Given this is a wage and hour blog, I feel compelled to address the changes the U.S. Department of Labor (DOL) made on February 15, 2019, to its Field Operations Handbook (FOH). Specifically, following up to Opinion Letter FLSAS2018-27, (as I wrote about here), 30d00(f) was amended as noted in Field Assistance Bulletin No. 2019-2. This amendment clarifies that employers may make a tip credit for duties performed in a tipped occupation that relate to that occupation, and that are performed contemporaneously, or reasonably before/after tipped activities. The revision rescinds the old 20% limit on non-tipped activities. How do you know whether a job duty is tipped or non-tipped? The FOH directs DOL staff to the non-tipped duties examples at 29 C.F.R. 531.56(e), and O*Net (Occupational Information Network).

That being said, this is a Minnesota wage and hour blog, don’t cha know! Thus, in Minnesota, employers cannot take tip credits to meet minimum wage obligations. Accordingly, it is wholly irrelevant unless you have business elsewhere.

On February 13, 2019, the US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued Directive 2019-04.  This Directive creates the Voluntary Enterprise-wide Review Program (VERP). The concept is to provide “high performing” contractors with a voluntary compliance program.  This removes those contractors from OFCCP’s normal establishment-based compliance evaluations process for up to 5 years. Employers will be able to apply for the program later this year. The application will include a compliance review of the contractor’s headquarters location, and some of its establishments. While the framework is out, the program is still in development, so the specifics are not clear. Thus, I suppose I’m really not saying much here that you may not already know…but stay tuned.  I’ll provide more details as they become available!

As expected, several bills have been introduced in the Minnesota House this session related to wage and hour issues. However, given we are the only state in the nation to currently have a split state legislature (Democrats control the House, while the Republicans control the Senate), it’s doubtful that any of these will actually get traction. In any event, for kicks and giggles, here’s what’s brewing:

  • HF0005: This bill would create a state-wide family and medical benefit insurance program.  The Family and Medical Benefit Insurance Division would provide employees partial wages for up to 12 weeks for leave due to a serious health condition, pregnancy, bonding, safety leave, or family care, and up to 26 weeks for caring for military service members. The insurance program would be financed through a joint employer/employee payroll tax that is yet to be proposed.
  • HF0006: This bill would impose stricter penalties on employers who fail to properly pay employees, even for non-fraudulent instances. An employer would be guilty of a gross misdemeanor for failure to pay any wages due to an employee. Further, the bill gives the Minnesota Department of Labor and Industry (MNDOLI) greater enforcement power by authorizing the issuance of subpoenas. Additionally, employers would be subject to stricter record keeping requirements, and higher fines for violations of those requirements.
  • HF0011: This bill, the “Earned Sick and Safe Time Act” would mandate paid sick and safe time at the state level. Similar to the Minneapolis and St. Paul ordinances, employers would be required to provide 1 hour of paid sick/safe leave for every 30 hours an employee works, up to 48 hours a year. The bill would apply to all employers with one or more employees, and includes temporary and part-time workers who work at least 80 hours a year for the employer in Minnesota.

On January 25, 2019, the National Labor Relations Board flopped again in SuperShuttle DFW, Inc., reinstating the pre-2014 common law agency test for determining independent-contractor status (overruling FedEx Home Delivery). Why is this important if you are not a unionized employer?  Well, the National Labor Relations Act (NLRA) does not require the same protections to independent contractors as it does for employees (and even employees who are not unionized have NLRA protections). For example, Section 7 of the NLRA gives employees the right to self-organize, engage in union actives, and engage or refrain from protected concerted activities. Because the NLRA excludes independent contractors from the definition of employee, Section 7 rights are not applicable to independent contractors, nor are the protections that the NLRA affords to employees.

Under the common law agency test, the Board considers factors such as the extent of control the employer exerts over the individual’s work, the skill required in the position, and/or who provides the work supplies. None of the common law factors are decisive, and “all incidents of the relationship must be assessed and weighed.” The Board held, “going forward we will continue to consider how the evidence in a particular case, (viewed as it must be) in light of all the common-law factors, reveals whether the workers at issue possess entrepreneurial opportunity. Funny enough, the Board noted (in a footnote), that cases in this area have not been, “entirely consistent.”  Who said judge’s don’t have sense of humor!

Admittedly, I’m a little late blogging about this one…not sure how it escaped me. It is slightly old news, but important for home health care providers or other employers who use varying average hourly rates. The Department of Labor (DOL) issued an opinion letter on December 21, 2018 regarding the determination of minimum wage and overtime compliance with the Fair Labor Standards Act (FLSA) for employees with varying average hourly rates. Specifically, the letter concerns an employer who provides in-home health care services. The FLSA mandates employers provided all covered, nonexempt employees at least the federal minimum wage for all hours worked and overtime compensation for all hours worked in excess of 40 hours per week.

Home health care workers may be required to travel between clients’ homes during the workday. In this case, the employer calculated employees’ weekly pay by multiplying the employee’s time with clients by his or her hourly rate, and then dividing the total by the employee’s total hours worked (including time with the client and travel time). The employer compared the resulting number to federal and state minimum wage rate requirements to confirm compliance.

The DOL has previously opined an employer complies with the FLSA “[i]f the employee’s total wages for the workweek divided by compensable hours equal or exceed the applicable minimum wage.” Thus, even though the employees’ hourly rates varied each week, because the employer ensured that the average hourly pay rate always exceeded the FLSA’s minimum wage requirements for all hours worked, the DOL found the employer’s compensation plan complied with the FLSA’s minimum wage requirements.

However, the DOL remarked that the employer’s compensation plan might not comply with the FLSA’s overtime requirements. Under the FLSA, nonexempt employees must receive overtime compensation, at a minimum of one and one-half times their regular rate of pay, for all hours worked over 40 hours per week. The employer in this situation assumed a regular rate of pay of $10 per hour when calculating overtime. The DOL opined that this may violate the overtime requirements for employees whose actually regular rate of pay is greater than $10 per hour because, “neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an ‘actual fact’ based on ‘mathematical computation’.” However, if the employees’ actual regular rate of pay were less than $10 per hour the compensation plan would not violate the FLSA’s overtime requirements because an employer has the discretion to pay overtime in excess of the FLSA’s requirements. As with all opinion letters it is important to remember that they are fact specific to an individual employer. However, they serve as a general guidance for all employers in similar situations.

As 2018 comes to a close, it is a great time for employers to address lingering issues that have been on the back burner and start “fresh” in the new year. A new year is a great time to roll out changes for both administration purposes and for employees; new year, new policies. Here are some items you may want to consider auditing internally and bringing up to current if need be for a January 1, 2019 revision date:

  • Wage disparities (male/female/minority)
  • Job classification (exempt, non-exempt, independent contractor)
  • Job descriptions (should reflect what the employee actually does – jobs morph over time)
  • Incentive compensation / bonus plans (the far majority I review need significant modification as they are written by sales folks and not HR/legal and thus leave out at-will language, deductions, prepayments, “earned” versus “accrued” and payout terms with absences, discipline, termination, etc.)
  • Minimum wage increases (State, Minneapolis, St. Paul)
  • Safe and Sick Leave Act ordinances (Minneapolis, St. Paul, Duluth)
  • Changing paid time off methods / calculations (from up front to accrual, etc. – and in compliance with any applicable ordinance)
  • Overtime (calculated weekly, all hours paid, no flex time between workweeks) – also, the new federal overtime rule is expected to be published in March 2019 – stay tuned on that (I would only be guessing as to how the DOL is going to roll it out).
  • Recordkeeping (best practices being followed; exempt/salaried employees can be made to record their time – which is very good to have if their classification is challenged in the future)
  • Wage deduction / loans / tuition reimbursement policies

With Thanksgiving tomorrow and Christmas right around the corner, employees start to question holiday time off and pay (or lack thereof). In Minnesota, there is no requirement that employers provide certain days off, with or without pay. Accordingly, employers just need to follow their policy (best practices – have it written), whatever it is. If employees must work on a holiday, employers must pay them for that time worked, but may also chose to pay an additional half-time or double time and/or additional PTO to be taken another day. Those hours worked count towards overtime. In addition, the additional pay will change the regular rate for overtime purposes and thus, the hourly overtime rate will increase. For employers who provide time off without pay, or time off with pay, those hours are not “hours worked” and thus, do not count towards overtime. Key here is that your policy is written in a way that allows you flexibility as business needs arise. If your policy is not always followed, it is time to dust it off and revise it to be consistent with actual business practices.

On November 8, 2018, the DOL issued Opinion Letter FLSA2018-24, addressing the question of when additional payments to an exempt employee based on an hourly, daily or shift basis defeats the professional exemption. In short, an exempt employee may have a “guaranteed salary”, but then also receive additional compensation on an hourly, daily, or shift basis, so long as there is a “reasonable relationship” between the guaranteed amount and actual wages earned. Generally, I tell employers not to ever pay a salaried employee based on hours worked; this is the exception to that rule – so long as it is properly done.

Usual earnings between 1 to 1.5 times the guaranteed salary will typically satisfy this test. (i.e. the employee is guaranteed $500 a week and typically earns $600 to $750 a week). The Court did not address earnings between 1.5 times and 1.8 times the guaranteed salary.  The Court noted that earnings more than that (i.e. 1.8 times or double) may not have a “reasonable relationship,” and thus, may defeat the exemption (and thus, minimum wage and overtime applies). Yet, no bright-line rule exists, and the DOL will look at it on an employee-specific basis (not as a group). Keep in mind that this test does not apply to other payments made to an exempt employee such as bonuses, commissions, etc., which do not have the “reasonable relationship” requirement.

On November 14, 2018, the St. Paul City Council passed an ordinance implementing a minimum wage of $15 for employees who work within the geographic boundaries of St. Paul. Employees based outside of St. Paul, but who occasionally perform work in St. Paul, are also covered if, “over the course of one week [the employee] performs at least two hours of work for an employer within the geographic boundaries of the city.” This means that the Ordinance (for now) appears to apply to employers both located within St. Paul, and those outside of St. Paul with employees who work two or more hours in a week in St. Paul. I cannot imagine that this will not be challenged, however, similar to the challenge made (and won) in Minneapolis by non-Minneapolis employers with respect to the scope of its Sick and Safe Time Act Ordinance.

Employers are defined in the Ordinance as “Macro” (more than 10,000 employees); “Large” (more than 100); “Small” (100 or less); and “Micro” (fewer than 5). The minimum wage hike begins January 1, 2020 for Macro businesses at $12.50 and ends up at $15 by July 1, 2022, with automatic increases thereafter. All other size employers begin the first increase on July 1, 2020. Large businesses start at $11.50 and end up at $15 by July 1, 2023.  Small businesses start at $10 and end up at $15 by July 1, 2026. Micro businesses start at $9.25 and end up at $15 by July 1, 2028. Once an employer has hit the $15 minimum wage, thereafter the minimum wage is automatically increased to whatever the City Minimum Wage rate is that applies to the City of Saint Paul (the adjusted minimum wage rates will be announced September 1 of each year). For purposes of determining company size, all employees, including temporaries, are included. Franchises with more than 10 locations nationally are based on all locations owned and operated by a single franchisee.

A few other items to note – there is no exemption for tipped employees.  Thus, like with our State minimum wage, employers cannot apply a tip credit to meet the minimum wage requirements. There are exceptions for youth wages, city-approved youth-focused training or apprentice program, persons with disabilities, extended employment program workers, independent contractors, and others. Finally, like Minneapolis, St. Paul will prepare a notice for employers to use, as well as accompanying regulations for the finer details…and likely a flashy website to make it easy for employees to learn their rights and file complaints.

The U.S. Department of Labor issued several opinion letters on November 8, 2018.  One of those, Opinion Letter FLSA2018-27, reproduces verbatim the text of Opinion Letter FLSA2009-23, which was (one of many) withdrawn by the Obama Administration “for further consideration”. This Opinion Letter clarifies the definition of a “tipped employee” for purposes of the Fair Labor Standards Act tip credit. However, since Minnesota does not allow a “tip credit” against minimum wage, I won’t go into more detail here, except to note it for those of you who have multi-state restaurants.