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

Following is an excerpt:

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

Click here to download the full version in PDF format.

Our colleagues Michael S. Kun, Jeffrey H. Ruzal, and Kevin Sullivan at Epstein Becker Green co-wrote a “Wage and Hour Self-Audits Checklist” for the Lexis Practice Advisor.

The checklist identifies the main risk categories for wage and hour self-audits. To avoid potentially significant liability for wage and hour violations, employers should consider wage and hour self-audits to identify and close compliance gaps.

Click here to download the Checklist in PDF format.  Learn more about the Lexis Practice Advisor.

This excerpt from Lexis Practice Advisor®, a comprehensive practical guidance resource providing insight from leading practitioners, is reproduced with the permission of LexisNexis. Reproduction of this material, in any form, is specifically prohibited without written consent from LexisNexis.

By Jeffrey Ruzal

President Obama has spent much of his second term zealously pursuing an increase to the current $7.25 federal minimum hourly wage. While it is not clear whether a federal wage hike is in the offing, many states have recently taken measures to increase their own minimum wage rates. Effective January 1, 2014, Arizona, Colorado, Connecticut, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont and Washington have all increased their minimum wage rates. There are also five additional states, California, Delaware, Michigan, Minnesota, West Virginia, plus the District of Columbia, which have passed legislation for future minimum wage increases that will take effect in 2014.

Employers, especially ones which operate in multiple states, must be vigilant in monitoring and planning for future state minimum wages increases. What is more, employers in specific industries, such as hospitality, must consider additional compliance measures, including changes in the maximum tip credit an employer may take against its tipped employees’ hourly wages.

The chart below provides each state’s previous and current minimum wage and maximum tip credit rates, as well as scheduled future increases through the end of 2014.

State

Previous Minimum Wage

Current Minimum Wage

Future Minimum Wage Increases in 2014

Previous Tip Credit

Current Tip Credit

Arizona

$7.80

$7.90

(effective 1/1/14)

$4.80

$4.90

(eff. 1/1/14)

California

$8.00

$9.00

(eff. 7/1/14)

No tip credit permitted

Colorado

$7.78

$8.00

(eff. 1/1/14)

$4.76

$4.98

(eff. 1/1/14)

Connecticut

$8.25

$8.70

(eff. 1/1/14)

$7.34 for bartenders; $5.69 all other tipped employees

Delaware

$7.25

$7.75

(eff. 6/1/14)

$2.23

D.C.

$8.25

$9.50

(eff. 7/1/14)

$2.77

Florida

$7.79

$7.93

(eff. 1/1/14)

$4.77

$4.91

(eff. 1/1/14)

Michigan

$7.40

$8.15

(eff. 9/1/14)

$2.65

Minnesota

$6.15 for employers w/ annual sales >$625,000; $5.25 for employers w/ < $625,000

$8.00 for employers w/ annual sales >$500,000; $6.50 for employers w/ < $500,000

(eff. 8/1/14)

$6.15 for employers w/ annual sales >$625,000; $5.25 for employers w/ < $625,000

Missouri

$7.35

$7.50

(eff. 1/1/14)

$3.68

$3.75

(eff. 1/1/14)

Montana

$7.80

$7.90

(eff. 1/1/14)

No tip credit permitted

New Jersey

$7.25

$8.25

(eff. 1/1/14)

$2.13

No change in tip credit

New York

$7.25

$8.00

(eff.12/31/13)

$8.75

(eff.12/31/14)

$5.00 for food service employees; $5.65 for service employees (delivery and coat check)

No change in tip credit

Ohio

$7.85

$7.95

(eff. 1/1/14)

$3.93

$3.98

(eff. 1/1/14)

Oregon

$8.95

$9.10

(eff. 1/1/14)

No tip credit permitted

Rhode Island

$7.75

$8.00

(eff. 1/1/14)

$2.89

No change in tip credit

Vermont

$8.60

$8.73

(eff. 1/1/14)

$4.17

$4.23

(eff. 1/1/14)

Washington

$9.19

$9.32

(eff. 1/1/14)

No tip credit permitted

West Virginia

$7.25

$8.00

(eff.12/31/14)

$5.80

By Michael Kun

Much has already been written about last week’s California Supreme Court decision in Duran v. U.S. Bank Nat’l Ass’n, a greatly anticipated ruling that will have a substantial impact upon wage-hour class actions in California for years to come.  Much more will be written about the decision as attorneys digest it, as parties rely on it in litigation, and as the courts attempt to apply it.

In a lengthy and unanimous opinion, the California Supreme Court affirmed the Court of Appeal’s decision to reverse a $15 million trial award in favor of a class of employees who claimed they had been misclassified as exempt, and to decertify the class.  How the$15 million award had been obtained in the first place has been the subject of much discussion and more than a bit of ridicule.  In short, the trial court had tried the case by essentially pulling names from a hat to determine which class members would be able to testify at trial, with the defendant precluded from presenting evidence as to other employees.  The California Supreme Court described this approach as a “miscarriage of justice.”   It then discussed in great length whether, when and how statistical sampling could be used in these cases, among other things.

Already, both the plaintiffs’ bar and the defense bar are claiming that the Supreme Court’s decision is a victory for them.

Because the Supreme Court did not foreclose the possibility that statistical evidence could be used to establish liability in these types of cases – instead, it recognized that “[s]tatistical sampling may provide an appropriate means of proving liability and damages in some wage and hour class actions” —  the plaintiffs’ bar is claiming victory.  To the extent they contend that Duran allows the use of statistical evidence to prove liability, they are ignoring the most important word in that sentence – “may” – along with the various caveats laid out by the Court.

Because the Supreme Court explained that the process must allow an employer to impeach the statistical model and litigate its affirmative defenses, and that there must be “glue” holding claims together beyond statistical evidence, the defense bar is likewise claiming victory.  But even they must admit that it is not the death blow to wage-hour class actions that they may have hoped for.

In truth, Duran is a unusual decision in that it provides more than a few quotes for plaintiffs’ lawyers and defense lawyers alike to rely on.

Ultimately, the most important language in Duran may be this: “A trial plan that relies on statistical sampling must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced.”

What does this mean?

It means that some trial plans based on statistical sampling may be approved.

And it means that some trial plans based on statistical sampling may not be approved.

It means that a trial court’s analysis will turn, at least in part, on whether the employer will be able to impeach the model and show that it does not work.

And it means that, more than ever, these cases are going to require the parties to retain expert witnesses, and whether classes will be certified will turn on those expert witnesses.  Remember, the Court did not just say that a trial plan that relies on statistical sampling might be appropriate.  No, it said that such a trial plan “developed with expert input” might be appropriate.

The result of all of this is that, with the plaintiffs’ bar now emboldened because the door has not been shut on the use of statistical evidence on liability, employers may face even more wage-hour class actions in California than before.

And statistical experts can go buy those new houses, cars and boats they’ve been eyeing because their services will be in greater demand than ever.  They are the real victors in this decision.

By Kara Maciel

Our national hospitality practice frequently advises restaurant owners and operators on whether it is legal for employers to pass credit card swipe fees onto employees or even to guests, and the short answer is, yes, in most states.  But whether an employer wants to actually pass along this charge and risk alienating their staff or their customers is another question.

With respect to consumers, in the majority of states, passing credit card swipe fees along in a customer surcharge became lawful in 2013.  Only ten states prohibit it:  California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma, Texas and Utah.  If a restaurant decides to add a surcharge to the bill to recoup the credit card swipe fee, it is important the that the fee not exceed the percentage charged by the credit card company, the fee is posted clearly on the guest check prior to paying the bill, and it cannot be used for debit card purchases.

With respect to employees, the credit card swipe fee may only be passed along to servers and applied to the tipped portion of the bill.  For example, if a bill is $100 plus a $20 tip, the swipe fee on the $100 (e.g., 3 percent or $3) must be paid by the restaurant.  However, when paying out the server, you can allocate $19.40 since you can charge the server 3 percent or 60 cents to recover the swipe fee on the gratuity.  As with guests, an employer may not charge the server more than credit card swipe fee, and the reduced amount in tips cannot cause the employee to earn less than the minimum wage.  And again, you must always check state and local law as some states prohibit deductions from credit card tips for processing fees, such as California, Colorado, Nevada, New Mexico, Oregon, and Washington, among others.

But even if legal, is it practical or good business sense to pass along processing fees to employees and customers?  Is it industry practice in your market to pass along these fees, or do you risk angering an important stakeholder in your profit margin – your employees and customers?  Surcharges could be perceived as owners taking more money out of the pockets of employees and customers and companies could risk losing the business to another restaurant down the street.  Unless the practice becomes an industry standard, it is likely that adding a surcharge or deducting the swipe fee from tips could do more harm than good.

 By Michael Kun

              You run a supermarket.  You contract with a janitorial company to come in every night to clean the aisles after you close.

               You run an ad agency.  You retain a contractor to handle your mailroom.

               You run a law firm.  You bring in a company to update the books in your law library.

               You run a hotel.  You contract with a van service to shuttle your guests to and from the airport. 

               Whatever business you are in, you are bound to enter into contracts with vendors to provide a variety of services. 

               And, except where they subcontract that work out, each of those vendors uses its employees to fulfill its contract with you. 

               You may recognize the vendor’s employees from seeing them in your workplace.  You may even know a few by name and say hello to them, or ask them about their weekend. 

               You didn’t hire them, you don’t pay them, you don’t supervise them.  Yet, when they file suit against your vendor claiming they were not paid for all of the time they worked, or that they were not paid overtime, or they were not otherwise treated in compliance with the law, don’t be surprised to see that they (and their lawyers) sue your company, too, contending that you are their “joint employer.”  And that you are responsible for paying them the wages they claim they were not paid.  Penalties, too.  And don’t forget attorney’s fees.

               Yes, the person who you occasionally wave to in the hallway or exchange holiday greetings with is now claiming that you are his employer.

               The “joint employer” theory is by no means a new one.  It has been used by plaintiffs and their lawyers for years to bring more – often “deep pocket” — defendants into lawsuits and leverage larger settlements than they might otherwise be able to obtain from their actual employers. 

               The little company that employs them may not have much money.  But the companies it contracts with?  Your company?  That may be very different, and therein lies the appeal of suing you. 

               While the tests for whether a company is a “joint employer” vary in different jurisdictions and under different laws, they all essentially turn on one element – control.  Do you control the individual’s work or the manner in which it is performed –or are you merely (and appropriately) concerned with the end result? 

               Directing an individual which aisles to clean or how to do so is dangerous; reporting a concern to the vendor about the quality of the work performed is not.  The former goes to the manner in which the work is done; the latter, to the end result.

               In order to best position yourself to avoid or defend a claim that a vendor’s employees are also your employees, you should review your contracts and your relationships with your vendors.  And you should take steps to ensure that the relationships are focused on the end result alone.  Ideally, among other things, you would be able to do the following:

1)      Your contract with the vendor should provide very clearly that the persons the vendor hires are its employees, that it is obligated to pay them in compliance with the law and to otherwise comply with the law as it relates to them, and that you are interested in the end result alone.

2)      Don’t be involved in any way in the vendor’s hiring of its employees.  That’s their responsibility. 

3)      Don’t be involved in any way in the vendor’s paying of its employees.  That’s their responsibility. 

4)      Don’t be involved in any way in disciplining the vendor’s employees.  If there are concerns, report them to the vendor and let the vendor address them. 

5)      Don’t be involved in any way in the vendor’s termination of its employees. 

6)      Don’t supervise or direct the vendor’s employees.  That should come from the vendor. 

7)      Don’t give the vendor’s employees clothing or badges with your company’s name or logo on it.  And if the vendor gives its employees such items, tell it to stop. 

8)      Don’t give the vendor’s employees business cards with your company’s name or logo on them, or anything else that would identify thems as doing anything other than working for a vendor that provides services to you.

9)      Don’t give the vendor or its employees any tools with which to perform work.  No computers, no pencils, no pads, no mops, no brooms, no hammers or nails. 

10)   Don’t give the vendor’s employees offices or desks. 

11)   Don’t keep files on the vendor’s employees. No personnel files.  No logs of who worked when. 

12)   Don’t include the vendor’s employees in meetings with your employees.  Remember, they’re not your employees.  Don’t treat them like they are. 

13)   Don’t require your vendor to use specific employees. 

         This is not to suggest that you should stop saying hello to the vendor’s employees when you see them, or asking how their weekend was.  But if you want to talk about the quality of the services they are performing, talk with the vendor, not its employees. 

         Taking such steps may not prevent you from being sued under a “joint employer” theory, but it should enable you to make a strong argument that the theory does not apply to you.  And depending on the vendors you use and the number of persons they employ, that could be worth a small fortune.

By: Kara M. Maciel

The following is a selection from the Firm’s October Take 5 Views You Can Use which discusses recent developments in wage hour law.

  1. IRS Will Begin Taxing a Restaurant’s Automatic Gratuities as Service Charges

Many restaurants include automatic gratuities on the checks of guests with large parties to ensure that servers get fair tips. This method allows the restaurant to calculate an amount into the total bill, but it takes away a customer’s discretion in choosing whether and/or how much to tip the server. As a result of this removal of a customer’s voluntary act, the Internal Revenue Service (“IRS”) will begin classifying automatic gratuities as service charges, taxed like regular wages, beginning in January 2014.

This change is expected to be problematic for restaurants because the new treatment of automatic gratuities will complicate payroll accounting. Each restaurant will be required to factor automatic gratuities into the hourly wage of the employee, meaning the employee’s regular rate of pay could vary from day to day, thus adding a potential complication to overtime payments. Furthermore, because restaurants pay Social Security and Medicaid taxes on the amount that its employees claim in tips, restaurants are eligible for an income-tax credit for some or all of these payments. Classifying automatic gratuities as service charges, however, would lower that possible income-tax credit.

Considering that the IRS’s ruling could disadvantage servers as well, restaurants may now want to consider eliminating the use of automatic gratuities. Otherwise, employees could come under greater scrutiny in reporting their tips as a result of this ruling. Furthermore, these tips would be treated as wages, meaning upfront withholding of federal taxes and delayed access to tip earnings until payday.

Some restaurants, including several in New York City, have begun doing away with tips all together. These restaurants have replaced the practice of tipping with either a surcharge or increased food prices that include the cost of service. They can then afford to pay their servers a higher wage per hour in lieu of receiving tips. This is another way for restaurants to ensure that employees receive a sufficient wage, while simultaneously removing the regulatory burdens that a tip-system may impose.

  1. The New DOL Secretary, Tom Perez, Spells Out the WHD’s Enforcement Agenda

On September 4, 2013, the new U.S. Secretary of Labor, Tom Perez, was sworn in. During his remarks, Secretary Perez outlined several priorities for the U.S. Department of Labor (“DOL”), including addressing pay equity for women, individuals with disabilities, and veterans; raising the minimum wage; and fixing the “broken” immigration system.

Most notably, and unsurprisingly, Secretary Perez emphasized the enforcement work of the Wage and Hour Division (“WHD”). Just last year, the WHD again obtained a record amount—$280 million—in back-pay for workers. Employers can expect to see continued aggressive enforcement efforts from the WHD in 2013 and 2014 on areas such as worker misclassification, overtime pay, and off-the-clock work. In fact, Secretary Perez stated in his swearing-in speech that “when we protect workers with sensible safety regulations, or when we address the fraud of worker misclassification, employers who play by the rules come out ahead.” By increasing its investigative workforce by over 40 percent since 2008, the WHD has had more time and resources to undertake targeted investigation initiatives in addition to investigations resulting from complaints, and that trend should continue.

  1. DOL Investigates Health Care Provider and Obtains $4 Million Settlement for Overtime Payments

On September 16, 2013, the DOL announced that Harris Health System (“Harris”), a Houston health care provider of emergency, outpatient, and inpatient medical services, had agreed to pay more than $4 million in back wages and damages to approximately 4,500 current and former employees for violations of the overtime and recordkeeping provisions of the Fair Labor Standards Act (“FLSA”). The DOL made this announcement after the WHD completed a more than two-year investigation into the company’s payment system, prompted by claims that employees were not being fully compensated.

Under the FLSA, employers typically must pay their non-exempt employees an overtime premium of time-and-one-half their regular rate of pay for all hours worked in excess of 40 hours in a workweek. Employers within the health care industry have special overtime rules. Notably, for all employers, an employee’s “regular rate of pay” is not necessarily the same as his or her hourly rate of pay. Rather, an employee’s “regular rate of pay” includes an employee’s “total remuneration” for that week, which consists of both the employee’s hourly rate as well as any non-discretionary forms of payment, such as commissions, bonuses, and incentive pay. The FLSA dictates that an employee’s “regular rate” of pay is then determined by dividing the employee’s total remuneration for the week by the number of hours worked that week.

The DOL’s investigation concluded that Harris had failed to: (i) include incentive pay when determining its employees’ regular rate of pay for overtime purposes, and (ii) maintain proper overtime records. As a result, Harris owed its employees a total of $2.06 million in back wages and another $2.06 million in liquidated damages.

Because an employee’s “total remuneration” for a workweek may consist of various forms of compensation, employers must consistently evaluate and assess their payment structures and payroll systems to determine the payments that must be included in an employee’s overtime calculations beyond just the hourly wage. Additionally, employers should conduct periodic audits to ensure that they are maintaining full and accurate records of all hours worked by every employee.

  1. Federal Court Strikes Down DOL Tip Pooling Rule

In 2011, the WHD enacted a strict final rule related to proper tip pooling and service charge practices. This final rule was met with swift legal challenges, and, this summer, the U.S. District Court for the District of Oregon (“District Court”) concluded that the DOL had exceeded its authority when implementing its final rule. See Oregon Rest. and Lodging Assn. v. Solis, No. 3:12-cv-01261 (D. Or. June 7, 2013).

Inconsistent interpretations of the FLSA among various appellate courts have created confusion for both employers and courts regarding the applicability of valid tip pools. One of the most controversial interpretations of the FLSA occurred in early 2010, when the U.S. Court of Appeals for the Ninth Circuit held that an employer could require servers to pool their tips with non-tipped kitchen and other “back of the house staff,” so long as a tip credit was not taken and the servers were paid minimum wage. See Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010). According to the Ninth Circuit, nothing in the text of the FLSA restricted tip pooling arrangements when no tip credit was taken; therefore, because the employer did not take a tip credit, the tip pooling arrangement did not violate the FLSA.

In 2011, the DOL issued regulations that directly conflicted with the holding in Woody Woo. As a result, employers could no longer require mandatory tip pooling with back-of-the-house employees. In conjunction with this announcement, the DOL issued an advisory memo directing its field offices nationwide, including those within the Ninth Circuit, to enforce its final rule prohibiting mandatory tip pools that include such employees who do not customarily and regularly receive tips.

Shortly after the issuance of the DOL’s final rule, hospitality groups filed a lawsuit against the DOL challenging the agency’s regulations that exclude back-of-the-house restaurant workers from employer-mandated tip pools. The lawsuit sought to declare the DOL regulations unlawful and inapplicable to restaurants that pay employees who share the tips at least the federal or applicable state minimum wage with no tip credit. On June 10, 2013, the District Court granted the plaintiffs’ summary judgment motion, holding that the DOL exceeded its authority by issuing regulations on tip pooling in restaurants. The District Court stated that the language of Section 203(m) of the FLSA is clear and unambiguous; it only imposes conditions on employers that take a tip credit.

The District Court’s decision may have a large impact on the tip pool discussion currently before courts across the country, especially if employers in the restaurant and hospitality industries begin to challenge the DOL’s regulations. Given the District Court’s implicit message encouraging legal challenges against the DOL, the status of the law regarding tip pooling is more uncertain than ever. Although the decision is a victory for employers in the restaurant and hospitality industry, given the aggressive nature of the DOL, employers in all circuits should still be extremely careful when instituting mandatory tip pool arrangements, regardless of whether a tip credit is being taken.

  1. Take Preventative Steps When Facing WHD Audits

In response to a WHD audit or inspection, here are several preventative and proactive measures that an employer can take to prepare itself prior to, during, and after the audit:

  • Prior to any notice of a WHD inspection, employers should develop and implement a comprehensive wage and hour program designed to prevent and resolve wage hour issues at an early stage. For example, employers should closely examine job descriptions to ensure that they reflect the work performed, review time-keeping systems, develop a formal employee grievance program for reporting and resolving wage and hour concerns, and confirm that all written time-keeping policies and procedures are current, accurate, and obeyed. Employers should also conduct regular self-audits with in-house or outside legal counsel (to protect the audit findings under the attorney-client privilege) and ensure that they address all recommendations immediately.
  • During a DOL investigation, employers should feel comfortable to assert their rights, including requesting 72 hours to comply with any investigative demand, requesting that interviews and on-site inspection take place at reasonable times, participating in the opening and closing conferences, protecting trade secrets and confidential business information, and escorting the investigator while he or she is at the workplace.
  • If an investigator wants to conduct a tour of an employer’s facility, an employer representative should escort the investigator at all times while on-site. While an investigator may speak with hourly employees, the employer may object to any impromptu, on-site interview that lasts more than five minutes on the grounds that it disrupts normal business operations.
  • If the DOL issues a finding of back wages following an investigation, employers should consider several options. First, an employer can pay the amount without question and accept the DOL’s findings. Second, an employer can resolve disputed findings and negotiate reduced amounts at an informal settlement conference with the investigator or his or her supervisor. Third, an employer can contest the findings and negotiate a formal settlement with the DOL’s counsel. Finally, an employer may contest the findings, prepare a defense, and proceed to trial in court.

In addition, employers should review our WHD Investigation Checklist, which can help them ensure that they have thought through all essential wage and hour issues prior to becoming the target of a DOL investigation or private lawsuit.

Following these simple measures could significantly reduce an employer’s exposure under the FLSA and similar state wage and hour laws.

By: Kara Maciel and Jordan Schwartz

On September 16, 2013, the U.S. Department of Labor (DOL) announced that Harris Health System (“Harris”), a Houston health care provider of emergency, outpatient and inpatient medical services, has agreed to pay more than $4 million in back wages and damages to approximately 4,500 current and former employees for violations of the Fair Labor Standards Act’s overtime and recordkeeping provisions. The DOL made this announcement after its Wage and Hour Division (“WHD”) completed a more than two-year investigation into the company’s payment system prompted by claims that employees were not being fully compensated.

Under the Fair Labor Standards Act (“FLSA”), employers typically must pay their non-exempt employees an overtime premium of time-and-one-half their regular rate of pay for all hours worked in excess of 40 hours in a workweek.  Employers within the health care industry have special overtime rules.  Notably, an employee’s “regular rate of pay” is not necessarily the same as his hourly rate of pay. Rather, an employee’s “regular rate of pay” includes an employee’s “total remuneration” for that week, which consists of both the employee’s hourly rate, as well as any non-discretionary forms of payment, such as commissions, bonuses and incentive pay. The FLSA dictates that an employee’s “regular rate” of pay is then determined by dividing the employee’s total remuneration for the week by the number of hours worked that week. The FLSA also requires employers to maintain accurate time and payroll records for each of its employees. Should an employer violate these provisions, the FLSA allows employees to recover back wages and an equal amount of liquidated damages.

The DOL’s investigation into Harris’s payment practices found that the company (i) had failed to include incentive pay when determining its employees’ regular rate of pay for overtime purposes, and thus had failed to property compensate its nurses, lab technicians, respiratory health care practitioners and other workers for overtime; and (ii) had failed to maintain proper overtime records. As a result, Harris owed its employees a total of $2.06 million in back wages and another $2.06 million in liquidated damages. Further, Harris has now taken steps to ensure compliance with the requirements of the FLSA by instituting changes in its payroll system and setting up a compliance program to ensure that its employees are properly compensated.

Because an employee’s “total remuneration” for a workweek may consist of various forms of compensation, employers must consistently evaluate and assess their payment structures and payroll systems to determine the payments that must be included in an employee’s overtime calculations beyond just hourly wage. Additionally, employers should conduct periodic audits to ensure that it is maintaining full and accurate records of all hours worked by every employee. Our Firm’s WHD Investigation Checklist could help employers ensure that they have thought through these and other essential wage and hour issues prior to becoming the target of a DOL investigation or private lawsuit. These simple steps could significantly reduce an employer’s exposure under the FLSA and similar state wage and hour laws.

By Michael Kun

A California plaintiff who prevails in a wage-hour lawsuit generally may recover his or her attorney’s fees.  The same is so for employers — but only for the next few months.

A new statute will take effect in January 2014 that will change whether and how an employer who prevails in such a case may recover its fees.  In a state already overrun with wage-hour lawsuits with questionable merit, that new statute seems to ensure that even more meritless wage-hour lawsuits will be filed by plaintiffs’ counsel who count on the in terrorem effect of those lawsuits to force employers to settle such claims – and who pocket 40% of what they recover.

Governor Jerry Brown has signed into law a bill that raises the standard for a prevailing employer to recover fees when they prevail in wage-hour actions.  Effective January 2014, an employer must meet a higher standard than an employee to recover fees.   It must not only prevail in the lawsuit, but it must establish that the lawsuit was brought in “bad faith.”  

While the authors of the bill contended that it was needed to correct an injustice that discouraged workers from pursuing such claims, one has to wonder whether those legislators could identify a single California employee who did not pursue a valid wage-hour claim because of the fear of paying attorney’s fees.  The California courts have been overrun with wage-hour lawsuits.  There is little, if anything, to suggest that employees have been deterred from filing these lawsuits.  If anything, they have been greatly encouraged to do so, and plaintiffs’ counsel sometimes file these suits with little effort to determine if they have any merit beforehand.  Indeed, it is not unusual for an employee not to even meet his or her attorney before the attorney files a wage-hour suit, or for that attorney to file a wage-hour class action with minimal, if any, investigation.

In this way, the new statute seems to be aimed to benefit the plaintiffs’ bar, not employees.  Until now, the only thing that prevented plaintiffs’ counsel from filing a meritless wage-hour action was the possibility that the employer would be able to recover its attorney’s fees.  Now, knowing that an employer is only going to be able to recover fees in meritless cases if it can establish that it was brought in “bad faith,” there is every reason to expect the filing of even more meritless wage-hour actions.

By: Dean Silverberg, Bill Milani, Jeffrey Landes, Susan Gross Sholinsky, Anna Cohen, and Jennifer Goldman

The New York State Department of Labor (“DOL”) recently published its long-awaited proposed regulations (“Proposed Regulations“) pertaining to the newly expanded categories of permissible wage deductions pursuant to the New York State Labor Law (“Labor Law”). As we previously reported (see the Act Now Advisory entitled “New York Labor Law Significantly Expands the Scope of Permissible Wage Deductions“), the amendments to Section 193 of the Labor Law (“Section 193”), which govern permissible wage deductions, became effective on November 6, 2012. However, Section 193 required the Commissioner of Labor to issue regulations implementing the amendments. With the release of the Proposed Regulations, New York employers should plan to implement new processes and procedures relating to wage deductions once the Proposed Regulations become final.

To read the full text of the advisory, please click here.