The Employment Expansion Trifecta: The Wage and Hour Division, The National Labor Relations Board, and . . . OSHA?
September 9, 2015
New York Labor and Employment Law Report
September 9, 2015
August 27, 2015
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.
July 23, 2015
July 20, 2015
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:
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.
June 29, 2015
The U.S. Department of Labor released its highly anticipated proposed rule on the Fair Labor Standards Act white-collar overtime exemptions today, along with a fact sheet summarizing the proposed rule. The proposed rule more than doubles the salary requirement to qualify for the executive, administrative, professional, and computer employee exemptions from the current level of $455 per week to an amount that is expected to be $970 per week by the first quarter of 2016, and significantly increases the salary threshold to qualify for the "highly compensated employee" exemption. The proposed rule also includes a procedure to automatically raise the minimum salary levels to qualify for the white-collar exemptions from year to year without further rulemaking. The USDOL estimates that nearly five million employees who are currently classified as exempt will immediately become eligible for overtime pay if the proposed rule is adopted as the final rule. The USDOL is proposing to set the salary requirement to qualify for the executive, administrative, professional, and computer employee exemptions at the salary level equal to the 40th percentile of earnings for full-time salaried workers, and the salary requirement to qualify for the highly compensated employee exemption at the salary level equal to the 90th percentile of earnings for full-time salaried workers. The USDOL used data compiled by the Bureau of Labor Statistics from 2013 in drafting the proposed rule, which provides for a minimum salary level of $921 per week to qualify for the executive, administrative, professional, and computer employee exemptions, and a minimum salary level of $122,148 per year to qualify for the highly compensated employee exemption. However, the USDOL stated in its Notice of Proposed Rulemaking that it will likely rely on data from the first quarter of 2016 if the proposed rule is adopted, which will result in a projected minimum salary level of $970 per week to qualify for the executive, administrative, professional, and computer employee exemptions. The proposed rule does not include any proposed revisions to the outside sales exemption. In addition, although there was some speculation that the duties requirements would also be revised to make the exemptions more restrictive, the USDOL's proposed rule does not include any revisions to the duties requirements to qualify for any of the white-collar exemptions. However, the USDOL stated in its Notice of Proposed Rulemaking that it is nevertheless seeking comments on whether the duties tests are working as intended to screen out employees who are not bona fide executive, administrative, or professional employees. So, there is still a possibility that the duties requirements could be revised based on comments received by the USDOL about the proposed rule. Employers should immediately begin to assess which employees who are currently classified as exempt will become non-exempt if the proposed rule is adopted as the final rule.
June 23, 2015
April 14, 2015
On March 27, 2015, the U.S. District Court for the Southern District of New York granted the plaintiffs’ motion to compel disclosure of a report prepared by a Human Resources (“HR”) consultant in class action litigation under the Fair Labor Standards Act (“FLSA”) and state wage and hour laws. In Scott v. Chipotle Mexican Grill, Inc., Chipotle claimed that a number of documents sought by the plaintiffs during discovery were privileged communications that were protected from disclosure. One such document was a report from an HR consultant examining the activities of four employees holding Chipotle’s apprentice position. Chipotle claimed that the report was subject to the attorney-client privilege because one of its attorneys retained the HR consultant to help him assess whether the apprentice position should be classified as an exempt or non-exempt position. The Court disagreed with Chipotle and ordered that the report be turned over to the plaintiffs. In general, the attorney-client privilege -- upon which Chipotle was relying -- applies to communications between an attorney and his/her client that were intended to be, and were in fact, kept confidential, and were made for the purpose of obtaining or providing legal advice. In certain limited situations, however, communications can fall within this privilege even if not made between an attorney and a client. The so-called “agent of attorney” doctrine acts to extend the attorney-client privilege to shield communications that are not between an attorney and client when the purpose of the communication is to assist the attorney in rendering legal advice to the client. Such communication must be “necessary” or “highly useful” for effective consultation between the client and attorney. This exception has been applied sparingly, in very limited circumstances. Here, the Court held that Chipotle failed to establish that the HR consultant did anything more than factual research to assist Chipotle in making a business decision, rather than to assist an attorney in rendering legal advice to Chipotle. The Court explained that the report did not provide any specialized knowledge that the attorneys could not have acquired or understood on their own or directly through Chipotle (their client). There was also no indication that the consultant was taking information that was incomprehensible to Chipotle’s attorneys and putting it into a “usable form,” rather than merely consolidating employee interviews and delivering a factual analysis. The Court rejected Chipotle’s argument that the report should be considered privileged because the consultant was hired by a law firm and the report was specifically drafted for an attorney, because the agent-of-attorney doctrine does not consider form over substance. The final nail in Chipotle’s coffin was the fact that no legal advice was actually provided by its attorneys following receipt of the HR consultant’s report, which indicated that the report was not created for the purpose of assisting the attorneys in providing legal advice. The Chipotle decision emphasizes the need for employers to exercise the utmost care when deciding whether to utilize the services of an HR consultant. Although the Court ruled upon a situation where an attorney was involved, at least tangentially, with the HR consultant, employers must recognize that when an HR consultant is simply providing advice to an employer and there is no attorney involvement at all, such communications or resulting reports would undoubtedly not be privileged. Even if an attorney is involved, however, the privilege still will not apply if the consultant’s investigation is merely factual, does not assist the employer’s attorney in rendering legal advice, and does not provide information outside of the attorney’s general expertise that is essential to effective consultation between the attorney and client. In such situations, there is a risk that the employer will be required to disclose any communications and reports from the consultant during future litigation, which potentially could be devastating depending upon the content of those communications and reports.
March 13, 2015
February 27, 2015
February 23, 2015
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.
February 4, 2015