NYC Fast Food Employers Beware – Strict “Fair Workweek” Laws Are Coming December 1st

On May 30, 2017, New York City Mayor Bill de Blasio signed a bill enacting four laws, together called the Fair Workweek legislation package, aimed at creating more predictable work schedules for NYC’s fast food workers.  The laws go into effect on December 1, 2017.

The first law requires that the fast food employer provide written notice to the fast food employee of the employee’s work schedule, including regular and on-call shifts, 14 days before the worker’s first day of the new schedule.  The written notice must be posted in a conspicuous place at the workplace that is readily accessible and visible to all employees and transmitted to each employee, including via e-mail, if e-mail is regularly used to communicate scheduling information. Modification to the employee’s work schedule within 14 days of the first day the schedule begins will result in employer penalties ranging from $10 to $75 depending on the nature and timing of the modification. The penalty is paid directly to the affected employee.

The second law mandates a minimum amount of time between a fast food worker’s shifts.  A fast food employer will no longer be permitted to schedule a worker for two shifts with fewer than 11 hours between the end of the first shift and the beginning of the second shift when the first shift ends the prior calendar day or spans two calendar days. However, the worker may request or consent in writing to working back-to-back shifts with fewer than 11 hours between. Absent such request or consent, the employer will be subject to a $100 penalty each time the employee works such back-to-back shifts.

The third law prohibits the fast food employer from hiring new employees, including subcontractors, to work regular or on-call shifts before exhausting its current workforce. Under the new law, when shifts become available, the fast food employer must post a notice in a conspicuous and accessible location for at least three calendar days, and transmit the notice directly to each employee that states, among other things, the number of shifts offered, the schedule of the shifts, whether the shifts will occur at the same time each week, the length of time required for coverage, and the number of workers required for coverage. Assuming these conditions are met, the employer may look to outside employment only if none of the current fast food employees accept the open shift.

Finally, the fourth law allows a fast food employee to authorize the employer to deduct voluntary contributions from the employee’s paycheck and to remit the payment directly to the employee’s designated non-profit organization. The deduction must be at least $6.00 and only once per pay period.

New York City follows San Francisco and Seattle as the third major city to enact Fair Work Week legislation. To understand how the Fair Workweek legislation package affects your fast food business and your employees, please contact Nicole L. Leitner, Esq., a member of the Wage & Hour Compliance Practice Group, at (973) 387-7897 or nleitner@nullnullgenovaburns.com, or John Vreeland, Esq., Chair of the Wage & Hour Compliance Practice Group and a Partner in the Labor Law Practice Group, at (973) 535-7118 or jvreeland@nullnullgenovaburns.com.

Of Employees and Independent Contractors: The Ninth Circuit to Consider Where Truck Drivers Fall

On February 24, 2017, Senior U.S. District Judge John W. Sedwick in the district of Arizona stayed a proposed class action in Virginia Van Dusen et al v. Swift Transportation Co., Inc. et al, No.: 2:10-cv-00899, against Swift Transportation Co., Inc. (“Swift Transportation”). The proposed class is comprised of about 600 members but could have implications for thousands of drivers for the company. This long-running case centers around claims that the trucking company incorrectly classifies its drivers as independent contractors. February’s ruling prevents any advancement until the Ninth Circuit hears the company’s challenge to the district court’s January 2017 ruling that its drivers’ contractor agreements were actually contracts of employment.

In the initial complaint, plaintiffs alleged that Swift Transportation incorrectly classified them as independent contractors as opposed to employees and failed to pay them proper wages under the Fair Labor Standards Act (FLSA) and under various provisions of the New York Labor Law and the California Labor Code. Plaintiffs sought relief from the court, requesting it enter an order declaring that Swift Transportation violated the FLSA, certifying the class, and awarding damages for unpaid wages, reimbursement for illegal deductions from wages, and an equal amount in liquidated damages and interest as well as attorneys’ fees. Illegal deductions, such as fuel costs, maintenance and repairs, and insurance, can be substantial in a trucking case, which makes trucking companies popular targets of class actions.

According to documents initially submitted to the court, twenty-five percent of Swift Transportation’s drivers worked in the company’s “owner operator division” and were considered independent contractors. Three-quarters of the trucks were driven by employees. The plaintiffs maintained that a majority of the “owner operators” did not own anything at all, but were instead selected by Swift to lease trucks from an affiliated company. They further argued that they should be considered employees because much of their day-to-day operations were within Swift Transportation’s control and oversight.

In determining whether the contractor agreements were exempt from arbitration under the Federal Arbitration Act (“FAA”) and the Arizona Arbitration Act (“AAA”), the court noted that § 1 of the FAA excludes “contracts of employment”. In assessing whether the Swift Transportation’s contractor agreements were exempt from the FAA, the federal district court looked to the four corners of the agreements. The agreements specified the type of work performed by the drivers, clearly showing that Swift Transportation’s “central mission” is delivering freight to customers across the country. The district court noted that the fact that its employees were doing the work of transporting on the company’s behalf suggested an employment relationship. Swift Transportation maintained, however, that the drivers were giving substantial autonomy and were free to do as much or as little as they wanted in order to profit as an independent driver. Other factors contained within the agreements bolstered the employment relationship, according to the court, including provisions regarding Swift’s control of its drivers’ schedules, load-determination and assignment, and per-mile rates paid to drivers. Moreover, these agreements were automatically extended on a year-to-year basis, a feature of employee status where the relationship is of possibly infinite duration. Thus, the court found that, within the four corners of the agreements, the contracts were those of employment and were exempt from arbitration under both the FAA and the AAA.

The federal district court also looked to other evidence to determine whether the independent drivers were employees. It noted that the plaintiffs had limited autonomy when it came to load assignments and payment structures. The fact that the plaintiffs were paid on a per-mile basis as opposed to time spent at work did not, in the court’s view, make the compensation project-based. Also, Plaintiffs were not paid after completion of a specific job but rather received settlement payments on a weekly basis similar to the regular paydays of Swift Transportation’s employee drivers. Even though Swift Transportation argued that plaintiffs were free to do as much or as few miles for the company as needed to profit as an independent driver, the combination of agreements and leases dictated a minimum amount plaintiffs needed to drive in order to pay for weekly rentals of leased trucks. As a result, the amount independent drivers had to drive for the company was the same as the employee drivers. It was also impractical for plaintiffs to “moonlight” or to turn down cargo loads in hopes of larger ones as there was no guarantee there would be one, which undermined the alleged freedom available to the independent drivers.

The lower court’s review of the agreements and of the additional factors is in line with the approach taken by the Ninth Circuit generally. In 2014, the Ninth Circuit held that the most important factor in determining a worker’s status is the amount of control exercised by the putative employer over the worker’s position. However, the Ninth Circuit also reviews the “totality of the circumstances,” similar to the test used by the U.S. Department of Labor when evaluating independent contractor status under the FLSA.

What is troubling for companies operating in multiple states is there is no complete consistency amongst the circuits as to how to assess the issue of employee versus independent contractor status. Even within the circuits themselves different tests are often used depending on from which state the case originated. Within Third Circuit, for example, there are several approaches. New Jersey expressly rejects the common law right to control test and instead courts apply the ABC test under N.J.S.A. 43:21-19(i)(6)(A)-(C):

  1. Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
  2. Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. Such individual is customarily engaged in an independently established trade, occupation, profession or business.

Delaware, on the other hand, uses the common law right to control test and courts focus on the amount of control “retained or exercised by the owner.” Delaware courts also look to the element of continuous subjection to the will of the principal, which is a defining factor in the worker-owner relationship.

In Pennsylvania, courts look to the common law factors which mirror those considered in the four corners assessment by the Ninth Circuit: control of manner work is to be done; responsibility for result only; terms of agreement between the parties; the nature of the work or occupation; skill required for performance; whether one employed is engaged in a distinct occupation or business; which party supplies the tools; whether payment is by time or by the job; whether the work is part of the regular business of the employer, and also the right to terminate the employment at any time.

While the Swift Transportation case will be instructive in determining whether truckers can be treated as independent contractors as opposed to employees, the lack of consistency among the circuits means that independent truckers will continue to be subject to challenge. Employers, therefore, need to be very careful in classifying their drivers as independent contractors, especially if their job duties and responsibilities are not materially different from those of its employee-drivers and if company maintains control over how the drivers perform their work.

For questions about independent contractors or trucking and logistics, please contact John Vreeland, Esq., Chair of the Transportation, Trucking & Logistics Group and a Partner in the Labor Law Practice Group at jvreeland@nullgenovaburns.com or (973) 535-7118, or, Harris S. Freier, Esq., a Partner in the Firm’s Employment Law and Appellate Practice Groups, at hfreier@nullgenovaburns.com or (973) 533-0777. Please also sign-up our free Labor & Employment Blog at www.labor-law-blog.com to keep up-to-date on the latest news and legal developments effecting your workforce.

New York State Launches Aggressive Campaign to Enforce The New Minimum Wage Law

On December 31, 2016, the new minimum wage law in New York State took effect.  New York’s minimum wage law is among the most complicated in the country. The minimum wage will gradually increase to $15.00 in the coming years, with annual increases to take effect on December 31st. However, how quickly the minimum wage reaches $15.00 depends on where your company is located, the type of business you are in, and whether you are a small or a large employer. For example, the minimum wage in NYC will increase as follows:

New York City 10 or fewer employees 11 or more employees
December 31, 2016 $10.50 $11.00
December 31, 2017 $12.00 $13.00
December 31, 2018 $13.50 $15.00
December 31, 2019 $15.00

For Nassau, Suffolk and Westchester counties, the increments began December 31, 2016 and will conclude on December 31, 2021, with the following increases annually on December 31 no matter the size of the workforce: $10.00, $11.00, $12.00, $13.00, $14.00 and $15.00.  For the rest of New York State, the increments began December 31, 2016 and will conclude on December 31, 2020, with the following increases annually on December 31 no matter the size of the workforce: $9.70, $10.40, $11.10, $11.80, $12.50 and $15.00.

There is a special carve out for fast food companies.  By December 31, 2018, fast food companies in NYC will reach the $15.00 and by July 1, 2021 the rest of NY State’s fast food companies will reach $15.00.

The New York Department of Labor (NYDOL) plans to aggressively enforce the new law and has created a 200-investigator unit to ensure employers are appropriately increasing employee pay to at least the minimum wage. The newly formed State Minimum Wage Enforcement and Outreach Unit’s mission is to inform workers of the new minimum wage law and to ensure they are properly paid.  The State has also established a hotline for workers to report violations of the new minimum wage law. Hotline calls will initiate a NYDOL compliance audit.  If violations are found, a company is subject to a $3.00 fine for each hour the company failed to pay the required minimum wage to an employee plus back wages and liquidated damages.

If you have any questions or would like to discuss the new NYS minimum wage law and its effect on your business, please contact John Vreeland, Esq., Chair of the Wage & Hour Compliance Practice Group and a Partner in the Labor Law Practice Group at (973) 535-7118 or jvreeland@nullgenovaburns.com, or Nicole L. Leitner, Esq., a member of the Wage & Hour Compliance and Labor Law Practice Groups at (973) 387-7897 or nleitner@nullgenovaburns.com.

Federal Judge Halts Final Overtime Rule Days Before Implementation

On November 22, U.S. District Court Judge Amos L. Mazzant III, sitting in Sherman, Texas, issued a nationwide preliminary injunction against the U.S. Department of Labor’s (“USDOL”) enforcement of its Final Overtime Rule which would have more than doubled the minimum salary employees must be paid to be treated as exempt from overtime. The USDOL estimated that the Final Overtime Rule, which was set to go into effect December 1, 2016, would capture 4.2 million workers into the overtime ranks.

The case, entitled Nevada v. U.S. Department of Labor, Civil Action No. 4:16-CV-00731, was filed by 21 states in the Eastern District of Texas. The States argued that the Department of Labor lacked the statutory authority to use a salary-level test and an automatic updating mechanism to determine overtime eligibility. Judge Mazzant agreed. Judge Mazzant found that under a plain reading of the statute, nothing in the White-Collar exemption indicates Congress intended the USDOL to define and delimit parameters for a minimum salary level. Instead, the focus is on the employee’s duties and Judge Mazzant found that the USDOL “exceed[ed] its delegated authority and ignor[ed] Congress’s intent by raising the minimum salary level such that it supplants the duties test.” While the USDOL may appeal the preliminary injunction, and the Court will eventually rule on whether to grant a permanent injunction, the Court has told the USDOL that it may not enforce the Rule.

So, what does this mean? For now, because of the nationwide preliminary injunction barring enforcement of the Overtime Rule, employers do not have to comply with the Overtime Rule’s requirements.  Right now, the current minimum salary that must be paid to qualify an executive, administrative or professional employee for an overtime exemption is $455 per week and this will remain the minimum salary on December 1st and until such time as Judge Mazzant’s decision is modified at the permanent injunction phase or successfully appealed.

Whether and when the government will appeal is unclear. The Final Overtime Rule is unpopular with employers, employer groups (like the Chamber of Commerce), and Senate and House Republicans. Whether President-elect Trump’s Department of Labor will defend the Overtime Rule in the face of State and business opposition is an issue that will be addressed in early 2017. We will keep you posted about any new developments regarding the Overtime Rule.

If you have any questions or would like to discuss the preliminary injunction against the Overtime Rule and options available to your business if it has already taken action to comply with the Overtime Rule, please contact John Vreeland in our Labor Group at (973) 535-7118 or jvreeland@nullgenovaburns.com.

 

New Jersey Assembly Picks Up Fight For $15 Minimum Wage

The fight for a $15 minimum wage is gaining steam in the New Jersey Legislature. On May 26, 2016, the New Jersey Assembly passed Bill A15, which would raise the minimum wage to $15 an hour by 2021. Currently, the New Jersey State minimum wage is $8.38 per hour.

The $15 minimum wage would not get there all at once. Under the recently passed bill, the minimum wage first would increase to $10.10 per hour on January 1, 2017.  Then, between 2018 and 2021, the minimum wage would increase by the greater of $1.25 an hour or $1.00 an hour plus the CPI each year. An identical version of the Assembly’s bill has already passed the New Jersey Senate’s Labor Committee (Bill S15). If the full Senate passes the bill it will head to the Governor’s desk where it most likely will be vetoed.

But the Governor’s veto may not be the end of the bill. The Legislature is proposing that in the event of a Governor veto, the bill be put to a constitutional referendum for the voters to decide during the New Jersey General Election on November 7, 2017. This would not be the first time the Legislature managed to get around a veto to increase the minimum wage. The minimum wage was previously raised by constitutional referendum in 2013 when voters amended the State’s Constitution to increase the minimum wage to $8.25 per hour despite a Governor Christie veto.

While the proposed $15 minimum wage may seem a long way away, employers should start thinking now about how this would affect their business. Many employers are still struggling from the more than 15% increase in the minimum wage over the last two years. An increase to just $10.10 in 2018 (which is when the increase would take effect if the bill is vetoed but then approved through referendum) would reflect another 20% increase, or an almost 40% increase since 2013.  Such increased labor costs may be more than some employers can or are willing to absorb. For instance, Wendy’s recently stated it would replace some workers with automated machines in response to significant increases in minimum wage.

For more information regarding the potential impacts of Bill A15, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@nullgenovaburns.com, or Aaron C. Carter, Esq. at 973-646-3275 or acarter@nullgenovaburns.com.

Major Changes to Federal Overtime Regulations Take Effect December 1. Are You Prepared?

This week, President Obama and Secretary of Labor Thomas Perez announced the publication of a final rule to take effect December 1 that will overhaul the Fair Labor Standard Act’s overtime regulations. The U.S. Department of Labor (USDOL) estimates that these changes will add more than four million employees to the overtime rolls.

Right now, in general, an employee is exempt from overtime pay if the employee satisfies three tests:

  • Duties Test: The employee’s primary job duties qualify as executive, administrative, or professional in nature, as these terms are defined in the regulations.
  • Salary Basis Test: The employee is paid on a salary basis, meaning the employee receives a predetermined and fixed salary that is not reduced because of variations in the quality or quantity of the work performed (i.e., no docking).
  • Salary Level Test: The employee’s weekly salary meets the minimum amount specified in the regulations.

The most significant change in the USDOL’s new rule is to the Salary Level Test. Today, the minimum salary needed to qualify for exempt status is $455 per week, or $23,600 annually. On December 1, 2016, this minimum will increase to $913 per week! This means in order to be exempt, an employee must be paid an annual salary of at least $47,476.

By more than doubling the minimum salary amount, many salaried employees who work long hours and currently qualify for an overtime exemption will on December 1 become eligible for overtime pay unless their salaries are increased. An employee whose weekly salary is below $913 will become overtime-eligible and you will have to track the employee’s hours of work through a verifiable timekeeping method and pay time-and-a-half for each hour worked over 40 in a workweek.

Employers need to start preparing now. First, you must identify your exempt employees whose salaries are below the new salary threshold. Then perform a business analysis to determine whether it is more cost effective to increase employee salaries to the minimum threshold, or treat these employees as overtime-eligible. We also recommend that you take this opportunity to evaluate whether your exempt employees are satisfying the other two tests. Many times we find that an employee’s exempt status is based on a job description that no longer accurately reflects the employee’s actual job duties. We recommend that employers self-audit their job classifications at least every two years to ensure employees classified as exempt currently satisfy a duties test and that pay practices for exempt employees meet the Salary Basis Test. Periodic self-audits are especially important now because the USDOL’s new rule establishes a mechanism for automatically updating the salary level every three years.

Employers cannot afford to be out of compliance with the FLSA. The Departments of Labor at both the federal and state levels have already signaled that they intend to aggressively enforce wage and hour laws. In addition, plaintiffs’ lawyers have become focused on wage and hour claims. Wage and hour litigation is by far the fastest growing type of employment litigation. Last year, more than 9,000 FLSA lawsuits were filed in the United States; many of them were filed as “collective actions” – the FLSA’s version of a class action. That is a 450% increase since 2000. This trend will almost certainly continue as plaintiffs’ lawyers hope to catch employers flat-footed and out of compliance with the new overtime regulations.

Wage and hour litigation can be expensive for employers. The FLSA provides for 100% liquidated damages – or double damages. It also shifts the plaintiff’s legal costs to the employer, meaning if the plaintiff proves a single violation of the law, the employer pays the plaintiff’s attorneys’ fees. This typically makes it difficult to resolve these types of suits early as the FLSA creates an incentive for a plaintiff’s lawyer to work the case and then recover attorneys’ fees when the lawsuit finally ends.

Again, the time to prepare is now, not when you receive the lawyer’s demand letter or the Department of Labor’s enforcement notice. A thorough self-audit, especially with the assistance of counsel, is an employer’s best protection against costly wage and hour enforcement actions and lawsuits.

For more information regarding these recent developments, please contact John R. Vreeland, Esq. Director of the firm’s Wage & Hour Compliance Practice Group, at jvreeland@nullgenovaburns.com or 973-533-0777.

CITY SETTLES WITH HIGH RANKING FIRE OFFICIALS FOR OVERTIME BACKPAY

On March 14, 2013 a Federal Judge in the Western District of Pennsylvania approved an FLSA settlement between the City of Pittsburgh and the Pittsburgh Fire Department’s high-ranking fire officials. The lawsuit began in August 2012 when a Captain, a Battalion Chief, and a Deputy Chief filed a lawsuit against the city for failure to pay overtime. The Court certified a collective action and ultimately more than 70 high-ranking firefighters opted into the lawsuit.

The City treated the high-ranking firefighters as exempt under the FLSA’s executive employee exemption. The Plaintiffs, however, claimed that they did not meet the standards for an exemption because they were directly involved in fire suppression activities.

The settlement requires the City to pay back-overtime, reclassify the positions as non-exempt and pay the Plaintiffs’ attorney’s fees.

This case underscores the fact that FLSA overtime exemptions can be complicated and difficult to apply. An employee’s job duties are much more important than his or her job title. If you have any questions about classifying your employees, or any other Labor Law issue, contact John Vreeland, Esq., the Director of the Wage & Hour Compliance group at jvreeland@nullgenovaburns.com, or Sara Weimer, Esq., at sweimer@nullgenovaburns.com.

$3 Million FLSA Settlement in New Jersey Gas Station Case

The U.S. Department of Labor announced on March 7 that it reached a settlement with Daniyal Enterprises to resolve overtime and other FLSA violations alleged on behalf of 417 New Jersey gas station workers (Harris v. Daniyal Enter., D.N.J. No. 2:13-914).  The $3 Million settlement includes $1 million in liquidated damages. In addition, Daniyal agreed to pay $91,000 in penalties.

This settlement is a reminder to all businesses that no operation is too small to go unnoticed by DOL enforcement divisions. The 417 employees in this case worked at 72 separate gas stations throughout New Jersey owned and operated by Daniyal Enterprises or one of its 14 related companies. This means the average station likely had just five to six attendants. Many small businesses mistakenly believe that they are too small to be noticed by the DOL and that they are not big enough to warrant an investigation. This is not the case. One complaint by just a single employee can initiate a DOL investigation at either the federal or state level, regardless of whether the establishment has 100 employees or just one. The NJDOL will also pursue anonymous complaints.

The Daniyal settlement also puts gas station owners on notice – your industry is on the DOL’s radar. In a March 7 statement about the settlement, Acting Labor Secretary Seth Harris stated, “Gas station attendants are few in number, earn low wages, work long hours and often lack English proficiency – factors that contribute to their vulnerability as well as the importance of protecting their right to be paid properly.”

There is no way to prevent an investigation. But performing a wage and hour compliance audit can reduce your exposure if and when one occurs.

For more information about the firm’s wage and hour compliance audit services, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Group, jvreeland@nullgenovaburns.com

Addressing Wage & Hour Issues Before the Department of Labor Arrives

The U.S. and State Divisions of Wage & Hour have increased their enforcement efforts in recent years. While many investigations are the result of an employee complaint, a happy staff does not guarantee the Division will never knock on your door. Sometimes employers are just randomly selected because the Division has targeted a particular industry or geographic region. And it takes only one former, disgruntled employee in need of cash to start a federal or state investigation of your business.

In terms of things most people would like to avoid, a visit from the Division of Wage & Hour ranks up there with going to the dentist. Often employers view these visits as an intrusion and an unnecessary interference with their business. What employers often do not realize is that while the Division may use words like “visit” and “inspection,” they are conducting a formal investigation that has legal implications and they have the authority to subpoena your business and payroll records, to assess the company for any wages determined to be owing to your employees, to fine you and to take you to court to collect unpaid wages and fines. What sometimes starts as a one hour visit can turn into an ordeal lasting months, maybe years, requiring trips to the Division’s offices and even a courtroom.

Sticking with the dentist visit analogy, think of your wage policies and records as your teeth and gums. Neglecting them makes that inevitable visit more painful than it needs to be. But preventive care, like regularly reviewing and revising your payroll policies and conducting periodic self-audits, will make the visit more tolerable and certainly less expensive. A good self-audit pinpoints the same issues DOL investigators look for – are employees being paid for all compensable time, are employees improperly classified as exempt or independent contractors, is overtime being calculated correctly, are there improper deductions from employee paychecks, and is the employer maintaining the right records.

The prudent employer identifies issues and addresses them before they become problems. We frequently assist our clients in self-audits and can tell you that it is the rare employer that is in complete compliance with the FLSA and State wage and hour laws. Identifying issues on your own gives you the opportunity to self-correct, which immediately begins reducing your exposure in the event of a future audit. Self-audits are also looked upon favorably by the Division and can save your company tens of thousands of dollars when negotiating a reduction in the inevitable fines that flow from a Division citation.

For more questions about self-audits or the Wage & Hour investigation process, contact John R. Vreeland, Esq. or Patrick McGovern, Esq. in our Labor Law Practice Group.