Here’s a tip for you: DOL offers new tip credit guidance rescinding 80/20 rule

On November 8, 2018, the U.S. Department of Labor (DOL) re-issued an opinion letter rescinding the “80/20 Rule,” which prohibited employers from taking a tip credit if a tipped employee spent more than 20% of his or her working time on non-tipped work. The DOL’s new guidance provides restaurant and hospitality employers with clarity and a more practical approach regarding when a tip credit can be taken.

Under the Fair Labor Standards Act (FLSA), the tip credit allows employers to pay tipped employees not less than $2.13 per hour and to take a tip credit equal to the difference between that amount and the federal minimum wage. So, before an employer can take the tip credit, it must determine whether the employee is working in a tipped job.

If an employee works in separate jobs, one of which is tipped and the other of which is not, the employee has “dual jobs,” and the employer can only take the tip credit when the employee is working in the tipped job. For example, if an employee works at times as a waiter and at other times as a maintenance worker, the employer can take the tip credit only for the time the employee spends working as a waiter and must pay the full minimum wage for the time the employee spends working as a maintenance worker.

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New Jersey Employers: The State Paid Sick Leave Law Is Now In Effect – Are You Ready?

The New Jersey Paid Sick Leave Act takes effect today, October 29, 2018. Just in time for flu season.

If you are a New Jersey employer or an employer with employees in New Jersey, regardless of size or employee number, you are now required by law to provide one hour of sick leave for every 30 hours worked – up to 40 hours in a benefit year – to all employees (including part-time and seasonal) with the minor exceptions of: (i) per diem health care employees, (ii) construction workers employed under a collective bargaining agreement (who will later begin to accrue sick leave under the law on the date the agreement expires), and (iii) public employees previously entitled to sick leave benefits under state law.

Sick leave under the law begins to accrue on the law’s effective date (October 29th), or upon an employee’s later date of hire, and may begin to be used 120 days after an employee’s start of employment (or upon such earlier date that an employer permits).  Leave granted under the law may be advanced in whole, or be subject to accrual.

The state law preempts the various municipal laws previously in effect.  Employers who provide paid time off (PTO) banks are compliant with the Act provided the PTO may be used for the purposes and in the manner set forth under the state law and is accrued at a rate equal to or greater than the rate provided by the law.

An employer may choose the increments in which an employee may use earned sick leave, provided that the largest increment required does not exceed the number of hours an employee is scheduled to work for that shift (including any overtime). Acceptable reasons for using paid sick leave include: (i) for preventative care or the diagnosis, care, treatment or recovery of an employee’s own mental or physical illness, injury or health condition, or that of their family member; (ii) treatment, counseling or preparation for legal proceedings necessary following domestic or sexual violence to an employee or their family member; (iii) an employee’s need to attend school-related conferences, meetings or events regarding their child’s education, or to attend a school-related meeting concerning their child’s health; or (iv) an employee’s time off upon the employer’s closing, or the closing of their child’s school or child care provider, due to a public health emergency. Continue Reading

NY Issues Final Guidance on Key Sexual Harassment Laws – Empire State Employers Must Take Immediate Action

As we previously reported, on October 9, 2018, two landmark New York State laws concerning sexual harassment prevention take effect. These laws require that all Empire State employers:

  • Implement a written sexual harassment prevention policy that meets or exceeds the content of a model sexual harassment prevention policy prepared by State regulators, and
  • Provide employees with annual sexual harassment prevention training that meets or exceeds the content of a model sexual harassment prevention training module prepared by State regulators

To that end, earlier today, the State published finalized versions of the aforementioned model sexual harassment prevention policy and training module. The finalized policy and training program, along with other pertinent information about the new laws (including a helpful series of FAQ’s), can be accessed here.

It is therefore imperative that every Empire State employer take immediate action to update their employee handbook/manual to reflect the State’s model sexual harassment prevention policy. Employers should also begin scheduling the requisite training for existing employees, and likely begin preparing to include such training in their onboarding protocol for new hires. In light of these developments – and the very short time-frame in which to achieve compliance – please contact your Reed Smith attorney if you have any questions about, or would like to discuss, the changes will need to be made with respect to your employee handbook/manual, how to properly comply with the annual training requirement, as well as any other questions concerning the ever-changing employment law landscape in New York State and City.

 

Uber’s arbitration agreements break down drivers’ misclassification suits

Employers considering requiring their employees sign arbitration agreements with class waivers just got a real-world example of the effectiveness of such agreements. On September 25, 2018, the U.S. Court of Appeals for the Ninth Circuit upheld the enforceability of arbitration agreements signed by thousands of Uber drivers in California. In the underlying lawsuits, the Uber drivers allege they were misclassified as independent contractors instead of employees, were not given the entire amount of their riders’ tips, and were not properly reimbursed for their business expenses. Uber sought to compel the drivers to arbitrate their claims pursuant to arbitration agreements they had signed with Uber.

The drivers attempted to avoid arbitration by arguing that the class waivers included in Uber’s arbitration agreement violated the National Labor Relations Act. In applying the Supreme Court’s recent decision in Epic Systems Corp. v. Lewis, which found arbitration agreements with class waivers enforceable in the employment context, the Ninth Circuit rejected the Uber drivers’ argument.

The Ninth Circuit also separately considered the drivers’ argument that the lead plaintiffs in one of the underlying lawsuits constructively opted out of Uber’s arbitration agreements on behalf of the entire class of plaintiffs. The Ninth Circuit also rejected this argument, finding that lead plaintiffs do not have the authority to make an election for others regarding arbitration agreements.

The Ninth Circuit’s ruling is the latest in a nationwide trend of enforcing arbitration agreements with class waivers in the employment context and will likely require many of the Uber drivers to proceed in individual arbitrations, instead of pursuing their claims as part of a class. The decision illustrates the effectiveness of arbitration agreements with class waivers in preventing employees from bringing legal claims against their employer in court and on a class basis. Employers considering implementing such agreements should consult with counsel to carefully analyze whether arbitration agreements with class waivers are appropriate for their workforce.

 

National Labor Relations Board proposes regulation to establish new joint employer rule

Yesterday, the National Labor Relations Board (NLRB or Board) announced a much-anticipated proposed regulation to establish a rule-driven standard for determining joint-employer status under the National Labor Relations Act (NLRA).

The Board’s proposed rule represents a return to a more common-law-centered understanding of joint-employer relationships, establishing joint employer status based on the exercise of substantial direct and immediate control. The Board’s announcement explained that its proposed rule, which is subject to revision after public comment, best serves the NLRA’s purposes by imposing bargaining obligations only on those employers that actually play an active role in establishing essential terms and conditions of employment. In other words, a related business partner not actively participating in employment decisions (such as setting employee wages, benefits, and other essential terms and conditions of employment) ought not be drawn into the collective bargaining process. The Board stated:

An employer . . . may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.

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New Jersey Federal Judge Finds Medical Marijuana User Cannot Compel Employer to Waive Employment Drug Testing Requirements

The United States District Court of New Jersey recently dismissed an employee’s disability discrimination, failure to accommodate and retaliation claims, holding that neither the New Jersey Law Against Discrimination (LAD) nor the New Jersey Compassionate Use Medical Marijuana Act (CUMMA) required the employer to waive its drug testing requirements.

In Cotto v. Ardagh Glass Packing, Inc., No. 18-1037, employee-plaintiff Daniel Cotto Jr. sustained an injury at work while operating a fork lift. Consistent with its practices, the employer, Ardagh, required that he pass a breathalyzer and urine test before he could return to work. Cotto explained that he was taking prescription medications, which he was told would not be a problem. However, in subsequent discussions, the company relayed concerns about Cotto’s use of medical marijuana and placed him on indefinite suspension until he could pass the drug test. Cotto objected, presenting his medical marijuana card and prescription, but Ardagh refused to relax the drug testing requirement. Cotto then filed suit, claiming the company’s refusal to waive the drug test constituted disability discrimination, a failure to accommodate his disability, and retaliation. Ardagh moved to dismiss Cotto’s Complaint, arguing that applicable New Jersey law, and CUMMA specifically, does not mandate an employer’s acceptance of medical marijuana use or require it to waive drug testing for substances that are illegal under federal law.

In considering Cotto’s discrimination claim, the Court noted that while no court had addressed CUMMA’s effect on the LAD, other non-New Jersey courts have concluded that the decriminalization of medical marijuana does not shield employees from adverse employment action except where expressly provided by statute. The Court then found that while CUMMA decriminalizes medical marijuana usage and removes the threat of civil sanctions, it specifically states that it should not be construed to require employers to permit the use of medical marijuana in the workplace, which neither invalidated nor supported Cotto’s claims. The Court thereafter held the employee’s disability discrimination claim failed for the “obvious” reason that “the LAD does not require an employer to accommodate an employee’s use of medical marijuana with a drug test waiver” – citing New Jersey courts’ determinations that drug testing is generally acceptable in private employment. Thus, Cotto could not prove that he could perform the essential functions of his job. Similarly, the Court held that Cotto could not prove a failure to accommodate claim because neither CUMMA nor the LAD requires an employer to waive its drug testing requirement. Finally, because refusing a drug test is not a protected activity, the Court dismissed the employee’s retaliation claim.

The Cotto decision is unpublished and therefore not controlling precedent under New Jersey federal or state law. However, the decision is persuasive authority for New Jersey private employers to refuse to waive drug tests for medical marijuana in similar situations while the substance remains federally-prohibited. Notably, though, New Jersey’s Governor and legislature have discussed their intention to expand marijuana use protections, making it especially important for employers to stay tuned for changes in the law which may ultimately enact workplace protections for medical marijuana users. Moreover, multistate employers must be aware of the specific laws in all of the states in which they operate – and if those laws provide for workplace protections for marijuana users – before taking adverse employment actions or refusing to accommodate such use.

Are confidentiality clauses about to become a relic in sexual harassment cases?

With a few minor tweaks here and there, your company has probably relied on the same severance and employment-related settlement agreements for years. Sure, you touch base with your friendly neighborhood employment lawyer from time to time to ensure there haven’t been any significant legal developments that necessitate revisions. But aside from peripheral alterations, these agreements have, by and large, retained their same basic form and content.

Among the most important terms of your company’s “form” severance and settlement agreements is the confidentiality clause. This provision protects your business from the public disclosure of potentially damaging allegations of workplace wrongdoing. This is particularly important when the asserted allegations exaggerate or skew the facts or are flat out spurious. Or when the alleged misconduct was perpetrated by a rogue manager, unbeknownst to management. Regardless of the reason, the confidentiality clause is of paramount importance. In fact, outside of the employee’s release of claims, your company – like so many others – considers this clause to be the seminal term of the agreement. Without it, your company might be far more hesitant, if not outright unwilling, to enter into potentially costly severance and settlement arrangements with current and former employees.

Two recently enacted laws – one at the federal level and one spurred by New York legislators – threaten to topple the long-standing use of confidentiality clauses in severance and settlement agreements, at least in cases involving sexual harassment. Below, we discuss each of these laws, as well as how you and your company can navigate the proverbial minefield of recent nondisclosure-related legislation.

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Reminder for NY employers: NYC’s Temporary Schedule Change Law is in effect

On July 18, 2018, New York City’s temporary scheduling provisions of the New York City Fair Workweek Law went into effect. As a reminder, this law requires covered employers to grant employees a maximum of two temporary work schedule changes per calendar year for qualifying personal events. Also, the law prohibits employers from retaliating against employees who exercise these rights and does not permit employees to waive these rights. To assist employers and workers in understanding the new law and its requirements, the New York City Department of Consumer Affairs (DCA) Office of Labor Policy & Standards released a mandatory posting, Frequently Asked Questions, and an overview as guidance on the temporary schedule change provisions of the law.

Pursuant to the mandatory posting requirement, covered employers must post the “You Have a Right to Temporary Changes to Your Work Schedule” notice where employees can easily see it at each NYC workplace. This poster should be printed on and scaled to fit 11 inch by 17 inch paper and must be printed in English as well as any language that is the primary language of at least 5 percent of the workers at the workplace. Covered employers must also retain records documenting compliance with the requirements of the Temporary Schedule Change Law for a period of three years, unless another law requires the records be maintained for a longer period.

Employers should certainly take the time to review the posting requirements, FAQs and the additional guidance from the DCA to ensure compliance with this law. Reed Smith’s experienced Labor & Employment Group is ready to address any of your questions or concerns. For more information regarding this law and the accompanying guidance, please contact your Reed Smith attorney.

 

California Supreme Court finds mere minutes matter…sometimes

Today, the California Supreme Court issued its much-anticipated opinion in Troester v. Starbucks Corp., No. S234969 (Cal. July 26, 2018), regarding whether the long-standing de minimis doctrine adopted under the federal Fair Labor Standards Act (FLSA) applies to claims for unpaid wages for minute increments of time under the California Labor Code.

The majority opinion held that the de minimis doctrine did not apply under the particular facts of the putative class action in which a Starbucks employee performed “store closing tasks” each closing shift that required him to work “four to 10 additional minutes each day.” Ultimately, the Court left undecided the possibility of applying the de minimis rule under different factual circumstances because it expressly refused to “decide whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded.”

The federal de minimis doctrine, as explained by the California Supreme Court, applies “in some circumstances to excuse the payment of wages for small amounts of otherwise compensable time upon showing that the bits of time are administratively difficult to record.” The question of whether the de minimis doctrine applies to California wage claims was submitted to the Court by the Ninth Circuit.

In its 35-page decision, the Court addressed the question of the applicability of the de minimis doctrine in two parts. First, it addressed whether California’s wage and hour statutes or regulations adopted the FLSA’s de minimis doctrine. The Court confirmed that it “liberally construe[s] the Labor Code and wage orders to favor the protection of employees,” which it describes as the purpose of the legislature and Industrial Welfare Commission (IWC). It explained that the language of the California Labor Code and IWC Wage Orders require that employees be paid for all work performed. As such, the “federal rule permitting employers under some circumstances to require employees to work as much as 10 minutes a day without compensation is less protective than a rule that an employee must be paid for ‘all hours worked.’” The Court concluded that neither the text nor the history of the California Labor Code or the IWC Wage Orders indicated any adoption of the de minimis doctrine. Interestingly, the Court recognized that the California Division of Labor Standards Enforcement adopted the de minimis doctrine in its Enforcement Policies and Interpretation Manual and opinion letters, but ignored the administrative guidance as non-binding.

Second, the Court addressed whether the de minimis principle itself, which has operated in California in other contexts, applies to state wage and hour claims. Once again, the Court responded in the negative. The Court declined “to decide whether a de minimis principle may ever apply to wage and hour claims given the wide range of scenarios in which this issue arises” and instead decided “only whether the de minimis rule is applicable to the facts of this case” (emphasis added). Under the factual record before it, the Court concluded that the de minimis doctrine did not apply “[i]n light of the Wage Order’s remedial purpose requiring a liberal construction, its directive to compensate employees for all time worked, the evident priority it accorded that mandate notwithstanding customary employment arrangements, and its concern with small amounts of time.” According to the Court, an “employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine,” and the Court further highlighted how “a few extra minutes of work each day can add up.” The Court acknowledged the issue of “the practical administrative difficulty of recording small amounts of time,” but stated that “employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time.”

The lack of clarity in the Court’s decision perpetuates the abyss in which California employers lack clarity on the scope of their obligation to capture infinitesimal and infrequent work performed by employees. In that regard, the Court’s decision gives rise to concerns among employers about the practical implications of paying for “all hours worked” without any consideration of the administrative difficulties of capturing such time. This question was raised by the concurring opinions from Justice Cuéllar and Justice Kruger, who discussed the “rule of reason” in light of the open question that remains following the majority opinion – “whether, in circumstances different from those presented in this case, the de minimis principle may apply to California wage and hour claims.” Therefore, this issue is far from decided and the applicability of the de minimis rule will continue to be a fact-intensive analysis.

For more information on developments in this area, please contact Christina Tellado at ctellado@reedsmith.com or Deisy Castro at dcastro@reedsmith.com 

Reminder for NY employers: key pieces of sexual harassment legislation just took effect

Earlier this year, New York Governor Andrew Cuomo signed into law the State’s Budget Bill for fiscal year 2018-19. Astute employers may recall that the Budget Bill has in the past been the Governor’s preferred mechanism for enacting sweeping employment law reforms. For example, the 2016-17 Budget Bill included provisions that will ultimately increase the statewide minimum wage to $15/hour by 2021. The 2016-17 Bill also laid the groundwork for the State’s paid family leave law, which took effect on January 1 of this year.

In this year’s Budget Bill, the Governor pivoted his attention to the recent groundswell of high-profile sexual harassment allegations. Indeed, as we previously reported, the Budget Bill imposes a myriad of new obligations and restrictions intended to remedy sexual harassment in the workplace. Two of the more prominent portions of the Budget Bill, discussed below, took effect on July 11, 2018.

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