regarding how to determine which tipped employees may receive a “tip credit” in lieu of receiving the full minimum wage directly from the employer. The new rule restores the “80/20” rule rescinded under President Trump, requiring employers to pay employees at least the minimum wage if they spend more than 20% of their time working on tasks that do not specifically generate tips such as wiping down tables, filling salt and pepper shakers, and rolling silverware into napkins, or duties referred to in the industry as “side work.” The rule goes into effect on December 31, 2021 and the change represents continuation of a pattern that has continued across administrations with Presidents adopting and rescinding the rule over the past three administrations.

Under the Fair Labor Standards Act (“FLSA”) employees can satisfy the minimum wage requirements for tipped employees by paying them at least $2.13 per hour if the employees earn enough in tips to make up the difference between that wage and the full minimum wage. The difference is referred to a tip credit. Prior to the new rule change, employers relied on a “reasonableness” analysis to determine the appropriateness of using the tip credit.

The new 80/20 rule divides employee duties into three categories to determine whether an employee qualifies for the tip credit: 1) job duties that directly produces tips, 2) job duties that directly support tip-producing work, and 3) any other job duties. Under the new rule, any time spent performing the third category of work must be compensated at least at the full minimum wage without any tip credit being applied. Employers may only apply the tip credit to employees in the second category if it “is not performed for a substantial amount of time.” The DOL defines this standard as exceeding 20% of the employee’s workweek or performed for a continuous amount of time exceeding 30 minutes.

Watch for further developments regarding this new rule, as litigation challenging the regulation seems likely.

The doctrine “joint employer” liability has received significant attention in recent months, including on this blog. Under the Fair Labor Standards Act, an employee may be deemed to have multiple employers—each of whom would be liable jointly for all aspects of FLSA compliance, including with regard to the payment of wages—in connection with his or her performance of the same work. During the prior administration, the U.S. DOL issued a rule intended to standardize the parameters of joint employer liability.  Months later, however, a federal court invalidated a portion of the new rule, holding that it impermissibly narrowed the scope of the joint employer doctrine. And, in July 2021, the DOL announced its outright repeal of the rule—i.e., whether a business might face joint employer liability will again be governed by the multi-factor “economic reality” test subject to varying judicial interpretations.

An important new development in New York law, however, essentially renders the concept of joint employment, and the standards that govern it, a moot point—at least in terms of wage liability in the construction industry. In September 2021, Governor Hochul signed Senate Bill S2766C (A3350), titled “An act to amend the labor law and the general business law, in relation to actions for non-payment of wages,” which adds new sections to the New York Labor Law (198-e) and General Business Law (756-f). As stated in the bill’s Justification, the law is intended to “provide New York construction workers with a new remedy against wage theft”—specifically, by pinning liability on contractors when one of their subcontractors fails to pay wages owed to its (the subcontractor’s) employees.  This transfer of liability occurs without any regard to whether the contractor could rightly be considered a joint employer of the subcontractor’s employee.

The critical aspects of Labor Law § 198-e, which will take effect on January 4, 2022, are as follows:

  • The law transfers liability to “contractors,” which includes any person or business entity that “enters into a construction contract with an owner.”
  • The law applies to work performed pursuant to a “construction contract,” which is defined broadly, but excludes public works contracts, home improvement contracts made by the owners of an owner-occupied dwelling, and some (but not all) contracts for the construction of one- or two-family homes.
  • The law renders contractors liable for wages owed but not paid by subcontractors at “any tier”—i.e., the contractor is accountable for the wages of its subcontractors’ subcontractors, etc.
  • Releases of liability granted to contractors by subcontractors or their employees will generally be invalid—though waivers granted by way of a collective bargaining agreement may be effective, provide certain criteria are met.
  • The law establishes an abridged, three-year period limitation for wage claims that a subcontractor’s employee may wish to assert against a contractor—in contrast to the ordinary six-year period of limitation that applies in other contexts under the Labor Law.
  • While contractors must assume liability for wages owed by subcontractors in the first instance, they may bring an action against the relevant subcontractor to recover wages paid to the subcontractor’s employees.

As noted in the bill’s Justification, the legislature’s intent was not only to ensure that “construction workers are quickly able to collect unpaid wages,” but also, at the same time, to “creat[e] an incentive for the construction industry to better self-police itself in turn[.]” To the latter end, corresponding revisions to the General Business Law are purported to arm contractors with tools to monitor their subcontractors, and thereby reduce their exposure to wage liability. Specifically, upon a contractor’s request, a subcontractor (at any tier) must provide:

  • certified payroll records containing “sufficient information to apprise the contractor . . . of such subcontractor’s payment status in paying wages and making any applicable fringe or other benefit payments or contributions to a third party on its employee’s behalf”;
  • the names of all of the subcontractor’s workers (including independent contractors) on a project;
  • as applicable, “the name of the contractor’s subcontractor with whom such subcontractor is under contract”;
  • the subcontractor’s contract start date and duration of work;
  • the identity of unions with which the subcontractor is a signatory; and
  • contact information for the subcontractor’s designated contact.

If a subcontractor at any tier fails to provide the foregoing information, the contractor may withhold payment otherwise due to that subcontractor.

Contractors potentially impacted by the new law should note that it applies not only to new contracts made on or after January 4, 2022, but also to contracts “renewed, modified or amended” on or after that date. Therefore, contractors in New York should:

  • Consider revisions to their standard contracts, including, at a minimum:
    1. requirements that the subcontractor recurrently, without the need for an affirmative request, provide all of the information to which the contractor is entitled under the revisions to the General Business Law;
    2. indemnity provisions explicitly referencing the new section of the Labor Law (such provisions are expressly permitted under the new law, as it states that it does not “prohibit a contractor . . . from establishing by contract or enforcing any other lawful remedies against a subcontractor it hires for liability created by violation of this section”); and
    3. obligations that subcontractors certify and/or demonstrate compliance with applicable wage laws.
  • Be sure to implement the foregoing types of protective provisions if and when there is any renewal, modification, or amendment of an existing contract.
  • Develop and implement practical procedures for collecting and reviewing the information that they are entitled to receive from subcontractors under the new law, and any additional information that they may otherwise demand for the purpose of reducing exposure to wage claims under the new law.

Finally, while the new law applies to one industry, keeping an eye on its impacts may be worthwhile even from a broader perspective. As noted, the departure from fundamental notions of joint employer liability is jarring. And the dual justifications for that departure—i.e., that (i) certain actors in the industry are “unscrupulous” and may try to “make themselves judgment proof” and (ii) good faith actors in the industry are in a position to influence the behavior of those would-be bad actors—would not necessarily be unique to this space. Time will tell if New York’s new rule is an anomaly or the front edge of a trend.

On September 27, 2021, California Governor Gavin Newsom signed into law the Garment Worker Protection Act, which makes California the first state to ban piece rate pay for garment workers, requiring instead that they be paid the minimum hourly wage.

The Division of Labor Standards Enforcement Manual defines piece rate as, “[w]ork paid for according to the number of units turned out … [that] must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods.”

Effective January 1, 2022, SB 62 will prohibit employers from paying employees engaged in garment manufacturing by a piece rate. The bill imposes a $200 fine per employee against a garment manufacturer or contractor, payable to the employee, for each pay period where the employee is paid by the piece rate.

The legislation expands liability for unpaid wages, including wage theft by contractors, to fashion brands. The law makes garment manufacturers, contractors, and “brand guarantors” who contract with another person for the performance of garment manufacturing joint and severally liable with any manufacturer and contractor for the full amount of unpaid wages and any other compensation, penalties, and attorney’s fees  due to a garment manufacturing employee for a violation of SB 62. The law defines “brand guarantor” as, “a person contracting for the performance of garment manufacturing … regardless of whether the person with whom they contract performs manufacturing operations or hires a contractor or subcontractor to perform manufacturing operations.”

Employees will be able to enforce their rights under the law solely by filing a claim with the Labor Commissioner. However, the law creates a rebuttable presumption that a brand guarantor or garment manufacturer is liable with the contractor for any amounts found to be due to the employee. The bill also gives the Labor Commissioner authority to enforce the law by issuing a stop order or a citation.

SB 62 also requires garment manufacturers and brand guarantors to keep all contracts, invoices, purchase orders, work orders, style or cut sheets, and any other documentation related to garment manufacturing performance for four years.

We will continue to monitor developments from California that may provide further guidance on compliance with and enforcement of SB 62. In the meantime, garment manufacturers and brand guarantors should ensure that their wage payment practices and recordkeeping procedures are compliant with SB 62 in advance of the law’s January 1, 2022 effective date.

On June 1, 2021 the Southern District of Florida granted the motion by Uber Technologies, Inc. (“Uber”) to compel arbitration, finding that the company’s drivers did not engage in sufficient interstate commerce to meet the interstate commerce exclusion in the Federal Arbitration Act (FAA).

Plaintiffs Kathleen Short and Harold White brought a class action against Uber alleging that the company’s policy of classifying its drivers as independent contractors violates the Fair Labor Standards Act and the Florida Minimum Wage Act because the company failed to pay drivers the minimum wage. Uber sought to enforce its arbitration agreement which unambiguously required plaintiffs to pursue any potential claims in an individual arbitration.

The plaintiffs attempted to avoid the agreement by arguing that they were outside the scope of the FAA. 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” from the FAA’s requirements. The Supreme Court has previously held in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), that the “interstate commerce” exclusion applies only to transportations workers.

Judge Aileen M. Cannon noted while the Eleventh Circuit had not weighed in on whether rideshare drivers qualify for the Section 1 exclusion, it has consistently held that the law applies only to workers who “actually engage in the transportation of goods in interstate commerce” and are “employed in the transportation industry.” The court explained that to determine whether the transportation worker exemption applies, courts have analyzed whether the class of workers as a whole engaged in interstate commerce, rather than looking at individual workers.

Judge Cannon rejected the plaintiffs’ exclusion argument based on Uber’s evidence that only 12.8% of the drivers made any interstate trips in 2020, and among those drivers, interstate trips amounted to fewer than 2% of their total number of trips. With similar cases being litigated in California and in the Third Circuit, the applicability of the FAA’s interstate commerce exclusion to rideshare drivers continues to be an important issue for rideshare companies.

Since the Supreme Court issued its seminal 2018 decision in Epic Systems Corp. v. Lewis, acknowledging that the Federal Arbitration Act (“FAA”) permits the use of arbitration agreements with class action waivers, many employers have implemented arbitration programs for their employees. Those arbitration programs have been aimed, in no small part, at avoiding the class and collective actions that have overwhelmed employers, particularly in California.

In response, California passed AB 51, which prohibits imposing “as a condition of employment, continued employment, or the receipt of any employment-related benefit” the requirement that an individual “waive any right, forum or procedure” available under the California Fair Employment and Housing Act (“FEHA”) and Labor Code.

AB 51 was challenged by several business groups, including the U.S. Chamber of Commerce, as being preempted by the FAA. Shortly before AB 51 was to go into effect, Judge Kimberly Mueller of the United States District Court of the Eastern District of California granted a temporary restraining order (“TRO”) and, subsequently, a preliminary injunction barring enforcement of the statute, concluding that the argument that AB 51 is preempted by the FAA was likely to prevail.

The Ninth Circuit, however, has now reversed on the central issue in United States Chamber of Commerce v. Bonta and opened the door for AB 51 to go into effect. It held that AB 51 “was not preempted by the FAA because it was solely concerned with pre-agreement employer behavior.” (The panel upheld Muller’s determination, however, that AB 51’s enforcement mechanisms – civil and criminal penalties – were preempted by the FAA because they punish employers for entering into an agreement to arbitrate.)

The dissent noted that the majority’s ruling created a split with the First and Fourth Circuits. Those courts have held that “too clever-by-half” workarounds to block the formation of arbitration agreements are preempted by the FAA, just as much as laws that explicitly block their enforcement.

That split suggests that the business groups may not only seek an en banc review of the case, but that they are likely to seek review by the United States Supreme Court. Given the Circuit Court split and the important issues Bonta raises under the FAA, there seems to be a significant chance that the Supreme Court would choose to review it.

And, should it do so, the current composition of the United States Supreme Court suggests that Bonta in fact could be reversed.

Of course, only time will tell whether the business groups seek en banc review or seek certiorari with the Supreme Court. And only time will tell whether AB 51 will be stayed during that time.

We will continue to monitor developments.

It is no secret that the Private Attorneys General Act (“PAGA”) has been a cash cow for plaintiffs’ counsel in California.

PAGA allows a single employee (and their counsel) to file suit on behalf of other employees for alleged Labor Code violations, without having to go through the class action mechanism.  In other words, a PAGA plaintiff can file suit seeking penalties for hundreds or thousands of employees, yet never need to show that there are common issues susceptible to common proof – or even that their own claims are typical of those of other employees.

As a result, there has been little to prevent plaintiffs and their counsel from filing massive PAGA actions on behalf of all of an employer’s employees, even without having any basis to believe that many those employees suffered any violation at all.

The in terrorem effect of a lawsuit seeking penalties on behalf of hundreds or thousands of employees has led to a great many multi-million-dollar settlements in which plaintiffs’ counsel typically take one-third of the recovery for themselves, often for doing little more than filing a boilerplate lawsuit and attending a mediation.

For years, employers have argued that PAGA claims should be stricken if the trial of such claims would not be manageable.  That would seem to be the case in many PAGA actions, particularly those with a large number of employees and highly individualized issues, such as whether, when and how employees worked off-the-clock or did not receive compliant meal or rest periods.

In a case involving 1,000 employees, even if 5 employees could take the stand each day to testify about their individualized experiences, trial would last 200 court days. That would seem to be unmanageable on its face.

And if a case involved 10,000 employees . . . well, you can do the math.

Some California trial courts have agreed that a PAGA claim cannot proceed if trial would be unmanageable, analogizing PAGA to claims under other statutes.

But other courts have been reluctant to impose a manageability requirement because no such requirement is expressly included in PAGA itself, and because there was no appellate decision imposing such a requirement in PAGA cases.

Now, employers have an appellate decision they can cite to – Wesson v. Staples the Office Superstore, LLC.

In Wesson, the California Court of Appeal concluded that “courts have inherent authority to ensure that a PAGA claim will be manageable at trial — including the power to strike the claim, if necessary .. . .”

The Court of Appeal noted that the “evidence and argument before the trial court revealed no apparent way to litigate [the defendant-employer]’s affirmative defense in a fair and expeditious manner, as the defense turned in large part on [the allegedly agreement employees]’ actual work experience, yet there was extensive variability” in that group.  Given those individualized issues, there was no dispute that any trial would span several years because there would be hundreds of witnesses.  “The trial court reasonably concluded that such a trial would ‘not meet any definition of manageability,’” and the Court of Appeal affirmed.

Wesson should prove to be a huge development in PAGA actions, informing defense strategies and making it more important than ever to identify and highlight individualized issues that will make trial unmanageable.  And that should impact the negotiation of PAGA settlements where settlement is desirable, helping to drive down the settlement values in these cases.

The in terrorem effect that often drove large settlements may now be gone, matched by the argument that the PAGA claims could be stricken in their entirety.

On September 1, 2021, Massachusetts Attorney General Maura Healey approved two versions of a ballot initiative (version 1, version 2) concerning the relationship between app-based drivers (such as those who transport passengers or deliver food) and the companies with which they contract. If passed, the ballot initiative will enact the Relationship Between Network Companies and App-Based Drivers Act (the “Act”) and classify such drivers as independent contractors, not employees. It will also require ride-sharing and food-delivery companies to provide them with certain benefits.

Like most companies, ride-sharing and food-delivery companies operating in Massachusetts must satisfy M.G.L. c. 149, § 148B’s “ABC test” to show that a worker is an independent contractor. The ABC test provides that workers are independent contractors only if their putative employer demonstrates that they are not subject to the company’s “control and direction,” perform work “outside the usual course” of the company’s business, and are “customarily engaged in an independently established trade, occupation, profession or business.”

Under the Act, however, app-based drivers would be independent contractors if they are not required to work on certain days, at specific times, or a set number of hours; are free to reject requests for rides or deliveries; and are not restricted from working in any other lawful line of work, including working for other app-based transportation and delivery companies (except while actively performing transportation or delivery services using a particular company’s app).

While the Act would classify app-based drivers who meet these criteria as independent contractors, it will also provide them with benefits typically reserved for employees. Specifically, companies would have to provide app-based drivers with at least 120% of the applicable minimum wage, a healthcare stipend, paid sick time, paid family and medical leave, occupational accident insurance, and paid occupational safety training.

Less than a year ago, Californians voted to approve similar measures in their state (although a California state court has recently ruled that the California initiative was unconstitutional).

Before Massachusetts voters will have the same opportunity next November, the Act will have to go through additional steps, such as collecting just over 80,000 signatures, being submitted to the General Court, and if the General Court declines to act on it, collecting roughly 13,000 more signatures.

We will monitor activity on the Act and update this post with pertinent developments.

Many New York families employ domestic workers –individuals who care for a child, serve as a companion for a sick, convalescing or elderly person, or provide housekeeping or any other domestic service. They may be unaware of federal and New York requirements that guarantee those domestic workers minimum wage for all hours worked, paid meal breaks, and overtime compensation.

In addition, New York imposes specific requirements on employers regarding initial pay notices, pay frequency, and pay statements that also apply to persons who employ domestic workers.

To avoid inadvertent wage and hour violations, it is important that persons who employ domestic workers in New York understand the relevant laws regarding domestic workers and approach what many understandably consider a personal relationship as a formal, business one for wage and hour purposes.

Legal Landscape

At the federal level, the Fair Labor Standards Act (“FLSA”) covers persons employed in domestic service in private homes.

At the state law level, two wage and hour laws apply to domestic workers in New York: (i) the Domestic Workers’ Bill of Rights (“DWBR”) and (ii) the New York Labor Law.

Although not widely publicized, the DWBR has been in effect since November 29, 2010 and covers all domestic workers – regardless of their immigration status – except for two categories: (a) those employed on a “casual basis,” “such as those who occasionally babysit or who do other household services for a limited amount of time,” and (b) caregivers related to the employer by blood, marriage or adoption, and those who provide companionship services and are employed by someone outside the family, such as a third-party agency.  See DWBR Facts for Employers and DWBR Fact Sheet.

Minimum Wage

Under both federal and New York law, domestic workers must be paid at least the minimum wage for all non-overtime hours (currently, $15 per hour in New York City, $14 per hour in Long Island and Westchester, and $12.50 in the remainder of the state).

However, under the DWBR, the length of the workweek for overtime calculation purposes varies based on whether the domestic worker “lives in” the employer’s home – a residential domestic worker.  For non-residential domestic workers, the workweek is the same as federal law: 40 hours a week, meaning that the overtime pay requirement is triggered after 40 hours.  For residential domestic workers, however, the workweek is 44 hours a week, meaning that the overtime pay requirements is triggered only after 44 hours.

Notably, under the DWBR, if an employer gives a domestic worker meals and/or lodging, the employer may be granted a specific credit toward the minimum wage paid to the worker, though the amount of nor calculation for such credit is not included in the DWBR fact sheet for employers (“Employer Fact Sheet”) or other related materials.  Instead, the Employer Fact Sheet advises employers to call 1-888-5-LABOR for more information.

Meal and Break Periods

Under the DWBR, domestic workers who work a shift of more than 6 hours on any day are entitled to at least 30 minutes free from duty for a meal period.  The DWBR does not proscribe when this meal break must be provided or taken.  The meal period does not need to be paid.

While not required, if an employer chooses to give an employee short (10 to 15 minute) breaks, consistent with the FLSA, such breaks are considered time worked and cannot be deducted from a domestic worker’s pay.

Days Off /Rest Periods

While the FLSA does not require payment for time not worked, such as vacations, the DWBR requires employers to provide domestic workers with at least three paid days off after one year of work.  For each day of paid rest the employee must be paid at their regular rate of pay for the

average number of hours they work on a normal workday.  Part time workers receive one day of paid rest for working, on average, fewer than 20 hours per week for an employer over the last year, two days of paid rest for working an average of 20 but fewer than 30 hours per week, and three days of paid rest for working 30 or more hours per week.  If an employer provides a domestic worker with three days of paid leave, regardless of the type of leave it is (e.g., sick leave, vacation leave), the employer’s obligation under the law is met.  See DWBR FAQs at p. 3.

In addition, under the DWBR, domestic workers other than those employed by an agency to provide “companionship services,” such as caring for an elderly person, must receive one day (24 hours) of rest per week upon a mutually agreeable day, ideally on the employee’s day of worship.  If the domestic worker agrees to work on his/her rest day, the worker must receive overtime pay.  See DWBR Employee Fact Sheet.


In New York, unless domestic workers are employed by an agency to provide “companionship services, they must be paid overtime.  See DWBR Employee Fact Sheet. Specifically, employers must pay in-scope domestic workers overtime at 1 1/2 times the employee’s “basic rate” after 40 hours of work in a calendar week for non-residential domestic workers and after 44 hours of work in a week for residential domestic workers.

In contrast, under federal law, domestic service workers who reside in the employer’s home and are employed by an individual, family or household are exempt from overtime.

Unhelpfully, the DWBR does not provide any guidance on the phrase “lives in [the employer’s] home.”  To the extent that the federal standard is relevant, under the FLSA, to be a live-in domestic worker, the worker must reside on the employer’s premises either “permanently” or for “extended periods of time.”  A worker resides on the employer’s premises permanently “when he or she lives, works, and sleeps on the employer’s premises seven days per week and therefore has no home of his or her own other than the one provided by the employer under the employment agreement.”  “A worker resides on the employer’s premises for an extended period of time when he or she lives, works and sleeps on the employer’s premises for five days a week (120 hours or more). If a domestic worker spends less than 120 hours per week working and sleeping on the employer’s premises, but spends five consecutive days or nights residing on the premises, this also constitutes an extended period of time.”  See U.S. Department of Labor, Wage and Hour Division Fact Sheet #79B (September 2013).

Hours Worked

Under both federal and New York law, employers only need to pay domestic workers for hours worked.   While this concept seems straightforward, its application can be challenging, particularly when a domestic worker is a live-in.  The U.S. Department of Labor advises that “[w]hen a live-in worker engages in typical private pursuits such as eating, sleeping, entertaining, and other periods of complete freedom from all duties, he or she does not have to be paid for that time.”  See U.S. DOL Fact Sheet #79B.  Put slightly differently, “domestic service employees (including live-in employees) who have been completely relieved from duty and are able to use the time for their own purposes—to go to a movie, run a personal errand, attend a parent-teacher conference— need not be paid for this time.”  Id.

Similarly, the New York Minimum Wage Order for Miscellaneous Industries states, “a residential employee – one who lives on the premises of the employer – shall not be deemed to be permitted to work or required to be available for work: (1) during his or her normal sleeping hours solely because he is required to be on call during such hours; or (2) at any other time when he or she is free to leave the place of employment.” 12 NYCRR § 142-2.1(b).  A New York State Department of Labor Opinion Letter from 2010 (after the DWBR was in effect) confirms that “[w]ages need not be paid to your nanny during her normal sleeping hours” and further indicates that payment of wages is not required during periods when the nanny is “free to leave.”  See Opinion Letter RO-10-0075.  The letter also states (rather obviously) that a domestic worker serving as a nanny is not free to leave when a child’s parents are absent from the residence.

With respect to sleep time, under the FLSA, an employer can exclude up to 8 hours a night as sleep time for “permanent” live-in domestic workers “as long as the employee is paid for some other hours during the workweek.”  For non-permanent domestic workers who reside with an employer for “extended periods of time,” an employer can exclude up to 8 hours a night “as long as the employee is paid for at least 8 hours during the 24-hour period.”  In both cases, the predicates for excluding sleep time from hours worked are (i) a reasonable agreement to exclude sleep and (ii) private quarters for the employee.  See DOL Fact Sheet #79D.  The following limitations apply: (i) any interruption to sleep time must be paid and (ii) an employee must get reasonable periods of uninterrupted sleep totaling at least five hours otherwise no sleep time can be excluded.

Pay Frequency:

Under the DWBR, employers must pay domestic workers each week, either in cash or by check.

Notice of Pay Rate:

Under New York State Wage Theft Prevention Act, employers must provide domestic workers with a written notice that lists the regular and overtime rates of pay, how often the employee is paid, the regular payday, the official name of the employer, the employer’s address and phone number, and allowances taken as part of the minimum wage (meal and lodging deductions).

The notice must be given in English and in the employee’s primary language.

The employer can use its own notice as long as it is compliant or one of the New York State Department of Labor’s sample forms.

Wage Statement (Pay Stub):

Per the DWBR, each week, the domestic worker must receive a written statement that shows (i) the number of hours worked; (ii) gross pay (total before deductions); and (iii) any deductions for taxes or other money taken out of the domestic worker’s pay.

Domestic workers must agree in writing to any deductions from their pay.  An employer can only take deductions authorized by law.  Domestic workers cannot be charged for breakage, supplies, and equipment.

What Employers Should Do

Employers should confirm that their domestic worker arrangements are fully compliant with New York state law – that is, that they compensate their domestic workers for all hours worked at the applicable minimum wage on a weekly basis with a compliant wage statement, correctly calculate overtime pay, provide appropriate paid/unpaid meal, rest periods, and days off, and provide a notice of pay rate if not already supplied upon hire.


Many people are employed at airports.  Of those, many individuals work within the terminals for private companies.  Federal law requires that those employees who work in the terminals must go through security checks – just like travelers.

Jesus Cazares was one of those employees, working at Los Angeles International Airport (LAX).  In bringing a lawsuit against his employer, Host International, Inc. – which operates the Admiral Club at LAX – Cazares alleged that he and his fellow employees were not paid for the time they spent passing through airport security checks en route to their work at the Admiral Club.  The district court rejected the notion that such time is compensable under California law and, earlier this month, the Ninth Circuit agreed in Cazares v. Host International, Inc.

Relying on the California Supreme Court’s decision in Frlekin v. Apple, Inc., which we discussed here, the Ninth Circuit concluded that, because Cazares was unable to show that he was subject to the control of his employer during the security checks, he was unable to state a claim for unpaid wages under California law.  Specifically, the Court concluded that the allegations made by Cazares “provide[] none of the factual predicates contemplated by the framework set out by the California Supreme Court . . . to support an inference that Host, the employer, had any ‘level of control’ over Cazares during the TSA security check process.  This factor is ‘determinative’ in assessing ‘whether an activity is compensable under the “hours worked” control clause.’”

Cazares also brought a meal period claim, alleging that he “was impermissibly subjected to on-premises meal breaks because, due to the TSA security process, he did not have time to leave the airport and return within thirty minutes.”  The Ninth Circuit rejected that contention, too, finding that Host’s only obligation was to allow Cazares to leave the Admiral Club – not the terminal entirely – and because Cazares made no allegation that he was not permitted to leave the Admiral Club, his meal period claim failed.

Similar to his meal period claim, in support of his rest period claim, Cazares alleged that Host failed to relieve him of all duties and relinquish control over how he spent his time during his rest periods because he “had to spend several minutes walking to the designated rest area.”  Following California law, the Ninth Circuit rejected this notion, too, because Cazares had failed to allege “that (1) he was required to take his rest period at a particular, remote designated area and (2) there were no other areas where he . . .  could take rest periods that were closer than the designated area.”

The Cazares decision is a welcome decision for those employers who employ persons at airports. More broadly, the decision confirms that employers generally need not compensate employees for time spent outside employers’ control.