A tip on tipped workers: pay them correctly or else

The Department of Labor has sued the owner of two restaurants claiming that servers were not properly paid overtime. 

El Toro Loco Legends LLC in Kansas City and El Toro Loco Lenexa LLC in Lenexa, Kansas, paid their tipped wait staff a minimum wage of $2.30 per hour, but did not properly calculate the overtime premium owed to those employees.

They calculated the overtime premium based off of the $2.30 tipped minimum wage instead of the greater of the full minimum wage of $7.25 per hour or the employee's effective weekly hourly rate including all tips received by the employee, less the employer's statutory tip credit against wages paid directly to the employee.

Federal court permits employer docking from an exempt employee’s PTO bank without violating the FLSA

I think it was Otis Redding who once famously sang, "I'm sittin' on the dock of the pay." 🤔

Whether or not I have that lyric correct, docking an exempt employee's pay is fraught with legal risk that, if done unproperly, could not only jeopardize the exempt status of the employee under the FLSA, but also all employees in the same job classification working for the same managers responsible for the actual deduction.

What about deductions from PTO or other paid leave banks? Do they carry with them the same legal risk. According to the recent opinion of the 3rd Circuit Court of Appeals in Higgins v. Bayada Home Health Care, taking deductions from banks of PTO or other paid leave raises no issues whatsoever the FLSA and therefore does not jeopardize any of the statute's exemptions.

Relaxing child labor protections is not the solution to our labor problem

Ohio's Senate recently passed legislation that, if signed into law, would make it easier for businesses to employ 14- and 15-year-old children. SB 30 would amend Ohio's current child labor laws to permit 14- and 15-year-olds to work later than 7 pm during the school term with "approval to do so from the person's parent or legal guardian." 

According to State Sen. Tim Shaffer, a Fairfield County Republican, he sponsored the bill to help solve Covid-related workforce shortages, in addition to teaching teens necessary work skills: "Learning how to show up on time, learning how to follow direction and execute commands and execute missions — I know at that age it was critically important for me. And this will certainly help employers across Ohio with their staffing problems as well."

Do you know the rules for paying remote workers for “downtime”?

Every 10 minutes at some random point that she couldn't anticipate, the company took photos of her and her work, a screenshot of whatever she was working on, and a photo of her face. And they were doing that to verify whether or not she was working.… The company was using that to pay Carol and the other workers only for the minutes when they appeared active.

If she was clicking away at a spreadsheet, doing demonstrable work, she was fine. She would be paid for that 10-minute increment. But as soon as she got a cup of coffee or answered the doorbell or went to the bathroom, she risked not being paid for that time.…

[E]ven if she had worked for 9 and 1/2 minutes out of 10 minutes, if that screenshot showed her inactive, if she was gone or distracted for that 30 seconds, she wouldn't be paid for that increment.

That's from The New York Times, describing the latest employer trend of monitoring remote workers and only paying them for the time during which the performance of actual work could be verified. And, if those remote workers happen to be nonexempt, that practice is highly illegal.

The Department of Labor just issued a Field Assistance Bulletin reminding employers on the proper payment of remote workers under the Fair Labor Standards Act.

Specifically:

• The FLSA requires employers to pay nonexempt employees for all hours worked.
• "Hours worked" is not limited solely to time spent on active productive labor but also includes time spent waiting or on break.
• Short breaks of 20 minutes or less (e.g., to go to the bathroom, get a cup of coffee, let the dog outside, or stretch one's legs) are generally counted as compensable hours worked.
• Longer breaks "during which an employee is completely relieved from duty, and which are long enough to enable [the employee] to use the time effectively for [their] own purposes are not hours worked."
• These rules apply regardless of whether the work is performed at the employer's worksite, at the employee's home, or at some other location away from the employer's worksite.

In other words, even if you catch your nonexempt employees "not working" during the workday, if a break lasts 20 minutes or less you still must pay them. It's non-negotiable under the FLSA. (Exempt employees are paid a salary which becomes owed in full as soon as he or she works just one minute in a work week.)

If you discover an employee abusing paid breaks or their salary status, your remedy is discipline or termination, not withholding wages.

The problem isn’t “fake” managers, it’s the poorly named “administrative” exemption

"Would you rather be a front-desk clerk or 'Director of First Impressions'? A barber or a 'Grooming Manager'?" CBS News posed this question, and concluded that employers use these fancy, inflated titles to avoid paying employees in full for their overtime work. 

"Title inflation," the article argues, is being used to deny overtime and steal wages from otherwise deserving employees.

The BIG risk of misclassifying employees as independent contractors

A national auto parts distributor has reached a settlement with the Department of Labor to pay a total of $5.6 million in back pay and liquidated damages (plus interest) to 1,398 drivers misclassified as independent contractors. The payments to the individual drivers are as low as $40 and as high as more than $120,000.

Settlement highlights wage and hour risks of remote work

The City of Cleveland has agreed to pay $50,000 to settle the wage and hour claim of a City Hall employee who claimed that she wasn't paid overtime while working from home during the Covid-19 pandemic.

Eve Bonvissuto, an assistant administrator in the city's public safety department's medical unit, had claimed $68,709 in overtime pay. She alleged that the city had misclassified her as exempt, and that city had no timecard or time-tracking system in place at the time for remote workers.

Avoiding liability missteps with year-end bonuses

As employers plan for year-end bonus payments to employees, you need to learn the difference between nondiscretionary bonuses, discretionary bonuses, and special occasion bonuses (such as holiday or other gifts). Otherwise, you risk finding a Department of Labor lump of coal in your wage and hour stocking.

What's the difference between these three types of bonus payments?

What should you do when the DOL shows up at your door?

"I'm an investigator with the Wage and Hour Division of the Department of Labor. I'm here to conduct an investigation into how your pay your employees." He then shows you his badge, and asks to see the following:

Records showing the business's annual dollar volume of transactions in in interstate commerce to establish that the DOL has jurisdiction; and

Payroll and time records for the past three years. 

With that, you're off the races in a DOL wage and hour investigation. The investigator will seek to determine if you've properly classified your employees as exempt or non-exempt, and if you've met your minimum wage and overtime obligations.

What do you do now? 

Pay attention to the industries the Department of Labor is targeting

Take a look at the following headlines, each taken from a Department of Labor news release from just the past month.

• US Department of Labor obtains court judgment ordering Pennsylvania restaurant, owner to pay 68 employees $193K in back wages, damages
• US Department of Labor finds overtime, tip violations; recovers $80K in back wages for 52 workers at 5 Carolina restaurants
• Dollars to doughnuts: Krispy Kreme to pay more than $1.1M to 516 workers after US Department of Labor finds systemic overtime violations

Must an employer pay employees for time spent waiting for computers to boot up?

It's a tale as old as time … or at least as old as employees have been working on computers. You start your work day by turning on your computer, and you wait. Wait for the computer to boot up so that you can then start actually working. That process (which repeats at the end of the work day when you shut the computer down) can take 30 seconds or it can take a few minutes or longer, depending on the age and speed of the machine, the operating system it runs, and the number of apps that need to load during the process. 

Here's the question — Is the time an employee spends waiting for their work computer to boot up compensable working time for which an employer must pay?

According to Cadena v. Connexx LLC (which the 9th Circuit just decided), the answer is an unequivocal yes.

Biden’s Department of Labor proposes significant new independent contractor regulations

Who qualifies as an independent contractor? If the Biden administration's new proposed regulations take effect as drafted, the answer to that question will change significantly. 

Under the proposed new rules, the DOL will use a multi-factor "economic realities test" that considers and balances the following non-exclusive list of six factors to determine whether the worker is truly in business for themselves, or is an employee working for someone else.

Dispelling six common wage and hour misconceptions

19 hours in a workday without overtime pay. That's how one Amazon delivery driver described his experience working for online conglomerate.

To be clear, while it might make for an awful work environment to work a 19-hour shift, there is nothing in the federal wage and hour laws that require overtime pay for a 19-hour workday. 

Overtime under the federal Fair Labor Standards Act is based on hours in a work week, not a workday. (Please check your state laws, employers in Alaska, California, Colorada, and Nevada, as your overtime obligations might be tied to hours in a workday, not work week.) The FLSA only requires time and a half of one's regular rate of pay is required for any hours in excess of 40 in a week. 

While it's easy to imagine 19-hour days quickly adding up to a number over 40 hours in a week, 19 hours in one workday, in and of itself, does not qualify one to overtime pay under the FLSA. 

Employers, repeat after me: “Tips belong to employees, not employers.”

$1,351,253.34. That's the amount a federal judge has ordered the Empire Diner, its owner, Ihsan Gunaydin, and its manager Engin Gunaydin to pay a group of 107 servers and kitchen workers based on an illegal tip scheme.

What rendered the restaurant's tip scheme illegal? It required servers to turn over 10 to 15 percent of their total tips received on any given shift to pay the bussers' wages. That's a clear violation of the Fair Labor Standards Act.

Lyfting independent contractor status

If I asked you to identify Lyft's business, how would you answer? 

"They're a transportation company," you'd say. There's no other correct answer … unless you ask Lyft. 

Lyft will tell you that it's a tech company, not a provider of transportation.

The wage and hour implications of employee electronic surveillance

Every now and again I come across a story that make me question how any in-house counsel blessed a workplace policy or practice.

The following story, taken from yesterday's episode of The Daily on the rise of workplace surveillance, is one of those stories.

Carol works as a Vice President for a bank. Like many white-collar employees these days, she's working remotely from her home. Pretty early on in her employment, she begins to notice that her paychecks are light. Then she figures out why.

Every 10 minutes at random points the company took a screenshot of her computer monitor and a photo of her face. The company was using that information to pay Carol (and every other worker) only for the minutes when they appeared be active according to the photos. If, for example, the photo happened to capture Carol during a moment of inactivity (for example, a 30-second interval when she went to get a cup of coffee), it would dock her for the entire 10-minute span. As you can imagine, the digital tracking actually missed a lot of Carol's work, including any work she did offline. She's working, but the company thinks she's not working, and it's going to dock for that any perceived increments of inactivity. 

There are two HUGE Fair Labor Standards Act red flags here.

Unlike ordering at Chick-Fil-A, legal compliance isn’t chosen from a menu.

"We are looking for volunteers for our new Drive Thru Express!🚘 Earn 5 free entrees per shift (1 hr) worked. Message us for details"

Anyone see anything wrong with this (since deleted) post? I sure do, as does my friend Suzanne Lucas (aka the Evil HR Lady), who correctly points out: "You cannot do this. Even if you want to declare yourself the Lord's chicken, you are still a for-profit business, and for-profit businesses cannot have volunteers. Not ever. Paying in sandwiches does not count."

To put in more succinctly, In a for-profit business, volunteer labor is illegal. Hard stop. 

Let’s play spot the issue

Let's see if you can spot the employment law issue from this story, which I've borrowed from our local police blotter.

On April 26, the owner of a bar came to the police station regarding an ex-employee who stole his daughter's AirPods.

The stealing incident, which took place in February, led the owner to track the pods to a house that just so happened to be the home of the ex-employee's sister.

That's when the owner told the employee he was withholding his last check to cover the cost of the AirPods.

The man needed a police report to document the incident and provide the state justification of docking the ex-employee $250 from his last paycheck.

What do you think? 

Restaurant learns the hard way what an illegal tip pool looks like

Hard Eight BBQ says it misunderstood its obligations under the Fair Labor Standards Act by paying managers a share of tips earned by servers across the restaurant's five locations. As a result, following a Department of Labor investigation it reached a settlement with its managers totaling $867,572. 

Matt Perry, COO of Hard Eight BBQ, told 5 NBCDFW that "managers were part of the tip pool at their five restaurants because they do the same jobs as other hourly employees on any given shift and that because of that they felt like managers should also receive a small portion of the tip share."

Ohio enacts sweeping changes to state wage and hour laws

Beginning July 6, 2022, Ohio employers have a new set of rules under which to pay their employees. 

SB 47 revamps Ohio's wage and hour statute to correct some major differences that have historically existed between it and the federal Fair Labor Standards Act.