The D.C. Circuit Vacates NLRB Ruling on Driver Status in FedEx Case

In early March 2017, the D.C. Circuit in FedEx Home Delivery v. NLRB, 2017 U.S. App. LEXIS 3826 (D.C. Cir. 2017) vacated a National Labor Relations Board (“NLRB” or “the Board”) ruling that Connecticut FedEx drivers constitute employees under the National Labor Relations Act (“NLRA”). The D.C. court said that the case was indistinguishable from a 2009 case before the panel involving a group of Massachusetts drivers.

In 2007, single-route FedEx drivers based in Hartford, CT elected Teamsters Local 671 (“Union”) to represent them which lead to FedEx filing subsequent objections to the NLRB. While the appeal was pending, the D.C. Circuit decided FedEx Home Delivery v. NLRB (FedEx I), 563 F.3d 492 (D.C. Cir. 2009), finding that FedEx drivers based out of the company’s Wilmington, MA terminal constituted independent contractors under the NLRA. In its holding, the court vacated the NLRB’s order to engage with the union and denied the Board’s cross-motion for enforcement. The court held that the NLRB was bound to apply the common-law ten factor agency test as set forth in the Restatement (Second of Agency), but explained that rather than a control inquiry, that the emphasis of these factors should be on  “entrepreneurial opportunity” for gain or for loss as it relates to the determination of a worker’s status.  FedEx identified three specific entrepreneurial opportunities available to the drivers: (1) drivers’ ability to hire other drivers; (2) drivers’ ability to sell routes; and (3) drivers’ ability to operate multiple routes.  Persuaded by these arguments, the court held that the FedEx drivers were independent contractors.

In 2014, the NLRB issued a revised decision in FedEx Home Delivery, 361 N.L.R.B. No. 55 (Sept. 30, 2014) which found that the facts pertaining to the Hartford drivers and those discussed in FedEx I were “virtually identical.” Still, however, the NLRB declined to adopt the D.C. Circuit’s 2009 interpretation of the NLRA because it disagreed with the court’s emphasis on “entrepreneurial opportunity” as the key factor in determining a worker’s status. Specifically, it said that the Board should give weight to actual, not merely theoretical, entrepreneurial opportunity, and it should evaluate the constraints imposed by a company on the individual’s ability to pursue that opportunity. Moreover, it noted that FedEx unilaterally drafts, promulgates, and changes the terms of its agreements with drivers, a feature that weighs “heavily in favor of employee status” along with the Board’s view that the drivers lacked independence and were disallowed the initiative and decision-making authority normally associated with an independent contractor   The Board also found that FedEx engaged in unfair labor practices affecting commerce under the NLRA by refusing to recognize and bargain with the union.

In the present case, FedEx argued that the question had already been argued before the D.C. Circuit in FedEx I and involved the same parties, thus the same result should follow. The court agreed and denied the Board’s cross-application for enforcement, granted FedEx’s petitions for review, and vacated the Board’s orders. The D.C. Circuit noted that in FedEx I, the Board considered all common-law factors and was still persuaded that the drivers were independent contractors. The court also noted that the U.S. Supreme Court previously held that that the question whether a worker is an “employee” or “independent contractor” under the NLRA is a question of “pure” common-law agency principles that a court can review and does not require special administrative expertise.

The takeaway for employers is that in determining whether workers are employees or independent contractors, employers must remember that despite significant overlap, there are in fact different tests as related to the NLRA, federal taxes, the Fair Labor Standards Act, state wage and hour law, ERISA, the Affordable Care Act, and various other circumstances.  While the D.C. Circuit has for the moment clarified (or rather reinforced) its view as to the proper test under the NLRA, employers should always focus on where their greatest liability is and attempt to cater to the relevant test as much as possible.

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.

How to Avoid Disney’s Not-So-Fairy Tale $3.8 Million Payment of Employee Back Wages

On Friday, March 17, 2017, the U.S. Department of Labor (“DOL”) and two subsidiaries of The Walt Disney Co. (“Disney”), the Disney Vacation Club Management Corp., and the Walt Disney Parks and Resorts U.S. Inc., reached an agreement to resolve claims under the Fair Labor Standards Act (“FLSA”), requiring the payment of back wages of over $3.8 million to more than 16,000 employees of the two Florida-based Disney companies.

According to the DOL, Disney deducted a uniform (or “costume”) expense from employee pay, which lead some employees’ hourly rate to fall below the federal minimum wage rate of $7.25 per hour. The subsidiaries also did not compensate the employees for performing pre- and post-shift duties while additionally failing to maintain required time and payroll records.

As part of the agreement, Disney agreed to start training all Florida-based managers, supervisors, and non-exempt employees on what constitutes compensable worktime and emphasizing the need to record all records pertaining to time accurately.

There are certain steps that employers can do to avoid the significant damages Disney incurred including:

  • Maintain accurate payroll, time, and schedule related records. This is particularly important to our hospitality and restaurant clients where record keeping can be especially difficult.  Also, remember that under the FLSA, the records must be  maintained for a minimum of three years for payroll records and six years under New Jersey and New York law.
  • Deductions are an easy target for the plaintiffs’ bar. Employers must make sure that any deductions are legal under state law and that the deductions if permissible do not bring the affected employee below the state or federal minimum wage;
  • Perform a wage and hour self-audit every two years to avoid misclassification issues and to ensure your recordkeeping and pay practices are consistent with the law;
  • To avoid donning and duffing claims (claims involving changing into and out of uniforms, costumes, and protective equipment for example), employers must take care to distinguish between non-compensable time when changing into and out of the uniform is merely for the employees’ convenience as opposed to compensable time when the job cannot be accomplished without wearing the designated uniform or costume or safety equipment and it is impractical to arrive at work wearing same.

If you have any questions or would like to discuss best practices in complying with federal wage regulations, please contact John R. Vreeland, Esq., Partner & Chair of the  Wage and Hour Compliance Practice Group at jvreeland@nullgenovaburns.com or call 973-533-0777 or Harris S. Freier, Esq., a Partner in the Employment Law and Appellate practice groups, at hfreier@nullgenovaburns.com, or call 973-533-0777.  Mr. Vreeland and Mr. Freier routinely work together in defending wage and hour class actions.  Please visit our free Labor & Employment Blog at www.labor-law-blog.com to stay up-to-date on the latest news and legal developments affecting 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.

NYC Joins the Pre-Trump Push for Employee Work Schedule Protections

New York City has joined several other cities, including San Francisco and Seattle, introducing legislation that offers more predictable, stable work schedules for employees in low-wage occupations. The legislation generally offers employees more notice of schedules, more access to extra hours, additional pay for last-minute schedule changes, and a mandated period of rest between certain back-to-back shifts. If passed, the legislation would take effect 180 days after being signed into law by Mayor Bill de Blasio.

More specifically, New York City has proposed a package of five bills that would offer the following protections related to employee work schedules:

  • Employees would have the right to request a change in their work arrangements (e.g., schedule changes, location reassignments) without fear of retaliation and employers would be required to engage in an “interactive process” and provide a good faith response within two weeks of the request.
  • Employees would be afforded a right to receive certain changes to work arrangements in emergency situations, like a childcare emergency or personal health emergency.
  • Employers would be prohibited from engaging in on-call scheduling of retail employees.
  • Employers would be prohibited from providing a retail employee with less than 20 hours of work during any 14-day period.
  • Employers of fast food restaurants would be required to provide employees with an estimate of their work schedule upon hire and notice of work schedules 14 days in advance, subject to penalties for untimely notice.
  • Employers would be prohibited from making fast food employees work consecutive shifts when the first shift closes the establishment and the second shift opens it the next day (nicknamed “cloepening” shifts). Employers would be required to give fast food workers at least eleven hours off between such shifts and would pay a $100 premium to an employee every time he or she was made to work such consecutive cloepening shifts.
  • Employers of fast-food establishments would be required to offer available hours to existing employees up until the point that they would have to pay those existing employees overtime, or until all current employees have rejected such available hours, before they could hire new employees.

New York City’s efforts appear to be an attempt to prevent what many fear will be backlash against workers’ rights from the incoming Trump administration. The goal of these legislative measures is to lessen the wage gap in big cities, where the cost of living is typically higher, by offering low-wage workers the opportunity to budget in advance, plan for education or family care, and secure a second job, among other things. Those who oppose the initiatives raise several concerns. According to many business officials, the implementation of scheduling mandates on employers would result in rising costs and decreased efficiency because scheduling changes are typically initiated by employees. Another critic accused the New York City Council of acting as labor organizers, particularly in light of the penalties imposed, which are similar to collective bargaining provisions.

For more information on the pending New York City legislation and how the new requirements will affect your business, please contact John Vreeland, Esq., Chair of the firm’s Wage and Hour Compliance Group, at (973) 535-7118 or jvreeland@nullgenovaburns.com, or Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practices Group, at dmastellone@nullgenovaburns.com, or 973-533-0777.

Meet Trump’s Pick for the U.S. Department of Labor – CEO Andrew Puzder

President-elect Donald Trump tapped Andrew Puzder to lead the U.S. Department of Labor (“USDOL”) in his administration, an appointment that could have important implications for employers in terms of the USDOL’s recent hardline enforcement policies on joint employer relationships and independent contractor status. It also may signal how vigorously the USDOL will defend certain regulatory changes made under the current administration, such as the revised Persuader Rules (which significantly hinder an employer’s ability to use law firms during a union organizing campaign) and the amendment to the Fair Labor Standard Act’s “White Collar” exemptions (which more than doubles the minimum salary an employee must be paid in order to qualify for an overtime exemption). Both of these regulatory changes were blocked by federal courts last month and remain unenforceable unless the USDOL successfully appeals the federal courts’ injunctions.

Mr. Puzder has been CEO of CKE, which owns fast food chains Hardee’s and Carl’s Jr., since September 2000. CKE has 75,000 employees in the U.S. and nearly 100,000 worldwide. Mr. Puzder was an outspoken critic of the Labor Department under the Obama administration. He wrote multiple Wall Street Journal op-eds against any increase in the minimum wage or changes in overtime rules. Mr. Puzder has advocated for employers to consider automation in the face of rising employee costs.  Concerning automation, Mr. Puzder commented, “[machines are] always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.” Mr. Puzder has written about how overregulation from Obamacare has held back the restaurant industry and has made the case for less regulation in the labor market.  In 2010, Mr. Puzder released a book with professor David Newton entitled “Job Creation: How it Really Works and Why Government Doesn’t Understand It.” Leading up to the 2012 election, Mr. Puzder was an economic advisor and spokesman for the Romney Campaign for President. This election cycle, Mr. Puzder was an advisor and fundraiser for the Trump campaign.

If you have any questions or would like to discuss how the change in the administration could affect your business, please contact John Vreeland, Esq., Chair of the firm’s Wage and Hour Compliance Group, at (973) 535-7118 or jvreeland@nullgenovaburns.com, or Aaron C. Carter, Esq. at (973) 646-3275 or acarter@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.