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.

On February 12, 2014, President Obama signed an Executive Order requiring that all new federal contracts and subcontracts contain a clause specifying that the minimum wage to be paid to workers under those federal contracts and subcontracts must be at least $10.10 per hour beginning January 1, 2015.  The federal contracts and subcontracts covered by this Executive Order include procurement contracts for services or construction and contracts for concessions.  This new $10.10 minimum wage will also apply to disabled employees who are currently working under a special certificate issued by the Secretary of Labor permitting payment of less than the minimum wage. Beginning January 1, 2016, and annually thereafter, the minimum wage for federal contractors will be increased by the Secretary of Labor based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, and rounded to the nearest multiple of five cents.  The Secretary of Labor is required to publish the new minimum wage at least 90 days before the new minimum wage is scheduled to take effect. For tipped employees, the hourly cash wage that must be paid by a federal contractor must be at least $4.90 beginning on January 1, 2015.  In each subsequent year, the federal contractor minimum wage for tipped employees will be increased by 95 cents until it equals 70 percent of the federal contractor minimum wage in effect for non-tipped employees.  If an employee’s tips, when added to the hourly wage, do not add up to the federal contractor minimum wage for non-tipped employees, the federal contractor will be required to supplement the employee's hourly wage to make up the difference. The Secretary of Labor is expected to issue regulations by October 1, 2014, to implement the provisions of the Executive Order.

On January 27, 2014, the U.S. Supreme Court issued a unanimous decision clarifying the meaning of "changing clothes" under the Fair Labor Standards Act ("FLSA").  In Sandifer v. United States Steel Corp., the Supreme Court adopted a fairly broad definition of the phrase "changing clothes," which should provide employers with some comfort that provisions of a collective bargaining agreement excluding clothes-changing time from compensable hours worked will likely be applied to time spent by employees donning and doffing most forms of protective gear. In general, the FLSA requires employers to pay employees for time spent donning and doffing protective clothing and equipment, if the employer requires employees to wear such protective clothing and equipment, and if the employee must change into and out of the protective clothing and equipment at the work site.  However, Section 203(o) of the FLSA provides that such time is not compensable if the employer and the representative of the employer's employees have agreed to a provision in their collective bargaining agreement to exclude from hours worked "time spent in changing clothes or washing at the beginning or end of each workday." In Sandifer, a group of U.S. Steel employees contended that even though their collective bargaining agreement excluded time spent "changing clothes" from compensable work time, they should nevertheless be compensated for such time because many of the items they were required to wear were protective in nature.  The employees argued that the items they were required to wear should not be considered "clothes" under the FLSA because those items are intended to protect against workplace hazards.  The employees also argued that, by putting on those protective items over their own clothes (rather than substituting those protective items for their own clothes), they were not engaged in "changing" clothes under the FLSA. The Supreme Court refused to interpret the phrase "changing clothes" as narrowly as the employees urged.  With respect to the definition of "clothes," the Supreme Court examined the dictionary definition of the term that existed at the time Section 203(o) of the FLSA was enacted, and held that the term includes all items that are designed to cover the body and are commonly regarded as articles of dress.  The Supreme Court further held that the definition of "clothes" does not necessarily exclude items that are worn exclusively for protection, as long as those items are designed to cover the body and are regarded as articles of dress.  With respect to the definition of "changing," the Supreme Court again examined the dictionary definition of the term that existed at the time Section 203(o) was enacted, and held that the term can mean either substituting or altering.  Accordingly, the Supreme Court concluded that time spent by employees altering their garments by putting on and taking off articles of dress constituted "changing clothes" under the FLSA, and that the employees were not entitled to compensation for such time based on the exclusion set forth in the collective bargaining agreement. Applying these definitions, the Supreme Court considered 12 items of protective gear:  a flame-retardant jacket, a pair of pants, and a hood; a hardhat; a snood (which is a hood that covers the neck and upper shoulder area); wristlets; work gloves; leggings; metatarsal boots; safety glasses; earplugs; and a respirator.  The Supreme Court found that the first nine items qualified as "clothes," but the last three did not.  Thus, the Supreme Court was left to consider the question of whether courts should tally the minutes spent donning and doffing each item, in order to deduct the time spent donning and doffing the non-clothing items from non-compensable time.  Recognizing that "it is most unlikely Congress meant Section 203(o) to convert federal judges into time-study professionals," the Supreme Court stated that courts should analyze whether the time period at issue can, on the whole, be characterized as "time spent in changing clothes or washing."  The Supreme Court articulated a "vast majority" standard for courts to use in their analysis:

If an employee devotes the vast majority of the time in question to putting on and off equipment or other non-clothes items (perhaps a diver's suit and tank) the entire period would not qualify as 'time spent in changing clothes' under Section 203(o), even if some clothes items were donned and doffed as well.  But if the vast majority of the time is spent in donning and doffing 'clothes' as we have defined that term, the entire period qualifies, and the time spent putting on and off other items need not be subtracted.

The Supreme Court concluded that the employees of U.S. Steel spent a vast majority of the time in question donning and doffing items that fell within the definition of "clothes," and that their time was non-compensable under the terms of the collective bargaining agreement.  Although courts addressing this issue in the future will be bound by the broad definition of the phrase "changing clothes" set forth in the Supreme Court's Sandifer decision, courts will be left to analyze on a case-by-case basis whether employees spend a "vast majority" of the time in question donning and doffing items that qualify as clothes or non-clothes items.

Employers who have employees in New York are required to issue annual notices under the Wage Theft Prevention Act ("WTPA") to all New York employees between January 1 and February 1, 2014.  This is the third year that the WTPA annual notice requirement has been in effect. As we have summarized in previous blog posts, the annual notice must contain the following information:

• the employee's rate or rates of pay (for non-exempt employees, this must include both the regular and overtime rate)
• the employee's basis of pay (e.g., hourly, shift, day, week, salary, piece, commission, or other)
• allowances, if any, claimed as part of the minimum wage (e.g., tips, meals, lodging)
• the regular pay day; and
• the name (including any "doing business as" name), address, and telephone number of the employer.

The annual notice must be provided to each employee in English and in the primary language identified by each employee, if the New York State Department of Labor ("NYSDOL") has prepared a dual-language form for the language identified by the employee.  At this point, the NYSDOL has prepared dual-language forms in Chinese, Haitian Creole, Korean, Polish, Russian, and Spanish.  The English-only and dual language forms created by the NYSDOL are available on the NYSDOL's web site.  If an employee identifies a primary language other than one of the six languages for which a dual-language form is available, the employer may provide the annual notice in English only.  Employers are not required to use the NYSDOL's forms, but employers who create their own forms must be sure that all of the information required by the WTPA is included. Employers are required to obtain a signed acknowledgment of receipt of the annual notice from each employee.  The acknowledgment must include an affirmation by the employee that the employee accurately identified to the employer his/her primary language, and that the notice was in the language so identified.  Signed acknowledgments must be maintained for at least six years.

Employers should be advised that the New York State Department of Labor ("NYSDOL") adopted new Regulations last week, amending the state’s Minimum Wage Orders.  A Notice of Adoption of these changes was published in the State Register on December 11, 2013, and the corresponding amendments will take effect on December 31, 2013. These amendments follow enactment of recent state legislation to raise the minimum wage in New York to $8.00 per hour, also effective December 31, 2013.  Accordingly, the new Minimum Wage Orders reflect this change, as well as future scheduled raises in the state minimum wage to $8.75 per hour as of December 31, 2014, and to $9.00 per hour as of December 31, 2015. Notably, the new Minimum Wage Orders also increase the minimum salary basis amounts for employees to qualify for the executive and administrative exemptions to $600.00 per week (up from $543.75 per week), inclusive of board, lodging, and other allowances and facilities.  This amount is also slated to increase to $656.25 as of December 31, 2014, and to $675.00 as of December 31, 2015. Finally, employers should take note that the amended Minimum Wage Orders impose other pay-related changes for employees in certain industries, including changes to the amount of allowances that may be taken for the provision of meals, lodging, and (where applicable) tips.

On October 16, our firm conducted a webinar, which provided a detailed explanation of the wage deduction regulations promulgated by the New York State Department of Labor ("NYSDOL") on October 9.  If you wish to view a recording of the webinar in its entirety and print out a copy of the PowerPoint slides from the webinar, you can click here.

The New York State Department of Labor (“NYSDOL”) just published final regulations on its website, governing employee wage deductions under Section 193 of the Labor Law.  According to NYSDOL, the final Section 193 regulations are effective today – October 9, 2013 – and will be codified at and replace the existing 12 N.Y.C.R.R. Part 195.  As we previously reported, these regulations were published in draft form earlier this year and made available for public comment.  The final regulations contain only minimal changes from this earlier draft version. Most notably, the final Section 193 regulations retain and set forth detailed procedures which employers must follow when seeking to recover wage overpayments and advances by payroll deduction.  As the Section 193 regulations are now in force and effective, it is imperative that employers establish and implement the correct procedures before attempting to recover overpayments and advances by payroll deduction.  An employer’s failure to follow these mandatory procedures will create a presumption that the deductions were illegal. Among other things, the final regulations also list specific prohibited deductions, impose precise requirements for obtaining proper “authorization” from employees, and provide guidance on what types of deductions may be deemed permissible “similar payments for the benefit of the employee.” We will be following up soon with more detailed guidance on these and other issues under the final Section 193 regulations, and encourage you to check back for an updated post.

The U.S. Department of Labor recently issued a final rule which narrows the companionship exemption to the Fair Labor Standards Act (“FLSA”) and extends the FLSA’s minimum wage and overtime protections to most direct care workers who provide essential home care assistance for the elderly and individuals with illnesses, injuries, or disabilities.  The new rule will take effect on January 1, 2015. The final rule defines “companionship services” to include “fellowship” (engaging the person in social, physical, and mental activities) and “protection” (being present to monitor the person’s safety and well-being).  The final rule also provides that “companionship services” may also include “care” (assistance with activities of daily living, such as dressing, feeding, and bathing), but only if such services do not exceed 20 percent of the employee’s total hours worked in a workweek per consumer.  In other words, an employee who spends more than 20 percent of his or her workweek performing “care” will not fall within the companionship exemption and will be entitled to minimum wage and overtime under the FLSA. The final rule also specifies that third-party employers of direct care workers (such as staffing agencies, public agencies, and home care agencies) may not claim either the exemption for companionship services or the exemption for live-in domestic service employees, even when the employee is jointly employed by the third-party employer and the individual, family, or household using the employee’s services.  However, the individual, family, or household may still claim any applicable exemption, even where there is a third-party joint employer. Although the final rule does not go into effect until January 1, 2015, home healthcare agencies should begin evaluating which of their currently exempt employees will need to be converted to non-exempt status as a result of the final rule.  Home healthcare agencies will need to ensure that their non-exempt workers are paid at or above the minimum wage for each hour worked and are paid overtime for all hours worked in excess of 40 in a workweek.  Agencies will also need to ensure that they maintain required records for such non-exempt employees and pay non-exempt employees appropriately for all travel time, sleep time, and waiting time between patient visits, to the extent required by the FLSA.

On August 9, 2013, in Sutherland v. Ernst & Young LLP, the Second Circuit Court of Appeals ruled that the Fair Labor Standards Act (“FLSA”) does not prohibit the enforcement of a class action waiver in an arbitration agreement.  The Second Circuit determined that nothing in the FLSA could be construed to override the liberal policy favoring the enforceability of arbitration agreements established by the Federal Arbitration Act ("FAA").  The Second Circuit further held that a class action waiver in an arbitration agreement was not rendered invalid simply because that waiver removed the financial incentive for the employee to pursue a claim under the FLSA.

Stephanie Sutherland (“Sutherland”) sued her former employer, Ernst & Young LLP (“E&Y”), in a putative class action to recover overtime wages under the FLSA and the New York State Department of Labor’s Minimum Wage Order.  When Sutherland accepted her offer of employment with E&Y, she signed an offer letter and a confidentiality agreement, both of which provided that disputes between Sutherland and E&Y would be resolved in mandatory mediation and arbitration, pursuant to the terms of E&Y’s Common Ground Dispute Resolution Program (the “Arbitration Agreement”), a copy of which was attached to the offer letter and the confidentiality agreement.  Sutherland and E&Y agreed that the Arbitration Agreement barred both civil lawsuits and any class arbitration proceedings.

After Sutherland filed her putative class action in federal court, E&Y filed a motion to dismiss or stay the proceedings, and to compel arbitration on an individual basis.  The U.S. District Court for the Southern District of New York denied the motion, and E&Y appealed.  The Second Circuit reversed the District Court’s order.

The Second Circuit noted that the FAA establishes a liberal federal policy favoring arbitration and that federal courts should enforce arbitration agreements according to their terms unless there is a contrary congressional command overriding the FAA’s mandate in favor of arbitration.  The Second Circuit held that the FLSA contains no contrary congressional command against waiving class actions.  The court reasoned that since Section 16(b) of the FLSA requires an employee to affirmatively opt-in to any collective action brought under the statute, the employee surely also has the power to waive participation in class proceedings as well.  Notably, the Second Circuit expressly declined to follow the National Labor Relations Board’s decision in D. R. Horton, Inc., which held that a waiver of the right to pursue a claim under the FLSA collectively in any forum violates the National Labor Relations Act.

Sutherland asserted that the Second Circuit should invalidate the class action waiver in the arbitration agreement because the waiver prevented her from effectively vindicating her statutory claims, and thus operated as a prospective waiver of her "right to pursue” statutory remedies.  She argued that she could not effectively vindicate her FLSA claims because she had no financial incentive to pursue those claims on an individual basis.  She claimed that she would be forced to expend approximately $200,000 in an individual action to recover less than $2,000 in damages.  The District Court had been persuaded by this argument, relying on the Second Circuit’s 2009 decision in In re: American Express Merchants’ Litigation.

After the District Court’s ruling, however, the Supreme Court reversed the Second Circuit’s decision in American Express.  The Supreme Court held that the plaintiffs in that case could not justify the invalidation of a class action waiver under the “effective vindication doctrine” by showing that they had no economic incentive to pursue their antitrust claims individually in arbitration.  The Supreme Court noted that the mere fact that it was not worth the expense to prove a statutory remedy did not constitute an elimination of the right to pursue that remedy.  Accordingly, the Second Circuit concluded that its 2009 American Express decision, upon which the District Court relied, was no longer good law.

With this decision, the Second Circuit has joined the trend among the federal circuit courts to enforce class action waivers in FLSA lawsuits.  Given the high cost of litigating wage and hour class actions, arbitration agreements containing class action waivers can be a useful tool for some employers.  Employers should carefully evaluate whether it would be worthwhile to enter into arbitration agreements with employees and whether to include a class action waiver in such arbitration agreements.