texasThey say, everything is bigger in Texas – who knew that would apply to lawsuits as well? As I wrote about earlier, on September 20, 2016, the State of Nevada, along with 20 other states sued the U.S. Department of Labor in the Southern District of Texas challenging the revised FLSA overtime regulations (the “State Plaintiffs”). The same day, the U.S. Chamber of Commerce and 55 businesses and industry groups followed suit (the “Business Plaintiffs”) under a slightly different theory. If successful, a single judge in Texas could decide to put a hold on the upcoming December 1, 2016 overtime revisions – including the increase in the white-collar salary threshold to $47,476 – affecting over 4 Million workers. For wage and hour attorneys like myself, this is like watching the Super Bowl, with each motion being a commercial.

On October 12, 2016, the State Plaintiffs filed an Emergency Motion for Preliminary Injunction and Request for Oral Argument and Expedited Consideration, which the DOL must respond to by October 31.  The parties each get to file a reply to the other’s argument, and the hearing will be November 16. Similarly, on October 14, 2016, the Business Plaintiffs filed a Motion for Summary Judgment, which the DOL also must respond to by October 31.  Coincidence?  I think not – great timing/coordination on the plaintiffs’ part. On October 17, the Business Plaintiffs moved to consolidate the two cases. On October 18, 2016, the DOL filed an Emergency Motion to Stay the Business Plaintiffs’ Motion for Summary Judgment and Motion for Extension of Time to File Response/Reply (basically asking the Court for more time to respond). The same day, the Court consolidated the two cases (meaning, they will proceed as one), under the State Plaintiffs’ case (since it was filed first).

On October 21, the Business Plaintiffs responded to the DOL’s Emotion Motion to Stay Summary Judgment Briefing, noting that a decision needs to be made prior to December 1 ,2016, and that the arguments before the DOL are not foreign to it, and that they “routinely confront these arguments in litigation challenging regulations.”  On Monday, October 24, 2016, the DOL filed its reply, arguing that the case should not be rushed as it “raises complex legal questions that could, on resolution, affect the rights of over four million American workers and their employers.” However, the DOL also hinted that it will argue that the injunction, if granted, should not be on a nationwide basis, but only those states that have filed suit (which would not include Minnesota).

On November 16, 2016, the hearing on the State Plaintiff’s Emergency Motion for Preliminary Injunction will be heard before Judge Mazzant. The status whether the Business Plaintiffs’ motion for summary judgment will proceed is up in the air. Until then, I’ll keep watching the commercials and keep you posted!

child laborWell, summer went by way to fast, and the kids are back in school. I’ve had a few parents of teens mention they cannot believe their kid is being scheduled to work until 10:30 p.m. at night – closing up nonetheless! Is that okay? Depends. Minnesota employers should recall that youth work rules change during the school year to be more restrictive. For those parents wanting or “allowing” their kid to work later – no can do. Like wage and hour laws, you can’t “agree” around the law. It is what it is. So, what is it? For non-agricultural occupations (where the parent is not the employer):

Large Employers (FLSA employer – annual sales more than $500,000):

  • Youth 14 and 15 cannot work:
    • Before 7 a.m. or after 7 p.m. (except from June 1 to Labor Day may work until 9 pm);
    • More than 18 hours during a school week;
    • During school hours on a school day (even if home schooled);
    • More than 3 hours a day on a school day (includes Fridays);
    • More than 8 hours a day on a non-school day; or
    • More than 40 hours during a non-school week.
  • Youth 16 and 17 cannot work (by Minnesota state law, which is more restrictive):
    • After 11 p.m. on nights before a school day (except can work until 11:30 with parent permission); or
    • Before 5 a.m. on a school day (except can work at 4:30 a.m. with parent permission).

Small Employers (not subject to FLSA – annual sales less than $500,000):

  • Youth 14 and 15 cannot work:
    • Before 7 a.m. or after 9 p.m.;
    • More than 40 hours a week; or
    • During school hours on a school day.
  • Youth 16 and 17 cannot work:
    • After 11 p.m. on nights before a school day (except can work until 11:30 with parent permission); or
    • Before 5 a.m. on a school day (except can work at 4:30 a.m. with parent permission).

Keep in mind, the work youth performs is still greatly restricted, as I wrote about earlier this summer (such as construction, sawmills, operating power-driven machinery such as forklifts and saws; etc.).

3D_Judges_GavelThe Minnesota Chamber of Commerce, along with several other employer groups such as TwinWest Chamber of Commerce, filed a lawsuit today in Hennepin County challenging the City of Minneapolis’ new Sick & Safe Leave Ordinance – as recently amended. The press release summarizing the action can be found here. In short, they argue that the ordinance conflicts with Minnesota state law, namely, that it is “unworkable” and “unlawful”, and that employers need statewide workplace regulations that are consistent. If you want to read the memorandum in support of the temporary injunction, you can find it on KSTP’s website here. What’s next? The parties will get a hearing date, the judge will likely take it under advisement, and issue an order either temporarily enjoining the City of Minneapolis from enforcing the ordinance, or disallowing such injunction. I would not be surprised to see a similar action filed in St. Paul, challenging its newly enacted sick and safe leave ordinance, modeled after the City of Minneapolis’ ordinance. Stay tuned!

woman wage dataIn only 18 months, federal contractors and subcontractors with 100 or more employees will be forced to report wage data to the EEOC via the new EEO-1 report, in order to show that there is no discrimination in pay. While this seems a long way away, employers whose data may not be so kind to them could benefit greatly from reviewing (and fixing) the pay disparities now. The “workforce snapshot period” is between October 1 and December 31, 2017. Thus, employers needing to review their pay practices (this is code for – employers whose data would show that females or minorities are paid less than their counterparts) would be wise to do so before the relevant period (one of the payrolls in that window) in order to make adjustments prior to reporting.

Further, if an employer were to be very on the ball, any such adjustments would best be made at the next annual merit increases, or performance reviews prior to the reporting period (preferably before December 1, 2016 – read more on that below). Thus, a little pre-planning could go a long way in not drawing any red flags to those who might otherwise receive a random raise without job justification. Further, if an employer has a bucket of money come raise time, it should use that opportunity to allocate more to those positions that are underpaid and less to those overpaid to control overhead costs. Additionally, employers should familiarize themselves with the relevant pay bands. It may not take much to raise a female employee from one pay band to another, or similarly, keep an male employee at a pay band when on the bubble (I recognize this sounds horrible, but it is reality – the EEOC is looking at pay bands, not actual salary so paying a woman 1 cent more to bump her up a pay band and a male 1 cent less to keep him in a pay band will fall in the employer’s favor all things being equal).

Also, keep in mind that employers would greatly benefit from reviewing the various pay bands at the same time you are reviewing the overtime revisions and make all the changes in one fell swoop come December 1, 2016. As I’ve said before, the December 1, 2016 deadline is really the best excuse employers have to change pay practices without much mystery as to why. There is hardly an employee that doesn’t know about the amendments and is waiting for the change.

Finally, in addition to reporting pay data in 10 EEO-1 job categories, employers will need to report the hours worked that year by each pay band. Employers can find more information on the EEOC’s website here. In the end, employers may be surprised to find after an internal audit that their pay rates are misaligned (not necessarily because of anything intentional) – and so now is the best opportunity to get that corrected and on the right path.

OfferOn September 28, 2016, the Minnesota Supreme Court confirmed that the Minnesota Payment of Wages Act does not allow an employer to offset liabilities owed by the employee to the employer when determining whether an employee “recovers” a greater sum of wages than the employer tendered in good faith where there is a dispute concerning wages owed. Toyota-Lift of Minnesota, Inc. v. American Warehouse Systems, LLC (Minn. 2016). Remember from my earlier post, the Minnesota Payment of Wages Act provides that when an employee’s employment terminates, the employer must promptly pay all wages due (or suffer double damages plus attorneys fees). If there is a dispute, the employer can make a “legal tender of the amount which the employer in good faith claims to be due” and then is not liable for any sum greater than the amount tendered, unless the employer recovers more than that amount in a lawsuit. Generally clients are advised to make a “payment” of the alleged wages due, then attempt to recover the over payment. This opinion appears to be a game changer.

Most notable (to me, anyway), is what the Court didn’t hold…but what it put in dicta (meaning, it’s two cents, but not binding law) in a footnote. The Court notes that the Act does not define “legal tender”, and goes on to state that it is not, “entirely clear that a ‘tender’ under subdivision 3 is the same thing as a ‘payment'”. Noting that “tender” is defined by Blacks Law Dictionary and others as an “offer”, “these factors suggest that a settlement offer might be considered a ‘tender,’ regardless of whether the settlement offer is accepted.” But, unfortunately, the employer failed to raise that argument in its brief, and so the Court did not formally make a ruling on that issue. Adding further insult to injury, the Court also noted that the employer argued at oral argument that the Act should be interpreted for extinguishing liability for penalties whenever an employer makes good faith tender of the amount allegedly due (regardless of whether the employee recovers more than the tender), but as they failed to brief that issue, it too, would not be considered.

This opinion could have huge impacts on the treatment of the payment of wages upon termination. Historically, when an employer terminates an employee, and a dispute arises as to unpaid wages, the employer is advised to pay the disputed amount within 24 hours, so long as it is in the realm of reason, then attempt to settle the dispute with the employee (knowing that rarely you are actually going to recover monies paid). This most often occurs with salespersons and their commissions.

This case, however, hints that it would be acceptable for an employer to tender an offer to pay that amount as part of a settlement agreement, and still be able to avoid the liability under the Act for not paying wages timely. Again, someone is going to have to challenge this, unfortunately, and properly bring the issue before the court to rule on. In other words, pay what is undisputed upon demand, and tender (an offer) to pay the remainder as part of a settlement. So long as the employee is not awarded more than the tender (settlement offer), the employer is not liable for anything else (such as double damages or the employee’s attorneys’ fees – the real penalty).

Band Aid ClockA year after President Obama’s executive order establishing paid sick leave for federal contractors, the DOL has finally published its final rule, Establishing Paid Sick Leave for Federal Contractors, at 29 CFR Part 13. For those of you not wanting to read all 466 pages of the Final Rule, I’ll try to summarize the good stuff below. Keep in mind that this rule is applicable to covered federal contract work (more on that below). Importantly, many of the provisions are very similar to requirements in the Minneapolis and St. Paul Sick and Safe Leave ordinances, so if you are a federal contractor doing business in those cities and this new rule applies to your business, it would be wise to craft a policy that covers all the requirements.

The rule applies to new contracts after January 1, 2017 covered by the Davis-Bacon Act, Service Contract Act, and other concessions contracts and service contracts related to federal property or lands. All contracts that fall under the executive order Establishing a Minimum Wage for Contracts are also covered. The rule does not apply to work under collective bargaining agreements that provide at least 56 hours of PTO that can be used for health-related reasons until January 2, 1020 (or the date the CBA ends if sooner). Employers may use multiemployer plans to provide leave under this Final Rule. Also the rule does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment, including those subject to the Walsh-Healey Public Contracts Act. It also does not apply to employees “performing in connection with covered contracts for less than 20 percent of their work hours in a given workweek.”

  • PTO Accrual or Up Front Bucket – Employees must be able to accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to 56 hours (7 days) per year (MSP and St. Paul cap at 3 days). Employees who do not need to record their time can be assumed to work 40 hours under the contract each week, or can use an estimate of hours worked (so long as reasonable and based on verifiable information). In lieu of accrual, employers may chose to provide 56 hours of PTO at the beginning of each accrual year.
  • Use of PTO – Employees must be able to use it while working on or in connection with a covered federal contract for own health needs or those of a family member, or due to being a victim of domestic violations, sexual assault or stalking (or to assist a family member who is a victim). Note, there is no waiting period.  Requests for PTO may be verbally or in writing (you can’t force them to put the request in writing, but after it is approved, you could ask that they follow the normal procedures to record that request such as through an online system). Denial of PTO for this purposes must be in writing with a reason why it is denied. Failure to find replacement worker is not a reason to deny.
  • Carryover of PTO – Employees must be able to carryover up to 56 hours from year to year while working for the same contractor on covered contracts – and get unused PTO back if return to work within a  year of leaving a job on a covered contract.
  • Recordkeeping – Employers must provide the employee with their PTO availability each pay period.
  • Payout of PTO – not required, but if an employer pays out PTO upon termination, and the employee later returns to the job, the employer does not need to restore unused leave.
  • Proof – Employers may require a doctor’s note or other documentation supporting the need for leave of 3 days or more (be sure to follow the process provided).

In any event, given the direction of city ordinances and the spread of such sick and safe leave laws, contractors should consider revising their PTO policy (hopefully you still don’t have a separate sick leave and vacation policy) to incorporate the most employee generous of all the applicable leaves to your business, so that your PTO policy will be compliant with all the laws and ordinances your business needs to function with little further administrative burden. As always, employers should be sure not to retaliate for requesting or taking such leave, or otherwise discriminate or interfere these rights. Finally, if you can’t get enough, or want more information, the DOL has a series of information on the Final Rule that can be located here.

ConstructionEach month I receive in my inbox the City of Minneapolis’ Compliance Monthly – a newsletter that the Minnesota Department of Civil Rights Contract Compliance Divisions publishes. Often, as it does in the September 2016 edition, it toots its own horn about how many contractors they have “held accountable”, and how much they have collected and disbursed in restitution (17 and $53,995 for 2016 Q2 if you are curious). But this month they also provided in their compliance tips something I thought may actually be of interest – a simple “how to” obtain the most current prevailing wage decision under the Davis-Bacon Act (DBA). So, here it is, with a few of my thoughts.

Step 1 – go to http://www.wdol.gov  (this is the federal Wage Determinations OnLine)

Step 2 – Choose “Selecting DBA WDs” (if you want to search old ones, click on “Archived WDs”; if you know the number you can put that in there instead)

Step 3 – Choose the State, County, and Construction Type – then click “search”

Step 4 – The wage decision will populate – click “printer friendly version” to print

Step 5 – (Optional) – Select “Sign Up for Alert Service”

Assuming you checked the right boxes/selections, this will provide the most current wage decision. Note, you can sign up for the Alert Service which will alert you when that determination has changed. While a DBA project will use the same rates throughout the project, keep in mind that some cities or other municipalities may adopt the published DBA rates, but also require that the pay be updated during the course of a project. This means the contractor is responsible for updating prevailing wages during the course of a contract. Also, if more than 90 days lag between the bid and the contract, the new rates may apply. Accordingly, I would suggest selecting signing up for the alert if this is the case with your project. Of course, we all know finding the list of rates isn’t the hard part, but selecting the one that you think is right based on the job duties performed that the government will actually agree on, when the job title doesn’t line up with those offered. But that is a whole other topic…

teaAs I wrote about earlier this May, the City of Minneapolis has enacted a sick and safe leave (SSL) ordinance, effective July 1, 2017. However, just last Friday, September 23, 2016, after tireless work by the Minneapolis Regional Chamber’s Workforce Fairness Coalition, the Minneapolis City Council adopted several revisions to the ordinance that are helpful to employers doing work in Minneapolis. The City’s presentation regarding the amendments to the ordinance can be found here and the amended regulations here. Because I know you are overworked (which is why you are reading this and not the ordinance in the first place), here are the revisions in a nutshell:

  • Defines “Regular Rate of Pay” – and importantly excludes tips, commissions, expense reimbursement; premium pay, bonuses, special occasion gifts, profit sharing payments, and retirement contributions.
  • Accrual of time is in one hour increments (no fractions).
  • Employers may front load SSL by providing 48 hours or more to employees following their 90 days of employment and 80 hours of SSL each year thereafter.
  • SSL must be recorded recorded as normal payroll practices or policies but no less than monthly.
  • SSL must be compensated at same hourly rate with same benefits as was scheduled to work when used SSL.
  • No longer must track hours of employees who “occasionally” work in the City (but, there is a presumption of a violation if no records are maintained).
  • Clarified that additional PTO does not need to be given for SSL if current PTO is sufficient to meet the accrual requirements for SSL and allows the use consistent with the Ordinance.

Finally, the City is working on releasing a FAQ document in October and creating a 16 member Workplace Advisory Committee, which you can apply to be on here.

Shermancourthouse1The nation may soon be watching what unfolds in a small courthouse in Sherman, Texas. A little over 2 months before the new overtime regulations go into effect, on September 20, the Attorney General or Governor of 21 states sued the U.S. Department of Labor, alleging that the new Fair Labor Standards Act (FLSA) overtime regulations are unlawful and contrary to the Constitution in State of Nevada et. al v. U.S. DOL (E.D. Tex.). The same day, the U.S. Chamber of Commerce also spearheaded and filed a separate lawsuit joined by 55 plaintiffs (mostly large nationwide business associations such as the National Association of Manufacturers and Associated Builders and Contractors), in Plano Chamber of Commerce et. al v. U.S. DOL (E.D. Tex). The States and Business groups present great arguments, but only time will tell if this quiet town of about 38,000 and one judge will shake up the nation. One thing is for sure – all eyes will be on Judge Amos Louis III Mazzant in the upcoming months.

The States’ Case

The plaintiff States have asked the Court to declare the new overtime regulations unlawful as they: violate the 10th Amendment, exceed Congressional authorization; were imposed without observance of procedures required by law; are arbitrary and capricious; and, in the alternative, improperly delegate Congressional legislative power. The States ask the Court to enter a temporary or preliminary injunction, stopping the regulations from taking effect.

The States’ basic argument is that the DOL has put salary levels as the primary indicator of exempt status over the actual duties test, which is not what Congress intended. Further, they argue that the automatic indexing of the salary level every three years does not account for actual economic conditions. Finally, they argue that the rule exceeds Constitutional authorization as the Federal government is mandating that States pay State employees overtime even if their duties are exempt. In support, the States note that despite President Obama’s instruction to “address the changing nature of the workplace”, the DOL didn’t in fact change the duties test, because it was more difficult than just changing the salary threshold (which doesn’t do anything to change the nature of the workplace). Notably, the $913 revised salary threshold was, as the States point out, based off of 2015 Q4 data from the “South”, nearly doubling the previous $455 per week threshold.

The U.S. Chamber of Commerce Case

The plaintiff business groups, on the other hand, argue that the new regulations violate the Administrative Procedure Act as the new minimum salary and escalator provisions exceed DOL’s statutory authority under the FLSA; and is arbitrary, capricious and otherwise contrary to law. The business groups argue that even the DOL has acknowledged that it does not have the authority to set wages or salaries for exempt employees. They further argue that historically, the DOL has declared the sole purpose of the salary level threshold is to screen out “obviously nonexempt employees”. Accordingly, in the past, the salary threshold has been set at the bottom 10 or 20% – not 40% as it will be. Interestingly, the “South” wages that were utilized include Maryland, the District of Columbia, and Virginia – which are 3 of the top 10 median income states. Slightly misleading (note the sarcasm), and kudos to whomever actually figured that out! At the end of the day, the business groups also make a great argument that basically, the DOL took an easy way out to force more employers to pay overtime to more individuals, many of whom are performing exempt duties and don’t need the FLSA’s protections.

While we can always hope, it is unlikely to change anything before December 1, 2016. Accordingly, employers should continue your wage and hour audit, and prepare for the imminent revisions to take place. Hope for the best and prepare for the worst!

MinnesotaJudicialCenterHope is on the horizon for Minnesota restaurants! On September 20, it was announced that the Minnesota Supreme Court will hear the appeal from the novel decision, Burt v. Rackner, Inc. d/b/a Bunny’s Bar & Grill (MN App. June 27, 2016). As I wrote about on August 4, 2016, the plaintiff, Todd Burt, was terminated by Bunny’s Bar and Grill for not sharing tips with other employees. Despite not losing tips/money, the Minnesota Court of Appeals held (for the first time in 40 years) that the termination of his employment for refusing to share his tips with other employees resulted in his lost employment, and thus, he had an actionable claim to recover future lost wages under the Minnesota Fair Labor Standards Act (MnFLSA). This may not sound like a big deal, but it is – here’s why.

The MnFLSA already provides remedies when an employee is wrongfully forced to share tips – the Minnesota Human Rights Commissioner may require the employer to pay the employee the lost wages. The problem is obvious, right?  Here, the employee didn’t lose any wages – because he wouldn’t share – so he sued under this new theory that it was wrongful discharge in violation of the MnFLSA. This opens up an entirely different box of remedies – and litigation. Good for the employee.  Bad for the employer. The question is, what remedies does the MnFLSA allow, as interpreted by the courts (this is called “common law”).

In the Court of Appeals opinion, the Court held, for the first time: “Where an employer requires, as a condition of employment, that an employee consent to working rules expressly prohibited by the MFLSA, the employee is authorized by the statute to sue for damages normally associated with a wrongful-discharge cause of action.” This decision was monumental, creating a new exception to Minnesota’s at-will employment.

Not surprisingly, and a great relief to many restaurants and employers, on July 27, 2016, Bunny’s Bar & Grill, petitioned the Minnesota Supreme Court to review (and overturn, obviously) the Court of Appeals decision. Here is the issue on appeal:

Whether the MFLSA, Minn. Stat. §§ 177.24 and 177.27, creates a claim for the retaliatory discharge of an employee who refused to share gratuities, abrogating the common law of at will employment without any expression of legislative intent to do so.”

That’s fancy lawyer speak for asking the Supreme Court to decide that the Court of Appeals decision improperly interprets the MnFLSA to create an action for wrongful discharge, when the law does not itself provide such an action. Bunny’s position is that the Minnesota legislature must change the law, not the courts, which are only tasked with interpreting the law. On August 17, the Minnesota Restaurant Association (MRA) asked the Minnesota Supreme Court to allow it to file a brief in support of Bunny’s Bar & Grill petition. On September 20, the Minnesota Supreme Court announced that it would take the extraordinary step and review the Court of Appeals decision, and also allowed the MRA to file an amicus curiae brief (a brief supporting why Bunny’s is right and the Court of Appeals was wrong) in support of Bunny’s.

Keep in mind that the decision, while applicable to tips sharing, will certainly be broadly interpreted (beyond tip sharing) and used for other wage situations. Accordingly, I would not be surprised to see more employer associations or large employers ask to file a “me too” amicus curiae brief. After that, it’s the hurry up and wait game – after briefing and oral arguments, I wouldn’t expect to see a decision until Spring 2017, so we’ll just have to wait.