Employers grappling with the many questions related to bringing employees back into the workplace safely in the midst of the COVID-19 pandemic should pay close attention to the potential wage-and-hour risks attendant to doing so—including whether to pay employees for time spent waiting in line for a temperature check, verifying vaccination status, or completing other health screening inquiries.

Given the growing trend of COVID-19 lawsuits, ignoring these risks could leave employers vulnerable to costly class and collective action litigation.

What the Law Requires

Under the Fair Labor Standards Act (FLSA), employees must be paid for (1) their time performing their “principal” work activity and (2) any time that is an “integral and indispensable part” of their principal work activity. By contrast, employees are not entitled to compensation for time spent performing activities that are “preliminary” or “postliminary” to their principal work duties.

In the leading case Integrity Staffing Solutions v. Busk, the U.S. Supreme Court clarified the meaning of each of these terms.

“Principal activities” are those the employee is employed to perform. An activity is integral and indispensable “if it is an intrinsic element of the [employee’s principal] activities and one with which the employee cannot dispense if he is to perform his principal activities.”

In Integrity Staffing, the Supreme Court held that mandatory post-shift security checks for warehouse employees were not compensable under the FLSA because they did not constitute a principal activity and they were not integral and indispensable to the workers’ primary work of retrieving products from shelves and packaging those products for delivery to customers, even though the employer required the screenings to prevent employee theft.

Notwithstanding Integrity Staffing, state laws may deviate from federal law as to what qualifies as compensable work time. In California, employees generally are entitled to wages for time spent waiting in line for an anti-theft security check after their shift, according to the California Supreme Court in Frlekin v. Apple, Inc.

These seemingly diametrically opposed holdings in Integrity Staffing and Frlekin stem from the way federal and California state law define “work.” Rather than adopt the “principal” or “integral and indispensable” framework, California law defines “hours worked” as all time that employees are subject to the control of an employer. Because the employees in Frlekin could not leave the premises until they went through the security check and were subject to discipline if they failed to comply with the security requirement, the California Supreme Court concluded they plainly were under the employer’s control, and therefore, were entitled to wages for their security check time. Other states similarly may diverge from federal law as to whether such time is compensable.

Integrity Staffing In the Time of COVID-19

Historically and typically, this classic wage-and-hour issue has arisen in contexts such as donning and doffing of protective equipment and waiting in line for security checks. Recently, it has appeared in a new form: COVID-19 health screenings.

The crux of the issue is whether employees are entitled to wages for their time spent waiting in line for a temperature check or completing some other form of health screening:  is measuring an employee’s temperature or verifying vaccination status a “principal activity,” or is it a “preliminary” or “postliminary” activity? On their face, a temperature check, vaccine status verification, and questionnaire about COVID-19 symptoms are not “principal activities,” nor are they intrinsic elements of principal activities in most workplaces, such as warehouses, factories, financial institutions, and retailers. Related issues include (1) whether and to what extent the screening activities are pursuant to government mandates or other guidance and (2) whether the time spent on these activities is de minimis and thus not compensable even if it might otherwise qualify as work.

As of now, it does not appear that any federal or state court has weighed in on whether such COVID-19 related inquiries, and the time spent completing them, are compensable under federal, state, or local law. With the rising tide of COVID-19 related litigation, employers should expect this issue to arise and a court pronouncement on the issue in the near future.

In the meantime, employers should review their health screening policies and procedures. Employers also should review the specific state wage-and-hour laws in jurisdictions where they operate to determine how those laws define compensable work time.

This summer, the Colorado Supreme Court addressed whether employers may implement practices by which employees forfeit accrued, unused vacation pay upon the termination of employment.  In Nieto v. Clark’s Mkt., Inc., 2021 CO 48, 2021 Colo. LEXIS 423 (Colo. June 14, 2021), the Court held that the Colorado Wage Claim Act (“CWCA”) requires employers to pay employees for earned but unused vacation upon the separation of their employment. The requirement applies irrespective of an employment agreement or policy forfeiting an employee’s right to such payment.

In Nieto, the employer’s vacation policy included a provision whereby employees forfeited unused vacation pay upon separation of employment. In response to an employee lawsuit over unused vacation pay, the district court dismissed the complaint, concluding that the terms of the vacation policy governed because the CWCA “clearly and unambiguously gives employers the right to enter into agreements with its employees regarding vacation pay.”

After analyzing the statute’s purpose, its language and structure, the legislative history, and the administrative interpretation by the agency charged with the statute’s enforcement, the Supreme Court concluded that the CWCA protects accrued vacation time just as it protects other wages or compensation. The Court also found that, “[a]lthough the CWCA does not create an automatic right to vacation pay, when an employer chooses to provide such pay, it cannot be forfeited once earned by the employee.” Accordingly, any agreements or terms that forfeit vacation pay are void.

It is important to note that Colorado employers may still restrict the amount and use of vacation days. The Nieto decision does not appear to affect the state’s Wage Protection Rules, which permit employers to cap the accrual of vacation days (e.g., at ten days paid vacation days per year), as long as the employee does not forfeit any time already accrued.

However, it is unclear how Nieto applies to other common time off policies.  For example, neither the Nieto decision nor the Wage Protection Rules offer specific guidance regarding whether employees may lose any frontloaded vacation time not taken by a certain date (e.g., a calendar year), even though the employer simultaneously provides additional vacation days in equal or greater number to replace the forfeited time off. It is also uncertain whether Nieto requires employers to pay employees for some or all accrued but unused leave provided under a single-bucket “paid time off” policy, which combines all forms of paid time off (e.g., vacation, personal, and sick time) into one leave policy.  Because employees may use such leave for any purpose, including those reasons protected by Colorado’s paid sick leave law, presumably some portion of an employee’s accrued but unused paid time off is beyond the reach of Nieto and need not be paid out upon separation of employment.

In light of the Colorado eSupreme Court’s decision, Colorado employers should review their existing vacation policies and employment agreements and reassess any provisions that could require employees to forfeit vacation days.

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*Naomi Friedman, a 2021 Summer Associate (not admitted to the practice of law) in the firm’s New York office, contributed to the preparation of this post.

1. Introduction

If you have hourly employees that earn bonuses, commissions, or other performance payments, this article is for you.

Properly compensating such employees is often not as simple as paying “time and a half” or “double-time” for qualifying hours.  Rather, federal law, and the laws of many states, require employers to “recalculate” overtime rates to include certain types of non-hourly compensation and pay overtime at those higher rates.  Many employers fail to make such payments, and of those that attempt to pay overtime (and double-time) at rates which incorporate these additional earnings, many fail to do it correctly.  Either circumstance results in a failure to pay earned wages to employees, which may give rise to lawsuits seeking back wages, penalties, and other relief available under state and federal law.

By the end of this article, you will be able to identify many scenarios that give rise to a “true-up” obligation, understand the complexity of recalculation, and appreciate the importance to your business of complying with this highly technical requirement of state and federal law.

2. Overtime and Double-Time Obligations

State and federal laws generally require employers to pay hourly employees an increased hourly rate when employees work more than a certain number of hours in a given period of time.  Federal law uses a weekly measure, requiring employers to pay employees one-and-one-half times (1.5x) the “regular rate” after 40 hours of work in a workweek.

Most states have similar rules, as well as laws that require employers to pay an increased hourly rate in other circumstances.  California, for example, requires employers to pay employees 1.5x the “regular rate” (a) after 40 hours of work in a workweek, (b) after 8 hours of work in a workday, or (c) for the first 8 hours on a seventh consecutive day of work in a workweek.  California also requires employers to pay employees double (2x) the “regular rate” (i) after 12 hours in a workday and (ii) for all hours worked after 8 hours on a seventh consecutive workday in a workweek.

3. Understanding The “Regular Rate”

The “regular rate” is a term of art that refers to a blended pay rate that includes many forms of compensation in addition to hourly pay, including commissions, bonuses, piece-rate pay, etc.  The FLSA, for example, defines the “regular rate” as “all remuneration for employment” save specific exclusions (e.g., bona fide gifts, holiday and/or vacation pay, discretionary bonuses). (See 29 U.S.C. 207(e).)  Compensation that is not excluded from the “regular rate” is often referred to as “includable compensation,” which is the term that will be employed for the balance of this article.

The “regular rate” serves a number of public-policy objectives, including: (1) incentivizing employers to employ more workers at straight-time hours instead of fewer workers at overtime hours, and (2) requiring employers who prefer overtime work to compensate employees for the burden of working longer hours.  The “regular rate” concept addresses employers who might try to evade these public policy objectives through the payment of compensation not directly tied to workhours (e.g., commissions, bonuses) by requiring the aggregation of many such forms of compensation into a new (and higher) hourly rate, which must be paid to employees for each overtime (or double-time) hour worked.  From this it follows that when employers do not account for such forms of remuneration when calculating overtime (or double-time) rates, or do so incorrectly, an underpayment of earned wages is the likely result.

The types of pay that qualify as compensation includable in the “regular rate” often differ from state to state, as well as under federal law.  However, overtime laws have historically characterized “includable compensation” as remuneration designed to motivate productivity, retain employees, or that is routinely awarded.  In contrast, reimbursements, vacation pay, and fringe benefits payments (e.g., 401(k) contributions) have been historically excluded from many state and federal definitions of “includable compensation.”

4. Calculating the Regular Rate Presents a Trap for the Unwary

The concept of the “regular rate” is easy to grasp and, in some circumstances, easy to calculate.  Indeed, the DOL Fact Sheet #56A explains the basic calculation in the following way:

Total compensation in the workweek (except for statutory exclusions) ÷ Total hours worked in the workweek = Regular Rate for the workweek

However, many forms of “includable compensation” are not deemed earned, or calculable, within a single workweek.  For example, many commission plans aggregate monthly sales, but those commissions are not deemed “earned” until some later date – after reconciliation for returns, errors, etc.  Many bonuses are similarly not earned in a single workweek, but are attributable to performance over a much longer period of time, such as a quarter or year.  In these situations, the calculation above is not helpful because the “[t]otal compensation in the workweek” component is unknown until a later date.

In such situations, the employer must pay the overtime wages in two installments.  The first installment is for the hourly component of overtime (i.e., true “time-and-a-half”) and is paid on the next regular payday based on the hourly wages earned and paid in that pay period.  The second installment is the “true-up” on the hourly overtime wages, which cannot be paid until the delayed “includable compensation” becomes known and the difference between what was already paid can be calculated.

While the math equation is not complicated, determining the specific items that feed into the calculation can be; because they often call for fact-specific legal analysis of questions like:

  • What forms of remuneration constitute “includable compensation”?
  • When is a specific from of “includable compensation” deemed “earned” and/or “calculable” under the employment agreement and applicable laws?
  • Over what period of time should the “includable compensation” be attributed?

The complexity of calculating the second installment is magnified in some states, such as California, which requires employers to use different calculations for different types of “includable compensation.”

While California is unusual in that regard, the fact that getting the calculation correct requires both math and legal analysis is instructive for employers in all fifty states.  This is because plaintiffs in all fifty states can, and do, file lawsuits against employers seeking allegedly unpaid overtime wages (and the corresponding penalties) on the theory that employers incorrectly calculated the inputs to the “regular rate” equation.

5. Underpaying a Little Can Cost a Lot

Most overtime true-up payments are for relatively small amounts.  There are, of course, circumstances where these payments can be large, as with employees earning significant non-hourly compensation who also work many overtime hours.  Whether the amounts are small or large, failing to make true-up payments constitutes a failure to pay earned wages, which can trigger lawsuits seeking damages, penalties, and fines that well exceed the amount of unpaid wages.

For example, lawsuits under the FLSA can result in the recovery of unpaid wages, legal fees, and in some circumstances, liquidated damages (or interest) and civil penalties.  The penalty schemes in some states are more aggressive.  In California, for example, failing to pay earned overtime could give rise to claims for the unpaid wages, interest, fees, as well as waiting time penalties (i.e., up to 30 days of average daily pay for separated employees), statutory penalties for untimely payment of wages, and civil penalties under the dreaded Private Attorneys General Act.

It also bears noting that the failure to pay overtime triggered by “includable compensation” is often a company-wide issue – i.e., not an isolated instance.  As such, claims based on a true-up theory are often suitable for class treatment and/or are likely to be deemed “manageable” for trial, which means that the exposure on such claims will be significant.  So it is worth the time, attention, and resources necessary to ensure that you comply with true-up obligations, which begins with engaging competent counsel to review your policies and practices that relate to the payment of overtime (or double-time) at the correct regular rate.

In a decision that seems like to be reviewed by the California Supreme Court or rejected by other California Courts of Appeal, one of California’s appellate courts has issued a perplexing decision holding that even employees whose claims are time-barred can file representative actions under California’s Private Attorneys General Act (“PAGA”).

In Gina Johnson v. Maxim Healthcare Services, Inc., the Fourth Appellate District held that the plaintiff could pursue PAGA claims on behalf of other employees even though her own claims were barred by the statute of limitations.

In reaching this decision, the Court relied upon the California Supreme Court’s 2020 decision in Kim v. Reins, which held that an individual who had resolved his own claims could still pursue PAGA claims on behalf of others.

While Kim v. Reins left many legal pundits scratching their heads as it seemed to fly in the face of basic concepts of standing, they could perhaps reconcile the conclusion with the fact that at least the plaintiff in that action had claims within the statutory period. That is not so in Johnson.

In fact, Johnson suggests that even persons who have not worked for an employer for many years could somehow still be permitted to file a PAGA suit on behalf of others.

Could an employee who last worked for an employer 5 years ago file a PAGA action? How about 10 years ago? Or 20?

The holding in Johnson suggests that this appellate panel would conclude that would be permissible. And that is precisely why the decision is likely to be reviewed by the California Supreme Court or ignored by other California appellate courts.

On July 19, 2021, Delaware Governor John Carney signed legislation that will gradually increase the state’s minimum wage to $15 per hour by 2025. This is a substantial increase from Delaware’s current minimum wage of $9.25 per hour. The minimum wage requirements apply to all employers who employ individuals in the state.

Following the examples set by neighboring Maryland and New Jersey, Delaware’s minimum wage increase will occur in phases. Effective January 1, 2022, the minimum wage will increase to $10.50 per hour. Thereafter, the minimum wage will increase annually on the following schedule:

  • Effective January 1, 2023 – $11.75 per hour;
  • Effective January 1, 2024 – $13.25 per hour; and
  • Effective January 1, 2025 – $15 per hour.

In the event that a federal minimum wage ever exceeds Delaware’s minimum wage, the higher federal wage would apply.

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Christopher Shur, a Law Clerk – Admission Pending (not admitted to the practice of law) in the firm’s New York office, contributed to the preparation of this post.

California law generally requires employers to pay non-exempt employees a premium of one hour of pay for non-compliant meal and rest periods. Employers have typically paid such premiums by using the employees’ standard hourly rates. A new California Supreme Court decision requires employers to pay premiums at a higher rate when employees receive nondiscretionary compensation. This change in the law not only will require employers to adjust how they calculate meal and rest period premiums going forward, but it also exposes some of them to litigation for their past practices if they did not previously pay at the higher rates – despite the fact that, before this new decision, they had no reason to believe that premiums should be paid at those higher rates.

On July 15, 2021, in Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court held that, when an employer is obligated to pay a meal or rest period premium for failing to provide a compliant meal or rest period, that premium must be paid at the “regular rate of pay,” as that term of art is generally used for overtime purposes, rather than the employee’s base rate of pay. The “regular rate of pay” generally takes into account all nondiscretionary forms of wages, including hourly pay, shift differentials, piece-rate, commissions and incentive/production bonuses, among other forms.

In reliance on a number of federal decisions, many employers in California have understandably paid these meal or rest period premiums based on employees’ base rates of pay. The California Supreme Court has now made clear that such a practice does not comply with the Labor Code.

Equally significant, the Ferra decision appears to apply retroactively, meaning that many California employers are likely to face a new wave of class actions and Private Attorneys General Act lawsuits alleging that their past practices did not comply with the Ferra standard.

For employers that do not provide any form of compensation beyond an employee’s hourly wages, the Ferra decision should not affect their operations.  In those circumstances, the “regular rate of pay” would always be equal to the base rate of pay.

Following Ferra, however, entities doing business in California that provide some form of compensation beyond hourly wages will want to review their payroll practices and make necessary adjustments to ensure that that meal and rest period premiums are calculated at the correct amounts.

Effective July 1, 2021, Virginia employers must ensure that their pay practices comply with a new stand-alone overtime law called the Virginia Overtime Wage Act (“VOWA”). VOWA largely tracks the federal Fair Labor Standards Act (“FLSA”) in that it incorporates most FLSA exemptions and requires employers to pay 1.5 times a nonexempt employee’s regular rate of pay for all hours worked in excess of 40 hours each workweek. However, VOWA and the FLSA differ in several ways.

Determining an Employee’s Regular Rate of Pay

VOWA’s most significant divergence from the FLSA is the statute’s formula for calculating a nonexempt employee’s regular rate of pay.

For nonexempt employees paid on an hourly basis, the regular rate is the employee’s hourly rate plus other non-overtime wages paid or allocated to that workweek (e.g., commissions or bonuses), minus any applicable federal exclusions (e.g., gifts, reimbursements for travel expenses, and holiday pay), divided by the total number of hours worked in that workweek.

For nonexempt employees paid on a salary or other regular basis, the regular rate of pay is “one-fortieth of all wages paid for that workweek,” which includes the employee’s regular salary plus other non-overtime wages paid or allocated to that week, such as non-discretionary bonuses or commissions.

This formula appears to preclude employers from paying nonexempt employees a fixed salary that covers straight-time wages for hours worked in excess of 40 hours in a workweek, or from using the FLSA’s “fluctuating workweek” method for calculating overtime. Under the fluctuating workweek method, overtime pay is based on the average hourly rate, produced by dividing the employee’s fixed salary and any non-excludable additional pay (e.g., commissions, bonuses, or hazard pay) by the number of hours actually worked in a specific workweek. Naturally, this means the average hourly rate may change from week to week depending on how many hours the employee actually worked.

VOWA’s new formula for calculating overtime will also result in higher overtime payments. For example, a nonexempt employee paid a fixed weekly salary of $600 with no bonus pay who works 50 hours in a workweek would earn the following overtime under each law:

FLSA Fluctuating Workweek:

($600 Salary + $0 Bonus) ÷ 50 = $12 regular rate

$12 regular rate x 0.5 = $6 half-time rate

$6 half-time rate x 10 overtime hours worked = $60 of overtime owed

$600 salary + $60 overtime = $660 total compensation owed for the week

VOWA:

($600 Salary + $0 Bonus) ÷ 40 hours = $15 regular rate

$15 regular rate x 1.5 = $22.50 per hour overtime rate

$22.50 overtime rate x 10 hours of overtime = $225 of overtime owed

$600 salary + $225 overtime = $825 total compensation owed for the week

Employers should note that VOWA’s formula will necessarily result in larger recoveries for misclassified workers, especially when the higher overtime rate is extrapolated over an entire limitations period or across multiple employees proceeding collectively—an option that is now available to Virginia employees pursuing wage claims thanks to last year’s amendments to the Virginia Wage Payment Act.

Overtime Exemptions Under VOWA

VOWA creates some ambiguity regarding whether Virginia employers may continue to rely on certain FLSA overtime exemptions. Although VOWA’s definition of “employee” appears to incorporate most FLSA overtime exemptions, a later section limits the available exemption defenses to only the executive, administrative, professional, and outside sales exemptions, and certain transportation-related exemptions (e.g., for local delivery drivers). See Va. Code § 40.1-29.2(A), (D). The latter would effectively eliminate the FLSA’s computer professional exemption, among others. Further, although the Virginia Department of Labor and Industry (“DOLI”) recently published frequently asked questions (see Question #3) that suggest the computer professional exemption is available under VOWA, the same guidance contradicts the statute by leaving out the transportation-related exemptions explicitly included in VOWA’s definition of “employee.”

Extended Statute of Limitations for Overtime Claims

VOWA provides a three-year statute of limitations for aggrieved employees to bring an overtime claim, regardless of the circumstances. In comparison, the FLSA provides a two-year statute of limitations for overtime violations, or three years if the violation was willful.

The extended statute of limitations will not have immediate practical effect, however, because DOLI has clarified that it cannot investigate claims brought before July 1, 2021.

Expansion of Available Damages and Remedies for Overtime Violations

The FLSA provides liquidated damages equal to the amount of unpaid overtime wages. An employer may avoid such “double damages” if it can show that it acted in “good faith” and that the employer had “reasonable grounds” for believing its actions complied with the requirements of the FLSA.

Under VOWA, however, all overtime wage violations are subject to double damages, plus pre-judgment interest of 8 percent per year. Further, VOWA does not offer a “good faith” defense, but instead permits treble damages, and the same pre-judgment interest and reasonable attorney fees and costs, where the employer (i) had actual knowledge that it failed to pay the overtime wages due or (ii) acted in deliberate ignorance or reckless disregard as to whether it was paying all overtime wages owed.

What Virginia Employers Should Do Now

The increased potential wage and hour liabilities mean that Virginia employers should review their overtime pay practices and exemption classifications. Specifically, Virginia employers should review their employee classifications and consider whether it makes practical sense to pay all nonexempt employees on an hourly, rather than salary basis.

California law generally requires that non-exempt employees be paid 1.5 times their “regular rate of pay” for work performed beyond 40 hours in a week or 8 hours in a day – and twice their “regular rate of pay” for time worked in excess of 12 hours in day or beyond 8 hours on the seventh day of the workweek.

While “regular rate of pay” is not expressly defined in the California Labor Code, there should be few questions about what that rate is when an employee works at the same rate during the workweek.

But when an employee works at two (or more) different rates of pay during a single pay period, how does the employer calculate the overtime rate?

Employers typically use the “weighted average” method to calculate the overtime rate for such “dual-rate employees.” Under that method, which has been endorsed by the California Division of Labor Standards Enforcement (“DLSE”), the hourly rate is calculated by adding all hours worked by the dual-rate employee in the pay period and dividing that number by the total compensation for that period.

But is that the only method that can be used in California?

Perhaps not.

In Levanoff v. Dragas, the California Court of Appeal affirmed the trial court’s decertification of a subclass for dual rate overtime violations, and it approved the dismissal of a Private Attorneys General Act (“PAGA”) dual rate claim, both of which alleged that Buffalo Wild Wings violated the law by not using the “weighted average” method.  Instead, the Court approved the use of a different method used to calculate the overtime rate for Buffalo Wild Wings employees – the “rate-in-effect” method, by which employees are paid overtime at the rate in effect when the overtime hours begin.

The “rate-in-effect” method is approved under federal law in some circumstances.

The Court of Appeal concluded that the DLSE’s adoption of the “weighted average” method is not binding upon it, and that it therefore was not bound to accept the “weighted average” method as the exclusive method to calculate overtime rates.

Addressing the use of the “rate-in-effect” method, the Court looked at both the face of the policy and the net effect of that approach, analogizing it to the use of a time-rounding policy.

The Court concluded that the “rate-in-effect” policy was neutral on its face. And the Court concluded that the use of the “rate-in-effect” method actually resulted in Buffalo Wild Wings employees overall receiving more overtime pay than they would have received under the “weighted average” method.

The Court’s decision, however, is limited to the facts.  Indeed, the Court expressly stated that it was not addressing the overtime calculation method employers must “always” use, but instead was addressing whether the use of the “rate-in-effect” method was lawful “under the facts of the case.”

For that reason, the decision cannot be read to approve of the “rate-in-effect” method in all cases.  In fact, had the “rate-in-effect” approach worked to the detriment of the Buffalo Wild Wings employees, it would appear that both the trial court and the Court of Appeal would have reached the opposite conclusion.

Accordingly, before California employers adopt the “rate-in-effect” method, they would be wise to determine whether or not it would work to the detriment of employees.

On June 16, 2021, Hawaii enacted Senate Bill 793 (the “Act”), which repeals an exemption to the minimum wage for disabled employees, often referred to as “the disability subminimum wage.” The Act took effect immediately and requires all Hawaii employers pay disabled individuals no less than the state minimum wage.

Previously, Section 14(c) of federal Fair Labor Standards Act permitted Hawaii employers to pay individuals with disabilities less than the state minimum wage, which is currently set at $10.10.  However, the Act explains that the exemption, which was intended to “train and prepare individuals with disabilities to gain open-market competitive jobs,” has shown over time to “simply [provide] a subsidy for sheltered workshops that do not support movement of [workers] to competitive employment.” In repealing the exemption, the Act states that the exemption no longer fulfills its original purpose and instead has led to discrimination against individuals with disabilities.

Hawaii employers should take steps to ensure that they no longer rely on the disability subminimum wage exemption.

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Alexandria Adkins, a 2021 Summer Associate (not admitted to the practice of law) in the firm’s New York office, contributed to the preparation of this post

As we previously reported, starting in 2016 the District of Columbia by statute gradually increased its minimum wage to $15.00 per hour, and its tipped minimum to $5.00, effective July 1, 2020. However, included in the statute were provisions for subsequent increases of both these rates based on the annual average increase in the Consumer Price Index for All Urban consumers in the Washington Metropolitan Statistical Area. See D.C. Code §32-1003(a)(6) and (f)(2).  The D.C. Department of Employment Services (DOES) recently announced that pursuant to these provisions, effective July 1, 2021 the minimum wage for all employees will increase to $15.20 per hour, and the tipped minimum to $5.05. The same rate applied to the Living Wage Act covering various government contractors.

D.C. employers should make sure that their payroll systems are adjusted to reflect these new rates. They should also post the updated DOES poster available here.