Articles Posted in Compensation, Wages and Overtime

The New York Wage Board has voted in favor of a $15 minimum wage for fast food workers, which will be phased in over the next few years.  The Board’s recommendation will now be submitted to the Commissioner of Labor, who can accept, reject or modify the Wage Board’s recommendations.  In the meantime, there is a 15 day comment period during which interested parties can comment on the the Wage Board’s proposal.  The proposed minimum wage increase for fast food workers is as follows:

For New York City

• $10.50 on December 31, 2015

The California-based Chinese food restaurant chain agreed to settle a collective action brought by 155 general managers for close to $3 million.  In Kudo v. Panda Restaurant Group Inc. (09-cv-00712, U.S. District Court, Southern District of New York), nationwide general managers claimed that they were improperly classified as exempt from the coverage of the Fair Labor Standards Act (FLSA), which, among other things, mandates the payment of overtime to employees, who work more than 40 hours in a workweek.

According to the general managers, they spent significantly more time performing nonexempt duties, such as preparing food, taking orders, removing trash, and collecting payments from customers, than performing managerial or exempt tasks.

This case illustrates, once again, that a worker’s title does not determine whether or not the worker is exempt, even if the worker is being a paid on a salaried and not hourly basis.  Duties and functions must be scrutinized to determine the precise nature of an employee’s job function to ensure proper classification.

Today, the New York State Department of Labor’s Acting Commissioner, Mario Musolino, announced that New York State will raise the minimum wage for all tipped workers in the hospitality industry to $7.50, effective December 31, 2015.  The amount could be $8.50 in New York City should the New York State legislature enact a higher minimum wage rate for New York City hospitality industry employees.   Currently, tipped food service workers must be paid an hourly wage of at least $5.00 and tipped service employees must receive at least $5.65 per hour.  In raising the tipped hourly minimum wage to $7.50, the Department of Labor has also determined to eliminate the different rates currently paid to different categories of tipped employees in the hospitality industry.

In addition, the New York State Department of Labor accepted the governor-appointed Wage Board’s recommendation to consider eliminating the tip credit altogether, which would require hospitality industry employers to pay employees the full hourly minimum wage, which in New York is currently $8.75.   Several states have already eliminated the tip credit, and New York with its 50% increase in the tipped minimum wage may be on its way to doing the same.

You can access the Acting Commissioner’s Order by clicking here:  Order of Department of Labor.

A Hospitality Industry Wage Board convened in September 2014 by the New York State Commissioner of Labor to consider changes to the minimum wages paid to tipped employees has just issued its recommendations to the Commissioner of Labor for review.  The public has until February 21, 2015 to submit comments to the Commissioner regarding the recommendations.

The Wage Board’s recommendations, released on January 30, 2015. consist of the following five proposals:

• Uniform tip amounts and criteria for all tipped workers in the hospitality industry, which would result in the same rates for food service workers, service employees and service employees working in resort hotels.  (Currently the Hospitality Industry Wage Order provides varying tip credit and wage rates for these different categories of workers.)

Important changes to New York wage and hour law take effect today and in 2015.

• Minimum Wage:  Today, the New York State Minimum Wage increases to $8.75, which is substantially higher than the current $7.25 minimum wage under the federal Fair Labor Standards Act.  New York employers are required to comply with the higher minimum wage rate under New York law.   Since 2011, the New York minimum wage has increased twice.  On December 31, 2013, the New York minimum hourly wage increased from $7.25 to $8.00.  The New York minimum wage is set to increase again on December 31, 2015 to $9.00 per hour.  Despite the increase of the basic minimum hourly wage, New York has not increased the minimum wage for Food Service Workers.  The New York minimum wage for Food Service Workers will remain at $5.00 per hour, provided that the worker earns at least $3.75 in hour on tips.

• Notice of Pay Rate:  The New York Wage Theft Prevention Act  took effect on April 9, 2011.  The Act required New York employers to provide written notice of wage rates to each new hire.  In addition, employers were required to provide employees with written notification of their pay and related information annually prior to February 1 of each year.  On December 29, 2014, Governor Cuomo eliminated the required annual notification.  Consequently, the Department of Labor will not require employers to provide annual statements in 2015.  However, employers are still required to notify employees of their pay rate at the time of hire.

On December 9, 2014, the United States Supreme Court decided that hourly warehouse workers who retrieved products from warehouse shelves and packaged them for delivery to Amazon.com customers were not required to be compensated for the time spent undergoing security screening at the end of the work day.  Workers spent approximately 25 minutes a day waiting to be, and being, screened.  The case. Integrity Staffing Solutions, et al. v. Busk, No. 13-433, implicates the Fair Labor Standards Act of 1938 (FLSA)  and Portal-to-Portal Act of 1947.

Congress amended the FLSA in 1947 to clarify the terms “work” and “workweek,” which the FLSA had not defined.  The  amendment, known as the Portal-to-Portal Act excluded from compensable work time  “activities which are preliminary to or postpreliminary to” the performance of an employee’s principal activities.   Subsequent Supreme Court precedent included as “principal activities” all activities that are an “integral and indispensable” part of the principal activities.

In rejecting the plaintiffs’ contention that the security screenings constituted compensable work time, the Supreme Court reasoned that the screenings were neither part of, nor “integral and indispensable” to, the principal activities of the workers’ activities, which was retrieving products from warehouse shelves and packaging them for shipment.  The Court was not swayed by arguments that the screenings were necessary to the plaintiffs’ primary work, because they were conducted to prevent employee theft.

A group of exotic dancers, who sued New York City’s Rick’s Cabaret for retaining a portion of gratuities and failing to pay minimum wages under the federal Fair Labor Standards Act  and New York Labor Law, were awarded preliminary damages of $10,866,035.

Specifically, the court awarded unpaid minimum wages in the amount of $3,324,151; improperly retained gratuities in the amount of $3,577,032; and recoupment of fines and fees that dancers were required to pay to Rick’s Cabaret in the amount of $3,964,852.  Moreover, it is likely that additional amounts will be awarded following a trial on other minimum wage claims, as well as liquidated damages reflecting 100% of the total damages awarded.  Ultimately, Rick’s Cabaret’s liability could exceed $20 million.

Rick’s Cabaret had previously argued that neither the Fair Labor Standards Act nor the New York Labor Law applied to the dancers because they were not employees, but independent contractors.  In earlier decisions, the court had ruled that the dancers had been misclassified, and were, in fact, employees, due to Rick’s Cabaret’s control over the ways that the dancers performed their jobs.

Under the Fair Labor Standards Act (FLSA) and New York State Labor Law, employees who work more than forty (40) hours in a workweek are entitled to overtime pay unless they are considered exempt.  An employee is considered exempt if they are paid a salary AND their duties satisfy the tests for a bona fide executive, administrative, or professional employee.  The professional exemption generally includes employees who are engaged in “creative” work.  In most situations, this would likely include employees engaged as writers.

However, in Tornatore v. GCI Communications,14-cv-6049, Judge Charles Siragusa of the Western District of New York, certified a class of employees, who were called “writers,” in a lawsuit alleging that they were entitled to overtime pay.  Tornatore reminds us that the title given to an employee means little where the actual skills and duties of the employees do not satisfy a recognized exemption.  According to the complaint, although the employees were given the title of “writer,” their actual duties involved communicating with customers, proof writing and editing, which do not rise to the level of artistic or creative professional work required by the Creative Professional exemption.  To be covered as a Creative Professional, the employee must be compensated on a salary or fee basis at a rate not less than $455 per week, and the employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.  Because, the plaintiffs argued, they did not perform the type of duties required to be exempt, they should have been paid overtime for all hours worked over 40 in a workweek.

Earlier this week a New York federal judge tentatively approved a $450,000 settlement of an unpaid intern class action that was filed against Elite Model Management.  The case, Davenport v. Elite Model Management Corp., 13-CV 01061, U.S. District Court, S.D.N.Y., was filed in February 2013 by a former Elite intern on behalf of herself and all other interns  who worked for the modeling agency from February 15, 2007 to the date of final judgment in the case.

The Complaint in the case alleged, among other things, violation of the minimum wage and overtime pay provisions of the Fair Labor Standards Act (FLSA) and New York Labor Law.  The $450,000 settlement is believed to be the largest settlement of an unpaid intern case to date.

This case illustrates the problems with internship programs that do not satisfy the strict prerequisites and guidelines applied to determine whether an internship is part of a bona fide program or just a way for an employer to enjoy free labor.  We previously wrote about these issues back in 2010 and 2011.  Since that time other cases have been filed alleging the misclassification of intern status and have resulted in liabilty for unpaid minimum wage and overtime pay.