2014 was a hectic year for New York labor and employment practitioners, yielding mixed results for employers and, in many instances, creating more questions than answers. Among the highlights, an expanded paid sick leave law, amended on the eve of implementation by Mayor Bill de Blasio, took effect in New York City. And in Albany, state legislators, following the lead of their NYC counterparts, enacted workplace protections against discrimination and harassment for unpaid interns.
Now, however, with 2014 almost fully behind us, it is time for New York state and city employers to look toward 2015. Here are some of the most pressing employment law issues on next year’s horizon:
Minimum Wage Moving On Up, Up, Up‼
Perhaps most key is that, on December 31, 2014, the statewide minimum wage for non-exempt (i.e., overtime-eligible) employees goes from $8.00 to $8.75/hour (and then to $9.00/hour December 31, 2015). Just as significantly, the minimum weekly salary for overtime-exempt executive and administrative employees will also increase December 31, 2014: from $600.00 to $656.25/week (and then to $675.00/week December 31, 2015).
Wages for tipped employees in the hospitality industry are also impacted come December 31, 2014. For food service workers, the “tip credit” – which permits employers to pay tipped employees less than the minimum wage so long as the employees earn enough gratuities to make up the difference – will increase from $3.00 to $3.75/hour (and to $4.00/hour December 31, 2015). This means that the “tipped minimum wage” for such workers will remain at $5.00/hour, provided that tips plus wages equal or exceed the applicable minimum wage (i.e., $8.75/hour as of December 31, 2014). Critically, the minimum overtime rate for these workers will increase to $9.375/hour. For non-food service workers (other than those at resort hotels), the tip credit will rise from $2.35 to $3.10/hour, although the tipped minimum wage for such workers will stay steady at $5.65/hour.
Certain meal and lodging credits, as well as uniform maintenance pay for employers that do not maintain required uniforms, are also scheduled to increase. In addition, the minimum wage spike will mean a spike in the “spread of hours” pay rate owed to employees when they work either (1) more than 10 hours in a given day, or (2) on a split shift, where the number of hours between the start and end of their workday exceeds 10.
Finally, employers should monitor the New York Department of Labor’s website for an updated minimum wage poster that must be displayed in the workplace.
Beware Enforcement of Newly Implemented NYC Laws
Two of the major 2014 storylines for the NYC business community were implementation of the city’s paid sick leave law and amendment of the NYC Human Rights Law (NYCHRL) to require accommodations for pregnant employees. In 2015, NYC employers should expect these two laws to emerge from their infancy and get some teeth.
The Earned Sick Time Act: On April 1, 2014, the NYC Earned Sick Time Act (ESTA) took effect, requiring employers with five or more workers to provide paid sick leave to all employees who perform more than 80 hours of work in NYC in a calendar year. Employers with fewer than five workers are required to provide comparable unpaid sick leave benefits. Recently, the NYC Department of Consumer Affairs (DCA), the agency that enforces ESTA, issued instructive ESTA FAQs and outlined the requirements for ESTA-compliant written sick leave policies.
In late October, DCA Commissioner Julie Menin testified before the NYC Council that, in the months since ESTA implementation, the agency has received more than 350 ESTA complaints. According to the DCA, professional service firms have been the subject of the most complaints (35 percent of the total), with retail industry employers the subject of 18 percent of the total. Most complaints have stemmed from an employer’s alleged failure to provide proper notice of ESTA to new and existing employees. Although the DCA had not levied a single fine against an employer as of late October 2014, it has issued warnings of “imminent fines” to at least five companies, and NYC businesses should expect the complaints to continue, and actual fines to be issued, in the coming year.
The Pregnancy Accommodation Amendment: Several months before ESTA’s January 2014 implementation, an amendment to the already-expansive NYCHRL took effect. It requires that NYC employers provide reasonable accommodations for an employee’s pregnancy, childbirth, or related medical condition. Such accommodations may include, among other things, bathroom breaks, leaves of absence for childbirth-related disabilities, breaks to facilitate increased water intake, periodic rest for those who stand for long periods, and assistance with manual labor. NYC employers also must distribute, to all new hires upon commencement of employment, written notice of the right to be free from discrimination on the basis of pregnancy, childbirth, or a related medical condition.
The advent of pregnancy accommodation requirements in NYC appears to be part of a larger, national movement to expand the rights of pregnant workers. In July 2014, for example, the Equal Employment Opportunity Commission issued guidance suggesting that the federal Pregnancy Discrimination Act requires accommodations for pregnant employees in certain circumstances. And the U.S. Supreme Court recently heard oral argument in a case presenting a similar issue. Given the high-profile support for pregnant workers’ rights on the national stage, NYC officials can be expected to vigorously enforce the NYCHRL pregnancy accommodation amendment in the coming months.
Get To Know the “New” NYC Commission on Human Rights
As we head into 2015, NYC employers can also expect increased visibility and enforcement initiatives from the recently overhauled NYC Commission on Human Rights (NYCCHR or the Agency) – the administrative agency tasked with enforcing the NYCHRL. Responding to pressure from Public Advocate Letitia James, Mayor de Blasio, on November 21, 2014, appointed an employee-plaintiffs’ side attorney, Carmelyn Malalis, as the Agency’s new chair. Ms. Malalis replaces Patricia Gatling, a holdover from the Bloomberg administration. De Blasio also appointed eight new NYCCHR commissioners, commenting that he expects the revamped Agency to “be a robust enforcer of our fundamental civil rights.”
One initiative that NYC employers can expect from the newly populated NYCCHR is an aggressive, continued push to combat discriminatory job postings on Craigslist and other websites. Even before the addition of de Blasio’s newest pro-employee appointees, the Agency had already, in recent months, been ramping up scrutiny of online job postings that arguably express a preference for applicants with particular demographic characteristics – such as females for a food server job (by posting an opening for a “waitress” rather than “waiter/waitress” or “food server”).
Upon discovering a potentially biased job posting, the NYCCHR will reportedly then try to build a case against the posting employer by sending “tester” resumes by email. Next, using tracking software, the Agency can determine which “tester” applicant emails the employer opens. In the case of a “waitress” job posting, for instance, if the employer opens the email from a “tester” applicant who is female, but not from one who is male (traits the Agency would make obvious through the email addresses it uses), the Agency may use this fact as evidence that the posting employer was indeed motivated by gender bias in hiring for the food server position. Despite modest pushback – one state senator recently criticized the NYCCHR for these surreptitious procedures – the Agency’s practice persists.
NYC employers should keep an eye out for these and other NYCCHR tactics to strengthen its enforcement of the NYCHRL – already one of the nation’s most expansive anti-discrimination laws – in 2015 and beyond.
A Decision in 2015 on Whether Employers Must Pay “Unpaid” Interns
Finally in 2015 – after what has felt like an endless wait – the federal Court of Appeals for the Second Circuit in Manhattan is expected to weigh in on the great intern debate: are company-sponsored unpaid internship programs lawful, or must interns be paid just like regular employees? The court has scheduled oral argument in tandem appeals for January 15, 2015, and should issue a ruling before year’s end.
As we have previously reported on this site, unpaid internship programs were once considered a long-standing, stable facet of the U.S. business landscape, as well as a valuable option for students seeking to gain real-world experience and to open doors in their sought-after career field. But in recent years, these programs have come under intense scrutiny and fierce legal attack. A veritable flood of class and collective action lawsuits have been filed against employers across a broad swath of industries. Propelled by an ever-enterprising employee-plaintiffs’ bar, and facilitated by the soft job market following the 2008 recession, these suits have attempted to hold companies liable under the federal Fair Labor Standards Act (FLSA) and parallel state laws, under the theory that companies unlawfully withheld minimum wages and overtime pay, while reaping the benefits of interns’ “free” labor. The suits seek not only back pay with interest, but also hefty attorneys’ fees, and have become so costly for employers to defend that several high-profile companies have elected to discontinue their internship programs altogether.
In its highly anticipated decision, the Second Circuit is expected to set the contours for when (if ever) a company must pay student (and other) interns. The court also will likely clarify whether, and if so, how much, deference federal courts should afford to policy positions of the United States Department of Labor (USDOL) on this issue. The USDOL contends that an intern must be classified as an employee under the FLSA (i.e., must be paid) unless all of the following six criteria are satisfied: (1) the internship is similar to training given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern does not displace regular employees; (4) the employer derives no immediate advantage from the intern’s activities; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages. The New York State Department of Labor, for its own part, has articulated 11 criteria (several of which are duplicative of the USDOL’s six) that must be met for a valid internship program.
The Second Circuit’s ruling will likely be based as much on politics and policy as on any technical FLSA statutory analysis. The USDOL has filed an amicus brief in the two intern cases pending before the court, urging that it “defer to the [the agency’s] longstanding six-part trainee test.” Other interested organizations, such as the United States Chamber of Commerce and the National Employment Law Project, have also vocalized their contrary positions, urging the court to rule in favor of the companies in the pending cases.
Many deem the Second Circuit’s decision to be the most important wage-and-hour decision expected in 2015, and it is anticipated to have significant impact on the future structure and use of internship programs not only in New York, but nationwide as well.
Keep Your Eye on Proposed Legislation
New York employers in 2015 must stay abreast not only of recently-enacted laws, but also of a host of statutes and regulations that are pending – and which, if enacted, could have such a significant impact on “business-as-usual” so as to warrant advanced operational preparation.
Gov. Andrew Cuomo’s proposed agenda in Albany is particularly noteworthy. One of the agenda items, the Women’s Equality Act, is a multifaceted plan that would, among other things:
- Limit the current justifications in state law for paying men and women differently
- Prohibit employers from terminating or retaliating against employees who share wage information
- Increase liquidated damages to 300 percent where an employer willfully fails to pay required wages
- Prohibit workplace discrimination based upon family status
- Extend the prohibition on sexual harassment in the workplace to workplaces with fewer than four employees
- Require employers to provide accommodations for pregnant employees, unless the requested accommodation imposes an undue hardship on the employer
- Permit the recovery of attorneys’ fees by successful litigants in sex discrimination cases
Expect Gov. Cuomo also to seriously mull legislation to further increase the state’s minimum wage and/or to permit localities to set their own wage standards (initiatives for which NYC Mayor Bill de Blasio has been a strong advocate). Gov. Cuomo has also discussed eliminating the tip credit, a move that would most directly affect hospitality industry employers. A governor-convened wage board is expected to report in early 2015 on any recommended changes to the current tip credit structure.
And in NYC, the City Council is considering two bills that could uproot two mainstays of the hiring process: criminal history inquiries and credit checks. The Fair Chance Act, part of the “ban the box” trend sweeping the nation, would prohibit any inquiry or statement about a job-seeker’s criminal history – including arrest or conviction records – made before a conditional offer of employment is extended. The Stop Credit Discrimination in Employment Act, for its part, seeks to ban any employment decision based on an applicant’s “consumer credit history,” which the proposed law defines as “any information bearing on an individual’s credit worthiness, credit standing or credit capacity, including but not limited to an individual’s credit score, credit account and other consumer account balances and payment history.” Both bills are currently pending before the City Council’s Committee on Civil Rights.
Finally, New York state and city employers should brace for highly anticipated guidance from the USDOL regarding the scope of certain exemptions under the FLSA. In March 2014, President Obama directed the USDOL to update and modernize existing overtime regulations for so-called “white collar” employees. In response to the president’s mandate, the USDOL is in the midst of preparing a proposed regulation entitled, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees.” The proposal will likely be unveiled within the first few months of 2015. It is expected to narrow the scope of the “white collar” exemptions – thereby making more workers eligible for overtime pay under federal law – and may increase the minimum weekly salary under the FLSA for exempt workers. Given that New York recognizes most of the FLSA exemptions, the USDOL’s proposed regulation will be of utmost importance, and may be cause for widespread employer audits of exempt/non-exempt classification schemes.
What Does this Mean for My Company?
New York employers can, and indeed should, expect a bevy of changes during 2015. From the minimum wage increase to expanded protections for pregnant employees to the use of unpaid interns, the New York employment law landscape remains in flux and is as dynamic as ever. Employers should stay in regular contact with experienced counsel to discuss these issues and to prepare a cogent plan of action to face them head-on. Make sure this is a New Year’s resolution you actually keep!