Jennifer Brand, Associate Solicitor of Labor, spoke at the American Bar Association Federal Labor Standards Legislation Committee’s Mid-Winter Meeting on February 26.  Ms. Brand provided an update on important USDOL initiatives and activities.  Ms. Brand discussed recent litigation involving interns and confirmed that the USDOL still believes the six factors outlined in its Fact Sheet #71 is the proper test to determine whether an unpaid internship is lawful.  Ms. Brand did acknowledge that as the workplace evolves, it may, in unusual situations, be appropriate to consider other factors. Ms. Brand also discussed the USDOL's appeal of the U.S. District Court for the District of Columbia’s order vacating two major provisions in the USDOL’s Home Care Rule originally intended to be effective January 1, 2015.  The new rule would have excluded third-party employers from relying on the companionship and live-in domestic worker exemptions and would have significantly narrowed the definition of companionship services.  It is anticipated the case will be heard in the May term. Finally, Ms. Brand acknowledged that the highly anticipated proposed changes to the white-collar exemptions would not be published this month as the USDOL had previously suggested.  She further stated that they are “not imminent.”  Although she would not comment on specifics, she stated that the USDOL is examining the appropriate salary level test and whether the duties test needs to be revised.  Practitioners believe that the proposals will include, among other things, raising the salary level test and narrowing the duties test of the exemptions to make it more difficult to classify employees as exempt.  Some of the expected changes may include implementing a strict percentage of exempt and non-exempt duties and the possible elimination of the “concurrent” duties test whereby an employee may perform exempt and non-exempt duties at the same time.

New York State's Acting Commissioner of Labor, Mario Musolino, issued an Order today, accepting most of the recommendations made by the Hospitality Industry Wage Board, including the recommendation to increase the minimum wage for all tipped employees in the Hospitality Industry to $7.50 per hour effective December 31, 2015.  The one recommendation that the Acting Commissioner rejected was the one that would have provided certain employers with some relief from this significant increase in labor costs -- namely, the recommendation to allow employers to take $1.00 off the hourly minimum wage for tipped employees if the weekly average earnings of their employees (wages paid plus tips received) equals or exceeds 150% of the regular minimum wage in New York City or 120% of the regular minimum wage in the rest of the state. So, to summarize, the Acting Commissioner's Order will:  (1) increase the minimum wage for all tipped employees in the Hospitality Industry (regardless of whether they are classified as food service workers, service employees, or resort hotel service employees) to $7.50 per hour effective December 31, 2015; and (2) implement a $1.00 increase in the minimum wage for tipped employees in the Hospitality Industry who work in New York City, which would take effect if and when the legislature enacts a higher minimum wage rate for New York City.  The Acting Commissioner also accepted the Wage Board's recommendation to review whether the current system of cash wages and tip credits should be eliminated. The Acting Commissioner's Order will be effective 30 days after notice of its filing is published in at least 10 newspapers of general circulation in the state.  Employers in the hospitality industry should begin to consider how this significant increase in labor costs attributable to the employment of food service workers and service employees will impact their businesses in 2016 and beyond.

On September 15, 2014, the New York State Commissioner of Labor assigned the three-member Hospitality Industry Wage Board ("Wage Board") with the task of reviewing and making recommendations regarding what changes, if any, should be made to the minimum wage rates and tip credits for food service workers and service employees in the hospitality industry.  After conducting several meetings, the Wage Board voted on January 30, 2015, to recommend that the minimum wage rate for all tipped employees in the hospitality industry (regardless of whether they are classified as food service workers or service employees) be increased to $7.50 per hour effective December 31, 2015.  The webcast of the Wage Board's January 30 meeting can be found here. Governor Cuomo has expressed his support for the Wage Board's recommendation, which will now be reviewed by the Commissioner of Labor.  If the Commissioner of Labor accepts the Wage Board's recommendation, the Hospitality Industry Wage Order will be revised to reflect the increase. Under the current Hospitality Industry Wage Order, employers are required to pay food service workers a minimum wage of at least $5.00 per hour, and may take a tip credit of no more than $3.75 per hour, provided that the total amount of tips received plus the wages paid equals or exceeds the current regular minimum wage of $8.75 per hour.  The term "food service worker" is defined as any employee who is primarily engaged in serving food or beverages and who regularly receives tips.  This includes "front of the house" employees such as wait staff, bartenders, captains, and bussing personnel, but excludes delivery workers.  Employers are currently required to pay service employees (other employees in the hospitality industry who customarily receive tips but are not involved in serving food or beverages) a minimum wage of at least $5.65 per hour, and may take a tip credit of no more than $3.10 per hour, provided that the total amount of tips received plus the wages paid equals or exceeds $8.75 per hour.  Service employees at resort hotels are subject to a special rule that allows them to be paid a minimum wage of at least $4.90 per hour.  Non-service employees ("back of the house" employees such as cooks and dishwashers) must be paid the regular minimum wage of $8.75 per hour, and no tip credit may be taken for those employees. So, the Wage Board's recommendation (if it is accepted by the Commissioner of Labor) would drastically increase the tipped employee minimum wage as of December 31, 2015, by $2.50 for food service workers, by $1.85 for most service employees, and by $2.60 for service employees at resort hotels.  The Wage Board also voted to make two other recommendations to the Commissioner of Labor:  (1) if the legislature enacts a higher regular minimum wage for New York City, then the minimum wage for tipped employees in the hospitality industry who work in New York City would increase by $1.00 effective on the date that the higher regular minimum wage goes into effect; and (2) if a hospitality industry employer can demonstrate that the weekly average earnings of an employee (wages paid plus tips received) equals or exceeds 120% of the regular minimum wage (or 150% of the regular minimum wage if the employee works in New York City), then the employer would be eligible to pay $1.00 less than the applicable tipped employee minimum wage. Employers in the hospitality industry should begin to consider how this potentially significant increase in labor costs attributable to the employment of food service workers and service employees will impact their businesses, and should evaluate what adjustments may need to be made in the event that the Commissioner of Labor accepts and implements the Wage Board's recommendation.  We will report on any further developments as they occur.

In a victory for Home Care employers, the U.S. District Court for the District of Columbia issued consecutive decisions which struck down two regulations issued by the U.S. Department of Labor (“USDOL”) that would have eviscerated the “companionship exemption” contained in the Fair Labor Standards Act (“FLSA”). The two USDOL regulations enacted in late 2013 were prevented from taking effect, as scheduled, on January 1, 2015, by two related decisions on December 22, 2014 and January 14, 2015, which vacated both regulations on the ground that they “conflicted with the [FLSA] statute itself.”  Each of the two challenged regulations would have imposed greater overtime obligations on Home Care employers, by sharply reducing the reach of the FLSA “companionship exemption,” which, for 40 years, had excluded most Home Care work from federal overtime laws. Specifically, the exemption excludes from federal minimum wage and overtime obligations companionship and live-in “services which provide fellowship, care and protection to a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs,” unless the work is performed by a Registered Nurse or similarly trained professional. In the first of the two decisions, the District Court struck down a USDOL regulation that would have eliminated the companionship exemption unless the Home Care worker is employed directly by the patient or household itself, rather than by an Agency.  Since the vast majority of Home Care workers are employed by Home Care Agencies, this new regulation would have had sweeping impact, had it taken effect.  In striking down the regulation, the Court held that “Congress intended the exemption to apply to all employers who provide companionship and live-in domestic services. . . .”  It curtly rejected the new regulation as contrary to the statute, noting that “Congress surely did not delegate to the [USDOL] here the authority to issue a regulation that transforms defining statutory terms . . . based on who cuts a check, rather than what work is being performed.” Shortly thereafter, on January 14, 2015, the Court addressed a second USDOL regulation which redefined – and significantly narrowed – the type of work that would be covered under the companionship exemption, restricting it to only those companions who provide “care” or assist with “activities of daily living” during less than 20% of their total hours.  Since Home Care is routinely intended to provide significant assistance with activities of daily living (such as driving, meal preparation, dressing, feeding and bathing), this regulation virtually eliminated the companionship exemption.  The Court rejected the regulation on the ground that it contradicts the FLSA itself.  The statutory exemption refers to “care” and services for the elderly and disabled “who are unable to care for themselves.”  The Court determined that the USDOL regulation would “write out of the exemption the very ‘care’ the elderly and disabled need . . . .”  In a closing flourish, the Court scolded the USDOL for usurping Congressional authority:

Redefining a 40-year-old exemption out of existence may be satisfyingly efficient to the Department of Labor, but it strikes at the heart of the balance of power our Founding Fathers intended to rest in the hands of those who must face the electorate on a regular basis.

Taken together, the two decisions wholly restore the previously-existing companionship and live-in exemptions from federal minimum wage and overtime laws.  An appeal to a higher federal court may well follow, so the two decisions may not be the final word on the USDOL Regulations.  It remains prudent to continue to follow this issue closely for further development, and to consult counsel if needed. In addition, Home Care Agencies in New York should take note that, even in the absence of the applicability of federal minimum wage and overtime laws, New York law requires that home care employees be paid a minimum wage of $8.75 per hour, and requires that hours over 40 in a work week be paid at 1½ times the State minimum wage (i.e., $13.125 per hour) rather than 1½ times the employee’s regular rate.

Happy New Year!  On December 29, Governor Cuomo signed the bill eliminating the requirement under the Wage Theft Prevention Act that employers in New York provide annual wage notices to their employees.  Although the bill currently provides that it will go into effect 60 days after it is signed (which would mean that it would take effect after the February 1 deadline to provide the wage notices for 2015), the Governor's approval memo accompanying the bill specifically notes that an agreed-upon chapter amendment will "accelerate the effective date of the notification rule changes in section 1 of the bill to remove the notice requirement on employers for the 2015 calendar year." We will provide an update once the expected chapter amendment is enacted in January.

The minimum wage for employees in New York will increase from $8.00 per hour to $8.75 per hour effective December 31, 2014.  The minimum wage for New York employees will increase again to $9.00 per hour effective December 31, 2015. Employers in New York should also keep in mind that the minimum salary under state law for employees to qualify for the executive and administrative exemptions will increase from $600.00 per week to $656.25 per week effective December 31, 2014.  The minimum salary under state law to qualify for the executive and administrative exemptions will increase again to $675.00 effective December 31, 2015.

New York employers who have already begun preparing to send out annual wage notices to their employees under the Wage Theft Prevention Act can safely stop their preparations.  The bill eliminating the annual wage notice requirement was delivered to the Governor yesterday and it is expected that the Governor will sign it.  The bill, as currently drafted, provides that the legislation will go into effect 60 days after it is signed into law, which would mean that it would take effect after the February 1 deadline to provide the wage notices for 2015.  However, Bond's Government Relations lawyers brought this concern to the attention of the Governor's office in early December, while the Governor's office and the Legislature were discussing potential chapter amendments to the bill, and it is our understanding that one of the agreed-upon chapter amendments that will be enacted early in the next legislative session will eliminate the annual wage notice requirement immediately.  So, we expect that employers will not have to issue the notices in 2015. We will provide an update as soon as the Governor signs the bill, and another update once the expected chapter amendments are enacted in January.  This is certainly great news for employers in New York, who will no longer have to engage in the costly and time-consuming process of issuing wage notices to all employees between January 1 and February 1 of each year.

Nearly six months ago, we reported that the New York Legislature passed a bill eliminating the requirement under the Wage Theft Prevention Act that employers provide an annual wage notice to their employees between January 1 and February 1.  We monitored the bill regularly, hoping that we would be able to report that the Governor had signed the bill and that employers would be relieved of this onerous requirement in 2015.  Unfortunately, the bill has not yet been delivered to the Governor, so at least as of now, the annual wage notice requirement remains in effect. Based on the information we have been able to obtain, it appears that the Governor's office and the Legislature are currently discussing potential revisions to the bill that are unrelated to the elimination of the annual wage notice requirement.  Aside from the elimination of the annual wage notice requirement, the bill that was passed on June 19 also increased the penalties for an employer’s failure to provide a wage notice upon hiring a new employee and for an employer’s failure to provide appropriate wage statements to employees, imposed significant consequences on employers who are found to be repeat offenders, and added provisions to the Limited Liability Company Law and the Construction Industry Fair Play Act.  It is our understanding that amendments to some of those other provisions are being contemplated. It is still possible that the bill will be signed by the Governor before the end of the legislative term.  However, if the legislation goes into effect 60 days after it is signed into law (which is how the bill is currently drafted), it is already too late for the law to go into effect in time to relieve employers of the obligation to distribute the annual notice by February 1, 2015.  Our firm has brought this issue to the attention of the Governor's office. At this point, employers in New York should prepare to send the annual wage notice to their employees between January 1 and February 1, 2015.  If the Legislature and the Governor give a nice holiday gift to New York employers by finding a way to eliminate this requirement for 2015, we will certainly let you know.

On November 6, Erie County Executive Mark Poloncarz signed an Executive Order, which requires all contractors, prior to entering into a contact with the County, to submit an Erie County Equal Pay Certification stating their compliance with federal and state equal pay laws.  The order applies to all bids, requests for proposals, and other contract solicitations issued by County offices, departments, and administrative units on and after January 1, 2015. Under the Executive Order, equal pay laws, which mandate that men and women are paid equally for the same work, include the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, Federal Executive Order 11246, and Section 194 of the New York State Labor Law (collectively referred to as the “Equal Pay Laws” in the Executive Order).  The required certification must include a declaration that there have been no adverse findings against the contactor under the Equal Pay Laws within the last five years and a disclosure of any pending claims against the contractor.  The Erie County Law Department will create the Equal Pay Certification form that contractors will be required to sign. Additionally, the County’s Division of Equal Employment Opportunity (the “Division of EEO”) is required under the Executive Order to establish a procedure for monitoring and periodic auditing of contractors to ensure compliance with the Equal Pay Laws and the certification requirements.  This increased oversight is significant, because a County contract may be immediately terminated and/or the contractor may be disqualified from participating in future County contracts if the contractor files a false or misleading certification or violates any provision of the Equal Pay Laws during the term of the contract. When the Division of EEO establishes a procedure for compliance monitoring and auditing, and when any other guidance becomes available, we will follow and report on those developments.

With that first real chill in the air, the holiday season is suddenly upon us.  For parents, it is a time to relive our childhood, watching with our children all of those holiday specials ranging from It's the Great Pumpkin, Charlie Brown to Santa Claus is Comin' to Town.  Unfortunately, for members of our misfit profession, “tis the season” is not so much about being jolly, but more about defending lawsuits. And speaking of lawsuits, a daily perusal of employment law blogs and periodicals reveals that there is no shortage of new and innovative ways to sue an employer.  The seemingly endless tide of profligate litigation makes me shiver like Linus in the Pumpkin Patch about what would happen if the Department of Labor, the EEOC, or the plaintiff’s bar set its sights on Santa and his manufacturing plant in the North Pole.  For this reason, I offer the following guidance to Mr. Kringle d/b/a Santa on how to clean up some glaring employment law violations.  (Disclaimer:  Our guidance to Mr. Kringle is not intended to be legal advice nor should it be a substitute for him retaining local counsel familiar with the laws in his local jurisdiction.  I would also include the obligatory tax advice disclaimer, but I believe Mr. Kringle is tax-exempt.) I will discuss individual lawsuits below.  However, my main concern in terms of liability is in the arena of the class action.  I say this with all due love and affection, “Mr. Kringle, your workshop is a treasure-trove of wage and hour violations.”  The elves work, quite obviously, more than 40 hours a week.  They work through meal periods and weekends and holidays.  Where is their overtime pay?  While efficiently furnished, I don’t see any punch clock for your employees.  Can we say liquidated damages and attorneys’ fees? Your workplace is also quite literally an accident waiting to happen.  The elves have no protective equipment.  There is an Abominable Snowman on the shop floor.  Can we all say, “OSHA”? Mr. Kringle, despite your big heart, your workplace is rife with harassment and discrimination.  For example, there is Rudolph’s red nose and the universally known harassment and bullying to which he has been subjected (“used to laugh and call him names”).  The un-remedied mocking of Rudolph makes for a great holiday gift for the plaintiff’s lawyer who signs up Rudolph and his “slam dunk” suit.  (We make no representations as to whether any plaintiffs-side lawyers are on the "Nice List" and worthy of such a gift).  I think it is imperative that all of your reindeer immediately receive anti-harassment training.  So too with poor Hermey.  The Seinfeldesque “Anti-Dentite” environment that you have condoned is ripe for litigation and is otherwise an insult to dentists world-wide.  That leads us to our Faragher defenses.  Are your EEO policies translated into “Elfish” and properly distributed with a clear record of same? Of additional concern, have you taken care to make sure that the post-toy delivery workplace celebration does not cross the proverbial “line” of appropriateness and result in more than just hangovers at the workshop the next day? Finally, we need a word about the Island of Misfit Toys.  Notwithstanding that the public may want all lawyers permanently deposited in this desolate place, it is nonetheless illegal to segregate your workforce on the basis of such protected characteristics as being a cowboy who rides an ostrich.  And, who among us wouldn’t want to ride an ostrich? Of course, Mr. Kringle is not the only one staring down the barrel at punitive damages.  Yes, I’m talking to you, Mr. Burgermeister Meisterburger.  Making toys is plainly a recreational activity under state labor laws and interfering with concerted activity in this regard will get you an unfriendly knock on the door from the NLRB. So, to our clients and blog subscribers, I wish you all a joyous holiday season in front of a warm fire surrounded by friends and family, without any visions of EEOC complaints or Department of Labor audits dancing in your heads.

Under a bill passed by the New York Legislature, employers in New York will not have to issue annual wage notices to employees in 2015 and beyond.  On June 19, 2014, a bill was passed in both the New York Assembly and Senate that eliminates the requirement contained in the Wage Theft Prevention Act that employers provide a wage notice to all employees by February 1 of each year.  This is certainly a welcome development for employers in New York who found the annual wage notice requirement to be extremely burdensome and costly.  The bill also increases the penalties for an employer's failure to provide a wage notice upon hiring a new employee and for an employer's failure to provide appropriate wage statements to employees, and imposes significant consequences on employers who are found to be repeat offenders.  If Governor Cuomo signs the bill, the legislation will take effect 60 days after it is signed. The bill does not change the requirement that employers provide a wage notice upon hiring a new employee.  The Department of Labor has issued templates for wage notices that can be used by employers for this purpose.  The bill increases the damages that can be recovered for an employer's failure to provide the initial wage notice within ten business days of an employee's first day of employment to $50.00 per work day that the violation occurred up to a maximum of $5,000.00 (up from $50.00 per work week up a maximum of $2,500.00).  The bill also increases the damages that can be recovered for an employer's failure to provide appropriate wage statements to employees to $250.00 per work day that the violation occurred up to a maximum of $5,000.00 (up from $100.00 per work week up to a maximum of $2,500.00).  An employer who is faced with a claim that it failed to provide the required wage notice or wage statement can still avoid liability by establishing that it made complete and timely payment of all wages due to the employee who was not provided the wage notice or wage statement. If an order to comply has been issued to an employer who has previously been found to have violated the wage payment laws or to an employer whose violation is found to be willful or egregious, the employer will be required to report certain data regarding the wages paid to employees and the hours worked by employees (without employee identifying information), which the Department of Labor will publish on its web site.  Employers who are found to have committed a wage payment violation for the second time in a six-year period could be liable for a maximum civil penalty of $20,000, which is double the maximum civil penalty that can be imposed for a first violation in a six-year period. The bill also provides that an employer similar in operation or ownership to a prior employer who has been found to have violated the wage payment laws will be liable for the prior employer's violations.  This provision prevents an owner (or owners) of a business entity from avoiding liability by dissolving the business entity and creating a new one that has essentially the same business purpose. The bill adds a provision to the Limited Liability Company Law providing that the ten members of a limited liability company ("LLC") with the largest percentage ownership will be personally liable for all wages and salaries due to employees of the LLC.  This new provision of the Limited Liability Company Law is similar to Section 630 of the Business Corporation Law, which provides that the ten largest shareholders of a corporation are personally liable for all wages and salaries due to employees of the corporation. The bill also adds a provision to the Construction Industry Fair Play Act, requiring construction contractors and subcontractors who have been found to be in violation of the wage payment laws to notify all of its employees regarding the nature of the violations.  The notification must be made by an attachment to the pay checks of all employees at all work sites. On the whole, this legislation (if it is signed by the Governor) will be a positive development for employers in New York, who will no longer have to engage in the costly and time-consuming process of issuing wage notices to all employees between January 1 and February 1 of each year.

On March 13, 2014, President Obama issued a memorandum directing the Secretary of Labor to update and streamline the Fair Labor Standards Act (“FLSA”) overtime regulations.  In the memorandum, President Obama noted that the regulations regarding exemptions from the FLSA’s overtime requirements, particularly for executive, administrative and professional employees (the white-collar exemptions), are outdated and should be updated to address the changing nature of the workplace.  President Obama also stated that the regulations should be simplified so that they are easier for employers and employees to understand and apply. Although the memorandum does not provide specific guidance, it is expected that the Department of Labor’s revised regulations will include an increase in the salary threshold necessary to qualify for the white-collar exemptions (currently $455.00 per week).  If such an increase is proposed, it could bring the federal regulations in line with the salary threshold necessary for employees in New York to qualify for the executive and administrative exemptions.  The salary threshold for employees in New York to qualify for the executive and administrative exemptions was recently increased to $600.00 per week on December 31, 2013 (up from $543.75 per week), and is scheduled to increase annually on December 31, 2014 ($656.25 per week) and December 31, 2015 ($675.00 per week). Any changes to the FLSA regulations that the Department of Labor proposes are subject to the normal rulemaking process, which includes a notice and comment period.  We will post updates on this blog throughout the rulemaking process.