Wage and Hour

New York Increases the Minimum Wage and Enacts Paid Family Leave

April 12, 2016

By Kerry W. Langan
On April 4, 2016, Governor Cuomo signed legislation, as part of the 2016-2017 state budget, enacting a $15.00 minimum wage plan and a 12-week paid family leave benefit. Minimum Wage Increase The legislation includes a historic increase in the minimum wage (currently $9.00 per hour) that will ultimately reach $15.00 per hour for all workers in New York State.  The increases vary based on employer size and geographic location as follows:
  • For large employers (11 or more employees) whose employees work in New York City, the state minimum wage will increase to $11.00 per hour on December 31, 2016, $13.00 per hour on December 31, 2017, and $15.00 per hour on December 31, 2018.
  • For small employers (10 or fewer employees) whose employees work in New York City, the state minimum wage will increase to $10.50 per hour on December 31, 2016, $12.00 per hour on December 31, 2017, $13.50 per hour on December 31, 2018, and $15.00 per hour on December 31, 2019.
  • For employers with employees working in Nassau, Suffolk, and Westchester Counties, the state minimum wage will increase to $10.00 per hour on December 31, 2016, $11.00 per hour on December 31, 2017, $12.00 per hour on December 31, 2018, $13.00 per hour on December 31, 2019, $14.00 per hour on December 31, 2020, and $15.00 per hour on December 31, 2021.
  • For all employers with employees working outside of New York City and Nassau, Suffolk, and Westchester counties, the state minimum wage will increase to $9.70 per hour on December 31, 2016, $10.40 per hour on December 31, 2017, $11.10 per hour on December 31, 2018, $11.80 per hour on December 31, 2019, and $12.50 per hour on December 31, 2020.  The minimum wage will continue to increase to $15.00 thereafter on an indexed schedule to be set by the Director of the Budget in consultation with the Commissioner of the Department of Labor.  These increases will be published on or before October 1st of each year.
The legislation also includes a safety measure allowing the Division of Budget, beginning in 2019, to conduct an annual analysis to determine whether there should be a temporary suspension or delay in any scheduled increases.  These minimum wage increases do not affect the timing and amounts of the minimum wage increases for fast food workers that were incorporated into the Hospitality Industry Wage Order effective December 31, 2015. Paid Family Leave In addition to a gradual increase in the minimum wage, a paid family leave program was enacted that will eventually result in eligible employees being entitled to up to 12 weeks of paid family leave when they are out of work for the following qualifying reasons:  (1) to care for a family member with a serious health condition; (2) to bond with a child during the first 12 months following birth or placement for adoption or foster care; or (3) because of a qualifying exigency arising out of the fact that the employee’s spouse, domestic partner, child, or parent is on active duty (or has been notified of an impending call or order to active duty) in the armed forces. In order to be eligible for paid family leave, employees must work for a covered employer – as defined under the New York Disability Law – for 26 or more consecutive weeks.  Family leave benefits will be phased in as follows:
  • Beginning on January 1, 2018, eligible employees will receive up to 8 weeks of paid family leave in a 52-week calendar period at 50% of the employee’s average weekly wage, capped at 50% of the state average weekly wage;
  • Beginning on January 1, 2019, eligible employees will receive up to 10 weeks of paid family leave in a 52-week calendar period at 50% of the employee’s average weekly wage, capped at 50% of the state average weekly wage;
  • Beginning on January 1, 2020, eligible employees will receive up to 10 weeks of paid family leave in a 52-week calendar period at 60% of the employee’s average weekly wage, capped at 60% of the state average weekly wage; and
  • Beginning on January 1, 2021 and each year thereafter, eligible employees will receive up to 12 weeks of paid family leave in a 52-week calendar period at 67% of the employee’s average weekly wage, capped at 67% of the state average weekly wage.
Like with the minimum wage increase, the legislation includes a safety measure whereby the Superintendent of Financial Services has the discretion to delay the scheduled increases listed above. Family leave benefits may be payable to employees for family leave taken intermittently or for less than a full workweek in increments of one full day or one-fifth of the weekly benefit.  Significantly, employers are not required to fund any portion of this benefit.  Rather, the program is funded entirely through a nominal employee payroll deduction.  The maximum employee contribution will be set by the Superintendent of Financial Services on June 1, 2017 and annually thereafter. Entitlement to paid family leave is also subject to certain medical certification and notification requirements.  Paid family leave benefits must be used concurrently with leave under the Family and Medical Leave Act.  In addition, employees are prohibited from collecting disability and paid family leave benefits concurrently. In addition to paid leave, this legislation contains a provision for the continuation of health benefits which provides as follows:  “In accordance with the Family and Medical Leave Act (29 U.S.C. §§ 2601-2654), during any period of family leave the employer shall maintain any existing health benefits of the employee in force for the duration of such leave as if the employee had continued to work from the date he or she commenced family leave until the date he or she returns to employment.” Lastly, employees who take paid family leave must be restored to their current position or to a comparable position with equivalent pay, benefits, and other terms and conditions of employment. Clearly, there are a lot of questions that remain unanswered regarding the paid family leave program.  However, covered employers should begin to prepare for the implementation of this legislation.

DOL Takes Final Step Toward Implementation of New Overtime Exemption Rules

March 17, 2016

Ever since President Obama on March 13, 2014 signed a Presidential Memorandum directing the United States Department of Labor to update the overtime exemption regulations under the FLSA, it has probably been the most talked about employment law issue over the last two years.  This is not surprising, as the FLSA applies in both the private and public sector and generally does not distinguish between for-profits and non-profits. Given the significant potential implications, the process of revising the overtime exemption rules moved along gradually.  It took over a year for the DOL to even publish proposed changes, which it did on July 6, 2015 in the Federal Register.  Despite numerous requests by various entities to extend the September 4, 2015 public comment period, including from approximately twenty members of Congress, the DOL declined to do so. On March 14, 2016, the DOL took the final step necessary before implementation of the proposed changes by sending the controversial rules to expand overtime protection to the White House’s Office of Management and Budget (“OMB”).  OMB can review the rules for a maximum period of 90 days.  There is no minimum amount of time required for OMB review.  We believe, given the heightened level of public scrutiny of the rules and collateral issues like the Presidential election coming up in November, that OMB should be prepared to do a relatively prompt review within 30 to 45 days.  If so, and assuming there is a 60-day grace period between issuance of the final rules and implementation of the final rules, this would mean an effective date of the final rules in late July or early August. Perhaps the most important question still remains though -- will the final rules contain any significant changes to the “duties” tests for the white collar exemptions despite the absence of any specific changes in the proposed rules?  Even if not, litigation over the final rules seems inevitable.  If so, the screams of foul play from employers will be deafening.

New York Adopts Tipped Worker and Fast Food Worker Minimum Wage Regulations

December 23, 2015

By Andrew D. Bobrek
As we reported previously, the New York State Department of Labor (“NYSDOL”) proposed a series of new regulations earlier this year.  These proposals included new regulations raising the minimum wage and reducing the maximum available “tip credit” for certain workers in the hospitality industry, and new regulations implementing the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15.00 per hour.  Today, both sets of regulations were formally adopted and published in the New York State Register. These new regulations are effective on December 31, 2015, and contain no changes from what NYSDOL originally proposed earlier this year. For more information about these regulations, readers can access our prior blog article.  Among other things, as of December 31, 2015, certain tipped workers who fall under New York’s Hospitality Industry Wage Order must be paid at least $7.50 per hour and may only receive a maximum “tip credit” of $1.50 per hour.  Also, as of this same date, covered fast food workers must be paid at least $9.75 per hour if they are employed outside of New York City or at least $10.50 per hour if they are employed inside of New York City.  These minimum wages for covered fast food workers are set to automatically increase annually, eventually reaching $15.00 per hour on December 31, 2018 in New York City and on July 1, 2021 in all other areas of New York. There may be legal challenges to these recently-adopted regulations, in particular the regulations impacting employers in the fast food industry.  We will continue to report any noteworthy developments here.

Start Preparing Now for Wage and Hour Changes on the Horizon

November 17, 2015

By Katherine R. Schafer
As we have previously reported on this blog, and as most of you are well aware, the U.S. Department of Labor has published its highly-anticipated proposed revisions to the “white collar” exemptions under the Fair Labor Standards Act (“FLSA”).  The proposed rule would increase the required salary level for exempt employees to a projected $50,440 per year in 2016 and establish a procedure for automatically updating the minimum salary levels on an annual basis going forward without further rulemaking.  The proposed rule also significantly increases the salary threshold to qualify for the “highly compensated employee” exemption to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually).  According to the USDOL, nearly 5 million employees currently classified as exempt will immediately become eligible for overtime pay should the proposed rule be adopted as the final rule. Current best estimates are that we could see the final rule published next year.  In the meantime, there are steps employers can take now to start preparing for compliance, beginning with identifying those current exempt positions with salaries that would fall below the Department’s proposed $50,440 per year (or $970 per week) threshold or the increased salary threshold for highly compensated employees.  These employees will either need to receive a bump in salary to put them over the minimum threshold or be reclassified as non-exempt.  For those likely to be reclassified, employers should start trying to estimate future compensation costs by looking at how many hours per week these employees are currently working. Employers should also start thinking about whether they will need to hire additional full-time, part-time or seasonal employees or whether they will need to compensate newly reclassified employees at a lower hourly rate (as compared to their current weekly salary divided by 40) to offset the potential increase in overtime costs.  In determining hourly rates for newly reclassified employees, keep in mind that the minimum wage in New York increases to $9.00 on December 31, 2015.  In the Hospitality Industry, tipped workers and fast food workers in New York may also be in line for wage rate increases on December 31, 2015, pursuant to proposed regulations issued by the New York State Department of Labor. Finally, employers should start thinking about how these changes will be communicated to their employees.  An effective communications strategy will be an important part of managing the uncertainty and anxiety surrounding the potential reclassification of an unprecedented number of positions in the workplace.

Recent Legislative and Regulatory Activity Will Impact the Payment of Wages in New York

November 6, 2015

By Andrew D. Bobrek
October saw a flurry of activity from workplace regulators in New York, and employers should take note of several recent legal developments. First, Governor Andrew Cuomo recently signed legislation extending a so-called “sunset” provision in prior amendments to New York’s wage deduction statute – Section 193 of the New York Labor Law.  Those amendments, enacted in 2012, broadened the scope of permissible wage deductions under state law, including deductions for certain overpayments and advances.  Absent legislative action, the amendments were set to expire this month, which would have caused Section 193 to revert to its prior, more restrictive form.  These amendments will now be extended for another 3-year period.  Notably, this recent legislative action serves to concurrently extend existing deduction-related regulations promulgated by the New York State Department of Labor (“NYSDOL”).  Among other things, the regulations set forth detailed requirements which employers must follow in order to lawfully deduct to recover overpayments and advances. Second, the NYSDOL proposed revised regulations on October 28, 2015, governing the payment of employee wages via payroll debit cards, direct deposit, and other means.  These revised regulations – which are not yet final or effective – would impose a number of new requirements regarding how employers pay their covered employees.  As we reported on this blog, the NYSDOL initially proposed regulations on this same subject earlier this year, which were open for an extended public comment period.  The recently-issued revised regulations contain several changes from what NYSDOL originally proposed, ostensibly in response to feedback it received during the prior public comment period.  On balance, the newly-revised version provides better clarity on certain requirements and may also render implementation of payroll debit card programs more feasible for employers.  As additional good news for employers, NYSDOL has indicated that there will be a six-month delay in the effective date once the revised regulations are adopted and published in final form.  The specific requirements proposed in the revised regulations can be accessed here, and are open for another 30-day public comment period. Third, the NYSDOL published proposed regulations on October 21, 2015, which would implement the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15 per hour.  NYSDOL’s Commissioner subsequently adopted this recommendation, which will now proceed through New York’s rulemaking process.  The proposed regulations are presently open for a 45-day public comment period.  Businesses and their advocates in New York have opposed this drastic change and have questioned the NYSDOL’s authority to enact such an industry-specific raise without legislative action.  It is expected that there will continue to be considerable opposition to this proposal, that there will be significant public commentary provided through the rulemaking process, and that opponents will, if necessary, assert a legal challenge to the proposed change. And fourth, the NYSDOL has proposed additional regulations which would – effective on and after December 31, 2015 – raise the minimum wage and reduce the maximum available “tip credit” for certain workers who fall under the existing Hospitality Industry Wage Order.  Specifically, the proposed regulations would raise the applicable minimum wage for covered “service employees” and “food service workers” to $7.50 per hour (from $5.65 and $5.00, respectively).  Concurrently, the maximum available “tip credit” for these workers would be reduced to $1.50 per hour (from $3.35 and $4.00, respectively).  The proposed regulations also contain similar changes for covered “service employees” working in resort hotels, and would also include new language governing the calculation of hourly tip rates.  These proposed regulations are currently open for a 45-day public comment period, which began on October 7, 2015. As a reminder, the NYSDOL proposed regulations referenced above remain pending and are not yet effective.  There is no specific timetable for further action on the part of NYSDOL.  Even so, it is conceivable that the regulations will be issued in final form and adopted at or near the end of this year.

Stronger New York Pay Equity Law to Take Effect in January 2016

October 29, 2015

New York employers take notice:  an amendment to New York’s equal pay law (S.1/A.6075) was signed by Governor Cuomo on October 21, 2015.  The law amends Labor Law Section 194, which prohibits pay differentials based on gender in jobs requiring “equal skill, effort and responsibility” which are “performed under similar working conditions.”  The bill was passed by the Assembly in April, and by the Senate in January, and the changes are significant. The amendment to Labor Law Section 194 is one of eight laws aimed at gender equality issues that Cuomo signed last week.  Of interest to employers, several of the other laws also touch on employment issues.  Those other laws:
  • Extend the prohibition on sexual harassment to all employers, including those with less than four employees (S.2 / A.5360);
  • Allow employees to obtain attorneys’ fees when they prevail in sex discrimination lawsuits (S.3 / A.7189);
  • Add “familial status” to the list of protected traits under the New York State Human Rights Law (S.4 / A.7317); and
  • Add a requirement to the Human Rights Law that employers must provide reasonable accommodations to all pregnant employees, not just those with a pregnancy-related disability (S.8 / A.4272).
The laws are slated to take effect on Tuesday, January 19, 2016. The premise of the pay equity amendment is simple and appealing:  the same day’s pay for the same day’s work.  At first glance, this is not big news.  The state labor law and federal law already require equal pay without regard to gender.  However, this law tightens and strengthens Section 194 in ways that will undoubtedly impact many New York workplaces. First, under existing law, an employer can defend a pay discrimination claim by showing that the difference in pay is justified by a seniority system, a merit system, a system measuring earnings based on quantity or quality of work, or “any other factor other than sex.”  This catch-all was viewed by many as a loophole and hindered the success of many pay discrimination claims.  The new law replaces the “any other” defense with the following:  "a bona fide factor other than sex, such as education, training, or experience."  This bona fide factor must be job-related and consistent with business necessity.  Notably, the burden is on the employer to prove the existence of this bona fide factor; it is not on the complaining employee to prove discriminatory motive (as in other types of employment discrimination litigation). As any employer can attest, many factors other than sex go into compensation decisions.  Under the old law (and still under federal law), these other factors typically held up to the test of “any other factor other than sex.”  It is not clear which factors will hold up under the new law.  For example, are market forces still a defense?  In a competitive market for talent, an employer might pay a new hire more than employees currently performing the same job simply because the market demands it.  Perhaps the candidate has an offer from a competitor that the employer must match to attract the candidate.  Often, internal compensation lags behind external market.  Whether market forces will be considered “a bona fide factor other than sex, such as education, training, or experience” remains to be seen. Moreover, even if an employer establishes a “bona fide factor” to justify a gender pay difference, an employee can still prevail under the new law by showing that:  (a) the bona fide factor has a disparate impact on one sex; (b) alternative employment practices exist that would serve the same business purpose and not produce the pay differential; and (c) the employer refused to adopt the alternative practice.  The lack of clarity over what will be considered a “bona fide factor” will undoubtedly result in a wave of litigation. Second, the Pay Equity Act gives employees the right to openly inquire about, disclose and discuss their wages.  Employers cannot prohibit these conversations.  Rather, the employer may only establish and distribute a written policy containing “reasonable workplace and workday limitations on the time, place and manner” for pay discussions.  The law states that an example of a reasonable limitation would be a rule that an employee may not disclose a co-worker’s pay without the co-worker’s permission.  The law contains some recognition that certain employees must still maintain confidentiality of pay information:  an employer may prohibit an employee with access to other employees’ pay information as part of their job from disseminating that information to others who do not have the same access. This right to openly discuss pay is new to New York law, but it is consistent with the National Labor Relations Board’s position that an employee’s right to openly discuss wages is protected by the National Labor Relations Act. Third, the law contains dramatically higher penalties than other state employment discrimination and wage/hour laws.  Employers who are found to have willfully violated the Equal Pay Act are subject to liquidated damages in the amount of 300% of the wages owed.  In other words, in addition to making the employee whole for any unlawful difference in pay, there is an additional potential penalty of three times those wages.  Other provisions of the New York Labor Law provide for liquidated damages of “only” 100%. As stated above, the law takes effect on January 19, 2016.  Therefore, employers should act quickly to evaluate any potential exposure.  Now is the time to review pay rates to ensure any gender differences can be justified based on the factors in the statute.  Consider whether these factors are job-related and consistent with business necessity.  Additionally, employers should review their written policies, particularly confidentiality policies, to ensure they do not contain restrictions on the right to share or discuss compensation information, and revise as necessary.  Similarly, supervisors should be made aware that they may not prohibit conversations about pay.  Finally, consider the pros and cons of adopting a new policy setting reasonable limits on the time, place and manner of pay discussions.

Public Comment Period on DOL's Proposed "White-Collar" Exemption Regulations Closes

September 10, 2015

As the public comment period closed on the U.S. Department of Labor's proposed revisions to the "white collar" exemptions under the Fair Labor Standards Act ("FLSA"), the Wage & Hour Defense Institute ("WHDI"), a national organization comprised of wage and hour attorneys from across the United States, submitted comments pointing out the seriously flawed aspects of the proposed changes and warning of the unintended hidden costs and burdens that will likely result.  Bond’s John Ho, a member in Bond’s New York City office, is a member of the WHDI and contributed to the preparation of the formal comments submitted.  The door slammed shut on the comment period on September 4, 2015, but apparently not before more than 50,000 additional comments streamed in during the final days before the midnight deadline. The WHDI's comments take the position that the newly proposed rules do not simplify the interpretation of the FLSA, and will lead to more (not less) litigation.  In its analysis, the WHDI asserts that the proposed rules will create significant hidden administrative and employee morale costs and, contrary to the impression created in the press, do not obligate employers to increase an employee's total compensation under the FLSA when converting from exempt to non-exempt status.  A copy of the WHDI's comments can be found here. With the closing of the 60-day public comment period on the proposed regulations, DOL still has a great deal of work ahead.  It must now review the nearly 250,000 comments received, which gives credence to the fact that a sharp divide exists as to the pros and cons of the proposal. If you would like further information on how employers should prepare for the implementation of the proposed regulations, contact your Bond attorney.

The Employment Expansion Trifecta: The Wage and Hour Division, The National Labor Relations Board, and . . . OSHA?

September 9, 2015

By Michael D. Billok
Perhaps it is the end of racing season in Saratoga, but the federal employment agencies are certainly looking to hit the trifecta against independent contractors, franchisors, parent companies, and similar entities under the guise of expanding the definitions of employer and employment. First, a little background:  on April 28, 2014, the U.S. Senate confirmed David Weil as the new head of the U.S. Department of Labor’s Wage and Hour Division.  Before he was confirmed, Weil had published a book entitled The Fissured Workplace, a dense lament on the perceived evils of independent contracting and franchising, and companies that Weil claims attempt to "have it both ways" by not bearing responsibility for the workers from whom they ultimately benefit by virtue of the work performed.  It was thus not unexpected that Weil would seek to remedy those perceived evils during his tenure; however, the extent to which this philosophy has reached other agencies is surprising. Fast-forward to July 2015, during which Administrator Weil issued an Interpretation turning the classic test for independent contractor status on its head.  The central tenet used to be control -- does the company set the worker's hours, have the power to discipline the worker, supervise and direct the worker, etc., or instead does the company simply give the worker the contours of the job, and pay contingent on the acceptability of the work?  The new Administrator’s Interpretation, however, focuses on the "economic realities" of the work arrangement, and whether the worker is "economically dependent" on the company.  Most workers have some dependence on the source of the income, and therefore unless a worker has multiple sources of income to demonstrate that he or she is truly in business for himself or herself, many people who currently consider themselves to be independent contractors are now employees in the eyes of the Wage and Hour Division.  As Weil puts it in his interpretation:  "Thus, applying the economic realities test in view of the expansive definition of 'employ' under the Act, most workers are employees under the FLSA." But the Wage and Hour Division is not the only agency to get into the act.  On August 27, the National Labor Relations Board issued a controversial decision in the Browning-Ferris case, basically holding that a staffing agency, franchisor, or contractor that reserves the right to make decisions affecting a worker’s employment, even if the entity does not actually exercise that right, will likely be considered a joint employer.  In short, the NLRB is also seeking to follow Weil’s lead and fuse “the fissured workplace” to hold contractors and other types of entities responsible for possible employment violations under the guise of joint employment. Not to be outdone, OSHA is going for the trifecta.  Late last month, the International Franchise Association disclosed that it is receiving reports from its members that OSHA investigators are seeking information and documents during inspections to tie franchisors into those inspections in order to cite them as employers along with franchisees.  The IFA is concerned that OSHA is (at the behest of unions such as SEIU) looking to simply treat franchisors as employers regardless of the details of a franchisor-franchisee relationship.  Indeed, the IFA obtained a copy of an internal OSHA memo that shows that OSHA is looking to follow the WHD and NLRB’s lead.  The memo states, in part: "Issue Presented for OSHA: Whether for purposes of the OSH Act, a joint employment relationship can be found between the franchisor (corporate entity) and the franchisee so that both entities are liable as employers under the OSH Act. Ultimate determination will be reached based on factual information about the relationship between the franchisor and franchisee over the terms and conditions of employment.  While the franchisor and the franchisee may appear to be separate and independent employers, a joint employer standard may apply where the corporate entity exercises direct or indirect control over working conditions, has the unexercised potential to control working conditions or based on the economic realities.  As a general matter, two entities will be determined to be joint employers when they share or codetermine those matters governing the essential terms and conditions of employment and the putative joint employer meaningfully affects the matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction." The IFA is seeking more information from OSHA via the Freedom of Information Act, and its full statement can be found here. In short, any entity with franchisees, independent contractors, or other vendors should be well aware that any investigation or inspection by the federal agencies tasked with enforcement of labor and employment laws -- the National Labor Relations Board, the U.S. Department of Labor’s Wage and Hour Division, and now, OSHA -- may seek to expand the investigation or inspection well beyond just the franchisee or contractor inspected, to any franchisor, parent company, or beneficiary of a contract for services.

D.C. Circuit Court of Appeals Upholds USDOL's Revised Regulations on the "Companionship Exemption" Under the FLSA

August 27, 2015

By Subhash Viswanathan

On August 21, the United States Court of Appeals for the District of Columbia Circuit upheld the U.S. Department of Labor’s revisions to the “companionship exemption” under the Fair Labor Standards Act, and reversed two decisions issued by the U.S. District Court for the District of Columbia that struck down those revisions.  The USDOL’s revised regulations eliminate the companionship exemption for home care workers who are employed by a third-party instead of by the patient or household, and greatly narrow the definition of “companionship services” for purposes of applying the exemption.  According to estimates provided by the USDOL, nearly two million formerly exempt home care workers will now be covered by the FLSA’s minimum wage and overtime requirements. In 2013, the USDOL significantly revised its FLSA regulations regarding the “companionship exemption,” which renders the minimum wage and overtime requirements inapplicable to “any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.”  As revised, the regulations prohibit third-party employers, such as home care agencies, from claiming that their employees are exempt from the federal minimum wage and overtime requirements, even if the employees are providing companionship services.  In addition, the revised rule greatly narrows the definition of “companionship services,” so that if an employee spends more than twenty percent of his or her time on the “provision of care,” the employee will be deemed not to be providing “companionship services,” regardless of whether the employee is directly employed by the family or by a third-party employer.  Under the regulations, “provision of care” means assistance with the activities of daily living. The Home Care Association of America challenged the revised regulations in federal court, contending that the USDOL had exceeded its authority in adopting the revised regulations.  The District Court agreed, and invalidated the regulations.  On appeal, the D.C. Circuit Court of Appeals reversed the District Court, holding that the USDOL had the authority under the FLSA to revise the regulations.  The Court further found that the USDOL’s decision to revise the regulations was “grounded in a reasonable interpretation of the statute” and was “neither arbitrary nor capricious.” Assuming that this decision stands and the USDOL’s revised regulations take effect, home care agencies will lose the benefit of the companionship exemption.  Direct care workers who provide services in a patient’s home must be paid at least the federal minimum wage (and in New York, the current higher minimum wage of $8.75 per hour).  In addition, home care agencies must pay home care workers overtime at one and one-half times the regular rate for hours worked in excess of 40 in a work week, unless the employee falls within one of the other FLSA exemptions.  The time spent traveling from one patient to another is considered to be compensable hours worked, and will count toward the 40-hour threshold.

Wage Board Recommends an Increase in the Minimum Wage for Fast Food Workers to $15.00 Per Hour

July 23, 2015

By Subhash Viswanathan
On July 22, 2015, the Fast Food Wage Board (which was empaneled at the direction of Governor Cuomo to investigate and make recommendations regarding an increase in the minimum wage for employees in the fast food industry) passed a resolution recommending that the minimum wage for employees in the fast food industry be raised to $15.00 per hour.  The recommended increase will be phased in to take effect by December 31, 2018, in New York City, and by July 1, 2021, for the rest of the state.  Governor Cuomo has publicly applauded the Wage Board's recommendation, which will almost certainly be accepted and adopted by the Commissioner of Labor. Assuming the Commissioner of Labor issues an order accepting the Wage Board's recommendation, the fast food hourly minimum wage in New York City will increase to $10.50 on December 31, 2015, $12.00 on December 31, 2016, $13.50 on December 31, 2017, and $15.00 on December 31, 2018.  The fast food hourly minimum wage in the rest of the state will increase to $9.75 on December 31, 2015, $10.75 on December 31, 2016, $11.75 on December 31, 2017, $12.75 on December 31, 2018, $13.75 on December 31, 2019, $14.50 on December 31, 2020, and $15.00 on July 1, 2021.  At this point, the minimum wage for all employees is $8.75 per hour.  On December 31, 2015, the minimum wage will go up to $9.00 per hour for all employees except fast food employees, who will be entitled to the higher minimum wage recommended by the Wage Board. In the Wage Board's resolution, "fast food employee" is defined as any person employed or permitted to work at or for a fast food establishment where the person's job duties include at least one the following:  customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning, or routine maintenance.  The Wage Board's resolution does not contain any exemption for high school or college students, who often seek part-time jobs in the fast food industry and who generally are not trying to support themselves or their families on their income. The term "fast food establishment" is defined as any establishment in New York serving food or drinks:  (1) where customers order and pay for their items before eating, and the items may be consumed on the premises, taken out, or delivered; (2) which offers limited service; (3) which is part of a chain; and (4) which is one of 30 or more establishments nationally.  The definition includes a franchisee who owns and operates only one fast food restaurant in New York State, if the franchisor and all other franchisees of the franchisor own and operate at least 30 such restaurants nationwide. If the Commissioner of Labor adopts the Wage Board's recommendation as expected, the Commissioner's order could be subject to legal challenges based on its selective targeting of the fast food industry and potentially other grounds.  It remains to be seen whether this minimum wage increase for employees in the fast food industry will withstand judicial scrutiny.

USDOL Issues Guidance Regarding Misclassification of Employees as Independent Contractors

July 20, 2015

By Subhash Viswanathan
On July 15, the U.S. Department of Labor's Wage and Hour Division ("WHD") issued Administrator’s Interpretation No. 2015-1, which provides guidance regarding the misclassification of employees as independent contractors.  According to the WHD Administrator's Interpretation, “most workers are employees” under the Fair Labor Standards Act ("FLSA"). The Administrator's Interpretation notes that the FLSA’s definition of “employee” is extremely broad and basic (“any individual employed by an employer”) and that to "employ" includes to "suffer or permit to work.”  The WHD explains that this definition was intentionally designed to create "as broad of a scope of statutory coverage as possible." In interpreting this broad definition, the WHD rejects the common law "control" test in favor of an “economic realities” test to determine employee or independent contractor status.  The economic realities test focuses on whether a worker is economically dependent on an employer (which would indicate an employment relationship) or in business for herself or himself, (which would indicate an independent contractor relationship).  The WHD evaluates the following six factors in making this determination, with no one factor being dispositive:
  1. The extent to which the work performed is an integral part of the employer’s business.
  2. Whether the worker’s opportunity for profit or loss depends on his or her managerial skill.
  3. The extent of the worker’s investment compared to that of the employer.
  4. Whether the work performed requires special business skills, judgment, and initiative.
  5. Whether the relationship is permanent or indefinite.
  6. The degree of control exercised by the employer over the worker.
According to the WHD, these factors should be evaluated in light of the broad definition of "employee" under the FLSA and the principle that the FLSA should be liberally construed to provide expansive coverage for workers. Misclassifying employees as independent contractors can result in a number of potentially expensive consequences, such as liability for minimum wage and overtime violations, unemployment insurance contributions, workers' compensation coverage, and unpaid employment taxes.  Therefore, organizations that have independent contractor relationships should examine those relationships closely to make sure that they do not cross the line into an employment relationship.  It is also worth noting that, although written agreements with independent contractors can be helpful, they are not dispositive in establishing an independent contractor relationship. Editor's Note:  Our thanks to Luke O'Brien, one of Bond's Summer Law Clerks, who helped prepare this article.

Second Circuit Sides With Employers in Two Cases Involving Unpaid Interns

July 6, 2015

In two recent cases decided on July 2, the Second Circuit Court of Appeals held that in many instances, unpaid interns may not necessarily be employees covered by the Fair Labor Standards Act ("FLSA") and the New York Labor Law ("NYLL").  In both cases (Glatt v. Fox Searchlight Pictures and Wang v. The Hearst Corporation), plaintiffs who had obtained internships at major media companies argued that they were entitled to wage payments under the FLSA and NYLL; in addition, they sought to bring their claims as class and/or collective actions, which would drive up the costs of litigation and significantly increase the potential liability.  The Second Circuit adopted a standard that will likely make it more difficult for unpaid interns to establish employment status, and will likely make it more difficult for unpaid interns to litigate their FLSA and NYLL claims in a class or collective action. The Glatt and Wang decisions articulated two principles of great importance to employers considering internship programs.  First and foremost, the Second Circuit rejected a rigid six-point test promulgated by the United States Department of Labor to determine whether interns should be considered employees, and instead adopted a more nuanced test of employment status that examines whether the employer or the intern is the “primary beneficiary” of the relationship.  Second, the Court noted that because the circumstances of the internships at issue in the two cases were fact-specific, there is a high burden which plaintiffs must meet to show the requisite commonality to support a class or collective action. While these cases were pending in the Second Circuit, the college and university community was concerned that an important resource for experiential learning might be foreclosed if employers decided to discontinue their unpaid internship programs because of a concern about FLSA or NYLL liability.  Because of the potential impact on higher education, the American Council on Education (together with six other national consortia of colleges and universities) asked Bond attorneys Shelley Sanders Kehl and E. Katherine Hajjar to file an amicus brief arguing that the Court should consider the educational value of internships.  These arguments were adopted by the Court and featured prominently in its Glatt decision. The Court proposed the following seven (non-exhaustive) factors to be considered in determining who is the “primary beneficiary” in an internship placement, but also recognized that additional factors may be relevant:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation;
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The Court explained that these considerations require “weighing and balancing all of the circumstances” and that a single factor will not be dispositive for a court to find that an intern is entitled to minimum wage.  The Court went on to observe that its decision reflects the “modern internship,” and the importance of internships in an intern’s formal education.  While the Court recognized that some internships may not pass muster under the primary beneficiary test, it established a protocol for designing internship opportunities that will qualify. This is good news both for interns and for employers, who will likely find it less risky to offer unpaid internships, providing real world experience to complement the formal education of today’s young adults.