- Posts by Nancy CooperOwner
She provides employers with counsel that includes labor negotiations, contract interpretation, employment contracts, noncompetition and confidentiality agreements, as well as guidance on dealing with personnel ...
Both the courts and the National Labor Relations Board (NLRB) seem to keep changing the definitions of joint employment. It is no wonder this has left employers scratching their head about the situation. The cause for this itch is the analysis differs depending on the law at issue. For example, the Fair Labor Standards Act (FLSA), various state employment laws defining “employees,” common law (guided by the National Labor Relations Act), the Family and Medical Leave Act (FMLA), and workers’ compensation laws all have joint employer doctrines and associated tests that are slightly different from the others.
To demonstrate these differences, we will look at two of the most recent cases that modify the joint employer analysis under both the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (the FLSA). Both these cases define a test – but it is not the same test. Unfortunately, the lesson is that an employer or putative employer will not know whether a person is an employee for the purposes of a particular law without determining first what test should be applied for that law.
On Tuesday, November 22nd, a United States District judge in Texas issued a preliminary injunction that blocks the U.S. Department of Labor (DOL) from implementing a controversial rule that would have expanded overtime protections from going into effect, at least for now. The pending regulations were scheduled to go into effect on December 1, 2016 and would have more than doubled the salary level required for employees classified as exempt under the “White Collar” exemptions. The Department of Labor estimated if the new regulations went in to effect more than 4 million workers would now be eligible for overtime. The salary level is currently $455 per week or $23,660 per year. The new regulations would have increased that amount to $913 per week or $47,476 per year.
When we last visited this topic, the proposed regulations revising the overtime exemptions were still very new. The regulations are due to go into effect on December 1 of this year. There has been legislation introduced to stop them from being implemented and court cases are pending. This article will remind you of the obligations, answer some additional questions that keep coming up and will bring you up to date on the efforts to stop the regulations from going into effect.
The good news is the long awaited rule on overtime has arrived – finally. The proposed rule goes into effect on December 1, 2016. The quick summary is the changes aren’t quite as bad as everyone feared. The long summary is below. We have broken out the rules into specific talking points to try and make them easier to digest. This does not erase the entire prospect of heartburn, however. The Department of Labor has also developed a page of Questions and Answers on the new rule, which includes a comparison between the old rule and the new rule.
Oregon is making history, once again. The new minimum wage law (signed by Governor Brown on March 2, 2016) brings two new titles: 1.) the first state to implement a tiered minimum wage (the amount paid is dependent upon the location of the business); and 2.) the state with the highest minimum wage. The passage of the new law has brought a mixed response. The cheers have emanated from the employees and the advocates for a livable wage. The jeers have emanated from businesses trying to figure out how they are going to keep their doors open. While the law is effective immediately, the first increase goes into effect July 1, 2016. So, without further ado, let’s get to the details so you can determine which camp you are joining.
The sharing economy requires a new look at work relationships. Many of the business models in the sharing economy are based on individuals being creative and entrepreneurial as they seek to provide services to others. Drivers for companies such as Uber and Lyft share their cars using a license to access software that connects drivers and riders. Residences are rented out on a short term basis using software that markets to prospective travelers on sites like VRBO and Airbnb. SnapGoods provides a mechanism for lending or borrowing high-end household items. DogVacay provides host homes to animals whose owners are travelling. TaskRabbit allows others to bid to do your tasks and odd jobs. There is a never-ending list of creative sites looking to maximize the sharing economy. But, when is the line crossed from independent contractors providing services to others to employees of the “hosting” company? This is the question that has been the focus of recent administrative rulings and lawsuits involving Uber.
In Florida, a driver for Uber filed for unemployment after his car was damaged in an accident. As reported in the Miami Herald, the state agency agreed he was an employee for the purposes of unemployment benefits. Meanwhile, in California the Labor Commission also found that an Uber driver was an employee not an independent contractor. Both Uber and Lyft are currently facing lawsuits that are wending their way through the Northern California Courts alleging the same thing. So, what does this mean to other sharing economy ventures outside of the transportation industry, such as the short term rental market?
A quick look at the reasoning of the California Labor Commission is the best place to start in the quest for an answer. Under California law, there is an inference of “employment” if personal services are performed as opposed to business services. The factors considered when determining independent contractor status are:
- Whether the person performing services is engaged in an occupation or business distinct from the alleged employer;
- Whether or not the work performed is a part of the regular business of the alleged employer;
- Whether the alleged employer or the worker supplies the tools and the place where the person performs the work;
- The amount invested by the worker in the equipment or materials required by the task and whether or not the worker has employees of their own;
- Whether the service rendered requires a special skill;
- The kind of occupation and whether the work is usually done under the direction of the alleged employer or by a specialist without supervision;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skills;
- The length of time for which the services are to be performed;
- The degree of permanence of the working relationship;
- The method of payment, whether by time or by job; and
- Whether or not the parties believe an employer-employee relationship is being created.
In the recent California case, the driver claimed she was owed unpaid wages, reimbursement of business expenses, liquidated damages and penalties. Uber disagreed saying she was an independent contractor who had complete control over her schedule, if she even took any riders, and she had to obtain her own license from the state to carry passengers. Uber simply provided the iPhone and the platform for matching riders and drivers. The Labor Commissioner sided with the driver, finding that the type of work performed by the driver was integral to Uber’s business. Specifically, without drivers such as the Plaintiff, Uber’s business would not exist. Uber was involved in every aspect of the operation. They vet the drivers, control the tools the drivers use, set the price for the trip, accept the cancellation fee without necessarily sharing it with the driver, and discourage the acceptance of tips by drivers because doing so would be counterproductive to the Company’s advertising and marketing strategy. The Labor Commission said all of these activities pointed to an excessive amount of control, thus demonstrating an employment relationship – not that of an independent contractor.
So what does this potentially mean to the rest of the sharing economy, in particular, the short term rental market? Likely, not much, but that could vary based on how the service operates. For example, VRBO provides a web platform and marketing, but the property owner needs to do the majority of the work to get her property on the site, manage the property and deal with reservations. One of the big distinctions is that the short term rental companies provide a marketing platform for a business service (renting a piece of property) as opposed to a personal service (renting a driver). The risk for such companies is not so much with the property owners, but with the service personnel who provide housekeeping, or maintenance services or other similar services to support the properties. The short term rental company may insulate itself from a claim that the service personnel are its employees if it limits its involvement in the hiring and supervision of such services, leaving that to each individual property owner. If, however, the short term rental company acts more as a property manager, such as Vacasa, then there may be an argument that the service personnel are employees of the short term rental company. No matter the industry, if there is any question regarding the employment/independent contractor status of your workers, it is always best to involve legal counsel sooner rather than later.
Nancy Cooper, member of our Labor and Employment Group and Hospitality, Travel and Tourism practice team, discusses the NLRB's March 2015 report and the importance of reviewing and updating your employee handbook. Thank you for today’s post, Nancy! – Greg
The National Labor Relations Board (NLRB or the Board) oversees all things union under the National Labor Relations Act (NLRA). Congress enacted the NLRA in 1935 to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy. Even though the NLRB is focused on labor management practices with the unionized workplace, it also has jurisdiction over private sector employers who do not have a union. The Board just has not often exercised that authority – but that has increasingly changed that over the last ten years or so.
The NLRA gives employees the right to act together to try and improve pay and working conditions (“protected, concerted activity”), whether the employees are union or non-union. These rights are also commonly referred to as Section 7 rights because they are outlined in Section 7 of the NLRA. The NLRB has become more active in enforcing these rights. Generally, the Board looks to see if actions taken are of a concerted (more than one person) nature intended to address issues with respect to employees’ terms and conditions of employment. Sometimes, though the issue is not the action taken, but the rules that govern the employees’ behavior, such as those in your employee handbook.
On March 18, 2015 the General Counsel of the NLRB issued a report regarding what language in certain employer policies would be considered lawful, and what would not. When reviewing such rules, the NLRB looks at whether or not the language would act to chill employees from exercising their right to engage in a protected, concerted activity. In other words, they looked at each policy before them to determine if the average reasonable employee would likely read the policy to mean that the employee was not allowed to talk about the terms and conditions of their employment with others, whether that be outside people or other employees. If it could be read to mean that, the policy was unlawful.
So what sorts of things could be read to restrict employees from talking to each other? Just about anything from social media policies to confidential information policies to anti-harassment rules and anywhere in between. Above all, the context in which a phrase was used seemed to make a difference if a phrase was a close call. So it is important, as you review your handbook, to not just focus on the words themselves but also the context in which they are used. Additionally, it is important to remember that a simple disclaimer such as, “Nothing in this policy is meant to prevent employees from engaging (or declining to engage) in discussions about their terms and conditions of employment” may be helpful, but they are not an automatic guarantee that an otherwise unlawful policy will now be lawful.
Some examples of phrases the NLRB found to be problematic (and why) are:
- Do not discuss customer or employee information outside of work, including phone numbers and addresses. (Overbroad reference to “employee information” and the blanket ban on discussion may lead an employee to think they could not discuss the terms and conditions of employment, including the contact information of other employees so that they could all talk.)
- Discuss work matters only with other Company employees who have a specific business reason to know or have access to such information. Do not discuss work matters in public places. (Broad restrictions that do not clarify they are not meant to impinge on an employee’s rights under the NLRA so an employee could reasonably understand it to encompass wages, benefits and other terms and conditions of employment.)
- Confidential Information is: “All information in which its (sic) loss, undue use or unauthorized disclosure could adversely affect the Company’s interests, image and reputation or compromise personal and private information of its members.” (Employees have a right to share information that supports their complaints about wages and terms and conditions of employment, and employees may believe they cannot disclose that kind of information because it might adversely affect the Company’s interest, image or reputation.)
Employee Conduct Toward Employer:
- Be respectful to the Company, other employees, customers, partners and competitors. (Overbroad and employees could reasonably construe them to ban protected criticism or protests regarding their supervisors, management or the Company in general.)
- No defamatory, libelous, slanderous or discriminatory comments about the Company, its customers, and/or competitors, its employees or management. (Overbroad and employees could reasonably construe them to ban protected criticism or protests regarding their supervisors, management or the Company in general.)
- It is important that employees practice caution and discretion when posting content on social media that could affect the Company’s business operation or reputation. (Overbroad because it could reasonably be read to require an employee to refrain from criticizing the employer in public.)
Employee Conduct Toward Another Employee:
- Do not make insulting embarrassing, hurtful or abusive comments about other company employees online and avoid the use of offensive, derogatory or prejudicial comments. (Overbroad because debate about unionization and other protected concerted activity is often contentious and controversial. Employees could reasonably read such a rule to mean they are limited in their ability to be honest in discussions regarding these subjects.)
There are many more examples of problematic employer rules on various topics in the report. You are encouraged to look again at your employee handbook and employer rules. If you have any questions, or for more information regarding this report, please feel free to contact me or Nancy. We will be glad to help bring your employer rules back within the safety zone – at least until the next General Counsel report is issued.
Nancy Cooper, member of our Labor and Employment group and Hospitality, Travel and Tourism practice team, discusses how the recent Supreme Court ruling, Integrity Staffing Solutions v. Busk, may impact potential employee wage and hour claims for hourly employees in the future. Thank you for today’s post, Nancy! – Greg
The Supreme Court ruled recently that employers did not need to pay employees for the time the employees spend waiting to go through a security screening to make sure they were not stealing from the company. The case is Integrity Staffing Solutions v. Busk. While many employers applauded this ruling they were also confused because it is initially difficult to determine how going through the security clearance is different than the requirement that you must pay certain employees for the time it takes to change in and out of uniforms or special apparel, also known as donning and doffing time. This article will explore those differences and attempt to make some sense in the distinctions.
First, the history behind the law. The Fair Labor Standards Act (FLSA) and its regulations require that employees are paid for all hours worked. The courts immediately started to broadly interpret this obligation and Congress was concerned about the financial impact on the businesses of the country. As a result, Congress passed the Portal-to-Portal Act to more clearly define what time was actually considered to be work time.
The portion of the Portal-to-Portal Act that is implicated by this opinion is the portion that discusses what activities before (preliminary) and after (postliminary) must be paid. Generally, those activities that are preliminary or postliminary to the performance of the principal activities that an employee is hired to perform must be compensated. “Principal activities” includes all activities which are an “integral and indispensible part of the principal activities.” In order to be considered an “integral and indispensible” activity, it must be one that is intrinsic to the employee’s duties and one which he cannot dispense if he is to perform his principal activities.
Now that the law and terms have been defined, let’s turn to the facts of the case. The employees were hired by Integrity Staffing Solutions to work in a warehouse fulfillment center that filled orders for Amazon. The employees were responsible for receiving an order and picking the items from the proper locations within the warehouse to fulfill the orders. Integrity Staffing Solutions required the employees to clock out from work and then stand in a line to go through security clearance – essentially a metal detector similar to those at an airport – as they left work for the day. This allowed Integrity Staffing Solutions to control the loss of merchandise through employee theft. The lines for these clearances were often long and would take as long as thirty minutes to get through. The employees sued on the basis this 30 minute wait time was actual work time and they should be paid for waiting in line. The Supreme Court disagreed.
In order to be paid for such preliminary or postliminary activity the activity must be so related to the employee’s duties that the job could not be performed if the preliminary or postliminary activity did not occur. The Court decided the focus should not be on whether or not the activity was required by the employer. Instead, the focus should be whether not the activity was actually tied to the work the employee was hired to perform. For example, employees required to wear protective clothing due to the nature of their work, such as dealing with chemicals used in the battery making process, could not perform the work they were hired to do without putting on the protective clothes. The same is true of the time that meat packers spend sharpening their knives.
So, what does all this mean to the hospitality industry? Does it really change the rules on donning and doffing? The short answer is no, it doesn’t change the rules. What it does do is make sure that employers really look at the activity and determine just how integral to the job the activity is. For example, the employer who puts a lot of emphasis on uniforms as a part of the brand (including defining the level and quality of customer service associated with the uniform) may have to pay for the time it takes to don and doff the uniform. This is true if the employer places a lot of emphasis on the public face of the uniform and the associated internal expectations of customer service created by the identity. In short, the uniform becomes a part of the job since it defines the customer service portion of the job.
In contrast, a server who wears a uniform simply as a uniform, but not as a part of the customer service brand and standards may not have to be paid for the time spent changing clothes. The server can still perform the integral functions of the position (serving food and beverages) without the uniform. It is somewhat removed from the position, unless of course the policies of the employer indicate otherwise as discussed above.
What is the takeaway? If there is a question about preliminary and postliminary requirements, take the time to look at the relationship between the activity and the job the employee was hired to perform. Be critical of the situation and candid with yourself as you analyze the situation. If there is any question, reach out to your legal counsel. Be sure that you understand the risks and benefits so that you are not facing a potential wage and hour claim.
 Steiner v. Mitchell, 350 US 247, 252-253.
 Steiner v. Mitchell, 350 US 247, 249, 251.
 Mitchell v. King Packing Co., 350 US 260, 262.
California employers are currently scratching their heads over how to interpret “suitable seating” that is required under California Wage Orders. Nancy Cooper, member of our Labor and Employment Group and Hospitality, Travel and Tourism practice team, discusses how that term is defined will affect your business. Thank you for today’s post, Nancy! - Greg
Section 1198 of the Labor Code of California states that the “employment of any employee for longer hours than those fixed by the order or under conditions of labor prohibited by the order is unlawful.
References to the “order” refer to California Wage Orders, which are issued from time to time by the California Industrial Welfare Commission and establish wages and working conditions for a number of industries within California. Section 14 of the majority of the California Wage Orders say that an employer must provide “all working employees” with “suitable seats when the nature of the work reasonably permits the use of seats.” What each Wage Order does not say is what this means.
Even though these Wage Orders have been around for decades, they are only now the focus of many lawsuits. So why now? Well, that is also hard to answer. These laws were originally focused on allowing employees who worked on certain equipment or in other jobs that were essentially stationary to sit down as they performed their work. There used to be many more “suitable seating” laws across the nation. They appear to have originated in the 1950s and were focused on the increasing number of females in the workplace. They have either remained on the books (though neutralized to be gender neutral) or taken off the books altogether. The California laws came to life with the passage of the Private Attorney General Act (PAGA). Under PAGA (which was deemed to apply to the suitable seating laws) an employee can seek up to a year of civil penalties and attorney fees, including a civil penalty of $100 for each aggrieved employee per pay period for the initial violation and $200 for each aggrieved employee per pay period for each subsequent violation. So, now there is real money tied to the law. Where there is real money – lawyers will follow.
Two of the more notable suits involving suitable seating are class actions that are currently on appeal with the Ninth Circuit Court of Appeals. As the Ninth Circuit was trying to interpret the law and make a ruling in these cases, the Court discovered that there was not clear interpretation of the law in California state court. There was not sufficient guidance from state courts to inform the Ninth Circuit what was intended under the law. Thus, the Ninth Circuit said that rather than substitute its own judgment in the interpretation of California law, it asked the Supreme Court of California to clarify three specific questions.
They first asked the California Supreme Court to clarify whether the term “nature of the work” refers to individual tasks that an employee performs during the day, or whether it should be read “holistically” to cover a full range of duties. As a sub-part to this question, if the courts should construe the “nature of the work” requirement holistically, should they then consider the entire range of an employee’s duties if more than half of the employee’s time is spent performing tasks that reasonably allow the use of a seat?
The second question the California Supreme Court was been asked to clarify is whether an employer's business judgment should be considered in determining whether the nature of the work “reasonably permits” the use of a seat, as well as the physical layout of the workplace and the employee’s physical characteristics.
The third and final question posed to the California Supreme Court was to clarify whether the employee must prove what would constitute a “suitable seat” in order to prevail.
So, what does this mean to the California hospitality industry? It could change the way in which operations are designed and how job expectations are defined. What if a sous chef wants a stool as he does prep work? Can the kitchen design handle the arrangement? How does that reconcile with the hazards of the kitchen workplace? Can it be set up in the often narrow passage ways of the kitchen?
How does the hostess position effectively use a seat and still present a welcoming atmosphere to the clientele? What about the wait staff? If they are given a seated area for use when the floor is not busy – what happens if someone is sitting down when they really should be tending to tables or cleaning the stations?
What about the reception desks at hotels and the spas? Do they give the same image if they are sitting down – even if on a high stool? More importantly, do you now have to change the lay-out of the reception area? Is there enough room for the employees to be seated or use a stool? Is a stool even considered “suitable seating”?
If a job or worksite has been modified as an accommodation to an individual in a wheelchair, does that mean that it is now considered to be a job that automatically can be performed when seated – even when it historically has not been?
It is not known when the California Supreme Court will provide answers to the questions posed by the Ninth Circuit. Any guidance offered by the Court will still be open to interpretation and lead to more suits. The answers will not be specific to any given industry. The Court is unlikely to provide guidance on the interplay with other laws (e.g. workplace safety, OSHA, etc.) as well as define who has the burden to prove the violations exist and that the solutions are or are not reasonable.
Some of the early California cases regarding suitable seating suggest that there may be some considerations available to employers. If a company can demonstrate that there is a genuine customer-service rationale for requiring the employees to stand, the company may have an argument. Depending on the nature of the service provided by the employee, it is acceptable for a Company right to be concerned with efficiency – and the appearance of efficiency – of the delivered service. These early cases have expressed concern not only about safety, but also about the employee’s ability to project a “ready-to-assist attitude” to the clientele. It is not clear that these arguments will survive the California Supreme Court’s analysis. It is anticipated that the answers will only create more questions, so it is well advised to start looking at your facilities as well as your job descriptions now so you can be prepared to take steps to not become the next lawsuit target.
It is no secret that wage and hour class actions are among the “hot topic” law suits that are on the increase. Like too many people, when I hear “class action” my heart starts to race, beads of sweat break out on my forehead and I start to feel sick to my stomach…and I don’t even own the business that is named in the suit. I just know the wage and hour cases are time intensive and expensive to defend. Wage and hour class actions often deal with the tried and true wage claims, misclassification of exempt employees as well as the overtime claims that go hand in hand with the misclassification. However, occasionally one comes along that makes you stop and think.
Last week one such action was brought in Alabama against a franchisee of a fast food restaurant. This particular lawsuit highlights the challenge of balancing the need to manage labor costs and the long term cost of doing so in an inefficient (or illegal) manner.
The restaurant industry is not a high margin industry, so it is tempting to cut corners where you can. For example, if you open early in the morning, you want to have everything ready to go as that first bleary eyed customer stumbles in looking for their first jolt of caffeine. The problem is if you don’t have sufficient prep work done, having the customers show up before your staff is totally prepared can result in you being in the weeds faster than you ever anticipated. The problem is the cash needed to support the labor isn’t there if the employees do the prep work before the doors are open. If this recent Alabama lawsuit is to be believed, the employees were asked to show up for work at least a half hour before the business opened to the public – but they could not clock in until there was at least $40 on the till. This essentially means all prep work was done off the clock - a fatal mistake under the wage and hour laws.
The Fair Labor Standards Act (FLSA) requires employers to pay for all hours worked to their benefit. This means simple things like turning on the kitchen equipment sufficiently early to ensure it is ready to go when the orders start flowing. This means getting the mise en place completed before the day starts. Not paying for this time means you have employees working off the clock.
Some work places know that they are requiring employees to work off the clock, such as the alleged violations in this new lawsuit. However, other work environments also create this problem, perhaps unintentionally.
Employer A: This employer limits employees' ability to clock in while still expecting an unrealistic amount of work to get completed within the “working day”. This leaves employees feeling like they are “bad” or “wrong” because they could not get everything done that was expected. Their solution is to clock out but keep working so they can catch up. This helps them appear as the “shining star” employee rather than the poor performer. No matter the motivation, this behavior is a problem.
Employer B: This employer creates an environment where employees feel so much a member of the team that they clock out and work off the clock (without anyone knowing) so that they feel like they are “helping” the business succeed. Here the good intentions of the employee still create liability for the company.
No matter the nature of the work environment, off the clock work is ultimately more expensive than simply managing your work force and keeping a realistic expectation on your labor numbers. If a wage and hour suit is brought, the employer could be responsible for paying for all the off the clock hours worked (for the last six years), the overtime pay that would have been accumulated but for the off the clock time (for the last two, possibly three, years), as well as an equal amount in liquidated damages. This is just under the FLSA. Add any state law violations and penalties and the amounts can continue to climb. You may even be liable for paying the attorney fees of the plaintiffs. All of this is on top of the emotional strain and costs to the company, not to mention the cost of paying attorneys to defend the claim.
It is very important to manage your labor numbers. It is even more important to manage your workforce and make sure that you aren’t creating an environment that either consciously or unconsciously creates a situation that employees feel compelled to work off the clock. If you wonder how to manage your hours, or if you need an audit of your wage and hour practices to make sure there is not exposure to such claims, members of our Labor and Employment team are available to help.
Greg Duff, Editor
Greg Duff founded and chairs GSB’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.